Happen (HAPN) Q2 2024 earnings summary

Executive summary

• Loan originations grew 10% sequentially to $1.8B, exceeding guidance, driven by new consumer loan initiatives and strong marketplace investor demand, though down 10% year-over-year due to high rates.

• Net income increased 22% sequentially and 47% year-over-year to $14.9M, with diluted EPS of $0.13, supported by disciplined expense management and improved credit performance.

• Pre-provision net revenue (PPNR) rose 13% sequentially to $55M, while balance sheet assets expanded to $9.6B.

• Operational efficiency improved, with a one-third reduction in the cost to originate a personal loan over the past year and an efficiency ratio of 54.0%.

• Deposits increased 8% sequentially and 18% year-over-year, with 87% FDIC-insured, supporting strong liquidity.

Financial highlights

• Total net revenue for Q2 2024 was $187.2M, up 4% sequentially but down 19% year-over-year; net interest income was $128.5M, up 5% sequentially.

• Risk-adjusted revenue reached $152M, up from $149M in the prior quarter.

• Provision for credit losses was $35.6M, up 11% sequentially but down 47% year-over-year.

• Non-interest expense was $132.3M, flat sequentially and down 12% year-over-year.

• Book value per share increased to $11.52; tangible book value per share to $10.75.

Outlook and guidance

• Q3 2024 originations expected between $1.8B and $1.9B, with PPNR guidance of $40M to $50M.

• Positive net income is anticipated for Q3, though below first-half 2024 levels due to reinvestment in the balance sheet.

• Guidance reflects continued expansion of new initiatives and assumes a stable to improving rate environment.

• Net interest margin expected to be flat to slightly down in Q3, improving as Fed rate cuts materialize.

• Capital and liquidity levels are expected to remain strong, supporting ongoing operations and growth initiatives.