Sunlight Financial Holdings, Inc.

Greetings, and welcome to the Sunlight Financial third quarter 2022 earnings call. At this time, all participants are in 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. Thank you. You may begin.

Good afternoon and welcome to Sunlight Financial's third quarter 2022 earnings call. After the close of the market today, we announced third quarter 2022 financial results and posted an earnings presentation to our investor relations website at ir.sunlightfinancials.com. If you're a vegan, 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 expectation or prediction of financial and business performance and conditions, and competitive and industry outlook. Forward-looking statements speak as of the date they are made, are subject to risks, uncertainties, and assumptions, and are not guarantees of performance. Sunnet 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 Sunnet Financial's 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 the most directly comparable GAAP measures can be found in both our 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 third quarter 2022 operational financial results. Despite a challenging macroeconomic environment, Sunlight achieved record volumes in the third quarter, funding $835 million of solar and home improvement loans, up 31% year over year. Home improvement volume was particularly strong, with $135 million funded in the third quarter of 2022, more than double the third quarter of 2021 funded volume of $63 million. We're excited about the momentum we're seeing in this business as we expand our presence in this $400 billion market. Sunlight also continues to perform well on other key operational metrics. 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 over 22,000 borrowers in the third quarter. That's up 24% from the same period a year ago and a new quarterly high for the company. We also continue to grow and strengthen our contractor relationships, adding 126 new active contractors to our platform in the third quarter, bringing our total installer relationships to 1,880. As disclosed in September, the largest installer in our contractor advance program became insolvent, leading us to take a significant impairment. Subsequently, we completed a re-underwriting process for all installer partners in the contractor advance program. As a result of these credit reviews, we have taken a number of actions to mitigate our risk within this program, including reducing advance limits, reducing the advance rate per job, increasing pricing for installers in this program, and eliminating advance eligibility for certain installers. We also continue to proactively monitor installers in this program for changes in their risk profiles. As of quarter end, we had $64 million in advances outstanding, with the largest advance outstanding at $10 million and no other single installer greater than $7 million. As Ronnie will discuss in more detail, the rapid rise in interest rates and our increased reliance on the indirect channel will have a significant negative impact on our near-term financial performance. To mitigate the impact going forward, we've made substantial pricing changes. We've eliminated certain harder to finance products, and we are exploring a hedging program to protect us from interest rate volatility in the future. Despite higher interest rates impacting the cost of systems, homeowners buy solar to eliminate a portion of their utility bill. With average residential electricity prices up 25% since 2018, and up over 14% in just the last 12 months, residential solar remains an attractive value proposition. Additionally, the passage of the Inflation Reduction Act, which increased the ITC from 26 to 30%, provides increased certainty for the industry over the next decade. On the consumer side, the solar asset class continues to perform well, driven by a high-quality borrower who, by definition, owns their home, and is borrowing money for a financially responsible purpose. Some light loans in particular continue to outperform in terms of credit quality, as our loss rates for our 2018, 2019, and 2020 vintages are substantially lower than previous averages for the same respective vintages. While industry-leading credit quality has always been our focus, it has become even more valuable in the current economic environment. as low loss rates improve capital providers' yields, increase demand for our assets, and are 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.