Q4 2025 OppFi Inc Earnings Call

March 11, 2026

Speaker #1: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you.

Operator 3: Good morning and welcome to OppFi's Q4 and fiscal year 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 Gallentine, Head of Investor Relations. You may begin.

Speaker #1: Good morning and welcome to OpFi's fourth quarter and fiscal year 2025 earnings conference call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded.

Speaker #1: 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.

Speaker #1: I am pleased to introduce your host, Mike Gallentine, head of investor relations. You may begin.

Speaker #2: Thank you, operator. Good morning and welcome to OpFi's fourth quarter 2025 earnings call. Today, our executive chairman and CEO, Todd Schwartz, and CFO, Pam Johnson, will present our financial results followed by a question-and-answer session.

Mike Gallentine: Thank you, operator. Good morning and welcome to OppFi's Q4 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 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 disclaimer statement 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.

Speaker #2: You can access the earnings presentation on our website at investors.opfi.com. 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 to differ materially from forward-looking statements.

Speaker #2: 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.

Mike Gallentine: Please refer to slide 2 of the earnings presentation and press release for our disclaimer statement 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.

Speaker #2: 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.

Speaker #3: Thanks, Mike. And good morning, everyone. Thank you for joining us today. I'm looking forward to discussing another year of record-breaking performance at OpFi. For 2025, total revenue increased 13.5% year over year, and adjusted net income increased 69% year over year, while keeping our industry-leading 78 net promoter score.

Todd Schwartz: Thanks, Mike, and good morning, everyone. Thank you for joining us today. I'm looking forward to discussing another year of record-breaking performance at OppFi. For 2025, total revenue increased 13.5% year-over-year, and adjusted net income increased 69% year-over-year while keeping our industry-leading 78 Net Promoter Score. We continued to find benefits from underwriting Model 6, which is designed to identify riskier borrowers and properly price risk across segments. Despite higher delinquencies on our summer vintages, OppFi maintained strong unit economics and adjusted in real time to support continued growth into Q4. The auto approval rate in Q4 was 79%. Which allowed more customers to be approved without human interaction and helped increase originations in Q4 8% year-over-year.

Speaker #3: We continue to find benefits from underwriting model 6, which is designed to identify riskier borrowers and properly price risk across segments. Despite higher delinquencies on our summer vintages, OpFi maintains strong unit economics and adjusted in real time to support continued growth into the fourth quarter.

Todd Schwartz: Despite higher delinquencies on our summer vintages, OppFi maintained strong unit economics and adjusted in real time to support continued growth into Q4. The auto approval rate in Q4 was 79%. Which allowed more customers to be approved without human interaction and helped increase originations in Q4 8% year-over-year.

Speaker #3: The auto approval rate in the fourth quarter was 79%, which allowed more customers to be approved without human interaction and helped increase originations in Q4 8% year over year.

Speaker #3: In conjunction with our lending partners, we plan to release model 6.1 in the first half of 2026, which we anticipate will boost originations and reduce risk.

Todd Schwartz: In conjunction with our lending partners, we plan to release Model 6.1 in the first half of 2026, which we anticipate will boost originations and reduce risk. We believe Model 6.1 better weights attributes in the model and enables more accurate segmentation of risk when identifying borrowers. The credit team is actively working on Model 7.0 with our bank partners, and early indicators are promising on both origination and risk fronts. We plan to launch Model 7.0 in Q3 of this year. We are encouraged to see improving vintage metrics in December and January, coupled with strong recovery metrics in Q4, which we believe will enable us to grow the top and bottom line in the double digits in 2026. OppFi continues to make great progress on building LOLA, the origination and servicing system of the future.

Speaker #3: We believe model 6.1 better weights attributes in the model and enables more accurate segmentation of risk when identifying borrowers. The credit team is actively working on model 7.0 with our bank partners, and early indicators are promising on both origination and risk fronts.

Speaker #3: We plan to launch model 7.0 in Q3 of this year. We are encouraged to see improving vintage metrics in December and January, coupled with strong recovery metrics in Q4, which we believe will enable us to grow the top and bottom line in the double digits in 2026.

Todd Schwartz: We plan to launch Model 7.0 in Q3 of this year. We are encouraged to see improving vintage metrics in December and January, coupled with strong recovery metrics in Q4, which we believe will enable us to grow the top and bottom line in the double digits in 2026. OppFi continues to make great progress on building LOLA, the origination and servicing system of the future.

Speaker #3: OpFi continues to make great progress on building LOLA, the origination and servicing system of the future. LOLA is designed with a clean architecture to leverage rapidly evolving AI tools across origination, servicing, and corporate operations.

Todd Schwartz: LOLA is designed with a clean architecture to leverage rapidly evolving AI tools across origination, servicing, and corporate operations. The building and test phase is complete, and we are actively finishing up the QA phase of the project. We plan to substantially migrate to our new software system in Q3 2026. 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, deliver reduced cycle times, and provide greater throughput for our product, tech, and risk teams. We believe our LOLA system and architecture will allow us to rapidly deploy and build new products to respond to our customers' needs and market dynamics. To that end, we are excited to announce a new line of credit product.

Speaker #3: The building and test phases complete, and we are actively finishing up the QA phase of the project. We plan to substantially migrate to our new software system in Q3 2026.

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, deliver reduced cycle times, and provide greater throughput for our product, tech, and risk teams. We believe our LOLA system and architecture will allow us to rapidly deploy and build new products to respond to our customers' needs and market dynamics. To that end, we are excited to announce a new line of credit product.

Speaker #3: 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, deliver reduced cycle times, and provide greater throughput for our product, tech, and risk teams.

Speaker #3: We believe our LOLA system and architecture will allow us to rapidly deploy and build new products to respond to our customers' needs and market dynamics.

Speaker #3: To that end, we are excited to announce a new line of credit product. We expect this product to launch with our bank partners in the summer of 2026.

Todd Schwartz: We expect this product to launch with our bank partners in the summer of 2026. We believe this exciting product will not only serve as another high-quality credit access option for customers in the states where we operate, but also enable us to serve new geographies. This product is designed to have fair, transparent features that the OppLoans installment product has provided to millions of customers. 2025 was a great year for OppFi, as we executed on our vision of being the leading technology-enabled platform that facilitates essential credit access and community services to everyday American-owned businesses. We believe the strong foundation of performance sets OppFi up for another year of potentially double-digit revenue and earnings growth. With that, I'll turn the call over to Pam.

Speaker #3: We believe this exciting product will not only serve as another high-quality credit access option for customers in the states where we operate, but also enable us to serve new geographies.

Speaker #3: This product is designed to have fair, transparent features that the op loans installment product has provided to millions of customers. 2025 was a great year for OpFi, as we executed on our vision of being the leading technology-enabled platform that facilitates essential credit access and community services to everyday American businesses.

Todd Schwartz: 2025 was a great year for OppFi, as we executed on our vision of being the leading technology-enabled platform that facilitates essential credit access and community services to everyday American-owned businesses. We believe the strong foundation of performance sets OppFi up for another year of potentially double-digit revenue and earnings growth. With that, I'll turn the call over to Pam.

Speaker #3: We believe the strong foundation of performance sets OppFi up for another year of potentially double-digit revenue and earnings growth. With that, I'll turn the call over to Pam.

Speaker #4: Thanks, Todd. And good morning, everyone. As Todd noted, we achieved another record year, and we finished with a strong fourth quarter, generating revenues of $159 million—an impressive 17% increase over Q4 '24.

Pamela Johnson: Thanks, Todd, and good morning, everyone. As Todd noted, we achieved another record year, and we finished with a strong Q4, generating revenues of $159 million, an impressive 17% increase over Q4 2024. Model 6 has been a significant contributor to this growth. Its enhanced predictive power has enabled us to better manage our loan economics through risk-based pricing and to underwrite larger loan amounts for creditworthy individuals, helping fuel record originations and receivables balances. In Q4, originations increased by 8% to $230 million compared to the prior year quarter. Factoring in loan repayments, origination growth increased our ending receivables by 16% to $493 million for the quarter. The growth in revenue was fueled by these originations and receivables growth, generating a stable revenue yield of 130%.

Speaker #4: Model 6 has been a significant contributor to this growth. Its enhanced predictive power has enabled us to better manage our loan economics through risk-based pricing and to underwrite larger loan amounts for credit-worthy individuals helping fuel record originations and receivables balances.

Speaker #4: In the fourth quarter, originations increased by 8% to $230 million, compared to the prior year quarter. Factoring in loan repayments, origination growth increased our ending receivables by 16% to $493 million, for the quarter.

Pamela Johnson: In Q4, originations increased by 8% to $230 million compared to the prior year quarter. Factoring in loan repayments, origination growth increased our ending receivables by 16% to $493 million for the quarter. The growth in revenue was fueled by these originations and receivables growth, generating a stable revenue yield of 130%.

Speaker #4: The growth in revenue was fueled by these originations and receivables growth, generating a stable revenue yield of $130%. As Todd noted, for the loans originated in the summer, we continued to see higher default rates.

Pamela Johnson: As Todd noted, for the loans originated in the summer, we continued to see higher default rates. However, one of the benefits of short-duration loans is that loans work through the system relatively quickly. That means that by Q1 2026, the majority of the higher default rate loans should be reflected in our earnings. As a result of the higher defaults, net charge-offs as a percentage of revenue increased to 45% for the quarter, up from 42% in the prior year quarter, and net charge-offs as a percentage of receivables increased to 59%, up from 54% in the prior year quarter. It's important to note that we believe that much of the higher risk associated with these loans was appropriately priced into them through higher interest rates. Our scale and focus on cost discipline contributed to our strong financial performance in the quarter.

Speaker #4: However, one of the benefits of short-duration loans is that loans work through the system relatively quickly. That means that by first quarter '26, the majority of the higher default rate loans should be reflected in our earnings.

Speaker #4: As a result of the higher defaults, net charge-offs as a percentage of revenue increased to 45% for the quarter, up from 42% in the prior year quarter.

Pamela Johnson: As a result of the higher defaults, net charge-offs as a percentage of revenue increased to 45% for the quarter, up from 42% in the prior year quarter, and net charge-offs as a percentage of receivables increased to 59%, up from 54% in the prior year quarter. It's important to note that we believe that much of the higher risk associated with these loans was appropriately priced into them through higher interest rates. Our scale and focus on cost discipline contributed to our strong financial performance in the quarter.

Speaker #4: And net charge-offs as a percentage of receivables increased to 59%, up from 54% in the prior year quarter. It's important to note that we believe that much of the higher risk associated with these loans was appropriately priced into them, through higher interest rates.

Speaker #4: Our scale and focus on cost discipline contributed to our strong financial performance in the quarter. Continued operational improvements drove notably lower total expenses before interest expense, which declined to 28% of revenue in the fourth quarter.

Pamela Johnson: Continued operational improvements drove notably lower total expenses before interest expense, which declined to 28% of revenue in the Q4, a substantial improvement compared to 33% in the same quarter last year. Additionally, by paying down our corporate debt and successfully upsizing one of our main credit facilities at more attractive interest rates earlier in the year, we reduced interest expense to 6% of total revenue, down from 8% in the prior year. As a result of strong revenue growth and improvements in our operating expense structure, Adjusted Net Income increased 27% to a Q4 record of $26 million, an increase from $20 million last year, and Adjusted Earnings Per Share grew 28% to $0.30 from $0.23 last year.

Speaker #4: A substantial improvement compared to 33% in the same quarter last year. Additionally, by paying down our corporate debt and successfully upsizing one of our main credit facilities at more attractive interest rates earlier in the year, we reduced interest expense to 6% of total revenue, down from 8% in the prior year.

Speaker #4: As a result of strong revenue growth and improvements in our operating expense structure, adjusted net income increased 27% to a fourth-quarter record of $26 million.

Pamela Johnson: As a result of strong revenue growth and improvements in our operating expense structure, Adjusted Net Income increased 27% to a Q4 record of $26 million, an increase from $20 million last year, and Adjusted Earnings Per Share grew 28% to $0.30 from $0.23 last year.

Speaker #4: An increase from $20 million last year and adjusted earnings per share grew 28% to $0.30 from $23 cents last year. On a gap basis, net income increased by $175% to $38 million.

Pamela Johnson: On a GAAP basis, net income increased by 175% to $38 million, reflecting our higher revenues, lower expenses, and a $12 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. However, as we have consistently stated, this is a non-cash item and does not affect the company's underlying profitability. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $93 million in cash equivalents, and restricted cash, alongside $321 million in total debt and $309 million in total stockholders' equity.

Speaker #4: Reflecting our higher revenues, lower expenses, and a $12 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.

Pamela Johnson: However, as we have consistently stated, this is a non-cash item and does not affect the company's underlying profitability. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $93 million in cash equivalents, and restricted cash, alongside $321 million in total debt and $309 million in total stockholders' equity.

Speaker #4: However, as we have consistently stated, this is a non-cash item and does not affect the company's underlying profitability. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $93 million in cash, cash equivalents, and restricted cash, alongside $321 million in total debt and $309 million in total stockholders' equity.

Speaker #4: Our total funding capacity stood at a strong $618 million at quarter's end, including $204 million in unused debt capacity. During the fourth quarter, OppFi strategically repurchased 515,000 shares of Class A common stock for $5 million.

Pamela Johnson: Our total funding capacity stood at a strong $618 million at quarter's end, including $204 million in unused debt capacity. During Q4, OppFi strategically repurchased 515,000 shares of Class A common stock for $5 million. Now, looking at the full year results, total revenue increased to $597 million, up 14% compared with 2024. Driving this strong growth was a 12% increase in originations to $899 million in 2025, which contributed to a 16% increase in ending receivables to $493 million. This also translates to an average yield of 133%, up from 131% in 2024.

Speaker #4: Now, looking at the full year results, total revenue increased to $597 million, up 14% compared with 2024. Driving this strong growth was a 12% increase in originations, to $899 million in 2025, which contributed to a 16% increase in ending receivables to $493 million.

Speaker #4: This also translates to an average yield of 133%, up from 131% in 2024. As we discussed, we experienced growth in originations, ending receivables, and yield from the improvements from Model 6, but we also saw a decrease in net charge-offs as a percentage of total revenue, down to 37% from 39%, and a decrease in net charge-offs as a percentage of average receivables to 49%, down from 51% in 2024, respectively.

Pamela Johnson: As we discussed, we experienced a growth in originations, ending receivables, and yield from the improvements from Model 6. We also saw a decrease in net charge-offs as a percentage of total revenue down to 37% from 39%, and a decrease in net charge-offs as a percentage of average receivables to 49%, down from 51% in 2024, respectively. While OppFi generated record revenues, the company maintained tight control over expenses, excluding interest, driving a sharp decrease in expenses as a percentage of revenue to 29% from 35% in 2024. As a result of the record revenues, coupled with the decreases in expenses, GAAP net income increased significantly to $146 million, up from $84 million in 2024. Diluted EPS for the full year was $0.99, up significantly compared with $0.36 in 2024.

Speaker #4: While OpFi generated record revenues, the company maintained tight control over expenses, excluding interest. Driving a sharp decrease in expenses as a percentage of revenue to $29% from $35% in 2024.

Pamela Johnson: While OppFi generated record revenues, the company maintained tight control over expenses, excluding interest, driving a sharp decrease in expenses as a percentage of revenue to 29% from 35% in 2024. As a result of the record revenues, coupled with the decreases in expenses, GAAP net income increased significantly to $146 million, up from $84 million in 2024. Diluted EPS for the full year was $0.99, up significantly compared with $0.36 in 2024.

Speaker #4: As a result of the record revenues, coupled with the decreases in expenses, gap net income increased significantly to $146 million, up from $84 million in 2024, and diluted EPS for the full year was $99 cents, up significantly compared with $36 cents in 2024.

Speaker #4: Adjusted net income increased to $140 million, compared with $83 million in 2024. Adjusted EPS was $1.59, also up significantly compared with $95 cents in 2024.

Pamela Johnson: Adjusted Net Income increased to $140 million compared with $83 million in 2024. Adjusted EPS was $1.59, also up significantly compared with $0.95 in 2024. The company delivered strong full-year results, exceeding guidance and Street estimates, driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year. These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver stockholder value. Given our strong operating performance driven by growth in net originations revenue and Adjusted Net Income, we are pleased to provide the following 2026 full year guidance. For total revenues, we expect $650 million to $675 million, an increase of 9% to 13% over 2025.

Speaker #4: The company delivered strong full-year results, exceeding guidance in Street estimates. Driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year.

Speaker #4: These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver stockholder value. Given our strong operating performance, driven by growth in net originations, revenue, and adjusted net income, we are pleased to provide the following 2026 full-year guidance.

Pamela Johnson: These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver stockholder value. Given our strong operating performance driven by growth in net originations revenue and Adjusted Net Income, we are pleased to provide the following 2026 full year guidance. For total revenues, we expect $650 million to $675 million, an increase of 9% to 13% over 2025.

Speaker #4: For total revenues, we expect $650 million, to $675 million. An increase of 9% to 13% over 2025. Adjusted net income is expected to be $153 million, to $160 million.

Pamela Johnson: Adjusted Net Income is expected to be $153 million to $160 million, an increase of 9% to 14% over 2025. Based on an anticipated diluted weighted average share count of 87 million shares, adjusted earnings per share are expected to be $1.76 to $1.84, an increase of 11% to 16% from 2025. With that, I would now like to turn the call over to the operator for Q&A. Operator?

Speaker #4: An increase of 9% to 14% over 2025. Based on an anticipated diluted weighted average share count of 87 million shares, adjusted earnings per share are expected to be $1.76 to $1.84, an increase of 11% to 16% from 2025.

Speaker #4: With that, I would now like to turn the call over to the operator for Q&A. Operator?

Speaker #3: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two.

Operator 3: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll pause for just a moment to allow everyone a chance to join the queue. We'll take our first question from David Scharf with Citizens Capital Markets. Your line is open.

Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We'll pause for just a moment to allow everyone a chance to join the queue. We'll take our first question from David Scharf with Citizens Capital Markets. Your line is open.

Speaker #3: Once again, that is star one to ask a question. And we'll pause for just a moment to allow everyone a chance to join the queue.

Speaker #3: And we'll take our first question from David Sharf with Citizens Capital Markets. Your line is open.

David Scharf: Great. Thanks for taking my questions. Good morning. Hey, Todd, maybe to start, more on the macro side and, you know, given the events going on right now geopolitically, can you remind us, since these are such short duration loans, like how quickly loss emergence, like in weeks or months, you know, typically occurs and specifically whether it's far too early to be talking about the impact of gas prices on some of your borrowers?

Speaker #1: Great. Thanks, thanks for taking my questions. Good morning. Todd, maybe to start more on the macro side, and given the events going on right now, geopolitically, can you remind us, since these are such short duration loans, how quickly loss emergence in weeks or months typically occurs?

Speaker #1: And specifically, whether it's far too early to be talking about the impact of gas prices on some of your borrowers.

Speaker #4: Yeah. Hey, David. Good morning. Thank you for the question. We see early indicators very early within the month of when they're originated, looking at first payments—28 days, 42 days out.

Pamela Johnson: Yeah. Hey, David. Good morning. Thank you for the question. We see early indicators, you know, very early within the month of when they were originated, looking at first payments, 28 days, 42 days out. We get earlier indicators. You know, in the summer, you know, what was interesting was we saw Consumer Sentiment Index take a nosedive during the summer. What followed was some, you know, higher, lower repayments, I should say. We course-corrected pretty quickly. Also, you know, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments, and that helps our unit economics tremendously.

Speaker #4: So we get earlier indicators. And in the summer, what was interesting was we saw the consumer sentiment index take a nosedive during the summer. And what followed was some higher—lower repayments, I should say.

Pamela Johnson: What followed was some, you know, higher, lower repayments, I should say. We course-corrected pretty quickly. Also, you know, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments, and that helps our unit economics tremendously.

Speaker #4: And we course-corrected pretty quickly. Also, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments, and that helps our unit economics tremendously.

Speaker #4: So we are still able to grow into the fourth quarter and the good news is we've definitely seen some improvement on those in December and in January, on those early indicators.

Pamela Johnson: We are still able to grow into Q4. The good news is, we've definitely seen some improvement on those in December and in January on those early indicators. It's giving us confidence to allow for double-digit growth on top and bottom line for 2026.

Speaker #4: And it's giving us confidence to allow for double-digit growth on top and bottom line for 2026.

Speaker #1: Got it.

David Scharf: Got it.

Speaker #4: And just the second question, yeah, sorry, about the cost of gas. Yeah, there's no doubt. Inflation is a tax on our customers. It hits their discretionary income and ability to repay.

Todd Schwartz: The second question-

David Scharf: Oh.

Todd Schwartz: Yeah, sorry. About the cost of gas. Yeah, there's no doubt. Inflation is a tax on our customers. You know, it hits their discretionary income and ability to repay. It's something we're watching closely. We're hoping it's temporary, but you know, it's any time prices of major items like gas go up rapidly like it just has over the last week, it's something that we're gonna watch. Also gonna continue to watch the Consumer Sentiment Index and just make sure that you know, the customer's in a good place. It's definitely gonna be top of mind here kind of in the first half of 2026.

Speaker #4: It's something we're watching closely. We're hoping it's a temporary but it's anytime prices of major items like gas go up, rapidly like it just has over the last week, it's something that we're going to watch.

Todd Schwartz: Also gonna continue to watch the Consumer Sentiment Index and just make sure that you know, the customer's in a good place. It's definitely gonna be top of mind here kind of in the first half of 2026.

Speaker #4: Also going to continue to watch the customer sentiment. Index and just make sure that the customers are in a good place. It's definitely going to be top of mind here kind of in the first half of 2026.

Speaker #1: Got it. Understood. And maybe just staying on credit, I know you don't provide specific loss guidance. For '26, as you mentioned, it's obviously risk-based pricing has to be factored in for total returns.

David Scharf: Got it. Understood. Maybe just staying on credit. I know you don't provide specific loss guidance for 2026. As you mentioned, it's obviously risk-based pricing has to be factored in for total returns. Is there anything we should think about in terms of the cadence of losses coming out of-

Speaker #1: But is there anything we should think about in terms of the cadence of losses coming out of?

Speaker #4: Yeah. I mean,

Todd Schwartz: Yeah, I mean.

David Scharf: you know, the credit tightening in the second half?

Speaker #1: In the second half?

Speaker #4: Yeah, I mean, there was some tightening that was done in response to some of the summer vintages. However, it's stable, and we're starting to feel more confident.

Todd Schwartz: Yeah, I mean, you know, there was some tightening that was done in response to some of the summer vintages. However, it's stable, and we're starting to feel more confident. Obviously, it's a wait and see here through Q1. We think there's also some strategic initiatives that we're working on in the business that are gonna unlock some more growth. We're very bullish on our Model 6.1, which factors in more recent data to allow us to give us confidence to grow. Then I'll point to the. We're getting more yield.

Speaker #4: Obviously, it's a wait and see here through the first quarter, but we think there are also some strategic initiatives that we're working on in the business that are going to unlock some more growth.

Speaker #4: We're very bullish on our model refit 6.1, which factors in more recent data to allow us to give us confidence to grow. And then I'll point to the we're getting more yield.

Speaker #4: We're getting more yield to price the risk properly across the segments. So back in '22, when there was some credit spikes, due to rapid inflation, we didn't have risk-based pricing.

Todd Schwartz: We're getting more yield to price the risk properly across the segments. Back when, you know, in 2022 when there was some credit spikes due to rapid inflation, we didn't have risk-based pricing. It wasn't a lever in our toolkit to be able to properly price risk across the segment. We feel like, with our model, with our new product line of credit, and with some of the risk-based pricing initiatives, you know, we're well positioned to continue to grow profitably and keep strong unit economics.

Speaker #4: So we weren't able, it wasn't a lever in our toolkit to be able to properly price risk across the segment. So we feel like with our model, with our new product line of credit, and with some of the risk-based pricing initiatives, we're well positioned to continue to grow profitably and keep strong unit economics.

Speaker #1: Got it. Maybe just one more follow-up, and then I'll get back in queue. You noted in your presentation that your bank partners had increased the sort of the percentage of their retention—I'm assuming it was notable enough for it to be included in the deck.

David Scharf: Got it. Maybe just one more follow-up, and then I'll get back in queue. You noted in your presentation that your bank partners had increased the sort of the percentage of their retention. I'm assuming it was notable enough for it to be included in the deck. You know, can you give us some color on, you know, both order of magnitude, but I guess more importantly, you know, is this something that usually cycles up and down that maybe we hadn't paid attention to, or if there's anything else that we should take away from that?

Speaker #1: Can you give us some color on both order of magnitude, but I guess more importantly, is this something that usually cycles up and down that maybe we hadn't paid attention to?

Speaker #1: Or if there's anything else that we should take away from that?

Speaker #4: Yeah, I mean, it's really just in some states. Every state is a little bit different. As we abide by all federal and state laws, banks do take higher percentages in some states of originations.

Todd Schwartz: Yeah. I mean, it's really just in some states, you know, every state is a little bit different, you know, because we abide by all federal and state laws. Banks do take higher percentages in some states of originations. But obviously our gross to net, you know, comes down a little. But I think what it gives us comfort is, you know, the banks are very comfortable with our servicing and underwriting capabilities and are willing to put their equity into the originations, which is an interest alignment and builds confidence for us. We view it as, you know, as a good thing long term and think that it shows the confidence that the banks have in us.

Speaker #4: But so obviously, our gross-to-net comes down a little. But I think what gives us comfort is the banks are very comfortable with our servicing and underwriting capabilities.

Todd Schwartz: But I think what it gives us comfort is, you know, the banks are very comfortable with our servicing and underwriting capabilities and are willing to put their equity into the originations, which is an interest alignment and builds confidence for us. We view it as, you know, as a good thing long term and think that it shows the confidence that the banks have in us.

Speaker #4: And are willing to put their equity into the originations, which is an interest alignment and builds confidence for us. And so we view it as a good thing.

Speaker #4: Long-term. And think that it shows the confidence that the banks have in us.

Speaker #1: Got it. Great. Thank you.

David Scharf: Got it. Great. Thank you.

Operator 3: We'll move next to Mike Grondahl with Northland Securities. Your line is open.

Operator: We'll move next to Mike Grondahl with Northland Securities. Your line is open.

Speaker #3: We'll move next to Mike Grundahl with Northland Securities. Your line is open.

Speaker #5: Hey, thanks, guys. I wanted to ask about those early summer vintages—as you look back, what are kind of the learnings from that? Was there any region to call out, a type alone, or a risk tier to call out?

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

Speaker #5: Just kind of curious what you learned from some of those higher losses.

Speaker #4: Yeah. That's a great question. And we did look at we have extensive data banking data, cash flow data, in addition to a lot of customer-level data to look at and the repayments, the actual repayments.

Todd Schwartz: Yeah. That's a great question. We did look at, you know, we have extensive data, banking data, cash flow data, in addition to a lot of customer-level data to look at, and the repayments, the actual repayments. You can't get, you know, better data than that. There's nothing actually that stood out to us as being the sole reason as to why we started to see some strain and some lower repayment rates.

Speaker #4: So, you can't get better data than that. There's nothing, actually, that stood out to us as being the sole reason as to why we started to see some strain and some lower repayment rates.

Todd Schwartz: One thing that, you know, was, is, and has been is the Consumer Sentiment Index has been something that we've started to look at as being a way to obviously not decision on credit, but as an early indicator of kind of how the customer is, how the customer's feeling. There is, you know, some ability to see that when the customer is, you know, feeling or not feeling financially secure or they don't feel like the direction of their financial path is upward, that, you know, some lower repayments. There's nothing to decision on. Yeah, we looked across the spectrum at a lot of different data points, and there was nothing that stood out as, oh, that's the reason for this happening.

Speaker #4: One thing that was and has been is customer sentiment and index. It has been something that we've started to look at as being a way to obviously not decision on credit, but as an early indicator of kind of how the customer is, how the customer's feeling.

Todd Schwartz: There is, you know, some ability to see that when the customer is, you know, feeling or not feeling financially secure or they don't feel like the direction of their financial path is upward, that, you know, some lower repayments. There's nothing to decision on. Yeah, we looked across the spectrum at a lot of different data points, and there was nothing that stood out as, oh, that's the reason for this happening.

Speaker #4: And there is some ability to see that when the customer is feeling or not feeling financially secure or they don't feel like the direction of their financial path is upward, some lower repayments.

Speaker #4: But nothing to decision on. But yeah, we looked across the spectrum at a lot of different data points. And there was nothing that stood out as, "Oh, that's the reason for this happening." But that is why we monitor this on a daily basis.

Todd Schwartz: That is why we, you know, monitor this on a daily basis, and it's something that, you know, we have really good reporting to be able to read and react. Something that, you know, you have to in this world. It's not kind of set it and forget it anymore on credit. You know, that's why we're doing the refit. That's why we're building Model 7. The pace of model building and change is rapid now in this world. You know, I think we're well positioned to respond to it and make course corrections along the way.

Speaker #4: And it's something that we have really good reporting to be able to read and react. And something that you have to in this world—in this world, it's not kind of set up, forget it anymore on credit.

Speaker #4: That's why we're doing the refit. That's why we're building Model 7. The pace of model building and change is rapid now in this world.

Speaker #4: And I think we're well positioned to respond to it and make course corrections along the way.

Speaker #5: Got it. And then just to clarify, is it Model 6.1 goes live in the second half of '26?

Mike Grondahl: Got it. Just to clarify, is it Model 6.1 goes live in the second half of 2026?

Speaker #4: Yeah.

Todd Schwartz: No.

Speaker #5: And then you're just.

David Brown: Maybe you're just.

Mike Grondahl: Maybe you're just.

Todd Schwartz: Model 6.1 is gonna go first half. We're gonna be launching. It's a refit, a refit, so it's taking a Model 6 and improving on it. And we do see early indicators of boosts in originations and better credit performance across the board. It really has a benefit on the origination side too, which we're excited about. We've been testing it all throughout Q4 and into Q1, so our confidence level is getting higher. And then we're also already starting to work on building Model 7, which is a brand new model, which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever.

Speaker #4: Model 6.1 is going to go first half. We're going to be launching. It's a refit. A refit. So it's taking a Model 6 and improving on it.

Speaker #4: And we do see early indicators of boosts in originations and better credit performance across the board. It really has a benefit on the origination side too, which we're excited about.

Todd Schwartz: It really has a benefit on the origination side too, which we're excited about. We've been testing it all throughout Q4 and into Q1, so our confidence level is getting higher. And then we're also already starting to work on building Model 7, which is a brand new model, which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever.

Speaker #4: We've been testing it all throughout the fourth quarter and into the first quarter. So our confidence level is getting higher and then we're also already starting to work on building Model 7, which is a brand new model.

Speaker #4: Which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever.

Speaker #5: Got it. And if there's one or two things that call out in 6.1, which you're relaunching now, what advantages or what benefits is it a certain data cohort or what would you say you're getting an edge from there?

Mike Grondahl: Got it. If there's one or two things to call out in Model 6.1, which you're, you know, relaunching now, what advantages or what benefits? Is it a certain data cohort, or what would you say you're getting an edge from there?

Speaker #4: Yeah. It's looking at repayment data. And reweighting our variables to have the model be more predictive. That's really what it is. So we look at a lot of different data points throughout the application process to determine creditworthiness.

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

Speaker #4: And when you actually have repayment data, to support it, it becomes extremely powerful. So it's a reweighting we have really good tools. Our credit team does a great job.

Todd Schwartz: You know, we have really good tools. Our credit team does a great job at constantly backtesting and finding areas for improvement. Once they go to work and they start to you know run the regression analysis, we found some things where we could better weight different variables and produce a more accurate score.

Speaker #4: At constantly backtesting and finding areas for improvement. And so once they go to work and they start to run the regression analysis, we found some things where we could better weight different variables.

Speaker #4: And produce a more accurate score.

Speaker #5: Got it. Then hey, just lastly, '24 had 95 million of free cash flow. '25 had 94 million. You know what I mean? Low to mid-90s each year.

Mike Grondahl: Got it. Hey, just lastly, 2024 had $95 million of free cash flow. 2025 had $94 million. You know what I mean? Like low to mid-nineties each year. I would assume 2026 is gonna be, you know, in a similar ballpark, maybe adjusted for a little bit of growth. How are you thinking about capital allocation? Do you have a chunk of Bitty to buy in 2026? I'm just trying to think about sort of uses for, you know, another large year for free cash flow.

Speaker #5: I would assume '26 is going to be in a similar ballpark, maybe adjusted for a little bit of growth. But how are you thinking about capital allocation?

Speaker #5: Do you have a chunk of biddy to buy in '26? I'm just trying to think about sort of uses for another large year for free cash flow.

Speaker #4: Yeah. Well, in the fourth quarter, we did buy back some shares. We thought that the long-term value of our stock price and the record performance that we've had and the consistency of that was not being valued properly.

Todd Schwartz: Yeah. Well, you know, in the Q4, you know, we did buy back some shares. We thought that our the long-term value of our stock price and the record performance that we've had, and the consistency of that was not being valued properly. We did buy back some shares with some of our capital. I'm happy to support the stock at those prices for sure. Listen, I think I kind of always say this, but it's a menu of options. We you know, we like to be well capitalized, to read and react to you know, the broader markets and see what's going on. I think that, you know, we're still active in the M&A space, looking at stuff.

Speaker #4: So we did buy back some shares with some of our capital. I'm happy to support the stock at those prices for sure. Listen, I think I kind of always say this, but it's a menu of options.

Todd Schwartz: Listen, I think I kind of always say this, but it's a menu of options. We you know, we like to be well capitalized, to read and react to you know, the broader markets and see what's going on. I think that, you know, we're still active in the M&A space, looking at stuff.

Speaker #4: We like to be well capitalized. To read and react to the broader markets and see what's going on. I think that we're still active in the M&A space looking at stuff.

Speaker #4: We're exploring different strategic initiatives. That would need capital. We've been investing in our tech systems we believe that Lola when launched will be the most cutting-edge tech-enabled lending system out there and allow us to plug into AI tools.

Todd Schwartz: We're, you know, exploring, you know, different strategic initiatives that would need capital. You know, we've been investing in our tech systems. You know, we believe that LOLA, when launched, will be the most cutting-edge tech-enabled lending system out there. It'll allow us to plug into AI tools, so we're investing in that. You know, there is a menu of options. In the past we've done a special dividend as well. Yeah, we'll, you know. We do anticipate free cash flow to, you know, continue to increase this year. It's our. We're paying down debt, as you can see, and getting the benefit there as well.

Speaker #4: So we're investing in that. So we there is a menu of options. In the past, we've done a special dividend as well. But yeah, we'll and we do anticipate free cash flow to continue to increase this year.

Todd Schwartz: You know, there is a menu of options. In the past we've done a special dividend as well. Yeah, we'll, you know. We do anticipate free cash flow to, you know, continue to increase this year. It's our. We're paying down debt, as you can see, and getting the benefit there as well.

Speaker #4: But it puts our we're paying down debt. I don't know if you can see. And getting the benefit there as well. So yeah, we're kind of using our cash wisely and strategically and like to be well capitalized to take advantage of situations that come up and continue to build the business.

Todd Schwartz: Yeah, we're kind of using our cash wisely and strategically, and like to be well capitalized to take advantage of situations that come up and continue to build the business.

Speaker #5: Got it. Thank you.

Mike Grondahl: Got it. Thank you.

Operator 3: We'll move next to David Storms with Stonegate. Your line is open.

Operator: We'll move next to David Storms with Stonegate. Your line is open.

Speaker #1: We'll move next to Dave Storms with Stonegate. Your line is open.

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

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

Speaker #6: Morning. And thanks for taking my questions. I wanted to start by maybe pivoting back to the macro question from earlier. You mentioned that in the summer you guys of course corrected pretty quickly.

Speaker #6: You would expect to do the same thing again should gas prices run. I was hoping if you could maybe illuminate a little more about what the playbook would be here.

Speaker #6: Is that targeting higher quality segments? Is that adjusting your pricing a little more aggressively? Maybe what does that look like?

Todd Schwartz: Yeah, absolutely. That is something that, you know, we have successfully been able to do, is this targeting, you know, lower risk customers, and even adjust pricing to accommodate more growth in the lower risk segments. You know, we've been launching that in Q4 and we'll continue that throughout the year. Yeah, no, I mean, the lower risk segments are more predictable on payback and repayment rates. We're not seeing as much degradation in those segments, and we'll continue to, you know, market and target. We think that also, you know, the line of credit product that we're building when we launch will, you know, potentially open up some new geographies for us with our bank partners. We're excited about that.

Speaker #4: Yeah, absolutely. And that is something that we have successfully been able to do—targeting lower-risk customers and even adjusting pricing to accommodate more growth in the lower-risk segments.

Speaker #4: We've been launching that in the fourth quarter, and will continue that throughout the year. Yeah. No, I mean, the lower-risk segments are more predictable on payback and repayment rates.

Todd Schwartz: Yeah, no, I mean, the lower risk segments are more predictable on payback and repayment rates. We're not seeing as much degradation in those segments, and we'll continue to, you know, market and target. We think that also, you know, the line of credit product that we're building when we launch will, you know, potentially open up some new geographies for us with our bank partners. We're excited about that.

Speaker #4: We're not seeing as much degradation in those segments. And we'll continue to market and target we think that also the line of credit product that we're building when we launch will potentially open up some new geographies for us with our bank partners.

Speaker #4: We're excited about that. It will give us some new geographies to provide credit access for customers. But yeah, I mean, inflation is something we're watching.

Todd Schwartz: Will give us some new geographies to provide credit access for customers. Yeah, I mean, inflation is something we're watching, you know, and seeing obviously gas being shooting up that quickly is concerning. You know, we're ready to respond if needed. It right now appears to be, you know, a temporary surge. Hopefully it will come back down in line and won't impact our customer repayment rates.

Speaker #4: And seeing obviously gas being shooting up that quickly is concerning. But we're ready to respond if needed. And right now, it appears to be a temporary surge.

Speaker #4: Hopefully, it will come back down in line and won't impact our customer repayment rates.

Speaker #6: That's very helpful, thank you. Turning to the new model we'll obviously have this year, maybe could you spend a little time talking about what's changed between— not maybe the models themselves, but the process of putting a model together?

David Storms: That's very helpful. Thank you. Turning to, you know, the new model rollout you have this year. Maybe could you spend a little time talking about what's changed between not maybe the models themselves, but the process of putting a model together? I gotta imagine you guys have a lot of tools at your disposal to create better, faster, stronger models with the advent of AI and such. Are we just gonna see that turn into faster model rollouts? Or should we expect like a step change in the quality of the models?

Dave Storms: That's very helpful. Thank you. Turning to, you know, the new model rollout you have this year. Maybe could you spend a little time talking about what's changed between not maybe the models themselves, but the process of putting a model together? I gotta imagine you guys have a lot of tools at your disposal to create better, faster, stronger models with the advent of AI and such. Are we just gonna see that turn into faster model rollouts? Or should we expect like a step change in the quality of the models?

Speaker #6: I got to imagine you guys have a lot of tools at your exposure disposal to create better, faster, stronger models. With the advent of AI and such, are we just going to see that turn into faster model rollouts, or should we expect a step change in the quality of the models?

Speaker #4: Yeah. I mean, first of all, you're absolutely right. The AI tools and the tools that we're now to deploy the pace of change has the cycle times of developing, refits, and developing new models has significantly reduced.

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

Speaker #4: Which is huge benefit to read and react. But the world's also changing at a much faster pace. I mean, I don't remember a time where gas went from $80 a barrel to $120 in one week.

Todd Schwartz: But you know, the world's also changing at a much faster pace. I mean, I don't remember a time where gas went from $80 a barrel to $120 in one week. You have to. I mean, that's table stakes now, right? You have to be able to read and react and, you know, be out in front of, you know, any macro noise that may affect repayment rates and be ready to, you know, make changes as needed. Yeah, you will continue to see more rapid model development, reduced cycle times, and better, more predictive data, as you know, as we continue to operate.

Speaker #4: So you have to—I mean, that's table stakes now, right? You have to be able to read and react and be out in front of any macro noise.

Speaker #4: That may affect repayment rates and be ready to make changes as needed. But yeah, you will continue to see more rapid model development, reduced cycle times, and better, more predictive data.

Todd Schwartz: Yeah, you will continue to see more rapid model development, reduced cycle times, and better, more predictive data, as you know, as we continue to operate.

Speaker #4: As we continue to operate.

Speaker #6: That's great. And one more for me, if I could sneak it in. Just looking at your guidance, anything here that's baked in that we should be aware of?

David Storms: That's great. One more for me, if I could sneak it in. Just looking at your guidance. Should we expect pretty simple seasonality on the year based on what you can see? Anything there would be very helpful.

Dave Storms: That's great. One more for me, if I could sneak it in. Just looking at your guidance. Should we expect pretty simple seasonality on the year based on what you can see? Anything there would be very helpful.

Speaker #6: Should we expect pretty typical seasonality on the year based on what you can see? Anything there would be very helpful.

Speaker #4: Yeah, no, I mean, we're encouraged by some of the early vintage metrics of December and January. We're seeing a normal to strong tax refund season.

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

Speaker #4: I think that it was well-documented from the IRS that the average return would increase this year, which is also very beneficial for us from a credit perspective.

Speaker #4: And we see growth. We feel like we have some good growth initiatives, and feel good throughout the year that we can achieve double-digit revenue and profit growth.

Speaker #6: Got it. So, thank you for taking my questions.

David Storms: Understood. Thank you for taking my questions.

Dave Storms: Understood. Thank you for taking my questions.

Speaker #1: And once more for your questions, that is starand1. We'll pause for just a moment. And it does appear that there are no further questions at this time.

Operator 3: Once more for your questions. That is star and one. We'll pause for just a moment. It does appear that there are no further questions at this time. This does conclude the Q&A portion of today's call, and this also concludes today's meeting. We appreciate your time, and you may now disconnect.

Operator: Once more for your questions. That is star and one. We'll pause for just a moment. It does appear that there are no further questions at this time. This does conclude the Q&A portion of today's call, and this also concludes today's meeting. We appreciate your time, and you may now disconnect.

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