David Scharf

David Scharf from Citizens Capital Market inquired about the prioritization of PRA Group's numerous strategic initiatives, seeking guidance on the top three areas investors should focus on, such as offshoring or outsourcing. He also asked about potential new asset classes PRA Group is exploring.

Answer

President and CEO Martin Sjolund highlighted three main vectors: capital and investing (disciplined allocation, strong funding), operations (cost flexibility, lean platform, technology modernization, AI leverage), and people and culture. Sjolund declined to specify new asset classes but noted exploration of adjacent opportunities, emphasizing a careful, data-driven approach to building capabilities before scaling.

David Scharf from Citizens Capital Markets inquired about the prioritization of PRA Group's extensive 3.0 strategy initiatives, seeking clarity on the top three focus areas for investors, and also asked about potential new asset classes under consideration.

Answer

Martin Sjolund, President and CEO of PRA Group, highlighted three main themes: disciplined capital and investing with a strong funding structure, creating cost flexibility in operations, and modernizing the platform with technology, particularly AI. He declined to specify new asset classes but noted a careful approach to exploring adjacent opportunities leveraging existing capabilities.

David Scharf of Citizens Capital Markets and Advisory inquired about the U.S. portfolio supply environment, asking about the volume of seller relationships, potential new sellers, and growth in non-credit card asset classes. He also asked about the long-term target for the legal channel's collection mix and its impact on the cash efficiency ratio.

Answer

Martin Sjolund, President and CEO, stated that while the U.S. buying environment is elevated, PRA Group maintains a disciplined global capital allocation framework. He noted the company has strong, long-standing seller relationships and is cautiously exploring new asset classes but remains focused on its core business. Regarding the legal channel, Sjolund explained there is no specific ceiling target for its mix, as the strategy is to maximize the net present value of each account over time. Rakesh Sehgal, EVP and CFO, added that legal collection costs are expected to grow 15-20% for the remainder of 2025, driven by strong 2024 portfolio purchases.

David Scharf from JMP Securities inquired about the state of the U.S. consumer, questioning if the Q1 cash collection shortfall was due to a weaker tax refund season or broader consumer stress, and asked about the rationale for lowering the full-year return on tangible equity guidance.

Answer

President and CEO Vik Atal and EVP and CFO Rakesh Sehgal clarified that the shortfall was due to internal seasonality modeling being too aggressive, not a decline in consumer health, noting that consumer engagement remains positive. Rakesh Sehgal highlighted that despite the miss against their model, underlying metrics like year-over-year cash collections (+11%) were strong. Regarding the guidance change, Vik Atal explained it reflects both the Q1 results and a prudent, cautious stance for the remainder of the year due to general macroeconomic uncertainty.

David Scharf asked about the drivers of strong European portfolio supply, the long-term ceiling for the cash efficiency ratio, and the potential for new U.S. competitors amid a changing regulatory landscape. He also sought clarification on the treatment of the gain from the Brazil transaction.

Answer

Vik Atal, President and CEO, explained that the strong European supply in Q4 was due to broad market volume, not yet a result of competitors' challenges. He noted that while technology and AI could improve efficiency long-term, current gains are driven by operational initiatives like offshoring. Atal also expressed confidence that high regulatory and operational barriers would limit new U.S. competition in the foreseeable future. He confirmed the gain on the Brazil sale is excluded from 2025 guidance.

David Scharf asked about the return on investment profile for European versus North American portfolio purchases, the potential collection impact from recent hurricanes, and the outlook for interest costs given the company's variable rate debt.

Answer

EVP and CFO Rakesh Sehgal explained that while European portfolios have lower purchase price multiples and longer collection tails, higher cash efficiency often results in comparable returns to the U.S. under their global investment framework. CEO Vik Atal added that any impact from hurricanes is not meaningful due to global diversification. Rakesh Sehgal also noted that with about 60% of debt at a fixed rate and a focus on managing leverage within their 2x-3x target range, the company is positioned to handle the rate environment.

David Scharf with Citizens Capital Markets inquired about Encore Capital Group's decision to provide 2026 EPS guidance, asking about the rationale for a single point estimate and the expected contributions from share buybacks and legal expenses. He also questioned whether a less onerous regulatory environment has influenced sellers' engagement with new competitors or if the buyer landscape remains concentrated.

Answer

Ashish Masih, President and CEO of Encore Capital Group, explained that the EPS guidance reflects strong purchasing and collections, effective execution, and a desire to align investor expectations with the company's prospects, feeling comfortable with the $12 estimate. He noted that while legal expenses might rise with increased account purchases, the percentage of legal collections is at an all-time low due to early-stage digital and call center collections. Tomas Hernanz, EVP and CFO, added that cash efficiency margins are expected to improve. Regarding competition, Mr. Masih stated that regulatory rules are stable and have not led to new competitors, and while there's some chatter from banks about selling, nothing material has changed in the competitive landscape.

David Scharf from Citizens Capital Markets inquired about Encore Capital Group's decision to provide 2026 EPS guidance, specifically asking about the rationale for offering a single point estimate of $12 per share and the factors contributing to the 10% EPS growth, including future share buybacks and legal expenses. Scharf also questioned the impact of the current regulatory environment on competition within the U.S. debt buying market.

Answer

President and CEO Ashish Masih explained that the guidance reflects strong purchasing and collections, stable Cabot performance, and MCM's operational excellence, noting that previous market estimates didn't fully capture Encore's prospects. He clarified that while share repurchase impact from 2025 is estimable, no specific guidance for 2026 buybacks is provided. Masih also stated that legal expenses would rise with increased account purchases but are leveling off, with a growing shift to call center and digital collections. EVP and CFO Tomas Hernanz added that cash efficiency margins are expected to exceed 58% in 2026, indicating operating leverage. Regarding competition, Masih confirmed that regulatory rules are stable and haven't led to new competitors, and the selling side chatter about banks selling or testing waters is not material.

Speaking for David Scharf, Zachary Oster from Citizens JMP Securities requested more detailed guidance on the line items within operating expenses, following a significant improvement in the cash efficiency ratio.

Answer

EVP and CFO Tomas Hernanz stated that the company would not provide guidance on individual expense lines. However, he guided for the cash efficiency margin to remain near the current Q1 level of 58.3% for the rest of the year. He explained that costs are expected to grow in line with collections as the company incurs expenses to onboard the large volume of recently purchased portfolios, while still maintaining significant operating leverage.

David Scharf questioned the significant Q4 goodwill impairment at Cabot, seeking confidence that issues are resolved after a similar write-down a year prior, and asked for the rationale behind exiting markets in Italy and Spain.

Answer

President and CEO Ashish Masih explained that the current impairment was driven by a reforecast of Estimated Remaining Collections (ERC) and the exit from the Italian NPL market. He differentiated this from the prior year's charge, expressing confidence that Cabot is now on a more solid footing. He clarified that Encore exited the Italian market entirely and the secured NPL market in Spain, but remains active in Spain's unsecured and SME debt markets.

David Scharf asked about Upstart's target balance sheet exposure for 2028 given the $2.5 billion revenue target and recent 20% reduction, and whether the 25% EBITDA margin guidance for 2028 represents a steady-state level or if higher margins are possible.

Answer

Dave Girouard, Co-founder and CEO, stated they don't target a specific exposure level but use the balance sheet as a tool for incubating new products, expecting fee-based revenues to dominate. Sanjay Datta, CFO, added the strategy is to build the largest, most resilient third-party capital supply chain. Paul Gu, Co-founder and CTO, attributed margin expansion to operating leverage and internal AI adoption, not viewing 25% as a terminal state and seeing room for higher margins.

David Scharf asked about Upstart's balance sheet exposure target for 2028, given the recent 20% sequential reduction. He also sought clarification on the 2028 margin guidance, specifically if the 25% adjusted EBITDA margin represents a steady-state level of profitability at scale.

Answer

Dave Girouard, Co-founder and CEO, stated that Upstart uses its balance sheet as a tool for incubating new products and proving models, not as a predominant lender, and doesn't target a specific exposure level. Sanjay Datta, CFO, emphasized building a resilient third-party capital supply chain. Paul Gu, Co-founder and CTO, attributed the 2028 margin expansion to operating leverage, with fixed costs growing slower than revenue and contribution profits, and internal AI adoption. He clarified that 25% is not a terminal state and sees room for further margin improvement.

David Scharf of Citizens JMP asked if the 2025 net interest income (NII) guidance includes significant fair value write-ups. He also questioned what, besides interest rates, needs to improve to return to the peak conversion and volume levels of early 2022.

Answer

CFO Sanjay Datta explained the NII guide is primarily driven by a now-performing asset portfolio after moving past older, underperforming vintages, with only some potential for incremental fair value marks. He stated that returning to 2022 scale will not require as constructive an environment because the company's models and overall business efficiency are dramatically stronger today.

David Scharf from Citizens JMP requested quantification of the one-time 'catch-up accruals' in Q3 expenses and asked if the new Atalaya funding partnership includes risk-sharing provisions.

Answer

CFO Sanjay Datta quantified the non-recurring expense accruals at approximately $5 million and confirmed the Atalaya deal includes a co-investment component where Upstart invests alongside its partner, a structure consistent with other recent strategic funding arrangements.

David Scharf of Citizens Capital Markets sought to understand if Pagaya observed increased loan application rejections or turndowns by lending partners by the end of Q4 2025, compared to earlier in the year. He also asked if the recalibration on credit extended to discretionary investments in securities.

Answer

CEO Gal Krubiner clarified that the shift was more about partners moving away from planned expansions rather than outright rejections, focusing on diversifying asset classes. President Sanjiv Das stated that credit recalibration for originations and discretionary investments in securities are distinct aspects and do not necessarily tie to each other.

David Scharf asked for more details on lending partner behavior, specifically if Pagaya observed an increase in loan application rejections by partners that would have been approved earlier, and whether the credit recalibration extends to discretionary investing in securities.

Answer

Gal Krubiner (CEO) explained that the shift was more about planned expansions becoming inactive, with partners focusing on asset classes and customer reach rather than aggressive growth. Sanjiv Das (President) clarified that the recalibration on credit risk for originations is distinct from discretionary investing in securities.

David Scharf questioned whether the significantly lower Q1 core operating expense level is sustainable and requested an update on the ABS market, specifically regarding spreads and residual retention since early April.

Answer

CFO Evangelos Perros affirmed that current OpEx levels are sustainable, citing the business's operating leverage and lower ABS setup costs from a changing funding mix. CEO Gal Krubiner addressed the ABS market, stating that while short-term spread widening occurs, Pagaya prices it into new assets to maintain profitability. He described retention as a function of price, noting the company can use its balance sheet as a short-term buffer while underlying demand for assets remains strong.

David Scharf from Citizens JMP requested clarification on the 2025 guidance, specifically asking if it incorporates the conservative impairment scenario from the earnings supplement, which assumes a potential $100-$150 million write-down.

Answer

Executive Josh Fagen confirmed that the full-year 2025 guidance does incorporate the conservative 'Scenario A', which includes a potential additional impairment of $100 million to $150 million. He clarified that while their base case expectation is for better performance, this buffer is built into the formal guidance provided.

David Scharf questioned the long-term outlook for the FRLPC margin as the asset mix shifts more towards auto and POS. He also asked if Pagaya is observing any change in approval rates from its lending partners due to increased private credit availability in the sector.

Answer

CEO Gal Krubiner stated that as the auto and POS businesses scale, their FRLPC margins are expected to converge with the high levels seen in personal loans, supporting the overall 3.5%-4.5% target range. Regarding partner behavior, Krubiner acknowledged that private credit is more active but said Pagaya is not yet seeing a massive increase in partner approval rates, as lenders continue to exercise prudent growth in the current rate environment.

David Scharf from Citizens Capital Markets asked if LendingClub's Q1 origination outlook factors in a larger-than-normal tax refund season and its potential impact on demand. He also inquired whether the earnings guidance assumes a flattish year-over-year loss rate under fair value accounting, or if the evolving asset mix, including longer-duration loans, might influence it. Finally, he sought to understand how the previous CECL macro layer provisioning translates to day-one fair value discounts.

Answer

VP, Head of FPandA, and Investor Relations Artem Nalyvailo stated that while a larger refund season is difficult to predict precisely, its typical effects (higher payments, temporary demand shifts) are considered in the outlook. He confirmed that the guidance assumes a stable environment with no major shift in annual loss rates, despite an expected increase in loan duration from new business lines. He clarified that fair value accounting does not explicitly layer in qualitative reserves like CECL, representing a different methodology for assessing potential stress.

David Scharf inquired about consumer demand drivers, specifically if prime borrowers are more willing to refinance, and asked for clarification on factors depressing the charge-off rate.

Answer

CEO Scott Sanborn explained that the primary driver for refinancing is overcoming a lack of borrower awareness about their high credit card APRs, a problem their DebtIQ product aims to solve. CFO Drew LaBenne clarified that the unusually low charge-off rate was due to a combination of strong organic credit performance, higher recoveries from older vintages, and the portfolio being younger on average.

David Scharf asked about the regulatory capital ratios Enova would adhere to post-Grasshopper acquisition and whether existing levels of share buybacks would continue under the new structure. He also questioned the long-term outlook for Consumer product mix, specifically line of credit versus installment products.

Answer

CEO Steve Cunningham stated that Enova expects to maintain a Tangible Capital Ratio around 17%-18% post-close, analogous to the Tier 1 Leverage Ratio, without dramatic changes to its leverage position. He emphasized that early focus post-close would be on investing in new opportunities presented by the structure, prioritizing organic growth over immediate buybacks, while still having capital flexibility. Regarding Consumer products, Cunningham reiterated product agnosticism, driven by meeting demand that aligns with unit economic hurdle rates, expecting variations in growth between line of credit and installment products over time.

David Scharf questioned the post-Grasshopper Bank acquisition operations, specifically regarding the regulatory capital ratios Enova intends to adhere to and the likelihood of continuing existing share buyback levels under the new structure. He also asked about the risk-adjusted returns of consumer line of credit versus installment products and whether installment products might regain a larger share of the consumer product suite.

Answer

Steve Cunningham, CEO of Enova International, stated that the company expects to maintain a Tangible Capital Ratio similar to its current 17%-18% post-close, analogous to the Tier 1 Leverage Ratio. He emphasized that initial focus would be on investing in new opportunities presented by the structure, with capital allocation prioritizing organic growth, then share buybacks, and finally inorganic opportunities. Mr. Cunningham explained that product growth is agnostic, driven by demand meeting unit economic hurdle rates, and variations between LOC and installment growth are expected over time.

David Scharf from JMP Securities LLC asked if the consumer product with credit fluctuations was the higher-APR CashNet product and questioned the timing of the CEO leadership transition.

Answer

Chairman & CEO David Fisher did not identify the specific product but noted that Enova's five distinct consumer products can experience fluctuations. Regarding the leadership transition, Fisher stated the business is on 'super stable footing,' and his confidence in the company's future and in his successor, Steve Cunningham, made this the right time for the change. He emphasized his significant personal stake in Enova's continued success.

David Scharf inquired about the potential for tariffs to pull forward small business loan demand for inventory, the payment frequency of Enova's loans, the outlook for Q2 funding costs, and recent trends in ABS market spreads.

Answer

CEO David Fisher stated there is no indication of SMBs stocking up on inventory due to tariffs, noting demand follows normal seasonal patterns. He confirmed that a large majority of loans have weekly or bi-weekly payments, allowing for rapid performance monitoring. CFO Steve Cunningham added that he does not expect significant changes in funding costs for Q2, as the outlook does not assume further rate cuts. He also noted that credit markets have remained much calmer than equity markets, with ABS transactions proceeding smoothly.

David Scharf asked for clarification on whether the consumer base is healthier or if the loan book's quality is a result of prior credit tightening. He also questioned the potential impact of tariffs on SMB credit demand and whether new private capital is entering Enova's specific credit tiers.

Answer

CEO David Fisher explained that the target consumer is strong due to the labor market and that the company actually added some risk in early 2024, indicating portfolio health is not solely from tightening. He believes tariff impacts would be balanced due to a diversified SMB book and stated that competition consists of the same players as five years ago, with no significant new private capital in their niche.

David Scharf of Citizens JMP asked for more color on why SMB originations are growing significantly faster than consumer originations. He also inquired if the strategy of intentionally moderating growth applies to both business segments and asked for an updated outlook on funding costs.

Answer

CEO David Fisher explained that the SMB segment's faster growth is primarily due to it being a less mature product line compared to the well-established consumer business. He confirmed the moderated growth strategy applies to both segments, managed by setting higher internal unit economic targets. CFO Steven Cunningham added that for Q4, funding costs as a percentage of revenue should remain in the 10.5% to 11% range but trend toward the lower end.

David Scharf inquired about any observed impact of a slowdown in U.S. remittance on pawn loan demand in Mexico and Latin America, and whether the company could offer a benchmark for U.S. top-line growth for fiscal 2026, considering the benefit from scrap sales.

Answer

CEO Lachlan Given stated that while evidence is anecdotal, lending in Latin America remains robust, driven by operational changes rather than a direct correlation with remittance changes. Investor Relations Advisor Sean Mansouri clarified that the company does not provide specific guidance but aims for robust revenue and profit growth, acknowledging the significant contribution of scrap gross profit.

David Scharf inquired about any observed impact on pawn loan demand in Mexico due to changes in the U.S. remittance industry and immigration enforcement actions. He also asked if the company could provide a benchmark for U.S. top-line growth for fiscal year 2026, considering the significant contribution from scrap sales.

Answer

CEO Lachlan Given noted that while evidence is anecdotal, lending in Latin America remains robust, and strong demand for loans is observed. CFO Tim Jugmans added that money transfer volumes fluctuate and don't show an immediate correlation, emphasizing that operational changes have driven strong loan demand in Latin America. Lachlan Given stated that the company does not provide specific guidance but aims for continued robust revenue and profit growth, acknowledging scrap gross profit's significant contribution while highlighting other business opportunities.

David Scharf from Citizens Capital Markets and Advisory asked for commentary on the pipeline of new potential sellers and questioned the impact of growing insolvency deployments on the company's consolidated yields and efficiency ratio.

Answer

CEO David Burton noted that while they are always cultivating new clients, he hasn't seen new major credit card issuers come to market but speculated the Capital One/Discover merger could be a catalyst. He also explained that a significant shift to insolvency portfolios, which have lower collection costs, would improve the cash efficiency ratio over time. CFO Christo Riloff added that the net return profile is similar between insolvency and distressed portfolios due to lower purchase prices for insolvency assets.

David Scharf from Citizens Capital Markets and Advisory asked for commentary on the pipeline of new potential sellers coming to market. He also inquired about the impact of the growing mix of insolvency portfolios on the company's consolidated yields and cash efficiency ratio.

Answer

CEO David Burton explained that the company is continuously expanding its funnel of opportunities and noted that while no new major credit card issuers are selling debt, the Capital One/Discover merger could potentially bring Discover to the market. Regarding insolvency, Burton and CFO Christo Riloff clarified that a higher mix of insolvency portfolios, which have a lower cost to collect, could improve the cash efficiency ratio over time. However, they underwrite these portfolios to a similar net return as distressed portfolios due to their lower purchase price.

David Scharf of Citizens Capital Markets and Advisory asked for an update on the pipeline of new portfolio sellers and questioned the impact of the increasing mix of insolvency deployments on the company's yields and efficiency.

Answer

CEO David Burton discussed ongoing efforts to expand the seller pipeline, noting that while no major new credit card issuers are selling, the Capital One/Discover merger could present future opportunities. Burton and CFO Christo Riloff explained that a higher insolvency mix (in the US and Canada) would improve the cash efficiency ratio over time, but the net return profile remains similar to distressed portfolios due to lower purchase price multiples.

David Scharf followed up on the stablecoin discussion, asking how holding stablecoins would impact unit economics and whether a different revenue model should be expected, given that FX markup is a key revenue component.

Answer

Co-Founder and CEO Matt Oppenheimer responded that he expects a similar revenue model. He emphasized that Remitly's core value is its ability to efficiently and reliably convert and move currencies, a capability that requires extensive infrastructure and regulatory expertise. This value proposition remains consistent whether the transaction involves fiat or stablecoins.

David Scharf from Citizens JMP Securities sought clarification on the drivers of the strong Q1 margin performance and the reasoning behind the lower guided margin for Q2.

Answer

CFO Vikas Mehta explained that the Q1 margin beat was primarily driven by significant marketing efficiencies. He stated that the company plans to increase marketing investments in the seasonally stronger Q2 to drive future growth, which accounts for the lower margin guidance. He also noted ongoing investments in technology and development to support product innovation.

David Scharf asked if Remitly had quantified the year-to-date revenue impact from the FX tailwind to provide context for why it's being excluded from the 2025 outlook.

Answer

CFO Vikas Mehta responded that it is difficult to precisely quantify the FX impact as it's hard to parse out from other factors like holidays or specific campaigns. He explained that while they see positive momentum correlated with currency strength, the company's policy is to be prudent and not factor in such volatile elements into future guidance.

David Scharf of Citizens Capital Markets and Advisory inquired about OppFi's long-term operating margin targets, the specific impact of increased average loan sizes on origination growth, and the reasons behind the increased percentage of loans retained by bank partners.

Answer

Founder, CEO & Executive Chairman Todd Schwartz stated that the company is satisfied with its current 20% operating margin, which exceeds original expectations. He explained that the increase in average loan size is an incremental adjustment for inflation over the last decade, not the sole driver of growth. He also clarified that the percentage of loans retained by bank partners fluctuates based on origination growth in specific states with different retention requirements. CFO Pamela Johnson added that the average loan size increased by approximately $100 year-over-year.

David Scharf inquired about OppFi's macroeconomic outlook, the drivers behind the year-over-year increase in yields, and any early reads on the pace of the Q1 tax refund season.

Answer

CEO Todd Schwartz stated that while they are monitoring potential impacts from tariffs and inflation, their 'Model 6' underwriting model, developed from 2022 learnings, prepares them for economic volatility. He attributed the higher yields to the launch of risk-based pricing and the cycling off of older, lower-yielding loans. Regarding tax season, Schwartz noted it was too early to assess but they anticipate a normal repayment cycle.

David Scharf from Citizens Capital Markets and Advisory asked for a ranking of Regional Management's growth opportunities and inquired about the outlook for the allowance for credit losses rate.

Answer

President & CEO Robert Beck explained that the company has multiple growth levers, including state expansion, auto-secured lending, and digital underwriting, which are deployed based on customer health and macro conditions. He noted recent growth was driven by lower-risk large loans. EVP, Chief Financial & Administrative Officer Harp Rana added that the allowance rate is based on portfolio mix, growth, and macro factors, and the company is comfortable with the guided 10.3% rate for Q3, which reflects improved macro conditions and the release of hurricane reserves.

David Scharf asked if there was a new core message for investors compared to the prior quarter, sought clarification on the Q1 capital generation calculation which appeared low, and requested context on the company's definition of 'credit tightening'.

Answer

CEO Robert Beck outlined three key messages: 1) Credit performance beat guidance with improving loss trends. 2) The 15 new branches opened since September are exceeding expectations with a tighter credit box. 3) The company's capital generation model is proven and powerful, as detailed in a new presentation slide. CFO Harpreet Rana explained that Q1 capital generation is seasonally lower due to net income patterns and that the reserve rate is expected to decline in Q2. Regarding credit tightening, Beck clarified that the company uses a granular approach, applying varied stress factors based on product, risk rank, and channel, rather than a single portfolio-wide metric.

David Scharf of Citizens JMP asked for specific indicators supporting management's conviction about improving consumer health, contrasting it with more cautious commentary from competitors. He also questioned the competitive landscape for higher-yielding small loans and the strategic factors, beyond accounting, that temper the company's growth rate.

Answer

CEO Robert Beck explained that their confidence stems from both improved credit quality from underwriting tightening and positive macroeconomic factors like low unemployment and real wage growth. He stated they are not seeing significant changes in competitive pressure in the higher-rate loan space. Regarding growth, Beck noted that beyond accounting, the decision is about balancing the timing of investment dollars against their returns and ensuring proper execution, citing the recent decision to accelerate branch openings as an example of flexing up when conditions are right.

David Scharf followed up on the competitive environment, asking about signs of increased price competition, and requested observations on the performance of the franchise auto business since the Foresight acquisition.

Answer

CEO Doug Shulman stated that while competition is plentiful, particularly in higher FICO bands, OneMain sticks to its disciplined underwriting and does not get 'fussed' by quarterly competitive shifts. Regarding the auto business, he praised the Foresight acquisition for its technology and sales team, noting it has performed well, driving growth in both franchise and independent dealer channels while maintaining a conservative credit posture.

David Scharf of Citizens JMP Securities asked for more color on why enterprise partners are choosing to lean into 0% APR promotions, questioning if it signals concerns about retail sales.

Answer

COO Michael Linford framed the use of 0% promotions as a sign of merchant strength and a growth-oriented mindset, not defensiveness. CFO Robert O'Hare added that for merchants with multiple channels, driving volume through their more profitable direct-to-consumer channel with Affirm, even with a higher MDR, is highly accretive to their own margins.

David Scharf asked for more color on why large enterprise partners are increasingly using 0% APR promotions, questioning if it signals retail weakness or competitive pressures.

Answer

COO Michael Linford positioned the trend as a sign of merchant strength, used by growth-oriented partners to proactively drive volume. CFO Robert O'Hare added a key insight: for merchants with both direct-to-consumer (DTC) and wholesale channels, using 0% APR offers to shift sales to their more profitable DTC channel is an accretive strategy, even with the associated merchant discount rate.

Asked for a high-level view on the 2025 flat revenue guidance, requesting a ranking of the key drivers (macro, competition, company-specific). Also requested the specific dollar amount of the increased investment in the digital channel for 2025.

Answer

Management cited two co-leading factors for the flat guidance: the difficult macroeconomic environment in Mexico and the secular shift to digital, which is causing the core retail market to contract. For 2025, the company plans to increase digital marketing spend from approximately $1 million to $9 million, while also investing an additional $3 million to $3.5 million to support the retail business.

David Scharf from JMP Securities asked for more detail on the combined company's free cash flow generation and inquired about the near-term outlook for U.S. demand, questioning if the impact of lower gas prices was becoming evident.

Answer

EVP and CFO Doug Orr stated that specific cash flow guidance was not being provided but noted that analysts could derive estimates from standalone models and synergy details. Brent Stuart, President and CEO of Cash America, described the outlook as "cautiously optimistic," citing higher demand and traffic in Q1 which led to the first positive same-store pawn loan balance growth since Q4 2014.

David Scharf of JMP Securities inquired about the combined company's free cash flow generation and whether the recent improvement in U.S. demand was linked to lower gas prices impacting consumer borrowing.

Answer

EVP and CFO Doug Orr declined to provide specific cash flow guidance but directed analysts to standalone models and synergy timelines. Brent Stuart, President and CEO of Cash America, noted that while demand was up, it was difficult to attribute directly to gas prices, citing inconsistent tax refunds as a possible factor and expressing cautious optimism for Q2.