Good morning, and welcome to OppFi's Third Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, John Kakos, SVP Controller. You may begin.

Thank you, operator. Good morning, and welcome to OppFi's Third Quarter 2024 Earnings Call. Today, we have Executive Chairman and CEO, Todd Schwartz; and CFO, Pam Johnson, presenting our financial results before taking questions. You can access the earnings presentation on our website at investors.oppfi.com. During this call, OppFi may discuss certain forward-looking information. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company's filings with the SEC. Please refer to Slide 2 of the earnings presentation for our disclaimer statements covering forward-looking statements and references to information about non-GAAP financial measures, which will be discussed throughout today's call. Reconciliation of those measures to GAAP measures can be found in the appendix to our earnings presentation. With that, I'd like to turn it over to Todd.

Thanks, John, and good morning, everyone. This quarter, we achieved record quarterly net income and revenue, which has enabled us to raise full year earnings guidance for the third time this year. The record quarterly net income was a result of credit initiatives that continue to drive strong loss payment and recovery performance, marketing cost efficiency and prudent expense discipline across the organization. We're also proud that we have successfully executed on some of the strategic initiatives that we previously outlined during the past several quarters. We've also realized additional operational efficiencies that have continued to strengthen the core business and increase profitability. Pamela will review our third quarter results in detail and our earnings guidance increase for full year 2024. Before she does, I will cover the highlights. Total revenue increased to $136.6 million, a company record for any quarter. GAAP net income grew 106.4% to $32.1 million, another OppFi record for any quarter, and adjusted net income increased 116.2% year-over-year to $28.8 million, also a company record for any quarter. Our key highlights for the quarter compared to the prior year are: a 5.4 percentage point increase in annualized average yield to 133.9%; an 8.1 percentage point improvement in the annualized net charge-off rate as a percentage of total revenue to 34.3%; a 400 basis point improvement in total expenses as a percentage of total revenue to 41.1%; and net income margin increased by 1,180 basis points to 23.5%, while adjusted net income margin expanded by 1,110 basis points to 21.1%. Throughout 2024, we have successfully executed on a number of operational initiatives designed to ensure continued future profitability growth. We also see additional opportunities to optimize our product structure with a goal of gaining volume while maximizing portfolio profitability. Operationally, our continued focus on process automation resulted in consistent year-over-year decreases in OpEx as a percentage of revenue, which led to a 400 basis point decrease mentioned above. Going into 2025, we plan to continue these efforts as well as integrate future AI-based enhancements in our operating model. OppFi has made tremendous progress in the past 2.5 years, and we look forward to building upon the foundation that we have set. In closing, we believe OppFi is well positioned to build a leading credit access and financial services platform with a suite of digital financial service products for everyday Americans, serving large addressable markets that exist due to the supply-demand imbalance in credit access. Our first step in executing this vision was taken with our equity investment in Bitty to enter the small business financing market. We are encouraged by the early results and potential opportunity of this platform and the strength of our relationship with Bitty. We continue to explore similar opportunities that would be accretive and align with OppFi's strategic vision. With that, I'll turn the call over to Pam.

Thanks, Todd, and good morning, everyone. For the third quarter, total revenue increased 2.6% to $136.6 million year-over-year with a 540 basis point improvement in average yield annualized to 133.9%. Total net originations increased 11.8% to $218.8 million, while total retained net originations increased 4.0% to $198.4 million as a result of our originations growth outpacing the growth in the percentage of loans retained by our bank partners. From a mix perspective, 53.2% of originations were to existing customers and 46.8% were to new customers. During the quarter, we and our bank partners continued to emphasize loans to existing customers since those loans have historically performed better than those to new customers. Credit performance during the third quarter supported this strategy as refinance loans to existing customers had lower delinquencies than loans to new customers. On an absolute basis, new customer originations for the quarter increased by 18.8% year-over-year, while existing customer originations increased by 6.3%. The year-over-year increase in new customer originations was a result of strategic credit and marketing initiatives designed to increase originations in lower-risk segments. The annualized net charge-off rate as a percentage of average receivables decreased by 860 basis points to 45.9% for the third quarter compared to 54.5% for the prior year quarter and the annualized net charge-off rate as a percentage of total revenue decreased by 810 basis points to 34.3% compared to 42.4% last year. Turning to expenses, total expenses were $56.1 million or 41.1% of total revenue compared to $60.1 million or 45.1% of total revenue in the third quarter last year. Interest expense totaled $11.3 million or 8.3% of total revenue compared to $12.1 million or 9.1% of total revenue in the same period a year ago, impacted by lower borrowings and a reduction in rates. Adjusted net income was $28.8 million compared to $13.3 million for the period last year. Adjusted earnings were $0.33 per share compared to $0.16 in the third quarter last year. For the 3 months ended September 30, 2024, OppFi had 86.7 million weighted average diluted shares outstanding for the calculation of adjusted earnings per share. We believe our balance sheet remains healthy with cash, cash equivalents and restricted cash of $74.2 million, total debt of $325.6 million and total stockholders' equity of $220.3 million as of the end of the third quarter. We ended the period with $599.2 million in funding capacity, including $199.4 million of unused debt capacity under financing facilities. Now turning to our outlook. For the full year 2024, we are increasing our adjusted net income guidance to $74 million to $76 million, which represents a 17% increase from our prior range of $63 million to $65 million. This results in anticipated adjusted earnings per share of $0.85 to $0.87 compared to the previous range of $0.73 to $0.75. We are reiterating guidance for total revenue of $510 million to $530 million and are currently pacing towards the midpoint of this range. Looking forward to 2025, we expect our positive momentum to continue with first quarter adjusted net income growth in excess of 15% year-over-year. As a reminder, we typically experience significant seasonality in the demand for loans on our platform, which is generally lower in the first quarter. Therefore, our potential Q1 earnings growth shouldn't be extrapolated out to the full year. We plan to introduce full year 2025 guidance when we report our 2024 full year results in March. With that, I would now like to turn the call over to the operator for Q&A.

And we do have a question. We'll move first to Mike Grondahl with Northland Securities.

This is Luke on for Mike. Congrats on the nice quarter. Just wanted to dive a little deeper into the improvement in yields, improving 5% year-over-year. Just wondering how much of that was due to pricing versus mix? And any other color you guys can provide on that?

Yes. Thanks for the question. I think it's a combination of better credit, people paying us back at a higher rate, but also last year, we had retired some lower risk-based pricing initiatives that is causing the yield to increase year-over-year. We also are starting to test pricing into some other segments as well, which has added to that, but it's a combination of the three things.

Okay. Got it. And then just looking out ahead into 2025 here, what are the biggest goals for you guys? Or what are you kind of most focused on or maybe top two or three priorities?

Yes. I mean we got the business performing really, really well right now. And if you look at our auto approvals continuing to increase another 5% to 7% for the quarter, quarter-over-quarter. So we're really excited. The business is performing and our funnel is very efficient. I think we're focused on growth. We have a lot of levers and growth initiatives that we've been testing, and we're starting to feel our confidence level in the credit for our customers and our ability to find new volume in different segments, but also with different marketing and channel partners is growing. And so we're looking to grow the business and continue to push on operational efficiencies. On the call, we mentioned some of these AI tools that we're going to be supplementing our ops with to help continue to expand while getting more efficient on the ops side.

Got it. And then just looking at the capital allocation going forward, I know you guys paid the special quarterly dividend. Just wondering about if dividends are something that you're thinking about going forward, if share repurchases have continued in the fourth quarter? Just any other sort of color around capital allocation.

Yes. Good question. We're always looking for the highest and best use for our cash. Obviously, our balance sheet is in good shape. And it's something that next year, we will look at. A special dividend is definitely something we're going to be considering. I think we're also holding capital back for some strategic M&A initiatives. Like in the second quarter, we had paid down some corporate debt. So we're using our cash the most efficiently as we possibly can and for the highest and best use where we see a return.

Congratulations again on a very nice quarter.

Thank you. I appreciate it.

We'll take our next question from David Storms with Stonegate.

I wanted to start by asking about the strategic M&A initiatives you mentioned as a potential use for cash. Can you describe what a target profile would look like? Would it be similar to an equity stake like the Bitty transaction, or are there any specific geographic targets? Any insights on this would be very helpful.

Yes. I mean we're looking at both. I mean I think whatever it is, it's got to be something that's highly accretive. I mean, OppFi's vision is to be a platform for digital alternative financial service products where we see large supply-demand imbalances in large addressable markets. There's definitely different profiles of business out there; different situations are pretty bespoke, but we're prepared to handle either-or. So it has to make sense for us, though. And obviously, we're going to protect and mitigate risk with anything we do to make sure that it's successful and ensure that we're going to be getting a return on our capital and it's highly accretive to shareholders.

Understood. That's very helpful. And I was a tad late to the call, so apologies if this is redundant. But just any puts and takes on guidance. Great to see that revenue was held up and profitability raised the guidance there. Anything that you're seeing that's giving you confidence specifically to raise that guidance?

Yes. We're seeing really strong credit performance, especially in our existing book, which feels confident that we can continue to test different marketing partner channels, expand that a little bit, also testing some pricing in the segments to find some new volume. And I think it also gives us confidence for next year that we have some levers for growth. We've been very disciplined in our approach on cost per acquisition. Also on the new side, we've been pretty cautious coming out of '22, and it's bode well for us. We put ourselves in a really good position with optionality here for growth coming out into 2025. And we think that we have some levers, and we have some new channels and segments that we can definitely look to next year for some growth.

Understood. And then just one more maybe macro level question for me. In the last six months, we've seen a Fed rate cut. We just finished up an election in the U.S. As you're looking out to the next maybe quarter or two, any macro catalysts you're keeping your eyes on? I know there's another couple of Fed rate cuts that may be on the target. Anything else that you feel is important?

Yes. Well, listen, I mean, it's nice to obviously get a little wind at the back there. I think quarter-over-quarter, we saw about a 50 basis point drop in interest cost, which is great to see. We can't really predict what the Fed is going to do. Any cost savings there would not be something we necessarily plan for, but it would just enhance our returns. But we're looking forward to an environment where we've kind of had that headwind for the last two years. So it would be great to see a lowering of that interest cost.

It seems there are no further questions at this time. I will now hand it back to Todd for any additional comments or closing remarks.

Yes. I just want to thank everyone for joining our Q3 earnings call, and I really look forward to seeing and hearing everybody on our Q4 earnings call coming up in March next year.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.