DALLAS, TX -- March 14th, 2024 -- OppFI, Inc. (NYSE: OPFI). Stonegate Capital Partners initiates their coverage on OppFI, Inc. (NYSE: OPFI).
Business Overview
OppFi, Inc. (“OppFi”, “OPFI” or “the Company”) is a tech-enabled, mission-driven specialty finance platform that broadens the reach of community banks to extend credit access to everyday Americans. Through its unwavering commitment to customer service, the Company supports consumers, who are turned away by mainstream options, to build better financial health. OppFi began trading on the NYSE under the symbol “OPFI” on July 20, 2021, following the completion of a Business Combination Agreement by and among FG New America Acquisition Corp. OppFi is currently organized in an “UpC” structure where voting interest is split between Class A common shares and Class V common shares and where economic interest is split between Class A common shares and Members retaining OppFi units. This unique ownership structure leads to management and shareholders having their interests aligned. OppFi units are primarily held by Founder and CEO Todd Schwartz and his family, with the remaining held by current and former employees. These units can be exchanged for Class A shares. We note that Mr. Schwartz, who founded the company in 2012, is the largest shareholder and also made open market purchases of Class A shares in both FY22 and FY23. This alignment helps keep the mission driven nature of OppFi at the forefront while also maintaining the economic interests of Class A shareholders.
Company Update
- Financial Results: OPFI reported revenue, adj. EBITDA, and adj. net income of $132.9M, $25.8M, and $8.9M, respectively. This compares to consensus estimates of $135.4M, $24.9M, and $6.4M. This resulted in full year revenue, adj. EBTIDA, and adj. Net Income of $508.9M, $114.7M, and $43.3M. Net revenue margin was 49.5% and 53.7% for the quarter and year, respectively. This was a year over year margin expansion of 910bps for the quarter and 577bps for the year. These strong results are driven by both an expansion of revenues as well as moderation of the Company’s expenses. We anticipate that this trend will continue through the balance of 2024 as OPFI focuses on profitability.
- Originations: Total net originations for the quarter were $191.9M, which is down from the $195.7M posted last quarter and up from $185.9M in 4Q22. We note that originations tend to follow seasonal trends. We expect originations to continue to improve year over year as the Company expands its geographic footprint, further expanding the total addressable market. Of the originations in the quarter 100% were by Bank Partners, up from 98% last quarter and 95% in 4Q22. Auto approval rate for the quarter was 73%, which was flat from last quarter and up from 69% in 4Q22. This resulted in ending receivables of $416.5M, up from $402.2M in 4Q22. We note that management has said they will not chase growth at the expense of quality.
- Lending Standards: Charge-Offs as a percentage of total revenue stood at 46% to end the quarter, which is down from 59% at the end of 4Q22. We view this as proof of the Company’s ability to simultaneously grow revenues and manage credit quality. Additionally, first payment default rate decreased by 40bps, and total delinquency rate declined by 90bps in the quarter. Yield was 126.8%, an expansion from 118.4% a year ago. We expect OPFI to continue focusing on the lowest risk segment in the current macro environment, further strengthening its credit position.
- Liquidity and Balance Sheet: OPFI ended the quarter with $73.9M of cash and restricted cash, an increase of $24.3M from 4Q22. The Company also had $192.3M of unused debt capacity, which when combined with $31.8M of unrestricted cash totaled $224.1M in liquidity.
- Guidance: OPFI has stated its full-year revenue, adj. net income and adj. EPS guidance for FY24. Revenue guidance was set at a range of $510.0M to $530.0M, which implies y/y revenue growth of 2.2% at the midpoint. NI guidance was set at $46.0M to $49.0M, which implies y/y growth of 9.6% at the midpoint. EPS guidance was set at $0.53 to $0.57, which implies y/y growth of 7.9% at the midpoint. We believe the Company is positioned to meet and potentially exceed its guidance and have adjusted our model accordingly.
- Valuation: We use a P/E comp analysis to guide our valuation. Our valuation relies on a P/E multiple range of 7.0x to 9.0x with a midpoint of 8.0x This arrives at a valuation range of $4.44 to $5.71 with a mid-point of $5.08.
