Sunnova Energy International Inc.

Good morning and welcome to Sanova's fourth quarter and full year 2024 earnings conference call. Today's call is being recorded and we'll have allocated an hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Rodney McMahon, Vice President, Investor Relations at Sanova. Thank you and please go ahead, Rodney.

Thank you, Operator. Before we begin, please note that 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, and our 2024 Form 10-K. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. On the call today are John Berger, Sonoma's Chairman and Chief Executive Officer, Eric Williams, Executive Vice President and Chief Financial Officer, and Paul Matthews, Executive Vice President and Chief Operating Officer. I will now turn the call over to John.

Good morning, everyone, and thank you for joining today's call. As you're aware, the fourth quarter of 2024 was a challenging time for our industry. Peer distress and stubbornly high interest rates, along with regulatory and political uncertainties, made both consumers and capital providers more cautious. This backdrop slowed the flow of tax equity, which in turn lowered the amount of capital we were able to deploy, ultimately leading to our 2024 cash generation to come in below expectations. But the team delivered a strong operational performance in a few key areas. This includes, over the course of the last two years, a reduction in net service expense of 24% per customer, while also reducing the total work orders open for our fleet by 12 percent this occurred while growing our cumulative solar customer base by over 70 percent and subsequently reducing our average age of work order by 83 percent building on the strengths of the business yet also facing the realities of this market we believe we have made the adjustments needed to better position sunova for success in 2025 and beyond turning to slide four i want to share how we have positioned SNOVA against the headwinds and backdrop I described. This includes continuing to prioritize margin overgrowth by focusing our originations in the most attractive markets and offering only our highest margin energy services, such as our solar lease and PPPA offerings, which now make up effectively 100% of our solar financings. 2024 was a year of consistent price increases to offset a higher cost of capital. If necessary, we will raise pricing again to protect our margins. Second, reducing expenses and decreasing demand on our working capital. Recently, we reduced our headcount by over 15%, which is expected to contribute approximately $35 million towards a total estimated annual cash savings of approximately $70 million. Since the end of 2023, our total headcount has declined by 30%. We further optimized working capital through revised dealer payments that are better aligned with our funding cycles and the current market structure. creating less lag between tax equity and debt funding and dealer payments. We also signed a non-recourse asset-based loan facility, barring against our own net contracted cash value. You've heard me reference this embedded value before, and it was the right time to access it to strengthen the company. This facility will be used to manage our working capital, serve as a bridge to additional tax equity, and enhance our ability to advance systems in progress and add new originations. Third, we have taken additional steps to further strengthen and maximize our asset-level funding. I will walk you through the details on the next slide, but at a high level, we significantly increased our amount of asset-level financing, including closing a $500 million tax equity fund in late December. However, the structure of this fund required the $75 million received at closing to be included in restricted cash. Thus, it did not contribute to our cash generation guidance as we expected. In February, another $50 million was released under the Segment Tax Equity Fund. Executing on these three items remains our top priority. We believe doing so best positions Sonoma for success and helps us address our late 2026 corporate debt maturities by mid-2025. I want to share in more detail how we are maximizing our asset-level capital in the current environment. Despite the more cautious capital markets environment, as you can see on slide 5, in 2024, we securitized $1.8 billion worth of solar assets and customer notes receivable and raised $1.3 billion of tax equity. Combined, these two sources of capital generated over $1 billion more in asset-level financing compared to the prior year, a company record. 2024 also marked the first year in the company's history we did not issue corporate-level capital. As I noted earlier, we did not reach our cash generation target. We were well positioned to achieve it coming out of the third quarter, but our guidance was back-weighted for the fourth quarter, and then we faced a number of headwinds at year-end. Most notable was the slowdown in project finance markets as investors paused to assess the impact of the election, which resulted in delays to some of the tax equity funds we anticipated to close in the fourth quarter. In response to this market tightness, we needed to slow our originations to match the pace of our own funding, And this further impacted our ability to generate cash due to a lack of origination moving through our system. As a reminder, we generate cash through a combination of recurring cash flows from our customers and through our ability to originate new customers and raise routine financing to support investment and growth. Slide six provides an overview of our path forward. In just the first couple of months into the new year, we have taken further steps to reduce costs without sacrificing customer service or quality, adjusted dealer payment terms to better match our funding, and finally, we have signed the non-recourse asset-based loan facility. With these items accomplished, we are now focusing our attention on our late 2026 corporate debt maturities with a mid-2025 target resolution date. With this, I'll turn the call over to Eric.