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CFO Sanjay Datta cited UMI fluctuations, risk capital deal timing, and loan seasoning as drivers of fair value volatility. CEO Dave Girouard explained that adverse selection is managed through competitive capital costs and advanced models like 'APR as a feature.' He noted that ~25% of loans are already funded by partner deposits, and non-depository capital is becoming more competitive.

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CFO Sanjay Datta explained that fair value is complex, impacted by UMI trends, risk-capital deal timing, and loan seasoning. CEO Dave Girouard stated that adverse selection is managed through competitive capital costs and sophisticated models like 'APR as a feature.' He added that ~25% of loans are already funded by partner deposits, and non-depository capital is becoming more competitive.

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CEO David Girouard explained that Upstart's growth is gated by the economic acquisition of borrowers, not by a shortage of funding, so the Fortress deal doesn't directly translate to higher guidance. Regarding the OnePay partnership, he confirmed it uses Upstart's models for underwriting and involves a revenue-sharing agreement that is a 'win-win' for both parties.

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CFO Sanjay Datta explained that contribution margins are not expected to fall because the company can scale efficiently; any reduction would be a conscious strategic decision to lower take rates for future growth, not a result of rising unit costs. He added that while conversations with at-will buyers are positive, it's too soon to call a trend, and the 2025 guidance does not rely on a specific rebound in the ABS market.

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CEO Dave Girouard explained that T-Prime loans have thinner but positive margins, allowing Upstart to capture contribution dollars from a new, highly-competed market segment. He noted that overall contribution margins are currently high and will likely normalize. On competition, he expressed confidence in Upstart's proprietary underwriting and integrated platform model.

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CEO Max Levchin explained the recession analysis is based on empirical data from past stress events, focusing on necessary credit adjustments. CFO Robert O'Hare added they focus more on internal loan book signals than external macro indicators. On credit reporting, Levchin stated it's a core mission to help consumers build credit responsibly, despite the complexity, and called on competitors to follow suit.

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CEO Max Levchin attributed the active consumer growth to a deliberate, multi-quarter focus on direct-to-consumer initiatives like the Affirm Card and expanded e-commerce coverage, not a loosening of credit standards. CFO Robert O'Hare explained that the marketing spend increase was to support new program launches but did not represent a change in strategy away from point-of-sale user acquisition. He noted that overall OpEx is expected to remain relatively flat for the next two quarters.

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CEO Max Levchin described a very strong reception in the U.K., driven by high merchant demand for longer-term financing, which he views as an underserved market. He stated Affirm's competitive moat is its sophisticated underwriting technology and data infrastructure, which has proven successful in the U.S. and is now being deployed in Europe.

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CEO Max Levchin clarified that future rate expectations are not explicitly used in real-time underwriting; the effect is lagged as it gets priced into new capital deals. CFO Michael Linford added a key caveat: if rates are cut due to economic weakness and a loosening labor market, they would need to adjust approval models for increased credit risk, potentially offsetting the benefit of lower funding costs.

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CEO Max Levchin explained the recession analysis is based on empirical data from past stress events, not specific macroeconomic forecasts. Regarding credit bureaus, he stressed its importance for helping consumers build credit, a process that required years of work with partners like TransUnion and Experian to ensure data was incorporated accurately and beneficially. CFO Robert O'Hare added that for recession planning, they focus more on their own loan book's performance due to its fast turnover.

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Executive Jay Martin acknowledged that forecasting is challenging due to inflation, potential tariffs, and recession risks, but stated the current forecast is their best estimate. He also noted the 2022 vintage was impacted by multiple factors, including a competitive environment and peak vehicle valuations. SVP & Treasurer Jay Brinkley added that loans are priced with a large margin of safety to absorb volatility. Brinkley also explained the high cash balance reflects a conservative stance amid capital market uncertainty, and the company felt good about the timing of its recent debt issuances.

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CEO Kenneth Booth responded that while their forecast always reflects their best estimate, the recent smaller decline was notable and primarily driven by the 2022 vintage, which is becoming less material. He added that the 2023 and 2024 cohorts, which are more significant for future results, remained stable. SVP & Treasurer Jay Brinkley addressed the capital position, stating that the company prefers to be conservative and maintain a solid cash position heading into the busy tax season and potential market uncertainty, and feels comfortable with its current standing.

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CEO Kenneth Booth stated that the 2023 and 2024 vintages are expected to perform better than 2022 because their initial forecasts were more conservative. Chief Treasury Officer Douglas Busk added the underperformance trend is similar but less severe. Mr. Booth noted hurricane impact is not material to the overall portfolio. Regarding profitability, Mr. Busk confirmed a wide variance between vintages like 2019 (highly profitable) and 2022 (less profitable) but affirmed that all vintages are expected to generate positive economic profit.

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Richard Fairbank, Chairman and CEO, explained that the strategy is to expand on Discover's existing playbook. This involves a 'boots on the ground' effort combining partnerships with other networks, working through merchant acquirers, collaborating with local financial institutions, and direct-to-merchant engagement. He stated Capital One will lean into this proven approach more heavily, leveraging the combined company's scale.

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CFO Brian Wenzel affirmed the strategy to maintain higher liquidity in the first half of the year, as it provides pricing flexibility on maturing CDs and is economically positive. He attributed Dual Card growth to the success of the CareCredit offering, which provides flexibility for out-of-network spending. CEO Brian Doubles added that the multiproduct strategy allows them to migrate customers from private label to dual cards as they demonstrate creditworthiness, which is a key value proposition for partners.

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CEO Stephen Squeri explained that the Kabbage platform currently integrates card, loan, and checking account access for SME customers. The next step is to integrate the recently acquired Center platform. However, he did not provide a specific timeline, noting the deal had just closed and requires 'hardening' to meet bank holding company standards before full integration.

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