• Revenue: $251 million in Q4, exceeding guidance by $1 million, but a 4% decline year over year.
• Net Income: $9 million in GAAP net income, a $51 million improvement year over year.
• Adjusted Net Income: $22 million, a $30 million improvement year over year.
• Return on Equity (ROE): GAAP ROE of 10%, adjusted ROE of 25% in Q4.
• Originations: $522 million in Q4, a 19% increase year over year.
• Net Charge-Off Rate: 11.7% in Q4, improved by 55 basis points year over year.
• Operating Expenses: $89 million in Q4, a 31% reduction year over year.
• Adjusted EBITDA: $41 million in Q4, a $31 million increase year over year.
• EPS: Diluted EPS of $0.20, adjusted EPS of $0.49 in Q4.
• Cash and Liquidity: Total cash of $215 million as of December 31, 2024, with $60 million unrestricted.
• Guidance for 2025: Adjusted EPS range of $1.10 to $1.30, reflecting a 53% to 81% increase over 2024.

• Warning! GuruFocus has detected 6 Warning Signs with OPRT.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Oportun Financial Corp (NASDAQ:OPRT) returned to GAAP profitability in Q4 2024 with a net income of $9 million, marking a $51 million year-over-year improvement.
• The company achieved a 19% year-over-year growth in originations, with a 23% increase in the number of loans originated.
• Operating expenses were reduced by 31% year-over-year, reaching the lowest quarterly figure since Q2 2019.
• Improved credit performance was demonstrated by a net charge-off rate of 11.7%, the lowest level since Q3 2022.
• Oportun Financial Corp (NASDAQ:OPRT) increased its full-year 2025 adjusted EPS expectations by 7% at the midpoint, reflecting a 53% to 81% increase over 2024.

Negative Points

• Total revenue declined by 4% year-over-year due to a decrease in the average daily principal balance in the personal loans portfolio.
• Interest expense increased by $22 million year-over-year, primarily due to a one-time $17 million non-cash write-off related to refinancing.
• The sale of the credit card portfolio resulted in a $4 million reduction in total revenue for Q4 2024 and $34 million for the full year.
• The company anticipates a temporary increase in the net charge-off rate to 12.3% in Q1 2025.
• Despite improvements, the back book of loans still accounted for 18% of gross charge-offs, indicating ongoing challenges in managing legacy loans.

Q & A Highlights

Q: Can you explain the changes in the EPS guidance for 2025 and what factors are contributing to the updated share count expectation? A: Jonathan Coblentz, CFO, explained that the share count adjustment reflects updated projections based on future share awards and employee turnover. The EPS guidance increase is driven by improved revenue expectations, stable operating expenses, and better credit performance. The company has also seen success in its financings, with a recent securitization yielding below their target rate, contributing to the positive outlook.

Q: As you focus on growth, which channels do you expect to drive this growth, and are all channels still active? A: Raul Vazquez, CEO, stated that all channels, including Medibank, branches, MoneyGram, and retail partners, are active and play a crucial role in originations. The company has seen significant strength in its retail and contact center channels, which have become more productive, contributing to healthy originations.

Q: How do you anticipate the cost of capital to evolve over the year, considering the current rate environment and debt maturities? A: Jonathan Coblentz, CFO, noted that while new debt issuances are priced favorably, older debt with lower rates is running off. This may lead to a temporary increase in cost of funds before it decreases over the long term. The company plans to continue reducing its debt-to-equity ratio through GAAP profitability and prepayments of corporate debt.

Q: What factors are driving the 10-15% growth expectation in originations for FY25? A: Raul Vazquez, CEO, explained that the growth is primarily driven by increased marketing efforts rather than opening up the credit box. The company plans to invest more in marketing to drive demand, leveraging the healthy top-of-funnel demand and maintaining its current credit standards.

Q: How does Oportun view the competitive landscape in the personal loan market for FY25, given the current portfolio yield? A: Raul Vazquez, CEO, mentioned that the competitive landscape is rational, with pricing reflecting the higher cost of capital. The company believes this environment is constructive for growth, as competitors are not reducing pricing irrationally.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.