Just Energy Group Inc.

Deb Merril - Co-Chief Executive Officer Pat Mccullough - Chief Financial Officer James Lewis - Co-Chief Executive Officer

Orhan Eldarov - RBC Capital Markets Carter Driscoll - FBR Capital Markets

Thank you very much. Good morning, everybody, and thank you for joining us this morning for our fiscal 2017 second quarter earnings conference call.

My name is Deb Merril, I’m the Co-CEO of Just Energy, and I have with me this morning our Executive Chair, Rebecca MacDonald; my Co-CEO, James Lewis; as well as Pat McCullough, our CFO. Pat and I will discuss the results of the quarter, as well as our expectations for the future.

We will then open the call to questions. Before we begin, let me preface the call by telling you that our earnings release and potentially our answers to your questions will contain forward-looking financial information.

This information may eventually prove to be inaccurate, so please read the disclaimer regarding such information at the bottom of our press release. The second quarter of this fiscal year was tremendous, building on a very strong first quarter, and placing the company on a clear path to achieving our financial expectations for the year.

Our business performed very well. We continue to deliver results that demonstrate the significantly improved profitability profile of the company as well as highlight our ability to generate meaningful cash flow to meet our ongoing capital commitment, while also funding our strategic growth initiatives.

As we head into our strongest seasonal quarters Q3 and Q4, the key performance metrics that we deem most critical to measuring our financial success in future trajectory are strong. In fact, as I prepared to speak with you today, it struck me how consistent and at times repetitive these calls have become over the recent past.

And that’s a positive thing, given that as a company we are consistently delivering results in any environment. Our ongoing ability to drive growth margin and earnings growth in a competitive environment clearly underlines that our strategic vision is producing the intended results.

We are very pleased with the UK business, which is performing exceptionally well. We’ve now grown the customer base by 16% over the past year.

And while we experienced defines in the total company level during the quarter, we are steadfast in our belief that the refusal to engage in aggressive pricing tactics that had developed within our industry during the current commodity price environment is the appropriate strategy for Just Energy. We are committed to evolving the company to capture more accretive profits and cash flow by not chasing market share at the expense of margin.

This effort has resulted in the addition and renewal of customers in all segments at margins above those customers lost. We are able to drive these improvements, because our new innovative products are gaining more appeal and presenting more value for our customers.

We are pleased with the progress we’ve made on our product line. We’re focused on delivering energy management solutions, including commodity, energy efficiency, and renewable products.

These value-driven product and structures are a key component of our growth strategy, and are allowing us to price our energy management solutions competitively without sacrificing customer satisfaction. This is very evident, when you look at our improving attrition rates.

The success of this strategy is once again evident in our results this quarter, as we grew gross margin by double-digits and delivered base EBITDA growth of 24% or even more impressive 34%, when normalizing for the prepay commission expenses. This strength and profitability resulted in significantly improved cash flow.

Base funds from continuing operations increased 39% during the quarter to $52.6 million. This translated to a payout ratio of 36% during the second quarter and 48% for the first six months of the fiscal year.

These are levels that this company has not seen in years. In fact, this quarter represent the lowest single quarter payout ratio in company history.

Our debt profile also continued to improve. During the quarter, we took steps to repay and restructure our debt, ultimately resulting in a 6% decrease in total debt and debt-to-EBITDA ratio of 2.4 times, an improvement from 3 times one-year ago and 2.6 times at fiscal yearend.

To summarize, it was another strong quarter for Just Energy. As you look ahead, we are planning for and are well-positioned for growth.

We have tremendous opportunities to achieve our near and long term goals through the addition of new products, markets, partnerships, and the customer loyalty program. The combined impact of these initiatives will drive value to our customers and sustainable growth for our business.

I’ll touch on a few of these exciting opportunities before we conclude today’s call. But first, let me ask Pat to provide some additional color to the quarter’s financial results.

Pat?

Thank you, Deb. We’re pleased with the strong start to the year as we demonstrate the improving profitability profile of the company.

The business is performing exceptionally well, and we are pleased with the consistency in our ability to deliver stable predictable bottom-line growth in just about any market environment, which is allowing us to generate stronger cash flow and position the company for future success. First, I’ll cover some of the highlights of the second quarter, and then provide some added color in certain areas.

Our second quarter Base EBITDA increased 24% to $56.9 million, a strong performance offset the $4.3 million of additional prepaid commission expenses during the period compared with the second quarter of fiscal 2016. If you exclude this additional expense item Base EBITDA for the quarter increased by 34% to $61.2 million compared to the prior year, this translates to a $15.5 million year-over-year improvement, of which $15.8 million was driven by strong operational and product performance with negative $300,000 impact from foreign exchange translation.

During the quarter, gross margin improved 10% to $183.5 million as a result of higher realized margin per customer from differentiated products and pricing discipline. The consumer division gross margin increased 8% as a result of higher margin contribution per customer, while the commercial division gross margin increased by 15%.

We believe that clear opportunities exist for ongoing margin per customer improvement, and a number of recent trends helped give us this confidence. Average realized gross margin over the trailing 12 months ending September 30 was $261 per RCE in the consumer division, and $80 per RCE in the commercial division.

This equates to improvements in consumer and commercial of 19% and 29% respectively. If you take a look through our MD&A, you can also see these incremental improvements between customers added and lost continue to hold true in the recent standalone quarter.

Our strong customer value proposition is allowing us to price our energy management solutions at premiums without sacrificing customer satisfaction. And we were pleased to see customer attrition improve 2 percentage points year-over-year, and 1 percentage point better than Q1 fiscal 2017.

It’s particularly encouraging that attrition rates improved in both the consumer and commercial divisions in what we consider highly competitive market environments. General and administrative expenses for the second quarter increased $6.4 million or 16% year-over-year.

This was primarily driven by higher costs required to support customer growth in the UK, as well as costs associated with international expansion and new strategic initiatives. Selling and marketing expenses which consist of commissions paid to channel partners decreased 9% year-over-year, primarily due to lower commission costs associated with lower gross customer additions and decreased residual commission expenses.

Now, I’ll review some of our other key financial metrics and balance sheet items. Base Funds from Operations of $52.6 million increased 39% from the prior year.

The increase in Base FFO was higher than the 24% increase in Base EBITDA, due to the additional cash generated from gas deliveries compared with the prior period, as we are paid on deliveries instead of consumption in some of the Canadian provinces and Michigan. The payout ratio on Base Funds from Operations was 36% for the quarter and 48% for the first six months of the fiscal year.

On a trailing 12-month basis, the payout ratio is currently 50%. We’re very pleased with the progress we’ve made as it demonstrates the viability of our future $0.50 a share dividend.

Cash and cash equivalents of $118.8 million were up 34% year-over-year and up sequentially, driven by strong operating cash flow of $61.1 million during the current period, up from $15.4 million one year ago. The bottom line performance drove this increase along with the negotiation of payment term extensions with some key suppliers.

This resulted in a deferral of approximately $34 million of commodity payments on a go-forward basis. We continue to pursue aggressive debt reduction; total debt of $644 million as of September 30, 2016 decreased by 3% from $660.5 million as of March 31.

While not reflected in the quarter-end results and balances, in early November we redeemed a principal amount of $225 million of the 6% convertible debentures scheduled to mature on June 30, 2017. We also redeemed the remaining principal amount of $55 million, on the 9.75% senior unsecured notes due June 2018 on October 6.

This completely retires the 9.75% notes. Management is confident in its ability to address the remaining $95 million balance of the June 30 convertible debentures through fiscal 2017 free cash flow and working capital improvements.

Internally, we’ve already turned our attention to calendar year 2018 and 2019 maturities. Overall, the balance sheet improvement initiatives have resulted in significantly improved debt ratios and we are committed to further reducing our debt.

As of September 30, Just Energy’s book value net debt was 2.4 times trailing 12-month Base EDITDA, an improvement from the 2.6 times reported at March 31, 2016 and the 3.0 times reported for the prior comparable year-ago period. We believe the net result of the near-term refinancing and pay-down maneuvers, I have just described, will put us at a net-debt-to-EBITDA ratio of close to 2 times by fiscal yearend.

During the quarter, we announced that JPMorgan Chase was added as a lender to our credit facility. As of September 30, 2016 we have not drawn on our $292.5 million credit facility, although letters of credit totaling $136.3 million dollars remain outstanding.

Turning now to our outlook, fiscal 2017 is off to a strong start in places that’s squarely on the path to achieving our previously provided full-year Base EBITDA guidance of $223 million to $233 million. This range reflects double-digit year-over-year percentage growth.

In fiscal 2017, we had initially estimated that Solar/TerraPass would contribute $10 million dollars towards the double-digit percentage Base EBITDA target. Given the secular challenges facing the solar industry today, we deem it prudent to remove these specific expectations for the current fiscal year.

However, I want to be very clear that the performance of the core North American and UK businesses are tracking well ahead of full-year guidance more than offsetting any short term RCE or Solar weakness to plan. With that, I’ll turn it over to Deb for some concluding remarks.

Thank you, Pat. So in summary, our first-half results have exceeded our expectations.

And we’re entering our seasonally strongest fiscal third and fourth quarter with confidence that we can build of that performance and deliver another year of double-digit earnings growth as well meet our Base EBITDA guidance. We’re experiencing great customer acceptance of our growing value-added product suite and long-term loyalty programs.

Our differentiated offering has continued to drive growth in North America and the United Kingdom, and will be a catalyst to our geographic expansion plans in Europe and beyond. Last quarter we spoke with you about our newly launched JE Perks program.

This continues to show encouraging signs of acceptance. And we have already seen dramatic attrition improvement in our pilot market.

Sales conversion rates were up 29% and all of this has been accomplished while raising the price. This clearly demonstrates that customers find value in this product and they’re willing to pay for it.

JE Perks is being scaled to all markets, so that the effects will be seen across our customer base in the coming quarter. I’ve been in this industry for 22 years and I feel there’s never been a more exciting time in this space.

As we observe the consolidation in the marketplace amongst our competitors, it is becoming clearer that the retail industry provides opportunities for growth for them. As the largest independent retailer, we have a unique advantage to adapt quickly to ever-changing technology and product landscapes, bringing solutions to the market faster than our competitors.

Despite our senior attrition, management have conviction that customer growth is coming soon. With new superior products like JE Perks, new sales channel additions and new market launches like Germany and Ireland, we will see exceptional customer growth in the near-term.

In closing, our business is healthy and growing stronger. We’re committed to maintaining our dividend and pursuing prudent geographic expansion, and further strengthening the company’s financial and strategic position.

As we stay the course to become a premier world-class provider of energy management solutions. And with that I will open it up for questions.

Hey, guys. How is it going?

Good. How are you?

Good, good, just showing in for the big man today. Yes, just have a couple of quick questions here.

First about your extension in Europe, I know you guys have talked about it over a couple of quarters in the past. You guys have said that it’s a mature market, but the opportunity to enter would sort of allow you to start right away with your strategy of high value, high margin products, and sort of focusing on a profitable book.

I was just wondering what is the competition like in, say, Germany and Ireland like will you be able to offer those creative products, like smart thermostat and stuff like that, or how are you guys looking at growing there?

Sure. I’ll start and if anyone like to jump in you feel free.

So Germany actually is a highly fragmented market with a lot of competitors. So you have about 800 different suppliers in Germany.

And what you find is a lot of those are very focused on customers in their region or where the incumbent territory might have been in the past. You don’t see a lot of change in a lot of product innovation.

So that’s really why we keep saying that - obviously we want to offer standard products. But we truly believe that our ability to take the flat-bill, bundle that with loyalty reward programs, and things that we’re doing in North America.

We just don’t see anybody doing it over there. So we feel very confident that we’ll be able to make a pretty good impression, and be able to see that benefit in a very short order.

Ireland is an interesting market. It’s much smaller obviously than Germany.

Germany is the largest market in Continental Europe for us, which is why it’s so attractive. But Ireland is small, but it’s kind of add on to our UK business, so it’s relatively low cost to enter, but again starting to see some - we see the progress we are making there.

We fundamentally believe that the value proposition will be much greater with the products that we bring.

And is Ireland also very fragmented, or just because it’s smaller it’s going to make you a bigger player.

Not nearly as many competitors, you have kind of being incumbents that are there. But not nearly as competitors in Germany, so it’s much less fragmented.

But again it’s smaller opportunity for us. So there are pros and cons to both.

Okay, great. And, yes, I think you mentioned earlier that you’re starting to look at the way to take out your 2018s, so maybe that’s a question to Pat.

Are there any ways you’re thinking of going about there? Is it going to be fairly sort of working cap solution or converts or what are you guys looking at?

Yes, what we’re really trying to focus on there is taking our free cash flow that we’re going to be generating this fiscal year and next fiscal year, as we’re thinking about 2018 and beyond. This year, we expect another $50 million, so $50 million of free cash flow that will help us take out the rest of the 330s.

But then in fiscal 2018, we’re expecting something closer to $75 million of free cash flow on a full-year basis. So we can almost take out the entire $100 million from free cash flow alone.

You saw that we noted that we have some working capital improvements through supplier - direct supplier payment term extensions. We’re continuing to work that opportunity and we think that opportunity could be much higher than that $35 million.

So those two opportunities alone free cash flow and off balance sheet trade financial are our favorite types of capital to take out those shorter-term maturities. But long story short, we could go look at private debt, other types of instruments, we’re trying not to put any further dilution potential on the board.

We want to limit that to the convertible we just did. But at this point, everything is in play with an emphasis on free cash flow and working capital financing.

Okay. Yes, that’s fair.

And would you be able to pin a number or range on how much more we can squeeze out of the working capital?

Yes. Working capital can be done in two ways.

It can be done directly with suppliers or can be done by involving a third-party. Those third-party fees for that are quite compelling if it is commodity payable financing.

They could be less than 5% annual money. We are limited within our excess borrowing base covenant, but we have almost $300 million of capacity there.

But we would never go that high, if we had the opportunity to do more commodity payables, because the commodity prices themselves or the volume in the market could put borrowing base capacity at risk. So we can probably limit this to another $100-million-ish if it was there for us.

We hope it could be, but it’s going to take some time to determine if we can get another 100 million done.

Okay, great. And, I guess, just one last question before I get back in queue, is for your solar, so you said you pulled your guidance for solar and that the base business is going to sort of more than offset or likely more than offset whatever weakness in solar you may see.

Was there anything in last quarter to that led you to pull on your guidance or like is it because of the Republican sort of government or what that drew you to that conclusion, was there anything specific?

There is pretty intense pressure on everyone’s margins right now. If you look at what’s happened to SunEdison, SolarCity, there is quite a bit of let’s say lowered expectation for the tax equity and the sponsor equity returns on solar projects.

Because of that there is a great deal of pressure on originators like us, but also fulfillment partners to push margins down. The harder it is to make money in this space, the more creative we have to be with lower cost commercialization strategies.

So door to door is a more expensive channel than digital, lead generation, telemarketing. So we’re working on the nuances of how we go to market to ensure that we like the returns within solar.

But fundamentally everyone’s margin is under incredible pressure right now. That was the main reason that we thought we should move that guidance.

Okay. All right, well, I’m going to get back in the queue, ask couple of questions after.

Thank you.

Thank you.

Thank you.

Good morning, Deb, James, Pat, Rebecca.

Good morning.

Good morning.

Congratulations on another strong quarter of execution. First question, I guess is, are there - as your bundling strategy still in early days, but as perks pay off at least in terms of lower attrition rates.

Is there a metric you think we can be following whether it’s on attach rate or a percentage up sell or is it still fairly early to try to get to some type of reportable metric or - I think we can think about that, because then I have the key portion to increasing your margin growth, certainly in light of still rolling off some of the older contracts, and what’s to be likely kind of a flattening top line growth until you can kind of restart it. So any type of color you can provide there?

And then I have a follow-up or two. Thank you.

Carter, I think to start with, the first thing is the attrition at the high level. We’re fairly level conservative with our approach.

We want to pilot the opportunity first. And then make sure that everything is working the way we think it is.

We’re pretty happy with the result so far, which is why we’ve seen attrition dropdown there. As we continue to roll out Just Energy Perks to all our customers, we will walk to some additional metrics.

But right now the attrition is the best guideline that you see today. What we did talk about, in Deb’s speech there and Pat’s, was the ability of our sales people to have a higher, what we call conversion-rate.

When they’re talking to folks at the door. It changes the conversation.

So we’ve seen an increase there of 29% on that front. So that’s an early indication of the positive results that you can look at.

I’m sorry to interrupt. Just as a clarification.

So when you talk about conversion rate, I mean have you provided past metrics in terms of what the conversion rate has been or those internally held? I guess, I’m just trying to from an apples and apples perspective trying to get a sense of where 29% is relative to past quarters?

No. We haven’t provided in the past that was more of an anecdote, just to give you some numbers to show, what we are seeing internally.

So we obviously know drawbacks internally, but we don’t actually disclose conversion rate. But we wanted to share with you that we are seeing a market improvement in conversion when you have these products together.

And I think that, we discussed amongst ourselves several times as we look forward and we’re transforming the company, the industry is transforming. And we’ve divided around, how we best show this with the product for customer the RCE metric.

And I think, we said with you about this, Carter, the RCE metric is tough as we - it’s not really the most important metric for us now. Its margin is product for customer it’s number of customers and things like that.

So I think, we’re going to have to address this in the coming quarters at some point, but we don’t do it too early, and get kind of ahead of our skies, and then end up with something that doesn’t make sense either. So but to your point there - we have to at some point probably shift our metrics in how we measure this.

The adoption rate and the implementation of the strategy, but our metrics today don’t do adjusted.

Yes. I understood.

And maybe just shifting gears a little bit, you had obviously very strong growth in the UK, you talked about Germany and Ireland. Maybe your expectations if you can lay it out for when you could see some type of material RCE contribution from either of those two new geographies.

And then would like to - filed with kind of the base business and then the low commodity environment. You have to get more volatility or you need to see the forward curves really spike up before you can expect more growth in your core RCEs, relative to what you’re allowing to will often not pursue, because they were maybe less profitable customers try to get a sense of both internationally and then domestically.

So kind of three questions in one, sorry for framing it that way.

Sure. But hopefully, I can follow all that, and I can say back for you.

But so Germany and Ireland, I am pretty comfortable saying that fiscal 2018 Germany will have a pretty good contribution to our customer growth. The strategy that we’re implementing now will hopefully put us in the market by the end of this - potentially calendar year if not definitely the first quarter of fiscal of our - the last quarter of our fiscal year.

So as we ramp that up for the last quarter of this year, we expect to kind of have that on the ground running in Q1 2018. So I’m pretty - we feel pretty good about that, Ireland is a little bit slower, because it’s a little bit longer lead time that we’re seeing.

So I would expect sometime in the middle or second-half of the year for Ireland to pick up a little bit. So from that perspective anything you want to talk about within North American…

I think in North America quarter, Carter, what we are seeing - actually I’ll bring up the UK. This past September you have result on volatility in the UK market, which you hadn’t seen in probably the past five or six years there with our line going down between France and the UK, some nukes and some wind not producing.

And in that volatility, what you see in pricing spike, you are seeing some repetitive struggle over there, which then sits right into our daily look-up, attracting customers with our flat-bill opportunities there and fixed rates. So when we do see volatility, you are absolutely right, we do see some increased awareness out there, some increased attrition - I mean, addition.

In North America here we hadn’t seen a lot of volatility. We had some early weather up in the Toronto area, Canada and some in the Northeast there.

But we continue to see low volatile environment, when we do see a pick up, we do expect the customer growth on the residential and commercial side to pick up. But one of the things we also expect to see is, as volatility happens, we see other players didn’t have in the market.

And we are starting to see that, again, you’ve heard some of the major utility affiliate looking to get out of the market in the Midwest there. That provides opportunities at some of the low-cost providers out there or low cost customer pricing companies leave the marketplace.

And I think, Carter, just low volatility North America, this is - as we’ve been talking about expanding our sales channels that we have to be able to operate in low volatility and high volatility markets. I mean, and that’s kind of what we’re building here is even in low volatility we can’t just sit there and say, oh well, sorry, cut from our shopping because of low volatility.

We have to find other ways to reach customers, which is why we’re building new sales channels, which is why we’re spending a lot of time and energy, starting to figure out how we can connect with customers in a low volatility environment, so that we can encourage them to think about our product and demonstrate the value.

Okay. And maybe just quickly Texas any - I mean, it’s a very large market obviously, extremely competitive anything changed Q-over-Q?

We got still operating again that low volatility market, I’m imagining, but the fixed rate product maybe have some early success there.

No, Texas has low volatile volume. In this past summer, you had peak loads and you see the volatility return there, and for us we’re consistent that Pat talked about our goals consistency there, as we put our hedges on we’ll continue to do so.

I think, some other players maybe little bit different, but now we’re still seeing - it’s very competitive as you mentioned. But we think on a risk adjusted basis, we - that’s the way we’re pricing and it’s showing up in our profitability.

Okay. And then just maybe shifting gears, Pat, just quickly go back over, so the goal for this year is to obviously get rid of the remaining 6% converts to the end of next June.

And I think, you highlighted about $50 million - your expectation of $50 million free cash flow fiscal 2017, if I heard correctly. And then working cap, I’m assuming is how you expect to finance the balance and then refinance the balance.

Is that correct?

That’s correct. We have $50 million that will be coming to the company on a free cash flow basis after dividends here in the remaining four months of the period or 4.5 months.

And then, between our credit facility expansion and those trade payables financing, we think will knockout the 95 in the next couple months with those items alone. But we’re also looking forward to the convertibles and the Eurobond, we’d like to be productively taking those out as we can.

But again, lot of free cash flow support coming in 2018 more trade payables financing opportunities, and then obviously by taking out CPP in that high yield note all of the restrictions on our balance sheet at that senior unsecured level, and even a senior secured, but subordinated that real estate that is now open to us, where - there were heavy restrictions within that CPP facility. So there is quite a bit of optionality that the business has now to deliver things that are not shareholder dilutive to refinance the 2018 and 2019 maturities.

Yes. I’m sure CPP would allow hold on to that level yield and you’re happy it’s gone.

I’ll get back in the queue, I appreciate it. Thanks for answering all my questions.

Thanks, Carter.

Hey, Pat, just to clarify when you said that debt-to-EBITDA of two times by year end, did you mean fiscal 2017?

Yes, we did. If we’re able to get that working capital trade financing done that’s obviously off balance sheet debt, if the net asset hit right, because your liabilities or payables go up.

But we’ll be closing in on 2.0 times quickly if we get to 2.1, 2.2 with just earnings alone that’s where I have your expectations. But if we get more of a refinancing done with off balance sheet debt, we could probably close pretty quick to 2.0.

And you’re considering working capital financing as off balance sheet debt or what you’re referring to?

Yes, because what we’re doing is we’re extending payment terms. So it’s a perpetual payment term extension.

So it’s not debt, it’s technically our trade payables, our current liabilities go up so there will be a net asset reduction, but it will not be an increase in debt.

What - okay, technically speaking it won’t be debt, but still be pretty senior rate on…

It was, yes. That’s why there is a borrowing base covenant that I was referring to from the credit facility, because that commodity payables is securitized at the top and one other thing to point out here, the reason we don’t see the next $100 million of potential here as, let’s say, a synthetic debt is because half of our markets were being paid on about a six week time period, so those purchase of receivable markets, I think the U.S.

markets outside of Texas. We get payment on six weeks timing.

We end up paying our suppliers based on our legacy supply agreements in two to three weeks. So there is an incredible mismatch in working capital.

So on one hand, we’re paying our suppliers before we’re getting paid on half of the business, but on the other hand there is actual liquidity risk there if commodity prices shut up and volume shut up, we’re going to have to pay more to our suppliers before we get paid those higher amounts. So we’re pretty determined to get this commodity payable extension done on a big piece of our commodity payables that will inherently match our incoming cash flow with our out coming cash flow.

And that’s the reason I’m taking the position that it’s really is not synthetic debt, it’s getting a balance working capital design for our business which had not been here in place or not been here historically.

Would there be any room to shorten the receivable cycle instead in [cover repayment] [ph]?

The work with us the most valuable part of our collateral pool with our suppliers and our banks. So we have looked at receivable factoring that’s a very difficult conversation with our counterparties, hence why we’re working on trade financing on the payable side.

Okay, okay, make sense. And just a quick one on solar, have you guys already expanded into New Jersey, and with your sort of walking away from our solar guidance.

Are you going to pull back from any extension plans in your current states you operate like California, New York stuff like that?

No we’ve - actually not. We’re continuing to believe this is a good product for us to have for our customers, it’s going to be short-term challenge and compressed a little bit from a margin standpoint.

But from an offering standpoint, we believe that the markets were in New York, New Jersey. We’re moving into Massachusetts shortly as well as actually looking at Texas.

So we still believe that there is a lot of opportunity here for us to grow the business, it just won’t be at the levels, and the thought that we have before, but kind of continue to expand that. And we’re also trying to find the right formula for sales, I think that training our sales force, and how we go about getting customers is something that we take a little bit longer, but I think that we’re starting to see some nice benefit from it.

But we’re going to do it in a much slower and smaller way.

Okay. That makes sense.

And lastly, I know that the election results just came in recently, but general republican agendas nothing new. Do you guys think there will be any pressure in reducing or eliminating subsidies already sort of preferential tax treatment for rooftop solar?

What - we’ve always said, we’re not betting too much on subsidies that were looking at things that are - that benefit our customers without subsidies, but I think, the ITC is safe until 20…

So four more years.

So four more years, but for us there is so much opportunity out there for other things coming into play as well, I mean battery, solar, smart home technology. So it’s kind of one small piece and even if the government or subsidies change over time, we’re still diversified in our product, in our scope, in our footprint that it won’t have a material impact.

And just a little bit of history, the ITC was actually put into place by the Republicans. Now, the Democrats have taken it as kind of a badge of honor.

But it’s that both parties supported in the past. And the design of that ITC is to create a runway to get the industry scaled, and allow frankly penetration, which will raise the cost of the underlying grid and make solar more competitive.

So there will be a point in time in the future where solar can stand on its own in many markets, but that as you heard from Deb isn’t core part of our strategy, but an important product offering that we want to be able to address.

Okay, that’s fair. All right, guys.

Thanks so much. That’s enough for me.

Thank you.

Yes. I’m sorry, just a follow-up on the solar question.

When you’re doing origination, are you - I’m assuming there is some mix between what’s originating for a lease versus a loan. Can you talk about that spread and maybe with selling cycle in terms of trying to get a customer design?

Yes. It’s a great question, because it’s one of the hardest things we’re learning is to find, first of all, product capacity in every market, meaning who has a competitive loan product, because the loan product delivers more value to the ultimate customer.

As they’re holding some of the - or all of the ITC benefit depending on how you price it, and local abstracts [ph]. The loan products are relatively new.

Our channel partner has only gotten into the loan product as they merged with Kilowatt Financial. So we are looking at opportunities to partner with others to ensure that we’ve got the broader product suite in every market.

But then also you have to have that fulfillment and EPC capacity available to you in every market. And that has been challenged in the Northeast, specifically markets like New York.

As we’re selling that though, that - let’s think about it from an equity perspective. So the ultimate financier in the solar products is looking at a different unlevered after tax IRR for a loan product versus a lease product.

And the tighter the margins are and they are tighter on the loan product, because you’re delivering more of that, let’s say, value to the customer versus being held by the ultimate financier, then it is imperative for us as the market moves away from PPAs to loans to have a much lower cost of acquisition model to ensure that these, let’s say, the profit potential for us is there. I think we’re a little bit surprised by how fast the market is just flipped to pushing more value to the customer, but also the absolute returns on every product - or every product is under attack.

So that kind of compounds the challenge for everybody to make origination returns work.

Right, so I mean it’s a double-whammy, because accelerating - moving away from SolarCity offers or had offered in the past then from the other top installers to - it’s really becoming an asset or consumers viewing it as an asset, and maybe starting embracing like storage and other types of opportunities. And I’m assuming that it elongates the selling-cycle, you have more underwriting risk and things of that nature, which is clearly where why guys have removed that expectation for this year I expect.

Yes, yes, we think you’re right.

Okay. All right, I appreciate it.

Thanks for that.

Perfect. Well, just wanted to say thank you again for everybody for joining us.

We still, like we said earlier, feel very comfortable and strong about the performance of the business this quarter. And on behalf of Jay and I, we also want to make sure we take a quick minute to thank our employees.

We’ve got a lot of employees to make this happen, and our partners and everyone who support us in this vision and what we’re trying to achieve as a company. We very much appreciate your support.

So until next time, we will see you again in three months. Thank you.

Thanks.