Q4 2019 Earnings Call
[music].
Good afternoon.
Opportune part actual corporation's fourth quarter and full year 2019 earnings conference call.
All lines have been placed on mute spirit background noise.
After the speaker's remarks, there will be a question and answer session today's call is being recorded.
For opening remarks introductions I'd like to turn the call over to know third man.
<unk> Investor Relations, Sir you may begin.
Thanks, and good afternoon, everyone. Joining me today to discuss opportune fourth quarter and full year 2019 results are rolled Vasquez, Chief Executive Officer, and Jonathan Cobots, Chief Financial Officer, and Chief administrative officer before we get started let me remind you that some of the remarks made today will include forward looking statements actual results may.
For materially from those contemplated or implied by these forward looking statements a more detailed discussion of the risk factors that could cause. These results to differ materially are set forth in today's earnings press release any forward looking statements that we make on this call are based on assumptions as of today.
Undertake no obligation to update these statements as a result, new information or future events.
Also on todays call, we may present, both GAAP and non-GAAP financial measures, which we believe will provide useful information a reconciliation of GAAP to non-GAAP measures is included in our earnings press release, our fourth quarter 2019 financial supplement as well as the appendix section of the fourth quarter and full year 2019 earnings presentation, all of which are.
Billable on the Investor Relations website at Investor Dot Opportune Dot com.
In addition, this call is being webcast and an archived version will be available after the call on the Investor Relations portion of our website with that I'll now turn the call over <unk>.
Thank you Nelson good afternoon, everyone. We appreciate youre, taking the time to join us and your interest in opportunity.
I will start with a review of our fourth quarter highlights followed by some perspective on our full year performance. Jonathan will then present for fourth quarter and for your financial results followed by our outlook for the first quarter in fourth year of 2020.
I will then take a moment to lay out some of our key objectives for 2020 before opening the line for questions.
The fourth quarter with a very strong finish to a terrific year for opportunities. We continue to grow our revenue delivered stable credit performance that exceeded our expectations improved our operating efficiency and achieved strong bottom line performance.
On a GAAP basis total revenue for the fourth quarter was 165 million grew 19% year over year, what a fair value pro forma basis total revenue with 165 million up 20% year over year.
Or met its principal balance at end of period with 2.2 billion up 23% year over year, driven by the strength of our origination.
Our annualized net charge off rate with 9%, which was better than our previous guidance and underscores the effectiveness of our proprietary risk models.
We were pleased by our credit performance I want to remind you that our goal continues to be to optimize for greater customer access growth and profitability not just to operate at the lowest lost way possible.
Overall, our credit performance continues to demonstrate the value of our data driven centralized underwriting in our full year 2019 annualized net charge off rate was 8.3% well within our annual target range between 79%.
In the fourth quarter, we continue to demonstrate our focus on operating efficiency and cost discipline.
Focus contributed to our improving profitability metrics, including adjusted EBITDA of 17 million and adjusted net income up 26.9 million.
Our fourth quarter adjusted diluted earnings per share or adjusted EPS were 94 cents significantly ahead of our previous guidance in our total adjusted EPS for 2019 were $2.53.
And we'll discuss the components that contributed to our strong performance in just a few minutes.
Now that I've shared some of our financial highlights I'd like to cover how we executed against our growth strategy in 2019, which as I outlined during our previous earning call has five key driver.
They are one customer growth.
Two data and technology, three new products for our Omni channel network in five geographic expansion.
Beginning with customer growth during 2019, we continue to invest in building or customer data and marketing technology platforms.
These platforms or enabling us to deepen our knowledge of our customers and leverage that knowledge to optimize our marketing efforts.
Our mission is to provider customers greater access to affordable financial services and the evolution of our marketing technology platform allows us to reach a greater number of the 100 million consumers we seek to serve.
The development of this platform has increased our brand awareness and enabled us to penetrate a greater percentage of our target market.
This was evident in the fourth quarter, when we furthered our objective a growing our overall customer base by expanding our large Spanish preferring population as well they start English referring customers.
We grew our active customer base, 14% year over year as a percentage of new applicants choosing servicing in English is now 56%.
We also made significant progress with our second driver our investments in data and technology as I mentioned last quarter. We were in the process of phasing in version 10 or de 10 of our risk score card, which has now been fully deployed across our omni channel network.
Just as we had hoped he can represent another improvement in our ability to manage credit risk in our new customer population, especially in our fast growing mobile DRAM.
We also launched the machine learning fraud model in based on our calculations early results indicate that it performed two times better than commercially available alternatives.
With our improvements in credit, scoring and fraud prevention, we're now able to land up to $10000 to our very best returning customers.
Let me now transition to our third strategic driver new products I will start with auto.
Our milestones in auto last year included key integration marketing deliverables product launches in volume targets.
In 2019, we successfully launched purchase and refinance auto loans, while we achieved our learning agenda goals with respect to product structure pricing and integration into our omni channel network origination volume of purchase and refinance loans was slightly less than originally anticipated.
We ended 2019 with 3.8 million in auto loan originations, which was about 1.2 million shy of our goal.
As I noted on our last earnings call. We believe that the largest volume driver in auto will be personal loan secured by a vehicle, which we anticipate sop launching in Q2 2020.
In order to create a more integrated customer experience and to build efficiencies that will benefit our customers intercompany, Matt shrinking the general manager of our personal loan business is now also the GM for auto.
Shifting to credit cards, the opportunities a credit card product was launched ahead of schedule in mid December.
No. The introduction of the opportune credit card was just the soft launch we have been very encouraged by the result.
Our credit card team is unable to complete end to end experience that will eventually serve customers across the U.S.
We began by marketing to customers outside the 12 states, where we currently make personal loans and we have credit card customers in seven New State, New York, Pennsylvania, Massachusetts, Georgia, North Carolina, Connecticut in Virginia.
Excited about these early results as they validate our customers appetite for this product and we are furthering our mission by addressing our customers additional financial needs.
No our fourth strategic driver, our omni channel network.
We added 25 retail locations in 2019 to end the year at 337.
With our retail presence our primary focus was on continuing to drive portfolio growth by opening new locations, while reducing or consolidating locations through a process of network optimization.
We also made investments across our other channels in 2019, including our contact center with the opening of our English speaking location in Jamaica, and the enhancement of our mobile solution with the introduction of all mobile servicing and payment capabilities.
Our final strategic driver is geographic expansion.
In terms of new markets or portfolio growth and momentum is excellent.
Florida is now 5% of our loan portfolio in New Jersey is just shy of 2% of our loan portfolio.
Those two states combined were only 5% at the end of the third quarter.
We see significant expansion opportunities in both states as well as opportunities to add new customers in longtime markets, such as California and Texas.
As I mentioned, we launched the opportune visa credit card in December in states, there were outside of the footprint of our personal loans.
As you'll see on page five of our earnings presentation deck or introduction of credit card has already expanded our footprint to seven additional states.
We will continue our geographic expansion with the opportune credit card as well its explore ways to enter new geographic markets via state licensing or through other means including a potential think sponsorship the offer our personal loan products on the nation wide basis.
In summary, Q4 with a strong quarter in 2019 with an incredible year for opportunities.
We delivered against all our strategic drivers and are making great progress in fulfilling our mission.
I'll now turn the call over to Jonathan who will walk you through a more in depth discussion of our fourth quarter in full year financial results as well as our preliminary outlook for 2020.
Well then spend a few minutes addressing this year's key objectives and then we'll take your question Jonathan.
Thanks, Raul and Hello, everyone. As you May recall in addition to gap. We also evaluate our performance based on fair value pro forma results.
Which we believe present more consistent view of the underlying trends of the business.
Unless I state otherwise all the metrics that I will now share with you will be on a fair value pro forma basis for the purposes of comparison to prior year periods. They force to definitions and reconciliations can be found in our earnings materials.
Now, let me start by giving you a summary of our bottom line results for the quarter. Adjusted net income was $26.9 million up 91% year over year.
This growth in adjusted net income was attributable to strong that revenue growth improvement in operating efficiency and a lower effective tax rate.
Adjusted net income is the numerator of our adjusted return on equity, which was 22.8% for Q4 2019 versus 16.1% in the prior year quarter.
Adjusted or are we benefited from the increase in fair value Harlows, given the declining interest rates since the end of 2019, we expect adjusted our or we will be lower in the first quarter of 2020 overtime. We believe improvements in our operating efficiency will allow us to consistently achieve a high teens are we on a consolidated basis.
Even as we make investments in new products.
We believe adjusted EBITDA is also a useful profitability metric because it is a proxy for our pretax cash profitability and backs out market volatility associated with fair value accounting.
For the fourth quarter, our adjusted EBITDA was $17 million compared to 15.2 million in the prior year quarter. This was ahead of the guidance, we provided a $15 million to $16 million and reflects our operating expense discipline higher total revenue lower cost of funds and better than anticipated net charge offs.
Yeah.
For the fourth quarter on a GAAP basis, we reported net income of $23.2 million down 8% year over year, and 81 cents, a diluted EPS down 20% year over year due to the elevation of our net income in 2018 caused by our election at fair value accounting.
Our adjusted EPS, However, was 94 cents up 52% year over year based on adjusted net income of $26.9 million and well ahead of our guidance range.
For the full year, we reported GAAP diluted EPS of 40 cents down 91% year over year, which was impacted by the requirement to allocate earnings to preferred stock prior to its conversion at IPO. In contrast, our adjusted EPS was $2.53 up 32% year over year.
Sure.
Next I'll run through the key drivers of our results for the fourth quarter.
Total revenue was $165.2 million up 20% over the prior year quarter, driven by equally strong growth in both interest income and noninterest income.
Our interest income for the fourth quarter increased to $148.2 million up 20% year over year as we grew our receivables portfolio through increased originations are managed principal balance at end of period grew 23% over the prior year quarter to reached $2.2 billion Aggregators.
Originations for the quarter of $619.3 million grew 17% due to our successful marketing efforts as well as increases in loan amounts for our returning customers. This portfolio growth was partially offset by an expected decline in our portfolio yield from 34.4% in the fourth quarter.
A year ago to 33.5% for the most recent quarter.
This was due to our rapid growth in Florida, and New Jersey, where rates are lower and our high percentage of returning customers, whom we generally reward with lower rates.
Noninterest income, which includes cash gain on sale from our whole loan sale program increased 20% to $17 million as a direct result of the growth in our loan originations the growth in the volume of loans sold was slightly offset by lower gain on sale premium of 10.2% versus 10.9%.
In the prior year period as a larger percentage of the loans. We sold were part of our access loan program and capitalized origination fees as a percentage of the loan balances decreased as our average loan size has increased.
For the fourth quarter net revenue, which is our total revenue after interest expense in that change in fair value was $131.8 million up 31% year over year the growth in net revenue exceeded our total revenue growth due to lower interest expense growth and an increase in the value of harlows.
Interest expense of $15.4 million was up 20% year over year. The higher interest expense was driven by increasing our average daily debt balance of 23% year over year and the issuance of Noninvestment grade tranches to increase our advance rate in our 2018 ABS deals we were able to access this debt capital of fish.
Certainly as our cost of debt decreased slightly to 4.1% in Q4, 2019 relative to 4.2% and the same period a year ago for the full year. Our cost of that was also 4.1% and over 80% of or debt was at a fixed rate.
Net increase or decrease in fair value or net change in fair value includes our current period principal net charge offs and mark to market on our loans and debt.
We provided a summary of the net change in fair value in our Q4 2019 earnings presentation that is available through our Investor Relations website.
As you'll see on page 14 of the presentation. The fourth quarter 18 million dollar net decrease in fair value consisted of an 18.1 million dollar mark to market increase on our loans receivable, a 4.1 million dollar mark to market increase in our asset back nodes and current period.
Our jobs of $40.2 million.
The 18.1 million dollar increase in fair value of our loans receivable was driven by a quarter over quarter increase in the fair value price for our loans from 103.8% to 104.5% as of December 30, Onest 2019, we're originating more valuable loans with longer terms and lower expected lifetime.
[noise] rates the fair value price also benefited from lower three to 12 month interest rates and credit spreads versus the prior quarter.
The $4.1 million Mark to market increased from our ABS notes resulted from higher two to three year interest rates as well as prices converging to par as our 2017 bond deals approach their call dates.
Page 35 of our earnings presentation illustrates the walk from our Q3 loans receivable Mark to our Q4, Mark in greater detail and there are several contributing factors highlighted first a decline in our portfolio yield which was consistent with our policy of rewarding returning customers, who obtain larger and longer loans.
The lower rate.
Second the average life of our loans increased because we originated more longer term loans third reduction of our estimate of remaining cumulative lifetime loan losses, and fourth a lower discount rate, resulting from lower interest rates taken together. These resulted in a 67 basis point increase in our fair value on pre.
Jim and led to a smaller net decrease in fair value and higher fourth quarter net revenue.
Our operating expenses for the fourth quarter were $100.5 million up 21% over the prior year just.
Operating efficiency of 57.8% was 160 basis points better than the comparable quarter last year. We've achieved this even with our increased investments in new products auto in credit cards, demonstrating our ability to deliver continued improvement in our operating efficiency, even as we invest for long term growth for the full year.
Operating efficiency improved 60 basis points from 28 team. This reflects our ability to exercise strong expense control, which enabled us to allocate capital for investments and the growth of our technology team data scientists and risk analysts as well as public company readiness sales and marketing and new products.
Our customer acquisition cost for the fourth quarter of 2019 was $131 modestly up from $118 in the prior year quarter. In addition to digital testing and expansion into new markets, We decided to increase our overall marketing investments as we realized higher operating efficiencies in other expense area.
Yes.
Operating costs associated with our auto loan and credit card products are included in our overall Opex and page 15 of the earnings deck provides some additional detail regarding these costs for Q4 2019, we recognized $5.1 million of operating expense related to our new product investments and for the full year 20.
19, these costs totaled $14.3 million as we continue to focus on building for long term growth and shareholder value.
Turning now to our tax rate I would like to explain the change in effective tax rate that we had this quarter.
Our effective tax rate was 26% for Q4 2019 as compared to 30% in Q3, 2019 and 27% in previous quarters.
The swing this quarter was due to the onetime impact in Q3 2019 of $7.9 million of stock compensation expense, which decreased pre tax income, but was not deductible for tax purposes, whereas Q4 had no such onetime impact and benefited primarily from a larger percentage of our 2019 revenue.
News being derived from states with lower tax rates, we would expect our effective tax rate to normalize to historical levels going forward.
Moving onto our credit performance, we have closed the gap in delinquencies relative to the prior year at the end of the third quarter, our delinquencies with 30 basis points higher than the prior year quarter in comparison at year end, our 30, plus day delinquency rate returned to last years level, a 4% due to improving credit trends in our portfolio are.
Net charge off rate this quarter was 9%, which was better than our expectations and for the full year 2019, our annualized net charge off rate was 8.3%, which was well within our annual target range of between 7% to 9%.
We continue to maintain a strong liquidity position and fund our business. It's sustainable leverage as of December 31st 29 June cash and cash equivalents were $72.2 million unrestricted cash was $64 million as of December 30, Onest 2019, our debt to equity ratio was 3.2 times.
A reduction from 3.7 times the prior year as the $60.5 million net proceeds we raised their IPO in September reduce doesn't need to issue debt to fund the strong growth of our portfolio. In Q4 29 team as of December 31st 29 gene, we now have $338 million of.
City on our 400 million dollar warehouse line that is committed through October 2021, we continue to manage our funding program to maintain 12 months or more liquidity runway.
Before providing guidance, let me spend a minute talking about two factors, we considered in setting guidance for our first quarter and full year, 2021st as you know there's been a declining interest rates since the end of 2019, which will have an impact on our fair value mark to market and reduce our net revenue in Q1 2020 are just.
Net income guidance for Q1 takes into account.
The second factor is the growth rate of our operating expenses in 2019, we made significant investments in anticipation of our IPO and the launches of credit card and auto for Q1 2020, we expect the 29 gene exit rate for these expenses to impact the year over year comparisons for adjusted EBITDA and adjusted net income.
For full year 2020, however, we expect margin improvement due to much slower growth year over year in operating expenses in the back half of the year.
With that context, let me now provide guidance for the first quarter and full year 2020 for Q1 total revenue between 163 and $165 million adjusted EBITDA between 15 and $17 million adjusted net income between.
Five and $7 million and adjusted earnings per diluted share between 18 cents and 25 cents.
For the full year 2020, we expect total revenue between 725 and $735 million adjusted EBITDA between 86 and $92 million adjusted net income between 68 and $74 million and adjusted earnings per diluted share.
Between $2.28 and $2.48 given our stable loss performance, our Q1 guidance for annualized net charge off rate is 9.1% plus or minus 10 basis points for the full year. Our guidance is a net charge off rate of 8.6% plus or minus 10 basis points, which is within.
Our target range of 7% to 9%.
That concludes my remarks, and I will now turn the call back over to Raul. Thanks.
Thank you Jonathan in 2019, we delivered on all five of our strategic drivers and we exceeded the financial expectations that we had set for ourselves.
Strategic drivers for 2020 or the same as those for 2019 by the end of this year, we expect to have grown across all of our products by further expanding our customer base, our geographic presence and our omni channel network, while continuing to maintain stable credit performance.
We expect to drive continued momentum across our strategic priorities, while being extremely focused on operating efficiency and ultimately delivering improved profitability to all shareholders.
For our personal loan product, we will explore ways to enter new geographic markets via state licensing or through other means including a potential bank sponsorship to offer our personal loan products on a nation wide basis.
We're continuing to invest in building our customer data in marketing technology platforms, and these platforms are enabling us to optimize our marketing and new channels.
For our new products are top priorities for 2020, we'll be bringing personal loans secured by a vehicle to market and building on the initial success of the newly launched opportune credit card.
We're proud of our achievements in the number of people, we serve and we believe we have wonderful opportunities for future sustainable long term growth.
Thank you all for your time and now Jonathan and I Welcome your questions and your comments operator.
Thank you at this time moving conducting a question answer session.
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Confirmation tell indicate your line is in the question Q.
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Participants, who speaker equipment, maybe necessary to pick up your handset before pressing the star keys.
Our first question comes from Mark to rise with Barclays.
[noise] yeah. Thanks for all the good detail on the on the moving parts around the fair value marks the quarter and it sounds like.
Thank you once you've gotten started kind of contemplates the impact of lower rates, but could you maybe Jonathan gives us some specifically for kind of what what the impact is you do you anticipate from lower rates on.
The revenue given kind of given what we already know.
Sure. Thanks for the question Mark So at this is a footnote that we actually included in the earnings press release, where we've indicated that in order to sat Q1 guidance. We're looking at a forward rate interest.
Straight out relative to our loans of 1.4 or 5% as of.
March 31st and so that's down from where we ended the year, obviously, you know quite a bit so that's the basis for the the calculation and we're also seeing a a verdict where you know the forward curve is saying theres going to be a vertical shift in rates.
So the rates are lower on the debt as well for that we're assuming a EUR, 1.14% rate answer that's quite a bit lower.
And where it wasn't as you know when rates move down then that impact is a reduction in that revenue.
Mark.
This is Rob Willett, if I could just said something.
You may recall that.
A few months ago, we talked about the fact that we provide adjusted EBITDA and about end adjusted net income because we think that they'll give you two different views of the business.
Adjusted net income certainly takes into account the value of our loans right. Our credit performance. The tenure of the loans the return, but it is impacted by things like interest rate shifts that we're seeing right now adjusted EBITDA does not have that impact in terms of the mark to market. So we think it's useful in it.
Quarter like Q1 to be able to have both of those metrics or that you can see the impact of interest rates and one and then the other one controls for it as Jonathan mentioned in the script. It's not just the decline in interest rates that are impacting Q1, there's a timing elements in terms of our operating expenses in the exit rate of 29 team that's factored in.
Into both of those numbers, but I just thought again I'd remind people why we think they're providing both metrics is useful.
Okay got it and then.
It looks like your full year guidance for 2020 kind of nicely hogs current expectations was pretty consistent with what you guys have been communicating so far if if we assume no rates remain.
You know relatively low for the full year should we expect you'll be closer to the low end of that range than in the middle or high end.
Scott I think our guidance range considers the rates.
So eight where you know we looked at the most current picture right now.
Yeah, and there's a there's a lot of year to go obviously and we're very committed to what we have told investors, which is we seek to improve the profitability of the business every year. So if we continue to see that impact what we'll try to do is to improve operating efficiency, even further to try to make up for some of the impact of interest rates.
Okay. That's helpful.
Right. Thank you.
Thank you Mark.
Our next question dish and the Sanjay Sakhrani with KBW.
Thank you congrats on the results I guess role you mentioned the success on marketing strategy is driving strong originations.
Can you maybe elaborate a little bit more on what you guys are having success on and then when we think about the <unk>.
For stronger or customers that are getting higher lines can you talk about how penetrated that part of your businesses in terms of the pool of accounts that are better. Thanks [noise].
Sure, so or sort of the marketing piece.
We're I'm really excited about the worked at the marketing team is doing right now and I think there are two parts to that Sanjay. The first is the success that we are seeing with the programs that are being put in place.
I'll start with a direct mail just because direct mail something that we've done for some time, but we continue to improve that's a partnership between the marketing team and certainly our risk team and our data scientists and one of the things that they continue to do is to figure out how to optimize our models. So that that way, we're making NPV positive decision.
In optimizing for disbursements, which obviously is what drives the piano. There was fantastic worked on in 2019 in improving those models and there was a lot of creative testing that was done in direct mail is well that I'm really pleased with him. So that vehicle that we've had for some time and that is very effective for us continues to get better and.
In addition to that.
We continue to strengthen our digital marketing team I've I've had a chance to do a couple of de ties with our team very strong very analytical.
And we're making more and more progress with all of the major online properties that you would expect us to be on from a digital marketing perspective. So there's really nice progress being made there and in addition to that the second thing that is even more exciting to me in some ways is over the years, we've articulated to you and to our investors. The fact that we.
I think we created a competitive advantage when it comes to underwriting that data.
Platform that we're putting together in terms of our customers and marketing efficacy. We believe that when we finished doing that work, which we made a lot of progress in 2019 and there are some deliverables in 2020 that platform that we're putting together on the marketing side. We think is going to give us the same kind of advantage when it comes to marketing that we have relative to.
The competition in underwriting.
So that's an effort that I'm pretty close to it I spent a lot of time with that group and that is really exciting for us.
But that's on the marketing side I'll pause there and see if you have any follow up questions on that when Sanjay before I moved to the second part.
Thank him for the second part [noise].
In terms of of the pool of customers with higher lines.
One of the the things that we're always focused on is continuing to improve the underwriting and it's both underwriting for new customers like the 10, which we talked about in the script or in the introduction I'm sorry to this call, but the group also focuses on trying to figure out how do we optimize the loans for our returns.
Number one of the big accomplishments that we added 2019 with the introduction of our 10000 dollar loan, which we put into the hands of our best in most tenured customers. So we think that there still is an opportunity every year to try to figure out cana customer take on a bigger loan with a longer terms so that that we the payment is.
Affordable without creating hardship in their lives.
And we continue to see success. There. So we think there is still a pool of customers. They can get higher lines relative to what they have today.
Okay.
Right.
I guess, one follow up just given all the turmoil in the market and you know the potential to the economy.
Tactically handling underwriting or you guys pulling back a little bit are you monitoring things just any clarity on that would be helpful. Thank you sure. So first of all your we're always laser focused on credit. It is the most important metric that we haven't the business. We have a large group of people that look at it on a daily basis and.
Then I'm, certainly myself, Jonathan and others look at it and have conversations about it on a weekly basis to understand the trends that are happening so whether we're in a strong economy or whether there are kind of clouds on the horizon. We're always laser laser focused on credit so that would be the first thing second thing is as we mentioned in the call.
Credit performance is stable and certainly when we looked at this quarter. We continue to feel that the performance is right, where we expected to be and you see that reflected in the guidance.
If there are changes that happened in the economy for whatever reason, we have the ability to make changes to our models overnight.
And the beauty of our centralized data trading system is that if Pat or chief credit officer and his team feel that changes are required we can push those overnight and they become effective across every touch point in every channel that we have immediately.
So we're watching it carefully and we think we're well positioned to make changes if they're required but right now we don't see anything that makes us feel like we need to pullback.
Okay wonderful thank you.
Thank you.
Our next question is from John Hecht with Jefferies.
Hi, Thanks, very much afternoon, and congratulations on another good quarter [noise].
First question is and I know you manage the business had a holistic basis, but are there any stats about the branches same store low activity or customer activity, you know and similarly for the omni channel that just can characterize any anything that's going on there.
Hi, John I'm pleased to hear your voice I I'd say first of all we're really pleased with the results of the Omni channel network. When you think about double digit growth and customers double digit growth in originations.
So we think the strategy, which is I articulated is one of our five growth drivers continues to serve us well by serving the customer well. So I'd say that first of all in terms of our retail locations. One of the things that I would tell you is relative to a few years ago, what we're seeing is that our.
Dances in marketing and our advances in site selection or leading us to grow receivables on our branches even faster than we were able to do that a few years ago.
So we are able to reach profitability with our branches within a year and that gives us a lot of confidence to go ahead and increase the number branches as you see is doing in 2020 relative to 2019.
The higher number of branches also gives us a it also reflects the momentum and it gives us confidence that we can continue to grow certainly in places like Florida, and New Jersey that are still relatively new states for us, but also look for pockets in places like California, Texas, and Illinois, where we think we can still put down some branches. So overall.
We think that the omni channel network is successful and where we really have a lot of confidence with the recent performance that we're seeing it or physical location.
Okay. That's helpful and then did you.
New Jersey is relatively new I think very new and you talked about 2% did you say that 2% of their loan portfolios at a new Jersey already.
That's right.
So that's obviously very successful penetration at a very good pace.
That's right and I think in many ways those two states book, Florida, and New Jersey, which are our newest states reflect the advances that we've made in our Omnichannel strategy and then certainly the ability to get better marketing at underwriting.
So when we think about our geographic expansion, which again is one of the other big priorities for us.
We feel that we can continue to look for opportunities to expand state by state on a license a state by state licensing model. The way that we have for our 12 stage four to look at a bank sponsorship if that makes sense for us.
Okay and.
And then yeah I realized early on but we know we all know theres been some changes in California with respect to the regulatory environment implemented or early January and.
Have you seen any demand or the market share opportunities in the wake of that or is it too early to tell at this point.
I think it's still a little bit early but certainly when we put together our marketing plans. This year one of the things that we're going to do is we're going to press harder in California now that some other lenders had to retreat given abbey fivethree nine but it is still a little early.
All right great. Thank you guys very much.
Sure John.
Our next question is from Rick Shane with JP Morgan.
Hey, guys. Thanks for taking my questions in a I appreciate all the data and.
Still waiting for it so I'm asking questions there and are in there I apologize.
What was the volume of loans sold and what was the gain on sale margin during the quarter place.
All right sure right. So we continue to sell a 15% of our total originations and then we sold all of our access lounge and the gain on sale was 10 point.
2%.
Right.
And if you take a look in the data packet has the exact number of loans that we sold.
Got it okay, I haven't added stumbled on that yet, but I'm sure I will.
Thank you and then the other question is as you head into 2020, you or your delinquencies are the same level. They were at the end of last year.
Your charge off guidance is conservative off slightly I.
I am curious when you look at what happened in 2019, and when you think about what's happening in 2020 wasn't the variance versus plan. This year in terms of all gross charge offs or onto recoveries and how should we think about that headed into 2020.
There wasn't really any difference between gross charge offs and recoveries. There's no story there of recoveries were dramatically better or you know versus gross charge offs. I think that's I'm continued to be relatively consistent in our business.
I think if if if I were to answer your question just a little more broadly Rick there would be kind of four points that I would bring up when it comes to losses number one losses are exactly in the range of what we expected and in fact as you pointed out they've been a little bit better than our guidance number two losses are within the target range of.
7% to 9% when we look at them on it on a yearly basis, and that's where we've said we want to be so we feel like we're right in the sweet spot of how we want to manage our business number three just as a reminder, we don't optimized for the lowest level of losses, we optimized for growth and profitability, while still being consistent with our mission and then number.
For a is you pointed out kind of at the beginning the trend is stable when you look at it on a year over year basis, we feel like that the trend is even improving slightly so that gives us a lot of confidence that we're executing the strategy that we've laid out for ourselves quite well.
Yes look the second derivative trend on delinquencies in very favorable.
Thank you.
That is it for me thanks, guys.
Thank you Rick.
Once again, ladies and gentlemen, if you'd like to ask your question. Please press star one.
Our next question is from David Scharf with JMP Securities.
Hi, good afternoon, Thanks for squeezing me in here.
Real estate wanted to maybe revisit.
So some of the geographic focus.
You know first you know I see that Virginia is Ah.
It's one of the new credit card States you know given the recent rate cap enactment. There that finally passed I know is expected for the past Nevertheless.
Similar to California.
Would that be a state we would anticipate you targeting more near term for personal loans.
Yeah, I I would say that's certainly one of many states that we take a look at and watch closely the legislation in Virginia is something that we kept to close eye on and I think as you know David that type of legislation were in favor of because we think it is a really good thing for consumers.
And as it pushes out other lenders that are much higher pricing than ours. We do think it creates a compelling market opportunity for us. So that is certainly one of the states that we're looking at.
Okay, Yeah in <unk> and I only ask because now now that it is a more favorable landscape, whether that's sort of moved it up.
Yeah near the top of the target list HM.
California, I know you were asked wet weather.
The indicators it maybe too early but.
Interest. These couple of months since 80, 539 past I'm wondering even if it hasn't materialized in volumes, if you've noticed any increase in application volume.
Post January one.
We don't.
Applications are one of the things that we really disclose David but it is you can imagine given the healthy growth that we're seeing in loans were also seeing healthy growth really across our whole business in applications as well.
So I would tell you in the state of California, We are pleased with the application volume that we're seeing.
As I mentioned earlier when the question was asked by John.
Our marketing plans for this year do include a strong kind of concerted push to grab some of that volume that we believe is up for grabs.
So we would expect that as the year progress is what will have a bit more color for you in for others.
Got it and maybe just one last one for journal <unk> I know a.
We appreciate the both both the data points at any color on Q1 parameters I'm wondering you know implicit in the revenue guide for 2020.
Should we still be thinking of this year as one in which you can kind of maintain origination growth in the mid teens level.
Your basis.
Yes, yes, yes, absolutely absolutely yeah, we continue to be.
Yeah, we continue to feel we've got great momentum in the business.
So we're really leaning into the opportunities that we're seeing a yeah were earlier, we talked about how pleased we are with the performance, Florida in certainly New Jersey.
But really across the footprint, we think the omni channel strategy is working one of the slides that we put in the deck with slide number five that you alluded to a bit earlier David.
Even the initial the initial performance and credit cards for us is very encouraging to be able to expand our footprint to seven new stage start to build brand awareness awareness there and certainly we have a sense of the plans both for auto under secured personal auto loan and then how credit card expects to continue to roll out there.
These are all things that give us a lot of confidence in our overall business. So yes, we certainly expect move at least mid teens growth in originations.
Terrific. Thanks, very much. Thank you Dave Thank you.
Ladies and gentlemen, we have reached the end of the question answer session I'll now turn the call over to rural Vasquez for closing remarks.
Well I want to thank you everyone. Once again for joining us on todays call and we look forward to speaking with you again soon take care everyone.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.