Rick Shane: Thanks guys for taking my questions. First on the warrants that are going to be issued, I assume that those warrants are at the money on day of issuance?
Raul Vazquez: Yes. The warrants are in the money. That’s right.
Rick Shane: No I’m assuming they’re issued at the closing stock price or some formula? Not in the money, but actually at the money. So they’re not discount warrants, they’re par warrants?
Raul Vazquez: No, that’s not the case, Rick. They weren’t discounted.
Rick Shane: Okay, got it. And have you provided or would you provide the degree at discount so that way we can start to think about how to calculate the share account dilution?
Jonathan Coblentz: You should include them in the share account dilution.
Rick Shane: Okay. You’re saying 100%, so they’re €“ okay, fair enough. I get the implication. Second question is, there was commentary related to the volatility and uncertainty of fair value marks in Q1 this year. And the implication was that there will be negative fair value marks based on some of the commentary you provided. I’m curious, given that we are approaching or that you’re indicating peak in charge-offs what is changing? Is it the discount rate that’s driving this? Or is there something else if we compare the fair value methodology on Page 37?
Raul Vazquez: So I’m going to, Rick, this is Raul. I’m going to hand it off to Jonathan in just one second, but just as a reminder for people that may not be quite as familiar with our business as you are. You may recall a few years ago we used to provide guidance on adjusted EBITDA. So it’s something that we’ve done in the past. It’s a metric that we like because; it doesn’t have the movement that GAAP net income and adjusted net income have due to the mark-to-market. So just to let everyone know, this is guidance we’ve provided in the past. It’s a metric that we think indicates the health of the business and the ability to generate cash of the business more accurately than adjusted net income does. It’s just with this very uncertain environment.
Again, we’ve seen it just in the last few days. We feel that’s validated our decision to hold off for now on adjusted net income until things are a bit more stable and predictable. But I’ll let Jonathan go through the details on the rest of your question.
Jonathan Coblentz: Sure. So Rick, the things that could drive that volatility are just how quickly the ABS market strengthens. So, as you saw on Slide 36, the bond portfolio, which is a Level 2 asset, we used dealer marks and trace. So this isn’t judgmental. That’s at a 92.5% price and so, we’ve seen the ABS market open up very strongly which is good for future access, but if credit spreads improve more quickly it’s hard to predict how that, how quickly that’ll happen.
Rick Shane: Got it. So more liability driven. Last question, I apologize I’ve taken more time than I usually intend to, but there’s an interesting trend here. If we look at the multiplier, of the weighted average life of the portfolio assumptions back over time, it’s drifted up from call it three quarters to just now effectively a year. If we then go and compare Slide 38 where you see, you basically show the amortization of a vintage. And so for example, on Slide 38, the 2021 vintage is amortized down almost exactly 50%. If we compare that to the same slide from a year ago, two years ago and three years ago, the amortization at this point in time is almost exactly the same. How do we reconcile the difference in amortization versus the difference in weighted average life assumption?
Jonathan Coblentz: Okay. Let me make sure I understand your question. So you’re looking at Slide 38 and you were referencing which vintage that was halfway paid down?
Rick Shane: So if you look, the 2021 vintage as of the end of 2022 is essentially 50% amortized. And that is €“ plus or minus 150 basis points from where the 2020 vintage stood at the end of 2021. The 2019 vintage stood at the end of 2020. So I’m curious why, and again the part of the strategy has been to extend duration that’s reflected in the multiplier. I’m actually curious why it’s not showing up in the vintages.
Jonathan Coblentz: I’m not. Yes, I’m sorry. Go ahead Raul
Raul Vazquez: Yes. Rick, we may need to do a little bit more work to come back to you, but the things that come to mind off the top of my head, first of all, the strategy is not to extend duration. The strategy is to provide more capital to our best borrowers. So those tend to be repeat borrowers, people that have had success in the past, and because they may be on their third or fourth loan with us, they have access to more capital. And to your point, that does come with longer term. But just to be clear, the strategy is not to extend duration. It is to deploy capital to our best borrowers. And a byproduct of that is certainly what you mentioned. On the second piece, we’ll get back to you, but certainly the strength of the economy, what payment rates look like, all of those things make a difference in the vintage. It’s interesting that it happens to be the same, but let us do a little bit more work and get back to you on that.
Jonathan Coblentz: Well, just add one thing on that point near term, if you look on Page 36, the average life in years at the end of the third quarter last year was 0.92. And now it’s 1.00. I would attribute that mainly to the fact that in the current macro environment with inflation, we’ve seen voluntary prepays slow down, and you’d expect that even from very good customers who are continue to pay perfectly on time, they’re just looking to, pay the contractual amount rather than, maybe pay a little bit extra to pay down the debt faster.
Rick Shane: Terrific. Hey guys, thank you for all the time and I appreciate all the answers.
Raul Vazquez: Thank you for the questions, Rick.
Operator: Thank you. Next question is coming from Hal Goetsch from Loop Capital Markets. Your line is now live.
Hal Goetsch: Hey guys, I’d like to get a little color on your expense growth guidance and just, if you exclude the write-off of the goodwill, you had about 30% total expense growth for the year, and that takes into account the acquisition of Digit, and your expense structure in Q4 was actually lower than Q2 2022, so it looks terrific. What can we expect, in terms of like maybe a range of growth? Is it flattish mid-single-digit growth? As you come out exiting the year? What kind of being flattish the first half? Talk to us about the pace and cadence of expense growth in 2023?
Jonathan Coblentz: We actually see expense €“ OpEx going down.
Hal Goetsch: Okay.
