Q4 2019 Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Ondecks fourth quarter and full year 2000, and Mike <unk> earnings call.

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After the speakers presentation, there with your question and answer session.

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I would now like to hand, the conference over to your speaker today.

Hi, My head of Investor Relations.

Please go ahead Mr. climate.

Thank you Carol good morning, everyone and welcome to Ondecks fourth quarter earnings call I'm here. This morning, we know of Brazil, or Chief Executive Officer, and Ken Brown, Our Chief Financial Officer.

Our earnings release was issued earlier this morning and is available with our earnings presentation and financial supplement and Investor Relations section of our website.

Certain statements, including those related to our 2020 financial guidance or forward looking statements. They are not Bakken are subject to material risks and uncertainties described in resi Steve filings.

These statements are based on currently available information and we undertake no duty to update them, except as required by law.

Today's discussion is also subject to the forward looking statement limitations in the earnings release, and our actual results could differ materially and adversely from those anticipated.

During this call will use terms defined in the earnings release and refer to non-GAAP financial measures for definitions and reconciliations to GAAP. Please refer to the earnings release and the appendix of the earnings presentation posted on our website.

Finally in order to better align our income statement construct with finance industry standards, we changed the sequencing of certain line items.

There were no changes to the composition of the line items, where the calculation at key performance metrics, although certain steps hurdles like net interest income were added to facilitate your understanding an analysis of our results.

Today's earnings release, and the financial data supplement posted on our website conform our historical figures to the current period presentation.

That I'll turn the call over to Noah.

Thanks, Steve and thank you all for joining us today.

19 was an important year for on deck and we finished strong fundamentally our core U.S. lending business is growing financially we had our second full year of profitability and strategically we're making significant progress positioning the company for improved performance and even greater long term success.

This morning, I will discuss in business highlights from the fourth quarter and full year 2019, and out one or strategic priorities for Twentytwenty.

Ken Ken will provide some detailed numbers give an update on funding in capital and review our Twentytwenty guidance after that we'll open the call for questions.

We have a lot to be proud of in 2019.

We grew the portfolio, we originated $2.5 billion of loans and finance receivables grew the portfolio, 8% to $1.3 billion. Since our inception, we have now originated over $13 billion of loans solidifying our position as the leading online lender to small businesses.

We improved our funding profile, we executed nearly $900 million a financings in 2019 and significantly lowered our borrowing costs.

Our annual cost of funds rate improved over 100 basis points from 2018 and was 4.8% a fourth quarter.

We also continue to improve the terms and structures of our credit facilities, while enhancing the breadth and composition of our funding providers.

And we strengthen the core.

Despite our credit pull back in early 2019, and no increase in marketing spend applications grew approximately 20% year over year as we grew our partner network and approved the efficiency of our marketing spend.

Our line of credit offering grew nearly 50% in 2019 every further developed it to include new amortization options and more dynamic management of credit lines in pricing.

And we nearly doubled the number of customers enrolled in our instant funding feature.

As you May recall instant funding delivers the best in class customer experience using the debit card network to fund line of credit draws in minutes customers, who have activated this feature have higher utilization than other line of credit customers.

We expect to see continued expansion and profitability of lines of credit and Twentytwenty as we brought me origination channels through which lines of credit are offered and cross sell it more to existing term loan customers.

Also our analytics capabilities improved in 2019 with advances in our fraud prevention capabilities, yielding a 70% reduction in principle fraud losses year over year.

And we rolled out better loan decisioning based on industry trends, allowing for more granular portfolio management.

We also made long term investments in our next generation technology infrastructure, which will allow us to bring new products and features to market faster in twentytwenty and beyond.

And we continue to drive operating efficiency in the core U.S. lending business in fact, even though our application volume increased significantly our core U.S. loan operations teams did the same size in 2019, as we became more efficient.

We also made significant progress on our strategic growth initiatives.

He XR platform as a service business continued to grow and diversify its client base PMC launched in the first half a year and investors Bank signed and launched in the second half of 2019.

We have also signed agreements with a couple of other financial institutions and expect announcement of these launches in the coming months.

The remaining OTI ex pipeline is strong, particularly with regional banks, who typically have quicker decisioning and the implementation time frames.

Also we are scaling our international operations towards profitability.

We combined our Canadian business with ever lots of the financial group in April a transaction that significantly increased the breadth and depth of our Canadian operations. We've now integrated the business relaunched our Canada brand and all the second largest online small business lender in Canada with a plan to become number one.

In Australia, we grew our portfolio in 2019 and operating efficiency is improving with the larger asset base.

Additionally, credit quality has remained generally stable and we have very little direct exposure in the areas affected by the wildfires.

As we have mentioned in prior quarters, we still expect our international businesses to transition to profitability in 2020.

And we continue to develop arc of in finance offering in 2019, we built out our capabilities and expanded our distribution partners, which resulted in consistent growth in applications and originations.

Well, a small part of our portfolio today, we remain confident in the opportunity to disrupt and grow in this market.

With respect to our fourth quarter financial performance, we generated 112 million of gross revenue.

9 million of net income and $3 million adjusted net income.

Overall, the quarter was solid with good asset growth generally stable credit and improved capital efficiency. However, we did have a few noteworthy items that impacted expenses and caused our adjusted net income to fall short of our guidance.

Ken will walk you through the financials in more detail, but there are several trends I want to highlight the position on Dec well for Twentytwenty.

First strong portfolio growth continues across the business.

Total loans grew 3% sequentially in the fourth quarter to $1.3 billion with growth in all areas term loans lines of credit and other which includes equipment finance and short term financing in Canada.

Growth in line of credit balances was particularly strong up 9% sequentially in nearly 50% from a year ago and that portfolio now accounts for 23% of total outstandings compared to 16% a year ago.

Moreover, we achieved our growth while improving the profile of newly originated loans, while our Ondecks score is our primary measure of credit worthiness. We also track borrower credit quality based on business owner FICO scores, which averaged 710 at year end, our highest level to date and that positions us well heading into 2020.

Second our net interest margin remains attractive our portfolio yield is being pressured a little by the lengthening of the term loan portfolio duration mix shift, including a greater proportion of lines of credit and higher delinquency. However, our pricing is essentially unchanged and our cost of funds improvements have largely offset the yield compression.

Roughly 29% our net interest margin more than covers expected credit costs and can deliver attractive returns.

Third the changes we made to our collection strategies are starting to be reflected in our portfolio performance.

Specifically, our recoveries in the fourth quarter. When you are the highest theyve ever been and benefited our net charge off rate approximately 200 basis points.

And finally, our balance sheet is becoming more efficient from both funding and capital perspectives on the funding side, we have ample liquidity and reduced our cost of funds rate below 5%.

On the capital side, we repurchased nearly $50 million of stock in less than nine month and have authorization to repurchase another 50 million.

Even with the buyback our capital ratios remain strong bolstered by continued growth in retained earnings.

In summary, we exited 2019, a much stronger company.

Our product offerings are more fulsome with expanded terms and features our distribution model remains diversified with three distinct origination channels across which we can allocate resources based on market dynamics.

Our credit Decisioning is more dynamic and targeted allowing us to quickly respond to changes in the environment.

Our growth strategies are taking hold both domestically and abroad, and our talent pool is deeper and stronger than ever with seasoned industry professionals well equipped to lead on Dec into the future.

I'd like to take a moment to highlight two recent leadership hires Scott Totman, as our chief product and Technology Officer, and Linda 10, as our head of internal audit.

Scott brings over 20 years of experience and large and small financial services and technology companies and prior to Ondecks with the engineering leader responsible for building the digital bank experience a capital one.

Linda comes to us for prior role as the Chief audit Executive and managing director at Brown Brothers Harriman and brings over 25 years of financial industry experienced ondecks.

Both Scott and Linda our seasoned professionals, who bring key skills to on deck as we move into Twentytwenty and prepare the company for a bank charter.

As we discussed previously obtaining a bank charter will enable us to better serve the needs of small businesses and increase our resiliency the economic uncertainties as we strive to deliver greater value to our customers our shareholders and our communities.

We continue to make progress here, we've been working with our advisors to define and execute a path forward concurrently we have been building out our internal processes and enhancing capabilities in order to meet bank regulatory expectations. We understand that the hurdle is high but I have every confidence that this objective is within our reach we will provide updates on our progress as appropriate.

In addition to preparing to obtain a bank charter our twentytwenty priorities are clear.

First and foremost enhancing and growing our core U.S. lending business.

We are leading the lending cycle and competition remains elevated however demand is strong as evidenced by a record level of applications in 2019, and we're working hard to improve conversion rates within our originations funnel.

Were high Tech high touch customer service model, the flexibility of our multichannel distribution network and our ability to mine the data from over $13 billion of originations are real competitive advantages that differentiate us in the market and will be a source of opportunity at the market evolves.

We're also going to advance our ability to earn returns on our strategic investments as I mentioned earlier, our international operations are on track to print transitioned to profitability this year.

We are continuing to grow and equipment finance and we're scaling OTI X by launching and growing signs customers and converting our pipeline.

And we will continue to buy back shares to achieve our target capital ratios and further improve the efficiency of our balance sheet.

Pretty good altogether, we expect to deliver solid topline growth a double digit growth rate in adjusted net income and loans and even greater growth in earnings per share.

With that I'll turn it over to Ken to walk through the 20, 917 financials and Twentytwenty guidance in more detail.

Well. Thank you know and good morning, everyone 29 team was our second full year of profitability and yet reflected several trends, including strong asset growth lower funding costs generally stable portfolio quality continued investment for the future as well as improved capital efficiency.

Fourth quarter net income was $9 million or 13 cents per diluted share, which brought full year 2019, net income to $28 million or 36 cents per diluted share.

Excluding stock based compensation and discrete tax benefits. Our adjusted net income was $3 million or five cents per diluted share in the fourth quarter and $26 million or 34 cents per diluted share for the full year.

While our fourth quarter net income was above our guidance due to tax benefit our adjusted net income was below guidance largely due to some noteworthy items that limited operating income tax expenses.

Net income was essentially flat year over year, while adjusted net income declined as the benefits from portfolio growth and improved funding costs were more than offset by a normalization in credit costs back to our target ranges.

Increased investment spend in our growth and Jason sees and the fact that we began to accrue income tax expense.

On a per share basis full year earnings increase on both the reported and adjusted basis and we grew book value per share, 14% from $3.75 a year ago to $4.26 at year end 2019.

Focusing on the fourth quarter results.

Gross revenue was 112 million essentially unchanged from the third quarter as slightly higher interest income, reflecting loan growth was offset by a decline in other revenue related to the wind down them and no Dx relationship.

Loans in finance receivables grew 3% sequentially and 1.3 billion on 618 million and volume.

Driven by growth in all products, particularly line of credit balances.

Net interest income increased slightly from the prior quarter, driven by portfolio growth and lower interest expense.

Net interest margin was essentially flat at just over 29%.

As the improvement in cost of funds rate offset the reduction in portfolio yield.

Our portfolio yield declined 30 basis points sequentially to 34.8%, reflecting the increase of loans with longer durations.

A greater proportion of London credit balances and higher delinquencies.

Funding cost improved and interest expense declined slightly despite higher debt balances to fund growth and the share buyback.

Our cost of funds rate declined 50 basis points sequentially and it's now 4.8% as we benefited from both lowering our borrowing spreads as well as the recent reduction in short term rates as we remain liability sensitive.

For the year, we executed nearly 900 million financings, including a $125 million securitization in the fourth quarter that was the first with online small business loan lateral to receive a triple aim rating.

In the quarter, we also paid off the high cost mezzanine debt associated with ever lost money in Canada.

Our upcoming debt maturity profile is light with only one small Canadian facility maturing this year and our 2018 securitization approaching the end of its revolving period.

We will continue to look for opportunities to further improve our funding profile.

Moving onto credits.

Provision expense and the corresponding provision rate increased slightly with the dollars of expense consistent with growth in the portfolio and the increased rate largely a function of lower originations, which is the denominator for this metric.

Our net charge off rate improved 20 basis points at 13.5%, reflecting increased recoveries at some of the changes in collection strategies. We have discussed are taking hold.

On the other hand, our 15 day, plus delinquency ratio increased 50 basis points to 9%.

Reflecting softness in certain industry sectors.

The increase delinquency level had a relatively small impact on our required reserves as we were already holding a higher level and reserves against those loans.

Our allowance for loan losses rose to 151 million at year end, which was largely driven by loan growth and our reserve ratio was unchanged at 12.2%.

As required we adopted the new Cecil standard as in January Onest 2020.

The net impact was relatively small with a $10 million aggregate decrease to our allowance for credit losses, and other liabilities and an equivalent increased to stockholders equity.

We expect the future PML impact to the provision to be immaterial as our prior loss emergence period encompass the life most of our loans.

However, we do expect increased volatility in the provision in reserve measures as the new standard requires companies to incorporate the impact of economic forecast into reserve requirements.

Turning to operating expenses, the 54 million, we reported this quarter was elevated due to some noteworthy items, including a $1.7 million write off of capitalized software costs.

Related to the termination of a vendor relationship.

A $1 million increase in the reserve for unfunded commitments and 700000 of severance costs in the sales and marketing line that resulted from a reorganization in the revenue team.

None of these items were added back as part of our adjusted net income calculation, but they did contribute to increase in our fourth quarter efficiency ratio up to 48.7% and our adjusted efficiency ratio to 46.7%.

Finally on income taxes, we recorded a 5.4 million.

Tax benefit in the fourth quarter that was driven by a $7.5 million release of the valuation allowance against our us deferred tax assets.

We previously indicated that we would evaluate releasing part of evaluation allowance at the end of 2019 and it was a positive development that we were able to do so.

Our ability to release, the remaining 37 million valuation allowance will be driven by our continued us profitability and earnings outlook.

Excluding the roughly $10 million of tax related benefits. We have in 2019, our full year effective tax rate was approximately 34% an amount above us statutory rates due to the losses from our international businesses.

The fourth quarter core tax provision was higher than in previous quarters. As it included about $1 million of true up items to get us to the required annual amount.

Turning to the balance sheet liquidity remains strong as we head over $350 million available borrowing capacity within our 1.3 billion of committed debt facilities and $56 million of cash equivalents at year end.

We have made considerable progress optimizing our capital structure.

We repurchased seven and a half million shares in the fourth quarter, bringing total 2019 repurchases to 10.7 million shares at a cost of approximately $44 million or $4, an 11 cents per share.

And we repurchased another million shares in January for roughly $4 million, which essentially completed our $50 million buyback authorization.

Accordingly, the board has authorized an additional $50 million for share repurchase.

As a result to this buyback our leverage ratio increased roughly 2.9 times at year end, but remains below our target ratio of roughly four times.

And our diluted share count at year end was approximately 69 million shares down from 79 million before we commence the repurchases last July.

As I mentioned, our average repurchase price has been around $4.11 per share.

Which is below our current book value per diluted share of $4.26. So the buyback had been accretive to EPS and book value per share.

Turning to 2020.

We expect many of the positive trends I just discussed to continue as we execute on the strategic priorities no highlighted.

Namely growing our us core lending franchise.

Following our international equipment finance and OTI ex Adjacencies.

Further increasing our capital efficiency and advancing our bank strategy.

The press release contains our detailed financial guidance for the first quarter in full year 2020.

Along with commentary on expected annual trends in certain key performance indicators and related drivers.

A few items to note.

First our full year net income and adjusted net income guidance are the same at $25 million to $35 million.

Usually our adjusted net income is higher as we add back stock based compensation.

However, our guidance also assumes we released another $10 million evaluation allowance against our us DTA in the fourth quarter and those two items largely offset in the adjusted net income guidance calculation.

Second the guidance also incorporates expected impacts farmers are adoption of Cecil and includes approximately $5 million of expenses related to our pursuit of a bank charter, which is up from about $3 million in 2019.

And finally, the guidance assumes the macroeconomic small business lending and capital market environments remain steady in 2020 with some softening in the us economy beginning in 2021.

With that let me turn the call back over to Carol. So we can begin our question and answer session.

Thank you.

I Wonder to ask a question you will need to press star one on your telephone.

To withdraw your question please press the pound to perhaps.

Our first question. This morning comes from Steven Kwok from KBW. Please.

Please go ahead.

Great. Thanks for taking my questions I guess the first one I had was just around the loan growth in 2019 came in a little bit below what our expectations, where can you just talk about the drivers of that and perhaps touched upon the competitive landscape as well.

Yes, sure happy to receiving those Noah does we mentioned in his prepared remarks, you know our application growth is actually quite strong in 2019, but as you know we didn't do a credit pullback, which brought down our conversion rates through most of the year. So I think what you saw in the fourth quarter was really just a continuation of that trend our approval rates were a little bit lower.

In the fourth quarter, which as you know the credit policy doing its job and the competitive environment remain similar to past couple of quarters remained elevated so the other dynamic the maybe a little bit unique to the fourth quarter.

Is having to do with our offer quality initiatives, we actually extended loan terms starting around June of last year and so what that does is it pushes out the timeframe for certain customers to take renewal loans. A few months later and so that just pushed volume back, but we don't think necessarily brought voluma away, but the loan book did grow 3% in the fourth quarter and if you look at the.

Guide for this year, we're really talking about.

Re ramping the growth rate a bit here in 2020, so looking at kind of that low double digits level versus kind of the high single digits level. We achieved in 2019. So we feel good about the growth prospects for 2020 years off to a good start.

Got it and just if you could just touched upon like is it just because you re accelerating the.

The funnel and Thats going to help drive you to get to that low teens growth. In 2020 is is that how we should think about it.

He has a couple drivers that I think our worst worth calling out. So one is around the funnel, yes, we definitely see a bunch of opportunities to improve conversion rate. So the second is really around the line of credit product, it's sort of come of age now we've been offer offerings product now for five or six years, but is becoming a bigger and bigger part of our loan book, we're finding that in certain segments. We actually think it's more profitable tell a customer a line of credit than.

Term loan.

We're actually I'm doing a fair amount of work on the pricing and optimizing the pricing about product. So that growth rate last year was I think near 50%.

So as that becomes a bigger part of our mix, new youre going to see that drive some incremental growth.

And then finally, we do have a number of kind of strategic partnerships. We're working on and we see will be saw nice growth in 2019, our platform kind of channel strategic partner channel and I do think we're going to see that continue to be a driver of growth in 2020.

Got it and just one last follow up its just if let's say growth were to come in around this year's level up high single digits.

The net income adjusted income that you guys forecast is that still achievable on if you will have like expense leverage is to get you back to there. Thanks.

So obviously our guidance is predicated on an assumed asset growth rate, but obviously in the way is you know RPM networks.

Less new originations also mean less provision dollars. So there would be offsets as well as some of the variable costs that wouldn't be there, yes, so I think plus or minus a few percentage points.

See that flex and the provision rate kind of offsetting into a part of the positive to allow us to get to the adjusted net income guidance. So we feel we feel good about the guide and I also feel good about the growth.

Great. Thanks again.

Thanks Steven.

Our next question comes from James.

Morgan Stanley. Please go ahead.

Good morning assume Walt on for James just following up on one of the questions around accelerating the funnel you guys mentioned and your outlook and comment on those sites softness in some pockets of the economy just to be clear youre not we're not talking about an hour reopening of the credit box I could you just walk us through how you're thinking about the improved conversion rates in the qual.

Any of that and how that plays in your comments from flat to I guess net down.

Softness in terms of the next couple of years.

Yes, so on part of the comments about future softness relate to see sole where you have to explicitly incorporate an economic assumption in your guidance. So we do feel good about the economic outlook broadly for 2020.

The segments that we see right now that are underperforming or wholesale trade manufacturing and transportation and we think we can be somewhat surgical as you mentioned the prepared remarks about doing a little bit of pulling back there, but we see that being more than offset by almost a natural growth rate in line of credit right. We've been working with many line of credit customers for awhile overtime as they proved themselves they get slightly higher credit line.

And we also haven't been selling the line of credit product in certain distribution channels like our partner network and we're rolling that out quite a bit this year. So.

Also on the conversion funnel, we've identified a number of kind of internal process opportunities to improve our customer experience that we believe very strongly will have a positive impacts on conversion rates. So I think when I look at the way we're going to grow this year. It isn't really through a wholesale opening up a credit quite the opposite I think it's more about tuning our customer experience, we are making sure we continue.

To be the fastest or near the fastest customer experience player in the market.

And then growth in our partner channels growth in our line of credit products.

And and even also growth in international and equipment finance to which should which have very nice growth rates this year growing faster than the core business.

Got it and then maybe just turning to the expenses and efficiency can you talked about some of the pieces that drove the higher expense. This quarter. If we think about the run rate you guys running around 40% adjusted efficiency in 2018 with all the confluence of events right. These expenses coming out.

International upcoming profitable is it reasonable to expect you to get down towards the low fortys or even 40% next year or what sort of how should we think about for the efficiency.

So.

As you go back to our long term targets that actually has an efficiency ratio a little bit north of 40% in there. So I wouldn't think it's realistic to expect we'd be there in 2020.

But I think if you looked at the exit run rate for the fourth quarter adjusted for the items that I called out.

And then you build in some inflation in nominal growth just related to growth in the business.

And then I did call out about 2 million extra spend related to our pursuit of the bank charter I think you'd get to what would be a reasonable level to assume for opex, but but we do expect this year to be a year of operating leverage.

Got it.

Probably not back to not to 40% health.

Got it totally understood.

Just not rate.

Sorry, Okay fair, if I could just squeeze on and on that bank charter.

Sure. So you guys put in the goal for 2020 to submit an application.

I just saw one of your private peers I guess, so to speak in the space get approved in one way or the other for for some FDIC insurance, but thats still ongoing for them. It sounds like this could take your submitting this upcoming year go through it. The following year, we talk to sort of looking at 2022 and outward in terms of where you could implement more bank charter focus strata.

Gee and what does that mean for the strategy from year to there.

Yes, I know it's a great question first we were pleased to see the development yesterday were borrow money received the FDIC approval on that was a lot of hard work that they put in to get there, but I would say that the situation on Dec is an is quite different than borrow in the sense that they were building a company essentially from scratch, whereas on Dec is profitable public has been operating for over a decade and so a lot of.

Infrastructure that you need and the and the capabilities build you need to pass regulatory approval or many other things we've already built into the business. So I wouldn't say 20 to 22 that field kind of aggressive I think 2021 is more realistic, but we can't speak to the exact timing.

And certainly as we said in the prepared remarks, we will provide more details on our on our progress and strategy here, but this is informed by interactions weve had with regulators and our advisors over the past you know kind of six to nine months.

Great. Thanks.

As a reminder, in order to ask your question. Please press star one.

The phone.

Our next question comes from Melissa Wedel from Jpmorgan. Please go ahead.

Thank you good morning, thanks, Thanks for taking my questions.

I was hoping you could touch.

The tax that line item I'm wondering what it there seems to be quite a bit of increase.

Hi Tech and analytics spending 2019, obviously understand that's a big part.

Yes platform and your model, but wondering how you're thinking about tax and.

Year over year into 2020.

Sure movements can I think one of the most notable things remember as I called out in this quarter. There was a 1.7 million dollar impairment charge in that second analytic fun.

So that's certainly not a run rate item.

And if you may recall, we also talked earlier in the year about some incremental spend this year related to both.

Enhancing the technology platform and Dx as well as making some investments in the core processing engine at online lender. So I think you've seen all those investments flowed through that line this year, but probably the most notable is in this quarter has had an additional 1.7 of impairment that should not repeat itself.

Okay.

And then as we think about sort of the.

Incremental repurchase authorization, we think about.

How to deploy that or pay spot on.

How are you finding that decision.

So.

We made the commentary about the expectation of repurchasing approximately $30 million over the course of 2020 and I think it would be appropriate you assume that that gets done evenly over the course of the year.

As we've said we were not.

We're not traders were not market timers here that said, we will be opportunistic at good situations present themselves, but I think our expectation is to.

Just do it ratably over the year.

Okay, Great. If I said I'll try one more question here.

Lastly, I wanted to touch on some of the change in cycles, scoring methodology I'm wondering if that impacts your underwriting profit Paul thanks very much.

Most of your time at the newly announced changes to the score.

That's right, yes, so as the most I can I can take that one.

We will.

You know assess basically <unk>.

Pact of the new FICO score refit, our models and strategies as appropriate, but I would say that FICO is just one input too many things we use in our decisioning. So it's a holistic evaluation of a business an owner the Ondecks score is really the primary measure of credit worthiness that we use so we don't see it dramatically impacting the portfolio, we and frankly, we did do some.

Analysis of the new FICO score changes, we don't think it's going to move metrics and the material way at the at the portfolio level.

Thanks.

Thanks Melissa.

Our next question comes from Scott from B. Riley FBR.

Please go ahead.

Hey, good morning, guys.

Just curious where you see the incremental loan growth coming from in 2020.

Let me as industry specific or geographic or.

Just a little bit no little bit more channel driven and product driven so I think we see a lot of growth this year coming from our strategic partners, both kind of existing partners that were deepening relationships with as well as new partners, we have in the pipeline.

We see a lot of growth this year coming from line of credit.

So its line of credit comes of age it has sort of a natural growth rate as customers you know get more time with us.

Improve their credit worthiness, we offer them slightly better credit lines or slightly better terms and that in turn increases draw volumes instant funding also increases draw volumes were seeing lots of like what I would call natural and very highly efficient growth I would say in that in that product right now.

And then finally international equipment Finance also have growth rates are going to be much higher than the core us business. So really those things coming together more so than any particular industry or or geography.

Perfect and any plans for additional product launches in 2020 or are we just.

You know maturation of the current product lineup.

Yes, I think we we feel that we have a much more opportunity right now on maturing line of credit and particularly equipment finance as well, which is going to ramp quite a bit by the end of the year again, not as a huge part of our overall portfolio, but really.

We're starting to get some nice momentum there so.

I think it we're focused really on those kind of three core offerings for our customers right now scaling those and I should mention your the term loan book, we expect to grow as well because of the maturity lengthening that we did in 2019, so really the core three products have a lot of growth in front of them. We have said in the past that over the long term, there's a number of other products that small business owners use.

Whether it's you know small business administration loans invoice factoring small business credit card those are some of the ones that we think about in the longer term, but for this year, we're focused on those three offerings.

Okay perfect. Thank you guys.

And once more if you would like to ask your question. Please press star followed by the number one on your telephone.

We have no one else in queue at this time, so ladies and gentlemen. This does conclude today's conference call. Thank you all very much for participating.

Free to disconnect.

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