SUNRUN Q3 2026 EARNINGS CONFERENCE CALL - SUNRUN INC

Financial Performance:

• Generated $56 million in Q3 cash generation (excluding $50 million equipment safe harbor investment); YTD debt reduced by over $100 million.
• Aggregate contracted subscriber value reached $1.2 billion; per-subscriber value rose 8% YoY to ~$52,500, with upfront net subscriber value margins expanding to <del>7% (</del>$3,700 per subscriber).
• Record 75% storage attachment rate achieved in Q3, up from 74% in Q2; direct installation volumes up 17% sequentially and 9% YoY.
• Affiliate volumes declined 67% YoY due to strategic scaling back; direct business expected to comprise 85-90% of total mix for the year.
• Raised ~$1.5 billion in non-recourse asset-level debt YTD; tax equity capacity secured for 980 MW beyond Q3 deployments; $661M unused revolving warehouse available.
• Reinvested $100M in equipment safe harbor activities through Q3; cash generation expected to be robust in Q4.

Guidance and Future Outlook:

• Revised full-year 2026 aggregate subscriber value guidance to ~$4.6 billion (down from prior $4.6B-$4.9B) and cash generation guidance to ~$200M (down from $200M-$375M).
• Low-end cash generation anchor driven by modestly lower sales pacing and sustained higher interest rates; 2027 volumes expected to grow YoY.
• Strategic goal to double distributed storage capacity online by end of 2028; aiming to increase participation rates and revenue per asset.
• Formal 2027 guidance to be provided in the Q4 2026 earnings call in February; expects "meaningfully positive" cash generation in 2027.
• Anticipates further price increases in 2027 to offset rising utility rates, elevated ITC insurance costs, and potential new California property taxes.

Business Segments and Product Lines:

• Direct Sales: Experiencing high single-digit to low double-digit monthly growth (June–Oct); specific markets like Illinois, Texas, and NJ growing >25% YoY.
• Affiliate Channel: Successfully reset partner base to meet rigorous quality standards; no plan to exit, expecting volume growth in both channels by Q2 2027.
• Distributed Power Plants: Largest residential IPP with >5 GWh storage installed; dispatched 434 MW in a single event; added 1.3 GWh storage and >1,000 MW dispatched power over the last 12 months.
• Distributed Compute: Piloting inference compute on customer sites (new homes, multifamily) to leverage co-located power; launched Tesla Renew consortium partnership.
• Customer Value: Expanded offering to existing customers with add-on batteries and service plans; leveraging fleet for recurring grid service revenue.

Market and Competitive Landscape:

• Positioned to capitalize on grid reliability concerns and demand for predictable energy costs; customers eager to lock in rates.
• Post-election "Blue Wave" seen as a catalyst to accelerate policy support for distributed energy resources and dispatchable power.
• Strong demand for tax equity credits; ITC pricing stable in the high 80s to low 90s range; tax credit supply for 2026 largely spoken for.
• Collaborating with utilities, market coordinators, and hyperscalers; Google/PG&E deal highlighted as a proof point for the Tesla Renew/Sunrun partnership.

Risks and Challenges:

• Headwinds include elevated ITC insurance costs (impacting proceeds by 1-2 percentage points) and new California property taxes on new systems.
• Sustained high interest rates increasing capital costs and moderating sales onboarding compared to expectations.
• Industry-wide complex utility rate markets and evolving state/federal policies require continuous adaptation.
• Affiliate channel ecosystem challenges remain a drag on volume, necessitating strict partner selection.

Management Commentary and Tone:

• Tone is confident and focused on quality, margins, and asset strength; management emphasizes a "reset" of the affiliate channel and growth in the direct business.
• Leadership highlighted the strategic shift to becoming a distributed independent power producer, citing speed-to-power and grid capacity needs.
• Management expressed strong optimism regarding the "Blue Wave" election results as an accelerator for policy alignment, while maintaining that the business is built to succeed under current policies.
• Specific praise given to the Illinois team for >30% installation growth.

Analyst Questions and Answers:

• Price Elasticity: Management confirmed a measured approach to price increases, observing utility trends and volume responses; expects to continue calibrating prices through 2027.
• Affiliate Strategy: No intention to exit the affiliate business; plans to maintain a base level of partners aligned with quality standards, with expected YoY volume growth in both channels by Q2 2027.
• ITC Extension: Believes likelihood of ITC extension has increased post-election but asserts business readiness under existing frameworks.
• Capital Markets: Noted directional improvement in debt and tax equity demand despite data center competition; activity in ITC transfer market accelerating.
• Hardware/Operations: Confident in current hardware and connectivity structures (including Lunar and Tesla partnerships) to meet varying grid dispatch requirements.
• Cash Gen Drivers: Full-year guidance reduction primarily driven by lower volume outlook rather than interest rates, though rates have a gradual impact.

Other Key Points:

• Q3 saw 24,000+ new customers added with average system sizes up 2% sequentially.
• Up to 46% of Q3 additions monetized via non-retained/partially retained models to diversify capital sources.
• Sunrun views itself as well-positioned to support AI growth through distributed compute and energy solutions.
• Forward-looking statements include disclaimers regarding non-GAAP measures and potential material differences from actual results.