Oportun Financial Corporation (OPRT) Earnings Call Transcript & Summary

Good morning, and welcome to the 2020 Oportun Financial Corporation Annual General Meeting, our first as a publicly traded company. My name is Kate Layton, and I'm Oportun's Deputy General Counsel and Corporate Secretary, and I will be serving as the secretary for this meeting. Before I introduce you to our Board, business leaders and some of our partners who are joining me virtually today, let me remind you that you may submit questions at any time during this meeting through the web portal. We will also respond to questions we received before this meeting. We have allotted time after the formal business portion of the meeting to respond to your questions. Only questions that are relevant to the proposals being put forth today and to our business operations will be answered. The members of the Board joining us today are: The Honorable Aida Alvarez, Jo Ann Barefoot, Louis Miramontes, Carl Pascarella, Dave Strohm and Neil Williams. Raul Vazquez, our CEO and a member of the Board of Directors, is also joining us today. The other officers of the company joining today are Jonathan Coblentz, our Chief Financial Officer and Chief Administrative Officer; Joan Aristei, General Counsel and Chief Compliance Officer; and Nils Erdmann, Vice President of Investor Relations. Also joining us is [ Suzanne Miller ], who will serve as the inspector of election. In addition, Ryan Anderson of Deloitte & Touche, our independent registered public accounting firm; and Calise Cheng of Cooley LLP, the company's outside legal counsel, are on the line and available to respond to appropriate questions during the question-and-answer session. Before calling the meeting to order, I would like to introduce Raul Vazquez, Oportun's CEO. Raul?

Good morning. As Kate mentioned, I am Raul Vazquez, and on behalf of the Board and employees of Oportun, I would like to express our appreciation for your ongoing support of our mission to provide inclusive, affordable financial services to low- and moderate-income communities. In the United States, approximately 100 million people are excluded from or poorly served by the financial mainstream because they lack a credit score or have been misscored by the primary credit bureaus. To this end, Oportun has already helped more than 850,000 of our customers' established credit histories. In addition, as of the close of our first quarter of 2020, Oportun has dispersed more than $8.9 billion in loans to more than 1.7 million people. We estimate that our loans have saved our customers more than $1.7 billion in interest and fees compared to the alternative products typically available to them. Throughout this pandemic and in past financial crises, we have observed that our customers are often the most vulnerable to economic dislocation, and they are also among the most resilient people in our society. Time and again, they have proven themselves able to adjust and find meaningful work that has allowed the vast majority of them to keep up with their obligations, including those to Oportun. Serving this community is what drives all of us at Oportun. I am incredibly proud of the way that our business has responded to COVID-19. I am also constantly amazed and grateful to our customers, many of whom are the heroes who keep store shelves stocked, facilities sanitized and safe, meals delivered and much more. It is an honor to work with all of my talented and passionate colleagues at Oportun to serve those customers. With that, I will now turn the meeting back to our corporate secretary. Kate?

Thank you, Raul. In keeping with the digital approach to this year's meeting, it's now shortly after 8 a.m. Pacific Time on June 3, 2020, and this meeting is officially called to order. We will proceed with the formal business of the meeting as set forth in your notice of annual meeting and proxy statement. After the formal meeting has been adjourned, we will provide time for general questions. Only validated stockholders may ask questions in the designated field on the web portal. [Operator Instructions] No one attending via the webcast or telephone is permitted to use a recording device of any kind. At this time, I'm appointing [ Suzanne Miller ] to act as the inspector of election at this meeting. Suzanne has taken and subscribed to the customary oath of office to execute her duties with strict impartiality. We will file this oath with the records of the meeting. Her function is to decide upon the qualifications of voters, accept their votes and, when balloting on all matters is completed, to tally the final votes. The Board of Directors fixed April 15, 2020, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that either: one, the Notice of the Meeting, the proxy statement and the 2019 annual report to stockholders or; two, the documents themselves were mailed on or about April 28, 2020, to all stockholders as of the record date and will be incorporated into the minutes of the meeting. The stockholder list shows that as of the record date, there were 27,143,797 shares of common stock outstanding and entitled to vote at this meeting. We are informed by the inspector of election that there are, represented in person or by proxy, shares of common stock representing 23,507,947 votes or approximately 87% of the voting power on the record date. Since this represents more than a majority of the voting power of all issued and outstanding stock entitled to vote on the record date, a quorum is present for purposes of transacting business. I want to remind stockholders that if you've already voted by proxy, you do not need to vote in this virtual meeting unless you want to change your vote. The proxy holders will vote your shares according to the proxy. Any stockholder who hasn't yet voted or wishes to change their vote may do so at any time during the meeting by clicking on the Voting button on the web portal and following the instructions there. Now I will present the matters to be voted. Proposal 1 is the election of directors. The current Board has nominated Jo Ann Barefoot and Dave Strohm for election as Class I Directors to hold office until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified. The Board recommends a vote for both nominees. Proposal 2 is the ratification of the selection of Deloitte & Touche LLP as Oportun's independent auditors for the year ending December 31, 2020. Deloitte & Touche has been our independent auditors since 2010. The Board recommends a vote in favor of the proposal. Proposal 3 is the advisory vote to approve the compensation of our named executive officers as described in the proxy statement. This vote, which is also often called a say-on-pay vote, is now required as a result of the Dodd-Frank Act. It is a nonbinding vote, although the Compensation Committee and the Board of Directors will certainly take the results of the vote into account when making future compensation decisions. The Board of Directors recommends approval of the compensation of the named executive officers. Proposal 4 is a nonbinding advisory vote on the frequency of holding the say-on-pay vote, more commonly known as say-on-frequency. Stockholders may indicate whether they prefer to hold the say-on-pay vote every 1, 2 or 3 years. The Board of Directors recommends holding the say-on-pay vote on an annual basis because it will allow us to receive more contemporaneous feedback from and be more responsive to our stockholders regarding our executive compensation program. I will now pause for a minute to allow any final votes to be placed. [Voting]

Now that everyone has had the opportunity to vote, I declare the polls for the 2020 Oportun Financial Corporation Annual General Meeting closed. The inspector of election has provided a preliminary report covering the proposals presented at this meeting, which are as follows: The proposal to elect Jo Ann Barefoot and David Strohm as Class I Directors of the company is carried; the selection of Deloitte & Touche LLP as Oportun's independent registered public accounting firm for the year ended December 21, 2020, is ratified; the compensation paid to our named executive officers has been approved; an annual say-on-pay vote has been approved. We will be reporting the final vote results in a Form 8-K to be filed with the Securities and Exchange Commission within 4 business days. There being no further business to come before the meeting, the 2020 Annual General Meeting of Oportun Financial Corporation is now adjourned. I'll now turn it over to Nils Erdmann, our Vice President of Investor Relations, to oversee the Q&A session. Nils?

Thanks, Kate. Now we would like to open things up for stockholder questions and comments. We will begin with a few that we received in advance of today's meeting. We will then take stockholders' questions that are being entered today on the web portal. Please note, we will attempt to answer as many questions as time allows, but only questions that are relevant to the meeting will be addressed. Before we get started, let me remind you that some of the remarks made today will include forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in the public filings with the Securities and Exchange Commission. Any forward-looking statements that we make are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. We will now take questions. Our first question is, what are management's plans to recoup share value in light of the recent business interruptions brought on by COVID-19?

Thank you, Nils. Prior to the pandemic, we were optimizing our portfolio for growth and profitability. It was our intention to drive continued momentum across our strategic priorities while being extremely focused on operating efficiency and delivering improved profitability to our shareholders. Since the start of the pandemic, the focus of our efforts has shifted from growth towards conservation of capital and liquidity. Our 3 near-term areas of focus became: number one, continuing to serve our customers; number two, achieving stable credit outcomes; and number three, maintaining sufficient levels of capital and liquidity. We remain optimistic that as the economy starts to reopen, our opportunity for growth will return. We are already seeing some small initial positive trends, as we mentioned during our first quarter earnings report in mid-May. Although there are very real challenges for us to overcome, Oportun has been lending for 14 years and we are applying many of the valuable lessons that we learned while managing through the Great Recession. By leaning on this past experience and leveraging all of the technology we have built, Oportun is again proving resilient and I firmly believe that we will be even stronger when this crisis finally recedes. We will continue to manage through the current environment thoughtfully while prioritizing, serving and supporting our customers while protecting and delivering long-term value for our shareholders.

Thank you, Raul. We will now allow a little bit of time for people to submit questions via the web portal. Thank you for your questions and comments. That concludes our question-and-answer portion of our meeting. If you are unable to ask a question, we encourage you to reach out to Oportun Investor Relations at [email protected]. Thank you for joining us today.

That concludes our first annual stockholders meeting. These are very challenging times and while clearly all companies, including Oportun, are affected by what's going on, we are confident that we will come out of this crisis even stronger. Together and with your continuing support as stockholders, we have built a strong, sustainable business that enables us to serve our customers whose need for financial support is greater than ever. I'll close by expressing my sincere thanks to our teams who are working hard during these very difficult circumstances, and I am grateful to all of you for joining us today.

Ladies and gentlemen, thank you for joining today's meeting. You may disconnect your lines at this time, and have a great day.