This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Thank you for standing by. This is the conference operator. Welcome to the Sunlight Financial third quarter 2021 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Lucia Dempsey, Head of Investor Relations. Please go ahead.
spk04: Good afternoon and welcome to Sunlight Financial's third quarter 2021 earnings call. After the close of the market today, we announced third quarter 2021 key financial metrics, filed our 10Q with the SEC, and posted an earnings presentation to our Investor Relations website at ir.sunlightfinancials.com. Joining me today are Matt Viteri, Sunlight Financial's Chief Executive Officer, and Barry Edinburgh, Chief Financial Officer. Following their prepared remarks, we will open the call to Q&A. Before we begin, I'd like to remind everyone that this webcast may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Forward-looking statements include, but are not limited to, some light financials expectation or prediction of financial and business performance and conditions and competitive and industry outlooks. Forward-looking statements speak as of the day they are made, are subject to risks, uncertainties, and assumptions, and are not guarantees of performance. Sunlight Financial is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. The company also refers participants on this call to the press release issued by the company and filed today with the SEC, the supplemental presentation posted to our website, and Sunlight Financial's SEC filings for a discussion of the risks that can affect our business. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures can be found in both our press release and the supplemental presentation. It is now my pleasure to turn the call over to Matt Pateri.
spk03: Thank you, Lucia. Good afternoon and thank you for joining us. I'm pleased to share Sunlight's third quarter of 2021 results as we experienced excellent year-over-year growth in all of our key metrics. In the third quarter of 2021, Sunlight funded $639 million in loans, up 77% from the third quarter of last year. We also saw strong growth in our financial metrics, with an increase in our total platform fee to 4.3%. record high total revenue of $30 million, and adjusted EBITDA up 97% to $11.4 million. Despite robust year-over-year growth, our funded loans in the third quarter came in below our forecast due to industry-wide challenges with supply chains, labor shortages, and permitting delays. We have seen these macro issues lengthening project installation times, which subsequently reduces our levels of funded loans. While these challenges have been building for several months, they particularly accelerated late in the third quarter and have persisted into the fourth quarter, leading us to reduce our full year 2021 funded loan guidance to $2.45 to $2.55 billion. However, I am pleased to affirm our full year 2021 guidance range for total revenue, adjusted EBITDA, and adjusted EBITDA margins as increased platform fee margins offset lighter-than-expected funded volume in the third quarter of 2021 and are expected to improve further in the fourth quarter of 2021, which Barry will discuss in greater detail. Many of you have heard me talk about the three pillars that are critical for any financing business and which drive Sunlight's value proposition, access to distribution, credit risk management, and stable, low-cost funding. Today, I'd like to focus on the first one, access to distribution. Sun Life Financial consistently focuses on building loyalty by creating value for our distribution channel, our network of nearly 1,500 contractor partners. In addition to maintaining competitive pricing, we have implemented several initiatives in the last few months to improve process efficiency and expand our product suite. First, we've upgraded Orange. our proprietary point-of-sale technology platform by adding enhanced NTP or notice-to-proceed review process with robotic process automation. This eliminates manual processes when providing contractors with approval to begin construction. This instant NTP not only improves process efficiency for contractors, but it also reduces our operational time and the expense associated with it. Second, we've launched a program called Sunlight Max, which offers a set of non-prime solar and home improvement products. This initiative leveraged Sunlight's credit expertise to increase approval rates and improve the value proposition for contractors who are now able to offer Sunlight's financing options to even more homeowners. We're already seeing the positive effect of these and other efforts to build contractor loyalty. As of today, we have established first look exclusivity and volume commitments with contractors representing more than $1 billion in expected 2022 funded loans. In addition to improving value for our existing network, we continue to grow the overall size of our contractor base, adding 92 contractors in this quarter, representing a 54% increase from the third quarter of 2020. And we're pleased to begin providing these 30 new solar contractors and 62 new home improvement contractors with our best-in-class technology platform, an unmatched product suite to fuel their growth. We're also continuing to see strong year-over-year growth in other key operational metrics. Despite the industry-wide issues impacting funded loan volume, we've facilitated financing for 18,189 borrowers in the quarter. up 65% from the prior year period. In addition to funding more homeowners, our average loan balance rose 8% to $35,000, and average solar loan balances in particular grew 15% to a record high of $41,000. In the third quarter of 2021, the battery attach rate for sunlight solar loans was 24%. That's nearly twice as high in the prior year period. And this growth is being driven by homeowners' increasing desire for reliability in the face of grid instability. The slight dip from the last quarter is likely due to the lower availability of batteries, as multiple manufacturers have cited delays in production and shipping. And positively, the demand for backup storage remains strong and will continue to support Sunlight's growth in the future. With that, I'd like to turn the call over to Barry Edinburgh, Sunlight CFO, to discuss our third quarter financial results in more detail.
spk10: Thanks, Matt. In the third quarter of 2021, Sunlight generated $30 million of total revenue, an increase of 72% over the third quarter of 2020, and a new quarterly high for the business. Adjusted EBITDA for the quarter was $11.4 million, up 97% from the third quarter of 2020. Adjusted EBITDA margin was also up materially to 37.9%. from 33.1% in the third quarter last year. This was our 11th consecutive quarter of recording positive adjusted EBITDA, continuing to validate our approach to the market, our revenue model, and the capital light nature of our business. Free cash flow generation is another major validation of the Sunlight Revenue Model and a unique and attractive feature of our business. We've produced a substantial amount of free cash flow in the third quarter of this year and continue to convert adjusted EBITDA to free cash flow at an extremely high rate In last quarter's earnings call, we indicated that we had negotiated improvements in pricing with our capital providers, enabling platform fee margins to rebound in the third quarter. And that's exactly what happened. Our overall platform fee margin increased to 4.3% this quarter, up from 4.0% in the second quarter. An even better indicator of our success in this regard is that our direct channel platform fee margin improved from 4.3% in the second quarter to 5.0% in the third quarter. We expect this momentum to accelerate in the fourth quarter as these pricing improvements flow through to more funded loans. Sunlight's ability to drive pricing on the capital provider side of our business is a testament to our industry-leading credit quality and the strong partnerships that we've developed with a diverse network of capital providers. We remain focused on delivering attractive risk-adjusted returns for our capital providers and view these relationships as mutually beneficial partnerships. This approach has enabled us to add three new capital providers to the platform in recent months, extending our access to flexible, low-cost capital to fund loans, and furthering our ability to provide attractive pricing to the contractor market. I'd also like to reference a few items relating to our costs and expenses, as there are certain items related to the business combination that closed on July 9th that materially impacted the calculation of gap net income, leading to a net loss for the quarter. The first is compensation expense taken in the third quarter of approximately $25 million related to equity-based awards driven by the close of the business combination. The second is amortization and depreciation amounting to approximately $20 million in the third quarter that primarily relates to amortizing intangible assets established in the context of the business combination. We will amortize these intangible assets as described in our 10-Q. and such amortization will continue to reduce GAAP net income until the assets have been fully amortized. It is important to note, however, that neither of these items impact adjusted EBITDA as they are non-cash transaction-related expenses. As Matt referenced earlier, we've adjusted our full year 2021 guidance for funded loans to $2.45 to $2.55 billion, but we are reaffirming the remainder of our full year 2021 guidance metrics. For total revenue, 113 to 121 million. For adjusted EBITDA, 46 to 51 million. For adjusted EBITDA margin, 38 to 42%. Industry-wide challenges with supply chains, labor shortages, and permitting delays have negatively impacted project installation timelines. These macro slowdowns reduce third quarter funded loans relative to our expectations, and we believe this dynamic will continue through the fourth quarter of 2021. However, A robust improvement in platform fee margins should offset this impact, enabling us to affirm our previously provided guidance ranges for total revenue, adjusted EBITDA, and adjusted EBITDA margin. With that, I'd like to turn it back to Matt.
spk03: Thanks, Barry. At this time, Sunlight plans to initiate full year 2022 guidance on our fourth quarter full year 2021 call in March of next year. In the meantime, We remain committed to delivering on our plans for the remainder of 2021 and setting the company up for continued success next year. Before we shift to Q&A, I'd like to highlight a couple of drivers for continued long-term growth. Our residential solar business will benefit from robust growth across the market, adding new contractors to our platform and increasing our market share with existing contractors, and higher average loan size, partially driven by increased demand for battery storage. The growth of our home improvement business will be driven by a large and highly fragmented addressable market, the addition of new contractors on our platform, and growth in home improvement margins as we add direct channel capital providers to fund home improvement loans. Finally, we continue to generate strong free cash flow and deploy that capital in ways that support the long-term growth and success of Sunlight, including contractor advances, growth in new verticals, and potential M&A opportunities. I'd like to now turn the call over to the operator for Q&A.
spk05: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. Our first question comes from Philip Shen of Roth Capital Partners. Please go ahead.
spk07: Hey, guys. Thanks for taking my questions. First one is on the outlook for margins as we get into Q4 and even into Q1. You know, you've negotiated these new credit agreements, and so it seems like you have more uh, benefits, uh, in the coming quarter. So I was wondering, you know, we could back into some of it with the, uh, affirmation of the EBITDA, but was wondering if you might be able to speak to, you know, from a basis point standpoint, uh, if you're going, uh, from, you know, the, um, the current Q3 level, how much higher could it go, you know, from 4.3% to 5%, 5.0. Um, and then also as it relates to the credit agreements, um, I just wanted to check in to see if they might be dynamic at all. In other words, the market, you know, the ABS market that your peers tap into continues to trend lower. And so are those credit agreements with your credit unions and the new partners that you have, are they dynamic at all where they can help you kind of stay with the market moves if they continue to go lower?
spk10: Yeah, thanks for the questions, Phil. Appreciate that. As far as the dynamic nature of the agreements, and, you know, they're not dynamic as a general rule with our credit unions. And that has positive aspects and negative aspects. The positive aspects are that we're able to go back and ask for improved pricing periodically. And other positive aspects are that in a rising rate environment, we don't have to worry about, you know, immediate negative changes to our pricing. And so we view that as a positive. As far as margins in the fourth quarter, I'm not going to quote a specific number, but we talked about what we were trying to do last quarter. And since that time, we've further improved our pricing in a bunch of ways with a number of our capital providers such that we expect the fourth quarter platform fee margin to be materially higher than the third quarter. We also think it's materially higher than even we would have thought just a few months ago. So we've done a really good job executing on things we can control and pulling levers that we are able to pull in order to benefit our platform remark.
spk05: Our next question comes from Moses Sutton of Barclays. Please go ahead.
spk11: Hi, thanks for taking my question. How do you see average loan balance trending as Inflation sort of peaks in the solar system and then potentially deflates. Specifically, the average loan balance pushed to 41,000 from 39.8 in solar quarter to quarter, despite the battery tax dropping.
spk01: So how do we sort of bridge that?
spk03: Yeah, Moses, thanks for the thanks for the call. Over time, if you kind of step back over the last couple of years, we've seen average balance rise. Part of that is due to the growth in battery storage, but part of that is also due to the increasing size of systems and the ability, as solar becomes more and more in the money, the ability for solar installers to be able to upsell and add other energy efficiency offerings alongside solar. And so you're right, we saw a slight dip in battery attach rates this quarter. We feel really good about the long-term trend. But even despite that, we saw some growth. So as we look out, we don't explicitly forecast and provide guidance around average balance, but we think the trends are certainly very favorable.
spk11: Got it, got it. That's helpful. And then, you know, Phil was asking questions on the back end of the margin, the platform margin. The question I had really was on the competitive side of it on the front end. Last quarter, you were giving an update sort of on where the market was moving and things were tightening a bit on the competition side. Any sense on how that's changed since then? There's still probably a great amount of benign capital going against yours, but just trying to think of how we can see the shift dynamically between last quarter now and where we are into next year.
spk03: Yeah, sure. Great question. So certainly this is an attractive market. It will be a competitive market too. Barry talked about the expansion in a margin. I think one of the things that's important to note is our margin expanded substantially. We expect it to expand and have material improvement, even further improvement and accelerate in the fourth quarter. And that's despite us being able to make some improvements to give our contractors even better pricing. And so we feel like we're very well positioned there. You know, it's also important to note that we do compete beyond as we win contractor relationships, and we've been really successful there. We compete beyond just price. And I talked about some of the new products that we rolled out, Sunlight Max, enhancements that we've made to Orange, and that also has helped us attract contractors. And while we have to be competitive on price, we don't necessarily have to have the lowest price. We feel like we're really well positioned.
spk11: Got it. Got it. Very helpful. And last one for me, I'll just back in the queue. Can you elaborate on any labor constraints? You know, where are those most severe, maybe anything specific to California? And conversely, where are you seeing the strongest momentum on a quarter over quarter basis?
spk03: Yeah, what's interesting is on the labor side, you know, we see and what we hear from our contractors, fortunately, you know, we don't feel it directly. So the extent of which there's inflation and labor costs, for instance, You know, we don't directly realize that, but we do feel it in that project timelines have lengthened. You know, what we hear is it's not just installers on the roof. In fact, many cases, it's the trades. It's needing a master electrician who needs to come on site in some jurisdictions. And, you know, just like all trades, it's been challenging to get that. We really hear that from contractors across the country. And it's something that they're focused on trying to ramp up. But we do hear that. And then the other place I'd say it's indirectly labor in permitting offices. Permitting offices have been backed up. It's both the result of significant demand, but we also suspect that there's also some labor pressure there, like there are in many service-related positions.
spk01: Got it, got it. Very helpful. Thank you.
spk06: Our next question comes from Chris Donut of Piper Sandler.
spk05: Please go ahead.
spk02: Good afternoon. Thanks for taking my questions. Just wanted to follow up on the last one there with the labor issues permitting and then to tack on supply chain. As we think about 2022, is there anything either positively or negatively that you're looking at with those three issues you cited in the release of the labor supply chain and permitting that you expect to materially change for better or for worse? Thanks for the question, Chris.
spk03: So first, I think a little bit of context around this. We saw these issues really start to accelerate in the back half of the third quarter, the end of August and into September. You'd see that in what we reported in our third quarter. And then for our full year guidance is reflective of this environment. Today, we're not giving guidance on 2022. I can tell you when we look at full year guidance for this year, it does take into account this current environment. And we don't see a reason why we'd abate in the near term. We do think over time, you know, we'll start to see, you know, as supply chains loosen up really across the country, we should start to see those issues improve, and hopefully we start to see some of the labor shortage improve as well. But we're not in a position today to forecast timing around that.
spk02: Okay. Understood. Yeah, I didn't mean to put you on the spot for it. It's just they're tough issues to get your arms around, and they affect in, you know, different direct and indirect ways. And then just shifting gears, there was one other, go ahead.
spk03: Chris, I was just going to say, you know, one other note that I think might be important is because we have a network of contractors and it's a diversified network of contractors, you know, we think what we experience is pretty reflective of the overall market. And so we don't believe we have, you know, significant exposure to any individual OEM, for instance, or at least directly. And, you know, so while there are systemic issues with supply chains, for instance, and certainly we feel the effects of some of that, we have less risk than if an individual OEM had a significant issue. There's a bit of diversification and some benefit by having a broad network of contractors. Okay.
spk02: Okay. Yeah, that makes sense to me. And then a separate topic, but away from your release in your slide deck, There's an announcement earlier this morning of a merger between American Challenger Development Corp and Patriot National Bank Corp. And within that press release, it mentioned a new multi-year loan purchase agreement involving sunlight and up to 1.75 billion of residential solar loans and battery loans. And it also says in the release that there's not a definitive documentation yet. Any comments on that one or is that something that's not quite the T's are crossed and I've got it at this stage?
spk10: Yeah, thanks for that question as well. So we as they put in their release, we have signed a term sheet with them and we're hopeful that we will finalize documentation and we're hopeful of a solid partnership with them. I think they are the type of cutting edge counterparty that can add value to sunlight. as a capital provider. And so we're looking forward to finalizing the agreement and getting them started. But it was just a term sheet that we signed, just so everybody knows. I'd also note that we announced that we acquired or added three new capital providers to the platform in the past couple months. They were not one of them. So to the extent that we move forward with them, they would be a fourth. So the three are not inclusive of that one that you mentioned, Chris.
spk02: Okay, and then just to tack one on here, would it be reasonable to assume that the terms with these new capital providers are similar to existing terms with your current and prior capital providers, or any reason we would expect something different?
spk10: Yeah, I wouldn't expect something different. I mean, the way we think about it is that we will add capital providers to the platform selectively, and we'll focus on both lowering our cost of capital and on finding partners who otherwise add value to Sunlight. Definitely not adding partners just to add them. We have lots of capacity, so when we're adding partners, it's for a good reason, and it's for partners that we think will be good long-term relationships for Sunlight.
spk02: All right, understood.
spk03: Thanks very much. Oh, yeah, sure. We often talk about being focused on originating high-quality assets, and how that attracts capital. And as Barry said, adding those three capital providers and then the announcement from this morning of signing the term sheet are just examples of why we're so focused on originating high-quality assets, because it creates demand for us to ultimately get to lower and lower cost of capital with really good, flexible, long-term partners.
spk01: Okay. Makes sense to me. Thank you.
spk05: Our next question comes from Aaron Sigonovich of Citi. Please go ahead.
spk09: Thanks. Just another question on the competitive dynamics. There are some other folks that have talked about piloting programs and entering into the market in the fourth quarter and into next year. Could you remind investors just what your competitive moats are and how you might be able to withstand some of the rising competition? Yeah, I think there's probably two ways to look at this.
spk03: One is we always talk about platforms like ours need to do three things. They have to have access to distribution, which we have relationships with nearly 1,500 contractors. need to underwrite risk and make sure it's priced appropriately. And they need to have access to diverse and low cost capital. And we've spent the last six years refining our model for each of those three. If you look at the first access to distribution, you know, for new, for new entrants, they'll need to create relationship with hundreds, if not thousands of contractors. And we've been very successful winning those relationships. We've got competitively priced products. Our technology platform orange, which is proprietary, It's used by 15,000 plus salespeople. It gets very, very high reviews because it's so easy to use. And we have a very diverse set of products. And again, you can see that the example of rolling out the Sunlight Max products, the wide range of products that we offer and all the innovation that we've had. And so we think we compete really well to win contractors. But we think that new entrants will need to not just be good at the front end. They'll also need to really understand risk. and they'll need to have access to diverse and low-cost capital if they want to be well-priced. And so, again, it's an attractive market. We have no doubt it'll attract new entrants, but we think it would be challenging for a new entrant to come in, and we think we're well-positioned, and you can see that by the 60 contractors, roughly 60 contractors who have made commitments to us for next year, and we think those will produce a billion dollars plus in volume.
spk01: Great. Thank you.
spk06: Once again, if you have a question, please press star, then one.
spk05: Our next question comes from Madi Mandeloy of Credit Suisse. Please go ahead.
spk06: Madi Mandeloy of Credit Suisse, your line is live.
spk01: Is it possible you're in mute?
spk06: Our next question comes from Jeff Osborne of Cohen.
spk05: Please go ahead.
spk08: Great. I just had a few questions. One, I was wondering on the max rollout, can you just talk about when that happened and what parameters there are on how subprime we're going here and what the impact of margins are?
spk03: Sure. So we rolled that out in the third quarter. We rolled it out for both solar and home improvements. So they're separate products for those particular contractors and those loan purposes. What's important is we talk a lot about our credit and our credit expertise. We think what's the right way to think about credit is ensuring that assets are priced appropriately for their risk. And so we spent significant time with our capital providers to make sure that we really understand the incremental risk here for this broader buy box and that these assets are priced appropriately. So while we don't disclose margins product by product, I can tell you we've been thoughtful about the risk-adjusted returns that the capital providers will receive so that it makes sense for them as long-term partners and also the margins that we would earn on it as well. So, we really try to take a thoughtful approach and it's been very well received as you probably mentioned by by contractors.
spk08: And just to follow up, is there a minimum in terms of like, how subprime will go? Is there a minimum score that you're putting in drawing a line in the sand? Or is it on a case by case basis? And then maybe for Barry is 1 of the 3 capital providers dedicated exclusively to this product. or is it a variety of existing people that you had in the past?
spk03: Yeah, so happy to take the first one. We don't disclose minimum FICOs because our credit strategy is beyond just FICO. So it's proprietary and it uses multiple attributes. But we did work with the capital providers to make sure that we could maximize the buy box and to make sure that we're picking out the right yeses. so that they're priced appropriately. Barry, happy to let you answer the second question.
spk10: Yeah. I mean, we generally know public account and who funds what pools of loans, but it's safe to say that these loans are intentionally originated to give our capital providers, you know, good returns, and that one of the providers that we brought on is focused on these types of loans, yes.
spk08: That makes sense. The last question I had is just can you remind us of what the typical timeline is of getting a contract signed? at the dining room table proverbially, you know, relative to funding alone and, you know, where that is, where it was last quarter, where it is today, what your expectations are for Q4. Any type of commentary about the lengthening timeline as it relates to the new guidance would be helpful to put in perspective.
spk03: Yeah, sure. So I would think about first two steps. There's at the kitchen table signing the, it's the credit, running credit and agreeing to go solar. Then customers sign a loan agreement, which is sometimes days or a couple weeks later, and then the system is installed. That whole process typically takes in the 90-day range. We don't disclose the cycle times and the moves in the cycle times, but what I can tell you, just to give you a little context, is the delays that we're seeing as a result of those three issues, supply chain, labor tightness, and permitting, is not delaying credit approval to loan signing. It's delaying loan signing to installation. So it is on the back end. It's not demand driven. We're not seeing delays because of demand. We're seeing delays because of these macro issues. So we're not given specific numbers around that timeline. But to give you a sense for the impact, if you look at the midpoint in the change of our guidance, full year, or really into the back half of the year, it's a $200 million impact of delays that'll get pushed out at the subsequent quarter. So hopefully that gives you some sense of the order of magnitude. And fortunately, we've had good success increasing our margins in third, and we will in the fourth quarter to help offset that.
spk01: Thanks, Matt. That's all I have. Appreciate it.
spk05: Once again, if you have a question, please press star, then one. Our next question is from Philip Shen of Roth Capital Partners. Please go ahead.
spk07: Hey, guys. Thanks for taking my follow-ups here. Just to kind of tag on to the last question, I think, Matt, you just talked about that you're not seeing delays in your credit approvals. And so it's just a push out from the credit approval to the installation. That said, was wondering if you are seeing at some level your contractors fall short of the growth or volumes that they perhaps worked with you on at the beginning of the year, and not relative to installations, but maybe perhaps to the credit approvals. We have picked up on some you know, share shifting, if you will, and wanted to understand, you know, if there's some other competitive dynamics beyond, you know, the reasons why you cited for the funded loan volumes being challenged, meaning supply chain, labor shortage, and permitting. You know, the reality is the market grew. I mean, Sunrun grew, I think, 18% quarter over quarter in Q3. I think from other data sources, you know, quarter over quarter, the industry was up. And so just curious if you could walk us through kind of some of the perhaps share shift or competitive dynamics that you can provide that might be beyond what you've commented on thus far. Thanks.
spk03: Yeah. So I think it's important to note that demand for sunlight has definitely remained strong. So if we look at top of funnel, and I gave a little bit of context to $200 million, the midpoint of our guidance ranges, that's how much volume we believe is getting pushed out as a result of these issues. And so if you add that on, you can see fairly substantial growth. In the third quarter alone, we think it was north of 10% of our volume. our volume is at least 10% lower as a result of these types of pressures. So we don't think it's demand-related. We do think it's the result of these three issues. And if you look at other signs for contractors and contractors' interest, the 60 commitments from contractors is, I think, a pretty strong statement from contractors of their vote and their opinions of the value proposition that we provide for them.
spk07: Thanks, Matt. Appreciate that. Um, and then looking into 22, I know you're not giving official guidance, uh, but was wondering if you might be able to sketch a little bit of what it might look like, um, either from a growth standpoint or margin standpoint, for example, do you expect margins to flatten out quarter as you, you know, as the cadence of, um, quarterly performance, you know, from Q1 through Q4 next year? Any color there could be helpful from a modeling standpoint.
spk03: Yeah, so we're not providing 2022 guidance now. I think, you know, broadly, I think a few broad statements that I think are important. You know, historically, we've been a high-growth company. We're profitable. You can see that from the history of our of our adjusted EBITDA quarter over quarter, and we're a cash flow positive business. And so this business has tremendous momentum, and we feel good about that momentum into 2022. We get out into the first quarter, we'll provide 2022 guidance. But we've been winning in the market, and we expect to continue to win in the market.
spk07: Okay, great. One last one for me. As it relates to approval levels, given the competition that's been out there, I historically have thought of you guys as, kind of in the low 70% type range for approval levels versus competition at like 80%. You guys come in with a lower dealer fee. The competition has a higher dealer fee. Just wondering if that dynamic has changed at all. Are you guys increasing your approval rates at all? How are the dealer fees changing around, if at all? Thanks.
spk03: So there's no perfect measure for – or there's no perfect market data for what others' approval rates are in the market. We can tell you what we believe is that our approval rates have been north of market average, and that's because we think we're better at picking the goods from the beds, and it lets us have a robust approval rate but still have the best credit quality, quantifiably the best credit quality in the industry. That doesn't mean that we have the absolute highest approval rate. where we think we're better than market average and we compete really well. Since we've added Sunlight Max, you know, we're not providing publicly the lift in approval rates, but I can say it's substantial. And so feedback from contractors has been really favorable because it just further accelerates our approval rate, you know, well above, we believe well above market average, and our pricing remains competitive. And that's because we've got that network of capital providers that are well-priced and let us earn a good margin and still have competitive pricing. Okay.
spk01: Thank you, Matt. I'll pass it on. Thanks, Bill.
spk05: Our next question comes from Moses Sutton of Barclays. Please go ahead.
spk11: Hi. Yeah, just one follow-up for me. So you had 18,189 borrowers in the quarter. Can you provide the solar-specific number there?
spk03: Yeah, Moses, we're generally not breaking out home improvement and solar, the number of borrowers, so we're just reporting on the total. Got it. Thank you. Yeah. Maybe for a little context is overwhelmingly our volumes are still solar, but I can tell you we do see good momentum on the home improvement side.
spk01: Great. Thanks.
spk05: This concludes the question and answer session. I would like to turn the conference over to Mr. Poteri for any closing remarks.
spk03: Great, thank you. Thanks for all the great questions and for your continued interest in sunlight. We're really excited by the momentum in our business and the opportunity ahead of us and we appreciate you joining us today. Thank you all and have a great evening.
spk05: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Disclaimer