Good morning, and welcome to the Cenova Acquisition of SunStreet Conference Call. Today's call is being recorded, and we will have allocated an hour for prepared remarks and question and answer. At this time, I would like to turn the conference over to Fannie McMahon, Vice President, Investor Relations at Cenova. Thank you. Please go ahead.
Thank you, operator. This morning, it was announced Sunnova has entered into a definitive agreement to acquire SunStreet from Lennar Corporation. The details of this transaction can be found in a press release issued just before 7 am Eastern Time earlier today. Joining me this morning are John Berger, Sunnova's Chairman and Chief Executive Officer and Stuart Miller, with Lennar's Executive Chairman. Before we begin, let me remind everyone that this call may contain forward looking statements.
These include remarks about future expectations, beliefs, for the company's call. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those as indicated or implied by such statements. Such risks and other factors are set forth in our press releases and filings with the Securities and Exchange Commission. We do not undertake any duty to update such forward looking statements. I will now turn the call over to John.
Thank you, Rodney. Good morning, everyone, and thank you for joining us. I'm excited to share with you that Sunnova has reached an agreement to acquire SunStreet, Menards residential solar platform in an all sought transaction that will position Cinnova as a market leader in the homebuilder space. In addition to this acquisition, We will also be entering into a strategic partnership with Lennar, whereby Cinnober will become Lennar's exclusive residential solar and storage service provider for years to come. Together, we will be aligning the strategic interests of both companies, enhancing Cenova and SunStreet's growth, while enhancing the lives of homeowners.
Under the terms of the agreement, Lennar will receive total consideration of up to 7,200,000 shares of Cinnova common stock, which is comprised of 3,300,000 shares in initial consideration payable at closing and up to an additional 3,900,000 shares associated with 2 earn outs. The earn outs are comprised of up to 2,800,000 shares of Sunnova common stock associated with certain annual customer growth commitments over 4 years, while the second earn out It's comprised of up to 1,100,000 shares of Sunnova common stock associated with the development of micro grid communities over the next 5 years. SunStreet, a wholly owned subsidiary of Lennar, was created in 2013 to specifically address homebuilder needs in the solar industry around unique solar installation processes and providing best in class service to new homes and communities. SunStreet has since earned a reputation as a leader in the residential solar market for homebuilders. While SunStreet has been anchored by Lennar, It has also expanded its reach by building relationships with additional homebuilders in multiple markets to bring clean, affordable energy to tens of thousands of new homeowners.
This opportunity is coming at a pivotal time in the energy transition. Consumers are demanding more from their energy service providers, Especially as people spend more time in their homes and power outages triggered by weather events continue to worsen due to climate change. This consumer awakening is demanding new energy services that are decentralized and decarbonized. And we are looking forward to truly providing the energy independence homeowners deserve. Under Cenova's ownership, We will bring SunStreet's proven track record of high quality, timely installations to even more homebuilders across the We also look forward to servicing existing SunStreet customers to deliver a better energy service through the addition of storage and other core Cinnova offerings.
This transaction will propel Cenovus customer growth, while simultaneously scaling our business and positioning us as the market leader in the homebuilder industry. Additionally, Lennar has given us a lower cost of capital and provided capital certainty through their commitment to provide significant tax equity investments over the next 4 years to support our new customer pipeline. At the end of the day, we will now have the ability to upsell over 250,000 And by teaming up with Lennar, one of the largest homebuilders in the country, we will be able to provide more new homeowners with access to innovative energy services. To deliver on this initiative, the partnership will focus on the development and rollout of new technologies. With Lennar participating in Cenova's entry into the microgrid space through Lennar's technology based subsidiary, Linx.
Together, We look forward to creating innovative pathways for how new communities are powered for years to come. As we enter the transition period of the agreement, Sunnova and SunStreet will continue operations as separate entities until the acquisition is finalized. Going forward, for existing customers of SunStreet, Sunnova will Reference the brand as SunStreet as Sunnova Company. We're excited about this next step in our evolution. We will continue to provide unparalleled service to our customers, while fulfilling our promise of generating value for our shareholders.
For all of us at Sunnova, this agreement speaks to the heart of our core values, service, synergy and sustainability. We believe in achieving more by working together, Collectively advancing the energy industry through collaboration, integrity, respect and long term trusted relationships. As our business impact grows, So to our positive social and environmental impact, helping Sunnova achieve its overarching mission of powering energy independence. I would like to thank our dedicated team at Sunnova for working hard to make this opportunity a reality, and Stuart and his team at Lennar for seeing that Sunnova was the right place for SunStreet to call home. And most importantly, a big welcome to the SunStreet team.
We're excited to have you join our family and look forward to the great work that we will do together, collectively accelerating the adoption of residential solar and storage service on new homes across the United States. I would now like to turn the call over to Stuart Miller, Lennar's Executive Chairman. Stuart?
Thank you, John, and good morning, everybody. Let me start by saying that today, we at Lennar are very excited to become long term investors in the Sunnova Energy International platform. It has become a core confidence at Lennar side management to help mold the future and to use our formidable volume to roll out and Today's sale is very purposefully a sale for stock in Cinnova as we fully expect to remain invested while we work with the Cinnova management team together with our Lenex At Lennar, we have long embraced Cenova's goal of being the source of clean, affordable and reliable energy and Sonova's mission to power energy independence so that homeowners have the freedom to live life uninterrupted Has never been more relevant than today with power outages in many parts of Texas, recent fires in California And regular hurricanes from Florida and elsewhere, the new home can meet the challenge of getting better and it will. At Lennar, we want to be involved in innovation. We want to be invested in innovation, and we want to be engaged with the best management teams to drive Success.
Accordingly, we are investing in Cinnova as we expect to work together to expand beyond just rooftop solar to storage and to microgrid technologies in the future in order to build life uninterrupted for our customers and clean energy for our planet. As John noted in his remarks, Lennar built the SunStreet to drive Lennar's sustainability focus at a time when there was very limited focus on alternative energy sources in the homebuilding space. SunStreet was built inside Lennar in order to facilitate Lennar's drive and determination to make rooftop solar a standard feature and everything's included feature on every Lennar Homes starting in California. We experimented and innovated and developed a standard offering and a best in class operating team that would dovetail installation with even flow production. The cost of the installation was included in the price of our homes and the standard sustainable new home product was born.
Today, SunStreet is a mature, Best in class, efficient and effective installer and owner of Bootstrap Solar for the production new home market. The SunStreet operating team understands the unique needs of the homebuilding business and is positioned to expand our initial Sustainability mandate to a broad range of customers. With California's 2020 mandate for rooftop solar on every new home And other solar initiatives in many other states across the country, the opportunity for growth is sizable and growing rapidly. Accordingly, today's announcement is a pivotal moment for Lennar, for the SunStreet team and for Sunnova. We built SunStreet to be a leader and an innovator.
And now combined with Cinnova, There is simply no better company in the space to carry excellence forward and to build a bigger and better platform with innovative So with that, let me turn it back over to John.
Thank you, Stuart. I sit here in Houston, Texas today with the ongoing energy crisis affecting millions of We feel strongly that the current discussion shouldn't be solely centered around renewables versus fossil fuels. It should be about the power of decentralized generation and services and how we can bring homeowners the most affordable and reliable energy they need. As Stuart noted, whether it's wildfires in California, hurricanes in Florida Before turning to Q and A, I would like to remind everyone that we'll be hosting our Q4 and full year 2020 earnings call next Thursday, February 25, at 8:30 am Eastern Time. During that call, we will further discuss the impact of our SunStreet acquisition in partnership with Lennar, including an update on how this agreement will positively impact Cenova and be accretive for growth in 2021 and beyond.
With that, operator, please open the line for questions.
Your first question is from the line of Brian Lee with Goldman Sachs.
Hey, guys. Good morning. Congrats on a nice deal here. Thanks. Maybe first Question for you, John.
How much volume does this platform do each year either in terms of new homes or new megawatts? I know you talked about the installed base, Just what's the run rate here annually? And then how does this impact your outlook for new customer additions in 2021? I would assume it's pretty incremental.
Yes. Thanks, Brian. We can't get into details now that would get into changing guidance and such. And so we're going to remain You're silent on that for now, but we'll cover that in detail next week on the earnings call, and it's not that many days away, Obviously, I would say this that it's a pretty decent add and it's going to start But we'll go through not only customer growth, but what does it do to our other key important metrics, adjusted EBITDA plus principal and interest, Recurring operational cash flow and such, but this is a very positive deal for shareholders in a rather quick fashion.
Okay. Yes, I look forward to more details. Maybe just on that point, even if at a high level, you mentioned the tax equity That, Lennar would be providing and also I would assume this is going to reduce your install costcost of Can you kind of speak to both of those sort of the tax equity capital, how much incremental you might see from the relationship here? And then also By going through this platform, what sort of the positive impact is on costs?
Yes, certainly. So So again, I'll stay at a high level, and then we'll be able to get into more details next week. But the cost structure It's better. It's lower because we don't have the acquisition side of the cost. And so we see this as very incrementally positive on the unlevered returns.
The tax equity is significant. I don't think that we can get into a direct There is a specific number at this point in time, but I think it would be fair to say that the incremental or additional is a better way of saying it, the An additional amount of growth is going to be funded by this tax equity. And this tax equity is for several years to come. So that's As you know, that's pretty unique, Brian, right, to have multiple year tax equity. So we've worked out something very, very attractive here.
We're not only getting a great platform and customer base to upsell 40,000 customers, we're getting 250,000 customers that didn't choose solar in the last 10 years to be able to go and upsell there with Lennar. And then on top of that, we're getting a great partnership with Lennar on new technologies, Microgrids, think new communities and how those could be powered. What about a wireless power company coming in and managing all those communities? I can tell you right Now sitting in Houston, where we have basically no power, that's pretty darn attractive. And then all of that comes with fully financed as far as the complicated piece of the capital structure with tax equity.
I mean, it's a heck of a deal.
Okay, great. And maybe last one from me and I'll pass it on. Just you spoke about technologies and I think Lennar You mentioned in the release also that it's a technology platform. So can you speak to what technologies does the SunStreet And then are you having to make any incremental investment there? And then just on In the release, you also mentioned the ability to work with other homebuilders.
Can you elaborate on that a bit? Who else uses SunStreet? And then what's the opportunity going forward there? Thanks, guys.
Certainly. So on the technology side of things, the process for homebuilding is very different than retrofit market, which obviously is our only for current processes and market that we have. So the devil's in the details, as they say. And what Stuart and the SunStreet team did with the rest of the folks at Lennar is over years It has perfected that process. And so that's something that we're going to be able to take on and implement across our Again, the good news and I referenced this is that the IT platforms are exactly the same.
We use Salesforce, they did too. We use Vena, so do they. And so there's a lot of similarities. So a lot of the integration costs is going to be relatively straightforward and lower. What I will say is that there are some opportunities to invest Further into IT systems to enhance capabilities, particularly as they rollout of new technologies.
So think load management, I think gensets, fuel cells and some other technologies that we I've discussed with Lennar already, EV charging. There's a number of things that we're going to be able to add, and we're going to invest in the IT Now as we put these companies together, that's going to make those services and offerings to new home buyers extremely interesting and powerful. In terms of Stuart, I don't know if you want to comment a bit more on the Linux platform and technologies. You've been a leader in homebuilding on new technologies. Would you like to say a few words on that?
And what do you see on Vision of the Future?
Look, Lennar has been highly focused on investing in technologies and investing in the evolution of The home building industry. And we have focused on finding best in areas of innovation in and around the new home experience and the customer interface. And that's exactly how we're looking at today's combination. We've built a platform, But it's time that we work with specialists in new home energy delivery systems And that's exactly what Cenova has focused on and will focus on the future. The opportunity set is to go from just providing Rooftop Solar to providing an integrated system through larger scale communities tying together a combination of rooftop solar with storage and other technologies to interface better with the grid and ultimately be a net provider of This is a very exciting proposition for us and we look forward to working together with people who specialize in this space and look forward to being invested in the future of home innovation.
Thanks, Stuart. Thanks, Brian.
Thanks, guys.
Your next question is from the line of Alan Ratner with Zelman and
Hey, guys. Good morning. Congrats on the deal. Sounds exciting. Stuart, I'd love to hear from Obviously, SunStreet has been around now for about 8 years, and I think you kind of touched on it a little bit in your prior answer.
But I'm curious, why now is the right time to pursue this type of partnership as opposed to continue to expanding the business within the confines of Lennox. And I'm just curious, was this driven more by the Lennar kind of return to core strategy? Or was there something specific Related to the solar business that you felt like now is the right time to pursue a partnership and take it to the next level?
It's a great question, Alan. We through the years, we've experimented in a number of ways with our technology initiatives. And SunStreet was one of those earlier experiments. We built the platform ourselves and internally. But as we've noted on our earnings calls, We are focused on returning to a core pure play kind of approach to the manufacturing business around Homebuilding.
And we've been trying to be the innovator. We have learned over the past years But the better model is to find the innovators who are best positioned to execute and be invested and work alongside with those innovators to enable them to be the best version of themselves, while we work on being the best version of ourselves as a pure play homebuilder. So this is part of an overall strategy. It's an overall strategy to be invested, to work alongside And to be a part of the innovation process, but not to actually try to become the innovation process because there are specialists that will do it better than us. Why right now?
We have spent the past couple of years looking at the right partnership That would define the right way forward for our company. We've talked to everybody who operates in this space and we just concluded that there's no better partner than Cinnova. We have compatibility with the management team. We share core values And we really look forward to seeing the kinds of innovations that we can bring to the market together. So that's where we came from on this.
Great. That's very helpful. And John, maybe I'll throw one your way. And admittedly, I'm less familiar with your business there. But I'm just curious, it sounds like new construction has not A focal point of your business up to this point.
So curious why you felt this was the right way to enter that space as opposed to starting something more greenfield or perhaps partnering with another
Yes, certainly. Thanks for the question. Yes, I I grew up in the construction business, actually spent a lot of time building homes and commercial buildings as I was growing up. And I can tell you that the community of homebuilders is very tight. And it's a community that takes years To be able to get to know, to have them trust you and then to understand, again, as I said earlier, the devil is in the details.
And just from my personal background, I recognize we don't know what we don't know about this space. And Lennar obviously does hands down. And so this gave us the ability to come in, have a huge existing base of customers, A really solid high quality partner that as Stuart just said shares our values. We work very well together as management teams. There is a lot of common ground, if you will, and common thought process.
And we both view this, And this goes a bit to answering some of Brian's question earlier too, it's a platform. So yes, there's other homebuilders on this platform. We have some homebuilders in our greenfield startup that we've been working internally on for the last year or so. And but there's a lot more we can do. We knew We knew that, but we needed help.
We needed a platform. We needed to be able to do it because we had so much going on in the growth with our retrofit business, new Sourcing them, partnering with the technology firms, launching those technologies out, making sure customers Get the service, especially in times like these that they deserve. All that, there's a lot going on. We needed to have a great partnership and platform. And this gives us that.
We're acquiring this business and other homebuilders, as you know, we're obviously not in the homebuilding business and we think that that will Really accelerate the growth here. And as Stuart also mentioned, we see the same vision and have the same vision For the long term, what is the new communities in America look like? And they look a lot different in our opinion as far as energy And what services that those new homebuyers deserve, which is to have clean affordable energy that's more reliable. And as I sit here in Houston, Texas, I mean, just the backdrop of what's going on here as far as this acquisition, It could not be more stark and give a message of there is a better way to do things and it's time. We got to move forward and I could pick no better
Well, it sounds like a very smart strategic partnership for both of you guys. And I wish you and your employees best of luck Dealing with the terrible situation down there right now. So good luck with everything, guys.
Thank you.
The next question is from the line of Philip Shen with Roth Capital Partners.
Hi, everyone. Donna, thanks for taking my questions and congratulations on the Just a few follow ups here. Stuart, you were talking about the rationale The acquisition was wondering if you guys could both address how the transaction came around. Stuart, it sounds like you guys were looking into this for some time, but Maybe a bit more color on how many others were at the table. It sounds like you were talking to everybody, but ultimately you highlighted that the win And the decision with Nova came about with how you see eye to eye with the management team, but just curious if you could
Sure.
Look, it's not uncommon For us at Lennar to know almost all of the participants in a space in which we operate. And that was very much the case with the solar business. We've been operating, as John noted, since 2013. So we got to know a number
of the solar
participants in the course of just growing our business. And just in getting to know people, you get to know where the intersection is most meaningful. If you know Don and you know his management team, They are focused on building best in class business. They have a conservative style about the way that they manage their business in terms of their financial accounting and the financial focus. All of the components of the way they operate their business just dovetail with the culture and the history of Lennar.
There is a compatibility among the people that enables us to work side by side and work together. And we were very particular about who we would partner with or invest with in this state. We spent a lot of time building a best in class program And best in class management team that would learn and understand the production home business all the new homebuilders and it works particularly well. We wanted to make sure that when we found a new home for SunStreet that would help advance its mission that it was a place where our people could thrive side by side with the management team of the acquiring company and Sonova was just at home. So this wasn't a reflective momentary decision for us.
It was a decision of care over time. We didn't have a burning need to do a transaction. It was a strategic opportunity To align with
a best in class participant,
so that our team could see a future that was very bright in the way they would go forward and the way that they would provide a production orientation to somebody in the solar space and Sunnova was that marriage.
Great. Thank you for that additional detail. I think it's helpful. And you talked about how you guys support other homebuilders. Can you give us some high level sense of what percentage of your Historic current business is with external non Lennar homebuilders.
And then As you guys build your vision together, what percentage do you think this could become in the next year or perhaps In other words, are you at maybe supporting is 20% of your business now external versus the expectation in the future that, Well, I guess it will all be owned by Sunnova. So technically, it's all external to them. But does that non Lennar homebuilder mix Increase meaningfully over time, is that part of the vision?
Stuart, you mind if I take that
I'm going to let John go ahead and take that.
So we're not going to get into details, Bill. We could Maybe do that next week again on as far as what the breakout is, but I don't think you're too far from an estimate there. I would say that Very clearly, what we're going to be able to do here is expand the number of third party homebuilders Given our platform, our products, the different financing products that we have, The service that we offer and everything else as far as service technicians to homeowners and all that's going to be able to ramp This business up quite significantly. And so we do expect obviously, Lennar, I'll leave it to Stuart to comment on his The growth as a company in terms of building new homes and so forth. But clearly, that market is on fire right now as far as The pace of home sales in the United States is certainly near records, if not at record.
So, this is a very strong market. Lennar is doing extremely well. Again, I'll let Stewart comment specifically on Lennar. But that means there's a lot of other homebuilders out there That need this service and capability that we now jointly can offer together as one company. And Given again what's going on around me as I'm literally sitting in ground 0 of this energy catastrophe, I think it just underlines the point that we've got to change and I think a lot of other homebuilders now get that if they didn't get it before and we're looking forward to growing that business quite strongly.
And again, it was a big driver for us to end this transaction This is about growth. It's about profitable growth. It's about expanding and the vision for the company and to fulfill the vision that I have and now Stuart and I have both together. So Stuart, you want to make any comments specifically around Lennar?
Sure. I'll keep this very brief because we're nearing the end of the quarter and we don't give any quarter update. But you've heard from the other builders As Dave reported, including us with our last earnings call, the housing market has been robust, if they believe. And so this new home market as Sonova enters is a fertile ground for growth in the solar rooftop business. And as we and others in our industry look ahead, It looks like there is a growth trajectory over the next few years that looks very strong.
And this is a Really good time for Cenova to be entering this part of the market with an operating team that can actually get that is up and running and can execute seamlessly as Sunnova grows the business. So this is an exciting time for a transaction like this. We knew it when we came together and we believe it even more fervently today.
Great. Thanks, guys. One last one, if I may. John, Clearly, you're matching the strength of one network with a new network that you're adding to your overall system and platform. Can you just talk through how this integration will occur and what do you expect?
And specifically, I know you have Hundreds of dealers and some are exclusive and master dealers. Do those guys get priority here? How do you Expect to go about the matchmaking and for that to ramp up. Thanks.
Yes. Thanks, Phil. Yes, you're right. This grows our dealer and partnership base with regards to installers quite significantly. And We welcome them on board the Cenova family and team as well and looking forward to having them.
Look, I think that this It opens up more possibilities for our existing dealers that didn't exist before. I think it's very clear. And most importantly, We maintain our commitment not to compete with our dealers. And so this it was very important to me. I don't Engage in acquisitions.
This is our first one, major one as a company, and I don't do it lightly. I'm very Particular, as I know Stuart is looking at the details of the transition, the people. The people is what matter most. And those people matter, not just employees, which management teams on board. We're looking forward to bringing Again, we have a need for people given our high growth in our existing business.
So this is a very important Piece for us to get this talent that SunStreet has and its high quality talent as Stuart was referencing. And then on top of that, we get high quality talent in their installer base, their diva base, and it aligns. There's perfect alignment. We don't have any channel conflicts and issues and so forth. Everything's aligned.
So again, we're paying attention to the details. The people are the most important to us and that extends into the installers and dealers. And we know that this would be exciting for Not only the SunStreet installers, but also our existing dealers as well. There's a lot of opportunity here.
Great. Thanks,
Your next question is from the line of Carl Reichardt with BTIG.
Good morning, John. Good morning, Stuart. First, just a big picture one. Either of you have
a sense of what it Of solar mandates, obviously, we've seen it in California for new residential construction. I'm curious what you think about the prospects for that occurring in states outside of California over the next few
Stuart, you want to take that one?
Sure. Look, I think that and as I noted in my remarks, Carl, and good morning to you, California has kind of led the way with an all new home solar mandate. And it's very clear that states across the country are becoming more and more focused on Alternative energy sources and solar in particular. And while other states haven't yet gone the route of the full mandate of solar across the new home market. It certainly seems directionally that it's building steam and that various states are considering How they will approach the same.
Now it's not this is not an equal application across the country, but there's definitely directionally A movement in this direction. We saw this coming at Lennar. We knew that we either had to Ramp up our SunStreet initiative, which was going to become more and more important or partner with someone who was able to do that, and that's exactly why we picked Sunnova.
Thanks, Stuart. That makes sense. And then sort of a bigger picture question for you. You've talked before about not just monetizing the sale of the new home, but Thinking about the services that the new homeowner will need on a go forward basis and trying to work to monetize those to some degree and this seems a nod in Are there can you talk maybe just bigger picture strategy wise about other service sets within the new home market that You're actively looking through investments to potentially monetize or maybe a review of the ones that you have. Thanks very much.
So boy, that's an interesting question. We're not quite at a point where we're looking at the components of the homebuilding business as a service or feed generator. The energy component is being looked at as we did with other elements of the homeownership journey as an opportunity to innovate and to build best of breed programs. You saw that very recently with Lennar's connected home that's Powered by Ring and Arrow and others, we are partnering with groups that are focused on Providing those services that are going to make homeownership ever more delightful to our customer base. And this, of course, is exactly what we're doing here with Cinnova today is we're partnering with a group, with a management team that will make Homeownership and the delivery of energy to the home, a more delightful experience for our customers and also appeal to A growing desire to be part of the sustainable movement in the country.
And so that's kind of piece by piece how we're looking at the innovation cycle and the services that are provided with the home that we with the homes that we deliver.
Great. Thank you, Stuart. Thanks, John. Congratulations. You bet.
Thank you.
Your next question is from the line of Julien Smith with the BLA.
Hi, good morning. Can you hear me?
I can. Good morning, Julian. Hey,
congratulations, Seth. Well done. Listen, I know there's a lot of sense to tell you about what exactly you can say. But can we talk about just the margin and how Yes. And whatever metrics you can talk about today, how that compares relative to what you do on today, right?
I don't want to be specific on metric because I'll let you decide how you want to talk about that. But I want to try to get more details on that front. And then separately, I get you don't want to talk about specific volumes, understood. But can you talk about like the breakdown between microgrid? How much value how meaningful is that as a function of this transaction relative to upsells And then relative to, shall we say, just building out this business in California and beyond, right?
Like If you can give us a little bit of order of magnitude of those three pieces that I think you're speaking to each of those. Those are the 3 buckets.
Yes, certainly, Julian. I can't give into and we're not going to break out on levered returns across different channels and Customer bases and such. But I will tell you that, again, as I mentioned earlier, the unit level economics, the unlevered returns Are going to be higher here because of the reduction or elimination of the acquisition costs. So it will definitely be accretive and positive in regards to unlevered returns. So I'll just have to leave it there and I'm sure you'll grill me more in the earnings call here next week on that.
In terms of what else we see out there and what parts of the transaction, look, I think that this is a very compelling transaction for both Lennar and Cinnova, very compelling. This is about growth. This is about not only on a forward basis, but upselling the existing customers with SunStreet That roughly 40,000 that don't have the storage, for instance, we can upsell that. We can upsell a lot of load management. We can do a lot of different things and offer different services as the technology has changed rather recently and it continues to Accelerate and change, as you well know.
In addition to that, we have 250,000 customers that never signed up for solar in the previous 10 years That we certainly will go back in and work with Lennar to upsell them on service here because, again, I think it's pretty obvious that this is needed out there and consumers really have more and more demand for it. Again, sitting here in the middle of this energy crisis is a stark The other is that Lennar is clearly, in my opinion, the leader in homebuilding and certainly a leader in the homebuilding industry. And when you look at the size of growth that they have in terms of unit numbers, We look to be able to expand that offering out to multiple areas and then offer that same service and technology and processes That we're getting with SunStreet to other homebuilders. So this is a lot about significant growth. What I would say is on with regards to The microgrids, you would need to have a strong partnership with a company of the size, Scale and vision that Lennar has in the development community to be able to start to do this And to integrate all the different homes of the community and different structures and to have a true microgrid operation.
And this is enhancing our grid services, which we will have news on that shortly as far as that knee pool deal that we did back in October. This also enhances those grid service opportunities. So this really catapults us into a what we think is a leadership position as Moving towards what the communities of the future will look like with regards to energy consumption and that's a part of this transaction. It's a part of the consideration of the transaction as well. But I think in any way you look at it, Whether it's the current base that we get, the ability to upsell, the growth potential and then the vision of and what we'll turn into reality of microgrid, any which way you look at it, this is very, very compelling for our shareholders.
Stuart, I don't know if you want to comment any on the microgrid side of things anymore than you have previously.
Yes. So I'll just add and state that John said it very well that the development of the microgrid system is going to take some effort, some focus, attention. There's going to have to be a commitment on both sides, the innovator side as well as we, the community developer, to coordinate a program that develops the way that the microgrid system of the future will operate. It's something that Lennar has a tremendous appetite for, and we look forward to working together with people who are expert in this industry to help frame the way that communities will work on energy delivery in the system and fulfill that promise
Okay. All right. We'll leave it there for next week. Stuart, thank you for
your civic engagement as well. Everyone, good day.
Thanks, Julie.
Your next question is from the line of Michael Weinstein with Credit Suisse.
Hey, morning. This is Maheep here on behalf of Mike at Wedbush Research. John, thanks for taking the questions. Just high level, just want to understand on the deal. Like, is this accretive to the net customer contracted value Or do you see it more accretive to the customer growth rate going forward or kind of a mix of both of those?
We'll stay at a high level. We'll get into that next week when we Review all the numbers and guidance for 2021. What I will say again is that this is accretive across the board And is accretive very relatively quickly, particularly in the customer growth side, but also on the major metrics. You referenced a net contracted customer value. Yes.
And I'll tell you by when and how relatively how much. But in addition to that, adjusted EBITDA plus P and I and recurring operational cash flow. So this is significantly accretive to us and it's something that we see impact this year and certainly in 2022 and beyond. Again, I'll just leave it at that and we'll get into more of that next week if you come by.
Got it, sure. I totally understand that. One of the And but just in terms of strategy again, like does this kind of kick off a general in house Customer acquisition operation for you guys, with similar partnerships and probably building on that, does this Restrict or limit you for future partnerships for either of you with other solar companies or other homebuilders in the market?
I'll go first and I'll let Stuart talk to his side of it. Absolutely not in terms of limiting We've talked quite a bit earlier about using this platform to expand and to go into other homebuilders, right? And that's We're quite certain that's going to happen. We're going to be driving that. We're going to take and let me talk a little bit more about the platform that we get with SunStreet.
It's There is it took years to perfect the processes that are specific to a home builder, To not interrupt at all the home buying process, to actually make it a better Experience for homebuyers and customers and the processes are very specific. We will go through and we will keep all those details. We're keeping everybody around all these processes. We're incorporating them into Our processes and will be a separate division, if you will, as it is today with regards to homebuilder. The technology that goes around that and automating a lot of these processes is something we're also getting.
So this enables us to have a very clear, specific and very good customer experience with the homebuyer coming in. And this sounds trivial, and I can tell you it is not. You cannot interfere at all with closing on a home. You cannot do that. And to understand how those processes and those steps go with all the different parties in the process, if you will.
You think about you're buying a home, there's a lot going on there, there's a lot of people involved, right? This is what they perfected. Then they automated it. That's in the technology. That happens to be in the same technology platform that we already have.
So we're going to be able to integrate those technologies and processes together and immediately To be able to offer this fantastic, well worked on and earned SunStreet process to all these homebuilders across the United States and hopefully beyond. So there's a lot of technology and processes we're picking up with SunStreet too and that's critically important. Stuart, do you want to talk to me more about his question?
Sure. So let me just say that as far as Lennar is concerned, We have a history. It's a well defined history of working with innovation and innovators. And that is we pick a horse. We pick a horse that we think is the right participant in an industry and that's where we spend our time and our focus.
We have chosen Cinnova as best in class, and that's where we're going to spend our time. So when you ask, are we constrained to work with others or anything else, It's just the way that we focus is we get focused on an innovation cycle with a partner and that's where we spend our time,
Got you. Thanks a lot for the color, both John and Swift, and congratulations on the team.
Thank you, Maheep. Thank you.
Okay. Your next question is from the line of Mark Stauff with JPMorgan.
Yes. Good morning. Thanks for taking And congrats on the deal. Stuart, you've got a very diversified geographic footprint. I'm just curious of the 40,000 or so solar installations that you've done, what percentage would you say are outside of California?
And can you say kind of maybe what a number 2, number 3 kind of markets are for you so far anyway?
Well, listen, John has carefully managed the specifics of the information that's gone out. So I don't want to get over my Excuse in this regard. But I will say directionally, the way we thought about this space We concentrated our efforts in California at first so that we could develop the mechanism, the plan, the programming of dovetailing solar installation with home production. And I think John has done a great job of explaining Why SunStreet is differentiated. It grew up in the production home business and we had to focus And concentrate our efforts in order to build the platform.
We've been steadily expanding beyond the boundaries of our California operations and the exact numbers and percentages perhaps will lead to John's conference call next week.
Okay. Thanks. And then I completely understand the rationale going forward here. Just a quick question on The existing 40,000 customers that you have, were those all sold as part of the upfront The cost of the home or is there anything John that might be kind of your traditional loan lease PPA type recurring cash flow?
Yes. The structure is that the recurring cash flows are not Coming with the customers, a portion of them were sold in terms of a loan construct and then since paid off And whether that was rolled into the mortgage upfront or mortgage later, that has occurred. And in the contracted The cash flows are something that we could down the road take a look at bringing on board, so to speak, and I'll leave that where it is. But Those were fully financed essentially beforehand. We don't see any capital requirements for that Cash flow is there.
And at the same time, though, to be very, very clear about it, those customer relationships are ours now through this acquisition, and we will be calling those customers and asking them if they would like to Upgrade to storage and other services and then be able to, again, as I've referenced, go back to the 250,000 and counting Other homeowners that don't have any solar at all even and ask them if they would like solar and storage and other services that we offer, Quite confident they will. So it gives us a nice platform and there might be some Opportunities to get additional cash flows from this existing base over a period of time. But right now, it's certainly not going to require any capital from us outside this acquisition amount that we're paying in stock.
Your next question is from the line of Ben Kallo with Baird.
Hey, good morning, guys. Congratulations. Good morning.
Thanks, Matt.
Thank you.
I had a question. When from Your business model of owning the assets, how does that change from a new home buyer Just going out and selling someone solar in a PPA or a lease?
Yes, Ben, It doesn't change. A lot of these customers were put under a lease construct. And here, What's really nice is that we're taking a highly sophisticated technology enabled platform that is SunStreet's, combining it with ours, Sophisticated platform with all the different products on it. So one of the things that were very attractive to Stuart and myself is that we're able to now broaden all the new homebuyers that are coming in to Menard and the other builders we have in the And so, when you look at it, we'll be able to offer leases and power purchase agreements and loan only And all the different variations that go with that, as you know, we're a leader. No one has a better and wider product array than we do, and we continuously Focus on never letting up on that and continue to launch out more products than anybody else out there.
So this is something where we're going to be able to And consumers are going to choose. And that's again the big part of this is, We wanted to be the best at delivering energy services, new energy services to the homebuyer and continuously innovate, continuously offer Whatever the customer wants at the end of the day. And so our business model will not change, but the availability and options in the service contracts, When our home buyers and other home buyers cannot be able Dubai are going to really expand here. So it's quite exciting.
And then just because I've got a couple
of questions while we're done On the call here, just about what's within SunStreet. I heard you say that there were channel conflicts, but are there is there a sales team within SunStreet? And are there construction crews within SunStreet?
No. We have the exact same account management. So We're pleased to have those folks already on board, so to speak. And it's our exact same model.
Your next question is from the line of Pavel Molchanov with Raymond James.
Thanks for taking the question. Following up on one of the earlier points about the geographic footprint, Is there overlap between where Cenova currently the states where Cenova currently deploys And where Lennar has newbuilds and are there any new geographies where Lennar has a
I'll take that one. The overlap is 100%. We're in these markets, California, Colorado, Florida, Nevada, Texas, etcetera. There will be other markets that Cenova will expand into this year, and we'll get a little more specific on that As we open those markets up, for instance, Washington, D. C, we just opened that up last week.
And so let me put it this way. Wherever Stuart wants us to go and has is building high quality communities, we'll go. And that goes with the other homebuilders as well. We aim to again serve our partnership with homebuilders across the country and wherever they want us to go, we'll go. And I do think that just the math itself, there is a high degree of overlap there, but we'll continue to expand geographic wise this year.
Frankly, it's going to be more than I thought at the beginning of this year. But right now, there's 100% overlap.
Understood. Yes, and maybe a more kind of hypothetical question. This is the first acquisition, as you said, That Cinnova has engaged in, is this a one off or can you envision buying New businesses, public or private, going forward?
Well, I can't comment on future M and A, but look, The way I look at this is, it was very important to me as the founder of Cenova to find the right people and partner To do my first major deal with Cinnova, and I found that. Stuart and I have talked a lot about The compatibility of the management teams, the compatibility, frankly, you've seen on this call, I think, between Stuart and myself. And the compatibility that I know exists between our employee bases. And that's hard to find. And for those who are really good and astute, who I listen to, like Stuart and doing Acquisitions, know that it starts with the people first.
And the people are probably 1, 2, and 3, and oftentimes management teams and CEOs Skip that over and don't pay attention to it. We are very, very focused on it as you can see. And so when we And see alignment like this, we will do a transaction. We will be more acquisitive as we move forward in time. Most likely, yes, But it has to be the right deal.
And this one's going to be a tough one to hurdle, I'll tell you that. This just has checks all the boxes for me. Again, I was very, very cautious. I want to make sure that not only anybody can announce a deal, But you have to execute on that. And I'm quite certain, Pavel, that you and everybody else out there, the shareholders And analysts are going to hold me accountable, make sure that this will be a transaction will be integrated efficiently and we will execute on the numbers that we've laid out and I'm quite confident that we will.
Will that lead to other transactions and such down the road. I absolutely think it will, but this one's going to be a tough one to beat all the way around.
Appreciate it. Let me add let me just add to that, John. I don't need to overstep my bounds, but I'm certainly not going to answer about the future of M and A within Sunnova, but I will say on the receiving end that the comprehensive due diligence and evaluation That was done on our SunStreet program. The confidence and the focus that was Brought to bear on both underwriting, the operation itself, the mechanisms and the people especially around this particular acquisition is indicative to us as investors in this company This is the company that we want to be working with because if there is another acquisition in the future,
Thanks, Pavel.
Okay. Your next question is from the line of Chris Souther with B. Riley.
Hey, guys. Thanks for taking
the question there.
And congrats on the deal here. Can you just talk a bit about the opportunity with the existing 40,000 customers? Are there service agreements that Cinnober will be taking over or is it really more around kind of the upsell with battery and other potential services? And then around integrating larger communities in micro grids, is this something you would do with, I think, the existing base or More likely kind of a clean sheet approach you take with the new community development.
Yes. Thanks, Chris. I'll take that first and see if Stuart wants to have any comments. The existing base, yes, the good the vast majority of those We do have service contracts. We will be providing the service there.
And I think the real value, of course, is the Ability to upsell batteries specifically, but again, look for load management, look for EV charging, look for generators, look for fuel cells, possibly down the road, look for a lot of different things we're going to be able to offer that pace. So that's Quite exciting. We'll get on top of that right away as soon as the transaction closes, and we're aligning all of our capabilities to be able to do that here at Cinnova. In terms of the microgrid, the answer is we will look at Both possibilities, but I would say that is and what's really interesting about the microgrid is imagine, as you put it, Chris, a clean sheet of paper Sitting here again, what's going on around me with regards to the centralized grids failure. And if you could do it all over again, what would you do?
Would you do the same thing? And I think all of us at least sitting here in Houston would say, no, We want something completely different. And that's where this gets very exciting is to work with Lennar and develop the communities of the future here today. And we have the technology, we have the capabilities, we'll develop more Software Technologies, Cinnova is often should be seen as more of a software company with services. And we're going to develop that with this new with SunStreet, with their technologies, integrating those together and figuring this out and how do we make the communities of tomorrow, happen today with regards to energy services and be able to provide a much better quality of life to those homebuyers in the new Lennar communities.
Stuart, I don't know if you have any more comments on the MichaelGrid topic here.
No, I think you said it well, John. Just say that, again, this is a very important focus for our company as we think about the evolution of a sustainable community and uninterrupted life for our customers as they battle the element. This is a core focus of our company and will continue to be.
That's great. I appreciate the color there. And then just maybe a last one here. Could you maybe discuss just historically what the lease versus lease and PPA versus loans historically for SunStreet were? I think you've mentioned leases as potentially being more prevalent than I had initially thought.
Yes. In the new homebuilder market, the new home market rather, yes, it predominantly has been leases. You can mix some PPAs in there, but people have typically chosen the lease. It does go well with the storage. It's better, right, with paying on a flat rate per month than a price per kilowatt hour.
And so I think that would be Something considerably higher than 50% historically. We certainly see that continuing as we move It's just a lot easier with the transaction. When you get into the details, a new home transaction, a purchase by a new home buyer It's materially different than a retrofit new home purchase. And so with that material difference In terms of financial structures to pay for the service that we provide, Homebuyers have typically chosen leases. And I know that's a bit counterintuitive to folks why don't you roll it into mortgage.
What I think is Exciting here is you're going to have the ability to do either whether you want to have a loan, you want to have a lease And certainly, you can acquire a PPA through a PPA as well. So I don't think that it's going to change very much as far as lease versus loan. But at the end of the day, again, I just want to highlight the fact that we're Agnostic to whether somebody wants to choose a lease PPA or loan. Our joint and I know Stuart shares this is, It's up to the customer. We want to give the customer what she wants.
And that's the most important to us above all else.
That's great to hear. And then maybe just the last one on SunStreet. It looks like in one of your presentations you've talked about over 8,500 solar Deployments in fiscal 2019, it was 2020 a similar type of number or Is that something you haven't disclosed yet?
I don't think we've disclosed that yet. We can talk to it next week. But So I would think it would be reasonably to assume that the business was growing and I'll just leave it at that. We'll talk about more next week.
Okay. That's great. Thanks guys.
Thank you.
Your next question is from the line of Kashy Harrison for Simmons Energy.
Good morning. Thanks for taking my questions and congratulations on the partnership.
Yes. So John, a quick clarification question. So will Lova be Lennar's exclusive residential So we're
in store provider into perpetuity or is this an agreement that lasts, I guess, over the next 5 years based on the earn out commentary from the release?
Yes. It's definitely multiple years, 4 plus years. But what I would say is that And again, I'll let Stuart comment on this. What was important to us is, again, it goes back to people, it goes back to compatibility of our teams and the way that we look at partnerships and we take them very seriously. We feel that we're not certainly not infallible.
We make mistakes, but we Treat people with respect, whether they're technology partners, whether they're contractors that are dealers, and we pride ourselves on having good partnerships That are long term. We don't get into a relationship that's transactional in nature and short term in nature. And what I can tell you, and again, I'll let Stuart speak for himself is that, that's what I found in Stuart and the Lennar team. They Do not get into relationships very lightly. They're not transactional.
They think long term and they're dedicated to their partners As we are, and that was really what started the process of discussion that led to the transaction that we're talking with you today. So we certainly see this as multiple, multiple years beyond any sort of contract term or anything else. That by itself is very long, but We certainly see this much, much longer than that and we will do everything that we can to be a great partner for Stuart, did you want to comment any on this?
Sure. Look, if you look historically at Lennar, We tend to be very focused on building long standing relationships. If you've listened to Lennar's calls, you've heard of Lennar's builder of choice focus around the people that we do business with in building our We are the builder of choice for many because We focus on loyalty. We focus on working together. And that's the partnership that we found with Sunnova.
Now for the next years, we are In a committed relationship, but even beyond that, you can expect that with this partnership working as we expect it to, to our customers, but innovating for the future and that entanglement is very sticky.
That's great color from both of you. Thank you. And then and maybe just a quick follow-up for Stuart. I was wondering if you could just discuss your You hold market share within California based on 2020 results. Looking through your investor deck, it seems like you have a very big presence there.
But I was just wondering if you could provide some details on share. And then on top of that, if you have any expectations based What you talked about in the past of your views on your ability to grow market share within the state of California? And I'll leave it there. Thank you for the time.
Well, I don't have the specific number on market share, but we are California's largest So I'll leave it at that. We're just a very we have a large presence in California. And I will say parenthetically that starting very early on 5, 6 years ago, I don't remember the exact number of years, Every Lennar home has been built with a solar installation included in the price of the home, and we're proud of that. We predated the 2020 mandate and kind of led in the direction of solar across our platform as the largest builder in California.
Your final question is from the line of Marshall Carver with Heikkinen Energy.
Yes. Thank you. I know you're not giving guidance, but I'm hoping to get a historical number. How many new solar customers did SunStreet have last year?
In 2020, we'll give that out. Again, I just answered that question a little earlier, a little and again, I apologize, it's a bit ambiguous, but I think 'nineteen was 8,500, and I don't want to trip over any issues with Information with regards to whether it's been disclosed by Lennar yet or by us. But again, that you would think that Business would be growing quite nicely. And so as we look forward in time, even with a truncated Closing of, say, April 1 this year, you would have a pretty significant addition to our growth on 2021 beyond.
Thank you. And one follow-up, when you talk about the deal being accretive On a customer and EBITDA basis, do you mean I'm assuming you mean accretive per share or is it just accretive on a total company basis?
Again, I don't want to trip up, but we'll talk more about guidance for 'twenty one and beyond next week. What I would say is that my answer is both. I watch very carefully, for instance, net, as you well know, MarshallNet contracted customer value per share to hold me accountable for equity issuance. I think that's the right thing to do is grow value per share, But then also overall value as well, which typically with adjusted EBITDA plus P and I or recurring operational cash flow is on an overall basis rather than a per share basis, but certainly encourage everybody to divide by the share count as well, Dave would like to do so.
Thank you and congrats on the deal.
Thank you.
I will now turn the call back to John Berger for any closing remarks.
Well, thank you. As events here in Texas and elsewhere. Prove, when you look at the energy crisis that's going around, power crisis that's going around, Me and my team and my new family with the SunStreet employees, Stuart and myself recognize that This kind of backdrop only proves convincingly why this deal makes complete sense. It made sense before, but it certainly what's going on around us Without a doubt proves that this is not only a transaction that makes sense, but is desperately needed. And we will roll out New communities for home buyers across the country in a very strong home buying market.
And we're looking forward to that growth opportunities to expand, to add the technologies and the processes That are very specific, that have been years in the making that come with SunStreet to our platform, our software platform. And we're so pleased and honored to have Stuart and Lennar choose Sunnova as the home for SunStreet and its employees. And most of all, we're looking forward to and I personally looking forward to all the SunStreet employees that come on board joining the We're looking forward to having you being part of the family. We have a lot of growth. We have a lot of things to do.
We needed a lot of people and we're looking forward to having you on board and joining our family. And with that, I want to thank Stuart for joining us and Looking forward to having a very strong partnership for years years to come. Thank you.
Thank you for joining today's conference call. You may now disconnect.