OneMain Holdings, Inc.

Welcome to the OneMain Financial first quarter 2023 earnings conference call and webcast. Hosting the call today from OneMain is Peter Pouillon, 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 1 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. Please make sure to 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 call over to Peter Pullian. Sir, you may begin.

Thank you. Good morning, everyone, and thank you for joining us. Let me begin by directing you to page two of the first quarter 2023 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 or as of today, April 25th, 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. I'd like to now turn the call over to Doug.

Thanks, Pete, and good morning, everyone. Thanks for joining us today. Today I will cover our results for the quarter. our positioning in this uncertain macroeconomic environment, and our strategic initiatives. Let me start with some highlights of our performance in the first quarter. We produced net income of $179 million and $179 million of capital generation in the quarter. We continue to see strong demand for our loan products. In what is typically a seasonally lower quarter for our lending business, we had $2.8 billion of originations despite our continued tight credit box. It is a very constructive, competitive environment for us, and our strong balance sheet allows us to continue to provide responsible access to credit for our customers and make every loan that meets our risk return criteria. Our top two risk grades, Those with the best credit quality and lowest risk customers made up approximately 65% of new customer originations in the first quarter, as compared to mid 2021 levels of 30 to 40%. We're pleased with the opportunities we see to write higher credit quality loans at a pace that is modestly ahead of our expectations coming into the year. Turning to credit, our 30 to 89 delinquency rate finished the quarter at 2.58%, 49 basis points below where we ended last quarter and in line with seasonal trends. Our underwriting remains quite conservative. This credit posture, combined with favorable competitive dynamics at the higher end of our credit spectrum, is leading to an increase in the overall credit quality of our portfolio. Loan net charge-offs in the quarter were 7.7%, in line with our expectations, aided by continued solid performance in late-stage collections and post-charge-off recoveries. The adjustments we made to our credit box in the middle of last year are driving improved early delinquency performance as we progress through the year. While still elevated, our back book of loans, which were originated before our credit tightening last summer, has stabilized. And the loans we have originated post-tightening are performing in line with expectations. As post-tightening vintages become a bigger portion of the portfolio, we should see credit move toward more normalized levels. Nonetheless, we continue to closely monitor the environment in our portfolio and remain poised to adjust as needed. Let me now talk for a minute about the macroeconomic environment. We're encouraged by the continued low unemployment numbers and what appears to be a reduction in the pace of inflation. Regardless, we continue to maintain a conservative credit posture as economic uncertainty persists. In light of recent developments in the banking sector, I want to stress that at OneMain, we have built our strategy and balance sheet to be durable across a range of macroeconomic environments. This includes a diversified balance sheet with staggered maturities, a long liquidity runway, disciplined asset liability management, and conservative underwriting. It is precisely in volatile environments like the one we are in now that our strength is most evident and positions us to be a reliable and trusted partner for our customers when they count on us most. Turning to our BrightRite credit card, we are pleased with the continued progress. We are closely monitoring spend volume, balance builds, revolve rates, and credit performance. as we continue our rollout into very targeted segments of the non-prime market. Just like the posture we are taking with personal loans, we are maintaining a conservative credit box in our card product and are only taking on customers that we are confident will meet or exceed our return hurdles, even if the economy were to worsen from here. At quarter end, We had more than 160,000 card customers and $122 million of card receivables. And we're really pleased with the continued digital adoption as 99% of eligible customers who make six on-time payments make their choice to decrease their interest rate or increase their line in our app. and over 85% of customers are making payments in the app. We remain confident that our approach to carefully scaling cards while maintaining conservative underwriting standards is the right approach to build a strong business for the future with excellent returns. We also continue to see strong origination volume and good credit performance in our secured lending distribution channels. Loans from these channels today total nearly 500 million of receivables. I'm also pleased with our continued pace of innovation, especially around digital tools for customers. For example, when delinquencies ticked up last year, we shifted more of our branch team members' time to collection activities. As we have invested in digital capabilities over the past several years, we not only have the ability to shift human resources to the highest value work, depending on the week, month, or year, but have given our team members and our customers more digital tools to improve efficiency, outcomes, and customer experience. Two great examples of this are click-to-pay links embedded in emails and enhanced two-way texting. When we need to reach out to customers, we don't just call them. We can text or email them. And when customers receive a text or email, they can then either engage with us via their channel of choice or complete a task like making a payment using a digital tool. These new digital capabilities are driving efficiency in our operations and a more seamless customer experience. Let me end by touching on capital return. Our $4 per share annual dividend translates into an approximately 10% yield at our current share price. And during the first quarter, we repurchased about 700,000 shares for $27 million. As we discussed last quarter, we have moderated our share repurchases given the uncertain economic environment and our desire to maintain strategic optionality. That said, we remain a programmatic buyer of our shares and will adapt the pace of repurchases as the environment evolves. I'll conclude here by reiterating that we feel very good about the strategic and competitive positioning of OneMain and the results for the quarter. With that, let me turn the call over to Micah.