Sunlight Financial Reports Second Quarter 2022 Results

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NEW YORK & CHARLOTTE, N.C.–(BUSINESS WIRE)–Sunlight Financial Holdings Inc. (“Sunlight Financial”, “Sunlight” or the “Company”) (NYSE: SUNL), a premier, technology-enabled point-of-sale financing company, today provided financial results for the second quarter 2022.

“I’m proud of Sunlight’s strong performance in the second quarter. Despite continued industry challenges with supply chain and labor constraints, we exceeded quarterly records for funded volume, number of borrowers served, and average solar loan balances due to strong demand for Sunlight’s products,” said Matt Potere, Chief Executive Officer of Sunlight. “This performance continues to demonstrate the value of our profitable, capital-light, cash-generative business model.”

“While our relationships with depositories and our industry-leading credit quality have provided a strategic advantage in a challenging macro-economic environment, we expect materially lower near-term margins in our Indirect Channel to impact our performance in the second half of 2022,” added Potere. “As recently-enacted pricing changes take effect, we expect Indirect Channel margins to return to historical levels over time.”

Second Quarter 2022 Key Financial Metrics

  • Total Funded Loans of $716 million, compared with $666 million in the prior-year period
  • Total Revenue of $31.6 million, an 18% increase from the prior-year period
  • GAAP Net Income of $5.7 million, an 8% increase from the prior-year period
  • Adjusted EBITDA of $6.8 million, relative to $11.5 million in the prior-year period, primarily driven by incremental public company costs and the delayed sale of funded volume to 2H22
  • Adjusted Net Income of $2.3 million or $0.01 per fully-diluted share, relative to Adjusted Net Income of $9.3 million in the prior-year period
  • Total Platform Fee Margin of 4.7% (up from 4.0% in the prior-year period) and Solar Direct Channel Platform Fee Margin of 5.4% (up from 4.3% in the prior-year period)

A reconciliation between historical GAAP and non-GAAP information is provided in the tables below.

Share Repurchase Program

On May 16, 2022, Sunlight’s Board of Directors authorized a share repurchase program pursuant to which Sunlight may repurchase up to $50 million of Sunlight’s Class A common stock over an 18-month period from the date of authorization. As of August 11, 2022, Sunlight has repurchased a total of 1,472,068 shares for a total of $5.6 million, funded through cash on hand and cash from operations. Sunlight will continue to repurchase shares pursuant to this plan in a programmatic manner, ensuring it persists as an efficient use of capital to drive shareholder return.

Full-Year 2022 Outlook

Although Sunlight has taken actions to mitigate the impacts of recent market volatility, including pricing changes and management of operational costs, rising interest rates and an increase in Indirect Channel loans are expected to negatively impact margins in the second half of 2022. Therefore, the Company is reducing its full-year 2022 guidance to the following ranges:

  • Full-Year Funded Loan Volume of $2.8 – $3.0 billion (from $2.9 – $3.1 billion)
  • Full-Year Total Revenue of $130 – $140 million (from $145 – $155 million)
  • Full-Year Adjusted EBITDA of $35 – $40 million (from $55 – $60 million) 

Conference Call Information

Sunlight will host a conference call and webcast to discuss its second quarter 2022 financial and operational results and business outlook at 5:30 PM ET today, August 15, 2022. The conference call will be webcast live from the Company’s investor relations website at ir.sunlightfinancial.com. A replay will be available on the investor relations website following the call.

Earnings Presentation

A supplemental earnings presentation is available at ir.sunlightfinancial.com. Additional information is available in the Form 10-Q, which Sunlight filed with the SEC on August 15, 2022.

About Sunlight Financial

Sunlight is a premier, technology-enabled point-of-sale finance company. Sunlight partners with contractors nationwide to provide homeowners with financing for the installation of residential solar systems and other home improvements. Sunlight’s best-in-class technology and deep credit expertise simplify and streamline consumer finance, ensuring a fast and frictionless process for both contractors and homeowners. For more information, visit www.sunlightfinancial.com.

Forward-Looking Statements

The information included herein and in any oral statements made in connection herewith may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may generally be identified by the use of words such as “could,” “should,” “would,” “will,” “may,” “believe,” “anticipate,” “outlook,” “2022 guidance,” “intend,” “estimate,” “expect,” “project,” “plan,” “continue,” or the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, Sunlight disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. Sunlight cautions you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Sunlight. Such risks and uncertainties include, among others: risks relating to the uncertainty of the projected operating and financial information with respect to Sunlight; risks related to Sunlight’s business and the timing of expected business milestones or results; global supply chain shortages, competition for skilled labor, and permitting delays; the effects of competition and regulatory risks, and the impacts of changes in legislation or regulations on Sunlight’s future business; the expiration, renewal, modification or replacement of the federal solar investment tax credit, rebates and other incentives; the effects of the COVID-19 pandemic on Sunlight’s business or future results; Sunlight’s ability to sustain profitability and to attract and retain its relationships with third parties, including Sunlight’s capital providers and solar contractors; the financial performance of Sunlight’s capital providers and contractors; the willingness of Sunlight’s capital providers to fund loans on terms desired by relevant markets and economically favorable to Sunlight; the impact of inflation and increased interest rates on Sunlight’s capital providers and the cost and availability of credit from our capital providers as well as on the demand for solar panel installation and home improvement; changes in the retail prices of traditional utility generated electricity; the availability of solar panels, batteries and other components and raw materials; and such other risks and uncertainties discussed in the “Risk Factors” section of Sunlight’s Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022, Form 10-Q as filed with the SEC on May 16, 2022 and Form 10-Q as filed with the SEC on August 15, 2022, and other documents of Sunlight filed, or to be filed, with the SEC. Should one or more of the risks or uncertainties described herein occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Sunlight’s SEC filings are available publicly on the SEC’s website at www.sec.gov.

Non-GAAP Financial Measures

Some of the operating and financial information and data contained in this press release, such as Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Net Income and Adjusted Net Income per Share (Diluted) or Adjusted EPS (Diluted) have not been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Sunlight believes these non-GAAP measures of financial and business results provide useful information to management and the reader regarding certain financial and business trends relating to Sunlight’s financial condition and results of operations. Sunlight further believes that the use of these non-GAAP financial and business measures provides an additional tool for use in evaluating projected operating results and trends and in comparing Sunlight’s financial and operating measures with other similar companies, many of which present similar non-GAAP financial and operating measures to their investors and potential investors. While Adjusted EBITDA, in particular, is relevant and widely used across industries and in the industries in which Sunlight participates, they may contain or exclude adjustments, exclusions and one-time items that third parties may or may not adjust for in connection with such measure, and such measure should not be considered an alternative to any GAAP measures in evaluating the profitability of an investment in, or whether to invest in or consummate a transaction involving, Sunlight. The principal limitation of the Adjusted EBITDA non-GAAP financial measure is that it excludes significant items of income and expense that are required by GAAP to be recorded in Sunlight’s financial statements. In addition, it is subject to inherent limitations as it reflects the exercise of judgment by Sunlight’s management about which items of income and expense are excluded or included in determining this non-GAAP financial measure. The Adjusted EBITDA non-GAAP financial measure and other non-GAAP metrics used herein, including Adjusted EBITDA Margin, Free Cash Flow, Adjusted Net Income and Adjusted Net Income per Share (Diluted) or Adjusted EPS (Diluted) should not be relied on or considered an alternative to any GAAP measures or other measures related to the liquidity, financial condition or financial results of Sunlight. Reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the accompanying tables to this release.

 

SUNLIGHT FINANCIAL HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

 

dollars in thousands

 

June 30, 2022

 

December 31, 2021

 

 

 

 

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

68,913

 

 

$

91,882

 

Restricted cash

 

 

1,581

 

 

 

2,018

 

Advances (net of allowance for credit losses of $3,487 and $238)

 

 

91,778

 

 

 

66,839

 

Financing receivables (net of allowance for credit losses of $146 and $148)

 

 

3,794

 

 

 

4,313

 

Goodwill

 

 

445,756

 

 

 

445,756

 

Intangible assets, net

 

 

335,343

 

 

 

365,839

 

Property and equipment, net

 

 

1,681

 

 

 

4,069

 

Other assets

 

 

22,533

 

 

 

21,531

 

Total Assets

 

$

971,379

 

 

$

1,002,247

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

Accounts payable and accrued expenses

 

$

16,082

 

 

$

23,386

 

Funding commitments

 

 

16,568

 

 

 

22,749

 

Debt

 

 

20,613

 

 

 

20,613

 

Distributions payable

 

 

1,521

 

 

 

 

Deferred tax liabilities

 

 

32,637

 

 

 

36,686

 

Warrants, at fair value

 

 

10,281

 

 

 

19,007

 

Other liabilities

 

 

10,009

 

 

 

843

 

Total liabilities

 

$

107,711

 

 

$

123,284

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

Class A Common Stock

 

 

9

 

 

 

9

 

Additional paid-in capital

 

 

765,284

 

 

 

764,366

 

Accumulated deficit

 

 

(195,642

)

 

 

(186,022

)

Total Capital

 

 

569,651

 

 

 

578,353

 

Treasury stock, at cost

 

 

(15,638

)

 

 

(15,535

)

Total Stockholders’ Equity

 

 

554,013

 

 

 

562,818

 

Noncontrolling interests in consolidated subsidiaries

 

 

309,655

 

 

 

316,145

 

Total Equity

 

 

863,668

 

 

 

878,963

 

 

 

 

 

 

Total Liabilities and Equity

 

$

971,379

 

 

$

1,002,247

 

SUNLIGHT FINANCIAL HOLDINGS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

dollars in thousands

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Revenue

 

$

29,590

 

 

$

26,203

 

 

$

57,821

 

 

$

50,990

 

Costs and Expenses

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of items shown separately below)

 

 

5,773

 

 

 

5,337

 

 

 

11,002

 

 

 

10,191

 

Compensation and benefits

 

 

14,138

 

 

 

8,108

 

 

 

27,263

 

 

 

16,120

 

Selling, general, and administrative

 

 

4,546

 

 

 

1,204

 

 

 

11,018

 

 

 

3,120

 

Property and technology

 

 

1,984

 

 

 

1,420

 

 

 

3,912

 

 

 

2,628

 

Depreciation and amortization

 

 

9,694

 

 

 

801

 

 

 

32,141

 

 

 

1,610

 

Provision for losses

 

 

4,042

 

 

 

436

 

 

 

4,680

 

 

 

1,172

 

Management fees to affiliate

 

 

 

 

 

100

 

 

 

 

 

 

200

 

Total Costs and Expenses

 

 

40,177

 

 

 

17,406

 

 

 

90,016

 

 

 

35,041

 

Operating income (loss)

 

 

(10,587

)

 

 

8,797

 

 

 

(32,195

)

 

 

15,949

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net

 

 

 

 

 

 

 

 

Interest income

 

 

87

 

 

 

112

 

 

 

171

 

 

 

253

 

Interest expense

 

 

(296

)

 

 

(317

)

 

 

(556

)

 

 

(572

)

Change in fair value of warrant liabilities

 

 

13,610

 

 

 

(1,451

)

 

 

8,726

 

 

 

(4,065

)

Change in fair value of contract derivatives, net

 

 

320

 

 

 

69

 

 

 

93

 

 

 

(787

)

Realized gains on contract derivatives, net

 

 

2,055

 

 

 

719

 

 

 

3,964

 

 

 

2,986

 

Other realized losses, net

 

 

(176

)

 

 

 

 

 

(373

)

 

 

 

Other income (expense)

 

 

(1,004

)

 

 

209

 

 

 

(828

)

 

 

621

 

Business combination expenses

 

 

 

 

 

(2,895

)

 

 

 

 

 

(6,482

)

Total Other Income (Expense), Net

 

 

14,596

 

 

 

(3,554

)

 

 

11,197

 

 

 

(8,046

)

Net Income (Loss) Before Income Taxes

 

 

4,009

 

 

 

5,243

 

 

 

(20,998

)

 

 

7,903

 

Income tax benefit (expense)

 

 

1,650

 

 

 

 

 

 

4,051

 

 

 

 

Net Income (Loss)

 

 

5,659

 

 

 

5,243

 

 

 

(16,947

)

 

 

7,903

 

Noncontrolling interests in loss of consolidated subsidiaries

 

 

(1,543

)

 

 

 

 

 

7,089

 

 

 

 

Net Income (Loss) Attributable to Class A Shareholders

 

$

4,116

 

 

$

5,243

 

 

$

(9,858

)

 

$

7,903

 

 

 

 

 

 

 

 

 

 

Loss Per Class A Share

 

 

 

 

 

 

 

 

Net loss per Class A share

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

 

 

$

(0.11

)

 

 

Diluted

 

$

0.05

 

 

 

 

$

(0.11

)

 

 

Weighted average number of Class A shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

84,635,413

 

 

 

 

 

84,717,117

 

 

 

Diluted

 

 

84,668,201

 

 

 

 

 

131,433,095

 

 

 

SUNLIGHT FINANCIAL HOLDINGS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Six Months Ended June 30,

dollars in thousands

 

2022

 

2021

Cash Flows From Operating Activities

 

 

 

 

Net income (loss)

 

$

(16,947

)

 

$

7,903

 

Depreciation and amortization

 

 

32,141

 

 

 

1,698

 

Provision for losses

 

 

4,680

 

 

 

1,172

 

Change in fair value of warrant liabilities

 

 

(8,726

)

 

 

4,065

 

Change in fair value of contract derivatives, net

 

 

(93

)

 

 

787

 

Other expense (income)

 

 

828

 

 

 

(621

)

Share-based payment arrangements

 

 

8,652

 

 

 

18

 

Deferred income tax expense (benefit)

 

 

(4,051

)

 

 

 

Increase (decrease) in operating capital:

 

 

 

 

Increase in advances

 

 

(25,206

)

 

 

(5,673

)

Decrease (increase) in due from affiliates

 

 

 

 

 

(1,839

)

Decrease (increase) in other assets

 

 

2,927

 

 

 

2,190

 

Increase (decrease) in accounts payable and accrued expenses

 

 

(4,077

)

 

 

2,664

 

Increase (decrease) in funding commitments

 

 

(6,182

)

 

 

3,779

 

Increase (decrease) in due to affiliates

 

 

 

 

 

761

 

Increase (decrease) in other liabilities

 

 

(1,946

)

 

 

202

 

Net cash provided by (used in) operating activities

 

 

(18,000

)

 

 

17,106

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

Return of investments in loan pool participation and loan principal repayments

 

 

586

 

 

 

832

 

Payments to acquire loans and participations in loan pools

 

 

(1,438

)

 

 

(1,170

)

Payments to acquire property and equipment

 

 

(1,265

)

 

 

(1,066

)

Net cash used in investing activities

 

 

(2,117

)

 

 

(1,404

)

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

Proceeds from borrowings under line of credit

 

 

 

 

 

20,746

 

Repayments of borrowings under line of credit

 

 

 

 

 

(14,758

)

Payments for share-based payment tax withholding

 

 

(103

)

 

 

 

Payments for repurchase of redeemable convertible preferred stock

 

 

(2,004

)

 

 

 

Payment of capital distributions

 

 

(1,182

)

 

 

(7,522

)

Payment of debt issuance costs

 

 

 

 

 

(491

)

Net cash provided by (used in) financing activities

 

 

(3,289

)

 

 

(2,025

)

 

 

 

 

 

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash

 

 

(23,406

)

 

 

13,677

 

 

 

 

 

 

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

 

 

93,900

 

 

 

52,705

 

 

 

 

 

 

Cash, Cash Equivalents, and Restricted Cash, End of Period

 

$

70,494

 

 

$

66,382

 

RECONCILIATION OF GAAP MEASURES TO ADJUSTED FINANCIAL MEASURES

ADJUSTED EBITDA AND FREE CASH FLOW RECONCILIATIONS

 

 

 

Three Months

Ended June 30,

 

Six Months

Ended June 30,

dollars in thousands

 

2022

 

2021

 

2022

 

2021

Revenue

 

$

29,590

 

 

$

26,203

 

 

$

57,821

 

 

$

50,990

 

(+) Realized gain on contract derivatives, net

 

 

2,055

 

 

 

719

 

 

 

3,964

 

 

 

2,986

 

Total Revenue

 

$

31,645

 

 

$

26,922

 

 

$

61,785

 

 

$

53,976

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

dollars in thousands

 

2022

 

2021

 

2022

 

2021

Net Income (Loss)

 

$

5,659

 

 

$

5,243

 

 

$

(16,947

)

 

$

7,903

 

Amortization of Business Combination intangibles

 

 

9,385

 

 

 

 

 

 

31,584

 

 

 

 

Non-cash change in financial instruments

 

 

(12,926

)

 

 

1,173

 

 

 

(7,991

 

 

4,232

 

Expenses from the Business Combination and Other

 

 

141

 

 

 

2,895

 

 

 

490

 

 

 

6,482

 

Adjusted Net Income (Loss)

 

$

2,259

 

 

$

9,311

 

 

$

7,136

 

 

$

18,617

 

Depreciation and amortization

 

 

309

 

 

$

801

 

 

 

557

 

 

$

1,610

 

Interest expense

 

 

296

 

 

 

317

 

 

 

556

 

 

 

572

 

Income tax expense (benefit)

 

 

(1,650

)

 

 

 

 

 

(4,051

)

 

 

 

Equity-based compensation

 

 

4,792

 

 

 

7

 

 

 

8,652

 

 

 

18

 

Fees paid to brokers

 

 

780

 

 

 

1,059

 

 

 

1,745

 

 

 

2,169

 

Adjusted EBITDA

 

$

6,786

 

 

$

11,495

 

 

$

14,595

 

 

$

22,986

 

Interest expense

 

$

(296

)

 

$

(317

)

 

$

(556

)

 

$

(572

)

Fees paid to brokers

 

 

(780

)

 

 

(1,059

)

 

 

(1,745

)

 

 

(2,169

)

Expenses from the Business Combination and Other

 

 

(141

)

 

 

(2,895

)

 

 

(490

)

 

 

(6,482

)

Provision for losses

 

 

4,042

 

 

 

436

 

 

 

4,680

 

 

 

1,172

 

Changes in advances, net of funding commitments

 

 

(5,769

)

 

 

(2,654

)

 

 

(31,388

)

 

 

(1,799

)

Changes in operating capital and other

 

 

(712

)

 

 

1,600

 

 

 

(3,096

)

 

 

3,970

 

Net Cash Provided by (Used in) Operating Activities

 

$

3,130

 

 

$

6,606

 

 

$

(18,000

)

 

$

17,106

 

Capital expenditures

 

$

(820

)

 

$

(357

)

 

$

(1,665

)

 

$

(1,066

)

Changes in advances, net of funding commitments

 

 

5,769

 

 

 

2,654

 

 

 

31,388

 

 

 

1,799

 

Changes in restricted cash

 

 

(774

)

 

 

915

 

 

 

(438

)

 

 

(125

)

Payments of Business Combination costs

 

 

 

 

 

2,012

 

 

 

 

 

 

6,482

 

Other changes in working capital

 

 

1,609

 

 

 

(566

)

 

 

4,082

 

 

 

(199

)

Free Cash Flow

 

$

8,914

 

 

$

11,264

 

 

$

15,367

 

 

$

23,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income (Loss)

 

$

2,259

 

 

$

9,311

 

 

$

7,136

 

 

$

18,617

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income (Loss) per Class A Share, Diluted

 

$

0.01

 

 

 

 

$

0.04

 

 

 

 



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