OppFi Inc. Q4 FY2024 earnings call

Company Updates - Fourth Quarter 2024 & Beyond: - OppLoans remains a top-rated loan platform. Product and tech team innovation with AI tools led to a record auto approval percentage in Q4 2024 (nearly 80% vs. 73% in Q4 2023), boosting net revenue by 23% y-o-y. - The continuous refinement of the machine learning model (Model 6 launched in 2024) improved credit evaluation, identified higher credit quality applicants, and enhanced risk separation. In Q4 2024, net charge-off rates improved 10% as a percentage of revenue compared to the prior year. - OppFi sees a favorable growth environment in 2025 with a strong balance sheet, macroeconomic tailwinds, strong credit trends, and scalable growth levers. Bitty, the small business financing investment, has experienced significant growth and is expected to contribute to profitability and cash flow in 2025. - OppFi's balance sheet is strong; excess cash was used to extinguish corporate debt, and the asset-based facility with Blue Owl was extended. - ### Fourth Quarter and Full Year Results: - Total revenue in Q4 2024 was $135.7 million, up 2.1% y-o-y. Net originations were $213.7 million, up 11.3% y-o-y. - Full year 2024 total revenue was $526 million, up 3.3% y-o-y. Net revenue was $321.5 million, up 17.7% y-o-y. GAAP net income was $83.8 million, up from $39.5 million in 2023. Adjusted net income was $82.7 million, up from $41.5 million in 2023.

In the fourth quarter of 2024 compared to Q4 2023, total revenue increased 2.1% to $135.7 million. Net revenue surged 22.9% to $80.8 million. Net originations grew 11.3% to $213.7 million, with retained net originations rising 6% to $192.5 million. The average yield improved by 320 basis points to 130%. The annualized net charge-off rate as a percentage of average receivables decreased by 430 basis points to 54.5%, and as a percentage of total revenue, it improved by 450 basis points to 41.9%.

2025 Guidance: - Full year 2025 total revenue expected to be $563 million to $594 million, a 7% to 13% increase. - Adjusted net income expected to be $95 million to $97 million, a 15% to 17% increase. Based on an anticipated diluted weighted average share count of 90 million, adjusted earnings per share would be between $1.06 and $1.07. - For Q1 2025, adjusted net income is expected to be $22 million to $24 million, more than double the previous guidance.

Risks: - Macro economic uncertainty, such as tariffs potentially impacting inflation and consumer repayments, which could affect the business.

Q: Good morning, everybody. Thanks for taking my call and congrats on wrapping up just a tremendous turnaround year for the 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. Maybe just at a high level, Todd, has anything changed in the last three months since the last call, as you think about both better versus lesser credit consumers you want to target, as well as just your overall feeling about macro uncertainty and what the impact of tariffs might be on certain employment sectors?

A: Yeah. Thanks, David. I mean, I think it's hard to tie it directly back, but I think 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 -- I think people are concerned about inflation and obviously that is something that would [Technical Difficulty]. I think our Model 6 and some of the learnings of '22 have better prepared us to kind of weather some volatility in consumer repayments. But overall we're -- 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 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.

Q: Hey. Thanks, guys, and congratulations on a really strong year. First question is really, [Technical Difficulty] 2025 looks like you guys are leaning in a little bit or we're going to see that inflection in the top line. I think you talked a little bit about macro, a little bit about positive credit environment. But I don't know, could you just articulate again why you feel comfortable leaning into that growth in '25? And then secondly, it sounds like, you're having good success on the marketing side, targeting some channels and whatnot. Could you kind of describe what's going right there and how that's working well?

A: Yeah. Listen, I mean, we're not prognosticators of the stock market or the macroeconomic conditions that they're 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 is, we get a lot of the learnings coming out of that and helped us to get where we are today. We're going to 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 test into this year and think that it can yield some really growth, but with high quality customers. We're never going to necessarily open the credit box and increase the risk of our portfolio. But we definitely think that there's opportunities out there with us, in our position, our balance sheet and we are seeing strong credit trends right now. Obviously, there's some ominous clouds on the horizon with what's going on, but we'll watch it closely and we have a really good read on it from getting data back pretty quickly. So, we can read and react or adjust as needed.

Q: Good morning, and congrats on the really strong quarter and end to 2024. Just hoping we could start with one of the prepared remarks was that you're expecting less seasonality in 2025. Just hoping you could go a little further into what some of the drivers of that may be smoothed earnings profile are?

A: Yeah. It's really our new model in corporate seasonal modeling that we're using -- we deployed last year that really accounts for seasonality and credit loss performance, which smooths out earnings so far in '25. I think also the first quarter of '24 was also kind of the last quarter of some of the elevated charge-offs that came out of '22. So -- but we feel like the earnings stream was going to be a lot more smoothed out this year and there's going to be strong income generations in the first and fourth quarter, more so than the year before. So, it's smoothing it out throughout the year.