MoneyLion Inc. (NYSE:ML) Q1 2024 Earnings Call Transcript

MoneyLion Inc. (NYSE:ML) Q1 2024 Earnings Call Transcript May 7, 2024

MoneyLion Inc. beats earnings expectations. Reported EPS is $0.599, expectations were $-0.29. MoneyLion Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to MoneyLion Inc.’s First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. We will have a question-and-answer session following the formal presentation. [Operator Instructions] Please note that this conference is being recorded. Before we go further, I would like to turn the conference over to Sean Horgan, MoneyLion’s Head of Investor Relations.

Sean Horgan: Thank you, operator. Hi, everyone. Thank you for joining us for our first quarter 2024 earnings conference call. MoneyLion’s CEO, Dee Choubey; and CFO, Rick Correia, are here with me today to discuss our results. You can find a presentation accompanying our earnings press release on our Investor Relations website at investors.moneylion.com. Please note that any forward-looking statements in this commentary are subject to our safe harbor statement, which can found in our SEC filings and our earnings press release. With that, I will turn the call over to Dee.

Dee Choubey: Thank you, Sean. Good morning, and thank you all for joining us for our first quarter 2024 earnings call. We kicked off the year with strong momentum. This continued the great progress we made in 2023 when we were hyper focused on efficiency. In Q1 2024, we accelerated revenue growth and substantially increased adjusted EBITDA and expanded margin quarter-over-quarter. We are now in the mode of offense with discipline. We continue to scale our consumer reach to record levels, further developed our marketplace and enhanced our world-class personal financial management, or PFM experience. The MoneyLion ecosystem is evolving into a marketplace-first platform and a brand that consumers can trust to make their best financial decisions.

Foundationally, we are building an innovating technology to create a unified experience for consumers to learn about, search for, compare, select and complete their checkout of financial products. This technology is made available to any of our enterprise partners and through moneylion.com and other owned channels. Now, let’s turn to the key takeaways for the first quarter of 2024. First, we achieved record quarterly revenue of $121 million. This represents 29% year-over-year growth, up from 19% in Q4 2023. This accelerated revenue growth was driven by the strength of our diverse business model. In addition, our Q1 revenue exceeded the high end of our guidance of $115 million to $118 million. Next, we generated record adjusted EBITDA of $23 million for the quarter, up from $17 million in Q4 2023.

This reflects a 19.4% adjusted EBITDA margin, up from 14.6% in Q4 2023, or approximately 480 basis points of margin expansion quarter-over-quarter. Adjusted EBITDA also exceeded the high end of our guidance range of $15 million to $18 million. And finally, we generated GAAP net income of $7 million and diluted earnings per share of $0.60. This is a significant profitability milestone for us and reflects our team’s execution of our offense with discipline strategy. Turning to total customers, we ended Q1 with 15.5 million total customers, reflecting an increase of 98% year-over-year. This represents a substantial user base that we continue to engage and cross sell. Behind this growth, we saw strong conversions on the consumer side of our business, offsetting some of the impact of lower conversions on the enterprise side of the business.

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Q&A Session

We believe a reversion in the economic environment will provide strong tailwinds to conversion rates over time. We continue to see impressive customer growth across our platform quarter-over-quarter. For Q2, we expect total customers adds to be above Q1. Next, total product shows the importance of flywheel. The more high-value products we offer through enterprise partners, the more personalized options consumers have network wide. This leads to a desirable product experience and better consumer outcomes driving cross-sell and ARPU expansion. The better our recommendations are, the more customers come to MoneyLion, which in turn attracts more enterprise partners and the cycle repeats. 25.3 million total products were consumed on our platform through the end of Q1 2024, compared to 14.7 million in the prior-year quarter.

By the end of the first quarter of ’24, 49% of the products consumed were third-party, up from 32% through the first quarter of 2023. With third-party comprising nearly half of our products consumed life-to-date, we continue to establish ourselves as a trusted source for consumers to make financial decisions. Of the 2.2 million products consumed in Q1, 1.5 million were third-party products. This marketplace-first approach enhances our ability to provide more personalization, more context and details on financial decisions, and more community-driven insights to drive repeat use. We’ve had a track record of strong repeat use, which Rick will walk you through in our cohorts. Our investments in artificial intelligence and machine learning allow us to be at the cutting edge of consumer engagement strategies that lead to hyper-personalized cross-sell, and the expansion of total product consumption on our platform.

This marketplace-first experience is also happening inside the MoneyLion app. MoneyLion has strategically combined the best aspects of marketplace and direct-to-consumer fintech business models. As a marketplace, we have the ability to rapidly scale our product offerings, creating a network effect and information edge that attract more buyers and sellers. Our direct-to-consumer fintech business allows us to maintain direct and deep relationships with customers. In 2024, we are expanding the depth of that relationship to the broader marketplace experience as well. For instance, we’re investing in engineering resources to develop even deeper integration with financial institutions by hosting their decisioning models to make the checkout experience more seamless for the consumer.

This should further improve conversion rates for the benefit first of the consumer and ultimately for our enterprise partners. MoneyLion’s best of both world’s flywheel-focused strategy allows us to create deep relationships with our customers across both our consumer-facing PFM as well as the marketplace. The core of our strategy is to build a relationship with the customer across multiple life decisions. We execute this strategy by continuously innovating and building what is already the most full-featured PFM in the industry. Through our PFM tools, such as personalized dashboards, calculators and insights, trending news, and peer-to-peer elements like commenting, plus a host of snackable educational content, we incentivize consumers to open the app every day to learn how to make their best financial decisions.

In this quarter, we released Know Money, an original content series produced in-house in our media business. Know Money is designed to teach consumers about fundamental financial topics such as budgeting and taxes, demonstrating our investment in and commitment to financial literacy. Owning our own content studio allows us to draw net new consumers into our ecosystem at attractive acquisition costs and also gives us an edge in retaining them over time and helping them with multiple financial decisions. We aim to deliver financial education at scale to a growing community of consumers. In fact, in addition to our embeddable widgets and calculators, our AI-driven search capabilities, we are now beginning to power other financial services companies with our content feed infrastructure as well.

MoneyLion’s unique marketplace, matching, personalization and programmatic compliance technology can also be leveraged by other financial institutions and publishers that seek to better serve their customers by providing a world-class, personalized experience and more product options through their own properties across the Internet. Our investments in personalization and application of generative AI, the financial content and data are now being packaged for access to any business through developer-friendly APIs. This enterprise solution represents a massive opportunity for MoneyLion. We’re committed to delivering on product velocity and execution in 2024, and we look forward to continuing and deepening our successful partnerships. Our network of over 1,100 enterprise partners continues to grow because of our reach, depth and scope of offerings across product verticals, compliance expertise and technical capabilities.

Our audience is expanding, with nearly 80 million total customer inquiries in the first quarter alone. I’ll now provide a quick update on our enterprise business and some of the trends we’re seeing so far in the second quarter. Starting with the impact of the macroeconomic environment. The recent headwinds impacting revenue related to our personal loans vertical persisted in the first quarter. More recently, so far in the second quarter, we’re seeing some positive signs. First, we’re seeing stabilization in the underwriting environment, particularly within the personal loans vertical. There’s renewed activity in our pipeline and growing interest in our digital marketplaces. As we make the investments to strengthen our position across product verticals like credit cards, insurance and mortgages, there are substantial tailwinds to diversify beyond personal loans.

We continue to see growth in total suppliers as evidenced by a very healthy total increase on the network over the quarter. Our marketplace technology is a key long-term growth engine for the entire MoneyLion ecosystem. And with that now I’ll turn the call over to Rick to discuss our financials in detail.

Rick Correia: Thanks Dee, and good morning to everyone. I look forward to sharing details about our financial performance for the first quarter ending March 31, 2024. I will also discuss our guidance and outlook for the second quarter of 2024. For more information, please refer to our GAAP consolidated financial statements and non-GAAP reconciliations, which are available in today’s earnings release and our 10-Q filing. Turning to our customer acquisition and lifecycle strategy. Our top of funnel drove approximately 80 million total customer inquiries in the first quarter of 2024, up over 130% from roughly the 34 million we saw in the first quarter of 2023. These inquiries converted into about 1.5 million new total customers and 2.2 million total products consumed during the quarter.

As you can see, our top of funnel continues to grow at a staggering pace, due to increasing demand from our large network of publishers, which expands our already massive top of funnel. As Dee noted, we continue to see muted conversions in the first quarter on the enterprise side of the business due to reduced enterprise partner marketing spend alongside macro headwinds. Importantly, given our unique vantage point in the industry, we are beginning to see signs of improvement in the second quarter, as the underwriting environment stabilizes and activity in our pipeline begins to pick up. Turning to our unit economics. In the last 12 months ending Q1 2024, we added 7.7 million total customers. Our customer acquisition cost, or CAC, was under $15, consistent with prior periods.

In the first quarter, we did see our CAC increase slightly due to typical seasonality, and we expect to see a reversion in the second quarter. Our payback period was around four months, which we continue to see as a great outcome. And lastly, ARPU was around $39, which is roughly in line with our full year 2023 ARPU. These unit economics are a function of our strong business equation and they reflect our strategy to take market share by adding total customers rapidly and efficiently. We will cross-sell personalized products and offer over time to drive lifetime value, including as we expand our marketplace product verticals. Now, let me turn to our recurring revenue trends across consumer and enterprise businesses. Starting with consumer, in Q1 2024, over 90% of our consumer revenue came from historical cohorts of customers.

As you can see, we are successfully deepening our product penetration and revenue expansion. This is a testament to the effectiveness of our personalized content, decisioning and lifecycle algorithms. In our enterprise business, we continue to increase our number of channel partners and vertically integrate with product partners, making MoneyLion the must have customer acquisition and monetization partner throughout the financial services ecosystem. As a result, we form durable, valuable partnerships. As you can see in our enterprise cohort data, over 95% of revenue from our marketplace came from prior-year cohorts of our enterprise partners. In addition to retaining revenue from existing partners, we are capturing the latent revenue opportunity of our quarterly customer inquiries and fueling our growth acceleration.

We are seeing continued strength in our first-party products. In the first quarter of 2024, total originations for these products were $717 million, representing an increase of 42% year-over-year. Consumer products continued to see heightened demand in the first quarter, contributing to our strong overall performance in consumer revenue. Credit performance trends remained stable in Q1 2024. Our provision expense as a percentage of total originations was 2.5% in Q1 2024. This reflects both our experience in managing credit quality and our focus on continuously optimizing for better credit performance. In addition, it’s important to note that Q1 benefits from some typical seasonal performance related to cash customers receive from tax refunds.

Going forward, we expect to continue to see strong credit performance, with provision expense as a percentage of originations consistent with 2023 levels. As we indicated last quarter, we are also transitioning to a forward flow financing arrangement, meaning that we will sell our finance receivables and move them off balance sheet. This standard forward flow arrangement further lightens our balance sheet, improves our cash efficiency, and is a testament to our strong and consistent originations performance over a spectrum of macroeconomic cycles. Now, turning to some of our other key financial metrics. MoneyLion generated $121 million of revenue in the first quarter. This represented 29% year-over-year growth, up from 19% in the prior quarter and 7% growth quarter-over-quarter, up from 2% in the prior quarter.

Notably, we generated $451 million over the last 12 months as of Q1 2024. This quarter’s performance was primarily driven by outperformance in both our consumer and marketplace businesses. This was slightly offset by our decision to exit certain non-core functions in our media business, which we believe will ultimately improve our quality of revenue and adjusted EBITDA margin profile even further. Now, onto our path to profitability. We reached an important milestone in Q1 2024. As Dee mentioned in the key investor takeaways, MoneyLion generated $7 million of GAAP net income and $0.60 of diluted EPS. Similarly, we generated $23 million of adjusted EBITDA in the first quarter. This represents an adjusted EBITDA margin of 19.4% or 480 basis points of margin expansion from Q4 2023.

And lastly, on our cash position. We closed the quarter with $93 million of cash, up from $92 million in Q4 2023. This quarter-over-quarter increase in cash is after accounting for some period-specific payments in Q1. As you can see from our past few quarters, we have consistently driven growth while generating cash before one time and seasonal expenses, proving Dee’s point that we play with offense and with discipline. Furthermore, we see no headwinds to continuing this trend and are encouraged by our potential to generate cash as we look to execute against our growth pillars. Now, turning to guidance. In the first quarter of 2024, we exceeded our guidance across all metrics. Revenue was $121 million, above the high end of our guidance range of $115 million to $118 million.

Adjusted EBITDA was $23 million, exceeding the high end of our guidance of $15 million to $18 million. Turning to our outlook. For the second quarter of 2024, we expect revenue between $125 million to $130 million, representing 17% to 22% year-over-year growth; adjusted EBITDA of $17 million to $20 million, representing approximately 13% to 16% adjusted EBITDA margin. Before I turn it back over to Dee, I’ll leave you with this. Our first quarter numbers really speak for themselves. Importantly, this is a testament to the strength of our business model and our ability to scale profitably. We expect this to continue through our next stage of growth. To echo Dee’s comments, we are a marketplace-first platform with an immense opportunity in front of us.

We are emerging as the trusted brand for financial decisions and access to market-leading first- and third-party products. With that, I will turn the call back over to Dee for his closing remarks.

Dee Choubey: Thank you, Rick. Last quarter, we laid out our four growth pillars for 2024: continued growth in consumer, relentless funnel optimization, product vertical expansion, and expanded distribution. As we shared today in our results, our first growth pillar, continued growth in our consumer business, helped drive strong performance in the first quarter. Going forward, we see longer-term growth coming from the remaining pillars. First on funnel optimization, through new remarketing channels, leveraging data insights to help filter the most relevant offers for consumers and enhancing our ability to match lenders with the best users with the highest efficiency. We are intensely focused on optimizing our funnel and driving higher conversions in the near term.

In terms of vertical expansion, we’re working to deepen our presence in select verticals, namely, we’re most excited about credit cards, auto insurance and mortgages. We’re exploring all opportunities to quickly bring these verticals to market. We believe this will position us well to capture demand for these products inside of the network. Lastly, on expanding our distribution, in addition to our alliance with EY, we continue to add new channel partners to our platform, which ultimately fuels our flywheel and will lead to meaningful financial impact over time. In closing, I’ll leave you with a few final thoughts. Our first quarter results reflect continued momentum in our business with an attractive combination of growth and profitability.

We generated GAAP net income and EPS, and our cash balance increased quarter-over-quarter. We will not leave growth on the table. We’re building for the long-term. This is our opportunity to scale rapidly without sacrificing margin because we can. We’re playing offense with discipline because we can. These advantages will take us to the next stage of our evolution, and we’re just getting started. With that, I’d like to thank you all for joining us today, and I will turn the call back over to the operator before we take your questions.

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of George Sutton with Craig-Hallum. Please proceed with your questions.

George Sutton: Thank you. Wonderful results, guys. So, if I’m hearing you correctly, Q1 benefited in large part from the much bigger funnel you’ve created. And it sounds like Q2 is beginning to show a better monetization of that funnel. And then, Dee, I wondered if you could lay out a little more detail on the things that you’re doing with AI to try to drive that monetization even further, you mentioned relative to content feed infrastructure.

Dee Choubey: Hey, George. Good morning. Thanks for the question. Absolutely, Q1, as we said, we really saw a strong consumer business for us and conversions in that business were quite robust. We continue to see normalization in Q2. There’s nothing to believe that adds aren’t going to trend above the 1.5 million customer number that we said. And then, the name of the game really is using a lot of our technology to personalize and provide engaging elements for the consumer to return back into our ecosystem. This has multiple benefits. Our first-party products, of course, benefit from that. But importantly, the technology that we’re building is creating highly-penetrated opportunities for our channel partners, for enterprise partners to benefit.