OppFi Inc.

Greetings, and welcome to the OPFI second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jason Rosenthal, Vice President, Finance. Please go ahead.

Thank you, Operator. On today's call are Jared Kaplan, OPFI's Chief Executive Officer, and Shiven Shah, Chief Financial Officer. The company's second quarter 2021 earnings press release supplemental presentation in associated form 8K can be found at investors.opfi.com. During the call, the company will be discussing certain forward-looking information. These forward-looking statements are based on assumptions and assessments made by OPFI's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as of today, and OPSI undertakes no duty to update or revise any such statement, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC, including the sections entitled Risk Factors. In today's Remarks by Management, the company will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this afternoon's earnings press release. The results discussed on this call reflect Opportunity Financial LLC for the second quarter ended June 30th, 2021, achieved prior to the completion of the business combination with FG New America Acquisition Corp on July 20th, 2021. This call is being webcast live and will be available for replay for one month on our website. I would now like to turn the call over to Jared.

Thank you and good afternoon, everyone. Since this is our first call as a public company, before discussing our second quarter results, I will take a few minutes to review the OP5 story. Our multi-year mission is to facilitate financial inclusion for the 150 million everyday consumers who lack access to traditional financial options by providing the best available products and an unwavering commitment to our customers. We are working to create the digital financial services destination for the everyday consumer. This is the US median consumer. It's not a low-income consumer. Our average customer makes about 50 grand and has a bank account, but their bank has failed them at their greatest moment of need. Banks won't provide these consumers with credit due to a low traditional credit score. Perhaps their car broke down and they need to get it repaired to go to work, or maybe they must finance a healthcare deductible to receive urgent medical care. Filling the void left by larger banks, shrewd community banks have recognized the market opportunity for this vastly underserved consumer. But these smaller banks often lack the people, process, and technology to enter the market directly. That's where OP5 comes in. We power community banks by providing best-in-class outsourced marketing, underwriting, servicing, and technology to facilitate credit access for this everyday consumer. Instead of traditional credit scores, we develop proprietary scoring based on alternative data to determine an individual's ability and willingness to repay. This proprietary credit decisioning technology is about 30% more predictive than FICO. The result for the customer is a much better financing alternative than the markets of last resort. Products like payday loans, auto title loans, bank overdraft lines, tribal loans, and unregulated markets. We are now expanding our credit access platform with the goal of becoming an ecosystem for this consumer. By helping someone at their greatest moment of need, we can create tremendous gratefulness and loyalty. We believe credit access is also a catalyst to selling more to our customers, and we have recently launched new products that are directed at graduating customers back to mainstream credit. In the future, we hope to enable them to save and ultimately build wealth. This is our long-term vision to build the preeminent financial services destination for the middle income credit challenge consumer. Much like SoFi has built a platform for Henry's, the high earner, not yet rich community, we are doing the same for the everyday consumer. How are we going about building this? Our multi-year growth strategy will be a combination of re-accelerating volumes for our traditional installment business, coupled with a planned expansion of new products to lower the cost of credit access, as well as savings and investment products. In the near term, this includes our new salary cap and credit card products. Our historical bank-sponsored installment product, the OpLoan, is easy to understand. The average loan is $1,500 with a term of 11 months. It's a simple interest loan that amortizes over its life. There are no fees, no origination fees, no late fees, no prepayment penalties, and no NSSEs. We help our bank partners report payment history to the three major credit bureaus. When someone is difficulty paying, our customer advocates work with them to help find a payment plan that is more suitable. Customers receive a fair, transparent pathway to building credit. We recently launched SalaryTap, which is a natural extension of what we've accomplished to date with the Oplone product offering. This is our new payroll deductible installment loan with loan amounts starting at $2,000, 24-month terms, and interest rates of about 30%. The key product feature is securing repayment through payroll deduction, and that does two key things for us. First, it materially reduces the risk premium on each loan. Secondly, it allows Hop5 to facilitate a sub-36% APR product nationally. We began formally rolling out salary cap in Q2 and plan to distribute through both direct-to-consumer and B2B channels. While the current book is not material to our results, the early numbers are promising, and we expect to ramp the business over the next several quarters. Now, let's talk about the OpFight card. OpFight card is the first graduation product we offer to OpLoans customers, and it provides us entry into the large $21 billion non-prime credit card market. We believe the OpFi card can do to the non-prime credit card space what OpLoans has done to the payday loan space. Gain market share by utilizing alternative data underwriting to facilitate a better priced product for consumers, coupled with best-in-class mobile first digital technology and exceptional customer service. Last week, we officially launched the card to select OpLoans customers who have repaid their loans in full. Upon approval, Cardholders are instantly able to access their OpFi card from the OpFi mobile app and directly add their card to their mobile wallets. This allows cardholders to access their card information immediately to begin making purchases online, in-app, and at the point of sale. Cardholders also receive a physical card that supports all payment types. We expect a deliberate rollout through year-end before ramping originations in 2022. Now I will discuss our large total addressable market. There are 60 million people in the country that lack access to mainstream financial credit. We also know that about 115 million live paycheck to paycheck, and 150 million have less than $1,000 in savings. This savings dirt has been caused by years of flat income in the wake of material increases in the cost of health care, education, housing, and child care. Without savings, credit access is vital when the unexpected strikes. The demand for small dollar credit is theoretically best served by our traditional banking system. Large banks have the lowest cost of capital, are first in line to get repaid through deposits, can utilize transaction data to underwrite loans, and can subsidize acquisition costs through cross-sell of their depositors. However, banks are not serving this customer. About 40% of our customers have primary checking accounts at the three largest banks. This shows that the largest banks, even those that market small dollar products, are failing this customer. Furthermore, although many credit unions supposedly offer small dollar products, they are not meeting the need for subprime credit. Over 20% of our customers bank primarily at credit unions. In addition to banks and credit unions, near prime lending platforms are also clearly not serving this customer we know this from securitization data and our own proprietary data in our mission to enable the best available product we've implemented a turn up referral program which provides the opportunity for our customers to receive a lower rate product outside of OPFI's platform today we refer the business to about 20 near prime lending platforms however Even when we're trying to give the business away, less than 2% of customers find a sub-36% APR alternative. Not all products greater than 36% APR are created equal, and we have the data and customer anecdotes to show that without the products on our platform, consumers would be forced to the markets of last resort. There are several key features of our platform that have enabled our success to date. Our credit decisioning technology is highly differentiated and unique. Our massive data set includes roughly 8 billion data points. We have received over 11 million applications, facilitated over 1.8 million loans and achieved 17.5 million repayment events. We are continuously improving the platform through AI and machine learning so that we can facilitate more access while maintaining loss rates. Historically, We purchased the majority of receivables from our bank-originating partners and kept them on our balance sheet. Whether you hold the receivable or sell them to third parties, credit performance determines your success. These products have short-term durations, and coupled with our credit risk management, holding the receivables on balance sheet allows us to maximize unit economics. Importantly, as a result of our platform and approach, we have been able to set ourselves apart from other fintechs. Given that we've been GAAP net income profitable since 2015, this strong cash flow model is crucial to fund the additional build-out of our future platform. We have a highly diversified digital marketing technology stack that is designed to drive new product growth. We have purposely built a variable cost go-to-market strategy. Many digital players still rely on direct mail-to-drive acquisition. Less than 20% of our business is direct mailed. Our model has led to much more stable and predictable flow and ultimately has delivered an extremely low acquisition cost. Beyond our decision and technology and marketing strategy, our unrivaled customer satisfaction and a tremendous employee culture drive our success. We maintain exceptional customer service metrics. I always tell people, don't just believe what I say. Go online and read what our customers say on the Better Business Bureau or Google or LendingTree. They tell the story better than I ever could. The typical customer talks about being laughed out of a bank and denied multiple times before gaining credit access to our platform. A recent customer from Dumry's, Virginia told us, my experience was seamless from beginning to end. I appreciate the excellent customer service. This loan has changed my family's life and will allow us to move forward to become debt-free in 2021 and get a higher credit score. Thank you so much for trusting that I will pay you back. This is one of the many impactful stories I hear every day from our customers. And you cannot provide exceptional customer service without exceptional talent. We have built a great place to work. We have a diverse employee base that cares about our customers. And we're very proud of the work environment we have built that enables such great customer stories. In fact, Recently, we were listed on the Forbes America 2021 list of America's best startup employers and built-in 2021 best places to work in Chicago. Finally, I wanted to briefly touch on our Q2 financial highlights. During the second quarter, as the economy reopened and stimulus waned, we saw a rapid acceleration of consumer spending that drove an increase in the demand for short-term credit. We spent much of the pandemic improving our AI conversion technology, and our platform was prepared to convert this increased demand at better than historical levels. The results are strong growth sequentially, year over year, and compared to the same period in 2019. Q2 originations of 144 million grew 44% sequentially, 84% year over year, and 20% over Q2 2019. This drove our quarters ending receivables to $260 million, a 19% year-over-year growth and 29% over 2019. Receivable growth is a leading indicator of future revenue growth. Most of the Q2 growth was back in weighted as customer spent stimulus and COVID restrictions began to unwind. So the majority of that revenue should be recognized throughout the remainder of the year. Adjusted revenue for the quarter of $78 million grew 6% over Q2 2020, and 36% over Q2 2019. It's important to note that despite the strong originations rebound, we are still below what we would consider a normalized demand environment. Although the recent surge of the Delta variant on top of unemployment benefits, advanced child tax credits, and a continued moratorium on home and student loan payments are tempering consumer credit. We believe the return of normalized demand is a matter of when, not it. But the timing remains uncertain given these factors. We will, however, remain disciplined in our approach to profitable growth as stimulus programs sunset and the pandemic officially ends. Stimulus programs and increased savings rates naturally hedge our business. These factors drive better credit, and combined with our growth, we need profitability to remain strong in Q2, with $17.9 million of adjusted income up 11 times versus $1.6 million in Q2 2020. We also made some key hires in the quarter, including Neville Crawley, who joined us as president. As we enter this next phase, we are evolving our organization to support our future growth and strategic transition from a monoline lending platform to our goal of becoming the premier digital financial services destination for the everyday consumer. Neville was the former CEO of global FinTech platform Kiva. He brings more than two decades of extensive leadership in financial services, product and technology. We are tremendously proud of the financial technology platform we have built and our commitment to serving consumers excluded from the traditional banking system through fair, transparent products and an extraordinary customer experience. We are very excited to transition to a public company and strengthen our position as the financial champion for the nearly 150 million everyday consumers in the United States. We continue to innovate our array of products, technology and capabilities and look forward to introducing those to consumers in the years ahead. With that, I would now like to turn the call over to Shivan to review our financials.