Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement (Tables)

v3.23.1
Fair Value Measurement (Tables)
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Summary of Carrying Values And Fair Values of Assets and Liabilities Recorded at Fair Value on A Recurring And Non-Recurring Basis
The carrying values and fair values of Sunlight’s assets or liabilities recorded at fair value on a recurring or non-recurring basis, as well as other financial instruments for which fair value is disclosed, at March 31, 2023 and December 31, 2022 were as follows:

Principal Balance or Notional Amount Carrying Value Fair Value
Level 1 Level 2 Level 3 Total
March 31, 2023
Assets:
Financing Receivables:
Loan participations, held-for-investment $ 3,437  $ 3,028  $ —  $ —  $ 2,960  $ 2,960 
Loans, held-for-investment 270  241  —  —  220  220 
Cash and cash equivalents 75,518  75,518  75,518  —  —  75,518 
Restricted cash 4,350  4,350  4,350  —  —  4,350 
Contract derivatives 25,202  293  —  —  293  293 
Liabilities:
Debt 7,694  7,694  —  —  7,694  7,694 
Warrants 312,225  931  —  —  931  931 
Guarantee obligation n.a. 15,128  —  —  15,128  15,128 
Servicing liability n.a. 1,010  —  1,010  —  1,010 
December 31, 2022
Assets:
Financing Receivables:
Loan participations, held-for-investment 3,635  3,254  —  —  3,110  3,110 
Loans, held-for-investment 309  278  —  —  260  260 
Cash and cash equivalents 47,515  47,515  47,515  —  —  47,515 
Restricted cash 4,272  4,272  4,272  —  —  4,272 
Contract derivatives 38,805  449  —  —  449  449 
Liabilities:
Debt 20,613  20,613  —  —  20,613  20,613 
Warrants 312,225  4,297  —  —  4,297  4,297 
Guarantee obligation n.a. 8,024  —  —  8,024  8,024 
Servicing liability n.a. 512  —  512  —  512 
Summary of Change in Assets Measured at Fair Value on A Recurring Basis
Sunlight’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

Assets Liabilities
Contract Derivatives Warrants
December 31, 2022 $ 449  $ 4,297 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  (3,366)
Included in change in fair value of contract derivatives, net (156) — 
Included in realized gains on contract derivatives, net 123  — 
Payments, net (123) — 
March 31, 2023 $ 293  $ 931 
December 31, 2021 $ 1,411  $ 19,007 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  4,884 
Included in change in fair value of contract derivatives, net (227) — 
Included in realized gains on contract derivatives, net 1,909  — 
Payments, net (1,909) — 
March 31, 2022 $ 1,184  $ 23,891 
a.Transfers are assumed to occur at the beginning of the respective period.
b.Increases in the fair value of liabilities represent losses included in net income.
Summary of Change in Liabilities Measured at Fair Value on A Recurring Basis
Sunlight’s assets and liabilities measured at fair value on a recurring basis using Level 3 inputs changed as follows:

Assets Liabilities
Contract Derivatives Warrants
December 31, 2022 $ 449  $ 4,297 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  (3,366)
Included in change in fair value of contract derivatives, net (156) — 
Included in realized gains on contract derivatives, net 123  — 
Payments, net (123) — 
March 31, 2023 $ 293  $ 931 
December 31, 2021 $ 1,411  $ 19,007 
Transfers(a)
Transfers to Level 3 —  — 
Transfers from Level 3 —  — 
Gains (losses) included in net income(b)
Included in change in fair value of warrant liabilities —  4,884 
Included in change in fair value of contract derivatives, net (227) — 
Included in realized gains on contract derivatives, net 1,909  — 
Payments, net (1,909) — 
March 31, 2022 $ 1,184  $ 23,891 
a.Transfers are assumed to occur at the beginning of the respective period.
b.Increases in the fair value of liabilities represent losses included in net income.
Summary of Significant Inputs And Assumptions Used in The Valuation of Contract Derivatives, Share-Based Compensation And Warrants Significant inputs used in the valuation of Sunlight’s contract derivatives include:
Contract Derivative Significant Inputs
2 Inputs include expected prepayment rate of applicable Indirect Channel Loans sold to the Indirect Channel Loan Purchaser. Significant increases (decreases) in the expected prepayment rate in isolation would result in a significantly higher (lower) fair value measurement.

The following significant assumptions were used to value Sunlight’s contract derivative:

March 31, 2023 December 31, 2022
Contract Derivative 2
Expected prepayment rate 75.0  % 75.0  %
Sunlight uses the observed market price of its publicly-traded Class A Shares and the warrants thereon to measure the value of RSU awards on the grant date and the value of Public Warrants, respectively. For Private Placement Warrants, Sunlight uses an independent third-party valuation firm to value those warrants using a Monte Carlo option pricing model, which includes the following estimates of underlying asset value, volatility, dividend rates, expiration dates, and risk-free rates:
Assumption March 31, 2023
Class A common share value per share(a)
$ 0.31 
Implied volatility(a)
113.2  %
Dividend yield(b)
—  %
Time to expiry (in years)(a)
3.3 
Risk free rate(a)
3.8  %
a.Significant increases in these assumptions in isolation would result in a higher fair value measurement.
b.Significant increases in these assumptions in isolation would result in a lower fair value measurement.