Funding Circle Holdings (LSE:FCH) — Half Year 2023

0:04 Good afternoon, and welcome to the FUNDING CIRCLE HOLDINGS PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please simply type in your question at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review your questions submitted today, and we'll publish those responses on the Investor Meet company platform. Before we begin, we'd like to submit the following poll. And if you could give that your kind attention, I'm sure the company would

0:35 be most grateful. I'd now like to hand over to Morton Singleton and Oliver White. Good afternoon. Good afternoon, everybody, and thank you very much for for joining. My name is Oliver White. I'm the CFO of FUNDING CIRCLE. I'm joined by my colleague, Morton Singleton, who's our director of investor relations.

0:55 Hopefully, we can have a great discussion today. Keen to introduce, you to FUNDING CIRCLE, update what's been going on, and answer any questions. The material we're going through is effectively the analyst presentation from our recent half year results, augmented by a few extra slides to give you a bit of context and detail. With that, I'd like to hand over to Morton to kick us off. Thanks very much, Oliver, and just draw your attention to the usual disclaimer side before going into the main context of the presentation. So first off, I will just introduce a little bit about the business before Oliver will take you through the details of the financials and our strategic progress in the half we've just reported. So first for a little bit about our business. FUNDING CIRCLE is The UK's leading SME, as in small business finance platform, and we have a material and growing presence in The United States.

1:47 To date, we've extended over 16,000,000,000 sterling in credit with funds received from over a 140 institutional investors, and we've delivered those to over a 140,000 small businesses. For our small business customers, we offer a quick and easy way for them to get finance. Our instant lending decision enables them to get back to running their businesses more quickly. We talk about borrowers coming to FUNDING CIRCLE for financing for three things. Firstly, to borrow for the long term with our term loans in The UK and The US. Secondly, to pay, spreading their bills and invoices over a longer term through our Flexi Pay product. And thirdly, to spend, financing their day to day transactions with our Flexi Pay card. The term loans we issue to small businesses are funded by institutional investors.

2:34 Some of you may know of us from the days when we offered peer to peer lending, but we ceased those retail funding activities back in 2021, and now all our funding for our term loans comes from institutional investors. For these institutional investors, we offer access to an alternative asset class through diversified portfolios of small business loans at a scale that is unmatched in the market, and we deliver stable and attractive returns.

3:03 We're a purpose led business with our mission to build the place where small businesses get the funding they need to win. Sustainability, therefore, sits at the core of what we do with our social agenda of supporting smaller businesses, benefiting local jobs and local communities, and in turn, driving society and national economies. But it is not the only thing we do from a sustainability perspective. This chart effectively summarizes our ESG framework and the many initiatives that we are driving to deliver on emissions, employee diversity, equity, and inclusion, and our governance and risk management. These are all led at board level with associated objectives and performance measures in place. Why do we exist?

3:49 Well, for a start, lending to smaller businesses isn't easy. Sure. The banks already do it to a large degree, and these remain our largest competitors. But the market is generally underserved because lending to small businesses is a hard thing to do. Why is it so hard? Well, for one, the small business environment is hugely diversified in terms of the nature of the businesses involved, and associated with that, they're wide ranging and often complex risks. Secondly, because the data availability on SME businesses is usually sparse and inconsistent with businesses also having limited access to secure against loan limited assets to secure against loans, and the ticket size is concerned are usually being quite small. Accordingly, the underwriting of small business loans is very labor intensive and a costly exercise, particularly when compared to lending to consumers or to large corporations.

4:44 And, fundamentally, it takes time, so usually weeks and sometimes months in the case of the traditional providers to deliver loans to small businesses. So banks and traditional providers don't generally focus on this subgroup of potential borrowers, and it remains largely underserved. This next chart shows how we've solved this problem by using our proprietary technology and data. Our data lake has over 2,000,000,000 data points. We use this data to create models, and in combination with our technology, this leads to valuable customer outcomes. Our models are three times better at discriminating risk than the bureau scores. This leads to higher conversion for the same risk. Our customer experience is also unrivaled.

5:31 75% of UK loan applications now receive an instant decision, and it's actually a 100% when it comes to our flexi pay loan applications. As a result, customer satisfaction levels remain high with net promoter scores of 76 and a trust pilot score of 4.6. You're unlikely to find any banks quoting either NPS or Trustpilot scores for their small business lending and for good reason. So that's our business in a nutshell. Now to our recent performance. And for that, I will hand over to Oliver. Thank thank you, Morton. So this has been a good solid half for FUNDING CIRCLE, and I wanted to share some of the highlights. Despite the the the tough environment, our originations and otherwise other words, our new lending has grown 14% to 771,000,000.

6:22 Our credit performance have remained stable, showing the strength of our risk models. We have priced up in line with the market to continue to deliver attractive returns to investors. And as a result, we've agreed three new forward flow agreements. And we'll talk about our funding model in a bit more detail as we go forwards. Also, I'm pleased with the performance of our three business segments, and it's worth noting we do think of our business as three distinct segments with different dynamics. The UK loans business delivered 1,400,000 of PBT. It's our most established business and demonstrates the scalability of the platform even at a low point in the cycle. We continue to make controlled investment in The US business in Flexi Pay in order to capture growth over the medium term.

7:08 In The US, growth continued with more than 20% improvement half on half. In Flexi Pay, transactions doubled half on half. I'm encouraged by the customer engagement as we see stronger recurring revenue trends. Overall, whilst we remain mindful of the economic backdrop, the business has shown its resilience and adaptability. We have a clear strategy. We're optimizing what we do, and we're finding new opportunities in our core business. We're launching new products and continuing to evolve the business. As I go into the financial performance, it's probably worth just beginning with a very important question of how we make money. We're a fee based business, and with 90% of income coming from fees. For our term loan businesses, so our established businesses in The US and The UK, we make money from transaction fees. So these are origination fees charged to the borrower, so therefore are driven by the level of originations.

8:06 Our typical yield is around 6%, was 5% after testing price elasticity in both The UK and The US. We've nudged that upwards to 6%, and we think that's a sustainable level going forwards. We charge our institutional investors, so our funding partners a servicing fee. This is some of the qualities of annuity income stream, and it's charged from the loans under management they have with us, charged at 1% per annum and driven by the loans under management. And we have Flexi Pay as our new product, with just 3% of total income in the half, but gonna grow materially over time. The typical yield there is 4.9% over three months. So the way the FlexiPay product works is a a borrower, takes a loan, pays it back over three months, and rather than paying an interest rate, pays a fixed fee on that loan.

9:03 If I then get into some of the financials. So this is the overall group performance. As the headline says, we think it's very resilient in light of very tough economic conditions in both The UK and in The US. Originations, so new lending, grew in each business unit, half one twenty three compared to half two twenty two. Total originations were 771,000,000 in the half, up 14%. This growth is despite our continued disciplined approach to originations and is testament to the strength of our business even in tougher macroeconomic environments. We continue to prioritize long term investor return performance over short term originations.

9:49 This is aligned with the expectations of our institutional investors and as a responsive approach to our borrowers. Headline loans under management continue to reduce to GBP 3,500,000,000 as the government loan schemes continue to amortize down. Commercial lending loans under management continue to grow up to GBP 1,500,000,000, an increase of 9%. Total income was GBP 76,600,000, with growth from each of our business units compared to half two twenty twenty two. Adjusted EBITDA was £3,000,000 negative, and PBT was a loss of £16,600,000 As we have previously guided to the market, anticipate losses near term as we choose to invest in growth, scaling our US loans and establishing our flexi pay businesses.

10:38 Our established UK loans business is now profitable at the PBT level as we continue to deliver on effectively managing this business through the changing economic conditions. Cash and net assets remained strong. Funding CIRCLE has cash of 204,000,000 and net asset value of 264,000,000. This puts us in a fully funded position to deliver a medium term plan. I will now walk through each business unit in a little bit more detail. The UK loans business is well positioned for continued growth. It is market leading platform for SME lending, has scale, and is PBT profitable. Originations grew sequentially half and half despite the impact of the continued distant approach to underwriting. Loans under management reduced as the government supported lending book continues to amortize down. Commercial lending continued to increase.

11:31 Total income was £57,100,000 up from 56,500,000 in the prior half, reflecting the origination trends, the increase in origination fee yield and higher interest income, offset by the expected reductions in servicing income and in investment income. Adjusted EBITDA was positive £8,800,000 up from £5,700,000 in half two of 'twenty two. This was driven by income growth and cost management in The UK loans business driving improved margins. UK loans adjusted EBITDA have been positive since half two of twenty twenty, demonstrating the robustness and scale of The UK loans business. The business is profitable at GBP 1,400,000 in profit before tax. Turning to The U. S. Loans business.

12:20 U. S. Loans continues to show good top line growth. US total originations increased 21% in half two to two fifty nine million. The US has continued to grow originations each half year since commercial lending resumed after government supported lending ceased in May 21. As in The UK loans business, we're continuing with a disciplined approach to originations. Loans under management were $5.00 2,000,000, up from $454,000,000. Total income was $20,700,000, up from 17,400,000. This improvement was driven by the increase in originations and loans under management and the increase in origination yield. Underlying operating income continues to grow strongly.

13:06 The U. S. Loans business recorded a negative adjusted EBITDA of $4,800,000 in half one and a loss before tax of $11,500,000 We are continuing to make controlled investment in U. S. Loans business, driving scale to profitability. Now to Flexi Pay, the third and newest of our business segments. Flexi Pay's key drivers are transactions and end of month balances, which are broadly comparable to the originations and loans under management metrics of our loans businesses. FlexiPay is a story of growth and a story of investment. FlexiPay transactions have more than doubled to £90,000,000 in the half. Period end balances have also grown to £34,000,000 This momentum has resulted in strong top line growth with a total income of £2,300,000 in half one twenty three, more than double the prior half.

13:57 Shortly, we'll be showing a a video to bring to life the FlexiPay product in a bit more detail. Adjusted EBITDA was £7,800,000 negative as we continue to invest in Flexi Pay. We have invested in technology and the Flexi Pay team. Additionally, as anticipated, marketing spend and the expected credit loss provision build both front run income. Profitability for Flexi Pay comes from repeated usage of the product, which will become evident as customer base becomes more established. We align costs to the strategic needs of the business sectors. So operating expenses continue to be actively and tightly managed. Funding Circle's cost base consists mostly of staff costs, marketing costs and technology costs.

14:46 Overall costs were £96,200,000 in half one versus 91,000,000 in half two. In summary, this is due to investment in The US loans business and Flexibay, partially offset by tight cost management in The UK loans business. The UK loans business is a most established segment with an increasingly efficient cost base that will allow us to benefit from operational leverage as we grow in the economic backdrop it covers. UK loans in half one twenty three demonstrated improved cost efficiency with costs decreasing to £56,100,000 whilst total income increased by 1%. The U. S. Loans business is scaling up. Control spend in marketing and other costs have supported volume growth and platform scaling. Flexi Pay is demonstrating a strong growth trajectory.

15:34 And as just discussed, we are investing behind the product. Let's now turn to our term loan performance and the returns provided to our platform investors. So this is the returns we deliver to those who invest money with us on our platform. The overall book has remained very stable despite the macroeconomic environment. We have seen pockets of stress versus initial expectations in the 2022 cohort, where we are forecasting small reductions in the expected returns in The UK of 40 basis points and The US of 30 basis points. In half two of twenty twenty two, we saw leading indicators of stress in the macro environment and took preemptive action. The reduction in return expectations results from originations in the early part of the year.

16:23 Returns post tightening are in line with expectation. All other annual cohort returns have even revised upwards or remain constant. The 2023 returns illustrates how we've responded to the changing base rate environment when able to reprice into a steepening yield curve to maintain returns. These borrowed price increases have been broadly in line with wider market price moves. Clearly, we are dealing with a heightened period of macro uncertainty. We are confident with our credit strategy. We continue to monitor all indicators closely, are very agile, and respond quickly when needed. Our credit risk management is proven. Our borrowers are resilient, and the loan quality is good. The loan returns demonstrate the robustness through the cycle of the asset class that FUNDING CIRCLE has developed and of the capabilities that FUNDING CIRCLE has built to originate, underwrite, and manage these loans.

17:22 FUNDING CIRCLE is diverse, agile, and sustainable funding model. The pie chart illustrates the diversification of sources of funding for total loans under management. And with each Innovo segments, we maintain a further diversified investor base. As Morton mentioned at the top of the meeting, the closed retail or peer to peer loan book continues to diminish as a proportion of loans to the management, now down to just 1%. We've continued to deliver sustainable funding and a and a flow of new investors. In The UK, as of the end of June, we have up to 1,600,000,000 of agreed funding, and we signed an additional material forward flow arrangement in January. In The US, we have up to 4,400,000,000 of agreed funding, and we signed both a material asset manager and our second credit union partner.

18:12 In June, we brought in Citibank as a senior debt provider to leverage FUNDING CIRCLE equity invested in Flexi Pay. This is for an initial 150,000,000 facility. Executing this in demanding market conditions is again testament to the quality of FUNDING CIRCLE's credit risk management and capital market capabilities. In The UK, in August, we launched our participation in the third iteration of the recovery loan scheme and brought on Alika Bank as a new bank investor. This is another example of FUNDING CIRCLE continuing to adapt to the changing macroeconomic environment. Participation in the scheme enables us to meet our objective to saying yes to more businesses and further diversifies our investor base. It's worth noting that the third iteration of the recovery loan scheme is quite different from some of the earlier government programs.

19:04 Whereas during COVID, government guaranteed lending displaced a large share of commercial lending, the most recent iteration of RLS is intended to work alongside commercial lending, addressing structural lending gaps. The majority of originations will continue to be commercial lending.

19:22 Our balance sheet remains robust. Net assets of £264,000,000 including cash of $2.00 4,000,000 and invested capital of £69,000,000 The decrease in net assets is principally driven by investment choices we've discussed into U. S. Loans and into flexi pay.

19:43 Moving on, our balance sheet, we see as a source of strategic advantage. This slide illustrates how we think how we use our cash and deploy our capital. Firstly, we support our operations. We run various stress tests and ensure we hold enough cash to protect against a combination of stress scenarios. We will also fund the operating cash flows necessary for The US and for FlexiPay to scale to become cash generative. We invest where it makes the platform stronger. Use cases include limited co investment for risk alignment with institutional investors, for example, in the new iteration of the recovery loan scheme, or to support research and development efforts. FUNDING CIRCLE is the equity investor in FlexiPay. As mentioned, towards the end of the half, we successfully leveraged the equity investment.

20:33 We have enough cash, to deliver a medium term plan. In addition, we have cash available for new growth opportunities should these become apparent. And we continue to manage share dilution by supporting the employee benefit trust in purchasing our shares in the market to fulfill our employee share awards. All in all, wearing my CFO hat, I'm pleased with FUNDING CIRCLE's financial performance in half one of twenty three. We've achieved good results in volatile macroeconomic conditions with The UK and US base rates looking that they will be higher for longer and the economic recovery pushed out. The business proved to be resilient and adaptable. We've sustained our credit quality and loan returns. Institutional investors remain committed to funding an attractive asset class.

21:20 FUNDING CIRCLE has continued to deliver its growth strategy. Our solid performance and robust balance sheet sets the business well to drive future growth. We're well positioned for long term success, and our 2023 and medium term guidance, as shown on this slide, is unchanged.

21:40 So now looking ahead, looking towards some of our exciting strategy. We're in a strong position. We've built good scale in The UK loans business. As Morton discussed at the top of the meeting, the small business loans market across The US and large and UK is large and underserved with more than 3,000,000,000 of loans outstanding. Our data and technology provides us with a sustainable competitive advantage. Our customer satisfaction remains high. These give us good foundations from which to grow, and we continue to make good progress against the three pillars of our growth plan. We're attracting more businesses through expanded and strengthened distribution channels alongside an expanded product set.

22:27 We're saying yes to more businesses. This doesn't mean irresponsible lending, but rather expanding to segments and delivering the right product to the right business, whether our owner through third party lenders we work with, and we're building products where we could achieve market leading positions with FlexiPay, which we'll talk more about. So as mentioned, we attracted more business through an expanded product set, focused brand investment, and continued strengthening of our existing channels. Each of our product expansions increases our relevance to our customers and enables us to go deeper in marketing channels. Flexi Pay, in particular, meets a more frequent customer use case, attracting more customers. We've completed our first season of sports sponsorship to improve brand metrics with the rugby premiership in The UK, and we continue to strengthen existing channels of new partnerships.

23:23 We want to say yes to as many businesses as possible by expanding expanding our end to end conversion. Last month, as I mentioned, we began our participation in the government's third iteration of recovery loan scheme. Last year, we leveraged our data to find further opportunities and expanded to super prime in The US and near prime in The UK. We strengthened our marketplace, referring businesses that we cannot support to other lenders. This enables us to leverage and monetize our advantage in distribution and marketing. Our third pillar relates to new products. As a reminder, FlexiPay solves small businesses' biggest pain point, cash flow management.

24:09 It enables us to solve more of our customer needs, building a deeper and more engaging relationship and access a sizable new market. We are seeing good growth with a doubling of transactions in the first half. Our total transactions are now more than a 150,000,000, and after a successful beta phase, we are moving into launch phase for our Flexi Pay card, enabling customers to finance a day to day spend. To bring Flexi Pay to life, I'm now gonna play a short video, fingers crossed technology works, to show you how it works and how our customers are using it. If you have a VAT bill, if you

25:51 have salaries to pay, suppliers' invoices, you can use it for anything, really. It's so easy to manage online. You log in into your account, you submit the payment, you got an email, payment has been sent, you got your payment schedule. Job done. You can use it on the phone. You can use it on a laptop. You can use it on the go. It's amazing. That video gives just a little window into the positive feedback and engagement we're seeing from our customers using FlexiPay and FlexiPay card.

26:51 FlexiPay transactions more than doubled in half one twenty three to around 90,000,000, and we have over 3,800 active lines of credit. We have high customer engagement with businesses using FlexiPay 1.3 times an average each month, and businesses are now flexi paid, if I can make up a word, more than 40,000 times since we launched.

27:12 What is particularly exciting for me is the chart on the right hand side. This shows transactions each half by cohort of joining FlexiPay, shown in different shades of purple. You can see the overall growth, the doubling in the most recent half, and the new customers that we're bringing on over time, but also the level of engagement we see with existing customers. Once a customer uses FlexiPay, they continue to do so because part of the day to day way of managing the business, as you look at this cohort analysis, you can see that trend with strong and increasingly predictable repeat usage delivering recurring revenue.

27:47 The product economics and the risk profile are attractive. We take the marketing costs upfront as we acquire customers, but the credit cycles quickly and the nature of the customer relationship is long. Customers come back and the product has frequent usage and recurring fee income. That's why we continue to be really excited about the opportunity that FlexiPay will generate and why we are investing in FlexiPay. This is my final slide. I'm I'm quite keen. I I we could spend half half the meeting listening to me, but in return, I could spend half the meeting along with Morton, answering any questions you may have. So if I reflect on the half and, indeed, if I reflect on the business in general, despite the tough economic environment, we've delivered a good solid set of results in line with expectations.

28:39 We have once again demonstrated resilience of the business on our aptitude of responding to the changing economic environment. Our UK loans business is profitable. We are seeing good growth in The US loans business and flexi pay. We continue to execute on our medium term plan to address the large and underserved market in both The US and The UK. Our technology and data gives us clear competitive advantage and is a moat around our business. It delivers a superior customer experience through our instant decision lending technology, a platform on which to build new products, and three times better risk discrimination than the bureau scores. We have delivered robust and attractive loan returns, thanks to our risk approach, which combines our data and analytics with credit expertise and means we continue to see strong investor demand.

29:29 Looking ahead, we have a strong team, a clear strategy, and we're focused on executing against our plan. We are unwavering in our mission to help more small businesses win, and we continue to do so in spite of the volatile macro environment. Thank you for your time today. Morton and I will be very happy to take any questions. And looking at the questions, there's been some great ones coming in. That's great. Just let me just give you just a quick moment to review some of those questions, and thank you once again for your presentation. Ladies and gentlemen, please do continue. Just to submit your questions using the Q and A tab just situated on the right hand corner of your screen. Just while Morten and I will take a few moments to review your questions submitted already, I just want to remind you that recording this presentation, along with a copy of the slides and the published Q and can be accessed via your Investor Meet company dashboard.

30:15 Oliver, Morton, you said I've received a number of questions from investors this afternoon. So thank you to everybody for your engagement. If I may, Morton, just hand back to you just to read out those questions, and then I'll pick up from you at the end. Fantastic. Thank you, Mark. Yes. A number of presubmitted questions, onto the platform, so taking them in order. Oliver, can you please discuss whether you can cross sell FlexiPay to loan clients and the reverse? Absolutely. So the bulk of the early, FlexiPay clients have been existing borrowers. We've clearly got the data in them. We've clearly got good engagement. The beauty, though, of Flexi Pay is it's also a vehicle to acquire new customers. Because of the risk characteristics of the product, we can probably offer it to a wider range.

31:03 And we certainly see we can bring in new customers into Flexi Pay and over time promote and cross sell the term loan products to them. Excellent. Next question. Can you elaborate about your plans for new products in The US, either akin to Flexi Pay or other?

31:23 So the first thing we're doing at flexi in The US is scaling the product we've got. It's a great product. It's well received, and certainly, we looked before COVID. We were run rating probably 80,000,000 originations a month for billion a year. So job one for the US team is to scale the existing product. It should be noted, at the beginning of the year in January, we hired a new and very experienced managing director for The US business, a guy called Steven Locker, who's worked for PayPal and for some other fintech lenders and platform lenders, including LendingClub, in The US. So we're investing in the management team.

32:09 We are looking at new products and adjacent products, but but job one is building the existing loan platform. We did speak about lending as a service previously, and this is an exciting opportunity to build upon that core product to work with smaller banks in The US, community banks, smaller regional banks, and provide effectively a white label experience. Works better in The US just because of the huge fragmentation of the banking market, but we're still excited about that opportunity. Okay. Next pre submitted question. It was very interesting to see the new pricing on originations as well as on FlexPay. Do you believe the new pricing will impact on volumes? I what level of elasticity are you modeling?

33:00 And, also, I read ahead, also got a question about could we increase servicing fees? So maybe I'll handle those two together. So firstly, in The UK and The US term loan business, we tested pricing elasticity, and we were confident that we could increase the yield, without damaging originations. I see that as being sustainable going forwards. FlexiPay was slightly different. So we did two things on FlexiPay. We originally launched as a 3% fixed fee, and now we moved up to an average of 4.9%. That was less around pricing power and more around two things. The first was the base rate environment changed. Pricing in the market needed or moved or cost of funds increased, so partly with the response to that.

33:46 And secondly, as the product developed, as we test and learn to, we're able to offer more of a risk based pricing approach. So therefore, a broader range of pricing depending on the risk characteristics of the borrower. Servicing fee is about 1% in The US and The UK. It's charged to our institutional investors. So it's charged on loans under management. It's got a bit of an annuity characteristic to that. That's dependent on individual contracts. Certainly, where we've got attractive products, we do look to to maximize that servicing fee. But at the moment, it's still around the 1% level. Thank you, Oliver. Next question. It seems that in The UK, efficiency has backtracked after a period of improvement. Can you please discuss that? Bit harsh to call it backtrack possibly. So so marketing as a percentage of operating income for the loans business, we've guided to about 30% on normalized level. Last year, it was 28%.

34:47 This half, it went up to 31%. That's primarily driven by with tighter underwriting, a tighter credit box. We have lower conversion, so less borrowers are accepted, and that has a bit of an impact on marketing efficiency. As we continue to find ways to widen the credit box and as the economy rebounds, we would expect conversion to increase and our marketing efficiency to improve. Thank you. We're now on to the live questions from this morning. So from Marcus, do you have a revenue sharing model for those directed via the marketplace? Not quite revenue sharing. We're paid a commission or a bounty as opposed to a longer term relationship. But as mentioned in the presentation, I think alluded to Marcus' question, it's a great way for us to monetize a relatively low incremental marginal cost.

35:43 Those customers who come to us who, for reasons of their product fit or their credit or or their risk profile, we're unable to provide a product to at the moment. Thank you, Oliver. Next question is from Simon. What is the planned investment into FlexiPay?

35:59 Okay. So we we haven't disclosed the full investment, and it's important to note, you know, there's investment in terms of building the technology and building up the team, and there's also, if you like, a p and l drag with the front loading of some of the costs, marketing costs, or expected credit loss provision build. We've guided in 2023, we will see an EBITDA loss in FlexiPay of between 10 and 20,000,000, and we've also guided that FlexiPay will be profitable at the EBITDA level by 2025. So clearly, got a J curve, but a relatively short J curve. Okay. Thank you. Several questions coming through from Vishal. The first one is building on the last one. So thanks for the presentation.

36:45 Could you please give some color on the normalized cost base for FlexiPay? In other words, at what point do you think FlexiPay will start benefiting from significant operational gearing and generate cash inflow for the group? So, again, I mean, I would go back to the the guidance we've given that we think Flexi Pay will be EBITDA profitable in or or breakeven in 2025. Vishal has then asked, please, could you discuss how the UK government initiatives to improve domestic investment in homegrown businesses could impact the market opportunity for FUNDING CIRCLE? I mean, that's quite a multifaceted question. I I think anything that gives certainty and confidence to small businesses will benefit small businesses and, therefore, by default, will benefit FUNDING CIRCLE.

37:35 What we are consistently told by our borrowers is it's the it's the uncertainty that means borrowers are hold off on making investment decisions. So I think anything that can just provide that degree of certainty and that confidence will benefit the small business environment and community and hence benefit FUNDING CIRCLE. And the last one from Vishal. Please, could you discuss how the market opportunity in The US has been impacted by the financial turmoil seen post SVB, First Republic, Signature Bank, etcetera? A great set of questions, Vishal. This probably plays most into the point I I mentioned about lending as a service. So this is working in The US to partner with some of the smaller banks there.

38:22 We've had great conversations, but I think the SVB fallout has meant it's gone slower than we would have liked. I think smaller banks in The US have had other things on their mind, which probably means now is not the time to pursue a new agreement with a third party in small business lending. Still confident for the long term, but I think the biggest impact has probably delayed the crystallization of some of those agreements. And the next one is the last question currently on the platform. So a reminder, if you want to submit a question, please do so now. Comes from Mark p. The US market is deep and liquid. What competitive advantage do we have? I think very similar to The UK and as Morton outlined at the beginning of the meeting. So we've actually been in The US for about ten years now, so we're experienced.

39:14 Yeah. We we have advantages in terms of our technology, our platform, our data, our credit risk management, which comes together to enable a very slick and seamless customer experience. It comes together to enable very targeted marketing. It comes together to enable a a distribution strategy that works, credit risk that delivers, and returns that we can deliver to institutional investors that make us of both The US and The UK an attractive, resilient, scalable investment opportunity. Thank you. We've had one more question come through from Elias. Julian, once FlexiPay is mature, how big a business do you see it being? Well, clearly, it's still nascent, and it's quite hard to see into the future. Again, we've guided that by 2025, you'll start off income of over 50,000,000, but I think that could be just the beginning, particularly seeing Flexi Pay as a family of products, meeting working capital and and relating these to small businesses.

40:21 We definitely see it could be a material part of the FUNDING CIRCLE business going forward. That's great. Morton, Oliver, you addressed all those questions from investors. So thank you once again to everybody for engagement this afternoon. And if any further questions do appear, I'll make those available to you post today's call. Oliver Morton, I know investor feedback is important to you both. I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, I wondered if I may, Oliver, just return to you just for a few closing comments, and then I'll redirect investors for their feedback. Yeah. Well, thank you, everybody, for for your time. I guess if I reflect back on the state of the business and our performance in half one, we've had a very solid set of results despite tough economic environment. All business units are showing growth and in progress in line with the medium term plan.

41:08 We feel confident enough to leave our guidance for both 2023 and medium term unchanged. I think we've demonstrated our strategic execution and agility of our approach, and we continue to deliver, what we say we do against the medium term plan. And then big picture, you know, we're operating in large underserved markets with growth in all the segments. We've got ambitious medium term targets for income growth and EBITDA profitability across all business lines by 2025. And that's underpinned by deep business strengths and sustainable competitive advantage. You know, we've proven the model. Our technology and data delivers strong competitive advantage and superior customer experience.

41:53 Loan returns are attractive and robust, driving institutional investor demand. And our market valuations below our net asset value, strong balance sheet and cash, which again further enables delivery of and confidence in our medium term plan. So thank you, everybody. That's great. Oliver Morton, thank you once again for updating investors this afternoon. Ladies and gentlemen, please do not close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of FUNDING CIRCLE HOLDINGS PLC, we'd like to thank you for attending today's presentation. Wish you all a very good afternoon.