Sunrun (Nasdaq: RUN), the nation’s leading provider of clean energy as a subscription service, today announced financial results for the quarter ended September 30, 2024.
“Sunrun’s focus on providing customers with the best experience and differentiated offerings is delivering strong operating and financial results. In the third quarter, we again set new records for both storage installation attachment rates and delivered solid quarter-over-quarter growth for solar installations while reporting higher Net Subscriber Values,” said Mary Powell, Sunrun’s Chief Executive Officer. “The team delivered the second consecutive quarter of positive Cash Generation. Our primary focus continues to be expanding our differentiation for customers and remaining a disciplined, margin-focused leader that drives meaningful Cash Generation.”
“In the third quarter, we delivered on our commitments for solar and storage installations, margin expansion and Cash Generation. Net Subscriber Value was the highest level the company has ever reported, a testament to our margin-focused and disciplined growth strategy,” said Danny Abajian, Sunrun’s Chief Financial Officer. “We have a strong balance sheet with no near-term corporate debt maturities, having extended our recourse working capital facility maturity to March 2027, and as of today, we have reduced parent debt by over $100 million since March. As we increase our Cash Generation, we will continue to allocate excess unrestricted cash to further reduce parent recourse debt and are committed to a capital allocation strategy beyond this initial de-leveraging period that drives significant shareholder value.”
Third Quarter Updates
- Storage Attachment Rates Reach 60%: Storage attachment rates on installations reached 60% in Q3, up from 33% in the prior-year period, with 336 Megawatt hours installed during the quarter. Sunrun has installed more than 135,000 solar and storage systems, representing over 2.1 Gigawatt hours of stored energy capacity.
- Continued Momentum in New Homes Business: Sunrun is seeing strong traction in its new homes division. Sunrun is working with 9 of the top 10 new home builders in California, and over half of the top 20 home builders in the US. In September, Sunrun signed a multi-year exclusive agreement with Toll Brothers (NYSE: TOL) in California. While this division represents less than 5% of our volumes currently, we expect this division to grow at least 50% next year. Home builders appreciate our leading subscription offerings, service commitments, and long track record. Our subscription offering can provide new home buyers with immediate value, including savings on energy and resiliency from backup storage systems, without increasing the cost of purchasing the home.
- Improving Grid Stability with Virtual Power Plants: In Q3, Sunrun introduced several new virtual power plant programs to help meet peak demand and enhance grid stability. In New York, Sunrun activated the state’s largest residential virtual power plant in collaboration with Orange & Rockland Utilities, Inc., a subsidiary of Consolidated Edison, Inc. (NYSE: ED). Over 300 solar-plus-storage systems provided stored solar energy during multiple peak demand events this summer, strengthening grid reliability. Participating customers received a free or heavily discounted home battery in exchange for their commitment to the 10-year program, while Sunrun received upfront payments from O&R based on installed battery capacity. In Maryland, Sunrun launched the nation’s first vehicle-to-home virtual power plant, partnering with Baltimore Gas and Electric Company (BGE), a subsidiary of Exelon Corporation (Nasdaq: EXC), to utilize a small group of customer-owned Ford F-150 Lightnings. BGE was awarded grant funding from the Department of Energy to create the program, and Sunrun helped develop and administer it. Participating customers can earn several hundred dollars by sharing energy from their F-150 Lightning trucks. In Texas, Sunrun partnered with Tesla Electric and Vistra on two virtual power plants. Still growing, the Tesla Electric program has already enrolled more than 150 Sunrun customers, leveraging home batteries to provide reserves during peak consumption. Customers will receive an annual payment, currently set at $400 per Powerwall for 2024, while Sunrun earns recurring revenue through the program. The Vistra partnership also offers customers financial incentives and credits for sharing stored energy with the grid when demand is highest.
- Continued Strong Capital Markets Execution: In September, Sunrun closed a $365 million securitization of residential solar and battery systems, its fourth securitization placed in 2024. The transaction was structured with two separate classes of publicly placed A+ rated notes. The weighted average spread was 235 basis points and the weighted average yield was 5.87%. The initial balance of the Class A notes represents a 73.8% advance rate on the Securitization Share of ADSAB (present value using a 6% discount rate). Similar to prior transactions, Sunrun raised additional capital in a subordinated non-recourse financing, which increased the cumulative advance rate to above 80% as measured against the initial Contracted Subscriber Value of the portfolio. Also, in July, Sunrun expanded its non-recourse warehouse lending facility by $280 million to $2,630 million in commitments, matching the growing scale of Sunrun’s business.
- Extended Maturity of Recourse Working Capital Facility and Reduced Parent Leverage Through Continued 2026 Convertible Note Repurchases: We extended the maturity of our recourse Working Capital Facility to March 2027 (from November 2025) as we were in compliance with the provisions in the agreement, which calls for having funds in a restricted reserve account equal to the amount of our outstanding 2026 Convertible Notes. We continue to reduce parent leverage with continued repurchasing of our 2026 Convertible Notes. To date, we have repurchased $317 million of these notes, leaving $83 million of the notes outstanding as of today. As of September 30, 2024 the outstanding balance on the 2026 Convertible Notes was $133.2 million.
Key Operating Metrics
In the third quarter of 2024, Customer Additions were 31,910 including 30,348 Subscriber Additions. As of September 30, 2024, Sunrun had 1,015,910 Customers, including 858,477 Subscribers. Customers grew 12% in the third quarter of 2024 compared to the third quarter of 2023.
Annual Recurring Revenue from Subscribers was approximately $1.5 billion as of September 30, 2024. The Average Contract Life Remaining of Subscribers was 17.6 years as of September 30, 2024.
Subscriber Value was $51,223 in the third quarter of 2024, a 9% increase compared to the third quarter of 2023. Creation Cost was $36,591 in the third quarter of 2024, a 2% increase compared to the third quarter of 2023.
Net Subscriber Value was $14,632 in the third quarter of 2024. Total Value Generated was $444 million in the third quarter of 2024. On a pro-forma basis assuming a 7.1% discount rate, consistent with capital costs observed in the quarter, Subscriber Value was $47,335 and Net Subscriber Value was $10,744 in the third quarter of 2024.
Gross Earning Assets as of September 30, 2024, were $16.8 billion. Net Earning Assets were $6.2 billion, which included $1,011 million in Total Cash, as of September 30, 2024.
Cash Generation was $2.5 million in the third quarter of 2024, the second consecutive quarter of positive Cash Generation.
Storage Capacity Installed was 336.3 Megawatt hours in the third quarter of 2024, a 92% increase compared to the third quarter of 2023.
Solar Energy Capacity Installed was 229.7 Megawatts in the third quarter of 2024, an 11% decrease compared to the third quarter of 2023. Included in this figure is 220.7 Megawatts of Solar Energy Capacity Installed for Subscribers in the third quarter of 2024, a 4% decrease compared to the third quarter of 2023.
Networked Solar Energy Capacity was 7,288 Megawatts as of September 30, 2024. Included in this figure is 6,204 Megawatts of Networked Solar Energy Capacity for Subscribers as of September 30, 2024.
Networked Storage Capacity was 2.1 Gigawatt hours as of September 30, 2024.
The solar energy systems we deployed in Q3 are expected to offset the emission of 4.7 million metric tons of CO2 over the next thirty years. Over the last twelve months ended September 30, 2024, Sunrun’s systems are estimated to have offset 4.1 million metric tons of CO2.
Outlook
Management is reiterating Cash Generation guidance of $350 million to $600 million for the full-year 2025.
Management is reiterating guidance for Cash Generation of $50 million to $125 million in Q4.
Storage Capacity Installed is expected to be in a range of 320 to 350 Megawatt hours in Q4, reflecting 52% growth at the midpoint compared to the prior year. For the full-year 2024, this implies 100% growth at the midpoint compared to 2023.
Solar Energy Capacity Installed is expected to be in a range of 240 to 250 Megawatts in Q4, reflecting 8% growth at the midpoint compared to the prior year, and 7% growth at the midpoint compared to Q3. For the full-year 2024, this implies a decline of 17% at the midpoint compared to 2023.
Net Subscriber Value is expected to increase in Q4 compared to Q3.
Third Quarter 2024 GAAP Results
Total revenue was $537.2 million in the third quarter of 2024, down $26.0 million, or 5%, from the third quarter of 2023. Customer agreements and incentives revenue was $405.9 million, an increase of $89.3 million, or 28%, compared to the third quarter of 2023. Solar energy systems and product sales revenue was $131.3 million, a decrease of $115.3 million, or 47%, compared to the third quarter of 2023. The increasing mix of Subscribers results in less upfront revenue recognition, as revenue is recognized over the life of the Customer Agreement, which is typically 20 or 25 years.
Total cost of revenue was $433.7 million, a decrease of 16% year-over-year. Total operating expenses were $665.0 million, a decrease of 111% year-over-year, on a pro-forma basis to exclude a non-cash goodwill impairment and amortization of intangible assets, which were incurred in the third quarter of 2023.
Net loss attributable to common stockholders was $83.8 million, or $0.37 per basic and diluted share, in the third quarter of 2024.
Financing Activities
As of November 7, 2024, closed transactions and executed term sheets provide us with expected tax equity to fund approximately 272 Megawatts of Solar Energy Capacity Installed for Subscribers beyond what was deployed through September 30, 2024. Sunrun also had $907 million available in its non-recourse senior revolving warehouse facility at the end of Q3 to fund over 318 Megawatts of Solar Energy Capacity Installed for Subscribers.
