Oportun Financial Corporation

Good afternoon and welcome to Opportune Financial Corporation's second 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. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. 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 second quarter 2021 results are Raul Vasquez, Chief Executive Officer, and Jonathan Koblitz, 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 for the Securities and Exchange Commission under the caption Risk Factors, including our most recent quarterly report on Form 10-Q and our annual report on Form 10-K for the year ended December 31st, 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 operation. Unless stated otherwise, all of the metrics shared on this call will be on a fair value pro forma basis. Also, since the start of this year, 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 second quarter 2021 financial supplement, and the appendix section of the second quarter 2021 earnings presentation, all of which are available on 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 on the Investor Relations portion of our website. With that, I will now turn the call over to Raul.

Good afternoon, everyone, and thank you for joining us. Q2 was another great quarter, demonstrating strong momentum across our business. In the quarter, we generated $138 million of total revenue and $17 million of adjusted net income, or 56 cents of adjusted EPS. Our aggregate originations came in at $433 million, up 175% year-over-year and above our initial expectation of $425 million. Additionally, our growth continues in the third quarter, and we saw our portfolio surpass our 2019 levels in July. We are also currently delivering credit performance that is among the best in our 15-year history. Our annualized net charge-off rate was 6.4%, an improvement of 219 basis points relative to last quarter, and 414 basis points better than last year. Delinquency rates also performed incredibly well with our 30-plus day delinquencies at 2.5% at quarter end. Based on the credit trends we're seeing, we are leaning into portfolio growth in the second half of the year, which is reflected in our increased aggregate originations guidance. Turning to our strategic objectives, we are making terrific progress, which I'm excited to share with you. These objectives include building upon the success of our digital first strategy, growing and expanding our new product lines, and advancing our strategic partnerships. I'll start with our digital first progress. Highlighting our strengths as a digital lender, our customers' utilization of our online services accelerated yet again in Q2, with 80% of new applicants choosing to apply online, up from 59% one year ago. Additionally, 79% of all payments were made outside of our stores in the quarter. Regarding our new product initiatives, volumes also continue to accelerate for our secured personal loan product. We ended the second quarter with $13.9 million in secured personal loan receivables, up from $0.1 million at the end of Q2 2020, and up 160% sequentially. We rolled out our offering to customers in Florida at the start of July and are already seeing the product gaining significant traction there. We plan to launch in the Texas market, our second largest market behind California, in the next few weeks. I remain confident that our SPL portfolio is on track to reach our year-end receivables goal of $40 million. Credit card receivables grew 608% year over year to $19.4 million and are also tracking very well to meet our year-end goal of $50 million. We now have over 54,000 active customer accounts, and our geographic footprint covers 44 states. Finally, with our strategic partnerships, one of the key advantages of our centralized and automated decisioning process is that 100% of applicants are evaluated with our AI-driven risk engine regardless of the channel or partner. This enables us to rapidly scale our lending as a service platform as we've demonstrated with Dolex growing to 142 locations by the end of July. We are tracking ahead of our year end objective of being in over 150 Dolex locations and are now raising our estimated year end footprint to 175 locations. The exceptional digital capabilities offered by our lending as a service platform are a key differentiator and enable us to grow faster while also addressing our partners' needs. I'm pleased to share with you that in July, we signed our second lending as a service partner with another large money services business. We expect to formally announce the partnership in the weeks to come with an initial rollout anticipated in the fourth quarter and the addition of over 100 new locations in the next 12 months. Turning now to our MetaBank partnership, I'm excited to share that our digital offering enabled by MetaBank is expected to launch in the coming weeks. As a reminder, this will enable us to be fully deployed across approximately 30 additional states by year end, starting with a dozen states this quarter. Through our partnership with MetaBank, we will be nearly doubling the size of our addressable market, and we will begin marketing simultaneously with our products availability in those states. Our second quarter results clearly demonstrate that we have returned to growth in our core unsecured personal loan business and that we also have several exciting growth vectors emerging. I'll now turn the call over to Jonathan, who will walk you through a more in-depth discussion of our financial results and provide our outlook for the third quarter and full year. We will then open the line for your questions. Jonathan?