OneMain Holdings, Inc. (NYSE:OMF) Q1 2024 Earnings Call Transcript

OneMain Holdings, Inc. (NYSE:OMF) Q1 2024 Earnings Call Transcript April 30, 2024

OneMain Holdings, Inc. misses on earnings expectations. Reported EPS is $1.29 EPS, expectations were $1.38. OneMain Holdings, 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: Welcome to the OneMain Financial First Quarter 2024 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Poillon, Head of Investor Relations. Today’s call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Peter Poillon. You may begin.

Peter Poillon: Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the first quarter 2024 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management’s current beliefs about the Company’s future financial performance and business prospects, and these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release.

We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay, at some point after today, we remind you that the remarks made herein are as of today, April 30th, and have not been updated subsequent to this call. Our call this morning will include the formal remarks from Doug Shulman, our Chairman and Chief Executive Officer; and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question-and-answer session. I’d like to now turn the call over to Doug.

Douglas Shulman: Thanks, Pete, and good morning, everyone. Thank you for joining us today. Today, I’ll cover our results for the first quarter as well as discuss our strategic initiatives. Before I do that, I want to welcome Jenny Osterhout to today’s call in her new role as Chief Financial Officer. I’ve worked with Jenny for many years, most recently in her role as Chief Strategy Officer at OneMain, where she worked closely with Micah and me and had responsibility for strategy, new products, technology, digital, corporate development, and has been a key partner in driving our strong performance the last several years. As you get to know her, I’m sure you will find her to be strategic, knowledgeable and a straight shooter. I also want to thank Micah for facilitating a smooth transition and he will continue to partner closely with Jenny and me to drive value for our customers and our shareholders in his new role as Chief Operating Officer.

I’ll start by saying, we feel very good about the results this quarter, especially the credit trends as we are seeing clear evidence that the credit tightening actions we have taken over the last couple of years are driving delinquency and ultimately losses in the right direction. Capital generation, the key metric against which we measure financial performance and manage our business was $155 million this quarter. Our receivables grew 6% year-over-year, benefiting from our expanded product offerings and strong balance sheet. We have been able to grow our portfolio and our customer base while maintaining a cautious credit posture across all of our products. Year-on-year total revenue growth was 7%. Our originations totaled $2.5 billion, down 10% from a year ago, a result of our disciplined management of the business where we only make loans that meet our return hurdles.

As we’ve discussed previously, we have continued to selectively increase prices and tightened credit over the last year. Let me say a couple of things about the health of the consumer. Before I do so, let me remind you that while we monitor these overall trends, we actually lend customer by customer based on their individual credit risk, taking into consideration their geography, net disposable income, our proprietary data on current and former customers and over 1,000 other variables. For the consumer overall, there remains a set of cross currents. Even though inflation has slowed down, and there has been healthy wage growth and unemployment remains quite low, interest rates remain elevated and living expenses have increased the last few years.

For our customer who makes on average $65,000 to $70,000 a year, their average income is up about 25% compared to pre-pandemic, but the cost of everyday expenses in aggregate from food to housing, to gas, is also up over 20%. So while we have seen income catch up with inflation, resulting in an increase in net disposable income for our customers when compared to 2019, consumers still need to carefully manage their household budgets in this environment. Our 30 to 89 delinquency was 2.72%, down 56 basis points from the fourth quarter, which is better than normal seasonal trends. Loan net charge-offs were 8.6%, consistent with our expectation given the delinquency we saw in the second half of last year and in line with our full-year strategic priorities.

We remain pleased with the performance of our newer vintages or front book comprised of loans originated since August 2022 as they continue to perform in line with expectations. And while these new vintages now comprise about 70% of our receivables, the back book, those loans originated before August 2022 still account for about 50% of our delinquencies. Our increased pricing in certain segments and tighter credit box has resulted in lower originations especially in the last two quarters. This has led to portfolio dynamics, which Jenny will discuss later. We remain confident that the credit performance of the overall portfolio is moving in the right direction and continue to expect that losses will peak in the first half of 2024, assuming that the macroeconomic environment remains relatively stable.

Nonetheless, we are maintaining our conservative credit posture at this time. Our OpEx ratio was 6.6%. We are always disciplined in our expense management and closely evaluate where to invest and where to cut. This quarter, we took some targeted expense actions, primarily across headcount and real estate as we continually hone our business for optimal efficiency and performance. Turning now to our strategic initiatives, which we discussed in detail at our Investor Day in December. We talked then about how we plan to capitalize on our clear competitive advantages, including deep experience with and proprietary data on the non-prime consumer, best-in-class underwriting, a unique business model with a branch network supported by digital and central capabilities and a fortress balance sheet.

We are using these competitive advantages to position OneMain for the future and expand our addressable market in a highly-disciplined manner and drive profitable growth. We served 3 million customers during the quarter, up from 2.6 million a year ago. Much of the growth in our customer base is attributable to our new products, the BrightWay credit card and Auto Finance, highlighting the importance of these new products to our long-term customer acquisition, customer engagement and growth strategies. Our auto finance receivables were $843 million at quarter end, and credit performance remains very good in this business. We recently enhanced our auto finance business with the acquisition of Foursight Capital, which closed on April 1. This acquisition brings us an experienced team, scalable technology, tested credit models, a franchise dealer network and a high-quality loan portfolio.

It substantially expands our total addressable market in the auto finance segment, complementing our current direct-to-consumer independent dealer strategy by adding a national network of franchise dealers. Importantly, it further diversifies and expands our suite of lending products, supporting our position as the lender of choice for non-prime consumers. In our credit card business, we ended the quarter with 509,000 accounts and $386 million of receivables. We continue to feel really good about key business metrics, including response rates, utilization and digital engagement. Given the credit environment, we are focusing our customer acquisition on cards that have an annual fee and a lower line of credit. We are confident that our credit card business will be a significant driver of profitable growth in the coming years.

But today, we have a tight credit box and will remain disciplined as we expand this business. Now let me briefly touch on capital allocation. Our top priority to invest in the business to position us for ongoing success has not changed. As I mentioned earlier, we grew our receivables year-over-year with a focus on high-quality profitable originations. Once again this quarter, about two-thirds of new customer originations were in our top two credit tiers. And we allocated a portion of our capital for the acquisition of Foursight, which will provide important benefits to our company and our shareholders in the years ahead. We are committed to a strong regular dividend. And our Board increased the dividend by 4% this quarter. The annual dividend is now $4.16 per share, reflecting our continued confidence in the capital generation of the business and our commitment to return capital to shareholders.

Share repurchases in the first quarter were modest, about 100,000 shares for approximately $5 million. With that, let me now turn the call over to Jenny.

Jenny Osterhout: Thanks, Doug, and good morning, everyone. I’d like to start by saying that it’s great to be here on my first earnings call as Chief Financial Officer of OneMain. Doug, Micah and I, along with the rest of the executive team at OneMain, will continue to focus on serving our customers, managing the company to outperform in any environment and executing on the strategy that we laid out at Investor Day in December. 2024 is off to a strong start with the first quarter highlighted by positive momentum, resulting in our continued proactive and granular management of their portfolio, ongoing expense discipline and further enhancement of our already strong balance sheet. First quarter net income was $155 million, $1.29 per diluted share, down 13% from $1.48 per diluted share in the first quarter of 2023.

The current quarter included a $27 million restructuring charge associated with expense initiatives that will support strategic investment in the company. C&I adjusted net income was $1.45 per diluted share, essentially flat as compared to the first quarter of 2023. Capital generation was $155 million for the quarter compared to $179 million a year ago, reflecting the impact of the current macroeconomic environment on our interest expense, yield and net charge-offs. Managed receivables this quarter were $22 billion, up $1.3 billion or 6% from a year ago. This does not reflect receivables from the Foursight acquisition, which closed on April 1. So the receivables growth this quarter is all organic. First quarter originations of $2.5 billion was down seasonally from the fourth quarter and down 10% year-over-year as we’ve maintained our conservative approach to new originations.

As discussed in previous quarters, a good portion of our tightening has come by a pricing action that we’ve taken, which offer what we view as a compelling trade-off of lower volume for higher profitability. The average APR on our loan originations in the quarter was 26.8%, up more than 100 basis points from the first quarter 2023. While we are encouraged by positive signs in our portfolio’s credit performance, for now, we are maintaining our conservative underwriting. As we go forward, we will adjust our underwriting posture as we monitor credit performance and the macroeconomic environment. Total revenue comprising interest income and total other revenue grew 7% as compared to first quarter 2023, in line with our full-year guidance range of 6% to 8%.

Interest income was $1.2 billion, up 7% year-over-year, driven by higher average receivable. Yield in the first quarter was 22.1%, flat compared to the fourth quarter as our pricing actions, which I mentioned earlier, offset the impacts of the credit environment and the growth of the auto book which has lower APRs. Other revenue was $180 million, up 2% from the prior year. Interest expense for the quarter was $276 million, up $38 million versus the prior year, driven by an increase in average debt to support our receivables growth, higher cash levels as well as modestly higher cost of funds. Interest expense as a percentage of receivables in the quarter was 5.2%. First quarter interest expense was impacted by the excess cash we’ve been carrying on our balance sheet through the quarter.

Excluding these impacts, interest expense would have been closer to 5% in the quarter, and we continue to expect full-year interest expense of approximately 5.2%. While the interest rate environment remains uncertain, our balance sheet strategy with staggered maturities and longer tenures, has allowed us to mitigate the volatility in the market over the last few years. Provision expense was $431 million, comprising net charge-offs of $457 million and a $26 million decrease in our allowance, which was driven by the seasonal decline in our receivables. Our allowance ratio remained flat to the fourth quarter at 11.6%. Policyholder benefits and claims expense for the quarter was $50 million compared to the $47 million in the first quarter 2023.

This is in line with our previously stated expectation of approximately $50 million each quarter. Let’s now turn to the C&I credit trends highlighted on Slide 9. Loan net charge-offs were 8.6%, in line with expectations for the quarter. Recoveries remained strong in the quarter. They were $77 million or 1.5% of receivables and included some opportunistic sales of charged-off loans during the quarter. 30 to 89-day delinquency at March 31 was 2.72%, which was 56 basis points better than the 3.28% we saw in December. While we typically see a seasonal reduction in 30 to 89-day delinquency from fourth to first quarter, this 56 basis point reduction is better than normal seasonal trends. Front book vintages, which we define as originations starting in August 2022, now comprise about 70% of total receivables as compared to 65% at year end.

However, currently, 50% of our 30-plus delinquencies still come from the back book vintages that only represent 30% of our receivables. So while we are pleased that we continue to see the front book perform in line with expectations, as we discussed last quarter, our portfolio is growing at a slower pace due to our credit tightening and pricing action. The result of this slower growth is an extension of the weighted average life of our portfolio. This drives the delinquency and loss performance of the portfolio to skew more to the older and higher delinquency receivables, with a smaller percentage of the more recent lower delinquency receivables on the book. Without this dynamic, our current quarter 30 to 89 delinquencies would be lower than last year.

I want to emphasize that we remain pleased with the performance of the loans we are booking today and as the back book runs down and the better performing front book continues to grow, our losses will improve. We continue to expect net charge-offs to peak in the first half of 2024, with typical seasonal patterns thereafter. Now let’s turn to Slide 12. Operating expenses were $362 million in the quarter, flat year-over-year. Expenses in the quarter were positively impacted by expense reduction actions taken this quarter. We expect our full-year OpEx ratio to fall in line with our guidance of approximately 6.7% as we continue our practice to both manage expenses and further invest in our business for future growth. The specific expense reduction actions taken this quarter were the result of our rigorous focus on expense management as well as the fruits of our focus on digital engagement and the optimization of our branch footprint.

The majority of these expense reductions came from headcount and real estate. These expense actions will create additional capacity for us to invest for growth in the future, while continuing to drive operating leverage. Our OpEx ratio was 6.6% in the first quarter, down from 7.1% in the same quarter of 2023. This reflects the disciplined approach to expense management I just described as well as the operating leverage inherent in our business that we outlined at Investor Day in December. Now let’s turn to funding and our balance sheet on Slide 13. We came into 2024 in great shape from a liquidity perspective, having issued $2.5 billion of unsecured and secured debt in the second half of last year and having redeemed the March 2024 maturity.

During the first quarter, we didn’t issue any debt, but we continued to make progress on our best-in-class liquidity profile by increasing our bank facilities and adding a new partner to our whole loan sale program. You also probably saw that last week, we issued a $1.1 billion seven-year revolving securitization priced at a blended rate of 5.99%. This was the first seven-year tenor ABS we’ve issued since 2019. And is a testament to the strength of our funding program. We had a deep order book that included both new investors and a long list of returning ABS investors. This issuance extends our maturity profile into 2031 and beyond and with the cash on our balance sheet provides further funding flexibility. Let me add a little more context on the changes to our liquidity profile that I mentioned.

In January, we closed our first credit card facilities with two members of our banking group. The initial combined commitment for the two facilities is $300 million, bringing company bank facilities to $8 billion from $7.7 billion in Q4 2023. We see these new credit card facilities as strategically important as we build out the ABS program for cards, giving us a new funding channel that further diversifies our balance sheet. On the whole loan sales front, we signed an 18-month $600 million forward flow agreement with a new partner with attractive pricing, essentially swapping out another partnership that we chose not to renew. While small, we see the whole loan sale program as a positive development and a further extension of our best-in-class funding program.

Wrapping up the balance sheet. Our net leverage at the end of the first quarter was 5.3x, flat compared to last quarter. Turning briefly to Slide 15, our 2024 priorities. We continue to feel very good about the priorities we laid out on the fourth quarter earnings call, and those priorities remain unchanged. We expect to end the year with managed receivables of approximately $24 billion, which includes approximately $1 billion from Foursight. We continue to expect full-year total revenue growth in a range of 6% to 8%. We also expect full-year interest expense as a percentage of average net receivables to be approximately 5.2%, and full-year consolidated net charge-offs in the range of 7.7% to 8.3%, with peak charge-offs in the first half of the year.

And finally, as I mentioned earlier, we expect our full-year operating expense ratio to be around 6.7%. We had a really solid first quarter with positive signs in our credit trends and remain confident in our ability to execute and deliver shareholder value throughout the years ahead. While over the past few years, I’ve had the opportunity to meet many of you. I look forward to spending more time with all of you going forward. With that, let me turn the call back over to Doug.

Douglas Shulman: Thanks, Jenny. We feel really good about the direction of credit as we have carefully managed our underwriting and pricing to ensure we meet our return hurdles. Our new products, credit card and auto finance have matured nicely and are positioned to be major contributors to profitable growth in the coming years. And as we deepen our customer relationships and expand into diversified our product offerings, we have further solidified our position as the lender of choice to the non-prime consumer. As always, I’m incredibly grateful to all of our talented team members who are highly committed to helping our customers meet their credit needs today but also helping them progress to a better financial future. With that, let me open it up for questions.

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Q&A Session

Operator: And the floor is now open for questions. [Operator Instructions] And our first question will come from John Rowan with Janney. Please go ahead.

John Rowan: Good morning. Jenny, I just want to unpack what you were talking about with the delinquency buckets and the growth math, right? Because it sounded like you said that one of the buckets, maybe the 30 to 89 day came down more than you would expect seasonally because of the Fed growth math, but maybe the 90-plus day did not come down in lockstep because of that growth math. I just want to make sure you understood that correctly. And maybe just walk us through what we should expect the growth math, the effect on delinquencies going forward?

Jenny Osterhout: Thanks for the question. Let me give a bit more context. So the way we think about it, the weighted average life of our receivables has increased from that slower growth that I mentioned. And we decreased the number of new originations, meaning those younger originations. So those originated in the last two quarters, think of that as Q4 and Q1. And those younger originations as a percentage of the overall book today are 24% of the book. And on a pre-COVID book, that’s growing more or would have been about 33%. So we increased the average age of our receivables for nearly 10% of the book. And that matters because those newer originations have a sub-1% delinquency, and we replaced those with those older vintages that have about a 4% delinquency.

So to put that in context, excluding that change in the growth dynamic, it would be, like you said, a little bit lower than last year. And that’s to the 30 to 89 delinquency. And we expect that impact will decrease as we get newer vintages on the books. We aren’t seeing anything abnormal with our 90-plus, I just want to add that into.

John Rowan: Okay. Thank you. And then, Doug, maybe just discuss kind of the market opportunity in credit cards. We haven’t talked a lot about the fee structure on the credit card, but obviously, there’s a proposal out to – or finalized rule out to reduce late fees. How do you see that market shaking out in the next couple of years with the new fee structure and what’s your opportunity there? Thank you.

Douglas Shulman: Yes. Look, we think we’ve got a huge opportunity in credit card. To put it in context, we have a 20% market share in the $100 billion personal loan market. And the credit card market for the non-prime consumer is about $500 billion. So run simple math, if we got 1% market share in the $500 billion market, we have $5 billion of receivables. And right now, we have under $400 million. So we think there’s a very large growth opportunity for us without us taking on any sort of undue risk. And so we really like our product, which the way it’s designed is payments equal progress, which means as you are a good payer, we will share some economics with you, either decrease the rate or increase your line after six on-time payments.

And then we’ve got a graduation strategy where people can start with a card with an annual fee. And if they have 24 on-time payments, they can go to a no-fee card. And so we have a unique value proposition. We know the non-prime consumer. We’ve got a lot of history with this consumer. We’ve got a lot of infrastructure. We can do things like cross-sell, cards and loans, and now we’re adding auto. And we’ve been slowly building this business very deliberate for three years. As I mentioned, we’ve got a tight credit box and we’re going to be very disciplined in the rollout. When it comes to late fees, I actually really like our positioning. Incumbent players who have a huge book and late fees were a big part of their business are going to have to shift the value proposition.

We have the advantage of being a challenger. And we’ve assumed this was coming and built in a business model where we can hit our 20% ROE thresholds with the $8 late fee. And so there’s lots of levers from pricing to annual fees to the structure of the card. And so I think we’ll see how it all shakes out. most of the large players, what I’ve heard who are already out there, basically said they’ll take up pricing to make up for the fee. People will do what they’re going to do. We’ve built the model. So we’ve assumed it’s going to be an $8 late fee that will be the max that we’ll be able to charge and we’ll build a great business with that as the parameters.

John Rowan: Okay. Thank you very much.

Douglas Shulman: Thank you.

Operator: Our next question will come from Terry Ma with Barclays. Please go ahead.

Unidentified Analyst: Hi. This is [Julia Gul] on for Terry. Two questions. First on originations, which were down 10% year-over-year? Was that driven by incremental tightening during the quarter or more a function of what you did in the last couple of quarters pulling through? And then what do you need to see to get less conservative with underwriting?

Douglas Shulman: Yes. First quarter is seasonally our lowest origination quarter. People just had a fair amount of spending around the holidays and then tax refunds come in, which is a big check for most people in America. Originations were on pace of what we expected. And we’ve stated that we think our receivables will be $24 billion at the end of the year. We still think we’re on pace for that. I’d also note, originations were down in the first quarter, 10% year-on-year. They were actually down 13% year-on-year in the fourth quarter. So the trend lines are not disturbing us at all, and we expected this with seasonality. So I think part of the year-on-year is seasonality. We also, as I mentioned, did two things: one is we increase pricing in certain segments.

There, we really like the trade, lower originations, but more profit. And in this environment, we’ll take that trade all day long. And then we have incrementally tightened our credit box during the year last year, which also contributed to it. What do we need to see to open the credit box? We are being conservative. As I mentioned, there’s still some cross currents in the macro economy. On the positive side, unemployment is low, wage growth has been healthy and inflation has slowed but bumping up against that is prices are still persistently higher than they were in 2019. And interest rate environment remains uncertain, which affects housing prices, especially in the overall economy. We continually have what we call weather vein where we’re booking a de minimis amount of business right below our credit cutoff.

It’s actually profitable. It just doesn’t meet our 20% ROE threshold. So we look at the performance of those loans we’ve been originating. And so we’ll keep an eye on that. When we decide to loosen up a little bit, it’s not a big bang. I mean, we underwrite by state, by risk grade, by product type, by the channel where the customer comes from, if it’s a new customer, whether they’re coming through a digital channel or direct mail channel or walking into our branch, we see different performance. We have former customers, present customers, new customers. And so I think you can expect us to when you loosen up, do it in distinct pockets. And I’d also just mention every month, we are changing assumptions and we do some loosening and some tightening and just the net effect over the last year has been more tightening than loosening.

And so we’re quite comfortable with our originations. I just want to repeat, we do not we don’t manage the growth. We manage the profitability and we view growth as an outcome of running a great business, having a great value proposition to customers, having a great customer experience. And so we’re super comfortable with where we are now, and we’ll keep an eye on both the macro and our internal data and we’ll decide where we go from there.

Unidentified Analyst: Very helpful. And then on delinquencies, the 30 to 89 days moving in the right direction, could you talk about the near-term outlook and the confidence level and timing on getting back to your 6% to 7% target loss ratio, please?

Douglas Shulman: Sure. As I said, we like the trends. Quarter-on-quarter, we were 56 basis points down on our delinquency which is a bigger drop than we saw in 2018 and 2019. And so we’re really feeling like we’ve turned a corner. Our front book is in line with expectations and performing well. And we think peak losses will be first half of 2024. The math will take it down from there. The business we’re booking now is in that 6% to 7% loss range in aggregate of the portfolio. When we get there is going to depend on a lot of factors, our growth does the macro remain stable, et cetera. So we’re not calling when we’re getting there, but we like the business we’re booking now it meets our 20% return thresholds, and we like the general trends.

Operator: And we will take our next question from John Hecht with Jefferies. Please go ahead.

John Hecht: Good morning, guys. And thanks for taking my question and welcome to the call Jenny.

Jenny Osterhout: Thank you.

John Hecht: First question is just based on the guidance and the seasoning of the back book, it looks like I think charge-offs should be peaking, I think, in this quarter. The ALL has been pretty consistent for several quarters, but how do we think about where the ALL might go once you’ve gone to that peak charge-off cycle?

Jenny Osterhout: Thanks. I’ll take this. So I think you’ve hit it pretty spot on. We’re pretty pleased with what we see on delinquency. We still think we’re going to be in that range of $7.7 million to $8.3 million for the year for the annualized loss rate, and we feel pretty comfortable in that range. I think typically, you would see delinquency move to charge-off about two quarters later. So you can expect to see the delinquency that we have here moving in the third quarter? And also, there’s some seasonality in delinquency as well. So we have our lowest delinquency in this quarter, in the first quarter of the year as customers get their tax refunds and then we trend upward throughout the remainder of the year. So you expect those same seasonal patterns to continue. But we’re pretty pleased with this improvement in delinquency, and we expect that to translate to losses later in the year.

John Hecht: And just to round that out, the ALL ratio, like you keep it at consistent levels or as delinquencies start to drop with that drop?

Jenny Osterhout: Yes. I think we’re going to be thinking about reserves. We take into account what’s happening in the macro environment, the growth of the book, obviously, lifetime losses as well. So you know we’ve maintained our 11.6% coverage ratio for reserving and we’ll be continually looking at all those factors as they change. And as we get to a more normalized environment, we’d expect reserve coverage to start to come down. But for now, we’re very happy with where we have our reserves.

John Hecht: Okay. That’s helpful. And then how do we think about yields? I mean, you’re clearly on the front book and the personal loan book, you priced a lot higher. But how do we think about yields with that mix and then the delinquency buckets and then also the auto and card segments. How should we think about the impact of all those factors on yields in the near term?

Jenny Osterhout: Yes. I can walk a little bit through yield because it’s flat here. And we discussed we’re deliberately taking those pricing actions and we increased APR by over 100 basis points. We’re only starting to see that flow through the portfolio, but it will – in time, it will take sort of full effect. And then offsetting that is the impact of the current macro environment, which is – which you’re seeing flow-through charge-offs. And then there is some increased impact from the auto book, specifically. But we like that trade that we’re making for the lower loss volatility and lower APR content. So over time, we think yields in a normalized environment would come back on the personal loan book to about 23% to 24%. And in the auto finance, it would be – remain in about 15% to 17%. So really, it will depend on the product mix going forward in terms of where that lands.

John Hecht: Okay. Thanks very much.

Operator: Our next question will come from David Scharf with Citizens JMP. Please go ahead.

David Scharf: Great. Thank you. Good morning and thanks for taking my questions. You know maybe just a couple of technical follow-ups. On the loss rate, there was an elevated recovery rate in the quarter. And I know you mentioned you had some opportunistic sale of charge-offs. Are you planning on increasing that? Or are you involved in any forward flow arrangements for charge-off sales? Or was this just a sort of one-off event?

Jenny Osterhout: No. We were always looking at internal and external collections and we continue to see pretty strong recovery performance and positive trends. So we’re still above our pre-pandemic recovery levels, and they’re in line with our expected charge-offs. So we had $77 million in this quarter, which included about $11 million you mentioned of post charge-off debt sales. That’s pretty consistent with prior year where we had $10 million of post charge-off debt sales. So again, we’re just – we’re always looking at that trade and making decisions where the economics are good. But overall, we’re actually quite pleased with where recoveries are.