OppFi Inc.

Good afternoon, and welcome to OPFI's first quarter 2023 earnings conference call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. After management's presentation, there will be a question-and-answer session. Participants who join the webcast could also submit questions at any time by either emailing investors at opfi.com or selecting Ask a Question feature on this live webcast. For those listening by dialing, you will be prompted to enter the queue after the prepared remarks. It is now my pleasure to introduce your host, Sean Smolarz, Head of Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon. On today's call are Todd Schwartz, Chief Executive Officer and Executive Chairman, and Pam Johnson, Chief Financial Officer. Our first quarter 2023 earnings press release and supplemental presentation can be found at investors.opfi.com. During this call, OpFi will discuss 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 Securities and Exchange Commission, including the sections entitled Risk Factors. In today's remarks by management, the company will discuss certain non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in the earnings press release issued earlier this afternoon. This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Todd.

Thanks, Sean, and good afternoon, everyone. I am very pleased to report continued strength in our business. In the first quarter of 2023, we achieved adjusted net income that exceeded our guidance with solid year-over-year growth. I believe this result clearly indicates our ability to rebound and deliver profitable growth. Pam will review our first quarter results in detail, as well as discuss our full year guidance update. Before she does, I will cover two topics. One, the key highlights from our Q1 2023 financial performance, and two, an update on strategic business initiatives for 2023. First quarter results were driven by improvement in credit performance as a result of credit model adjustments made in the middle of 2022, total expense leverage, and better than expected recoveries and payments. This enabled us to exceed our first quarter guidance for adjusted net income and achieve year over year growth. The key highlights for the first quarter this year compared to last year are 9% growth in ending receivables, to $370.2 million, 20% growth in total revenue to $120.4 million, net income of $3.9 million, and adjusted net income of $4.4 million. We realize further gains in cost efficiency in both marketing and operations with the 9% decrease in marketing costs per new funded loan and the eight percentage point decrease in total expenses as a percentage of revenue. Now, I'd like to provide updates on our previously discussed core strategic initiatives for 2023. Credit performance continues to strengthen. As we anticipated after credit adjustments were made last year, we experienced sequential improvements in vintage level first payment defaults beginning in Q3. and then improvements in portfolio level total delinquency rates starting in Q4. Now, I'm pleased to report net charge off rates both as percentage of revenue and average receivables improved in Q1 sequentially. We expect net charge off rates to end 2023 significantly lower than last year. In the first quarter, the first payment default rate decreased 20% year over year and 9% sequentially. This was down 30% from the peak last year. The total delinquency rate decreased 20% from the fourth quarter of 2022 and 3% year-over-year. The net charge-off rate as a percentage of total revenue decreased 18% or 11 percentage points, falling to 48.9% from 59.8% in Q4 last year. We attribute part of this success to our values-based collection strategy, During the first quarter, recoveries doubled to $6.4 million year-over-year. This also represented a 40% increase sequentially. Portfolio quality remains our priority. We made the strategic decision to focus on profitable growth by tightly managing credit. As a result, we are emphasizing credit performance over origination growth to achieve consistent earnings growth. We continue to diligently monitor leading indicators closely and additional credit adjustments will be made as needed. Our marketing initiatives continue to unlock pockets of growth to drive cost-effective, low-risk origination volume. We continue to focus on optimizing our diverse channel mix across SEO, direct mail, and long-standing partners. One of the other areas of focus for 2023 is continuing to improve our operational efficiency. We recently streamlined our customer support operations to maximize efficiency while improving customer experience. This is evidenced by our net promoter score of 80 that we achieved in Q1. In summary, I'm very pleased with our Q1 performance that exceeded our earnings guidance and delivered year-over-year growth. Given our Q1 performance and greater confidence in the remainder of the year, we raised our guidance for full year adjusted net income and earnings per share. With that, I'll turn the call over to Pam.