Earnings Transcript for CURO - Q4 Fiscal Year 2021

Operator: Good day, and welcome to the CURO Holdings Fourth Quarter 2021 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded. I’d now like to turn the conference over to Matt Keating with Investor Relations. Please go ahead, sir.

Matt Keating: Thank you, and good morning, everyone. After the market closed yesterday, CURO released results for the fourth quarter and full year 2021, which are available on the Investors section of our website at ir.curo.com. With me on today’s call are CURO’s Chief Executive Officer, Don Gayhardt; President and Chief Operating Officer, Bill Baker; and Chief Financial Officer, Roger Dean. This call is being webcast and will be archived on the Investors section of our website. Before I turn the call over to Don, I’d like to note that today’s discussion will contain forward-looking statements based on the business environment as we currently see it. As such, it does include certain risks and uncertainties. Please refer to our press release issued last night in our Forms 10-K and 10-Q for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today’s discussion. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update or revise these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliation between these GAAP and non-GAAP measures are included in the tables found in yesterday’s press release. Before we begin, I’d like to remind you that we have again provided a supplemental investor presentation. We will reference this presentation in our remarks, and you can find it in the Events and Presentations section of our IR website. With that, I would like to turn the call over to Don.

Don Gayhardt: Thanks, Matt. Good morning, everyone, and thanks for joining us today. 2021 was a transformative year for CURO that will dramatically shape our company’s prospects and ability to drive shareholder value well into the future. We made two significant acquisitions

Roger Dean: Thanks, Don, and good morning. Consolidated revenue for the fourth quarter of 2021 was $224 million, an increase of 11% from the same quarter last year. Adjusted EBITDA was $17 million, and we reported an adjusted loss of $0.29 per share compared to last year’s adjusted EBITDA of $34 million and adjusted earnings per share of $0.20. Fourth quarter earnings were at a low point, and it’s pretty easy to summarize the drivers. First, we had the impacts of upfront loan loss provisioning on high levels of sequential loan growth with expected upticks in net charge-offs for credit normalization; second, sequential spending increases at Flexiti to support LFL’s onboarding and a really good holiday season for Flexiti’s merchant partners increased our sequential expenses. Net revenue for the fourth quarter decreased $2 million or 1% year-over-year and decreased $8 million or 6% sequentially. The sequential decline in net revenue reflected upfront loan loss provisioning on accelerated sequential loan growth and higher net charge-off rates from new customer mix and originations, seasonality and channel origination mix shifts. Our consolidated provision for loan losses exceeded net charge-offs by $15 million in the fourth quarter of 2021. The chart at the top of Slide 5 of our supplemental earnings presentation illustrates the loan-loss provision, tailwinds and headwinds by quarter and is useful for thinking about 2022. Consolidated operating expenses for the quarter increased $34.7 million or 32% compared to the prior year. Excluding the increase in operating costs related to the Flexiti acquisition, transaction costs associated with our acquisition of Heights and onetime store closure costs related to our second and third quarter U.S. store rationalization, adjusted operating expenses increased just $4.7 million or 4.4%, aided by cost savings from the store closures. The $4.7 million increase was due to the timing and level of performance-based variable compensation and higher variable costs, primarily due to collection and financial services fees on higher volume year-over-year, particularly in Canadian direct lending. 2021 loan growth was significantly influenced by our acquisitions of Flexiti and Heights. To illustrate, our gross combined loans receivable increased by $985 million or 165% year-over-year. Don mentioned earlier that excluding Flexiti and Heights, gross combined loans receivable increased by $66 million or 11% in 2021. Excluding the U.S. runoff portfolios, gross combined loans receivable increased $121 million or 23% in 2021. Turning to our business segments. Canada Direct Lending loan balances increased by $97 million or 29% during 2021 and 9% sequentially. Flexiti continued to grow rapidly throughout 2021, particularly beginning in the July 2021 when its exclusive POS financing partnership with the LFL Group began. In addition, the holiday season resulted in $114 million of Canadian POS Lending growth in November and December alone. Excluding the impact of the Heights acquisition, our U.S. gross combined loans receivable decreased $31 million or 12% in 2021, primarily due to COVID-19 impacts and runoff portfolios. However, excluding runoff portfolios and loans acquired with Heights, our U.S. gross combined loans receivable increased $24 million or 13% versus a year ago and 7% sequentially. Interest expense for the fourth quarter increased $10 million or 53% year-over-year primarily related to interest on non-recourse debt to support the loan growth at Flexiti and the additional $250 million tack-on issuance of 7.5% senior secured notes to finance in part the Heights acquisition. Turning next to credit. Our credit metric trends in Q4 were consistent with what many of our peers have seen overall, what is being turned as a trend towards normalization but still favorable to pre-pandemic run rates. Our consolidated quarterly net charge-off rates for the fourth quarter improved year-over-year by 220 basis points primarily from the relative growth of Canadian POS Lending, which shifts our portfolio mix to lower loss rate products. Sequentially, consolidated quarterly net charge-off rates increased 100 basis points due to the relative loan growth, new customer mix and originations, seasonality and channel origination mix shifts. U.S. quarterly net charge-off rates increased 340 basis points year-over-year and 275 basis points sequentially, primarily driven by new customer mix growth, origination channel mix and diminishing COVID-19 impacts. Notwithstanding, U.S. net charge-off rates remained 80 basis points below the fourth quarter of 2019. U.S. past due rate, including loans guaranteed by the company, improved sequentially by 75 basis points or 3% which was better than we expected. Canada Direct Lending net charge-off rates increased 85 basis points year-over-year and 110 basis points sequentially as provisioning fully normalized with no noise from allowance releases or adjustments. Canada Direct Lending net charge-off rates remain 240 basis points below the fourth quarter of 2019. The Canada Direct Lending past due rate increased sequentially 200 basis points due to growth and seasonality. Don already covered the 2022, 2023 outlook for several of our businesses. I’ll close with some color on Q1 expectations. We were encouraged by January’s loan growth. Consolidated balances grew approximately $34 million with both Canadian businesses leading the growth. Flexiti continued to grow in January bucking what is normally a seasonal decline for post-holiday merchant seasonality. Customer behavior through the U.S. federal income tax season is a big uncertainty for the next six weeks, and it affects the way we think about Q1 expectations. In thinking about Q1 earnings, I’d also point everyone to Slide 5 of our earnings supplement deck, especially the upper right chart. You’ll see that in the first quarter of 2021, allowance release driven primarily by the second round of major U.S. COVID-19 government stimulus resulted in the loan loss provision being $17 million less than net charge-offs. In other words, $17 million of pretax earnings benefit with historically low net charge-off rates. As we saw in the back half of 2021, loan loss provisioning normalized with loan growth and net charge-offs are bouncing off of unsustainable levels. And also remember that we acquired Flexiti at the end of Q1 2021. So we are comping against no operating expense base for Flexiti in Q1. This should result in Q1 earnings significantly below Q1 of 2021, but meaningfully improved versus Q4 of 2021. We will continue our practice of updating you on our outlook for the quarter next month. We ended the year with $63 million in unrestricted cash and $214 million of additional liquidity, including undrawn capacity on revolving credit facilities and borrowing base levels. We continue to work on several opportunities to expand capacity to support growth and capital return. And finally, our Board authorized our quarterly dividend about $0.11 per share and authorized a new $25 million share repurchase program. This concludes our prepared remarks, and we’ll now ask the operator to begin Q&A.

Operator: Thank you. [Operator Instructions] Today’s first question comes from Bob Napoli of William Blair. Please go ahead.

Bob Napoli: Thank you and good morning.

Don Gayhardt: Good morning, Bob.

Bob Napoli: Good morning, Don. How are you?

Don Gayhardt: I’m good.

Bob Napoli: So just a question on the 2023 outlook. And I kind of – as you’ve owned Flexiti now for a while, your confidence level in the revenue and pretax earnings for the Canadian businesses in particular. Canada Direct Lending, I would imagine you have much higher visibility and confidence given the longer history there, the Canada POS Lending and Flexiti. So I’m just – I was curious, I guess, on your confidence level, what you’ve learned in owning Flexiti for a year and the profit model – the long-term profit model, the confidence in that?

Don Gayhardt: Bob, I’ll talk a little bit about Flexiti and a couple of kind of broader comments and maybe let Bill comment on sort of the Canadian Direct Lending business. So we’ve owned Flexiti since March of last year. It seems like – it’s feels like a lot longer than that. But I think we – and we spent pretty much nine months in somewhat intensive diligence on that. So I think we’ve got to know the team there very well and really got to understand the business. And obviously, the merchant side of the business, the B2B side of the business. I think we had some really good exposure with that with our ownership and activity and Board service with Katapult here in the U.S. So it wasn’t a – it’s obviously different than a B2C company. I think it wasn’t a completely new animal from that perspective. I would say, I think what ultimately was compelling for us was that they were not only Desjardins, which is kind of an Uber credit union, a $600 billion and $700 billion asset credit union, but also TD Bank and some of the larger banks up there had really been getting out of the point of sales pace. You’d think the market was big enough, et cetera, et cetera. So we saw an opportunity for smaller players like Flexiti to sort of take share as the larger players exited and that thesis has proven, I think, very, very true. And then the big win for us was getting LFL. We basically kind of triple the origination base. We felt during diligence, we had a decent chance to get it. It wasn’t until after that – we had to get some of it. And I think we’re able to sort of get all of it. So I guess, in terms of like where the numbers kind of roll out from here, there aren’t any – there’s some new business in there, but there aren’t any sort of major new wins that are in the numbers. It’s basically kind of some growth in the existing merchants, some kind of a category of smaller wins, but there aren’t any kind of, we like to call them, earthmoving kind of merchant wins that are baked into the 2022 and 2023 forecast. So I think from a confidence level, I mean the drivers of that business are going to be – and we talked about yield. Yields been was a little bit lower in 2022. Volume was a little better. Yield was a little lower just because – so these are promotional periods, pay now interest for 90 days, 180 days, whatever. And then if you pay the obligation off in that period, we get our merchant discount, but that’s – and maybe some a little bit of fee income, but it doesn’t flip into an interest-bearing account. Like in the U.S., a lot of the card business, you probably know how to hump it, but a lot of people paying off their – certainly during 2021, buying like people paying off their balances more because they had more sort of disposable cash. And that’s starting to – I think, card balances in December – November, December started to come back. So we’re starting to see more of a normalization in terms of the rate at which consumers – remember, these are prime customers with 740 FICOs, the rate at which they let the promotional period kind of roll into an interest-bearing obligation. So – and then from there, we’ve got credit and credit’s been very, very good, and again, these are very high-quality customers. We’re trying to add some long prime to it. But by and large, it’s sort of our prime customer base. And then it’s OpEx. And there, I think the issue just we’re trying to make sure we invest in the right areas to continue kind of building. We mentioned we – they have a bunch of different formulation they can work on with merchants. But a sort of we call them, more robust pay and for product, a buy now, pay later product, we think something that that our merchant base is really going to like, and in some cases, I think it’s going to – from a competitive standpoint, it’s going to give us a nice leg up and one that’s more sort of easily integrated for online merchants. So we’re putting some real investment dollars into that. We started that in the back half of this year, about 2021 and that will continue into 2022. And then funding costs. And I think we – obviously, we spent – and Roger, he spent a ton of time adding a securitization. That deal got priced in and I think Roger probably November, December and closed. So we started borrowing and that’s putting stuff in the warehouse in the securitization in December and that’s going to lower our overall funding cost. So I think, by and large, those are kind of the big drivers. I think we feel good about our ability to manage those. Some of them, again, the externality for how the rate at which people pay off obligations not – that’s – we’re waiting for that. And I think we say, that will normalize but also probably credit quality ticks up a little bit. Our credit losses tick up a little bit as more balanced because obviously, if somebody pay – somebody just pays it off in the promotional period, you have no charge-offs. So there’ll be a little bit of a – but we want a reasonably high percentage of those to roll into a balance. So – but I’ll just – from a market position, we think they’re a market leader in point of sale in Canada. We think in direct lending, we’re a top three provider in the kind of direct-to-consumer space. And maybe I’ll let Bill talk a little bit about sort of our confidence levels in direct lending.

Bill Baker: Sure. Good morning, Bob. For us, it’s a few things, and I’ll be brief. But I think the first is the experience and tenure of our operating team. We’ve got a really good team who understands, which is the second driver I think is the product. And I think it’s our confidence and the stickiness and predictability of that open-end product. I think we’ve got the models really well refined. I think our team is very experienced in explaining and helping customers use it properly. And you can see that in the numbers as far as just how long the customers keep that product open and draw on it. And then the third is the growth in LendDirect. LendDirect had a terrific year last year on growth to the point where it was generating as many online customers as the Cash Money brand and obviously, with a much smaller footprint which led us to the decision to expand that footprint to the point Don made by at least 12 locations, perhaps more. Those would all be in the Ontario province, which gives us even more operating leverage and helps our marketing dollars go further.

Bob Napoli: Thank you. Just a follow-up question. The First Phase credit card, what is the – I mean, how aggressive is the rollout? What is – how much testing have you done? So what should we think about as far what is the near-term and long-term opportunity for that business, near-term cost, long-term opportunity?

Bill Baker: Yes, I’m happy to take that one as well. So we really are in a pilot phase right now, testing, all the workflows, making sure credit works, and we’ll continue to do that for the next couple of months. But at that point, just based on the structure of the product, we have the ability to ramp pretty quickly. So I think we want to make sure that everything works right, the customer experience is right, that our bank partner is comfortable with everything, that everything has bottomed up. That has gone reasonably well thus far. We’ve got a lot of good experience on the team at this point with – from a credit card experience perspective. So I think you’ll see the first quarter be – continue to be a rollout, opening new marketing channels, evaluating those. And then really in the middle to back half of the year, you see us get more aggressive with volume as we have the confidence to do so. The costs are really – it’s internal from a team perspective. And of course, you’ve got your bank costs and processing costs. But I think those are all, we’ve got those all baked into the model and understand the targets that we need to hit for that product to be successful.

Bob Napoli: Thank you.

Operator: And our next question today comes from Moshe Orenbuch with Credit Suisse. Please go ahead.

Moshe Orenbuch: Great. Thanks. And a lot of detail on the call on the Canadian business. Maybe you could – and you did kind of talk a little bit about the U.S. side and maybe just expand a little on what you think it’s going to take to get that back to where you’re – I mean – or maybe just tell us what your plans are and what you think it can get to within a kind of a two-year time frame?

Don Gayhardt: Moshe, it’s Don. Good morning. I’ll give a little color. Maybe anyone else can chime in. But so we saw – if you ex out the – for the run-off portfolios from regulatory change, the biggest ones will the California, Virginia and then the Verge Credit bank product. We saw 9% sequential growth in balances. I think last year, we said we’d like to see 8% to 10% sequential growth, absent the runoffs in sort of the core portfolios for some extended period of time. So I think we’re – the first quarter so far is tracking a lot. I think there’s a lot of people in our space have talked about this is going to be a very different tax season. So that’s part of our caution on guidance on the U.S. business, is just with the child tax credit payout last year, how that’s going to impact tax refund season and what the paydowns and credit, et cetera. So that will really get a little bit of a – we have some thoughts about it, and we’ve kind of prepared for a bunch of different outcomes, but it’s certainly going to be a different year than anything we’ve seen in a long time. So – but that – the tax season aside, I think that if you can – if we can continue to see good sequential growth. And if tax season is going to obviously have an impact. So maybe for the year, you’re still looking at balance growth that’s going to be well past 20% for the year in the U.S. And I think a lot depends on the macro, the factors in the U.S., but we’re still 2.5 million – 2 million, 2.5 million jobs in the number you believe, short of the number of people that were working before COVID in the U.S. Actually, that says Canada – Canada is actually the more people working in Canada now than we’re working with pre-COVID. The U.S., we’re still sorting – a lot of those jobs in the U.S. are in retail restaurant, hospitality jobs. And there’s a lot of – that’s a key kind of customer base for us. So provided that, that gap continues to close, we feel – you said kind of a two-year horizon, I think we see a two-year horizon. But remember, we still have portfolios in California, Virginia, Verge those from a regulatory standpoint, that business, we just – we’re going to have to kind of build back and that would out sort the benefit of some pretty nice pieces of business there. So I think it is – I think it’s a good question though is it is kind of a two-year build to kind of back from the sort of the COVID impacts because these balances pay off the smaller higher-yielding products where the products have paid off and stayed kind of depressed from a demand level more so than the larger ticket, the larger balance, lower-yielding products. So I don’t know, Bill, Roger, you have any comments on that?

Bill Baker: I think you covered. Go ahead, Roger.

Roger Dean: Sorry. Yes, and I think the other thing that’s obviously worth noting is we have to continue to be diligent on evaluating the cost structure of that business because of those trends and because with more – obviously, with more volume going online and also we’re not going to have an installment product in California in the future. So that runoff portfolio influences a lot of decisions around evaluating cost structure as well.

Moshe Orenbuch: Got it. Thanks. And maybe just as a follow-up, I mean your delinquencies overall were relatively stable in the fourth quarter and you’ve talked about credit normalization. Like you just – I understand the trends that you talked about kind of year-over-year differences in provisioning. But maybe just in terms of just the delinquency performance, are they at roughly normal levels? Is there more of that to come? Like how do we think about that into 2022?

Bill Baker: This is Bill. Maybe I’ll just share a few things, and I’ll let others chime in. But I think if you look – in the prepared remarks, we talked about the things that drive a lot of that, which is the channel mix, the new customer mix. But if you just look at it on a per unit basis, and then those that do go into delinquency and the liquidation levels, we continue to be – to perform well above where we were pre-pandemic. And I think a lot of that is – a lot of what we learned through the pandemic, both from a credit risk model perspective and just our recovery tactics. And we would expect to maintain a significant portion of those efficiencies as we move into a more "normal" period.

Moshe Orenbuch: Great, thanks.

Operator: Thank you. Our next question today comes from John Hecht at Jefferies. Please go ahead.

John Hecht: Good morning, guys. Thanks very much. Don, I think I can’t remember the last call or the call before, you talked about – you intimated kind of impacts of inflation and how that might affect things. I’m just kind of interested in update because, yes, I think we’re now seeing it in real-time action and how does inflation impact the different segments? I mean, I would assume the lending segment has a different impact than point-of-sale. Are you seeing any changes that are worth noting at this point in time as that develops?

Don Gayhardt: Yes. I mean, I’ll try to do this in a way that’s not – because I think it’s – you just hit on some of the complications, right, that it’s different – it has different impacts in different segments. So obviously, in the point-of-sales side, your AOV, your average ticket, is going to go up because you’re talking about furniture and appliances, stuff with either lumber or – but chips in certain appliances, et cetera. So you’re seeing some inflation in the AOV. And I think that it’s something that from a credit quality standpoint that we’ve got to be pretty mindful about how we adjust the underwriting side. I would say, again, as I said – remember, that’s a prime customer. So a 740, now we are adding some non-prime to that, and we’re working closely with our partners at Flexiti on the non-prime stuff includes the underwriting. But for now, overwhelming, that’s a prime customer. So with more sort of flex and ability to absorb price increases. And when I’m talking about price increase meaning they are just how much net disposal income do they have? So Canada is seeing – wage inflation in Canada was about 2.7% for 2021, but it’s expected to kind of keep going up from there this year. And in the U.S., I think it was 4.7%, but the rate – the sequential rate fell in the fourth quarter. And I think a lot of the forecasts are maybe that we’re sort of going to see some moderation there. So I think in the direct-to-consumer side, the thing for us is always, if the inflation is sort of – if prices are going up at a – on a kind of – something of a normal – again, we haven’t seen inflation like this since I was in high school, I think. So I don’t have a lot of experience with this in my business life. But I think in my experience, though, is that as long as there aren’t sort of shocks and the one I use – example I use is gas prices during Katrina. Katrina hit – obviously disrupted all the refinery capacity, et cetera and gas prices went in the period. And I went back to look at impact on 90 days of gas price of $2.11 to $3. And that’s the kind of spike that – and I remember in my prior job, that did have a credit impact because there was that big a spike. So but again, gas prices are up again. But I said I think the prices are moving up in a normal fashion, it gives our customers more ability to sort of adapt because, again, they live in tight budgets generally. And I think they have kind of an ingrained ability to manage it more tightly than customers that have more sort of flex in their disposable income. So we’re not seeing – I would say we are not seeing any – I don’t think we’re seeing any of that bleed over in the NCO and delinquency performance. I think more of what’s happening there is like you just kind of – is kind of returned to normal post-COVID as bank balances and excess cash starts to burn off.

John Hecht: Okay. That’s very helpful commentary. And then two quick questions kind of related to modeling. Is the runoff of like California and Verge, where are we in that whole spectrum? And then where are you guys putting up new branches? I think you talked to a dozen or so new branches?

Don Gayhardt: Roger, you want to talk about the portfolio run off?

Roger Dean: Yes, sorry, I was muted. Forgive me. Yes, John, for those runoff balances, just for perspective, those balances ended 2021, in total, at about $55 million. So it started – would have started 2021, we’re at about $85 million. And so the – obviously, one thing that sticks out because of how long – and that includes California, Virginia. Illinois, was tiny, and then the Verge product, the bank product. So $55 million of receivables running down. We still think that by the end of the year, by the end of 2022, we still probably have a quarter of that left.

John Hecht: Okay.

Bill Baker: And then, John, to the question on the branches, a couple of moving parts. One is LendDirect, and those will all be in the Ontario province mostly outside the Greater Toronto area, filling out some of the surrounding markets. We’re going to open a couple of cash monies again in some of outside markets this year. And then the Heights expansion will be primarily four new states for us.

John Hecht: Okay, great. Appreciate that, guys. Thanks.

Operator: And our next question today comes from John Rowan at Janney. Please go ahead.

John Rowan: Good morning, guys.

Don Gayhardt: Hi, good morning, John.

John Rowan: I missed the very beginning of the call. Two questions. So Don, did you kind of address the longer-term guidance? We haven’t had an update of that $3 a share number for 2023 since pre-Heights. I’m wondering if there’s an update to that number, where you think it is inclusive of Heights? I just wanted to get an update on that.

Don Gayhardt: Yes. I mean, John, we didn’t really addressed it specifically. And I think the – we addressed sort of the component pieces other than the U.S. direct lending business. As so we talked about Heights and interest to guide for Heights for 2023. And then we talked about the guide for – modestly higher guide for the combined Canadian businesses in 2023. So I would say that if you heard me answer about sort of the recovery of the U.S. business, if we can see – and again, this is not an official just saying if we can see a real recovery in that business over the next couple – again, a two-year kind of – where we see sort of pretty consistent sort of sequential growth in earning asset balances and pretty decent credit performance, our feeling is that you can kind of add up the numbers from the subsidiary pieces. And we think we can plug in a number for – if we get some growth and the kind of growth we’re talking about over a two-year period, I think we’re certainly of the belief that Heights – the $3 plus Heights in 2023 is absolutely achievable. But again, the piece of that we’re still a little cautious on for a bunch of factors we talked about is going to be the recovery of the U.S. business, do you want to talk about that obviously.

John Rowan: Yes. I mean, obviously, the U.S. business is still losing money on a – not on adjusted EBITDA, but on an operating basis. There was a lot of noise in the quarter in the U.S. business because of the Heights acquisition. Realistically, exclusive of that, I mean, how unprofitable is the U.S. business? And kind of where do you see that tipping point of it turning profitable again?

Don Gayhardt: So the other thing Roger said, I’m a little – I think in terms of sort of specific numbers, I just – I think we’re going to – we’d like to see things kind of spool out and get through the first quarter, which has talked about the tax season impact. But I’ll just say that the other thing we are continue – Roger mentioned, continue to evaluate is the cost structure in that business. We closed – I’m going to get the exact number on call, but somewhere in the neighborhood of 40 branches during last year. Some of the dynamics in terms of consumers’ willingness ability to do transactions online, which obviously have – into that kind of variable cost lending model are still there. So to give you like a more precise answer, I think we need to sort of be a little bit more precise and come to some conclusions about additional moves we’re going to make on the cost structure of that U.S. direct lending business. The non-Heights U.S. direct lending business. And obviously, Roger, Bill on comment by all means.

Roger Dean: Yes, John, I would – it might be helpful, and we can talk about it offline. Just Page 16 of our earnings release has the segment P&L for the U.S. and the segment operating loss for Q4, including – look, obviously, we capture the interest on the senior notes in that segment, John. But we have the operating loss for Q4 for that business on Page 16 of our earnings release is a little over $28 million.

John Rowan: Okay. And then just last one, I make sure I understood 1Q guidance. It’s weaker than 1Q 2020, but better than 4Q 2021, correct?

Roger Dean: Correct.

John Rowan: Thank you very much.

Operator: [Operator Instructions] Today’s next question comes from Vincent Caintic with Stephens. Please go ahead.

Vincent Caintic: Hi, thanks. Good morning. Thanks for taking my questions. Most of my questions have been answered. But one question about marketing and customer acquisition cost trends that you’re seeing. Your growth has been great. I think some of the other fintechs have pointed to higher acquisition costs and some concerns about low-end consumers starting to maybe slow down their spending. Just wondering what you’re seeing and how your particular growth, have you been able to generate that while keeping marketing efficient? Thank you.

Bill Baker: Good morning, Vincent. This is Bill. And so I think it’s – for us, as we’ve long said, the fact that we have a very diversified marketing funnel that gives us the ability to very quickly throttle up or fiddle down based on what we’re seeing in almost real time. And I think that was the case in the fourth quarter. In addition, we actually tested some higher cost per funded channels to see what that did for demand. And of course, now we’ll evaluate what the credit looks like and just how it performs as a vintage. But not to say that there aren’t pockets where you see increased marketing costs. Our ability to move that to a more reasonable cost channels and based on performance, I think it has been and continues to be a real differentiator for us.

Vincent Caintic: Okay, great. That’s all I had. Thank you.

Operator: And ladies and gentlemen, this concludes our question-and-answer session. I’d like to turn the conference back over to the management team for any final remarks.

Don Gayhardt: Hey, it’s Don, thanks, everybody, for joining us. We will talk to you again after we report our first quarter. Thanks very much, and have a great day.

Operator: Thank you, sir. This concludes today’s presentation. We thank you all for your participation. You may now disconnect your lines, and have a wonderful day.