Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Tables)

v3.23.2
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Summary of Fair Value Measurement, GAAP Hierarchy GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy based on the transparency of inputs to the valuation.
Level Measurement
1 Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
2 Inputs are other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability.
3 Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Sunlight follows this hierarchy for its financial instruments, with classifications based on the lowest level of input that is significant to the fair value measurement. The following summarizes Sunlight’s financial instruments hierarchy at June 30, 2023:

Level Financial Instrument Measurement
1 Cash and cash equivalents and restricted cash Estimates of fair value are measured using observable, quoted market prices, or Level 1 inputs.
Public Warrants Estimates of fair value are measured using observable, quoted market prices of Sunlight’s warrants.
2 Servicing liabilities
Estimates of fair value are measured based upon observable market data.
3 Loans and loan participations, held-for-investment Estimated fair value is generally determined by discounting the expected future cash flows using inputs such as discount rates.
Affiliate and non-affiliate contract derivatives Estimated fair value based upon discounted expected future cash flows arising from the contract.
Private Placement Warrants and warrants issued to affiliate Estimated fair value based upon quarterly valuation estimates of warrant instruments, based upon quoted prices of Sunlight’s Class A shares and warrants thereon as well as fair value inputs provided by an independent valuation firm.
Summary of Cash and Cash Equivalents Sunlight reported cash and cash equivalents and restricted cash in the following line items of its Unaudited Condensed Consolidated Balance Sheets, which totals the aggregate amount presented in Sunlight’s Unaudited Condensed Consolidated Statements of Cash Flows:
June 30, 2023 December 31, 2022
Cash and cash equivalents $ 80,147  $ 47,515 
Restricted cash and cash equivalents 6,227  4,272 
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows(a)
$ 86,374  $ 51,787 
a.As of June 30, 2023 and December 31, 2022, Sunlight held $28.1 million and $3.5 million, respectively, on deposit with Sunlight’s Bank Partner.
Summary of Restricted Cash Sunlight reported cash and cash equivalents and restricted cash in the following line items of its Unaudited Condensed Consolidated Balance Sheets, which totals the aggregate amount presented in Sunlight’s Unaudited Condensed Consolidated Statements of Cash Flows:
June 30, 2023 December 31, 2022
Cash and cash equivalents $ 80,147  $ 47,515 
Restricted cash and cash equivalents 6,227  4,272 
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows(a)
$ 86,374  $ 51,787 
a.As of June 30, 2023 and December 31, 2022, Sunlight held $28.1 million and $3.5 million, respectively, on deposit with Sunlight’s Bank Partner.
Summary of Overall Risk Tiers The overall risk tiers are defined as follows:
1 Low Risk The counterparty has demonstrated low risk characteristics. The counterparty is a well-established company within the applicable industry, with low commercial credit risk, excellent reputational risk (e.g. online ratings, low complaint levels), and an excellent financial risk assessment.
2 Low-to-Medium Risk The counterparty has demonstrated low to medium risk characteristics. The counterparty is a well-established company within the applicable industry, with low to medium commercial credit risk, excellent to above average reputational risk (e.g. online ratings, lower complaint levels), and/or an excellent to above average financial risk assessment.
3 Medium Risk The counterparty has demonstrated medium risk characteristics. The counterparty may be a less established company within the applicable industry than risk tier "1" or "2", with medium commercial credit risk, excellent to average reputational risk (e.g., online ratings, average complaint levels), and/or an excellent to average financial risk assessment.
4 Medium-to-High Risk The counterparty has demonstrated medium to high risk characteristics. The counterparty is likely to be a less established company within the applicable industry than risk tiers "1" through "3," with medium to high commercial credit risk, excellent to below average reputational risk (e.g. online ratings, higher complaint levels), and/or an excellent to below average financial risk assessment.
5 Higher Risk The counterparty has demonstrated higher risk characteristics. The counterparty is a less established company within the applicable industry, with higher commercial credit risk, and/or below average reputational risk (e.g. online ratings, higher complaint levels), and/or below average financial risk assessment. Tier "5" advance approvals will be approved on an exception basis.
Summary of Intangible Assets Acquired Sunlight identified the following intangible assets, recorded at fair value upon closing of the Business Combination (Note 6), and carried at a value net of amortization over their estimated useful lives on a straight-line basis. Sunlight’s intangible assets are evaluated for impairment on at least a quarterly basis:
Estimated Useful Life
(in Years)		 Carrying Value
Asset June 30, 2023 December 31, 2022
Contractor relationships(a)
11.5 $ 350,000  $ 350,000 
Trademarks/ trade names(b)
10.0 7,900  7,900 
Developed technology(c)
3.0 — 5.0 12,807  11,163 
370,707  369,063 
Accumulated amortization(d)(e)(f)
(66,123) (49,143)
$ 304,584  $ 319,920 
a.Represents the value of existing contractor relationships of Sunlight estimated using a multi-period excess earnings methodology.
b.Represents the trade names that Sunlight originated or acquired and valued using a relief-from-royalty method.
c.Represents technology developed by Sunlight for the purpose of generating income for Sunlight, and valued using a replacement cost method.
d.Amounts include amortization expense of $0.5 million, $0.2 million, $0.8 million and $0.3 million related to capitalized internally developed software costs for the three and six months ended June 30, 2023 and 2022, respectively.
e.Includes amortization expense of $8.6 million, $9.6 million, $17.0 million and $31.9 million for the three and six months ended June 30, 2023 and 2022, respectively.
f.At June 30, 2023, the approximate aggregate annual amortization expense for definite-lived intangible assets, including capitalized internally developed software costs as a component of capitalized developed technology, are as follows:
Developed Technology Other Identified Intangible Assets Total
July 1, through December 31, 2023 $ 1,637  $ 15,727  $ 17,364 
2024 3,267  31,285  34,552 
2025 2,563  31,199  33,762 
2026 846  31,199  32,045 
2027 —  31,199  31,199 
Thereafter —  155,662  155,662 
$ 8,313  $ 296,271  $ 304,584 
Summary of Property and Equipment Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives:
Estimated Useful Life
(in Years)		 Carrying Value
Asset Category June 30, 2023 December 31, 2022
Furniture, fixtures, and equipment 5 $ 1,512  $ 1,512 
Computer hardware 5 1,328  1,328 
Computer software 1 — 3 278  338 
3,118  3,178 
Accumulated amortization and depreciation(a)
(1,841) (1,689)
$ 1,277  $ 1,489 
a.Includes depreciation expense of $0.1 million, $0.1 million, $0.2 million and $0.2 million for the three and six months ended June 30, 2023 and 2022, respectively.
Summary of Disaggregation of Revenue Sunlight’s contracts include the following groups of similar services, which do not include any significant financing components:
For the Three Months Ended June 30, For the Six Months Ended June 30,
2023 2022 2023 2022
Platform fees, net(a)
Platform fees $ (30,894) $ 27,810  $ (12,985) $ 53,645 
Platform fees from affiliate (4) 63  (4) 382 
(30,898) 27,873  (12,989) 54,027 
Other Revenues(b)
Other revenues 1,156  1,514  3,292  3,283 
Other revenues from affiliate 115  203  535  511 
1,271  1,717  3,827  3,794 
$ (29,627) $ 29,590  $ (9,162) $ 57,821 
a.Amounts presented net of variable consideration in the form of rebates to certain contractors.
b.Includes loan portfolio management, administration, and other ancillary fees Sunlight earns that are incidental to its primary operations.