MoneyLion Inc

NYSE:ML

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and welcome to MoneyLine, Inc.'s First Quarter 2024 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. Before we go further, I would like to turn the conference over to Sean Horgan, MoneyLion Head of Investor Relations.

[Sean Horgan, executive]

Thank you, operator. Hi, everyone. Thank you for joining us for our first quarter 2024 earnings conference call. MoneyLion CEO, Diwakar Choubey; and CFO, Rick Correia, are with me today to discuss our results. You can find the presentation accompanying our earnings press release on our Investor Relations website at investors.moneylion.com. Please note that any forward-looking statements in this commentary are subject to our safe harbor statement, which can be found in our SEC filings and our earnings press release. With that, I will turn the call over to Dave.

[Diwakar Choubey, executive]

Thank you, Sean. Good morning, and thank you all for joining us for our first quarter 2024 earnings call. We kicked off the year with strong momentum. This continued the great progress we made in 2023 when we were hyper-focused on efficiency. In Q1 2024, we accelerated revenue growth and substantially increased adjusted EBITDA and expanded margin quarter-over-quarter. We are now in the mode of offense with discipline. We continue to scale our consumer reach to record levels, further developed our marketplace and enhanced our world-class personal financial management or PFM experience. The MoneyLion ecosystem is evolving into a marketplace first platform and a brand that consumers can trust to make their best financial decisions. Foundationally, we are building and innovating technology to create a unified experience for consumers to learn about, search for, compare, select and complete their checkout of financial products. This technology is made available to any of our enterprise partners and through Moneylion.com and other owned channels. Now let's turn to the key takeaways for the first quarter of 2024. First, we achieved record quarterly revenue of $121 million. This represents 29% year-over-year growth, up from 19% in Q4 2023. This accelerated revenue growth was driven by the strength of our diverse business model. In addition, our Q1 revenue exceeded the high end of our guidance of $115 million to $118 million. Next, we generated record adjusted EBITDA of $23 million for the quarter, up from $17 million in Q4 2023. This reflects a 19.4% adjusted EBITDA margin, up from 14.6% in Q4 2023 or approximately 480 basis points of margin expansion quarter-over-quarter. Adjusted EBITDA also exceeded the high end of our guidance range of $15 million to $18 million. And finally, we generated GAAP net income of $7 million and diluted earnings per share of $0.60. This is a significant profitability milestone for us and reflects our team's execution of our offense with disciplined strategy. Turning to total customers. We ended Q1 with 15.5 million total customers, reflecting an increase of 98% year-over-year. This represents a substantial user base that we continue to engage and cross-sell. Behind this growth, we saw strong conversions on the consumer side of our business, offsetting some of the impact of lower conversions on the enterprise side of the business. We believe a reversion in the economic environment will provide strong tailwinds to conversion rates over time. We continue to see impressive customer growth across our platform quarter-over-quarter. For Q2, we expect total customers adds to be above Q1.Next, total product shows the importance of MoneyLion. The more high-value products we offer through enterprise partners to more personalized options consumers have network-wide. This leads to a desirable product experience and better consumer outcomes, driving cross-sell and ARPU expansion. The better our recommendations are, the more customers come to MoneyLion, which in turn attracts more enterprise partners and the cycle repeats. 25.3 million total products were consumed on our platform through the end of Q1 2024 compared to $14.7 million in the prior year quarter. By the end of the first quarter of '24, 49% of the products consumed were third party, up from 32% through the first quarter of 2023. With third-party comprising nearly half of our products consume life to date, we continue to establish ourselves as a trusted source for consumers to make financial decisions. Of the 2.2 million products consumed in Q1, 1.5 million were third-party products. This marketplace first approach enhances our ability to provide more personalization, more context and details and financial decisions and more community-driven insights to drive repeat use. We've had a track record of strong repeat use, which Rick will walk you through in our cohorts. Our investments in artificial intelligence and machine learning allow us to be at the cutting edge of consumer engagement strategies that lead to hyper-personalized cross-sell and the expansion of total product consumption on our platform. This marketplace first experience is also happening inside the MoneyLion app. MoneyLion has strategically combined the best aspects of marketplace and direct-to-consumer fintech business models. As a marketplace, we have the ability to rapidly scale our product offerings, creating a network effect and information edge that attract more buyers and sellers. Our direct-to-consumer fintech business allows us to maintain direct and deep relationships with customers. In 2024, we are expanding the depth of that relationship to the broader marketplace experience as well. For instance, we're investing in engineering resources to develop even deeper integration with financial institutions by hosting their decisioning models to make the checkout experience more seamless for the consumer. This should further improve conversion rates for the benefit first of the consumer and ultimately, for our enterprise partners. MoneyLion best of both world's flywheel focused strategy allows us to create deeper relationships with our customers across both our consumer-facing PFM as well as the marketplace. The core of our strategy is to build a relationship with the customer across multiple life decisions. We execute this strategy by continuously innovating and building what is already the most full-featured PFM in the industry. Through our PFM tools such as personalized dashboards, calculators and insights, trending news and peer-to-peer elements like commenting plus a host of snackable educational content, we incentivize consumers to open the app every day to learn how to make their best financial decisions. In this quarter, we released no money and original content series produced in-house in our media business, no money is designed to teach consumers about fundamental financial topics such as budgeting and taxes, demonstrating our investment in and commitment to financial literacy. Owning our own content studio allows us to draw net new consumers into our ecosystem at attractive acquisition costs and also gives us an edge in retaining them over time and helping them with multiple financial decisions. We aim to deliver financial education at scale to a growing community of consumers. In fact, in addition to our embeddable widgets and calculators, our AI-driven search capabilities, we are now beginning to power other financial services companies with our content feed infrastructure as well. MoneyLion's unique marketplace matching, personalization and programmatic compliance technology can also be leveraged by other financial institutions and publishers that seek to better serve their customers by providing a world-class personalized experience and more product options through their own properties across the Internet. Our investments in personalization and application of generative AI, the financial content and data are now being packaged for access to any business through developer-friendly APIs. This enterprise solution represents a massive opportunity for MoneyLion. We're committed to delivering on product velocity and execution in 2024, and we look forward to continuing and deepening our successful partnerships. Our network of over 1,100 enterprise partners continues to grow because of our reach, depth and scope of offerings across product verticals, compliance expertise and technical capabilities. Our audience is expanding with nearly 80 million total customer inquiries in the first quarter alone. I'll now provide a quick update on our enterprise business and some of the trends we're seeing so far in the second quarter. Starting with the impact of the macroeconomic environment, the recent headwinds impacting revenue related to our personal loans vertical persisted in the first quarter. More recently, so far in the second quarter, we're seeing some positive signs. First, we're seeing stabilization in the underwriting environment, particularly within the personal loans vertical. There's renewed activity in our pipeline and growing interest in our digital marketplaces. As we make the investments to strengthen our position across product verticals like credit cards, insurance and mortgages, there are substantial tailwinds to diversify beyond personal loans. We continue to see growth in total suppliers as evidenced by a very healthy total inquiries on the network over the quarter. Our marketplace technology is a key long-term growth engine for the entire MoneyLion ecosystem. And with that, now I'll turn the call over to Rick to discuss our financials in detail.

[Richard Correia, executive]

Thanks, Di, and good morning to everyone. I look forward to sharing details about our financial performance for the first quarter ending March 31, 2024. I will also discuss our guidance and outlook for the second quarter of 2024. For more information, please refer to our GAAP consolidated financial statements and non-GAAP reconciliations, which are available in today's earnings release and our 10-Q filing. Turning to our customer acquisition and life cycle strategy. Our top of funnel drove approximately 80 million total customer inquiries in the first quarter of 2024, up over 130% from roughly the $34 million we saw in the first quarter of 2023. These inquiries converted into about 1.5 million new total customers and 2.2 million total products consumed during the quarter. As you can see, our top of funnel continues to grow at a staggering pace due to increasing demand from our large network of publishers, which expands our already massive top of funnel. As denoted, we continue to see muted conversions in the first quarter on the enterprise side of the business due to reduced enterprise partner marketing spend alongside macro headwinds. Importantly, given our unique vantage point in the industry, we are beginning to see signs of improvement in the second quarter. As the underwriting environment stabilizes and activity in our pipeline begins to pick up. Turning to our unit economics. In the last 12 months ending Q1 2024, we added 7.7 million total customers. Our customer acquisition cost, or CAC, was under $15, consistent with prior periods. In the first quarter, we did see our CAC increase slightly due to typical seasonality, and we expect to see a reversion in the second quarter. Our payback period was around 4 months, which we continue to see as a great outcome. And lastly, ARPU was around $39, which is roughly in line with our full year 2023 ARPU. These unit economics are a function of our strong business equation and they reflect our strategy to take market share by adding total customers rapidly and efficiently. We will cross-sell personalized products and offer over time to drive lifetime value, including as we expand our marketplace product verticals. Now let me turn to our recurring revenue trends across consumer and enterprise businesses. Starting with Consumer in Q1 2024. Over 90% of our consumer revenue came from historical cohorts of customers. As you can see, we are successfully deepening our product penetration and revenue expansion. This is a testament to the effectiveness of our personalized content, decisioning and life cycle algorithms. In our enterprise business, we continue to increase our number of channel partners and vertically integrate with product partners, making MoneyLion the must-have customer acquisition and monetization partner throughout the financial services ecosystem. As a result, we formed durable, valuable partnerships. As you can see in our enterprise cohort data, over 95% of revenue from our marketplace came from prior year cohorts of our enterprise partners. In addition to retaining revenue from existing partners, we are capturing the latent revenue opportunity of our quarterly customer inquiries and fueling our growth acceleration. We are seeing continued strength in our first-party products. In the first quarter of 2024, total originations for these products were $717 million, representing an increase of 42% year-over-year. Consumer products continue to see heightened demand in the first quarter, contributing to our strong overall performance in consumer revenue. Credit performance trends remained stable in Q1 2024. Our provision expense as a percentage of total originations was 2.5% in Q1 2024. This reflects both our experience in managing credit quality and our focus on continuously optimizing for better credit performance. In addition, it's important to note that Q1 benefits from some typical seasonal performance related to cash customers receive from tax refunds. Going forward, we expect to continue to see strong credit performance with provision expense as a percentage of originations, consistent with 2023 levels. As we indicated last quarter, we are also transitioning to a forward flow financing arrangement, meaning that we will sell our finance receivables and move them off balance sheet. This standard forward flow arrangement further lightens our balance sheet, improve our cash efficiency and is a testament to our strong and consistent originations performance over a spectrum of macroeconomic cycles. Now turning to some of our other key financial metrics. MoneyLion generated $121 million of revenue in the first quarter. This represented 29% year-over-year growth, up from 19% in the prior quarter and 7% growth quarter-over-quarter, up from 2% in the prior quarter. Notably, we generated $451 million over the last 12 months as of Q1 2024. This quarter's performance was primarily driven by outperformance in both our consumer and marketplace businesses. This was slightly offset by our decision to exit certain noncore functions in our media business, which we believe will ultimately improve our quality of revenue and adjusted EBITDA margin profile even further. Now on to our path to profitability. We reached an important milestone in Q1 2024. As De mentioned in the key investor takeaways, MoneyLion generated $7 million of GAAP net income and $0.60 of diluted EPS. Similarly, we generated $23 million of adjusted EBITDA in the first quarter. This represents an adjusted EBITDA margin of 19.4% or 480 basis points of margin expansion from Q4 2023. And lastly, on our cash position. We closed the quarter with $93 million of cash, up from $92 million in Q4 2023. This quarter-over-quarter increase in cash is after accounting for some period specific payments in Q1. As you can see from our past few quarters, we have consistently driven growth while generating cash before onetime and seasonal expenses, proving Di's point that we play with offense and with discipline. Furthermore, we see no headwinds to continuing this trend and are encouraged by our potential to generate cash as we look to execute against our growth pillars. Now turning to guidance. In the first quarter of 2024, we exceeded our guidance across all metrics. Revenue was $121 million, above the high end of our guidance range of $115 million to $118 million. Adjusted EBITDA was $23 million, exceeding the high end of our guidance of $15 million to $18 million. Turning to our outlook for the second quarter of 2024, we expect revenue between $125 million to $130 million, representing 17% to 22% year-over-year growth. Adjusted EBITDA of $17 million to $20 million, representing approximately 13% to 16% adjusted EBITDA margin. Before I turn it back over to Di, I'll leave you with this. Our first quarter numbers really speak for themselves. Importantly, this is a testament to the strength of our business model and our ability to scale profitably. We expect this to continue through our next stage of growth. To echo Di's comments, we are a marketplace first platform with an immense opportunity in front of us. We are emerging as the trusted brand for financial decisions and access to market-leading first and third-party products. With that, I will turn the call back over to Di for his closing remarks.

[Diwakar Choubey, executive]

Thank you, Rick. Last quarter, we laid out our 4 growth pillars for 2024, continued growth in consumer, relentless funnel optimization, product vertical expansion and expanded distribution. As we shared today in our results, our first growth pillar, continued growth in our consumer business helped drive strong performance in the first quarter. Going forward, we see longer-term growth coming from the remaining pillars. First, on funnel optimization, through new remarketing channels, leveraging data insights to help filter the most relevant offers for consumers and enhancing our ability to match lenders with the best users with the highest efficiency. We are intensely focused on optimizing our funnel and driving higher conversions in the near term.In terms of vertical expansion, we're working to deepen our presence in select verticals. Namely, we're most excited about credit cards, auto insurance and mortgages. We're exploring all opportunities to quickly bring these verticals to market. We believe this will position us well to capture demand for these products inside of the network. Lastly, on expanding our distribution, in addition to our alliance with EY, we continue to add new channel partners to our platform, which ultimately fuels our flywheel and will lead to meaningful financial impact over time. In closing, I'll leave you with a few final thoughts. Our first quarter results reflect continued momentum in our business with an attractive combination of growth and profitability. We generated GAAP net income and EPS and our cash balance increased quarter-over-quarter. We will not leave growth on the table. We're building for the long term. This is our opportunity to scale rapidly without sacrificing margin because we can. We're playing offense with discipline because we can. These advantages will take us to the next stage of evolution, and we're just getting started. With that, I'd like to thank you all for joining us today, and I will turn the call back over to the operator before we take your questions.

[Operator]

[Operator Instructions]. Our first questions come from the line of George Sutton with Craig Hallum.

[George Sutton, analyst]

Wonderful results, guys. So if I'm hearing you correctly, Q1 benefited in large part from the much bigger funnel you've created. And it sounds like Q2 is beginning to show a better monetization of that funnel. And then Di, I wondered if you could lay out a little more detail on the things that you're doing with AI to try to drive that monetization even further, you mentioned relative to content feed infrastructure.

[Diwakar Choubey, executive]

George, thanks for the question. Absolutely, Q1, as we said, we really saw a strong consumer business for us and conversions in that business were quite robust. We continue to see normalization in Q2. There's nothing to believe that ads aren't going to trend above the $1.5 million customer number that we said. And then the name of the game really is using a lot of our technology to personalize and provide engaging elements for the consumer to return back into our ecosystem. This has multiple benefits. Our first-party products, of course, benefit from that. But importantly, the technology that we're building is creating highly penetrated opportunities for our channel partners, for enterprise partners to benefit.So the use of artificial intelligence, right? So we've been a pioneer in using those technologies for 11 years at this point, right? This is part of our DNA. So we first, of course, use those applications in the consumer side of the business. But in the enterprise side of the business, just kind of creating those journeys to be much more personalized and contextualized, that's the ultimate evolution. So as we talk about really running in this marketplace, the more customer inquiries we get. So in Q1, we saw $80 million total customer inquiries, the more our information advantage increases. The more we know about customer preferences, customer intent, the more we're able to really put that back into that machine learning capability of ours and provide higher intent consumers back to our enterprise partners, right? That's the reason really for our enterprise partners to think of money line as it must have a trusted partner in their customer acquisition, customer monetization and customer retention strategies because we have such high-intent consumers in market looking for a financial product. So as that top of the funnel increases over time, we have a lot of ability to create form factor changing mechanisms to engage those consumers, right? So we've said a lot about AI power, GAI powered financial search. So that's, again, a lot of work is being done from a technology perspective. Those are -- we're at the bleeding edge there in terms of that build-out. And as we roll those out, we're seeing a lot of success in getting the consumer back in for the second product, the third product, right? The reason to invest in the content, the reason to invest in all this personalization and machine learning is to be with the consumer as a trusted companion across multiple financial products line decisions, and we're showing a lot of progress towards that.

[George Sutton, analyst]

Just as a follow-up, and it really didn't come up at all, the EY partnership and also your WOW offering. Could you just give us quick updates on both of those?

[Diwakar Choubey, executive]

Sure. So EY is progressing nicely. The pipeline is active. We're having positive conversations with banks. And as we've said last quarter, that this is a joint development with EY. So we're building that interface layer. We're building the technology receptors, if you will, that help banks connect to really the offering that we've been building out. We've been very pleased by the traction that we're getting with the target banks that we have in mind. And as we said before, we expect the EY partnership to start adding growth for us in late Q4 of this year going into 2025, and all of that is very well on track. On WOW, we said last quarter that we believe that this is an incredibly powerful bundle of products for us. We've said that the full market launch, we're really getting ready for that, where we're finding our marketing message, the contextual upsell strategies, a revamped dashboard a clear articulation to the customer of the value. We believe that priced at $9.99 a month, wow offers hundreds of dollars of benefits anyway to consumers. And really, if you think about the hub into our marketplace, WOW brings the benefits of our first-party products or third-party products the customer value proposition really nicely into one bundle, right? It expands our target addressable market, increase in recurring revenue. And over time, we really think of this as a chassis that increases our product adoption, right? The -- ultimately, the name of the game is, can we get our consumers into using multiple of our products coming back to us for multiple financial buying decisions. And this will lead naturally to increasing ARPU, increasing retention and becoming that trusted companion with our consumers over time. So that's really progressing nicely as well. And we have a lot more exciting things for us to really execute on from a marketing messaging perspective in Q2. And you'll see that we've been very efficient with our marketing spend. And as we continue now progressing down the evolution of generating more free cash flow, we'll have opportunities really to reinvest in that marketing message around WOW to make that an even bigger for growth story going forward.

[Operator]

Our next questions come from the line of Harold Goetsch with B. Riley Securities.

[Harold Goetsch, analyst]

My question is on the forward flow arrangement, Rick, could you comment on what this balance sheet looks like? Or how much difinill look in Q2 or Q3 as this happens? And what it might do to provision expense? Any comments there would be appreciated.

[Richard Correia, executive]

Yes. Thanks, Harold So on the forward flow, as we talked about, we're continuously looking for opportunities to be more efficient on cash. And the forward flow arrangement allows us to sell our receivables in real time and basically realize all of the kind of cash upfront. So you'll see an increase to our cash. If you're looking at the flow-through from our adjusted EBITDA to cash, one of the reconciling items there is the use of cash for our arcaccapital for our receivables. So that goes away as soon as we transition to the forward flow arrangement. From a provision perspective, in a steady state, that will go away because, of course, we no longer basically have the receivables on balance sheet and therefore, we no longer provision for them.

[Operator]

Our next questions come from the line of Kyle Peterson with Needham & Company.

[Kyle Peterson, analyst]

Great. I wanted to start on the Enterprise segment, just kind of what you guys are seeing there, particularly in like consumer and personal loans, I guess, from some of our checks, some of the trends have been kind of mixed, but you guys still seem to be performing well. So just any color there would be helpful.

[Diwakar Choubey, executive]

Kyle, I'll start and let Rick can chime in as well there. Quarter-over-quarter, we actually saw our marketplace business see some growth, right? So personal loans as a percentage of the total marketplace revenues for us continues to be around that 55%, right? We brought that down from historically where it was over 80%. So this has been the result of a lot of diversification. We really see a lot of opportunities here to increase our market share in verticals like credit cards, insurance, mortgages, auto insurance, right? So this is, again, product-led growth. We talked a lot about this idea of hosting the decisioning of a lot of the financial institutions, completing the checkout experience, the consumers actually have a much more seamless experience inside of whether it's the marketplace flows that we have or the direct-to-consumer flows that we have. o some of those efforts are mitigating some of the conversion elements. We are seeing a lot of success in the product-led areas there. And ultimately, I think we're muting some of the macroeconomic headwinds that we see in the credit and personal loan verticals because let's be clear, the interest rate regime continues to keep conversions at historically low levels right now for us on the personal loan side. But that's also an opportunity. Because if you think about if we can return back to even late 2022 levels on conversions on the personal loan side, there's a lot of built-in growth with our existing massive top of the funnel. The consumer demand throughout our network, both in the consumer and the enterprise side continues to grow very nicely. It's just that the position we're in, in the economic cycle mutes that a little bit, right? So this is really where product-led growth around cross-sell, around being contextual and being relevant for the consumer is mitigating and actually leading us to an area where the marketplace itself had quarter-over-quarter growth.I think Rick mentioned that our media business, we've made some strategic decisions there to get out of some noncore noncore revenue generating items there. And that's what's led really to the quarter-over-quarter decline there, but the marketplace, the core marketplace itself continues to have strong growth based on some other things that I just mentioned. Yes.

[Richard Correia, executive]

Yes. And I'd say the 2 of the kind of key drivers around that, if you look at the recurring revenue profile of that enterprise business and specifically the marketplace business as you see from the cohorts, we continue to have over 90% recurring revenue profile with our partners. The second is that we've invested heavily in our AI-driven algorithmic cross-selling functionality. So when someone comes on to the platform, subsequently, we are retargeting them to be able to drive that kind of second and third derivative product, which, of course, is margin expansion opportunities for us. So the durability of that marketplace business is really shining through. And that's also in the face of some of the headwinds that Di talked about from a macro perspective. So we believe that we're seeing the kind of early signals that that's turning in the quarter, which gives us a lot of confidence as things unfold over the rest of the year.

[Kyle Peterson, analyst]

Got it. That's really helpful. And then just a follow-up. Great to see you guys were profitable on a GAAP net income basis this quarter. Is that something we should expect to see moving forward from you guys? Or is there anything onetime in the expense front, the benefited during the quarter? Just how should we think about profitability on a GAAP basis from here?

[Diwakar Choubey, executive]

Yes. We didn't have any onetime items that drove that that's blood, sweat and tears that got us there. I would say, if you looked at our business year-over-year, from an operating leverage perspective, we continue to show significant improvement there. So year-over-year, revenue was up 28%. And but our OpEx was only up 13%. So that expansion in terms of being able to drive our EBITDA margin, our net income margin is really coming from the platform advantage. We've been talking about it for a long time. And we've hit that inflection point where we feel really good about us continuing to drive free cash flow, continuing to drive net income. Obviously, this season, we talked about tax season kind of happening within the quarter. So that had some effect in terms of the overall performance of our provision. But again, the real driver is that we are creating operating leverage from our platform advantage, and we don't see that changing going forward.

[Operator]

Our next questions come from the line of Jacob Stephan with Lake Street Capital Markets.

[Jacob Stephan, analyst]

Congrats on the quarter and GAAP profitability here. I was just kind of hoping you could elaborate a little further on the comments you made about lower conversion rates on the enterprise side of the business. It sounds like product partners might be spending less with you, and it's kind of affecting you, but any kind of comments you have there would be really helpful.

[Diwakar Choubey, executive]

Look, as we said before, given our -- given the mix that we have between the version in new verticals that we're building out across credit cards, insurance, mortgages, auto loans, and sort of the strength of the business and the credit verticals, it is clear that we are still in the troughs of marketing spend with a lot of our partners. But we're mitigating that, but consumer demand continues to be really high for products.Now really, the opportunity, there are very few people out there in the market that in take the intentions and the preferences. When we talk a lot about machine learning, when we talk about the application of generative AI, these aren't things that we're doing for fun, right? These are the things that we're doing really to glean the second derivative, the third derivative of why the consumer is in market looking for the financial product. So they're coming in for a credit product, but we can solve the problem of the consumer with a substitution product. We're now able to mitigate the macro and abstract away from the fact that marketing spends are muted. So we're continuing to add suppliers, right? So we are -- because of the way we are set up because we are API first, because we're developer-friendly, if you're a publisher, we're a leading partner to use to monetize your impressions that you're getting as a publisher through financial products, right? So we're best in class there, and that's mitigating a lot of the conversion elements that we're seeing. So yes, there are muted conversions, but we're mitigating that with product-led growth as well as an increase in the number of supply that we're bringing into the ecosystem. I'll turn it over to Rick to add any color to that as well.

[Richard Correia, executive]

Jacob, I appreciate you double clicking into this one. If you're looking to our marketplace and we break it into our lending and our non-lending products, certainly within lending, I think everyone is now acutely aware, as we've talked about what the macro looks like. If look at our nonlending business, where we've invested in terms of growing our ability to offer non-lending products, mortgages, credit cards, insurance, a wellness products. That's actually up from a conversion perspective, and that's more reflective of us, again, tracking away from the macro, investing in areas where we see opportunities to sell that kind of second and third derivative product. As a reminder, when customers come in and take a first-party product with us, they have a 60% product margin. When they take a third-party product, it's around a 30% product margin. When we cross-sell later, we are able to have a 90% product margin with those customers going through that journey. And we call it our 30, 60, 90 strategy. And so while yes, we are seeing muted conversions on the lending side. On the non-lending side, we've been able to increase the percentage of our product consumption within nonlending within the marketplace. And overall, we're seeing margin expansion because we are able to successfully take that customer through the 30, 60, 90 journey. And we're going to continue to see that as we focus on investing in kind of marketing and helping our customers get into the right second and third products with us going forward.

[Jacob Stephan, analyst]

Got it. Okay. That's helpful. And then just maybe touching on guidance a little bit here. EBITDA margin guidance positive sequential step down, something we haven't seen for a while here. But maybe I was just looking for some additional kind of comments on why we all a sudden like sequentially down in EBITDA margins.

[Richard Correia, executive]

Yes. I think I would just clarify. In fact, you're seeing us really consistent. Guidance for the first quarter was 13% to 15% of EBITDA margin, which is extremely strong in terms of -- if you think about us where we are in our life cycle as a company. We've talked about medium-term targets in the 20% to 30% range. The Q2 guidance was right in line with that. In fact, it was slightly higher at 13.1% to 16%, so a higher midpoint. As I talked about, we did see a little bit of seasonality give us some lift in Q1 in terms of EBITDA margin at 19.4%. Kind of given the macro given everything that's happening within the space, we're really confident we're going to be consistent in terms of our really strong EBITDA margin at 13% to 16%.

[Operator]

Thank you. We have reached the end of our question-and-answer session. And with that, I would like to bring the call to a close. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.