Blend Labs, Inc. Q2 FY2024 Earnings Call

Good afternoon, and welcome to Blend's Second Quarter 2024 Earnings Conference Call. My name is Winnie Ling, and I'm the Head of Legal and People for the company. Joining us today are Nima Ghamsari, Co-Founder and Head of Blend; and Amir Jafari, our Head of Finance and Administration. After Nima and Amir deliver their prepared remarks, we'll open up the call for questions, moderated by our Investor Relations lead, Bryan Michaleski. You can find the supplemental slides on our Investor Relations webpage at investors.blend.com. During the call, we'll refer to certain non-GAAP measures, which are reconciled to GAAP results in today's earnings release and in the appendix to our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Also, certain statements made during today's conference call regarding Blend and its operations, in particular, its guidance for the third quarter of 2024 may be considered forward-looking statements under federal securities laws. The company cautions you that forward-looking statements involve substantial risks and uncertainties and a number of factors, many of which are beyond the company's control, could cause actual results, events or circumstances to differ materially from those described in these statements. Please see the risk factors we've identified in our most recent 10-K, 10-Qs and other SEC filings. We are not undertaking any commitment to update these statements if conditions change, except as required by law. With that said, I'll now turn the call over to Nima.

Thank you, Winnie. Good afternoon, everyone. Welcome to our second quarter earnings call. The results we're sharing with you today reflect continued execution against the objectives we set out to achieve late last year, and I'm encouraged that our ongoing commitment to serving our customers through innovation and technology is paying off. We signed a number of important new deals this quarter. We brought more customers live on our platform, and we saw a record high economic value per funded loan, all of which showcase the applicability of our platform to the challenges facing origination broadly today. Before we get into the details of our progress, I want to spend a moment to share our latest perspective on the environment that we're operating in. Since we last spoke, there's been a meaningful shift in the lending environment across the U.S. and in the bond market. The bond market seems to be signaling that the Fed's target rate could end the year potentially more than 100 basis points lower than where we've been for the past year. Mortgage rates hit their lowest level since April 2023 earlier this week. And we're already starting to see this reflected in our business through application activity levels. While I'd say it's too early for us to tell how this is going to convert into fundings or revenue or what lies ahead regarding mortgage rates, as things shift seemingly day to day, it's an encouraging signal as we look into the second half of the year. Even more importantly, though, I'm hearing from our customers in the market that there's now a greater sense of urgency to get ready for the new market environment. In particular, while profitability has been low for mortgage companies in recent periods, that's resulted in a decreased appetite for investment. However, as they see the light at the end of the tunnel and notice rates coming down on the horizon, they're growing more optimistic. This means they are now willing to have conversations about how technology can propel them forward. Shifting away from the macro, our business is ramping up. We had several new customer wins across mortgage and consumer banking, and we have a pipeline that is as strong as it's been for quite some time, particularly strong in mortgage and home equity. As a reminder, our strongest periods of bookings typically occur in the third and fourth quarters because our customers, who are mostly banks and credit unions, budget for the upcoming year in those quarters. Over the past six months, we’ve been building a pipeline and watching it mature in the past few months, and I feel confident that we're well-positioned to execute some key partnerships during this important time. On the product front, we continue to be a leader in digital origination innovation, and we're investing across our platform. Amongst the newer additions to our portfolio are products focused on helping consumers refinance in an automated streamlined way, as well as a real-time home equity product allowing borrowers to quickly tap the equity in their homes. We're also introducing new features in our platform to leverage recent advancements in AI. This is timely because with so much money in untapped home equity and more loans becoming profitable as rates decrease, we're confident these products will help people access this enormous opportunity. We made significant progress towards our fourth-quarter non-GAAP operating profitability goal, which Amir will elaborate on later with regard to our work in that area and how we're continuing to pace towards that goal. Before we dive into more details on these highlights, starting with our platform, when we launched Blend Builder, we aimed to create an ecosystem in which Blend, our customers, and our partners could all innovate on a single platform. We already have capabilities built into the platform that span credit bureaus, income verification, automated underwriting, and digital closing, and we are continuously adding to this list. This quarter, we're excited to announce new functionality, starting with new account funding. For digital account opening, debit card funding is a critical piece of that, and we launched a new partnership with Astra, enabling a better deposit funding experience without the friction and cost it typically takes both for consumers and for banks or credit unions to turn on that functionality. Now, our customers can access this integration through our platform and offer more options to end consumers to drive deposits to their institution. You'll hear more about how Langley Federal Credit Union is already benefiting from this later. We are also incorporating new advancements with AI on our platform. We've integrated some of the latest large language models and are applying them to practical use workflows, which is very important for it to be a very practical use case. Given the rapid advancement in AI, we're positioned to leverage it to automatically process documents provided during workflows. Documents are still collected during most lending and origination workflows. For example, if you need to verify a birth certificate to open a new account, our platform can read and confirm the birth certificate in real-time, compare the data provided by the consumer, and prompt the consumer to make a correction if there isn’t a match. These simple examples are important because they are common, but they also illustrate AI's ability to streamline processes that people otherwise wouldn't be able to address economically in a real-time way. This application of AI is still in the early stages of improvement, but we expect to apply it broadly to various documents involved in the process to simplify and lower the cost of lending and account opening. We bring together capabilities like income verification and AI for our customers to create comprehensive solutions relevant to the market. Our deposit account solution and consumer loan solutions are great examples. Two new areas I’m excited to share today are a next-generation refinance flow and a next-generation home equity flow. In particular, I’ll discuss the refinance flow because it’s timely. As rates look to drop, in an ideal world, consumers could stumble upon lower rates, have a few taps to get approved, lock in their new rate and savings, and close with minimal hassle in a matter of a week or two. Today, however, this process is very arduous, often taking weeks or even months and incurring significant costs due to the amount of effort needed by the lending institutions. Credit reports must be reviewed, income verified, and files must be underwritten. Our new flow combines many of the capabilities I previously described to create a seamless refinance process that enables incredible consumer experiences, quick savings, and a more efficient way for institutions to produce those refinance loans. Although this is still in the early stages, we already have one customer and a couple of other projects in the pipeline for deployment. It has sparked broad interest among our customer base. This technological innovation creates win-win situations. Consumers receive the financial assistance they may need in this environment, while lenders can serve a greater number of borrowers at a lower cost. If solutions like this can gain widespread adoption in the market, it fulfills our goal of enabling consumers to lower their payments and lenders to better serve them, benefiting both parties financially. Citing some business highlights for the quarter, our continued focus on delivering leading mortgage capabilities has helped us acquire new customers and expand with renewing customers. Last month, Horizon Bank, an $8 billion financial institution based in the Midwest, chose Blend as their mortgage partner. Horizon was looking for a technology provider with highly automated workflows and advanced loan officer tools that could significantly enhance operational efficiency and loan officer productivity while also delivering an excellent consumer experience. It was a competitive process, and we are thrilled Horizon selected us to facilitate their consumers' home-buying journey. We also outperformed another large regional bank, which was facing frustrations with their existing technology. They sought a solution that went beyond a simple application intake tool and incorporated the necessary automation. The loan officer was not required to spend a lot of time manually inputting data into the loan origination system or chasing down documents. They were impressed by our integrations into their systems and the automation embedded in our origination flows, including the automatic generation and delivery of conditions and documents to borrowers. We managed to get this customer live in only a few weeks, and since then, they have already added home equity lending to their offerings. Before I discuss financial highlights, I want to touch on the investments we've made in our product, specifically catering to independent mortgage banks, who have faced significant challenges in this environment. We've assessed our product strategy within this customer segment to ensure we're ahead of the curve, resulting in several new features currently in development that we're making good progress on. One focuses on loan officer and branch configurability improvements. Top-performing loan officers tend to prefer managing their own workflows without constraints from our broad standards. For instance, some loan officers may choose to consult before checking a consumer's credit, while others wish to complete as much as possible before engaging with the consumer for a more in-depth conversation. We aim to enable loan officers to customize their bond experience, aligning it with their workflow preferences to better manage costs and sales motions. Another upgrade for these independent mortgage banks involves an automated disclosures flow, especially crucial for the refinance experience where automation is essential. We’re working on automating the generation of required documents for borrowers, such as loan estimates, ensuring timely and regulatory-compliant delivery. These are just two of the many upgrades in our development pipeline aimed at empowering loan officers and independent mortgage banks to provide tailored experiences for their customers. Given the potential increase in volumes as rates decrease, the timing couldn't be better. Turning to some financial highlights, our economic value per funded loan increased by nearly $5 this quarter. Customers recognize the benefits of applying our technology across the home-buying process, and we are providing more value as the adoption and utilization of our add-on products continues to rise. For example, we are witnessing greater adoption of our Blend Close solution, which enables more comprehensive deployment across loan books. One area of strength I’m excited about is within our remote online notarization solution, which allows borrowers to sign all real estate documents with an online notary via electronic signatures from their homes, accelerating the entire mortgage loan application process, making it faster, more secure, and fully digital from beginning to end. Our customers are currently completing hundreds of these high-value closings each month. While this may not seem substantial given our business size and the mortgage industry's scale, we are just beginning, and we expect these volumes to ramp up as the solution becomes available to more eligible loans and customers. This is significant for consumers desiring a digital closing experience, but also beneficial for us, as the unit price for the service is even greater than that of our mortgage software. Initial data we’ve gathered is promising, indicating nearly 0 defect rates in signatures in some instances and reducing typical origination times by approximately 1.5 days. This solution is transformative, demonstrating why we believe adopting a digital-first and standardized approach to closings in the industry is vital. Such data points enhance our sales strategy and serve as proof points showcasing how our technology can generate better business outcomes. Our customers trust that we can continue to innovate in ways that bolster their bottom line, leading them to seek more ways to apply our latest technology to their current challenges. One example is one of our oldest and largest customers on our mortgage solution, who has already expressed interest in integrating digital closings into their mortgage experience ahead of their renewal next year. This momentum showcases our growing confidence in expanding the value delivered and earned from every loan that Blend touches. Notably, just last year, we shared our expectation to achieve an economic value per funded loan of $90 sometime in 2024. Given the traction we've seen year-to-date, we believe we’ll surpass this achievement soon. As we learn more from our customers about their latest plans to deploy our add-on solutions, it made sense to reset expectations for this growth avenue. Our latest outlook indicates that the economic value per funded loan will exceed $100 by the end of 2024, a nearly $10 improvement in just one year's time. We remain focused on enhancing these products to simplify their deployment and make as many loans eligible for these accretive solutions as possible. Moving to Consumer Banking, Q2 marks the first quarter this business generated $8 million in revenue, reflecting 37% year-over-year growth. We are exceeding our near-term projections for this business, anticipating a $50 million run rate with 35% compounded annual growth from 2024 to 2026. We’re currently performing ahead of that 35% growth target—testament to the speed and execution of our implementation teams who have excelled in rapidly onboarding customers, as well as our go-to-market teams effectively communicating our consumer banking value proposition to both new and existing customers. Last week, we announced significant statistics regarding the recent implementation of Langley Federal Credit Union, one of the 100 largest credit unions in the U.S. with over $5 billion in assets. Langley selected Blend's deposit account opening solution. Since launching in March, they've reported significant improvements across several key areas, starting with a staggering 37% increase in new digital account openings. July represented their highest month on record for digital account openings. On the backend, the percentage of applications requiring contact center intervention dropped from 32% to just 7% post-implementation of Blend. By driving new business and enhancing operational efficiency, our platform gives our customers a unique competitive advantage. This is why many of our customers who initially launched with one or two of Blend's products end up expanding their relationship with us over time. This trend is reflected in our pipeline. As we enter the second half of the year, we have approximately 40 cross-sell opportunities in our pipeline across our full suite of consumer banking products. For years, consumers have expressed a desire for a straightforward interface where they could understand everything their bank or credit union offers. We've discussed this trend for some time, and while it takes time for institutions with billions in assets operating across various systems to evolve, we feel we have reached an inflection point. The signs are all there: large deals with major financial institutions like Navy Federal Credit Union and Citizens Bank, as well as increasing interest from large credit unions seeking to empower their platforms. We have a growing pipeline for cross-sell opportunities, all indicating that we are making meaningful progress toward the vision of a frictionless, comprehensive banking experience. Now, shifting gears to home equity lending: Home equity comprises a significant part of our current cross-sell opportunities. Many of these prospects are customers who have experienced first-hand the differentiation of Blend's solutions in other areas and are eager to expand our partnership in this section of their business, especially given the macro trend of increased home equity. Consumers have benefitted from home price appreciation over the past few years and may find themselves sitting on a substantial amount of equity, which can serve as a low-rate source for home remodeling projects or debt consolidation. As such, it has become a natural area for our customers to enhance their offerings in this environment. Before I turn it over to Amir for our quarter results and outlook, let me reemphasize some key momentum areas I see for Blend in the second half of the year. First, the data we observed recently indicates we may be on the cusp of a shift in the lending landscape. It’s a positive signal that the activity underpinning our business is nearing a return to growth. More importantly, our business is positioned to benefit from this. We have a larger customer base, a significant number of loans moving through our system, and good market share. With each incremental loan processed, we’re generating considerably more value and revenue from it. Our efforts to optimize our expense structure will provide us with substantial financial leverage as the macroeconomic environment rebounds. Second, our investment in our platform is maturing at just the right time. Modern experiences, including AI integrations and real-time home equity resources or the refinance flow that simplistically facilitates faster refinancing for consumers who require it, have emerged. These developments are the result of years of development on our foundational platform, and this new approach to technology resonates with our customers, who are frequently bringing us innovative ideas regarding how our solutions can enhance their operations. Lastly, I’m pleased to share that our pipeline of opportunities has never looked healthier. I attribute this largely to the macro environment and the maturation of our solutions. Our sales team, including myself, remains active on the road, listening to customers, compiling growing wish lists from prospects and existing customers using our products. It’s evident that Blend is at the forefront of the industry’s considerations in delivering best-in-class modern origination experiences. As our customers pivot to focus on what lies ahead, our communication lines are busier than ever. I look forward to sharing new innovative partnerships we are establishing in the next few months with you all soon. With that, I’ll hand it over to Amir to discuss our second-quarter results.

Thank you, Nima, and good afternoon, everyone. I'm pleased to be here today to discuss our financial results for the second quarter. Our second quarter marks another period of strong execution. We welcome several new customers to our platform. We increased the pace of growth in consumer banking. We've reached a new high for our economic value per funded loan and have taken significant steps toward our goal of fourth quarter non-GAAP operating profitability. Before I jump into the results, let me remind you that unless otherwise stated, all results are non-GAAP. Total company revenues in the second quarter were $40.5 million, ahead of the midpoint and near the high end of our guidance. We reported platform revenue of $28.7 million, which was also ahead of the midpoint of our guidance. Our mortgage suite revenue was $18.5 million, aligning with expectations regarding a decrease in aggregate industry originations during the quarter. As Nima shared, we brought in several new mortgage customers this year and built a strong pipeline to fuel growth in future quarters. We believe aggregate industry originations will likely be up in the third quarter compared to Q2. If the market is correct in predicting multiple rate cuts this year, we anticipate that volume increases will continue into next year—assuming affordability for homebuyers improves. Moving on to another highlight, our mortgage suite economic value for funded loan rose by more than $5 compared to last quarter and by approximately $11 compared to the same period last year, reaching $97. The increase in our per-funded-loan rates is driven primarily by higher attach rates of our value-adding products. Turning to another key segment, consumer banking products are driving the expansion of our footprint, with revenue for those products growing 37% year-over-year to a total of $8 million. Our growth pace is accelerating as we launch new initiatives that add incremental platform fees and further adoption of our complete suite of solutions. With 37% year-over-year growth just two quarters into our three-year guidance provided at our Investor Day, we are on track to exceed the 35% compound annual growth target. We also recognized $2.2 million in professional services revenue, consistent with the same period last year. We recorded title revenue of $11.8 million, exceeding the high end of our guidance range. Moving onto gross profit: Total company non-GAAP gross profit was $21.8 million. Our non-GAAP Blend platform segment gross margins were 71%, compared with 74% the prior year. For our software, we reported non-GAAP software gross margins of 79% compared to 81% in the previous year. Our non-GAAP title margins came in at 11% for the second quarter, consistent with the same period last year. Non-GAAP operating costs for the second quarter totaled $27.4 million compared with $41.6 million last year. As we invest in our platform and go-to-market functions, we continue to enhance efficiency to balance our investments. This also leads to a business that is more durable and resilient than ever. Our non-GAAP loss from operations was $5.6 million in Q2, coming in well below the high end of our guidance range. We anticipate more improvement in Q3 as we move toward our target of non-GAAP operating profitability in Q4. For the second quarter, our remaining performance obligations stood at $87.4 million, an increase of $34.2 million compared to Q2 of 2023 when RPO was $53.2 million. This marks the fifth consecutive quarter with an RPO balance that increased year-over-year, with Q2 growing by 64% year-over-year. RPO in the second quarter decreased by $5.6 million compared to Q1 of 2024, attributed to the pace of go-live ramp for our customers. In the second half of the year, we are beginning negotiations on several renewals and new deals, positioning us to return to quarterly growth alongside year-over-year outperformance. Free cash flow for the quarter was negative $8.5 million, compared to negative $34.6 million in the same quarter last year. This free cash flow includes approximately one month’s worth of interest expense from our term loan, which we paid down in full at the end of April with capital raised from a valued investment. Our unlevered free cash flow, excluding interest expenses, was negative $6.9 million in Q2. Despite the decline in Q2, momentum towards achieving positive free cash flow is building. Many customers time their renewals at the close of their fiscal year, so Q1 tends to experience a larger influx of prepayment cash inflows. The company is debt-free and operating efficiently. We still anticipate generating positive quarterly cash flow shortly after reaching non-GAAP operating profitability. Additionally, we're witnessing further leverage from our partnership with Haveli. We concluded the quarter with approximately $120 million in cash, cash equivalents, marketable securities, including restricted cash. Given our visibility toward profitable growth and our strong balance sheet with significantly reduced cash needs, we are excited to announce that our Board has authorized our first share repurchase program of up to $25 million. We believe that our current valuation does not adequately reflect our market opportunity, expansive product offerings, and disciplined expense management. This decision aligns with our planned investments in the next generation of the origination technology that Nima discussed. We are confident in our ability to achieve our current investment objectives while providing shareholders with returns. Moving forward to our outlook for the third quarter of 2024: We expect platform revenues to range from $28 million to $31 million in Q3 of 2024. We anticipate our title business revenues will be between $11.5 million and $12.5 million. Our total company revenue outlook is expected to be between $39.5 million and $43.5 million for Q3. This guidance is based on our internal assessment of customer growth and our outlook for Q3 origination activity based on application volume observed to date throughout our customer base. We project total non-GAAP net operating loss to be between $4 million and $7 million for Q3, with the midpoint indicating a 65% improvement year-over-year. And with that, I thank you all for joining. Bryan, we are now ready for questions.

Thank you, Nima, Amir, and Winnie for your comments. We will now move to the Q&A segment of the call. Our first question comes from Dylan Becker with William Blair. Dylan, you can unmute and please go ahead.

Gentlemen, nice job here. Maybe Nima, starting for you. Obviously, some recent news on the rate dynamic here throughout the balance of the year. I wonder, obviously, that has an impact on affordability, but supply has been a big constraint as well. You kind of called out some of the home equity piece. But can we start to shift away from some of that lock-in that incentivizes more sellers into the market here, kind of getting a push from both the supply side and the demand side to help fuel some of that recovery.

Yes. It's a good question, Dylan. Thanks for the question. I think it's interesting—everyone understands that refinances are very interest rate-sensitive because you have to be in the money unless you're taking cash out, but purchases tend to be relatively sensitive to interest rates as well. So, I think it will unlock new supply and demand. I also think the general macro environment is leading consumers who have been waiting for a long time to start feeling like rates moving in the right direction will allow them to move homes and refinance that new home that they buy in one or two years with lower rates.

Sure. Okay. That makes perfect sense. And maybe obviously, great to see the consumer strength as well here and what sounds like healthy pipeline commentary. I know it's a bit of an earlier initiative too, but it sounds like there have been some notable go-lives. So, help us get a sense of the referenceability, some of the value that's been tied and realized from some of those early customers that's helping to fuel the later-stage pipeline activity that seems to be growing pretty nicely?

Yes. I love the idea of referenceability; it’s a key tenant for us. We want every customer to be referenceable. The Langley Federal Credit Union case study turned out wonderfully—the numbers were impressive. They reported a 37% growth in accounts and a drop from 32% to 7% in contact center interventions needed. Those figures are critical. In another case, a customer reported a significant increase in flow utilising a new feature they rolled out, which nearly doubled user engagement without requiring contact interventions.

Our next question comes from Joe Vafi with Canaccord Genuity. Joe?

Guys, good afternoon, it's impressive to see the progress in the business. I guess, Nima, following up on your commentary about customers being ready for a rebound. Can they get ready quickly, or is it going to take them another budget cycle to prepare for an eventual rebound in mortgage volumes? I have a quick follow-up as well.

Yes, that's another great question. I think they see this as a critical part of their business moving forward. We are seeing some customers who were hesitant about deploying new technology coming to the table wanting to move quickly. And by 'quickly,' I mean unusually fast for organizations of their size. It shows that these organizations can move swiftly when it becomes essential, especially at the highest levels of management. While this may not hold true for all customers, we are seeing significant interest from sizable institutions and smaller, more agile ones. The urgency underscores the importance of being ready for whatever changes come in the mortgage market.

Sure. That’s exciting. As for the refinance product that you called the refinance flow, I know you mentioned being in beta with one customer there. Can you provide a timeline for general release? It sounds like an excellent product, particularly since the refinance process can often be more cumbersome than obtaining a purchase mortgage.

Yes, that's a common question among our customers, Joe. The interest in this product is growing, and we want to roll it out as soon as possible. We have the next two customers lined up. Timing is critical due to the current market climate. We’re eager to do this in a significant way. We’ll leverage existing capabilities in our platform to minimize implementation time and complexity. We believe we can achieve effective rollout efficiently due to already established integrations with their back-office systems. I wish I could give you a specific timeline, but it’s difficult to predict given the regulatory environment and the customers we engage with, but we’ll move as quickly as we can.

Our next question comes from Ryan Tomasello with KBW.

Regarding the add-on products in the mortgage sector, you’ve noted nice traction with the closed solution, Nima. Could you quantify the current attach rates and your thoughts on where they can go from here? What do you find to be the largest hurdle to getting customers to adopt that solution? Also, regarding income verification, given the competitive dynamics in that space with some of the higher-cost incumbents, have you observed any notable traction with that product? What are your thoughts on that opportunity for Blend?

While we don't share specific attach rates for these products, we are thrilled with the traction we've seen with Blend Close. However, we still have ample room for growth within our existing customer base. We recognize the benefits digital closings offer—such as reduced loan processing times and fewer errors—and the industry recognizes the potential here, which is why our attach rates aren't at 100%. The market is still playing catch-up with perceptions about digital closings, and we’re committed to helping our clients achieve both an efficient and effective transition to this process. Additionally, we're excited about the prospects for our income verification solution. Our goal is to provide a best-in-class orchestration across various income streams, assisting clients looking for quicker and more cost-effective verification solutions. The interest is growing among our customers, and they recognize the need for speed and automation for income verification.

For Amir: The operating income goal for the fourth quarter is still achievable, correct? Given that Q4 typically has negative seasonality, do you expect that seasonality to be less of a concern this year due to potential rate cuts? Please provide clarity on the bridge from Q2 to achieving that goal and whether we'd see sustainable operating income beyond that fourth-quarter inflection.

Yes, to confirm, we are still firmly on the path to breakeven in Q4, despite seasonal challenges. We are prepared to restore growth, as evidenced by our Q2 results. The challenge of Q4 seasonality is present, but we confidently anticipate that recent macroeconomic shifts should mitigate some challenges. Our strategy emphasizes maintaining efficiency while capitalizing on positive market conditions. Achieving operating profitability in Q4 is crucial, as it sets the stage for sustainable operations moving forward.

Our next question comes from David Unger with Wells Fargo.

As you strive for profitable free cash flow in the near future alongside a strategic partner, how should we think about the balance between improving cash flow versus investing for growth, especially considering the stock buyback?

We aim for balance, avoiding the pendulum swinging too far in either direction—either overly conservative during negative sentiment or excessively aggressive during positive trends. Our strategy leverages ROI-centered initiatives for substantial impact. Our belief in the potential of projects like our next-gen refinance workflows and home equity solutions guides our investment decisions. As we build our customer base and derive positive sentiment, we foresee improved free cash flow over time, enhancing our capability to invest strategically.

To add to that, several quarters ago, I highlighted our increasing innovation per dollar spent, which stems from our robust foundational platform. We’ve built powerful capabilities that operate like LEGO blocks, allowing us to innovate rapidly and efficiently. Our recent developments highlight this advantage. We're excited about our momentum and the ongoing commitment to balanced growth alongside strong operational control.

I appreciate all the detail. Just a follow-up regarding the Q3 guidance: was it developed based on your internal forecast, and when did you finalize it in light of the recent market movement?

Our guidance reflects internal assessments without directly incorporating the recent market fluctuations. The influence of these changes typically lags as we track funded loans through their life cycle.

Seeing no further questions, this concludes today's earnings call. Thank you all for joining. Have a nice rest of your day.