Oportun Financial Corporation · NASDAQ:OPRT
Oportun Financial — Q2 2023 Earnings Presentation
34 slides from Oportun Financial's earnings presentation, Aug 8, 2023
Slide 1: 2Q 2023 Earnings Presentation
2Q 2023 Earnings Presentation August 8, 2023
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: Earnings overview
Earnings overview Key takeaways from Oportun's second quarter 2023 results Returned to profitability1 Adjusted Net Income of $2M reflects 11th profitable quarter in the last 12 Credit outlook improving Annualized Net Charge-Off Rate anticipated to decline to 11.7% +/- 15 bps in 3Q 14% Y/Y decline in
Slide 4: Strategic priorities: focused on sustainable long-term growth & profitability
Strategic priorities: focused on sustainable long-term growth & profitability ~85% corporate expense allocation ~10% ~5% Fortify Core Business Strengthen Core Build Member Unsecured Personal Develop Product Suite Economics Engagement Platform Loan Product • Improve profitability and • Prioritize uni
Slide 5: Fortifying business economics
Fortifying business economics • 2Q23 Operating Expenses of $136M, lowest quarterly figure since 2021 • 43.4% Adjusted Operating Efficiency, sets fourth consecutive quarterly post-2019 Cost Reductions IPO record • On track for ~$125M OpEx in 4Q23, driven by 28% cut in corporate staff1 in 1H23 • Focus
Slide 6: Second quarter performance vs. guidance
Second quarter performance vs. guidance 2Q 2023 Guidance 2Q 2023 Actual Drivers Total Revenue $250 - $255 M $267 M Higher originations and yield Annualized Net Charge-off Effective collection and recovery 12.8% +/- 15 bps 12.5% Rate (%) efforts In line with expectations; Adjusted EBITDA (1) $2 - $7
Slide 7: Second quarter 2023 highlights
Second quarter 2023 highlights Financial Highlights Adjusted Operating Efficiency1 (1,860) bps Total Revenue GAAP Net Income $267M $(15)M 62.0% 52.4% 43.4% (1) (1) Adjusted EBITDA Adjusted Net Income $4.3M $2.3M GAAP Diluted EPS Adjusted EPS(1) 2Q22 4Q22 2Q23 $(0.41) $0.06 Total revenue $226M $262M
Slide 8: 2Q23 OpEx to average daily principal balance more efficient than 2019
2Q23 OpEx to average daily principal balance more efficient than 2019 OpEx to Average Daily Principal Balance (%) Adjusted OpEx to Average Daily Principal Balance (%)(1) 21.5% 20.9% 18.2% 15.5% 2Q19 2Q23 2Q19 2Q23 Opex Ratio Adjusted Opex Ratio (1) See Appendix for Key Definitions and a reconciliati
Slide 9: Credit performance
Credit performance 19 basis point sequential decline in 30+ Day Delinquency Rate in 2Q23 a positive forward indicator Annualized Net Charge-off Rate (%)(1) 30+ Day Delinquency Rate (%)(1) 12.5% 12.1% 11.7% 8.6% 5.5% 5.3% 4.3% (2) 2Q22 1Q23 2Q23 3Q23E 2Q22 1Q23 2Q23 (1) See Appendix for definition of
Slide 10: First Payment Defaults driven down to 2019 pre-pandemic levels
First Payment Defaults driven down to 2019 pre-pandemic levels 3% 2% 1% 0% 8 4 8 1 18 22 5 1 5 /9 15 19 3 29 2 7 13 16 21 27 30 4 10 4 18 24 /1 4/ 1/ 3/ /2 9/ /2 /2 7/ 8/ 2/ /1 1/ 5/ 3/ 4/ 8/ 9/ 2/ 12 6/ 7/ 5/ 4/ 6/ 11 9/ 10 12 10 11 2019 2022 2023 First Payment Defaults are calculated as the princi
Slide 11: Post-July credit tightening loans are performing near to better than 2019 pre-pandemic vintages
Post-July credit tightening loans are performing near to better than 2019 pre-pandemic vintages and growing in proportion Net-Charged Off + 30+ Day Delinquency Rates, Quarter-End Back Book 30+ Day Delinquency Rates, MoB 6 MoB 3 Portfolio Outstanding ($B)2 Q3 Vintage* Q4 Vintage Q4 Vintage Q1 Vintage
Slide 12: Second quarter 2023 capital and liquidity
Second quarter 2023 capital and liquidity Liquidity enhanced by new $300M whole loan sale flow agreement and record $100M+ operating cash flow Sources of Liquidity Net Change in Cash and Primary Drivers Operating Cash Flow Trend Fixed Rate Debt (%) ($M) ($M) ($M) $709 $103 $0.4 $89 26% -Net interest
Slide 13: Third quarter and Full Year 2023 guidance
Third quarter and Full Year 2023 guidance 3Q 2023E FY 2023E Total Revenue $260 - $265 M $1,045 - $1,055 M Annualized Net Charge-off Rate (%) 11.7% +/- 15 bps 11.7% +/- 30 bps Adjusted EBITDA (1) $35 - $40 M $70 - $75 M (1) See Appendix for Key Definitions and non-GAAP reconciliation to the most comp
Slide 14: Corporate Responsibility & Sustainability Report 2022
Corporate Responsibility & Sustainability Report 2022: Addressing the biggest challenges facing U.S. consumers Our impact Borrowing Saving Serving Giving Back 15.5B+ $8.9B+ ~2M 3,497 Credit extended since Cumulatively saved by Hours volunteered since Members 2006 members since 2015 2020 1.1M+ $1,800
Slide 15: Appendix
Appendix
Slide 16: 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 17: 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 18: 2Q Adjusted EBITDA up $9M Y/Y, turning positive
2Q Adjusted EBITDA up $9M Y/Y, turning positive Adjusted EBITDA ($M)(1) $8.8M $(50)M $29 $4.3 $(4.5) $(24) $(20) 2Q22 1Q23 2Q23 YTD 2022 YTD 2023 Adjusted EBITDA Margin (%)(1) Adjusted EBITDA Margin (%)(1) (2.0)% (9.4)% 1.6% 6.7% (3.8)% (1) See Appendix for ‘Key Definitions’ and a reconciliation to
Slide 19: 2Q Adjusted Net Income also returns to profitability
2Q Adjusted Net Income also returns to profitability Adjusted Net Income ($M)(1) (40)% (252)% $56 $3.8 $2.3 $(88) $(86) 2Q22 1Q23 2Q23 YTD 2022 YTD 2023 Adjusted ROE (%)(1) Adjusted ROE (%)(1) 2.3% (71.3)% 2.0% 18.2% (34.4)% (1) See Appendix for ‘Key Definitions’ and a reconciliation to the most com
Slide 20: 6% Y/Y growth in Owned Principal Balance drives revenue growth despite credit tightening
6% Y/Y growth in Owned Principal Balance drives revenue growth despite credit tightening Owned Principal Balance at EOP ($B) Aggregate Originations ($M) 6% (45)% $3.0 $3.0 $878 $2.8 $485 $408 2Q22 1Q23 2Q23 2Q22 1Q23 2Q23 20
Slide 21: 2Q total revenue up 18% Y/Y
2Q total revenue up Total Revenue ($M) $526 18% Y/Y 18% $441 $260 $267 2Q23 Highlights $226 Total Revenue: $267M 18% Y / Y due to higher originations and portfolio 2Q22 1Q23 2Q23 YTD YTD yield 2022 2023 Net Revenue: $118.6M (18)% Y / Y due to higher Net Revenue ($M) net charge-offs and interest expe
Slide 22: Strong risk-adjusted yield drives profitability
Strong risk-adjusted yield drives profitability 31.8% 20.1% (11.7)% 15.1% (5.0)% (1) (2) Gross Yield Net Charge-Offs Risk-Adjusted Yield Servicing Fees Unlevered Contribution Yield (1) Reflects annualized interest income for the six months ended 6/30/2023 as a % of Average Daily Principal Balance fo
Slide 23: Key financial & operating metrics
Key financial & operating metrics Quarter Ended Six Months Ended June 30 Change Change 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Members 2,005,008 1,911,592 1,877,260 1,858,335 1,818,588 10.3 % 2,005,008 1,818,588 10.3 % Products 2,155,240 2,059,007 2,006,245 1,981,310 1,928,261 11.8 % 2,155,240 1,
Slide 24: 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) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Interest income $ 240.5 $ 237.6 $ 244.1 $ 232.1 $ 207.7 15.8 % $ 478.1 $ 399.9 19.6 % Non-interest income 26
Slide 25: Condensed consolidated balance sheet
Condensed consolidated balance sheet Quarter Ended Change ($ Millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y Cash and cash equivalents $ 73.4 $ 74.1 $ 98.8 $ 175.9 $ 66.7 10.0 % Restricted cash 129.0 127.8 105.0 96.4 67.1 92.1 % Total cash $ 202.3 $ 201.9 $ 203.8 $ 272.2 $ 133.9 51.2 % Loans receivable at fa
Slide 26: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Quarter Ended Six Months Ended June 30, Change Change ($ Millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (14.9) $ (102.1) $ (8.4) $ (105.8) $ (9.2) (62.7)% $(117.0) $36.5 NM Adjustments: Income tax expense (benefit) (2.6) (39.4) 0.5 (6.5) (3.5)
Slide 27: Adjusted net income reconciliation
Adjusted net income reconciliation Quarter Ended Six Months Ended June 30, Change Change ($ Millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (14.9) $ (102.1) $ (8.4) $ (105.8) $ (9.2) (62.7) % $ (117.0) $ 36.5 NM Adjustments: Income tax expense (benefit) (2.6) (39.4) 0.5 (6.5
Slide 28: Adjusted operating efficiency and adjusted operating expense reconciliation
Adjusted operating efficiency and adjusted operating expense reconciliation Quarter Ended Six Months Ended June 30 Change Change ($ Millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Operating Efficiency 51.1 % 56.4 % 57.8 % 103.7 % 69.9 % 53.7 % 69.3 % Total Revenue $ 266.6 $ 259.5 $ 261.9 $ 250.
Slide 29: 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) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Net income (loss) $ (14.9) $ (102.1) $ (8.4) $ (105.8) $ (9.2) (62.7) % $ (117.0) $ 36.5 NM Net
Slide 30: 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) 2Q23 1Q23 4Q22 3Q22 2Q22 Y/Y 2023 2022 Y/Y Diluted earnings (loss) per share $ (0.41) $ (3.00) $ (0.25) $ (3.21) $ (0.28) (46.4) % $ (3.31) $ 1.10 N
Slide 31: Forward looking adjusted EBITDA reconciliation
Forward looking adjusted EBITDA reconciliation 3Q23 FY 2023 ($ Millions) Low High Low High Net income (loss)* $ 7.8 * $ 11.4 * $ (28.9) * $ (25.2) * Adjustments: Income tax expense (benefit) 2.8 4.2 (9.4) (8.1) Interest on corporate financing 10.9 10.9 37.7 37.7 Depreciation and amortization 10.7 10
Slide 32: Net change in fair value
Quarter Ended Change Net change $ Millions 2Q23 1Q23 2Q22 1Q22 Q/Q Y/Y in fair value Loan Portfolio Drivers Discount rate 11.1 % 11.1 % 9.0 % 6.8 % —% 2.1 % Remaining cumulative charge-offs as a % of principal balance 11.4 % 11.7 % 11.2 % 10.4 % (0.4)% 0.1 % Average life in years 0.96 0.96 0.90 0.85
Slide 33: Fair value estimate methodology
Fair value Quarter Ended Change estimate 2Q23 1Q23 4Q22 3Q22 2Q22 1Q22 4Q21 Y/Y methodology Weighted average portfolio yield over the remaining life of the loans 30.02 % 29.78 % 29.50 % 29.90 % 30.27 % 30.15 % 30.14 % (0.25) % Less: Servicing fee (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) %
Slide 34: 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 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 Term for Vintage (Months) Net Lifetime Loan Losse