Okay. Hello, everybody, and welcome to Sidoti's August MicroCap Conference. My name is Brendan McCarthy. I'm an analyst here at Sidoti, and presenting with us, we have OppFi. Leading the discussions from the firm will be CFO Pam Johnson, as well as Head of IR, Shaun Smolarz. Before I hand it over, a quick reminder, the Q&A tab is located right at the bottom of your screen. Feel free to type in any questions throughout the presentation, and we can save time for Q&A towards the end. But with that said, Pam, take it away.
Thank you, Brendan, and thank you all for joining us. We're very excited to share the OppFi story with you. I wanna call your attention to our disclaimer slide regarding forward-looking statements and non-GAAP financial measures. I'm not gonna read it all, but did wanna make sure that you noted that within our presentation. Our mission statement: OppFi is a tech-enabled, mission-driven specialty finance platform that broadens the reach of community banks to extend credit access to everyday Americans. You know, some of the key points there. We're tech-enabled. We have a very strong tech that supports all of our activities. So tech is really important to us. We are mission-driven.
We are out there to help people. We fill a niche in the credit cycle that we fill you know, is an underserved customer, and we are there to help them. Specialty finance, in that we play in a space that is considered subprime. Our customers have a challenge. We broaden the reach of community banks because what we're doing is we're allowing community banks to reach out to these customers. We facilitate the originations and then service the loans on the backside. We extend credit access to everyday Americans, those Americans who have had challenges with their credit. They may be small business owners, they may be the consumer next door.
But they've suffered some setbacks in their financial status and are unable to get traditional financing from banks and credit unions, so we're there for them. Todd Schwartz is our founder, our Chief Executive Officer, and our Executive Chairman. He has a passion for this business unlike anybody I know, and a knowledge of it that is unmatched. It's great to work next to him as the CFO of the company. He founded this business in 2011 in a storefront-type of situation and knew he couldn't scale the business very well opening storefronts. So he turned to the tech world and found a niche that I think we fill very well. He's a visionary leader.
He is the majority owner, so you've got that owner/founder type of relationship with this company, where he's very much invested in its success. And he comes from a multigenerational entrepreneurial family. It's in his genes to be able to run a company like this and lead an organization. So he's the perfect fit as a leader of this organization, I think. So now I'll turn it over to Shaun to talk a little bit about, you know, the problem we're trying to solve and... Oh, I'm sorry, I do have one more slide. I apologize. Let me take you through this. You know, we lead the charge in financial inclusion and profitable growth. We have been profitable across business cycles.
That's one of my elevator speeches. We're a fintech that's actually been profitable for a number of years, 9 consecutive years of positive net income. We use tech-enabled automation, real-time, automation-driven decisioning. 89% of our applications were processed without human intervention in 2023. We have significant scale. We facilitate more than $6.4 billion in gross loans, covering over in gross loan issuance, covering 3.7 million or 7 million loans in number since inception. We offer education and wellness tools to improve financial health, so we do make, you know, a social impact, we feel. Again, we are mission-driven, and it's important to us that we're helping people, not just- they're just not a number to us. They're...
We understand the situation they're in. We understand sometimes the challenges that they have, and we try and work with them. We are an Up-C structure coming out of our De-SPAC that we did back in July 2021. We have 20.3 million Class A common shares. That is our public float. But then we're also have 66 million Class V common shares that are convertible to Class A common units, so that gets us to our total of about 86 million shares outstanding. We just invested into a new line of business for small business financing. We bought a 35% equity interest in Bitty Advance, which is a credit access company offering revenue-based financing and other working capital solutions to small businesses.
Now I'll turn it over to Shaun to talk a little bit about, again, the problem we're solving with OppFi and, how we do it.
Thanks, Pam. There are many credit-challenged Americans in financial distress. More than 60 million are credit-marginalized, meaning they've, in the past year, have been declined for credit at least once. Of these, nearly half live paycheck to paycheck, not only paycheck to paycheck, but paycheck to paycheck with issues paying their bills. A little over half have a credit score below 650 or no credit score at all, and a little over a third struggle to obtain new lines of credit following a financially harmful event. These three attributes really define and are representative of the typical OppFi customer. OppLoans is the brand name of our core product, which is a simple interest amortizing installment loan with no fees. And as Pam mentioned before, part of our mission is really to help our customers improve their financial health.
And so that's why we have a relationship with Zogo, which is a gamified financial education app. Experian Boost helps customers improve their actual credit score, and SpringFour offers other financial wellness resources. We also have two programs, one called TurnUp, the other one called Turn Down. So when customers come to us directly and apply to us on our website, we'll check to see if they may qualify for potentially a sub-36% APR product, and we'll refer them upstream to apply to another company that can, like, be able to service them better. And on the flip side, for Turn Downs, applicants who we decline, we'll help them potentially find another solution, a better fit for them.
In terms of customer service, the customer experience, customers have the potential to have same-day funding. We report to all three major credit bureaus, so as customers make on-time payments, in theory, their credit score may go up. We have a compassionate approach to payment plan modifications and a 5-day return guarantee. Now, more about the customer experience and satisfaction. As you can see from our customer review and satisfaction scores are very strong. Just a few call-outs, 4.5 in Trustpilot, 4.8 on Google, A+ by the Better Business Bureau, and a 77 NPS, which is exceptionally strong for the financial services industry. One important part of our business, our company, for everyone to understand, is the bank partnership model.
We have relationships with three FDIC-member Utah-chartered banks to originate loans, facilitating the credit access: Capital Community Bank, First Electronic Bank, and FinWise Bank. OppFi essentially is the servicer. We manage the payment processing, customer interactions, and we've helped these, these partner banks expand their geographic footprint to 40 states. As I said before, the bank partners originate 100% of the loans, and then OppFi later purchases economic rights in the loans that are funded by asset-backed credit facilities and forward flow arrangements. In terms of our credit model, it's a dynamic risk underwriting model that's designed to evaluate the likelihood of repayment. The key data points relate to cash flow and behavioral inputs, and the model adapts to the macroeconomic trends and risk appetite of not only OppFi, but also our bank partners.
In terms of the marketing strategies to drive originations, the partner channel is our largest channel, the most important one, and it enables us to have scalable reach with the best online marketplaces. And we're focused on that channel for cost-efficient, lower-risk application volume. Credit Karma, Experian, LendingTree are some of the largest ones for us. And on the direct mail channel side, we're taking a newer approach to direct mail right now to build brand awareness with targeted campaigns that invite recipients of the direct mail pieces, invite them to apply. The invitation to apply rather than the traditional pre-screen marketing offers. And on the lower-cost marketing side, organic marketing strategies that are more cost-effective. Email marketing is one of our key drivers for customer re-engagement and also to help drive referrals.
SEO also helps us further our organic growth. In terms of our long-term growth strategy, it's to build a leading credit access and financial services platform. I'll distill these five key pillars down to organic and inorganic. On the organic growth side, it's really all about optimizing the core business, and we strongly believe that we can drive organic origination growth, can be achieved without loosening the credit box, through new products, whether it's based on pricing and product features, and also optimizing our marketing, through new marketing initiatives that will drive, an increase in higher-performing origination volume, while at the same time refining our credit models to maintain the strong credit performance. On the inorganic side, we're focused on accretive, or evaluating and potentially closing accretive strategic acquisitions that fit our mission of credit access.
More on the strategy, about diversifying the business through strategic acquisitions. We're taking a private equity approach and discipline to evaluating particular opportunities. We're most focused on finding fast-growing, scalable, profitable operators, that we could also leverage our expertise to essentially add fuel to the fire of the existing fast-growing company or operators. And within this M&A space right now, we're most focused on small business financing. A couple of weeks ago, we announced our 35% equity interest acquisition in Bitty Advance, which is in small business financing. And here's a little bit of why we're so excited about small business financing. We think similar to the consumer market, there are significant supply-demand imbalances in this- for small businesses to access credit.
Not all small business owners can access a small business loan at their local, traditional, bank, on Main Street America. On an annualized basis, about $550 billion in annual non-bank and online lender financing. 71% of medium to high-risk small business applicants apply for financing at an alternative provider, traditional banks, such as a non-bank financing company, an online lender, or even a community development financial institution, a CDFI. 61% of small business applicants cite a chance of being funded as the one of their key reasons for applying to an online lender. Half of small businesses that are discouraged non-applicants cited lender requirements that were too strict or that they were previously denied financing previously. A little bit more about Bitty Advance.
It's a credit access company, primarily for revenue-based financing or merchant cash advance. We think that our acquisition right now, in Bitty, about the 35% level, is essentially our foundation of our new small business financing vertical. Bitty has a very strong foundation, a strong scale. More than $420 million extended to more than 29,000 customers just since July 2020. So a little over four years have scaled the business that strong. That's really due to the very experienced leadership at Bitty. Craig Hecker, he's the CEO of Bitty. He's staying on as CEO. Right now, he's an industry veteran and industry leader in the space. We think Bitty aligns with our mission to broaden credit access, as it focuses on underserved small businesses across America. It's a very,
We think it's going to be a very accretive acquisition. It's already profitable, has 25%+ operating margins, and their business is based on origination and service fee income, so no balance sheet or credit risk in terms of the profitability, since it's based on fee income. I'll now turn it back over to Pam for our financial overview.
Thanks, Shaun. Talk a little bit about our earnings rebound that we had in 2023 and our improved credit performance. Total revenue, that up and to the right is a good thing. We're projecting $520 million in 2024. We're at $509 million in 2023. In 2021, we were only at $350 million. So, we have had substantial growth over the last three years. Net charge-off rates, 2021 was a low year, 29.5%. If you recall, that's when we had a lot of the economic stimulus out there, and so people had extra cash to service their debt and pay it off, and so we had fewer net charge-offs during that year.
We saw our highest in 2022, when we saw inflation spike so substantially in Q1 and Q2 of 2022. That 9% inflation rate we saw during that time hits our customers very, very hard. They don't have an extra savings in the bank. They don't have another $500 to deal with higher grocery prices, doubling of utility bills, extra rent expenses. So, we did see our customers experience a lot of challenges during that time. And we, we then, you know, took the appropriate measures, and we're bringing it- we brought it down to 43.5% in 2023. 2021, that good net charge-off rate led to a high EPS of $0.76 per share.
2022, again, a challenge year for our customers, which led to a challenged year for us with higher net charge-offs. We're at $0.04 a share. Last year, we were back up to $0.49 a share, and this year, our guidance is at $0.74 a share. So, again, making really good improvements through management of credit and expense reductions and management as well. We reported our Q2 earnings last week. It was a record second quarter for total revenue and profitability for the company. Total revenue was $126.3 million, compared to the prior year's Q2 of $122.5 million. Net charge-off rate, again, quite a bit lower at 32.5%, compared to last year's 36.2%.
Adjusted EPS of $0.29 a share versus last year's $0.19 a share. So, certainly a market improvement. This slide gives you a walk through what we call our customer level unit economics. It looks at the revenue that we see from a customer over their life. And in this case, it's around $2,325. And it walks you through the different aspects of the loan that takes us down to our earnings before taxes for a customer of $427, which is an 18% earnings EBT margin. But, you know, you have things like net write-offs that impacted acquisition costs, servicing costs, interest expense, and then we have our corporate overhead as well.
So, this is a really good view of kind of the life cycle of our customer and what we can expect when we make a loan to them. Our 2023 vintage outperformed the 2021 and 2022 vintages. This is, you know, your typical vintage loss curve. You know, we had improvements throughout the cycle. You know, 2021 was 17.7% improvement, 2022, 18.4%, and 2023, 16.6%. So, again, we've enhanced our credit models.
We've tightened and targeted more our marketing initiatives, and we feel like, you know, we have a good conservative approach to the customer that we're serving right now and managing the credit, and feel like we can manage it into the future through our mechanisms and our underwriting models now. I wanted to illustrate our net charge-off rate seasonality. This business certainly has a seasonality to it. In Q1, we see some of our highest net charge-offs. People are coming out of the holiday season. They've overspent in many cases and are unable to service their loans. So we see high net charge-off rates in Q1.
We see lowered net charge-off rates, particularly in Q2, because they've got their tax refunds, and then they kind of settle up all their outstanding debt, and they're able to service it better, and so our net charge-off rates are less in Q2 and Q3. Then they come up again in Q4, because, again, they're looking at back to school, they're looking at Christmas and things like that that are leading them to perhaps overspend and overextend themselves. So we have higher charge-off rates then. This is why you will see Q2 and Q3 be our best performing quarters from an overall bottom line standpoint, because the net charge-off rate drives that bottom line so substantially. Whoops, I think we moved twice. Yeah.
This again, so this is what I just mentioned, so that's why our earnings per share is so much higher in Q2 and Q3 than what you'll see in Q4. Next slide. Okay, oops. The company generates a lot of free cash flow. It will. You know, we have a good liquidity, we have a good, strong balance sheet, and it gives us a lot of optionality around our capital allocation. Last year, overall, we generated $551.8 million in free cash flow. This year, first half so far, $74.4 million. Now, the one thing to remember is we will have higher volumes, higher originations in Q3 and Q4, and that will, you know, certainly require more cash to just manage that business.
But we have been able to deploy a lot of the capital this year already. We did a special dividend of $0.12, and that used $10.3 million in cash. We have, through Q2, had repurchased 2.5 million shares. We repaid $10 million of our corporate term debt, and we expended $15.3 million in cash for the purchase of Bitty Advance. If you go to the right side here, you can see what our funding capacity is. Right now, we have a debt of $475 million related to our asset-based line, our forward flow, and our total return swap, and another $50 million capacity on the corporate debt.
So $525 million at the end of June. But if you look, you know, we still had $80.8 million in cash, in restricted cash, and $223 million in undrawn debt. So plenty of ability to grow our balance sheet with our funding partners. Turning to our guidance for 2024, this is what we released last week in our earnings. You know, we affirmed our total revenue of $510 million-$530 million. We raised our adjusted net income to $63 million-$65 million from our $50 million-$54 million, based on a strong Q2.
And then our adjusted EPS from, we think it'll be in the $0.73-$0.75 range, and that was raised from $0.58-$0.62. This is my elevator speech on why I think OppFi is a really good investment. You know, it's founder-led with majority ownership, as I told you. Todd has a passion for this business, and he's so invested in it, and is really a great leader. It's mission driven. We facilitate credit access to those underserved by traditional banks, so we have a reason to exist. We have a problem to solve, and it's... I think we do it very, very well. We have disciplined credit underwriting and operating expense management.
You can see how we've weathered the storm through some of the more difficult economic cycles, and I think, you know, we can continue to do that. Future earnings growth expect to be driven by strong credit performance, operating expense efficiency, and accretive acquisitions. Bitty is one of those, you know, it's going to be accretive immediately. We're looking, always looking at other opportunities, other adjacent types of business, other opportunities to grow our current business. We have strong free cash flow generation, having a solid balance sheet, and gives us optionality for capital allocation initiatives. So, again, lots of flexibility on how this company can grow and deploy its capital. That is our presentation. Again, thank you for your attention. If, after this presentation you have any questions, please reach out to Shaun. Happy to address those.
In the meantime, would love to take some Q&A for the next five minutes or so, Brendan?
... Fantastic. Thank you, Pam. Thank you, Shaun. We can now get into Q&A. We have a couple questions from our audience here. Can you talk about the impact of rate cuts on profitability? Potential rate cuts, I should say.
Sure. We did not raise rates to our customers when interest rates went up, and we don't plan to lower them as they go down, in general. So any rate decreases will just fall directly to our bottom line. Debt is tied to SOFR and is variable, and so SOFR tends to lag the fed funds rate by a little bit, but we should see that in our profitability.
Great. Great, looking at that loan pricing model, can you talk about your, your pricing strategy, as well as average APRs and how they compare to your peers?
Sure. Our APRs are generally in the 160 range. It is appropriate for this level of risk. Frankly, there's not a ton of peers that really operate in this more niche space, but we think it's very appropriate. You know, we do test... We're testing some different pricing strategies that, you know, may be higher, a little higher, a little lower, you know, depending on the sensitivity of the customer. But we haven't launched those yet. But we think it's very appropriate, and it works well for our customer. Again, there's no origination fees, there's no late fees, there's no NSF fees. There's no prepayment penalties.
So, if they pay off early, and a lot of times they do, you know, it, it becomes less expensive than the full 160% APR, or 160% over a year, so.
Great. That's helpful. And looking at the history of the company and the share price, it looks like it was challenged before late 2023, and really picked up in the late part of last year, and it's been on a good run this past 12 months. Can you talk about were there, were there any significant or substantial changes over the past year that might be reflected in that, in those changes?
Well, we think, you know, the spike we saw at the end of last year, and, you know, you never know for sure, but, you know, we think there was an exuberance about the possibility of a lot of rate cuts during 2024, and they have not, you know, come to fruition as of yet. But we think, you know, our shareholders probably understand the impact of the rates on our type of a business and how it's very impactful. And then, you know, we think, you know, our special dividend, our announcement of our $20 million share repurchase plan, is a positive.
We, you know, felt like we got some good feedback on that, and again, it shows our ability to utilize our capital well, I think.
Great. Great, and I wanted to talk about the bank partnerships that you acquired. Can you talk about how the three of those ultimately developed and your plans for expanding into additional partnerships?
Well, these are creative, entrepreneurial types of banks, as I put them. You know, they are community banks. They're not, you know, large branch-based banks at all. They believe in tech, and so, you know, we've worked to develop these really great relationships. We've had the three of them now for quite some time. Really have not sought out a lot of other partners because they seem to be able to handle the capacity that we are able to service as well, and seem to have an appetite for it. We just have great relationships with them and, you know, we...
Part of the success of that is because we have such strong compliance. We have to have the compliance of a bank. You know, we have to maintain the same type of level of compliance that the FDIC would be looking at, because we are a third party to, and such an important third party to those banks. So that's something we invest heavily in. We believe in it, and do the right thing, so.
Got it. Got it. And turning back to loan pricing, are there any regulatory limits on interest rates?
Well, you know, certainly what we're able to do with these bank partnerships is export the federal regulations for this. So there are some states that are not particularly favorable to this, and we don't do business with those. Right now, we do business in 40 states. We have different structures in some of the states that they prefer that the bank have more of an interest in the more of an economic interest in the loan. And so we've accommodated those. And so, you know, we were able to work through all of those types of interest rate caps right now, or we choose not to do business in that state.
Great. Well, Pam and Shaun, we really appreciate the time today. We'll end the presentation there. Thank you for the overview, and I know there may have been some questions that we did not get to, but feel free to reach out to OppFi directly, through the contact information there. But Pam and Shaun, thank you again for your time.
Okay, great. Thank you!
Thanks.
All right. Thanks, everybody.