Yahoo Finance OneMain Holdings Inc (OMF) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics ...
Capital Generation: $155 million this quarter.
Receivables Growth: 6% year-over-year increase.
Total Revenue Growth: 7% year-over-year.
Originations: $2.5 billion, down 10% from previous year.
30-89 Delinquency Rate: 2.72%, down 56 basis points from previous quarter.
Loan Net Charge-offs: 8.6%, consistent with expectations.
OpEx Ratio: 6.6%, reflecting disciplined expense management.
Customer Base: Grew to 3 million customers, up from 2.6 million a year ago.
Auto Finance Receivables: $843 million at quarter end.
Credit Card Accounts: Ended quarter with 509,000 accounts and $386 million of receivables.
Dividend Increase: 4% increase this quarter, annual dividend now $4.16 per share.
Share Repurchases: Approximately $5 million for about 100,000 shares.
Net Income: $155 million, $1.29 per diluted share, down 13% from $1.48 per diluted share in Q1 2023.
Managed Receivables: $22 billion, up $1.3 billion or 6% from a year ago.
Interest Income: $1.2 billion, up 7% year-over-year.
Interest Expense: $276 million, up $38 million from previous year.
Provision Expense: $431 million, comprising net charge-offs of $457 million.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Jenny, can you clarify the impact of growth math on delinquency buckets, particularly the 30-89 day and 90-plus day buckets? A: Jeannette E. Osterhout, Executive VP & CFO of OneMain Holdings, Inc., explained that the weighted average life of receivables has increased due to slower growth and a decrease in new originations. This shift has increased the average age of receivables, replacing younger originations with older vintages that exhibit higher delinquency rates. She emphasized that this dynamic is temporary and expects the impact to decrease as newer vintages are added to the books. Osterhout also noted that there are no abnormalities with the 90-plus delinquencies.
Q: Doug, could you discuss the market opportunity in credit cards, especially considering the new fee structure proposal to reduce late fees? A: Douglas H. Shulman, Chairman, President & CEO of OneMain Holdings, Inc., sees a significant growth opportunity in the credit card market for non-prime consumers, which is estimated at about $500 billion. He highlighted OneMain's unique product design, which rewards good payment behavior with better terms. Shulman also mentioned that OneMain's business model is well-prepared for the proposed reduction in late fees, as it has been developed with a potential $8 maximum late fee in mind.
Q: What factors would need to change for OneMain to become less conservative with its underwriting? A: Shulman stated that OneMain's current conservative underwriting stance is influenced by various macroeconomic factors, including persistent high prices and an uncertain interest rate environment. He mentioned that any adjustments to underwriting criteria would be gradual and data-driven, focusing on specific segments and based on the performance of slightly riskier loans that are still profitable but don't meet the company's top return thresholds.
Q: Can you provide insights into the expected trends for delinquencies and loss ratios moving forward? A: Shulman expressed confidence in the improving trends in delinquencies and anticipates that peak losses will occur in the first half of 2024. He explained that the current loans are performing within the expected loss range of 6% to 7%, and the timing to reach this level consistently across the portfolio will depend on various factors including portfolio growth and macroeconomic stability.
Q: How do you see the impact of tax refunds on delinquency trends this quarter? A: Shulman and Osterhout noted that tax refunds this season were quite normal and have not factored any significant deviations into their projections. They observed a slight increase in the average refund amount and believe that the current delinquency improvements reflect this.
Q: What are the plans for reinvesting savings from recent cost-cutting measures? A: Osterhout mentioned that savings from cost-cutting will provide additional capacity for strategic investments throughout the year. These investments will be targeted based on geographic growth opportunities, product growth, and the overall business and economic environment, ensuring flexibility in their operational strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
