Beth Eby: So we are going to continue to monitor the residential solar market. If it declines below our expectations, we will need to make additional moves. The discussions with our sponsors on that additional $50 million are related to us meeting our business plans. And as for additional financing, we are always going to be on the lookout to lower our cost of capital. And we have an ongoing need, as Peter mentioned a couple of times, for additional rounds of project financing, particularly in the lease space.
Peter Faricy: The only thing I’ll add to that, Phil, is that, the thing that looks uncertain this year is really the demand side. Our forecasts for this year have been much more conservative than we were a year ago, particularly given what happened in 2023. So I think we’re going to be on our toes with regards to our cost structure as well. We’re constantly taking a look at are the costs we have — how do we make as many of our fixed costs and the variable costs, and how do we keep our overall cost structure lean, strong, and in line with market conditions as we go forward.
Philip Shen: Got it. Peter and Beth, thank you very much.
Operator: Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Jordan Levy with Truist Securities. Your line is open. Please go ahead.
Jordan Levy: Thanks so much. Appreciate all the color guys. Now that you’ve got the near term financing concerns taken care of here, I’m just curious how you think about the sort of resiliency profile of the go forward business? And maybe just touches on the last question, but asking in another way, do you believe now that you’re in a position to handle a longer term down trend in demand? And what sort of level, maybe just some thresholds around what demand levels would require additional financing?
Peter Faricy: Yes. So two comments on that, Jordan. Thanks for the question. I think one of the reasons that we continue to share the cost of retail electric rates is that, fundamentally that’s really the biggest driver of this business in the long term. And I think when you talk to customers, why did they buy residential solar? There’s a group of reasons. There’s certainly the wanting to do good in the world and use clean energy instead of fossil fuels. There’s certainly a theme around resiliency with grid instability, but the number one reason at the top of the list is really cost savings. And so, as we see retail electric rates rising much faster than the cost of residential solar. That spread getting bigger is really the fundamental driver of bigger demand.
And this is still a market, and we have to keep in mind, even though last year was a very tough year, still 4% penetration in this market. There’s tens of millions of customers out there that we could save money for this month if we can get in front of them with a lease offer or a loan offer or cash offer to help them get residential solar. So really the fundamentals of this business from our perspective are still very strong. On the cost side, what we really tried to do was, for perspective, again, in 2022, we grew revenue 54%. And I think last year, if I were to be vocally self-critical, one of the areas that we didn’t do as well on was, we still had a relatively optimistic revenue plan last year of 22% growth coming into the year. And obviously that turned out not to be the case for the year.
So the way we thought about it this year is, how do we stress test our top line and how do we prepare for scenarios in case demand declines and declines even more than we expect. And so, we’ve really thought about building our cost structure to be able to weather that storm this year, if that makes sense.
Jordan Levy: That’s really helpful. I appreciate that, Peter. And then maybe just as a follow-up, as we go forward here, what are sort of the major benchmarks or data points you would point to get a good sense of where you’re coming in in terms of hitting profitability improvement targets. Is it sort of that second half of the year free cash flow inflection or are there other things we should be tracking as well?
Peter Faricy: Yes, definitely. I mean, I think the — for color our year is definitely back half loaded. And that’s really a function of the fact that we’re selling through higher cost equipment in the first half of the year and selling lower cost equipment in the second half of the year. So that part is pretty straightforward. But same thing for cost of capital. Our cost of capital is a little higher at the beginning of the year and will be lower in the second half of the year. Those two things plus the full year kick in of all of our cost of goods sold and OpEx savings really create a very different picture for the second half of the year. Beth, do you want to give any more color on that?
Beth Eby: And I think with the restructuring that we announced a couple of weeks ago, we are in a position where most of the cost reduction for the year has been done. We still have some ongoing productivity improvements that we’ll be delivering through the year, but the cost reductions have been implemented. So we’re looking forward to a much more cash flow positive year this year.
