Oportun Financial Corporation (OPRT) Q4 2019 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Oportun Financial Corporation's Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator instructions] Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Nils Erdmann, Vice President of Investor Relations. Mr. Erdmann, you may begin.

Thanks, and good afternoon, everyone. Joining me today to discuss Oportun's fourth-quarter and full-year 2019 results are Raul Vazquez, Chief Executive Officer; and Jonathan Coblentz, Chief Financial Officer and Chief Administrative Officer.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 today's earnings press release. Any forward-looking statements that we make on this call 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.Also on today's call, we may present both GAAP and non-GAAP financial measures, which we believe will provide useful information. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release, our fourth-quarter 2019 financial supplement, as well as the appendix section of the fourth-quarter and full-year 2019 earnings presentation, all of which are available on the Investor Relations website at investor.oportun.com.In addition, this call is being webcast and an archived version will be available after the call on the Investor Relations portion of our website. With that, I will now turn the call over to Raul.

Thank you, Nils, and good afternoon, everyone. We appreciate your taking the time to join us and your interest in Oportun. I will start with a review of our fourth-quarter highlights, followed by some perspective on our full-year performance. Jonathan will then present our fourth-quarter and full-year financial results, followed by our Outlook for the first quarter and full year of 2020.I will then take a moment to lay out some of our key objectives for 2020 before opening the line for questions. The fourth quarter was a very strong finish to a terrific year for Oportun. We continue to grow our revenue, delivered stable credit performance that exceeded our expectations, improved our operating efficiency and achieved strong bottom-line performance. On a GAAP basis, total revenue for the fourth quarter was $165 million and grew 19% year-over-year.On a fair value pro forma basis, total revenue was $165 million, up 20% year over year. Our managed principal balance at end-of-period was $2.2 billion, up 23% year over year, driven by the strength of our originations. Our annualized net charge-off rate was 9%, which was better than our previous guidance and underscores the effectiveness of our proprietary risk models.While we were pleased by our credit performance, I want to remind you that our goal continues to be to optimize for greater customer access, growth and profitability, not just to operate at the lowest loss rate possible.Overall, our credit performance continues to demonstrate the value of our data-driven centralized underwriting. And our full-year 2019 annualized net charge-off rate was 8.3%, well within our annual target range of between 7% and 9%.In the fourth quarter, we continued to demonstrate our focus on operating efficiency and cost discipline. This focus contributed to our improving profitability metrics, including adjusted EBITDA of $17 million and adjusted net income of $26.9 million.Our fourth-quarter adjusted diluted earnings per share, or adjusted EPS, were $0.94, significantly ahead of our previous guidance. And our total adjusted EPS for 2019 were $2.53. Jonathan will discuss the components that contributed to our strong performance in just a few minutes.Now that I've shared some of our financial highlights, I'd like to cover how we executed against our growth strategy in 2019, which, as I outlined during our previous earnings call, has five key drivers.They are: 1) Customer growth; 2) Data and technology; 3) New products; 4) Our omni-channel network; and 5) Geographic expansion. Beginning with customer growth during 2019, we continued to invest in building our customer data and marketing technology platforms.These platforms are enabling us to deepen our knowledge of our customers and leverage that knowledge to optimize our marketing efforts. Our mission is to provide our customers with greater access to affordable financial services and the evolution of our marketing technology platform allows us to reach a greater number of the 100 million consumers we seek to serve.The development of this platform has increased our brand awareness and enabled us to penetrate a greater percentage of our target market. This was evident in the fourth quarter, when we furthered our objective of growing our overall customer base by expanding our large Spanish-preferring population, as well as our English-preferring customers.We grew our active customer base 14% year-over-year and the percentage of new applicants choosing servicing in English is now 56%. We also made significant progress with our second driver, our investments in data and technology.As I mentioned last quarter, we were in the process of phasing in Version 10 or V10 of our risk scorecard, which has now been fully-deployed across our omni-channel network. Just as we had hoped, V10 represents another improvement in our ability to manage credit risk in our new customer population, especially in our fast-growing mobile channel.We also launched a machine learning fraud model and based on our calculations, early results indicate that it performs two times better than commercially available alternatives. With our improvements in credit scoring and fraud prevention, we are now able to lend up to $10,000 to our very best returning customers.Let me now transition to our third strategic driver, new products. I will start with auto. Our milestones in auto last year included key integrations, marketing deliverables, product launches and volume targets. In 2019, we successfully launched purchase and refinance auto loans.While we achieved our learning agenda goals with respect to product structure, pricing and integration into our omni-channel network, our origination volume of purchase and refinance loans was slightly less than originally anticipated. We ended 2019 with $3.8 million in auto loan originations, which was about $1.2 million shy of our goal.As I noted on our last earnings call, we believe that the largest volume driver in auto will be personal loan secured by a vehicle, which we anticipate soft launching in Q2 2020. In order to create a more integrated customer experience and to build efficiencies that will benefit our customers and our company, Matt Jenkins, the General Manager of our personal loan business is now also the GM for auto.Shifting to credit cards, the Oportun Visa Credit Card product was launched ahead of schedule in mid-December. Though the introduction of the Oportun Credit Card was just a soft launch, we have been very encouraged by the results. Our credit card team has enabled a complete end-to-end experience that will eventually serve customers across the U.S. We began by marketing to customers outside the 12 states where we currently make personal loans.And we have credit card customers in seven new states: New York, Pennsylvania, Massachusetts, Georgia, North Carolina, Connecticut and Virginia. I'm excited about these early results as they validate our customers' appetite for this product, and we are furthering our mission by addressing our customers' additional financial needs.Now our fourth strategic driver, our omni-channel network. We added 25 retail locations in 2019 to end the year at 337. With our retail presence, our primary focus was on continuing to drive portfolio growth by opening new locations while reducing or consolidating locations through a process of network optimization.We also made investments across our other channels in 2019, including our contact centers, with the opening of our English-speaking location in Jamaica and the enhancement of our mobile solution, with the introduction of full mobile servicing and payment capabilities. Our final strategic driver is geographic expansion. In terms of new markets, our portfolio growth and momentum is excellent.Florida is now 5% of our loan portfolio and New Jersey is just shy of 2% of our loan portfolio. Those two states combined were only 5% at the end of the third quarter. We see significant expansion opportunities in both states, as well as opportunities to add new customers in long-time markets such as California and Texas. As I mentioned, we launched the opportunities at credit card in December in states that were outside of the footprint of our personal loans.As you'll see on Page 5 of our earnings presentation deck, our introduction of credit card has already expanded our footprint to seven additional states. We will continue our geographic expansion with the Oportun credit card, as well as explore ways to enter new geographic markets via state licensing or through other means, including a potential bank sponsorship to offer our personal loan products on a nationwide basis.In summary, Q4 was a strong quarter in 2019, was an incredible year for Oportun. We delivered against all our strategic drivers and are making great progress in fulfilling our mission.I'll now turn the call over to Jonathan, who will walk you through a more in-depth discussion of our fourth-quarter and full-year financial results, as well as our Preliminary Outlook for 2020. I'll then spend a few minutes addressing this year's key objectives, and then we'll take your questions. Jonathan?

Thanks, Raul, and hello, everyone. As you may recall, in addition to GAAP, we also evaluate our performance based on fair value pro forma results, which we believe present a more consistent view of the underlying trends of the business.Unless I state otherwise, all of the metrics that I will now share with you will be on a fair value pro forma basis for the purposes of comparison to prior-year periods. A full list of definitions and reconciliations can be found in our earnings materials.Now let me start by giving you a summary of our bottom-line results for the quarter. Adjusted net income was $26.9 million, up 91% year-over-year. This growth in adjusted net income was attributable to strong net revenue growth, improvement in operating efficiency and a lower effective tax rate. Adjusted net income is the numerator of our adjusted return on equity, which was 22.8% for Q4 2019 versus 16.1% in the prior-year quarter.Adjusted ROE benefited from the increase in the fair value of our loans. Given the decline in interest rates since the end of 2019, we expect adjusted ROE will be lower in the first quarter of 2020.Over time, we believe improvements in our operating efficiency will allow us to consistently achieve a high-teens ROE on a consolidated basis, even as we make investments in new products. We believe adjusted EBITDA is also a useful profitability metric because it is a proxy for our pre-tax cash profitability and backs out market volatility associated with fair value accounting.For the fourth quarter, our adjusted EBITDA was $17 million, compared to $15.2 million in the prior-year quarter. This was ahead of the guidance we provided of $15 million to $16 million and reflects our operating expense discipline, higher total revenue, lower cost of funds and better than anticipated net charge-offs.For the fourth quarter, on a GAAP basis, we reported net income of $23.2 million, down 8% year-over-year and $0.81 of diluted EPS, down 20% year-over-year due to the elevation of our net income in 2018 caused by our election of fair value accounting. Our adjusted EPS, however, was $0.94, up 52% year-over-year based on adjusted net income of $26.9 million and well ahead of our guidance range.For the full-year, we reported GAAP diluted EPS of $0.40, down 91% year-over-year, which was impacted by the requirement to allocate earnings to preferred stock prior to its conversion at IPO. In contrast, our adjusted EPS was $2.53, up 32% year-over-year.Next, I'll run you through the key drivers of our results for the fourth quarter. Total revenue was $165.2 million, up 20% over the prior-year quarter, driven by equally strong growth in both interest income and noninterest income.Our interest income for the fourth quarter increased to $148.2 million, up 20% year-over-year as we grew our receivables portfolio through increased originations. Our managed principal balance at end-of-period grew 23% over the prior-year quarter to reach $2.2 billion.Aggregate originations for the quarter of $619.3 million grew 17% due to our successful marketing efforts, as well as increases in loan amounts for our returning customers. This portfolio growth was partially offset by an expected decline in our portfolio yield from 34.4% in the fourth quarter a year ago to 33.5% for the most recent quarter.This was due to our rapid growth in Florida and New Jersey, where rates are lower and our high percentage of returning customers whom we generally reward with lower rates. Noninterest income, which includes cash gain on sale from our home loan sale program, increased 20% to $17 million as a direct result of the growth in our loan originations.The growth in the volume of loans sold was slightly offset by lower gain on sale premium of 10.2% versus 10.9% in the prior-year period as a larger percentage of the loans we sold were part of our access loan program. And capitalized origination fees as a percentage of the loan balance have decreased as our average loan size has increased.For the fourth quarter, net revenue which is our total revenue after interest expense and net change in fair value was $131.8 million, up 31% year-over-year. The growth in net revenue exceeded our total revenue growth due to lower interest expense growth and an increase in the value of our loans.Interest expense of $15.4 million was up 20% year-over-year. The higher interest expense was driven by an increase in our average daily debt balance of 23% year-over-year and the issuance of noninvestment grade tranches to increase our advance rate in our 2018 ABS deals.We were able to access this debt capital efficiently as our cost of debt decreased slightly to 4.1% in Q4 2019 relative to 4.2% in the same period a year ago. For the full-year, our cost of debt was also 4.1%, and over 80% of our debt was at a fixed rate.Net increase or decrease in fair value or net change in fair value includes our current period principal net charge-offs and mark-to-market on our loans and debt. We provided a summary of the net change in fair value in our Q4 2019 earnings presentation that is available through our Investor Relations website.As you'll see on Page 14 of the presentation, the fourth quarter $18 million net decrease in fair value consisted of an $18.1 million mark-to-market increase on our loans receivable, a $4.1 million mark-to-market increase in our asset-backed notes and current period charge-offs of $40.2 million.The $18.1 million increase in fair value of our loans receivable was driven by a quarter-over-quarter increase in the fair value price for our loans from 103.8% to 104.5% as of December 31, 2019. We are originating more valuable loans with longer terms and lower expected lifetime loss rates. The fair value price also benefited from lower 3-month to 12-month interest rates and credit spreads versus the prior quarter.The $4.1 million mark-to-market increase from our ABS notes resulted from higher 2-year to 3-year interest rates, as well as prices converging to par as our 2017 bond deals approached their call dates.Page 35 of our earnings presentation illustrates the walk from our Q3 loans receivable mark to our Q4 mark in greater detail, and there are several contributing factors highlighted. First, a decline in our portfolio yield, which was consistent with our policy of rewarding returning customers who obtain larger and longer loans with a lower rate.Second, the average life of our loans increased because we originated more longer term loans. Third, reduction of our estimate of remaining cumulative lifetime loan losses. And fourth, a lower discount rate resulting from lower interest rates.Taken together, these resulted in a 67-basis-point increase in our fair value loan premium and led to a smaller net decrease in fair value and higher fourth quarter net revenue.Our operating expenses for the fourth quarter were $100.5 million, up 21% over the prior year. Adjusted operating efficiency of 57.8% was 160 basis points better than the comparable quarter last year.We've achieved this, even with our increased investments in new products, auto and credit cards, demonstrating our ability to deliver continued improvement in our operating efficiency even as we invest for a long-term growth. For the full-year, operating efficiency improved 60-basis-points from 2018.This reflects our ability to exercise strong expense control, which enabled us to allocate capital for investments in the growth of our technology team, data scientists and risk analysts, as well as public company readiness, sales and marketing and new products.Our customer acquisition cost for the fourth quarter of 2019 was $131, modestly up from $118 in the prior year quarter. In addition to digital testing and expansion into new markets, we decided to increase our overall marketing investments as we realized higher operating efficiencies in other expense areas. Operating costs associated with our auto loan and credit card products are included in our overall OpEx.And Page 15 of the earnings deck provides some additional detail regarding these costs. For Q4 2019, we recognized $5.1 million of operating expense related to our new product investments. And for the full-year 2019, these costs totaled $14.3 million as we continue to focus on building for long-term growth and shareholder value.Turning now to our tax rate. I would like to explain the change in effective tax rate that we had this quarter. Our effective tax rate was 26% for Q4 2019, as compared to 30% in Q3 2019 and 27% in previous quarters.The swing this quarter was due to the one-time impact in Q3 2019 of $7.9 million of stock compensation expense, which decreased pre-tax income but was not deductible for tax purposes. Whereas Q4 had no such one-time impact and benefited primarily from a larger percentage of our 2019 revenues being derived from states with lower tax rates.We would expect our effective tax rate to normalize to historical levels going forward. Moving on to our credit performance. We have closed the gap in delinquencies relative to the prior year. At the end of the third quarter, our delinquencies were 30-basis-points higher than the prior-year quarter.In comparison, at year-end, our 30-plus day delinquency rate returned to last year's level of 4% due to improving credit trends in our portfolio. Our net charge-off rate this quarter was 9%, which was better than our expectations and for the full-year 2019, our annualized net charge-off rate was 8.3%, which was well within our annual target range of between 7% to 9%.We continue to maintain a strong liquidity position and fund our business at sustainable leverage. As of December 31, 2019, cash and cash equivalents were $72.2 million and restricted cash was $64 million.As of December 31st, 2019, our debt-to-equity ratio was 3.2 times reduction from 3.7 times the prior year as the $60.5 million net proceeds we raised in our IPO in September reduced our need to issue debt to fund the strong growth of our portfolio in Q4 2019.As of December 31st, 2019, we now have $338 million of undrawn capacity on our $400 million warehouse line that is committed through October 2021. We continue to manage our funding program to maintain 12 months or more of liquidity runway.Before providing guidance, let me spend a minute talking about two factors we considered in setting guidance for our first-quarter and full-year 2020.First, as you know, there has been a decline in interest rates since the end of 2019, which will have an impact on our fair value mark-to-market and reduce our net revenue in Q1 2020. Our adjusted net income guidance for Q1 takes this into account.The second factor is the growth rate of our operating expenses. In 2019, we made significant investments in anticipation of our IPO and the launches of credit card and auto.For Q1 2020, we expect the 2019 exit rate for these expenses to impact the year-over-year comparisons for adjusted EBITDA and adjusted net income. For full-year 2020, however, we expect margin improvement due to much slower growth year-over-year in operating expenses in the back half of the year.With that context, let me now provide guidance for the first-quarter and full-year 2020. For Q1, total revenue between $163 million and $165 million, adjusted EBITDA between $15 million and $17 million. Adjusted net income between $5 million and $7 million, and adjusted earnings per diluted share between $0.18 and $0.25.For the full-year 2020, we expect total revenue between $725 million and $735 million. Adjusted EBITDA between $86 million and $92 million, adjusted net income between $68 million and $74 million and adjusted earnings per diluted share between $2.28 and $2.48. Given our stable loss performance, our Q1 guidance for annualized net charge-off rate is 9.1%, plus or minus 10-basis-points.For the full-year, our guidance is a net charge-off rate of 8.6%, plus or minus 10-basis-points, which is within our target range of 7% to 9%. That concludes my remarks. And I will now turn the call back over to Raul.

Thank you, Jonathan. In 2019, we delivered on all five of our strategic drivers, and we exceeded the financial expectations that we had set for ourselves.Our strategic drivers for 2020 are the same as those for 2019. By the end of this year, we expect to have grown across all of our products by further expanding our customer base, our geographic presence and our omni-channel network, while continuing to maintain stable credit performance.We expect to drive continued momentum across our strategic priorities, while being extremely focused on operating efficiency and ultimately, delivering improved profitability to all shareholdersFor our personal loan product, we will explore ways to enter new geographic markets via state licensing or through other means, including a potential bank sponsorship to offer our personal loan products on a nationwide basis.We are continuing to invest in building our customer data and marketing technology platforms, and these platforms are enabling us to optimize our marketing in new channels. For our new products, our top priorities for 2020 will be bringing personal loans secured by a vehicle to market, and building on the initial success of the newly launched Oportun credit card.We're proud of our achievements and the number of people we served. And we believe we have wonderful opportunities for future sustainable long-term growth.Thank you all for your time. And now Jonathan and I welcome your questions and your comments.Operator?

Thank you. [Operator instructions] Our first question comes from Mark DeVries with Barclays.

Yes. Thanks for all the good detail on the moving parts around the fair value marks in the quarter. And it sounds like I think, your 1Q guidance just already kind of contemplates the impact of lower rates. But could you maybe, Jonathan, give us a sense specifically for kind of what the impact is you anticipate from lower rates on the revenue kind of given where we are right now?

Sure. Thanks for the question, Mark. So, and this is a footnote that we actually included in the earnings press release, where we've indicated that in order to set Q1 guidance, we're looking at a forward rate interest rate relative to our loans of 1.45% as of March 31st. And so that's down from where we ended the year, obviously, quite a bit.So that's the basis for the calculation. And we're also seeing a -- the forward curve is saying there's going to be a vertical shift in rates. So, the rates are lower on the debt as well. For that, we're assuming a 1.14% rate.And so, that's quite a bit lower than where it was. And as you know, when rates move down, the net impact is a reduction in net revenue.

Mark, this is Raul. If I could just add something. You may recall that a few months ago, we talked about the fact that we provide adjusted EBITDA and adjusted net income because we think that they'll give you two different views of the business.Adjusted net income certainly takes into account the value of our loans, right, our credit performance, the tenure of the loans, the return, but it is impacted by things like interest rate shifts that we're seeing right now.Adjusted EBITDA does not had that impact in terms of the mark-to-market. So, we think it's useful in a quarter like Q1 to be able to have both of those metrics so that you can see the impact of interest rates in one and then the other one controls for it.As Jonathan mentioned in the script, it's not just the decline in interest rates that are impacting Q1, there is a timing element in terms of our operating expenses and the exit rate of 2019, that's factored into both of those numbers. But I just thought, again I'd remind people why we think that providing both metrics is useful.

Okay, got it. And then it looks like your full-year guidance for 2020, kind of nicely hugs current expectations is pretty consistent with what you guys have been communicating so far. If we assume the rates remain relatively low for the full year, should we expect you'll be closer to the low end of that range than the middle or high end?

Yes. I think our guidance range considers the rates, so we looked at the most current picture right now?

Yes. And there is a lot of year to go, obviously. And we're very committed to what we have told investors, which is we seek to improve the profitability of the business every year. So, if we continue to see that impact, what we'll try to do is to improve operating efficiency even further to try to make up for some of the impact of interest rates.

Okay, that's helpful. Alright, thank you.

Thank you, Mark.

Our next question is from Sanjay Sakhrani with KBW.

Thank you, and congrats on the results. I guess, Raul, you mentioned the success on marketing strategies, driving stronger originations. Can you maybe elaborate a little bit more on what you guys are having success on?And then when we think about the pool of your stronger customers that are getting the higher lines, can you talk about how penetrated that part of your business is in terms of the pool of accounts that are better? Thanks.

Sure. So, I'll start with the marketing piece. I'm really excited about the work that the marketing team is doing right now. And I think there are two parts to that, Sanjay.The first is the success that we are seeing with the programs that are being put in place. So, I'll start with direct mail just because direct mail is something that we've done for some time, but we continue to improve. That's a partnership between the marketing team and certainly, our risk team and our data scientists.And one of the things that they continue to do is to figure out how to optimize our models so that that way, we're making NPV positive decisions and optimizing for disbursements, which obviously is what drives the P&L.There was fantastic work done in 2019 in improving those models, and there was a lot of creative testing that was done in direct mail as well, that I'm really pleased with. So, that vehicle that we've had for some time and that is very effective for us continues to get better.In addition to that, we continue to strengthen our digital marketing team. I've had a chance to do a couple of deep dives with that team, very strong, very analytical. And we're making more and more progress with all of the major online properties that you would expect us to be on from a digital marketing perspective. So, there is really nice progress being made there.And in addition to that, the second thing that is even more exciting to me in some ways is, over the years, we've articulated to you and to our investors the fact that we think we've created a competitive advantage when it comes to underwriting.The data platform that we're putting together in terms of our customers and marketing efficacy, we believe that when we finish doing that work, which we made a lot of progress in 2019, and there are some deliverables in 2020, that platform that we're putting together on the marketing side, we think, is going to give us the same kind of advantage when it comes to marketing that we have relative to the competition in underwriting.So, that's an effort that I'm pretty close to, and I spend a lot of time with that group, and that is really exciting for us. But that's on the marketing side. I'll pause there and see if you have any follow-up questions on that one, Sanjay, before I move to the second part.

No, you can move to the second part.

Okay. In terms of the pool of customers with higher lines, one of the things that we're always focused on is continuing to improve the underwriting. And it's both underwriting for new customers like V10, which we talked about in the script or in the introduction, I'm sorry, to this call. But the group also focuses on trying to figure out how do we optimize the loans for our returning customer.One of the big accomplishments that we had in 2019 was the introduction of our $10,000 loan, which we put into the hands of our best and most tenured customers. And so we think that there still is an opportunity every year to try to figure out can a customer take on a bigger loan with a longer-term so that that way the payment is affordable without creating hardship in their lives.And we continue to see success there. And so we think there is still a pool of customers that can get higher lines relative to what they have today.

Okay, great. I guess, one follow-up. Just given all the turmoil in the market and the potential to the economy, how are you tactically handling underwriting? Are you guys pulling back a little bit? Are you monitoring things? Just any clarity on that would be helpful. Thank you.

Sure. So, first of all, we're always laser-focused on credit. It is the most important metric that we have in the business. We have a large group of people that look at it on a daily basis.And then certainly, myself, Jonathan and others look at it and have conversations about it on a weekly basis to understand the trends that are happening. So, whether we're in a strong economy or whether there are kind of clouds on the horizon, we're always laser, laser-focused on credit. So, that would be the first thing.Second thing is, as we mentioned in the call, credit performance is stable. Certainly, when we look at this quarter, we continue to feel that the performance is right where we expect it to be. And you see that reflected in the guidance. If there are changes that happen in the economy for whatever reason, we have the ability to make changes to our models overnight.And the beauty of our centralized data-driven system is that if Pat, our Chief Credit Officer and his team feel that changes are required, we can push those overnight and they become effective across every touch point and every channel that we have immediately.So, we're watching it carefully, and we think we're well-positioned to make changes, if they're required. But right now, we don't see anything that makes us feel like we need to pull back.

Okay. Wonderful, thank you.

Thank you.

Our next question is from John Hecht with Jefferies.

Thanks, very much. Afternoon, and congratulations on another good quarter. First question is and I know you manage the business on a holistic basis but are there any stats about the branches same-store loan activity or customer activity and similarly for the omni-channel that just can characterize anything that's going on there?

Hi, John, it's nice to hear your voice. I'd say, first of all, we're really pleased with the results of the omni-channel network, when you think about double-digit growth in customers, double-digit growth in originations. So, we think the strategy, which, as I articulated, is one of our five growth drivers that continues to serve us well by serving the customer well. So, I'd say that, first of all.In terms of our retail locations, one of the things that I would tell you is relative to a few years ago, what we're seeing is that our advances in marketing and our advances in site selection are leading us to grow receivables on our branches even faster than we were able to do that a few years ago.So, we are able to reach profitability with our branches within a year. And that gives us a lot of confidence to go ahead and increase the number of branches, as you see us doing in 2020 relative to 2019.The higher number of branches also gives us -- it also reflects the momentum, and it gives us confidence that we can continue to grow, certainly in places like Florida and New Jersey that are still relatively new states for us, but also look for pockets in places like California, Texas and Illinois, where we think we can still put down some branches.So overall, we think that the omni-channel network is successful. And we're we really have a lot of confidence with the recent performance that we're seeing in our physical locations.

Okay, that's helpful. And then, did you -- New Jersey is relatively new, I think, very new, and you talked about 2% -- did you say that 2% of the loan portfolio is out of New Jersey already?

That's right.

So, that's obviously very successful penetration at a very good pace?

That's right. And I think in many ways, those two states, both Florida and New Jersey, which are our new estates reflect the advances that we've made in our omni-channel strategy and then certainly, the ability to get better at marketing and our underwriting.So, when we think about our geographic expansion which again is one of the other big priorities for us, we feel that we can continue to look for opportunities to expand state-by-state on a license or state-by-state licensing model, the way that we have for our 12 states or to look at a bank sponsorship, if that makes sense for us.

Okay. And then, I realized early on, but we know we all know there's been some changes in California with respect to the regulatory environment implemented in early January. And have you seen any demand market share opportunities in the wake of that or is it too early to tell at this point?

Yes, I think it's still a little bit early, but certainly when we put together our marketing plans this year, one of the things that we are going to do is we're going to press harder in California, now that some other lenders have had to retreat, given AB 539, but it is still a little early.

Got it, great. Thank you, guys, very much.

Thank you, John.

Our next question is from Rick Shane with JPMorgan.

Hey guys, thanks for taking my questions. And I appreciate all of the data and still wading through it. So, if I'm asking questions that are in there, I apologize. What was the volume of loans sold and what was the gain on sale margin during the quarter, please?

Sure, Rick. So, we continue to sell a 15% of our total originations, and then we sold all of our access loans. And the gain on sale was 10.2%, right. And if you take a look in the data pack, it has the exact number of loans that we sold.

Got it, okay. I haven't stumbled on that yet but I'm sure I will. Thank you. And then the other question is, as you head into 2020, you -- or your delinquencies are at the same level they were at the end of last year.Your charge-off guidance is conservative, up slightly. I'm curious when you look at what happened in 2019 and when you think about what's happening in 2020, was the variance versus plan this year in terms of growth charge-offs or on recoveries and how should we think about that headed into 2020?

Okay. There wasn't really any difference between gross charge-offs and recoveries. There's no story there of recoveries were dramatically better or versus gross charge-offs. I think that's continue to be relatively consistent in our business.

I think if I were to answer your question, just a little more broadly, Rick, there would be kind of four points that I would bring up when it comes to losses. 1) Losses are exactly in the range of what we expected.And in fact, as you pointed out, they've been a little bit better than our guidance. 2) Losses are within the target range of 7% to 9%, when we look at them on a yearly basis.And that's where we've said we want to be. So, we feel like we're right in the sweet spot of how we want to manage our business. 3) Just as a reminder, we don't optimize for the lowest level of losses, we optimize for growth and profitability, while still being consistent with our mission.And then 4) as you pointed out, kind of at the beginning, the trend is stable. When you look at it on a year-over-year basis, we feel like the trend is even improving slightly. So, that gives us a lot of confidence that we're executing the strategy that we've laid out for ourselves quite well.

Yes. Look, the second derivative trend on delinquencies is very favorable.

Thank you.

That is it for me. Thanks, guys.

Thank you, Rick.

[Operator instructions] Our next question is from David Scharf with JMP Securities.

Hi yes, good afternoon. Thanks for squeezing me in here. Hey, Raul, I wanted to maybe revisit some of the geographic focus. First, I see that Virginia is one of the new credit card states.Given the recent rate cap enactment there that finally passed, I know it was expected but it passed nevertheless similar to California. Would that be a state we would anticipate you targeting more near-term for personal loans?

Yes. I would say that's certainly one of many states that we take a look at and watch closely. The legislation in Virginia is something that we kept a close eye on. And I think, as you know, David, that type of legislation we're in favor of because we think it is a really good thing for consumers.And as it pushes out other lenders that have much higher pricing than ours, we do think it creates a compelling market opportunity for us. So, that is certainly one of the states that we're looking at.

Okay, yes. And I only ask because now that it is a more favorable landscape, whether that sort of moves it up to the near the top of that target list. On California, I know you were asked whether there were any early indicators.It may be too early. But in just these couple of months since AB 539 passed, I'm wondering, even if it hasn't materialized in volumes, have you noticed any increase in application volume post-January 1?

No, we don't, our applications are one of the things that we really disclose, David. But as you can imagine, given the healthy growth that we're seeing in loans, we're also seeing healthy growth really across our whole business in applications as well.So, I would tell you, in the state of California, we are pleased with the application volume that we're seeing. As I mentioned earlier, when the question was asked by John, our marketing plans for this year do include a strong kind of concerted push to grab some of that volume that we believe is up for grabs.And so we would expect that as the year progresses, we'll have a bit more color for you and for others.

Got it. And maybe just one last one for Jonathan.

Sure, go ahead.

I know we appreciate the both the data points and the then the color on Q1 parameters. I'm wondering, implicit in the revenue guide for 2020, should we still be thinking of this year as one in which you can kind of maintain origination growth in the mid-teens level on a year-over-year basis?

Yes, absolutely.

Yes, absolutely. Yes, we continue to be -- we continue to feel we've got great momentum in the business. So, we're really leaning into the opportunities that we're seeing.Earlier, we talked about how pleased we are with the performance of Florida and certainly, New Jersey. But really across the footprints, we think the omni-channel strategy is working. One of the slides that we put in the deck was Slide No. 5 that you alluded to a bit earlier, David.Even the initial performance of credit cards for us is very encouraging to be able to expand our footprint to seven new states, start to build brand awareness there. And certainly, we have a sense of the plans, both for auto and the secured personal auto loan.And then how credit card expects to continue to roll out. Those are all things that give us a lot of confidence in our overall business. So yes, we certainly expect at least mid-teens growth in originations.

Got it, terrific. Thanks, very much.

Thank you, David.

Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Raul Vazquez for closing remarks.

Well, I want to thank everyone once again for joining us on today's call. And we look forward to speaking with you again soon. Take care, everyone.

This concludes today's conference. You may disconnect your lines at this time. And thank you, for your participation.