Thank you for your patience. My name is Krista, and I will be your conference operator today. I would like to welcome everyone to the Spruce Power First Quarter 2024 Earnings Conference Call. I would now like to turn the conference over to Bronson Fleig, Head of Investor Relations. Bronson, you may begin.

Good afternoon, and welcome to Spruce Power's conference call to discuss results for the first quarter of 2024. With me today are Chris Hayes, our Chief Executive Officer; and Sarah Wells, our Chief Financial Officer. Our call this afternoon will include statements that speak to the company's expectations, outlook, and predictions of the future, which are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, which may cause our actual results to differ materially from those expressed in or implied by these statements. We are not obliged to revise or update any forward-looking statements, except as may be required by law. Please refer to our disclosures regarding risk factors and forward-looking statements in today's earnings release and other SEC filings. A copy of our press release has been posted to the Investor Relations page of our website for reference. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent and can be found in the press release that we issued this afternoon. With that, I will turn the call over to our CEO. Chris, go ahead.

Thank you, Bronson, and good afternoon to everyone. This is my first earnings call here at Spruce Power as Chief Executive Officer. I would like to express how excited I am to step into a new leadership position with the company. I have familiarity with Spruce, having served as an independent director since Spruce was acquired 18 months ago in the reverse merger with XL Fleet. More importantly, I have been active in the renewable energy industry and project development for many years, and I'm excited to apply that expertise to our vision for Spruce. As I stepped into the CEO role, I believe Spruce is in its strongest position in its corporate history. There are three main reasons. First, our core solar business is inflecting toward positive cash generation as the benefits of 2023 M&A activity and greater scale are realized. Next, Spruce has a strong balance sheet and abundant liquidity. This positions us well to take advantage of the massive investment cycle occurring upstream in residential solar markets. Lastly, legacy XL Fleet overhang items are diminishing, allowing us to look forward to focusing on growing positive cash flows. My core near-term focus will center on driving Spruce to pursue capital-light organic growth opportunities that can leverage our outstanding owner-operator platform. This includes acquisitions of operating residential solar portfolios with attractive return profiles and a sharpened focus on extracting value from Spruce's best-in-class solar servicing technology platform. My goal is to leverage my experience in productizing several once-nascent technology services businesses in renewable energy markets into businesses that today are sustainable generators of recurring revenues. I believe that Spruce's servicing technology platform is primed for optimization that can drive organic growth opportunities. I'm happy that the Board of Directors has entrusted me to unlock this value as an additional source of growth for Spruce. Spruce Servicing. So let's start there with Spruce's servicing technology platform. I want to discuss our servicing platform in more detail because it is really our 'secret sauce'. The platform foundationally enables us to do many things well, including our ability to be the preeminent consolidator of residential solar assets through M&A. Spruce's servicing technology platform was years in the making and today stands as a mature, fully integrated business. It was crafted to provide exceptional customer service while operating residential solar assets in the most efficient manner, thus maximizing asset-level cash flows. Our full wrap servicing suite includes infrastructure such as: one, a billing and collections platform that enables seamless customer payment services and in-house collection activities; two, asset operations in which we remotely monitor our rooftops and collect data and analytics, enabling us to efficiently deploy field services teams to service rooftops and keep revenues flowing; third, homeowner support, a suite of both online tools and U.S.-based call center agents that handle anything from basic customer questions to system transfers in a home sale process; and lastly, a suite of many other valuable services. This includes tools that use in-depth financial analysis and reporting to generate detailed records for asset owners and third-party funds on a multitude of financial and operational reporting metrics. All these systems are technology-driven so that we can provide integrated seamless services to both Spruce and third-party assets. The key takeaway is that Spruce has the most comprehensive service offering in the market. It's hard to replicate, and we believe we have created a moat in servicing. Spruce services its own solar assets as well as some third-party portfolios, a few of which are now wholly-owned through acquisitions. Our platform has matured such that we can scale this servicing business to far more of those third-party portfolios. To that end, it's important to underscore our addressable market. Upstream to Spruce, we are amid a massive investment wave in residential solar and distributed energy assets. According to leading industry data sources, around 25 gigawatts of rooftop solar have been installed in the United States over the past five years. Despite the transitory challenges of policy and cost of capital volatility, the magnitude of residential solar installations ahead is compelling. We believe hundreds of thousands of homeowners will adopt solar through the end of the decade. Even more encouraging for Spruce lease and PPA paper is becoming a preferred consumer financing choice as this tape can be more efficiently priced by originators for the consumer in this 'higher for longer rate environment'. This robust outlook creates tremendous opportunity for Spruce to offer our best-in-class servicing platform to third-party originators and, of course, the opportunity to consolidate solar portfolios over time through M&A. Why? The answer is simple. One, from a servicing perspective, we offer what we believe is the most comprehensive and price competitive service offering in the market. Our platform is purpose-built and years in the making. So we are competitively advantaged compared to Spruce's competing piecemeal offerings from solar originators and financing parties attempting to retain servicing in-house alongside asset ownership. Two, from an M&A perspective, history tells us that most originators are good at what they do. Installing solar and owning solar assets for 20 to 30 years is not their forte. These solar installers and their partners who look to own portfolios for either economic or tax reasons eventually look to recycle capital for future development activities. In fact, this has been the catalyst for many of Spruce's 13 acquisitions to date. So in these first few weeks as CEO, I've begun to present our team with a goal of creating value from this tremendous platform we have. Earlier this year, we announced the launch of Spruce Pro, which is our B2B brand for marketing our servicing technology platform to other residential solar assets as well as commercial solar and other energy businesses. Early indications of interest for Spruce Pro and our servicing technology offering are exciting and outpacing our initial expectations. I look forward to providing more updates over the next few quarters. Next, I want to discuss our philosophy and current position around capital allocation. At quarter end, Spruce had $150 million of cash. This war chest enables us to pursue growth by acquiring residential solar portfolios and through expanding our service and customer base. Our philosophy around capital allocation has been consistent since Spruce went public via the merger, and we have no intention of changing it. Our investment decisions are driven by a rigorous analysis of opportunity cost. At any point in time, we will direct our capital to the highest return alternative. We retain maximum flexibility in deciding what to do because we can't predict in advance which alternative will be most attractively priced as market conditions are always changing. Occasionally, like this quarter, we may do nothing because our alternatives are equivalent, and we expect future conditions to create better opportunities. I watched the Berkshire Annual Meeting last weekend and noted that Buffett was raising cash for the same reason. He wants to be ready for more compelling opportunities he expects in the coming quarters. We do not rush to deploy capital merely to boost our growth metrics temporarily. Instead, we emphasize patience, ensuring that when we make moves, they are both strategic and prudent. This disciplined approach means we are not swayed by short-term market trends or pressures to close deals rapidly. We can wait for our fat pitch— the right opportunity that aligns perfectly with our long-term objectives and company values. The great thing is, Spruce has paved the way. If we do not grow our portfolio with an acquisition, we are still collecting meaningful and attractive cash flow from the assets we own. This is in stark contrast to the broader residential solar industry, which must 'grow or die'. So we have no reason to force any capital allocation moves. We can and will be patient and act only when the likely return is compelling and is the best among the alternatives we have. Before handing it off to Sarah, some final thoughts. I've enjoyed many conversations with the investment community over the past several weeks, many of you no doubt listening today. I'll echo the sentiments that I've expressed in that Spruce remains focused on executing our core strategies. I'm excited to leverage my experience to enhance the value of our underlying servicing business, which offers us a durable competitive advantage over the long run. Spruce is very well positioned, and I look forward to building on the momentum our team has created to date. Sarah?

Thanks, Chris. I'll first address some housekeeping items that impact our financial reporting, specifically, an update on wrapping up legal proceedings related to legacy XL Fleet Corp. and its operations. As previously communicated, during the quarter, Spruce made a payment in the amount of $15 million to settle the Southern District of New York securities class action lawsuits surrounding the 2020 merger of XL Fleet. This matter as well as the previously disclosed SEC inquiry have been settled with legacy XL Fleet legal items diminishing; this allows us to look forward to growing the cash flow from our core business. Moving to first quarter financial results. First quarter revenue was $18.3 million compared to $18.1 million in the prior year period. The year-over-year increase is largely due to incremental revenues from the Tredegar acquisition completed in August 2023. First quarter core OpEx, which we define as SG&A and portfolio O&M, was $16.6 million in total as compared to $17.6 million for the prior year period. Breaking this out, first quarter portfolio O&M expense increased to $3.1 million from $1.9 million in the prior year period. The increase is largely due to timing considerations in which $2 million of accrued expenses at year-end were settled during the first quarter. SG&A expenses decreased to $13.5 million in the first quarter from $15.7 million in the first quarter of 2023. The prior year period saw impact due to legal fees tied to the legacy XL Fleet lawsuit and restructuring charges. Finally, we generated a GAAP net loss attributable to stockholders of $2.5 million in the first quarter. As we discussed in our last call, management considers operating EBITDA as a key measure in evaluating Spruce's operating performance. We define operating EBITDA as adjusted EBITDA plus net proceeds from investment in SEMTH master lease, interest earned on cash investments, and proceeds from buyouts and prepayments, as these items represent material cash inflows from our ongoing business and strategy. Adjusted EBITDA was $3.8 million for the first quarter. Adding in the net proceeds from the Spruce Power 4 portfolio of $3.9 million brings the total to $7.7 million. Next, adding $1.6 million of interest earned on cash investments and $1.4 million of proceeds from buyouts and prepayments, operating EBITDA totaled approximately $10.7 million for the first quarter. Next, I'll address our capital and liquidity position. As of March 31, 2024, we had cash and cash equivalents of $150 million. This compares to $173 million of cash and cash equivalents as of December 31, 2023. The net change in cash is primarily attributable to XL wind-down activities, namely the previously mentioned $15 million net payment to settle the SDNY shareholder lawsuit. The total principal balance of long-term debt was $640 million as of March 31, 2024, with a blended interest rate of 5.8%, including the impact of hedge arrangements. As a reminder, all of Spruce's debt is nonrecourse to the company and consists of project level debt that is supported by our solar lease and PPA portfolio and is nonrecourse to the company. At quarter end, 97% of our debt profile was hedged with mark-to-market on our swaps of a positive $34 million. Spruce's nearest maturing facility, the SP4 facility, is due August 2025. We are actively engaged with the Linden community to refinance the facility. Last, moving to full year financial guidance, which can be found on Slide 20 of our Investor Relations deck. We are reaffirming our guidance, which includes an outlook for adjusted free cash flow of breakeven to moderately positive. As a reminder, this outlook excludes the impact from legacy XL Fleet items, namely legal expenses. This concludes our prepared remarks. Operator, please open the line for questions.

Your first question comes from Peter Gastreich with Water Tower Research.

Yes. Congratulations on your results, and thank you very much for the presentation. Just a couple of questions here for starters. First of all, I've noticed in your Q1 results that you did not repurchase any shares in the first three months. So I just would like to understand if there's any reason why the company was not proactive there? And the second question is just about your servicing platform, and you talked a bit about that in your presentation. I wonder if you could dig a bit deeper there to help us understand those competitive advantages. And in particular, if this could help to drive your revenues outside the PPAs and SLAs going forward?

Great. Thanks for the question. So on the share buyback question, our focus is to build a long-term durable business. We think to be a dominant operator of solar assets over the long term and to reach greater scale, we are seeing compelling opportunities at compelling prices; to execute, we need capital. We think that is a great element of this business, and it's driving M&A flow from an origination perspective into the business. As to your second question on the servicing platform, we've been building this over seven years while managing our existing portfolio. This is a full wrap service completely integrated technology services start to finish, and we are not aware of a more comprehensive offering than ours. Having the ability to leverage our fixed costs makes this a very interesting business opportunity for us. And that's one of the reasons we're pursuing it in a capital-light manner.

Your next question comes from the line of Tristan Richardson with Scotiabank.

Maybe just one for me. You talk about M&A, and I'm just kind of curious, in your new role, do you see the pace of M&A changing going forward within your core TPO asset? And then curious maybe how the bid-ask spread looks today as you review deals?

Well, it's a great question. You almost answered the first with the second. So we are, for sure, seeing a widening spread between bid and ask. Looking across this space, for whatever reason, there is all sorts of chaos and opportunity. As it relates to us being a pure play, we are one of the largest third-party owners. We think that is a great business model. We are a great buyer at the right price; we will be disciplined. I would love to announce a deal tomorrow, but we are going to be super disciplined and wait for the right opportunity in IRRs to come our way and then execute aggressively.

Appreciate it. And congrats on your new role.

Thank you. Really appreciate it.

And that concludes our question-and-answer session. I will now turn the call back over to Bronson Fleig for closing remarks.

Thanks, operator, and thank you to everyone who joined our call today. If you have any follow-up questions, please reach out to me separately along with our Investor Relations team. This concludes our call. Have a great day.

This concludes our call. Thank you for your participation, and have a great day.