Oportun Financial Corporation

Good afternoon and welcome to Opportun Financial's fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Dorian Hare, Senior Vice President, Investor Relations. Thank you. You may begin.

Thanks, and hello, everyone. With me to discuss Opportunity's fourth quarter 2024 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 relating to our business, future results of operations and financial position, including projected adjusted ROE attainment, plans for products and services, business strategy, expense savings measures, and plans and objectives of management for future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, 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 risk factors, including our upcoming Form 10-K filing for the year ended December 31st, 2024. 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 other than that is required by law. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe could be useful measures for the period-to-period comparison of our core business and which will provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available at the Investor Relations section on our website. 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 these non-gap-to-gap financial measures is included in our earnings press release, our fourth quarter 2024 financial supplement, and the appendix section of the fourth quarter 2024 earnings presentation, all of which are available at the investor relations section of our website at investor.opportune.com. In addition, this call is being webcast, and an archived version will be available after the call, along with a copy of our prepared remarks. With that, I will turn the call over to Rebels.

Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. We ended the fourth quarter with stronger than anticipated results, demonstrating that we've turned the corner in improving our financial performance and are entering 2025 with momentum, discipline, and focus. We met or exceeded the guidance expectations that we set for the fourth quarter and every quarter throughout 2024. The four key headlines from Q4, in my view, are... a return to GAAP profitability, improved credit performance, a return to originations growth, and ongoing expense discipline. First, and importantly, Q4 marked our return to GAAP profitability. Our $9 million of net income was a $51 million year-over-year improvement and drove an ROE of 10%. adjusted net income of $22 million with a $30 million year-over-year improvement, and we generated an adjusted ROE of 25%. Moreover, we generated $41 million of adjusted EBITDA, a $31 million increase from last year's level and exceeded the top end of our guidance by 37%. We were able to achieve these results through improved credit performance, a return to originations growth, and continued expense discipline. I'd like to reiterate that we expect to be profitable on a gap basis for full year 2025. Second, regarding improved credit performance, our net charge off rate was 11.7%, an improvement of 55 basis points year over year, and the lowest level of losses since the third quarter of 2022. In dollars, The positive trends continued as our net charge-offs improved year-over-year for the fifth consecutive quarter, in this instance by 12%. I'm also pleased with our ongoing progress in reducing 30-plus-day delinquencies, which were 4.8% for the quarter and better by 113 basis points year-over-year. That's the fourth consecutive quarter of year-over-year improvement. Third, originations were $522 million during Q4, returning to growth at 19% year over year. Even with a conservative credit box, we increased the number of loans originated by 23%. And lastly, we reported $89 million in operating expenses, down 31% year over year, which was our lowest quarterly figure since the second quarter of 2019. Without the benefit from one-time items, our 4Q24 operating expense would have been approximately $95 million, still below the $97.5 million target we set at the beginning of 2024. Building on our 2024 progress, we will continue to advance our three key strategic priorities in 2025, which are improving credit outcomes, fortifying business economics, and identifying high quality originations. Regarding credit outcomes, we expect to reduce our net charge off rate in 2025 by benefiting from our V12 credit model for a full year and from our back book of loans shrinking to just 1% of our own portfolio by year end. We expect to attain an adjusted ROE in the teens up from 8% in 2024 by generating 10 to 15% full year originations growth. returning to revenue growth by year-end, and targeting a 5% full-year decline in operating expenses. And we'll continue to identify high-quality originations under our current conservative credit standards by reinvesting in marketing and targeting high-quality new members while continuing to support our best existing members. We are also prioritizing the growth of secured personal loans within our own portfolio. as they offer superior unit economics compared to unsecured loans. During 2024, secured personal loan losses ran approximately 500 basis points lower compared to unsecured personal loans, with fourth quarter revenue per loan approximately 75% higher due to larger average loan sizes. Finally, I'd like to provide a preview of 2025 guidance. Jonathan will share with you that we're increasing our full-year adjusted EPS expectations by 7% at the midpoint. Our updated adjusted EPS range is $1.10 to $1.30, reflecting a 53% to 81% increase over 2024's $0.72. In summary, our results are a testament to our team's execution, and we are at the beginning of a new chapter for Opportune. With a strong foundation, we worked diligently to build in 2024. We remain more focused than ever to drive growth and shareholder value in 2025. With that, I will turn it over to Jonathan for additional details on our financial and credit performance, as well as our guidance.