So the short answer is a lot of the things that have happened to our core business have also conspired to restrain auto lending volumes a little bit as well.
John Coffey: I just have one follow-up question. Last quarter, when you reported in August, you already had a month behind you, that being July. So given that you had your Q3 guide, what was the biggest surprise, given that you had still two months to go? What was the factor that – I know it wasn’t a big miss of guidance, but it was a miss. What was the thing that you thought recently was the thing you were wrong on or was the biggest surprise there versus what you originally thought of?
Dave Girouard: I’ll highlight two things that we sort of alluded to in our remarks. One of them is with respect to the transaction volume, the transaction revenue. One of our model launches this quarter allowed us to essentially measure the sort of macro impact along the lines of what we do for UMI, but at a borrower or in a segment level, which is a greater level of granularity in terms of macro sensitivity in the borrower base. And what that model quickly understood is that what’s happening in very recent months is that the – what you might think of as the primer or the more affluent borrowers are sort of starting to accelerate in their default trends, whereas the less affluent borrowers who were earlier affected last year in the sort of environment that we’ve been through are now much more stable, and it led us to be, I would say, a little bit more conservative in our approval of more affluent, sort of primer borrowers.
So that was one impact that I think versus what we had contemplated in our guidance was a bit of a delta. And the second one was just sort of a mechanical thing that showed up in that interest income. But it had to do with essentially a process change around the timing with which we were charging off bankruptcy loans. We went from the resolution of the bankruptcy to essentially the announcement of the bankruptcy and it had the effect of pulling some charges forward from future quarters up into Q3. And that’s something that we weren’t expecting when we announced guidance.
Operator: We’ll take our next question from Robert Wildhack with Autonomous Research.
Robert Wildhack: I wanted to ask about the co-investment summary on slide 20. Last quarter, the $40 million co-investment was marked up $11 million, so up 30%. And now, the $66 million is up, but it’s only up $7 million or like 11%. What were the drivers behind that markdown versus the second quarter?
Dave Girouard: It’s a great question. What you’re seeing there is maybe a bit of retrenching in how we’re valuing that. So it’s representative of what you might think of some headwinds over the past 90 days and how all of that system is performing. Look, one of the things that’s on our minds that I think is relevant here is we’re not necessarily adjusting this valuation for current seasonality. And it occurs to us, we’re in the worst seasonal part of credit right now. So credit, it is at its best from a seasonal standpoint in the sort of February to April timeframe. And it’s sort of at its worst in the October/November timeframe. I think some of what’s happening here is that, like, the seasonal headwinds, the credit performance are making this asset maybe look a little bit worse than it will in six months, and we haven’t necessarily gotten to the level of sophistication of adjusting for seasonality.
So I think that’s part of the story there. But some of it also may be durable, and therefore, what it would indicate is that stuff is performing marginally worse than it looked 90 days ago.
Robert Wildhack: On the committed funding partners, those initial agreements, the ones in place now, I think they were described as $2 billion in funding for the next 12 months. So that was roughly spring 2023 to spring 2024. So of the existing agreements, can you remind us what’s locked in for beyond spring 2024? And for anything that’s not, what’s the process or arrangement for extending or renewing those agreements?
Dave Girouard: I guess I would say we haven’t necessarily given specific numbers beyond the spring. I do think there was some announcements out there in the public, which alluded to some longer timeframes for some of those agreements. And so, some of those we expect to continue. I think with the other ones, as we get towards the sort of one year mark and depending on how happy the counterparties are and how happy we are and how well everything is performing, you might imagine that there will be discussions around renewal. So I think we’ll be undertaking those probably in the new year.
Operator: We’ll take our next question from John Hecht with Jefferies.
John Hecht: You did about $1.2 billion of loan originations and it looks like you cleared nearly a quarter of that through your on balance sheet securitization. So for the remaining 75-ish-percent, I’m wondering, could you just let us know what was the characteristic? Were they kind of bank buyers that have been around for a while? Are they more credit funds? Were they more tied to the counterparties in the forward flow agreements that you just were talking about? How do we think about the mix of that disposition?
Dave Girouard: Maybe just one clarification about the securitization. It was executed in Q3, but a lot of the loans that were sold into the securitization were originated in Q2. So it wasn’t necessarily a component of Q3 origination. I think at a higher level, yeah, we sort of have these three channels, if you will, of funding. One is the bank and credit union channel where they’re typically doing the origination themselves as a lender, there is our sort of traditional forward flow channel. And now, there’s a newer channel of what you might think of as committed capital. I think in rough terms, the forward flow and the bank channel numbers are somewhat comparable and the channel by which we are providing loans into committed partnerships where we co-invest is slightly larger than the other two, but there’s a pretty good balance across the three.
Operator: We will take our next question from Giuliano Bologna with Compass Point.
Giuliano Bologna: Just going back to the committed capital co-investment disclosure that you have, I’m curious – it may have come up earlier in the call – roughly speaking, what the balances of loans that you have outstanding that you have a co-investment structure attached to, like this one?
Sanjay Datta: I think that’s disclosed in the Q. I don’t have the exact number on my fingertips right now. Last quarter, if you recall, the co-investment represented approximately 5% of the total. And I think that’s probably still a relatively consistent ratio.
Giuliano Bologna: Maybe a similar brief question related to the revenue from fees. Do you have the numbers for the platform referral fees versus the servicing income for the quarter and how that breaks down to the period? And the genesis of that is to kind of back into what the take rate was on originations?
Sanjay Datta: I think those numbers are also disclosed in the Q in one of the notes. And I don’t have them off my fingertips again, but I think you will see something like transaction revenue is maybe 3x to 4x the servicing revenue . Transaction revenue is up about 7%, servicing revenue is declining slightly as the outstanding balance in the platform declines. But if you want the specific numbers, they’ll be in one of the notes in the Q. We can point you to it offline, if that’s helpful.
