Q3 2024 Upstart Holdings Inc Earnings Call
Speaker Change: be well above the historical average. This is all to say that we believe any substantial macroeconomic wins remain in our future.
Speaker Change: Today I'd like to share some details about the third quarter and the progress that we made.
Speaker Change: In our core personal loan product, we continue to iterate on our ability to rapidly launch increasingly sophisticated models. Model 18, which I described in some depth last quarter, drove large conversion improvements in Q3, which translated to much of the growth we're reporting today.
Speaker Change: We also continue to solve ML infrastructure and scaling challenges related to training frequency, process automation, and inference speed. We've set aggressive goals regarding data freshness for our machine learning team, which is critical to proper calibration in a volatile macro environment.
Speaker Change: I believe that our model training and deployment represent the state-of-the-art in an industry that, for the most part, has yet to discover the power of predictive AI.
Speaker Change: Q3 was Upstart's largest quarter of personal loan origination volume in two years, despite the significantly elevated rates I mentioned earlier. Our goal is to offer the best rates and best process to all Americans, and we're making significant strides in this direction.
Speaker Change: This means not just having the best models and highest levels of automation, but feeding them with the most efficient fuel, the capital, so that the end product, the loan, is consistently the best available.
Speaker Change: While this is a goal we can never 100% achieve, a constant, urgent, and determined effort to offer the best rate and the best process to everybody will make Upstart a formidable brand and a sustainable leader in the industry.
Speaker Change: Our key prime program which we announced just a couple of weeks ago takes a giant leap toward this goal by expanding our reach to the super prime end of the credit spectrum.
Speaker Change: By working closely with our lending partners, we're creating offers of credit that shine in comparison to anything in the market and bring us closer to a brand that can resonate with all Americans.
Speaker Change: Originations of Upstart Auto Loans increased 46% sequentially to $26.5 million. On the retail side, we signed our 11th Certified Digital Retailing OEM Agreement in October.
Speaker Change: This agreement increases Upstart's franchise dealer market opportunity by 14%. In October, we also began the rollout of a complete redesign of Upstart's in-store software product that improves usability and information access as we continue to modernize the technology stack used by dealerships across the country.
Speaker Change: On the refinance side, we recently upgraded the loan application experience, reducing the average time to fund from 19 days to 9. Car owners who refinanced with Upstart now save an average of $800 per year, and we're optimistic that we can increase the amount saved by our borrowers in the months ahead.
Speaker Change: Our home equity business continues to scale like you'd expect from a fast-growing startup, with originations more than doubling on a sequential basis. And I'm also happy to report that with more than 600 HELOCs originated to date, we still have zero defaults.
Speaker Change: Growth in the HELOC product was driven predominantly by conversion rate improvements, a common theme if you've followed Upstart for long.
Speaker Change: that are targeting and higher qualification rates combined with a 50% increase in closed rates of those offered loans led to these strong results.
Speaker Change: We exited Q3 with an instant approval rate for HELOC applicants of 49% up from 42% in Q2. This means we're able to instantly verify applicants' income and identity without the need for tedious document uploads.
Speaker Change: We're now live in 34 states and Washington, D.C., covering 55% of the U.S. population. We expect to expand to more states with our HELOC product this quarter.
Speaker Change: We continue to invest heavily in servicing and collections, and as I've said before, we're particularly focused on leveraging machine learning to customize the borrower experience and improve repayment rates, and this effort is beginning to pay off.
Speaker Change: I'm increasingly confident that loan servicing and collections will become another area where we have unique and sizable competitive advantage over time.
In Q3, we launched multiple personalization efforts.
Speaker Change: including optimizing the time of day to call and the time of day to send emails.
Speaker Change: We don't have concrete results for these initiatives yet, but they're part of our broader push to use machine learning and data to create a materially differentiated loan servicing experience.
Speaker Change: We also expanded support coverage to include Sundays without adding headcounts to the team. And finally, we began exploring the use of large language models to reduce our spend even further.
Speaker Change: Our work to improve operational efficiency combined with machine learning means we believe we can continue to improve roll rates, even while reducing the cost of servicing each loan.
Speaker Change: Last quarter, we continued to see strong loan performance, with roll rates from one-day delinquent to charge-off down 13% year over year.
Speaker Change: Even more compelling is that 30-day delinquency rates have trended down sequentially through Q3, despite the fact that the third quarter has traditionally been a seasonally worse quarter for loan servicing. We're confident that there are many more wins in this part of our business in the coming quarters.
Speaker Change: On the funding supply of our business, we continue to strengthen our position quarter to quarter. A few weeks back, we announced a partnership with Blue Owl, whereby their Adelia affiliate will purchase up to $2 billion in loans from the Upstart platform over 18 months.
Speaker Change: Similar to last quarter, I'm happy to report that in Q3, well over half of our loan funding was in the form of longer term committed partnerships.
Speaker Change: Today, I want to call the incredible work done by our Capital Markets team, who have risen to the challenge of developing important and innovative partnerships with several of the market leaders in private credit.
Speaker Change: Innovation on the funding side of our business is a trend I expect to continue throughout 2025.
Speaker Change: Banks and credit unions continue to increase their funding on the Upstart platform as their liquidity improves and they ramp up their lending.
Speaker Change: This year we signed 24 new lenders, which is already more new lenders and new capital than was added in all of 2023.
Speaker Change: In addition, more of our existing bank and credit union partners are expanding their lending programs with us, bringing more low-cost capital with more attractive rates to upstart borrowers. The T-Prime program I mentioned earlier is one important way they're doing this.
Speaker Change: I'm also pleased that loan funding has kept pace nicely with our regrowth of originations.
Speaker Change: The volume of loans on UPSART's balance sheet continues to trend down, even while loan originations have accelerated.
Speaker Change: We're also in a stronger cash position as a result, keeping supply and demand in balance while we regrow our core business will continue to be a challenge, but we're in a strong position to manage this important dynamic.
Speaker Change: Last quarter I told you that Upstart was turning a corner. Now I can say that we're clearly gaining momentum.
Speaker Change: Even without a significant boost from the macro economy, we're in growth mode and our credit is performing well. Our core business is expanding again and our newer businesses are making fast progress. We're hopeful that we'll see macroeconomic wins in the quarters to come, but we're not waiting around for them.
Speaker Change: Upstart's mission is simply to improve access to credit and our strategy to accomplish this goal is to provide the best rates and best process to everybody. This isn't AI for AI's sake. It's because more than a decade ago we recognized that it's the right tool to accomplish this ambitious goal.
Speaker Change: We believe that success in this regard will result in a generational company with immeasurable impact on American families and the U.S. economy. We're making rapid progress against this goal, and as a brilliant leader in our industry once said, it's day one here at Upstart.
Speaker Change: Thank you, and now I'd like to turn it over to Sanjay, our Chief Financial Officer, to walk through our Q3 2024 financial results and guidance. Sanjay?
Sanjay: Thanks Dave and thanks to all of you who are joining us today on what I'm sure has been a distracting week for everyone here in the U.S.
Sanjay: The macroenvironment continues to be an influential factor in our business, though with respect to consumer credit, it has in our view remained relatively stable since our last report a quarter ago.
Sanjay: As anticipated, this has allowed our risk models the freedom to continue improving borrower selection and driving conversion gains.
Sanjay: Our belief is that inflation is largely behind us, a remnant trace from an historically large increase in the money supply that occurred between 2020 and 2021.
Sanjay: The enduring strength of our labor market also continues to astonish, and in our view, the U.S. economy now suffers from a structural shortage of workers, making the odds of significant near-term unemployment in our estimation remote in any scenario short of an economic meltdown.
Sanjay: Consumers in the U.S. have continued their remarkable spending spree, perhaps even a little too remarkably for our taste, but Americans did enjoy a surge of disposable income entering 2024 that provided some support for the ongoing spend levels, as well as some welcome breathing room in savings rates.
Sanjay: Consequently, consumer defaults on unsecured credit have stabilized over the course of the year, easing down from their peak to a lower but still elevated level of stress, as reflected in our Upstart Macro Index.
Sanjay: Taken as a whole, the macro-currents around us have become much less choppy, and in their current state no longer appear to represent a direct headwind to our business.
Sanjay: With all of this as context, here are some financial highlights from Q3 of 2024.
Sanjay: Revenue from fees was $168 million in Q3, up 28% sequentially from the prior quarter and 8% ahead of guidance, as various model accuracy enhancements continue to produce improved conversion.
Sanjay: Net interest income was negative $5 million. Less than half of the net interest income loss we experienced in the same quarter a year ago.
Sanjay: Taken together, net revenue for Q3 came in at $162 million, $12 million above our guidance, and up 20% year-on-year.
Sanjay: The volume of loan transactions across our platform in Q3 was approximately 188,000 loans, up 64% from the prior year and up 31% sequentially, and representing over 118,000 new borrowers.
Sanjay: Average loan size of $8,400 was up from $7,700 in the prior quarter, driven higher by the model wins, which allowed more borrowers to qualify for full personal loans at the expense of the smaller relief loans that they otherwise would have been presented with.
Sanjay: Our contribution margin, a non-GAAP metric, which we define as revenue from fees minus variable costs for borrower acquisition, verification, and servicing as a percentage of revenue from fees.
Sanjay: came in at 61% in Q3, up 3 percentage points sequentially, and 4 percentage points above our guidance for the quarter.
Sanjay: Our margins benefited from higher conversion rates on personal loans, as well as improved automation and efficiency in the borrower onboarding process.
Sanjay: Operating expenses were $207 million in Q3, up 13% sequentially from Q2.
Sanjay: expenses that are considered variable relating to borrower acquisition verification and servicing were up 20% sequentially less than the growth of the corresponding fee revenue base
Sanjay: Fixed expenses were up 12% as the improved trajectory of the business triggered some catch-up accruals for expenses that were not being incurred earlier in the year at our lower volumes, some of which will be temporary in nature.
Sanjay: We continue to pursue tight expense management as a core principle, and have implemented some further streamlining of operational headcounts since the end of the quarter.
Sanjay: Altogether, Q3 gap net loss was $7 million, significantly ahead of guidance, and due in large part to gains made on the refinancing of some of our outstanding convertible debt.
Sanjay: Adjusted EBITDA was positive $1 million, also comfortably ahead of guidance, and accomplishing our goal of breaking through to positive adjusted EBITDA, one quarter ahead of schedule.
Sanjay: Adjusted earnings per share was negative six cents based on a diluted weighted average share count of 90.1 million.
Sanjay: We ended the third quarter with loans on our balance sheet of $537 million before the consolidation of securitized loans.
Sanjay: down from $686 million in the prior quarter, continuing the progress we've made over the past year in reducing the size of the balance sheet and establishing strong relationships with a handful of strategic capital partners.
Sanjay: Of that loan balance, loans made for the purposes of R&D, principally auto loans, stood at $399 million.
Sanjay: In addition to loans held directly, we continue to consolidate $119 million of loans from an ABS transaction completed in 2023, from which we retained a total net equity exposure of $18 million.
Sanjay: We ended the quarter with $445 million of unrestricted cash on the balance sheet, up almost $70 million from the prior quarter.
Sanjay: In Q3, we also completed the refinancing of roughly half of our outstanding convertible debt with a new issuance that pushes the maturities on this tranche out to 2029.
Sanjay: On the funding side of our platform, we see encouraging signs that the markets are becoming increasingly constructive.
Sanjay: Liquidity in the banking and credit union sectors continues to improve and increasing numbers of lenders are dropping their required rates of return on our platform.
Sanjay: On the institutional side, the large amounts of money that have been raised under the banner of private credit, initially earmarked mainly for corporate lending, are now increasingly finding their way over to consumer assets.
Sanjay: In our return to the ABS markets this past month, we saw high levels of oversubscription and significant tightening of spreads for each class of bonds.
Sanjay: These are the signs that the capital markets are returning to their core function and once again embracing risk in the pursuit of yield.
Sanjay: As we look ahead to Q4, we continue to presume a roughly stable macro environment, with minimal change to credit trends in either direction.
Sanjay: We expect the September 50 basis point rate cut from the Fed to work its way into our marketplace pricing over the course of this quarter, providing some modest lift to volumes.
We would expect that EBITDA would with policy.
And sorry, John can you remind me of your first question.
The status of the Prime customer I know you said they were sort of later or two to weekend, but they're also coming back but you said some of that that return the prime customer as opposed to the subprime was a little delayed I think you spoke about it quite a bit I think the last call or two.
Got it yes, yes, thanks for refreshing.
On the on the sort of the trend of consumer repayments and defaults in the various segments within that we did call out the fact that.
There was a bit of a.
Our phasing difference between lower prime and higher prime consumers in that the lower prime consumers were impacted.
Sooner than the primary consumers maybe back in early 2021.
And by the time, they had stabilized and started improving again, even as of a quarter or two ago the prime borrowers.
Still had not quite stabilized I think we see that all sort of re converging to a place of stability across the spectrum right now and so if you take our macro index as a high level indicator of where.
Where are the aggregate numbers are on consumer repayments, we don't perceive there to be any real remaining segment differences and Thats. Why you may have heard in another announcement, we sort of announced that we are leaning in.
More.
More confidently into the prime segment with that with the Prime program.
Great. Thank you very much.
Okay.
Thank you John.
Our next question is coming from our van run many with Piper Sandler.
Hi.
Hi, Thanks for taking my question, just kind of Dave I just wanted to go back to some of the comments you made.
With the opening remarks like you know some of your performance you said are a lot of its performances.
Kind of driven by inherent improvements in your own kind of model N and not as much of it.
Can you kind of this lower interest rate cuts would love to see if you can kind of expand on that a little bit more.
And provide some metrics.
And also if you can kind of.
Can you give us an idea of how this lower interest rate rates.
Sort of add to some of the headwinds that you're seeing.
Sure.
We got a little bit of help from interest rates, let's say.
Fed rates change and maybe a modest amount of support from that in September so not all that meaningful over the course of the quarter.
Going forward, we certainly hope will get more boost but really the growth in the third quarter was really due to model upgrades that we're upgrading our AI models constantly but sometimes we get.
Just a small modest wins and other times, we get very large wins and model 18, which I first mentioned in the call three months ago.
It was probably one of the bigger launches and an upgrade to the system than we've had in quite some time and it doesn't really mean much more increased separation of risk and that very commonly leads to higher conversion you can think of it as basically it's identifying riskier people and eliminating them from the borrower pool.
Net net is you can lower the rates and approve more other people and also the level of automation is that our all time high over 90% of the loans are fully automated both of those contribute to growth and to just getting more people through the funnel which is very.
The fundamentals of those numbers that we put up there.
Alright, perfect and then.
I think if I heard I heard you right you said.
Roughly kind of half of your loan volume now is to committed capital.
And if that's the case.
No.
You know as it look forward to the next couple of years as we get into like a more normalized operating environment.
When you think of committed capital versus like opportunistic Apple how do you think that's equally valid because I know kind of a hurdle before we went into this tough environment.
You almost did not have like a lot of committed capital, but not yet.
About half of that how do you think that will trend over the next couple of years.
Okay.
Sure Arvind well, we will say this we certainly love having a significant portion of the capital being committed today. It may even be more than we would we'd like historically if you went back a couple of years. The funding on the platform was entirely at well month to month Baidu.
By design and then as you know we decided a couple of years ago. We wanted to start to have much more committed capital think of it more like a supply chain of capital and a little less like just a pure marketplace and that's really helped and that's what's really supplying a lot of the fuel for growth today is that well over half of it is committee.
Capital, having said that I think there is a place for kind of a spot market spot market. If you will where capital can come and go there are there's capital that will come in will ultimately take loans for securitization when the ABS markets are functioning. So I don't think we ever 100% committed capital because there's this kind of.
Market creation happens with Apolo, Kathryn as well, so a healthy balance will be good, but certainly we like today having.
A lot of committed capital a lot of long term partners that we can create a lot of value for it and they can create value for us as well.
Perfect. That's really helpful. Thank you very much I'll hop back in queue.
Thank you.
Our next question is coming from James Faucette with Morgan Stanley.
Hi, Ron it's Michael <unk> on for James Thanks for taking my question I just wanted to ask on the small dollar loans, obviously, reaching breakeven economics here like how should we be thinking about.
Incremental variable cost reduction, there and sort of the impact on approval rates broadly.
Sure Michael This is Dave.
The small dollar product essentially.
Is really kind of a way to get somebody into the system, who wouldn't be approved for a larger loan generally speaking and.
It is generating positive economics, it's actually not a drain on us whatsoever, there very short term loans, they turn over a couple of turns over.
Super quickly so.
I don't think we see that as any kind of drain on the system.
They are as I said positive economics, it's really expanding the boundaries of who we can improve a lot of those small dollar borrowers will come back later and get personal loans are maybe refinancing auto loan et cetera. So for us. It's really helpful. It's also helping train our AI models on a lot of borrowers that it would not have otherwise.
So it kind of keeps pushing the boundaries of what we can improve I don't know Sanjay if you want to add anything to that.
No I think that's a that's a pretty good description.
Okay, Great and maybe maybe just one.
Sort of question on impact of a change in administration broadly I know, it's obviously tough to prognosticate about.
Direction of the overall unemployment rate, but if we are in this this world in which unemployment rate is lower credit is generally better like how are you thinking about sort of like run rate origination trajectory that we should be cognizant. However over the next call it.
12 months to 18 months.
Well with respect to the administration.
The market as you can see in the last day or so.
Kind of like a business friendly Republican administration, historically, so that's not maybe not a surprise.
But having said that our business has grown up through four different administrations and had very engaged relationships with regulators under each of them. So we don't really see a.
Which party is in power in D. C is a central factor in our business. So very happy and we've made a ton of progress working with regulators, particularly around the use of AI and fairness in lending and those kind of issues.
So we feel very good about that.
Generally speaking you know.
Our growth as a company has almost always come internally not externally, meaning improvements in the models and.
Getting more and more funding improving models being out approved more people.
These newer products that are coming out are appealing to a different set of people. The prime program is now has more competitive offers for much more prime.
Borrowers. So so all these are the kinds of things that we just keep I think we can grow on and certainly.
As the consumer risk drops the upstart macro indexes that goes down and that is certainly.
A tailwind to us as is <unk>.
Fed rates benchmark rates going down so those are all good things, but if I kind of said in the remarks, we arent waiting around for fed rates to drop or for you of my itself to drop we really believe we can drive consistent growth really through just the kind of improvements we make to our models quarter ending quarter out.
That's great color I appreciate it.
Thank you.
Our next question is coming from Rob <unk> with autonomous research.
Yeah.
Hi, guys I wanted to ask about key prime and your extension into Super Brian can you just fill us in on how you get paid in that business is it any different.
And then how does it take rates and contribution margins compare to the core business.
Sure Rob it's a good question we.
Essentially we don't do any loans that there arent positive unit economics on so we arent you'd never do this in a way that we would intentionally.
Lose money on the loan so they are.
But certainly across the spectrum.
The more prime you are the more youre at that end of the spectrum thinner margins are because you have just more heavily competed consumer and what we're really able to do with our lending partners to find something that works for them in terms of very low relatively low loss rate product, which is very good for our credit Union and bank partners.
It has a nice yield and we make less on it but we have a very positive contribution margin. If you look at our business today contribution margins are super high compared to where they were historically.
Like.
In the range of 60%, whereas.
In the middle of 2021, they were in the mid Forty's I believe so we expect our contribution margins to come back down to Earth as our volumes expand and we don't think T. Prime is going to upset that in any dramatic way, but this is essentially also important to say. These are this is sort of a part of the market. We are just not participated in his.
Storage <unk>.
So regardless of the percent contribution margin. These are contribution dollars that we would not otherwise have and that's how we would think about it.
Okay. Thanks, and then.
Somewhat relatedly just wanted to get your thoughts on the on the broader competitive landscape youre going into Super Prime with cheap crime.
You have someone like <unk>, who is doing their own loan platform business. It seems to be targeted more towards your main demographic. What do you guys think about all of that how do you. How intense do you feel the competition is today and then how do you manage around that competition to make sure you're protecting protecting your targeted cash flows going forward.
Yes, I mean, we've always operated in a very competitive environment.
In some sense from a consumer perspective alone is alone and for us having proprietary underwriting that we think is creating separation is always been the center of our thesis we can improve more people at lower rates. We can avoid that people you don't want to lend to.
And increasingly with what were talked about T. Prime as we can compete across the credit spectrum. So.
Certainly there'll always be a lot of competition, but we like our model. It can be you know alone can be originated and held by a credit union or a bank.
At a very modest yield and a very low risk.
We also have.
Our relationships with the private credit market are very successful and a b S.
So there's just I think a platform that can move really quickly and I think controlling all parts of this from the data that's collected that the model is trained on servicing these loans et cetera. It means it's a very healthy approach. We have a lot of competition has very different models out there whether they'd be banks or other types of impacts but we.
Like are playing it but its a vast market and there's there's room for multiple players for sure.
Very helpful. Thank you.
Thank you.
Our next question is coming from Kyle Peterson with Needham.
Yeah.
Hey, good afternoon, guys. Thanks for taking the questions.
Well to start off.
On the rate cut commentary.
You guys mentioned in your prepared remarks that the September cut is expected to work its way through.
And into the fourth quarter.
If there's further easing and we had to cut today should we think about these as being central tailwind like a one to two quarter lag or or is there another way to to kind of incorporate that into our own assumptions.
I'll take that one yes.
I think I think that's roughly right a rate cut by the fed first requires warehouses and other financing mechanisms to adjust.
And then thereafter, we'll begin to sort of reflect that in our.
Core pricing.
So I think a lag of.
You know one to three months is probably reasonable.
Okay.
That's helpful. And then maybe switching gears I know you guys mentioned.
The average loan size was a little bigger and part of that studio model improvements.
You know maybe any thoughts about does that impact some of the progress or initiatives you guys had had been making on the small dollar product or does that now get shifted to a different type of consumer if some of those guys that were taking the smaller loans can now now qualify for longer ones, just how that fits.
The near term growth algorithm would be very helpful.
Yeah I guess.
In the Grand scheme of things when either risk is lower or required returns are lower and more people can qualify for larger loans.
It doesn't mean that less of them are taking what they otherwise would've been offered which is maybe a smaller dollar loan I think that overall is good for the ecosystem for the borrowers.
It may have obviously impacts on.
Average metrics like loan size et cetera, but I think overall, we would view that as a positive in the environment.
Got it that's helpful. Thank you.
Our next question is coming from David Schwartz.
Listen with JMP.
Hey, good afternoon. Thanks for taking my questions. Most have been answered, but just two quick follow ups.
First on the expense side.
Essentially I think you said there was some catch up accruals in the third quarter and I'm wondering.
If you could quantify how much of Q3 expense levels might be non recurring and how much spin.
Specifically in the fourth quarter, we should think of.
For marketing.
Yeah.
Yes, I think that let me just.
On the back of a cocktail napkin I think you could think of that as sort of like five.
5 million ish in excess expense that maybe was otherwise would've been sort of captured earlier in the year and where this is sort of captured as a one time catch up this quarter.
Okay.
In a in a Q4 marketing spend just given the.
You know as we think about cat, it's similar similar to third quarter levels.
Yes.
Precede her to be any large changes coming.
Okay, and then just lastly on the funding side.
I think earlier in the year.
Correct me, if I'm wrong I think the castle Lake arrangement included some form of risk sharing or mandated risk retention.
Is that the.
The case without a liar recent deals or are these just kind of strict.
Flow arrangements.
Yeah that'll ideal has a version of co investment, where we are we're investing alongside them.
Okay got it great. Thank you.
Thanks, David.
Our next question is coming from assignment <unk> with Redburn Atlantic.
Hi, everyone. Thanks for taking my question I was wondering.
David could you talk a bit about the conversion rates and how we should think about that progressing as modal 18 really starts to drive through a neurologist because.
While you delivered some great upside to the numbers this quarter I put the conversion rate would have been hard to deliver that on it.
It went up 100 basis points or so I was just curious as to how to think about that going forward.
Sure I mean conversion rate getting higher is a good thing.
Sort of multiple you know sort of contribute directly to growth.
The only thing that that contributes to growth so depending on how acquisitions working et cetera, but.
You should expect when we make model improvements when we increase automation and things of that nature. It will drive conversion rate up but theres always this like sort of trade off where that where suddenly it makes sense to spend more on marketing or some other.
Type of expense and it can drive it back down so conversion rate doesn't doesn't grow to the sky If you will.
Because there will always be an interest from our side and in.
Speaker Change: And in fact investing more once it reached one conversion rate reaches a certain point.
Speaker Change: Right.
Speaker Change: If I go back in time I remember in the earlier days.
Speaker Change: I think we used to talk about a conversion rate of 22% being sort of optimal.
Speaker Change: So has that changed.
Speaker Change: Hey, Simon this is Sanjay one so maybe one additional consideration thats sick newer in this multi product world than in the old days, when we were really largely a single product.
Speaker Change: Is that for example, we were converting some people into small dollar loans and.
Speaker Change: It's the model our accuracy improves more of those are being converted into full personal loans and so that's not an improvement to conversion per se because each one of those is counted as a convert it's just so much more lucrative conversion. So I think maybe what we can try to do over the next couple of quarters is giving you guys more insight into.
Product level of conversion, where where it'll be more meaningful to the economics.
Speaker Change: That'd be great I appreciate it thank you so much.
Simon: Thank you Simon.
Speaker Change: And looks like our last question is coming from Giuliano Bologna with Compass point.
Speaker Change: Congratulations great to see continued progress.
Speaker Change: Securing committed.
Speaker Change: Committed funding arrangements.
Speaker Change: On that topic, so it looks like the <unk>.
Speaker Change: Congress capital or sorry, sorry.
Speaker Change: That's about 100 million linked quarter.
Speaker Change: Curious about you know when you think about a go forward basis is there a rough sense of.
Speaker Change: How fast that should be growing.
Speaker Change: Quarter over quarter, especially as volumes continue to improve from here.
Speaker Change: And also you know yours is it is there an upper bound to where you'd want that to be relative to capital or cash and Joe.
Speaker Change: Not too much. It's a compound question, but then I'd be curious roughly where the percentages are the what kind of cars outstanding relative to the Congress.
Speaker Change: Third quarter.
Speaker Change: Yeah, Hey, Julianna. This is Sanjay hope you're well.
Speaker Change: So I think the rough framework of the rough model you can use to think about this and we've sort of signaled. This in the past is that in these particular.
Speaker Change: Deals, we expect to be somewhere in the mid to high single digits as a co investment.
Speaker Change: And I think that that's generally true and it continues to be true now I think in quarters, where we sign big deals such as the blow flush out a liar deal.
Speaker Change: And very often those deals are accompanied by large back book transactions as well in order to feed the relationship in and sort of that.
Speaker Change: See the utilization of the financing facilities, then there could be a bigger one time.
Speaker Change: I sort of jumped in the committed capital dollars level and Thats true this quarter as a result of the blow deal.
Speaker Change: Those are more a function of deal signings and ongoing.
Speaker Change: Forward flow investment.
Speaker Change: But I think writ large I think a mid to high single digit.
Percentage of of the flow, which.
Speaker Change: Is committed and as Dave said, that's sort of somewhere over half of our total volume right now is the right amount for us to scale on.
Speaker Change: And you know the total amount that we're comfortable with I think is really a function of the scar size and scale of our platform because obviously, if it gets bigger and as their business is throwing off more money, we're able to put.
Speaker Change: More of it in dollar terms into these arrangements, but I think that overall as a percentage of the total volume were doing it it should be some single digit percentage.
Speaker Change: No that's helpful.
Speaker Change: Sure.
Speaker Change: From a from an exposure perspective should we just think about in Europe, there was somewhere in the mid to high single digits.
Speaker Change: 334 represents.
Speaker Change: Or is there any kind of like ballpark.
Speaker Change: What the principles, Florida, it looks like at this point.
Speaker Change: Yeah that that 334 million is a mid single digit percentage of the total amount of origination.
You know that that he was used to to generate.
Speaker Change: That's very helpful and then.
Speaker Change: I'd be curious.
Speaker Change: Yes.
Speaker Change: Do you have any sense of where the take rate move this quarter will get the data from the 10-Q, but I'm curious when you think about kind of the gross take rate.
Speaker Change: No I'm sorry, it was shrinking a little bit lower as you add a little more crime I.
Speaker Change: So hopefully that's a good way of thinking of it and I'm curious if you can give a rough sense of or.
Speaker Change: Some of the higher prime loans coming on in this era.
Speaker Change: Although single digit I'd say greater than mid single digit or greater.
Speaker Change: A rough sense of where that sort of a high prime loans might be coming on.
Speaker Change: Yeah.
Speaker Change: Yes, sure Giuliano I think that the take rate.
Speaker Change: Is in roughly the same ballpark.
Speaker Change: As in prior quarters I think in this particular quarter it maybe very slightly down.
Speaker Change: Some of it has to do with the mix between institutional funding and L. P funding. Some of it is maybe a function of this T. Prime program that we're scaling which as Dave said has.
Speaker Change: Smaller, but still positive margins.
Speaker Change: And some of it is frankly experimentation as we scale, we're always trying to find the optimum elasticity.
Speaker Change: Or are the optimum price given elasticity in different segments and that allows us to.
Speaker Change: Experiment, a little bit with some percentage of our traffic and I think the combination of those three.
Speaker Change: Create a bit of push and pull with take rates, but net net I think there. They are in the same ballpark, maybe it may be marginally lower than last quarter.
Speaker Change: That's very helpful. I appreciate the time and I'll jump back into queue.
Julien: Thanks Julien.
Julien: Yeah.
Speaker Change: And there are no further questions at this time I will now turn the conference back to you.
Gerard: You gave gerard for any additional or closing remarks.
Gerard: Just wanted to say thanks to all for joining US today, we're excited about our position.
Gerard: Our velocity towards the future. We think our business is really beginning to hit on all cylinders again, we appreciate you joining us, especially during this super busy week and we look forward to talking to you again in the new year. Thanks, Thanks for joining.
Speaker Change: This concludes today's goodbye.
Speaker Change: Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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Sanjay: Yes.
Sanjay: Yes.
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