OppFi Earnings Call: Growth Plans Amid Credit Strain

Oppfi Inc ((OPFI)) has held its Q1 earnings call. Read on for the main highlights of the call.Claim 55% Off TipRanksUnlock hedge fund-level data and powerful investing tools for smarter, sharper decisions Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks OppFi’s latest earnings call painted an upbeat long-term picture despite visible short-term strain. Management highlighted solid top-line growth, expanding receivables and strong free cash flow, while underscoring a transformative bank acquisition and significant technology upgrades. Yet they were candid about higher credit losses, softer loan demand and heavy 2026 investment spend that are pressuring current profitability. Revenue Growth OppFi posted first-quarter 2026 revenue of $152 million, an 8% increase from a year earlier. Management credited the gain largely to growth in the loan book, reinforcing the company’s ability to expand even amid a more cautious consumer backdrop. Receivables Expansion Receivables ended the quarter around $445 million, up roughly 9% year over year, with commentary pointing to a 9.4% increase. The larger balance sheet provides a bigger revenue base but also heightens exposure to credit cycles as consumer conditions fluctuate. Strong Free Cash Flow and Capital Allocation The company generated $69 million in free cash flow during the quarter, bolstering its balance sheet and strategic flexibility. OppFi also repurchased 1 million shares for $9.9 million and announced a new $40 million buyback program, supported by $625 million in total funding capacity and $241 million of unused debt. Transformative BNC Acquisition OppFi unveiled a roughly $130 million acquisition of BNCC Corp and BNC National Bank, a deal that brings more than $1 billion in assets and about $1 billion in deposits. With over 80% of those deposits costing under 2%, management expects the combination to cut funding costs, expand lending into potentially all 50 states and meaningfully lift adjusted earnings per share over the next three years. Corporate Simplification and Tax Benefit The firm shifted from an Up-C structure to a traditional C corporation and ended its tax receivable agreement, simplifying its corporate setup. It recorded about $466 million in tax-amortizable goodwill, which is expected to translate into roughly $111 million of future cash tax savings over time. LOLA Platform Deployment and Product Innovation OppFi continued rolling out its LOLA technology platform, with Model 6.1 fully deployed and Model 7 slated for the fall. Early results show auto-approval rates edging up from 78.6% to 79.2%, and management expects cycle times for product enhancements to be cut roughly in half as it migrates origination and servicing systems and prepares a new line-of-credit product for summer 2026. Expense Discipline Operating expenses held steady at 34% of revenue in the first quarter, flat versus last year despite meaningful spending on technology and strategic initiatives. This suggests the company is managing its cost base carefully even as it invests heavily in future growth. Improved Recoveries Recoveries jumped 38% compared with the prior-year quarter, helping to cushion the impact of rising defaults. Stronger collections are a critical offset as the company navigates a tougher credit environment and works to stabilize loss trends. Decline in Originations Loan originations slipped 7% year over year to $176 million as OppFi tightened credit in certain customer segments. Management also cited reduced demand tied to higher average tax refunds, which left some consumers less reliant on short-term borrowing. Elevated Credit Losses Net charge-offs rose sharply, with charge-offs climbing to 42% of revenue from 35% a year ago and to 55% of receivables from 47%. The higher loss rates underscore the strain lower-income borrowers are facing and pose a near-term drag on profitability. Pressure on Yield and Profitability Revenue yield slipped to 131% from 136% in the prior-year quarter, reflecting both mix and credit dynamics. Adjusted net income declined 11% to $30 million and adjusted EPS fell to $0.35 from $0.38, showing that growth in the portfolio has yet to fully offset rising credit costs and investment outlays. Near-Term Demand Headwinds Management pointed to historically weak consumer sentiment, ongoing inflation and geopolitical tensions, including impacts on gas prices, as factors weighing on customer appetite for loans. These pressures have prompted a cautious near-term growth stance even as the company positions for a better environment. Large Near-Term Investment Spend OppFi is channeling more than $150 million into 2026 initiatives, including the LOLA platform, the BNC acquisition and restructuring tied to its corporate transition. While these moves may constrain near-term earnings and limit other uses of cash, management argues they are essential to building a more competitive, diversified and scalable franchise. Forward-Looking Guidance and Strategic Outlook The company reaffirmed its 2026 guidance while reiterating plans to close the cash-and-stock BNC deal in the fourth quarter of 2026. Management forecasts the acquisition will lift adjusted EPS by at least 25% in year one and build to 50% by year three, supporting targets for return on assets near 10% and return on equity around 35% by 2028, backed by robust capital and ongoing tech-driven product expansion. OppFi’s earnings call revealed a business at a strategic crossroads, balancing disciplined cost control and strong cash generation against higher credit losses and softer demand. Investors are being asked to look through a choppy 2026 as management bets on the BNC acquisition and the LOLA platform to lower funding costs, broaden reach and accelerate product innovation, with the goal of delivering materially stronger returns over the next several years.