Oportun Financial Corporation (NASDAQ:OPRT) Q4 2025 Earnings Call Transcript

Oportun Financial Corporation (NASDAQ:OPRT) Q4 2025 Earnings Call Transcript February 26, 2026

Oportun Financial Corporation beats earnings expectations. Reported EPS is $0.27, expectations were $0.26.

Operator: Greetings, and welcome to the Oportun Financial Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Dorian Hare of Investor Relations. Please go ahead.

Dorian Hare: Thanks, and hello, everyone. With me to discuss Oportun’s fourth quarter 2025 results are Raul Vazquez, Chief Executive Officer; and Paul Appleton, our Interim Chief Financial Officer, Treasurer and Head of Capital Markets. I’ll remind everyone on this call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations and financial position, including projected adjusted ROE attainment and expected originations growth, planned products and services, business strategy, expense savings measures and plans and objectives of management for future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, and we caution you not to place undue reliance on these forward-looking statements.

A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors, including our upcoming Form 10-K filing for the year ended December 31, 2025. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today’s call, we will present both GAAP and non-GAAP financial measures, which we believe can be useful measures for period-to-period comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operations.

A full list of definitions can be found in our earnings materials available in the Investor Relations section of our website. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP financial measures is included in our earnings press release, our fourth quarter 2025 financial supplement and the appendix section of the fourth quarter 2025 earnings presentation, all of which are available at the Investor Relations section of our website at investor.oportun.com. In addition, this call is being webcast, and an archived version will be available after the call, along with a copy of our prepared remarks. With that, I will now turn the call over to Raul.

Raul Vazquez: Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. Our fourth quarter results were strong. We met or exceeded all of our guidance metrics, reflecting continued operational discipline and strong execution across the business. The 4 key headlines from the quarter are sustained GAAP profitability, solid credit performance, ongoing expense discipline and a reduced cost of capital. Let’s start with profitability. We generated $25 million of GAAP net income in 2025, including $3.4 million in the fourth quarter. This capped a year of significantly enhanced profitability for Oportun with full year GAAP net income improving by $104 million and adjusted EPS growing 89%. These results were driven by growth in originations, improved credit performance, balance sheet optimization and disciplined expense management.

Turning to credit performance. Our annualized net charge-off rate was 12.3% in Q4 at the better end of the guidance range we provided. On the expense side, Q4 operating expenses of $84 million came in below the $92 million expectation set last quarter and marked our lowest quarterly spend as a public company. Driven by disciplined expense management, full year 2025 GAAP operating expenses totaled $362 million, a $49 million or 12% reduction from 2024. Finally, our balance sheet optimization initiatives are lowering our cost of capital and positioning us for stronger long-term returns. Driven by corporate debt repayments as well as actions related to our ABS notes and warehouse facilities, Q4 interest expense, excluding $5.5 million of debt extinguishment costs was $52 million.

That was $4.1 million lower than Q3. We also completed a $485 million ABS transaction earlier this month, marking our fourth consecutive issuance with a sub-6% funding cost and a AAA rating on the senior notes. Paul will further detail our balance sheet optimization initiatives and how they factor into our 2026 expectations. With our Q4 and full year 2025 highlights covered, I’ll now review how we’re executing against our 3 strategic priorities: improving credit outcomes, strengthening business economics and identifying high-quality originations. Starting with credit outcomes. As we discussed in our second quarter call, the first half of the year included a higher mix of new members than expected, so we shifted originations towards returning members.

That adjustment was effective. 74% of second half originations came from returning members, up from 64% in the first half. To further strengthen our risk management approach, we also introduced new early default models focused on new and returning members and added 5 new data sources into our underwriting process. In 2026, a key focus will be upgrading our decisioning infrastructure capabilities to accelerate model training and deployment, thereby enabling us to respond even faster to evolving credit conditions. Turning to business economics. We continue to make strong progress on efficiency and operating leverage. 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.

Our full year 2025 adjusted OpEx ratio improved 109 basis points year-over-year to 12.7% of our owned 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 that we are advancing a new initiative designed to enhance our unit economics and progress towards 20% to 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 would otherwise not serve 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 warranted. We are assuming only modest incremental profitability in the second half of 2026 as we roll this initiative out 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. We exceeded our prior expectation for high single-digit percent growth by focusing on members with higher free cash flow and on channels that deliver the strongest results.

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. And expanding our secured personal loans portfolio secured by members’ autos remains a key pillar of our responsible growth strategy. SPL originations increased 51% in full year 2025. As a result, our secured portfolio grew 39% year-over-year to $226 million and secured loans now represent 8% of our owned portfolio, up from 6% at year-end 2024. Importantly, secured personal loan losses were more than 600 basis points lower than unsecured personal loans during the year. To continue our strong SPL growth momentum into 2026, we’ve recently initiated new direct mail campaigns targeted specifically at potential SPL customers who own their vehicles.

By executing against our 3 strategic imperatives: improving credit outcomes, strengthening business economics and identifying high-quality originations, we’ve driven meaningful operational and profit improvement in 2024 and 2025. We’re confident this disciplined framework will continue to support our momentum in 2026. With that, I’d like to now preview our initial 2026 outlook. 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. Our outlook prudently assumes these conditions persist throughout 2026 alongside our currently tight credit posture. We remain well positioned to adjust quickly as conditions evolve.

The guidance for full year 2026 that Paul will soon detail for you is underpinned by mid-single digits originations growth, a 1% to 2% decline in average daily principal balance, revenue growth ranging from flat to a 2% decline, a net charge-off rate range with a midpoint reflecting slight year-over-year improvement, a reduction in interest expense of at least 10% and substantially flat operating expenses. We expect these drivers to result in full year 2026 adjusted EPS growth of 16% at the midpoint of our full year guidance. We also expect higher profitability in the second half than the first as originations ramp under our normal seasonal pattern and loss rates improve. Now I will turn it over to Paul for additional details on our financial and credit performance as well as our guidance.

Paul Appleton: Thanks, Raul, and good afternoon, everyone. Turning to Slide 5. We delivered a strong fourth quarter relative to guidance. Identifying high-quality originations enabled us to exceed the top end of our quarterly total revenue guidance by $1.7 million or 1%. Combined with disciplined expense management, this drove strong adjusted EBITDA of $42 million, exceeding the top of our guidance range by $5.5 million or 15%. For full year 2025, we delivered adjusted EPS of $1.36 towards the high end of the $1.30 to $1.40 expectation and achieved GAAP profitability of $25 million, consistent with our full year GAAP profitability commitment. Turning now to Slide 6. We recorded our fifth consecutive quarter of GAAP profitability with net income of $3.4 million and diluted EPS of $0.07.

We also generated adjusted net income of $13 million and adjusted EPS of $0.27. While maintaining credit discipline, fourth quarter originations of $495 million were down 5% year-over-year, primarily due to credit tightening actions. This was modestly better than our prior expectation for a high single-digit decline. Total revenue of $248 million declined by $3.2 million or 1% year-over-year. This decline was attributable to the absence of $3.8 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, a transaction that has been accretive on a cash basis. Net decrease in fair value was $99 million this quarter due primarily to $86 million in net charge-offs.

Also included in the decrease in Q4 fair value was $17 million of derivative-related impacts in line with our expectations associated with the acquisition of an Oportun service loan portfolio and the wind-down of a related risk-sharing agreement. The majority, $13 million was noncash. As we discussed on our prior earnings call, these loans were previously held by our bank sponsor, Pathward. We continue to expect a profitability benefit from the acquisition, driven by lower funding costs associated with owning the portfolio versus the prior arrangement with Pathward. We also expect derivative-related fair value impacts to be muted in the first quarter and following the wind down to no longer affect fair value in future quarters. Partially offsetting the impact of the wind down, sustained lower ABS funding costs drove a favorable $4.9 million mark-to-market adjustment on our loan portfolio.

Reported fourth quarter interest expense was $58 million, down $16 million year-over-year. After adjusting for debt repayment-related charges of $17 million in the prior year quarter and $5.5 million in Q4 ’25, interest expense declined $4.6 million or 8% year-over-year. This improvement reflects the balance sheet optimization initiatives Raul referenced earlier, which I’ll detail momentarily. Net revenue was $90 million, down 3% year-over-year as the impact of lower total revenue and a higher net decrease in fair value offset lower interest expense. Operating expenses were $84 million, down $5.6 million or 6% year-over-year, better than our $92 million expectation and reflecting continued cost discipline. Our adjusted OpEx ratio reached a record low of 11.6%, marking the first time we’ve outperformed our 12.5% unit economics target.

Importantly, as we work toward meeting our unit economics targets on a GAAP basis, our GAAP OpEx ratio improved to 12%, down from 13.1% in the prior year quarter and also outperformed our target. Adjusted EBITDA, which excludes the impact of fair value mark-to-market adjustments on our loan portfolio and notes was $42 million in the fourth quarter. This reflected a year-over-year increase of $1.5 million as lower operating expenses and interest expense more than offset higher net charge-offs and lower total revenue. Adjusted net income, which excludes the debt repayment-related charges discussed earlier, was $13 million, down $8.6 million year-over-year, primarily due to the wind down of the Pathward risk-sharing agreement I discussed earlier.

Adjusted EPS similarly declined year-over-year from $0.49 to $0.27. Importantly, GAAP net income before taxes was $6.6 million, up $2.7 million or 68% year-over-year as lower operating expenses more than offset lower net revenue. GAAP net income was $3.4 million and would have been higher absent repayment-related charges and the tax headwinds this quarter. The $5.3 million year-over-year decline in GAAP net income was largely attributable to the tax comparison as this quarter reflected $3.2 million of tax expense versus a $4.8 million benefit in Q4 ’24 due to discrete items and R&D credit timing. Diluted EPS of $0.07 declined by $0.13 year-over-year. Next, I’d like to provide some additional color on our credit performance in Q4. As shown on Slide 7, our Q4 net charge-off rate increased as anticipated, coming in at 12.3% and at the low end of the annualized guidance we provided.

As expected, the higher loss pre-July 2022 back book continued to roll off, shrinking to less than 1% of our owned portfolio at year-end. Our 30-plus delinquency rate was 4.9%, up a modest 13 basis points year-over-year. As a forward-looking indicator, this supports our expectation that 1Q ’26 will represent the peak quarterly net charge-off rate for the year with moderation beginning in the second quarter. Turning now to capital and liquidity. As shown on Slide 9, we continue to strengthen our debt capital structure by reducing higher cost corporate debt, lowering our overall cost of capital and enhancing liquidity. First, I’m pleased with the progress we made with deleveraging, ending Q4 ’25 at 7.2x debt to equity. That’s down from 7.9x a year ago and from the 3Q ’24 peak of 8.7x.

During 2025, shareholders’ equity increased by $36 million or 10% with consistent GAAP profitability supporting continued deleveraging. Reducing our high-cost corporate debt, which carries a 15% interest rate remains our second highest capital 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 or 16% in Q4. These repayments lowered our annualized run rate expense by $10.5 million, generating meaningful and sustainable savings. During Q4, we increased total committed warehouse capacity from $954 million to $1.14 billion. We also extended the weighted average remaining term of our combined warehouse facilities from 17 months to 25 months and reduced the aggregate weighted average margin by 43 basis points.

We achieved this by closing a new $247 million 3-year revolving term committed warehouse facility and improving the terms of our existing facilities. Following the fourth quarter and earlier this month, as Raul mentioned, we completed a $485 million ABS transaction at a 5.32% weighted average yield. In the last 9 months, we have now raised $1.9 billion in the ABS market at sub -6% yields, demonstrating sustained access to capital on 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 31, total cash was $199 million, of which $106 million was unrestricted and $93 million was restricted. Turning now to our guidance. As shown on Slide 12, our outlook for the first quarter is total revenue of $225 million to $230 million, annualized net charge-off rate of 12.65%, plus or minus 15 basis points and adjusted EBITDA of $25 million to $30 million.

At the midpoint, our Q1 revenue guidance implies an $8 million year-over-year decline, reflecting seasonally lower demand during tax season and our continued tight credit posture. Our Q1 annualized net charge-off rate midpoint guidance of 12.65% reflects the impact of first half 2025 originations, which included a higher percentage of new members prior to the tightening actions we implemented in the second half. We expect first quarter ’26 delinquencies to decrease to 4.4% to 4.5%, which would be 20 to 30 basis points lower than 1Q ’25 and 40 to 50 basis points lower sequentially than 4Q ’25. That anticipated improvement in delinquencies gives us confidence that charge-offs will decrease beginning in the second quarter. Importantly, our implied net charge-off guidance for the remaining 3 quarters of 2026 is approximately 11.65%, which is 100 basis points lower than the first quarter guidance midpoint, reflecting the impact of our tightened underwriting and improved mix.

At the midpoint, our Q1 adjusted EBITDA guidance implies a year-over-year decline of approximately $6 million, less than the expected revenue decline of $8 million, driven by lower operating and interest expense. Our initial full year 2026 guidance includes total revenue of $935 million to $955 million, annualized net charge-off rate of 11.9%, plus or minus 50 basis points, adjusted EBITDA of $150 million to $165 million and adjusted EPS of $1.50 to $1.65. We expect to lower interest expense by more than 10% in 2026, which supports our adjusted EPS guidance. We are confident in this expectation because the benefits of the balance sheet optimization initiatives completed in 2025 will flow through to our 2026 financials. Midpoint growth of 16% in adjusted EPS and 6% in adjusted EBITDA, even amid macro uncertainty for low to moderate income consumers reflects the resilience of both our members and our business model.

Before I turn it back to Raul, 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 nonrecurring items and better reflect our future run rate. As shown on Slide 11, we made meaningful progress during the year. Full year 2025 adjusted ROE was 17.5%, nearly a 10% point increase year-over-year, driven primarily by cost reductions and improved credit performance. We expect to build on this progress in 2026. Our North Star remains delivering GAAP ROE of 20% to 28% annually. We plan to achieve this by reducing annualized net charge-offs to 9% to 11%, lowering operating expenses to 12.5% of our owned portfolio and attaining 10% to 15% annual growth in our owned loan portfolio.

We also intend to make substantial progress towards returning to our target 6:1 debt-to-equity leverage ratio this year by reducing our debt outstanding and continuing to grow profitability. With that, Raul, back over to you.

Raul Vazquez: To close, I’d like to emphasize 3 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, we expect full year profitability to improve across all metrics in 2026. 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% to 21% adjusted EPS growth per our guidance, improved ROE and higher GAAP profitability year-over-year. And 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, sustainable 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 beginning in 2027 and drive additional progress towards our 20% to 28% GAAP ROE objective over time. This will be my final earnings call as CEO of Oportun. I will step down as Chief Executive Officer and from the Board by April 3 or earlier if the Board appoints a successor. Following that, will serve as an advisor through July 3 to support a smooth transition. I will continue meeting with investors this quarter and I’m working closely with the Board and management team to ensure an orderly and seamless leadership transition.

It has been a privilege to lead Oportun for nearly 14 years and to work alongside such a talented, committed and mission-driven team. I am deeply grateful to our employees, members, partners and shareholders for the trust and support they have shown me throughout this journey. I am confident that Oportun is well positioned for its next chapter with a strong foundation, a clear strategy and a team fully capable of continuing to deliver for our members and shareholders. With that, operator, let’s open up the line for questions.

Operator: [Operator Instructions] And the first question comes from the line of Kyle Joseph with Stephens.

Raul Vazquez: Kyle, you may have us on mute. We can’t hear you.

Q&A Session

Operator: The next question will come from the line of David Scharf with Citizens.

Zachary Oster: This is Zach on for David. Congrats on the strong fourth quarter performance. I wanted to dig in a little bit on the macro side and see if we can get any more color. And also just kind of if you can kind of talk about any of the signs that we might see that might lead to some loosening.

Raul Vazquez: Sure. Sure, Zach. So when we think about the macro, right, we think that the consumer, first of all, is showing a tremendous amount of resilience. So that has us optimistic as we go into the year. From a macro perspective, we certainly know that tax refunds are expected to be bigger this year. So far, our delinquency performance at the beginning of the year makes us feel good about what the path for loss is going to continue to be. So we think that, that’s constructive. On the flip side, right, Q4 GDP growth was a bit lower than expected. Wage growth for the lowest quartile in the country is the lowest, right? They do have the lowest wage growth right now. And then when we think about fuel, because we know fuel prices are something that our customer base is pretty sensitive to, although they are lower year-over-year, in the last month alone, we’ve seen fuel prices on average in the state of California go up $0.40 a gallon.

So that is one of the things that we’re going to continue to watch carefully. So I think on the macro side, Zach, there are some puts and takes. And as a consequence, right, we continue to have a conservative credit box until we see things improve. To your point, in terms of improvement, we’d like to see stronger job growth across the economy. We’d like to see continued GDP growth. We’d like to see a strong finish to the tax season. And then obviously, we want to see the trajectory that we expect for losses to develop. Those are the sorts of things that would require us to — I’m sorry, that we would be required to see to open up.

Operator: The next question comes from the line of Brendan McCarthy with Sidoti.

Brendan Michael McCarthy: Just wanted to start off on the net charge-off rate. Obviously, it looks like a temporary step-up in the first quarter, and then you mentioned it will step down in the second quarter and thereafter. Just curious as to what data points you’re seeing regarding first payment defaults or the new origination vintages that really give you that confidence that it will step down like that.

Raul Vazquez: Yes. The biggest signal in terms of the losses going down is really what we’re seeing in delinquencies. So right now, based on what we’re seeing in delinquencies and 30-plus delinquencies specifically, but early delinquencies also look good, Brendan. But on the 30-plus side, we think we’re going to end up at 4.4% to 4.5% for Q1. That would be 20 to 30 basis points lower than last year and 40 to 50 basis points lower quarter-over-quarter. So we think that this elevated loss rate for Q1 is really just a product of the higher mix of new customers that we had at the beginning of the year, right? We’ve been signaling this bubble. We talked about it in our last 2 earnings calls. So the trajectory of losses is what we expect.

If anything, Q4 was on the low end of the guidance that we provided. So we got a lot of confidence when we look at delinquencies going back to your question, looking at the path for delinquencies for Q1 that we will see losses start to come down in Q2 and then certainly in Q3 and Q4. You did see that the implied loss rate for Q2 to Q4 is 11.65%. And again, the confidence really comes from what we’re seeing in delinquencies so far this year.

Brendan Michael McCarthy: Great. I appreciate the detail there, Raul. And another question here on operating expenses. I think you guided to flat OpEx for 2026 relative to 2025. I’m curious if you can differentiate the Q4 run rate, which would be a little bit lower if you took that and annualized it for 2026. Just wondering what increases are kind of baked into that from the Q4 run rate?

Raul Vazquez: Yes. So I would say from an OpEx perspective, when we look at 2026, there’s really 2 things going on. Number one, I’m really proud of the discipline that the team showed throughout all of 2025 and certainly in Q4. And that discipline continues this year. We’re going to continue to look for opportunities to reduce OpEx. We’re going to continue to stay pretty lean from a headcount perspective. So that part is going to continue, and that’s the first part of the OpEx story. The reason that OpEx looks flat is really the second dimension, which is there are going to be some incremental investments relative to 2025. And we think these are investments that investors are going to be excited about. Number one, we’re going to be investing in this return to risk-based pricing, right, specifically pricing over 36%.

As a reminder, for people that may be newer to the Oportun story, the bulk of our history, we have pricing over 36%, right? The bulk of my time even as CEO, these last 14 years, we were pricing a part of the portfolio over 36%. So this is not new to us. This is something we know how to do. It’s the same Chief Credit Officer. So in many ways, this is returning to the pricing that we had before. But this is going to require engaging a new bank partner. It’s going to require some new development and just some new investment. But again, we’re excited about the impact that, that’s going to have. Though modest this year, we think it will lead to a bigger impact in 2027 and the years beyond that. So that’s one investment. Number two, secured personal lending continues to be our major focus from a growth perspective.

We shared that originations this last year were 51% year-over-year growth in originations for SPL, right? This year, we’ve said we’re going to have kind of mid-single-digit growth in the business. That means growth both in UPL, but more importantly, disproportionate growth rates in SPL. So we continue to invest in that part of the business, Brendan. And then number three, I just answered Zach’s question in terms of what we would need to see to open up the credit box. We are going to see growth in the portfolio this year, in particular — I’m sorry, growth in originations, in particular, Q2 through Q4, that will not be through opening the credit box. It will be through investing in marketing. So that’s another investment that you’re seeing. So the net-net of the savings we expect to find plus those 3 investments means relatively flat OpEx for the year.

Brendan Michael McCarthy: Understood. I appreciate the color there. And I think that’s a key takeaway, your plan to go above that 36% cap. Can you give us a sense of how this might increase your addressable market? And is that plan included in your expectation for mid-single-digit growth in originations for the year?

Raul Vazquez: It is not included in our view for this year. For this year, we’re going to take a very methodical, very prudent approach to rolling this out. Again, we know how to do this. This is not new to us. But certainly, right, this is a different environment than a few years ago when we stopped doing this. So we think it is prudent to roll this out in a thoughtful way. Certainly, as we get into ’27 and future years, we think there’s 2 big benefits here, Brendan. One is certainly over time, to your point, it should open up some additional market for us. And our ability to price appropriately for that slightly higher risk, right, is going to improve our unit economics and is going to improve the overall profitability of the business.

So we’re excited about that. What we also used to do, and this is contemplated in our plans is we would price the best part of our portfolio slightly below 36%. And if someone came back as a returning borrower, they would get the benefit of good performance by having lower pricing. We think not only does that maximize lifetime value because it allows us to go ahead and retain those individuals, but by marketing price points below 36%, it also changes the through-the-door population and the applicant quality that we see so that, that way you see an overall benefit from a credit quality perspective. So we think that part of the business, the pricing below the 36% is also accretive to the business. And that’s why we’re so excited, although the benefits would be muted this year, we’re very excited about this initiative, and I’ve got a ton of confidence in this leadership team’s ability to execute the plan well both this year and in future years.

Operator: The next question comes from the line of Hal Goetsch with B. Riley Securities.

Harold Goetsch: Raul, I just want to thank you for your service to the company and to investors. Thank you very much. I think you had a tremendous run there from start-up to a public company. Congratulations. You’re going to be missed. And my question is, can you go into a little more detail on the expense reduction? It seems like it was particularly good. And what did you see there that allowed you to do that this quarter? And the follow-up question is, what are the goals for maybe debt — corporate debt reduction in 2026?

Raul Vazquez: Yes. So let me start, Hal, by saying thank you for the very kind words. Shareholders are in great hands with this leadership team. Like I said, I’ve got a ton of confidence in them, but I appreciate your kind words. On the OpEx side, I’m going to focus on the full year, right, because the story from a full year perspective was very compelling, right? OpEx was down $49 million or 12% on a year-over-year basis. And really, what we saw were contributions almost across all areas, Hal. So from a tech and facilities perspective, that’s the largest part of our OpEx, that was down $24 million year-over-year or 14%. That’s really efficiencies in our technology spend. It’s really cutting, right, the size of that group so that way, also some of the charges that come over time with that also decreased, but a lot of good work there.

I know the tech team is going to continue to look for opportunities, right, both to get leaner as we continue to use AI and that would be leaner through attrition, just to be clear, but also opportunities to try to figure out if we can lessen the number of contracts or just reduce the expense associated with some of the multiyear contracts that are coming up next year. On the personnel side, right, we’ve certainly gotten much leaner as people know, over the years and reduced the size of headcount. So personnel for the year was down about $7 million or 8%. G&A was down $19 million or 36% and then outservicing was also down about $2 million. So really a ton of discipline and focus across all parts of the business. As I was answering the question in terms of OpEx earlier, right, those reductions still gave us an opportunity to self-fund some improvement or some increase in sales and marketing.

So sales and marketing for the year was up $4 million or 5%, right? The bulk of that investment was in the areas that we’ve talked about throughout the year, both direct mail and a really, really healthy customer referral program that we’re very pleased with. So that’s really what the picture look like for ’25, and we’ll seek to do something similar in ’26, right? Obviously harder to continue to reduce some of those numbers at the same magnitude, but we’ll continue to look for reductions across the areas I just mentioned and then some modest investment in marketing. And then remind me — I’m sorry, the second part of your question.

Harold Goetsch: What would you have a goal for debt reduction this year after a tremendous last 1.5 years or so?

Raul Vazquez: Yes. So on the debt reduction side, from a capital allocation strategy perspective, our priorities are still, number one, fund profitable growth; number two, pay down the debt, in particular, the 15% interest rate corporate facility. We made a lot of progress last year. We did $70 million in payments last year, including $37.5 million. That does impact GAAP profitability because there are some repayment charges. So our GAAP net income would have been even higher if not for the $5.5 million or so of debt repayment charges in the quarter. We do have additional payments contemplated in the plan by quarter. We’ll certainly talk more about those every time that we have an earnings call, Hal, give you an update on how much did we pay down.

But the plan does include that. And in fact, GAAP net income would be even higher this year, if not for some of those debt repayment charges that we have to recognize. So yes, you’ll continue to see us pay down that debt as aggressively as possible.

Operator: [Operator Instructions]

Raul Vazquez: Okay. There appear to be no further questions. So we want to thank you once again for joining today’s call. We appreciate your continued interest in Oportun, and the team looks forward to speaking with you again soon. Thank you, everyone.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.