OppFi's Record-Breaking Q2 2024 Performance
OppFi Inc. (NYSE: OPFI), a leading financial technology platform, has achieved a record-breaking second quarter in 2024, surpassing profitability and revenue expectations. The company announced a 20% increase in its full-year earnings guidance, driven by operational efficiencies and strategic initiatives, including an investment in Bitty Advance to extend its reach in the small business financing market.
Q2 Highlights
- Total revenue rose by 3.1%.
- Recoveries surged by 30%.
- Net charge-off rate and total expenses improved.
- Management expressed confidence in the company's growth trajectory and its ability to navigate competitive and macroeconomic challenges.
Key Takeaways
- Record Q2 profitability and revenue exceed market expectations.
- Full-year earnings guidance increased by 20% following Q2 performance.
- Investment in Bitty Advance to expand into small business financing.
- Anticipated adjusted net income between $17 million and $19 million in Q3, with adjusted EPS of $0.20 to $0.22.
- Management expects total revenue to rise slightly in Q4 compared to Q3, with year-over-year improvements.
Company Outlook
- Guidance for total revenue in 2024 reaffirmed.
- Earnings guidance raised by over 20%.
- Confidence in credit stability and growth opportunities in H2 2024.
Bearish Highlights
- Concerns over inflation as a significant pain point for customers.
- Monitoring unemployment rates for potential impact on delinquency and credit.
Bullish Highlights
- Strategic investment in Bitty Advance to capture the small business financing market.
- Decreased acquisition costs for new customers, down 3% year-over-year.
Misses
- No specific misses were highlighted in the summary provided.
Q&A Highlights
- Discussion on the SMB market and the expectation to take market share.
- The company has seen a decrease in customer acquisition costs despite aggressive growth efforts.
- Potential benefits from Federal Reserve rate cuts on the company's profit and loss statement.
Full Transcript – OppFi Inc (OPFI) Q2 2024 Earnings Call
Shaun Smolarz: Thank you, operator. Good morning. On today's call are Todd Schwartz, Chief Executive Officer and Executive Chairman; and Pam Johnson, Chief Financial Officer. During this call, OppFi will discuss certain forward-looking information.
Todd Schwartz: Thanks, Shaun, and good morning, everyone. We're excited to report record second quarter profitability and revenue, which substantially exceeded our expectations and enabled us to raise full-year earnings guidance by more than 20%. The strong profitability in the quarter was a result of operational and credit initiatives that drove strong loss payment and recovery performance as well as improved operating achievement on key metrics and net profit margin. We're also proud that we have successfully executed many other strategic initiatives that we previously outlined during the past several quarters.
Our key highlights for the quarter compared to the prior year are:
- A solid 6 percentage point increase in revenue yield to 134.8%.
- A substantial 30% increase in recoveries.
- A 3.7 percentage point improvement in the annualized net charge-off rate as a percentage of total revenue to 32.5%.
- A 90 basis point improvement in total expenses as a percentage of total revenue to 45%.
- Net income margin increased by 710 basis points to 21.9% and adjusted net income margin expanded by 660 basis points to 19.6%.
Pamela Johnson: Thanks, Todd, and good morning, everyone. For the second quarter, total revenue increased 3.1% year-over-year to $126.3 million with a 2.4% increase in total net originations to $205.5 million and a 600 basis point improvement in total revenue yield to 134.8%.
For the full year 2024, we are reiterating guidance for total revenue of $510 million to $530 million. We are currently pacing toward the midpoint of this range, $520 million. We're raising earnings guidance by more than 20% for adjusted net income and adjusted earnings per share. We now expect adjusted net income of $63 million to $65 million compared to our prior range of $50 million to $54 million. In addition, we now anticipate adjusted earnings per share of $0.73 to $0.75 compared to the previous range of $0.58 to $0.62. For the third quarter, we are introducing guidance of adjusted net income of $17 million to $19 million and adjusted earnings per share of $0.20 to $0.22. Based on seasonal differences, we also expect total revenue in Q4 to be slightly higher than in Q3, while the annualized net charge-off rate as a percentage of total revenue is anticipated to be substantially lower in Q3 than in Q4.
Operator: Thank you. We will take our first question from Mike Grondahl with Northland.
Unidentified Analyst: Hey, guys. This is Luke on for Mike. Congrats on the nice quarter. Just want to start here with yields being up about 6% year-over-year. I was just wondering how much of this was due to mix versus pricing?
Todd Schwartz: Yes. Good question. I mean, a lot of it has to do with credit performance, right. We're getting less dropping out of accrual and more yield from paying customers. We had very strong payments and recoveries in the second quarter. A lot of the initiatives that we launched in the second half of '22 are now in full operation.
Unidentified Analyst: Got it. And then for the low-end consumer payment and borrowing trends, does the lower credit losses kind of mean that you guys can step on the growth pedal?
Todd Schwartz: Yes, I think so. In the second half, our confidence level in the stability of our credit with the launch of our new underwriting model is high. We feel confident that growth is out there and we're starting to roll out our initiatives for growth in the second half.
Unidentified Analyst: Got it. And then just last one here. Any updates on the competitive environment or anything that's changed since last quarter?
Todd Schwartz: Yes. I mean, I think there's a lot of noise going on with the credit card late fees with Buy Now Pay Later with earned wage access. We're just focused on our core customer. We're focused on driving value to our customer and providing the best available service at the highest NPS (Net Promoter Score).
Operator: Thank you. We will take our next question from Dave Storms with Stonegate.
Dave Storms: Good morning and thank you for taking my questions. Just hoping we could start with the Bitty transaction and if you see any synergies in the near or short term that you're especially excited to take advantage of?
Todd Schwartz: Yes. We just closed it last week, but I've gotten to know Craig pretty well. I think Craig is a talented operator and obviously someone who has a lot of experience in the small business space. We think the collaboration between our two companies is going to yield great results.
Dave Storms: That's very helpful. Thank you. And then, it sounds like you were pretty aggressive with acquiring new customers. Just curious as to what form that took? Were there any concessions? Did acquisition costs go up? And what does that look like with that new vintage of new customers?
Todd Schwartz: Yes, it's actually no. Our acquisition cost year-over-year is down 3%. We're being very disciplined. And to remind everyone, the second quarter vintage typically has had some of the highest charge-offs of the year on the other side of tax refund and payment season. But we like what we're seeing, our funnel is robust and we think we can still maintain that our CPF and find growth here in the second half. We think that the market is starting to come in our favor, and we think we're well-positioned to take advantage of it.
Dave Storms: That's perfect. Thank you. And then just one more, if I could from a macro level. We're seeing unemployment tick up slightly, but there's almost certainty that the Fed will cut rates at least once this year. How do you factor that into underwriting going forward through the back half of the year?
Todd Schwartz: Yes. I think it's a good question. For us, inflation is probably the most painful for our customer. We experienced that in 2022 and handled it. Unemployment is another concern, but I think there's also a benefit when the Fed lowers rates. We'll be paying less interest costs, which is a benefit to our P&L. But it's something we're going to watch and make sure that people are employed. That's something in our underwriting we will be watching weekly to ensure there are no large spikes in unemployment that could cause blips in our delinquency rates or credit.
Dave Storms: Understood. That's very helpful. Thank you for taking my questions, and good luck in the third quarter.
Operator: [Operator Instructions]. And there are no further questions on the line at this time. So I'll turn the program to Todd Schwartz, Chief Executive Officer for any additional or closing remarks.
Todd Schwartz: Thanks, everyone for joining us today, and we look forward to reporting our Q3 results in November. Have a great day.
Operator: This concludes today's program. Thank you for your participation and you may now disconnect.
