Sunnova Reports Third Quarter 2022 Financial Results

Third Quarter 2022 Highlights

• Added 21,800 customers in the third quarter of 2022, bringing total customer count to 246,600 as of September 30, 2022;
• Reinforced liquidity through a convertible debt raise, satisfying our projected corporate capital needs given our current growth plans;
• Increased single customer economics as expressed through fully burdened unlevered return;
• Effectively managed our emergency response to support our customers' energy reliability and resilience during recent hurricanes; and
• Expect growth to escalate further in 2023 due to increasing demand for cheaper, more reliable energy services, complemented by the positive impacts of the Inflation Reduction Act.

Sunnova Energy International Inc. ("Sunnova") (NYSE: NOVA), one of the leading Energy as a Service (EaaS) providers, today announced financial results for the third quarter ended September 30, 2022.

"In the third quarter, we took action to fortify our liquidity and satisfy our planned 2023 corporate capital needs ahead of schedule through a timely capital raise, putting the company in an excellent financial position with a strong balance sheet," said William J. (John) Berger, founder and Chief Executive Officer of Sunnova. "Our record low customer default and delinquency rates and customer feedback clearly show that consumers do not see us as merely providing financing but providing an essential service to them. Sunnova is optimally positioned to benefit from this strong consumer demand for its energy service, catalyzed by a combination of our focus on service, the Inflation Reduction Act, and the global energy crisis, as homeowners look to avoid rising utility bills that they must pay.

"As extreme weather events continue to wreak havoc, especially in areas on the frontline of climate change like Puerto Rico and Florida, the importance of battery storage performance during grid failure has become even more critical. In fact, customers impacted by Hurricane Fiona averaged 5.3 days of solar plus storage battery backup with many residents remaining dependent on their Sunnova system for more than 10 days. For any customers in need of assistance, Sunnova quickly dispatched service technicians to return their systems to full operation. We continue to offer tried-and-true solutions to climate change realities while providing a better energy service at a better price."

Third Quarter 2022 Results

Revenue increased to $149.4 million, or by $80.5 million, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service and the sale of inventory to our dealers or other parties, which began in April 2022.

Revenue increased to $362.1 million, or by $185.4 million, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service, the April 2021 acquisition of SunStreet, and the sale of inventory to our dealers or other parties.

Total operating expense, net increased to $177.1 million, or by $100.0 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service, greater depreciation expense, an increase in cost of revenue - inventory sales due to the sale of inventory to our dealers or other parties, higher general and administrative expense, and a change in other operating expense (income) primarily due to changes in the fair value of certain financial instruments and contingent consideration.

Total operating expense, net increased to $426.8 million, or by $204.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service, the April 2021 acquisition of SunStreet, greater depreciation expense, an increase in cost of revenue - inventory sales due to the sale of inventory to our dealers or other parties, and higher general and administrative expense.

Adjusted Operating Expense increased to $53.7 million, or by $14.9 million, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service and higher general and administrative expense.

Adjusted Operating Expense increased to $150.6 million, or by $50.8 million, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This increase was primarily the result of an increased number of solar energy systems in service, the April 2021 acquisition of SunStreet, and higher general and administrative expense.

Sunnova incurred a net loss of $29.9 million for the three months ended September 30, 2022 compared to a net loss of $25.9 million for the three months ended September 30, 2021. This higher net loss was primarily the result of higher general and administrative expense and a change in other operating expense (income) primarily due to changes in the fair value of certain financial instruments and contingent consideration. This was partially offset by an increase in interest income of $7.1 million due to our larger customer loan portfolio, and a decrease in interest expense, net of $8.3 million.

Sunnova incurred a net loss of $60.2 million for the nine months ended September 30, 2022 compared to a net loss of $116.3 million for the nine months ended September 30, 2021. This lower net loss was primarily the result of an increase in interest income of $16.2 million primarily due to our larger customer loan portfolio, a decrease in loss on extinguishment of long-term debt, net of $9.8 million primarily due to a make-whole payment related to the early repayment of one of our solar asset-backed notes in June 2021, and a decrease in interest expense, net of $48.5 million. This was partially offset by higher general and administrative expense.

Adjusted EBITDA was $41.3 million for the three months ended September 30, 2022 compared to $25.2 million for the three months ended September 30, 2021. Adjusted EBITDA was $93.5 million for the nine months ended September 30, 2022 compared to $68.1 million for the nine months ended September 30, 2021. These increases were primarily due to customer growth increasing at a rate faster than expenses.

Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $22.3 million and $15.1 million, respectively, for the three months ended September 30, 2022, or by $8.0 million and $6.2 million, respectively, compared to the three months ended September 30, 2021. Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $67.5 million and $39.1 million, respectively, for the nine months ended September 30, 2022, or by $25.1 million and $15.2 million, respectively, compared to the nine months ended September 30, 2021. These increases were due to our larger customer loan portfolio.

Liquidity & Capital Resources

As of September 30, 2022, Sunnova had total cash of $540 million, including restricted and unrestricted cash.

2022 Guidance

Sunnova management is reaffirming its guidance for customer additions and Adjusted EBITDA, increasing its guidance for interest payments received from solar loans, and decreasing its guidance for principal payments received from solar loans, net of amounts recorded in revenue.

• Customer additions of between 85,000 and 89,000 reaffirmed;
• Adjusted EBITDA of between $117 million and $137 million reaffirmed;
• Customer interest payments received from solar loans increases from between $45 million and $55 million to between $50 million and $60 million; and
• Customer principal payments received from solar loans, net of amounts recorded in revenue, decreases from between $134 million and $154 million to between $90 million and $100 million.

Non-GAAP Financial Measures

We present our operating results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). We believe certain financial measures, such as Adjusted EBITDA and Adjusted Operating Expense, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our business. We use Adjusted EBITDA and Adjusted Operating Expense as performance measures and believe investors and securities analysts also use Adjusted EBITDA and Adjusted Operating Expense in evaluating our performance. While Adjusted EBITDA effectively captures the operating performance of our leases and PPAs, it only reflects the service portion of the operating performance under our loan agreements. Therefore, we separately show customer P&I payments. Adjusted EBITDA is also used by our management for internal planning purposes, including our consolidated operating budget, and by our board of directors in setting performance-based compensation targets. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used both to better assess our business from period to period and to better assess our business against other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by other companies. In addition, other companies may not publish these or similar measures. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with GAAP. Sunnova is unable to reconcile projected Adjusted EBITDA and Adjusted Operating Expense to the most comparable financial measures calculated in accordance with GAAP because of fluctuations in interest rates and their impact on our unrealized and realized interest rate hedge gains or losses. Sunnova provides a range for the forecasts of Adjusted EBITDA and Adjusted Operating Expense to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and the impact on the related reconciling items, many of which interplay with each other. Therefore, the reconciliation of projected Adjusted EBITDA and Adjusted Operating Expense to projected net income (loss) and total operating expense, as the case may be, is not available without unreasonable effort.

Third Quarter 2022 Conference Call Information

Sunnova is hosting a conference call for analysts and investors to discuss its third quarter 2022 results at 8:00 a.m. Eastern Time, on October 27, 2022. The conference call can be accessed live over the phone by dialing 844-200-6205, or for international callers, 929-526-1599. The access code for the live call is 212518.

A replay will be available two hours after the call and can be accessed by dialing 866-813-9403, or for international callers, +44 204-525-0658. The access code for the replay is 493538. The replay will be available until November 3, 2022.

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

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or Sunnova’s future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "going to," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these words or other similar terms or expressions that concern Sunnova’s expectations, strategy, priorities, plans or intentions. Forward-looking statements in this release include, but are not limited to, statements regarding our level of growth, customer value propositions, technological developments, service levels, the ability to achieve our 2022 operational and financial targets, and references to Adjusted EBITDA and customer P&I payments from solar loans. Sunnova’s expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including risks regarding our ability to forecast our business due to our limited operating history, the effects of the coronavirus pandemic on our business and operations, supply chain uncertainties, results of operations and financial position, our competition, changes in regulations applicable to our business, fluctuations in the solar and home-building markets, availability of capital, our ability to attract and retain dealers and customers and manage our dealer and strategic partner relationships, the ability to successfully integrate the SunStreet acquisition, the ability of Sunnova to implement its plans, forecasts and other expectations with respect to SunStreet's business and realize the expected benefits of the acquisition. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in Sunnova’s filings with the Securities and Exchange Commission, including Sunnova’s annual report on Form 10-K for the year ended December 31, 2021 and subsequent quarterly reports on Form 10-Q. The forward-looking statements in this release are based on information available to Sunnova as of the date hereof, and Sunnova disclaims any obligation to update any forward-looking statements, except as required by law.

About Sunnova

Sunnova Energy International Inc. (NYSE: NOVA) is a leading Energy as a Service (EaaS) provider with customers across the U.S. and its territories. Sunnova's goal is to be the source of clean, affordable and reliable energy with a simple mission: to power energy independence so that home and business owners have the freedom to live life uninterrupted®. For more information, please visit sunnova.com.

Key Terms for Our Key Metrics and Non-GAAP Financial Measures

Estimated Gross Contracted Customer Value. Estimated gross contracted customer value as of a specific measurement date represents the sum of the present value of the remaining estimated future net cash flows we expect to receive from existing customers during the initial contract term of our leases and power purchase agreements ("PPAs"), which are typically 25 years in length, plus the present value of future net cash flows we expect to receive from the sale of related solar renewable energy certificates ("SRECs"), either under existing contracts or in future sales, plus the cash flows we expect to receive from energy services programs such as grid services, plus the carrying value of outstanding customer loans on our balance sheet. From these aggregate estimated initial cash flows, we subtract the present value of estimated net cash distributions to redeemable noncontrolling interests and noncontrolling interests and estimated operating, maintenance and administrative expenses associated with the solar service agreements. These estimated future cash flows reflect the projected monthly customer payments over the life of our solar service agreements and depend on various factors including but not limited to solar service agreement type, contracted rates, expected sun hours and the projected production capacity of the solar equipment installed. For the purpose of calculating this metric, we discount all future cash flows at 4%.

Number of Customers. We define number of customers to include every unique premises on which a Sunnova product is installed or on which Sunnova is obligated to perform services for a counterparty. We track the total number of customers as an indicator of our historical growth and our rate of growth from period to period.

Weighted Average Number of Systems. We calculate the weighted average number of systems based on the number of months a customer and any additional service obligation related to a solar energy system is in-service during a given measurement period. The weighted average number of systems reflects the number of systems at the beginning of a period, plus the total number of new systems added in the period adjusted by a factor that accounts for the partial period nature of those new systems. For purposes of this calculation, we assume all new systems added during a month were added in the middle of that month. The number of systems for any end of period will exceed the number of customers, as defined above, for that same end of period as we are also including any additional services and/or contracts a customer or third party executed for the additional work for the same residence. We track the weighted average system count in order to accurately reflect the contribution of the appropriate number of systems to key financial metrics over the measurement period.

Definitions of Non-GAAP Measures

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) plus net interest expense, depreciation and amortization expense, income tax expense, financing deal costs, natural disaster losses and related charges, net, losses on extinguishment of long-term debt, realized and unrealized gains and losses on fair value instruments, amortization of payments to dealers for exclusivity and other bonus arrangements, legal settlements and excluding the effect of certain non-recurring items we do not consider to be indicative of our ongoing operating performance such as, but not limited to, costs of our initial public offering ("IPO"), acquisition costs, losses on unenforceable contracts, indemnification payments to tax equity investors and other non-cash items such as non-cash compensation expense, asset retirement obligation ("ARO") accretion expense, provision for current expected credit losses and non-cash inventory impairments.

Adjusted Operating Expense. We define Adjusted Operating Expense as total operating expense less depreciation and amortization expense, financing deal costs, natural disaster losses and related charges, net, amortization of payments to dealers for exclusivity and other bonus arrangements, legal settlements, direct sales costs, cost of revenue related to cash sales, cost of revenue related to inventory sales, unrealized gains and losses on fair value instruments and excluding the effect of certain non-recurring items we do not consider to be indicative of our ongoing operating performance such as, but not limited to, costs of our IPO, acquisition costs, losses on unenforceable contracts, indemnification payments to tax equity investors and other non-cash items such as non-cash compensation expense, ARO accretion expense, provision for current expected credit losses and non-cash inventory impairments.

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