Q2 2024 OppFi Inc Earnings Call

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Operator: We stand by; your program will begin momentarily.

Operator: Please stand by; your program will begin momentarily.

Speaker Change: https://www.youtube.com.au Thank you, Operator. Good morning. On today's call are Todd Schwartz, Chief Executive Officer and Executive Chairman, and Pam Johnson, Chief Financial Officer. Our second quarter...

Shaun Smolarz: Thank you, operator. Good morning. On today's call, our Todd Schwartz, Chief Executive Officer and Executive Chairman, and Pam Johnson, Chief Financial Officer. Our second quarter 2024 earnings press release and supplemental presentation can be found at investors.opfi.com. During this call, OppFi will discuss certain forward-looking information. These forward-looking statements are based on assumptions and assessments made by OppFi's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Operator: Thank you, operator. Good morning.

Operator: On today's call are Todd Schwartz, Chief Executive Officer and Executive Chairman, and Pam Johnson, Chief Financial Officer. Our second quarter 2024 earnings press release and supplemental presentation can be found at investors.oppfi.com. During this call, OppFi will discuss certain forward-looking information. These forward-looking statements are based on assumptions and assessments made by OppFi's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Speaker Change: Thank you.

Speaker Change: During this call, OppFi will discuss certain forward-looking information.

Speaker Change: These forward-looking statements are based on assumptions and assessments made by OppFi's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Operator: Any forward-looking statements made during this call are made as of today, and OppFi undertakes no duty to update or revise any such statement, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in the company's filings with the United States Securities and Exchange Commission, including the sections entitled risk factors.

Shaun Smolarz: Any forward-looking statements made during this call are made as of today, and OppFi undertakes no duty to update or revise any such statement, whether as a result of new information, future events, or otherwise.

Shaun Smolarz: Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company's filings with the United States Securities and Exchange Commission, including the sections entitled risk factors.

Speaker Change: important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in the company's filings with the United States Securities and Exchange Commission including the sections entitled risk factors.

Shaun Smolarz: In today's remarks by management, the company will discuss certain non-GAAP financial metrics, or reconciliation of these non-GAAP financial measures to most comparable GAAP measures, can be found in the earnings press release issued earlier this morning.

Speaker Change: In today's remarks by management, the company will discuss certain non-GAAP financial metrics. Reconciliation of these non-GAAP financial measures to most comparable GAAP measures can be found in the earnings press release issued earlier this morning.

Shaun Smolarz: This call is being webcast live and will be available for replay on our website.

Shaun Smolarz: I would now like to turn the call over to Todd.

Todd Schwartz: Thanks, Sean.

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 margins. A 3.7 percentage point improvement in the annualized net charge-off rate as a percentage of total revenue to 32.5%.

Todd Schwartz: Good morning, everyone. We're excited to report records, 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. We've realized more operational efficiencies that continued to strengthen the core business and increased profitability.

Speaker Change: 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 percent.

Todd Schwartz: We've also returned value to stockholders through a special dividend and share repurchases. In addition, we strengthened the balance sheet by paying down debt and generating solid free cash flow. And we've identified adjacent verticals to expand our reach and facilitate credit access, including closing our first investment in Biddy Advance last week.

Todd Schwartz: Week.

Todd Schwartz: Pam will review our second quarter results in detail, our earnings guidance increase for full year 2024, and our earnings outlook for the third quarter. Before she does, I will cover three primary topics. One, highlights from the second quarter of 2024, two, a discussion of the recently announced Biddy transaction, and three, a summary of recent capital allocation initiatives provided by our balance sheet. Total revenue increased 3.1% to $126.3 million, a company record for a second quarter. Gap net income grew 53.1% to $27.7 million, another OppFi record for a second quarter, and adjusted net income increased 56.2% year over year to $24.8 million, also a company record for a second quarter.

Speaker Change: Pam will review our second quarter results in detail, our earnings guidance increase for full year 2024, and our earnings outlook for the third quarter. Before she does, I will cover three primary topics. One.

Speaker Change: highlights from the second quarter of 2024, two, a discussion of the recently announced BIDI transaction, and three, a summary of recent capital allocation initiatives provided by our balance sheet.

Pam Johnson: Total revenue increased 3.1% to $126.3 million, a company record for a second quarter.

Pam Johnson: Gap Net Income grew 53.1%

Pam Johnson: to $27.7 million, another OppFi record for a second quarter. An adjusted net income increased 56.2% year-over-year to $24.8 million, also a company record for a second quarter.

Todd Schwartz: 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%, and 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%. Moreover, strong free cash flow generation continued to bolster the balance sheet. In Q2, we generated 18 million of free cash flow as defined by total cash provided by operating activities minus total cash used in financing activities.

Speaker Change: Our key highlights for the quarter compared to the prior year are a solid 6% point increase in revenue yield to 134.8%, a substantial 30% increase in recoveries,

Speaker Change: A 3.7 percentage point improvement in the annualized net charge-off rate as a percentage of total revenue to 32.5%.

Todd Schwartz: Net income margin increased by 710 basis points to 21.9%, and adjusted net income margin expanded by 660 basis points to 19.6%. In Q2, we generated $18 million of free cash flow as defined by total cash provided by operating activities minus total cash used in financing activities. We have focused on the small business financing market as we believe there are supply and demand imbalances similar to the consumer market. Fifty percent of small businesses that are discouraged non-applicants cite lender requirements as being too strict and or they were denied financing previously as reasons for why they did not expect to be approved and therefore did not apply for financing.

Speaker Change: Moreover, strong free cash flow generation continued to bolster the balance sheet. In Q2, we generated $18 million of free cash flow as defined by total cash provided by operating activities minus total cash used in financing activities.

Todd Schwartz: At the quarter end, total cash, cash equivalence, and restricted cash was 80.8 million, including 46.6 million in unrestricted cash, and an additional 223.2 million of available, unused debt capacity on our financing facilities.

Todd Schwartz: As we have mentioned on these earnings calls during the past several quarters, we have been evaluating strategic opportunities that fit our mission to facilitate credit access to everyday Americans and would help us diversify opt-by with additional products and customers. We have focused on the small business financing market as we believe there are supply and demand and balances similar to the consumer market. Like the everyday consumer that we serve with op loans, there are many small businesses that are underserved by traditional banks and lack access to sufficient credit to meet their working capital needs. According to a recent study by the Federal Reserve, 71% of medium to high credit risk small business applicants for a loan line of credit or merchant cash advance have applied to a non-bank financing company, online lender, or community development financial institution.

Speaker Change: We have focused on the small business financing market as we believe there are supply and demand imbalances similar to the consumer market.

Speaker Change: Like the everyday consumer that we serve with op loans, there are many small businesses that are underserved by traditional banks and lack access to sufficient credit to meet their working capital needs.

Speaker Change: According to a recent study by the Federal Reserve, 71% of medium to high credit risk small business applicants for a loan, line of credit, or merchant cash advance have applied to a non-bank financing company, online lender, or community development financial institution.

Todd Schwartz: 50% of small businesses that are discouraged non-applicant site lender requirements as being too strict and or they were denied financing previously. As reasons for why they did not expect to be approved and therefore did not apply for finance. We're excited by our equity investment in Biddy that includes options to acquire a majority stake and ultimately the entire enterprise in the future. Craig Hacker, who has majority control of Biddy, is an industry veteran and leader, particularly within the small business finance space. I'm personally looking forward to collaborating with Craig and helping him and his team take Biddy to the next level of profitable growth by leveraging off my expertise in data analytics, marketing, and automation.

Speaker Change: 50% of small businesses that are discouraged non-applicants cite lender requirements as being too strict and or they were denied financing previously as reasons for why they did not expect to be approved and therefore did not apply for financing.

Speaker Change: We are excited by our equity investment in BIDI that includes options to acquire a majority stake and ultimately the entire enterprise in the future.

Todd Schwartz: Craig Hecker, who has majority control of Biddy, is an industry veteran and leader, particularly within the small business finance space. I'm personally looking forward to collaborating with Craig and helping him and his team take Biddy to the next level of profitable growth by leveraging OppFi's expertise in data analytics, marketing, and automation. As demonstrated by our strong profitable growth, solid free cash flow generation, and first acquisition, we are carefully managing OppFi for earnings.

Todd Schwartz: This acquisition is intended to serve as the foundational piece of our new small business financing vertical. Biddy is a credit access company that offers revenue-based financing and other working capital solutions. Biddy generates income through origination and service-based income and therefore does not have balance sheet or credit risk. As demonstrated by our strong, profitable growth, solid free cash flow generation, and first acquisition, we are carefully managing OppFi for earnings growth. We believe earnings growth can be achieved given our discipline, expense management, better operational efficiency, and stronger credit performance, despite low to mid-single digit revenue growth. As I discussed earlier, our solid balance sheet has provided us with optionality to allocate capital.

Speaker Change: This acquisition is intended to serve as the foundational piece of our new small business financing vertical. Biddy is a credit access company that offers revenue-based financing and other working capital solutions.

Todd Schwartz: We believe earnings growth can be achieved given our disciplined expense management, better operational efficiency, and stronger credit performance despite low- to mid-single-digit revenue gains. We announced and paid a $0.12 per share special dividend to our public Class A stockholders, as well as a $0.12 per unit special distribution to members of Opportunity Financial, LLC. Our first step in executing on this vision was our equity investment in Biddy to enter the small and medium business financing market.

Speaker Change: We believe earnings growth can be achieved given our discipline expense management, better operational efficiency, and stronger credit performance despite low to mid single-digit revenue growth.

Todd Schwartz: In Q2, we return cash to stockholders through a dividend and share repurchases. We announced and paid a 12 cent per share special dividend to our public Class A stockholders, as well as a 12 cent per unit special distribution to members of Opportunity Financial LLC. After announcing a new 20 million share repurchase program, we purchased approximately $2.5 million of Class A common stock during the quarter at an average price of $3.27. We have continued to repurchase shares in the third quarter. In addition to returning capital to stockholders, we also paid down 10 million of debt on our corporate term loan.

Speaker Change: We announced and paid a $0.12 per share special dividend to our public Class A stockholders, as well as a $0.12 per unit special distribution to members of Opportunity Financial, LLC.

Speaker Change: After announcing a new $20 million share repurchase program, we purchased approximately $2.5 million of Class A common stock during the quarter at an average price of $3.27.

Todd Schwartz: We are continuing to evaluate additional strategic opportunities in new and existing verticals that we believe would enhance our goal of further facilitating credit access.

Todd Schwartz: I believe OppFi has made tremendous progress during the past two and a half years. We have more work to do, and we look forward to building upon the foundation that we have set.

Speaker Change: I believe OppFi has made tremendous progress during the past two and a half years. We have more work to do and we look forward to building upon the foundation that we have set.

Todd Schwartz: In closing, we believe OppFi has the ingredients needed to build a leading credit access and financial services business with a suite of best-in-class digital financial service products for everyday Americans, where there are large, addressable markets and a supply-demand imbalance in credit access. Our first step in executing on this vision was taken with our equity investment in Biddy to enter a small and medium business financing market.

Speaker Change: Our first step in executing on this vision was taken with our equity investment in BIDI to enter a small and medium business financing market.

Pamela Johnson: With that, I'll turn the call over to Pam.

Pamela Johnson: Thanks, Todd, and good morning, everyone. For the second quarter, total revenue increased 3.1 percent year-over-year to 126.3 million, with a 2.4 percent increase in total net originations to 205.5 million and a 600 basis-point improvement in total revenue yield to 134.8 percent. Total retained net originations decreased 3.1 percent to 189.3 million, since one of our bank partners now retains a larger portion of loans originated in some states. From a mixed perspective, 55.6% of originations were to existing customers, and 44.4% were to new customers. During the quarter, along with our bank partners, we continued to amplify the loans to existing customers since those loans are generally less risky than to new customers.

Speaker Change: Thanks, Todd, and good morning, everyone.

Todd Schwartz: From a mixed perspective, 55.6% of originations were to existing customers, and 44.4% were to new customers. During the quarter, along with our bank partners, we continue to emphasize loans to existing customers since those loans are generally less risky than loans to new customers.

Pamela Johnson: Credit performance during the second quarter supported this strategy, as refinanced loans to existing customers had lower delinquencies and loans to new customers. On the absolute basis, new customer originations for the quarter increased by 4.4% year-over-year, while existing customer originations increased by 0.9%. The year-over-year increase in new customer originations, where the results are strategic credit and marketing initiatives, intended to drive lower risk new originations. The annualized net charge-operate, as the percentage of average receivables, decreased by 280 basis points to 43.8% for the second quarter, compared to 46.6% for the prior year quarter. And the annualized net charge-operate, as the percentage of total revenue, decreased by 370 basis points to 32.5% compared to 36.2% last year.

Speaker Change: On an absolute basis, new customer originations for the quarter increased by 4.4% year-over-year, while existing customer originations increased by 0.9%. The year-over-year increase in new customer originations were the result of strategic credit and marketing initiatives intended to drive lower-risk new originations.

Speaker Change: The annualized net charge-off rate, as the percentage of average receivables, decreased by 280 basis points to 43.8% for the second quarter, compared to 46.6% for the prior year quarter.

Speaker Change: And the annualized net chargeoff rate as a percentage of total revenue decreased by 370 basis points to 32.5% compared to 36.2% last year.

Pamela Johnson: Turning to expenses, total expenses were 56.8 million, or 45% of total revenue, compared to 56.2 million, or 45.9% of total revenue in the second quarter last year. And just expense totaled $11 million, or 8.7% of total revenue, compared to $11.2 million, or 9.2% of total revenue in the same period a year ago. Adjusted net income was $24.8 million, compared to $15.9 million for the comparable period last year. Adjusted earnings were $0.29 per share, compared to $0.19 in the second quarter last year. For the three months into June 30, 2024, Op-Fi had $86.3 million weighted average diluted shares outstanding for the calculation of adjusted earnings per share.

Speaker Change: Turning to expenses, total expenses were $56.8 million or 45% of total revenue compared to $56.2 million or 45.9% of total revenue in the second quarter last year.

Pamela Johnson: We believe our balance sheet remains healthy with cash, cash equivalents, and restricted cash of $80.8 million, total debt of $301.8 million, and total stockholders' equity of $201.7 million as of the end of the second quarter. We ended the period with $605.8 million in funding capacity, including $223.2 million of unused debt capacity under financing facilities.

Speaker Change: We ended the period with $605.8 million in funding capacity, including $223.2 million of unused debt capacity under financing facilities.

Pamela Johnson: Now turning to our outlook. 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 are 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 to $54 million. In addition, we now anticipate adjusted earnings per share of $73 to $75, compared to the previous range of $58 to $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 $20 to $22.

Speaker Change: Now turning to our Outlook.

Speaker Change: For the full year 2024, we are reiterating guidance for total revenue of $510 million to $530 million.

Speaker Change: We are currently pacing toward the midpoint of this range, $520 million. We are raising earnings guidance by more than 20% for adjusted net income and adjusted earnings per share.

Speaker Change: 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.

Pamela Johnson: Based on seasonal differences, we also expect total revenue in Q4 to be slightly higher than in Q3, while the annualized net charge of rate as a percentage of total revenue is anticipated to be substantially lower in Q3 than in Q4. Nonetheless, we anticipate year-over-year improvement in this annualized net charge of rate in both of those quarters. As a reminder, this rate is typically the lowest in the second and third quarters, while highest in the first and fourth quarters.

Pamela Johnson: members. I'll close my prepared remarks by announcing our participation at next week's Sedoti MicroCap Virtual Conference. Shaun and I plan to meet with investors on both days, August 14th and 15th, and our presentation will be on the second day at 1:45 p.m. Eastern Time. The webcast of our presentation can be accessed with a link on our Investor Relations website.

Todd Schwartz: I'll close my prepared remarks by announcing our participation at next week's Sidoti Microcap Virtual Conference. Shaun and I plan to meet with investors on both days, August 14th and 15th, and our presentation will be on the second day at 1.45 p.m. Eastern Time. The webcast of our presentation can be accessed with a link on our investor relations website. With that, I would now like to turn the call over to the operator for Q&A.

Speaker Change: And our presentation will be on the second day at 1.45 p.m. Eastern Time. The webcast of our presentation can be accessed with a link on our Investor Relations website. With that, I would now like to turn the call over to the operator for Q&A. Operator?

Operator: With that, I would now like to turn the call over to the operator for Q&A. Operator? Thank you. At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the question Q at any time by pressing star and two. Again, it is star and one if you'd like to ask a question today.

Speaker Change: Thank you. At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the question queue at any time by pressing star and two.

Operator: Again, it is star and one if you'd like to ask a question today.

Speaker Change: Again, it is star and one if you'd like to ask a question today.

Michael Grondahl: We'll take our first question from Michael Grondahl with Northland. Please go ahead. Your line is open.

Speaker Change: We'll take our first question from Mike Grondahl with Northland. Please go ahead, your line is open.

Todd Schwartz: Hey guys, this is Luke on from Mike. Congrats on the nice quarter. I 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? Good question. I mean, a lot of it has to do with credit performance. We're getting less dropping out of a cruel and more yield from paying customers. We had a very, 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.

Todd Schwartz: Yeah, 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, 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. We also have sunsetted some of the pricing testing we were doing last year, which also increased yield. But we were happy to see strong repayment rates and strong recoveries that yielded a higher yield for the quarter.

Speaker Change: Yeah, 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 a very, very strong, you know, 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. We also, you know, had sunsetted some of the pricing.

Todd Schwartz: We also had sunset in some of the pricing testing we were doing last year, which also increased yield. We were happy to see strong repayment rates and strong recoveries that yielded higher yield for the quarter.

Todd Schwartz: Got it. And then for the low-end consumer payment and borrowing trends, does the lower credit losses kind of mean that you had to step on the growth pedal? Yeah, I think that certainly in the second half, we're starting our confidence level and the stability of our credit with the launch of our new underwriting model. We feel confident that growth is out there, and we're starting to roll out our initiatives for growth in the second half. We're also feeling more comfortable with credit seasonally. The second half of the year that the credit performs better than some of the advantages in the first half.

Speaker Change: 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?

Speaker Change: You roll out our initiatives for growth in the second half. We're also feeling more comfortable with credit seasonally. You know, the second half of the year, the credit performs.

Todd Schwartz: So we are confidence level and our growth initiatives are starting to deploy, so we think that there's some growth out there.

Speaker Change: you know, better than kind of some of the vintages in the first half. And so our competence level and our growth initiatives are starting to deploy, so we think that there's some growth out there.

Todd Schwartz: Got it. And then just last one year, any updates on the competitive environment or anything that's changed in the last quarter? Yeah, I mean, I think there's a lot of noise going on with the credit card late fees, with by now pay later, with earn wage access. We're just focused on our core customer. We're focused on driving our customer and providing the best available service at the highest NPS. I think we continue to watch some of the other options in the market and some of the co-competition, but I feel really good about where we're operating metrics and our prospects for growth.

Speaker Change: Yeah, I mean, I think, you know, there's a lot of noise going on with, you know, the...

Speaker Change: The credit card late fees, the buy now pay later, with earned wage access, we're just focused on our core customer. We're focused on driving to our customer and providing the best available service at the highest NPS. And I think

Speaker Change: We continue to watch some of the other options in the market and some of the competition, but I feel really good about where we're operating, our operating metrics, and our prospects for growth.

Michael Grondahl: Yeah, that's helpful. Thank you, guys, for taking the questions, and congrats again on the quarter.

Todd Schwartz: Thank you.

Speaker Change: Yeah, that's helpful. Thank you guys for taking the questions and congrats again on the quarter.

David Storms: We'll take our next question from Dave Storms with Stonegate. Please go ahead. Your line is open.

Todd Schwartz: Morning and thank you for taking my questions. Just hoping we could start with the bitty transaction and just high level. If you see any synergies in the near short term that you're especially excited to take advantage of. Yeah, I mean 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 to provide that with Craig as a business that currently is an origination, so he's earning his income from origination and servicing.

Speaker Change: Good morning and thank you for taking my questions. Just hoping we could start with the BIDI transaction and just high-level if that if you see any synergies in the near short term that you're especially excited to take advantage of.

Speaker Change: We think the collaboration between our two companies is gonna yield great results. To remind everyone, Craig has a business that currently is in origination, so he's earning his income from origination and servicing. We think that has a lot of optionality, also has a really good digital platform. We believe in this digitization of small business and think there's a lot of growth there. I think when you take a lot of the things that we do well and the things that Craig's doing well, there's a lot of complimentary.

Todd Schwartz: We think that has a lot of optionality. He also has a really good digital platform. We believe in the digitization of small business and think there's a lot of growth there. I think when you take a lot of the things that we do well and the things that Craig is doing well, there's a lot of complimentary skill sets, and I think it's going to yield great results. I think we've done a lot of research on the SMB market, and we feel that there is a supply-demand imbalance, and we feel that there's ability to not only take market share but, as the addressable market continues to go online to search for working capital options, that their potential is even growth in the total addressable market.

Craig: And we feel that there is supply, demand, and balance. And we feel that there's ability to not only take market share, but as the...

Todd Schwartz: We're excited. We're going to be, we think there's some accretion to earnings that we mentioned in this year and then for the future, but we feel really good about taking our time there.

Craig: that their potential is even growth.

Craig: We're excited, we think there's some accretion to earnings that we mentioned in this year and then for the future, but we feel really good about taking our time there, we kind of started to talk about it for over a year and a half, and so I think we're just happy that we've fulfilled and delivered on our promise that we're going to...

David Storms: We've kind of started to talk about it for over a year and a half, and so I think we're just happy that we've fulfilled on our delivered on our promise that we're going to create. Op5 is going to create a brand that has a suite of best-in-class digital financial service products that address supply-demand imbalance and credit access, and we feel like we're on our way. We have all the ingredients to be able to do that, and we'll yield great results for us. That's very helpful. Thank you.

Craig: you know, create.

Questioner: That's very helpful, thank you. And then just turn, it sounds like you were pretty aggressive with acquiring new customers. Just curious as to what form, you know, that took. Were there any concessions? Did, you know, acquisition costs go up? And kind of what that looks like, you know, with that new generation of new customers.

David Storms: And then just turn it. It sounds like you were pretty aggressive with acquiring new customers.

Todd Schwartz: Just curious as to what form that took, were there any concessions to acquisition costs go up and kind of what does that look like with that new vintage of new customers? Yeah, it's actually no. Our acquisition cost year over year is down 3%. So we're being very disciplined, and to remind everyone, the second quarter of vintage typically has had some of the highest charge of the year on the other side of tax refund and payment season. But we are liking, you know, what we're seeing. Our funnel is robust, and we think that we can still maintain that our CPS and find growth here in the second half.

Todd Schwartz: We think that the market is starting to come in our favor, and we think that we're well positioned to take advantage of it. That's perfect.

Craig: and find growth here in the second half. We think that the market is starting to come in our favor and we think that we're well positioned to take advantage of it.

David Storms: Thank you.

Todd Schwartz: And then just one more if I could from a macro level. You know, we're seeing unemployment take up slightly, but you know, there's almost certainty that the customer we experienced that in 2022 and had to, you know, and handled it. I think that we've been unemployment is another concern, but I think there's also benefit when the Fed lowers rates, right? We'll be paying less interest costs, which is, you know, obviously a benefit to our P&L. But it's something we're, you know, we're going to watch and obviously making sure that people are employed. You know, that's something that in our underwriting, we will be kind of watching weekly and making sure that we're not seeing large spikes in unemployment in our, in our frequency rates or credit.

Speaker Change: For us, inflation is probably the most painful for our customer. We experienced that in 2022 and had to, you know, and handled it. I think that unemployment is another concern, but I think there's also benefit when the Fed lowers rates, right? We'll be paying less interest costs, which is, you know, obviously a benefit to our P&L. But it's something we're, you know, we're going to watch and obviously making sure that people are employed. You know, that's something that in our underwriting we will be kind of watching weekly and making sure that we're not seeing large spikes in unemployment.

Craig: cause blips in our delinquency rates or credit.

David Storms: Understood. That's very helpful.

Questioner: So that's very helpful. Thank you for taking my questions and good luck in the third quarter.

David Storms: Thank you for taking my questions, and good luck on the third floor. Thank you.

Speaker Change: Understood. That's very helpful. Thank you for taking my questions and good luck in the third quarter. Thank you.

Operator: And once again, if you'd like to ask a question, please press the star and one keys on your telephone keypad. We can pose for a moment to allow any further questions to queue.

Speaker Change: And once again, if you'd like to ask a question, please press the star and one keys on your telephone keypad. We can pause for a moment to allow any further questions to queue.

Todd Schwartz: 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: And there are no further questions on the line at this time, so I'll return 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.

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 does conclude today's program. Thank you for your participation, and you may now disconnect. Thank you.

Speaker Change: This does conclude today's program. Thank you for your participation and you may now disconnect.

Speaker Change: Through. All all all.