Q2 2026 OppFi Inc Earnings Call

August 10, 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.

Speaker #1: Good afternoon, and welcome to OppFi's second quarter 2026 earnings conference call. As a reminder, this conference is being recorded. I am pleased to introduce your host, Jared Pollack.

Operator: Good afternoon, and Welcome to OppFi's Q2 2026 earnings conference call. As a reminder, this conference is being recorded. I am pleased to introduce your host, Jared Polak. You may begin.

Speaker #1: You may begin.

Speaker #2: Thank you, operator. Good afternoon, and welcome to OppFi's second quarter 2026 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.

Jared P. Polak: Thank you, operator. Good afternoon, and welcome to OppFi's Q2 2026 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. 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 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.

Jared Polak: Thank you, operator. Good afternoon, and welcome to OppFi's Q2 2026 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. 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 factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements. Please refer to slide two of the earnings presentation and press release for our disclaimer 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.

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 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 statement covering forward-looking statements and references to information about non-GAAP financial measures, which will be discussed throughout today's call.

Speaker #2: Reconciliations of those measures to GAAP measures can be found in the appendix to our earnings presentation and press release. In addition, certain important information related to the BNCC transaction is included in the registration statement on form S-4 filed by OpFi in conjunction with the transaction.

Jared P. Polak: In addition, certain important information related to the BNCC transaction is included in the registration statement on Form S-4 filed by OppFi in conjunction with the transaction. Investors are encouraged to read the Form S-4 and other documents filed with the SEC in conjunction with the transaction. Additionally, OppFi and BNCC and their directors and officers may be deemed to be participating in a solicitation of proxies in favor of the proposed merger. Please refer to the disclaimer information included in our earnings release. With that, I'd like to turn the call over to Todd.

Jared Polak: In addition, certain important information related to the BNCC transaction is included in the registration statement on Form S-4 filed by OppFi in conjunction with the transaction. Investors are encouraged to read the Form S-4 and other documents filed with the SEC in conjunction with the transaction. Additionally, OppFi and BNCC and their directors and officers may be deemed to be participating in a solicitation of proxies in favor of the proposed merger. Please refer to the disclaimer information included in our earnings release. With that, I'd like to turn the call over to Todd.

Speaker #2: Investors are encouraged to read the Form S-4 and other documents filed with the SEC in conjunction with the transaction. Additionally, OppFi and BNCC and their directors and officers may be deemed to be participating in a solicitation of proxies in favor of the proposed merger.

Speaker #2: Please refer to the disclaimer information included in our earnings release. With that, I’d like to turn the call over to Todd.

Speaker #3: Thanks, Jared. And good afternoon, everyone. Thank you for joining us today. I'll first share a business update, and then Pam will review our strategic investments and Q2 financial performance in detail.

Todd Schwartz: Thanks, Jared, and good afternoon, everyone. Thank you for joining us today. I'll first share a business update, and then Pam will review our strategic investments and Q2 financial performance in detail. While Q2 fell short of our original financial expectations, we believe it was one of our most productive quarters from a strategic standpoint. We invested meaningfully in testing new products and improving existing products with the goal of strengthening our competitive positioning. We also took the additional time needed to refine our LOLA system, laying what we believe to be a strong foundation for future growth and efficiency. That work pushed back rollout by a few months, but we're encouraged by the results and remain confident in our ability to hit our long-term financial targets. I will provide more detail on new product initiatives later in my remarks.

Speaker #3: While Q2 fell short of our original financial expectations, we believe it was one of the most productive quarters from a strategic standpoint. We invested meaningfully in testing new products and improving existing products, with the goal of strengthening our competitive positioning.

Speaker #3: We also took the additional time needed to refine our LOLA system, laying what we believe to be a strong foundation for future growth and efficiency.

Speaker #3: That work pushed back rollout by a few months, but we're encouraged by the results and remain confident in our ability to hit our long-term financial targets.

Speaker #3: I will provide more detail on new product initiatives later in my remarks. First, I'd like to provide an update on our pending acquisition of BNC National Bank.

Todd Schwartz: First, I'd like to provide an update on our pending acquisition of BNC National Bank. We announced that we've officially submitted our regulatory applications to the OCC and other governing agencies. We look forward to working with regulators throughout the approval process and aim to close the transaction in Q4 of this year. We're excited to work with the BNC team to integrate and build the strongest possible strategic footprint, expanding product offerings, consumer choice, and credit access, while reducing costs for our customers and extending community banking access to more of them. We'll provide further updates on this throughout the year. Next, I'd like to highlight an important development at OppFi, the upcoming line of credit launch with one of our bank partners. During the second quarter, we completed extensive testing around pricing, term structure, and customer behavior, and we are very encouraged with the results.

Speaker #3: We announced that we've officially submitted our regulatory applications to the OCC and other governing agencies. We look forward to working with regulators throughout the approval process and aim to close the transaction in Q4 of this year.

Speaker #3: We're excited to work with the BNC team to integrate and build the strongest possible strategic footprint—expanding product offerings, consumer choice, and credit access, while reducing costs for our customers and extending community banking access to more of them.

Speaker #3: We'll provide further updates on this throughout the year. Next, I'd like to highlight an important development at OppFi: the upcoming line of credit launch with one of our bank partners.

Speaker #3: During the second quarter, we completed extensive testing around pricing, term structure, and customer behavior, and we are very encouraged with the results. The testing reinforced our belief that the line of credit product fills an important need for consumers, particularly during macro periods when affordability and monthly payment flexibility become increasingly important.

Todd Schwartz: The testing reinforced our belief that the line of credit product fills an important need for consumers, particularly during macro periods when affordability and monthly payment flexibility become increasingly important. Customers are increasingly gravitating towards products with lower monthly payments but longer repayment terms, as these options offer greater affordability and cash flow flexibility on a month-to-month basis. That preference was reflected in our testing results and reinforces why the line of credit product is such an important addition to our platform. The testing demonstrated meaningful opportunities to drive additional growth from both new and existing customers while diversifying our product offerings. We expect to launch the line of credit product next month. That timing was intentional and reflects a deliberate measure twice, cut once approach. Before its launch, we wanted to be fully confident in its pricing structure, customer experience, conversion dynamics, and expected performance.

Speaker #3: Customers are increasingly gravitating toward products with lower monthly payments but longer repayment terms, as these options offer greater affordability and cash flow flexibility on a month-to-month basis.

Speaker #3: That preference was reflected in our testing results and reinforces why the line of credit product is such an important addition to our platform. The testing demonstrated meaningful opportunities to drive additional growth from both new and existing customers, while diversifying our product offerings.

Speaker #3: We expect to launch the line of credit product next month. That timing was intentional and reflects a deliberate measure-twice-cut-once approach. Before its launch, we wanted to be fully confident in its pricing structure, customer experience, conversion dynamics, and expected performance.

Speaker #3: With testing now complete, we feel good about its readiness. The technical aspects of this product will have been developed and brought to market in under 6 months.

Todd Schwartz: With testing now complete, we feel good about its readiness. The technical aspects of this product will have been developed and brought to market in under 6 months, a relatively short period of time. This is made possible by our new modular technology platform. Beyond enabling this launch, the modular platform creates a scalable foundation for future product innovation, allowing us to develop and introduce new offerings more efficiently. As a result of the slight timing shift in both the line of credit launch and LOLA migration completion, originations came in below our original expectations during the quarter. Accordingly, we are revising our 2026 guidance. Our expectations for 2027 and 2028 remain unchanged, and we continue to believe we are on a path towards achieving approximately $3 of earnings per share by the end of 2028.

Speaker #3: A relatively short period of time. This is made possible by our new modular technology platform. Beyond enabling this launch, the modular platform creates a scalable foundation for future product innovation, allowing us to develop and introduce new offerings more efficiently.

Speaker #3: As a result of the slight timing shift in both the line of credit launch and LOLA migration completion, originations came in below our original expectations during the quarter.

Speaker #3: Accordingly, we are revising our 2026 guidance. Our expectations for 2027 and 2028 remain unchanged, and we continue to believe we are on a path towards achieving approximately $3 of earnings per share by the end of 2028.

Speaker #3: Taken together, this has been an important quarter of progress for OpFi in laying the foundation for growth. We are well underway in our effort to strategically transform the business, investing more than $150 million this year to enable continued growth on our path to achieve $500 million of adjusted net income in the next 5 years.

Todd Schwartz: Taken together, this has been an important quarter of progress for OppFi in laying the foundation for growth. We are well underway in our effort to strategically transform the business, investing more than $150 million this year to enable continued growth on our path to achieve $500 million of adjusted net income in the next 5 years. We remain focused on executing our shared vision of becoming a leading technology-enabled bank platform that offers essential credit access and community banking services to everyday Americans and businesses. With that, I'll turn the call over to Pam.

Speaker #3: We remain focused on executing our shared vision of becoming a leading technology-enabled bank platform that offers essential credit access and community banking services to everyday Americans and businesses.

Speaker #3: With that, I'll turn the call over to Pam.

Speaker #4: Thanks, Todd. And good afternoon, everyone. I want to build on Todd's comments regarding the quarter and our updated outlook. While we continue to see some variability in consumer credit trends, we are prioritizing balance sheet strength, unit economics, and margin stability over shorter-term volume growth.

Pam Johnson: Thanks, Todd, and good afternoon, everyone. I want to build on Todd's comments regarding the quarter and our updated outlook. While we continue to see some variability in consumer credit trends, we are prioritizing balance sheet strength, unit economics, and margin stability over shorter-term volume growth. OppFi has demonstrated throughout its history that disciplined underwriting, strong credit performance, and sustainable profitability create more long-term value than pursuing growth at any cost in the near term. Importantly, we continue to direct our focus toward building the foundation to unlock new long-term growth, and our planned acquisition of BNC is expected to be financially transformative. We anticipate significant revenue synergies beginning in 2027 as we expand our ability to deliver a broader suite of financial products across a larger geographic footprint. These synergies are expected to be driven primarily by geographic expansion and cross-selling opportunities.

Speaker #4: OppFi has demonstrated throughout its history that disciplined underwriting, strong credit performance, and sustainable profitability create more long-term value than pursuing growth at any cost in the near term.

Speaker #4: Importantly, we continue to direct our focus toward building the foundation to unlock new long-term growth, and our planned acquisition of BNC is expected to be financially transformative.

Speaker #4: We anticipate significant revenue synergies beginning in 2027 as we expand our ability to deliver a broader suite of financial products across the larger geographic footprint.

Speaker #4: These synergies are expected to be driven primarily by geographic expansion and cross-selling opportunities. In addition, we believe OppFi will be able to leverage BNC’s capabilities and relationships to further grow our existing business lines.

Pam Johnson: In addition, we believe OppFi will be able to leverage BNC's capabilities and relationships to further grow our existing business lines. The combination of OppFi and BNC is expected to create a banking organization with capital levels well in excess of regulatory and market standards. Looking ahead to 2028, we expect the combined company to generate return on assets of at least 10% and returns on equity of at least 35%. Turning to our financial performance for Q2, we generated revenue of $145 million, a 1.9% increase over Q2 2025, and a company record for any second quarter. Originations for the quarter decreased by approximately 9% to $212 million compared to the prior year quarter, as we tightened underwriting in segments where we believe risk-adjusted returns were less attractive. These actions were designed to help preserve portfolio quality and support long-term profitability.

Speaker #4: The combination of OpFi and BNC is expected to create a banking organization with capital levels well in excess of regulatory and market standards. Looking ahead to 2028, we expect the combined company to generate return on assets of at least 10% and returns on equity of at least 35%.

Speaker #4: Turning to our financial performance for the second quarter, we generated revenue of $145 million, a 1.9% increase over Q2 2025, and a company record for any second quarter.

Speaker #4: Originations for the quarter decreased by approximately 9% to $212 million, compared to the prior year quarter, as we tightened underwriting in segments where we believe risk-adjusted returns were less attractive.

Speaker #4: These actions were designed to help preserve portfolio quality and support long-term profitability. Net charge-offs as a percentage of revenue during the quarter increased to approximately 40% from $32% in the prior year period.

Pam Johnson: Net charge-offs as a percentage of revenue during the quarter increased to approximately 40% from 32% in the prior year period, and net charge-offs as a percentage of receivables increased to approximately 52% from 43% in the prior year period. Given the denominator effect, these charge-off metrics appear inflated in times of slower growth. Importantly, these charge-offs are partially offset by a meaningful improvement in recoveries, an area where we believe we maintain a distinct competitive advantage. Recoveries increased to approximately $15 million from $11 million in the prior year period. We continue to closely monitor consumer payment behavior and adjust our underwriting posture with agility as conditions evolve, and we remain confident that the actions we have taken position the portfolio for stronger performance over time. Operating expenses remained well controlled as we continued to balance investment and strategic initiatives with disciplined expense management.

Speaker #4: And net charge-offs as a percentage of receivables increased to approximately 52% from 43% in the prior year period. Given the denominator effect, these charge-off metrics appear inflated in times of slower growth.

Speaker #4: Importantly, these charge-offs are partially offset by a meaningful improvement in recoveries and area where we believe we maintained a distinct competitive advantage. Recoveries increased to approximately $15 million from $11 million in the prior year period.

Speaker #4: We continue to closely monitor consumer payment behavior and adjust our underwriting posture with agility as conditions evolve, and we remain confident that the actions we have taken position the portfolio for stronger performance over time.

Speaker #4: Operating expenses remained well controlled as we continued to balance investment and strategic initiatives with disciplined expense management. Total adjusted operating expenses were approximately $49 million, or $34% of revenue, down slightly from $35% in the prior year period.

Pam Johnson: Total adjusted operating expenses were approximately $49 million, or 34% of revenue, down slightly from 35% in the prior year period. On an unadjusted basis, given one-time expenses related to the BNC transaction and corporate simplification, expenses were 43% of revenue, compared with 39% of revenue in the prior year period. While we continued investing in strategic initiatives, particularly those related to the BNC transaction and platform development, we maintained disciplined expense management across the rest of the organization. Taken together, adjusted net income decreased by 27% in Q2 to approximately $29 million compared to the prior year period, and adjusted earnings per share decreased to $0.33 from $0.45 in the prior year period. Despite that, our adjusted net income margin remains strong at 19.8%.

Speaker #4: On an unadjusted basis, given one-time expenses related to the BNC transaction and corporate simplification, expenses were $43% of revenue compared with $39% of revenue in the prior year period.

Speaker #4: While we continued investing in strategic initiatives, particularly those related to the BNC transaction and platform development, we maintained disciplined expense management across the rest of the organization.

Speaker #4: Taken together, adjusted net income decreased by 27% in the second quarter to approximately $29 million compared to the prior-year period, and adjusted earnings per share decreased to $0.33 from $0.45 in the prior-year period.

Speaker #4: Despite that, our adjusted net income margin remained strong at 19.8%. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with approximately $92 million in cash, cash equivalents, and restricted cash, alongside $277 million in total debt and $414 million in total stockholders' equity.

Pam Johnson: Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with approximately $92 million in cash equivalents, and restricted cash, alongside $277 million in total debt and $414 million in total stockholders' equity. Our total funding capacity was $541.8 million at quarter end, including $173.5 million of unused debt capacity. The strong liquidity position and balance sheet flexibility continues to provide a solid foundation for our capital allocation strategy and long-term growth objectives. On capital allocation, our balance sheet remains a significant source of strength. Our business continues to generate meaningful free cash flow, allowing us to invest in growth initiatives while simultaneously returning capital to shareholders. During the quarter, we began repurchasing shares under the board-authorized $40 million repurchase program, reflecting our belief that the current valuation does not appropriately reflect the long-term earnings potential of the company.

Speaker #4: Our total funding capacity was $541.8 million at quarter end, including $173.5 million of unused debt capacity, with strong liquidity positions and balance sheet flexibility continues to provide a solid foundation for our capital allocation strategy and long-term growth objectives.

Speaker #4: On capital allocation, our balance sheet remains a significant source of strength. Our business continues to generate meaningful free cash flow allowing us to invest in growth initiatives while simultaneously returning capital to shareholders.

Speaker #4: During the quarter, we began repurchasing shares under the board-authorized $40 million repurchase program, reflecting our belief that the current valuation does not appropriately reflect the long-term earnings potential of the company.

Speaker #4: Given the timing shift in our launch of the line of credit product and completion of the Lola System migration, we are revising our full-year 2026 guidance to total revenue of $600 million to $625 million, adjusted net income of $115 million to $130 million, and adjusted EPS of $1.34 to $1.51.

Pam Johnson: Given the timing shift in our launch of the line of credit product and completion of LOLA system migration, we are revising our full 2026 guidance to total revenue of $600 million to $625 million, adjusted net income of $115 million to $130 million, and adjusted EPS of $1.34 to $1.51. While we are reducing our near-term outlook, our confidence in the long-term earnings potential of the company remains unchanged. Our expectations for 2027 and 2028 remain intact, and we continue to believe OppFi is building a stronger, more diversified, and more valuable platform. We remain confident in our path toward achieving our long-term objective of approximately $3 of earnings per share by the end of 2028. With that, I will now turn the call over to the operator for Q&A. Operator?

Speaker #4: While we are reducing our near-term outlook, our confidence in the long-term earnings potential of the company remains unchanged. Our expectations for 2027 and 2028 remain intact, and we continue to believe OppFi is building a stronger, more diversified, and more valuable platform.

Speaker #4: We remain confident in our path toward achieving our long-term objectives of approximately $3.00 of earnings per share by the end of 2028. With that, I will now turn the call over to the operator for Q&A.

Speaker #4: Operator?

Speaker #3: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, please press star 1 on your telephone keypad.

Operator: Thank you. At this time, we will open the floor for questions. If you would like to ask a question, you may press star one on your telephone keypad. To remove yourself from the queue, you may press star two. Again, that is star one to ask a question. We will take our first question from David Arslanian from Citizens Capital Markets. Please go ahead. Your line is open.

Operator: Thank you. At this time, we will open the floor for questions. We will take our first question from David Arslanian from Citizens Capital Markets. Please go ahead. Your line is open.

Speaker #3: To remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. We'll take our first question from David Sharf from Citizens Capital Markets.

Speaker #3: Please go ahead. Your line is open.

Speaker #5: All right. Thank you. Good afternoon, thanks for thanks for taking my questions. Todd, wondering if you can provide just a little more color on sort of your assessment of what you're seeing.

David Arslanian: All right. Thank you. Good afternoon. Thanks for taking my questions. Todd, wondering if you can provide just a little more color on your assessment of what you are seeing from your consumers vis-a-vis credit and what led to the tightening. Obviously, it has been another earning season where there has been some pretty broad-based constructive commentary from most lenders about consumer resiliency in the face of inflation and whatnot. Maybe if you can just share a little more on what led to some of the tightening that you enacted in the quarter.

Speaker #5: From your consumers, vis-à-vis credit and what led to the tightening. Obviously, it's been another earnings season where there's been some pretty broad-based, constructive commentary from most lenders about consumer resiliency in the face of inflation and whatnot. Maybe you can just share a little more on what led to some of the tightening that you enacted in the quarter.

Speaker #2: Yeah. I mean, we actually it actually started last summer when we saw some consumer sentiment. Listen, I think if you look at the average of the last four years, the charge-offs are we had a really strong two-year window there, and we're seeing some reversion on that back to but with our risk-based pricing, and with some of the term testing we're doing, one of the things I mentioned in my remarks is that the affordability is becoming very, very important for the consumer.

Todd Schwartz: Yeah. It actually started last summer when we saw some consumer sentiment. Listen, I think if you look at the average over the last four years, the charge-offs are, we had a really strong two-year window there, and we are seeing some reversion on that back to. With our risk-based pricing, and with some of the term testing we are doing, one of the things I mentioned in my remarks is that the affordability is becoming very important for the consumer. So consumers are opting for more total cost to keep their monthly payments affordable. We need to be responsive to competition and to what others are providing in the marketplace. I think that is why we are so excited about the line of credit product. There are also things we can be doing on installment better to better serve our customers.

Speaker #2: So, consumers are opting for higher total costs to keep their monthly payments affordable. And we need to be responsive to competition and to what they're thinking. That's why we're so excited about the line of credit product.

Speaker #2: There are also things we can be doing on installment better to better serve our customers. I think if you're getting the payment-to-income wrong with customers, that is fundamental.

Todd Schwartz: I think if you are getting the payment to income wrong with customers, that is the fundamental rule of underwriting. You are going to cause more customer delinquency or less repayments overall. I think with our risk-based pricing and some of our term and some of our new marketing initiatives, we feel really good for the H2 that we are going to start to grow again and start to get that back on track. There were some head fakes with the war and everything going on, but we feel like from our business standpoint, we can operate in any environment. I think that if you look at our margin and our balance sheet, that was prioritized with everything going on with the transformation and the bank acquisition. It was prioritized. But we are getting back to growth now, and we think that there is a lot of opportunity.

Speaker #2: Rule of underwriting—you’re going to cause more customer delinquency or less repayments overall. I think with our risk-based pricing and some of our term and some of our new marketing initiatives, we feel really, really good for the second half; that we’re going to start to grow again and get that back on track.

Speaker #2: There were some head fakes with the war and everything going on, but we feel like, from our business standpoint, we can operate in any environment.

Todd Schwartz: There were some head fakes with the war and everything going on, but we feel like from our business standpoint, we can operate in any environment. I think that if you look at our margin and our balance sheet, that was prioritized with everything going on with the transformation and the bank acquisition. It was prioritized. But we are getting back to growth now, and we think that there is a lot of opportunity. We're seeing some competitors provide some more affordability on the payments to allow for more growth. We think we can be very competitive, and bring something to market that customers are going to be successful with.

Speaker #2: And I think that if you look at our margin and our balance sheet, that was prioritized, with everything going on with the transformation and the bank acquisition, it was prioritized.

Speaker #2: But we're getting back to growth now, and we think that there's a lot of opportunity. We're seeing some competitors provide some more affordability on the payments to allow for more growth.

Todd Schwartz: We're seeing some competitors provide some more affordability on the payments to allow for more growth. We think we can be very competitive, and bring something to market that customers are going to be successful with.

Speaker #2: And so we think we can be very competitive and bring something to market that customers are going to be successful with.

Speaker #5: Got it. Understood. And maybe as a follow-up, as we think about the second half outlook, and the guidance reduction, is there a way to give us a sense for how much of that is related to the sort of a lower starting point and balances that you're exiting Q2 with and the delayed and maybe a one-month delay in rolling out kind of Lola and line of credit?

David Arslanian: Got it. Understood. Maybe as a follow-up, as we think about the H2 outlook and the guidance reduction, is there a way to give us a sense for how much of that is related to the lower starting point and balances that you're exiting Q2 with and the delayed and maybe a one-month delay in rolling out kind of LOLA and line of credit, that being one bucket and maybe the other bucket just being everything else, whether it be changes in loss rate assumptions, fair value. How much of it's just kind of the Q2 tightening and lower jumping-off point, versus are there any other factors that we should be aware of that's behind the guidance for Q4?

Speaker #5: That being sort of one bucket and maybe the other bucket just being everything else whether it be changes in loss rate assumptions, fair value, how much of it's just kind of the Q2 tightening and lower jumping-off point versus are there any other factors that we should be aware of that's behind the guidance reduction?

Todd Schwartz: Yeah. We've been operating in this credit environment now for over a year. So we're comfortable with where we're at there and see stability. It's really geared towards the late onset of some of the growth initiatives that we've had in Q2. We're making great progress. From a financial growth perspective, the way it reports out to you guys and the street in this small three-month window, it shows that we're growing slowly. But when I think about what we're doing on a daily basis with the teams on the product initiatives,

Speaker #2: Yeah. I mean, we've been operating in this credit environment now for over a year, so we're comfortable with where we're at there and see stability.

Speaker #2: It's really geared towards the late onset of some of the growth initiatives that we've had. In the second quarter, we're making great progress. I mean, from a financial growth perspective, the way it reports out to you guys and the street and the small three-month window, it shows that we're growing slower.

Speaker #2: But when I think about what we're doing on a daily basis with the teams and the product initiatives, the migration, everything's going very well.

Todd Schwartz: the migration. Everything's going very well, and we think that the business is going to. We're trying to retool the business to set this thing up for a much larger multi-product platform. So, it is definitely more of a late onset situation where we're not getting the line of credit in market as soon as we thought we would. Also some of the migration things with data that we're working through to make sure that we're taking, I think I said it in my commentary, measure twice, cut once approach, and making sure, and while keeping the balance sheet strong.

Speaker #2: And we think that we're just the business is going to we're trying to retool the business to set this thing up for a much larger multi-product platform.

Speaker #2: And so it is definitely kind of more of a late-onset situation, where we're not getting the line of credit in market as soon as we thought we would.

Speaker #2: And then also some of the migration things with data that we're working through to make sure that we're taking—I think I said it in my commentary—a measure twice, cut once approach, and making sure, while keeping the balance sheet strong.

Speaker #5: Got it. Got it. Great. Thank you.

David Arslanian: Got it. Great. Thank you.

Operator: Thank you. We'll take our next question from David Storms with Stonegate Capital Partners. Please go ahead. Your line is open.

Speaker #3: Thank you. We'll take our next question from Dave Storms with Stonegate Capital Partners. Please go ahead, your line is open.

Speaker #4: Hello, good afternoon. This is Maximus. I'll be asking questions for Dave Storms today. I just wanted to start off on Lola. As the platform gets further rolled out in the second half of the year, I'm kind of just wondering where you think the biggest benefit will be first.

[Analyst] (Stonegate Capital Partners): Hello. Good afternoon. This is Maximus. I will be asking questions for David Storms today. Just wanted to start off on LOLA. As the platform gets further rolled out in the H2 of the year, just wondering where you think the biggest benefit will be first. Is it better conversion, servicing efficiencies, recoveries, or if you have any other color, that would be great.

Maximus Alexander-Nino: Hello. Good afternoon. This is Maximus. I will be asking questions for David Storms today. Just wanted to start off on LOLA. As the platform gets further rolled out in the H2 of the year, just wondering where you think the biggest benefit will be first. Is it better conversion, servicing efficiencies, recoveries, or if you have any other color, that would be great.

Speaker #4: Is it better conversion, servicing efficiencies, recoveries, or, if you have any other color, that'd be great?

Speaker #2: Yeah, we think it— I think one of the benefits you're going to be seeing here is we have a new product coming to market in less than six months.

Todd Schwartz: Yeah. I think one of the benefits you are going to be seeing here is we have a new product coming to market in less than six months. That is because it was completely built on the new system, which took advantage of our modular architecture and all the benefits of it. We did not have to go into the legacy system at all to be able to develop it and build that new product. That is one of the biggest things I am excited about is cycle time for development and bringing things to market. From a product standpoint of being able to work on things at a much faster clip. Our goal is to reduce our cycle times by 70% over the next year. That is also, it will allow us to push on some of these automated. We actually made progress in the quarter.

Speaker #2: And that's because it was completely built on the new system, which took advantage of our modular architecture and all the benefits of it. We didn't have to go into the legacy system at all to be able to develop it and build the new product.

Speaker #2: And so that’s one of the biggest things I’m excited about: cycle time for development and bringing things to market. And from a product standpoint, being able to work on things at a much faster clip.

Speaker #2: Our goal is to reduce our cycle times by 70% over the next year. And so that is I'm also it will allow us to push on some of these automated we actually made progress in the quarter our automated approval rate was up into the 80s first time the companies achieved that.

Todd Schwartz: Our automated approval rate was up into the 80s, first time the company has achieved that. We are continuing to make progress even on the legacy system. This will unlock our ability to start to move those metrics higher and better service our customer. We think the cycle time from app to fund for some of the more manual applications is going to go down significantly. That is another benefit of the new system.

Speaker #2: So we're continuing to make progress even on the legacy system. But this will unlock us to our ability to start to move those metrics higher and better service our customer.

Speaker #2: We think the cycle time from app to fund for some of the more manual applications is going to go down significantly. So that's another benefit of the new system.

Speaker #4: I appreciate that. And then lastly, wanted to get a little bit more color on the line of credit as well. You had mentioned the testing that had happened this past quarter, and I just wanted to see if you could dive in deeper into more of the findings or the discoveries that you guys have found out.

[Analyst] (Stonegate Capital Partners): I appreciate that. Lastly, I wanted to get a little bit more color on the line of credit as well. You had mentioned the testing that happened this past quarter, and I just wanted to see if you could dive in deeper into more of the findings or the discoveries that you guys have found out. Also, I wanted to see if the LOC, the line of credit, is going to be more specifically for new customers or current customers as well. Thank you.

Maximus Alexander-Nino: I appreciate that. Lastly, I wanted to get a little bit more color on the line of credit as well. You had mentioned the testing that happened this past quarter, and I just wanted to see if you could dive in deeper into more of the findings or the discoveries that you guys have found out. Also, I wanted to see if the LOC, the line of credit, is going to be more specifically for new customers or current customers as well. Thank you.

Speaker #4: And also wanted to see if the line of credit is going to be more specifically for new customers, or for current customers as well.

Speaker #4: Thank you.

Speaker #2: Yeah. Good question. Well, first of all, I think the way customers can draw on their lines and the flexibility of when they draw as opposed to kind of the installment right now is done at a refinance or if someone's paid in full, they would re-loan out.

Todd Schwartz: Well, first of all, I think the way customers can draw on their lines, and the flexibility of when they draw as opposed to the installment right now is done at a refinance or if someone is paid in full they would reload out. That ability to draw smaller increments over time and give the customer the flexibility of when they choose to do that. Also coupled with the payment stream being a little bit longer dated to allow for more affordability of monthly payment. We feel like those two aspects of this are really going to do a great job to respond to some of the market dynamics we are seeing. One of the things we will be testing is what customers select in a market where we are going to offer both. That is not in the original launch plan.

Speaker #2: So that ability to draw smaller increments over time and give the customer the flexibility of when they choose to do that also coupled with the payment stream being a little bit longer dated to allow for more affordability of monthly payment.

Speaker #2: So, we feel like those two aspects of this are really going to do a great job to respond to some of the market dynamics we're seeing.

Speaker #2: We're one of the things we will be testing is what customers select in a market where we're going to offer both. That isn't in the original launch plan, the original launch plan will allow for three new geographies.

Todd Schwartz: The original launch plan will allow for three new geographies for us to offer a line of credit to customers, so net new customers. Soon after, we will be in market where customers can choose which product they desire and what best fits their financial needs. As we run those tests, we will be updating everyone with the results and kind of see where we think that the new product fits best in the market.

Speaker #2: For us to offer a line of credit to customers—so, net new customers. But soon after, we will be in market where customers can choose which product they desire and what best fits their financial needs.

Speaker #2: And so, as we run those tests, we'll be updating everyone with the results and kind of seeing where we think that the new product fits best in the market.

Speaker #4: Great, thank you. That's all from me. Good luck next quarter.

[Analyst] (Stonegate Capital Partners): Great. Thank you. That's all for me. Good luck next quarter.

Maximus Alexander-Nino: Great. Thank you. That's all for me. Good luck next quarter.

Speaker #2: Thank you.

Todd Schwartz: Thank you.

Speaker #3: Thank you. We'll take our next question from Mike Rondal with Northland Securities. Please go ahead, your line is open.

Operator: Thank you. We'll take our next question from Mike Grondahl with Northland Securities. Please go ahead. Your line is open.

Operator: Thank you. We'll take our next question from Mike Grondahl wid Securities.th Northland Securities. Please go ahead. Your line is open.

Speaker #6: Hey, guys. Thanks. With the reduced outlook, just trying to understand, between the line of credit product and the Lola migration, are those both about a month delayed?

Mike Grondahl: Hey, guys. Thanks. With the reduced outlook, just trying to understand between the line of credit product and the LOLA migration, are those both about a month delayed? Trying to understand that a little bit better. The revenue outlook down, I don't know, probably $40 to $50 million. Adjusted EPS about $0.40 at the midpoint. Is that more LOC versus LOLA? Just trying to understand the breakdown there because it's kind of big numbers for these two delays.

Speaker #6: Trying to understand that a little bit better, and then revenue outlook down, I don't know, probably $40 to $50 million. Adjusted EPS about $0.40 at the midpoint.

Speaker #6: Is that more LOC versus Lola? Just trying to understand the breakdown there, because it's kind of big numbers for these two delays.

Speaker #2: Yeah. I mean, the line of credit, like I said, opens up to three new geographies, and we think there's meaningful volume to come out of it.

Todd Schwartz: The line of credit, like I said, opens up three new geographies. And we think there's meaningful volume to come out of it, so every month that it gets delayed obviously impacts our origination targets. I do think, though, that on the LOLA side, it's less about that. It has delayed some of our product initiatives. The way it would hurt originations for the LOLA is we are originating new loans into the LOLA system. It's the legacy products, and it's the product initiatives that we have scheduled, but we're not able to enact because of the delay in the system. And so those are high ROI initiatives that we know will result in boost in origination growth. So when you couple that with the LOC and the delays, that is the reason for bringing down some of the origination targets.

Speaker #2: So every month that it gets delayed, obviously, impacts our origination targets. I do think, though, that on the Lola side, it's less about that.

Speaker #2: It has delayed some of our product initiatives. So, the way it would hurt originations for the Lola is we are originating new loans into the Lola system.

Speaker #2: It's the legacy products. And it's the product initiatives that we have scheduled but we're not able to enact because of the delay in the system.

Speaker #2: And so those are high ROI initiatives that we know will result in boost in origination growth. So when you couple that with the LOC and the delays, that is the reason for bringing down some of the origination targets.

Todd Schwartz: And so those are high ROI initiatives that we know will result in boost in origination growth. So when you couple that with the LOC and the delays, that is the reason for bringing down some of the origination targets. I do, however, feel though that we are hitting on some things now, and I do feel like we're going to be able to return to growth in the second half with some of the things we've been working on throughout the quarter and the testing with our customer intelligence.

Speaker #2: I do, however, feel, though, that we are hitting on some things now. And I do feel like we're going to be able to return to growth in the second half with some of the things we've been working on throughout the quarter and the testing with our customer intelligence.

Todd Schwartz: I do, however, feel though that we are hitting on some things now, and I do feel like we're going to be able to return to growth in the second half with some of the things we've been working on throughout the quarter and the testing with our customer intelligence.

Speaker #6: Got it. And is it are you characterizing it as a one-month delay or how would you describe the LOC delay? In terms of time.

Mike Grondahl: Got it. Are you characterizing it as a one-month delay, or how would you describe the LOC delay in terms of time?

Speaker #2: Yeah. Our goal is to get this in market in September. So that would effectively be a two-month delay from where we originally planned.

Todd Schwartz: Our goal is to get this in market in September. So that would effectively be a two-month delay from where we originally planned.

Speaker #2: But we feel pretty confident now. We're getting a lot closer and feel that there's a high likelihood that we can get this thing launched in September, which is exciting.

Mike Grondahl: Okay.

Todd Schwartz: We feel pretty confident now. We are getting a lot closer, and feel that there is a high likelihood that we can get this thing launched in September, which is exciting.

Speaker #6: Got it. And then, lastly, net charge-offs on average receivables: 52% from 43%. On revenue, 40 versus 32. I mean, despite that, I think you're kind of saying the credit environment's pretty stable.

Mike Grondahl: Got it. Lastly, net charge-offs on average receivables 52% from 43%, on revenue 40 versus 32. Despite that, I think you are kind of saying the credit environment is pretty stable. It is nothing that you are worried about, but those increases seem kind of significant. Could you just reconcile that for us?

Speaker #6: It's nothing that you're worried about. But those increases seem kind of significant. Could you just reconcile that for us?

Speaker #2: Yeah, I mean, listen, I think first of all, our recoveries are up, not only on a dollar basis—collecting more—but as a percentage as well.

Todd Schwartz: Well, listen, I think first of all, our recoveries are doing from a percentage, from not only on a dollar basis, collecting more, but as a percentage as well. So the net number, those are real, the recoveries. What I will say is if we were growing at 9%, 10%, those numbers come down to about 500 basis points, right? So the 40% comes down to 35. So there is some elevation. We acknowledge that, and we have kind of talked about that over the last two quarters from the lows of early 2025. I do think it is a little bit exacerbated because of our, on the origination side, the little bit of slower growth. So it exacerbates those numbers a little bit from our standpoint. We are very happy to see the strong performance and recoveries, which always is welcome when looking at the total picture.

Speaker #2: So the net number—those are real, the recoveries. But what I will say is, if we were growing at 9–10 percent, those numbers come down to about 500 basis points.

Speaker #2: Right? So the 40% comes down to 35. So there is some elevation. We acknowledge that. And we've kind of talked about that over the last two quarters from the lows of early '25.

Speaker #2: But I do think it's a little bit exacerbated because of our on the origination side, a little bit of slower growth. So it exacerbates those numbers a little bit.

Speaker #2: From our share point. But we are very happy to see the strong performance and recoveries, which is always welcome when looking at the total picture.

Speaker #6: Got it. Lastly, I guess, any update on the bank merger or acquisition?

Mike Grondahl: Got it. Lastly, I guess any update on the bank merger or acquisition?

Todd Schwartz: Yeah. All I can say, we are in the middle of our comment period. All I can really say is we have submitted our application and are working with the regulatory agencies at this time. As soon as we have updates to provide, we will in the coming quarters. As of now, we cannot really comment on it more to say than we have submitted our business application and are working with the regulatory agencies.

Speaker #2: Yeah. I mean, all I can say, we're in the middle. Of our common peers, all I can really say is we've submitted our application.

Speaker #2: And are working with the regulatory agencies at this time. As soon as we have updates to provide, we will, in the coming quarters. But as of now, we can't really comment on it more, other than to say that we've submitted our business application and are working with the regulatory agencies.

Speaker #6: Got it. Is it reasonable to still think by year-end? Has that timeline changed in your guys' view at all?

Mike Grondahl: Got it. Is it reasonable to still think by year-end? Has that timeline changed in your guys' view at all?

Speaker #2: Yeah, I mean, I would like to think so. We're ready to fulfill on that timeline. Obviously, it's a little bit out of our control.

Todd Schwartz: Yeah. I would like to think so. We are ready to fulfill on that timeline. Obviously, it is a little bit out of our control. That would be our plan as of now is Q4.

Speaker #2: But that would be our plan as of now, is Q4.

Speaker #6: Okay. Hey, thank you.

Mike Grondahl: Okay. Hey, thank you.

Speaker #3: Thank you. This concludes our question and answer session and brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This concludes our question and answer session and brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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