Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OppFi Inc (OPFI, Financial) reported first-quarter 2024 results that exceeded earnings guidance, leading to an increase in the full-year earnings outlook.
- Revenue grew by 5.8% year-over-year to $127.3 million, with a significant improvement in revenue yield and credit performance.
- Net income saw a substantial increase, rising to $10.1 million from $3.9 million in the previous year.
- Operational efficiencies led to a decrease in total expenses as a percentage of total revenue when excluding one-time costs.
- The company announced its first-ever special dividend of $0.12 per share, reflecting confidence in its financial health and commitment to shareholder returns.
Negative Points
- Despite overall positive results, total retained net originations decreased by 2% year-over-year.
- The annualized net charge-off rate as a percentage of average receivables slightly increased by 20 basis points.
- Interest expenses remained a significant cost, totaling $11.4 million or 9% of total revenue.
- The macroeconomic environment remains uncertain, with sticky inflation and high interest rates posing challenges for consumers and the company.
- Total expenses on a GAAP basis increased year-over-year, primarily due to costs related to exiting the credit card business and other one-time expenses.
Q & A Highlights
Q: Hi, good morning and thanks for taking my questions here. To start off with Todd, you made some references two, not only the transition partnerships, terrific actions have your partners expanding into maybe one or more states retaining some more loans in this, maybe it's a good time. Can you take a step back and can you just spring many states you're operating in through your partners partners there, broadly speaking, whether there are your partnership arranged?
A: Yes, David, good morning. , we currently maintain three bank partners and the banks are the originators in the different states. So it really is up to them on the structure. On the other side, some of the states due to some state laws that have passed in this cycle of legislation. The percentage ownership once once the loan is sold to SB. varies, but we're in 40 states, and I think we have a strong national footprint to serve our customers.
Q: Yes, somewhat related. I know the the geographic mix may have partially contributed to the elevated revenue year in terms of thinking about the yield going forward, just trying to get whether we Q1, whether it's impacted by geographic mix, pricing leverage is competitive. Q4 is just more a reflection of some of the delinquency trends. But as we speak, balance of the year, pricing leverage is 130% kind of a iLinc. How should we?
A: Yes, I think that that's probably on the higher end of the range. I mean, I think, you know, we had a really, really strong payment recovery period due to the operational efficiencies in the ops and recoveries, but also tax refund came in really strong was strong and accelerated in March significantly. It sets us up well for the year. We're happy about that hub I think we've also if you remember, there were some testing we did back in '22 and '21 that finally burned off some. We've exited Georgia, which was a lower yielding states, some of that it also allowed for some increase in yield. I think that's, you know, we're very we're very happy to see because you got to remember we're paying a much higher higher interest costs. And there's some headwinds there, and we haven't raised price to this point. And so this is really a good way to and it's really just getting back to where we were in the in the 2019 2021 era of yield.
Q: Maybe last when we eliminate the bit $6 million, third one-time expenses so trying to get a sense for gives us a good start quarterly for the year. Should increase that number going forward from an OpEx. It's a run rate on time?
A: Correct. And it may even go down a little bit going forward based on some data.
Q: And this is Owen on for Mike this morning. Congrats on the quarter and for what drove the outperformance, what's going right? And what maybe is still a headache?
A: Yes, I think I mean, it's pretty clear that we had really, really strong payments come in from. We've lowered our acquisition costs year over year by $10 from that's a help bomb. We while still increasing revenue by 5% on our charge-offs as a percentage of revenue went down. So all metrics, OpEx as a percentage of revenue went down and all metrics in the business and for and for year over year. And that's our goal right every years to get a little bit better and continuous improvement. And we feel it's really sets us up well for this year. We're really focused on are starting to see some credit trends we like and things have really stabilized in the credit and I think that, you know, obviously with some new geographies and with some nothing to report on. But some interesting conversations having on partnerships and growth strategies, there's definitely some some hopefully some some pastures, greener pastures ahead where we're going to be able to originate more and have confidence that the customers are going to be paying us back at the rates we think we can achieve. So I think I think when you when you look at we in the first quarter, people came out and said we were overly conservative or almost had a little bit of a negative connotation to our earnings. But it wasn't that I think we were we were validated, you know, the Fed's not lowering rates interest has sorry, inflation's been super sticky. They can't seem to get it below 3%. And we've always told people like this disproportionately affects our customers as far as challenges go, interest cost and sticky inflation. That would be the ones that I mean, though we can't control those. So everything we can control you see we're addressing and performing really well. The things we can't control we're just watching very closely and hopeful that the inflation will we'll come down and add eventually some relief on interest rates.
Q: In terms of the competitive environment. Are there any updates here on a quarter-over-quarter basis or is that pretty similar?
A: Yes. I mean, I mean, listen, I said this before, like we are we are experiencing some tightening above us. You know, that's allowing for, you know, some some more segment, one customers to come into the funnel, but that doesn't offset to reminder, that doesn't offset the tightening we've done on the back end, which is, you know, we're still originating in a pretty pretty tight band of segments. I think you know it, we did some testing last year that was very successful, some swap and swap out stuff. We've really really refined our cash flow underwriting model, which has been very successful. So we're waiting for the day where we can in 2019, I remind everyone that was 40% of our new originations came from that segment segment for us, and we're waiting for the day where we feel comfortable and have the confidence to be able to start originating on behalf of the bank partners on those segments again. But right now, we feel really comfortable. Our acquisition cost is where we want it. We're still able to grow and we're finding operational leverage every quarter. So we feel good about where we're at.
Q: Morning, appreciate you taking the questions. I'm just hoping we could start with maybe a little peek behind the curtain process for declaring that special dividend. Is that something you would revisit it's a year once a quarter when cash levels get to a certain point, just any clarity around that would be very helpful.
A: Yes. I mean, there's no there's no formula, but it's definitely something we would consider again, I mean, what's become apparent to us is, you know, as our know we hold receivables on to manage interest costs. Obviously, those can be put into a borrowing base, but we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
