Sunrun Inc. (RUN) Q1 2019 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Q1 2019 Sunrun 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 call is being recorded. I would now like to turn the conference over to your host, Mr. Patrick Jobin. Please go ahead.

Thank you, Angela and thank you for 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. 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, these statements are being made as of today and we disclaim any obligation to update or revise them. 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.

Thanks Patrick. We are pleased to share with you Sunrun's first quarter results along with progress against our strategic priorities. In the first quarter, we added more than 11,400 customers representing 86 megawatts of deployments, a 27% year-over-year improvement. We generated 77 million of net present value and created MPV per watt of $1.06 or $8,100 per customer. For the year, we are reiterating our growth guidance and cash generation of over $100 million while raising our unit margin target. These strong results can be achieved while investing in our customer experience and product leadership for long-term differentiation. We have now installed over 5,000 Brightbox battery systems and continue to expect Brightbox installations to grow over 100% in 2019. We have launched this service in eight states and it represents over 10% of our direct business overall and more than 25% in California. Brightbox provides customers with backup power and the ability to turn unfavorable rate changes into a benefit by using stored power at high cost time. It also offers Sunrun additional revenue streams through energy services. As we've stated before, we believe energy services can add an incremental 25% to net value per customer. It also protects us against attempts by incumbents to undermine the value of residential solar. Given the value inherent in distributed solar and batteries along with the increased competitive advantages they bring, we expect Brightbox to become our standard offering over the coming years. Sunrun is helping our country decarbonize through a rapidly growing customer base and pioneering work building the future energy system. Consumer preferences for clean energy they can control and rapid advancements in battery technology mean that households will increasingly get a major portion of their energy onsite. We are designing our footprint of energy assets to provide ongoing value to utilities and grid operators as well as our individual customers. This will help us create a 100% clean energy future for Americans and a model for the rest of the world whether or not you have solar panels on your roof. Last quarter we demonstrated our initial success towards this effort winning a 20 megawatt capacity bid in the ISO New England auction from an anticipated 5,000 Brightbox systems. This quarter we've identified two additional opportunities to replace traditional infrastructure with superior customer-cited resources. The City of Los Angeles has resource needs following the decommissioning of a fossil fuel power plant. We have proposed the solution to replace this capacity. Our analysis found that as few as 75,000 Los Angeles homes with solar and batteries could provide a virtual power plant and replace the lost capacity. We estimate that doing so could save almost 60 million as compared to an equivalent new gas plant. In addition to these direct savings, solar and batteries add quality jobs, cleaner air, lower energy costs, and more reliable power for communities and businesses. Building clean energy locally eliminates the need for expensive transmission lines to move power into the city and can help strengthen an aging distribution grid, preventing blackouts and providing emergency backup power when outages occur. Our analysis also highlights how much room there is for Sunrun to grow. Despite this significant expansion of residential solar, Los Angeles is home to only 180 megawatts of residential solar installed on 36,000 homes. This represents only 2.5% of the 1.3 million total customers. Another report by The New York Grid Operator has highlighted that the best place to put clean energy is local, where customers are. The grid operator warn that without upwards of a $1 billion in new transmission lines into the New York City region, electricity from upstate renewables won't reach the city. With over 3 gigawatts of fossil fuel peak plants in New York City and Long Island slated for retirement in the early 2020s, the role for local rooftop solar and battery storage as the cost effective peak capacity resource couldn't be more clear. Turning now to our sustainability efforts, we as a company along with many of our shareholders, care about leading an ESG matters as a foundation for building a strong and enduring company. We recently adopted a Supplier Code of Conduct that reflects our commitment to doing business as ethically and means that we will only work with vendors and suppliers who share the same commitment. To both advance and demonstrate our commitment to diversity and inclusion in the workplace, this quarter we joined two leading groups, the CEO Action for Diversity & Inclusion and the Catalyst CEO Champions for Change, signing on with many Fortune 500 companies in the pledge to advance positive social change including by maintaining and accelerating representation of women on our Board of Directors and driving Diversity & Inclusion as part of Sunrun's culture. Examples of this commitment include our achievement of gender pay parity last year and our demonstrated solar industry leadership on these issues based on a report published this week. I'll now turn the call over to Bob Komin, our CFO to review Q1 performance and to discuss guidance in more detail.

Thanks Lynn. Customer NPV in the first quarter was approximately $8,100 or $1.06 per watt. Project value per customer was approximately $34,600 or $4.52 per watt in Q1. As a reminder, project value is very sensitive to modest changes in geographic channel and tax equity fund mix. Turning now to creation costs on slide eight. In Q1, total creation costs were approximately $26,500 per customer or $3.46 per watt. Similar to project value, creation costs can fluctuate quarter-to-quarter. Creation cost per watt improved $0.05 year-over-year. We expect creation cost to show modest declines for the full year 2019 even as we deploy more Brightbox battery systems and make investments to grow our direct business. As a reminder, our cost stack is not directly comparable to those of peers because of our channel partner business. Blended installation cost per watt, which includes the costs of solar projects deployed by our channel partners as well as installation costs incurred for Sunrun-built systems improved by $0.07 year-over-year to $2.58 per watt. Install cost for systems built by Sunrun were $1.95 per watt. In Q1, our sales and marketing costs were $0.78 per watt. Our total sales and marketing unit costs are calculated by dividing costs in the period by total megawatts deployed. A higher mix of direct business results in higher reported sales and marketing cost per watt but it also means there will be lower blended installation cost per watt over time due to the higher mix of direct business installations at a lower cost per watt. In Q1, G&A costs were $0.29 per watt, a slight improvement from Q1 of 2018. Finally, when we calculate creation cost, we subtract the GAAP gross margin contribution realized from our platform services. This includes our distribution racking and lead generation businesses as well as solar systems we sell for cash or with a third-party loan. We achieved platform services gross margin of $0.20 per watt. In the first quarter, we deployed 86 megawatts. Our cash and third-party loan mix was 16% in Q1, in line with recent levels. We expect this mix to be in the mid to high teens for the year. Turning now to our balance sheet. We ended the first quarter with $310 million in total cash, a $6 million increase from last quarter while also reducing our recourse debt by $8 million generating $14 million of cash in the quarter. We continue to expect cash generation to increase to over $100 million in 2019. Quarterly cash generation can fluctuate due to the timing of project finance activities but this represents our best view based on our plans for the remainder of the year. We define cash generation as the change in our total cash less the change in recourse debt. Also please note that our cash generation outlook excludes any strategic opportunities beyond our current plans, along with ITC Safe Harbor inactivities which we may undertake. Net income to common shareholders in EPS was slightly negative in the quarter as the growth rates in our direct business exceeds the growth in our channel business, we have more GAAP cost to expense upfront instead of capitalized and amortized over 20 years or more. Given faster growth rates in our direct business, this trend may continue. Our focus is on managing the business to our key value creation metrics of cash generation, NPV, and building a growing base of valuable customers. Moving on to guidance on slide nine, we continue to expect full year 2019 deployments to grow between 16% and 18%. We are increasing our unit economics to $1.15 or greater per watt in NPV, up from the prior target of $1.10. In the second quarter, we expect deployments to be in the range of 102 to 104 megawatts. Now, let me turn it over to Ed.

Thanks Bob. Today I plan to discuss our capital strategy for the remainder of 2019 and I will also review net earning assets and capital runway. By mid-year, we continue to expect to execute on better terms than our Q4 2018 transaction, a securitization of assets that have been operating for five or more years. We expect to generate proceeds that exceed or are consistent with our valuation framework that uses gross earnings assets as a book value measure. This highlights the quality of our assets and our capability to continue to extract value from them over time. Moving to slide 10 at quarter end, net earning assets was $1.4 billion, an increase of $143 million or 11% year-over-year. Net earning assets is our way to describe the value of the cash flows to Sunrun shareholders after payments to financing counterparties. Cash was $310 million. Total cash, less recourse debt, increased $75 million from the prior year period. Turning finally to our pipeline, our tax equity and debt capital commitments provide runway through Q4 2019. With that, I'll turn the call back over to Lynn.

Thanks Ed. Let's please open the line for questions.

[Operator Instructions] And our first question comes from the line of Michael Weinstein with Credit Suisse.

Hi guys.

Hi Michael.

Hey. Just to start-off, maybe we can talk a little bit about the news last week that Tesla was going to be cutting prices for its solar option at SolarCity. I realized that the New York Times reported initially came out quoted a 41% reduction in cost but that turned out to be an error, it was only 16%. Maybe you can just talk about what the viability of that strategy just in general. I mean how much cost really be reduced off of the sales process. And also whether do you think there is a threat from Tesla ever in the future at any point or anybody else for that matter.

Yes, thanks, Michael. Tesla certainly gets a lot of attention. So, we do think that's great for the industry because as we've always said, more awareness at this stage in the game really raises the boat for everyone. So, we like the attention. But in terms of the specific tactic, first, I believe they announced lowering prices already back in November. As you can see with our share gains, we like our competitive position just given that wasn't and announced in May about six months ago. In terms of the specific tactic around trying to standardize and automate, we don't think necessarily there's nothing proprietary about it. We certainly pursue those efforts wherever possible as well and there's -- wherever they make sense. And we certainly believe that there might be a small segment of customers where this can be a good strategy but the majority of customers still very much benefit from a consultation and something more customized. So with just said and to answer of your derivative questions, I think on the cost side, what can we do with acquisition cost. We do continue to believe that our lifetime value of our customers support the acquisition cost where it is. I mean just in looking at the total net present value of our customer in the quarter over $8,000, so we're cash flow positive, we're making money and we're taking share and so we think that's the right strategy. And I think just to put our money where our mouth is on that, you can see that reiterate the growth acceleration this year from last year. At the same time, we're increasing our unit margin targets just underscoring that we like our competitive position and our strategy.

Got you. A question about the -- on slide 11 regarding the value of future cash flows. It looks like contracted net earning asset, that portion of it went down slightly from 2018 in the first quarter of 2019 and that's made up -- more than made up for it in the renewal asset value. Just wondering if that's a result of higher debt that's been put on to the contracts or being signed to the contracts maybe you can just talk about that.

Sure. Hi, it's Ed. Good afternoon. So, we're obviously pleased with the cash generation that we turned in, in Q1 particularly in light of it being the seasonally toughest quarter for the business. Certainly, the cadence of financing activities is such that in any given quarter, you can see fluctuations up or down. And we continue to manage the business in such a way that we expect to generate cash and adds to book value. So, I wouldn't read anything in particular into the results this quarter. We'll continue to add to the book value and our cash balance over time.

On the same lens, when are you coming back to the market for more ABS refinancing or any kind of debt activity.

Sure. So, we still anticipate our next transaction in the ABS market will be mid-year this year. I expect it will be as I suggested on the call, a transaction that is principally assets that we place in service is more than five years ago. And looking forward to that transaction, and obviously are working to have that executed soon and then expect there to be more work that we'll be doing and that financial markets over the balance of the year as well.

Are you seeing spreads continuing to improve at this point, loan-to-value?

Yes. So, the financial markets this year generally have been favorable. The base rate, the treasury rate obviously has fallen. Spreads certainly compressed since December and have stabilized and so we think that the financial markets are in a good spot. Obviously, the day-to-day news is difficult to predict these days. But overall, I think that we feel the markets are in a good spot. We're optimistic for a good execution.

All right. Thanks a lot. I'll let somebody else have a crack at it.

Thanks Michael.

And our next question comes from the line of Julien Dumoulin with Bank of America Merrill Lynch. Please go ahead.

Hey good afternoon everyone.

Good afternoon.

Hey. So perhaps just to go back to -- I believe this is layered in the slide deck, on slide nine. The NPV per watt, you obviously raised that in terms of your -- total number to 115 from 110. And as you said already, 1Q perhaps isn't necessarily when you would expect these kinds of things given the seasonality here. What drives the confidence early in the year to already bump this up? Is it something about cost? Is it something about confidence and customers? What you're selling? And where originally? And just want to get some sense of that confidence.

Sure. I think we see confidence on both sides of the equation. So, if we look at our expectation, why we got more confident to increase that, it's on both sides. So, we expect slight improvement to the project value throughout the year and also improvement on -- slight improvement on the cost side. So, those compounded together. And it's really just a factor of more confidence in the execution capabilities. I think we're also constantly looking at trimming businesses that we don't like or doesn't hit our thresholds and so I think in Q2, we do expect that we are have confidence in the growth rate in that gives us more confidence to trim some of the less profitable business, particularly in the channel area for next quarter.

Excellent. And then I'll turn it over to the other -- you're focusing in the northeast market rather. Can you talk about S rack and just any monetization opportunities to our anything that you think about kind of highlight that value to the extent. Is there any ability to sell this on a more forward basis rather than sort of the traditional three-year forward look that you've done? And then in tandem of that I'd be curious how you are seeing the New Jersey market evolves year given some of the questions before the BPU and as well as any -- if there any thoughts on Massachusetts given some of the changes in that market, too.

Sure Julien, its Ed. Good afternoon. So, to your question, so first, we obviously, continue to evaluate our S rack portfolios, actually in the quarter, we did do a transaction that was designed to sort of hedge S rack prices more significantly than we had before. So, in the financial statements for instance you'll see we substituted one liability to do for revenue for another project that as we retired some of the debt that we have had against S rack contracts and firmed those up in a transaction with a third party. That transaction included about half, maybe slightly more than half of the assets that we have installed in S rack states. With the New Jersey program, we expect that the state will implement a successor program or if not, a stop-gap program prior to the exhaustion of the current program, which assuming some a rush to interconnect towards the end I think best estimates in the marketplace so that would be around Q1 of 2020. The next program is likely to be a little less generate, but we also see cost decline in those markets and so expect those markets will continue to grow.

Sorry, just to clarify. What was the size of the S rack transaction?

The -- about of the transaction in the footnote, I believe it was $95 million and -- but most of the proceeds were used to retire debt previously against the contracts.

Got it, excellent. Thank you all.

Thanks Julien.

And your next question comes from the line of Brian Lee with Goldman Sachs. Caller, please go ahead.

Hey guys thanks for taking the questions. I might have missed this, but did you make any comments around the Safe Harbor strategy for the year. Any updates there and then implications for near to medium term cash flow?

Sure Brian, it's Ed again. Good afternoon. We didn't make any comments on the call regarding the Safe Harbor. We are excited about the opportunity that the Safe Harbor provides us. That said exactly what materials we would Safe Harbor and to what extent we view as proprietary and also subject to ongoing RFPs. So, we think it will be premature for us to chat about that at the moment. But over the course of the year, as we continue to evaluate there is the results of RFPs as well as technological and political developments, we'll have more details to share in the future.

Right, fair enough. And then I think someone alluded to this a little bit earlier in the call but maybe I'll ask in kind of a different way. If you look at slide 10, it looks like net earning assets has been flattish for a few quarters sequentially on a pretty consistent basis over the past year or so, again on slide 10, and then growth has been growing a lot more consistently. Does this have all to do with how you're financing the asset? I'd be curious if there's something structurally different there over the past year or so since -- if I recall correctly, the gross and net balances have been more correlated in the past.

Sure. So, Brian, it's Ed again. So, we described on the call, net earning assets increased about 11% in the year and $75 million of cash was generated in the year as well. So, to a certain extent, the value that we generate, we take it in period and some of it we defer over time. Given the improvements in the capital markets for subordinated debts, the fact that the Social Security now be called and refinanced, there's increasingly less trade-off in financing some of those more cash flows upfront. So, that's been something that we have been on the margin playing with kind of over the last year, but we think that the increase in net earning assets taken together with the increase in cash is the strong results of the company.

All right. And should we read into that just given that environment, it will probably be a similar trend those two metrics moving through the year?

I mean certainly, we'll have quarterly fluctuations in these metrics based on the timing of individual project-financed transactions. But certainly at the moment, I think our current trends, give or take, we expect will continue over the course of the year.

All right. Thanks a lot guys.

Thanks Brian.

And your next question comes from the line of Philip Shen with ROTH Capital Partners. Caller, your line is open.

Hi everyone. Thanks for the questions. The first is on California. It looks like all three utilities there are looking to at least request a much larger return on equity for shareholders. And it looks like rates could increase by as much as 12% for customers. Let's say this comes through, it seems like you might have an opportunity to raise your pricing commensurately. And our back-of-the-envelope analysis suggests that you can increase your NPV per watt by $0.25 or you can invest in growth as well. So, how would you guys want to prioritize, if this were to come through, the additional value? Would you focus on growth? Would you focus on NPV? Or something else altogether?

Thanks for the question. It's a great question. And I would also that as much as the increase -- the potential price increase but also the outages that are planned. So it's worth noting that PG&E itself has come out and said that they're expecting to turn power off for as many as 5 million customers. So, I think the combination of that and how visceral that would be with people have their power off for multiple days, in connection with a lot of news around these price increases, we do -- we are encouraged what we will do for customer awareness. In terms of how we that plays out, I think that will be something that will make the decisions when we look at what's the incremental business could yield a different customer acquisition costs. But certainly there is an opportunity to increase price. As we think about just our longer term, ITC strategy, that our -- and how we absorb that decline, we've always said that we expect that we'll be able to increase our project values by about 2% per year while improving costs at about 4%-ish. And so this -- that kind of dimension may be in the zone there and a good way to think about it. But I mean the bigger story is just one of the issues with one of the challenges in acquiring customers has been our awareness, urgency of why to do this now. And so the factor and the awareness around the price increases of the wildfires plus the reason to do it now because of power's going to be turned off, that is a really powerful marketing benefit to us.

Great. Thanks Lynn. Shifting gears to some of you guys talked about in your prepared remarks in terms of grid services in capability for L.A. as well as in New York. Could you talk -- perhaps expand on what you guys talked about there. And specifically talk to timing. Sorry if I missed it but I don't think you guys talked about timing of when, for example, L.A. opportunity could be realized. Thanks.

Yes, great question. We are very excited about the progress being made on energy services. And so the way we're pursuing that businesses is we're pursuing it in two ways. One is we're just going direct to customers and offering Brightboxes to as many customers as possible because the value proposition stands on itself in many way in many places with these rate structures plus with backup power. At the same time we're trying to open up these contracts with utilities or these other virtual power plant opportunities where we can start to leverage those assets and thinking about like a sharing economy, people aren't going to use the battery all the time so we should set of our program and our platform and our technology to actually share those batteries and replace traditional utility CapEx which is a $50 billion annual market. So, the reality of these programs is that they take their multi years in terms of setting them up. If you look at the ISO -- as an example that's three years out. But once he set the programs out, they're very, very scalable. And we think it will be an increasing competitive advantage for us and for our customers given that we have the market share and the specification to be setting them up today in order to yield a benefit. And so we expect, and we have shared that on per margin -- per customer potential would be about a 25% incremental value. But it's -- we haven't come out with specific guidance around, hey, that's your after here, here is what we expect because these are multiyear programs to set up.

Okay, fair enough. Shifting gears to the California new home mandate. Under that mandate, how do you expect customer acquisition cost in this channel to compare with your other channels? And ultimately, do you expect the same NPV per watt in the channel. And I know I'm kind of asking the question from a few different perspectives there. Or do you expect there to be somewhat a lower NPV per watt? Are you willing to accept the lower NPV per watt given the potential volume that can through from some of these builders?

Yes, it's a great question. We will -- we don't believe that we have to materially compromise on the margin at all in that market. And we wouldn't expect to. So, we -- again our current strategy and the way we run the business is so that our incremental customers generate cash to us. And so you need to be at that sort of dollar-ish plus level in order to be in that type of position. We also like our competitive position with that new home market as well because it's increasingly clear that the builders prefer the third-party owned business model, the slow as a service business model versus owning it because it's more efficient. People want to use their mortgage capacity for a bigger house or other features in the home. And so by us owning and paying for it, the builder doesn't have to pay and the homebuyer doesn't have to pay. It's much more efficient. Just by definition, that's a market where we have 40-plus market share so we like our competitive position and being able to offer that product.

Okay, great. Thanks very much. I'll pass it on.

Thank you.

And your next question comes from the line of Joseph Osha with JMP Securities. Please go ahead.

Who knew that was my last name. It's very exciting.

Didn’t tell you about it.

Apparently not. So, a couple of ones. Ed, you actually referred to back to the comment you made earlier I thought it was interesting. Are you basically saying that your upfront cash equity or upfront monetization is a result of what's happening in the market now no longer carries that kind of total IRR penalty that it did before. I remember you had -- your position have been for a long time that if you could retain as opposed to cashing out on the end, it was more efficient. Are you saying something different now?

Joe, I think we're just saying on the margin that it had become easier to obtain call options and retain overall asset control given improvements in the market which, one, yes does create a little bit less of a penalty for obtaining more financing upfront, but also gives you more control as it just makes things simpler if you're going to offer storage retrofits or other products for existing customers. You no longer have quite the complexity if you have like an equity owner in the project or something that wasn't you. So, there is a simplicity benefit and there is a flexibility benefit as the terms in the markets sort of first of subordinated debt continue to become more sponsored friendly.

So, it's really more about callable debt than it is cash equity. Is that correct?

Correct. Obviously, look a callable debt we retain full refinancing upside, full control of the assets. And there so are more no regrets sort of opportunities in that context.

Okay, great. To amplify a little bit on what Philip was asking, yes, this New England ISO deal was a capacity market deal. As you look at California and all of this potential for utilities turning off and so forth, is there some potential for pooling these assets in a locale, for example, to provide some kind of I don't know what to call it like community island or something or when we are thinking about your conversations with CAIs and regulators, is it still going to be just a fairly straightforward capacity kind of deal.

No, there are certainly are those opportunities and we're taking it upon ourselves to present them. And so I think the powers at the end of the situation are scrambling but we believe we have very compelling solutions to help set up micro-grids and we are trying to figure out who do we want to team up with to offer those. And so I think stay tuned. We're not announcing anything yet but we're certainly working on those ideas. And in the meantime, we're pursuing that passage to sell Brightboxes direct to customers which we're quite excited about the prospect.

And just so I'm clear, this is going to be CA ISO more than anyone that we have already before brewing. So, is it going to be CA ISO? Or who do you have to interface with?

It's going to be -- I mean I think it's really dynamic in California. So, you will be seeing would ISO, will it be the utility directly, will it be CCA increasing. I think there is a lot of influx though. I mean we're pursuing the ability to sell into either of that sort of wholesale type structure or have bilateral agreements with the utility or CCA presented an interesting opportunity as well. So, I think energy because it's the local there will be different business model with which where we sell our grid services into. So, I think in California, it's still very much TBD.

Got it. Thanks. And then one last one. Back to Ed to your comment on the ABS deal. Obviously, you're -- Sunrun's position has been and I think it makes sense that net metering relationships are regulatory mandated and not contracts, they're not at risk. But I'm wondering if you've gotten any kind of early signals from the market at about how they feel about PG&E assets and whether there's been any kind of sense as to how that's going to go given the utility status.

I mean appetite to finance assets in California investor owned utility is as strong as ever, if not becoming just nationally stronger. The recent track record with net metering are positive states that had diminished or we're considering diminishing net metering are more returning to net metering. Maine as an example, Connecticut is an example and the other way around. So, the regulatory environment has been very supportive and they're -- we are not aware of any widget through the bankruptcy of PG&E or any other California utility that could diminish that relationship. And to Lynn's earlier comment, with rates increasing and reliability falling consumer interest in on-site energy is increasing, and I think consumers will react very negatively to having those options diminished against the backdrop of the current environment.

Okay, I agree. Thank you very much.

And your final question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Thanks for fitting me in. As you look at optimizing your upfront capital, I know you've done quite a couple of structures there. What new opportunities are you starting to see out there? We've seen some innovative structures with some of other asset owners in the public markets.

Sure. So, I think the big picture, which is encouraging to us, is that the overall interest in residential solar assets grows, the performance history expands and multiple options continue to be available to us. Again, I think, as we plan for the future of the company, as we may expand our offerings to customers beyond simply rooftop solar the more control and ownership we have in these assets, the easier that will help me and so I think although certainly we evaluate all possibilities on a case-by-case basis, maintaining flexibility is important to us and what we're doing currently is working. And I think over time, it's just going to be cheaper and deeper at the market and we're encouraged by that.

Okay. And then going back to solar customer -- existing solar customers and trying to sell additional services you relayed that is an opportunity, but certainly it sounds there's going to be some acute opportunities over the near term fulfilling California. What sort of success rates or data do you have on take rates for existing solar customers getting retrofits or batteries or additional services?

Thanks for asking that question. It's a good thing to clarify. We currently have not offered that product. It is our -- it's been -- it's our judgment that putting Brightbox on new builds is much more efficient so we focused our efforts there as we launched it. So, we currently have an operator so we don't have data to share of the currently.

And maybe if I can clarify my comment, certainly, we do expect technology to evolve and products to improve over time. And the assets that we're financing today, we are putting seven to 20-plus year capital in place. And so obviously, as we plan for that, we want to maintain that flexibility over not just the near term but the medium to long term as well.

Okay. Thanks so much guys.

Thanks Colin.

Okay and thank you everyone and have a great evening. Bye, bye.

And ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now disconnect.