OPFI - Earnings call transcript Q2 2022

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Operator

Good afternoon and welcome to OppFi's Second Quarter 2022 Earnings Call. All participants are in a listen-only mode.

As a reminder, this conference call is being recorded. After management's presentation there will be a question-and-answer session. It is now my pleasure to introduce your host, Shaun Smolarz, Head of Investor Relations.

begin. may You

Shaun Smolarz

Good Chief operator. Johnson, today's are call Financial Thank Officer afternoon. and Schwartz, Executive Pam Executive Todd Officer. you, On Chairman; Chief and

be release Our supplemental earnings quarter investors.oppfi.com. press second presentation XXXX can found at and

GAAP described the A the comparable decisions Risk the press statements issued these forward-looking company's remarks is be to would I by this to metrics. Any undertakes turn update expected forward-looking call found measures are discuss whether factors and any are and in and During forward-looking factors to new the release statements appropriate. this These trends, as to available company made call and Important the over could assessment call be statements, assessments including otherwise. measures financial non-GAAP by Commission, being of of the Exchange that management, of are this statements light they in Todd. on made developments no conditions, will and with materially non-GAAP differ sections In morning. business forward-looking during OppFi's assumptions cause historical information. information, and today's management of today, earnings discuss This financial will in future on or live results, website. future our as of such or OppFi can call, a filings reconciliation earlier Factors. other will made webcast result be to events, OppFi most believe developments replay certain duty and based their the revise for current from experience now to actual entitled like Securities

Todd Schwartz

designed second initiatives the our three quick like its our update strategic good on afternoon, underway and impact on success are quarter, from key solid view position customers, beyond. and our today, in us XXXX including a to and for Shaun, I’d to the on environment that and and operational highlights macroeconomic financial Thanks, cover everyone. topics provide

second performance operational We expectations. are financial the pleased relative with our to and for quarter our

expenses, XX% increased Marketing Continued year-over-year per result We our by to items percentage a of the rate backs operating and a expense, revenue a loan to as interest the strong customer of by percentage direct funded demand reduced increase first launched by as we led year-over-year The XX excluding percentage dropped cost approval add one-time XX% initiatives points total points X half of XX%. in in to auto year-over-year $XXX. year. originations.

credit a high million our in capacity. macroeconomic of score And is to XXX the inflation that a us customers. it impact points. having above is the on funding XX-year With of our one negative resulting facilities, upsized regards over environment, also to current maintain We customer clear NPS XX

previous and employed, would is service groceries, minimal home increased college customer inflation We that market. crunched savings. household expected to middle despite labor average ability utilities predictions. with Our like The gasoline, of price originally transitory economists' income has these and earns and educated, be strong their everyday in-line customers the debt has necessities

vintage expectation. again models most company's customers the represent can originated accelerating. in both These In as in history. in on beyond performing we loans, as were to began credit swiftly of effects In response, credit credit well well adjustments new inflation However, inflation during as see last the inflation higher performance, we were growth persisted has as see May, to year's loans our and target adjusted started now, in older July that base. early significant May our measures refinance

changes. since our platform loans new improved has the result, these implementing a being As of through greatly credit profile funded

We these product higher borrowers. quality amongst our demand for are see to encouraged continued strong

and macroeconomic Even impacted by take changes will measures, be of of Going to with will credit we our year charge-offs half with profitability the our these monitor in and model this the previous half year. the customers diligently first action this in their accordingly. second on delinquencies forward, continue of credit and the tightening originated impact loans

risk the or loss at end we anticipate a in net our reminder, on half, a about that quarter will modest given generally will two Despite the the previous adjusted from loans in disappointment these are very now perform second in a expected, As believe that adjusted We resulting initially credit rates XXXX the for charge-off higher of lower are full-year. prior in the originated model at charge-off loans receivables quarters. breakeven confident we than well an XXXX. basis base

us to per taking beyond. we're to In we efficiency and marketing we measures will in operations described, there addition for the Shifting position expect success cost newly are further marketing XXXX our initiatives, opportunities credit additional our to continue measures in loan. believe and significant lowering that I've funded

expanding higher quality We by quality lower are partnered cost, optimizing our ones. and removing channels partners, higher

mail a promote efficiency also direct have enhancements portal customer with our to in channel cost and redesigning to in payments of funded operations, and by Within delinquency number options. reductions have have taken in we significant reduce steps implemented We QX. per more improve this loan capabilities payment seen in and

our initiating new make to help In new testing health to models as financial this charge-offs during second adverse customers score and as we the avoid half partnership addition, year, payments, of customers, impacts. well minimize to credit provide affordable programs resources are

trading my recent previously I stock my at Before purchased highlight as I the price of wanted of window. disclosed average common A class an [ph] also family prepared close to and [$X.XX] I that million most $X.X open remarks, during

continue to we fundamentals. We share long-term OppFi from the disconnected are price that is see shares when prepared supporting

temporary facing environment, the macroeconomic bump we to these are as credit of navigate. and challenges speed the view we able headwinds we are that effects While

and actions results updated quarter We to in are I'll XXXX guidance. the company confident turn ever. taking than are stronger With Pam that performance our make call will our the and improve review the we that, to over second

Pam Johnson

Todd, afternoon, Thanks, good everyone. and

year [XX%] to to second XX% higher to $XX funded a loans loan We achieved period. XX% growth in volume Turning per the year-over-year increased revenue by quarter million. originations costs $XXX to as lowering apps. our increase while $XXX our million, prior now new driven results. to year-over-year by compared or increased Total resulting funded rate over was the qualified application in $XXX defined [ph] increase and funded in an demand Origination marketing

rates. year. to percentage from points and as of marketing loans as net new total Our on a of efficient reflect second originations quarter up marketing mail search last optimization, more continued over cost higher as customer XX%, results direct increased lower and XX and growth more conversion efficient strategic spending in of loans email engine Total such lower referrals percentage as the well channels

addition, annualized increase increasing for our approval credit a in pre-pandemic In charge-off year-over-year quarter points investments first versus trends XX%. XX% than average The worse The of prior the reflects of resulted year of rate XXXX for percentage receivables in as quarter XX% XX% rate XXXX the to net percentage and for the levels. was second automation auto year-over-year the XX quarter.

increased technology, in XX to greater and as backs to the quarter, higher the primarily XX% originations, operating for and or to expenses XX% marketing total period. revenue professional cost revenue more add fees. of expenses, of expenses total million increased expense, Turning fund XX% from due prior year $XX These second items excluding investments or well in one-time million interest as

quarter increased, total of as per well expenses funded declined the amount lower result marketing percentage a cost operating prior revenue from and loan, earlier as expenses year million quarter, increased new Adjusted initiatives the implemented of of as higher offset totaled as than charge-offs as more expenses. operational down EBITDA our While this costs a efficiency versus $XX by year. $XX the for revenues were million elevated

net As EBITDA second the million We of expected, or ago $XX quarter the ago second the of X% million totaled Interest $X X% year mark compared total $X the to to for XX% adjusted compressed for in period. in the quarter, year. our total expense compared of adjusted compared revenue, for year to income $X comparable to XX%, million or period million period. last revenue generated

million XXXX, earnings outstanding, XX, June $X.XX share. earn of for had diluted shares were second Adjusted shares. the average out per weighted As million quarter excluding XX.X XX.X OppFi

balance receivables $XXX million, debt and $XXX Our and of equity cash, with total restricted cash remains gross million of equivalents, $XXX sheet cash healthy million, of million. of $XX

liquidity than of doubled to more our in future million support funding from $XXX our plans that with We into of one credit utilized debt of announced million. part tied to total refinance have with our we growth we one other facilities. facilities $XX available capacity. this upsize $XXX ample We In credit million to June, Atalaya

quarter, Common Class of shares an $X.X $X.XX per repurchased for During second of the million approximately Stock XXX,XXX at share. we average A

million. at an During we repurchased the for share approximately first per $X.X XXXX, of a $X.XX total average XXX,XXX of shares half

reported revenue limited adjusted net anticipate are latter are net early full-year and quarters operating to total of significant inflation in to increase due our excluding an of a and add loans older environment, fourth XX% that the current expenses macroeconomic to high total to for expect Turning We periods. percentage rate outlook, considering guidance guidance credit to those of and net on vintage expectations the breakeven given caused persistent uncertainty deterioration and for modest during XX%, in adjusted We third half one-time growth revising basis expense, quarter backs and the the revenue second now adjusted of or charge-off loss XX% charged-off visibility the we full-year, income as the XX% quarter. items, the third interest as downward. to year-over-year, maintaining reiterating

having revenue. for expectation are revised revenue previously we remain for metrics, optimistic other total very about results, anticipate a third withdrawing expenses Notwithstanding percentage issued the operating we now we of and more total full-year the our than this update for for report we outlook guidance growth XXXX. While quarter XXXX, specific when our

to JMP from XXXX risk now that, from exit of the Securities. of Please [Operator portfolio, credit to healthy over half run-off Instructions] the Thank with David comes this With the and from year. the go would tightened operator higher first to expect question Scharf first like you. the model we We significantly our ahead, call for given Q&A. a loans And turn Operator? David.

David Scharf

spectrum Great. broad commentary Thanks And heard pretty reporting wanted of the kind trends? season of different the my and first Hi, lenders questions. outlook lot Thank the a tail taking Hey, we've and macro Todd a off, not on of subprime wondering, surprisingly, other and from inflation impacts you. of Pam. this of credit Todd, follow-up which I'm in commentary the for regarding factors. a about end to

sort been, of less have Some pretty so. others benign,

commentary pronounced point, patterns? payment consumer At potentially and do or it's are this you other there pressures is are think probably you definitive. confident impacting inflationary the are that Your strictly that among most factors

Todd Schwartz

David. Thanks, good That's a Yes. question.

I had look first that you that we've risk that in if different think originations through I had the on were of a we – the mentioned of year, partners. thought some little we had season at the call, channel higher gotten holiday most quarter made with the last

business to significantly period to a have As quickly, or May year, through forecast a of We've timeframe those deteriorate build an of we stable, that's that's two long-term. business the at not our forecast existing playing where we then all very the for can you but we're like best going we pretty quarters. in We're flow your has of quick this significantly three-week significant being a profitability time, sacrifice saw happened subsided the when [indiscernible] very year, on book and we're the but quarter buckets, beginning conservative pretty it tightened period much the have but over the stayed and it in a in and right, playing we that books, deterioration around forecast. obviously

is and anything income cost on growth help is talked about doing the So, XXXX there. have adjusted having now we're our net also Pam impact us shortsighted and acquisition going quality it, we're receivables, by – in that higher may I and to

So, the acquisition the and growth have we cost.

May on. the the in-line as coming That's inflation have Those have it quick not so, loans seen the to really been better And is necessarily the new gone really hardest. rise We've and started feeling with in continuing have the think that. might consumer with when months payments prioritization get issue. a I the down were just to been and in our have housing, plan X.X% kids we and at peaked of and customers of like that got a it's pay interviews the recession and the groceries, point. at surveys end And and done at some customers. on food, and our day They for definitely stuff we've when

lot better. of we're are Right cautiously so, stretched, where we're a the now we're at. moves good good feel as get think and And customers I seeing improvement guess but were we really and making that to all feeling starting that and right things we're I optimistic

our for portals states loans behalf things the the That's payments that the David lot those. economy payments. giving to for obvious about are customers that we some customers, bank redesigns And in working of we are the on really states to to going some good a see arrange And the issue encouraging. of more about like partners payment stimulus starting we're direct options that that's of we eligible out have feel of of

So, a lot in just a It's there things feel positive. we're had seeing the quarter. positive I second and of there little we headwind really

though expected. ultimately the business is performing every other than So, metric in better

David Scharf

positive. about underwriting, be? auto we've some a increasing operational the you also the challenges always wondering, credit. it. rate of of an always color. a related approval is increasing kind I not when focused obviously being if as to visibility think you something question, a is And or but see sure Speakers] an Got then tightening auto follow-up got it at appreciate I'm it, in always approval as And ever just rate technology looked And credit [Multiple maybe might this want of to and I'm

Todd Schwartz

a is people someone for than just good David, auto-approvals mean, I is calls The though, that question. exact our better. in. for process That's same underwriting so really technology Yes. the means getting is it who the

having get can be in the talk taking decision the when and to or without process mean we're for our through we're changing does making so consumer the technology someone. to to not and So, better to It bottlenecks it credit process comes standards, loosening standards out underwriting just the application they go auto-approvals. clear,

David Scharf

Got it. No, the clarification. no, appreciate

you. Thank Okay.

Operator

question take Chris from And from Please go ahead, you. we'll Thank D.A. next Brendler our Chris. Davidson.

Chris Brendler

well. want on as surprisingly, Good thanks. question the follow-up Hi, Not to credit afternoon. I

certain stratify months, get July of of it levels going of you've can like just Is Just where of since did – starting an August, income to it comfort improvement perspective? is the changes into inflation June, from went as sort be And you is May, some like that you sort underwriting – made kind picture? we're that lower of in end the what are might is issues or any, still, worse? it there to here in the middle this you have giving the the what's

Todd Schwartz

David. back to was mean, Yes. saying I I what with

was seeing the good quarter on So, as first you can tell, I We had bullish. like liked after side. the was what I second earnings credit I call, really a quarter.

by Our we X% gross beat costs, charges as a percentage came or down X% origination. quarter-over-quarter and beat acquisition we

we So, May in in right. made lead based significant all the pretty early a definitely reduce book, to week those which existing And of quick Starting signs, would tightening our a we positive. May, saw indicator decline profitability. on in first

think gone. but pretty May delinquency customers rates with I right conservative with are to our of much see July, some It's optimistic, of So, had that second dealing then and but conservative made in kind not to in actually we set of we be those and just year, spike be considering the in that make lowest of and year been the far refinance to but something as – was pressure pay we're and be cautiously wanted higher, conservative and sure has think as half in and steps, deal going that definitely this into inflationary the tightening we all delinquency. volatile, to kind we And wait the June. making started customers the and population, do the be the are pretty I significant feeling the another to even made customers which really is

not our already but at of because the – and the quickly, that's climbed] feel I so books. control on can really which for can, [past end kind there's loan our we the so right, deterioration was surprising new we everything speed, did was what we happened, due think mean, rate principle the I [ph] on side, something good. significantly on existing we

we which weighted to a loans, significant year, even last average down right book the evaluate X.X or being a about we of added of good like higher, customers, from is really shift score new points now. – when quality is and feel totally is the huge points new So, risk X.X kind

highest – lowest significantly Some the the of has and in percentages our quality increased of percentage. segments dollars

feel what really so, about good we And originating we're now.

saw, down about in optimistic see I and the half. think book second we started of a that's some getting environment, what of inflation I but push I some the this existing better like stabilization some here. payment the back and We of and rates and we're said, pressures the cautiously getting the we've things seen the think to little

Chris Brendler

that. appreciate I Okay.

So, And first perspective. a have there I persisted, sound also timeline? with just there to was like doesn't upsize and issued credit from necessarily that's then problems it would get still July June, thought it through the any the Obviously, picture an like comfortable that transaction are comments facility of June, but like bit so around May would, from got say, of be in the lender it then immediate the and really sort update August. trend worse then in it I a was impact in more credit didn't sounds little it there maybe a just positive maybe and would If around sign. inflation correct? positioning macro there crescendo was like going the [indiscernible] as was on – that the

Todd Schwartz

originally May this January, significantly. of and again of that last we in pretty those tightening again tightening with much performed We been in pretty have we've partners. of And in is, ahead started historically we've existence for November, thing mean, for relationships November we I partners the year, tightening them, the Yes, relationships great in business. out great financing started we now the have were had tightening

and our a trust I So, we're for kind with continue they relationships some help that's in go as have think us real of we and been to we partners and and, what doing. And through expand of so volatility. grow great them this believe us

Chris Brendler

stronger this first quarter. scores? then you are insight? part one sort this, much than the if how matter more any buckets The of expected just among seeing of there Okay. this And up a like question, the credit of tightened then like And have is And originations the where moving we're could? actually I as

So, is have high it improved. conditions think I demand? competitive it really strong? Is would and really is the

tighten So your can top you [indiscernible] and line numbers?

Todd Schwartz

absolutely has is cost not That only plan almost achieving Yes. our – ahead of acquisition that so year-over-year. that, down. come on We're $XX-plus

I opted think to there's maybe continues strongest got demand the demand of right? of through room be rest and so, growth. lot be there to the on some growing for faster, in slow seen, even improvement we've We but be careful, guidance down potentially some you range And the the double we've to to that still we're here. quality XX% could XX% down putting a but

is, and of, quality So, of kind They people to XXXX, accessing products. That's the kind come about we're customers of our points We starting of over not into increased addressable were space for credit. because that qualify see score weren't credit. seeing, back customers, what's high XXXX reversal that seeing the inquiring XX where market some the credit We're now happening strength. for our our of we're kind average pandemic. saw,

of early lower to their dollar I percentage of So, and of customers probably since, the days started kind originating business segment amount grow. when the we, highest like we that we're of have kind said,

payment or big need really seeing great to feel on tough side some make doing this customers with the we've we're especially our support I with implemented that through the everything doing. payments about we're them results, on work time and stuff recovery releases. we're And that to some side, partial that. continue the to self-service of So, think good technology And done

using thing eight or bank other using we're data. of underwriting have our the part doing Another that started for in the We've – seen seven data that we've of bank I’ve years better the been some now. lenders,

So, historical incredible data. we have

focused completely And payment so, the to income really, issues. on we've model or really credit revamped to kind of

this expenses year. in I of I think to with especially at, environment ability the of pay additional think vital to kind $XX,XXX for when per customers look are a large, it's is dealing to $X,XXX

wage And so, some is optimistic low. remains unemployment because we growth there and remain

that And over low there us so that enhancements and model is gives lot the the credit unemployment and good the favorably. of about very thing that made doing to be we've our a this, that of working some year is appear is

Chris Brendler

Okay, great. Thanks Todd.

Operator

appear time. there at questions back [Operator no remarks. to floor for over like Todd Instructions] I'd And the to closing to turn Schwartz further Okay. be this

Todd Schwartz

everyone forward the profitability in earnings up for listen, for joining to you. again We Okay. quarter today. us we Thank November. Well, Thank our third We're speaking changes conference to us XXXX. with look return you. are thanks in making call confident in set you during to

Operator

Thank you. We conclude you Ladies your for gentlemen, this today's teleconference. does participation. and thank

time a great You may disconnect have your day. this lines and at

OppFi (OPFI) 9 Aug 222022 Q2 Earnings call transcript