Earnings call transcript: OneMain Holdings beats Q2 2025 EPS forecast

OneMain Holdings Inc. (OMF) reported a strong financial performance for the second quarter of 2025, surpassing earnings per share (EPS) expectations with a reported EPS of $1.45, compared to the forecasted $1.23. This represents a 17.89% surprise. Despite a slight miss on revenue, which came in at $1.2 billion against a forecast of $1.21 billion, the company’s stock saw a positive pre-market reaction, rising by 1.91% to $59.75. According to InvestingPro data, OMF boasts a healthy 7% dividend yield and trades at an attractive P/E ratio of 12.47, suggesting potential value for investors. The company maintains a "Good" Financial Health Score, with particularly strong metrics in profit and price momentum.

Key Takeaways

• OneMain Holdings’ EPS exceeded expectations by 17.89%.
• Revenue fell slightly short of forecasts, with a 0.83% miss.
• Stock price increased by 1.91% in pre-market trading.
• Strong year-over-year growth in net income and capital generation.
• Enhanced product offerings and operational efficiencies highlighted.

Company Performance

OneMain Holdings demonstrated robust performance in Q2 2025, with a 137% year-over-year increase in GAAP net income to $167 million. The company’s capital generation also rose by 63% to $222 million. Total revenue was reported at $1.5 billion, marking a 10% increase from the previous year. The company’s managed receivables grew by 7% to $25.2 billion, indicating strong consumer demand and effective credit management.

Financial Highlights

• Revenue: $1.5 billion, up 10% year-over-year
• EPS: $1.45, up 42% year-over-year
• Capital generation: $222 million, up 63% year-over-year
• Managed receivables: $25.2 billion, up 7% year-over-year
• Operating expenses: $415 million, up 11% year-over-year

Earnings vs. Forecast

OneMain Holdings reported an EPS of $1.45, significantly surpassing the forecast of $1.23. This 17.89% surprise underscores the company’s strong operational performance and cost management. However, revenue slightly missed expectations, coming in at $1.2 billion compared to the forecasted $1.21 billion, a minor shortfall of 0.83%.

Market Reaction

Following the earnings announcement, OneMain Holdings’ stock rose by 1.91% in pre-market trading, reaching $59.75. This positive movement reflects investor confidence in the company’s ability to outperform EPS expectations despite a slight revenue miss. The stock’s performance is notable given its proximity to the 52-week high of $60.33. InvestingPro data shows analyst targets ranging from $55 to $74, with a consensus recommendation leaning towards "Buy." The company’s comprehensive Pro Research Report, available to InvestingPro subscribers, provides detailed analysis of OMF’s valuation metrics, growth potential, and competitive positioning among the 1,400+ covered US equities.

Outlook & Guidance

Looking ahead, OneMain Holdings expects full-year managed receivables growth of 5-8% and revenue growth at the high end of a 6-8% range. The company anticipates net charge-offs in the lower half of the 7.5-8% range and an operating expense ratio of approximately 6.6%. Significant capital generation growth is also expected throughout 2025.

Executive Commentary

CEO Doug Schulman highlighted the success of strategic initiatives, stating, "We are seeing the results of initiatives and actions we put in motion over the past couple of years." CFO Jenny Osterhout noted, "We had a really strong quarter with improved credit performance." Schulman also emphasized consumer stability, adding, "Our consumer has been quite stable... over a year now."

Risks and Challenges

• Potential economic downturns could impact consumer demand.
• Rising operating expenses may pressure margins.
• Competitive pressures in the non-prime lending space.
• Regulatory changes could affect lending practices.
• Dependence on stable labor market conditions.

Q&A

During the earnings call, analysts inquired about the maturation strategy of the credit card portfolio and the role of the branch network in customer service. Discussions also covered consumer credit stability and the competitive landscape, providing insights into OneMain Holdings’ strategic positioning and pricing dynamics.

Full transcript - OneMain Holdings Inc (OMF) Q2 2025:

Conference Operator: Welcome to the OneMain Financial Second Quarter twenty twenty five Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Poulian, Head of Investor Relations. Today’s call is being recorded. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to Peter Pouillon.

You may begin.

Peter Poulian, Head of Investor Relations, OneMain Financial: Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page two of the second quarter twenty twenty five investor presentation, which contains important disclosures concerning forward looking statements and the use of non GAAP measures. The presentation can be found in the Investor Relations section of the OneMain website. Our discussion today will contain certain forward looking statements reflecting management’s current beliefs about the company’s future, financial performance and business prospects.

And these forward looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward looking statements. If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, July 25, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Schulman, our Chairman and Chief Executive Officer and Jenny Osterhout, our Chief Financial Officer.

After the conclusion of our formal remarks, we’ll conduct a question and answer session. I’d like to now turn the call over to Doug.

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Thanks, Pete, and good morning, everyone. Thank you for joining us today. Let me start by saying we had a very strong second quarter, which demonstrated our expertise in credit management and best in class ability to serve the non prime consumer. We continue to see growth in high quality loan originations, good pricing and positive credit trends across the board, all leading to strong growth in capital generation. As you know, we’ve been very disciplined in the last three years in managing credit, optimizing pricing and executing strategic initiatives to drive growth without opening our credit box.

All of this sets us up very well for the future. Let me provide a few of the highlights for the quarter. Capital generation was $222,000,000 up 63% year over year. C and I adjusted earnings were $1.45 per share, up 42%. Our total revenue grew 10% and receivables grew 7% year over year, crossing the $25,000,000,000 mark for the first time in the company’s history.

Originations grew 9%, driven by our expanded use of granular data and analytics as well as product and customer experience innovations to opportunistically drive growth through higher quality loans. Turning to credit. We continue to see positive trends. Our 30 plus delinquency was 5.07%, which is down 29 basis points year over year as compared to up 27 basis points last year. C and I net charge offs were 7.6% in the quarter, down 60 basis points from last quarter and down 88 basis points compared to the second quarter of last year.

Consumer loan net charge offs were 7.2%, down 64 basis points from last quarter and down 110 basis points year over year. Due to the strength of the first two quarters of the year, we have updated our view on 2025 net charge offs to be at the lower half of the range we provided you at the beginning of the year. Jenny will discuss the specifics in a few minutes, but we are quite pleased with the improvement in credit that we have seen during the first half of twenty twenty five. Let me touch on some of the recent initiatives that are helping to drive originations in our core personal loan business. One initiative is loan consolidation.

As many Americans have seen growth in credit card debt, we enhanced our debt consolidation offering. This product allows customers to refinance their debt with a OneMain loan with a single predictable payment and faster paydown. This year, we increased awareness of the product and made changes to the customer experience to make it easier to consolidate debt with OneMain. Let me give you a few other examples. We have added new data sources to further automate income verification and collateral details.

We also have a new streamlined and faster process to renew a loan for select customers who have demonstrated excellent credit performance. We’re also growing a new loan origination channel as we enable credit card customers to cross buy personal loans through our credit card app. While this is a small test, early results are showing excellent credit performance and low acquisition costs, laying the groundwork to expand this channel in the future. I’ve said before that to run a great business, it is a thousand little things that add up to meaningful value creation. Initiatives like these are impactful in the aggregate as they expand our reach, improve our offers and increase application pull through rate.

This is a small sample of the many initiatives we are working on every day, enabling us to drive growth and efficiency across our loan business. Let me move on to the progress we are making on our strategic initiatives. Today, we provide access to responsible credit to more than 3,500,000 customers, up 11% from a year ago. Much of the growth is attributable to the Brightway Credit Card and OneMain auto finance business as we’re engaging more customers across our expanded multiproduct platform. In our credit card business, we ended the quarter with $752,000,000 of receivables, up 61% from a year ago.

We now have more than 920,000 credit card customers. The revenue yield has improved 140 basis points year over year and portfolio credit performance remains in line with our expectations and will move down over time as the portfolio matures. The credit card portfolio represents only about 3% of our total receivables today as we remain measured in our credit card growth. Our goal is to grow this product conservatively with a focus on building the product for the long term. We are confident that as we scale this business to a mature steady state, its capital generation return on receivables will be similar to our personal loans business, albeit with higher revenue yield that absorbs higher losses.

In the meantime, we’re very focused on continuously improving the user experience, growing with our best customers and reducing marginal cost per account to ensure a profitable business for the long run. In our auto finance business, we ended the quarter with over $2,600,000,000 of receivables, up 119,000,000 from the last quarter. It has now been a little over a year since we closed the acquisition of Foresight, and we are pleased with the evolution of our auto business since then. In the last year, our roster of active dealers grew by 14%. Quarterly originations grew by 29%, and we’ve added more than $400,000,000 of receivables.

The auto portfolio pricing has moved up nicely and the credit performance remains in line with expectations and better than comparable industry performance. We’ve made excellent strides in carefully growing the auto business within our disciplined credit policies and are very optimistic about our offering through both independent and franchise dealers. We continue to see the auto finance business as a driver of future profitable growth. Let me touch briefly on the current economic environment. This quarter, the macroeconomic environment remained consistent with past quarters with policy news causing some volatility, but our customer base continuing to manage their household balance sheets well.

The non prime consumer remains resilient, supported by a solid labor market and good wage growth. And there are provisions in the recent tax bill that could benefit our customers, including the reduction of taxes on tips and overtime and some of the expanded family tax benefits. I spoke last quarter about the resiliency of our business and our ability to manage profitably through the cycle. Our confidence is supported by our long history of serving the non prime consumer, a conservative underwriting approach that for the past three years has incorporated a 30% cushion to ensure that the loans we originate will remain profitable even if the environment experiences stress and a strong balance sheet with tremendous liquidity. Our second quarter execution offered further evidence of this business model.

Our underwriting posture remains very conservative with more than 60% of our new originations coming from top two credit tiers. And once again, we demonstrated best in class access to capital markets, raising $1,800,000,000 in the quarter in both the ABS and unsecured markets, which provides us with a lot of flexibility for the coming quarters. Let me close on capital allocation, where our priorities remain the same. We continue to focus on the long term success of our business, including strategically investing in our expanded product set, data science, digital innovation as well as profitable growth. Our regular annual dividend of $4.16 per share yields about 7% at today’s share price.

This quarter, we repurchased 460,000 shares at an average price of just below $46 per share. During the first half of twenty twenty five, we’ve repurchased about 780,000 shares for approximately $37,000,000 already outpacing the 755,000 shares we repurchased in all of 2024. We will continue to pace our repurchases based on a number of factors, including excess capital available, economic conditions and market dynamics. In summary, it was a great quarter. We are seeing the results of initiatives and actions we put in motion over the past couple of years, including careful management of our credit box, innovations in our core loan products to drive originations and new products and channels, all of which resulted in significant capital generation growth year over year.

With that, let me turn the call over to Jenny.

Jenny Osterhout, Chief Financial Officer, OneMain Financial: Thanks, Doug, and good morning, everyone. I’m pleased to start by summarizing another strong quarter marked by double digit revenue growth, solid receivables growth and ongoing credit performance improvements. We demonstrated our industry leading balance sheet management with great market access and funding execution, raising $1,800,000,000 in both the secured and unsecured markets, providing additional flexibility for future issuances. Second quarter GAAP net income of $167,000,000 or $1.4 per diluted share was up 137% from $0.59 per diluted share in the second quarter of twenty twenty four. It is worth mentioning that last year’s second quarter GAAP results included purchase accounting adjustments associated with the acquisition of Foresight, which were excluded from our C and I adjusted results.

C and I adjusted net income of $1.45 per diluted share was up 42% from $1.02 in the second quarter of twenty twenty four. Capital generation, the metric against which we manage and measure our business, totaled $222,000,000 up $86,000,000 or 63% from $136,000,000 in the second quarter of twenty twenty four, reflecting strong growth in our loan portfolio, improved portfolio yield and the notable improvement in our credit performance. Given the strong growth in capital generation through the first six months of twenty twenty five, we are well positioned to generate significantly more capital this year than we did in either of the past two years. Managed receivables ended the quarter at $25,200,000,000 up $1,600,000,000 or 7% from a year ago. This compares to 6% organic growth last quarter.

It has now been a year since our acquisition of Foresight. So all growth discussed this quarter and going forward is organic. Our growth highlights OneMain’s unique ability to find pockets of growth in higher quality origination segments in our personal loan product, while also carefully growing into our newer businesses and responsibly driving improved pricing across the portfolio. It was just three years ago in the 2022 that we reached $20,000,000,000 in receivables. Since this time, we’ve been able to increase our receivables by 25% or $5,000,000,000 while maintaining a notably tightened credit box and driving new product growth, including $1,300,000,000 from the acquisition of Foresight.

Second quarter originations of $3,900,000,000 were up 9% year over year despite our continued conservative credit box. As we look forward to the second half of this year, we expect a more normalized mid single digit year on year growth in originations as we are now more than a year into the successful personal loan growth initiatives that we started in June. Importantly, we remain very comfortable with our full year managed receivables growth guidance of 5% to 8%. Second quarter consumer loan yield was 22.6%, up 19 basis points from the first quarter and up 67 basis points year over year. The improvement in yield was driven by the sustained benefit of the pricing actions we’ve taken and the seasonal improvement in 90 plus delinquencies, partially offset by an increasing mix of lower yield, lower loss auto finance receivables.

While we’re pleased with the improvement in yield this year, we expect it to moderate in the second half of the year due to the typical seasonality of 90 plus delinquencies and growth in our auto portfolio. Total revenue this quarter was $1,500,000,000 up 10% compared to the second quarter of twenty twenty four. Interest income of $1,300,000,000 grew 10% year over year, driven by receivables growth and the yield improvement I just mentioned. Other revenue of $195,000,000 grew 6% compared to the second quarter of twenty twenty four, primarily driven by higher gain on sale associated with our whole loan sale program and higher credit card revenue associated with the growing credit card portfolio. We now expect our 2025 revenue growth to be at the high end of our previously discussed range of 6% to 8%.

Interest expense for the quarter was $317,000,000 up $22,000,000 compared to the second quarter of twenty twenty four, driven by the increase in average debt to support our receivables growth. Interest expense as a percentage of average net receivables in the quarter was 5.4%, consistent with the prior quarter and in line with our expectations for the full year. Second quarter provision expense was $511,000,000 comprising net charge offs of $446,000,000 and a $65,000,000 increase to our reserves, driven by the increase in receivables during the second quarter. Our loan loss ratio remained flat quarter over quarter at 11.5%. I’ll discuss credit in more detail momentarily.

Policyholder benefits and claims expense for the quarter was $54,000,000 up from $47,000,000 in the second quarter last year. As we have said before, we expect quarterly PB and C expense in the low $50,000,000 range. Let’s turn to Slide eight and look at consumer loan delinquency trends. 30 plus delinquency at June 30, excluding Foresight, was 5.07%, down 29 basis points compared to a year ago, benefiting from improvements in both early and late stage delinquencies. As we look ahead, the sustained improvement in delinquency will result in continuing loss benefits into the second half of the year.

It is worth noting that we’re seeing positive trends in both early and late stage delinquency performance of our newer products, credit cards and auto finance, in addition to our personal loan product. So across the board, we are feeling good about the direction of travel. On Slide nine, you see our front book vintages comprised of consumer loans originated after August 2022 credit tightening now make up 90% of total receivables. The performance of the front book remains in line with expectations and is driving most of the delinquency and loss improvements we are seeing. While the back book continues to diminish, now making up only 10% of the total portfolio, it still represents 24% of our 30 plus delinquency.

And as expected, as the back book continues to run down over the remainder of this year, we anticipate it will contribute less to our delinquency results. Let’s now turn to charge offs and reserves as shown on Slide 10. C and I net charge offs, which include credit cards, were 7.6% of average net receivables in the second quarter, down 88 basis points from a year ago. Consumer loan net charge offs, which exclude credit cards, were 7.2% in the quarter, down 110 basis points year over year. We remain confident in the continued year over year improvement of losses over the remainder of 2025.

As we have discussed before, the difference between C and I net charge offs and consumer loan net charge offs comes from our credit card portfolio. Let me spend a moment to update you on the credit trends of this small but growing portfolio. As a point of reference, we rolled out the credit card business in August 2021, yet the portfolio size remains approximately $750,000,000 today. After our initial rollout of a test portfolio, we have been extremely prudent in the ramp of the business given the uncertain environment over that time frame. As we continuously focused on improving the product and user experience.

Our losses this quarter in our card portfolio improved modestly to the mid-nineteen percent range. As we look forward, we expect continued improvement over the remainder of the year with credit card losses anticipated to decline by around 150 basis points in the second half of the year. This is primarily driven by the seasoning of the credit card portfolio and improvements across both early and late stage delinquencies. We are pleased with the overall quality of the credit card portfolio and feel confident that we are building an enduring profitable business for the long term. More broadly, given the trajectory of our early and late stage delinquencies through the first six months of the year across all our products, we are confident that our full year net charge offs will come in within the lower half of our original guidance range of 7.5% to 8%.

Recoveries continued to remain strong, amounting to $87,000,000 in the quarter or 1.5% of receivables as we continue to utilize the various strategies we have available to optimize recoveries. Loan loss reserves ended the quarter at $2,800,000,000 While the credit performance of our portfolio is improving as reflected in our delinquency and charge off metrics, our 11.5% reserve coverage stayed flat during the quarter as we maintain an appropriately conservative macroeconomic overlay in our reserve. As a reminder, the higher loss, higher yield credit card portfolio contributes to the reserve, adding 35 basis points to the overall reserve ratio at June 30. Now let’s turn to Slide 11. Operating expenses were $415,000,000 up 11% compared to a year ago.

Our second quarter twenty twenty four operating expenses were unusually low due to the expense actions we took in the first quarter of last year. Adjusting for those benefits, expense growth was aligned to our receivables growth even as we continue to invest for the future. The 6.7% OpEx ratio this quarter is nine basis points higher than last quarter and is in line with our expectations. As we’ve said before, our OpEx ratio can fluctuate from quarter to quarter, but we feel great about the inherent operating leverage of our business. We remain confident in our full year 2025 operating expense ratio guide of approximately 6.6%.

Now turning to funding and our balance sheet on Slide 12. During the quarter, we continued to optimize our balance sheet. We raised a total of $1,800,000,000 through two issuances. In May, we issued a seven year $800,000,000 unsecured bond at seven oneeight percent, callable in three years. The bond proceeds were used to partially redeem a significant portion of the seven oneeight percent bonds that mature in March 2026 as we proactively manage our balance sheet by reducing our nearest maturity.

At quarter end, only about $400,000,000 of the original $1,600,000,000 of March 2026 bonds remain outstanding, with no further unsecured maturities until January 2027. In June, we also issued a three year revolving $1,000,000,000 ABS with a cost of funds under 5%. Both of our issuances during the quarter had strong market demand, including a healthy number of new investors in our name. With $3,300,000,000 of funding raised through the first half of twenty twenty five, we have great flexibility on amount, purpose and timing of funding over the remainder of the year. Additionally, our bank facilities totaled $7,500,000,000 at quarter end, with unencumbered receivables of $9,700,000,000 contributing to our best in class liquidity profile.

Net leverage at the end of the second quarter was 5.5 times, flat to last quarter. Turning to Slide 14, our full year 2025 guidance. Given the strong performance of revenues and net charge offs in the first half of the year, we are updating our guidance on those metrics. Total revenue growth is now expected to come in at the high end of the previously provided 6% to 8% range. C and I net charge offs are expected to come in between 7.57.8%, narrowing to the lower half of the guidance range we gave you at the beginning of the year.

We are maintaining our full year managed receivables growth in the 5% to 8% range and our operating expense ratio guide of approximately 6.6%. With all of these metrics moving in the right direction, capital generation in 2025 will significantly exceed 2024. So I’ll end with how I opened. We had a really strong quarter with improved credit performance, excellent originations, growth in total revenue and continued balance sheet strength. We have notable momentum as we move into the 2025 and look forward to delivering outstanding shareholder value in the quarters and years ahead.

And with that, let me turn the call back over to Doug.

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Thanks, Jenny. As I mentioned at the beginning of the year, as we actively managed the business over the past couple of years, we created very positive trends in credit and originations. These tailwinds that I spoke about then are clearly present now as we are on pace to deliver significant capital generation growth in 2025. We are confident in the strength of our business model and our strategic initiatives, and we have positioned OneMain very well for the long term with intense focus on our core loan business as well as our new products and channels. We are operating from a position of strength with an experienced team, resilient business model, strong and diverse balance sheet, credit expertise and long experience serving the non prime consumer, all of which should benefit our company, our customers and our shareholders both in the near and the long term.

I’ll close by thanking all of the OneMain team members for their continued dedication to helping our customers improve their financial well-being. Their hard work and dedication to our customers is unmatched. With that, let me open it up for questions.

Conference Operator: The floor is now open for questions. Thank you. Our first question is coming from Moshe Orenbuch with TD Cowen. Please go ahead.

Moshe Orenbuch, Analyst, TD Cowen: Great. Thanks for taking my questions. I guess, Doug and Jenny, you talked a little bit about the growth in originations and the changing rate of growth there. Could you just talk flesh out a little bit about the underlying competitive dynamic, other factors that are causing this that are driving behind the success that you’ve had and kind of how you see that going forward?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Sure. Let me just talk. Hi, Moshe. How are doing? I will talk about the competitive environment for a minute, then Jenny may want to add.

The competitive environment remains quite constructive for us. As you mentioned, we’ve had nice origination growth despite continuing to have a very tight credit box. I think you can look at our pricing. So we’re able to take some price, which shows that our offers are quite competitive. And 60% of our originations are in our higher risk grades, which is usually where there’s more competition, and we seem to be getting, our fair share.

I think in general, are a lot of competitors out there, especially for, unsecured loans. You know, half our loans are, secured with an auto, not, you know, very separate from our auto finance business. And so it’s a competitive market and we have to earn our customers’ trust. There’s a lot of capital available. So at different times in the market, if the capital markets are tight, competitors sometimes can’t get access to capital, can’t get it at a rate they want and so can’t loan.

Think there’s abundance of capital, that’s not a constraint on, the competitive environment. But we feel quite good about our positioning. We got loyal customers. We have this expanded product set. We’re making the kinds of enhancements I talked about around product and customer experience.

And so the competitive environment remains there’s a lot of competition out there, but it’s you know, we feel good about our positioning in it.

Jenny Osterhout, Chief Financial Officer, OneMain Financial: You know, the the only piece I’d I’d add there is, and Doug touched on this, but, really, it’s high quality, originations growth, which we like. So it starts with credit, who are you underwriting, and our ability to do that while maintaining a pretty tight credit appetite, is is very good. And then to be able to do that also while having good pricing, I think, is another piece that that is very good. And the growth is really the outcome of our choices there. And so I think we’re we’re quite happy with where it stands.

Moshe Orenbuch, Analyst, TD Cowen: Got it. And and as a follow-up and maybe kind of dovetailed with that a little bit, you know, Jenny, you kind of alluded to a couple of times the strong, stronger capital generation. And obviously, we see that you bought back some stock even kind of at the higher closer to the higher end of your leverage target. So maybe you can just talk a little bit about how you think about kind of deploying that in the next six to twelve months in terms of having that stronger capital generation and relatively kind of constructive environment from a loan growth perspective?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yes. Let me take this on capital our capital generation and our capital allocation policy. We’ve been quite consistent for many years. First use of capital is building a great business and investing in our products, our people, our digital capabilities, our data science, and putting money you know, putting our capital into every loan that meets our risk return criteria. Second is our dividend, and we’re about a 7% yield now.

It’s a strong dividend. It’s part of the value proposition we have to shareholders. After that, we will use our capital in a discretionary manner where we think it has the highest return to shareholders. There’s going to be more excess capital. I think you’ve seen that as capital generation goes up.

You’ve seen quarter over quarter higher share repurchases. You’ve now seen year over year already higher share repurchases. We could use that for more share repurchases. We could use that for something strategic. And that’s kind of how we think about it.

Moshe Orenbuch, Analyst, TD Cowen: Thanks very much.

Conference Operator: Thank you. And next we’ll go to Terry Ma with Barclays. Please go ahead.

Terry Ma, Analyst, Barclays: Hey, thank you. Good morning. A question for you, Doug. You kind of called out the card portfolio. It should kind of mature and eventually kind of reach the same return on receivables as the personal lending business.

I guess, one, any sense on kind of timing of when that happens? And then two, as you kind of get to that point, how do you think about sizing that business and kind of growth going forward?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yeah. Look, we’re not, giving any, like, forward guidance on card per se, but let me tell you how I think about it, which is, you know, over time, the the card yields will remain above 30%. They’re already above 30%. They, you know, will move up up and down a little bit, but in general, they’ll, you know, we’re confident they’re gonna be above 30%. Losses are kind of in the mid teens.

You it’s lower actual, operating expense because it’s a digital product and without needing the branch infrastructure, to do it. And so if you add all of those things up, you know, you get to a similar, capital generation return on receivables. You know, we’re really not chasing growth in card. We’re being quite measured. And right now, we’re kind of perfecting the product, making sure we feel really good about the cards we put on our book, driving you know, when you’re in the early stages, you have higher unit costs.

And then over time, those unit costs go down. They go down just by the nature of, more receivables against a fixed cost base, but they also were actively working to drive those down. And every year, they’re going down some. And then we will ramp it as appropriate. We’ve actually been quite conservative.

I mean we’ve been at this four years and we still have under $1,000,000,000 of receivables. During that time, we had a non prime consumer economic cycle. And so we’re in no rush. We think this is a great product. We now have a bunch customers.

You know, we have almost a million customers. We’re seeing some really nice results from our test of cross sell from people who have cards to loans, and we’re just going to keep the pace as appropriate. At some point, we probably will, accelerate growth, but we’re not at that point now.

Terry Ma, Analyst, Barclays: Got it. Super helpful. And then as a follow-up, on the recently passed one big beautiful bill, you kind of also called out reduction of taxes on tips and over time and also expanded credits. Any idea how much the what percentage of the portfolio this is going to benefit for your borrower base? Thank you.

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yes. Look, first of all, want to be really clear. My comments were that some of the provisions could help some of our customers. We are not baking anything into our internal projections or our guidance or anything around the bill. So I want to be really clear about that.

But just to dimension it, if you look at a bunch of industry segments, healthcare, manufacturing, construction, and then you add retail and hospitality, that is around 40% to 50% of our portfolio. Those are likely places that either have overtime or tips. You know, the question is, you know, how much of an impact is it gonna be? How much are they gonna save? And is it really going to affect, payment patterns at all?

I think it’s TBD and way too early. And then there’s some other provisions like, you know, child care benefits, child tax credits that generally could help our customers. And so, you know, that’s the dimension of it. I mentioned it because it’s a could be a net positive but it’s not something we’ve baked in.

Terry Ma, Analyst, Barclays: Got it. Thank you.

Conference Operator: Our next question comes from Mark DeVries with Deutsche Bank. Please go ahead.

Mark DeVries, Analyst, Deutsche Bank: Yes, thanks. With the front book now 90% of the portfolio and the back book down to 24%, how much longer should we kind of expect this year over year an improvement in credit to persist? In other words, how much longer do we kind of have this tailwind?

Jenny Osterhout, Chief Financial Officer, OneMain Financial: Thanks. I’ll take that. Listen, I think overall, in terms it’s hard for me to give you exactly a sense of how long we’ll be continue to see it. I think we really like what we’re seeing, and we’re really liking the trending the trends. And, you know, so we’re the 30 to 89 being down eight basis points compared to last year, and that 30 plus down 29 basis points compared to last year.

I mean, I think we really like this direction of travel, and, you know, the quarter over quarter improvement may vary some, but we’re we’re really liking where we’re going. And we’re also seeing better later stage roll rates, which leads to better loss outcomes. So I think, generally, we’re feeling quite good about this. I don’t know that I can give you a specific moment when, you know, when we’ll get back to a place where year over year we’re not coming down.

Mark DeVries, Analyst, Deutsche Bank: Okay. Fair enough. And then, I just wanted to clarify my understanding of, I think Jenny in your prepared comments calling out kind of a moderation of growth in the back half of the year, at least relative to the first half trend. Is that attributable more to just tougher comps? Or are you pulling back a little bit on credit?

Jenny Osterhout, Chief Financial Officer, OneMain Financial: Really, if I if I look at, you know, our originations growth, last quarter so last quarter, our originations growth was 20%. And then if you look at that organically, it’s 13 it was 13%. And so this quarter, we were at a 9% growth in originations. And I think, really, you know, what you’re seeing is we’ve been very focused on, you know, how growth outcomes while maintaining our our credit box, and we’ve been doing that for about a year. So if you know, I I I do think, you know, you’re starting to lap those some of those initiatives, and so you’ll see that with some of the moderation in the origination growth.

You know, we’re we’re very pleased with with where we are, and and and sticking to our guidance of that 5% to 8% receivables growth for the year. So that should give you a sense of where we’re expecting to land.

Mark DeVries, Analyst, Deutsche Bank: Got it. Thank you.

Conference Operator: Our next question comes from John Hecht with Jefferies. Please go ahead.

John Hecht, Analyst, Jefferies: Thank you guys very much for taking my questions. Just a couple of things. I mean, I guess touching on the credit side of the business. It looks like payment rates accelerated a little bit in the quarter. So I’m wondering if there’s anything to take away from that.

And then tag onto that is any impact from the, I guess, student loan repayment update, in terms of reporting and, requirements?

Jenny Osterhout, Chief Financial Officer, OneMain Financial: Thanks. I’ll take that. You know, I’d say in terms of payments, I don’t think we see anything particularly unusual on payments. I’ve mentioned before, but we are seeing good, trajectory on delinquency. I think what you see there is that, you know, customers are going delinquent but seem to be able to then make a payment after falling delinquent.

And that’s a phenomenon, you know, we’ve seen for a while. I don’t know that I’d call it trend yet. So that’s just one interesting piece here. To move to your to your question on student loans, you know, we we monitor the the whole portfolio very closely, and we’ve been highly focused on this since that deferral period ended in October. So it’s been a while.

Since the Fed collections action started in May, we have not noted any significant difference in the performance of the segment of the portfolio that has a student loan compared to the segment of the portfolio without a student loan. And just one other, you know, piece to mention on this is that, many of our customers are current on their student loans, and many are also still in deferred status. But it’s, you know, it’s clearly something that we’ll be watching, and closely monitor versus our other population.

John Hecht, Analyst, Jefferies: Okay. Jenny, thank you. And then, Doug, just, you know, maybe your updated thoughts on the branch network, versus on the online channel. I mean, I know the branch network’s important from a servicing and customer interaction perspective, but where are you now kind of on this journey of becoming more digital, and how does that impact your thinking about the branch network?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yeah. Look. We we view that we’re gonna be able to serve our customers across multiple channels, in person, on the phone, and online or on a mobile app. And we’re always working to optimize exactly, you know, which of these channels it’s a combination. It’s most value added to our customers and our business model and then where customer preference is.

You know, our real focus with the branch network is, you know, our customers really like, having personalized service, someone to talk to, someone to help think about managing their debt, getting them into the right size loan, thinking about a loan consolidation and paying off credit cards and getting into a single monthly payment. And then they also really like if they have a hiccup in their life, you know, one spouse loses a job or they’re between jobs that they have someone to call, and we will we will work with them. And so the value added is the customer interactions that our branch team members have. And, you know, our branch managers have averaged ten year, fifteen years. They really know their customer base, and they know how to work, with this customer.

So what we’re always trying to do is free our branch team members up to do value added work. And so a lot of what we put into the app is make a payment, change your payment date, forgot my password, check my balance. And so we continually made that easier and gotten more and more people to use the app for that. And then we’ve also supplemented our branches with our central call centers. So if there’s overflowing collection or a branch is busy booking loans and they need to have some help.

And so a lot of what we’re doing is optimizing the work for maximum efficiency for us, maximum efficiency for our our customers, and making sure our branches are focused on engaging with customers, which customers really like.

Conference Operator: Take our next question

John Hecht, Analyst, Jefferies: from Rick Shane

Conference Operator: with JPMorgan.

Rick Shane, Analyst, JPMorgan: Hey. Good morning, everybody. Look, you’ve done a good job sort of laying out the case of on credit of dilution of the back book, tightening of credit on the front book. The one factor that’s probably a little bit harder for us to understand is what’s really going on from a macro perspective. If you were to look at cohorts on a like for like basis on credit category, are you seeing your consumer stable, improving, deteriorating?

Just to give us a sense of where we are in that cycle.

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yes. Look, our consumer has been quite stable, you know, I’d say for over a year now. As you know that, you know, there was deterioration in ’22 and and, you know, into ’23. I think like for like, you know, we’re booking better quality credit than we did, you know, if you go way back pre pandemic, and we’re managing the book to be about the same. So we’ve got tools in our toolkit that allows us to kind of manage who we put on the book.

But I I do think the overall, the non prime consumer has been stable. I don’t think they’ve, you know, seen their economic situation get wildly better. It also hasn’t gotten worse. It’s been stable the last twelve to eighteen months. I think what you’ve seen us do is carefully manage the business so our numbers have continued to get better.

And, we know how to kind of manage within any sort of economic environment to make to drive positive capital generation.

Rick Shane, Analyst, JPMorgan: Got it. And look, if we were to go back to 2022, in the April to August time frame where credit shifted rapidly, that was obviously triggered in part by the rapid spike in gas prices. We estimate that your customer probably their spending at the pump is high single digits of their spending. What are the inputs, excuse me, that you’re looking at right now to sort of measure the health of your consumer? And what are you seeing?

Obviously, gas prices have been a nice tailwind. What are the offsetting headwinds in terms of other expenses?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: I mean, look, we’re interested in macro trends, we’re all over them. And we understand, you know, whether it’s food or housing or transportation costs. Like, we watch that. But the real inputs we look at is each customer that comes in, do they have a job? Don’t they?

How much do they make? How much do they spend? What’s their net disposable income? What’s their debt load? And can they afford, you know, what can they afford to, a, take a loan from us?

And if so, what is what is the price? So the the main input is, like, customer by customer. I think on a in a macro, you know, setting, I do think, and to your, you know, earlier question, wages in aggregate have, you know, over about a year ago caught up with inflation in aggregate. And our customers now have more net disposable income, than they did, you know, before all of this down cycle and even really before pre pandemic. And so we underwrite to net disposable income.

I mean, we obviously have, you know, we we have a thousand factors that go into our models, but it’s relatively straightforward. How much do you make? How much do you spend? How much is left over? And can you afford the loan, that we’re putting you into?

Rick Shane, Analyst, JPMorgan: Look. I I appreciate that, the simple description of it. It it’s funny. Sometimes we lose sight of that, and and you guys probably don’t appreciate that as outsiders, it’s hard to sort of appreciate that. So thank you very much.

Sure.

Conference Operator: Our next question comes from David Scharf with Citizens Capital Markets. Please go ahead.

David Scharf, Analyst, Citizens Capital Markets: Great. Thanks for taking my questions squeezing me in here. Doug, actually want to just revisit I think it was the very first question on just the competitive environment. We’ve been seeing pretty much across the board this reporting season so far credit related beats. So obviously, all lenders and not necessarily direct competitors to OneMain.

I mean, it’s a variety of asset classes. But credit’s clearly been performing or outperforming for most. And I assume that also is the case for many of your private competitors and private credit’s been flowing freely, as you noted. Are there any either early signs of more price competition? Or I’m wondering if past cycles are indicative of maybe how many quarters it is before you start to see competitors become much more aggressive on pricing?

Or you mentioned it’s constructive right now, but could you provide a little more color on kind of what you’re seeing on the margin?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Look, having been through if, I mean, in late twenty twenty one and early twenty twenty two as people were feeling more comfortable from the pandemic, competitors flooded into the market, and we watched it. And we actually watched, you know, competitors take a little bit of share at that time. And we stuck to our knitting, and we have a credit box, and we have our product, and we have our marketing, and we have our customer experience, and we, you know, work on that every day to make it better and more refined and more specific and more granular. And whatever we can book, we book within those parameters, and we actually don’t get too, too fussed about if the numbers go up a little bit and go down a little bit. I mean, I’ve talked about it before as growth is an output.

I think, you know, some of the places where there’s more price competition like Credit Karma or LendingTree, some of the aggregators, we’re seeing plenty of competition. Some of the competitors that got burned in 2022 trying to manage non prime credit and didn’t have the expertise we had, have come back in but haven’t come as far into non prime. And so there is more competition at the, call it, six sixty and above than there, FICO, than there is six sixty, and and below. And so we, you know, we we we track very carefully, you know, with the data we can get our hands on, originations, volume, product. As I mentioned before, plenty of competition in the market, right now, but, we feel good about the fair share we’re getting.

And, you know, we as a management team always check any impulse to get too fussed any given quarter about, you know, if origination growth is, you know, exactly some place. Instead, we just stick to our discipline, have a great value proposition to our customer, and we’re pretty confident that we do this very well for the non prime consumer.

David Scharf, Analyst, Citizens Capital Markets: Got it. No, that’s very helpful color. And maybe just a quick follow-up on the auto side. I mean, it’s been a year since the Foresight acquisition closed. I know you gave some kind of growth metrics around originations in rooftops.

But more specifically, can you provide just some maybe your observations about the franchise business particular, how just how it’s performed relative to kind of your expectations a year ago, either in terms of kind of penetration of franchise rooftops and sort of just the traction you’ve gained within F and I managers?

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: Yeah. Look. We we actually looked long and hard and debated whether we were gonna build it ourselves, and we found Foresight, which we think, you know, was a best in class, auto lenders. They actually had very good, sales team, a very good technology, which were, have converted our whole auto business onto, which includes a portal for, the dealers. They, and we’ve grown that nicely.

You know, I mentioned that active dealers are up, and, you know, we’ve seen active dealers up. And so I think Foresight for a very small auto lender was very good at competing head to head with the bigger auto lenders inside franchise dealers. And so our growth has been in both franchise and independent, dealers over time. You know, I think you, probably know in the auto business, the dealer wants a good price for their customer, and they want fast exec execution so they can move cars and free up their showroom and their f and I dealer to move to the next customer. And, you know, Foresight, you know, does a decision in under fifteen seconds.

And for franchise dealers, they’re bigger auto loans. You know, they’re usually a higher credit quality customer. And so we’ve been we’ve been really pleased with it, and, you know, we’re kinda growing it commensurate with the rest of our business. But, again, we put the same discipline of a of a stress. You know, we’re assuming we put a 30% extra stress on our underwriting models so that, you know, it we’re we’re we’ve maintained a conservative credit posture even in our auto business.

Terry Ma, Analyst, Barclays: Got it.

Doug Schulman, Chairman and Chief Executive Officer, OneMain Financial: So I think we are Yeah. Sure. So we’re up against the hour. Thank you all very much for joining the call. If we didn’t get to your question, our IR team is happy to engage, and we look forward to seeing everybody during this quarter and on next quarter’s call.

So thank you very much.

Conference Operator: Thank you. This does conclude today’s OneMain Financial second quarter twenty twenty five earnings conference call. Please disconnect your line at this time, and have a wonderful day.

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