Sunlight Financial Holdings Inc. (SUNL) on Q4 2021 Results - Earnings Call Transcript
Operator: This is the conference operator. Welcome to the Sunlight Financial Full Year 2021 Earnings Conference 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. . I would now like to turn the conference over to Lucia Dempsey, Head of Investor Relations. Please go ahead.
Lucia Dempsey: Good afternoon, and welcome to Sunlight Financial's Full Year 2021 Earnings Call. After the close of the market today, we announced fourth quarter and full-year 2021 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, Sunlight Financial's expectation or predictions 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. 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 at Sunlight Financial's website and Sunlight Financial's SEC filings for a discussion of the risks that can affect our business. Additionally, on 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. Joining me today are Matt Potere, Sunlight Financial's Chief Executive Officer; and Barry Edinburg Financial Officer. Matt will start with key highlights for 2021, and then Barry will provide additional detail on our fourth quarter and full-year results. Matt will then provide our 2022 outlook and a quick recap of how we drive value for all stakeholders. Following these prepared remarks, we will open the call to Q&A. It is now my pleasure to turn the call over to Matt Potere.
Matthew Potere: Thank you, Lucia. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report outstanding fourth quarter and full-year 2021 results. Sunlight funded $638 million of solar and home improvement loans in the fourth quarter, leading to a full-year total of $2.5 billion, up 72% from the prior year. Total revenue for the year was $121 million, at the top end of our guidance range, which we provided in August of 2021, driven by record-high total revenue of $37 million in the fourth quarter. Both full-year adjusted EBITDA of $53 million and adjusted EBITDA margin of 44% exceeded the top end of our guidance ranges as well. These results are a testament to our strong relationships with both contractors and capital providers, leading to strong year-over-year growth despite a more challenging macro environment. 2021 was a pivotal year for Sunlight operationally as well, as we demonstrated growth and success in a number of areas. Our average loan balances continue to increase with full-year 2021 solar loans averaging over $40,000 and even up to $42,000 in the fourth quarter alone. We ended the year with a 22% battery attachment rate, up from only 13.1% in 2020. And while Sunlight's battery attachment rate will fluctuate quarter-to-quarter, based on installer distributions, equipment availability and other factors, we believe that battery storage will continue to provide increasing benefits to homeowners over time and that our battery attachment rates will continue to increase in the coming years as a result. Now, we're also pleased to have ended the year with more than 1,500 active contractors, a 40% increase over year-end 2020. This was primarily driven by rapid growth of our home improvement contractor network, as we continue to build out that business, and supported by continued expansion of our solar contractor network. I'll now turn it over to Barry to discuss our financial accomplishments in more detail.
Barry Edinburg: Thanks, Matt. As mentioned earlier, Sunlight generated $37 million of total revenue in the fourth quarter of 2021, a 27% increase over the fourth quarter of 2020 and new quarterly high for the business. This led to full-year total revenue in 2021 of $121 million, meeting the top end of our guidance range and representing a 73% increase over the prior year. Sunlight's full-year adjusted EBITDA of $53 million exceeded guidance and was up 121% from full-year 2020, driven by record-high adjusted EBITDA of $18.5 million in the fourth quarter of 2021 alone. Adjusted EBITDA margin was also up materially, from 34.4% for full-year 2020 to 43.9% in full-year 2021. As discussed on previous calls, in the second quarter of 2021, we leveraged our strong partnerships with capital providers and the relative attractiveness of Sunlight loans to improve pricing with certain capital providers. This effort resulted in a rapidly increasing platform fee percentage in the second half of the year. Our Direct Channel Solar Platform fee percentage in the fourth quarter was 5.7%, up from 4.32% in the second quarter. Our total platform fee percentage in the fourth quarter was 5.3%, up from 4.0% in the second quarter. The full year came in at 4.4% for the total business and 5.1% of the Solar Direct Channel business. Our ability to execute on margin has always been driven by our funding strategy, our industry-leading credit quality and the long-term nature of our partnerships. We added 3 new capital providers in 2021. And in the fourth quarter, we were pleased to establish a Direct Channel capital provider for home improvement loans, enabling us to record some home improvement platform fees in revenue and earn a higher margin than in the Indirect Channel. We also expect to continue adding capital providers in the coming quarters, in order to expand access to low-cost funding and enhanced platform feasibility in various market conditions. In addition to maintaining access to attractive capital with which to the fund loans, Sunlight itself is very well capitalized and turns adjusted EBITDA into free cash flow at a high rate. We ended the year with nearly $92 million of cash in the balance sheet, and we generated significant free cash flow in 2021. While we will be focused on maintaining adequate liquidity in the business, we plan be strategic in deploying cash, as Matt will discuss later in more detail. Before we turn it back to Matt, I'd like to speak on a more personal note as this is my last earnings call with Sunlight Financial. As we announced this afternoon, I have decided to step down as Chief Financial Officer of the company. In order to support a seamless transition, however, I have agreed to serve as an adviser to the business through the end of the third quarter. I've thoroughly enjoyed my time at Sunlight over the last 6 years, and I'm proud of what we've collectively built. I really appreciate the partnership with Matt and all of my teammates in Sunlight and believe that we've established a unique platform. Capital-light cash-generating financing model will continue to drive success for the business in the coming years. I know the company is in good hands, and I look forward to following the continued success of Sunlight Financial in the future.
Matthew Potere: Thanks, Barry. It's been an absolute pleasure building this company with you, and we'll miss the value you brought to our business every day. On behalf of the Board and all of our Sunlight teammates, I want to thank you for the integral role you've played and wish you all the best in your future endeavors. Now, as we also announced this afternoon, Rodney Yoder has been appointed Chief Financial Officer, effective April 1. I've had the pleasure of working with Rodney at both MD&A and Swift Financial. He is a seasoned finance executive with significant experience in financial analysis, consumer credit, M&A and strategic decision-making. And I'm pleased to welcome Rodney to the team, and I look forward to the value he'll bring us as we tackle our next phase of growth. Now, as I mentioned earlier, Sunlight has achieved outstanding results despite challenges in the macro industry environment. Though some of these challenges have continued into 2022, we remain well positioned to perform effectively, particularly relative to our peers. Now first, I'd like to touch on COVID-related impacts. The Omicron variant that spiked between December and January, aggravated normal seasonality trends with lower credit approvals and funded buy. However, we've already seen signs of recovery, and we expect to resume to normal seasonality in the second quarter of this year. The second is supply chain, labor and permitting. As we've mentioned on prior calls, these issues impacted pull-through rates and funded volume in the second half of 2021, leading to funded volume approximately 10% lower for the full year than we otherwise would have expected. We expect these issues to persist in the near term, hit to slowly normalize through the course of 2022. The third is inflation. While rise in prices are impacting our economy in a number of ways, the effect on Sunlight is more muted for two reasons. First, Sunlight does not directly bear installation costs, such as materials or labor. And secondly, power prices are expected to increase at a higher rate than the price of solar installation, which further enhances the residential solar value proposition. The fourth item is interest rate volatility. We intentionally choose to be primarily funded by depository institutions, which leads to less volatility in our funding costs, even in a rising rate environment. For example, although the 5-year swap rate has increased over 100 basis points since our last earnings call, creating what we believe to be an approximate ABS execution difference of more than 5 points, we have not yet seen any deterioration in pricing with our depository partners. That said, we do anticipate that rising rates may have some impact, particularly on our Indirect Channel. Lastly, the regulatory environment. While final outcomes are uncertain for an ITC extension and for updated state net metering legislation, we believe support for increased renewable energy, particularly solar, remains strong at the federal and state levels. With these macro factors in mind, as we forecast our performance in solar and home improvement for the year, I'm pleased to initiate Sunlight's 2022 full-year guidance ranges for the following metrics: total funded loan volume of $2.9 billion to $3.1 billion, total revenue of $145 million to $155 million and adjusted EBITDA of $55 million to $60 million. Our guidance highlights the continued growth of our business, with the midpoint of the total revenue guidance, for example, representing 24% growth year-over-year. We expect slightly lower growth in adjusted EBITDA to account for the full-year impact of increased costs related to being a public company, as we've discussed on prior calls. We've also decided to provide funded volume guidance for the first quarter of 2022, which we expect to be between $580 million and $590 million. We do not intend to regularly provide quarterly volume guidance, but we feel it's useful this quarter, given the timing of this earnings call and the residual impacts of slower pull-through rates and Omicron on first quarter funded volume. In addition to providing guidance on specific metrics, I'd like to share how we strategically think about capital deployment as we continue to profitably operate a capital-light, cash-generative business. Our current primary use of capital is our contractor advances program, where we provide contractors with working capital for Sunlight-financed installations. We have found this to be a highly effective tool for strengthening relationships and growing volume with existing contractor partners. We invested more than $30 million into the program in 2021, in the form of higher advance balances. In the program, there was a material factor in signing significant contractor commitments for 2022. We'll continue to allocate capital to this program, opportunistically, to further deepen relationships and increase volume in market share. Outside of that, we expect to strategically use capital toward bolt-on M&A and to return value to shareholders. We're continually evaluating acquisition opportunities to enhance our value proposition or to provide opportunities to apply our unique capabilities in adjacent verticals. We may also consider opportunities to build long-term investor support by returning capital to shareholders, particularly in periods of prolonged undervaluation. We'll continue to work with our Board to evaluate the best investment opportunities, and we'll share more on future earnings calls. Now, before turning to Q&A, particularly for those of you who are newer to Sunlight, I want to take a moment to walk you through how the company drives success and how we are building the premier clean energy-focused point-of-sale finance platform. Now, as I've described on prior calls, there were 3 key pillars that are crucial for the success of finance platforms, access to distribution, effective risk management and access to diverse and low-cost capital. For the first pillar, access to distribution, Sunlight's network of over 1,500 solar and home improvement contractors efficiently provide Sunlight with volume nationwide. The contractors are attracted to Sunlight, thanks to our proprietary point-of-sale platform, which we call Orange. Our innovative products such as our new 30-year solar loan, and our ability to provide contractors with advances. This has led to securing contractor commitments of over $1.5 billion in potential funded loans in 2022. The second pillar, credit risk management, has been the core of Sunlight's success from the beginning. Our management team has significant through-the-cycle credit experience, having spent the last few decades building consumer credit businesses at a variety of firms. We've also been iterating on our credit strategy since the start of Sunlight, which has played a key role in developing our industry-leading credit quality. We also have recently implemented Credit Strategy 5.0, which reflects a fully refreshed methodology and is expected to further increase our approval rates without increasing loss rates. This approach has allowed us to originate the highest credit quality solar loans in the industry. The third pillar, stable and low-cost funding, reflects our decision to fund our loans by building deep partnerships with depository institutions that provide low-cost, reliable and long-term capital. By treating these funding sources as long-term partners, we remain dedicated to their success, and we build mutually beneficial relationships. We'll continue to add capital providers to address demand and to build diversity, but we're also proud that our capital provider commitments are more than sufficient to meet our expected 2022 funded buy. And as I mentioned earlier, we believe that funding with the depository institutions represents a competitive advantage in the current environment as they reduce our exposure to interest rate volatility, relative to our peers. Executing on to these 3 pillars, creates a virtuous cycle for Sunlight, where success with contractors drives value for homeowners, which drives attractive returns for capital providers and which, in turn, drives increased capital for contractors. Now, we believe Sunlight's unique attributes create compelling long-term value for shareholders. Sunlight's focused on two very attractive markets, residential solar and home improvement. And both of these markets are growing rapidly, driving significant demand for our best-in-class financing. And even with increased competition, the market provides sufficient room for growth of volume and market share. Additionally, our point-of-sale technology platform, Orange, enables scalability and serves in a competitive advantage. Through over 6 years of consistent iteration, we've created a powerful technology platform for assessing credit, for processing loan products and driving increased sales for our contractors and installers. In addition to winning contract relationships, Orange allows Sunlight to scale efficiently and deliver significant operating leverage. It could also allow us to expand to attractive adjacent verticals. And as we've mentioned several times, our capital-light balance sheet enables us to drive growth with minimal direct credit risk exposure. Lastly, we are a soundly profitable business with strong cash flow generation. 2021 reflects our third year of recording positive adjusted EBITDA, and we continue to convert EBITDA to free cash flow at a higher rate. We expect to maintain this trajectory through 2022, and we'll continue to deploy capital to support the long-term growth and success of the company.With that, I'd like to turn it over to the operator.
Operator: . Our first question is from Arren Cyganovich with Citi.
Arren Cyganovich: The growth forecast that you have for the year, I just was wondering if you could talk a little bit about the confidence. 4Q and 1Q growth look like, kind of, flattish, explained away by supply chain at Omicron, which makes sense, but you're implying a decent pickup in growth. What gives you the confidence that you won't have the same kind of supply chain type of issues in the latter half of the year?
Matthew Potere: Yes. Thanks for the question, Eric. So First, I think we set our guidance last year, and we met and exceeded the high end of that guidance. And as we set our guidance this year, we took into account the fact that there are supply chain challenges that we've talked about before, the labor challenges as well as permitting. And we do expect some of those to persist into the year. That said, seasonally, we typically see each quarter sequentially growing. We continue to have confidence that we'll be able to hit the projections that we're laying out here, they're taking into account some of those macro factors that we talked about.
Arren Cyganovich: The Direct Channel versus Indirect Channel for funded loans. In my mind, I always think of the Indirect Channel as kind of more akin to the ABS market or pooling for the ABS market. What are the commitments on each of those? And what are the -- those commitments? Are they hard commitments? And what kind of time frame is remaining on those commitments?
Barry Edinburg: Yes. Thanks for the question. We have various levels of commitments on both sides of our business, the Direct Channel side and the Indirect Channel side. On the Direct Channel side, it's mostly depository partners that really aren't focused on market execution. They are -- fund themselves with deposits, and we get to take advantage of that sort of low-cost capital. On the indirect side, we have relationships with others that are more market focused but those are negotiated relationships. So pricing is negotiated, and we have various relationships with various that last different amounts of time. So there's no real consistency in there, from one to the other, but I feel really good about the commitments we have in place and don't expect any issues in funding loans in 2022 or beyond that for that matter.
Operator: The next question is from Chris Donat with Piper Sandler.
Christopher Donat: Best wishes to Barry for what comes next. I wanted to ask about the 2022 guidance for the implied fee margin, which looks like about 5% at the midpoint. Just wondering, if you expect some downward pressure on that from the mix of home improvement and solar, like an increasing mix of home improvement? Or are there other factors that might put some downward pressure on the fee margin from where we were in the fourth quarter?
Barry Edinburg: Yes. Thanks for the thoughts, Chris. I appreciate that and the question. So overall, we expect the 2020 platform, few percentage, to exceed that of the 2020 full-year number or '21 full year number as many of the improvements we saw come through in the second half of the year will continue in 2022. I would note that all the factors that you have mentioned, whether it be market or home improvement percentage of our business, all those things were taken into account in our forecast and in our guidance. But I think it's important to give context on the platform fee percentage and how we think about it, going forward. First, our margins are going to have some normal variability quarter-to-quarter due to the product and installer mix, capital provider mix and the competitive environment. So we shouldn't expect margins to be perfectly consistent quarter-to-quarter. Second, the fourth quarter of 2021 was definitely a high watermark for several reasons, and we don't expect margins to continue in 2022 at that level. Third, while we think that we're relatively well positioned, or we are relatively well positioned, in a rising rate environment, relative to those of our peers that are relying on the capital markets, it's likely that we'll see some impact from rates, especially in our Indirect Channel. So we feel good about the forecast. We feel good about how we're thinking about margins, but I think all that context is really important.
Christopher Donat: Got it. That all makes sense to me. And then, in terms of the number of contractors that you show on Slide 11 of the slide deck, the number of solar contractors ticked down to 762, should we be concerned about that? Or -- I know not all contractors are created equal. So just want to understand what's the dynamic there and if that's something worth paying attention to, going forward?
Matthew Potere: Yes. Thanks, Chris. So we always report this number because we think it's an indicator of the business. But we -- as we said before, we don't think the absolute number of contractors is as important as the quality of the relationships that we have. And the numbers will bounce around a little bit. In the fourth quarter, we saw a little bit of a dip in -- on solar and saw continued growth in home improvement. I note, we were up significantly year-over-year. And toward the end of the year, what we really did was focus our efforts on locking up deeper relationships with our contractors. And so we were able to gain commitments that we think will equal about $1.5 billion worth of volume in 2022. And so that's where we focused our efforts, effectively flat in solar and good growth in home improvement. And as I look out, I'd expect us to continue to have some growth, but there'll always be a little bit of quarterly noise in there.
Christopher Donat: Okay. Yes, I guess, we haven't seen any quarterly noise, at least for the last couple of years, but it would seem not surprising. And then just last question for me on -- in the financials, the goodwill impairment, any comment there on what that was and what caused it?
Barry Edinburg: Yes, absolutely. So we are -- we've put a significant amount of goodwill on the balance sheet, in the context of the business combination that we went through last year. Purchase parts accounting required it. We posted about a $670 million chunk of goodwill. We'll need to test that for impairment on an annual basis and in some circumstances, more frequently than that. As part of our testing in the fourth quarter of 2021, we wrote down the value of goodwill by about $225 million. And that impairment was driven primarily by a market-based analysis of companies similar to Sunlight, not anything relating to the operations of the company. So my perspective is, it's no ways from an operations standpoint, but obviously, there's a -- these accounting impact there.
Christopher Donat: Got it. Right. But nothing that would affect cash flow or adjusted EBITDA or anything like that?
Barry Edinburg: All noncash. Nothing that affects any of those things.
Operator: The next question is from Philip Shen with ROTH Capital Partners.
Philip Shen: Thanks for taking the questions. Barry, I'll though the same sentiment. We'll miss working with you. I was wondering if you might be able to share some color as to the decision to move on. Why at this point? You've been with the company 6 years, you're just public now. There's so much more to build and grow. What's taking away from the business?
Barry Edinburg: Sure. I appreciate the thoughts and the question, Phil. So I mean, you really said it. You said, I've been with the company for 6 years. I joined the company as CFO almost 6 years ago, when the company was effectively a start-up. We raised several rounds of capital. We built the financing capital markets functions effectively from scratch, helped grow the business into one with $121 million of total revenue in 2021. And we listed the company on the New York Stock Exchange last year, as you just said. I'm really proud of the partnership with Matt and all my teammates at Sunlight. But I think it's really an appropriate time for me to take a step back. And it's completely natural, at this point, to bring in some new leadership to the company to help drive the next phase of growth. I think, as we said in the release and the remarks, I'll stay on as an adviser for at least the next couple of quarters to make sure the transition is a smooth one. But that's pretty much the thought of it, that it's time to make this change.
Philip Shen: Okay. Well, we'll miss you again, and we look forward to working with Rodney. Shifting over to the volumes and the Q1 guide. I think the guide is flat year-over-year and flattish anyway. And some of the other public peers, I call NOVA, I think they're guiding for -- in the up 100% year-over-year, runs guiding up 15% year-over-year. You guys talked about it being all market-driven, I noticed. So just wondering, what else might there be, from an industry dynamic standpoint? You contracted growth, as you guys just highlighted, it was a little bit down. Is there something else that you might be able to share, that might help explain why the year-over-year growth might be flat?
Matthew Potere: Yes. So I think, Phil, first, if you look at the full-year 2021, obviously up substantially over 2020. And if you look at the midpoint of our guidance for 2022, revenue, for instance, up in the mid-20% range. So we're continuing to show -- continue to show growth in setting guidance numbers out there that we felt confident in. When I look at the first quarter, we've talked about these macro issues. And we do -- we continue to expect them to persist into the first quarter. The other effect, which happened at the end of the year and into the front part of the first quarter, was Omicron. And that impacts both credit approvals at the top of the funnel and also impacts funded loans. And so because we saw that impact, we're giving guidance for where we are in the first quarter. But as I mentioned earlier, we continue to expect sequential growth quarter-over-quarter and good growth over the full year.
Philip Shen: Okay. The year-over-year growth is definitely good. And then from a contractor growth standpoint, I know we just talked about it a touch, but how much do you think that contractor number could grow in '22 versus year-end '21?
Matthew Potere: We don't set public targets as it relates to the contractor growth. And we really are focused on the quality of it. We've said in the past and we continue to believe that -- it's important to share this number because we know the market investors are interested in the overall number. But setting an absolute target, the goal is not to hit an absolute number of contractors. The goal is to drive profitable growth. And that's really what we're focused on. So I do expect we'll see growth in 2022, and we'll see that as we look out. But if I look back to last quarter, I'm confident we made the right decision by focusing on deepening those relationships rather than chasing a number to make the page look good versus developing deep, long-term relationships. And we're focused on those deep, long-term relationships.
Philip Shen: Okay. And then in terms of the Sunlight Max program for the nonsolar and home efficiency markets or homeowners, you guys talked about doing over $1 billion of volume in '22. Is that still on the table? What should we expect a...
Matthew Potere: Yes. I don't think sort of -- I don't think we actually connected $1 billion to Sunlight Max in particular. So perhaps you were talking about some other target, or there were some other context. We do have commitments from contractors that we expect to be $1.5 billion worth of volume, but that's not necessarily Sunlight Max . As it relates specifically to Sunlight Max , we -- it is a product in our suite of products that help us bring contractors and help us drive volume. And we've absolutely seen that as the case, especially in our home improvement business, where we're able to give a single experience with full-spectrum lending within our platform. And so we've got great contractor feedback. It's helping drive contractors, it's helping drive good growth there. But we're not breaking out the Sunlight Max volume explicitly.
Philip Shen: Okay. And then with the ABS markets going higher, in terms of cost of capital. It seems like where you're sitting with deep credit union relationships that might be a nice and good competitive positioning. Can you talk through -- at the end of last year, you guys were talking about being more open to ABS in '22. What's your latest view on ABS? I think you still might embrace it this year. If not, how do you think you're positioned with your current funding sources, relative to what the ABS market might do ahead?
Barry Edinburg: Yes, sure. I mean, look, we're always looking at ways to diversify our funding sources and lower our cost of capital. And if we think we can accomplish those goals back in the ABS markets, then we'll explore it as an option, for sure. And we are -- we have explored it. We understand what the execution looks like, and we're monitoring the deals that everyone is working on, as well as talking to ready agencies and bankers about what things might look like. In the current rate environment, though, it's hard to imagine that the cost of capital will be competitive with what we have in our other channels. We'll keep looking at it, though, for sure. And feel like, as you said, we are extremely well positioned in a rising rate environment, relative to some of our peers. In that, we really haven't seen changes in pricing, of any note, with our Direct Channel capital providers that provide us the vast majority of our funding, contrast that with the ABS markets, where execution on transactions has changed by a number of points. I mean, we said in Matt's remarks, that we think it's more than 5 points, it's probably even more than that. So it's a significant change in execution in the ABS markets, and we really haven't seen much of a change in our Direct Channel. So feel really well positioned. I feel like we have access to a lot of capital, and our depositories are still heavy on deposits and asset hungry. So feeling pretty good about it.
Operator: The next question is from Jeff Osborne with Cowen and Company.
Jeffrey Osborne: A couple of questions on my end. I was wondering, Matt, you mentioned with the cash balance looking at M&A and bolt-on acquisitions. Would those M&A opportunities leverage the same access to distribution and all of your talking points as it relates to the business model? Or would you be wondering astray, not leveraging the Orange platform? I'm just trying to get a sense of how synergistic it would be, relative to a -- to build out over the past 5 to 6 years.
Matthew Potere: Yes. So we're always looking at M&A opportunities. And we've been disciplined and we continue to be disciplined. The two areas that we're most focused on are, first, bolt-on acquisitions, where we can further enhance the relationship and the value proposition with contractors. And so that's the first opportunity. And then the second is, over time, we may look at opportunities to expand into adjacent verticals through M&A. But we've definitely been very thoughtful. We've not announced any acquisitions to date, and we'll continue to be thoughtful and disciplined as we look at M&A opportunities.
Jeffrey Osborne: Got it. And then you alluded to on the supply chain side. And what I'm trying to get at is your visibility at the top of the funnel and how that evolved in February and March. Is that something you can articulate qualitatively, as opposed to quantitatively? And then, I think, in the past, you've talked about 70, 75 days or so from loan request to funding status. Can you give us an update on maybe where that is in normal times and where that is now?
Matthew Potere: Yes. So those three macro issues, supply chain, labor and permitting. We saw them through the back half of the year, and we continue to see them persist. And I mentioned in my remarks to give you some context for the impact of that. We estimate it had about a 10% impact on our funded loans versus where we otherwise would have funded. So it is a somewhat material impact. We do expect that those issues will abate later in the year. The specific first quarter, the -- what was unusual in the first quarter was Omicron, which clearly having at the back half of the fourth quarter and has abated in the first half of the first quarter. And so fortunately, we've seen the market rebound as Omicron, that wave has passed. And we think we're on a more normal trajectory. And we think the market is on a more normal trajectory at this point.
Jeffrey Osborne: And just a lag from the top of the funnel to funding status. Is there a quantitative number you can give us on that? Is that stretching out?
Matthew Potere: Yes. So we don't usually -- yes, we don't typically share that in particular. What I can tell you, though, is, we do continue to see that lag. And while maybe there is some green shoots as of recently, that perhaps we see some improvement there, I think it's probably too early to say, and it's definitely longer than we've seen historically.
Jeffrey Osborne: Got it. And my last quick one for Barry. You mentioned to a prior question or question that Q4 had several one-time items that led to the platform fee margin being above trend line or above normal. Can you just rattle off what the top 2 would be in your mind?
Barry Edinburg: Not really one-time items, but more -- the swap market hasn't changed as much as it has in the first quarter of this year. So when I think about our Indirect Channel, which has some exposure to the market, as I mentioned earlier, that's impacted. And in the fourth quarter, really hasn't been. So that's one thing. And the other thing I would mention are installer mix. We have different prices with different installers. Capital provider mix, you have different prices with different capital providers and the fact that I mentioned before about the swap market and its impact on the Indirect Channel. So those are examples of things that can make things move around and examples of things that have made the fourth quarter a special one.
Operator: Our next question is from Maheep Mandloi with Credit Suisse.
Unidentified Analyst: This is Chandni on behalf of Maheep. When I look at your full-year 2022 outlook, just taking your revenue and the adjusted EBITDA, your implied adjusted EBITDA margin is slightly lower, compared to what we're seeing in 2021. So if you could, sort of, guide on how we should think about like the cost for 2022, that would be really helpful.
Barry Edinburg: Yes. That's a good question. So we're definitely expecting adjusted EBITDA margin to come down a bit. There's a few things happening here, but the primary one is related to expenses. I think we mentioned some of this in our remarks. In 2022, we are not only going to incur a full year of public company-related expenses. Whereas in 2021, we only incurred a half year of such expenses. But we're also forecasting an increase in some expenses that were artificially depressed in previous periods due to the pandemic. I think about this as a normalization to a new expense baseline and would expect that our adjusted EBITDA margin will improve in the back half of the year and in future periods as our fixed costs remain relatively constant, in the context of continued volume growth, and our operating leverage continues to take hold.
Operator: This concludes the question-and-answer session. I'd like to turn the conference back over to Matt Potere for closing remarks.
Matthew Potere: Great. Thank you, and thank you, everyone, for joining us this evening. We appreciate the opportunity to be able to share where we think were really strong results to wrap up 2021, I am in great trajectory going into 2022. So we look forward to sharing the story with you in the future. And again, thank you for your time, and have a great evening.
Operator: This concludes today's conference call. Thank you for participating. You may disconnect your lines. Have a pleasant day.
