OppFi Inc. — Q1 2024 Form 10-Q Summary
Reporting period: Three months ended March 31, 2024; filed May 9, 2024. OppFi is a technology-enabled specialty finance platform, primarily facilitating bank-partner installment loans through OppLoans. It reported one operating segment. Comparisons below are with Q1 2023 unless otherwise noted.
Financial and operating performance
| Metric | Q1 2024 | Prior period / change |
|---|---|---|
| Total revenue | $127.3 million | $120.4 million; +5.8% |
| Net revenue | $63.2 million | $57.2 million; +10.5% |
| Income from operations | $5.3 million | $3.7 million; +41.7% |
| Net income | $10.1 million | $3.9 million |
| Net income attributable to OppFi Inc. | $5.5 million | $0.3 million |
| GAAP EPS, basic / diluted | $0.29 / $0.10 | $0.02 / $0.02 |
| Adjusted net income / Adjusted EPS (non-GAAP) | $8.8 million / $0.10 | $3.9 million / $0.05 |
| Cash flow from operating activities | $74.4 million | $65.6 million |
| Cash flow from investing / financing activities | ($18.0) million / ($41.6) million | ($28.3) million / ($15.6) million |
Revenue growth reflected higher average receivables and stronger payment activity. Net income included a $5.2 million gain from the decrease in the fair value of warrant liabilities; this noncash, market-sensitive item materially contributed to the year-over-year earnings increase. Expenses rose 8.4% to $57.9 million, including $2.9 million of OppFi Card exit costs and higher professional fees. Expenses were 45.5% of revenue versus 44.4% a year earlier.
OppLoans net originations were $163.5 million, up 2.4%; ending unpaid principal receivables were $371.4 million, up 0.5% year over year. Annualized average yield was 129.5% versus 126.0%. Net charge-offs were 47.9% of revenue versus 49.0%, while annualized net charge-offs as a percentage of average receivables edged up to 62.0% from 61.8%. Management attributed higher yield to fewer delinquent, non-accruing loans, lower hardship-program enrollment, and portfolio mix.
At March 31, 2024, total assets were $563.2 million and stockholders’ equity was $197.3 million. Cash and restricted cash totaled $88.7 million, including $47.2 million unrestricted cash. Finance receivables at fair value were $412.0 million; unpaid principal was $371.4 million. Senior debt, net, was $300.3 million and notes payable were $0.7 million. Management reported $224.7 million of undrawn debt capacity and approximately $613.7 million of total funding capacity, including cash and financing commitments.
Material changes, outlook, and notable items
- OppFi completed its wind-down of the OppFi Card product in January 2024, charged off the remaining card receivables, and recorded $2.9 million of exit costs. The remaining accrued exit-cost liability was $2.7 million at quarter-end. SalaryTap receivables continued to run down.
- All Q1 originations were through bank partners, compared with 95.2% in Q1 2023; OppFi said it had stopped directly originating loans in Q3 2023. Total retained net originations decreased 2.0% to $152.5 million.
- On March 19, OppFi amended a revolving facility to remove a collateral performance trigger with which it had previously been out of compliance. A separate Gray Rock facility amendment in April extended maturity to October 2026 and raised its margin to 7.45%.
- Management believes unrestricted cash, undrawn debt and operating cash flow will meet liquidity needs for at least 12 months from the filing date. No specific earnings or operating guidance is provided. The company used $12.7 million of cash after quarter-end for a $0.12-per-share Class A dividend and a $0.12-per-unit distribution; it also authorized a share repurchase program of up to $20 million.
- Important risks include uncertain regulatory and legal outcomes involving lending compliance and bank partnerships, including the California Department of Financial Protection and Innovation case concerning AB 539 and the bank-partner lending model. Other agency and state inquiries are ongoing. A separate Delaware stockholder lawsuit remains at an early stage; the company says potential loss cannot yet be estimated.
- Disclosure controls were deemed ineffective because of a previously identified material weakness in IT access controls and segregation of duties. Management is implementing remediation and says compensating controls are in place, but the weakness is not considered remediated pending successful testing.
Key investor verification points
- Assess earnings quality separately from the $5.2 million warrant-liability fair-value gain and review the company’s non-GAAP adjustments, including the $6.2 million of other addbacks and one-time expenses.
- Track receivables performance, delinquency and charge-off trends, and the assumptions used to value loans. The loan portfolio fair value relies on internally developed discounted-cash-flow models and unobservable inputs.
- Review liquidity and facility availability alongside borrowing costs, maturities, covenant and cross-default provisions, and the effect of the subsequent dividend, distribution and repurchase authorization.
- Monitor California litigation, regulatory inquiries, the continuing reliance on bank partners, and whether lenders and financing sources continue to support the model.
- Verify progress toward remediating the material weakness. Also account for OppFi’s Up-C structure and noncontrolling interests when comparing GAAP EPS with adjusted measures.