Author
Andy Cagle
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Leveraging LSQ’s extensive data and expert analyses, this pre-recorded webinar sheds light on the pandemic’s effect on U.S. SMEs, credit trends, and the foreseeable future of lending for financial professionals. LSQ’s premier strategy and analytics practitioners provide visibility into the types of transactions they’ve seen during different stages of the pandemic, including recent debtor in possession (DIP) deals, which are estimated to tick up in 2021. If you’re interested in better understanding what’s currently happening in credit markets and preparing for future conditions— this is a must-watch webinar.
Highlights from this webinar include:
- Changes in market behavior LSQ’s financial analysts have perceived since COVID-19 hit the U.S.
- What we’ve observed from a credit perspective and how the lending climate has evolved.
- Creative solutions that exemplify opportunities related to current and future market trends.
- Key indicators our team will be monitoring to gauge the future health of the credit market.
Watch the Webinar
Featured Speakers
Tom Fevola, Director of Underwriting
Rich Lee, Chief Risk Officer
Renee Jackson, SVP National Sales Director
Julian Gonzalez, Product Marketing Manager
Transcript
Julian (Host): My name is Julian Gonzalez, and I’m the product marketing manager for LSQ. I want to thank you all for joining us today for our Credit Market Trends webinar. Today’s goal is to provide our audience with insights that pertain to the pandemic’s effect on U.S. businesses, credit market trends, and the foreseeable future of lending. We’ll share what we’ve seen occur in terms of market behavior, creative solutions spurred by the pandemic, and what to watch out for as we approach an uncertain 2021.
Webinar Housekeeping
Julian: First, let’s take care of some basic housekeeping for those of you unfamiliar with GoToWebinar. If you’re experiencing any audio or technical problems, this is typically a browser or operating system compatibility issue with GoToWebinar. However, today’s event is being recorded, and all registrants will receive an email within a week containing a link to the recorded event, so you won’t miss out on any of the great info we’ll be sharing today.
This webinar is computer audio-only, so there are no dial-in numbers. On the left-hand side of your screen, you’ll see a graphic that looks like a traffic light. The arrow icon allows you to collapse or expand the panel. You can see the expanded panel on the right side of your screen. This is where you can post questions for our moderator and presenters. While the second icon is for muting, the format we’re using today keeps all participants muted so the presenters can focus on the learning material. However, we do encourage you to engage us through the questions and chat feature.
The third icon is for expanding or minimizing your screen. The final icon, “Raise Your Hand”, is to alert our moderator of any questions or concerns you may have. We will be monitoring the chat and questions function, but with the high attendance today, keeping pace of the volume of questions may prove challenging at times. If your question is not answered during the session, rest assured we will be in touch as soon as possible. With that, I would like to turn things over to Renee Jackson, who is our SVP of National Sales, International Sales Director at LSQ. Renee?
About LSQ
Renee Jackson: Wonderful. Thank you, Julian, and thanks to everyone for joining us today. As Julian mentioned, I’m Renee Jackson, and I lead our sales team here at LSQ and based out of Denver, Colorado. Just very briefly give you a high-level overview of LSQ. We are one of the largest privately held working capital solution providers in our industry, founded in 1996 by a gentleman named Max Eliscu.
We are headquartered in Orlando, Florida, but with that said, we do have a national footprint and have over 40 different bank partners and have funded over $25 billion in total fundings out the door, providing to small- to medium-sized businesses. Let me give you a brief introduction to the other two gentlemen that will be joining us today. We have Tom Fevola, who is based in our Orlando, Florida office, and then we have Rich Lee, who is our Chief Risk Officer based out of New York.
We chose a few topics that we thought would really resonate well given the audience as we move into the latter part of 2020. We have our Changes in Market Behavior, Recent Observations and Creative Solutions, and Looking Ahead. Again, please feel free to submit questions using the webinar control panel. With that said, I will hand the floor over to Tom Fevola, who is our Director of Credit and Underwriting.
Tom Fevola: Thanks, Renee. I’m going to hand it over to Rich Lee, who is handling this part.
Changes In Market Behavior
Rich Lee: No problem. Thanks, Renee, and thanks, Tom. For everybody who also joined, I really appreciate you taking the time to join this webinar. Hopefully, you’ll find some of the information helpful. As well, certainly to the extent that if you have any questions, please don’t be shy, but as well, we’re also happy to take any questions outside of the session as well.
I’ll get us started here today when it comes to the risk discussion, and then I’ll hand it over to Tom, who’s going to provide some additional color within our portfolio and some of the transactions that we’re looking at within our ecosystem. Just to remind folks, LSQ is in the middle of I would consider just the broader B2B commercial lending landscape. For us, we have observations that are cut across the U.S. as well across industries because we are generalists.
Recovery
We provide working capital to small, medium size corporations, and as well many times have interactions with the Fortune 500, so across the larger investment grade landscape. Really, our bread and butter is spending time in the broader corporate landscape across the U.S., both SMEs, as well as the larger corporates. I figured a good place to start maybe is just setting the stage with where we started. I remember doing this session in the middle of Q2 right after the COVID pandemic had officially started, which I like to think of that as somewhere in the March 11th time frame which coincides with when I think the NBA officially shut down.
For LSQ, that was the day where we officially, within an internal team, created a war room to try to understand and navigate an environment that we had never experienced before, which was the U.S. economy broadly shutting down overnight. When you go back- I guess that’s about seven to eight months now -and think about that time period, there was just a lot of uncertainty. We didn’t really understand the virus. We didn’t understand what the implications were around shutting down the broader U.S. economy overnight.
We started our war room here within LSQ across the risk operations and data science team as well some other key execs to help navigate LSQ through the process, but as well help our clients navigate through a very difficult situation. During that session when we had a similar webinar, I think we were close to probably hitting trough of the broader U.S. economic activity. COVID, on the other hand, was probably hitting its peak during that first wave. I was asked a question during one of these sessions and was asked a question of, “Hey, what will the recovery look like in your opinion?”
At that time, the common responses around what a recovery would look like were things like the Nike swoosh sign, which would be a pretty quick recovery. There was a v-shaped recovery, which would be an immediate, quick turnaround and then w-shaped recovery. I think those were the three most common shapes that were used to describe or predict what a recovery would look like. Looking back at my answer, I think I had replied with a downward shaping W is what I had said at the time and I guess not too surprising to be pretty draconian for somebody who wears a risk hat.
Looking back today, now we actually have the benefit of hindsight and seeing how different parts of the economy recover. I guess the question I should have asked was how do you define recovery maybe was the appropriate question. To that question of what would be your prediction of recovery— why don’t we spend a little bit of time on where we are now today? Then I’ll just share a couple of slides on what are some of the things that we are looking at. Then I’ll hand it over to Tom who will go a little bit more into the details of some of the transactions that we’re working through.
I just put three bullet points together. These are very simple metrics. You can look at so many other multitude of metrics as to how you define recovery, but here’s three just simple ones. GDP growth in Q3 looked like a v-shape. A record GDP growth from a record trough in Q2 growing more than 30% in Q3. If you think about continuing unemployment claims, we had peaked right around 25 million U.S. employees that were receiving claims. That’s down to right around 7 million so a pretty big recovery there as well.
Then if folks here follow the equity markets, certainly, you’ve seen an incredible recovery in the broader equity market led by your tech stocks and work from home stocks. I think year-to-date now we’re just north of or right around 10% recovery, which is pretty incredible, but from the trough, I think we’ve recovered over 65%. When you look at these three simple metrics, and you can look at many other, I think the recovery story in Q3 at least has been pretty resilient. It’s looked more like a V or a Nike swoosh, if I were to use the different shapes that folks were using when it comes to the recovery.
Record New Bond Issuance
Q3 looks pretty good overall. We noticed that within LSQ’s walls of our clients, the conversations that we have. Much of the U.S. economy is back open. Certainly, I think there’s uncertainty looking forward, but when you look at Q3, the recovery has been very strong, and even consumer demand was extremely strong across many different asset classes. Certainly, the work from home-related companies saw a big uptick, but as well you saw it across auto. You saw it across real estate. Overall, I’d say the recovery looked extremely strong in Q3. Next slide, please.
Couple things that we look at. We looked at this chart even last year in 2019. For LSQ, we’ve had a view that corporate debt even coming into 2020 pre-COVID was extremely high. It wasn’t actually just corporate debt. It was also government debt. When you think about the recovery from the ’08 recession, much of that was covered up or helped through liquidity and low rates which has also helped buoy a corporate debt binge.
When you look at this chart, which is a little bit of a longer-term, is looking at since 2010 for the last decade, you can see the growth of both high yield and investment grade debt quarter over quarter. Then you can certainly see the tremendous spike in Q2, even Q3, which in 2020 here for Wall Street, it will be a record year in high yield and investment-grade debt issuance, and that Q4 number I suspect will be much higher by the end of the year. This, as you can imagine, much of it is driven by the liquidity that was pushed out by the broader government and as well rock bottom interest rates.
Quite frankly, that depth engine, that liquidity is probably what helped much of the recovery when you look at some of those other marketplaces. Whether you look at the equity markets, whether you look at fixed income market, whether you look at consumer demand, much of that pull forward demand took place, and certainly, it was further supplemented and helped out by a record bond issuance across– I would consider this cohort really to be let’s call it maybe the Fortune 500, probably a little bit larger. Not quite the Russell 2000 but certainly your larger corporations that have access to the broader fixed income marketplace.
This is a chart we continue to watch. I think for us the jury’s still out where we believe right now that debt issues have been I guess not solved per se but have been let’s say “solved” by additional debt. We think that’s a short-term solution that ultimately you do have to pay the piper. This is a chart that we monitor very closely. We’ll continue to monitor closely looking forward because our view is that we haven’t really solved the corporate debt binge issue that we had even coming into 2020, and we’ve only exacerbated it here since COVID.
Loan Officer Sentiment
Now here’s a different lens. You can see the dotted line that intersects zero. I don’t put much attention here to the absolute number but rather the relative changes is where I tend to spend more time. I’m sure many of you here are quite familiar with the loan officer surveys provided by the Fed. Above zero means risk is tighter across the lending landscape, and then below zero is taking a little bit more risk across. This is across small, medium-sized banks in the U.S., and they do this across commercial lending as well as consumer lending. Here, this is what we have. Here is more focused on the commercial lending landscape.
I find this to be interesting because when you compare it to the prior slide where we’ve had record debt issuance in 2020, this is the risk appetite of our commercial loan officers in 2020, and you can see that we are above zero. So risk is getting tighter across the credit landscape across our commercial banks. When you think about this cohort, who do these banks lend to?
These are not the large corporates that have access to the fixed income marketplace and the bond marketplace, but rather these are folks that I would consider much closer Main Street. Small medium-sized businesses. Many of our clients are within this cohort as well. Have access to capital through many of our attendees today and through other commercial banks.
I find this to be pretty interesting. We noticed this across our portfolio. We noticed this from conversations that we have with our sales teams that interact with different bankers across the U.S. I also have these conversations with other loan officers across the U.S. in our commercial lending landscape, and there is definitely what I would describe as a little bit more risk aversion in how credit is being deployed across our bank space here in the U.S. I think this is a very interesting dichotomy that exists here today that’s being formed in this “v-shaped or Nike swoosh shaped” recovery where there is this dichotomy of access to liquidity between Wall Street and Main Street.
Mobility Data
Next slide, please. Then here’s an alternative data set which I’m sure many of you have seen something like this. There are other much interesting data sets that we also track, but I just added one as an example. Here’s mobility data based on Apple’s maps. Folks are tracking things like I think TSA check-ins on a day to day basis. People are tracking things like open table reservations. There’s many different alternative data sets. That’s ultimately trying to get at what does the consumer behavior look like?
I don’t have a strong view here, nor will I use this venue to talk about my political views as to should you wear a mask, should you not wear a mask, what’s the right solution when it comes to the shutting down the economy versus not? Overall, I think what’s most important is what is the reaction function of consumers based on COVID. I think the reaction function that we are focused on is, “Are folks comfortable or back to the levels that they were at pre-COVID?” I think the answer is pretty clear.
When you look at this chart, it tries to look like a Nike swoosh but not quite. What’s more interesting more recently is that, I would say, since about August timeframe, it started to plateau. This is really across large metropolitan cities in the U.S. that cuts across blue and red states. More recently, in October- and quite frankly, if you look at November data, this trend continues -not only did it plateau, you start to see it sloping downwards slowly. I think this is really important. When we try to connect dots, it’s about understanding this health of the consumer that ultimately impacts the commercial lending landscape here as well.
For us, I think there’s a lot of discussion here as to fiscal stimulus, a vaccine and so forth. But at least the reaction function to COVID today, when you look at the consumer behavior in end of Q3 and early parts of Q4, you’re seeing a plateau, and you’re seeing a downward trending slope which we monitor very closely. Overall, for us, we were looking at this data closely. We do think Q3 recovery was extremely strong, but as we’re all trying to do, we’re trying to predict the future here for Q4 and Q1 of 2021 and forward.
For us, our belief is that we’re not out of the woods yet. I think as credit folks, we ought to be very judicious as to how we think about consumer demand looking forward, how much of that consumer demand was pulled forward due to the fiscal stimulus in Q2, and what’s the reaction function ultimately of the U.S. consumer looking ahead. Anyway, we want to share a few slides with you as to at a macro level what we look at, the things that we’re paying attention to, how we’re interpreting that data, but I’ll stop here.
I’ll come back with a few slides that summarize some of these thoughts, but I’ll now turn it over to Tom who’s going to take a little bit more of a micro view and take you down to the transactional level, the business level as to what LSQ is seeing.
Recent Observations and Creative Solutions
LSQ Portfolio Analysis — U shape
Tom: Thanks, Rich. Appreciate it. As Rich mentioned, the next segment of our presentation is going to focus on LSQ through 2020 and the observations we’ve made as it relates to our portfolio of business and how performance has been across the years so far today. Next slide, please. Rich mentioned a V shape and a Nike swoosh. I chose to view our portfolio on a month over month basis. If you were to look at the portfolio on a quarterly basis, it would very much represent a V-shaped type performance for the year of 2020 for LSQ directly. However, if you break it down over a monthly basis, it’s much more closely resembles a U-shape, so I’m adding another letter to the recovery alphabet here as it relates to LSQ.
There are two KPIs within LSQ that help demonstrate how our performance has been that’s important to understand for our business. The first is the percent of AR purchases by month, which is the left data graphical representation. We segmented this by three sections to represent the pre-COVID, post-COVID and what I have as recovery perhaps optimistically, so I added a question mark there, to demonstrate how we have performed as it relates AR purchases from LSQ’s base of clients.
Luckily, it does break down bi-quarterly, so it’s a little easier to look at it if we segment it by that. As we look at Q1 for 2020, the first thing to mention is that Q1 performed generally as expected for LSQ. I recall late 2019 working with some of the internal folks here at LSQ to try to predict on how 2020 was going to look for the base of clients, and there was pretty strong projections and growth projected for 2020, going into 2020 for our client base.
One thing that I do remember very clearly discussing that related around COVID at the time at the end of 2019 was there was a small cohort of LSQ clients that relied on the Chinese supply chain for some of their product to be delivered to the U.S. that was getting interrupted as China navigated through the COVID crisis in their country. We were attempting to understand what type of impacts on the portfolio that may have and how some of our clients were already preparing to shift from Chinese manufacturers to other manufacturers elsewhere in the world. Overall, Q1 performed pretty relative to expectation for LSQ.
We move into the post-COVID section, which as Rich mentioned, we’re marking as sometime around the first or second week of March through the end of June, beginning into July, you’ll see significant downward pressure. This pressure represented between a 25% to 35% reduction in performance over Q1. At the time, as painful as it would be for LSQ, there was a lot of knowledge sharing and thought leadership being shared by a great many folks as not only LSQ is good corporate citizens shared some of its information, but other peers for LSQ also shared that they were seeing very similar. We were in, I would say, this normal standard deviation for reduction based on what the other peers in our group were also experiencing.
The drivers that put this downward pressure on us largely came from three areas in our observation. The first was obviously the pandemic itself. As national, state, and local governments mandated shutdowns, it significantly reduced our clients ability to generate revenue in that environment, so that’s obviously understood. The second was the response by the government as it relates to stimulus for small to medium businesses. That came in the form, for our client base, primarily in the PPP program, or Paycheck Protection Plan program. A great many LSQ clients participated in that program, which had an interesting effect. For those clients that didn’t have the revenue they had in Q1, it obviously extended them the lifeline as it was intended to, to be able to carry them through the period.
However, there was a segment of LSQ’s client base that didn’t lose as much revenue, but with the addition with the PPP funding to their businesses, it actually allowed them to not use LSQ’s product as much as they normally would have with the absence of PPP. That was also a downward driver. Looking at it holistically, it certainly strengthens the clients within our portfolio base for those that were able to do that, but obviously impacted LSQ’s performance as it relates to purchases from its clients.
Then the third downward pressure was, it did matter what industry or sector you were in. Some clients certainly were able to continue to perform, not necessarily as well as they did in Q1, but they were still able to perform and maintain some semblance of revenue stream throughout the period of what we’re terming post-COVID here.
As we move into the third part of this graph titled recovery, there were four main points of observations that we made. The first was again pandemic related and was the relaxing of mandates for businesses to continue to start operating. Obviously, this happened by region, and so it was a little bit of a patchwork recovery for some of our clients that have national footprints where they were able to start generating and opening up revenue streams across their businesses based on how the geographical regions responded.
The second was, going back to PPP funding again, the now depletion of those funds. Most of our clients obtained those funds in the April/May period, and they lasted somewhere between 90 to 120 days. For those clients that were not utilizing their LSQ facilities because they were relying upon the PPP funds, when those were exhausted, the revenue stream still remained, and so then they were able to begin submitting their purchases to LSQ, which helped and aid in our recovery process.
The third element, which is very interesting, is there was a segment of our clients that throughout the course immediately post-COVID, their businesses were decimated based on the products that they might have been selling or the services they offered. In true small business fashion, several of these owners shifted and adapted to the environment around them and started to change in how they approached regaining some of their revenue. A good example is we had some clients that had manufacturing utility and the ability to utilize that manufacturing to change the main product from a non-essential retail product to an essential retail product, and that certainly helped as well.
Then lastly, throughout the recovery period, we also experienced an uptick in new business, which allowed us to also increase our recovery performance, which segues into the next graph which is 2020 new transactions by month. Sorry, go back, Julian. Thank you. Which is the graph on the right. That’s very similar to the graph on the left, but a key performance indicator for LSQ is transactions broken down by month across 2020 in percentage format. At Q1, again, maintained pace. It was as projected. If I give just a brief profile of what an LSQ prospect look like in Q1, it basically had a couple of points to it.
The first was, it was a client that was looking for growth. They had projections in 2020 that was going to support growth, and so they were looking for products to help assist in that growth, and LSQ’s accounts receivable purchasing platform would help in that. The second is that they were in search of– Sorry, I have a technical difficulty here. One second. Thank you. Sorry for the delay there.
Secondly, they were in search of a solution which covered a wide-range of industries. As a generalist, as Rich mentioned, we fund into a wide range of industries, and our profile spanned all of those industries. Thirdly, as Rich mentioned, it’s nothing new, but these companies showed up with heavy debt on their balance sheet. Corporate debt was in existence prior to 2020, and so those three segments or those three elements were part of the profile of an LSQ prospect in Q1. Q2, the downward trend, same thing, putting pressure on it was the reduction of revenues as mentioned.
Also, the PPP suppressed our ability to source new business because a lot of banks- many of those are in attendance today -were able to issue their client base PPP funds, and so they were able to stay with their current facilities, which bank prospects are a large source of LSQ’s pipeline. Then thirdly, in addition to that, a lot of the current lenders were issuing forbearance agreements for these periods, as ABL and bank lenders had a very large section of their portfolio that wasn’t performing according to plan. These typically had 60, 90, 120 day fuses on them, which allowed them to continue utilizing their existing facility, also suppressing our ability to attract some new business.
Recovery period. The last quarter here, what we’ve seen is the end of the PPP and forbearance or the usage of PPP and forbearance starting to end. We’re starting to see some thawing in the markets as far as other lenders exiting relationships that they’ve tagged, that they may have been carrying through the pandemic period now that it’s generally accepted that we might be closer to the recovery side than non-recovery.
We’ve also seen, as I mentioned earlier, several clients that have adapted and changed their business models, which now requires different types of funding sources, which includes LSQ’s product. Profile now basically is that most of the companies that we’re seeing are in survival versus growth mode, change from Q1. Instead of being in a broad sector view for our funnel, we are now much more narrow, which leads us into the next slide, where if we take a look at what LSQ sector performance was over 2020, there’s some interesting trends here.
LSQ Sector Performance
Rich mentioned earlier that there was a panel that they provided earlier in the year on giving outlooks on what to be expected. I’ve actually taken the left side of this slide, and this was the view on which industries and sectors at the time that our internal thought process led us to believe as to the sectors that were going to perform well versus those that were not. I think for the most part, it was generally spot-on, with the exception of perhaps one in the have-nots, and that’s automotive. I’ll just cover that here in a moment. Looking at these lists or these sections, I think we were pretty close.
As it relates specific to LSQ portfolio performance by sector, the graph on the right, let me explain how to read this very briefly. The zero horizontal line is how that industry performed in Q1. Then the Q2 and Q3 bars from that zero horizontal line are in comparison to Q1 performance. Let’s take an example of telecom here. If zero represents Q1 performance, Q2 we saw, even during the immediate post-COVID period, an uptick in purchases and NFE across the LSU portfolio of between 10 and 15%. Then Q3, telecom’s really doing well, and we’ve seen an increase compared to Q1 of north of 60%.
I think telecom makes sense to be performing this way. Even post-COVID, there was a lot of need for different telecom solutions across the country between, both tech and telecom. As folks started to work remote, there was a scramble for some of these services and usages. If I take a look at just one or two other industries here very quickly, retail being one. I’ve lumped essential retail, consumer staples and non-essential retail into one grouping here. We saw a 25-ish percent reduction, close to 30% in Q2 versus Q1.
Typically, that’s actually more pronounced because typically Q1 for retail is the down season as they come off of the holidays. In Q2, while we were down further, typically we see an increase there. However, as I mentioned earlier, we have several clients that perform in both the essential retail and consumer staples area. In Q3, we started to not only see a recovery on the positive side as it related to pre-COVID, but also a couple of those clients, as I mentioned earlier, were able to shift their business models to start shifting out of non-essential retail into more essential retail.
Quick focus on government. One of the larger loss leaders that’s in the haves section that was predicted, a large driving factor in our observation from that we finance a lot of government AR. Mostly the government, other than the military, actually shut down, with the inability to be able to work remotely. Until those government offices reopened post-COVID, there was no way for the government employees to access their secure systems even remotely. Only essential personnel were reporting, and it really had an impact on our portfolio. Largely recovered. Probably one of the biggest recoveries of our portfolio was the government sector.
Automotive I touched on briefly. It was interesting pre-COVID or during post-COVID to analyze that that was heavily impacted, and it was really starting to be negatively impacted. As consumers have moved to finding other non-public facing modes of transportation, the automotive sector has recovered quite well, especially as it relates to our portfolio. Final too, oil and gas and travel and hospitality not only perform poorly but continue to trend downward. We expect that to continue for at least the immediate short-term, as a lot of bankruptcy filings occurring between these two sectors that we’ve observed. Next slide, please.
Recently Funded Transactions
Then lastly, I’ll conclude before turning it over to Rich. A couple of recently funded transactions that LSQ has performed. These are over the last 60 days. Took a very small cross sampling here just to present. I’ll cover very high-level. The first notable observation that we’re seeing is we’re starting to become involved in a lot more debtor in possession, Chapter 11 bankruptcy filing transactions, DIP transactions, where we’re being engaged by both bank and non-bank partners to essentially be a bridge to pre-plan 363 sales, or being able to finance through the period of Chapter 11 until they come out the other side as NewCo. We’re starting to see more of those, and we expect that trend to continue.
An interesting observation that I’ve been making in the transaction opportunities in this regard has been that there seems to be a lot more solidifying information around how a company is going to emerge from bankruptcy even before they enter into it, which is an interesting concept. The only other transaction that I’ll focus on is the third one here: the non-bank ABL out of the east region. What we’re also observing is that, as Rich mentioned, LSQ sits at the intersection of our clients and their customers. Thereby, we work with tens of thousands of these customers, collecting very real-time data points as it relates to their payment performance, which allows us to be very well positioned to make credit-risk decisions as to risk appetite in supporting our clients as they choose and elect where to grow, and provide very valuable feedback for them.
We’re starting to see a couple of transactions now that mirror this where we’re able to structure some credit solutions that allow previous increases to facilities that current lenders are not allowing. That’s been an interesting trend. We’re also seeing a much more heavy reliance from our client portfolio base on LSQ’s credit expertise to help guide them through this period. That’s some of the insights within our individual portfolio that we’ve observed over the course of 2020. With that, I’ll hand it back over to Rich who will move on to the next section.
Looking Ahead
Rich: Thanks Tom. Julian, can you just go to the next slide, please? Great. I’ll be short here. It’s just one page, and just summarizing what we just discussed and maybe looking ahead. By the way, folks, if you’ve got questions, certainly want to go to the Q&A session here to make sure that we address any questions and maybe make this a little bit more interactive. Please do use the chat function, I think, so that we’ll go through some of your questions.
Just summarizing what went through, looking ahead, these are the three things we mentioned upfront. For us, we are focused on the sustainability of the consumer recovery. What does that curve look like? How much of the consumer demand and recovery in Q3 was driven by stimulus checks and pull forward demand? I do think we are seeing some data points in Q4 when it comes to credit card data, other forms of mobility data where some of that may have plateaued, and in some parts maybe even slowing down.
We want to pay close attention to that, and certainly that’s tied and intertwined with that second bullet point, which is fiscal policy. Now fiscal policy will play a role certainly when it comes to consumers. As we saw significant recovery from the 25 million unemployment number making significant progress, but we still have 7 million folks that are unemployed. Protecting that consumer certainly will play a role, but also there are other parts in other pockets of the economy where fiscal policy will play our role, such as states, municipalities. Those are the uncertainties looking ahead.
Corporate debt binge. I don’t believe that we’ve really solved the corporate debt binge that has been building up over the last decade. We have bought more time with record debt. At some point, I suspect here, as the noise starts to be muted and maybe as we have a little bit more balance to COVID- maybe it gets behind us with the vaccine -looking forward, I suspect here balance sheets will matter again. Folks will focus on balance sheets again. Folks will focus on the income statement as well. That corporate debt binge, I don’t believe we’ve solved yet. At some point, I suspect that that will matter again, and so certainly, something that we’re paying very close attention to. Overall, from our end, certainly the recovery has been good to see. Many of our clients are in a much better place. We also want to make sure that we work with our clients maybe that have not experienced the amount of recovery that some of our other clients may have experience where there are certainly those that were closely tied to work from home, or maybe DIY home furnishings, et cetera, that have recovered very nicely, sometimes even growing versus last year, versus others that have not seen that type of recovery where they’re in other industries maybe that are still struggling, and certainly want to work closely with those clients.
Then finally to wrap it up from my end, looking forward, for LSQ, at least, we have the ability to be a little bit more flexible, given the fact that we are not a regulated bank. We have scale, and we have 20 plus years of working with small, medium-sized enterprises. Certainly, to the extent that you have clients or other businesses that you work with that are looking for a creative solution or maybe an interim solution, certainly please, we welcome the opportunity to work with you to hopefully find that solution during these difficult times. I’ll wrap it up there, Julian.
Renee: Wonderful. Thank you, Tom and Rich. I just would like to engage the audience, open up the floor for any Q&A. I know we’re running out of time here, but we can keep this open for a couple of minutes, and feel free to send any questions in.
Just as a brief reminder too, we will be sending a recording to all of the participants. If we don’t have any questions, we’ll go ahead and end it there. I do not have any on my end. Julian, on your end?
Julian: No, sounds you like you covered everything!
Renee: Wonderful. Thank you again everyone for joining. We look forward to working with you in the future, and have a wonderful rest of your day.
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