ECN Capital Corp. (ECN) Earnings Call Transcript & Summary

Good afternoon. Welcome, everybody, to ECN's 2022 Investor Day. We're really excited today to talk through each of our businesses and give you a good summary of where we are as a company. Just on Page 6, a quick agenda review and presentation structure. The Investor Day is obviously starting here, and we'll run presentations of each of the companies, Kessler; Triad; and our latest, Source One, which we're excited to talk about. We'll have about a 5-minute break between sessions, and we'll follow that up with an executive summary. At 4:00 this afternoon, we'll have a live moderated Q&A, just like last year. For those that have questions, please enter them in the webcast portal or e-mail the questions to Investor Day at ecncapitalcorp.com, and we'll address them during the Q&A session. Thanks. And with that, I'm going to introduce Steve Hudson for an introduction. Thank you.

Thanks, John, and welcome to ECN's 2022 Investor Day. I wish we were all in person, and hopefully, that will happen next year. Turning to Page -- Slide 8 that you've seen in the past. This is our so-called banner page. We're quite happy to announce Source One as a partner on this page. You'll be hearing shortly from Matt Nelson, who is the Founder and President of Source One. As well, John Wimsatt will be speaking on that topic. We're also a little sad because Service Finance is no longer on that page, but it's a great outcome. As you know, Service Finance was sold to Truist Bank in an all-cash transaction for $2 billion late in fourth quarter. It's important to note that the after-tax proceeds of that transaction, $7.50, was distributed by a special dividend to our shareholders. And I think the key takeaway here is that, that distribution was -- that sale was 6.5x return on our invested capital within 48 months. I think that's a great outcome. Turning to our share price performance over the past 5 years. I'd like to note a few things for you. It's 5 years since we split and began this journey. I believe the execution by this team has been exceptional. I'm also quite proud, as I just mentioned, that we returned $2.5 billion of capital to our shareholders with the sale of Service Finance and a few of the SIBs and other transactions. I would note that I believe that we are in the first quarter or the first several innings of this journey. And we are, as a management team, quite excited to continue to execute on our plan. Slide 11, I'd like to give you my view of the business model at ECN, of really 3 components, if you will. We have the industry-leading origination platforms with very deep moats around them: Triad, Source One and Kessler Group. Second component is our relationship, our committed relationship, with our partners who purchased our credit assets. We've been able to deepen and strengthen those relationships in the past year, and we've been able to arrange terms that are favorable to both parties. Both of those business components are grounded by our rated servicing, advisory and portfolio management services. The 3 together, I think, make a very formable competitor in our industry. Turning to the key takeaways. The 3 things I'd like you to take away from today's presentation is our resilient business with our proven growth strategies. I'm quite proud of the fact that we didn't close for a single day during the pandemic. I want to thank all of our employees for accomplishing that. We also have very proven make and take share strategies. We call it our playbook, and we continue to execute those strategies on our existing platforms and our newest at Source One. Second, we have the ability to maximize shareholder returns. As I just mentioned, $2.5 billion of capital returned to our shareholders over this 5-year period, and I believe we're able to efficiently allocate capital for both growth and risk mitigant -- risk mitigation. And the third takeaway is our expanded and deepening relationships with our banks and financial institution partners. We're welcome to -- welcome some of the largest funds in the world as partners. As I mentioned, we've been able to drive those arrangements to a preferable basis. And all of that gives me strong confidence in our ability to execute on the '22 and '23 business plan. With that said, I'd like to turn back to John to give you some advice on our M&A strategy.

Thanks, Steve. You guys have heard us talk about our M&A strategy over time. It's really focused on what we call tuck-in acquisitions. Those tuck-in acquisitions are made or thought to be complementary to our existing businesses. We have a proven model. That proven model drives value creation and shareholder returns. You've seen that with Service Finance, quite obviously, as Steve just took you through, with Triad and with the Kessler Group as well. Source One really marks our first acquisition under that tuck-in strategy. For the last several years, we've looked at, I don't know, hundreds of potential transactions to close one. We're very, very selective. Any transaction we do must be consistent with ECN's proven business model, has to be immediately accretive. It has to be a transaction that enhances our franchise value. We're focused on companies that are asset-light, fee-oriented businesses. We're focused on high-quality credit assets. Those credit assets need to be in demand by our existing funding partners. They're nonrecourse -- nature of those transactions. We want to partner with top-tier financial institutions. We want to bring our ability to leverage the relationships that ECN has to the table. We want limited integration risk, very high visibility on driving growth through proven ECN processes. That's key. That's a very big component of what we're doing in our M&A strategy. What that means, we're focused on businesses where ECN can leverage existing core competencies, high-quality origination franchises where growth prospects can be enhanced alongside ECN, complementary products for existing business partners and a capability-enhancing platform such as servicing companies. With all that said, we are thrilled to be able to announce the Source One acquisition. Source One is exactly what we're talking about, complementary business to Triad, specifically in ECN overall. ECN and Triad acquired Source One Financial in the fourth quarter, really at the end of the year for $90 million. Source One will be a reporting segment of Triad. And formed in 1999, Source One originates prime loans in the RV and marine market. It's consistent with ECN's proven business model. These are prime credit assets. It's asset-light, no recourse originations on behalf of bank and credit union partners. This is an extension of Triad's successful business model, very similar demographics, over 2,000 dealers active in 38 states on behalf of, like I said, 30 credit unions and banks. Management team has over 200 years total experience. As important to us, obviously -- as the financial deal, which we show here, is definitely accretive. We expect $12 million to $14 million in adjusted operating income here in '22, which means we paid around 7x that number for the company. But as important to us is, again, focusing on those significant growth opportunities that we can identify using ECN's proven business expansion strategies. As you'll see later here in the presentation today, we'll detail some of those strategies for you, and you'll see how it fits right down the middle with Triad and Service Finance's playbook. With that, very excited to start the day and run through the companies, and we'll turn it over to Scott Shaw to discuss Kessler. Thanks.

Good morning. My name is Scott Shaw. I'm the President and CEO of the Kessler Group. Today, I'm going to walk through 20 slides on KG, 2021 accomplishments and 2022 outlook. What do we do? Well, we help clients grow and optimize consumer credit portfolios, and we generate recurring revenue streams from multiyear agreements through 3 areas of our business. Partnership Services, where we manage and advise on the purchase, sale and renewal of co-brand credit cards. We've done 6,000 of them over 40 years. We have a Performance Marketing and Card-as-a-Service-business where we've funded $1 billion over the past 10 years in marketing. And we have a newly created, over the last couple of years, Credit Card Investment Management business, where we've sourced over $5 billion in consumer credit portfolios on behalf of third-party investors. These businesses are synergistic. Partnership Services lead to Performance Marketing and Card-as-a-Service Performance Marketing leads to credit card investment management, and we generate multiple revenue streams from our clients across all these 3 areas. 2021 highlights. 2021 adjusted operating income will be above the $49 million, which was the high end of our range. We had a great year in Partnership Services, adding a new bank client partner in Canada. We handled several large portfolio transactions and also renewed 2 major programs for one of our clients. In our Performance Marketing business, we added 10 new clients and onboarded our first card-as-a-service client, a large credit union. We also, in credit card investment management, entered a multiyear agreement with a subsidiary of a leading global investment firm, which I'll refer to going forward as SLC. We also returned all of ECN's invested capital in the platform. It's a great 2021. Management team, handpicked with deep industry expertise and functional knowledge across consumer lending, marketing, credit, operations, capital markets, and partnership management, average tenure of about 25-plus years. Partnership services, the industry, very robust. We had several new entrants that are notable, Goldman Sachs, with Marcus entered the partnership space, with the Apple and GM cards. And we have large fintechs entering one, namely Deserve. We're talking to both. We also had significant news in the industry, of which we participated in 50% of them. What do we do in partnership services? We optimize partners co-brand and credit card programs. You can see down at the bottom of the slide, we do selection process, optimization, restructuring, issuer reentry, analysis, valuation, due diligence, purchase and sale and interim service agreements, very deep expertise. We've been doing it for 40 years, and we get paid annual retainers based on balances as well as performance-based annuities to help our clients grow. One case study I'd like to mention briefly. We actually were engaged by a client to divest a large co-brand program in Canada, Costco Canada. We actually found a right issuer for it. We did a great job for our client. And then it just so happens that the buyer, the Canadian bank, got to know us through the process. And several months after completing the process, they asked us to enter an agreement with them to help them support the successful relaunch of the credit card program. Just shows that people got to know us, want to work with us. The Partnership Services outlook, long-term, high-quality recurring revenue streams. We see growth in the business going forward as we diversify our client base and continue to handle a robust transaction pipeline. Second business, our Credit Card Investment Management business. We brought on a very aggressive time line. We had a hypothesis that in 2018, we saw the landscape changing for portfolio transactions rather than going from bank to bank all the time. There were some portfolios that couldn't because of CECL and other requirements, and so we actually thought we could create a way to bring portfolios from banks and institutions to third-party institutional investors. We launched the platform in '18. ECN invested $135 million to help build out and validate the platform. We acquired the full platform and a team by the end of '19. We originated a portfolio without ECN Capital in 2020, which was a milestone. ECN exited their investments at attractive returns in 2021. We entered the agreement with SLC, the subsidiary that I mentioned before, and acquired a $450 million portfolio, which I'll talk about in a minute. And we expect to do $1 billion to $3 billion annually in new portfolio volume. We've proven our thesis. The SLC partnership was a really big milestone for us. We source, structure, originate and manage credit card portfolios on their behalf under a multiyear agreement. We did $750 million in the fourth quarter of 2021. We get paid management fees and we get paid success fees based on returns above and beyond target hurdles. And just for scope, the economics of a CCIM deal for asset management is about 4x that, that we make on our typical partnership services transaction. The case study I mentioned, we actually acquired a $450 million credit card business from a national card issuer, very complex deal, very competitive. And it was unique in that there were large rewards liability, and there was also promotional pricing based on the bank's marketing techniques. So it's hard for some other buyers to understand the business in the way that we did. We actually won the transaction, and we'll generate 20% to 30% levered returns for SLC and we'll generate several million dollars a year in management fees for our CCIM business. The financial outlook for CCIM. We've sourced $5 billion so far in the last 4.5 years. We'll do $1 billion to $3 billion a year going forward. And if you look over on the right, the expected revenue growth, it looks tempered. But in reality, it's a new, capital-light platform consistent with other ECN businesses with no direct debt or equity investments in the portfolio acquisitions, and we should generate 30% plus realized equity returns for our partners. Our third business, Performance Marketing. We've evolved. We migrated from a principal model where we own all the IP -- I mean, from where we didn't own the IP to where we do own the IP. We're a marketing fee-for-service business. We provided funding, and our clients did the marketing, and we help support it. Now we're actually doing the marketing, providing the funding and controlling all the IP. We think it's a much better, high-growth sustainable model. So what do we do? We deliver clients better customers at a lower CPA. So our whole model is about taking proprietary data, omnichannel execution, creative funding, doing it ourselves and delivering them customers at a lower cost than they could acquire on their own. And what do we do? We do this 12% to 15% better than they do, and we recycle that money 3 to 4 times a year to generate substantial returns. And they actually acquire the customers from us and expense demarketing over life of that customer, which is attractive for them. One study is super regional bank that we've worked with for several years, a great client of ours. We took them from $8 million in marketing funding up to $60 million in 2021. We started working on 2017, 2018. We've expanded to multiple products, and we've moved to digital and also to customer incentives. We had another hypothesis beginning of last year, could we create a turnkey credit card solution? We had a need from some of our credit unions and financial institutions. We created a card-as-a-service offering. We offer new customer acquisition, portfolio monitoring, portfolio P&L analysis, product development and credit underwriting in one-stop shop with KG. We delivered our first client in 2021, a $4 billion credit union. We're on track to deliver $2.5 million from that from new account payments. We'll double the growth and from profitability incentives. We validated that hypothesis. We also have a large credit card network that hired us to launch a credit card program with a $60 billion bank, and we're adding 2 new credit unions that were referred by our first credit union, and they're both 2 to 3x the size of our first client. The program elements are around strategic advisory, account origination and account management. Very detailed, but very turnkey and this will be a high-growth business for us going forward. What's the outlook for Performance Marketing? Well, our customer base is diversifying. We're getting to larger institutions. We also expect 100% year-over-year revenue growth from this business, and we can use this to drive new assets for our credit card investment management business and our third-party institutional investors. So for '22 guidance, we expect revenue to grow 25% at the midpoint year-over-year. We expect adjusted operating income to increase. We took our guidance up from $52 million to $59 million up to $55 million to $60 million, and we expect EBITDA margins to remain really healthy, approximately 50%. Looking forward to a great 2022, and hopefully, we'll get a chance to see you guys in person next year. Thank you. [Break]

Hello. I'm Mike Tolbert, President of Triad Financial Services. And here with me is Matt Heidelberg, Chief Operating Officer. Today, we're going to share with you a little bit about who Triad is, what we do, how we do it. We'll take a look at the success that we've had in '21, and then we'll turn our attention to 2022. The manufactured housing finance industry continues to be an attractive business. There's a large addressable market with ESG tailwinds. In fact, in '21, shipments grew to about $11 billion. Our origination growth is consistent. We have strong margins and free cash flow. Our relationships are deeper and stronger than ever, and we have an industry-leading management team. With our product menu -- with our full product menu being complete, with the growth of the market and Triad's strong position, I'm going to be raising guidance. You can expect to see the '22 pretax income at $62 million to $70 million for 2022. Slide 40. We've been doing this for a long time, for over 60 years, making us the oldest manufactured housing finance company in the U.S. Headquartered in Jacksonville, Florida, we operate in 47 states. We originate manufactured housing loans. We do this through a long-established network of dealers and manufacturers that consist of over 3,000, and we do it on behalf of our 50 investment partners consisting of banks, credit unions, insurers and GSEs. Our growth comes from the stronger-than-ever consumer demand and strategic initiatives. Our outstanding portfolio today is about $3.1 billion, and we have state-of-the-art technology in both our servicing and originations platform. Again, we have a handpicked industry-leading management team with over 200 years industry experience. Headquartered in Jacksonville, Florida with operations offices in Bourbonnais, Illinois and Anaheim, California. Our sales staff consists of 13, strategically placed throughout the U.S., and we have a servicing team that provides industry-leading performance through both good and bad economic cycles. Again, infrastructure built to scale. I touched on the technology just a moment ago, from servicing and the origination platforms. Slide 42. So why do we do what we do? Well, there's an affordable housing crisis. With 1/3 of households and half of renters being cost-burdened, having a hard time making their housing payments, price-to-income ratios are near at peak levels, and there's a supply and demand. There's a gap between the affordable housing demand and the supply, and that's growing exponentially year-over-year. I believe the solution to this is affordable housing, is manufactured housing. I believe this because the average price per square foot is half that of the same -- of the equivalent site-built home. And manufactured homes are built in a controlled environment, which leads to efficiencies in both speed and cost ultimately being passed to the consumer. With 9% of single-family starts being manufactured homes and more than 22 million people living in manufactured homes, 90% of people who purchase a manufactured home say they're satisfied to extremely satisfied. And the #1 chance consumers choose to purchase a manufactured home, it's a chance at homeownership, an opportunity they may not have had otherwise. So what is a manufactured home? Well, manufactured homes are efficient, they're durable and they're affordable. Again, they're built in a factory. They're built in a controlled environment with 90% of the process taking place indoors, protecting the materials from the elements. And manufactured homes are customizable. They have a variety of designs, floor plans, elevations and amenities. These homes are built well. They're built to both federal and state regulations. Once the homes are complete, they're shipped and installed on a permanent foundation. Manufactured homes are built through HUD code. To give you an idea what that looks like, each manufacturer has a HUD-certified inspector on-site. And before that home leaves that factory, that inspector certifies that, that home is built to the code. Why is HUD code important? Well, prior to HUD code, manufactured homes had an average useful life of about 20 years. Homes built after HUD code have about a 55-year useful life. And the affordability. We touched on the price per square foot already, but the typical monthly cost of a manufactured home is about 40% less than that of the equivalent site-built home or apartment rental. Of the homes under $150,000 built in the U.S., 80% of them are manufactured homes, and Triad's consumer has an average house payment that is only 12% of their income. Slide 44. This gives you an idea what a manufactured home looks like, both on the interior and exterior. They're often indistinguishable from a site-built home. They're customizable. They have modern kitchens, and they have modern baths. Slide 45. We'll take a look at what the market looks like. CFPB publishes HMDA data, which gives us originations in 2020 for manufactured housing at about $24 billion. Taking your attention to the right of the slide on the chart, you can see that land home originations represented 3x that of chattel originations. To give you some context, chattel originations represented 94% of Triad's 2020 originations, given it's about 10% of the chattel market. Slide 46. We'll take a look at where Triad fits within the market. For the time period of 2019 and 2020, originations grew 6% and 29%, respectively. If you take a look at the graph to the right for 2020, origination growth in 2020 benefited significantly from refinances. '19 and '20 were both attractive refinance markets with attractive interest rates. For context, Triad's total originations increased by 15% both '19 and '20 as we just don't do a lot of originations, less than 2% -- I'm sorry, refinances. Less than 2% of our originations represented the refinance business. Slide 47. We'll take a look at the market relative to shipments. The life cycle of the shipment right now is about 9 to 12 months. The backlogs are larger than they've ever been. Even with that, in 2020, manufactured housing shipments exceeded 100,000 for the first time since 2006. In fact, it was 106,000, representing a growth of 13% in '21 compared to the average growth rate of 7.5% since 2014. As a result, the shipment market increased to about $11 billion in '21, which is a 36% increase compared to the average growth rate of about 15%. What is this telling you? It's telling you that the market is growing. Now where does Triad fit within the market relative to shipments? Take you back to 2017 at the ECN Triad acquisition. At that time, Triad had about 7% market share relative to shipments. Today, we have just over 9% at 9.3%. 70% of our originations are new homes. Triad's originations continue to outpace the shipment growth, and let's focus on the time period from 2019 to 2021. You'll notice that the shipments grew during that time period of 14%, while Triad originations grew by 26%. Again, the market is growing and Triad is taking share. Slide 49. So how do we do it? Well, we do it through our business model strengths. And what are those? It's the financial institution partnerships. It's the low-risk originations. It's the relationships with the manufacturers and the dealers and it's the safety and the soundness, the strong regulatory framework. We have nonrecourse purchase agreements with our over 50 investor partners. We have prime consumers. Before we ever fund a loan, we have a conversation with the consumer to ensure that they receive what they were promised and they're satisfied with the purchase, over 3,000 dealer network partners that are vetted and approved before we ever do business with them. Active partnerships with 8 of the top 10 manufactured housing communities and license to originate and service loans in 47 states with direct and indirect oversight by the CFPB, the FDIC, the OCC and the NCUA. Given this, given all this oversight in the over 60 years we've been in business, we've had 0 objections or negative comments during any formal examination. All this together, it gives us predictable, stable, consistent returns. Triad's model is difficult to replicate. I mean, many have tried, but none have succeeded. Replicating it, it would take time, and it would be costly. It's because of the power of the network. It's because of our finance partners. They rely on us to be the experts to deliver scale, diverse loan originations. It's because we partner with all major manufacturers. It's the 3,000 dealer relationships we have. Our origination network, it sources highly attractive, consistent loan originations. Additionally, funding partners' primary focus today, it's on credit losses and regulatory compliance, something we manage very well. Additionally, we have extensive underwriting policies, and we have multi-point dealer underwriting models, meaning before a dealer ever sends us an application, we want to make sure that's someone we want to do business with. We look at their credit, personal and business. We look at their licensing and their reputation throughout the industry and determine if it's going to be someone we want to do business with. We want to maintain a high-quality dealer base. Slide 51. I'd give you an idea of what our manufacturer base looks like. Being a consistent financing partner for over 60 years, we have a highly diversified well-penetrated network of manufacturers across the country. Collectively, these manufacturers provide a full range of products and options for consumers nationwide. Additionally, the majority of these manufacturers participate with our floor plan program, which on its own is a profitable vertical. However, it also drives significant growth for manufactured housing originations. Much is the same with our investor partners. Again, diverse, well capitalized, consisting of bank's credit unions, insurance companies, GSEs and the institutional investors. In 2021, we added 15 new partners. Now before I turn it over to Matt, who will deliver an update on performance and deliver update on product and he'll go over the guidance that I have stated for 2022, I want you to remember that in 2020, 2021, I have delivered on my guidance for both years, and I believe '22 is going to be much the same given Triad's strength and the momentum we have today.

Thanks, Mike. I am Matthew Heidelberg, Chief Operating Officer, Triad Financial. And Mike walked you through a reminder of who we are, how we do it, what the market looks like. He gave me the more fun job to talk about the success that we've had recently and why that's going to continue. But I wanted to start with Page 53, a quick review of interest rates. It's quite topical for us right now. We've been receiving lots of questions, so we thought it's timely to do a quick review. As you can see in the chart to the top left, they are our average loan rates relative to the 30-year mortgage, obviously, highly correlated, and this gives you a view going back over 20 years. The chart to the right shows you that consistent average premium we've maintained relative to the 30-year mortgage. So we're correlated. As rates rise, you'll also see our loan rates rising. But what does that mean for us? Our origination revenue or the premium we receive when we sell a loan to a partner is a function of the expected interest income of that loan when we originate the loan. So higher loan rates mean larger interest income, which pushes our fee up. So we welcome a rising rate environment, and this gives you a quick review of why we're not too concerned about it. Our servicing book. Total loans outstanding have been growing quite quickly given the duration of our products and our increased originations. Total loans outstanding ended the year at $3.1 billion, but more importantly for us is building that recurring revenue stream. And to do that, we've been compounding that by raising our percentage of that -- those loans outstanding that we're the full servicer on from as little as 30% at the time of the acquisition, 2017, to 67% ending the year. One thing that hasn't changed would be the demographic of what our average borrower looks like. 2021 originations for our core portfolio averaged 742 credit score. This chart, I'm sure, mirrors that, that you've seen in prior years. Another thing that's changed very little would be our performance history on our loans. Partners are really happy with the consistency and reliability they have in our products. While you'll see the 30-plus day delinquencies ticked up a little bit in 2020 due to COVID, we quickly brought that right back down. We have no loans in deferments, and we're back at normal levels. Net charge-offs are maintaining exceptionally low charge-off rates. Our partners are all very happy. 2021, we hit the mark over 50% growth in originations to just over $1 billion, and that came from a factor of 2 main things. One would be the average ticket size. So our average loan amount did increase 25% in the year. Part of that is a function of our growth of the Land Home department. If I normalize for that, our legacy products average ticket increase of about 20%, in line with the industry. Where we did better would be in the unit growth. Growth of the number of loans that we made in the year were up 19% year-over-year, 6 points above that of the industry. So we continue to take market share. Moving to our application growth chart. I really like this chart. I think it's starting to show you what we've been working so hard on the last 2 years, and we're starting to see that in our numbers. By focusing in on 2021 relative to 2020, applications were up $400 million, and loans that we rejected were actually down $300 million. Approvals are up, originations are up. Those increased approvals are also going to be feeding into 2022. That combination of that took our look-to-book ratio, which is stagnant around 14%, 15% in prior years. Now with these expanded product menu, we're pushing that up over 20% as we look forward. How are we doing it? First, it's not because our legacy products are not still growing. You can see up towards the top of this chart, chattel and COP growing north of 40% year-over-year, but it's our expanded product menu. We want to launch our product, and then we want to expand the reach once we're in there. That's Silver, Land Home, Bronze, Rental, CLP, they're only just beginning to contribute volume, but they will be at heightened growth rates as we grow from here, contributing to additional growth for us as we look forward. How that's changing our mix is we're really evolving from a prime chattel lender, like you see here in 2018 in the chart. And now we're becoming a more diversified lender, more products that's driving more applications from our dealers. We want to be a one-stop shop. Dealers don't need a reason to send a loan anywhere else. In 2021, other products contributed 6% to our originations. Land home contributed 10%, up from a nominal amount in prior years. But what's important to take away with that land home piece is that according to HMDA data, land home originations are 3x that of channel. You can expect a very long runway for us in land home as you look forward through the years. Back to core chattel, plus 40% year-over-year, and the graph towards the right gives you a sense of the distribution of those growth rates and how we got there to end the year. We might have little dips due to weather at a certain period of time, but we always quickly make up for it. We're really proud of how the team did. Updating you on docs out. Again, these are loans that we've closed with the borrower. They have cash down, but we've not yet funded the loan. The house isn't done being built yet or it's not fully set on site. And with the extending backlogs in the industry, you saw this docs out number rise in 2020 into 2021. We're really pleased to see manufacturers starting to deliver a little bit more on the homes in the back half of the year, but that's not a trend we're baking in the guidance yet. We want to take a conservative approach and see what happens with this as we move forward into this year. Land Home. Our pipeline continues to grow. We ended the year at $193 million. So that's $193 million of loans we're waiting to fund, that we expect to fund, and that's relative to guidance of only $200 million to $300 million. We feel really good about our guidance in this number and about the growth rate for this category, as I mentioned, with the 3x the originations that of chattel. With FHA, Triad became an approved FHA lender in 2021. This is back to expanding our reach. We want to make sure dealers know that they can confidently send us any type of application. We're going to be able to work hard for them to get an approval. FHA does just that. It expands our reach for our dealer network and give us the ability to say yes to more loans. On Page 65, that's how we -- this is how we started doing just that in our chattel side. Expanding the reach was why we started Silver and Bronze, and that's also a big reason why you saw a decline in the denials that we had in 2021. So we're receiving more applications, and we're saying yes to more applications. But I want to make sure you remember that we are doing this with committed -- forward committed capital partners and no recourse to Triad. In the community space, similarly, we're looking to expand our reach. Triad's initial foray into the community network was with what they refer to as their COP program. And this program, ECN's previously referred to it as our managed-only program. Triad works with a large community REIT to adjudicate a loan on their behalf and sell them the loan right back to them. The requirement then for that REIT is to have the capital to purchase and warehouse a portfolio of loans over time. The programs you see listed here on Slide 66 give us an ability to expand our reach to more of the midsized community owners. We think the potential with these programs can double our opportunity relative to what we had previously with just COP. Floor plan on Page 67. I'm pleased to say not much has changed. The chart towards the top right shows you our short duration of this product. Fundings continue to grow, and our balance just grows modestly given the short duration and high turn of these loans. It's not a loss leader. The chart of floor plan realized yields there on the bottom right shows you that we're comfortable with the profits we're earning in it. But most importantly, we're happy to see -- we updated our 2021 data to take a look at what floor plan dealers did relative to non-floor plan dealers. Floor plan dealers contributed 3x the growth rate of retail originations relative to non-floor plan dealers. So this is definitely going to be a product that we're going to continue to push. We've really enjoyed the results. Moving into guidance. Originations were on the low end of $1.4 billion to a high end of $1.6 billion. How we get there from $1 billion in 2021 are really from 3 categories. Core chattel, our legacy chattel products contributing 18% year-over-year. We feel really good about that growth rate because with the backlogs, the way they are, our last 6 months approval growth rates give us a really good look through into what funding is going to look like going forward. The approval growth rates are matching the growth that you see here that we're attributing for their contribution to the $1.4 billion. In Land Home, we're looking for $200 million on our base case, and we're already sitting on a pipeline of $193 million starting the year. Our other categories, similar to our legacy chattel products, the growth and $170 million contribution from all of these products, Silver, Bronze, CLP, Rental, is a reflection of the applications and approvals that we see in our pipeline already. Wrapping it all up, we just reviewed total originations, $1.4 billion to $1.6 billion. That's going to lead to revenue of $142 million to $160 million and adjusted operating income before tax of $62 million to $70 million. Thank you very much. [Break]

As I mentioned earlier at the beginning, we are thrilled to be able to talk about Source One this afternoon. As you guys know, and we talked about briefly earlier, we've, for a long time, had a tuck-in acquisition strategy, and this marks really the first acquisition as that -- as part of that strategy. Source One is a prime RV and marine lender, has over 30 banks and credit unions. There's a large addressable market focused on prime loans. The company has had consistent long-term origination growth, very strong margins and free cash flow conversion. A 2,000-plus dealer network across 38 states. The company is fully funded for '22 with 30-plus lending partners, a very experienced management team. And most importantly, and something that I'm going to talk about later, we see significant growth opportunities ahead. This is an extension of Triad's proven business model, and we couldn't be more excited about it. We talked about this at the beginning, Page 72, about the acquisition, so I'm not going to reiterate all the points that we talked about previously. Just to say that Source One will be a reporting segment of Triad. And interestingly, it's about the same size as Triad was when we bought it in 2017. As you'll see, as we go forward, we'll run you through the business, but then we'll talk through some of the growth opportunities. We think that we have a similar path as we had with Triad, and hopefully, that comes across today. This is an accretive acquisition, and we see significant long-term growth opportunities using expansion processes that we've used successfully at both Service Finance and Triad. And this is very consistent with ECN's proven model. These are prime assets. It's an asset-light business, no recourse originations, and we do it on behalf of our bank and credit union partners. Now I'm going to introduce Matt Nelson, who's the President of Source One, to take you through the business, and I'll come back and talk about some of the growth opportunities.

Thank you, John, and thank you all for being here today. As John shared, my name is Matt Nelson. I'm the President, one of the original founders of Source One. Excited to be here as a new member, team member to the ECN Triad teams and also to be able to present to you something somewhat new to me, to be able to present to a group of shareholders and analysts. I'm here today just to provide you a little background on Source One, kind of who we are, what we do, where we're going. And then ultimately, as John kind of touched on previously, I'll be passing it back to John for him to really touch base on some of the initiatives that we're looking to incorporate to help really drive our future growth at the company, similar to the successes that Triad experienced over the last few years. So to begin with, Source One is a company, again, I started back in 1999. We originate prime, super prime, RV and marine loans. We're headquartered in many -- or Lakefield, Minnesota, which is just about 20 minutes south of Minneapolis. We have an additional office in Wilmington, North Carolina. Our demographics, consumer demographics are extremely similar to Triad with an average FICO score around 745, but our average ticket size is around $40,000. We provide our dealerships, so it's really 2 unique lending options. Again, something that makes us extremely unique in the marketplace, and I'll get into that in just a little bit. We currently work with over 2,000 dealerships spread across 38 states and originate on behalf of 30 different lending partners, which consist of credit unions, banks and specialty finance companies. From a management team's perspective, I've been very fortunate to surround myself with some -- a lot of industry experience with over 200 years combined experience, and more importantly, been able to surround myself with a lot of quality people who have been working with me for a number of years to really help drive the growth of Source One. From these next 2 slides, I'm just going to look at the industry overview and some trends in the marketplace that we see. From 2013 to 2019, we saw marine RV sales grow from $40 billion to roughly $60 billion, and IBISWorld shows that RV and marine financing exceeded $24 billion in 2020. Based on '21, last year's originations of $445 million, source One currently has about a 2% market share. COVID has been actual boon for the marine RV industry for the last couple of years, but it's also really had an impact on the inventory levels with each -- with the high demand. Like a lot of other industries, the marine RV industry has certainly had challenges as far as replenishing the inventory levels. And according to Baird, marine inventory levels remain near historic lows. And on the RV side, shipments have improved but remain a little bit tight based on the fourth quarter production. IBISWorld sees a return to growth in '22 and expects a 3% growth annually through 2026. On the next slide, on Slide -- Page 76, moving on to the trends. Again, all positive momentum, which, as you can see over the last 5 years, have been moving in the right direction, and it's forecast to continue to move that way. RV ownership on the RV side is expected to almost double by 2025 and triple by 2030. Likewise, boat registrations are expected to increase from 263,000 to 315,000 from 2017 to 2021. So again, very favorable market trends here, and that is expected based on market research to continue for the foreseeable future. Moving on to the types of loans that Source One does finance. You'll see on the left-hand side is what we do finance, and I'll kind of go in a little bit deeper on that in the next slide, too. But really, we're focused on your mid-level travel trailers, your towables, your runabout boats. Not what you see on the right-hand side, which is your, I call them, your mad cruiser, your Class A motor homes and yachts. And to further illustrate that, as I stated earlier, average loan ticket price is around $40,000. So on the RV side, you're looking at your towable units, your travel trailers, fifth wheels. And being that we're from Minnesota, we even do our fish houses, which are really glorified travel trailers with holes in the floor. And then on the RV side -- or on the -- excuse me, on the marine side, we're typically looking at your units under 30 feet in length, which consists of your pontoons, your runabouts, your aluminum fishing boats. So what makes Source One different? We have -- we're unique in that we provide our dealers really 2 solutions, really depending on what their needs are. On the one side, we call it our legacy program, which consists -- I like to call it our banking program because that's ultimately what dealers view us as, where we go out to dealerships, and we give them access to a group of lenders that are exclusive to Source One. They submit applications to us. We underwrite them. We get the terms and conditions, pass it back to the dealership and allow the dealership to really consummate that loan with the consumer. So on that end, it's we're kind of geared towards the dealerships that are really set up with an F&I department within their locations as opposed to our other opportunity that we're able to provide our dealers the other solution, which is acquired via a platform we acquired back in 2019, which I like to call our Epic program. It's a full-service program for our dealers. So for dealerships that don't have a dedicated F&I department or somebody on-site that can handle the financing transaction for the consumer, they'll outsource that. And that's a service that we do also offer our dealers now where we're able to really walk in, work directly with the dealership and the consumer on going overall the terms, conditions of the loan, provide them any aftermarket products such as warranty or GAP sales and then provide all the closing documents to the dealers. So long story short is we're able to clock into any dealership out there and really have a solution that will best fit their needs. So again, something unique to us, nobody else in the industry is offering, and we've been very successful in growing the business with the 2 platforms. Profitability standpoint, how Source One earns our money. We earn a fee, origination fee, from our lending partners that equals about just under 7%. That fee has a 1-year recapture period with our lenders. So if the loan prepays or defaults within the first year, that loan is subject to a repayment to the lender themselves. So there's no other recourse associated with our loans. Everything is assigned to the lender at point of sale, so no other recourse to Source One. Out of our fee, we pay a fee of approximately 3.6% to the dealer to incentivize them for the business, which gives us a net revenue of about 2.6%, what you can see has been a very consistent number over the past 5 years. Some characteristics of our program on Page 81. Our average loan size, as I stated earlier, is right around that $40,000. The range we look at is anywhere from $5,000 upwards to $250,000. Our average term on our loans is around 148 months. Our range is at 80 to 240. Again, our average FICO score is around 745, and the credit range that we're focusing on today is at 660 to 900 customer. Annual net loss rates for our lending partners is roughly around 40 basis points with a net yield to them of approximately 4.75%. This next illustration on Page 82 shows you the kind of credit scores that we really -- our portfolios consist of today. And as you can see, we're definitely more heavily weighted on the 700-plus FICO band comprising about 85% of our originations are falling within that 700 and north credit range. And then moving on to our apps, originations, approvals. Certainly, last year, we did see an impact of the inventory shortages really reflected kind of in the third quarter. After starting off the year with a record first and second quarter, we saw a dip in the third just due to inventories. Dealer inventories are just running -- are drying up. Demand was still there. A lot of loans -- or a lot of orders were placed. And ultimately, we saw those come to fruition in the fourth quarter, which led us to a record fourth quarter last year. Just some general stats on the originations. Typically, we see about 60% of the loans that we receive, we are approving. And then from a look-to-book ratio, which is the same as out of those approvals, what are we cashing, that number comes in around 35%. Our app growth, we are expecting for '22 to be approximately 25% at the midpoint. Similar to Triad on Slide 84, the businesses, the marine RV industry is very seasonal, as is depicted in the chart here. You can see the season really kind of kicks off in early spring, right, not too far from now, really, and really kind of goes throughout the summer peaks in the summer and then kind of tapers back off in the fall. And finally, I'll get in the origination mix. Today, we're seeing on the RV versus marine, we're a little bit more weighted on the marine side historically, comprising about 60 -- just north of 60% of the volume we're doing is in marine, with just under 40% represented on the RV. Likewise, our spreads between new and used, definitely more weighted on the new product lines as opposed to the used. Although with COVID over the last couple of years, we definitely see an increase in used as the new inventories have been a little bit tighter. So with that being said, I'm going to take it and pass this on to John. I appreciate your time today. John will be kind of going over some of the items we're looking to instill and implement in 2022 to really help foster our growth on a move-forward basis. Thank you.

Thanks, Matt. So we're on Slide 87. As you guys know, when we look at any sort of M&A or any acquisition opportunities, we obviously want an accretive transaction, and we want to be a great franchise and a great business. But one of the things we like to spend a lot of time on is really understanding the opportunity we have by taking a great company, putting it inside of ECN and working with them to grow the business, okay? We've done this very successfully across our other franchises. If you look at Source One, we identified those before, obviously, executing the acquisition. And over the next few years, we see a very low-risk execution path of $30 million to $40 million of adjusted operating income. If you look at it, we're starting '22 with guidance of $12 million to $14 million, which is a fantastic base. And just to put it in context, originations have grown at a CAGR of around 17% from 2018 to 2021. We expect $10 million or more additional growth over the next couple of years just through geographic expansion that we'll detail here in a second and some of the other initiatives that we're going to talk about. And then finally, adding capabilities like servicing and floor plan should also add $10 million plus. We've established a S-1 integration and growth committee, which includes senior management from Source One, Triad and ECN in order to oversee the integration to implement various strategic plans in order to maximize the opportunities at Source One. Now we'll go through some of those opportunities. This is a list of some of the things, and we'll spend some time on a couple of them. But as you can see here, we think there's a huge opportunity with the geographic expansion, and we'll get into some detail there in the next couple of slides. We also are very excited to introduce floor plan and really leverage Triad's expertise and infrastructure to build a new revenue stream for Source One. Servicing capabilities and licensing will also be added over the next period of time, which we think will add materially to the growth as well. And in addition to that, we think that improving the size and quality of the funding pipeline is something we always try to do with all of our lenders. We'll leverage those ECN relationships and introduce some new funding commitments from high-quality partners. Finally, over time, we expect to launch expanded loan programs. Just like you've heard Matt and Mike talk about today at Triad, by expanding those programs, we can increase the amount of the funnel or of the applications that we can approve. We expect over time to expand current programs to facilitate somewhat of the geographic expansion. In addition, we'll start a Silver and Bronze-like program at Source One as well. Page 89, we just talk a little bit about the geographic expansion. As you can see here, while Source One is today in 38 states, there's dealers in 38 states and origination -- 86% of originations come from these 15 states. As you can see on the bottom or in the middle with the map, there's a lot of area that isn't well covered. We have 0 limited coverage in California, Florida and New York, 3 of the top 5 states in the country for marine and RV originations and. And we still think there's room to expand in some of the bigger states that we're in, like in Texas and Arizona. We plan to add 5 new salespeople by the end of the year. We're going to have new sales coverage in the Northwest, Southwest Florida, Mid East Coast and Northeast to complement the existing territory that Source One has, which really over time or since its founding, has concentrated sort of through the middle of the country. Another area we've talked about here at the beginning is floor plan. It does not -- Source One currently doesn't offer floor plan. What's interesting about the floor plan space for marine and RV is it's a lot like manufactured housing in a sense that there's only a couple of competitors. In manufactured housing, remember, it was only Berkshire Hathaway that was offering really floor plan to manufactured housing dealers. It's similar in the RV and marine space, you really have North Point and Wells Fargo and a couple of other folks. This will be the only platform that offers both a commercial product and floor plan as well as a retail product. We're very excited about it. We've shown at Triad that floor plan drives dealer loyalty and results vast increases in retail originations. We think this will have the ability to attract new dealers and improve existing dealers' share of wallet. Importantly, the launching of a floor plan business is really going to be an extension of Triad's existing commercial finance group, leverage that existing infrastructure, systems and people. Underwriting and risk mitigation processes will mirror Triad's. Sourcing and licensing, a couple of other areas, just to talk about quickly. Source One currently sells its loan servicing removed. We're going to build out a servicing capability so that Source One can become a turnkey solution for funding partners. Not only will it introduce a new, high-quality revenue stream. It builds out a -- the material increases the funding opportunities and partnership opportunities that Source One has. In addition, on the licensing side, Source One has relied on preemption on behalf of its funding partners. What that means that they write directly on to the lender's paper, they're not licensed themselves. Like our other businesses, Service Finance and Triad, we will be directly licensing Source One across all the states that we do business in so that they can underwrite, approve, close loans as well as service and collect on loans. That will improve our customer service, create higher certainty of funding for our dealer network. It will shift the underwriting approval and control to Source One, and it shortens the processing times, results in better customer response and increased originations. So finally, to wrap it up, we're going to give '22 guidance on Source One. We expect originations to grow about 26% at the midpoint. Earnings, operating earnings, adjusted operating income of around 47%, $12 million to $14 million. Very strong profitability here with EBITDA margins over 65%. Again, we're super thrilled to be able to announce our first tuck-in acquisition strategy target as Source One. Thank you, guys. [Break]

Good afternoon, everyone. My name is Michael Lepore, and I'm the Chief Financial Officer of ECN Capital. Before I get into the 2022 forecast, just a quick note on 2021. We are currently in the process of finalizing our audited results. We expect to finish the year strong at both Triad and KG. Turning to Page 95 on the consolidated financial forecast for 2022. As in prior years, our forecast is built on a detailed bottoms-up basis by each of our business units. Our 2022 EPS range of $0.29 to $0.31 per share compares to our previous preliminary guidance of $0.25 to $0.30 per share. Key changes are the addition of Source One that we spoke about earlier as well as higher contribution from both Triad and KG, partially offset by enhanced liquidity measures and higher interest costs on our senior line, which I'll speak to shortly. On a quarterly basis, our guidance breaks down as $0.04 to $0.05 per share in Q1, which due to seasonality of our businesses is typically the lowest quarter of the year; $0.08 to $0.09 in Q2; $0.09 to $0.10 per share in Q3; and $0.08 to $0.09 per share in Q4. Turning to Page 96 and the consolidated forecast. As noted previously, we're raising and tightening the 2022 EPS guidance to $0.29 to $0.31 per share compared to $0.25 to $0.30 per share previously. This guidance reflects the contribution from each of the businesses that we presented earlier, including updating the guidance for both Triad and KG. Our corporate expenses are expected to be in the range of $12 million to $14 million, consistent with our Q3 commitment. And our forecasted annual tax rate on adjusted operating income is expected to be about 20%. Now turning to Page 97 for an update on the balance sheet. Key points to make are that ECN is committed to maintaining liquidity to fund our growth opportunities, including tuck-in M&A, such as the Source One acquisition we completed in the fourth quarter. We use our senior -- our operating philosophy is to use our senior line to mainly finance our on-balance sheet assets that support the growth of our core businesses. These loans include floor plan loans as well as new product loans, which we have used in the past at both Service Finance and Triad to grow those businesses, and these loans eventually turn to flow programs. In the fourth quarter, we completed 2 hybrid debt issuances, one for CAD 86 million at a 6% interest rate on a 5-year term and one for CAD 60 million at a 6.25% interest rate for a 6-year term. These issuances significantly enhanced our liquidity to fund our growth but at a slightly higher interest cost. Ending in 2022, we expect 2022 debt levels to be in the range of $600 million to $650 million, which compares to about just over $500 million at the end of the third quarter. This increase is primarily driven by the acquisition of Source One, the redemption of our Series A preferred shares in December and higher capital usage by the businesses. Also, ECN plans to reinstate its quarterly dividend in 2022, starting at $0.01 per share or $0.04 per share annually. On the right, I've given a little bit of an interest expense bridge compared to our previous guidance. You can see the impact of the higher interest expense generally driven by the enhanced liquidity measures as well as the higher interest costs on our senior line, which those costs have been more than offset by the increase in rates on our floor plan loans. Finally, turning to Page 98. This slide illustrates that ECN has been good stewards of capital since it's split off from Element back in 2016. We have consistently paid dividends. And in addition, we have retired almost 40% of our common shares at an average cost of CAD 3.85 per share. And in December, we paid a special dividend of CAD 7.50 per share, which represents the net after-tax proceeds from the sale of Service Finance. In total, we have returned $2.5 billion of capital to shareholders through share buybacks and special dividends. And with that, I'll turn it over to John Wimsatt to discuss our ESG initiatives.

Thanks, Michael. We're starting on Page 101 here. As we made last year, ESG is an area where management and Board of Directors have made a strong commitment to continuously improve our ESG policy, our impact and our disclosure of these issues to various stakeholders. We have formally established an ESG management committee in 2020 to address ECN's ESG impacts and their disclosure. The ESG management committee has worked with the Board of Directors to establish ESG objectives and priorities for '21 and beyond, which included Sustainalytics successfully reviewing Service Finance and Triad's loan programs from an ESG perspective. ECN and the Board continue to have ongoing engagement with our stakeholders to enhance our ESG disclosure, and we'll continue to work with those stakeholders to evolve our ESG commitment. Page 102, just a review of the Sustainalytics, third-party opinions that we had done for Service Finance and Triad. As you can see here, at Service Finance's case, a large majority of Service Finance originations materially improved energy efficiency, and they met 2 program goals of the United States Sustainable Development goals. On Page 103, more important to the ongoing business, this is Sustainalytics review of Triad. As part of our ongoing commitment, we had Sustainalytics review Triad, to look at both, in environmental impact as well as affordability. Sustainalytics certified the origination program finances the purchase of affordable manufactured homes with a significant social impact. The majority of those loans satisfy CRA requirements in the U.S. It delivers positive social benefits by serving low and moderate income populations and contributes to United Nations' sustainable development goals. The report's available on the website. On Page 105, just very quick, talk about manufactured homes and their environmental impact. We've talked about some of this before, but just to reiterate, Triad finances sustainable housing construction with minimal waste compared to traditional site-built homes. Compared to site-built homes, manufactured homes are constructed in efficient factories, the majority of which are ENERGY STAR rated themselves and they consume far less materials. In fact, they generate 2.5x or over 4,000 pounds less waste per home. They consume less -- 5% less energy over their life cycle. And we manufacture -- about 1/3 of the homes that are manufactured today have ENERGY STAR, ENERGY STAR symbols. We're going to move on to Page 108. It's important to note we -- Community Reinvestment Act is a federal law designed to encourage banks to help meet the needs of low and moderate income borrowers. The -- over 70% of Triad's 2020 loan satisfied CRA requirements. Both chattel and land home loans qualify for CRA, and it really shows Triad's support for affordable housing solutions and it supports our bank partners by delivering them a high percentage of CRA eligible loans. A number of different social things that we're doing. I'll run through these relatively quickly. But on Page 109, the 30% Club. Our CEO, Steve Hudson, is a founding member of Canadian Chapter of the 30% Club. 30% Club is a mission for women to represent at least 30% of all boards and C suites globally. We're a proud supporter of the Black Opportunity Fund in Canada. The Habitat for Humanity in Jacksonville is an area that Triad supports. And Rosie's Place is a place where Kessler is proud to actively volunteer at Rosie's Place. Page 113, we run through some of the team demographics. You've seen some of these before, but these are updated for 2021. And Page 114, employee growth and commitment. We're committed to employee training, development and continued learning programs. management team and employees at ECN, we take pride in engaging, participating and supporting both our employees themselves and the communities they live in. Governance regulatory oversight and responsible lending on page -- starting on Page 115. We'll keep this relatively short because we've talked about it a little bit, but Triad's partners are overseen by the Office of the Comptroller of the Currency or the OCC, the FDIC, the CFPB, the NCUA, the NMLS in addition to various other state regulatory and licensing agencies. We've had -- Triad has had 0 negative -- 0 objections or negative comments during any formal examination. We've run through most of this -- of the governance things on Page 117 so you're welcome to take a look there. And I did want to highlight on Page 118, on responsible lending. The CFPB maintains a complaint database. So it's all the complaints that come in, again, for -- against lenders, et cetera. Since -- from 2017 to 2021, Triad had over 285,000 applications. Through all of that, they've only had 46 complaints. That's less than 1 basis point. And 100% of those complaints have been successfully resolved with the owner. It's a very impressive record, and we're very proud of it. Page 120, we talk about SASB. ECN follows the SASB guidelines for consumer finance industry. We report -- our reporting and disclosure is compliant with SASB. And for the next couple of slides, we run through a number of the stats there. With that, very happy to once again say that we have a strong ESG commitment. It comes from the Board all the way down through the ranks. We manage it and we're growing every day. With that, I'm going to turn it over to Steve Hudson for our executive summary and conclusion.

Thanks, John. It's my pleasure now to provide some wrap-up comments on the 2022 Investor Day. Turning -- from my perspective of 30 years in the commercial finance industry and as the founder of ECN, I'd like to share my thoughts on the strengths of our business model. First and foremost, as I mentioned earlier in the day, we have 3 components that comprise our business. First of which is our industry-leading origination platforms, very deep moats around those platforms, quite proud of that. Second of all is our stable and growing funding base, which I've mentioned earlier with our strategic partners, the demand for our credit assets is unprecedented, and we've been able to seek longer -- able to arrange longer terms and better arrangements for ECN. All -- those 2 components are wrapped around our rated servicing, advisory and portfolio management businesses. Those 3 together, I think, make a very formable business. Turning to the manufacturer and dealer network. I'm very proud that we have 5,000 dealers accumulated over the last 80 years, 60 years at Triad and 20 years at Source One. That's very powerful. That dealer network, the manufacturers behind it, will drive our growth in '22 and '23. And as I mentioned earlier, our partnerships with the investors who purchase our credit assets, getting very deep and getting longer. When we bought our various businesses, it was amalgam of very small banks and very small credit unions. They are here today, but they are now led by some of the largest institutions in the world. It's a very powerful business. I'd like to highlight a couple of elements of the growth strategy with you. The proven take and make share strategy, which we call our playbook, have become our hallmark. We kind of developed those and tested them at Service Finance, proved them up at Triad and now rolling them out at Source One. Take strategy is obviously taking 5,000 dealers and growing that base, taking the manufacturing base and growing that. The make share strategy is our expanded product menu. If I had to highlight a few of those for you, Triad, Silver and Bronze and the Land Home are important initiatives. And our make share, Source One, our geographic expansion into states that they're currently not in. And a Silver and Bronze program for Source One launched in '22. And then Kessler Credit Card Investment Management business was a nascent business in 2018 and '19. Today, it represents several billion of managed assets on behalf of some of the largest institutions in the world. And the last one, which I've highlighted just a moment ago for you, is our funding partnership with some of the largest institutions in the world. It really gives us the strength and the liquidity to aggressively grow our business. And John mentioned earlier at the start of today's sessions our tuck-in strategy. I like the fact that they're modest. I like the fact that they're on-message and they're accretive. Turning to -- I'll just take a second and if we could step back, I don't want anyone to think that ECN is a holding company. We are very active day-to-day in assisting our partners and achieving their growth and their guidance. What does exactly -- what does that mean? You look at Triad, it means that Silver and Bronze programs that we launched successfully 24 months ago, the floor plan that drives the retail originations, the Land Home initiative. And if you think about that for a second, land home in the industry is 3x the size of chattel. Chattel is currently $1 billion at Triad. That means over the next several years, hopefully, a few, but several will see $3 billion of land home at Triad. That underpins the strong origination plans at Triad. At Source One, similar thing, Silver and Bronze program to come in '22, floor plan and servicing, all that playbook being replicated at Source One. And at Kessler Group, credit card investment management business, I just spoke of, it's transformative. We've taken what was a bank-to-bank model, credit card portfolios going from one bank to the next. Now we've proven that banks can then sell to institutions with third-party management. That was all delivered by Kessler Group. And Card-as-a-Service is another example of these new program launches. Technology improvements, very significant. Michael Lepore and his team have implemented SAP in our existing businesses. We'll roll it out into Source One. That SAP allows for daily, weekly and monthly reporting. We get the numbers every morning, every week. And every month, everyone goes through an operational review with me, incredible detail. And as well, we continue to drive efficiencies initiatives across all of our businesses. We are active day-to-day with our partners. The case study of that would be our successful program with Service Finance over the last 48 months. You saw the new programs, which was our make share, Silver and Bronze, the dealer advance, the progress pay, solar being transitioned from modest on-balance sheet business to a significant flow business. You saw the take share with Beacon Roofing, Panasonic, ServiceTitan, Abbey Carpet. Those are the same programs, the same playbooks that we're now running at Triad and Source One as well as at Kessler Group. And the improved funding has been critical from my perspective to get better returns on our existing credit flows, has driven incremental value for our shareholders. As I mentioned earlier, if I had 3 takeaways for you, these would be the 3 takeaways. Our resilient business with proven growth strategy, as I mentioned earlier at the start of the day. Very proud of our team, didn't close for a single day during the pandemic. Thank you. And we've been able to develop this playbook of proven strategies. We have the ability to maximize shareholders' returns. We're quite proud of our $2.5 billion being returned to our shareholders over the past 5 years. And I think that as a company and a Board, we're able to efficiently allocate capital for both growth and risk mitigation. And then finally, our funding relationships, the institutions who purchase our credit assets are deeper and expanded. All of that gives me a high degree of confidence in our ability to deliver on our '22 and our '23 business plan. Let me wrap up by providing a summary of the guidance that was provided by the individual businesses throughout the day. We're guiding to $0.29 to $0.31 for '22. I would guide you to the higher end of that range. We had a strong fourth quarter, as others have mentioned. January and February to date doesn't make a year, but it's been a great start to the year. And with respect to our guidance and initial guidance of $0.23, $0.36 to $0.42, I would take you to the midpoint to the upper end. A lot has been accomplished over the last 5 years, and I feel very confident with the growth. I want to thank everyone for attending today, albeit virtually. We're desperate to see you in person next year. We enjoy the in-person environment, and I want to thank everyone for their tremendous support of ECN. Have a great day. [Break]

Good afternoon, everyone. Welcome back, and thanks for attending and viewing the presentations earlier today. We're excited to take everyone's questions and have this question-and-answer panel. As you can see all the speakers from earlier today are up here, and we'll go ahead and get right into it. We had a number of questions, really, the biggest topic that we got across was really supply chain, inflation, interest rates. And so I guess the question is for each of the businesses, and maybe, Steve, you could address this more broadly your views. Can you discuss how supply chain issues inflation and potentially higher interest rates affect the outlook for your industry and your business? I guess we'll start with Triad.

Yes, sure. Supply chain, it's a shorter-term obstacle that's getting better. Evidence as such is it's simply in the amount of shipments that we had in 2021. When we take a look at -- moving on to inflation, a little broader, a little longer-term obstacle. But on a positive note, lumber being the biggest cost in the production of a manufactured home, in January alone reduced by 30%. In conversations with manufacturers, they indicate we can see, on average, a 5% to 10% increase in prices for the year, all while the consumer demand is stronger than ever, and we remain the affordable option.

Great. I mean do you want to comment on interest rates?

Yes, on interest rates. So I guess going back to the slide that we had in the presentation. You could see that we've averaged 2 points plus premium relative to 30-year mortgage rates, and that's going back over 20 years. Our partners are quite happy. That's leading to a net yield for them that they're quite happy with, and why we've had these relationships as long as we have. And for us, as I indicated in the presentation, since our gain on sale is really a function of the interest income at the time of origination, then higher loan rates, longer terms, larger amount financed all equate to slightly higher premiums for us.

Fantastic, how about you, Matt?

Real similar to what the Triads experienced as far as supply side of things. With -- on the RV side, as noted in the presentation, we saw kind of a record fourth quarter in production and deliverables in the RV space. We expect Marine is still lagging as kind of noted to. But with the geographical expansion, we're kind of look to -- we're already in the process of taking on this year. We expect to overcome any legs on the Marine side. As far as interest rates, for us, again, similar to Triad, where we -- any interest rate increases ultimately gets passed on to the end consumer. So again, not really impacted on that front. And then finally, as far as inflation, again, being that our average loan ticket size is at kind of midsized travel trailer, marine product in that $40,000 range. Again, that's not something that we expect long term to have a tremendous impact on our business either.

Great. And Scott?

Our business is a little bit different. Supply chain issue would be, can you get credit card plastics out to people, and I don't think that's going to be a huge problem. Regarding the interest rates, some of our borrowings are up, credit card balances are up about 5% over the past 11, 12 months going to the Fed. So we're not seeing any deterioration in balances. And as far as credit cards are a variable price. So there's a hedge built in already. So we don't see any real material negative impact, actually a slightly positive impact to the current rate environment.

Great. And Steve, I don't know if you have any high-level comments.

Just broadly, John, I would comment that we've been able to pass through -- as you saw in '21, we've been able to pass through the impact of inflation and higher average ticket prices. And in '22, I know that the businesses are forecasting anywhere from 5% to 10% price increase inflation. We've taken a more conservative position of 5% that would be to the upside if inflation runs hotter and higher. On the interest rate, we're not seeing any impact on the demand for affordable houses. Matt's got 22 years of history, and we're very early in the cycle. So I don't see a lot of impact.

Right. So to sum up those higher ticket sizes that we could see from inflation could actually be a net positive for the underlying businesses. And the interest rate portion of it really does get passed through to consumers, so we see a very limited impact.

And I think in Scott's business, as he pointed out, we saw the $1 trillion of credit card balances at the start of the pandemic fall to $800 billion, and you're now seeing that balance recover. And that's a net positive to Scott's business.

Fantastic, fantastic. So I guess, I'll focus a little bit on Triad first. Volumes have really been robust really since ECN owned the business, but especially last year, and we saw that across sort of the industry as well with that 106,000 shipments, first time through 100,000 since 2006.

Finally.

Yes. Finally is correct. So I guess the question that we get is, first of all, how do you think about your -- that core chattel product going forward? Obviously, it's been super robust growth. Do you continue to see that? And then I'll step back, and we'll talk about Land Home for a minute.

Yes, our core chattel products, we've been doing great. It really has -- it's actually been accelerating for us these last couple of years. Again, as you heard in the presentation, 40% plus on that product. in 2021. It's really a function of a few things. We've been a reliable partner for the industry for over 60 years. I mean nobody else can say that in the industry. And a reliable partner through multiple economic cycles, and now that we're adding additional product lines, it's driving more applications for those additional product lines. But I think what people miss is that it's driving applications all around. We're scooping up more of that core chattel product than even the dealers might have known was there before. So it's really just a multitude of things.

Jumping over to Land Home. I mean, Land Home is the newer product. It seems to be the one with the biggest short-term prospects in terms of growth, although we can also talk about some of the other products you guys have successfully launched. Did $100 million, give or take, last year, maybe a little short of your original guidance, but still very, very strong. Given the pipelines that you see today, how comfortable are you with that $200 million to $300 million that we talked about in terms of guidance for next year. And then longer term, we talked -- we emphasized today that Land Home is 3x the size of chattel. How does this translate to you guys and sort of over what time frame?

Well, very confident in the guidance. As everybody heard, just starting the year, we're already sitting on nearly $200 million of a pipeline, just waiting to fund. So that $200 million to $300 million, we feel really good about. That gives us a bit of a buffer as to like what backlogs might do for the industry too. So we feel like we're pretty conservative on that. And your question more on...

Just longer term, and we touched on it today, we actually emphasized that Land Home is really 3x chattel. I mean chattel has been the historic business, 94% of volume in 2020. Over time, how do you see that evolving? I mean, I think we've indicated that we think it's going to grow materially for a long period of time. How do you guys think about it?

I don't see any reason why we wouldn't garner the same market share we have on the chattel side relative to Land Home. We're -- it's obviously early stages. We've spent the last 18 months building a team of industry experts come with us with a lot of experience and relationships, and that's just getting the pipeline started. I'd rather not promise the exact time we're going to hit $3 billion, but we feel really good about the runway.

Great. I guess as a final question as it relates to all this growth, and how much success you guys have had. Have you seen any material new competition coming into the space?

No, there has not been any new competition.

Yes, nothing to speak of, right?

No.

Okay. And John, if I can, just maybe going back on the Land Home opportunity, and I'm not pushing Mike or Matt for a number at least today, maybe tomorrow. But if you think about $1 billion of chattel at this year at Triad, and in the industry, Land Home is 3x chattel, that's a $3 billion opportunity. So if Triad's at its high-end range of $300 million, that means a $2.7 billion opportunity. I'm not suggesting that's going to get hit in the short term, but over the next few years, I think there's lots of -- and that gives us confidence in these origination targets. It took us -- took Mike and Matt 4 years to get ready to aggressively launch this product to build the infrastructure. So having made the investment, I think we're in -- I think, Triad is in great shape.

Great. Let's talk a little bit now about Source One and the newest member of the ECN team, got a lot of questions, as you can imagine, as it's the new thing that we're talking about here today. And I guess the first couple of comments we got were really talking about the transaction itself, like how did it come up? How long are you guys working on it? Can you comment on if it was a competitive process? When you've been in discussions? And who did you buy it from? And given that I'm working on a lot of the M&A type stuff, I'll actually take and answer the beginning part of that question. We started talking to Source One back in the beginning of 2020, really. If you remember, it was pre-COVID when we first started talking. We spent a long time getting to know each other. And following the business and getting very, very comfortable with the management team and Matt and his team getting very, very comfortable with us. And then this summer, we started having more and more conversations and we entered into exclusivity, I think, around September or so. And so again, it was a long-term due diligence. We spent a tremendous amount of time and effort really getting to know the company. And we couldn't have been more happy with the management team and the underlying business. Do you want to comment on -- the question is specific was, who did you buy the company from management or other owners?

Right. Yes. So can -- who the company Source One that consistent from an overship standpoint was myself, obviously. One of the other founding partners, James Brown, is actually has a state. He passed here just a couple of years ago. And then one of the companies acquired here just a couple of years ago, the 2 founders of that company, Donnie Cole and Ray [ Cazai ] I had a small membership or ownership position in it. And then also a group led by Kramer Rooke and Ryan Kelly from Station Partners, a private equity firm that invest in Source One, back in 2016 have really been by my side, been crucial to helping us continue to grow Source One from where we were in 2016 to where we ended up today.

Fantastic. And why did you decide to sell the business at the time that you did?

Yes. It wasn't something that we were really looking to market or we were actively pursuing anybody. It really came down to felt we -- between Kramer, Ryan and myself, we've gotten the company to a point kind of where we're doing really well. Nobody was really looking to sell. But when the opportunity came along and I spent time with Steve and some of the other guys from a from [indiscernible] from ECN and seeing what they've been able to do at Triad over the last few years and a lot of the similarities between Source One and Triad, it just seemed like the natural move for us to go in that direction to really help us expedite our growth using a lot of the same tools that Triad has been able to incorporate over the last few years.

Fantastic. I guess I might direct this one actually to Michael, just I think will be an appropriate person to answer. We've commented in the past when we bought companies about incentive plans and management programs, et cetera. Historically, they've been strongly tied to business performance. Maybe you could talk a little bit about philosophy there, and what we did at Source One, and how long...

Sure. John, yes, similarly, what we've done with our previous acquisitions. Obviously, we buy the management team and support the management team as part of that. We entered into long-term employment arrangements with Matt and his key executives and those employment arrangements include long-term incentive compensation plans that are really tied to the performance of both the Source One business and ECN share price. So they're very aligned with growing the business to hit our growth targets. Just one other thing to note is that's noteworthy is that Matt and his executive team actually bought over $6.5 million worth of ECN shares into private placement right after the acquisition closed. So again, just a vote of confidence in the future from Matt and the management team, and they're very aligned with supporting the growth of ECN share price.

One more slightly different topic, but would still be for you. We said very specifically that Source One is going to be a reporting segment of Triad. The question I'm getting is, are you planning on providing the level of detail that we have in the past on the other businesses? Or is it just going to be sort of blended inside of Triad?

No. I think just to keep the transparency, although it will be a reporting segment of Triad, we will continue to provide separate information on each of the businesses so that the analysts and investors can assess the performance of each business independently.

Great. So to move into KG for the next little segment here. We changed the reporting again here going into the end of the year, and I think that's a reflection of how the business has evolved over time. So we've changed the reporting segments to sort of the partnership segment the CCIM segment, which is really the credit card investment management as well and then the Performance Marketing and Card as a Service. Maybe you can talk about why the business has evolved here, and why those are the important areas and why we're focused there?

John, it's A complex question, but I'll try to answer it very simply. The credit card investment management business, which is a really large part of our growth and part of our strategy was, as I mentioned earlier today, was the hypothesis we had 3.5, 4 years ago, and ECN believed in it, invested in it to incubate it. That now is -- that business is growing to the point where we can now break it out and focus on it separately. That business was a couple of million dollars in revenue 4 years ago, and now it's $35 million in revenue and growing. And some of that growth is in the management fee, some is in the performance-based compensation that will come in over time. So the strategy was to kind of build it, solidify it, leverage ECN's expertise, and now kind of start reporting on as a specific business as it grows. And so that is a key part of our growth. It plays into partnership services into leverage marketing or performance marketing. And my goal is to actually have all businesses contribute roughly 25% to 1/3 of the entire business across 3 different business lines. So that's the strategy behind.

Fantastic. We'll get to questions on sort of each of the segments, but I think I'll start with Partnership Services. We've got a pretty nice expectation of growth in partnership services next year. It's growing nicely, and that's without the contribution of CCIM, like previously that had been sort of part of that segment. So even after pulling that out, we're seeing some pretty nice growth. Is this from the new partner that you just announced or further new partner growth? Or is it existing programs that are growing through sort of balance increases or other ways?

Well, we're seeing a slight increase in fees from the size of the balances that we have under our management, our partners own. So we'll see a slight uptick from that as balances grow. We'll also see a large percentage of our revenue come from new partnerships. We had a new client in Canada that we talked about earlier today, which will grow incremental revenue, which is an offshoot of an existing client relationship we have. So the way that business works, a lot of the programs are renewals or divestitures and they're timely based on contractual provisions in their contract with our underlying partners. So it is a little bit year-over-year. We had 7, 8 transactions in 2020. We had 6 in '21, a couple of them were larger. So it's really new partnerships that we're going to bring in to grow the business because we have a steady base that's relatively consistent year-over-year.

Do you mind just talking about, what do you think the average life or duration of those sort of partnership contracts are today?

Well, a new contract with a partner, if we're working with a client is roughly 5 to 7 years. Our underlying client agreements are between 3 and 5 years.

Okay. The last question on this segment. I guess it's across the 3 segments is, we say that 85% of revenues is really from recurring multiyear agreements. Can you describe what that other 15% is today?

Some of it was a legacy business. We used to have an M&A practice 3 to 4 years ago, where we do one-off transactions with clients that weren't traditional multiyear clients for us. So some of that makes up to 15%. And it's also -- we'll find one of the networks will need us for some type of business, and we'll do something for them and generate several million dollars in fees, and that would be considered a one-off transaction, part of the business. So it's not core through a multiyear arrangement, but it's still a sizable contributor to our revenue for the year.

Great. I guess I'll move to a couple of corporate questions for Steve and Michael. The first question that I actually got from a couple of people was just talking about dividend strategy. How do we pick one set of share? And what is the plan going forward?

Yes. John, I'll take that question. So $0.01 per share is our starting point, as we divested service finance and reset the business, so that's our starting point, but we also wanted to deploy capital into the growth opportunities in each of our businesses, including the tuck-in M&A strategy that we announced as well.

As it relates to return on capital, you guys highlighted today just the incredible $2.5 billion of return capital. Maybe talk about that a little bit. How we thought about that and how we think about it going forward, return of capital versus, say, investing and allocating capital towards additional M&A growth or future internal growth.

Let's say, we always -- we have the NCIB. We've used that as a tool to manage capital. But as we are sitting now, I think we have better uses of the capital is to support the growth of the businesses. I think we can earn higher returns at this point, but we'll always use the NCIB should the value proposition dictate that's where we go. We're flexible in terms of our capital allocation. We'll look to invest capital, where we can -- where we think we're going to earn the highest returns.

John, if I can just please reflect on Source One and question of capital is that if you look what's happened at Triad over the last 4 years is that we've invested $6 million in systems and processes. We've built a professional management team, a lot of it bank based. We've deepened and lengthen the funding relationships. Many of the funders at Triad would like to purchase the paper at Source One. So we've built the infrastructure. It's built and as shareholders we paid for the build. So now we have to utilize it through organic growth and also M&A. And I'm not going to be the guy that issues equity for a modest M&A deal. We talked about modest on message accretive deals. So maybe it could be $0.02, but we're early in the year. And we've got a big plan for organic growth, and we also like to do -- if this is not an M&A spree, but we'd like to be able to do some modest tuck-ins that are very accretive to our shareholders. To answer your question, we're keeping some dry powder.

Right? I think you just answered these questions, but both of these came in. Do you expect to do more M&A here in '22 and '23? And is Source One sort of a typical size deal? Or how do you...

Well, you can ask John, because that's your area of responsibility, but it's -- we have -- we could easily do another Source One deal, Michael, without...

Yes. We definitely have the dry powder to do another Source One sized acquisition.

You just got to find it, John.

The only thing I would add just as the person who does work on a lot of the M&A, we're always looking at transactions. There's always things that are out there. As you can tell by now, we're highly selective. We spent a lot of time with management teams. We do a tremendous amount of due diligence, we typically work from a position of exclusivity. We're looking for transactions that are immediately accretive and tick the boxes on all the things that we -- and our shareholders think are important, whether it's an asset-light model, whether it's high-quality funding partners on down the list, all the different things we talked about today during the presentation. So the answer is, if we can find something that ticks all those boxes and is a great financial transaction for us, yes, we'll pursue those kinds of deals.

And John, if I can, just I want to -- can't emphasize enough. This is not us going out and doing a large M&A deal. M&A deals, as I know, over my 30-year career of a larger nature carry with it integration risks and other forms of risks, and we're simply not on for that, but companies like Source One, Matt's very modest, but 22 years ago, we created it with his partners, a long track record of credit history and through cycles and robust business. And it fits within the infrastructure of Triad. And that's a perfect match. So think of -- I know you're looking, John -- joking, I know you're looking at -- I know you've got a number under consideration, but there'll be that modest on-message accretive transactions.

Fantastic. I'll move back to Triad here for a moment. I'm going to talk about a couple of different areas. I mean the first one I'm going to ask is just it's straight question I got was, are there any other new products for Triad to launch? I mean we say we've got the full product menu at this point. Is that right? Are we going to see 3 more products next year? Do you feel like we are where we got everything covered?

We're kind of happy with our hands full at the moment to be asking for what's next. The function of the new products don't always just come from us. It's a function of working with our dealers. They're telling us what they need, what hole might need to be filled. And then we work with our funding partners to try to solve for that. So everybody wins. At the moment, we feel pretty good with what we have, and the direction and the products we have now have a long way to go to, they're just starting to scale as you saw in that product mix slide that we had in the presentation.

Great. Okay. I'll jump back to Source One here for a second. It seems like it's right on message. That's what the actual question was. But can you comment on the confidence level you have in these expansion plans, and which areas do you expect to have the most early success in? And what is anticipated in sort of the '22 earnings range? And -- you can start with that, Matt, and I can fill in on the growth things.

Yes. I think the 3 items that we're really focused on right now is, one, that we're addressing is -- actually, all 3 we're addressing right now, but the first being the geographical expansion. We're moving forward on that, looking to identify up to 5 additional sales reps to really kind of expand our footprint from us being kind of in the central corridor of the U.S., really kind of branching and pushing out to the East and West Coast. And the goal is by the end of the year to really have that expansion placed and completed. And then on the other 2, as far as Floorplan and the servicing, getting licensed, those are items that we too have been working on really since close. So with those items, we'll certainly keep you appraised throughout the year as to where we stand on those fronts.

Yes. The only thing I would add to what Matt said there is each of these items are things that we've done before, right? We did these things at Triad, right? We've expanded product sets. We've added Floorplan. We've really enhanced the servicing side of the business. So the good news is, we're working off our playbook. These are the things that we've done historically. And like Matt said, in terms of what's in '22 guidance, if we start looking towards the high end of guidance, could we get some contribution from some of the expansion that we can accomplish earlier in the year. Yes, I think that's possible. But we're going to spend the time to do this right, but we're going to get the Floorplan and the servicing up and running this year. We're going to have the 5 salesmen in place so we can cover the full geography of the country. We're working on licensing as we speak. And some of the other areas we talked about, which might be a little bit longer term. It's expansion of the product set, adding something like a silver and bronze and expanding our funding partner base. It's all stuff that we're working on today, and we expect to contribute in a really meaningful way over the next couple of years. Just because you talked about the expansion plan a little bit, is there any particular reason why the company evolved the way it did in the middle of the country, so you didn't necessarily target Florida or target California, which are some of the biggest markets in the country. You made your way to Texas.

We started in -- so back in '99, we started in Minnesota and just really just kind of over the years, continue to branch out. So our progression based on lender appetites and everything lenders we are working with currently and at the time was to move south and then Southeast is actually a region that we just entered in, opened up last summer. So the whole plan all along is to continue to expand our opportunities geographically. So that's been a plan that we've had -- I've had on my docket for a long time. So we're getting there now with the support of Triad, ECN, some of those relationships. We feel like we can really jump-start that and really make a big push in 2022.

Okay. Maybe John, if I could just some of Matt's done a phenomenal job. But actions were already underway even prior to the closing, we had put the capital side to grow Floorplan at Source One. We got into licensing in all the states, and Matt already had a plan done with those previous owners, we're implementing. So we benefit from that. And I also think the other important part is that is Matt's business was probably the most impacted by the supply constraints in '21, there were material supply constraints, particularly in marine. And we've seen early improvement actually in all the businesses that January and February don't make a year, but January and so far to date in February, the numbers have been strong. So it's -- I think a question on confidence is high.

Fantastic. So I'll move back to Kessler now. Credit card investment management, obviously, is something we've been talking about for the last couple of years. I think you did a really nice job today explaining the evolution of where it is, how it went from sort of really a thesis to something that has been completely validated. Can you talk about where you are in terms of current assets under management? I mean, people see that $5 billion number over the life since the platform has been put together, where are you today in terms of asset management -- assets under management, sorry?

We're about $2.25 billion right now. The portfolios that we acquired over the first couple of years with ECN and help with other strategic institutional investors were runoff portfolios. They were very predictable. We thought that was the right way to prove them on loan. Those are declining balances over time. So you see some runoff in the book. A lot of the portfolios that we're now targeting for our relationship with SLC and other investors without ECN's invested capital, are programs that not only have existing portfolios, but have significant forward flow opportunities. So we expect to not only buy portfolios, but actually slow down the runoff on those portfolios once we acquire them and hopefully get to the point where we can grow those. We're pretty excited about the prospects. We started off with a couple of hundred, $200 million, $300 million portfolios 4 years ago. And now the smaller portfolios that we're looking at are somewhere between $400 million and $500 million portfolios. And I'd say about 40% of the ones we're targeting now are north of $1 billion.

And I think, John, if you look at this, that Scott's being modest here, that he and his partner, Sanji started with a business that was bank to bank, 1 bank selling a credit card portfolio and the other bank buying the credit card portfolio and KG, Kessler got a onetime M&A fee. And the thesis was institutional investors with an asset management arrangement with Scott and third-party servicing, also provided by Scott, could actually enter the space. In the space of 3.5 years, it's gone from 0 to $2.25 billion and a significant pipeline behind it. And that proof of concept or proof of business I think is extremely material. And the valuation for ECN, all of the shareholders are taken onetime fee to management fees now on and performance fees on top of that, but management fees alone on $2.25 billion, growing to $5 billion is a game changer.

Great. So you said you think you can do $1 billion to $3 billion of potential new asset management -- assets under management, sorry, within the SLC program overall. How do you think about confidence level as it relates to that? You obviously have a pipeline of transactions and other things, but just curious.

Based on what we've -- the most recent activity, I feel very confident that we'll do $1 billion a year with SLC. Some of these transactions are multibillion. So could take a long time, they're complex. But we expect to land some percentage of those as well. And so I feel very strongly about that. I also feel strongly about kind of portfolios and businesses that don't really conform into our SLC relationship, where we have a history and a group of buyers that are very interested in other types of portfolios, whether it be consumer loan, student loan, auto, et cetera, that we're now involved in, and we expect to grow those about $1 billion a year as well, so...

Do you expect that the economics will always be the same as what we've talked about with the SLC?

I wish I could say they were, John. But what we found -- we have a philosophy within our company is that we try to get the maximum value over time and align our interest with the partner. So in some cases, we get higher management fees and lower performance fees. Some people like to pay us for our services, and we're okay with that, and ECN is comfortable with the model. Others, we actually push for more performance fees because we expect the returns to be higher, and we can make more money over time than we can of management fees. So it's really we toggle between the 2, but all the deals were a combination of those 2.

I think, John, one of the worst kept secrets is SLC is a Blackstone affiliate. So I've said it, probably in trouble. But that -- to become their partner, to scrub that Scott and Sanji and their business went through was very deep and very significant. And I'm very proud that KG and the fighting group were picked -- fighting part of KG were picked as the asset manager of Blackstone. That's a significant endorsement by a third party. So...

Well, the reason why I think they picked this was our sourcing ability our ability to structure deals unique to credit card where they weren't deep in credit card, our ability to manage those assets going forward to maximize the returns. So it's the confidence level in our expertise and long-standing relationships with partners. But I will also tell you, we benefit from their relationship in 1 deal we recently completed in the fourth quarter. They use their relationships with CEOs and other people in the industry to help move us to the forefront of a line of 15 competitors that were looking at the deal. And we won that deal together. So we both add value, and they're also -- I think they're out there looking at some deals in the marketplace that we can come in and help them do a better job with, and that will become part of our relationship. So it's very collaborative, cooperative and they've been great partners as have our other investors that we work with for the past 4 years.

Right. I got a number of different questions. Maybe different wording and whatnot about CCIM and the revenues that we expect this year versus last year. I want to make sure that people come away understanding what the difference in '21 was versus '22. We've actually made that shift to that asset-light business that we're talking about. So comparing the 2 isn't necessarily apples and oranges. And I think combination between Scott and Michael, you guys can probably answer that pretty well. So...

You want me to take the first crack it? Yes, we had a -- and Michael can talk to ECN support of some of the portfolios that they invested in, in order to incubate and build out the business, improve the business model. He can talk to that. But the way I look at the business is, we're creating great returns for our investors. ECN has a right to co-invest with our other investors whenever they choose to. If it makes sense strategically for ECN, that's always open. We love that rather than giving our investors excessive returns. We'd love to do it back with ECN. But the good news is that we have a full plethora of investors. We're fully invested in all the deals that we have. We actually oversubscribed through our partners. And the way I look at the revenue from year-over-year, the business is growing, management fee is about baseline about 50% a year. We have promoted and performance fees that will start kicking in once you get to certain hurdles in the relationship, and that usually kicks in and after year 1, one deal, we actually get in before end of year 1, which was very attractive, but that starts to kick in over time. So that will continue to build up for future revenue. But we had some opportunities in 2021 that Michael can speak to that actually accelerated the performance of that business and validate the model.

Yes. Thanks, Scott. Yes, I think the key point to note for 2022, those are pure asset management fees and the revenue line for that business. As Scott mentioned, we entered into a transaction with SLC. And as part of that, ECN exited its debt and equity investments that incubated the portfolio. So we have some investment income in 2021. But in 2022, it's pure asset management and performance fees.

Okay, great. So jumping back to corporate a little bit. And I think this is Michael, and I'm sure Steve will have an opinion as well. But we did have a number of questions on how ECN manages debt levels and what level ECN would be comfortable with over time. And then ultimately, what are your current thoughts on the investment-grade rating or ratings in general?

Sure. John, maybe I'll start first with the investment-grade rating. As of -- as you know, we are still investment grade rated with KBRA. We did get downgraded 1 notch by DBRS mainly as a result of the service finance transaction, and it's mainly due to the size and scale of the business post the sale of Service Finance. But we do intend to -- as we increase the size and scale of the business going forward, we do expect to retain our investment grade rating with DBRS as well. In terms of our debt levels, I think it's important to segregate our long-term debt with our senior line debt. So there's really 2 pieces to our debt, one is the hybrid debentures, which we completed 2 issuances in the fourth quarter. So we have about USD 175 million in those debentures that are really long-term permanent capital that are equity like and get equity treatment from the banks. So there's other part of our permitted capital and then obviously lower cost capital than issuing straight common equity or even preferred shares. So again, those important debentures that actually leverage and increase the returns to our common shareholders. And then second, we have our senior credit facility, which we use to support the on-balance sheet finance assets that we use to grow our Triad business and Source One and KG. So that's -- it's an important distinction. So if you take those 2 pieces together, our debt levels are very reasonable and manageable. In terms of managing overall debt levels, we managed to stay within the investment-grade ratings of the rating agencies, the criteria for the rating agencies as well as the business covenants within our senior credit facility.

John, I'd just say into my 32nd year in this industry, that we have a deep relationship with our Canadian bank partners, and that's an important source of capital for debt and for equity when needed, we don't need equity. And we have a covenant package with our banks that we live comfortably within that we always have room. We're not the organization that's going to push covenants. And as part of that, we planned, Michael, and I'm working with Michael have ensured the sufficient dry powder and staying within the covenant package to fund our organic growth and to do tuck-in M&A. I think we're I think the hybrid issuance that Michael completed were great because we got equity like treatment. We got deductible interest expenses as opposed preferred shares, which are not. And I think it's a far more favorable form of financing to our shareholders.

And technically, we can settle them.

We can settle them in our common shares. That's exactly right.

So I'll move back to Triad here for a couple more questions. First question. I don't -- we get [indiscernible] from time to time, but I thought I'd bring it up. You guys have signed more than 10 partners a year for the last several years, including 15 in '21, but you still -- you're always saying that you have a 50-plus. Maybe talk a little bit about what that looks like in any given year, and how many portfolios you're actually managing and those kinds of things. And just trying to explain to people what that 50-plus really means.

Yes. Actually, I'm surprised I don't get that question more often. It's been a few years now. We -- the 50-plus really refers to the active partners we have in any given year. purchasing loans. But in reality, we have, I mean, well north of 200 portfolios and partners sitting out there. It's -- the difference is really Triad several years back, right, the main funding partner was a smaller regional bank credit union. And they hit concentration limits. They want to slow down. They paused purchasing for a little while and then they'll come back. So that really bridges the gap between the 2. But the reality is we have that full 200-plus network at our disposal and to hopefully introduce Source One assets to -- and I mean that's really been a big strength for us over the years.

Right. I've got one more for you, but I'll come back.

Oh good.

Catch your breath.

It's actually a similar question for Source One. I can probably take it. But we did have somebody ask that given the duration of the Source One, the longer-duration loans written or written basis, would they be appropriate for sort of insurance companies and other folks? And my first answer is like with every business, we're going to expand the funding network over time. As you know, we've had both Triad and Service Finance introduced insurance companies introduced some pension funds and introduced institutional investors and additional banks and credit unions. I think all of that would be on the table for Source One over time. We want to create a very diverse funding network with high-quality sort of top-tier institutions. But Matt, maybe you can talk about your history with your funding partners and some of these guys, like I know you're largest funding partner, the Credit Union, you guys have been together for -- when I've talked to them, I don't know, I can't remember, it's 20 years plus, right, these are long and deep relationships. Can you talk about the nature of that?

Right. Yes, we've been really been blessed to round myself with a lot of really good lending partners that have really grown with Source One and me over the last 15 years, a lot of them have been with me, I think my oldest current relationship I had goes back to 2003. So a lot of good partners we've been able to hook up with over the years. And really, it's just been driven by the asset class that we're looking at. We're focused on the high credit, super FICO credit scores. Our niche is at mid-level product line, whether it be in the marine and RV side of things. So it's been a success for Source One and really our lending partners. It's extremely low risk on our low loss rates, excuse me, on it, it's averaged around 40 basis points or less historically for us, and that's been really consistent and providing a nice net yield to our dealer, to our lending partners to just under 5%.

John, if I can add. We have this unprecedented demand for credit yield and credit assets, and we originate some phenomenal credit assets, whether it's credit card portfolios or high-quality RV and marine assets or it's affordable housing loans, they perform exceedingly well. The demand is very high. And we've taken that opportunity while being respectful of the existing relationships to introduce new relationships, new not outside, but new to other parts of the business where we can get a significant counterparty lengthen the term and improve the economics. I think we're in a good spot. And again, we're not going to tear off existing relationships, but there's lots of volume we funded here, the demand is much more than we thought.

Great. For Scott, Card as a Service, a lot of questions on how big that market is. I mean you guys launched with your -- again, it was a thesis you launched with that first partner in 2021. Today, we let everyone know that you've up a couple of new partners and a big network. So maybe talk about that Card as a Service business, sort of how it's evolved to today, and how big the TAM is or whatever you want to call it the total addressable market for Card as a Service?

I think you guys asked me that question when I first talked about Card as a Service last year. Just like with the CCM business, we actually had a hypothesis, we could create a kind of a turnkey credit card solution for credit unions, banks, people that didn't have the depth and the expertise that we could bring them to manage, to grow and manage the profitability of the credit card portfolios. Because of a relationship that we had -- we established our first one in '21. And on that business, we're averaging about 1% of the outstandings of the credit card book in fees across 3 different components. We then get introduced to 2 other larger, 2 to 3x the size of that credit union by that credit union. So it was word of mouth, people within the industry. We think that will start to expand. We can hopefully get a couple of referrals and deals from people that we're doing business with. So I expect 2 to 3 new clients in '22 and then that grow into 10 clients in '23 and then probably 30 clients in '24. It's kind of -- and it'll branch out, it's not a go knock on doors and ask if you can talk to the CEO or the Chief Risk Officer, Credit Officer or whatever. It's a much more kind of internal word-of-mouth sale. But with our network relationships who now understand what we do and see the demand. A lot of fintechs are coming to us to actually provide the service for them, not just banks and credit unions. So we think this could be a business that could be another cornerstone, another $30 million, $40 million business in 3 to 4 years.

Right. Yes, I've always thought it was a super interesting business. I mean, especially given that the existing agent model that's out there today, they're taking all the net interest income. They're keeping those balances for those card issuers to be able to provide that solution really seems like it could be a great business for you.

So with our credit investment, we're actually taking balances and then managing and owning them while someone else actually will originate source, manage the profitability. With these, we're actually doing that ourselves. So we're going to have solutions that we can go into any institution either by the receivables, let them do a lot of the work upfront and kind of the middleware as I call it, where we can actually do that ourselves. So the goal of the company is to have 3 or 4 options with every single client that we go into, so we can make sure we get some incremental business and then grow from there.

Fantastic. So back to you guys a quick question. So we've been talking about it for a couple of years, and it's moved around the backlogs, right? Like so we've said today, 9 to 12 months are still there. Can you talk about how they trended throughout the year? Where you think they are today, where you think they're going over the next 12 months or so? How that has affected your business, we talked about docks out some other things. And do you -- just your general view on backlogs. And then just I have a follow-up.

Yes, I guess, jump in. The backlog -- the docs out is a really good chart to point to. I think kind of validates like what we speak to and we're talking about backlogs. In 2020, you obviously saw backlogs extending that pushed that docs out number up quite a bit over the year, and how we feel about it today as you got to the -- towards the end of 2021, we saw that docs out number coming back down. So manufacturers are starting to catch up a little bit. It's not a trend we're building in a guidance to continue. I think we see backlogs today standing at around 9 months. In a normal market, pre-COVID, that's relative to about 2.5 months probably, that's fair?

Yes.

So we're modeling for that to stay elevated for now. If that can continue to come in, that's going to give us more confidence for -- to do the upper end of that origination guidance.

All right. Can you talk a little bit about the industry and where it is today? Where are you seeing the backlogs? Is it supply chain? Is it labor? We talked about labor previously earlier in the year. How are those different areas? And then finally, we talk to manufacturers all the time. There's been some news about opening new plants or opening some mothballed plants. How does that affect supply as we go into '22?

It's really everything you want to...

Yes. I mean it's all of the above. It's labor, it's supply chain. And talking to the manufacturers, they're getting more efficient. They're working around these obstacles they have, and I think as we get further into the year, we'll see that the life cycle or the backlog it's going to get -- it's going to be reduced. The daily production for manufacturers has increased, and it's getting better and better each month, each quarter.

Right. Great.

I think John just maybe, we're -- if you can -- supply issues, there is an affordability crisis in U.S. housing. And that's not going away. That's here, unfortunately, for a very long time. And Triad is one of the few or 2 that can provide a solution to provide affordable financing on these homes. We're still faced with the fact that traditionally billed home is $144 a square foot and a manufacturing home was $55 a square foot, if I remember the math, and that's driving all this. So you've got -- part of the supply issue is driven by increased demand and the inability to bring on significant capacity, which is now starting to happen. But even with significant capacity brought on, the demand is still going to increase because we don't see the affordability issue being dealt with than any other form through manufactured housing.

Great. Okay. We've got a couple more questions here. One, Steve, you've said this for the last couple of years, you've been very clear that ECN is not a holding company, right? And I, of course, agree with that, but the people just like you to elaborate on your thoughts there and really why you would consider it an operating business, an operating company?

Do we feel like a passive investor, Scott?

Not even close.

I think that, listen, we've got very gifted leaders running great businesses. But we do get very deep on growth initiatives. Michael and myself, James Barry, Algis, entire team, our Chairman, so we -- look, the proof is in the pudding. If you look at what we did at Service Finance, you see an expanded menu with bronze and silver and dealer advances and changing solar into this. You saw technology investments by Michael into SAP. So Michael now gets daily and monthly and -- daily, weekly and monthly reporting and efficiencies. So I think we're a very hands-on team. There seem to be this impression in the past, there was a lot of fat at the ECN level, there's not -- we committed -- I made a commitment Michael did that we would have $12 million of corporate overhead. I think 1 or 2 people left the building. Most of that reduction came from Michael and I providing a 60% reduction in our cash comp. And that's -- it's a mean and lean team, and we're very hands-on when our partners ask us. Matt doesn't need help running the day to day business nor Scott nor Mike or Matt, but we certainly are here, Michael, do you want to...

No, I think that's right. And maybe the perfect example is Service Finance, which was a great business, but it is their owner-managed business. They're focused on making money and making the most of their dollars, and we take it and improve it, bring it up to public company standards to the extent that we can sell it to a top 10 bank in the U.S., and they can plug it right into their systems. So I think that's a big part of what we do.

If I can give you an example, John?

Sure.

There's a $600 million turn down business at Source One. -- and still reasonable credits, just not the credits that Matt's partners want. Well, that's the bronze and silver program. There are people who like that paper that's appropriately underwritten who like that risk profile. I'm not saying it's going to be $600 million, but it could be a couple of hundred million. And we've run those programs before, so we're going to help. Matt, when he's already launched those. We know the investors for the product. We know how to underwrite the product. So the amazing thing about Source One when I met Matt back in 2020 was that it's the same type of organization as Triad, the business that you bought first, John.

It's about the same size too, when we bought it.

And I think the opportunity is you might even pass the guys of Triad.

Hopefully.

But if you look to the growth prospects of this business, and it's early days for Matt, for sure, but I think he has the wind in his back. It's -- and you've got very gifted management team at Source One.

Great. We're going to take 1 more question, and I'm going to leave this one for Steve. I got it from a number of different people. We're forecasting growth at the midpoint in 2023 that looks something like 30-ish percent from the midpoint today. How comfortable are you with that number?

I didn't say that. I guided everyone to 30% to 31% in '22. And then the bottom end, from my perspective, in '23 is the midpoint to the top end, John. So we put a range out there, and I know our CFO wants to range, but I know what the business is to go back to the example of Land Home. And it's a $3 billion -- we've made all the investments to be in Land Home. We've hired the 60 people. We put the $6 million in systems. We brought a CFO in from a bank, and we're there to go. It's a $3 billion opportunity for Triad. And this year, it will be $200 million to $300 million. I'm not saying that on the high end, it's $2.7 billion today, but it's somewhere in that range. And we don't have to do anything more to get it other than roll the product out, which is everything is hard, that it just takes time. And then look to the bronze silver business at Source One. Matt is having to underwrite all that credit to say no to it. We're not having additional people. So you've got to bring -- that's a $600 million business, maybe it's $200 million or $300 million. So I can easily get to the $0.30, $0.31, and I can see a path to the midpoint of '23 being the bottom end to the top end being a reasonable range.

Okay. Great.

And just to add to that $600 million number, that's -- we're getting that volume today without even marketing for it. So we're not even soliciting that business. We're still getting it.

[indiscernible] our applications, right, by just launching, it drove more apps.

And we still have 33 more states to bring it to.

The secret to growing dealers as we saw with Service Finance to take 5,000 dealers between these 2 businesses to 8,000 over the next 2 or 3 years is offering a full menu of products. The moment you offer full menu of products, you switch off the competitive sources and you drive deep in the partnership with the dealers and up to the manufacturer. And we're -- we have that playbook. We don't need to build it, we have it.

Well, again, we'd like to thank everybody for attending today and viewing the presentations and listening to Q&A. We obviously hope it was very, very helpful. Hopefully, you've got a good feel for how we feel about the business going forward into 2022 and an early look of what 2023 can look like. And we look forward to keeping touch and talking to all of you. And if there's any follow-up questions or anything else, please reach out. Thank you very much.