Oportun Financial (US:OPRT)2022-08-09 03:00Financial Data and Key Metrics Changes - The company achieved second quarter originations of $878 million, up 103% from the second quarter of 2021 [7] - Revenue for the second quarter was $226 million, an increase of 63% year-over-year, with adjusted net income of $3.8 million or adjusted EPS of $0.11 [8][18] - The annualized net charge-off rate was 8.6%, compared to 6.4% in the prior year period [23] - Total operating expenses were $158 million, an increase of 43% year-over-year, while adjusted operating expenses increased 45% to $140 million [21] Business Line Data and Key Metrics Changes - The secured personal loan product ended the second quarter with $100 million in receivables, up 620% year-over-year [14] - Credit card receivables grew 511% year-over-year to $190 million, with over 193,000 members holding an Oportun-branded credit card [14] - The company reduced its exposure to new borrowers, with 35% of loans going to new borrowers in July compared to 51% in the first quarter [10] Market Data and Key Metrics Changes - The company ended the second quarter with 1.8 million members, reflecting a 38% annualized growth rate [12] - The company observed an uptick in delinquencies, particularly among borrowers with lower free cash flows and smaller loans [9] Company Strategy and Development Direction - The company is focused on three strategic priorities: growing its member base, increasing multi-product relationships, and enhancing platform capabilities [12] - The company plans to tighten credit standards and reduce operating expense growth to navigate the current macroeconomic environment [11][31] - The company aims to maintain a profitable growth trajectory despite the challenges posed by inflation and rising gas prices [36] Management's Comments on Operating Environment and Future Outlook - Management noted that the weakening macroeconomic environment has started impacting the company's numbers more significantly [9] - The company expects increased charge-offs in the second half of 2022 due to rising delinquencies [9] - Management remains cautiously optimistic about the business, citing potential improvements in the macro environment, such as decreasing gas prices [63] Other Important Information - The company completed a $400 million securitization in May and another in July, reflecting investor confidence [25] - The updated guidance for the full year includes aggregate originations between $3.15 billion and $3.18 billion and total revenue between $930 million and $940 million [27] Q&A Session Summary Question: Which products and/or channels will be affected by the tightening? - The core personal loan product will see the least tightening, while credit card and secured personal loan receivables targets have been reduced [39] Question: How is the competitive environment affecting the company? - The company views the current environment as a momentary pause and believes it will continue to take market share once conditions improve [41] Question: What similarities exist among cohorts experiencing credit stress? - Borrowers with lower free cash flow and smaller loans are facing difficulties due to rising inflation and gas prices [48] Question: How does the company expect to manage potential rolling delinquency challenges? - The company will continue to monitor macroeconomic indicators and adjust its strategies accordingly [56] Question: What would it take to reopen the lending funnel? - The company would need to see a reversal of negative trends, such as decreasing gas prices and evidence of peak inflation [70]