Earnings call transcript Q1 2023

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Operator

Greetings. Welcome to Sunlight Financial First Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

the to turn of Dempsey, now Relations. Investor will conference Lucia over Head I you. Thank

begin. may You

Lucia Dempsey

Good to market ir.sunlightfinancial.com. website and announced an After our afternoon, earnings welcome quarter first the earnings quarter first our results close call. quarter XXXX presentation XXXX of and Form to at the XXXX today, financial filed Sunlight we XX-Q, Financial's posted first Relations Investor

beliefs, the or uncertainties this remarks constitute statements are and XXXX. implied begin, we I'd by within of Before forward-looking expectations, materially actual may that subject certain risks, that statements prospects. factors These differ remind of cause Securities that like such could statements. Private variety plans estimates, contain webcast other everyone results of and statements indicated Litigation about meaning the to those Act Such to to Reform future a from include

and of Forward-looking or business performance statements limited Financial's Sunlight conditions include, and are but predictions and financial to, competitive industry expectations not and outlook.

the of press business. affect required and for a supplemental law. the website the the as that SEC as speak the they any or and subject issued filings release participants future risks, Sunlight of of date statements today to under SEC, disclaims any obligation, risks can to alter The revise or Forward-looking whether to statements, by obligation result forward-looking a call of by with are and performance. new assumptions update, except and on not Financial's otherwise, guarantees company also no expressly uncertainties are Financial otherwise discussion are presentation our this to refers Sunlight Financial's as company posted events filed is and made, Sunlight the information,

or comparable most measures GAAP found in we The these accordance of isolation and for both GAAP. which call, substitute discuss be measures of today's a release performance. the additional our useful results A be be believe we in during considered with to presentation. this reconciliation press information directly non-GAAP prepared in presentation evaluating as in not our measures, supplemental should can non-GAAP can the Additionally, will

Rodney Financial's with the me and Sunlight's start our Matt performance are Executive Chief will up review detail then an will Chief Potere, with additional Joining quarter Yoder, for ongoing operational our Officer. results success. update on We'll Financial before Matt of XXXX. Matt of key today Rodney share on the closes questions. first financial call our Sunlight open then for an Officer; priorities

Potere. now to is Matt It call to pleasure my over turn the

Matt Potere

XXXX. Sunlight joining bankruptcy late Home quarter and XXXX. In a you X% for for that the volume Thank to reflecting of the a million with relative XX% installer the particularly loans, first you, Lucia, XX% when solar of increase the million of a filed to in strong us. solar relative normalizing improvement all of quarter home XXXX, year. same increase quarter or first period $XX thank XXXX of That's the funded and last increase the in $XXX was funded impact improvement first

XX,XXX home nearly quarter, sustained solar demonstrating overall. for demand the improvement borrowers for funded We and in loans also first financing the

average We average XX% also with X% solar XXXX, loans continue to loan to up the $XX,XXX, quarter to $XX,XXX. first grow to saw average relative balances and up improvement of home balances

quarter to add this quarter home increasing and increase a in XX new XX of relationships the solar installers platform, Orange maintain XX% the to strong new Additionally, with to contractors network that origination new our XXXX. partners of continue total including contractor year, relationships to our first our became X,XXX, we of contractors first improvement relative active and

bolstering execution, of with reducing new well positioned the SVB other channel indirect our based to Contractor as actions the that maturity our address Cross believe many in we disclosed, we've Sunlight River credit of taken key and as previously financing As rightsizing ensuring arrangements Bank Advance our our issues enhancing expense revolving profitable base by our liquidity, pricing, Program. facility, addressing XXXX the

to which be an an on this demonstrates provide our update continue I in credit to performance, we also wanted that industry quality. take credit to opportunity leader

we our balance for credit and performance originated While ensure sheet, the that our of we indirect on capital track don't loans high hold loans providers partners. quality with can platform channel Orange performance own we our

only for originated XXXX. XX points for months, loans assets to in benefits to average Sunlight's and after originated our credit high-quality proposition performance For future XX peers earn which to rate margins. our loss an loans solar superior XXXX attractive in capital them the return, that turn value had similar supports and relative opportunity Sunlight XXX our reinforces current basis example, an in basis This credit points dedication of by risk-adjusted providing providers,

I'd the like discuss financial to to call to Yoder, over quarter's now turn Rodney CFO, Sunlight's the results.

Rodney Yoder

relative Thanks, generated in to $XX.X Matt. million quarter XXXX revenue in period. year the $XX.X Sunlight first total prior of the of million

indirect platform and in first quarter $X.X total year. total and sold was channel this volume loans While fee a in million to only XX%, factors channel also million proportion direct fees loans loans we down These decreased. indirect to a small solar decrease of decrease as portion funded fees led were home X%, of loans $X.X indirect platform or of in channel up channel direct platform the improvement a the

the XXXX, XXX direct quarter of XXXX, impact up the the points last pricing channel in of we've in actions X.X% our reflecting basis In platform the margin fee of first X.X%, year. quarter implemented from first was

sales, indirect near-term. we Given the the fee platform Backbook sale April in margins as channel negative indirect loan upcoming channel well as expect Loans

expect implementing approved fee pricing channel platform improve mid to recently been and indirect later loans our we to be profitable we've this and actions XXXX, year. direct margins since thanks However,

a a and first $X.XX a $X.XX in million income of loss the for XXXX, in $X.X or million EBITDA diluted of loss XXXX. per per the profit million the to was diluted of to or net million share quarter Adjusted quarter relative first loss profit a of of $X.X relative $XX.X the first first quarter quarter adjusted was for $XX.X share,

the In impacted increased EBITDA origination fees, higher balances from of quarter platform income XXXX partially income. addition by cost revenue which net first loan of for offset higher adjusted CRB, at fees, unsold interest by to were decreased adjusted increased and

loan solar April were loans the While sell any first in solar we specified indirect quarter the Cross the the indirect we and million not added River of new channel $XXX on Bank sale did of deferred in the associated channel XXXX, loans completed to agreements. term as payments XX,

originating recently expect new coming indirect sales are balances finance our through we unsold CRB's sheet, maintain balance additional loan CRB the we to While agreements within loan loans channel months. in of the executed at compliance

XXXX. I'll highlight back our progress we the turn made to call now the address challenges Matt from to key to significant

Matt Potere

Thanks, Rodney.

we're River strong we originate Bank high-quality we're With last the that to channel the financing loans Loans our month. well of As Bank, indirect encouraged and for on loans. we we're to profitable continuing assets positioned indirect maturity, unsold lower an just channel. Backbook million Cross reduce balance supported Losses River are the loans by at including seeing sold the Cross channel extended increased in the the demand sale fees discussed, capacity, solar indirect facility of are $XXX of the by agreements, and funding

the are and the taking materially that interest of both number ensure We've of unprofitable actions rate a channels. raising of to since year also of pricing, to profitable products the ensure are new they being last including and profitable elimination loans direct that middle in been originated the indirect

taken volume actions profitable. full a we've we also in today year approving believe believe to to right to the $X base and our expense expectations annual are loans result, discussed these We've adjust As lead we approximately the we will size our savings. are million cost for

as of to and we improve liquidity us Program the XXXX. to in $XX million Contractor total This March XXXX as of March outstanding XX, March to advances indefinitely reduce As XXXX position. profile company's previously our $XX of disclosed, from the XX, enabled Advanced suspended risk million

I forward on months progress our long-term we additional on strengthen providing our continue as our to look and to for operations the over value focus stakeholders. delivering updates coming

back operator like Q&A. the to the that, for to With I'd call turn

Operator

[Operator question Philip Please with Thank MKM. is Shen Instructions] Our proceed. you. first from ROTH

Philip Shen

Hey guys. for taking my questions. Thanks

remaining then guess expect amount there? QX? the do balance sale more about the million. on in after taper on could April Can And amount platform by and of QX zero have loans some also My left of you is you or end expect that you do kind to million in to of $XXX $XXX about have the the sold that one residual of guys to sheet. is keep Thanks. much be First talk you fee close how to year through you

Rodney Yoder

question. Thanks, the Phil. Appreciate

million of million. of sale, channel. And did The reflect So as disclose partially to by balance that'll potential quarter in unsold further the were complete other that the will did sales the your $XXX if of end of we CRB balance April, second we offset and at in $XXX funding completed CRB. loans that be March, reducing point, that sale the

Page time. actions We're of very we sold we've contained CRB your these size us execute pretty strong You'll We sales. the very to over But and going of And to the is this have the the that the of the believe $XXX XX, we disclosed future over while on more believe taken and in well with for on detail have five last book million the walk the profitability the we've of front do of balance pleased for forward. ability assets. book months. in kind a pricing see point, book arrangement specific given provides haven't we back back subsequent demand we

Philip Shen

year for that? quarters? or Can see quantify that it you talked And how margin about which in by you think Do bit this a Okay, of anyway improving the normalized end could thank improving. you level think year you the you. platform takes than the longer do a see fee you little we over

Matt Potere

question. Yes, Phil. the for Thanks

the we actions improve actions last profitability. started to well. So to unprofitable eliminate middle year take we've middle started we pricing coupon low in of last and And continued in as products to year the the of taking

continue front loans we mentioned, off is book Rodney think profitable. think those back and to well contained we the As the and we sell have book we'll

And pricing believe took, on, recently that And the shift front we've you'll away been loans the that we mix think originating as do back toward so profitable. the we year do book. of the see goes we actions they're because the book and from

Philip Shen

to Thanks, way. you the little don't Matt. Okay. I'm any just right going right. putting be might, be in might offensive mean I of guys it. ask I way one, to one might this All next it. a this ask bit it

in channel loans you we script, originating. said your the you're that So believed indirect

Or loans the back perhaps in that's also think now you not then. probably the I'm guys them, they profitable profitable guessing that they're true. book. one, You were you not the now. were that When are thought – profitable originated

it if might can they're Does what were this how terms you turned gives case they So saying the Street, today then, what not around to might, it make were but time? you The fact profitable they that profitable. be then out in of what thought that sense? the that confidence different that Street be the give you're Thanks. probable

Matt Potere

yes, question. year levels. rates And increased last unprecedented understood. The your nearly interest certainly Yes, at understand have

made we've and buyers what that back believe regular that's with today, eliminated a that rapid originating were confidence And us significant that products loans we've we're profitable. the That so unprofitable are seen unprofitable. very book loan rise rates, and we we pricing made give actions, in having said, conversations that

Philip Shen

book, of duration to kind you expect back there Would expect Got for kind to quarter expect sold go-forward you And originated the balance as once on it. to within and clean Thanks. be a up be do loans the sheet you off on parties? quarter? third the then the longer? Would sitting of a it your to what opposed basis, you

Rodney Yoder

similar question, improvements the potential thanks sell the back PTOs. and in loans, as seeing we getting and Yes, pulling are for We through, the we – Phil. book, some down

it we don't do So, But be going any forward. a timeframe. in expect on cadence change we material expect regular

Philip Shen

while earlier manage an some it Thanks. your update question. give that could So Board some take strategic bought in [ph] just alternatives share is I'll pass topic? on process, Okay, great. Can you to on. you getting One headlines the there maybe curious some detail urging if action? or Bloomberg last on

Matt Potere

Yes, course. sure, of

pleased comment challenges were first, River While specific aligned year agreement We of any Bank. or positions is, agreement the very think potential last to Cross the the it can't very and the the What well close address to I objectives strategic company say rumor I on we alternatives with process. can to transaction. that from

interest interest actions of the All the the to that of go company are forward. best best in and continues consider the shareholders said, of we Board additional the that as

Philip Shen

both. you I'll on. thank Okay, pass it

Operator

with Please proceed. is Cyganovich question Citi. next Our Arren from

Arren Cyganovich

in $XXX listed fund that XX-K provider? the that of you go least and looking Was I with at put one that only direct items fund And forward time. capital you million direct through at first the your one your loans capacity did provider that had you what's quarter. all was channel basis? out channel Thanks. recently But in one loans a on originate to single so

Rodney Yoder

thanks question. appreciate Yes, Really the Arren. the question, for

talked in we've about past, that to the the or partners ratios. loan calls tell As continue depository deposit the strong or the the credit appreciate entire our us of they macroeconomic quality to impacts loans

over as we a sheets same that loans the of credit performance. go generate higher their We we've and as balance direct on profitability [indiscernible] back. have book. the made to so up, previously perspective channel. indirect and the low [ph] to But Matt products our And progress benefits from what alliance the eliminating we're a yields basis provides And coupon then on the on free front time attractive at channel. a about mentioned, come regardless time talked channel seeing we believe they'll expect raising like forward

Arren Cyganovich

third much though, I that, to $XXX the lower expect going in a a is down and million, possible come you to level? that is forward guess Or from perspective that's do second like quarters?

Rodney Yoder

arrangement providing Thanks does and and the say back-book CRB, on sell book. given and Yes. signed not pricing made that us originate specifically, is provide our We're we what really arrangement, Arren. capability we that I changes – to the like would we've growth flexibility profitable it the this the that guidance down but with front

certainly, on look certainly near in And so channel, higher that's a direct the the reliance where we – we'll have term. much

Arren Cyganovich

deck, million Okay. that I be basis I as in your caps, Is River's Cross is is XX limitation a back-book? down quarterly much with loan the is the terms cap And of where on essentially originations of dates. you how sell guess, then, going on for slide have your you guess, the respect Page you maximum kind arrangement, basis? of of various of kind on can the the end a to at try produce $XXX then say, to a if year, quarterly And this that at, to

Rodney Yoder

Yes. Thanks for again the question.

small sales. limits. I both after Keep stay mind cadence So where in compliance as originate, a these a couple And on the definitely through We I'd that as with with be million we're mentioned of also of X%. we'll $XXX is will things. loans selling can we be channel. sitting in balance balance amount that a earlier, note that originations the collateral increased and

$XXX new So will to within that be would I $XXX balance would million between the as capacity well somewhere us as million both to and reflect again, that be originations expect quarter. that perspective, the sales

Arren Cyganovich

new indirect you Got have yet it. for place do program And channel a hedging in originations?

Rodney Yoder

we've our We'll pricing, speed to going made rates. does had in risk continue magnitude, and opportunities provide talked hedging and some interest as evaluate costs, rates So the associated improvement we'll unprecedented significant which we've moved mitigate last forward. has against to that and protection about assess year, benefits an in

Arren Cyganovich

Okay. savings go-forward And just your What cost had you've cost rate some a then run are kind on that what now you savings? of your do basis operating mentioned you lastly, cost view – after as implemented.

Rodney Yoder

question. Great Yes.

address there. talked million expect we've with size as about and cost annual the before volumes, align the of our actions to have headcount. we steps, the taken expected the organization reduce So about taken our – We've it savings $X with to we of align to base

Advance liquidity deliver and to the loans. CRB the So addressed arrangement, and Contractor we've got actions there pricing profitable we've with with Program that our

Arren Cyganovich

you. Thank Okay.

Rodney Yoder

Thank you.

Operator

next Cowen. Jeff Instructions] with from is proceed. Osborne question [Operator Our Please TD

Jeff Osborne

great. Hey evening. Good

of a Maybe on Just items. up side. couple questions my picking the expense just on

the couple to a I think of Is about of ago roughly quarters a good the use? company $X still talked million number company you had being public that quarter. cost a

Rodney Yoder

look parties. for have we – on of That's reliance reducing to Yes. continued ways third

are company expense, use. that I And a okay that's numbers quite an so think to accounting probably bit of for driving compliance public number the now but

Jeff Osborne

think five-handle? is the trying with profitability think how there I'm a of majority mix; of think to becomes about then And fee way forma would a on what Is of it. the we that just basis? as today? indirect the Got pro that be to that four-handle, about platform the loans the underwriting should a you're

Rodney Yoder

book. the that's going not going of sales the function Yes, and front be of back mix to and and to – guidance. that's providing timing be the disclosing a We're of

a income You our that as took in we'll that can we report strong sale as statement front significant had to loans impact said, April, That look $XXX that Matt earnings. of channel. do had mentioned, we and at in to when $XX.X We sold pricing the million. of the see loss profitability on million. December and the But through, expect actions, made released pulls we we that

Jeff Osborne

I was about Is you're back the trying think I way at there the pursuing book of underwritten that any loans? what just to sales is on. for is management new target book, a excluding front underwater that benchmark get guess the to

Rodney Yoder

Yes.

So I that largely address particular, relying we're think, any you profitable loans deliver on will the that in again, actions Sunlight. targeted while that have the fact guidance pricing see be to the would channel indirect normally we we providing not from

Jeff Osborne

there are? or the that then I was seeing just out X.X% Matt, curious, And got, you've you're think that Got no what with for something dealer the fee. what, for it. dealer no? zero Is maybe fee loans uptake I of loan demand

Matt Potere

some see interest both would have and we generally, products improvement no do taken them. to earlier, say, do associated mentioned dealer or the I fee towards have some of Rodney in contractors. from number So significant dealer a actions, home certainly skew as products no APR we that do We product, but APR solar with eliminate lower than lowest fee originations lowest we've see the products. the dealer – pretty still lower our

Jeff Osborne

the then And the advances. It's had great last to that see on is I one just down. it. Got come of million $XX

that that the delinquent, $X Is three or more. it million table the looks a separate days XX breakout like customer? one are in It disclosed relative to the a that concentration. in that size or or also is But delinquent days folks million is the installers? think four Q; with of of $X there's is I in XX in that's or particular by handful that rest. is chunkier you've one all You

Rodney Yoder

that's combination We Yes, provide required. to be a going detail if certainly installers. of can more

Jeff Osborne

Thank Okay. you.

Operator

We have I reached closing like the turn conference the comments. Matt to end question-and-answer would session. of our for back to over

Matt Potere

a questions, address Thank thanks, Great. challenges We're what the long-term generating to XXXX. all joining our and looking everyone, forward attractive we're from the today. to pleased we've us think industry. that with And is you made your for very partners value for progress really we in for key

Thank have a you all, evening. and good

Operator

Thank conference. you. today's This does conclude

this lines disconnect participation. and You you may your at thank your time, for

Sunlight Financial (SUNLQ) 15 May 232023 Q1 Earnings call transcript