Sunrun, Inc. Q3 FY2024 earnings call

• Sunrun reached the 1 million customer milestone, set new records for storage installations, and had solid quarter-over-quarter growth for solar installations.
• Leading with storage offering, achieving nearly 50% share of residential storage installations in America, with 60% of new customers having storage installed in Q3. Networked storage capacity reached 2.1 gigawatt-hours.
• 16 grid service programs active with over 20,000 customers, including activating New York’s largest residential power plant. Customers benefit from backup power during outages and direct payments or discounted batteries.
• New homes business growing, working with 9 of top 10 new home builders in California and over half of top 20 in US, expecting at least 50% growth next year.
• Focus on accelerating clean energy differentiation, launching products/services to expand customer lifetime values, and maintaining margin- and customer-focused approach.

In Q3, Solar Energy Capacity installed was approximately 230 megawatts, within the guidance range of 220 to 230 megawatts. Storage installations were 336 megawatt hours, up 92% year-over-year, with a 60% attachment rate to new installations. The company ended Q3 with over one million customers and approximately 858,000 Subscribers representing 7.3 gigawatts of Networked Solar Energy Capacity, a 13% increase year-over-year. Subscribers generate significant recurring revenue, with annual recurring revenue (ARR) standing at over $1.5 billion, up 22% year-over-year.

• Q3 cash generation was $2.5 million, consistent with positive guidance. Expect Q4 cash generation $50 to $125 million. 2025 cash generation expected $350 to $600 million.
• Storage attachment rates to remain around 60% or slightly higher. Net Subscriber Values expected to increase in Q4 compared to Q3.
• Assumptions include 45% weighted average ITC level in 2025, battery attachment rates around 60%, and maturing tax credit transfer market to improve timing of cash generation.

• Policy uncertainty, particularly around the Inflation Reduction Act (IRA) and ITC changes.
• Competitive pricing pressures from new entrants with aggressive pricing.
• Supply chain and tariff risks, though module costs are a small part of the cost stack, and industry is already burdened by tariffs.

Q: Brian Lee from Goldman Sachs asked about the implications of the election outcome on cash generation targets, especially ITC-related ones.

A: Mary Powell stated outright repeal of the IRA is highly unlikely, and Danny Abajian mentioned funds are funding against all three adders and investors view it as secure.

Q: Julien Dumoulin-Smith from Jeffries asked about debt paydown and competitive landscape.

A: Danny Abajian said they will continue paying down debt, including the revolver, and competitive landscape has seen aggressive pricing from some players with expected corrections.

Q: Andrew Percoco from Morgan Stanley asked about tariff risk and ABS markets.

A: Danny Abajian said module costs are a small part of the cost stack, and there's experience in dealing with tax code changes.

Q: Kashy Harrison from Piper Sandler asked about election impact on ITC and growth.

A: Mary Powell and Paul Dickson mentioned they can adjust to policy tweaks, and Danny Abajian talked about volume growth and unit margin expansion.

Q: James West from Evercore ISI asked about virtual power plants.

A: Mary Powell said it's about regulatory and utility environment, and Sunrun is leading in this space.

Q: Praneeth Satish from Wells Fargo asked about new homes unit economics and domestic content.

A: Paul Dickson said new homes have efficient economics, and Danny Abajian talked about margin target setting for domestic content.

Q: Philip Shen from ROTH Capital Partners asked about Powerwall 3 supply and domestic content.

A: Paul Dickson said no supply issues with Powerwall 3, and Danny Abajian talked about domestic content qualification pickup.

Q: Dylan Nassano from Wolfe Research asked about domestic content and grid services revenue.

A: Danny Abajian said domestic content qualification will pick up, and grid services revenue is in line with assumptions.

Q: Andre Adams from Oppenheimer asked about labor and permitting.

A: Paul Dickson said seeing strong labor demand and progress on automated permitting.

Q: Maheep Mandloi from Mizuho asked about safe harbor process.

A: Danny Abajian said they have a developed playbook for safe harbor processes.

Q: Noah from Truist Securities asked about new homes profitability.

A: Danny Abajian said new homes have similar margin profile with cost efficiencies as the traditional subscription model.