Sunlight Financial Holdings, Inc.

Greetings and welcome to Sunlight Financial second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lucia Dempsey, head of investor relations. Please go ahead.

Good afternoon and welcome to Sunlight Financial's second quarter 2022 earnings call. After the close of the market today, we announced second quarter 2022 financial results and posted an earnings presentation to our investor relations website at ir.sunlightfinancial.com. 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, Summit Financial's 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. Summit 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 at the Summit Financial's website and Sunlight Financial's SEP filings for 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 the press release and the supplemental presentation. Joining me today are Matt Pateri, Sunlight Financial's Chief Executive Officer, and Rodney Yoder, Sunlight Financial's Chief Financial Officer. Matt will provide an operational update on the quarter, and then Rodney will share additional detail on our financial results. Following these prepared remarks, we will open the call to Q&A. It is now my pleasure to turn the call over to Matt Pateri.

Thank you, Lucia, and thank you all for joining us as we discuss Sunlight Financial's second quarter 2022 operational and financial results. I'm pleased to report strong second quarter results, including record high results in the number of metrics and free cash flow generation of nearly $9 million. In the second quarter, Sunlight funded $716 million of solar and home improvement loans, a new quarterly record, and $50 million higher than our funded loans in the second quarter of 2021. Home improvement volume was particularly strong. with $112 million funded in the second quarter of 2022, more than double the second quarter of 2021 funded volume of $45 million. We're excited about the structural momentum we're seeing in this business as we expand our presence in the rapidly growing $400 billion market. We persistently see incredibly strong customer demand despite the inflationary environment, with record numbers of credit applications for both solar and home improvement financing. I'm pleased that installers remain highly engaged with our platform, selling our products with strong success and reinforcing the value we provide to homeowners. Solar Loans in particular have been resilient in this market as customers routinely achieve cost savings relative to their utility bills, which nationally are up 12.7% on average from June 2021 to June 2022. That's nearly 50% above the headline rate of inflation. Sunlight continues to perform well on key operational metrics as well. We remain a leading financing choice for contractors and homeowners as our Orange platform provides a fast and frictionless process for financing solar installations and home improvement projects. We funded loans for nearly 21,000 borrowers in the second quarter, up 11% from the same period a year ago, and a new quarterly high for the company. Average loan balances are also increasing yet again, driving incremental revenue for sunlight without any additional expense. This is driven by a combination of larger systems, increased related add-ons, and potentially higher prices. In particular, solar loans this quarter averaged $45,000, once again the highest yet for the company, and up 12% relative to the second quarter of 2021. Despite lingering challenges with battery supply, Sunlight's battery attachment rate increased to 14% in the second quarter. While this is lower than 2021, we believe that battery storage rates will increase over time as battery shortages abate and EV adoption increases, supported by government incentives. We're pleased to have an additional 165 active contractors on our platform in the second quarter, bringing our total installer relationships to over 1,750. While our industry leading credit quality and partnerships with depository institutions provide sunlight strategic advantages and our direct channel margins are stable, current marketing conditions will negatively impact our indirect channel in the second half of this year. To that end, we had a pipeline of loans that were allocated to a new capital provider to be sold following their merger with the bank. However, the delay and ultimate cancellation of that merger caused us to shift the sale of approximately $85 million of funded loans from the second quarter into the second half of the year, and will also increase our near-term reliance on the indirect channel. In addition, we expect the recent rise in interest rates and increased volatility in the capital markets to negatively impact indirect channel margins in the second half of the year, as Rodney will discuss in more detail. To address market conditions, we have implemented price increases on new credit applications and eliminated several harder to finance products. We believe these pricing actions will deliver normalized platform fee levels in 2023. A key differentiator that highlights the strength of our business model, especially in this challenging environment, is our industry leading credit quality. As we announced in June, Sunlight's credit loss rates are significantly better than our peers. Our relentless focus on credit quality supports capital providers as they focus on attractive risk-adjusted returns and is an important lever to attract and maintain a strong network of capital providers. With that, I'd like to turn the call over to Rodney Yoder, Sunlight CFO.