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Sunnova Energy International Inc (NYSE:NOVA)
Q1 2020 Earnings Call
May 15, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to Sunnova's Q1 2020 earnings conference call. Today's call is being recorded, and we have allocated an hour for prepared remarks and question and answer. At this time, I would like to turn the conference over to Rodney McMahan, vice president, investor relations at Sunnova. Thank you.

Please go ahead.

Rodney McMahan -- Vice President, Investor Relations

Thank you, operator, and good morning, everyone. Yesterday, we released our earnings press release and posted a slide presentation to the Investor Relations portion of our website at investors.sunnova.com, which will be referenced during this call. Joining me today are John Berger, Sunnova's chairman and chief executive officer; and Robert Lane, executive vice president and chief financial officer. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These include remarks about future expectations, beliefs, estimates, plans and prospects. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our press releases and filings with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements.

Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release. I will now turn the call over to John.

John Berger -- Chairman and Chief Executive Officer

Good morning, and thank you for joining us for our Q1 2020 earnings call. Before discussing our quarterly results, let me start by saying, I hope you and your family have stayed safe and healthy through these unique and challenging times. As everyone is aware, much has changed since our last earnings call, with the COVID-19 pandemic spreading across the globe creating a dual health and economic crisis. At Sunnova, we met the COVID-19 challenges head-on by first and foremost, ensuring the health and safety of our customers, employees and dealers while still delivering best-in-class service to our customers.

Second, we let our dealers do what they do best, which is to be innovative and entrepreneurial. They quickly created solutions to continue originating and installing solar energy systems, while remaining in compliance with all applicable health and safety guidelines. Third, we focused on ensuring the company had more than enough liquidity to make it through this crisis, however, long it may last. We implemented an aggressive cost-cutting plan and closed on several financing transactions Rob will expand upon later in the call.

Before getting too deep into the details, let me start out by saying that despite all the uncertainty in Q1, we were still able to deliver strong quarterly results. Thanks to these strong results, as well as other influencing factors we will describe in greater detail later in the call, we are pleased to be able to reaffirm our 2020 guidance. Throughout these difficult times, the advantage of our business model and our disciplined and focused approach has never been more apparent. While dealing with the pandemic has been challenging, it has clearly demonstrated that providing inexpensive and reliable power to our customers through our solar and solar plus storage offerings is more important now than ever before.

The COVID-19 pandemic has also demonstrated the flexibility and superiority of the dealer model, which allowed our dealers to focus exclusively on what was going on in the field, and tailor their actions to the local situation, while we at Sunnova were able to direct our focus on people, capital, assisting our dealers and providing service to our customers. Finally, these uncertain times have further highlighted the importance of not only creating, but also retaining long-term contracted cash flows. These cash flows provide financial stability and the financial strength needed to raise capital in a difficult environment. On Slide 3, you will see that we closed out another quarter of strong growth.

The Sunnova team worked tirelessly to increase our customer base, expand our dealer network and boost our storage attachment rate. As a result, we were able to exceed our 2020 financial and operational estimates for the quarter. In spite of the disruption caused by COVID-19, in Q1 2020, we still added nearly 7,000 new customers, which was our best quarter in company history, and 107% more than the number of customers we added in the first quarter of 2019. At the start of the year, we exceeded our plan origination rate, setting new records for January and February and positioning March to be the strongest month of the quarter.

While our origination pace did decline slightly due to the onset of COVID-19, we still managed not to experience a year-over-year decline in origination for the month of April. So far this month, we are again experiencing strong origination growth. This has all been made possible in large part, thanks to our dealer model, as we saw more and more cities across America, calling for stay-at-home orders, our dealers quickly and nimbly adjusted their processes by increasing their use of virtual tools to support both their sales and interconnection activities. Our dealers also worked with their respective agencies having jurisdiction to utilize electronic inspections and permitting.

These actions have reduced our dealers' reliance upon face-to-face meetings, therefore, allowing them to be able to continue selling our solar energy service and get new customers placed in service. Now more than ever, the strength of the dealer model is on full display. At March 31, 2020, the total number of dealers and sub-dealers who have partnered with Sunnova reached 191, a 23% increase from the end of 2019. Even in this environment, we currently have a growing backlog of high-quality contractors who are looking to become Sunnova dealers and an increasing number of them are asking for exclusivity.

One trend that has continued to surge throughout all of this is our storage attachment rate on origination, which we saw grow from 24% in Q4 2019 to 30% in Q1 2020. In fact, in only two short quarters, we have seen that rate double from 15% in Q3 2019 to the current 30% achieved this quarter. Additionally, the ability to network and remote operate our customers' battery-enabled systems allows us to offer new energy services individually and through aggregation. In short, this pandemic caused an acceleration of what we already saw as a megatrend for the global energy industry.

In our Q4 2019 call, we called 2020, the year of the battery, and we still believe that to be true. Millions of Americans find themselves spending more time in their houses, which have become more than just homes but also schools and offices. For all of us having clean, affordable, and reliable power is more important than ever. Batteries provide our customers with peace of mind knowing that when their electric grid fails them, they will still have the power they need to educate their children and work from home.

Sadly, with both wildfire and hurricane season just around the corner, we will again see the fragility of the traditional, centralized power infrastructure on full display with power outages continuing to plague consumers. As a result, we expect demand for our solar plus storage offerings will continue to increase as consumers look for energy options that provide higher energy resiliency and reliability. Most recently, the uncertainty brought upon by COVID-19 has shown us the world may be more fragile than we originally thought, magnifying the importance of being self-reliant and further proving the economic and societal value of solar plus storage. Turning to Slide 4, we provide a summary of our first quarter 2020 results, which are further expanded on Slide 5.

Our total customer count, adjusted EBITDA, the principal and interest we collect on solar loans and our adjusted operating cash flow were all above our expectations for the quarter. On Slide 6, we reflect on both our estimated net and gross contracted customer value over the previous three years. Using a discount rate of 4%, net contracted customer value, or NCCV, increased from $952 million on March 31, 2019, to $1.2 billion or $14.41 per share on March 31, 2020. As we noted before, our gross contracted customer value metric represents only our existing contracted cash flow base and excludes any upside potential from renewal value, ability to up-sell existing customers, selling energy services or any of our growth prospects.

To reach our NCCV, we subtract all debt and liabilities, both corporate and asset level, from our total present value cash flows. As reflected on this slide, our NCCV is experiencing significant increases year over year, which translates directly into shareholder value creation. We have long believed the service we provide is inherently essential, which leads customers to pay in both good economic times and in bad. As we expected, during this crisis, our customers have continued to pay.

And to date, Sunnova customer payment behavior has not materially changed since the onset of COVID-19. The percentage of customer payables collected in April was 99.5% of the preceding 12 months, and we continue to see strong collectibility into the month of May. In addition, of the few accounts that are past due, we've experienced a great deal of success in our collection efforts. The strong collectability of customer accounts will directly relate to the expected drop in the industry's long-term cost of capital as macro-financial market liquidity issues subside over time.

We will also continue to reap the benefits of our increasingly attractive solar service contracts due to our practice of retaining the long-term contracted cash flows from our customers versus those who do not retain them. The strategic decision continues to inure our benefit as the strong payment performance of our customers further reduces our cost of capital resulting in significant improvements to our gross and net contracted customer value per share as we move from a PV6 to a PV4. While I cannot promise what the future will hold, I do know that Sunnova will continue to be a leader to our customers, our dealers, our lenders, our shareholders, and the communities we serve. And thanks to the ample amount of liquidity we have secured and the strength and flexibility of our business model, we are better-positioned than anyone in the industry to not only get through this current crisis but to navigate any additional challenges these uncertain times may bring.

I will now turn the call over to Rob to walk you through our financial results, our recent financing activities and our guidance in greater detail.

Rob Lane -- Executive Vice President and Chief Financial Officer

Thank you, John. Starting on Slide 8. We recorded revenue of $29.8 million for the three months ended March 31, 2020, a period-over-period increase of $3.1 million or 12%, thanks to our strong customer growth. As a reminder, revenue does not include the cash we received from the principal and interest payments we collect on solar loans.

So our actual cash generation will grow at a higher percentage rate than our GAAP revenue. Adjusted operating expense, which represents the full recurring cash expenses to grow and run our service operations, also increased in response to the increase in the number of customers served to $23.6 million for the three months ended March 31, 2020. While total adjusted operating expense increased, we are seeing an overall decline on a per-customer basis and projected adjusted operating expense per customer will be at least 10% lower for the full-year 2020 versus full-year 2019. Adjusted EBITDA for the first quarter of 2020 was $6.2 million, down from $8.1 million during the same period last year.

This decrease is primarily driven by the growth in our customer loan portfolio as the costs associated with these loans are allocated to adjusted EBITDA, while the cash collected is represented outside of adjusted EBITDA. That customer cash inflow is the principal and interest payments from our solar loans, which were $6.4 million and $4.4 million, respectively, for the three months ended March 31, 2020, nearly double the amounts from last year. As we laid out in our Q4 2019 earnings call, we made a few changes to how our adjusted operating cash flow, or AOCF, metric is calculated. As investors are aware, we use AOCF to adjust items that are more investing or financing in nature out of operating cash flow, as well as to move cash flows that are more operating in nature but classified per GAAP as investing or financing back into operating cash flow.

Starting this year, we are backing out realized interest rate swap breakage income and expense we incur at securitization as we consider this a financing cost that would not occur, except for moving assets from a warehouse or term facility into a securitization. We consider these costs in our projections for net cash proceeds from investing and financing. We're also subtracting out cash received for inventory sales, which is just for items such as batteries that we prepurchase for our customer loans. We believe these changes give investors a clear picture of the operating cash flows.

AOCF was lower in the first quarter of 2020 compared to the first quarter of 2019, primarily because of increased interest expense from our larger asset portfolio and changes in our working capital. However, we are forecasting an increase of approximately 100% year over year in AOCF. Estimated NCCV as of March 31, 2020, was approximately $895 million using the industry standard 6% discount rate, up 26% from $709 million as of March 31, 2019. On a quarter-over-quarter basis, NCCV improved slightly as increases in customer value and increased tax equity deployments were largely offset by interest rate hedge breakage costs associated with our TPO securitization in February and the seasonally lower cash flows of the first quarter relative to the rest of the year.

As a reminder to investors, NCCV will experience seasonal and transactional-induced volatility, but we still project value creation along the lines of what we discussed last quarter. Changes in working capital and interest rate hedge breakage fees will cause some fluctuations to these rules of value creation from time to time. On Slide 9, you will find a summary of our year-to-date financing activities. While the financial markets, including the ABS market, have experienced a great deal of turmoil over the past several weeks, I am pleased by the progress the finance team has made to successfully navigate this challenging environment.

Thanks to their tremendous efforts, as well as the efforts of our debt and equity investors, we were able to execute on several important financing transactions that will ensure Sunnova has the capital it needs to continue funding its high level of growth. The 2020 financing transactions completed to date include a $412.5 million securitization, two expansions of our third-party operated warehouse facilities, $150 million in new tax equity funds, and a $190 million convertible debt facility, assuming the full exercise of the investment option. Going forward, we will target a range of 55% to 60% of debt to assets for the company's capitalization, including subsidiaries. This range will serve as a rough guide to our long-term capitalization and will be dependent in the short-term on financial market pricing of various securities and maintaining liquidity targets.

Our primary goal remains recurring cash flow to our common equity, and we believe this is only accomplished by a balanced approach to capitalization. Consistent with this philosophy is the new convertible debt we raised that on an as-converted basis gives us a pro forma debt-to-asset ratio of 55% as of March 31, 2020, and is immediately accretive to NCCV on a PB6 basis. We believe that this corporate capital will provide adequate working capital for our rapid growth through the end of 2021 and possibly beyond. It also provides the capital we may need if debt capital markets do not continue to improve or even worsen.

As we move forward in time, the company is naturally deleveraging by paying down its front-end-loaded debt amortization, having its tax equity facilities split once tax equity investors receive their returns and by paying off its renewable energy credit hedges. Due to this corporate capital and natural deleveraging in addition to our confidence in continuing our operating leverage improvement, we expect the company to maintain this capitalization range for the next several years. Even under strained financial market scenarios over the next two years, we currently see this corporate capital as being adequate. However, we will be opportunistic in our approach to the equity and equity-linked markets only to the extent that transactions like this one will be accretive to recurring operating cash flow per share and NCCV per share metrics.

We will use this corporate capital and our strong balance sheet to drive down our cost of capital at the asset level. There is a growing realization that solar industry contracts in all forms are inherently service contracts, and as such, are highly dependent on the performance of the service platform company. This realization will continue to increase the asset investors' focus on the quality of the service company's balance sheet, as well as its recurring cash flows that are not dependent on the capital markets. There is a balance between corporate and asset-level capital that is optimal for the lowest long-term cost of capital that we expect to achieve in the coming quarters.

In this difficult environment, we are grateful to our investors who see the importance of having sufficient liquidity and a well-funded balance sheet, coupled with our strong recurring operational cash flows and a continued focus on deleveraging. Turning to Slide 11, you will find our full-year guidance for 2020. As John noted earlier in the call, we are pleased to be able to reaffirm our guidance ranges for 2020 as they remain unchanged at customer additions of 28,000 to 30,000; adjusted EBITDA of $58 million to $62 million; customer principal payments received from solar loans, net of amounts recorded in revenue of $32 million to $36 million; interest received from solar loans of $17 million to $21 million; and adjusted operating cash flow of $10 million to $20 million. Our ability to reaffirm guidance was made possible by the strength and flexibility of our business model, our disciplined and concerted approach to running the business, and the steps we took early in the pandemic, which resulted in cost-cutting measures.

These cost rationalizations included eliminating all noncritical expenses, reducing our reliance on third-party contractors, and renegotiating contract terms with certain vendors. Further contributing to our high level of comfort in reaffirming guidance is the fact that our business model provides excellent visibility into future cash flows. By retaining our customers, we now have 91% of the midpoint of our 2020 targeted revenue and principal and interest received from solar loans locked-in from existing customers as of May 1, 2020. Propelling our growth and giving even further visibility into our guidance are our unique technology partnerships, our growing list of distinctive and innovative product offerings, and the fact that we are uniquely agnostic to financing types for our service offerings.

It is important to remind everyone once again that at Sunnova, we don't count a customer until they have been placed into service, meaning they have received permission to operate from the local authorities having jurisdiction, and we are receiving monthly payments. On our Q4 2019 earnings call, we noted that based on our forecast used to set guidance, we expect to capture approximately 10% of our adjusted EBITDA and principal and interest from solar loans in the first quarter of 2020. I am happy to report we exceeded that target as actual Q1 2020 adjusted EBITDA and principal and interest from solar loans equaled $17 million or 15% of the midpoint of our 2020 guidance. Based on our most recent forecast and for the balance of the year, we now expect to capture at least 25% of our adjusted EBITDA and principal interest from solar loans in the second quarter of 2020, increasing to approximately 30% in Q3 and the remaining balance in Q4.

As for customer growth, we expect our customer additions to continue to occur fairly evenly throughout the year, with approximately 45% of our forecasted customer additions happening during the first half of the year, while the remaining 55% should occur over the last six months. In addition to reaffirming our more formal guidance, we are also updating our high level 2020 projected cash proceeds found on Slide 12. As you will see, our projected cash flows from existing operations, which is our adjusted operating cash flow less corporate CAPEX remains unchanged at $5 million to $15 million. The box on the right includes all of our EPC costs, including our dealer network bonus payments, payments for work in progress, and inventory, as well as our financing.

The financing includes proceeds from tax equity, net securitization proceeds, debt amortization payments, and the recently raised convertible notes. When we compare our expectations for growth financing with where we were almost a quarter ago, much has changed, especially with respect to the ABS markets. Even as base rates have lowered, spreads have widened and expectations for advance rates have come down. This means that for the BB-rated tranches, interest rates are expected to be higher than what we executed in our February securitization, resulting in lower proceeds.

And while we see that market continuing to improve, it could still be several months or quarters before we return to the levels we saw just three months ago, when we price our 2020-1 financing. Further, the lower base rate means that we would also expect to have higher hedge breakage costs relative to where we were earlier this year. The quality of the solar asset classes, especially Sunnova's assets, and our strong customer payment behavior is not reflected in the current financial market conditions. However, the new corporate capital gives us significant flexibility to potentially fund the higher end of the advance rate on our balance sheet for now and wait until we have been able to demonstrate our collections and performance to the capital markets through more payment cycles.

That would give us the opportunity to finance deeper into the stack at much more favorable terms next year, effectively time-shifting to full securitization. There is, of course, still significant potential for us to improve these numbers this year if the market and its view of Sunnova's paper continue to improve. In the meantime, the convertible notes allow us to finance the top of the asset stack regardless of where ABS advance rates settle, enable us to drive competitive pricing and terms in the asset level capital markets, provide needed working capital as our growth continues to accelerate, and provide us with a capital cushion to withstand more potential financial market shocks well through 2021 and possibly beyond. As we look forward, and consistent with what we are hearing from investors, we expect to transition this slide to one that focuses more on generating positive recurring operating cash flow, or ROCF, which as we noted on our last earnings call is equal to revenues and other customer cash inflows less the principal and interest we pay on our debt.

We also subtract out the service-related expenses and allocated overhead, which together account for approximately 60% of our cash costs. We believe positive ROCF will be achieved in the $3.8 to $4.8 billion asset range sometime in 2021 or 2022. We continue to see that goal as achievable in that asset range and time frame due to our continued growth, stable unit economics, and ability to raise capital even amid a challenging environment. This marries up with our targeted leverage in keeping rather than selling off our customer cash flows.

By keeping cash inflows on the balance sheet and responsibly capitalizing those cash flows, we believe we are very well-positioned to achieve our ROCF-positive goal while still accreting value on an NCCV per share basis. Simply put, we plan to grow long-term value and long-term cash flow simultaneously. Like you, John and I are shareholders first, and we plan to increase value to our common equity with a view toward long-term sustainable cash flows and true value creation. I will now turn the call back over to John to provide closing remarks.

John Berger -- Chairman and Chief Executive Officer

Thanks, Rob. As we have repeatedly discussed, we strongly believe that due to the inclusion of batteries and other technologies in our service offerings, along with our focus on using standard financial metrics, that unit-level returns should be expressed in terms of unlevered yields. Our year-to-date asset level returns, including leases, PPAs and loans, have dipped slightly to approximately 9.75% due to contract type and geography mix. However, due to actions taken last quarter, we expect these returns to quickly move back toward our 10% target.

For fully burdened unlevered single asset returns, we would also include the sales and marketing portion of our overhead spend, working capital interest expense and the indirect sales expenses that are incurred. Currently, we estimate that our fully burdened asset level returns, inclusive of loans, are between 8.25% and 8.75%. Without including loans, the fully burdened single asset returns would be even higher. Our unlevered asset level returns have been relatively unchanged for several quarters, and we expect that trend to continue.

Our fully burdened asset level returns have been trending higher over the last several quarters due to increasing operating leverage, and we expect that trend to continue as well. Additionally, the unlevered returns exclude any potential increase in value for such items as the renewal of a contract, providing customers energy services or a battery or other up-sell opportunities. It is important to note that between our ROCF and our fully burdened unlevered returns that there are no cash expenses excluded. Investors have a full, complete, and straightforward picture of all of our expenses and resulting cash generation.

In closing, while the past several weeks have been filled with uncertainty, they have also been filled with hope, determination, ingenuity and compassion for one another. With ample liquidity, increasing customer growth and battery attachment rates, strong collectability of customer payments, the achievement of positive ROCF just on the horizon and a superior business model designed to weather any storm, Sunnova is well-positioned for 2020 and beyond. With that, operator, please open the line for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from Julien Dumoulin-Smith of Bank of America Merrill Lynch. Your line is open.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey. Good morning. Congratulations on holding the line on '20 here. Well done.

I wanted to follow up specifically on financing angles here and dig into the latest issuance. So can you comment on why raising the $190 million with a further option and then the exchange? Basically, why so much liquidity? And also why the offering of the exchange? And then related to that, why not sell down cash flows from your existing assets, given presumably that would have been the lower cost of capital? But again, curious to understand the liquidity position that you're coming from to understand the totality of the issuance here if you can?

John Berger -- Chairman and Chief Executive Officer

Yes. Thanks, Julien. This is John. First, this is a very uncertain environment.

I think that we're getting a little reprieved here coming out of the full lockdowns. But there's no guarantee, right, and we go into the fall or even late summer, in fact, we're starting to see a little bit of concern about opening schools fully in such. So if you want to call it COVID-2 or you want to call it a retracement of the pandemic, whatever, there's a lot of risk here. And I'm not entirely sure that the financial markets are going to take that and bounce back, as well as they did back in last month, in April.

So this is a very uncertain time, and I think it's very prudent to have insurance, and it's very prudent to make sure that we are the best-capitalized firm by far in the industry. And so that's first and foremost, why we took the action we did. We've been telegraphing for quite a while, as you know, that our large growth rate uses a large amount of working capital as every firm does. And so we solved that problem through this as well.

And it really goes to the proper leveraging of the company and the balance sheet. We talked about giving some guidance in that 55% to 60% debt-to-asset ratio. Again, that's a long-term rough guide to help you all out, but we don't want to over-lever the business. And we think that the liquidity and the long-term durability that our customers can count on, our dealers can count on, our lenders can count on, our shareholders can count on is best done to have both strong balance sheet but also a very strong cash flow statement that's years and years in the making.

And so I would offer up that having both the cash flow statement and looking toward having a near-term or relatively near-term recurring operational cash flow positive plus having the cash on the balance sheet really should give a lot of investors the ability to sleep at night and say that we are fully prepared for really almost any scenario that may come our way, and I fear that we are not out of this crisis yet. So the last thing I would add is that I don't think there's been full transparency given into the asset level of the equity market, however, you want to phrase that, they have different terms. It's the bottom end of the stack of the asset and that market, and we referenced this in the piece of capital right above it, the BB tranche market was under extreme stress. It has come back quite a ways, but it's still not anything close to what we did back in February in our securitization.

And so that asset level market sits right -- equity markets sits right below that BB, and that market is from what we can tell largely closed. Will it open back up again? It's possible. But I think we could all agree that we'd much rather see or you'd much rather see as an investor to buy the BB market before you do the asset level equity. So I take issue with the fact that the cost of capital would be lowered doing that.

But also, we're looking at a long-term cost of capital overall and balancing the corporate and the asset level cost of capital and giving durability to the investors.

Rob Lane -- Executive Vice President and Chief Financial Officer

Yes. Julien, on the exchange, we felt it was better to have the single class of capital there. We've also felt that the cash terms were going to be better for us. We increased the exchange rate that was being offered.

We still have the equity clawback. So we have still the capability to bring that back in the same way that we did before, perhaps even a bigger amount there. And just on the numbers real quick, it was $130 million of new capital with another $60 million of new capital on the investor option. So I just want to make sure that I understood where you were calling out the 190.

So the total amount of new would be 190 if we did the full investor option.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Right. And then -- but in terms of your debt paydown thought process, you all talked about year-end '21 paydown, I think, of the prior $55 million. As it stands now, I suspect maintaining liquidity from what it's worth through the current period, I think that's obvious. But then related to that, how do you think about the sizing of the total capital that you just pursued, if you could elaborate a little bit further on that.

Just that how did you come up with the $190 million, for instance? How are you thinking about that, given the comments on liquidity and working capital, etc.?

John Berger -- Chairman and Chief Executive Officer

Yes. So I'll answer a couple, and then Rob can chime in, Julien. So first of all, we assume that we would have lower amount of secure -- number of securitizations this year. So effectively, time-shifting to cash flows from '20 to '21.

And so we want to make sure we had enough capital upfront to be able to fund all the way through that, if we so chose to time-shift those securitizations. The market does continue to improve, and we may go ahead and execute on something that, again, we don't perceive to be likely in the next month or so that would be the same as February, but not bad overall in terms of a blended cost of capital. However, that can change on a dime, and they are our concerns. We want to make sure that we took care of that.

Secondly, and probably maybe even more importantly, is it that this gets us in a very draconian scenarios all the way through 2021 and possibly beyond. So this was basically our way of making sure that, again, shareholders can sleep at night that we can get through almost anything that comes our way. And we can do so in fine fashion. Did you want to add anything to that, Rob?

Rob Lane -- Executive Vice President and Chief Financial Officer

Yes. I mean, I think there are a couple of other things that we want to make sure we have some security around to what John said. Interest rates are lower, but spreads have increased in the ABS market, and you can see that in the secondary trades. So that sort of leads to two things.

One, for the securitizations that we would do, we would expect to have a lower advance rate compared to where we were able to have an advance rate back in February, as well as potentially higher interest rate breakage costs to the extent we're not able to roll some of our out-of-the-money hedges. Even hedges that were put on two, three months ago, are out of the money right now. So it really behooves us to be able to give ourselves a maximum amount of flexibility possible. And at the end of the day, Julien, we are a high-growth company.

We have the highest growth rate of the publicly traded companies out there. So we wanted to make sure that we didn't do anything and put a stumbling block in front of us that would prevent us from continuing that growth, thanks to the fantastic work that our dealers are doing out in the field.

John Berger -- Chairman and Chief Executive Officer

I'd add two more things, Julien, to that, is the commercial bank market is something that we started with as a company. So we know it pretty well, very interesting times to convince Texas banks to fund solar. But I would also point out that that doesn't get you through the full stack that we've even been securitizing, let alone getting into what others in the industry do all the way through the cost of the stack. And so that market, whether it's in the ABS market or the bank market, it's still something that we see has been troubled by the financial market or the pandemic.

And again, like the asset level equity, as I said, we don't see that open. And then overall, we picked this up in our last securitization. We made comments. Rob made comments on that just a few minutes ago that the investors in the asset level are starting to understand that these are solar service contracts.

And therefore, they're looking upstairs to the quality, not only the balance sheet, do you have a little bit of cash on hand, given your burn rate versus your burn rate. But do you have both cash on hand and a cash flow that's long term and durable because remember, they're investing for years, not just a few months. So we believe that that proper balancing and that good balance sheet coupled with that great cash flow statement, that's, again, multiyear cash flows are going to drive our overall cost of capital down. We've started to see that.

We continue to see that to be the case as well. So we're looking at an overall blended cost of capital for the company, not just something at the asset level.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Thank you guys so very much.

John Berger -- Chairman and Chief Executive Officer

Thanks, Julien.

Operator

Your next question comes from Brian Lee of Goldman Sachs. Your line is open.

Brian Lee -- Goldman Sachs -- Analyst

Hey, guys. Thanks for taking the questions. I hope everyone is doing well. I guess just to follow up on Julien's question.

If that draconian scenario, John, doesn't play out over the next kind of 12 to 18 months, maybe the world normalizes a little bit quicker than you're bracing for, what's your ability to do something to replace that convert sort of what time frame is that allowed in? And are there any prepayment restrictions in place?

Rob Lane -- Executive Vice President and Chief Financial Officer

Yes. No. Thanks for that question, Brian. So we have a one-third clawback that we can go do an equity raise if we find that our price goes up pretty significantly.

And that's -- we have that option in the first two years. And then in addition to that, we can call in the notes or force-convert the notes in certain circumstances beginning in year three. Along the same lines, though, I mean, we're very happy to have these investors in. We think they're fantastic partners to have.

And, I mean, my belief is that we're going to continue as a growth company, we're going to continue to benefit from having that convert there. The other thing, and I'll just point this out, if things are not draconian, that brings us to this recurring operating cash flow even faster. And that's really what we're aiming for is flowing cash flow to the equity. And this really gives us that opportunity.

I mean, one thing I'd just sort of remind you is that when we get to the top of the asset stack, whether it's selling off 100% of your residual cash flows so that they don't exist anymore or whether it is some of the more draconian sweeps that we can find in the really tight, high-yield markets. Either one of those means that the assets are paid for, but we're not flowing cash down -- sorry, not flowing cash up to the corporate equity. Even if we're paying a coupon here on this debt because it doesn't have an amortization on it, it really gives us that opportunity to flow more cash up toward the equity. So we're excited for the flexibility that it gives us and think that if it's not draconian, that accrues to everybody's benefit.

Brian Lee -- Goldman Sachs -- Analyst

OK. Great. And then just a second question here on the outlook and the guidance. I appreciate the 91% coverage that you noted on revenue and the P&I.

Wondering kind of if you had any similar metrics to provide on the visibility for the 28,000 to 30,000 customer additions outlook for 2020? I guess the guidance does imply, based on the 45-55 split you mentioned for first half, second half, that Q2 new customer additions will be sort of 6,300 or so, down about 6% sequentially. That's much better than your peers. So just wondering how much visibility you have here into that Q2 level, but also into some of the increasing numbers in the back half of the year?

John Berger -- Chairman and Chief Executive Officer

Yes, Brian. Thank you. That's good math. I would say that, first and foremost, you look at it, we did roughly a little north of 6,800 for Q1 for last quarter.

Obviously, if you just multiply that times four, you get pretty close to the bottom end of the range we gave for the entire year. We would have done a little bit north of 7,000 had we not been hit with the pandemic. The end of March, I think, was the worst, along with maybe the first week of April for everybody. So we have seen a continued pickup not only in origination but in service.

We have a very large backlog, fully installed systems and rate waiting to be in-serviced. So I would say that what we can effectively do, we talked about a two-quarter lag, given our backlog, we have pretty strong visibility well into Q3 and even moving into Q4. How that may fall between a Q2 or Q3 or Q3 or Q4, we don't quite have that level of specifics, of course, just given the relative uncertainty. But the backlog gives us a pretty strong and the pace we've already been at all the way through to this call, May 15, today, gives us very strong confidence that we can get into that range for the entire year.

So if we -- that's one of the reasons we waited, frankly, to have the call. You probably know that we would like to be earlier. But we want to have a little bit more information to share with everybody and say, look, things are really moving up here. And all we need is a couple more months of good origination, which we're well on the track to.

And we feel very comfortable being able to hit that range. I would also point out that there is a lot of discussion about whether we could hit a 30% annual growth or maybe it's really 25%. And then obviously, we had something that we guided to quite a bit north of that from 2019 to 2020. I would just point to Q1 '19 to Q1 2020 was over 100%.

So probably something you ought to read into, everybody should read into is that we're a very conservative company. I think that's coming through and how we look at the world. And when you look at that Q1-to-Q1 growth rate, I think that kind of gives you some visibility of what we had in the tank prior to the pandemic. And that's why we can come out and be confident in our guidance.

Brian Lee -- Goldman Sachs -- Analyst

All right. Thanks, guys.

John Berger -- Chairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from Philip Shen of ROTH Capital Partners. Your line is open.

Philip Shen -- ROTH Capital Partners -- Analyst

Hey, guys. Thanks for the questions. Coming back to the convert, I was wondering if you could talk through the process that landed on this deal specifically. Can you talk through what other options you were looking at? When you look at some of the details, it looks like they're near 10% coupon, looks like from the Q, there's a 5% OID.

And so it seems like -- are the net proceeds actually closer to 124 million? And then in terms of the prepayment penalty, it seems like there could be 10% to 15% depending on the timing. So given the potential dilution here and so forth, I was wondering if you could talk through what other options you guys looked at? Do you consider pure equity? Coming back to Julien's question, did you consider selling any of the cash flows from the assets? It sounds like the answer probably was no and is no given the focus on cash flow with equity. But just wanted to see if we could get a little more color on the process of landing on this specific deal.

Rob Lane -- Executive Vice President and Chief Financial Officer

Yes. Phil, I appreciate the question. Let me start at the end and then I'll bring up forward. When we look at the cash flows to the equity, that's still sort of a safety valve, and that's what we look at is something that if we had to do something, we had no other asset left.

We know we have an incredible amount of value still there that is completely untapped. Right? Compared to our peers who use it as a regular way financing, it is something there that we still have as an asset if we needed to, a break glass type thing. But again, that is not the value thesis that we have, and that's not how the company was built. We did, however, to your point, look at a lot of other different options, including equity, including a public convert, including straight debt and including some other options.

Part of the reason why we settled on this option was: one, overall, we felt it would result in lower leverage overall for the company. If we were to do straight equity, we were not finding it available really in the quantum to be able to do it in this same size where we could sort of feel that we could be done really and not be going back into the markets, unless there was a positive reason to do so going forward. So this gave us the quantum without really increasing the leverage. We did see a lot of other opportunities out there, and we're grateful for everyone who was working with us to be able to come up with creative solutions.

But then one other reason -- and I'll be honest, is that we really like the investors. We felt that they were really focused on our business. We felt that they've really understood our business and took the time to do so. A lot of these are guys that have been with us for some time.

We have some folks that, while they're newer to be investors, we had spoken with before, and are just very pleased to have such strong partners to work with. At the end of the day, Phil, I think your numbers certainly are correct. What I can tell you is that out there, what we saw, the discounts we would have had to take in order to make a public transaction work would have been incredibly punitive to us and still not been able to achieve the quantum of capital that we were able to achieve here.

John Berger -- Chairman and Chief Executive Officer

Yes. And, Phil, just to build on what Rob said, on the asset level equity side or selling off, that market is either shut or very punitive in rates at this point in time. Could that change and improve as we move toward the fall? Absolutely, it has been improving, as I noted, from the end of March, 1st of April. But those rates were not attractive whatsoever compared to our other alternatives.

And I think that's been crossed-over out there a bit. And what I would also tell you is that we have done very well as a company to our shareholders by retaining these cash flows not only to lower the long-term overall cost of capital for the company but we firmly believe in going back to our customer payment performance, and it's great. But the rest of the industry has done well, too, as you noted on my competitors' calls. That means that these assets are worth more than what anybody would be willing to pay even prior to the pandemic, but certainly during this crisis.

So if you look at overall, I think, certainly, over the long term, measured in quarters, not necessarily years, we feel very comfortable that overall, the shareholders are going to -- which obviously, at the top of the list, include myself and Rob and the management team, are going to be better off by retaining these. And look, we're never going to say no. Somebody wants to come in and buy some assets, whether those are loans or leases or PPAs and wants to pay us, what we feel is a very full price, we will certainly do that. But again, we're very focused on generating recurring operational cash flow to really bolster our financial position as a company.

So everybody can again sleep at night.

Philip Shen -- ROTH Capital Partners -- Analyst

Great. Shifting over to the ABS market, John and Rob, I think you guys addressed this a bit. But specifically, I was wondering when you think that market could open up for you guys based on the conversations you're having? And in the meantime, to what degree is the term loan in any market available to you? John, you commented earlier that the commercial banks in Texas likely may not be available now, but I was wondering if other options might be as it relates to term loan As? And then finally, in terms of your warehouse, checking over your Q, it looks like for the $400 million warehouse, it still remains uncommitted. So to what degree -- or when do you expect that could be converted to committed? And why hasn't that not been thus far?

John Berger -- Chairman and Chief Executive Officer

Yes. First of all, just to correct, the Texas banks are definitely open for business. And we've got a number of relationships there. If that happens to be the best path forward, we can certainly take that.

I was making the point that that's how the company got started, actually, was in the commercial bank market, not the ABS market. So we have a lot of familiarity and relationships there. I guess maybe very bluntly, we've made a lot of money for the banks, and so they're more than happy to do that again. And specific on the ABS market quality, and I'll turn the rest over to Rob, but that top end or that investment-grade tranche has come back quite a bit.

And so we think that's in good shape. We also could see that maybe a BBB piece would be in good shape as well. And again, the BB market has improved significantly, but somebody's got to open up the market here on the ABS transaction side, really get some price discovery outside the secondary trade, which have been very -- at least liquidity is improving a bit, but certainly, the price discovery is not what we would all like to see in terms of the amount of quantity of capital traded, so we'll see what happens. And look, if the ABS market continues to improve all the way up to the top of the stack, then that's great.

And again, it goes back into we're going to perform a lot better, and we'll generate a lot more cash flow and we'll generate a lot more cash proceeds. But I think, in this climate, I think it's prudent to be conservative. Rob, do you want to talk about ABS and upcoming transactions here?

Rob Lane -- Executive Vice President and Chief Financial Officer

Yes. No. Absolutely. So Phil, what I'd say is that we're still getting ready to go out there, and we will still be doing -- unless things change dramatically, we will still be doing transactions this year.

We will still be securitizing or taking advantage of the term loan A market. We had some very excellent discussions with a number of players who are very eager to work with us. And really, this is the time when folks come out with very creative solutions, where they understand that the markets are temporarily dislocated and it's really just a matter of proving out things that they already know and that we've already been able to demonstrate that we need the broader market to see a little bit more, part of one of the reasons why we felt it was very important to come out on this call and talk about where our collections were relative to where they had been. I mean they're basically unchanged, and our team that goes after delinquencies has really been strong.

But I do want to also, if you don't mind, correct, one thing that you should find in sub-events, which is that that is now a fully committed facility that we have with Credit Suisse, that that is committed up to now, $390 million. There's $10 million that's uncommitted on the B tranche of that, I mean, we could still draw on it. And it's just when they went to the full commitment, they just asked for their own internal that we go ahead and continue that one on the sort of draw-as-you-go basis. But that is fully committed.

As you would also see in sub-events, we also just closed on another piece of tax equity. We expect to have one to two more pieces of tax equity closed by the next time we talk. And we're still moving down the path there to continue our negotiations for the next pieces. So, I mean, we feel very comfortable on our capitalization.

I mean yes, this new convert does give us a great deal more flexibility, but it's not really changing how we're going about the basic end of our business, which is to make sure to aggregate assets off of our warehouses and securitize them or, otherwise, put them into some form of term vehicle. So that pace really hasn't slowed down nearly as much as one might have expected it to.

Philip Shen -- ROTH Capital Partners -- Analyst

Great. John, Rob, thanks very much. I'll pass it on.

John Berger -- Chairman and Chief Executive Officer

Thanks, Phil.

Operator

Your next question comes from Ben Kallo of Baird. Your line is open.

Ben Kallo -- Baird -- Analyst

Hey, guys. I have one more convert question, and then I have two other questions. So I just think about whatever the all-in cost on the convert is, and then I think about how that applies to your unit economics. And if I just take it as simple as possible, maybe that's not the way to do it, but how do you have returns on your individual investments with the cost of capital that are higher than those? I mean, how do you have positive returns, or is that not the right way to look at it? Should I look at it more of this is some type of short-term bridge that you look at as some type of weighted average cost across the life of the portfolio because you expect to be able to refinance it with cheaper capital?

John Berger -- Chairman and Chief Executive Officer

Yes, Ben. This is John. What I would say is when you look at the overall company weighted average cost of capital, obviously, everybody needs equity. We've laid out what we feel like is a proper capitalization for a company whether you have a dealer model or you put the contractor on balance sheet.

Some may have a very much more aggressive view of the world. We don't think that's prudent in this environment, and all leverage is good leverage in any sort of equity issuance whatsoever is bad. We don't feel like that would be a prudent thing at all because, at the end of the day, if they get stuck in the markets, you end up with zero. Right? You end up bankrupt.

And there's been too many times in this industry, in particular, that people have made that misjudgment. And we, again, want to make sure everybody sleeps at night. To your point about the cost is relative to the unlevered returns, on the unit economics, what I would say is, one, those are burdened by the interest on our working capital. So some of that, you'd gross up a bit if you were looking at the -- some of this capital is for working capital, right? And then there's a very small piece of the capital stack that would actually be funded at this.

One thing is that the asset level equity market has typically been 12% or higher. And again, I think that that market is relatively shot at this point in time, it's much more expensive. You just look at the whole asset purchasing as some of the markets is readjusting to some -- a slightly higher cost of capital and a much higher cost of capital toward the equity portion. So the market is telling you, you need to fund some of these assets with equity, at least some small percentage of that.

And so I think that would -- if you look at it overall, though, that doesn't really move your overall cost of capital very much at the asset level. And then when you look at your weighted average cost of capital as a company, it certainly doesn't move it very much and is offset by, again, having less stress on the balance sheet. You're more properly balanced, you're not over-levered, however you want to put it, and you've got recurring cash flows coming in to give investors, both at the asset level and the equity investors, comfort that you have enough liquidity almost no matter what comes upon you.

Ben Kallo -- Baird -- Analyst

Great. And then just as far as your dealers go and your business partners, maybe could you talk about what you've seen over the past, let's call it, two, three months and just the health of their business and how you monitor your key relationships there as far as their liquidity position? And just maybe kind of, if you could contrast that with that and your framework of having that model of using dealer networks, has this become a strength or a weakness when we worry about liquidity and small businesses and how you process all of that?

John Berger -- Chairman and Chief Executive Officer

Yes. It's a great question. I would say that we constantly monitor. We have a very stringent process of bringing dealers onboard.

We have very much -- again, this goes to the focus of the business model, Ben. We're completely focused on the success of our dealers. We are not going to compete with them. It's not some other co-channel or anything else of that nature.

This is who we are. And what that means is that we have a lot of very talented folks that are working hand-in-hand with our dealers that understand what's going on in their world. And it is very different, as you can imagine, in terms of if you're a dealer in New York versus if you're a dealer in Texas. Those are very different experiences over the last two to three months.

Obviously, New York is a lot worse. And so what we demonstrated through this is that this combination of having these strong entrepreneurs in the field where they've grown up, they know everybody in that area, they have the ability to move quickly and do the right things, whether that is adjusting personnel, whether that's adjusting processes, whether it's sales or in service, installation and service, whatever it may be, in conjunction with we're focused on our cost structure. We're focused on taking care of our customers, taking care of both in the truck rolls and the service but also on the billing and the collections and everything that goes in with service, the capitalization. And so part of this is we make sure that they're in a good financial condition, which they are, especially our large dealers.

And that is a long-term focus for the company. So nothing changed there. We just made sure that everything was still what we thought it to be and, again, doing the constant checks that we always do. And then the other side here is making sure that we have a great balance sheet, a great cash flow statement.

We're strong and we can weather any storm with them. And again, I want to point out that we feel very strongly that with our dealers, we're in this together. And if they're in good shape and we're in good shape, we're going to come out of this even stronger than what we came into it. And I think that our performance to date relative to the industry and our guidance to date relative to the industry puts that in very stark focus.

Ben Kallo -- Baird -- Analyst

And then -- thank you. And then just on the tax equity that you raised, could you just talk about how -- what you see in the tax equity market as far as breadth goes? Is this a new partner? And then how deep is the market right now and then how much of the cost of capital there changed? And then I'll turn it over. Thanks.

Rob Lane -- Executive Vice President and Chief Financial Officer

It's with an existing partner. It's our second fund with that partner, and we expect to be doing a number -- more of those funds. One thing about this tax equity market is that there are two providers that have said that they are open, very much open, for business and are standing by their commitments, and we have relationships with both of them. In addition, we're talking with other folks as well to add some or sort of thicken that side.

We find a lot of folks who want to use tax equity strategically as well not just on the bank side, and we're very happy to be partnering with them. What I'd say from rates is that, generally speaking, with the base rate having gone down, there's the opportunity for us to bring the rate down a little bit, but we've generally kept the rates about the same just because there is a little bit of a spreadwidening at the same time. So we haven't seen really a change in rates overall. And I don't think our peers have seen that either, at least from the comments that they've made.

We're very fortunate to have the relationships that we do. We're also very fortunate to have some very interesting inbounds that we've been working with. And given sort of where we are, with what we're working on, we feel very comfortable, certainly in the near term that we'll have sufficient tax equity. And as we look toward what we're going to be doing for the late fourth quarter and '21, we're already in discussions there as well.

So it's really remained a strong market for those of us who have proven that we can perform. So as tax capacity does become more precious to a lot of folks, they're making sure to go with the ones that they know can and will use it responsibly.

John Berger -- Chairman and Chief Executive Officer

One thing to add to that, Ben. I think that, again, this has been relatively glossed over. But as you can imagine in this environment, particularly with banks, the banks are going to be looking more and more to the platform company or the corporation rather than just necessarily the asset entity, the SPV. And again, I made that comment in the ABS market earlier, that I certainly saw that.

It was very eye-opening for me. I've been predicting that, as you know, for a number of years. And a lot of folks are realizing these are service contracts. These are not just put them on the shelf pieces of paper that will just perform.

And as that realization is coinciding with this pandemic crisis, what you're seeing, we're certainly seeing it, is a lot more the banks going where is your cash flows upstairs; how much cash do you have; like, if you fully ran out and you didn't get any contracts, what would you look like. These are things that really we need to all think about, that the banks are certainly thinking about. And they're looking toward who has the strong balance sheet, who has the strong cash flow statement so that you can go quarters, not a couple of months. If you didn't bring in a certain number of contracts, maybe any contracts, depending how draconian their analysis goes, and can you be there, would you make it, will you make me hold.

And so if you look at it that way, I think we've got some of the strongest tax equity partnerships in the industry. We know that. I'm not saying others do not, but we certainly have some of the strongest, if not the strongest. And we certainly see that we have the best financial position, balance sheet, and cash flow statement in the entire industry.

So when it comes down to it, we will get the last amount of tax equity. I think that market is in relatively good shape. I think our competitors, Rob mentioned that, as well. But again, we are preparing for the worst and hoping for the best.

Ben Kallo -- Baird -- Analyst

Thank you, guys.

Rob Lane -- Executive Vice President and Chief Financial Officer

Thanks, Ben.

Operator

Your next question comes from Paul Coster of JP Morgan. Your line is open.

Paul Coster -- J.P. Morgan -- Analyst

Yeah. Thank you for taking the question. In the opening remarks, you mentioned that you have had some slow pays or no pays, not very many, but you had success in collections. Can you just talk us through a case study so we understand how that works and how it might work prospectively?

John Berger -- Chairman and Chief Executive Officer

Yes, Paul. This is John. I'll try to answer that. So what we were -- what we do is we look at past due one, past-due 30, and then delinquencies basically past due 60 days.

And then default, we have a very stringent default definition, I think, relative to others at about -- it's 120 days. And so when we're looking at our performance through this financial and health crisis, what we are doing is we're looking at all those indicators, plus other sorts of indicators such as removal which is their legal right, removal from automatic payment, which the vast majority, I think, 95-plus percent of our customers are still in automatic withdrawal, ACH. And so we're looking for all sorts of indicators that would tell us, are people going to move in that delinquency bucket, are people going to move into that default bucket. We've increased our staff significantly just to deal with this.

And if you recall on previous earnings calls that I anticipated that we were going to have a recession at some point, obviously, didn't anticipate anything like this. But we were already gearing ourselves for that and not having as wide aperture in terms of taking very low FICO scores as maybe some others do in the fintech world and so forth. So what we did was we made sure that our credit scorecard screening was very tight. We made sure that we're getting on top of customers and talking with them and having conversations right away, not waiting for the past due 60 and the past due 120.

And we felt it's very important to make sure that people are able to keep up with their bills and not let them get behind. We've noticed that over the years that when you let people get behind, it may seem that that is the right thing to do, but it's actually not, it's making people go to where they can't ever catch up. And so we're always working with our customers, but we're making sure that they're staying current. And we're seeing a lot of our customers effectively treat us as a utility, which is, again, is what we've always talked about that that would happen.

That is indeed happening. So we can't predict the future, but I would tell you, and I'd share this with everybody, that our payment performance from our customers surprises even this management team. It is very good. And that should, again, lead to a lower cost of capital over time as the market recognizes that.

Paul Coster -- J.P. Morgan -- Analyst

Yeah. Helpful. And then one last question. Some of the dealers must be encountering some issues in specific locations where stay-at-home orders are most stringent, and they have fixed costs.

And for you, they are a variable cost. And so there's asymmetry there. How do you help them out specifically in those situations where they're carrying a fixed cost and it's difficult for them to keep going?

John Berger -- Chairman and Chief Executive Officer

Well, each is different. You're right. It varies on the dealer, it varies on the geography. And the vast majority of our dealers have been doing fairly well.

Now what I would say is that if you have a door-knocking group as part of your labor force of origination and so forth that it is highly likely that that group is no longer working for you as a dealer. I think we can all understand that knocking doors was basically banned in many of the territories. That doesn't mean that that can't come back. And we're seeing some early signs of that, by the way.

But where our dealers pivoted very quickly, and this has been much talked about, but we were the first to talk about that out there in the marketplace way back in March, early April, is to the video conferencing sales, the phone sales and so forth. Obviously, that retraining, if you will, took some time. It was done -- some firms, some dealers did it better than others, and some dealers did it quicker than others. But largely, everybody's moved to that.

And I would tell you that the consensus opinion is, among all the dealers, is that this works. It's cheaper. We're going to keep this, and it doesn't mean we don't bring back some door-knocking and so forth. But at the end of the day, this is a lot more cost-effective.

And if customers will truly sign up for this way, just think about all of the savings in time. As a salesperson, you have not to go out to the home and so forth. And so again, I'm not saying 100% of that will happen post-pandemic, post this crisis, but certainly, I think the large percentage of the sales will be done that way, and that's a lot more efficient, not only for the individual salesperson, certainly for the dealer and overall for the industry. So it's something that, again, it varies by dealer, but they've been very successful as a whole with.

Paul Coster -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

Your next question comes from Michael Weinstein of Credit Suisse. Your line is open.

Michael Weinstein -- Credit Suisse Securities -- Analyst

Hi, John.

John Berger -- Chairman and Chief Executive Officer

Hi, Michael.

Michael Weinstein -- Credit Suisse Securities -- Analyst

Hey. Maybe we could talk about the uncertainty you talked about for the economy. And going forward, how much visibility do you have into Q4, considering there's about a four to six-month lag between new originations for customers and the installation and collection of cash? And what does that say about Q4 cash flows and maybe even 2021 cash flows?

John Berger -- Chairman and Chief Executive Officer

Yeah. So once you get to Q4, if we had 91% of our revenue as of May 1st, you can imagine that we have near 100% as you get into Q4. And certainly, as you move through Q4, it definitely hits 100%. Right? And we certainly can control costs.

I think we've demonstrated that time and time again. So we have a pretty -- on all of our financial metrics, adjusted EBITDA, principal and interest from customer loans, cash flow, we have pretty good visibility at this point in time, really good visibility into the Q4 time frame. The customer in-service or the customer growth, that's one we have less than the financial side of things. But again, what we're seeing right now on origination, which is really this quarter is going to be, for some, at least Q4, plus what we have in the backlog, we, again, are seeing some pretty significant growth.

And what that means for us is that we still feel comfortable about the Q4 account. Now I would hope, and we're working hard to do this, that we can pull up more, and Brian earlier pointed out a number for Q2. I think that the math was great, but I would love to see us -- we can pull that up into Q2 and Q3 and put less pressure on Q4, so to speak. But again, given our backlog and given the origination growth that we saw through some, I think we could all agree, really horrific times in terms of being able to do business and just the living life as we're all doing to this health and economic crisis, it gives me a lot of heart and, again, strong visibility into our growth.

And then what we're seeing right now for the last few weeks, and certainly continues as recently as yesterday, is really good growth that we feel very good about in terms of being able to forecast on the Q4 customer growth metric.

Michael Weinstein -- Credit Suisse Securities -- Analyst

Why not issue straight corporate debt or something that might be cheaper or even straight corporate equity instead of convertible equity, something that might actually have less cash outflows over a period of time? Your stock is trading at a pretty decent price, just wondering why those options were not chosen.

Rob Lane -- Executive Vice President and Chief Financial Officer

We certainly looked at them. But the price for corporate debt that we found was much higher than the rates that we were finding here by several points. And there wasn't nearly the certainty of being able to close on that debt. Even if we could find rates that are only a three or four points higher, it was still very uncertain they could actually be closed in the time period that we wanted to make sure that we had it closed by.

And then on the equity side, for us to have gone out and done an equity or we could either have done a very small PIPE and that would not have really have helped us nearly to the quantum that we had here, or we could do a public offering. But if that were the case, we are an S-1 filer at this point. So for us to go out as an S-1 filer, we have to spend two days publicly out there before we can price. That just adds, especially in a market like today and with the stock as volatile as ours, really too much risk out there, I think, to the equity shareholders.

We could have lost a great deal of value just going out there while we're marketing the deal and then having to price the deal. So we felt that this was really the option that did the best to preserve our stock price and bringing the right cost of capital.

John Berger -- Chairman and Chief Executive Officer

And I would add to that, Michael. I want to point out that our retained cash flows from our customers really enabled us to raise this kind of capital, and we could have raised a lot more if we so chose that to be prudent. We obviously picked a piece, as in my comments earlier, I mentioned that in terms of quantum, that we felt it was very prudent to get us through draconian times, even all the way through '21 and beyond. But the only reason we were able to do this is we retained our cash flows.

The idea that you have an assigned asset value or assigned value on your balance sheet to an uncontracted potential revenue from customers and that you can borrow against that or even sell any sort of security against it is just not true and certainly not in this environment. What I'd overall point out is that, again, when you look at your burn rate as a company, and we have a very low one because of our model and we don't have the contractor on the balance sheet, what you're looking at is the number of months that you could go if the capital markets were shot. And you would go through -- if you have the contractor or a dealer on the balance sheet, you would go through a surprisingly large amount of cash if that were to occur. And that's why we don't do that model.

That's why we retain cash flows. That's why we like the cash flows. And it gives us that optionality to raise capital and what clearly is in the environment. And relatively, and I would point out again, this isn't accretive on NCCB, PV6 basis.

So on a per-share basis, this is very accretive to shareholders. Lastly, I would say, optimization on a spreadsheet by financial folks is great until the real-world hits. The real world just hit in mid-March and continues. This is what really happens.

This is what really goes on in the trenches. And this isn't fitting on well on a spreadsheet or anything else. This is the real-life, and we need to be all prepared for real life. And I don't know what's going to come down the pipe here.

No one does. If it's really up and off to the races and the pandemic melts away, I mean, God bless us. Right? That would be great. If it doesn't happen, I want to be able to look everybody in the eye and said we were fully prepared, we did the right thing and we're going to make it through.

I would also say, we certainly have the firepower now that if anybody gets in trouble, we are willing to step in at the right time and basically make any sort of acquisition we seem prudent and accretive to shareholders. So we have the strongest balance sheet. We have the strongest cash flow statement and we're going to continue to improve it with our strong growth rate.

Michael Weinstein -- Credit Suisse Securities -- Analyst

And it sounds like the finance markets are more dislocated than the solar market from your point of view. Right? That's the real issue.

John Berger -- Chairman and Chief Executive Officer

Correct.

Michael Weinstein -- Credit Suisse Securities -- Analyst

Can you talk just a little bit about the battery attachment rates? Battery attachment value. Right? How much of that -- how much extra -- how much does that contribute to the increasing net contracted customer value that you're seeing?

John Berger -- Chairman and Chief Executive Officer

I don't know if we have that off the top of our head. We can certainly try to get that out to everybody. But we basically -- when we give our unit-level economics, our unlevered, both gross and then fully burdened as we gave out, those are all-inclusive of batteries. And so when we deploy capital, we look at it on an aggregate basis.

Obviously, on some contracts, we make more money, in some contracts we make less money. But we look at it on an average, and that's what we've laid out quarter after quarter of what we're doing. So we're quite pleased with the returns that we're getting on batteries. And I would say it's not including the energy services that we're starting to see those opportunities.

So those are further growth cash flows that we'll be able to add as a company and be able to leverage those assets in terms of being able to sell additional energy services to our customers or in aggregation, some people call it grid services, but energy services, and into the local centralized grid system. But they -- so the unit economics for us are pretty strong and baked into those overall economics with batteries. And we continue to see that there's going to be a lot more, an additional accretion or additional unit economic increase over time as we demonstrate and execute on energy service opportunities.

Michael Weinstein -- Credit Suisse Securities -- Analyst

All right. Thank you very much.

John Berger -- Chairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from Sophie Karp of KeyBanc. Your line is open.

Sophie Karp -- KeyBanc Capital Markets Inc. -- Analyst

Hi. Good morning. I have a couple of questions related to interest rates and how you kind of view the world from here. So first is -- well, clearly the financial markets for solar ABS may be dislocated, but it's likely temporary.

And with interest rates going basically to zero, do you see 4% discount rate as the new normal? And my second question, what does it do to your loan business? With consumer rates, again, going down, especially for consumers at the higher ranges of their creditworthiness, and we see a lot of offerings at 0% for long-term financing, right, right now, so what does it do longer-term to your loan business? Is that even kind of viable for you to continue to realize that spread that you're looking for?

John Berger -- Chairman and Chief Executive Officer

Thanks, Sophie. Yeah. I think what you pointed out is that the risk-free rate has dropped tremendously. However, in all asset classes, mortgages included, the spread is still up from where it was, say, early March and certainly in our securitization in February.

What I would also say, though, is that, again, mainly due to the Fed intervention, which we applaud Chairman Powell for doing and being so aggressive in the front end, which really, I think, it really made the opportunity to get out of this crisis or at least muddle through it a lot better than what it would have been otherwise, say, if he had waited as long as what was had and been done in '08 and '09 financial crisis. With that said, the investment-grade portion of the ABS market, which is commensurate roughly with the commercial bank market, in terms of what portion of the capital stack they're willing to fund, it has come down quite a bit. And that has a lot to do with, again, the Fed intervention. And so we see that to be a relatively attractive cost of capital, not too far, maybe 50, 70 basis points away from what we did in February.

The problem gets into when you start getting into asset classes or portion of the capital stack that the Fed is not intervening in directly or even somewhat indirectly, then that starts to get -- those spreads start to widen out pretty substantially. Again, if you look at the BB market, as we've talked about a couple of times, that widened out significantly in the secondary trades, in the earlier days of the crisis. It's come back down quite a bit. But I would point out that in our February securitization, that rate was 5.4%.

Certainly, right now, it's not near that. So the overall spreads, regardless of asset class, regardless of solar, have increased. They've come a lot down from where they were in the apex of the crisis, at least to date. That was the apex back in late March and early April, but we still have a ways to go.

All in, though, if you weight the tranches of capital, we still calculate that we're well south of a PV5. So I think we're still headed back down to a PV4. I would also say that if the risk-free rate stays where it is at roughly 60 basis points to 70 basis points on the 10, the overall PV is definitely going to go, in terms of the cost of capital, to a four or maybe even less simply because as the spreads come back in, as the payment performance that we've been talking about demonstrates, the fundamentals, if you will, of the industry will take over and drive that cost of capital even lower.

Sophie Karp -- KeyBanc Capital Markets Inc. -- Analyst

And on your loan business?

John Berger -- Chairman and Chief Executive Officer

On the loan business side of things, we see roughly about the same returns there. We've seen some people need to get more aggressive to get enough volume to feed their overhead. We don't have that need. Again, we have these strong long-term cash flows, and we're set up completely differently.

So we're not going to be aggressive in that area. However, I would also say that, obviously, as folks get more aggressive, that has a lot more risk, whether they're going to make it through the crisis or not. But overall, we've seen that market be relatively stable, as I spoke about in my opening comments, in terms of unlevered unit economics, either gross or fully burdened. And so we still see the viability, if you will, keeping the spreads that we've talked about.

Again, it's more likely that our cost of capital will drop faster over a period of time given where we sit today, given the payment performance, than our overall rates that we're able to or embedded unlevered returns that we're getting in our loans to our customers.

Sophie Karp -- KeyBanc Capital Markets Inc. -- Analyst

Thank you.

Operator

Today's final question comes from Pavel Molchanov of Raymond James. Your line is open.

Pavel Molchanov -- Raymond James -- Analyst

Thanks for taking the question. You've gotten a lot of finance questions, and I will turn to more of an operational topic. Can you just paint us a visual picture? What does social distancing look like on a rooftop solar work site? How would you -- or how do your dealers, that is, do the physical labor in the conditions that we all find ourselves in right now?

John Berger -- Chairman and Chief Executive Officer

Yeah. That's a good question, Pavel. What I would say first is that you must have your equipment. Right? So everybody wears a face mask, everybody's got a lot of the PURELL and you've got all of the gear that you need to be safe: gloves, etc.

And so that was standard issue to all of our service technicians, as well as our dealers did the same for their crews. You do distance yourself. That means that you're limited to the number of people you put in a truck, and that's typically one, so that you don't have that kind of ability to spread among your folks. And then on the job site itself, you make sure you have quite a bit of distancing.

That's not too different than what is the normal operation, by the way. If you can imagine across the construction site, I grew up in the construction business, and you would be able to pretty easily be able to stay more than six feet away from folks as you're operating, even when you're on a rooftop. And then the last thing I would say is that for over 90% of our installations, you don't need to go into the house. There are some things you need to go back in and take care of maybe when others feel more comfortable with it, you certainly are going to get in full gear and make sure that you are not touching anything in the house and so forth.

So there's a way to do this. And I'm proud that we've been able to work with our dealers and really others in the industry to show the authorities having jurisdiction, whether -- and governors or whatever that may be, that this can be done and is being done in a very safe manner. That health is our first and foremost priority, but we can make this happen. And indeed, what we need to do as a society, as a country, is have a balance between focusing on making sure people are healthy and staying healthy, and making sure that we have an economy that we can move forward on so that we can all put food on the table, pay the mortgage, pay the power bill and so forth and move on.

And I think what I'm most proud of, of what we've done as a company coming out of this and with our partners, our dealers, is that we've been able to strike that right balance to make sure that people are taken care of but, at the same time, moving forward and taking care of our customers who we are selling the most essential service, which is power.

Pavel Molchanov -- Raymond James -- Analyst

One more question kind of on the lockdown aspect of this. So you're in a lot of jurisdictions. Some of them have been rather strict in their business closure and operating enforcement, others have not. Where have you -- or again, your dealers, I suppose, more directly, have had the greatest headwinds in terms of resuming normal operations during the reopening phase in the last four weeks, let's say?

John Berger -- Chairman and Chief Executive Officer

I don't think it would come as any surprise to anybody, New York has been the most difficult area. And New York City proper, that has been the most difficult area. And I think it's understandable. Again, though, I'm very confident that we've been able to demonstrate, not only this company and our dealers, our partners, but also the rest of the industry, I think, has done a very good job, too, that we can operate very responsibly.

And I would encourage those local leaders to be able to have us do that. So that is the most intense area, if you will, of the entire footprint that we have. And -- but I think it's also understandable. But again, I think, and I'm very confident, that we could operate in a very responsible manner.

Pavel Molchanov -- Raymond James -- Analyst

Thank you very much.

Operator

That was our final question for today. I will now return the call to our presenters.

John Berger -- Chairman and Chief Executive Officer

Thank you, everyone, for joining us. I think that it goes without saying that these times are very uncertain. These times are very difficult on everybody. This is not only a health crisis, but it's also an economic crisis.

And what I'm very proud of not only as an industry but, certainly, as Sunnova and the company and our dealers, our partners, we've done a tremendous job of navigating very uncertain, very difficult times. Those have gone down to very personal in nature in terms of those who are the most vulnerable. But also, we all recognize that we must move forward, we must figure out how to deal and live with this thing that is the virus until it is eradicated through a vaccine or other methods. But I'm very proud that everything that we've been building over the years since I founded the company is in full display that we have the right people at the right time doing the right things.

And that's what gives me the greatest amount of comfort. That's what gives me the greatest amount of really satisfaction to see this happen and see how well we've been -- all have been able to execute. I'm very confident in the company's future. Obviously, we've done a lot of hard work and the right strategy, including the right financial strategy, to make sure that we have very strong underpinnings that no matter what comes, we will make it through.

And we will not only survive this crisis, we are thriving. We are going to be a better company coming out of this than what we were going into this crisis. And I have to thank all of my employees, my customers, my lenders, my shareholders, and my dealers for all pitching in to make that truly possible and making it happen. So thank you very much, and I look forward to the next earnings call.

Operator

[Operator signoff]

Duration: 94 minutes

Call participants:

Rodney McMahan -- Vice President, Investor Relations

John Berger -- Chairman and Chief Executive Officer

Rob Lane -- Executive Vice President and Chief Financial Officer

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Brian Lee -- Goldman Sachs -- Analyst

Philip Shen -- ROTH Capital Partners -- Analyst

Ben Kallo -- Baird -- Analyst

Paul Coster -- J.P. Morgan -- Analyst

Michael Weinstein -- Credit Suisse Securities -- Analyst

Sophie Karp -- KeyBanc Capital Markets Inc. -- Analyst

Pavel Molchanov -- Raymond James -- Analyst

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