Company Overview - OneMain is a consumer finance lender that provides personal loans, auto loans, and credit cards, focusing primarily on the subprime consumer market [2] Leadership - Doug Shulman serves as the CEO of OneMain and participated in a conference to discuss the company's operations and market focus [2] Industry Context - The consumer finance sector, particularly in the subprime lending space, is characterized by its focus on providing financial services to consumers with lower credit scores [2]

OneMain Conference Call Summary Company Overview - **Company**: OneMain - **Industry**: Consumer Finance, Specialty Payments - **Focus**: Personal loans, auto loans, credit cards, primarily targeting subprime consumers [1][3] Key Insights on Non-Prime Consumer Health - **Resilience of Non-Prime Consumers**: The non-prime consumer segment is described as resilient, with income levels catching up to inflation. However, there has not been a dramatic improvement in their financial situation over the past year [4][5][6] - **Employment Trends**: Unemployment remains historically low, allowing most individuals seeking jobs to find employment. However, there are some crosscurrents affecting the economic landscape [5][6] - **Loan Approval Rates**: Approval rates are not a primary focus; instead, the emphasis is on whether applicants meet underwriting criteria. The company has seen a steady flow of applications [12][14] Portfolio Resilience and Underwriting Strategy - **Portfolio Management**: The current portfolio is considered resilient, with a conservative underwriting approach established since 2022. The company has implemented a minimum threshold of 20% return on equity (ROE) for loans [14][16] - **Stress Testing**: A stress test model predicts losses at 6.5%, accounting for a 30% stress overlay, indicating a conservative approach to potential economic downturns [14][16] - **Lessons Learned**: The importance of discipline in lending practices is emphasized, with a focus on data-driven decision-making and maintaining a conservative balance sheet [17][18] ILC Application Update - **ILC License Status**: No updates on the Industrial Loan Company (ILC) application; it is viewed as a "nice to have" rather than a necessity for the business [24][30] - **Operational Benefits**: If granted, the ILC license could simplify operations across different states and enhance the ability to issue credit cards directly [30][31] Funding Strategy - **Conservative Balance Sheet**: The company maintains a diversified funding strategy, including asset-backed securities (ABS) and bank lines totaling over $7 billion from 14 banks. This approach aims to mitigate liquidity risks [41][43][50] - **Long Liquidity Runway**: The company keeps about two years of liquidity to ensure operational stability during market disruptions [50][52] Auto and Credit Card Business Updates - **Auto Lending Growth**: The auto lending segment has been expanding, with a focus on independent dealerships and a recent acquisition of Foursight to enhance capabilities [56][57][58] - **Credit Card Strategy**: The credit card business is growing, with a focus on serving the non-prime consumer. The integration of credit cards into the overall strategy is seen as complementary to personal loans [62][63][66] Capital Allocation and Returns - **Capital Priorities**: The company prioritizes investing in business growth, maintaining a healthy dividend, and opportunistic share buybacks. A recent buyback program was increased to $1 billion through 2028 [93][94] - **M&A Considerations**: While open to M&A opportunities, the company currently favors organic growth and share repurchases as the best use of capital [95] Conclusion - **Investor Communication**: The company aims to clarify misconceptions about its risk profile, emphasizing the strength of its balance sheet and the stability of its non-prime lending model [102][103] - **Long-Term Strategy**: OneMain is positioned as a resilient player in the consumer finance space, focusing on disciplined lending practices and maintaining a strong balance sheet to navigate economic cycles [107][108]

Core Viewpoint - OneMain Financial (OMF) shares have performed well over the past year, with a gain of approximately 9% [1] - However, shares experienced a decline following President Trump's proposal to cap credit card rates at 10% [1] Company Performance - OneMain Financial's stock has shown resilience with a 9% increase over the last year [1] - The recent dip in share price is attributed to external political proposals affecting credit card interest rates [1] Market Context - The proposal to cap credit card rates could have significant implications for companies in the financial services sector, particularly those involved in consumer lending [1]

Core Insights - OneMain Financial reported strong fourth-quarter results with GAAP net income of $204 million, or $1.72 per diluted share, representing a 64% increase from the previous year [1] - The company achieved capital generation of $225 million, up from $183 million year-over-year, and full-year capital generation reached $913 million, a 33% increase [1][3] Financial Performance - Fourth-quarter adjusted earnings per share were $1.59, a 37% increase from the prior year, with total revenue of $1.6 billion, up 8% [2][7] - Interest income rose to $1.4 billion, also an 8% increase, while interest expense increased by 4% to $323 million [7][8] - Managed receivables ended the year at $26.3 billion, reflecting a 6% growth, with fourth-quarter originations at $3.6 billion, up 3% year-over-year [6][5] Credit Trends - Full-year C&I net charge-offs decreased to 7.7%, down 46 basis points from 2024, while consumer loan net charge-offs fell 63 basis points year-over-year [9] - The fourth-quarter provision expense was $542 million, with a loan loss reserve ratio remaining flat at 11.5% [10] - Credit card net charge-offs improved to 17.1%, with 30-plus delinquency rates also showing improvement [12] Product Initiatives - The company is expanding its product offerings, including a new secured lending product for homeowners and a paycheck-linked loan product aimed at reducing risk [15][14] - OneMain is also enhancing its operational capabilities with AI tools to improve customer service and productivity [16] Capital Returns and Funding - OneMain announced a $1 billion share repurchase program and returned $639 million to shareholders in 2025, a 20% increase from 2024 [19][20] - The company issued a $1 billion unsecured bond and reduced its secured funding mix to 50%, improving flexibility and reducing interest expenses [21] 2026 Outlook - For 2026, the company expects managed receivables growth of 6% to 9% and C&I net charge-offs in the range of 7.4% to 7.9% [23] - Management highlighted the potential positive impact of an industrial loan company (ILC) license, which could enhance customer reach and funding diversification [25]

Core Viewpoint - OneMain Holdings, Inc. reported mixed financial results for the fourth quarter, with earnings per share exceeding analyst expectations but sales falling short of estimates [1][2]. Financial Performance - The company achieved quarterly earnings of $1.59 per share, surpassing the analyst consensus estimate of $1.54 per share [1]. - Quarterly sales were reported at $1.093 billion, which was below the analyst consensus estimate of $1.168 billion [1]. Management Commentary - Doug Shulman, Chairman and CEO, highlighted strong revenue and earnings growth in 2025, emphasizing the company's disciplined credit approach, ongoing innovation investments, and commitment to customer service as key factors for future profitable growth and shareholder value [2]. Stock Performance - Following the earnings announcement, OneMain shares experienced a slight increase of 0.1%, trading at $62.33 [2].

Core Insights - OneMain Holdings, Inc. reported mixed results for Q4, with earnings per share of $1.59 exceeding the analyst consensus estimate of $1.54, while quarterly sales of $1.093 billion fell short of the estimate of $1.168 billion [1][2] Financial Performance - Quarterly earnings per share were $1.59, beating the consensus estimate of $1.54 [1] - Quarterly sales amounted to $1.093 billion, missing the analyst consensus estimate of $1.168 billion [1] Management Commentary - Doug Shulman, Chairman and CEO, highlighted strong revenue and earnings growth in 2025, emphasizing a disciplined credit approach, ongoing innovation investments, and a commitment to customer service as key factors for future profitable growth and shareholder value [2] Stock Performance - Following the earnings announcement, OneMain shares increased by 0.1%, trading at $62.33 [2]

Core Insights - OneMain Holdings (OMF) reported fourth-quarter 2025 adjusted earnings of $1.59 per share, exceeding the Zacks Consensus Estimate of $1.55, and reflecting a 37.1% increase year-over-year [1] - The company's net income on a GAAP basis was $204 million, a significant rise of 61.9% from the prior-year quarter, with adjusted earnings for 2025 at $6.66 per share, surpassing estimates and increasing 36.2% from the previous year [2] Financial Performance - Quarterly net interest income (NII) increased by 8.3% year-over-year to $1.09 billion, driven by higher net finance receivables and improved yield [3] - Total other revenues reached $193 million, up 20.6% from the prior-year quarter, attributed to an increase in nearly all fee income components [3] - Total other expenses rose by 2.7% year-over-year to $495 million, primarily due to higher operating expenses [4] Credit Quality - The provision for finance receivable losses was $542 million, up 3.6% from the prior-year quarter, with net charge-offs of $492 million, an increase of 6.3% year-over-year [5] - The company reported 30-89-day delinquencies of $803 million, up 8.1% from the prior-year quarter, with an allowance ratio of 11.54%, slightly up from 11.48% in the previous year [5] Balance Sheet and Share Repurchase - As of December 31, 2025, net finance receivables amounted to $24.8 billion, a 1.5% increase from the prior quarter, while long-term debt rose by 1.6% to $22.7 billion [6] - In the reported quarter, OneMain Holdings repurchased 1.2 million shares of common stock for $70 million [7] Strategic Outlook - Rising expenses due to higher compensation and operating costs are expected to impact profitability, alongside weakening asset quality as a near-term challenge [8] - The company is focusing on growing credit card and auto finance loans, along with strategic acquisitions, which are anticipated to support its financial performance [9]

Employee Engagement and Support - As of December 31, 2025, the company had approximately 9,300 employees, emphasizing a commitment to community and team member support [60] - The company achieved a 90% participation rate in its annual Employee Engagement Survey in 2025, indicating strong employee engagement [62] - The company offers a comprehensive benefits package, including competitive pay, healthcare, retirement benefits, and paid development time, to attract and retain talent [65] - The company’s approach to talent development and inclusivity is aimed at remaining competitive in attracting and retaining exceptional team members [64] Financial Performance and Risk Management - The company forecasts a net interest income sensitivity of -$35 million for a hypothetical 100 basis point increase in interest rates over the next 12 months [300] - The company has limited exposure to other market risks, including foreign exchange rates, equity prices, and commodity prices, which are not considered material to its operations [302] - The company’s finance receivables consist of fixed-rate consumer loans and credit cards, which are not viewed as interest rate sensitive [299] Social Responsibility and Community Engagement - The company is committed to social responsibility, focusing on building trust with stakeholders and providing responsible credit solutions [67] - The company’s Impact Executive Council, consisting of senior executives, monitors Impact issues and risks, reflecting its commitment to social responsibility [69] - The company has delivered financial education curriculum to over 4,900 schools and 600,000 students through its partnership with EVERFI, aiming to enhance financial literacy [70]

Financial Data and Key Metrics Changes - Full-year earnings per share increased by 36% year-over-year to $6.66, with capital generation rising by 33% to $913 million [5][18] - Fourth quarter GAAP net income was $204 million, or $1.72 per diluted share, up 64% from the previous year [18] - Managed receivables grew by 6% year-over-year to $26.3 billion, with revenue increasing by 8% in the fourth quarter [18][20] Business Line Data and Key Metrics Changes - Personal loans saw significant growth driven by targeted initiatives, with debt consolidation products reducing customer payments by about 25% [6][7] - Auto finance receivables grew to $2.8 billion, with a scalable platform established and partnerships expanded [9][14] - Credit card receivables increased to $936 million, with accounts rising to nearly 1.1 million customers [10][14] Market Data and Key Metrics Changes - The company maintained a conservative underwriting posture despite a slightly weaker labor market and persistent inflation [16][32] - The 30-plus delinquency rate for consumer loans was 5.65%, in line with expectations and better than pre-pandemic trends [14][23] - C&I net charge-offs were 7.9% in the fourth quarter, with consumer loan net charge-offs at 7.6%, showing significant improvement [14][25] Company Strategy and Development Direction - The company is focused on product innovation, enhancing customer experience, and expanding its auto finance and credit card businesses [34] - Plans to maintain a conservative underwriting posture while targeting a minimum 20% return on tangible equity [19][32] - The introduction of new products and the expansion of existing services are expected to drive growth in managed receivables by 6%-9% in 2026 [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of OneMain's customers and the strength of its portfolio, anticipating continued capital generation growth in 2026 [16][34] - The company expects to see some seasonal patterns in losses, with a potential improvement in the second half of 2026 [32] - Management highlighted the importance of maintaining a strong balance sheet and the ability to issue capital opportunistically [30][31] Other Important Information - The company was recognized as one of America's most loved workplaces for the fourth consecutive year, reflecting a strong corporate culture [13] - A $1 billion share repurchase program was approved through 2028, with a commitment to maintaining dividends [15][18] Q&A Session Questions and Answers Question: Outlook for credit performance - Management indicated that while credit should continue to improve, there are pressures from the backbook contributing to delinquency and losses, with expectations for a range of C&I net charge-offs in 2026 [37][39] Question: ILC application status and implications - The company is progressing through the ILC application process, which could enhance its ability to serve customers and diversify its balance sheet, but any positive effects are expected to materialize around 2027 [41][42] Question: Loan growth expectations - The company expects loan growth to be driven by innovation in personal loan products and improved team member effectiveness, with a target of 6%-9% growth in managed receivables for 2026 [53][54] Question: Impact of tax refunds on performance - Tax refunds are a significant focus, as they typically improve delinquencies and drive loan demand, but the company does not have specific expectations for the current tax season [60][62] Question: Interest yield trends - The consumer loan yield is currently at 22.5%, with expectations for stability in yields moving forward, influenced by product mix and pricing actions [63][64] Question: Whole loan sales strategy - The whole loan sale program is viewed as a funding diversification strategy, providing flexibility and attractive pricing, while also generating additional revenue streams [70][72]

Financial Data and Key Metrics Changes - Full-year earnings per share increased by 36% year-over-year to $6.66, with capital generation rising by 33% to $913 million [5][18] - Fourth quarter GAAP net income was $204 million, or $1.72 per diluted share, up 64% from $1.05 per diluted share in the fourth quarter of 2024 [18] - Total revenue for the fourth quarter was $1.6 billion, an 8% increase compared to the fourth quarter of 2024, with full-year revenue growth at 9% [20][21] Business Line Data and Key Metrics Changes - Receivables grew 6% year-over-year to $26.3 billion, with personal loans driving growth through targeted initiatives [5][18] - Auto finance receivables increased to $2.8 billion, with significant progress in building a scalable platform [9][14] - Credit card receivables grew to $936 million, with accounts increasing to nearly 1.1 million customers [10][14] Market Data and Key Metrics Changes - The company maintained a conservative underwriting posture despite a slightly weaker labor market in 2025, with net charge-offs improving significantly [16][24] - The 30-plus delinquency rate for consumer loans was 5.65%, in line with expectations and better than pre-pandemic trends [14][23] Company Strategy and Development Direction - The company is focused on product innovation, enhancing customer experience, and expanding its auto finance and credit card businesses [34] - A new secured lending product for homeowners is being introduced, which is expected to drive originations without loosening underwriting standards [7][9] - The company is committed to a share repurchase program, with a $1 billion authorization through 2028, reflecting confidence in capital generation [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of OneMain's customers and the portfolio, anticipating continued capital generation growth in 2026 [16][33] - The outlook for 2026 includes managed receivables growth of 6%-9%, with expectations for C&I net charge-offs in the range of 7.4%-7.9% [32][33] Other Important Information - The company was recognized as one of America's most loved workplaces for the fourth consecutive year, highlighting its strong workplace culture [13] - The financial wellness platform on the mobile app saw a 36% increase in customer adoption, indicating a commitment to customer financial education [11][12] Q&A Session Summary Question: Outlook for credit performance - Management indicated that while credit should continue to improve, there are pressures from the backbook contributing to delinquency and losses, with expectations for seasonal patterns in 2026 [37][39] Question: ILC application status and implications - The company is progressing through the ILC application process, which could enhance its ability to serve customers and diversify its balance sheet, but any positive effects are expected to materialize around 2027 [41][42] Question: New product rollout and pilot periods - New products, including the home merchandise-backed product, will undergo pilot testing to assess performance before full rollout [47] Question: Loan growth expectations - The company expects loan growth to be driven by innovation in personal loan products and improved team member effectiveness, with a target of 6%-9% growth in 2026 [53][54] Question: Impact of tax refunds on performance - Tax refunds are a significant focus, with expectations that higher refunds could improve delinquencies and drive loan demand, although no specific expectations were set for the current tax season [60][62] Question: Interest yield trends - The consumer loan yield is currently at 22.5%, with expectations for yields to remain stable, influenced by product mix and pricing actions taken in previous years [63][64] Question: Whole loan sales strategy - The whole loan sale program is viewed as a funding diversification strategy, providing flexibility and attractive pricing, while also contributing to revenue through gains on sale and servicing income [70][72]