OpFi (OPFI) Q3 2025: Adjusted Net Income Surges 41% on Model 6.1, Lola Migration, and Credit Discipline

2025-10-29 | By EarningsIQ Research

OpFi delivered a record quarter, raising guidance for the third time in 2025 as adjusted net income soared 41% on disciplined risk-based pricing and continued operational leverage. Dynamic credit modeling, tech stack investment, and expanding direct response channels set the stage for sustained double-digit growth into 2026, but rising charge-offs and macro uncertainty warrant close monitoring of credit trends and customer behavior.

Summary

• Dynamic Credit Modeling Drives Outperformance: Model 6.1 and risk-based pricing underpin robust growth despite higher charge-offs.
• Lola Tech Migration Targets Scalable Efficiency: Early Lola testing signals improved automation and cost leverage for 2026.
• Guidance Raised Again Amid Macro Watch: Management expects double-digit growth, but remains vigilant on consumer credit stress and regulatory shifts.

Performance Analysis

OpFi posted record top-line and bottom-line results, with revenue up 14% year-over-year and adjusted net income climbing 41% to $41 million. Originations grew 12.5%, fueled by higher auto-approval rates and nearly half of new volume coming from first-time customers. Net charge-offs rose to 35% of revenue, up modestly from 34% last year, but management emphasized that risk-based pricing and tight segment management kept unit economics strong. The yield on the portfolio dipped slightly to 133%, reflecting both seasonality and the impact of targeting lower-risk customers at competitive rates.

Expense discipline was a clear highlight, with total expenses before interest down to 30% of revenue, a three-point improvement from Q3 2024. Interest expense also fell as a percentage of revenue, aided by recent refinancing and a new $150 million credit facility at lower rates. Share repurchases continued, with over 1 million shares bought back since the start of Q3, reflecting confidence in underlying cash generation and capital returns. BIDI, OpFi’s SMB finance investment, contributed $1.4 million in equity income, and management pointed to ongoing growth opportunities in that channel.

• Originations Mix Shift: Nearly 50% of new originations came from new customers, reflecting expansion of addressable market.
• Expense Leverage: Operating costs as a percentage of revenue declined, supporting margin expansion.
• Credit Quality Watch: Higher charge-offs in new vintages offset by dynamic risk segmentation and pricing.

Overall, OpFi’s results reflect a balance of aggressive growth levers and prudent risk management, but the sustainability of credit performance and consumer resilience will be key watchpoints into 2026.

Executive Commentary

Strategic Positioning

1. Dynamic Credit Modeling and Risk-Based Pricing

OpFi’s Model 6.1, a risk segmentation and pricing engine, is central to the company’s ability to grow originations while controlling losses. The model incorporates AI tools, behavioral data, and macro signals to dynamically adjust pricing and approval thresholds, allowing OpFi to both expand into lower-risk segments with competitive rates and tighten exposure in riskier cohorts as needed. This flexibility is critical in the current macro environment, where consumer stress can shift rapidly and static underwriting would expose the business to outsized losses.

2. Lola Origination System Migration

Lola, OpFi’s next-generation loan origination and servicing platform, is designed to provide a clean tech architecture that integrates AI for end-to-end automation. Early testing in Q4 is focused on improving funnel conversion, increasing auto-approval rates, and reducing cycle times, with full migration slated for Q1 2026. This investment positions OpFi to achieve scalable growth with minimal incremental fixed cost, supporting both margin expansion and responsiveness to market changes.

3. Direct Mail and Connected TV Expansion

OpFi is methodically scaling its direct response channels, with direct mail comprising 4.2% of originations in Q3 and the potential to reach double digits. Connected TV advertising, currently in early testing, is expected to drive targeted customer acquisition and brand awareness in 2026 and beyond. These channels offer controllable, scalable funnels that can be dialed up or down based on credit signals and unit economics.

4. Capital Allocation Discipline

Share repurchases and credit facility optimization reflect management’s focus on maximizing shareholder returns and maintaining funding flexibility. The company’s robust balance sheet, with $75 million in cash and $204 million in unused debt capacity, provides ample runway for both organic and inorganic growth, while ongoing buybacks signal confidence in intrinsic value.

5. SMB Finance Adjacency via BIDI

BIDI, OpFi’s investment in SMB revenue-based finance, continues to generate equity income and exposes the company to additional growth vectors outside core consumer lending. Management highlighted BIDI’s technology-driven approach and ongoing supply-demand imbalance in the SMB finance market as catalysts for continued expansion.

Key Considerations

This quarter showcased OpFi’s ability to balance growth and credit risk, leveraging technology and dynamic modeling to adapt to evolving consumer conditions. The company’s strategic investments in Lola and marketing channels are designed to compound cost advantages and drive sustainable expansion, but execution and credit vigilance remain paramount as the macro backdrop evolves.

Key Considerations:

• Credit Tailwinds and Headwinds: Model 6.1’s real-time risk segmentation is a competitive edge, but higher charge-offs in new vintages and macro stress require ongoing monitoring.
• Scalable Tech Stack: Lola migration aims to unlock throughput and automation, minimizing fixed overhead as originations scale.
• Marketing Channel Diversification: Direct mail and connected TV offer leveragable, data-driven customer acquisition, but cost discipline and funnel optimization are essential as spend rises.
• Capital Return and Flexibility: Ongoing share buybacks and improved credit terms support shareholder value and future growth optionality.
• SMB Finance Optionality: BIDI provides diversification and upside, but remains a small contributor relative to core consumer lending.

Risks

OpFi faces rising credit risk in new loan vintages, with higher charge-offs and potential for macro-driven consumer stress, especially if labor markets or household budgets deteriorate. Regulatory scrutiny on consumer lending, competitive pricing pressure, and the need to sustain recovery rates are additional watchpoints. The company’s dynamic modeling and risk-based pricing provide tools for adaptation, but execution missteps or a sharp downturn could pressure unit economics and growth targets.

Forward Outlook

For Q4 2025, OpFi guided to:

• Continued double-digit revenue and adjusted net income growth
• Stable to improving charge-off ratios as a percentage of revenue

For full-year 2025, management raised guidance:

• Total revenue of $590 million to $605 million
• Adjusted net income of $137 million to $142 million
• Adjusted EPS of $1.54 to $1.60

Management highlighted several factors that will shape results:

• Model 6.1 rollout and Lola migration drive operational efficiency and credit precision
• Marketing channel scaling and disciplined OpEx support margin expansion into 2026

Takeaways

OpFi’s Q3 results reinforce the company’s ability to combine technology-driven growth with risk management, but the sustainability of credit performance and consumer resilience will determine whether double-digit growth can persist into 2026.

• Model-Driven Growth: Model 6.1 and Lola migration are central to sustaining growth and managing risk as the credit cycle evolves.
• Expense Leverage and Capital Returns: Cost discipline and share buybacks underpin margin expansion and shareholder value.
• Macro and Regulatory Watch: Investors should monitor credit trends, consumer stress signals, and regulatory developments for early signs of inflection.

Conclusion

OpFi delivered a record Q3, raising guidance and demonstrating operational leverage through dynamic credit modeling, tech investment, and disciplined capital allocation. Sustained outperformance will depend on the company’s ability to navigate evolving credit conditions and execute on its scalable growth initiatives.

Industry Read-Through

OpFi’s results signal that tech-enabled lenders with dynamic risk modeling and scalable platforms can outperform even as consumer credit normalizes and macro volatility persists. The emphasis on risk-based pricing, automation, and diversified customer acquisition channels provides a blueprint for other fintechs and specialty finance players. However, rising charge-offs and the need for real-time adaptation underscore the importance of agile credit management across the sector. Direct mail and connected TV are emerging as effective, data-driven acquisition levers that could be adopted more broadly in digital lending and adjacent verticals.

OPFI Financials Consumer Finance Fintech Risk-based Pricing Lending Automation Credit Modeling