Oportun Financial Corporation · NASDAQ:OPRT
Oportun Financial — Investor Presentation (August 2024)
48 slides from Oportun Financial's investor presentation, August 2024
Slide 1: Investor Presentation | August 2024
Investor Presentation | August 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 Loans Loans Savings Comprehensive Physical and Digital Channels Target Market Unique Servicing Thin-file / no-file borrowers who
Slide 5: Mission 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(8) Positive social impact $3,562 $3,490 $3,141 Approx. 1.2M $2,000 savings $2,439 $2,495 Credit histories established(9) $1,310 $1,027 $478 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 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 use of V12 risk model built on inflation data to returning members; V12- underwritten new m
Slide 13: Post-July 2022 credit tightening quarterly vintages are outperforming prior vintages
Post-July 2022 credit tightening quarterly vintages are outperforming prior vintages in net lifetime loss rate by month on book (12) ~400bps lower ~400bps lower front book front book losses 12+ losses 12+ months post- months post- disbursement 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 (13) 2Q24 Annualized Net Charge-Off Rate Front Book 10.6 % Back Book 21.2 % 28% of 61% 2Q24 gross charge- offs 21% 6% 16% 11% 3% YE22 YE23 1Q24 2Q24 3Q24 E YE24 E Pr
Slide 15: 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 16: 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 17: 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 17
Slide 18: Financial Overview
Financial Overview Oportun
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 14 APR Non-Interest Revenue Cost of Interest Net Charge Adjusted Oper
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 13.8% to 12.5% 1/10/25 • Achieve $97.5M 4Q24
Slide 21: 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 (17) 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
Slide 22: 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 23: 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 24: 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 25: 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 (20) Whole Loan Sale $ 300 August 2023 Whole Loan Sale 400 October 2023 Private
Slide 26: Resilient top-line performance amidst credit tightening
Resilient top-line performance amidst credit tightening Aggregate Originations ($M) Total Revenue ($M) (5)% $2,923 (10)% ´24E / ´23 $1,057 (6)% $953 $995 - $1,010 $2,295 $627 $1,813 $485 $584 $1,348 $250 $435 $267 2020 2021 2022 2023 2Q23 2Q24 2020 2021 2022 2023 2024E 2Q23 2Q24 See Appendix for def
Slide 27: Expect $69M improvement in 2024 Adjusted EBITDA
Expect $69M improvement in 2024 Adjusted EBITDA, ~360% year-over- year growth Adjusted EBITDA($M) +$69M ´24E vs ´23 $84 - $92 $30 $19 $17 $14 2022 2023 2024E 2Q23 2Q24 Adjusted EBITDA Margin (%) 1.7% 1.8% 8.8% 5.4% 12.1% Presented under revised calculation introduced in 2024. See Appendix for defini
Slide 28: 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* $23 - $26M $84 - $92M * See Appendix for Key Definitions and the revised Adjusted profitability metrics and forw
Slide 29: Management and Governance
Management and Governance Oportun
Slide 30: 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 31: Environmental, Social & Governance (ESG) Impact
Environmental, Social & Governance (ESG) Impact Less Expensive Credit(10) Employee Diversity(22) Interest and Fees Saved(10) 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 memb
Slide 32: Appendix
Appendix
Slide 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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) $(117.0) Adjustments: Income tax expense (benefit) (18.1) (4.0) (15.5) (16.2) (
Slide 39: Adjusted net income reconciliation
Adjusted net income reconciliation Quarter Ended Six Months Ended June 30, Change Change ($ 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 40: 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 41: 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 42: 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 43: 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 44: 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 45: 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 46: 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 47: 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 48: Investor Contact
Investor Contact Dorian Hare 650-590-4323 ir@oportun.com
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