- Earnings call transcript Q3 2022

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Operator

Good afternoon and welcome to OppFi's Third 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 third presentation XXXX can found at and

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

Todd Schwartz

review additional about good performance balance our details and quarter And results third afternoon our Thanks, sheet. everyone. financial and Pam will Shaun. provide

second third four, trends. I so our view an performance. our Two, initiatives call. of our XXXX. outlook as quarter-to-date on quarter she One, business Three, And Before as of well discussed macroeconomic will the cover on key quarter are key update topics. highlights the four does early

excluding these quarter XX% the year-over-year our overall by Our expenses, by expanded environment. in total by backs, add some revenue ending on economic pleased I'm interest to to and revenue results given total items line discussed million; period. company's XX% the the by we're $XXX pleased progress well originations $XXX by million; million highlights to adjustments last to year expense, million; to in initiatives as or of marketing Operating costs decreased $XXX third In with XX% grew challenging receivables were to increased key was XX% in new million credit performance to $XXX. positive significant revenue or report are: most net funded history. expectations XX.X% $XX.X made per decreased and The loan key one-time prior $XX.X XX.X% total models of the as from mid-July, the quarter. we

We’re changes at loans lower to of Also, end customers based the payment than quarter, quarter. default happy X% more To rate existing second quarter of to on the for for refinance default customers at third achieved the intended the results specific, XX% the the report that first second ended payment these trends. quarter. the lower new than first ended be the third rate early the end

lower percentage us continue the to better dynamic quarter continue that the delinquent This in ended XXXX. portfolio to the and of the at as stabilizing. in new gives that the percentage of larger loans third out. the second end strengthen at days become performing Looking vintage portfolio increasingly loans confidence loans quality an will is the portfolio metrics, these of feel portfolio, confident total than the up strong cycle XX Based overall effectively on X% to of the the we active quarter, non-performing

lowering portfolio vintage the volume it the to since our becoming with the worsen loan the current quarters quarter as quality fourth to a of sequentially in of forecast continued net of funded evolve is continue higher key originations. consistent we of We While to to initiatives underwriting source rate data cycle addition average will discuss platform. I'm within we performance the loans we mail been likely investors non-performing want newly stronger, rate is strengthen charge The our happy originations serve have that cost sources XXXX. to with prior to these and our off charge through call, the initiatives remind On second platform. while with the quarter per were vintages marketing the off these as of credit from successful. new accuracy happy function initiatives lags and tailwinds partner attributes performance in quality net loan. The models our new channels the to also anticipate and continue conference direct quarter report further

declined of weighted loan assessment while X% risk-based costs sequentially. the to by XX% Specifically, by marketing repay ability our sequentially, average new funded improved per

channels, the While day customers XX% planned increased initiatives Furthermore, decreased QX excited in our tier by We accomplished upmarket XX%. implemented July, part partners originations due mail. platform. by in in lowest direct adjustments originations funding to in that to added strategic in QX, same this credit for we're volume new including targeting new by highest was year-over-year, for and marketing the

We that recoveries. based also values customer recovery significantly strategy enhanced experience and our renewed increased implemented

of navigate, and with As has payment successful This easy to and this customers. well launched self-service to expanded be redesign, part a proven capabilities very received. we portal for options program,

and the unemployment we on our high can inflation have Turning are and our monitoring broader current customers. persistent business to rates macroeconomic outlook that trends, economy the effects and closely

optimistic ability navigate are the and recent to the environment we strategic However, in given are trends we our increasingly positive from confident our adjustments.

The briefly full I'll us perform trends, to business business confidence our performance. line continues which year on Speaking expectations, our reiterate to in quarter-to-date now with discuss provides our guidance.

tightening tiers uncertain this risk growing is mainstream environment, help options, to in being are the opportunity credit the and from addressable continue market We're demand, lowest upmarket experience by in credit including which robust a market. benefiting thereby more providing turned likely share. We that to down credit lenders us our customers within peers

believe initial of application at our strong result you their may offers in will was all-time originations. were for XX% on platform. presenting demand will current XXXX. example, recall the a of match our an by now in in for turn the outlook check lenders for percentage provider accepted this turn For options OppFi lower I market through it rate, a applicants lower opted-in moved before who The overview up opt who and near-prime reached program consumers start low and an of up that the We provide of risk than will XXXX.

We are with cadence accelerating the confident throughout that profitability will rebound year. in the XXXX quarterly

to fully by our QX be until rates elevated, half of yet quarter cycle we XXXX We as charge year loan the platform from vintages of when off results. first is net early the report of improving through full The QX likely won't QX the providing guidance anticipate impacted year fourth XXXX. and XXXX

our are collections technology. expenses. initiatives in enhance XXXX, the the Three, differentiation and optimize value. we expanding to focused and increase the and One, growth to the continuing to pursuing with core experience. on areas data strengthening efficiency optimizing further platform to model marketplace, these Two, scale For And business credit four, initiatives including recoveries. shareholder maximize customer

market we I disconnect OppFi value. shares we believe and its true, to the believe there long-term fair support family continue my and As plan a is between stated when what price is previously, to

During family $X.XX the average an my open per for of share. quarter XXX,XXX third window, shares purchased approximately trading price I and with $XXX,XXX

XXX,XXX shares approximately purchased has family of my price average an for purchases, these year-to-date. With million at $X.X $X.XX

optimism. Pam, I rates, to pressures, and quality early message new the becoming to us the a that Before portfolio has credit want our to over With existing to These cycle customers, loan that non-performing and key to with higher stronger as over is due confidence delinquency adjustments turning to with that, the despite I'll turn business Pam. out call macroeconomic provide vintage lower call model. reiterate dynamics older the stabilized and loans

Pam Johnson

good afternoon everyone. and Todd, Thanks

our originations third million, to costs our generated results, year-over-year funded Turning quarter lowering by year effects increased, which $XXX.X credit We volume, was therefore demand, XX% to the of reprioritizing to Origination strong compared while $XX year-over-year per $XXX. driven total a increase or now XX.X% offset by certain revenue partially an in $XXX.X the to loan and million. application adjustments new XX.X% prior by period higher marketing model growth created to marketing continued partners.

The marketing our referrals channels was marketing, such of Total our investments This lowering a cost driven in email, Speaking we growth shift net adjustments relating loans, and to prior loans, originations to continue of be of rate July. XXX efficient auto XXX in cost more at adjustments as quarter basis XXXX resulted down percentage loan. as for year in quarter. third inflation automation in XX.X%. XX.X% of over vintages, of versus in percentage annualized initial XX.X% The the XX.X% year approval credit of and net elevated increasing for the reflects prior the charge-off the XX.X% funded engine points was low and of as model. year basis second XX.X%, the in the enacted receivables to XXXX increase credit driven Moreover, loan optimization. rate for to search was decreased and average charge-offs by to originated by quarter new total points The lower sequentially. a improvement for impact year-over-year quality from mix new

origination growth decelerated therefore the rate. net and denominator, addition, charge-off adjustments impacted In have credit the

$XX.X total expenses. in net for income to net operating Therefore, the result as quarter prior a $XX.X initiatives revenue revenue mitigated last comparable the percentage offset backs of XX.X% revenue period. from of items than the approximately charge-offs, generated the million partially Interest as total we to by excluding Turning expenses revenues earlier quarter well period for totaled or year. which third $XX.X in X% prior approximately million revenue or by expense expenses, this implemented million of decreased are third as year as by operating was of totaled total We percentage add for for $X.X in this $XX.X and million third third XX.X% EBITDA million elevated or quarter a compared XX to X.X% onetime our quarter, points $X.X Adjusted lowering more same for the leveraged period revenue lower interest of expenses to from the $XX.X of compared total the quarter adjusted down $XXX,XXX million expense total higher year-ago. or year. million the

average months quarter XX, weighted XX.X XX.X three OppFi Adjusted shares. the third earnings excluding had end XXXX; $X.XX the were For September per share. million diluted shares through outstanding of earn-out million

sheet and million equity receivables $XXX.X $XX.X cash of data $XXX.X of restricted of million Our healthy and of gross remains total equivalents with $XXX.X cash quarter-end. million, of cash, balance as million,

in million $XXX liquidity available funding ample total our future have growth with We support capacity. to plans

XX,XXX $X.XX During QX price per approximately Year-to-date an an XXX,XXX average shares the share. $X.X at of company of average per $XXX,XXX OppFi approximately repurchased at shares $X.XX price share. million for repurchased for has

reaffirmed XX% full to to with on on Turning total be XX% to quarter add-backs as and plan net XX%, XX% a to to an operating XXXX on our date our fourth and revenue guidance, of to year-over-year, To increase modest outlook expenses basis breakeven have expense, line or profitability as to percentage guided we we the be expectations well. a total onetime interest adjusted being and items in loss. excluding the revenue performance quarter based third have review

remain ramp-up each For and rebound quarter. The XXXX optimistic. profitability will we

would our rate call Q&A. to operator charge-off we turn net improves expenses. for efficiency the further scale Operator? and With like the that over As growth initiatives the now sequentially to

Operator

Thank have ahead. line the from We JMP Scharf of you. question Please Securities. [Operator first with a go Instructions] David

David Scharf

that questions. couple from ad first for lenders well that the Todd, Thanks of digital the or oriented of other some kind the picking are constrained back, may competitors you view to back something less. other funding pulled just customer were taking There my afternoon. in outlook start signaling the back things. the third competitors advertised same good the is Were a actually crypto reverting We've favorable thing? Hey, sustainable? the digital I and a of some heard services CAC delve again. sort acquisition is wanted companies sensing into these is quarter Hey, have rates is digital broadly. on very some that FinTech rates as Should both third may lot mean, companies some ad quarter. up or a of that financial we of norm as pulled have is to floor

Todd Schwartz

a It's good Yes. question.

a match the both, partners it's borrower product when, screen think comes – partners right? the turn I our kind credit a I which turn-up of with think bit the financing hit think and from definitely non-prime them to I program then of of at cost when the that that down up our significant consortium a us. we is And could and one against you're rate It essentially XX%, all a banks So happening of and down provide lower lenders think, I little to program almost in cost. That the our mentioned down an seeing to there banks. have into it's borrowers filters the I the that way a lower tightening call time to above segment. features all on filtering signifies is starts potentially quarter, us, low

So we're seeing that.

now have balance going made some some lenders you constraints and growth environment. right credit the through point about with that and think I challenges with sheet the

there well. and really take able well some share as market positioned we're I think to there

probably due the of one it's vintages the the the think years. quarter just to the seasonally I best probably – in you'll fourth of

probably that, more have hopeful you coming with around But have and improvements from we some see and it's more at some but of in going where will on and slightly came that obviously be can like in gotten and our increased competition some some and that above only to we we've definitely feel competition, I initiatives our slightly levers than or So – – around expectations better we're line happy now. we're efficiencies it, that we slightly efficient. worked we're expected

David Scharf

being average What organizations you it. is new Is of up are the exactly that year risk periods definitionally that – it. think and weighted that third just a Got was XX%. portfolio you a clarify, to score Got and what a overall ago? And referring to quarter I to? vintage refer or the

Todd Schwartz

loans. most score we've based risk and and found pay average companies So that the their in segment new on improved quarter our customers weighted risk ability has to on

probability and So is reliability obviously success of that of the higher the numbers. the charge-off

us tightening share. going more borrowers, able being the above, points of to about And and better partially to having which then our market finding efficiencies quality and earlier the so also marketing take made because I it is of segment one statements on some and

David Scharf

– to rate viewing we than inflation, particularly to longer once of Got rates, of maybe loss new within the term, business unprecedented other low one time unemployment, any of is should on last of emerge can through sort kind a term appreciate to kind color one. low a XXXX, longer normalize little incredibly trajectory think of what for of guess a the likely interest context, expected storm And that we're cycle, be rate Within normalized that of but [indiscernible]? sort there never and I the we the charge-off the see the experienced be the in business? of, we the it. And, during higher over was on incredibly everybody's perfect that again. downturn, low I the that eight the for incredibly were and maybe side you specifically models lending the for last five, developed context what asked years, struggling assess normal is, was that

Todd Schwartz

to calls, feel always a metric. forties, when Yes. kind revenue feel I The we'll said think we I think hit Listen as and high this previous – that into thirties, target potentially strive and about also I've low we we percentage we've and the that that achieved get good really that business historically. of that on of

David Scharf

Thanks Great. it. I got. Got all very That's much.

Todd Schwartz

for Appreciate Yes. it. the Thanks. Thanks question.

Operator

like for call you. Schwartz, have Todd Over sir. closing [Operator And you, to question-and-answer CEO over you. remarks. back and turn the Executive of reached Thank session. and gentlemen, to Chairman Thank Instructions] Ladies the end the we I'd to

Todd Schwartz

forward during call, fourth today. with season. look our We a to earnings call. again quarter speaking us you Thanks everyone conference happy for holiday Have joining

Operator

Thank you. this Ladies and conference. gentlemen, concludes today's

your You time. this may participation. lines you Thank disconnect at for your

OppFi (OPFI) 10 Nov 222022 Q3 Earnings call transcript