Sunnova Energy International Inc.

Thank you for your patience, everyone. The CINOVA fourth quarter for year 2023 earnings conference school will begin shortly. So ask a question during today's call. Please press start followed by one on your telephone keypad. To withdraw your question, please press start followed by two. Good morning and welcome to CINOVA's fourth quarter and full year 2023 earnings conference call. Today's call is being recorded and we have allocated an hour for prepared remarks and question and answer. At this time, I would like to turn the conference over to Rodney McMahon, Vice President Investor Relations at CINOVA. Thank you. Please go ahead.

Thank you, operator. Before we begin, please note during today's call, we will make forward looking statements that are subject to various risks and uncertainties as described in our slide presentation, earnings press release in our 2023 form 10K. Please see those documents for additional information regarding those factors that may affect these forward looking statements. Also, we will reference certain non-GAAP measures during today's call. Please refer to the appendix of our presentation as well as the earnings press release for the appropriate GAAP to non-GAAP reconciliations and cautionary disclosures. On the call today are John Berger, CINOVA's Chairman and Chief Executive Officer and Robert Lane, Executive Vice President and Chief Financial Officer. I will now turn the call over to John. Good morning and thank you for joining

us. 2023 proved to be a formidable test for the residential solar industry. Macroeconomic challenges and a rapidly evolving landscape meant that companies who were unable to adapt and tackle these challenges head on have struggled or exited the market. While this unfortunate reality for some may have caused apprehension and generated negative headlines, it also presents a silver lining of reduced competition for adaptable companies like CINOVA. We stand apart in this regard, fortified by our scale, robust balance sheet, agility and forward thinking approach, enabling us to not only weather the storm but pick up market share and expand margins in the process. The past few weeks we have seen encouraging signs of improved market dynamics beginning to emerge. Tighter risk premiums reflected in our recent securitizations coupled with an uptick in overall market demand as we transition beyond the seasonally softer period for customer originations paints a more optimistic picture than many perceive. To better position CINOVA for the rest of 2024 and beyond, we have continued to increase our focus on cash generation by pursuing additional margin expansion, exploring potential asset sales and rapidly implementing cost cutting measures. To achieve cost savings, we are continuing to implement a range of initiatives primarily focused on automation driven efficiencies. This strategic approach will enable CINOVA to sustain growth without expanding its headcount. Additionally, we have initiated an immediate pause in spending related to select growth initiatives such as international expansion. While these initiatives are temporarily on hold, we will remain committed to revisiting them in the future contingent upon improved market conditions and an improved valuation of CINOVA's equity. Factoring in these cost reductions, we now anticipate a revised cost structure will result in a decrease of at least 20% in total adjusted operating expense per customer in 2024. Slide 3 highlights our growth and customer count, power generation and energy storage under management, battery penetration and expected contracted cash inflows for both 2024 and the remaining life of our customer contracts. During the fourth quarter, we placed over 34,000 customers into service, which brought our total customer count at the end of 2023 to just over 419,000. And our megawatt hours and solar power generation under management, 1,090 megawatt hours and 2.5 gigawatts, respectively. Turning to slide 4, you will see as of December 31, 2023, the expected cumulative nominal contracted cash inflows associated with our customer contracts over a weighted average remaining life of 22 years was $16 billion. In 2024, these same contracts are expected to generate 789 million in contracted cash inflows. These inflows are the sum of all expected cash generated from customer lease, PPA and loan contracts, including those from SRECs and grid services in service as of December 31, 2023. Also on this slide, we provide our expectations of levered cash flows, which based only on what was securitized as of December 31, 2023, is expected to be $136 million in 2024 and $4.9 billion on a cumulative nominal basis. Cumulative levered cash flows will continue to grow as new assets are added and will grow on a per annum basis as tax equity flips occur and debt is paid down. I will now hand the call over to Rob, who will walk you through our financial highlights.

Thank you, John. Starting on slide six, you will see our adjusted EBITDA together with interest income and principal proceeds equaled $549 million for the year ended 2023, which included a $207 million contribution from investment tax credit or ITC sales. Excluding ITC sales, 2023 adjusted EBITDA together with interest income and principal proceeds increased by $58.5 million versus the prior year. Since most expenses flow through adjusted EBITDA, including those that support our loan business, we view adjusted EBITDA together with interest income and principal proceeds as a more complete picture of our financial performance. While 2023 ITC sales were heavily back end weighted due to delayed treasury guidance, we expect a more even contribution of this activity in 2024 as we plan to continue utilizing ITC tax credit and exchange for ability primarily from new tax equity partnerships to diversify our funding sources. Slide seven highlights Sinova's continued ability to efficiently access the capital markets. In 2023, we added $957 million in additional tax equity funds, entered into over $1 billion in asset-backed securitizations, closed the $50 million secured revolving credit facility to support procuring and selling inventory to dealers, closed the $65 million accessory loan facility and issued a second green bond which, together with a modest equity offering, brought in $466 million in additional capital after fees and expenses. We also expanded our warehouse capacity while securing amendments to keep pace with our origination. Through February 21st of this year, we have added another $195 million in tax equity and priced two asset securitizations at the tightest spreads we have seen in the past 12 to 18 months. In our $537 million of liquidity as of December 31st, 2023, our both are restricted and unrestricted cash and the available collateralized liquidity we could draw upon from our tax equity and warehouse credit facilities. Subject to available collateral, we had $835 million of additional capacity in our warehouses and open tax equity funds. Combined, these amounts represent nearly $1.4 billion of liquidity available, exclusive of any additional tax equity funds, securitization closures, asset sales, -the-money interest rate hedges, further warehouse expansions or other sources of liquidity during the year. On slide 8, you will find a summary of our unit economics. As of December 31st, 2023, on a trailing 12-month basis, our fully burdened unlevered return on new origination increased to 12%, while our weighted average cost of debt decreased to 6.4%, respectively. This resulted in a .6% implied spread over the same period, the highest since early 2022. Slide 9 provides additional information on our unit economics, which have improved and continue to improve into 2024. We now estimate an implied spread on near-term origination of 600 basis points. Overall, our margins have remained stickier than expected, considering the declines we have seen in the weighted average cost of debt. However, we maintain that the long-term expected spread is 500 basis points. Our weighted average cost of debt, life to date, remains just over 5% as of December 31st, 2023. As a reminder, we measure our cost of capital on a yield and issue basis rather than an interest rate basis, as this more fairly captures the effects of any discounts, fees, and capped call purchases. Slide 10 reflects the strong growth we have seen on our net contracted customer value, or NCCV. At a 6% discount rate, NCCV was $3.1 billion, an increase of 35% compared to December 31st, 2022. Our December 31st, 2023 NCCV at this discount rate was $25.26 per share. This represents a greater than twofold increase since we announced our -double-triple plan. Even with this significant increase, our NCCV per share ended the year lower than expected, primarily due to the timing of tax equity closures and fourth-quarter customer additions coming in slightly below our expectations. At this time, we have elected to reaffirm our 2024 full-year guidance found on slide 12. We will reassess our guidance next quarter once our lower cost structure has had more time to operate. We expect to capture approximately 15% of our 2024 adjusted EBITDA together with interest income and principal proceeds in the first quarter, increasing to approximately 20% in the second quarter, 30% in the third quarter, and 35% in the fourth. Customer additions are expected to be more back-end weighted with 15% in the first quarter, 25% in the second quarter, and the balance evenly distributed over the second half of the year. This is mainly due to our new channels, as well as growth in accessory and service-only sales. Thus, the back-end weighting will be more driven by accessory loan and service-only customers. As of December 31, 2023, 90% of the midpoint of our total 2024 targeted customer revenue, interest income, and principal proceeds was locked in through existing customers as of that same day, respectively. We have updated our liquidity forecast for 2024 and are introducing guidance for 2025 and 2026, which can be found on slide 13. We now expect to generate enough cash in 2024 to provide the working capital needed to hit our growth target for the year while keeping our cash position relatively flat. This will be accomplished through a combination of securitizations and sales, net of operating costs. As we exit 2024, we expect to achieve an annual run rate of cash generation between $200 million and $500 million. This significant increase in cash generation beyond 2024 is a reflection of our pricing changes and can be further enhanced towards the top end of the range through improvements in treasury rates, ever-tightening risk premiums, and final domestic content guidance. We are electing to sunset a recurring operating cash flow metric in favor of levered cash flows in response to investor inquiries around not just the cash flows from in-service and securities, but the desire to see the value and cost of our superior customer service model. Levered cash flows is the sum of expected residuals from all securitized lease, PPA, and loan contracts, plus all MSA fees, plus expected cash inflows from unplugged SRECs and grid services. As John noted earlier, we have continued to focus on cost reductions. However, one area that will continue to retain its investment is our collections department to ensure we are maintaining our low per annum capital loss rate, which is unchanged at approximately 25 basis points. Finally, while we forecast no need for corporate capital through 2026, for good housekeeping purposes, we will be putting in place a modest ATM in the coming weeks and will update the market every quarter of any anticipated usage. We have discussed this ATM before, and to be clear, we do not intend to utilize the ATM between now and our next earnings call. The best time to put tools like an ATM in place is when they are in fact a luxury and not a necessity. I will now turn the call back over to John.

Thanks, Rob. Sunova is committed to delivering a comprehensive, sustainable, and streamlined approach to energy financing, servicing, and management for our customers. We are an adaptive energy services company that has an unwavering focus on innovative technologies, integrated energy solutions, and quality control as evidenced by our investments in our global command center and our adaptive technology center, both designed to optimize our operations and provide our customers with a strong customer experience. In a world where perceptions are manipulated, we know there are people selectively crafting narratives that paint a picture that is far from the truth, but we stand firm in our commitment to focus on transparency and integrity, choosing to focus on the facts. For example, on slide 15, you will see as of December 31, 2023, only .6% of our customers had an escalated concern, an improvement from .1% at the end of 2022. Moreover, in 2023, we saw an 80% improvement in our service response time as the average age of a closed work order went from 96 days as of December 31, 2022, to 19 days as of December 31, 2023. This marked improvement was driven by our investments in our customer service infrastructure, which enhanced and strengthened our customer service levels and capabilities. 2024 will be a year of continued growth and transformation for our customers, with a continued emphasis on cash generation as a top priority. To accomplish this, in addition to expanding margins and the more aggressive cost reductions we mentioned, we will look to leverage asset sales as a more meaningful source of cash generation coupled with increasing our long-term levered cash flows. Our commitment to prudent capital management and shareholder value creation remains unchanged. We remain dedicated to evaluating ways to deploy our capital with an emphasis on both maximizing returns on capital and exploring opportunities to make returns of capital. Over time, we will continue to evaluate the optimal allocation of our capital resources and will not hesitate to take advantage of attractive opportunities in the capital markets and in our rapidly changing industry. As we look to the remainder of 2024, we are excited about what we are seeing. While there is no denying that what we are doing is difficult, at the end of the day, we are transforming the energy landscape, challenging the status quo and offering customers greater choice to help meet society's ever-increasing energy demands. With that, operator, please open the line for questions.

Thank you. We will now start today's Q&A session. If you would like to ask a question, please press start followed by one on your telephone keypad. If you change your mind, please press start followed by two. Our first question today comes from Philip Chen from Roth MKM. Your line is now open. Please go ahead.

Everyone, thanks for taking my questions. Hey, John, just now you highlighted asset sales a number of times. Can you give some more color on what this means? I know you have a lot of secured assets on balance sheets. My guess is you would not touch any of that. Can you talk through your view of what you would do ahead? Are there any current assets available for sale? Additionally, what is the magnitude of asset sales in 2024 and 2025 that is contemplated in your guidance and outlook?

Yeah, Phil, thanks. No, we could possibly look at past securitizations. That would probably be more on the TPO side of things, would be my guess. And we are exploring some of those. But I think primarily in our plan, it's really the loans, both the solar plus loans and the accessory loans that we've looked to see if we could sell those as assets. I think that's pretty clear that we can. And I would expect to see some of those asset sales in the course of this year. It's not even close to the majority of the cash generation that we've laid out. That is primarily through our TPO and securitizing well through our asset costs given the spread that we're realizing and have been realizing for the last few quarters, starting to come into play, so to speak, as we move towards being able to securitize these assets, primarily in the back half of this year, just given the timing. But it's possible to have that in the latter part of the second quarter and third quarter. So this is primarily on the cash generation side. Securitization proceeds is assumed. Obviously, ITC adders are a part of that. And once we get domestic content guidance, that's why there's a range there. Those cash generation for each securitization could go up meaningfully. We have a very conservative tax equity or ITC percentage compared to peers assumed in this. So it could be quite a bit meaningfully higher than the bottom end of that range. And then that could be supplemented with loan and accessory loan sales. Rob, anything to add?

Well, I mean, that pretty much covers it. Like you said, Phil, we've got some phenomenal long-term securitizations with really good pricing locked in at rates that you can't get today and with advanced rates that you can't get today. So it wouldn't make sense to really touch most of what we have in our securitizations already.

Great. Thanks, guys. Shifting over to OPEX, looks like the adjusted OPEX went up meaningfully. In Q4, clearly you're seeing the benefit of that in your customer service quality metrics. You talked about lowering this by 20% per customer. Can you share what the outlook is specifically for the customer service and sales and marketing line items, which were each quite high on an absolute dollar basis in Q4? Can you talk about how these line items may trend and scale ahead?

Yeah, Phil. So some of this is we have attempted to give more visibility by breaking out direct sales, and that is a good portion of the sales increase. It's still a small minority of our origination, but it does stand out as far as the sales and marketing growth. On the service side, I've talked over the last few quarters about catching up on the service levels that we promised our customers. We've done that now and then some. And so we'll be able to, once we've cleared that backlog, which we've done, we're seeing a cost reduction on a per customer basis that's pretty meaningful. And so you'll see that, as I said, peak in Q4, outside some bonus payments, we pay bonuses to employees in Q1. We're already seeing some pretty meaningful cost reductions this quarter, the last few months. I expect that to continue to accelerate in Q2 and beyond, but it's too high. There's no question about it, and we're bringing it down meaningfully and slowing the growth. Clearly, you can see that in the capital budgets we've laid out for 24, 25, and 26. That helps to meaningfully cut the cost as well. And then bring in the automation. That's been something that we've invested in as part of the spending, a big part of the spending, and I expect to start realizing some of those efficiencies or a lot of those efficiencies as soon as this quarter.

Great. Thanks, John. One last one here. You talked about the potential for a modest $100 million ATM. On the one hand, you're saying you don't need corporate capital, but then you have this announcement. Can you share more on your thinking in terms of the rationale and timing and also how you plan to address the upcoming 26 convert maturity? Thanks.

Yeah, so like we said in the prepared comments, really, this is just good housekeeping, Phil. We've been talking about this publicly since at least the second quarter of last year. We plan to update the street on our intended use, but we're putting it in place now because we don't intend to use it now. And, you know, we wish we'd have done it a long time ago so it wouldn't be an issue, but it is. So we're just making sure to get it done. The second thing on the converts, our plan on the converts is still to be able to refinance both the converts and the high-yield bond and then to use the excess cash generation that we're planning on getting over the next two years to pay down. So first is use cash to pay down, and second is to refinance the second part of it. So between those two, we expect to be able to refinance and lower our overall amount of debt that we have on the balance sheet pro forma for that. You know, I think it was brought up with some of our peers as well. The cost of capital that we have is still really, really low, and the time frame that we have, this is paper that's not due until 2026. The right time to be addressing it and refinancing it is in 2025, but the right time to start preparing for it is now. And that's what we're doing with looking at the cash generation and with other things that we'll look to do along the way to try to decrease that burden as we get closer to the maturity dates.

So, Phyllis, John, I just wanted to highlight two things. We have the ability to generate levered cash flows off the existing assets. We did not lever all the way through the asset, and so that's providing meaningful cash flow that, frankly, no one else has. And then we're also generating, through securitizations and asset sales, in my answer to your first question, additional cash. And so we have two ways to generate the cash to pay down the debt, and that's what we're focused on is doing just that.

John, Rob, thanks very much for all the comments. I'll pass it on.

Our next question comes from Prennece Pitch from Wells Fargo. Your line is now open. Please go ahead.

Thanks. Good morning, guys. Just wondering if you could maybe comment at a high level on competition that you're seeing in the financing space. Are you seeing any financing-only companies offer aggressive or irrational pricing that's impacting your strategy in any way?

Yeah, it does, John. We are seeing some of that. It doesn't last very long. I think there's maybe one player or two in particular that is doing that. But the market, I'm surprised, been around the market for a while, a long time. And I got to say, the stickiness on the price increases that we and our peers have been able to put forth has surprised me in a positive way. So I think that the market is clearly very healthy, and we always have one or two folks that want to come into the market and then decide to buy market share. We certainly see that now. That always ends in a trail of tears, and there's no reason why that would be any different here. But on the margin, clearly, we're taking share. We continue to. We're projecting that out, although slowing growth really to generate the cash. And so I don't really see it's impacting our operations much at all. We continue to see a surprising amount of pricing power.

Got it. And then I wanted to get your general view of how spreads could trend over the course of 2024. You had a roughly 6% implied spread now, but you'll probably continue to enjoy tailwinds from declining equipment costs and tax credits. So I guess just holding interest rates constant, would you expect the spread to widen over the next 12 months, or are there other kind of puts and takes we should consider?

Now, I think it's quite likely it will. And so if you hold the rate constant, we're seeing some reduction in the risk premium. I think that that does continue to come in from what has been what has been historically a really high spread that materialized in 22 and 23. And even without that, though, I think, you know, hanging in on the 6% plus or minus and then may go a little bit northward for a couple of quarters or so this year. But again, the price pricing power has been pretty sticky, and I'd expect that to continue.

Got it. Thank you.

Our next question comes from Julian Humelian Smith from Bank of America. Your line is now open. Please go ahead.

Hi, good morning. This is Tanner on for Julian. I just want to ask you a quick question about the EBITDA guide. Is there an assumption for 2024 for gain on sale through loan portfolio monetization, or is this pure upside in terms of the stated guide? And do you expect this opportunity to be predictable in the sense that as we progress through 2024, you could begin to provide a target for asset sales or monetization in the year over a certain period of time?

Thanks. Yeah, that's really upside. I think that as we get more visibility into the market and market appetite, we'll be able to give more information. You could do it really in two ways. You can do it lumpy or you can do it to programmatic forward flow type of programs. And I think that as we enter into those programs, that disclosure will help season that guide a little bit.

All right. Thank you very much.

Our next question comes from Brian Lee from Goldman Sachs. Your line is now open. Please go ahead.

Hey, guys. Good morning. Thanks for taking the questions. Maybe just a follow up on the asset sales. If I look at slide 13, you've got the 200 million and then 300 million dollars of cash generation in 25 and 26. No asset sales are being embedded in those forecasts, correct?

Correct. Very little. But on the margin, if you look at some of the loans, there could be something on the margin there, but very little. That's primarily, if not wholly, you know, securitized as well as the leverage cash flows.

Okay, great. So, John, if you are base casing, you know, no asset sales, it sounds like it'd be opportunistic. If you do start to kind of more programmatically sell down assets and monetize them, would you first, I guess, include it in the cash generation metric and then to how additive could it be? Are we talking like hundreds of millions of dollars a year? What kind of upside to the 200 to 300 million dollar figures on this slide? Could we be talking about it if those asset sales started to show up?

Yeah, so if you look at the cash flows that we've laid out, I think for the first time, for the first time on slide four, that shows pretty meaningful as you move forward in time, as we've been talking about the last several earnings calls, cash generation after paying all the debt service off, right? And tax equity. So there's a meaningful amount. I mean, the cumulative nominal leverage cash flows, almost five billion dollars. So there's quite a bit there that we could do. And that's another avenue of if we wanted to do it and made sense to essentially pay down the corporate debt, whether that's the converts or the bonds, you know, down the road. So it gives us an again, having these contracted cash flows gives us an enormous amount of optionality. I think there was anything meaningful. Rob, you can correct me. I think we'd break it out for you all to show that.

But. And that would be if we did see something that was a material amount, we want to go ahead and call that out.

All right. Yep. Fair enough. We'll stay tuned. The second question I had was again on this slide. You've got the investment in systems. It's growing kind of like 10 to 15% in 2025 based on these numbers. What sort of growth are you embedding in that forecast for investment? It just seems like there's a lot of cost deflation that we know about happening right now. So the growth in investment seems fairly meaningful unless you're implying either significant growth into 25 next year or maybe there's a mixed element in there to just any color. There would be helpful on what assumptions are baked into that. Thanks, guys.

Yeah, if you look at it, the capex, which includes all of our spending, you know, anything that we spend on IT capex, our software, deliver our service, our service costs, our overhead, you know, GNA and sales costs. That's all in those numbers. And so when you look at it's roughly about 4.2 billion, 4.8, 4.8. And so you're looking at very little to your point 10, 15% growth from 24 to 25. So we are in and flat from 25, 26. We are meaning intentionally slowing the capex growth. I've said before in the last earnings call, I like where we were in that 4 to 5 billion dollar capex range. And I just want to sit here and generate some cash at this point, particularly given where our debts trading corporate debts trading and where the equity is trading. So I like where we are. And we're just going to focus on how do we cut cost, expand margins and generate the cash.

Yeah, John, I guess I was talking more on like the customer growth side. So you're doing 185 to 195,000 new customer ads this year on that, you know, 4.2, 4.3 billion dollar base of investment. You know, presumably 4.8 next year would go a lot further given some of the cost reductions you're making and as well as, you know, cost deflation you're seeing on the hardware side. So trying to get a sense is 10 to 15% growth, you know, modest in investment. What does that kind of translate to in your growth assumptions for, you know, new customers or however you're quantifying it?

Yeah, OK, so we haven't given out obviously customer growth guidance that far out just for this year. So roughly about 190 came in roughly at about one one forty two, just a little north of that for last year. And and so you can you can obviously the simple math there, roughly about 31% customer growth. The CapEx is roughly about 20% customer growth. And so I do feel like because of our different channels, the strong uptake and battery only sales, up sales and load manager sales, EV charger, et cetera, and these different channels that we now have, I think that will continue to have our customer count grow a little faster than our CapEx growth. And in the other side of that, or the reason for that is what you're pointing out is, you know, declining equipment costs, declining EPC. You basically get more for your buck per customer. That's also going to contribute to having a little bit higher customer growth than CapEx growth.

OK, fair enough. Makes sense. I'll pass it on. Thanks, guys. Thanks.

Our next question today comes from Ben Callow from Bard. Your line is now open. Please go ahead.

Hey, good morning. Thank you, guys. Just real quickly on asset sales. Just what are you seeing, John and Rob, in the private market and how does that impact your decision on sales, just valuations? If you could talk a little bit about that.

Yeah, so we look at the private market pricing. We look at third party buyers and we look at the securitization market. We put them one up next to the other. And what we see is that they have they have different expectations that can make the pricing of certain loans more attractive for securitization and others more attractive for sale. So really, it's an optimization game for us. And then the other thing that is an impact for us is the Hestia channel. And that allows us to be able to securitize certain loans that might be flat if we were to sell them, but then can bring cash if we elect to securitize them instead. So it really is an optimization game. And we spend a lot of time. My finance team, the pricing team, the marketing team spend a lot of time together to try to make sure that we're pricing optimally. And then we're tranching optimally for the right for the right outcome.

Thank you, John. You mentioned your remarks, just the carnage in the marketplace. I don't know if that's the right word. But how does that affect you positively and negatively? I mean, there has to be some negative impact too, I imagine. But could you just talk about the health of the industry and impacts to you?

Yeah, yeah, I don't think I use that term, Ben. But yeah, it's been, I think, a challenging year. Yeah, look, obviously, we out executed everybody last year across the value chain and delivered the numbers. And I think that kudos goes to all the folks at Sanova and our dealers for really just a great year. Now we want to focus even more about how do you get a lot more efficient, stay in this range of capex of 45 billion and generate the cash. Just given where, again, where our corporate debt securities and equity is trading. And that gets into that there's an overall clearly negative cloud over over the industry, whether it's from the debt markets, credit markets or the equity markets, or sometimes in the media, we've seen that. So I think that's overall just a unfortunate cloud that at some point will blow away. And because the reality, even when you look at California, which were not big in California, made that point over and over. But just looking at California, I think there's surprising strength there. I know there is. But the numbers when you run the numbers make a lot of sense. Why? Because the utilities jacked up rates like crazy in the last 12 months. And we're continuing to see that across the country. So you're selling into a industry that is increasing rates despite natural gas prices plummeting to historic lows at in orders of 50 percent, 19 percent. Just in the last week alone, three major utilities announced rate increases 15 percent and greater. So selling into that kind of market where you've got despite fuel prices dropping or at least going sideways in the case of oil is is pretty interesting to do. And the other side of this, you've got stabilization across the capital, kind of in the worst side of things, if you will, maybe improvement. And you have equipment pricing that's clearly declining. And then you've got additional incentives through the IRA that are yet to be employed, specifically the domestic content at ITC Adder. So all this is if you look at the numbers, you look at what's going on. Yeah, it's difficult to move when you have a NIM change that is abrupt and is significant is what California did. And that causes a lot of pain because people need to change in their behavior. And now you have to sell a battery. How do you do that? That that just doesn't happen like a light switch. People some people adapt faster than others. And so I think overall, the fundamentals are really good across the industry. And but the the ability to see that through the headlines, negative headlines is very challenging. What that means for those that continue to execute like Sonoma, this is a great time. This is the kind of time where you can really gain market share. It's not just us. Obviously, there's another peer doing it as well and pick up good business and generate a lot of cash that frankly couldn't do in the heyday when everybody was happy, which seems like a long time ago. But three years ago or so, two, three years ago. So a great time fundamentally. And this too shall pass. But we'll come out of the other end of this much, much stronger with new technologies, cheaper storage and better customer service.

If I could speak one into just thank you for that. Just come into election year. I know we're so early. How are you judging risk or assessing risk? And you're headed into the election year. If you could just talk about that, what your policy people are talking to you about.

I'm going to try to stay away from the politics. I'm not going to say, you know, who would we prefer and so forth. Look, I think what's interesting is for the first time that I've ever seen this and being as long as I've been in this industry, we don't really need anything. We don't. We just need what the IRA is provided to stay intact largely. And when you look at the amount of investment in manufacturing plants and even customer growth in the so-called red states, it's pretty phenomenal. And I don't think that you can listen to some of the message points, if you will, from some parts of the political spectrum. But at the end of the day, I just don't think that this is going to go away in terms of the IRA and its provisions. If anything, just being located in Houston, I will say that there's more activity on the hydrogen and carbon sequestration and in our area than I've ever seen by multiples. And very large companies, so-called conventional energy, oil and gas, conventional power, are now fully engaged in the IRA. So I think we certainly have energy policy that's in place. And I don't think, regardless of the election outcome, that that's going to change. Thank you.

Our next question comes from Joseph Osher from Guggenheim Partners. Your line is now open. Please go ahead.

Thanks and good morning, folks. Two questions. First, I'm wondering if we could drill down maybe a little bit more on B2 Converts, which are trading at, you know, we know the levels that they're trading at. Is the plan really to just sort of pick away at them now with free cash and take the majority of them out when you refi? Or I'm just wondering if I can get a better sense as to what your plan might be for taking advantage of the prices that those two instruments are trading at. Then I have one other question.

Thanks, Joe. This is John. Yes, I mean, we have a lot of optionality. We have delivered cash flows and we expect to generate more cash, you know, as we securitize and lever through the cost of the asset with the ITC adders, et cetera. So, you know, how would we go about doing this? And obviously, as you pointed out, the converts are trading at a very attractive level. It is entirely possible that we do look at, you know, buying some of those in. What I want to do is we want to execute over the next few weeks and then look to see what our options are, look to see where the market is, and then make decisions accordingly. But we do have a number of options, including, as we've answered a couple of questions on this call already, the ability to sell some of those levered cash flow assets. They've been, you know, paid down debt because they've been in place, the securitization been in place for years. So we've got a number of weapons, but it's not lost on us that the debt's trading at a very attractive level. And my primary focus is to generate the cash to pay to pay that debt down. And then whatever's left, if it makes sense, we can refinance it. As Rob said earlier, Rob, anything you want to add to that?

We just want to be responsible stewards of capital. And at some point, that's going to be repurchasing in the open market and another part is going to be making sure that we continue to just build up the cash. But we will, you know, we've got optionality between now and later in 2025, which would be the prudent time to go ahead and refinance those notes.

OK, thank you. And then my other question, you know, one of your folks said to me at one point talking about, you know, dealers and making working capital available to dealers. He said, quote, we are not a bank. I'm curious as you look at your customer ads this year, you know, how it breaks down in terms of new dealers coming onto the platform or existing dealers expanding their footprint just in the context of some of the things that you're doing. Some of the pressure that the financial pressure that exists on dealers out there and your emphasis on on preserving working capital and cash.

Yeah, Joe, you know, there's been a couple of stumbles on some dealers. Quite candidly, we saw those coming because we have in terms of processes, systems experience, for instance, duration holdbacks is something that's SNOVA implemented years and years ago. It's now become an industry standard given the last couple of years. You know, I think it's clear that we know how to manage that risk better than anybody else. Period. Full stop. And we're going to continue to do that. And when you look at where our growth is, yeah, we have a lot of new dealers coming on board. They are scrubbed a lot very closely on the financial side of things. So we fail quite a few of them. And has that failure rate gone up over the last year? Yes, it has. So we we do have, if you will, high graded the dealer versus the entire marketplace or industry. And we're going to continue to do that. But we see very large demand coming from competitors and so forth for dealers to come on board with us. And, you know, we easily replaced any of those that we lost. I mean, very easily replaced. So we feel like we're in a good spot financially. We understand the risks. We're managing it and we're seeing the growth and we're high grading our partners as as you would expect. Thank

you. Thank you.

Our next question comes from Mark Strauss from JP Morgan. Your line is now open. Please go ahead.

Yes, good morning. Thanks for taking our questions. Just a couple of quick ones, I think, for Rob. So fully appreciate the greater than 20% reduction that you're targeting in pro forma OPEX. In for you, though, the pro forma OPEX was a bit higher than what I think was implied in the guide. Can you just kind of talk about what drove that? And then the quick second question is just the ITC sales in your 2024 EBITDA. I think you said on the last call that was going to be about 15 to 20 percent. Correct me if I'm wrong, but just looking for an update there. Thank you.

Yeah, no, absolutely. So, you know, we did the breakout of our adjusted OPEX and you could see that in the back of our deck. One of the drivers, some of the increase of that adjusted OPEX was the increase in direct sales, and that's really a driver in the second half of the year. There were other drivers as well, but some of that had to do with part of the year in push that we had. Part of it as well had to do with some technological improvements and part of it had to do with what we were doing internally to help move along some width and just some stuff that we have to expense ourselves and don't actually put into the PC that helps to get more systems up built in the service. So a combination of those things. And if you look at the guide, I think we were talking about 20 percent give or take as a combination of the adjusted EBITDA plus the P&I. I think that we're still looking at that base case that we have calls for somewhere of around 35 to 40 million of ITC sales per quarter on a go forward basis. We could certainly exceed that, and that is going to be a function of partially how quickly we're able to deploy our leases and PPAs and especially as we're getting later on into the year, what type of ITC and tax equity partners we're bringing along. The transfer abilities really opened up this universe to a lot of folks, but we tend to find is that a lot of them like the economics of ITC transfer ability. They make a few pennies on the dollar to do the transfer, but then they look at the economics of tax equity and that becomes much more attractive to them. And so our goal is to continue to try to convert ITC buyers into tax equity partners on a go forward basis.

Thank you, Rob.

On it, question comes from Cassie Harrison from Piper Sanla. Your line is now open. Please go ahead.

Good morning and thank you for taking my questions. So my first one's on the liquidity forecast slide. Does this chart assume a 7% cost of debt? And then can you guys give us a sensitivity framework for changes in the cost of debt to the net change in cash forecast?

Yes, so what I'd say is that this is assuming the current cost of debt environment. We're not assuming any improvement in the risk free or any improvement risk premium, although we are seeing risk premium improvement. It does take into account the cost cuts that John highlighted, and it does take into account our current pricing as well. So if we're able to take advantage of better pricing, that certainly accretes to those numbers. Generally speaking, I would say that if you look at this capital budget, about every point of additional advance that we would get on our debt would give us somewhere around 45 to 50 million of additional liquidity. And then if you look at advanced rates, I would say that you're probably talking about seven points of advance for each point of interest expense. So each point of interest rate improvement or degradation. So right now, the risk free came back up to about a 4.3. It's come back down. Since then, there's still the belief that it goes down further in the year. If you were to see a one point improvement in the risk free without anything else changing, we would equate that to about six or seven points of improvement in advance rate. And that would translate into another at about 45 to 50 million dollars. You could extrapolate that to another 300 million dollars of cash generation. Assuming that pricing held steady.

One thing cash is, John, I would add that the assumption of the ITC adders in this is very conservative relative to others. You know, I would say, you know, low low thirties all the way across. So any sort of upside potential there with domestic content is going to move that these numbers up quite meaningfully.

Appreciate that. Well, since you brought it up, can you give us the sensitivity on on the IPC as well?

Somewhere with 32 to 40 would be our kind of maximum. That may be too conservative. Give me some other commentary, but I would say we haven't considered anything north of 40. Yeah,

I mean, most of this is running at about 32. So if you've got up to 40, you would call that a 25 percent increase in the tax equity proceeds and pretty much everything else. You know, your debt might that proceeds would go down maybe a little bit on that. So call that a net 15 percent increase that we'd expect to get on on the total tax equity, less the any change in the recourse debt. So it's not a lot, but to be call it, you know, 225 to 250 in this capital in this plan. Now, there could be other additional guidance and it depends on where we end up deploying. But one thing that's been very gratifying to us is that there does appear to be a really strong push for building domestic content and there tends to be an appetite for people to want to use domestic content. We just need to get the final rules in to make sure that that the rules actually allow us to fully utilize it. So at this point, domestic content is really not even in this plan. This is really a reflection of energy communities more than anything else based on where we are, where we're building, where we're targeting.

Appreciate all that color. And then just my quick follow up question. You know, spreads are they're back to 600 basis points, which I think is pretty close to where you guys were prior to the Fed beginning to hike. And, you know, presumably other experienced players in the market are benefiting as well from wider spread. Yeah, how do you think about the upper limit specifically? I'm wondering, you know, what do you think that point is at which the spreads become so wide that competition comes in and then we're back to that 600 range? Is it 800 is in 900 of the thousand just trying to understand when competition comes in and pushes it back to normal like a normalized level.

Thank you. This is John. I would say, you know, we've been consistent on saying that and stated again in our prepared remarks that we believe that the long term spread is 500 basis points. And that's 500 basis points on an unlevered basis. So you obviously lever these assets up and that can be quite meaningful spread. And when you look at our history, we've topped out something closer to 700 for maybe one quarter. It was above two or three quarters, 600 and above. And so I think somewhere in that six to 700 range is probably the peak. And again, we've laid out for years that we felt like it'd be 500 would be a long term average. And that I don't see any reason why that wouldn't be the case. Now, the only reason why it wouldn't be the case is if more competition drops out of the market for at least a period of time, it could expand further, especially if you get a pretty big decline in the risk free and more importantly, the risk premiums quite suddenly, maybe brought on by a recession or something of that nature. And given our strong paper performance, we have seen investors want to flock to it versus some of the other paper markets. And that could widen it out further than what I've ever seen. But I think right now, you know, where we are, maybe a little bit north towards 700 is probably what I would consider be peak.

Our next question comes from Sophie Carr from KeyBank.

Your line is now open. Please go ahead.

Hi, good morning, guys. Thank you for taking my question. I was wondering if you could give us a quick rundown on what different markets in the US look like in the current environment in terms of demand trends and where you see a high growth geographically and which ones do you consider unsellable right now and for the foreseeable future?

Hi, Sophie. This is John. We're seeing pretty strong growth across the board with the exception of California. That's probably, you know, I'm certain it's more about us. Most of our vast majority of our California businesses are new homes, you know, channel. We do have plans to improve that region. And we're so small in that region on the retrofit market that it'd be pretty easy to increase market share there. The rest of, you know, pretty seem pretty strong growth in the islands. You know, those markets have continued to mature. We've been building out and started those markets like Puerto Rico, for instance, year over a decade ago. The Northeast Mid-Atlantic seems to be doing pretty well. I would say general trend growth, solid growth. And but what we're seeing is a lot of growth in the South and then some of these other states that we've historically never have had much of anything in. Some of that is going to be enabled by our Home Depot relationship and some of the other dealers that we've been able to bring on. So it's something that we certainly have been a bit surprised about. And in the market, I think, you know, went decidedly from loan to TPO fairly quickly and continued to gain traction. And so there's just not that many folks out there, as you know, with a lease or PPA.

That is helpful. And then maybe along those lines on the partnership with Home Depot and other channels you guys have, have you given any thought to addressing the structural sales costs, custom acquisition costs, I guess, in your markets? The knock on the economics of the US-resist solar has been a higher customer acquisition cost. Can I eat into that? So I was wondering if you guys have given us any thoughts and strategically how can you address that at some point in the future?

Yes, we actually with retail, we have addressed it. We do have a fundamentally different model. Again, this company is very focused on its dealers and that is what we built the company on. And we're going to continue to have that focus on that business model. And then going into the retail channels and specifically you asked me about Home Depot, that is dealer driven. So we have a very different perspective and model than what others have done and are doing in the retail channel. It's been very successful for us financially, for our dealers financially and for our partner, retail partners financially. So we have changed that model up and it is working.

Thank you. I'll take the rest offline. Thank you.

Thank you. Our next question comes from Pavel Malkanov from Raymond James. Your line is now open. Please go ahead.

Thanks for taking the question. At the risk of delving a bit into politics, so to speak, you obviously had the letter from the Congressional Committee about Hestia. That was several months ago. Can we just get an update on that whole situation?

Sure. Yeah, most unfortunate. It's very clear politics are at play. But to be clear that that letter was directed at the Department of Energy and the Loan Program Office, not us. Obviously, we were mentioned, but we're not subject to any investigation at this point in time. And look, what I would say is I'm just going to focus on having us do a better and better job serving customers. There's always ways that we can improve our customer service. There's always ways that we can improve our quality control, our consumer protection. We've got plans that we put out put forth about how to improve consumer protection, mandating service. I think the states and the federal government ought to mandate service with creditworthy service companies like ourselves. We've been calling for that for years. So we're going to focus on doing a better, better job for our customer. And again, there's always something we can improve on, and we're going to focus on doing that. And we're going to leave the noise, shall we say, to others to deal with.

Okay, fair enough. Can I just follow up on M&A? You know, you've been asked a lot about sort of selling assets. I'm curious if in the current industry conditions, there are any corporate M&A opportunities for Sunova as a company, particularly when it comes to entering new geographies?

That's a good question. We do see some attractive asset purchases that we were taking a look at. We haven't executed on anything yet, but we have seen that. We see more of it, particularly in the business market side of things that may be pretty interesting to do. In terms of the corporate M&A, obviously, we can't comment anything specifically. But right now, I think it's really we have all the growth we need. We need to make sure that the growth comes in at the highest possible cash generation possible. So I'm not really looking to do anything at this point in time. We don't need to. Candidly, that was one of the reasons just shutting down the international and some of the other moves is we don't need to do it to get the growth that we need to generate the cash. So we just need to we need to stay focused on generating the cash rather than doing some of these other things. And they'll be there down the road because nobody else is able to really expand and exploit those opportunities right now either. So I don't see anything on the horizon, but there's always a possibility.

Thanks very much.

Thanks. Our next question comes from William Griffin from UBS. Your line is now open. Please go ahead.

Great. Good morning and thanks for squeezing me in here. My first one just was wondering if you could touch on O&M costs and how you're seeing those trends relative to what's embedded in your customer value assumptions, particularly in light of your enhancements in response time and service levels that you discussed here.

Yes, John. Yeah, we we see the cost per customer coming down rather quickly. We have been putting a lot of IT in place, new processes. We clearly had new leadership we brought in over a year ago, and that's been a tremendous improvement. So the way I put it is we wanted to get effective, the best in the industry at service. We I think we have done that now. It doesn't mean that we can't improve to go into that question I just answered from another gentleman. But, you know, we see a lot of opportunity to improve our cost structure on the service side of things. And we're realizing that. So we expect quite a bit, quite large decreases in even greater than the 20 percent on the service cost per customer as we're moving forward, really from here on out. And I'm quite confident we'll achieve those.

Perfect. And just the last one from you here, you gave a pretty wide range on the cash generation guidance exiting 2024. Could you walk us through some of the puts and takes that would get you to the higher end versus lower end of that range? And then, you know, is that going to be more cost of capital driven or more a function of growth?

There's a couple of things that will get us there. One is better ITC guidance. If we get the domestic content, there's a significant uplift. We would we would assume we could get there. The second is if we could continue to see the contraction of the risk free, sorry, the risk premium. We've seen risk premium come back down, but it's still much, much wider than it was even three, four years ago when when this was still a pretty nascent industry and was enjoying very tight margins on the risk premium. And then a third, obviously, is the risk free. If that comes in, that's a benefit. And then finally, I would say it depends on the magnitude of asset sales. If we can accelerate some asset sales, then that would end up being accretive to that cash number as well. We could, you know, frankly, we could blow through the target, too. I mean, there's nothing that's really keeping it artificially at that number. But we're not trying to be irrationally aspirational with that with that range.

Got it. Appreciate the time. Thanks very much.

Next question comes from Donovan Schaefer from Northland's capital market. Your line is now open. Please go ahead.

Hey, guys, I want to follow up with I forget who it was. Someone else asked about customer acquisition costs and, you know, with the Home Depot and the way you approach that, it sounds like you have proactive actions and measures and things that you take to address it. But I'm curious if you can talk more generally about the overall kind of industry trends there right now. So, you know, I think one parallel that comes to mind and it just it just kind of raises this question and makes you kind of contemplate. But you guys are probably the best ones to have an answer is, you know, in the EV in the market for commercial or sorry for consumer EVs. You know, there has been this sort of slower growth than maybe people were initially thinking the idea that, well, you had the early adopters and then maybe some kind of intermediate wave of adopters and then, you know, a third or fourth wave is getting is somehow a bit more difficult somehow. And so I'm wondering if there's anything that you guys have seen at all in that and if that has had impact on customer acquisition costs, just any kind of commentary around there would be helpful.

Certainly, I think, you know, when you look at our overall strategy being an adaptive energy services company, we're selling multiple serve energy services and services to customers. That's been a huge benefit to us in terms of profitable growth, and we expect that to continue. And so specifically as storage pricing, as battery pricing continues to plummet downwards, that is enabling us to go back and upsell our existing customer base quite a bit. And you can see that over the years that we've done that better than anybody, frankly. And then we have additional items like EV charging, load management that's really coming to bear. It's pretty interesting. And, you know, the other items that we offer in roofing and generators and all that has really got a pretty strong uptake. So I think one just how do you, you know, margin stack, you know, and think about expanding the EBITDA per customer, the cash generated per customer. We've been doing that. That goes to our services per customer metric. And so we see a lot of opportunity to really drop our customer acquisition costs by just mining our current customer base and delivering them better and better services as products come on the market that are better and cheaper, frankly. On the overall organic growth, you know, outside adding new customers, you know, that continues to be where we're taking market share. And I think some, you know, big portion of that is our product set is the widest and the best in the industry, we feel. We hear that a lot from our dealers and more people that, you know, more dealers that want to come on board and be our dealer. And so I think it's really about the products that we offer, the service. Services become something that nobody but us talked about to now everybody's talking about it. And how do you have great service? How do you get that power to flow? Not just for the first few weeks after the install, the first six months of the contract life, if you will. But how do you do that for 25 plus years and having the best service and then being able to sell service only even is expanding the marketplace quite nicely. So we focus on service. We focus on delivering these new products. We that our OEM partners focus on delivering better products, hardware cheaper. Then I think the market will continue to expand and the cost of acquisition will continue to go down. And we're seeing some of that in some of the southern states and in the middle part of the country states. And so, again, there's a lot more good things happening in the marketplace than I think, obviously, that most speak up today with regards into the capital markets.

Okay, that's helpful. And then just as a follow up, if we you know, you guys have always stood out as you know, for the presence in Puerto Rico, some other islands and you know, even kind of maybe more southern markets and less so say California compared to some other peers. So I'm wondering, in terms of the LMI, you know, adder for the tax credits and the IRA and the energy communities adders, are you finding like you kind of, you know, like luck of the draw like you, you're finding out in hindsight, gee whiz. You know, you like I look at California, in California, you're probably not going to have quite so many low or middle income homeowners. You have a lot of low middle income, you know, residents in the state, but property, you know, house prices are so high. It's not as often you're going to get an overlap between homeownership and somebody sort of position in a socio economic sense. Whereas, you know, maybe somewhere like Puerto Rico or parts of Texas or other, you know, other island nations and markets you've been in in the past. And similar thing with the energy communities. You know, I'm just curious if I think of oil and gas companies that had so much acreage held by production and then the whole shale revolution happened and it was like, oh my gosh, they're sitting on a gold mine. You know, they didn't know it. Are you seeing any like the thing like that from your own geography just when you look at like LMI and energy communities?

Yeah, that's an insightful question. The answer is yes. You're right.

Okay. Thank you. Well, I appreciate it. I'll take the rest of my questions offline. Okay. Thank you.

Our next question comes from Maheep Mandloey from Mizuo. Your line is now open. Please go ahead.

Hey, thanks for squeezing me in. Just a question on asset sales versus ATM. None of those are planned into the guidance for 2526. But in your talks today or what you're saying, which look more attractive here and how should we think about asset sale pricing? We keep hearing low to mid teens for high yield tranches from some of the asset managers. But just curious how you think about pricing here.

Thanks.

So we think about pricing holistically. We think about whole stack pricing. And what does it make sense to sell assets thinking through the entire stack versus the fully burdened on-level return? And it's not really an either or when we're looking at the ATM and the asset sales. The asset sales are a function of what's more attractive to us, what's going to yield a better cash return and better liquidity. Is it an asset sale or is it a full stack securitization or is it a securitization with monetizing the residual? The ATM, like we said, that's housekeeping. That's not meant to be in there. That's not something we're looking at to be using. This is something that we just said, have been saying for a while, it has been a request to the board for much longer than that. That we go ahead and put into place an ATM. And again, good housekeeping and the best time to do it when you don't need to do it.

Just a question on the guidance here. And then the prepared remarks, you kind of talked about not changing at this stage and maybe on the next quarter revisited. So what's the upside? Like it's mostly on the OPEC or anything else we should look for. And how much of tax credit transferability is in the EBITDA guidance at this stage?

Thanks. Sure. Like I said, on the EBITDA guidance, we've got about about 30 to 40 million dollars of ITC sales per quarter in there. So it's fairly modest and less than what we had produced this year. We could certainly do much better than that, but it's not a big part of the guidance. And then, you know, we have gone through the budget process. But part of what we want to make sure is to see how this market starts to develop, to see how we do with lease and PPA growth versus loan growth. As well as making sure that we can roll through and grind out a lot of the cost cuts that we've been doing and see what see if we can get some additional impact and uplift there. So we don't necessarily expect guidance to change, but admittedly, it's pretty wide range out there. So we're hoping to be able to maybe tighten that up a little bit and get a bit more granular there.

Appreciate that. Thank you. Our next question comes from Dylan Nassano from Wolf

Research. Your line is now open. Please go ahead.

Hey, good morning. Thanks for your time. I know we're running a bit long here, so just one quick question for me. So you said on the prepared remarks that you may update 2024 guidance once you see how cost cutting is playing out. We've laid out some upside cases for EBITDA, but I'm also wondering, is there a scenario where customer additions may be a bit lower as you reduce the gross growth initiatives? Any elaboration on that comment would be appreciated. Thank you.

This is John. You know, possibly, but I think we feel pretty good about where this range is. I would say that we had, you know, as we cut our capex down from the Q3 call for this year, we clearly had customer additions north of this range in our plan. And so I think we're just coming back into plan. So we feel pretty good about where we are. Again, we have the ability with the accessory channels and the other services to be able to sell more or grow customers faster, as I mentioned earlier, than our capex growth. So right now we feel pretty good about our trend here. We are seeing more and more pickup on growth as the quarter goes on. So that's quite nice to see for obviously us, but also the industry as well. And so, you know, I think we're going to have a better year overall as an industry than people think. And certainly, you know, we're on track to what we feel like is going to be yet another record year for us.

Great. Thanks,

John. We have time for just one more question from Amit Thacker from BMO Capital Markets. Your line is now open. Please go ahead.

Hey, thanks for squeezing me in. I think in the past, you guys kind of targeted a 60% debt to cap ratio. And we've been a little bit north of that the last couple of years. I was just wondering if, you know, maybe that ratio, you've got more ability to kind of add more leverage, given the size, increasing size of the overall entity or the asset sales can be designed to kind of bring you back towards that 60%. And that's kind of what we're kind of trying to drive towards.

Yeah, you're right. So we've been targeting that 55 to 60 and we're about 68 and then pegging there for the last few quarters. We're going to, you know, a long term target is to bring that down in the 55 to 60. So, again, primarily focused on generating cash and paying down debt. So even with selling of assets and monetizing, I would expect to see that to be a net reduction of debt or would necessarily make that much sense to do. So we're going to bring that down. I think that's a good call out. And it's something that clearly it's my top focus.

OK, and then Mike, something within kind of like the loan portfolio, you guys talked about kind of what sorts of assets would be more, I guess, make more sense for you to kind of potentially look at monetizing. Can you just give us a sense for like, you know, what's the what's kind of a notional value of that, whether it's loans or TPO?

On the marginal origination, that which has not been securitized yet.

Yeah.

We probably got not quite a billion within in service and within the warehouses right now on loans. Probably won't generate another call it billion of net origination over the course of the next 12 months. So that's that's your pool of existing assets that we could go after, absent absent a pickup in loan origination.

Great. Thank you.

Thank you.

That concludes the Q&A portion of today's call. I will now hand back over to John Vega for any final remarks.

Thank you. We are going to continue aggressively pursue cost cuts to improve our operating leverage. We're going to continue to expand our margins. Most importantly, we're reaching scale and we're prioritizing cash generation. We look forward to updating you on our execution as we work to deliver excellent energy services to a growing number of customers around the country and to deliver returns to our shareholders. Thank you for joining us.

That concludes today's CINOVA fourth quarter for year 2023 earnings conference call. You may now disconnect your line.