Q4 2024 LendingClub Corp Earnings Call

January 28, 2025

Patient portion of the call with an opportunity for questions and answers at the end if you'd like to queue for a question you can do so by pressing star one on your telephone keypad.

[inaudible]

Artem: I'd like to pass it over to Artem <unk>.

Artem: Please go ahead.

Artem: Thank you and good afternoon, welcome to lending club's fourth quarter and full year 2024 earnings conference call.

Artem: Joining me today to talk about our results are Scott Sanborn, CEO and drew <unk> CFO.

Artem: You can find the presentation accompanying our earnings release on the investors relations section of our website on the call. In addition to questions from analysts. We will also be answering some of the questions that were submitted for consideration via email.

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Artem: Our remarks today will include forward looking statements, including with respect to our competitive advantages and strategy macroeconomic conditions platform volume and pricing future products and services and future business and financial performance. Our actual results may differ materially from those contemplated by these forward looking statements.

Artem: Factors that could cause these results to differ materially are described in today's press release and earnings presentation. Any forward looking statements that we make on this call are based on current expectations and assumptions and we undertake no obligation to update these statements as a result of new information or future events.

Artem: Our remarks today also include non-GAAP measures relating to our performance, including tangible book value per common share and pre provision net revenue and return on tangible common equity you can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release.

Artem: And presentation.

And now I'd like to turn the call over to Scott.

Scott Sanborn: Hey, Thank you art and welcome everyone.

Scott Sanborn: We feel great about how we executed the year and how we've positioned the company both strategically and financially.

Scott Sanborn: In the fourth quarter originations were up 13% year on year pre provision net revenue was up 34% and total net revenue came in at a high for the year up 17% to $217 million.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Stepping back and looking at the year in total I'm extremely pleased with what we accomplished.

Speaker Change: [music].

Scott Sanborn: We successfully exited our new bank operating agreement on time to become one of the first fintech banks to do so.

Scott Sanborn: Our product innovation enabled us to grow originations, while maintaining industry, leading marketing efficiency.

Scott Sanborn: We maintained our credit outperformance with delinquencies more than 40% better than our competitive set.

Scott Sanborn: Our consistent compelling asset performance drove consecutive quarterly increases in loan sales prices.

Cole: Good afternoon, and thank you for attending today's lending club fourth quarter 24 earnings Conference call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to queue for a question you can do so by pressing star one on your telephone.

Scott Sanborn: We grew our balance sheet by 20% compared to the U S Bank average of 3% to 4%.

Scott Sanborn: We increased our deposit base by 24% fueled by the launch of our award winning level up savings product and.

Scott Sanborn: And we advanced our strategy driving adoption of our mobile app to improve engagement and member lifetime value.

Speaker Change: Key pad.

Scott Sanborn: We are looking forward to continuing our momentum in the year ahead as we build on our strong foundation.

Speaker Change: Pass it over to art novel logo.

Speaker Change: Please go ahead.

Scott Sanborn: Critical to our foundation is credit where our data advantage flexible technology platform and disciplined risk management are enabling compelling returns for both us and our marketplace investors.

Speaker Change: Thank you and good afternoon, welcome to lending club's fourth quarter and full year 2024 earnings conference call. Joining me today to talk about our results are Scott Sanborn, CEO and drew <unk> CFO.

Scott Sanborn: These attractive returns combined with our product innovation and status as a nationally chartered bank have supported steady growth in marketplace investor demand.

Speaker Change: Can find the presentation accompanying our earnings release on the investors relations section of our website.

Speaker Change: On the call. In addition to questions from analysts we will also be answering some of the questions that were submitted for consideration via email.

Scott Sanborn: The result is four consecutive quarters of increasing loan sales prices up by 170 basis points year on year.

Speaker Change: Our remarks today will include forward looking statements, including with respect to our competitive advantages and strategy macroeconomic conditions platform volume and pricing future products and services and future business and financial performance. Our actual results may differ materially from those contemplated by these forward looking statements.

Scott Sanborn: And marketplace loan demand is increasingly coming from banks, who purchased roughly one third of our volume in Q4 up from less than 5% when we entered the year.

Scott Sanborn: We continue to work on growing this percentage and we have a healthy pipeline of bank demand that we expect to materialize over the course of 2025.

Speaker Change: Factors that could cause these results to differ materially are described in today's press release and earnings presentation.

Scott Sanborn: Demand from private credit, which represented the majority of our loan sales in 2024 is also growing.

Speaker Change: Any forward looking statements that we make on this call are based on current expectations and assumptions and we undertake no obligation to update these statements as a result of new information or future events.

Scott Sanborn: These loan investors have been drawn to the consistent returns and seamless access provided by our structured certificate program, where we've now crossed $4 billion in total originations to.

Speaker Change: Our remarks today also include non-GAAP measures relating to our performance, including tangible book value per common share and pre provision net revenue.

Scott Sanborn: To build on that success, we are now working with a major rating agency towards an investment grade rating for the senior security.

Speaker Change: Turn on tangible common equity.

Speaker Change: You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation.

Scott Sanborn: This rating, we will open the program to investors, who require a rated product, including insurance companies, who collectively hold over $8 five trillion in assets.

Scott Sanborn: Now I'd like to turn the call over to Scott.

Scott Sanborn: We are currently expected to close our first rated transactions directly with the insurer in the first quarter with a spread roughly 30 basis points tighter than our typical structured transaction.

Scott Sanborn: Hey, Thank you art and welcome everyone.

Scott Sanborn: But we feel great about how we executed the year and how we've positioned the company both strategically and financially.

Scott Sanborn: In the fourth quarter originations were up 13% year on year pre provision net revenue was up 34% and total net revenue came in at a high for the year up 17% to $217 million.

Scott Sanborn: Continued improvement in loan sales pricing will over time support the economics of expanding back into a broader set of marketing channels to further grow originations.

Scott Sanborn: Based on our trajectory we plan to begin testing our way back into currently dormant marketing channels as we exit Q1 and enter our more favorable seasonal period.

Scott Sanborn: Stepping back and looking at the year in total I'm extremely pleased with what we accomplished.

Scott Sanborn: We successfully exited our new bank of operating agreement on time to become one of the first fintech banks to do so.

Scott Sanborn: We are eager to accelerate our growth as we move through the year as I've said before credit card balances and interest rates are at historic highs and those increases have translated to higher costs for our members.

Our product innovation enabled us to grow originations, while maintaining industry, leading marketing efficiency.

Scott Sanborn: We maintained our credit outperformance with delinquencies more than 40% better than our competitive set.

Scott Sanborn: For reference our members are now paying over $180 more per month than they were paying just a few years ago, which is an increase of more than 30%.

Scott Sanborn: Our consistent compelling asset performance drove consecutive quarterly increases in loan sales prices.

We grew our balance sheet by 20% compared to the U S Bank average of 3% to 4%.

Scott Sanborn: That increased expense represents a huge savings opportunity the lending club is uniquely well positioned to deliver our value proposition is quite compelling not only to our members save when they consolidated credit card debt through lending club. They also increased their credit score and average of 48 points.

Scott Sanborn: We increased our deposit base by 24% fueled by the launch of our award winning level up savings product and.

Scott Sanborn: And we advanced our strategy driving adoption of our mobile app to improve engagement and member lifetime value.

Scott Sanborn: We are looking forward to continuing our momentum in the year ahead as we build on our strong foundation.

Scott Sanborn: In addition to providing savings our ability to tailor our experience to members' needs amplifies our value proposition and helps fuel. Our success. For example, we launched top up a year ago to give borrowers and easy way to consolidate their existing loan balance with new borrowing while maintaining one monthly payment.

Scott Sanborn: These attractive returns combined with our product innovation and status as a nationally chartered bank have supported steady growth in marketplace investor demand.

Scott Sanborn: The early results have been outstanding with an approximate 80% lift in issuance dollars per member compared to offering a repeat personal loan and a net promoter score of 82.

Scott Sanborn: The result is four consecutive quarters of increasing loan sales prices up by 170 basis points year on year.

Scott Sanborn: Innovations like top up gives us a competitive edge that flows through to our marketing efficiency.

Scott Sanborn: And marketplace loan demand is increasingly coming from banks, who purchased roughly one third of our volume in Q4 up from less than 5% when we entered the year.

Scott Sanborn: After efficiently acquiring satisfied members the second step of our strategy is to engage them through our mobile app.

Scott Sanborn: We began marketing the app to loan customers six months ago, and our early results confirm that app users engage more frequently and demonstrate a higher propensity to take another product versus web only members.

Scott Sanborn: We continue to work on growing this percentage and we have a healthy pipeline of bank demand that we expect to materialize over the course of 2025.

Scott Sanborn: Therefore, we plan to enhance the functionality of the app over the coming year with new high engagement experiences and features this includes that IQ, our debt monitoring and management tool, which will help members stay on top of their debt and further highlight the urgency and value of refinancing of our credit card debt.

Demand for private credit, which represented the majority of our loan sales in 2024 is also growing.

Scott Sanborn: To build on that success, we are now working with a major rating agency towards an investment grade rating for the senior security.

Scott Sanborn: Even in its current early stage that IQ is driving a nearly 50% increase in member engagement and a 25% increase in loan issuance for enrolled members.

Scott Sanborn: This rating, we will open the program to investors, who require a rated product, including insurance companies, who collectively hold over $8 five trillion in assets.

Scott Sanborn: Our efforts on that IQ will be accelerated by last quarter's acquisition of Tallies Award winning debt management technology. We plan to release, an enhanced version of that IQ with new features like credit card linking automated payments and contextual offers as we enter the third quarter.

Scott Sanborn: Looking ahead with marketplace demand growing loan sales prices, improving our marketing engine, restarting and investor and consumer innovations taking hold we have ambitious plans as we move through the year, which the team and I are excited to deliver.

Scott Sanborn: Continued improvement in loan sales pricing will overtime support the economics of extending back into a broader set of marketing channels to further grow originations.

Scott Sanborn: On our trajectory we plan to begin testing our way back into currently dormant marketing channels as we exit Q1 and enter our more favorable seasonal period.

Scott Sanborn: That includes accelerating our originations growth, increasing mobile app adoption and user engagement continuing to innovate on our product roadmap and improving shareholder returns.

Scott Sanborn: In closing I'm extremely proud of our lending club has been able to accomplish and for that I'd like to thank the entire team who has made it happen.

Scott Sanborn: For reference our members are now paying over $180 more per month than they were paying just a few years ago, which is an increase of more than 30%.

Drew: So drew I'll turn it over to you to go through the results in detail.

Drew: Thanks, Scott I, just wanted to add that I am also proud of the lending club team and what we were able to accomplish this year.

Scott Sanborn: That increased expense represents a huge savings opportunity the lending club is uniquely well positioned to deliver our value proposition is quite compelling not only do our members save when they consolidated credit card debt through lending club. They also increase their credit score and average of 48 points.

Drew: Our investments of time energy and resources have put us in a great position from which to grow as we move through 2025.

Drew: With that let's go into the details of our financial results starting with originations.

Drew: We originated over $1 8 billion in the quarter, which was a 13% increase year over year originations were driven by continued product innovation, while maintaining tight underwriting standards and industry, leading marketing efficiency.

Scott Sanborn: In addition to providing savings our ability to tailor our experienced to members' needs amplifies our value proposition and helps fuel. Our success. For example, we launched top up a year ago to give borrowers and easy way to consolidate their existing loan balance with new borrowing while maintaining one monthly payment.

Drew: If you turn to page 12 of our earnings presentation, you can see the originations breakdown across the four funding programs.

Scott Sanborn: The early results have been outstanding with an approximate 80% lift in issuance dollars per member.

Drew: You will note that this quarter the disposition mix shifted as the return of banks allowed us to sell more whole loans at better economics.

Scott Sanborn: <unk> to offering a repeat personal loans and a net promoter score of 82.

Scott Sanborn: Innovations like pop up give us a competitive edge that flows through to our marketing efficiency.

This is an encouraging development and was complemented by a separate $400 million sale from our extended seasoning portfolio at the beginning of the quarter.

Scott Sanborn: After efficiently acquiring satisfied members the second step of our strategy is to engage them through our mobile app.

Drew: Our improving marketplace economics further enabled us to reinvest and retain more of our high yielding held for investment loans as we entered 2025.

Drew: Now, let's move on to pre provision net revenue or <unk>, which is total net revenue less noninterest expenses.

Drew: <unk> was $74 million for the quarter up 34% from $56 million last year and came in above our guidance range of $60 million to $70 million.

Drew: These results were driven by strong execution and improved loan sale pricing.

Scott Sanborn: Even in its current early stage that IQ is driving a nearly 50% increase in member engagement and a 25% increase in loan issuance for enrolled members.

Drew: As well as a few unique items that I'll call out as I break down revenue and expenses.

Drew: As shown on page 13 total revenue for the quarter was $217 million.

Our efforts on that IQ will be accelerated by last quarter's acquisition of Tallies Award winning debt management technology. We plan to release, an enhanced version of that IQ with new features like credit card linking automated payments and contextual offers as we enter the third quarter.

Drew: Up 17% from $186 million in the same quarter of the prior year.

Drew: Revenue benefited from the previously mentioned $400 million loan sale as well as favorable marks at the end of the quarter due to higher sales prices.

Drew: Now, let's go into the two components of revenue starting with non interest income.

Drew: Noninterest income was $75 million in the quarter up 38% from $54 million in the same quarter of the prior year.

Drew: This increase was driven by loan sales prices, which have improved each of the last four quarters.

Drew: This price improvement was seen in both structured certificates as well as whole loans as banks returned to the platform.

Scott Sanborn: In closing I am extremely proud about lending club has been able to accomplish.

Drew: Okay.

Scott Sanborn: I would like to thank the entire team who has made it happen.

Drew: Now, let's move on to net interest income, which was $142 million in the quarter up 8% from $131 million in the same quarter last year.

Drew: So drew I'll turn it over to you to go through the results in detail.

Speaker Change: Thanks, Scott I, just wanted to add that I am also proud of the lending club team is what we were able to accomplish this year are investments of time energy and resources have put us in a great position from which to grow as we move through 2025.

Drew: The increase was primarily driven by growth in our interest earning assets from our structured certificates program as well as the $1 3 billion loan portfolio purchase in the third quarter.

Drew: On Slide 14, you can see our net interest margin was down slightly this quarter at 542% as expected.

Speaker Change: With that let's go into the details of our financial results starting with the originations.

Speaker Change: We originated over $1 8 billion in the quarter, which was a 13% increase year over year originations were driven by continued product innovation, while maintaining tight underwriting standards and industry, leading marketing efficiency.

Drew: We believe this will represent the low point of our net interest margin over the coming quarters.

Drew: The main driver of the sequential change was a higher mix of cash after we executed the $400 million extended seasoning sale.

Drew: It's worth noting we saw substantial improvement in our funding costs during the quarter driven by lowering our deposit rates in reaction to fed cuts and the planned exit of our highest cost commercial deposit cuts customer.

Speaker Change: If you turn to page 12 of our earnings presentation, you can see the originations breakdown across the four funding programs.

Speaker Change: You will note that this quarter the disposition mix shifted as the return of banks allowed us to sell more whole loans at better economics.

Drew: Which will lead to further funding cost improvements in Q1.

Speaker Change: This is an encouraging development and was complemented by a separate $400 million sale from our extended seasoning portfolio at the beginning of the quarter.

Drew: Now please turn to page 15 of our presentation, which refers to the second component of <unk> noninterest expense.

Drew: As I indicated last quarter, our expense space did increase coming in at $143 million.

Speaker Change: Our improving marketplace economics further enabled us to reinvest and retain more of our high yielding held for investment loans as we entered 2025.

Drew: Primary step up of expenses was in the depreciation line driven by a $4 $4 million pre tax impairment of internally developed software.

Speaker Change: Now, let's move on to pre provision net revenue or <unk>, which is total net revenue less noninterest expenses.

Drew: This was the result of our <unk> technology purchase, which made some of our internal development work no longer fit for purpose.

Speaker Change: <unk> was $74 million for the quarter up 34% from $56 million last year and came in above our guidance range of $60 million to $70 million.

Drew: We were able to keep our marketing spend flat year over year, despite higher origination volumes due to two items.

Drew: First the stronger customer response to our level of savings products allowed us to be more efficient and bringing in new customers.

Speaker Change: These results were driven by strong execution and improved loan sale pricing.

Speaker Change: As well as a few unique items that I'll call out as I break down revenue and expenses.

Drew: Second we had higher deferral of marketing spend as we retain more held for investment loans in the period.

Speaker Change: As shown on page 13 total revenue for the quarter was $217 million.

Drew: In the first quarter, we do expect marketing expenses will move up to support the expansion of acquisition channels in future quarters.

Speaker Change: Up 17% from $186 million in the same quarter of the prior year.

Speaker Change: Revenue benefited from the previously mentioned $400 million loan sale as well as favorable marks at the end of the quarter due to higher sales prices.

Drew: Now, let's turn to provision on page 16.

Drew: Provision for credit losses was $63 million during the quarter compared to $42 million in the same quarter of the prior year.

Speaker Change: Now, let's go into the two components of revenue starting with non interest income.

Drew: The increase was primarily due to higher day, one seasonal as we stepped up our retention of held for investment loans to $605 million.

Noninterest income was $75 million in the quarter up 38% from $54 million in the same quarter of the prior year.

Drew: Provision was also higher due to two smaller items first we took an additional reserve for the remainder of the office property in our legacy commercial real estate portfolio.

Speaker Change: This increase was driven by loan sales prices, which have improved each of the last four quarters.

Speaker Change: This price improvement was seen in both structured certificates as well as whole loans as banks returned to the platform.

Drew: <unk> discussed on the second quarter earnings call.

Drew: That loan is now fully reserved.

Speaker Change: Okay.

Drew: Separately, we increased our economic qualitative reserves based on a modest increase in Moody's projections for future unemployment insurance claims.

Speaker Change: Now, let's move on to net interest income, which was $142 million in the quarter up 8% from $131 million in the same quarter last year.

Drew: Taking a step back.

Speaker Change: The increase was primarily driven by growth in our interest earning assets from our structured certificates program as well as the $1 $3 billion loan portfolio purchase in the third quarter.

Drew: Overall credit continues to perform well as evidenced by our net charge offs on our held for investment portfolio, improving the $46 million from $83 million in the same quarter of the prior year.

Speaker Change: On Slide 14, you can see our net interest margin was down slightly this quarter at 542% as expected.

Drew: The net charge off rate ratio was four 5% in the quarter.

Drew: Down from six 6% in the same quarter last year.

Speaker Change: We believe this will represent the low point of our net interest margin over the coming quarters.

Drew: The net charge off rate benefited from higher recoveries due to proceeds from a larger than usual sale of previously charged off loans.

Speaker Change: The main driver of the sequential change was a higher mix of cash after we executed the $400 million extended seasoning sale.

Drew: Without this benefit the net charge off rate would have been four 9%.

Speaker Change: It's worth noting we saw substantial improvement in our funding costs during the quarter driven by lowering our deposit rates in reaction to fed cuts and the planned exit of our highest cost commercial deposit cuts customer.

Drew: Net income for the quarter was $9 $7 million, which includes the $3 2 million post tax noncash software impairment I mentioned earlier.

Speaker Change: Which will lead to further funding cost improvements in Q1.

Drew: Now, let's move on to guidance, which assumes stable employment and inflation and one fed rate cut in the second half of the year.

Speaker Change: Now please turn to page 15 of our presentation, which refers to the second component of <unk> noninterest expense.

Drew: We will continue to use quarterly guidance to inform near term expectations. We are also providing a view into our Q4 2025 exit rate.

Speaker Change: As I had indicated last quarter, our expense base did increase coming in at $143 million.

Drew: Give you a better sense of our expected growth and earnings trajectory as we enter 2026.

Speaker Change: The primary step up of expenses was in the depreciation line driven by a $4 $4 million pre tax impairment of internally developed software.

Drew: For the first quarter, we anticipate originations of one eight to $1 9 billion.

Speaker Change: This was the result of our <unk> technology purchase, which made some of our internal development work no longer fit for purpose.

Drew: Up 12% year on year at the midpoint.

Drew: We are gaining confidence that the sustained sales price improvements in the marketplace will allow us to open up additional paid marketing channels as we enter the seasonally favorable second and third quarters.

Speaker Change: We were able to keep our marketing spend flat year over year, despite higher origination volumes due to two items.

Speaker Change: First the stronger customer response to our level of savings products allowed us to be more efficient and bringing in new customers.

Drew: We expect to be able to continue growing loan volumes as we move through the year and plan to exit the fourth quarter at or above $2 3 billion in quarterly originations or roughly 25% above our current levels.

Speaker Change: Second we had higher deferral of marketing spend as we retain more held for investment loans in the period.

Speaker Change: In the first quarter, we do expect marketing expenses will move up to support the expansion of acquisition channels in future quarters.

Drew: We expect <unk> in the range of $60 million to $70 million in the first quarter up 34% year over year at the midpoint, reflecting the increase in paid marketing to support an acceleration of growth in future quarters.

Speaker Change: Now, let's turn to provision on page 16.

Speaker Change: Provision for credit losses was $63 million during the quarter compared to $42 million in the same quarter of the prior year.

Drew: We plan to continue delivering positive net income in the first quarter with gradual improvement in earnings and return on tangible common equity or our OTT as we move through the year.

Speaker Change: The increase was primarily due to higher day, one seasonal as we stepped up our retention of held for investment loans to $605 million.

Drew: Our goal is to exit with an 8% our OTC in the fourth quarter.

Speaker Change: Provision was also higher due to two smaller items first we took an additional reserve for the remainder of the office property in our legacy commercial real estate portfolio.

Drew: All in all we had a great 2024 and are positioned to build on the momentum as we enter 2025.

Scott Sanborn: Let me turn it back over to Scott for some parting thoughts.

Speaker Change: First discussed on our second quarter earnings call.

Scott: Thanks drew before we close I'd, just like to take a minute to acknowledge the devastating fires in Los Angeles, we have activated plans to support our customers in the area and our thoughts are with our members employees family friends and colleagues who've been affected.

Speaker Change: That loan is now fully reserved.

Speaker Change: Separately, we increased our economic qualitative reserves based on a modest increase in Moody's projections for future unemployment insurance claims.

Speaker Change: Taking a step back.

Speaker Change: Overall credit continues to perform well as evidenced by our net charge offs on our held for investment portfolio improving to $46 million from $83 million in the same quarter of the prior year.

Scott: I'd also like to thank the many firefighters aid workers and other first responders for their heroic and tireless efforts.

Scott: With that I will turn it over to questions.

Speaker Change: The net charge off ratio was four 5% in the quarter.

Speaker Change: Great if you'd like to keep her a question you can do so by pressing star one on your telephone keypad.

Speaker Change: Down from six 6% in the same quarter last year.

If for any reason you'd like to remove your question at star too, but again to join the question queue. Please press star one.

Speaker Change: The net charge off rate benefited from higher recoveries due to proceeds from a larger than usual sale of previously charged off loans.

Speaker Change: Our first question is from Vincent <unk> with BTG.

Speaker Change: This benefit the net charge off rate would have been four 9%.

Speaker Change: Your line is now open.

Speaker Change: Hey, good afternoon, thanks for taking my questions.

Speaker Change: Net income for the quarter was $9 $7 million, which includes the $3 2 million post tax noncash software and impairment I mentioned earlier.

Speaker Change: Question first on the first quarter volume guidance I'm just curious.

Speaker Change: Seeing it.

Speaker Change: The flat quarter over quarter, if you could maybe talk about why that is versus the growth that <unk> been experiencing recently and then if you could help us understand sort of what pricing you're you're.

Speaker Change: Now, let's move on to guidance, which assumes stable employment and inflation and one fed rate cut in the second half of the year.

Speaker Change: We will continue to use quarterly guidance to inform near term expectations. We are also providing a view into our Q4 2025 exit rate to give you a better sense of our expected growth and earnings trajectory as we enter 2026.

Speaker Change: Contemplating over the course of 2025 and how.

Speaker Change: Sort of the changing interest rate expectations, especially in the longer end of the curve might affect.

Speaker Change: Pricing and volume thank you.

Speaker Change: Yeah.

Speaker Change: For the first quarter, we anticipate originations of one eight to $1 9 billion.

Speaker Change: Hey, Vincent it's Scott I'll start with on volume I think we signaled last quarter of Q4 Q1 are typically our most challenging seasonal quarters in terms of customer response and kind of overall interest I think if you look at our past pattern.

Speaker Change: Up 12% year on year at the midpoint.

Speaker Change: We are gaining confidence that the <unk>.

Speaker Change: Sustained sales price improvements in the marketplace will allow us to open up additional paid marketing channels as we enter the seasonally favorable second and third quarters.

Speaker Change: It's pretty typical to see originations roughly in line Q4 to Q1, I think that was actually the case last year as well.

Speaker Change: We expect to be able to continue growing loan volumes as we move through the year and plan to exit the fourth quarter at or above $2 3 billion in quarterly originations or roughly 25% above our current levels.

Speaker Change: And.

Speaker Change: The big driver for US, we're planning on maintaining discipline on credit the big driver for us is going to be reactivating marketing channels, which are really better off doing especially given that response models creative testing all of that we've got a got a redo all that work doing it in these quarters.

Speaker Change: We expect <unk> in the range of $60 million to $70 million in the first quarter up 34% year over year at the midpoint, reflecting the increase in paid marketing to support an acceleration of growth in future quarters.

Speaker Change: It's going to be more expensive than doing it in our more seasonally kind of beneficial quarter. So the goal would be to really start testing our way we will actually.

Speaker Change: We plan to continue delivering positive net income in the first quarter with gradual improvement in earnings and return on tangible common equity or our OTT as we move through the year.

Speaker Change: Start to turn those things on as we exit the quarter. So that we can work through them and in Q2 and and build from there.

Drew: In terms of pricing drew you want to take that one yes in terms of us.

Speaker Change: Our goal is to exit with an 8% our OTC in the fourth quarter.

Drew: And I assume youre talking about sales prices.

Speaker Change: All in all we had a great 2024 and are positioned to build on the momentum as we enter 2025.

Drew: In terms of sales prices, even without the fed doing further rate cuts throughout the year or maybe later in the year. We expect we'll still be able to raise sales prices as we've done over the last four quarters. So I think the pace of that will depend on the mix of buyers and.

Scott Sanborn: Let me turn it back over to Scott for some parting thoughts.

Scott Sanborn: Thanks drew before we close I'd, just like to take a minute to acknowledge the devastating fires in Los Angeles, we have activated plans to support our customers in the area and our thoughts are with our members employees family friends and colleagues who've been affected.

Drew: A little bit on the rate environment, but we continue to make traction in that space.

Drew: Great about the performance of the loans were originating and selling and the buyers.

Scott Sanborn: I'd also like to thank the many firefighters aid workers and other first responders for their heroic and tireless efforts.

Drew: Of all types have been very active.

Drew: <unk> by what we're seeing yes, and just to maybe touch on what we said in our prepared remarks.

Scott Sanborn: With that I will turn it over to questions.

Drew: Bank switch up to about a third of our volume in Q4, and we feel good about the pipeline I think we've said this before exactly nailing down the <unk> timeline of bank due diligence can be difficult.

Scott Sanborn: Great if you'd like to keep her a question you can do so by pressing star one on your telephone keypad.

Scott Sanborn: If for any reason you'd like to remove your question at star too, but again to join the question queue. Please press star one.

Drew: So in the Meanwhile, we've got other ways to get prices up and that includes the rated product that we talked about on the calls it the other way to drive an increase in prices without any help from the fed.

Speaker Change: Our first question is from Vincent <unk> with BTG.

Speaker Change: Your line is now open.

Vincent: Hey, good afternoon, thanks for taking my questions.

Drew: Okay, great. Thank you for that and then.

Vincent: Question first on the first quarter volume guidance I'm just curious.

Drew: Focusing a bit more long term so it was helpful to see.

Drew: Your guidance for.

Vincent: Seeing it.

Drew: Fourth quarter 2025.

Vincent: The flat quarter over quarter, if you could maybe talk about why that is versus the.

Drew: Volume growth rate there I guess, when you think long term about the volume and be the ROE.

Vincent: The growth that <unk> been experiencing recently and then if you could help us understand sort of what pricing you are.

Vincent: Sure.

Drew: In the past I can 2019, we've seen $3 billion per quarter run rates and that was just in the marketplace loan volume and then in row I think your marginal Roes in the 20% plus range I'm just wondering what we should think about long term in terms of book, but that's sort of volume and ROE metrics and what does it take to get to.

Vincent: We are contemplating over the course of 2025 and how.

Vincent: Sort of the changing interest rate expectations, especially in the longer end of the curve might affect.

Vincent: Pricing and volume thank you.

Vincent: Hey, Vincent it's Scott I'll start with on volume I think we signaled last quarter of Q4 Q1 are typically our most challenging seasonal quarters in terms of customer response and kind of overall interest I think if you look at our past pattern.

Drew: Maybe that long.

Drew: Sure run rate. Thank you.

Drew: Yes, so I'll take first volume.

Drew: If you look over the past five plus years, you can see that we've routinely been at.

Vincent: Yes, it's pretty typical to see originations roughly in line Q4 to Q1, I think that was actually the case last year as well.

Drew: Call it $3 billion to $4 billion a quarter in issuance given.

Drew: Some of the data we've shared on the size of the Tam and the amount of savings. We can provide we don't see why we.

Vincent: And.

The big driver for us.

Vincent: Planning on maintaining discipline on credit the big driver for us is going to be reactivating marketing channels, which are really better off doing especially given that response models creative testing all of that we've got a got a redo all of that work doing it in these quarters is going to be more expensive than doing it in our.

Drew: We can't get back there and and eventually beyond even with let's call. It.

Drew: On a tighter credit box I think the question on timing of the win will be one of the reasons. We thought about the guide this year and the reason we split it into kind of Q1 versus Q4 exited as I mentioned, we haven't really dropped direct mail in a couple of years, we haven't been active in paid search digital advertising and the pace.

Vincent: More seasonably kind of beneficial quarter. So the goal would be to really start testing our way well actually.

Vincent: Start to turn those things on as we exit the quarter. So that we can work through them and in Q2 and build from there.

Drew: Which dose response models get tuned we find the right creative we tune that user experience.

In terms of pricing drew you want to take that one yes in terms of us.

Drew: Yes, it's hard to predict that exactly we're confident that we will get it done over the course of the next couple of quarters then.

Vincent: And I assume youre talking about sales prices.

Vincent: In terms of sales prices, even without the fed doing further rate cuts throughout the year or maybe later in the year. We expect we'll still be able to raise sales prices as we've done over the last four quarters. So I think the pace of that will depend on the mix of buyers and.

Drew: Our intent and belief is we will continue to grow from there.

Drew: Our exit rate is not our destination in either volume or Aro TCE. If you want to yes, it's going to make that same point I mean, this is where given the exit rate <unk> for 2025 greater than 8%. That's not meant to be our destination 2025 is a year, where we're improving performance of passing through to 2026.

Vincent: A little bit on the rate environment, but we continue to make traction in that space.

Vincent: Great about the performance of the loans were originating and selling and the buyers.

Drew: Beyond so we still havent given obviously the long term guidance on where we expect to be but we would expect the end of 2025 to be a stepping stone for further improvement, yes, and one other comment Jimmy mentioned, we're assuming one rate cut which comes in the back half of the year. So there's no real material benefit in our result.

Vincent: Of all types have been very active.

Vincent: <unk> by what we're seeing and.

Vincent: Just to maybe touch on what we said in our prepared remarks.

Vincent: <unk>, which up to about a third of our volume in Q4, and we feel good about the pipeline I think we've said this before exactly nailing down the <unk> timeline of bank due diligence can be difficult.

Drew: <unk> from that this year should.

Vincent: So in the Meanwhile, we've got other ways to get prices up and that includes the range of product that we talked about on the calls.

Drew: The tone change there and things shift in the other direction that will obviously be constructive. So the guide, we're giving really doesn't assume much benefit from the broader rate environment within the year.

Vincent: The way to drive an increase in prices without any help from the fed.

Drew: Great very helpful. Thank you.

Vincent: Okay, great. Thank you for that and then.

Drew: Okay.

Speaker Change: Our next question is from Brad <unk> with Piper Sandler Your line is now open.

Vincent: Focusing a bit more long term so it was helpful to see.

Vincent: Your guidance for.

Vincent: Fourth quarter 2025.

Brad: Hi, guys. Thanks for taking my question.

Vincent: The volume growth rate there I guess when you think.

Brad: Just given the higher origination outlook has there been any change regarding loan performance between different cohorts of consumers between prime near Prime and from the lower end consumers.

Vincent: Long term about the volume and be the ROE.

Vincent: In the past like in 2019, we've seen $3 billion per quarter run rates and that was just in the marketplace loan volume and then in row I think your marginal Roe.

Brad: Yes so.

Brad: Based on what you can see in some of the presentation materials, where we're continuing to see quite stable performance across the board.

Vincent: The 20% plus range I'm, just wondering what we should think about long term in terms of both but that sort of volume and ROE metrics and what does it take to get to maybe that long.

What I think you'll hear from.

Brad: Lenders across multiple categories, I'd say stable, but elevated is the right way of thinking about it.

Vincent: Sure run rate. Thank you.

Vincent: Yes, so I'll take first volume.

Brad: The degree of the active management, that's required let's call it today versus maybe a year ago, but certainly lower but.

Vincent: If you look over the past five plus years, you can see that we've routinely been at <unk>.

Vincent: Call it $3 billion to $4 billion a quarter in issuance given.

Brad: It's not static we continue to to on the margins.

Vincent: Some of the data we've shared on the size of the Tam and the amount of savings. We can provide we don't see why we.

Brad: Tweak here and there.

Brad: Things are pretty much coming in in line with our expectations I would say, maybe a bit of a brighter spot at the bottom end of the spectrum call. It in that in the <unk> space where.

Vincent: We can't get back there and eventually beyond even with let's call it.

Brad: We're seeing outperformance.

Vincent: A tighter credit box I think the question on timing of the win will be one of the reasons. We thought about the guide this year and the reason we split it into kind of Q1 versus Q4 exited as I mentioned, we haven't really dropped direct mail in a couple of years, we haven't been active in paid search digital advertising and the pace it.

Brad: I'd hesitate to say to conclude that that's.

Brad: Maybe broader and due to the consumer versus potentially our own underwriting, they're a little difficult to parse those two out but we're seeing performance consistent with our expectations across the board and some outperformance down there.

Vincent: Which dose response models get tuned we find the right creative we tune that user experience.

Speaker Change: Thanks, and then just in terms of your decision.

Speaker Change: Hold more loans on balance sheet, especially as loan sale pricing improves.

Vincent: Yes, it's hard to predict that exactly we're confident that we'll get it done over the course of the next couple of quarters then.

Speaker Change: Coming from backfire specially.

Speaker Change: Can you just talk about your pacing there throughout 2025, and then since we're about a year out from the bank operating agreement expiring is there any updates to your capital deployment strategy going forward.

Vincent: Our intent and belief is we will continue to grow from there.

Vincent: Our exit rate is not our destination in either volume or our OTC. If you want to yes, I was going to make that same point I mean, this is where given the exit rate <unk> for 2025 greater than 8%. That's not meant to be our destination 2025 is a year, where we're improving performance of passing through to 2026.

Speaker Change: Yes, so we held them 605 this quarter in terms of loans, we put on balance sheet into into held for investment.

Speaker Change: I think we will look to retain.

Speaker Change: Similar muscle loans on the balance sheet, but one of the areas we want to.

Speaker Change: Beyond so we still havent given obviously the long term guidance on where we expect to be but we would expect the end of 2025 to be a stepping stone for further improvement, yes, and one other comment Jimmy mentioned, yes, we're assuming one rate cut which comes in the back half of the year. So there's no real material benefit in our result.

Speaker Change: <unk> increased the amount of holders in the held for sale portfolio. We sold as soon as we mentioned couple of times on the call already we sold $400 million out of there and we're going to look to replenish some of the inventory in the held for sale portfolio. Because we think we will continue to see demand. There. We will also maintain a healthy level of <unk> as we go through the year.

Speaker Change: It's from that this year should.

Speaker Change: One change there and things shift in the other direction that will obviously be constructive. So the guide, we're giving really doesn't assume much benefit from the broader rate environment within the year.

Speaker Change: Not quite be at the 600 million level each quarter, but we will continue to hold an HFC as well.

Speaker Change: Obviously price and demand will drive some of that decision making quarter to quarter.

Speaker Change: Great very helpful. Thank you.

I would say in general.

Speaker Change: Operating conditions in the marketplace have improved quite significantly I am sure Youre looking at capital markets activities, even outside of US. So intent is to lean into that this year the held for sale.

Speaker Change: Yeah.

Speaker Change: Our next question is from Brad <unk> with Piper Sandler Your line is now open.

Brad: Hi, guys. Thanks for taking my question.

Speaker Change: The building of that portfolio and that strategy has been very successful and we want to make sure we have inventory available because what we're seeing is that large buyers.

Brad: Yes so.

Speaker Change: Like the capability to get started.

Brad: Yes.

Brad: Based on what you can see in some of the presentation materials, where we're continuing to see quite stable performance across the board similar to what I think you'll hear from Len.

Speaker Change: <unk>.

Speaker Change: A decent size upfront and then can move to an ongoing purchase to maintain our portfolio size. So our plan is to facilitate that.

Brad: Lenders across multiple categories, I'd say stable, but elevated is the right way of thinking about it.

Speaker Change: Thanks, I appreciate you taking my questions.

Brad: The degree of the active management, that's required let's call it today versus maybe a year ago, but certainly lower but.

Speaker Change: Okay.

Speaker Change: We have a question from Tim Switzer with <unk>. Your line is now open.

Brad: It's not static we continue to to on the margins.

Tim Switzer: Hey, good afternoon, Thanks for taking my question.

Tweak here and there.

Anthony: It's Anthony.

Brad: Things are pretty much coming in in line with our expectations I'd say, maybe a bit of a brighter spot at the bottom end of the spectrum call. It in that in the <unk> space where.

Anthony: It was a very nice decrease on the deposit costs this quarter.

Speaker Change: Can you talk about.

Speaker Change: What has been the customer response, and what are your expectations on managing deposit costs going forward and if you're able to maybe quantify at all.

Brad: We're seeing outperformance.

Brad: I'd hesitate to say to conclude that that's.

Brad: Maybe broader and due to the consumer versus potentially our own underwriting there a little difficult to parse those two out but we're seeing performance consistent with our expectations across the board and some outperformance down there.

Speaker Change: The planned exit of your commercial deposit customer that would be really helpful.

Speaker Change: Yes, So we had a few factors, which I outlined on the call. The first one you just mentioned was this large commercial customer that had been with us for many years and contractually we were paying just above fed funds on that deposit and in the fourth quarter that contract was up in <unk>.

Speaker Change: Thanks, and then just in terms of your decision.

Brad: Hold more loans on balance sheet, especially as loan sale pricing improves.

Brad: Coming from bank buyers specially.

Speaker Change: So we were able to.

Speaker Change: Exit offset deposit, which was really the last of our sort of large legacy.

Speaker Change: Radius relationships so.

Speaker Change: So thats going to have more carry forward benefit as we go into Q1.

Speaker Change: Yes, so we held them.

Speaker Change: 605, this quarter in terms of loans, we put on our balance sheet into into held for investment.

As we as you look at sort of the liquid deposits or the non CD deposits.

Speaker Change: I think we will look to retain a similar muscle loans on the balance sheet, but one of the areas we want to.

Speaker Change: We're able to effectively repriced with about 80% beta compared to the <unk>.

Speaker Change: Fed lowering rates this quarter I don't know that will continue at that pace going forward, but I think what was also encouraging was the competitive dynamic in the market around deposit pricing was was very rational I would say I guess and I think many competitors also moved allowing us to keep our house.

Speaker Change: Increase the amount of holders in the held for sale portfolio. We sold as soon as we mentioned couple of times on the call already we sold $400 million out of there and we're going to look to replenish some of the inventory in the held for sale portfolio. Because we think we'll continue to see demand. There. We will also maintain a healthy level of <unk> as we go through the year may.

Speaker Change: It costs moving down more in line with that pumps as it happens and you have talked about level of savings.

Speaker Change: Not quite be at the $600 million level each quarter, but we will continue to hold an HFC as well.

Speaker Change: So we launched that product in August we were able to bring in $1 2 billion in total deposits. So very very successful with won multiple awards for that experience and say the behavior, we're seeing there.

Speaker Change: Obviously price and demand will drive some of that decision making quarter to quarter.

Speaker Change: I would say in general.

Speaker Change: Operating conditions in the marketplace have improved quite significantly im sure Youre looking at capital markets activities, even outside of US. So intent is to lean into that this year the held for sale.

Speaker Change: In line with the brand promise, where we're trying to reward people for engaging in good financial behavior. So you'll get our best rate. If you are adding to your savings account every month and what we're seeing is more than 70% of our customers are doing that so.

Speaker Change: The building of that portfolio and that strategy has been very successful and we want to make sure we have inventory available.

Speaker Change: What we're seeing is that large buyers.

Speaker Change: I think it's both a good product for the customer and has been successful for us So and it gives us another tool in the toolkit to manage as rates are coming down. So we're pretty pleased with the response I think drew mentioned.

Speaker Change: Like the capability to get started.

Speaker Change: <unk>.

Speaker Change: Decent size upfront and then can move to an ongoing purchase to maintain our portfolio size. So our plan is to facilitate that.

In fact customer response to the product was so high that we were able to actually save on on some of our marketing expenses because the response and efficiency was really strong.

Speaker Change: Thanks, I appreciate you taking my questions.

Speaker Change: We have a question from Tim Switzer with <unk>. Your line is now open.

Speaker Change: Okay got it thank.

Speaker Change: Thank you and I had a follow up on your comment about you.

Speaker Change: Hey, good afternoon, Thanks for taking my question.

Speaker Change: Year Altra.

Speaker Change: Held for investment loans potentially not going over the $600 million Mark again was that a comment just for Q1 or for the rest of 2025 then.

Anthony: It's Anthony.

Anthony: It was a very nice decrease on the deposit costs this quarter.

Speaker Change: If so why not increase your HSI loans as you.

Speaker Change: Can you talk about.

Speaker Change: What has been the customer response and what are your expectations.

Speaker Change: Have an opportunity to continue.

Speaker Change: And originations overall and profitability.

Speaker Change: Expectations on managing deposit cost going forward, and if you're able to maybe quantify at all.

Speaker Change: Yes, listen I think first of all we'll take it quarter by quarter and see how things play out to determine exactly where we ended up that's first and foremost.

Speaker Change: The planned exit of your commercial deposit customer that would be really helpful.

Speaker Change: Yes.

Speaker Change: But I don't see us being.

Speaker Change: We had a few factors, which I outlined on the call. The first one you just mentioned was this large commercial customer that had been with us for many years and contractually we were paying just above fed funds on that deposit and in the fourth quarter.

Speaker Change: Down as low as we were at the beginning of this year.

Speaker Change: So, but I think at least as we look into Q1 will probably be a little bit under where we were in Q4, but the same time, we'll be building up some of the held for sale portfolio. So that we have more inventory available to sell as buyers keep coming back and prices are moving up.

Speaker Change: That contract was up and so we were able to.

Speaker Change: Exit exit offset deposit, which was really the last of our sort of large legacy.

Speaker Change: In fact total balance sheet will be growing division between the senior note the held for sale portfolio and the held for investment portfolio.

Speaker Change: Radius relationships so the.

Speaker Change: So thats going to have more carryforward benefit as we go into Q1.

Speaker Change: Might change based on different market conditions.

Speaker Change: As we as you look at sort of the liquid deposits or the non CD deposits.

Speaker Change: Okay got it thank you guys.

Speaker Change: Able to effectively repriced with about 80% beta compared to the fed lowering rates. This quarter I don't know that will continue at that pace going forward, but I think what was also encouraging was the competitive dynamic in the market around deposit pricing was was very rational I would say I guess.

Speaker Change: We have a question from Iliano Bologna with Compass. Your line is now open.

Iliano Bologna: Good afternoon.

Iliano Bologna: In the quarter, maybe picking into.

Iliano Bologna: The resilience in the outlook.

Speaker Change: Thank many competitors also moved allowing us to keep our posit costs moving that more in line with that.

A couple of questions around that.

Iliano Bologna: I don't think I'd be curious.

Iliano Bologna: Thinking about seasonality yes.

Speaker Change: First of all because of the weakest fourth quarter or is it really the secondary Joseph tooth rehearing is strongest when we think about the $2 3 billion plus for the fourth quarter.

Speaker Change: As it happens.

Speaker Change: Talking about level of savings.

Speaker Change: Yes, so we launched that product in August we were able to bring in $1 2 billion in total deposit. So very very successful with won multiple awards for that experience and say the behavior, we're seeing there.

Speaker Change: Should we think about that having any kind of normal seasonal impact from.

Speaker Change: It's <unk>.

Speaker Change: <unk> role or should it be kind of a ramp throughout the throughout the years.

Speaker Change: Buying with.

Speaker Change: The guidance.

Speaker Change: In line with the brand promise, where we're trying to reward people for engaging in good financial behavior. So you get our best rate. If you are adding to your savings account every month and what we're seeing is more than 70% of our customers are doing that so.

Speaker Change: For the fourth quarter that's fine.

Speaker Change: Yes so.

Speaker Change: Again, if you think about just about seasonality.

Speaker Change: And strip out any actions, we may be taking where things were doing to drive growth, let's say, what we typically do.

Speaker Change: Do as we push our way into new partnerships, new channels test new products and experiences grow the volume in Q2, and Q3, and then try to basically hold at their Q4 and Q1, so roughly in line.

Speaker Change: In fact customer response to the product was so high that we were able to actually save on.

Speaker Change: This this past Q4, just due to where some of the holidays fell array, both Christmas and new year, it's fallen.

Speaker Change: So of our market access because the response and efficiency was really strong.

Speaker Change: And.

Speaker Change: Kind of hitting a bit in the middle of the week.

Speaker Change: Okay got it.

Speaker Change: Seasonality there is a little stronger than typical years, but say as a general rule ramp up Q2, and Q3 try to hold roughly flat and by roughly I mean.

Speaker Change: Thank you and I had a follow up on your comment about.

Speaker Change: <unk>.

Speaker Change: Held for investment loans potentially not going over the $600 million Mark again was that a comment just for Q1 or for <unk>.

Speaker Change: If there's two 3% down that's us counteracting, maybe an inherent or.

Speaker Change: Rest of 2025 then.

Speaker Change: Or a 5% seasonal pressure that we typically see.

Speaker Change: So why not increase your <unk> loans as you have an opportunity to continue increase in originations overall in profitability.

Speaker Change: That's helpful.

Speaker Change: There's an earlier question about kind of his.

Speaker Change: Local trends are maybe getting into the kind of three to 4 billion quarterly run rate.

Speaker Change: Yes, listen I think first of all we'll take it quarter by quarter and see how things play out to determine exactly where we ended up that's first and foremost.

Speaker Change: Curious when you think about rolling out the new programs or the new category really engaging in direct marketing programs.

Speaker Change: But I don't see us being.

Speaker Change: I'm curious what your typical turnaround time is to get a sense of what the response rate is.

Speaker Change: Down as low as we were at the beginning of this year.

Speaker Change: If you have any kind of enhanced or.

Speaker Change: So, but I think at least as we look into Q1 will probably be a little bit under where we were in Q4, but same time will be building up some of the held for sale portfolio. So we have more inventory available to sell as buyers keep coming back and prices are moving up.

Speaker Change: Okay benefits, what kind of response rates from that.

Speaker Change: How does the funding capacity look can you execute and pushed through the incremental volumes alone buyers do you have private credit borrowers banks or structured product.

Speaker Change: Total balance sheet will be growing division between the senior note.

Speaker Change: Primary.

Speaker Change: Our consistent buyers that could step in and fill that void if you add incremental.

Speaker Change: Held for sale portfolio and the held for investment portfolio.

Speaker Change: Volume it was within your credit box.

Speaker Change: Might change based on different market conditions.

Speaker Change: You could originate.

Speaker Change: Yeah, I mean, so one I would say, we're not starting from scratch with active in these channels for.

Speaker Change: Okay got it thank you guys.

Speaker Change: Okay.

Speaker Change: Most of our history. So we have some sense of the range of outcomes getting to the range, we like best which is highly optimized in blood will take some time in terms of marketplace demand, yes, I mean, what's really evolved over the last couple of quarters.

Speaker Change: We have a question from Iliano Bologna with Compas. Your line is now open.

Iliano Bologna: Good afternoon.

Speaker Change: Congrats on the quarter.

Speaker Change: But we think of as let's call it our fill rate meaning.

Iliano Bologna: Taking into the.

Iliano Bologna: The resilience in the outlook.

Speaker Change: Are we selling everything we can produce or is there more demand and we're producing that's really started to shift over.

Iliano Bologna: A couple of questions around that.

Iliano Bologna: One thing I'd be curious just thinking about seasonality yes.

Iliano Bologna: First quarter is usually the weakest fourth quarter or is it really the secondary Joseph <unk>.

Speaker Change: Really markedly in Q4, and we expect to continue in Q1, which is we have more purchase capacity.

Iliano Bologna: If youre hearing the strongest when we think about the $2 3 billion plus for the fourth quarter.

Speaker Change: Which is why we're saying hey, it's time to turn on the marketing and increase our production. So we're not concerned about our ability to.

Iliano Bologna: Should we be thinking about that having any kind of normal seasonal impact from the <unk>.

Iliano Bologna: <unk> role or should it be kind of a ramp throughout the throughout the years.

Speaker Change: Sell the loans.

Speaker Change: That we produce.

Iliano Bologna: Buying with.

Iliano Bologna: The guidance.

Speaker Change: And then maybe one last one on the marketing.

Iliano Bologna: Question on the fourth quarter that's fine.

Iliano Bologna: Yes so.

Speaker Change: Sensors and kind of the percentage of volume.

Iliano Bologna: Again, if you think about just about seasonality.

Speaker Change: There's obviously some benefit too.

Iliano Bologna: And strip out any actions, we may be taking where things were doing to drive growth, let's say, what we typically do.

Speaker Change: Good morning, Jeff Islands, and it kind of seems like you might be pushing a little bit more into.

Speaker Change: Andy Hff's broken some of the challenges as you grow based on this environment to kind of your 600 ish million pesos.

Iliano Bologna: Do as we push our way into new partnerships, new channels test new products and experiences grow the volume in Q2, and Q3, and then try to basically hold at their Q4 and Q1, so roughly in line.

Speaker Change: Hi.

Speaker Change: Commentary.

Speaker Change: What should we how should we think about that.

Speaker Change: Where you're marketing should give us kind of a percentage of volume.

Speaker Change: So thinking about that as you kind of reopens omnichannel as we kind of push on rate pushed further into some of those newer channels just one.

Iliano Bologna: This this past Q4.

Iliano Bologna: Due to where some of the holidays fell array, both Christmas and new year's falling.

Iliano Bologna: And.

Speaker Change: Yes, I mean.

Iliano Bologna: Kind of hitting a bit in the middle of the week.

Speaker Change: We're clearly in our most efficient channels right now right. So as we grow we're going to have a little bit of stubs.

Iliano Bologna: Seasonality there is a little stronger than typical years, but say as a general rule ramp up Q2, and Q3 try to hold roughly flat and by roughly I mean.

Speaker Change: The increase in the level of marketing expense.

Speaker Change: The kind of marketing expense rate or the cash if you will as we bringing those accounts also as we if we ship more volume to Hff's I think that you are identifying is we won't defer the marketing expense, but as a reminder, we will also get to recognize the origination fee upfront not defer that as well and so net net that's a positive trade.

Iliano Bologna: If there's two 3% down that's us counteracting, maybe an inherent or a 5% seasonal pressure that we typically see.

Speaker Change: That's helpful.

Iliano Bologna: In earlier question about kind of as you noted.

Iliano Bologna: Historical trends or maybe getting into the kind of three to 4 billion quarterly run rate.

Iliano Bologna: I'd be curious when you think about <unk>.

Speaker Change: In the immediate P&L when we make that shift so I think over time, you can look back at our history and you can see what our marketing efficiency look like at higher volumes and we would expect it to be a similar trajectory as we grow but we'll always be looking to see if we can improve upon that as we move forward.

Iliano Bologna: Rolling out the new programs or the new cohorts re engaging endurant marketing programs.

Iliano Bologna: I'm curious what the typical turnaround time that is to get a sense of what the response rate is.

Iliano Bologna: If you have any kind of enhanced or.

Okay benefits, what kind of response rates from that.

Iliano Bologna: How does the funding capacity look can you execute and pushed through.

Speaker Change: That's very helpful. I appreciate the time and I will jump back in the queue.

Iliano Bologna: The incremental volumes alone buyers do you have.

Speaker Change: Our next question is from Bill Ryan with Seaport Research Partners. Your line is now open.

Iliano Bologna: Credit buyers banks or structured product.

Iliano Bologna: Probably start consistent buyers that could step in and fill that void.

Bill Ryan: Hi, good afternoon. Thanks for taking my questions first on the Pp in our guide for Q1.

Iliano Bologna: Incremental volume.

Iliano Bologna: Volume is within your credit box.

You could originate.

Speaker Change: You talked about $60 million to $70 million.

Iliano Bologna: Yeah, I mean, so one I would say, we're not starting from scratch with active in these channels for.

Speaker Change: Little bit below consensus 73 in the 74 you reported.

Speaker Change: In the fourth quarter and you also called out a couple of special expense items in the fourth quarter. So as we think about.

Iliano Bologna: Most of our history. So we have some sense of the range of outcomes getting to the range, we like best which is highly optimized <unk> take some time in terms of marketplace demand, yes, I mean, what's really evolved over the last couple of quarters.

Speaker Change: The Q1 number of $60 million to $70 million, what are the key drivers of it being a little bit lower.

Speaker Change: Relative to Q4.

Speaker Change: So it's sort of like expense driven or some of the revenue expectations. If you could talk about that a little bit.

Iliano Bologna: But we think of as let's call it our fill rate meaning.

Iliano Bologna: Are we selling everything we can produce or is there more demand and we're producing that's really started to shift over.

Speaker Change: Yes, I think probably the most relevant piece is going to be an increase in marketing spend which will happen.

Iliano Bologna: Really markedly in Q4, and we expect to continue in Q1, which is we have more purchase capacity.

Speaker Change: <unk>, probably deposit levels and Martin.

Marketing spend in deposits getting back to normal levels in Q1, but also the ramp in the channels that will began as.

Iliano Bologna: Which is why we're saying hey, it's time to turn on the marketing and increase our production. So we're not concerned about our ability to.

Speaker Change: As we go throughout Q1, we will have a higher level of marketing spend coming through as well that's probably the biggest factor that will change in <unk> as we go quarter to quarter, we do expect.

Iliano Bologna: Sell the loans.

Iliano Bologna: That we produce.

Iliano Bologna: And then maybe one last one on the marketing.

Speaker Change: Revenue to go up a little bit, but we had some benefits from the $400 million sale.

Iliano Bologna: Sensors and kind of the first.

Iliano Bologna: <unk> volume.

Iliano Bologna: There is obviously some benefit too.

Speaker Change: And Ah portfolio marks that we're not assuming a repeat as we go into Q1 as well so.

Iliano Bologna: Good morning, Jeff Islands.

Iliano Bologna: It sounds like you might be pushing a little bit more into.

Speaker Change: We expect revenue flat to up but we won't have those benefits that we had in Q4.

Iliano Bologna: Yes.

Speaker Change: I have spoken some other channels.

Iliano Bologna: ROE based on this environment, we kind of view.

Okay, and just to follow up on the competition.

Iliano Bologna: 600 ish million HSI.

Iliano Bologna: Commentary.

Speaker Change: Basically people on the call watch some of the competitors and what's going on.

Iliano Bologna: What should we how should we think about that.

Iliano Bologna: Where you're marketing should give us kind of a percentage of volume.

Speaker Change: How would you describe the competitive landscape is it getting quite a bit more aggressive or it's just you know there are plenty of origination volume potential for everybody out there.

Iliano Bologna: Just thinking about that as you kind of reopening some of the channels, we kind of push on that.

Iliano Bologna: Pushed further into some of those newer triangles. This one.

Speaker Change: Yes, we haven't really seen any shift in the competitive landscape I'd say.

Iliano Bologna: Yes, I mean.

Iliano Bologna: We're clearly in our most efficient channels right now right. So as we grow we're going to have a little bit of both.

Speaker Change: As I've said before this market has always been.

Speaker Change: <unk> and it continues to be so.

Iliano Bologna: Increase in the level of marketing expense.

Speaker Change: We talked a little bit about.

Speaker Change: The deposit rates and.

Iliano Bologna: Kind of marketing expense rate or the cash if you will as we bring in those accounts also as we if we shipped more volume to Hff's I think that you are identifying is we won't defer the marketing expense, but as a reminder, we will also get to recognize the origination fee upfront not defer that as well and so net net that's a positive trend.

Speaker Change: We were at roughly an 80% beta on the way up we expect to be at roughly an 80% beta on the way down if you look at coupons, which is one measure of loan coupons, which is one measure of competitive activity.

Speaker Change:

Speaker Change: We were at roughly a 60% beta on the way up and we expect to be similar on the way down and it hasnt moved that much yet I think our exit rate.

Iliano Bologna: In the immediate P&L when we make that shift so I think over time, you can look back at our history and you can see what our marketing efficiency looked like at higher volumes and we would expect it to be similar trajectory as we grow but we'll always be looking to see if we can improve upon that as we move forward.

Speaker Change: Was maybe somewhere between 10 and 30 basis points on coupons as we exited the quarter, so not not seeing a ton of change there.

Speaker Change: For us.

Speaker Change: Something we haven't talked about but if you look at.

Speaker Change: That's very helpful. I appreciate the time and I will jump back in the queue.

Speaker Change: Drew mentioned, where in our most efficient channels and what we've been really focused on since the rate environment shifted is getting more and more efficient and productive in those channels and so like if you look at our conversion rate on some of the leading aggregators, we converted roughly twice the rate as anybody else right. So our ability to go for.

Speaker Change: Our next question is from Bill Ryan with Seaport Research Partners. Your line is now open.

Bill Ryan: Hi, good afternoon. Thanks for taking my questions first on the Pp in our guide for Q1.

Speaker Change: Talked about $60 million to $70 million.

Speaker Change: And offer all the way through to the converted loan and we haven't seen any meaningful change in that.

Speaker Change: It's a little bit below consensus 73 in the 74 year reported.

Speaker Change: In the fourth quarter and you also called out a couple of special expense items in the fourth quarter. So as we think about.

Speaker Change: It's really going to just be a question of as I mentioned lighting up some additional channels to really drive that volume through the borrower demand is there.

Speaker Change: The Q1 number of $60 million to $70 million, what are the key drivers of it being a little bit lower.

Speaker Change: Relative to Q4.

Speaker Change: And I'd say borrower demand is there and we feel quite confident about our ability to convert it.

Speaker Change: So it's sort of like expense driven or some of the revenue expectations. If you could talk about that a little bit.

Speaker Change: Okay. Thank you.

Speaker Change: Yes, I think probably the most relevant piece is going to be an increase in marketing spend which will happen.

Speaker Change: Yeah.

Speaker Change: We have a question from John Hecht with Jefferies. Your line is now open.

Speaker Change: It's probably deposit levels and Martin.

Speaker Change: Marketing spend in deposits getting back to normal levels in Q1, but also the ramp in the channels that will begin as.

John Hecht: Hello, Congratulations and thanks very much for taking my questions.

John Hecht: I guess the first one is more of an extension extension of some of the discussion points and that is that you guys have a lot of programs for funding whether it's the securities program are holding loans on the balance sheet or extended aging.

Speaker Change: Revenue to go up a little bit, but we had some benefits from the $400 million sale.

John Hecht: And I know over time, you've talked about going after the one are using the one thats probably the most highest from a return perspective at the time, but yes. There is.

Speaker Change: And portfolio marks that we're not assuming a repeat as we go into Q1 as well so.

Speaker Change: We expect revenue flat to up but we won't have those benefits that we had in Q4.

John Hecht: A lot of different factors to consider now.

John Hecht: Some markets might have more favorable pricing dynamics for you guys or economic dynamics, but some are a little bit more reliable over the intermediate term. So I guess the question is just other than some of the primary focus on return on capital what are some other secondary factors that you guys prioritize in terms of allocate.

Speaker Change: Okay, and just to follow up on the competition.

Speaker Change: People on the call watch some of the competitors and what's going on.

Speaker Change: How would you describe the competitive landscape is it getting quite a bit more aggressive or it's just that there are plenty of origination volume potential for everybody out there.

John Hecht: I guess the different funding channels.

Speaker Change: Yes, we haven't really seen any shift in the competitive landscape I'd say.

Speaker Change: Yes, so maybe I'll start and drew feel free to jump in so.

Speaker Change: As I've said before this market has always been.

John Hecht: Yeah.

John Hecht: As we as we mentioned in the past.

Speaker Change: <unk> and it continues to be so.

John Hecht: Our belief is our ability to deliver consistency and size is generally rewarded in terms of both price and predictability. We are not in general locking in a lot of longer term large deal looks like youre reading about elsewhere, because we believe the price.

Speaker Change: We talked a little bit about it.

Speaker Change: The deposit rates and.

John Hecht: We have seen and believe we will continue the price trajectory is up.

We were at roughly a 60% beta on the way up and we expect to be similar on the way down and it hasnt moved that much yet I think our exit rate.

John Hecht: And what we're seeing is.

John Hecht: If.

John Hecht: Bank buyers are great buyers of fine paper as they come back we're going to sell more whole loans. You saw that you can see in our presentation youll see that the mix of whole loans went up because banks are buying whole loans, and therefore and they are buying at.

Speaker Change: Was maybe somewhere between 10 and 30 basis points on coupons as we exited the quarter, so not not seeing a ton of change there.

Speaker Change: For us.

Speaker Change: Something we haven't talked about but if you look at.

John Hecht: Better pricing, so we will move there when it comes to the certificates.

Speaker Change: Drew mentioned, we're in our most efficient channels and what we've been really focused on since the rate environment shifted is getting more and more efficient and productive in those channels and so like when you look at our conversion rate on some of the leading aggregators, we converted at roughly twice the rate as anybody else right. So our ability to go from.

John Hecht: There is a way to get those prices up to which is the rated product. So we are.

John Hecht: We are being deliberate in how we evolve the mix and and also drive within the static mix price increases.

John Hecht: It's our it's our expectation that over the course of 2025, we're going to be able to continue to drive that lift in pricing, which will again allow us to feed more into marketing to drive.

Speaker Change: And offer all the way through to the converted loan and we haven't seen any meaningful change in that.

Speaker Change: It's really going to just be a question of as I mentioned lighting up some additional channels to really drive that volume through the borrower demand is there.

John Hecht: Faster top line growth.

John Hecht: Okay.

John Hecht: Yeah.

Speaker Change: Okay, and then follow up question I mean, Scott you did I didn't hear you say, yes, I think you even said all parts of the balance sheet I'll bucket should grow this year, but I'm wondering considering your capital and your goals with respect to capital levels and the ability to use the secondary marketplace.

Speaker Change: And I'd say borrower demand is there and we feel quite confident about our ability to convert it.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: We have a question from John Hecht with Jefferies. Your line is now open.

Speaker Change: Sure.

Speaker Change: What do you think what's kind of balance sheet growth that you think but is there a range of growth that you're striving for just for modeling purposes.

Speaker Change: Hello.

Speaker Change: Congratulations and thanks very much for taking my questions.

Speaker Change: The first one is more of an extension.

Speaker Change: Tension some of the discussion points and that is that you guys have a lot of programs for funding whether it's the securities program are holding loans on the balance sheet or extended aging.

Speaker Change: Yes. So this year, we obviously experienced exited the last several years since we bought the bank experienced pretty robust balance sheet growth, we expect to grow above the industry again. This year in terms of balance sheet growth probably not quite at the levels that we grew our balance sheet in previous years, but.

Speaker Change: And I know over time, you've talked about going after the one are using the one that's probably the highest from a return perspective at the time.

Speaker Change: We're still expecting robust growth compared to the industry as far as capital, we still have excess capital at the holding company that we can deploy down to the bank. So the capital at this point isn't a constraint.

Speaker Change: But yes, there is a lot of different factors to consider now.

Speaker Change: Yes, because some markets might have more favorable pricing dynamics for you guys or economic dynamics, but some are a little bit more reliable over the intermediate term. So I guess the question is just other than some of the primary focus on return on capital what are some other secondary factors that you guys prioritize in terms of outlook.

Speaker Change: We're not viewing it as a constraint to our growth.

Speaker Change: Okay Super helpful. Thanks, guys.

Reggie Smith: Our next question is from Reggie Smith with Jpmorgan. Your line is now open.

Speaker Change: Catering against the different funding channels.

Speaker Change: Yes, so maybe I'll start and Terry feel free to jump in so.

Reggie Smith: Hey, guys.

Reggie Smith: And kind of piecing together the storyline here.

Speaker Change: No.

Speaker Change: It sounds like you guys have shifted historically shifted away from direct mail.

Speaker Change: As we as we mentioned in the past.

Speaker Change: Our belief is our ability to deliver consistency and size is generally rewarded in terms of both price and predictability. We are not in general locking in a lot of longer term large deal looks like youre reading about elsewhere, because we believe the price.

Reggie Smith: And.

Reggie Smith: I guess paid search and focus more on the aggregate of sites. My question. One is that correct and then two as you move to direct mail in and paid search what are some of the tradeoffs like how does it change the applicant pool, maybe how price sensitive are there any changes there.

We have seen and believe we will continue the pricing trajectory is up.

Speaker Change: And what we're seeing is.

Reggie Smith: As you as you kind of shift over and then how are you guys thinking about.

Speaker Change: If.

I kind of turned down service I would imagine as you kind of expansion marketing aperture youll, probably get people in here, where it has a higher injection rate is there a way to monetize those.

Speaker Change: Buyers are great buyers of fine paper as they come back we're going to sell more whole loans. You saw that you can see in our presentation youll see that the mix of whole loans went up because banks are buying whole loans, and therefore and they are buying at.

Reggie Smith: Those rejections.

Reggie Smith: And then I have a follow up thank you.

Reggie Smith: Yes, so reggie on the channels, what I'd say is when the rate environment has shifted and loan pricing went from.

Speaker Change: Better pricing, so we will move there when it comes to the certificates.

Speaker Change: There is a way to get those prices up to which is the rated product. So we are.

Reggie Smith: Part of 101 down to call. It 90, 696 and a half.

Speaker Change: We are being deliberate in how we evolve the mix and and also drive within the static mix price increases.

Reggie Smith: Unit margin went way down which meant.

Reggie Smith: The ability to afford.

Reggie Smith: More expensive marketing channels came down.

Speaker Change: It's our it's our expectation that over the course of 2025, we're going to be able to continue to drive that lift in pricing, which will again allow us to feed more into marketing to drive.

Reggie Smith: And there is some other aspects when you use pre screen channels direct mail as an example, they have an obligation to provide credit. So if youre in an environment, where there is some funding uncertainty and you have an obligation to provide credit you got to be thoughtful about that so we kind of retrench to our most efficient channels that.

Speaker Change: Faster topline growth.

Speaker Change: Okay.

Scott Sanborn: Okay, and then follow up question I mean, Scott you did I didn't hear you say aye.

Reggie Smith: That included Aggregators amongst others. Other partnerships most of all is our own channels are our mobile app, our existing customer base and that's how we how and why we invested in the lending mobile app as well as the top up program to drive that repeat business as well when we go back into the other channel it doesn't.

Scott Sanborn: I think you even said all parts of the balance sheet I'll bucket should grow this year, but I'm wondering considering your capital.

Scott Sanborn: With respect to capital levels and the ability to use the secondary marketplace.

Scott Sanborn: What do you think what's the kind of balance sheet growth that you think is there a range of growth that you are striving for just for modeling purposes.

Reggie Smith: Doesn't change our credit box, we roughly maintain 50% new to 50% repeat on a monthly basis will still be.

Reggie Smith: We'll maintain the same kind of credit criteria, but different channels can appeal to different audiences and your point is accurate that there are some different price sensitivity.

Scott Sanborn: Yes. So this year, we obviously experienced exited the last several years since we bought the bank experienced pretty robust balance sheet growth, we expect to grow above the industry again. This year in terms of balance sheet growth probably not quite at the levels that we grew our balance sheet in previous years, but.

Speaker Change: And different channels for example.

Speaker Change: When youre going to comparison shopping site versus Youre, giving independent offer so all of that is factored into our pricing strategy and our return strategy. We wouldn't expect to see any kind of meaningful shift in the returns, we're delivering to investors or to ourselves.

Scott Sanborn: We're still expecting robust growth compared to the industry as far as capital, we still have excess capital at the holding company that we can deploy down to the bank. So capital at this point isn't a constraint.

Speaker Change: Because all of that is factored into how we go after all of those categories.

Scott Sanborn: We're not viewing it as a constraint to our growth.

Okay Super helpful. Thanks, guys.

Speaker Change: Yes, I think to your next question is.

Reggie Smith: Our next question is from Reggie Smith with Jpmorgan. Your line is now open.

Speaker Change: When we think about maintaining.

Speaker Change: Pretty pretty strong discipline on credit is there opportunity to open that up to people to do second looks to answer that is absolutely and that can feed into our growth as we go through through the year.

Reggie Smith: Hey, guys.

Speaker Change: And kind of piecing together the storyline here it sounds like you guys have shifted historically shifted away from direct mail.

Reggie Smith: And.

Speaker Change: Yes on that last point is that.

Reggie Smith: I guess paid search and focus more on the aggregator sites. My question. One is that correct and then two as you move to direct mail in the paid search what are some of the tradeoffs like how does it change the applicant pool, maybe how price sensitive are there any changes there.

Speaker Change: Opportunity improved incrementally in the last few months.

Speaker Change: It sounds like one of your competitors is kind of leaning into that and I was just curious if.

That opportunity is there.

Speaker Change: For you guys as well.

Speaker Change: I would say the more volume we are generating top of funnel. The more there is a as long as assuming a steady credit box. The more there is available at the bottom of the funnel. So as we move into the latter part of the year, we would expect that opportunity to improve.

Reggie Smith: As you as you kind of shift over and then how are you guys thinking about.

Reggie Smith: I kind of turned down survey, so I would imagine as you kind of expansion marketing aperture youll, probably get people in here, where it has a higher rejection rate is there a way to monetize those.

Speaker Change: Got it and then last question.

Speaker Change: <unk> for me.

Reggie Smith: Those rejections.

Speaker Change: Maybe you guys talked about.

Reggie Smith: And then I have a follow up thank you.

Speaker Change: Getting some of the structured securities right in and I want to make sure I understand it correctly. This would be the senior tranche would get a rating and so you can essentially sell both buckets.

Speaker Change: Yes, so so ready on the channels, what I'd say is when the rate environment shifted and loan pricing went from.

Speaker Change: Part of 101 down to call. It 90, 696 and a half.

Speaker Change: The senior supported tranche as well as the.

Unit margin went way down which meant.

Speaker Change: The more equity based tranche, where today you only selling the equity tranche to someone else is that the right way to think about it.

Speaker Change: Ability to afford.

Speaker Change: More expensive marketing channels came down.

Speaker Change: That's that's correct, yes, the senior the senior security the senior tranche.

Speaker Change: And there is some other aspects when you use pre screen channels direct mail as an example, they have an obligation to provide credit so if youre in an environment, where there's some funding uncertainty and you have an obligation to provide credit you got to be thoughtful about that so we kind of retrench to our most efficient channels that.

Speaker Change: Could it can be sold now, but getting a rating on it gets you a tighter spread opens the pool of buyers such as insurance as we said on the call. So it's a more.

Economically attractive way to do the same transaction.

Speaker Change: That included Aggregators amongst others. Other partnerships most of all is our own channels are our mobile app, our existing customer base and that's how we how and why we invested in the lending mobile app as well as the top up program to drive that repeat business as well when we go back into the other channel it doesn't.

Speaker Change: It's not a it's not a small feat to have gotten.

Speaker Change: Or to be on the verge of getting this rating from from a major so.

Speaker Change: We're pretty excited about it and it opens up some different avenues.

Speaker Change: Potentially better pricing for structured certificates going forward.

Speaker Change: It doesn't change our credit box will be roughly maintained 50% new to 50% repeat on a monthly basis will still be.

Speaker Change: Yes.

Speaker Change: Feels like it might be getting ahead of myself.

Speaker Change: Yeah.

Speaker Change: It is.

Speaker Change: We will maintain the same kind of credit criteria, but different channels can appeal to different audiences and your point is accurate that there are some different price sensitivities.

Speaker Change: Latin more funding available to you a lot more optionality.

Speaker Change: That may not be fully appreciated by the market.

Speaker Change: Yeah.

Speaker Change: I think the funding I think the funding markets are very active right now.

Speaker Change: And different channels for example.

Speaker Change: <unk>.

Speaker Change: We talked a lot about the banks coming back because that's something we've all been very focused on but I would say if you just look at private credit asset managers insurance, who sometimes.

Speaker Change: It comes comes through private credit all very active there is a lot of liquidity in the market looking for homes. So.

Speaker Change: Does all of that is factored into how we go after all of those categories.

Speaker Change: We're excited about how that states will perform in 2020.

Speaker Change: Yes, I think to your next question is.

Speaker Change: Again that <unk> that is informing.

Speaker Change: When we think about maintaining.

Speaker Change: Trying to optimize to get the best possible price, but that's also informing.

Speaker Change: Pretty pretty strong discipline on credit is there opportunity to open that up to people to do second looks the answer to that is absolutely and that can feed into our growth as we go through through the year.

Speaker Change: Our strategy as.

Speaker Change: As we think about how we go forward right the ability to sell the <unk>.

Speaker Change: Spreads get tighter.

Speaker Change: As well as the opportunity for us to build the Hff's portfolio, if we're selling it in slugs of $400 million.

Speaker Change: Yes on that last point is that.

Speaker Change: Opportunity improved incrementally in the last few months.

Speaker Change: We need to we need to have we need to have that available to these potential buyers.

Speaker Change: It sounds like one of your competitors is kind of leaning into that and I was just curious if.

Speaker Change: Yeah, and I guess you guys made the point about 23444, <unk> 25 is kind of a minimum it could very well be stronger than that.

Speaker Change: That opportunity is there.

Speaker Change: For you guys as well.

Speaker Change: Some things fall in line.

Speaker Change: Yes, I would say we are very confident in that number.

Speaker Change: And as we go through the course of the year and see how the competitive environment plays out then.

Speaker Change: Got it and then.

Speaker Change: How.

Speaker Change: Our execution is rolling through obviously, we can give an update but we're confident in that number and again, we're confident in that number as being on the way to something larger than that.

Speaker Change: Last question for me.

Speaker Change: You guys talked about.

Speaker Change: Getting some of the structured securities rated and I want to make sure I understand it correctly. This would be the senior tranche would get a rating and so you can essentially sell both buckets.

Speaker Change: Sounds good congrats guys.

Speaker Change: Okay. Thanks Rajiv.

Speaker Change: The senior supported tranche as well as the.

Speaker Change: And now I'd like to turn the call over to Artem Nally Veeco for some questions submitted via email.

Speaker Change: No more equity based tranche, where today you only selling the equity tranche to someone else is that the right way to think about it.

Speaker Change: Alright. Thank you Cole <unk>, we have a few questions here that were submitted via E mail.

That's correct, yes, so senior senior security the senior tranche.

Speaker Change: The first question is so the lending club name was appropriate when the company was primarily a peer to peer lending platform.

Speaker Change: It can be sold now.

Speaker Change: But getting a rating on it gets you a tighter spread opens the pool of buyers such as insurance as we said on the call. So it's a more.

Speaker Change: This is no longer the case and does your full fledged Neo bank has management given any consideration to changing the name of the company to something more descriptive.

Speaker Change: Economically attractive way to do the same transaction.

Speaker Change: It's not a <unk>.

Speaker Change: Love This question.

Speaker Change: Not a small feat to have gotten.

Speaker Change: Great question and a great observation, so obviously when.

Speaker Change: To be on the verge of getting this rating from from a major so.

Speaker Change: All we were doing was lending.

Speaker Change: We're pretty excited about it and it opens up some different avenues and potentially better pricing for structured certificates going forward.

Speaker Change: And that lending was initially powered by retail investors the name really worked.

Speaker Change: It does not reflect the scope of our ambition or even frankly.

Speaker Change: It feels like I might be getting ahead of myself.

Speaker Change: Our evolving product mix. So it is very top of mind for for management, we actually do have in our budget. This year to be doing some work in research on what's the current perception of the brand.

Speaker Change: There is.

Speaker Change: Latin more funding available to you a lot more optionality.

Speaker Change: That may not be fully appreciated by the market.

Speaker Change: How might a rebranding influenced that consumer perception. So no no decisions made yet but it is very top of mind. If we think about the year ahead as our.

Speaker Change: I think the funding I think the funding markets are very active right now.

Speaker Change: It's.

Speaker Change: We've talked a lot about the banks coming back because that's something we've all been very focused on but I would say if you just look at private credit asset managers insurance, who sometimes.

Speaker Change: We get that IQ into the markets.

Speaker Change: We do anticipate having a checking experience specifically for our borrowers that we will be marketing as we exit the year next year.

Speaker Change: Comes comes through private credit all very active there is there is a lot of liquidity in the market looking for homes. So.

The name the name is limiting in its current form so it's definitely top of mind for us alright, great. Thanks, Matt So here's the second question.

Speaker Change: We're excited about how that states will perform in 2020 again that <unk> that is informing.

Speaker Change: Have you considered acquiring any entities to grow your 5 million member base further.

Speaker Change: Trying to optimize to get the best possible price, but that's also informing our.

Speaker Change: Our strategy as.

Speaker Change: I guess I'll start maybe Jim you.

Speaker Change: As we think about how we go forward the ability to sell the <unk>.

Speaker Change: You can finishes.

Speaker Change: The the rate environment has certainly rippled through fintech broadly and definitely through lend tech within Fintech. So there are.

Speaker Change: Spreads get tighter.

Speaker Change: As well as the opportunity for us to build the <unk>.

Speaker Change: Hff's portfolio, if we're selling it in slugs of $400 million.

Speaker Change: Numerous opportunities available.

Speaker Change: We need that we need to have we need to have that available to these potential buyers.

Speaker Change: And we are absolutely open to.

Speaker Change: Enhancing our capability is accelerating our roadmap.

Speaker Change: Yeah, and I guess you guys made the point that get 23444, <unk> 25 is kind of a minimum it could very well be stronger than that.

Speaker Change: <unk> acquisition, we announced last quarter is as an example of that.

Speaker Change: But we are we will remain pretty disciplined on the hurdles that that needs to clear Kelly as an example, we were building that capability ourselves on our ability to acquire it at a fraction of the cost of what it was going to cost us to build was a pretty easy decision.

Speaker Change: Some things fall in line.

Speaker Change: Yes, I'd say, we are very confident in that number.

Speaker Change: And as we go through the course of the year and see how the competitive environment plays out.

Speaker Change: Anything you'd add there I would add just that as we are.

Speaker Change: Looking at doing any acquisitions, we're obviously very conscious of using our shareholders capital wisely and appropriately and making sure. If we ever do any type of M&A that we're generating an appropriate return for shareholders, while we're doing that.

Speaker Change: Sounds good congrats guys.

Rajiv: Okay. Thanks Rajiv.

Speaker Change: And now I'd like to turn the call over to Artem Nally Veeco for some questions submitted via E Mail.

Speaker Change: And obviously, thus far we have been extremely disciplined on that dimension.

Speaker Change: Perfect. Okay. Thank you both I think that's all the time, we have so with that we'll wrap up our fourth quarter earnings conference call. Thank you for joining us today and if you have any questions. Please E mail us at IR at lending club Dot com.

Speaker Change: Alright. Thank you Cole so Scott drew we have a few questions here that were submitted via E mail.

Speaker Change: The first question is so the lending club name was appropriate when the company was primarily a peer to peer lending platform.

Speaker Change: This is no longer the case and does your full fledged Neo bank has management given any consideration to changing the name of the company to something more descriptive.

Speaker Change: Most of this question.

Speaker Change: Great question.

Speaker Change: Great observation, so obviously when.

Speaker Change: All we were doing was lending.

Speaker Change: And that lending was initially powered by retail investors the name really worked.

Speaker Change: It does not reflect the scope of our ambition or even frankly.

Speaker Change: Our evolving product mix. So it is very top of mind for management, we actually do have in our budget. This year to be doing some work in research on what's the current perception of the brand.

How might a rebranding influence that consumer perception. So no no decisions made yet but it is very top of mind. If we think about the year ahead as are we.

Speaker Change: We get that IQ into the markets.

Speaker Change: We do anticipate having a checking experience specifically for our borrowers that we will be marketing as we exit the year next year.

The name the name is limiting in its current form so it's definitely top of mind for us alright, great. Thanks, Matt So here's the second question.

Speaker Change: Have you considered acquiring any entities to grow your 5 million member base further.

Speaker Change: I guess I'll start maybe you.

Speaker Change: You can finishes.

Speaker Change: The the rate environment has certainly rippled through fintech broadly and definitely through lend tech within Fintech. So there are.

Speaker Change: Numerous opportunities available.

Speaker Change: And we are absolutely open to.

Speaker Change: Enhancing our capabilities accelerating our roadmap.

Speaker Change: <unk> acquisition, we announced last quarter is as an example of that.

Speaker Change: But we will remain pretty disciplined on the hurdles that that needs to clear Kelly as an example, we were building that capability ourselves our ability to acquire it at a fraction of the cost of what it was going to cost us to build was a pretty easy decision.

Speaker Change: Anything you'd add there I would add just that as we are.

Speaker Change: We're looking at doing any acquisitions, we're obviously very conscious of using our shareholders capital wisely and appropriately and making sure. If we ever do any type of M&A that we're generating an appropriate return for shareholders, while we're doing that.

Speaker Change: And obviously, thus far we have been extremely disciplined on that dimension.

Speaker Change: Perfect. Okay. Thank you both I think thats all the time, we have so with that we'll wrap up our fourth quarter earnings conference call. Thank you for joining us today and if you have any questions. Please E mail us at IR at lending club Dot com.

Q4 2024 LendingClub Corp Earnings Call

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