Sunlight Financial Reports First Quarter 2023 Results

- 1Q23 Funded Loan Volume of $627.4 Million -

- 1Q23 Total Revenue of $20.6 Million -

- 1Q23 GAAP Net Loss of $(34.8) Million -

- 1Q23 Adjusted EBITDA of $(12.4) Million -

- 1Q23 Adjusted Net Loss of $(17.2) Million -

Sunlight Financial Holdings Inc. (“Sunlight Financial”, "Sunlight" or the “Company”) (NYSE: SUNL), a premier, technology-enabled point-of-sale finance company, today announced its results for the first quarter 2023.

"I am pleased we completed the Financing Agreements with Cross River Bank (CRB), which position us to resolve our challenges from last year by strengthening our liquidity and enabling us to resume Indirect Channel loan sales, including the nearly $300 million loan sale we executed at end of April of this year," said Matt Potere, Chief Executive Officer of Sunlight. “In the first quarter of 2023, Sunlight funded $627 million of solar and home improvement loans, up 6% from the prior-year period, with overall average loan balances up 10% relative to the first quarter of 2022."

First Quarter 2023 Key Operational and Financial Metrics

• Funded loans of $627.4 million, up 6% from $592.8 million in the prior-year period
• Average solar loan balance of $46,810, up 6% from $43,999 in the prior-year period
• 15,799 borrowers served, compared with 16,757 in the prior-year period
• 2,070 active contractor relationships, up 30% from 1,589 in the prior-year period
• Total Revenue of $20.6 million, compared with $30.1 million in the prior-year period
• GAAP Net Loss of $(34.8) million, compared with $(22.6) million in the prior-year period
• Adjusted EBITDA of $(12.4) million, compared with $7.8 million in the prior-year period
• Direct Channel Platform Fee Margin of 7.1% (up from 5.3% in the prior-year period)
• Total cumulative funded loans of $9.6 billion as of March 31, 2023

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

Key Priorities

• Enhance Indirect Channel Execution: At the end of April 2023, Sunlight completed an Indirect Channel loan sale of $296 million, following the completion of the CRB Financing Agreements. This sale further reduces the balance of our unsold loans at CRB, which was $764 million as of March 31, 2023. Additional sales of Indirect Channel loans in the second quarter and second half of 2023 are expected to maintain our unsold loan balances at CRB within compliance of the recently executed CRB Financing Agreements and diversify Sunlight's funding sources.
• Ensure Profitable Pricing: Since the third quarter of 2022, consistent with the overall industry, the Company has been eliminating unprofitable products and materially raising pricing, enabling recently credit-approved loans to be profitable in both the Direct and Indirect Channels.
• Reduce Contractor Advance Program: In the first quarter of 2023, the Company suspended the Contractor Advance Program and has reduced total outstanding advances down from $86 million as of March 31, 2022 to $18 million as of March 31, 2023, with a significant further decrease in April 2023.

Industry-Leading Credit Performance

While Sunlight does not hold loans on its own balance sheet, it tracks the performance of loans originated by the Company in order to ensure high-quality credit performance for its capital providers.

Solar loans that Sunlight originated in 2018, 2019 and 2020 continue to outperform loans of similar size and term financed by solar loan peers in the ABS markets during the same time periods. Maintaining industry-leading credit quality demonstrates our commitment to high-performing assets, which helps us differentiate from peers, strengthens relationships with capital providers, and drives demand from new investors in the Direct and Indirect Channels.

Source: Kroll ABS performance reports, internal performance reports as of January 2023. Loss rates reflect 36, 30, and 24 months for 2018, 2019, and 2020 Vintages, respectively.

Note: Reflects gross losses for 2018-2019 and net losses for 2020. Loss rates for peers with multiple ABS deals in a given vintage year reflect an average of all issuances.

Conference Call Information

Sunlight will host a conference call and webcast to discuss its first quarter 2023 financial and operational results and business outlook at 5:30 PM ET today, May 15, 2023. 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 First Quarter 2023 Form 10-Q, which Sunlight filed with the SEC on May 15, 2023.

About Sunlight Financial

Sunlight Financial 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,“ “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: material adverse impacts from macro-economic conditions including unprecedented interest rate increases on business, profitability and cash-flow, 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 May 4, 2023 and Sunlight's 10-Q as filed with the SEC on May 15, 2023. 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 Net Income (Loss) and Adjusted Net Income (Loss) per Class A Share 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, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Class A Share 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.

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