Business Wire | Jul 28, 2021 04:05PM EDT

Sunnova Reports Second Quarter 2021 Financial Results

Jul. 28, 2021

HOUSTON--(BUSINESS WIRE)--Jul. 28, 2021--Sunnova Energy International Inc. ("Sunnova") (NYSE: NOVA), one of the leading U.S. residential energy service providers, today announced financial results for the quarter ended June 30, 2021.

"The residential solar industry has entered a new phase of maturation and growth and with it a new value proposition for customers has emerged. Where it was once solely focused on the product and savings, the customer value proposition is now acutely focused on reliability and resiliency as well as savings," said William J. (John) Berger, Chief Executive Officer of Sunnova. "Customers are now expecting a long-term energy service offering that is fast and intelligent. To meet this need, we have dedicated resources to building out our end-to-end software platform, which contains capabilities such as quoting tools for dealers, predictive service analytics for customers, and grid services software for aggregation.

"Our field service technicians and customer care team are increasingly providing higher quality services at a quicker pace to our growing customer base. Service delivery must be quick, accurate, and predictive as new technologies such as batteries, load managers, electric vehicle chargers, and secondary generation enter the market. Service is becoming the crucial differentiator in the residential energy industry, and Sunnova continues to position itself as the industry leader for wireless power services."

Second Quarter 2021 Results

Revenue increased to $66.6 million, or by $23.8 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Revenue increased to $107.8 million, or by $35.2 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These increases were primarily the result of an increase in the number of solar energy systems in service and the April 2021 acquisition of SunStreet.

Total operating expense, net increased to $80.9 million, or by $33.0 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Total operating expense, net increased to $145.5 million, or by $53.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These increases were primarily the result of an increase in the number of solar energy systems in service, the April 2021 acquisition of SunStreet, greater depreciation expense, and higher general and administrative expense.

Adjusted Operating Expense increased to $32.6 million, or by $7.8 million, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. Adjusted Operating Expense increased to $61.1 million, or by $12.7 million, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These increases were primarily the result of an increase in the 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 $66.3 million for the three months ended June 30, 2021 compared to a net loss of $28.7 million for the three months ended June 30, 2020. This larger net loss was primarily the result of higher net interest expense, which was primarily due to increases in unrealized losses on interest rate swaps of $18.8 million and higher general and administrative expense.

Sunnova incurred a net loss of $90.3 million for the six months ended June 30, 2021 compared to a net loss of $105.7 million for the six months ended June 30, 2020. This lower net loss was primarily the result of lower net interest expense which was primarily due to a decrease in realized losses on interest rate swaps of $36.9 million due to the termination of certain debt facilities in 2020. This was partially offset by an increase in general and administrative expense.

Adjusted EBITDA was $30.1 million for the three months ended June 30, 2021 compared to $18.0 million for the three months ended June 30, 2020, an increase of $12.1 million. Adjusted EBITDA was $42.9 million for the six months ended June 30, 2021 compared to $24.2 million for the six months ended June 30, 2020, an increase of $18.7 million. These increases were the result of customer growth increasing at a faster rate than expenses.

Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $15.8 million and $7.9 million, respectively, for the three months ended June 30, 2021, or by $8.2 million and $1.3 million, respectively, compared to the three months ended June 30, 2020. Customer principal (net of amounts recorded in revenue) and interest payments received from solar loans increased to $28.1 million and $15.0 million, respectively, for the six months ended June 30, 2021, or by $14.2 million and $4.0 million, respectively, compared to the six months ended June 30, 2020. These increases were the result of our larger customer loan portfolio.

Net cash used in operating activities was $60.8 million for the three months ended June 30, 2021 compared to $24.8 million for the three months ended June 30, 2020. This increase was primarily the result of increases in purchases of inventory and prepaid inventory of $10.3 million, payments to dealers for exclusivity and other bonus arrangements of $4.9 million, and payments to installers and builders for homebuilder asset-development activities of $7.9 million.

Net cash used in the operating activities was $110.7 million for the six months ended June 30, 2021 compared to $82.9 million for the six months ended June 30, 2020. This increase was primarily the result of increases in purchases of inventory and prepaid inventory of $32.8 million, payments to dealers for exclusivity and other bonus arrangements of $3.2 million, and payments to installers and builders for homebuilder asset-development activities of $7.9 million.

Adjusted Operating Cash Flow was $10.0 million for the three months ended June 30, 2021 compared to $18.8 million for the three months ended June 30, 2020. This decrease was primarily the result of working capital changes primarily related to a change in the timing of insurance payments.

Adjusted Operating Cash Flow was $4.6 million for the six months ended June 30, 2021 compared to $(1.3) million for the six months ended June 30, 2020. This increase was primarily the result of customer growth increasing at a faster rate than expenses, which was partially offset by a change in the timing of insurance payments.

Liquidity & Capital Resources

As of June 30, 2021, Sunnova had total cash of $469.1 million, including restricted and unrestricted cash. An additional $160 million of qualified, unencumbered assets were available in Sunnova's tax equity and warehouse credit facilities as of June 30, 2021.

2021 Guidance

Management increases full-year 2021 guidance for customer principal payments received on solar loans, net of amounts recorded in revenue and Adjusted Operating Cash Flow.

* Customer additions of 55,000 - 58,000 (excluding legacy SunStreet customers) reaffirmed; * Adjusted EBITDA of $80 million - $85 million reaffirmed; * Customer principal payments received from solar loans, net of amounts recorded in revenue increases from $57 million - $63 million to $62 million - $68 million; * Customer interest payments received from solar loans of $28 million - $34 million reaffirmed; * Adjusted Operating Cash Flow increases from $20 million - $30 million to $35 million - $45 million; and * Recurring Operating Cash Flow of $(5) million - $5 million reaffirmed.

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, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow, 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 use Adjusted Operating Cash Flow and Recurring Operating Cash Flow as liquidity measures and believe Adjusted Operating Cash Flow and Recurring Operating Cash Flow are supplemental financial measures useful to management, analysts, investors, lenders and rating agencies as an indicator of our ability to internally fund origination activities, service or incur additional debt and service our contractual obligations. We believe investors and analysts will use Adjusted Operating Cash Flow and Recurring Operating Cash Flow to evaluate our liquidity and ability to service our contractual obligations. Further, we believe that Recurring Operating Cash Flow allows investors to analyze our ability to service the debt and customer obligations associated with our in-service assets. However, Adjusted Operating Cash Flow and Recurring Operating Cash Flow have limitations as analytical tools because they do not account for all future expenditures and financial obligations of the business or reflect unforeseen circumstances that may impact our future cash flows, all of which could have a material effect on our financial condition and results of operations. 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, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow 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, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow 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, Adjusted Operating Expense, Adjusted Operating Cash Flow, and Recurring Operating Cash Flow to projected net income (loss), total operating expense, or net cash provided by (used in) operating activities, as the case may be, is not available without unreasonable effort.

Second Quarter 2021 Financial and Operational Results Conference Call Information

Sunnova is hosting a conference call for analysts and investors to discuss its second quarter 2021 results at 8:30 a.m. Eastern Time, on July 29, 2021. To register for this conference call, please use the link http://www.directeventreg.com/registration/event/5674287.

After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes for entry. To ensure you are connected for the full call we suggest registering at a minimum 10 minutes before the start of the call. A replay will be available two hours after the call and can be accessed by dialing 800-585-8367, or for international callers, 416-621-4642. The conference ID for the live call and the replay is 5674287. The replay will be available until August 5, 2021.

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 at www.sunnova.com.

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 2021 operational and financial targets, and references to Adjusted EBITDA, customer P&I payments from solar loans, Recurring Operating Cash Flow and Adjusted Operating Cash Flow. 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, 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, 2020, 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 residential solar and energy storage service 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 homeowners have the freedom to live life uninterrupted(r).

SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts and share par values)

As of As of June 30, 2021 December 31, 2020

Assets

Current assets:

Cash $ 368,626 $ 209,859

Accounts receivable-trade, net 17,886 10,243

Accounts receivable-other 23,123 21,378

Other current assets, net of allowance of $1,041and $707 as of June 30, 2021 and December 31, 230,043 215,175 2020, respectively

Total current assets 639,678 456,655



Property and equipment, net 2,591,041 2,323,169

Customer notes receivable, net of allowance of$24,977 and $16,961 as of June 30, 2021 and 773,466 513,386 December 31, 2020, respectively

Intangible assets, net 200,097 49

Goodwill 4,096 -

Other assets 357,730 294,324

Total assets (1) $ 4,566,108 $ 3,587,583



Liabilities, Redeemable Noncontrolling Interests and Equity

Current liabilities:

Accounts payable $ 39,955 $ 39,908

Accrued expenses 42,676 34,049

Current portion of long-term debt 128,320 110,883

Other current liabilities 28,104 26,014

Total current liabilities 239,055 210,854



Long-term debt, net 2,592,797 1,924,653

Other long-term liabilities 321,693 171,395

Total liabilities (1) 3,153,545 2,306,902



Redeemable noncontrolling interests 140,185 136,124



Stockholders' equity:

Common stock, 111,985,517 and 100,412,036 sharesissued as of June 30, 2021 and December 31, 2020, 11 10 respectively, at $0.0001 par value

Additional paid-in capital-common stock 1,596,659 1,482,716

Accumulated deficit (529,936 ) (530,995 )

Total stockholders' equity 1,066,734 951,731

Noncontrolling interests 205,644 192,826

Total equity 1,272,378 1,144,557

Total liabilities, redeemable noncontrolling $ 4,566,108 $ 3,587,583 interests and equity

(1) The consolidated assets as of June 30, 2021 and December 31, 2020 include $1,690,509 and $1,471,796, respectively, of assets of variable interest entities ("VIEs") that can only be used to settle obligations of the VIEs. These assets include cash of $20,400 and $13,407 as of June 30, 2021 and December 31, 2020, respectively; accounts receivable-trade, net of $5,304 and $2,953 as of June 30, 2021 and December 31, 2020, respectively; accounts receivable-other of $840 and $583 as of June 30, 2021 and December 31, 2020, respectively; other current assets of $156,307 and $182,646 as of June 30, 2021 and December 31, 2020, respectively; property and equipment, net of $1,485,775 and $1,257,953 as of June 30, 2021 and December 31, 2020, respectively; and other assets of $21,883 and $14,254 as of June 30, 2021 and December 31, 2020, respectively. The consolidated liabilities as of June 30, 2021 and December 31, 2020 include $38,682 and $32,345, respectively, of liabilities of VIEs whose creditors have no recourse to Sunnova Energy International Inc. These liabilities include accounts payable of $4,006 and $2,744 as of June 30, 2021 and December 31, 2020, respectively; accrued expenses of $92 and $827 as of June 30, 2021 and December 31, 2020, respectively; other current liabilities of $3,049 and $3,284 as of June 30, 2021 and December 31, 2020, respectively; and other long-term liabilities of $31,535 and $25,490 as of June 30, 2021 and December 31, 2020, respectively.

SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

Revenue $ 66,556 $ 42,790 $ 107,832 $ 72,619



Operating expense:

Cost of 18,548 14,021 35,956 27,007 revenue-depreciation

Cost of 4,996 2,869 6,230 3,912 revenue-other

Operations and 4,985 2,926 8,605 5,145 maintenance

General and 48,336 28,133 90,656 56,026 administrative

Other operating 4,034 (16 ) 4,034 (22 )expense (income)

Total operating 80,899 47,933 145,481 92,068 expense, net



Operating loss (14,343 ) (5,143 ) (37,649 ) (19,449 )



Interest expense, 50,109 30,532 58,160 97,850 net

Interest income (7,988 ) (6,680 ) (15,168 ) (11,300 )

Loss onextinguishment of 9,824 - 9,824 - long-term debt, net

Other income (16 ) (266 ) (129 ) (266 )

Loss before income (66,272 ) (28,729 ) (90,336 ) (105,733 )tax



Income tax - - - -

Net loss (66,272 ) (28,729 ) (90,336 ) (105,733 )

Net income (loss)attributable toredeemablenoncontrolling (2,876 ) (3,471 ) 6,043 (9,400 )interests andnoncontrollinginterests

Net lossattributable to $ (63,396 ) $ (25,258 ) $ (96,379 ) $ (96,333 )stockholders



Net loss per shareattributable tocommon $ (0.57 ) $ (0.30 ) $ (0.88 ) $ (1.15 )stockholders-basicand diluted

Weighted averagecommon shares 111,973,338 84,033,278 109,181,788 84,017,214 outstanding-basicand diluted

SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended

June 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(90,336

)

$

(105,733

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

40,325

30,814

Impairment and loss on disposals, net

1,612

1,222

Amortization of intangible assets

7,065

15

Amortization of deferred financing costs

8,833

5,409

Amortization of debt discount

6,047

7,610

Non-cash effect of equity-based compensation plans

10,844

6,044

Non-cash payment-in-kind interest on loan

-

679

Unrealized (gain) loss on derivatives

(2,932

)

4,543

Unrealized (gain) loss on fair value instruments

4,169

(256

)

Loss on extinguishment of long-term debt, net

9,824

-

Other non-cash items

3,742

7,287

Changes in components of operating assets and liabilities:

Accounts receivable

(9,301

)

(1,941

)

Other current assets

(67,854

)

(81

)

Other assets

(29,066

)

(21,504

)

Accounts payable

(2,274

)

(706

)

Accrued expenses

5,544

(16,033

)

Other current liabilities

(4,328

)

4,631

Other long-term liabilities

(2,598

)

(4,928

)

Net cash used in operating activities

(110,684

)

(82,928

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(236,347

)

(274,333

)

Payments for investments and customer notes receivable

(305,498

)

(99,016

)

Proceeds from customer notes receivable

30,881

15,090

State utility rebates and tax credits

273

172

Other, net

1,502

490

Net cash used in investing activities

(509,189

)

(357,597

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt

1,282,796

936,938

Payments of long-term debt

(570,068

)

(629,268

)

Payments on notes payable

(8,022

)

(2,451

)

Payments of deferred financing costs

(12,939

)

(16,819

)

Payments of debt discounts

(2,324

)

(3,132

)

Purchase of capped call transactions

(91,655

)

-

Proceeds from issuance of common stock, net

9,822

(129

)

Proceeds from equity component of debt instrument, net

-

73,657

Contributions from redeemable noncontrolling interests and noncontrolling interests

116,610

120,653

Distributions to redeemable noncontrolling interests and noncontrolling interests

(6,261

)

(2,600

)

Payments of costs related to redeemable noncontrolling interests and noncontrolling interests

(6,778

)

(2,187

)

Other, net

(103

)

(1

)

Net cash provided by financing activities

711,078

474,661

Net increase in cash and restricted cash

91,205

34,136

Cash and restricted cash at beginning of period

377,893

150,291

Cash and restricted cash at end of period

469,098

184,427

Restricted cash included in other current assets

(39,470

)

(18,644

)

Restricted cash included in other assets

(61,002

)

(63,504

)

Cash at end of period

$

368,626

$

102,279

Key Financial and Operational Metrics

SUNNOVA ENERGY INTERNATIONAL INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended June 30,

2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $ (90,336 ) $ (105,733 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 40,325 30,814

Impairment and loss on disposals, net 1,612 1,222

Amortization of intangible assets 7,065 15

Amortization of deferred financing costs 8,833 5,409

Amortization of debt discount 6,047 7,610

Non-cash effect of equity-based compensation plans 10,844 6,044

Non-cash payment-in-kind interest on loan - 679

Unrealized (gain) loss on derivatives (2,932 ) 4,543

Unrealized (gain) loss on fair value instruments 4,169 (256 )

Loss on extinguishment of long-term debt, net 9,824 -

Other non-cash items 3,742 7,287

Changes in components of operating assets and liabilities:

Accounts receivable (9,301 ) (1,941 )

Other current assets (67,854 ) (81 )

Other assets (29,066 ) (21,504 )

Accounts payable (2,274 ) (706 )

Accrued expenses 5,544 (16,033 )

Other current liabilities (4,328 ) 4,631

Other long-term liabilities (2,598 ) (4,928 )

Net cash used in operating activities (110,684 ) (82,928 )



CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment (236,347 ) (274,333 )

Payments for investments and customer notes (305,498 ) (99,016 )receivable

Proceeds from customer notes receivable 30,881 15,090

State utility rebates and tax credits 273 172

Other, net 1,502 490

Net cash used in investing activities (509,189 ) (357,597 )



CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt 1,282,796 936,938

Payments of long-term debt (570,068 ) (629,268 )

Payments on notes payable (8,022 ) (2,451 )

Payments of deferred financing costs (12,939 ) (16,819 )

Payments of debt discounts (2,324 ) (3,132 )

Purchase of capped call transactions (91,655 ) -

Proceeds from issuance of common stock, net 9,822 (129 )

Proceeds from equity component of debt instrument, - 73,657 net

Contributions from redeemable noncontrolling 116,610 120,653 interests and noncontrolling interests

Distributions to redeemable noncontrolling interests (6,261 ) (2,600 )and noncontrolling interests

Payments of costs related to redeemablenoncontrolling interests and noncontrolling (6,778 ) (2,187 )interests

Other, net (103 ) (1 )

Net cash provided by financing activities 711,078 474,661

Net increase in cash and restricted cash 91,205 34,136

Cash and restricted cash at beginning of period 377,893 150,291

Cash and restricted cash at end of period 469,098 184,427

Restricted cash included in other current assets (39,470 ) (18,644 )

Restricted cash included in other assets (61,002 ) (63,504 )

Cash at end of period $ 368,626 $ 102,279

Key Financial and Operational Metrics

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands)

Reconciliation of Net Loss to Adjusted EBITDA:

Net loss $ (66,272 ) $ (28,729 ) $ (90,336 ) $ (105,733 )

Interest expense, net 50,109 30,532 58,160 97,850

Interest income (7,988 ) (6,680 ) (15,168 ) (11,300 )

Depreciation expense 20,782 15,868 40,325 30,814

Amortization expense 7,126 7 7,158 16

EBITDA 3,757 10,998 139 11,647

Non-cash compensation 2,920 3,354 10,844 6,044 expense

ARO accretion expense 697 524 1,349 1,013

Financing deal costs 356 1,571 357 1,687

Natural disaster losses - - - 31 and related charges, net

Acquisition costs 1,478 - 5,488 -

Loss on extinguishment 9,824 - 9,824 - of long-term debt, net

Unrealized (gain) losson fair value 4,282 (256 ) 4,169 (256 )instruments

Amortization of paymentsto dealers for 643 396 1,257 747 exclusivity and otherbonus arrangements

Provision for current 5,152 1,416 8,465 3,280 expected credit losses

Non-cash inventory 982 - 982 - impairments

Adjusted EBITDA $ 30,091 $ 18,003 $ 42,874 $ 24,193

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

(in thousands)

Interest income from customer notes receivable

$

7,862

$

6,568

$

14,959

$

10,940

Principal proceeds from customer notes receivable, net of related revenue

$

15,773

$

7,541

$

28,075

$

13,919

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands)

Interest income from customer $ 7,862 $ 6,568 $ 14,959 $ 10,940 notes receivable

Principal proceeds fromcustomer notes receivable, net $ 15,773 $ 7,541 $ 28,075 $ 13,919 of related revenue

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

(in thousands)

Reconciliation of Net Cash Used in Operating Activities to Adjusted Operating Cash Flow:

Net cash used in operating activities

$

(60,776

)

$

(24,816

)

$

(110,684

)

$

(82,928

)

Principal proceeds from customer notes receivable

17,422

8,150

30,881

15,090

Financed insurance payments

-

(53

)

(2,254

)

(2,451

)

Derivative origination and breakage fees from financing structure changes

-

5,772

8,936

36,894

Distributions to redeemable noncontrolling interests and noncontrolling interests

(3,428

)

(1,227

)

(6,261

)

(2,600

)

Payments to dealers for exclusivity and other bonus arrangements

16,243

11,387

19,908

16,731

Net inventory and prepaid inventory purchases for asset-development activities

29,942

19,595

50,796

18,002

Payments of non-capitalized costs related to acquisitions

2,706

-

4,757

-

Payments of non-capitalized costs related to equity offerings

-

-

609

-

Payments to installers and builders for homebuilder asset-development activities

7,912

-

7,912

-

Adjusted Operating Cash Flow

$

10,021

$

18,808

$

4,600

$

(1,262

)

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands)

Reconciliation of NetCash Used in Operating Activities to AdjustedOperating Cash Flow:

Net cash used in $ (60,776 ) $ (24,816 ) $ (110,684 ) $ (82,928 )operating activities

Principal proceeds fromcustomer notes 17,422 8,150 30,881 15,090 receivable

Financed insurance - (53 ) (2,254 ) (2,451 )payments

Derivative originationand breakage fees from - 5,772 8,936 36,894 financing structurechanges

Distributions toredeemablenoncontrolling interests (3,428 ) (1,227 ) (6,261 ) (2,600 )and noncontrollinginterests

Payments to dealers forexclusivity and other 16,243 11,387 19,908 16,731 bonus arrangements

Net inventory andprepaid inventorypurchases for 29,942 19,595 50,796 18,002 asset-developmentactivities

Payments ofnon-capitalized costs 2,706 - 4,757 - related to acquisitions

Payments ofnon-capitalized costs - - 609 - related to equityofferings

Payments to installersand builders forhomebuilder 7,912 - 7,912 - asset-developmentactivities

Adjusted Operating Cash $ 10,021 $ 18,808 $ 4,600 $ (1,262 )Flow

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

(in thousands, except per system data)

Reconciliation of Total Operating Expense, Net to Adjusted Operating Expense:

Total operating expense, net

$

80,899

$

47,933

$

145,481

$

92,068

Depreciation expense

(20,782

)

(15,868

)

(40,325

)

(30,814

)

Amortization expense

(7,126

)

(7

)

(7,158

)

(16

)

Non-cash compensation expense

(2,920

)

(3,354

)

(10,844

)

(6,044

)

ARO accretion expense

(697

)

(524

)

(1,349

)

(1,013

)

Financing deal costs

(356

)

(1,571

)

(357

)

(1,687

)

Natural disaster losses and related charges, net

-

-

-

(31

)

Acquisition costs

(1,478

)

-

(5,488

)

-

Amortization of payments to dealers for exclusivity and other bonus arrangements

(643

)

(396

)

(1,257

)

(747

)

Provision for current expected credit losses

(5,152

)

(1,416

)

(8,465

)

(3,280

)

Non-cash inventory impairments

(982

)

-

(982

)

-

Direct sales costs

(48

)

-

(48

)

-

Cost of revenue related to cash sales

(3,822

)

-

(3,822

)

-

Unrealized loss on fair value instruments

(4,298

)

-

(4,298

)

-

Adjusted Operating Expense

$

32,595

$

24,797

$

61,088

$

48,436

Adjusted Operating Expense per weighted average system

$

215

$

281

$

462

$

568

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands, except per system data)

Reconciliation of TotalOperating Expense, Net to Adjusted Operating Expense:

Total operating expense, net $ 80,899 $ 47,933 $ 145,481 $ 92,068

Depreciation expense (20,782 ) (15,868 ) (40,325 ) (30,814 )

Amortization expense (7,126 ) (7 ) (7,158 ) (16 )

Non-cash compensation (2,920 ) (3,354 ) (10,844 ) (6,044 )expense

ARO accretion expense (697 ) (524 ) (1,349 ) (1,013 )

Financing deal costs (356 ) (1,571 ) (357 ) (1,687 )

Natural disaster losses and - - - (31 )related charges, net

Acquisition costs (1,478 ) - (5,488 ) -

Amortization of payments todealers for exclusivity and (643 ) (396 ) (1,257 ) (747 )other bonus arrangements

Provision for current (5,152 ) (1,416 ) (8,465 ) (3,280 )expected credit losses

Non-cash inventory (982 ) - (982 ) - impairments

Direct sales costs (48 ) - (48 ) -

Cost of revenue related to (3,822 ) - (3,822 ) - cash sales

Unrealized loss on fair (4,298 ) - (4,298 ) - value instruments

Adjusted Operating Expense $ 32,595 $ 24,797 $ 61,088 $ 48,436

Adjusted Operating Expense $ 215 $ 281 $ 462 $ 568 per weighted average system

As of

June 30, 2021

As of

December 31, 2020

Number of customers

162,600

107,500

As of As of June 30, 2021 December 31, 2020

Number of customers 162,600 107,500

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

Weighted average number of systems (excluding loan agreements and cash sales)

126,900

75,100

109,300

72,700

Weighted average number of systems with loan agreements

24,600

13,300

22,700

12,500

Weighted average number of systems with cash sales

100

-

100

-

Weighted average number of systems

151,600

88,400

132,100

85,200

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

Weighted average number of systems(excluding loan agreements and cash 126,900 75,100 109,300 72,700 sales)

Weighted average number of systems 24,600 13,300 22,700 12,500 with loan agreements

Weighted average number of systems 100 - 100 - with cash sales

Weighted average number of systems 151,600 88,400 132,100 85,200

As of June 30, 2021

As of December 31, 2020

(in millions, except per customer data)

Estimated gross contracted customer value

$

3,516

$

2,997

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 individual possessing an in-service solar energy system with respect to which Sunnova is obligated to perform a service under a written agreement between Sunnova and the individual or between Sunnova and a third party. For all solar energy systems installed by us, in-service means the related solar energy system and, if applicable, energy storage system, must have met all the requirements to begin operation and be interconnected to the electrical grid. We do not include in our number of customers any customer under a lease, PPA or loan agreement that has reached mechanical completion but has not received permission to operate from the local utility or for whom we have terminated the contract and removed the solar energy system. We also do not include in our number of customers any customer that has been in default under his or her solar service agreement in excess of six months. 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 the 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 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 Cash Flow. We define Adjusted Operating Cash Flow as net cash used in operating activities plus principal proceeds from customer notes receivable, financed insurance payments and distributions to redeemable noncontrolling interests and noncontrolling interests less derivative origination and breakage fees from financing structure changes, payments to dealers for exclusivity and other bonus arrangements, net inventory and prepaid inventory (sales) purchases, payments of non-capitalized costs related to our IPO, acquisitions and equity offerings, payments of direct sales costs, excluding inventory, to the extent the related solar energy system is financed through a loan, payments to installers and builders for homebuilder asset-development activities and payments of customer rewards.

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, unrealized 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 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.

Recurring Operating Cash Flow. We define Recurring Operating Cash Flow as Adjusted Operating Cash Flow less principal payments on our securitizations and corporate capital expenditures, plus sales-related and sales-allocated cash operating expenses and interest expense from our credit warehouses and inventory facility.

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CONTACT: Investor Relations: Rodney McMahan, Vice President Investor Relations IR@sunnova.com 877-770-5211

CONTACT: Media: Alina Eprimian, Media Relations Manager Alina.Eprimian@sunnova.com