Raul Vazquez: They’re pretty much across the board. They touched every department in the organization. So, it’s a combination of both compensation savings through headcount reduction and the non-comp savings and certainly narrowing our focus by eliminating the embedded finance partnership, eliminating the investing and retirement product, those contribute to the savings as well, John.
John Hecht: Okay. Then — and I know you guys have talked about pushing some price increases out to enhance the risk-adjusted margin. Do you still have more room there? Is it — out of the 40 states that you’re moving into, is there just a subset of those that you have more room? Maybe can you give us a sense for where yields might go?
Raul Vazquez: Yeah. I think we have a bit more room. We did share that our 32.5% portfolio yield was up 30 basis points quarter-over-quarter. So, we think we’ve done a good job, John, throughout the year, increasing pricing. And at the end of the year, we’ve shared that will end up with our year-end portfolio yield being 200 basis points higher than it was at the end of 2022. So, we think we’ve taken a lot of the improvement already. From here on out, it’s going to be smaller improvement.
John Hecht: Okay. And then — so I think the share count jumped this quarter. Was that tied to some of the, I guess, the warrants for the prior debt deal? Anything we should think about with the share count in the next couple of quarters?
Jonathan Coblentz: No, I think the share count should be relatively stable going forward.
John Hecht: And then, the last one is the flow arrangement, not the Castlelake deal, but the other one. I think you mentioned you’re going to be getting servicing income in this net. Do you expect to make any gain — will you be taking a gain on those asset sales as well?
Jonathan Coblentz: Great question, John. We expect that on a gain basis, it will be breakeven for us. So, we just economically wouldn’t expect to have a gain that we will have with servicing fee income. But the real win in this relationship is the Access Loan borrowers who are successful with the loan, they will become candidates for returning loans in — starting in the latter half of 2024. You may recall, we’ve had this program in the past, and it worked out really well for us. So, we’re looking forward to restarting it with Ellington.
John Hecht: Yeah. So almost like more of a customer acquisition type opportunity.
Jonathan Coblentz: Absolutely. No, that’s right. We’ll be able to serve more new customers without taking credit risk exposure and get the benefit of the customer life cycle.
John Hecht: Okay. Great, guys. Thank you very much.
Raul Vazquez: Thank you, John.
Operator: Thank you. [Operator Instructions] Our next question is coming from Lance Jessurun from BTIG. Your line is now live.
Lance Jessurun: Hey, guys. Thanks for taking my question today. In terms of interest expense, obviously, that contributed a little bit to the miss. But assuming we’re in a bit of a higher for longer scenario and rates are relatively stable, how are you thinking about the cadence of your interest expense over time? I know without giving guidance into ’24, but looking at where rates are versus where you expect your funding mix to be over ’24 and ’25, how should we kind of think about that cadence going forward?
Jonathan Coblentz: Yeah, that’s a great question, Lance. So, what I can point you to is interest expense for the third quarter was $47 million, and I said in my remarks that we expected interest expense for the fourth quarter to be $51 million to $53 million. So that gives you a quarter-over-quarter type cadence. We would expect that there’s going to be some continued upward pressure into 2024 just because the existing financings that we have that are at a lower cost of interest are going to start either going into amortization and coming up for renewal over the course of the year next year.
Raul Vazquez: And Lance, certainly, that view is part of what drove our thinking on the cost reductions and taking $80 million of expense out of the business on an annualized basis as we go into 2024 is just this certainly this view of higher for longer, with longer apparently getting longer and longer over time.
