Oportun Financial Corporation · NASDAQ:OPRT
Oportun Financial — Q3 2024 Earnings Presentation
47 slides from Oportun Financial's earnings presentation, November 2024
Slide 1: Investor Presentation | November 2024
Investor Presentation | November 2024
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: Company Overview
Company Overview Oportun
Slide 4: Oportun: Borrowing, savings and budgeting for hardworking individuals
Oportun: Borrowing, savings and budgeting for hardworking individuals Strong Customer Value Proposition Proprietary Underwriting Engine Unsecured Personal Secured Personal Savings Loans Loans Comprehensive Physical and Digital Channels Target Market Unique Servicing Thin-file / no-file borrowers who
Slide 5: Mission and Vision
Mission Empowering members to build a better future Vision Be the leading A.I.-driven, digital-first platform helping hardworking individuals meet their borrowing, savings, and budgeting needs 5
Slide 6: Addressing the biggest challenges facing U.S. consumers
Addressing the biggest challenges facing U.S. consumers of U.S. households struggle with spending, saving, 69% borrowing and planning(2) 57% 48% 55% 90% would struggle to with checking of Americans think that being 85% come up with accounts remain financially healthy $1,000 in an overdrafted in disc
Slide 7: Responsibly structured credit products
Responsibly structured credit products Member Personal Secured Solution Loans Personal Loans Simple-to-understand, Personal installment loan Use Case affordable, unsecured, fully- product secured by an amortizing installment loans automobile, allowing members with fixed payments to access larger loa
Slide 8: We deliver significant savings compared to alternatives
We deliver significant savings compared to alternatives Cost of borrowing $1,500(7) Positive social impact $3,562 $3,490 $3,141 Approx. 1.2M $2,000 savings $2,439 $2,495 Credit histories established(8) $1,310 $1,027 $498 Certified by the US Treasury Department Online-only Online Single-Pay Payday Re
Slide 9: Savings product is also a 2024 priority
Savings product is also a 2024 priority #1 Savings App of 2024 according to Bankrate Effortless saving | Unlimited goals | Help reduce overdrafts 8 Best Money-Saving Apps of 2024 Best for Automated Saving according to Forbes Best Money-Saving Apps of August 2024 Problem Solution Impact A.I.-driven 5
Slide 10: Multi-channel loan fulfillment and servicing
Multi-channel loan fulfillment and servicing 49% of 2023 applicants used more than one channel to apply; 74% utilized Mobile / Digital channel for at least part of their applications, even if they initiated in Retail or with a Contact Center Loan Fulfillment Channels* Payment Channels Mix Channel Sc
Slide 11: Strategic Priorities
Strategic Priorities Oportun
Slide 12: 2024 Strategic Priorities
2024 Strategic Priorities • Front book annualized NCO rate of 10.4% vs. 23.7% back book Improving Credit • Front book exhibits 400+ bps lower losses 12+ months post-disbursement Outcomes • 30+ day delinquencies decline Y/Y for third consecutive quarter to 5.2% • V12 credit model driving new loan por
Slide 13: More recent quarterly vintages outperforming 1H22 vintages in net lifetime loss rate
More recent 3Q22-3Q23 quarterly vintages are outperforming 1H22 vintages in net lifetime loss rate by month on book(11) ~400bps lower front book losses 12+ months post- disbursement See Appendix for Key Definitions 13
Slide 14: 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 (12) 3Q24 Annualized Net Charge-Off Rate Front Book 10.4 % Back Book 23.7 % 24% of 61% 3Q24 gross charge- offs 21% 16% 4% 11% 8% YE22 YE23 1Q24 2Q24 3Q24 YE24 E Pre-
Slide 15: Ready to return to originations growth
Ready to return to originations growth Year-Over-Year Aggregate Originations Growth -1% -10% -17% -24% -28% -45% -49% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 15
Slide 16: Financial Overview
Financial Overview Oportun
Slide 17: Attractive unit economic model
Attractive unit economic model 3Q24 Adjusted ROE of 1.1% a 1,147 bps Y/Y improvement from (10.4)% in 3Q23 Illustrative Unit Economics as a % of Owned Principal Balance Corporate Level Profitability = = = = = A B Total C Net D Risk E F 13 APR Non-Interest Revenue Cost of Interest Net Charge Adjusted
Slide 18: Key drivers to reach ROE target
Key drivers to reach ROE target Reductions as a percentage of owned principal balance 8.7:1 to 6:1 20-28% • Prioritize use of free cash flow towards debt repayment • At least $40M of corporate debt on new facility to be repaid by 1/31/26 14.0% to 12.5% • Return to GAAP profitability • Achieve $97.5M
Slide 19: Dollar net charge-offs expected to decline ~9% in 2024
With dollar net charge-offs expected to decline ~9% in 2024, annualized net charge-off rates would be lower with flat-to-moderate ADPB growth As Reported (7-8% ADPB Declines) Flat ADPB 10% ADPB Growth 11.9% 12.0% 11.8% 11.1% 11.1% 10.9% 10.1% 10.1% 9.9% 3Q24 Actual 4Q24 Guidance Midpoint FY24 Guidan
Slide 20: 3Q24 Earnings Overview
3Q24 Earnings Overview Key Financial Results - Resilient total revenue of $250M under conservative credit posture - Quarterly operating expense of $102M down 17% Y/Y, lowest since 2020 - Adjusted EBITDA of $31M, 117% Y/Y growth - Adjusted Net Income profitability Profitable on an adjusted basis in e
Slide 21: Operating expenses and Adjusted OpEx Ratio sharply down since 3Q22
Operating expenses and Adjusted OpEx Ratio sharply down since 3Q22 major expense reduction initiatives Adjusted OpEx to Average Daily Principal Balance (%) $145.3 $143.6 (17)% $141.9 22.6% $132.7 $123.0 $116.4 19.4% 18.6% $107.3 17.5% $101.7 $94.1 $96.3 16.5% 15.6% 14.5% 14.3% 13.8% 13.9% 2Q22 3Q22
Slide 22: Year to date, Oportun would be profitable excluding non-recurring and non-cash impacts
Year to date, Oportun would be profitable if non-recurring and non-cash impacts are excluded $8 $7 $14 $47 $27 $(87) GAAP Net Loss Mark-to-market Mark-to-market Other non- (16) Stock-based Adjusted Net on credit cards on ABS notes recurring charges compensation Income expense Favorable impacts bridg
Slide 23: Third quarter 2024 capital and liquidity
Third quarter 2024 capital and liquidity Record 3Q24 $108M operating cash flow; two warehouse facilities totaling $552M and $223M ABS transaction executed; $235M corporate debt refinancing closed on 11/14 Sources of Liquidity Net Change in Cash and Primary Drivers Operating Cash Flow Trend Fixed Rat
Slide 24: 3Q24 originations virtually flat Y/Y; 4Q24 anticipated to grow ~10% Y/Y
3Q24 originations virtually flat Y/Y following significant credit tightening; 4Q24 anticipated to grow by ~10% Y/Y Aggregate Originations ($M) Total Revenue ($M) (5)% $2,923 (1)% ´24E / ´23 $1,057 (7)% $953 $997 - $1,001 $2,295 $627 $1,813 $483 $584 $1,348 $480 $250 $268 2020 2021 2022 2023 3Q23 3Q2
Slide 25: FY24 Adjusted EBITDA guidance midpoint of $93M
Current FY24 Adjusted EBITDA guidance midpoint of $93M a 6% uplift from prior guidance, almost 5X FY23’s $19M Adjusted EBITDA($M) $92 - $94 +$74M $31 $19 ´24E vs ´23 $17 $14 2022 2023 2024E 3Q23 3Q24 Adjusted EBITDA Margin (%) 1.7% 1.8% 9.3% 5.4% 12.5% Presented under revised calculation introduced
Slide 26: Fourth quarter and Full Year 2024 guidance
Fourth quarter and Full Year 2024 guidance 4Q 2024E FY 2024E Total Revenue $246 - $250M $997 - $1,001M Annualized Net Charge-off Rate (%) 11.8% +/- 15 bps 12.0% +/- 10 bps Adjusted EBITDA* $28 - $30M $92 - $94M * See Appendix for Key Definitions and the revised Adjusted profitability metrics and for
Slide 27: Management and Governance
Management and Governance Oportun
Slide 28: Experienced Management Team with Expertise Across Products and Industries
Experienced Management Team with Expertise Across Products and Industries Raul Vazquez Jonathan Coblentz Chief Executive Officer and Chief Financial Officer and Board Member Chief Administrative Officer 20+ years in Consumer Finance, High 25+ years in Consumer Finance Tech and Retail Patrick Kirscht
Slide 29: Environmental, Social & Governance (ESG) Impact
Environmental, Social & Governance (ESG) Impact Less Expensive Credit(9) Employee Diversity(20) Interest and Fees Saved(9) 7x less on avg vs. lending alternatives 83% in the U.S. identify as members for people with little or no credit $2.4B+ of an underrepresented group; saved cumulatively by member
Slide 30: Appendix
Appendix
Slide 31: Key definitions
Key definitions • 30+ Day Delinquency Rate is the unpaid principal balance for our owned loans and credit cards receivable 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 32: 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 33: Key financial & operating metrics
Key financial & operating metrics Quarter Ended Nine Months Ended September 30 Change Change 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Aggregate Originations (Millions) $ 480.2 $ 434.8 $ 338.2 $ 437.3 $ 482.7 (0.5) % $ 1,253.1 $ 1,375.8 (8.9) % Portfolio Yield (%) 33.2 % 33.9 % 32.5 % 32.7 % 32.5 %
Slide 34: Condensed consolidated income statement
Condensed consolidated income statement Quarter Ended Nine Months Ended September 30 Change Change ($ Millions, except per share data. Shares in Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Interest income $ 230.0 $ 231.4 $ 230.6 $ 242.2 $ 243.3 (5.4) % $ 692.0 $ 721.3 (4.1) % Non-interest i
Slide 35: Condensed consolidated balance sheet
Condensed consolidated balance sheet Quarter Ended Change ($ Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y Cash and cash equivalents $ 71.8 $ 72.9 $ 69.2 $ 91.2 $ 81.9 (12.3) % Restricted cash 156.7 163.8 127.4 114.8 117.8 33.1 % Total cash $ 228.5 $ 236.6 $ 196.6 $ 206.0 $ 199.6 14.5 % Loans receivable at
Slide 36: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Quarter Ended Nine Months Ended September 30, Change Change ($ Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (30.0) $ (31.0) $ (26.4) $ (41.8) $ (21.1) (41.7) % $(87.4) $(138.1) Adjustments: Income tax expense (benefit) (9.5) (18.1) (4.0) (15
Slide 37: Adjusted net income reconciliation
Adjusted net income reconciliation Quarter Ended Nine Months Ended September 30, Change Change ($ Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (30.0) $ (31.0) $ (26.4) $ (41.8) $ (21.1) (41.7)% $ (87.4) $ (138.1) 36.7 % Adjustments: Income tax expense (benefit) (9.5) (18.
Slide 38: Adjusted operating expense and ratio reconciliation
Adjusted operating expense, adjusted operating efficiency and adjusted operating expense ratio reconciliation Quarter Ended Nine Months Ended September 30 Change Change ($ Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Operating Efficiency 40.8 % 43.6 % 43.8 % 49.3 % 45.7 % 42.7 % 51.0 % Total
Slide 39: Basic and diluted earnings per share reconciliation
Basic and diluted earnings per share reconciliation Nine Months Ended September Quarter Ended 30 Change Change ($ Millions, except per share data. Shares in Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (30.0) $ (31.0) $ (26.4) $ (41.8) $ (21.1) (41.7) % $ (87.4) $ (138.1)
Slide 40: Adjusted earnings per share reconciliation
Adjusted earnings per share reconciliation Nine Months Ended September Quarter Ended 30 Change Change ($ Millions, except per share data. Shares in Millions) 3Q24 2Q24 1Q24 4Q23 3Q23 Y/Y 2024 2023 Y/Y Diluted earnings (loss) per share $ (0.75) $ (0.78) $ (0.68) $ (1.09) $ (0.55) (36.4) % $ (2.21) $
Slide 41: Forward looking adjusted EBITDA reconciliation
Forward looking adjusted EBITDA reconciliation 4Q 2024 FY 2024 ($ Millions) Low High Low High Net (loss) $ (12.1) * $ (10.6) * $ (47.8) * $ (46.2) * Adjustments: Income tax expense (benefit) (3.4) (2.9) (12.9) (12.5) Interest on corporate financing 10.1 10.1 49.8 49.8 Depreciation and amortization 1
Slide 42: Forward looking adjusted net income and adjusted EPS reconciliation
Forward looking adjusted net income and adjusted earnings per share reconciliation FY 2025 ($ Millions, except per share data. Shares in Millions) Low High Net Income (loss) $ 12.6 $ 25.1 Adjustments: Income tax expense (benefit) 4.7 9.3 Stock-based compensation expense 14.4 14.4 Other non-recurring
Slide 43: Net change in fair value
Quarter Ended Change $ Millions 3Q24 2Q24 3Q23 2Q23 Q/Q Y/Y Net change Loan Portfolio Drivers in fair value Discount rate 8.3 % 8.7 % 11.2 % 11.1 % (0.3)% (2.8)% Remaining cumulative charge-offs as a % of principal balance 11.9 % 11.6 % 11.9 % 11.4 % 0.4 % —% Average life in years 1.11 1.02 0.99 0.9
Slide 44: Fair value estimate methodology
Fair value Quarter Ended estimate Change 3Q24 2Q24 1Q24 4Q23 3Q23 2Q23 1Q23 Y/Y methodology Weighted average portfolio yield over the 26.96 % 28.42 % 28.87 % 29.10 % 29.58 % 29.85 % 29.61 % (2.62) % remaining life of the loans Loans receivable at fair Less: Servicing fee (5.00) % (5.00) % (5.00) % (
Slide 45: Net lifetime loan loss rates by vintage
Net lifetime loan loss rates by vintage Year of Origination 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Dollar Weighted Average Original Term for Vintage (Months) 19.1 22.3 24.2 26.3 29.0 30.0 32.0 33.3 37.8 39.2 Net Lifetime Loan Losses as % of Original Principal Balance 6.1% 7.1% 8.0% 8.2% 9
Slide 46: Endnotes
Endnotes 1. FINRA Investor Education Foundation Study, February 2021 2. Financial Health Network (FHN): “Financial Health Pulse™ 2022 U.S. Trends Report” 3. GoBankingRates Survey, December 2021 4. Financial Health Network: “The FinHealth Spend Report 2022” 5. Gallup article published on May 18, 2023
Slide 47: Investor Contact
Investor Contact Dorian Hare 650-590-4323 ir@oportun.com