Interview with MoneyLion's CFO

Kinsey Grant: Hello, everybody. Happy Thursday and welcome to Public live. I am your host Kinsey Grant. So on Tuesday of this week, financial technology company MoneyLion released its Q4 and fiscal year 2022 earnings reports, so joining me to walk through the numbers and tell us more about MoneyLion and its future is Rick Correia, CFO of MoneyLion.

Rick Correia: Hi, thanks for having me.

Kinsey Grant: Of course. Thank you so much for being here. I'm sure it's been a very busy week for you. So I appreciate you taking the time.

Rick Correia: Great, thanks. Let's do it.

Kinsey Grant: Sweet. So I want to get started here. Before we dive into the nitty gritty and the details of their earnings reports. Can you just explain to anybody who might not be familiar with MoneyLion what you do? Tell me about the company?

Rick: Yeah, absolutely. At our core, we help connect customers with the right product, financial product, so whether that's a first party product or a third party product, you know, it's an authentic way for us to give our customers advice and content and at the same time, just making sure that you have all their financial needs met.

Kinsey Grant: Absolutely, certainly makes a ton of sense. So let's get into the earnings report from earlier this week. So on the earnings call, you reiterated three key takeaways for investors. I would love it if you could recap what those three key takeaways were for our listeners today.

Rick Correia: Yeah, so let me just, I want to read something from the Fun Police or lawyers, which is that as we're going through the financials or anything that I'm talking about, unless it's otherwise stated, I'll be referring to our non-GAAP adjusted results. And so you can see the appendix in our earnings release available on our IRS site for any of our GAAP results and reconciliations of each non-GAAP measure to the comparable GAAP measure. And then, of course, you can always find our latest earnings presentations on moneyline.com. 

So with your question, in terms of the three key takeaways that we highlighted on our earnings call, the first was that we reached a significant milestone, which is we reached positive adjusted EBITDA in the month of December. This also marked our fourth consecutive quarter of adjusted EBITDA improvement. And so we're really proud of this milestone we've been working towards optimizing growth and profitability. And as everyone can appreciate a really dynamic market environment. 

The others that we announced that we expect to generate positive adjusted EBITDA for the full year of 2023. There aren't many of us in this kind of competitive space that can say that. And it's another great milestone for us as we turn the quarter corner towards delivering really kind of profitable growth at scale. And then we also surprise the analyst community by being months ahead of our EBITDA targets. So in terms of our Q4 results, our Q4 adjusted EBITDA came in ahead of expectations at the 6 million adjusted EBITDA or negative Don number was an improvement from 32 million a year prior and Q4 ‘21. And this was really driven by the performance in our consumer business, seeing the continued benefits of a lot of the operating leverage that our business was built to realize as well as around 15 million of annualized run rate, fixed cost savings that we actioned during the fourth quarter. 

The second takeaway that was important for our investors is that we added over a million total customers in Q4. And we did that at a remarkably low CAC, which you've probably been following us is really kind of one of the things that differentiate us, and that's under a $10 CAC. And so we've been able to grow while actually reducing our marketing spend, and specifically reducing it with the paid digital channel. So you know, when you look at the Googles and the Facebooks of the world, those channels are becoming increasingly expensive. And so we benefit from having a unique way in terms of driving our top funnel. And we do that by having over 30 million inquiries a quarter. You know, that gives us a tremendous number of customers data and importantly intent that we can then optimize to, as I said at the beginning of this match customers with the right suite of products.

The third key takeaway is that we reached quarterly adjusted to be EBITDA of 92 million in Q4 of ‘22, and this is up 70%, over the prior year quarter. And so for the full year of 2022, we had an adjusted revenue that increased nearly 100%, year over year to 328 million. And so because of this kind of diversified consumer and enterprise business model, we're able to continue delivering really strong performance across economic cycles. And so that's really the kind of key three takeaways that we wanted our investors to take away from the business update that we provided yesterday.

Kinsey Grant: Awesome. Yeah, I appreciate all that insight. And I think that we'll get more into this consumer and enterprise product lineup in just a couple of minutes here. But before we do get to that, with all of these key takeaways in mind, knowing that there are some pretty impressive stats and you know, some important numbers that you and your team shared earlier this week, I would love if you could just explain the context behind all of this, you know, not necessarily how you got there, but more so what does this mean? What do these big three key takeaways mean, for investors - for adding value for investors? Tell me a little bit about that.

Rick Correia: Yeah, so when you look at why these matters, so much for us is one, it's unique for a company that has kind of both our growth trajectory and profitability trajectory, to meet the needs of our customers in such a meaningful way. And so whether our customers are experiencing, you know, times of need, or they have times of excess, we're able to deliver for them, either our first party or our third party products. And so when you think about the context of this, we exited the year, with 6.5 million total customers. And so our definition of customers are monetized customers, as opposed to just those that kind of browse our platform. And that's important, because it means that we're going to be delivering value to them. 

The second reason, when you look at the number of products that were taken by those customers, it's nearly 13 million. And so that's a really nice blend of both first party products that we provide, as well as third party products. And so it means they're actually meeting the needs of our consumers. And then we ended the year with over 1000 enterprise partners. And we'll touch upon this a bit more later, when you look at what we have, from an enterprise business perspective, we have one of the leading financial marketplaces out there. And so that means that we're helping our customers kind of get matched with product providers so that we're meeting their needs authentically. And then we amassed over 33 million unique customer profiles across our platform. And so what's really important about that is if you look at the recurring revenue profile of both of our consumer and enterprise businesses, it means that our customers are coming back to us, because we're actually helping them.

So on the consumer side, for example, over 75% of our revenue comes from our historical cohorts, whether it's kind of pre 2019, or 2020, or 2021, and even 2022. Every day that we wake up, over 75% of our revenue are coming from customers that we acquired historically. And then on the enterprise side, we have a similar type of profile, we have over 80% of our enterprise customers that represent revenue – recurring revenue that we are realizing. And so what does that mean, again, we wake up every day, and we are generally generating over 80% of our revenue in the enterprise side from historical cohorts. 

Then just digging down into the customers. You know, the thing that we have been proud about doing within MoneyLion is having some of the leading unit economics. So we've kind of talked about the customers that we added in the fourth quarter, we added just over a million of them. And we did that, as I mentioned earlier at about an $8 CAC. And so if you went back a year that you know, our CAC was in the 20s, and every quarter, we've been able to improve our CAC and kind of keep it at that low level, because of the unique type of funnel that we have. That then translates into a two month payback period. And importantly, we're able to do that at a really strong ARPU, and so our ARPU was at over $60. And again, while we're spending less than $10, to acquire them.

Kinsey Grant: Great. So you know, with all these numbers in mind, and noting, especially to your final point, you just made here the trend that these numbers seem to be following and these metrics seem to be following, they appear to be pretty significant for the money line and for the future of your business. And I'm curious about the general circumstances in which these numbers were tallied, you know, you think about the macro climate, the economic circumstances that any business would be facing in most of last year, certainly at the end of last year. I'm curious about how those macro circumstances impacted the financials that you reported and also, you know, how they might impact the way that you go about the future quarters. You know, once we get past the quarters that you were, of course reporting on earlier this week. Tell me a little bit about your perspective and your take on everything that's happening in the macro sense and how it impacts your business?

Rick Correia: Yeah, that is a great question. You know, one of the things that's unique about where we are positioned is we have a really interesting window into the American consumer. We also have an interesting window into a lot of the market participants on the enterprise side, right? The kind of big channels where customers are looking for products, as well as those big companies that are delivering those financial products. And so with those windows, where we kind of have a good sense of how the consumer is performing and behaving. And I think what we see right now is they're, they're pretty resilient still. And we're uniquely positioned because of this mix between our consumer and enterprise business. So on the consumer side, we're continuing to see consumers having a lot of demand for financial products and demand for credit. And demand for the kind of higher yield savings that they're seeing, you know, are very different than the type of yield that they receive in their deposit accounts, one, two, three years ago. 

And then on the enterprise side, you know, channel partners are still seeing a lot of consumers spending time looking for ways to kind of improve their financial lives. We have seen, you know, some headwinds, from the kind of product providers where just kind of given the raising rate environment, you know, they're having to step back or tighten their risk box, which means it just isn't as much available, as we kind of saw in late Q3 and certainly part of Q4 of ‘22 customers having access to that. And so I think what's been important is having, for us, both a consumer business and an enterprise business allows us to be able to continue to hit our financial targets, because they kind of work as almost a hedge where what we've seen with the consumer side is we're able to kind of drive more and more kind of transaction fees, those type of direct deposit interchange revenue lines, as we kind of saw some headwinds, as I said, with the enterprise side of the business. With that position, just really to your question about what it means for the future, it means that we'll be able to continue to execute and realize the momentum that we've been having. If you look at the overall mix of our business, from an enterprise and consumer perspective, you know, consumer is about 65% of the revenue mix in enterprise is about 35%. And that's a slight shift more towards consumer relative to what we were expecting, you know, six months ago, we thought we'd start trending more and more towards 50-50. But again, that's a benefit for us, as we start to see that the shift or the tailwinds that we see in the consumer side, tend to offset some of the headwinds that we see on the enterprise side.

Kinsey Grant: Totally and noting, to your point that this could, in some ways, behave as a hedge that you have these two forks in the business. I'm curious about how, you know, it might be what the experience might be building both a consumer and an enterprise part of the business, in what could be construed as, as volatile economic circumstances or a volatile economic environment? Is that a difficulty for MoneyLion? And if so, tell me about how you try to, you know, establish these two business entities or, you know, I don't want to suggest that they're separate entities, but two parts of your business that serve a different customer? Is it difficult to develop both of those and to mature both of those at the same time, knowing that the economic climate is not the most hospitable?

Rick Correia: Yeah, another great question, which so, I think fortunately, for us, it's all built. You know, certainly there are always optimizations and improvements that you're doing. But we are, you know, easily the most full featured offering out there from a financial bank perspective that exists. So for some companies that might have a feature as an entire company, we have that embedded, it's just a feature. So for example, like a round ups. And so if you kind of looked at the MoneyLion app, from a consumer perspective, it's fully built, it's the most full featured product that exists out there, we encourage people to download the app and play around with it, it's free, you get access to incredible kinds of content. And then the more that you interact with it, the more personalized it becomes, and the more that we're able to help people  access the right mix of financial products. And so, you know, from an enterprise perspective, you know, there are always ways to continue to improve. 

So to give people a little more transparency into what that means from an enterprise perspective, we are a network and we're a technology company. What we help our channel partners do is we allowed them to be able to have a very flexible, different ways in which they can basically use our technology, you can kind of have an embedded piece of software, we can host an entire white label type of site for you, you can kind of have a mobile version of it. And that allows our channel partners to kind of optimize the way in which they want to have customer experience to meet their needs. And however, basically, those channel partners are kind of routing customers to us, or people that have high intent to us, on the other side of the equation, are our very fast set of product partners. And again, we have deep integration, and we give them software that allows them to kind of tweak the way in which they want to see customers, the type of customers, they want to see the frequency to help them meet their needs. And so for that perspective, again, that's already all built. Of course, we're always looking at ways to optimize the funnel, we're always looking at ways to add more and more new types of enterprise web services that we can deliver to those partners. 

But you know, when we look at the macro environment ahead, and it's incredibly difficult to kind of look forward and think about what that macro can unveil for our business. But we're confident because whichever way the market kind of tilts over the next coming quarters, we're going to either kind of realize our plan, or we're going to be able to take advantage of credit partners and the credit boxes, the risk boxes that will widen back up. And that allows us to kind of further you know, meet that on that demand that we're seeing. It's increasing quarter over quarter from the client side with products that meet their needs. So we think that at a minimum for us, we execute against our plan, we get to EBITDA positive over the year, and with some tailwinds, and with some kind of macro positive news, you know, the kind of back after the year we get to kind of spring load into outperformance.

Kinsey Grant: Yeah, makes a ton of sense. And I think this answer specifically speaks to some of MoneyLion’s potential competitive advantages moving into the future. So with that in mind, I would love to just hear your perspective broadly about the future of the FinTech space, what is exciting to you right now?

Rick Correia: I think what's exciting, and we're excited because we kind of play a really unique position within the FinTech space, which is I think, some people try to kind of pigeonhole us into being, you know, a neobank, or patroness into being, you know, a lender or petitioners into being kind of a robo-advisor. We are all of the above. But importantly, we're really just that interface layer to the customer. And so what we are able to do is really kind of play that kind of Swiss role, where we are a data company and a technology company that is able to take our customer and give them access to the right product. And that can be a product from any FinTech provider. So what's exciting about us as there is, more and more FinTech players are entering the space, they're always kind of driving innovation. And we get to take advantage of that by making those products available to our customers, whether it's an insurance, whether it's in mortgages, whether it's an auto refi, even when you start to look at some of the things that are kind of very budget intensive, so travel, spend on a car, things like that, we're even able to give our customers access to those types of, of non financial products through our partners, through our overall Money Lions membership or while membership. So it's a really exciting place to be in a space to be because we hope there are more and more market entrants into the FinTech space, and specifically on the product side so that we can make that available to our customer base.

Kinsey Grant: Yeah, and we're certainly excited to watch how FinTech unfolds in the coming months and years. Certainly, it's been a very interesting past couple of weeks. I shouldn't even be that generous – the past couple of days following the FinTech space. So we are going to have to check back, Rick, and see how things pan out for the next couple of months and years. So with that, I want to thank our wonderful guests today, Rick Correia, CFO at MoneyLion for his time. Rick, thank you so much. 

Rick Correia: Thank you. I look forward to being back next quarter. 

Kinsey Grant: Of course. And thank you again to our partners at MoneyLion who made today's show possible. We will be back next month with even more news and updates from the FinTech economy. Thank you so much for listening, and I'll see you next time.