Q4 2024 OppFi Inc Earnings Call
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Mike Gallantyne: Good morning and welcome to OppFi's fourth quarter 2024 earnings conference call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded.
Speaker Change: Good morning, and welcome to opt Pfizer's fourth quarter 2024 earnings conference call.
All participants are in a listen only mode.
Speaker Change: As a reminder, this conference call is being recorded.
Mike Gallantyne: After management's presentation, there will be a question and answer session. For those listening by dial-in, you will be prompted to enter the queue after the prepared remarks.
Speaker Change: After management's presentation, there will be a question and answer session.
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Mike Gallantyne: I am pleased to introduce your host, Mike Gallantyne, Head of Investor Relations. You may begin. Thank you and good morning and welcome to OppFi's fourth quarter 2024 earnings call. Today, our Executive Chairman and CEO, Todd Schwartz, and CFO, Pam Johnson, will present our financial results before taking questions. You can access our earnings presentation on our website at investors.oppfi.com. During this call, OppFi may discuss certain forward-looking information. The company's filings with the SEC describe essential factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements. Please refer to slide 2 of the earnings presentation for our disclaimer statements covering forward-looking statements and references to information about non-GAAP financial measures, which will be discussed throughout today's call.
Mike: I am pleased to introduce your host Mike <unk> head of Investor Relations.
Speaker Change: You may begin.
Speaker Change: Thank you and good morning, and welcome to <unk> fourth quarter 2024 earnings call.
Speaker Change: Today, our executive Chairman and CEO, Todd Ford CFO, Pam Johnson will present, our financial results before taking questions.
Speaker Change: You can access our earnings presentation on our website at investors got out by Dot com.
Speaker Change: During this call may discuss certain forward looking information.
Speaker Change: The company's filings with the SEC describe essential factors that could cause actual results developments and business decisions to differ materially from forward looking statements.
Speaker Change: Please refer to slide two of the earnings presentation for our disclaimer statements covering forward looking statements and references to information about non-GAAP financial measures will be discussed throughout today's call.
Mike Gallantyne: Reconciliations of those measures to gap measures can be found in the appendix to our earnings presentation.
Speaker Change: Reconciliations of those measures to GAAP measures can be found in the appendix to our earnings presentation with that I'd like to turn the call over to Todd.
Todd Schwartz: With that, I'd like to turn the call over to Todd. Thanks, Mike. And good morning, everyone. Thank you for joining us today.
Todd Ford: Thanks, Mike and good morning, everyone. Thank you for joining us today, when I returned as CEO, we laid out a three year plan to grow our 2021 operational and financial capabilities and I'm happy to report we've exceeded those expectations our motto operational excellence coupled with continuous improve.
Todd Schwartz: When I returned to CEO, we laid out a three-year plan to grow our 2021 operational and financial capabilities. And I'm happy to report we've exceeded those expectations. Our motto of operational excellence coupled with continuous improvement is taking effect in all facets of the business. OppFi made tremendous progress in 2024, propelling our company to deliver strong financial results in the fourth quarter and the fiscal year 2024, including record Q4 and annual total revenue. We expect these strong results to continue in 2025, and our yearly guidance anticipates up to a double-digit percentage increase in revenue and adjusted EPS driven by strong growth and continued operating efficiency.
Todd Ford: It is taking effect in all facets of the business upside made tremendous progress in 2020 for propelling our company to deliver strong financial results in the fourth quarter and the fiscal year 2024, including record Q4 and annual total revenue.
Todd Ford: We expect these strong results to continue in 2025, and our yearly guidance anticipates up to a double digit percentage increase in revenue and adjusted EPS driven by strong growth and continued operating efficiency. In addition, due to the solid performance. So far in Q1, we are increasing our expectations.
Todd Schwartz: In addition, due to the solid performance so far in Q1, we are increasing our expectations for the Q1 2025 adjusted net income we shared during our last call by more than two times.
Todd Ford: For the Q1 2025, adjusted net income we shared during our last call by more than two times.
Todd Schwartz: Pam will provide a detailed review of our 4th quarter financials and guidance for 2025. Before she does, I'd like to highlight a few company updates for the 4th quarter of 2024, the full year of 2024, and the year ahead 2025. OppLoans remains one of the highest rated and most transparent loan platforms in our space. Our product and tech teams continued innovation and use of AI tools led to a record auto approval percentage for our company. This number improved to almost 80% in Q4 2024 compared to 73% in Q4 2023. which improved funnel metrics, propelling our net revenue up 23% year over year.
Todd Ford: Pam will provide a detailed review of our fourth quarter financials and guidance for 2025 before she does I'd like to highlight a few company updates for the fourth quarter of 2020 for the full year of 2024 and the year ahead 2025.
Todd Ford: Op loans remains one of the highest rated and most transparent loan platforms in our space are product and tech teams continued innovation and use of AI tools led to a record Ottawa approval percentage for our company. This number improved to almost 80% in Q4 2024 compared to 73%.
Todd Ford: In Q4 2023.
Todd Ford: Each improved funnel metrics propelling, our net revenue up 23% year over year.
Todd Schwartz: We expect this to continue to improve in 2025, building on our operational efficiency for future growth. The continuous refinement of our machine learning model helped improve the credit evaluation process and help identify and approve applicants with higher credit quality. As you may recall, OppFi launched Model 6 in 2024, which better identifies the risks of long-term charge-offs versus earlier versions that were more focused on up-front, shorter-term repayment status. It also assists in targeting better quality borrowers at the top of the funnel. The model also enhances risk separation and allows for seasonal segmentation and modeling throughout the year.
Todd Ford: We expect this to continue to improve in 2025 building on our operational efficiency for future growth. The continuous refinement of our machine learning model helped improve the credit evaluation process and help identify and approve applicants with higher credit quality as you may recall, our five launched model six and two.
Todd Ford: 2024, which better identifies the risk of long term charge offs versus earlier versions that were more focused on upfront shorter term repayment status. It also assists in targeting better quality borrowers at the top of the funnel.
Todd Ford: The model also enhances risk separation and allows for seasonal segmentation and modeling throughout the year and the fourth quarter of 2020 for a price net charge off rates improved 10% as a percentage of revenue compared to the prior year. The model gives us the confidence to grow and whether different periods of economic volatility.
Todd Schwartz: In the fourth quarter of 2024, OppFi's net charge-off rates improved 10% as a percentage of revenue compared to the prior year. The model gives us the confidence to grow and weather different periods of economic volatility, and it bodes well for our future. OppFi sees a favorable environment for growth in 25. Our strong balance sheet, favorable macroeconomic tailwinds, strong credit trends, and scalable growth levers position us well. We believe the potential of entering into additional partnerships, continued funnel improvements, and direct response marketing initiatives will enable us to attract new high-quality customers who exhibit strong unit economics.
Todd Ford: And it bodes well for our future.
Todd Ford: <unk> is a favorable environment for growth in 'twenty, five our strong balance sheet favorable macroeconomic tailwind strong credit trends and scalable growth levers position us well, we believe the potential of entering into additional partnerships continued funnel improvements and direct response marketing initiatives.
Todd Ford: <unk> will enable us to attract new high quality customers, who exhibit strong unit economics.
Todd Schwartz: As you may recall, BIDI was our first outside investment in the small business financing space. Similar to our consumer business, we continue to see a large supply-demand imbalance in the working capital space for small business. BIDI has experienced significant growth, and we believe it will continue to provide profitability and cash flow to OppFi in 2025. We are excited to continue working with BIDI as they seek to disrupt the space with best-in-class products, modeling, and services. OppFi's balance sheet remains strong. Earlier this week, we used excess cash to extinguish our corporate debt. Last month, we extended our asset-based facility with BlueOwl, providing additional capacity.
Todd Ford: As you may recall, but he was our first outside investment in the small business financing space similar to our consumer business. We continue to see a large supply demand imbalance in the working capital space for small business.
Todd Ford: <unk> has experienced significant growth and we believe it will continue to provide profitability and cash flow to our Phi in 2025. We are excited to continue working with Betty as they seek to disrupt the space with best in class products modeling and servicing.
Todd Ford: <unk> balance sheet remains strong earlier this week, we used excess cash to extinguish our corporate debt last month, we extended our asset based facility with Blue all providing additional capacity. This is a testament to our financial strength and continued growth opportunities. Our corporate development team continues to look for complement.
Todd Schwartz: This is a testament to our financial strength and continued growth opportunities. Our corporate development team continues to look for complementary products where OppFi's best-in-class platform and technology can deliver exceptional value to consumers and businesses. OppFi will look for the highest and best uses of its capital to add accretive acquisitions and investments, invest in high ROI initiatives, and reward shareholders. OppFi is building a leading mission-driven tech platform with a suite of best-in-class digital financial service products that addresses large supply demand imbalances and credit access for consumers and businesses.
Todd Ford: Three products were off by its best in class platform and technology can deliver exceptional value to consumers and businesses at Phi will look for the highest and best uses of its capital to add accretive acquisitions and investments invest in high ROI initiatives and reward shareholders.
Todd Ford: <unk> is building a leading mission driven tech platform with a suite of best in class Digital financial service products that addresses large supply demand imbalances and credit access for consumers and businesses over the last three years, we have taken considerable steps to position <unk> as a leader.
Todd Schwartz: Over the last three years we have taken considerable steps to position OppFi as a leader in our space and fulfill our vision and strategic plan.
Todd Ford: In our space and fulfill our vision and strategic plan.
Todd Schwartz: Pam will now review our fourth quarter and full-year results in detail and share our increased guidance for 2025.
Todd Ford: Pam will now review, our fourth quarter and full year results in detail and share our increased guidance for 2025 with that I will turn the call over to Pam.
Pamela Johnson: With that, I'll turn the call over to Pam. Thanks, Todd. And good morning, everyone. Looking at the fourth quarter of 2024, we are pleased to report that the results reflect continued strong demand for loans, good credit performance and disciplined cost management. For this discussion, all results are for the fourth quarter of 2024 compared with the fourth quarter of 2023. Total revenue increased 2.1% to $135.7 million, supported by an impressive 320 basis point improvement in the average yield to 130%. Net originations grew 11.3% to 213.7 million, with retained net originations rising 6% to 192.5 million, as origination growth outpaced the percentage of loans retained by our bank partners.
Pam Johnson: Thanks, Todd and good morning, everyone.
Pam Johnson: Looking at the fourth quarter of 2024, we are pleased to report that the results reflected continued strong demand for loans, good credit performance and disciplined cost management.
Pam Johnson: But this discussion all results for the fourth quarter of 2024, compared with the fourth quarter of 2023.
Pam Johnson: Total revenue increased two 1% to $135 7 million supported by an impressive 320 basis point improvement in the average yield to 130% net.
Pam Johnson: Net originations grew 11, 3% to $213 7 million with retained originations rising 6% to $192 5 million as origination growth outpaced the percentage of loans, we change by your bank partners.
Pamela Johnson: Our strategic focus on growing our customer base through new, targeted credit and marketing initiatives that exhibit economically attractive profit characteristics continue to drive results. New customer originations increased by 8.8% while displaying improved credit risks, as shown by the increased yield and lower charge-offs. This strategy contributed to a substantial improvement in credit quality, with the annualized net charge-off rate as a percentage of average receivables decreasing by 430 basis points to 54.5% and improving by 450 basis points to 41.9% as a percentage of total revenue. The revenue growth, coupled with the improved credit quality that Todd spoke about earlier, driving the higher yield and improved charge-off rate, drove the significant 22.9% increase in net revenue to $80.8 million.
Pam Johnson: Our strategic focus on growing our customer base through new targeted credit and marketing initiatives that exhibit economically attractive profit characteristics continued to drive results new customer originations increased by eight 8%, while displaying improved credit risks as shown by the increased yield.
Speaker Change: And lower charge offs.
Speaker Change: This strategy contributed to a substantial improvement in credit quality with the annualized net charge off rate as a percentage of average receivables decreasing by 430 basis points to 54, 5% and improving by 450 basis points to 41, 9% as a percentage of total revenue.
Speaker Change: The revenue growth, coupled with improved credit quality that Todd spoke about earlier driving the higher yield and improved charge off rate drove the significant 22, 9% increase in net revenue to $80 8 million.
Pamela Johnson: Cost discipline also played a key role in strong performance. Total expenses before interest expense declined to $45.1 million, or 33.2% of total revenue, down from 33.8%. Continued improvements to our automated loan approvals contributed to effective cost control. For the fourth quarter, 79.5% of loans were approved in seconds with no human intervention, up 630 basis points from the fourth quarter of 2023. Interest expense improved to 8.1% of total revenue, down from 9.1% last year, driven by the paydown of our higher interest corporate debt and a reduction in rates. As a result, adjusted net income more than doubled to $20.3 million from $8.4 million, while adjusted earnings per share grew to $0.23 from $0.10 in the fourth quarter of last year.
Speaker Change: Cost discipline also played a key role strong performance total expenses before interest expense declined to $45 1 million or 33, 2% of total revenue down from 33, 8%.
Speaker Change: Improvements to our automated loan approvals contributed to effective cost control for the fourth quarter 79, 5% of loans were approved in seconds with no human intervention of 630 basis points from the fourth quarter of 2023.
Speaker Change: Interest expense improved to eight 1% of total revenue down from nine 1% last year, driven by the pay down of our higher interest corporate debt and a reduction in rates as a result, adjusted net income more than doubled to $20 3 million from $8 4 million, while adjusted earnings per share grew to <unk>.
Speaker Change: Three from 10 cents in the fourth quarter of last year.
Pamela Johnson: We maintained a strong balance sheet, ending the quarter with $88.3 million in cash, cash equivalents, and restricted cash, alongside $318.8 million in total debt and $234.2 million in total stockholders' equity. OppFi also paid down another $10 million on its corporate debt in the fourth quarter of 2024 and reduced it by another $20 million in the first quarter of 2025, paying it off months ahead of schedule. Our total funding capacity at year end was $613 million, including $206 million in unused debt capacity, excluding our pay down of debt and expansion of our Blue Owl facility in the first quarter of 2025.
Speaker Change: We maintained a strong balance sheet, ending the quarter with $88 $3 million in cash cash equivalents and restricted cash alongside $318 8 million and total debt and $234 2 million and total stockholders' equity.
Speaker Change: <unk> also paid down another $10 million in its corporate debt in the fourth quarter of 2024 and reduced it by another $20 million in the first quarter of 2025 paying it off months ahead of schedule. Our total funding capacity at year end was $613 million, including $206 million in unused debt capacity.
Speaker Change: Excluding our pay down of debt and expansion of our Blue all facility in the first quarter of 2025.
Pamela Johnson: Now, looking at the full year results, which represent the full impact of the strategic initiatives that Todd discussed. Total revenue increased to $526 million, up 3.3% compared with 2023. This was towards the high end of our guidance of $510 to $530 million. With the revenue growth, improved yield, and charge-off rates we realized during the year, net revenues increased 17.7% to $321.5 million. GAP's net income increased significantly to $83.8 million, up from $39.5 million in 2023, and it eluded EPS for the full year with $0.36 compared with a loss of $0.06 in 2023. Adjusted net income increased to $82.7 million compared with $41.5 million in 2023.
Todd Ford: Now looking at the full year results, which represent the full impact of the strategic initiatives that Todd discussed.
Todd Ford: Total revenue increased to $526 million up three 3% compared with 2023.
This was towards the high end of our guidance of $510 million to $530 million with the revenue growth improved yield and charge off rates, we realized during the year net revenues increased 17, 7% to $321 $5 million.
Todd Ford: GAAP net income increased significantly to $83 8 million up from $39 5 million in 2023 and diluted EPS for the full year was 36 cents compared with a loss of six cents in 2023.
Todd Ford: Adjusted net income increased to $82 7 million compared with $41 5 million. In 2023. This also exceeded our raised 2024 guidance of $74 million to $76 million adjusted.
Pamela Johnson: This also exceeded our raised 2024 guidance of $74 to $76 million. Adjusted EPS was $0.95 compared with $0.49 in 2023. This also significantly exceeded our raised EPS guidance of $0.85 to $0.87.
Todd Ford: Adjusted EPS was <unk> 95, compared with 49 cents in 2023. This also significantly exceeded our raised EPS guidance of 85 to 87 cents.
Pamela Johnson: The company delivered strong, full-year results, exceeding guidance and street estimates, driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year. These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver shareholder value.
Todd Ford: The company delivered strong full year results exceeding guidance and street estimates driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year.
Todd Ford: These efforts enhanced efficiency expanded market opportunities and strengthened financial performance underscoring the company's ability to execute its long term strategy and deliver shareholder value.
Pamela Johnson: These strong 2024 results also provide the template for the expected 2025 growth highlighted in our full year guidance, which I will now discuss. Given our strong 2024 operating performance, driven by our improved model, which strengthened the credit quality of originations, refinements in our seasonal modeling, and the focus on operating efficiencies and cost discipline, coupled with the testing of additional marketing partners in 2025, and the healthy start to the year, we are providing the following guidance for the entire year and the first quarter of 2025. for the full year 2025, total revenue of $563 million to $594 million, an increase of 7% to 13%.
Todd Ford: These strong 2024 results also provides a template for the expected 2025 growth highlighted in our full year guidance, which I will now discuss.
Todd Ford: Given our strong 2024 operating performance driven by our improved model, which strengthened the credit quality of originations refinements in our seasonal modeling and the focus on operating efficiencies and cost discipline, coupled with the testing of additional marketing partners in 2025, and a healthy start to the year, we are providing the following guidance for the entire year.
Todd Ford: In the first quarter of 2025.
Todd Ford: For the full year 2025, total revenue of 563 million to $594 million, an increase of 7% to 13%.
Pamela Johnson: Adjusted net income of $95 million to $97 million, an increase of 15% to 17%. And based on an anticipated diluted weighted average share count of $90 million, adjusted earnings per share would be between $1.06 and $1.07. In 2025, we expect less seasonality in our results than in prior years, driven by the stabilization and growth of yield, predictable credit trends, and the full year impact of our operating efficiency. Additionally, we expect a more stable interest rate environment to contribute further to our consistent performance throughout the year. We anticipate this impact will be most pronounced in the first and fourth quarters, with those quarters contributing more than in prior years.
Todd Ford: Adjusted net income of 95 million to $97 million, an increase of 15% to 17% and based on an anticipated diluted weighted average share count of $90 million adjusted earnings per share would be between $1 <unk> and $1.07.
Todd Ford: In 2025, we expect less seasonality in our results than in prior years, driven by the stabilization and growth of yield predictable credit trends and a full year impact of our operating efficiencies. Additionally, we expect a more stable interest rate environment to contribute further to our consistent performance throughout the year.
Todd Ford: We anticipate this impact will be most pronounced in the first and fourth quarters with those quarters contributing more than in prior years.
Pamela Johnson: We expect our momentum to continue in the first quarter, with adjusted net income expected to be $22 million to $24 million, more than double our previous guidance.
Todd Ford: We expect our momentum to continue in the first quarter with adjusted net income expected to be 22 million to $24 million more than our previous guidance 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.
Operator: At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing Star 2. Once again, that is Star 1 to ask a question.
Todd Ford: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: You may remove yourself from the queue at any time by pressing star two.
Todd Ford: Once again that is star one to ask a question.
David Scharf: We'll go first to David Scharf with Citizens. Your line is open, please go ahead. Great, good morning everybody, thanks for taking my call and congrats on wrapping up just a tremendous turnaround year. team over there. Hey, listen, it's been an interesting earnings season where everyone has to ask the obligatory. question about the macro outlook and kind of what assumptions on the consumer you're making.
David Scharf: We'll go first to David Scharf with citizens. Your line is open. Please go ahead.
David Scharf: Great. Good morning, everybody. Thanks for taking my call.
Speaker Change: Congrats on wrapping up just a tremendous turnaround year.
Speaker Change: For the team over there.
Speaker Change: Hey, listen it's a it's been an interesting earnings season, where everyone has to ask the obligatory.
Speaker Change: A question about the macro outlook and kind of what assumptions on the consumer Youre, making.
Todd Schwartz: Maybe just at a high level, Todd, you know, has anything changed in the last three months since the last call, as you think about... both better versus lesser credit. you want to target, as well as just your overall feeling about... No macro uncertainty. Yeah, thanks. Thanks, David. I mean, listen, I think, you know, it's hard to tie it directly back. But I think, you know, I mentioned on the call, our Model 6, which takes a lot of the learnings of 22 when we saw inflation. I mean, ultimately, I think tariffs could, you know, I think people are concerned about inflation.
Speaker Change: Maybe just at a high level Todd.
Speaker Change: Has anything changed in the last three months since the last call as you think about.
Speaker Change: Both.
Speaker Change: <unk> versus lesser credit.
Speaker Change: Tumors, you want to target.
Speaker Change: As well as just your overall feeling about.
Speaker Change: No macro uncertainty in what the impact of tariffs might be uncertain employment sectors.
Speaker Change: Yeah. Thanks, Thanks, David I mean listen I think it's hard to tie it directly back, but I think I mentioned on.
Speaker Change: The call our model six which takes a lot of the learnings of 'twenty two when we saw inflation I mean, ultimately I think tariffs.
Speaker Change: Could I think people are concerned about inflation and obviously that is something that would.
Todd Schwartz: And obviously, that that is something that I think our Model 6 and some of the learnings of 2022 have better prepared us to kind of weather some volatility in consumer repayments.
Speaker Change: Okay.
Speaker Change: Our model <unk> and some of the learnings at 'twenty to have better prepared us to kind of weather, some some volatility and consumer repayments, but.
Todd Schwartz: But overall, I think if you look at our growth trends, we're growing at a really nice clip and we think there's a lot of growth out there, but we're going at a speed and a pace that we feel comfortable with, that we know we have strong unit economics and we know that we're targeting really high-quality customers.
Speaker Change: Overall, we're I think I think if you look at our growth trends were growing at a really nice clip and we think theres a lot of growth out there, but we're going to we're going at a speed and a pace that we feel comfortable with that we know we have strong unit economics, and we know that we're targeting really high quality customers.
Todd Schwartz: And along those lines, can you provide, well, maybe a refresher on what has driven... Over the past year and looking into 2025, what what assumptions are under? and the Revenue Guide do. and whether it reflects a change in focus on maybe the, you know, credit. Yeah, I mean, we launched a little bit of risk-based pricing in the second half of the year, which allowed for more yield. We also, you know, we still had in the book back from 22 and 23 some lower yielding customers that, you know, have since been, you know, off the books.
Dan: Go ahead Dan.
Dan: Along those lines can you provide maybe a refresher.
Dan: And.
Dan: What has driven the increase in yields.
Dan: Over the past year and looking into 2025, what assumptions are underlying kind of the revenue guide there.
Dan: And whether it yet.
Dan: It reflects a change in focus on maybe two.
Speaker Change: You know credit tiers, you're going after.
Yes, I mean, we we launched a little bit of risk based pricing in the second half of the year, which allowed for more yield also.
Speaker Change: We still we still had in the book back from 'twenty to 'twenty three.
Speaker Change: Some lower lower lower yielding.
Speaker Change: Customers that have since been off the books and so that crop yield up also better repayments just better credit history.
Todd Schwartz: And so that's propped yield up. Also, better repayments, just better credit history, better repayment rates, causing us to have some increased yield. So it's a nice blend. receivables in addition to a little bit more yield coming off the book. causing causing more more revenue.
Speaker Change: Better repayment rates, causing us to have some increased yield.
Speaker Change: It's a nice blend.
Speaker Change: So it's even bowls in addition to a little bit more yields coming off the book.
Speaker Change: Causing causing more more revenue.
Todd Schwartz: And then maybe just one last one to squeeze in here, you know, given obviously a lot of the headlines coming out of... Is there any read on... for the critical Q1 sort of pay down quarter, you know, versus prior. Yeah, I mean, we're watching it closely. I mean, we're right, you know, in the start in the middle of it. It's probably too early to assess if it you know, compared to other years. We don't anticipate that refunds will will be, you know, necessarily delayed, or not given. Due to that, that's our position. But we're watching it closely.
Speaker Change: Got it and then maybe just one last one to squeeze in here.
Speaker Change: Given obviously a lot of the headlines coming out of them.
Speaker Change: Washington.
Speaker Change: Is there any.
Any read on the pace of tax refund season.
Speaker Change: So for the critical Q1 sort of pay down quarter versus prior years.
Speaker Change: Yeah, I mean, we're watching it closely I mean, we're right in the start in the middle of it it's probably too early to assess if compared to other years.
Speaker Change: We don't anticipate.
Speaker Change: That refunds will be necessarily delayed or not given due to that thats our position. So we're watching it closely.
David Scharf: And, you know, hoping hoping for a normal refund, payment, um, yep. Okay, great, thank you very much and congrats. Thank you.
Speaker Change: Hoping hoping for a normal.
Matt: Hey, Matt.
Speaker Change: Yes.
Speaker Change: Okay, great. Thank you very much and congrats.
Speaker Change: Thank you.
Mike Grondahl: We'll go next to Mike Grondahl with Northland Securities. Your line is open, please go ahead. Hey, thanks, guys. And congratulations on a really strong year. First question is really... 2025 looks like you guys are leaning in a little bit or we're gonna see that inflection in the top line.
Speaker Change: We'll go next to Mike Grondahl with Northland Securities. Your line is open. Please go ahead.
Speaker Change: Hey, Thanks, guys and congratulations on a really strong year.
Speaker Change: First question is really.
Speaker Change: 2025 looks like you guys are leaning in a little bit or we're going to see that inflection in the topline.
Mike Grondahl: I think you talked a little bit about macro, a little bit about, you know, positive credit environment, but I don't know, could you just articulate again, why you feel comfortable leaning into that growth in 25? Um, and then secondly, you know, it sounds like you're having good success on the marketing side, targeting some channels and whatnot. Can you kind of describe what's going right there and how that's working well? Yeah, you know, listen, I mean, we're not we're not, you know, prognosticators of, you know, the stock market or the macroeconomic conditions, you know, that they're going on, I think, you know, we we really, you know, feel strongly about our underwriting model and the development of it.
Speaker Change: I think you talked a little bit about macro a little bit about you know positive credit environment.
Speaker Change: I don't know could you just articulate again, why you feel comfortable leaning into that growth in 'twenty five.
Speaker Change: And then secondly.
Speaker Change: It sounds like you're having good success on the marketing side targeting some channels and whatnot.
Speaker Change: You kind of describe what's going right there in hold.
Speaker Change: That's working well.
Speaker Change: Yeah.
Speaker Change: Listen I mean, we're not we're not prognosticators of Av.
Speaker Change: The stock market or the macroeconomic conditions.
Speaker Change: Theyre going on I think we really feel strongly about our underwriting model and the development of it over the last couple of years, obviously 22 was a little bit of a painful time, but with the one benefit from that as we get a lot of the learnings.
Todd Schwartz: Over the last couple years, obviously, 22 was a little bit of a painful time. But with the one benefit from that is we get a lot of the learnings coming out of that and helped us to get where we are today. You know, we're going to always, always focus on quality over quantity. But we do think there's a lot of growth out there. We have really not deployed some scalable things, levers and direct response in brand marketing and other things that we think we're going to start to, you know, test into this year and think that it can yield some really growth.
Speaker Change: Coming out of that and helped us to get where we are today.
Speaker Change: We're going to always.
Speaker Change: Always focus on quality over quantity, but we do think there is a lot of growth out there we have really not deployed some scalable things levers in direct response and brand marketing and other things that we think we're going to start to test into this year and think that it can yield some really growth, but with high quality customers and we're never going to.
Todd Schwartz: But with high quality customers, we're never going to, you know, necessarily open the credit box and, you know, increase the risk of our portfolio. But we definitely think that there's opportunities out there with us, you know, in our position, our balance sheet. And we are seeing strong credit trends right now. Obviously, there's, you know, some ominous clouds on the horizon, you know, with what's going on. But, you know, we'll watch it closely. And, you know, we have a really good read on it from from getting data back pretty quickly. So we can we can read and read and react or adjust as needed.
Necessarily open the credit box and an increase the risk of.
Speaker Change: Our portfolio, but we definitely think that there is opportunities out there with us and our position our balance sheet and we are seeing strong credit trends right. Now obviously there is some ominous clouds on the horizon with what's going on but we will watch it closely and we have a really good.
Speaker Change: Read on it from from getting data back pretty quickly. So we can we can read and read and react or adjust as needed.
Mike Grondahl: Got it.
Todd Schwartz: And then on the marketing side, kind of, you know, where you're seeing the most success, what's working? Yeah, I mean, I think like, you know, we just from a customer satisfaction standpoint, the auto approvals have really, really, you know, helped, you know, with with with getting, you know, improved funnel metrics, to allow for customers to go through without human interaction. I think that's something that we prioritize, and have really seen strong gains in. But I think from a customer experience standpoint, we think that we're in a really good spot to convert customers at a higher rate due to that.
Speaker Change: Got it and then on the marketing side kind of.
Speaker Change: Where youre seeing the most success what's working.
Speaker Change: Yes, I mean, I think like we just from a customer satisfaction standpoint, the auto approvals have that really really helped.
Speaker Change: With getting improved funnel metrics to allow for customers to go through without human interaction I think that's something that we prioritize and have really seen strong gains in.
Speaker Change: But I think from a customer experience standpoint, we think that we're in a really good spot to convert customers at a higher rate due to that.
Mike Grondahl: And, you know, that's why our appetite for increasing marketing spend in certain channels, and then also turning on certain channels that we haven't before that we have experience in, but we've just kind of been a little dormant. And we think there's a lot of growth. Got it.
Speaker Change: That's why our appetite for increasing marketing spend in certain channels and then also turning on certain channels that we had before that we have experienced and that we've just kind of been a little dormant.
Speaker Change: There's a lot of growth.
Speaker Change: Yeah.
Mike Grondahl: And then, maybe just lastly, um... You know, cash balances at $88 million at year end, then it sounds like you paid down $20 or $30 million. in early 2025 on the debt. You know, and that was cash generated in 24. You know, it looks like you could generate, I don't know, roughly a hundred million plus in free cash. 125 How do you think about it? Do you want to do another Biddy? Is it share buybacks? You know, what do you think about uses for that? Yeah, I mean, I think, you know, and I touched a little bit on the script.
Speaker Change: Got it and then maybe just lastly.
Speaker Change:
Speaker Change: Cash balances at 88 million at year end than it sounds like you paid down 20 or $30 million in early 2025 on the debt.
Speaker Change: You know and that was cash generated in 'twenty four.
Speaker Change: It looks like you could generate I don't know roughly 100 million plus in free cash in 'twenty.
Speaker Change: <unk> 25.
Speaker Change: How do you think about it if you want to do another bid he.
Speaker Change: Is it.
Speaker Change: Share buybacks, what do you think about uses for that $100 million.
Speaker Change: Yeah, I mean I think.
Todd Schwartz: It's a menu, right? We have a menu of options. And I think we're going to do what we think is the highest and best use of our capital. I think you kind of listed out some of those options. The corporate debt, we were really happy. That's something that was taken out from when we went public back in 21. It was something, it was a higher cost corporate debt that was, you know, at the corporate level that we wanted to extinguish to give us ultimate flexibility to really kind of build out our vision of being a platform business for alternative digital financial service products.
Speaker Change: And I touched a little bit in the script. It's a menu right. We have a menu of options and I think we're going to we're going to do what we think is the highest and best use of our capital I think you kind of listed out some of some of those options. The corporate debt. We were we were really happy that's something that was taken out from the from when we went public back in 'twenty, one and was something that was it was a higher.
Speaker Change: Cost corporate debt.
Speaker Change: At the corporate level that we wanted to extinguish to get us ultimate flexibility to really kind of build out our vision of being a platform business for alternative digital financial service products and this really gives us that flexibility, but yeah, we're going to be looking at a number one growth.
Operator: And this really gives us that flexibility. But yeah, we're going to be looking at number one growth, right? We're also, you know, developing, continuing to develop our product and software. So there's high ROI initiatives there. Buybacks is always an option. You know, there's dividends. There's, you know, a lot of, and then there's obviously us inorganically looking for things like similar to Bitty. So there's kind of a menu of options that we'll be looking at and definitely going to, you know, prioritize things where we think it has the highest ROI for us. Got it. Thank... And as a reminder, ladies and gentlemen, if you'd like to ask a question today, please press star one on your telephone keypad.
Speaker Change: We're also <unk>.
Speaker Change: <unk> continuing to develop our product and software so theres high ROI initiatives there bye.
Speaker Change: Buybacks is always an option.
Speaker Change: Theres dividends there is.
Speaker Change: A lot of it and then Theres, obviously us inorganically looking for things like similar to <unk>. So there's kind of a menu of options that we'll be looking at and definitely going up.
Speaker Change: <unk> types of things, where we think it has it has the highest ROI for us.
Speaker Change: Got it got it thank you.
Speaker Change: Okay.
Speaker Change: Yes.
And as a reminder, ladies and gentlemen, if you'd like to ask a question today. Please press star one on your telephone keypad.
Dave Storms: We'll go next to Dave Storms with Stonegate. Your line is open, please go ahead. Morning and congrats on the really strong quarter and end to 2024. Just so we could start with one of the prepared remarks was that you're expecting less seasonality in 2025. Just hoping you go a little further into what some of the drivers of that maybe smooth earnings profile are. Yeah, it's really, you know, our new model incorporates seasonal modeling that we deployed last year that really, you know, accounts for seasonality and credit loss performance, which smooths out earnings, you know, so far in 25.
Speaker Change: We'll go next to Dave storms with Stonegate. Your line is open. Please go ahead.
Dave Storms: Good morning, and congrats on the really strong quarter, and then 2024.
Speaker Change: Just hoping we could start with one of my prepared remarks, because that youre expecting less seasonality in 2025, just hoping you could go a little further into what some of the drivers of that maybe smoother earnings profile.
Yes, it's really it's really our new model and corporate seasonal modeling.
Speaker Change: We deployed last year that really.
Speaker Change: Accounts for seasonality in credit loss performance, which Smoothes out earnings.
Speaker Change: So far in 'twenty five.
Todd Schwartz: I think also, you know, the first quarter of 24 was also kind of the last quarter of some of the elevated charge-offs that came out of 22.
Speaker Change: I think also.
Speaker Change: The the first quarter of 'twenty four it was also kind of the last quarter. Some of the elevated charge offs that came out of 'twenty two so but.
Todd Schwartz: But, you know, we feel like the earnings stream was going to be a lot more smoothed out this year, and there's going to be, you know, strong income generations in the first and fourth quarter more so than the year before, so it's smoothing it out throughout the year. And then, while thinking about the model, how do you view, like, the upper bound of automation? You know, are you going to run into maybe an end to some of the low-hanging fruit where you can grow that by 500 basis points a year, or will you be able to just expand into new markets and continue to...
Speaker Change: We feel like the earnings stream was going to be a lot more smoothed out this year and there is going to be strong income generation in the first and fourth quarter more so than than the year before so it's smoothing it out throughout the year.
Okay.
Speaker Change: Understood very helpful and then well thinking about the model how do you view like the upper bound of automation.
Speaker Change: Are you going to run into May.
Speaker Change: Maybe and just some of the low hanging fruit, where you can grow that by five.
Speaker Change: 500 basis points, a year or will you be able to just expand into new markets.
Speaker Change: Bush automation.
Todd Schwartz: Yeah, I think it's I mean, I think it's something we can continue to incrementally improve. I think it's probably impossible to get to 100%. You know, there's going to be, you know, who knows with AI these days, maybe maybe it is, but I think you're always going to have, you know, a subset that might might take some human interaction. But, you know, our goal is to continuously improve that metric. You know, we think it has a lot of benefits from an operational efficiency from the funnel metrics. And, you know, it also, our customer satisfaction when someone goes through from an auto approval standpoint is much higher.
Speaker Change: Yeah, I think it's I mean, I think it's something we can continue to incrementally improve.
Speaker Change: I think it's probably impossible to get to a 100% there's going to be.
Who knows with AI. These days, maybe maybe it is but I think you're always going to have a subset that.
Speaker Change: Take some human interaction.
Speaker Change: Our goal is to continuously improve that metric.
Speaker Change: We think it has a lot of benefits from an operational efficiency from the funnel metrics.
Speaker Change: It also our customer satisfaction when someone goes through from an auto approval standpoint is much higher on customers really enjoy the experience. So it's kind of a win win for us. So that's definitely something we will prioritize and I are looking at this year.
Todd Schwartz: Customers, you know, really enjoy the experience. So it's it's kind of a win win win for us.
Dave Storms: So that's definitely something we'll prioritize and are looking at this year. So thank you for taking my questions, and good luck in 2025. Thank you.
Speaker Change: Understood. Thank you for taking my questions and good luck in 'twenty.
Speaker Change: Thank you.
Operator: Thank you ladies and gentlemen.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's program. Thank.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time. [music]
Speaker Change: You for your participation you may disconnect at any time.
Speaker Change: [music].