Sunrun Inc 2026 Q2 Earnings Call

Before we begin, please note that certain remarks we will make on this call constitute forward-looking statements related to the expected future results of our company, including our Q3 and full year 2026 financial outlook and other statements that are not historical in nature, are predictive in nature or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, beliefs or other statements that may be considered forward-looking. Though we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially or adversely. Please refer to the company's filings with the SEC for more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements.

Please also note these statements are being made as of today, we disclaim any obligation to update or revise them. Please note, during this earnings call, we may refer to certain non-GAAP measures, including cash generation, creation costs reflected in operating expenses, and creation costs reflected in capital expenditures, which are not measures prepared in accordance with U.S. GAAP. These non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and other investor materials available on the company's investor relations website and accompanying this webcast. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. On the call today are Mary Powell, Sunrun's CEO, Danny Abajian, Sunrun's CFO, and Paul Dickson, Sunrun's President and Chief Revenue Officer.

A presentation is available on Sunrun's investor relations website, along with supplemental accompanying materials. An audio replay of today's call, along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun's investor relations website shortly after the call. Let me turn the call over to Mary.

Thank you, Patrick, and thank you all for joining us today. Sunrun is successfully executing a transition towards our direct business, which has higher margins, better customer satisfaction, and better credit profiles. We had positive cash generation in the quarter while executing a sizable safe harbor investment. We are delivering award-winning customer experience and laying the foundation for durable high margin growth in the periods ahead. We resumed strong growth in sales activities in recent months and expect to be exiting the year growing by over 10%. This tees us up well for a very strong 2027. Sunrun's energy assets are at the center of a power sector that is in need of energy capacity and where speed to power is critical. Sunrun now has over 4.6 GWh of storage capacity installed across the country and is the largest residential independent power producer.

America needs more power faster than the traditional grid can deliver it. Sunrun is well situated to meet that need. On to our Q2 results. We continue to generate strong demand for our storage offerings and set a new record in Q2, reaching a 74% Storage Attachment Rate. This equates to the installation of over 15,500 battery systems in Q2. Aggregate Subscriber Value for Q2 was nearly $1.2 billion, near the top end of our guidance range of $1.1 billion-$1.2 billion. In the quarter, we produced positive cash generation of $45 million when excluding $22 million of equipment safe harbor investments. Excluding safe harbor investments, we have produced positive cash generation in the first half of the year and $428 million of cash generation over the last two years.

We are adjusting our full year guidance to $200 million-$375 million versus our prior range of $250 million-$450 million. This is being driven by three things. First, we are further reducing our outlook for volume originated through our affiliate channels due to deliberate reductions we made and the bankruptcy of Freedom Forever. Second, the ramp of sales activities and the process of onboarding new reps took more time than expected. This transition towards a higher direct mix carries more front-loaded costs but higher long-term margins. Third, we are reflecting a higher capital cost as interest rates have inched up over the last few months. Our monthly sales trends in our direct business have inflected in June and July, turning positive, with monthly sales growth exceeding 10% compared to the prior year. We are confident we will return to robust growth in our direct business.

Danny will further address guidance shortly. Strategically, Sunrun is executing well, building a base of valuable energy assets. At the end of Q2, we had installed more than 266,000 storage plus solar systems, representing approximately 4.6 GWh of networked storage capacity. We are creating a formidable network of flexible dispatchable power at a rapid pace. Sunrun added more than one GWh of storage capacity and dispatched more than 700 MW of power over the last 12 months. This is equivalent to dozens of peaker plants. The assets we have already deployed today represent over $500 million in grid services present value. Sunrun's distributed power plants are on track to generate approximately $40 million in GAAP gross revenue and greater than $10 million in operating margin in 2026, with substantial growth expected in the years ahead.

We remain on track to reach our goal to over 10 gigawatt hours of dispatchable capacity online by the end of 2028, more than doubling from current levels. We expect revenue to grow materially faster as we continue to secure commercial opportunities for the fleet we have built. Conversations with potential off-takers have inflected materially in just the last few months. Our large scale of dispatchable resources and development engine that is growing this fleet at a rapid pace is opening the doors to monetize these resources through utility partnerships, direct energy market participation, retail electricity providers, and large load users such as data center hyperscalers. Sunrun is well positioned in a market that is structurally short power and where speed to power is a critical bottleneck.

To this end, in June, we announced a framework with Renew Home and Tesla to bring over 16 gigawatts of home energy resources to hyperscalers, deployable in months without the land, transmission, or interconnection burden of traditional generation. In July, we launched a distributed AI compute pilot using our home footprint not just as a power resource, but as an edge compute platform. Commercial momentum is accelerating as the market turns to us for the scale, assets, and customer relationships that would otherwise take years and billions of dollars to replicate. We remain sharply focused on growing our direct business. It's our highest margin business. It's where we have the most control over the full lifecycle customer experience and compliance amid increased regulatory complexity. Our vertically integrated approach allows us to drive competitive advantage. Earlier this year, we shared that we expected volumes in our direct business to grow.

Volume growth in our direct business is ramping from negative growth in Q1 to double-digit growth exiting this year. This results in full year growth of low single digits. Over the past few quarters, as the broader market has gone through turmoil, we have had the opportunity to bring on some of the best talent in the industry. Our sales force has grown by over 1,500 people year to date, far outpacing what is seasonally typical, as we backfill what was a deliberate reduction in sales capacity in mid-2025 due to tax bill uncertainty as we position for growth. Importantly, this hiring is response to demand signals we're seeing for our battery offerings. Some of the talent we are onboarding from the industry is taking more time to acclimate to selling our more sophisticated product.

We are being deliberate about that ramp. We are building out our capacity to expertly guide customers through complex rate environments while presenting our full suite of advanced offerings. By holding our expanded team to the industry's highest standards for customer experience and operational quality, we are focused on achieving durable, profitable growth. New customer growth is only one lever. Increasingly, we're focused on unlocking value from the customers and assets we already have. Our distributed power plant business is a good example of this. Monetizing capacity we've already installed and turning existing systems into a recurring high-margin revenue stream with no incremental acquisition cost. As we grow customer participation in these programs and broaden monetization into data centers, grid edge applications, and capacity markets, we expect this to become a larger contributor to cash generation over time. We're seeing a similar dynamic play out in add-on batteries.

As resiliency becomes a bigger priority for homeowners, existing solar-only customers, and even homeowners without solar are increasingly choosing to add storage to their homes. We installed nearly 1,200 add-on batteries during Q2, and momentum is accelerating as we explore various new offerings and markets. Between distributed power plant programs and add-on batteries, we are building substantial recurring cash flow streams that are additive to our core origination business. Before handing it over to Danny, I want to take a moment to celebrate some of our people who truly embrace our customer-first service mentality. For this quarter, I want to specifically highlight Sunrun service organization. In Q2, we launched Lighthouse, turning our best-in-class service capabilities for Sunrun customers into an opportunity to also serve non-Sunrun customers. Our service organization is well positioned to drive additional recurring cash flow growth.

Connor and our regional service managers, thank you for the customer focused execution that makes this possible.