Oportun Financial Corporation · NASDAQ:OPRT
Oportun Financial — Q2 2024 Earnings Presentation
39 slides from Oportun Financial's earnings presentation, Aug 8, 2024
Slide 1: 2Q 2024 Earnings Presentation
2Q 2024 Earnings Presentation August 8, 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: Second quarter performance vs. guidance
Second quarter performance vs. guidance 2Q 2024 Guidance 2Q 2024 Actual Total Revenue $245 - $250M $250 M Annualized Net Charge- 12.4% +/- 15 bps 12.3% Off Rate (%) Adjusted EBITDA (1) $14 - $17M $30 M (1) See Appendix for Key Definitions and non-GAAP reconciliation to the most comparable GAAP measu
Slide 4: 2Q24 Earnings Overview
2Q24 Earnings Overview Key Financial Results - Resilient total revenue of $250M under conservative credit posture Top-end of guidance range - Quarterly operating expense of $109M, down 20% Y/Y 270+ bps Y/Y improvement in Adjusted OpEx Ratio; $94M Adjusted Operating Expense lowest in 3 years - Adjust
Slide 5: 2Q24 performance: Significant Y/Y improvement on key metrics
2Q24 performance: Significant Y/Y improvement on key metrics Portfolio Yield Risk Adjusted Yield 33.9% s 21.6% ps 1 bp 7b +19 +16 32.2% 19.7% 2Q23 2Q24 2Q23 2Q24 Net Charge-offs ($M) Adjusted Operating Expense ($M) $123 -23.5 -10.3 % $93 % $94 $84 2Q23 2Q24 2Q23 2Q24 5
Slide 6: Second quarter 2024 highlights
Second quarter 2024 highlights Financial Highlights Adjusted EBITDA Trends ($M)(1) $30 Total Revenue GAAP Net Loss $250M $31M $14 $14 Adjusted EBITDA(1) Adjusted Net Income(1) $9.9 $30M $3.2M $1.9 GAAP Diluted EPS Adjusted EPS(1) $(0.78) $0.08 $(20) Annualized Net Charge-Off Rate (NCO)(1) 1Q23 2Q23
Slide 7: 2024 Strategic Priorities
2024 Strategic Priorities • Front book annualized net charge-off rate 10.6% vs. 21.2% back book Improving Credit • 30+ day delinquencies decline Y/Y for second consecutive quarter to 5.0% Outcomes • Expanding application use to returning members of V12 risk model built on inflation data; V12-underwr
Slide 8: Post-July 2022 credit tightening vintages outperforming in net lifetime loss rate
Post-July 2022 credit tightening quarterly vintages are outperforming prior vintages in net lifetime loss rate by month on book(1) ~400bps lower ~400bps lower front book front book losses 12+ losses 12+ months post- months post- disbursement disbursement (1) 3Q22 vintage only includes August and Sep
Slide 9: 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) 2Q24 Annualized Net Charge-Off Rate Front Book 10.6 % Back Book 21.2 % 61% 28% of 2Q24 gross charge-offs 21% 6% 16% 11% 3% YE22 YE23 1Q24 2Q24 3Q24 E YE24 E Pre-
Slide 10: Steadily trending towards a return to originations growth as credit normalizes
Steadily trending towards a return to originations growth as credit normalizes Year-Over-Year Aggregate Originations Growth -10% -17% -24% -28% -45% -49% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 10
Slide 11: Operating expenses and Adjusted OpEx Ratio sharply down
Operating expenses and Adjusted OpEx Ratio sharply down since prior to 3Q22 major expense reduction initiatives Adjusted OpEx to Average Daily Principal Balance (%) $145.3 $143.6 $141.9 22.6% $132.7 $123.0 $116.4 19.4% 18.6% $107.3 17.5% $101.7 16.5% $94.1 15.6% 14.5% 14.3% 13.8% 2Q22 3Q22 4Q22 1Q23
Slide 12: Letter of intent signed to sell Credit Card portfolio
Letter of intent signed to sell Credit Card portfolio Buyer: A leading U.S. credit card marketer and servicer Expected 2024 Impact: of credit cards • Revenue: -$11M 2H24 impact on interest and non-interest income impact Sale price: • Adjusted EBITDA +$4M 2H24 impact inclusive of revenue loss, • 70%
Slide 13: New collaboration with Western Union to provide lending service
New collaboration with Western Union to provide lending service Potential for Oportun to reach Western Union's millions of customers Key partnership attributes: • Collaboration with Western Union, a leader in cross-border money transfers • Significant lead generation opportunity for Oportun • Key pr
Slide 14: Credit performance
Credit performance Annualized net charge-off rate declines 23 bps year-over-year; 30+ day delinquency rate reduced 30 bps year-over-year Annualized Net Charge-off Rate(1) 30+ Day Delinquency Rate(1) 12.5% 12.3% $93.5 12.0% 5.3% 5.2% 5.0% $155.8 $144.3 $85.3 $83.9 $134.9 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24
Slide 15: Second quarter 2024 capital and liquidity
Second quarter 2024 capital and liquidity Record 2Q24 $108M operating cash flow increased 5% year-over-year Sources of Liquidity Net Change in Cash and Primary Drivers Operating Cash Flow Trend Fixed Rate Debt (%) ($M) ($M) ($M) $941 $40 $107 $106 $108 $103 17% $237 $86 -Net revenue and $108 operati
Slide 16: Demonstrated access to capital markets
Demonstrated access to capital markets Since June 2023, Oportun has raised over $1.6 billion in financings from fixed income investors, based upon the strong performance of recent vintages Date Type Amount ($M) June 2023 (1) Whole Loan Sale $ 300 August 2023 Whole Loan Sale 400 October 2023 Private
Slide 17: Third quarter and Full Year 2024 guidance
Third quarter and Full Year 2024 guidance 3Q 2024E FY 2024E Total Revenue $248 - $252M $995 - $1,010M Annualized Net Charge-off Rate (%) 12.3% +/- 15 bps 12.1% +/- 30 bps Adjusted EBITDA (1) $23 - $26M $84 - $92M (1) See Appendix for Key Definitions and the revised Adjusted profitability metrics and
Slide 18: 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 (7-10% ADPB Declines) Flat ADPB 10% ADPB Growth 12.3% 12.3% 12.1% 11.2% 11.1% 11.1% 10.2% 10.1% 10.1% 2Q24 Actual 3Q24 Guidance Midpoint FY24 Guid
Slide 19: Attractive unit economic model
Attractive unit economic model Business structured to deliver strong ROEs in a normalized environment Illustrative Unit Economics as a % 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 Opera
Slide 20: Key drivers to reach ROE target
Key drivers to reach ROE target Reductions as a percentage of owned principal balance 7.9:1 to 6:1 20-28% • Prioritize use of free cash flow towards debt repayment • Return to GAAP profitability • $38M remaining on corporate debt facility to be repaid by 1/10/25 13.8% to 12.5% • Achieve $97.5M 4Q24
Slide 21: Appendix
Appendix
Slide 22: 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 23: 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 24: Reduced OpEx and credit losses support 109% Y/Y improvement in Adjusted EBITDA
Reduced OpEx and credit losses support $16M, 109% Y/Y improvement in Adjusted EBITDA during 2Q24, $38M YTD Adjusted EBITDA ($M)(1) $16M $38M $32 $30 $14 $1.9 $(5.6) 2Q23 1Q24 2Q24 YTD 2023 YTD 2024 Adjusted EBITDA Margin (%)(1) Adjusted EBITDA Margin (%)(1) 5.4% 0.8% 12.1% (1.1)% 6.4% (1) Beginning
Slide 25: 2Q Y/Y $3M Adjusted Net Income decline
2Q Y/Y $3M Adjusted Net Income decline principally driven by unfavorable net change in fair value, partially offset by expense reductions Adjusted Net Income (Loss) ($M)(1) $(3.0)M $58M $6.2 $3.6 $3.2 $6.9 $(51) 2Q23 1Q24 2Q24 YTD 2023 YTD 2024 Adjusted ROE (%)(1) Adjusted ROE (%)(1) 5.5% 3.7% 3.5%
Slide 26: Owned Principal Balance and Aggregate Originations decreased year-over-year
Owned Principal Balance and Aggregate Originations decreased year- over-year given conservative credit underwriting Owned Principal Balance at EOP ($B) Aggregate Originations ($M) (8)% (10)% $3.0 $2.8 $2.7 $485 $435 $338 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 26
Slide 27: 2Q Total Revenue resilient, down (5)% Y/Y
2Q Total Revenue Total Revenue ($M) resilient, down (5)% (6)% $526 $501 Y/Y $267 $250 $250 2Q24 Highlights Total Revenue: $250M, down $16M Y/Y; lower 2Q23 1Q24 2Q24 YTD YTD average daily principal 2023 2024 balance on conservative underwriting partially offset by higher portfolio Net Revenue ($M) $1
Slide 28: Key financial & operating metrics
Key financial & operating metrics Quarter Ended Six Months Ended June 30 Change Change 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Aggregate Originations (Millions) $ 434.8 $ 338.2 $ 437.3 $ 482.7 $ 485.1 (10.4)% $ 773.0 $ 893.1 (13.4)% Portfolio Yield (%) 33.9 % 32.5 % 32.7 % 32.5 % 32.2 % 33.2 % 31
Slide 29: Condensed consolidated income statement
Condensed consolidated income statement Quarter Ended Six Months Ended June 30 Change Change ($ Millions, except per share data. Shares in Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Interest income $ 231.4 $ 230.6 $ 242.2 $ 243.3 $ 240.5 (3.8) % $ 462.0 $ 478.1 (3.4) % Non-interest income
Slide 30: Condensed consolidated balance sheet
Condensed consolidated balance sheet Quarter Ended Change ($ Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y Cash and cash equivalents $ 72.9 $ 69.2 $ 91.2 $ 81.9 $ 73.4 (0.7) % Restricted cash 163.8 127.4 114.8 117.8 129.0 27.0 % Total cash $ 236.6 $ 196.6 $ 206.0 $ 199.6 $ 202.3 17.0 % Loans receivable at
Slide 31: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Quarter Ended Six Months Ended June 30, Change Change ($ Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (31.0) $ (26.4) $ (41.8) $ (21.1) $ (14.9) (108.2)% $(57.5) $(117.0) Adjustments: Income tax expense (benefit) (18.1) (4.0) (15.5) (16.2) (
Slide 32: Adjusted net income reconciliation
Adjusted net income reconciliation Quarter Ended Six Months Ended June 30, Change Change ($ Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (31.0) $ (26.4) $ (41.8) $ (21.1) $ (14.9) (108.2) % $ (57.5) $ (117.0) 50.9 % Adjustments: Income tax expense (benefit) (18.1) (4.0) (
Slide 33: Adjusted operating expense and ratio reconciliation
Adjusted operating expense, adjusted operating efficiency and adjusted operating expense ratio reconciliation Quarter Ended Six Months Ended June 30 Change Change ($ Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Operating Efficiency 43.6 % 43.8 % 49.3 % 45.7 % 51.1 % 43.7 % 53.7 % Total Reven
Slide 34: Basic and diluted earnings per share reconciliation
Basic and diluted earnings per share reconciliation Quarter Ended Six Months Ended June 30 Change Change ($ Millions, except per share data. Shares in Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Net income (loss) $ (31.0) $ (26.4) $ (41.8) $ (21.1) $ (14.9) (108.2) % $ (57.5) $ (117.0) 50.9
Slide 35: Adjusted earnings per share reconciliation
Adjusted earnings per share reconciliation Quarter Ended Six Months Ended June 30 Change Change ($ Millions, except per share data. Shares in Millions) 2Q24 1Q24 4Q23 3Q23 2Q23 Y/Y 2024 2023 Y/Y Diluted earnings (loss) per share $ (0.78) $ (0.68) $ (1.09) $ (0.55) $ (0.41) (90.2) % $ (1.46) $ (3.31)
Slide 36: Forward looking adjusted EBITDA reconciliation
Forward looking adjusted EBITDA reconciliation 3Q 2024 FY 2024 ($ Millions) Low High Low High Net (loss)* $ (5.4) * $ (3.7) * $ (39.9) * $ (33.6) * Adjustments: Income tax expense (benefit) (1.4) (1.0) (10.8) (9.1) Interest on corporate financing 12.3 12.3 51.1 51.1 Depreciation and amortization 12.
Slide 37: Net change in fair value
Quarter Ended Change $ Millions 2Q24 1Q24 2Q23 1Q23 Q/Q Y/Y Net change Loan Portfolio Drivers in fair value Discount rate 8.7 % 9.1 % 11.1 % 11.1 % (0.4)% (2.4)% Remaining cumulative charge-offs as a % of principal balance 11.6 % 11.9 % 11.4 % 11.7 % (0.4)% 0.2 % Average life in years 1.02 1.03 0.96
Slide 38: Fair value estimate methodology
Fair value Quarter Ended estimate Change 2Q24 1Q24 4Q23 3Q23 2Q23 1Q23 4Q22 Y/Y methodology Weighted average portfolio yield over the 28.42 % 28.87 % 29.10 % 29.58 % 29.85 % 29.61 % 29.34 % (1.43) % remaining life of the loans Loans receivable at fair Less: Servicing fee (5.00) % (5.00) % (5.00) % (
Slide 39: 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