Q3 2025 OppFi Inc Earnings Call

Operator: Please stand by. Your program is about to begin. Good morning and welcome to OppFi Inc.'s third quarter 2025 earnings conference call. All participants are in a listen only mode. As a reminder, this conference call is being recorded. Following management's presentation, a question and answer session will be held for those listening by dial in. You will be prompted to enter the queue after the prepared remarks. I am pleased to introduce your host, Mike Galentine, Head of Investor Relations. You may begin.

Please stand by your program is about to begin.

Good morning and welcome to op 5's third quarter 2025 earnings conference. Call all participants are in a listen-only mode.

As a reminder, this conference call is being recorded following Management's, presentation, a question and answer session will be held

For those listening by dialing, you will be prompted to enter the queue after the prepared remarks.

Mike Gallentine: Thank you, operator. Good morning and welcome to OppFi Inc.'s third quarter 2025 earnings call. Today our Executive Chairman and CEO Todd Schwartz and CFO Pamela Johnson will present our financial results followed by a question and answer session. You can access the earnings presentation on our website at investors.oppfi.com. During this call, OppFi Inc. 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 2 of the earnings presentation and press release for our disclosed disclaimer statements covering forward-looking statements and references to information about non-GAAP financial measures which will be discussed throughout today's call. Reconciliations of those measures to GAAP measures can be found in the appendix to our earnings presentation and press release. With that, I'd like to turn the call over to Todd.

I am pleased to introduce your host, Mike Gallentine, Head of Investor Relations. You may begin.

Thank you, operator. Good morning, and welcome to OppFi's third quarter 2025 earnings call.

Today, our executive chairman and CEO, Todd Schwarz, and CFO Pam Johnson will present our financial results. Followed by a question and answer session.

You can access the earnings presentation on our website at investors. Cam.

During this call, OppFi 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.

The different material from forward-looking statements.

Please refer to slide 2 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 today's call.

Reconciliations of those measures to gaap measures can be found in the appendix to our earnings presentation and press release.

With that. I'd like to turn the call over to Todd.

Todd Schwartz: Thanks Mike and good morning everyone. Thank you for joining us. Today, OppFi achieved another record quarter of revenue, profitability, originations, and ending receivables. In addition, we are happy to report that we have renewed our credit agreement with Castlelake, improving operating leverage, pricing, and capacity. Given our continued outperformance in Q3, we are raising earnings guidance for the third time this year. I will discuss Growth Credit, our loan origination, lending application, LOLA origination system migration, and Bitty, our SMB investment. On the call in the quarter, we achieved a 12.5% growth in net originations and a 13.5% increase in revenue year over year, with almost 50% of originations coming from new customers. Auto-approval rates increased to 79% year over year, and customers continued to be approved at a higher rate than in prior quarters.

Thanks, Mike and good morning everyone. Thank you for joining us today.

OPI achieved another record quarter of revenue, profitability, originations, and ending receivables. In addition, we are happy to report that we have renewed our credit agreement with Castle Lake, improving operating leverage, pricing, and capacity.

Given our continued outperformance in Q3, we are raising earnings guidance for the third time this year.

I will discuss growth credit our loan. Origination lending application Lola. Migration.

And Biddy, our SMB investment, on the call.

In the quarter, we achieved a 12.5% growth in net originations and a 13.5% increase in Revenue year-over-year with almost 50% of originations coming from new customers.

Todd Schwartz: With no human interaction, we continue to see increased scale in our partnerships and direct response programs. We started testing connected TV in Q4 and believe that this could contribute to growth in 2026 and beyond. This strong top-line growth combined with prudent expense management led OppFi to generate a record $41 million of adjusted net income for the quarter, representing 41% year over year growth. Regarding credit, Model 6 continues to perform well and better segment customers across risk segments. Throughout the quarter, we saw higher net charge-offs in new loan vintages. However, by tightening higher risk segments and applying a risk-based pricing approach, we maintained strong unit economics while sustaining growth. The team leveraged AI tools, customer attributes, and repayment data to refit Model 6 into what we believe is the most reliable model to date, Model 6.1.

Auto approval rates, increase to 79% year-over-year, and customers continue to be approved at higher rate than in Prior quarters with no human interaction. We continue to see increased scale in our Partnerships and direct response programs. We started testing connected TV and Q4, and believe that, this could contribute to growth in 2026 and Beyond.

This strong Topline growth combined with prudent expense management. LED off by the generate, a record 41 million of adjusted net income for the quarter representing 41% year-over-year growth.

We maintain strong unit economics while sustaining growth.

Todd Schwartz: This Model 6.1 refit is designed to identify riskier borrower populations better while incrementally improving volume. The model is also designed to enhance risk pricing across segments, accounting for behavioral and CDC seasonal volatility. In conjunction with our lending partners, we plan to roll out Model 6.1 refit in Q4 and fully implement it in Q1 2026. With LOLA origination system, OppFi is building the origination system of the future. This will give us a clean architecture that is designed to take advantage of rapidly developing AI tools in originations, servicing, and corporate operations. The product and tech teams have been working hard and have officially begun the testing phase of our migration. We plan to continue testing LOLA throughout the fourth quarter and migrate in Q1 2026.

The team leverage, AI tools. Customer, attributes and repayment data to refit model. 6 into what we believe is the most reliable model to date model. 6.1

This Model 6.1 refit is designed to identify riskier borrower populations better while incrementally improving volume.

The model is also designed to enhance risk pricing across segments, accounting for behavioral and seasonal volatility.

In conjunction with our lending Partners. We plan to roll out model, 6.1 refit in Q4, and fully implemented in q1 2026.

With Lola Obi is building the origination system of the future. This will give us a clean architecture. That is designed to take advantage of rapidly, developing AI tools and originations servicing and corporate operations.

The product and Tech teams have been working hard and have officially begun the testing phase of our migration.

Todd Schwartz: Early indicators give us confidence that LOLA will help continue to improve funnel metrics, increase automated approvals, enhance efficiency in servicing and recoveries, better integrate major systems, and deliver reduced cycle times and greater throughput for our product, tech, and risk teams. Our investment in Biddy continues to perform well. In the third quarter of 2025, Biddy generated $1.4 million in equity income for OppFi. Biddy is a great partner that we have enjoyed working with and learning from in the SMB space. The company shares OppFi's business principles and corporate values and consistently uses technology to enhance operations and the customer experience. Biddy has identified significant additional growth opportunities and continues to capitalize on the ongoing supply-demand imbalance in the small business revenue-based finance space. Overall, OppFi delivered another strong quarter both financially and operationally, outperforming expectations and allowing us to raise guidance for the third time this year.

We plan to continue testing Lola throughout the fourth quarter and migrate in Q1 2026.

Early indicators, give us confidence that Lolo will help continue to improve funnel. Metrics increased automated approvals and enhance efficiency and servicing and recoveries better integrate, major systems and deliver reduced cycle times and greater throughput for our product Tech and risk teams.

Our investment in Biddy continues to perform well. In the third quarter of 2025, Biddy generated $1.4 million in equity income for OPI.

vidi is a great partner that we have enjoyed working with and learning from in the SMB space.

The company shares OppFi's business principles and corporate values and consistently uses technology to enhance operations and the customer experience.

That he has identified significant additional growth opportunities and continues to capitalize on the ongoing Supply demand imbalance in the small business Revenue based Finance space.

Todd Schwartz: Looking ahead, we anticipate continued double-digit revenue and adjusted net income growth throughout the remainder of 2025 and into 2026. We believe OppFi is well on its way to executing its vision of becoming the leading tech-enabled digital finance platform that partners with banks to offer essential financial products and services to everyday Americans. With that, I'll turn the call over to Pam.

Pamela Johnson: Thanks Todd and good morning everyone. As Todd noted, we achieved another record quarter generating revenues of $155 million, an impressive 14% increase over third quarter 2024. Model 6.1 has been a significant contributor to this growth, empowering OppFi to expand its reach and grow its business effectively. Its enhanced predictive power has enabled us to better manage our loan economics through risk-based pricing and allow our bank partners to underwrite larger loan amounts for creditworthy individuals, helping fuel robust growth in originations and receivables balances. As Todd noted, in the third quarter of 2025 we observed an increase in net charge-offs as a percentage of revenue at 35%, up from 34% in third quarter 2024. It's important to note that we believe this risk is appropriately priced into these loans.

Overall, OPI delivered another strong quarter, both financially and operationally, outperforming expectations and allowing us to raise guidance for the third time. Looking ahead this year, we anticipate continued double-digit revenue and adjusted net income growth throughout the remainder of 2025 and into 2026. We believe OPI is well on its way to executing its vision of becoming the leading tech-enabled digital finance platform that partners with banks to offer essential 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 achieved another record quarter, generating revenues of $155 million, an impressive 14% increase over the third quarter of 2024.

Model 6 has been a significant contributor to this growth, empowering Opsi to expand its reach and grow its business effectively.

It's enhanced predictive power has enabled us to better manage our loan economics through risc-based prices and allow our bank Partners. To underwrite larger loan amounts for credit worthy individuals, helping fuel robust growth and originations and receivables, balances,

as Todd noted in the third quarter of 2025, we observed an increase in net, charge offs as a percentage of Revenue at 35% up from 34% in third quarter 24,

Pamela Johnson: This strategy also contributed to our net revenue growth, reaching a quarterly record of $105 million, a 15% increase over third quarter 2024, though the yield decreased slightly to 133% from 134% in third quarter 2024. Our scale and focus on cost discipline also played a pivotal role in our strong performance. Continued operational improvements contributed to notably lower total expenses before interest expense, which declined significantly to 30% of revenue in the third quarter, a substantial improvement compared to 33% in the same quarter last year. As we noted previously, earlier this year, we proactively paid down our corporate debt and successfully upsized one of our main credit facilities at more attractive interest rates. These strategic moves helped reduce interest expense to 6% of total revenue, down from 8% in the prior year.

It's important to note that we believe this risk is appropriately priced into these loans.

This strategy, also contributed to our net revenue growth. Reaching a quarterly record of 105 million. A 15% increase over a third quarter. 24 though, the yield decreased slightly to 133% from 134% in third quarter 24

Our scale and focus on cost discipline also played a pivotal role in our strong performance.

Continued operational improvements contributed to notably lower total expenses before interest expense, which declined significantly to 30% of Revenue in the third quarter, a substantial Improvement compared to 33% in the same quarter last year.

Pamela Johnson: Additionally, in early October we announced the signing of another $150 million credit facility with lower interest rates than the previous one, positioning us to realize even lower interest expenses as a percentage of revenue in the future. As a direct result of increased revenue and strategic reductions in expenses, adjusted net income surged 41% to a quarterly record of $41 million, marking a significant increase from $29 million last year. Concurrently, adjusted earnings per share grew to $0.46 from $0.33 last year. On a GAAP basis, net income increased by 137% to $76 million, reflecting our higher revenues, lower expenses, and a $32 million non-cash gain related to the change in the fair value of our outstanding warrants. Because our Class A common stock price decreased during the quarter, the estimated value of the warrants issued when we went public decreased, driving this non-cash income.

As we noted previously earlier this year, we proactively paid down our corporate debt and successfully upsize 1 of our main credit facilities at more attractive. Interest rates. These strategic moves helped reduce interest expense to 6% of total revenue down from 8% in the prior year.

Additionally, in early October, we announced the signing of another $150 million credit facility with lower interest rates than the previous one, positioning us to realize even lower interest expenses as a percentage of revenue in the future.

Early record of 41 million marking a significant increase from 29 Million last year. Concurrently adjusted earnings per share. Grew to 46 cents from 33 cents last year.

On a gap basis. Net income increased by 137% to 76 million reflecting our higher revenues, lower expenses, and a 32 million non-cash, gain related to the change in the fair value of our outstanding warrants.

Pamela Johnson: However, as we have consistently stated, this is a non-cash item and does not impact the underlying profitability of the company. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $75 million in cash, cash equivalents, and restricted cash alongside $321 million in total debt and $277 million in total stockholders' equity. Our total funding capacity stood at a strong $600 million at quarter's end, including $204 million in unused debt capacity. During the third quarter, OppFi Inc. strategically repurchased 710,000 shares of Class A common stock for $7.4 million. Additionally, since the third quarter, OppFi Inc. has repurchased 317,000 shares of Class A common stock for $3.2 million, as management continues to believe the share price does not reflect our underlying cash generation or our return on capital opportunity.

Because our Class A common stock price decreased during the quarter, the estimated value of the warrants issued when we went public decreased, driving this non-cash income. However, as we have consistently stated, this is a non-cash item and does not impact the underlying profitability of the company.

Looking at the balance sheet, we continue to maintain a robust financial position. Ending the quarter with $75 million in cash, cash equivalents, and restricted cash, alongside $321 million in total debt and $277 million in total stockholders’ equity, our total funding capacity stood at a strong $600 million at quarter's end.

Including 204 million in unused. Debt capacity.

During the third quarter, we strategically repurchased 710,000 shares of Class A common stock for $7.4 million.

Pamela Johnson: Given our strong operating performance driven by growth in net originations, revenues, and adjusted net income, we are pleased to provide the following updated full-year guidance. We are once again increasing our guidance for total revenues. We are raising the bottom of the range to $590 million while leaving the top of the range at $605 million, up from the prior guidance of $578 million to $605 million. Adjusted net income is expected to be $137 million to $142 million, up from our prior guidance of $125 million to $130 million. Based on an anticipated diluted weighted average share count of 89 million shares, adjusted earnings per share are expected to be $1.54 to $1.50, up from our prior guidance of $1.39 to $1.44 per share. With that, I would now like to turn the call over to the operator for Q&A. Operator.

Additionally, since the third quarter OPI has repurchased 317,000 shares of class a common stock for 3.2 million as management continues to believe the share price does not reflect our underlying cash generation or our return on Capital opportunity.

Given our strong operating performance driven by growth in net originations revenues and adjusted net income. We are pleased to provide the following updated full year guidance.

We are once again, increasing our guidance for total revenues. We are raising the bottom of the range to 590 million. While leaving the top of the range at 605 million up from the prior guidance of 578 million to 605 million.

Adjusted net income is expected to be between $137 million and $142 million, up from our prior guidance of $125 million to $130 million.

Based on an anticipated diluted weighted, average share count of 89 million shares adjusted earnings per share are expected to be 1.54 cents to 1.60 cents up from our prior guidance of $1.39 to $144 per share.

Operator: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, to ask a question, that is star one. We'll take our first question from David Scharf with Citizens Capital Markets. Your line is open.

With that, I would now like to turn the call over to the operator for Q&A operator.

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Once again to ask a question, that is star 1.

We'll take our first question from David sharf with Citizens Capital markets, your line is open.

[Analyst 1]: Good morning and thanks for taking my questions. Maybe I'll start off with credit since it's been so topical this reporting season. Obviously you spoke to a strong performance. Just curious, are there any early indicators or metrics such as versus defaults or the like? I mean, anything that gives you a sense that households that you're catering to are becoming a little more stressed than three months ago or pretty much the loss rates you reported speak for themselves?

No. Yeah, good morning and, uh, thanks for taking my questions. Um, uh, maybe I'll uh, start off with, with credits since it's been so topical

Is this reporting season. Um, just curious. Obviously you you, you spoke to um,

A strong performance. Just just curious are, are there any early indicators or metrics such as first name? And the defaults or the like? I mean, anything that gives you a a a sense that households that you're catering to are becoming a little more stressed than 3 months ago or pretty much the loss ratio reported to speak for themselves.

Todd Schwartz: Yeah, David, good question. Thank you. You know, we constantly are surveying, looking at different data points not only from the data that we receive from customers' bank accounts and the macroeconomic data. I mean, the backdrop from a macroeconomic standpoint still remains largely unchanged. We are hearing about different products like auto loan delinquencies and all this, but you know, we really focus on how it affects our customers. In our bank data, we're not seeing anything that would cause alarm. However, we did see some higher early payment stats in the quarter that caused us to tighten slightly. I will remind you though that back in 2022, without risk-based pricing, not being able to price risk properly in these environments is something that we were not able to do.

Yeah, um hey David, good question, thank you. Um you know, we we uh we constantly are surveying uh look looking at different data points. Not only from the the data that we receive from customers bank accounts. And the macroeconomic data, I mean the backdrop from a macroeconomic standpoint Still Still Remains largely you know unchanged we are hearing

Todd Schwartz: Also, our recovery lines, we feel really good about keeping unit economics strong with pricing and strong recoveries in this environment and feel like we can operate in any environment with Model 6.1. You know, and it's kind of a dynamic modeling environment. It's not set it, forget it anymore. We're really of the mindset that we're going to meet the customer where they are and we're going to price it properly and have a product for them. Yeah, we may incur some higher charge-offs coming through in the fourth. Let's not lose sight of, as a percentage of revenue year over year, we expect our charge-offs as a percentage of revenue to go down year over year. That's just kind of how the environment is now. You can't set it, forget it.

Todd Schwartz: You have to be constantly watching it and constantly updating your pricing per segments and your pricing for risk.

It's kind of a dynamic modeling environment. It's not, you know, it's not set it, forget it anymore. We're really of the mind that mindset that, you know, we're just, we're going to meet the customer where they are and we're going to price it properly and and, uh, you know, have a product for them. So, yeah, we may, we may incur some, some higher charge offs, you know, coming coming through, um, in the fourth. But let's not lose sight of you know, as a percentage of Revenue year-over-year. We expect our uh our charge offs as a percentage of Revenue to to go down year-over-year. So um you know that's just kind of how the environment is now. You got to, you can't set it, forget it. You have to be constantly watching it and constantly updating your pricing per segments and your pricing for risk.

[Analyst 1]: Got it. No, that's helpful. You kind of delved into maybe my follow-up, which was maybe to get a little better context for risk-based pricing. That Model 6.1 is going to enable more of, you know, I guess at a high level. Should we think about more risk-based pricing as you're currently leaving yield on the table, or is it you're leaving volume on the table, that there are maybe consumers that are applying, not accepting the loan? You know, maybe you can give us a little context.

Got it. No that that that's helpful you you um you kind of delved into maybe my follow-up with which was maybe to get a little better context for risk based pricing. Um the the model 6 is going to enable more of that, you know.

I guess at a high level should should we think about?

more risk-based pricing as

um, your currently leaving yield on the table or is it? Um, you're leaving value on the table that they're Maybe.

Consumers that are applying not accepting the loan, you know?

Todd Schwartz: It's both. I think in times of volatility and economic environments it allows us to properly price risk. That gives us that lever. It also allows us to target with potentially lower prices for our lowest risk customers. It allows us to better target them. We use it for both. We use it for credit and losses. We also are using it for targeting and growth. It's a switch that you can toggle depending on the environment. That's kind of why I spoke a little bit before about the dynamic nature of it. It's something that we're reading in real time on a weekly basis and kind of assessing, especially in an environment like this where there's a lot of news and a lot going on. The Fed's meeting soon, we're waiting and seeing on that from a unit economic standpoint if we do get some relief on interest rate.

Todd Schwartz: Right now we're just in an environment like that where we're just going to continue to watch credit. We still think we can grow in this environment with strong unit economics.

Maybe it's, it's both. I think, I think in times of volatility and economic environments, it allows us to properly price risk, so that gives us that lever, but it also allows us to Target, um, with with potentially lower prices for our lowest, uh, you know, lowest risk customers. Um, it allows us to better Target them, um, and so we, we, we use it for both, we use it for for credit and losses. We also are using it for targeting and growth and it's you, it's, it's a switch that you can toggle depending on the environment. Um, and that's, and that's kind of why I spoke a little bit before about the dynamic nature of it. It's something that we're reading, um, you know, in real time on a weekly basis and, and, and kind of assessing, especially in a, in an environment like this, where, you know, there's a lot of news and a lot a lot going on. Um, you know, we do, you know the fed's meeting soon. Um, you know, we're, we're we're waiting and seeing on that, you know, from a unit, economic standpoint, if we, if we do get some relief on on interest rate, uh, but, uh,

[Analyst 1]: Got it, got it. Great. Hey, apologize. Maybe just one quick follow-up on credit because obviously you had mentioned auto. It's been sort of dominating the headlines. A lot of company-specific events out there. Auto subprime delinquencies have gone up. I'm curious, since you're capturing bank data, do you monitor what % of household budgets are being attributed to auto payments since affordability is still sort of plaguing the auto sector for both new and used?

You know, right now, we're, we're, we're just in in an environment like that, where we're just going to continue to, to watch credit, but we still think we can grow in this environment, um, with strong unit economics.

Got it. Got it great. Hey apologize. Maybe maybe just 1 1 quick follow up on on on credit because, you know, obviously you you had mentioned Auto. It's been sort of dominating the headlines. A lot of company specific events out there, but but but Auto subprime delinquencies have gone up. I'm curious since you're capturing Bank data.

Are, are you, do you monitor what? Percentage of household? Budgets are being attributed to auto payments, since affordability is still sort of playing?

You know, the, the auto sector for both new and used.

Todd Schwartz: Yeah, I mean, we're very, ability to repay is very prevalent in our modeling. Not specifically necessarily, you know, auto, but it is factored into the equation of ability to repay. Customers have to have the discretionary income to make the monthly payments, and it's something that is top of mind in our model. We have not seen in our bank data significant reductions in income or balances or anything that would cause alarm here. That's why we tightened where it made a lot of sense and also use the model to better target lower risk customers in this environment. We're watching it just like everybody else right now. I'm not going to not say that credit isn't worse.

Todd Schwartz: It is worse than it was last year in the new segments, especially the new, but something that we can operate in now with our current pricing structure and how we operate.

Yeah, I mean something, you know, we're we're very ability to repay is, is very prevalent in our modeling not specifically necessarily, uh, you know, Auto. Uh, but it is it is factored into the equation of ability to repay. Um, you know, the customers have to have the discretionary income to make the monthly payments. And so it's something that we as top of Mind in our model, we have not seen um, in our in our bank data. Uh, you know, significant reductions in income or balances or anything that would uh, cause alarm here. Um and and so that's why we can, you know, we tightened where it made a lot of sense. And, and, and then also, you know, use the model to better Target lower risk customers in this environment. Uh, but you know, we're, we're, we're watching it just like everybody else. Right now, I'm, I'm not going to, uh, not say that, you know, credit isn't worse. It is, it is worse than it was last year in the new segments.

[Analyst 1]: Great. Thank you very much, Todd. Yep.

especially the new but, uh, you know, something that we can operate in now, um, with with our, you know, our current pricing structure and, uh, and, and how we operate

Great, thank you very much that.

Operator: Our next question comes from Mike Groendal with Northland Securities. Your line is open.

Yep.

[Analyst 3]: Hey, thanks, guys. Congratulations on the origination side. Could you talk a little bit about direct mail, and then some of your thoughts on connected TV that you mentioned?

Our next question comes from my grown doll with Northland Securities. Your line is open.

Hey, thanks guys and congratulations.

on the origination side, could you talk a little bit about direct mail and then some of your thoughts on connected TV that you mentioned

Todd Schwartz: Yeah, thanks, Mike. How you doing? I think direct mail is a highly scalable lever for us that we're just starting. We're just in the early innings of it. It was 4.2% of our originations that can easily be in the double digits if we wanted. We're going slow and being pretty methodical and strategic. We're making sure we have the creative right, excuse me, and making sure that the modeling is right. It's something that, you know, it's a powerful funnel, top of funnel. If you can get a lot of apps that's consistent, it's something that we're prioritizing and focusing on.

Yeah. Um, thanks, Mike. How you doing? Um,

Um, that can easily be in the double digits. If, if we wanted, we're going slow and being pretty methodical and strategic we're making sure we have the creative right? Excuse me, and making sure that the modeling is, right? Um, it's something that, you know, it's, it's, it's, it's a, it's a powerful, uh, funnel, uh, top of funnel. Um, you know, if you can, if you can get a lot of apps that's consistent. It's something that, you know, we're prioritizing and focusing on.

[Analyst 3]: Got it.

Todd Schwartz: Connected TV, I think the connected TV, yeah. We're in the really early innings of that. It's something that we think is controllable, scalable, and it's also reaching a lot of our customers in a targeted fashion. We're excited about it. It also allows us to get our brand out there and our creative. Our marketing team has been working hard on that, and we're going to be testing that throughout the quarter. We'll have more to report on that in our Q4 earnings. We think it's promising and it's something that can help us scale and continue to grow next year.

[Analyst 3]: Got it. You've been really disciplined on OpEx. I would call OpEx basically flattish to up a tad. How much can you grow originations and the book without having a step function lift in OpEx? You've kind of done this now for two plus years, if not longer. You bolted on more revenue and more loans on your existing platform and been really efficient, and the throughput's been great. How long can you continue to do that?

Got it and then connect the connected TV. Yeah. So we're the early really early in things of that. Um, but but, you know, it's something that we think it's controllable scalable. And it's also reaching a lot of our customers in a targeted fashion. So we're excited about it. Um, it also allows us to get our brand out there and are creative. Uh, so, you know, our marketing team has been working hard on that and, you know, we're going to, um, be testing that throughout the quarter. Uh, but, you know, we'll, we'll have more to report on that in our Q4 earnings. But, uh, you know, we, we think it's promising and it's something that can uh, help us scale and continue to grow, uh, next year.

Got it.

and then,

um,

You've been really disciplined on Opex.

You know, I I would call Opex, sort of, you know, basically flattish to up.

How much can you grow originations? And the book?

Todd Schwartz: Yeah, good question. We feel really confident in our ability to scale. This is where things get highly incremental at this scale as far as originations and growth go. We don't anticipate, I mean LOLA is that, that's why I keep talking kind of about LOLA on these calls and introduced it last quarter. We've made significant R&D and software development initiatives in the company over the last year to allow us to continue to scale and then also allow us to essentially, as I said, build the lending origination system of the future. It really allows us to install and integrate some of these new age AI tools that are coming. Some of them are more developed than others and some of them are more ready to use today versus in a year from now.

Without having a step function, lift in Opex. Like, you know, you've kind of done this now for 2 plus years, if not longer, you know, bolted on more revenue and and and more loans on your existing platform. And and then really efficient the throughputs been great. But how long can you continue to do that?

Yeah, good. Good question. Um, you know we feel really confident in our ability to scale. I mean, this is this is where where, you know things get um, you know, highly incremental um at this scale. Um, as far as you know, originations and growth go um we don't anticipate, I mean Lola is that that's that's why I keep talking kind of about Lola, um, on these calls and introduced it last quarter. Um, you know, we've made significant, uh, you know, R&D and and software, uh, development, um, initiatives in, in the company over the last year that to allow us to continue to scale. And then also allow us to, you know, essentially, as I said building The Lending origination system of the future but it really allows us to uh, install and integrate. Uh, so

Todd Schwartz: It was all about having a clean architecture on your tech stack and not have a lot of technical debt built up so that we can take advantage of some of these tools. It also better integrates our corporate system so we really don't anticipate having to add much fixed overhead. It's more going to just be variable cost of the growth and think that this can continue and definitely into next year.

[Analyst 3]: Got it. One last question. I think in your prepared remarks you said double-digit revenue and adjusted net income growth for the rest of 2025. Obviously implied by your guidance, but I think you also said and into 2026. Is there anything you want to say about 2026? Are you sort of striving for double-digit top line? Anything there would be helpful.

Some of these new age AI tools that are coming. Um, you know some of them are more developed than others and some of them are more ready to use today versus, you know, in a year from now. Uh, but it was all about having a clean architecture on your Tech stack and not have a lot of technical debt built up so that we, we can take advantage of of, some of these tools and also better, you know, integrates our corporate systems. So we, we really don't anticipate, um, having to add much fixed overhead. Um, you know, it's more going to just be variable cost to the growth. Um, and, you know, think that, you know, this can continue, um, and, and, and definitely into next year.

got it and and then

You said, uh, double-digit revenue and adjusted net income growth for the rest of.

2025, you know, obviously implied by your guidance. But I think you also said

And into 2026. Is there anything you want to say about 2026 are, are you sort of

You know.

Todd Schwartz: Yeah, I mean, listen, it's something that, you know, it is credit dependent. I'll caveat that. I will say that we have the levers. I'm pretty confident, you know, within our walls we have the levers to grow in double digits and feel confident we can do that. The only thing that would prevent us from doing that is we're not going to chase growth if credit is not there. That's just not something we're going to do. You know us now, we're very disciplined so we won't chase growth to take on higher losses. We do have the levers, if that's what you're asking. For next year for double-digit growth. Absolutely.

Striving for double-digit topline. Um, anything there would be helpful.

[Analyst 3]: Got it. Hey, thanks a lot.

Yeah, I mean I mean, listen, it's something that, you know, it, it is credit dependent, I'll caveat that my but, you know, I will say that we have the levers and I'm pretty confident, um, you know, within our walls, we have the levers to grow in double digits. Um, and feel confident, we can do that. The only thing, you know, that would prevent us from doing that is we're not going to chase growth if, if credit is not there, it's just not something we're going to do, you know us now? Uh, we're we're very disciplined. Uh, so we won't Chase growth, uh, to take on higher losses but we we, we, we do have the levers, if that's what you're asking for. Next year, for double digit growth. Absolutely

Got it. Hey, thanks a lot.

Todd Schwartz: Thank you.

Operator: As a reminder, if you would like to ask a question, that is Star one to join the queue. You may remove yourself by pressing Star two. We'll take our next question from Kyle Joseph with Stevens. Your line is open.

Thank you as a reminder. If you would like to ask a question, that is star 1 to join the queue. You may remove Yourself by pressing star 2,

[Analyst 4]: Hey, good morning. Thanks so much for taking my questions. Given everything going on with the portfolio in terms of new customer mix and the risk-based pricing, I just wanted to get your thoughts in terms of yield trends we should expect going forward.

We'll take our next question from Kyle. Joseph with Stevens. Your line is open.

Terms of new customer, mix the risk based pricing. Uh, just wanted to get your kind of your thoughts. In terms of uh yield Trends, we should expect going forward.

Todd Schwartz: Yeah, we feel good that our yield's stable. It came down a little bit in Q3. It's due to, you know, that is typical this time of year. Q3 you're going to see some of your lower yields as you start to see some losses kind of come into the past dues, the drop out of accrual. We do hope that we'll see a nice rebound in Q4 and it's also been stable throughout the year. We anticipate stability and elevated yield coming through the book. That is part of the risk based pricing. We're better pricing risk across the segments. We feel good about where we are with that.

[Analyst 4]: Got it. Helpful. Moving to the balance sheet and capital, obviously you guys have done a lot of work on the balance sheet year to date and it's in a really good place. You guys are still generating strong cash flows despite portfolio growth. Just give us a sense for your capital allocation priorities now that you have the balance sheet in really good position.

Yeah, um, you know, you know, we feel we we feel good. Uh, that are that are yield stable. It, you know, it it came down a little bit in, uh, in Q3 that's it's due to, you know, that that is typical this time of year, uh, Q3 you're going to see, you know, some of your lower yields as, as you start to see some losses kind of come into the past dues you drop out of a cruel. Uh, we do. We do, you know, hope hope that the we'll see a nice Rebound in Q4. And, and it's also been stable throughout the year, but, uh, you know, we anticipate stability and it elevated yield, um, coming through the book. Um, and that's and that is part of the risk based pricing, right? We're better pricing risks, um, you know, cross the segments. Uh, so we we feel good about where, you know, where we are with that,

Got it helpful and then, uh, moving to the, the balance sheet and capital, you know, obviously you guys have have done a lot of, a lot of work on the balance sheet, uh, year to date. Uh, and it's in a really good place and then you guys are still generating strong cash flows despite portfolio growth but just you know give us a sense for kind of your your Capital allocate all allocation priorities. Uh, now that you have the balance sheet and really good position.

Todd Schwartz: Pam talked about it. We've been buying back stock in open windows and with predetermined programs. We'll continue to defend our share price when we think it's undervalued. It's something that we feel like we're not trading. Hopefully the third time is the charm here, Kyle, with us raising guidance again. That's top of mind right now, obviously defending our share price and making sure that we're properly valued in the marketplace. We're continually actively looking at M&A opportunity, looking at using it for growth. The menu of options is open. We are actively looking at those different scenarios and best and highest use of our cash.

[Analyst 4]: Got it. Just one last one for me. Apologies if I missed it. Just in terms of the marketing spend, we saw a return to growth this year. I think you mentioned that was, you know, maybe TV in direct mail. If you could walk us through what you're seeing in terms of customer acquisition costs and how you expect marketing expenses to go going forward and how that versus portfolio growth. Obviously they go hand in hand.

Yeah, uh well, Pam, I think Pam, you know, talked about it, we've been we've been buying back stock, uh, and open windows. And and with uh, you know, predetermined programs, we'll continue to, you know, defend our share price, when we think it's, you know, undervalued, um, it's something that you know, we, we were, uh, we feel like we're, we're not trading. Uh, hopefully the third time is the charm here, Kyle. You know, with with us, you know, raising guidance again. Um, but you know listen, it's it's uh, that's top of mind right now is obviously defending our share price and making sure that we're properly valued in the marketplace. Well, you know, we're continually actively, you know, looking at m&a opportunities looking at, uh, we're using, you know, it from growth, um, you know, the menu of options is open. Um, so we are, you know, we're, we're, we're, we're actively, uh, looking looking at those uh, different. You know, scenarios and and best and highest use of our cash.

Got it. And, uh, just 1 last 1 for me. Uh, apologies. If I, if I missed it, but just in terms of the marketing, uh, spend, uh, we, we saw return to growth this year. I think you you mentioned, that was, you know, maybe TV in direct mail. Um, but yeah, if you could walk us through, you know, what you're seeing in terms of customer acquisition costs and and how you, uh, expect marketing expenses to, to go going forward and how that versus, uh, portfolio growth, obviously they go hand in hand.

Todd Schwartz: Yeah, I think I stated back in Q2, you should expect the acquisition cost to kind of creep up here as we go into growth mode here in the second half. That's consistent with what's happened. We're probably up $20 to $30 per. We feel very comfortable there and think there's even probably some more room, especially for lower risk segment customers, to be able to pay those CPFs and feel really strong about the unit economics and the incremental growth it provides.

[Analyst 4]: Great. Thanks so much for taking all my questions.

Yeah. Um, you know, I think, I think I've stated back in Q2, you know, you should expect the, the acquisition cost to kind of creep up here. As we, as we go into growth mode here in the second half. And that's, you know, it's consistent with, you know, what's happened. Um, you know, we're we're probably up 20 to 30 dollars per. We feel very comfortable there. Um, and and think there's even probably some more room especially for lower risk segment. Customers to to be able to pay uh, those CPS and and feel really strong about the unit economics. And the incremental growth, it provides

Todd Schwartz: Thanks, Kyle.

Great. Thanks so much for taking all my questions.

Thanks Kyle.

Operator: Our last question comes from Robert Lynch with Stonegate Capital Partners. Your line is open.

[Analyst 2]: Hey, good morning Pam and Todd, really appreciate you taking the questions today. Just have a few here. With net charge-offs as a percentage of revenue, saw a slight increase in Q3. Is this typical seasonality or mix? Could you get this back up to the 45% in Q4 that we saw last year? Seasonality and early indications for the holiday season coming up?

Our last question comes from Robert Lynch with Stonegate Capital Partners, your line is open.

Hey, good morning, Pam and Todd. I really appreciate you taking the questions today. I just have a few here. With net charge-off as a percentage of revenue, I saw a slight increase in Q3. Is this typical seasonality or mix? And could you get this back up to the 45% in Q4 that we saw last year? Any thoughts on seasonality and early indications for the holiday season coming up?

Todd Schwartz: Yeah, I mean there is seasonality to the business and you're going to see your lowest charge-offs as a % of revenue kind of in Q2 and Q3, and then it elevates year over year. It is slightly elevated. We do anticipate, though, for annualized, a reduction as a % of revenue overall. We didn't tighten, we were very conservative in 2024, even tightening probably a little too conservative maybe in Q2, which caused really strong revenue as a % of charge-off numbers. We don't need to be, we're at a level now where we feel really comfortable that the unit economics are strong. It's going to flatten out here, and incrementally every quarter could be a little bit less, could be a little bit more. We feel really good at these numbers where we're at and think that we can generate really strong returns within this band.

It's going to, it's going to.

Uh, flatten out here. And you know, incrementally every quarter could be a little bit less, could be a little bit more, but we feel really good at these numbers where we're at. And think that, you know, we can generate really strong returns within this band.

[Analyst 2]: Okay, great. Really appreciate the color there. I got maybe two more here, but you highlighted stronger recoveries from operational changes. Is the second half recovery run rate now above plan, and how confident are you that this level is sustainable into 2026?

Okay, great. I really appreciate the color there. Um, I got maybe two more here, but, you know, you highlighted stronger recoveries from operational changes. Is the second half recovery running right now above plan? And, you know, how confident are you that this level is sustainable into 2026?

Todd Schwartz: Yeah, I mean we've now achieved, as a percentage of gross charge-offs, a really strong recovery right now for two years. We think it's very sustainable. It's performing at or above plan every quarter. We have a great process, team, and strategy behind it. We feel it's sustainable. At first, the first year when we were achieving those results, it was something that was hard to bake into the unit economics because, you know, we weren't sure if the stability of it was going to last. It has, and we feel really good that, you know, we're going to continue to achieve that percentage of recovery on charge-off, and it obviously helps our unit economic model, you know, and how we price and how we target on the front end. It's been a great story for us. Awesome.

Yeah, I mean, we we, we've now um, you know, achieved uh, you know, a strong as a percentage of gross charge offs a really strong recovery rate, right now, for, for 2 years, we think it's very sustainable. Um, it's it's performing at or above plan every quarter. Uh, we have a, we have a great, you know, process team and strategy behind it. Um, so we feel as sustainable, uh, and, and, you know, at first, uh, you know, the first year, when we were achieving those results, it was something that was hard to bake into the unit economics, uh, because you know, we weren't sure if that the stability of it was going to last, but it has and and we feel really good that, you know, we're going to continue to achieve, uh, the that percentage of recovery on charge off. Um, and it, it obviously helps our, our unit economic model, um, you know, and and how we price and how we Target on the front end. And so, um, it's been a, it's been a great story for us.

[Analyst 2]: Thank you for the color there. I've got just one more kind of unique question here, on the recent shutdown. What impact did it have on any of the data you see coming in as well as your models, with customer behavior more for them and yourself as well? How are you monitoring the situation and mitigating any of the effects going forward in real time?

Awesome. Thank you for the color there and you know I've got just 1 more um kind of unique question here but um on the recent shutdown you know what impact did it have on? You know, any of the data you see coming in as well as your models, you know, with customer behavior. Um

Todd Schwartz: Yeah, you know, I thought we were prepared for this question because I thought I was going to get it sooner. It's something that, you know, we're active under. We have a very, very fair hardship program for customers that have been impacted by the federal government shutdown. We do have some exposure. It's something we're currently watching. It's pretty de minimis at this point on the number of hardships this time of year because of weather events. It is our largest hardship program offering for this quarter because of the Q3 and the weather events that happen usually typically in this time of year, but, you know, they're incrementally. There are some more coming from the federal government shutdown. Nothing that would cause alarm or cause us to really change how we operate at this point or from a credit perspective.

More for them and and yourself as well. And how are you monitoring the situation and mitigating any of the effects? You know, going forward in real time.

Todd Schwartz: Definitely something we're watching very closely as it unfolds and we'll continue to.

[Analyst 2]: Great, really appreciate it. Todd, Pam, Mike, congratulations on the quarter and I'll get back in the queue.

Yeah, you know, I I thought we were prepared for this question because I thought I thought I was going to get it sooner but um, no. It's it's something that, you know, we're activating. We we have a, we have a very, very uh, Fair. Um, you know, uh, hardship program, um, for, for, for customers that have been impacted by the federal government shutdown. We do we do have some exposure or something where we're currently watching. It's it's it's it's pretty demanding this at this point. Um, on the number of hardships, uh this this time of year because of weather events it is our it is our, you know, largest you know hardship uh program offering for this quarter because of the Q3 and the weather events that happen usually typically in in this time of year but you know they're incrementally there are some more coming from the federal government shutdown. Nothing that uh We've caused alarm or or cause us to you know really change you know you know how we operate at this point or credit from a credit perspective but uh definitely something we're watching very closely uh is that unfolds and and we'll continue to

Right, really appreciate it. Todd, Pam, Mike, um, congratulations on the quarter and I'll get back in the queue.

Operator: It appears we have no further questions at this time. This does conclude today's program. Thank you for your participation, and you may disconnect at any time.

It appears we have no further questions at this time. This does conclude today's program thank you for your participation and you may disconnect at any time.