OppFi Inc. 2026 Q3 Earnings Call

You may begin. Thank you, operator.

Good morning and welcome to OppFi's third 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. 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.

In addition, certain important information related to the BNCC transaction will be 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. Please refer to the disclaimer information included in our earnings release. With that, I would like to turn the call over to Todd.

Thanks, Jared, and good morning, everyone. Thank you for joining us today. I'll begin with a business update, and then Pam will walk through our strategic investments and third-quarter financial results in detail. Q3 was one of the most productive quarters in our company's history in executing across key strategic initiatives. At the same time, we believe our current share price does not reflect the long-term intrinsic value of the business. Our stock trades well below peer multiples on both a trailing and forward basis. When the market is not getting us credit for our investment and long-term earnings potential, we intend to utilize our board-authorized $40 million repurchase program when we believe repurchases represent an attractive use of capital. First, an update on our pending acquisition of BNCC. On September 17th, BNCCORP, Inc. stockholders overwhelmingly approved the transaction, leaving regulatory approval as the final step.

We continue to work constructively with regulators on our bank merger applications, and we remain confident the combination will benefit our customers through a broader product set and lower costs, and BNCC's customers through enhanced digital banking capabilities. Next, I am pleased to share that we launched our new line of credit product with our bank partners in Q3. LOC expands credit access while responding to consumers' growing preference for more flexible products. We are beginning to scale it in new geographies and will test it in existing markets to give customers more flexible options. We believe the product will also open new marketing funnel opportunities, which we plan to test in Q4. We see considerable growth potential for LOC in 2027. We built and launched the technology behind LOC in less than six months, thanks to our new LOLA platform.

Its clean, modular architecture lets our product and technology teams move faster, shortening development cycle times for new products and other initiatives across originations, servicing, and risk. The increased agility allows us to deliver more roadmap priorities and innovations at a faster pace. In our core installment business, we continue to focus on affordability and supporting our program's reach. Our latest pricing initiative, Pricing Test 5, represents our most significant rate and payment reduction opportunity to date. Alongside flexibility, customers want more affordable payments and lower APRs, and we are responding by lowering monthly payments and rates for a large portion of customers. This initiative reflects a combination of macro conditions and competitive dynamics, as well as insights from our customer data, which suggests that offering more affordable monthly payments over longer durations can lead to improvement across key loss indicators.

Early indicators are positive, and we expect this to support origination growth in Q4 and into 2027. The LOLA migration for our installment business is progressing well. Substantially all new customers now run on the new system. The next step is migrating existing customers and data, which we expect to be substantially complete heading into 2027. LOLA has meaningfully strengthened our ability to launch and service multiple products, shortened cycle times for product enhancements, compliance, and other workflows, and the LOLA platform now enables us to embed AI agents across originations and servicing workflows over time. We expect development of these capabilities to begin in 2027 and look forward to sharing updates as we progress. In Q4, we expect to launch Model 7, our most powerful underwriting and targeting model yet.

Early results show a 20% improvement in aligning marketing pre-screening scores with our bank partners' established underwriting criteria, enabling us to make more accurate and better-targeted offers to potential customers, particularly on partner sites. When customers receive offers that more closely match the loan amount they ultimately qualify for, application-to-funded rates are significantly higher. By improving our accuracy, we expect to drive higher conversion and application-to-funded rates. The model is currently in validation, and we look forward to launching it this quarter. Lastly, Bitty, our small business funding investment, recently surpassed $1 billion in total funding since 2021, marking a significant milestone in its growth. During the quarter, Bitty launched a new premier funding product as part of its strategy to become a full-spectrum small business funder.

The offering expands Bitty's competitive reach into the near-prime segment, providing larger funding amounts, more attractive pricing, and longer repayment terms, allowing Bitty to compete more effectively across a broader range of small business customers. Bitty is also advancing its AI and automation strategy across the entire funding cycle, from underwriting and credit decisioning to funding and servicing. These initiatives are designed to streamline the customer experience, accelerate decision-making, enhance portfolio performance, and create a more efficient, scalable operating platform. Early results are encouraging, and we believe the combination of expanded market reach, AI-driven innovation, and a scalable operating platform creates a compelling opportunity for Bitty to accelerate growth in 2027 and beyond. Taken together, this was an important quarter of progress in building the foundation of OppFi's next phase of growth.

We are well underway in strategically transforming the business, investing more than $150 million this year to support continued growth on our path to our objective of $500 million in adjusted net income within five years. We remain focused on our vision of becoming a leading technology-enabled bank platform that provides 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 morning, everyone. I want to build on Todd's comments regarding the quarter. Higher-for-longer inflation and subdued consumer sentiment continue to affect our customer base, which tends to be disproportionately impacted relative to the broader population. Against this backdrop, we remain focused on maintaining a strong balance sheet with healthy profit margins over shorter-term volume growth. OppFi has repeatedly demonstrated throughout its history that disciplined underwriting, strong credit performance, superior unit economics, and sustainable profitability create more long-term value than pursuing growth at any cost in the near term. Turning to our financial performance for the third quarter, we generated revenue of $149 million, a 3.8% decrease from Q3 2025. Originations for the quarter decreased by approximately 7% to $229 million compared to the prior year quarter, primarily driven by tightened marketing partner screening criteria. We expect the introduction of Model 7 to help improve future performance.

While credit losses are elevated compared with the prior year period, net charge-offs as a percentage of average receivables remain broadly in line with historical averages, driven in part by our strong recoveries. Net charge-offs as a percentage of revenue during the quarter increased to approximately 40% from 35% in the prior year period, and net charge-offs as a percentage of receivables increased to approximately 53% from 47% in the prior year period. Given the denominator effect, these charge-off metrics appear inflated in times of slower growth. Moreover, we saw a reversion to the mean in credit, but note we believe it is overall stable. 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 $52 million or 35% of revenue, compared with 34% in the prior year period. On an unadjusted basis, including one-time expenses related to the BNCC transaction, expenses were 37% of revenue, compared with 36% of revenue in the prior period. While we continue investing in strategic initiatives, particularly those related to the BNCC transaction and platform development, we maintained disciplined expense management across the rest of the organization.