LC - NYSE

Ladies and gentlemen, thank you for joining us. And welcome to the LendingClub Corporation Q3 2025 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press 9 to raise your hand, 6 to unmute. I will now hand the conference over to Artem Nalivayko, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon. Welcome to LendingClub Corporation's third quarter 2025 earnings conference call. Joining me today to talk about our results are Scott C. Sanborn, CEO, and Drew LaBenne, CFO. You can find the presentation accompanying our earnings release on the Investor Relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email. Our remarks today will include forward-looking statements, including with respect to our competitive advantages, demand for our loans and marketplace products, and future business and financial performance. Our actual results may differ materially from those indicated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and earnings presentation. Any forward-looking statements that we make on this call are based on current expectations and assumptions, and we undertake no obligation to update these statements as a result of new information or future events. Our remarks also include non-GAAP measures related to our performance, including tangible book value per common share, pre-provision net revenue, and return on tangible common equity. You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. Finally, please note all financial comparisons in today's prepared remarks are to the prior year-end period unless otherwise noted. And now, I'd like to turn the call over to Scott.

Thank you, Artem. Welcome, everybody. We delivered another outstanding quarter with 37% growth in originations, 32% growth in revenue, and a near tripling of diluted earnings per share. Innovative products and experiences, compelling value propositions, a 5 million strong member base, consistent outperformance on credit, and a resilient balance sheet are all coming together to deliver sustainable, profitable growth. I'm excited to share more on our vision and our many competitive advantages at our upcoming Investor Day in two weeks, so I'll keep it brief today. Quarterly originations of $2.62 billion came in above the top end of our guidance, reflecting strong demand from both consumers and loan investors, our increased marketing efforts, and the power of our winning value proposition and customer experiences. With competitive loan rates enabled by our sophisticated credit models and a fast, frictionless process, we continue to be very successful at attracting our target customers. In fact, when our loan offers are made side by side on a leading loan comparison site, we close 50% more customers on average than the competition. We continue to be disciplined in our underwriting. Our asset yield remains strong, and our borrower base continues to perform well. In fact, we're delivering our originations growth while also demonstrating roughly 40% outperformance on credit versus our competitor set. Consistent strong credit performance on a high-yielding asset class has allowed us to confidently build our balance sheet, which now stands at over $11 billion, delivering a durable, resilient revenue stream that nonbanks can't replicate. In fact, this quarter we generated our highest ever net interest income of $158 million, enabled by a growing balance sheet and expanding net interest margin. Our loan marketplace is also thriving, with our reputation for strong credit performance and innovative solutions attracting marketplace investors at improving loan sales prices. We grew marketplace revenue by 75% to our highest level in three years and had our best quarter ever for structured certificate sales totaling over $1 billion. We also secured earlier in the quarter a memorandum of understanding by which funds and accounts managed by BlackRock would purchase up to $1 billion through LendingClub Corporation's marketplace programs through 2026. What's more, our new rated product, specifically designed to attract insurance capital, is capturing strong interest, which should help us to continue to improve loan sales prices and further boost marketplace revenue. As excited as I am about our financial performance, I'm equally excited about what we're seeing in member engagement and behavior. Our mobile app, combined with high engagement products and experiences like LevelUp checking and DebtIQ, are successfully encouraging members to visit us more often and are driving new product adoption. We launched LevelUp checking in June as the first of its kind banking product designed specifically for our borrowers. Members are responding positively, with a 7x increase in account openings over our prior checking product. In a recent survey, 84% of respondents said they were more likely to consider a LendingClub Corporation loan given the offer of 2% cash back for on-time payments through LevelUp checking. And what's really encouraging is that nearly 60% of new accounts being opened are being opened by borrowers. Our efforts are driving a nearly 50% increase in monthly app logins from our borrowers, and with that engagement, an increasing portion of our repeat loan issuance is now coming through the app. That's proof that these investments are enabling lower-cost acquisition from repeat members, keeping pace with our new member growth as we continue to ramp our marketing efforts. We'll share more examples at Investor Day of how our intentional product design, coupled with an engaging mobile experience, is creating a flywheel to increase lifetime value. Before I turn it over to Drew, I want to thank all LendingClubbers for their incredible execution and dedication to improving banking for our more than 5 million members. Their efforts are paying off, and I look forward to building on our momentum. With that, I'll turn it over to you, Drew.

Thanks, Scott, and good afternoon, everyone. We delivered another outstanding quarter, extending the momentum we built throughout the first half of the year. For the third quarter, we generated improved results across all key measures, including originations, revenue, profitability, and returns. Total originations grew 37% year over year to over $2.6 billion, reflecting the impact of our growth initiatives, scaling of our paid marketing channels, and continued expansion of loan investors on our marketplace platform. Revenue grew 32% to $266 million, driven by higher marketplace volume, improved loan sales prices, and expanding net interest income. Pre-provision net revenue, or revenue less expenses, grew 58% to $104 million, reflecting the scalability of our model. The net impact of all these items is that we nearly tripled both diluted earnings per share and return on tangible common equity to $0.37 per share and 13.2%, respectively. The business is firing on all cylinders, demonstrating the earnings power of our digital marketplace bank model. Now, let's turn to Page 12 of our earnings presentation. We will go further into originations growth. We delivered our highest level of originations in three years. Borrower demand remained strong, as the value we are providing in the core use case of refinancing credit card debt continues to be compelling. Loan investor demand also remains strong, with marketplace buyers looking to increase orders and prices steadily improving. Demand for our structured certificate program continues to grow as we added the rated product attracting new insurance capital. In addition to $1.4 billion of new issuance sold, we also sold $250 million of seasoned loans out of the extended seasoning portfolio, which included a rated transaction supported by Insurance Capital. Our consistently strong credit performance sets us apart from the competition and is one of the reasons we have been able to sell all of these loans without any need to provide credit enhancements. Leveraging one of the benefits of being a bank, we grew our held-for-sale extended seasoning portfolio to over $1.2 billion, consistent with our strategy to grow our balance sheet while maintaining an inventory of seasoned loans for our marketplace buyers. Finally, we retained nearly $600 million on our balance sheet in Q3 in our held-for-investment portfolio. Now let's turn to the two components of revenue on Page 13. Non-interest income grew 75% to $108 million, benefiting from higher marketplace sales volumes, improved loan sales prices, continued strong credit performance, and lower benchmark rates. Fair value adjustment of our held-for-sale portfolio benefited by approximately $5 million in the quarter from lower benchmark rates. Net interest income increased to $158 million, another all-time high, supported by a larger portfolio of interest-earning assets and continued funding cost optimization. The growth in this important recurring revenue stream is expected to continue into the future as we leverage our available capital and liquidity to further grow the balance sheet. If you turn to Page 14, you will see our net interest margin improved to 6.2%. We continue to see healthy deposit trends, and total deposits ended the quarter at $9.4 billion, a slight decrease from last year. The change was primarily attributable to a $100 million decrease in brokered deposits, which was mostly offset by an increase in relationship deposits. LevelUp savings remains a powerful franchise driver, approaching $3 billion in balances and representing the majority of our deposit growth this year. We are maintaining a disciplined approach to deposit pricing while providing meaningful value for our customers. Turning to expenses on Page 15, non-interest expense was $163 million, up 19% year over year. As we signaled last quarter, the majority of the sequential increase was driven by marketing spend as we continue to scale, test, and optimize our origination channels to support continued growth in 2026. We continue to generate strong operating leverage on our growing revenue, and our efficiency ratio approached an all-time best in the quarter. Let's move on to credit, where performance remains excellent. We continue to outperform the industry with delinquency and charge-off metrics in line with or better than our expectations. Provision for credit losses was $46 million, reflecting disciplined underwriting, stable consumer credit performance, and portfolio mix. Our net charge-off ratio improved modestly again this quarter to 2.9%, and we continue to see strong performance across our vintages. I would highlight that the net charge-off ratio also continues to benefit from the more recent vintages we've added to the balance sheet. We expect the charge-off ratio to revert upwards to more normalized levels as these vintages mature. These anticipated dynamics are already factored into our provision. On Page 16, you will see that our expectation for lifetime losses is also stable to improving across all vintages. Turning to the balance sheet, total assets grew to $11.1 billion, up 3% compared to the prior quarter. Our balance sheet remains a competitive strength, allowing us to generate recurring revenue through retained loans while maintaining the flexibility to scale marketplace volume as loan investor demand grows. We ended the quarter well-capitalized with strong liquidity and positioned to fund future growth without raising additional capital. Moving to Page 17, you can see that pretax income of $57 million more than tripled compared to a year ago, hitting a record high for the company. Taxes for the quarter were $13 million, reflecting an effective tax rate of 22.6%. We continue to expect a normalized effective tax rate of 25.5%, but we may have some variability in this line due to the timing of stock grants and other factors. Putting it all together, net income came in at $44 million, and diluted earnings per share were $0.37, which nearly tripled compared to a year ago. Importantly, return on tangible common equity of 13.2% showed continued improvement and came in above the high end of our guidance range, and our tangible book value per share now sits at $11.95. As we look ahead, the business enters the fourth quarter with significant momentum. Loan investor demand remains strong, loan sales pricing continues to trend higher, and our product and marketing initiatives are driving high-quality volume growth. As a reminder, in Q4, we typically see negative seasonality on originations due to the holiday season. With that in mind, we expect to deliver originations of $2.5 to $2.6 billion, up 35% to 41% year over year, respectively. Our outlook for pre-provision net revenue is $90 million to $100 million, up 21% to 35%, respectively. Our outlook assumes two interest rate cuts in Q4 and includes increased investment in marketing to test channel expansion, which will support originations growth in future quarters. We expect to deliver an ROTCE in the range of 10% to 11.5%, more than triple year over year. We will provide additional details on our strategic and financial framework at our Investor Day on November 5, where we hope you will join us. With that, we'll open it up for Q&A.

We will now begin the question and answer session. A reminder that if you would like to ask a question, please raise your hand now. And star six to unmute. Your first question comes from the line of Bill Ryan with Seaport Research Partners. Your line is open. Please go ahead.

Hello. I think you're on mute.

Got it.

Thanks. So first question, I just want to ask about the disposition plans. Looking into the future between your various channels, structured certificate, whole loans, and extended seasoning, and what your plans are to continue to grow the held-for-investment portfolio on the balance sheet. Looks like there's a little bit of mix shift last couple of quarters dialing back on the whole loan sales focusing on the other two. And if you could also kind of maybe talk about the economics of what you're seeing between the various disposition channels.

Yeah. Great. Hey, Bill. Thanks for the question. So, you know, for HFI for Q4, it's kind of steady as she goes in terms of what we plan each quarter. So we're targeting, you know, roughly $500 million in HFI, and that sort of just depends on how the quarter evolves. Sometimes that's a little higher, a little lower. I'd say, generally, it's been a little higher the past couple of quarters. The other programs are roughly in line with where we've been for the past couple of quarters. We see demand for structured certificates being strong. We're seeing good pickup in the rated product as well, and as I mentioned, we sold one of those out of extended seasoning this quarter, a rated deal that is. So demand is strong and still there, and with issuance being targeted to be roughly the same, kind of the mix and disposition should also be roughly the same. I guess, Bill, to make sure you're tracking, you probably are. Not all of these sales are equal. Historically, whole loan sales to banks would come at a different price than, say, whole loan sales to an asset manager. As the insurance-rated transactions have been coming in, those prices, as we mentioned in the script, are really approaching bank prices now. And in those cases, we're generally not retaining the A note. So effectively, it is a whole loan sale, and it's coming at a higher price. So it's really the mix is based on where we're getting the best execution, and, you know, we are looking to certain channels. So that's a channel we're developing, and it's going in the direction we like, which is building demand and higher prices there.

Okay. Thanks, Scott. And just one big picture follow-up. If you can maybe kind of touch on the competitive state of the market. I mean, origination volumes have increased quite a bit across the board. You've heard about some companies maybe have opened their credit boxes a little bit. Some with product structure, if you will. Fixed income investors' allocation more capital to the sector. I mean, if you could kind of give us an overview of have you seen any pressure on your underwriting standards at all?

No. We haven't. I'd say, you know, as we say every quarter, this has always been a competitive space. In our case, our growth is coming off of a low, and it's coming off of a low that's been informed not just by tighter credit underwriting, which, you know, we're maintaining the discipline there, but also because we just pulled back on marketing. So our ability to grow is if you still look at, you know, where you can see volume levels, you'll see we're still running below historical levels of spend and volume. In a TAM that's larger than it ever was. So we're not seeing the space as competitive. It's no more competitive than it was last quarter or the quarter before. As usual, we see a mix in who we're competing with in different environments. So when the interest rate environment shifted, we were competing more with banks and less with fintechs. I'd say now we're competing a bit more with fintechs and a little bit less with some of the banks, but that doesn't it's not changing certainly not affecting our underwriting standards. You know, we are absolutely in this for the long game. And as you know, we're bringing our own cooking here. So we are looking to make sure we are delivering the returns for ourselves as well as for our loan buyers, and we don't view the way we get rewarded long term is by posting a temporary jump in growth through short-term making on credit.

Okay. Thanks for taking my questions.

Next question comes from the line of Tim Switzer with KBW. Tim, your line is open. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. My first one is, can you explain what drove the higher loss in the net fair value adjustment? And, you know, I think you mentioned earlier on the call that pricing seems to be holding up on loan sales. So just curious what drove that adjustment line.

Yeah. So keep in mind, we had a positive fair value adjustment in Q2 that I believe was about $9 million in the quarter, and we had $5 million this quarter. So positive adjustments in both quarters, but it was larger in Q2 than it was in Q3. And so that's a big part of the delta right there. You know, as we said, prices moved up a little bit, so it's not price that's driving that. The other piece is as we have a larger extended seasoning portfolio, there is natural roll down that happens, and that comes through that net fair value adjustment line. So that's also a little bit of the change that we're seeing quarter over quarter. It's just a larger portfolio.

Got you. Is there a good way for us to be able to model the impact of the extended seasoning portfolio?

There is. It's probably a little complicated to get into the details on this call, but we can follow up with you afterwards.

Appreciate that. We can do it offline.

Yeah.

And then can you also walk us through the loan reserve dynamic a bit this quarter because it went up quite a bit, but if we look at your slide 16 that indicates lower loss expectations for those legacy vintages, I guess, and you obviously didn't grow the HFI book a whole lot. So I'm just curious on, you know, what was that reserve going up for, I guess?

Yep. So two factors. Again, last quarter, there was a one-timer that we called out in the provision line because we had a re-estimation of the lifetime losses, and that caused a positive benefit in the provision line. And so I think there's about $11 million. Right, Artem? Yeah. $11 million last quarter that you know, credit was great again this quarter, but we didn't do a change in the reserve on the previous vintages. So that's one factor. The other is just as we're growing some of our businesses, like, for example, our purchase finance business into HFI, the duration's a little longer, so it has a little higher upfront CECL charge, but also fantastic economics on balance sheet. And so those are the two main drivers.

Gotcha. Thank you. And, one last one real quick. Can you explain what drove the increase in diluted shares? And the period went up a little bit, but not nearly as much as diluted share count. Sorry if you said this earlier on the call.

Yeah. No. I think share price is probably the biggest factor. Right? If you just do the treasury, if you just think of treasury stock method on the diluted shares, the higher the share price, the more dilution you effectively get on the outstanding, you know, grants that have been issued. So there wasn't there was no step change in terms of kind of the, you know, the vehicles that cause diluted share count.

Got you. Alright. Thank you.

Thank you.

Next question comes from the line of Giuliano Bologna. Your line is open. Please go ahead. Giuliano, your line is open. Please go ahead. Joanna, I think you're on mute too. Okay. We can come back to Giuliano. We'll move on to Vincent Caintic of BTIG. Line is open. Please go ahead.

Hi. Great. Can you hear me?

Yes.

Yes. Having some tech issues. I have a feeling maybe others are as well. But yeah, so thank you for taking my questions. First question, kind of a follow-up on that funding side. And I want to ask it, kind of the demand for, you know, your marketplace loans, the structured certificates, and the seasoned portfolio. It's great to see that there's so much demand. And, you know, I think a lot of there's been a lot of investor questions over the past months where, you know, we've seen some other companies have some issues, some bankruptcies, and so forth. And so there's been some concerns broadly about institutional investor appetite for fintech originated loans. So it looks like your demand is great. And I was wondering if you can maybe talk about kind of the broad industry and if you're seeing any differentiation. And if maybe that's a competitive advantage of your funding vehicles and mechanisms versus the rest of the industry. Thank you.

Yes. So thanks for the question, Vincent. A lot there. So I'd say, first of all, the comments I'm gonna make are really just focused on our asset class in our industry, so not, you know, auto securitizations or any of the other things that are going on. But, you know, we just actually our team was just at a conference yesterday talking to, you know, loan current investors and potential investors, and I'd say the appetite is still very strong. I don't think there's any fade on the appetite at all for, you know, the various vehicles that are out there, whether it's a structured product, the rated product, or, you know, whole loans out of extended seasoning. So demand is definitely there. I think track record matters. So the demand is there for us. I think it's certainly there for other issuers as well. But I'd say on the margin that issuers are also being maybe slightly more cautious on who they're partnering with, and we're hearing that in we've been the partner of choice for years and I think continue to be. So I think that plays to our advantage. Obviously, we're always watching the ABS markets to see if there's any, you know, major disruption there. And haven't seen much. Certainly, there's been a little noise as you indicated over the past couple of weeks, but summary demand remains good. Prices are strong, so we're feeling good going into the fourth quarter.

Okay. Great. Thank you. That's very helpful. And I guess also, real quick.

Think just a little added color. We're certainly hearing that some capital providers are further narrowing their selection of who they're working with. But, you know, hard for us to kind of but, you know, we remain in the wallet and remain a really primary important partner there, but certainly hearing some chatter of that.

Okay. Great. That's super helpful. Thank you. And, actually, kind of related to, you know, the volatility we've been hearing over the past month just in broader consumer credit. Just wondering if you could talk about, you know, your credit performance and what you're seeing. So it was great to see charge-offs at 2.9% this quarter. That's great. Just wondering if you're noticing maybe not in the loans that you're that are on your balance sheet already. But as you get applications, maybe has the quality of that changed? Are you noticing maybe any themes in terms of delinquency evolution like, maybe with lower credit tiers or any comments you might say be seeing with that relative to press trend?

Yeah. No. I mean, I'd say for us, you know, reminder, we remain very, very restrictive compared to, you know, pre-COVID. And that is even more so the case in sort of the lower credit area. So I acknowledge there's definitely been a decent amount of press about a bifurcated economy and, you know, where certain subsets of consumers could be struggling. But, you know, in our portfolio, given how we're underwriting today, I mean, just for an example, there's talk about, you know, consumers earning less than $50k a year. I think that represents 5% of our originations right now. So very, very small. Same thing with student loans. As you know, we've restricted underwriting to that group. So the percent of that are, you know, delinquent on a student loan and current on us is, you know, now measured in basis points and is shrinking. So we on our book, aren't seeing anything more than the normal kind of, you know, variability that you adapt and continue to manage to, which our platform is set up and our team is set up to do that quite well. So no not, you know, no kind of broad themes. Despite, again, we're reading the same thing you are, but we're not seeing it in our book. And I think that's based on how we're underwriting.

Great. Thanks. And maybe I'll sneak one more in, and this might end up having to be for the investor meeting. We want to leave some meat on there. But your CET1 of 18% is very healthy. I'm just wondering how much is too much. Thank you.

We'll see you in November.

Sounds good. Alright. Thanks, guys. I appreciate it. See you then.

In all seriousness, I think, what you know, a little bit on that is, we do have what we would say is some excess capital, and our plan is to use that for growing the balance sheet as we ramp up originations. And, you know, if we have enough capital to satisfy that primary goal and more than enough after that, then I think we'll consider other options.

Okay. Great. And, see you November 5. Thanks very much.

Okay. Thank you. Our next question comes from Giuliano Bologna from Compass Point. Your line is now open.

Sounds good. Hopefully, you guys can hear me now. I have the unmute notification this time. Congratulations on a great quarter. You know, it's great to see that, you know, continued, you know, great results. When I look forward, I mean, there's obviously a tremendous amount of demand, you know, through the marketplace, whether structured certificates or whole loan sales. I'm curious in a sense how much more do you think you'd want to grow that versus grow the kind overall HFI pie? Because, you know, the outlook is called 45% between HFI and extended seasoning. Which is a pretty, you know, healthy amount, and it looks like that could, you know, keep growing balances. But just trying to think about, you know, how you think about the balance going forward because you have a lot of dry powder, a lot of liquidity, a lot of capital to kind of keep pushing. So I'm curious how you think about how much you do want to, you know, push both sides there?

Yeah. Yeah. And we'll get into this more at investor day. So but to give you an answer now for, you know, for Q4, the or even longer term. I mean, the end goal is to grow originations enough that we can feed all of our desires to grow the balance sheet and we can feed all the investors in the marketplace that are paying the appropriate price for the loans we're originating. So our goal is to be able to do both. And then, you know, if we're not quite there on total originations, then it's a bit of a balancing act. Right? We still want to see healthy growth on the balance sheet, but we originate loans that are better off in the marketplace on the sheet, and we're going to sell those. And we have long-term investors that we want to keep our relationship with, so we're going to make sure we're able to allocate to them as well. So, you know, always a bit of a balancing act while we're still ramping originations. The end goal is we have enough originations to feed both sides.

That's very helpful. One thing I'm curious about, when I look at your marketing spend, as a percentage of volume, it, you know, came up a little bit, but it's still, you know, much lower than I would've expected, you given that pushing some new marketing channels. I mean, I'm calculating it, you know, 1.55%, 1.553%. You know, you obviously, you know, highlighted that you're gonna push a little bit more harder on the marketing side. In April, you know, in anticipation of, you know, growth in '26.

Know,

looks like, you know, I mean, HFI was down, so there should be, you know, a little bit less of a benefit from more, you know, capitalization or amortization of that through, you know, on HFI. But seems like that's, you know, continued to be very efficient, you know, from a, you know, percentage of volume perspective. I'm just curious, you know, how I should think about that, you know, going over going forward over the next few quarters.

Yeah. So as I mentioned, I think we, you know, excitedly, I'd say we still see a lot of opportunity there. Right? We are coming from a place of reasonably low activity into a market that I think is pretty attractive in terms of the value proposition to the consumer, the experience we've got. We, you know, it's our efforts are working well. We are still, I mean, we're only two quarters into restarting direct mail as an example. We're on the third version of our response model. We will be on our fourth as we exit the year, you know, building the creative optimization library, optimizing the experience, and, you know, then take that across some of the other channels like digital and all the rest. So we still have a lot of opportunity in front of us. I think what you're also seeing in Q3 is not just the performance of those channels being, you know, positive. But also some of our other efforts. I touched on it in my prepared remarks. Our other we are growing we, you know, we delivered 37% growth year on year. That was both in new and in repeat marketing over indexes to driving new. But repeat is coming at a, you know, much lower much lower cost. So our ability to scale that at an equivalent pace, we're still at fifty fifty to jump in year on year marketing spend. We're still, you know, drive roughly fifty fifty with new versus repeat. So both of those efforts are working in the external marketing efforts. And then the efforts to drive repeat and lifetime value from our customers.

That's very, very helpful. I appreciate it. And, yeah, congrats on team performance. I'm looking forward to seeing you guys, you know, in a couple of weeks.

Great. Thanks, Giuliano.

Thank you. And your next question comes from Reggie Smith of JPMorgan. Your line is open. Please go ahead. Reggie, your line is open.

You're on mute, Reggie.

There we go.

Can you hear me now?

Yes.

I'm sorry. I wanted to follow-up on the, on the last question. So

kind of thinking about marketing, you know, obviously, it costs less to reengage a previous customer. I guess thinking about that expense ratio, you know, the 1.5 that we see on the income statement, my sense is that it's not evenly distributed and that, you know, maybe your incremental or your marginal loan is a little bit more. Help me understand, I guess, how inefficient that is, or where where is the marginal cost to underwrite a loan? And then maybe frame that against you could sell one for. Like, it's my my sense and my gut is that despite the fact that that your marketing channels are not optimized, that it's still, there's still room there to kind of kind of go, almost as though you're leaving money on the table possibly. Not in a bad way, but just just thinking about the opportunity there. So maybe talk a little bit about what the marginal cost to acquire a new loan is and then maybe frame that against, you know, what you can sell these loans for. Looks like origination, your marketplace ratio is about 5%. So there seems to be a lot of room there. But anything you could share there would be great. Thank you.

Yeah. So you're certainly thinking about it the right way. We're underwriting marginal cost of acquisition that reflects the lifetime value of the customer. And, you know, the part of this process, you know, book. And what we are very, very focused on is profitable sustainable growth. Right? We're not looking to just post inefficient volume that we can't rinse and repeat and drive further. So as we push into these new channels, we're where we'll find that efficient frontier and then we work to basically bring it in, right, by improving our targeting models, improving our creative and response rates, improving our pull-through on the experience and the conversion rate on the experience so that we can then go deeper and push harder in those channels. So I think you're right that we have more room to go, but it is it is very mathematically and or scientifically backed. Right? It's we've got a very good handle on what we can expect to get from our customers. Now that that number is going up. Right? As we and we'll share a little bit more info on this. But as we get better and better, you know, these repeat customers are not only lower cost to acquire, they're also lower credit loss. And, oh, by the way, if we get you back once, it's likely we're gonna get you back three or four times. So you know, there really is a real long-term benefit here. That will drive up the lifetime value, which will drive up our ability to pay up at acquisition, but we're building towards it. And we're building towards it incrementally every quarter.

That makes sense. And if I could sneak one more in, I'd love to hear more about the BlackRock program and the insurance sales channel.

If I'm thinking about

that right, I guess, this is a way for civilians to get exposure to these types of notes? Like, as liquidity the liquidity there for the consumer, they able to sell that stuff back? Like, how does that kind of work? And then on the insurance side, like, do you think we'll get to a point where you're announcing, you know, a committed number from the insurance channel. Like you do for, you know, kind of private credit, today.

Thank you.

Yeah. So a couple of things there. One, this is not this is not direct to consumer sales that's happening. This is really, you know, in the BlackRock example, I think they have many different ways that they may, you know, represent other clients where they're managing money to purchase this program. So I wouldn't want to box it into just one use case for them, but it's not a, you know, direct or indirect to consumer investors that's happening in any way. I think the insurance pool is extremely deep. And so the, you know, these are insurance companies who are taking premiums for various insurance policies. And investing that money. So, you know, it's a massive pool. It is, as Scott was saying, it usually, the price is not quite as good as banks, but generally, it's still a very low cost of capital. And so we think we can make progress in terms of growing that channel and helping our overall price that we're selling loans at as well.

And I guess on the direct to consumer point, is that possible? I could maybe not with BlackRock, but is that, like, a channel that one day be a thing, or are there things that prevent that, regulatory wise that would prevent that or make that difficult?

So there is capital in our loan book today that is provided by it's usually coming through funds that are managed by RIAs. At some of the wealth managers and, you know, hedge funds and all the rest. So there is private individual investor capital coming in to purchase the asset. So that's one. Going direct to consumer retail would be, you know, going back to our original model. And if you recall, you know, it is doable. Then the loans become securities, which comes with a lot of overhead and disclosure requirements, and we have been able to operate a much better business without that because we're what I mean by that is you we are required to announce when we make pricing changes. We're required to announce when we make credit changes. We had all of our competition downloading our publicly available data and using it to compete against us because we had to tell them what we were doing. So it's not something I would gladly go back in that old structure. But, certainly, high net worth individual through funds is a source of capital today. I was thinking about how I would love to, to pick up some yield, versus what I get in my savings account now.

So I think there's something there. I don't know.

We could open it up.

Thanks a lot. Listen. Great quarter, guys.

We'll talk soon. Thanks.

Thanks.

Thank you. And a reminder that if you'd like to ask a question, please raise your hand. Our next question comes from Kyle Joseph of Stephens. Line is open. Please go ahead.

Hey. Good afternoon. For taking my questions. You guys have touched on this a bit, but just looking at looking at Slide 10 and kind of delinquency trends amongst FICO bands. Obviously, at least amongst the competitor set, you saw a pretty big increase on the lower band there. Just give us a sense for how that impacts your originations, and investor demand and, you know, where you're seeing kind of the best bang for your buck in term across the FICO band score?

Yeah. So that doesn't directly affect us as I touched on before. You know, we're certainly hearing some chatter about, maybe people consolidating with a smaller handful of originators that have shown themselves to have more stable and predictable performance. What you know, always looking at is what does the application profile look like coming at us? Is it shifting? Is it shifting in a way we like, we don't like? So, you know, when you see an uptick like that, it's generally gonna result in somebody else pulling back. It's we don't know. Is that one platform too? Three? Like, hard for us to say, but we'll be monitoring and adapting to is making sure we continue to get a consistent through the door population. And that that we want. And because it may provide some opportunity. It might provide some risk, and that's part of, you know, what our day job is.

Got it. Helpful. And then, just one follow-up for me. Talked a lot about marketing expenses today, but just, you know, and imagine you'll cover this at the investor day as well. But just, you know, a sense for the operating leverage you have on the remaining expense items.

Yeah. We think it's pretty significant. We will get into it more at investor day. I think you can already see it happening right now in terms of, you know, the revenue growth we've produced year over year compared to expenses. And that's certainly not to say that other expenses won't go up as we grow the company. But I think marketing is where you'll see the most variable cost as we scale up.

Got it. That's it for me. Thanks very much for taking my questions.

Great.

Thank you for your questions. I will now turn the call to Artem for some questions via email.

Alright. Thanks, Kevin. So Scott and Drew, we've got a couple of questions here that were submitted by our retail investors. First question is, we noticed a difference in origination growth rate across issuers and originators. To what do you attribute differences in growth?

Yeah. So first, thanks to all the retail investors for submitting. I understand from Artem that we got quite a few this quarter, so that's great. Yeah. As we talked about on the call, not all originations are created equal. Our focus is on profitable sustainable originations growth, and, you know, I think 37% growth in originations to a level that's, you know, really getting close to our highest over the last several years. Is also coming with record high pretax net income and also coming with outperformance on credit by 40%. So it's we're not just looking at one number, which is dollars originated year on year. We're looking at a combined balance of what we think makes for a sustainable, profitable business.

Perfect. Alright. Second question. You talked a little bit about potential rebrand coming up. Any updates on the status?

Yep. I'm only talking about it because you all keep asking. But I would say we're yes. We have done quite a bit of work this year, and we're in the final stages of the let's call it, the research and development phase and landing on, you know, where we want to take it. Very excited about it. We're now entering the planning and execution phase. Which we're gonna be pretty deliberate about as it won't surprise anyone on this call. We built up equity in this brand after almost twenty years. We think a new brand will give us a broader permission set with our customer base and kind of create new opportunities for us, but we gotta make sure we don't lose the, you know, tens of thousands of positive reviews and awards and our conversion rate that we finally honed across all these channels and so lots of work to do. So when will it be, you know, out in the ether will be probably of next year. Don't hold me to that date exactly, but we're doing the planning phase to make sure we know exactly what we're gonna get and can support it with the, you know, marketing oomph that it's gonna need to be successful.

Alright. Perfect. And last question. Just any updates on the product road map or launching any new products?

Yeah. So, obviously, this year, as we've been getting back to growth, we've also been, you know, expanding our ambitions on the product mix. We talked about LevelUp checking on the call today. Of savings has been a big driver, which I think Drew talked about that IQ this year. So there is absolutely more to come. That's part of the reason we're gonna be investing in a new brand. What I'd say is, you know, stay tuned for investor day where we'll talk a little bit more about some opportunities we're gonna be pursuing in the years to come.