Oportun Financial Corporation · NASDAQ:OPRT
Oportun Financial — Q4 2023 Earnings Presentation
36 slides from Oportun Financial's earnings presentation, Mar 12, 2024
Slide 1: 4Q 2023 Earnings Presentation
4Q 2023 Earnings Presentation March 12, 2024 1
Slide 2: Forward-looking statements
Forward-looking statements This presentation and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical fact contained in this presentation and the accompanying oral presentation, including statements as to future performance, result
Slide 3: 4Q23 Earnings Overview
4Q23 Earnings Overview Solid 4Q23 execution, markedly improved profitability anticipated for 2024 Total revenue of $263M, bringing FY23 to record $1.1B, up 11% Y/Y Quarterly operating expense of $129M including $7M of severance, down 15% Y/Y $101M adjusted operating expense is lowest in 2.5 years; n
Slide 4: 2024 Strategic Priorities
2024 Strategic Priorities • Maintaining tight credit posture initiated in July 2022; tightened further in 4Q23 Improving Credit • Launched V12 risk model built on performance indicators and factors learned Outcomes during inflationary environment • February 2024 month-end 1-29 day delinquencies runn
Slide 5: Focused on three differentiated core products: Personal Loans, Secured Personal Loans and Savings
Focused on three differentiated core products: Personal Loans, Secured Personal Loans and Savings Unsecured Secured 2023 Product Savings Personal Loans Personal Loans Streamlining • Primary focus and largest • Expansion opportunity of • #1 savings app of 2023 • Credit card strategic review component
Slide 6: Post-July 2022 credit tightening quarterly vintages are outperforming prior vintages in net lifetime loss
Post-July 2022 credit tightening quarterly vintages are outperforming prior vintages in net lifetime loss rate by month on book(1) ~400bps lower front book losses 12+ months post- disbursement (1) 3Q22 vintage only includes August and September 2022. 6
Slide 7: Pre-July 2022 credit tightening back book continues to shrink
Pre-July 2022 credit tightening back book continues to shrink Quarter-End Back Book Portfolio % of Owned Principal Balance Outstanding (1) 53% of 4Q23 gross charge-offs 61% 21% 3% 4Q22 4Q23 4Q24 Expected Actual Actual Pre-July 2022 Credit Tightening (1) Excludes credit cards. 7
Slide 8: Significantly more efficient than 2019
Significantly more efficient than 2019 OpEx to Average Managed Principal Balance (%) Adjusted OpEx to Average Managed Principal Balance (%)(2) 19.1% 18.1% 16.0% 12.5% (1) 4Q19 4Q23 4Q19 4Q23 OpEx Ratio Adjusted OpEx Ratio (1) 4Q23 includes $7M in non-recurring severance costs (2) See Appendix for Ke
Slide 9: Fourth quarter performance vs. guidance
Fourth quarter performance vs. guidance 4Q 2023 Guidance 4Q 2023 Actual Total Revenue $260 - $265 M $263 M Annualized Net Charge-off 12.3% +/- 15 bps 12.3% Rate (%) Adjusted EBITDA (1) $5 - $10 M $6 M (1) See Appendix for Key Definitions and non-GAAP reconciliation to the most comparable GAAP measur
Slide 10: Fourth quarter 2023 highlights
Fourth quarter 2023 highlights Financial Highlights Adjusted Operating Efficiency(1) (1,402) bps Total Revenue GAAP Net Income $263M $(42)M 52.4% (1) (1) 40.8% 38.4% Adjusted EBITDA Adjusted Net Income $6.1M $(21)M GAAP Diluted EPS Adjusted EPS(1) 4Q22 3Q23 4Q23 $(1.09) $(0.54) Total revenue $262M $
Slide 11: Credit performance
Credit performance Annualized Net Charge-off Rate improved by ~50bps year-over-year in 4Q23 Annualized Net Charge-off Rate (%)(1) 30+ Day Delinquency Rate (%)(1) February 2024 month-end 1-29 day 12.8% delinquencies running lower 12.3% than 2023 11.8% 5.9% 5.6% 5.5% 5.1% - 5.3% 4Q22 3Q23 4Q23 4Q22 3Q
Slide 12: Fourth quarter 2023 capital and liquidity
Fourth quarter 2023 capital and liquidity $200 million February asset backed securitization priced 160 bps lower than October ABS; recently amended senior secured term loan to obtain asset coverage ratio(1) covenant flexibility Sources of Liquidity Net Change in Cash and Primary Drivers Operating Ca
Slide 13: Revised adjusted profitability metrics
Revised adjusted profitability metrics Revisions starting with 2024 reporting to better align with how management evaluates operational performance Revised Adjusted Net Income (1) • Excludes fair value mark-to-market adjustments on Adjusted Net Income Revised Calculation ($ Millions) asset-backed no
Slide 14: First quarter and Full Year 2024 guidance
First quarter and Full Year 2024 guidance 1Q 2024E FY 2024E Total Revenue $233 - $238 M $975 - $1,000 M Annualized Net Charge-off Rate (%) 12.1% +/- 15 bps 11.9% +/- 50 bps Adjusted EBITDA (1) $(14) - $(12) M $60 - $70 M (1) See Appendix for Key Definitions and the revised Adjusted profitability met
Slide 15: Attractive unit economic model
Attractive unit economic model Business structured to deliver strong ROEs in a normalized environment Illustrative Unit Economics - % of Owned Principal Balance Corporate Level Profitability = = = = = A B Total C Net D Risk E F 1 APR Non-Interest Revenue Cost of Interest Net Charge Adjusted Operatin
Slide 16: Appendix
Appendix
Slide 17: Key definitions
Key definitions • 30+ Day Delinquency Rate is the unpaid principal balance for our owned loans and credit card receivables that are 30 or more calendar days contractually past due as of the end of the period divided by Owned Principal Balance as of such date • Adjusted EBITDA is a non-GAAP financial
Slide 18: Key definitions (cont'd)
Key definitions (cont’d) • Customer Acquisition Cost (or "CAC") is calculated as sales and marketing expenses, which include the costs associated with various paid marketing channels, including direct mail, digital marketing and brand marketing and the costs associated with our telesales and retail
Slide 19: Adjusted EBITDA up $40M Y/Y; FY23 up $12M Y/Y
Adjusted EBITDA up $40M Y/Y; FY23 up $12M Y/Y Adjusted EBITDA ($M)(1) $40M $12M $16 $6.1 $1.7 $(34) $(10) 4Q22 3Q23 4Q23 YTD 2022 YTD 2023 Adjusted EBITDA Margin (%)(1) Adjusted EBITDA Margin (%)(1) (12.8)% 5.8% 2.3% (1.1)% 0.2% (1) See Appendix for Key Definitions and non-GAAP reconciliation to the
Slide 20: 4Q Adjusted Net Loss driven by non-cash fair value marks and higher interest expense
4Q Adjusted Net Loss driven by non-cash fair value marks and higher interest expense Adjusted Net Income (Loss) ($M)(1) $(25)M $(194)M $69 $4.6 $(18) $(21) $(124) 4Q22 3Q23 4Q23 YTD 2022 YTD 2023 Adjusted ROE (%)(1) Adjusted ROE (%)(1) 3.3% (15.5)% (19.3)% 12.1% (26.1)% (1) See Appendix for Key Defi
Slide 21: Owned Principal Balance and Aggregate Originations decreased year-over-year
Owned Principal Balance and Aggregate Originations decreased year- over-year given tightened credit underwriting Owned Principal Balance at EOP ($B) Aggregate Originations ($M) (6)% (28)% $3.1 $2.9 $2.9 $610 $483 $437 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 21
Slide 22: 4Q total revenue flat Y/Y; FY23 up 11% Y/Y
4Q total revenue flat Total Revenue ($M) $1,057 Y/Y; FY23 up 11% Y/Y —% $953 $262 $268 $263 4Q23 Highlights Total Revenue: $263M, flat Y / Y; higher portfolio yield 4Q22 3Q23 4Q23 YTD YTD offsetting lower average 2022 2023 daily principal balance Net Revenue: $72M, down Net Revenue ($M) 50% Y / Y du
Slide 23: Key financial & operating metrics
Key financial & operating metrics Quarter Ended Year Ended December 31 Change Change 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Members 2,224,302 2,098,172 2,005,008 1,911,592 1,877,260 18.5 % 2,224,302 1,877,260 18.5 % Products 2,387,745 2,259,464 2,155,240 2,059,007 2,006,245 19.0 % 2,387,745 2,00
Slide 24: Condensed consolidated income statement
Condensed consolidated income statement Quarter Ended Year Ended December 31 Change Change ($ Millions, except per share data. Shares in Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Interest income $ 242.2 $ 243.3 $ 240.5 $ 237.6 $ 244.1 (0.8) % $ 963.5 $ 876.1 10.0 % Non-interest income 20.
Slide 25: Condensed consolidated balance sheet
Condensed consolidated balance sheet Quarter Ended Change ($ Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y Cash and cash equivalents $ 91.2 $ 81.9 $ 73.4 $ 74.1 $ 98.8 (7.7) % Restricted cash 114.8 117.8 129.0 127.8 105.0 9.4 % Total cash $ 206.0 $ 199.6 $ 202.3 $ 201.9 $ 203.8 1.1 % Loans receivable at fa
Slide 26: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Quarter Ended Year Ended December 31, Change Change ($ Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (41.8) $ (21.1) $ (14.9) $ (102.1) $ (8.4) (396.5)% $(180.0) $(77.7) (131.5)% Adjustments: Income tax expense (benefit) (15.5) (16.2) (2.6) (
Slide 27: Adjusted EBITDA reconciliation compared to revised calculation
Adjusted EBITDA reconciliation compared to revised calculation Quarter Ended Year Ended December 31, 4Q23 4Q22 2023 2022 ($ Millions) Reported Revised Reported Revised Reported Revised Reported Revised Net income (loss) $ (41.8) $ (41.8) $ (8.4) $ (8.4) $ (180.0) $ (180.0) $ (77.7) $ (77.7) Adjustme
Slide 28: Adjusted net income reconciliation
Adjusted net income reconciliation Quarter Ended Year Ended December 31, Change Change ($ Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (41.8) $ (21.1) $ (14.9) $ (102.1) $ (8.4) (396.5)% $ (180.0) $ (77.7) (131.5)% Adjustments: Income tax expense (benefit) (15.5) (16.2) (
Slide 29: Adjusted net income reconciliation compared to revised calculation
Adjusted net income reconciliation compared to revised calculation Quarter Ended Year Ended December 31, 4Q23 4Q22 2023 2022 ($ Millions) Reported Revised Reported Revised Reported Revised Reported Revised Net income (loss) $ (41.8) $ (41.8) $ (8.4) $ (8.4) $ (180.0) (180.0) $ (77.7) $ (77.7) Adjust
Slide 30: Adjusted operating efficiency and adjusted operating expense reconciliation
Adjusted operating efficiency and adjusted operating expense reconciliation Quarter Ended Year Ended December 31 Change Change ($ Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Operating Efficiency 49.3 % 45.7 % 51.1 % 56.4 % 57.8 % 50.6 % 75.2 % Total Revenue $ 262.6 $ 268.2 $ 266.6 $ 259.5 $
Slide 31: Basic and diluted earnings per share reconciliation
Basic and diluted earnings per share reconciliation Quarter Ended Year Ended December 31 Change Change ($ Millions, except per share data. Shares in Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (41.8) $ (21.1) $ (14.9) $ (102.1) $ (8.4) (396.5) % $ (180.0) $ (77.7) (131.5
Slide 32: Adjusted earnings per share reconciliation
Adjusted earnings per share reconciliation Quarter Ended Year Ended December 31 Change Change ($ Millions, except per share data. Shares in Millions) 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y 2023 2022 Y/Y Diluted earnings (loss) per share $ (1.09) $ (0.55) $ (0.41) $ (3.00) $ (0.25) (336.0) % $ (4.88) $ (2.37)
Slide 33: Forward looking adjusted EBITDA reconciliation
Forward looking adjusted EBITDA reconciliation 1Q 2024 FY 2024 ($ Millions) Low High Low High Net (loss)* $ (35.8) * $ (34.2) * $ (54.2) * $ (46.3) * Adjustments: Income tax expense (benefit) (14.7) (14.3) (12.9) (10.8) Interest on corporate financing 13.4 13.4 48.7 48.7 Depreciation and amortizatio
Slide 34: Net change in fair value
Quarter Ended Change Net change $ Millions 4Q23 3Q23 4Q22 3Q22 Q/Q Y/Y in fair value Loan Portfolio Drivers Discount rate 10.1 % 11.2 % 11.5 % 10.2 % (1.0)% (1.4)% Remaining cumulative charge-offs as a % of principal balance 12.1 % 11.9 % 10.4 % 11.7 % 0.2 % 1.7 % Average life in years 1.01 1.00 1.0
Slide 35: Fair value estimate methodology
Fair value Quarter Ended Change estimate 4Q23 3Q23 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y methodology Weighted average portfolio yield over the remaining life of the loans 29.10 % 29.58 % 29.85 % 29.61 % 29.34 % 29.73 % 30.14 % (0.24) % Less: Servicing fee (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) %
Slide 36: Net lifetime loan loss rates by vintage
Net lifetime loan loss rates by vintage Year of Origination 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Dollar Weighted Average Original Term for 9.3 9.9 10.2 11.7 12.3 14.5 16.4 19.1 22.3 24.2 26.3 29.0 30.0 32.0 33.3 37.8 Vintage (Months) Net Lifetime Loan Losse