OppFi Inc. (NYSE: OPFI), a specialty finance platform that partners with community banks to offer credit to Americans with limited access, has acquired a 35% equity stake in Bitty Advance, a company specializing in credit access for small businesses.
The deal, which includes the option for OppFi to gain majority and full ownership in the future, is set to enhance OppFi's earnings immediately.
Bitty Advance, led by CEO Craig Hecker, has been a notable player in providing revenue-based financing and other capital solutions to small businesses. Since its inception in 2020, Bitty has facilitated funding for over 29,000 small businesses in the United States.
The acquisition is seen as a strategic move for OppFi to enter the small business financing vertical, a sector where an estimated 71% of medium to high-credit-risk small business applicants turn to non-traditional bank financing.
The total market for non-bank small business lenders is about $550 billion annually, according to the Consumer Financial Protection Bureau.
OppFi's CEO Todd Schwartz expressed optimism about the acquisition, citing Bitty's alignment with OppFi's mission and its potential for growth with OppFi's resources.
Financially, the transaction is expected to add roughly $0.03 in adjusted earnings per share to OppFi's consolidated results on an annualized basis. OppFi has the option to increase its stake in Bitty to a majority share in 2027 and acquire the remaining equity for full ownership by 2030.
The acquisition's financial terms imply a 6.0x purchase multiple on Bitty's adjusted net income for the trailing twelve months ending March 31, 2024. OppFi will file additional details about the transaction in a Form 8-K with the U.S. Securities and Exchange Commission.
Moelis (NYSE:MC) & Company acted as the financial advisor, while Sidley Austin LLP provided legal counsel for OppFi in this transaction. OppFi plans to discuss further details and address investor questions during its second-quarter earnings conference call on August 7, 2024.
This strategic move is part of OppFi's broader initiative to evaluate and pursue acquisitions that complement its mission to facilitate credit access, particularly in underserved sectors.
OppFi reported a strong first quarter for 2024, exceeding earnings guidance and updating its full-year financial outlook. The company's total revenue rose by 5.8% to reach $127.3 million, and adjusted net income reached $8.8 million, with earnings per share rising to $0.10. Following these developments, OppFi has raised its full-year revenue guidance to between $510 million and $530 million.
InvestingPro Insights
As OppFi Inc. (NYSE: OPFI) forges ahead with its strategic acquisition of Bitty Advance, the company's financial health and market performance offer a glimpse into its potential to capitalize on this new venture. With a market capitalization of approximately $327.12 million, OppFi stands as a notable entity in the specialty finance landscape.
Investors might find OppFi's Price to Earnings (P/E) Ratio particularly interesting; at 15.81, it reflects the company's earnings relative to its share price, and this ratio has slightly increased to 17.48 when adjusted for the last twelve months as of Q1 2024. This could suggest that investors are expecting higher future earnings growth, supported by the company's revenue growth of 26.08% during the same period. Moreover, OppFi's Price to Book (P/B) ratio stands at a high 18.0, which could indicate that the market values the company's assets highly relative to its current book value.
Looking into the company's performance, OppFi has demonstrated strong returns with a 42.44% price total return over the last three months and an impressive 97.32% over the last year. These figures underscore the company's robust growth trajectory and may reassure investors of its capacity to integrate and leverage Bitty Advance's offerings.
Among the InvestingPro Tips for OppFi, two stand out in the context of this acquisition. First, analysts predict that the company will be profitable this year, which aligns with the expected immediate earnings enhancement from the Bitty Advance deal. Second, with a high return over the last year, OppFi's recent performance seems to reflect a positive market sentiment that could bode well for its expansion into small business financing. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, offering a comprehensive look at the company's financials and market position.
As OppFi navigates its growth and acquisition strategies, these metrics and insights provide a valuable lens through which investors can assess the company's current standing and future prospects. For those interested in a deeper dive, further InvestingPro Tips can be found, offering a more nuanced understanding of OppFi's potential in the dynamic financial sector.
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