Good morning and welcome to Sunnova’s Second Quarter 2021 Earnings Conference Call. Today's call is being recorded and we have allocated an hour for prepared remarks and question-and-answer. During the question-and-answer session please limit yourselves to one question and one follow-up.

At this time, I would like to turn the conference over to Rodney McMahan, Vice President, Investor Relations at Sunnova. Thank you. Please go ahead..

Thank you, operator. Before we begin, please note during today's call we will make forward-looking statements that are subject to various risks and uncertainties that are described in our slide presentation, earnings press release and our 2020 Form 10-K.

Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will reference certain non-GAAP measures during today's call.

Please refer to the appendix of our presentation as well as the earnings press release for the appropriate GAAP to non-GAAP reconciliations and cautionary disclosures. .

Good morning and thank you for joining us. We are proud to report that the strong growth we experienced in our dealer network, customer count, and single customer margins in the first quarter carried through into the second quarter.

Over the last several months, we have seen the residential solar industry enter a new phase of maturation and growth, and with it, the value proposition for customers has changed. Our industry was once solely focused on savings and now it is driven by an acute customer focus on reliability and resiliency as well as savings.

This quarter, we continued to see improvements in many of our key financial metrics; specifically, stronger than expected growth in adjusted EBITDA, the principal and interest we collect on solar loans, and our single customer implied spread or margin.

Additionally, we experienced a decline in adjusted operating expense on a per customer basis of 23% over the past year. We expect this trend of declining adjusted operating expense per customer to continue over the coming quarters.

On Slide 3, you will see some of the details of these strong operational results where we further increased our customer base, battery attachment rate, and dealer network.

We began the quarter on a high note with the timely closing of the SunStreet acquisition and finished the quarter by placing more solar systems into service during the month of June than in any other month in the company's history.

As a result, our customer growth continues to accelerate with just over 46,000 customers added in the second quarter of 2021.

With three months of SunStreet integration behind us, the rapid growth of our dealer network, and the expected launch of several new services later this year, we are increasing our expected year-over-year organic customer growth rate for 2022 from 40% to 50%.

The combination of continued operational improvements and advantage from our increasing scale is setting Sunnova up for a strong 2022. We saw the continued instability of regional power grids increasingly push homeowners to seek out more reliable and resilient energy services.

This resulted in a continued increase in our battery attachment rate on origination, which went from 23% in Q1 2021 to 28% in Q2 2021, even when accounting for the Sunnova New Homes customers we acquired. .

Thank you, John. Turning to slide 7, you will see the continued improvement in our second quarter results over the past few years. Q2 2021 revenues are up over 90% from Q2 2019 while over the same period adjusted EBITDA and the principal and interest received on solar loans increased by 121% and 199%, respectively.

As John noted earlier, Q2 adjusted and recurring operating cash flows improved materially from the first quarter of this year, although they declined year-over-year. As further detailed in our 10-Q, this was because of an acceleration of certain cash expenses into the second quarter that were made in the second half of the year in 2020.

On balance, we expect AOCF to be stronger for the second half of the year than originally forecasted because of lower interest expense due to the record low-cost financings we have executed this year, the higher than budgeted principal payments on loans, and the strong results from SunStreet.

We also expect ROCF to be positive for the balance of the year and to end the year at breakeven a significant milestone for an industry that has yet to see a cash positive Power-Co..

Thanks, Rob. Since Sunnova's founding we have been focused on doing what is right for the long-term.

Our conservative capitalization strategy is predicated on accumulating enough customers and cash flows to build a firm foundation with a high amount of optionality, which we have been able to do by building a company that has billions of dollars in future cash flows locked in for many years.

In our early days, we made a crucial bet that our underlying assets, and the cash flow they would generate, would prove to be far more valuable than the market appreciated at the time.

This has clearly paid off as we now have a formidable balance sheet to drive our cost of capital even lower and pursue having the lowest cost of capital in the industry. In addition, we are now at a point where operating leverage can be increased dramatically over the next several years.

One can already see this happening by the fact our adjusted EBITDA together with the principal and interest on solar loans, AOCF, and ROCF are increasing at a rate faster than our customer growth.

In fact, we are already generating cash and long-term contracted cash flows in amounts greater than some of our competitors with larger customer bases thanks to our capitalization strategy and business model. What this equates to is that we have successfully built a long-term, incredibly strong cash generation machine.

On this firm foundation we will continue to build out a new energy service company focused on delivering a better energy service at a better price. Our employees are concentrated on serving the customer and increasing the speed at which they are able to respond to their questions, concerns, and issues in the field.

In fact, we improved our service duration by 15% from Q1 to Q2, and expect a further 20% improvement by the end of the year. The technology platform we are building will enable us to provide a service that is not only fast, but also intelligent, reliable, and predictive.

This same technology platform will enable us to aggregate our customers and drive even more value creation, which will deliver tremendous financial value for both ourselves and our customers. Service is our real business, financing is a key enabler.

We are again thinking long-term and building an energy service that is reliable, quick, and enables consumers to power their own energy independence. At the end of the day, service is the crucial differentiator in our industry and we will continue to lead in providing the best energy service. With that, operator, please open the line for questions..

. Your first question comes from the line of Brian Lee with Goldman Sachs and Company. .

Maybe just to start off, I know there's been a lot of questions around the growth targets here for 2021. You've got obviously a strong Q1 and then an even better Q2 to start the year on that metric. And then you're raising the view for 2022 from 40 to 50.

So what's maybe getting lost in translation? Why not a guidance raise here for '21? Anything happening in the back half that we should be aware of? And then maybe just related to that. What was the actual organic customer growth additions for SunStreet in the second quarter for you? I know you said 9,000 still the target for the year.

But what did you see in SunStreet for Q2?.

Hey, Brian. This is John. Thanks. First, on the cost side, the back half of the year, as Rob in his prepared remarks stated, moved up the obsolescence, and we then are looking at moving some of the meter replacements then from '22 into '21. So that's the first thing. So it's really just the shifting, obviously shifting the spending.

And then some of the software. We're seeing a lot of the opportunities on the services side of things, whether it's EV charging generators, load managers, et cetera. And we're trying to pull those up, as well as new geographies into this year from next year. And so it's really just the shifting of spending a little bit.

Is it a little conservative? Probably so on top of that. But that should explain any sort of shift. Is adjusted EBITDA plus P&I a little conservative for next year relative to some of the growth in Group? Probably so. But we felt like we gave enough forward guidance at this point in time for next year.

And we'll, of course, do what we've done historically, and issue out guidance, formal guidance for next year on our Q3 call in October. And just as a reminder, we do that far ahead of anybody else in the industry. So felt like that was enough, if you will.

And in terms of the other question -- part of the question, Rob, why don’t you take that?.

Yes. I mean, we did about 2,000 SunStreet customers and homebuilder customers in the quarter. That's a pretty ratable business. So that went about as we expected, Brian. .

Okay, that's helpful. Maybe, John, just to rephrase my question, and maybe I'm misinterpreting your answer. But are you saying the cost shifts are keeping your customer growth target range unchanged for this year, that's having an impact or did I miss something? I was just wondering why you see better growth relative to original targets for 2022.

But right now for '21 you're keeping things unchanged on the growth side. .

Yes, sorry. I thought you were referring to adjusted EBITDA plus P&I. Now on the customer side of things, again, in the remarks, on the supply chain, specifically, we see really no material issues with regards to modules or inverters. It's really been on the battery side of things as we've been talking for almost a year or actually been a year.

And we continue to see improvement over this past quarter, over this past last 30 days including -- and it has a lot to do with more and more competition in this space, more in phases coming on very strong. As listed in his call; Generac, as Aaron listed in his calls, are doing a very good job. We've got coming up.

And then, of course, Tesla continues to ramp up as well, as well as many others out there. So there's a lot of supply that’s coming.

But then you look back at our storage attachment rate, because of a lot of the events that are going on, wild fires, hurricane season, just a huge -- and you've heard this on from other companies in the States, including the last two that I mentioned is that, there's a lot of focus from consumers on reliability and resiliency.

So, we're seeing demand pick up materially on the storage side of things. And then so as we continue to see the improvement, we thought we would see on storage, but the demand is materially higher. So we're not entirely sure if we think, we can get everything that we want, even including the higher demand by the end of the year.

But if it doesn't, it may spill a bit into the next year. So that's why we paused a little bit to increase guidance with customer growth this year. Next year, it’s fairly easy for us just given the trend of growth rate that we're seeing, very strong. Again, we'll give formal guidance in October.

But that seems a fairly easy lift for us to raise the growth for next year.

Does that answer your question?.

Absolutely makes sense. I appreciate the additional color. And maybe if I could just squeeze a quick few follow-ups in here. One on the capital and liquidity chart. That's helpful. I appreciate you sharing that with us.

It didn't sound like you threw in equity when you were walking through some of the pieces that you'd be considering for the 500 million in 2023. Does that imply it's fairly low down the list of potential option for capital raises out in '23? And then secondly, more of a housekeeping question.

When I look at the deck here, you have the amount of misprints in your prepared remarks. But the gross customer value -- gross total customer value and contracted customer value per customer they were both down quite a bit from Q1 to Q2 reported numbers.

Is that a mix issue, is that SunStreet? What's sort of happening with that number and how should we think about it for future quarters here? We haven't seen it down at $21,000, $25,000 per customer for a while here?.

Yes, so I think it on a per customer basis. What you're really seeing there is some SunStreet mix, really two effects. One, we picked up about 34,000 customers that we don't have into. We have there pretty much zero cash in and out right now, that’s because we’re paid a servicing fee and then we service the customers.

So we have the service obligation, it’s fully covered, but there's not additional revenue attached with them. So that's really what you see in there is that denominator creating that issue. And going back to your first question on the corporate capital, it's an option, it is not -- it wouldn't be an option at today's stock prices, certainly.

And there's so many other things we can do on that gap that we went over in the call and again happy to reiterate them but more corporate debt. We actually have the opportunity to go a little bit deeper on the investment grade tranche on our securitizations, and of course, asset sales.

We look at that, as you know, if the ducks are quacking, feed them. I mean, the market right now is screaming on asset valuations and with the equity down below where we believe true value is, we would certainly go to assets before we go to equity, especially given the opportunities we're seeing out there in this market.

But again, key to that is service retained. We want to continue to have the customer, the contract, the service in that relationship. And that's always been a key to our growth in the past and it certainly has been paying dividends in for the last several quarters. .

And Brian, this is John, just to reinforce what Rob said is, oftentimes in this sector, every once in a while, you'll get where the asset values disconnect completely from the corporate equity values. And here we are again.

As witnessed by our ABS offerings which we did two of them, one lease and PPA and one loan as you know, just really recently, and then looking at their corporate equity price, and it's not just us, but obviously, peers as well. And there is a divorce from those valuations. And it's pretty extreme at this point in time.

So, something that’s out to $60 a share certainly looks very, very compelling to us relative to the asset values at this point in time. And so we had no intention of issuing the equity. We don't need it anytime soon and frankly, at this point in time, we wouldn't do it.

We a number of options, including selling some of the assets offered some of these prices. We're exploring that and that may be something we go ahead and start putting in place because it's another avenue of liquidity. And it gives us another option, if you will, on the corporate capital side of things.

So I think, this is what we're doing with the corporate debt side, what Rob's doing is giving us the most amount of flexibility on the financing side than anybody has in our space, and it gives us a lot of optionality right from doing anything on the corporate equity side..

Your next question comes from the line of Mark Strouse of JPMorgan. .

Just a follow-up to Brian's question.

On the targets for next year, you took up the growth targets, but you left EBITDA growth unchanged? Is that just a mix of loans that’s not obviously included in that metric and that's why it's not going up or is there something else there?.

Yes, Mark, this is John. Yes, it could be. I mean we're seeing loans push towards a 60% level and we think the market is actually probably closer to 80% at this point in time, so best estimate of ours, but continues to move in that direction.

And so we wanted to have a few more weeks, months of gain term, if you will, before we formally give you all our 2022 guidance. And like I said, it was also some degree of conservatism as well. So, we thought that given the growth rate, obviously, it's significantly above the customer growth rate.

And that's why we feel comfortable about creating value on a per customer basis of adjusted EBITDA plus our principal and interest of 80% from now through 2025 on a per customer basis.

So it is likely that, that will move up, at least for certain on the adjusted EBITDA plus P&I, but we want to make that formal call on the next earnings call for next year..

And then the outside….

Mr. Strouse's line has disconnected. Your next question comes from the line of Philip Shen with ROTH Capital Partner..

With the recent securitizations, including the first refinancing of securitized assets behind you, can you talk about what's next in terms of green bond?.

Yes, Phil, thanks for asking. Bottom line here is we're locked and loaded. We're in the blocks. I mean take the analogy that you want. We would suggest that folks keep checking our IR page and refresh, make sure you're signed up on investor alerts, follow us on Twitter. Whatever it is….. .

Just for you….

But look, yes, as you probably remember, before we get into the green bond, we needed to complete a few other steps in advance, right? So the convertible debt that was setting us up giving us the runway to be able to move, we had to launch the green financing framework, get that taken care of. To your point, refinancing 2017-1.

We closed on two securitizations, both of which, forewent the high yield, tranches of our securitization in order to open up the cash flow and allow us to move it up to the equity. We said we do on all these things. We've delivered. Clearly today we come out with the earnings, which is, you want to make sure that you can come out clean.

Now, look, I went over this ahead of time, the lawyers had told me in no uncertain terms that I need to emphasize that this is no formal announcement of an offering. But I think with the filing of this Q, you should expect to see us in the market very soon..

Great. Thanks for the detail. And…go ahead Rob..

I said, that's all they will allow me to say..

Got it. Okay. And you talked about your ABS spreads. Well, in the given recent two transactions, your spreads are coming down nicely. I think the most recent loan ABS was 100 basis points spread over base rate.

And heading into 2021 -- we checked in with some ABS investors and they shared with us that spreads over time could get to as low as 80 basis points.

What do you see in the next 6 to 12 months? How much lower can these spreads over base rates go for your recent loan assets?.

I mean, we've certainly seen them come in. We believe they can continue to come in. One of the great things about it is that I would say 2.5 or -- it's not 2.5 -- 1.5 years ago, when I was at an ABS conference, I was told that we were the most disconnected asset class that there was so much value still to be had.

I think to your point, we're getting to that point where we are getting back a lot closer to what true value is. I don't want to prognosticate as far as where those spreads could go. We do think of course there is room for them to come back in, especially given the incredibly strong performance that we've had. I would love to see them come in more.

We are not doing our planning based on them coming in more. But when you see -- interest rates and the base rates continue to be flat or continue to rise, that's actually going to give us a little bit more room to squeeze those margins too. So we're going to continue to follow that. I think it's a very virtuous cycle.

Either, we'll see interest rates go down, and we may not get the spread compression, but we will get the absolute base rate compression, or you'll see the base rates be flatter go up, and then there's more opportunity for us to have spread compression there. .

And Rob, I think that build on that we've got roughly about four securitizations that we could refinance as we did back in June. On that first one, which is the industry’s -- obviously, the industry’s first refinancing of the securitization.

And that's probably got somewhere between 200 basis points, 275 basis points today, a spread that we could bring in on the rate, on those securitizations. Now, those will happen over the next three years or so as it makes sense from the market side of things versus, and you may call, payments, et cetera.

But it's quite rough while it is coming in quite a lot. And I think we're in a -- Rob is really in a great position to take our previous securitizations and pick up pretty significant cash flow and value on those assets as we do..

One last one here. In terms of unit economics, we're seeing that improve and then John you talked about how you think the market could be 80% loan versus lease at 20% and maybe you're at 60%.

Can you talk through a little bit on the economics for you, the unit economics for loans and specifically where you're seeing prepayment levels? Are you seeing that trend come down? For example, are you at -- yes, so is that coming lower or do you think we see the prepayment levels extending and from a unit basis you have that spread for the whole company.

But if you were to look at it from a loan versus lease perspective, how much does that change?.

Yes, it's a great question. We're seeing really good returns on the loans as well and to just remind everybody, we do put our service to the customer plus great services on our loans that were, again, finance-agnostic.

I think we've done a very good job of effectively putting on parity loans, lease PPAs, so with whatever truly best for the customers what we do. And we keep our service consistent and the same all the way through grid services. So that's made us to why we're agnostic about it.

But we are seeing prepayment rates continue to go up further than we thought and planned. That is giving us even further cash flow. That was a part of some of the cash flow that Rob spoke about in his prepared remarks, increasing far more than we had planned and guided to, and we continue to see that increasing and as we move forward in time.

We also have a few things that we're putting in place, programs we're putting in place to further augment that pay down if you will. So we do expect quite a bit of rapid pay downs on the on the loan side as we move forward in time and we have been saying that so far this year. .

Your next question comes from a line of Ben Kallo with Baird. .

I have three. First, can you give us an update on Generac? I know you mentioned the growth you’re both offering, John.

But just on the partnership and how it's progressed?.

Yes, Ben. It continues to be fairly strong. I mean, we’re going to find -- we're obviously -- if you look at our dealer growth, it was well ahead of what we expected. I think, when you look out at a 1,000 dealers at the end of next year in our forecast we gave last quarter, we're clearly pretty far ahead of that pace.

And so part of that is working with folks like Aaron and his team over Generac to find the right dealers and really get those products moving.

And so we've had some success there, I expect a lot more success in the back half of this year and the next year, particularly as the number of products as -- and I will let Aaron to go through it, and really went through in his call yesterday that they're launching out over the coming, call it, several quarters.

So those I think we can always do, we want to do more and more business with them. And they've great products, they're a great company, well run and things are coming pretty well. They have done a fantastic job clearly..

My next question to go along those lines about the dealer growth. How you recruit them? I'm sorry about this as an but a big statement, you're laying down this national championship greetings.

But like how do you get the dealers versus your competitors?.

Yes, that hurt. Just wait till this year, right? We'll see what happens in football. I think that what we're seeing is a continued trend to the strategy the company is working. And you can see others moving and adopting that strategy, particularly over the last several months of this year.

And what -- when you can come in and get a really -- we just want another improvement, pretty dramatic improvement to our quote tool, for instance, and the commissioning app we launched that a couple months ago. And we're constantly improving the software applications and pieces and services that we're offering.

We can always do more, and we're intent on really focusing on the service side and pushing and making sure we're getting the right services to the dealers, then also really just -- service is the crucial differentiator as I said my remarks to customers, and we see that being something that we can clearly outpace really anybody in the field, we're really focused on the service to the customer.

And that matters to the dealers as well, because of referrals, et cetera. And so once we've got all the products they want through any financing, plug into the platform, we're totally focused on them. We don't have -- we're not trying to take your deals and so forth with our own originators and starters. So there's no channel conflict.

And we're adding more and more tools to improve customer service to increase referrals. And then on top of that, as I mentioned, again, in my prepared remarks, we have a 350% year-over-year increase in leads to our dealers as well. We want to continue to push that. So continue to push the branding.

Overall, all this basket, if you will, of efforts and capabilities is really gaining a lot of traction out there in the marketplace for dealers. We don't pay up. We're not going to do that. And the others will but then others have, but we're not going to do that.

But outside that we really believe strongly that we're clearly providing the best value for dealers. We're really focused on the long-term and growing our businesses over the long-term..

And then just turning to the liquidity side. I have two questions there, so or actually four more questions. The first one, just going back to the way that you can access capital, you talks about solar systems and I get it. But one of the things that we always talk about and you guys both emphasized this, the recurring cash flow.

And doesn’t that have any way to have the asset sale versus ending that recurring cash flow?.

Yes, I mean, I think that what we would look at is what's going to have the best total equity return for the investor. And so when we've gone through this process, we assume that there obviously could be more opportunities, if there is an asset sale, or if we get proceeds from an asset sale.

We probably considered that -- we'll consider that down at the bottom. So it's not recurring cash, right? If you sell an asset, yes, it's cash. It is not recurring cash. It is a onetime cash benefit for that specific transaction. So that's why we're throwing this out at the bottom and are considering it as a part of ROCF. .

And then finally, sticking this investment in new system of $3.5 billion for '23, I think that's implying guidance, tell me if I'm wrong, if I just say in a system, some people get batteries that’s baked in, so I can do the math, that’s 100,000 systems or plus for '23?.

I think you're directionally correct. Obviously, I think the two factors are going in there is, one that you're going to have more than likely bigger tickets from a lot of investors as we add more and more batteries, even in homebuilder where we expect a smaller ticket.

We're starting to see a lot more interest in demand to be adding things like battery storage and then of course, obviously making the pivot into micro grids as well around that timeframe. But at the same time, I don't want to get over my skis and try to do a specific number of customer adds on guidance.

For that I think that ends up in wanting to wanting to increase. But I think your point is, yes, looks a little conservative.

Yes, I mean there's a -- it could be conservative, certainly there when you think about the growth opportunities in front of us, especially as you know, we're well on our way to that target of having 1,000 dealers and sub-dealers by the end of '22. .

You're next question comes from the line of with Credit Suisse. .

One question, John, just on the high levels for the 2021 and 2022 guidance.

Are you seeing any impact from labor shortages either impacting some of those demand coming in and/or on the unlevered IRRs on those projects?.

No, I mean, we're clearly seeing the unit economics move and has stayed very strong. And our cost of capital has dropped further than and faster than we thought it would. And at the same time, our unlevered returns, our cash on cash from our customers stayed much stronger.

Is that trend going to continue? So far it is but it's maintained a lot of strength. We are -- because of our model, our dealers are the ones that manage the labor expenses, and therefore some of their margins may come in a little bit, at least on a temporary basis. That also is the true the case with equipment.

So with modules go up a little bit, which they have, they manage that, if you will. So, all-in-all, we have not seen any sort of a true labor cost issue really impact us materially, and don't expect it to. .

And then maybe just like one small housekeeping.

So the cash sales item, 6.9 million, is that the asset sale, which you're referring to on the ROCF side or is that SunStreet related, because that might be some cash sales on SunStreet just want to understand that and what the marginal EBITDA contribution from that cash sale?.

So that is actually -- we have the homebuilders. And there's some different accounting nuances sitting, there are a few line items here. So I don't want to get too deep into the weeds. But on the homebuilders section, we account for slightly differently, because we're building these homes. And we don't know up until the point of the home sale.

If the customer is going to enter into the PPA, which is what a majority -- vast majority of customers do, or if they want to purchase the system outright, just roll it into their mortgage. So what you're seeing there is a significant portion of them are actually purchasing the system outright and rolling it into the mortgage.

We're still providing service to them, but it's just being done from an accounting standpoint. It's not selling the asset, but it is the customer purchasing the asset. Just think of it like they're purchasing the asset. Paying off the loan immediately is how we're viewing it internally. But it's accounted it for as a sale and runs through the P&L.

As far as the exact way that it is being accounted for, I would say that, we -- a lot of those who have noticed, yes, we had a beat on the revenue. And then our operating expenses were also a little bit higher in general. And the vast majority of that beat relative to where analysts had this before, was attributable to those cash sales. .

And maybe just take one last final question from me. So John spoke about more expanding your quoting tool services and your general service offering.

So maybe if you can expand what that solution could look like for dealers, and as you expand these offerings doe it move Sunnova towards the kind of a branded marketplace, which connects customers and dealers, for lack of a better word, kind of an experia of solar?.

Yes, thank you. No, I don't think, I'd characterize it that way. I would characterize it as, there are equipment manufacturers and there are service providers and then of course, there are highly valued dealers that do the work in the field, origination and installation.

Our employees, as we have laid out are the ones that do the service, whether that's taking calls in and solving customers’ problems, whatever those problems may be, or willing to drop in into the home and making sure it gets fixed, particularly, we've had some events even this -- over last few months, where there's been events where we had to make sure that the batteries were all alive, and things have worked very, very well, by the way, but we do need to roll trucks there on a moment's notice to make sure anything goes wrong is taken care of.

So this is really the point is that we're a wireless power company, we're a service provider.

And been saying that since we founded the company is, that is what with the industry means is to have a service provider, truly somebody that integrates all the pieces of equipment with all this, a manufacturer, which we're seeing an exponential rise in the number and the pieces of equipment.

Now specifically instead of just going solar only with an inverter, you've got now ESS, you're getting load managers out there, generators, EV charging, maybe fuel cells as we're involved in that as well.

But there's a number of things that you can stay focused on the power side and bring all that integration of those pieces of hardware together, through and out of apps, if you will.

So the customer has a single portal to go to us for service and someone for service, one person or one throat to choke, if you will with us versus trying to track everybody down. That's the purpose of this company is to provide service, excellent service to the customer. And that's materially different than any sort of experia.

I don't think that model works in this space. And it never has, and I don't think it ever will. But a large scale service provider as we are in our competitors is definitely necessary. And frankly, a lot -- there's a lot of value there owning that customer, and making sure that customer is taken care for years to come. .

Your next question comes from line of Sophie Karp with KeyBanc. .

I wanted to ask another high level question and that's something you guys just alluded to, in answering the prior question, maybe a little bit.

But more broadly speaking, it seems that more and more companies are in the space getting -- not staying in their lane, if you will, and just trying to sell products that historically have not been within their core competency. I am presuming it’s some of them like your suppliers as well.

So at what point this kind of collaborative relationship becomes competitive, and how do you see the competitive landscape evolve and then it sets in your position and economics kind of moving forward given this dynamic?.

Yes, Sophie, that is a good question. That can happen. Instead of focusing on business, we've seen that before. And it's been a reflection of this industry historically. There's so much exciting things to do, right? And certainly that now more true than ever.

And so, we have a lot of folks that are out there looking for other things to get involved with, plus there's been an immense amount of capital that's moved into the space over the last year and a half or so. And so what I would say is, is that, those -- we're going to stick to our knitting, we're a service provider.

We've, again, founded the company on that business model, we're going to stick with it. There are some overlaps we see with some of the equipment providers and some of the pieces of like, an app or a software piece or something like that, but we've been able so far to be able to work that out.

And there are a lot of options out there on the equipment side of things, whatever that, that piece of equipment may be and maybe in the future. And so, so far we've been very fortunate to continue to have strong relationships with all of our equipment suppliers, and we expect that to continue.

But yes, there's a little bit of an overlap, but we're going to stick to our knitting. We're not going to get into the equipment manufacturing business. I know that there's something that oftentimes comes up to be a fear, we're not going to do that.

We're going to stick to being a service provider and taking care of the customer and that is definitely something that needs to be done. And I would also remind -- again, I said this in my prepared remarks. Nobody else has the contract with the customer except us. We own the customer, it’s very clear, it's in black and white.

And when we are looking to upsell the customer battery, or load manager or anything else, and take care of the customer, it’s our employees that are rolling the trucks and getting the customer taken care of. So at the end of the day, there's no question if we want to….

A follow-up if I may.

Owning the customer, right, as you see potentially share of loan customers increasing, this kind of loan customer versus if you pay your lease customer kind of lessons that bond in any way or this in -- or does it diminish your ability to include those customers -- loan customers into offerings?.

It’s a great question again. What I would say is that going back to the previous parts is I think that we get -- what we have done is we put on a level playing field, loan, lease, PPA. So we don't care. It does not diminish our relationship with the customer, does not diminish our obligations, either in service to the customer or goods services.

So that's something I think the entire industry is going to trend towards fairly quickly. We're seeing, hearing that out there.

I think that at the end of the day, truly giving the customer the option of whether they want to take the task, start it themselves under a loan contract or half monetize it because they cannot under a lease and PPA, I think is the right direction of the industry in terms of giving the customer the true choice of what they want to do.

From there on our relationship with service and grid services, we're agnostic. So we truly are agnostic as far as whether a customer wants to choose a loan or a lease or a PPA. .

Your next question comes from the line of Pavel Molchanov with Raymond James..

If we think about kind of the long-term adoption curve of rooftop solar in the U.S., part of the story is expansion beyond the coastal markets, the high power price markets.

In your kind of post Lennar model, are you noticing any mainstream of demand in outside the traditional coastal markets and I’d include Puerto Rico in that?.

Pavel, yes, we are. You can probably see as we are launching new states we have more to go in the balance of this year. We're seeing -- and I made a comment about this on last earnings calls.

I was at least surprised that we're seeing such strong interest from consumers and the interior party in United States, which traditionally as you know, have relatively low power rates as opposed to the coastal states. And not necessarily exposed to at least like hurricanes and some other weather-induced events.

Fires, unfortunately are something that's in, particularly the Western states, as we've seen with Arizona, Colorado, and others. But, we are seeing pretty strong pickup and I do anticipate that we will be probably pretty close if not there in all 50 by next year. And we certainly are looking towards that international expansion as well.

But we're definitely seeing a broadening of interest from consumers in solar. The other thing that surprised me is in storage too. So we're seeing that across in the interior United States as well. So it's a very compelling as far as the growth prospects on a forward basis for the industry. .

I'll follow-up with kind of classic washing type question. In the Bipartisan Infrastructure Bill that went through the Senate, preliminarily, yesterday, there was no extension of any tax credits in ITC included.

What's your expectation for the prospect of another ITC extension in some other package, maybe between now and the end of the year?.

I think it's pretty close to 100%. We didn't expect that to be in that though. We expected that if a true bipartisan, which it looks like it's going to do, which is, as a citizen of the country, I'm very pleased to see that we can find some way to at least get some of the folks to get on board and do the American people's work.

That we were not going to be included in that.

Mainly because you can be included in the tax extenders or budget or something of that nature that's going to come later this year, whether that's in the September timeframe and set up a continuing resolution, or that's in the December timeframe, we rather suspect that will be in December, just because that's been the trend over the last, I don’t know, several years, right? And so that's our current -- has been our expectation of remains our current expectation, but there's no higher priority to them -- the administration has laid out on the climate change.

Climate change is obviously the top priority for them but also on the climate change, there's no highest priority than the extension of the IPC. So we feel extremely comfortable with that. And we would love to just get it done and move on, right? But I think that it'll get done by the end of the year.

And, for us, obviously, as an industry, it doesn't matter whether it gets done this month or December. .

We have time for one more question. Your final question comes from the line of Sean Morgan with Evercore. .

So in terms of the business mix, I assume most of the other -- the increase in other categories is attributed to SunStreet. Earlier you talked about not always knowing whether the customer can elect for a cash loan or a cash purchase or a PPA.

So some of that 30,000 plus new customers, is some of that unsold, held in inventory, is that all fully sold and you're just not out getting it versus loan, versus PPA, and just how does that shift work going forward?.

Yes, so I -- none of that we would look to consider to be not a customer clearly, but 34,000 give or take those are the acquired customers.

The others are the customers that we sell serve-only contrasts to, which we've a fairly significant experience doing as you can see, and then there are some of the cash in there that don't fit neatly into the other three buckets. .

There are no additional questions at this time. I'll turn the call back over to Mr. John Berger for closing remarks. .

Thank you, operator. Thank you all for joining us for our Q2 2021 call. We're pleased that the company is continuing to execute. We have experienced strong margin, strong cash flow, strong growth and we continue to see that on a forward basis. We've endeavored to layout in great detail on a look forward basis all of our cash flow and expectation.

The company is in a very enviable spot in the industry in terms of cash flow to the equity. And we continue to see a lot of strength in our business model and look forward to having continue to offering our customers better service, more services and strengthening our cash flows to the equity. Look forward to seeing you in the Q3 call. Thank you..

Ladies and gentlemen, this does conclude today's conference. You may now disconnect. Everyone have a great day..