John Hecht

John Hecht asked about breaking down the consolidated guidance into segment-level details for the upcoming year.

Answer

Chris Lapointe, CFO, provided 2026 revenue growth expectations for each segment: Financial Services (40%+), Lending (approx. 23%), and Tech Platform (approx. 20% normalized). He also outlined medium-term (2025-2028) compounded annual growth rates of at least 30% for revenue and 38%-42% for EPS, anticipating accelerated growth in 2027-2028 across crypto, brokerage, home loans, and student loans.

John Hecht of Jefferies inquired about the expected cadence of SoFi's financial performance for the remainder of 2025, specifically regarding segment contributions and management's confidence in its medium-term guidance.

Answer

CFO Chris Lapointe confirmed that Q4 results are expected to surpass Q3 across all key metrics. He reiterated confidence in the 2026 guidance for 25%+ revenue growth and EPS of $0.55-$0.80, while noting the business mix is shifting due to accelerated growth in the Loan Platform Business (LPB) and new crypto opportunities. CEO Anthony Noto added that the primary challenge is prioritizing the numerous growth opportunities to optimize for long-term compounded growth and a 20-30% ROE.

John Hecht of Jefferies asked about the resilience of the loan platform business (LPB) in a potentially more volatile interest rate or capital markets environment.

Answer

CFO Chris Lapointe highlighted strong visibility and forward commitments from partners, ensuring demand. He emphasized the company's diversified model (holding, selling, referring) provides resilience. CEO Anthony Noto added that the total fee-based business is substantial ($970M in 2024) and that LPB revenue is cash upfront, which is favorable for capital and credit.

John Hecht asked about the credit performance of recent loan vintages compared to the 2017 vintage and how this trend, along with prepayment assumptions, impacts return on capital.

Answer

CFO Chris Lapointe explained that recent vintages are projected to yield significantly higher returns, with ROEs exceeding 30%, more than double the 2017 vintage. This improvement is driven by lower expected losses, higher pricing power, deposit-driven funding efficiencies, and origination fees, which collectively offset higher prepayment speeds. CEO Anthony Noto added that achieving these returns in a rising-rate environment suggests further upside as rates decline.

John Hecht asked for the company's perspective on how affordability issues, high used car prices, and potential lower interest rates might fluctuate in coming periods. He also inquired if there would be any change in the capital returns strategy, particularly regarding buybacks, under the new CEO's leadership. Finally, he asked if the recent expansion of the initial spread, after a period of decline, is expected to persist and if it's related to better pricing or operating metrics.

Answer

Vinayak Hegde (CEO, Credit Acceptance Corporation) stated that the company is well-positioned to serve subprime customers across all economic cycles, maintaining a conservative approach and focusing on frictionless dealer partnerships. He confirmed that the capital return strategy, including buybacks, will remain unchanged. Jay Martin (CFO, Credit Acceptance Corporation) clarified that the initial spread relates to pricing and declined to provide future guidance, directing to historical data in the press release.

John Hecht asked for Credit Acceptance's perspective on how affordability issues, such as high used car prices, might fluctuate in coming periods and whether lower interest rates could alleviate some of these challenges. He also inquired if there would be any change in Credit Acceptance's capital returns strategy, particularly regarding buybacks and accessing capital markets, under the new leadership. Finally, he asked about the recent expansion of the initial spread after a period of decline, questioning if this trend is expected to persist and whether it is driven by better pricing or improved operating metrics.

Answer

CEO Vinayak Hegde stated that Credit Acceptance is well-positioned to serve subprime customers across all economic cycles, emphasizing a conservative approach, frictionless experience for dealers, and a focus on maximizing intrinsic value regardless of market conditions. He confirmed that there would be no change in the company's capital returns strategy, indicating a continuation of the current course. CFO Jay Martin clarified that the initial spread is related to pricing. He stated that the company does not provide guidance on future pricing but directed John Hecht to the historical pricing table in the press release.

John Hecht asked why the current market, despite capital scarcity and disruption, has not become a favorable, opportunistic environment for Credit Acceptance, unlike past cycles such as the post-GFC period. He inquired what factors need to change for conditions to improve.

Answer

Chief Treasury Officer Douglas Busk responded that the company is actively adjusting its forecasts for new loan originations to account for the observed underperformance of recent vintages. He reiterated that the business model is designed to produce acceptable aggregate returns even when individual loan performance is worse than forecasted and noted that the impact of the challenging 2022 vintage on overall results will diminish over time.

John Hecht from Jefferies inquired about Bread Financial's objectives and potential growth trajectory for direct-to-consumer deposits, which currently comprise almost 50% of funding. He also asked about the pricing competitiveness of these deposits compared to non-DTC options. Additionally, he sought clarity on the expected direction of the Allowance for Loan Losses (ALL) reserve rate, given improving credit quality, and whether it could return to day-one levels.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, stated that the longer-term goal for direct-to-consumer deposits is to reach 70% plus of total funding, aligning with larger peers, and confirmed that pricing remains competitive and better than brokered CDs. Regarding the reserve rate, he explained that the Q4 2025 rate of 11.2% improved due to better credit metrics, with no changes to risk weightings. He anticipates a gradual reduction as credit quality improves and risk weights move to a neutral position, aiming for around 10% over time, though not necessarily back to day-one levels due to a different portfolio and risk philosophy.

John Hecht inquired about Bread Financial's direct-to-consumer deposits, which comprise almost 50% of funding, asking about future growth objectives and how their pricing compares to non-DTC deposits. He also asked about the trajectory of the reserve rate, given its decline due to improving credit, and whether it is expected to return to 'day one' levels.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, expressed satisfaction with deposit growth, stating a longer-term goal of 70%+ of total funding, with competitive pricing superior to brokered CDs. Regarding the reserve rate, he noted the Q4 rate of 11.2% improved due to better credit metrics, maintaining a prudent risk overlay. He anticipates the reserve rate will follow credit quality improvements, aiming for around 10% over time, but not necessarily back to 'day one' levels due to portfolio differences and risk weighting philosophy.

John Hecht inquired about the relationship between the fair value discount rate and annualized loss rates, the consistency of credit tenor, the interaction of revenue yield, net interest margin, and fair value adjustments, and the competitive environment.

Answer

CEO Scott Sanborn stated that while the discount rate doesn't directly translate to an exact loss rate, the platform's ANCL estimate remains 4.5%-5%, with new products expected to have similar profiles. He confirmed credit tenor is consistent with no major pivots. Scott Sanborn clarified that the coupon in NIM will be higher than the discount rate, with fair value adjustments offsetting this to achieve the revenue yield. CFO Drew LaBenne and Scott Sanborn described a healthy marketplace with active capital, noting LendingClub's strong competitive position due to credit performance and pull-through rates.

John Hecht from Jefferies sought to understand the relationship between LendingClub's fair value discount rate and the annualized loss rate for its primary product, and whether the general credit tenor remains consistent. He also asked for clarification on how revenue yield, net interest margin, and fair value adjustments interact, including the treatment of charge-offs. Finally, he inquired about the current operating market and competitive environment.

Answer

CEO Scott Sanborn explained that while the discount rate doesn't directly translate to an exact loss rate, the current ANCL estimate is 4.5%-5%, and the credit tenor remains consistent. He clarified that the coupon in NIM is higher than the discount rate, with fair value adjustments offsetting this to achieve the revenue yield, and charge-offs are included in these adjustments. CFO Drew LaBenne and CEO Scott Sanborn described a healthy, active marketplace with new capital sources, acknowledging a competitive but manageable environment where LendingClub maintains discipline.

John Hecht asked about the secondary factors, beyond returns, that influence the allocation across LendingClub's various funding channels and inquired about the target range for balance sheet growth.

Answer

CEO Scott Sanborn explained that the company prioritizes consistency and size to achieve better pricing and predictability, and the funding mix evolves based on which buyers offer the best economics, such as the recent shift to more whole loan sales as banks returned. CFO Andrew LaBenne stated that while balance sheet growth may not be at the same high levels as in previous years, they still expect robust growth above the industry average and noted that capital is not currently a constraint on growth.

John Hecht asked about the decision-making framework for allocating loans between selling, retaining, or seasoning, and inquired about the impact of increased capital in private credit markets on competition and strategy.

Answer

CFO Drew LaBenne explained the allocation is a price optimization exercise, balancing pre-existing investor orders with the goal of balance sheet growth for recurring revenue. CEO Scott Sanborn added that while held-for-investment loans offer the highest lifetime value, they create an upfront earnings drag. He noted that as banks return with premium pricing for whole loans, it provides stronger in-period earnings that can fund more HFI retention. Both executives acknowledged that more private credit capital is entering the space, which can improve pricing power for sellers like LendingClub.

John Hecht inquired about specific geographies Enova plans to expand into with the Grasshopper Bank acquisition that are currently unapproachable or have limited access. He also asked for a description of the regulatory framework and reporting mechanisms post-acquisition, and if any significant state-level regulatory activity was observed.

Answer

Steve Cunningham, CEO of Enova International, confirmed a "hit list" of specific states like California, Pennsylvania, and Ohio where a national bank charter would facilitate easier expansion for the NetCredit brand. He outlined that CashNet and Brazil operations would remain outside the national bank under Federal Reserve oversight. Reporting would include SEC filings, weekly call reports for the national bank, and Federal Reserve filings for holding companies. Mr. Cunningham noted that state-level regulatory activity was relatively quiet, with no significant policy changes observed.

John Hecht inquired about specific geographies Enova could expand into post-Grasshopper acquisition that were previously limited. He also asked for a description of the regulatory framework and reporting mechanisms post-acquisition, and if any significant state-level activity was observed.

Answer

CEO Steve Cunningham confirmed that a national bank charter would facilitate expansion into specific states for the NetCredit brand, citing California, Pennsylvania, and Ohio as examples. He noted that state-level regulatory activity was relatively quiet. Post-close, CashNet and Brazil are expected to remain outside the national bank under the holding company, with oversight from the Federal Reserve. Reporting would include SEC filings, weekly call reports for the national bank, and Federal Reserve filings for holding companies.

John Hecht from Jefferies asked about the evolution of marketing channels, particularly with AI, and how the favorable funding environment is impacting balance sheet strategy.

Answer

Chairman & CEO David Fisher noted that while high-level marketing channels remain the same, the use of technology has made them more targeted, shifting from national TV to digital TV. CFO Steven Cunningham added that the credit markets are favorable, allowing for opportunistic financing, but the company's outlook does not assume any rate cuts. He affirmed the balance sheet is well-positioned to execute on its strategy.

John Hecht questioned whether the favorable competitive environment was driving the higher mix of new customers, asked about the stock price levels that would trigger aggressive share repurchases, and sought clarification on the O&T expense guidance.

Answer

CEO David Fisher confirmed that strong growth in new customers is a result of both a conducive competitive environment and ongoing product enhancements. CFO Steve Cunningham stated that the company would be interested in opportunistically repurchasing shares even at current valuation levels to utilize its buyback capacity. He also clarified that the guidance for Operations and Technology (O&T) expense is around 8.5% of total revenue for Q2.

John Hecht inquired about the mix of new versus recurring customers in the consumer and small business portfolios, whether this mix has shifted over the past year, and where the primary growth opportunity lies for 2025.

Answer

CFO Steve Cunningham responded that the new customer mix has been 'remarkably stable' for a long time, holding at approximately 40% of originations for both portfolios. He does not anticipate a significant shift in this strategy and confirmed the company will continue to focus on both acquiring new customers and serving its existing base.

John Hecht of Jefferies asked for an outlook on the competitive environment, questioning if the current 'weaker competition' is sustainable or if new entrants might emerge. He also asked if there were any notable changes in the characteristics of originations, such as the new versus recurring customer mix.

Answer

CEO David Fisher clarified that the competitive landscape is characterized by a general lack of strong competitors rather than existing ones being less aggressive, citing high barriers to entry like capital costs and model development time. He sees no signs of meaningful competitive changes. CFO Steven Cunningham added that the mix of new versus returning customers has remained consistent across both the consumer and SMB portfolios.

John Hecht asked about Capital One's 'barbell strategy' of targeting super prime/prime and non-prime segments, whether they are currently leaning into or away from specific cohorts in credit card or auto, and if the mix is expected to remain stable.

Answer

Chairman and CEO Richard Fairbank clarified that Capital One has always been a full-spectrum lender, not strictly a 'barbell,' but has historically been more cautious on high-balance prime revolvers. He stated that Discover, primarily a prime player, fits well into Capital One's full-spectrum strategy, and that Capital One is also a full-spectrum player in the auto segment, including subprime, near prime, and prime.

John Hecht asked about Capital One's 'barbell strategy' across super prime, prime, and non-prime segments in credit card and auto, inquiring if the company is currently leaning into or away from any specific cohorts, and if the mix is expected to remain stable. He also asked about the cadence of seasonality and its impact on Net Interest Margin (NIM), particularly in Q1.

Answer

Chairman and CEO Richard Fairbank clarified that Capital One is a full-spectrum lender, cautious on high-balance prime revolvers, and that Discover, a prime-focused player, fits well into this strategy. He confirmed Capital One is a full-spectrum player in auto. CFO Andrew Young explained that Q1 NIM will face seasonal headwinds from fewer days and higher cash balances, with tax refunds being a 'wild card.' He noted that deposit pricing lags Fed funds, potentially causing brief pressure, but structurally, the balance sheet is relatively neutral, with mix impacting ambient NIM.

John Hecht of Jefferies asked for an assessment of the current state of the U.S. consumer and whether any behavioral differences have been observed between the legacy Capital One and the newly acquired Discover customer bases.

Answer

Richard Fairbank, Founder, Chairman & CEO, described the U.S. consumer as being in a 'great place' and a source of economic strength, citing low unemployment and improving credit metrics in their portfolio. He noted that while they are monitoring pressures like student loan repayments, the overall picture is one of strength. He observed that the Discover portfolio is slightly more revolver-oriented but that both companies are seeing positive credit performance.

John Hecht asked about the balance between achieving marketing synergies from the Discover acquisition and the desire to invest in brand development, particularly for the global network.

Answer

Richard Fairbank, Chairman and CEO, described the Discover brand as a significant asset that they will continue to invest in for both the network and as a card product brand. He clarified that major investment in the global network brand is a longer-term goal, contingent on building out international acceptance. Therefore, the near-term synergy case is not dependent on a massive, immediate global brand campaign.

John Hecht asked about the expected future mix of Capital One's consumer loan book across its various segments and how the total portfolio might look after the combination with Discover.

Answer

CEO Richard Fairbank explained that Capital One has been on a long-term journey to move upmarket, with its fastest growth among heavy spenders, a trend he expects to continue. The Discover acquisition will be highly complementary, bringing in a large, high-quality business focused on the prime segment, where Capital One has had relatively less emphasis. The post-deal strategy is to continue Capital One's full-spectrum approach while preserving Discover's successful prime-focused model, aiming to get the "best of both worlds."

John Hecht asked for color on consumer spending trends, wondering if consumers are becoming more cautious and how this behavior is affecting Capital One's business volumes.

Answer

Chairman and CEO Richard Fairbank explained that after a post-pandemic surge, spend per customer has been largely flat since early 2023, with a slight recent uptick. He clarified that Capital One's overall purchase volume growth is primarily driven by new account acquisition rather than increased spending from existing customers. He also noted that the mix between discretionary and non-discretionary spending remains stable and consistent with pre-pandemic levels, suggesting that consumer spending behavior has largely settled.

John Hecht asked about quantifying the performance of newer loan vintages compared to older ones, the current competitive environment for America's Car-Mart, and key factors signaling a more constructive macroeconomic environment for the industry.

Answer

Jonathan Collins (CFO) explained that the 18-20% differential in improvement for specific static pools (LOS vs. old system) continues to hold up. Doug Campbell (CEO) noted that the subprime auto sector is under significant pressure, especially for smaller operators, due to challenges in procuring capital and inventory, which differentiates Car-Mart. He also stated that Car-Mart must prepare to navigate any environment by focusing on higher-quality customers, optionality in vehicle procurement, and transforming collection methods, prioritizing cost structure optimization and positive earnings before rebuilding inventory.

John Hecht asked about Average Order Value (AOV) trends, the meaningful increase in transaction count per customer, and whether the characteristics of transactions are changing, referencing past growth in categories like groceries.

Answer

Max Levchin, Founder and CEO, stated that AOV hovers around $260-$270, trending down slightly over the last few fiscal years due to expansion into lower AOV areas. He noted recent growth in apparel and beauty products, which skew lower AOV, and highlighted that stable AOVs with increased frequency indicate capturing more consumer spend.

John Hecht asked about Average Order Value (AOV) trends and whether the characteristics of transactions are changing, particularly given the meaningful increase in transaction count per customer.

Answer

Max Levchin stated that AOV is stable, hovering around $260-$270, and has trended down slightly over the last few fiscal years due to expansion into lower AOV areas like apparel and beauty. He emphasized that stable AOVs with growing frequency indicate Affirm is capturing a more meaningful share of consumer spend, particularly evident with the Affirm Card.

John Hecht from Jefferies asked how transaction characteristics change as a customer matures on the platform and requested a framework for how lower interest rates would impact the business.

Answer

Founder & CEO Max Levchin explained that as customer frequency increases, the average order value (AOV) tends to decrease, which is an intended outcome of becoming useful for more everyday purchases. CFO Rob O'Hare stated that a 100 bps rate change should impact funding costs by about 40 bps, though it would take 1-2 years to fully materialize across the portfolio.

John Hecht asked what Affirm has learned about customer interaction and revenue per user from the Affirm Card product, and inquired about the future trajectory of expense scaling given strong margins.

Answer

CEO Max Levchin described the Affirm Card as a product for the company's best customers who are choosing to deepen their relationship, leading to the strongest economics and engagement. CFO Robert O'Hare stated that while investments have been made to support launches like the U.K., the non-GAAP operating expense level is expected to be relatively flat going forward from Q2 levels, though some costs will naturally scale with GMV growth.

John Hecht asked how the recent increase in secondary market activity for loans affects Affirm's balance sheet management strategy, particularly the decision to retain versus sell assets.

Answer

COO Michael Linford acknowledged the forward flow whole loan market is very strong due to Affirm's credit performance and favorable market trends. However, he emphasized that Affirm will maintain a stable, diversified funding base across all channels, including ABS, and will not become over-reliant on any single source.

John Hecht inquired about the typical use cases for Upstart's HELOC loans, given their average size, and pressed for more transparency on what specific elements or demographics the UMI and AI engine were detecting that caused a divergence from other lenders' reported positive credit trends and volumes.

Answer

CFO Sanjay Datta stated that HELOCs are general-purpose loans, often used for home improvement or debt retirement, acting as substitutes for personal loans. Sanjay Datta explained that Upstart's system is designed for faster, more precise real-time credit assessment by controlling for numerous variables, cohorts, and vintages, allowing it to detect underlying patterns that traditional, backward-looking metrics might miss or obscure, even if it sometimes appears overreactive.

John Hecht asked about the typical use case for Upstart's HELOC loans, given their average size, and sought to understand what the AI engine is seeing that causes its different market perspective compared to other lenders.

Answer

Sanjay Datta, CFO of Upstart, stated that home equity loans are general-purpose, often used for home improvement or debt retirement, and can be substitutes for personal loans. He explained that Upstart's system is built to respond faster and more precisely than traditional credit metrics, detecting underlying patterns in real-time by controlling for thousands of variables, which can lead to different conclusions than other market players.

John Hecht from Jefferies inquired about the potential impact of interest rate reductions on the business, specifically whether rate changes are passed through to customers and how funding partnership agreements are structured to handle such changes.

Answer

CFO Sanjay Datta stated that lower rates would be "unambiguously good," leading to lower APRs for borrowers and improved conversion rates after a lag. He confirmed that committed funding partnership structures are designed to contemplate and adjust to changes in the rate environment.

John Hecht asked about the potential impact of market interest rate reductions on Upstart's business and whether those rate changes are passed through to customers.

Answer

CFO Sanjay Datta confirmed that a reduction in market rates would be "unambiguously good" for the business. He explained that lower rates would be passed on to borrowers "virtually one for one" with a slight lag, resulting in improved conversion rates, and that existing funding partner structures are designed to accommodate these changes.

John Hecht asked about the expected borrower mix between prime and core customers for the year and inquired about the potential mature take rates for newer products like HELOC and auto loans.

Answer

CFO Sanjay Datta stated that while there's no explicit guidance on the mix, Upstart is bullish on growing the prime segment. For newer products, he anticipates larger loan sizes with initially modest take rates. He also noted that revenue for products like auto loans will be more ratable over the loan's life through servicing fees, unlike the upfront fees in personal loans.

John Hecht from Jefferies Financial Group Inc. asked about the sources of loan volume, including channel mix and recurring business, and sought details on the small-dollar loan product, including its role as a customer development tool.

Answer

CFO Sanjay Datta explained that recent growth was conversion-driven, so the channel mix remained consistent with prior quarters. CEO David Girouard described the small-dollar loan product as a strategic accelerator for model training and customer acquisition, noting it accounted for 13% of new borrowers in Q4. Sanjay Datta added that these loans average just over $1,000 with 6-18 month terms.

John Hecht asked for Ares Capital Corporation's perspective on industry competition, considering narrow spreads and recent idiosyncratic events like First Brands and Tricolor, and also sought an update on regulatory opportunities such as AFFE.

Answer

CEO Kort Schnabel stated that the competitive environment remains consistent with historical trends, with no significant impact from recent idiosyncratic events on the competitive landscape. He highlighted that such events underscore the differentiation of Ares' documents and credit selection compared to the broadly syndicated market. CFO Scott Lem added that broadly syndicated market reverberations can create opportunities for private credit to gain market share. Mr. Schnabel also noted no meaningful updates on regulatory opportunities like AFFE.

John Hecht asked for an overview of industry competition, considering narrow spreads, recent idiosyncratic events, and any updates on regulatory opportunities like AFFE.

Answer

Kort Schnabel (CEO) stated that the competitive environment is ongoing, with no significant impact from recent idiosyncratic events on their market, emphasizing ARCC's differentiated documents and credit selection. Scott Lem (CFO) added that broadly syndicated market disruptions can create opportunities for private credit to gain market share. Mr. Schnabel also noted no meaningful updates on regulatory opportunities like AFFE, as momentum has historically fluctuated.

John Hecht asked if the recent strong investment activity and pipeline signal the beginning of a more active M&A environment, and whether Ares Capital is preparing for a busy 2025. He also inquired about the Riverside acquisition and its role in the company's lower middle market strategy.

Answer

CEO Robert Kipp DeVeer confirmed that Ares Capital expects a busy year in 2025, particularly after the election. Co-President Kort Schnabel clarified that the Riverside acquisition reinforces their commitment to the lower middle market by integrating an experienced team, rather than shifting to a new asset class.

John Hecht asked for more insight into Four Technologies' customer acquisition strategies, cross-sell opportunities, and organic growth drivers, and sought to understand what PROG Holdings perceives as 'normal' secular GMV growth trends for Progressive Leasing.

Answer

Steve Michaels, President and CEO, attributed Four's growth primarily to organic factors like referrals, word-of-mouth, user-generated content, and strong app downloads, noting successful, low-cost paid marketing efforts. He highlighted the Four Plus subscription model's strong adoption and exciting bi-directional cross-sell opportunities with leasing. Brian Garner, CFO, acknowledged the difficulty of defining 'normal' GMV growth but pointed to a strong pipeline, engagement with meaningful retailers, and opportunities within the existing installed base, expressing confidence in driving GMV growth north of current mid-single digits (adjusted for headwinds).

John Hecht asked for more insight into Four Technologies' customer acquisition strategies, including the cross-sell opportunity, given its consistent growth. He also inquired about what PROG Holdings perceives as 'normal' secular GMV growth trends, comparing the current mid-single-digit growth (adjusted for headwinds) to the 2015-2020 period.

Answer

Steve Michaels, President and CEO, explained that Four Technologies' growth has been primarily organic, driven by referrals, word-of-mouth, and user-generated content, with minimal paid marketing. He noted strong adoption of FourPlus and exciting bi-directional cross-sell opportunities within the ecosystem. Brian Garner, CFO, acknowledged the 2015-2020 period as a high-growth phase due to enterprise retailers and new launches, making it difficult to define a 'normal' range. However, he expressed encouragement that mid-single-digit GMV growth, even with current headwinds, indicates significant opportunity within the existing installed base and pipeline, suggesting the company's best days are ahead.

John Hecht of Jefferies asked if management was seeing any 'green shoots' indicating a consumer replenishment cycle for durables. He also inquired about the appetite for share repurchases and the tax-rate impact of new bonus depreciation legislation.

Answer

CEO Steven Michaels stated the company is not predicting a near-term recovery in key durable goods categories and that its conservative decisioning posture remains appropriate. On capital allocation, he reiterated a commitment to repurchases but gave no specific target. He clarified the tax law change provides a significant cash tax benefit via deferral but will not affect the GAAP income statement tax rate.

John Hecht asked for an update on the American Signature partnership ramp-up and the current environment for the new retailer pipeline.

Answer

CEO Steven Michaels reported that the American Signature partnership is 'going very well,' with strong partner buy-in and performance. He added that the current challenging macro environment is conducive to pipeline conversations with new retailers, as PROG's offerings can help them save sales and drive traffic. While not naming specific logos, he expressed encouragement about ongoing discussions.

John Hecht of Jefferies asked for clarification on the dynamic between increased early buyouts (EBOs) and write-offs, questioning if different customer cohorts were responsible. He also requested a GMV breakdown by new versus existing merchants and an update on the PROG Marketplace.

Answer

CFO Brian Garner confirmed that higher-credit 'trade-down' customers are driving more 90-day buyouts, which can slightly pressure gross margins initially but offers strong long-term customer value. CEO Steve Michaels declined to break down GMV by merchant type but highlighted broad-based growth. He also reported that PROG Marketplace GMV grew over 300% year-to-date, far exceeding the initial target, driven by sophisticated marketing and an improved checkout experience.

John Hecht asked about the characteristics of partners where Synchrony is seeing expansion versus modest contraction, such as digital mix versus in-store. He followed up by asking about the source of elevated payment rates, if it's across various income levels, and the impact of debt consolidation.

Answer

Brian Doubles (President and CEO) highlighted partner engagement and program priority as key to success, regardless of platform. Brian Wenzel (EVP and CFO) specified pressure in home specialty/home improvement and outdoor power equipment/power sports (bigger ticket discretionary), while seeing strength in diversified value (value-oriented retailers) and digital platforms. Regarding payment rates, Brian Wenzel attributed elevation primarily to credit actions (more restrictive non-prime) and a mixed shift from promotional to core balances, noting no significant impact from installment products or debt consolidation.

John Hecht requested an update on the Health and Wellness platform's performance and opportunities, and asked about the credit performance of the 2024 vintage compared to pre-pandemic levels.

Answer

President and CEO Brian Doubles described Health and Wellness as a top-performing platform where the company is investing heavily and is optimistic about returning to above-average growth as credit is selectively reopened. EVP and CFO Brian Wenzel stated that the 2024 and 2025 vintages are performing better than the 2018 pre-pandemic benchmark, reflecting the positive impact of recent credit tightening actions. He noted the 2022 and 2023 vintages performed slightly worse, which prompted those actions.

John Hecht asked for early performance reads on the 2024 credit vintage and whether it is tracking within long-term goals. He also inquired about the changing mix between digital and in-store commerce since the pandemic.

Answer

EVP and CFO Brian Wenzel stated that the 2023 and 2024 vintages are performing better than the industry average and are only slightly worse than Synchrony's 2018 vintage, giving them confidence in their credit outlook. President and CEO Brian Doubles confirmed that digital commerce continues to increase, highlighting digital wallets and the recent Apple Pay integration as key investment areas where Synchrony believes it has a competitive technology advantage.

John Hecht asked about spending trends within the Health and Wellness segment, particularly discretionary versus non-discretionary, and requested an update on the status of the CFPB late fee rule litigation.

Answer

CEO Brian Doubles noted that while there has been some recent pullback in bigger-ticket discretionary purchases within Health and Wellness (like cosmetics), the segment is still seeing better growth than the rest of the business. CFO Brian Wenzel added that pet care spending remains strong. On the litigation, Wenzel explained they are in a 'waiting game' for a district court ruling on a motion regarding venue and standing, with no set timetable for a decision.

John Hecht from Jefferies inquired about the composition of Q2 portfolio deployments and the current supply and pricing dynamics across key asset classes.

Answer

CEO David Burton confirmed that the deployment mix was consistent with recent trends, highlighting continued growth in US and Canadian insolvency portfolios. He added that supply remains robust across all asset classes with no material changes in pricing from the previous quarter.

John Hecht of Jefferies inquired about the mix of portfolio deployments during the quarter and asked for an update on supply and pricing trends across key asset classes like credit cards and personal loans.

Answer

CEO David Burton responded that the deployment mix was consistent with recent trends, highlighting continued growth in insolvency deployments in the U.S. and Canada. He also noted that the favorable supply trends seen in the first quarter continued, with increased supply across all asset classes and no material changes in the market dynamics.

John Hecht of Jefferies inquired about the composition of portfolio deployments in the quarter and whether there were any notable changes in the mix. He also asked for an update on supply and pricing trends across the various asset classes Jefferson Capital specializes in, such as credit cards and personal loans.

Answer

CEO David Burton responded that the deployment mix was consistent with recent trends, highlighting continued growth in insolvency deployments in the U.S. and Canada. He added that supply trends across all asset classes have remained consistent with the first quarter, with a general increase in supply.

John Hecht asked about the competitive landscape, inquiring if other companies are entering Pagaya's unique B2B2C model and his perspective on the market's direction given Pagaya's first-mover advantage.

Answer

Co-Founder and CEO Gal Krubiner stated that while some lenders may build partial funding platforms, Pagaya's model is unique due to its deep tech stack integration, its diversified funding network of over 150 investors, and its proven ability to scale across three major asset classes. He positioned Pagaya as the category leader in creating a 'syndication market' for consumer credit, which provides a significant and sustainable competitive advantage.

John Hecht asked about the competitive landscape, inquiring if other companies are entering Pagaya's unique B2B2C model and how Pagaya views its first-mover advantage.

Answer

Co-Founder and CEO Gal Krubiner stated that while other lenders may build partial solutions, Pagaya's competitive moat is its deep tech stack, a diversified funding network of over 150 investors, and proven capabilities across three major asset classes. He positioned Pagaya as the category leader creating a 'syndication market' for consumer credit, welcoming the trend as it validates their model and makes their solution more attractive to new lenders.

John Hecht asked how Pagaya positions its business at the product level to navigate the high degree of macroeconomic uncertainty and variability.

Answer

CEO Gal Krubiner explained that Pagaya builds for the long-term, assuming macro uncertainty is normal. He stated that while current data shows consumer resilience, the company remains cautious and has plans for scenarios like higher unemployment or inflation. Krubiner highlighted that Pagaya's diversified funding, strong balance sheet, and disciplined risk management provide stability. He also noted that in a downturn, other lenders often tighten credit, which can increase application flow to Pagaya's network, creating a natural balancing mechanism.

John Hecht from Jefferies asked for more detail on the framework for the Q4 fair value marks, which were larger than expected, and sought assurance that similar large marks would not recur in 2025.

Answer

CEO Gal Krubiner explained that the outsized losses stemmed from 2023 vintages, which were highly sensitive due to challenging funding conditions at the time. He stated that 2024 and future vintages are not expected to have similar issues due to a better funding environment and stronger credit performance, noting the 2025 GAAP net income guidance already accounts for potential impairments. CFO Evangelos Perros added that $144 million of the $156 million Q4 impairment was against 2023 vintages and detailed mitigating actions like optimizing ABS structures. President Sanjiv Das concluded that navigating this period strengthened the overall operating business.

John Hecht requested a comparison of the Fee Revenue Less Production Costs (FRLPC) for the mature personal loan product versus newer products like auto and POS. He also asked about risk retention levels across these different product lines and the trend in the network's conversion rate.

Answer

CFO Evangelos Perros detailed that while the company-wide FRLPC was 4.3%, the mature personal loan product achieved 6.6%. He stated that auto and POS are expected to follow a similar path to profitability. Perros also noted that the low conversion rate provides a significant opportunity for profitable growth, which is expected to materialize as newer partner relationships mature, particularly in 2025.

John Hecht of Jefferies inquired about future credit strategy, asking if improving loss curves could lead to charge-offs below the target range and potentially looser underwriting. He also asked about the mix of branch versus digital originations and the possibility of re-establishing third-party whole loan sales.

Answer

CEO Raul Vazquez stated that despite improving credit, it is not the right time to loosen underwriting, as the focus remains on originating more, smaller loans. He mentioned that about one-third of originations come from retail channels. Interim CFO Paul Appleton added that while whole loan sales are an option, securitizing loans in the ABS market is more profitable long-term and will remain the primary funding strategy.

John Hecht from Jefferies inquired about the current mix of online versus in-branch loan applications, the strategy for growing the secured loan business, and the state of the competitive landscape.

Answer

CEO Raul Vazquez responded that the mix between online and physical channels remains stable, with only a minor two-point shift toward online. He highlighted that the secured personal loan portfolio grew 59% year-over-year, driven by an increase in the number of loans rather than larger loan sizes. The strategy involves presenting both secured and unsecured options to all members and using targeted marketing. Vazquez also characterized the current competitive environment as rational and constructive for Oportun.

John Hecht of Jefferies inquired about the primary channels for origination growth, the outlook for cost of capital and leverage, and any considerations for fair value marks in the upcoming year.

Answer

CEO Raul Vazquez stated that all origination channels are active, with particular strength in retail and contact centers. CFO Jonathan Coblentz addressed the other points, noting that the cost of funds will be influenced by strong pricing on new debt issuances offset by the runoff of older, low-rate debt. He said the goal is to reduce the debt-to-equity ratio through profitability but gave no specific target. For fair value, he noted improving credit could be a benefit, while the discount on asset-backed notes will continue to amortize as a negative on a GAAP basis.

John Hecht of Jefferies Financial Group Inc. inquired about the remaining fair value mark-to-market on asset-backed securities (ABS), the company's target leverage ratios for deleveraging, and the primary channels Oportun will focus on to drive future originations growth.

Answer

Jonathan Coblentz, CFO & CAO, stated that approximately $31 million in cumulative fair value marks remain on the ABS notes, which are expected to be mostly realized by the end of 2025. He also confirmed the company's target leverage ratio is 6:1. CEO Raul Vazquez added that growth will be driven by expanding their physical footprint into new states like Georgia and Pennsylvania, as well as leaning into Lending as a Service partnerships with companies like DolEx, Barri, and Western Union.

John Hecht asked for details on the SBIC fund's interest rate structure and asset characteristics, the potential impact of lower interest rates on prepayments, and any expected seasonality in Q3 and Q4 originations.

Answer

CEO Kyle Brown explained the SBIC fund will secure two-to-one leverage with low-cost, fixed-rate debentures, creating strong returns and new fee streams for Trinity. He noted that lower rates would be beneficial, as most loans are at their floors, which would reduce Trinity's borrowing costs and potentially increase prepayment fee income. Regarding seasonality, he pointed to the strong momentum and nearly $849 million in unfunded commitments as indicators of a strong Q3 deployment.

John Hecht of Jefferies inquired about the key drivers behind the sustained strength in U.S. retail margins and asked for an update on EZCORP's acquisition pipeline, market pricing, and geographic focus.

Answer

CFO Tim Jugmans explained that the strong margins are a result of both the increase in gold prices and improved lending practices, which ensure items are priced correctly if they forfeit to inventory. CEO Lachlan Given added that the acquisition pipeline is robust across existing markets and that the company is well-capitalized to execute its core strategy of scaling the business, while balancing opportunistic capital returns to shareholders.

John Hecht of Jefferies inquired about the cycle of wage increases in Mexico and their broader business impact, how the company measures the ROI on its digital investments like the EZ+ rewards program, and the outlook for store growth through de novo openings versus acquisitions.

Answer

Executive Lachlan Given acknowledged the significant wage increases in Mexico, noting that while they impact expenses, the Latin American business is experiencing phenomenal sales and loan growth. On digital investments, he explained that success is measured by strong comparative growth metrics, market share gains, and direct feedback from store managers, all while using a lean, ROI-based approach. For store growth, Mr. Given outlined a balanced strategy of roughly 40 de novo stores per year, primarily in Latin America, complemented by a disciplined M&A approach with a strong pipeline.

John Hecht of Jefferies inquired about the drivers behind the quarter's higher tax rate, the potential for further penetration and efficiency gains from the EZ+ Rewards and online payment platforms, the ongoing business impact from recent hurricanes in Florida, and any observed changes in customer behavior as inflation stabilizes.

Answer

CFO Timothy Jugmans clarified that the higher tax rate was due to one-off items, such as a withholding tax in Guatemala, and expects it to normalize, albeit with slight increases as Latin America's profit contribution grows. CEO Lachlan Given explained that the EZ+ Rewards program, now with 5.4 million members, is shifting focus from penetration to engagement, while online payments are boosting in-store efficiency. Mr. Jugmans added that online payments have significant growth potential in Latin America. Regarding customer behavior, Mr. Given described demand as consistently robust across all regions.

John Hecht asked about recent payment rate trends, the impact of student loan repayments, and the company's evolving strategy regarding its physical branch network versus its digital channels.

Answer

EVP & CFO Jenny Osterhout noted nothing unusual in payment trends and stated that the company has observed no significant performance difference in customers with student loans. CEO Doug Shulman explained their channel strategy is to optimize the customer experience, using digital tools for routine tasks to free up branch staff for high-value, personalized customer interactions, which remain a core part of their model.

John Hecht asked for an early assessment of the 2024 loan vintage performance, suggesting metrics like first payment defaults, and how it compares to historical vintages. He also inquired about the outlook for the cost of capital for the upcoming year, considering the current market and the company's debt maturity stack.

Answer

CFO Jenny Osterhout responded that while they don't provide specific vintage-level data, the 'front book' vintages are showing good customer payment behavior, with performance tracking closer to the 2017 vintage. On the cost of capital, Osterhout stated that they expect it to be slightly above current levels but noted that the impact is muted as nearly 90% of the average debt for 2025 is already on the books at fixed rates, insulating the company from near-term rate volatility.

John Hecht from Jefferies inquired if the constructive competitive environment was consistent across all three product lines (personal loans, auto, credit card). He also asked how the increasing presence of private credit through forward flow agreements impacts OneMain's strategic thinking and the competitive landscape.

Answer

CEO Douglas Shulman explained that while their tight credit standards are consistent, the competitive benefit is most pronounced in personal loans. For auto and credit cards, where OneMain is a smaller player, their own execution is more critical. He emphasized that OneMain's 'fortress balance sheet' is a key strategic advantage, allowing them to lend consistently when competitors reliant on fickle capital markets, like private credit, pull back.

John Hecht asked if management is seeing any 'green shoots' for a discretionary spending recovery, and also inquired about the company's appetite for share repurchases and the financial impact of the permanent bonus depreciation tax change.

Answer

CEO Steven Michaels stated they are not calling for a near-term recovery in durable goods and their conservative posture remains appropriate. He reiterated capital allocation priorities, including share repurchases. He explained the tax change is a deferment that lowers cash taxes for the foreseeable future but does not affect the GAAP tax rate.

John Hecht inquired about the timing of Q1 deployments, whether the full impact of rate changes was reflected in the quarter's run rate, and the drivers behind FSK's strong origination activity and potential market share gains.

Answer

Chief Investment Officer & Co-President Daniel Pietrzak noted that Q1 origination included some deal slippage from the prior quarter and was well-diversified across the joint venture, asset-based finance, and non-U.S. exposure. Chief Financial Officer Steven Lilly confirmed that most rate declines have flowed through the portfolio, which is reflected in the flat recurring interest income guidance for Q2. Pietrzak added that while FSK benefits from a large existing book and diversified channels, the M&A market has slowed in Q2 amid broader uncertainty.

John Hecht questioned the outlook for the M&A and investment pipeline into 2025, asking if it is expected to grow. He also requested commentary on the credit outlook, particularly concerning EBITDA and revenue trends within the portfolio.

Answer

Daniel Pietrzak, CIO, expressed optimism for M&A growth in 2025, citing pent-up sponsor demand, LP pressure for capital returns, and the firm's strongest deal pipeline since early 2022. On credit, Pietrzak noted that while portfolio companies show positive revenue and EBITDA growth, the pace has slowed, and tighter interest coverage ratios make them more susceptible to idiosyncratic risks. Brian Gerson, Co-President, highlighted specific weakness in consumer products and some industrial sectors.

John Hecht inquired about the impact of the current macroeconomic environment, including rising used car values and potential tariffs, on Open Lending's ability to structure deals. He also asked about potential growth opportunities from the refinance and OEM segments of the business.

Answer

CEO Jessica Buss stated that the company is closely monitoring the macro environment, viewing the recent increase in the Manheim index as a positive for the back book's collateral values. She noted that rate increases are being implemented to anticipate tariff impacts and that the credit union environment is improving. Executive Matthew Sather added that tariff volatility is a key concern. Regarding growth, Buss confirmed a pilot program with an OEM is in its initial phases and that the company is prepared for the refinance market's return, holding initial talks with large credit unions.

John Hecht of Jefferies Financial Group Inc. questioned how tightening credit standards for borrowers with 'credit builder' trade lines would affect the company's addressable market and what market conditions are needed to increase loan flow from OEM partners.

Answer

Interim CFO Charles Jehl stated the tightened standards would not have a huge impact on go-forward volume as these were underperforming cohorts. CEO Jessica Buss added that the strategy is to focus on quality over quantity, using refined pricing to attract better-performing loans to replace the volume from 'super thin' files. Jehl also expressed optimism about a new OEM partner currently in its pilot phase.

John Hecht asked about the potential impact of policy changes, such as reduced government funding for universities, on private student loan demand. He also inquired if the character of buyers in their recent large loan sale had changed, particularly with the rise of private credit funds.

Answer

CEO Jonathan Witter acknowledged that reduced university funding could create a larger financing gap for families, a potential positive for originations. However, he noted potential headwinds, like fewer international students, and concluded it's too early to determine the net material impact. CFO Peter Graham stated there was no real difference in the loan sale process or the makeup of bidders this year compared to last, and he expects the buyer to use Sallie Mae's securitization framework for funding.

John Hecht of Jefferies inquired about the impact of the private credit market on loan sale execution, the near-term drivers of Net Interest Margin (NIM), and potential regulatory changes beyond PLUS reform.

Answer

CFO Pete Graham confirmed the supportive private credit market was a factor in the favorable loan sale environment and noted NIM will be affected by the repricing of both old and recent debt over the next few quarters. CEO Jon Witter stated the company aims to operate in a way that withstands political shifts and is not planning for a 'lightning regulatory regime,' focusing instead on constructive engagement with regulators.

John Hecht asked about the maturity profile of the deposit book and how it affects repricing, and also sought to quantify how much of the strong origination growth came from Discover's market exit.

Answer

CFO Pete Graham reiterated that a mix of older, higher-cost and newer, lower-cost deposits will create some NIM pressure in the first half of 2025 before normalizing. CEO Jon Witter stated it was premature for exact figures but that 'simple math' suggests the 13% growth is consistent with capturing their fair share of the exiting competitor's volume plus normal market growth.

John Hecht of Jefferies inquired about any structural changes expected for the upcoming tax season and asked for details on the customer acquisition strategy for the growing direct-to-consumer (DTC) channel, including its impact on metrics.

Answer

CEO Mitchell E. Fadel noted that early indications suggest tax refunds will be higher this year, which he views as a positive for consumer confidence and spending. Regarding DTC, he explained that the primary strategy is to leverage their millions of existing customers in the database for cross-selling, which keeps customer acquisition costs (CAC) low. New customer acquisition is being pursued cautiously to balance growth with expense management.

John Hecht asked whether the consumer trade-down trend is expected to alter the mix or type of transactions during the upcoming holiday season.

Answer

CFO Fahmi Karam responded that the company does not expect a significant shift in the transaction mix during the holiday season. He noted that while the trade-down trend may continue to influence 90-day purchase option activity, particularly into Q1's tax season, the overall holiday GMV mix by channel or customer type is expected to be consistent with prior years.

John Hecht asked about the company's willingness to increase its leverage ratio to offset declining rates and inquired about any strategic shifts in sector focus, particularly in light of the new political administration.

Answer

CEO Scott Bluestein confirmed the company intends to increase leverage in 2025, viewing its current underlevered balance sheet as a competitive advantage to drive growth and offset yield compression. Regarding sector focus, he stated that the investment teams have begun rotating capital more aggressively into and out of certain sectors in anticipation of new administration policies, expressing general bullishness on technology, M&A, and capital markets activity for the year.

John Hecht asked about the flexibility of portfolio companies to wait out interest rate uncertainty, whether specific sectors might become more active depending on the election outcome, and the company's strategic view on investment opportunities in Artificial Intelligence (AI).

Answer

CEO Scott Bluestein explained that many quality companies delayed debt financing in Q3 to await the Fed's rate cut, leading to a subsequent surge in activity and a $630 million pending commitment pipeline. He acknowledged that different election outcomes would likely impact certain sectors favorably or unfavorably but declined to specify which ones to avoid signaling strategy. Regarding AI, Bluestein described Hercules' approach as selective and tangential, preferring companies with AI elements over pure-play AI firms due to the high-risk, high-reward nature of the nascent market.

John Hecht from Jefferies inquired about the expected product mix for 2025, particularly the balance between large, small, and auto-secured loans. He also asked for details on the relative performance of the 2024 versus 2023 loan vintages and the potential impact of interest rate cuts on the company's financials.

Answer

CEO Robert Beck stated that the company will continue its 'barbell strategy' in 2025, balancing growth in the auto-secured business with the higher-rate small loan business. He noted that new originations are performing as expected, highlighting the lower delinquency (7.2%) and reserve rates (10.2%) of the 'front book' compared to the 'back book'. CFO Harpreet Rana added that while the impact of rate cuts has been calculated, it would not be disclosed, but confirmed plans to issue new fixed-rate debt in 2025.

John Hecht asked about the nature of the hurricane-related provision, questioning if it was a one-time event or a pull-forward of future losses. He also inquired about the potential for continued price increases and the long-term target mix between large and small loans.

Answer

CFO Harpreet Rana clarified that the $2.1 million incremental reserve is a direct, one-time impact from the hurricanes, with losses expected over the next several months. CEO Robert Beck added that the $3.5 million in personal property insurance claims helps customers and pays down loan balances. Beck attributed rising yields primarily to a strategic mix shift toward higher-margin small loans, balanced by growth in lower-risk auto-secured loans (the "barbell strategy"), rather than broad price hikes. He indicated this strategy will continue but deferred specifying a long-term mix target until 2025 guidance is issued.

John Hecht asked about the stability of the allowance for loan loss (AOL) in the private student loan portfolio and the sensitivity of the loan origination business, particularly the refi segment, to potential interest rate reductions.

Answer

CFO Joe Fisher stated that the current AOL level is appropriate, though new originations will continue to add to it under CECL accounting. Regarding interest rate sensitivity, Fisher explained that a minor 25 basis point cut is unlikely to significantly move the market. He suggested that a more substantial reduction of 75 to 100 basis points would be needed to make refinancing a compelling option for a large number of borrowers, which could meaningfully increase origination volumes.

John Hecht questioned whether the allowance for loan loss on the private student loan portfolio has stabilized and asked about the sensitivity of the loan origination business to interest rate cuts.

Answer

CFO Joe Fisher indicated they are comfortable with the current allowance level but noted it will increase with new originations due to CECL accounting. He stated that a 25 basis point rate cut is unlikely to significantly move the market for loan originations. A more substantial pickup in refinance volume would likely require a 75 to 100 basis point reduction in rates.

John Hecht from Jefferies asked about the post-merger branding strategy, specifically whether the First Cash and Cash America store names would be consolidated, and how the combined entity planned to leverage its increased scale for localized marketing and customer acquisition.

Answer

Chairman and CEO Rick Wessel stated that both the First Cash and Cash America brands have significant value and will be maintained in the marketplace. President and CEO of Cash America, Brent Stuart, added that the merger is complementary with little geographic overlap, and the focus is on a non-disruptive transition for customers and employees. Rick Wessel also noted that storefronts are their primary advertising, so there is little need for marketing consolidation.

John Hecht of Jefferies inquired about the post-merger branding strategy for the stores and what marketing strategies could be deployed to leverage the combined company's increased scale.

Answer

Chairman and CEO Rick Wessel stated that both the First Cash and Cash America brand names will be retained due to their significant value and customer recognition. Brent Stuart, President and CEO of Cash America, added that the merger is complementary with little geographic overlap, making a brand change unnecessary. Rick Wessel also noted that advertising spend is minimal, as the storefront itself is the primary marketing tool.