Sunrun Inc. (RUN) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Sunrun Inc. Q1 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the conference to your host, Mr. Patrick Jobin. Sir, you may begin.

Thank you, operator, and thank you to those on the call for joining us today. Before we begin, please note that certain remarks we will make on this conference call constitute forward-looking statements. These include, but are not limited to, statements related to our financial and operating guidance and expectations regarding our business, future growth rates and financial and key operating metrics. 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. If this call is reviewed after today, the information presented during this call may not contain current or accurate information. On the call today are Lynn Jurich, Sunrun’s Co-founder and CEO; Bob Komin, Sunrun’s CFO; and Ed Fenster, Sunrun’s Co-Founder and Executive Chairman. The presentation today will use slides which are available on our website, at investors.sunrun.com. And now let me turn the call over to Lynn.

Thank you, Patrick. We're pleased to share with you Sunrun’s first quarter financial and operating results along with progress against our priorities for 2017. In the first quarter we deployed 73 megawatts, up 21% year-over-year exceeding our guidance by over 5%. We gained market share, increased deployments, reduced our creation costs and generated 56 million in net present value. We've done so while improving unit level economics year-over-year and while maintaining our cash position above 200 million for the seventh consecutive quarter. Our performance in Q1 and recent trends gives us confidence to reiterate our full 2017 guidance of over 35% growth in NPV, deployment growth of 15% and our cash flow outlook. I'm pleased with our strong results and our competitive position. First our multi-channel business model; our channel business provides us with broad reach and leverages cost effective regional installers. Our direct business allows us to achieve efficiencies in core market and share best practices with our partners through our platform. As the largest standalone residential solar company, Sunrun is the natural choice for Big Box retailers and large consumer brands which are effective acquisition channels and offer geographic expansion opportunities. Second our product suite, we offer products to customers want, whether it's service agreements, often knowns as leases or PPAs, loans or cash products. We enable consumers to save money on their energy bills and purchase cleaner electricity at locked in predictable rates. We have already saved our customer over 100 million in our short tenure history. Our customers appreciate that our interests are aligned with them over the long run. We delivered strong financial results this quarter by also making progress against our long term strategic priorities. First our three-pronged partnership with National Grid is off to a great start. As previously announced National Grid is contributing a 100 million in project equity. In the quarter we have started to contribute assets into the fund and just yesterday closed 195 million non-recourse back leverage facility to complete the capital structure. The Grid services collaboration is progressing and setting the groundwork for additional revenue trends in the future and the early results of the co-marketing pilot are encouraging and we are expanding into more zip codes. It is clear that forward thinking utilities and regulators recognize the value distributed energy resources can grain to country's energy infrastructure. Second, we lead the industry and continue to innovate with the first zero down solar plus storage as a service offering for residential customers. over the last few months we advanced installations of our BrightBox offering in Hawaii and California. Sunrun is focused on modernizing our inefficient and dirty $1 trillion energy infrastructure, playing offence and gaining market share. Our channel enabling platform innovation with BrightBox and our capital position built increasing inter-barriers while new markets are opening up to set the stage for continued growth. I'll now turn the call over Bob Komin to review Q1 performance in more detail and discuss guidance.

Thanks Lynn. In the first quarter we exceeded our deployment guidance and executing well against our 2017 goals. NPV was $0.83 per watt in Q1 resulting in aggregate NPV created $56 million. This represents 125% growth compared to prior year. For the year 2017 we continue to expect to generate $1 per watt in NPV, a 15% improvement to our unit level economic compared to 2016. We expect the seasonal patent of NPV to be consistent with prior years with lower NPV throughout first half and gradual increasing throughout the year as volumes increase. NPV is calculated as project value less creation cost, so let's go to each of the component next. Q1 project value of $4.21 per watt was $0.20 lower than Q4, frankly due to the mix of business in the quarter. we expect project value to be approximately $4.25 per watt for the year, 5% below 2016, this decline should be more than offset by cost reduction. As a reminder project value is very sensitive to modest changes in geographic, channel and tax equity fund mix. We expect project value will continue to decline slightly overtime with cost declining more although in the short run there can be quarterly fluctuation. Turning now to creation cost on Slide 9. In Q1 total creation cost was $3.38 per watt, an improvement of $0.69 or 17% year-over-year. Similar to project value creation cost can fluctuate quarter-to-quarter due to changes in geographic and channel mix and this quarter we saw some benefits to our cost from our mix of business. as a reminder our cost stock is not directly comparable to those appears because of our channel partner business. Blended installation cost per watt, which includes both solar projects deployed by our channel partners, as well by Sunrun improved by $0.31 or 10% year-over-year to $2.57 per watt. Install cost for systems built by Sunrun were $2.14 per watt, reflecting a $0.22, or 9% year-over-year decline. We expect installation cost to improve further as we realize more of the benefits of lower panel and inverter prices beginning in Q2. In Q1, our sales and marketing costs were $0.51 per watt, a 12% improvement from Q4 and a 41% improvement from the prior year, primarily driven by channel mix and our focus on the most cost-effective customer acquisition channels. Next, G&A cost per watt was $0.29, a $0.01 increase from Q4. These costs have been largely flat for the last several quarters. In 2017, we expect to realize further operating leverage with volume growth exceeding G&A cost increases. Finally, when we calculate creation costs, we subtract the GAAP gross margin contribution realized from our platform services. This includes our distribution, racking and lead generation businesses, as well as our solar systems we sell for cash or with a third-party loan. We achieved platform services gross margin of $0.09 per watt lower than Q4, due primarily to a lower mix of solar system sales and seasonality in our distribution business. In the first quarter, deployments increased 21% year-over-year to 73 megawatts, exceeding our guidance of 69 megawatts. This fee was primarily attributable to an increase in our channel volumes, the strength and flexibility of our multi-channel platform model continue to serve us well in the current market conditions. As we've highlighted over the last few quarters, we're seeing more opportunities that are favorable to work with partners while meeting our NPV and cash contribution goals. As we've previously described this trajectory can fluctuate quarter-to-quarter since we did not manage to a mix or volume target, we instead prioritized based on unit level margins. Our cash and third-party loan mix was 7% in Q1 lower than Q4. We expect this to increase slightly and return to more recent levels of low to mid-teens. As discussed previously, we believe our PPA and lease product mix of over 80% better matches consumer preferences and delivers our customers significant value and predictability, which is one of the reasons we have been able to take share. In Q1, our net bookings were 74 megawatts, an increase of 19% from the prior year. As a reminder, bookings are calculated net of cancellations. Our liquidity position remains strong. We entered Q1 with $204 million non-restricted cash, the seventh consecutive quarter we've been above $200 million. Our view that we'll be able to maintain or potentially increase our cash position by the end of 2017 without issuing additional equity remains unchanged. This excludes any strategic opportunities or accelerated market entries beyond our current plan. As a reminder the timing of project finance proceeds can vary quarter-to-quarter and our primary objective is to optimize for the lowest long-term cost of capital. So, we focus first and foremost on the best execution of financing, which could impact the timing of our cash balance on a specific quarter end measurement day. Moving onto guidance on Slide 10, we remain confident in our growth trajectory with Q2 going for 72 megawatts which reflects approximately 15% year-over-year growth in the first half of 2017. We're reiterating our guidance of 15% growth for deployments for the year which is approximately 325 megawatts. Our principle focus is generating approximately a $1 of NPV per watt. We continue to believe we can generate more than $290 million in aggregate NPV in 2017, of more than 35% increase from the prior year. Now let me turn it over to Ed.

Thanks, Bob. Today I wanted to touch on three items. First, I will discuss how our use of cash equity flexes [ph] with National Grid, impacts our growth and net earnings assets figures. Second, I'll summarize the back-leverage facility we arranged for the National Grid partnership and report out on what we see as a strong project finance environment general. And lastly, I'll touch on our customer centric business model and very happy customer base. Turning first to our installed asset base, we are pleased to report that as of March 31, net earning assets were $1.1 billion, reflecting a 35% year-over-year increase. Net earnings assets now totaled $10 per share. As a reminder, net earnings assets represent the present value cash flows we expect to receive from our fleet of deployed solar systems after deducting our estimated operating and maintenance cost our project level financing and distributions to our tax equity partners. The use of cash equity financing such as the national grid partnership increases our corporate cash balance versus the use of just on recourse debt. However with the solar facilities in such a partnership largely monetized up front growth in gross and net earnings assets will flow as we exclude from these metrics cash flows destined for cash equity partners. In 2017 we expect to be able to maintain or grow corporate cash while [technical difficulty] net earnings assets. Lastly on Slide 12, we have included the table we introduced last quarter which presents the present value of our renewal cash flows as a function of the number of years that renewal payments received and the per kilowatt hour rate realized in the renewal period. as you can tell from the table even very low real PPA rate below even wholesale power prices provide significant present value for Sunrun, given our large and growing fleet. Transitioning to financing activity yesterday we closed a 195 million back levered facility for our partnership with National Grid. At closing we partially drew on this credit facility with most of the proceeds being used to repay our existing aggregation facility or returning capital to national grid. As we continue to place assets into this partnership we will draw down further on the facility. As our customary practice we entered into 20 year interest rate swaps to predominantly fixed LIBOR for the initial contracted term of the customer agreements. The swaps we have executed thus far have set in all in interest rate of 5.1% for the credit facility seven year term generating proceeds at the high end of the 95% to 100% range of contracted project value we discussed last quarter. This resulted before considering the 50% upside sharing arrangement we have with National Grid for refinancing. We believe the closing of this facility will mark to major milestone. First, this type of back levered facility has become sufficiently plain vanilla and supported by a large enough number of lenders that we didn’t even use as syndication agent to place it. Second, the combined proceeds we received in this transaction is consistent with our reported contracted private values. We believe there is a growing market for cash equity and that the proceeds we realized in this transaction can be achieved while offering such investors an attractive return on equity of about 10% even before considering the benefits they may realize from future refinancing. With this closing, we have committed tax equity back leverage and project equity run way into Q4. We also continue to see robust interest from tax equity investors and providing additional capital [technical difficulty]. Turning to my final topic I wanted to share some metrics that underscore our customer centric approach towards the business. Our net promoter store a best practice measure of customer satisfaction, for the last 12 months has been 69 which is excellent and puts us on power with some of the best companies in the world like Apple, Amazon and Netflix. Our NPS score this quarter was the highest we'd ever recorded and it is representative of the fact we're always investing and improving our customer experience. Our customer referral rates have grown sequentially for each of the last four quarters which is the further signs customers are increasingly pleased with Sunrun. Our better business bureau rating is in A plus and our product offerings ensure we're naturally aligned with customers. Not everyone in the industry can make this claim. For instance we provide performance guarantees that ensure customers only pay for power delivered and we make kilowatt hour rate customers pay entirely transparent. We standby and service our systems. For those who saw us as only sell a system and walk away, customers have no guarantee of the true cost of solar energy received and can be left without a service provider to maintain their system. We offer customers a low price for solar energy that is fixed for 20 years. What facility can say that? We care about having a happy customer base that is generating value from their solar systems. Our asset performance statistics show it. Our cumulative loss ratio is less than 1% and in the aggregate our systems produce more power than we've promised our customers. Our commitment to best practices also extends to safety and construction quality. And importantly our employees care. In the quarter we received an appreciative call from a bystander who reported that on a major South Carolina road when the cars came to a stop a dog ran out in the traffic. She said two Sunrun employees jumped out of their vehicle and caught the dog just before it would have been hit by oncoming traffic. They returned the dog to its owner and drove off to their job site. These are the sort of people and culture we're proud to have at Sunrun. We pride ourselves in delivering excellent customer service, not just throughout the sales process, but the decades that follow and I'm pleased to report the data support our excellent track record. I'll now turn the call back over to Lynn for closing remarks.

Thanks, Ed. While we're pleased with Sunrun's performance in Q1, we're even more excited about the tremendous market opportunity in front of us and how Sunrun is positioned. Operator please open the line for questions.

Thank you. [Operator Instructions] Our first question comes from Andrew Hughes of Credit Suisse. Your line is open.

Ed one on bookings and then one on cash equity, just curious on the bookings front, your average turnaround time from bookings deployment especially now with the little more stringent booking definition and then it looks like you need to do about 35 more megawatts in the second half then in the first half to hit guidance, so is there any -- what should we look for I guess in the second quarter bookings numbers that give us confidence in your full year targets and what you need to do in the second half?

Sure. So, I think your question was, was your first question, Andrew, on what are the cycle times, I think just to answer that from the bookings to install right now, we're running at about 20 days is what you're going to see, so you're going to see the bookings number translate pretty closely into the installs and so you're not probably going to see -- because the summer season ramps quite a bit too; you're probably going to see some additional bookings in Q3 that will also get installed in the quarter because that timeline is so significant, if you -- we don’t believe it's a situation where we would need to post a Q2 bookings number the exact same amount that we would need install in Q3 to hit the guidance. I think we are still planning to deliver the 15% growth year on installs and we are really hustled in Q1, so we did better than expected and that guidance in Q2 keeps us at about 15% year-over-year growth rate for the first half of the year and right on track for the year. So as you know Q3 and Q4 are always a lot stronger due to summer selling season. So we are confident we have the right channels to achieve that.

And then Ed, you mentioned that the cash equity opportunities looks strong, curious first as your role the projects finance runway forward, does the mix of tax equity and cash equity and project debt look any different than it has historically, is there a more cash equity in that mix? And then more broadly have you guys thought at all about going a little bit deeper into your asset base and perhaps selling stakes in the operating assets and using that cash to buy back shares or something else along those line?

This is Ed, so first the ratio of tax equity to back leverage is approximately the same, hasn’t changed very much and continues to have that relationship whether or not it's the case that we use additional cash equity. In terms of the opportunities for additional cash equity, obviously, we continuously evaluate our capital structure and work to optimize our long-term value and obviously, pay attention to our liquidity position as well. In terms of our overall strategy, I think we've said on the call that our preference is to continue grow net earnings assets and to grow the cash book of business. It’s -- to grow our net earnings assets while increasing our corporate cash. So it's certainly possible that we would evaluate or execute certain cash equity transactions in the future, but we haven’t made any determinations or statements on it at this time.

Our next question comes from Julien Dumoulin of UBS. Your line is open.

Perhaps just to start with a little bit more perfunctory question, curious obviously there is a discussion in the media that the gauge [ph], can you comment, I suppose to give us a little bit more context; one A, is there something ongoing and then B, can you give us a little bit more context about how you see cancellations materialize with those. I know you already referenced it a little bit in your opening comments perhaps a little bit more clarity there, then I got a follow up.

Sure, Julian we are glad you brought it up and actually we view the article that you are referencing as a gift on two dimensional Julian. And I think the first one is that we get to talk to about our customer experience which we're phenomenally proud off. And I think the stats speak of themselves, saving our customers 100 million our NPS score and the first time of customers coming us to through referral sale. So we think customer experience is going to be a huge differentiator. We think we are winning on that dimension and so we welcome the opportunity to really talk about that and engage on that dimension with the media and other constituencies, and I think the second reason why this discussion is important is that we think that the cancellation term is really misleading in our industry and you have to think about the sales process. So from the sales processes, you get a customer to sign. You want the customer to indicate they're very interested because you're going to start spending money on that customer. So the customer signs, but they sign before you actually go to that -- first of all they don't put any money down, they you go to the house to inspect the site, you can pull -- you give them the exact savings that they're going to realize and for some customers they decide that there is too much shaving, it doesn't work, their roof might not be appropriate. So there's a number of reasons why people might fall out, they might want to wait until they do another home improvement, all of those I think are very natural and to be expected in the part of the process. So I think when people hear the word cancellation, they jump to -- oh, no these customers have installed systems and now they're not paying and they're trying to cancel it, it's very much not the case. We believe it's the right sales process to get that upfront signature, but then have a natural fall out through that process. So, that's how it works in practice. And I think the other thing that was a little misleading in some of the discussion around this is, all of the dollars we spend on sales and marketing are recorded in our financial statements. So, all those dollars associated with those customers we record, and then the bookings number we report each quarter nets out the cancellation. So, I think we just wanted to clarify those couple of points. In terms of the investigation that you asked about, the scale of our business is really significant, we'll spend a $1 billion in 15 states and we're disrupting huge entrenched competitors, so we get a ton of attention on us as you might have mentioned, so we respond to all enquiries fully and with the utmost transparency, so everything that's material is in our filings and we're really proud of the high standard that we set for ourselves and our team.

And then another question more on the regulatory side, the Siniva [ph], the 201 filing, I just love to hear your initial thoughts both in terms of probably like [indiscernible] and more importantly what you gauge the impact to be both in terms of what that would mean for PPA prices being improved, but also directly for yourselves and your contracted positions?

Julien, it's Ed. Obviously, everyone's favorite topic [indiscernible]. It's the early days in the Siniva trade case and we think it's premature for anyone to be making predictions as to the outcome. But as the major media has put it, the partition was a last ditch effort to survive by a Chinese owned company that is asking U.S. government to fix prices for solar panels. On the policy side the International Trade Commission needs to determine, among other facts, whether Siniva is representative of U.S. manufacturing? This is a key and necessary finding. If they do, on the political side the U.S. trade representative and the President have to decide the price controls that are appropriate, considering additional facts such as that the last time 201 sanctions were imposed in 2002, they had to be repealed prematurely following cross initiative retaliation by other countries and also for instance the 99% of all U.S. solar jobs are downstream. Even Solar World said, and I quote, "any actions to be taken against the unfair trade shall consider all parts of the U.S. solar value chain." We expect to participate in the trade case both directly and Siniva, although we don't believe our earnings call is the right venue to assert the details of our position. AEE our distributor has set interaction with Siniva and our experience suggests they are not representative of other U.S. solar manufacturing companies. As one example, they never met the quality standard necessary to be on our own approved vendor list. In the event that price controls are imposed, to your question, I would note the panels represent only 10% to 15% of residential solar cost. And that we would expect market price would increase in the geographies that support it. There would also be time ahead of any potential decision to optimize our procurement activities and supply chain prior to the effective date of any determination.

Our next question comes from Brian Lee of Goldman Sachs. Your line is open.

Thank you for taking my questions, I had two of them. May be just to start off, a follow up on earlier cash equity question. It sounds like Ed you're looking at that source of financing with a bit of higher appetite than you might have previously and just wondering, are you seeing from the other side of the table, a different set of audience numbers in terms of the types of potential investors I know right now its National Grid and they've taken to that strategic category, are you looking at more strategic in that round or is it going to be more of this traditional financial decision [technical difficulty]?

So as I said we continuously evaluate all options for our capital structure and work to maximize our returns overtime that could potential involve further cash equity transactions. I think we said on the last call continues to be the case we see both strategic and financial interest in these sorts of transactions on similar terms. So we do see that from both sorts of counter parties.

Okay fair enough and then second question, I'll pass it on is around sales and marketing cost a pretty steep drop here which is impressive. Can you talk to how much of that was mix driven versus like-for-like organic cost reduction and how we should think about the potential for further reduction as you move through the years? If you can quantify that [indiscernible].

So it's both, the answer is both. There is certainly some mix to some more partner business more channel business, but also the actions we have been taking the over the past three years to deliberately focus on channels where we would like the unit level economics, unit channel, channel-by-channel, market-by-market. I think we would expect that will pick up a bit through the rest of the year. But again, as I mentioned in my blogs I think these customer acquisition cost [indiscernible] they're really warranted by the value of the customer we are creating. So we can build a very strong long term solid cash generating business at that level of acquisition cost. And the market frankly supports that because the value of the customers are there. Now overtime we are going to work to continue to get that down. We have ideas and effort, but for now I wouldn’t expect that, that would be significant declines and I wouldn’t believe at the market what really support that.

So it sounds like we're in that 50 to 60 cent-per-watt range moving through the next deep waters. Okay thanks a lot.

Our next question comes from Collin Rusch of Oppenheimer. Your line is open.

Can you guys just talk a little bit about the competitive dynamics between the potential providers for the backlog rich facilities, it would seem that if you're getting, attach to the size from single entity that you might feel to start bring down in terms of the cost of capital on that front?

So, I first just wanted to clarify the transaction that we entered into, the $195 million credit facility did involve a reasonably large syndicated bank, we just organized the syndicate ourselves, so it was not a single counterparty who provided the capital to us. That said we do see increasing interest in the sector. It is a strategic decision when the right time to push on terms is. We have a long view on the market and monitor that situation carefully and obviously do the best to minimum our credit costs not just this year, but for the years to come.

And then just looking at the equipment prices as you go into the back half of this year, obviously, there's been a fair amount of noise around new entrants in the inverter space, some exits and you guys have talked about that, could you just talk about some of the supply chain dynamics, not just with inverters but with some of the other equipment including [indiscernible] that you're seeing out there in terms of cost reduction as you get through the balance of the year?

Sure, happy to address that. I think if you look at our installation costs in the first quarter, we're actually in that number, didn't realize a time of the material cost reductions that we're expecting for the year, so I think we talked on the last call $0.15 kind of number, and we didn't see that yet, out of the first quarter, just due to inventory and we're going to see that in the second quarter so we're really looking forward to feature ongoing tailwinds there.

And could you speak specifically to some of the Chinese imports on the inverter side, are you starting to see real volumes, are you still testing equipment, delays and expectations around that, just trying to get a sense of that, that part of the smart chain?

Good question maybe for the 4H [ph] call. I don't know -- we're seeing -- our inverter cost we would expect, we probably see $0.05 to $0.07 out for the year.

Thank you. Our next question comes from Krish Sankar of Bank of America Merrill Lynch. Your line is open.

Thanks for taking my questions, I had a couple of them, first one is for Ed or Lynn, the second half growth in demand or in your megawatt installed, is it primarily coming from just true demand, or you're seeing any share gains and along with that where is your market share today? And I had a follow-up.

We would, I believe we do expect to see share gains, yes. So, I believe the overall market growth rate projections are in the low teens and we're at 15%, so it's a modest, but it's a solid share gain, and I'm sorry what was the follow-up to that?

Where is your market share today?

Well the market share today, I don't have the exact latest figure, but I would say it's just about 10%.

And then I had a follow-up to, a question for Bob, just kind of curious, and then you guys have spoken about getting NPV for $1 a watt for a while now, I'm just trying to figure out, what is the path to that, is that primarily cost reduction plus unit volume or is this some other mechanics behind it?

So, certainly we've talked about getting more instillation cost improvement in the back half of this year and a lot of that will happen there. And we also if you look at our trajectory for the year in the second half we are going to have volume growth. So that certainly help us across the entire cost stack, not just installations costs. When you add that all together we are comfortable with the dollar NPV for the year. and we were there in 2016 as well in the second half.

Our next question comes from Vishal Shah of Deutsche Bank. Your line is open.

First question is on the back leverage and the tax equity market. There is some uncertainty around the corporate tax rate, so I am just curious if in your discussions that you have with some of these lenders if there are any contingency around a change in tax law and who takes the risk in that case?

So just backing up for a minute on corporate taxes generally. We do not see an impact first I just want to say on tax availability especially for Sunrun, even in the biggest of years most tax equity investors are constraining by staffing in underwriting not their own tax capacity. And right now our observation is the several large tax equity investors actually appear to be short on their plans for 2017. And in addition, with rising interest rates on a short-term basis it's not obvious that bank income taxes will decline even if the corporate income tax rate is reduced. As compared to other tax investments like winder loan, housing still off so doesn’t carry very much net depreciation benefit. So it's not very sensitive to changes and so investors aren’t that concerned about the proposed changes because, they don’t have their material effect on the projects. On pricing on term that varies on a transaction by transaction basis actually the last term sheet we entered into with the tax equity investor actually had the risk of change in tax law on the tax equity investor. But again because the -- even the reductions with 20% corporate rate we would reduce the value of systems by maybe 3%. It's not that big an issue for people to think thorough. And obviously from our perspective that’s a fraction of our annual cost reduction.

And one other question, I know there is some discussion on the 201 cases, but I believe your module costs, given that you have some inventory that you carried forward are definitely more than where the market price is today. Right. So I am just curious to see if your margin cost sort of $0.40 where the market price is between $0.35 and $0.40 is that a fair assessment? And then what do you think the NPV would be for? A solar plus storage system relative to your peer solar offering. Do you think your NPV, the watt will be higher or lower than $1 per watt?

Yes, sure absolutely, so yes, we are in Q1 our module hustle higher than your stated range there of 35 to 40, but we have been pretty flood through that. And so, we are sitting in the exact range that you cite. Then in terms of the solar plus storage product yes as we mentioned on the last call the NPV is higher than in our standard product. But again in terms of it impacts on the annual financials this year, it will not be substantial. On the north of $1 per watt NPVs that we are talking about generating the back half of this year that’s really not from storage contributions that would be upside to that figure.

And the solar plus storage offering, would that be mostly C&I initially and then residential, how does it -- how you plan too --?

It's all residential, we're still completely residential focused and we've sold as we mentioned over a 1,000 of those already and we're the only company we believe that, we're offering that as a service. So, we invented, once again we've been a real innovator from the product side and we offer the solar plus storage pipe product through a PPA for consumers which has proven to be pretty effective.

Thank you. [Operator Instructions] We've question from Sophie Karp of Guggenheim Securities. Your line is open.

I've a quick question on the mix in the quarter, it looks like share of cash sales has declined a little bit and kind of curious if this is a trend and how do you see the development. And also maybe as a follow-up, how you think about your position versus small mom and pop shops at this point because it appears to be something that you like to talk about?

On the first question, yes, our cash mix was lower than what we've seen. We were at about 7% in Q1, we think that it'll go back up to where it has been in the last few quarters which is only a few percentage points higher in the low kind of teen range. Part of the reason that we think that Q1 was a little behind where it has been is the -- our retail channel is where we generate most of the cash and loan mix in our business and in Q4 it was a seasonally tough quarter for us, the holiday season was not great in general and solar and we're feeling that in installation volume in Q1.

And then on your -- the second point of your question on the longer tail solar installer universe, I mean we have -- that's terrific for us, I mean that's why we've a multi-channel business model and we've always believed that there are both scale advantages for national players around building a brand, having baked this development relationship, procurement, utilization in core markets, so those advantages exists, but where are also a lot of attractive advantages for a smaller local businesses that are more referral based, that another local permitting department in their communities and so we believe that the market will have both, and for years we were sort of criticized for that and the story was vertical integration, and now the story is, oh it's all about the long [indiscernible]. Really, we believe that the story is more balanced full cover role and we think that that the advantage of that multi-channel model of us are being pour out through our financial results.

Thank you. I'm showing no further questions at this time.

Okay, well thank you everyone and we look forward to you speaking with you further. Take care.

Thank you. Ladies and gentlemen this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.