Kyle Peterson

Kyle Peterson asked about any changes in buyer appetite for Figure loans due to recent private credit jitters and inquired about the performance of Figure's crypto-backed loans amidst recent crypto price volatility, specifically regarding credit performance and collateral.

Answer

CFO Macrina Kgil stated that Figure has seen no change in demand for its loans, as private credit jitters are primarily in commercial loans, not residential mortgages. CEO Michael Tannenbaum added that crypto-backed loans have performed well, with zero losses to date, due to the ease of liquidating Bitcoin collateral when LTV thresholds are breached, despite volatility.

Kyle Peterson asked about the impact of recent jitters in private credit on buyer appetite for Figure's whole loans and securitizations, and separately, how Figure's crypto-backed loans have performed amidst recent crypto price volatility.

Answer

CFO Macrina Kgil stated that Figure has not seen any change in demand for its loans, as the private credit jitters are primarily isolated to commercial loans, not residential mortgages. She highlighted Figure's rapid origination times (average 9 days, as fast as 5 days) allow for quick market adaptation. CEO Michael Tannenbaum described crypto-backed loans as a 'dream asset class' for investors due to the ease of liquidation in the Bitcoin market, noting zero losses to date despite volatility. He reiterated that securitization execution across all Figure products is at all-time tights, underscoring Figure's strong market position.

Kyle Peterson asked about the current stage or 'inning' of upsell/cross-sell and package density momentum, and its sustainability for future growth.

Answer

Scott Staples, CEO, used a sports analogy, stating that the 'game has started all over again,' now in the 'first inning of the next generation' of package density, with digital identity at its core. He emphasized that risk mitigation is now the number one concern for customers, driving demand for more protection and thus increasing package density.

Kyle Peterson asked about the current stage or "inning" of First Advantage's upsell, cross-sell, and package density initiatives, and whether these efforts can sustain growth for several more years.

Answer

Scott Staples, Chief Executive Officer, used a sports analogy, stating that the "game has started all over again," and they are in the "first inning of the next generation of package density with digital identity at the center." He highlighted that risk mitigation has become the number one concern for customers, driving demand for more protection (employees, brand, offices, shareholder value). This translates into a need for more data searches, new offerings, and innovative verification and identity solutions, with digital identity acting as the "cleanup hitter" in this new phase.

Kyle Peterson from Needham & Company asked for clarification on the assumptions within the updated interest expense guidance, including the impact of debt repricing and rate cuts. He also inquired about the competitive environment and whether the company's increased scale post-Sterling acquisition is improving win rates.

Answer

CFO Steven Marks confirmed the interest expense guidance incorporates the recent debt repricing and voluntary prepayment, and conservatively assumes only one 25 bps rate cut in December. CEO Scott Staples noted that while win rates are improving, he attributes this to their focused execution on software, data, and AI-driven client experience improvements, rather than scale alone.

Kyle Peterson asked for the 2025 outlook on performance by vertical and inquired about the company's priorities and expected pace for deleveraging the balance sheet.

Answer

CFO Steven Marks stated that broad market normalization means no specific verticals are expected to stand out on base performance, but strong pipeline wins in healthcare and retail will drive growth. CEO Scott Staples added that the international rebound is expected to continue. Regarding the balance sheet, Marks noted that modest deleveraging will occur in 2025 through mandatory debt prepayments and free cash flow, with more significant deleveraging expected in 2026 as synergies are fully realized.

Kyle Peterson asked if the strong Q4 repayment performance, particularly on third and fourth payments, increased Sezzle's appetite for expanding Pay-in-Five products. He also inquired about the capital allocation strategy, specifically regarding the timing of share repurchases and the balance between organic investment, M&A, and buybacks.

Answer

CEO and Executive Chairman Charlie Youakim confirmed that improved repayment performance does increase appetite for Pay-in-Five, acknowledging a potentially slightly higher provision but noting that unit economics are designed to remain similar due to increased attraction and retention. CFO Lee Brading stated that the $50 million buyback was completed in December, with details in the upcoming 10-K, and emphasized an opportunistic approach to buybacks. Charlie Youakim elaborated on capital allocation priorities, focusing first on internal business investments, then potential partnerships, M&A (historically build vs. buy), and finally buybacks/dividends, stressing that executive compensation is not tied to share price.

Kyle Peterson of Needham & Company inquired about Sezzle's increased appetite or confidence to expand its Pay-in-Five product, given the favorable repayment performance in Q4 2025, and sought details on the company's capital allocation strategy, specifically regarding the timing of share repurchases and the balance between organic investment, M&A, and buybacks.

Answer

CEO Charlie Youakim confirmed increased appetite for Pay-in-Five, noting consumer preference and the system's design to maintain unit economics despite slightly higher provision. CFO Lee Brading stated the $50 million buyback was completed in December, with a new $100 million program authorized, and that buybacks are opportunistic. Charlie Youakim emphasized internal business investment as the priority, followed by potential partnerships and M&A (though historically less common), with buybacks and one-time dividends as other options, stressing no executive performance comps are tied to share price.

Kyle Peterson inquired about the expected decline in Adjusted EBITDA margins for 2026, asking if it's due to mix shift or new investments, and also questioned the health and appetite of private credit and funded capital partnerships amidst recent negative headlines.

Answer

Paul Gu, Co-founder and CTO, attributed the margin changes to a mix shift towards larger secured products with lower take rates and a strategic focus on long-term customer value and brand reputation. Sanjay Datta, CFO, stated that Upstart is deliberate with private credit partners, who perform deep diligence, and confirmed that co-investments are performing well, indicating strong direct partnerships.

Kyle Peterson inquired about the expected decline in EBITDA margins for 2026, asking if it's due to product mix, balance sheet runoff, or new investments. He also asked about the health and appetite of private credit and funding partners given recent market headlines.

Answer

Paul Gu, Co-founder and CTO, attributed the margin decline to an intentional strategy: a changing mix towards secured products and prime borrowers with lower take rates but larger market sizes, and a longer-term view on customer value and brand building. Sanjay Datta, CFO, stated that Upstart is deliberate with private credit partners, who perform deep diligence, and their co-investments are performing well, indicating strong partnership health.

Kyle Peterson inquired about the impact of recent high-profile bankruptcies and negative credit events in the auto sector on Upstart's expansion plans and customer conversations, and also asked about trends in the superprime segment (720+ FICO), including sequential origination declines and potential model tightness or competition.

Answer

CEO Dave Girouard stated that recent auto sector issues had no direct impact on Upstart, noting that fraudulent activity wasn't widespread but caused market caution and increased diligence. CFO Sanjay Datta explained that model tightness due to macro signals affected prime segments (UMI higher for low-mid 700s) and acknowledged the superprime segment's competitiveness.

Kyle Peterson inquired about the impact of recent high-profile bankruptcies and negative credit events in the auto lending space on Upstart's expansion plans and customer conversations, and also asked about trends in the superprime segment.

Answer

Dave Girouard, CEO of Upstart, stated that these events had no direct impact on Upstart, noting that the company has rigorous processes to mitigate dealer-related risks. Sanjay Datta, CFO of Upstart, added that model tightness affected the superprime segment, which is also highly competitive, contributing to a sequential decline in originations there.

Kyle Peterson questioned the trend of a declining average loan size, asking if it was a strategic shift, and inquired about the competitive landscape for newer products like HELOC and auto loans.

Answer

CEO Dave Girouard confirmed the lower average loan size is a strategic result of the rapid growth in the small-dollar loan product, which expands the user base. He contrasted the new products, where the advantage is a differentiated, low-cost consumer experience, with unsecured loans, where the advantage is primarily in underwriting and pricing.

Kyle Peterson from Needham & Company inquired about the drivers behind the declining average loan size and asked for a comparison of the competitive landscape for new products like HELOC and auto versus the core personal loan market.

Answer

CEO Dave Girouard clarified the lower average loan size is a strategic result of rapid growth in the small-dollar loan product. He differentiated the competitive advantages, noting that for home and auto, the key is creating a superior, faster, and lower-cost origination experience, whereas underwriting is the primary differentiator for unsecured loans.

An analyst on for Kyle Peterson asked about Upstart's funding mix strategy in the current macro environment, particularly with the new Fortress agreement, and inquired about take rate pressure from the shift towards super-prime borrowers.

Answer

CFO Sanjay Datta highlighted the stability of committed partnerships like Fortress in the current climate. He clarified that take rates are lower due to success in the competitive super-prime segment, not subprime. CEO David Girouard added that diversifying into super-prime loans is a strategic positive, even if it brings down the average contribution margin from recent highs.

Kyle Peterson of Peterson, Johnson & Partners inquired about the future funding mix between committed capital, at-will buyers, and depositories, and the expected pace of reducing loans held on the balance sheet in 2025.

Answer

CFO Sanjay Datta stated the medium-term goal is over 50% committed capital, with the rest from banks and at-will sources. He noted that reducing on-balance-sheet loans is a quarter-to-quarter process, acknowledging a timing lag between rapid borrower growth and securing new capital agreements.

Kyle Peterson of Needham & Company asked about the expected time lag for Fed rate cuts to impact the business and how a rising average loan size affects the strategy for the small dollar loan product.

Answer

CFO Sanjay Datta estimated a lag of one to three months for Fed rate cuts to fully translate into marketplace pricing. He added that as model improvements allow more borrowers to qualify for larger loans, fewer will be offered small dollar loans, which the company views as a positive outcome for borrowers and the platform.

Kyle Peterson inquired about Broadridge's plans for its balance sheet as it continues to accumulate Canton Coins, given the material mark-to-market gains, and whether there are additional opportunities like Tharameon or avenues to create more liquid assets.

Answer

CEO Tim Gokey clarified that Broadridge will accumulate Canton Coins at a lower rate post-January 1st due to changes in the minting curve. He reiterated that Broadridge is an operating company, not an investment company, and intends to dollar-cost average out of these holdings over multiple years, without seeking immediate liquidity. He stated that Broadridge is not actively looking for specific investments like Tharameon, which arose from key actors around Canton.

Kyle Peterson inquired about the progress of Broadridge's on-chain initiatives, specifically the Canton Network DLR platform, and sought an update on the pipeline for moving other asset classes to this platform and its expansion potential in the near and medium term. He then asked about Broadridge's balance sheet plans regarding the accumulation of Canton Coins, including potential additional opportunities like Tharimmune and strategies to create more liquid assets from these holdings.

Answer

CEO Tim Gokey highlighted the DLR platform's doubling of volumes since June and a strong roadmap with additional clients. He detailed plans to make repos real-time within the current fiscal year, incorporating stablecoin to transform them into a trading function, and extending the platform to other fixed income assets and deposits in fiscal 2027. Gokey also mentioned the eventual move to the Canton mainnet for enhanced interoperability and commitment to supporting multiple Layer 1 networks. CEO Tim Gokey confirmed that Broadridge, as a Super Validator, will continue accumulating Canton Coins, albeit at a lower rate due to a minting curve change as of January 1st. He clarified that Broadridge is an operating company, not an investment company, and intends to dollar-cost average out of these holdings over multiple years rather than seeking immediate liquidity. Gokey stated that the Tharimmune investment was a unique situation to ensure broader access to Canton.

Kyle Peterson of Needham & Company asked about any observed impact of the government shutdown on Broadridge's sales cycles, deal closures, or client conversations. He also sought clarification on Broadridge's long-term strategy and near-term role for digital assets and tokenization within its business.

Answer

CEO Tim Gokey stated that the selling environment remained stable with no slowdown in conversations due to the government shutdown, noting that sales cycles are typically longer. He expressed confidence in the market, strategic client conversations, and a healthy, growing pipeline. Regarding digital assets, CEO Tim Gokey described tokenization as a megatrend for the next decade, with Broadridge driving it across fixed income, repos, collateral, and longer-term tokenized equities, which could boost position growth. He highlighted the Canton Network's potential as an operating system and Broadridge's role in enabling wealth managers to integrate digital assets into client service operations. CFO Ashima Ghei added that Canton Coins contribute about one point to capital markets growth, with revenue varying based on minting activity and coin price, and noted potential balance sheet volatility from the $74 million coin holdings.

Kyle Peterson asked about the current sales cycle environment, specifically if the recent government shutdown had impacted deal closures or client conversations. He also sought Broadridge's perspective on the evolving role of digital assets and tokenization within its business, both in the near and long term, given recent revenue contributions and investments.

Answer

CEO Tim Gokey stated that the selling environment remains stable, with no slowdown in conversations due to the government shutdown, noting that many sales cycles are longer-term. He highlighted a strong market, exciting strategic client conversations, and a healthy, growing pipeline. Regarding digital assets, Tim Gokey described tokenization as a 'megatrend' for the next decade, with Broadridge driving it across fixed income, repos, collateral, and longer-term tokenized equities, which could boost ICS position growth. He also mentioned the Canton Network's potential as an operating system and Broadridge's plans to enable wealth managers to integrate digital assets into client service operations by early next calendar year. CFO Ashima Ghei added that Canton Coin revenue is expected to contribute about one point to capital markets growth in fiscal 2026, with some balance sheet volatility.

Kyle Peterson from Needham & Company asked about the slightly lower year-over-year revenue backlog and the timeline to replenish it, and also inquired about any significant seasonal factors to consider for fiscal 2026, particularly for event-driven revenue.

Answer

CEO Tim Gokey characterized the backlog as not materially different from the prior year, noting it remains strong at 10% of recurring revenue and provides significant visibility. CFO Ashima Ghei addressed seasonality by highlighting an expected large mutual fund proxy in Q1, which is baked into the 12-15% Q1 EPS guidance. She also noted that Q2 will face a tough comparison due to strong proxy activity in the prior year, likely resulting in a year-over-year decline for that quarter.

Kyle Peterson inquired about the drivers of SoFi's impressive deposit growth, specifically if it's primarily from member deposits, and requested an update on the recent downward beta for deposits.

Answer

Anthony Noto, CEO, attributed deposit growth to SoFi's competitive advantage in offering a superior value proposition through SoFi Money, including high APY, rewards, and free financial planning. He noted that 97% of deposits come from direct deposit customers, indicating high-quality primary account relationships. Chris Lapointe, CFO, added that the downward beta for deposits has consistently been around 60%-70% since the bank's launch and is expected to remain stable.

Kyle Peterson sought clarification on the strength of the loan platform business, asking if the growth was broad-based across new and existing partners or concentrated, and if SoFi was observing a similar trend of loan buyers consolidating purchases to fewer platforms.

Answer

CFO Chris Lapointe stated that growth was seen across both new and existing partners, with many existing partners increasing their commitments for Q3 and Q4, indicating a 'flight to quality.' CEO Anthony Noto confirmed that SoFi is benefiting from the trend of consolidation towards higher-quality platforms.

Kyle Peterson asked for more detail on the strength of the Loan Platform Business (LPB), specifically whether the growth was broad-based across new and existing partners or concentrated, and if SoFi is observing a consolidation of purchases among fewer platforms.

Answer

CFO Chris Lapointe stated that growth in the Loan Platform Business was observed across both new and existing partners. He highlighted a 'flight to quality,' where several existing partners increased their commitments for Q3 and Q4, indicating continued momentum and a consolidation trend benefiting SoFi.

Kyle Peterson from Needham & Company asked about the growth trajectory of the Loan Platform Business (LPB), inquiring whether the strong Q2 performance represents a new run-rate or if further acceleration is expected in Q3.

Answer

CFO Chris Lapointe highlighted the strong momentum in the LPB, which originated $2.4 billion in Q2, up from $1.6 billion in Q1. While he did not provide specific origination guidance, he stated that SoFi expects continued growth and momentum in the business through both Q3 and Q4.

Kyle Peterson of Needham & Co. inquired about the Technology Platform's pipeline, asking if recent market volatility has impacted client appetite or decision-making timelines.

Answer

CEO Anthony Noto stated that the outlook for the Tech Platform remains unchanged by recent volatility. He anticipates an acceleration in new deals contributing to 2026 revenue, as traditional financial institutions and consumer brands face increasing pressure to innovate. Noto noted a recent increase in inbound partnership and acquisition interest, signaling a return of capital to the fintech sector.

Kyle Peterson from Wolfe Research, LLC inquired about SoFi's ability to lower deposit APYs more aggressively than peers while still achieving strong deposit and member growth.

Answer

CEO Anthony Noto explained that the SoFi Money value proposition extends beyond its top-tier APY, including features like Zelle, and serves as a key entry point for members to adopt other products. CFO Chris Lapointe added that SoFi is near its long-term funding mix target and can manage deposit levels through pricing while still driving strong member growth via other financial services products.

Kyle Peterson asked about deposit trends and customer behavior, particularly regarding average balances, after SoFi adjusted the interest rate paid on member deposits.

Answer

CEO Anthony Noto reported that the SoFi Money product continues to perform well, with over $2 billion in member deposit growth during the quarter and spending levels remaining strong. He emphasized that direct deposit members are highly engaged and hold more products, underscoring the competitive advantage of SoFi's national bank charter in controlling its value proposition and driving flywheel effects.

Kyle Peterson inquired about the drivers behind Axos Financial's low-to-mid teens loan growth outlook, asking if it would be sustained by existing strengths like CRE specialty and leasing, or if new opportunities would emerge. He also sought clarity on a sustainable run rate for fee income, considering Verdant's contributions and any seasonality.

Answer

Gregory Garrabrants, CEO of Axos Financial, indicated that future growth would be more balanced, with less reliance on CRE specialty and increased contributions from Fund Finance, non-real estate lender finance, and Floorplan. He noted Verdant's seasonal business model but projected $150-$200 million in growth. Derrick Walsh, EVP and CFO, confirmed that the current quarter's fee income, adjusted for a $1.5 million paper statement fee, serves as a good jumping-off point, with Verdant's non-interest income expected to be generally consistent.

Kyle Peterson inquired if the current quarter's fee income, adjusted for seasonality and Verdant's contribution, represents a good run rate for future periods.

Answer

Gregory Garrabrants, CEO, and Derrick Walsh, CFO of Axos Financial, confirmed that, excluding a $1.5 million paper statement fee, the current quarter's fee income is a good run rate, with Verdant's non-interest income expected to be consistent with potential small growth.

Kyle Peterson from Needham & Company inquired about the net impact on net interest margin (NIM) from competing factors like loan yield pressure and slower prepayments. He also asked for an update on Axos's strategy for managing expense growth relative to revenue, particularly through the use of AI.

Answer

President & CEO Gregory Garrabrants explained that the NIM outlook remains consistent, as tighter loan yields are often offset by deposit benefits from new business lines. He stated that while there's some pressure, he expects the NIM to remain fairly consistent. Regarding expenses, Mr. Garrabrants reiterated the target to keep personnel and professional services cost growth below 30% of revenue growth. He provided specific examples of how AI is creating efficiencies in legal document review and software development, stating his belief that it will significantly "bend the cost curve" and improve productivity.

Kyle Peterson inquired about Axos Financial's loan growth strategy, asking about specific areas of caution or competitive opportunity, and followed up on the significant quarterly increase in fee income.

Answer

CEO Gregory Garrabrants noted caution in C&I segments like logistics but sees opportunities to push back on spread compression due to market volatility. He expressed optimism for overall loan growth as headwinds in single-family and multifamily loans subside. CFO Derrick Walsh clarified that the prior quarter's fee income was depressed, making the current quarter more representative. He attributed the strength to BOLI additions, auto insurance recoveries, and other loan fees, noting only a minor $750,000 one-time fair value mark.

Kyle Peterson inquired about the potential for further reductions in deposit costs and the key drivers behind the strong net interest margin (NIM) guidance.

Answer

President and CEO Greg Garrabrants explained that the previous quarter's deposit cost reduction was mainly from repricing rate-sensitive deposits, which may be difficult to repeat without a drop in reference rates. He noted the long-term goal is to improve the deposit mix and offset any variable-rate loan income declines with deposit repricing. Garrabrants added that it's difficult to disaggregate the drivers of NIM between assets and deposits, as many lending businesses also bring in low-cost deposits. He emphasized the strategy is to grow into the bank's excess liquidity rather than aggressively shedding deposits.

Kyle Peterson of D.A. Davidson & Co. inquired about the competitive landscape for new loan deals, particularly in C&I, and asked about the catalysts needed for fee income to recover, such as the level of rate drops required to boost mortgage banking.

Answer

President and CEO Greg Garrabrants acknowledged increased pricing pressure from competitors, noting that Axos may need to make minor pricing concessions to maintain loan volume. Regarding fee income, he explained that prepayment penalties are tied to a less active loan mix and that falling rates create a mark-to-market headwind on the mortgage servicing book. He identified the securities business as the best opportunity for fee income growth through higher volumes. CFO Derrick Walsh added that seasonal paper statement fees typically boost fee income in the December quarter.

Kyle Peterson asked about the sustainability of 30%+ ARR growth on the platform side. He also inquired if FICO has observed any disruption or changes in card business activity due to chatter around a potential 10% cap on card APRs.

Answer

CEO Will Lansing indicated that current platform ARR growth levels are sustainable, with significant appetite for the new platform and its increasing contribution to overall ARR. CFO Steve Weber added that FICO expects continued, sustained growth in ARR for the rest of the year. Steve Weber stated that FICO has not seen any changes in card business activity related to the potential APR cap, noting decent volumes in pre-qual and originations.

Kyle Peterson from Needham asked about the sustainability of 30%+ ARR growth in FICO's platform business and how to project this trend. He also inquired about any observed disruption or changes in activity within the card business due to chatter around a potential 10% cap on card APRs.

Answer

Will Lansing, CEO, indicated that current platform ARR growth levels are sustainable, driven by strong appetite for the new platform and its increasing contribution to overall ARR. Steve Weber, CFO, added that the platform's larger share of total ARR will further accelerate overall growth, projecting continued significant ARR growth for the rest of the year. Regarding the card business, Mr. Weber stated that FICO has not observed any changes in activity or disruption from the potential APR cap, noting decent origination volumes.

Kyle Peterson of Needham & Company asked about FICO's capital allocation strategy, specifically whether the accelerated pace of share buybacks would continue given the stock price and cash flow.

Answer

CEO Will Lansing reiterated FICO's strategy of returning cash via buybacks to maintain an optimal capital structure, stating the company leans into opportunities when the stock price corrects. CFO Steve Weber added that current leverage is modest by historical standards, implying capacity for more.

Kyle Peterson from Needham & Company inquired about FICO's capital allocation philosophy regarding share buybacks in a volatile market and asked if software sales cycles were changing based on geography or bank size.

Answer

CEO Will Lansing reiterated that FICO's strategy is to buy back shares consistently rather than time the market, though they have been more aggressive when they felt the stock was undervalued. CFO Steve Weber stated they have not observed any discernible changes in sales cycle behavior across different regions or bank sizes.

Kyle Peterson from Needham & Company inquired about FICO's capital allocation strategy, specifically how it balances its consistent share buyback approach with being opportunistic in a volatile market. He also asked if there were any discernible trends in software sales cycles based on geography or bank size.

Answer

CEO Will Lansing reiterated that FICO's philosophy is not to be a market timer but to buy back shares consistently based on a long-term view of the company's value, though they have exceeded free cash flow for buybacks at times when the stock seemed undervalued. CFO Steve Weber stated they have not seen any discernible trends or changes in customer behavior based on region or size of bank.

Inquired about the company's appetite for share buybacks at current stock levels and sought to understand the confidence in the full-year guidance despite a seemingly weaker mortgage outlook.

Answer

Management sees significant value in the stock and has an appetite for more buybacks, especially on price dips. The full-year guidance remains intact because it was based on a conservative view of interest rates from the outset, which already accounted for potential market softness.

Kyle Peterson from Needham & Company asked if the strong Q4 Scores revenue included any one-time items and inquired about the rollout timing for the new mortgage score pricing.

Answer

CFO Steven Weber confirmed there was a small amount of one-time revenue in the quarter, around a "few million dollars," which was not highly material to the overall result. Regarding the price rollout, Mr. Weber explained that there is always a lag, as the new pricing is "feathered in" over time because some customer contracts do not renew on January 1, a dynamic consistent with prior years.

Kyle Peterson inquired about the new logo pipeline, asking if TriNet sees an opportunity to gain market share or increase new logo sign-ups as competitors catch up on their own repricing efforts. He also asked for guidance on how to think about the interest income line item moving forward, given timing shifts on tax returns and resilient rates, and requested a rough amount of catch-up interest benefiting the current quarter.

Answer

Mike Simonds (CEO) stated that TriNet's quicker and more responsive pricing adjustments, coupled with improved NPS and broker-driven RFPs, position them well to gain share as the market pricing gap narrows. Kelly Tuminelli (CFO) explained that interest income benefited from catch-up interest associated with IRS tax refunds, which is uncertain going forward due to IRS delays. She specified that roughly $3 million of catch-up interest was unusual this quarter, with balances also temporarily higher.

Kyle Peterson inquired about the intra-quarter trajectory of client hiring (CIE), asking if the trend was linear or lumpy. He also asked for a quantification of the impacts from the ASO transition and the Clarus divestiture on professional services revenue to better understand the organic trend.

Answer

EVP & CFO Kelly Tuminelli responded that Client Initiated Employment (CIE) was 'pretty linear' and steady throughout the quarter, with bright spots in tech and financial services. Regarding professional services revenue, Tuminelli clarified that the ASO conversion is performing better than expected, helping offset PEO volume impacts. She quantified the Clarus divestiture impact as a $4 million year-over-year swing ($2 million in revenue last year versus none this year).

Kyle Peterson asked for details on the moving pieces within the full-year guidance, questioning if any components were tracking better or worse than expected, and also inquired about SMB confidence trends observed into early April.

Answer

CFO Kelly Tuminelli explained that while the overall guidance is on track, there were slight variations: expenses performed slightly better than planned, while client-in-employment (CIE) hiring and attrition were slightly worse, with insurance costs tracking in line. President and CEO Michael Simonds added that despite macro volatility, TriNet's business has low direct exposure to tariff impacts and that the company's pipeline and upcoming product initiatives support optimism for the second half of the year.

Kyle Peterson requested clarification on the expected seasonality for 2025, particularly for the first quarter, given the company's shift to an annual guidance model. He also asked for the outlook on Worksite Employees (WSEs) for the year, considering factors like the discontinuation of the technology fee.

Answer

CFO Kelly Tuminelli addressed seasonality by noting that the first quarter's Insurance Cost Ratio (ICR) is typically about two points better than the full-year average, while the fourth quarter is about two points worse. She also mentioned that Professional Services Revenue (PSR) is usually front-loaded in Q1. Regarding WSEs, Tuminelli projected a year-over-year decline due to prudent new business pricing, low single-digit client hiring (CIE) growth similar to 2024, and an anticipated 1-2 point increase in attrition from record-low levels.

Kyle Peterson of Needham & Company asked for clarification on the projected Q4 step-down in professional services revenue and the timeline for repricing the remaining third of the insurance book.

Answer

CFO Kelly Tuminelli attributed the Q4 professional services revenue forecast to two main factors: a non-recurring $8 million item from the prior year and a conservative assumption of slower client hiring. She also explained that the remaining insurance book will be repriced in smaller cohorts throughout the next year, with renewal cycles in Q1 and July.

Kyle Peterson sought clarification on the various factors influencing the government business, including the impact of the federal shutdown and the ramp-up pace of state and local opportunities.

Answer

Mark Begor, Chief Executive Officer, expressed satisfaction with Q3 government performance, noting that the impact from 2024 CMS funding changes is largely behind them. He stated that the federal shutdown has had no impact to date and is expected to be a deferral, not a loss, of revenue. He highlighted strong momentum post-OB3, with states focusing on reducing error rates to avoid increased benefit costs, and new federal program opportunities.

Kyle Peterson asked for more color on the government business, specifically the net effect of federal shutdown noise and the ramp-up pace of state and local opportunities.

Answer

CEO Mark Begor expressed satisfaction with Q3 government performance, noting that the 'air pocket' from last year's CMS funding changes is behind them. He highlighted strong momentum post-OB3 and states' focus on reducing error rates. He clarified that any federal shutdown impact would likely be a deferral of revenue, not a loss, and is not assumed to materially extend in the guidance.

Kyle Peterson asked if the decision to hold full-year guidance reflected recent market volatility and whether Equifax is observing any credit tightening in specific non-mortgage consumer segments.

Answer

CEO Mark Begor confirmed that holding the guidance despite a strong Q1 was a prudent measure due to significant second-half economic uncertainty. CFO John Gamble added that recent mortgage trends support the guide. Regarding credit, Gamble noted that trends are consistent with the past 18 months: some weakening in subprime delinquencies for card and auto, but the issue has not spread to other consumer segments.

Kyle Peterson asked about capital allocation priorities, specifically the balance between increasing the dividend and initiating a share buyback program, as well as the potential timing for these actions.

Answer

CEO Mark Begor stated the company plans to both resume dividend growth and launch a multiyear share repurchase program in 2025. He noted that the exact timing depends on gaining more visibility into the mortgage and hiring markets, but the intent to increase capital returns is clear, alongside continuing bolt-on M&A.

Kyle Peterson of Needham & Company asked for an estimate of how much mortgage rates would need to fall to stimulate purchase activity. He also inquired about the company's priorities and balance between dividend growth and share buybacks for capital return in 2025.

Answer

CEO Mark Begor stated it is difficult to predict the exact rate drop needed but pointed to the market's quick positive response to a small rate dip in late September as an encouraging sign of pent-up demand. On capital allocation, Begor reiterated the strategy: post-cloud transformation, priorities are bolt-on M&A, followed by consistent dividend growth (framed as aligned with earnings growth), and then using remaining excess free cash flow for a multiyear share buyback program. CFO John Gamble added that deleveraging also increases capital capacity.

Kyle Peterson from Needham & Company asked about the outlook for the take rate and product mix, and followed up on whether the favorable funding environment has led to irrational competition.

Answer

CFO Rob O'Hare stated that while 0% loans are expected to gain share, the company's plan allows it to remain at the high end of its 3-4% ROTC target range. COO Michael Linford added that Affirm's commitment to credit quality attracts the best capital partners, insulating them from irrational market behavior.

Kyle Peterson of Needham & Company asked about underlying credit trends and sought an explanation for the sequential increase in the allowance for loan losses, despite healthy delinquency metrics.

Answer

CFO Robert O'Hare confirmed that repayment rates remain healthy, with no signs of consumer stress, and noted an uptick in prepayments. He explained the marginal increase in the allowance rate is related to the resulting change in the mix of loans remaining on the balance sheet. CEO Max Levchin added that they remain attentive and can adjust quickly due to the short-term nature of their loan book.

Kyle Peterson asked about Affirm's future funding mix, specifically if more large-scale forward flow agreements like the Sixth Street partnership are planned, and inquired about the ramp-up timeline for that deal.

Answer

COO Michael Linford described the Sixth Street partnership as a major leap forward and indicated that another deal of that size is not expected in the super near term. He emphasized a long-term strategy of building a durable, scaled capital program that utilizes forward flow agreements, ABS markets, and warehouse lines. He also confirmed the Sixth Street deal will ramp up thoughtfully over the course of the next year, not overnight.

Kyle Peterson asked about the expected contribution to fiscal 2025 growth from different revenue streams, such as merchant network revenue versus interest and gain on sale, and the anticipated split.

Answer

CFO Michael Linford explained that the revenue mix is an output of origination mix and capital strategies, rather than a direct input. He declined to provide specific line-item guidance but noted that the core driver is making the underlying loan asset more valuable, which they expect will translate to about 10 basis points of higher monetization down to the RLTC line.

Kyle Peterson asked about credit trends, noting that while delinquency trends look healthy, the allowance for loan losses on the balance sheet increased sequentially and sought to understand the drivers.

Answer

CFO Robert O'Hare explained that repayment rates are healthy and that a slight uptick in prepayments—a positive credit signal—was observed. This prepayment activity alters the mix of loans remaining on the balance sheet, which can marginally increase the allowance rate. CEO Max Levchin added that the company remains vigilant and can adjust underwriting quickly due to the short duration of its loan book.

Kyle Peterson of Needham & Company inquired about the extended sales cycle, asking if the resulting revenue impact is a short-term timing issue or a more prolonged challenge for 2026 targets. He also asked about the new Goldman Sachs partnership and its expected evolution and benefits.

Answer

CEO Dave Guilmette explained that while upsell and cross-sell deals are taking longer to close, the pipeline of late-stage deals is up 35% year-over-year, and strong execution in the second half is critical for 2026. Regarding the Goldman Sachs partnership, Guilmette described it as a significant future revenue opportunity that will strengthen Alight's wealth solutions, improve its competitive position, and serve as a model for future partner collaborations.

Kyle Peterson inquired about the sales cycle, asking if management is seeing actual deal extensions due to the macro environment or if their commentary is simply cautious. He also asked about capital allocation, specifically if the company would be more aggressive with share buybacks.

Answer

CEO David Guilmette stated that there has been no material shift in client buying patterns, though the macro environment could add an extra layer of decision-making, potentially delaying contract execution by a few weeks. CFO Jeremy Heaton confirmed the company has $261 million in its buyback authorization and the flexibility to be opportunistic, while still prioritizing balance sheet strength and strategic opportunities.

Kyle Peterson from Needham & Company asked if the commentary on potentially extended deal cycles was precautionary or based on recent changes in client behavior, and also questioned the company's capital allocation strategy regarding share buybacks in a volatile market.

Answer

CEO David Guilmette stated that there has been no material shift in client buying patterns and the commentary was more about general caution in the current environment. CFO Jeremy Heaton confirmed they would be opportunistic with the $261 million share buyback authorization, while noting that strengthening the balance sheet remains the top priority, followed by strategic opportunities and capital returns.

Kyle Peterson inquired about the potential business impact from federal government layoffs and how contract structures might provide offsets. He also asked about Alight's capital allocation strategy, specifically the balance between its new dividend and share buybacks.

Answer

CEO David Guilmette stated that any impact from federal layoffs would be immaterial to 2025 revenue and earnings, citing the company's limited public sector exposure and the nature of the contracts. CFO Jeremy Heaton added that while the dividend is a priority, the company will be opportunistic with its increased share repurchase authorization.

Kyle Peterson inquired about the capital allocation strategy, specifically how the new dividend initiation affects the approach to share buybacks. He also asked for CEO David Guilmette's key takeaways from client conversations in his first few months.

Answer

CEO David Guilmette affirmed the capital allocation strategy is unchanged, with a commitment to return capital via both the new dividend and share repurchases, supported by confidence in the free cash flow profile. He also shared that client conversations are resonating around Alight's ability to 'nail the basics' and use its integrated platform to improve employee engagement. CFO Jeremy Heaton noted the company still has $93 million in its buyback authorization.

Kyle Peterson inquired about the new dividend's impact on the company's share buyback strategy and asked CEO Dave Guilmette for his key takeaways from client conversations during his first few months.

Answer

CEO David Guilmette affirmed that the capital allocation strategy remains unchanged, with a commitment to return capital via both dividends and share buybacks, supported by confidence in free cash flow. He also shared that client conversations are resonating around Alight's ability to 'nail the basics' and use its integrated platform to improve employee engagement and well-being.

Kyle Peterson of Needham & Company asked for clarification on the Q3 capital markets guidance, which seemed conservative given the improving pipeline. He also inquired about the capital allocation strategy, specifically the approach to share buybacks, and requested an update on the pension annuitization process.

Answer

CFO David Gardella and CEO Daniel Leib responded. Gardella clarified that the high end of the capital markets guidance implies roughly 15% sequential growth and that continued market improvement could lead to results at or above that range. Regarding capital allocation, both executives confirmed share repurchases remain a key tool, deployed more aggressively at lower stock prices, but organic investment in the company's transformation remains the top priority. Gardella stated the pension annuitization process is underway and expects to provide a more detailed update on the cash impact during the third quarter.

Kyle Peterson of Needham & Company, LLC inquired about the sustainability of the impressive growth in the Arc Suite, asking if it was driven by lumpy or one-time factors. He also asked about the potential pace of share buybacks going forward.

Answer

CFO David Gardella explained that the Tailored Shareholder Report (TSR) regulation provided a somewhat 'lumpy' benefit that would be annualized in the first half of 2025 before being overlapped. President of Global Investment Companies Eric Johnson added that beyond TSR, growth is supported by strong fundamentals like key contract renewals and price performance. CEO Daniel Leib emphasized the high value clients place on their service expertise. Regarding buybacks, both Gardella and Leib reiterated their disciplined strategy of being more aggressive at lower stock prices and confirmed that repurchases remain a key component of their capital deployment strategy.

Kyle Peterson of Needham & Company inquired about the duration of the de-SPAC headwind, the expected decline rate for print revenue in 2025, and the capital allocation plan, including an update on the pension termination.

Answer

Executive Craig Clay stated that DFIN is at the "tail end" of the de-SPAC cycle and is now strategically avoiding low-quality deals to manage risk. Executive David Gardella clarified that while the underlying secular decline in print is mid-single-digits, event-driven projects cause significant volatility. Gardella also confirmed the capital allocation strategy remains focused on organic investments, buybacks, and debt reduction, with the pension termination still planned for year-end 2025.

Kyle Peterson asked if the current level of consumer incentives as a percentage of billings is a stable run rate and requested details on the financial impact of the Dosh divestiture, including any one-time costs.

Answer

CFO Alexis DeSieno stated that revenue as a percentage of billings should remain stable in the low 60% range, as previous overages related to platform over-delivery have been controlled. Regarding Dosh, she explained there would be no major P&L impact or one-time costs, though a noncash gain will be recognized in Q1. CEO Amit Gupta added that the Dosh divestiture was a strategic decision to improve focus on core operations.

Kyle Peterson asked about the ongoing impact of the strategic review process on revenue, specifically regarding deal delays and whether these distractions have continued into 2025 and are factored into guidance. He also inquired about demand for supply chain solutions amid current geopolitical shifts.

Answer

CEO Anthony Jabbour confirmed that while some delayed deals have closed, others are on hold pending the outcome of the strategic review. CFO Bryan Hipsher noted that the 2025 guidance accounts for this uncertainty, expecting the process to conclude in Q1. Regarding demand, Jabbour stated that the environment for risk and supply chain solutions remains strong, attributing the Q4 revenue softness in the segment to client migrations to modern, ratable API models rather than a lack of demand.

Kyle Peterson inquired about the performance and Q4 outlook for the Digital Marketing business and asked for an update on the company's balance sheet leverage targets.

Answer

CEO Anthony Jabbour and CFO Bryan Hipsher confirmed that while Digital Marketing remains a headwind, it improved sequentially as expected, with declines narrowing from double-digits to low single-digits in Q3. For the balance sheet, CFO Bryan Hipsher reiterated the goal to reach approximately 3.5x net leverage by year-end 2024 and to continue deleveraging towards the 3.0x to 3.25x range in 2025 through EBITDA growth and debt reduction.

Kyle Peterson inquired about the strategy for the newly authorized share buyback program and asked for an update on the higher healthcare and utilization costs mentioned in the previous quarter.

Answer

CEO Anthony Jabbour explained that the share repurchase program will be opportunistic, driven by the belief that the stock is significantly undervalued compared to its peer group based on key financial metrics. CFO Bryan Hipsher clarified that the higher costs seen last year, such as medical and bonus expenses, were more one-time in nature and are not considered a headwind for the current year, noting the company is focused on expense management while investing for growth.

Asked about the balance between customer additions and ARPU in the second-half guidance, and sought details on the transition to the new forward flow agreement for receivables, including its P&L impact and timing.

Answer

The company is prioritizing rapid customer growth and marketplace adoption, which leads to slightly lower ARPU but drives record revenue and expands long-term contribution margins. The transition to the forward flow agreement is underway in Q3, is more cash-efficient, and moves receivables off-balance sheet. It is expected to be P&L neutral in the near term, with historical provision expense being a good proxy for future performance.

Asked about current trends in the Enterprise segment, particularly personal loans, and whether the quarter's GAAP net income profitability is sustainable or if it was aided by one-time items.

Answer

Executives noted the marketplace business grew quarter-over-quarter, with diversification into credit cards and insurance mitigating headwinds in personal loans. The GAAP profitability was attributed to sustainable operating leverage (revenue growing much faster than OpEx) and platform advantages, not one-time items, though some seasonality in Q1 provided a minor lift.

Asked if the base growth softness was concentrated in specific verticals or geographies and inquired about the possibility of increasing share buybacks given the company's financial position and stock valuation.

Answer

The base growth softness was broad-based across the business. Healthcare and industrials led performance in the U.S., and EMEA led internationally. The capital allocation strategy remains unchanged: 1) organic growth investment, 2) M&A, and 3) shareholder returns via buybacks. While the stock price is attractive, they are cautious about maintaining their leverage target (2-3x) and ensuring stock liquidity for investors. They will continue to evaluate the level of buybacks.

Kyle Peterson of Peterson, Johnson & Partners inquired about the potential for reaching a bottom in paid subscriber numbers, given the cautiously optimistic tone and improved engagement metrics in June and July.

Answer

CEO Amber Mason expressed cautious optimism, stating the company aims for quarter-over-quarter subscriber growth but cannot guarantee it. Executive Jonathan Shanfield added that they are seeing traction that was absent six months ago. SVP of Financial Planning and Analysis, Lee Harris, noted that churn rates have decreased and new subscriber acquisition saw a slight increase in Q2, with positive trends continuing into July.

Kyle Peterson from Needham & Company inquired about whether paid subscribers were approaching a bottom, barring any unforeseen market events, and asked for clarity on the cash flow margin outlook for the second half of the year.

Answer

CEO Amber Mason stated the company is "cautiously optimistic" about subscriber growth. Interim CFO Stephen Park added that key metrics are showing improvement and traction. SVP of Financial Planning & Analysis Lee Harris noted that churn rates have declined and new subscriber acquisition saw a slight increase. Regarding cash flow, Harris explained that margins are lumpy, with Q1 and Q3 typically lower, but expects the second half of the year to be consistent with the first half, with potential for slight upside.

Kyle Peterson of Needham & Company inquired about the paid subscriber churn rate for the quarter to differentiate it from gross subscriber additions. He also asked for guidance on the expected run rate for G&A expenses in the coming quarters.

Answer

Lee Harris, SVP of Financial Planning & Analysis, explained that churn was within the normal range, though on the higher side, and that the primary challenge is new subscriber acquisition, not retention. CEO Amber Mason added that they are seeing positive signs with themes like AI and macroeconomics. Regarding G&A, Lee Harris noted that while they seek more efficiencies, significant further decreases are not expected unless revenue trends worsen. Jonathan Shanfield, VP of IR, elaborated that after substantial cost-cutting, the focus is now on optimizing back-end professional fees, with the goal of maintaining current efficiency levels.