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| Statement |
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| While we are cautious due to these macroeconomic headwinds and our elevated interest expense, we believe that we're well positioned to operate in this type of environment |
| So, feel really good that we have the levers to drive growth despite record high interest rates for our business for the life of our business and then also some unfavorability at fair market value |
| We're excited to begin 2024 and leverage our strong 2023 to continue achieving profitable growth |
| I mean there's tremendous efficiencies that we're finding |
| We achieved what we said we would do, and credit improvements and operating efficiencies led us to raise full year earnings guidance 3 times |
| In addition, our solid fourth quarter enabled us to exceed our final full year earnings guidance for 2023 |
| And we've done this quite a few times with great success, but I think could benefit us significantly in 2025 |
| Fourth quarter results were driven by revenue growth, credit performance improvements and expense leverage |
| Specifically, the key highlights for fourth quarter 2023 compared to the prior year are: strong 10.7% total revenue growth to $132.9 million; disciplined 3.3% net originations growth to $191.9 million; the annualized net charge-off rate as a percentage of total revenue improved by 12.9 percentage points to 46.4%; and prudent expense management with total expenses, excluding interest expense as a percentage of total revenue, down 5.6 percentage points to 33.8% |
| This led to solid rebounds in profitability |
| So really, really happy with tech and product and the ability to increase that year-over-year |
| Our financial highlights for full year 2023 compared to the prior year are: record total revenue of $508.9 million, a 12.4% increase; record ending receivables of $416.5 million, a 3.6% increase; the net charge-off rate as a percentage of total revenue declined to 43.5%, an 8.1 [percent] (ph) point improvement; and disciplined expense management with total expenses, excluding interest expense, as a percentage of total revenue of 6.2 percentage points to 35.4% |
| As a result, profitability improved sharply, with net income of $39.5 million compared to $3.3 million, and adjusted net income of $43.3 million from $5 million |
| This was stronger than implied by our full year guidance due to the lower net charge-off rate as a percentage of total revenue |
| For the fourth quarter, year-over-year, total revenue increased 10.7% to $132.9 million, with a 3.3% increase in net originations to $191.9 million and an 840 basis point improvement in yield to 126.8% |
| I'll begin by echoing Todd's comments that we are very excited to have achieved our ninth consecutive year of net income in 2023, with record annual total revenue of $508.9 million, record ending receivables of $416.5 million, and a substantial rebound in profitability with net income of $39.5 million and adjusted net income of $43.3 million |
| In addition to improvement in the annualized net charge-off rate as a percentage of total revenue already mentioned, earlier stage delinquency trends also improved compared to the same period last year |
| We also realized solid expansion in yield of 8.4 percentage points to 126.8% compared to 118.4% in the year-ago period |
| This provides us the optionality to deploy cash to create additional shareholder value |
| Our values-based recovery strategy also ended 2023 strongly with a 40.8% increase year-over-year in the fourth quarter for recoveries of previously charged-off loan balances |
| We ended 2023 with a strong balance sheet, including unrestricted cash of $31.8 million, which nearly doubled year-over-year |
| Credit performance continued to improve year-over-year as expected |
| We are pleased that credit modeling enhancements and adjustments made throughout the 2023 appear to have had the intended effect and our portfolio mix continued to shift to the lowest risk segments |
| We have a benefit quite some time and seen that when you do that, you end up just getting a lot more high-risk customers into the funnel and end up paying more for less |
| We also realized operating cost leverage year-over-year with a focus on making each department more efficient |
| Adjusted net income margin was 8.5%, 50 basis points higher than implied by the midpoint of our guidance |
| One thing that we mentioned on the call is year-over-year significant improvement |
| Our vision around being a tech-enabled platform that provides best-in-class alternative -- digital alternative financial service products, where we receive supply-demand imbalance where the banks are not and the large financial institutions are not fit that bill |
| Nonetheless, we note that employment trends appear relatively strong for customers |
| The annualized net charge-off rate as a percentage of average receivables improved by 11.4 percentage points to 58.8% for the fourth quarter of 2023 compared to 70.2% for the prior-year quarter |
| Statement |
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| And I think we're being very cautious because new originations, as you know, are the riskiest and provide the highest charge-offs |
| We achieved these results despite interest expense increasing by $11.6 million or 33% year-over-year and a macroeconomic environment marked by sticky inflation that hurt the financial health of our customers |
| As we have communicated during the past couple of years, persistent above normal inflation hurts customers more than recessions do, because they have more difficulty budgeting for everyday expenses, especially when living paycheck to paycheck with limited to no savings |
| But this year, we're forecasting it to be some growth, but we're obviously being very cautious because of the credit on the new stuff |
| In summary, we think current macroeconomic conditions, both help and hurt customers, and therefore, the net effect for OppFi is uncertain |
| We're seeing -- just to be clear, Mike, we brought -- our fair market value was brought down 200 basis points year-over-year |
| On an absolute basis, new customer originations for the quarter decreased by 4.2% year-over-year, while existing customer originations increased by 9.7% |
| But didn't you still have bad -- sorry, more challenging 2022 vintages in the book that you would have been cycling through? I'm just surprised it wouldn't be at least similar |
| So, we did -- we're still keeping everything fairly close as far as growth and being very cautious about it |
| As a result, the marketing cost per funded loan was down 6.3% year-over-year in the fourth quarter |
| So, we're just being pretty cautious |
| As a percentage of total revenue, the annualized net charge-off rate decreased by 12.9 percentage points to 46.4% compared to 59.3% last year |
| But yes, as your revenue growth slows, obviously impacts some of those numbers and as a percentage of receivables as well |
| We're not seeing necessarily a lot of improvement in the customer repayment rates and things like that |
| The total first payment default rate decreased by 40 basis points and the total delinquency rate declined by 90 basis points |
| We're seeing -- obviously, as you go lower in the segment, segment one being our lowest risk customer, you're seeing less degradation from '19 than you would in a segment three |
| Fourth is a little -- is somewhat muted compared to second and third because you start growing again because of the fourth quarter seasonality |
| I apologize |
| This was partially due to risk management with originations to existing customers generally being less risky than those to new ones |
| We're not passing through |
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