Oportun Financial Corporation

Greetings and welcome to the opportune financial third quarter 2024 earnings call and webcast. At this time all participants are in listen only mode. If anyone should require operator assistance please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder this conference is being recorded. It's now my pleasure to turn the call over to Dorian Hare, Investor Relations. Please go ahead, Dorian.

Thanks, and hello, everyone. With me to discuss Opportunity's third quarter 2024 results are Raul Vasquez, Chief Executive Officer, and Jonathan Koblentz, Chief Financial Officer and Chief Administrative Officer. I'll remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations, and financial position, planned products and services, business strategy, expense-saving measures, statements regarding our senior secured term loan and plans and objectives of management for our future operations. Actual results may differ materially from those contemplated or implied by those forward-looking statements, and we question you not to place undue reliance on these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially is set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption risk factors, including our upcoming Form 10Q filing for the quarter ending September 30, 2024. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today's call, we record both GAAP and non-GAAP financial measures, which we believe can be useful measures for the period-to-period comparisons of our core business and which provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available at the Investor Relations section on our website. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP financial measures is included in our earnings press release, our third quarter 2024 financial supplement, and the appendix section on the third quarter 2024 presentation, all of which are available at the investor relations section of our website at investor.opportune.com. In addition, this call is being webcast, and an archived version will be available after the call, along with a copy of our prepared remarks. With that, I will now turn the call over to Raul.

Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. Overall, I'm pleased with the progress demonstrated by our third quarter results. The four headlines from the quarter, in my view, were lower charge-offs, return to growth, continued cost reduction, and higher profitability. First, we had lower charge-offs. Our annualized net charge-off rate was 11.9%, which was 26 basis points better than the lower end of our guidance range. When measured in dollars, our quarterly net charge-offs declined year over year for the fourth consecutive quarter, in this instance, by 6%. I'm also pleased with the progress we continue to make with our 30-plus day delinquencies, which were down 34 basis points year over year to 5.2%. That's the third consecutive quarter of year-over-year declines. Improvement in our credit performance is being driven in part by our implementation of our V12 credit model, which leverages the performance data of our portfolio over the last two years under higher inflation. We started using V12 to underwrite new borrower applications in January and recently implemented V12 to underwrite applications from returning borrowers, So we expect to see further improvements in credit performance in 2025. Second, we're ready to return to originations growth. After several consecutive quarters of origination levels that were lower than the prior year's levels, originations at $480 million during Q3 were virtually flat year over year. This is despite continuing to de-risk the business by decreasing average loan sizes, which were down 18% year-over-year from $3,975 to $3,244. Third, we continued progress on expense reduction actions Our 3Q gap operating expenses were $102 million, down 17% year over year, and we are reiterating our expectation to reduce gap operating expenses to $97.5 million or less by the fourth quarter. And fourth, each of these factors led to higher profitability. We generated $31 million of adjusted EBITDA, more than doubling last year's level and exceeding the top end of our guidance range by 21%. Q3 was also our third consecutive quarter of adjusted net income profitability. I mentioned at the start of the year that we would see our business recover significantly, which we have delivered with improving trends in profitability, credit performance, originations, and expense reductions. Additionally, the macro backdrop has also improved this year, with economists' expectations for a recession significantly diminishing, with resilient growth and ongoing low unemployment and with the Fed now having initiated a rate cut cycle that's expected to continue into next year. As we near the end of 2024, we are well positioned to deliver an even better 2025. We've recently executed two transactions that were critical towards that end. First, we closed the sale of our credit card portfolio today. As we shared previously, the transaction will be $2 million adjusted EBITDA accretive this quarter, and $11 million adjusted EBITDA accretive for full year 2025. Second, as we announced on October 29th, we executed an agreement to fund a $235 million four-year senior term loan facility that will replace our existing corporate financing facility. This reflects a key milestone towards strengthening our balance sheet and enhancing our operational flexibility, thereby improving our financial results. As we said in March, we had been evaluating refinancing options for the existing facility given scheduled increases in the asset coverage ratio covenant requirements. We weren't going to be in compliance with the existing facility's ACR covenant, which limited operational flexibility to enhance shareholder value and didn't reflect operational improvements in the business. The new facility replaces the ACR covenant with an adjusted EBITDA-based leverage covenant that rewards accretive decisions and recognizes cash flow generation. With the closing of our credit card sale, which was a necessary condition, we expect a new term loan to fund this week. In connection with providing the term loans, the lenders will receive approximately 4.86 million penny warrants, which equals 9.8% of the fully diluted shares outstanding of the company, excluding out-of-the-money options on a pro forma basis. Even with the dilution impact from the newly issued warrants, we expect to drive increased profitability on a per share basis through focusing on our core products, maintaining expense discipline, and improving credit performance. I'd like to reiterate our preliminary full year 2025 expectations that we released at the end of last month. They are diluted EPS between 25 cents and 50 cents, adjusted EPS between $1 and $1.25 and an annualized net charge off rate between 11% and 12%. In addition to our positive view of 2025, our full year 2024 outlook continues to show that after a strong start to this year, our second half performance will be even better than the first half. In summary, I'm proud of how the team executed in Q3, and pleased that with the credit card sale behind us and the refinancing transaction expected to close this week, we can now turn our focus towards a strong close to 2024 and significantly improving our profitability and credit performance in 2025. With that, I will turn it over to Jonathan for additional details on our financial performance, credit performance, and guidance. Jonathan will also update you on how this translates to progress towards our longer term unit economic objectives.

Thanks, Raoul, and good afternoon, everyone. As Raoul mentioned, we're pleased with the progress demonstrated by our third quarter results, and we're looking to carry that positive momentum into the fourth quarter and 2025. As shown on slide seven, OPPORTUNE delivered total revenue of $250 million, and we were profitable on an adjusted basis for the third consecutive quarter. with adjusted net income of $0.9 million for adjusted EPS of $0.02. While maintaining prudent credit discipline, originations of $480 million were down only 1% year over year. Sequentially, originations were up 10%, aligning with the typical seasonal pattern for a ramp throughout the year. Total revenue of $250 million declined by 7%, driven principally by a 7% decline in our average daily principal balance under our conservative credit posture. Our total net decrease in fair value of $132 million was primarily driven by current period charge-offs of $82 million and a $35 million non-cash mark on our ABS notes due to their weighted average price increasing from 96% to 97.8%, as benchmark interest rates declined and credit spreads tightened significantly. As a reminder, we elected last year to stop fair valuing our new debt financings and expect their fair value impact to be minimal by the end of 2025 as the prior financings near maturity. Interest expense of $56 million was up $9 million year over year, primarily driven by an increase in our cost of debt to 7.8%, versus 6.3% in the year-ago period, reflecting the higher rate environment. Net revenue was $63 million, down 26% year-over-year, primarily due to the total revenue decline, non-cash marks on our ABS notes, and a higher interest expense. Turning now to operating expenses and efficiency, we continue to see the benefits of our expense reduction initiatives. Our $102 million in total operating expenses in Q3 reflected a 17% decrease from the prior year period. For the quarter, we recorded adjusted net income of $1 million, a $13 million improvement compared to the prior year quarter, and adjusted EPS of 2 cents up 33 cents versus last year. The improvement was principally driven by our sharply reduced cost structure. I want to take a moment to emphasize that our adjusted net income provides a future run rate view of our GAAP net income by removing non-recurring items and the mark to market on our ABS notes, which will be almost entirely gone after 2025. As you can see on slide eight, we would have been GAAP profitable on a year-to-date basis, excluding non-recurring and non-cash impacts relating to fair value marks on our ABS notes. the write-down of our credit card portfolio triggered by our agreement to sell it, and other non-recurring charges. Similarly, for the third quarter, our gap net loss was $30 million, driven by the $35 million non-cash mark on our ABS notes. Adjusted EBITDA, which excludes the impact of fair value mark-to-market adjustments on our loan portfolio and notes, was $31 million in the third quarter. This reflected, a year-over-year increase of $17 million, or 117%, driven also by our sharply reduced cost structure, along with lower net charge-offs on a dollar basis, partially offset by higher interest expense. Our adjusted EBITDA performance exceeded the high end of our guidance range by $5 million, primarily on lower-than-anticipated net charge-offs. Let me now shift to more details on our strong Q3 credit performance, another key sign of progress. Our front book of loans originated since July 2022 continues to perform quite well, while our back book of loans underwritten prior to then continues to roll off. As you can see on slide 10 of our earnings presentation, the losses in our front book 12 months plus after disbursement, continue to run approximately 400 basis points lower than the losses on our back book. And our 3Q23 vintage, which has now been on our books for 12 months, has shown the lowest losses of any front book vintage so far. Furthermore, you can see our annualized net charge-off rate for the quarter by front book versus back book on slide 11. In Q3, the front book had an annualized net charge-off rate of 10.4%. which is within the 9% to 11% net charge-off range that we are targeting in our unit economics model. Finally, you can see on slide 9, in addition to our charge-offs declining 6% year-over-year, I'm pleased with the progress we continue to make with our 30-plus-day delinquencies, which were down 34 basis points to 5.2%. That's the third consecutive quarter of year-over-year declines. Our October 30-plus delinquencies remain below 2023 as well. In summary, we continue to feel good about the quality of the credit we are originating. As you can see on slide 12, we've had several consecutive quarters of origination levels that were lower than the prior year's levels due to conservative underwriting and our focus on improving our loss rates. However, we are now ready to return to originations growth within our targeted credit quality range And I'm pleased that at $480 million during Q3, originations were virtually flat year over year. This is despite continuing to de-risk the business by decreasing average loan sizes, which are down 18% year over year from $3,975 to $3,244. You should expect our four Q24 originations to grow not only sequentially, in line with seasonal patterns, but also to grow in the 10% range year over year, which is another sign of the progress we're making in our business recovery. It is also currently our intent to grow full year 2025 originations above 2024 levels. I'd also like to further highlight the significant progress we've made on cost reduction actions. We are much more efficient today than we were when we initiated significant cost reductions in the third quarter of 2022. Since then, our adjusted operating expenses have declined by 34%, while our adjusted OPEX ratio, as a percentage of own principal balance, has improved by 860 basis points. Our adjusted OPEX ratio of 13.9% remained close to last quarter's record low level. We expect to continue to make improvements in our adjusted OPEX ratio in the future through continued strong financial discipline, along with a return to originations growth. And as Raoul said, we are reiterating our expectations to reduce gap operating expenses to $97.5 million or less by the fourth quarter. Regarding our capital and liquidity, as shown on slide 14, Net cash flows from operating activities for the third quarter were a record $108 million, up 1% year over year. As of September 30, total cash was $229 million, of which $72 million was unrestricted and $157 million was restricted. I'd note that these liquidity levels are after having paid down $17 million of corporate debt during the quarter. Further bolstering our liquidity was $483 million in available funding capacity under our warehouse lines and remaining whole loan sale agreement capacity of $24 million. During the third quarter, we closed two new committed personal loan warehouse facilities totaling $552 million. We also executed a new $223 million ABS transaction that was seven times oversubscribed and priced at an 8.07% weighted average interest rate consistent with our unit economics targets. And in October, we facilitated a securitization of our whole loans purchased by Castle Lake, which priced at a 7.27% weighted average interest rate. While the only economics opportunity we'll receive from the latter ADS transaction is a servicing fee, The further tightening of credit spreads for ABS-backed buyer loans should benefit us in the future. We expect the corporate debt refinancing that closes this week will improve Opportunity's operational and balance sheet flexibility. We are committed to deleveraging, which we believe is in the best interest of shareholders, as part of the refinancing. At closing, we will repay our residual financing facility, which had a $22 million outstanding balance as of the end of 3Q and we are required to pay down without prepayment penalty at least $40 million under the new term loan facility by January 31st, 2026. We also have the option to repay without prepayment penalty an additional $10 million under the new term loan facility at any time and another 10 million after the first anniversary of its closing. The required amortization combined with the voluntary penalty-free prepayments will allow us to reduce our corporate debt balance to $175 million prior to the new term loans maturity. Given that we have consistently repaid $5.7 million of corporate debt every month this year, we are confident in our ability to continue to de-lever over the next two years. Turning now to our guidance as shown on slide 15, our outlook for the fourth quarter is total revenue of $246 to $250 million, annualized net charge-off rate of 11.8%, plus or minus 15 basis points, adjusted EBITDA of $28 to $30 million. The potentially slight sequential decline in total revenue implied by our 4Q guidance from 3Q's $250 million total revenue is driven primarily by the sale of a credit card portfolio. Adjusted EBITDA is expected to slightly decline from 3Q due to a seasonal increase in marketing expenditures. We expect our fourth quarter to feature strong year-over-year improvement in our annualized net charge-off rate, where our midpoint guidance implies a reduction of approximately 50 basis points from last year's 2.3%. We also expect adjusted EBITDA to markedly improve year-over-year where our midpoint guidance implies an almost tripling from last year's $10 million. Furthermore, we expect our GAAP EPS and adjusted EPS to markedly increase year over year. I note that although we expect Q4 originations to grow in the 10% range, we expect the average daily principal balance in Q4 to decline in the 8% range year over year as a result of prior credit tightening actions. As you can see on slide 16, were our loan portfolio to remain flat or to grow by 10% year-over-year during 4Q24, our expectations for our annualized net charge-off rate would be 90 basis points and 190 basis points lower, respectively. I'd also like to call out that we expect 4Q24 interest expense to be around $75 million, up from $56 million in Q3 due to a one-time $18 million non-cash charge from the write-off of deferred financing costs related to the repayment of the current corporate financing facility as part of the refinancing, and to a lesser degree, the repayment of the residual financing facility. This will impact our Q4 GAAP financial results, but will be excluded from our adjusted results. Our guidance for the full year is total revenue of $997 million to $1.001 billion. Annualized net charge-off rate of 12% plus or minus 10 basis points. Adjusted EBITDA of $92 to $94 million. Our full year 2024 adjusted EBITDA expectation at the midpoint of $93 million reflects a level almost five times last year's $19 million. Our revised full-year 2024 guidance reflects 10 basis points of improvement in our annualized net charge-off rate expectation at the midpoint from what we previously guided to in August. Before handing the call back to Raul, I'd like to update you on our progress towards our long-term unit economics targets. While our long-term targets are gap targets, I'll be using adjusted metrics actuals for comparison since they remove non-recurring items and provide a better sense of our future run rate. We made solid progress in Q3 as evidenced by our 11 percentage point year-over-year improvement in adjusted ROE, driven principally by cost reductions. We will continue to focus on improving our credit performance, reducing expenses as a percentage of own principal balance, and reducing leverage on our journey to reach our 20 to 28% ROE target. Raul, back over to you.

Thanks, Jonathan. To close, I'd like to emphasize three key points. First, we're pleased with the progress demonstrated by our third quarter performance and our momentum thus far into the second half. We expect to generate second half adjusted EBITDA levels at our guidance midpoint that are almost 90% higher than the first half and to also be markedly more profitable on an adjusted net income basis. Second, with the completion of the credit card sale and refinancing of our corporate debt, we see no impediments to the full recovery of our business. And finally, our momentum is quite strong heading towards 2025, where we expect an improved credit performance, ongoing cost discipline, and a return to originations growth will enable us to generate $1 to $1.25 in adjusted EPS and an adjusted ROE in the teens. To wrap up, I want to thank all of our team members in our retail locations, our contact centers, and our corporate employees for their commitment and contributions. With that, operator, let's open up the line for questions.

Certainly. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. We ask you to please ask one question and one follow-up and return to the queue. Once again, if you'd like to be placed into question queue, please press star 1 at this time. One moment, please, while we poll for questions. Our first question today is coming from John Heck from Jeffries. Your line is now live.

Afternoon, guys. Thanks very much for taking my questions. I think I have two for Jonathan and one for you, Raul. Two for Jonathan. Jonathan, you mentioned the fair value marks on the ABS should be wrapped up by the end of next year. Do you have a sense of what's left to mark on that based on the current mark versus, I guess, par?

Yes, and we actually have a slide for that, John. Thank you for the question. If you take a look at slide... Hold on. It's at the back of the earnings deck, and it's... I'm just flipping there right now. Sorry. It's slide 34. If you look at slide 34 in the middle, we have asset-backed notes at fair value, and it says cumulative fair value mark to market adjustment, and for the notes, that is $30.8 million, so $31 million, right? So we're not making any more. We're not electing fair value for any new debt, so this existing fair value debt is just going to pay down. It'll be mostly paid off by the end of next year, and between then and now, would expect to take most, if not all, of that mark.

And the second question for you is you mentioned a priority of de-levering the business. What do you guys look at in terms of leverage ratios or primary leverage ratios, I guess, and what would kind of the longer-term target be for that?

Sure. So if you take a look at slide 16 of our deck, It's where we have the unit economics model that we've been trying to, that we're focused on. And, yeah, thank you, Raul. And there it indicates that our target leverage ratio, which we're currently above, is six to one. And so the, I mentioned in my remarks on the call, John, that This new facility, one of the things we really like about it is we can repay $60 million of the principal balance without paying a prepaid penalty. So that would take the debt from $235 to $175. We've talked about the fact that this year, every month we've paid down $5.7 million of corporate debt principal. And our cash flow position is only going to be stronger. Cash generation is only going to be stronger next year. given the increased profitability that we're projecting. So if we pay down that debt to $175 over time, we expect that we'll get to our target six-to-one leverage ratio, and we're comfortable with that as a target for us.

Okay. And then, Raul, question for you. You guys are leaning back into growth, which is nice. And, you know, over time, you guys have built up channels. You've got the Meta, you've got Dolex, and then you have Bari. Maybe talk about, and then you've got your own branches, you've got your own online presence, maybe can you talk about where the kind of focus for the source of growth will come, given all those opportunities?

Thanks for the question, John. So we feel that we've got all the things that we need to get back to target growth rates of 10 to 15% for the portfolio. To your point, our own kind of multi-channel business, our physical stores, Our contact centers, our digital channels, we know those are going to serve us well. And to answer your question, we think that really there is an opportunity to continue to lean into our own physical channels. One of the things that we'd like to do is to really put down some physical locations in some of the states where we don't have locations today. The bulk of our locations today are in California and Texas. But we're able to lend in over 40 states. So one of the things that we're looking at next year is putting down some physical locations in states like Georgia, Pennsylvania, Ohio. Think of all of the large populated states that were just a focus in the election, in this last election. We think there's an opportunity for us with physical locations to drive awareness, consideration, and growth of our portfolio. On top of that, the lending as a service opportunity, like you said, DOLEX, BARI, and now Western Union, we think that's also a great opportunity and something we're going to lean into next year.

Okay, great. Thanks, guys. Thank you, John. Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Gauchi Srees from Singular Research.

Can you guys hear me?

Yes, we can.

Congratulations on the quarter. Thank you. In terms of customer acquisition, you just mentioned physical location investment, the CapEx into physical location. I know it has been trending down to $118. So can you provide more insight into the drivers, into the significant reduction in customer acquisition costs? Is it primarily a decline due to due to returning customers? Is this a shift in marketing channel mix? And how is it going to trend looking into 2025?

We think it's the product of a couple of things. First of all, we've reduced sales and marketing expenses. As we were looking at reducing OPEX throughout the business, one of the things that we also looked at was just sales and marketing expenses, which are down 8% year over year. You combine that then with the fact that V12, in particular for new applicants, has given us an opportunity to really lean into growth. Overall growth in loans was 22% for the quarter. So when you combine the lower OPEX, the higher growth in loans, that's what really drives that CAC to the record low of $118,000. As we do return to growth, we want to invest more in marketing. So I'm not necessarily asking the team to continue to have us at these low levels. What we're really looking for is a return on that investment, right? This is much more of an investment than an expense. So as we mentioned during our comments, as we are now comfortable returning new growth, we'd really like to spend more. Along with the seasonal patterns of our business, we spend more in Q4 on marketing and really drive portfolio growth as opposed to driving CAC lower.

Okay. Thank you. And my follow-up is on your EPS forecast for F25. It's between $1 and $1.25. Given all your unit economics model and now your forecast for origination growth, what is primarily driving between the lower bound and the upper bound of that estimate?

Yeah, when we look at the adjusted EPS of $1 to $1.25, we're confident we can deliver that. So there are a couple of things that we think are going to help us deliver that. Number one, this return to growth. That'll help us drive the portfolio higher. It'll start to really help with revenue. We're really proud of our Q3 performance, in particular the improvement in profitability when you think about the fact that revenue was down $18 million and we still improved profitability. So when we think about next year, driving originations growth again, driving growth in the portfolio will help us reverse that trend in revenue. So that's number one. Number two, losses. We expect losses to continue to come down. We shared that we expect losses to be in the 11% to 12% range. So that's certainly going to help us. And then finally, we're going to continue to be very disciplined in OPEX. So when we look at an exit rate of $97.5 million and we continue to be disciplined in that area, we think that's really what's going to give us the opportunity to deliver that adjusted EPS in that range.

Awesome. Thank you again for taking my questions. I'll take the rest offline.

Thank you so much. Thank you. As a reminder, if you'd like to be placed in the question queue, please press star 1 on your telephone keypad. Our next question is coming from Vincent Cantick. From BTIG, your line is now live.

Hi, Jeff, and thanks for taking my questions. So, actually, follow-up questions kind of related to the growth aspect of it. So, it's nice to be able to see that we're now at the inflection point for year-to-year growth rates. I was wondering, you mentioned in the prepared remarks that you are seeing macro improvements to the economy. And so, if you could maybe talk about the drivers of that growth rate specifically, if you – I could talk about your underwriting posture and any changes to that. And I'll ask my related question now. As you're growing, what sort of, I guess, risk-adjusted margins and loss rate should we be expecting with the growth you're achieving? Thank you.

So I'll take the beginning of those. I'll let Jonathan talk about the risk-adjusted margins. In terms of our return to growth throughout the year, we've been talking about the fact that there were a few things we were going to be looking for. Number one, we'd want to look at our own metrics. And when we look at where credit is trending, we look at the performance that we've been able to drive in delinquencies. We shared that 30-plus delinquencies were down 34 basis points year over year. That gives us confidence that our underwriting adjustments are working. V12, we shared in our comments that We started using V12 for underwriting the new applicants. We started that at the beginning of the year, and we've been very, very pleased with the improvement of V12 versus V11. We're now using that for the returning population, which is historically where we've had 75% to 80% of our portfolio has been in the hands of returning borrowers. So to be able to apply this much improved risk model V12 relative to V11 to the returning portfolio. That's one of the things that gives us confidence in being able to return back to growth. So our internal metrics are one of the things we were going to look at. Number two, we wanted to continue to see inflation come down. And I think now there's broad recognition that the Fed has done a fantastic job trying to get that back to their target rate. So to see inflation start to come down, we know gives more breathing room in the budgets of our borrowers. And then finally, we were going to look for other macro indicators that the economy would be constructive. So when we look at the unemployment rate, and in particular, how strong the job market is for blue collar workers, and we look at fuel prices, fuel prices continue to be low. We know that's one of the things that also makes a big difference in our borrowers' ability to make our payments and to be able to just make their paycheck stretch in all of the ways that they need. Those are the things that really give us confidence returning to originations growth, our internal metrics and then what we see in the macro. I'll pass it over to Jonathan now.

Thanks, Rahul. So, Vincent, if you want to take a look at slide 17, which is our unit economics model, you asked about risk-adjusted margin and loss rates. So, we gave guidance for 2025 that we expect our annualized net charge-off rate to be between 11% and 12%. And then on the unit economics slide, right, as you've seen for several quarters now, we've had very resilient total revenue at around 36%. We've had stable cost of funds at 8%. And that takes us to a net interest margin before charge-offs of 28%. So if we take that 28% and we're 11% to 12% charge-offs for next year, that would imply 16% to 17% risk-adjusted NIM.

Okay, great. That's very helpful. Thank you for all that detail. So it sounds like you have significant model improvements, and you're now reflecting that. There's some macro improvements here, but you're not really changing, I guess, your underwriting posture in terms of loosening up a lot. So it's your model improvements and the macro improvement, and you're still otherwise remaining tight. So it sounds like there's opportunities, basically, and you're still being very conservative, if I'm understanding that correctly.

That's absolutely right. We would not characterize this growth as being driven by opening up, From a portfolio perspective, what we've seen is the decisions that we've made over the last few quarters in terms of reducing OPEX, in terms of having a tight credit box, all of that is creating a trajectory for the business where by now adding a bit of growth with the current credit box, by adding a bit of growth, what we're able to do is to drive improved profitability. So when we look at 2025, as we've shared now with the preliminary view into 2025, We expect that those lower losses, that ongoing low level of OPEX combined with a bit of growth really delivers that improved profitability next year relative to our really good performance this year.

Great. That's super helpful. Thanks very much.

Thank you. Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

I want to thank everyone once again for joining us on today's call, and we look forward to speaking with you again soon.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.