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Date

Wednesday, May 6, 2026 at 4:30 p.m. ET

Call participants

  • Chief Executive Officer — Mary Powell
  • Chief Financial Officer — Danny Abajian
  • President and Chief Revenue Officer — Paul Dickson
  • Vice President, Investor Relations — Patrick Jobin

Takeaways

  • Customer Additions -- Approximately 19,000 new customers were added, with average system sizes up 5% sequentially from Q4.
  • Storage Attachment Rate -- Rate increased to 73%, representing a two-percentage-point rise sequentially from Q4.
  • Aggregate Subscriber Value -- Reported at $1.1 billion, above the guided range of $850 million to $950 million.
  • Contracted Net Value Creation -- Totaled $108 million, near the high end of the $25 million to $125 million guidance.
  • Cash Generation -- Negative $31 million, excluding $28 million in safe harbor equipment investments; management attributed the shortfall to financing activity shifted into Q2.
  • Aggregate Creation Costs -- Amounted to $872 million; on a unit basis, up 18% year over year due to higher system sizes, elevated storage attachment rates, and fixed-cost absorption from lower volumes.
  • Upfront Net Subscriber Value -- On a per-unit basis, reached $5,136, up over $4,000 per subscriber year over year.
  • Storage Fleet Capacity -- Grew to 4.3 gigawatt hours, up from 4.0 at the end of 2025, with over 50% growth year over year in dispatchable storage assets.
  • Direct Sales Force -- Expanded by over 20% since the beginning of the year, with more than 1,000 sales hires year to date and continued onboarding of hundreds more.
  • Tax Equity and Non-Recourse Financing -- Raised $774 million in non-recourse asset-level debt so far in 2026, including a $584 million securitization at a spread of 220 basis points, 20 basis points tighter than Q3 2025.
  • Tax Credit Market Exposure -- Approximately 23% of Q1 subscriber additions used the non-retained or partially retained model; proceeds from these deals provide economics similar to the retained model, with additional GAAP simplicity.
  • Recourse Debt Repayment -- Paid down $92 million in recourse debt during the quarter, ending with $680 million in unrestricted cash and $626 million of parent recourse debt.
  • Guidance -- Full-year 2026 cash generation guidance reaffirmed at $250 million to $450 million, excluding $50 million to $100 million in anticipated safe harbor investments.

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Risks

  • Affiliate partner volumes declined, attributed to "reduced lead generation and sales activities in mid-2025 around the budget bill" and the strategic reduction of affiliate business. Management noted, "customer additions are down year over year."
  • Certain multinational tax equity investors have paused activity while awaiting "Treasury guidance on FIAT ownership restrictions," contributing to modest downward pressure on tax credit pricing. Management cited a "partial recovery" in recent months.
  • Default rates have "elevation recently" in the affiliate channel. Danny Abajian stated, "we have seen a bit of credit cycle consumer performance degradation," though overall default rates remain below 1% per year.

Summary

Sunrun (RUN 4.68%) reported above-guidance aggregate subscriber value and high-end contracted net value creation while experiencing negative cash generation due to deferred financing activity. The company increased its storage attachment rate to 73% and expanded installed battery storage capacity to 4.3 gigawatt hours, marking over 50% annual growth in dispatchable storage. Management highlighted strategic progress in shifting business mix toward direct sales, reflected in accelerated sales force expansion and higher-value geographic focus.

  • The direct business mix now drives early-stage sales growth, and March saw over 30% month-on-month increase in direct sales bookings.
  • Sunrun has secured expected tax equity capacity to fund about 1,000 megawatts of new subscriber projects, leveraging both traditional and hybrid funding channels.
  • Fleet servicing costs have decreased by more than 30% year over year, supported by improved service levels and operational focus.
  • Standalone battery products have been introduced, and sales have reached "thousands of units," indicating early traction in storage-only solutions.
  • Market dynamics are shifting post-25D ITC sunset, but Sunrun's subscription-heavy portfolio and vertical integration are insulating it from volume losses seen by smaller dealers unable to benefit from the expired credit.
  • Management reiterated the plan to reduce parent recourse debt to below two times trailing four-quarter cash generation, referencing substantial Q1 progress.

Industry glossary

  • Aggregate Creation Costs: Total direct costs incurred by Sunrun to acquire and install new subscriber systems over the period.
  • ITC (Investment Tax Credit): Federal tax credit for solar system owners, referenced in both Section 25D for consumers and corporate tax equity structures.
  • FIAT (Foreign Investment in American Technologies): U.S. regulatory framework with ownership restrictions affecting eligibility for certain solar tax credits.
  • Non-Recourse Asset-Level Debt: Financing secured solely by project assets, not backed by Sunrun's corporate balance sheet.
  • Safe Harboring: Practice of making strategic investments to lock in eligibility for the ITC at specific rates through future years, despite potential policy changes.

Full Conference Call Transcript

Patrick Jobin: Thank you. Before we begin, please note that certain remarks we will make on this call are forward-looking statements related to the expected future results of our company, including our Q2 and full year 2026 financial outlook, and other statements that are not historical in nature, are predictive in nature or depend upon or refer to future events or conditions such as our expectations, estimates, predictions, strategies, beliefs, or other statements that may be considered forward-looking. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely.

Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note these statements are being made as of today, and we disclaim any obligation to update or revise them. Please note, during this conference call, we may refer to certain non-GAAP measures, including cash generation and aggregate creation costs, which are measures prepared not in accordance with U.S. GAAP. These non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance.

Reconciliations of these measures can be found in our earnings press release and other investor materials available on the company's Investor Relations website. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. On the call today are Mary Powell, Sunrun Inc.'s CEO; Danny Abajian, Sunrun Inc.'s CFO; and Paul Dickson, Sunrun Inc.'s President and Chief Revenue Officer. A presentation is available on Sunrun Inc.'s Investor Relations website along with supplemental materials. An audio replay of today's call along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun Inc.'s Investor Relations website shortly.

And now, let me turn the call over to Mary.

Mary Powell: Thank you, Patrick, and thank you all for joining us today. At Sunrun Inc., we are rapidly ramping sales and operations to fulfill the surging customer demand we have generated for our offering. Sunrun Inc. is solidifying and expanding its leadership position as the nation's largest residential distributed power plant developer and operator. Our addressable market is no longer solar-driven savings. It is America's need for power to fuel our economy. Our strategy is working. In Q4, we told you we had reached an inflection point. Today, we are here to tell you that the momentum we built is holding and accelerating.

In a market environment that continues to test many participants, our scale, our vertically integrated model, our product strategy, and our relentless focus on execution and customer experience are proving to be genuine, durable competitive advantages. Put simply, we believe the market dislocations occurring around us present opportunities for us to extend our lead and accelerate profitable, high-quality growth. Let me start with our Q1 results. We added approximately 19,000 customers in Q1, and our storage attachment rate increased again to 73%, reflecting our continued commitment to a storage-first strategy as we build the nation's largest distributed power plant. Aggregate subscriber value for Q1 was $1.1 billion, above our guidance range of $850 million to $950 million.

Contracted net value creation was $108 million, near the high end of our guided range of $25 million to $125 million. Cash generation came in at negative $31 million, excluding equipment safe harbor investments. We chose to shift certain project finance transaction activity from Q1 into Q2, negatively impacting our cash generation for Q1. We remain on track for our full-year guidance of $250 million to $450 million. Danny will walk you through the details of the financials in a moment; I want to give you the strategic picture first. We closed 2025 having installed more than 237,000 solar-plus-storage systems, approximately 4 gigawatt hours of network storage capacity. In Q1, that number grew to 4.3 gigawatt hours.

Our fleet of dispatchable storage has grown over 50% compared to the prior year. That is not just a metric. It is infrastructure. It is real distributed, dispatchable power woven into American homes and the energy system. And it is something no one else in this industry has at our scale. This is the business we have been building: not a company that sells solar panels, but a company that operates critical energy infrastructure that stabilizes the grid and provides customers price certainty and backup power. In a moment of unprecedented electricity demand, driven by AI data centers and electrification, coupled with an aging grid, that distinction has never mattered more.

I want to spend a moment on the dynamic industry environment we are operating in. Sunrun Inc. is incredibly well positioned to capitalize and extend our lead in the industry. The changes happening in the industry are difficult for many companies to navigate, but we believe that they play directly to Sunrun Inc.'s strengths. Let me hit the big changes in the industry and our position. First, the consumer ITC under Section 25D of the Tax Code associated with cash purchases or loan financing sunset at the end of December. Many smaller dealers and some of our affiliate partners that had significant volume dependent on the 25D tax credit have suffered significant volume declines this year.

Sunrun Inc.'s origination volume is almost entirely subscriptions, and thus we are not seeing similar impacts from changes to the 25D tax credit. Second, utility rate structures have become increasingly complex, and customer value propositions hinge on and can be expanded by storage that is properly designed and actively managed to ensure consumer value. We believe that our vertically integrated model has allowed us to provide the best customer experience and offerings. We train our sales force and operations teams and ensure end-to-end alignment. This is one of the reasons we have very deliberately shifted our growth mix towards our direct business. Third, the regulatory complexity navigating domestic content and FIAT rules is increasing.

We believe that our experience and scale give us tremendous advantages to navigate these items from equipment procurement, logistics, and compliance. Fourth, we have focused on margins and cash generation well ahead of others in the industry. This allows us to operate with a strong balance sheet that has low parent recourse leverage, enabling us to strategically invest in profitable growth and make the right long-term business decisions from a position of strength. Our balance sheet strength, along with our large-scale operations, has also afforded us the ability to prudently invest in safe harboring, enabling maximum ITC levels through 2030.

Sunrun Inc.'s end-to-end visibility, our vertical integration, and our sophisticated capital markets experience are precisely what allow us to drive competitive advantages and thrive. We are leaning in during this moment of industry change. We are seeing strong momentum in direct sales force recruiting. We are matching direct sales momentum by ramping our direct installation capacity, enabling us to approach year-over-year growth in overall installations later this year. We hired more than 1,000 people in sales year to date. We are onboarding hundreds more, representing some of the best talent in the industry from sales dealers who have recognized Sunrun Inc.'s sustainable approach and appreciate our customer experience focus.

These talented sales representatives understand the shifts in the industry have made the dealer model unstable and unattractive. We are driving strong, profitable growth with expanding margins for new customers. We are also deep into our strategy of building capital-light sources of recurring cash flows that are independent of new customer origination. We will be monetizing our base of customers and providing at-scale resources to the grid. We plan to also offer these services to orphaned customers across the industry. We expect these recurring cash flows to scale and augment our cash generation growth in the coming years. Our full-year 2026 guidance remains intact, and we are excited about our long-term growth trajectory.

I wanted to close by returning to what I believe most deeply about this company and this moment. America needs more power, and Americans want more independence and control. The proliferation of AI data centers, the electrification of transportation and homes, the decarbonization of the grid—these all demand new solutions. The answer is not going to come from a single large plant that takes years to build. Instead, we believe distributed, intelligent, flexible resources deployed into homes and communities today will be a meaningful part of the solution. That is Sunrun Inc. We have over 1.1 million customers across the country. We have the largest residential battery fleet in the country. We are dispatching energy to the grid.

We are protecting families from outages. And we are doing all of this while generating meaningful cash, paying down debt, and building a balance sheet that gives us flexibility to invest in the future. Before handing it over to Danny, I also want to take a moment to celebrate some of our people who truly embrace our customer-first and service-focused mentality. This quarter, I specifically want to call out our team members in Hawaii. As we all saw, Hawaii experienced severe and catastrophic flooding this past March, affecting thousands of residents including many Sunrun Inc. customers.

Over a dozen of our team members in Hawaii, ranging from electricians to installers to sales leaders, spent many hours assisting in recovery efforts on the island of Oahu. I am so thankful for their contributions. Darius, Kelton, Chad, and to all our Hawaii team members, mahalo. We are incredibly proud to have you representing Sunrun Inc. Danny, over to you.

Danny Abajian: Thank you, Mary. Our Q1 volume performance exceeded our expectations as we expanded our sales force and increased productivity at a robust clip. We added nearly 19,000 customers this quarter, with average system sizes up 5% from Q4 and a 73% storage attachment rate, up two points from Q4. While customer additions are down year over year given the effect of reduced lead generation and sales activities in mid-2025 around the budget bill and our decision to reduce affiliate partner volume, early-funnel sales activities this year have seen an inflection point toward growth. Based on the strong sales in our direct business, we are on track to resume overall year-over-year growth in installations later this year.

To provide some more color on early-stage activities in our direct business, our active sales force has grown over 20% since the start of the year, and March saw over 30% growth in sales bookings month on month. These trends are outpacing the typical ramps we have seen at this point in prior years. Importantly, this growth is occurring in higher-value geographies and with our desired product mix. Aggregate contracted subscriber value was $980 million in Q1. On a unit basis, contracted subscriber value was up 14% year over year driven by higher system sizes, a higher storage attachment rate, a higher average ITC level, and lower capital costs. Aggregate creation costs were $872 million in Q1.

On a unit basis, creation costs were 18% higher year over year driven by higher system sizes, a higher storage attachment rate, and adverse fixed-cost absorption from lower volumes. Upfront net value creation was $91 million in Q1, or approximately 9% of aggregate contracted subscriber value. This represents the cash margin we expect to obtain once systems and their tax attributes are monetized before working capital and recourse debt interest costs. On a unit basis, upfront net subscriber value was $5,136, up over $4,000 per subscriber compared to the prior year. Cash generation was negative $59 million in Q1, or negative $31 million excluding the $28 million net investment in equipment safe harboring.

Cash generation was lower than our guidance due to our decision to shift certain project finance transaction activity from Q1 into Q2. We repaid $92 million of recourse debt in Q1, ending the quarter with $680 million of unrestricted cash and $626 million of parent recourse debt. Turning now to our activity in the capital markets. Investor demand for Sunrun Inc.'s assets remains strong. We have executed and closed several traditional and hybrid tax equity funds and tax credit transfer agreements so far this year, and have developed a pipeline of several transactions we expect will close during Q2.

Corporate ITC buyers and traditional tax equity investors are actively engaging in their 2026 tax planning, and we are capturing a broadening base of investors. According to industry data, approximately 27% of Fortune 1,000 companies purchased tax credits in 2025 in a market which grew nearly 50% from 2024. Tax credit investment has become common practice for hundreds of corporate treasurers and CFOs who are generating savings and reducing their corporate tax rates, and we expect more of them will catch on this year. Market activity has picked up considerably from 2025 when tax law changes created temporary tax planning uncertainty. Pickup in activity has also driven modest recovery in market pricing for ITCs.

Certain multinational tax equity investors have paused 2026 activity as they await Treasury guidance on FIAT ownership restrictions to confirm that their capital structure does not present any complications. The broader universe of tax credit investors is not impacted by ownership restrictions and remains active. We have built a supply chain and operating process for full FIAT compliance. Through today, we have raised $774 million in non-recourse asset-level debt financing year to date. The publicly placed tranche of our recent $584 million securitization priced at a spread of 220 basis points, a 20 basis point improvement from our most recent transactions in Q3 of last year.

As of today, closed transactions and executed term sheets, inclusive of agreements related to non-retained or partially retained subscribers, provide us with expected tax equity capacity, or equivalent, to fund approximately 1,000 megawatts of projects for subscribers beyond what was deployed through the first quarter. We also have over $675 million in unused commitments available in our non-recourse senior revolving warehouse loan to fund over 250 megawatts of projects for retained subscribers as of the end of Q1 pro forma to reflect the announced securitization. Approximately 23% of our subscriber additions in Q1 were monetized through the non-retained or partially retained model.

A reminder: proceeds from these transactions are equal to or better than our on-balance-sheet retained monetization, while also providing simpler GAAP treatment and further diversification of capital sources. Under the joint venture structure, we retain a share of long-term cash flows along with grid services and the ability to cross-sell customers. Turning to our outlook on Slide 23. We are reiterating all of our 2026 full-year guidance. We expect strong volume growth in our direct business and to produce cash generation of $250 million to $450 million for the year, excluding the use of approximately $50 million to $100 million related to equipment safe harbor investments.

We expect to continue to allocate cash generation to reduce parent leverage and make final equipment safe harbor investments. In the coming quarters, we will evaluate additional value-accretive capital allocation strategies depending on the market environment and our outlook. We will now open the call for questions.

Operator: Thank you. And with that, we will now be conducting a question and answer session. Once again, we ask that you please limit yourself to one question and one follow-up. If you would like to ask a question, please press star [inaudible] on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset. One moment while we poll for questions. Our first question comes from the line of Philip Shen with ROTH Capital Partners. Please proceed with your question.

Philip Shen: Thanks for taking my questions. First one is on that tax equity pause, Danny, that you mentioned earlier. I just wanted to understand what the impacts to your business are and whether you have been able to pivot away to other sources of capital or funding. Ultimately, this can drive the cost of funding higher. As a result, do you see any impacts to your volumes? I know you maintained your full-year guide. But the reality is, it is impacting the wider market. You cut affiliate volumes down 40% year over year a quarter ago. So is the bigger impact more with the affiliate business, and you have everything buttoned up for the direct business? Thanks.

Danny Abajian: Yes. I would say there are two different questions in there, and I do not know that they are necessarily related if you are tying them together. Our strategy decision to lean into the direct business for all the reasons that we articulated is pretty much independent of our observations of conditions in the capital markets. So those two are not necessarily linked in the way the question suggests. On the capital markets side, I would not categorically refer to it as a pause in the market. Certainly, there have been a few who have paused their activity in doing transactions. We did see, as we noted on the last call, a slowdown in activity in late 2025.

We noted that was a few cents per credit in terms of pricing impact. We had been seeing low-$0.90 per credit pricing move into the high-$0.80s, and we also noted a modest, partial recovery as market activity picked up early this year. Corporate buyers have resumed their buying activity sequentially. Once they had clarity on what they needed for 2025, the appetite was there; they then swiftly moved into filling their needs for 2026. It has been noted there are a few players who have paused over FIAT, and I would say that is not related to our supply chain; it is related to ownership-side FIAT restrictions.

They want to be certain of their qualification before they resume activity, but that characterizes a rather small portion of the market. That does feed into supply-demand fundamentals that led to modestly lower pricing, but we are seeing nice recovery building. Matching that with the volume trajectory and demand we are seeing, we feel nicely balanced overall.

Philip Shen: Thanks, Danny. Shifting over to the Freedom Forever bankruptcy, historically I think you worked with them. Can you talk about the exposure you have there, if any? And when did you cut off Freedom from your affiliate network? Was it back during the Q4 call, or earlier? Thanks.

Danny Abajian: Yes, great question. Our partnership with Freedom has declined in volume programmatically over the last three years and gotten to a place where we have relatively little exposure or ongoing new sales generation with them. From a run-rate perspective, it is quite small. To be amply clear, the dislocation between our strategy on deemphasizing affiliate partner business and ramping up our internal business is not driven by capital. We are raising capital and growing that internal business swiftly, as Mary highlighted, and we are seeing robust growth there.

It is really a focus around becoming an organization that has control over more aspects of the business, which is paramount as we transition to be a distributed power player and build and own those assets. On financial exposure, we have participated in the affiliate partner space for nearly two decades and have lots of safeguards to manage exposure regardless of the partner. The nature of the exposure is related to projects that are in flight. They may have been installed but not fully interconnected, so there is an exercise of working through in-flight pipeline for us.

Because we are vertically integrated, should we need to step in and complete installations, we can do that, giving us more direct control over outcomes. We are not going to disclose specific figures here on the call.

Philip Shen: Danny, Paul, thank you very much.

Mary Powell: Thank you.

Danny Abajian: Thank you.

Operator: Our next question comes from the line of Colin Rusch with Oppenheimer & Co. Please proceed with your question.

Colin Rusch: Thanks so much. I want to get into some of the assumptions on the net subscriber value. There is a little fewer megawatts getting amortized over the offers, that is clear. But having a higher percentage of non-contracted value, I want to understand the underlying assumptions around that and what is driving some of that value capture.

Danny Abajian: Are you doing the comparison sequentially, just so I follow which numbers you are looking at?

Colin Rusch: I am looking at almost $6,000 of non-contracted net subscriber value, which is substantially more than what we have seen historically. I am trying to understand what is driving that.

Danny Abajian: There are a few factors at play. Some of it is system characteristics, some is mix. System sizes are larger, which you will note in the metrics. The storage attachment rate is higher. The average ITC level is higher as we had more domestic content qualification in the period; that will range a little for the balance of the year. Most notably, you will see fluctuation across the last several quarters related to the retained and non-retained mix; that is the biggest driver to the non-contracted value and a big driver overall. Of course, discount rate will fluctuate.

On the creation cost side, it is more heavily driven by lower fixed-cost absorption in the period related to sequential volume declines over the last few quarters, which we expect to inflect and gain back. There are also mix effects as we shift toward our direct business away from affiliates; some lagging costs are blending up the creation cost figure, weighing on us in period, and that drag should alleviate over the coming few quarters.

Colin Rusch: Thanks. Looking at the market, we are going through a substantial shift in end market dynamics with competition as well as where some of these crews are. What are the most prominent gating factors for megawatt growth right now—sourcing deals, construction availability, or tax equity? How are you managing those limitations?

Mary Powell: Great question. We are ramping meaningful, profitable growth. Our access to capital to support it is strong. Our approach is an extension of what we have been doing for years: very sharply focused on where we can do that with the best customer experience and the highest margins, while positioning strongly from a distributed power plant perspective.

Paul Dickson: Adding to that, as Mary has articulated on prior calls, we have been appropriately selective around hiring and onboarding sales talent to generate more volume in profitable markets at attractive returns, and to attract the best talent we can. Some of that talent swirled around with the 25D expiration and market turmoil—finance shops pulling back, changing pay, exiting; several installation shops struggling or closing. More of the thoughtful sales talent is realizing the unsustainable and unattractive nature of that model, and more of that business is flowing to us.

Where previously we were cautious around internal growth, we are now seeing steep upticks and are increasingly bullish on approaching year-over-year growth overall later this year, absorbing the dealer decline and seeing attractive growth in the internal direct business.

Colin Rusch: Perfect. Thanks, guys.

Operator: Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Brian Lee: Hey, everyone. Good afternoon, and thanks for taking the questions. Danny, going back to your comments around tax equity—it has been a key focus since your commentary from last quarter. It sounds like on the margin you are seeing some improvement in trends. You quantified it in terms of pricing, and it is not a systematic pause, maybe just a few lenders holding off. Is that a fair assessment of your view of the market today versus the end of last year and early this year? And how much does tax equity availability and cost play into the low and high ends of the range for cash generation this year?

Danny Abajian: Your recap is spot on. We are seeing more buyer activity pick up. There is a narrow focus on the tax credit transfer market; that market was $28 billion in 2024 and $42 billion in 2025, growing 50% year over year despite the widely noted slowdown. It is still only 27% penetrated in the Fortune 1,000. Among buyers in 2023 and 2024, there was an 80% repeat rate in 2025. Once corporate treasurers and CFOs overcome the entry cost of learning how to do this, it becomes part of planning and is going mainstream. The amount of unsold credits exiting 2025 was half of what it was exiting 2024.

Trends are positive, and we see research indicating potential full price recovery, with second-half pricing as high as the first half of last year. Beyond transfers, we have a broad base of capital: non-retained asset sale monetizations, traditional tax equity with new investors, and pref equity structures. We saw through enough transactions to get 2025 done; our focus is on 2026.

Brian Lee: Super helpful. Any thoughts on how the low-to-high-end ranges of cash generation embed tax equity availability and cost?

Danny Abajian: It is still approximately $25 million per penny on a dollar-per-credit basis, plus or minus.

Operator: Our next question comes from the line of Praneeth Satish with Wells Fargo. Please proceed with your question.

Praneeth Satish: Good afternoon, thank you. So just to understand it correctly, Q1 cash generation was impacted by a shift of financings into Q2 in the tax equity market. Can you help frame how much volume got shifted and what Q1 cash generation would have looked like absent that timing shift? And for Q2, now that we are in May, how far along are you in terms of proceeding with those transactions you shifted from Q1?

Danny Abajian: The negative $31 million is the number that excludes the $28 million safe harbor investment. On a pro forma basis, starting from negative $31 million, you would have to believe that $31 million or more of a draw from a fund that closed earlier would have taken us to breakeven or positive. The delay is not related to a slowdown in the market; it is inherent to transactions that some close before the quarter, some after. All deals need to be right to close. We could see lumpiness over quarters. Our job is to keep transactions tightly on the calendar; sometimes they straddle quarter ends. We are generally fine with that.

Zooming out over a rolling four-quarter period, we want a high magnitude of cash generation, which is what we are looking to for the whole year.

Praneeth Satish: Got it, helpful. Switching gears, fleet servicing costs have been trending down quite a bit over the last few years, including this quarter. What is driving those reductions, and do you expect those costs to continue to decline, or are you nearing a natural floor?

Mary Powell: Thanks for that observation. It is the result of a team relentlessly focused on improving customer experience and service while leveraging our scale and capabilities as the largest installer in the country, with a continued focus on driving down costs. We have also done a lot to leverage AI to get next-click improvements that drive down cost. We are pleased with what we have seen and expect more improvements in the coming months and years.

Danny Abajian: Thank you.

Operator: Our next question comes from the line of an Analyst. Please proceed with your question.

Analyst: Good afternoon. Thanks for taking my question. Danny, you gave a number of 1,000 megawatts of closed transactions and executed term sheets. Can you speak to the mix within that tax equity pipeline between the different buckets—corporate buyers, big multinational financial institutions, etc.?

Danny Abajian: In terms of investor mix, it ranges from very large global institutions to more specialized domestic players. On the ITC buyer side, it now spans across all industries, including companies not traditionally tied to the solar space.

Analyst: Would you say corporate buyers are a bigger part of the mix today, and if so, how much?

Danny Abajian: We noted 23% of systems were sold into the non-retained model—that is quantified and represents a single investor acquiring assets in a JV structure. Apart from that, there is a mix of traditional and hybrid tax equity funds—sometimes the tax credit purchase is stapled with the same investor participating in the fund, and sometimes we sell out tax credits to the ITC transfer market. There is also an emerging set of pref equity JV structures, such as what we announced with Hannon Armstrong last quarter. In those transaction types, there is also transfer activity going out to the same market that spans all industries.

Analyst: Okay. Sounds good. Appreciate it.

Operator: Our next question comes from the line of an Analyst. Please proceed with your question.

Analyst: Good afternoon, thanks for the time. First, can you talk about the nature of the change in the partnership a little bit more? Does that impact anything around your cash flow and cash generation—reiterated guidance, etc.? Why do it now? And Mary, on the direct business ramp, is there any change in your strategy and go-to-market with the new sales talent? How are you shaping sales tactics versus the affiliate channel?

Paul Dickson: Can you clarify which partnership you are referencing?

Analyst: I apologize—on the financing side, the JV structure. How does retaining cash flows change, and how does that impact your cash guide?

Danny Abajian: We have the same disclosures as in the past. There is the non-retained model with an energy infrastructure investor, and the Hannon JV transaction we discussed. We like the efficiencies of those structures. The economics are in a very similar range. We have noted that upfront proceeds look very similar in the non-retained model versus the retained model. All of that is assumed in the $250 million to $450 million cash generation guide.

Paul Dickson: On market dynamics, the major point is understanding the market itself. Historically, people categorized consumer demand as solar savings, but consumers are generally unaware a better solution exists. As we scale salespeople to educate Americans about this alternative, we continue to see the same take rates, adoption, and excitement, which are accelerating. The real change is we are selling critical infrastructure: resiliency with a battery that insulates them against outages and price uncertainty due to energy shortages, while also being a grid infrastructure resource. Framed that way, the market is: does America need more power, and is dispatchable power useful? That is the market we serve.

We have evolved how we train our salespeople and deliver the value proposition over the last 24 months, and we are seeing higher take rates and efficiency. Sunrun Inc. is focused on being stable and sustainable, underwriting assets correctly. As the broader market sees more turmoil, Sunrun Inc.’s stability becomes more attractive, and more people are flowing into our program.

Mary Powell: Simply put, what we sell has become more sophisticated. Policy changes have become more sophisticated. Meeting customer needs requires a company like Sunrun Inc. that is very focused on the customer and has sophisticated capabilities around training the sales force and ensuring we provide the best fit for customers. We continue to make strategic changes to deliver world-class NPS, the right product, and the right program design for both the consumer and the grid. We can scale that significantly and effectively in the direct business, which is why you have seen us focus on it.

Analyst: Excellent. Thank you very much.

Operator: Our next question comes from the line of Maheep Mandloi with Mizuho. Please proceed with your question.

Maheep Mandloi: Thanks for the questions. First, on products going forward, could you see selling a battery storage product similar to what we have seen in Texas with 25 to 50 kilowatt-hour batteries with utilities? Any opportunities there?

Paul Dickson: Yes. We have launched our standalone battery offering, and it is being received extremely well. We have sold thousands of units. As that continues to grow in size and scale, we will likely start providing more reporting on it in the future.

Maheep Mandloi: Great. And one housekeeping on recourse debt. Is the plan still to get to two times below cash generation, or any plans to pay down even further?

Danny Abajian: We expect to get to that number, if not a little through it, by the end of the year. We had a big paydown in Q1, and we expect more paydown before year-end. We are trending towards less than 2x total parent debt to trailing four-quarter cash generation.

Operator: Our next question comes from the line of Robert Zolper with Raymond James. Please proceed with your question.

Robert Zolper: Thanks for taking the question. On your last call, you said across the portfolio you experienced roughly 75 basis points of annual net defaults. How has that been trending since the last call?

Danny Abajian: Across the board, starting with the macro, we have seen a bit of credit cycle consumer performance degradation. There is a range based on different markets and average FICO profiles. Our affiliate and non-affiliate mix is also changing; we see elevation of default rates with greater affiliate mix and some market mix implications. We typically see an initial period of a couple of years where default rates look elevated, then annual default rates start to fall as we get through early issues on the customer-facing service delivery side. Our service costs are down more than 30% year over year with greatly improved SLAs, which is related.

We remain in the less-than-1% per year territory—very small—but we have seen some elevation recently. We have reasons to believe those will come down and are generally contained.

Robert Zolper: Understood, thank you. As it relates to renewal rate assumptions, if you have 75 basis points of net defaults annually, roughly 20% over a 25-year life, how could you have renewal rates in excess of 80%?

Danny Abajian: On Slide 30, we show default-rate-affected sensitivities on contracted value, not on the non-contracted piece. For renewals, it is not linear. Our contracts typically allow us to renew at a 10% discount to the then-current utility rate. Our renewal assumption in the tables uses a percentage of our year-25 Sunrun Inc. solar rate. If initial savings and utility rate inflation outpace our annual rate of increase, we are well discounted to the expected utility rate in the future. Mathematically, you can get to these renewal rates even assuming customer attrition. Also, annual default rate reflects billed versus collected amounts.

Many customers who do not pay for some period may be going through a foreclosure or short sale; ultimately a new, creditworthy homeowner often resumes payments. So it is not full attrition.

Operator: Our next question comes from the line of Vikram Bagri with Citi. Please proceed with your question.

Vikram Bagri: Good evening, everyone. One quick question. You are more sophisticated in raising and recycling capital than the average TPO. We have seen a lot of stress in the market with a few blowups; there was discussion about another one this morning by a supplier. Where do you see your market share at the end of this year or next year? Do you think the TPO market as a whole in the U.S. grows or shrinks after the dust settles on safe harbor, tax equity, and your guidance? Fully understanding you manage for profitable growth, how do you see the market evolving?

And based on that, if there is an opportunity to gain market share given your hiring, would you layer on more safe harbors?

Paul Dickson: Today, Sunrun Inc. represents one-third of subscription volumes in the United States on the solar product. We are more than 50% of the storage market. On those two metrics, we anticipate increases as we execute our strategy. We expect continued consolidation in the space and to be a recipient of that consolidation.

Danny Abajian: On safe harbor, with our $50 million to $100 million use of cash for safe harbor activity this year, we have a July 4 deadline—one year from the date of bill passage. As we complete that exercise, we will have safe-harbored the use of the solar ITC out through 2030 with a combination of vendors, with redundancy and buffer for growth. That gives us a window to play the market opportunity and enables market share capture over time, especially with the 25D credit no longer there; a lot of demand will access solar via our product. On operational fulfillment, we coordinate very specifically by geography.

We see how many retail stores are generating leads, how many new reps are selling at the doors; we get the exact signal we need to hire on an existing platform already at scale and can grow cost-efficiently. Pull-through on fulfillment is a coordination task; we do not see bottlenecks.

Operator: With that, ladies and gentlemen, this concludes our question and answer session as well as today's conference call. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your day.