John Berger: Yes, there are terminations and payoffs. So we are seeing an increase in the constant prepayment rate, especially in some of our accessory type loans. And so that’s a welcome news, if you will and the unexpected. So we wanted to make sure as soon as a customer was at their loan paid off with us. And we did not owe them any more service that we weren’t appropriately reflected subtract the customer from our customer count. And so you’re seeing that reflect here. It’s basically our payoff rate is up is accelerating a bit.
Tristan Richardson: Appreciate it. Thank you all very much.
Operator: Thank you. The next question is from Amit Kumar with BMO Capital Markets. Your line is open.
Amit Kumar: Hi, good morning, guys. And just wanted to again, echo the sentiments and thank Rob for putting up with all of us for last few years. And just real quick on that looks like the dealer count went up from I think like another 90 or 100 dealers, I was just kind of wondering like what are you guys seeing in terms of kind of attrition within the dealers having even when you look like you’re going to grow a little bit less than maybe we anticipated at the beginning of the year into the dealer count going to be kind of fairly steady from here on.
John Berger: I think that’s probably pretty accurate. We’re constantly managing the dealer network to make sure we had the best and there are things that happen in our dealers’ lives because there are obviously great entrepreneurs that are out there trying to make the way in the world and things happen in life, right and sometimes positive, sometimes negative. So you want to have a constant influx of new dealers. And this is true whether it’s in the power business, the solar business, wherever you want to call it or home security or any other business that is heavily dependent upon great to entrepreneurs and dealers. So we’re going to trying to maintain and bring in new blood, if you will, the time because we’ll have some others that need to be exited. But I think we’re in a pretty good spot where we are at our size of our network. Maybe trends a little bit lower, who knows?
Amit Kumar: And then, it looks like in your and just looking through your 10-Q that you’ve added some additional risk on kind of language around resources to repay the [indiscernible] on debt credit facilities. I was just wondering like was there something that kind of like triggered on the additions of that language or something your auditors kind of require you to do this quarter or is that always really there?
John Berger: No, there’s no difference and we feel pretty good about refinancing that with the with our lenders and I think it’s just lawyers doing their job.
Amit Kumar: Thank you.
Operator: Thank you. The next question is from [indiscernible]. Your line is open.
Unidentified Analyst: Yes, thanks for taking the questions. Just one more question on the liquidity forecast yet. Just to confirm that the reduction in levered cash flows is mainly because of the customer focus shift, right? And that is what’s causing the reduction in the Nordic Capital and the investment made this year. And I’m going to trying to understand like the levered yield on that cash flow seats would be low to mid-single digits on that known business synergies. And likewise, how to think about the yields on most of the non-solar customers going forward? Thanks.
John Berger: It’s a small decreases and this will fluctuate quarter to quarter. It could be that weather wasn’t as great in some areas of the country that high SRX, for instance, it could also be that these accessory loans which is the majority of it. In this case, we don’t expect to originate as much as we had in the past or it could be asset sales of such loans and such to drive some of the revenue down. So I think you’ve got the right idea.
Unidentified Analyst: Yes. Thank you. And that’s helpful.
Operator: Thank you. The next question is from Chris [ph] with RBC Capital Markets. Your line is open.
Unidentified Analyst: Yes, good morning. I wanted to focus a little bit more on the cost structure here. And notably made some progress in cutting that adjusted operating expense. But I guess just taking a step back and looking at how that cost structure compares against the underlying assumptions baked into your net contracted customer value calculation inflation and the implied spreads. I think in the 10 K, you all indicate that the assumptions like $20 per kilowatt per year escalating and then $81 not escalating for the battery. So and I guess if I just think about that in the context of your customer service costs that you’re operating at right now which I think are multiple times higher than that. The first question is just how do we get comfortable underwriting your net contracted customer value if the operating cost assumptions that you’re under right now are vastly different.
And then second is what would be the net contracts and customer value if we were to recast those that that forecast under the current operating cost structure?
John Berger: Yes, we’ve done a great job on improving customer service and in fact, we’re at an all-time low and decidedly. So as far as our backlog of service tickets, if you will, on the customer base, we are we have started to redirect decidedly, so the technicians, our service technicians, who do a fantastic job for us and our customers over to the service only business. And so that will drive additional revenue and drop the cost structure. So you will see our cost structure drop this pretty significant. We’ve already started to experience it. You’ll start to see that over the coming quarters have become very visible. So I mean knowledge on the GCCV. I just want to point that out that that was set by the industry standards long before even Sonoco [ph] was founded.
And that’s something that we’ve used to be consistent of our securitizations do contain some higher cotton cost or MSAP.s that do code into our levered cash flows. I should point that out. So we feel very comfortable being able to drop the cost significantly especially if we were absolutely had to the kind of situation you were talking about and I wouldn’t necessarily spend too much time trying to figure out what the increased spend would do on. I think you can do some back-of-the-envelope math and figure that out. But we’re very, very focused on reducing that service cost. And I do believe we’ll get down to something that’s materially lower than what we have done over the past 12 to 18 months.
Unidentified Analyst: Okay. And then I guess just as a follow up to confirm that the unlevered rate of return calculation that you all provide. Is that assuming is the same sort of cost structure as in the NCCV? Or is that marked against kind of what your what you’re sort of operating at right now? Thanks.
John Berger: It’s what we’re operating at right now is it to be clear, it’s all service costs. It’s all costs. It’s all spend in the current year. So that’s pretty burdensome when you’re taking one marginal unit or more marginal customer and burdening with the entire existing customer service base at the current cost structure. I think what we’ve tried to do in the coming quarters is a look at a forward service cost estimate and take out some of the initial upfront cost to have an alternative view of a return. But right now, what we have is we every money is all the money that we spend and the upfront. We burden it in our unit economics in that fully burdened unlevered return. So and in many ways, it’s more punitive than it actually should be.
Unidentified Analyst: Got it. Thank you.
Operator: Thank you. The next question is from [indiscernible].
Unidentified Analyst: Hi, good morning. Thank you, Rob, for everything. And maybe two quick ones. Just on go on reducing expenses and really focusing on any direct sales. I know you guys do a little direct sales but have you have you changed any thoughts around that, John and then I have a follow-up. A – John Berger No. And decidedly, I think still on the dealer business model side of things. I look great entrepreneurs that we have and the dealers are there on Harbor, if you will, if that’s a phrase or word I can use with you’ve been but we’ve been focused on that since I founded the Company in terms of the dealer model and we have not wavered. I know others have gone back and forth but we have not wavered and will not. We’ve got a little bit of direct sales, as you pointed out but that’s really about finding areas where we just hadn’t had a dealer coverage.
And so that will continue to be a very relatively small part of our business but I expect it to generate a good deal of cash.
Unidentified Analyst: And just on the balance sheet and your different options on the Sun strong JV with SunPower and Hannon, or is that something that we could possibly see with you guys a structure like that?
John Berger: It’s possible that we’re definitely looking at and looking at our options there and done. The Hannon team is very strong and they’ve done a lot of good things and run a good business. And so of course, we’ll always won’t want to talk to folks that run good businesses. So and that’s certainly possible.
Unidentified Analyst: Great. Thank you.
Operator: Thank you. The next question is from William Griffin with UBS. Your line is open.
William Griffin: Thanks. Good morning. First question was just how should we think about the impact of pulling forward some of these ABS transactions on future cash generation, should we expect a lower level of securitization activity in 2025?
John Berger: Well, the way you should think about it is as we pull forward the securitizations, we pull forward cash and that cash is we’ve we right now see that as significant the way to look at 2025 is that we would be on a steady pace. And so what’s the probability that we do more securitizations this year than we do in 25? I’ve put a lot of thought into that, frankly, I just we just need to have a securitization schedule that’s disciplined and keeps us ahead of the markets we take as little of the interest rate risk as we as we should and can in our in our backlog, we haven’t done that in the past couple of years or so just and that is changing as we speak. At this year. And so as long as we’re on a disciplined schedule where we’re generating cash, I think of how many securitizations we do or do not do.
I don’t think it really matters. But it is likely that we’ll just be on a more of a steady state that you’re kind of seeing right now trying to space out the securitizations accordingly, of course but the more of a steady state.
William Griffin: Got it. And then, just last one here. Have you seen any impact on your advance rates or your financing terms relative to what you maybe we would have otherwise expected just given where the debt and stock have been trading and maybe some of the implied concerns there? A – John Berger No [ph].
William Griffin: All right. Thanks very much.
Operator: Thank you. The next question is from Jonathan Shafer with Northland Capital Markets.
Donovan Schafer: Hey, guys. Thanks for taking the questions. So I wanted to ask you a feel compelled to I’ll dig in a bit more deeply on the — I guess it’s true. It’s on slide 31, terminations, payoffs and expirations. I know some of that service-oriented some of it or not. And there’s presumably a lot of kind of moving parts there and a lot of nuance at the same time collectively, it’s a pretty big jump in I think it was approximately 2000 last quarter and it jumped to almost 8,000, no a sort of 8,000 deduct, if you will, to customer additions in this quarter. So could you unpack that a bit more and maybe get at like specifically what is the cause? I mean, I can imagine, you know, maybe in some cases that people are just worried about on your day-to-day expenses or something, some people with savings like retirees or whoever could just opt to buyout the lease or a loan.
I mean, there may be more basic things behind that but just how do you expect this to trend? Like — what’s — what’s the cause all else equal? Do you do you want to see that come back down or do the economics? I know like with loans and dealer, she sometimes they can actually improve the economics. So yes, do you want to see this trend up to you, not on maybe one of the lines but on the other line, you have anything you can do to kind of unpack that, that would be great.
John Berger: The vast majority of payoffs. So do we want that to become more negative as you move forward in time to get our money back faster and the loans? Absolutely, 110%.
