Q3 2024 OppFi Inc Earnings Call
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Marketing cost efficiency and prudent expense discipline across the organization.
We're also proud that we have successfully executed on some of the strategic initiatives that we previously outlined during the past several quarters. We've also realized additional operational efficiencies that have continued to strengthen the core business and increase profitability.
Speaker Change: Tamara will review our third quarter results in detail in our earnings guidance increase for full year 2024 before she does I will cover the highlights.
Total revenue increased to $136 6 million.
Speaker Change: A company record for any quarter.
GAAP net income grew 106, 4% to $32 1 million another off by a record for any quarter and adjusted net income increased 116, 2% year over year to $28 8 million also a company record for any quarter.
Our key highlights for the quarter compared to the prior year or a 5.4 percentage point increase in annualized average yield to 133, 9%.
An 8.1 percentage point improvement in the annualized net charge off rate as a percentage of total revenue to 34, 3%.
A 400 basis point improvement in total expenses as a percentage of total revenue to 41, 1%.
Net income margin increased by 1100 80 basis points to 23, 5%, while adjusted net income margin expanded by 1100 10 basis points to 21, 1%.
Throughout 2024, we have successfully executed on a number of operational initiatives designed to ensure continued future profitability growth.
We also see additional opportunities to optimize our product structure with the goal of gaining volume while maximizing portfolio profitability operationally. Our continued focus on process automation resulted in consistent year over year decreases in opex as a percentage of revenue, which led to 400 basis points.
Speaker Change: Kris mentioned above.
Speaker Change: Going into 2025, we plan to continue these efforts as well as integrate future AI based enhancements in our operating model.
Speaker Change: <unk> has made tremendous progress in the past two and a half years and we look forward to building upon the foundation that we have set in closing we believe <unk> is well positioned to build a leading credit access in financial services platform with a suite of digital financial service products for everyday Americans.
Speaker Change: Serving large addressable markets that exist due to the supply demand imbalanced in credit access.
Our first step in executing on this vision was taken with our accurately investment entity to enter the small business financing market. We are encouraged by the early results and potential opportunity of this platform and the strength of our relationship with <unk>. We continue to explore similar opportunities that would be accretive and align with <unk>.
Strategic vision.
Pam: With that I'll turn the call over to Pam.
Pam: Thanks, Todd and good morning, everyone for the third quarter total revenue increased two 6% to $136 6 million year over year with a 540 basis point improvement in average yield annualized to 133, 9% total net originations increased 11 eight.
Pam: The $218 8 million of total retained net originations increased 4.0% to $198 4 million as a result of our originations growth outpacing the growth in the percentage of loans retained by our bank partners.
Pam: I'm a mixed perspective 53, 2% of originations were to existing customers and 46, 8% were to new customers.
Pam: During the quarter, we and our bank partners continue to emphasize loans to existing customers since those loans have historically performed better than those to new customers.
Pam: Credit performance during the third quarter supported this strategy as refinance loans to existing customers had lower delinquencies than loans to new customers.
Pam: On an absolute basis, new customer originations for the quarter increased by 18, 8% year over year, all existing customer originations increased by six 3%.
Pam: The year over year increase in new customer originations was the result of strategic credit and marketing initiatives designed to increase originations in lower risk segments.
and so on.
Interest expense totaled $11.3 million, or 8.3% of total revenue, compared to $12.1 million, or 9.1% of total revenue in the same period a year ago, impacted by lower borrowings and a reduction in rates.
Adjusted net income was $28.8 million compared to $13.3 million for the period last year.
Adjusted earnings were $0.33 per share compared to $0.16 in the third quarter last year.
For the three months ended September 30, 2024, OP-FI had 86.7 million weighted average diluted shares outstanding for the calculation of adjusted earnings per share.
We believe our balance sheet remains healthy with cash, cash equivalents, and restricted cash of $74.2 million, total debt of $325.6 million, and total stockholders' equity of $220.3 million as of the end of the third quarter.
We ended the period with $599.2 million in funding capacity, including $199.4 million of unused debt capacity under financing facilities.
Now, turning to our outlook.
For the full year 2024, we are increasing our adjusted net income guidance to $74 million to $76 million, which represents a 17% increase from our prior range of $63 million to $65 million.
This results in anticipated adjusted earnings per share of $0.85 to $0.87 compared to the previous range of $0.73 to $0.75. We are reiterating guidance for total revenue of $510 million to $530 million and are currently pacing towards the midpoint of this range.
Looking forward to 2025, we expect our positive momentum to continue with first-quarter adjusted net income growth in excess of 15% year-over-year.
As a reminder, we typically experience significant seasonality in the demand for loans on our platform, which is generally lower in the first quarter.
Therefore, our potential Q1 earnings growth shouldn't be extrapolated out to the full year. We plan to introduce full-year 2025 guidance when we report our 2024 full-year results in March. With that, I would now like to turn the call over to the operator for Q&A. Operator?
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Speaker Change: And we do have a question. We'll move first to Mike Grondahl with Northland Securities. Your line is open.
Speaker Change: Hey guys, this is Luke on for Mike. Congrats on the nice quarter. I just wanted to dive a little deeper into the improvement and yields. Improved 5% year over year. Just wondering how much of that was due to pricing versus mix and any other color you guys can provide on that?
Speaker Change: Thanks for the question. I think it's a combination of better credit, people paying us back.
Speaker Change: at a higher rate, but also in last year we had retired some lower risk-based pricing initiatives that is causing the yield to increase year over year. We also are starting to test pricing into some other segments as well, which is added to that, but it's a culmination of the three things.
Speaker Change: Okay, I got it. And then just looking out ahead into 2025 here, what are the biggest goals for you guys, or what are you kind of most focused on, or maybe top two or three priorities?
Speaker Change: Yeah, I mean we got the business performing really really well right now You know and if you look at our auto approvals continuing to increase that You know another another five to seven percent for the quarter quarter of a quarter So, you know, we're really excited about the business is performing and our funnel Is very efficient. I think we're focused on growth
Speaker Change: We have a lot of levers and growth initiatives that we've been testing, and we're starting to feel our confidence level and the credit for our customers and our ability to find new volume in different segments, but also with different marketing and channel partners is growing. And so we're looking to grow the business.
Speaker Change: and continue to push on operational efficiencies. You know, on the call we mentioned some of these AI tools that, you know, we're going to be supplementing our ops with to help continue to expand while getting more efficient on the ops side.
Looking at the capital allocation going forward,
Speaker Change: paid the special quarterly dividend. Just wondering about if dividends is something that you're thinking about going forward, if share repurchases have continued in the fourth quarter, just any other sort of color around capital allocation.