Sunrun Inc. Q4 FY2025 earnings call

• Sunrun's disciplined growth strategy focused on being a critical energy system player with healthy margins is paying off. • In 2025, they dispatched 425 megawatts to the grid and added 1.5 gigawatt hours of dispatchable generation capabilities. • Prioritized growing customer base with optimized, disciplined way, focusing on product mix and high value routes to market and geographies. • Increased storage attachment rate to 71% exiting 2025. • Launched innovative customer products like Flex, which has reached thousands of installs per quarter. • Developed strategic partnerships such as with NRG, Tesla, and Hannon Armstrong. • Improved vertically integrated direct business with high net promoter scores. • Reduced affiliate volumes by over 40% in 2026 for better customer experience and operational control. • Focused on being the best in energy business, delivering sophisticated energy offerings and strong customer experience while building the nation's leading distributed power plant.

In 2025, Sunrun's storage attachment rate increased to 71%, up nine percentage points from the prior year. Subscriber additions were approximately 108,000 for the full year, approximately flat from the prior year. Storage capacity installed grew by 26%, and average system size grew by 4%. GAAP revenue, gross profit, and operating income were meaningfully higher in Q4 due to the increase in asset sales monetization. Cash generation was $377 million in 2025, and $187 million in Q4. Aggregate subscriber value for 2025 is expected to be between 4.8 and 5.2 billion, and contracted net value creation is in a range of 650 million to 1.05 billion. Cash generation for 2026 is expected to be between $250 to $450 million.

• Positioned to grow volume in direct business by high single to low double digits in 2026, expecting Q1 to be the low point followed by strong sequential growth. • Aggregate subscriber value for 2025 is between 4.8 and 5.2 billion. • Contracted net value creation for 2025 is in range of 650 million to 1.05 billion. • Cash generation for 2026 is between $250 to $450 million. • Expect Q1 aggregate subscriber value to be approximately $850 to $950 million and contracted net value creation to be $25 to $125 million. • Expect to repay over $100 million in parent recourse debt in 2026 and be below target recourse leverage of two times cash generation. • Plan to explore further capital allocation options to maximize shareholder value based on market conditions and long-term outlook.

• Uncertainty surrounding budget bill and tariff impacts on sales activity in certain routes and geographies. • Complexity of sales processes, utility rate structures, storage integration, distributed power plants, and ITC compliance. • Potential impact of delayed FEOC guidelines on tax equity and transfer markets. • Insurance costs increasing as the insurance market deals with increased volume. • Equipment prices weighing down due to shift to domestic. • Risk of further challenges if FEOC rules take longer than expected to come out affecting the transfer market and Sunrun's operations.

Q: Kudos on cash generation and guidance for 2026, speaking to moving pieces around cash-gen not having more upside off the range started in 2025.

A: Primary variables include interest rates, ITC percentage, storage attachment rate. Factors like modest growth in direct side, contraction on affiliate side, overperformance in 2025, lower view on ITC pricing, higher insurance costs, and equipment prices weighing in.

Q: On asset sales model, mix into 2026, average level it should trend at quarter to quarter.

A: Asset sale activity will continue to move around, generally expect a decline from 50% level seen in Q4, but quarter to quarter fluctuation as typical in tax equity funds. Separate from that, partnership with Hannon Armstrong is a meaningful part of the mix for the balance of the year.

Q: On retained versus non-retained assets, how to think of the mix and disclosure of available capacity for non-retained asset sales.

A: Tax equity or tax credit capacity includes both retained and non-retained. Mix is evolving with utilization of structures like joint ventures as part of diversification of funding sources. Specific breakouts of mix not provided beyond general statements.

Q: On cash-in outlook for 2026 excluding potential safe harbor investments, if 2025 numbers net those out and magnitude impact thereafter.

A: 2026 activity expected to save harbor up to four tax years following 2026, with cash allocation in range of $50 to $100 million. 2025 activity was capital light, exact number not detailed.

Q: On demand environment, TPO, non-TPO market and affiliate side as competitor.

A: As 25D market wound down, volume migrated to other places. Affiliate volume has largely migrated due to financing shocks and need for improved controls. Anticipate those migrating will eventually move to places with controls and training on complex rate environments.

Q: On challenges from delayed FEOC guidelines for Resi Solar and how Sunrun navigates it.

A: Sunrun is a sophisticated, vertically integrated player with end-to-end visibility. Initial guidance was positive and fit. Strategic partnerships and diversified capital structure are helpful. Viewed FIAC guidance as incrementally helpful and confirmatory.

Q: On outlook for buyback or capital allocation, current positioning.

A: Continuing to pay down parent debt, expecting $100 million or more in 2026 to get below two times leverage target. Looking to maximize shareholder return with capital allocation and finalizing safe harboring activity.

Q: On quantifying labor cost increase year-over-year and DPP side with utilities.

A: Install cost increased year-over-year, creation cost was 8% increase. Utilities are showing growing interest in Sunrun's assets for grid stability outcomes, with varied activity by geography.

Q: On leverage ratios targeting and creation cost change between OPEX and CAPEX.

A: Leverage ratio target is two times, expecting to get below that with $100 million pay down in 2026. The change in creation cost is due to the shift in financing mix from 10% to 50% from Q3 to Q4 to asset sale activity, resulting in full expensing of greater degree of asset origination costs.

Q: On significance of changing default rate measurement in metric sensitivities and default rate of seasoned securitizations.

A: Changing default rate measurement to capture evolving range and provide full coverage. Seasoned securitizations default rates vary, average around 50 to 75 basis points depending on asset performance, vintages, types.