Okay, hello everybody, and thank you for joining us today, and welcome to Sidoti's September Small Cap Conference. My name is Brendan McCarthy. I'm an analyst here at Sidoti, and I'm pleased to welcome Oportun Financial. The ticker is OPRT. Joining us from Oportun are CEO Raul Vazquez and Head of Capital Markets and Interim CFO Paul Appleton. Before I hand it over, a quick reminder that the Q&A tab is located right at the bottom of your screen. Feel free to type in any questions throughout the presentation, and we can save time for Q&A at the end. But with that said, I'll pass it over to Raul.
Thank you, Brendan. We appreciate being invited to speak today. Thank you as well to the audience for joining us. I am Raul Vazquez, CEO of Oportun Financial. With me today are Paul Appleton, our Interim CFO, Treasurer, and Head of Capital Markets, as well as Dorian Hare, our SVP of Investor Relations. Today, I will be presenting our current investor presentation dated August 2025, which is available on our investor relations website at investor.oportun.com. For those of you who are less familiar with Oportun, we offer intelligent borrowing and saving solutions that help our members build a better financial future. Our products holistically address two of the most fundamental challenges to financial health and resilience, which are access to affordable credit and the ability to build adequate savings.
Since our founding in 2005, we've originated more than 7.7 million loans and extended more than $20.8 billion in credit, helping 1.3 million members build credit histories. To give you a sense of scale, we generated just over $1 billion of revenue during 2024, along with $105 million of adjusted EBITDA. We were profitable on an adjusted basis, generating $0.72 per share of adjusted EPS. Our mission is to empower our members to build a better future. We do so through our three products, which I'll detail shortly. The three products are Unsecured Personal Loans, Secured Personal Loans, and our award-winning Set & Save savings product. Our target market is comprised of thin file and no file low to moderate income individuals who we believe are traditionally underserved.
Our customer base is both English and Spanish speaking, and we seamlessly engage with them via our bilingual retail and contact center teams, as well as through our mobile app. I will now share more details about our product offering. Our responsibly structured credit products begin with Unsecured Personal Loans, which are the largest and most profitable part of Oportun's business. They allow our members a fast and convenient way to address pressing financial needs, such as car repair or a security deposit on an apartment they want to rent. Our competitive differentiation in personal loans stems from our focus on underserved communities, our advanced technology and data capabilities, our AI-driven underwriting, and our ability to tailor our products to meet or exceed our members' expectations. The loans originated in the second quarter of this year. The average loan size for our Unsecured Personal Loans was approximately $3,000.
The average term was 25 months, and the weighted average APR was 35.8%, which, as I'll discuss soon, provides a strong value proposition for our members. We also offer a Secured Personal Loans product, which is secured by member's auto. We are excited about our expansion of Secured Personal Loans, which we grew 58% year over year to $195 million, or 7% of our own portfolio in the second quarter, which was up from a level of $123 million, or 5% of our own portfolio a year ago. In 2024, credit losses for Secured Personal Loans were more than 500 basis points lower than for unsecured loans. And furthermore, Secured Personal Loans originated during the second quarter are expected to generate approximately twice the revenue per loan compared to unsecured loans, primarily due to the higher average loan size, which you can see on this page.
The average loan size for our Secured Personal Loans was approximately $6,300 in the second quarter, while the average term was 34 months, and the weighted average APR was 35.1%. As I alluded to earlier, our value proposition is supported by the fact that we deliver significant savings to our members as compared to alternatives that are generally available to them. Competitor products and payday loans are on average seven times more expensive. So we're proud to have helped save our members more than $2.5 billion in interest and fees since our inception. I'd now like to take a moment to explain our proprietary underwriting engine, which is a key differentiator for how we operate and serve our members. Our underwriting is 100% centralized and automated with no exceptions. There is no one with the title of underwriter at Oportun.
We have used AI and machine learning to analyze billions of data points, producing over 1,000 end nodes that enable highly precise credit and fraud decisions, including who we approve and for how much. We leverage multiple independent frameworks in our decisioning, including our alternative data score, which allows us to score 100% of customers, even those without a credit file. We also leverage raw data from the credit bureaus to formulate our own custom bureau score, and we verify incomes 100% of the time, thus formulating a borrower's ability to pay. In addition to that, having successfully used Plaid to access bank transaction data for underwriting for several years now, we recently enhanced our decisioning to utilize Plaid Check, their FCRA-compliant consumer report. Approximately 60% of second quarter loan disbursements utilize bank transaction data.
And in addition, features like average balance, income, and non-sufficient funds are custom features identify payments made to buy now, pay later lenders and made cash advances from lenders such as Dave, Chime, and MoneyLion. Most of these loans and cash advances are not reported to the credit bureaus, so Oportun gained valuable insight into other forms of credit that applicants may be using. So we've built an underwriting platform that can respond quickly and is even able to modify underwriting parameters overnight as market dynamics shift. Now I'd like to provide you with some color on our loan fulfillment and servicing. Beyond the loan pricing I talked about, we keep our members satisfied by offering a diverse set of channels, which allow them to engage with us in the way that suits them best.
In the second quarter, 44% of loan applicants used multiple fulfillment channels, including our retail stores, contact centers, and our mobile and digital platform, to complete their applications. Notably, 79% of applicants used our mobile and digital channel for at least part of their applications. And for payments, in addition to our direct locations, Oportun offers over 100,000 partner payment locations to our members at various PayNearMe, MoneyGram, and CheckFreePay affiliated facilities. Now I'll provide you with a bit more information on Set & Save, which is our savings product. It was rated the number one app in its category by Bankrate last January and recognized by Forbes last October as an outstanding personal finance app for simplifying your money. Members can seamlessly integrate their existing bank accounts into the platform and set personalized savings goals.
Our AI engine then analyzes members' income and spending patterns to determine a safe, optimal allocation toward their savings goals. Funds are automatically transferred over time to help members reach their targets effortlessly, and on average, our savings product helps members set aside $1,800 annually, contributing to more than $11.9 billion saved since the launch of this product in 2015. There is also a synergy between our credit and savings products. Our savings product fosters daily engagement with members, even after they have repaid their most recent loan, while our credit solutions provide essential support for unexpected expenses beyond their savings. Building on our progress in 2014, we have continued to advance the same three key strategic priorities in 2025, which are improving credit outcomes, strengthening our business economics, and identifying high-quality originations.
Regarding credit outcomes, I'll note, as we said on our August 6th earnings call, that the first half saw a greater mix of new members versus returning members than expected, and as a result, we're recalibrating our originations more towards existing members. On strengthening business economics, our focus is on continued efficiency gains. During Q2, we improved our risk-adjusted net interest margin year over year by 192 basis points to 16.3%. That metric includes portfolio yield, net charge-offs, cost of capital, and loan-related fair value impacts. We also improved our adjusted OpEx ratio year over year by 45 basis points to 13.3% of our own portfolio. Both measures contributed meaningfully to the strong operating leverage we delivered during the quarter, driving Adjusted ROE higher by 12 percentage points year over year and nearly quadrupling our Adjusted EPS.
Finally, we're continuing to identify high-quality originations by reinvesting in marketing and targeting members with higher levels of free cash flow within our conservative credit standards. Total originations of $481 million were up 11% year over year. That's the third consecutive quarter that we've grown originations under our ongoing conservative credit posture. Supporting this strategy, our loan referral program delivered strong results with those originations creating a 127% increase year over year to $34 million during Q2. We also remained focused on expanding our secured personal loan portfolio, which accounted for 39% of our personal loan originations growth. We're pleased that SPL is now available in eight states after we launched the product in Nevada and Utah during the second quarter. Let me now shift to some details on our current underwriting practices and strong Q2 credit performance, a key testament to the significant progress that we've made.
A key pillar of how we can successfully underwrite personal loans in this environment is the stability of our hardworking members and outcome driven by our credit underwriting model, which actively identifies people with strong stability in their communities. I mentioned before that we verify incomes for personal loan members 100% of the time. For second quarter originations, the median gross income of approved borrowers was approximately $50,000. Additionally, our Q2 borrowers had an average of 5.1 years at their current job and 5.3 years at their current residence. Moreover, 94% of our approved members had their loan proceeds disbursed to their U.S. bank accounts rather than opting to receive disbursements in the form of a check.
Shifting to credit performance, you can see on slide 15 that our front book of loans originated since July 2022 continues to perform quite well, while our back book of pre-July 2022 loans continues to roll off. Furthermore, our recent front book credit vintages have generally outperformed previous ones. As of our August 6th earnings call, losses on our front book 12 plus months after disbursement were approximately 600 basis points lower than those on our back book, an improvement from the 400 basis points we had seen previously when tracking our front book performance. This progress reflects our ongoing refinements to our credit model. You can see our annualized net charge-off rate for the second quarter disaggregated by front book versus back book on slide 16.
The front book had an annualized net charge-off rate of 11.6%, which was near the 9%-11% net charge-off range that we are targeting in our unit economics model. Importantly, our back book continues to decline, making up just 2% of our quarter-end loan portfolio, yet its net charge-off rate was 11% and still accounted for 10% of gross charge-offs. So you can see a path towards lowering our NCO further as we continue to feel very good about the quality of the credit we are originating. Now I'd like to turn the presentation over to Paul for a financial review, including more details on our Q2 results. The strong results he will share with you are a testament to our team's execution, and we continue to be highly focused on driving shareholder value in the remainder of 2025. Paul? Thanks, Raul, and good afternoon, everyone.
During the second quarter, we met our adjusted EBITDA and annualized net charge-off rate guidance while delivering strong GAAP and adjusted EPS. We reported total revenue of $234 million, which was $3 million below the low end of our guidance due to higher member repayment rates, causing a slightly lower loan yield. We achieved our third consecutive quarter of GAAP profitability with $6.9 million in net income and diluted EPS of $0.14 per share. We're also profitable on an adjusted basis for the sixth consecutive quarter with adjusted net income of $15 million and adjusted EPS of $0.31 per share. While maintaining credit discipline, originations of $481 million were up 11% year over year, in line with our expectations, and sequentially, originations were up 2% from Q1's $469 million. Total revenue of $234 million declined by $16 million, or 6% year over year.
This decline was primarily due to the absence of $10 million of credit card revenue in the prior year quarter. As a reminder, we completed the sale of our credit card portfolio in November of last year, which has been accretive to our bottom line. Total net change in fair value declined by $70 million during Q2. This is primarily due to $79 million in net charge-offs partially offset by a favorable $9 million mark to market adjustment on our portfolio, driven by our improved credit performance and strong demand for our loan assets. Net revenue was $105 million, up 74% year over year, driven by improved fair value marks and lower net charge-offs, which more than offset lower total revenue and higher interest expense. Operating expenses were $94 million, down 13% from the prior year, reflecting our ongoing cost discipline.
Adjusted EBITDA, which excludes the impact of fair value mark to market adjustments on our loan portfolio and notes, was $31 million in the second quarter, and adjusted net income was $15 million, an improvement of $11 million from last year, principally driven by our reduced operating expenses along with improved credit performance. As a result, adjusted EPS increased markedly year over year from $0.08 per share to $0.31 per share. Turning now to our outlook for the year, we reiterated our expectation on our August 6th earnings call for loan originations growth in the 10% range, which we think is a prudent level of growth given continued macro uncertainty.
Due to additional cost-saving measures that we've identified, we also indicated on our August 6th earnings call that we expect full year 2025 operating expenses of approximately $380 million, down from the $390 million we previously anticipated for a 7% full year reduction from 2024's $410 million. On the earnings call, we increased our full year adjusted EPS guidance by 8% at the midpoint to $1.20 per share to $1.40 per share, representing strong growth of 67%-94% versus last year's adjusted EPS levels. Lastly, we also reiterated our expectation for full year GAAP profitability in 2025.
Regarding now our capital and liquidity, as shown on slide 20, we deleveraged by reducing our debt to equity ratio from 7.6 times to 7.3 times quarter over quarter, supported by GAAP profitability and $105 million in operating cash flow, of which $55 million of that operating cash flow was used to pay down debt. This means we've now reduced leverage from 3Q24's peak level of 8.7 times by 1.4 times. As of June 30th, total cash was $228 million, of which $97 million was unrestricted and $131 million was restricted. Further bolstering our liquidity was $618 million in available funding capacity under our warehouse lines. Following our second quarter in August, we issued $538 million in ABS notes at a 5.29% weighted average yield. This was 38 basis points lower than our previous ABS financing in June.
We also proactively paid $10 million towards the $27.5 million in mandatory corporate loan payments due by January 26th in August, and another $10 million in September following the second quarter, further strengthening our balance sheet. Oportun has now reduced the initial October 2024 $235 million balance on its higher-cost corporate financing facility to now $202.5 million. Before I hand the call back to Raul, I'd like to update you on our progress towards our long-term unit economics targets. As you can see on this slide, we continue to make significant progress in Q2. Adjusted ROE was 16%, which was a 12 percentage point year-over-year improvement. The increase was driven principally by cost reductions and improved credit performance.
We continue to focus on further optimizing credit performance, reducing expenses as a percentage of our own principal balance, and reducing leverage to drive improvement in shareholder returns on our path towards attaining the 20-28% ROEs on a GAAP and full-year basis over time. With that, Raul, back over to you. Thanks, Paul. To close, I'd like to emphasize two key points. First, we're pleased with our second quarter performance, achieving GAAP profitability for the third consecutive quarter with a GAAP ROE of 7% and adjusted ROE of 16%, both markedly improved from a year ago, and second, we again, on our Q2 earnings call, increased our full-year adjusted EPS guidance expectations. Our adjusted EPS guidance range of $1.20-$1.40 reflects strong growth over full year 2024 of 67%-94%.
Following our return to adjusted profitability last year and with full-year GAAP profitability now in sight for this year, we're seeing clear evidence that our strategy is working. This progress is a testament to the commitment of our team and the trust of our members. We remain confident in the long-term value we are creating for both our business and our shareholders. With that, Brendan, we're happy to answer questions from you or the audience. Fantastic. Thank you, Raul and Paul, for the overview. We can now open it up for Q&A, and it looks like we have a couple of questions from our audience here, starting off with the macro and economic conditions. It looks like, you know, employment trends and employment conditions are declining.
I guess, how has the borrowing base held up so far, and how can investors really think about how the economic conditions will impact Oportun's borrowers? We think our borrower is very resilient. So our borrower continues to make the adjustments that are necessary to make their payments. In terms of the job market right now, we believe that there's more softness in the white-collar part of the job market than the blue-collar part of the job market. For example, we're here in the Bay Area. Salesforce recently announced 4,000 layoffs and attributed it to efficiencies that they're seeing in AI, right? Those jobs that are being lost tend to be, you know, more white-collar type jobs. On the blue-collar side, though, there may be a weakening in terms of the demand for blue-collar labor.
The policies of the administration have also meant that there's been a big reduction in the supply of blue-collar labor, so we think right now the unemployment rate in blue-collar workers is still quite low. It's a good market still, and our borrowers really don't think of their jobs in terms of careers. They think of them in terms of needing to put food on the table and making sure they meet their financial obligations, so if they happen to lose a job, say, in construction, they'll pivot and find a job in healthcare or in retail, so we think today the job market continues to be constructive for our borrower, right? Someone that earns around $50,000. That's great, and as a somewhat related follow-up, you built your company to serve both English speakers as well as Spanish speakers.
How has recent immigration enforcement and recent immigration policy impacted the business? Has that impacted the borrowing base at all or maybe credit trends? I think the performance of our business really speaks for itself. Dollar losses have been down year over year for seven straight quarters. Delinquencies, and this includes Q2, right? So this includes some of the time period under the immigration crackdown. Delinquencies have been down year over year for six consecutive quarters. One thing that people probably don't know about our business is, number one is we shared in the presentation, right? We look for people that have a lot of stability in terms of their residence and in terms of their job. And then number two, we make a very, very small percentage of loans to people who don't have an ITIN and don't have an SSN, right?
We feel that really the business over the years, we've developed a business that really wouldn't feel the sort of impact that people might expect in terms of scale from those types of actions. Got it. We have a question here on the savings side of the business. I know that's an important part of your business model, and maybe you can talk about the revenue model there, how you generate revenue in the savings or from the savings account, as well as the expense structure and the rate that you're paying. Sure. So on savings, right, what we're able to do is the funds are actually held by, you can think of them as banks that are too big to fail, right? So it's very important for us that our members feel that their savings are going to be secure.
Those are held, you know, for the benefit of the borrower at very large institutions. We are able to earn Fed funds rate. And really, the person that is using this capability is using it, our Set & Save product is using it, not say to earn the highest yield that they can, right? They're using it actually to build automated savings because they may have had challenges saving in the past. So we don't really compete in terms of the rate that we pay the borrower. We compete on this automated savings capability. And as a consequence, I believe we pay about 10 basis points to the borrower on the deposits that we hold. So this ends up being a very good product for us when you combine the $5 a month subscription fee plus the Fed funds rate that we're able to earn. Understood.
I want to talk about the secured personal loan product. I think you mentioned roughly 7% of the loan portfolio as of Q2 available in eight states. What's kind of the long-term growth outlook there? I think in the past you've mentioned wanting to get that portfolio up to, or wanting to get the SPL product up to right around 50% of the total loan receivables portfolio. How do you, I guess, how do you get there as far as growth and maybe geographical growth as well? That's very much an aspirational goal, right? We always want to make sure that we are growing our lending portfolio in a responsible fashion. We just really show that statistic as a sense of what we've seen in the marketplace and what we think this product can grow to over time.
Right now, it is the fastest part, the fastest growing part of our business. It was 5% of the portfolio last year. It's up to 7% this year. As we think about our strategies for 2026, one of our priorities is to continue to grow this product quickly given the fact that revenue is about twice the size. Losses last year were 500 basis points lower. So we very much aspire to continue to grow this quickly. Among the things that we want to do, number one, we want to continue to make it easier for someone to get through this part of the process. So historically, this was almost a side-by-side offering, but now we're developing marketing campaigns that are specific to people that own their car and might be interested in this. We also, over time, this would be, say, a two to four-year goal.
We want to try to figure out how do we go from the eight states that we're in today to replicating more of the full footprint of Oportun, which is 41 states. So we think there's still a lot of exciting opportunities to grow this product, Brendan. We're very excited about it. That's great. And what's the typical, you know, ramp-up process look like as you enter a new state? Yeah, I guess how long does it take to get up and running? And then what does customer acquisition look like from there? So today, the eight states that we're in with secured personal lending of the eight states were via physical footprints. So we could grow the physical, we could grow the footprint of availability for SPL in two ways. Number one would be to build locations in new states.
That's something that we're certainly taking a look at in the next two- to three-year timeframe. As part of this recovery in the business, one of the things we've done is to be just very, very thoughtful about CapEx and overall expense levels. For example, just even relative to the beginning of the year, we reduced the OpEx expectations for our business by another $10 million. We announced that in Q2, our Q2 earnings call. But we certainly think that part of opening up the SPL opportunity is going to be in the next two- to three-year timeframe, starting to open locations in new states. And then second, to create a storeless model, Brendan, right? An opportunity where we can offer the product in store, in states, I'm sorry, where we don't have any physical location.
So that's part of the work that our product teams, our business teams, and our engineering teams are doing is creating a storeless capability, a storeless version of the SPL offering. Understood. That's great. Maybe we'll ask one more question on the balance sheet. You've made great progress, you know, reducing leverage over the past couple of quarters. What can investors take away from that progress and maybe how much more you'd like to reduce leverage? And then maybe we can also tie in the most recent ABS transaction that I know had a few key positive takeaways in terms of spread. So I'll start, and then I'm going to hand it off to Paul. What we would want investors to take away from this is, first of all, the first use of capital is to drive profitable growth in the business. That's our number one use of cash.
The second is to pay down debt. And as you just mentioned, we're pleased with the progress we made going from peak leverage of 8.7 times. It was seven, that was about a year ago. It was 7.6 times in Q1, 7.3 times in Q2. And as Paul shared, we announced in the last press release on the securitization that we made an additional $10 million post Q2 pay down on the debt. So again, that really reinforces what the priorities are in terms of the uses of cash. But I'll let Paul talk about the securitization and the good work that he and the team are doing there. Thanks, Raul. Yeah, look, on the securitization, we were pleased with the execution of 5.29% yield on that transaction, which was lower than we've seen in the previous two.
It was our second transaction with a AAA rating at the top of the stack. Really good investor demand. The market has been good, but you know, when you look at the performance that we've been able to achieve in terms of lower cost of funds, we're very pleased with that outcome. As you guys know, we're a long-term ABS issuer. We've issued over $7 billion in bonds at this point. We've never had any issues with any of our securitizations. They've all performed well, and the investor demand and knowledge of the platform, I think, is a strength of the franchise going forward. That's great. Well, Raul and Paul, we really appreciate the time today and the overview. We'll conclude our presentation there. I'll actually pass it back over to you for any closing remarks. Oh, we're grateful for your time.
We continue to believe that despite the stock today being up about 137% in the last 12 months, we think that's still a very attractive entry point to the stock. We're still trading at a discount to book. That gap continues to get smaller as we continue to deliver profitable quarters and show the improvement and the recovery in the business. But we're grateful for the opportunity to highlight the progress we've made. And we certainly welcome any follow-up conversations from any investors who are interested in learning more about Oportun. Fantastic. Well, thank you, everybody, for joining us. Thank you, Brendan. Take care. Take care.