Q2 2026 Finwise Bancorp Earnings Call

July 29, 2026

Speaker #1: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star 0 on your telephone keypad.

Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to the speakers. Please go ahead.

Operator: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to the speakers. Please go ahead.

Speaker #1: Before turning to guidance, I'd like to provide an update on a couple of factors reflected in our financial performance. First, consistent with our expectations, we estimate that QCT handset revenues from Chinese OEMs reached a bottom in the third fiscal quarter and will return to double-digit sequential growth in the fourth quarter.

Speaker #1: As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to the speakers. Please go ahead.

Speaker #2: Good afternoon, and thank you for joining us today for Finwise Bancorp's second quarter 2026 earnings conference call. Earlier today, we filed our earnings release and investor deck, and posted them to our investor website at investors.finwisebancorp.com.

Juan Arias: Good afternoon, thank you for joining us today for FinWise Bancorp's Q2 2026 earnings conference call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations, and beliefs, and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them, contained in the company's earnings press release and filings with the Securities and Exchange Commission.

Juan Arias: Good afternoon, thank you for joining us today for FinWise Bancorp's Q2 2026 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.FinWisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations, and beliefs, and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them, contained in the company's earnings press release and filings with the Securities and Exchange Commission.

Speaker #1: Second, the semiconductor industry is experiencing broad-based increased in input costs across wafer fabrication, assembly, test, advanced packaging, memory, and other materials. We're taking concrete actions to reflect the higher input costs in our product pricing.

Speaker #1: These actions will benefit our gross margins over time, as the pricing changes gradually come into effect. Finally, as a result of our supply constraint, we now expect an acceleration in the step-down of Apple product revenues starting in the fourth fiscal quarter, as our share for the upcoming iPhone launch is expected to be materially lower than our prior estimate of 20%.

Speaker #2: Today's conference call is being recorded and webcast on the company's investor website, as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today.

Speaker #1: All these factors are contemplated both in our third quarter performance and fourth quarter outlook. Against this backdrop, I'll now provide our guidance for the fourth fiscal quarter.

Speaker #2: Forward-looking statements represent management's current estimates, expectations, and beliefs, and Finwise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements—including factors that may negatively impact them—contained in the company's earnings press release and filings with the Securities and Exchange Commission.

Speaker #1: We are forecasting revenues of $9.7 to $10.5 billion and non-GAP EPS of $2.05 to $2.25. In QTL, we estimate revenues of $1.2 to $1.4 billion and EBITDA margin of $68 to $72% reflecting normal seasonal trends.

Speaker #1: In QCT, we expect revenues of $8.4 to $9 billion and EBITDA margins of 23% to 25%. We forecast QCT handset revenues to be approximately $5.2 billion, driven by sequential growth in Android, offset by lower Apple product revenues.

Speaker #2: Posting the call today, our CEO, Jim Noone, CFO, Bob Wahlman, and executive chairman Kent Landvatter. Jim, please go ahead.

Juan Arias: Hosting the call today are CEO Jim Noone, CFO Robert Wahlman, and Executive Chairman Kent Landvatter. Jim, please go ahead.

Juan Arias: Hosting the call today are CEO Jim Noone, CFO Bob Wahlman, and Executive Chairman Kent Landvatter. Jim, please go ahead.

Speaker #3: Good afternoon, everyone. Our second quarter earnings, a 15 cents per share, were short of our expectations. Driven by higher provision expense on the loans where we retain credit risk.

Jim Noone: Good afternoon, everyone. Our Q2 earnings of $0.15 per share were short of our expectations, driven by higher provision expense on the loans where we retain credit risk. We are proactively managing these credit trends and will continue to empower our credit and compliance teams to identify and reduce risk across the portfolio, as they did during Q2, resulting in meaningful reductions in our NPA balances. I'd like to start by giving you more detail on credit quality. Total provision for credit losses was $22.7 million for Q2, compared to $10.6 million in the prior quarter. Of the $22.7 million, $16.7 million related to credit enhancement loans, which is offset by corresponding credit enhancement income and does not affect net results.

Speaker #1: We expect QCT IoT revenues to remain approximately flat versus the year ago period with double-digit growth across our industrial networking and robotics category of products offset primarily by the impact of memory constraints on tablets and other consumer products.

Speaker #3: We are proactively managing these credit trends, and will continue to empower our credit and compliance teams to identify and reduce risk across the portfolio.

Speaker #1: In QCT Automotive, we expect another record quarter with approximately 60% year-over-year revenue growth. Lastly, we anticipate non-GAP operating expenses to be approximately $2.7 billion in the quarter reflecting the acquisition of modular and continued investment in our data center product roadmap ahead of revenue ramp.

Speaker #3: As they did during the second quarter. Resulting in meaningful reductions in our MPA balances. I'd like to start by giving you more detail on credit quality.

Speaker #3: Total provision for credit losses was 22.7 million for the second quarter. Compared to 10.6 million in the prior quarter. Of the 22.7 million, 16.7 million related to credit enhancement loans.

Speaker #1: Before I conclude my prepared remarks, let me summarize the key drivers of QCT's growth trajectory going forward. We are well positioned to execute on the vision we outlined at our recent investor day, with QCT non-handset revenues expected to grow to $40 billion by fiscal 2029, nearly double the target we had previously provided.

Speaker #3: Which is offset by corresponding credit enhancement income and does not affect net results. The remaining 6 million dollars in provision reflected increased provisioning in the core loan portfolio.

Jim Noone: The remaining $6 million in provision reflected increased provisioning in the core loan portfolio, driven by losses recognized on the liquidation of non-performing loans, higher reserves on non-performing and classified loans, and the more conservative servicing standards we have implemented. As noted earlier, non-performing loan balances declined in Q2 from nearly $50 million in Q1 to approximately $38 million in Q2. A meaningful improvement driven primarily by a reduction in SBA 7 loans classified as non-accrual. This was the result of loan collateral resolutions and paydowns. Of this $38 million, approximately $19 million is guaranteed by the federal government, and the remaining $19 million is unguaranteed. Total net charge-offs, excluding those from loans with credit enhancement, were $5.2 million, slightly above our guided range of $4 to $5 million. Net charge-offs within the core portfolio remain concentrated in the loans with the identified attributes we discussed in Q1.

Speaker #1: This forecast includes data center revenue growth to $5 billion in fiscal '27 and $15 billion in fiscal '29. As a result of our diversification execution, we now estimate non-handsets at more than 50% of QCT revenues in fiscal '27 and grow to approximately two-thirds in fiscal '29.

Speaker #3: Driven by losses recognized on the liquidation of non-performing loans, higher reserves on non-performing and classified loans, and the more conservative servicing standards we have implemented.

Speaker #3: As noted earlier, non-performing loan balances declined in the second quarter. From nearly 50 million last quarter to approximately 38 million dollars this quarter. A meaningful improvement, driven primarily by a reduction in SBA 7A loans classified as non-accrual.

Speaker #1: In the short term, we anticipate growth in non-handset revenues relative to the prior year to accelerate from 24% in fiscal 2026 to greater than 60% in fiscal 2027—a significant inflection point in the execution of our growth strategy.

Speaker #3: This was the result of loan collateral resolutions and paydowns. Of this 38 million dollars, approximately 19 million is guaranteed by the federal government, and the remaining 19 million dollars is unguaranteed.

Speaker #1: We expect this growth from non-handset revenues in fiscal '27 to replace total Apple product revenues in '26. In handsets, when memory industry dynamics stabilize, our Snapdragon product leadership and emergence of agentic AI experiences will position us well to reinstate QCT Android revenue scale and growth rates.

Speaker #3: Total net charge-offs excluding those from loans with credit enhancement were 5.2 million dollars. Slightly above our guided range of 4 to 5 million dollars.

Speaker #1: Lastly, I'd like to welcome the Modular team to Qualcomm. We're excited to have completed this transaction, adding a world-class team whose AI software expertise will enhance our ability to execute on the significant opportunities ahead.

Speaker #3: Net charge-offs within the core portfolio remain concentrated in the loans with the identified attributes we discussed last quarter. Approximately 80% of this quarter's charge-offs within the core portfolio came from this legacy pool.

Speaker #1: This concludes our prepared remarks. Back to you, Brad.

Jim Noone: Approximately 80% of Q2's charge-offs within the core portfolio came from this legacy pool. This is a finite, well-defined pool with approximately $50 million in performing balances outstanding at the end of the quarter. We are proactively managing this portfolio and will provide additional updates in future quarters as we continue to make progress. Let me walk through net charge-offs in each of our three key portfolios in more detail. First, SBA net charge-offs were $2.9 million versus $2.2 million in Q1, with the vast majority tied to legacy credits referenced earlier. This largely reflects specific industry and loan attributes, which we have materially tightened via policy changes. These charge-offs are likely to remain elevated over the next few quarters. Second, net charge-offs on strategic programs with credit enhancement were $7.9 million versus $4.8 million in Q1.

Speaker #2: Thank you, Akash. Operator, we are now ready for questions.

Speaker #3: This is a finite, well-defined pool, with approximately 50 million dollars in performing balances outstanding. At the end of the quarter. We are proactively managing this portfolio and will provide additional updates in future quarters as we continue to make progress.

Speaker #3: Thank you. To ask a question, please press star one. To withdraw your question, press star two. If you’re using a speakerphone, please pick up your handset before pressing the numbers.

Speaker #3: One moment, please, for the first question. The first question is from the line of Joshua Buchholzer with TD Cowen. Please proceed with your question.

Speaker #3: Let me walk through net charge-offs in each of our three key portfolios in more detail. First, SBA net charge-offs were 2.9 million, versus 2.2 million in the prior quarter.

Speaker #4: Hey, guys. Thank you for taking my question, and congrats on solid results in a tough backdrop. I wanted to start with the gross margins.

Speaker #4: It's pretty clear you explained what's going on with the rising input costs and now you're raising prices. Can you walk us through how we should think about QCT gross margins returning to their prior levels?

Speaker #3: With the vast majority tied to legacy credits referenced earlier. This largely reflects specific industry and loan attributes which we have materially tightened by a policy changes.

Speaker #4: How long between the ASPs increases kind of match the input costs rising? Thank you.

Speaker #3: These charge-offs are likely to remain elevated over the next few quarters. Second, net charge-offs on strategic programs with credit enhancement were 7.9 million, versus 4.8 million in Q1.

Speaker #5: Hi, Josh, it's Akash. So, as I said in my prepared remarks, there are two key drivers of the impact on gross margins. I think the first is a little bit of a weaker mix within the premium tier.

Speaker #3: The sequential increase continues to reflect normal seasoning of a larger credit-enhanced portfolio, and Finwise is fully reimbursed for any losses. Finally, net charge-offs on strategic program loans without credit enhancement were 2.3 million in Q2, versus 2.3 million dollars in Q1.

Jim Noone: The sequential increase continues to reflect normal seasoning of a larger credit-enhanced portfolio, and FinWise is fully reimbursed for any losses. Finally, net charge-offs on strategic program loans without credit enhancement were $2.3 million in Q2 versus $2.3 million in Q1, reflecting normal repayment behavior across the balances we manage here. To summarize, we remain very comfortable with the overall quality of our portfolio. The issues we have described are ring-fenced, understood, finite, and being actively managed. Outside of this pool, credit performance across the book remains healthy and as generally expected. In terms of originations, we delivered $1.6 billion in Q2, ahead of our expectations for $1.4 billion and down modestly from an elevated $1.7 billion in Q1. The sequential change reflects seasonally lower volume in the student loan program, partially offset by growth across several of our established programs.

Speaker #5: As you know, we have multiple chips within premium, and you're seeing operator OEMs making a choice on which chip to use. They're also using prior generation chips in response to the current environment of increased memory costs.

Speaker #5: And then the second factor is the higher input cost across the supply chain. And so, as you would expect, we're taking action to increase prices and reflect that in our customer product pricing.

Speaker #3: Reflecting normal repayment behavior across the balances we manage here. To summarize, we remain very comfortable with the overall quality of our portfolio. The issues we've described are ring-fenced, understood, finite, and being actively managed.

Speaker #5: And we expect this benefit to show up in our gross margins over the next couple of quarters. These changes, as you would expect, come in gradually, as we have some contracts in place. So we need to get past those contracts.

Speaker #3: Outside of this pool, credit performance across the book remains healthy and has generally expected. In terms of originations, we delivered 1.6 billion dollars this quarter.

Speaker #5: There are also product cycles that happen so this will come up over time. But I think when we get through it, we expect to be consistent with the historical gross margin range we have.

Speaker #3: Ahead of our expectations for 1.4 billion, and down modestly from an elevated 1.7 billion in the prior quarter. The sequential change reflects seasonally lower volume in the student loan program.

Speaker #4: Thank you for all the color there, Akash. Maybe to follow up, you mentioned that data center revenue from your ASIC engagements, which start to layer in in the December quarter.

Speaker #4: Any help you can give us on the sort of the shape of that contribution through fiscal 2027, as it's obviously quite a material step up in revenue growth there?

Speaker #3: Partially offset by growth across several of our established programs. This resilience in origination reflects the benefit of a more diversified partner base, which is a deliberate part of our strategy and increasingly lets us absorb variability in any single program.

Jim Noone: This resilience in origination reflects the benefit of a more diversified partner base, which is a deliberate part of our strategy and increasingly lets us absorb variability in any single program. We are also pleased to announce on this call the contract signing of a new strategic partnership subsequent to the end of Q2, and we expect to share the partner's name in the coming quarters as we get closer to launching the products with them. This is a well-established prepaid card provider that will use a combination of our BIN sponsorship and MoneyRails services. The cards issued under this program will be offered on the Mastercard network. Based on the current pace of implementation, we expect the program to go live during Q4.

Speaker #4: Thank you.

Speaker #5: Yeah, so I think, as we said, the revenue starts in the December quarter, and you should expect a ramp as we go through the year.

Speaker #3: We are also pleased to announce on this call the contract signing of a new strategic partnership, subsequent to the end of the second quarter.

Speaker #5: As we've said this before, we have two custom chip engagements, and both of these are global And we're going to expect to start seeing revenue from both of them starting in the December quarter.

Speaker #3: And we expect to share the partner's name in the coming quarters as we get closer to launching the products with them. This is a well-established prepaid card provider that will use a combination of our BIN sponsorship and money rail services.

Speaker #5: As you know, the December quarter is right there, and so we do have POs from these engagements, and we've already started wafers. So we're very confident about the engagement with both customers.

Speaker #3: The cards issued under this program will be offered on the Mastercard network, and based on the current pace of implementation, we expect the program to go live during the fourth quarter.

Speaker #3: Our next question is from the line of Joseph Cardoso, with JP Morgan. Please proceed with your questions.

Speaker #3: This partner chose Finwise for our expertise in BIN sponsorship, and our disciplined approach to program execution. The same qualities that continue to differentiate us in the market.

Jim Noone: This partner chose FinWise for our expertise in BIN sponsorship and our disciplined approach to program execution, the same qualities that continue to differentiate us in the market. Our sales pipeline remains very strong, and we anticipate signing additional and more meaningful deals before year-end. It's worth putting this in context. The pipeline we're seeing today, built by our expanded sales team and led by our Chief Fintech Officer, Sarah Grotta, is materially stronger and potentially more meaningful to our bottom line than the pipeline we had just a few years ago. This quarter, we also welcomed a new salesperson with years of industry experience across both lending and cards, bringing our business development team to five, including our Chief Fintech Officer. Turning to our credit-enhanced product, balances were $121 million at the end of Q2.

Speaker #6: Hey, good afternoon, and thanks for the questions here. Maybe just as a first one and a follow-up, kind of on the pricing dynamics, can you just flesh out the pricing actions? Like, any commentary in terms of the magnitude of price increase that you're looking to take?

Speaker #3: Our sales pipeline remains very strong, and we anticipate signing additional and more meaningful deals before year-end. It's worth putting this in context. The pipeline we're seeing today—built by our expanded sales team and led by our chief fintech officer, Sarah Grada—is materially stronger and potentially more meaningful to our bottom line than the pipeline we had just a few years ago.

Speaker #6: And then whether these actions are broad-based or you're going to look to be more concentrated across the portfolio. And just as we think about maybe pricing actions in some of these consumer markets like handsets, how do you navigate rising prices in a market that has already seen demand affected by cost inflation and other components?

Speaker #6: And then I have a follow-up. Thank you.

Speaker #3: This quarter, we also welcomed a new salesperson with years of industry experience, across both lending and cards. Bringing our business development team to five—including our chief fintech officer.

Speaker #5: Sure, Joe. So the way you should think about it is this is a pricing action that we are taking broadly across different end markets.

Speaker #5: As I said earlier, there are certain places where we have a contract or we are waiting for a product cycle to come through. So it'll layer in over time.

Speaker #3: Turning to our credit-enhanced product, balances were 121 million at the end of the second quarter. As we noted in the tallied press release last week, our prior guidance of approximately 217 million in credit-enhanced balances by year-end 2026 no longer applies.

Speaker #5: But it's no different than what a lot of the peers in our industry have done, and you should expect something, that the scale of the increase that we're looking at is double-digit and consistent with some of the actions from other players.

Jim Noone: As we noted in the Tallied press release last week, our prior guidance of approximately $217 million in credit-enhanced balances by year-end 2026 no longer applies, reflecting the change in how those balances are now structured. We're pleased with the trade-off since we retain the full and higher economics described earlier. Importantly, we still expect some further growth in credit-enhanced balances in 2026. The largest partner we mentioned last quarter, whose pace had slowed, is picking back up. We also remain in active discussions with several prospects. We'll continue to provide quarterly updates going forward. Looking ahead, meaningful credit-enhanced balance growth beyond 2026 will come from new partner additions. The product continues to be a meaningful growth driver for our long-term plans, and building that pipeline is where our focus needs to be.

Speaker #3: Reflecting the change in how those balances are now structured. We're pleased with the trade-off, since we retain the full and higher economics described earlier.

Speaker #6: Maybe Joe, this is Christiana. Just can I add one comment? I understand your comment, but I think the market is actually down because of the magnitude of increases in the build materials with memory.

Speaker #3: Importantly, we still expect some further growth in credit-enhanced balances in 2026. The largest partner we mentioned last quarter, whose pace had slowed, is picking back up.

Speaker #6: So even a double-digit price increase, which is just passed through of the input costs increase and wafer price increases, it's actually a small when you compare to the order magnitude of the memory build materials of the we actually don't expect that fundamental changes in the premium tier and the higher tier volume.

Speaker #3: We also remain an active discussions with several prospects. We'll continue to provide quarterly updates going forward. Looking ahead, meaningful credit-enhanced balance growth beyond 2026 will come from new partner additions.

Speaker #3: The product continues to be a meaningful growth driver for our long-term plans and building that pipeline is where our focus needs to be. In closing, taken together, this quarter reinforces our conviction in the company's strong long-term trajectory and in our three key priorities.

Speaker #6: And we maintain the position that China handset, too.

Jim Noone: In closing, taken together, this quarter reinforces our conviction in the company's strong long-term trajectory and in our three key priorities. First, we will continue to empower our credit and compliance teams to prune risk proactively, as you are seeing us do within the legacy pool within our core portfolio. Second, we will continue to support the momentum in our sales pipeline that's already coming through from our business development team and which we highlight in the investor deck this quarter. Finally, we will continue to support the multi-product platform we have built at FinWise because we believe this carries enormous value for both potential partners and our shareholders. That same model that took us from zero to $100 million in credit-enhanced balances in 6 months, build the infrastructure, pilot it, market it, then launch the right partners, is now turning the corner in cards, payments, and deposit sponsorship.

Speaker #3: First, we will continue to empower our credit and compliance teams to prune risk proactively. As you are seeing us do within the legacy pool within our core portfolio.

Speaker #3: Second, we will continue to support the momentum in our sales pipeline that's already coming through from our business development team and which we highlight in the investor deck this quarter.

Speaker #3: Finally, we will continue to support the multi-product platform we have built at Finwise. Because we believe this carries enormous value for both potential partners and our shareholders.

Speaker #3: That same model that took us from zero to 100 million dollars in credit-enhanced balances in six months—build the infrastructure, pilot it, market it, then launch the right partners—is now turning the corner in cards, payments, and deposit sponsorship.

Speaker #3: So in the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we're now entering.

Jim Noone: In the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we're now entering. I believe we will have a very strong period for new partnerships over the next 12 to 24 months. The strategic plan we set out on 3 years ago has not changed. What's changing is the pace of opportunity in front of us, and my job is to make sure we capitalize on it for the long-term benefit of our shareholders. I will now turn the call over to our CFO, Robert Wahlman, to provide more detail on our financial results.

Jim Noone: In the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we're now entering. I believe we will have a very strong period for new partnerships over the next 12 to 24 months. The strategic plan we set out on 3 years ago has not changed. What's changing is the pace of opportunity in front of us, and my job is to make sure we capitalize on it for the long-term benefit of our shareholders. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results.

Speaker #3: I believe we will have a very strong period for new partnerships over the next 12 to 24 months. The strategic plan we set out on three years ago has not changed, what's changing is the pace of opportunity in front of us.

Speaker #3: And my job is to make sure we capitalize on it for the long-term benefit of our shareholders. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results.

Speaker #2: Thanks, Jim. And good afternoon, everyone. Finwise reported second quarter net income of 2.1 million, and diluted earnings per share of 15 cents. Results were driven by strong loan originations growth and net interest income and disciplined expense management, partially offset by a large provision for credit losses in our traditional banking portfolio.

Robert Wahlman: Thanks, Jim. Good afternoon, everyone. FinWise reported Q2 net income of $2.1 million and diluted earnings per share of $0.15. Results were driven by strong loan originations, growth in net interest income, and disciplined expense management, partially offset by a large provision for credit losses in our traditional banking portfolio. Net interest income was $28.7 million for Q2 2026 compared to $28.1 million for the prior quarter. The increase from the prior quarter was primarily due to growth in the credit-enhanced loan portfolio and a decrease in non-performing loans, which resulted in a lower reversal of interest on non-accrual loans and contributed to an increase in the average yield on loans held for investment. Net interest income also improved as a result of a decrease in average interest-bearing liabilities and the related cost of funds.

Bob Wahlman: Thanks, Jim. Good afternoon, everyone. FinWise reported Q2 net income of $2.1 million and diluted earnings per share of $0.15. Results were driven by strong loan originations, growth in net interest income, and disciplined expense management, partially offset by a large provision for credit losses in our traditional banking portfolio. Net interest income was $28.7 million for Q2 2026 compared to $28.1 million for the prior quarter. The increase from the prior quarter was primarily due to growth in the credit-enhanced loan portfolio and a decrease in non-performing loans, which resulted in a lower reversal of interest on non-accrual loans and contributed to an increase in the average yield on loans held for investment. Net interest income also improved as a result of a decrease in average interest-bearing liabilities and the related cost of funds.

Speaker #2: Net interest income was 28.7 million for the second quarter of 2026, compared to 28.1 million for the prior quarter. The increase from the prior quarter was primarily due to growth in the credit-enhanced loan portfolio and a decrease in non-performing loans, which resulted in a lower reversal of interest on non-accrual loans and contributed to an increase in the average yield on loans held for investment.

Speaker #2: Net interest income also improved as a result of a decrease in average interest-bearing liabilities and the related cost of funds. These increases were partially offset by a decline in average balances within the traditional loan portfolio.

Robert Wahlman: These increases were partially offset by a decline in average balances within the traditional loan portfolio. Net interest margin for Q2 2026 was 13.69% compared to 12.90% for the prior quarter. This sequential quarter increase is in line with growth in the credit-enhanced loan portfolio, a decrease in non-accrual loans, and a decrease in the yield on interest-bearing liabilities. As we've said before, we suggest thinking about net interest income and net interest margin in two ways, including and excluding excess credit-enhanced income. Non-interest income was $25.6 million versus $14.6 million in the prior quarter, primarily due to an increase in credit enhancement income, which corresponds to the provision for credit losses on credit-enhanced loans and resulted from the credit enhancement portfolio growth.

Bob Wahlman: These increases were partially offset by a decline in average balances within the traditional loan portfolio. Net interest margin for Q2 2026 was 13.69% compared to 12.90% for the prior quarter. This sequential quarter increase is in line with growth in the credit-enhanced loan portfolio, a decrease in non-accrual loans, and a decrease in the yield on interest-bearing liabilities. As we've said before, we suggest thinking about net interest income and net interest margin in two ways, including and excluding excess credit-enhanced income. Non-interest income was $25.6 million versus $14.6 million in the prior quarter, primarily due to an increase in credit enhancement income, which corresponds to the provision for credit losses on credit-enhanced loans and resulted from the credit enhancement portfolio growth.

Speaker #2: Net interest margin for second quarter of 2026 was 13.69%, compared to 12.90% for the prior quarter. This sequential quarter increase is in line with growth in the credit-enhanced loan portfolio, a decrease in non-accrual loans, and a decrease in the yield on interest-bearing liabilities.

Speaker #2: As we've said before, we suggest thinking about net interest income and net interest margin in two ways. Including an excluding excess credit-enhanced income. Non-interest income was 25.6 million versus 14.6 million in the prior quarter.

Speaker #2: Primarily due to an increase in credit-enhancement income, which corresponds to the provision for credit losses on credit-enhanced loans, and resulted from the credit-enhancement portfolio growth.

Speaker #2: In addition, the company prevailed in litigation with an off-boarded strategic partner, which resulted in an increase in miscellaneous income of 450,000 and a decrease in other expenses of 300,000.

Robert Wahlman: In addition, the company prevailed in litigation with an off-boarded strategic partner, which resulted in an increase in miscellaneous income of $450,000 and a decrease in other expenses of $300,000. Non-interest expense was $28.9 million versus $28.3 million in the prior quarter, primarily due to increases in credit enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit enhanced loan portfolio growth. Otherwise, operating expenses were flat quarter over quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in Q2 versus 65% in Q1 2026. Let me briefly review the financials of the Tallied acquisition.

Bob Wahlman: In addition, the company prevailed in litigation with an off-boarded strategic partner, which resulted in an increase in miscellaneous income of $450,000 and a decrease in other expenses of $300,000. Non-interest expense was $28.9 million versus $28.3 million in the prior quarter, primarily due to increases in credit enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit enhanced loan portfolio growth. Otherwise, operating expenses were flat quarter over quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in Q2 versus 65% in Q1 2026. Let me briefly review the financials of the Tallied acquisition.

Speaker #2: Non-interest expense was 28.9 million versus 28.3 million, in the prior quarter. Primarily due to increases in credit-enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit-enhanced loan portfolio growth.

[Company Representative] (Finwise Bancorp): for the prior quarter. This sequential quarter increase is in line with growth in the credit-enhanced loan portfolio, a decrease in non-accrual loans, and a decrease in the yield on interest-bearing liabilities. As we've said before, we suggest thinking about net interest income and net interest margin in two ways, including and excluding excess credit-enhanced income. Non-interest income was $25.6 million versus $14.6 million in the prior quarter, primarily due to an increase in credit enhancement income, which corresponds to the provision for credit losses on credit-enhanced loans and resulted from the credit enhancement portfolio growth. In addition, the company prevailed in litigation with an off-boarded strategic partner, which resulted in an increase in miscellaneous income of $450,000 and a decrease in other expenses of $300,000.

Bob Wahlmann: For the prior quarter. This sequential quarter increase is in line with growth in the credit-enhanced loan portfolio, a decrease in non-accrual loans, and a decrease in the yield on interest-bearing liabilities. As we've said before, we suggest thinking about net interest income and net interest margin in two ways, including and excluding excess credit-enhanced income. Non-interest income was $25.6 million versus $14.6 million in the prior quarter, primarily due to an increase in credit enhancement income, which corresponds to the provision for credit losses on credit-enhanced loans and resulted from the credit enhancement portfolio growth. In addition, the company prevailed in litigation with an off-boarded strategic partner, which resulted in an increase in miscellaneous income of $450,000 and a decrease in other expenses of $300,000.

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Speaker #2: Otherwise, operating expenses were flat quarter over quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in the second quarter versus 65% in the first quarter of 2026.

Operator: Conference Center. How may I help you? Hello? Hello? Can you hear me? Are you looking for a conference? Yes. Which one are you looking for? The FinWise Bancorp. I'm sorry, say it again. It's Q2 FinWise Bancorp. Do you hear me? I kind of could hear you. Oh, FinWise. Okay. And what is your name? Rachel Smith.

Speaker #2: Let me briefly review the financials of the tallied acquisition. As noted in last week's release, we expect roughly 4 million dollars in total integration and transition costs over the coming year.

Robert Wahlman: As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year, weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships. These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations, by the end of Q3 2026, and will provide an update then. Total assets were $925.3 million, up from $899.4 million, primarily due to increases in the company's credit enhancement loans, the credit enhancement asset, and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment.

Bob Wahlman: As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year, weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships. These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations, by the end of Q3 2026, and will provide an update then. Total assets were $925.3 million, up from $899.4 million, primarily due to increases in the company's credit enhancement loans, the credit enhancement asset, and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment.

Speaker #1: In addition, the company prevailed in litigation with an offboarded strategic partner, which resulted in an increase in miscellaneous income of 450,000 and a decrease in other expenses of 300,000.

Speaker #2: Weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships.

Speaker #1: Non-interest expense was 28.9 million versus 28.3 million, in the prior quarter. Primarily due to increases in credit enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit-enhanced loan portfolio growth.

[Company Representative] (Finwise Bancorp): Non-interest expense was $28.9 million versus $28.3 million in the prior quarter, primarily due to increases in credit enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit-enhanced loan portfolio growth. Otherwise, operating expenses were flat quarter-over-quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in Q2 versus 65% in Q1 2026. Let me briefly review the financials of the Tally acquisition. As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year, weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships.

Bob Wahlmann: Non-interest expense was $28.9 million versus $28.3 million in the prior quarter, primarily due to increases in credit enhancement guarantee and servicing expenses, largely resulting from an increase in interest income attributable to the credit-enhanced loan portfolio growth. Otherwise, operating expenses were flat quarter-over-quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in the Q2 versus 65% in the Q1 of 2026. Let me briefly review the financials of the Tallied acquisition. As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year, weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships.

Speaker #2: These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations by the end of the third quarter of 2026, and will provide an update then.

Speaker #2: Total assets were 925.3 million, up from 899.4 million. Primarily due to increases in the company's credit-enhancement loans, the credit-enhancement asset and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment.

Speaker #1: Otherwise, operating expenses were flat quarter over quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit-enhanced accounting effects, the efficiency ratio was 63.9% in the second quarter versus 65% in the first quarter of 2026.

Speaker #2: Deposits increased to 693.8 million versus 674.9 million. Driven by growth in interest-bearing demand deposits and time certificates of deposit. Partially offset by a decrease in non-interest-bearing demand deposits.

Robert Wahlman: Deposits increased to $693.8 million, versus $674.9 million, driven by growth in interest-bearing demand deposits and time certificates of deposit, partially offset by a decrease in non-interest-bearing demand deposits, reflecting a shift in customer partner balances toward the interest-bearing products. We also continue to operate from a very strong capital position with a bank leverage ratio of 18.1%, over double the well-capitalized minimum, and a holding company leverage ratio of over 22%. Finally, as of 30 June 2026, the company has repurchased a total of 29,736 shares for approximately $400,000 under the company's share repurchase program announced in May 2026, which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value, reflecting our conviction that this is an attractive use of capital at those levels.

Bob Wahlman: Deposits increased to $693.8 million, versus $674.9 million, driven by growth in interest-bearing demand deposits and time certificates of deposit, partially offset by a decrease in non-interest-bearing demand deposits, reflecting a shift in customer partner balances toward the interest-bearing products. We also continue to operate from a very strong capital position with a bank leverage ratio of 18.1%, over double the well-capitalized minimum, and a holding company leverage ratio of over 22%. Finally, as of 30 June 2026, the company has repurchased a total of 29,736 shares for approximately $400,000 under the company's share repurchase program announced in May 2026, which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value, reflecting our conviction that this is an attractive use of capital at those levels.

Speaker #1: Let me briefly review the financials of the Tallied acquisition. As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year.

Speaker #2: Reflecting a shift in customer-partner balances toward the interest-bearing products. We also continue to operate from a very strong capital position with a bank leverage ratio of 18.1%, over double the well-capitalized minimum.

Speaker #1: Weighted toward the next two quarters and narrowing thereafter as we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform, intellectual property, and customer relationships.

Speaker #2: And a holding company leverage ratio of over 22%. Finally, as of June 30th, 2026, the company has repurchased a total of 29,736 shares for approximately 400,000 dollars under the company's share repurchase program announced in May 2026.

Speaker #1: These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations, by the end of the third quarter of 2026, and will provide an update then.

[Company Representative] (Finwise Bancorp): These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations, by the end of Q3 2026, and will provide an update then. Total assets were $925.3 million, up from $899.4 million, primarily due to increases in the company's credit enhancement loans, the credit enhancement asset, and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment. Deposits increased to $693.8 million, versus $674.9 million, driven by growth in interest-bearing demand deposits and time certificates of deposit, partially offset by a decrease in non-interest-bearing demand deposits, reflecting a shift in customer partner balances toward the interest-bearing products.

Bob Wahlmann: These are non-cash items requiring that the assets be marked to market and amortized. We expect to complete the initial purchase accounting, including the asset valuations, by the end of Q3 2026, and will provide an update then. Total assets were $925.3 million, up from $899.4 million, primarily due to increases in the company's credit enhancement loans, the credit enhancement asset, and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment. Deposits increased to $693.8 million, versus $674.9 million, driven by growth in interest-bearing demand deposits and time certificates of deposit, partially offset by a decrease in non-interest-bearing demand deposits, reflecting a shift in customer partner balances toward the interest-bearing products.

Speaker #2: Which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value.

Speaker #1: Total assets were $925.3 million, up from $899.4 million, primarily due to increases in the company's credit enhancement loans, the credit enhancement asset, and the loans held for sale portfolio, partly offset by a decrease in other loans held for investment.

Speaker #2: Reflecting our conviction that this is an attractive use of capital at those levels. Let me provide Ford Outlook on some key metrics as we've done in prior quarters.

Robert Wahlman: Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for H2 2026. While there may be variability quarter-to-quarter, we believe originations can come in around $1.6 billion in Q3, reflecting the typical seasonal pickup in student lending. For Q4, we are comfortable with a baseline estimate of $1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. The average gain on sale of loans over the past two quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year. Quarterly net charge-offs.

Bob Wahlman: Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for H2 2026. While there may be variability quarter-to-quarter, we believe originations can come in around $1.6 billion in Q3, reflecting the typical seasonal pickup in student lending. For Q4, we are comfortable with a baseline estimate of $1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. The average gain on sale of loans over the past two quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year. Quarterly net charge-offs.

Speaker #1: Deposits increased to $693.8 million versus $674.9 million, driven by growth in interest-bearing demand deposits and time certificates of deposit, partially offset by a decrease in non-interest-bearing demand deposits.

Speaker #2: Loan originations for second half of 2026. While there may be variability quarter to quarter, we believe originations can come in around 1.6 billion in the third quarter, reflecting the typical seasonal pickup in student lending.

Speaker #1: Reflecting a shift in customer-partner balances toward interest-bearing products. We also continue to operate from a very strong capital position, with a bank leverage ratio of 18.1%, which is more than double the well-capitalized minimum.

Speaker #2: For the fourth quarter, we are comfortable with a baseline estimate of 1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable.

[Company Representative] (Finwise Bancorp): We also continue to operate from a very strong capital position with a bank leverage ratio of 18.1%, over double the well-capitalized minimum, and a holding company leverage ratio of over 22%. Finally, as of 30 June 2026, the company has repurchased a total of 29,736 shares for approximately $400,000 under the company's share repurchase program announced in May 2026, which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value, reflecting our conviction that this is an attractive use of capital at those levels. Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for H2 2026.

Bob Wahlmann: We also continue to operate from a very strong capital position with a bank leverage ratio of 18.1%, over double the well-capitalized minimum, and a holding company leverage ratio of over 22%. Finally, as of 30 June 2026, the company has repurchased a total of 29,736 shares for approximately $400,000 under the company's share repurchase program announced in May 2026, which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value, reflecting our conviction that this is an attractive use of capital at those levels. Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for H2 2026.

Speaker #1: And a holding company leverage ratio of over 22%. Finally, as of June 30, 2026, the company has repurchased a total of 29,736 shares for approximately 400,000 dollars under the company's share repurchase program announced in May 2026.

Speaker #2: The average gain on sale of loans over the past two quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year.

Speaker #2: Quarterly net charge-offs. We anticipate an approximate range of 4 to 5 million in net charge-offs for non-credit-enhanced loans, as a good quarterly number to use in your models for the remainder of this year.

Robert Wahlman: We anticipate an approximate range of $4 to 5 million in net charge-offs for non-credit enhanced loans as a good quarterly number to use in your models for the remainder of this year. Non-performing loan balances for Q3 2026. We anticipate a migration to non-performing loans of approximately $7 million in Q3. Net interest margin. We are maintaining our prior outlook that when including credit-enhanced balances, the net interest margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs. Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase.

Bob Wahlman: We anticipate an approximate range of $4 to 5 million in net charge-offs for non-credit enhanced loans as a good quarterly number to use in your models for the remainder of this year. Non-performing loan balances for Q3 2026. We anticipate a migration to non-performing loans of approximately $7 million in Q3. Net interest margin. We are maintaining our prior outlook that when including credit-enhanced balances, the net interest margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs. Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase.

Speaker #1: Which provides for the purchase of up to 685,000 of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value.

Speaker #2: Non-performing loan balances for Q3, 2026. We anticipate a migration to non-performing loans of approximately 7 million dollars in the third quarter. Net interest margin.

Speaker #1: Reflecting our conviction that this is an attractive use of capital at those levels. Let me provide a forward outlook on some key metrics, as we've done in prior quarters.

Speaker #2: We are maintaining our prior outlook that when including credit-enhanced balances the net interest margin is expected to increase. Driven by growth in credit-enhanced balances and efforts to lower funding costs.

Speaker #1: Loan originations for second half of 2026. While there may be variability quarter to quarter, we believe originations can come in around 1.6 billion in the third quarter, reflecting the typical seasonal pickup in student lending.

[Company Representative] (Finwise Bancorp): While there may be variability quarter to quarter, we believe originations can come in around $1.6 billion in Q3, reflecting the typical seasonal pickup in student lending. For Q4, we are comfortable with a baseline estimate of $1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. The average gain on sale of loans over the past 2 quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year. Quarterly net charge-offs. We anticipate an approximate range of $4 to 5 million in net charge-offs for non-credit-enhanced loans as a good quarterly number to use in your models for the remainder of this year. Non-performing loan balances for Q3 2026.

Bob Wahlmann: While there may be variability quarter to quarter, we believe originations can come in around $1.6 billion in Q3, reflecting the typical seasonal pickup in student lending. For Q4, we are comfortable with a baseline estimate of $1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. The average gain on sale of loans over the past 2 quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year. Quarterly net charge-offs. We anticipate an approximate range of $4 to 5 million in net charge-offs for non-credit-enhanced loans as a good quarterly number to use in your models for the remainder of this year. Non-performing loan balances for Q3 2026.

Speaker #2: Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin, consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage, with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit-enhancement accounting effects.

Speaker #1: For the fourth quarter, we are comfortable with a baseline estimate of 1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable.

Speaker #1: The average gain on sale of loans over the past two quarters is a reasonable proxy for the quarterly run rate we'd expect for the remainder of the year.

Speaker #2: That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling.

Robert Wahlman: Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for questions and answers. Operator?

Bob Wahlman: Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for questions and answers. Operator?

Speaker #1: Quarterly net charge-offs: We anticipate an approximate range of $4 to $5 million in net charge-offs for non-credit-enhanced loans, which is a good quarterly number to use in your models for the remainder of this year.

Speaker #2: With that, we would like to open the call for questions and answers. Operator?

Speaker #1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions. Thank you. Our first question will come from Evan Yee with Raymond James.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions. Thank you. Our first question will come from Evan Yee with Raymond James.

Speaker #1: Non-performing loan balances for Q3 2026: we anticipate a migration to non-performing loans of approximately $7 million in the third quarter. Net interest margin.

[Company Representative] (Finwise Bancorp): We anticipate a migration to non-performing loans of approximately $7 million in Q3. Net interest margin. We are maintaining our prior outlook that when including credit-enhanced balances, the net interest margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs. Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for questions and answers. Operator?

Bob Wahlmann: We anticipate a migration to non-performing loans of approximately $7 million in Q3. Net interest margin. We are maintaining our prior outlook that when including credit-enhanced balances, the net interest margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs. Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for questions and answers. Operator?

Speaker #1: A confirmation tone will indicate you're line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: We are maintaining our prior outlook that, when including credit-enhanced balances, the net interest margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs.

Speaker #1: One moment while we pull for questions. Thank you. Our first question will come from Evan Yee with Raymond James.

Speaker #1: Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin, consistent with our ongoing risk reduction strategy. Efficiency ratio: we remain focused on driving sustainable, positive operating leverage, with a long-term goal of steadily lowering our core efficiency ratio, which excludes credit-enhancement accounting effects.

Speaker #3: Hey, good afternoon. Thanks for taking my questions. So I want to start on credit. So NPL declined by 12 million this quarter. I was just curious, how much of that improvement came from collateral liquidations versus upgrades or payoffs?

Evan Yee: Hey, good afternoon. Thanks for taking my questions. I wanted to start on credit. NPL has declined by $12 million this quarter. I was just curious how much of that improvement came from collateral liquidations versus upgrades or payoffs. Should we expect a similar pace of resolution over the next few quarters? Thanks.

Speaker #3: And then should we expect a similar pace of resolution over the next few quarters? Thanks.

Speaker #1: That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling.

Speaker #4: Yeah, no problem, Evan. We were really happy to have reduced by roughly a quarter our NPA balances during the second quarter. It reflects active resolution work.

Jim Noone: Yeah, no problem, Evan. We were really happy to have reduced by roughly a quarter our NPA balances during Q2. It reflects active resolution work, and it's not a one-time swing. I think just generally the direction of travel is favorable there. Our total risk exposure at quarter end was $19 million of the total $38 million in NPA balances. Similar to our NCO comments, we know the loans at risk, we restricted the attributes, and we're actively managing that segment of the portfolio. As far as guidance, I would just point to Bob's comments on $7 million of potential net migration in Q3.

Speaker #4: It's not a one-time swing, so I think just generally the direction of travel is favorable there. Our total risk exposure at quarter end was 19 million, of the total 38 million in NPA balances.

Speaker #1: With that, we would like to open the call for questions and answers. Operator?

Speaker #2: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #4: And similar to our NCO comments, we know the loans at risk. We restricted the attributes, and we're actively managing that segment of the portfolio.

Speaker #2: A confirmation tone will indicate you're line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #4: As far as guidance, I would just point to Bob's comments on 7 million dollars of potential net migration in Q3.

Speaker #2: One moment while we pull questions. Thank you. Our first question will come from Evan Yee with Raymond James.

Speaker #3: Okay, great. And then just another question from me. How do you think about the 50 million dollar credit card portfolio you acquired from the Tallied acquisition?

Evan Yee: Okay, great. Just another question from me. How are you thinking about the $50 million credit card portfolio you acquired from the Tallied acquisition? Has your thinking evolved regarding retaining versus selling those receivables?

Evan Yee: Hey, good afternoon. Thanks for taking my questions. I wanted to start on credit. NPL declined by $12 million this quarter. Just curious how much of that improvement came from collateral liquidations versus upgrades or payoffs. Should we expect a similar pace of resolution over the next few quarters? Thanks.

Speaker #3: As you're thinking evolve regarding retaining versus selling those receivables?

Speaker #4: Yeah. So since going public, Evan, we've talked a number of times about our interest in acquiring technology platforms that kind of fit our suite of services that we take to market with fintechs.

Speaker #3: And then should we expect a similar pace of resolution over the next few quarters? Thanks.

Jim Noone: Yeah. Since going public, Evan, we've talked a number of times about our interest in acquiring technology platforms that kind of fit our suite of services that we take to market with fintechs. The Tallied acquisition fits this strategy really well, and credit card processors don't come up on the market very often. As you saw in the press release, we acquired the platform and the related assets of Tallied. Owning the credit card operating system provides the core component for the tech stack, like the credit card tech stack. It fits really neatly with what we've built historically with Fintech Connect for lending and MoneyRails for payments. We look at this really as a technology platform acquisition rather than a business acquisition, and it fits pretty well with kind of the scope of services that we offer our partners.

Speaker #1: Yeah, no problem, Evan. We were really happy to have reduced, by roughly a quarter, our NPA balances during the second quarter. It reflects active resolution work, and it's not a one-time swing, so I think just generally, the direction of travel is favorable there.

[Company Representative] (Finwise Bancorp): No problem, Evan. We were really happy to have reduced by roughly a quarter our NPA balances during Q2. It reflects active resolution work, it is not a one-time swing. I think just generally the direction of travel is favorable there. Our total risk exposure at quarter end was $19 million of the total $38 million in NPA balances. Similar to our NCO comments, we know the loans at risk. We restricted the attributes, we are actively managing that segment of the portfolio. As far as guidance, I would just point to Bob's comments on $7 million of potential net migration in Q3.

Bob Wahlmann: No problem, Evan. We were really happy to have reduced by roughly a quarter our NPA balances during Q2. It reflects active resolution work, it is not a one-time swing. I think just generally the direction of travel is favorable there. Our total risk exposure at quarter end was $19 million of the total $38 million in NPA balances. Similar to our NCO comments, we know the loans at risk. We restricted the attributes, we are actively managing that segment of the portfolio. As far as guidance, I would just point to Bob's comments on $7 million of potential net migration in Q3.

Speaker #4: The Tallied acquisition fits this strategy really well. And credit card processors don't come up on the market very often. So as you saw in the press release, we acquired the platform and the related assets of Tallied.

Speaker #1: Our total risk exposure at quarter-end was $19 million, of the total $38 million in NPA balances. And similar to our NCO comments, we know the loans at risk.

Speaker #4: Owning the credit card operating system provides the core component for the tech stack, like the credit card tech stack. And it fits really neatly with what we've built historically with fintech connect for lending and money rails for payments.

Speaker #1: We restricted the attributes, and we're actively managing that segment of the portfolio. As far as guidance, I would just point to Bob's comments on 7 million dollars of potential net migration in Q3.

Speaker #4: So we look at this really as a technology platform acquisition rather than a business acquisition. And it fits pretty well with kind of the scope of services that we offer our partners.

Speaker #3: Okay, great. Thank you for taking my questions. I'll step back.

Evan Yee: Okay, great. Thank you for taking my questions. I'll step back.

Speaker #3: Okay, great. And then just another question from me. How do you think about the $50 million credit card portfolio you acquired from the Tallied acquisition?

Evan Yee: Okay, great. Just another question from me. How are you thinking about the $50 million credit card portfolio you acquired from the Tally acquisition? Has your thinking evolved regarding retaining versus selling those receivables?

Speaker #4: No problem.

Jim Noone: No problem.

Speaker #1: Next, we'll hear from Andrew Terrell with Stevens.

Operator: Next, we'll hear from Andrew Corell with Stephens.

Speaker #3: As you're thinking evolve regarding retaining versus selling those receivables?

Speaker #5: Hey, good afternoon.

Andrew Corell: Hey, good afternoon.

Andrew Terrell: Hey, good afternoon.

Speaker #4: Hey, Andrew.

Jim Noone: Hey, Andrew.

Speaker #1: Yeah. So, since going public, Evan, we've talked a number of times about our interest in acquiring technology platforms that fit our suite of services that we take to market with fintechs.

[Company Representative] (Finwise Bancorp): Since going public, Evan, we have talked a number of times about our interest in acquiring technology platforms that kind of fit our suite of services that we take to market with FinTechs. The Tally acquisition fits this strategy really well, credit card processors do not come up on the market very often. As you saw in the press release, we acquired the platform and the related assets of Tally. Owning the credit card operating system provides the core component for the tech stack, like the credit card tech stack. It fits really neatly with what we have built historically with Fintech Connect for lending and MoneyRails for payments. We look at this really as a technology platform acquisition rather than a business acquisition, it fits pretty well with kind of the scope of services that we offer our partners.

Speaker #5: Hey. Just to start, Bob, I think you mentioned 3 to 4 million of charge-offs in the prepared remarks was kind of the expectation. One, was that correct?

Andrew Corell: Hey. Just to start, Bob, I think you mentioned $3 to 4 million of charge-offs in the prepared remarks was kind of the expectation. One, was that correct? Two, is that relative to the core portfolio? I think it was $2.93 million charge-offs for this quarter.

Andrew Terrell: Hey. Just to start, Bob, I think you mentioned $3 to 4 million of charge-offs in the prepared remarks was kind of the expectation. One, was that correct? Two, is that relative to the core portfolio? I think it was $2.93 million charge-offs for this quarter.

Bob Wahlmann: Since going public, Evan, we have talked a number of times about our interest in acquiring technology platforms that kind of fit our suite of services that we take to market with FinTechs. The Tally acquisition fits this strategy really well, credit card processors do not come up on the market very often. As you saw in the press release, we acquired the platform and the related assets of Tally. Owning the credit card operating system provides the core component for the tech stack, like the credit card tech stack. It fits really neatly with what we have built historically with Fintech Connect for lending and MoneyRails for payments. We look at this really as a technology platform acquisition rather than a business acquisition, it fits pretty well with kind of the scope of services that we offer our partners.

Speaker #5: And then two, is that relative to the core portfolio? I think it was 2.93 million charge-off for this quarter.

Speaker #1: The Tallied acquisition fits this strategy really well, and credit card processors don't come up on the market very often. So, as you saw in the press release, we acquired the platform and the related assets of Tallied.

Speaker #4: Yeah, I can take it, Andrew. The NCOs, most of the 2.9 million in NCOs in the core portfolio came from the legacy pool that had those defined attributes and cohorts.

Jim Noone: Yeah, I can take it, Andrew. The NCOs, most of the $2.9 million in NCOs in the core portfolio came from the legacy pool that had those defined attributes and cohorts. We anticipate that will continue to have NCOs from that group until we fully work through them. As we've noted, we expect elevated charge-offs over the next few quarters as we work through those loans. As far as guidance, in this quarter, the non-credit enhanced NCOs did come in slightly above the high end of the range, which was the $4 to 5 million number I think you're referencing. It's kind of normal quarter to quarter timing on individual resolutions rather than a deterioration there. We still see $4 to 5 million as kind of the right normalized run rate for that segment.

Speaker #1: Owning the credit card operating system provides the core component for the tech stack—the credit card tech stack—and it fits really neatly with what we've built historically with Fintech Connect for lending and Money Rails for payments.

Speaker #4: We anticipate that'll continue to have NCOs from that group until we fully work through them. As we've noted, we expect elevated charge-offs over the next few quarters as we work through those loans.

Speaker #1: So we look at this really as a technology platform acquisition rather than a business acquisition, and it fits pretty well with kind of the scope of services that we offer our partners.

Speaker #4: As far as guidance, the in this quarter, the non-credit-enhanced NCOs did come in slightly above the high end of the range, which was the 4 to 5 million dollar number.

Speaker #3: Okay, great. Thank you for taking my questions. I'll step back.

Evan Yee: Okay, great. Thank you for taking my questions. I will step back.

Speaker #1: No problem.

[Company Representative] (Finwise Bancorp): No problem.

Bob Wahlmann: No problem.

Speaker #4: I think you're referencing. But it's kind of normal quarter to quarter timing on individual resolutions rather than a deterioration there. So we still see 4 to 5 million as kind of the right normalized run rate.

Speaker #2: Next, we'll hear from Andrew Terrell with Stevens.

Operator: Next, we'll hear from Andrew Terrell with Stephens.

Speaker #4: Hey, good afternoon.

Andrew Terrell: Hey, good afternoon.

Speaker #1: Hey, Andrew.

[Company Representative] (Finwise Bancorp): Hey, Andrew.

Bob Wahlmann: Hey, Andrew.

Speaker #4: Hey. Just to start, Bob, I think you mentioned 3 to 4 million of charge-offs in the prepared remarks was kind of the expectations. One, was that correct?

Speaker #4: For that segment.

Speaker #5: Okay. So 4 to 5 is the core portfolio plus strategic loans without credit enhancement?

Andrew Corell: Okay. $4 to 5 is the core portfolio plus strategic loans without credit enhancement?

Andrew Terrell: Okay. $4 to 5 is the core portfolio plus strategic loans without credit enhancement?

Speaker #4: And then two, is that relative to the core portfolio? I think it was 2.93 million charge-off for this quarter.

Speaker #4: That's

Jim Noone: That's correct.

Speaker #5: Okay, great. And as you're working through some of these portfolios, I know you're giving kind of explicit back half guidance. It doesn't necessarily imply it, but just help us think about when you feel like you've reached when you feel like you've kind of worked through the majority of this portfolio.

Andrew Corell: Okay, great. As you're working through some of these portfolios, I know you're giving kind of explicit back half guidance that doesn't necessarily imply it, just help us think about when you feel like you've kind of worked through the majority of this portfolio. When should we start anticipating improvements sequentially in credit quality?

Andrew Terrell: Okay, great. As you're working through some of these portfolios, I know you're giving kind of explicit back half guidance that doesn't necessarily imply it, just help us think about when you feel like you've kind of worked through the majority of this portfolio. When should we start anticipating improvements sequentially in credit quality?

Speaker #1: Yeah, I can take it, Andrew. The NCOs, most of the 2.9 million in NCOs in the core portfolio came from the legacy pool that had those defined attributes and cohorts.

[Company Representative] (Finwise Bancorp): Yeah, I can take it, Andrew. The NCOs, most of the $2.9 million in NCOs in the core portfolio came from the legacy pool that had those defined attributes and cohorts. We anticipate that'll continue to have NCOs from that group until we fully work through them. As we've noted, we expect elevated charge-offs over the next few quarters as we work through those loans. As far as guidance, in this quarter, the non-credit-enhanced NCOs did come in slightly above the high end of the range, which was the $4 to 5 million number I think you're referencing. It's kind of normal quarter-to-quarter timing on individual resolutions rather than a deterioration there. We still see $4 to 5 million as kind of the right normalized run rate for that segment.

Bob Wahlmann: Yeah, I can take it, Andrew. The NCOs, most of the $2.9 million in NCOs in the core portfolio came from the legacy pool that had those defined attributes and cohorts. We anticipate that'll continue to have NCOs from that group until we fully work through them. As we've noted, we expect elevated charge-offs over the next few quarters as we work through those loans. As far as guidance, in this quarter, the non-credit-enhanced NCOs did come in slightly above the high end of the range, which was the $4 to 5 million number I think you're referencing. It's kind of normal quarter-to-quarter timing on individual resolutions rather than a deterioration there. We still see $4 to 5 million as kind of the right normalized run rate for that segment.

Speaker #5: When should we start anticipating improvement sequentially in credit quality?

Speaker #1: We anticipate that we'll continue to have NCOs from that group until we fully work through them. As we've noted, we expect elevated charge-offs over the next few quarters.

Speaker #4: So I can't put a this is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that.

Jim Noone: This is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that. We've guided to the $4 to 5 million of non-credit enhanced charge-offs per quarter for the remainder of 2026. We expect the SBA vintage driven elevation to persist over the next few quarters as those vintages continue to season and we work through. The pool is finite and identified roughly about $50 million, and that's what informs this guidance. It's a bounded pool with a guided range, but I can't give you a fixed number of quarters or amount. I would say a lot of it's going to come through to the next couple of quarters and taper on as we go into 2027.

Bob Wahlman: This is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that. We've guided to the $4 to 5 million of non-credit enhanced charge-offs per quarter for the remainder of 2026. We expect the SBA vintage driven elevation to persist over the next few quarters as those vintages continue to season and we work through. The pool is finite and identified roughly about $50 million, and that's what informs this guidance. It's a bounded pool with a guided range, but I can't give you a fixed number of quarters or amount. I would say a lot of it's going to come through to the next couple of quarters and taper on as we go into 2027.

Speaker #1: As we work through those loans, as far as guidance, the in this quarter, the non-credit-enhanced NCOs did come in slightly above the high end of the range, which was the 4 to 5 million dollar number.

Speaker #4: We've got it to the 4 to 5 million dollars of non-credit-enhanced charge-offs per quarter. For the remainder of 2026, and we expect the SBA vintage driven elevation to persist over the next few quarters as those vintages continue to season and we work through.

Speaker #1: I think you're referencing. But it's kind of normal quarter to quarter timing on individual resolutions rather than a deterioration there. So we still see 4 to 5 million as kind of the right normalized run rate.

Speaker #4: But the pool is finite and identified roughly about 50 million dollars. And that's what informs this guidance. So it's a bounded pool with a guided range.

Speaker #1: For that segment.

Speaker #4: Okay. So 4 to 5 is the core portfolio plus strategic loans without credit enhancement?

Andrew Terrell: Okay. Four to 5 is the core portfolio plus strategic loans without credit enhancement?

Speaker #4: But I can't give you a fixed number of quarters or amounts. But I would say it's a lot of it's going to come through to the next couple of quarters and taper on as we go into 2027.

Speaker #1: That's correct.

[Company Representative] (Finwise Bancorp): That's correct.

Bob Wahlmann: That's correct.

Speaker #4: Okay, great. And as you're working through some of these portfolios, I know you're giving kind of explicit backup guidance. It doesn't necessarily imply it, but just help us think about when you feel like you've reached when you feel like you've kind of worked through the majority of this portfolio.

Andrew Terrell: Okay, great. As you're working through some of these portfolios, I know you're giving kind of explicit back-off guidance that doesn't necessarily imply it, but just help us think about when you feel like you've kind of worked through the majority of this portfolio. When should we start anticipating improvements sequentially in credit quality?

Speaker #5: Yep. Okay. Great. I appreciate it. And then can you talk about just with the Tallied acquisition, is that included in they're obviously moving from a credit enhanced position to non-credit enhanced, I would assume, with the acquisition.

Andrew Corell: Yep. Okay. Great. I appreciate it. Can you talk about just with the Tallied acquisition, is that included? They're obviously moving from a credit-enhanced position to non-credit enhanced, I would assume, with the acquisition. Are loss rates against that portfolio baked into your guidance here, or would that be incremental? Just talk about the credit quality of the loan portfolio that you'll be acquiring.

Andrew Terrell: Yep. Okay. Great. I appreciate it. Can you talk about just with the Tallied acquisition, is that included? They're obviously moving from a credit-enhanced position to non-credit enhanced, I would assume, with the acquisition. Are loss rates against that portfolio baked into your guidance here, or would that be incremental? Just talk about the credit quality of the loan portfolio that you'll be acquiring.

Speaker #4: When should we start anticipating improvement sequentially in credit quality?

Speaker #5: Are loss rates against that portfolio baked into your guidance here, or would that be incremental? And just talk about the credit quality of the loan portfolio that you'll be acquiring.

Speaker #1: So I can't put a this is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that.

[Company Representative] (Finwise Bancorp): This is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that. We've guided to the $4 to 5 million of non-credit enhanced charge-offs per quarter for the remainder of 2026.

Bob Wahlmann: This is Bob. I can't put a specific quarter count or point to a quarter when we'll be through that. We've guided to the $4 to 5 million of non-credit enhanced charge-offs per quarter for the remainder of 2026. We expect the SBA vintage driven elevation to persist over the next few quarters as those vintages continue to season and we work through. The pool is finite and identified, roughly about $50 million. That's what informs this guidance. It's a bounded pool with a guided range. I can't give you a fixed number of quarters or amount. I would say a lot of it's going to come through the next couple of quarters and taper on as we go into 2027.

Speaker #4: Yeah, the credit quality is really high, Andrew. We have experience with this. Including during the due diligence of when we onboarded that portfolio, that extended back to the original US bank loan tapes and there's a couple of decades worth there of performance.

Jim Noone: Yeah, the credit quality is really high, Andrew. We have experience with this, including during the due diligence of when we onboarded that portfolio that extended back to the original U.S. Bank loan tapes, and there's a couple of decades worth there of performance. We know the performance really well. It's really high quality. There's not meaningful charge-offs in that portfolio. Is it baked into the NCO guidance? Yes, but it's not material to that number.

Speaker #1: We've got it to the 4 to 5 million dollars of non-credit-enhanced charge-offs per quarter. For the remainder of 2026, and we expect the SBA vintage-driven elevation to persist over the next few quarters as those vintages continue to season and we work through.

[Company Representative] (Finwise Bancorp): We expect the SBA vintage driven elevation to persist over the next few quarters as those vintages continue to season and we work through. The pool is finite and identified, roughly about $50 million. That's what informs this guidance. It's a bounded pool with a guided range. I can't give you a fixed number of quarters or amount. I would say a lot of it's going to come through the next couple of quarters and taper on as we go into 2027.

Speaker #4: So we know the performance really well. It's really high quality. There's not meaningful charge-offs in that portfolio. So is it baked into the NCO guidance?

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the FinWise Bancorp Q3 Fiscal 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session. If you would like to ask a question during this time, press star then the number one on your telephone keypad. To withdraw your question, press star then the number two. If you're using a speakerphone, please pick up your handset before pressing the numbers. Please limit your questions to one question and one follow-up. As a reminder, this conference is being recorded 29 July 2026. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 137-61080. I would now like to turn the call over to Brett Simpson, Senior Vice President of Investor Relations. Mr. Simpson, please go ahead.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Finwise Bancorp Q2 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session. If you would like to ask a question during this time, please press star then the number one on your telephone keypad. To withdraw your question, press star then the number two. If you're using a speakerphone, please pick up your handset before pressing the numbers. Please limit your questions to one question and one follow-up.

Speaker #1: But the pool is finite, and identified roughly about 50 million dollars. And that's what informs this guidance. So it's a bounded pool with a guided range.

Speaker #4: Yes, but it's not material to that number.

Speaker #1: But I can't give you a fixed number of quarters or amounts. But I would say it's a lot of it's going to come through to the next couple of quarters and taper on as we go into 2027.

Speaker #5: Okay. Great. I appreciate it. If I could ask one more, the I appreciate the slide 12 in the presentation. The pipeline for fintech partners and despite you giving it this quarter, I'll have to ask a question you've shown this, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see?

Andrew Corell: Okay. Great. I appreciate it. If I could ask one more. I appreciate the slide 12 in the presentation, the pipeline for Fintech partners. Despite you giving it this quarter, I'll have to ask a question still. Just since it's the Q1 you've shown this, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see, how robust it is compared to the past couple of quarters where we didn't necessarily see this level of disclosure?

Andrew Terrell: Okay. Great. I appreciate it. If I could ask one more. I appreciate the slide 12 in the presentation, the pipeline for Fintech partners. Despite you giving it this quarter, I'll have to ask a question still. Just since it's the Q1 you've shown this, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see, how robust it is compared to the past couple of quarters where we didn't necessarily see this level of disclosure?

Speaker #4: Yep. Okay. Great. I appreciate it. And then can you talk about just with the Tallied acquisition, is that included in they're obviously moving from a credit-enhanced position to non-credit-enhanced, I would assume, with the acquisition.

Andrew Terrell: Yep. Okay. Great. I appreciate it. Can you talk about just with the Tally acquisition, is that included? They're obviously moving from a credit-enhanced position to non-credit enhanced, I would assume, with the acquisition. Are loss rates against that portfolio baked into your guidance here, or would that be incremental? Just talk about the credit quality of the loan portfolio that you'll be acquiring.

Operator: As a reminder, this conference is being recorded on July 29, 2026. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 13761080. I would now like to turn the call over to Brett Simpson, Senior Vice President of Investor Relations. Mr. Simpson, please go ahead.

Speaker #5: How robust it is compared to the past couple of quarters where we couldn't necessarily see this level of disclosure?

Speaker #4: Are loss rates against that portfolio baked into your guidance here, or would that be incremental? And just talk about the credit quality of the loan portfolio that you'll be acquiring.

Speaker #4: Yep. Yeah. So we thought you that would be a helpful slide this quarter. I had mentioned last quarter, Andrew, that the pipeline was stronger than I had seen it in the eight years I've been at the bank.

Jim Noone: Yep. Yeah. We thought that would be a helpful slide this quarter. I had mentioned last quarter, Andrew, that the pipeline was stronger than I had seen it in the eight years I've been at the bank. It's just continuing to compound right now. We added that slide to the investor deck to give you some detail on what it looks like, expected launch dates, and kind of the breadth of product. It does give some color, I think, on why I was so bullish on Fintech sales last quarter. I expect that to continue to grow, both in number and in breadth of product. Sarah Grotta and her team are doing a really great job, we intend to keep executing to convert those into contracts and announcements.

Speaker #1: Yeah, the credit quality is really high, Andrew. We have experience with this, including during the due diligence when we onboarded that portfolio. That extended back to the original U.S. Bank loan tapes, and there's a couple of decades' worth there of performance.

[Company Representative] (Finwise Bancorp): Yeah, the credit quality is really high, Andrew. We have experience with this, including during the due diligence of when we onboarded that portfolio that extended back to the original U.S. Bank loan tapes, and there's a couple decades worth there of performance. We know the performance really well. It's really high quality. There's not meaningful charge-offs in that portfolio. Is it baked into the NCO guidance? Yes, but it's not material to that number.

Bob Wahlmann: Yeah, the credit quality is really high, Andrew. We have experience with this, including during the due diligence of when we onboarded that portfolio that extended back to the original U.S. Bank loan tapes, and there's a couple decades worth there of performance. We know the performance really well. It's really high quality. There's not meaningful charge-offs in that portfolio. Is it baked into the NCO guidance? Yes, but it's not material to that number.

Speaker #4: And it's just continuing to compound right now. We added that slide to the investor looks like expected launch dates and kind of the breadth of product.

Brett Simpson: Thank you. Good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation that accompany this call on our investor relations website. In addition, this call is being webcast on qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends, or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements.

Speaker #4: It does give some color, I think, on why I was so bullish on fintech sales last quarter. I expect that to continue to grow.

Speaker #1: So we know the performance really well. It's really high quality. There aren't meaningful charge-offs in that portfolio. So, is it baked into the NCO guidance?

Speaker #4: Both in number and in breadth of product. Sarah Gratta and her team are doing a really great job. And we intend to keep executing to convert those into contracts and announcements.

Speaker #1: Yes, but it's not it's not material to that number.

Speaker #4: And this announcement that we did with the prepaid partner as part of our earnings call this quarter is really just the first one. And you'll have more coming in the back half of the year here.

Jim Noone: This announcement that we did with the prepaid partner as part of our earnings call this quarter is really just the first one, and you'll have more coming in the back H2 of the year here.

Speaker #4: Okay. Great. I appreciate it. If I could ask one more, the I appreciate the slide 12 in the presentation. The pipeline for fintech partners and despite you giving it this quarter, I'll have to ask a question still.

Andrew Terrell: Okay. Great. I appreciate it. If I could ask one more. I appreciate the slide 12 in the presentation, the pipeline for fintech partners. Despite you giving it this quarter, I have to ask a question still. Since it's the Q1 you've shown this, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see, how robust it is compared to the past couple of quarters where we couldn't necessarily see this level of disclosure?

Speaker #5: Great. Thank you so much for taking the questions.

Andrew Corell: Great. Thank you so much for taking the questions.

Andrew Terrell: Great. Thank you so much for taking the questions.

Speaker #4: Yep, you're welcome.

Jim Noone: Yep, you're welcome.

Speaker #4: Just since it's the first quarter you've shown this, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see?

Speaker #3: And as a reminder, if you do have a question, please press star one on your telephone keypad. Next, we'll move to Manuel Navas with Piper Sandler.

Operator: As a reminder, if you do have a question, please press star one on your telephone keypad. Next, I'll move to Manuel Navas with Piper Sandler.

Brett Simpson: Please refer to our SEC filings, including our most recent 10-Q, which contain important factors that could cause actual results to differ materially from the forward-looking statements. Now to comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon.

Speaker #4: How robust is it compared to the past couple of quarters, where we couldn't necessarily see this level of disclosure?

Speaker #2: I also appreciate this slide 12. Are the new partner types considered kind of new partner additions or extra programs with current partners?

Speaker #1: Yep. Yeah. So we thought you that would be a helpful slide this quarter. I had mentioned last quarter, Andrew, that the pipeline was stronger than I had seen it in the eight years I've been at the bank.

Manuel Navas: I also appreciate this slide 12. Are the new partner types considered kind of new partner additions or extra programs with current partners?

[Company Representative] (Finwise Bancorp): Yep. Yeah, we thought that would be a helpful slide this quarter. I had mentioned last quarter, Andrew, that the pipeline was stronger than I had seen it in the 8 years I've been at the bank. It's just continuing to compound right now. We added that slide to the investor deck to give you some detail on what it looks like, expected launch dates, and kind of the breadth of product. It does give some color, I think, on why I was so bullish on fintech sales last quarter. I expect that to continue to grow both in number and in breadth of product. Sarah Grotta and her team are doing a really great job, and we intend to keep executing to convert those into contracts and announcements.

Bob Wahlmann: Yep. Yeah, we thought that would be a helpful slide this quarter. I had mentioned last quarter, Andrew, that the pipeline was stronger than I had seen it in the 8 years I've been at the bank. It's just continuing to compound right now. We added that slide to the investor deck to give you some detail on what it looks like, expected launch dates, and kind of the breadth of product. It does give some color, I think, on why I was so bullish on fintech sales last quarter. I expect that to continue to grow both in number and in breadth of product.

Cristiano Amon: Thank you, Brett, and good afternoon, everyone. Thanks for joining us today. In fiscal Q3, we delivered revenues of $9.9 billion, coming in at the high end of our guidance and non-GAAP earnings per share of $2.21. QCT revenues were $8.5 billion, with another quarter of record automotive revenues, as well as growth in IoT. Licensing business revenues were $1.3 billion. At our recent Investor Day, we lay out the next chapter of Qualcomm, built across three dimensions. One, expanding into the data center with four unique product lines. Two, driving agentic and physical AI compute everywhere. Three, expanding beyond silicon to full stack software and platform solutions.

Speaker #1: And it's just continuing the compound right now. We added that slide to the investor deck to give you some detail on what it looks like expected launch dates and kind of the breadth of product.

Speaker #4: So they're kind of they're both shown there, Manuel. If you look on that far left-hand column, you can see we put that partner type.

Jim Noone: They're both shown there, Manuel. If you look on that far left-hand column, you can see we put that partner type. While a majority are certainly new partners, like fully new partners to the bank, there are two existing partners on there where we are adding new products for those two new partners, and those are kind of slots 2 and 3 there.

Speaker #4: And so while the majority are certainly new partners, right, like new fully new partners to the bank, there are two existing partners on there, where we are adding new products.

Speaker #1: It does give some color, I think, on why I was so bullish on fintech sales last quarter. I expect that to continue to grow.

Speaker #1: Both in number and in breadth of product. Sarah Gratta and her team are doing a really great job. And we intend to keep executing to convert those into contracts and announcements.

Speaker #4: For those two new partners. And those are kind of slots two and three there.

Bob Wahlmann: Sarah Grotta and her team are doing a really great job, and we intend to keep executing to convert those into contracts and announcements. This announcement that we did with the prepaid partner as part of our earnings call this quarter is really just the first one, and you'll have more coming in the H2 here.

Speaker #2: And the launch dates on here, you have three programs in the fourth quarter of this year. Would that mean revenue would hit in the launch date or would it be a little bit after?

Manuel Navas: The launch dates on here, you have three programs in Q4 of this year. Would that mean revenue would hit in the launch date, or would it be a little bit after?

Speaker #1: And this announcement that we did with the prepaid partner as part of our earnings call this quarter is really just the first one. And you'll have more coming in the back half of the year here.

[Company Representative] (Finwise Bancorp): This announcement that we did with the prepaid partner as part of our earnings call this quarter is really just the first one, and you'll have more coming in the H2 here.

Speaker #4: Yeah, so launch means we're operationally live. Revenue would begin accruing at that point. But two things I would point out to you. To just make sure you guys kind of have this on your radar.

Jim Noone: Yeah. Launch means we're operationally live. Revenue would begin accruing at that point. Two things I would point out to you to just make sure you guys kind of have this on your radar. One is when we make the announcement, that's typically upon contract signing. There might be a few weeks generally between when we sign a contract and when we're ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations. That's number 1. Number 2, while we're live and kind of revenue-producing day one of the launch, there's generally a piloting period and certainly a scaling period with the fintech as their volumes pick up.

Speaker #4: Great. Thank you so much for taking the questions.

Andrew Terrell: Great. Thank you so much for taking the questions.

Cristiano Amon: We also updated our fiscal 2029 financial targets, which now include more than $24 billion in revenue across automotive and IoT, plus more than $15 billion in data center, bringing our total non-handset revenue outlook to $40 billion by fiscal 2029, up from our previous target of $22 billion. This reflects our conviction in the opportunities throughout the end of the decade and the scale of our business diversification. In the short term, the entire industry continues to be impacted by unprecedented memory prices, higher manufacturing and input costs, as well as supply chain shortages driven by overall data center demand. In addition to the resulting revenue decline in mobile and consumer electronics, this is creating short-term pressure on QCT gross margins, which will be slightly below our historical range. We're implementing price increases, as they take effect, we expect to see gross margins realign to our operating model.

Cristiano Amon: We also updated our fiscal 2029 financial targets, which now include more than $24 billion in revenue across Automotive and IoT, plus more than $15 billion in Data Center, bringing our total non-handset revenue outlook to $40 billion by fiscal 2029, up from our previous target of $22 billion. This reflects our conviction in the opportunities throughout the end of the decade and the scale of our business diversification. In the short term, the entire industry continues to be impacted by unprecedented memory prices, higher manufacturing and input costs, as well as supply chain shortages driven by overall Data Center demand. In addition to the resulting revenue decline in mobile and consumer electronics, this is creating short-term pressure on QCT gross margins, which will be slightly below our historical range. We're implementing price increases. As they take effect, we expect to see gross margins realign to our operating model.

Speaker #1: Yep, you're welcome.

[Company Representative] (Finwise Bancorp): Yep, you're welcome.

Bob Wahlmann: Yep, you're welcome.

Speaker #2: And as a reminder, if you do have a question, please press star one on your telephone keypad. Next, we'll move to Manuel Navos with Piper Sandler.

Operator: As a reminder, if you do have a question, please press star one on your telephone keypad. Next, we'll move to Manuel Navas with Piper Sandler.

Speaker #4: One is when we make the announcement, that's typically upon contract signing. There might be a few weeks generally between when we sign a contract and when we're ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations.

Speaker #5: I also appreciate this slide 12. Are the new partner types considered kind of new partner additions or extra programs with current partners?

Manuel Navas: I also appreciate this slide 12. Are the new partner types considered kind of new partner additions or extra programs with current partners?

Speaker #4: So that's number one. Number two, while we're live and kind of revenue producing day one, of the launch, there's generally a piloting period. And certainly a scaling period with the fintech.

Speaker #1: So, they're both shown there, Manuel. If you look on that far left-hand column, you can see we put that partner type.

[Company Representative] (Finwise Bancorp): They're both shown there, Manuel. If you look on that far left-hand column, you can see we put that partner type. While a majority are certainly new partners, like fully new partners to the bank, there are two existing partners on there where we are adding new products for those two new partners, and those are kind of slots two and three there.

Bob Wahlmann: They're both shown there, Manuel. If you look on that far left-hand column, you can see we put that partner type. While a majority are certainly new partners, like fully new partners to the bank, there are two existing partners on there where we are adding new products for those two new partners, and those are kind of slots two and three there.

Speaker #1: And so while the majority are certainly new partners, right, like new fully new partners to the bank, there are two existing partners on there, where we are adding new products for those two new partners.

Speaker #4: As their volumes pick up and generally there's at least a few quarters between when we go live and when we're comfortable kind of updating whether it's origination guidance or other stuff with you guys because we have more of a track record to point to and more evidence to point to.

Jim Noone: Generally, there's at least a few quarters between when we go live and when we're comfortable kind of updating, whether it's origination guidance or other stuff with you guys, because we have more of a track record to point to and more evidence to point to.

Speaker #1: And those are kind of slots two and three there.

Speaker #5: And the launch dates on here, you have three programs in the fourth quarter of this year. Would that mean revenue would hit in the launch date or would it be a little bit after?

Manuel Navas: The launch dates on here, you have three programs in Q4 of this year. Would that mean revenue would hit in the launch date, or would it be a little bit after?

Speaker #2: So in essence, you've announced one new partner at the beginning of this call. This has five further partners in the pipeline that are just on the term sheet side, but that should hopefully pull through and that'd be five more partner additions.

Manuel Navas: That says you've announced one new partner at the beginning of this call.

Cristiano Amon: Despite these headwinds, we expect top-line growth for Qualcomm in fiscal 2027, driven by an inflection in non-handset revenues throughout the fiscal year. We're incredibly excited about the next chapter of Qualcomm, our relevance in the next phase of AI, and distributed intelligence from edge to cloud. We remain firmly focused on the execution phase of our strategy. I will now share some key highlights on the business. Let me start with data center. This is the ideal and logical time for Qualcomm to enter the market as agentic workloads are reshaping the economics of AI. Efficient token generation and total cost of ownership are fundamental to scaling AI; as a result, inference is becoming disaggregated in the data center and will be increasingly distributed. This means hybrid inference will evolve across the entire compute continuum, from data center to on-premise network edge and edge devices.

Cristiano Amon: Despite these headwinds, we expect top-line growth for Qualcomm in fiscal 2027, driven by an inflection in non-handset revenues throughout the fiscal year. We're incredibly excited about the next chapter of Qualcomm, our relevance in the next phase of AI, and distributed intelligence from edge to cloud. We remain firmly focused on the execution phase of our strategy. I will now share some key highlights on the business. Let me start with data center. This is the ideal and logical time for Qualcomm to enter the market as agentic workloads are reshaping the economics of AI. Efficient token generation and total cost of ownership are fundamental to scaling AI, as a result, inference is becoming disaggregated in the data center and will be increasingly distributed. This means hybrid inference will evolve across the entire compute continuum from data center to on-premise network edge and edge devices.

Jim Noone: Yep.

Manuel Navas: This has five further partners in the pipeline that are just on the term sheet side, but that should hopefully pull through, and would that'd be five more partner additions? Is that the right way to read that?

Speaker #1: Yeah. So launch means we're operationally live. Revenue would begin accruing at that point. But two things I would point out to you. To just make sure you guys kind of have this on your radar.

[Company Representative] (Finwise Bancorp): Yeah. Launch means we're operationally live. Revenue would begin accruing at that point. But two things I would point out to you to just make sure you guys kind of have this on your radar. One is when we make the announcement, that's typically upon contract signing. There might be a few weeks generally between when we sign a contract and when we're ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations. That's number one. Number two, while we're live and kind of revenue-producing day one of the launch, there's generally a piloting period and certainly a scaling period with the fintech as their volumes pick up.

Bob Wahlmann: Yeah. Launch means we're operationally live. Revenue would begin accruing at that point. But two things I would point out to you to just make sure you guys kind of have this on your radar. One is when we make the announcement, that's typically upon contract signing. There might be a few weeks generally between when we sign a contract and when we're ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations. That's number one. Number two, while we're live and kind of revenue-producing day one of the launch, there's generally a piloting period and certainly a scaling period with the fintech as their volumes pick up.

Speaker #2: Is that the right way to read that?

Speaker #4: Yeah, I think four of them are signed term sheets, like fully new partners. Another one is where we've got commercial terms agreed to, but not necessarily a time signed term sheet by the time we went to press with the deck.

Jim Noone: Yeah. I think four of them are signed term sheets, like fully new partners. Another one is where we've got commercial terms agreed to, but not necessarily a signed term sheet by the time we went to press with the deck. Yes, generally.

Speaker #1: One is when we make the announcement, that's typically upon contract signing. There might be a few weeks generally between when we sign a contract and when we're ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations.

Speaker #4: But yes, generally.

Speaker #2: Callie just happened. Has its improved product offering platform for you has that enhanced your ability to compete or land any of this pipeline of deals?

Manuel Navas: Tallied just happened. Has its improved product offering platform for you, has that enhanced your ability to compete or land any of this pipeline of deals? Is it already relevant or is it that's still to help you down the road?

Speaker #1: So that's number one. Number two, while we're live and kind of revenue producing day one, of the launch, there's generally a piloting period. And certainly a scaling period with the fintech.

Speaker #1: As their volumes pick up and generally there's at least a few quarters between when we go live and when we're comfortable kind of updating whether it's origination guidance or other stuff with you guys because we have more of a track record to point to and more evidence to point to.

[Company Representative] (Finwise Bancorp): Generally, there's at least a few quarters between when we go live and when we're comfortable kind of updating whether it's origination guidance or other stuff with you guys because we have more of a track record to point to and more evidence to point to.

Bob Wahlmann: Generally, there's at least a few quarters between when we go live and when we're comfortable kind of updating whether it's origination guidance or other stuff with you guys because we have more of a track record to point to and more evidence to point to.

Speaker #2: Is it already relevant or is it that's still to help you down the road?

Speaker #4: It's already relevant. It's not demonstrated in the slide that we're referencing. So as far as conversations and calls, it's definitively relevant. But it's not part of what's on that slide.

Jim Noone: It's already relevant. It's not demonstrated in the slide that we're referencing. As far as conversations and calls, it's definitively relevant, but it's not part of what's on that slide.

Cristiano Amon: Given Qualcomm's assets, it's a natural evolution of our growth story. We are developing a differentiated set of product lines, including connectivity in fiscal 2026, custom silicon and AI accelerators in fiscal 2027, and server-class CPUs in fiscal 2028. Our portfolio is rolling out in phases over the next two years, leveraging decades of leadership in power-efficient compute and strong ecosystem presence and relationships. Our two near-term custom silicon wins will be revenue-generating in the December quarter, and we have begun wafer production. Both projects are in the first phase of strategic multi-year customer relationships that we expect to expand over time. Our innovative High Bandwidth Compute solution is designed to address one of the industry's most difficult bottlenecks by integrating compute directly with high-density memory, improving performance per watt, memory efficiency, and total cost of ownership.

Cristiano Amon: Given Qualcomm's assets, it's a natural evolution of our growth story. We are developing a differentiated set of product lines, including connectivity in fiscal 2026, custom silicon and AI accelerators in fiscal 2027, and server class CPUs in fiscal 2028. Our portfolio is rolling out in phases over the next two years, leveraging decades of leadership in power efficient compute and strong ecosystem presence and relationships. Our two near-term custom silicon wins will be revenue generating in the December quarter, and we have begun wafer production. Both projects are in the first phase of strategic multi-year customer relationships that we expect to expand over time. Our innovative High Bandwidth Compute solution is designed to address one of the industry's most difficult bottlenecks by integrating compute directly with high-density memory, improving performance per watt, memory efficiency, and total cost of ownership.

Speaker #5: So in essence, you've announced one new partner at the beginning of this call. This has five further partners in the pipeline that are just on the term sheet side, but that should hopefully pull through and that'd be five more partner additions.

Manuel Navas: In essence, you've announced one new partner at the beginning of this call.

Manuel Navas: Awesome. How quickly can you act on the buyback? You said your tangible book value is key. When can you start from today?

Speaker #2: Awesome. How quickly could you act on the buyback? You said you're potential book value is key. Can you start as soon as when can you start from today?

[Company Representative] (Finwise Bancorp): Yep.

Bob Wahlmann: Yep.

Manuel Navas: This has five further partners in the pipeline that are just on the term sheet side, but that should hopefully pull through. Now, would that be five more partner additions? Is that the right way to read that?

Speaker #5: Is that the right way to read that?

Speaker #1: Yeah, I think four of them are signed term sheets—like, fully new partners. Another one is where we've got commercial terms agreed to, but not necessarily a signed term sheet by the time we went to press with the deck.

[Company Representative] (Finwise Bancorp): Yeah. I think four of them are signed term sheets, like fully new partners. Another one is where we've got commercial terms agreed to, but not necessarily a signed term sheet by the time we went to press with the deck. Yes, generally.

Bob Wahlmann: Yeah. I think four of them are signed term sheets, like fully new partners. Another one is where we've got commercial terms agreed to, but not necessarily a signed term sheet by the time we went to press with the deck. Yes, generally.

Speaker #4: So we will have a short period to allow the earnings to disseminate. But this is Wednesday and I believe we start on Friday.

Jim Noone: We will have a short period to allow the earnings to disseminate. This is Wednesday, and I believe we start on Friday.

Speaker #1: But yes, generally.

Speaker #2: Okay. Originations were solid. Can you break down the way it built and kind of beat expectations a little bit this quarter? And why not a little bit higher origination progression going forward?

Manuel Navas: Okay. Originations were solid. Can you break down the way it built and kind of beat expectations a little bit this quarter? Why not a little bit higher origination progression going forward?

Speaker #5: Callie just happened. Has its improved product offering platform for you—has that enhanced your ability to compete or land any of this pipeline of deals?

Manuel Navas: Tally just happened. Has its improved product offering platform for you, has that enhanced your ability to compete or land any of this pipeline of deals? Is it already relevant or is it that's still to help you down the road?

Cristiano Amon: I'm pleased to report that we have completed the tape-out of HBC Gen 1, an engineering milestone that move us into the next phase of customer engagements. We expect to demonstrate HBC performance on silicon in the coming quarters ahead of the launch of our first HBC solution in mid-2027. Across our merchant platforms, including HBC-based AI accelerators, server connectivity, and CPUs, we are in active conversations with nearly every leading data center player about building long-term partnerships. We're pleased with the activity and interest across these opportunities and expect to share more as they advance. As announced earlier today, we have closed our acquisition of Modular Incorporated, and integration is now underway. Modular strengthens our ability to deliver an end-to-end software stack for data center and edge AI deployments.

Speaker #5: Is it already relevant, or is it something that's still to help you down the road?

Speaker #4: Sure. Yeah. So the originations were pretty strong here, Manuel. At 1.6 billion in the quarter. It exceeded our guidance of 1.4. It's up roughly 8% year over year.

Jim Noone: Sure. Yeah. The originations were pretty strong here, Manuel Navas, at $1.6 billion in the quarter. It exceeded our guidance of $1.4 billion. It's up roughly 8% year over year. As far as the composition this quarter, the student lending seasonality is the only program-level change that was material. That reduction in Q2 was offset by kind of more measured increases across the board with our programs. All in all, we were really happy with originations in the quarter. There's one other comment I think I would just make here, which is, in March 2023, our originations kind of troughed out at $850 million. Kind of what we told folks at the time was the fundamentals of the business were sound. The issues at the time were not going to alter the trajectory.

Speaker #1: It's already relevant. It's not demonstrated in the slide that we're referencing. So as far as conversations and calls, it's definitely relevant, but it's not part of what's on that slide.

[Company Representative] (Finwise Bancorp): It's already relevant. It's not demonstrated in the slide that we're referencing. As far as conversations and calls, it's definitively relevant, but it's not part of what's on that slide.

Bob Wahlmann: It's already relevant. It's not demonstrated in the slide that we're referencing. As far as conversations and calls, it's definitively relevant, but it's not part of what's on that slide.

Speaker #4: As far as the composition this quarter, the student lending seasonality is the only program level change that was material. And that reduction in Q2 was offset by kind of more measured increases across the board with our programs.

Speaker #5: Awesome. How quickly could you act on the buyback? You said your potential book value is key. Can you start as soon as when can you start from today?

Manuel Navas: Awesome. How quickly can you act on the buyback? You said your tangible book value is key. When can you start from today?

Speaker #4: So all in all, we were really happy with originations in the quarter. And there's one other comment. I think I would just make here.

Speaker #4: Which is in March of '23, our originations kind of troughed out at 850 million. And kind of what we told folks at the time was the fundamentals of the business were sound.

Speaker #1: So we will have a short period to allow the earnings to disseminate. But this is Wednesday and I believe we start on Friday.

[Company Representative] (Finwise Bancorp): We will have a short period to allow the earnings to disseminate. This is Wednesday, and I believe we start on Friday.

Bob Wahlmann: We will have a short period to allow the earnings to disseminate. This is Wednesday, and I believe we start on Friday.

Speaker #4: The issues at the time were not going to alter the trajectory. And we're consistently originating at kind of twice those levels now. So I think it's important to point out.

Speaker #5: Okay. Originations were solid. Can you break down the way it built and kind of beat expectations a little bit this quarter? And why not a little bit higher origination progression going forward?

Manuel Navas: Great. Originations were solid. Can you break down the way it built and kind of beat expectations a little bit this quarter? Why not a little bit higher origination progression going forward?

Jim Noone: We're consistently originating at kind of twice those levels now. I think it's important to point out. It's also important to remember those types of times as we work through this legacy SBA portfolio. We know what it is. We've gone through this before, whether it's with fintech credits that we retained in some of the NCOs back in 2022 or the origination trough-out in 2023 with some of our fintech partners. None of this alters the trajectory of the company. We're very comfortable with kind of how things are trending and managing through, whether it's originations or the legacy SBA pool.

Cristiano Amon: It will also be hardware-agnostic, helping simplify AI software complexity across multiple platforms and giving developers a modern and open environment for a heterogeneous compute. This is an important step in how we see AI infrastructure evolving with software and hardware coming together to deliver better performance, flexibility, and efficiency. Our vision and objective with Modular goes far beyond augmenting our AI software capabilities. We have the ambition to change the current industry approach to AI software from closed to open systems to promote enhanced competition, innovation, and resilience. Modular will host ModCon in August with some incredible announcements from industry partners, and we look forward to further engaging with developers and ecosystem partners at this event. In automotive, customer momentum continues to drive exceptional revenue growth.

Speaker #4: It's also important to remember those types of times as we work through the this legacy SBA portfolio. We know what it is. We've gone through this before, whether it's with fintech credits that we retained and some of the NCOs back in '22.

Speaker #1: Sure. Yeah. So the originations were pretty strong here, Manuel, at $1.6 billion in the quarter. It exceeded our guidance of $1.4 billion. It's up roughly 8% year over year.

[Company Representative] (Finwise Bancorp): Sure. Yeah, the originations were pretty strong here, Manuel. At $1.6 billion in the quarter, it's exceeded our guidance of $1.4 billion. It's up roughly 8% year-over-year. As far as the composition this quarter, the student lending seasonality is the only program-level change that was material. That reduction in Q2 was offset by more measured increases across the board with our programs. All in all, we were really happy with originations in the quarter. There's one other comment I think I would just make here, which is in March 2023, our originations kind of troughed out at $850 million. What we told folks at the time was the fundamentals of the business were sound. The issues at the time were not going to alter the trajectory. We're consistently originating at kind of twice those levels now.

Bob Wahlmann: Sure. Yeah, the originations were pretty strong here, Manuel. At $1.6 billion in the quarter, it's exceeded our guidance of $1.4 billion. It's up roughly 8% year-over-year. As far as the composition this quarter, the student lending seasonality is the only program-level change that was material. That reduction in Q2 was offset by more measured increases across the board with our programs. All in all, we were really happy with originations in the quarter. There's one other comment I think I would just make here, which is in March 2023, our originations kind of troughed out at $850 million. What we told folks at the time was the fundamentals of the business were sound. The issues at the time were not going to alter the trajectory. We're consistently originating at kind of twice those levels now.

Speaker #4: Or the origination trough out in '23 with some of our fintech partners. None of this alters the trajectory of the company. And we're very comfortable with kind of how things are trending and managing through whether it's originations or the legacy SBA pool.

Speaker #1: As far as the composition this quarter, the student lending seasonality is the only program level change that was material. And that reduction in Q2 was offset by kind of more measured increases across the board with our programs.

Speaker #2: I appreciate that. My last question for me is, can you kind of break up expectations for new loan growth? You kind of pulled the guide on the credit enhanced loan growth because a portion of it is tallied.

Manuel Navas: I appreciate that. My last question for me is, can you kind of break up expectations for new loan growth? You kind of pulled the guide on the credit-enhanced loan growth because a portion of it is Tallied. Where should balance sheet loan growth go going forward? Describe, if you can, some of the credit-enhanced growth on a quarter-to-quarter basis. What are kind of some of your plans for balance sheet growth?

Speaker #1: So all in all, we were really happy with originations in the quarter. And there's one other comment. I think I would just make here.

Speaker #1: Which is in March of '23, our originations kind of troughed out at $850 million. And kind of what we told folks at the time was the fundamentals of the business were sound.

Cristiano Amon: This quarter, we signed a landmark expanded agreement with BMW, winning a highly competitive selection process to become the lead compute silicon provider for their next generation ADAS as well as digital cockpit. This agreement represents a material expansion of our automotive pipeline and establishes Qualcomm as the lead compute silicon partner for BMW, extending across model programs well into the next decade. We look forward to building on our existing cooperation with BMW in the years ahead. Additionally, our recently announced collaboration with Stellantis supports our automotive pipeline well into the 2030s. These agreements reflect the broad interest we're seeing for digital cockpit and ADAS. Customers are shifting from socket-by-socket design awards to multi-generation strategic engagements as they increasingly recognize the value of our broad technology portfolio, platform approach, and long-term commitment to partnerships, the automotive industry, and open ecosystems.

Speaker #2: Where should balance sheet loan growth go going forward? And describe if you can some of the credit enhanced growth on a quarter-to-quarter basis. What are kind of some of your plans for balance sheet growth?

Speaker #1: The issues at the time were not going to alter the trajectory, and we're consistently originating at about twice those levels now. So I think it's important to point that out.

Speaker #4: Yep. So I think we're seeing let's say more measured growth in a number of our portfolios. Although you certainly did see our SBA balances were down quarter over quarter.

Jim Noone: Yep. I think we're seeing, let's say, more measured growth in a number of our portfolios. Although you certainly did see our SBA balances were down quarter-over-quarter. Some of that was loan sales, some of it was working through non-performers. As far as Credit Enhanced Balance Sheet, we grew that from zero to $100 million in a couple of quarters. We withdrew the guidance, like you said, mostly related to Tallied, and that portfolio having been one of the growth engines there, and then converting that to the direct portfolio as part of the acquisition just made guidance there more difficult, I would say. We got off to a quick start. We beat expectations. We have to bring in additional partners to grow meaningfully from here. We do have some growth in the other partners. It is just more gradual.

[Company Representative] (Finwise Bancorp): I think it's important to point out. It's also important to remember those types of times as we work through this legacy SBA portfolio. We know what it is. We've gone through this before, whether it's with fintech credits that we retained in some of the NCOs back in 2022 or the origination trough-out in 2023 with some of our fintech partners. None of this alters the trajectory of the company. We're very comfortable with how things are trending and managing through, whether it's originations or the legacy SBA pool.

Bob Wahlmann: I think it's important to point out. It's also important to remember those types of times as we work through this legacy SBA portfolio. We know what it is. We've gone through this before, whether it's with fintech credits that we retained in some of the NCOs back in 2022 or the origination trough-out in 2023 with some of our fintech partners. None of this alters the trajectory of the company. We're very comfortable with how things are trending and managing through, whether it's originations or the legacy SBA pool.

Speaker #1: It's also important to remember those types of times as we work through the this legacy SBA portfolio. We know what it is. We've gone through this before, whether it's with fintech credits that we retained and some of the NCOs back in '22.

Speaker #4: Some of that was loan sales. Some of it was working through non-performers. As far as credit enhanced balance sheet, we grew that from zero to 100 million in a couple of quarters we withdrew the guidance, like you said, mostly related to tallied and that having that portfolio having been one of the growth engines there and then converting that to the direct portfolio as part of the acquisition just made guidance there more difficult, I would say.

Speaker #1: Or the origination trough out in '23 with some of our fintech partners. None of this alters the trajectory of the company. And we're very comfortable with kind of how things are trending and managing through whether it's originations or the legacy SBA pool.

Speaker #5: I appreciate that. My last question for me is, can you kind of break up expectations for new loan growth? You kind of told the guide on the credit enhanced loan growth because a portion of it is tallied.

Manuel Navas: I appreciate that. My last question for me is, can you kind of break up expectations for new loan growth? You kind of pulled the guide on the credit-enhanced loan growth because a portion of it is Tally. Where should balance sheet loan growth go going forward? Describe, if you can, some of the credit-enhanced growth on a quarter-to-quarter basis. What are some of your plans for balance sheet growth?

Cristiano Amon: Further, with our fifth generation Snapdragon Digital Chassis ramping in September, we're delivering a significant increase in content per vehicle, and we are on track to become the number one automotive semiconductor player by revenue. Last quarter, we said we were targeting an annualized revenue run rate of $6 billion as we exit fiscal 2026. Today, we're raising that outlook and now expect annualized sales of approximately $7 billion exiting fiscal 2026. Within industrial, we're strengthening our position across many verticals as they embrace AI at the edge and open weight models. At our Investor Day, we introduced a fiscal 2029 projection of $8 billion in revenue for industrial networking and robotics. We're happy to report that our industrial design win pipeline exceeds $7 billion with over $3.5 billion in design wins secured this fiscal year.

Speaker #4: So we got off to a quick start. We beat expectations. And we have to bring in additional partners to grow meaningfully from here. But we do have some growth in the other partners.

Speaker #4: It's just more gradual. And so that's part of why we pulled guidance on the credit enhanced this quarter.

Jim Noone: That's part of why we pulled guidance on the Credit Enhance this quarter.

Speaker #5: Where should balance sheet loan growth go going forward and describe if you can some of the credit enhanced growth on a quarter-to-quarter basis? What are kind of some of your plans for balance sheet growth?

Speaker #2: Thank you for the commentary.

Manuel Navas: Thank you for the commentary.

Speaker #4: Yep, you're welcome.

Jim Noone: Yep, you're welcome.

Speaker #1: Yep. So I think we're seeing let's say more measured growth in a number of our portfolios. Although you certainly did see our SBA balances were down quarter over quarter.

Speaker #1: And we do have a question that has come in via email. And we will let Juan Arias handle that. Please go ahead, sir.

Operator: We do have a question that has come in via email. We will let Juan Arias handle that. Please go ahead, sir.

[Company Representative] (Finwise Bancorp): Yep. I think we're seeing, let's say, more measured growth in a number of our portfolios. Although you certainly did see our SBA balances were down quarter-over-quarter. Some of that was loan sales, some of it was working through non-performers. As far as credit-enhanced balance sheet, we grew that from zero to $100 million in a couple of quarters. We withdrew the guidance, like you said, mostly related to Tally. That portfolio having been one of the growth engines there and then converting that to the direct portfolio as part of the acquisition just made guidance there more difficult, I would say. We got off to a quick start. We beat expectations. We have to bring in additional partners to grow meaningfully from here. We do have some growth in the other partners. It's just more gradual.

Bob Wahlmann: Yep. I think we're seeing, let's say, more measured growth in a number of our portfolios. Although you certainly did see our SBA balances were down quarter-over-quarter. Some of that was loan sales, some of it was working through non-performers. As far as credit-enhanced balance sheet, we grew that from zero to $100 million in a couple of quarters. We withdrew the guidance, like you said, mostly related to Tally. That portfolio having been one of the growth engines there and then converting that to the direct portfolio as part of the acquisition just made guidance there more difficult, I would say.

Speaker #2: Thanks, operator. The question I think this is for Bob. How should we think about the earnings trajectory in the second half of 2026 and into 2027 relative to the first half of 2026?

Juan Arias: Thanks, operator. The question, I think this is for Bob. How should we think about the earnings trajectory in H2 2026 and into 2027 relative to H1 2026? What are the key earnings and growth drivers investors should be focused on?

Speaker #1: Some of that was loan sales. Some of it was working through non-performers. As far as credit enhanced balance sheet, we grew that from zero to 100 million in a couple of quarters we withdrew the guidance, like you said, mostly related to tallied and that having that portfolio having been one of the growth engines there and then converting that to the direct portfolio as part of the acquisition just made guidance there more difficult, I would say.

Speaker #2: What are the key earnings and growth drivers investors should be focused on?

Cristiano Amon: This reflects strong customer demand and a meaningful increase in new businesses. We have a very broad portfolio of purpose-built silicon and full stack software solutions for this category. Our channel presence exceeds 38,000 customers, supported by a deep partner ecosystem that is already yielding results. With Arduino and Edge Impulse, our reach now extends to more than 30 million users. Moving on to handsets. Despite overall industry contraction caused by the current memory environment, we're seeing early signs of an agentic smartphone cycle that will grow over time. In China, major OEMs are preparing to bring new on-device agents and orchestrators to market, and we believe agentic experiences will play a larger role in premium tier demand as adoption grows. Our share position at Samsung remains strong, with Snapdragon powering approximately 70% of their flagship devices.

Speaker #4: Well, that's a great question. It's driven by a lot of considerations. Key assumptions and variables as to what drives our revenues and what drives our expenses.

Robert Wahlman: Well, that's a great question. It's driven by a lot of considerations, key assumptions, and variables as to what drives our revenues and what drives our expenses. Maybe that's the best way to approach it. I'll go through what I think of being the key assumptions first, the key drivers first.

Bob Wahlman: Well, that's a great question. It's driven by a lot of considerations, key assumptions, and variables as to what drives our revenues and what drives our expenses. Maybe that's the best way to approach it. I'll go through what I think of being the key assumptions first, the key drivers first.

Speaker #1: So we got off to a quick start. We beat expectations, and we have to bring in additional partners to grow meaningfully from here. But we do have some growth in the other partners.

Bob Wahlmann: We got off to a quick start. We beat expectations. We have to bring in additional partners to grow meaningfully from here. We do have some growth in the other partners. It's just more gradual. That's part of why we pulled guidance on the credit-enhanced this quarter.

Speaker #4: And maybe that's the best way to approach it. I'll go through what I think of being the key assumptions first, the key drivers first.

Speaker #1: It's just more gradual. And so that's part of why we pulled guidance on the credit enhanced this quarter.

Speaker #4: And that's the first one we oftentimes talk about is originations. And we provided color there today. Originations for Q3, we expect to be around 1.6.

Robert Wahlman: The first one we oftentimes talk about is originations, and we provided color there today. Originations for Q3, we expect to be around 1.6, and Q4, we expect to be a baseline of 1.4. Variables that can affect that include the strength of the student lending season and, of course, the economy always significantly influences the originations. The second item, and was also talked about here, that when I think about the key driver, is what's happening with the credit-enhanced portfolio, which is one of our key areas of growth. Now, while we lose Tallied from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to Tallied on the interchange. We don't pick up any additional interest income, but we pick up all the interchange.

Bob Wahlman: The first one we oftentimes talk about is originations, and we provided color there today. Originations for Q3, we expect to be around 1.6, and Q4, we expect to be a baseline of 1.4. Variables that can affect that include the strength of the student lending season and, of course, the economy always significantly influences the originations. The second item, and was also talked about here, that when I think about the key driver, is what's happening with the credit-enhanced portfolio, which is one of our key areas of growth. Now, while we lose Tallied from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to Tallied on the interchange. We don't pick up any additional interest income, but we pick up all the interchange.

[Company Representative] (Finwise Bancorp): That's part of why we pulled guidance on the credit-enhanced this quarter.

Speaker #5: Thank you for the commentary.

Manuel Navas: Thank you for the commentary.

Speaker #4: And Q4, we expect to be baseline of 1.4. But variables that can affect that include how the strength of the student lending season and, of course, the economy always significantly influences the originations.

Speaker #1: Yep. You're welcome.

[Company Representative] (Finwise Bancorp): Yep, you're welcome.

Bob Wahlmann: Yep, you're welcome.

Speaker #3: And we do have a question that has come in via email. And we will let Juan Arias handle that. Please go ahead, sir.

Operator: We do have a question that has come in via email, and we will let Juan Arias handle that. Please go ahead, sir.

Speaker #5: Thanks, operator. The question I think this is for Bob. How should we think about the earnings trajectory in the second half of 2026 and into 2027 relative to the first half of 2026?

Cristiano Amon: As announced at Galaxy Unpacked, our collaboration is now expanding across the wider Galaxy ecosystem from the latest foldable phones and Galaxy Watches to intelligent eyewear developed with Google, bringing new agentic experiences to more devices. This reflects a broader potential to reimagine mobile for the age of agentic AI. Beyond smartphones, PCs, smart glasses, and other new personal AI form factors are all becoming endpoints for agents. That creates a significant multi-year upgrade opportunity for Qualcomm, as today's install base needs to evolve to enable more personal, contextual, and autonomous AI experience. In PCs, we're growing our leading share of design wins in Googlebook, bringing Snapdragon together with Gemini Intelligence for a new generation of AI-first laptops. With Microsoft, we're collaborating on Project Solara, a chip-to-cloud platform designed for agent-first enterprise devices.

Speaker #4: The second item, and was also talked about here that when I think about the key drivers is what's happening with the credit enhanced portfolio, which is one of our key areas of growth.

Speaker #4: Now, while we lose tallied from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to tallied on the interchange.

Speaker #5: What are the key earnings and growth drivers investors should be focused on?

Speaker #4: We don't pick up any additional interest income, but we pick up all the interchange. But in addition to that, we just Demis is talking about the what is going to be growth in the credit enhanced portfolio?

Speaker #1: Well, that's a great question. It's driven by a lot of considerations—key assumptions and variables—as to what drives our revenues and what drives our expenses.

[Company Representative] (Finwise Bancorp): Well, that's a great question. It's driven by a lot of considerations, key assumptions, and variables as to what drives our revenues and what drives our expenses.

Bob Wahlmann: Well, that's a great question. It's driven by a lot of considerations, key assumptions, and variables as to what drives our revenues and what drives our expenses. Maybe that's the best way to approach it. I'll go through what I think of being the key assumptions first, the key drivers first. The first one we oftentimes talk about is originations, and we provided color there today. Originations for Q3 we expect to be around 1.6, and Q4 we expect to be a baseline of 1.4. Variables that can affect that include the strength of the student lending season and, of course, the economy always significantly influences the originations.

Robert Wahlman: In addition to that, Jim was just talking about what is going to be growth in the credit-enhanced portfolio. We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio. We will see some growth there. Third key item. We spent a lot of time talking about that, is the provision for loan losses. We have said that it's about $4 to $5 million on the non-credit enhanced portfolio with the strategic partner retained portfolio running just over $2 million. That's pretty steady over time. The core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027. Some benefits there. Expenses is, I guess, the fourth key item.

Bob Wahlman: In addition to that, Jim was just talking about what is going to be growth in the credit-enhanced portfolio. We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio. We will see some growth there. Third key item. We spent a lot of time talking about that, is the provision for loan losses. We have said that it's about $4 to $5 million on the non-credit enhanced portfolio with the strategic partner retained portfolio running just over $2 million. That's pretty steady over time. The core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027. Some benefits there. Expenses is, I guess, the fourth key item.

Speaker #4: We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio.

Speaker #1: And maybe that's the best way to approach it. I'll go through what I think are the key assumptions first, the key drivers first.

[Company Representative] (Finwise Bancorp): Maybe that's the best way to approach it. I'll go through what I think of being the key assumptions first, the key drivers first. The first one we oftentimes talk about is originations, and we provided color there today. Originations for Q3 we expect to be around 1.6, and Q4 we expect to be a baseline of 1.4. Variables that can affect that include the strength of the student lending season and, of course, the economy always significantly influences the originations. The second item and was also talked about here that when I think about the key driver is what's happening with the credit-enhanced portfolio, which is one of our key areas of growth. While we lose Tally from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to Tally on the interchange.

Speaker #4: So we will see some growth there. Third key item, and we spent a lot of time talking about that, is the provision for loan losses.

Speaker #1: And that's the first one we oftentimes talk about—is originations. And we've provided color there today. Originations for Q3, we expect to be around $1.6 billion.

Speaker #4: We have said that it's about 4 to 5 million dollars. On the non-credit enhanced portfolio, with the strategic partner retained portfolio running just over 2 million dollars.

Speaker #1: And Q4, we expect to be a baseline of 1.4. But variables that can affect that include how the strength of the student lending season and, of course, the economy always significantly influences the originations.

Cristiano Amon: Through our Snapdragon START program for smart glasses, we're delivering a complete reference platform that enables eyewear brands to develop their own devices. With roughly 600 million global eyewear units shipped every year, this program will help expand the ecosystem and accelerate the transition of this category to smart glasses. You will hear more about this at Snapdragon Summit in September. At Investor Day, we lay out our vision for Qualcomm's next chapter and our path toward our fiscal 2029 targets. We're already seeing an inflection in our non-handset businesses, which underscores the success of our diversification strategy, and there's a lot more to come. Our data center business is just at the beginning of its journey, and we recognize that investors want to see more proof points that we can successfully execute on our plans as a new entrant.

Speaker #4: And that's pretty steady over time. But the core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027.

Speaker #1: The second item—and this was also talked about here—is that when I think about the key drivers, it’s what’s happening with the credit-enhanced portfolio, which is one of our key areas of growth.

Bob Wahlmann: The second item and was also talked about here that when I think about the key driver is what's happening with the credit-enhanced portfolio, which is one of our key areas of growth. While we lose Tally from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to Tally on the interchange.

Speaker #4: So some benefits there. And expenses is, I guess, the fourth key item. And again, it has been steady. For some period, pretty consistent. For several quarters now.

Speaker #1: Now, while we lose tallied from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to tallied on the interchange.

Robert Wahlman: Again, it has been steady for some period, pretty consistent for several quarters now. Excluding the Tallied transition expenses, we expect that the operating expenses will remain very flat or flat-ish through 2026, but grow as we move forward as we bring on additional partners. When you take a look at that, our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan losses from a P&L perspective, driven in large part by the charge-offs in the traditional loan portfolio.

Bob Wahlman: Again, it has been steady for some period, pretty consistent for several quarters now. Excluding the Tallied transition expenses, we expect that the operating expenses will remain very flat or flat-ish through 2026, but grow as we move forward as we bring on additional partners. When you take a look at that, our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan losses from a P&L perspective, driven in large part by the charge-offs in the traditional loan portfolio.

Speaker #1: We don't pick up any additional interest income, but we pick up all the interchange. But in addition to that, we just—Demis is talking about what is going to be growth in the credit-enhanced portfolio?

[Company Representative] (Finwise Bancorp): We don't pick up any additional interest income, but we pick up all the interchange. In addition to that, Jim was just talking about what is going to be growth in the credit-enhanced portfolio. We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio. We will see some growth there. Third key item, we spent a lot of time talking about that, is the provision for loan losses. We have said that it's about $4 to $5 million on the non-credit enhanced portfolio with the strategic partner retained portfolio running just over $2 million. That's pretty steady over time.

Bob Wahlmann: We don't pick up any additional interest income, but we pick up all the interchange. In addition to that, Jim was just talking about what is going to be growth in the credit-enhanced portfolio. We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio. We will see some growth there. Third key item, we spent a lot of time talking about that, is the provision for loan losses. We have said that it's about $4 to $5 million on the non-credit enhanced portfolio with the strategic partner retained portfolio running just over $2 million. That's pretty steady over time.

Speaker #4: And excluding the tallied transition expenses, we expect that the operating expenses will remain very flat or flattish through 2026, but grow as we move forward as we bring on additional partners.

Speaker #1: We expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio.

Speaker #4: So when you take a look at that, I mean, our core business is our core business, our core businesses and our activities are generating a consistent level of profitability what is hurting us is the provision for loan losses from a P&L perspective driven a large part by the charge offs in the traditional loan portfolio.

Cristiano Amon: We welcome the challenge ahead and are confident we will prove, as we have many times before, that Qualcomm can execute and win in new growth areas, including data center. With that, I'll turn the call over to Akash.

Speaker #1: So we will see some growth there. The third key item, and we spent a lot of time talking about that, is the provision for loan losses.

Speaker #1: We have said that it's about $4 to $5 million. On the non-credit enhanced portfolio, with the strategic partner retained portfolio running just over $2 million.

Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. Let me begin with our results for Q3. We delivered revenues of $9.9 billion and non-GAAP EPS of $2.21, with revenue at the high end of our guidance. QTL revenues of $1.3 billion and EBT margin of 69% were in line with our expectations. QCT revenues of $8.5 billion were at the high end of our guidance, and EBT margin of 26% was in line with guidance. QCT Handset revenues of $5.1 billion reflect the impact of industry-wide memory dynamics on the global smartphone market. QCT IoT revenues of $1.8 billion were up 9% versus the prior year, driven by growth within the industrial, networking, and robotics category of products. In QCT Automotive, we delivered another record quarter, with revenues of $1.6 billion, with 61% year-over-year growth driven by accelerating demand and increasing compute content per vehicle.

Speaker #4: So kind of summing all that up, when I think about it, I'm looking at the second half of 2026. And I think this is one way that you can look at it thinking about it is that to view one way you can look at it is to view the first quarter of 2026 as a proxy for Q3 and Q4.

Robert Wahlman: Summing all that up when I think about it, I'm looking at the H2 2026, and I think this is one way that you can look at it, thinking about it, is that one way you can look at it is to view the Q1 2026 as a proxy for Q3 and Q4. It's been a very stable environment. The charge-offs and the provisions are probably going to be about there. To make any adjustments you think appropriate for what's happening on the other portfolios. Originations are growing a little bit, and so forth. The credit-enhanced portfolio growing a little bit, expense is flat. Whatever you think are appropriate there. That's my crystal ball look at this.

Bob Wahlman: Summing all that up when I think about it, I'm looking at the H2 2026, and I think this is one way that you can look at it, thinking about it, is that one way you can look at it is to view the Q1 2026 as a proxy for Q3 and Q4. It's been a very stable environment. The charge-offs and the provisions are probably going to be about there. To make any adjustments you think appropriate for what's happening on the other portfolios. Originations are growing a little bit, and so forth. The credit-enhanced portfolio growing a little bit, expense is flat. Whatever you think are appropriate there. That's my crystal ball look at this.

Speaker #1: And that's pretty steady over time. But the core or traditional portfolio has been running high this year. But we do see that, as we talked about, tapering as we leave 2026 and head into 2027.

[Company Representative] (Finwise Bancorp): The core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027. Some benefits there. Expenses is, I guess, the fourth key item. Again, it has been steady for some period, pretty consistent for several quarters now. Excluding the Tally transition expenses, we expect that the operating expenses will remain very flat or flat-ish through 2026, but grow as we move forward as we bring on additional partners. When you take a look at that, our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan losses from a P&L perspective, driven in large part by the charge-offs in the traditional loan portfolio.

Bob Wahlmann: The core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027. Some benefits there. Expenses is, I guess, the fourth key item. Again, it has been steady for some period, pretty consistent for several quarters now. Excluding the Tally transition expenses, we expect that the operating expenses will remain very flat or flat-ish through 2026, but grow as we move forward as we bring on additional partners. When you take a look at that, our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan losses from a P&L perspective, driven in large part by the charge-offs in the traditional loan portfolio.

Speaker #1: So some benefits there. And expenses is, I guess, the fourth key item. And again, it has been steady. For some period, pretty consistent. For several quarters now.

Speaker #4: It's been a very stable environment. And the charge offs and the provisions are probably going to be about there. But then to make any adjustments, you think appropriate for what's happening on the other portfolios, originations are going a little bit and so forth, the credit enhanced portfolio growing a little bit, expenses flat.

Speaker #1: And excluding the tallied transition expenses, we expect that the operating expenses will remain very flat or flat-ish through 2026, but grow as we move forward as we bring on additional partners.

Speaker #4: But whatever you think are appropriate there. But that's my crystal ball look at this.

Speaker #1: So, when you take a look at that, I mean, our core business is our core business—our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan losses, from a P&L perspective, driven in large part by the charge-offs in the traditional loan portfolio.

Speaker #1: Thank you. And we do have a follow-up question. We'll hear from Manuel Navas with Piper Sandler.

Operator: Thank you. We do have a follow-up question. We'll hear from Manuel Navas with Piper Sandler.

Akash Palkhiwala: Total non-handset revenues in QCT, including Automotive and IoT, grew 28% year-over-year, underscoring the continued execution of our diversification strategy. Lastly, we returned $2.3 billion to stockholders, including $1.4 billion in share repurchases and $937 million in dividends. Before turning to guidance, I'd like to provide an update on a couple of factors reflected in our financial performance. First, consistent with our expectations, we estimate that QCT Handset revenues from Chinese OEMs reached a bottom in Q3 and will return to double-digit sequential growth in Q4. Second, the semiconductor industry is experiencing broad-based increase in input costs across wafer fabrication, assembly, test, advanced packaging, memory, and other materials. We're taking concrete actions to reflect the higher input costs in our product pricing. These actions will benefit our gross margins over time as the pricing changes gradually come into effect.

Manuel Navas: I appreciate the commentary. I just want to jump on to kind of make sure I understand the progression well. The core portfolio provisioning rose this quarter on some heightened losses. The expectation is that those, while the heightened losses might be higher in the H2 than previously expected, they should be lower than the Q2. Is that the right projection on my part?

Speaker #2: I appreciate the commentary. I just want to jump on to kind of make sure I understand the progression well. The core portfolio provisioning rose this quarter on some heightened losses.

Speaker #1: So, kind of summing all that up, when I think about it, I'm looking at the second half of 2026. And I think this is one way that you can look at it. Thinking about it, one way you can look at it is to view the first quarter of 2026 as a proxy for Q3 and Q4.

[Company Representative] (Finwise Bancorp): Summing all that up when I think about it, I'm looking at the H2 of 2026 and I think this is one way that you can look at it, thinking about it, is that one way you can look at it is to view the Q1 of 2026 as a proxy for Q3 and Q4. It's been a very stable environment. The charge-offs and the provisions are probably going to be about there. To make any adjustments you think appropriate for what's happening on the other portfolios. Originations are growing a little bit and so forth. The credit-enhanced portfolio growing a little bit, expense is flat. Whatever you think are appropriate there. That's my crystal ball look at this.

Bob Wahlmann: Summing all that up when I think about it, I'm looking at the H2 of 2026 and I think this is one way that you can look at it, thinking about it, is that one way you can look at it is to view the Q1 of 2026 as a proxy for Q3 and Q4. It's been a very stable environment. The charge-offs and the provisions are probably going to be about there. To make any adjustments you think appropriate for what's happening on the other portfolios. Originations are growing a little bit and so forth. The credit-enhanced portfolio growing a little bit, expense is flat. Whatever you think are appropriate there. That's my crystal ball look at this.

Speaker #2: But the expectation is that those while the heightened losses might be a little might be higher in the second half than previously expected, they should be lower than the second quarter.

Speaker #2: Is that the right projection on my part?

Speaker #4: From a provisioning from a provisioning perspective, the answer to that question is yes. Provisioning in the second quarter was 6 million dollars compared to, I think, roughly and this is excluding the credit enhanced, roughly in that 4 to 5 million dollar range that we said.

Robert Wahlman: From a provisioning perspective, the answer to that question is yes. Provisioning in the Q2 was $6 million compared to, I think, and this is excluding the credit enhanced, roughly, in that $4 to $5 million range that we said. Yeah, we expect the Q2 to be a bit of an outlier.

Bob Wahlman: From a provisioning perspective, the answer to that question is yes. Provisioning in the Q2 was $6 million compared to, I think, and this is excluding the credit enhanced, roughly, in that $4 to $5 million range that we said. Yeah, we expect the Q2 to be a bit of an outlier.

Speaker #1: It's been a very stable environment, and the charge-offs and provisions are probably going to be about there. But then, to make any adjustments you think appropriate for what's happening on the other portfolios—originations are going a little bit, and so forth.

Speaker #4: So yeah, we expect the second quarter to be a bit of an outlier.

Speaker #2: Got it. Okay. That's helpful. And then okay. And the shifting of the credit enhanced portfolio, you're taking on the tallied portfolio. Is the tallied portfolio going to have less growth than what you could have had with it if it had continued independently?

Manuel Navas: Got it. Okay. That's helpful. Then, okay. The shifting of the credit-enhanced portfolio, you're taking on the tallied portfolio. Is the tallied portfolio going to have less growth than what you could have had with it if it had continued independently? It seems like you could think of these two portfolios, your credit-enhanced portfolio and the tallied portfolio, and say that they're going to have the same growth that you had previously in your guidance, or are you slowing the tallied growth?

Speaker #1: The credit enhanced portfolio is growing a little bit, expenses are flat. But use whatever you think is appropriate there. That's my crystal ball look at this.

Akash Palkhiwala: Finally, as a result of our supply constraint, we now expect an acceleration in the step-down of Apple product revenues starting in Q4, as our share for upcoming iPhone launch is expected to be materially lower than our prior estimate of 20%. All these factors are contemplated both in our Q3 performance and Q4 outlook. Against this backdrop, I'll now provide our guidance for Q4. We are forecasting revenues of $9.7 to $10.5 billion and non-GAAP EPS of $2.05 to $2.25. In QTL, we estimate revenues of $1.2 to $1.4 billion, an EBT margin of 68% to 72%, reflecting normal seasonal trends. In QCT, we expect revenues of $8.4 to $9 billion and EBT margins of 23% to 25%. We forecast QCT Handset revenues to be approximately $5.2 billion, driven by sequential growth in Android, offset by lower Apple product revenues.

Speaker #3: Thank you. And we do have a follow-up question. We'll hear from Manuel Novos with Piper Sandler.

Operator: Thank you. We do have a follow-up question. We'll hear from Manuel Navas with Piper Sandler.

Speaker #5: I appreciate the commentary. I just want to jump on to kind of make sure I understand the progression well. The core portfolio provisioning rose this quarter on some heightened losses.

Manuel Navas: I appreciate the commentary. I just want to jump on to kind of make sure I understand the progression well. The core portfolio provisioning rose this quarter on some heightened losses. The expectation is that while the heightened losses might be higher in the H2 than previously expected, they should be lower than the Q2. Is that the right projection on my part?

Speaker #2: Because it seems like you could think of these two portfolios, your credit enhanced portfolio and the tallied portfolio, and say that they're going to have the same growth that you had previously in your guidance.

Speaker #5: But the expectation is that, while the heightened losses might be a little higher in the second half than previously expected, they should be lower than the second quarter.

Speaker #2: Are you slowing the tallied growth?

Speaker #4: No, there's no change to what the expected growth rate is. With tallied, Manuel, just because it's become a direct portfolio versus a credit enhanced portfolio.

Robert Wahlman: No, there's no change to what the expected growth rate is with tallied, Manuel, just because it's become a direct portfolio versus a credit-enhanced portfolio. It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Bob Wahlman: No, there's no change to what the expected growth rate is with tallied, Manuel, just because it's become a direct portfolio versus a credit-enhanced portfolio. It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Speaker #5: Is that the right projection on my part?

Speaker #1: From a provisioning from a provisioning perspective, the answer to that question is yes. Provisioning in the second quarter was six million dollars compared to, I think, roughly and this is excluding the credit enhanced, roughly in that four to five million dollar range that we said.

[Company Representative] (Finwise Bancorp): From a provisioning perspective, the answer to that question is yes. Provisioning in Q2 was $6 million compared to, I think, This is excluding the credit-enhanced, roughly in that $4 to $5 million range that we said. Yeah, we expect Q2 to be a bit of an outlier.

Bob Wahlmann: From a provisioning perspective, the answer to that question is yes. Provisioning in Q2 was $6 million compared to, I think, This is excluding the credit-enhanced, roughly in that $4 to $5 million range that we said. Yeah, we expect Q2 to be a bit of an outlier.

Speaker #4: It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Speaker #1: So yeah, we expect the second quarter to be a bit of an outlier.

Akash Palkhiwala: We expect QCT IoT revenues to remain approximately flat versus the year-ago period, with double-digit growth across our industrial, networking, and robotics category of products, offset primarily by the impact of memory constraints on tablets and other consumer products. In QCT Automotive, we expect another record quarter, with approximately 60% year-over-year revenue growth. Lastly, we anticipate non-GAAP operating expenses to be approximately $2.7 billion in the quarter, reflecting the acquisition of Modular and continued investment in our data center product roadmap ahead of revenue ramp. Before I conclude my prepared remarks, let me summarize the key drivers of QCT's growth trajectory going forward. We are well positioned to execute on the vision we outlined at our recent Investor Day, with QCT non-handset revenues expected to grow to $40 billion by fiscal 2029—nearly double the target we had previously provided.

Akash Palkhiwala: We expect QCT IoT revenues to remain approximately flat versus the year-ago period, with double-digit growth across our industrial networking and robotics category of products, offset primarily by the impact of memory constraints on tablets and other consumer products. In QCT Automotive, we expect another record quarter, with approximately 60% year-over-year revenue growth. Lastly, we anticipate non-GAAP operating expenses to be approximately $2.7 billion in the quarter, reflecting the acquisition of Modular and continued investment in our data center product roadmap ahead of revenue ramp. Before I conclude my prepared remarks, let me summarize the key drivers of QCT's growth trajectory going forward. We are well positioned to execute on the vision we outlined at our recent Investor Day, with QCT non-handset revenues expected to grow to $40 billion by fiscal 2029, nearly double the target we had previously provided.

Speaker #5: Got it. Okay. That's helpful. And then okay. And the shifting of the credit enhanced portfolio, you're taking on the tallied portfolio. Is the tallied portfolio going to have less growth than what you could have had with it if it had continued independently?

Manuel Navas: Got it. Okay. That's helpful. The shifting of the credit-enhanced portfolio, you're taking on the Tally portfolio. Is the Tally portfolio going to have less growth than what you could have had with it if it had continued independently? It seems like you could think of these two portfolios, your credit-enhanced portfolio and the Tally portfolio, and say that they're going to have the same growth that you had previously in your guidance. Are you slowing the Tally growth?

Speaker #2: Okay. Got it. Okay. This is helpful to clarify. Thank you. Thank you for the time and the commentary.

Manuel Navas: Got it. Okay. This is helpful to clarify. Thank you. Thank you for the time and the commentary.

Speaker #4: You're welcome.

Jim Noone: You're welcome.

Bob Wahlman: You're welcome.

Operator: That will conclude today's conference call. We thank you for your participation. You may disconnect your lines at this time.

Speaker #5: Because it seems like you could think of these two portfolios—your credit enhanced portfolio and the tallied portfolio—and say that they're going to have the same growth that you had previously in your guidance.

Speaker #5: Are you slowing the tallied growth?

Speaker #1: No, there's no change to what the expected growth rate is. With Tallied, Manuel, just because it's become a direct portfolio versus a credit-enhanced portfolio.

[Company Representative] (Finwise Bancorp): No, there's no change to what the expected growth rate is with Tally, Manuel, just because it's become a direct portfolio versus a credit-enhanced portfolio. It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Bob Wahlmann: No, there's no change to what the expected growth rate is with Tally, Manuel, just because it's become a direct portfolio versus a credit-enhanced portfolio. It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Akash Palkhiwala: This forecast includes data center revenue growth to $5 billion in fiscal 2027 and $15 billion in fiscal 2029. As a result of our diversification execution, we now estimate non-handsets at more than 50% of QCT revenues in fiscal 2027 and grow to approximately two-thirds in fiscal 2029. In the short term, we anticipate growth in non-handset revenues relative to prior year to accelerate from 24% in fiscal 2026 to greater than 60% in fiscal 2027, a significant inflection point in the execution of our growth strategy. We expect this growth from non-handset revenues in fiscal 2027 to replace total Apple product revenues in 2026. In handsets, when memory industry dynamics stabilize, our Snapdragon product leadership and emergence of agentic AI experiences will position us well to reinstate QCT Android revenue scale and growth rates. Lastly, I'd like to welcome the Modular team to Qualcomm.

Speaker #1: It's just that when that changed, in conjunction with the fact that we had another partner whose growth had slowed and certainly hadn't met expectations earlier in the year, it just kind of made sense to pull the guidance.

Speaker #5: Okay. Got it. Okay. This is helpful to clarify. Thank you for the time and the commentary.

Manuel Navas: Got it. Okay. This is helpful to clarify. Thank you. Thank you for the time and the commentary.

Speaker #1: You're welcome.

[Company Representative] (Finwise Bancorp): You're welcome.

Bob Wahlmann: You're welcome.

Operator: That will conclude today's conference call. We thank you for your participation. You may disconnect your lines at this time.

Akash Palkhiwala: We're excited to have completed this transaction, adding a world-class team whose AI software expertise will enhance our ability to execute on the significant opportunities ahead. This concludes our prepared remarks. Back to you, Brad.

Cristiano Amon: Thank you, Akash. Operator, we are now ready for questions.

Brett Simpson: Thank you, Akash. Operator, we are now ready for questions.

Operator: Thank you. To queue a question, press star, then the number one. To withdraw your question, press star two. If you're using a speakerphone, please pick up your handset before pressing the numbers. One moment, please, for the first question. The first question is from the line of Joshua Buchalter with TD Cowen. Please proceed with your question.

Operator: Thank you. To queue a question, press star, then the number one. To withdraw your question, press star, then two. If you're using a speakerphone, please pick up your handset before pressing the numbers. One moment, please, for the first question. The first question is from the line of Joshua Buchalter with TD Cowen. Please proceed with your question.

Joshua Buchalter: Hey, guys. Thank you for taking my question, and congrats on the solid results in a tough backdrop. I wanted to start on the gross margins. It's pretty clear—you explained what's going on with the rising input costs, and now you're raising prices. Can you walk us through how we should think about QCT gross margins returning to their prior levels? How long until the ASP increases kind of match the input cost rising? Thank you.

Akash Palkhiwala: Hi, Josh. It's Akash. As I said in my prepared remarks, there's two key drivers on the impact on gross margins. I think the first is a little bit of a weaker mix within premium tier. As you know, we have multiple chips within premium, and you're seeing operator OEMs making a choice on which chip to use, and also using prior generation as a response to the memory cost increase environment. The second factor is the higher input cost across the supply chain. As you would expect, we're taking action to increase the prices and reflect it in our customer product pricing. We expect this benefit to show up in our gross margins over the next couple quarters. These changes, as you'd expect, come in gradually, as we have some contracts in place, we need to get past those contracts.

Akash Palkhiwala: There are also product cycles that happen. This will come up over time. I think when we get through it, we expect to be consistent with the historical gross margin range that we have.

Joshua Buchalter: Thank you for all the color there, Akash Palkhiwala. Maybe to follow up, you mentioned that data center revenue from your ASIC engagements would start to layer in in the December quarter. Any help you can give us on the sort of the shape of that contribution through fiscal 2027, as it's obviously quite a material step up in revenue growth there? Thank you.

Akash Palkhiwala: Yeah. I think as we said, the revenue starts in the December quarter. You should expect a ramp as we go through the year. We've said this before, we have two custom chip engagements. Both of these are global scale hyperscalers. We're going to expect to start seeing revenue from both of them, starting in the December quarter. As you know, the December quarter is right there. We do have POs from these engagements. We've already started wafers. We're very confident about the engagement with both the customers.

Operator: Our next question's from the line of Joseph Cardozo with JP Morgan. Please proceed with your questions.

Operator: Our next question is from the line of Joseph Cardozo with JP Morgan. Please proceed with your question.

Joseph Cardozo: Hey, good afternoon. Thanks for the questions here. Maybe just as a first one, a follow-up kind of on the pricing dynamics. Can you just flesh out the pricing actions, like any commentary in terms of the magnitude of price increase that you're looking to take? Whether these actions are broad-based or you're going to look to be more concentrated across the portfolio? Just as we think about maybe pricing actions in some of these consumer markets like handsets, how do you navigate rising prices in a market that has already seen demand affected by cost inflation and other components? I have a follow-up. Thank you.

Joseph Cardoso: Hey, good afternoon. Thanks for the questions here. Maybe just as a first one, a follow-up kind of on the pricing dynamics. Can you just flesh out the pricing actions, like any commentary in terms of the magnitude of price increase that you're looking to take? Whether these actions are broad-based or you're going to look to be more concentrated across the portfolio? Just as we think about maybe pricing actions in some of these consumer markets like handsets, how do you navigate rising prices in a market that has already seen demand affected by cost inflation and other components? I have a follow-up. Thank you.

Akash Palkhiwala: Sure, Joe. The way you should think about it is this is a pricing action that we're taking broadly across different end markets. As I said earlier, there are certain places where we have a contract or we are waiting for a product cycle to come through, so it'll layer in over time. It's no different than what a lot of the peers in our industry have done. You should expect something that the scale of the increase that we're looking at is double digit and consistent with some of the actions from other players.

Cristiano Amon: Maybe Joe, this is Cristiano. Just can I add one comment? I understand your comment, but I think the market is actually down because of the magnitude of increases in the bill of materials with memory. Even a double-digit price increase, which is just a pass-through of the input costs increase and wafer price increases, it actually is small when you compare it to the order of magnitude of the memory bill of materials. We actually don't expect that fundamental changes in the premium tier, in the higher tier volume. We maintain the position that China handset

Cristiano Amon: Maybe, Joe, this is Cristiano. Just—can I add one comment? I understand your comment, but I think the market is actually down because of the magnitude of increases in the bill of materials with memory. Even a double-digit price increase, which is just a pass-through of the input costs increase and wafer price increases, actually is small when you compare it to the order of magnitude of the memory bill of materials. We actually don't expect fundamental changes in the premium tier, in the higher-tier volume. We maintain the position that China handset—

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