All right. Welcome everybody, and thank you for joining us today at the Sidoti March Small Cap Conference. My name is Brendan McCarthy. I'm an analyst with Sidoti, and I'm very pleased to welcome Oportun Financial with us, presenting with us today. Ticker is OPRT. Joining us from the firm, our Head of Capital Markets and Interim CFO, Paul Appleton, as well as Senior Vice President of IR, Dorian Hare. Before I hand it over, a quick reminder that the Q&A tab is located 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. With that said, I'll hand it over to Paul.
Thank you, Brendan. We appreciate your invitation to speak today. Today, I will be presenting our current investor presentation, dated March 2026, which is available on our investor relations website at investor.oportun.com. For those who are less familiar with Oportun, we offer 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, access to affordable credit and the ability to build adequate savings. Since our founding in 2005, we have originated approximately 8 million loans, extended more than $21 billion in credit, and helped 1.3 million members build credit histories. To give you a sense of scale, we finished full year 2025 with almost $1 billion of total revenue, along with $148 million of Adjusted EBITDA.
We have also been profitable on a GAAP basis for the last five consecutive quarters, including generating $25 million in earnings in 2025. Our mission is to empower our members to build a better future. We do this through our three products, unsecured personal loans, secured personal loan, 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 are traditionally underserved. Our customer base is both English and Spanish-speaking, and we seamlessly engage them through our bilingual, retail, and contact center teams, as well as through our mobile app. I will now share some details on our product offering. Unsecured personal loans 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 a car repair or a security deposit on an apartment they're about 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 and exceed our members' expectations. For loans originated in the fourth quarter of last year, the average loan size for the unsecured personal loan was approximately $3,300. The average term was 26 months, and the weighted average APR was 35.8%. We also offer a secured personal loan product, which is secured by a member's automobile.
We are excited about our expansion of secured personal loan, which we grew 39% year-over-year to 8% of our owned portfolio in the fourth quarter, up from 6% the year before. During 2025, credit losses for secured personal loan ran over 600 basis points lower than for the unsecured personal loan product. Furthermore, secured personal loan originated last year are expected to generate approximately twice the revenue per loan compared to unsecured personal loans, primarily due to the higher average loan size I just mentioned. The average loan size for our secured personal loan product was approximately $6,500 in the fourth quarter, while the average term was 35 months and the weighted average APR was 33.4%.
As I alluded to, 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. I'd 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 actually at the company with the title of underwriter. 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 own proprietary alternative data score, which allows us to score 100% of applicants, even those without a credit file. We also leverage raw data from the credit bureaus to formulate our own custom bureau score. We verify income 100% of the time, thus formulating a borrower's ability to pay. Also, we have successfully used Plaid to access bank transaction data for underwriting for several years now. We built an underwriting platform that can respond quickly and is available to modify underwriting parameters overnight as market dynamics shift.
I'd like to provide you next with some color on our loan fulfillment and servicing. Beyond lower pricing, as I talked about, we keep our members satisfied by offering a diverse set of channels, allowing them to engage with us in the way that suits them best. In the fourth quarter of 2025, 53% of loan applicants used multiple fulfillment channels, including our retail stores, contact centers, and mobile digital platform to complete their applications. Notably, 78% of applicants used our mobile digital channel for at least part of their application. Of the 90% of payments we received during the fourth quarter, more than 90% were made via debit or ACH. In addition to our Oportun-branded locations, Oportun offers over 100,000 partner payment locations to make the payment options available very convenient for our members.
Now I'll provide you with and some more information on the Set & Save product I mentioned a moment ago. This product was rated the number one app in its category by Bankrate in 2025 and recognized by Forbes 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 optimum allocation towards their goals. Funds are automatically transferred over time to help members reach their targets effortlessly. On average, our savings product helps people set aside $1,800 annually, contributing more than $12.5 billion saved since its launch.
Now I'd like to turn it over to Dorian to update you on our strategy and provide some color on our current underwriting, credit performance, financial performance, and outlook. I'll then follow up with some comments on our capital liquidity and unit economics and provide some closing remarks. Dorian?
Thanks, Paul. Building on our progress in 2024 and 2025, we are continuing to advance our three key strategic priorities in 2026, which are improving credit outcomes, strengthening business economics, and identifying high-quality originations. Regarding credit outcomes, note that as shared on our February 26th earnings call, we shifted originations more towards existing members in the second half of 2025, with 74% of volume coming from them, compared with 64% in the first half of the year. In 2026, a key focus will be upgrading our decisioning infrastructure capabilities to accelerate our model training and deployment, thereby enabling us to respond even faster to evolving credit conditions. On strengthening business economics, our focus is on continued efficiency gains.
During full year 2025, our risk-adjusted net interest margin ratio improved 55 basis points year-over-year to 15.8%. As a reminder, that metric includes portfolio yield, net charge-offs, cost of capital, and loan-related fair value impacts. We also improved our adjusted OpEx ratio during full year 2025 by 109 basis points to 12.7% of our own portfolio. Together, these improvements drove strong operating leverage, lifting adjusted ROE by almost 1,000 basis points to 17.5%. I'm also pleased to share, as we did on our February 26 earnings call, that we are advancing a new initiative designed to enhance our unit economics and progress towards 20%-28% annual GAAP ROEs while expanding access to responsible credit.
In partnership with potential new bank sponsors and warehouse providers, we are exploring the reintroduction of risk-based pricing above 36% APRs for select higher-risk segments on shorter-term loans. This creates a meaningful opportunity to extend our mission of financial inclusion by responsibly serving customers that we otherwise could not while better aligning pricing and term length with risk in order to improve portfolio returns. At the same time, we are selectively testing modestly lower APRs for certain higher quality returning members to maximize lifetime value where competitive dynamics warrant it. We are assuming only a modest incremental profitability in the second half of 2026 as we roll out this initiative in a disciplined and measured manner. However, if executed successfully, we believe this initiative can drive higher earnings power in 2027 and beyond.
Finally, on identifying high quality originations, we grew originations by 10% during full year 2025 while maintaining a conservative credit posture. In full year 2025, loan application growth more than doubled the rate of originations growth while customer acquisition costs declined 6% to an average of $117, a testament to our strong loan demand, disciplined underwriting, and improved cost efficiency. Expanding our secured personal loans portfolio secured by members' autos remains a key pillar of a responsible growth strategy. SPL originations increased 51% in full year 2025. To continue our strong SPL momentum into 2026, we've recently initiated new direct mail campaigns targeted specifically at potential SPL customers who own their vehicles. Let me now shift to some details on our current underwriting practices.
A key feature 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. Paul mentioned before that we verify incomes for personal loan members 100% of the time. For fourth quarter originations, the median gross income of approved borrowers was approximately $56,000. Additionally, our Q4 borrowers had an average of 5.7 years at their current job and 6.2 years at their current residence. 95% of approved members had their loan proceeds dispersed to their U.S. bank accounts rather than opting to receive disbursements in the form of a check.
Lastly, our managed portfolio as of Q4 featured borrowers with an average VantageScore at origination of 661, which is at the lower end of what's considered a prime score. Next, I'd like to provide some additional color on our credit performance in Q4. As shown on slide 16 of our investor presentation, our Q4 annualized net charge-off rate increased as anticipated, coming in at 12.3% at the low end of the annualized guidance we provided. As expected, our higher loss pre-July 2022 back book continued to roll off, shrinking to less than 1% of our own portfolio by year-end. Our 30+ delinquency rate was 4.9%, up a modest 13 basis points year-over-year.
As a forward-looking indicator, this supports our expectation that the first quarter of 2026 will represent the peak quarterly net charge-off rate for the year, with moderation beginning in the second quarter. Now to provide some color on our fourth quarter financial results. During the fourth quarter, we met or exceeded each of our guidance metrics while delivering solid GAAP and adjusted earnings per share. We reported total revenue of $248 million. We achieved our fifth consecutive quarter of GAAP profitability with $3.4 million in net income and diluted EPS of $0.07. We were also profitable on an adjusted basis for the eighth consecutive quarter, with adjusted net income of $13 million and adjusted EPS of $0.37. Operating expenses were $84 million, down 6% from the prior year, reflecting our lowest quarterly spend as a public company.
Adjusted EBITDA was $42 million in the fourth quarter, while adjusted net income was $13 million. Our fourth quarter results capped a year of significantly enhanced profitability for Oportun, with full-year GAAP net income improving by $104 million and adjusted EPS of $1.36 growing 89%. These results were driven by growth in originations, improved credit performance, balance sheet optimization, and disciplined expense management. Oportun's guidance for full year 2026, originally presented on our February 26th earnings call, is underpinned by mid-single digits originations growth. I'd note that while our member base remains resilient, inflation above Federal Reserve targets, declining wage growth, uneven job creation, and policy uncertainty continue to create a cautious environment for low to moderate income consumers. We expect a 1%-2% decline in average daily principal balance.
We assume revenue growth ranging from flat to a 2% decline. We assume a net charge-off rate with the midpoint reflecting a slight year-over-year improvement from last year. We expect a reduction in interest expense of at least 10% and substantially flat operating expenses. As for the February 2026 guidance that we provided, we expect these drivers to result in profitability improvements across metrics, highlighted by full year 2026 adjusted EPS growth of 16% at the midpoint. We also expect higher profitability in the second half than the first as originations ramp under our normal seasonal pattern and loss rates improve. With that, I'll turn it back over to Paul.
Thank you, Dorian. I'd like to highlight our capital and liquidity as a key driver towards meeting our 2026 earnings guidance expectations. Dorian mentioned that we've guided to a reduction in interest expense of at least 10% in 2026. We are confident in this expectation because the benefits of the balance sheet optimization initiatives we've already completed will flow through to our 2026 financials. We continue to strengthen our debt capital structure by reducing high-cost corporate debt, lowering our overall cost of capital, and enhancing liquidity. I'm pleased with the progress we've made deleveraging, ending the fourth quarter with 7.2x debt-to-equity ratio. That's down from 7.9x a year ago and down from third quarter of 2024's peak of 8.7x . During 2025, shareholders equity increased by $36 million or 10%, consistent with GAAP profitability and continued deleveraging.
Reducing our high-cost corporate debt, which carries a 15% interest rate, remains a high capital allocation priority after originating high-quality loans and reinvesting in the business. Since the $235 million corporate debt facility was put in place in November 2024, we've reduced the outstanding balance by $70 million or 30%, including $37.5 million of principal payments in the fourth quarter. These repayments lowered our annualized run rate interest expense by $10.5 million, generating meaningful and sustainable savings. During Q4, we also increased total committed warehouse capacity from $954 million- $1.14 billion. We extended the weighted average remaining term of our combined warehouse facilities from 17 to 25 months while reducing the aggregate weighted average margin by 43 basis points.
We achieved this by closing a new $247 million three-year revolving committed warehouse facility and improving the terms of existing facilities. Following the fourth quarter in February, we completed a $485 million ABS transaction at a 5.32% weighted average yield. In the last 10 months, we have raised $1.9 billion in the ABS market at sub-6% yields, demonstrating sustained access to capital at favorable terms. In addition to reducing high-cost corporate debt by $70 million during 2025, we increased our unrestricted cash balance by $46 million or 76%. As of December 31st, total cash was $199 million, of which $106 million was unrestricted and $93 million was restricted.
Before I close, let me briefly review our unit economics progress for full year 2025. Although our long-term targets are GAAP targets, I'll reference adjusted metrics because they remove non-recurring items and better reflect our future run rate. As shown on slide 19 of our investor presentation, we made meaningful progress during the year. Full year 2025 adjusted ROE was 17.5%, nearly a 10 percentage point year-over-year improvement, driven primarily by expense reductions and improved credit performance. We expect to build on this progress in 2026. Our North Star remains delivering GAAP ROEs of 20%-28% annually.
We plan to achieve this by reducing annualized net charge-offs to our 9%-11% target range, lowering operating expenses to 12.5% of the earned portfolio, and attaining 10%-15% annual growth in our loan portfolio. We also intend to make substantial progress towards returning to our 6-to-1 debt-to-equity leverage ratio this year by reducing our debt outstanding and continuing to grow GAAP profitability. Now to close, I'd like to cover three key points. First, we're pleased with our 2025 results. On a full-year basis, we improved GAAP net income by $104 million and grew adjusted EPS by 89%. Second, our February 2026 guidance indicates that we expect full-year profitability to improve across all metrics.
Although the additional credit tightening implemented in the second half of last year is expected to temper revenue growth in 2026, we still project 10%-21% adjusted EPS growth per our guidance, improved ROE, and higher GAAP profitability year over year. Third, we see a compelling long-term opportunity ahead for Oportun. The progress we've made over the past year in reducing leverage, lowering our cost of capital, and strengthening our liquidity enables us to focus squarely on operational execution and profitable, sustained growth. For 2026, we are assuming only modest incremental profit from the risk-based pricing initiatives discussed earlier as we roll them out prudently. However, if executed successfully, a return to risk-based pricing could enhance earnings growth meaningfully beginning in 2027, driving additional progress towards our 20%-28% GAAP ROE objective over time.
Our disciplined execution across credit, efficiency, and quality growth has delivered consistent progress over the last two years. Oportun is now a more resilient business, even amidst ongoing macro uncertainty, supported by our dedicated team and loyal members. With that, Brendan, we'd be happy to answer questions from you or the audience.
Great. Thank you, Paul, and thank you, Dorian. We can now open the floor for Q&A here. Why don't we start off talking about the macroeconomic environment? You know, many different dynamics at play here. We've seen fuel costs increase lately. How has the borrower base held up, and how can investors think about the current economic condition of the average borrower?
Thank you for the question, Brendan. You're absolutely right to call it out. As a company, we've certainly taken a very prudent approach to the macro uncertainties we're all seeing, this year and even last year. The uncertainty around inflation, we saw a high inflation report here this morning above expectations, and clearly the impacts of the Middle East events on gas prices are certainly something we watch very closely. I feel our borrowing base is well-positioned and resilient and has demonstrated that over time. Clearly, we're going to keep our cautious credit outlook in place, and our tight credit box in place to ensure that we're originating profitable loans to customers who can weather the expected macroeconomic uncertainty ahead of us.
Understood. Let's talk about the secured personal loan product. Can you talk about distribution there or maybe customer acquisition, what geographies you're currently operating in, and also disclose the portfolio mix of secured versus unsecured as of the most recent quarter end?
Yes. Look, we're really excited about the trend for our secured personal loan product. It's something that has grown to 8% of originations and 8% of the portfolio through last year. That's where it's at now. We see a continued growth opportunity for that product. As Dorian mentioned, it has superior economics. It's twice the revenue, lower charge-offs, because we have that security interest in the borrower's vehicle. We continue to invest in that product this year. We're rolling out tailored marketing for the secured personal loan product to those borrowers who own their own vehicle outright. We think it's a continued growth vector for the company.
Maybe over the longer term, what's a target mix for the overall portfolio? How large would you like the secured portfolio to ultimately grow to as a percentage of the total loan book?
Yeah, look, I think there's definitely upside from the 8%. We haven't presented publicly a target for this year or for longer term. Clearly, with the product today, Brandon, we're only in 8 states with it, but as a company we originate lending in 41 states. You can see there's certainly an opportunity to increase the geography of where we offer the loan. There's a huge addressable market for the loan, right, in terms of people who have a vehicle that they could pledge as collateral to get a larger loan. We're very optimistic that this can become an even more meaningful part of the business, both in 2026 and beyond.
Got it. Looking at your cost structure, it looks like you achieved a record low adjusted OpEx ratio in Q4 of 2025, you know, well under the 12.5% target. As we look ahead to 2026, I think you're looking for mid-single-digit growth in originations. How can we kind of think about that outlook for flat operating expenses for the year? Do you think that, you know, customer acquisition costs will play a meaningful role there?
I think we've done a nice job managing down customer acquisition costs. It's something we disclose in our financials, and you can see it trended down in 2025. We're happy with where the acquisition costs per customer are trending. I think overall in OpEx, we guided to flat OpEx, year-over-year. Within that is continued efficiency realization, so run rate coming down offset by some investments in some of these growth initiatives we talked about earlier. Spending more on marketing to acquire more customers to drive that originations growth. Investing more in the SPL product to ensure that continues to grow. Then the risk-based pricing program Dorian mentioned earlier, those are all meaningful investments we're making this year that we expect will drive meaningful profit growth again in 2027.
Great. On that risk-based pricing model, we have a question from our attendees. Can you discuss the plan to further enter that market? You know, how big of an addressable market is that area pricing the rates above 36%? Really, if you're able to quantify that opportunity for Oportun.
Yeah. We look at the pricing. We call it risk-based pricing. We don't consider it a new product. It's not a new segment. It's not a new customer for us. What it is pricing these customers for the risk they are, particularly on smaller loans and for new borrowers who we haven't had the opportunity to lend to before, where the risk is inherently higher. One thing I'd point out for those of you who haven't followed the Oportun story all the way along is pricing above 36% is something we've done for a majority of our history. It's something we know well. Think about it this way. It's the same marketing channels, the same segment, but it's pricing up some of those smaller loans, higher risk segments a little bit above 36%.
We're not talking about going to triple digits or anything like that. We're talking about modest increases so that we continue to approve more customers and give them the opportunity to get a loan through Oportun versus some of those significantly more expensive options and alternatives that exist elsewhere.
Got it. Turning to the balance sheet, I think you ended 2025 with debt-to-equity right around 7.2x , you know, down substantially from 2024, and the goal is to ultimately reach 6x Just given the outlook on, you know, paying down debt, as well as, you know, growing the portfolio, how can we kind of think about capital allocation for 2026?
Yeah, it's a great question. Look, we're pleased with the leverage reduction in leverage we've accomplished so far, but we're not there yet, right? When we think about that 6-to-1 leverage ratio target, that's something that I'd imagine we're gonna be in that neighborhood towards the end of 2026. That 6-to-1 leverage target by the end of the year. What that means is continuing to pay down that high-cost corporate debt. As Dorian Hare mentioned, we were able to do that significantly in 2025 and build cash, right? Unrestricted cash built $46 million last year, even though we paid down $70 million of that high-cost corporate debt. We're gonna get to that target leverage ratio by continuing to pay down the high-cost corporate debt in 2026.
Great. Maybe as one last follow-up there, as you look at your, you know, debt structure, you know, what's an ideal mix look like as it relates to, you know, ABS, you know, corporate debt, and then the warehouse facilities?
Yeah. You know, the ABS is the debt we have on the balance sheet and the warehouse debt we have on the balance sheet that finances originations, right? That's how we pay for the disbursements we fund to the borrowers. That should continue along at similar levels. It would grow over time as the portfolio grows, and as originations grow. The corporate debt, as we mentioned, at the price level it's at right now, at 15% cost of funds, that we'd like to see wind down to zero or refinance it to a lower cost. The corporate debt is clearly allowing us to invest in growth initiatives, right? We've taken on that capital, can fund growth initiatives with that.
At its current cost, paying that down is certainly the key priority.
Great. Well, Paul and Dorian, we really appreciate the overview and the detail. We'll conclude there.
Thank you, Brandon. Thanks everyone for tuning in.
Thanks everybody for joining. Take care.
Bye.