Joseph Osha: Great. Very unequivocal. And the second question related to Lunar. Just so that I understand, is it the case that at least in some installations, you can use the inverter there to drive a panel string? I’m trying to understand what exactly that product is.
Mary Powell: Paul, do you want to speak to Lunar?
Paul Dickson: Yes, of course. So we’re really excited about the Lunar product. The install efficiencies of pairing the inverter with the battery create a lot of opportunity for us to speed up our installations and actually deploy full battery backup in more consumer situations. So we’re excited about the operational efficiency as well as the ability to apply it in more situations.
Joseph Osha: But that — just to clarify, is it the case that I can use that inverter to drive a string of panels, if I want to?
Paul Dickson: Yes.
Operator: Our next question today is coming from Kashy Harrison from Piper Sandler.
Kasope Harrison: So first one for me, there’s a very helpful color around equipment costs. And I wanted to broaden the discussion to customer acquisition costs of California. You’ve indicated sales are down maybe 1/3 year-over-year and smaller installers — you’re outperforming smaller installers post them. And so I’m wondering if this creates an opportunity for the industry in the run to maybe solve for improved economics by reducing customer acquisition costs, just given where we are in the cycle and where economics are in California. Or is that maybe not necessarily possible because there’s still enough alternative opportunities for sales teams to go if the commission dollars come down.
Paul Dickson: Yes. I think we continue to see people recognizing the value of selling at Sunrun. We’ve seen a 6% — 5.5%, 6% decrease in CAC over the last 6 quarters. So sequentially, CAC has fallen every quarter, the last trailing 6 quarters as our net subscriber value is increasing. So you’re seeing that kind of translation take place actively historically and we forecast that taking place going forward as well.
Kasope Harrison: And then maybe just for my follow-up. Just — and apologies if I missed this in the initial prepared commentary, but just looking at the guidance, I think it implies a pretty big sequential uptick at the midpoint to maybe just over 310 megawatts by the fourth quarter. Can you maybe walk us through what drives the confidence in that sequential improvement? And perhaps how much of the outlook is currently de-risked by signed agreements?
Paul Dickson: Yes. So outside of California, we’ve been seeing 25% growth year-over-year in sales activity. And so we’re seeing really strong growth outside of California. Speaking specifically inside California, we saw strong outpacing of growth quarter-over-quarter throughout the period and entering into the latter weeks of the end of the quarter and this first few days of this quarter, we’re seeing, I would categorize as explosive sales activity from our teams there, bolstering our confidence in the number.
Operator: Next question today is coming from Colin Rusch from Oppenheimer.
Colin Rusch: Within the sales process, can you talk a little bit about the trends on the conversion rates that you’re getting in terms of lead to converting into actual sales? And then also on system size, particularly in California, as you transition into NEM 3.0.
Paul Dickson: Yes. So a lot of competitors inside California are downsizing systems because they don’t have a Shift solution. So the way to preserve customer savings, given the time of use rate situation is to size down on systems. Our portfolio has not experienced that as we are deploying nearly a little in excess of 80% of the systems we’re deploying have either a Shift or full battery backup. So we’re not as susceptible to that decreased system size dynamic. Conversion rate is something we watch continuing and are very focused on and driving up conversions and customer experience is a constant focus for us.
Colin Rusch: And then as you look at monetizing the virtual power plant in those assets, I guess, it’s still relatively nascent. Can you talk a little bit about the pricing dynamics and the potential to increase the functionality of the portfolio and monetize those assets at a higher level on a go-forward basis?
Mary Powell: Well, as we said, right now, we look at it as a value of $2,000 NPV per customer with the opportunity to just grow that going forward, to your point. So again, anything that’s new takes time in — like energy generation space. And I feel very heartened by the fact that you now have one of the largest utilities in America, partnering on a substantive project that is very high profile. It is leading to many other conversations. So again, we see it as nothing but continued upside, not just for Sunrun and our shareholders, but for customers. Again, back to that California program that I talked about with PG&E, customers who went ahead and went with us for solar and storage for all sorts of financial and resiliency reasons, for basically a few months access to their storage, they have $750 of found money, which dramatically impacts the value proposition and the way customers see it.
So again, I see this as a really strong growing opportunity for Sunrun and our customers and our shareholders.
Operator: The next question is coming from Tristan Richardson from Scotiabank.
