Sunnova has doubled its dealer network but still posts net losses in third quarter earnings

Sunnova residential solar-001

Sunnova’s financial results for the third quarter shows a growing dealer network (doubled over last 12 months) and customer growth amid continued losses (Net loss of $34.4 million for the quarter).

“We delivered on our operational and financial targets,” said William J. (John) Berger, Chief Executive Officer of Sunnova. “We continued to grow our dealer base, launch new product offerings, and increase battery attachment rates. In addition, we closed on a number of significant financial transactions in the third quarter, including our IPO, a new tax equity facility, a new credit facility for our leases and PPAs, and a comprehensive amendment to the credit facility for our loan products.

“We continue to generate strong asset level returns that are inclusive of all dealer payments. Our quarter-over-quarter improvement in net cash used in operating activities and positive Adjusted Operating Cash Flow, generated by our long-term cash flows from operations, reflects our ability to scale our overhead and service expenses. We continue to see the asset-backed securities market provide cash in excess of our newly originated customer service contracts while allowing us to retain the contracted cash flows. These cash proceeds, coupled with our Adjusted Operating Cash Flow, are currently expected to generate sufficient cash while growing our net contracted customer cash flow and value.”

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The company reaffirmed its 2019 customer growth rate target of at least 30% or approximately 79,000 customers at year end. The company set its 2020 guidance of customer additions between 23,000 to 27,500, and adjusted EBITDA of $55 million to $60 million. Customer principal payments received from solar loans, net of amounts recorded in revenue between $30 million and $35 million. Interest received from solar loans between $15 million and $20 million, adjusted operating cash flow of $5 million to $15 million.

“We remain focused on maximizing cash flow,” Berger said. “With our dealer model driving strong growth, our existing and future customers positioned to generate recurring long-term cash flows, our focus on providing those customers service for many years to come, our ability to generate cash from financing activities and our continued attention to containing costs, we believe we are well positioned for 2020 and beyond.”

Third Quarter 2019 Results

Total number of customers was 72,600 as of September 30, 2019, an increase of 15,600 compared to September 30, 2018.

Revenue increased to $36.6 million, or by $6.2 million, in the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Revenue increased to $97.9 million, or by $18.8 million, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases in revenues are primarily a result of an increase in the number of customers served.

Total operating expense, net increased to $42.5 million, or by $15.5 million, in the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Total operating expense, net increased to $111.1 million, or by $30.6 million, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases are the result of an increase in the number of customers served, greater depreciation expense, and higher period-over-period general and administrative expenses due to costs related to our initial public offering and the hiring of personnel to support growth.

The result is a net loss of $34.4 million for the three months ended September 30, 2019 compared to a year-over-year net loss of $6.6 million. For the first nine months of 2019, that’s a net loss of $119.7 million compared to a net loss of $29.3 million for the nine months ended September 30, 2018.

Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $4.3 million and $3.1 million, respectively, for the three months ended September 30, 2019, or by $2.6 million and $1.5 million, respectively, compared to the three months ended September 30, 2018 due to our larger customer loan portfolio. Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $13.0 million and $8.2 million, respectively, for the nine months ended September 30, 2019, or by $7.9 million and $4.0 million, respectively, compared to the nine months ended September 30, 2018 due to our larger customer loan portfolio.

Net cash used in operating activities was $18.8 million in the three months ended September 30, 2019 compared to $4.7 million in the three months ended September 30, 2018. Net cash used in operating activities was $74.5 million in the nine months ended September 30, 2019 compared to $25.2 million in the nine months ended September 30, 2018. These increases were due primarily to higher inventory purchases necessary to meeting growing demand, an increased use of working capital and an increase in the amount of exclusivity and other bonus arrangement payments made to certain dealers that are inclusive in our asset level economics during the three and nine months ended September 30, 2019 compared to the same periods of 2018.

Adjusted Operating Cash Flow was $1.6 million in the three months ended September 30, 2019 compared to $(1.3) million for the three months ended September 30, 2018. This increase in Adjusted Operating Cash Flow was primarily due to the increase in the number of customers served. Adjusted Operating Cash Flow was $(18.4) million in the nine months ended September 30, 2019 compared to $(13.5) million for the nine months ended September 30, 2018. This decrease in Adjusted Operating Cash Flow was due primarily to breakage costs for interest rate hedges in connection with refinancing indebtedness to take advantage of lower interest rates and higher operating and interest payments partially offset by higher revenue and P&I received.

— Solar Builder magazine

[source: https://solarbuildermag.com/news/sunnova-has-doubled-its-dealer-network-but-still-posts-net-losses-in-third-quarter-earnings/]

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