Pathward Financial, Inc. Q2 FY2026 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to Pathward Financial's Second Quarter Fiscal Year 2026 Investor Conference Call. Operator instructions are in effect. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Chief of Staff and Investor Relations. Please go ahead.

Thank you, operator, and welcome. With me today are Pathward Financial's CEO, Brett Pharr; and CFO, Greg Sigrist, who will discuss our operating and financial results for the second quarter of fiscal year 2026, after which we will take your questions. Additional information, including the earnings release, the investor presentation that accompanies our prepared remarks and supplemental slides may be found on our website at pathwardfinancial.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to update any forward-looking statements. Please refer to the cautionary language in the earnings release, investor presentation and in the company's filings with the Securities and Exchange Commission, including our most recent filings for additional information covering factors that could cause actual and anticipated results to differ materially from the forward-looking statements. Additionally, today, we will be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to assist you in understanding the company's results and performance trends, particularly in competitive analysis. In order to make our adjusted net interest margin as comparable as possible we have excluded the impact of the gross accounting methodology on our consumer loans including contractual rate-related processing expenses associated with deposits on the company's balance sheet. The historical numbers in the earnings presentation have also been updated to reflect this. Reconciliations for such non-GAAP measures are included in the earnings release and the appendix of the investor presentation. Finally, all time periods referenced are our fiscal quarters and fiscal years, and all comparisons are to the prior year period unless otherwise noted. Now let me turn the call over to Brett Pharr, our CEO.

Thanks, Darby, and welcome, everyone, to our earnings conference call. At the midpoint of our fiscal year, we continue to make good progress on our goals and execute on our long-term strategy of being the trusted platform that enables our partners to thrive. Our tax season is going very well with tax-related products leading the way in revenue growth for the quarter. Additionally, new and existing partnerships announced last year are developing nicely and the Partner Solutions pipeline remains robust. Net interest income from our commercial finance loans also increased significantly as well. All in all, our core businesses remain healthy, and we are pleased with the results achieved in the quarter. Continuing with some highlights. We reported net income of $72.9 million and earnings per diluted share of $3.35. Noninterest income in the quarter grew 9% and represented 55% of our total revenue. This was primarily accomplished through numerous successes within tax services and further supported by growth in our core card and deposit fees. Return metrics were also strong for the first six months of the year with return on average assets of 2.75% and return on average tangible equity of 40.69%. Just a reminder that these metrics generally hit their high point during this quarter due to the seasonality of the tax business. Finally, we are maintaining our guidance range of $8.55 to $9.05 earnings per diluted share. Our investments within tax services are paying off, and we are very proud of all that the team was able to accomplish not only this quarter, but also in the planning and preparation that was undertaken to achieve the results that you see today. This year, we operated with over 48,000 tax offices, which is another record for us and nearly double the number of offices from just five years ago. We are thankful to have cultivated such strong relationships with our existing tax partners and independent tax offices as well as new ones that have come on board. It is incredibly important to us, especially given the competitive nature of the space, that they trust our people and the level of service they receive. We hope to inspire financial confidence and empower more people to navigate the tax system with clarity. Tax season can be the most significant financial event of the year for many families. And through our products, we aim to help individuals make informed decisions about their finances. This focus on empowering taxpayers and delivering transparent solutions drove increased engagement and improved financial performance within tax services. For the six months ending March 31, 2026, we increased total tax product revenue by 13%, led by a 13% increase in noninterest income related to refund transfer products and Refund Advance products. Additionally, Refund Advance originations increased by over $200 million this year. This brought total tax services revenue to $96 million. Loss rates on refund advances were also favorable when compared to last year due to our continued work on our underwriting models and data analytics capabilities. This led us to pretax income of $62 million for tax services, an increase of 30%. We believe these outcomes reflect our commitment to empowering people and partners through innovative solutions, unlocking potential and fueling success for those we serve. We remain diligently focused on delivering on our strategy of being the trusted platform that enables our partners to thrive. As a reminder, this consists of five key focus areas in our fiscal 2026. First, we continue to favor asset rotation in areas where we believe we have a competitive advantage to deliver higher return on assets. With an asset limit of $10 billion to remain below the Durbin amendment exemption, we remain focused on creating balance sheet optionality. This should deliver increasing net interest income without growing the overall asset size and generate sustainable fee income in the form of secondary market revenue. Second, we invest regularly in technology and our run rate to help ensure that our platform undergoes the evolution and scalability needed to support our partners' growth as they expand their reach with new products and markets. Third, we believe people and culture are Pathward's most important assets, which is why I'm very proud to share with you that we once again earned the Great Place to Work certification in 2026 for the fourth year in a row. Our culture is just as important as the outcome of our efforts. At Pathward, we are guided by our core values: lead by example, find a better way, help others succeed and dare to be great. These core elements along with our talent-anywhere approach is what we believe sets us apart. Fourth, the consultative governance approach we take when it comes to our risk and compliance framework helps our partners manage an area that is often complex and difficult to navigate. We also continue to invest in this area to not only evolve with the regulatory environment, but also allow for scalability with our partners. Finally, our focus on the client experience is about supporting our partners for greater successes and revenue enablement. Our pipeline remains full, and we are diligently working to bring more partners into the Pathward family and help those that we are already working with grow. We are also happy to announce that in April after the quarter closed, Pathward executed a three-year extension with a leading money movement platform. Now I'd like to turn it over to Greg, who will take you through the financials.

Thank you, Brett. Overall, we are pleased with the financial performance in the quarter. As Brett mentioned, our tax season is off to a great start. This is the product of thoughtful planning and teamwork, and we're proud of what the team is accomplishing again this year. We're equally pleased to see growth in Partner Solutions, which I'll dive into a little deeper in a moment. First, let me start with revenue. As expected, the sale of the consumer finance portfolio back in October did impact net interest income given the elimination of the gross-up accounting for that portfolio. Having said that, our strategy of balance sheet optimization continues to deliver solid results with growth in our core commercial finance business. Other parts of our strategy have enabled us to report solid results in noninterest income, particularly in our tax products as well as in core card and deposit fees. In our consolidated tax services which consist of both our independent tax offices and tax partnerships, we saw an 18% increase in noninterest income from Refund Advance and tax fees and a 7% growth in revenue from refund transfers during the quarter. This is the direct result of significant work to grow this business, increase market share and evolve the underwriting model. Core card and deposit fee income, which excludes the servicing fees we earn on custodial deposits, grew 22%. We're seeing a lot of growth through existing partners as well as increasing contributions from new contracts signed last year. Due to the continued backlog from the first government shutdown, we fell short of our goal range for secondary market revenues but we believe this is primarily a timing impact, and we expect to make up the difference in subsequent quarters. Noninterest expense improved in the quarter. Outside of the impact from the sale of the consumer portfolio, the primary driver was lower card processing expense due to lower rates, partially offset by an increase in compensation and benefits. Given the value we place on our people, we remain committed to investing in them as well as processes and technology, and we were still able to manage expenses well when compared to the prior year quarter. This led to a net income of $72.9 million and earnings per diluted share of $3.35. Deposits on the company's balance sheet at March 31 were relatively flat versus a year ago. This is consistent with our balance sheet optimization strategy. Lower-yielding assets such as securities declined and partner deposits were strong in the quarter. This allowed us to have over $250 million more in average custodial deposits than in the prior year quarter and also generated higher servicing fee income in the quarter. Loans and leases at March 31 grew 9%. Our focus on ensuring we have the right loans on the balance sheet was the primary driver of the increase with a $588 million increase in our core commercial finance business, particularly in renewable energy and structured finance. Additionally, origination volumes were strong during the quarter with $367 million in commercial finance at yields higher than the March 31 portfolio yield and $945 million in consumer finance. This represents significant growth versus the same quarter last year, and we were pleased by the growth in consumer finance originations, which was driven by the new contract we announced last year. In commercial finance, our loan pipeline remains strong despite timing delays in certain cases stemming from the October 2025 government shutdown. Net interest margin was 6.3% in the quarter. Our adjusted net interest margin was 5.32%, a 23 basis point improvement over the same quarter last year. This was primarily driven by lower rate-related card expenses. Our nonperforming loans saw a modest increase to 2.39%, and our allowance for credit loss ratio on commercial finance increased versus last year. This was driven by a mix of specific reserves and our CECL model which takes into account a number of factors, including the macroeconomic environment as well as portfolio history over time. Our commercial finance portfolio metrics are being driven by a relatively small number of loans in comparison to our portfolio size and in different verticals. As we've mentioned before, we look at our credit metrics with a full year look back. And on March 31, our going 12-month net charge-off rate was at or below the same metric at the end of every quarter in fiscal 2025, and the rate remains at the low end of our historic range. Lastly, we continue to believe that we are still in a relatively stable credit environment, consistent with the past few quarters. Our liquidity remains strong with $2.7 billion available, and we are extremely pleased with our position at this point in the year. During the quarter, we repurchased approximately 855,000 shares at an average price of $84.15. This leaves 3.4 million shares still available for repurchase under the current stock repurchase program. This concludes our prepared remarks. Operator, please open the line for questions.

Operator instructions are in effect. Your first question comes from the line of Tim Switzer with KBW.

So the first one I had, you guys took a sizable amount to buy back quite a bit this quarter relative to what you've been doing recently. You still have a good amount of capital, obviously, a high ROE. Is what you did this quarter kind of repeatable for the rest of the year? And what are your other priorities outside of organic growth and repurchases? Are there any other kind of M&A-type businesses you're in discussions with?

Yes, Tim, let me start and Brett may jump in at the end. But I think what you typically see throughout the years is you're going to see seasonality in that buyback number of shares and the dollar amount. It typically is correlated to our higher earnings quarter. So second quarter is always our highest buyback quarter on a relative basis. I would say, though, that the algorithm for the number of shares we buy early in the quarter does get updated periodically. And I think this quarter in part was we took advantage of lower share prices as well. So if it optically looks like we got a little bit ahead, it probably had something to do with that. Obviously, very pleased with where we landed in the quarter on the buybacks, but I think more broadly on the question of capital and capital allocation, I still continue to believe and we continue to believe that share buybacks are the highest use of capital at this point in time. We obviously continue to look at a lot of things, and if that changes, we'll at some point let you know, but I think it's still buybacks.

Yes. And Tim, it's Brett. So just sort of on the strategic elements of M&A, I mean we're always looking to see what's out there. But with our results, we've got a pretty high hurdle rate and for obvious reasons, we wouldn't be involved in much of a bank kind of situation. We look for things that you might buy versus build. But we've just not seen anything over time that made sense. So the kind of capital utilization we're doing is the highest and best use in our mind at this moment.

And then the other another question I had, I remember a quarter or two ago the new programs you guys announced in '25 would contribute mid- to high-single digits to card fees year-over-year, not including some of the new partnerships you guys have now that we're a few quarters in. Are you guys still on track for that? What have been the puts and takes over the last few months? And where do you think that can go as you head into '27?

Yes. And Greg can talk about specifics as he wants to. But if you look at our card fee income year-to-date, that's part of the increase in the noninterest income. We had those deals. We've always talked about some of them take time to come on. We're now seeing the benefit of that come through the noninterest income line.

Yes. But as I said in my prepared remarks, year-over-year, the significant increase versus a year ago is largely organic. But as you would expect and as we talked about, we started to see some of the benefit of the new deals—but it's all about speed to revenue. It still takes some time after you've signed the deals to get those programs live, get the programs ramped and get them fully loaded. But the guide we gave previously about what that looked like on a fully loaded basis still applies. We still think it's going to be a measurable increase into next year as those programs fully ramp.

And then the last one I had, and it might be a little too early to ask the question, and I don't know if we have enough details, but there's been a proposed executive order about banks being required to obtain customer identification information. It seems like a tricky situation with some of the partner banks and like what's the risk needing to perform that for all the bank accounts you guys have and what that cost would be? And then I know there's a lot on the other side of it, is there an opportunity at all for your prepaid card products? Do we know if those would be required to obtain customer identification information as well?

All right, Tim. So let's get in the weeds just a little bit. Obviously, we don't know what the rules are, right? So that's part of it. You probably know that for any known owner of an account, you have to collect something called CIP. So we already have documentary and nondocumentary pieces of information about our customers that we're required to get. An exception to that is if it's unregistered, like an unregistered gift card, that would not apply, and I would suspect, in this case, it would not apply. So we already have the processes in place with our partners to collect the necessary information like that. If there is something else that has to be collected, then we, like everybody else, would have to go and do that. But until we know what the rules are, we don't know what the implications are, but the highways already exist to get that kind of information.

Are you able to tell us maybe what percent of your deposits or accounts would be part of that funded registered prepaid card business?

Yes. So I'm getting the heads that say we don't disclose that here. But you can think about our business in general and the kinds of things we have. If you're in gift cards, it doesn't apply unless they specifically register it. Payroll cards, obviously, you know who it is. There are various kinds of things. So we would have it on some and we would not have it on others.

Yes. And I think as we say broadly on just the topic of deposits, it's a well-diversified deposit base, so it's going to be different—it's evolving over time as we continue to bring on new partners, it continues to diversify. So hopefully that helps you.

Your next question comes from the line of Joe Yanchunis from Raymond James.

So I'd like to start with credit here. And I know you touched on it in your prepared remarks, but NPAs ticked higher again this quarter. Can you provide some color on the underlying credits that drove this increase? And I know you often count your workout process, which can take time. So do you have a sense for how much of this bucket was resolved in the quarter?

So let me go through a big picture. You recall we've got different asset classes. We always do collateral-managed transactions, so there's no uncured exposure and we stay out of certain kinds of verticals that we do not think have good collateral attributes over time. We measure these things through the cycle, and Greg in his comments even talked about that. You always have some one-offs, right? So you have to go through a workout. Workouts can be short; workouts can be long, and they're uneven as you go through them. So I don't know that we could answer the question about how many have been resolved right here and now. They're all consistent with the way that we approach our collateral management program, and we've had consistent results with that literally for years that you can trace through. Again, we're not seeing anything changing in the credit environment; it's just one-off stories that happen in various asset classes.

Yes. And Joe, just to walk you through a few of the issues on the credit side broadly. You probably saw when you get into it that on the past due side, the 30- to 59-day bucket increase, it went up by about $40 million. That was due to a limited number of loans that frankly came after quarter end. So that kind of factors into this equation, too. When you take that into account, overall past dues are pretty moderate. When you look at the nonaccrual balances in the earnings release, those nonaccrual balances actually came down about $5 million. That's the bucket that had some of the larger loans in it that we've been talking about in terms of resolution over the last couple of quarters. What drove the NPL ratio in the quarter though is that greater than 90 days past due and still accruing bucket, which is really the broad stuff in a normal course collateral management and collection piece that Brett is talking about. So a number of smaller loans drove that uptick in the quarter, not anything larger in terms of resolution.

And then just moving over to the provision, the provision increased pretty materially in this quarter. How much of that increase was due to seasonal tax changes, organic growth versus underlying credit issues?

I think the line I focus on the most is commercial finance. We isolate the tax services provisioning in the document. On the commercial finance side, yes, it was a mix. There's certainly some specific reserving related to what we talked about on the NPL side, but it's also just driven by our normal CECL process. Many quarters CECL is driven by increases in the loan book, but this quarter it was more driven by looking forward and taking a pragmatic view of where we're going to land on some of these credits. With the benefit of looking forward, we still believe this is a benign, very stable credit environment. The other thing I pointed to in my prepared remarks was that we always look at the trailing 12-month net charge-offs because that's a better barometer for this business given how lumpy some of our workouts and recoveries are. When you apply that backward-looking 12-month view to net charges this quarter, and frankly to the things driving some of the credit metrics, it's benign and well within our historic averages.

One of the things that's important about our asset classes, Joe, is that in some industries nonperforming loans are a leading indicator and net charge-offs are a lagging indicator. If you look at the correlation in our book for the past decade, that's not what happens. When you have nonperforming loans in our book, they tend to be tightly secured. Even if you get a charge-off, you often get a recovery. Look at that history through the cycle and you'll see our net charge-offs are disconnected from our nonperforming loans.

I appreciate that. I'll ask one more before hopping back in the queue. You had mentioned, subsequent to quarter end, you reached a contract extension with a partner. I didn't catch the name. During recontracting, how do the economics change? I understand that if the partner grows during the contract, you'll get more volume. But does the recontracting generally result in lower margins?

Every contract is different. There's a lot of contracts where you trade one thing for the other because that's what the partner wants to do. A classic example is if there's deposits involved and somebody wants a higher percentage of what we call contractual card service payments on it, then we might charge more transaction fees. The net economics for us can be the same. A lot depends on whether the partner wants to take interest rate risk or not—we can manage interest rate risk or they can manage it. So there are always trade-offs. If you want a longer-term contract, it will probably be better economically; if you want it shorter, probably not as good economically. Every contract negotiation is different, and there's not a standard approach. We're not seeing things generally go south on the margin side because pricing is returning to levels we find acceptable.

Part of that is we apply discipline and do risk-adjusted return analysis every time we do either a new partner or one of these renewals. There's a pricing team that looks at it to make sure it makes sense and is sensible for us from an overall enterprise perspective.

Your next question comes from the line of Manuel Novas from Piper Sandler.

Is there any more color you could add about the partner pipeline—you said it's robust? Anything you could add there?

Yes. We've been through these last several years where there was a period of time I alluded to earlier where there were some things going on in the industry that we really didn't want to participate in. A lot of that's gotten washed out. Over the last year to 18 months things have really picked up and it's actually coming through with contracts. Yes, our pipeline is very strong. Part of that has to do with our breadth of product approach with our partners, where we'll do multiple kinds of products with the same partner. That's an advantage we have in the marketplace. We're continuing to have lots of new opportunities and new partners as well as existing partners bringing on new products and new programs. So the pipeline is very strong and part of it is because we think the dynamics and economics have returned back in our favor.

You can see the results: 22% increase in core card fee income from last year. That in part is new products with existing organic partners. I don't have the exact split, but that's one outward sign that we're having success with our existing partners doing the multi-threaded approach on the product side, in addition to new partners and new products. We're really pleased with where we are right now.

That's helpful. Can you speak to there was some loan decline this quarter? I understand some of the seasonality there. How should we think about loan growth going forward? You talk about healthy pipelines in different loan lines—can you speak to the likely mix of that growth going forward as you kind of reset the loan book to how you want it to end up?

Let me work backwards on that. We like the verticals we're in. We've done some resetting over the last couple of years and we've exited a couple of verticals. When we think about the asset classes that we're in, we've been very purposeful with them. We've used a risk-adjusted return approach and we look at credit through the cycle. The variance you saw in the quarter was more of a timing issue. On the USDA side, there's probably a bit of a slowdown in the quarter just related to the government shutdown, which led to some slowdown on the USDA side, but I continue to believe that's just a timing issue. When I think about the rest of the asset classes more broadly, it's more of a timing issue. Our pipelines are very full across the verticals. When I think about the balance of the year, I tend to focus more on origination than on a relative point estimate of loan balances. We focus on balance sheet velocity, which means we can be down quarter-on-quarter because we intentionally rotate assets. This quarter the issue was timing related to USDA, but going forward I would expect to see some modest continued uptick in the quarters going forward in the products we're in, with an eye toward risk-adjusted returns across the verticals.

I appreciate that. Any near-term guidance on the direction of the NIM? It stepped down on both the full version and then the adjusted level—how should we think of it going forward on either metric?

Adjusted NIM is the one I would recommend focusing on because I believe it's the more accurate representation of the interest rate risk on our balance sheet. It neutralizes for things that are not sitting in net interest expense, such as contractual rate-related fees we paid to partners on deposits. That one was down in the quarter, but you tend to always see seasonality in the March quarter because of tax season. The balance sheet grows and as a result, we tend to do some wholesale borrowings at the margin to fund that—usually for 45 to 60 days—which tends to cause a downtick in the March quarter. Looking ahead, I still continue to believe we're stable to slightly upward trending on adjusted net interest margin. Why? If you look back over the last year, rates are down approaching 100 basis points versus last year but the adjusted yield and adjusted NIM are up versus a year ago, which suggests we're not sensitive to the short end of the curve. We are more sensitive to the middle part of the curve, 3- to 5-year, because that's where we price the fixed-rate loans that we hold. Also, we have roughly $200 million over the next 12 months in the securities portfolio that will reprice and likely be deployed into loans over the horizon. There's still a bit of fixed-rate loans that were originated before rates rose in 2022 that are subject to repricing, and that bucket is becoming smaller. All of that leads me to believe there's a modest tailwind for adjusted NIM given the current rate environment and mix.

One last question on the tax season. I know there's about a month left in terms of what you haven't reported yet. What are some of the learnings you're going to apply to next year? Anything on new tax laws where you can gain market share? Any priorities you might set up for the next tax season?

Over the last several years we've really focused on customer service with our EROs, and because of some disruption in the marketplace it has given us a great opportunity to capture market share. We would hope to continue to do the same next year. This year got a boost from new tax laws and interest in refunds and the size of refunds, and that may not come next year. But we still believe we're delivering a better experience for our ERO partners, which helps us retain more and capture more in future years.

Technical difficulty noted. Your next question comes from the line of Tim Switzer from KBW. Tim, your line is open. Please go ahead.

There's obviously been a lot of pullback from some competitors in the banking-as-a-service space due to the regulatory environment. Now that we're a few years through that, can you discuss if you're starting to see more competition coming in? Are there different types of players or more players in the space than previously, where this is coming from beyond banks now as you guys also expand your offerings?

Yes. Let's talk about the elephant in the room: many entities are pursuing bank charters right now. In our pipeline we are not yet seeing a material effect from that. Some partners are getting charters, but in many cases they're getting limited-purpose charters and have acknowledged to us they're going to continue to do things with us. There is a long way between applying for a charter and actually operating a bank at scale. My view is we're a couple of years out on that and we'll have runway in our pipeline. We're not seeing impact yet from new charters. I do believe there will be some successful entrants in a few years, and we'll see more competitors then. But we've been through competitive waves before. We're focused on serving partners well, offering a wide breadth of products that are not easy to duplicate, securing longer-term contracts where appropriate, and benefitting from switching costs that help us even if a new wave of competitors comes.

And you did get ahead of my follow-up on some of your partners getting charters. One more: there's so much movement in the space and the administration is open to digital assets. Any recent developments you can share or discuss your level of interest in partnering with a stablecoin issuer or other digital asset companies?

We're in the payments business, so we pay attention. We have our own views on how we're going to deal with that and how we think about that. We're a partner-led model, and we're watching our partners. As partners come to us, we're engaging in various things—not just stablecoins, but many different kinds of payment mechanisms that are evolving. We'll continue to evaluate and participate in the dialogue, but it's not something we're announcing broadly today. We'll watch how our partners guide the opportunities.

Your next question comes from the line of Joe Yanchunis from Raymond James.

So a few more questions. Cross-selling remains a big opportunity. Over the next 12 to 18 months, do you expect to have more success cross-selling products or signing up new partners?

It's hard to put a precise split on it. We're going to be doing both. New ideas and partners come in, and existing partners can also buy additional products from us. When you do a new partner and a new program, ramp-up is slower. Organic growth from existing partners has been a lot of our growth recently, but new products and new partners are also key parts of our overall strategy.

From a revenue growth perspective, you typically get faster revenue from existing partners in part because of third-party risk management—it reduces friction after they've been onboarded. Over the next 18 months, I still think a fair amount of revenue growth will come from existing partners through cross-selling or multi-threaded product adoption. Past 18 months, you'll see more tailwind from new partners and new products.

How has the time to onboard a new partner changed versus three years ago? I understand it depends on the product, but generally, has speed to market improved?

We've focused on speed to market and improving process. Some of that is process improvement and some of that is investing in technology that helps shorten development and integration time. Sometimes we're waiting on partners, too. Some products can be turned on in weeks; others take longer. We're focused on improving speed, but third-party onboarding frameworks and risk management are important parts of the program and those steps must be done.

Speed to launching is different from speed to revenue because many programs are not lift-and-shift. You often need to help partners ramp their customer base and usage, and that varies by product. That's another dimension where we work with partners.

On the technology front, you're a major player in the bank-as-a-service space. Can you talk about the value of building your own technology versus receiving third-party vendor solutions?

We spend a lot of time on this. The requirements for this business are fairly unique and in many cases there isn't sufficient scale for service bureaus to invest in developing tailored solutions. So we have to build many capabilities ourselves. We're rebuilding a lot of things now. Also, AI is being used within our engineering teams to help speed up development of capabilities, which makes it easier to build internally. That will be a key part of the future. I'm not saying software service providers are going away—there will be different use cases—but the things that are unique to our business, we'll likely build internally.

Taking a step back and looking at the broader banking space, what do you view as the biggest potential risk to the industry? For example, big banks targeting lower-end consumers or digital-first customers?

A key issue for the big banks is scale. I don't see a mass migration of G-SIBs into the low-to-moderate income or digital-first, young consumer segments because there's not sufficient scale to make it attractive relative to their other opportunities. As the industry evolves and interchange becomes less central, we'll face different competition. Being small, fast and nimble is valuable in the third-party delivery environment. We will have to adapt to change as product demands evolve from our partners, which we are doing. We like the wide breadth of products we offer and don't see a scenario where a big bank comes in and dominates the low end overnight.

At this time, there are no further questions. I will now hand the call over to Brett Pharr, CEO, for closing remarks.

Thank you, everyone, for joining the call today. Have a good evening.

This concludes today's call. Thank you for attending. You may now disconnect.