Oportun Financial Corporation (OPRT) Earnings Call Transcript & Summary

Okay. Good afternoon. Thanks for joining. I'm very pleased to be joined on the stage by Raul Vazquez, the CEO of Oportun. We're going to be doing a fireside chat. We've got a number of prepared questions for Raul. And then I'll take a break in the middle and open it up to any questions from the audience, if you have any.

So I'm sure you've already been getting this today with some of the meetings you've had, but just wanted to focus first on credit. 2Q credit performance came in, in line with expectations, but you revised the full year outlook higher. Can you just talk a little about the drivers about the change in the outlook?

Sure. It's interesting just even walking over here, the hallway conversations are all about credit. So for the second quarter, we hit our guidance, as you know, right? We delivered the losses of 8.6%. One of the things that we did mention, however, was that we had seen a portion of the portfolio, specifically those that had lower free cash flow, those who've gotten smaller, shorter-term loans that they've started to see increasing delinquencies and increasing roll rates. As a consequence, we took our guidance for the year up 80 basis points, 60 basis points when you adjust for the lower originations. But we continue to feel good about the credit we're originating today, but we are working through a portion of the portfolio that is starting to feel the impact of inflation.

Okay. And I think you just touched on this briefly, but do you have a sense of what kind of inflation is impacting your customers more? Is it broad-based or is it driven by categories like food, gas or rent?

We think it's broad-based. We think it's all those things that you just talked about, Mark. The majority of our borrowers, they rent, they don't own their home. Certainly, the increase in rents that we've seen across the country is impacting them. Increase in fuel, which, thankfully, we're starting to see that come back down now, 12 consecutive weeks of declining gas prices and certainly, the increases in food. So all 3 of those things resulted in that portion of the portfolio, just getting sweet and having to prioritize their payments differently in ways that I certainly understand. They prioritize putting food on the table, keeping a roof over their heads and making sure they could put gas in the car to get to work.

Okay. I know it's only been a few weeks since you last reported, but any kind of incremental changes you're observing in the data since then on the credit performance?

Well, we're looking forward to the next earnings call, as you know, because we talked about this after the last call. What we're in essence doing now is we're running the same playbook that we ran during the pandemic, which we thought we executed really, really well. What that means specifically is we've tightened the credit box. And in the next earnings call, we're going to provide more transparency and more detail on early delinquency performance, specifically first payment defaults and some of the early delinquency buckets. So we're looking forward to sharing that information. What I can share today is in the securitization disclosures that are on the investor part of our website, you'll see that in August, the 15- to 29-day bucket, though still elevated relative to a year ago decreased month-over-month in the 30-day bucket, 30 to 59 days, if I remember correctly, were stable relative to last month. So that part of the portfolio, those early rates are already showing this kind of stability and improvement that you would expect from us as we're tightening credit. And as I mentioned, we'll have more to share with the next earnings call.

Okay. And normally, I would think from a seasonality perspective, you'd see the opposite, right, this time of the year to extend which there is seasonality?

That's exactly right. There is quite a bit of seasonality in our business. So as we go into the back half of the year, we normally see delinquencies rise and then they come back down in Q1 of the following year. So it is contrary to the seasonal trend, and it's exactly what we are intending to do as we demonstrate that we've got absolute control over our underwriting, even in this environment.

Okay. So as you alluded to, you have made some underwriting adjustments. Can you just talk more specifically about what you've been doing there?

There are 3 things that we've been doing. Number one, we made adjustments across all parts of the portfolio. So at a high level, we have different models and different approaches for new applicants and for repeat applicants. The one thing that we did was we decreased approval rates, we decreased loan sizes across both new and approval. You can think of that as just tightening the credit box with the models we have. Second thing we did is we started updating our models. For example, we put in place a new model for underwriting or returning portfolio. And that's right now we shifted actually the bulk of our focus and effort from an originations perspective to the returning portfolio. So having an updated model is going to make us even better with that underwriting. Third thing we're doing is introducing brand-new model. So one of the things that we've been able to do is, as part of our application process, we can now look in someone's bank account. And we've, therefore, created a bank transaction model that adds predictive power on top of all the other models we use, and we're ramping up the number of people that we're underwriting using that bank transaction model.

Okay, great. So if the impact of inflation were to get worse or if there were to be kind of a macro downturn, what kind of adjustments can you keep making at this point?

There'll be a few things we would do. Number one, we would continue to shift the portfolio to the returning side. The returning part of the portfolio is the most profitable. It's individuals who are already demonstrated success with our product and pricing structure. They have lower losses, lower cost to acquire, longer terms and more capital. So we just -- we make quite a bit more money on that part of the portfolio. So we would keep shifting the portfolio in that direction. Second thing we would do across any new or returning loans we would adjust the underwriting to ensure that we're focused only on the loans that with a higher inflation or higher cost of debt, anything that we think impacts the economics of the loan, we make adjustments to ensure we're originating profitable loans. I should add, by the way, we already made pricing adjustments. We disclosed this in the last call. So as these pricing adjustments work their way through the portfolio, we should increase our yield by 130 basis points, which is also going to help us right now.

Okay, got it. I mean, my next question is what are the other results that you can see from underwriting refinements and what's the outlook for credit in 2023? Assuming it's too early for the positive inflection you saw in August, early DQs to be impacted by that, right? So is there anything that you can see yet as kind of a forward look on the impact of changes you've been making?

Well, when we think about 2023, the average life of our portfolio is less than a year. So the loans we're originating now will make up the bulk of the portfolio next year. So though we recognize that we're going to have to work through about 2 quarters of elevated delinquencies and charge-offs we're actually very optimistic and very bullish about 2023 based on the early delinquency trends that we're seeing in the loans we're originating today.

Okay, got it. Can you talk about what kind of impact your underwriting refinements will have on originations? And do you need to -- what are you going to need to see to want to open the credit box back up again?

Our top 2 priorities right now are demonstrating new investors that we're creating high-quality loans, right? So that will come with the transparency and visibility of the credit numbers that we'll share. Priority number 2 is profitability. And originations is a part of that, but we really think of originations as being in service to those 2 things, not really a goal in and of themselves. So in our last earnings, for example, we lowered our originations guidance from about $3.45 billion to $3.5 billion, which was the guidance we provided for the year. We lowered that to $3.15 billion to $3.18 billion. So we absolutely recognize that in this environment, we're not rewarded for growth. We're rewarded really for good credit performance and profitability. So we'll make any adjustments that we need to on the origination side to get the quality credit outcomes that we're looking for. Did I get to both parts of your question? There might even the second part.

Yes. Well, I guess, yes, the second part is what do you need to see before you're willing to open up the credit box again?

So there were a couple of things we'd want to see. Number one, we want to get our losses back to the 7% to 9% range. So I mentioned for the year, I mentioned Q3 was 8.6% -- I'm sorry, Q2 was 8.6%. Q3, we expect about 9.8%, plus or minus 15 basis points. And then for the year, we expect 9.6% plus or minus 15 basis points. So we're a bit outside of the 7% to 9% that we target. So the first thing we'd want to see before we start leaning into originations much more is we'd like to get back to that 7% to 9% range. That would be number one. Number 2, we want to see inflation start to come down. The numbers shared today, I think, indicate that it's going to be some time before that happens. Although there were year-over-year improvements, they were modest at best. So we think it's going to take some time for that to come down. And number 3, we'd like to see the Fed start to ease back on rate increases. So those are really the 3 things that we'd like to see.

Okay. So can you talk about just overall demand for loans from the customers right now? How is that trending?

I'm pleased with demand. Even with a strong job market, like the one that we have today, inflationary pressures mean that at the margins, people could use more capital, right? So we're really pleased with the demand that we're getting. In fact, a lot of the work that we've done over the last year from a strategy perspective is increasing the top of the funnel. We've expanded into 30 states. We've got a Lending-as-a-Service program that gives us more channels and therefore, more applicants that we get to see. So demand is not something that we're worried about right now. We're seeing healthy demand.

Okay. And then as you go through that demand, how do you fare out borrowers who may be more kind of credit seeking behavior because they're stressed more and types loans you probably don't want and the ones that you do at this point in the cycle?

From an underwriting perspective, we verify income, it doesn't matter if it's the first time we've seen someone or the fifth time. So one of the things that we do is we ensure that someone is going to have the ability to pay from an income perspective. Number 2, from a -- again, from an underwriting perspective, we'll look at someone's credit score. We pulled the full credit file, and then we create a proprietary score based on that. We then create another score, which is the alternative data score and that's all based on data sources that are outside of the bureau. So that's already 3 dimensions, if you will, and then we add the bank transaction model score that I was talking about earlier. So all of those views give us a sense of someone's ability and willingness to pay based on what we see in the bureaus based on a lot of other data outside of that and especially as we shift to the returning portfolio based on their own payment and delinquency behavior on their prior loans.

Okay, great. Turning to competition. What are you seeing there? And what does the competitive intensity feel like?

We continue to be really well-positioned from a competitive perspective. When it comes to, say, small dollar lenders, specialty lenders, we know that based on some work done by a group called the Financial Health Network, what someone pays us in interest in fees is about one-fifth of what they typically pay someone else, and it can be payday is 9x more expensive than we are. So we feel that when we're competing, especially in these new states where some companies are having to deal with us the first time we're well-positioned. In addition to that, I think as places like Upstart and others pull back, it means we're starting to see someone with a slightly better credit profile applying for credit from us. So I like where we're positioned competitively.

And so you -- I mean, I assume you're generally just seeing competitors pull back at this point in the cycle.

That's right.

Okay. And so the net-net, when you think about demand remaining strong, the environment uncertainty aside is relatively favorable for originating loans.

That's right. That's right. We think we're in a position right now where we can be very selective, and that's exactly where we want to be going back to your question about originations. We do know we can grow the portfolio through a focus on just a returning borrower. To give you a sense, a new borrower on average gets about $3,100 in capital. A returning borrower gets $5,100. So simply focusing on the new borrowers we've acquired in the last year gives us a chance to grow the portfolio because of that increase in average loan size.

Okay. Just thinking, how do you think about the risk in your portfolio from both any kind of geographic concentrations you may have, industry concentrations as you think about the potential risk from rising unemployment.

Yes. So thankfully, when we think about rising unemployment, the job market is incredibly robust. It's not that long ago that we thought of 5% is the natural unemployment rate. So we think there's still opportunity for unemployment to move up without impacting the way that we underwrite or certainly the patterns that we've seen historically there. So we're not concerned about that, even though we understand the Fed is willing to trade some unemployment to get their arms around inflation. So no worries there. From a geographic concentration perspective, the entry into 30 new states means that we're diversifying the portfolio more and more. And then from an industry perspective, our portfolio is a cross-section of kind of employment sectors. So we don't have really any meaningful concentration from an industry perspective either.

Okay, got it. I wanted to switch gears and talk about strategic initiatives. How is your pivot to more digital versus physical branches going?

We think that's going incredibly well. We started working on our mobile capabilities in 2015, if I remember correctly. So when the pandemic hit, we were already well along on that journey. We had full mobile application and servicing capabilities. So what we saw during the pandemic was consistent with the rest of the business world. Our customer base shifted to digital. Now over 70% of our originations come via digital channels, purely digital. So that is the number one channel that is by far the fastest-growing channel in the one where we're investing the most capital. We do have physical locations. We have 200 of them. We like the member that goes there. Our locations are small and highly profitable, but we're really pleased with how digital is going for us as a business. So much so that, as you know, in December of last year, we acquired a neo banking platform called Digit and that's only adding to our digital capabilities right now.

Okay. And how does how does that shift towards more digital originations impact credit? I assume it's a slightly higher risk when you're originating particularly a fully digital loan versus the customer who comes into one of your branches?

I mean there is a bit more even when I was at Walmart.com because I spent 9 years at Walmart before going to Oportun, we always saw a bit more fraud in the online channel than in the physical channel. But when I talk about really going all the way back to 2015 and starting our digital journey, outside of recessions, we were in that 7% to 9% range very consistently. So we're really comfortable with the quality of loans that we originate through the mobile channel.

Okay. And I'm assuming the cost savings more than offset the incremental fraud risk.

They do. They do. There's -- obviously, there's cost savings in terms of no physical location, no staffing, none of the turnover challenges that exist today in this market. So it is by far, like I said, not only the dominant channel but the fastest-growing channel. We announced in May that we were closing 27 of our own locations and that that was going to generate $20 million in savings over the next 4 years. So we're actively trying to figure out how can we deploy more capital to these digital channels. And it's really in service to our vision to be a one-stop shop. When we think about SoFi, SoFi has said that they want to be the financial services provider to everyone who's wealthy. And that's great. We're happy to have them do that because that leaves the majority of Americans to us. And we think really providing all of the products that someone needs in a really convenient fashion means having to be great at digital, and that's what we're committed to doing.

Okay. Digital expansion aside, how is your geographic expansion progressing? I think you're in 42 states currently in personal loans. Can you give an update on kind of where you are there?

Yes. We're pleased with how that went. So those 30 states or so that we added were through a partnership with Password formerly Medibank. So that gave us the opportunity to really expand to all these states, look for brand-new customers, take share from competitors who are more expensive than we are. So we're pleased with how that's going. We're not focused really on adding many more states. There's probably a handful left. The marginal cost because it is through the partnership with Medibank is really low. But right now, especially in this environment, we're much more focused on growth through the returning portfolio as opposed to the new portfolio. Maybe to add a data point on that. Historically, before the expansion into these states, about 40% of loans went to new borrowers. As we expanded into these new states, and we're focused on that growth opportunity, that 40% grew to 51% so over half of the loans were going to new borrowers. In July, when we started to see the increase in delinquencies that we've been talking about, we drove the percentage of loans going to new borrowers down to 35%. So that's one way to quantify our focus on the returning portfolio.

Okay, great. I'll pause here and move to the audience response section. We've got a number of questions. If those of you who are out there willing to participate, please grab the controller in front of you and register a response to these questions. First one, what factor do you view as most likely to determine whether Oportun outperforms over the next year? One, accelerating originations?

On improving profitability. So you asked earlier, Mark, about the seasonality of our business. Not only do we historically see seasonal trends in delinquencies but because demand is so much stronger in the back half of the year, our OpEx goes up to support that demand. This year, we decided we're going to keep OpEx flat to the first half of the year to both demonstrate the stabilization of credit, which this is our third recession if we're already in one that we've navigated. So we know the playbook. We've got confidence that we know how to do it, and we look forward to showing that. But the thing that goes hand in hand, we think with the stabilization of credit is improving profitability.

Okay. Next question, please. What do you view is the biggest risk to shares selling originations, more volatile fair value marks, normalizing credit regulatory risk, 5 other? Okay. 60% said normalizing credit. Great.

Can I talk about the other 2? Is that okay?

Yes, sure.

Happy to take questions, by the way. So fair value, I appreciate the fact that it looks like someone voted there. What's a little tricky about fair value, we've talked about this is that a lot of those factors are outside of our control, right? Yields today shifted quite a bit. And all of those things impact the fair value mark. We look at the change in fair value, both for the debt and using for the loans with a desire to have those offset each other. And before the last couple of years, when we looked at the history, that's exactly what they did, but these extraordinary times did mean some volatility there. One of the things that people can look at is the adjusted EBITDA. We don't guide to that number because we know that analysts and our investors are much more interested in adjusted net income. But that's one of the things that we use internally to just try to manage the volatility that exists with fair value. Adjusted EBITDA doesn't have that noise when it comes to regulatory risk.

Okay, great. Next question, please. Over the next year, would you expect your position in Oportun to, one, increase; two, decrease; three, remain the same? Okay, 50% increase. So thank you all for participating in that. At this point, I want to open it up to the audience for questions if you have any. If not, I'm happy to keep going.

We can hear you. I'm not sure it's on, but we can hear you.

Is what happened in the last quarter, a function of inflation is a function of a changing world. Is it a function of maybe trying to do too many things, roll out too many products, change too many things I think we're all excited about. But what was the -- looking back with the benefit of some hindsight what were the root causes for the degradation in the performance of that bucket?

Inflation, definitely. We've looked at -- as you can imagine, we had a Board meeting a couple of weeks ago. So we've looked at what happened in terms of roll rates and delinquencies in a lot of different ways. And the increases that we saw in roll rates, we just -- we haven't seen anything like that. They defied all seasonal patterns, anything that we've seen in the portfolio. Our Chief Credit Officer has been with us since 2008, right? So not only do we benefit from a lot of cutting-edge technology, but a really steady experienced hand who spent his whole career in financial services. There was nothing that was geographic in nature, nothing that was industry-specific. So we really feel that it was the effects of inflation squeezing those borrowers that just didn't have a lot of cushion in their lives.

And I'll actually just sort of repeat some of the same questions, Mark had earlier. Was that -- is that more gasoline? Is that more rent? You mentioned that your borrowers are renters, whether empirically or you've got, where do you think the problem was, is?

So I'll give you a sense of what also gives me this particular perspective I'm going to share with you. One of our Slack channels is one in which the collectors post the sampling of the conversations that we're having, right? So it gives us a chance not just to look at the numbers and spreadsheets, but to get a sense of what is it that they're hearing and what's happening. So what we think happened is based on the stories that we've seen, and we get new ones every day is people were doing the best that they could to manage, and then there was some sort of extra disruption. So they got COVID, right, and they lost hours for the next 2 weeks and just couldn't stay on top of their payments. Someone in their family got sick, maybe they got COVID, right? They had to take care of their family member, hours got cut. A hospital bill that was -- it's just something. And while they were doing everything they could stay on top of their payments, those who had little cash flow, right, had to deal with that extra item, whatever it was, and it was just too much at that point. That was the breaking point. But we don't see anything that is just a question of either just rent or just gas or just food.

And this is a bottom cohort in terms of you mentioned cash flow. Is that also income?

Yes, it would probably correlate to income. That's right.

Raul, just to follow up on that last point. What is the implication -- the fact that you're seeing higher delinquencies, charge-offs on borrowers who are having either inflationary pressures, temporary disruptions, not permanent disruptions in income. What are the implications for the recoveries on some of these charge-off balances? I mean are these still potentially customers and good standing for whom you might ultimately recover some of the balances that you charge off?

We normally recover about 10% of the balances. So we would expect that to stay about the same. Historically, that's been very stable. Several states have announced stimulus measures, and that's not included in any of our guidance. So there's a chance, for example, in California, as those checks start to come out in October, there's a chance that we'll be able to get some of that money back in recovery.

Okay, got it. Another question up front?

[indiscernible] extent is your business less cyclical in terms of benefiting for some trade down into different customers who might not have used your services in better times, but as you start getting to a less favorable economic environment or a more challenging credit environment they start -- they turn to your services for -- credit?

We see a bit of that, that as others pull back that we do see a benefit, but that's not what drives the bulk of our demand. The bulk of our demand is just really driven by the fact that if you're a typical blue collar American, it's just -- it's really hard to get ahead, right? Some people say that there are individuals that are LMI that live in a constant recession, where even when there's not these inflationary pressures the car doesn't start and you need a loan or you're going to buy a refrigerator, you need a loan. So that's really what's driven our demand over the years. When others pull back, that's just more demand on top of what we normally see, but that's not what drives our business. We really see very consistent demand. And part of what drove the growth because we had a couple of quarters where we reported triple-digit originations growth was moving into these brand-new markets where individuals had not had access to our product.

[indiscernible]

Okay. So back in 2008, 2009, we saw losses increase 120 basis points. So it was really quite modest. If I remember correctly, it may have been from 7.7% to 8.9%, something like that. The business was obviously much smaller then, but you may recall that during the Great Financial Crisis, one of the things that people learned was there were portions of near prime or even subprime that performed better than prime, right, because there wasn't as much exposure to credit. So that's one of the things that we have benefited from is the customers that we serve generally haven't had a lot of access to credit, so they don't really get over their skis. In the pandemic, that one was obviously a bit different. But we also felt like we saw pretty good stability there. The challenge for our business is any time there's a huge and sudden change in employment, that's when things get most difficult. And certainly, that happened during the pandemic. That hasn't happened now, which is why we only increased the guidance for losses by 60 basis points if you adjust for the growth math. And one of the things that still gives us confidence when we look into 2023 is the fact that the job market is so robust.

We got one more up front.

Yes. I want to -- I think something that's being missed a little bit in these discussions is sort of the increasing importance actually of the liability side of the balance sheet over, call it, the last year, I think Upstart has run into huge trouble because structure of its liability side of the balance sheet. And I could point to one or 2 other competitors where actually, it's not just credit, it's funding that's becoming more and more of the issue. So could you update or could you refresh a little bit on what you're seeing in that side of the market as well as sort of the thoughts around getting a banking license?

Absolutely. So we haven't had the challenges that Upstart has had. So we did a $400 million securitization in May. We did another $400 million securitization in July. Both were oversubscribed. We think a lot of that is our track record. We did our first securitization in 2013. So we're well-established in the securitization market. On the warehouse side, as of Q2, we still had $200 million available on the warehouse. So from a funding perspective, when we think about the guidance we provided for originations, we're comfortable with the liquidity that we've got available. To your point, we do desire to be a bank. We had actually applied to be a bank. And as we got close to finishing the Digit application, we withdrew our application because we knew we were going to have to update both the bank charter and the business plan. We're not ready to get back in line because right now, it looks like the line isn't moving at all. The OCC doesn't seem to be processing those. But once we get a sense that there's movement again, we will apply to be a bank because when we do think about providing the 3 credit products we have and the 4 products that we acquired through the Digit acquisition, we think being a bank is actually the best platform for us. And to your point, we think one of the things that helps us is just the risk-adjusted yields that we have in the business, and that's very different than an Upstart prosper over the years at times has run into similar challenges. So the part of the market that we serve gives us a chance to both save our members a lot of money and provide an attractive yield to our investors. Thank you.

Okay. Moving on, just in terms of new products, you're expanding into ancillary products like secured loans and credit cards. Can you give an update on the credit card rollout and how that's progressing?

Yes. So this is part of being that one-stop shop. Our Net Promoter Scores are higher than the scores. The risk gets higher than the scores even that Apple gets. So we know we've got a customer base that loves dealing with us. And our research indicated that they wanted more products. So in December of 2019, we introduced a credit card right before the pandemic, and I'm really pleased with how that's gone. We feel we've got product market fit. Our portfolio at the end of Q2 was $119 million. We've got about 200,000 people walking around with an Oportun credit card. So we feel really good about the daily role we can play in their lives. Secured personal loans, we acquired a company and then use their IP to build a secured personal loan offering. OneMain, we think has done a great job with that offering, and we certainly think we can build a multibillion-dollar business over time there as well. That portfolio at the end of Q2 was $100 million. In this environment, we are, however, focused on the most profitable, most predictable growth that we can deliver from a credit perspective. So we reduced originations expectations for both of those products, and we announced that we were lowering our target for receivables to $130 million for each of those products. But I'm pleased with how they're going. And as the economy finds its footing, what we'll do is we'll restart our growth agenda across both personal loans and those other products.

Okay. I certainly understand the inclination to pull back in a time of uncertainty. The one thing that as you think about OneMain you referenced, one of the things they're using the secured personal loan forwards, it's actually a nice alternative. You got somebody coming in. It's an uncertain environment. I may not want to give them an unsecured loan, but if they put collateral up -- how do you think about that as kind of a complement to the slightly riskier unsecured lending business?

We love that strategy. We don't have secured personal loans in all of our states yet, so we wouldn't be able to execute that strategy quite the way that they have. That is part of our road map is to go ahead and introduce it in all of our states so that we do have the opportunity to do that. We're just not there today. And just going back to the comment I made earlier, when we looked at the poll about both credit and profitability as we think about managing profitability in particular, as we get to '23 and think about '24, one of the things that we're committed to doing is the slowing down overall OpEx. So as part of introducing those products in late 2019 and 2020, we did increase OpEx as we were staffing up those groups working on those platforms, but we think that those additions now serve as a good foundation for future years. So when we think about profitability in future years, we expect less charge-offs, origination growth through the returning portfolio and then slower OpEx will drive higher profitability in '23 and '24.

Okay. And how should we think about the customer profiles for those 2 different products and how they may differ from your existing customer base?

Pretty much the same customer. So right now, when we think about who applies for our products, you can think of it as someone with a low prime score to people even that have no credit score. Average income now is getting close to about $50,000. So every year, we start to see our customer be a bit more affluent, have slightly better credit scores, but we don't see meaningful differences between the 3 products. We think of it as acquiring the same customer. We have multiple doors available to them, and we're okay with them coming through any of the doors.

Okay. One last question, if there are none from the audience. You also have a Lending-as-a-Service initiative. Can you just give an update there?

Thrilled with how that's going. So really think of that as using the same IP, same underwriting engine. We control all of the underwriting with our partners. A year ago, we provided this underwriting capability in 108 locations. At the end of Q2, it was 294 locations. We don't pay any of the rent. We don't pay any of the staffing. We only pay when a loan is dispersed, and the cost is actually lower than our overall TAC. So it's very accretive to the business. And again, we fully control the underwriting, and we expect to have 500 locations by the end of the year. As the third-party network grows, that gives us an opportunity to continue to think about the size of our own network and whether or not we can close stores and free up that capital to improve profitability or to invest it in other parts of the business so really pleased with that.

Okay, excellent. I think we'll need to end on that note, but please join me in thanking Raul for all of his insights.