Sanjay Sakhrani

Sanjay Sakhrani followed up on the strong uptake of new products and initiatives, including higher CAC refunds this year, asking how much of these positive trends are already factored into Chime's current guidance and assumptions.

Answer

Chris Britt, Co-Founder and CEO, confirmed that Chime is expecting an outsized CAC season due to the One Big Beautiful Bill Act. He noted that while the peak of CAC season is yet to come and refunds are slightly later this year, the magnitude is tracking higher, with average CAC refunds up double digits year-over-year as of the end of the previous week. He stated that the trends observed so far are embedded into Chime's guidance.

Sanjay Sakhrani asked about the strong uptake on new products and initiatives, including stronger CAC refunds, and how much of this has been factored into Chime's embedded assumptions for guidance.

Answer

Chris Britt, Co-Founder and CEO, confirmed expectations for an outsized CAC season in 2026 due to the One Big Beautiful Bill Act. He noted that while the peak is yet to come and refunds are later, the magnitude is tracking higher, with average CAC refunds up double digits year-over-year as of last week, and this is embedded in the company's guidance.

Asked about the expected growth trajectory for Revenue Per Active Member (RPM) for the rest of the year and into the next. Also inquired about the potential timeline to reach the company's long-term operating margin goals.

Answer

RPM growth is expected to see some natural normalization in the second half of the year as the company laps the initial launch of MyPay. However, this will be accompanied by accelerating adjusted EBITDA margin growth. The long-term margin target of 35%+ is not a decade-long goal, and the company has a strong line of sight to get there, with the pace depending on the level of discretionary growth investments in the coming years.

Sanjay Sakhrani asked about the expected growth trajectory for Average Revenue Per Active Member (RPM) given the upcoming lapping of the MyPay launch, and inquired about the potential timeline to reach Chime's long-term operating margin targets.

Answer

CFO Matt Newcomb explained that RPM growth will see some natural normalization in the second half of the year as the company laps the MyPay rollout. However, he emphasized that improving MyPay economics will drive accelerated adjusted EBITDA margin growth in H2. Regarding the long-term 35% margin target, he noted it is not a decade-long goal and that the company has the flexibility to balance growth investments with profitability.

Sanjay Sakhrani questioned if the moderating TPV growth expectation for H2 2026 is conservative given the pipeline and BNPL strength, and asked for details on expected growth for value-added services and Europe in 2026 versus 2025.

Answer

CEO Mike Milotich highlighted remarkable Q4 2025 performance across all use cases, explaining H2 2026 moderation is due to tough comps, but still expects healthy mid-to-high 20s TPV growth. He stated Europe is expected to significantly outpace overall company growth, and value-added services growth will moderate after doubling in 2025 but still grow faster than the company, contributing higher margins.

Sanjay Sakhrani asked if the expectation for moderating TPV growth in the second half of 2026 was conservative, given the strong pipeline and BNPL performance. He also requested a dimensionalization of expected growth for value-added services and Europe in 2026 compared to 2025, and insights into broader product rollouts that could accelerate growth.

Answer

CEO Mike Milotich acknowledged the remarkable Q4 2025 performance, with strong growth across all major use cases, including nearly 60% for lending/BNPL despite tough comps. He stated that while H1 2026 TPV growth is expected to remain over 30%, it will moderate to the mid-to-high twenties in H2 due to tough year-over-year comparisons. For Europe, he noted it's now mid-teens of TPV, growing significantly faster than the company, and expects this to continue, especially with the TransactPay acquisition. Value-added services growth is expected to moderate in 2026 after doubling in 2025 but will still outpace overall company growth, focusing on tokenization, risk services, and new areas like rewards and data analytics.

Sanjay Sakhrani asked for an update on the CEO search process. He also inquired about the apparent difference in spending behavior reported by Block compared to the trends seen across Marqeta's broader platform.

Answer

Mike Milotich, Interim CEO and CFO, stated that the Board is taking the necessary time to find the right CEO and the search is ongoing. Regarding spending behavior, he explained that Marqeta's view is based on a much broader population of customers across multiple use cases, such as the expansion of BNPL into lower-discretionary categories. This diversification means trends on Marqeta's platform may differ from those of any single customer, including Block.

Sanjay Sakhrani asked about the primary risks to the 2025 outlook and inquired about the specific opportunities and value added by integrating the American Express network onto the platform.

Answer

Interim CEO and CFO Mike Milotich identified macro factors and the risk of customers delaying program ramps as potential headwinds. On the American Express partnership, he explained it offers a win-win: Marqeta gains access to Amex's strength in B2B lending and loyalty, while Amex can leverage Marqeta's expertise and track record to expand its debit business. This makes Marqeta's platform more comprehensive by including all major networks.

Sanjay Sakhrani from KBW asked for validation that competitors are facing similar launch delays and questioned if the Q4 gross profit outlook is a worst-case scenario for 2025, seeking clarity on the recovery cadence.

Answer

CEO Simon Khalaf confirmed that the industry-wide nature of these delays was a key topic at the recent Money20/20 conference, noting a 'flight to quality' to Marqeta. CFO Michael Milotich added that the 2025 recovery cadence depends on how quickly the company can work through its program backlog. While he believes they are 'over the hump,' he stated a more precise quarterly outlook for 2025 would be provided in the next earnings call.

Sanjay Sakhrani asked for a deeper dive into the Q4 2025 impact from excess loan growth, distinguishing between provisions related to credit versus growth, and how these dynamics might affect 2026. He also inquired about the performance of the Walmart rollout and overall U.S. traction.

Answer

CFO Niclas Neglén explained that Q4 2025 saw strong growth and seasonality driving higher pay later volumes, leading to fair value adjustments substantially offset by reduced credit loss provisions, and a mix shift towards fair financing. He noted moderately stronger growth in January 2026. CEO Sebastian Siemiatkowski expressed satisfaction with the Walmart rollout and highlighted the success of Klarna's third-party network strategy with partners like Stripe and Adyen, expanding acceptance points and offering all payment methods, which is driving solid growth.

Sanjay Sakhrani asked for a deeper dive into the Q4 2025 impact of excess loan growth on Transaction Margin Dollars (TMD), distinguishing between provisions related to credit versus growth, and how this might affect 2026.

Answer

CFO Niclas Neglén explained that Q4 2025 dynamics were driven by strong growth and seasonality in pay later volumes, primarily sold through Forward Flow programs, resulting in fair value adjustments offset by provision reductions. He noted a mix shift towards fair financing and anticipated similar trends in 2026 with moderately stronger growth than Q4 2025. Sebastian Siemiatkowski added a follow-up on the Walmart rollout, expressing satisfaction with its performance and the broader strategy of leveraging third-party networks like Stripe and Adyen to expand payment options and fair financing availability.

Sanjay Sakhrani followed up on corporate payments, asking about organic growth assumptions for non-travel segments, including the impact of new customer wins like Nuvei, and whether investments in the direct payables business are expected to accelerate its growth in 2026.

Answer

Melissa Smith (Chair and CEO, WEX) expressed confidence in corporate payments' trajectory, highlighting strong travel customer volumes and successful expansion of embedded payments outside travel, leveraging WEX Bank and virtual card platforms. She expects double-digit growth in AP Direct for 2026, driven by consistent salesperson additions and high customer retention, leading to a gradual build in spend volume over the year, though travel remains the largest part of the segment.

Sanjay Sakhrani asked for details on WEX's organic growth assumptions for the mobility segment in 2026, particularly regarding the choppiness in the over-the-road market, key variables for potential out/underperformance, and the expected first-half versus second-half contribution from BP.

Answer

Melissa Smith, Chair and CEO, WEX, noted that 40% of mobility volume comes from over-the-road customers, with strong retention and increased acquisition rates, especially in the small business market. She stated that 2026 guidance assumes a similar macro environment to 2025. Jagtar Narula, CFO, WEX, clarified that 2026 mobility growth builds on 2025's 1% ex-fuel/FX growth, with BP and new products contributing, and an expected roughly even growth cadence throughout the year, balancing BP's second-half contribution with interest rate drags.

Sanjay Sakhrani asked about the conclusions from WEX's strategic review regarding investor appreciation, the softening trends in the Mobility segment's over-the-road market, and the factors influencing the increase in financing fee rates.

Answer

Melissa Smith, Chair and CEO, WEX Inc, explained that the Board's deep strategic review, supported by Bank of America and JPMorgan, concluded that the businesses are stronger together, and the focus is on executing the strategic plan and leveraging Q3 growth post-OTA transition. She noted that the over-the-road business saw a slight softening in Q3 after a pull-forward, and the local business experienced consistent negative same-store sales, both viewed as transient issues. Jagtar Narula, CFO, WEX Inc, clarified that financing fee rates were sequentially comparable, with the year-over-year increase attributed to prior pricing changes and a one-time event in the previous year.

Sanjay Sakhrani with KBW inquired about the outcomes of WEX's comprehensive portfolio review, specifically how the conclusion that businesses are "stronger together" addresses investor perception and stock performance. He also asked about softening trends in the Mobility segment's over-the-road business and the drivers behind the increase in financing fee rates.

Answer

Melissa Smith, Chair and CEO of WEX Inc., explained that the board's rigorous review, supported by Bank of America and JPMorgan, reaffirmed the strategic plan and the company's focus on execution post-OTA customer transition. She detailed a slight softening in Mobility's over-the-road segment and consistent negative same-store sales in local business, highlighting WEX's focus on sales, retention, and marketing investments. Jagtar Narula, CFO, clarified that higher financing fee rates were due to prior pricing changes and a favorable year-over-year comparison.

Sanjay Sakhrani from Keefe, Bruyette & Woods (KBW) asked about the potential revenue growth trajectory exiting 2025 into 2026, given recent wins. He also sought clarification on the timing of the BP deal's revenue contribution and the monetization of the expanded HSA TAM.

Answer

CFO Jagtar Narula stated that while not giving 2026 guidance, the second-half growth swing is driven by both lapping prior-year items and new business momentum. Chair, CEO & President Melissa Smith clarified the BP revenue contribution of 0.5% to 1% is for the first full year after the 2026 conversion. For the HSA TAM, she said the focus is on effectively marketing to the newly eligible population in the next open enrollment season.

Sanjay Sakhrani inquired about the potential revenue growth trajectory exiting 2025 into 2026, given new business wins and lapping comps. He also sought clarification on the timing of the BP revenue contribution and the monetization of the expanded HSA TAM.

Answer

CFO Jagtar Narula noted that while not providing 2026 guidance, about 30% of the significant positive swing in Corporate Payments growth in H2 is from new business momentum that should provide a good starting point. CEO Melissa Smith clarified the BP deal's 0.5% to 1% revenue contribution is for the first full year *after* the 2026 conversion. For the HSA TAM, she explained the focus is on developing a plan to effectively reach the newly eligible population in the next open enrollment season.

Sanjay Sakhrani questioned the underlying weakness in the Mobility segment, given that a pull-forward in trucking demand should have provided a boost, and asked about the verticals and cyclicality within the non-travel Corporate Payments business.

Answer

CEO Melissa Smith explained that local fleet same-store sales were down 3.9% due to weather and economic softness, which outweighed the pull-forward seen in the smaller over-the-road (OTR) segment. She noted that this softness was factored into the full-year guide. For Corporate Payments, she detailed that the non-travel portion is diverse, with some concentration in healthcare and fintech, and has seen softness in discretionary T&E spend, though new AP Direct sales are offsetting this.

Sanjay Sakhrani asked for details on WEX's revised long-term outlook, the growth potential of its direct corporate payments software assets, and clarification on a onetime item impacting earnings.

Answer

CEO Melissa Smith attributed the updated 5-10% long-term organic growth target to normalized growth in travel and a maturing HSA market. She highlighted investments in embedded payments and direct AP to capture market share. CFO Jagtar Narula confirmed a onetime earnings impact was from a large travel customer's contract renegotiation, which is being partially offset by cost actions.

Sanjay Sakhrani asked for more detail on the spending weakness in the Mobility segment and whether management views it as a leading macroeconomic indicator. He also followed up on the Corporate Payments segment, inquiring about any other potential concerns, such as other large OTA renewals.

Answer

CEO Melissa Smith described the spending decline as recent and broad-based across industries and geographies, attributing it to customer uncertainty around elections and interest rates rather than definitively calling it a broader macro signal. On Corporate Payments, CFO Jagtar Narula stated that the company is not concerned about any specific major renewals for the upcoming year, while Melissa Smith noted a continued focus on navigating weakness in airline spend.

Sanjay Sakhrani inquired about the expected liquidity from the two additional vehicle payment divestitures in the pipeline, beyond the PayByPhone sale, and the outlook for the lodging business, specifically the drivers for achieving low single-digit growth.

Answer

Ron Clarke, Chairman and CEO, stated that if both additional vehicle businesses are transacted, the liquidity raised would be over $1 billion, likely between $1 billion and $1.3 billion, with proceeds intended for share repurchases. Regarding lodging, he noted that the business has stabilized with IT and product fixes, and customer volume losses have halted. The key to achieving low single-digit growth in 2026 is improving new sales, as the business generates strong cash flow with EBITDA margins in the 60s.

Sanjay Sakhrani asked about the potential liquidity Corpay expects to raise from additional divestitures beyond PayByPhone and the intended use of those proceeds. He also sought elaboration on the drivers for the lodging business to return to low single-digit growth and its go-forward outlook.

Answer

CEO Ronald Clarke stated that two other vehicle businesses are in late-stage process, potentially raising over $1 billion, with proceeds earmarked for CPAY share repurchases. He noted that the lodging business has stabilized with fixed IT and product issues, and the key to returning to growth is improving new sales, as it remains a high-margin business.

Sanjay Sakhrani questioned the growth cadence for the second half, particularly asking if the difficult year-over-year comparison in Q4 posed a risk to growth rates. He also asked about the slight decline in same-store sales and whether it signaled any underlying economic concerns.

Answer

CFO Peter Walker affirmed the company's outlook, stating that print growth is projected to be consistent in Q3 and Q4, with Vehicle Payments improving to 10% organic growth and Corporate Payments remaining in the high teens. President, Chairman & CEO Ronald Clarke added that there are no significant concerning trends in same-store sales, as the metric is nearly flat and stable across categories, with no material signs of client health deterioration.

Sanjay Sakhrani asked about the cadence of growth in the second half, specifically questioning if the difficult year-over-year comparison in Q4 posed a risk to growth rates for Vehicle and Corporate Payments. He also asked for color on underlying economic trends based on same-store sales data.

Answer

CFO Peter Walker affirmed the company's outlook, projecting consistent print growth rates for Q3 and Q4, with Vehicle Payments improving to 10% organic growth and Corporate Payments remaining in the high teens. President, Chairman & CEO, Ronald Clarke, added that there are no significant concerning economic trends visible in same-store sales, which are nearly flat across all categories.

Sanjay Sakhrani requested more detail on the embedded assumptions in the 2026 outlook, particularly which aspects of branded underperformance are expected to turn around. He also sought confirmation that Enrique Lores was involved in setting current expectations, implying no major strategy changes are anticipated.

Answer

Steve Winoker, Chief Investor Relations Officer, provided detailed P&L assumptions for 2026, including TM, OpEx, EPS, tax rate, FCF, OVAS, TEs, TL, and credit losses. Jamie Miller, Executive VP and CFO, reiterated that the 2026 outlook assumes minimal in-year benefit from investments but traction will build. She confirmed Enrique's deep involvement in shaping strategy and 2026 guidance, ensuring continuity and focus on accelerating the existing plan.

Sanjay Sakhrani (Keefe, Bruyette & Woods, Inc.) inquired about the strong growth momentum in Venmo, particularly its consistent 20% revenue growth. He asked CEO Alex Chriss to elaborate on the potential for further upside and to outline the expected growth trajectory for Venmo in the coming years, considering current initiatives.

Answer

CEO Alex Chriss highlighted Venmo's evolution beyond P2P to an omnichannel payment platform, noting 7% year-over-year MAU growth (66 million total). He detailed the success of monetization levers, including 43% growth in Debit card MAU and 24% growth in Pay with Venmo MAU, driving mid-teens ARPA growth year-to-date, which he believes is still only 1/3 to 1/4 of its potential. Chriss also mentioned new initiatives like the Built partnership for rent payments and successful college partnerships, attracting valuable merchants and ensuring continued strong growth.

Sanjay Sakhrani focused on Venmo's strong growth momentum, with revenues consistently growing 20%, and asked CEO Alex Chriss to elaborate on the 'multiplier of upside' from current levels. He sought a detailed outlook on how to project Venmo's growth rate for the next year and beyond, considering various initiatives.

Answer

CEO Alex Chriss expressed excitement about Venmo's trajectory, noting its evolution from a P2P product to an omnichannel platform. He highlighted 7% year-over-year MAU growth, 43% debit card MAU growth, and 24% Pay with Venmo MAU growth, driving mid-teens ARPA growth year-to-date. Alex Chriss stated that Venmo's ARPA is currently a third to a quarter of its potential, with new products like the Built partnership for rent payments and successful college partnerships accelerating adoption. He expects continued strong growth well into the future.

Sanjay Sakhrani from Keefe, Bruyette & Woods (KBW) asked for more detail on the drivers of transaction margin dollar growth for the second half of the year and whether the recent increase in transaction losses represents a new run rate.

Answer

COO & CFO Jamie Miller confirmed that the key growth drivers remain consistent but noted a ~2-point interest rate headwind in H2 and tougher comps for credit. Regarding transaction losses, she explained the Q2 uptick to 9 bps was due to normalization and new product launches, and she expects the full-year run rate to be approximately 8 bps.

Sanjay Sakhrani asked about the drivers behind the strong growth in Other Value-Added Services (OVAS) revenue and whether that level of performance is expected to continue.

Answer

CFO and COO Jamie Miller attributed the strength primarily to credit performance in both consumer and merchant lending, noting a favorable comparison to the prior year. While credit will remain a primary driver, she reiterated the full-year guidance for mid-single-digit OVAS growth, which incorporates an anticipated $150 million headwind from interest rates.

Sanjay Sakhrani requested more specific details on the U.S. branded volume growth rate as it exited the fourth quarter and how that trend has continued into the current quarter.

Answer

CFO Jamie Miller reiterated that U.S. branded checkout saw a 3-point sequential growth improvement in Q4. She emphasized that this was pure growth off a base, reflecting the impact of innovation focused on the U.S. market, particularly around mobile, as the company moved past lapping difficult comparisons from earlier in the year.

Sanjay Sakhrani inquired about the commercial services segment, particularly the weakness and deceleration in SME spend, what initiatives will drive improvement in the coming year, and how competitor M&A (like Capital One acquiring Brex) impacts the competitive landscape and American Express's product positioning.

Answer

Steve Squeri, Chairman and CEO, clarified that small business remains strong, while the middle market segment shows some slowdown. He acknowledged the highly competitive space, mentioning American Express's acquisition of Center and upcoming product refresh communications, while noting that the industry-wide slowdown in SMB largely affects the middle market.

Sanjay Sakhrani from KBW asked about the deceleration in SME spend, particularly in commercial services, and what initiatives American Express is undertaking to drive growth. He also questioned how competitors' M&A moves, like Capital One's acquisition of Brex, might alter the competitive landscape and how Amex's products compare.

Answer

CEO Steve Squeri clarified that small business spend remains strong, with the slowdown primarily in the middle market. He acknowledged the highly competitive space, mentioning Capital One/Brex and Ramp, but expressed confidence in Amex's position, especially with the upcoming launch of Center's expense management solution. He indicated that more details on Amex's commercial strategy would be shared later in the year.

Sanjay Sakhrani of Keefe, Bruyette & Woods (KBW) asked about the intermediate-term outlook for spending trends, potential catalysts for growth in areas like SMB, and the impact of losing the Amazon SMB co-brand portfolio.

Answer

Chairman and CEO Stephen Squeri stated that American Express plans for spending to remain consistent, noting that while airline and lodging spend is softer, goods and services spending remains resilient. He explained that the Amazon and Lowe's portfolio losses were economic decisions and are not expected to have a major impact on the SMB segment. CFO Christophe Le Caillec added that strong new card acquisition provides a stable foundation for future billing growth.

Sanjay Sakhrani asked about any indications of spending being pulled forward and how American Express balances protecting earnings versus making long-term investments if revenue growth slows.

Answer

CEO Stephen Squeri stated there has been no significant consumer spending pull-forward, only minor activity in small business wholesale. He emphasized that while the company can achieve its EPS guidance at 8% revenue growth, he will not sacrifice valuable long-term investment opportunities to hit a short-term number, a strategy consistent with the company's actions during the COVID pandemic.

Sanjay Sakhrani asked for more detail on the sources of the Q4 spending acceleration to assess its sustainability and questioned if revenue upside would translate to higher EPS.

Answer

CEO Stephen Squeri stated that management retains the flexibility to reinvest revenue outperformance but noted higher EPS is plausible with stronger revenue. He detailed the broad-based Q4 spending lift across consumer, SME, and international segments, with particularly strong travel spend. CFO Christophe Le Caillec added that while the first few weeks of January showed similar strength, the sustainability throughout 2025 remains the key question.

Sanjay Sakhrani of Keefe, Bruyette & Woods questioned the feasibility of achieving the company's 10%+ revenue growth aspiration in the current soft spending environment, asking if an acceleration in billed business is necessary.

Answer

Chairman and CEO Stephen Squeri confirmed that an acceleration in billed business from its current 6% level would be necessary to reach the 10% revenue growth aspiration. However, he emphasized that the business is now scaled to deliver on its mid-teens EPS growth target even with softer billings, making EPS the primary focus until the economy strengthens.

Sanjay Sakhrani of KBW inquired whether the 28% growth in Value-Added Services (VAS) this quarter is sustainable for the remainder of the year, asking if specific factors drove this strength that might not reoccur. He also asked Chris Suh if the higher expenses associated with stronger VAS revenue growth are variable or leverageable in the future.

Answer

Chris Suh, Visa's Chief Financial Officer, and Ryan McInerney, Visa's Chief Executive Officer, noted that while 28% is above expectations, it aligns with the momentum seen in VAS (mid-20%s growth), reflecting strong strategy execution and investment. They highlighted that this year's unique events (FIFA World Cup and Olympics) benefit marketing services, contributing to revenue and expense. Suh clarified that expenses related to these events are primarily peaking in Q2 and Q3, leading to higher first-half expenses, but are associated with incremental revenue.

Sanjay Sakhrani asked if the 28% growth in Value-Added Services (VAST) this quarter is sustainable for the remainder of the year, inquiring about specific factors driving the strength and the leverageability of associated expenses.

Answer

Chris Suh, Visa's Chief Financial Officer, stated that while 28% VAST growth was above expectations, it aligns with ongoing momentum, reflecting strategy execution and investment across all four portfolios. He explained that higher Q1 and Q2 operating expenses, particularly marketing-related, are due to major events like the FIFA World Cup and Olympics, which also generate incremental revenue, making these expenses associated with capturing that revenue.

Sanjay Sakhrani asked about Visa's macroeconomic outlook, inquiring if the company has observed any choppiness in the economy or consumer trading down on discretionary items, as reported by competitors, and how these trends are factored into Visa's financial outlook.

Answer

Chris Suh, Visa's Chief Financial Officer, responded by highlighting Visa's diversified business across various spend categories and card types. He noted that growth across spend bands remained consistent in Q4, with higher-spending cardholders driving more growth, indicating continued consumer resilience, which is the underlying assumption for fiscal year 2026.

Sanjay Sakhrani asked about Visa's macroeconomic assumptions for fiscal year 2026, specifically inquiring if Visa has observed any choppiness in the economy or changes in consumer spending habits, such as trading down on discretionary items, as reported by competitors.

Answer

CFO Chris Suh explained that Visa's outlook assumes a stable macro environment and resilient consumer spending, citing the company's diversified business across various spend categories and consistent growth across all spend bands, with higher-spending cardholders driving more growth.

Sanjay Sakhrani of Keefe, Bruyette & Woods asked a high-level question about stablecoins, inquiring whether they will ultimately dilute, maintain, or add to the total addressable market (TAM) for payments and when they might become a material contributor.

Answer

CEO Ryan McInerney expressed optimism, stating that stablecoins represent a significant opportunity for Visa. He argued that in emerging markets, they could accelerate the digitization of cash. In cross-border payments, they could help Visa expand its penetration of the enormous remittance and B2B TAMs by enabling faster and more efficient flows on platforms like Visa Direct. He believes stablecoins can accelerate progress in digitizing both consumer and commercial payment flows.

Sanjay Sakhrani of Keefe, Bruyette & Woods asked a high-level question about whether stablecoins will ultimately add to, dilute, or maintain the total addressable market for payments and when they might become material.

Answer

CEO Ryan McInerney expressed optimism that stablecoins will be an accelerant to growth. He argued they can help digitize cash-heavy emerging markets and increase penetration in the enormous cross-border remittance and B2B markets. He believes stablecoins will help accelerate Visa's progress in digitizing global payment flows rather than diluting the opportunity.

Sanjay Sakhrani of Keefe, Bruyette & Woods asked a high-level question about stablecoins, inquiring whether they will ultimately add to, dilute, or maintain the total addressable market for payments and when they might become a material contributor.

Answer

CEO Ryan McInerney expressed optimism, stating that stablecoins could accelerate Visa's progress. He identified two key opportunities: 1) accelerating cash digitization in emerging markets where stablecoins are adopted, and 2) expanding Visa's penetration in the massive cross-border remittance and B2B payment markets by enhancing the Visa Direct platform.

Sanjay Sakhrani of KBW asked for clarification on assumptions for U.S. inbound travel corridors, particularly from Canada, and whether there was evidence of a spending pull-forward in April.

Answer

CFO Chris Suh stated there was some minor evidence of a spending pull-forward in early April but it was not meaningful to overall growth. For cross-border assumptions, he explained that Visa is using an average of March and April data to normalize for various factors, including currency weakness and the slowdown in Canada-to-U.S. travel. He reiterated that the U.S. inbound corridor is a small percentage of global travel volume.

Sanjay Sakhrani asked about the drivers behind Visa's improved full-year outlook and whether the guidance assumes that recent volume accelerations will be sustained.

Answer

Chris Suh, Chief Financial Officer, acknowledged the strong Q1 results but emphasized that it is only one quarter into the fiscal year and that the company will provide further updates on the second half as the year progresses.

Sanjay Sakhrani questioned the deceleration in commercial volumes, asking about the impact of days mix and what growth rate should be expected going forward, considering potential macro effects.

Answer

CFO Chris Suh confirmed that Q4 commercial volume growth was impacted by days mix. He reiterated optimism about the long-term opportunity in new flows, anticipating that commercial volumes will eventually grow faster than consumer volumes.

Sanjay Sakhrani inquired about the drivers of Bread Financial's anticipated loan growth in 2026, specifically asking if it involves loosening underwriting standards or reflects consumer appetite. He also asked about the expected growth of Bread Pay in 2026 and whether internal data indicates any underlying choppiness in credit quality despite a stable labor market.

Answer

Ralph Andretta, President and Chief Executive Officer, attributed loan growth to a resilient consumer, sales momentum, new and stable partners, and improving credit, emphasizing thoughtful, profit-driven underwriting without general loosening. He expects Bread Pay volume to increase with new partners like Cricket and Vivint. Perry Beberman, Executive Vice President and Chief Financial Officer, added that underlying data is encouraging, with improving roll rates across risk bands and early entry rates below pre-pandemic levels, indicating consumer resilience.

Sanjay Sakhrani with KBW inquired about the drivers of Bread Financial's anticipated loan growth in 2026, specifically asking if it involves loosening underwriting standards and the consumer's appetite for credit. He also asked about the expected growth of Bread Pay in 2026 and the underlying data for credit quality, including any signs of choppiness beneath the surface.

Answer

Ralph Andretta, President and Chief Executive Officer, explained that loan growth is driven by a resilient consumer, sales momentum, stable and new partners, and improving credit, without a general loosening of underwriting standards, emphasizing thoughtful underwriting for profit. He expects Bread Pay volume to pick up with new partners like Cricket and Vivint. Perry Beberman, Executive Vice President and Chief Financial Officer, added that underlying data shows encouraging improvements in roll rates across risk bands, with early entry rates below pre-pandemic levels and late-stage roll rates also improving, indicating consumer resilience despite potential economic pressures.

Sanjay Sakhrani asked about constructive consumer credit trends, potential signs of weakness across Bread Financial's portfolio, and the expected progression of the reserve and loss rates given stable conditions. He also inquired about the outlook for loan growth into next year and any portfolio acquisition opportunities.

Answer

Perry Beberman (EVP and CFO) noted surprisingly resilient macro metrics and stable, gradual improvement across Bread Financial's prime and near-prime portfolio, with no significant cracks. He explained that the reserve rate change was driven by improving credit quality, with future shifts off adverse scenarios potentially providing a tailwind. Ralph Andretta (President and CEO) added that positive credit sales, improving credit metrics, new partner signings, and a robust pipeline suggest some loan growth going forward.

Sanjay Sakhrani asked about constructive trends across the portfolio, specifically if Bread Financial has observed any signs of weakness in consumer credit given concerns about subprime lenders, and inquired about the progression of the reserve rate and loss rate assuming stable conditions. He also followed up on the potential for loan growth in the next year and portfolio acquisition opportunities.

Answer

Perry Beberman (EVP and CFO) explained that the macro environment and consumer financial health remained surprisingly resilient through Q3, with wages outpacing inflation. He noted stable, gradual improvement across all vintage bands in Bread Financial's portfolio, with no signs of cracks, and entry rates into delinquency being better than pre-pandemic levels. He clarified that the reserve rate change was driven solely by improving credit quality, with macro inputs and credit risk mix overlays remaining similar to the prior quarter. Ralph Andretta (President and CEO) added that with positive credit sales, improving credit metrics, new partners, and a resilient consumer, he anticipates some loan growth going forward.

Sanjay Sakhrani of Keefe, Bruyette & Woods (KBW) asked for more detail on the tempered revenue outlook and the progression of net interest income (NII), as well as how the company plans to 'play offense' on growth now that credit is improving.

Answer

EVP & CFO Perry Beberman explained the tighter revenue guidance was due to faster-than-expected delinquency improvements, which lowered billed late fees. CEO Ralph Andretta added that with top partners secured long-term and a robust new business pipeline, the company is now in a position to simultaneously invest in growth, strengthen the balance sheet, and return value to shareholders.

Sanjay Sakhrani inquired about the underlying consumer payment behaviors and credit trends given the choppy macroeconomic backdrop, how these factors are incorporated into the reserve baseline, and the status of late fee rule mitigation efforts with retail partners.

Answer

EVP and CFO Perry Beberman acknowledged the economic uncertainty, particularly around tariffs, but noted that hard data on consumer health remains solid. He explained the credit reserve maintains a prudent risk overlay with outsized weighting on adverse scenarios to account for this uncertainty. CEO Ralph Andretta added that the company does not plan to roll back recent pricing changes made in anticipation of the now-vacated late fee rule, and partners are supportive of this decision. Perry Beberman confirmed these factors are included in the current guidance.

Sanjay Sakhrani inquired about Bread Financial's path to its medium-term financial targets, particularly how the absence of a late fee regulation might accelerate this timeline and the expected impact of mitigation efforts. He also asked about the strategy to re-accelerate NIM-accretive loan growth, questioning if it's tied to credit tightening or potential portfolio acquisitions.

Answer

EVP & CFO Perry Beberman stated that while the company is on the path to its medium-term targets, elevated gross losses remain a headwind that needs to normalize from over 8% to 6%. He noted that improving credit quality temporarily reduces billed late fees, and Fed rate cuts pressure yields, but CFPB mitigation actions are building. President & CEO Ralph Andretta added that Q4 showed positive 'green shoots' in spending and that new 2024 portfolios will mature in 2025, making him cautiously optimistic for loan growth.

Sanjay Sakhrani asked for an update on credit trends, questioning if the improvement in delinquency changes will stabilize and how credit tightening will impact future metrics. He also inquired about the timing of hurricane-related impacts and the full offset of the CFPB late fee rule.

Answer

EVP and CFO Perry Beberman noted that while credit actions have helped stabilize delinquencies, the economy remains challenging for their customers. He expects gradual improvement in 2025, contingent on the macro environment. Beberman clarified that hurricane-related impacts on credit metrics would begin in October and that fully offsetting the late fee rule's financial impact is a multi-year process, not something achievable within a 12-month window.

Sanjay Sakhrani from KBW inquired about the specific drivers behind the deterioration in the private legacy portfolio, given these loans were originated over a decade ago. He also asked for context on the expected path for Net Interest Margin (NIM) in 2026 for both FFELP and consumer lending, and what assumptions are included in the 2026 provisions.

Answer

CFO Steve Hauber explained that the private legacy portfolio has gone through cycles, with some borrowers consistently paying and others struggling, especially through the pandemic relief cycle. He noted that while performance slipped quarter-to-quarter, they expect positive momentum in 2026. For NIM, he expects FFELP to be relatively consistent due to stable prepayment rates, and consumer lending NIM to be relatively stable, with portfolio growth offset by a mix shift towards refi. For provisions in 2026, he stated it primarily entails provision on new originations, with year-end reserve levels being the expectation going forward.

Sanjay Sakhrani inquired about the specific drivers behind the deterioration in the private legacy portfolio, particularly what is causing higher delinquencies on loans originated over a decade ago. He also asked for context on the expected path for Net Interest Margin (NIM) for both FFELP and consumer lending in 2026, and what is factored into provisions given recent delinquency trends and growth differences.

Answer

CFO Steve Hauber explained that the private legacy portfolio has experienced cycles, including pandemic relief, affecting borrowers. He noted that while performance slipped, they anticipate positive momentum and improving trends in 2026, with macroeconomic factors like inflation contributing. For NIM, he expects FFELP NIM to be relatively consistent year-over-year due to stable prepayment rates. Consumer lending NIM is also expected to be relatively stable, with portfolio growth offsetting the margin impact of a higher refi mix. Provisions for 2026 primarily include new originations, with year-end reserve levels expected to hold.

Sanjay Sakhrani asked about the strategic value of the Brex acquisition, its enhancement to Capital One's small business platform, and how it will integrate over time. He also inquired about Capital One's view on the proposed 10% credit card cap and any discussions with the administration.

Answer

Chairman and CEO Richard Fairbank detailed how the Brex acquisition accelerates Capital One's journey in business payments, leveraging Brex's integrated platform, modern tech stack, and talent. He explained how Capital One's brand, marketing, balance sheet, and investment capacity will boost Brex's growth, while Brex enhances Capital One's corporate liability market, small business bank, and travel business. Regarding the credit card cap, Mr. Fairbank stated it would reduce credit availability, cause economic shocks, and harm consumers and businesses, emphasizing the industry's intense competition.

Sanjay Sakhrani asked about the strategic value of the Brex acquisition, specifically how it enhances Capital One's platform in the small business space and its integration over time. He also inquired about Capital One's view on the proposed 10% credit card cap and any discussions with the administration on the issue.

Answer

Chairman and CEO Richard Fairbank explained that acquiring Brex accelerates Capital One's journey in business payments, leveraging Brex's pioneering integrated platform of business credit cards, spend management, and banking with a modern, cloud-based tech stack and in-house AI. Capital One brings brand, marketing, balance sheet, and investment capacity to accelerate Brex's growth, while Brex opens the corporate liability market, enhances personal liability offerings, and propels national small business banking and travel. Regarding the credit card cap, Mr. Fairbank stated that a price control would make credit less available, compelling the industry to slash credit lines and restrict new originations, potentially causing economic shocks and impacting consumers' ability to build credit history.

Sanjay Sakhrani asked about the health of the consumer, specifically addressing observed cracks in subprime and auto lending, and how Capital One's internal data aligns with broader macroeconomic indicators like employment and underemployment.

Answer

Richard Fairbank, CEO and Chairman, discussed the U.S. consumer's resilience amidst elevated economic uncertainty, noting recent inflation, tariffs, slow job creation, and the resumption of student loan repayments. He detailed Capital One's improving credit performance, with domestic card charge-offs down year-over-year, supported by strong recoveries and well-performing new originations. Fairbank highlighted strong auto credit performance, attributing it to Capital One's adaptive underwriting choices made in 2022 and 2023, and noted that subprime credit performance is moving in line with prime, without significant differential impacts in their portfolio.

Sanjay Sakhrani with Keefe, Bruyette & Woods inquired about the current health of the consumer, specifically noting potential cracks in subprime and auto lending, and asked for Capital One's observations on underemployment versus broader macroeconomic trends.

Answer

Richard Fairbank, Capital One's Chairman and CEO, stated that the U.S. consumer and macro outlook remained resilient in Q3 2025, with low unemployment and stable debt burdens, despite elevated economic uncertainty. He highlighted improving charge-off rates, strong recoveries, and well-performing new originations in both domestic card and auto, noting Capital One's subprime performance was stable due to adaptive underwriting choices made in 2022 and 2023.

Sanjay Sakhrani of KBW asked if Capital One intends to accelerate growth in the Discover card business, which had previously pulled back. He also requested a simplified guide on how purchase accounting will affect major financial line items going forward.

Answer

Richard Fairbank, Founder, Chairman & CEO, confirmed plans to lean into growth with the Discover franchise, praising its products and customer experience. CFO Andrew Young addressed the accounting question by pointing to the detailed disclosures in the earnings presentation appendix and 8-K filing, stating the impacts were too complex for a simple summary but provided visibility in the filings.

Sanjay Sakhrani asked for an update on the timing of key milestones for achieving Discover integration synergies, such as the debit conversion, and inquired about the company's capital return strategy following the merger.

Answer

CFO Andrew Young clarified that the synergy timeline assumptions from the deal announcement are being pushed back by approximately six months to align with the new closing date. Regarding capital return, he stated that a detailed plan will be formulated after the transaction closes and they have full access to Discover's data, suggesting the current pace of capital return will likely continue in the near term.

Sanjay Sakhrani asked for an update on the Discover deal's regulatory approval process and integration efforts. He also questioned whether the deal's synergies would be sufficient to cover all necessary investments or if more might be required.

Answer

CEO Richard Fairbank confirmed the approval process is moving forward, with active engagement with regulators and recent progress like the finalized proxy statement. He reiterated that they remain well-positioned for approval early in the year. On investments, Mr. Fairbank explained that while they are still separate companies, the plan involves leveraging synergies from overlapping businesses to fund significant, multi-year investments in areas like risk management, international network acceptance, and the Discover brand to unlock long-term value.

Sanjay Sakhrani followed up on credit, asking for clarification on whether credit trends are now expected to move with seasonality rather than improve beyond it. He also questioned the path to normalization for both credit losses and the allowance coverage ratio, which remain above 2019 levels.

Answer

Chairman and CEO Richard Fairbank clarified that credit has stabilized and is now consistent with seasonal patterns, though he noted these patterns have changed due to lower tax refund volumes, resulting in less seasonal amplitude. Regarding normalization, he cited headwinds from a 'delayed charge-off' effect and high interest rates, balanced by tailwinds from rebuilding recovery inventory and moderating inflation. CFO Andrew Young added that the allowance coverage ratio's path will depend on loss forecasts, and even with lower projected losses, coverage may only decline modestly due to uncertainties. He also noted the CECL Day 1 coverage would be closer to 7% after adjusting for the Walmart portfolio.

Sanjay Sakhrani asked Michael G. Rhodes to contextualize the outlook for 2026, identifying the biggest risks and opportunities. He also sought clarification on credit performance, specifically if the momentum in delinquencies suggests further improvement in the charge-off rate, and if any factors might weigh against this progression.

Answer

CEO Michael G. Rhodes expressed optimism for 2026, building on 2025's strategic shifts and disciplined execution, focusing on strong volumes, margins in auto, corporate finance momentum, and customer acquisitions in the digital bank. He highlighted expected expense discipline, NIM expansion, strong fee income, and good credit performance, with the main worry being macro discontinuities. CFO Russell Hutchinson added confidence in dealer engagement, consumer bank migration, and disciplined corporate finance growth. Regarding credit momentum, Mr. Hutchinson noted that the NCO guide (1.80%-2%) incorporates vintage rollover and strong delinquency/flow-to-loss rates, but also factors in an expectation of higher unemployment in 2026, which could weigh on further improvement.

Sanjay Sakhrani asked Michael Rhodes to contextualize Ally Financial's outlook for 2026, identifying the biggest risks and opportunities. He also sought clarification on whether the current momentum in delinquencies suggests further improvement in the charge-off rate, and if any factors might weigh against this progression.

Answer

Michael G. Rhodes, CEO of Ally Financial, expressed optimism for 2026, anchored on strong business fundamentals, disciplined expense management, NIM expansion, and robust fee income. He noted that the primary risk remains the macro environment. Russell Hutchinson, CFO, added that strong dealer engagement, customer acquisition in the consumer bank, and disciplined growth in corporate finance contribute to the positive outlook. Mr. Hutchinson clarified that while delinquency momentum is positive, the 2026 NCO guide balances this with an expectation of higher unemployment compared to 2025, suggesting that further improvement to the low end of the range would require incremental favorability in delinquency, float-to-loss, or used vehicle pricing.

Sanjay Sakhrani with KBW inquired about Ally Financial's credit performance amidst broader consumer credit jitters, specifically asking if Ally's metrics suggest contagion and how the company's underwriting standards are impacting the path forward. He also followed up on the Net Interest Margin (NIM) trajectory, the timeline for reaching the 'upper threes' target given lower rates, and the impact of increased competition from other banks re-engaging in the market.

Answer

CEO Michael Rhodes stated that Ally is observing consumer behaviors better than expectations, with no impact on credit performance despite macro uncertainty. CFO Russ Hutchinson added that favorable vintage rollover from tightening underwriting standards in 2023 and enhanced servicing strategies are driving positive loss trends, with lower credit tiers performing better than expected. Regarding NIM, CFO Russ Hutchinson referenced a historical case study from Q2 and Q3 of the prior year to explain how NIM and beta evolve through rate-cutting cycles, providing confidence in the path to high threes. He acknowledged increased competition but emphasized Ally's consistent market presence, strong dealer relationships, and record application volumes, which enable selective underwriting and attractive risk-adjusted returns, supported by demand pull-forward from tariffs and EV lease tax credits.

Sanjay Sakhrani asked about the drivers for Net Interest Margin (NIM), the potential for outperformance or underperformance of guidance, and the timeline to reach the medium-term target in the high 3% range.

Answer

CFO Russ Hutchinson explained that while Q2 NIM expansion was strong, some drivers like securities repositioning and lease recovery were non-recurring. He noted the outlook considers various rate scenarios, with near-term rate cuts being a headwind due to asset sensitivity. CEO Michael Rhodes added that while credit trends are encouraging, the company will remain disciplined and data-informed before accelerating growth, citing macroeconomic uncertainty.

Sanjay Sakhrani asked about Ally's Net Interest Margin (NIM) guidance in the current interest rate environment and how the mix of new auto originations is influencing yield dynamics and the competitive landscape.

Answer

CFO Russ Hutchinson stated that the full-year NIM guidance of $3.4 billion to $3.5 billion already considers a range of interest rate scenarios, including several Fed rate cuts. He noted that while timing can affect a single quarter, the business adjusts over time. On originations, Hutchinson highlighted record application volumes, a favorable competitive environment, a strong 9.8% originated yield in Q1, and an expectation to continue originating in the high 9% to 10% range.

Sanjay Sakhrani asked about the reasons for the Q4 drop in auto origination yields, specifically the influence of consumer selection versus competitive pressures. He also questioned if recent strategic actions, like the card sale and accounting changes, would alter the timeline for achieving the mid-teens ROTCE target.

Answer

CFO Russ Hutchinson attributed the 90 basis point drop in originated yield primarily to a mix shift towards higher-quality S-Tier originations (from 43% to 49%) and lower benchmark rates, not increased competition. CEO Michael Rhodes added that market dynamics were favorable in Q4. Regarding the ROTCE target, Hutchinson stated the timing remains unchanged, and the recent moves to focus the business increase their confidence in achieving the goal, though no precise timeline has been given due to macro uncertainties.

Sanjay Sakhrani inquired if the more conservatively underwritten post-Q2 2023 auto loan cohorts are performing as expected. He also asked new CEO Michael Rhodes for his perspective on the business and the feasibility of its long-term financial targets.

Answer

CFO Russ Hutchinson confirmed that later 2023 and early 2024 vintages show progressive improvement, validating the underwriting changes, though overall performance missed optimistic expectations. CEO Michael Rhodes stated his confidence in achieving mid-teens returns is based on credit normalization, NIM expansion to ~4%, and disciplined expense and capital management. He affirmed that his own deep-dive analysis supports this path, though the timing is fluid.

Sanjay Sakhrani inquired about the visibility for the anticipated Q4 hardware revenue ramp, the ceiling for hardware margins, the impact of M&A delays on Q3 and Q4 results, and the organic versus inorganic contribution to the 2028 revenue target.

Answer

Yair Nechmad, Co-Founder and CEO, confirmed strong Q4 visibility for enterprise hardware sales and stated that hardware margins are expected to remain in the 30%-35% range due to optimized manufacturing and sourcing, even with new product launches like VPOS Media. Sagit Manor, Chief Financial Officer, clarified that M&A delays contributed to the gap between Q3 results and consensus, impacting Q4 guidance. Aaron Greenberg, Chief Strategy Officer, detailed specific M&A delays (Integral Vending and another dropped deal), reiterating the $200 million inorganic revenue target by 2028, with organic growth remaining the primary driver.

Sanjay Sakhrani inquired about the sustainability of pricing tailwinds into 2026, pricing power in core payments, and sought clarification on the sequential step-down in U.S. volumes due to the Capital One debit migration, including the expected magnitude of impact on U.S. volumes for Q4 and next year.

Answer

CFO Sachin Mehra stated that pricing tailwinds can continue if Mastercard delivers value through new and existing products across both payment network and Value Added Services. Regarding Capital One, he clarified that the sequential decline in U.S. volumes in October was due to both the Capital One migration and tougher comps from 2024 weather impacts. He reiterated that the migration's impact is contemplated in 2025 guidance and provided context for adverse impacts in 2026 and 2027. CEO Michael Miebach added that while Capital One is important, Mastercard continues to win other partnerships globally, maintaining a positive overall trend.

Sanjay Sakhrani inquired about the sustainability of pricing tailwinds into 2026 and Mastercard's pricing power in its core payments business. He also sought clarification on the magnitude of the Capital One debit migration's impact on U.S. volumes in Q4 and next year, and the optics of the sequential volume step-down.

Answer

CFO Sachin Mehra stated that pricing tailwinds can continue if Mastercard delivers value through new and existing products across both payment network and Value Added Services. Regarding Capital One, he explained that the sequential decline in U.S. switched volumes in October was due to the migration and tougher comps from 2024 weather impacts. He reiterated that the migration's impact on volumes is well understood and contemplated in guidance, with cards continuing to migrate through Q4 and early next year. CEO Michael Miebach added that while Capital One is an important partner, Mastercard continues to win globally with its 27,000 bank partners, maintaining a positive overall trend.

Sanjay Sakhrani inquired about the impact of lapping major portfolio wins from the previous year and asked how the Capital One debit portfolio migration is factored into the current financial guidance.

Answer

CFO Sachin Mehra confirmed that the lapping impact from prior wins, such as Citizens and Wells Fargo, became more pronounced in Q2 and will persist through the second half of the year. Regarding Capital One, he stated that guidance includes their best estimate for the debit migration, with a minimal net revenue impact expected in 2025 and the majority to be felt in the following year. CEO Michael Miebach added that the credit services partnership with Capital One remains strong.

Sanjay Sakhrani from Keefe, Bruyette & Woods asked about the underlying health of the consumer and whether the decision not to raise the full-year outlook, despite a strong quarter, was due to prudence or specific concerns.

Answer

CEO Michael Miebach affirmed that consumer spending fundamentals remain stable and engaged. CFO Sachin Mehra added that the Q1 revenue beat was driven by hard-to-predict FX volatility and timing benefits from lower rebates and incentives, which are expected to normalize. He noted some moderation in travel to the U.S. is being offset by strength in other regions, underscoring the resilience of their diversified model.

Sanjay Sakhrani asked for clarification on the drivers of the volume acceleration seen in Q4 and continuing into January, questioning the role of consumer strength versus share gains.

Answer

CFO Sachin Mehra confirmed the primary driver was strong, healthy spending from both consumers and commercial clients. He noted that while share gains from past wins are a consistent contributor, the quarter-over-quarter acceleration was due to underlying spending trends rather than new share shifts. He also mentioned a minor lift from crypto-related purchases and a pull-forward of travel spend.

Sanjay Sakhrani from Keefe, Bruyette & Woods asked about the recent uptick in U.S. volume and how consumer spending behavior might be affected by lower interest rates.

Answer

Chief Financial Officer Sachin Mehra explained that while the consumer remains healthy, the early Q4 U.S. volume uptick was partly due to one-time factors like calendar mix and the timing of social security payments. He noted that despite Fed rate reductions, the yield curve has risen, but overall consumer confidence and spending patterns remain strong.

Sanjay Sakhrani sought clarification on the fourth-quarter impact of moving loans to 'held for sale,' specifically if it involves recognizing a provision release rather than an actual gain on sale, and how to dimensionalize this contribution to the annual guidance. He also asked about the company's foresight into the behavior of graduate cohorts entering repayment in November, given the challenging job market.

Answer

CFO Pete Graham confirmed that designating loans as 'held for sale' results in a release of the CECL provision, not a gain on sale, and that the impact on guidance is this provision release. He noted the exact amount of reclassified loans is not yet disclosed. CEO Jon Witter addressed the graduate repayment wave, acknowledging the historical difficulty of the post-graduation period but highlighting a de minimis year-over-year change in early graduate unemployment rates and Sallie Mae's proactive outreach and preparedness.

Sanjay Sakhrani sought clarification on the fourth-quarter impact of moving loans to 'held for sale,' specifically whether it results in a provision release rather than an actual gain on sale, and if it provides an earnings benefit. He also asked for a way to quantify the contribution of this provision release to the annual guidance and inquired about the company's foresight into how recent graduate cohorts, entering repayment in November amidst a challenging job market, might behave.

Answer

CFO Pete Graham clarified that 'held for sale' accounting involves a lower of cost or market valuation, and if a premium is expected, there's no change in loan value. The impact on guidance comes from the release of the CECL provision. He noted that the exact amount of reclassified loans has not been disclosed, but the impact is roughly the CISL reserve rate released. CEO Jon Witter acknowledged that the post-graduation period is always challenging, with half of financial distress occurring in the first two years. He stated that early graduate unemployment rates are only slightly elevated year-over-year and that the company has not yet observed the ambiguous economic environment translating into borrowers' inability to meet obligations, emphasizing preparedness and increased outreach.

Sanjay Sakhrani of Keefe, Bruyette & Woods (KBW) asked for reassurance on credit quality for the remainder of the year following the California wildfire impacts. He also requested a breakdown of the incremental $4.5-$5 billion opportunity between Grad PLUS and Parent PLUS loans.

Answer

CFO Pete Graham reiterated that the wildfire impact was a timing shift between quarters and that year-to-date performance gives them confidence in their full-year guidance. CEO Jonathan Witter provided the breakdown, stating the opportunity is approximately two-thirds Grad PLUS and one-third Parent PLUS.

Sanjay Sakhrani from Keefe, Bruyette & Woods asked for a more precise estimate of the underwritable portion of the PLUS loan market and for details on other potential student loan policy reforms the company is tracking.

Answer

CEO Jon Witter declined to provide a specific number on PLUS underwritability without a concrete proposal but elaborated on the company's policy stance. He stated the federal government does 'too much for too many, and not enough for those who really need it,' advocating for more grants for disadvantaged students, caps on un-underwritten federal loans, and thoughtful bankruptcy reform for student debt.

Sanjay Sakhrani questioned how Sallie Mae would achieve its reaffirmed full-year guidance after a weaker quarter, asking about the expected progression of NIM and the rationale behind selling its FFELP loan portfolio.

Answer

CFO Pete Graham stated that confidence in the full-year guidance is driven by the expected continued improvement in the overall reserve rate. He noted NIM will face pressure for another 1-2 quarters but mentioned a potential loan sale is an option to manage capital if origination growth remains high. He explained the FFELP portfolio was sold because it had become a small, non-core asset creating operational complexity.

Sanjay Sakhrani asked for an update on the health of the consumer and the outlook for credit quality. He also inquired about Pagaya's current origination capacity and potential growth profile over the next few years, given its improved funding, liquidity, and profitability.

Answer

Co-Founder and President Sanjiv Das noted that consumer loan repayment performance has been very good, though the company remains cautious and disciplined in its underwriting. Co-Founder and CEO Gal Krubiner added that Pagaya has the capacity to at least double its volume over the next 18 months, but the focus remains on disciplined, profitable growth and increasing GAAP net income, rather than chasing volume at all costs.

Sanjay Sakhrani asked for an update on the health of the consumer and the outlook for credit quality. He also questioned Pagaya's growth capacity given its improved funding, liquidity, and profitability.

Answer

Co-Founder and President Sanjiv Das reported that consumer loan performance remains very good, though Pagaya continues to be disciplined and cautious with its underwriting. Co-Founder and CEO Gal Krubiner added that while the company has the capacity to at least double its volume over the next 18 months, the primary focus is on disciplined, profitable growth and increasing GAAP net income rather than chasing volume at all costs.

Steven Clark, on behalf of Sanjay Sakhrani from KBW, asked about the wide range in the 2025 network volume guidance and the key factors that would determine performance at either end of that range.

Answer

Executive Josh Fagen explained that Pagaya's growth is driven by adding partners and products to its network, with levers including model performance and cost of capital. President Sanjiv Das added that predictability is crucial for their large partners. He characterized the current operating environment as stable, with delinquencies down or stable, and noted the guidance is responsibly conservative as it does not assume any interest rate drops in 2025.

Sanjay Sakhrani from KBW asked about customer resiliency in response to tariffs and whether Payoneer views stablecoins as a disruptive threat to its business model.

Answer

CEO John Caplan highlighted the 'grit' and entrepreneurial nature of their customers, who are focused on globalizing their businesses, and noted the de minimis tariff impact is negligible. CFO Bea Ordonez addressed the stablecoin question, stating that Payoneer is well-positioned to leverage the technology, not be disrupted by it, by solving the 'last mile challenge' of off-ramping to local currency and abstracting away complexity for users.

Sanjay Sakhrani of KBW asked about the potential impact of broader, less severe tariffs across multiple geographies, beyond the specific China-U.S. situation. He followed up by asking if there was evidence of a volume pull-forward ahead of May and questioned the reason for the sequential decline in the number of Ideal Customer Profiles (ICPs).

Answer

CFO Bea Ordonez responded that lower-level, broad-based tariffs are not expected to have a material impact as they are typically absorbed within the supply chain. She noted it was difficult to identify a Q1 volume pull-forward due to other factors but confirmed April trends were stable. CEO John Caplan explained the ICP count declined because the company is now focused on maximizing profitable revenue from larger, higher-quality customers rather than the sheer quantity of ICPs.

Sanjay Sakhrani asked about the macroeconomic assumptions underpinning Payoneer's 2025 guidance, the potential impact of China tariffs, and the key opportunities for ARPU optimization.

Answer

CFO Bea Ordonez explained that the guidance is pragmatic, assuming marketplace volume growth normalizes to high-single digits and B2B growth hits 25%. She noted that ARPU expansion is driven by the higher-yielding B2B business, cross-selling products like Card, and ongoing pricing initiatives. Regarding tariffs, she emphasized Payoneer's diversified business model provides resilience against most moderate trade policy changes.

Sanjay Sakhrani inquired about the primary drivers behind the strong B2B SMB performance and the underlying assumptions for the forecasted Q4 revenue deceleration and higher transaction costs.

Answer

CEO John Caplan attributed the 57% B2B volume growth to targeted acquisition, new vertical expansion, and improved customer experience. CFO Bea Ordonez explained the Q4 revenue guidance reflects tougher comps and macro prudence, consistent with medium-term targets. She noted the expected rise in transaction costs is due to seasonal business mix shifts and serves as a good run-rate indicator for 2025.

Sanjay Sakhrani asked about the biggest organic growth opportunities and risks for the next 18 months, and how the Global Blue acquisition fits into the company's 'most likely' long-term guidance scenario.

Answer

CEO Taylor Lauber identified SkyTab's continued adoption and the core payments platform's expansion as the largest organic opportunities. He explained that the 'most likely' scenario involves reinvesting capital to accelerate growth, using acquisitions like Vectron and SmartPay as distribution channels in new markets. He believes combining Shift4's products with Global Blue's reach will accelerate growth for both.

Sanjay Sakhrani of Keefe, Bruyette & Woods, Inc. asked for more detail on the softer consumer spending trends and whether there were any significant changes in Q3. He also requested further observations on the success of the SkyTab product.

Answer

President Taylor Lauber characterized consumer spending as mixed, noting a persistent low single-digit same-store sales decline in restaurants since summer but highlighting strength in sports and entertainment and a rebound in hotels in October. CEO Jared Isaacman discussed SkyTab's strong progress, including upcoming wins in the U.K. and Ireland, and noted that talent from recent acquisitions is being repurposed to accelerate SkyTab's development and global expansion.

Sanjay Sakhrani asked for more detail on the softer consumer spending trends mentioned, particularly if there was a significant change in Q3, and also requested further observations on the success of the SkyTab product.

Answer

President Taylor Lauber described consumer spending as mixed, noting a persistent but modest same-store sales decline in restaurants off historic highs, a September dip in hotels that rebounded in October, and continued strength in sports. CEO Jared Isaacman highlighted that SkyTab's progress remains strong, with install velocity increasing and talent from recent acquisitions like Revel and Vectron being repurposed to accelerate its feature development and global rollout, including in the U.K. and Ireland.

Sanjay Sakhrani asked if the loan growth guidance incorporates the loosening of credit standards, what the expected contribution from the Walmart partnership will be this year, and how management is thinking about capital deployment.

Answer

President and CEO Brian Doubles clarified that the benefits from credit loosening and the new Walmart program will primarily impact growth in 2026, as these initiatives take time to ramp up. EVP and CFO Brian Wenzel added that while the Walmart launch won't be meaningful to the 2025 growth rate, it provides strong momentum for 2026. On capital, Wenzel reaffirmed the commitment to shareholder returns, noting the $2 billion remaining on the buyback authorization, while Doubles emphasized that winning new programs is also a highly attractive use of capital.

Sanjay Sakhrani of Keefe, Bruyette & Woods followed up on credit quality, asking if the favorable delinquency trends could lead to charge-offs migrating below the historical average, given the significant credit tightening. He also inquired about the company's appetite for pursuing large portfolio RFPs currently in the market.

Answer

CEO Brian Doubles reiterated that they are pleased with credit trends but noted there may be an opportunity to methodically open up the credit box in the back half of the year, while staying within their long-term 5.5%-6% NCO target. Regarding large portfolios, Doubles confirmed strong interest but emphasized the need for rigorous discipline, good partner alignment, and returns that compete with other uses of capital like share repurchases.

Sanjay Sakhrani asked for more detail on the impact of the product, pricing, and policy changes (PPPCs), questioning if the full run-rate benefit would be realized by the end of 2025 and how the ROA would be affected if the proposed late fee regulation does not occur. He also inquired about the M&A deal environment and drivers for loan growth.

Answer

EVP and CFO Brian Wenzel explained that the full run-rate benefit of PPPCs will not be realized by the end of 2025, with more to come from finance charges and promotional fees in 2026. He stated that without the late fee rule, PPPCs should drive ROA incrementally higher. President and CEO Brian Doubles added that the competitive environment for deals remains disciplined and that recent weak purchase volume was by design, resulting from proactive credit actions to improve the portfolio's risk profile.

Sanjay Sakhrani asked about the expected trend for the credit loss reserve rate into next year and for an update on the strategy regarding the CFPB late fee rule, including contingency plans.

Answer

EVP and CFO Brian Wenzel reiterated guidance for the year-end 2024 reserve rate to be generally in line with year-end 2023 (around 10.3%) and expects it to trend down toward the Day 1 CECL level as delinquencies normalize. Regarding the late fee rule, both Wenzel and CEO Brian Doubles stated the company is planning as if the rule will be implemented and that the timing does not change their goal of reaching neutrality. Any rollback of pricing changes would require a high degree of certainty the rule is defunct and would be a discussion with partners.

Sanjay Sakhrani from KBW asked for more detail on the conclusion of the strategic review process and questioned the expected trajectory for EBITDA growth throughout 2025, seeking clarification on normalized gross profit for 2024.

Answer

CEO John Morris explained that the Board concluded the strategic review due to the changed macro environment, believing that investing in organic growth will yield the best returns. CFO Tim Murphy added that these organic growth investments are already included in the financial outlook, so adjusted EBITDA growth should track a similar path to gross profit growth. He also quantified the 2024 political media impact as 4-5 points of headwind to full-year 2025 growth.

Sanjay Sakhrani asked about the expected growth trends for 2025, the rationale behind initiating a strategic review, and the outlook for free cash flow conversion after adjusting for one-time items.

Answer

CFO Tim Murphy stated that excluding recent client losses and strategic migrations, the normalized gross profit growth rate would be around 10%, with the core AP business growing in the low to mid-teens. CEO John Morris explained the strategic review is a comprehensive effort to maximize shareholder value. Murphy confirmed that adjusted free cash flow conversion should remain strong in 2025.

Sanjay Sakhrani inquired about the timeline for achieving targeted expense reductions and the company's future earnings power. He also asked about the forward outlook for the FFELP Net Interest Margin (NIM) and the adequacy of current loan loss reserves.

Answer

CEO David L. Yowan projected that the full $400 million in expense reductions would be realized by mid-2026. CFO Joe Fisher clarified the current EPS guidance of $1.00-$1.20 includes $0.26 of net expenses slated for removal. Fisher expects the FFELP NIM to remain at the high end of its range in the near term but noted potential pressure from future rate cuts. He expressed confidence in current reserves but said the company continues to monitor trends.

Sanjay Sakhrani asked for clarity on Navient's capital allocation strategy, specifically whether the focus has firmly shifted from capital returns to growth, and inquired about the timeline for achieving the targeted expense run-rate and the rationale behind recent loan loss provisions.

Answer

Edward Bramson, Vice Chair, positioned the company in a turnaround phase, noting the ~$204M expense run-rate is a real target post-TSA, but excludes future cost-saving initiatives. He emphasized the goal is to shift perception from a run-off entity to a growing one. CFO Joe Fisher added that while the company feels appropriately reserved, it continues to monitor rising delinquencies and economic pressures impacting the portfolio.

Sanjay Sakhrani asked for details on the lower expected recovery values for private student loans and requested guidance on how falling interest rates might impact net interest margins (NIMs).

Answer

CFO Joe Fisher explained that the $21 million adjustment to recovery rates was part of a regular quarterly review, reflecting the challenge of recovering from high-quality borrowers who have already exhausted other programs. Regarding NIM, he noted that while falling rates create a substantial refinance opportunity, they also pressure the FFELP NIM in the short term due to asset/liability repricing lags. He indicated that rate cuts beyond 50 basis points would begin to be offset by an increase in floor income.

Sanjay Sakhrani questioned the risk of FFELP loan consolidation requests reaccelerating, the potential earnings impact of the BPS sale, and the status of the process related to the recent CFPB accrual.

Answer

CFO Joe Fisher addressed the consolidation risk, stating that while volatile due to government programs, the company's guidance already accounts for potentially elevated prepayment levels. CEO David L. Yowan discussed the BPS sale, noting strong buyer interest and an expected conclusion in the second half of the year. He explained the sale is a key enabler of expense reduction and could be accretive. Regarding the CFPB, Yowan confirmed the total reserve now exceeds $100 million, reflecting developments in discussions, but declined to provide further details.

Sanjay Sakhrani asked about the risk of loan consolidation requests reaccelerating, whether the BPS sale would be accretive to earnings, and what the recent CFPB-related accrual signifies for the ongoing lawsuit.

Answer

CFO Joe Fisher acknowledged the volatility in consolidation requests but stated the guidance accounts for this risk. CEO David L. Yowan explained the BPS sale would be accretive through significant expense reductions that exceed the lost revenue, with potential for further accretion from the use of proceeds. Regarding the CFPB, he confirmed the total reserve now exceeds $100 million, reflecting recent developments, but declined to provide further details.

Sanjay Sakhrani requested more color on the drivers behind the improving EBITDA margins and the outlook for this metric going forward.

Answer

CFO Joel Wilhite expressed satisfaction with achieving over 20% EBITDA margins, noting it demonstrates the business's potential even amid macro uncertainty. He mentioned the company is ahead of schedule on its gross margin targets and reiterated long-term goals of an 80% gross margin and a 30% EBITDA margin, driven by continued operating discipline and expense leverage.

Sanjay Sakhrani asked for an update on the macroeconomic outlook, specifically concerning float revenue expectations, the interest rate assumptions baked into guidance, and any emerging green shoots in customer spending.

Answer

CFO Joel Wilhite clarified that the Q1 float revenue beat was driven by the timing of customer balances, not interest rate changes. He stated the full-year guidance still incorporates an assumption of approximately 75 basis points in rate cuts in the second half of the year. He also confirmed that the guidance continues to reflect the ongoing macro impact of suppressed discretionary spending.

Asked about the expected revenue contribution from the existing pipeline in 2024 and the timing for realizing cost synergies from Paya and other initiatives like back-end processing insourcing.

Answer

Philip Fayer explained that new customer revenue ramps over 6-12 months and that historical trends are conservatively factored into the 2024 guidance. He noted that cost synergies from Paya are on track, but the benefits from back-end insourcing are considered an upside for this year and are mainly targeted for 2025. Other upsides not fully baked into the guidance include debit routing capabilities and AI-driven efficiencies.