Before we begin, please note that certain remarks we will make on this conference call constitute forward-looking statements. Although 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 that these statements are being made as of today and we disclaim any obligation to update or revise them. On the call today are Mary Powell, Sunrun’s CEO; Ed Fenster, Sunrun’s Co-Founder and Co-Executive Chair; and Danny Abajian, Sunrun’s CFO. And now, let me turn it over to Mary.

Thank you, Patrick. I have really been looking forward to this call to share our strong fourth quarter and full year results with you as well as to talk about our outlook and priorities for 2023. We ended 2022 delivering and even modestly exceeding our guidance, growing new installations by over 25% and delivering greatly increased net subscriber values. We exited 2022 with nearly 800,000 customers, 5.7 gigawatts of network solar energy capacity and $5.6 billion in net earning assets. I am confident 2023 will build on this strong momentum as the strength of our subscription model provides market share gains. The year is off to a great start. We are seeing early funnel sales growth in January of over 30% across our entire direct business and even faster growth in California. Part of this is expected acceleration ahead of the changes in California, but it is also indicative of the broader utility rate trends, which continue to rise and the growing consumer awareness of our offering. Our strong traction is also a result of our ability to attract the best sales talent in the industry that is eager to work with the nation’s leading clean energy provider, especially one that is leading on storage and innovation. Sunrun is the clear leader providing energy as a subscription service with over 60% share of new subscriptions across the industry. Recent trends in financing costs for loans, the growing need for advanced systems with storage, awareness of the value of service and performance guarantees, along with the uncertain economic climate have all contributed to the growing relative advantages of our subscription offering. We are already seeing a shift in our sales activities towards the subscription offering and expect it will flow through in a meaningful way in our installation activities in the coming quarters. The customer value proposition is swinging even further towards the subscription model as the ITC and other potential adders are only available to homeowners in this model, making solar and storage even more accessible to more customers. Sunrun is significantly advantaged as the leader in storage deployments. We have installed more than 53,000 residential solar and storage systems across the country, more than any other company. We have developed considerable skills and capabilities communicating the value proposition of storage systems with customers in addition to gaining experience in efficiently designing, permitting and installing these more advanced projects. We believe we are also leading in procuring storage hardware given our strong relationships with multiple suppliers and our large scale. While storage supply was a constraint to growth as recently as last year, supply conditions have improved considerably for us and we are well positioned to dramatically increase the attachment rate of storage. Storage solutions are not only a significant competitive advantage for Sunrun and differentiator in the eyes of customers and salespeople in the industry, they are meaningfully accretive to our margins. At Sunrun, we are continuing to further differentiate our offering to customers and increase our competitive advantages. Just this month, we announced a collaboration with PG&E to form a 30-megawatt virtual power plant this summer, helping to provide critical baseload in a repeatable way when it is needed most. This builds on the 17-megawatt virtual power plant we announced in Puerto Rico just a few months ago with 14 advanced virtual power plant opportunities now forged across the country. We are leading the industry and showing utilities and regulators the possibilities of leveraging our network of distributed home solar and storage systems while generating recurring revenue streams and driving increased customer value. In the fourth quarter, we demonstrated continued progress on making Sunrun faster, better and stronger in all dimensions of the fundamentals. You can see the results of this through our record-setting net subscriber value of over 16,000, which as Danny will discuss, helped us offset so many of the interest rate pressures we faced last year. We achieved this through hard work, focused on the fundamentals of cost efficiency and performance improvements, along with continued price optimization while ensuring a strong customer value proposition even as we invest in innovation and differentiation. Throughout the year, we worked on streamlining our operations, leading to improved customer experience throughout the process and better productivity. We grew new installations over 25% in 2022, while only growing headcount at one-third of that rate. This was achieved through a strong focus on streamlining operations while delivering customers a great experience and value. The average hours spent on an installation by our crews improved 23% in Q4 compared to the prior year, driven in part by a reduction of the average crew size by 12% as we found ways to be more productive and efficient, while maintaining our high safety and quality standards. We also maintained strong overhead cost discipline. With G&A expenses declining more than 12% compared to last year and reaching 1,100 per new customer by Q4, a 29% improvement year-over-year, showing the benefits of our scale and our disciplined approach to sustainable, profitable growth. I am tremendously proud of what our team is doing in the field each and every day for our customers and I know we will continue to drive even more efficiency while delighting our customers in 2023. Shifting gears to policy updates. The biggest development since our last call is the finalization of the NEM 3.0 proceeding in California, where regulators approved an updated net billing tariff. The final language was dramatically improved from the initial draft as the regulators dropped the proposed discriminatory fixed fee on solar customers. The new proposal will introduce variable pricing with significant reductions of the value of energy exported back to the grid during the day, dramatically increasing the value proposition of storage. As I noted earlier, Sunrun is the leader in storage solutions and is well positioned for this transition to more solar plus storage installations. In addition to our solar offering, and solar with storage offerings for home backup, we will launch a new offering in California that incorporates storage to optimize the economics of energy produced by the solar system, reducing low-value exports and increasing self-consumption for our customers’ benefit. This system will be easier and quicker to install. We believe this new offering delivers a strong value proposition for our customers and net subscriber value for Sunrun. In the interim, prior to the new structure becoming effective in mid-April, we are already working hard to help customers sign up under the current rate structure in California to lock in even greater savings potential. We are seeing record-breaking demand in California with early funnel sales activity in January, growing more than 30% compared to last year. Lower sales activity is expected immediately following implementation of the new tariffs, but we also expect that the combination of the pull forward of demand into Q1 and the anticipated strong customer response to our innovative offering will result in strong growth over the long-term in this market. Combined with the strong sales-driven backlog in California and strong demand across the country, we expect to deliver smooth and sequentially growing installations throughout 2023. On other policy matters, we are excited by the increased opportunities created by the Inflation Reduction Act. Investing to help disadvantaged low-income communities, providing economic benefits to areas with high unemployment or that have high exposure to fossil fuel-based economies and helping encourage domestic production of advanced clean technologies are all things that Sunrun is well positioned to do. As we have discussed before, the Inflation Reduction Act established three investment tax credit adders to accomplish these objectives. We, along with so many across the industry, are disappointed to see that so many low and moderate income Americans and those in multifamily dwellings will now have to wait to benefit from the LMI adders. The initial treasury guidance released last week appears in our position to the administration’s broad goal to encourage as much solar in low-income communities as fast as possible. As many in the industry have already noted, the proposed drawn out and long mechanism to allocate the available capacity likely delays many projects, delaying and potentially risking delivering benefits to low-income communities. These are the communities that need the benefits of solar energy the most and Sunrun is particularly well-positioned to help these communities gain access to affordable, clean and predictably priced energy at a critical time when utility rates are escalating so quickly and household budgets are being squeezed. We will continue to work with others in the industry and with policymakers to make sure these communities benefit in the way the IRA legislation intended. While we are awaiting guidance from the treasury on the other two ITC adders for energy communities and domestic content, we are proactively taking steps today to ensure we can act quickly once clarity is obtained. For example, we have already entered into agreements for nearly 200 megawatts of module supply from a leading domestic producer in addition to meaningful supply arrangements for storage solutions produced in the U.S., which should, in our opinion, allow a significant portion of our volume to qualify for the domestic content adder. But obviously, we will have to wait until official guidance from treasury is obtained. In summary, Sunrun continued our focus of crushing it on the fundamentals and we have the right strategy and high energy focused and experienced team in place to continue to successfully navigate these uncertain times. The value proposition for customers continues to increase as utility rates escalate rapidly and consumers demand affordable, clean and predictably priced energy. While 2022 brought its set of challenges and we will certainly have our share of things to overcome in 2023, I am proud of our team’s quick actions last year to adapt to the rapidly changing macro environment around us. At Sunrun, we see adversity as a way to help shape ourselves and make a stronger company for the long run. We have more work to do, so we won’t be sitting idle and I am confident that our team is up to the challenge. Before I hit one final item, I want to express my sincere appreciation for all the Sunrun employees working so hard to create a company that is faster, better and stronger for our customers and our communities. Building the best company and helping turbocharge this consumer-led revolution in energy is only possible with the talented and committed team who is ready to lead the charge every single day. Last, but certainly not least, I also want to update you on a management change we announced today. After over 15 years in a full-time leadership capacity, Ed Fenster, who has been on parental leave since August, decided the timing was right to transition to a role where he can spend more time with his young family. While Ed will cease having direct reports at the company, he will remain very active in strategic matters. Ed won’t be quite as visible day-to-day, but his trusted counsel will be omnipresent and we certainly know that he won’t hesitate digging deep on topics with our team as needed. To state the obvious, Ed has played an invaluable role in making Sunrun the market leader and he will continue to play an invaluable role going forward. You will continue to hear from him and he will continue providing his wisdom, insight and leadership throughout the company in so many ways. Thank you so much, Ed. And with that, I turn it over to you.

Thank you, Mary. I am so thankful for and impressed by the team leading Sunrun today. It’s been a great honor to have had the privilege of working day in and day out alongside the many talented people who have helped Sunrun grow and flourish from a small company run out of my attic into the nation’s leading provider of solar and storage. While being on parental leave over the last several months, I concluded that I want to spend more time with my children during these important formative years before they are in school. And I also plan to travel with them for a few months over the summer. The company and the leadership team are both in a fantastic position. I frankly don’t believe my full-time day-to-day participation is any longer key to our success and I remain as committed as ever to that success. I’ll continue to be involved in key decisions, participate in management and strategy meetings, and meet very extensively with our capital providers. I am not taking on other work; I just believe the time is right for me to focus my Sunrun time in the highest value areas and to recover the balance to spend with my family. Company leadership is in fantastic hands. Sunrun has deep bench strength and tremendous experience across all aspects of the business. Over the last few quarters, the company has been more operationally efficient and enjoyed significant gains in net promoter score while increasing volumes and pricing. The operating results corroborated my intuition that it’s an appropriate time for me to make this transition. I am grateful for all your support and I look forward to remaining part of this great company as we move forward. Speaking of which, I’d like to turn the call over to Danny to share the financial update.

Thank you so much, Ed. Working with you so closely and receiving your mentorship has been a real privilege. I appreciate that your counsel to our team is always a call away. Today, I will cover our operating and financial performance in the quarter along with an update on our capital markets activities and outlook. Turning first to results for the quarter, in the fourth quarter, customer additions were approximately 37,400, including approximately 27,500 subscriber additions. Our subscriber additions were 72% of our total customer additions in the period, a small increase from last quarter. Our recent sales activities and the benefits from the tax credit adders in the Inflation Reduction Act which are only available to the solar subscription model indicate the mix of customer additions is likely to shift towards subscribers more significantly in the quarters ahead. Solar energy capacity installed was approximately 275 megawatts in the fourth quarter of 2022, a greater than 25% increase from the same quarter last year. For the full year 2022, solar energy capacity installed was nearly 1 gigawatt at 991 megawatts, a 25.2% increase from the prior year, modestly exceeding our guidance. Our installation teams and partners performed incredibly well in the fourth quarter, driving strong efficiency and productivity metrics while also remaining committed to safety and high-quality installations. The increased pace of installations is allowing us to gradually work down our pipeline, which is approximately one quarter at the end of Q4. We aim to manage sales and installation activities to maintain a pipeline that optimizes our resource planning and customer experience, although we do expect our pipeline to increase in the first half of the year. We have now installed over 53,000 solar and storage systems. We expect storage installations will grow rapidly in the quarters ahead and attachment rates will increase meaningfully. Storage solutions not only provide customers increased value from energy rate optimization and backup power capabilities, but they carry higher margins, typically by several thousand dollars per customer. As Mary highlighted, our ability to satisfy demand for storage installations with superior operational fulfillment is a clear differentiator for Sunrun in the marketplace. We ended Q4 with approximately 797,000 customers and 667,000 subscribers representing 5.7 gigawatts of network solar energy capacity, an increase of 21% compared to the prior year. Our subscribers generate significant recurring revenue with most under 20 or 25-year contracts for the clean energy we provide. At the end of Q4, our annual recurring revenue, or ARR, stood at over $1 billion with an average contract life remaining of over 17 years. During 2022, we successfully demonstrated our adaptability and financial resiliency in the face of persistently high inflation, a historic speed of interest rate increases, a dynamic supply chain and a large installation backlog. We implemented significant pricing increases throughout the year behind double-digit utility price inflation as utilities pass their own increases in labor, fuel and capital costs through to their customers. Because the trajectory of utility price increases were similar to our price increases for new customers, we maintained an attractive value proposition and sustained high demand. We found and created ways to offset rising input costs with improved operational efficiencies. In Q4, subscriber value was approximately $46,300 and creation cost was approximately $29,800, delivering a net subscriber value of $16,569, a healthy increase from $13,259 in the prior quarter. Total value generated, which is the net subscriber value multiplied by the number of subscriber additions in the period, was $456 million in the fourth quarter. From Q4 2021 to Q4 2022, our subscriber value increased by over $9,000 or approximately 25%, while our creation costs remained approximately flat despite sharply higher equipment prices and general inflation. Our net subscriber value more than doubled from approximately $7,000 year-over-year. As a reminder, starting in Q3, our subscriber value reflected the benefit of a 30% tax credit as opposed to 26% provided by the passage of the Inflation Reduction Act in August. Each quarter, we provide ranges for advance rate measured as a percentage of contracted subscriber value that reflect current capital costs. We finance our systems upon installation with tax equity and project level non-recourse debt which monetizes a portion of our subscriber value. Our advance rate ranges allow investors to approximate proceeds from all sources, net of fees and gains the obtainable net cash unit margins on deployments. From Q4 2021 to Q4 2022, our advance rates fell substantially from a range of 95% to 100% to 75% to 85%. However because we also increased our contracted subscriber value by over $8,200 over the same period, our estimated proceeds per customer increased by $700 using the midpoints of these two ranges. Given today’s higher cost of capital environment, commencing with 2023 reporting, we anticipate increasing our discount rate assumption from 5%, which we used in our reporting throughout 2022 to 6%, as you can see in Slide 12, adjusting the discount rate higher by 1% would lower the total subscriber value and thus net subscriber value by approximately $3,600 in Q4. Because proceeds per customer are already based on market rates, our advance rate in Q4 as a percentage of contracted subscriber value would increase to approximately 80% to 90%. Turning now to gross and net earning assets and our balance sheet. Gross earning assets were $12.4 billion at the end of the fourth quarter. Gross earning assets is the measure of cash flows we expect to receive from customers over time, net of operating and maintenance costs distributions to tax equity partners and partnership flip structures and distributions to project equity financing partners discounted at a 5% unlevered capital cost. Net earning assets were nearly $5.6 billion at the end of the fourth quarter, an increase of $487 million or 10% from the prior quarter. Net earning assets is gross earning assets plus cash less all debt. We also anticipate adjusting the discount rate used to calculate gross earning assets from 5% to 6% to be consistent with the changes in how subscriber value is calculated. On Slide 11, we provide gross earning assets and net earning assets pro forma using a 6% discount rate. We ended the quarter with $953 million in total cash. We continue to maintain a robust project finance runway. As of today, closed transactions and executed term sheets provide us with expected tax equity capacity to fund over 400 megawatts of projects for subscribers beyond what was deployed through the fourth quarter. Sunrun also had $837 million in unused commitments available in its $1.8 billion non-recourse senior revolving warehouse loan at the end of the quarter to fund over 320 megawatts of projects for subscribers. This strong capital runway allows us to be selective in timing our capital markets activity. Turning now to our outlook. We expect growth in solar energy capacity installed to be between 10% and 15% for the full year 2023, which we believe will result in market share gains. We currently see more upside opportunity than downside risk in achieving growth in this range, but feel it is best to err on the cautionary side early on in the year. Even with the tremendous sales activities we are currently seeing, our conservative stance is influenced by the mid-April transition to the new net billing tariff in California, extended cycle times of higher storage mix timing uncertainty with the implementation of ITC adders and our ongoing pricing adjustments and go-to-market optimization efforts. We expect our storage attachment rate will increase significantly in 2023 from approximately 15% in 2022. The strong sales growth we are seeing coupled with the increasing mix of storage is likely to extend cycle times and increased working capital needs. But we will remain focused on prudently managing our backlog and working capital without foregoing the tremendous opportunity to extend Sunrun's lead in 2023. In Q1, we expect solar energy capacity installed to be in a range of 215 and 225 megawatts. The first quarter is typically seasonally lower than the fourth quarter, as you can see from nearly all of our historic results over the years. Due to lower selling activities exiting the prior year and more weather-related installation limitations and shorter days entering the new year. We expect net subscriber value to be approximately $10,000 in Q1 using a 6% discount rate and to increase sequentially throughout 2023. For comparability, using a 5% discount rate, net subscriber value would be over $13,000 in Q1. Our focus is on delivering profitable growth, efficient operations and strong unit margins while navigating a fluctuating interest rate environment. Our discipline has served us well for the last 15 years and we believe will serve the company and our stakeholders well in the current economic paradigm. Turning briefly to our capital markets activities and outlook. As we’ve shared before, we regularly enter into interest rate swaps to hedge capital costs on our newly installed customers. We are principally exposed to interest rate fluctuations between customer origination through shortly after installation around the time of installation, our systems are financed with project level non-recourse debt. Nearly all of this financing is insulated from near-term interest rate fluctuations as our debt is either fixed coupon, long-dated securities or floating rate debt that has been hedged with interest rate swaps. At the end of 2022, Sunrun executed an $835 million term out financing consisting of a $600 million non-recourse syndicated bank facility and a $235 million subordinated debt facility, supporting a 335-megawatt portfolio of systems. The team executed this transaction particularly well, delivering senior loan pricing at an initial credit spread, 100 basis points below recent solar loan securitization transactions observed in the sector at that time and a cumulative advance rate exceeding the high end of our guidance range of 85%. Because the advance rate on this portfolio benefited from previously placed in the money interest rate hedges, we expect the advance rate in our next term out transaction, which does not carry such benefit to be slightly lower. Cost of capital has trended favorably over the last few months as credit markets have improved. We continue to observe our capital cost in the mid-6% to mid-7% area. Consistent with this cost of capital range, we expect advance rates on our newly deployed portfolios to still be between 75% and 85% of contracted subscriber value calculated using a 5% discount rate or 80% and 90% against contracted subscriber value calculated using the new 6% discount rate. The longstanding relationships we have cultivated with many capital providers in multiple markets, our reputation as a high-quality sponsor and the consistently strong performance trends of payment performance trends of our customers through multiple economic cycles affords us ready access to capital and allows us to be selective with our transactions. Our next term out transaction will likely be in the securitization market as opposed to the bank market due to much improved conditions in that market to start the new year. With that, let me turn it back to Mary.

Thanks, Danny. I am so appreciative of our hardworking team whose adaptability and commitment to our purpose helped deliver an amazing year of transformation for Sunrun in 2022. I am confident that our momentum will continue into 2023 as we focus on the fundamentals to make us faster, better and stronger for the benefit of our beloved customers, our amazing employees, the hundreds of communities we operate in across the country and our financial partners. With that, operator, let’s open the line for questions.

Our first question comes from Julien Dumoulin-Smith with Bank of America. Please proceed with your question.

Good afternoon. Congratulations, Ed. Thank you for the time. Nicely done, I would say. And more specifically here, the look for 10% to 15% on ‘23 is impressive. You guys said in your prepared remarks that you are looking for market share gains. Can you elaborate a little bit on the depth of that market share gain considering some of the commentary on the loan side? Just what are you seeing in terms of your ability to capture some of that shift, if you will?

Yes, hey, Julien, it’s nice to hear from you. This is Mary. So really, it’s based on the fact that we’re seeing really good signs at the beginning of the year in terms of consumer demand. We believe that we are really well positioned with the subscription model for this year, which clearly has a more valuable customer proposition because of basically its ability to monetize the value of the ITC adders for customers. And then again, we expect to gain market share because, again, you have firms like Wood Mackenzie expecting sort of flattish to 6% and we are looking at, we are feeling like 10% to 15%. As you know, we’re very, very focused on sustainable profitable growth. So again, we are looking at that 10% to 15% as being reasonable and conservative. So given that and given Wood Mackenzie, we believe we will probably pick up some market share. And also it’s really what we call the year of storage. And Sunrun is the leader in storage and we feel like we are really well positioned in California, which will always be and will continue to be a really important market for our products because, frankly, Californians need our product because the utility power is just not as reliable and is very highly priced. So we feel like we are in a good position.

Julien, just to add, the one thing I would add as a reminder on the — because we do expect a big increase in storage installations this calendar year, a storage installation can take 50% more labor hours than a solar-only one and can take as many as 50 or more days to get installation. And so as you significantly increase the storage attachment rate, you have many more projects in the development pipeline. And when we are talking about the annual growth rate, we are actually obviously talking about the projects that are exiting the pipeline, not entering the pipeline. And so that’s a factor in there as well.

Yes, that’s actually perhaps the follow-up here. I mean the funnel that you guys talked about 30% plus, you are only at 10% to 15%. I mean, what does that say for ‘24? I know it might be a little early. And then related to that, 16,000 plus per customer here, it’s pretty solid print. How do you see the cadence of that through the course of the year as you say too?

So we actually, Julien, to build on Ed’s response, one of the things to think about when we talk about growth is how we have classically talked about it is installed capacity. But as we are becoming more and more of a clean energy plus storage company, storage is very accretive to value. So really looking at growth in the context of the additional value we can create through storage is very important as we look to the year. Danny, you…

And on the net subscriber value, just allow me to do the walk. As I said in the prepared remarks, we did achieve greater than 16,000 in Q4 and we guided to greater than or approximately $10,000 in Q1 in there is the switch from 5% to 6% discount rate. And if we went on a like-for-like basis, at the 5% discount rate, the guide would have been over $13,000 per customer in Q1. And between Q4 and Q1, obviously, there is a sequential decline in installation volume due to some seasonality that’s normal in the business. And as we kind of see that volume drop over that period of time, there is reduced operating cost leverage coming through in the period. But then the outlook would be for this number to grow sequentially throughout the year as we grow volumes and shift the mix towards higher value projects.

Our next question comes from James West with Evercore ISI. Please proceed with your question.

Thanks and good afternoon everybody.

Hi.

Hey, Mary. I just want to follow-up quickly on kind of where Julien was going with his questions around your expected installation growth versus the increase you are seeing early this year. I guess, as you transition to more of, as you mentioned, a storage company rather than just pure residential solar, the correlation between the top line and what you guys see as installation growth, I would assume that starts to break down somewhat and maybe revenue outgrows installations. Is that a fair comment?

Yes. I mean, there is a greater disconnect between the top line growth and the installation volume growth as we shift to more complex jobs that take a few more hours. And as we ramp up our installation capability against that volume growth, there is generally a lagging effect and an expectation that the size of our pipeline will resume growth after a few quarters of contracting.

Okay, okay. It makes sense. And then maybe just a quick follow-up for me, I noticed obviously, you had some commentary in your prepared remarks about your B2B business. And I saw some commentary in the press release around Lunar and moving to the Gridshare software on your current VPPs. I was wondering how that process is going? And is it a higher quality product; will you switch to that on all your B2Bs going forward or maybe other parts of your business?

Thank you for noting that. We are so excited about our work in the virtual power plant space. And as we noted in my remarks, again, the PG&E announcement following the Puerto Rico announcement, we just see this as an area that strategically is so important as we look to the future, particularly as we look to a future with so much more storage paired with solar. I think, as I’ve often talked about when I talk about radical collaboration, we’re going to get to the day, I think, in the not-too-distant future where regulators and utilities are eager to have more access to our capacity. So long-winded way to transition into your question on Lunar, we are really excited about their capabilities. That is going incredibly well. Not only are they working on this next-generation storage capability that we’ll have access to in ‘23, but through their work with the Gridshare program, we find it highly sophisticated, with great performance and we’re really excited to be working with them.

Our next question comes from Brian Lee with Goldman Sachs. Please proceed with your question.

Hey, everyone. Good afternoon. Thanks for taking the questions.

Hey, Brian.

Hey, how is it going? Maybe going back to the market share gain that's super interesting and encouraging, how much of that is coming from specific states that you would highlight as areas where you have doubled down efforts, invested more than your peers? And then how much of that is just coming from this broader loan-to-lease mix shift that everyone is obviously acknowledging at this point? And then maybe related to that, just what are you embedding for California, non-California growth in general for your outlook here for the year? And then I had a follow-up.

At a high level, Brian, as we have talked about when we have met, our focus again has been faster, better, stronger. One of the areas I’m so impressed with the team in 2022 and that we will continue in 2023 is looking at data every week, every market, every geo, making decisions around our position and how to leverage the best customer value proposition in that area. So we are going to continue to do that. From a broader perspective, we are seeing great interest in all the markets that we are in. We also feel really good about our position in California because we are innovating around a product that we feel will help customers monetize the value of the new tariff in California. With that, I would toss it to Danny to give more specific growth-level comments.

Mary covered it well in the lead-in as well, where she said 30% early funnel sales growth nationally and higher than that in California at the moment. The expectation post mid-April market transition in California is that the value proposition will still be great for customers in the market and the growth rate there will trend more towards what we’ve seen ex-California.

Okay. Fair enough. I appreciate that additional color. And maybe another one for you, Danny or maybe Ed as well, just high-level thoughts on this transition from PV5 to PV6; some investors were maybe expecting to go all the way to PV7. So just thoughts on PV6 versus PV7 and then general cost of capital trends in ‘23 and what you expect in ABS financing costs and volume this year? Thank you.

I think we want to have a discount rate in the metric that doesn’t fluctuate every quarter. As you saw in the remarks, quarter-over-quarter fluctuations also generate the need to explain lots of pro forma. For period-over-period comparability the thought was to select something that allows us to keep it in place for a year. We were thoughtful about that looking at where rates have moved in the recent past and long-term rate expectations and felt 6% was a good mark to approximate the system value. We’re also continuing to give constant guidance on where advance rates are fluctuating at any moment in time relative to market interest rates, and we will continue to give clarity on how much of the contracted subscriber value we are able to monetize in the cash proceeds at the point of install. That number today is 75% to 85%, which will be 80% to 90% using the new discount rate. Given where things are today, probably somewhere between 7% and 7.5% cost of capital; from an advance rate standpoint that would put us in the bottom half of the advance rate guidance range based on where things are trending at the moment.

Our next question comes from Phil Shen with ROTH. Please proceed with your question.

Thanks for taking the questions. Mary, I think you talked about the guidance being reasonable and conservative. I was wondering if another area of conservatism might be around the onboarding of new dealers. I’m imagining there is a fair amount of dealers wanting to jump on your platform at this point. To what degree could that serve as yet another level of upside as my sense would be that maybe that 10% to 15% growth is maybe more organic with your existing base of dealers. What’s been the interest and activity of new inquiries as well? Thanks.

I would say relatively more organic and definitely seeing flywheel effects as we’ve integrated the Sunrun and Vivint businesses with a two-year operating period and track record. That’s being seen as an attractive place to sell directly. So I’d say it’s more direct-driven than dealer-driven. And to the extent it becomes dealer driven, we would view that as relatively more upside to the model.

Yes. We’re the nation’s leader and as I described our go-to-market strategy, we remain very selective and disciplined. Our focus is on sustainable profitable growth. There are different ways we could see upside, but we’re focused on being selective and disciplined to ensure sustainable profitable growth.

Great. Can you comment on whether you are seeing a high level of inbound interest from dealers that you historically have not worked with because you have your subscription model?

We are seeing interest. As Mary said, we’re selective. We see the flywheel effects and the combined businesses have provided an attractive track record for dealers and direct sellers alike.

Great. Thanks, Mary. In terms of my follow-up, on NEM 3.0 in California, Mary talked about this new offering in California. It sounds like it has a strong value proposition and contributes well to net subscriber value. Most are expecting a decline in California once NEM 3.0 installations are done but can you talk about this new offering and possibly how it could serve your customers and potentially result in a situation where you could actually grow your California volumes year-over-year in a time when many of your competitors are actually decreasing year-over-year?

One of the most powerful things for Sunrun going into this year in California is that we have deep bench strength around storage. We’ve installed 53,000 storage systems already. This product is quicker and easier to install and provides a strong savings proposition for customers. Our leadership on storage differentiates us from others. We advocated for longer ramp time with regulators because we saw that some players, particularly the long tail that may not have storage experience, would find it much harder to adopt this new tariff quickly. We feel we’re in good shape as we go into the year. We are expecting, on an installation basis, sequential growth in installations across all the quarters of this year.

Our next question comes from Kashy Harrison with Piper Sandler. Please proceed with your question.

Hi, good afternoon, and thanks for taking the question. And then congrats Ed. So just one quick follow-up question on the 2023 guide, how are you thinking about your lease-loan mix in 2023?

We said on the call, 71% to 72% of customer additions were subscribers. The outlook there is closer to the 80% area. Historically, prior to last year, we were generally in an 80% to 85% range. I think we will trend more towards that historical norm.

Got it. And then my follow-up, based on your slide with advance rates, you indicated you can generate roughly $3,600 per customer. How are you thinking about the changes in working capital during 2022? It looks like it’s been about $400 million to $500 million these past two years. So I’m curious how you’re thinking about 2023.

Working capital is mainly associated with the run-up in sales, which results in many of the sales organization costs being incurred ahead of proceeds. As we ramp operational capacity, there’s fixed investment to grow the footprint, particularly this year with meaningful growth in battery attach rate. You’ll see a substantial move in inventory balance on the balance sheet, which already occurred in Q4. Given 25% installation growth last year versus 10%–15% this year, that suggests lower working capital growth year-over-year, but offsetting that is a higher equipment cost per installation with more batteries per job. So there are offsetting factors.

Just to clarify, are you saying changes in working capital in 2023 will be lower than in 2022?

I don’t have the exact comparison, but as I said, lower installation growth suggests lower working capital need, while higher equipment per job suggests more working capital need. They likely offset to some degree.

Our team is confident we have more operational improvements and efficiencies to harvest that will help us, particularly moving the backlog through. You’ll continue to see sequential improvements in that regard.

Our next question comes from Joseph Osha with Guggenheim Partners. Please proceed with your question.

Hi, thank you. Ed, we are going to miss you, man.

I’m going to be on the call. I’ll be here for you, Joe.

In terms of the California deadline, I’ve heard you refer to installer backlog. How much installed backlog do you think you could get? Could we be installing NEM 2.0 systems through September or so? I’m trying to get a sense of that.

What we’re aiming towards is likely months, not quarters, of backlog. We worked to improve efficiency last year and we still see sequential improvements we can make to digest the pipeline. We’re building a healthy pipeline and we’re trying to avoid having too many customers backlogged. We’re focused on moving that through.

Last year at the peak we were at about two quarters of backlog and we brought that down throughout the year by finding efficiency gains in the business. As we transition more towards battery installations we’re bullish on our ability to find those efficiency gains as well.

Thank you. Given the working capital discussion, if I look at 2022 you managed to put around $100 million of cash on the balance sheet. Should we expect that level of cash generation this year given what you’ve said?

The unit level cash walk moved by about $700 per customer. A lot of margin gain was offset by interest rate increases. We’re starting the year a bit better on a cash unit margin perspective. The inventory buildup for the run-up in volume will be consumptive from working capital. As we transition and realize more higher-value projects we do expect sequential growth in unit margins, but we will see offsets from working capital through the year.

Okay, thanks a lot.

Our next question comes from Maheep Mandloi with Credit Suisse. Please proceed with your question.

Hi, good evening. Thanks for taking the question. On the net subscriber value, you talked about a sequential decline in Q1 versus Q4 and ramping it through the year, but could we expect it to ramp up back to that 16,000 on a like-for-like basis by Q4? Also, where are you assuming the 30% ITC or any of the adders for your customers here?

Good question. The $10,000 guide with the new 6% discount rate does not assume the realization of any ITC adders in Q1. The low-income adder would be the most material, and we addressed timing concerns around that. The IRA adders—energy communities and domestic content—are not assumed in the Q1 guide. We have reasonable confidence we can realize a portion of domestic content given our supply agreements. If guidance is favorable and we install qualifying systems, that will generate upside. Sequential growth in net subscriber value will be related to higher pricing realization and the shift toward higher-value, battery-attached projects. The $10,000 does not include upside from the adders and we expect sequential growth. Also, because the metric is reported on an installation basis, fewer installations in Q1 relative to Q4 create some headwinds in the metric, but we expect recovery through the year.

I would add more sales activity in Q1 than Q4. Because the metric looks at installed customers and cash costs in the period, when we move from Q4 to Q1 we have fewer installations and more sales activity, both of which create a headwind in the metric that reverses over time.

Got it. Thanks. And should investors expect the focus to remain on net subscriber value per customer or any new metrics to help investors?

We will continue to focus on the primary metrics. There is value creation from subscribers and headline megawatts, and value per megawatt is appreciating because of higher-value installations. GAAP financials are another area where there may be opportunity to simplify over time. Ultimately, the objective is to grow unit margins and continue that trend as we get into a stable interest rate environment and continue to grow unit margins—cash flow generation is the priority, but given growth it is also consumptive from a working capital standpoint.

Our next question comes from Biju Perincheril with Susquehanna. Please proceed with your question.

Hi, thanks for taking my question. Going back to 2023 guidance, can you sort of bridge the installation growth in the first quarter being down to roughly 3% year-over-year to the 10% to 15% growth for the year? Is that all market share gains and from the shift towards more storage systems or are there other factors?

Q1 is typically lower than Q4 across years. Year-over-year comparisons can look irregular quarter-to-quarter. We expect sequential growth and to realize 10% to 15% annualized growth given the extra volume we’re seeing and the ability to fulfill that volume as we grow build capacity.

Okay. Were there any abnormal impacts in that first quarter number from weather or anything else?

Not unusual. A little bit of weather and the acceleration of pipeline, but nothing unusual.

Our next question comes from Steve Fleishman with Wolfe Research. Please proceed with your question.

Thank you. Questions on the IRA adders. First, if you find later on that you would qualify for a low-income adder or energy community for someone that you added in Q1 or Q2, can you go back and capture the adder later on?

As currently set on the low-income piece, unfortunately the answer is no, which reads a little inconsistent with the legislation. As soon as that kicks in it will be upside we have not planned for here. On the energy communities piece, the effective date is closer to January 1, but the particulars of geographic qualifications and timing are nuanced and require guidance.

Same goes for the domestic content adder—timing and final guidance will determine applicability. From a funding perspective, tax equity investors would be happy to realize that tax credit value provided they have the appetite and pay for it in the advance.

Okay. Then as you think about the adders availability later in the year or next year, how much of that do you think you can retain versus being competed away to get customers?

It’s likely we can retain a good amount. We’re well positioned for domestic content and energy communities based on our supply and operations; the low- and moderate-income adders are more timing-related. We know the low-income adders will kick in by the end of 2023 into 2024, and could be sooner depending on policy discussions.

Our next question comes from Christine Cho with Barclays. Please proceed with your question.

Thank you. When we think about the cadence of installations throughout the year in California, you mentioned it will take a couple of months. I would assume if someone wants to be grandfathered under NEM 2.0 they aren’t really looking for a battery. Should we think those NEM 2.0 applications will be prioritized over solar plus storage installations, especially if storage takes 50% longer? By that logic, should solar plus storage installations be more back-end loaded this year?

Yes, we’re seeing a pull forward of demand. It’s logical that there will be a higher attach rate once we get past April 15. In terms of pipeline management, we’re being clear with customers trying to get in before the cutover about timing. We’re focused on strong customer experience and meeting all requirements so customers technically qualify for the cutoff date. We will move customers in the order they came into our pipeline.

Is there any color on the difference in subscriber value for a solar-only customer versus a solar-plus-storage customer in California? As installations might be down, there is an offset because of higher subscriber value for solar-plus-storage.

Yes. With backup and storage, the incremental margin is in the low single digits of thousands per customer on average, depending on home size and battery configuration. There’s a wide range, but that’s an average incremental contribution.

Our next question comes from Corinne Blanchard with Deutsche Bank. Please proceed with your question.

Hi, good afternoon. Thanks for taking my question. Do you still have room for pricing power or increases in pricing over the next couple of months?

We continuously monitor macro factors—interest rates and utility rates—and adjust pricing dynamically. There is opportunity for pricing changes, but we are deliberate and more specific from a geographic perspective rather than taking national action.

Makes sense. Do you expect further increases in expense? Some peers are heavily investing to support California growth. Is that your intent over the next few weeks or months?

Cost increases you’ll see will be related to higher-cost equipment—batteries—so you’ll see creating-cost increases. But last year costs remained generally flat as equipment prices went up but were offset by installation efficiency gains. We expect to continue improving efficiency and to see net subscriber value increase as a result.

Our next question comes from Abhi Sinha with Northland Financial. Please proceed with your question.

Hi. Thanks for taking my question. Could you share some updates on Puerto Rico — progress in market share, expectations over the next 3 to 5 years, and any impact of agreements there? Also, comparing the VPP you have in Puerto Rico to the PG&E opportunity, are there differences in value, and is the Puerto Rico example around $2,000 per customer incremental NPV?

I recently spent time in Puerto Rico with our partners. Puerto Rico is an important market and in many ways a postcard from the future, with a high storage attach rate and forward-leaning demand for solar plus storage. We’ve been deploying the Span panel there and leveraging Puerto Rico’s need to transform the grid. We are bullish on the opportunity and working with local partners and government. The Governor and his team are engaged on expanding what we’ve done so far to rethink grid management and increase solar-plus-storage deployments. We expect market share to continue to go up.

Our next question comes from Colin Rusch with Oppenheimer. Please proceed with your question.

Thanks so much. Ed and Danny, on that last financing, can you talk about where you were able to push cost of capital a little lower and how durable those advantages are? Is it around construction, underwriting assumptions, performance of the systems in the field? Just trying to get a better understanding of what’s happening with the portfolio that’s helping enable that cost of capital advantage.

The key driver was execution strategy. Debt capital markets can move faster than bank markets in a rising-spread environment. Our deep, multiyear relationships and strong reputation as a high-quality sponsor are very valuable. Being able to access both bank and securitization markets at scale allows us to be nimble and shift as markets change. That relationship capital enabled the favorable pricing on the $835 million term-out financing.

Understanding all markets, setting strategy accordingly and having strong relationships when the market tightens pays dividends. I believe we benefited from that.

On the VPP technology side, are there meaningful hardware innovations emerging that materially contribute to functionality and granular control, or is it still largely at the system level for capturing value?

VPP software capabilities have been improving and we’re excited about Lunar’s Gridshare technology. Sunrun has done VPP work for years; the technology exists and is improving. The larger challenge historically has been the culture of utilities, but we see utilities increasingly wanting access to distributed capacity. We’re bullish on what Lunar can do and on increased demand for distributed assets to support the grid of the future.

We have reached the end of our question-and-answer session. This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time.