Sunnova Reports Second Quarter 2020 Financial Results and Reaffirms 2020 Guidance

Second Quarter 2020 Highlights

• Increased total customer count to 91,600 as of June 30, 2020;
• Increased storage attachment rate on origination to 34% in the second quarter of 2020;
• Closed a $158.5 million securitization of residential solar loan agreements; and
• Reaffirmed full-year 2020 guidance.

HOUSTON–(BUSINESS WIRE)–Sunnova Energy International Inc. (“Sunnova”) (NYSE: NOVA), one of the leading U.S. residential solar and storage service providers, today announced financial results for the quarter ended June 30, 2020.

“We are proud to report another quarter of strong results and to reaffirm our 2020 guidance,” said William J. (John) Berger, Chief Executive Officer of Sunnova. “Our response during the COVID-19 pandemic has demonstrated how quickly our industry can adapt to not only survive this crisis but thrive. With our expanding dealer network and rising storage attachment rate, in the second quarter we believe we grew our customer base at a rate faster than any other public U.S. residential solar and storage service company.

“Based on our current customer growth trajectory, and driven by our business model and capitalization strategy, we are experiencing significant operating leverage and are at the tipping point of achieving the scale needed to reach positive Recurring Operating Cash Flow. Overall, we are rapidly lowering our costs on a per customer basis while simultaneously growing our customer base faster than anyone else in the industry. The combination of this rapid growth, plus our ability to lower costs, is having a positive impact on cash flow and we believe will soon lead to the generation of positive Recurring Operating Cash Flow.”

Mr. Berger added, “As the direct correlation between people spending more time in their homes and their increasing energy consumption continues to rise, homeowners are becoming more focused now than ever on ensuring the energy they use to power their lives is affordable, reliable, and clean. We are seeing this focus manifest itself in increased consumer appetite for our service offerings, which we are proud to report are helping power our customers’ energy independence.”

Second Quarter 2020 Results

Revenue increased to $42.8 million, or by $8.2 million, in the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Revenue increased to $72.6 million, or by $11.3 million, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. These increases were primarily the result of an increase in the number of customers served.

Total operating expense, net increased to $47.9 million, or by $10.6 million, in the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Total operating expense, net increased to $92.1 million, or by $23.5 million, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. These increases were primarily 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 the hiring of personnel to support growth.

Adjusted Operating Expense increased to $24.8 million, or by $3.8 million, in the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Adjusted Operating Expense increased to $48.4 million, or by $8.8 million, in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. These increases were primarily the result of an increase in the number of customers served and higher period-over-period general and administrative expenses due to the hiring of personnel to support growth.

Sunnova incurred a net loss of $28.7 million for the three months ended June 30, 2020 compared to a net loss of $49.8 million for the three months ended June 30, 2019. This smaller net loss was primarily the result of lower net interest expense which was driven by unrealized gains on interest rate swaps in the three months ended June 30, 2020 versus unrealized losses in the three months ended June 30, 2019.

Sunnova incurred a net loss of $105.7 million for the six months ended June 30, 2020 compared to a net loss of $85.3 million for the six months ended June 30, 2019. This larger net loss was primarily the result of higher net interest expense which was driven by higher realized net losses on interest rate swaps occurring in the first quarter of 2020.

Adjusted EBITDA was $18.0 million for the three months ended June 30, 2020 compared to $13.6 million for the three months ended June 30, 2019, an increase of $4.4 million. Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $7.5 million and $6.6 million, respectively, for the three months ended June 30, 2020, or by $2.3 million and $3.9 million, respectively, compared to the three months ended June 30, 2019. Adjusted EBITDA was $24.2 million for the six months ended June 30, 2020 compared to $21.7 million for the six months ended June 30, 2019, an increase of $2.5 million. Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $13.9 million and $10.9 million, respectively, for the six months ended June 30, 2020, or by $5.3 million and $5.9 million, respectively, compared to the six months ended June 30, 2019. These overall increases were primarily driven by customer growth increasing at a faster rate than expenses.

Net cash used in operating activities was $24.8 million for the three months ended June 30, 2020 compared to $31.3 million for the three months ended June 30, 2019. This decrease was primarily the result of a decrease in payments to dealers for exclusivity and other bonus arrangements with net outflows of $11.4 million in 2020 compared to $20.0 million in 2019.

Net cash used in operating activities was $82.9 million for the six months ended June 30, 2020 compared to $55.7 million for the six months ended June 30, 2019. This increase was primarily the result of an increase in purchases of inventory and prepaid inventory with net outflows of $18.0 million in 2020 compared to $7.1 million in 2019 and an increase in realized loss on interest rate swaps of $25.6 million due to the termination of certain debt facilities in 2020, offset by decreased payments to dealers for exclusivity and other bonus arrangements with net outflows of $16.7 million in 2020 compared to $22.0 million in 2019.

Adjusted Operating Cash Flow was $18.8 million in the three months ended June 30, 2020 compared to $5.4 million for the three months ended June 30, 2019. Adjusted Operating Cash Flow was $(1.3) million in the six months ended June 30, 2020 compared to $(10.5) million for the six months ended June 30, 2019. These increases were primarily the result of customer growth increasing at a faster rate than cash expenditures.

Liquidity & Capital Resources

As of June 30, 2020, Sunnova had total cash of $184.4 million, including restricted and unrestricted cash.

2020 Guidance

Management reaffirms existing full-year 2020 guidance and introduces guidance for full-year 2020 Recurring Operating Cash Flow.

• Customer additions of 28,000 – 30,000;
• Adjusted EBITDA of $58 million – $62 million;
• Customer principal payments received from solar loans, net of amounts recorded in revenue of $32 million – $36 million;
• Customer interest payments received from solar loans of $17 million – $21 million;
• Adjusted Operating Cash Flow of $10 million – $20 million; and
• Recurring Operating Cash Flow of $(20) million – $(5) million.

“We continue to have a high level of confidence in achieving our 2020 financial targets as our business model provides excellent visibility into future results,” added Mr. Berger. “This visibility is reflected in the fact 95% of the mid-point of our 2020 targeted revenue and principal and interest from solar loans is locked in through existing customers as of June 30, 2020.”

Non-GAAP Financial Measures

We present our operating results in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We believe certain financial measures, such as Adjusted EBITDA, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our business. We use Adjusted EBITDA and Adjusted Operating Expense as performance measures, and believe investors and securities analysts also use Adjusted EBITDA and Adjusted Operating Expense in evaluating our performance. While Adjusted EBITDA effectively captures the operating performance of our leases and PPAs, it only reflects the service portion of the operating performance under our loan agreements. Therefore, we separately show customer P&I payments. Adjusted EBITDA is also used by our management for internal planning purposes, including our consolidated operating budget, and by our board of directors in setting performance-based compensation targets. We use Adjusted Operating Cash Flow and Recurring Operating Cash Flow as liquidity measures and believe Adjusted Operating Cash Flow and Recurring Operating Cash Flow are supplemental financial measures useful to management, analysts, investors, lenders and rating agencies as an indicator of our ability to internally fund origination activities, service or incur additional debt and service our contractual obligations. We believe investors and analysts will use Adjusted Operating Cash Flow and Recurring Operating Cash Flow to evaluate our liquidity and ability to service our contractual obligations. Further, we believe that Recurring Operating Cash Flow allows investors to analyze our ability to service the debt and customer obligations associated with our in-service assets. However, Adjusted Operating Cash Flow and Recurring Operating Cash Flow have limitations as analytical tools because they do not account for all future expenditures and financial obligations of the business or reflect unforeseen circumstances that may impact our future cash flows, all of which could have a material effect on our financial condition and results of operations. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used both to better assess our business from period to period and to better assess our business against other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by other companies. In addition, other companies may not publish these or similar measures. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with GAAP. Sunnova is unable to reconcile projected Adjusted EBITDA, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow to the most comparable financial measures calculated in accordance with GAAP because of fluctuations in interest rates and their impact on our unrealized and realized interest rate hedge gains or losses. Sunnova provides a range for the forecasts of Adjusted EBITDA, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and the impact on the related reconciling items, many of which interplay with each other. Therefore, the reconciliation of projected Adjusted EBITDA, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow to projected net income (loss), total operating expense, or net cash provided by (used in) operating activities, as the case may be, is not available without unreasonable effort.

Second Quarter 2020 Financial and Operational Results Conference Call Information

Sunnova is hosting a conference call for analysts and investors to discuss its second quarter 2020 results at 8:30 a.m. Eastern Time, on July 30, 2020. The conference call can be accessed live over the phone by dialing 833-557-0560, or for international callers, 778-560-2599. A replay will be available two hours after the call and can be accessed by dialing 800-585-8367, or for international callers, 416-621-4642. The conference ID for the live call and the replay is 6978804. The replay will be available until August 6, 2020.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of Sunnova’s website at www.sunnova.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or Sunnova’s future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “going to,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern Sunnova’s expectations, strategy, priorities, plans or intentions. Forward-looking statements in this release include, but are not limited to, statements regarding our service levels, our liquidity and position and its ability to support our growth, our level of growth, our ability to handle market disruptions related to the COVID crisis, the ability of our dealers to quickly pivot to new virtual sales practices, the ability to achieve our 2020 operational and financial targets, and references to future rate of customer additions, Adjusted EBITDA, customer P&I payments from solar loans, Recurring Operating Cash Flow and Adjusted Operating Cash Flow. Sunnova’s expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including risks regarding our ability to forecast our business due to our limited operating history, the effects of the coronavirus pandemic on our business and operations, results of operations and financial position, our competition, fluctuations in the solar and home-building markets, availability of capital, our ability to attract and retain dealers and customers and our dealer and strategic partner relationships. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in Sunnova’s filings with the Securities and Exchange Commission, including Sunnova’s annual report on Form 10-K for the year ended December 31, 2019. The forward-looking statements in this release are based on information available to Sunnova as of the date hereof, and Sunnova disclaims any obligation to update any forward-looking statements, except as required by law.

About Sunnova

Sunnova Energy International Inc. (NYSE: NOVA) is a leading residential solar and energy storage service provider with customers across the U.S. and its territories. Sunnova’s goal is to be the source of clean, affordable and reliable energy with a simple mission: to power energy independence so that homeowners have the freedom to live life uninterrupted^TM.

Contacts

Rodney McMahan – Investors

Kelsey Hultberg – Media

IR@sunnova.com
877-770-5211

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