Giuliano Bologna: Thinking about the cadence kind of where you are on the funding side, I realize this is a question that’s been asked a few different ways at this point. But when you think about where you are from an operating perspective, you have to do more volume to get incremental margin to cover your fixed costs. I’m curious how you’re thinking about the cadence of how funding could come back or how you’re preparing to kind of manage the business for the foreseeable future, so if this environment persists for a number of quarters beyond 4Q.
Dave Girouard: Let’s see. Well, as I said in the remarks, I think there’s a lot of really good conversations happening on the funding side. The platform constraint today on growth is on the borrower side and our inability to approve. But in anticipation of that eventually changing, and as we said to one of the earlier questions, that could change because rates drop, it could change because sort of default trends normalize and UMI drops. In anticipation of that, we definitely want to have a few more agreements teed up and some partnerships ready to go at that time. But it isn’t the gating item on platform growth currently.
Operator: We will take our next question from Reggie Smith with J.P. Morgan.
Reginald Smith: Most of them might have been answered, but I was curious. You were talking earlier, I think a previous analyst had asked about approvals. And, Sanjay, I think you suggested that roughly a third of the loans that are approved are ultimately funded. Can you tell us kind of how that has trended? Has it changed over time? The second part of your question, do you ever approve borrowers for less than they request and do people tend to take those loans if you do?
Sanjay Datta: Well, the first question was what has happened to what we call acceptance rates, which is the instance where a loan is approved and an offer is made, and what percentage of those are accepted by the borrower. And those are currently at the 30% level. They’ve definitely trended down. I think they probably used to be in the 60s a couple of years ago before the environment sort of became very challenging. And the intuition is obvious. As rates have gotten very high, even though borrowers are getting approved under 36%, in some instances, the rates that they’re being approved for are quite high. And their propensity to accept those rates is a lot lower than it was before. The second question had to do with – remind me of your second question, Reggie?
Reginald Smith: If somebody comes in with a loan request and it’s totally out of whack with their income or debt levels, you ever approved them to less? Or can you do things like that to improve acceptance rates? Or is there a size below it just doesn’t make economic sense to do a loan? Any color there would be helpful.
Sanjay Datta: That’s a great question, Reggie. And we absolutely do that. There are many applicants who are asking for loan levels that we are not able to approve them for. But what we can do is say, well, we can approve you for a lower amount. And very often, those are accepted instead. That is a component of our acceptance rates, and it is a business practice we have.
Reginald Smith: Do you find that those loans tend to perform as well as you would expect? Or do they – what insights do they glean from those types of transactions? Sas They perform as expected on a risk adjusted basis. Because we’re approving them for a lower amount, that adjustment to the risk is commensurate with the risk that we perceive. And so, they, at the end of the day, for investors, perform as expected, just as full offers do compared to what we call these counter offers.
Reginald Smith: That makes sense. Last question for me, marketing I saw up sequentially. It had been obviously down a lot from the previous year. Anything to call out there on the marketing side, competition, advertising, what’s driven that?
Sanjay Datta: Reggie, I think the thing to call out is that we’re at the point now where we are, as I said, a borrower constrained platform. And as we regrow into prior volumes, all of that growth will be paid growth. So, obviously, as we’ve contracted over the past 18 months, we’ve prioritized organic and unpaid volume, repeat volume, if you will. We’ve got a great benefit from that. But I think the incidence of repeat loans will start to subside, just given the recent volumes on the platform. And as we sort of regrow into higher volumes, such as where we had been previously, that you’ll see a higher incidence of paid growth versus unpaid growth, and that will have the effect of bringing up the overall average acquisition cost.
Operator: There are no further questions at this time. Mr. Girouard, I will turn the conference back to you for any additional or closing remarks.
Dave Girouard: All right. Well, thanks all for joining us today. We continue to make strides in building the first and best AI lending platform in the market. There is not a company better positioned than Upstart to lead this transformation of the financial services industry. So thank you, and we’ll see you next time.
Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.
