OneMain Holdings, Inc.

Welcome to OneMain Financial fourth quarter and full year 2022 earnings conference call and webcast. Hosting the call today from OneMain is Peter Pullian, head of investor relations. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We do ask that you limit yourself to one question and one follow-up, and please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Peter Pullian. You may begin.

Thank you, Gretchen. Good morning, everyone, and thank you for joining us. Let me begin by directing you to page two of the fourth quarter 2022 investor presentation. which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the investor relations section of our website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. And these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, February 7th, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Micah Conrad, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. Let me turn the call over to Doug.

Thanks, Pete, and good morning, everyone. Thank you for joining us today. I'd like to start today's call by providing a brief overview of some of our accomplishments in 2022. And then I'll cover our performance for the fourth quarter, the current credit macroeconomic environment, and discuss our key strategic initiatives. As you all know, inflation started to impact delinquency levels for many non-prime consumers in the second quarter. We demonstrated our agility by quickly pivoting our credit posture and operations. On credit, we significantly tightened our credit box over the summer. and our new originations are performing as expected. Operationally, we pivoted more of our team to collections and to supporting customers who were having difficulty making ends meet. The result is that for the last two quarters, we have seen stabilization of our credit results. Despite a significantly tightened credit box through much of the year, we originated $13.9 billion of loans and served over 2.6 million customers in 2022. This highlights our commitment to serving hardworking Americans in good times and in bad, and also underscores the strength of our balance sheet. We had plenty of access to funding, even in a very difficult year in the capital markets and in the bond markets in particular. We made significant progress in 2022, building out our credit card and new secured lending distribution channels, both of which will drive significant growth in the year ahead. And through this very difficult environment, we generated almost $1.1 billion of capital, demonstrating the incredible business model we have built over the years. We also made significant progress in our ongoing commitment to be a socially responsible company, highly focused on our customers, communities, and employees. We rolled out Trim, our money-saving and financial wellness platform, to all of our customers in 2022 as we continue to help our customers improve their financial well-being. We launched Creditworthy by one main in thousands of high schools across the country. We issued a first of its kind social ABS bond, highlighting our mission to helping hardworking Americans make progress to a better future. And we made a $50 million deposit commitment to support minority depository institutions and military veterans. Last week, we were informed that OneMain has been included in Morningstar's Sustainalytics top-rated ESG companies list for 2023, ranking in the top 10% of rated companies in the diversified financials industry category. OneMain was also named to America's 100 most loved workplaces list. for 2022 by Newsweek. Together, these accolades showcase our deep commitment to our team members who serve our customers so well every day and to the communities in which we work. Now, let me provide a brief overview of the quarter. We had capital generation of $233 million in the quarter. and demand for loan products remained strong. Originations totaled $3.5 billion in the quarter, even with the significant tightening actions we took earlier this year. Considering our more conservative underwriting posture, we're really pleased with the volume of originations, as well as the overall credit quality. Our 6% year-over-year receivables growth was supported by our expanded products and distribution channels. Our 30 to 89 delinquency levels finished the quarter at 3.07%. This is in line with normal seasonal trends. We're optimistic about this continued stabilization in credit performance following our quick pivots last year. Net charge-offs in the quarter were 6.9%. also within our expectations, and were aided by good performance in our later stage collections and strong post-charge-off recoveries. Regarding the macroeconomic environment, as well as the non-prime consumer, we're encouraged by the continued strong employment numbers. However, elevated levels of inflation are impacting consumers. particularly those at the lower end of the credit spectrum. We remain highly focused on supporting our customers, especially those most pressured by inflation. We have several advantages that allow us to better serve our customers and set us apart from the competition. They include our community-based branch network that keeps us close to our customers, So we can work with each of them based on their own individual circumstances. Our long history serving the non-prime consumer through economic cycles, and this includes our proprietary data, as well as our strong credit and data science teams and models. And we have an incredibly strong balance sheet, which we positioned with a long liquidity runway and staggered maturities. exactly for times like this. The data that we analyzed shows that we are performing quite well in comparison to other non-prime lenders. And you can see that illustrated on slide 10 of our presentation. We continue to have a very conservative underwriting posture. Today, we are only making loans that will meet our return hurdles even if the macroeconomic environment worsens. Notwithstanding our current conservative credit box, we expect to continue to grow our balance sheet in the year ahead. We expect growth in 2023 to continue to come from higher credit quality customers, along with growth from credit card and new distribution channels. To better illustrate the point on improved credit quality, I'll point out that our top two risk grades, those with the best credit quality and lowest risk customers, make up about 60% of our new customer originations today versus just 37% in mid-2021. Let me now spend a few minutes on strategic initiatives. Our top focus is managing our credit and balance sheet through this complex macroeconomic environment. But we also continue to focus on strategic initiatives that will fuel growth and profitability over the medium and long term. We continue to close about half of our loans outside of a branch, engaging customers through our mobile app, website, text, screen share, phone, and more. We also have advanced our mobile and two-way tech strategies and now have the ability to digitally engage with customers in collections, payments, and servicing. We are confident that our omni-channel strategy, leveraging the best of digital, phone, and in-person interactions, will advance our competitive position. On new products, we continue to make excellent progress in our digital-first Brightway credit card. During the holiday season, we saw our customers regularly reach for our card to spend on holiday purchases. We're now seeing many of our early customers hitting on-time payment milestones, at which point they can choose to lower their APR or increase their credit line. the overwhelming majority of our customers are engaging directly through our mobile app. We continue to closely analyze the performance of our cards across a number of metrics, like spend volume, balance build, revolve rates, and most importantly, credit. Even as we maintain a conservative credit posture, we see a lot of opportunity to grow our card portfolio. At year end, we had approximately 135,000 card customers and $107 million of card receivables. We're going to continue to scale this business in profitable segments, and we remain confident that our credit card business will drive meaningful growth with excellent returns in the future. This year, as we scale the credit card business, It will have a mild drag on capital generation before expecting it to turn positive in 2024. In 2025 and beyond, we expect the business will be quite profitable and begin meaningfully contributing to our capital generation growth. We also continue to see excellent results from our efforts to expand distribution channels in our secured lending business. which grew to nearly 400 million of receivables in 2022. Let me end by touching on capital allocation. Our top priority is always investment in our business. First, to underwrite high-quality loans to meet our return hurdles. And second, continued investment in the initiatives that will drive excellent capital generation growth in the future. We will also continue to return capital to shareholders. This morning we announced an increase to our quarterly dividend by more than 5% to $1 or $4 annually. This translates to a yield of approximately 9% at our current share price. Even in a difficult economic environment, our business has strong capital generation and we are committed to a healthy dividend level. During the fourth quarter, we repurchased 1.6 million shares, bringing the full year repurchase to 7.2 million, or about 5.5% of shares outstanding at the beginning of the year. With that, let me turn the call over to Micah to take you through the financial results of the fourth quarter.