OPFI - Earnings call 4 2023

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Operator

Good afternoon, and welcome to OppFi's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions].

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

begin. may You

Shaun Smolarz

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

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

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

Todd Schwartz

to revenue ending and annual XXXX to net and achieved profitable operating receivables. efficiencies year for Thanks, total full what consecutive we us begin good our our Xx. XXXX guidance would to excited achieving said do and marked records led of income improvements We're Shaun, leverage earnings credit with growth. continue we strong XXXX ninth afternoon, everyone. and year raise We and

over fourth enabled final full guidance be strategy emphasizing in plan for our portfolio our well simultaneously growth XXXX, results the in our aiming as to year disciplined quarter company. operating us quarter further to will XXXX. our maintain profitability we while as addition, throughout QX and XXXX with to for efficiency In solid for introduce fourth underwriting, Pam earnings guidance full year detail and exceed review

will XXXX highlights I and topics. driven QX were from Two, areas commentary full and growth, the Three, during four of our improvements progress results strategic XXXX QX expense leverage. discussion our cover primary priorities. Fourth and Before X quarter One, macroeconomic our outlook business revenue she credit for XXXX. 'XX our our performance year does, by financial on performance. in

by Specifically, of million, quarter million, total points adjusted prior Net charge-off The the revenue XX.X% XX.X%. This and loss X.X% XX.X% net up to percentage prudent million expenses, revenue, of expense percentage key year management total and expense of percentage of net $X.X to disciplined solid growth million. of XXXX as compared to improved the rebounds million. of excluding rate $X.X in points total growth down annualized to X.X from led income interest a a $X.X income highlights loss percentage a XX.X $X.X from profitability. a up for million, fourth strong $XXX.X as net originations revenue $XXX.X to total are to

X.X% net expense record expense of as $XXX.X management to increase. as of year by financial disciplined to X.X for $XXX.X excluding interest point million, improvement declined ending revenue total of and charge-off a XX.X% an a XX.X%. total percentage to Our year million, a points percentage X.X% total record of and are prior a revenue expenses, highlights percentage with XXXX The total the increase, compared full revenue XX.X% receivables rate

a implied the our and sticky $X the marked profitability results basis adjusted was As We sharply a guidance. net result, million achieved $XXX increasing higher expense $XX.X customers. million adjusted points $X.X improved by these financial of that by and macroeconomic margin from our million, million of net income or XX% income environment hurt of despite with $XX.X of million health X.X%, midpoint by compared interest to year-over-year net inflation XX than income

strategy while to discipline risk contributed to year balance maintaining expense Our OppFi. growth meaningfully transformational for and this

our business during the to expected. quarter continued performance improve progress Credit fourth year-over-year strategic as our discuss areas. I'll with Now

also In rate rate period addition points charge-off default first same of mentioned, a stage percentage revenue to decreased improvement improved net last trends earlier compared delinquency declined by delinquency total the The payment basis in as total year. and the to points. XX rate total XX basis the already annualized by

ago points year XXX.X% to We in to also expansion percentage and the X.X XXX.X% compared yield realized period. solid of

pleased adjustments had are We made have to our mix to the intended and XXXX continued to modeling appear the credit and throughout portfolio shift risk lowest that effect enhancements the segments.

also Our in XXXX increase strongly values-based a with the XX.X% fourth charged-off of balances. quarter recoveries year-over-year recovery ended loan previously for strategy

generate Our cost-effective volume. quality focused marketing origination higher team to remains on initiatives

loan fourth cost down As quarter. per year-over-year a was the X.X% marketing result, the in funded

entering with In addition, expanded the partners bank new also states. geographically platform

development We focus Further, year-over-year evaluating potential acquisitions also value. leverage making and our a as corporate with means on more partnerships continued further a we on each department opportunities create operating shareholder cost by work to efficient. realized

as an a result criteria [indiscernible], for As refined opportunity. would our we've we what attractive view

about how the discuss briefly I'll we're macroeconomic thinking environment. Now

with be We than in norms. expect was inflation historic how it to sticky and interest to in XXXX, XXXX higher rates similar economy the

Wall couple recent we of incomes. Street a net to said there and savings. persistent customers. In have especially Journal limited conditions, macroeconomic than they when this for years, living more [ and budgeting communicated employment is current everyday for inflation food for normal strong we do, the uncertain. it's was OP To difficulty note since paycheck effect this think past we customers relatively more comprised during have As hurts trends to above were appear illustrate years paycheck because XX article summary, recessions expenses, the further her of customers point, health been ] that much both Nonetheless, American's no

these and We are positioned macroeconomic and cautious believe in due interest we this XXXX. same the well strategy to discipline While elevated operate our to to environment. pursue we're headwinds expense, type we of in that intend

expenses over profitability We banks and continue launched tolerances, this incorporate an on model maintaining achieve losses. disciplined that updated operating we to conjunction risk that expected will with and dynamic partner with prudent emphasizing credit intended reduce in expect QX to focusing by drive the scaling to credit plan us, efficiently. In risk is and a growth risk be lower new model volume to origination growth

anticipate expansion geographic also partners We bank enter as new further states.

shareholder funnel analytic In achieve on top also with in to insights. Moreover, year, last doubled will deploy Similar cash $XX.X I call with expenses summary, before and strategy. process every partnerships addition, we will value. ended a operating vendor sheet, This fit find we're additional corporate nearly reviewing of XXXX focused to new to spending long-term provides strong my million, create with efficiencies, cash over be focus Pam, to to the unrestricted our to we function the acquisitions. In balance including planning of right optimization on or the and including improvements. for marketing which for optionality are development manage year-over-year. reiterate to We confidence patient turning accretive us

more Our confidence a communicate targeted approach. by our events during our story to be with in XXXX business the will demonstrated investor participation in

Pamela Johnson

$XX.X to Thanks, Todd, $XXX.X and million, begin receivables total a XXXX, comments good net consecutive profitability achieved income of very ninth million. of income net afternoon, by rebound excited I'll echoing million, in Todd's substantial year everyone. with have record annual are adjusted record and with $XX.X we income net million our of of $XXX.X ending that revenue in of

results. Now I'll quarter XXXX our detail fourth

than for quarter average receivables of year-over-year, total increased of while customers the annualized customer fourth X.X% generally an the by to X.X% decreased improvement XX.X yield originations X.X%. mix the originations and risky a partially prior increased $XXX.X ones. On compared XXX to basis by for less being due XX% management by customers net XXX.X%. new increase million in From fourth year existing XX% The to XX.X% and to customer point perspective, points to customers. percentage quarter year-over-year, to as an for in originations with improved new absolute quarter. originations basis, net new rate to $XXX.X was were percentage existing XX.X% with the to of million those charge-off a XX.X% For to risk XXXX a originations to This existing revenue quarter,

XX.X% the per a double the income expense, on Adjusted higher a the for interest points total revenue stronger in to percentage of expenses, facilities. Adjusted to increase by were interest or was totaled period than to in of due rate percentage a our total EBITDA net XX.X% $X.X by our charge-off X.X% or ago. $XX.X revenue the rates million expense full loss last credit an annualized $X.X Adjusted or decreased more than XX.X% last for million due compared total lower adjusted same to total million year total revenue, percentage of rate X.X% per revenue earnings year was net revenue compared was implied excluding share to million million was net the share. year. Total of As to charge-off XX.X period $X.XX $XX.X $XX.X to period compared the quarter. Interest year. or This compared as guidance $XX.X $X.X revenue. of XX.X% prior of the of in million million year comparable $XX.X year-over-year same net The XXXX. million, totaled

for X million diluted months share. adjusted weighted the OppFi XXXX, of the average XX.X ended calculation XX, shares December per had earnings outstanding During

sheet $XX.X total equity debt year-end. and of restricted million of healthy cash cash, million stockholders' cash remains balance with of of equivalents million, as and $XXX.X $XXX Our total

including million addition, at receivable the total of capacity funding had XXXX, in In undrawn $XXX.X we of debt $XXX.X million. end

to now outlook. Turning our

per in the growth percentage expect from share annualized quarter. the diluted more For earnings We of average total on a anticipate as net charge-off million rate perspective. shares. managed the year-over-year quarter, $X.XX first a weighted based Quarter-to-date, the will in have business XX first increase we tightly adjusted revenue we

net from normal rate year credit first during to a last charge-off quarter is perspective. aggressive first year this the more from and tightening The therefore, quarter models benefited mid-XXXX,

causes also has first quarter, fluctuations in tax driven The refunds. the typically portfolio by quarter-over-quarter. which business seasonality, contracts Our

result, charge-offs in profitability. is smallest and for highest and net the generally quarter quarters. the quarter profitability As for quarter third We accelerated second anticipate a first the

total full guidance $XXX is the to XXXX, for million revenue year $XXX For million.

With $X.XX. net share average share count anticipated weighted I XX% million of now the Based turn midpoint. be call million, Operator? diluted million, between to $X.XX income would adjusted $XX and earnings the the an expect at over to of Q&A. XX.X implying operator that, per growth approximately $XX We adjusted would to like on for

Operator

Instructions]. [Operator

Securities. question first have Grondahl of from we is Northland The Mike

Michael Grondahl

kind to I clarify don't some of add statement. know, your or more could color you Pam

think how emphasizing growth profitability outlook like said the in Just I growth. over you you Todd back of trying 'XX just that sounds kind to your the feeling ratcheted growth quarter will understand macro. far? too so even be It that a more first about and about said you're lot

little just more bit be a color helpful. there would So

Pamela Johnson

things we're that Mike. and question. -- of necessarily seeing the manage from the environment improvement the to in comes customer to not we Thanks. credit seeing. lot tightened box We're have like Sure, certainly again We're Good a not repayment It rates that. environment. macroeconomic

like we're -- any being for year, as that more everything as for this still next is Again, over tenants very our that? growth So one did fairly of growth we to about Todd, and profitability sure. it. emphasis cautious of keeping you add far would to close

Todd Schwartz

chime I'll Yes. in. just

mentioned I dynamic last Mike. call, it think now, I in had on have we the place modeling

throughout we the seasonality that vintages what there's So means vintages, know to is year. the

fourth the some vintages into loss go the of of lowest the quarter, You year.

vintages that's March refund think what -- the Pam she those quality And tax some the if typically, referring February, vintages, season. lowest repayment I of the on was was the on you year. was to of -- it's at rates call are look

rebuilding think the I this, dynamic and when to the want some I seasonality clarify. And said on deploy what So we the year referring throughout she more of now testing But we in that's model. we modeling as marketplace. based have worked she's it a to on

Michael Grondahl

little to it. need And start we push what see? what that see would needs outside, you you Got a you -- help need growth you when we're to change? What would or Like would for bit? to

Todd Schwartz

the Well, acquisition now, of cost. right on funnel. very our enjoying we're We're benefit lower being efficient

that curves go being But [ customer, I see we're segment from segment, degradation sustained XXXX to mimic it, in there see So risk you yet. to seeing ] would We're that, you obviously, 'XX segment would We're as right? less lower you're in to need -- right? or happy loss our lowest the close three. seeing a even not one than

However, have And to commitment not we our and our the sustained. kept product we've same. price seen that credit our and access

not raising prices not customers. through. we're So We're passing on

Mike, So to not some And within pricing future. not operate our might what really that's employ we of think that's the have business confines we I testing But say now. right in I see we the to and around effective -- outs the with some what we fourth to growth being would out quarter, swap segments in had need said, to turn swap really stuff. very now. That in

grow. to ways finding are we so And

expand the jet]. on I We in mentioned our chosen also call partners bank expansion, to [ geography -- have

mean credit doesn't ways So are It just right? the expanding to other box. grow,

Michael Grondahl

one Got adjusted to until mean, EPS taking do it. that further, growth? $X.XX other Like sort is than to mean, you $X.XX other business EPS you this levers drive I a adjusted step I have grow? of

Todd Schwartz

conservative. it. very term. in because this I that raising be when our mean, value our year-over-year. was other fair be been align and this then absolutely. to significant our the We've and have which come in doing -- there P&L, with in a long market conservative for basis ready out but theirs that We're the brought environment, we're This be to for brought XXX that's is seeing not seen really hit clear, to down points was -- Mike, just companies we're growth -- is line and we we're And

funnel finding. There are stuff there's interesting the working focused we operational also more mean, on We're several address also We're efficiencies. then We really on pull that throughput. and levers at look there. some we're really the funnel. to we're getting customer efficiencies started can I on just that tremendous bottlenecks side found

drive rates fair market So I feel despite our business also growth high life have the we good record really that at interest levers our of the then and unfavorability for to business for value. some

Operator

question JMP we next The have from of [indiscernible] Securities. is

Unknown Analyst

digging So little it's those if any figure types We're to piece it, the or a it's of kind by bit are driven what really next into of of year. lower kind out -- trying the factors? of for lower drivers average growth yields more Or within volume.

Todd Schwartz

part. missed you apologize. can I the sorry, question? repeat I'm just I the first

Unknown Analyst

Yes, sorry.

better So what box? lower revenue sense I'm are guidance? Is the just the XXXX trying Is to drivers get yields? a just lower of it for it tighter credit volumes [indiscernible]

Todd Schwartz

to currently, more to I yield its mean, the necessarily. at stay to where current seeing there. Yes. really, forecast by yield, We're not It paying not with chase credit us strong the We levels. also going do has no. the really growth

for We getting that, funnel more have seen [indiscernible] paying that some do high-risk into quite when just the end more time up you customers ended a you less. and lot and

So the to on outlook. I what think seeing it really we're do has macroeconomic with

And quarter right? be mentioned we the most and swap yet some allow going all put of growth. together, are been is it year, years all doing model of the the over very testing more is our the where also launching second powerful that model really we're in and the have change, to that on can and think going outs powerful other swap prepared, X.X last on we've the things we we for really, Now -- attributes to we

similar bank service some as right to still to levers in growth have that we So last seeing well said, funnel we're year, working on. what propel -- I but from some like geography partners can that states. is more some we now, [indiscernible] we're And in the largely albeit efficiencies

at how yes, looking we're -- it. So kind that's of we're but --

Unknown Analyst

just makes follow-up And more it. question. then Got one That sense.

give rate Just kind way if of kind on year. the throughout the wondering dynamic were charge-off out you we the it of for color specifically, can more of and play that they the on the the year

Todd Schwartz

The a percentage as charge-off revenue? rate of

Unknown Analyst

Yes.

Todd Schwartz

thing lot is Yes. the that significant gains. I of made I a improvement. we've One mentioned on think we year-over-year mean call

to your it's to yes, as similar expect to But numbers But if largely same, stay looking significantly slows, there. percentage ways those impacts going improve as incremental that. some a -- well. as and improvement for that obviously to We receivables always We're that think be of not growth the on we aspect. revenue it's be of going

Operator

from ] The next Storms question of we have Dave Stonegate. [ is

Unknown Analyst

Just wanted to start.

in You mentioned you updated a was the acquisition hoping criteria. into I little general and what you're could market? bit that seeing more dive a of sense just M&A

Todd Schwartz

Yes.

like question to criteria, sure -- I acquisition the referring want the answer get the on you criteria. are make specific to it I more to On our correctly. just

Unknown Analyst

of you that were -- for uses as growth. cash was understanding when external look about talking towards My you

updating Does that there? were criteria your make You --

Todd Schwartz

Sorry, focused X mean on I started originations We've to think M&A. loan I'm about really think Well, OppFi learning I a verticals are interesting on the X on talking sorry, to we're ton or side. and complementary on we you're I that yes. -- on think really the in the hone I brand. very side. was M&A really,

for being Our supply-demand digital where brand, fit alternative vision we the finding imbalance bill. business that's where for for platform us are our financial best-in-class provides and not products tech-enabled financial for highly the that that a and large right? us shareholders institutions our all service really the to a It align. situation and alternative banks just accretive It's receive works are has around that not

stuff. do my So lot pulling is very We're private are I -- before a as equity, was something about patient. a back came on transactional in second CEO we're We're life in not it. This haphazardly. lot we that going to being just thoughtful my of of doing

lot team's get make going right. on sure we're to it lot and of our of experience a to a that pulling So experience that

more to and that starting starting -- The sense. We're confidence. now, get So more hard starting nothing to we're yes, But get we're to see make to around. we're report looking starting work, rational. but potentially can is market more we're at opportunities to

Unknown Analyst

Understood. That's more. very helpful. And one then just

approval to kind you months On think it How took rate, this you in year-over-year, that XX continues on hurdles rate? the And rate? over continue a growing to next about the of nice grow. do auto see the the that up step ceiling where

Todd Schwartz

Yes. I the large made improvement. mean I think scale we've

I -- XX%. somewhere in of think we're the at neighborhood sitting I it's think

goal, with every a So [ happy ability to to really year-over-year. increase and Incrementally, continue that ] that. really, product that's is and the year, to tech increase right,

and of on the people talked servicing think I to through artificial so on great to about one front during better help the some opportunity, really right, manual customer intelligence there's sure able the that things have -- to using -- is the to the AI funnel to process be the tools the the of these having side, making more -- process all auto approved in them have be fashion the style to go so an underwriting. all information prevent that in get we and documentation we and automated

there So on closely. build and to we're obviously, looking teams track something to incrementally at tech product our all watch that. we continue very pulling and on and that it's But options

Unknown Analyst

year. the on Congrats

Operator

[Operator Management next we question Davidson Instructions]. of The [ have ] is from Capital. Ross

Unknown Analyst

guidance. Just circling back on

you've states, Just was the it sounds launched like. more had I question some in

sounds revenue? is by entered Am uplift understand the said like outlook that, more similar still to wouldn't provide missing you're what's XXXX. I and you've the states in sort and -- that Given of think why I I or something the in implied states even than -- some you there? the XXXX Wouldn't it cloudy

Todd Schwartz

very provide new we're you the because mean new And cautious and highest are I as pretty originations you're our know, new originations, charge-offs. I the those when launching all much. being I Yes. riskiest think are think geographies,

and -- we're some is So differences. way, there careful by the being very

this but been state first into the X alike. -- time, are states we've for go a time You no a long doing

being just out want of because, is not we get to on now thoughtful we're issues, I pretty charge-off We can And behalf we'll So ahead very ourselves. have partners favorable things and don't want way we're bank very very But sensitive that now. That's upside. the rates. to obviously, right? potentially the to going and originating get to of cautious to be say work strategic some think don't that's stuff delinquency

a that XXXX. cautious success. So we're And growth, we've the of times new just obviously going forecasting with we on being in But we're the benefit at stuff. we're credit done be pace very this but a But this very feel us comfortable significantly could because some I it great year, think few quite to with.

Unknown Analyst

was ] you make just Yes, it sense. through? -- wanted only from I you be the XXXX cycling hear That's sure did a I that guess still up other QX to year will sorry, current understood didn't the you just ago. And book that just on been bad at had challenging [ helpful. then you XXXX charge-offs. And I You And the makes said right? question have I quarter wouldn't but that similar? referenced I'm more be least in would tightening, vintages have I surprised

Todd Schwartz

higher, to -- to but it's like wanted of you I dollar be it wanted as probably can similar. but as Yes. jump percentage be may going a revenue, to I well, clarify clarify a as in amount, Pam, that

So substantially I a a it's when seeing being percentage I'm we similar higher. revenue. as little misleading it's of or Like to it roughly say similar -- don't

major not do. amount something to you did is ever So -- is -- tightening a speaks 'XX we which dollar contemplate midyear, or the really really

seasonality. quarter see difference of always we were muted in year going as with is the got in seasonality-wise, then we to that -- quarter up year. a some quarter I first last coming -- start I is much is first of normalized that the we of yields to for of a very the some overall, compared third we somewhat accelerates profitability fourth. because of a the it and again as a little -- second it's so environment. But and in And think subsidized 'XX, which percentage from But growing don't second, because mentioned, quarter you fourth Fourth revenue, didn't low be benefit that third and more

Pamela Johnson

as of minor -- lift charges of a quarter. as minor a lift the first minor, that percentage revenue, in very charge-offs in percentage the a for just very so see the -- We

Operator

pause any moment for we floor questions. see It to back at Todd I would And if closing seems questions further Instructions]. a [Operator to no turn have further over this time. comments. to We'll like we have Schwartz the

Todd Schwartz

and We forward Yes, with the questions. to look everyone first I thoughtful today report to joining speaking again May want then thank results. everyone when in we quarter for our

Operator

This concludes you joining conference. you. Thank today's Thank for us.

lines. You may disconnect now your

OppFi (OPFI) 7 Mar 242023 Q4 Earnings call transcript