MoneyLion Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

There are 8 speakers on the call.

Operator

Greetings, and welcome to the MoneyLion's Q2 2024 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shawn Horgan, Head of Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you, operator. Good morning, and thank you all for joining us for our Q2 2024 earnings conference call. With me today are MoneyLion's CEO, Dhi Chaobe and CFO, Rick Correa to discuss our results. You can find the presentation accompanying our earnings press release on our Investor Relations website at investors. Moneyline.com.

Speaker 1

Please note that any forward looking statements made in this commentary are subject to our Safe Harbor statement, which can be found in our SEC filings and our earnings press release. With that, I'll turn the call over to Dean. Thank you, Sean. Good morning, and thank you all for joining us for our Q2 2024 earnings call. MoneyLion delivered another strong quarter in Q2, achieving record revenue of $131,000,000 and adjusted EBITDA of $18,500,000 This performance is the result of focused execution against the growth pillars we laid out at the beginning of the year, coupled with our offense with discipline approach.

Speaker 1

Together, this guides our strategic and tactical decision making as we march toward our ambitious goal of becoming the number one destination for financial decisions. Now turning to the key takeaways for the Q2 of 2024. First, we achieved record quarterly revenue of $131,000,000 This represents 23% year over year growth. Importantly, our enterprise revenue has reached an inflection point, increasing 17% compared to the Q1 of 2024. In addition, our 2nd quarter revenue exceeded the high end of our guidance of $125,000,000 to $130,000,000 2nd, we generated adjusted EBITDA of $18,500,000 for the quarter.

Speaker 1

This reflects an adjusted EBITDA margin of 14.2%, representing 550 basis points of margin expansion year over year. Relative to our guidance, our 2nd quarter adjusted EBITDA was exactly in the middle of our range of $17,000,000 to $20,000,000 3rd, in the second quarter, we generated GAAP net income of $3,100,000 and diluted earnings per share of $0.26 And for the first half of twenty twenty four, we generated net income of $10,200,000 and diluted EPS of $0.85 If you look at how we've been building the business, there is a clear arc to our evolution. Our technology is expanding on the foundational work we've done over the last 10 years. We have the right pieces in place to deliver an even greater impact. From a strategic perspective, we are in pole position to be the number one destination for Americans to make their best financial decisions.

Speaker 1

Moneyline is the 1st digital ecosystem for consumer finance and we have all of the elements typical of a successful ecosystem. These elements are commerce, business services, content and developer kits. As we all know, digital ecosystems have disrupted many consumer industries. For example, leading companies like Amazon, Apple and Expedia all share some level of strength across these dimensions. Those ecosystems disrupted and dominated their industries.

Speaker 1

However, consumer finance has lacked a true digital ecosystem until now. We have spent the last decade building for this. We are the 1st digital ecosystem for consumer finance. Despite the presence of many that offer other parts of the equation, no single entity has successfully implemented a complete ecosystem strategy. This is what we're playing for.

Speaker 1

MoneyLion is already in the market with products and services across commerce, business services, content and developer kits with more in development in MoneyLion Labs, which I will discuss more in a moment. And the success of this approach is already reflected in our numbers. For 1, total customer growth is an outcome of this strategy. We ended the 2nd quarter with 17,000,000 total customers, up 73% year over year. This also represents 1,600,000 new customers compared to the prior quarter.

Speaker 1

Similarly, we've seen robust product consumption across 1st party and third party marketplace products. By the end of Q2, 2024, 27,700,000 total products were consumed on our platform. Importantly, 51% of the products consumed life to date were 3rd party, up from 39% through the Q2 of 2023. Off the 2,400,000 products consumed in the 2nd quarter alone, 1,700,000 were 3rd party products. This highlights MoneyLion's positioning going forward, providing the best marketplace for 1st and third party products across consumer finance verticals.

Speaker 1

Growth in MoneyLion's leading financial marketplace continues to be a key pillar of our ecosystem strength. As I mentioned before, our enterprise business has reached an inflection point. Enterprise revenue grew 17% quarter over quarter in Q2 2024. This bolsters our positioning to further diversify revenue across multiple financial verticals. And importantly, our consumer marketplace, which is part of our enterprise revenue has been and will continue to be a strong area of growth for us.

Speaker 1

There are multiple ways for consumers to engage with MoneyLion's ecosystem. The direct to consumer product is showing great scale and helping consumers learn, search and get introduced to money topics. As we've said, this is part of our strategy of building the best commerce solution for financial products. Consumers then can access our financial marketplace in a data driven way, personalized exactly for their financial situation or they can take any of our first party features on an alacarte basis. Users can further reduce fees by accessing the best in class financial operating system with a never overpay promise through our Wow membership, as well as other programs.

Speaker 1

As you can see, aligned with our mission, our nimble technology stack and global team of engineers, data scientists and the industry's leading product builders and innovators allow us to deliver consumer PSM and liquidity products across multiple delivery methods. Innovation is in our DNA and we'll continue to build new products and adapt existing products as necessary. All this culminates into continued growth even as we scale. In the Q2, consumer revenue increased 33% year over year. As we just mentioned, we continue to believe we have the most full featured and innovative PFM in the industry.

Speaker 1

Importantly, this world class PFM technology is available via our mobile app and online at moneyline.com. Having this caliber of a PFM tool is the difference between a transaction and a relationship. This is a critical problem that plagues other marketplaces. As we'll talk about later, the benefits show up in our cohort data. Aligned with our mission, no PFN provides this much value around financial literacy, content and access to the best financial product from our marketplace as MoneyLion does.

Speaker 1

As we continue enhancing our best in class PSM, we're pleased that we've extended our agreement with our partner bank, Pathward, for another 3 years to 2029. We've already had a successful 5 year partnership with Pathward, delivering the powerful combination of MoneyLion's innovative tech forward capabilities with the expertise of Pathwords OCC chartered banking infrastructure to millions of American consumers. In addition to extending our flagship RoarMoney digital bank account product, in the future, we will be adding overdraft protection capabilities to our program with Pathword and we'll be looking to provide overdraft features to help meet the liquidity needs of our customers. This is yet another example of our team quickly bringing new features to our sizable user base in innovative ways as we've done that for the past 10 years. The PSM capabilities enhance benefits in our network by providing an important companion in the financial product buying experience.

Speaker 1

And it plays an important role in optimizing conversions in our enterprise network as well. I'll now provide a quick update on our enterprise business. Our network of over 1200 enterprise partners continues to grow with over 85,000,000 total customer inquiries in the 2nd quarter alone. With respect to the macroeconomic environment, on our last earnings call in May, we noted that we were seeing stabilization in the underwriting environment, particularly as it relates to personal loans as rates began to normalize. In the Q2, we continue to see an overall stabilization and improvement in our personal loans vertical.

Speaker 1

Consumer interest in lending products remained strong and we consistently added new partners across the credit spectrum and other substitution products to our platform to meet this demand. Additionally, consumer inquiries for non lending products continue to grow and we have expanded our marketplace coverage to provide consumers with more access to new verticals like credit cards, auto insurance and mortgages. This contributed to our 2nd best revenue quarter for enterprise business. So far in the Q3, we're seeing a continuation of this trend with further growth and continued stabilization in the underwriting environment. The diversity of our partnership base is a key lever in managing macroeconomic conditions and partner driven idiosyncratic fluctuations.

Speaker 1

As you'll see in our Q3 and full year guidance, platform and partner diversity drives multiple ways to win and grow. The strength of the MoneyLion team is in managing these levers dynamically. We added even more senior heft this quarter with the hiring of John Kaplan, who was previously CRO of Pinterest and prior to that a VP of National Sales and Managing Director of the Financial Services vertical at Google. Turning to specific enterprise product updates, we continue to release new products that will reduce friction between consumers and relevant product solutions. These include new methods of distributing our marketplace technology, more credit based filters to enhance user approval rates, the launch of our new hosted decision engine capabilities and intelligent personalized remarketing.

Speaker 1

In making these updates, we're building towards a connected end to end checkout experience, which we will touch on in a moment. In short, we continue to make progress on our strategic initiatives within our enterprise business and the underwriting environment is showing signs of relative improvement. Now I'd like to turn to something we're excited to share with you all today. The first unveiling of what's been in our DNA since our founding, but now crystallized as MoneyLion Labs. We've always had R and D projects that later became scaled revenue drivers.

Speaker 1

But with Labs, we can now give investors more visibility into how this team will continue innovating and reimagining the future of consumer finance. As I mentioned earlier, we believe the 4 key elements of the digital ecosystem are commerce, business services, content and developer kits. We are executing this approach while building on our core businesses as we look to drive towards a more scaled revenue base in 2025 and beyond. First, starting with commerce, our new financial product search technology Moneyline AI brings together our unique assets, allowing users to talk to their money, receive unique Gen AI driven insights and receive personalized offers. Our ambition is for Moneyline AI to become the new form factor through which users engage with their financial decisions.

Speaker 1

Importantly, we offer Moneyline AI as an embeddable search bar for enterprise partners so that it can live on their mobile and web properties as well. 2nd, as it relates to business services, our end to end money line checkout experience will give businesses the ability to offer a more seamless customer experience that reduces friction and drives higher conversions. For the first time, a customer will be able to search for, find and take out a 3rd party financial product all in one place. Currently, financial product buying journeys are like the DMV being passed on from one desk to another. We intend to fix that.

Speaker 1

Checkout will empower financial services providers to reach consumers precisely with their exact criteria using credit, risk, cash flow, product history or other behavioral data. In addition to MoneyLion checkout, our business services capabilities include storefronts for 3rd party products, data analytics and reporting, programmatic compliance and much more. The 3rd element is content. A great example of how we're bringing this strategy to life is our content as a service solution. This builds on the investments we have made in this space.

Speaker 1

Our content capabilities also include content related to personalized products and offers, commenting, community and other social features, a robust library of financial literacy content and a lot more. And finally, the 4th relevant element is developer kits. MoneyLion is bringing this to life through web services, which includes things like audience builder, which allows enterprise partners to unlock the full potential of their marketing strategies with targeted engagement and next best action, which improves the ability to engage with customers by providing personalized recommendations that are both timely and relevant. Separately, MoneyLion offers developer kits, predefined compliance APIs and embeddable widgets and calculators. Through Moneyline Labs, you'll see that in addition to our financial performance, where we're consistently executing, we are setting a bold vision for the future and our role as the 1st digital ecosystem for consumer finance.

Speaker 1

Offense with discipline is possible because of the technology and data advantages that we have. And with that, now I'll turn the call over to Rick to provide a more detailed customer acquisition, unit economics and financial update.

Speaker 2

Thanks, Dee, and good morning to everyone. I look forward to sharing details about our financial performance for the Q2 ending June 30, 2024. I will also discuss our guidance and outlook for the Q3 and full year of 2024. For more information, please refer to our GAAP consolidated financial statements and non GAAP reconciliations, which are available in today's earnings release and our 10 Q filing. Turning to our customer acquisition and lifecycle strategy, our top of funnel continues to be highly productive and drove over 85,000,000 total customer inquiries in the Q2 of 2024, up from the over 50,000,000 that we saw in the Q2 of 2023.

Speaker 2

These inquiries converted into about 1,600,000 new total customers and 2,400,000 total products were consumed during the quarter. Our substantial top of funnel is a key pillar in our consumer finance ecosystem. It's the gift that keeps on giving. As we enhance our data platform and continuously optimize down funnel conversion rates. Now I'd like to turn to a concept that illustrates the power of our integrated enterprise and consumer business model.

Speaker 2

It relates to the customer journey and the 30, 60, 90 contribution margin progression that goes with it. Starting with 30, when a customer enters our ecosystem through the B2B channel and converts into a product, product partners pay us an affiliate fee and we pay away 70% on average to the channel partner, generating a 30% contribution margin. Those consumers become part of our dynamic ecosystem, giving us the ability to drive personalization and future product offers on the 30, sixty, ninety contribution margin journey. Next sixty, for over a decade, we have delivered important first party financial product solutions to customers and consistently generate approximately a 60% contribution margin. These customers also get added to our customer data platform that we look to monetize at future inflection points using our continuously improving life cycle marketing stack.

Speaker 2

Finally, 90, we leverage life cycle marketing and signals to offer our vast catalog of third party products to the consumers in our ecosystem, which represent 0 CAC monetization opportunities. Given that we earn affiliate fees on customers with de minimis CAC and COGS, we generate over 90% contribution margin. As a result of our unique ecosystem and data advantage, this cohort of customers is the fastest growing part of our business and contributes to margin expansion. Further, many of the strategic initiatives deep previewed in MoneyLion Labs contribute to shifting more of our product mix towards the 6090 contribution margin profile. Turning to our unit economics.

Speaker 2

In the last 12 months ending Q2, 2024, we added 7,200,000 total customers. Our customer acquisition cost or CAC remains under $15 Our payback period was around 5 months and our ARPU was around $35 It's important to remember that we have deliberately focused on rapid customer growth as we drive towards an optimal mix of 1st and third party product consumption. As mentioned, we are increasing our mix of 90% contribution margin cohorts and expanding our margin profile. These unit economics are a function of our strong business equation and they reflect our strategy to take market share by adding total customers rapidly and efficiently. We will invest in building the MoneyLion brand in the second half of twenty twenty four to build national awareness.

Speaker 2

This will be an opportunistic investment, but we believe this is the right time to give our holistic offerings broader reach and expect these investments to accelerate our shift in product mix towards 60% 90% contribution margin profile in the medium term. Now let me turn to our recurring revenue trends. In Q2, 2024, over 80% of our direct to consumer revenue from our first party products and our consumer marketplace came from historical cohorts of customers. We are seeing continued strength in our first party products. In the Q2 of 2024, total originations for these products were $770,000,000 representing an increase of 40% year over year.

Speaker 2

These products perform incredibly well and they serve the liquidity needs of hardworking Americans. Credit performance trends remained stable in Q2 2024. Our finance receivables provision expense as a percentage of total originations was 3.6% in Q2, 2024. As we noted last quarter, Q1 benefits from typical seasonal performance related to the cash customers receive from tax refunds. As expected, the credit performance we saw in the 2nd quarter reverted to historical levels, reflecting our deep experience in managing credit quality.

Speaker 2

As a reminder, our originations are comprised of short term receivables for our liquidity and credit building products. Originations are sold to non recourse warehouse facilities, shifting credit risk to our financing partners. We recently announced a new forward flow agreement to sell our Instacash Advance receivables. As stated last quarter, the forward flow agreement is more cash efficient and moves receivables off balance sheet with no variable interest entity or VIE treatment. We are currently transitioning to the 4th floor arrangement and will realize the associated benefits in the 3rd 4th quarters of 2024.

Speaker 2

Importantly, our holistic capabilities have been tested over multiple macro environments over the last decade. The resilience of our ecosystem and business model shines in these moments where macro volatility is increasing. Now turning to some of our other key financial metrics. MoneyLion generated $131,000,000 of revenue in the 2nd quarter. This represented 23% year over year growth and 8% quarter over quarter growth.

Speaker 2

Notably, we generated $475,000,000 of revenue over the last 12 months as of Q2, 2024. Now on to our path to profitability. As it relates to the 2nd quarter, MoneyLion generated $18,500,000 in adjusted EBITDA. This represents an adjusted EBITDA margin of 14.2 percent or 5.50 basis points of margin expansion from Q2 2023. Similarly, MoneyLion has generated $72,000,000 of adjusted EBITDA in the last 12 months ending Q2 2024.

Speaker 2

In addition, as Dee mentioned in the key investor takeaways, MoneyLion generated $10,200,000 of GAAP net income and $0.85 of diluted EPS in the first half of twenty twenty four. We ended the 2nd quarter with $98,000,000 in cash, up from 90 $3,000,000 at the end of the Q1 of 2024. MoneyLion is consistently generating positive cash flow now, and we intend to continuously optimize our cost of capital to align with our strong performance. Now turning to guidance. In the Q2 of 2024, we met or exceeded our guidance across all metrics.

Speaker 2

Revenue was $131,000,000 above the high end of our guidance range of $125,000,000 to $130,000,000 representing 23% year over year revenue growth and 8% quarter over quarter revenue growth. Adjusted EBITDA was $18,500,000 in the middle of our guidance range of $17,000,000 to $20,000,000 representing 550 basis points of year over year adjusted EBITDA margin expansion. Turning to our outlook, we are positioned for a strong Q3. For Q3 2024, we expect revenue between $133,000,000 to $138,000,000 representing 21% to 25% year over year growth. At the midpoint, this represents revenue growth of 23% year over year and 4% quarter over quarter.

Speaker 2

We also expect adjusted EBITDA of $18,000,000 to $21,000,000 representing approximately 13% to 15.8% adjusted EBITDA margin. At the midpoint, this represents adjusted EBITDA margin of 14.4%. We are also guiding to the full year of 2024, reflecting our confidence in our performance for the second half of twenty twenty four. For the full year of 2024, we expect revenue between $525,000,000 to $535,000,000 representing 24% to 26% year over year growth. At the midpoint, this represents 25% year over year growth for the full year of 2024.

Speaker 2

This also represents at the midpoint and implied Q4 revenue growth of 26% year over year and 5% quarter over quarter. We expect adjusted EBITDA of $80,000,000 to $87,000,000 representing approximately 15% to 16.6% adjusted EBITDA margin. At the midpoint, this represents an adjusted EBITDA margin of 15.8%. This also represents an implied Q4 EBITDA margin of 15.4% at the midpoint. While other business models are seeing weakness, we are enjoying growth and profitability given our unique ecosystem position.

Speaker 2

We are looking to finish really strong in each of the next two quarters and create significant momentum into 2025. With that, I'll turn it back to Dee for his closing remarks.

Speaker 1

Thank you, Rick. Despite the volatility of the macro and global events out of our control, MoneyLion is uniquely positioned to continue winning and gaining market share in the second half of the year. At the beginning of the year, we laid out our pillars for 2024. As we look forward, our plan is to continue carrying out our winning strategy. Our focus as a firm is to continue to execute.

Speaker 1

These pillars are worth restating. Continued growth in consumer. We will drive responsible, efficient growth in our consumer business through increased PFM capabilities, driving total origination volume, expanded total payment volume, strong credit performance with tight risk management and broader membership adoption. 2nd, relentless funnel optimization. We will optimize our enterprise funnel through improved data products, enhanced machine learning and continued optimizations through latest AI techniques, consumer experiences, remarketing capabilities and much, much more.

Speaker 1

3rd, product vertical expansion. We will deepen our presence in key verticals like credit cards, auto insurance and mortgages. This enhances our ability to deliver products to our users and our enterprise partners. 4th, expanded distribution. We will expand our distribution through new supply partnerships, new ecosystem partnerships, including and new form factors like Moneyline AI.

Speaker 1

And finally, longer term initiatives. As we mentioned today, we have introduced a number of new products including financial product search, MoneyLion checkout, content as a service and web services. We believe these will serve as longer term growth drivers in addition to the growth pillars that we provided at the beginning of the year. In summary, Moneyline continues to operate under the guiding principle of offensive discipline. Moneyline is the 1st digital ecosystem for consumer finance and we have all the ingredients to fill the void with the same playbook that has disrupted a myriad of other industries.

Speaker 1

For those reasons, we're confident we can deliver on our ambitious vision to be the number one destination for financial decisions. With that, I'd like to thank you all for joining us today. And I'll turn the call back over to the operator for Q and A.

Operator

Thank you. We will now conduct a question and answer Our first question comes from George Sutton with Craig Hallum. Please proceed.

Speaker 3

Thank you, guys. Nice results. So I wondered if you could walk through the model in the sense of if rates starts to come down, what the impacts might be? And can you give us any sense if you've assumed any of that in the guidance?

Speaker 4

Hey, George. Thanks for the question. So I'll go off with answering the second part of your question, which is we have not assumed the rate cuts within our guidance. And so as a reminder in terms of the model how it works, we on our enterprise side of our business, have kind of spent the past couple of years really diversifying the revenue mix away from consumer credit. 1, because that helps our customers in terms of the various decisions that they're making within their financial lives outside of credit.

Speaker 4

So we went from what was a couple of years ago, a 90% kind of concentration from a revenue perspective in consumer credit and lending down to around 55% in the most recent quarter. So the benefit of that, of course, is that we have a very diversified revenue stream. The other benefit of that is that as rates do come back, we would expect to see a tailwind. We said last quarter that we thought we saw the bottom in terms of what was basically channel partners or product partners moving away from extending credit and move from a defensive posture to an offensive posture. And you can see that in our results.

Speaker 4

So our enterprise business did enjoy our product partners kind of stepping back in. And so now we have the benefit of all of our verticals enjoying that growth. And that's what drove what is our 2nd best quarter ever within our enterprise business.

Speaker 3

Great. And then relative to the end to end checkout experience, so you mentioned you had 85,000,000 come into the funnel, you had 2,400,000 products. In the sense that you would have this end to end checkout experience, can you give us a sense of how those numbers might change?

Speaker 4

Hey, George, it's Steve. Good morning. Thanks for the question. So just broadly, the checkout experience, what it allows us to do is instead of passing the consumer from one website to another, oftentimes we've all been through application process fees where we put in all of our Social Security Number PII into one form and it gets passed on to another. That's unfortunately still the state of 80% of consumer finance.

Speaker 4

Now what we have been able to do is become the common language for publishers on one side of the market to talk to lenders on the other side of the market where we can now with of course significant consumer permissioning and consents pass that consumer through our engine of decision making where a lot of these lenders are now hosting their underwriting models. Just like a lot of these Internet companies host their websites with AWS, think of a lot of these lenders now hosting their underwriting models or waterfalls or knockout criterias inside of MoneyLion's secure ecosystem. So we're now able to tell the consumer that without an ounce of doubt, here's a personal loan or a credit card or a mortgage or a HELOC or an insurance product that they have qualified for that they can then and they're buying, right? So we expect that to be anywhere from a 20% to 40% conversion list on the existing funnel, right? That is not baked into the guidance and we believe it can be a game changer for us as we bring that to market.

Speaker 3

And lastly, when do you plan to be able to bring that to market?

Speaker 4

So we're transitioning clients over now. It's live. It's end market. It's not a pipe dream. So again, that's a process.

Speaker 4

As we've said in the past, we've made a lot of investments into our partner solutions team, to our sales team. You saw that we hired more senior as Head of Revenue and so on and so forth. So that will be a process over the next couple of quarters, but we do anticipate it to be in the medium term, not the long term where that checkout experience becomes more proliferated throughout the ecosystem. Now remember, as we've said in the past, our clients on the enterprise side are some of the most sophisticated, most compliance focused financial institutions in the world. So to walk them through the compliance process, the review process, the cybersecurity, the infosec, all of that is time consuming.

Speaker 4

But rest assured, we are hard at work converting all the logos that you see on the enterprise side of our ecosystem into that checkout experience. Super. Thank you.

Operator

Our next question comes from Hal Goodsh with B. Riley Securities. Please proceed.

Speaker 5

Hey, thanks guys. Thanks for all the updates. Question is on the personal loan market and the other new emerging verticals and mortgages, credit cards and auto insurance. Can you just give us

Speaker 4

a feel you said personal loans are stabilizing. Is it stable like flat year over year for

Speaker 5

you guys or just over turning the growth? Can you give us any more color on that? And can you give us a feel for the other verticals where they're at in terms of traction with partners, revenue, if you could, and where they are as part of your mix in the B2B side on the enterprise side? Thanks.

Speaker 4

Hey, Hal, good morning. Thanks for the question. I'll kick it off and then Rick can chime in on some of the first and second derivatives we're seeing on the growth rates in personal loans. But kind of philosophically, We have now significantly We have now significantly diversified that. But even inside of personal loans, we provide capabilities across the credit spectrum, right.

Speaker 4

So one of the reasons we've been able to keep the growth rate stable and if not growing in personal loans is because we've been able to go deeper into the credit spectrum. We've been able to go into financial wellness verticals like secure credit cards, different types of personal loans aside from just the $10,000 to $50,000 personal loans we've gotten in line of credit. So all of those substitution effects are really driving growth in our personal loans vertical, right? We're also, as we said, as Rick said just a few minutes ago that we saw the trough from a conversion rate perspective, that's coming back as well. And then again, we haven't baked in the really the reduction in the interest rates in our guidance.

Speaker 4

But if you think about it from a 1st principles perspective, a lot of the substitution effect that we saw over the last year and a half, over the last 18 months, where the rates were available to the consumer, but they weren't taking the product because it was just way too expensive from what they were used to. They had sticker shock and they were delaying a lot of the purchasing. So, now what we see is that as rates come down, that conversion rate naturally should improve a little bit inside of that core $10,000 to $50,000 personal loan vertical. So that's one point. The second point is, we talked about checkout, we talked about decisioning, We are bringing a very modern technology stack into the credit card world, right.

Speaker 4

So there are a lot of credit card marketplaces out there. The way we are building it should inherently have competitive advantages. Number 1, as we've talked about this in the past, we have our own media capabilities, right. So, our top of the funnel, we're reimagining how consumers interact with even the comparison part at the consideration point of thinking do I want to change a credit card. Most American households have 4 to 6 credit cards.

Speaker 4

So we think that there's lots of ways to really drive that funnel, whether it's through content, whether it's through calls, whether it's through a companion mobile app, we then can become the super supplier for large issuers. We started off that process, going really well. Credit cards are seeing a significant growth area inside of our enterprise revenue and we're pleased with that, but there's more work to do in terms of getting more and more issuers onto the credit card platform. Mortgages is still early. We have the tech stack, we're ready to go.

Speaker 4

But if you think about just kind of the dynamics, last year was probably the lowest first new purchase homes that we've seen in the last 15 years. This year, we're seeing some recovery and as we go into 2025, mortgages will be a growth area for us as well. So that's how we take a portfolio approach, but the tech stack and a lot of the work that we've done in compounding the technology behind the tech stack really positions us well to take market share. Yes. And what I'll add to that is, I appreciate your focus on enterprise, how, because we've been talking about strategically how important this part of our platform is.

Speaker 4

And if you look at the quarter over quarter revenue expansion, almost 17% in enterprise. And that doesn't happen by accident. It happens because of us being able to bring the kind of more and more products into the overall ecosystem. And it's what gives us the confidence when you look at our Q3 guidance. It's what gives us the confidence to have 4% quarter over quarter growth.

Speaker 4

It's what gives us the confidence to have 23% year over year growth having Q3. And then you'll see we've guided to the full year. So what that implies for Q4 is that we're then expecting a 26% year over year or a 5% quarter over quarter growth even in Q4. And that's because of the momentum that we're entering into the kind of 3rd and 4th quarters with given the enterprise business. And so one of the things that you'll continue to see from us is this focus on being able to take that full catalog of products and give them to our existing customer base and an existing consumer base.

Speaker 4

And that's when I talk about 30%, 60%, 90% contribution margin journey that our customers go through. The ability for us to be able to give customers that full spectrum of product offerings only happens because we've been able to expand within the product verticals. So again, appreciate the question. And you'll see that that's going to carry us into the second half of the year in terms of our expansion, both kind of on the revenue side and EBITDA margin expansion through the end of the year.

Speaker 5

If I could ask one follow-up, there was some recent news on Google on antitrust and I recall DU saying that MoneyLion has become an alternative customer acquisition service to Google and Facebook and others. And it might be kind of early, but I wonder if you could comment on the potential that antitrust might help or hurt you guys based on this recent news? Thanks.

Speaker 4

Yes, Hal. Look, I think just kind of as it relates to our business model, we've always said that we operate our own walled garden as measured by 85 +1000000 consumer increase over the last quarter increasing from $80,000,000 in Q1. It just gives us a lot of degrees of freedom. We are a must have channel partner for some of the most sophisticated and leading digital financial services acquisition companies. You can see that in our client list.

Speaker 4

And we provide a lot of capabilities. We talked about web services. So how do you navigate MoneyLion's walled garden? You have to optimize your ads, you have to optimize your content, you have to optimize your algorithms, right? So now even to kind of really operate inside of the MoneyLion engine network, clients are using a lot of these web services capabilities just like they would on Google or just like they would on Meta to build their audiences, to build the right algorithms.

Speaker 4

So I think there are a lot of similarities and we absolutely offer a very credible alternative to acquire consumers that are in market, that are vetted and that have a very high intention to take a financial product. And we're going to continue that, right? And that's really what differentiates us in the Fintech ecosystem as well, right? We're not just this or that. We are the ecosystem.

Speaker 4

We're the marketplace. And we're building tools for a lot of our publishing as well as our financial partners to navigate that ecosystem with precision.

Speaker 5

Cool. Thanks guys.

Operator

The next question comes from Kyle Peterson with Needham and Company. Please proceed.

Speaker 6

Great. Thanks guys. Good morning. Just wanted to touch on the guide, particularly in the back half. I know there's been some moving pieces between customer adds and ARPU.

Speaker 6

How should we think about those two dynamics in the back half of the year in terms of what's assumed in the guide?

Speaker 4

Yes. So, hey, thanks for the question. I think it's important when we talk about strategically what we've been really focused around, which is a significantly larger TAM. And so our goal has been to help every person in America be able to make the right financial decision. That gives us an enormous sandbox to play in terms of helping customers.

Speaker 4

And importantly, it allows us to be authentic in terms of bringing both kind of first and third party products to customers. And so what you'll see is in the past few quarters, we've been adding more and more consumption of 3rd party products. So we're really becoming a marketplace first business. And the benefit of that is, again, is we get to help our customers. We also are able to use that to drive record revenue.

Speaker 4

And so while ARPU has come down slightly, what you'll see is that it's actually allowed us to have a significantly faster growth rate around our revenue. The other thing it allows us to do is it allows us to take that customer on that journey that we talked about the thirty-sixty-ninety journey. We are now really focused on being able to not only kind of bring customers into the marketplace through our B2B channels, but we're investing heavily in our lifecycle marketing tech stack to be able to help those customers along a multiyear journey. So you'll see that that's also driving our lifetime value or expanding our lifetime value. And importantly, as I mentioned, that as customers go down that journey with us, we're now also driving higher revenue with those consumers.

Speaker 4

And so, we're comfortable making the trade off in terms of slightly lower ARPU for record level expected revenue over the next two quarters, while also expanding contribution margin and increasing kind of the margin profile of the overall mix more towards that kind of 60% to 90% profile.

Speaker 6

Okay. That makes sense. It's really helpful. And just as a follow-up, I wanted to just walk through a bit more on the transition to the forward flow in the warehouse. On the unit economics of that, historically, you guys have said it's relatively neutral to the P and L.

Speaker 6

So I guess should we kind of think of the provision expenses that historically is that a decent proxy for what the OpEx kind of loss on sale line will be moving forward? And I guess, could you just clarify the exact timing and kind of how fast that transition so far will occur in

Speaker 4

the Q3? Yes. So the question around forward flow, I'll take it kind of in reverse order. The timing is it's currently underway. So we talked about it last quarter.

Speaker 4

It was announced at the very beginning of July and we are in the process of transitioning right now. As you summarized, the benefit is it's more cash efficient. We also are able to move our receivables off balance sheet. And so from a credit risk perspective, we're going to shift that to our financing partners. In terms of the go forward, as you can see, we are relentless in terms of continuously optimizing unit economics.

Speaker 4

And so while, yes, this specific forward flow arrangement is relatively neutral from a P and L perspective, We continuously look for ways to optimize in terms of our processing, in terms of our overall underwriting. And so we would expect over time to continue to improve unit economics. And so if we kind of hold those two things separate, unit economics will continue to improve and the kind of forward flow arrangement will be more cash efficient for us and improve our overall cash flow, which you'll see even in the most recent quarter, we just continue to be cash flow positive in terms of being able to generate cash from our operations.

Speaker 6

Okay. And just to confirm, I guess, at least for in the near term, reasonable to assume that kind of the historical provision should be somewhat similar to the OpEx line item that will be replaced with? And then there's sort of upside down the road?

Speaker 4

Yes, we don't see any headwinds in terms of the performance of our consumer book. We had obviously that typical Q1 seasonal benefit. We had reversion back to our historical levels. And so going forward, we wouldn't expect there to be any change to that given the unique way in which we manage our customers and the way we manage our balance sheet.

Speaker 6

Okay. That's really helpful. Thank you.

Operator

Next question comes from Jacob Steffen with Lake Street Capital. Please proceed.

Speaker 7

Hey guys, thanks for taking my questions. Jumping between calls this morning, so apologies if I double cover something here. But maybe could you guys just touch on the overall marketing spend environment? I mean, what are you guys seeing in terms of with the election coming up? Is there any elevated marketing spend that may affect the customer acquisition cost here?

Speaker 4

Well, I think there are hey, Jacob, good morning. First of all, there are a couple of elements to that, right? There's the way that I distill your question is, there's customer acquisition costs for MoneyLion going into the second half of the year. And then there is the spend that 3rd party enterprise clients really perform on the MoneyLion ecosystem. So let me take the first one, right.

Speaker 4

So we see no impact to our ability to maintain tax and LTVs at the levels that we're guiding to in the second half of the year. As a reminder, we have multiple levers here to manage tax and LTV. We have the ability of course to use our organic capabilities. We've got a very strong returning customer base and that's what really drives the operating margin as well. And then from a channel perspective, we have levers across traditional performance media brand as well as MoneyLion spending on its own walled garden as well.

Speaker 4

Now we may take some strategic initiatives to invest in the brand in the second half of the year for sure as we see those opportunities arise. But again, from where we're guiding, there should be really no impact in our ability to navigate the multiple levers that we have. And really, we've seen this before. We've seen ebbs and flows in the marketing environment before and we've built our apparatus really to be responsive to that. On the second point, we are actually seeing increased spend on our MoneyLion engine marketplace, and that's encouraging.

Speaker 4

We've said that, look, you've got the Apple walled garden, you've got the Google walled garden, you've got the meta walled garden. Clearly, we're not as big as those just yet, but of course, we are a very important channel for financial services clients to get in consideration end market highly vetted consumers for financial products. So we're becoming a must have for the CMO inside some of these largest financial institutions and we actually see that accelerating going into the second half of the year, driven by some of the trends that you just mentioned.

Speaker 7

Okay, got it. That's helpful. And maybe just an update on Nexus. I'm not sure if you guys talked about that on the call, but any update would be helpful.

Speaker 4

Yes, sure. So our partnership with allows us to really develop and co build and co distribute embedded marketplace and embedded financial services capabilities for medium, small and regional banks, if you will, right. So, if you think about what we're doing with the technology build around MoneyLion checkout, around a lot of the web services capabilities, all of those are really compounding into these modular building blocks that we are then using channels to increase the partners that we have on the enterprise side of the business. And is a great partner in doing that. That's continuing to progress.

Speaker 4

That's continuing to really again, these are really highly sophisticated financial institutions where we have to engage in long sales cycles. But again, it's going exactly the plan and we continue to believe that it will be impactful in late 2024, early 2025 from a contribution perspective.

Speaker 7

Okay. That's helpful. And then just last one for me. The 8 ks you guys put out this morning, that wasn't your earnings release. Maybe if you could just kind of help us understand it.

Speaker 7

Is that moving towards kind of a bank overdraft framework for your the Instacash product?

Speaker 4

So the 8 ks that we put out this morning was an extension of our relationship with Pathway, our partner bank. This is a very fruitful 5 year long relationship. It's just an extension. We're always looking at innovative ways to provide liquidity products to to millions of our consumers. So we added we did add the capability with Pathwork to provide overdraft protection to our already feature filled RoarMoney digital bank account.

Speaker 4

And we have multiple ways to win and this will be a complement to the existing first party consumer capabilities that we're providing.

Speaker 7

Okay. I appreciate all the color. Thanks, guys.

Operator

Thank you. At this time, this concludes today's teleconference. You may disconnect your lines at this time.

Powered by Quartr
Earnings Conference Call
MoneyLion Q2 2024
00:00 / 00:00