Greetings and welcome to the SolarCity Second Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Aaron Chew, Vice President of Investor Relations. Thank you, Mr. Chew. You may begin.

Thank you and good afternoon to everyone joining us today for SolarCity's second quarter 2015 earnings conference call. Leading the presentation today will be a discussion from our Chief Executive Officer, Lyndon Rive; our Chief Operating Officer, Tanguy Serra, and our Chief Financial Officer, Brad Buss, after which point in time we will open it up to questions. As a reminder, today's discussion will contain forward-looking statements that involve our views as of today based on information currently available to us. Forward-looking statements should not be considered as guarantee of future performance or results and reflects information that may change over time. Please refer to SolarCity's quarterly shareholder letter issued today, as well as the slides accompanying this presentation, as well as our periodic reports filed with the Securities and Exchange Commission for a discussion of forward-looking statements and the factors and risks that could cause our actual results to differ from our forward-looking statements. We do not undertake any obligation to publicly update or revise any forward-looking statements. In addition, during the course of this call, we'll use a number of specially defined terms relating to our business metrics and financial results, including non-GAAP financial metrics. We refer to the definitions of these terms and the required reconciliation between GAAP and non-GAAP financial metrics included in the shareholder letter issued today and the slides accompanying this presentation which are available on our Investor Relations website at investors.solarcity.com. With that behind us, I would like to introduce SolarCity's Chief Executive Officer, Mr. Lyndon Rive. Lyndon R. Rive - Chief Executive Officer & Founder: Thank you, Aaron. Q2 was an amazing quarter for SolarCity. We booked two new records, bookings and installs. As we look at our business, we essentially have two companies in one. We're a development company and a…

Thanks, Lyndon. So Lyndon mentioned we had a really solid quarter of installs. We deployed 168 megawatts of residential systems and 21 megawatts of commercial systems. I' m very happy with our continued build and scale and delivering incredibly strong sales and our leadership team have continued to work hand-in-hand to offer customers an amazing experience. Housing installs grew at 86% year-on-year. And as Lyndon mentioned, we believe we have cracked the code on commercial growth through a combination of sales execution and significantly lowering our commercial install cost, allowing the commercial team to book significant profitable megawatts in Q2, and thereby ending our flattish commercial megawatt deployment record, and we expect to see substantial growth in commercial megawatts in the back half of the year. Our costs continue to climb. Our all-in costs are down 2% year-over-year, and our install costs are down 7% despite flattish power prices which speaks to the continued increased productivity of our team. Our like-for-like install costs on housing and on commercial are down versus last quarter, but in this quarter, we had a higher proportion of higher-cost projects like carports, which also carry higher PPA rates, and so the overall blend of the cost is up versus last quarter, but the like-for-like project like trend continues to be declining sequentially in cost. The sales costs and, to a certain extent, the G&A are sized for the next quarter of continued growth and to always include some element of investment to the future. We see panel prices and inverter prices coming down over the next few quarters. That, combined with the effects of our in-sourcing our commercial projects, allows us to nicely bridge the gap between the current $2.13 of what we're at and the $1.90 target cost we call for operation cost. With…

Thanks, Lyndon. I'm going start us off on slide seven, and as usual, we had a very busy quarter with a lot of accomplishments in our financing. As you can see, we've launched our latest ABS into the market. It's about $124 million. Unfortunately, since this offering is in the market, there's nothing further we can say or any of the details we can get into it, so we'll give you a full summary once it closes. This is the final tax equity structure to be rated for the ABS market, and we now have two rating agencies and two banks well-versed in all of our structures, and I expect a much more predictable flow going forward. With respect to tax equity, our pipeline remains very robust. In Q2, we added a new fund. We upsized an existing fund, and we ended the quarter with 447 megawatts un-deployed. We have 2015 covered, and we plan on closing additional funds with new and existing investors in the second half with a focus on selling up our 2016 needs which is proceeding very well. In addition, our revolver has been increased to support growth with additional banking partners added. Our financing factory is leading the industry in innovation and cost of capital, and we are in great shape to support our continued growth in 2016 and beyond. Economic value creation is a key metric we introduced last quarter, and it captures the total value creation to equity using our actual Q2 installs and cost for the forecast for debt. Our EVC increased 33% from Q1, driven mostly by deployment growth and lower cost. The Q2 unlevered IRR was 12%, up nicely from 11% in Q1. The NPV on a per-watt basis was approximately $1.14 per watt, suggesting a range of approximately $1…

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. Our first question comes from the line of Patrick Jobin from Credit Suisse. Please proceed with your question. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Congrats (14:16) on the new records and the IRRs. First question for me just on, I guess, the cash flow number, looking at that, before deducting the amortizing debt – or partially amortizing debt, I guess about $185 million annualized in Q2. I guess some of those megawatts have been added late Q2 as well. So, I guess, one, is that the right way to think about it? And then, two, looking at the capital structure for the PowerCo, just help us understand kind of how you're thinking about optimizing that capital structure and anything to do for equity there. Thanks.

Yeah. Hey, thanks, Patrick. It's Brad. So, I think – yeah, I mean, your quick math on your intro to your question, I think, is a good way to look at it. And remember, with the rate that we're adding stuff, stuff that's constantly added throughout the quarter, right? So we've given historical stuff. I mean, obviously, we'll start looking at some more forward-looking stuff on a going-forward basis that I'm sure you'll all be asking for that. But we think it's very important that you kind of get grounded in kind of the past. There's a lot of assumptions you can do and we'll provide, so you could see it going forward. And I think as far as the capital structure, I mean, we're very flexible as you could see. We've led the way in the securitization. We got a couple other things that we're working through. I think you'll continue to see us drive innovation where it can because our focus is on not only lowering those costs, but lowering that cost of capital as well. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Got it. And then my second question, just thinking about organizational constraints. So 260 megawatts for Q3 installation, I guess that implies about 360 megawatts at the midpoint for Q4. Just the level of comfort around the organizational capacity, given you're doing some more of the commercial work yourself. And then a sub-part question, just thinking about the mix of commercial in back half, given some of your comments there would be helpful. And then, sorry, last sub-point, I think you've already brought this up, but $900 million to $1 billion in value – or equity value created this year implies some pretty stable returns. I just want to make sure I'm interpreting that comment correctly given the mix. Thanks. Lyndon R. Rive - Chief Executive Officer & Founder: So, Tanguy, why don't you go ahead and answer the install questions, and then I'll go ahead and talk about the equity value.

Sure. Yeah, thanks. We've provided a couple (16:48) on scaling – we have been scaling historically at that growth rate, and the most important piece of when you scale is to build the infrastructure to be able to scale, and so things like training centers, training programs close to the university, they're all built out, and so we're able to hire, onboard, train and get installs in the roofs in a way that makes a lot of sense. And there's a fair bit of software and algorithms that go into predicting where and when those crews will be needed, and so we feel very, very good about being able to do scaling as we have historically. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. One thing I want to add on that as well is the commercial bookings, we had early commercial bookings in Q1 and not so good commercial bookings in Q2. And the big delay for commercial is the permit. And, of course, to book them early in the year, the permits should come out in time for us to get it, so that's another reason that makes it easier to ramp up by the end of the year.

To specifically answer your question, the mix of commercial as a percentage will increase in the back half of the year. Lyndon R. Rive - Chief Executive Officer & Founder: And regarding the equity value, this is why we've added the extra disclosures, so you can calculate the $0.07 per watt that we generate. If you discount it back to today, it's roughly about $1 a watt – a little over $1 a watt. And so that's the reason for the extra disclosure. The company is growing extremely well and it creates tremendous value at every watt we deploy. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Thank you.

Operator?

Our next question comes from the line of Brian Lee from Goldman Sachs. Please proceed with your question. Brian K. Lee - Goldman Sachs & Co.: Hey, guys. Thanks for taking the questions. So, if I look at your average megawatts in installed base over the past 12 months on the same trailing 12-month basis that you're looking at this cash available for distribution metric that you're disclosing, it implies an unlevered number of somewhere around $0.14 to $0.15 a watt and then levered per watt right at around $0.10. Is that a fair way to think about the generation potential and future megawatt growth? And then I had a follow-up.

Yes, I mean, it's definitely in the ballpark. I mean, there's different things that impact that depending on some of our structures and prepayments, yada, yada, yada, but you're always going to have that. That's why we thought I wanted to give you that trailing 12 so you could kind get a view, seasonality, yada, yada, yada. But your concept is the right way to look at it. Brian K. Lee - Goldman Sachs & Co.: Okay, fair enough. That's helpful. And, Brad, follow-up for you and you've kind of already alluded to it. But last quarter, you cited that the availability of capital was at an all-time high and you guys have obviously done a great job in adding some tax equity capacity since the end of last year. But as we move closer to 2016, how should we be thinking about general tax equity availability for new funds, which I would presume are going to start being slated for 2017 volumes? So question would just be about how the 10% credit impacts the volume of tax equity and also the cost and maybe if you're getting any early indications from the banks. Thanks.

Yeah. I think the big thing you'll see is, obviously, a lot of stuff on the utility scale that's expected to obviously dry up pretty heavy. We've seen dollars that were allocated to wind moving over, and we're actually seeing some people that were playing more in the low-income housing credits coming into this market. So if anything, I think the moves toward distributed solar are picking up much quicker than we expected. The companies we're dealing with have remained very profitable. A lot of banks that were underwater for a while are coming back. They now have possible income that they want to manage. So I think net-net, the market is actually better and bigger, and I think to where you're going, I think terms and with our size and, more importantly, the frequency and consistency that we can deliver is being very well noticed. And we get a lot of people that are, like, why would I want to deal with anybody else because you guys have got the track record? We have a great machine on the front and back end and we – most importantly, we deliver to these guys on when they need it. So I'm very comfortable for 2016 and, who knows where 2017 will go, but I don't think that will be an issue. Brian K. Lee - Goldman Sachs & Co.: Okay. Thanks, guys.

Our next question comes from the line of Philip Shen from ROTH Capital Partners. Please proceed with your question. Philip Shen, your line is live.

Hey, can you hear me now? Lyndon R. Rive - Chief Executive Officer & Founder: Yes. We can.

Hey, guys. Thanks for taking my questions. It looks like you've reduced your 2015 outlook by an implied 6% by shifting guidance and the units from deployed to installed. And what drove the decision to change the units and what would it take for you to hit the high end of the revised guidance? And can you elaborate a bit more on what your bottlenecks might be causing the shift? Thanks. Lyndon R. Rive - Chief Executive Officer & Founder: Yes. So, yeah, we did change that. We changed it from deployed to install. We can control install, and what we noticed happened last year, as we had the large volume, the mad rush going into November, December, the city departments and the utility inspectors that can't keep up with us, and so that's the constraint. In order to hit that, you have to then take in two weeks or a month earlier, and if you look at our monthly run rate, it wouldn't be – we wouldn't be able to get that deployed number by the end of the year, although the install number, we feel very good about.

And I think, from my perspective, we just want to be very consistent. We've had a few people that, in conversations and modeling has (23:04) installed, deployed, and we want to be on the same page we could control it. And again, we're very confident in the install which is the most important thing, from our perspective, as we – if we don't get installed, nothing else is going to matter.

I'd just add, just to give you some color, we feel very, very good about the deployment numbers and install numbers that we're giving out here, things that could swing it between the bottom and the top of the range. As Lyndon said, at the run rate that we'll be at towards the end of the year, it's 50 megawatts, it's two weeks' worth of volume. It – permit times, extending two weeks on a given project, could swing between bottom and top of the range, but it really doesn't change the fundamental economics. It's really is – it's weeks of timing as opposed to whether we will install them or not.

Great. Thanks, everyone. As for my follow-up, can you give us your latest view on how you expect megawatts to scale in 2016 and potentially into 2017 as well? Lyndon R. Rive - Chief Executive Officer & Founder: Yes. Good question. We're not ready really yet to give a forecast for 2016, but we're confident that our growth would be above the industry growth for 2016, so we'll be just – we're just not yet ready to give a megawatt install for 2016.

Great. Thank you. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. Next question?

Our next question comes from the line of Sankar Krish from Bank of America. Please proceed with your question.

Hey, guys. This is Andrew on for Krish. A quick question on the deployment versus install breakdown, just curious if you had an estimate of where deployments would be in 2015. And the main part of the question is really how – what are the implications of this going into next year with – as far as getting installations qualified for the investment tax credit? Will that be an issue if you have something on a roof installed by the end of – in mid-December 2016 but it doesn't get approval or is officially deployed until sometime in 2017? Does that raise some ITC issues?

Let me take the first part. In our press release, we show you installs and deployed and we're going to continue to show you those information. We're just not going to guide to it, just so we're clear. So you'll always see that information when it happens and we'll put it out there, just so we're clear on that. But it's too hard to guide to right now. I mean, the amount of commercial and the hundreds of jurisdictions we're dealing with, it's all over the place, especially with Christmas. So we'll be glad to provide the information, talk about it historically, but it's too hard to predict. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. It should range between two to three weeks in delay, so roughly speaking. So whatever (26:11), that number will grow, but you have to look at it weeks of megawatts installed versus total megawatts being deployed. There's a difference between installed and deployed.

Right. Lyndon R. Rive - Chief Executive Officer & Founder: In terms of the second question, yes, absolutely, this would be a concern on especially larger projects that have to PTO in time for the ITC. This will have to be included into our guidance and has to be built in as we look at selling. The way we would look at it, however, for most of the projects, this is more applicable for the commercial projects that don't (26:51) without it, but for most of the projects that we were deploying, we will continue to just install and have a $0.60 per watt economic value creation instead of over $1 but, yes, we'll just continue.

Great. And then just on the PowerCo cash flow modeling, thanks for that and all the incremental detail. When you look into 2017, just curious if you guys can comment on how quickly do tax equity obligations ramp down and versus how quickly sort of interest and amortization might ramp up as the financing mix renew installs changes, in other words, do you have legacy tax equity obligations that you'll have to pay but since new systems will be potentially more debt-financed, the interest and the amortization requirements increase? Thanks.

Yeah. Way to in the future. Lyndon R. Rive - Chief Executive Officer & Founder: But I'm not sure I understand your question, though.

Andrew, are you asking sort of the extent to which your pre – your 30% ITC stuff kind of rolls off as the 10% roll ins and the pace with which that happens?

Yes, exactly. If your obligations to tax equity stay kind of where they are entering 2017 for a while as those legacy 30% deals continue to get paid off, but as new installs are being debt-financed, your interest and amort payments might increase as well? Lyndon R. Rive - Chief Executive Officer & Founder: Yes. So, essentially, what happened is we'll do less tax equity, more debt. Nothing changes with the past systems. Those obligations stay exactly the same. All the systems to deploy in 2016 are going to have similar obligations to what you're seeing in 2015. In 2017, on a 10% ITC, we'll be raising less tax equity so we'll be giving less of the cash flows to the tax equity investors and then more of the cash flows to debt providers. I think that answers your question (29:02).

Thanks, guys. Yes.

Our next question comes from the line of Vishal Shah from Deutsche Bank. Please proceed with your question.

Yes. Hi. Thanks for taking my question. In the near term, have you seen any change in the margin pricing environment because of the change in the trade case ruling for some of the Chinese companies that the prices (29:23) have gone up a little bit? And then can you maybe give us color about your international strategy, are you starting to look at some of the international markets as you look beyond looking at 2016 (29:34)? Thank you.

Sure. I'll answer the first one and then how much Lyndon will ask me to – we'll, let Lyndon answer (29:43) the second one, but on the first one, yeah, we're seeing – we're clearly seeing exactly you described module prices have been flattish for the last several quarters, last five to six quarters, and we're seeing now pricing start to come down. There's a number of really high-quality module manufacturers both in China and outside of China for which we are grateful partners that are seeing their price reductions from these quarters, so that is really good when we look at our cost target. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. And on the international markets, we're absolutely very interested in looking at international markets. There are many international markets where the equity value creation is really good without any incentives, so it's just pure on the fundamentals. So, yeah, we are looking at those and stay tuned.

Operator, next question?

Our next question comes from the line of Edwin Mok from Needham & Company. Please proceed with your questions.

Ed, are you there?

Your line is live. Edwin?

Do you have us on mute? Why don't we come back to him?

Okay. Edwin Mok - Needham & Co. LLC: Hello. Can you hear me?

Yes, we can.

There we go. Edwin Mok - Needham & Co. LLC: Hey. Sorry about that. So I understand you guys have the ABS on the row (31:18) and can't talk too much about it. But can you actually clarify two things? First is this ABS is only for the historical lease project, it doesn't include any MyPower? And then related to that question, how much MyPower (31:37) contract do you think you need to build up to before you can actually do a MyPower ABS?

Edwin, we really can't talk about that deal. So I would suggest maybe realigning your question. Edwin Mok - Needham & Co. LLC: But then my question relate to MyPower ABS, maybe any way you can quantify how much do you think you can build up – you need to build up in MyPower contracts before you can do a MyPower ABS?

We really don't want to talk about ABS right now, if you don't mind. Edwin Mok - Needham & Co. LLC: Okay. Okay. That's... Lyndon R. Rive - Chief Executive Officer & Founder: On MyPower, just like when we would do – if we were to do ABS on MyPower, yeah, it has to be worthwhile to get into large enough size to go through the transaction.

It's easier and, well, like Lyndon said, we're building up the assets. And then we'll look at the back-leveraging at the time that's appropriate. And if ABS is the right vehicle, away it goes. Edwin Mok - Needham & Co. LLC: Right. Yeah. I kind of agree with that. It seems like it should be much easier. And then thanks for providing the PowerCo cash flow information. That was very helpful. Any way we can kind of think about – as I walk through that, right, so obviously, you guys are financing a lot of it with debt, right? Any way we can kind of think about how much – what kind of interest rate we should expect? As we look forward, how do we think about interest rate that we should expect that need to – you guys need to pay to finance those cash flow? Any kind of way you can kind of help us think about that?

Could you clarify exactly what you're asking? Lyndon R. Rive - Chief Executive Officer & Founder: So we... Edwin Mok - Needham & Co. LLC: So... Lyndon R. Rive - Chief Executive Officer & Founder: We disclosed our interest rates. So you have that.

Are you for – yeah. I'm a little unclear what exactly you're asking, Edwin. Edwin Mok - Needham & Co. LLC: Yeah. So, I mean, you guys disclosed – I can use the historical information to get a rough idea of what rate, what your blended interest rate are right now for your debt that you have, right. Is there a way we can kind of think about that longer term? What rate do you – is it – because you guys have a lot of different debt – different type of financing, right, debt financing. So it's kind of hard for us to figure out how much of which each component of that is baked into the MyPower debt.

I mean, there's two elements obviously, right, what happens with rates, and then the corresponding offset hopefully is where does our credit spread continue to go, right? Our paper is doing really well. We'll talk across the securitization once it's done, but we're moving in the right direction. The assets are great. So we're in that low 4s now, and it's just a reflection of where those two net out. I think we're going to be comfortably well below all of our competitors out there and, more importantly, below the 6% we've been using for a lot of our present value calculations. So you tell me where rates are going to go and then I'll fill in the rest. Edwin Mok - Needham & Co. LLC: Yes, okay. Right, hey, thanks very much. I appreciate your answer.

All right, thank you.

Our next question comes from the line of Tyler Frank from Robert W. Baird. Please proceed with your question. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): Hey, guys. It's Ben from Baird. Thanks for all these disclosures there. My question was on any kind of bottlenecks you're seeing in construction crews out there? We've heard some of that and I just want to see where you guys are in your hiring for installation crews and as we look ahead to 2016 how you feel versus some of the competitors out there that aren't vertically integrated?

Yeah. I think you answered your question, really grateful for that. Being vertically integrated is the key to this stuff which is – we call it – you can use the bicycle chain analogy or whatever analogy you want to use for tension which is, if you've got a pipeline of sales coming through and then a fast deployment and a high-quality deployment of audit and then a call center in Las Vegas with over 1,000 people taking the calls, handling the customer care issues, going through the paperwork and then pushing that out to the field with permitting and ultimately creating jobs for installers, that tension is what creates success. So what that does is that it allows us to pay people well obviously, because we've got a really sophisticated form of incentive pay for installers. And the more jobs that they filter through, the more job they get paid, which creates a really, really positive tension in the organization. And then the other thing it does is that, because we are able to pay higher wages in the industry comparables at a lower cost because our utilization is significantly higher, it allows us to attract and recruit the best in the industry as well as from other industries because, as I said, we're able to pay more than comparable jobs. And I think that's the key to all of this stuff which is install is all about really, really having a really strong focus on productivity. If you focus on productivity and you focus on kilowatts installed per crew and keep that really high, you can pay people more. If you can pay people more, you tend to attract the best; and if you attract the best, then your productivity is high. And so that positive cycle associated with the vertical integration that you mentioned is the key to all this. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. In terms of our bottleneck, hiring install crews is not top of the list. The biggest bottleneck that we face is picking up from booking to getting it ready for installation. And that's dealing with all the permitting, that's getting – going back to the customers, finalizing the design, back and forth customers on vacation, that to us is our biggest bottleneck, and taking it from a booking to actually getting it ready for installation. The installation itself, as Tanguy mentioned, we need (37:36) really good processes to ramp that up. Ben J. Kallo - Robert W. Baird & Co., Inc. (Broker): All right. Thank you very much.

Our next question comes from the line of Paul Coster from JPMorgan. Please proceed with your question.

Yes. Thanks very much for taking my question. But just on I think the economic value creation, page 8 or 9, that your capacity factors seem to go down a little bit, is this because of a geographic sort of mix shift towards (38:06) or is there something else going on? Lyndon R. Rive - Chief Executive Officer & Founder: I don't understand your capacity factor, what do you mean by that?

Yeah, how are you calculating that, Paul?

4 hours per annum, it seems to have come down a little bit relative to the price (38:21). Lyndon R. Rive - Chief Executive Officer & Founder: Okay. Okay.

(38:23) Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. So, that's a mix (38:25) increasing in terms of percentage of our installations. So, that's just the mix.

Right. Got it. Okay. And then can you tell us anything about FICO scores and where you're headed and ultimately here and maybe also what kind of default rates you're seeing at the moment, if anything? Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. So, on FICO scores, I mean, our goal as a company is to get to point where we can solar affordable to everyone.

Yeah. Lyndon R. Rive - Chief Executive Officer & Founder: So, that's – we're going to try and do – we're going to do more and more innovation to achieve that goal. So, that's make solar affordable to everyone. Right now, if you take the history of the company, we went from 725 down to 700 down to 680 down to 650 [FICO score] and now we have to figure out how do we make it possible for everybody in America to get cheaper, cleaner energy, and so that's – we just have to solve that. In terms of the actual default, it's...

They're miniscule. Lyndon R. Rive - Chief Executive Officer & Founder: I mean, best thing to look at is the last securitizations that we've done. That describes it really well.

Okay.

Yeah. Real quick follow-up. Just to clarify Lyndon's comments, the numbers he gave you are our bottom, our minimum. They don't represent our actual average. Our average is still comfortably in the 700s, 730, 740. Yeah. So, you're not going to see that mix change too quickly. And, yeah, the delinquency – even just aging is well below normal, it's sub-1% just age stuff, and as far as true write-ups, it's a couple of handfuls. And it's usually due to an unfortunate circumstance.

Right. Okay, got it. And then lastly if you could give us quick update on the manufacturing capacity up in New York State labor, and what's your latest thinking on when that comes online and starts contributing towards the lower costs?

Yeah. We're excited about that. We're still on track. We'll have the buildings ready towards the end of this year and the equipment getting installed in H1 next year. And then ramping up and being at full capacity in 2017. And that will significantly contribute to reduction in costs both because the panels themselves on a dollars-per-watt basis will be cheaper, but also because they're higher efficiency panels and, as a consequence, all of these per panel costs will come down on per watt basis.

Okay. Thank you very much.

Our next question comes from the line of Pavel Molchanov from Raymond James. Please proceed with your questions. Pavel S. Molchanov - Raymond James & Associates, Inc.: Thanks for including me, guys. Can I ask about the small business opportunity? So you talk about how it's in the donut hole? There are no FICO scores the way you have in resi, but you don't have corporate credit ratings either. So, how are you going to decide which small businesses are creditworthy to sign a lease and which ones are not? Lyndon R. Rive - Chief Executive Officer & Founder: Yes. That's a really good question. So, this new program, it's actually not that new, but it's new to leases and power purchase agreements. It's called the PACE program. That's essentially a program that allows you to tie the lease payment to the property tax of the building. And so, with that, you essentially take a – building on our customer that it was hard to underwrite the credit to automatically an investment-grade credit. So it's really, really strong credit, in fact stronger than most investment-grade credit. And so now you can use that and then you could finance the systems, and so then the key thing is to tie it to that. And it's available right now in California. We expect that the results of this will show other states to follow it, because the PACE program is actually deployed to about 14 states, but California is the first to allow leases under that program, and the whole purpose of the program is to allow building owners to make an operational – building upgrade to the building that reduces operating costs. So any business that actually does this, the business actually becomes healthier and using the property tax to pay…

Yeah. As Lyndon said, our ambition is to provide solar to everyone, and we're really working hard on that. The key to providing solar to everyone is continue to lower cost. As and when we continue to lower cost and we have the regulatory regimes in states that allow us to create economic value, we will open in those states, as you say we opened three. We've got a couple more that we're evaluating and likely to open pretty quickly. And then as we continue to lower costs, we'll be able to open more states. But now those are the ones we're going to open (45:59). Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. Some states' policy needs to change. Like you have Florida, which should be a good market, but there needs to be some policy change there to make solar work in progress. So as those things happen, we'll have to expand in. Pavel S. Molchanov - Raymond James & Associates, Inc.: All right. Appreciate it, guys.

Our next question comes from the line of Colin Rusch from Northland Capital Markets. Please proceed with your question.

Hi, gentlemen. This is Noah Kaye in for Colin. Let's just pick up on the last question, which turned to a discussion of policy. I think in your letter, you mentioned Nevada and Hawaii as kind of a near-term policy focus, where I guess the industry is playing a bit of defense on the net metering. So where do you see the incremental opportunities for progressive policy? What are you putting most of your focus on these days? Lyndon R. Rive - Chief Executive Officer & Founder: So I'm highly optimistic where we end up in Hawaii, California and New York. I think these are the three states that are going to look at how did the utility and solar industry of the future look like, and they are going to come up with programs that allow and continue to generate the adoption of renewable energy. So those are the three states that have closest understanding of it and the solutions will be quite right (47:25).

Okay. Turning to a different topic, looking at sales cost and thinking about sales cost efficiency, you had a record bookings number in the quarter that's a high denominator. Year-over-year sales cost are still picking up. Can you help us understand and maybe better tease out how you're thinking about driving down those sales cost over time, and what your expectations are to lower the acquisition, cost process? Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. So, the acquisition cost is actually quite tied to our growth as well. If you do look at – a lot of the acquisition cost today is referrals. And it's the largest source of our new customers. And so, if we were to stand (48:24) on the growth, the acquisition cost would come down dramatically. So that last mile (48:29) and reaching those extra customers who have never thought of solar before and then spending money to get them excited about it, (48:37), we are going to start trying to sell over the Web. We are establishing new partners as you may see, we have established a partnership with DIRECTV. We have one with Best Buy and Home Depot, and those partners are still doing well. But the acquisition cost it's seeming to stay flattish, and slightly increase, but flattish and unless we succeed at really funneling it through the Web or changing the sales process and getting more units through the same sales team that's where we have to get there. It's not ideal. I'd like it to be a little lower.

Understood. Thank you

Our next question comes from Michael Morosi from Avondale Partners. Please proceed with your question.

Hi, guys. Thanks for taking my question and appreciate the incremental disclosures here. First, cost per watt, installation costs were up quarter-over-quarter, and I was wondering if you could maybe help quantify the impact from the investments that you're making in capacity and maybe any under-absorption that happened there as those costs were up quarter-over-quarter. And then also, C&I was called out as being a driver of higher cost in the quarter, which kind of surprised me, because I would have expected C&I installation costs to be lower on a per watt basis, and then I have a follow-up.

Sure. A couple of things; so one is, on a like-for-like basis if you look at housing, rooftops for commercial, ground mount for commercial, carports for commercial, on a like-for-like all the costs are down sequentially. So housing is down. It costs us less this quarter than last quarter to install a given house. This quarter in Q2 we had a number of higher cost projects, including in particular carports, which have a higher cost per watt than the average blend. And so when you pull those through the financials, the blended cost goes up. So it's a mix effect. Now, as I mentioned earlier, the price – the PPA price of those carports is also higher, and so even though the dollars – the costs are higher, the revenue associated with that is also higher. So it's somewhat of a mix effect on the cost. On a like-for-like basis, the costs continue to decline. We really cracked the code on being able to grow without having excess capacity and hiring just in time. If you don't do that, your cost is just too high really, really quick. And so we're very focused on that. That was, I think, the first part of your question. Do you have a second part?

Yeah. And I think you touched on it a little bit, but just the mix of C&I and where those higher costs come from and what (51:45)...?

Yeah. So, it's counterintuitive. But when you subcontract out a commercial install, it actually costs you more than it would cost us to do a residential install. I think that speaks more to our residential quality and the quality of our install teams. A lot of our installers are truly heroes and we're able to get amazing cost on the resi space. And so, the – counterintuitively, our commercial costs have historically been higher than our resi cost. And when we're insourcing the commercial jobs, we're seeing some phenomenal costs on the commercial side, which we feel really, really good about and that's going to drag down the blended cost very substantially, and I think which gives us a lot of comfort in $1.90 build cost for 2017. Lyndon R. Rive - Chief Executive Officer & Founder: And which opens up a whole new market for us.

That's right. And I think – let me raise a key point here, which is – there's a number of roofs in commercial that we have a phenomenal product for because we've been able to crack the code on costs. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. I mean, in terms of roof space, small commercial is a bigger market than large commercial, so it's a big market.

Okay. Thanks for that. And then...

(52:57) so one point just for – when we do the commercial cost of sales, we're able to use ZS Peak, or a number of our Zep products. And so that we really get the benefit of having a better mounting hardware, which also is part of the trick here.

All right. Thanks, guys. Appreciate that color. And then, as a follow-up... Lyndon R. Rive - Chief Executive Officer & Founder: One more thing on that same point. Well, hold on. We're not giving up on this thing. I feel like (53:20) I should give an explanation of like, how long it used to take us when we subbed it versus if we do it ourselves.

Yeah. So, I mean, this is a fascinating topic. We've spent a lot of our time on it. We really, really think we can take a lot of cost out of commercial. So a typical big-box retailer used to take about 26 days, 27 days to install and with great subcontractors, super high quality, but when we do the job ourselves, with our people, SolarCity employees, our awesome people, our training, our methods, our approach, our culture, it takes three days. And so that's a dramatic difference, obviously, in fixed cost because the crane and all of the associated fixed costs that you've paid per day just dramatically collapse. And the other thing it does is for a big-box retailer, who obviously every day of construction on a roof is a pain, being able to take less than 27 days to three days has become a compelling and powerful sales argument for our sales team. And so we're winning a lot of business on that base of just being lower cost, faster, better, safer than competitors out there. Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. In fact, people don't believe us, so we created a video to show you how we can do it in three days versus 27 days. You'll see it.

With less people. Lyndon R. Rive - Chief Executive Officer & Founder: (54:36)

We'll be posting it on our website.

Very good. And I have a feeling this answer might be a little bit shorter, but yeah, I can't help but notice that you called out the CAFD per share of being $1.18, so that begs some obvious comparisons across the YieldCo space and a healthy discussion around any premiums maybe associated with lack of dilution that it takes to grow that CAFD, but also it maybe begs the question of whether – or how close we might be to seeing any kind of cash return to shareholders?

Cash return to a SolarCity shareholder, I don't think you're going to see it for a long, long, long time. Our goal is every dollar we're making we're reinvesting it as fast as we can driving the growth until (55:35) solar penetration is (55:39) 50% or 60% of the world. I think the return to the shareholder is going to be far greater if we continue to grow and spread the solar love.

All right. I appreciate it. Thanks, guys.

Our next question comes from the line of Julien Dumoulin-Smith from UBS. Please proceed with your question.

Hey, good afternoon. Lyndon R. Rive - Chief Executive Officer & Founder: Hi, Julien.

Hey. So first quick question, ABS not to get too touchy, but how frequently do you guys expect to come to the market now, just hopefully ironing out the issues associated with it, but should we expect a pretty regular frequency at this point and (56:15)?

We're not going to comment on ABS.

Julien, Brad is looking like – no, we're not going to answer that question.

Yeah. (56:23).

I tried, right.

(56:26)

Fair enough. And then just on the commercial effort here you guys are talking about. I mean obviously, it's somewhat exciting, but could you help quantify that in terms of the megawatt opportunity in terms of leveraging pace? I mean, it seems kind of like a step-change if you can kind of provide some perspective, both maybe in the back half of this year as you think about that contributing to your targets and then subsequently in years onwards if you can kind of talk to it, maybe while we're at it, margin to the extent possible as well? Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. So I think the next quarter is going to be very telling. So we cracked the nut on the cost. We've cracked the nut on financing, now that you cracked the next nut and that is, every – it's going to be the same process as our residential. Everyone signs the same contracts. There's no negotiating, nothing. This is what you get. This is what you pay for, and we love your cost of energy. So that sales process we just launched it on Tuesday. We have to express that sales process to really give you a better forecast. And so the next earnings call we'll be able to give you a lot more insight into what – how that division is doing. But in terms of market size, it is the second biggest market in the country: residential, number one; small commercial, number two; and then large commercial, number three. So it has amazing potential and if we crack that – if we prove it out, we'll create a similar type of factory where you sell onsite. You sell over the phone. You get customers sign up. We do the design. We do the installs. We leverage our existing operational centers. We create the crews within the same infrastructure, and we just scale it. And we take it from California and then eventually take it to the East Coast and expand it to the other states.

And more importantly the returns are on par, right, with our resi business? Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. Gross retained value should be around the $1.90 a watt or so.

Okay. So it's similar?

Yeah.

Yeah.

And then just – and you kind of alluded to it earlier in terms of policy for PACE, I mean, are you seeing adoption elsewhere, if you can kind of speak to that and where – what is your expectation for the adoption if you have one in other states? Lyndon R. Rive - Chief Executive Officer & Founder: On PACE?

Yeah. Lyndon R. Rive - Chief Executive Officer & Founder: So PACE has a great – it's a great story. It creates a lot of jobs and reduces the operating cost of the building, and it's a good program to enable small businesses to use clean energy. And so, I am convinced that as soon as policymakers see the amount of job growth that we're creating with this program in California and the amount of savings we can give to the small businesses, then that they would just change their policy because they already have the program in place. They just got to say that it's allowed for leases. Then so it's not a big – look, it's not bring in a whole new – they're not creating the PACE program. It's just making a modification to include leases.

Right. But no necessary for a timeline or forecast or expectations on specific addition dates, et cetera? Lyndon R. Rive - Chief Executive Officer & Founder: I'm expecting first half of next year.

Got you. All right. Great. Thank you.

We do have a follow-up question from the line of Patrick Jobin from Credit Suisse. Please proceed with your question. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks for taking the follow-up. I really appreciate it. So bonus fees (01:00:04) on 2017 at the cost target, which I guess is only 14% cost decline to get to that $0.60 of NPV. It looks like the market doesn't give you much credit post-2017. But what other assumptions are going into that $0.60? Am I correct to assume you're kind of just looking at isolating that ITC impact, and you're not including any utility rate increases? And then my second question kind of aligns with that, have you seen any traction with a larger set of customers in California given the AB 327 rate tier compression having more customers potentially viable for solar? Lyndon R. Rive - Chief Executive Officer & Founder: Yeah. So, first part, you are correct. We're assuming pricing – there's not much movement on pricing. It's a combination of cost reduction and less cash going to the (01:00:58) investors. That gets us to the $0.60 a watt. In terms of market increase in California, people in the know know it; most of the consumers don't quite know it yet. We're excited about it as it will increase our base. The challenge has never been the top tier. The challenge has always been the smaller homes or the homes that use less energy. Now at our $0.15 offering, every customer will see a savings. So, we like it. Patrick S. Jobin - Credit Suisse Securities (USA) LLC (Broker): Right. Thanks. Great quarter.

Thanks, everybody. Lyndon R. Rive - Chief Executive Officer & Founder: Thank you and then have a great day. We're done, operator.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.