Q2 2024 MoneyLion Inc Earnings Call
unknown: This reflects an adjusted EBITDA margin of 14.2%, representing 550 basis points of margin expansion year over year. Relative to our guidance, our second quarter adjusted EBITDA was exactly in the middle of our range of $17 to $20 million. Third, in the second quarter, we generated a gap net income of $3.1 million and diluted earnings per share of 26 cents.
Adjusted EBITDA margin of 14.2%, representing 550 basis points of margin expansion year over year rare.
Relative to our guidance, our second quarter adjusted EBITDA was exactly in the middle of our range of $17 million to $20 million.
Third.
In the second quarter, we generated GAAP net income of $3 $1 million and diluted earnings per share of 26 cents.
Diwakar Choubey: And for the first half of 2024, we generated net income of $10.2 million and diluted EPS of $0.85. If you look at how we've been building the business, there is a clear arc to our evolution. How are technologies expanding on the foundational work we've done over the last 10 years? We have the right pieces in place to deliver an even greater impact. From a strategic perspective, we are in a pole position to be the number one destination for Americans to make their best financial decisions.
And for the first half of 'twenty 'twenty four we generated net income of $10 2 million and diluted EPS of <unk> 85.
Speaker Change: If you look at how we've been building the business. There is a clear arc tour evolution, our technologies expanding on the foundational work we've done over the last 10 years.
We have the right pieces in place to deliver an even greater impact.
From a strategic perspective, we're in pole position to be the number one destination for Americans to make their best financial decisions.
Diwakar Choubey: MoneyLion is the first digital ecosystem for consumer finance, and we have all of the elements typical of a successful ecosystem. These elements are commerce, business services, content, and developers. As we all know, digital ecosystems have disrupted many consumer industries. For example, leading companies like Amazon, Apple, and Expedia all share some level of strength across these dimensions. Of the 2.4 million products consumed in the second quarter alone, 1.7 million were third-party products
Moneyline is the first digital ecosystem for consumer finance and we have all of the elements typical of a successful ecosystem. These elements, our commerce business services content and developer kits.
Speaker Change: As we all know digital ecosystems of disrupted many consumer industries for example, leading companies like Amazon Apple and Expedia all share some level of strength across these dimensions.
Speaker Change: And we've extended our agreement with our partner Bank password for another three years to 2029.
Speaker Change: We've already had a successful five year partnership with password delivering the powerful combination of Moneyline's innovative tech forward capabilities with the expertise of passwords OCC chartered banking infrastructure to millions of American consumers.
Speaker Change: In addition to extending our flagship war money digital bank account product in the future, we will be adding overdraft protection capabilities to our program with password and we'll be looking to provide overdrafts features to help meet the liquidity needs of all of our customers.
Speaker Change: This is yet another example of our team quickly, bringing new features to our sizable user base and innovative ways as we've done that for the past 10 years.
Speaker Change: The PFM capabilities enhanced benefits in our network by providing an important companion and the financial product buying experience and it plays an important role in optimizing conversions and our enterprise network as well.
Speaker Change: I'll now provide a quick update on our enterprise business.
Speaker Change: Our network of over 1200 Enterprise partners continues to grow with over $85 million total customer inquiries in the second quarter alone.
unknown: In the second quarter, we continue to see an overall stabilization and improvement in our personal loans vertical. In short, we continue to make progress on our strategic initiatives within our enterprise business, and the underwriting environment is showing signs of relative improvement. Thanks, Dean. Good morning to everyone.
unknown: I look forward to sharing details about our financial performance for the second quarter ending June 30, 2024. I will also discuss our guidance and outlook for the third quarter and full year of 2024. In the second quarter of 2024, we met or exceeded our guidance across all metrics. Turning to our outlook, we are positioned for a strong third quarter.
Speaker Change: <unk> million that we saw in the second quarter of 2023. These.
Speaker Change: These inquiries converted into about one 6 million new cut total customers and 2.4 million total products were consumed during the quarter.
Speaker Change: Our substantial top of funnel is a key pillar in our consumer finance ecosystem. It's the gift that keeps on giving as we enhance our data platform and continuously optimize down funnel conversion rates.
Speaker Change: Now I'd like to turn to a concept that illustrates the power of our integrated enterprise and consumer business model.
Speaker Change: It relates to the customer journey and the 30 60 90 contribution margin progression that goes with it.
Speaker Change: Starting with 30.
Speaker Change: When a customer enters our ecosystem through the beta be channel and converts into a product.
Speaker Change: Partners pay us an affiliate fee and we pay away, 70% on average to the channel partner generating a 30% contribution margin.
Speaker Change: Those consumers become part of our dynamic ecosystem, giving us the ability to drive personalization and future product offers on the 30 60 90 contribution margin journey.
Speaker Change: Adjusted EBITDA margin expansion.
Speaker Change: Turning to our outlook, we are positioned for a strong third quarter for.
Speaker Change: For Q3, 2024, we expect revenue between $133 million to $138 million, representing 21% to 25% year over year growth at the midpoint. This represents revenue growth of 23% year over year and 4% quarter over quarter.
Speaker Change: We also expect adjusted EBITDA of $18 million to $21 million, representing approximately 13 to 15, 8% adjusted EBITDA margin at the midpoint. This represents adjusted EBITA margin of 14, 4%.
Speaker Change: We are also guiding to the full year of 2024, reflecting our confidence in our performance for the second half of 2024.
Speaker Change: For the full year of 2024, we expect revenue between $525 million to $535 million, representing 24% to 26% year over year growth at the midpoint. This represents 25% year over year growth for the full year of 2020 for.
Speaker Change: This also represents at the midpoint and implied Q4 revenue growth of 26% year over year and 5% quarter over quarter.
Speaker Change: We expect.
unknown: Thank you guys. Nice results. So I wondered if you could walk through the model in the sense of if rates start to come down, what the impacts might be, and can you give us any sense of whether you've assumed any of that in the guidance?
Speaker Change: Where a lot of these lenders are now hosting.
Speaker Change: There are underwriting models, just like a lot of these internet companies hosted websites with AWS think of a lot of these lenders now hosting their underwriting models or waterfalls, a knockout criterias inside of moneyline secure ecosystem. So we're now able to tell the consumer that without announce a doubt here's a personal.
Speaker Change: Loan or a credit card or a mortgage and HELOC or an insurance products that they have qualified for that they can then they're fine right should we expect that to be anywhere from a 20% to 40% conversion lift on the existing funnel like that is not baked into the guidance and we believe it can be a game changer for us as we bring that to market.
Speaker Change: And lastly, when do you plan to be able to bring that to market.
unknown: So we're transitioning clients over now. It's live.
Speaker Change: So we're transitioning clients over now it's alive, it's end market. It's a it's not a pipe dream. So again, that's a that's a process as we've said in the past we've made a lot of investments into our partner solutions team to our sales team you saw that we hired.
Speaker Change: More senior folks as head of revenue and so on and so forth. So that'll be a process over the next couple of quarters, but we do anticipate it to be.
Speaker Change: In the medium term not the long term where that check out experience becomes more proliferated throughout the ecosystem that remember as we've said in the past.
Speaker Change: Our our clients on the enterprise side or some of the most sophisticated most compliance focused financial institutions in the world So to walk them through the compliance process. The review process. The cyber security the intersect all of that is a time consuming but rest assured we are hard at work.
Speaker Change: Converting all the levers that you see on the enterprise side of our ecosystem into that checkout experience.
Speaker Change: Super Thank you.
Speaker Change: Yeah.
how much: Our next question comes from how much with B Riley Securities. Please proceed.
Speaker Change: Hey, Thanks, guys. Thanks for.
Speaker Change: All of the update questions on you know on the personal loan market and the other new emerging verticals in mortgages credit cards and auto insurance could you just give us a feel you said personal loans are stabilizing is it stable like flat year over year for you guys or just you know.
Speaker Change: Returning to growth can you give us any more color on that and can you give us a feel for the other verticals, where they're at in terms of traction with partners.
Speaker Change: Revenue if you could.
Speaker Change: And where there are as part of your mix and in the beta besides on the enterprise side. Thanks.
al: Hey, al Good morning, Thanks for the question I'll I'll I'll kick it off and then Rick can chime in on some of the.
Rick: First and second derivatives were seeing other growth rates in personal loans, but you know kind of philosophically a couple of years ago with set us over and over that over 90% of our enterprise revenue was through the personal loan vertical we have now significantly diversified that but EBIT inside of personal loans, we provide capabilities across the credit spec.
al: Right. So one of the reasons, we've been able to keep the growth rate stable if not growing in personal loans, just because we've been able to go deeper.
Speaker Change: Deeper into the credit spectrum, and we've been able to go into financial wellness verticals like secure credit cards different types of personal loans aside from just the 10 to $50000 of personal loans, we've gotten one credit.
Speaker Change: So all of the substitution effects are really driving our growth in our personal loans vertical right. We're also as we said as Rick said are just a few minutes ago that we saw the trough from a conversion rate perspective, that's coming back as well and then again, we haven't baked in the ER.
Speaker Change: Really the reduction in the interest rates in our guidance, but if you think about it from a first principles perspective, a lot of the substitution effect that we saw over the last year and a half over the last 18 months, where the rates were available to the consumer but they weren't taking the product because it was just way too expensive for them. What they were used to that sticker shock and they were delaying.
Speaker Change: Lot of the purchasing so that what we see is that as rates come down that conversion rate naturally should improve.
Speaker Change: Improve a little bit inside of that core 10 to $50000 of personal loan vertical. So that's one point. The second point is you know we talked about checkout, we talked about Decisioning, we're bringing a very modern technology stack into the credit card world right. So there are a lot of credit card marketplaces out there the way we are building it.
Speaker Change: Should inherently have a competitive advantages number one as we've talked about this in the past we have our own media capabilities right to our top of the funnel. We're re imagining how consumers interact with even the comparison are at the at the consideration point of thinking do I want to change their credit card most.
Speaker Change: Erika households at four to six credit card. So we think that there's lots of ways.
unknown: Yeah, and we'll add to that. It's what gives us confidence when you look at our third quarter guidance.
Speaker Change: Great. Thanks, guys.
Speaker Change: I just wanted to touch on on the guide, particularly in the back half.
Speaker Change: I know, there's been some moving pieces between customer ads and <unk>.
Speaker Change: How should we think about.
Speaker Change: You know those two dynamics.
Speaker Change: In the back half of the year in terms of what's assumed in the guide.
Speaker Change: Yeah.
unknown: Yes, thanks for the question.
Speaker Change: Yes.
Speaker Change: Thanks for the question.
Speaker Change: I think it's important when we talk about strategically what we've been really focused around which is a significantly larger tam and so our goal has been to help.
Speaker Change: Every person in America be able to make the right financial decision on that.
Speaker Change: It gives us an enormous a sandbox to play in terms of helping customers.
Speaker Change: And importantly.
Speaker Change: It allows us to be authentic in terms of bringing both are kind of first and third party products to.
Speaker Change: Customers and so what you'll see is in the past few quarters, we've been adding more and more consumption of third party products. So we're really becoming a marketplace for its business and the benefit of that because again you'd get to help our customers. We also are able to use that to drive record revenue.
Speaker Change: So while our Peru has come down slightly what you'll see is that it's actually allowed us to have a significantly faster.
Speaker Change: Faster growth rate around our revenue.
Speaker Change: The other thing it allows us to do is it allows us to take that customer on the journey that we talked about the 30 60 90 shrink.
Speaker Change: We are now really focused on being able to not only kind of bring customers.
Speaker Change: Into.
Speaker Change: The marketplace through our B to B channels, but we're investing heavily in our lifecycle marketing tech stack to be able to help those customers along a multiyear journey. So you'll see that that's also driving really kind of lifetime value are extending our lifetime value and importantly, as I mentioned that is because the customers go down that journey with us we're now.
Speaker Change: Also driving higher margin or higher contribution margin revenue with those consumers and so we're comfortable making the trade off in terms of slightly lower arps, who for a record level expected revenue over the next two quarters, while also expanding contribution margin and increase in kind of the margin profile.
Speaker Change: The overall mix more towards that kind of 60 to 90 profile.
Speaker Change: Okay.
Speaker Change: This makes some sense.
Speaker Change: Very helpful and.
Speaker Change: Just as a follow up I wanted to just walk through a bit more on the transitioning to the forward flow.
Speaker Change: The warehouse.
Speaker Change: On the unit Economics, and then a historically you guys have said, it's relatively neutral to the P&L. So I guess should we kind of think of you.
Speaker Change: The provision expense is that historically is that a decent proxy.
Speaker Change: What are the Opex kind of loss on sale line will be moving forward and I guess could you just clarify.
Speaker Change: At the time the exact timing.
Speaker Change: And kind of how fast that transition and so forth what will occur in the third quarter.
unknown: Yeah.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: The question around Port flow I'll take it kind of in reverse order. The timing is it's currently underway. So we talked about it.
Speaker Change: Last quarter.
Speaker Change: It was announced.
Speaker Change: But that'd be getting it.
Speaker Change: Of July and we are in the process of transitioning right now as you summarized.
Speaker Change: The benefit is it's more cash efficient.
Speaker Change: We also are able to move.
Speaker Change: Move our receivables off balance sheet.
Speaker Change: And so from a from a credit risk perspective, because shift that to our financing partners.
Speaker Change: Yeah in terms of the go forward as you can see we are relentless in terms of continuously optimizing unit economics, and so while yes. There's a specific forward flow arrangement is relatively neutral from a P&L perspective, we continuously look for ways to optimize and term.
Speaker Change: All of our processing in terms of our.
Speaker Change: Our overall underwriting and so we would expect over time to continue to improve unit economics.
Speaker Change: And so if we kind of hold that those two things separate.
Speaker Change: It will continue to improve and the kind of forward flow arrangement will be more cash efficient for us and improve our overall cash flow, which.
Speaker Change: Which you'll see even.
Speaker Change: Even in the most recent quarter, we just continued to be cash flow positive.
Speaker Change: In terms of being able to generate cash from our operations.
Speaker Change: Okay, and just to confirm I guess at least her in the near term.
Speaker Change: Reasonable to assume that kind of the historical provision should be somewhat similar to.
Speaker Change: Me the Opex line item there'll be a replacement and then they figure it out.
Speaker Change: Okay.
Speaker Change: Yeah, we don't see any headwinds and.
Speaker Change: In terms of the performance of our consumer book at <unk>.
Speaker Change: Obviously that that typical first quarter seasonal benefit we had a reversion back to our historical levels and so going forward, we wouldn't expect there to be any change to that.
Speaker Change: Given kind of a unique way in which we kind of manage our customers and the way we manage our balance sheet.
Speaker Change: Okay.
Speaker Change: That's really helpful. Thank you.
Speaker Change: The next question comes from Jacob Stephan with Lake Street Capital. Please proceed.
Jacob Stephan: Hey, guys. Thanks for taking my questions jumping between calls this morning, So apologies if my.
Jacob Stephan: Doug will cover something here, but maybe could you guys just touch on the the overall marketing spend environment. I mean, what are you guys seeing a in terms of you know with the election coming up.
Speaker Change: Is there any elevated marketing spend that may affect the customer acquisition cost here.
unknown: Well, I think there are a good morning, first of all, there are a couple of elements to that, right? There's performance on the MoneyLion ecosystem.
Speaker Change: Well I think that are hey, Jake and good morning first of all there are a couple of elements to that right.
Speaker Change: There's the way that that is.
Speaker Change: It's still your question is.
Speaker Change: There's customer acquisition costs for moneyline going into the second half of the year and then there is the spend that third party enterprise clients.
Jacob Stephan: Really.
Jacob Stephan: For them on the Moneyline ecosystem. So let me take the first one right. So we see no.
Speaker Change: Impacts to our ability to maintain tax and ltvs at the levels that we're guiding to in the second half of the year. As a reminder, we have multiple levers here to manage CAC and LTV.
Jacob Stephan: Do we have the ability of course to huge our organic capabilities are we got a very strong returning customer base and that's what really drives the operating margin as well and then from a channel perspective, we have levers across traditional performance media brand as well as moneyline.
Jacob Stephan: <unk> spending on its own walled gardens as well now we may take some strategic initiatives to invest in the brand in the second half of the year for sure as we see those opportunities arise.
Jacob Stephan: But again from where we're guiding there should be really no impact in our ability to navigate the multiple levers that we have and it really you know we've seen this before we've seen ebbs and flows.
Jacob Stephan: And the marketing environment before and we've built our apparatus really to be responsive to that on the second point, we are actually seeing increased spend on our moneyline engine marketplace and that's encouraging.
Jacob Stephan: We've said that once you've got the Apple walled gardens, Google walled gardens that the meta walled garden.
Jacob Stephan: You know clearly we're not as big as those just yet but of course, we are a very important channel.
Jacob Stephan: Channel for financial services clients to get in consideration in market.
Speaker Change: They didn't consumers for financial products. So, we're becoming a must have for the CMO inside some of these largest financial institutions and we actually see that accelerating going into the second half of the year driven by some of the trends that you just mentioned.
Speaker Change: Okay got it that's helpful.
Speaker Change: And maybe just an update on the <unk> Nexus I'm not sure. If you guys talked about that on the call, but any update would be helpful.
Speaker Change: Yeah sure. So E Y our partnership with <unk> allows us to really develop and co building co distribute.
Jacob Stephan: Or embedded market place and embedded financial servicing capabilities for medium small and regional banks.
Speaker Change: Banks, if you will right. So if you think about what we're doing with the technology build around money one check out around a lot of the web services capabilities. All of those are really calm counting into these modular building blocks that we're then using channels.
Jacob Stephan: It increased a bit.
E y: The partners that we have on the enterprise side of the business and E Y is a great partner in doing that that's continuing to progress that's continuing to.
Jacob Stephan: Really again these are really highly sophisticated.
Speaker Change: The financial institutions, where we have to engage in long sales cycles, but again, it's going exactly as planned and we continue to you know.
Jacob Stephan: Believe that it will be impactful.
Jacob Stephan: In late 2020 for early 'twenty 25 from a contribution perspective.
Speaker Change: Okay. That's helpful. And then just last one for me. The 8-K, you guys put out this morning.
Speaker Change: Wasn't your earnings release, maybe if you could just kind of help us understand is that are you know moving towards kind of a bank overdraft a framework for your D&C cash product.
unknown: So the 8K that we put out this morning was an extension of our relationship with Pathwork, our partner bank. This has been a very fruitful five-year-long relationship.
Speaker Change: So sort of the 8-K that we put out this morning was an extension of our relationship with passport our partner Bank. This.
Speaker Change: This is a very fruitful five year old one relationship it's just an extension.
unknown: It's just an extension. You know, we're always looking at innovative ways to provide liquidity products to millions of our consumers. So we added, we did add the capability with Pathwork to provide overdraft protection to our already feature-filled war money digital bank account. And, you know, we have multiple ways to win, and this will be a complement to the existing first-party consumer capabilities that we're providing.
Speaker Change: So we're always looking at innovative ways to provide liquidity products to a million.
Jacob Stephan: If our consumers so.
Speaker Change: So we added we did add the capability with afterwards cry overdraft protection to our already feature filled a war money digital bank account.
Jacob Stephan: And you know we have multiple ways to win and this will be a complement to the existing first party consumer capabilities that work right.
Speaker Change: Okay I appreciate all the color thanks, guys.
Operator: Thank you. At this time, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
Speaker Change: Thank you at this time. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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