Curtis Nagle: Well, just one of the question was, right, so yes, you had your first Super Bowl ad, right? That’s a very splashy form of brand marketing. So is that indicative of a big ramp up, right, as we’ve kind of been talking about in brand marketing and just kind of how to think about that for the rest of the year. And then again, just do you — what do you see in terms of response in the first week from that add?
Carrie Wheeler: Yes. I mean, all credit to our creative marketing team. We actually didn’t buy a Super Bowl ad to be clear. We — this has been a year of cost discipline, as you know, as we were not sending…
Curtis Nagle: Far enough. Okay.
Carrie Wheeler: Okay. Yes, we were by the way — we did want to be part of the Super Bowl, pre-run and part of the conversation, and I think our team did a good job of putting us in that room, and we did a lot of stuff in and around Super Bowl before the game, and then we had a live-out during half time in Atlanta. So I’d say it’s too early to tell the impact of that. We definitely saw a big pickup in traffic and awareness in Atlanta specifically. And I think time will tell in terms of what the impact of that is. I would say the higher level, though, if you think about how we think about marketing spend, I mean, last year, we took down spend substantially. That was in response to where our spreads were because some spend became less efficient.
You think about this year, we have really leaned into some of our more efficient marketing channels. Brand being one, is the whole thing is evidence is one of those. But what we found is that brand lift all boats for us. So we increased our brand spend, and we’re finding that increases conversion across all avenues. And actually, even though we had lower spend last year, we actually maintained our brand awareness, something we’re really proud of. And the partnerships will continue to lean into because they’re very efficient from a customer acquisition cost perspective and then there’s paid. So you should expect to see more creative from this. You should expect to see more brand, but we’re going to do within making sure we manage the overall envelope.
Curtis Nagle: Okay, that makes sense. Thanks very much.
Carrie Wheeler: Welcome.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Ryan Tomasello of KBW. Please go ahead, Ryan.
Ryan Tomasello: Hi, everyone. Thanks for taking the questions. It seems like one of the more important variables you focus on from a macro perspective is not necessarily the absolute level of rates, but the volatility in rates, is that an accurate statement? And if so, it’d be helpful if you can just elaborate on how you define rate volatility if there is a difference between upward versus downward volatility, if that makes sense? And just generally, how that plays into your willingness to ramp volumes?
Dod Fraser: Yes, happy to cover that, Ryan. Yes, I think rate volatility really flows through and impacts the overall market by keeping sellers and buyers on the sidelines. So I think that is why — and you can see it in the numbers and the metrics that we have on the back of our shareholder letter as well. If you look at where you’ve seen rates come down and you’ve seen increases in supply and demand. And so I think really, for us, at least, we care most about the balance of sellers and buyers, the balance of supply and demand. And so that’s really where we stay focused. And based on what we’re seeing right now and what we’ve seen year-to-date, we continue to see a balance between the sellers and buyers, and that is leading to relative price stability and in line with what we’ve seen historically.
Ryan Tomasello: Okay, thanks. And then just on the capital structure, it looks like borrowing capacity came down by a few hundred million quarter-over-quarter, and you removed the language from the shareholder letter around sufficient capacity to hit the breakeven targets. Just to clarify that commentary and that move in the capacity? And second, just how you’re thinking about longer-term capacity beyond the $10 billion in volume, especially as you have to dip into the higher cost floating rate debt. Obviously, you bought back some of the converts. Just any updated thoughts there on capital allocation to the convert.
Dod Fraser: Certainly not trying to signal any change. So we’re comfortable with that — with our current capital base, both on the equity and debt side, we can get to that ANI breakeven point. We are and always have — you saw us do this in COVID, modulating how much capacity we have, lenders don’t like this to have unused capacity. So I think that is something we’ve been working with our lenders on and they like to reduce unused capacity, and they’ve been there for us in the past. I think really for the near term, we’re very focused on the fact that we have these term debt facilities that are fixed through the full year. And we feel very comfortable about our ability to use those facilities and cash on hand to sort of finance our business.
And so really feel quite comfortable on the capital side. I think if you sort of zoom out a bit and think about your last question there, look, we obviously don’t talk about future capital decisions. But we — as you alluded to, we did three convertible note buybacks last year, we will always be opportunistic on the capital front.
Ryan Tomasello: Great, thanks for that.
Dod Fraser: You bet.
Operator: Thank you. Our next question comes from the line of Mike Ng of Goldman Sachs. Please, go ahead, Mike.
Mike Ng: Hey, good afternoon. Thank you very much for the question. I just had a follow-up on the earlier question regarding OpEx and marketing spending. I was just wondering if you could talk a little bit more about any of the direct benefits that you see from increasing marketing spending? Is there a direct relationship between marketing and your pace of acquisitions? And then said differently, should the pace acquisitions increased because of your step-up in marketing spend, why is it only flat sequentially? I’m assuming the top of funnel would widen because of that incremental spend? Thank you.
Carrie Wheeler: Hey Mike, it’s Carrie. So first of all, marketing will not be flat sequentially, right? It’s going to be up 50% in terms of advertising expense in Q1. That is part of the fuel to drive acquisition growth we’ve been talking about for the first half of the year, that’s one. There definitely is a correlation between advertising spend and how we drive volumes. It’s not all of the story. I mean things like partnerships are fixed and brand is less directly correlated certainly, but it’s a longer-term investment that we’re seeing in the payoff and things like brand awareness. So as Christy said, the step-up from Q4 to Q2, a good chunk of that, about half of that was in marketing. That’s probably the biggest chunk up we’ll have.
We’re always going to evaluate our marketing budget for the course of the year, but we’re comfortable with what you just told you, which is that should be the biggest step up for the year. And we tend to see — we spend into the first part of the year. We tend to get quieter in the very back half of the year because sellers require it. So yes, we feel good about — given where our spreads are today, we feel good about the marketing investment we’ve sized.
Dod Fraser: One added point, I think — and Carrie alluded to this earlier, if you think about how things flow through our business, we spend advertising dollars. And so what we’ve seen is an uptick in offers and acquisition contracts each month in the first quarter. And so really, the impact of that dollar spend flows through to closes in the second quarter, which, as we said, is we expect to be sequentially up from the first quarter.
Mike Ng: Great. Thanks for the thoughts.
Operator: Thank you. I would now like to turn the conference back to Carrie Wheeler, CEO, for closing remarks. Madam?
Carrie Wheeler: Thanks. First of all, thank you, everyone, for joining us today. I just want to say we’re excited about how we’re set up for 2024 and beyond. Hopefully, you can hear from us, we’ve done the hard work in 2023 to be leaner, to be more agile and to be able to rescale the business in a sustainable fashion. As I said, when not if. So heading into 2024, we’ll be deploying the same operating principles, focus execution results. We’re looking forward to speaking with you next quarter. Thank you.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
