Dave Girouard: Yes, seasonality in our business is fairly consistent. We did exactly what we would have expected this year where the sort of loan demand troughs and also credit performance improves a lot during the season when people are receiving tax refunds from the government. And that has played out every year and we saw it again this year. So that’s, we were sort of planning on that. We’ve begun to model that into our credit, et cetera, and expect it. And so it seems to have gone the usual path.
Operator: And our next question will come from Giuliano Bologna with Compass Point.
Giuliano Bologna: Good afternoon. One thing I’d be curious about kind of thinking right about and realizing you had some commentary about some model improvement but it seems like a lot of your loans were being priced above 36%. I’m curious if there’s any incremental sense of what portion of the funnel you think you could push below 36% over the next few months and quarters and how that could flow into incremental origination volumes?
Dave Girouard: Yes, Giuliano, it’s a good question. Yes, because we have a limit, there’s no loans above 36% on our platform. That means when underlying rates or return demands go up as well as when loss assumptions go up, a lot of people will no longer be approved. And that’s one of the fundamental challenges of having that limit at 36%. Having said that, it also works the opposite way. So as rates come down and or risk comes down, which we measure as UMI, a lot of those people will come back into the approval fold. So it’s one of the things we deal with. We’ve also mentioned several initiatives to actually bring more people into the approval bucket, things like the auto secured personal loan, things like the small dollar loan. So we’re tackling it on many fronts because we’d like to stay in that sort of 36% envelope because it sort of reflects where nationally chartered banks can go, and so it feels like a good place for us to be.
Giuliano Bologna: That’s helpful. And I realize you provided some commentary about the co-investments, it looks like the fair value is down $10 million, linked quarter. When we think about the kind of bucket of loans that’s associated with because obviously multiple vintages there. I’m curious what vintages are driving that kind of the deterioration in the pool. Is it coming from, yes, four quarter old vintages, three quarter old kind of I am kind of just curious what vintages are driving that and if you’re seeing any changes in the trends across the vintages that are covered by co-investment.
Sanjay Datta: Hey, Giuliano, this is Sanjay. Yes, I would say this is, the dynamic here really is more about a move or maybe we’d call it a deterioration at the prime end of the borrower base, and it has happened pretty consistently across vintages. I mean, the more seasoned the vintages, the less loss it has left in its life, so the less impactful it is, but I would say all else equal, prime borrowers, whether they took out their loan a year ago or a month ago, have all performed a little bit worse this year than they were performing six months ago, and that’s the thing that’s being reflected in the lower volume guide that we have for Q2, as well as some of the fair value changes that have really been reflected in our risk sharing positions, so I wouldn’t call it a vintage-specific thing.
Operator: And we’ll take a question from Simon Clinch with Redburn Atlantic.
Simon Clinch: Hi, everyone. Thanks for taking my question. I wanted to follow up on the questions around the second half. I mean it’s the first time for a while we’ve had you give that kind of visibility. And I was wondering if you could perhaps give a little bit more color around what you’re actually anticipating in terms of the conversion rate as the borrow constraints ease and what you’re probably assuming in that guidance? And then to that last point about the primer and the primer end of the market, are you assuming continued deterioration in that part following the current trends within that work as well for the second half?
Sanjay Datta: Hey, Simon. Well, I’ll take crack at the first part of your question, which is really the second half of this year. And again, let me just kind of reiterate some points, because as you mentioned, we are going back to longer term perspective somewhat here. And it’s important to remember the reason we went away from that over the recent past is because we were grappling with a very specific thing in the macro. And that thing, as we said, is that when the economy received a large influx of cash in the form of stimulus, that then abruptly stopped. It created; it propagated a massive wave of elevated defaults. And that thing worked its way through the borrower base, starting with the sub-primer folks and working its way to the more and more affluent folks.
The folks who were impacted earliest, the borrowers that were at the sub-primer end of the spectrum are now well on their way to recovery. The prime-ist end of that spectrum, I think we’ve said, is sort of like more recently crested in terms of their default patterns. And because we’ve now seen that essentially play itself out, we’re now back in the environment where there’s just sort of, in our view, regular macro risk and execution against the product roadmap in order to create model gains. So I believe we are, in some sense, back in the environment we were in before the stimulus and, frankly the pandemic. And in that world, most of our growth was directly reflected in conversion gain. And most of that conversion gain came directly from improved model accuracy.
So I think you can roughly intuit that sequential growth that we’re telegraphing for the back half of this year. We expect most of that, if not all of it, to show up directly in the form of conversion. Now, in that long explanation, I’ve forgotten what the second part of your question was. Would you mind repeating it?
Simon Clinch: No, the second part of that question was just around the primer, and if you’re actually assuming that to deteriorate, but you’ve said it’s crested and sounds like you’re assuming just go back at a normal level, is that fair?
Sanjay Datta: Well, to be clear, we are — defaults now are very high. We’re not expecting them or assuming that they’ll go back down. We will just assume that they won’t further deteriorate, right. I think we’re sort of assuming a constant macro to today, not an improving one. An improving one would, we believe, be a tailwind to what we’re working against.
