Executive Summary / Key Takeaways

• Record Performance and Upgraded Outlook: OppFi has achieved record quarterly revenue and adjusted net income, leading to significantly raised full-year 2025 guidance. This performance is driven by a disciplined growth strategy and enhanced operational efficiencies.
• Technological Moat Deepening: Proprietary AI-driven underwriting (Model 6) and a new loan origination system (LOLA) are central to OppFi's competitive advantage, enabling improved credit quality, higher auto-approval rates, and scalable growth.
• Strategic Diversification and Capital Allocation: The successful Bitty investment in small business lending demonstrates OppFi's multi-product platform vision. The company's strong balance sheet supports further inorganic growth, high-ROI initiatives, and shareholder returns, including special dividends and potential share repurchases.
• Resilient Business Model: Despite macroeconomic uncertainties and ongoing regulatory scrutiny in California, OppFi's bank partnership model and advanced credit modeling provide stability and adaptability, focusing on underserved consumers.
• Undervalued Growth Story: Management and analysts perceive OppFi's stock as undervalued, trading at attractive multiples relative to its strong earnings potential and operational improvements, suggesting significant upside as its growth story unfolds.

OppFi's Mission and Market Landscape: A Foundation for Growth

OppFi Inc. (NYSE:OPFI) operates as a tech-enabled digital finance platform, dedicated to providing financial products and services to the vast segment of everyday Americans underserved by traditional banking. Founded in 2012, the company's core offering, OppLoans, is built on a transparent and responsible platform that prioritizes financial inclusion and exceptional customer experience. This mission-driven approach has positioned OppFi as a critical bridge for approximately 60 million Americans facing credit insecurity, leveraging its proprietary technology to facilitate access to essential credit.

The company's business model is fundamentally rooted in strategic bank partnerships. OppFi provides its bank partners with a comprehensive, turn-key outsourced solution encompassing marketing, data science, and proprietary technology for digital customer acquisition, underwriting, and loan servicing. This collaborative model allows partner banks to extend their reach into a market segment they might otherwise find challenging to serve, while OppFi benefits from a stable, recurring revenue stream and a robust operational framework.

The broader financial services industry is undergoing a significant transformation, marked by the accelerating shift towards digital banking and the pervasive influence of artificial intelligence. OppFi is strategically aligned with these trends, operating within a fintech landscape that includes both direct and indirect competitors. Direct rivals such as Upstart Holdings Inc. (UPST), LendingClub Corporation (LC), SoFi Technologies, Inc. (SOFI), and Affirm Holdings, Inc. (AFRM) vie for market share in online lending, personal loans, and point-of-sale financing. OppFi distinguishes itself through its deep focus on the underserved non-prime segment and its bank-centric partnership model, which offers a more conservative and regulatory-compliant approach compared to some tech-first lenders. This positioning provides a unique value proposition, fostering trust and stability in a highly regulated environment.

The Technological Edge: Model 6 and LOLA Driving Efficiency

At the heart of OppFi's competitive strategy lies its differentiated technology, which acts as a powerful moat in the fintech lending space. The company's proprietary Model 6 credit software is a cornerstone of its operational and financial success. This advanced machine learning underwriting model was specifically designed to identify the risks of long-term charge-offs more effectively than earlier versions, which focused on shorter-term repayment status. Model 6 facilitates superior risk separation, enables seasonal segmentation, and supports optimized targeting for new loan approvals throughout the year.

The tangible benefits of Model 6 are evident in OppFi's financial performance. In the second quarter of 2025, the net charge-off rate as a percentage of total revenue improved to 31.9%, down from 32.5% in the prior-year quarter. This credit model has also enabled the confident underwriting of larger loan amounts for creditworthy individuals, leading to an approximate $100 increase in the average loan size year-over-year, with these newer, larger loans beginning to positively impact the portfolio. Furthermore, Model 6's predictive accuracy has allowed for better alignment of loan prices and terms with risk, contributing to a higher average yield, which reached a record 136.1% in Q2 2025, up from 134.8% in Q2 2024. This dynamic pricing capability, combined with improved credit performance, directly fuels revenue growth and enhances profitability.

Building on this technological foundation, OppFi is set to launch LOLA (Loan Origination Lending Application), a new system developed over the past year. LOLA is engineered to significantly reduce loan application processing times and boost operational efficiencies. By integrating with cutting-edge AI tools, LOLA is expected to enhance customer experiences, improve satisfaction, and further increase automation, particularly in auto-approvals. The auto-approval rate already reached 79.7% in Q2 2025, a notable increase from 75.8% in Q2 2024, demonstrating the impact of algorithmic automation. LOLA's modern architecture will also allow for seamless integration with other major systems, creating a cleaner data layer and providing deeper insights to fuel future innovation. The migration to LOLA is planned over the next six months, promising to solidify OppFi's operational leadership.

For investors, these technological advancements are critical. Model 6 and LOLA collectively enhance OppFi's competitive moat by enabling more efficient, accurate, and scalable lending operations. This translates into better financial performance through lower credit losses, higher yields, and reduced operating costs. The ability to dynamically "read and react" to market conditions and consumer behavior through these models provides a strategic advantage, ensuring sustained profitability and market relevance in the evolving fintech landscape.

A History of Strategic Evolution and Execution

OppFi's journey has been marked by a deliberate evolution of its strategic capabilities. Following its founding in 2012 and a business combination in July 2021, Executive Chairman and CEO Todd Schwartz initiated a three-year plan to significantly enhance operational and financial performance. This strategic roadmap has yielded substantial results, positioning the company for its current phase of accelerated growth.

Key milestones underscore this disciplined execution. In 2024, the introduction of Model 6 revolutionized the company's underwriting capabilities, directly contributing to improved credit quality and profitability. Expanding its market footprint, OppFi made a strategic 35% equity investment in Bitty Holdings, LLC in July 2024, entering the small business financing market. This move was driven by the recognition of a significant supply-demand imbalance in working capital for small businesses, aligning with OppFi's vision of becoming a multi-product platform for alternative credit. Bitty has since proven to be an accretive investment, contributing to OppFi's profitability and cash flow.

Financially, OppFi has proactively strengthened its balance sheet. The company successfully extinguished its higher-interest corporate debt in Q4 2024 and Q1 2025, months ahead of schedule, by utilizing excess cash. Concurrently, in February 2025, OppFi expanded its asset-based facility with Blue Owl, increasing its revolving credit facility from $250 million to $300 million and extending its maturity to February 2029. These actions demonstrate robust financial health and provide ample liquidity for future growth initiatives.

In March and May 2025, the company strategically exited its OppFi Card product, reversing previously recognized expenses and terminating associated vendor contracts, streamlining its product portfolio. Reflecting its strong financial position and commitment to shareholders, OppFi's Board of Directors declared a special dividend of $0.25 per share in March 2025. These strategic moves, from technological innovation to market expansion and balance sheet optimization, collectively underscore OppFi's disciplined approach to unlocking its full growth and profitability potential.

Financial Performance: Records and Operational Leverage

OppFi's recent financial performance vividly illustrates the success of its strategic initiatives and operational improvements. The second quarter of 2025 marked a record period for the company, showcasing robust growth and enhanced profitability. Total revenue surged by 12.8% year-over-year to $142.443 million for the three months ended June 30, 2025, driven by higher average receivables balances and an increased average statutory rate on its loan portfolio. For the six months ended June 30, 2025, total revenue reached $282.711 million, an 11.5% increase from the prior year.

This revenue growth was underpinned by strong origination momentum. Total net originations increased by 13.8% to $233.873 million in Q2 2025, and by 14.6% to $423.041 million for the six-month period, primarily due to increased demand from returning customers and the efficacy of Model 6 in enabling higher issuance for refinance and returning customers. Ending receivables also reflected this strength, growing 13.1% year-over-year to $437.750 million as of June 30, 2025, benefiting from a higher starting balance and term extension initiatives.

Profitability metrics highlight significant operational leverage. Adjusted net income, a key non-GAAP measure reflecting core business performance, soared by 59.0% year-over-year to a record $39.4 million in Q2 2025. This impressive growth was a direct result of increased revenue coupled with disciplined cost management. Total expenses before interest expense declined to 39% of revenue in Q2 2025, down from 45% in Q2 2024. This reduction was primarily driven by lower interest expense (due to debt paydown and rate decreases), reduced direct marketing spend (reflecting a shift towards lower-cost returning customers), and lower capitalized technology amortization. The income from operations consequently increased by 52.0% to $44.808 million in Q2 2025.

While GAAP net income decreased to $11.480 million in Q2 2025, this was predominantly due to a $33.304 million non-cash charge related to the change in fair value of warrant liabilities, which correlated with an increase in OppFi's Class A common stock price. This non-cash item does not reflect the underlying operational strength of the business. The equity method investment in Bitty also contributed positively, adding $1.121 million in income for Q2 2025.

OppFi maintains a robust liquidity position. As of June 30, 2025, the company held $78.265 million in cash and restricted cash, alongside $219.103 million in unused debt capacity, totaling approximately $603.3 million in funding capacity.

This strong financial foundation, combined with increasing operating cash flow (net cash provided by operating activities was $179.357 million for the six months ended June 30, 2025), ensures ample resources to meet future liquidity needs and pursue strategic growth.

Outlook and Growth Trajectory

OppFi's management is highly confident in the company's future trajectory, as evidenced by its consistently raised guidance and clear strategic roadmap. For the full year 2025, the company now projects total revenues between $578 million and $605 million, representing a significant 10% to 15% increase year-over-year. Adjusted net income is expected to be between $125 million and $130 million, a substantial 51% to 57% increase from 2024, with adjusted EPS anticipated to range from $1.39 to $1.44 based on 90 million diluted weighted average shares.

This optimistic outlook is underpinned by several key assumptions. Management expects continued strong credit performance, particularly from its existing customer base, validated by the efficacy of Model 6. This advanced underwriting system is anticipated to enable OppFi to effectively manage risk and "weather different periods of economic volatility." Furthermore, the company foresees less seasonality in its 2025 results compared to prior years, driven by the stabilization and growth of yield, predictable credit trends, and the full-year impact of operating efficiencies. A more stable interest rate environment is also expected to contribute to consistent performance, potentially reducing interest costs that have been a headwind.

Strategic growth levers include the continued expansion of marketing channels and the testing of new direct response initiatives to attract high-quality customers. The company is also focused on product optimization, including risk-based pricing and incrementally increasing average loan sizes to account for inflation, thereby maximizing portfolio profitability. Beyond its core OppLoans product, OppFi is actively exploring inorganic growth opportunities in adjacent spaces such as small business lending (building on the success of Bitty), consumer point-of-sale financing, and Earned Wage Access.

Capital allocation remains a strategic priority. With a strong balance sheet and robust cash flow generation, OppFi maintains a "menu of options" for the "highest and best use" of its capital. While a special dividend was paid to reward shareholders, the company aims to preserve flexibility for accretive M&A, high-ROI product and software development initiatives (like LOLA), and potential share repurchases, especially when management perceives the stock to be "undervalued" or "disconnected" from its intrinsic value. This comprehensive approach to growth and capital deployment positions OppFi for sustained long-term value creation.

Risks and Challenges

Despite OppFi's strong performance and optimistic outlook, several risks and challenges warrant investor attention. The company operates in a highly regulated environment, and ongoing legal proceedings, such as the lawsuit against the California Department of Financial Protection and Innovation (DFPI) regarding the applicability of AB 539 interest rate caps, pose a notable regulatory risk. An unfavorable outcome could materially impact the company's operations and financial results in California, a state that contributes significantly to its finance receivables.

Macroeconomic headwinds, including potential economic slowdowns, persistent inflation, interest rate changes, and the impact of tariffs, remain a concern. While management notes a "very stable consumer" environment currently, they are closely monitoring these factors and their potential effects on consumer repayment behavior and credit quality. The company's concentration of finance receivables in states like Texas (13%), Florida (11%), and Virginia (11%) also exposes it to localized economic conditions.

Furthermore, while Model 6 has significantly improved credit performance, the inherent nature of serving underserved borrowers means that credit quality requires continuous, vigilant monitoring, particularly for new loan originations. Any unexpected deterioration in the broader economic environment could still impact charge-off rates. The non-cash charge related to the change in fair value of warrant liabilities, while not impacting core operations, can introduce volatility to GAAP net income, which investors should be aware of. Lastly, the recently enacted "One Big Beautiful Bill Act" (OBBBA) introduces new U.S. tax legislation, the full financial impact of which is still being evaluated by the company.

Conclusion

OppFi stands at a pivotal juncture, having successfully executed a multi-year strategic plan that has transformed its operational efficiency and financial performance. The company's core investment thesis is firmly rooted in its ability to leverage advanced technology, particularly its AI-driven Model 6 underwriting and the forthcoming LOLA origination system, to profitably serve the vast and underserved market of everyday Americans. This technological leadership, combined with a disciplined bank partnership model, has enabled OppFi to achieve record revenues and adjusted net income, while simultaneously improving credit quality and operational leverage.

Looking ahead, OppFi's strategic vision extends to becoming a leading multi-product digital finance platform, as evidenced by its successful foray into small business lending with Bitty. The company's robust balance sheet and proactive capital allocation strategy, which includes special dividends, debt reduction, and a keen eye on accretive M&A and share repurchases, underscore its commitment to maximizing shareholder value. While macroeconomic uncertainties and regulatory challenges persist, OppFi's adaptable business model and continuous focus on technological innovation and operational excellence position it strongly to capitalize on future growth opportunities. For discerning investors, OppFi represents a compelling opportunity in the fintech sector, offering a unique blend of mission-driven purpose, proven execution, and significant upside potential as its growth story continues to unfold.