Peter Faricy: The color I’d add is that, you know, from a panel perspective, and this is really true across all equipment, by the way, so it doesn’t matter whether it’s panels, inverters, EV chargers, quality has gone up this past year and prices have come way down. You’re focusing on the 30% drop in panels, which is really, really important. What does that play out going forward? Well, for 2024, I think it’s going to be great for consumers. It’s going to mean for those who’ve been on the edge of whether or not they believe this is affordable, because it’s a big ticket item, we’re going to be in a better position to provide more affordable options for consumers. And I think given the volatility we’ve had in the market this year, that’s going to be terrific.
We’re selling through panels that I would say are close to market right now. And then I think there’s no question in 2024, we’ll have a greater and greater share of panels that are world-class quality and world-class price competitive. And those are the two pieces we focus on the most. We really, you know, for our dealers and our customers, we want to provide them the best panels in the world, but they have to be at affordable prices, and we think we can do both.
Pavel Molchanov: All right. Thanks very much.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Joseph Osha from Guggenheim.
Joseph Osha: Good morning, everyone a couple of questions. First, we’ve heard a few comments about reducing equipment costs, obviously buying in cheaper panels helps? I’m wondering what you can say about your philosophy for procuring inverters as we move through 2024? And then I do have another question. Thanks.
Peter Faricy: Sure, yes. Well, first of all, I think most of you know we’ve had an exclusive relationship with Enphase. It’s been in place for a number of years. That goes through the first quarter of 2024. Enphase is a company that we respect a lot. They make high quality products. We respect the engineering team and the quality team and the support we’ve gotten from them. So we have nothing, but if you were doing a customer survey, we’re in the — we’d give positive reviews. We’re pleased with those products and so our customers and dealers. But I would say forward-looking, what you would expect broadly is what I mentioned earlier, which is whether it’s inverters or panels, the market’s going to a place where the expectations on quality are increasing and the expectations on value or prices are decreasing and the expectation is that value is going to increase.
And I would say that’s certainly true in the inverter market. So we would expect that to be true as we go forward. I would say that, that market, from our point of view, has gotten more competitive recently. I think there’s a number of new entrants. There’s a number of options that have been introduced this past year that I think are interesting from our dealer standpoint and at some point I think consumers would benefit from as well. But having said all that, I do expect that we’ll continue to have a good partnership with Enphase, and I look forward to discussing that more in future calls as we go.
Joseph Osha: I’m sure [Indiscernible] does too. Just following up a little bit on some of your bookings comments, obviously there’s some sequential improvement, but I’m just wondering if you can maybe walk us, give us a year-on-year walk, in particular in California, trying to understand what the progression for that has looked like in Q3, and what you think that might look like in the Q4 and Q1, given some of the unique dynamics of the state?
Peter Faricy: Yes. So, California has been interesting. We were actually pretty close in our forecast for the year to how it’s turned out. The law I guess, lasted a little longer in the summer than we probably would have thought it would have based on the transition from NEM 1 to NEM 2. But I think the September and October recovery are, kind of, in line with our expectations on the California side. What’s been, frankly, a lot more difficult to forecast this year was the outside of California business. I think we mentioned on previous calls, we were struggling in kind of the Southeast and Southwest part of the U.S. Some of those places like Arizona and Florida have low utility costs. So there’s still benefit there, but the benefit does become a little bit more marginal, if utility costs remain low.
So Arizona, Florida have been a struggle. Same thing for Texas, Colorado. So the reason I think, you know, in the slide that we talk about the retrofit booking increase is that there is an increase in California, but we’re really beginning to see some of these other Southern states begin to get some traction, which I think is a positive signal. Now, I think it’s too early. September and October, you know, do not yet make up a long enough trend that we’d feel comfortable saying, you know, we know that this will last into 2024. I think, again, this has been such a volatile year. I think it’s prudent to be cautious and thoughtful here. But we also, you know, we are — we’d rather have a positive signal, obviously, to end the year than have a neutral or negative signal.
So quite a bit of improvement in September and October and our hope is that, that lasts for the remainder of the year.
Joseph Osha: Okay, not to just put you on the spot, do you think California can be up year-on-year in Q4 in bookings?
Peter Faricy: I don’t think it’ll be up year-over-year, but I think it has a chance to get closer to flattish. You know, I mentioned earlier, we really had a very, very strong bookings year last year until mid-November. You know, mid-November through the end of December was really light. And you can blame it on the holidays, the weather, you know, all those different factors. But that may have been in retrospect, maybe interest rates finally catching up and consumer confidence finally catching up. And that may have been the beginning of what was really a bigger slowdown that happened into this year. So from a November and December standpoint, it’ll be easier to have flat year-over-year performance, if you will, because last year was so soft. So that would be our hope and our goal is to get something closer to flat November and December in California.
Joseph Osha: Thank you very much.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian Lee from Goldman Sachs.
Brian Lee: Hey everyone, good morning. Thanks for taking the questions. I guess, one question I had was more kind of housekeeping factual. I know, Beth, you’re still working with your creditors on the waivers and what have you, but could you remind us what the actual covenants are? I believe there might be some either minimum cash and/or EBITDA coverage covenants. Could you remind us what those are, where you stand relative to those today?
Beth Eby: So the covenants — there’s four covenants. One is a net debt to EBITDA with all the adjustments of 4.5 times. And that’s all the non-recourse. You take out the non-recourse groups there’s an interest coverage. There’s a minimum liquidity, not minimum cash, and an asset covenant.
