Oportun Financial Corporation

Good afternoon and welcome to Opportunity Financial Corporation's first quarter 2021 earnings conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Nils Erdmann, VP of Investor Relations. Mr. Erdmann, you may begin.

Thanks and good afternoon, everyone. Joining me today to discuss OPPORTUNE's first quarter 2021 results are Raul Vasquez, Chief Executive Officer, and Jonathan Koblenz, Chief Financial Officer and Chief Administrative Officer. I'll remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations and financial position, planned products and services, business strategy, and plans and objectives of management for our future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, particularly given the uncertainties caused by the COVID-19 pandemic, and we caution you not to place undue reliance on these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors, including our most recent quarterly report on Form 10-Q and and our annual report on Form 10-K for the year ended December 31, 2020. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe can be useful measures for period-to-period comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operations. Unless stated otherwise, all of the metrics shared on this call will be on a fair value pro forma basis. Also, starting this quarter, there is no difference between our GAAP-reported metrics and fair value pro forma. A full list of definitions and reconciliations can be found in our earnings materials. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, our first quarter 2021 financial supplement, and the appendix section of the first quarter 2021 earnings presentation, all of which are available in the Investor Relations website at investor.opportune.com. In addition, this call is being webcast, and an archived version will be available after the call in the Investor Relations portion of our website. And with that, I will now turn the call over to Raul.

Good afternoon, everyone, and thank you for joining us. We are off to a great start this year, and I'm proud of the many accomplishments we can point to in the first quarter. Our financial and operational performance was a continuation of several trends exiting 2020, as well as progress that was consistent with the growth initiatives I outlined during our last earnings call. Our first quarter financial results reflect the strength of our business as we generated $135 million of total revenue and $12 million of adjusted net income, or 41 cents of adjusted EPS. Aggregate originations were $335 million, and we crossed the $10 billion mark in originations in February, representing over 4 million loans that we've made to hardworking people so far in our 15-year history. We experienced some impact to demand volume in early January and again in mid-March relating to stimulus payments, but by mid-April, disbursements and applications were realigning with historical trends. In terms of credit, we delivered favorable results that outperformed our pre-pandemic levels. demonstrating the efficacy of our AI driven models, as well as signaling the continued US economic recovery and the benefits of the stimulus. For the first quarter, our annualized net charge off rate was 8.6%, an improvement of 72 basis points relative to last quarter and 31 basis points better than last year. Now, let me tell you about how we are innovating to grow our business and address market needs. Specifically, I will share the progress we are making on our digital first strategy, new products, and our strategic partnerships. Let me start with our digital first strategy, which I emphasized on our last earnings call because our investment in digital capabilities gives us a path for continued growth in a more capital efficient manner. Growth trends in the first quarter continue to show our customers increasing utilization of our online services. For Q1, 68% of new applicants chose to apply online, up from 51% one year ago. Additionally, 76% of all payments were made outside of our stores, whereas this figure was 62% one year ago. We successfully completed our retail network consolidation prior to the end of the first quarter, and I'm pleased to report that we accomplished this with minimal impact to our loan production. As I already have mentioned, we will utilize a portion of the cost savings from this effort to further enhance our AI-driven digital platform and accelerate our digital growth. This reinvestment will focus on providing our customers with even more choices, flexibility, and new digital experiences. Regarding our new product initiatives, we set two consecutive disbursement milestones with our secured personal loan product in February and March, and volume continues to accelerate. We ended the first quarter with $5.4 million in secured personal loan receivables, representing 170% quarter-over-quarter growth. We are seeing dramatic increases in demand for SPL, as well as overall engagement levels that show the product is gaining traction with our customers. This is encouraging on several levels, both in terms of the product market fit as well as the economics for SPL. Compared to our unsecured personal loans, the average SPL loan is roughly twice the size and 30-plus day delinquencies are lower. We are preparing to roll out our SPL offering to customers in Florida in the next few weeks, with the Texas market following in the third quarter. As momentum continues to build for our SPL product, I'm confident that our portfolio is on track to reach our goal of $40 million by year-end. Credit card is also executing according to plan, and we continued our geographic expansion across the U.S. and are now in 43 states as of today. In the first quarter, credit card receivables grew 276% year-over-year to $8.2 million, and we brought our active customer accounts to over 25,000. In summary, our credit card portfolio is tracking well to meet our objective of growing to $50 million by the end of the year. Third and finally, we expect to significantly expand our services and our geographic footprint with partners like Dolex and MetaBank. Our partnership with Dolex is the initial application of our lending as a service offering and in Q1, we launched in 28 of the 150 Dolex locations that are planned for 2021. During the month of April, we brought this count up to 71. We are already in all of the Dolex locations in Florida and we expect to open in all remaining locations in Texas, bringing our DOLEX store count to over 100 by the end of the second quarter. Our partnership with MetaBank will enable us to connect with potential personal loan customers in over 30 additional states. Our soft launch across digital channels will begin in a dozen states in the second half of the year, and our aim is to be fully deployed across all the remaining states by year end. With MetaBank, We will unlock incremental growth by bringing our best-in-class AI-driven marketing and underwriting capabilities to more customers across the U.S., nearly doubling the size of our addressable market. We are currently building operational integrations with MetaBank and designing the customer experiences into our mobile and online channels as we get closer to launch. These partnerships enable new experiences for our customers and help to expand the opportune mission and brand across new channels and marketplaces. We are building platform integrations with Dolex and operational integrations with MetaBank, and we expect to add new lending as a service partners throughout 2021. Our aspiration is to be the digital first lending platform of choice for retail partners and consumers, bringing financial inclusion to millions more hardworking people. We remain steadfast in our mission, and as a testament to that, We recently released our 2020 Corporate and Social Responsibility Report, highlighting the progress we've made in driving social impact, supporting the communities we serve, and managing our environmental footprint. The report outlines our priorities on these important issues and illustrates that we live our mission inside the company as well as outside. This includes our diverse workforce where the majority of our employees, along with every level of management, from frontline supervisors to the board of directors identify as women or people of color. I am proud of the report, the positive impact we have had on the communities we serve and the company we have built. I'll now turn the call over to Jonathan, who will walk you through a more in-depth discussion of our first quarter financial results and provide our financial outlook for the second quarter and full year. We will then open the line for your questions. Jonathan.