Oportun Financial Corporation

Greetings, and welcome to the Opportun Financial fourth quarter 2025 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Dorian Hare of Investor Relations. Please go ahead.

Thanks, and hello, everyone. With me to discuss OPPORTUNE's fourth quarter 2025 results are Roel Vasquez, Chief Executive Officer, and Paul Appleton, our Interim Chief Financial Officer, Treasurer, and Head of Capital Markets. I'll remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations and financial position, including projected adjusted ROE attainment and expected origination growth, planned products and services, business strategy, expense savings measures, and plans and objectives of management for future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, and we caution you not to place undue reliance on these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors. including our upcoming Form 10-K filing for the year ended December 31st, 2025. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe can be useful measures for period-to-period comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available in the Investor Relations section of our website. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP financial measures is included in our earnings press release, our fourth quarter 2025 financial supplement, and the appendix section of the fourth quarter 2025 earnings presentation, all of which are available at the investor relations section of our website at investor.opportune.com. In addition, this call is being webcast, and an archived version will be available after the call, along with a copy of our prepared remarks. With that, I will now turn the call over to Rahul.

Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. Our fourth quarter results were strong. We met or exceeded all of our guidance metrics, reflecting continued operational discipline and strong execution across the business. The four key headlines from the quarter are sustained GAAP profitability, solid credit performance, ongoing expense discipline, and a reduced cost of capital. Let's start with profitability. We generated $25 million of GAAP net income in 2025, including $3.4 million in the fourth quarter. This capped a year of significantly enhanced profitability for Opportune, with full-year gap net income improving by $104 million and adjusted EPS growing 89%. These results were driven by growth and originations, improved credit performance, balance sheet optimization, and disciplined expense management. Turning to credit performance, our annualized net charge-off rate was 12.3% in Q4, at the better end of the guidance range we provided. On the expense side, Q4 operating expenses of $84 million came in below the $92 million expectation set last quarter and marked our lowest quarterly spend as a public company. Driven by disciplined expense management, full year 2025 gap operating expenses totaled $362 million, a $49 million or 12% reduction from 2024. Finally, Our balance sheet optimization initiatives are lowering our cost of capital and positioning us for stronger long-term returns. Driven by corporate debt repayments as well as actions related to our ABS notes and warehouse facilities, Q4 interest expense, excluding $5.5 million of debt extinguishment costs, was $52 million. That was $4.1 million lower than Q3. We also completed a $485 million ABS transaction earlier this month, marking our fourth consecutive issuance with a sub 6% funding cost and a AAA rating on the senior notes. Paul will further detail our balance sheet optimization initiatives and how they factor into our 2026 expectations. With our Q4 and full year 2025 highlights covered, I'll now review how we're executing against our three strategic priorities. improving credit outcomes, strengthening business economics, and identifying high-quality originations. Starting with credit outcomes, as we discussed in our second quarter call, the first half of the year included a higher mix of new members than expected, so we shifted originations towards returning members. That adjustment was effective. 74% of second-half originations came from returning members, up from 64% in the first half. To further strengthen our risk management approach, we also introduced new early default models focused on new and returning members and added five new data sources into our underwriting process. In 2026, a key focus will be upgrading our decisioning infrastructure capabilities to accelerate model training and deployment, thereby enabling us to respond even faster to evolving credit conditions. Turning to business economics, we continue to make strong progress on efficiency and operating leverage. During full year 2025, our risk-adjusted net interest margin ratio improved 55 basis points year over year to 15.8%. As a reminder, that metric includes portfolio yield, net charge-offs, cost of capital, and loan-related fair value impacts. Our full year 2025 adjusted OPEX ratio improved 109 basis points year over year to 12.7% of our own portfolio. Together, these improvements drove strong operating leverage, lifting adjusted ROE by almost 1,000 basis points to 17.5%. I'm also pleased to share that we are advancing a new initiative designed to enhance our unit economics and progress towards 20% to 28% annual gap ROEs while expanding access to responsible credit. In partnership with potential new bank sponsors and warehouse providers, we are exploring the reintroduction of risk-based pricing above 36% APRs for select higher risk segments on shorter-term loans. This creates a meaningful opportunity to extend our mission of financial inclusion by responsibly serving customers that we would otherwise not serve while better aligning pricing and term length with risk in order to improve portfolio returns. At the same time, we are selectively testing modestly lower APRs for certain higher quality returning members to maximize lifetime value where competitive dynamics warranted. We're assuming only modest incremental profitability in the second half of 2026 as we roll this initiative out in a disciplined and measured manner. However, if executed successfully, we believe this initiative can drive higher earnings power in 2027 and beyond. Finally, on identifying high quality originations, we grew originations by 10% during full year 2025 while maintaining a conservative credit posture. We exceeded our prior expectation for high single digits percent growth by focusing on members with higher free cash flow and on channels that deliver the strongest results. In full year 2025, loan application growth more than doubled the rate of originations growth, while customer acquisition costs declined 6% to an average of $117. a testament to our strong loan demand, disciplined underwriting, and improved cost efficiency. And expanding our secured personal loans portfolio secured by members' autos remains a key pillar of our responsible growth strategy. SPL originations increased 51% in full year 2025. As a result, our secured portfolio grew 39% year over year to $226 million, and secured loans now represent 8% of our own portfolio, up from 6% at year end 2024. Importantly, secured personal loan losses were more than 600 basis points lower than unsecured personal loans during the year. To continue our strong SPL growth momentum into 2026, we've recently initiated new direct mail campaigns targeted specifically at potential SPL customers who own their vehicles. By executing against our three strategic imperatives, improving credit outcomes, strengthening business economics, and identifying high-quality originations, we've driven meaningful operational and profit improvement in 2024 and 2025. We're confident this disciplined framework will continue to support our momentum in 2026. With that, I'd like to now preview our initial 2026 outlook. While our member base remains resilient, inflation above federal reserve targets, declining wage growth, uneven job creation, and policy uncertainty continue to create a cautious environment for low to moderate income consumers. Our outlook prudently assumes these conditions persist throughout 2026 alongside our currently tight credit posture. We remain well positioned to adjust quickly as conditions evolve. The guidance for full year 2026 that Paul will soon detail for you is underpinned by mid-single digits originations growth, a 1% to 2% decline in average daily principal balance, revenue growth ranging from flat to a 2% decline, a net charge-off rate range with a midpoint reflecting slight year-over-year improvement, a reduction in interest expense of at least 10%, and substantially flat operating expenses. We expect these drivers to result in full-year 2026 adjusted EPS growth of 16% at the midpoint of our full-year guidance. We also expect higher profitability in the second half than the first as originations ramp under our normal seasonal pattern and loss rates improve. Now I will turn it over to Paul for additional details on our financial and credit performance as well as our guidance.