Danny Abajian: Yes. Yes, to that second part, the cash generation here is really geared towards maximum use of non-recourse. So, it’s really implied here is a growing amount of non-recourse that is exceeding the cost to generate the originations. So, that is the cash generation. That’s obviously different. That’s not a plan to raise more parent capital.
Joseph Osha: Okay. And on that first question, how can we think about what recourse debt? How we should think about that in–?
Danny Abajian: Yes. I think Yes. Obviously, with the transaction — with the 144A transaction in the market, I will have to kind of reiterate pointing to that. But I’ll kind of like reiterate the part of the prepared remarks no material movement in either direction in the amount of like net parent leverage.
Joseph Osha: That is net recourse.
Danny Abajian: Recourse, correct.
Joseph Osha: Okay. Thank you very much.
Operator: Thank you. Our next question comes from the line of Philip Shen with ROTH MKM. Please proceed with your question.
Philip Shen: Hi all. Thanks for the questions. As it relates to renewals, I was wondering if you could share — sorry if I missed it, but can you share from a renewal standpoint, the dollar or megawatt volume that could be up per year, this year, next year and how that might scale thereafter? Thanks.
Danny Abajian: Yes. So, this year, we have no customers that are up for renewal of proactive pilots. So, we’re reaching out to customers that in three to four years from now begin to start renewing. And so we’re proactively talking to them to understand what those opportunities are.
Mary Powell: And in fact, renewing them early. So, again, like it is about learning and scaling. So, again, we’re not at all thinking about this as something like we’re going to sit here and wait for customers to renew. We’re going to come up with programs and ways to meet their needs ahead of the end of their renewal period.
Philip Shen: Yes, I totally get everything you said, and I don’t understand the renewals are not for some time, but I was wondering if you guys had a view as to what the volume might be. That’s — I’ll move to the second question here. with your flat 24-megawatt guide as a backdrop, our work with Freedom Forever, which I believe is one of your largest, if not largest dealers suggest they may be growing 60% to 100% year-over-year. So, our estimates suggest that they might — may have contributed 250 megawatts to your business in 2023. In 2024, this could be closer to 380 megawatts and as they’re splitting their volume between you and EverBright. So, our rough numbers suggest that they might be adding, what, roughly 130 megawatts to your megawatts in 2024 of your roughly 1 gig.
So, given that you have guided flat year-over-year, can you give us some color on what is happening with the rest of the business if they’re growing 130, perhaps our assumptions on the freedom situation are off the mark, maybe correct us if we’re wrong. But maybe share with us what’s going on with the rest of your dealer business year-over-year. And from a direct standpoint, how is that business going is your direct business? I know on Slide 20 — 6 there, Slide 6, it shows that you have a direct business growing really well. but I was wondering where Freedom is categorized. Are they categorized in the affiliate program there or partner? Or is that in the blue Sunrun. So, if you can share some more color on that situation, that would be fantastic.
Thanks.
Mary Powell: Yes. So, that’s what I was going to point you to is Slide 6, which really gives you a very clear picture of how we see 2024 currently. And yes, Freedom Forever, who has been a partner for quite a long time. a valued partner, shows up in the affiliate partner installations category. Currently, no affiliate partner is over 10%. And of our volume. And yes, you’re right. We’re seeing our direct business growing nicely.
Operator: Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Brian Lee: Hey everyone. Good afternoon. Thanks for squeezing me in. I know a lot’s been covered here on the call, but maybe just one for me on this Slide 20, where you’re talking about the different levers and assumptions on the cash flow generation. You mentioned it’s going to be lumpy throughout the year. But can you give us a sense for, I guess, what are maybe milestones, events capital raises, et cetera, that would give you and maybe in what time frame, more visibility as to whether you hit the low, mid, high end. I mean, it seems like if I just through some of this, you’re already tracking well above the storage mix that’s embedded here in the assumption. I think you mentioned to a prior question, the 7.5% might be a bit conservative already here starting the year.
So, just trying to understand, one of the puts and takes, but also the timeline as to when that view kind of crystallizes as we move through the year? Granted it’s going to be lumpy on a quarter-to-quarter basis. Thank you.
Danny Abajian: Great question. So, I’ll start — I’ll maybe highlight a few of the factors on the page. On volume, I think we talked about directionally throughout the year, picking up sequentially, considerably throughout the year and implied there is hitting that 15% year-over-year mark in the back half of the year. Of course, we also highlighted that the year-over-year comps in the first half won’t look as good. We do have the Q1 sequential decline really pacing out of that. gives us a very decent return back on operating cost leverage in the business. And as we get that, that will be trending well. the backup storage mix, we believe we will exceed based on the remarks. The ITC orders, we’re a little bit shy of about 34%.
I think we have pathways building again, in that kind of Q3, Q4 timeframe to getting more of it. I think the two factors there would be more geo-targeting, where it relates to energy communities and low income and of course, on domestic content, the onset of that as the regulations get crystallized. And then capital costs, obviously, in a range, we are giving the range at the moment and saying 0.25 point is between $40 million and $50 million. So, there’s north of 100 basis points of cushion from high end to low end of range as respect to capital costs.
Brian Lee: All right. Appreciate the color. I’ll pass it on. Thank you.
Danny Abajian: Thank you.
Operator: Thank you. Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.
Colin Rusch: Thanks so much. Could you guys talk about the maturity of the VPP monetization, obviously, with the incremental deployments of energy storage. Just want to get a sense of on a portfolio level, how you see that value potentially increasing the NPV of the portfolio?
Mary Powell: Yes, we’re really pleased with the PGD. I’m sure you saw the press release that we did with that program, where 8,500 customers participated in a program over a number of months. We think it sets up a really good framework for future virtual power plant structures that we do, that really results in like a view that over time, it would be a net subscriber value of about $2,000.
Colin Rusch: Fantastic. And then just you mentioned labor efficiency and both on the sales and installation front, I just want to get a sense of order of magnitude you’re expecting to see over the course of the year and the cadence of that efficiency as we go throughout the year.
Mary Powell: Yes, I mean, we’re really pleased with the efficiency gains we’ve seen across the business. I would say in the installation area, particularly where that productivity has really resulted in some great benefits. CAC as a percent of subscriber value is coming down. Obviously, and that is happening despite the distortion created by some of the mix change. So, yes, we’re really pleased, particularly as, again, we’ve moved to a solar plus storage company. So, that also, as you think about productivity gains and you think about the gains we’ve had, where we are, in essence, having our folks selling two products, installing two products. So, yes, we’ve been really pleased by the results we’ve seen around our kind of maniacal focus on cost in the business.
Operator: Thank you. Our next question comes from the line of Maheep Mandloi with Mizuho. Please proceed with your question.
David Benjamin: Hi, this is David Benjamin on for Maheep. I have a question on the convert. Can you please talk or give a little bit of color around the timing? I understand that it’s for the refinance, but the converts due in 2026 doesn’t go current until 2025. So, just any color you could provide around that would be helpful. Thanks.
Danny Abajian: Yes, I think really in early getting out ahead and early liability management exercise, the revolver was the same thing, the warehouse was the same thing. I think we like the market conditions. We have obviously good depth especially I’m not addressing the convert directly, but across the capital spectrum. I think just deep pools of capital available to us and just wanting to be exceptionally timely in handling all of that.
Operator: Thank you. That concludes the time that has been allocated for Q&A. You may now disconnect.
