OppFi (OPFI) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total originations reached a record $165 million, up 25% year-over-year and 14% sequentially, indicating strong demand for short-term credit [6][24] - Adjusted revenue for Q3 2021 was$ 92 million, a 25% increase compared to Q3 2020 and a 17% increase sequentially [7][23] - Adjusted EBITDA was $32 million, representing a 35% margin, with adjusted net income of$ 17 million for the quarter [7][38] - The annualized net charge-off ratio increased to 36%, up from 28% in Q2 2021 and 25% in Q3 2020, indicating a return to pre-COVID levels [25][79] Business Line Data and Key Metrics Changes - The ending receivables balance was $293 million, up 22% year-over-year and 13% sequentially [6][23] - 51% of originations were from new customers, a significant increase of approximately 40% from the previous quarter [24] - The company is investing heavily in technology, particularly in AI and machine learning tools, to enhance the credit approval process [8][9] Market Data and Key Metrics Changes - The demand environment is recovering but remains less steep than anticipated, with consumers holding higher cash reserves due to pandemic influences [14] - The company expects a gradual return to normalized demand as consumers work through their savings [14][15] Company Strategy and Development Direction - The company is focusing on product innovation and design to capture more market share, particularly through the introduction of SalaryTap and the OppFi credit card [10][11][44] - A personalized pricing approach is being explored to better align with consumer needs and drive growth [15][52] - The company aims to become a premier digital financial services destination by offering a comprehensive product suite [17][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while originations accelerated, the demand rebound was less steep than expected due to various macroeconomic factors [14] - The company anticipates Q4 revenue will be supported by ongoing growth in originations and higher receivables, but earnings may be impacted by credit normalization and increased marketing efforts [16][46] - The long-term prospects remain positive, with a commitment to investing in the platform to drive future growth and increase market share [46] Other Important Information - The company published its inaugural Social Impact Report, highlighting the positive effects of its products on consumer credit scores [12] - The company has a diversified capital structure with nearly$ 500 million of funding capacity to support future growth plans [41] Q&A Session Summary Question: Demand environment and year-end balances outlook - Management indicated that the demand environment is broad-based and challenging to forecast due to external factors, with healthy growth compared to 2019 [50] Question: Impact of personalized pricing approach - Management clarified that the personalized pricing approach is separate from competitive factors and aims to drive customer growth while offering lower-priced products [52] Question: Timeline for SalaryTap and credit card product impact - Management expects both products to scale over time, with SalaryTap showing strong product-market fit [56] Question: Cadence of originations over the quarter - Management noted steady origination growth in the 20% range year-over-year, projecting similar trends for Q4 [62] Question: Credit quality and charge-off rates - Management expects charge-offs to normalize to pre-pandemic levels, with Q4 typically seeing higher charge-off rates [79][85]