Michael Ng: Hey, good morning. Thank you very much for the question. I appreciate all the revenue guidance by segment for 2024. I was just wondering, if you could talk a little bit about the contribution profit outlook, key things to consider for each segment and any specifics around 2024 by segment would be helpful? Thank you.
Anthony Noto: The way to think about it is, the Lending business is meaningfully profitable, very high contribution profit margins there. For those that have been following us for a long time, you’ll remember the comments that we’ve made about ensuring that our loans have a 40% to 50% variable profit margin per loan, so that those loans will be durable through the cycle and we remain focused on achieving that. The second thing, I’d say is on the Technology Platform, the margins contracted there quite meaningfully prior to this year as we invested in moving to the cloud from on-prem, and we invested in new architecture and new products and services, and we’re now seeing the benefit of those investments coming in, higher revenue and more operating leverage.
And you saw the nice contribution profit margin expansion there, which you can continue to see with more revenue. It’s a business that once you exceed your fixed cost, the incremental profitability is quite meaningful. And in the Financial Services segment, it’s a lot harder to talk homogeneously because there’s so many different businesses there. Chris said on the call that we’re losing over $100 million a year from a contribution profit standpoint across the different businesses we’re investing. Despite the fact that we achieved $25 million in the quarter of contribution profit, we’re still losing meaningfully in businesses like Credit Card and SoFi Invest because of the acquisition costs there, but also because the fixed costs are not covered by the variable profit yet.
And so that business has a lot of upside in contribution profit. We have think about it by business and where those businesses are in their development cycle and so Invest and Credit Card are very early in their investment cycle and therefore losing a lot of money. SoFi Money is now variable profit positive and carrying the weight of the profitability of their overall business. We also have some ancillary businesses in there that are high margin, that are small dollars that contribute nicely, but they’re not the biggest contributor to that area. Next question?
Operator: Thank you. Our next question is from Vincent Caintic from Stephens. Vincent, please go ahead, your line is open.
Vincent Caintic: Hi. Good morning. Thank you for taking my questions and I appreciate all the details. Going back to the breakout expectations, I wanted to focus on, sort of your expectations for how that affects loan sales and what your pipeline looks like for loan sales. Should we expect an acceleration in loan sales in 2024, if rates continue to go down? And then, on the fair value mark, does the current fair value marks actually reflect the four rate cuts already, or should we expect that discount rate to decline and therefore increase the fair value mark as time goes on? Thank you.
Christopher Lapointe: Yeah. Sure. In terms of the overall demand for our loans, the demand remains extremely robust. You saw that we did over $1 billion of sales in Q4, $875 million of which came from unsecured personal loan sales with a $375 million securitization and $500 million of sales in whole loan format. We do expect demand to remain robust. We’re seeing that already in Q1. As a reminder, we do have a forward — $2 billion forward flow arrangement in 2024 with a party that has bought loans from us over the course of the last few quarters that will stay intact throughout the year. And then we do expect robust demand on other — on the run loan transactions that we’ve done, akin to what we did in Q4. So overall, really good demand as strong execution levels as demonstrated in my prepared remarks.
In terms of the fair market value marks, these include the four rate cuts already. Our marks are reflective of a point in time. So as of the end of Q4, the marks reflect what the underlying benchmark rate as of December 31.
Anthony Noto: So they don’t reflect the four rate cuts going forward. The other thing I’d say is, as we think about our durability of our loans, we have continued to reduce our credit box. In this late December, we reduced underwriting by eliminating what we call tier six and seven, which is the higher end of our FICO band. As those that know the company, we underwrite 685 going higher and our average is much higher than 680 in the mid-7s as we talked about earlier. But as we progress through the year, we have reduced our credit box and we continue to do so. And in December, making a relatively big change on six and seven, so that our loans are durable through the cycle, whether we hold them on balance sheet or we sell them.
Christopher Lapointe: And then the only other thing I would add, just to follow on to my point around, do the marks include the four rate cuts? As you all know, what we hedge interest rate exposure on our loans. So when interest rate drops, the value of the loan increases, but that’s offset by hedge losses. Similar to what happened in Q4, we saw meaningful interest rate reductions, but we also had meaningful hedge losses that offset that.
Anthony Noto: Next question, please.
Operator: Thank you. Our last question we have time for today is from Dominick Gabriele from Oppenheimer. Dominick, please go ahead. Your line is open.
Dominick Gabriele: Hey, guys. Thanks so much for the question and the color across the call. So maybe, Anthony, you can talk to us or Chris through the assumptions that lead to your mid-20% revenue growth within the Tech Platform, that’d be really helpful. Maybe including, if possible, breaking it down by the new client wins, pipeline for deals, customer ads, anything you can provide, I feel like this target is likely going to be of significant importance moving forward. Thanks so much.
Anthony Noto: Yeah. We’re not going to get into that level of detail. We’re in the market in conversations with dozens of potential partners across the spectrum of the diversified customer base we have. We have an ongoing dialogue with everything from government-related deals for child support and benefits from the federal government all the way to new consumer Financial Services offerings from large established non-financial services brands all the way to big, large traditional banks in our country. The drivers of the business are quite simple. We have an underlying payment processing platform that you should think about generating revenue based on two factors. One, getting paid based on the transactions that occur in that platform, the volume of those transactions, and the price for those transactions in addition to the APIs that we provide.
Within the Technology Processing platform, we provide APIs for account opening, for bill pay, for two-day early paychecks, for person-to-person payments, for Payment Risk Platform fraud capabilities. And so different partners use different APIs and the more they use, the more we get paid, but it also drives the more transactions. In addition to that, we have other products like Konecta, which is a natural language chatbot that uses machine learning. We also have a product called Payment Risk Platform, where we’re helping people decide instantaneously on the risk of a transaction and whether or not it should be authorized or not, and we get paid for each one of those authorizations. In addition to that, we have Technisys banking core, which is a much larger decision for any institution use, but think of a core as an operating system.
