Oportun Financial at Sidoti Small-Cap Conference: Strategic Growth Focus

On Thursday, 20 March 2025, Oportun Financial (NASDAQ: OPRT) presented at the Sidoti Small-Cap Virtual Conference, highlighting its return to GAAP profitability and strategic goals for 2025. While the company showcased strong Q4 performance and a positive outlook, it also addressed challenges such as increased interest expenses and the need to reduce operating costs.

Key Takeaways

• Oportun returned to GAAP profitability, reporting a Q4 net income of $9 million.
• Originations grew 19% year-over-year, with a focus on underserved communities.
• The company increased its 2025 adjusted EPS guidance by 7% at the midpoint.
• Operating expenses decreased by 31% year-over-year in Q4 2024.
• Oportun aims to improve credit outcomes and reduce leverage in 2025.

Financial Results

• Q4 Total Revenue: $251 million, surpassing guidance by $1 million but down 4% year-over-year.
• Portfolio Yield: Increased by 155 basis points year-over-year to 34.2%.
• Interest Expense: $74 million in Q4, up $22 million year-over-year.
• Net Revenue: $93 million, a 30% increase from the previous year.
• Operating Expenses: Reduced to $89 million, a 31% decrease year-over-year.
• Net Income (GAAP): $9 million, marking a $51 million improvement from last year.
• Adjusted Net Income: $22 million, with an adjusted EPS of $0.49.
• Adjusted EBITDA: $41 million, a 315% increase year-over-year.
• Debt to Equity Ratio: Improved from 8.7x to 7.9x quarter-over-quarter.

Operational Updates

• Secured Personal Loans (SPL): Grew 38% year-over-year in Q4 2024, with credit losses significantly lower than unsecured loans.
• Loan Fulfillment: 53% of applicants used multiple channels, and 73% used mobile or digital platforms.
• Net Charge-Off Rate: Improved to 11.7%, the lowest since Q3 2022.
• Partnerships: Collaborating with Pathword and Western Union to expand market reach.

Future Outlook

• 2025 Originations Growth: Expected between 10% and 15%.
• Revenue Growth: Anticipated return to growth by year-end 2025.
• Operating Expenses: Targeting a 5% decline for the full year.
• Adjusted EPS for 2025: Increased guidance to $1.10-$1.30, reflecting significant growth.
• Adjusted ROE: Aiming for a rate in the teens, with a long-term target of 20% to 28%.

Q&A Highlights

• Consumer Financial Health: Oportun is closely monitoring macroeconomic conditions and the financial health of its borrowing base.
• Go-to-Market Strategy: Emphasizes a multi-channel approach, including retail, contact centers, and digital platforms.
• Secured Personal Loans: Increased focus due to better unit economics compared to unsecured loans.
• Lending Partnerships: Continued efforts to leverage partnerships for broader reach and customer engagement.

Oportun Financial’s presentation at the Sidoti Small-Cap Virtual Conference underscores its commitment to strategic growth and financial stability. For more details, please refer to the full transcript below.

Full transcript - Sidoti Small-Cap Virtual Conference:

Brendan McCarthy, Analyst, Sidoti: Okay. Good afternoon, everybody, and welcome to Sidoti’s March Small Cap Conference.

My name is Brendan McCarthy. I’m an analyst here at Sidoti, and I’m pleased to welcome Oportun Financial. The ticker is o p r t. Joining us from the company will be CEO, Raul Vasquez, and CFO, Jonathan Coblens. Quick reminder, before we get going here, the q and a tab is located at the bottom of your screen.

Feel free to type in any questions throughout the presentation, and we can save time for q and a towards the end. But with that said, Raul, take it away.

Raul Vasquez, CEO, Oportun Financial: Thank you, Brandon. We appreciate Sidoti’s coverage of Oportun and being invited to speak today. I also wanna thank all of you in the audience for joining us today. I’m Raul Vasquez, CEO of Oportun Financial. With me today are Jonathan Koblintz, our Chief Financial Officer and Dorian Hair, our SVP of Investor Relations.

What I will be presenting today is our current investor presentation dated February 2025, which is on our Investor Relations website at investor.opportune.com. For those unfamiliar with Oportune, we provide loans and savings products to support hardworking individuals. Our mission is to empower our members to build a better future. We do so through our three core products, which I’ll detail shortly, unsecured personal loans, secured personal loans, and a reward winning Set and Save savings product. Our target market is comprised of thin file and no file low to moderate income individuals who are traditionally underserved.

Our customer base is both English and Spanish speaking, and we seamlessly engage with them via our via our bilingual retail and contact center teams as well as through our mobile app. I will now share more details on our product offering. Our responsibly structured credit products begin with our unsecured personal loans, which are the largest and most profitable part of Oportun’s business. They allow our members a fast and convenient way to address pressing financial needs such as car repair or a security deposit on an apartment they are renting. Our competitive differentiation in personal loans stems from our focus on underserved communities, our advanced technology and data capabilities, our AI driven underwriting and our ability to tailor our products to meet and exceed our members’ expectations.

For loans originated in the fourth quarter of last year, the average loan size for our unsecured personal loans was approximately $3,300 The average term was twenty six months and the weighted average APR was 35.8%, which as I’ll discuss soon provides a strong value proposition for our members. We’re continuing to roll out our plans to expand our secured personal loan product, which is secured by members’ autos. We are excited about the expansion of secured personal loans, which grew 38% year over year as of 4Q twenty four, driven by its superior unit economics. In 2024, credit losses for secured personal loans were more than 500 basis points lower than unsecured loans, while revenue per loan was approximately 75% higher. This is primarily because on average, secured personal loans in the fourth quarter were more than twice the size of unsecured loans.

The average loan size for our secured personal loans was approximately $6,700 in the fourth quarter, while the average term was 35 months and the weighted average APR was 35.1%. As I alluded to, our value proposition is supported by the fact that we deliver significant savings to our members as compared to alternatives that are generally available to them. With our APRs capped at 36%, competitor products and payday loans are on average seven times more expensive. We’re proud to have helped 1,200,000 members establish a credit history while saving them more than $2,400,000,000 in interest and fees. So it’s not surprising that we’ve been certified as a community development financial institution by the U.

S. Treasury Department since 02/2009, which we consider validation of our mission driven approach and commitment to provide capital access to underserved communities. Beyond lower pricing, we keep our members satisfied by offering a diverse set of loan fulfillment and payment channels, allowing them to engage with us in a way that suits them best. In 2024, ’50 ’3 percent of loan applicants used multiple fulfillment channels, including our retail stores, contact centers and mobile and digital platform to complete their applications. Notably, 73% of applicants used our mobile and digital channel for at least part of their applications.

And for payments, in addition to our direct locations, Oportun offers over 100,000 partner payment locations to our members at various PayNearMe, MoneyGram and Check Free Pay affiliated facilities. Set and Save, our savings product, was rated number one app in its category by Bankrate in January and recognized by Forbes in October as an outstanding personal finance app for simplifying your money. Members can seamlessly integrate their existing bank accounts into the platform and set personalized savings goals. Our AI engine then analyzes members’ income and spending patterns to determine a safe optimal allocation toward their goals. Funds are automatically transferred over time to help members reach their targets effortlessly.

On average, our savings product help members set aside $1,800 annually, contributing to a total of $11,400,000,000 saved since its launch. There is also a strong synergy between our credit and savings products. Our savings product fosters daily engagement with members even after they have repaid their most recent credit products, while our credit solutions provide essential support for unexpected expenses beyond their savings. Building on our progress in 2024, we will continue to advance our three key strategic priorities in 2025, which are improving credit outcomes, fortifying business economics, and identifying high quality originations. Regarding credit outcomes, we expect to reduce our net charge off rate in 2025 by benefiting from our V12 credit model for a full year and from our back book of loans shrinking to just 1% of our own portfolio by year end.

We expect to attain an adjusted ROE in the teens, up from 8% in 2024 by generating 10% to 15% full year originations growth, returning to revenue growth by year end and targeting a 5% full year decline in operating expenses. And we will continue to identify high quality originations by adhering to our current conservative credit standards, reinvesting in marketing and attracting high quality new members while deepening relationships with our best existing members. As shown on slide 12, a key pillar of how we can successfully underwrite personal loans in this environment is the stability of our hardworking members, an outcome that’s driven by our credit underwriting model, which actively seeks to identify people with strong stability in their communities. We ensure all borrowers, whether new or existing, undergo income verification before loan approval. For fourth quarter originations, the median gross income of approved borrowers was approximately $50,000 Additionally, our borrowers had an average of five point seven years at their current job and six point four years at their current residence.

Moreover, 91% of our approved members had their loan proceeds dispersed to their U. S. Bank accounts rather than opting to receive disbursements in the form of a check. Now let’s turn to our strong Q4 credit performance, a clear testament to the significant progress we’ve made. Our front book of loans originated since July 2022 continues to perform quite well, while our back book of pre July 2022 loans continues to roll off.

As shown on slide 13 of our investor presentation, our recent credit vintages have outperformed previous ones. As of our February 12 earnings call, losses on our front book twelve plus months after disbursement were up to 500 basis points lower than those on our back book, an improvement from the 400 basis points we had seen previously. This progress reflects our ongoing refinements to our credit model. Furthermore, you can see our annualized net charge off rate for the fourth quarter by front book versus back book on Slide 14. In total, our fourth quarter net charge off rate of 11.7% was an improvement of 55 basis points year over year and the lowest level of losses since the third quarter of twenty twenty two.

The front book had an annualized net charge off rate of 10.5%, which is within the 9% to 11% net charge off range that we are targeting in our unit economics model. Importantly, our back book continues to decline, making up just 5% of our year end loan portfolio by the end of twenty twenty four, yet still accounting for 18% of gross charge offs. So in summary, we continue to feel very good about the quality of credit we are originating. Our credit performance and confidence in our underwriting model enabled us to return to originations growth in Q4 for the first time in ten quarters. Originations of $522,000,000 were up 19% year over year.

And on our February 12 earnings call, we stated that full year 2025 originations would grow in the 10% to 15% range, aligning with our unit economics model objective to grow our own portfolio by 10% to 15% over time. We also set the expectation on our earnings call that we would return to revenue growth by the end of this year. Now I’d like to turn the presentation over to Jonathan for a financial review, including more details on our four Q results. The strong results he will share with you are a testament to our team’s execution and mark the beginning of a new chapter for Oportun. With the strong foundation we built in 2024, we are more focused than ever on driving growth and shareholder value in 2025.

Jonathan?

Jonathan Coblens, CFO, Oportun Financial: Thanks, Raul, and good afternoon, everyone. We had a strong fourth quarter returning to GAAP profitability and meeting or exceeding our guidance expectations. We’re confident that Oportun will build on this momentum in 2025, further enhancing profitability and achieving full year GAAP profitability as we advance towards our long term financial goals. Total revenue of $251,000,000 exceeded the top end of our prior guidance by $1,000,000 and declined by 4% year over year, driven by a lower average daily principal balance in our personal loans portfolio due to prior credit tightening actions. This impact was partially offset by a 155 basis point increase in portfolio yield to 34.2%.

Given the successful completion of the sale of our credit card portfolio in mid November, it’s important to keep in mind that while the sale is accretive to the bottom line, our credit card business contributed 4,000,000 of total revenue for 04/2024 and 34,000,000 for the full year. Q four interest expense of 74,000,000 was up 22,000,000 year over year, primarily due to a one time 17,000,000 noncash write off of deferred financing costs related to the repayment of our prior corporate financing facility as part of our November refinancing. Net revenue was $93,000,000 up 30% year over year as lower net charge offs and lower noncash fair value marks on our asset backed notes more than offset lower total revenue and higher interest expense. Turning now to operating expenses and efficiency, our $89,000,000 in total operating expenses in q four reflected a 31% reduction from the prior year period. As noted on our earnings call, this figure includes approximately $6,000,000 in onetime benefits that are not expected to recur as part of a normalized run rate.

Accordingly, we set on our February 12 earnings call to expect 97,500,000.0 in quarterly operating expenses for 2025, reflecting our $95,000,000 exit rate plus a modest increase in marketing investment to drive originations growth. We’re pleased to have returned to GAAP profitability with $9,000,000 in net income, a $51,000,000 year over year improvement and diluted EPS of 20¢. Adjusted net income was $22,000,000 a $30,000,000 improvement compared to the prior year quarter, resulting in adjusted EPS of 49¢. These improvements were principally driven by our sharply reduced cost structure along with improved credit performance. Adjusted EBITDA, which exclude excludes adjusted EBITDA, which excludes the impact of fair value mark to market adjustments on our loan portfolio notes was $41,000,000 for the fourth quarter.

This reflected a year over year increase of $31,000,000 or 315%. Our adjusted EBITDA performance exceeded the high end of our guidance by $11,000,000 primarily on lower than anticipated operating expenses and net charge offs. Regarding our capital and liquidity, as shown on slide 22, we deleveraged during four q by reducing our debt to equity ratio from 8.7 times to 7.9 times quarter over quarter as we were GAAP profitable and utilized part of the $91,000,000 of our operating cash flow to reduce debt outstanding by $49,000,000 As of December 31, total cash was $215,000,000 of which $60,000,000 was unrestricted and $155,000,000 was restricted. Further bolstering our liquidity was $776,000,000 in warehouse lines and remaining whole on sale agreement capacity of $45,000,000 Following the fourth quarter in January, we issued $425,000,000 in ABS notes. The transaction was a significant

Raul Vasquez, CEO, Oportun Financial: 20

Jonathan Coblens, CFO, Oportun Financial: Our access to capital markets is well established since June of twenty twenty three. Oportun has raised approximately $2,800,000,000 in diversified financings, including hold on sales, securitizations, and warehouse agreements from fixed income investors and banks. We anticipate we will come to market a few more times this year with ABS deals. Before handing the call back to Raul, I’d like to update you on our progress towards our long term unit economic targets. While our long term targets are GAAP targets, I’ll be using adjusted metric actuals for comparison because they remove nonrecurring items and provide a better sense of our future run rate.

It’s clear that we made significant progress in q four. Adjusted ROE was 25%, which was a 33 percentage point year over year improvement. The increase was driven principally by cost reductions, a higher loan yield, and lower net charge offs. Full year 2024 adjusted ROE was 8%, a 23 percentage point improvement over full year 2023. While we’re pleased to have reached the 20% to 28% adjusted ROE range in Q4 at 25%, our goal is to sustain this level annually.

Slide 18 shows how we will continue to focus on improving our credit performance, reducing expenses as a percentage of owned principal balance, and reducing leverage to drive improvement in shareholder returns. Raul, back over to you.

Raul Vasquez, CEO, Oportun Financial: Thanks, Jonathan. To close, I’d like to emphasize three key points. First, we’re pleased with our return to GAAP profitability in the fourth quarter and with our quarterly GAAP ROE of 10% and adjusted ROE of 25%. Second, we have clear line of sight towards substantially improving our profitability from twenty twenty four’s levels and we expect to be GAAP profitable on a full year basis. Confident in our outlook, on our February 12 earnings call, we increased our full year 2025 adjusted EPS expectations by 7% at the midpoint to a $1.1 to a dollar 30, reflecting 53% to 81% year over year growth.

And finally, our February 12 guidance indicated that we will generate an adjusted ROE in the teens this year while making progress towards 20% to 28% ROEs on an annual basis. We see a bright future ahead for Oportun by remaining laser focused on improving credit outcomes, fortifying business economics, and identifying high quality originations. With that, Brendan, we’re happy to answer questions from you or the audience.

Brendan McCarthy, Analyst, Sidoti: Fantastic. Thanks, Raul. Thanks, Jonathan, for the overview. We can now open up for Q and A here. And couple of questions from our attendees.

Our first one here involves state of the consumer and really the financial health of your borrowing base. I guess, do you see any changes with consumers maxed out on their credit cards, mid higher interest rate environment. Maybe just talk about the state of the borrowing base a little bit.

Raul Vasquez, CEO, Oportun Financial: Yeah. On the state of the borrowing base, we continue to believe that given the adjustments that our consumer, our target consumers made in their own budgets and given the adjustments we made in our underwriting that this is a constructive environment for us to make loans. Right? We we continue to watch the macro very carefully, so I really like this question. Among the positives, I think our number one, it continues to be a very strong job market in particular for blue collar workers.

Right? That’s who we serve. Median gross income we talked about is $50,000 so we like the job market. At the same time, right, we’re keeping a close eye on inflation as I think everyone is today and overall macro conditions. So again, today, we think it’s constructive.

Right? Our credit metrics indicate that we can continue to look for this very modest 10% to 15% growth, but we watch the environment carefully.

Brendan McCarthy, Analyst, Sidoti: Got it. And and you, you know, pointed to or hinted at, you know, the return to loan origination growth this year in fiscal twenty five. Maybe you could discuss your current go to market strategy as well as marketing efforts as it relates to that outlook.

Raul Vasquez, CEO, Oportun Financial: Sure. Doreen, could you go to the happy to do it. Doreen, could you please go to the slide that shows our channels? We alluded to this in our in our comments. We really go to market through a combination of three channels.

We built a multichannel business, and you see the three channels here on the left side. They are our retail channels, so we have a 28 physical locations. And then we offer our loans through 490 partner locations. Think of them as locations that are paid for and staffed by our partners, but where they make Oportun loans available. That retail channel generated 34% of the loans that we originated, in 2024, where contact centers, are basically two contact centers in which people can call us.

They tend to be already familiar with the application process. They know what we’re going to ask of them. And as a consequence, they’re very comfortable making a phone call, talking to one of our employees, and going through the application process that way. That’s 43% of the loans originated in 2024. So that’s actually our top channel, and we like that channel because we see a lot of our repeat borrowers who are among our best borrowers use that channel to go ahead and and, you know, start an application process and get a loan from us.

And then finally, we got the mobile and digital channel that although it says here is only 23% of loan originations, it was involved in about three quarters of applications in one way, shape, or form. And that’s because we did create these channels where they could complement each other to be able to provide the most convenient means of getting a loan in the market. Right? So we think that convenience is one of the things that we really deliver. So that’s how, our members come to us.

The way they find out about us tend to be things like direct mail. We do do some digital advertising. And then word-of-mouth is a really, really big part of our business. We get a lot of high quality originations through our customer referral programs as well.

Brendan McCarthy, Analyst, Sidoti: Great. That’s helpful. And could you provide an update on views related to the first two months of the Trump administration? And and have you seen any regulatory change or potential for regulatory change and and as well as early client response?

Raul Vasquez, CEO, Oportun Financial: Well, I wanna be careful, in terms of the fact that we’re in March here. So we’re we don’t wanna discuss anything that has to do with q one performance. But I think to answer that question broadly, I think the whole financial services industry viewed the Trump administration as being positive for the industry. And certainly, when Trump won the election, our whole sector saw stocks stock prices move up as did opportune. And so far, we would say that what we’ve seen from a policy perspective has been constructive.

Brendan McCarthy, Analyst, Sidoti: Great. Great. And you mentioned, you know, pretty positive growth outlook for the SPL product. Perhaps you could talk about, you know, what kind of revenue mix you might expect opportune to have in the coming years or quarters and maybe, just discuss what impact that might have on the loan portfolio as well as credit metrics and portfolio yield.

Raul Vasquez, CEO, Oportun Financial: Yeah. We’re big believers in our SPL product. We shared that it grew 38% year over year in Q4. So certainly growing faster than the core of the business, but it’s off of a relatively small base. So SBL represents 4% to 5% of our lending portfolio.

It is an objective of ours to increase the penetration of SBL in the business because as we mentioned, revenue per loan tends to be about 75% higher. Losses are about five basis I’m sorry, 500 basis points or five percentage points lower. So the overall economics for SPL are really accretive to the business. So we are trying to grow the SPL portion of the portfolio faster than the overall business. We really like this business.

Brendan McCarthy, Analyst, Sidoti: Got it. And we have a couple questions from the attendees on on the, Findel Capital letter released this morning. And and I know Oportun just recently released a press release, so maybe I’ll just turn it over to you to perhaps address, address that however you’d like.

Raul Vasquez, CEO, Oportun Financial: Well, I think the the first thing I would say is, as a company, we certainly value, the input from all investors. And specifically with Findell, we’ve engaged actively, repeatedly, and in good faith with them for some time, striving to foster a constructive and collaborative relationship, really, with the goal of enhancing value for our all shareholders. Right? That’s what Findell wants. That’s what we want as well.

And I think for, kind of specific elements, I would point people to the response that we just published recently.

Brendan McCarthy, Analyst, Sidoti: Got it. And maybe we could switch to the the back book. I know you mentioned that should be roughly 1% of loans receivable looking at the end of twenty twenty five. And I guess, do you see the need or or maybe the desire to to change underwriting or or credit performance at the end of this year and maybe, any propensity for a higher average loan size?

Raul Vasquez, CEO, Oportun Financial: Well, we we, when we think about adjustments to the risk engine, if you could go to slide 13, please, Dorian, and just bring that slide back up. One of the things that we’ve been presenting over the last year or so is a view of credit performance by quarterly vintage. And, the way that we built our risk engine allows us to make both broad and very fast changes if we need to, and that’s very useful at times like, say, the pandemic, right, where we realized that the world was changing and that we needed to make some very fast adjustments across the entire portfolio. The risk engine allows us to do that, but the risk engine also allows us to make very granular changes as well. And what we really like and what we hope investors respond to positively is that you see here that we continue to fine tune the risk engine and that’s led to the situation that you see on the slide where q one twenty four performance is better than the prior quarter, q four twenty three, which is better than the prior quarter and better than the prior quarter.

Right? So every subsequent quarter is better because of the fine tuning of the risk engine. And this is what we do all the time. Right? We’ve got a lot of data scientists, engineers, and credit risk analysts that look for opportunities to keep fine tuning the engine.

So, yes, we would expect to continue to make adjustments, to the risk engine throughout the year much as we’ve done here. But we really like v 12 and the underlying performance that we see from v 12. So the improvements in credit will come from having v 12 for all year and then these ongoing adjustments.

Brendan McCarthy, Analyst, Sidoti: Great. And perhaps we could turn to the lending partnerships. I know Oportun has pretty substantial or significant partnerships with Pathword as well as as a relationship with Western Union. Maybe you could just talk about the value proposition of those two relationships.

Raul Vasquez, CEO, Oportun Financial: Yeah. So, the partnerships to your point, Brendan, are very valuable to us. PathWord is one in which, we do the marketing for loans. They originate the loans, and then that puts us in an opportunity to be able to serve nationwide in partnership with them, be able to serve most of the country with the responsible affordable loans that Oportun provides. So that’s been a great partnership.

We stepped into that partnership with them in 2021, and, we think it’s been mutually beneficial. The partnership with Dolex, Bari, and Western Union is slightly different. That’s one in which at their locations, they serve, their customers with their core products. Those are money service businesses, so they provide their services, but they also then market a loan. If they have one of their customers that they believe is interested in a loan, they tell them about the relationship with Oportun, and then they give us an opportunity to be able to connect with that customer and start to take them through the loan application process.

So both means of increasing awareness and consideration of Oportun, but done differently.

Brendan McCarthy, Analyst, Sidoti: Great. That’s helpful. And maybe we’ll conclude on one more question. Just talk about, you know, maybe what investors might be misunderstanding about Oportun’s story and why now is a particularly good time to take a look at the at the stock price or at the stock?

Raul Vasquez, CEO, Oportun Financial: Yeah. I think, I would say there are two ways to view the Oportun story. Right? One is to look at, the past, right, and to focus on the challenges that we had in 2022 and 2023, and there’s certainly a group of people that are very focused on that. And then I think there’s another group of people that look at the fact that we made changes to our product assortment.

We made changes to our pricing. Right? We made changes to our operating expenses and became a leaner, more focused version of Oportun. And that group of investors is looking at where we are today and where we’re going. We mentioned in our comments that we think this is the beginning of a new chapter for Oportun.

That leaner, more focused company has returned to GAAP profitability, has given guidance to full GAAP profitability for this year and a significant increase in profitability. Right? So I’d say that’s the biggest distinction right now. And those investors that are looking at where we’re at and where we’re going, we think are the ones that have really driven the superior performance in the stock price over the last twelve months.

Brendan McCarthy, Analyst, Sidoti: Fantastic. Well, Raul and Jonathan, we really appreciate the overview and and the detailed insight. We’ll conclude the conference there. Thanks, everybody, for your time.

Raul Vasquez, CEO, Oportun Financial: Thank you very much, Brendon. Thank you, everyone, for joining.

Brendan McCarthy, Analyst, Sidoti: Thanks, everybody. Have a nice day.

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