Executive Summary / Key Takeaways

• OppFi has achieved record profitability and revenue, driven by operational efficiencies, improved credit performance powered by its proprietary Model 6 AI underwriting, and disciplined growth initiatives.
• The company's tech-enabled platform and bank partnership model provide a competitive edge through lower operating costs, enhanced customer experience, and efficient risk management.
• Strategic expansion into the small business financing market via the Bitty equity investment diversifies the business and is expected to be accretive, leveraging OppFi's core competencies.
• A strong balance sheet, marked by the paydown of corporate debt and expanded funding capacity, offers significant flexibility for capital allocation, including potential M&A, high-ROI investments, and shareholder returns.
• Management has significantly increased full year 2025 adjusted net income and EPS guidance, signaling confidence in continued strong financial and operational momentum despite potential macroeconomic uncertainties.

Setting the Scene: A Platform for Financial Inclusion

OppFi Inc. operates as a tech-enabled digital finance platform with a core mission: to facilitate financial inclusion for the estimated 60 million everyday Americans who find themselves underserved by traditional banking options. Through collaborations with community banks, OppFi provides access to credit products, primarily installment loans via its OppLoans platform, for employed consumers with bank accounts earning median wages. This business model, structured as an Up-C following the July 2021 Business Combination, positions OppFi as a service provider leveraging its proprietary technology to enable banks to reach this specific demographic efficiently and responsibly.

The journey since becoming a public entity has seen OppFi adapt to market dynamics. Learnings from periods of economic volatility, such as the inflationary pressures experienced in 2022, have been instrumental in refining its operational and credit strategies. This focus on continuous improvement and operational excellence has become a driving force behind the company's recent performance and strategic direction.

The Engine of Efficiency: Technology and Operational Excellence

At the heart of OppFi's operational model lies its differentiated technology platform, particularly its AI-driven underwriting capabilities. The launch of Model 6 in 2024 represents a significant evolution in this technology. Unlike earlier models that focused primarily on shorter-term repayment status, Model 6 is designed to more effectively identify the risks of long-term charge-offs. It facilitates enhanced risk separation, enables seasonal segmentation in underwriting, and supports optimized targeting for new approvals throughout the year.

The tangible benefits of this technological advancement are evident in key operational metrics. The auto-approval rate, which measures the percentage of approved loans processed without human intervention, improved significantly to 78.6% in the first quarter of 2025, up from 73.4% in the prior year period. This 7.1 percentage point increase reflects the continued application of algorithmic automation projects that streamline the origination process. Management notes that this improvement in auto-approval rates directly contributes to better funnel metrics and enhances the customer experience, which is reflected in high customer satisfaction scores (over 90% CSAT and 80 NPS for OppLoans).

For investors, this technological edge translates into a competitive moat. The ability to accurately assess risk in the non-prime segment, coupled with increasing operational automation, drives efficiency and contributes directly to improved financial performance through lower losses and reduced operating costs. The company continues to invest in product and technology initiatives, including exploring future AI-based enhancements, with the stated goals of further improving customer experience, optimizing originations and servicing, and driving continued operational efficiency.

Strategic Pillars: Bank Partnerships and Diversification

OppFi's business model is fundamentally built on its partnerships with banks. This collaboration allows OppFi to leverage its technology and expertise while the loans are originated by its bank partners, a structure management is confident complies with state and federal laws, despite ongoing regulatory inquiries and legal challenges, such as the California DFPI lawsuit regarding the applicability of interest rate caps. This partnership model provides advantages, including potentially lower funding costs compared to direct balance sheet lending and navigating complex state-by-state regulatory landscapes.

Expanding beyond its core consumer lending product, OppFi has strategically entered the small business financing market. The acquisition of a 35% equity interest in Bitty Holdings, LLC in July 2024 is intended as the foundational piece of a new vertical. Bitty operates as a credit access company offering revenue-based financing and working capital solutions to small businesses. Crucially, Bitty generates income through origination and service fees, meaning OppFi's equity investment does not expose it to balance sheet or credit risk from Bitty's loan portfolio. Management sees a significant supply and demand imbalance in the small business working capital space, similar to the consumer market, and believes it can leverage its data analytics, marketing, and automation expertise to help Bitty grow. The Bitty investment is expected to be accretive to OppFi's profitability and cash flow, contributing $1.076 million in income from equity method investment in Q1 2025.

Financial Performance: A Trajectory of Improvement

OppFi's focus on operational excellence and credit quality is clearly reflected in its recent financial performance. The first quarter of 2025 marked a record quarter, with total revenue increasing 10.1% year-over-year to $140.3 million. This growth was driven by higher average receivables balances, an increase in the average statutory rate on loans, and stronger payment activity.

The impact of improved credit quality, largely attributed to the effectiveness of Model 6 and disciplined underwriting, is particularly striking. The change in fair value of finance receivables, which includes gross charge-offs and fair value adjustments, decreased significantly. Net charge-offs as a percentage of total revenue improved to 34.6% in Q1 2025, down from 47.9% in the prior year period. Similarly, annualized net charge-offs as a percentage of average receivables decreased to 47.0% from 62.0%. This improvement in credit performance, combined with revenue growth, propelled net revenue up 43.7% year-over-year to $90.8 million. The annualized average yield on the portfolio also saw a notable increase, rising 4.8 percentage points to a record 135.8%.

Cost discipline has further enhanced profitability. Total expenses before interest expense decreased by 18% in Q1 2025, contributing to a reduction in expenses as a percent of total revenue from 45.5% to 34.4%. Interest expense also declined, falling to 7% of total revenue from 9% in the prior year, benefiting from the paydown of higher-interest corporate debt and rate decreases.

The culmination of these factors resulted in a substantial increase in income from operations, which surged 704.1% year-over-year to $42.5 million. While net income attributable to OppFi Inc. showed a loss of $11.4 million due to a significant increase in the change in fair value of warrant liabilities (driven by the increase in the Class A common stock price), adjusted net income, which excludes such non-cash and non-recurring items, increased a remarkable 285% to $33.8 million. Adjusted earnings per share grew to $0.38 from $0.10 in the prior year period.

Balance Sheet Strength and Capital Allocation

OppFi maintains a robust balance sheet, providing significant financial flexibility. As of March 31, 2025, the company held $91 million in cash and restricted cash, with total debt standing at $288 million. Total funding capacity reached approximately $615.8 million, including a substantial $237 million in unused debt capacity under its financing facilities.

Recent capital management actions underscore this strength and strategic flexibility. The company successfully paid off its corporate term loan in Q1 2025, months ahead of schedule, and expanded its asset-based facility with Blue Owl (OWL), adding $50 million in capacity and extending the maturity of a tranche to February 2029. These actions reduce interest expense and enhance available liquidity for future initiatives.

Management is focused on deploying capital strategically across a "menu of options." This includes investing in high-ROI organic growth initiatives, exploring inorganic growth opportunities (particularly in the SMB and consumer POS spaces), and returning value to shareholders. A special dividend of $21.7 million was paid in Q2 2025, and the company continues to have $16.4 million remaining under its share repurchase authorization as of March 31, 2025. Management believes the current share price may be undervalued relative to the business's earnings potential and improved metrics.

Competitive Positioning and Market Dynamics

OppFi operates within a competitive landscape populated by other fintech lenders targeting non-prime consumers, including publicly traded players like Upstart (UPST), LendingClub (LC), Oportun (OPRT), and Enova International (ENVA), as well as traditional banks and emerging platforms like Buy Now Pay Later providers.

OppFi's core competitive advantages lie in its bank partnership model and its sophisticated AI underwriting technology. The bank model can offer lower funding costs compared to some direct lenders. Its Model 6 AI, while perhaps not matching the sheer speed of some competitors like Upstart in all aspects, is designed for better long-term default prediction accuracy in the non-prime segment, contributing to superior credit performance and margins. OppFi also emphasizes a high-touch, positive customer experience, reflected in its strong NPS and CSAT scores, which can foster loyalty and repeat business.

Financially, OppFi's recent performance highlights its strength in profitability and cash flow generation. Its TTM Gross Profit Margin of 81.11% and EBITDA Margin of 53.30% are competitive within the sector. While its revenue growth rate (7-13% guided for FY2025) may trail some faster-growing fintechs like Upstart (which has seen higher growth rates in some periods), OppFi's focus on disciplined, profitable growth has resulted in positive adjusted net income and strong operating cash flow ($83.74 million in Q1 2025). This contrasts with some competitors who may prioritize top-line growth at the expense of near-term profitability or cash flow.

However, OppFi faces vulnerabilities. Its R&D investment, while contributing to Model 6, may be lower than some larger, more tech-centric competitors, potentially impacting the pace of innovation. Its scale, while growing, is still smaller than some established players. The regulatory environment, particularly challenges to the bank partnership model, remains a significant risk that could impact its operational framework and growth potential.

The stockholder lawsuit, while not naming OppFi directly, could result in indemnification obligations.

The strategic move into small business financing via Bitty positions OppFi to address a different, yet similarly underserved, market segment. This diversification leverages OppFi's core competencies in digital platforms and credit access while mitigating direct credit risk through Bitty's fee-based model. This expansion is a key differentiator from many consumer-only fintechs.

Outlook and Risks

Management's outlook for 2025 is decidedly optimistic, underpinned by the strong performance in Q1. They have significantly increased full year 2025 guidance for adjusted net income to a range of $106 million to $113 million (a 28% to 37% increase from 2024 guidance) and adjusted EPS to $1.18 to $1.26. Total revenue guidance remains unchanged at $563 million to $594 million (7% to 13% growth).

This increased confidence is based on several factors: the continued effectiveness of Model 6 in driving credit performance, ongoing operational efficiencies (like increasing auto-approval rates), disciplined growth initiatives targeting higher-quality customers, and an expectation of less seasonality in results throughout 2025 due to stabilized yield and predictable credit trends. Management anticipates strong momentum continuing into the second quarter.

However, investors must remain mindful of key risks. Regulatory and legal challenges, particularly the California DFPI lawsuit questioning the bank partnership model's validity, could significantly impact operations and financial results if resolved unfavorably. While management is confident in its compliance and is vigorously defending its position, the outcome remains uncertain. Macroeconomic conditions, including potential shifts in inflation or unemployment, could affect customer repayment ability, although Model 6 is designed to mitigate some of this volatility. Concentration of credit risk in certain states also presents a geographic vulnerability. The stockholder lawsuit, while not naming OppFi directly, could result in indemnification obligations.

Conclusion

OppFi's first quarter 2025 results underscore a compelling narrative of a company successfully executing on its strategic plan to drive profitable growth through technological innovation and operational excellence. The refinement of its AI underwriting with Model 6 is yielding tangible benefits in credit performance and efficiency, directly contributing to record profitability and strong cash flow generation. The strategic entry into the small business financing market via Bitty represents a prudent step towards diversification, leveraging core strengths to address a large, underserved market without taking on direct credit risk.

With a strengthened balance sheet providing ample liquidity and flexibility, OppFi is well-positioned to pursue further growth initiatives, both organic and inorganic, while also returning capital to shareholders. The significantly raised full year guidance reflects management's confidence in the sustainability of these positive trends. While regulatory and macroeconomic risks persist, OppFi's focus on disciplined growth, technological differentiation, and operational efficiency provides a solid foundation. The investment thesis hinges on the company's ability to continue leveraging its platform and partnerships to serve the financial needs of everyday Americans and small businesses effectively and profitably, navigating the competitive landscape through superior execution and strategic expansion.