OPRT Update (Q4 and Full Year 2023 results)

• Aggregate originations - 1.8bn a year, at this rate the loan book size should stay roughly constant.

• Gross portfolio yield increased 23 basis points year-over-year.

• Net charge-off rate in Q4 2023 was within guidance.

• Management guided to 97.5mln of operating expenses per quarter (400mln a year) by Q4 2024, which is less than I modelled in the cost cut scenario, where I forecasted them to be 420mln. So this is positive.

• As for the performance of the post-tightening book, the company keeps obscuring the performance of new vintages. In Q3 2023, the company changed the presentation format from net charge-offs + delinquencies to just net charge-offs. This quarter, they stopped comparing the charge-offs for new vintages to 2019 cohorts and started comparing them to 2022 cohorts, which is a negative sign indicating that the quality of those vintages likely deteriorates as time passes. However, net lifetime losses for post-tightening vintages are 400bps lower than for Q12022, Q2 2022, 12 months after origination. Management says they continue tightening, mainly by shortening the loan life and decreasing the loan size.

• The latest securitisation (10th of February) was done at an 8.4% interest rate, 160 basis points lower than October securitisation and 60bps lower than I forecasted. So this is positive.

• Overall, considering the charge-offs don’t need to significantly decrease if expenses decrease in line with management’s estimates, I think the base case for the thesis is still intact.