NASDAQ:RUN Sunrun Q2 2025 Earnings Report $12.00 +2.93 (+32.30%) Closing price 08/7/2025 04:00 PM EasternExtended Trading$12.06 +0.06 (+0.50%) As of 04:41 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Sunrun EPS ResultsActual EPS$1.07Consensus EPS -$0.18Beat/MissBeat by +$1.25One Year Ago EPS$0.55Sunrun Revenue ResultsActual Revenue$569.34 millionExpected Revenue$555.42 millionBeat/MissBeat by +$13.91 millionYoY Revenue Growth+8.70%Sunrun Announcement DetailsQuarterQ2 2025Date8/6/2025TimeAfter Market ClosesConference Call DateWednesday, August 6, 2025Conference Call Time4:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Sunrun Q2 2025 Earnings Call TranscriptProvided by QuartrAugust 6, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: In Q2, Sunrun delivered $1.6 billion in aggregate subscriber value (up 40% year-over-year) and achieved a record contracted net value creation of $376 million, well above guidance. Positive Sentiment: Sunrun generated positive cash for the fifth consecutive quarter ($27 million) and ended Q2 with $618 million in unrestricted cash after paying down $21 million in recourse debt. Positive Sentiment: With a 70% storage attachment rate on new installations and over 3 GWh of dispatchable energy (targeting >10 GWh by 2029), Sunrun is the largest home-to-grid operator, enrolling over 71,000 customers in VPP programs. Positive Sentiment: Sunrun’s policy position is strengthened by the 48E commercial ITC (which extends storage credits through 2033), a safe-harbor strategy to retain solar credits, and >40% share of national storage installations. Positive Sentiment: Sunrun maintains deep access to capital with $1.7 billion of YTD tax equity commitments, $323 million in warehouse loans, a $431 million securitization priced at 6.37%, and raised full-year 2025 guidance for subscriber value and net value creation. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallSunrun Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Good afternoon and welcome to Sunrun's Second Quarter Earnings Conference Call. Please note that this call is being recorded and that one hour has been allotted for the call, including the Q and A session. I will now turn the call over to Patrick Jovan, Sunrun's Investor Relations Officer. Please go ahead, sir. Patrick JobinDeputy CFO & IR Officer at Sunrun00:00:26Thank you, operator. Before we begin, please note that certain remarks we will make on this call constitute forward looking statements. Though we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward looking statements. Please also note these statements are being made as of today, we disclaim any obligation to update or revise them. Patrick JobinDeputy CFO & IR Officer at Sunrun00:00:53Please note, during this earnings call, we may refer to certain non GAAP measures, including cash generation and aggregate creation costs, which are not measures prepared in accordance with U. S. GAAP. The non GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and other investor materials available on the company's Investor Relations website. Patrick JobinDeputy CFO & IR Officer at Sunrun00:01:19These non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U. S. GAAP. On the call today are Mary Powell, Sunrun's CEO Danny Abadjan, Sunrun's CFO and Paul Dixon, Sunrun's President and Chief Revenue Officer. The presentation is available on Sunrun's Investor Relations website along with supplemental materials. Patrick JobinDeputy CFO & IR Officer at Sunrun00:01:41An audio replay of today's call along with a copy of today's prepared remarks and transcript including Q and A will be posted to the Sunrun's Investor Relations website shortly after the call. And now let me turn the call over to Mary. Mary PowellCEO at Sunrun00:01:53Thank you, Patrick, and thank all of you for joining us today. In the second quarter, we delivered strong financial and operating results while delivering a best in class customer experience for over 1,000,000 Americans. We generated $1,600,000,000 in top line aggregate subscriber value, significantly exceeding our guidance and growing 40% year over year. Contracted net value creation of $376,000,000 which was our highest ever, more than doubled from last quarter and was also well above guidance. We generated this record profitability by growing the attachment rate of our storage offerings to an all time high of 70% of customer additions in the period and by driving significant cost efficiencies and performance improvements across the business. Mary PowellCEO at Sunrun00:02:42We also reported the highest upfront net subscriber value quarter in the company's history, a 17 percentage point margin improvement compared to the prior year and now representing an 11% margin on contracted subscriber value. We achieved this result by growing contracted subscriber value, while reducing our installation and customer acquisition costs. The trends in our operating performance highlight the cash generation trajectory of the business, as our customer origination activities are financed over the coming quarters. We are structurally generating cash. In the quarter, we generated $27,000,000 in cash, our fifth consecutive quarter of positive cash generation. Mary PowellCEO at Sunrun00:03:26While the quarterly number is lower than our prior guidance, we are on track to meet our cash generation outlook of $200,000,000 to $500,000,000 for the full year. We paid down another $21,000,000 in recourse debt in the quarter and ended with $618,000,000 in unrestricted cash, a $13,000,000 increase from the prior quarter. One of the things that excites me the most about the work of the team over the last couple of years and that really accelerated this quarter is our definitive leading position as the nation's largest home to grid distributed power plant operator. We have transformed the business to be a provider of energy resilience for homeowners and a formidable independent power producer. Now with more than three gigawatt hours of dispatchable energy from our fleet of home batteries and nearly eight gigawatts of solar generation capacity. Mary PowellCEO at Sunrun00:04:21Our transition to lead with storage and provide more sophisticated products and services not only differentiates us in the market, but also provides a tremendous energy resource that is extremely valuable to the grid. We now have nearly 200,000 storage systems installed. Over 71,000 customers have enrolled in Home to Grid programs, representing 300% year over year growth. These programs provided three fifty four megawatts of power capacity to the grid over the last year. Based on current activities and the energy capacity challenges our country faces, we are finding that our prior estimate of $2,000 or more in incremental net present value per participating customer is not only realistic, it is likely conservative. Mary PowellCEO at Sunrun00:05:11As we continue to scale storage and provide utility scale energy resources back to the grid, we expect a rapidly growing cash flow stream over the coming years. We expect to have more than 10 gigawatt hours of dispatchable energy online by 2029. Turning to an update on policy on slide eight. Paul and I spent a good portion of the quarter actively engaged in Washington DC and in legislative offices around the country to ensure that the work we are doing to build the nation's largest distributed power plant, driving American energy independence and dominance is well understood. What we do is provide our customers with an opportunity to take control of their own energy future and at the same time help Americans get vital energy capacity they need by strengthening the grid. Mary PowellCEO at Sunrun00:06:03Given our rapid transition over the last couple of years, many stakeholders hadn't realized we are scaling just what the country needs, a massive customer base of Americans who become independent power producers that provide a valuable dispatchable energy resource to America's grid. While there were a few twists and turns in the process that led up to the final budget bill, the ultimate legislation is something that will encourage the continued build out of dispatchable energy. Sunrun is well positioned to continue to generate strong financial returns under the enacted legislation. The investment tax credit for customers who purchase solar outright or finance it with a loan known as 25D will sunset at the 2025. Sunrun, however, primarily benefits from the commercial investment tax credit known as 48E, as 94% of new customer additions are subscribers. Mary PowellCEO at Sunrun00:07:04The 48E credit ends starting in 2028 for the solar portion of a project, but remains in place for storage through 02/1933. While the sunset of the 25D homeowner tax credit could lead to large declines for a segment of the market in certain geographies, Sunrun is positioned to continue to grow margins and volumes into 2026. You can see on Slides nine and ten that nationally we represent over 40% of storage installations and more than one third of subscription volumes. While market dynamics will present significant growth and market share opportunities, our focus will remain on running a sustainable business with strong margins, high quality installations and delighted customers. We are building a business that can generate value with lower incentives. Mary PowellCEO at Sunrun00:07:57On slide 11, we demonstrate one of many achievable paths to generating strong margins in 2028 without the solar portion of the tax credit. With conservative assumptions for pricing increases against utility rate escalation, equipment cost declines, customer acquisition cost reductions and grid services value, we would more than offset the reduction of the solar tax credit. These items are just a subset of the value we plan to unlock in the years ahead. While we are planning for a step down in the solar portion of the tax credit in 2028, we are of course taking actions to lengthen our runway. Per statute and current treasury guidance, projects that have commenced construction before July 2026 are eligible for the solar portion of the tax credit beyond 2027. Mary PowellCEO at Sunrun00:08:49In accordance with these rules, Sunrun has already commenced construction on projects or plans too soon in order to retain the full solar portion of the tax credits through 02/1930. Treasury guidance on the requirements to commence construction may be updated, but new guidance is not expected to be retroactive and must be consistent with legislative statute. I'll now turn the call over to Danny for the financial update and outlook. Danny AbajianCFO at Sunrun00:09:17Thank you, Mary. Turning first to the unit level results for the quarter on Slide 13. Subscriber value increased to approximately $54,000 a 22% increase compared to the prior year as we increased our storage attachment rate by 16 percentage points to 78%, grew our Flex deployments and benefited from a 43% weighted average ITC level, an increase of seven percentage points from Q2 of last year. Subscriber value reflects a 7.4% discount rate this period. We meaningfully reduced costs as well with creation costs falling 4% from the prior year. Danny AbajianCFO at Sunrun00:09:55Though installation costs were approximately flat to the prior year, we were able to offset a 12% increase in equipment costs driven by the jump in storage attachment rate with a 13% improvement in non equipment costs such as install labor and other soft costs. We also lowered customer acquisition costs and overhead by 10% on a per subscriber addition basis. We accomplished these strong cost reduction outcomes by delivering high quality, maintaining strength safety standards and embracing product and technological innovation. The higher subscriber value and lower creation costs led to a 182% year over year growth in net subscriber value to $17,000 the highest outcome in the company's history. Turning now to aggregate results on slide 14. Danny AbajianCFO at Sunrun00:10:43These results are the average unit margins multiplied by the number of units. First on the top line, aggregate subscriber value was $1,600,000,000 in the second quarter, a 40% increase from the prior year. Aggregate creation costs were $1,100,000,000 which includes all CapEx and asset origination OpEx, including overhead expenses. Excluding the expected present value from non contracted or upside cash flows, our contracted net value creation was $376,000,000 an increase of $285,000,000 from last year and about $1.64 per share. This level of value creation reflects a net margin of approximately 26% of contracted subscriber value. Danny AbajianCFO at Sunrun00:11:28Slide 15 breaks down the unit level economics and aggregate economics on a contracted only basis, along with the main underlying drivers for the increases. Turning now to Slide 16. Sunrun raises non recourse capital against the value systems we originate each period from tax equity, which monetizes the tax credits and the share of cash flows and asset backed debt, along with receiving cash from subscribers opting for prepaid leases and from governments and utilities under incentive programs. We estimate these upfront sources of cash will be approximately $1,200,000,000 for subscriber additions in Q2, representing approximately 85% of the aggregate contracted subscriber value or what we call the advance rate. When we deduct our aggregate creation cost of $1,100,000,000 we are left with an expected upfront net value creation of approximately $165,000,000 This represents our estimate for the expected net cash to Sunrun from subscriber additions in the period after raising non recourse capital and receiving upfront cash from subscribers and incentive programs. Danny AbajianCFO at Sunrun00:12:37This figure excludes any value from our equity position in the assets over time, including potential asset refinancing proceeds and cash flows from other sources such as print services, repowering or renewals or upside from flex electricity consumption above the contracted minimum. Actual realized proceeds in the quarter were 1,300,000,000 with $679,000,000 from tax equity, $526,000,000 from non recourse debt and $82,000,000 from customer prepayments and upfront incentives. Aggregate upfront proceeds differ from proceeds realized due to the former being an estimate for subscriber additions in the period and the latter being proceeds received subscriber additions that may have occurred in a different period. Cash generation, which reflects realized proceeds as opposed to aggregate upfront proceeds and is after working capital changes in parent interest expense, was $27,000,000 in Q2. Though upfront net value creation is different from cash generation due to working capital and other items, it is a strong indicator of cash generation over time. Danny AbajianCFO at Sunrun00:13:45Cash generation was impacted negatively by working capital timing in Q2. Inventory increased by $77,000,000 from Q1 and taken together with changes to payables and receivables, this represented an investment of $45,000,000 in Q2 as you can see on our cash flow statement. We also are continuing to see tax equity partners spend extra time digesting policy developments and changes with competitors leading to extended timelines associated with monetizing tax credits. Turning now to slide 19 for a brief update on our capital markets activities. Sunrun's industry leading performance as an originator and servicer of residential, solar and storage continues to provide deep access to attractively priced capital. Danny AbajianCFO at Sunrun00:14:32As of today, closed transactions and executed term sheets provide us with expected tax equity capacity to fund over two ten megawatts of projects for subscribers beyond what was deployed through the second quarter. Thus far in 2025, we have added $1,700,000,000 in tax equity, resulting in this strong runway. We also have $323,000,000 commitments available in our non recourse senior revolving warehouse loan to fund over 114 megawatts of projects for subscribers. We are underway with plans to execute multiple term out transactions in the coming months, including a private transaction with counterparties already identified. Our strong debt capital runway has allowed us to be selective in timing term out transactions. Danny AbajianCFO at Sunrun00:15:18In July, we priced our third securitization transaction of 2025, where we refinanced a season full of residential solar systems. The $431,000,000 securitization priced at a yield of 6.37%, in line with the yield of our prior securitization in March. The weighted average spread of the notes was two forty basis points, which is approximately 15 basis points higher than our securitization in March. The higher spread followed overall market movements in credit spreads for similarly rated credit. Inclusive of this transaction, we had issued approximately $1,400,000,000 in asset backed securitizations thus far in 2025. Danny AbajianCFO at Sunrun00:15:59Though some investors are taking extra time to assess transactions as noted earlier, asset financing markets are open and healthy and there are an increasing number of investors, especially from private credit, who have done repeat transactions with us. We plan to continue executing both publicly placed transactions and direct placements in the private credit markets and to expand our tax credit buyer universe with more large corporations. On the Parent Capital side, we continue to pay down recourse debt, paying down another $21,000,000 during the second quarter. Since March, have paid down recourse debt by $235,000,000 We have also increased our unrestricted cash balance by $131,000,000 and grown net earning assets by $2,400,000 over this time period. We expect to pay down our recourse debt by $100,000,000 or more in 2025. Danny AbajianCFO at Sunrun00:16:54Aside from the $5,500,000 outstanding of our 2026 convertible notes, we have no recourse debt maturities until March 2027. Over time, we will explore further capital allocation options to maximize shareholder value based on market conditions and our long term outlook. Turning now to our outlook on Slide '20. We are either reiterating or raising all of our guidance for 2025. For the full year, we are reiterating our guidance for aggregate subscriber value to be between 5,700,000,000.0 and $6,000,000,000 representing 14% growth at the midpoint. Danny AbajianCFO at Sunrun00:17:31We expect contracted net value creation to be in a range of 1,000,000,000 to $1,300,000,000 an increase from our prior range of $650,000,000 to $850,000,000 and representing 67% growth at the midpoint. Strong performance in the second quarter along with continued cost efficiency improvements and value optimization is leading to improvements in our contracted net value creation outlook for the year. We are reiterating our cash generation guidance for the year of 200,000,000 to $500,000,000 This reflects the strong operating performance along with the increased working capital investments. For the third quarter, we expect aggregate subscriber value to be approximately one point five to one point six billion dollars representing 8% growth at the midpoint and contracted net value creation to be between $275,000,000 and $375,000,000 representing 58% growth at the midpoint. We expect cash generation to be between 50,000,000 and $100,000,000 Operator, let's open the line for questions. Operator00:18:37Thank you. We will now conduct a question and answer session. Please proceed. Moses SuttonManaging Director at BNP Paribas00:19:13Thanks and congrats on quite an impressive update on really everything. On Slide 11, where you detailed the start of construction, if three years will have started construction by mid August, is that like saying extending through all of 2018 and 2019 because you don't have to save harbor for 2026 and 2027? And if so, why on that same slide would you show the bridge above the 6500 Bridge? You have all that done by 2028. It seems to me like you're properly protecting the solar ITC through year end 2029 and that you'll do 2,030 in 1H twenty twenty six notwithstanding the new rules? Danny AbajianCFO at Sunrun00:19:52Right. I think, yes, two different things. Yes, on the safe harbor, we are articulating that there's a Section 48 of a few months, there's Section 48 Safe Harbor of a few months, and then there's three years that you noted from the slide there. And you're correctly noting that that is extending the runway by a few years beyond 2028. And on the top portion of that slide, we're just doing a very simple walk of the loss in margin from the loss of the solar portion of the ITC. Danny AbajianCFO at Sunrun00:20:34You could think of that as 2028 or even a different year, but really to show the buildup back up to full recovery, if not a little bit more than full recovery of that about $6,000 per system loss in ITC value. And we've shown a few of the factors. Not in here is other cost reduction in the business. So operating cost efficiencies, servicing cost efficiencies, everything else we'll do on top of this. This will just show one possible path just to illustrate that we think it's achievable to recover that solar portion. Danny AbajianCFO at Sunrun00:21:11And of course, we're complementing that prudently with a safe harbor strategy as well. Moses SuttonManaging Director at BNP Paribas00:21:17Got it. That's what I thought. Very helpful. And then on the cash generation being reiterated, the guidance for the year, is that net of the safe harbor spend that you've done a little bit already and then finishing through August? Or will you be like netting that out when you do the cash generation math at the end of the year? Will it be excluding what you spent on Safe Harbor? How should we think about that? I don't if that's it on thinking. Danny AbajianCFO at Sunrun00:21:39Yes. We've reflected the working capital effect we noted in Q2. Danny AbajianCFO at Sunrun00:21:45We've also reflected expectation for the balance of the year. Moses SuttonManaging Director at BNP Paribas00:21:51Thank you. Danny AbajianCFO at Sunrun00:21:53Thank you. Operator00:21:53The next question comes from Brian Lee with Goldman Sachs. Please proceed. Brian LeeVice President at Goldman Sachs00:22:00Thanks for taking the questions. Kudos on the nice quarter and execution. I guess first question kind of related to Moses' question. You had the big uptick in net value creation. So one, I was wondering if you could maybe quantify the different buckets to what's driving that significant increase in the view for the year? Brian LeeVice President at Goldman Sachs00:22:24And then related to that, how come that's not really translating to anything on the cash generation outlook for the year? Maybe some of the puts and takes between what drove the uptick in net value creation, but why that's not translating at least this year into cash generation? Danny AbajianCFO at Sunrun00:22:46Yes. I'll unpack that a little bit. So the sequential growth in volume definitely was a big factor If we look year on a year over year basis, I think that's a good way to try to bridge 17 points of unit level margin expansion. We noted about seven to eight points worth of margin expansion within that associated with the increase in the weighted average ITC as we've had more adders in the business. Danny AbajianCFO at Sunrun00:23:21The battery attachment rate I noted certainly contributed and to the aggregate result, the strength in year over year growth and subscriber additions also certainly helped. So I'd say more volume with tilted towards higher value mix. And then we also noted the operating cost efficiencies have been when you look at it on the surface, it appears that the 4% year on year reduction, but actually once you unpack it and realize that all the extra materials cost consumption being fully absorbed by ops and sales and marketing cost reduction around it, the ability to keep creation costs flat year over year as we raise the top line led to huge margin expansion. Now, we're also noting in Q2 in particular, some of the activity with our inventory balance and associated change in working capital, a little bit of extra time in the capital markets as people are kind of coming back from digesting the effects of the budget bill. That market is picking up in activity. Danny AbajianCFO at Sunrun00:24:35I think it's also a little bit of the summer period coming into effect as well. But as the tax planning for the balance of the year continues, that activity picks up. So when you couple that with the sequential growth in volume and some of the installation activity to full cash conversion cycle with tax equity and term outs that we normally have, we expect to be more back half weighted in the cash generation in the business. Brian LeeVice President at Goldman Sachs00:25:05Okay, fair enough. That's helpful color. And then just on the safe harboring, presumably you're focused on meeting the 5% threshold to satisfy the commenced construction criteria. Can you give us a sense of what the kind of working capital financing needs will be between now and sort of, I guess, July 2026? Kind of quantify that for us. Brian LeeVice President at Goldman Sachs00:25:32And then where you are with respect to discussions with lenders on securing? What percent you have you secured? What percent do you have line of sight to secure? Danny AbajianCFO at Sunrun00:25:44I'll take the first part. I might need to clarify the lender question, but we did a bunch of activity at the end of last year, that's several months' worth. We talked about additional activity in the quarter. The associated effects, you can kind of see in the inventory balance and some of the change in working capital. We've continued to pursue a capital light strategy for doing safe harbor. Danny AbajianCFO at Sunrun00:26:19I think we'll continue to do that. There's also the whatever the outcome of the executive order will be, will impact the timing for more safe harboring. Of course, we feel like that'll be prospective changes, not retroactive, And we've already done a few years worth of that. Again, I think maybe your lender question was around the capital to maybe finance it. I'm not sure if I'm following that. Danny AbajianCFO at Sunrun00:26:49But again, we've been able to do it in a very, very capital efficient manner. Brian LeeVice President at Goldman Sachs00:26:56Okay. I appreciate it. Thank you guys. Operator00:27:00The next question comes from Praneeth Satish with Wells Fargo. Please proceed. Praneeth SatishAnalyst at Wells Fargo00:27:05Thanks. Good afternoon. Maybe just going back to the safe harboring question, just in terms of trying to quantify how much cash you've spent so far in Q2 and then into Q3, I guess we should look at maybe the inventory changes as kind of a proxy to those $70.70 dollars $80,000,000 something like that. And then you mentioned that by mid August, you'll have enough safe harbor to cover volume current volume through 02/1930. I guess is that we'll see what happens with the executive order. Praneeth SatishAnalyst at Wells Fargo00:27:37But is that where you stop or will you continue to safe harbor to cover expected volume growth to create a bit of a buffer? Danny AbajianCFO at Sunrun00:27:48I think we did note that there's about three years' worth of activity. There's a one year period from the date of bill passage to supplement with more safe harbor activity, we would plan to do more. The details of that will very much depend on the treasury guidance that comes out following the executive order. So we still need some more time to firm up thoughts on how much more, but we can comment by saying we do intend to do more. It's just kind of a matter of the details with what qualifies and what that strategy looks like. Praneeth SatishAnalyst at Wells Fargo00:28:28Got it. And maybe switching gears a little bit on the grid services. So I know you're estimating at least $2,000 NPV per customer. But maybe if you can help frame how much you're getting on a recurring revenue basis currently? I think we're kind of triangulating around $20,000,000 per year of recurring revenue from your enrolled customers, I guess, that in the ballpark? Praneeth SatishAnalyst at Wells Fargo00:28:53And then as a follow-up, at what point do you securitize that revenue stream? Can you securitize it if it gets to $50,000,000 Is that large enough? Or do you need to go higher than that? Because it seems like based on the guidance you provided of getting to 10 gigawatt hours by 2029, maybe you can cross you can get to 50,000,060 million dollars of recurring revenue by 2029. So just trying understand if there's a possibility of some securitizations there? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:29:22Yes. I think I'll start with that, and then I'll let Danny maybe take the securitization and financing of it. But today, we have about 3.2 gigawatts of storage devices, roughly 200,000 devices out in the market. 35% of those are currently enrolled in programs, a little over 70,000 of our battery devices are enrolled in functioning and paying programs. We're focusing heavily in our go forward strategy about around deploying battery devices and reaching penetration and concentration in areas that would have and do have attractive home to grid, virtual power plant type programs set up. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:30:01And so 35% enrollment rate as of today, and we anticipate that growing nicely. We've articulated this 10 gigawatt number that we think is very achievable for us. And so kind of like anchoring around a $20,000,000 number is, I think, conservative but directionally okay. We see that $2,000 per subscriber number being something that we are currently beating and plan to continue to beat. And I think as we build out more capacity and more robust programs, we'll have more stability that will make financing those easier, but I'll let Danny kind of take that. Danny AbajianCFO at Sunrun00:30:37Yes. And latching on to the $2,000 per customer, a vision and a realistic path to tripling the deployed capacity over the next few years. We start to push in the several 100,000 customer range for participating customers with their batteries. So on a present value basis, that starts to look very meaningful in terms of scale, several $100,000,000 of total present value. As far as the financing outlook for that, I don't think we've concluded yet. I think we're happy with the way the scale is building. Danny AbajianCFO at Sunrun00:31:20It's a new bank financing activity, certainly subscale, but as it scales, those options will open up and become very obvious to us. Praneeth SatishAnalyst at Wells Fargo00:31:28Got it. Thank you very much. Operator00:31:31The next question comes from Joe Osha with Guggenheim. Please proceed. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:31:36Hi, thank you. I've got two questions for you. First, just thinking about the market as 25D goes away, maybe I'm asking this question in the right way. Does some portion is some portion of that cash and loan market sort of convertible to lease or PPA? Or do we just think about it going away? Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:31:58I'm just trying to think about how to think about that. And I have a follow-up. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:32:03Yes, great question. Kind of independent research consensus suggests half the market is that cash loan today, and about half of that goes away. So a 25% pullback in the market overall, and we think that is quite reasonable. So if 25% of that market largely is areas where third party owned isn't a viable solution, so most of that market, I think, goes away. The sales and fulfillment partners that operate in third party owned markets that are today selling under 25D, I do think most of them make a reasonably successful transition over into a third party owned model with the solutions available to us or to them. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:32:47I think for us, there maintains a really heavy focus on quality, margin control. And I think most of the players who are a bit more focused on the superior consumer offering that third party has been for quite some time are focused around and understanding the value of dispatchable controllable load have already migrated into a third party model and are working with us. And so while I do see some migration of the 25B volume flowing into SunRush, I think there's a lot of development and maturity for many of the partners that would need to take place. Even simple things like we deploy domestically manufactured equipment and are focused on that. So having these organizations build out the supply chain and the sophistication to track and report on that to adhere with that standard for us, for example. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:33:36I think there's some development that would need to take place. But I think overall, 25% contraction in the overall market, some of that flowing to Sunrun will be natural. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:33:48Yes, I agree. And I'm just wondering if that's yes, okay, thanks. And my other question, this just occurred to me listening to your call, it's interesting that if I heard correctly, only about a third of your existing storage fleet is signed up for grid services. I'm wondering if there's been any effort to go back to the existing installed base and see if you can sign up nonparticipants. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:34:15Are you talking about signing them up to install storage with them? Or going No. Back Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:34:20to I believe I heard you say that of your installed storage fleet, about onethree is signed up for grid services. Did I hear that correctly? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:34:30Yes. Sorry. So That's because of programs Mary PowellCEO at Sunrun00:34:33and the geographies, Joe. It's not like all of our customers are technically capable to participate in programs. So again, it's more to the geographies of where we are already seeing a lot of grid constraints and challenges, and we expect to see that grow. Then we Yes. Also Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:34:54wasn't trying to be I'm just wondering whether there's some opportunity to go back and try and sort of remarket that existing fleet of storage. That was my question. Mary PowellCEO at Sunrun00:35:05100%. Yes, As is we also see tremendous opportunity with our existing customer base and we've started to do that successfully, which is scale in a super low CAC way storage attachment for the 800,000 customers that we have that don't currently have storage so that we can enroll them in these programs. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:35:30Okay. Thank you. Operator00:35:34The next question comes from David O'Carroll with Morgan Stanley. Please proceed. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:35:40Hi. Thanks so much for taking my questions. I was wondering, could you touch on just maybe how aggressively you're pursuing cost savings and cost efficiencies right now? Where do efforts stand in terms of cutting customer acquisition costs? Good progress here on creation costs, obviously, for the quarter. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:35:59Just wondering how much of that is you really pushing more aggressively there? And is that part of the near term strategy that you plan to pursue? Mary PowellCEO at Sunrun00:36:08Yes. I would obviously, we have had a laser focus on running incredibly efficient and effectively for our customers for some time, and it's really gaining a lot of traction, particularly as we've talked about onboarding a really strong AI team that has helped to accelerate that throughout the business. So we still see opportunity for years to come in the context of continuing to drive down cost in the business, drive down the cost of customer acquisition. And so yes, we not only have achieved a lot of that, but we see a lot of continued opportunity as a business. Danny AbajianCFO at Sunrun00:36:56Yes. The only additional color I'll make is on post installation servicing costs. We've seen those come down quite a bit over the last year as well. And that's been a key focus on top of installation and customer acquisition cost efficiency. On that side, we are also seeing as we kind of scale up volume, we're seeing operating cost leverage across our fixed cost base in a very, very meaningful and nice way. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:37:29Yes, absolutely. Makes sense. And then separately, where do you stand with regard to the fee provisions, particularly with your storage supply? How much visibility do you have there to manage within the thresholds of the OBV? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:37:47Yes. We've worked a lot with our partners and have had a lot of really good collaboration. We think the capabilities that we have in the timeline works quite nicely and we see a good ability to walk into it in compliance. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:38:06Great. Thank you so much. Operator00:38:10The next question comes from John Wyndham with UBS. Please proceed. Praneeth SatishAnalyst at Wells Fargo00:38:18There we go. I had to Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:38:19get off mute. Sorry. First of all, I'm not usually one to dole out compliments on quarterly calls, but over 5,700 on the upfront net subscriber value is a massive number. So good work by the team. I wanted to ask a question. Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:38:37Maybe it's been an area where people aren't looking these days. We've obviously had so much focus on the federal level. Can I give you the opportunity maybe to walk around the room a little bit and talk about anything you have an eye on in terms of state level subsidies and policy programs? Historically, in this industry, when the federal government wants to go sort of one way under one administration, the opposite states tend to go to another, meaning like the last time we saw Trump elected, saw some of the more democratic states sort of double down on their commitment to renewables. Just if you could help us on anything we should be keeping an eye on, investors should be keeping an eye on at the state level over the next six or twelve months, would really appreciate just your high level thoughts. Thank you so much. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:39:19I think like an overall perspective, you articulated a dynamic we've seen play out and to be true multiple times and continue to be the right way to think about it. Overall, are and have been long standing durable rebate programs then we continue to see a strong stable elements like the SREC programs that exist, for example, or other state programs that have dedicated funding and continued stability. And we've seen, I think, in some areas, some enhancements there and some further commitments there. And then I would say early conversations are kind of budding in several new markets that create interesting and exciting opportunities for us. Mary PowellCEO at Sunrun00:40:03Yes. The only thing I would add to that is that, as we all know from reading the news every day, the grid is running into challenges. And now with also the AI challenge and the AI race with China, you're seeing a lot more focus on energy capacity. So not only do I expect to see some of the same phenomenon we've seen in the past, but I think someone is in a particularly athletic position because I think you're going to see a real focus on storage as a part of that. So as states are looking at that exact topic of how do we make sure we're accelerating it in our jurisdiction, I think there is also a very strong focus on dispatchable resources, which again plays very well into our vision and our work in the energy space. Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:40:56Appreciate it. Thank you. Operator00:40:59The next question comes from Dylan Nosano with Wolfe Research. Please proceed. Dylan NassanoVice President at Wolfe Research, LLC00:41:04Yes, hi. Thanks for taking my question. I just want to go back to the Slide 11, where you show what a post ITC world could look like. So my question is, how can the industry kind of drive down those customer acquisition costs without significantly lowering volumes? It just seems like there's a view in the industry that sales commission payments are kind of like the lifeblood of volume growth. Dylan NassanoVice President at Wolfe Research, LLC00:41:26So to me, it seems like a little bit of a chicken and egg problem. Curious how you think you could kind of achieve both? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:41:34I think we've programmatically been focused on innovation and creating a differentiated consumer offering. And as we've done that CAC as a percent of proceeds or of value created has been programmatically falling. And we're in, I would say, the early stages of that innovation cycle and building out that differentiated offering. So our sales reps are focused more on selling consumers' features and functionality and benefit. Layer on top of that revenue that we were talking about with home to grid capabilities around virtual power plants, and that's becoming a more substantial thing as the grid build the impacts of the electron shortage, the price you'll be able to fetch to be sitting on currently a little over three gigawatts of dispatchable capabilities, soon to be 10 gigawatts over the next few years, becomes very meaningful and a real source of incremental top line revenue with no real associated CAC burdening it. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:42:36And so as those kind of dynamics play out, we have been seeing and expect that trend to continue to walk us into cap reductions in line with what's shown on Slide 11. Dylan NassanoVice President at Wolfe Research, LLC00:42:49Got it. Thanks. And then just as a follow-up. So I guess just given that residential solar is generally shorter cycle than utility scale solar, can you talk a little bit about how you plan to balance safe harbor related equipment acquisitions with a little bit more limited for demand visibility? Just trying to think through some potential headwinds like stuff like equipment degradation. Dylan NassanoVice President at Wolfe Research, LLC00:43:13And then separately kind of on that point, are you looking to further diversify your supply chain mix kind of maybe more towards some historically less represented suppliers? Danny AbajianCFO at Sunrun00:43:29I would say the take the second part first. I think the safe harbor activity and the available capacity and like ability to do the Safe Harbor activity with our existing vendor mix has been like a very achievable exercise. So I wouldn't say the activity of safe harbor necessitates a big, big change in vendor mix. It could impact the mix amongst our vendor universe, but it's not like a drastic change in mix. So then I would say that the multiple year the question on the multiple year runway, it's definitely a big combination of activity aggregating into a few years. Danny AbajianCFO at Sunrun00:44:21I think we would like to see the executive order fully play out, fully complete the strategy before we kind of get into the details. Dylan NassanoVice President at Wolfe Research, LLC00:44:33Got it. Thank you. Operator00:44:36The next question comes from Julien Dumoulin DUMOULIN Smith SMITH:] with Jefferies. Please proceed. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:44:41Hey, good afternoon. This is Hannah Velasquez on for Julien. Like everyone else has said, congrats on the quarter. So I just wanted to open up with a clarifying question. It sounds like of the three year safe harbor program that you all are pursuing, you safe harbored about one year's worth post the one big bill to date. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:45:02And then you're waiting, I assume, until Treasury issues guidance for the remaining two years. So clarifying question there, is that correct? And the follow-up there is, what gives you confidence that no portion of guidance will be retroactive? I'm sure you're hearing all the whisperings that it could be retroactive back to 7.4% or 7.7% or even retroactive back to January 1. Mary PowellCEO at Sunrun00:45:26Yes. I can hit the retroactive comment first. This is Barry. Yes, I what we're hearing, having spent quite a bit of time in Washington, I was just there last week, like what we're hearing is retroactivity is very, very low likelihood, extremely low likelihood. And I think as we've all seen, we already are seeing a lot of Republican Senate leadership expressing their desire, frankly, not for there to be a lot of changes at all, let alone retroactive changes. Mary PowellCEO at Sunrun00:45:59So everything we're hearing is that there will be there likely will be some changes and they will be prospective. So Danny, why don't you take the rest of it? Danny AbajianCFO at Sunrun00:46:07Yes. The end of year activity was about twelve months of solar equipment, six months of battery. So just to bridge that to the bullet point you see at the bottom of Slide eleven, two months of Section 48, that implies the equipment that is available from that safe harbor activity. There are six months that have commenced construction in the calendar year before the passage of the bill, as that's the six months. And then there's three years expecting to have commenced by this August. Danny AbajianCFO at Sunrun00:46:46So that's fully incremental to the first two. And then what we're talking about further to that is doing more than the three years by July 2026, which is the one year deadline from the date of bill passage and that's still in flight. Again, that's the part that's more TBD based on the treasury guidance. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:47:11Okay. Thank you. And then just as a follow-up on the battery side, when you talk about potentially getting to 10 gigawatt hours by 2029, what macro and market level assumptions are you considering to underwrite that number? Does it assume other states adopting maybe VPP programs across utilities or expanding across the current basis states where batteries is particularly strong? And then maybe you could also just identify which of the key states currently you feel will drive a bulk of this ramp to 10 gigawatt hours through 2029? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:47:45Yes. So the state participation in grid service programs, would just be the enrollment rate and the economics that would drive off of that 10 gigawatts. But the batteries absent grid service programs are highly economical and attractive for us to be selling and create a great grid resource and good customer functionality. So building the 10 gigawatt base is attractive. We're on independent program enrollment. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:48:17As we said, we're at 3.2 gigs right now, and I think a kind of steady state mix or consistent state mix of what you've been seeing, we're at about 70% attach rate today. So that puts us at about 17,000 new batteries installed on an annual basis. That puts us not far off, with little acceleration needed to be walking right into 10 gigawatts, through 2028. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:48:43Okay. Thank you. Operator00:48:45The next question comes from Manheed Mandalay with Mizuho. Please proceed. Maheep MandloiDirector at Mizuho Financial Group00:48:53Hey, thanks for taking the questions here and congratulations on the quarter here. I just wanted to clarify one thing on the safe harbor through '28, all you want to see on that. Like, what growth rates are we assuming here for that? Is this 5,760,000,000 per year kind of run rate or slightly higher than that for those years? Thanks. Danny AbajianCFO at Sunrun00:49:18Just to clarify, growth rate is that the growth rate we're assuming for our business when we design the Safe Harbor activity? Maheep MandloiDirector at Mizuho Financial Group00:49:26Yes, yes, because I think most of the only part of that shows up in inventory, presume, right? The rest shows up as Danny AbajianCFO at Sunrun00:49:33Yes, it's modestly growing. I would say the expectation obviously we've talked about the industry dynamics of 25D and the opportunity we have there. I think also we're being very disciplined on volume growth. I think we're just anchored, as we've said for many quarters on the margin growth. I think that has us with a view of modest growth and the resulting multiple year runway comment when we're talking about the magnitude of the safe harbor activity is underpinned by that assumption. Maheep MandloiDirector at Mizuho Financial Group00:50:16Got it. Appreciate that. Thanks. Operator00:50:19The next question comes from Colin Rusch with Oppenheimer. Please proceed. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:50:24Thanks so much guys. Given some of the distress that's out there in the market, are you seeing any opportunities to pick up portfolios of assets that you could optimize and leverage with kind of add on sales, especially given what you're doing with the balance sheet right now? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:50:40That's definitely an opportunity that exists out in the market. It's not something that we're pursuing. I think there's an opportunity for us to do more with battery deployments and growing with and optimizing our own fleet, and we're really focused on that for the time being. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:51:00That's super helpful. And then just on the battery side, given some of the innovations around battery chemistry and some of the extended lifetimes, are you seeing any material step functions in terms of new chemistries that you guys could get you could start deploying and ability to start driving some price and margin just through some of those incremental chemistry improvements? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:51:21Yes. One of the benefits of being the largest deployer of residential batteries in the country is you get bird pick and you get insights into what anybody is doing. So we do look at a lot of technologies. There's some incredibly impressive innovators out there, we're excited about the prospects of continuing development around cheaper batteries, port functionality, better installability. There's a lot of innovation taking place in that space, and we think we're seeing it both from our existing partners as well as new emerging opportunities. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:52:00Great. Thanks so much guys. Operator00:52:04The next question comes from Philip Shen with Roth Capital. Please proceed. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:52:10Hey guys, thanks for taking my questions. First one is a follow-up on retroactivity. I know, Mary, you talked about it being an extremely low likelihood. We're hearing similar that they're not leaning that way. That said, there is still a out there that's non zero. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:52:28And so what happens if there is retroactivity? What's the path? And then in terms of what you guys have safe harbor thus far, how have you guys done that? Is it through inverters, batteries, modules? What's the dominant category of equipment? Thanks. Mary PowellCEO at Sunrun00:52:46Yes. On the first part, Phil, nice to chat with you. The key context to keep in mind for Sunrun is that it would be isolated to claiming the ITC for solar for '28 through '30. And I think as we show in our slide, we see it as we believe Sunrun can generate attractive returns without the solar portion of the ITC. So first and foremost, that's really important to understand from a base stakes perspective. Mary PowellCEO at Sunrun00:53:14And then when you layer on top of that, that you've heard exactly what I'm hearing, exactly what everybody else is hearing, which is very low likelihood of retroactivity, I think we're feeling in a very strong position. Danny AbajianCFO at Sunrun00:53:30Vendor equipment type mix, say, kind of all of the above, I think we'll reserve comment on exact specifics of our strategy. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:53:42Okay. Thanks guys. And then shifting to my second question here, on tax credit buyers and buying some of our checks suggest a substantial percentage of the tax credit buyers out there are not interested in resi solar as a category in general. So then you have just less demand, right? And there's a fair amount of supply, especially with the new entrants, Nova's B Cave not notwithstanding, pricing appears to be challenged with some of these resi players. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:54:13We're hearing kind of in the call it mid to high $0.80 on a dollar of credit. I got to imagine the pricing for you guys is better, but to what degree has that overall kind of challenge sentiment for resi solar impacted your pricing for tax credits? Have you seen meaningful change that could impact margins despite your strong margins in the quarter, but could it impact margins ahead? Thanks. Danny AbajianCFO at Sunrun00:54:40Yes. I think it's a big, big market. We've raised $1,700,000,000 into year to date. We did note on the call in the prepared comments that buyers over the period with the playing out of the bill between the different versions, I think going into summer, the players in the market did slow down a little bit. Some of it was residential driven, wanting to understand the sponsor differentiation in the space. Danny AbajianCFO at Sunrun00:55:17That's not different than we see in the debt capital markets as well when we're doing our securitization transactions. I think in a moment like today where we're showing the results of our work, we do encourage capital providers across all markets to really due diligence on the unit margins of what the originator is originating. And we're very proud to show how healthy that looks. And the results and all the work we've done to make that be the case. And I think that's a key credit point when somebody is looking at an asset deal, wanting to understand how the sponsor differentiates from the others they may have come across. Danny AbajianCFO at Sunrun00:56:06Now residential versus utility scale, there are definitely different considerations in utility scale. You do have a very, very long deployment window, the timing of which could be very uncertain. The overall completion rate of the project, which could be uncertain. So the fact that we're unique in that there aren't that many business models with a flow rate that is very reliable. We see that in the residential space. Danny AbajianCFO at Sunrun00:56:38I think that is an attractive point. There are pricing differences between where residential clears and where utilities clears. We feel like over time those two should still converge. I think in the moment there might be certain price points that are there's market chatter around certain price points that may or may not clear. I would say that's more of an in the moment thing as opposed to like a big long term structural deviation from what we expect the economics to be. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:57:14Okay, great. Thanks, Danny. Thanks, Mary. Danny AbajianCFO at Sunrun00:57:17Thank you. Operator00:57:18The next question comes from Chris Dendronos with RBC. Please proceed. Chris DendrinosVice President at RBC Capital Markets00:57:24Yes, thank you. I wanted to follow-up on the 25D conversation and the opportunity to capture some of that, I guess, call it, non TPO market that might come to TPO. You mentioned you're not looking to employ a long tail or roll up strategy. What kind of is the strategy here? Do you do anything different, I guess, from this point forward in terms of onboarding new installers? Chris DendrinosVice President at RBC Capital Markets00:57:48Are you looking to add new installers? Or how are you thinking about making sure that you're benefiting from some of this opportunity here? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:57:58Yes. We have a really successful and great relationships with our affiliate partner business and do see some opportunity to onboard people in the 25D space to join that affiliate partner network. Just calling out that it is there are some limitations given our strict underwriting, quality, safety controls and things like that. So, there's really strict things that we think limit out much of that market. That being said, there are some fantastic players in that space that we see could be and likely will become good Sunrun partners. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:58:35Beyond that, we do see some companies seeing this as an opportunity to kind of go to safer harbors, and we've seen the onboarding and actually organizations come into Southern and become Southern employees joining our sales force or our installation labor force. And so we see that taking place as well. Those are the two mechanisms and interaction points between Sunrun and kind of the 25D market. Chris DendrinosVice President at RBC Capital Markets00:59:04Got it. And I guess maybe separately on a follow-up. Tariff impacts, quarter you had highlighted, I want to say it was maybe $1,000 or $1,300 per customer from tariffs. How has that changed, I guess today just given fluctuations in tariff rates? Thanks. Danny AbajianCFO at Sunrun00:59:25Yes. I think I mean, the short answer is we've moderated and ended up at the low end of the range. And all of the associated impacts, we've kind of reflected in our forecast and is supporting all the guidance we've given. Chris DendrinosVice President at RBC Capital Markets00:59:42Thank you.Read moreParticipantsExecutivesPatrick JobinDeputy CFO & IR OfficerMary PowellCEODanny AbajianCFOPaul DicksonPresident & Chief Revenue OfficerAnalystsMoses SuttonManaging Director at BNP ParibasBrian LeeVice President at Goldman SachsPraneeth SatishAnalyst at Wells FargoJoseph OshaSenior MD - Equity Research at Guggenheim PartnersDavid ArcaroExecutive Director - Equity Research at Morgan StanleyJon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS GroupDylan NassanoVice President at Wolfe Research, LLCHannah VelásquezSenior Associate - Equity Research at JefferiesMaheep MandloiDirector at Mizuho Financial GroupColin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLCChris DendrinosVice President at RBC Capital MarketsPowered by Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Sunrun Earnings HeadlinesTraders Buy High Volume of Sunrun Call Options (NASDAQ:RUN)1 hour ago | americanbankingnews.comSunrun (NASDAQ:RUN) Shares Gap Up After Strong Earnings2 hours ago | americanbankingnews.comCritical AI announcement set to ignite AI 2.0 Markets are jittery. Rallies fade. Sectors rotate overnight. And the true impact of new tariffs and policy shifts hasn’t even hit the data yet. That’s why smart traders are turning to a strategy built for exactly this kind of market—fast, simple, and designed to react to real price action, not predictions. | Timothy Sykes (Ad)Sunrun Stock Surges 32%. The Solar Sector Suddenly Looks Brighter.August 7 at 10:33 AM | barrons.comHere are Some of Today's Biggest Analyst CallsAugust 7 at 8:53 AM | 247wallst.comSunrun Inc. (RUN) Q2 2025 Earnings Call TranscriptAugust 7 at 7:01 AM | seekingalpha.comSee More Sunrun Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Sunrun? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Sunrun and other key companies, straight to your email. Email Address About SunrunSunrun (NASDAQ:RUN) designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels and racking; and solar leads generated to customers. In addition, the company offers battery storage along with solar energy systems; and sells services to commercial developers through multi-family and new homes. Its primary customers are residential homeowners. The company markets and sells its products through direct-to-consumer approach across online, retail, mass media, digital media, canvassing, field marketing, and referral channels, as well as its partner network. 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PresentationSkip to Participants Operator00:00:00Good afternoon and welcome to Sunrun's Second Quarter Earnings Conference Call. Please note that this call is being recorded and that one hour has been allotted for the call, including the Q and A session. I will now turn the call over to Patrick Jovan, Sunrun's Investor Relations Officer. Please go ahead, sir. Patrick JobinDeputy CFO & IR Officer at Sunrun00:00:26Thank you, operator. Before we begin, please note that certain remarks we will make on this call constitute forward looking statements. Though we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward looking statements. Please also note these statements are being made as of today, we disclaim any obligation to update or revise them. Patrick JobinDeputy CFO & IR Officer at Sunrun00:00:53Please note, during this earnings call, we may refer to certain non GAAP measures, including cash generation and aggregate creation costs, which are not measures prepared in accordance with U. S. GAAP. The non GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and other investor materials available on the company's Investor Relations website. Patrick JobinDeputy CFO & IR Officer at Sunrun00:01:19These non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U. S. GAAP. On the call today are Mary Powell, Sunrun's CEO Danny Abadjan, Sunrun's CFO and Paul Dixon, Sunrun's President and Chief Revenue Officer. The presentation is available on Sunrun's Investor Relations website along with supplemental materials. Patrick JobinDeputy CFO & IR Officer at Sunrun00:01:41An audio replay of today's call along with a copy of today's prepared remarks and transcript including Q and A will be posted to the Sunrun's Investor Relations website shortly after the call. And now let me turn the call over to Mary. Mary PowellCEO at Sunrun00:01:53Thank you, Patrick, and thank all of you for joining us today. In the second quarter, we delivered strong financial and operating results while delivering a best in class customer experience for over 1,000,000 Americans. We generated $1,600,000,000 in top line aggregate subscriber value, significantly exceeding our guidance and growing 40% year over year. Contracted net value creation of $376,000,000 which was our highest ever, more than doubled from last quarter and was also well above guidance. We generated this record profitability by growing the attachment rate of our storage offerings to an all time high of 70% of customer additions in the period and by driving significant cost efficiencies and performance improvements across the business. Mary PowellCEO at Sunrun00:02:42We also reported the highest upfront net subscriber value quarter in the company's history, a 17 percentage point margin improvement compared to the prior year and now representing an 11% margin on contracted subscriber value. We achieved this result by growing contracted subscriber value, while reducing our installation and customer acquisition costs. The trends in our operating performance highlight the cash generation trajectory of the business, as our customer origination activities are financed over the coming quarters. We are structurally generating cash. In the quarter, we generated $27,000,000 in cash, our fifth consecutive quarter of positive cash generation. Mary PowellCEO at Sunrun00:03:26While the quarterly number is lower than our prior guidance, we are on track to meet our cash generation outlook of $200,000,000 to $500,000,000 for the full year. We paid down another $21,000,000 in recourse debt in the quarter and ended with $618,000,000 in unrestricted cash, a $13,000,000 increase from the prior quarter. One of the things that excites me the most about the work of the team over the last couple of years and that really accelerated this quarter is our definitive leading position as the nation's largest home to grid distributed power plant operator. We have transformed the business to be a provider of energy resilience for homeowners and a formidable independent power producer. Now with more than three gigawatt hours of dispatchable energy from our fleet of home batteries and nearly eight gigawatts of solar generation capacity. Mary PowellCEO at Sunrun00:04:21Our transition to lead with storage and provide more sophisticated products and services not only differentiates us in the market, but also provides a tremendous energy resource that is extremely valuable to the grid. We now have nearly 200,000 storage systems installed. Over 71,000 customers have enrolled in Home to Grid programs, representing 300% year over year growth. These programs provided three fifty four megawatts of power capacity to the grid over the last year. Based on current activities and the energy capacity challenges our country faces, we are finding that our prior estimate of $2,000 or more in incremental net present value per participating customer is not only realistic, it is likely conservative. Mary PowellCEO at Sunrun00:05:11As we continue to scale storage and provide utility scale energy resources back to the grid, we expect a rapidly growing cash flow stream over the coming years. We expect to have more than 10 gigawatt hours of dispatchable energy online by 2029. Turning to an update on policy on slide eight. Paul and I spent a good portion of the quarter actively engaged in Washington DC and in legislative offices around the country to ensure that the work we are doing to build the nation's largest distributed power plant, driving American energy independence and dominance is well understood. What we do is provide our customers with an opportunity to take control of their own energy future and at the same time help Americans get vital energy capacity they need by strengthening the grid. Mary PowellCEO at Sunrun00:06:03Given our rapid transition over the last couple of years, many stakeholders hadn't realized we are scaling just what the country needs, a massive customer base of Americans who become independent power producers that provide a valuable dispatchable energy resource to America's grid. While there were a few twists and turns in the process that led up to the final budget bill, the ultimate legislation is something that will encourage the continued build out of dispatchable energy. Sunrun is well positioned to continue to generate strong financial returns under the enacted legislation. The investment tax credit for customers who purchase solar outright or finance it with a loan known as 25D will sunset at the 2025. Sunrun, however, primarily benefits from the commercial investment tax credit known as 48E, as 94% of new customer additions are subscribers. Mary PowellCEO at Sunrun00:07:04The 48E credit ends starting in 2028 for the solar portion of a project, but remains in place for storage through 02/1933. While the sunset of the 25D homeowner tax credit could lead to large declines for a segment of the market in certain geographies, Sunrun is positioned to continue to grow margins and volumes into 2026. You can see on Slides nine and ten that nationally we represent over 40% of storage installations and more than one third of subscription volumes. While market dynamics will present significant growth and market share opportunities, our focus will remain on running a sustainable business with strong margins, high quality installations and delighted customers. We are building a business that can generate value with lower incentives. Mary PowellCEO at Sunrun00:07:57On slide 11, we demonstrate one of many achievable paths to generating strong margins in 2028 without the solar portion of the tax credit. With conservative assumptions for pricing increases against utility rate escalation, equipment cost declines, customer acquisition cost reductions and grid services value, we would more than offset the reduction of the solar tax credit. These items are just a subset of the value we plan to unlock in the years ahead. While we are planning for a step down in the solar portion of the tax credit in 2028, we are of course taking actions to lengthen our runway. Per statute and current treasury guidance, projects that have commenced construction before July 2026 are eligible for the solar portion of the tax credit beyond 2027. Mary PowellCEO at Sunrun00:08:49In accordance with these rules, Sunrun has already commenced construction on projects or plans too soon in order to retain the full solar portion of the tax credits through 02/1930. Treasury guidance on the requirements to commence construction may be updated, but new guidance is not expected to be retroactive and must be consistent with legislative statute. I'll now turn the call over to Danny for the financial update and outlook. Danny AbajianCFO at Sunrun00:09:17Thank you, Mary. Turning first to the unit level results for the quarter on Slide 13. Subscriber value increased to approximately $54,000 a 22% increase compared to the prior year as we increased our storage attachment rate by 16 percentage points to 78%, grew our Flex deployments and benefited from a 43% weighted average ITC level, an increase of seven percentage points from Q2 of last year. Subscriber value reflects a 7.4% discount rate this period. We meaningfully reduced costs as well with creation costs falling 4% from the prior year. Danny AbajianCFO at Sunrun00:09:55Though installation costs were approximately flat to the prior year, we were able to offset a 12% increase in equipment costs driven by the jump in storage attachment rate with a 13% improvement in non equipment costs such as install labor and other soft costs. We also lowered customer acquisition costs and overhead by 10% on a per subscriber addition basis. We accomplished these strong cost reduction outcomes by delivering high quality, maintaining strength safety standards and embracing product and technological innovation. The higher subscriber value and lower creation costs led to a 182% year over year growth in net subscriber value to $17,000 the highest outcome in the company's history. Turning now to aggregate results on slide 14. Danny AbajianCFO at Sunrun00:10:43These results are the average unit margins multiplied by the number of units. First on the top line, aggregate subscriber value was $1,600,000,000 in the second quarter, a 40% increase from the prior year. Aggregate creation costs were $1,100,000,000 which includes all CapEx and asset origination OpEx, including overhead expenses. Excluding the expected present value from non contracted or upside cash flows, our contracted net value creation was $376,000,000 an increase of $285,000,000 from last year and about $1.64 per share. This level of value creation reflects a net margin of approximately 26% of contracted subscriber value. Danny AbajianCFO at Sunrun00:11:28Slide 15 breaks down the unit level economics and aggregate economics on a contracted only basis, along with the main underlying drivers for the increases. Turning now to Slide 16. Sunrun raises non recourse capital against the value systems we originate each period from tax equity, which monetizes the tax credits and the share of cash flows and asset backed debt, along with receiving cash from subscribers opting for prepaid leases and from governments and utilities under incentive programs. We estimate these upfront sources of cash will be approximately $1,200,000,000 for subscriber additions in Q2, representing approximately 85% of the aggregate contracted subscriber value or what we call the advance rate. When we deduct our aggregate creation cost of $1,100,000,000 we are left with an expected upfront net value creation of approximately $165,000,000 This represents our estimate for the expected net cash to Sunrun from subscriber additions in the period after raising non recourse capital and receiving upfront cash from subscribers and incentive programs. Danny AbajianCFO at Sunrun00:12:37This figure excludes any value from our equity position in the assets over time, including potential asset refinancing proceeds and cash flows from other sources such as print services, repowering or renewals or upside from flex electricity consumption above the contracted minimum. Actual realized proceeds in the quarter were 1,300,000,000 with $679,000,000 from tax equity, $526,000,000 from non recourse debt and $82,000,000 from customer prepayments and upfront incentives. Aggregate upfront proceeds differ from proceeds realized due to the former being an estimate for subscriber additions in the period and the latter being proceeds received subscriber additions that may have occurred in a different period. Cash generation, which reflects realized proceeds as opposed to aggregate upfront proceeds and is after working capital changes in parent interest expense, was $27,000,000 in Q2. Though upfront net value creation is different from cash generation due to working capital and other items, it is a strong indicator of cash generation over time. Danny AbajianCFO at Sunrun00:13:45Cash generation was impacted negatively by working capital timing in Q2. Inventory increased by $77,000,000 from Q1 and taken together with changes to payables and receivables, this represented an investment of $45,000,000 in Q2 as you can see on our cash flow statement. We also are continuing to see tax equity partners spend extra time digesting policy developments and changes with competitors leading to extended timelines associated with monetizing tax credits. Turning now to slide 19 for a brief update on our capital markets activities. Sunrun's industry leading performance as an originator and servicer of residential, solar and storage continues to provide deep access to attractively priced capital. Danny AbajianCFO at Sunrun00:14:32As of today, closed transactions and executed term sheets provide us with expected tax equity capacity to fund over two ten megawatts of projects for subscribers beyond what was deployed through the second quarter. Thus far in 2025, we have added $1,700,000,000 in tax equity, resulting in this strong runway. We also have $323,000,000 commitments available in our non recourse senior revolving warehouse loan to fund over 114 megawatts of projects for subscribers. We are underway with plans to execute multiple term out transactions in the coming months, including a private transaction with counterparties already identified. Our strong debt capital runway has allowed us to be selective in timing term out transactions. Danny AbajianCFO at Sunrun00:15:18In July, we priced our third securitization transaction of 2025, where we refinanced a season full of residential solar systems. The $431,000,000 securitization priced at a yield of 6.37%, in line with the yield of our prior securitization in March. The weighted average spread of the notes was two forty basis points, which is approximately 15 basis points higher than our securitization in March. The higher spread followed overall market movements in credit spreads for similarly rated credit. Inclusive of this transaction, we had issued approximately $1,400,000,000 in asset backed securitizations thus far in 2025. Danny AbajianCFO at Sunrun00:15:59Though some investors are taking extra time to assess transactions as noted earlier, asset financing markets are open and healthy and there are an increasing number of investors, especially from private credit, who have done repeat transactions with us. We plan to continue executing both publicly placed transactions and direct placements in the private credit markets and to expand our tax credit buyer universe with more large corporations. On the Parent Capital side, we continue to pay down recourse debt, paying down another $21,000,000 during the second quarter. Since March, have paid down recourse debt by $235,000,000 We have also increased our unrestricted cash balance by $131,000,000 and grown net earning assets by $2,400,000 over this time period. We expect to pay down our recourse debt by $100,000,000 or more in 2025. Danny AbajianCFO at Sunrun00:16:54Aside from the $5,500,000 outstanding of our 2026 convertible notes, we have no recourse debt maturities until March 2027. Over time, we will explore further capital allocation options to maximize shareholder value based on market conditions and our long term outlook. Turning now to our outlook on Slide '20. We are either reiterating or raising all of our guidance for 2025. For the full year, we are reiterating our guidance for aggregate subscriber value to be between 5,700,000,000.0 and $6,000,000,000 representing 14% growth at the midpoint. Danny AbajianCFO at Sunrun00:17:31We expect contracted net value creation to be in a range of 1,000,000,000 to $1,300,000,000 an increase from our prior range of $650,000,000 to $850,000,000 and representing 67% growth at the midpoint. Strong performance in the second quarter along with continued cost efficiency improvements and value optimization is leading to improvements in our contracted net value creation outlook for the year. We are reiterating our cash generation guidance for the year of 200,000,000 to $500,000,000 This reflects the strong operating performance along with the increased working capital investments. For the third quarter, we expect aggregate subscriber value to be approximately one point five to one point six billion dollars representing 8% growth at the midpoint and contracted net value creation to be between $275,000,000 and $375,000,000 representing 58% growth at the midpoint. We expect cash generation to be between 50,000,000 and $100,000,000 Operator, let's open the line for questions. Operator00:18:37Thank you. We will now conduct a question and answer session. Please proceed. Moses SuttonManaging Director at BNP Paribas00:19:13Thanks and congrats on quite an impressive update on really everything. On Slide 11, where you detailed the start of construction, if three years will have started construction by mid August, is that like saying extending through all of 2018 and 2019 because you don't have to save harbor for 2026 and 2027? And if so, why on that same slide would you show the bridge above the 6500 Bridge? You have all that done by 2028. It seems to me like you're properly protecting the solar ITC through year end 2029 and that you'll do 2,030 in 1H twenty twenty six notwithstanding the new rules? Danny AbajianCFO at Sunrun00:19:52Right. I think, yes, two different things. Yes, on the safe harbor, we are articulating that there's a Section 48 of a few months, there's Section 48 Safe Harbor of a few months, and then there's three years that you noted from the slide there. And you're correctly noting that that is extending the runway by a few years beyond 2028. And on the top portion of that slide, we're just doing a very simple walk of the loss in margin from the loss of the solar portion of the ITC. Danny AbajianCFO at Sunrun00:20:34You could think of that as 2028 or even a different year, but really to show the buildup back up to full recovery, if not a little bit more than full recovery of that about $6,000 per system loss in ITC value. And we've shown a few of the factors. Not in here is other cost reduction in the business. So operating cost efficiencies, servicing cost efficiencies, everything else we'll do on top of this. This will just show one possible path just to illustrate that we think it's achievable to recover that solar portion. Danny AbajianCFO at Sunrun00:21:11And of course, we're complementing that prudently with a safe harbor strategy as well. Moses SuttonManaging Director at BNP Paribas00:21:17Got it. That's what I thought. Very helpful. And then on the cash generation being reiterated, the guidance for the year, is that net of the safe harbor spend that you've done a little bit already and then finishing through August? Or will you be like netting that out when you do the cash generation math at the end of the year? Will it be excluding what you spent on Safe Harbor? How should we think about that? I don't if that's it on thinking. Danny AbajianCFO at Sunrun00:21:39Yes. We've reflected the working capital effect we noted in Q2. Danny AbajianCFO at Sunrun00:21:45We've also reflected expectation for the balance of the year. Moses SuttonManaging Director at BNP Paribas00:21:51Thank you. Danny AbajianCFO at Sunrun00:21:53Thank you. Operator00:21:53The next question comes from Brian Lee with Goldman Sachs. Please proceed. Brian LeeVice President at Goldman Sachs00:22:00Thanks for taking the questions. Kudos on the nice quarter and execution. I guess first question kind of related to Moses' question. You had the big uptick in net value creation. So one, I was wondering if you could maybe quantify the different buckets to what's driving that significant increase in the view for the year? Brian LeeVice President at Goldman Sachs00:22:24And then related to that, how come that's not really translating to anything on the cash generation outlook for the year? Maybe some of the puts and takes between what drove the uptick in net value creation, but why that's not translating at least this year into cash generation? Danny AbajianCFO at Sunrun00:22:46Yes. I'll unpack that a little bit. So the sequential growth in volume definitely was a big factor If we look year on a year over year basis, I think that's a good way to try to bridge 17 points of unit level margin expansion. We noted about seven to eight points worth of margin expansion within that associated with the increase in the weighted average ITC as we've had more adders in the business. Danny AbajianCFO at Sunrun00:23:21The battery attachment rate I noted certainly contributed and to the aggregate result, the strength in year over year growth and subscriber additions also certainly helped. So I'd say more volume with tilted towards higher value mix. And then we also noted the operating cost efficiencies have been when you look at it on the surface, it appears that the 4% year on year reduction, but actually once you unpack it and realize that all the extra materials cost consumption being fully absorbed by ops and sales and marketing cost reduction around it, the ability to keep creation costs flat year over year as we raise the top line led to huge margin expansion. Now, we're also noting in Q2 in particular, some of the activity with our inventory balance and associated change in working capital, a little bit of extra time in the capital markets as people are kind of coming back from digesting the effects of the budget bill. That market is picking up in activity. Danny AbajianCFO at Sunrun00:24:35I think it's also a little bit of the summer period coming into effect as well. But as the tax planning for the balance of the year continues, that activity picks up. So when you couple that with the sequential growth in volume and some of the installation activity to full cash conversion cycle with tax equity and term outs that we normally have, we expect to be more back half weighted in the cash generation in the business. Brian LeeVice President at Goldman Sachs00:25:05Okay, fair enough. That's helpful color. And then just on the safe harboring, presumably you're focused on meeting the 5% threshold to satisfy the commenced construction criteria. Can you give us a sense of what the kind of working capital financing needs will be between now and sort of, I guess, July 2026? Kind of quantify that for us. Brian LeeVice President at Goldman Sachs00:25:32And then where you are with respect to discussions with lenders on securing? What percent you have you secured? What percent do you have line of sight to secure? Danny AbajianCFO at Sunrun00:25:44I'll take the first part. I might need to clarify the lender question, but we did a bunch of activity at the end of last year, that's several months' worth. We talked about additional activity in the quarter. The associated effects, you can kind of see in the inventory balance and some of the change in working capital. We've continued to pursue a capital light strategy for doing safe harbor. Danny AbajianCFO at Sunrun00:26:19I think we'll continue to do that. There's also the whatever the outcome of the executive order will be, will impact the timing for more safe harboring. Of course, we feel like that'll be prospective changes, not retroactive, And we've already done a few years worth of that. Again, I think maybe your lender question was around the capital to maybe finance it. I'm not sure if I'm following that. Danny AbajianCFO at Sunrun00:26:49But again, we've been able to do it in a very, very capital efficient manner. Brian LeeVice President at Goldman Sachs00:26:56Okay. I appreciate it. Thank you guys. Operator00:27:00The next question comes from Praneeth Satish with Wells Fargo. Please proceed. Praneeth SatishAnalyst at Wells Fargo00:27:05Thanks. Good afternoon. Maybe just going back to the safe harboring question, just in terms of trying to quantify how much cash you've spent so far in Q2 and then into Q3, I guess we should look at maybe the inventory changes as kind of a proxy to those $70.70 dollars $80,000,000 something like that. And then you mentioned that by mid August, you'll have enough safe harbor to cover volume current volume through 02/1930. I guess is that we'll see what happens with the executive order. Praneeth SatishAnalyst at Wells Fargo00:27:37But is that where you stop or will you continue to safe harbor to cover expected volume growth to create a bit of a buffer? Danny AbajianCFO at Sunrun00:27:48I think we did note that there's about three years' worth of activity. There's a one year period from the date of bill passage to supplement with more safe harbor activity, we would plan to do more. The details of that will very much depend on the treasury guidance that comes out following the executive order. So we still need some more time to firm up thoughts on how much more, but we can comment by saying we do intend to do more. It's just kind of a matter of the details with what qualifies and what that strategy looks like. Praneeth SatishAnalyst at Wells Fargo00:28:28Got it. And maybe switching gears a little bit on the grid services. So I know you're estimating at least $2,000 NPV per customer. But maybe if you can help frame how much you're getting on a recurring revenue basis currently? I think we're kind of triangulating around $20,000,000 per year of recurring revenue from your enrolled customers, I guess, that in the ballpark? Praneeth SatishAnalyst at Wells Fargo00:28:53And then as a follow-up, at what point do you securitize that revenue stream? Can you securitize it if it gets to $50,000,000 Is that large enough? Or do you need to go higher than that? Because it seems like based on the guidance you provided of getting to 10 gigawatt hours by 2029, maybe you can cross you can get to 50,000,060 million dollars of recurring revenue by 2029. So just trying understand if there's a possibility of some securitizations there? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:29:22Yes. I think I'll start with that, and then I'll let Danny maybe take the securitization and financing of it. But today, we have about 3.2 gigawatts of storage devices, roughly 200,000 devices out in the market. 35% of those are currently enrolled in programs, a little over 70,000 of our battery devices are enrolled in functioning and paying programs. We're focusing heavily in our go forward strategy about around deploying battery devices and reaching penetration and concentration in areas that would have and do have attractive home to grid, virtual power plant type programs set up. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:30:01And so 35% enrollment rate as of today, and we anticipate that growing nicely. We've articulated this 10 gigawatt number that we think is very achievable for us. And so kind of like anchoring around a $20,000,000 number is, I think, conservative but directionally okay. We see that $2,000 per subscriber number being something that we are currently beating and plan to continue to beat. And I think as we build out more capacity and more robust programs, we'll have more stability that will make financing those easier, but I'll let Danny kind of take that. Danny AbajianCFO at Sunrun00:30:37Yes. And latching on to the $2,000 per customer, a vision and a realistic path to tripling the deployed capacity over the next few years. We start to push in the several 100,000 customer range for participating customers with their batteries. So on a present value basis, that starts to look very meaningful in terms of scale, several $100,000,000 of total present value. As far as the financing outlook for that, I don't think we've concluded yet. I think we're happy with the way the scale is building. Danny AbajianCFO at Sunrun00:31:20It's a new bank financing activity, certainly subscale, but as it scales, those options will open up and become very obvious to us. Praneeth SatishAnalyst at Wells Fargo00:31:28Got it. Thank you very much. Operator00:31:31The next question comes from Joe Osha with Guggenheim. Please proceed. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:31:36Hi, thank you. I've got two questions for you. First, just thinking about the market as 25D goes away, maybe I'm asking this question in the right way. Does some portion is some portion of that cash and loan market sort of convertible to lease or PPA? Or do we just think about it going away? Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:31:58I'm just trying to think about how to think about that. And I have a follow-up. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:32:03Yes, great question. Kind of independent research consensus suggests half the market is that cash loan today, and about half of that goes away. So a 25% pullback in the market overall, and we think that is quite reasonable. So if 25% of that market largely is areas where third party owned isn't a viable solution, so most of that market, I think, goes away. The sales and fulfillment partners that operate in third party owned markets that are today selling under 25D, I do think most of them make a reasonably successful transition over into a third party owned model with the solutions available to us or to them. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:32:47I think for us, there maintains a really heavy focus on quality, margin control. And I think most of the players who are a bit more focused on the superior consumer offering that third party has been for quite some time are focused around and understanding the value of dispatchable controllable load have already migrated into a third party model and are working with us. And so while I do see some migration of the 25B volume flowing into SunRush, I think there's a lot of development and maturity for many of the partners that would need to take place. Even simple things like we deploy domestically manufactured equipment and are focused on that. So having these organizations build out the supply chain and the sophistication to track and report on that to adhere with that standard for us, for example. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:33:36I think there's some development that would need to take place. But I think overall, 25% contraction in the overall market, some of that flowing to Sunrun will be natural. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:33:48Yes, I agree. And I'm just wondering if that's yes, okay, thanks. And my other question, this just occurred to me listening to your call, it's interesting that if I heard correctly, only about a third of your existing storage fleet is signed up for grid services. I'm wondering if there's been any effort to go back to the existing installed base and see if you can sign up nonparticipants. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:34:15Are you talking about signing them up to install storage with them? Or going No. Back Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:34:20to I believe I heard you say that of your installed storage fleet, about onethree is signed up for grid services. Did I hear that correctly? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:34:30Yes. Sorry. So That's because of programs Mary PowellCEO at Sunrun00:34:33and the geographies, Joe. It's not like all of our customers are technically capable to participate in programs. So again, it's more to the geographies of where we are already seeing a lot of grid constraints and challenges, and we expect to see that grow. Then we Yes. Also Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:34:54wasn't trying to be I'm just wondering whether there's some opportunity to go back and try and sort of remarket that existing fleet of storage. That was my question. Mary PowellCEO at Sunrun00:35:05100%. Yes, As is we also see tremendous opportunity with our existing customer base and we've started to do that successfully, which is scale in a super low CAC way storage attachment for the 800,000 customers that we have that don't currently have storage so that we can enroll them in these programs. Joseph OshaSenior MD - Equity Research at Guggenheim Partners00:35:30Okay. Thank you. Operator00:35:34The next question comes from David O'Carroll with Morgan Stanley. Please proceed. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:35:40Hi. Thanks so much for taking my questions. I was wondering, could you touch on just maybe how aggressively you're pursuing cost savings and cost efficiencies right now? Where do efforts stand in terms of cutting customer acquisition costs? Good progress here on creation costs, obviously, for the quarter. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:35:59Just wondering how much of that is you really pushing more aggressively there? And is that part of the near term strategy that you plan to pursue? Mary PowellCEO at Sunrun00:36:08Yes. I would obviously, we have had a laser focus on running incredibly efficient and effectively for our customers for some time, and it's really gaining a lot of traction, particularly as we've talked about onboarding a really strong AI team that has helped to accelerate that throughout the business. So we still see opportunity for years to come in the context of continuing to drive down cost in the business, drive down the cost of customer acquisition. And so yes, we not only have achieved a lot of that, but we see a lot of continued opportunity as a business. Danny AbajianCFO at Sunrun00:36:56Yes. The only additional color I'll make is on post installation servicing costs. We've seen those come down quite a bit over the last year as well. And that's been a key focus on top of installation and customer acquisition cost efficiency. On that side, we are also seeing as we kind of scale up volume, we're seeing operating cost leverage across our fixed cost base in a very, very meaningful and nice way. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:37:29Yes, absolutely. Makes sense. And then separately, where do you stand with regard to the fee provisions, particularly with your storage supply? How much visibility do you have there to manage within the thresholds of the OBV? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:37:47Yes. We've worked a lot with our partners and have had a lot of really good collaboration. We think the capabilities that we have in the timeline works quite nicely and we see a good ability to walk into it in compliance. David ArcaroExecutive Director - Equity Research at Morgan Stanley00:38:06Great. Thank you so much. Operator00:38:10The next question comes from John Wyndham with UBS. Please proceed. Praneeth SatishAnalyst at Wells Fargo00:38:18There we go. I had to Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:38:19get off mute. Sorry. First of all, I'm not usually one to dole out compliments on quarterly calls, but over 5,700 on the upfront net subscriber value is a massive number. So good work by the team. I wanted to ask a question. Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:38:37Maybe it's been an area where people aren't looking these days. We've obviously had so much focus on the federal level. Can I give you the opportunity maybe to walk around the room a little bit and talk about anything you have an eye on in terms of state level subsidies and policy programs? Historically, in this industry, when the federal government wants to go sort of one way under one administration, the opposite states tend to go to another, meaning like the last time we saw Trump elected, saw some of the more democratic states sort of double down on their commitment to renewables. Just if you could help us on anything we should be keeping an eye on, investors should be keeping an eye on at the state level over the next six or twelve months, would really appreciate just your high level thoughts. Thank you so much. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:39:19I think like an overall perspective, you articulated a dynamic we've seen play out and to be true multiple times and continue to be the right way to think about it. Overall, are and have been long standing durable rebate programs then we continue to see a strong stable elements like the SREC programs that exist, for example, or other state programs that have dedicated funding and continued stability. And we've seen, I think, in some areas, some enhancements there and some further commitments there. And then I would say early conversations are kind of budding in several new markets that create interesting and exciting opportunities for us. Mary PowellCEO at Sunrun00:40:03Yes. The only thing I would add to that is that, as we all know from reading the news every day, the grid is running into challenges. And now with also the AI challenge and the AI race with China, you're seeing a lot more focus on energy capacity. So not only do I expect to see some of the same phenomenon we've seen in the past, but I think someone is in a particularly athletic position because I think you're going to see a real focus on storage as a part of that. So as states are looking at that exact topic of how do we make sure we're accelerating it in our jurisdiction, I think there is also a very strong focus on dispatchable resources, which again plays very well into our vision and our work in the energy space. Jon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS Group00:40:56Appreciate it. Thank you. Operator00:40:59The next question comes from Dylan Nosano with Wolfe Research. Please proceed. Dylan NassanoVice President at Wolfe Research, LLC00:41:04Yes, hi. Thanks for taking my question. I just want to go back to the Slide 11, where you show what a post ITC world could look like. So my question is, how can the industry kind of drive down those customer acquisition costs without significantly lowering volumes? It just seems like there's a view in the industry that sales commission payments are kind of like the lifeblood of volume growth. Dylan NassanoVice President at Wolfe Research, LLC00:41:26So to me, it seems like a little bit of a chicken and egg problem. Curious how you think you could kind of achieve both? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:41:34I think we've programmatically been focused on innovation and creating a differentiated consumer offering. And as we've done that CAC as a percent of proceeds or of value created has been programmatically falling. And we're in, I would say, the early stages of that innovation cycle and building out that differentiated offering. So our sales reps are focused more on selling consumers' features and functionality and benefit. Layer on top of that revenue that we were talking about with home to grid capabilities around virtual power plants, and that's becoming a more substantial thing as the grid build the impacts of the electron shortage, the price you'll be able to fetch to be sitting on currently a little over three gigawatts of dispatchable capabilities, soon to be 10 gigawatts over the next few years, becomes very meaningful and a real source of incremental top line revenue with no real associated CAC burdening it. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:42:36And so as those kind of dynamics play out, we have been seeing and expect that trend to continue to walk us into cap reductions in line with what's shown on Slide 11. Dylan NassanoVice President at Wolfe Research, LLC00:42:49Got it. Thanks. And then just as a follow-up. So I guess just given that residential solar is generally shorter cycle than utility scale solar, can you talk a little bit about how you plan to balance safe harbor related equipment acquisitions with a little bit more limited for demand visibility? Just trying to think through some potential headwinds like stuff like equipment degradation. Dylan NassanoVice President at Wolfe Research, LLC00:43:13And then separately kind of on that point, are you looking to further diversify your supply chain mix kind of maybe more towards some historically less represented suppliers? Danny AbajianCFO at Sunrun00:43:29I would say the take the second part first. I think the safe harbor activity and the available capacity and like ability to do the Safe Harbor activity with our existing vendor mix has been like a very achievable exercise. So I wouldn't say the activity of safe harbor necessitates a big, big change in vendor mix. It could impact the mix amongst our vendor universe, but it's not like a drastic change in mix. So then I would say that the multiple year the question on the multiple year runway, it's definitely a big combination of activity aggregating into a few years. Danny AbajianCFO at Sunrun00:44:21I think we would like to see the executive order fully play out, fully complete the strategy before we kind of get into the details. Dylan NassanoVice President at Wolfe Research, LLC00:44:33Got it. Thank you. Operator00:44:36The next question comes from Julien Dumoulin DUMOULIN Smith SMITH:] with Jefferies. Please proceed. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:44:41Hey, good afternoon. This is Hannah Velasquez on for Julien. Like everyone else has said, congrats on the quarter. So I just wanted to open up with a clarifying question. It sounds like of the three year safe harbor program that you all are pursuing, you safe harbored about one year's worth post the one big bill to date. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:45:02And then you're waiting, I assume, until Treasury issues guidance for the remaining two years. So clarifying question there, is that correct? And the follow-up there is, what gives you confidence that no portion of guidance will be retroactive? I'm sure you're hearing all the whisperings that it could be retroactive back to 7.4% or 7.7% or even retroactive back to January 1. Mary PowellCEO at Sunrun00:45:26Yes. I can hit the retroactive comment first. This is Barry. Yes, I what we're hearing, having spent quite a bit of time in Washington, I was just there last week, like what we're hearing is retroactivity is very, very low likelihood, extremely low likelihood. And I think as we've all seen, we already are seeing a lot of Republican Senate leadership expressing their desire, frankly, not for there to be a lot of changes at all, let alone retroactive changes. Mary PowellCEO at Sunrun00:45:59So everything we're hearing is that there will be there likely will be some changes and they will be prospective. So Danny, why don't you take the rest of it? Danny AbajianCFO at Sunrun00:46:07Yes. The end of year activity was about twelve months of solar equipment, six months of battery. So just to bridge that to the bullet point you see at the bottom of Slide eleven, two months of Section 48, that implies the equipment that is available from that safe harbor activity. There are six months that have commenced construction in the calendar year before the passage of the bill, as that's the six months. And then there's three years expecting to have commenced by this August. Danny AbajianCFO at Sunrun00:46:46So that's fully incremental to the first two. And then what we're talking about further to that is doing more than the three years by July 2026, which is the one year deadline from the date of bill passage and that's still in flight. Again, that's the part that's more TBD based on the treasury guidance. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:47:11Okay. Thank you. And then just as a follow-up on the battery side, when you talk about potentially getting to 10 gigawatt hours by 2029, what macro and market level assumptions are you considering to underwrite that number? Does it assume other states adopting maybe VPP programs across utilities or expanding across the current basis states where batteries is particularly strong? And then maybe you could also just identify which of the key states currently you feel will drive a bulk of this ramp to 10 gigawatt hours through 2029? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:47:45Yes. So the state participation in grid service programs, would just be the enrollment rate and the economics that would drive off of that 10 gigawatts. But the batteries absent grid service programs are highly economical and attractive for us to be selling and create a great grid resource and good customer functionality. So building the 10 gigawatt base is attractive. We're on independent program enrollment. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:48:17As we said, we're at 3.2 gigs right now, and I think a kind of steady state mix or consistent state mix of what you've been seeing, we're at about 70% attach rate today. So that puts us at about 17,000 new batteries installed on an annual basis. That puts us not far off, with little acceleration needed to be walking right into 10 gigawatts, through 2028. Hannah VelásquezSenior Associate - Equity Research at Jefferies00:48:43Okay. Thank you. Operator00:48:45The next question comes from Manheed Mandalay with Mizuho. Please proceed. Maheep MandloiDirector at Mizuho Financial Group00:48:53Hey, thanks for taking the questions here and congratulations on the quarter here. I just wanted to clarify one thing on the safe harbor through '28, all you want to see on that. Like, what growth rates are we assuming here for that? Is this 5,760,000,000 per year kind of run rate or slightly higher than that for those years? Thanks. Danny AbajianCFO at Sunrun00:49:18Just to clarify, growth rate is that the growth rate we're assuming for our business when we design the Safe Harbor activity? Maheep MandloiDirector at Mizuho Financial Group00:49:26Yes, yes, because I think most of the only part of that shows up in inventory, presume, right? The rest shows up as Danny AbajianCFO at Sunrun00:49:33Yes, it's modestly growing. I would say the expectation obviously we've talked about the industry dynamics of 25D and the opportunity we have there. I think also we're being very disciplined on volume growth. I think we're just anchored, as we've said for many quarters on the margin growth. I think that has us with a view of modest growth and the resulting multiple year runway comment when we're talking about the magnitude of the safe harbor activity is underpinned by that assumption. Maheep MandloiDirector at Mizuho Financial Group00:50:16Got it. Appreciate that. Thanks. Operator00:50:19The next question comes from Colin Rusch with Oppenheimer. Please proceed. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:50:24Thanks so much guys. Given some of the distress that's out there in the market, are you seeing any opportunities to pick up portfolios of assets that you could optimize and leverage with kind of add on sales, especially given what you're doing with the balance sheet right now? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:50:40That's definitely an opportunity that exists out in the market. It's not something that we're pursuing. I think there's an opportunity for us to do more with battery deployments and growing with and optimizing our own fleet, and we're really focused on that for the time being. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:51:00That's super helpful. And then just on the battery side, given some of the innovations around battery chemistry and some of the extended lifetimes, are you seeing any material step functions in terms of new chemistries that you guys could get you could start deploying and ability to start driving some price and margin just through some of those incremental chemistry improvements? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:51:21Yes. One of the benefits of being the largest deployer of residential batteries in the country is you get bird pick and you get insights into what anybody is doing. So we do look at a lot of technologies. There's some incredibly impressive innovators out there, we're excited about the prospects of continuing development around cheaper batteries, port functionality, better installability. There's a lot of innovation taking place in that space, and we think we're seeing it both from our existing partners as well as new emerging opportunities. Colin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.00:52:00Great. Thanks so much guys. Operator00:52:04The next question comes from Philip Shen with Roth Capital. Please proceed. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:52:10Hey guys, thanks for taking my questions. First one is a follow-up on retroactivity. I know, Mary, you talked about it being an extremely low likelihood. We're hearing similar that they're not leaning that way. That said, there is still a out there that's non zero. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:52:28And so what happens if there is retroactivity? What's the path? And then in terms of what you guys have safe harbor thus far, how have you guys done that? Is it through inverters, batteries, modules? What's the dominant category of equipment? Thanks. Mary PowellCEO at Sunrun00:52:46Yes. On the first part, Phil, nice to chat with you. The key context to keep in mind for Sunrun is that it would be isolated to claiming the ITC for solar for '28 through '30. And I think as we show in our slide, we see it as we believe Sunrun can generate attractive returns without the solar portion of the ITC. So first and foremost, that's really important to understand from a base stakes perspective. Mary PowellCEO at Sunrun00:53:14And then when you layer on top of that, that you've heard exactly what I'm hearing, exactly what everybody else is hearing, which is very low likelihood of retroactivity, I think we're feeling in a very strong position. Danny AbajianCFO at Sunrun00:53:30Vendor equipment type mix, say, kind of all of the above, I think we'll reserve comment on exact specifics of our strategy. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:53:42Okay. Thanks guys. And then shifting to my second question here, on tax credit buyers and buying some of our checks suggest a substantial percentage of the tax credit buyers out there are not interested in resi solar as a category in general. So then you have just less demand, right? And there's a fair amount of supply, especially with the new entrants, Nova's B Cave not notwithstanding, pricing appears to be challenged with some of these resi players. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:54:13We're hearing kind of in the call it mid to high $0.80 on a dollar of credit. I got to imagine the pricing for you guys is better, but to what degree has that overall kind of challenge sentiment for resi solar impacted your pricing for tax credits? Have you seen meaningful change that could impact margins despite your strong margins in the quarter, but could it impact margins ahead? Thanks. Danny AbajianCFO at Sunrun00:54:40Yes. I think it's a big, big market. We've raised $1,700,000,000 into year to date. We did note on the call in the prepared comments that buyers over the period with the playing out of the bill between the different versions, I think going into summer, the players in the market did slow down a little bit. Some of it was residential driven, wanting to understand the sponsor differentiation in the space. Danny AbajianCFO at Sunrun00:55:17That's not different than we see in the debt capital markets as well when we're doing our securitization transactions. I think in a moment like today where we're showing the results of our work, we do encourage capital providers across all markets to really due diligence on the unit margins of what the originator is originating. And we're very proud to show how healthy that looks. And the results and all the work we've done to make that be the case. And I think that's a key credit point when somebody is looking at an asset deal, wanting to understand how the sponsor differentiates from the others they may have come across. Danny AbajianCFO at Sunrun00:56:06Now residential versus utility scale, there are definitely different considerations in utility scale. You do have a very, very long deployment window, the timing of which could be very uncertain. The overall completion rate of the project, which could be uncertain. So the fact that we're unique in that there aren't that many business models with a flow rate that is very reliable. We see that in the residential space. Danny AbajianCFO at Sunrun00:56:38I think that is an attractive point. There are pricing differences between where residential clears and where utilities clears. We feel like over time those two should still converge. I think in the moment there might be certain price points that are there's market chatter around certain price points that may or may not clear. I would say that's more of an in the moment thing as opposed to like a big long term structural deviation from what we expect the economics to be. Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLC00:57:14Okay, great. Thanks, Danny. Thanks, Mary. Danny AbajianCFO at Sunrun00:57:17Thank you. Operator00:57:18The next question comes from Chris Dendronos with RBC. Please proceed. Chris DendrinosVice President at RBC Capital Markets00:57:24Yes, thank you. I wanted to follow-up on the 25D conversation and the opportunity to capture some of that, I guess, call it, non TPO market that might come to TPO. You mentioned you're not looking to employ a long tail or roll up strategy. What kind of is the strategy here? Do you do anything different, I guess, from this point forward in terms of onboarding new installers? Chris DendrinosVice President at RBC Capital Markets00:57:48Are you looking to add new installers? Or how are you thinking about making sure that you're benefiting from some of this opportunity here? Paul DicksonPresident & Chief Revenue Officer at Sunrun00:57:58Yes. We have a really successful and great relationships with our affiliate partner business and do see some opportunity to onboard people in the 25D space to join that affiliate partner network. Just calling out that it is there are some limitations given our strict underwriting, quality, safety controls and things like that. So, there's really strict things that we think limit out much of that market. That being said, there are some fantastic players in that space that we see could be and likely will become good Sunrun partners. Paul DicksonPresident & Chief Revenue Officer at Sunrun00:58:35Beyond that, we do see some companies seeing this as an opportunity to kind of go to safer harbors, and we've seen the onboarding and actually organizations come into Southern and become Southern employees joining our sales force or our installation labor force. And so we see that taking place as well. Those are the two mechanisms and interaction points between Sunrun and kind of the 25D market. Chris DendrinosVice President at RBC Capital Markets00:59:04Got it. And I guess maybe separately on a follow-up. Tariff impacts, quarter you had highlighted, I want to say it was maybe $1,000 or $1,300 per customer from tariffs. How has that changed, I guess today just given fluctuations in tariff rates? Thanks. Danny AbajianCFO at Sunrun00:59:25Yes. I think I mean, the short answer is we've moderated and ended up at the low end of the range. And all of the associated impacts, we've kind of reflected in our forecast and is supporting all the guidance we've given. Chris DendrinosVice President at RBC Capital Markets00:59:42Thank you.Read moreParticipantsExecutivesPatrick JobinDeputy CFO & IR OfficerMary PowellCEODanny AbajianCFOPaul DicksonPresident & Chief Revenue OfficerAnalystsMoses SuttonManaging Director at BNP ParibasBrian LeeVice President at Goldman SachsPraneeth SatishAnalyst at Wells FargoJoseph OshaSenior MD - Equity Research at Guggenheim PartnersDavid ArcaroExecutive Director - Equity Research at Morgan StanleyJon WindhamHead - Alternative Energy & Environmental Services Equity Research at UBS GroupDylan NassanoVice President at Wolfe Research, LLCHannah VelásquezSenior Associate - Equity Research at JefferiesMaheep MandloiDirector at Mizuho Financial GroupColin RuschMD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.Philip ShenMD & Senior Research Analyst at Roth Capital Partners, LLCChris DendrinosVice President at RBC Capital MarketsPowered by