管理層發言
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. You may begin.
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, 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 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. 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.
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. First, I'd like to provide an update on our pending acquisition of BNC National Bank. We're pleased to announce 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. 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. 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. 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 five 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.
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 the larger geographic footprint. 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. 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 at least 10% and returns on equity of at least 35%. 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. Originations for the quarter decreased by 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. 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 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 continue 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. 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 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. 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 $92 million in cash, 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. With strong liquidity position and balance sheet flexibility, it 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. 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, but 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.
分析師問答
At this time, we will open the call for questions. Please follow the operator's instructions to queue for a question.
Todd, wondering if you can provide just a little more color on sort of your assessment of what you're seeing from your consumers vis-a-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. And maybe if you can just share a little more on what led to some of the tightening that you enacted in the quarter?
Yes. It actually started last summer when we saw some shifts in consumer sentiment. If you look at the average over the last four years, charge-offs followed a really strong two-year window and we're seeing some reversion toward more normalized levels. With our risk-based pricing and some of the term testing we're doing, affordability has become very, very important for consumers. Consumers are opting for higher total costs to keep their monthly payments affordable, and we need to be responsive to competition and to what others are providing in the marketplace. That's why we're excited about the line of credit product. There are also things we can do with installment products to better serve our customers. If you're getting the payment-to-income calculation wrong with customers, that is a fundamental underwriting rule and it will cause more delinquency or lower repayments overall. With our risk-based pricing, term testing and new marketing initiatives, we feel very good about the second half and that we'll start to grow again and get back on track. There were some external head fakes with geopolitical events and other factors, but from our business standpoint we can operate in any environment. We prioritized margin and balance sheet strength during the transformation and the bank acquisition, but we're getting back to growth now and we see a lot of opportunity. We're seeing some competitors provide more affordability on payments to allow for more growth, and we think we can be competitive and bring products to market that customers will succeed with.
Got it. Understood. Maybe as a follow-up: as we think about the second-half outlook and the guidance reduction, can you give us a sense of how much of that is related to the lower starting point in balances you're exiting Q2 with and the roughly one-month delay in rolling out LOLA and the line of credit? That would be one bucket, and the other could be everything else — changes in loss rate assumptions, fair value, how much is just the Q2 tightening and lower jumping-off point. Are there any other factors behind the guidance that we should be aware of?
We've been operating in this credit environment for over a year, so we're comfortable with where we're at and see stability. The guidance revision is primarily driven by the later onset of some of our growth initiatives. In a short three-month reporting window, that shows up as slower growth, even though we're making significant progress operationally with teams and product initiatives. We're retooling the business to set it up for a much larger scale, multi-product platform. So it's mainly a timing issue where the line of credit didn't hit the market as soon as we originally planned, and we're also working through some data migration items related to LOLA to ensure we measure twice and cut once while keeping the balance sheet strong.
We'll take our next question from Dave Storms with Stonegate Capital Partners.
This is Maximus. I'll be asking questions for Dave Storms today. Just wanted to start off on LOLA. As the platform gets further rolled out in the second half of the year, kind of just wondering where you think the biggest benefit will be first. Is it more better conversion, servicing efficiencies, recoveries? Or if you have any other color, that would be great.
One of the benefits is speed to market for new products. We developed our new line of credit in less than six months because it was built on the new system and modular architecture; we did not have to touch the legacy system to develop it. That demonstrates the cycle-time advantage for development and bringing products to market. Our goal is to reduce cycle times by 70% over the next year. This system will also allow us to increase automation. We made progress in the quarter on the legacy system as well: our automated approval rate moved into the 80s for the first time the company has achieved that. We'll continue to move those metrics higher and better serve our customers. Cycle time from application to funding for more manual applications should decline significantly as a result.
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 happened this past quarter. I just wanted to dive deeper into more of the findings or the discoveries that you guys have found out. Also wanted to see if the LOC, the line of credit, will be more specifically for new customers or for current customers as well?
Customers can draw on their lines in smaller increments over time, which offers flexibility compared to installment loans that require refinance or reloan when paid in full. The ability to draw intermittently and have a longer-dated payment stream improves monthly affordability. Those two aspects respond to the market dynamics we're seeing. One of the tests we'll run is to see what customers select in markets where we offer both products. The original launch will target three new geographies, focusing on net new customers. Shortly thereafter we'll be in markets where customers can choose between products and we'll run tests to see which product fits best for various customer segments. We'll update everyone with results as those tests run.
We'll take our next question from Mike Grondahl with Northland Securities.
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. And then revenue outlook down probably $40 million 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.
The line of credit opens in three new geographies and we expect meaningful volume from that. Every month it is delayed impacts our origination targets. On the LOLA side, it's less about a direct one-to-one delay and more that it has delayed some product initiatives. We originate new loans into LOLA as part of product initiatives that we believe have high ROI and will boost originations. Because those initiatives were delayed, origination targets were reduced. When you couple the LOC delay and the postponed product initiatives related to the LOLA migration, that's the reason for lowering origination expectations. I do feel we're hitting on the right things now and expect to return to growth in the second half with these initiatives and customer testing.
Got it. Are you characterizing it as a one-month delay, or how would you describe the LOC delay in terms of time?
Our goal is to get this in market in September. That would effectively be a two-month delay from where we originally planned, but we feel much closer now and believe there is a high likelihood we can launch in September.
Got it. And then lastly, net charge-offs on average receivables are 52% from 43%. On revenue, 40% versus 32%. Despite that, you're saying the credit environment is pretty stable. It's nothing that you're worried about. But those increases seem significant. Could you reconcile that for us?
Recoveries are improving both in absolute dollars and as a percentage, which offsets charge-offs to some extent. Also, because we had slower growth, the denominator effect makes those percentage metrics look higher. If we were growing at 9% to 10%, those percentages would come down by roughly 500 basis points. There is some elevation from the lows of early 2025, and we acknowledged that over the last two quarters, but the slower origination pace exacerbates the apparent increase. Overall, we remain comfortable with portfolio performance and encouraged by recovery trends.
Lastly, I guess any update on the bank merger?
We have submitted our applications and are working with the regulatory agencies. As soon as we have updates to provide, we will in the coming quarters. For now, we cannot comment further beyond saying we've submitted our business application and are engaging with the regulators.
Got it. Is it reasonable to still think by year end? Has that timeline changed in your view at all?
I would like to think so. We're ready to fulfill that timeline, though regulatory timing is not entirely in our control. As of now, our plan remains to close in Q4.
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.