OPPFI 3Q26 EARNINGS CONFERENCE CALL - OPPFI INC

Financial Performance:

• Q3 2026 revenue totaled $149 million, a 3.8% decrease year-over-year (YoY).
• Originations declined approximately 7% to $229 million, driven by tightened marketing partner screening criteria.
• Adjusted net income decreased 23% to $32 million; adjusted EPS fell to $0.37 from $0.46 YoY.
• Net charge-offs as a percentage of revenue rose to 40% (vs. 35% prior year) and as a percentage of receivables to 53% (vs. 47% prior year), attributed to the denominator effect of slower growth rather than deteriorating asset quality.
• Recoveries improved significantly to approximately $15 million from $11 million YoY, partially offsetting higher charge-offs.
• Adjusted operating expenses were $52 million (35% of revenue); total expenses including BNC transaction costs were $55.5 million (37% of revenue).
• Balance sheet ended with $141 million in cash, $350 million in total debt, and $443 million in stockholders' equity; $199 million of debt capacity remained unused.
• Free cash flow generation continued, enabling an active share repurchase program where nearly $18 million was bought back YTD.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance revised to $600–$610 million; adjusted net income to $115–$120 million; adjusted EPS to $1.34–$1.40.
• Long-term target of approximately $3.00 adjusted EPS by end of 2028 remains intact.
• Management expects 2027 to be a significant growth year, driven by the Line of Credit (LOC) product scale-up, launch of Earned Wage Access (EWA), and Model 7 underwriting enhancements.
• The BNC acquisition is anticipated to close in Q4 2026, pending final regulatory approval.
• Strategic investments totaling over $150 million are underway to support growth, platform migration, and the BNC transaction.

Business Segments and Product Lines:

• Installment Business: Launched "Pricing Test 5," a rate and payment reduction initiative targeting more affordable monthly payments; early indicators suggest potential for improved loss metrics.
• Line of Credit (LOC): Launched new LOC product in Q3 via the "Lola" technology platform; initial testing successful, with plans to scale in new geographies and existing markets in Q4.
• Bidi (Small Business): Total funding surpassed $1 billion since 2021; launched a "Premier Funding" product to target near-prime segments with larger amounts and longer terms.
• Technology: "Lola" platform migration is nearly complete for new customer originations, expected to be fully migrated by early 2027, enabling AI agent integration in 2027.
• Underwriting: "Model 7" to launch in Q4, expected to improve pre-screening alignment by 20%, thereby increasing application-to-funded rates.

Market and Competitive Landscape:

• Consumer sentiment remains subdued with "higher for longer" inflation impacting the lower-income customer base disproportionately.
• Competitive dynamics show growth in Line of Credit products; OPFI aims to capture this flexibility preference over installment-only products.
• Management notes peers incur significantly higher acquisition costs (up to double OPFI's percentage), allowing OPFI to maintain disciplined yields while offering competitive pricing.
• EWA (Earned Wage Access) is identified as a mainstream opportunity with strong product-market fit and unique marketing channels not available for traditional installment loans.

Risks and Challenges:

• Credit losses appear elevated in absolute terms due to slower volume growth (denominator effect), though charge-off rates relative to historical averages are stable.
• Macro economic conditions (inflation, consumer sentiment) continue to pressure origination volumes.
• Regulatory approval for the BNC bank merger remains the final, yet expected, hurdle; potential delays into Q1 2027 were noted as a risk.
• Strategic transformation requires substantial capital deployment ($150M+) which may pressure short-term margins.

Management Commentary and Tone:

• Tone is confident regarding long-term intrinsic value, describing current share price as trading at an "unfair multiple" well below historical and forward valuations.
• Management expressed strong conviction in the company's ability to reach $500 million in adjusted net income within five years.
• Emphasis placed on "disciplined underwriting" and "superior unit economics" over short-term volume growth at any cost.
• Executive leadership highlighted the successful execution of the Lola platform migration and the rapid 6-month development of the LOC product.

Analyst Questions and Answers:

• Product Strategy: Confirmed that LOC and EWA are primary growth levers for 2027; no other specific product launches currently detailed beyond these.
• Yield Management: Yield impact for Q4 expected to be flat YoY; management remains comfortable reducing yields for higher-quality customers to drive volume without compromising margin relative to peers.
• BNC Transaction: Anticipates regulatory resolution in Q4; deal structure is 50% stock, 50% cash, requiring no new external financing as ample cash exists ($130M purchase price).
• Capital Structure: A $75M facility drawn at ~12% interest provides capital flexibility for 2027; this is viewed as replenishing capacity rather than de-levering, maintaining a long-term trend of de-leveraging on a debt-to-equity basis.
• Investment Spend: Total strategic investments (including Bidi, Lola, BNC, and buybacks) exceed $150 million.

Other Key Points:

• The BNC transaction was overwhelmingly approved by BNC Corp stockholders on September 17, 2026.
• Citi's AI and automation strategy is being advanced across the entire funding cycle to streamline operations and enhance portfolio performance.
• Management intends to remain active in share repurchases under the $40 million authorized program whenever shares are deemed undervalued.
• "Pricing Test 5" reflects a strategic pivot toward longer-duration loans with lower monthly payments to improve affordability and loss indicators.