MoneyLion Inc.

Good day and welcome to MoneyLion, Inc.' 's first quarter 2022 earnings conference call. Joining us today are Dee Chow-Bei, CEO and co-founder, Rick Correa, Chief Financial Officer, and Sean Horgan, the company's Head of Investor Relations. 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 during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Before we go further, I would like to turn the conference over to Mr. Horgan as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Sean, please go ahead with your presentation.

Good morning, everyone, and thank you for participating in today's conference call to discuss Moneyline's results for the first quarter ending March 31st, 2022. Joining us today are Dee Chaubey, CEO and co-founder, and Rick Correa, Chief Financial Officer. Before I introduce Dee, I'd like to remind you that any forward-looking statements made in this commentary are subject to our safe harbor statement found in our SEC filings and in our press release. Today's call is also accompanied by an earnings presentation that you can view on our webcast and on our website at investors.moneyline.com. Now I'll turn the call over to Dave.

Thank you, Sean, and welcome to the Moneyline team as your newly appointed head of investor relations. Please feel free to email Sean with all your questions after this call. Welcome, everyone, to our first quarter's earnings announcement. We'll use this opportunity to reiterate our 2022 full-year guidance as well as discuss business updates and financial results. The macro markets are volatile. Tech indiscriminately is down and oversold. Markets may be irrational in the short term, but they will certainly normalize in the long term. We can't, however, time or predict the markets, and certainly can't control them. What we can control is our business, and I couldn't be more proud of the execution of the global Moneyline team. We are well capitalized, and we're seeing all the right fundamentals in our business that gives us confidence we'll scale and thrive. We've made great progress in the first quarter. Despite the noise, Moneyline has never been better positioned to execute on what we believe categorically is the most exciting strategy in fintech. Our business serves more customers today than it did a year ago. Moneyline continues to efficiently grow at near 100% year-over-year growth rates. And we're doing so while spending less per unit dollars in marketing. We're showing decreasing customer acquisition costs, and completely diversifying our revenue base. Not a lot of fintechs can say that. We set out to rewire the financial system for the hardworking American. And with that mission in mind, we have built a platform unlike any in the market. That's why we are so uniquely positioned to become the category leader through this shifting landscape. We brought together content from diverse and influential creators to educate, delight, and empower our customers. And we've been growing a marketplace of partners that give our customers access to billions of dollars in aggregate savings, to lower-cost personal loans, savings, car insurance deals, reduced wireless bills, and hundreds of personalized offers activated through our content and lifestyle feed and across our distributed platform. Our ability to contextualize these savings as advice sets us apart. More than ever before, our products are mission critical to the lives of customers as we continue to help them navigate their financial path through changing economic environments. Increasing inflation in tight spending environments positively impacts our consumer business by increasing the inherent demand of our products. Moneyline has been built to win in every economic cycle. We posted record revenue in the first quarter and exceeded our guidance, and we're reaffirming our full year 2022 guidance. Our cash position remains strong, and we have ample runway through our path to profitability. In the first quarter, we saw record new customer ads while reducing our marketing spend from the fourth quarter of 2021, resulting in a substantially lower CAC of $16 in the first quarter. We're projecting 100% growth rate in adjusted revenue in 2022, and we continue to expect to exit the year with break-even adjusted EBITDA. Moneyline has always been an attractive growth investment, but we believe our shares have entered deep value territory. If you're a FinTech investor looking for a disruptive growth story with real artificial intelligence and machine learning chops in a still nascent consumer adoption cycle, we represent an incredible opportunity at a time when the markets seem to be going through an air pocket. The investment thesis is playing out just as we've always said, with continued execution of our strategic plan. You'll see that customer growth compounds for us as we're able to increase recurring revenue from existing customers. This drives lifetime value expansion, and we're seeing this nicely in the first quarter. Are multiple products per customer strategies working as well? Lifetime value expansion gives us margin expansion over time and revenue scale as well, and it all builds on top of prior customer cohorts. We're diversifying our revenue mix by expanding SaaS and fee-based revenues, with enterprise revenues increasingly representing a larger portion of our total revenue mix. We've realigned our financial presentation to two categories, consumer and enterprise, based on the nature of the products and services provided and the channels through which the products and services are offered. The synergies between our consumer and enterprise businesses drive network effects and position us to increase market share just by virtue of the compounding benefits and our understanding of the financial intent of the entire American consumer base. These synergies also help significantly reduce customer acquisition and retention costs while sharing a common technology, content, and data infrastructure. Our consumer business is centered around a hyper-personalized in-app feed that includes engaging financial and lifestyle content from our network of content creators, athletes, celebrities, and of course, by the large amount of data produced through increasing everyday consumer transactions through our best-in-class financial products. Our suite of consumer products include automated advice, banking, credit, investing, crypto, and rewards, all of which serve to provide superpowers to our consumers in times of excess as well in times of need. As we've said before, this suite of capabilities is a must-have toolkit in all economic cycles. In the first quarter, we saw continued engagement with our educational resources, learning modules, roundups, investing products, crypto, and our full suite of digital banking products and capabilities. We integrated a suite of affiliate products, including credit cards, insurance, personal loans, and auto refinance options natively and seamlessly into our consumer experience. This allows us to expand our target markets to a broader spectrum of consumers, including those with higher income profiles and those that own their homes. The addition of the infrastructure for enterprise business has made our consumer value proposition more robust and more rich, and certainly more appealing to our broader segment of Americans. Overall, we saw changes in our positioning in the first quarter that helped establish us as a go-to one-stop shop for all money moments for all Americans. Our enterprise business represents an embedded finance marketplace that provides significant value propositions to our enterprise clients by allowing them to fully monetize their own consumers to financial products. Moneyline's network APIs can be installed via native API code, CRM integrations, embedded widgets, or simple partner page integrations at any consumer-facing application or website. This allows us to sit in the center of an extensive distribution network that serves as an efficient matching engine for consumers to reach through our business partners and product providers. Our embedded finance marketplace provides access to the widest range of financial offerings to meet consumer financial needs. The distribution power is immense. Any website, bank, credit union, or aggregator can offer their customers and members monetization through financial products, access to our marketplace. As a result, our vantage point in TAN has significantly expanded. 99% of households in America can theoretically become customers of Moneyline. Coupled with our low-cost, highly engaging content, we're seeking to become the daily destination to get advice on the right financial product in any moment in time. The combination of our consumer enterprise assets drives a powerful new business model for Moneyline. additional data and customers further enhances our value proposition to enterprise partners, creating a virtuous cycle. Let's discuss in detail our acquisition and retention growth loop advantages. Through our data advantage, we're able to much better personalize products for consumers, meaning more users trust Moneyline for all money moments, not just single point solutions like banking or credit. Consumer preference data gathering allows us to provide better conversion and fulfillment rates for our enterprise clients. More consumers with better data that allows better monetization opportunities for demand generators who choose Moneyline's embedded marketplace capabilities over competitors. The big idea is this. Moneyline becomes a substantial walled garden for financial products that doesn't necessarily compete with, but is adjacent and an extension of, consumer destinations like Amazon, Apple, Google, and Facebook. Ads for financial products are targeted with limited financial data on the consumer within these walled gardens. Because of our data advantage, we're able to disrupt the expansive targeted ad market dominated by Google, Facebook, Amazon, and others by offering an advice-driven ad unit, using AI-driven financial matching capabilities to match the right customers with the right product, driving positive outcomes for our enterprise and our consumer customers. This matching can happen right in the Moneyline app or website in a natural and seamless manner. Our media and creator network capabilities allow us to position recommendations as prescient advice as opposed to annoying ads, or the matching can happen anywhere on the Internet where Moneyline's embedded finance network APIs are connected, like CNBC's Mortgage Calculator and many other examples like that. We estimate our enterprise business unlocks an additional $24 billion of revenue opportunity and an additional expansion of our targeted addressable market. Moving on to total customers, we continue to drive new customer ads as we execute on our plan to add scale across our business. We ended the first quarter with 3.9 million customers, up 117% year-over-year. Interestingly, we're scaling users while spending less. Fourth and first quarter total customers leveraged our network and media capabilities. This is a key differentiator of the MoneyLend platform and gives us significant durability in this market environment. We will grow our customers at the rate we projected while still converging to profitability. We're very glad to have these levers. In addition to millions of consumers that use Moneyline's app and financial products, our enterprise business has seen growth in product partners and channel partners. Product partners drive multiple monetization opportunities as we expand product asset classes like personal loans, mortgages, credit cards, insurance. Asset classes can include financial and non-financial products. Channel partners drive top of the funnel which is translated into quarter-over-quarter growth in applications for products received. Similarly, total products consumed on our platform continues to grow. Over 9 million products were consumed by the end of the first quarter. We've always been proud of our platform approach, and those investments continue to help increase lifetime value. We operate a capital-light model, meaning we have little to no balance sheet credit exposure as we offload credit originated through our banking services to warehouse facilities. Nevertheless, we saw a decrease in provision as a percentage of finance receivables from 5.5% in the fourth quarter of 2021 to 4.8% in the first quarter of 2022. This continues to demonstrate recurring strong performance from returning customers, and the strong originations and underwriting DNA we've built over the years here at Moneyline. We have a near decade track record in managing credit risk. This is also where our data advantage shines. It will be hard for new entrants to gain this level of scale in these markets while expanding margins to a larger turning customer base. Our record performance continues in the first quarter. We continue to perform in revenue growth, customer growth, gross profit margin, and importantly, we very efficiently use the cash on our balance sheet. We expect to continue efficiently adding scale throughout 2022. We have the team that we want. And from an expense-based perspective, we expect to deliver significant operating leverage throughout 2022. With that, I'd like to pass it off to our CFO, Rick Correa, to walk us through the financial performance in detail.

Thanks, Dee. Good morning to everyone. Looking forward to sharing details about our record financial performance and union economics driven by our key metrics that Dee presented. As we're going through the financials, Please note that unless otherwise stated, I will be referring to adjusted results and all quarter period references refer to the first quarter of 2022 versus the first quarter of 2021. Our GAAP consolidated financial statements and reconciliations are available in the appendix of today's presentation, today's earnings release, and our upcoming 10-Q filings. Off the back of our Q4 and Q1 acquisitions, we have realigned our financials to better reflect our consumer and enterprise businesses and KPIs. Let's take a deeper look at these two businesses in terms of their respective revenue streams. Our consumer revenue includes our highly successful Instacash and Credit Builder Plus fee-based revenue. These products represent the bulk of the consumer business and have approximately 80% to 90% recurring revenue. This is driven by having a returning customer base and cohort revenue retention trends as shown on slide 19 of our presentation. Our raw money bank account is a critical driver for extending customer lifetime value while generating interchange and cardholder fees. Finally, Moneyline Investing and Moneyline Crypto generate revenue share on crypto transactions and a monthly per account fee on investment accounts. Our enterprise business revenue includes affiliate fees. If you recall, this was our fastest growing revenue stream in Q4 of 2021 and is now included in the enterprise business following the acquisition of Even Financial and its consolidation into our expanded marketplace offering. We accelerated our marketplace strategy and importantly, the marketplace is where a significant majority of the affiliate fees are now generated. I highlight this specifically as when looking at our consumer revenue in Q4 2021 of $45 million versus Q1 2022 of $46 million, it is important to note that this high growth affiliate fee revenue stream was moved from consumer into enterprise. Moneyline also earns revenue from SAS contracts for providing infrastructure to our enterprise accounts for connecting financial institutions to consumers through channel partners. Additionally, given our deep understanding of customers' interests and transactions, we're able to offer our customers targeted content and offers that generate advertising fees. Lastly, our media division, which was established through our acquisition of Malka Media, generates revenue from providing content management, creator and influencer management to creators, influencers, and corporate clients. This is an important benefit for generating enterprise revenue. We also realize synergies by providing low-cost content and customer acquisition in our consumer business. As we look ahead, the enterprise business is expected to rapidly scale to become nearly half of our overall revenue mix in the near term. This creates both revenue diversification and, as Dee mentioned, significant customer acquisition and engagement synergies for the consumer business. This mix reflects both our success in rewiring the financial system and our unique business model with even more powerful unit economics. Our powerful unit economics are once again evident in our ARPU, CAC, sub-six-month payback period, and another record quarter of new customer ads. These metrics are even more impressive against a rising CAC backdrop for most other consumer finance businesses. This outcome is the result of a vast top of funnel and our high customer conversion rates. Looking ahead, our enterprise business represents additional revenue diversification and synergies that further distinguish Moneyline's customer acquisition strategy and de-risks our growth plan and accelerates our path to profitability. We have consistently acquired customers with a sub-six-month payback period. Additionally, our historical customer revenue cohorts demonstrate the power of the Moneyline platform and our ability to generate recurring revenue and extend lifetime customer value. What these cohorts tell us is that our customer value proposition is highly compelling and we are growing efficiently. That gives us considerable confidence as we march towards another 100% year-over-year growth in 2022 while exiting the year at breakeven EBITDA. As we grow our top line, we are also rapidly realizing operating leverage from the platform. Expenses as a percentage of revenue are expected to improve 122% in 2Q 2022 from 138% in 1Q 2022. keeping us on track to exit 2022 with breakeven EBITDA. Importantly, we believe we have more than adequate cash runway through profitability and expect to be operating cash flow positive in the second half of this year. Looking at our record first quarter performance, adjusted revenue for the quarter grew 105% year over year to 66 million. Another record quarter for us, and our fifth consecutive quarter with 100 plus percent year over year growth. We expect to continue our remarkable growth trend with a Q2 guidance of 78 to 83 million of adjusted revenue representing 114 to 120% year over year growth and acceleration from the first quarter of 2022. Off the back of our full year 2021 adjusted revenue of 165 million, Our last 12 months of adjusted revenue is nearly 200 million, representing a 21% increase. Given our strong momentum, we are reaffirming our adjusted revenue full year guidance of 325 to 335 million, which is 100% increase over 2021 at the midpoint of our guidance. In Q1 2022, we generated 40 million of adjusted gross profit, which is an increase of 108% over our Q1 2021 adjusted gross profit of 19 million. The Q1 2022 adjusted gross profit was realized a slightly higher gross profit margin of 61% versus 60% in Q1 2021. However, it was slightly lower quarter over quarter given the slightly lower gross profit margin of the enterprise business. We expect a reversion to our mid-60s gross profit margin on a forward basis as we realize near-term synergies, and specifically in Q2, we expect to continue to realize a gross profit margin of between 60 and 65%. Our adjusted gross profit for the last 12 months is $125 million, representing a 20% increase over a full year 2021. That gives us confidence to reaffirm our 2022 adjusted gross profit margin of 60 to 65%. This is a critical differentiator for Moneyline. Historical investments in our technology, platform, data, and artificial intelligence-driven processes are translating into strong margin performance. Now, taking a look at our quarterly guidance. In Q1, we guided to 60 million to 65 million of adjusted revenue, and we generated 66 million. This represents 105% growth versus our guidance of 85 to 100%. We are targeting 78 to 83 million of adjusted revenue in Q2 2022, representing 114 to 128% year-over-year growth. As mentioned, we expect reversion back to our historical adjusted gross profit margin as we realize acquisition-related integration synergies. We are guiding to 60 to 65% adjusted gross profit margin. Our Q1 adjusted EBITDA continues to show a very strong trend and was also within range at a loss of 24.9 million. Given this trend, we are guiding Q2 2022 adjusted EBITDA loss between 15 and 20 million, representing a 30% quarter over quarter improvement at the midpoint and a 16 percentage point margin improvement compared to Q1. Looking at our full year guidance, As we stated, our business is built to win in any economic cycle. As a result, we are reaffirming our full year 2022 guidance for adjusted revenue,