Q4 2022 Bm Technologies Inc Earnings Call
Speaker 1: Thanks for watching!
Speaker 1: T
Speaker 2: Good afternoon, everyone, and welcome to the BM Technologies fourth quarter and full year 2022 earnings call.
Speaker 2: Please note that this event is being recorded.
Speaker 2: Following management's prepared remarks, we will hold a question and answer session.
Speaker 2: For those of you joining on the webcast, you can submit your questions online where the management team can see them.
Speaker 2: At this time, I'd like to turn the conference call over to Brian Pernodpo, Investor Relations for BEM Technologies. Please go ahead. Brian Pernodpo, Investor Relations for BEM Technologies
Speaker 3: Thank you for joining us for VM Technologies.
Speaker 3: earnings call. Our earnings release and investor presentation were filed this afternoon and both are posted on the investor relations page of the company's website at ir.bmtxinc.com. Our investor presentation includes important details that we will be walking through on this afternoon's webcast and I encourage everyone to pull up a copy.
Speaker 3: Before we begin, I would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated.
Speaker 3: Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. These refer to our SEC filings, including our Form 10-K and 10-Q, and 10-Q, and 10-Q.
Speaker 3: for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the investor relations section of our website. At this time, it is my pleasure to turn the call over to Laveleen Sidhu, BM Technologies Chair and CEO . Thank you, Brian .
Speaker 2: Good afternoon to everyone and thank you for joining BN Technologies' fourth quarter and full year earnings call.
Speaker 2: Joining me today is our CFO Jim Dollinger and our President Jamie Donohue, who will be available during the Q&A session.
Speaker 2: In 2022, we generated revenue of $83.6 million and core EBITDA of $14.5 million.
Speaker 2: In a few minutes, we will discuss full year results in more detail. However, I wanted to take a moment to address some exciting updates that have taken place since we last spoke.
Speaker 2: To begin, back in December , we shared that we would not be moving forward with our previously announced merger with First Down Bank and instead would focus on becoming a lean, efficient, and innovative fintech company with a sponsor bank model. The prolonged regulatory approval process provided us the opportunity to reflect on
Speaker 2: our broader strategy to maximize the value of BMTX service deposits in the context of an evolving macro environment.
Speaker 2: With interest rates materially higher today than when the merger was announced, as well as the health of the economy in question, we believe BMTX is better situated as a fintech with a sponsor bank model without the capital needs and credit risk that an on-balance sheet strategy would entail.
Speaker 2: We continue to believe this is in the best interest of our shareholders.
Speaker 2: In addition to the pivot above, we have made several enhancements to the leadership team, which I am very excited to share with you.
Speaker 2: I am delighted to welcome Raj Singh as my partner and co-CEO as we position BMPX for our next phase of growth.
Speaker 2: Raj has been a valued advisor for nearly three years, assisting us from the start of our journey as an independent public company while he was at Raymond James Investment Banking, serving as vice chairman.
Speaker 2: More recently, he joined the board of directors and has partnered closely on various business initiatives.
Speaker 2: His experience with corporate strategy, complex negotiations, mergers and acquisitions, finance and accounting, and capital markets brings both breadth and complementary skill sets to the senior leadership team.
Speaker 2: In his new role, Roger's principal responsibilities will be to assist in driving revenue growth and implementing operating efficiencies resulting in improved EBITDA over the next three to five years.
Speaker 2: His addition builds on recent enhancements to the senior leadership team, including Jamie Donahue's promotion to president and Jim Dellinger's promotion to CFO .
Speaker 2: I look forward to working with our executive team as we execute on our plan for long-term shareholder value creation.
Speaker 2: Let me turn the call over now to Jim to discuss our financial results in more detail.
Speaker 2: call over now to Jim to discuss our financial results in more detail. Jim.
Speaker 4: Thank you, Lothry.
Speaker 4: Turning to Slack 4, the company realized almost $84 million of operating revenue in 2022 compared to $95 billion in 2021.
Speaker 4: The $11 million year-over-year decrease
Speaker 4: was driven primarily by lower interchange fees, account fees, and other BAS development fees.
Speaker 4: Interchange fees totaled $22.3 billion for 2022 as compared to $28.1 million for 2021.
Speaker 4: Spend for 2022 was $2.9 billion in total as compared to $3.3 billion in total for 2021.
Speaker 4: Spend in our higher education vertical was particularly and adversely impacted by the hailing of the prior year's unprecedented stimulus.
Speaker 4: As well as grant funds provided to higher education institutions during the pandemic. Overall, we should spend in the higher education space normalizing in 2023 to pre-COVID levels.
Speaker 4: However, with the company's strategic initiatives in its higher education vertical in 2023, we anticipate growth in this area as we drive higher account activation, retention, and usage.
Speaker 4: Servicing fees were essentially flat in 2022 as compared to 2021, totaling 44.6 billion versus 45.1 million.
Speaker 4: decreased margins resulting from higher interest rates, and our prior fixed rate deposit servicing fee structure.
Speaker 4: or substantially offset by higher average deposit balances.
Speaker 4: which totaled approximately $1.8 billion for 2022, as compared to $1.6 billion for 2021, an increase of 9% year over year.
Speaker 4: With the Fed's continuing and aggressive measures to cool inflation.
Speaker 4: With the Fed's continuing and aggressive measures to co-inflation, including increasing interest rates,
Speaker 4: We have allowed certain highly interest rate sensitive deposit amounts to run off in late 2022 and year to date 2023. We anticipate run up to moderate as interest rates begin to peak with growth resuming in late 2023 and beyond.
Speaker 4: Account fees were marginally lower for 2022, totaling $9 million versus $10.5 million in 2021. We're still seeing a bit of a flashfootiness with thisulation before return, as I hope
Speaker 4: driven by lower total active accounts and lower account activity.
Speaker 4: There were approximately 500,000 new account signups in 2020, so.
Speaker 4: In our higher education business, new checking accounts sign up has improved 11% year over year.
Speaker 4: With our planned strategic focus in 2023,
Speaker 4: We anticipate growth in number of active accounts and activity.
Speaker 4: University fees totaled $5.7 million in both 2022 and 2021.
Speaker 4: with approximately 750 existing college and university campus relationships.
Speaker 4: 11 new colleges and universities signed on in 2022.
Speaker 4: providing access for over 60,000 additional students to bank mobile disbursements and vibe checking account.
Speaker 4: In addition, we processed over $12.2 billion of financial aid refund disbursements during 2022. 1
Speaker 4: $1.5 billion of these higher education disbursements.
Speaker 4: We're deposited into bank mobile bio accounts.
Speaker 4: and $1.7 billion of additional organic deposits.
Speaker 4: were deposited in the VIBE accounts, indicating primary bank behavior.
Speaker 4: Core EBITDA for 2022.
Speaker 4: A total of $14.5 million as compared to $29 million for 2021.
Speaker 4: The majority of this year over year decrease is driven by the 11 million dollar reduction in revenue.
Speaker 4: with further impacts from $3.5 million of increased operating expense in 2022.
Speaker 4: most of which is related to compensation, as we added personnel and preparation for the previously planned bank charter and business combination.
Speaker 4: These higher compensation expenses have been reduced in 2023 through the profit enhancement plan actions taken during the first quarter.
Speaker 4: We ended 2022 with a strong financial position.
Speaker 4: including an increase of $6.7 million in working capital to $19.1 million from $12.4 million in 2021, with over $21 million of cash and no debt December 31, 2022.
Speaker 4: Turning to slide five, first is account-level performance metrics.
Speaker 4: Revenue for 90-day active accounts was $185 for 2022, down approximately two percent from 2021. It's impossible for us to fulfill Wi-Fi last year but we're storming it.
Speaker 4: driven by the reduction in stimulus field spending, but still highly positive on a per account basis.
Speaker 4: Average deposits for 90-day active accounts.
Speaker 4: For $4,322 in 2022, an increase of 18% year over year.
Speaker 4: Average spend for Daddy Day Active Account was $6,975 in 2022, a decrease of approximately 5%.
Speaker 4: driven by the reduced stimulus pool spending in the second half of 2022.
Speaker 4: To further highlight our strong poor account metrics and focusing on our BASH portfolio,
Speaker 4: Q4 2022 spend for highly active VAST users, those with direct deposit, and a minimum of 5 customer-driven transactions per month.
Speaker 4: totaled $17,700 and the average deposit balance totaled $3,200.
Speaker 4: This very attractive cohort makes up approximately 20% of active accounts at December 31, 2022 as compared to 18% in the year-ago period.
Speaker 4: With that, I return the call to Lavleen to discuss business highlights, strategy, and other exciting updates.
Speaker 2: Lovely. Thank you. Thanks, Jim. As we pivoted our business from becoming a bank to being a lean, efficient, innovative fintech with a sponsor bank model, it was important for us to take steps forward to make this happen. I am thrilled to share with you that we have executed a new deposit servicing agreement for the first time in the history of our business.
Speaker 2: with First Carolina Bank for our higher education business.
Speaker 2: Second, we have renewed our relationship with our existing and largest fast partner T Mobile for another two years. And lastly, we have executed a new Deposit Servicing Agreement with Customers Bank to support the extension of this partnership. We are excited to kick off 2023 with these agreements in place.
Speaker 2: The new variable rate pricing structure of these agreements significantly improves our revenue outlook in 2023, and adding a new Durban-exempt partner bank for the higher education business provides a further benefit to interchange revenues.
Speaker 2: We did receive quite a bit of interest from banks for our higher education portfolio given its scale, lack of interest rate sensitivity, and the mission-driven nature of the student demographics we served. However, we chose to work with First Carolina Bank, due in large part to its strong regulatory standing.
Speaker 2: capital liquidity, credit performance, profitability, and respected management team.
Speaker 2: I would like to go back to the variable rate pricing of these new agreements for a moment.
Speaker 2: As Jim mentioned, a drag on our revenue and profitability beginning in the second half of 2022 was the reduction of deposit servicing fees due to the rising rate environment and the fixed rate structure of our prior sponsor bank contract.
Speaker 2: Moving to variable rate fee structures is critical for our growth and profitability in a rising interest rate environment, and the new servicing fee agreements will provide us with a margin increase of more than 100 basis points on our average service deposit from the prior fixed rate servicing fee structure.
Speaker 2: In addition, the partnership with First Carolina Bank provides us with higher interchange revenues as they are a German-exempt bank and are able to obtain better interchange fee pricing.
Speaker 2: the effect of which will be passed through to BMTX under the new arrangement. Due in large part to these revenue enhancements, the company expects to return to profitable growth beginning in the second half of 2023.
Speaker 2: While the new partnership with First Carolina Bank is currently pending regulatory approval, the bank is confident that regulatory approval will occur before the end of the second quarter.
Speaker 2: Deposits within our higher education business will transition from Customers Bank to First Carolina Bank once regulatory approval has been obtained. In addition to the banking agreement, as I shared, we were able to renew our existing and largest BAS partnership through 2025. This extension reflects the high value offering and our continued leadership in the banking
Speaker 2: Our execution plan on slide seven is focused on both growth and operational efficiencies, but a focus on overall profitability.
Speaker 2: Our growth strategy is based on a few key pillars.
Speaker 5: First.
Speaker 2: is our focus on creating a customer for life in our higher education vertical.
Speaker 2: The customer for life strategy really begins from the moment a customer opens an account with us.
Speaker 2: We are focusing our efforts to improve the initial onboarding experience for our customers, as well as optimizing communications to be more personalized. We are also introducing behavioral-based incentives and adding a rewards engine in the near term. A second pillar of our growth strategy is a focus on technology enhancements and partnerships.
Speaker 2: Technology enhancements are prioritized based on strategies to improve adoption and retention.
Speaker 2: Additionally, we continue to forge and seek partnerships that add value to our existing customers and help build a pipeline of new opportunities. Our cost reduction strategy is based on our previously announced profit enhancement plan.
Speaker 2: The profit enhancement plan is expected to deliver roughly $15 million of cost savings in 2023, improving both operating margin and operating cash flow. We are currently on target with our plan and realized approximately $7 million of annualized savings in the first quarter of this year, largely through a workforce reduction completed in January .
Speaker 2: A large element of the workforce reduction was the release of the capacity developed in 2022 in anticipation of the bank charter acquisition and business combination. In addition to right-sizing our workforce for the FinTech model, we are also implementing multiple operational improvements to yield additional cost savings going forward.
Speaker 2: As stated, our execution plan is to ultimately drive improved financial performance.
Speaker 2: As stated, our execution plan is to ultimately drive improved financial performance. We would like to provide some additional thoughts on this.
Speaker 2: We expect core EBITDA results for the first half of 2023 to be in line with the second half of 2022. Significant improvement is expected in the second half of the year once the effect of new variable rate servicing fees.
Speaker 2: Durbin-exempt interchange fees for our higher education business and expense savings from the profit enhancement plan begin to be fully realized.
Speaker 2: Full year 2023, we expect our core EBITDA to be an estimate of about $14 million. As we continue our execution plan and await regulatory approval for First Carolina Bank, we will provide estimate updates if necessary.
Speaker 2: We also anticipate generating positive operating cash flow in the second half of 2023, for which we will continuously and strategically evaluate ways to deploy and opportunities to increase shareholder value.
Speaker 2: Turning to slide 8.
Speaker 2: We are also ensuring that the right leadership is in place as we position ourselves for our next phase of growth.
Speaker 2: As I mentioned earlier, today we announced that Raj Singh, a recent board addition with a successful investment banking career, will join me as Co-CEO. His experience brings both breadth and complementary skill sets to the existing senior leadership team and his role will focus on driving revenue growth and implementing operating efficiencies.
Speaker 2: resulting in improved EBITDA over the next three to five years.
Speaker 2: His addition builds on recent enhancements to the senior leadership team, including Jamie Donahue's promotion to president from his previous role as CTO. Jamie comes with deep financial services and technology experience, which serves us well as we focus on being a fintech with a sponsor bank model.
Speaker 2: Lastly, we elected Jim Dellinger, our current Chief Accounting Officer and an experienced public company CFO with 25 years of financial, operational, and transformation experience to the Chief Financial Officer role.
Speaker 2: Running a business in today's complex environment is a challenging and exciting opportunity, and I am grateful to have a team of high-caliber executives leading this company alongside me as we enter our next phase of growth.
Speaker 2: today's complex environment is a challenging and exciting opportunity. And I am grateful to have a team of high caliber executives leading this company alongside me as we enter our next phase of growth. Moving to slide 9.
Speaker 2: Here we summarize the attractive investment opportunity BMTX presents.
Speaker 2: In short, there are a handful of key attributes of BMTX that are very important to focus on.
Speaker 2: First, we are a dominant player and market leader in our higher education segment. This business has thrived and been core to our overall business for many years.
Speaker 2: Our 99% customer retention speaks to the value proposition we offer our clients and customers.
Speaker 2: We open hundreds of thousands of accounts annually and have a replenishing addressable market with new incoming students each year.
Speaker 2: Additionally, we have a competitive advantage as there are regulatory intricacies to this business which create high barriers to entry, and we have a unique expertise in this area.
Speaker 2: We built our company to be centered around risk management with our in-house compliance and risk capabilities that give us a distinct advantage when it comes to BSA AML, fraud prevention, and customer service.
Speaker 2: Second, we continue to invest in our BAS business through our collaboration with Helix and the renewal and expansion of our largest and existing BAS partnership, where we recently added new features.
Speaker 2: over the last year including savings accounts, true name, P2P capabilities, and our perks engine.
Speaker 2: Third, our new variable rate deposit servicing agreement with Customers Bank and our new agreement with Durban Exempt's First Carolina Bank will position us to benefit from the higher interest rate environment as well as higher interchange fees and restore our profitability.
Speaker 2: Fourth, finally, we remain financially strong, debt-free, and generated positive operating cash flow in 2022. We believe through the strategies we are executing and management team additions, we are well positioned to achieve the growth and margins that will create significant value in the coming years. We keep!!!!!
Speaker 2: We are amongst the largest and most established fintech companies in terms of scale, customers, and deposits, and we have strong and positive brand recognition across millions of current and former customers and account holders. Our business is more than just a simple mobile app or web interface.
Speaker 2: We have significant and well-established partnerships in place and differentiate ourselves with our in-house, back-office support that enables us to provide the banking services, customer support, and ease of use that today's customers want.
Speaker 2: Thank you for your time today and for your interest in VM technology. I will return the call to the operator for your questions.
Speaker 6: Thank you. We will now take questions, audio questions, and move forward with web questions after that. If you would like to ask an audio question today, press star followed by the number 1 on your telephone keypad.
Speaker 6: Your first question today will come from the line of Mike Grondell with Northern Securities. Your line is now open.
Speaker 7: Hey Mike. Hey guys, good afternoon. The first question for me is really...
Speaker 7: Can you help us think about deposits both at T Mobile...
Speaker 7: and higher ed just over the course of 23 I know you've been intentionally running them down but like what's embedded in the 14 million of EBITDA in the second half of the year as it relates to a deposit level.
Speaker 2: Sure, I'll take that first and then Jim, if you want to add anything. Sure. So, you know, as we said, we did allow for a runoff of deposits last year. That was really a combination of a balancing act between what we considered a
Speaker 2: us not wanting to have extremely rate-sensitive deposits, which we didn't see had a lot of franchise value, would also, the constraints we had with the fixed-rate agreement. That continued on in the first quarter of this year, and so we continued to see some declines in that portfolio, but I'd have to say that it's definitely at a less accelerated rate than we saw last year.
Speaker 2: of unrate that we didn't have before. So all said and done, I think that overall we continue to see declines in the first quarter and may, you know, continue to some degree for the first half of the year. While we believe the second half of the year is not turning from stabilization to slight.
Speaker 2: sort of decline to growth once again. So I think year over year, Mike, you can kind of expect that at a high level, no guarantees, but we're kind of expecting that where we ended the year this year is probably where you're gonna see us to continue into next year and next year.
Speaker 7: Got it. So year end 23 similar to year end 22.
Speaker 8: That's what we believe at this time. Yep. And then.
Speaker 7: How should we think about the transition?
Speaker 7: of the deposits to First Carolina Bank. If you get approval, and I'm just gonna say late June approval, do those move quickly to First Carolina Bank, or is there sort of a rolling...
Speaker 2: you know, the deposits get pushed over there in a rolling basis. That's a good question. So with First Carolina Bank, you know, we've been working obviously, Mike, since since last year on this and so there's a lot of thoughtfulness and preparation that's taking place and we've done this very carefully, prudently and thoughtfully with First Carolina Bank.
Speaker 2: And so our expectations are, you know, first to get through the regulatory approval process. You know, the bank does feel confident that by the end of the second quarter, we would be in good shape on that front. And in terms of operationally moving over the deposits, as I said, we've been working very diligently, thoughtfully over the last few months. And so we anticipate and expect that once we get that approval, we will be able to move
Speaker 2: we'll be able to move quickly. The deposit's over and it won't be in batches. We expect to move it all over at once.
Speaker 7: Got it, got it, okay. And then maybe one more, the $15 million of cost saved
Speaker 7: from your...
Speaker 7: pet plan. I mean do you want us to think about that is the 92 million of operating expenses in 22?
Speaker 7: basically dropping 15 million to 77 million in 23 or in if that's the case or if not are where the savings coming from is it primarily salary and benefits and then check
Speaker 7: and then professional services if you could kind of one help us understand year-over-year change and then to just sort of sort of the buckets.
Speaker 4: Yeah, Mike, this is Jim. Excellent question. Thank you. So the PIP is expected to contribute to 2023, about $15 million of off-back savings.
Speaker 4: That $15 million is principally coming from free buckets. So bucket number one, which I'll call people costs, is going to translate into about $9 million of cost savings in 2023.
Speaker 4: the principal lever for that savings was already completed in the first quarter of 2023.
Speaker 4: Obviously, the savings will extend through the full year, but as we mentioned a moment ago, we did complete the risk in January . So that's the biggest individual basket. The second basket, which is in the range of...
Speaker 4: $5 million is coming from savings from service contracts, software licensing and SaaS contracts. That's our second biggest bucket. And then the last individual lever that we have is a combination from improved experience, loss experience.
Speaker 4: on our service deposit accounts, as well as reductions in other discretionary spend. So all in, that will contribute to about $15 million of actual savings in 2023, or approximately $18 million of savings on an annualized basis.
Speaker 7: Got it, got it. That's helpful. And maybe just the last question from me.
Speaker 7: the previous deposit service agreement you know it was a 3% rate is there a kind of a back of the envelope to think of a new deal with First Carolina and with customers bank like is there a shortcut that we can think about it on the outside
Speaker 2: I'll take it first. What we've said, Mike, is what we're standing by, where for competitive reasons, we're not going to provide the actual pricing, but we're very pleased to be able to share that it is variable rate pricing. We're in the rising rate environment and it will continue to be.
Speaker 2: And the only quantification we've provided is that you can expect it to be in excess of 100 basis points from that fixed rate agreement that you referenced earlier.
Speaker 7: Got it. Okay. Hey, thank you.
Speaker 8: Okay. Hey, thank you. Thanks, Mike.
Speaker 9: Your next question comes from the line of Brian Dobson with ChartAN. Your line is now open. Hi, it's Greg Pendi in for Brian Dobson. Just can you remind us just on the student business, there's just a lot of things to be changing day by day, what their decisions are going to be.
Speaker 9: And also, I think the interest payments are poised to pick up. Is there any potential disruptions to your business on the student front with some of the changes that might be taking place?
Speaker 9: Yeah, so there's the student loan forgiveness plan and then in addition, I believe interest payments poised to pick back up.
Speaker 2: So for loan forgiveness you know that actually you know helps helps her business because you know students are just more confident to be able to take loans out and so you kind of see that volume increase of anything so that really doesn't have you know it's a neutral to positive impact on our business so as long as they're continuing to get
Speaker 2: loans and going to school, that's helpful to our business. The far disbursement number that you may have seen year over year did decline. And the reason for that is though, it's more about that stimulus. As part of the stimulus in 2021, schools were also given something called Care Grants.
Speaker 2: And to really help higher education students, institutions navigate that pandemic time. And so bar disbursements have gone down a bit, but other than that, as it relates to sort of the political sort of environment that you were referring to as it relates to loans, that's actually neutral to positive.
Speaker 6: Okay, that's helpful. Thanks a lot. Thank you. Your next question comes from the line of Bill DeZellum with Teton Capital. Your line is now open. Thank you. Good afternoon. A couple of questions.
Speaker 6: First of all, what led to the 11% increase in the higher ed checking accounts in 22? Yes, Bill. We're constantly looking at incremental improvements or progress as it relates to customer for life strategy which we spoke about and have been speaking about.
Speaker 2: And so I wouldn't say it's one thing that led to it. It's really a myriad of small little tweaks that we made constantly to really improve our marketing, our communication, the user experience, etc., all of which we're continuing to do and double downing on this year. Since 2012, on more than 30% of non- fleshless campaigns for executive enjoyments are representative of projects, the
Speaker 6: So I would just say it's a myriad of various different tweaks and optimizations that we've done. And lovely, those tweaks and optimizations, do they tend to fall under the customer for life bucket or which I really think of almost as post school or do they tend to more fall under the category of...
Speaker 6: of improving the student's experience while in school.
Speaker 2: Well, the 11% increase in signups, that's actually once they're in school and they're getting their refund. So it's really hitting on that more, Bill, than post-students once they're un-enrolled.
Speaker 6: Great, thank you.
Speaker 6: the interchange fee income relative to customers, given that they are not urban exempt, should we interpret that to mean that it will be a smaller level of fee income, or are they somehow supplementing that fee income? So customers bank our agreement with them, which we amended at the end of the presentation.
Speaker 6: for some time, but maybe a bit more detail behind how that engagement began.
Speaker 2: Sure, Helix does not work with First Carolina Bank, and we found First Carolina Bank through just relationships because, you know, being in this industry now for eight, nine years, so I've had an opportunity to really be able to talk to many bank CEOs, and so it was really just through relationships and through connections.
Speaker 2: that we were able to really find First Carolina, which I'm really excited to be partnering with.
Speaker 2: to really find First Carolina, which I'm really excited to be partnering with. Great, thank you.
Speaker 10: Thanks. Your next question comes from the line of Michael Diana with Maxim. Your line is now open.
Speaker 4: Hey Mike. Hey, lovely. Thank you. I just wanted to make sure I understood your core EBITDOT guidance. So you say the guidance for first half is in line with the second half of 2022, which was actually slightly negative. Is that right? Yeah. I think the best way to think about it is for first half of 2023 is it's going to be in line with second half, which is close to break even.
Speaker 4: And then once we have the full effects of the new agreements, as well as the profit enhancement plan, we expect strong performance in the second half of 2023, which will lead us to that $14 million estimate for even for the full year.
Speaker 4: So the run rate in the second half is 28 million, basically.
Speaker 4: So the full year is 14 million of core year. I don't know if I answered your question.
Speaker 2: We're going to avoid getting too specific here. We just in sort of trying to help our investors as much as possible wrap their hands around this. This was something that we wanted to put out there. And really the way that we're thinking about it, we've been clear already that deposits did continue to decline yet at a slower rate in the first.
Speaker 2: you know, the first quarter of this year. Really, with the new agreement in place and the new pricing, April 1st, that that's going to be helpful to us, which is variable rate pricing. And then the other sort of uncertain, unknown on timing is the full shift to First Carolina Bank, which affects our Durban interchange. And so there's just a lot of moving parts, and right now, you know, our best guess.
Speaker 3: our first question is why are T Mobile deposits being left at Cubby?
Speaker 2: Sure, I'll take that. So, you know, another way to ask it is, you know, why didn't those deposits go with First Carolina Bank? And so our focus right now, our highest priority was to find the right sponsor bank for our higher education portfolio.
Speaker 2: You know, for us, our higher education portfolio is really multiples of annualized spend relative to our TMO portfolio. And so, you know, really protecting our interchange revenues is of the highest priority. And so, you know, really taking care of that portfolio was number one. Number two is as it relates to First Carolina and the decision not to take on both portfolios.
Speaker 2: And number two is, it's always been our strategy. We've been stating that we're being consistent, that we want diversification. We want multiple sponsor banks. And so, this is really an opportunity for us to find the best fit. It's not just the best fit for us, it's the best fit for T Mobile. And so, we're taking our time, yet are very conscious that...
Speaker 2: We want to find the right partner as quickly as possible. And obviously, our aim and goal is that we'd find that well in advance of the end of that relationship. I won't say the end because we expect to renew at that time, but the current agreement, which ends in 2025.
Speaker 3: Okay, our next question, how will deposits develop in 2023 and what are you doing against the decline? I think we kind of talked about that already. Yeah, I think it's what we articulated earlier.
Speaker 11: Next question.
Speaker 3: When will you start to buy back shares and or warrants?
Speaker 2: Yeah, so we've been getting this question a lot. I think number one is I want to reiterate that the company does feel that our shares are undervalued. And that's why we were excited to put out that press release that talked about the board authorizing us to be able to move on this. The reason why we haven't moved on it is a couple fold. And most importantly, we are in a blackout period. We have been.
Speaker 2: since essentially we made that announcement and will continue to be as Q1 is creeping up right now before we know it. We'll be back on a phone call with each other. And secondly, you know in the second half of the year as we've been talking about we expect to generate positive free cash flow and we will be evaluating our strategic options including the
Speaker 9: BASP pipeline.
Speaker 2: I think that BAS pipeline, as we've talked about many times, you know, it's a long haul until conversion. And so you have many cycles of conversations with a BAS partner. I haven't seen anything that says anyone is willing or walking away from this. I think that.
Speaker 2: this is just a blip in sort of the life cycle of these sales. And so it hasn't really affected it is what I'd say, but any large brand, any large company is carefully watching this and seeing how it plays out. The good thing is that we have very strong sponsor bank relationships in place.
Speaker 2: Customers Bank is extremely strong bank partner of ours with exceptional levels of liquidity, capital, strong credit performance, and we're proud to be their partner. And I feel the same way about First Carolina. Okay, I think that Brian , if that's okay, we spent a lot of time with Q&A today and.
Speaker 2: I hope you guys felt that we shared a lot during our commentary as well. I want to thank you everyone for your continued support of our company. I think we're at a very exciting inflection point, and I look forward to speaking with you next quarter. Thank you.
Speaker 10: This concludes today's conference call. Thank you for attending. You may now disconnect.