Q3 2024 Oportun Financial Corp Earnings Call
Speaker Change: In an interview with ABC, Cadet James Hardman and Vanessa Capello Nplt celebrating her 1st anniversary A special edition of Scope Sponsored by OSI
and Eric Green ~~ Upbeat music ~~
Speaker Change: Greetings and welcome to the Opportune Financial third quarter 2024 earnings call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
A question and answer session will follow the formal presentation.
Speaker Change: You may be placed into question queue at any time by pressing star 1 on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: It's now my pleasure to turn the call over to Dorian Hare, Investor Relations. Please go ahead, Dorian.
Dorian Hare: Thanks, and hello everyone. With me to discuss Opportune's third quarter 2024 results are Raul Vazquez, Chief Executive Officer, and Jonathan Coblentz, Chief Financial Officer and Chief Administrative Officer.
Dorian Hare: I'll remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business,
Dorian Hare: Future Results of Operations and Financial Positions, Planned Products and Services,
Dorian Hare: Statements regarding our Senior Secured Term Loan and plans and objectives of management for our future operations. Actual results may differ materially from those contemplated or implied by those forward-looking statements, and we question you not to place undue reliance on these forward-looking statements.
Dorian Hare: A more detailed discussion of the risk factors that could cause these results to differ materially is set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption, Risk Factors, including our upcoming Form 10-Q filing for the quarter ending September 30, 2024.
Dorian Hare: Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law.
Dorian Hare: Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.
Speaker Change: In addition, this call is being webcast, and an archived version will be available after the call, along with a copy of our prepared remarks. With that, I will now turn the call over to Raul.
Raul Vazquez: Thanks, Dorian. And good afternoon, everyone. Thank you for joining us. Overall, I'm pleased with the progress demonstrated by our third quarter results. The four headlines from the quarter, in my view, were lower charge-offs, return to growth, continued cost reduction, and higher profitability.
Raul Vazquez: First, we had lower charge-offs. Our annualized net charge-off rate was 11.9%, which was 26 basis points better than the lower end of our guidance range.
Raul Vazquez: When measured in dollars, our quarterly net charge-offs declined year-over-year for the fourth consecutive quarter, in this instance, by six percent.
Raul Vazquez: I'm also pleased with the progress we continue to make with our 30-plus day delinquencies, which were down 34 basis points year-over-year to 5.2 percent. That's the third consecutive quarter of year-over-year declines.
Raul Vazquez: We started using v12 to underwrite new borrower applications in January and recently implemented v12 to underwrite applications from returning borrowers. So we expect to see further improvements in credit performance in 2025.
Raul Vazquez: Second, we're ready to return to originations growth. After several consecutive quarters of origination levels that were lower than the prior year's levels, originations at $480 million during Q3 were virtually flat year over year.
Raul Vazquez: This is despite continuing to de-risk the business by decreasing average loan sizes, which were down 18% year-over-year from $3,975 to $3,244.
Third, we continued progress on expense reduction actions.
Raul Vazquez: Our 3Q GAAP operating expenses were $102 million, down 17% year-over-year, and we are reiterating our expectation to reduce GAAP operating expenses to $97.5 million or less by the fourth quarter.
Raul Vazquez: And fourth, each of these factors led to higher profitability. We generated $31 million of adjusted EBITDA, more than doubling last year's level and exceeding the top end of our guidance range by 21%. Q3 was also our third consecutive quarter of adjusted net income profitability.
Raul Vazquez: I mentioned at the start of the year that we would see our business recover significantly, which we have delivered with improving trends in profitability, credit performance, originations, and expense reductions.
Raul Vazquez: Additionally, the macro backdrop has also improved this year, with economists' expectations for recession significantly diminishing.
Raul Vazquez: with resilient growth and ongoing low unemployment and with the Fed now having initiated a rate cut cycle that's expected to continue into next year.
Raul Vazquez: As we near the end of 2024, we are well positioned to deliver an even better 2025.
Raul Vazquez: We've recently executed two transactions that were critical towards that end. First, we closed the sale of our credit card portfolio today.
Raul Vazquez: As we shared previously, the transaction will be $2 million adjusted EBITDA accretive this quarter and $11 million adjusted EBITDA accretive for full year 2025.
Raul Vazquez: Second, as we announced on October 29th, we executed an agreement to fund a $235 million four-year senior term loan facility that will replace our existing corporate financing facility.
Raul Vazquez: This reflects a key milestone towards strengthening our balance sheet and enhancing our operational flexibility, thereby improving our financial results.
Raul Vazquez: As we said in March, we had been evaluating refinancing options for the existing facility given scheduled increases in the asset coverage ratio covenant requirements.
Raul Vazquez: We weren't going to be in compliance with the existing facilities ACR covenant which limited operational flexibility to enhance shareholder value and didn't reflect operational improvements in the business.
Raul Vazquez: The new facility replaces the ACR Covenant with an adjusted EBITDA-based leverage covenant that rewards accretive decisions and recognizes cash flow generation.
Raul Vazquez: With the closing of our credit card sale, which was a necessary condition, we expect a new term loan to fund this week.
Raul Vazquez: In connection with providing the term loans, the lenders will receive approximately $4.86 million penny warrants, which equals 9.8% of the fully diluted shares outstanding of the company, excluding out-of-the-money options on a pro forma basis.
Raul Vazquez: Even with the dilution impact from the newly issued warrants, we expect to drive increased profitability on a per share basis through focusing on our core products, maintaining expense discipline, and improving credit performance.
Raul Vazquez: I'd like to reiterate our preliminary full year 2025 expectations that we released at the end of last month. They are diluted EPS between 25 cents and 50 cents.
Raul Vazquez: Adjusted EPS between $1 and $1.25 and an annualized net charge-off rate between 11% and 12%.
Raul Vazquez: In addition to our positive view of 2025, our full year 2024 outlook continues to show that after a strong start to this year, our second half performance will be even better than the first half.
Raul Vazquez: In summary, I'm proud of how the team executed in Q3 and pleased that with the credit card sale behind us and the refinancing transaction expected to close this week, we can now turn our focus towards a strong close to 2024 and significantly improving our profitability and credit performance in 2025.
Raul Vazquez: With that, I will turn it over to Jonathan for additional details on our financial performance, credit performance, and guidance.
Raul Vazquez: Jonathan will also update you on how this translates to progress towards our longer-term unit economics objectives.
Jonathan Coblentz: As shown on slide 7, Opportune delivered total revenue of $250 million and we were profitable on an adjusted basis for the third consecutive quarter with adjusted net income of $0.9 million for adjusted EPS of $0.02.
Jonathan Coblentz: While maintaining prudent credit discipline, originations of $480 million were down only 1% year-over-year. Sequentially, originations were up 10%, aligning with the typical seasonal pattern for a ramp throughout the year.
Jonathan Coblentz: Total revenue of $250 million declined by 7%, driven principally by a 7% decline in our average daily principal balance under our conservative credit posture.
Jonathan Coblentz: and a $35 million non-cash mark on our ABS notes due to their weighted average price increasing from 96% to 97.8% as benchmark interest rates declined and credit spreads tightened significantly.
Jonathan Coblentz: Interest expense of $56 million was up $9 million year-over-year, primarily driven by an increase in our cost of debt to 7.8% versus 6.3% in the year-ago period, reflecting the higher rate environment.
Jonathan Coblentz: Net revenue was $63 million, down 26% year-over-year, primarily due to the total revenue decline, non-cash marks on our ABS notes, and a higher interest expense.
Jonathan Coblentz: Turning now to operating expenses and efficiency, we continue to see the benefits of our expense reduction initiatives.
Jonathan Coblentz: Our $102 million in total operating expenses in Q3 reflected a 17% decrease from the prior year period.
Jonathan Coblentz: For the quarter, we recorded adjusted net income of $1 million, a $13 million improvement compared to the prior year quarter.
Jonathan Coblentz: adjusted EPS of 2 cents up 33 cents versus last year. The improvement was principally driven by our sharply reduced cost structure.
Jonathan Coblentz: I want to take a moment to emphasize that our adjusted net income provides a future run rate view of our gap net income by removing non-recurring items and the mark-to-market on our ABS notes, which will be almost entirely gone after 2025.
Jonathan Coblentz: As you can see on slide 8, we would have been GAAP profitable on a year-to-date basis excluding non-recurring and non-cash impacts relating to fair value marks on our ABS notes.
Jonathan Coblentz: the write-down of our credit card portfolio triggered by our agreement to sell it and other non-recurring charges. Similarly, for the third quarter, our gap net loss was $30 million driven by the $35 million non-cash mark on our ABS notes.
Jonathan Coblentz: This reflected a year-over-year increase of $17 million, or 117%, driven also by our sharply reduced cost structure, along with lower net charge-offs on a dollar basis, partially offset by higher interest expense.
Jonathan Coblentz: Our Just-D.Va. performance exceeded the high end of our guidance range by $5 million, primarily on lower-than-anticipated net charge-offs.
Jonathan Coblentz: Let me now shift to more details on our strong Q3 credit performance, another key sign of progress.
Jonathan Coblentz: Our front book of loans, originated since July 2022, continues to perform quite well, while our back book of loans, underwritten prior to then, continues to roll off.
Jonathan Coblentz: As you can see on slide 10 of our earnings presentation,
Jonathan Coblentz: the losses in our front book, 12 months plus after disbursement, continue to run approximately 400 basis points lower than the losses on our back book. And our 3Q23 vintage, which has now been on our books for 12 months, has shown the lowest losses of any front book vintage so far.
Jonathan Coblentz: Furthermore, you can see our annualized net charge-off rate for the quarter by front book versus back book on slide 11.
Jonathan Coblentz: Finally, you can see on slide 9, in addition to our charge-offs declining six percent year-over-year, I'm pleased with the progress we continue to make with our 30-plus day delinquencies, which were down 34 basis points to 5.2 percent.
Jonathan Coblentz: That's the third consecutive quarter of year-over-year declines, and our October 30-plus delinquencies remain below 2023 as well. In summary, we continue to feel good about the quality of the credit we are originating.
For more information, visit www.FEMA.gov
Jonathan Coblentz: As you can see on slide 12, we've had several consecutive quarters of origination levels that were lower than the prior year's levels due to conservative underwriting and our focus on improving our loss rates.
Jonathan Coblentz: However, we are now ready to return to Origination's growth within our targeted credit quality range.
Jonathan Coblentz: And I'm pleased that at $480 million during Q3, originations were virtually flat year over year.
Jonathan Coblentz: This is despite continuing to de-risk the business by decreasing average loan sizes, which are down 18% year over year, from $3,975 to $3,244.
Jonathan Coblentz: You should expect our 4Q24 originations to grow not only sequentially in line with seasonal patterns, but also to grow in the 10% range year over year, which is another sign of the progress we're making in our business recovery.
Jonathan Coblentz: It is also currently our intent to grow full-year 2025 originations above 2024 levels.
Jonathan Coblentz: I'd also like to further highlight the significant progress we've made on cost reduction actions.
Jonathan Coblentz: We are much more efficient today than we were when we initiated significant cost reductions in the third quarter of 2022.
Jonathan Coblentz: Since then, our adjusted operating expenses have declined by 34 percent.
while our adjusted OPEX ratio
Jonathan Coblentz: as a percentage of own principal balance has improved by 860 basis points.
Jonathan Coblentz: remain close to last quarter's record low level. We expect to continue to make improvements in our adjusted OPEX ratio in the future through continued strong financial discipline.
Speaker Change: along with a return to originations growth. And, as Raul said, we are reiterating our expectations to reduce GAAP operating expenses to $97.5 million or less by the fourth quarter.
Speaker Change: Regarding our capital and liquidity, as shown on slide 14, net cash flows from operating activities for the third quarter were a record 108 million dollars up 1% year-over-year.
Speaker Change: As of September 30, total cash was $229 million, of which $72 million was unrestricted and $157 million was restricted.
Speaker Change: I'd note that these liquidity levels are after having paid down $17 million of corporate debt during the quarter.
Speaker Change: Further bolstering our liquidity was $483 million in available funding capacity under our warehouse lines and remaining whole loan sale agreement capacity of $24 million.
Speaker Change: During the third quarter, we closed two new committed personal loan warehouse facilities totaling $552 million.
Speaker Change: We also executed a new $223 million ABS transaction that was seven times oversubscribed and priced at an 8.07% weighted average interest rate, consistent with our unit economics targets.
purchased by Castle Lake.
Weighted Average Interest Rate
Speaker Change: While the only economics opportunity we'll receive from the latter ABS transaction is a servicing fee, the further tightening of credit spreads for ABS-backed borrower loans should benefit us in the future.
Speaker Change: We expect the corporate debt refinancing that closes this week will improve Operagen's operational and balance sheet flexibility. We are committed to deleveraging, which we believe is in the best interest of shareholders as part of the refinancing.
Speaker Change: At closing, we will repay our residual financing facility, which had a $22 million outstanding balance as of the end of 3Q.
Speaker Change: We are required to pay down, without prepayment penalty, at least $40 million under the new term loan facility by January 31, 2026.
Speaker Change: We also have the option to repay without prepayment penalty an additional $10 million under the new term loan facility at any time, and another $10 million after the first anniversary of its closing.
Speaker Change: The required amortization combined with the voluntary penalty-free prepayments will allow us to reduce our corporate debt balance to $175 million prior to the new term loan's maturity.
Speaker Change: Given that we have consistently repaid 5.7 million dollars of corporate debt every month this year, we are confident in our ability to continue to delever over the next two years.
Speaker Change: Turning now to our guidance as shown on slide 15, our outlook for the fourth quarter is total revenue of 246 to 250 million dollars, annualized net charge off rate of 11.8 percent plus or minus 15 basis points.
Speaker Change: The potentially slight sequential decline in total revenue implied by our 4Q guidance from 3Q's $250 million total revenue is driven primarily by the sale of a credit card portfolio.
Speaker Change: A just diva does expected to slightly decline from 3Q due to a seasonal increase in marketing expenditures.
Speaker Change: We expect our fourth quarter to feature strong year-over-year improvement in our annualized net charge-off rate, where our midpoint guidance implies a reduction of approximately 50 basis points from last year's 2.3%.
Speaker Change: I note that although we expect Q4 originations to grow in the 10% range, we expect the average daily principal balance in Q4 to decline in the 8% range year-over-year as a result of prior credit tightening actions.
As you can see on slide 16,
Speaker Change: were our loan portfolio to remain flat or to grow by 10% year-over-year during 4Q24.
Speaker Change: Our expectations for our annualized net charge-off rate would be 90 basis points and 190 basis points lower, respectively.
I'd also like to call out
Speaker Change: and, to a lesser degree, the repayment of the residual financing facility. This will impact our Q4 GAAP financial results, but will be excluded from our adjusted results.
Speaker Change: Our guidance for the full year is total revenue of $997 million to $1.001 billion.
Speaker Change: annualized net charge-off rate of 12% plus or minus 10 basis points adjusted EBITDA of 92 to 94 million dollars
Speaker Change: Our full year 2024 Justity Bidai expectation at the midpoint of $93 million reflects a level almost five times last year's $19 million.
Speaker Change: Our revised full year 2024 guidance reflects 10 basis points of improvement in our annualized net charge-off rate expectation at the midpoint from what we previously guided to in August.
Speaker Change: Before handing the call back to Raul, I'd like to update you on our progress towards our long-term unit economics targets.
Speaker Change: While our long-term targets are gap targets, I'll be using adjusted metrics actuals for comparison since they remove non-recurring items and provide a better sense of our future run rate.
Speaker Change: We made solid progress in Q3 as evidenced by our 11 percentage point year-over-year improvement in adjusted ROE, driven principally by cost reductions.
Speaker Change: We will continue to focus on improving our credit performance, reducing expenses as a percentage of owned principal balance, and reducing leverage on our journey to reach our 20 to 28 percent ROE target. Raul, back over to you.
Raul Vazquez: Thanks, Jonathan. To close, I'd like to emphasize three key points. First, we're pleased with the progress demonstrated by our third quarter performance and our momentum thus far into the second half.
Raul Vazquez: We expect to generate second half adjusted EBITDA levels at our guidance midpoint that are almost 90% higher than the first half and to also be markedly more profitable on an adjusted net income basis.
Raul Vazquez: Second, with the completion of the credit card sale and refinancing of our corporate debt, we see no impediments to the full recovery of our business.
and an adjusted ROE in the teens.
Raul Vazquez: To wrap up, I want to thank all of our team members in our retail locations, our contact centers, and our corporate employees for their commitment and contributions.
With that, Operator, let's open up the line for questions.
Speaker Change: Certainly, we will now be conducting a question and answer session. If you would like to be placed into question queue, please press star 1 on your telephone keypad.
Raul Vazquez: A confirmation tone will indicate your line is in the question queue.
Raul Vazquez: We ask that you please ask one question and one follow-up, then return to the queue. Once again, if you would like to be placed into question queue, please press star 1 at this time. One moment, please, while we poll for questions.
Raul Vazquez: Our first question today is coming from John Hecht from Jeffries, your line is now live.
Afternoon guys, thanks very much for taking my questions.
current mark versus the fair versus I guess par
Speaker Change: Yes, and we actually have a slide for that, John. Thank you for the question. If you take a look at slide...
Speaker Change: It's slide 34. If you look at slide 34 in the middle we have asset backed notes at fair value and it says cumulative fair value marked to market adjustment and for the notes that is $30.8 million, so $31 million.
Speaker Change: Right, so we're not making any more, we're not electing fair value for any new debt, so this existing fair value debt is just going to pay down, it will be mostly paid off by the end of next year, and between then and now, I would expect to take most if not all of that mark.
Speaker Change: And then second question for you is you mentioned a priority of de-levering the business. How do you guys, what do you guys look at in terms of leverage ratios or primary leverage ratios I guess and what would kind of the longer term target be for that?
Thank you for watching.
Speaker Change: And, yeah, thank you, Raul. And there it indicates that our target leverage ratio, which we're currently above, is 6 to 1.
Speaker Change: of Corporate Debt Principle, and our cash flow position is only going to be stronger, cash generation is only going to be stronger next year.
Speaker Change: given the increased profitability that we're projecting. So if we pay down that debt to $175 over time, we expect that we'll get to our target 6 to 1 leverage ratio. And we're comfortable with that as a target for us.
Speaker Change: Okay, and then Raul, question for you, you guys are you're leaning back into growth.
Speaker Change: and then you've got your own branches, you've got your own online presence. Maybe, can you talk about where the kind of focus for the source of growth will come, given all those opportunities?
Raul Vazquez: To your point, our own kind of multi-channel business, our physical stores, our contact centers, our digital channels, we know those are going to serve us well. And to answer your question, we think that really there is an opportunity to continue leaning into our own physical channels.
Raul Vazquez: One of the things that we'd like to do is to really put down some physical locations in some of the states where we don't have locations today.
Raul Vazquez: On top of that, the lending as a service opportunity, like you said, Dolex, Bari, and now Western Union, we think that's also a great opportunity and something we're going to lean into next year.
Okay, great. Thanks guys
Thank you, John.
Speaker Change: Thank you. As a reminder, that's star one to be placed into question Q.
Speaker Change: Our next question is coming from Gautam Srees from Singular Research Related Outlines.
Hey, can you guys hear me?
Yes we can, Tim.
Congratulations on the quarter.
Speaker Change: So, can you provide more insight into the drivers, into the significant reduction in customer acquisition costs? Is it primarily a decline due to returning customers or is this a shift in marketing channel mix and what is it going to, and how is it going to trend looking into 2025?
Speaker Change: We think it's the product of a couple of things. First of all, we've reduced sales and marketing expenses. As we were looking at reducing OPEX throughout the business, one of the things that we also looked at was just sales and marketing expenses, which are down 8% year over year.
Speaker Change: So when you combine the lower OPEX, the higher growth in loans, that's what really drives that CAC.
Speaker Change: to the record low of $118. As we do return to growth, we want to invest more in marketing. So I'm not necessarily asking the team to continue to have us at these low levels.
Speaker Change: What we're really looking for is a return on that investment, right? This is much more of an investment than an expense.
Speaker Change: So, as we mentioned during our comments, as we are now comfortable returning to growth, we'd really like to spend more. Along with the seasonal patterns of our business, we spend more in Q4 on marketing and really drive portfolio growth as opposed to driving CAC lower.
Speaker Change: It's between $1 and $1.25. Given all your unit economics model and now the forecast for origination growth, what is primarily driving between the lower bound and the upper bound of that estimate?
Speaker Change: Yeah, when we look at the adjusted EPS of $1 to $1.25, we're confident we can deliver that.
Speaker Change: So there are a couple of things that we think are going to help us deliver that. Number one, this return to growth.
Speaker Change: that'll help us drive the portfolio higher. It'll start to really help with revenue.
Speaker Change: We're really proud of our Q3 performance, in particular the improvement in profitability when you think about the fact that revenue was down $18 million and we still improved profitability.
reverse that trend in revenue. So that's number one.
Speaker Change: Number two, losses. We expect losses to continue to come down. We shared that we expect losses to be in the 11% to 12% range, so that's certainly going to help us. And then finally, we're going to continue to be very disciplined in OPEX.
Speaker Change: So, when we look at an exit rate of $97.5 million and we continue to be disciplined in that area, we think that's really what's going to give us the opportunity to deliver that adjusted EPS in that range.
Speaker Change: Thank you again for taking my questions. I'll take the rest offline.
And thank you so much.
Speaker Change: Thank you. As a reminder, if you'd like to be placed in the question queue, please press star 1 on your telephone keypad. Our next question is coming from Vincent Kaentich from BTIG. Your line is now live.
Thank you, Anthony. Thanks for taking my questions.
Speaker Change: So actually follow-up questions kind of related to the growth aspect
Speaker Change: of it, so it's nice to be able to see that we're now at the inflection point for year-to-year growth rates.
Speaker Change: I was wondering, you mentioned that there were a pair of remarks...
Speaker Change: that you are seeing macro improvements to the economy. And so, if you could maybe talk about the drivers of that growth rate specifically, if you could talk about your underwriting posture and any changes to that. And I'll ask my related question now. As you're growing, what sort of
Speaker Change: I guess risk-adjusted margins and loss rates should we be expecting with the growth you're achieving. Thank you.
Speaker Change: So I'll take the beginning of those. I'll let Jonathan talk about the risk-adjusted margins.
That gives us confidence that our underwriting adjustments
Jonathan Coblentz: We started using v12 for underwriting the new applicants We started that at the beginning of the year and we've been very very pleased with the improvement of v12 versus v11 We're now using that for the returning population, which is
Historically where we've had
Jonathan Coblentz: Seventy-five to eighty percent of our portfolio has been in the hands of returning borrowers.
So to be able to apply this...
Jonathan Coblentz: much improved risk model, V12 relative to V11, to the returning portfolio.
That's one of the things that gives us confidence.
Jonathan Coblentz: in being able to return back to growth. So our internal metrics are one of the things we were going to look at.
Jonathan Coblentz: Number two, we wanted to continue to see inflation come down.
Jonathan Coblentz: And I think now there's broad recognition that the Fed has done a fantastic job trying to get that back to their target rate.
Jonathan Coblentz: And then finally, we were going to look for other macro indicators that the economy would be constructive. So when we look at the unemployment rate, and in particular how strong the job market is for blue-collar workers, and we look at fuel prices, fuel prices continue to be low. We know that's one of the things that also makes a big difference.
Jonathan Coblentz: and our borrower's ability to make our payments and to be able to just make their paycheck stretch in all of the ways that they need. Those are the things that really give us confidence returning to originations growth, our internal metrics and then what we see in the macro.
Jonathan Coblentz: I'll pass it over to Jonathan now. Thanks, Raul. So, Vincent, if you want to take a look at slide 17, which is our unit economics model, you asked about risk-adjusted margin.
and Loss Rates, so we gave guidance.
Jonathan Coblentz: And then on the unit economics slide, right, as you've seen for several quarters now, we've had very resilient total revenue at around 36 percent. We've had stable cost of funds at 8 percent.
Jonathan Coblentz: and that takes us to a net interest margin before charge-offs of 28 percent. So if we take that 28 percent and we are 11 to 12 percent charge-offs for next year, that would imply 16 to 17 percent risk adjusted now.
For more information visit www.FEMA.gov
Speaker Change: There's some macro improvements here, but you're not really changing, I guess, your...
Speaker Change: your underwriting posture in terms of loosening up a lot. It's actually, so it's your model improvements and the macro improvement and you're still otherwise remaining tight. So there's, sounds like there's opportunities basically and you're still being very conservative if I'm understanding that correctly.
Speaker Change: That's absolutely right. We would not characterize this growth as being driven by opening up.
Speaker Change: from a portfolio perspective. What we've seen is the decisions that we've made over the last few quarters.
Speaker Change: in terms of reducing OPEX, in terms of having a tight credit box.
Speaker Change: So, when we look at 2025, as we've shared now with the preliminary view into 2025, we expect that those lower losses, that ongoing low level of OPEX combined with a bit of growth really delivers that improved profitability next year relative to our really good performance this year.
That's super helpful. Thanks very much.
Thank you.
Speaker Change: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.
Speaker Change: I want to thank everyone once again for joining us on today's call, and we look forward to speaking with you again soon.