MoneyLion Inc.

Standing by. My name is Mon Deep, and I'll be your operator today. At this time, I'd like to welcome you to Q3 2024 earnings call. All lines have been placed on any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number on your telephone keypad. If you'd like to ask a question, press star once again. Thank you. Now I'd like to turn the call over to Sean Horgan, Head of Investments. You may begin.

Thank you, Operator. Good morning, and thank you all for joining us for our third quarter 2024 earnings conference call. With me today are Moneyline CEO, Dee Chauvet, and CFO, Rick Correa, to discuss our results. You can find the presentation accompanying our earnings press release on our investor relations website at investors.moneyline.com. Please note that any forward-looking statements made in this commentary are subject to our safe harbor statement, which can be found in our SEC filings and our earnings press release. With that, I'll turn the call over to Dee.

Thank you, Sean. Good morning, and thank you all for joining us for our third quarter 2024 earnings call. Last quarter, we introduced our vision of becoming the number one destination for financial decisions. In Q3 2024, we took decisive steps towards this outcome. We delivered record performance in the third quarter, and we see that momentum continuing with accelerating revenue growth in the fourth quarter. This reflects our confidence in achieving our vision, and now let's turn to the key takeaways for the third quarter. First, we achieved record quarterly revenue of $135 million. This represented 23% year-over-year growth. Building on this quarter, we're raising our full year 2024 revenue guidance to $536 to $541 million, up from $525 to $535 million. Based on our new guidance, we expect revenue in the fourth quarter of $151 million at the midpoint. This represents 34% year-over-year growth, a significant increase from the comparable 23% year-over-year growth in the third quarter. Second, we generated record adjusted EBITDA of $24 million for the quarter, which exceeded our guidance range of $18 to $21 million. This reflects an adjusted EBITDA margin of 18 percent above the high end of our guidance of 13 to 15.8 percent. We now expect full-year 2024 adjusted EBITDA in the range of $88 to $93 million. up from our prior guidance of 80 to 87 million. This new range reflects an adjusted EBITDA margin of 16.8% at the midpoint. Importantly, we once again generated positive cash flow during the quarter, and we ended the quarter with a cash balance of 112 million, up from 98 million at the end of the second quarter. Third, we generated record enterprise revenue in the quarter. Enterprise revenue grew 18% quarter over quarter to 45 million. This reflects continued momentum on the heels of 17% quarter-over-quarter growth in the prior quarter. Lastly, our strategic initiatives are fueling growth by improving conversion metrics across our marketplace. This is highlighted by the launch of Moneyline Checkout, our end-to-end solution that we believe will unify and simplify the financial product shopping experience in the same way that online marketplaces did for the online travel industries. These are crucial drivers that position Moneyline for accelerating growth exiting the year. We expect this momentum to continue with enterprise revenue growth above 18% quarter over quarter in Q4. Turning to customer growth, we ended the third quarter with 18.7 million total customers, marking a 54% year-over-year increase and 1.6 million new customers compared to Q2. To put this into perspective, total customers have grown about three and a half times since Q3 of 2022. We're happy with this growth, but more importantly, we're increasing the products consumed on our platform. By the end of Q3 2024, 30.7 million total products have been consumed on our platform. Importantly, we increased our product consumption from 2.4 million in Q2 to 3 million in Q3. This underscores the success of our land and expand strategy. Every time we add a customer to the Moneyland platform, we have the ability to cross-sell, retarget, and monetize these customers with our industry-leading personal financial management or PFM tools and financial offers. We added 1.8 million third-party products alongside 1.2 million first-party products, a proof point and our strategy to target an expanding target addressable market and a diverse customer base. This demonstrates the increasing scale of our Marketplace First platform, which can help all Americans make their best financial decisions. Over time, we have made Moneyline more and more relevant as a product for every American. Our technology drives better outcomes for both consumers and enterprise partners, fueling revenue growth and operating leverage. And in a word, our machinery is working. Moneyline is the ultimate financial marketplace. This is our strategic advantage as we're able to enjoy low-cost customer acquisition, and then we nurture consumers over their financial journeys and product buying inflection points. This engagement leads to higher ARPUs and lifetime value. It bears repeating because when we talk about enterprise growth, we're also talking about the integration of the marketplace within the Moneyline consumer app, which is one of the key components of the enterprise business equation. Enterprise continues to gain momentum with 17% quarter-over-quarter growth in Q2, followed by 18% growth in Q3, and further acceleration is expected in Q4. Our consumer marketplace is one of the fastest-growing parts of our business, and it's an important lever that helps us generate high contribution margin revenues. Our first-party products like Instant Cash and our full suite of banking and investing capabilities continue to drive year-over-year growth in our consumer business with high contribution profit margins. Because of our large base of returning customers, consumer revenue is largely highly recurring in nature. We control the growth levers here as well. This gives us a lot of confidence to profitably acquire new cohorts of customers using our flywheel advantage. Across the digital consumer finance landscape, Moneyline is now renowned as the most full-featured personal finance platform in the industry. This is important because it provides insights and tools that keep customers returning to our platform for valuable guidance and advice, insights and content. Further, consumer marketplace conversions are increasing as customers repeatedly turn to our ecosystem for financial decisions. Our web and mobile digital products are built to engage consumers with guidance across financial inflection points. Just to name a few, we've built calculators and insights to inform product buying decisions, community features like user-generated content and commenting. We have a consumer marketplace with a broad set of third-party products and offers. And, of course, our premium membership, WOW, which provides real cash back on financial decisions. So now let's turn to enterprises. Our enterprise business is thriving across both macroeconomic and fundamental factors. We are becoming the de facto ecosystem for any financial services provider in the industry looking to acquire highly vetted in-market consumers. Our network expanded to over 1200 enterprise partners in the third quarter, driving almost 90 million total customer inquiries. So I'll start with the macroeconomic environment as it relates to our enterprise business. In the third quarter, within our largest vertical, personal loans, we noted in our last two earnings calls that the current credit cycle likely bottomed at the end of Q1. Conversion rates, or the percentage of approved applications, improved modestly in Q3, but still remained below historical levels. We expect upside in loan conversions as interest rates decrease. We've added new partners across verticals, And in the third quarter, non-personal loan revenue was about half of the marketplace revenue, underscoring the success of our diversification efforts. So far in the fourth quarter, we've seen conversion rates trend positively. We expect continued stabilization through the first half of next year as well, as lenders revisit their acquisition strategies in a lower interest rate environment. Our focus remains on revenue diversification and providing even more software development capabilities, business intelligence and analytics, and conversion funnel optimization tools to our enterprise partners. We believe our edge in optimizing our software leads to increased revenue opportunities for all participants in our marketplace. Deepening our presence in key verticals is another strategy to grow the value of our marketplace. This is beginning to bear fruit, but we believe we're only in the early innings of penetrating these verticals. The key verticals we're focused on include credit cards, mortgages, and auto insurance. Let me touch on each of these briefly. In credit cards, we're hosting the decisioning models of our partner issuers to deliver personalized, pre-qualified offers to our users. In addition, we are leveraging personalized lifecycle campaigns backed by new data sources to optimize conversions. We're making progress on our go-to-market efforts for mortgage-related products, like home equity line of credits, with many more features and capabilities to come. In the coming months, we plan to launch real-time mortgage pricing displays, contents and widgets across the Moneyline ecosystem. In auto insurance, we saw substantial growth in the third quarter by calibrating the right product and offers for the right segments of our vast customer base. This will grow as we continue refining the capabilities. Our goal is to grow these verticals to a similar scale as what we today enjoy in personal loans. These diversification efforts expand our revenue opportunity and smooth out our enterprise revenue, strengthening our naturally hedged business across macroeconomic cycles. We are super excited about Moneyline Checkout. It transforms the consumer experience, disrupting the industry while improving our unit economics. This brings to bear multiple facets of our technology development, into one platform that reduces significant friction for the consumer. When I say that Moneyline is a must-have partner for customer acquisition and consumer finance, this is yet another reason why. Let me explain. When consumers visit Amazon to buy something like sneakers, they expect to search, shop, compare, and complete their purchase all in one place. They don't expect to be redirected to Nike.com to finish the transaction. Consumer finance has lacked this kind of seamless experience until now. with Moneyline Checkout. Moneyline Checkout lets consumers complete financial transactions across hundreds of providers in real time without leaving the Moneyline platform. By integrating consumer and third-party data directly with Moneyline's product partners, these providers can increase conversions and expedite onboarding. Whether a consumer is borrowing for a loan, signing up for a credit card, starting a savings account, or choosing among the dozens of other product categories Moneyline offers, they can complete the entire transaction within Moneyline's dynamic consumer marketplace. So how does this translate to positive outcomes for our enterprise partners? Well, we're already seeing great results. Our pilot partners leveraging Moneyline Checkout have seen increases across key metrics, such as a 25% improvement in click-through rate, a 2.5 times increase in conversions, and a 30% or more increase in revenues. So we're excited to continue rolling out Moneyline Checkout across our network and driving better outcomes for both consumers and enterprise partners. So with that, I'll turn the call over to Rick to provide a more detailed update on our financials. Thanks, Dee, and good morning to everyone. I look forward to sharing details about our financial performance for the third quarter ending September 30, 2024. I will also discuss our guidance and outlook for the fourth quarter and full year of 2024. For more information, please refer to our GAAP consolidated financial statements and non-GAAP reconciliations, which are available in today's earnings release and our 10-Q filing. First, our customer acquisition and lifecycle strategy continues to translate into strong customer and product ads. Our top of funnel expanded to almost 90 million total customer inquiries in the third quarter of 24, up from 85 million in the prior quarter. These inquiries converted into 1.6 million new total customers and 3 million total products consumed during the quarter, up from 2.4 million products in Q2. Our top of funnel demonstrated significant growth from an already massive base in Q3. This demonstrates that our machinery is working. As we scale and enhance our customer data platform, we deliver more personalized offers and recommendations to consumers, leveraging our lifecycle marketing engine. Over time, this formidable data advantage compounds and ultimately manifests our vision of becoming the number one destination for financial decisions. Onto our 30, 60, 90 strategy. This concept is incredibly important to understand as it enables our business to scale in a way that is unrivaled in the industry. The 30-60-90 framework demonstrates Moneyline's mix of contribution margin revenue. 30-60-90 represent different channels through which customers can enter the Moneyline ecosystem and the approximate contribution margin associated with that channel. Importantly, these customer journey channels are not linear. different customer acquisition entry points along their financial journey. 30 is our B2B channel. This represents the broad distribution we have across our network of channel partners and is the engine that allows us to match customers with products across the Internet. When a customer converts in this channel, a product partner pays us an affiliate fee, and we realize at approximately 30% contribution margins. This is the backbone of our massive top of funnel and creates our customer acquisition advantage. In addition, this channel fuels our advantage. With 80 million quarterly inquiries, this channel provides deep insights into consumer profiles, including their propensity for a basket of financial products. This massive funnel gives Moneyline a fertile user base to lifecycle and remarket to at a later point along their financial journey. 60 represents our first-party products. When someone downloads the Moneyline app and takes one of our various first-party products, we typically earn around 60% contribution margin. We continue to innovate by developing new first-party features and products, including our WOW membership and the recently launched Roar Money Black Card. 90 represents our consumer marketplace. This customer converts from an extensive catalog of third-party products in our ecosystem. As Dee mentioned, Our consumer marketplace is a key component of our business equation. It is one of the fastest growing parts of our business and represents revenue that typically has around a 90% contribution margin. As we continue to scale this revenue stream, our incremental revenue will drive more contribution profit dollars than it would otherwise through other channels. Our direct to consumer brand investments are a part of our high priority strategy to take market share of a large fee pool and shift our revenue mix over time. In sum, our progressive approach to being the number one destination for financial decisions accelerates our mix of high contribution margin enterprise revenue and ultimately driving margin expansion over time. Turning to our unit economics. In the last 12 months ending Q3 24, we added 6.6 million total customers Our customer acquisition cost, or CAC, is under $20. This continues to be a great outcome relative to the industry. The slight quarter-over-quarter increase coincides with our strategy to accelerate the mix of the high contribution margin enterprise revenue related to our 30-60-90 strategy. Next, our payback period was approximately six months, and our POO was around $32. These unit economics underscore our success in our CAM expansion strategy, scaling our total customers to 18.7 million in the third quarter from 5.4 million in the same quarter two years ago. As Dee mentioned, our land and expand strategy is also working as we increase product consumption to 3 million in Q3 from 2.4 million in Q2. As mentioned, our technology enables us to monetize a large customer base at high incremental margins. we are excited to unlock the value of our entire ecosystem through our direct-to-consumer investments. Now let me turn to our recurring revenue trends. In Q3 24, 78% of our direct-to-consumer revenue, or revenue from our first-party products and consumer marketplace, came from historical cohorts of customers. We are seeing continued strength in our first-party products. In the third quarter of 2024, total originations for these products were $776 million, representing an increase of 38% year-over-year. Credit performance trends remain consistent in Q3 2024. Our finance receivables provision expense as a percentage of total originations was 3.1% in Q3 2024. Excluding first quarter seasonality, Q3 was one of our best performing quarters for provision expense as a percentage of originations. This is a great outcome and a predictable one as we actively manage our credit performance to be in a healthy range and have a high degree of confidence in our ability to continue to do so going forward. As a reminder, we historically experienced a seasonal benefit in provision expense as a percentage of originations in the first quarter of every year. As we transition into how we finance consumer originations into a forward flow arrangement, we'll no longer see this seasonal variance. We expect loss rates to remain within a healthy range. Now turning to some of our other key financial metrics. In the third quarter, Moneyline generated a record $135 million of revenue, representing 23% year-over-year and a 4% quarter-over-quarter growth. In the fourth quarter, we expect this growth to accelerate to 34% year-over-year to $151 million. as implied by the midpoint of our upwardly revised full year 24 guidance. Now for an update on profitability. As it relates to the third quarter, Moneyline generated $24 million in adjusted EBITDA. This represents an adjusted EBITDA margin of 18%. Additionally, over the last 12 months ending in Q3-24, this represents $83 million of adjusted EBITDA. We are consistently generating positive cash flow. At the same time, we are reinvesting in growth and taking market share. Accordingly, we ended the third quarter with $112 million in cash, up from $98 million at the end of the second quarter of 2024. As we invest in growth initiatives, we expect adjusted EBITDA margin between 14% to 18% in Q4 2024. While we can throttle back growth, to drive near-term margin expansion, now is not the time. The opportunity in front of us is too big. Instead, we are focused on increasing marketing to drive acquisition and, importantly, take market share. Now turning to guidance. In the third quarter of 2024, our results met or exceeded guidance across all metrics. Revenue was $135 million within our guidance range of $133 to $138 million, representing a 23% year-over-year growth. Adjusted EBITDA was 24 million, above the high end of our guidance range of 18 to 21 million. Turning to our outlook, we are positioned for accelerating growth in the fourth quarter. For Q4 24, based on our full year guidance, we expect revenue between 149 to 154 million, representing 32 to 36% year-over-year growth. At the midpoint, This represents growth of 34% year-over-year, up from 23% growth in Q3 24. We also expect adjusted EBITDA of 22 to 27 million, representing adjusted EBITDA margin of between 14.1 to 17.9%. For the full year of 2024, we now expect revenue between 536 to 541 million, representing 27% to 28% year-over-year growth. At the midpoint, this represents 27% year-over-year growth for the full year of 2024 compared to 25% growth in our prior guidance. We expect adjusted EBITDA of $88 to $93 million, representing approximately 16.3% to 17.4% adjusted EBITDA margin. At the midpoint, this represents an adjusted EBITDA margin of 16.8%, up from our prior guidance of 15.8%. With that, I'll return the call to Dee for his closing remarks. Thank you, Rick. As we look ahead to the future, given our position as the first consumer digital finance ecosystem, we're focused on taking market share and expanding the scope of our opportunity. We've seen continued year-over-year growth in our consumer business with high contribution margins. This business has generated around $350 million over the last 12 months, ending the third quarter. up 30 percent year-over-year. Moreover, despite broad economic concerns, we've grown and managed incredibly well, with loss rates averaging below 3.5 percent over the last eight quarters. We'll continue to deepen our presence across the auto insurance, credit cards, and mortgage verticals. We'll open ourselves up to serviceable revenue pools, all three of which we believe represent a billion dollars or more of annual revenue. We have the technology to serve these markets well, and we intend to capitalize on this opportunity going forward. As mentioned earlier, our new Moneyline checkout experience minimizes friction in the financial product shopping journey by offering an end-to-end experience. We're incorporating new data sources through strategic partnerships, enabling us to deliver even more personalized recommendations and offers. This improves the consumer experience and adds value to our product partners. We covered our 30-60-90 mix shift strategy in detail today because it is key to our business equation. This strategy enables us to increase our mix of 90% contribution margin revenue. We'll be going direct to consumer with brand marketing investments as soon as Q4 2024, driving consumers directly to Moneyline's owned and operated properties. There, we can engage with them directly and earn high contribution margin revenue. Together, these initiatives will drive both revenue growth and margin expansion for us. We're incredibly proud of our results for Q3 2024 and the growth in front of us. And as such, we've raised our 2024 guidance, implying accelerating revenue growth and healthy margins in the fourth quarter. Now is the time to lean into growth as we enter new markets and leverage our technology to enhance financial decisions for all Americans. Our technology, enables our vision to become the number one destination for financial decisions within three years. To do so, we're playing offensive discipline as money line and marks on the next horizon of its evolution. And with that, I'd like to thank you all for joining us today. And I'll turn the call back over to the operator for Q&A.