OppFi Inc.

Good afternoon and welcome to OPFI second quarter 2023 earnings conference call. All participants are in 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 can submit questions at any time by either emailing investors at opfi.com or selecting the ask a question feature on this live webcast. For listening by dialing, you may be prompted to enter the queue after the prepared remarks. It is now my pleasure to introduce your host, Sean Smallers, Head of Investor Relations. You may begin, sir.

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 second quarter 2023 earnings press release and supplemental presentation can be found at investors.opsci.com. During this call, OPSI 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 OPFI 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 United States Securities and Exchange Commission, including the sections entitled Risk Factors. In today's remarks by management, the company will discuss certain non-gap 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'm very pleased with our second quarter results, which further demonstrate our focus on profitability. In the second quarter of 2023, we more than doubled adjusted net income year over year while achieving double-digit revenue growth. I believe this result clearly indicates our ability to balance growth and risk while maintaining expense discipline. Pam will review our second quarter results in detail as well as discuss our full-year guidance update, which includes raising our earnings outlook. Before she does, I will cover three topics, one, the key highlights from our Q2 2023 financial performance, two, our progress on strategic business priorities for 2023, and three, an update on our corporate development initiatives. Second quarter results were driven by improvement in credit performance due to adjustments made last year and recent modeling enhancements, as well as continued total expense leverage and growth and recoveries. The key highlights for the second quarter this year compared to last year are solid 14% total revenue growth to 122.5 million, the strong rebound in both net income with 90% growth to 18.1 million, and adjusted net income with 138% growth to 16.3 million. We achieved these results while holding ending receivables steady at approximately $398 million, further demonstrating our renewed focus on profitability over portfolio growth. To this end, we realized additional gains in cost efficiency in both marketing and operations. Marketing costs per funded loan decreased 23%. Total expenses as a percentage of total revenue decreased by 16%. Now, I'd like to provide updates on our core strategic initiatives. During the second quarter, credit performance continued to strengthen. Net charge-off rates improved year-over-year and sequentially, both as a percentage of total revenue and average receivables. Net charge-off rate as a percentage of total revenue decreased 17%, or 7 percentage points, falling to 36.2% from 43.5% in Q2 last year. Further illustrating the effects of credit modeling enhancements and adjustments at the end of the second quarter, the total first payment default rate decreased 23% and the total delinquency rate declined by 10%. I want to take this opportunity to remind investors about the overall seasonality of the business. Since this affects sequential credit trends, loan vintages originated during late first quarter to early second quarter are historically weaker than other times of the year, which affects credit performance in the third and fourth quarters. Therefore, partly due to seasonality, we expect net charge-off rates to increase sequentially in both the third and fourth quarters, while continuing to improve on a year-over-year basis. This year, our recovery strategy continues to contribute strongly to our net charge-off rate improvement. During the second quarter, recoveries increased 91% year-over-year to 6.5 million. Our plan this year is to remain disciplined and prioritize strong unit economics and profitability over originations growth. Last year's adjustments to credit modeling have yielded positive results. Our product and marketing teams continue to focus on cost-effective initiatives to generate lower risk origination volume. We have worked hard to optimize our marketing funnel to lower origination costs and yield better quality. We remain very focused on realizing operational efficiencies. This is demonstrated by the 16% improvement year over year for total expenses as a percentage of total revenue during the second quarter. We achieved this with more efficient marketing spend, effective management of general and administrative expenses, and the previously announced streamlining of our customer support operations. These improvements were made despite interest expense increasing by approximately $3 million or 43% year over year. Before I conclude my remarks, I'll provide a brief update on our corporate development initiatives. As discussed on our Q4 2022 conference call in March, diversifying the business is one of our strategic growth priorities. We are most interested in potential accretive acquisitions in adjacent customer or product categories, where we believe we can leverage our core competencies and brand equity to create value and serve more customers. We believe there are opportunities in the market and are starting to see more realistic valuation expectations. In summary, the strength of our business during the first half of the year gives me confidence that our strategic decision making last year put us on the right path and is generating positive results. This confidence is why my family and I continue to purchase shares during the recent open trading window following our Q1 earnings release. We also expect to be more proactive with investor relation activities in the second half of this year with plans to meet with investors at conferences and related events. With that, I'll turn the call over to Pam.