Reginald Smith: Hey. Good morning. Thanks for taking my question. Chris, I think you said that personal loan charge-offs were 4%, I believe, for the full year, I was wondering, if you could tell us what that was for the fourth quarter? I was — I guess my math, and it could totally be off, I had you guys at like 3.1% through the first three quarters of the year, and that would imply, I think, like a 6% loss rate in the fourth quarter. So I don’t know if I’m wrong there, like any color there will be helpful?
Christopher Lapointe: Yeah. No worries. Hey, Reggie. In terms of the fourth quarter, what you heard in my prepared remarks was accurate for the fourth quarter. So our NCO rate for the personal loans business was 4.0%. That was up from 3.44% in Q3 of 2023. As Anthony had alluded to, we do expect a continued normalization towards pre-COVID levels and life of loan losses in the 7% to 8% range.
Anthony Noto: Next question?
Operator: Thank you. Our next question is from Dan Dolev from Mizuho. Dan, please go ahead. Your line is open.
Dan Dolev: Thank you. Hey, guys. Excellent quarter. Nice work. Anthony, maybe a question for you. You provided a nice outlook on profitability into 2026. Can you maybe give us your comfort level on the earnings — the long-term earnings power of the business? Thank you.
Anthony Noto: Yeah. I think that there’s two important indicators for the long-term earnings power of the business, which is what have we done to date and then what’s the sort of incremental way to think about profitability? So 30% EBITDA margin in the fourth quarter is a huge milestone for us. I cannot tell you the number of people that I mentioned, our long-term margin at 30% too that were naysayers there. So I’m really proud of the scale that we’ve achieved at over $2 billion of revenue, but equally proud of what we’ve done from a profitability standpoint to have 35% revenue growth, which accelerated with a 30% actual EBITDA margin and GAAP profitability shows you the earnings potential of this business. The margin could be much higher than 30%, but we’re sticking to that as our long-term margin today.
As I think about 2026 in that time period, a margin profile in the 30s is what would help us get there and would make it achievable. If you think about our businesses individually than collectively, as a series of unit economic businesses, where we’re architecting the revenue per account, the variable cost per account, to the variable profit margin that obviously exceeds the customer acquisition cost by a meaningful margin and then pays back after 12 months to 24 months. As you scale that variable profit per account, you’re going at a fixed cost base. Once you get that above the fixed cost base, the incremental unit economics just drops to the bottom line, and our unit economics are greater than 30%, which means our long-term margins could be greater than 30%, but we’re going to stick with that right now for our long term margin.
It’s quite surprising, we achieved it so early, while we’re still growing, so that should be a great indication of what the future could bring. But we’re not going to push it higher than that because we want to make sure we hold ourselves accountable to some constraints on what we invest in while balancing growth versus profitability and marching towards higher ROE and greater tangible book value growth. Next question, please.
Operator: Thank you. Our next question is from Jeff Adelson from Morgan Stanley. Jeff, please go ahead. Your line is open.
Jeffrey Adelson: Hey. Thanks, guys. I appreciate you taking my questions. I just wanted to dig in on — follow up on Reggie’s question a little bit and dig in on the credit on the personal loan book. I know you did modestly increase the life of loss expectation there to 4.8% this quarter. I guess when we look at some of the ABS data, it does look like the data continues to get worse and we have other lenders out there in the consumer world that have flagged that losses should also get worse this year. So I’m wondering, if you could help us frame, where you have your expectations for 2024 credit on the loss side going there. Is there a world where you see that overshooting the kind of 4.8% life of loan expectation this year, or do you think that it could kind of hold there? And then as a follow up, I’m wondering you could also provide the dollar benefit to NII you got this quarter or revenues this quarter from the new secured financing you announced? Thanks.
Christopher Lapointe: Yeah. Sure. So on the actual PL losses, I just want to be clear, when I mentioned the 4.0% NCO rate, that was an annual loss rate where we expect it to normalize too is 7% to 8% life of loan, which translates closer to a 4.8% to 5%-ish annualized loss rate, which we expect to occur in the first half of 2024. The reason that we get confident that we are going to peak out at those levels is that if you look at our NCOs for Q4 of 2023, about 15% of those net charge-offs are related to credits that we have removed from the system and that comprises about 3% of the overall UPB on the balance sheet. That’s expected to get down to less than 1% by the end of the year. In terms of your second question, around the benefit from revenue from secured financing that we announced, we did about $450 million in the quarter as I alluded to in my prepared remarks. The actual revenue generation associated with that in period was immaterial given time of sales.
Anthony Noto: And the only other thing I’d add is that, our backdrop for credit and credit performance and normalization is tied to our economic outlook. Obviously, in a more challenging economic outlook, those assumptions would likely not hold to be true and we’d obviously manage the business differently. I would say the one thing that’s been true over the last six years that I’ve been here is whatever we thought would happen with the economy isn’t actually what’s happened with the economy. And we have to be nimble and smart and read all the macroeconomic data points and our own business performances to adjust accordingly. So I don’t want anyone to think that the outlook that we have is in all economic backdrops. It’s not. It’s for the very specific one that we outlined. Next question, please.
Operator: Thank you. Our next question is from Michael Ng from Goldman Sachs. Michael, please go ahead.
