OneMain Holdings, Inc.

Welcome to the OneMain Financial First Quarter 2024 Earnings Conference Call-In Webcast. Hosting the call today from OneMain is Peter Poyan, Head of Investor Relations. Today's call is being recorded. At this time, all participants have been placed in the 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 2. 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 0. It is now my pleasure to turn the floor over to Peter Poyan. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to page two of the first quarter 2024 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 the one main 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, April 30th, 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 Jenny Osterhout, 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. Thank you for joining us today. Today I'll cover our results for the first quarter, as well as discuss our strategic initiatives. Before I do that, I want to welcome Jenny Osterhout to today's call in her new role as Chief Financial Officer. I've worked with Jenny for many years, most recently in her role as Chief Strategy Officer at OneMain, where she worked closely with Micah and me that had responsibility for strategy, new products, technology, digital, corporate development, and has been a key partner in driving our strong performance the last several years. As you get to know her, I'm sure you will find her to be strategic, knowledgeable, and a straight shooter. I also want to thank Micah for facilitating a smooth transition And he will continue to partner closely with Jenny and me to drive value for our customers and our shareholders in his new role as Chief Operating Officer. I'll start by saying we feel very good about the results this quarter, especially the credit trends, as we are seeing clear evidence that the credit tightening actions we have taken over the last couple of years are driving delinquency and ultimately losses in the right direction. Capital generation, the key metric against which we measure financial performance and manage our business was $155 million this quarter. Our receivables grew 6% year over year. benefiting from our expanded product offerings and strong balance sheet. We have been able to grow our portfolio and our customer base while maintaining a cautious credit posture across all of our products. Year-on-year total revenue growth was 7%. Our originations totaled $2.5 billion, down 10% from a year ago. a result of our disciplined management of the business where we only make loans that meet our return hurdles. As we've discussed previously, we have continued to selectively increase prices and tighten credit over the last year. Let me say a couple of things about the health of the consumer. Before I do so, let me remind you that while we monitor these overall trends, we actually lend customer by customer based on their individual credit risk, taking into consideration their geography, net disposable income, our proprietary data on current and former customers, and over 1,000 other variables. For the consumer overall, there remains a set of cross-currents. Even though inflation has slowed down and there has been healthy wage growth and unemployment remains quite low, interest rates remain elevated and living expenses have increased the last few years. For our customer who makes on average $65,000 to $70,000 a year, their average income is up about 25% compared to pre-pandemic. But the cost of everyday expenses in aggregate from food to housing to gas is also up over 20%. So while we have seen income catch up with inflation, resulting in an increase in net disposable income for our customers when compared to 2019, consumers still need to carefully manage their household budgets in this environment. Our 30 to 89 delinquency was 2.72%, down 56 basis points from the fourth quarter, which is better than normal seasonal trends. Loan net charge-offs were 8.6%, consistent with our expectation given the delinquency we saw in the second half of last year and in line with our full year strategic priorities. We remain pleased with the performance of our newer vintages or front book comprised of loans originated since August 2022 as they continue to perform in line with expectations. And while these new vintages now comprise about 70% of our receivables, the back book, those loans originated before August 2022 still account for about 50% of our delinquencies. Our increased pricing in certain segments and tighter credit box has resulted in lower originations, especially in the last two quarters. This has led to portfolio dynamics, which Jenny will discuss later. We remain confident that the credit performance of the overall portfolio is moving in the right direction and continue to expect that losses will peak in the first half of 2024, assuming that the macroeconomic environment remains relatively stable. Nonetheless, we are maintaining our conservative credit posture at this time. Our OpEx ratio was 6.6%. We are always disciplined in our expense management and closely evaluate where to invest and where to cut. This quarter, we took some targeted expense actions, primarily across headcount and real estate, as we continually hone our business for optimal efficiency and performance. Turning now to our strategic initiatives, which we discussed in detail at our investor day in December. We talked then about how we plan to capitalize on our clear competitive advantages. including deep experience with and proprietary data on the non-prime consumer, best-in-class underwriting, a unique business model with a branch network supported by digital and central capabilities, and a fortress balance sheet. We are using these competitive advantages to position OneMain for the future. and expand our addressable market in a highly disciplined manner and drive profitable growth. We served 3 million customers during the quarter, up from 2.6 million a year ago. Much of the growth in our customer base is attributable to our new products, the Brightway credit card and auto finance. highlighting the importance of these new products to our long-term customer acquisition, customer engagement, and growth strategies. Our auto finance receivables were $843 million at quarter end, and credit performance remains very good in this business. We recently enhanced our auto finance business with the acquisition of Foresight Capital, which closed on April 1st. This acquisition brings us an experienced team, scalable technology, tested credit models, a franchise dealer network, and a high-quality loan portfolio. It substantially expands our total addressable market in the auto finance segment complementing our current direct-to-consumer independent dealer strategy by adding a national network of franchise dealers. Importantly, it further diversifies and expands our suite of lending products, supporting our position as the lender of choice for nonprime consumers. In our credit card business, we ended the quarter with 509,000 accounts and $386 million of receivables. We continue to feel really good about key business metrics, including response rates, utilization, and digital engagement. Given the credit environment, we are focusing our customer acquisition on cards that have an annual fee and a lower line of credit. We are confident that our credit card business will be a significant driver of profitable growth in the coming years. But today we have a tight credit box and will remain disciplined as we expand this business. Now let me briefly touch on capital allocation. Our top priority to invest in the business to position us for ongoing success has not changed. As I mentioned earlier, We grew our receivables year over year with a focus on high-quality, profitable originations. Once again this quarter, about two-thirds of new customer originations were in our top two credit tiers. And we allocated a portion of our capital for the acquisition of Foresight, which will provide important benefits to our company and our shareholders in the years ahead. We are committed to a strong regular dividend and our board increased the dividend by 4% this quarter. The annual dividend is now $4.16 per share, reflecting our continued confidence in the capital generation of the business and our commitment to return capital to shareholders. Share repurchases in the first quarter were modest, about 100,000 shares for approximately $5 million. With that, let me now turn the call over to Jenny.