OneMain - Earnings Call - Q2 2025

Executive Summary

• Strong quarter: C&I adjusted diluted EPS was $1.45, above S&P Global consensus of $1.23 (GAAP diluted EPS $1.40); total revenue rose 10% YoY to $1.5B; capital generation increased 63% YoY to $222M. EPS consensus values from S&P Global.*
• Credit improvement continued: net charge-off ratio declined to 7.19% (from 8.29% YoY) and 30+ dpd delinquency improved to 5.17% (from 5.45% YoY).
• Guidance tightened positively: management now expects total revenue growth at the high end of the 6–8% range and C&I net charge-offs of 7.5%–7.8% (lower half of prior range); OpEx ratio guided to ~6.0% for FY25; yield to moderate in 2H on seasonality and mix.
• Liquidity/funding remained a strength (raised $1.8B in Q2; issued a 3-year $1B revolving ABS <5% cost; $769M cash; 5.5x net leverage) supporting continued originations and capital returns (460k shares repurchased; $1.04 dividend).

What Went Well and What Went Wrong

• What Went Well

  • Credit trends improved ahead of plan: NCO ratio down to 7.19% (from 8.29% YoY); 30+ dpd 5.17% (vs 5.45% YoY); management narrowed full-year NCO to 7.5%–7.8% (lower half of prior range).
  • Capital generation accelerated: $222M in Q2 (+63% YoY), driven by receivables growth, better yield, and credit.
  • Strategic/funding execution: raised $1.8B across secured and unsecured; issued a 3-year $1B revolving ABS <5% cost; strong market access with $3.3B raised in 1H25. CEO: “We had a very strong second quarter…growth in high-quality loan originations, good pricing, and positive credit trends…leading to strong growth in capital generation”.

• What Went Wrong

  • Operating expenses rose 11% YoY to $415M with elevated strategic investments (though OpEx ratio guidance improved).
  • Card losses remain elevated (mid-teens to ~20% on a small, seasoning book), offset by >30% yields; management remains conservative on growth.
  • Yield expected to moderate in 2H (seasonality in 90+ dpd and increased auto mix), tempering some of the favorable pricing tailwinds.

Transcript

Peter Poillon (Head of Investor Relations)

Welcome to the OneMain Holdings Inc. second quarter 2025 earnings conference call and webcast. Hosting the call today from OneMain Holdings Inc. is Peter Poillon, Head of Investor Relations. Today’s call is being recorded at this time. All participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. We do ask that you limit yourself to one question and one follow-up and please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance, please press zero. It is now my pleasure to turn the floor over to Peter Poillon. You may begin.

Doug Shulman (Chairman and CEO)

Thank you, Operator.

Peter Poillon (Head of Investor Relations)

Good morning everyone, and thank you for joining us. Let me begin by directing you to page 2 of the second quarter 2025 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management’s current beliefs about the company’s future financial performance and business prospects, and these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements.

If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, July 25, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we’ll conduct a question-and-answer session. I’d like to now turn the call over to Doug.

Doug Shulman (Chairman and CEO)

Thanks, Pete, and good morning everyone. Thank you for joining us today. Let me start by saying we had a very strong second quarter, which demonstrated our expertise in credit management and best-in-class ability to serve the non-prime consumer. We continue to see growth in high-quality loan originations, good pricing, and positive credit trends across the board, all leading to strong growth in capital generation.

Our total revenue grew 10%, and receivables grew 7% year over year, crossing the $25 billion mark for the first time in the company’s history. Originations grew 9%, driven by our expanded use of granular data and analytics, as well as product and customer-experience innovations to opportunistically drive growth through higher-quality loans.

Due to the strength of the first two quarters of the year, we have updated our view on 2025 net charge-offs to be at the lower half of the range we provided at the beginning of the year. Jenny will discuss the specifics in a few minutes, but we are quite pleased with the improvement in credit that we have seen during the first half of 2025.

This year we increased awareness of the product and made changes to the customer experience to make it easier to consolidate debt with OneMain. Let me give you a few other examples. We have added new data sources to further automate income verification and collateral details. We also have a new streamlined and faster process to renew a loan for select customers who have demonstrated excellent credit performance.

Creation initiatives like these are impactful in the aggregate as they expand our reach, improve our offers, and increase application pull-through rate. This is a small sample of the many initiatives we are working on every day, enabling us to drive growth and efficiency across our loan business.

The revenue yield has improved 140 basis points year over year, and portfolio credit performance remains in line with our expectations and will move down over time as the portfolio matures. The credit-card portfolio represents only about 3% of our total receivables today as we remain measured in our credit-card growth. Our goal is to grow this product conservatively with a focus on building the product for the long term.

In our auto finance business, we ended the quarter with over $2.6 billion of receivables, up $119 million from the last quarter. It has now been a little over a year since we closed the acquisition of Foursight, and we are pleased with the evolution of our auto business since then.

Let me touch briefly on the current economic environment this quarter. The macroeconomic environment remained consistent with past quarters, with policy news causing some volatility, but our customer base continuing to manage their household balance sheets well. The non-prime consumer remains resilient, supported by a solid labor market and good wage growth.

Here’s a clean continuation and summary-style presentation of what you provided:

We remain focused on the long-term success of the business, prioritizing strategic investment in our expanded product portfolio, data science, digital innovation, and profitable growth. Our regular annual dividend of $4.16 per share represents a yield of roughly 7% at the current share price. During the quarter, we repurchased 460,000 shares at an average price just under $46. In the first half of 2025, total repurchases reached approximately 780,000 shares for about $37 million, already exceeding the 755,000 shares repurchased in all of 2024. We will continue to manage repurchases based on excess capital, economic conditions, and broader market dynamics. Overall, it was a very strong quarter.

We are seeing the results of initiatives and actions we put in motion over the past couple of years, including careful management of our credit box, innovations in our core loan products to drive originations, and new products and channels, all of which resulted in significant capital generation growth year over year. With that, let me turn the call over to Jenny.

Jenny Osterhout (CFO)

Thanks, Doug, and good morning everyone. We delivered another strong quarter, highlighted by double-digit revenue growth, healthy receivables expansion, and continued improvement in credit performance. We also demonstrated industry-leading balance sheet management, maintaining strong market access and execution as we raised $1.8 billion across both secured and unsecured markets, providing added flexibility for future issuances.

Capital generation — our primary performance metric — was $222 million for the quarter, an increase of $86 million, or 63%, from $136 million in the prior-year period. The increase reflects continued growth in our loan portfolio, improved portfolio yield, and better credit performance. With strong results through the first six months of 2025, we expect capital generation for the full year to exceed levels from each of the past two years.

Our growth reflects OneMain’s ability to identify and pursue opportunities in higher-quality personal loan originations while selectively expanding newer businesses and responsibly improving pricing across the portfolio. In the second quarter of 2022, total receivables reached $20 billion. Since then, receivables have increased by 25%, or $5 billion, even as we maintained a meaningfully tighter credit box and expanded into new products, including approximately $1.3 billion from the Foursight acquisition.

Looking ahead to the second half of the year, we expect originations to normalize to mid–single-digit year-over-year growth, as we are now more than a year into the successful personal loan growth initiative launched in June of last year. We remain comfortable with our full-year managed receivables growth outlook of 5% to 8%.

While we are pleased with the improvement in yield this year, we expect it to moderate in the second half, reflecting normal seasonality in 90-plus-day delinquencies and continued growth in the auto portfolio.

Interest expense was $317 million for the quarter, an increase of $22 million from the second quarter of 2024, reflecting higher average debt balances to support receivables growth. Interest expense represented 5.4% of average net receivables, consistent with the prior quarter and aligned with our full-year expectations.

Turning to Slide 8, consumer loan delinquency trends continued to improve. At June 30, 30-plus-day delinquency, excluding Foursight, was 5.07%, a decrease of 29 basis points from the prior-year period, reflecting improvement in both early- and late-stage delinquency performance. We expect these trends to continue to provide loss benefits through the second half of the year.

The performance of the front book remains in line with expectations and is driving most of the delinquency and loss improvements we are seeing. While the back book continues to diminish — now making up only 10% of the total portfolio — it still represents 24% of our 30-plus-day delinquency. As expected, as the back book continues to run down over the remainder of this year, we anticipate it will contribute less to our delinquency results.

The difference between C&I net charge-offs and consumer loan net charge-offs reflects the composition of our credit card portfolio. As context, our credit card offering was launched in August 2021, and the portfolio remains modest in size at approximately $750 million. After an initial pilot phase, we have deliberately managed growth given the uncertain environment. As we continued to enhance the product and customer experience, credit card losses improved modestly this quarter to the mid-19% range. We expect further improvement over the second half of the year, with credit card losses anticipated to decline by roughly 150 basis points.

This improvement is primarily driven by the seasoning of the credit card portfolio and by improvements across both early- and late-stage delinquencies. We are pleased with the overall quality of the credit card portfolio and feel confident that we are building an enduring, profitable business for the long term.

While the credit performance of our portfolio continues to improve, as reflected in our delinquency and charge-off metrics, our 11.5% reserve coverage remained flat during the quarter as we maintained an appropriately conservative macroeconomic overlay in our reserve. As a reminder, the higher-loss, higher-yield credit card portfolio contributes to the reserve, adding 35 basis points to the overall reserve ratio as of June 30.

As we've said before, our operating expense ratio can fluctuate from quarter to quarter, but we feel great about the inherent operating leverage of our business. We remain confident in our full-year 2025 operating expense ratio guidance of approximately 6.0%.

In June, we also issued a three-year, $1 billion revolving ABS with a cost of funds below 5%. Both of our issuances during the quarter saw strong market demand, including participation from a healthy number of new investors in our name. With $3.3 billion of funding raised through the first half of 2025, we have excellent flexibility regarding the amount, purpose, and timing of funding for the remainder of the year.

Total revenue growth is now expected to come in at the high end of the previously provided 6% to 8% range. C&I net charge-offs are expected to come in between 7.5% and 7.8%, narrowing to the lower half of the guidance range we provided at the beginning of the year.

Doug Shulman (Chairman and CEO)

Thanks, Jenny. As I mentioned at the beginning of the year, through active management of the business over the past couple of years, we’ve created very positive trends in both credit and originations. The tailwinds I spoke about then are clearly evident now, as we are on pace to deliver significant capital generation growth in 2025.

I'll close by thanking all of the OneMain team members for their continued dedication to helping our customers improve their financial well-being. Their hard work and dedication to our customers is unmatched. With that, let me open it up for questions.

Peter Poillon (Head of Investor Relations)

The floor is now open for questions. If you have a question or comment, please press star one on your touchtone phone. If at any point your question is answered, you may remove yourself from the queue by pressing star two.

Moshe Orenbunch (Analyst)

Great, thanks for taking my questions. I guess for both Doug and Jenny — you talked a bit about the growth in originations and the changing rate of growth there. Could you expand on the underlying competitive dynamics and other factors driving your recent success? And how do you see those trends evolving going forward?

Doug Shulman (Chairman and CEO)

Sure, thanks, Moshe — good to hear from you. Let me start with a few comments on the competitive environment, and then Jenny may want to add.

There’s a lot of capital available in the market. At different points in the cycle, when capital markets tighten, some competitors struggle to access funding or can’t obtain it at attractive rates — which limits their ability to lend. Right now, there’s an abundance of capital, so that’s not a constraint on the competitive environment.

Jenny Osterhout (CFO)

The only thing I’d add — and Doug touched on this — is that what we’re seeing is really high-quality origination growth, which is exactly what we want. It all starts with credit: who you’re underwriting and how effectively you’re doing it. Our ability to maintain a disciplined credit appetite while still driving growth is a real strength.

Moshe Orenbunch (Analyst)

Got it.

As a follow-up — and maybe dovetailing with that a bit — Jenny, you’ve mentioned several times the stronger capital generation. We also noticed that you repurchased some stock, even while operating near the higher end of your leverage target.

Doug Shulman (Chairman and CEO)

Let me take that one — regarding our capital generation and capital allocation policy. We’ve been very consistent on this for many years.

We could use that for more share repurchases. We could use that for something strategic. That's kind of how we think about it.

Moshe Orenbunch (Analyst)

Thanks very much.

Peter Poillon (Head of Investor Relations)

Thank you. Next, we'll go to Terry Ma with Barclays. Please go ahead.

Terry Ma (Analyst)

Hey, thank you. Good morning. Maybe a question for you, Doug — you mentioned that the credit card portfolio should mature and eventually reach similar returns and receivables levels as the personal lending business.

Doug Shulman (Chairman and CEO)

Yeah, look, we’re not providing specific forward guidance on the credit card portfolio per se, but let me share how I think about it. Over time, card yields will remain above 30% — they’re already above that level today.

They’ll move up and down a bit, but overall, we’re confident that yields will stay above 30%. Losses are running in the mid-teens, and operating expenses are lower because it’s a digital product — we don’t need the same branch infrastructure to support it.

Every year, those costs come down a bit more, and we’ll continue to ramp the business as appropriate. We’ve actually been quite conservative — we’ve been at this for about four years, and we still have under $1 billion in receivables. During that time, we’ve navigated a full non-prime consumer economic cycle, and we’re in no rush.

Terry Ma (Analyst)

Got it, that’s super helpful. As a follow-up — on the recently passed One Big Beautiful Bill — you mentioned the reduction of taxes on tips and overtime, as well as the expanded credits. Do you have a sense of how much of your borrower base this would benefit, or what percentage of your portfolio could be impacted?

Doug Shulman (Chairman and CEO)

Yeah, first of all, I want to be very clear — my comments were simply that some of the provisions in the bill could help some of our customers. We’re not baking any of that into our internal projections, guidance, or outlook.

That's the dimension of it. I mentioned it because it could be a net positive, but it's not something we baked in.

Terry Ma (Analyst)

Got it.

Thank you.

Peter Poillon (Head of Investor Relations)

Our next question comes from Mark Devries with Deutsche Bank. Please go ahead.

Mark Devries (Analyst)

Yeah, thanks. With the front book now making up about 90% of the portfolio and the back book down to 24%, how much longer should we expect the year-over-year improvement in credit to persist?

Jenny Osterhout (CFO)

Thanks, I’ll take that. It’s hard to pinpoint exactly how long we’ll continue to see this level of improvement, but overall, we really like what we’re seeing and the trends we’re tracking. Our 30–89 day delinquencies are down eight basis points compared to last year, and our 30+ day delinquencies are down 29 basis points year over year.

Mark Devries (Analyst)

Okay, fair enough. I just wanted to clarify my understanding — Jenny, in your prepared remarks, you mentioned some moderation of growth in the back half of the year, at least relative to the first-half trend. Is that more due to tougher comps, or are you pulling back somewhat on credit?

Jenny Osterhout (CFO)

If you look at our origination growth last quarter, it was 20%, and organically, that was 13%. This quarter, originations grew 9%. What you’re seeing is that we’ve been very focused on achieving strong growth outcomes while maintaining a disciplined credit box, and we’ve been doing that for about a year.

Mark Devries (Analyst)

Got it. Thank you.

Peter Poillon (Head of Investor Relations)

Our next question comes from John Hecht with Jefferies. Please go ahead.

John Hecht (Analyst)

Thank you very much for taking my questions. Just a couple of things on the credit side of the business — it looks like payment rates accelerated a bit during the quarter. Is there anything to read into that? And as a follow-up, are you seeing any impact from the recent student loan repayment updates in terms of reporting or customer requirements?

Jenny Osterhout (CFO)

Thanks, I’ll take that. In terms of payments, we’re not seeing anything particularly unusual. As I’ve mentioned before, delinquency trends are moving in a good direction. What we’re seeing is that some customers go delinquent but are then able to make a payment shortly after — a pattern we’ve observed for a while now. I wouldn’t call it a clear trend yet, but it’s something interesting we’re watching.

It’s been a while since the federal collections actions resumed in May, and so far, we haven’t seen any significant difference in performance between the portion of our portfolio that includes customers with student loans and the portion without them.

John Hecht (Analyst)

Okay, Jenny, thank you.

Doug Shulman (Chairman and CEO)

Yeah, look, we view ourselves as serving customers across multiple channels — in person, over the phone, online, and through our mobile app. We’re continually optimizing how these channels work together to deliver the most value to our customers and to our business model, while aligning with customer preferences.

The real value-add comes from the customer interactions our branch team members provide. Many of our branch managers have tenures of 10 to 15 years — they truly know their customers and understand how to work with them effectively.

A lot of what we're doing is optimizing the work for maximum efficiency for us, maximum efficiency for our customers, and making sure our branches are focused on engaging with customers, which customers really like.

Peter Poillon (Head of Investor Relations)

We'll take our next question from Rick.

John Hecht (Analyst)

Thank you so much.

Peter Poillon (Head of Investor Relations)

We'll take our next question from Rick Shane with JPMorgan.

Rick Shane (Analyst)

Hey, good morning, everyone. You’ve done a great job outlining the dynamics on credit — the dilution of the back book and the tighter underwriting on the front book. The one factor that’s harder for us to gauge is the macro environment.

Doug Shulman (Chairman and CEO)

Yeah, look, our consumer has been quite stable — and has been for over a year now. As you know, there was some deterioration in 2022 and into 2023. But like-for-like, we’re booking higher-quality credit now than we did pre-pandemic, and we’re managing the book to maintain that quality.

Rick Shane (Analyst)

Got it. If we look back to 2022 — around the April to August timeframe — credit shifted rapidly, in part due to the spike in gas prices. We estimate that fuel spending accounts for a high single-digit percentage of your customers’ budgets.

Doug Shulman (Chairman and CEO)

Look, we closely monitor all the major macro trends — whether it’s food, housing, or transportation costs — we track those carefully. But the real inputs we focus on are at the individual customer level.

We underwrite to net disposable income. Of course, our models include thousands of factors, but at its core, the process is relatively straightforward: How much does the customer earn? How much do they spend? How much is left over? And can they afford the loan we’re offering them?

Rick Shane (Analyst)

I appreciate that — the straightforward explanation. It’s funny, sometimes we lose sight of how simple that foundation really is. As outsiders, it’s not always easy to fully grasp it, so thank you for the clarity.

Doug Shulman (Chairman and CEO)

Sure.

Peter Poillon (Head of Investor Relations)

Our next question comes from David Scharf with Citizens Capital Markets. Please go ahead.

David Scharf (Analyst)

Great, thanks for taking my question and for squeezing me in here, Doug. I wanted to revisit what I think was the very first question about the competitive environment.

You mentioned it's constructive right now, but can you provide a little more color on kind of what you're seeing on the margin?

Doug Shulman (Chairman and CEO)

You know, having been through this before — back in late 2021 and early 2022, as people started feeling more comfortable coming out of the pandemic — we saw competitors flood into the market. We watched it happen, and at that time, some competitors did take a bit of share.

I think the areas where we’re seeing more price competition are on platforms like Credit Karma or LendingTree — the aggregators. There’s definitely plenty of activity there. Some of the competitors who struggled in 2022 managing non-prime credit — largely because they lacked the expertise we have — have reentered the market, but they haven’t gone as deep into non-prime lending this time.

Instead, we just stick to our discipline, have a great value proposition to our customer, and we're pretty confident that we do this very well for the non prime consumer.

David Scharf (Analyst)

Got it, that’s very helpful color. Just a quick follow-up on the auto side — it’s been about a year since the Foursight acquisition closed. I know you’ve shared some growth metrics around originations and dealership rooftops, but could you speak more specifically about the franchise business?

Doug Shulman (Chairman and CEO)

Yeah, look, we spent a lot of time debating whether to build the platform ourselves, but ultimately we found Foursight — which we believe was a best-in-class auto lender. They had a strong sales team and excellent technology, which we’ve now fully integrated across our auto business, including a dedicated dealer portal.

As you probably know, in the auto business, dealers want two things — a good price for their customer and fast execution so they can move cars quickly, free up their showroom, and allow their F&I managers to move on to the next customer.

If we didn't get to your question, our IR team is happy to engage, and we look forward to seeing everybody during this quarter and on next quarter's call. Thank you very much.

Peter Poillon (Head of Investor Relations)

Thank you. This does conclude today's OneMain Holdings Inc. second quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.