OppFi Inc. (OPFI) Earnings

Management highlights

- Strategic and Acquisition Updates: * Pending acquisition of BNC National Bank (BNCC) has had all required regulatory applications submitted to the OCC and relevant governing bodies; management targets closing in Q4 2026. The combined firm is expected to have capital levels well above regulatory requirements, with projected 2028 return on assets of at least 10% and return on equity of at least 35%, driven by revenue synergies from geographic expansion and cross-selling opportunities. * The quarter fell short of original financial expectations but delivered meaningful strategic progress, with over $150 million in planned 2026 investments to build a leading technology-enabled bank platform targeting $500 million adjusted net income within five years and ~$3 EPS by the end of 2028. - Product and Technology Updates: * Extensive testing of the new line of credit (LOC) product with a bank partner was completed in Q2; testing confirmed the product meets strong consumer demand for flexible, lower monthly payments with longer repayment terms, especially in the current macro environment. The LOC is on track to launch next month (September 2026), a deliberate timeline to ensure pricing, customer experience, and performance are fully validated. * The new modular Lola technology platform enabled development of the full LOC product in under six months, creating a scalable foundation that will speed up future product development cycles. Refinement of the full Lola system migration was extended by a few months to ensure a strong foundation for future growth and efficiency. - Credit and Operational Strategy: * Management prioritized balance sheet strength, disciplined underwriting, and long-term unit economics over near-term volume growth, tightening underwriting in segments with less attractive risk-adjusted returns to preserve portfolio quality. Recoveries performance remains a distinct competitive advantage for the firm. Operating expenses were well-controlled outside of strategic investments and one-time merger costs. * The company began share repurchases under the board-authorized $40 million repurchase program during the quarter, reflecting management's view that current share valuation does not reflect the firm's long-term earnings potential.

Guidance

- Full year 2026 guidance was revised downward to reflect delays in the line of credit launch and Lola system migration. The new 2026 guidance range is: 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. - Long-term guidance for 2027 and 2028 remains fully unchanged. Management continues to confirm confidence in the target of achieving approximately $3 of earnings per share by the end of 2028, and the long-term target of $500 million adjusted net income within five years.

Segment performance

OpFi does not break out performance into separate product segments in this call. Aggregate company financial results for Q2 2026 are: total revenue of $145 million, a 1.9% increase year-over-year (YoY) and a company record for any second quarter. Total originations decreased 9% YoY to $212 million, following intentional underwriting tightening in lower risk-adjusted return segments. Net charge-offs were 40% of revenue (up from 32% YoY) and 52% of receivables (up from 43% YoY), partially offset by recoveries that increased to $15 million from $11 million YoY. Total adjusted operating expenses were $49 million, equal to 34% of revenue (down 1 percentage point YoY); unadjusted expenses were 43% of revenue (up 4 percentage points YoY) due to one-time merger and corporate simplification costs. Adjusted net income decreased 27% YoY to $29 million, with adjusted EPS of 33 cents (down from 45 cents YoY) and an adjusted net income margin of 19.8%. Ending Q2 2026 balance sheet totals: $92 million in cash/cash equivalents/restricted cash, $277 million in total debt, $414 million in total stockholders' equity, and $541.8 million total funding capacity including $173.5 million in unused debt capacity.

Risks & headwinds

- Current consumer credit trends show variability, with net charge-off metrics elevated compared to prior year periods, partially driven by slower near-term originations growth that inflates charge-off ratio denominators. Management has responded by tightening underwriting in lower return segments to preserve portfolio quality. - The BNC National Bank acquisition closing timeline is partially dependent on regulatory approval, which is outside of management's full control, though the current target remains Q4 2026. - The delayed launch of the line of credit product and delayed completion of the Lola system migration led to Q2 originations falling short of original expectations, and required a downward revision to full-year 2026 financial targets.

Analyst Q&A

• Q: What consumer credit trends led to the recent underwriting tightening, given broad industry commentary on ongoing consumer resiliency? /

  A: Management began adjusting underwriting last summer after seeing shifting consumer sentiment, with current charge-off levels representing a normalization after two years of unusually strong credit performance. Consumers now prioritize lower monthly payments with longer repayment terms even if it increases total borrowing costs, so underwriting adjustments focused on correcting payment-to-income ratios to reduce future delinquency risk. Management expects to return to growth in the second half of 2026, and notes the firm's strong balance sheet and margin can operate effectively across market environments.

• Q: What share of the 2026 guidance downward revision comes from the Q2 underwriting tightening and lower starting balances versus delays to the line of credit (LOC) and Lola initiatives? /

  A: Nearly all of the guidance reduction stems from delayed timing of growth initiatives, rather than changes in credit loss or growth assumptions from the underwriting tightening. Management deliberately took extra time to validate product design and system performance (a "measure twice, cut once" approach) to lay a stronger foundation for the multi-product platform transformation, so the delayed launch of these initiatives pushed near-term originations and revenue into 2027.

• Q: What will be the primary early benefits of the new Lola platform? /

  A: The biggest immediate benefit is drastically faster new product development cycle time: the entire line of credit product was built on Lola's modular architecture in under six months without needing to modify legacy systems. Management targets a 70% reduction in new product development cycle times over the next year. Additional early benefits include higher automated approval rates (already reached the 80% range for the first time in company history) and faster app-to-funding times for manual applications.

• Q: Why are the reported net charge-off ratios significantly higher YoY, and does this indicate unexpected credit stress? /

  A: The elevated ratios are partially exacerbated by slower near-term originations growth, which shrinks the denominator for the percentage metrics; management estimates the charge-off ratio would be 500 basis points lower if the firm was growing at the expected 9-10% YoY pace. Charge-offs have been normalizing from the very low 25% levels seen in prior periods, and the firm has delivered strong, improved recovery performance that partially offsets higher gross charge-offs. Management notes credit conditions are currently stable.