Q2 2025 OppFi Inc Earnings Call
Session will be held for those listening by Dialling, you'll be prompted to enter the queue. After the prepared remarks I am pleased to introduce your host Mike <unk> head of Investor Relations you may begin.
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Thank you operator, good morning, and welcome to <unk> by second quarter 2025 earnings call.
Today are executive Chairman and CEO, Todd <unk>, and CFO, Pam Johnson, who will present, our financial results followed by a question and answer session.
You can access the earnings presentation on our website at investors dot up by Dot com.
During this call up by May discuss certain forward looking information.
The company's filings with the SEC describe essential factors that could cause actual results developments and business decisions to differ materially from forward looking statements.
Please refer to slide two of the earnings presentation and press release for our disclaimer statements covering forward looking statements and references to information about non-GAAP financial measures, which will be discussed throughout todays call.
Reconciliations of those measures to GAAP measures can be found in the appendix to our earnings presentation and press release with that I would like to turn the call over to Todd.
Thanks, Mike and good morning, everyone. Thank you for joining us today.
After a strong start to 2025 I am proud to report that the second quarter was a record quarter for <unk>.
The business achieved record quarterly revenue adjusted net income and operating margin our.
Our Q2 results reinforce our belief that <unk> is unlocking its full growth potential and demonstrating that we are well positioned to continue increasing profitability and strengthening our balance sheet.
Given our Q2 outperformance we are increasing full year 2025 revenue adjusted net income and adjusted EPS guidance.
During the quarter the company generated a 14% increase in total net originations a 13% increase in revenue and a 59% increase in adjusted net income year over year.
Our disciplined approach to growth and dynamic pricing led to this double digit growth and we anticipate that year over year growth will continue throughout 2025.
Throughout the quarter the underwriting model model six continued to perform well in the second quarter of 2025 optimize net charge off rate improved to 32% of revenue compared to 33% for the prior year.
Model gives us the confidence that we will be able to continue to grow and whether different periods of economic volatility.
<unk> continues to invest in product and technology initiatives to improve customer experience and originations and servicing.
The auto approval rate improved to 80% in Q2 2025 up from 76% in Q2, 2024, which in turn improved funnel metrics and propelled our net revenue up 16% year over year.
<unk> remains one of the highest rated products in the industry, posting and 79% NPS score and a <unk> score of 89% throughout the quarter.
We are proud to announce our new loan origination lending application named Lola.
Our product Tech and operation teams have been working diligently over the last year to build the loan origination system of the future.
It's designed to significantly reduce loan application processing times and boost operational efficiencies.
By integrating with AI tools, Lola is expected to enhance customer experiences improve satisfaction and increase automation, including auto approvals. It's moderate architecture also allows for seamless integration with other major systems and tools, creating a cleaner data layer.
<unk> and providing deeper insights to fuel further innovation.
Over the next six months <unk> plans to migrate to Lola.
Our investment in <unk> continued to perform well in the second quarter of 2025 the.
The business continued to add accretive profitability and cash flow to <unk>.
Did he is doing a great job utilizing technology to improve operations and the customer experience identifying additional growth opportunities and new credit segments and capitalizing on the continued supply demand imbalance in the small business lending space.
Overall, <unk> had a strong quarter financially and operationally, we expect continued healthy revenue momentum and profitable growth throughout the remainder of 2025 and into 2026, we believe <unk> is well on its way to executing its vision of becoming the leading.
<unk> Tech enabled digital finance platform that Collaborates with base to offer financial products and services to everyday Americans.
With that I'll turn the call over to Pam.
Thanks, Todd and good morning, everyone. As Todd noted we had another quarter with record results. These are due in large part to the proprietary model six credit software.
<unk> has helped us expand our reach and grow our business in a highly capital efficient and profitable manner.
Enhanced predictive power has enabled the ability to confidently underwrite larger loan amounts for credit worthy individuals.
This ability to increase the average loan size, while maintaining rigorous risk standards directly fueled the growth in originations, which Todd mentioned.
The impact of model six extends beyond just loan side. We have also seen an improvement in the auto approval rates.
This enables deserving borrowers to more easily access credit, thereby enhancing the customer experience, increasing operational efficiency and improving customer satisfaction.
The synergy between expanding originations driven by larger and more efficiently approved loans and disciplined credit performance is clearly reflected in the healthy growth of our finance receivables, which increased 13% to $438 million year over year.
This growth is supported by the improved predictive accuracy of model.
Which is properly aligned loan prices and terms with risk driving revenue.
As a result of the machine learning improvements incorporated into the model six which helped underwrite better performing loans and increased finance receivables total revenue reached a quarterly record of $142 million, representing a 13% increase year over year.
The revenue growth, coupled with a lower net charge off rate drove a significant 16% increase in net revenue to $100 million.
The net result of these positive effects with a 130 basis point improvement in the average yield to a quarterly record 136%.
Our focus on cost discipline also played a key role in our strong performance.
<unk> operational improvements contributed to lower total expenses before interest expense, which declined to 39% of revenue in the second quarter compared to 45% in the same quarter last year.
As we noted during the first quarter earnings call, we proactively pay down our corporate debt, which reduced interest expense to 7% of total revenue down from 9% in the prior year.
As a result of the increases in revenue and reductions in expenses adjusted net income increased 59% to a quarterly record $39 million up from $25 million at.
At the same time adjusted earnings per share grew significantly to 45.
From 2009 last year.
On a GAAP basis, our net income decreased by 59% to $11 million, primarily due to a $33 million non cash charge, reflecting the change in fair value of our outstanding warrants.
Because our class a common stock price increase during the quarter the estimated value of the warrants issued when we went public also increased driving this noncash expense.
Moving to the balance sheet, we maintained a strong position ending the quarter with $78 million in cash cash equivalents and restricted cash alongside $306 million in total debt and $218 million in total stockholders equity.
Our total funding capacity was $6 3 million at quarter end, including $219 million in unused debt capacity.
We expect our healthy momentum to continue into the second half of 2025.
Given our strong operating performance driven by growth in originations and a focus on operating efficiencies. We are providing the following updated full year guidance.
For the full year 2025, we now expect total revenues to be between $578 million and $605 million, representing a 10% to 15% increase compared to 2024.
We are again, increasing our adjusted net income guidance to be between $125 million and $130 million, representing a 51% to 57% increase compared to 2024.
Based on an anticipated diluted weighted average share count of 90 million shares we are increasing our adjusted earnings per share guidance to be between $1 39.
And $1 44.
With that I would now like to turn the call over to the operator for Q&A operator.
Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad.
You may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question, we'll pause for a moment to allow questions to queue.
And our first question will come from David Scarf with citizens capital market. Your line is open.
Hi, good morning.
Thanks for taking my questions.
Hey.
First one little more high level.
For both Todd and Pam I mean, obviously you.
You've delivered on everything and more of.
Kind of your.
Restructuring over the last couple of years in both the expense and credit side as well as.
As well as volume and this is not a back ended way of trying to force you into providing.
Future guidance, but.
Is there a long term.
<unk> structure operating model, we ought to think about or maybe more specifically.
Is there a target Roe.
Net margin.
Sure.
Over the next three five years that you have in mind for the business based on all the changes you've made.
Yes.
Thanks, David Thanks for the question.
I think I think we had when we went on this journey I would come back as CEO back in 2022, we have laid out.
Roughly what we thought those could be if we were we were a long way from home at that point, but we kind of told you Hey. This is what we think we're going to achieve and we've achieved it.
I think I think we're.
We're very satisfied where we're at today.
Think that the business is performing incredibly well now it does ebb and flow right depending on some macro factors. There's some clouds out there that we're looking at with tariffs and stuff like that with the consumer on inflation and unemployment but.
We if we can bump that if we're achieving a 20%.
Margin that is a very healthy margin and that that is probably exceeding our expectations and we feel really really good there.
One of those things this year.
We wanted to return to growth.
And that was a big priority for us and I think.
The team has done a really great job executing on that.
The combination of not only recruiting.
New customers with our great service and auto approvals, but also finding the right price and the right size of.
Of origination for our customers. So it's a nice balance.
We have a nice kind of combination right now of growth and profitability that we will look to continue to achieve here throughout the 25 and beyond.
Got it got it understood and more more granularly on the quarter, you referenced and I apologize I havent done the math myself, but.
you may remove yourself from the Queue at any time by pressing star 2 once again that is star 1 to ask a question we will pause for a moment to allow questions to queue
The latest credit models.
They have enabled you to.
It sounds like.
Notably increased the average origination size can you give some context around that sort of what the average loan size.
It has increased by or how much of originations in the quarter.
first, 1 little little more high level, uh, you know,
<unk> was due to.
Increasing the average loan amount as opposed to just the number of.
Origination yes.
I mean, I think I think the way we're thinking about it is.
You have <unk> had significant inflation, obviously inflation today is less.
As well as volume. And this is not a back-ended way of trying to force you into providing.
Then it was a couple of years back, but that inflation has stopped prices have not fallen down and so what's really happened is our top end price.
you know, future guidance but
Is there a long-term?
Margin structure operating model. We we ought to think about or or maybe more specifically
<unk> $4000 was one of the largest originations we made that had not been adjusted.
You know, is is there a Target Roe or or net margin? Um,
For the next 3, 5.
And almost 10 years, where we have not really taken into account for inflation.
And so we are now able to incrementally I would say increase that up to closer to $5000, which will allow allows for the updating of prices and inflation in today's economy.
And then also incremental term, but these are all incremental things that we're doing.
So it's probably 10%.
Increase in size and so it's not it's not like we're only relying on.
Yeah. Um, thanks David. Thanks for the question. Um, I think I think we had when we, when we went on this journey, uh, when I, when I come back to see CEO back in 2022, we had laid out, um, you know, roughly what we thought. Those could be. We were, we were, uh, we were a long way from home at that point, but but we we kind of told you. Hey, this is, this is what we think we're going to achieve. And we've achieved it. Um, you know, when I think I think we're, you know, we're very satisfied where we're at today.
Just raising the amounts of the origination.
It's a combination of.
Doing that and then also have.
Making sure that our current customers are paying us and we're staying current.
Then also there.
A large population of customers that have been successful in our product and paid in full that are coming back to us at great rates as well.
So it's a combination of things.
So David our average.
Our average loan size, David has increased by about $100 for the year over year, but again. It's these these newer larger loans are just now infiltrating the portfolio right and so you're you're just starting to really get the initial impact of those but an average loan size right now its about $100 more than it was during the six months last year.
Consumer on inflation and unemployment. But, um, you know, if we can, you know, bump that, if we're achieving a 20% margin, that is a very healthy margin and that is, uh, you know, probably exceeding our expectations, and we feel really, really good there. Um, one of the things this year, um, you know, we wanted to, uh, return to growth.
I see okay.
Just sorry, if I can squeeze in just one more on originations I see in your.
In your slide deck, there's a reference to sort.
The growth in the percentage of loans retained by bank partners.
Um, and that was a big priority for us. And I think, um, you know, the team has done a really great job, you know, executing on that. Um, It's a combination of, uh, not only recruiting, um, you know, new customers with our great service and auto approvals, but also finding the right price and the right size of, uh, of origination for our customers. So it's, it's a nice balance. Um, so we have a nice, you know, kind of combination right now of growth and profitability that we will look to continue to achieve here throughout the 25th and
Is that something that was contractual or is it concentrated with one partner.
Beyond got it. Got it. Understood
Is it just kind of the demand they just want to retain more.
Maybe provide a little more context.
Depending on the state, we abide by all federal and state laws.
Hey, more more granularly on on the quarter. Um you you referenced and I apologize, I haven't done the math myself. But um you know that the latest credit models have enabled you to uh
it sounds like, you know,
Depending on some of the states.
Banks retain different percentages.
Notably increase the average origination size C, can you give some context around that sort sort of what the average loan size?
And so that just means.
For the quarter there was some growth maybe more growth in those states.
has increased by, or or how much originations in the quarter um, was due to
They retained more got it got it.
just increasing the average loan amount as as opposed to just the number of, uh,
Great. Thanks, so much.
Thank you. Our next question will come from Kyle Joseph with Stephens. Your line is open.
Hey, good morning, guys. Thanks for taking my questions and congrats on a nice quarter.
Just wanted to dive into credit a little bit more obviously your charge offs are heading in the right direction.
Good.
Expansion in your in your net revenue margin.
Just wanted to get your thoughts on the macro the health of the underlying consumer kind of any any trends youre seeing on the <unk> first payment default trends and then layer that in with kind of some of the larger is that commentary around larger originations and how you expect that to impact credit going forward.
Yes, it's good question.
I think we saw a strong start to the year I think coming into the summer months, we're being we're being pretty we're still being cautious I mean, we've.
Never.
Origination. Yeah. I mean I mean I mean I think I think the you know the way we're thinking about it is um you know, you you have you've had significant inflation and you know obviously inflation today is less um, than it was a couple years back, but that inflation has stopped prices have not fallen down. And so what's really happened is our, our top end, uh, price of of 4,000 dollars was, was was 1 of the largest, uh, originations to be made, you know, that that had not been adjusted and, and almost 10 years where we, we had not really taken into account for inflation. Um, and so we are now able to incrementally I would say um increase that up to closer to $5,000 which will allow us for um the updating of prices and and you know, inflation in in today's economy. Um and then also you know, incremental term but these are all incremental things that we're doing. Um, so it's, it's
We've always been very.
Slow too to ever change the credit box and we're still running I would say pretty pretty tight.
The good news is we've been able to still achieve growth and continue to.
Pushed down the charge offs as a percentage of revenue.
I think I think.
Similar to the fed waiting and seeing on lowering interest rates were waiting and seeing a couple of more things here in today's economy to make sure that.
We're seeing the Ftes and also long term charge off rates.
You know, probably 10%, um, increase in size and and um, so it's it's not, it's not like we're only relying on um, just raising, um, the amount of the origination, um, It's a combination of um, you know, doing that. And then also, you know, making sure that our current customers are paying us and we're just staying current. Um, and then also, you know, there's a, there's a large population of customers that have been successful in our product and paid in full, um, that that are, you know, coming back to us at at Great rates as well. Um, so it's it's a combination of things.
We need to work within the confines of our of our structure. So.
Got it. So, David, our average...
But yes, it's still we're still running relatively I would say tight compared to.
Years passed back in 2018, 19, where much more risk segments were available at the current charge off rates. So we've kind of largely unchanged and we will continue to be cautious and read and react I mean thats. The nice thing about model six now is our ability to dynamically read and react to situations and.
Our our average loan size, David has increased by about a hundred dollars for the year-over-year. But again, it's these, these newer larger loans are are just now, infiltrating the portfolio, right? And so you're you're you're just starting to really get the initial impact of those but uh, an average home in place right now is about a hundred dollars more than it was during the 6 months last year. Yeah, I see.
We've said it a couple of times on the earnings call. It also focuses more on long term charge off rate than short term volatility in the FTE numbers.
Got it really helpful. And then just shifting gears to expenses a bit.
The quarter really highlighted the operational leverage in the model.
In your slide deck. There there's a reference to sort of the growth in the percentage of loans retained by Bank Partners. I is that something that was contractual or is it concentrated with, you know, 1 partner? Um, is it just kind of the demand? They just want to retain more what? Maybe provide a little more context. Yeah.
Youre seeing kind of accelerating.
Origination growth.
As far outpaced it.
At least marketing expense growth to me that signals, a relatively healthy market, but.
How youre thinking about the market overall are you thinking about marketing expenses.
You know, we it depending on the state, you know, we abide by all federal and state laws, um, depending on on some of the, the states, um, Banks retain different percentages. Um, and so that just means, um, you know, for the quarter, there was some growth maybe more growth in those States. So, that's, that's how uh, they, they retain more
Got it.
Given kind of competitive factors in the market.
Thanks so much.
Yes, I mean, if you look at.
2024, and 23, we averaged right around 200 $200.
Thank you. Our next question will come from Kyle. Joseph with Stevens. Your line is open.
Cps and that has increased and I kind of talked about it in the first quarter that there were some marketing initiatives that we were going to be unlocking this year and direct response partnerships.
And some investment and some.
Some of our organic search methods as well so.
Started to roll that out our costs for the for the quarter was $2 20, So we're definitely making those investments, but we're being we're being smart smart about it but those we think that there is continued investment for Q3 and Q4 that we'll see in Etfs.
First payment, default Trends uh and then you know later that end was kind of some of the larger, the commentary around larger originations and how you expect that to Impact Credit going forward.
But the good news is so.
So far we've been happy with the results and continuing to learn and find new new methods and channels that we work that work for us on a scalable way.
Got it helpful. And then just one last one from me if you don't mind.
I wanted to get your sense for or your.
<unk> for yields given some of the dynamics in the portfolio, obviously credit has been good.
Kind of a shift towards larger loans, obviously, some of thats, probably graduating consumers into higher.
Our larger loan balances, but and then at the same time, you're seeing pretty good year over year yield expansion, but just kind of unpack that and give us a sense for where you where are you CEO is trending for the portfolio over time.
Yes, we think it's going to be stable.
Incrementally increasing to stable I think we're.
One of the things we implemented last year was more.
More of a risk risk based pricing approach for different segments.
Yeah, it's a good question. Um, you know, I think we've we, you know, we saw a strong start to the year, I think, you know, coming into the summer months, we're being we're being pretty. We're still being cautious. I mean, we we've never, um, you know, we've always been very, um, slow to to ever change the credit box and we're still running. I would say pretty, um, pretty tight. Um, was the good news is, we've been able to, you know, still achieve growth, um, and continue to, uh, you know, push down the the charge offs as a percentage of Revenue. Um, I think I think, you know, similar to the FED waiting and seeing on on lowering interest rates, we're, you know, waiting and seeing a couple more things here in today's economy to make sure that, um, you know, that we're, we're we're seeing the the fpds and also, long-term charge off rates, um, that that we need to, to work within the confines of our, you know, of our structure. So, um, but yeah, it's, it's it's, it's still, we're still running, you know, relatively I would say tight compared to, you know,
Based on credit risk and so that's.
That's been starting to that was rolled out starting last year and is now starting to take shape in the portfolio.
But we feel we feel like it's.
Stable levels to slightly increasing.
Got it really helpful. Thanks for taking my all my questions.
Yeah.
Thank you. Our next question will come from Mike Grondahl with Northland Securities. Your line is open.
Years passed back in 2018, 1 9 9.
Hey, guys. Thanks, another very nice quarter.
Pam maybe the first one for you.
You guys had mentioned like.
Roughly 10% higher average loan size maybe $100.
Year over year.
Do you expect the average loan size to keep creeping up.
Have you kind of fully absorbed that increase or how should we think about that the next couple of quarters.
I would say incrementally it will creep up a bit.
Really helpful and then just shifting to expenses a bit obviously. Um, you know, the quarter really highlighted the, uh, operational leverage in the model. Um, but you know, you're seeing kind of accelerating, um, origination growth. Um, that has far outpaced, uh, you know, at least marketing expense growth. Uh, you know, to me that's signals are relatively healthy Market. But, you know, how, how you're thinking about the market overall, how you're thinking about marketing expenses, um, G given kind of competitive factors?
We again really haven't seen I would say the full.
Our rollout of these larger loans yet.
At the level that we could be.
Making them, so I think youll see an incremental increase.
Okay, not huge but again.
Got it got it.
Nothing has changed materially in terms of your average loan size, but it's creeping up a little bit and I think Todd said, Hey, just what kind of adjusting for inflation I think is what I heard which makes sense.
Yeah. I mean, if you look at, um, 2024 and 2023, we averaged right around $200, um, MCPS, and that has increased. And, and I kind of talked about it in the first quarter that there were some marketing initiatives that we were going to be um, unlocking this year in direct response partnerships, um, and and some investment, um, in some of our.
Secondly on credit quality.
Last week, we kind of had a reset from the government.
In the jobs data June July.
Did you guys see that at all like did that caused you guys to rethink a little bit about leaning into growth I'm, just curious kind of kind of how you feel about the macro right now.
Organic, uh, search methods as well. So um, you know, we've started to roll that out our our costs for the, for the quarter was 220. So we're definitely making those Investments. But we're being, you know, we're being smart, uh, smart about it. But those, uh, we think that there's continued investment for Q3 and q34 that we'll see and MCTS. Um, but the good news is, um, you know, so far we've we've been happy with the results and, you know, continuing to learn and, uh, find new new methods and channels that, that we work that work for us on a scaleable way.
Yes, I mean listen.
The the job numbers I get revised.
Months later, and then theyre not even what they if.
Got it helpful. And then, uh, yeah, just 1 last 1 for me, if you don't mind. Just just, uh, I want to get your, your sense for or your expectations for for yields given some of the Dynamics, in the portfolio. Obviously credit's, been good. Um, kind of a shift towards, you know, larger loans, obviously. So that's probably graduating consumers in the, in the higher.
If they get worse and it's something we watch at some macro indicators that we'll watch unemployment.
We watch inflation those are the two big ones for us.
It's not something.
We're going to like.
Uh or larger loan balances but and then at the same time you're seeing pretty good year-over-year, yield expansion but just kind of unpack that and give us a sense for where you where you see yields trending for the portfolio over time.
Dynamically change of model because of some macro indicators that may not even be fully accurate, but it is definitely something we're watching here going into the growth months of the year I think you have to always be careful and watching.
What's going on in the economy.
Yeah.
If things are changing pretty pretty quickly in today's environment. So you can't read and react to everything but it's definitely something that will inform us and then also we have we have very very good early data.
Yeah, we do. We think it's, it's going to be stable, um, you know, incrementally increasing to stable? Um, I think, you know, we're we're start, we're, you know, 1 of the things. Um, we uh, implemented last year was, um, more of a risk risk based pricing approach, um, for different segments. Um, they, you know, based on credit risk and so, um, you know, that's been starting to that was rolled out starting last year and is, is now starting to, you know, take shape in the portfolio.
Um, but we we feel, we feel like it's, you know, at the at a stable level to slightly increasing.
I kind of see cracks or see problems kind of well before any economists or any one due to the repayment rates kind of in the default frequencies we see.
Got it really helpful. Thanks for taking my all my questions.
Thank you. Our next question will come from Mike grandahl with Northland, Securities. Your line is open.
So we can read and react as needed.
Got it and does that data still look really good.
Yes.
Hey guys, thanks. Um, another very nice quarter. Um, Pam, maybe the first 1 for you. Um, you guys had mentioned like,
So far I mean like.
This is coming off of a tax refund season.
Roughly 10%, higher average loan size. Maybe a hundred dollars.
Youre going to start to see higher losses for the second half, it's something that we model in our prepared for but it's something we're always closely watching especially on new new loan originations is something you have to be careful with.
Up. Um, have you kind of fully absorbed that increase or how should we think about that the next couple quarters?
Because because of the environment changes things can change as well.
I would say incrementally it will creep up.
Perfect and then did you guys call out what the collection.
Amount was in <unk> I know.
Two years ago give or take a little bit you revamped collections started being more active there and I know you've had a lot of success.
A bit. Um uh you know we again, really haven't seen, I say the full um uh Out roll out of these larger loans yet, you know, at the at the level that we could be um, you know, making them. So I think you'll see an incremental increase,
okay, not you but only
Got it, got it.
Collections in <unk>.
Okay.
Just to understand your question are you talking about recoveries like post <unk> charge offs.
Yes.
Um, nothing's changed materially in terms of your average loan size, but it's creeping up a little bit. And I think Todd said, hey, I just what kind of adjusting it for inflation? I think is what I heard, which makes sense. Um
I've got that handy Mike.
You know, secondly, on credit quality.
Last year Q2, our recoveries were $8 million 400000, and this year there are $10 million 692.
Um, last week we kind of had a reset from the government.
So.
in the jobs data, you know, June July,
Again major increase.
um,
Got it great.
And then just lastly.
Opex was pretty much flat year over year, I think it was roughly 45 million Bucks.
How do we think about the growth there.
did you guys see that at all? Like did that caused you guys to rethink a little bit about leaning in to growth? I I I'm just curious kind of kind of how you feel about the macro right now.
Going forward should it track revenues should it be.
Half of revenue growth and any any how do you guys think about it.
Yes, I don't think if we think about it necessarily as like a formula per se I mean, we're going to invest when we see the high.
There is a need for there is a need for it and I think I mentioned for the first time, our Lola system.
Lending application Lola.
We think that's a great investment and something that is going to propel us into the future allows us to seamlessly integrating with AI tools that also better integrates all our major systems and it is really going to.
Yeah, I mean, listen the the, the job numbers, you know, are get revised every, you know, months later, and then, and they're not even what they, you know. So it if they get worse and it's something we watch, it's a macro indicator that we're watching. Um, we watch inflation. Those are the 2 big ones for us that we you know kind of it's it's not something. Um, we're going to like, you know, the dynamically change a model because of some macro indicator that may not even be, you know, fully accurate, but it is definitely something. You know, we're watching here going into the growth months of the year. Um I think you have to always be, you know, careful and watching. Um you know what, what's going on in the economy. Um,
Set us up really nicely here once we migrate for the next.
10, five to 10 years.
If not beyond so.
I think I think as far as like the corporate and.
In our servicing we think that with the team in place. We can we can definitely continue to scale without having to add maybe some incremental costs, but without having to add major cost but.
Our response to.
To scaling and continuing to grow is to really really focus on delivering value to our customers.
You know, it, it, it, it, it things are changing, pretty pretty quickly in today's environment. So you can't read and react to everything, but it's definitely something that will inform us. And then also, you know, we have, we have very, very good early data, um, to kind of see cracks or see problems kind of well before any, uh, economists or anyone, um, due to the, you know, repayment rates, kind of and, and the default frequencies we see. Um, so we can read and react as needed.
Got it. And hey, does that data still look really good?
And really getting our all the technical debt and all the.
The software that had been built in the past really cleaned up.
It gives us a clean footprint going into this new world, where we know that there's these cool AI tools that can benefit not only us operationally, but also our customer experience.
Got it.
Sorry, I'll squeeze one more in just with the robust free cash flow.
Yeah. I mean I mean so so far. I mean like you know, this is coming off of a tax refund season. Um, you know, you're going to start to see higher losses for the second half. Um, it's something that, you know, we model and and are prepared for, but it's something we're always, you know, closely watching especially on new new loan. Originations is something you have to be careful with. Um, because because of uh, the environment changes things can, you know, change as well.
Any updated thoughts on capital allocation capital allocation I saw the dividend was was what was incremental.
Perfect. And then did you guys call out what the collection?
How are you thinking about that.
Yeah.
We're continuing to explore opportunities and investment opportunities.
Our goal Mike is to be a multi product platform for the alternative credit space to be the leader in that.
Amount was in 2q. I I I know, you know uh 2 years ago, give or take a little bit. You you revamped collections started being more active there. And I know you've had a lot of success. How was collections? In 2q.
And we're seeing some interesting stuff out there nothing to report but.
Just a just to understand your question. Like are you talking about recoveries like post post charged off.
Yes.
We're really happy with the <unk> investment, that's continuing to perform really well in the SMB space where.
We're continuing to look at adjacent spaces and point of sale.
Continuing to look at.
I've got that handy, Mike. Um, uh, last year Q2, our recoveries were $8,400,000 and this year they're $10,692,000. So, you know, again, major increase.
The earned wage access space is obviously, a very very hot space. The valuations are very.
Got it. Great. Um, and then just lastly.
Very full there, but they're getting they're getting a lot of credit it seems like consumers really like the product right a lot of the <unk>.
Opex was pretty much flat year-over-year. I think it was roughly 45 million bucks.
Product market fit there for consumers so.
We are definitely active.
How do we think about the growth there?
Looking where it can make sense, it's going to be something that.
We make sure it really fits within our brand promise on our mission, we don't want to do anything just to just to say Hey, we did it we did an acquisition it really has to fit our our footprint and our vision for being a multi product platform, but we're definitely looking at that.
Going forward. Should it track revenues? Should it be?
Half of Revenue growth. Any any how do you guys think about it?
<unk>.
<unk>.
Cool, thanks, I'd like to add that I would like to add that we would be considering stock repurchases. If we feel like there is a.
A mismatch between the value of.
The enterprise and the stock price.
Yes.
I would go ahead and say, we do think it is disconnected, but yeah.
We think it has been.
Various connected that is another menu option for us as well to protect our share price. When we think it's not valued correctly as well so.
Perfect perfect. Thanks, guys.
Thank you our next our last question today will come from Dave storms with Stonegate. Your line is now open.
Hey, good morning, and thank you for taking my questions.
Just wanted to circle back to the low low initiative.
How should we be thinking about that rollout over the next six months I guess.
What does success look like for that is it measured in costs are on our approval rates. The number of clicks to originate alone just anymore, there would be great.
Yes, I mean, I think successes, we just continue to achieve the results we're getting right now with our current system.
Lie here, once we migrate for the next uh, 10 5, 10 years. Um, it it's not Beyond so, um, you know, I think, I think as far as like the corporate, um, and our servicing, we think that, you know, with the team in place, um, we can, we can definitely continue to scale without having to add, you know, maybe some incremental cost but without having to add major costs. But, uh, you know, our response to, um, to scaling and continuing to grow is to really, really focus on delivering value to our customers and, and really getting our our, you know, all the technical debt and all the, um, the the software that had been built in the past really cleaned up, uh, to give us a clean footprint going into this new world. Where, you know, we know that there's, there's these cool AI tools that can, um, benefit, not only us operationally, but also our customer experience.
The real value is the ability to.
As for the future to really unlock the full potential of all the new technologies.
AI and plug them in without.
Breaking the system and being able to seamlessly integrate them. It also.
Got it and hey, I'm sorry. I'll squeeze 1 more in just with the robust, free cash flow. Any updated thoughts on Capital allocate Capital allocation, you know I saw you, the dividend was, what was, what was incremental? Um, how how are you thinking about that?
It really improves our data analysis.
And connect better into major systems, but it would be to continue to achieve great results, we're getting today and even build upon them incrementally better.
But also it really just gives us that optionality to be able to deploy new tools in all facets of the business marketing credit operations.
Yeah, um, we're continuing to explore, you know, opportunities and investment opportunities. Um, and, and, you know, our goal. Mike is to be a multi-product platform for for the alternative credit space to be the leader in that. Um, and you know, we're seeing some interesting stuff out there. Uh, nothing to report.
Even even better for compliance and financials as well and data.
So it really really just helps us.
Clean up.
A lot of the tech footprint, we had over the last 10 years that we built and improve on it.
That's perfect. Thank you and then just one more from me your guidance takes into account.
The second half being seasonally softer.
Are you seeing anything in the macro that would throw off the seasonal distribution between <unk> and <unk>.
Can you be a little more specific just to make sure I answered your question correctly.
Yeah of course, so your guidance takes into account the second.
Half being seasonally softer as it normally is.
Should we expect.
<unk> and <unk> to be seasonally in line with our typical seasonal trends are you seeing anything in the macro picture that might.
But, um, you know, we're we're really happy with, um, the biddie investment. That's continuing to perform really well in the SMB space. Um, we're continuing to look at a, at a Jason spaces and, uh, point of sale, um, continuing to look at, um, you know, the, the, the earnings access space is obviously a very, very hot space. The valuations are, you know, very, very full there. But the, you know, they're getting, they're getting a lot of credit. It seems like consumers really like the product, right? A lot of, uh, uh, product Market fit there for consumers, so, you know, we're, we're, we're definitely active, um, looking you know, where, where it could make sense, it's it's going to be something that, um, you know, we make sure it really fits within our brand promise and our mission, we don't want to do anything, um, just to just to say, hey, we did it. We did an acquisition, it really has to fit, um, our, you know, our footprint and our vision for being a multi-product platform. But, uh, we're definitely looking at that, um, you know, closely
Some of that off.
Yes, no I think listen I think as you as you start to grow more.
Theres costs associated that and obviously charge offs build a little bit until you kind of reset for next year. So I mean, I think we're seeing a pretty a pretty standard.
Cool. Hey Mike. I'd like to add that. I'd like to add that, you know, we would be considering stock repurchases. If we feel like there's a, a mismatch between the the the value of the the
The Enterprise and the stock price.
Process there but.
Nothing nothing to call out.
Out of the ordinary.
That's perfect. Thank you for taking my questions and good luck in the third quarter.
Yeah, well I I would I would I would go ahead and say we do think it is disconnected. But yeah, we we think it's been very, very disconnected. That is another menu option for us as well to protect our, you know, our share price. When we we think it's, you know, not valued, uh, correctly as well. So,
Yeah.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
Perfect, perfect. Hey, thanks guys.
Thank you. Our next, our last question today will come from Dave storms with Stonegate, your line is now open.
Hey, good morning, and thank you for taking my questions. Uh, just wanted to Circle back to the Lolo initiative. Um, you know, how should we be thinking about that roll out over the next 6 months? And I guess, uh, what does success look like for that? Is it measured in cost or Auto approval rates the number of clicks to originate a loan? Just any more, there would be great.
Yeah, I mean I think success is we just continue to achieve the results, we're we're getting right now with our current system. Um, the the real value is the ability to to to, for its, for the future to really unlock the the full potential of all the new technologies um in Ai and and plug them in without uh breaking the system and and being able to seamlessly integrate them. It also in um, really improves our our, our data analysis um and and connects better into major systems but it would be to continue to achieve the great results. We're getting today and even build upon them incrementally better.
Um, but also, it really just gives us that optionality to uh, be able to deploy new tools and all facets of the business, uh, marketing credit operations, um, you know, even even better, you know, for compliance and, and financials as well and data. Um, so it really it really just helps us. Um, clean up, um, a lot of the tech footprint, we had over the last, you know, 10 years that we've built and and improve on it.
You're can you can you be a little more specific just to make sure I answer your question correctly?
Yeah, of course. Uh, so your, your guidance takes into account the the second half b and seasonally softer as it normally is. Um, should we expect, uh, 3 q and 4 q to be seasonally in line, you know, with their typical seasonal Trends? Or are you seeing anything in the macro picture? That might, uh,
Throw that off.
Yeah no, I think I mean listen I think as you as you start to grow more, um, you know, there's costs associated and obviously, you know, charge offs, you know, build a little bit, um, until you kind of reset them next year. So, I mean, I think we're we're seeing a, a pretty, a pretty, you know, standard, um, process there. But, uh, you know, nothing nothing to to call out, um, out of the ordinary,
That's perfect. Thank you for taking my questions and good luck in third quarter.
thank you, ladies and gentlemen, this concludes today's event, you may now disconnect