Vincent Caintic

Vincent Caintic from BTIG followed up on credit, asking for more detail on the assumptions baked into the second-half loss expectations and reserve rate. He also inquired about the economics of new business in the current environment.

Answer

EVP & CFO Perry Beberman reiterated the credit guidance, noting that while credit quality has improved, the company is maintaining conservative weightings on adverse economic scenarios in its CECL model due to macro uncertainty. CEO Ralph Andretta added that the new business pipeline is robust and that the company remains highly disciplined on the economics and pricing of any new partnerships.

Vincent Caintic inquired about the nature of conversations with merchants amid market uncertainty and asked about the competitive environment for winning new programs, specifically referencing the new Crypto.com partnership.

Answer

CEO Ralph Andretta described conversations with merchants as constant and comprehensive, covering everything from approval rates to the potential impacts of tariffs. Regarding the Crypto.com win, he attributed the success to Bread Financial's advanced technology, seamless integration capabilities across platforms, and engaged team. He highlighted that this demonstrates their ability to compete and win on factors beyond just price or credit depth.

Vincent Caintic asked for an update on the rollout of Net Interest Margin (NIM) mitigants and how conversations with merchants are progressing given the new administration and potential changes to the CFPB. He also questioned if the company is on track to meet its medium-term ROE guidance of 20-25% by Q4 2025.

Answer

EVP & CFO Perry Beberman explained that mitigation is a phased-in approach with APR increases still rolling out, and 95% of partners have contractual commitments. While optimistic about the regulatory environment, the company is proceeding with its plans. He confirmed that achieving the ROE target depends on credit performance and a potential reduction in the reserve rate, which would set the company up well for 2026.

Vincent Caintic asked for the company's perspective on the Q4 holiday sales season, including consumer sentiment and merchant activity. He also requested more precise guidance on the charge-off rate trajectory for Q4 and into 2025, considering the hurricane impact.

Answer

President and CEO Ralph Andretta stated he expects a moderate holiday sales season, with consumer behavior remaining consistent with recent quarters. EVP and CFO Perry Beberman added that external factors like a shorter shopping season could pressure retail sales. Regarding charge-offs, Beberman confirmed a $10 million shift from Q4 2024 to Q2 2025 due to hurricane relief, which will slightly lower the Q4 rate but not affect the full-year guidance, and reminded analysts to expect a seasonal increase in Q1.

Vincent Caintic commented on LendingClub's very healthy CET1 ratio of 18% and asked how much capital is considered 'too much'.

Answer

CFO Drew LaBenne acknowledged having some excess capital, stating that the primary plan is to utilize it for growing the balance sheet as originations ramp up. He indicated that if there is still more than enough capital after satisfying this primary goal, other options would then be considered.

Vincent Caintic asked about the philosophy behind the company's guidance, given recent outperformance, and questioned the capital management strategy with a high CET1 ratio.

Answer

CEO Scott Sanborn explained that initial 2025 guidance factored in a planned Q2 growth ramp and macro uncertainty. CFO Drew LaBenne added that visibility is improving and that the high CET1 ratio of 17.5% is intentionally maintained to fund significant future growth without shareholder dilution. He also highlighted that marginal ROTCE on new loans is in the attractive 25-30% range.

Vincent Caintic questioned if the origination and PPNR guidance was conservative, sought details on the pricing improvement and demand for the new rated security, and asked about target capital levels and appetite for share repurchases.

Answer

CEO Scott Sanborn clarified that the Q2 originations guidance is not conservative but has a wider range due to new marketing channels. CFO Andrew LaBenne added that PPNR is driven by volume and stable pricing. On the rated security, management noted a 30-50 basis point price improvement and solid demand. Regarding capital, Sanborn stated that levels are strong and are being held for growth, making share repurchases a secondary consideration for now.

Vincent Caintic asked about the drivers for the flat quarter-over-quarter Q1 volume guidance, the outlook for loan sales pricing in 2025, and the company's long-term targets for origination volume and Return on Tangible Common Equity (ROTCE).

Answer

CEO Scott Sanborn explained that Q1 is a seasonally challenging quarter and the company plans to reactivate dormant marketing channels as it exits Q1 into a more favorable seasonal period. CFO Andrew LaBenne added that they expect loan sales prices to continue rising due to strong buyer demand, independent of Fed rate cuts. Both executives clarified that the Q4 2025 exit rate guidance for volume and ROTCE is a stepping stone, not a final destination, and that the company has previously achieved higher volumes and aims to surpass them.

Vincent Caintic inquired about the expected capabilities and volume impact from the DebtIQ and Tally acquisition rollout, the potential effects of the CFPB's open banking rule, and the loan sale price level needed to drive meaningful origination volume.

Answer

CEO Scott Sanborn explained that the Tally acquisition significantly accelerates the DebtIQ roadmap, which will provide members a holistic view of their debt and automated payment strategies, ultimately driving low-cost repeat loan volume. He stated that a loan sale price in the mid-to-high 98% range would provide enough margin to reopen dormant marketing channels, with testing expected in Q1 ahead of seasonally stronger Q2 and Q3.

Vincent Caintic inquired about the framework for PROG Holdings' underwriting posture, what current conditions it can absorb, and what would trigger further tightening. He also asked about the potential GMV opportunity from the three new retailers and Four Technologies' long-term economics and potential EBITDA margins at maturity.

Answer

Steve Michaels, President and CEO, explained that PROG Holdings monitors a mosaic of indicators, noting that while delinquencies are elevated, they are not currently impacting overall portfolio yield or negative outcomes. He stated that any future tightening would be highly dialed-in to specific pockets or geographies. Michaels described the new retailers as 'recognizable logos' and 'super regional' in size, with GMV expected to ramp gradually. Regarding Four Technologies, Michaels noted that its year-to-date EBITDA margin (mid-single digits after Q4 loss) is expected to improve over several years due to scale and improving loss rates, with the potential to resemble public BNPL comps at maturity.

Vincent Caintic asked for a framework on PROG Holdings' current underwriting posture, specifically what it can absorb and what would trigger further tightening. He also inquired about the potential GMV opportunity from the newly signed retailers and how the company envisions Four Technologies' future economics and EBITDA margins at maturity, comparing it to other public BNPL companies.

Answer

Steve Michaels, President and CEO, stated that the decisioning team monitors a 'mosaic' of indicators (e.g., first pay bounces, delinquencies) and is poised to make highly dialed-in adjustments (by vertical, retailer, or geography) if needed, rather than broad changes. He described the new retailers as 'super regional' in sizing, expecting GMV to ramp up through training and productivity gains. Regarding Four Technologies, Michaels noted that while Q4 seasonality would impact full-year EBITDA margin, the year-to-date performance was strong (20%+ margin). He anticipates margin improvement over several years driven by scale and improving loss rates, aiming for economics comparable to public BNPL companies, acknowledging that the high growth rate might decelerate in 2026.

Vincent Caintic of BTIG asked about the potential scale of the Four Technologies business, its growth sustainability, and its core economics. He also asked if Four's profitability is understated due to CECL reserving during its rapid growth.

Answer

CEO Steven Michaels expressed excitement for Four, guiding for its GMV to more than double in 2025 and noting its potential for EBITDA margins far exceeding the leasing business. He provided key metrics like a ~10% TTM take rate and ~5x quarterly purchase frequency. He confirmed that CECL accounting does suppress current reported profitability due to upfront loss provisioning, especially in high-growth periods like Q4, and that margins will expand as growth moderates.

Vincent Caintic asked about the impact of trade-down activity from lenders higher in the credit stack, specifically regarding application volume growth versus application quality. He also inquired about the company's view on the right long-term EBITDA margin, considering ongoing investments in marketing and technology.

Answer

CEO Steven Michaels acknowledged that while application volume is up, partly due to tightening from other lenders, the average quality of those applications is slightly lower than last year. CFO Brian Garner reiterated that the Big Lots bankruptcy does not change the company's conviction in its long-term 11% to 13% EBITDA margin target. He stressed that it would be a lost opportunity to pull back on key technology and integration investments that are expected to drive future GMV growth.

Vincent Caintic of BTIG asked about the company's medium- to long-term GMV growth potential, considering the combined effects of winning new merchants, increasing penetration with existing partners, and navigating near-term headwinds.

Answer

CEO Steve Michaels did not provide a specific long-term GMV growth algorithm but stressed that the market remains significantly underpenetrated. He explained that growth is driven by deploying new initiatives within the existing partner base and, over the long term, adding new retailers. He emphasized that converting the recent influx of 'trade-down' applicants requires superior execution and product experience, which the company's funnel optimization efforts are successfully delivering, turning macro tailwinds into funded GMV.

Vincent Caintic of BTIG asked about the competitive environment, specifically if higher repayment rates were due to customers being refinanced by competitors. He also sought clarity on the outlook for overall portfolio growth in 2025 and whether the current portfolio yield level is stable.

Answer

CEO Raul Vazquez responded that the company sees no evidence of competitive refinancing, attributing higher repayments to smaller average loan sizes being easier for customers to pay off. He guided for mid-single-digit originations growth in H2 2025, with the full-year portfolio expected to decline by approximately 3%. Vazquez also stated that the current portfolio yield is expected to be relatively stable going forward.

Vincent Caintic of BTIG asked about the sensitivity of the 2025 guidance to macroeconomic factors like inflation, and whether the consumer finance market should be viewed as a zero-sum game for growth among fintechs.

Answer

CFO Jonathan Coblentz stated that the guidance already incorporates multiple macro scenarios. CEO Raul Vazquez added that their current V12 underwriting model was built using recent inflationary data, providing confidence. Vazquez argued it is not a zero-sum game for Oportun, as the company serves a specific, under-served niche of consumers with thin or no credit files, differentiating it from traditional fintechs.

Vincent Caintic of BTIG followed up on the return to growth, asking about the specific drivers, changes to underwriting posture, and the expected risk-adjusted margins and loss rates associated with this new growth phase.

Answer

CEO Raul Vazquez clarified that the return to growth is driven by confidence in their internal credit models (V12), improving macro conditions like lower inflation, and a strong job market, not by loosening their credit box. He emphasized they are remaining conservative. CFO & CAO Jonathan Coblentz directed attention to the company's unit economics model, stating that with a 2025 charge-off forecast of 11-12%, the implied risk-adjusted net interest margin would be in the 16% to 17% range.

Vincent Caintic asked about the near-term performance drag on the Rent-A-Center segment from prior underwriting adjustments and its long-term growth outlook. He also inquired about Bridget's second-half marketing plans and potential for new product introductions.

Answer

CEO & CFO Fahmi Karam explained that the purposeful pullback in credit and product categories impacted Rent-A-Center's results, noting same-store sales would have been flat to slightly up without these changes. He stated the long-term goal is low single-digit growth. For Bridget, Karam highlighted a test-and-learn approach for marketing in new channels and excitement for the new line of credit product, which was developed based on direct consumer feedback.

Vincent Caintic of BTIG inquired about the extent of underwriting tightening at Acima, noting the divergence between application and GMV growth, and asked about headwinds from the furniture product mix at both Acima and Rent-A-Center.

Answer

CEO Mitchell E. Fadel highlighted that Acima's product mix is now highly diversified, with furniture representing only about 40% of revenue, mitigating sector-specific headwinds. CFO Fahmi Karam clarified that while overall approval rates are relatively stable, they are dynamically managed, with tightening in riskier segments and for new customers, offset by higher approvals for returning customers. Fadel added that the app-to-GMV growth gap is also due to a product mix shift toward lower-ticket items from new marketplace partners.

Vincent Caintic inquired about the economics of Acima's trade-down business, including gross margins and loss expectations, and asked about the management strategy for the Rent-A-Center segment, which is seeing higher margins despite increased charge-offs.

Answer

CFO Fahmi Karam explained that the trade-down dynamic results in lower initial margins due to more 90-day buyouts but provides access to new customers with higher repeat business potential, which should lead to improved loss rates over time. CEO Mitchell E. Fadel added that for Rent-A-Center, the company balances loss rates with the need for volume to maintain strong EBITDA margins, noting that losses have peaked seasonally as expected and the business is benefiting from competitor closures.

Vincent Caintic from BTIG inquired about the company's guidance philosophy, given the significant Q2 earnings beat, and asked why newer stores show higher receivables per branch than mature ones.

Answer

President & CEO Robert Beck explained that the Q2 guidance was conservative due to macro uncertainty at the time, and the company leaned into growth as conditions improved. The full-year guidance range reflects the variable impact of growth on CECL provisioning. He clarified that newer stores have higher receivables because they are primarily in new states with lower branch density, resulting in larger average store sizes and customer bases.

Vincent Caintic of BTIG asked about the expected credit reserve rate on new originations and the potential for it to decline in 2025. He also inquired about the drivers for higher net income in the second half of the year and sought management's view on the upcoming tax refund season.

Answer

CEO Robert Beck indicated that the front book's 10.2% lifetime reserve rate is a good indicator of where the portfolio is heading as the back book runs off, though he guided for the overall reserve rate to remain flat in Q1. He explained that the expected second-half net income lift is due to both revenue from portfolio growth occurring in the last three quarters of the year and seasonally lower net credit losses post-tax season. Regarding the tax season, Beck stated it was too early to provide an indication of its strength.

Vincent Caintic sought clarification on any further hurricane-related impacts expected in the fourth quarter. He also asked about the long-term outlook for credit reserve rates and asset yields once the product mix normalizes, and inquired about the competitive landscape, particularly regarding fintechs funded by private credit.

Answer

CEO Robert Beck confirmed that no further material impacts from the hurricanes are expected beyond what was disclosed for Q3, with the main variable being the timing of loss recognition. He deferred providing specific long-term targets for reserves and yields until 2025 guidance but emphasized the effectiveness of the 'barbell strategy.' CFO Harpreet Rana added that this strategy's balancing effect applies to yields, losses, and reserves. Regarding competition, Beck stated they are not seeing significant pressure from fintechs, expressing confidence in their decades of experience in the small loan market.

Vincent Caintic of BTIG asked how positive macro trends translate to growth, given Enova's consistent performance, and sought clarification on whether a specific macro factor caused the minor credit 'blip' in one consumer product.

Answer

Chairman & CEO David Fisher stated that despite solid macro trends, the company prefers a balanced approach to growth and risk, especially given its already strong 20%+ growth rate and low valuation. He clarified 'categorically, no,' that the credit blip was not tied to a specific macro trend but was an isolated, product-specific issue that was quickly resolved, describing it as a 'non-event' internally.

Vincent Caintic asked for a comparison of the relative strength and growth outlook between the consumer and SMB businesses for 2025, the use cases for SMB borrowing, and trends in expense efficiency heading into 2026.

Answer

CFO Steve Cunningham projected that the portfolio mix would remain stable, with SMBs constituting about 60%, and that borrowing use cases are not expected to change. Regarding expenses, he noted that G&A and O&T as a percentage of revenue should continue to scale down through 2025, while marketing will remain around 20% of revenue, varying seasonally with origination opportunities.

Vincent Caintic of BTIG inquired about the drivers behind the impressive sequential origination growth and its potential to continue. He also asked about the company's operating leverage and how efficient the business can become as it scales, potentially allowing for faster EPS growth.

Answer

CEO David Fisher attributed the strong growth to a combination of seasonality and a conducive macro environment. He affirmed that strong growth of over 20% is expected to continue in Q4. CFO Steven Cunningham confirmed that significant operating leverage exists, particularly as fixed G&A expenses grow much slower than revenue. He noted that as the company continues to scale, this leverage should persist, allowing profitability to grow faster than the top line.

Vincent Caintic asked about the potential scale of the Four Technologies business, its key economic metrics, and whether its current profitability is understated due to CECL reserving amid rapid growth.

Answer

CEO Steven Michaels expressed high confidence in Four's growth, noting its potential for EBITDA margins to exceed the leasing business. He shared key metrics like a ~10% take rate and ~5x quarterly purchase frequency. He confirmed that CECL accounting does suppress reported earnings during high-growth phases, and margins are expected to expand as growth moderates.

Asked about the impact of macroeconomic factors like tariffs and used car prices on the business and consumer behavior. He also inquired about the progress of operational upgrades, including the partnership with Cox Automotive, and its expected effect on gross profit margins and sales.

Answer

The company stated that the impact from tariffs is manageable at around a $300 increase per unit and has not led to a pull-forward of sales. Strong lead activity continues, but the company is being more selective on credit due to tight used car supply. The rollout of risk-based pricing was accelerated to manage this environment. Regarding operations, the gross profit margin target of 37-38% is expected to be reached sooner than planned. A key focus is on improving the collections process through the 'Pay Your Way' campaign before pushing for significant unit growth.

Vincent Caintic asked about the impact of macro factors, such as tariffs and used car prices, on consumer behavior and sales. He also inquired about the progress of operational upgrades, including the Cox Automotive partnership, and their expected effect on gross profit margins and store productivity.

Answer

CEO & President Douglas Campbell explained that the tariff impact was manageable at around $300 per unit and did not cause a pull-forward of sales. He highlighted strong lead activity and a strategic focus on selective underwriting. Campbell also detailed the relaunch of the 'Pay Your Way' platform to improve collections and customer experience, viewing it as a critical step before pursuing aggressive unit growth. He noted that the company is focused on growing receivables through smarter underwriting rather than just unit volume for now.

Asked for an update on the tax season, including application volume and customer behavior. He also inquired about the potential for higher-quality customers entering their sales funnel and the remaining potential benefits from the LOS and other process improvements.

Answer

Executives noted that tax season started slow but demand is strong, with application volume up over 3.5%. They are seeing strong website traffic and plan to test extending the season to attract higher-credit customers. There are still more benefits to be realized from process improvements like the Cox partnership and from expanding risk-based pricing, which is now live in 34 stores.

Vincent Caintic asked for an update on the tax season, including application volume, credit performance, and whether a higher quality of customer is entering the sales funnel. He also questioned how much more benefit the company can realize from its recent process and system improvements.

Answer

CEO Douglas Campbell reported that after a slow start, tax season demand is strong, with application volume up over 3.5%. He noted that while there is an opportunity to serve higher-credit customers, the full effect post-tax season is still uncertain. Campbell also stated that there are more benefits to come from process improvements, particularly from the Cox partnership and the expansion of risk-based pricing, which is now being tested in 34 stores.

Asked about the long-term credit loss expectations for a fully LOS-originated portfolio and the strategic rationale behind closing some dealerships while acquiring others.

Answer

The company is hesitant to provide a definitive long-term credit loss target for the LOS portfolio due to new initiatives like risk-based pricing that will alter the customer mix. Dealership closures are driven by underperformance and changing market dynamics in older locations. Acquisitions are focused on strategic fit, operational leverage, and significant growth potential, including some opportunities much larger than their typical stores.

Inquired about the required decline in used car prices to stimulate demand, visibility on sales volume growth, details on performance-managing underperforming locations, the difference in loss expectations between old and new loan vintages, and a breakdown of SG&A expenses.

Answer

Executives stated that a $500-$800 reduction in vehicle procurement costs would significantly improve their addressable market. Sales volume is impacted by both market conditions and internal capital restrictions on underperforming stores. For those stores, they restrict inventory and tighten underwriting until performance improves or the location is closed. They pointed to cash-on-cash return projections to illustrate the improved quality of new loan vintages versus the back book. SG&A was flat YoY due to cost cuts offsetting new technology expenses (~$1M quarterly) and acquisition-related costs.

Vincent Caintic of BTIG asked about the competitive landscape, particularly if rivals are using aggressive economics to win merchants, and for updated thoughts on pursuing a bank charter.

Answer

COO Michael Linford stated the market is competitive but Affirm wins on conversion and impact, not price, pointing to consistent merchant fee rates as evidence. CEO Max Levchin said a bank charter is not a near-term funding solution and would only be pursued if necessary to enable a specific, high-priority product feature.

Vincent Caintic asked about Affirm's ability to continue taking market share as traditional credit card lenders tighten underwriting, and inquired about the potential impact of macro and political developments from Washington.

Answer

CEO Max Levchin explained that Affirm's model of underwriting every transaction allows it to remain confident in its portfolio, unlike revolving credit issuers who may be dealing with past mistakes. He stated that if other lenders pull back, Affirm will be there to serve customers. On the macro front, he expressed confidence in Affirm's ability to operate in any rate environment and noted the company's mission and core values are not guided by political headlines, ensuring stability regardless of the administration.

Vincent Caintic asked about the long-term outlook for adjusted operating income margins, given that current guidance is already above 20% and trending higher.

Answer

COO Michael Linford confirmed they are not updating the long-term framework but acknowledged that performance is ahead of schedule due to faster-than-expected operating leverage and a focus on achieving GAAP profitability. He reiterated that Affirm expects to continue growing margins from current levels.

Vincent Caintic asked about the competitive landscape, particularly regarding pricing pressure, and sought an updated view on the funding structure and the possibility of becoming a bank.

Answer

COO Michael Linford stated that while the market is highly competitive, Affirm wins on conversion and impact, not price, allowing for consistent merchant fee rates. CEO Max Levchin reiterated that a bank charter is not a near-term funding solution and would only be pursued if it were necessary to enable a specific product feature that is currently unachievable.

Vincent Caintic requested more detail on the credit reserve rate, asking about the level of conservatism and the underlying macro assumptions, and also inquired about the conditions that would lead to a change in their underwriting posture.

Answer

CFO Jenny Osterhout explained that the reserve includes a macro overlay assuming unemployment rises to ~6% in 12 months and was modestly raised quarter-over-quarter. CEO Douglas Shulman added that they are not removing the 30% underwriting stress buffer due to current uncertainty. He clarified that any future adjustments to their credit box would likely be micro-level changes in specific segments rather than a broad loosening or tightening.

Vincent Caintic of BTIG asked for the expected timing of a year-over-year improvement in the net charge-off rate and a reminder of typical loss seasonality. He also inquired about the outlook for origination growth and when the newer, higher-quality 'front book' would become the dominant factor in credit performance.

Answer

CFO Jenny Osterhout outlined the typical loss seasonality, noting that improving delinquency trends lead loss improvements by about two quarters, but declined to give specific 2025 guidance. CEO Douglas Shulman reiterated that origination growth is an output of their disciplined credit-first approach, not a primary target, and that they are pleased with current demand levels driven by their product and market position.

Vincent Caintic of Stephens Inc. asked newly appointed CEO Jessica Buss for her insurance-focused perspective on Open Lending's challenges, what structural and economic changes are necessary for a turnaround, the investment required, and the remaining risk exposure from the 2021-2022 loan vintages.

Answer

CEO Jessica Buss explained her plan to apply a more sophisticated, real-time, insurance-based approach to pricing and risk management to enhance predictability and reduce volatility in the profit share. She noted the core infrastructure is in place, but predictive modeling and data feedback loops need enhancement. Interim CFO Charles Jehl added that the unit economics for the problematic 2021-2022 vintages have already been significantly written down.

Vincent Caintic of BTIG, LLC sought clarity on the potential magnitude of GAAP profitability in 2025 and whether funding capacity could be a constraint on the transaction volume implied by the fee revenue guidance.

Answer

CFO Sanjay Datta clarified that for 2025, they expect to be in the 'ballpark of breakeven' on a GAAP basis, not dramatically profitable, partly due to a one-time accounting impact from stock-based compensation changes. He also stated that while the analyst's volume math was aggressive, the guidance assumes funding will not be a bottleneck; growth is primarily gated by success on the borrower side, not capital availability.