Oppfi Inc. quarterly report, Q2 FY2022

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OppFi Inc. — Q2 2022 Form 10-Q

Reporting period: Three and six months ended June 30, 2022. Financial statements are unaudited and consolidated. OppFi is a fintech platform that facilitates bank-partner consumer lending, primarily through OppLoans installment loans. SalaryTap and OppFi Card were not significant contributors. Comparisons with 2021 should be read in light of the July 2021 business combination and changes in the company’s Up-C structure.

Financial performance and position

  • Q2 revenue: $107.9 million, up 37.6% year over year, driven by higher receivables and originations. Net revenue, after fair-value changes and credit-loss provision, was $65.2 million, down 2.8%.
  • Q2 profitability: Operating income was $6.4 million, down 64.4%; net income was $9.5 million, down 47.2%. Net income attributable to OppFi Inc. was $3.5 million. Basic and diluted EPS were $0.26 and $0.10; Adjusted EPS, a non-GAAP measure, was $0.08. A $3.3 million warrant-liability fair-value gain contributed to Q2 results.
  • First half: Revenue was $208.6 million, up 28.3%, while net revenue was $115.9 million, down 10.1%. Operating income fell 90.0% to $4.2 million; net income fell 78.3% to $9.2 million. Adjusted EBITDA was $31.2 million, down 51.7%, and Adjusted Net Income was $7.4 million, down 80.1% (both non-GAAP).
  • Credit and portfolio: Q2 net originations rose 57.0% to $226.2 million; ending receivables grew 54.2% year over year to $401.5 million. Annualized net charge-offs as a percentage of average receivables increased to 51.4% from 28.4% in Q2 and to 53.2% from 29.1% for the first half. Average yield fell to 118.1% in Q2 from 128.5%, which management attributed to more delinquent loans not accruing interest and greater participation in its APR Stepdown program.
  • Expenses and margins: Q2 total expenses were $58.8 million, up 19.8%; management reported expenses at 54.5% of revenue versus 62.6% a year earlier. Higher marketing, technology, professional, and interest costs were partly offset by headcount reductions and vendor savings. Increased charge-offs more than offset revenue growth.
  • Cash flow: First-half operating cash flow was $102.8 million, versus $84.8 million a year earlier; investing cash outflow was $164.4 million, mainly reflecting loan originations and acquisitions; financing cash inflow was $56.9 million. Cash and restricted cash ended at $57.6 million, down $4.7 million from year-end.
  • Liquidity and debt: June 30 unrestricted cash was $23.5 million, with $212.4 million of undrawn debt capacity. Total debt was $336.5 million, up $62.5 million (22.8%) from December 31, including $331.2 million of senior debt. Total liabilities were $412.6 million and stockholders’ equity was $165.5 million. Management said cash, undrawn facilities, and operating funds should meet liquidity needs for at least 12 months.

Material changes and notable items

  • Management reported that repayment problems and inflation-related pressure on customers’ free cash flow contributed to rising losses. In mid-July, OppFi and its bank partners further tightened underwriting, including for refinances; management said new-loan credit quality improved by late July.
  • In June, a revolving facility was expanded from $75 million to $200 million and extended to June 2025, with separate LIBOR- and SOFR-linked tranches. A new $75 million Gray Rock facility was entered into in April. Senior debt draws increased to support receivables growth.
  • OppFi repurchased 615,652 Class A shares for $2.1 million in the first half; $17.9 million remained under its $20 million authorization at June 30. Repurchases reduce OppFi’s ownership percentage in OppFi-LLC under the company’s structure.
  • Adoption of lease accounting in 2022 added a $14.8 million right-of-use asset and $17.3 million lease liability at June 30; management said adoption did not materially affect operations or cash flows.
  • The California regulator’s cross-complaint seeks to apply AB 539 interest-rate caps to the bank-partner program and seeks, among other relief, to void loans and impose penalties. OppFi is contesting the claims. The company also reported other inquiries into lending compliance and its bank-partnership model; outcomes were unknown.

Outlook, risks, and contingencies

No specific revenue or earnings guidance is provided in the filing. Management’s outlook emphasizes continued credit pressure: it cited inflation and customer repayment issues, described further underwriting tightening, and noted uncertainty about the persistence of pandemic-related and economic effects. The company identifies regulatory and legal uncertainty—particularly the California AB 539 dispute and the future participation of bank partners and financing sources—as material risks. It also cautions that rising funding needs or insufficient available financing could adversely affect results and financial condition. Management reported no material changes to the risk factors in its 2021 Form 10-K.

The company settled the District of Columbia matter in 2021, agreed to $0.3 million in payments and $1.5 million in consumer refunds, and reported that the refunds were distributed during the first half of 2022. Management stated it did not expect other pending proceedings and regulatory matters to have a material adverse effect, but their outcomes remain uncertain.

Key facts for investors to verify

  • Whether the underwriting changes reduce charge-offs and delinquency, and how quickly portfolio credit performance responds.
  • How the California AB 539 case and other regulatory inquiries affect lending availability, bank partnerships, and financing sources.
  • Whether growth in receivables and originations can generate sustainable net revenue after credit losses, while funding costs and debt utilization rise.
  • The assumptions behind fair-value loan measurements and their impact on reported results; Q2 included a $42.2 million negative change in finance-receivables fair value, including $46.6 million of net charge-offs and a positive $4.4 million valuation adjustment.
  • The distinction between unrestricted cash ($23.5 million) and total cash including restricted balances ($57.6 million), and the availability and terms of undrawn facilities.
  • Non-GAAP reconciliations and the comparability of year-over-year results, given the business combination and the 2021 reporting structure.