OppFi Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are principally with FY2021. This is an annual filing, not a standalone fourth-quarter report. OppFi operates a digital lending platform, primarily facilitating unsecured installment loans through bank partners. Its Up-C structure means OppFi Inc. owned approximately 13.5% of OppFi-LLC at year-end, with the remaining economic interest held by members.
Financial and operating performance
| Metric | FY2022 / year-end | FY2021 / comparison |
|---|---|---|
| Total revenue | $452.9 million | $350.6 million; up 29.2% |
| Net revenue | $217.0 million | $263.7 million; down 17.7% |
| Operating income (loss) | $(6.3) million | $57.3 million |
| Net income | $3.3 million | $89.8 million; down 96.3% |
| Net income attributable to OppFi Inc. | $7.1 million | $25.6 million |
| Adjusted net income (non-GAAP) | $5.0 million | $65.8 million |
| Adjusted EBITDA (non-GAAP) | $53.9 million | $116.9 million |
| Net originations | $758.2 million | $595.1 million; up 27.4% |
| Ending receivables | $402.9 million | $337.5 million; up 19.4% |
| Average yield | 118.9% | 126.9% |
| Net charge-offs / average receivables | 61.7% | 37.5% |
Revenue growth reflected higher receivables and originations, but materially higher credit losses reduced net revenue and drove the operating loss. Charge-offs on the installment portfolio were $232.3 million in 2022, versus $103.4 million in 2021. Management attributed weaker credit performance to elevated inflation and lower-quality loans originated before credit adjustments made earlier in 2022; increased hardship-program enrollment also weighed on yield. Expenses rose 8.2% to $223.3 million, including higher interest expense, marketing, payment processing and technology costs. Expense growth was partly offset by headcount reductions and vendor savings.
GAAP basic and diluted EPS attributable to OppFi Inc. were $0.51 and $0.05, respectively. The difference reflects the company’s Up-C structure and diluted-share calculation. Adjusted EPS, a non-GAAP measure, was $0.06, compared with $0.78 in 2021.
Cash flow, debt and liquidity
- Operating cash flow was $243.3 million, versus $167.3 million in 2021; investing cash outflow was $317.2 million, primarily reflecting loan originations and purchases; financing cash inflow was $61.3 million. Cash and restricted cash declined $12.7 million to $49.7 million.
- Year-end unrestricted cash was $16.2 million; restricted cash was $33.4 million. Undrawn debt capacity was $136.8 million. The company reported approximately $532.2 million in total funding capacity, including commitments and balance-sheet cash.
- Total debt on the balance sheet was $347.1 million, compared with $274.0 million a year earlier. Interest expense and debt issuance cost amortization rose to $35.2 million from $24.1 million.
- In December 2022, OppFi entered a $150 million revolving facility with UMB Bank, with interest at Term SOFR plus 7.50%, and repaid approximately $109 million outstanding under its Ares facility. Management stated that available cash, undrawn debt and operating income should meet liquidity needs for at least 12 months from the filing date.
Material changes and notable items
- The bank-partner share of net originations increased to 94.6% from 90.6%. FinWise originated 36.2% of net originations in 2022, down from 60.8% in 2021; OppFi still depends substantially on its three bank partners.
- Auto-approval rate increased to 67.8% from 60.0%. New loans represented 51.5% of originations, compared with 46.2%.
- OppFi stopped accepting new applications for SalaryTap and OppFi Card during strategic reviews; neither contributed meaningfully to 2022 results. OppFi Card receivables were classified as held for sale, with $0.55 million reported as assets held for sale at year-end. A sale had not been concluded.
- The company repurchased approximately $2.5 million of Class A shares during 2022 under its $20 million authorization; no repurchases occurred in the fourth quarter.
- A $6.4 million PPP loan forgiveness gain benefited 2021, but not 2022. OppFi also recorded a $9.4 million gain from the change in fair value of warrant liabilities in 2022, versus $26.4 million in 2021.
- OppFi adopted lease accounting guidance in 2022, recognizing a $13.6 million operating lease right-of-use asset and a $16.6 million lease liability at year-end. The adoption did not materially affect operating results or cash flows.
Outlook, risks and contingencies
The filing provides no specific revenue, earnings or origination guidance. Management describes a strategy of growing the core OppLoans product, expanding bank partnerships and pursuing selected acquisitions, while stating liquidity is expected to be adequate for at least the next 12 months. These statements are subject to significant uncertainty.
- Credit and economic risk: Charge-offs increased sharply, and management cautioned that its models have limited testing through a severe downturn. Inflation, unemployment, interest rates and borrower payment capacity may further affect losses, demand and funding availability.
- Regulatory and legal risk: OppFi is challenging the California regulator’s position that it is the “true lender” and subject to California’s 36% rate cap. California sought a preliminary injunction in January 2023; the outcome is uncertain. More than 8% of year-end finance receivables related to California-originated loans.
- Other litigation: The company resolved the District of Columbia matter in 2021, paid $0.3 million and issued $1.5 million in consumer refunds, completing the settlement in 2022. Other lending-compliance and bank-partnership inquiries remain in process; management says their outcomes are unknown.
- Funding and partner concentration: A substantial majority of originations rely on bank partners, and loan funding depends on warehouse and other credit facilities, collateral performance, covenants and continued access to capital. Debt has floating-rate exposure.
- Financial controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 due to a material weakness in IT general controls, specifically user-access and segregation-of-duties controls. Remediation is underway but not yet complete. The company also disclosed that certain prior EPS statements should no longer be relied upon due to an accounting error; it says the related control weakness was remediated.
- Other risks: The filing highlights consumer-protection and fair-lending regulation, cybersecurity and data privacy, model accuracy, loan-collection costs, competition, and potential liquidity effects from its Tax Receivable Agreement. The agreement provides members 90% of certain realized tax savings; the year-end liability was $25.6 million.
RSM US LLP issued an unmodified opinion on the consolidated financial statements. The auditor was not engaged to audit internal control over financial reporting and expressed no opinion on its effectiveness.
Key facts investors should verify
- Whether delinquency and charge-off trends improve following credit tightening, and how newer loan vintages perform.
- How much of revenue, originations and funding continues to depend on the largest bank partner, FinWise, and whether partner agreements remain stable.
- Developments in the California DFPI case, including any injunction, and the potential effect of a 36% rate cap on lending and receivables.
- Progress in remediating the IT-controls material weakness and whether further restatements or control deficiencies arise.
- Available liquidity after receivables growth, debt maturities, borrowing-base requirements and floating-rate costs.
- Whether OppFi Card is sold, and the ultimate outcome of the SalaryTap and OppFi Card strategic reviews.