OppFi Inc. Q4 FY2025 earnings call

• Todd mentioned that 2025 was a record-breaking year with total revenue up 13.5% YOY and adjusted net income up 69% YOY while maintaining a 78 net promoter score. • Benefits from underwriting Model 6 were discussed, with higher delinquencies on summer vintages but strong unit economics. • Auto approval rate in Q4 2025 was 79%, increasing originations 8% YOY. • Plan to release Model 6.1 in the first half of 2026 to boost originations and reduce risk, and launch Model 7.0 in Q3 2026. • Improving vintage metrics in December and January with strong recovery metrics, expecting double-digit growth in 2026. • Progress on building Lola, the origination and servicing system, with QA phase nearly complete, planning to migrate to new system in Q3 2026. • Announcement of a new line of credit product to launch with bank partners in summer 2026. • Pam noted 2025 was a record year with strong Q4 results. Model 6 contributed to growth. Originations and receivables growth fueled revenue. Net charge-offs increased due to higher defaults but risk was priced appropriately. Expenses excluding interest decreased as a percentage of revenue. Interest expense decreased. Adjusted net income and adjusted EPS increased in Q4 2025. Full-year 2025 results exceeded guidance with strong revenue, expense control, and improved financial performance.

For 2025, total revenue increased 13.5% year-over-year. Adjusted net income increased 69% year-over-year. In the fourth quarter of 2025, revenue was $159 million, a 17% increase over Q4-24. Originations in Q4 2025 increased 8% year over year to $230 million. Ending receivables for the quarter increased 16% to $493 million. For the full year 2025, total revenue was $597 million, up 14% compared with 2024. Originations were up 12% to $899 million. Ending receivables were up 16% to $493 million. Average yield was 133% in 2025, up from 131% in 2024. Net charge-offs as a percentage of total revenue decreased to 37% in 2025 from 39% in 2024, and as a percentage of average receivables decreased to 49% from 51% in 2024. Expenses excluding interest decreased as a percentage of revenue to 29% in 2025 from 35% in 2024. GAAP net income in 2025 was $146 million, up from $84 million in 2024. Adjusted net income in 2025 was $140 million, up from $83 million in 2024. Adjusted EPS in 2025 was $1.59, up from $0.95 in 2024.

• For 2026, total revenues are expected to be $650 million to $675 million, an increase of 9% to 13% over 2025. • Adjusted net income is expected to be $153 million to $160 million, an increase of 9% to 14% over 2025. • Based on an anticipated diluted weighted average share count of 87 million shares, adjusted earnings per share are expected to be $1.76 to $1.84, an increase of 11% to 16% from 2025.

• Higher delinquencies on summer vintages in previous years, although OpFi maintains strong unit economics. • Impact of geopolitical events and inflation on customer repayment rates, specifically gas prices affecting discretionary income and ability to repay. • Need to continuously monitor and respond to changes in customer sentiment and market dynamics as the pace of model building and change is rapid.

Q: Maybe to start more on the macro side, and given the events going on right now geopolitically, can you remind us, since these are such short duration loans, like how quickly loss emergence, like in weeks or months, typically occurs? and specifically whether it's far too early to be talking about the impact of gas prices on some of your borrowers.

A: Hey, David, good morning. Thank you for the question. We see early indicators, you know, very early within the month of when they were originated, looking at first payments, 28 days, 42 days out. So we get earlier indicators, and, you know, in the summer, You know, what was interesting was we saw Consumer Sentiment Index take a nosedive during the summer. And what followed was some higher, lower repayments, I should say. And we course corrected pretty quickly. Also, you know, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments. And that helps our unit economics tremendously. So we are still able to grow into the fourth quarter. And the good news is we've definitely seen some improvement on those in December and in January on those early indicators. And it's giving us confidence to allow for double-digit growth on top and bottom line for 2026. And then the second question, yeah, sorry about the cost of gas. Yeah, there's no doubt. Inflation is a tax on our customers. It hits their discretionary income and ability to repay. It's something we're watching closely. We're hoping it's a temporary, but anytime prices of major items like gas go up rapidly like it just has over the last week, it's something that we're going to watch. Also going to continue to watch the customer sentiment index and just make sure that the customer is in a good place. It's definitely going to be top of mind here kind of in the first half of 2026.

Q: Understood. And maybe just saying on credit, I know you don't provide specific loss guidance for 2026. And as you mentioned, it's obviously risk-based pricing has to be factored in. for total returns, but is there anything we should think about in terms of the cadence of losses coming out of the credit tightening in the second half?

A: Yeah, I mean, there was some tightening that was done in response to some of the summer vintages. It's stable, and we're starting to feel more confident. Obviously, it's a wait and see here through the first quarter, but we think there's also some strategic initiatives that we're working on in the business that are going to unlock some more growth. We're very bullish on our model refit 6.1, which factors in more recent data. to allow us to give us confidence to grow. And then I'll point to the, you know, we're getting more yield. We're getting more yield to price the risk properly across the segments. So back, you know, in 22, when there was some credit spikes due to rapid inflation, we didn't have risk-based pricing. So we weren't able, it wasn't a lever in our toolkit to be able to properly price risk across the segment. So we feel like with our model, with our new product line of credit, and with some of the risk-based pricing initiatives, we're well-positioned to continue to grow profitably and keep strong unit economics.

Q: Maybe just one more follow-up, and then I'll get back to Q. You noted in your presentation that your bank partners had increased sort of the percentage of their retention. um i'm assuming it was notable enough for for it to be included in in the deck you know can you give us some color on you know both order of magnitude but but i guess more importantly you know is this something that usually cycles up and down that maybe we hadn't paid attention to or if there's anything else that we should uh take away from that A: Yeah, I mean it's really just uh In some states, every state is a little bit different because we abide by all federal and state laws. Banks do take higher percentages in some states of originations. And so obviously our gross to net comes down a little. But I think what it gives us comfort is the banks are very comfortable with our servicing and underwriting capabilities and are willing to put their equity into the originations, which is an interest alignment and builds confidence for us. And so we view it as a good thing long term and think that it shows the confidence that the banks have in us.

Q: Hey, thanks, guys. You know, I wanted to ask on those early summer vintages, as you look back, what are kind of the learnings from that? Was there any region to call out, a type alone or a risk tier to call out? Just kind of curious what you learned from some of those higher losses.

A: Yeah, that's a great question. And, you know, we did look at, you know, we have, extensive data, banking data, cash flow data, in addition to a lot of customer-level data to look at, and the repayment, the actual repayment. So you can't get better data than that. There's nothing actually that stood out to us as being the sole reason as to why we started to see some strain and some lower repayment rates. One thing that is and has been is customer sentiment and index has been something that we've started to look at as being a way to, obviously not decision on credit, but as an early indicator of kind of how the customer is, how the customer's feeling. And there is some ability to see that when the customer is feeling or not feeling financially secure, or they don't feel like the direction of their financial path is upward, some lower repayments. But nothing to decision on. But yeah, we looked across the spectrum at a lot of different data points, and there was nothing that stood out as, oh, that's the reason for this happening. But that is why we monitor this on a daily basis, and it's something that we have really good reporting on. to be able to read and react, and something that you have to in this world. In this world, it's not kind of set up, forget it anymore on credit. That's why we're doing the refit. That's why we're building Model 7. The pace of model building and change is rapid now in this world, and I think we're well-positioned to respond to it and make course corrections along the way.

Q: And then just to clarify this, Is it model 6.1 goes live in the second half of 26?

A: No, model 6.1 is going to go first half. We're going to be launching. It's a refit, a refit. So it's taking a model 6 and improving on it. And we do see early indicators are boosts in originations and better credit performance across the board. It really has a benefit. on the origination side too, which we're excited about. We've been testing it all throughout the fourth quarter and into the first quarter, so our confidence level is getting higher. And then we're also already starting to work on building Model 7, which is a brand-new model, which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever.

Q: Yeah, it's looking at repayment data. and reweighting our variables to have the model be more predictive. That's really what it is. So we look at a lot of different data points throughout the application process to determine credit worthiness. And when you actually have repayment data to support it, it becomes extremely powerful. So it's a reweighting. We have really good tools. Our credit team does a great job at you know, constantly back testing and finding areas for improvement. And so once they go to work and they start to, you know, run the regression analysis, we found some things where we could better weight different variables and produce a more accurate score.

Q: Hey, just lastly, 24 had 95 million of free cash flow. $25 had $94 million. You know what I mean? Low to mid-90s each year. I would assume $26 is going to be in a similar ballpark, maybe adjusted for a little bit of growth. But how are you thinking about capital allocation? Do you have a chunk of biddy to buy in $26? I'm just trying to think about uses for another... large year for free cash flow A: yeah well uh you know in the in the fourth quarter um you know we we did buy back some shares uh we thought that our the long-term value of our stock price and the record performance that we've had um and the consistency of that was not being valued properly so we did we did buy back some shares with some of our capital um i'm happy to support the stock at those prices for sure Um, listen, I, I think I kind of always say this, but it's a menu of options. Um, we, you know, we like to be well capitalized, uh, to read and react to, to, to, you know, the, the broader markets and see what's going on. I think that, you know, we're still active in the M and a space looking at stuff. Um, we're, you know, exploring, uh, you know, different strategic initiatives, um, that would need capital. Um, you know, we've, we've been investing in our tech systems. You know, we believe that Lola, when launched, will be the most cutting-edge tech-enabled lending system out there. And it'll allow us to plug into AI tools, so we're investing in that. So, you know, there is a menu of options. In the past, we've done a special dividend as well. But, yeah, we'll, you know, and we do anticipate free cash flow to, you know, continue to increase this year. But we're paying down debt, if you can see, and getting the benefit there as well. So, yeah, we're kind of using our cash wisely and strategically and like to be well capitalized to take advantage of situations that come up and continue to build the business.

Q: Good morning, and thanks for taking my questions. I wanted to start by maybe pivoting back to the macro question from earlier. You mentioned that, you know, in the summer you guys, of course, corrected pretty quickly. You would expect to do the same thing, again, should gas prices run. I was hoping it would be good to maybe illuminate a little more about what the playbook would be here. Is that targeting higher quality segments? Is that, you know, adjusting your pricing a little more aggressively? Maybe what does that look like?

A: Yeah, absolutely. And that is something that, you know, we have successfully been able to do is targeting, you know, lower risk customers and even adjust pricing to accommodate more growth in the lower risk segments. You know, we've been launching that in the fourth quarter and we'll continue that throughout the year. Yeah, the lower risk segments are more predictable on payback and repayment rates. We're not seeing as much degradation in those segments, and we'll continue to market and target. We think that also the line of credit product that we're building when we launch will potentially open up some new geographies for us with our bank partners. We're excited about that. It will give us some new geographies to provide credit access for customers. But, yeah, I mean, inflation is something we're watching, you know, and seeing, obviously, gas being – shooting up that quickly is concerning. But, you know, we're, you know, ready to respond if needed. And right now, it appears to be, you know, a temporary surge. Hopefully, it will come back down in line and won't impact our customer repayment rates.

Q: Turn into, you know, the new model we'll obviously have this year. Maybe could you spend a little time talking about what's changed between, not maybe the models themselves, but the process of putting a model together? I got to imagine you guys have a lot of tools at your disposal to create better, faster, stronger models with the advent of AI and such. Are we just going to see that turn into faster model rollouts, or should we expect a step change in the quality of the models?

A: Yeah, I mean, first of all, you're absolutely right. The AI tools and the tools that we're now to deploy, the pace of change has, you know, the cycle times of developing refits and developing new models has significantly reduced, which is a huge benefit to read and react. But, you know, the world's also changing at a much faster pace. I mean, I don't remember a time where gas went from $80 a barrel to $120 in one week. So, You have to. I mean, that's table stakes now, right? You have to be able to read and react and, you know, be out in front of, you know, any macro noise that may affect repayment rates and be ready to, you know, make changes as needed. But yeah, you will continue to see more rapid model development, reduced cycle times, and better, more predictive data as, you know, as we continue to operate.

Q: That's great. And one more for me, if I could sneak it in. Just looking at your guidance, anything here that's baked in that we should be aware of? Should we expect pretty typical seasonality on the year based on what you can see? Anything there would be very helpful.

A: Yeah, no, I mean, we're encouraged by some of the early vintage metrics of December and January. We're seeing a normal to strong tax refund season. I think it was well documented from the IRS that the average return would increase this year, which is also very beneficial for us from a credit perspective. And we see growth. We feel like we have some good growth initiatives and feel good throughout the year that we can achieve double-digit revenue and profit growth.