BM Technologies, Inc. (AMEX:BMTX) Q1 2023 Earnings Call Transcript

BM Technologies, Inc. (AMEX:BMTX) Q1 2023 Earnings Call Transcript May 22, 2023

BM Technologies, Inc. beats earnings expectations. Reported EPS is $0.13, expectations were $-0.5.

Operator: Good afternoon, everyone, and welcome to the BM Technologies First Quarter 2023 Earnings Call. Please note that this event is being recorded. [Operator Instructions] At this time, I’d like to turn the conference over to Brian Prenoveau, Investor Relations for BM Technologies. Please go ahead, Brian.

Brian Prenoveau: Thank you, operator, and good afternoon, everyone. Thank you for joining us for BM Technologies first quarter earnings call. Our earnings release and investor presentation were filed earlier this afternoon and both are posted on the Investor Relations page of the company’s website at ir.bmtxinc.com. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities law.

Please refer to our SEC filings, including our Form 10-K and 10-Qs for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of the website. At this time, it is my pleasure to turn the call over to Luvleen Sidhu, BM Technologies CEO. Luvleen?

Luvleen Sidhu: Thank you, Brian, and good afternoon, everyone. On today’s call, we’ll discuss our first quarter financial results and provide updates on various initiatives. Additionally, we want to introduce you to our co-CEO Raj Singh. To begin, it is clear that the last six to nine months have been quite volatile for the broader market and specifically for fintech companies. The effects of unprecedented interest rate increases, changes in the regulatory landscape, pressure on fintech valuations and the end of unprecedented stimulus into the system, just to name a few, have all impacted our business. These changes have forced us to closely examine and, in some ways, reposition our business to adapt to the realities of today.

As we look back on the last few months, we are grateful for this change as we believe it is helping us build a stronger foundation for growth and increased shareholder value into the future. We will talk more about some of these changes throughout our call today. Before getting into that, I would like to briefly mention some financial highlights from the quarter. Operating revenues totaled $13.5 million, average service deposits totaled $1.2 billion and debit card spend totaled $0.8 billion, a 16% increase from fourth quarter 2022. As mentioned in our earnings release, first quarter 2023 tracked very closely to our expectations. Our first quarter results were temporarily negatively impacted by the loss of Durbin Exempt Interchange until we transition our higher education business to a new sponsor bank.

Our spend and deposit metrics for this business have improved quarter-over-quarter and these positive fundamentals will drive revenue growth once we transition to our new partner bank. Regulatory review of our partnership with First Carolina Bank is underway, and we continue to receive positive progress to date. I would now like to recap some of the significant steps we took in the first quarter to help strengthen our business. At the top of the year, we focused on establishing key agreements and renewals with Customers Bank, First Carolina Bank and our largest BaaS partnership to position our company for continued growth and margin expansion in today’s high rate environment. Beginning in the second quarter, we expect servicing fee margins to improve by over 150 basis points at the current Fed funds rate due to our new variable rate deposit servicing agreements.

Additionally, significant work has been done to advance our profit enhancement plan to ensure profitability, positive cash flow and reinforce our commitment to being a lean and efficient fintech. We are on track to realize the benefits of our profit enhancement plan, with the goal of cutting core operating costs by $15 million in 2023. Initiatives completed during the first quarter collectively comprised nearly 50% of our targeted $15 million cost savings goal that will be realized throughout the remainder of 2023. Lastly, adding Raj as our co-CEO has helped strengthen our team, and we see significant new opportunities on the horizon for our company. In addition to investing in product upgrades to increase customer adoption and retention, we are also focusing on improving productivity and operational effectiveness throughout the business.

We are accomplishing this through better leverage of technology and automation, to streamline operations and the expanded use of data-driven decisioning. We believe these investments will lead to financial improvements, enhanced customer experiences and continued value creation for our shareholders. I will now the call over to our CFO, Jim Dullinger, to review our financial performance during the quarter. Jim?

Jim Dullinger: Thank you, Luvleen. During the first quarter of 2023, the company earned $13.5 million of operating revenue, down for both the prior quarter of $15.7 million and the prior year $25 million. Servicing fees for the first quarter of 2023 totaled $6.6 million, while interchange and card revenue totaled $3.1 million for the same period. These revenues were negatively impacted by reduced deposit servicing revenue associated with our current fixed rate agreements and the temporary loss of Durbin-exempt interchange fees both limiting factors will be addressed in the near term. Beginning March 31, we expect service fee margins to improve by over 150 basis points at the current fed fund rates due to the impact of the new variable rate deposit servicing agreements.

In addition, interchange fees will significantly increase upon the planned transition to a new Durbin-exempt partner bank in the second half of 2023. Average service deposits totaled $1.2 billion for the first quarter of 2023, down slightly from the $1.4 billion for the fourth quarter of 2022 and down significantly from the stimulus-elevated balance of $2.1 billion for the first quarter in 2022. Most of this balance reduction occurred within our BaaS vertical. As discussed in our prior call, we strategically allowed our highly interest rate-sensitive deposit accounts to run off in late 2022 and year-to-date 2023 versus repricing at unprofitable levels. We anticipate this runoff to moderate as interest rates begin to peak with deposit growth resuming in late 2023 and beyond.

Within our higher education vertical, average service deposits and organic deposits increased 9% and 22%, respectively, from the fourth quarter of 2022, indicating continuing higher engagement of our student customer base. Deposits for 90-day active account at March 31 totaled $1,947 within our higher education vertical and $5,563 was in our BaaS vertical, both comparing favorably to market averages. Spend totaled $787 million for the first quarter of 2023, up significantly from $679 million for the fourth quarter of 2022 and down slightly from $819 million for the first quarter of 2022. Spend for 90-day active accounts increased both in total and for each vertical during the first quarter of 2023, with $2,027 of spend per active accounts during the first quarter of 2023; $1,713 of spend per active account during the fourth quarter of 2022; and $1,888 of spend per active account during the first quarter of 2022.

Overall, we continue to see spend in our higher education vertical normalizing in 2023 to pre-COVID levels. Of note, deposit and spend metrics for our higher education vertical have improved quarter-over-quarter and these positive fundamentals will drive significantly higher deposit servicing revenue and interchange revenue once we realize the benefits of the new variable rate deposit servicing agreements and transition to our new partner bank with Durbin-exempt interchange fees. Annualized debit card spend for highly active BaaS users, those with both direct deposits and a minimum of five customer-driven transactions per month, was approximately $18,850 during the first quarter of 2023. This very attractive cohort makes up approximately 21% of active accounts at March 31, 2023, as compared to 18% in the year ago period.

Account season university fees totaled $3.6 million for the first quarter of 2023, up from $3.4 million for the fourth quarter of 2022 and down from $4.2 million for the first quarter of 2022. There were approximately 105,000 new account sign-ups during the first quarter of 2023. In our higher education vertical, new checking account sign-ups improved 12% year-over-year. With our continued strategic focus in 2023, we anticipate continued growth in both the number of active accounts and account activity. Two new colleges and universities signed on with BMTX during the first quarter of 2023, providing over 70,000 additional students, access to BankMobile disbursements and the BankMobile Vibe checking account. This builds upon our approximately 750 existing college and university campus relationships.

We processed over $4 billion of student financial aid refund disbursements during the first quarter of 2023 as compared to $1.9 billion during the fourth quarter of 2022 and $4.9 billion during the first quarter of 2022. Core operating expenses totaled $15.4 million for the first quarter of 2023 comparing favorably to the $17.6 million incurred for the fourth quarter of 2022 and a $15.8 million incurred for the first quarter of 2022, with sequential quarterly reductions since the third quarter of 2022. As previously noted by Luvleen, we completed cost reductions under our profit enhancement plan during the first quarter of 2023, yielding approximately $7 million of anticipated annualized cost savings. The company is actively and aggressively implementing multiple operational efficiency improvements throughout its business operations yield the expected profit enhancement plan savings totaling $15 million for 2023.

The full year 2023 charges to achieve the projected annual savings remain within the previously announced range of $1.5 million to $3 million with approximately $819,000 of these charges incurred during the first quarter of 2023. Core EBITDA totaled negative $1.9 million for the first quarter of 2023, flat with the fourth quarter of 2022 and down from the $9.2million for the first quarter of 2022. Substantially, all of this year-over-year decrease is driven by the reduction in revenue for the factors – I noted a moment ago, with expected improvement beginning in the second quarter of 2023. We continue to expect core EBITDA results for the first half of 2023 to be in line with the second half of 2022. And for full year 2023, we estimate core EBITDA of approximately $14 million under the expectation that we will target the transfer of our higher education customer deposits to the First Carolina Bank beginning on or about July 1.

Liquidity remained strong with $10.9 million of cash, $12.6 million of working capital and no debt at March 31. Use of cash during the first quarter of 2023 included $3.2 million for non-recurring items. We expect our change in cash to correlate closely with our change in core EBITDA over the remainder of 2023. With that update, we’d like to turn the call back to Luvleen. Luvleen?

Luvleen Sidhu: Thanks, Jim. These past few months have also given us the opportunity to come together as a new management team with a renewed focus on our business. Many of the steps we’ve taken over the past quarter and continue to execute are foundation building and transformative at the same time. Raj and I would like to share with you some of the initiatives we are working on and also have him introduce himself to all of you. Raj?

Raj Singh: Good afternoon, and thank you, everyone, for joining. I’m excited to introduce myself to all of you for the first time. As you know, I’ve been – in the co-CEO role for almost two months now and have been closely partnering with Luvleen and the rest of our team to integrate quickly and implement a variety of strategic initiatives. It’s been an absolute pleasure getting to know the broader team of the company and meeting and collaborating with so many talented and dedicated individuals. The question I’m asked most often is why did, I join BMTX? It’s also a question. I’m quite passionate about answering. This company is incredibly unique, particularly among the landscape of other fintech companies. We are extremely fortunate to have a gigantic sales channel available to us.

We don’t need to look beyond our existing BaaS partnership or our student business to have access to tens of millions of potential account holders. Most peers are struggling to identify and win relationships to gain us to a scaled customer opportunity set. We are currently sitting on a massive pool and continue to work to expand that pool to other potential customers. The challenge ahead of us is to improve our products, expand our product offerings, identify strategic partnerships or tuck-in acquisitions and develop marketing strategies to increase growth through adoption and retention. All these items are actively being focused on, and I believe results will follow. So the answer is simple. We have an incredibly large opportunity within our existing channels and still have plenty of wood to chop to significantly propel our business even further.

All this said, there is work ahead for our team, and we are up for the challenge. As Luvleen and Jim noted, there is an active focus on identifying and implementing operational efficiencies to lower costs. Some have been referenced in prior calls, but there remain several areas that are right for automation, technology enhancements, leveraging AI and machine-based learning and process improvements that can improve functionality and efficiency. We have identified multiple areas to improve within the business and are actively working in that direction. Under the right set of outcomes, this will result in higher quality output across the organization, improved efficiency and improved financial performance. Our consistent message across all areas is to leverage automation and the implementation of additional systems that results in faster and better data that will drive our decisions.

Data-driven decision-making and process improvement is one of our mantras to make gains we are striving for over the next six to 18 months, both in revenue generation and operations. These significant moves will take time to reap benefits, but we do expect to be – begin realizing these benefits by the end of 2023. I appreciate all of your support, and you taking the time to join this call. I look forward to work with our executive team as we continue to execute our plan for long-term shareholder value creation. I’ll turn the call back to Luvleen.

Luvleen Sidhu: Thank you, Raj. It’s been great working with Raj so far on a daily basis. His background and experience are being immediately felt by the team with new ideas for improvements in products, user experience and operations. I’m truly excited about what’s to come. I want to end by thanking all of our dedicated employees who are working tirelessly through credit tumultuous market and our investors who continue to support us. Big changes for organizations are never easy and often take time. However, we see an exciting future driven by a massive opportunity set that to-date remains largely untapped, innovative solutions to everyday banking needs has been at the core of what we do. We are excited about the changes in the company and the direction we are heading. Thank you for your time today, and I’ll return the call to the operator for your questions.

Q&A Session

Operator: Thank you [Operator Instructions]. We’ll take our first question from Brian Dobson with Chardan Capital Markets.

Luvleen Sidhu: Hi Brian.

Brian Dobson: Yes, hey how are you? Thanks for taking my question. So in your prepared remarks, you mentioned that the management team is now considering a new, call it, data-driven or data enhanced decision-making process. Do you think that you could elaborate on that a little bit?

Luvleen Sidhu: Sure. I think the point that we’re trying to make here, Brian, is that overall there is a renewed sense of looking at the efficiency. So when we talked at the end of the year and we pivoted from a bank model, we reoriented the market to really think of us as lean and efficient fintech. And that really is a multitude of different strategies that we’ve implemented all the way from looking at our people and having the right people in the right places and then looking downwards to operational efficiencies, which includes process improvements, automation and leveraging Baas, AI and machine learning to really help with all of that and additionally, to your question, data. So as a financial services company, we’re one of the unique companies that have access to a myriad of different data sources and a wealth and depth of data.

And so, we just are getting better and better at extracting that data and being able to utilize and leverage it in ways that continue to create operational efficiencies for the company. And in the future, also on the revenue side, how can we use that to better monetize as well. So I hope that’s helpful.

Brian Dobson: Yes, that is, thank you. And as you look at over the broader landscape, in terms of banking-as-a-service, how does the potential viewpoint of some of your, call it, new customers or potential customers changed over the past few months? Do you find them still as eager to engage in that type of business?

Luvleen Sidhu: Yes. No, I appreciate that question. I think that as a business, we continue to explore BaaS as a very interesting growth opportunity. And I think that the upside potential for BaaS is actually huge. But I think that what’s really important for us to be authentic about with the market is that the reality of many players that participate in the Banking-as-a-Service space actually operate in an unprofitable way. And Banking-as-a-Service has to be structured in a way and you have to find the right partners to really strike win-win deals where they can be profitable if not on day one, at quite quickly thereafter with scale. And so, we continue to see interest. We continue to have a pipeline, a robust one that we are working with our partner, Helix, on.

But as I said before, we are only looking for deals that can be structured in a win-win way and particularly where our program management and our technology platform can be a key differentiator in that deal. And so, we’re really excited about the opportunity. As I said, it’s quite untapped, but we also have to be grounded in the reality that we will only pick deals that are profitable or have a short road map to getting there.

Brian Dobson: Yes, excellent thanks that’s very helpful.

Luvleen Sidhu: Thank you.

Operator: We’ll take our next question from Mike Grondahl with Northland Securities.

Mike Grondahl: Hi, thank you guys and good afternoon. The first question, I think you guys said that from the deposit servicing agreement, you’re going to benefit a 150 basis point in 2Q. Is that like April 1? First, could you just clarify that statement?

Jim Dullinger: Yes, Mike, this is Jim. How are you?

Mike Grondahl: Good.

Jim Dullinger: April 1 effective date is the effective date of new agreements. And that 150 basis point expected improvement in margin is based upon the current rate. So you are correct in your statement.

Mike Grondahl: Got it. So I mean, I think – but I want to bounce that off you, Jim. If you had $1.2 billion in deposits, all of 2Q, 150 basis points on $1.2 billion of deposits. It’s like $17 million annualized, you’ll see like $4.25 million of servicing revenue would be the potential, all things being equal 2Q benefit. Is that correct?

Jim Dullinger: Yes. I think the way to think about it, Mike, is if we look at in the current rate environment, as our margins would increase by the 150 basis points, again, beginning with Q2 across the entire portfolio. And again, without getting into the pricing specifics is that would certainly yield that benefit for the remainder of fiscal year 2023.

Luvleen Sidhu: As long as rates, remain at their current levels.

Jim Dullinger: Right.

Mike Grondahl: Got it. And then help me understand, you get – assuming you get said approval by July 1, and I think there is another step-up tied to the deposit servicing agreement, the one with First Carolina Bank. What is the step-up July 1 then that we need to contemplate?

Luvleen Sidhu: So, we’re not breaking up individually, Mike, between deposit servicing fee and interchange. But on an aggregate level, I would like to conservatively estimate that for every quarter, at least $2 million of revenue enhancement by moving over to First Carolina Bank. And the caveat, to that is any – significant fluctuations in deposit and spend relative to where we are today.

Mike Grondahl: Okay. And so just so I’m clear, that – the July 1 – that’s incremental to the 150 basis points we’re talking about?

Luvleen Sidhu: I wouldn’t say no – we’re not splitting it apart in that way. I gave you an aggregate number that at least $2 million a quarter of benefit primarily from the interchange. But again, we’re not giving actual pricing on the deposit side. So I can’t give you a flat out absolute number. But a good proportion of that, a more significant proportion of that is interchange revenue than the cost of revenue.

Mike Grondahl: Got it.

Luvleen Sidhu: Does that make sense, yes?

Mike Grondahl: I think let me try to phrase it, you can tell me. To be safe and to be conservative, this 150 basis points starting in 2Q, it sounds like that captures the benefit for the rest of the year kind of all this stuff inclusive?

Jim Dullinger: I think most of it, Mike. There is incremental benefit coming from the Durbin-exempt interchange. But I think to answer your question, is the number that Luvleen mentioned, the $2 million per quarter, that’s an all-in expectation. Again, that’s at the current rates and the current deposit levels.

Mike Grondahl: Got it. Can you comment the lack of a Durbin exemption in 1Q? What the revenue amount was that you lost out on by not having that?

Luvleen Sidhu: It’s – again, it’s at least $2 million.

Mike Grondahl: Okay.

Luvleen Sidhu: So if you look quarter-over-quarter, our revenue would have increased and that’s not been shown because of the lack of Durbin-exempt interchange.

Jim Dullinger: It’s roughly a 50% cut and break [ph] Mike, is the way to think about it is spent of the Durbin exempt versus the Durbin regulated, so if each of our spend.

Mike Grondahl: Got it.

Jim Dullinger: For Q1 and applied the Q4 level that you could get what our interchange would have been, all other things being equal. It’s kind of the way that I think about it.

Mike Grondahl: Got it. Okay thanks. And then, hey lastly, I know – two questions kind of tied to operating expenses. It sounds like you have achieved $7 million of annualized savings on your way to try to achieve $15 million of annualized savings. The first question is kind of what’s left to get – to go from $7 million to $15 million? And then secondly, once you’ve run out these costs and gotten more efficient, whether it’s GAAP or core, what is that rough goal of operating expenses you’re targeting on a quarterly basis?

Jim Dullinger: Yes. Let me attack your first question first is – so you are correct, the $7 million annualized is where we are in the continuum of achieving the full $15 million for full year 2023. The majority of those costs are people-related costs. And there are multiple other levers and multiple other operational areas that we are currently working and executing upon and will continue to over the remainder of the year. I think as we discussed in our last call, there are a variety of levers. But as you might expect, one of the big levers is obviously working with our third – partners and providers and initiating various procurement strategies with them in order to achieve further savings beyond the people costs we achieved in the first quarter.

Luvleen Sidhu: And Mike, the $70 million in core operating expenses at 12/31/2022 so for the full year, we had – we reported last quarter, right, $70 million of total core operating expenses. So the goal is this year that we see that $15 million reduction in that line item. So that’s how you should quantify it. We’re not ready to kind of give guidance on a quarterly basis. But I want to be able to actualize that for you. And please balance that out with what we’ve been very clear about that there could be charges as it relates to implementing some of these that could be in the range of $1 million to $3 million.

Mike Grondahl: Got it, okay. Thank you.

Operator: We’ll take our next question from Bill Dezellem with Tieton Capital.

Bill Dezellem: Great, thank you. A couple of additional questions please. First of all, relative to the Banking-as-a-Service deposits, would you please talk about the trend throughout the quarter from December 31 forward and through the end of Q1? And then whatever insights you can share from March 31 until today that would also be helpful?

Jim Dullinger: Yes – it’s Jim again. So from a standpoint of our overall deposits, as I think as we mentioned in our last call, is the first quarter is a period of stabilization. By the end of the first half, we expect it overall to be stabilized. And then we anticipate a return to growth in the second half of 2023, and growth will likely come first within the higher education vertical based upon our strategic investments and strategic initiatives. So as you can see from our total deposit numbers, overall, there was a slight reduction from Q4 into Q1, but we expect stabilization to occur by the end of the first half.

Bill Dezellem: And so let me continue with that. Did you see – specifically in the BaaS part of the business that the rate of deposit outflow slow as the quarter progressed then and that then leads to the stabilization in Q2? Or does that stabilization really happen from this point forward, so really the last half of the second quarter?

Raj Singh: This is Raj. That is the interest rate-sensitive portion of the overall portfolio. So, we are going to see higher one-off as it relates to that portion. But I think what Jim is trying to articulate is the rate of runoff has declined and started to stabilize. But we will have to continue to monitor that closely as – we move into the next quarter.

Bill Dezellem: Great, thank you. And then relative to the – student deposits you had organic growth there. What have you been doing that’s leading to that successful organic growth?

Luvleen Sidhu: Sure. So I’ll take that one. We’re just deciding, because we all want to answer your [ph] questions. So for the student business, as I said before, the way that I think about the business is BaaS is very exciting. There’s huge upside potential there. But I wanted to ground everyone in the realities of – there are deals that need to be structured and unique opportunities that come along that can be structured in hopefully, profitable ways, but they’re harder to come between. Well, we have refocused our efforts on in the meantime is really capitalizing and leveraging this awesome student business that we’re so proud to be a part of and is much more under our control and being able to pay the destiny for. And so, we have a huge market of 5 million students that we serve, that’s a replenishing market every single year.

And we’re really mission-driven here, because we want to give students, we’re always in the best interest of students and creating a financial foundation for them that is positive and affordable. So I want to just tell you our mission before getting into some of our tactics. So our tactics is just to name a few. So, on the product side we’re really focusing on unifying to one single technology platform across our business. And so making sure that our student business and that app experience that student has is really equivalent to our most modern, best technology. And so, our goal is by the end of the year that we have that app experience beginning to get into the hands of our students that’s most modern in nature. And it’s also an API-based driven technology platform, which we have on the BaaS side and would be moving to our student side.

So that, we continue to ask our students what are the features, what are the products that could really help financially empower you, and engage with you more and more. And given that it’s an API-based platform, we’ll be able to respond much more quickly to that and over time, have a very customer-centric pipeline of feature enhancements to the product. That’s what we’re also looking at. And then we’re just revamping and reinvesting, as Raj said in his remarks, on the marketing side. So working on leveraging incentives to encourage primary banking relationships. We’re working on communication revamp and segmentation and personalization of communicating to our student population. We’re in the process before year-end to launch some type of rewards-based loyalty program for our students as well.

So there’s a whole list of activities that we’re doing, but I just wanted to give you a flavor of what our marketing product and technology teams here working on.

Bill Dezellem: And that, Luvleen, is on a go-forward basis. How about specifically what was the key driver or were the key drivers in Q1 for the success you had there?

Luvleen Sidhu: So it’s the beginning innings of some of the things that I just said. We also, in all transparency, do have a seasonal business, and Q1 tends to be a stronger quarter for us. And so it was really a mix of both of those things.

Bill Dezellem: Great. Thank you. And then a couple of additional questions. First of all, Luvleen and Raj, how are the two of you splitting the co-CEO responsibilities?

Luvleen Sidhu: Sure. So firstly, I’m so grateful to have Raj as a partner. And as I said in my prepared remarks, his impact is being felt through the organization. And I think the employees, if you ever had a chance to talk to them, they would share that same excitement and enthusiasm for what he’s bringing to the table. But to more directly answer your question, I continue to focus on the vision, the strategy, the innovation and handling our key customer relationships and sales. Raj continues to actually support me in these different functions. But additionally, he has risk, legal, HR, fraud, customer service, reporting to him and he’s really focused on helping us find operational efficiencies as well as revenue opportunities to drive profitability and also opportunistically looking at M&A opportunities for us as well.

Bill Dezellem: Great. Thank you. And then relative to your guidance for the full year, the second half will have how much cost savings built in to those numbers?

Jim Dullinger: Yes. We would expect to achieve the remainder of our $15 million goal over the course of Q2 through the end of the year. I would expect that it would be — roughly half of that would be achieved in the second half of the year. We’ve achieved this — we mentioned about $7 million in the first quarter from the people initiatives. There will be continued savings in Q2, but I would expect that the bulk of the remaining 50% will be in the second half.

Bill Dezellem: And so by the end of — so by December, that’s when the $15 million of the annualized would be present. But basically $4 million would actually be embedded in that second half number? Is that what we’re hearing you say?

Jim Dullinger: I think probably slightly north of $4 million, but I think you’re thinking about it correctly in proportions.

Bill Dezellem: Perfect. Thank you all for the time.

Luvleen Sidhu: Thank you.

Jim Dullinger: Thank you.

Operator: Thank you. And there are no further audio questions at this time. I’ll turn the call over to Brian for the questions submitted via the web.

Brian Prenoveau: Thank you, operator. Our first question is, do you foresee the ongoing regional bank crisis potentially impacting the partnership with FCB? And do you have any update on that regulatory approval process?

Raj Singh: Sure. We continue to have active dialogue with FCB on a weekly — or more than weekly basis. They continue to provide us updates with respect to the process that they’re going through and continue to remain optimistic based on the feedback, as well as their current standing that is proceeding as expected. In terms of the bank crisis, obviously, that’s an extremely unfortunate set of events and continue to exist as we sit here today. And I think our existing key relationship with Customers Bank has been a tremendous asset to our company, just their financial strength, overall well-being and regulatory strength has been steadfast and has continued to be able to provide us all the support and services that we need. And continue to believe that differentiates us versus other fintechs with a sponsor bank model.

We also believe the process that we underwent with FCB in terms of selecting them with respect to their capitalization, their controls, their regulatory standing similarly will well position us for ongoing stability. So in terms of our two primary relationships, I think we’ve done very, very well in terms of developing those relationships, having partnerships that make a lot of sense to both parties economically and ensure ongoing stability of our programs.

Brian Prenoveau: Great. Thanks, Raj. We have actually two questions on the repurchase program that was announced. And if that program is still in effect?

Jim Dullinger: Yes. This is Jim again. So I think as I mentioned in my remarks is — our expectation is to generate both positive core EBITDA as well as positive cash flow over the remainder of 2023. As that positive cash flow is generated, obviously, we look to opportunities to invest it for the maximum shareholder return. One of the opportunities of — one of the options for that is obviously the previously announced pre-communicated repurchase program that is one of many opportunities that we’d look at for the use of that cash.

Brian Prenoveau: Great. Thank you. We have another question about the nonrecurring expenses and the drop in cash balance. Could you expand on that and explain sort of the dip in cash?

Jim Dullinger: Yes. Yes. I think as I mentioned in my remarks, there was included in Q1, nonrecurring cash outlays. Part of that nonrecurring nature relates to the profit enhancement plan and the activities that we took during the first quarter, so the payment of severance expenses being the single largest. And then also, there are some nonrecurring items related to working capital that occurred in the first quarter as well. I would say that from an expectation of forward movement is as we achieve the improvement of core EBITDA, we would expect a very close correlation in cash for those improvements in core EBITDA as we continue throughout the remainder of 2023.

Brian Prenoveau: Thanks, Jim. And do you have any plans — or what are the plans to organically grow deposits after the First Carolina Bank merger — I’m sorry not merger, partnership.

Raj Singh: Yes. This is Raj. Yes. That’s probably among the most exciting parts of what we’re seeing in the business at this time. I think Luvleen had mentioned, we have a variety of initiatives underway, which by changing the way that our product technology platforms can be leveraged, our ability to adapt those products, leveraging marketing initiatives and communication channels, which have already shown some positive effect, integrating some improved technology in terms of sign-ups and onboarding processes, I think there’s a whole variety of different ways that we’re actively looking at that. And I think that it will take a little bit of time, but during the second half of 2023, we’ll start experiencing that impact. And I think longer term, there is just an enormous untapped market opportunity there, which we’ll continue to strategize and implement various solutions around.

Brian Prenoveau: Thanks, Raj. I see no further questions on the webcast. So I’ll turn the call back over to Luvleen.

Luvleen Sidhu: Thank you, Brian. Thank you to everyone that joined today. As you can see that we’re in a pivotal moment, and there’s a lot of excitement about the future and where we’re going. So I appreciate your continued support, and we’ll touch base with you next quarter. Thank you.

Operator: And that concludes today’s presentation. Thank you for your participation. And you may now disconnect.