Financial Data and Key Metrics - Total revenue for Q4 2023 increased by 10.7% to 191.9 million in Q4 2023 [12] - Annualized net charge-off rate as a percentage of total revenue improved by 12.9 percentage points to 46.4% in Q4 2023 [12] - Total expenses, excluding interest expense, as a percentage of total revenue decreased by 5.6 percentage points to 33.8% in Q4 2023 [12] - Net income for Q4 2023 was 5.2 million in the prior year [12] - Adjusted net income for Q4 2023 was 2.8 million in the prior year [12] - Full-year 2023 total revenue reached a record 416.5 million, a 3.6% increase year-over-year [13] - Net income for 2023 was 3.3 million in the prior year [13] - Adjusted net income for 2023 was 5 million in the prior year [13] Business Line Performance - Credit performance improved year-over-year, with the total first payment default rate decreasing by 40 basis points and the total delinquency rate declining by 90 basis points [15] - Yield expanded by 8.4 percentage points to 126.8% in Q4 2023 compared to 118.4% in the prior year [16] - Recoveries of previously charged-off loan balances increased by 40.8% year-over-year in Q4 2023 [16] - Marketing cost per funded loan decreased by 6.3% year-over-year in Q4 2023 [17] Market and Geographic Expansion - The platform expanded geographically with bank partners entering new states [17] - A new credit model incorporating an updated dynamic risk model is expected to launch in Q2 2024, aimed at driving lower risk origination volume and reducing credit losses [21] Strategic Priorities and Industry Outlook - The company plans to maintain a disciplined underwriting strategy, emphasizing profitability over portfolio growth in 2024 [10] - The macroeconomic environment for 2024 is expected to be similar to 2023, with sticky inflation and higher interest rates [19] - The company is cautious about macroeconomic headwinds but believes it is well-positioned to operate in this environment [20] - Corporate development opportunities, including potential partnerships and acquisitions, are being evaluated to create shareholder value [18] Management Commentary - Management expressed confidence in the long-term strategy, citing a strong balance sheet with unrestricted cash of $31.8 million, nearly doubling year-over-year [23] - The company plans to focus on top-of-funnel optimization, operating efficiencies, and geographic expansion in 2024 [22] Q&A Session Question: Growth Outlook and Macroeconomic Environment - The company is emphasizing profitability over growth due to the macroeconomic environment and has tightened the credit box to manage risks [36][37] - Growth will depend on sustained loss curves resembling 2019 levels, and the company is exploring other growth avenues such as geographic expansion [40][42] Question: Drivers for 2024 Revenue Guidance - Revenue guidance for 2024 is driven by maintaining strong yields and not chasing growth through higher customer acquisition costs [49] - The company expects its new credit model, launching in Q2 2024, to support growth [50] Question: Charge-off Rate Dynamics - The charge-off rate as a percentage of revenue is expected to remain similar year-over-year, with minor fluctuations due to seasonality [53][54][76] Question: M&A and Acquisition Criteria - The company is refining its criteria for acquisitions, focusing on verticals that complement its brand and are accretive to shareholder value [61] Question: Auto Approval Rate - The auto approval rate is currently at 72%, with incremental improvements expected through AI tools and process optimizations [62][63] Question: Geographic Expansion Impact - New state entries are expected to provide growth opportunities, but the company is cautious due to the higher risk associated with new originations [69][71]
OppFi (OPFI) - 2023 Q4 - Earnings Call Transcript