Vivint Solar Holdings Inc VSLR priced its 20.6 million-share IPO at the high end of a $14 to $16 range this past Tuesday. On Wednesday, it opened for trading at $17.01, and has since drifted steadily lower to $13.75 where it closed on Friday.
Chief Executive Officer Greg Butterfield isn’t concerned about the day-to-day minutiae of Wall Street trading, though.
In an interview with Benzinga, he acknowledged that IPOs are exciting but in reality, “just another financing event that lets [the company] execute [a] broader strategy and mission.”
The Mission
According to Butterfield, Vivint's mission is to provide “lower-cost, environmentally conscious alternatives to traditional utility generated energy." Its sales force, which focuses on face-to-face interaction with customers, is paid entirely on commission, and marketing efforts are centered on residential areas.
“Ours is a more customer-centric approach,” Butterfield said.
“We go door-to-door and canvas people who live in the neighborhoods. [The sales team] schedules meetings in the evenings so the whole family can be there.”
By using tablets with proprietary software, salespeople are able to walk consumers through the benefits and potential cost savings of going green. “We find it to be more personal, more customized,” he added.
A Win-Win
Given the upfront infrastructure cost associated with solar technology, Vivint’s strategy circumvents the need for customers to pay it. Vivint pays the upfront cost and in return, secures what often amounts to a 20-year contract.
“We primarily use the power purchase agreement," Butterfield explained.
"We work out all the funding and financing and actually own the systems put on the roof and they agree to buy the electricity those panels create for the term of that contract. The benefit to them is they save 15 to 30 percent on their power bill and they get the ability to control their power rates going forward.
"We will have a small fixed escalator, where utility rates traditionally go up 6 percent annually in the states we're at, 4 percent nationally," he added. "They get the freedom to choose where they buy their power from and what kind of impact that power has on the environment."
At the end of the contract, customers can choose to sign a new agreement. Vivint estimates a large number of current customers will re-sign because electricity isn’t like many other types of technology, where a premium is placed novelty.
“Electricity just isn’t that kind of value proposition," Butterfield said. "The value proposition is: I save money, I’m being socially responsible, and when I turn the lights on, they come on."
Risk
Vivint is able to provide these solar arrays for free partly because of its contractual arrangements, but also because of tax incentives. Should the government initiate any cuts, Vivint’s S-1 states its business could be materially affected. Butterfield, for one, acknowledged the hazard, but asserted there's no near-term risk to the program.
“I think we’re [solar power] such a small piece of overall energy that’s generated in the nation, I don’t see any major regulatory changes that could impact the business," he said.
"I look at public sentiment and they’re on the side of clean energy and saving money. We think there might be an interconnection fee that will be so small, the economics of it won’t be ruined.”
Passions
Butterfield also talked about his passions.
"I love using technology to provide a better service to a customer, or...to create a disruption and change the way things have been done in an old world model," he said, before adding: "Or to...create a whole new industry that never even existed.”
The energy is evident.
“I want to make a difference and change the world. I’m really passionate about the cause...We’ve grown from 800 to over 2,500 employees. People are here because they want to be here, not because it’s just a job.
“It’s fun to go to work,” he stated.
'I Will Be Here As Long As I Add Value'
Butterfield is no stranger to technology-related IPOs.
In 2002, he led his company at the time, Altiris, to a successful IPO after growing revenues from $3 million to $300 million. Initially priced at $10 per share, Symantec acquired the company in 2007 for $33 a share -- a 230 percent gain for investors over that time.
On average, the CEO spends about a half-decade at every company, and technology reinvents itself every five to seven years, Butterfield explained.
“I’ve had this rule of seven. After seven years, you’ve added all the value you can add in that seven years. You’ll probably do the organization a favor by bringing in a fresh perspective after that time. If you don’t, you run the risk of getting stale.”
Butterfield clarified he has no intentions of going anywhere while there is work to be done, though. “I will be here as long as I add value. I’m 55, but I’m pretty young. I mountain bike, skydive, and jump from cliffs," he said.
Advice
Butterfield, lastly, discussed advice. The best he has ever received, he said, was from the late Ray Noorda, the founder of Novell the Associated Press once deemed the "Father of Network Computing."
Butterfield recalled the advice: “Take care of your employees, take care of your customers, take care of your partners, and Wall Street will take care of itself."
Speaking broadly, he concluded: "We’ve gotten into a situation where everyone focuses on a quarterly number and what happens in 60 or 90 days, we fail to see what’s really important. Too many people lose that concept.”
Disclosure: At the time of this publication, the author holds no positions in any mentioned security.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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