OneMain Holdings, Inc. Q2 FY2025 Earnings Call

Welcome to the OneMain Financial Second Quarter 2025 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Poillon, Head of Investor Relations. Today's call is being recorded. It is now my pleasure to turn the floor over to Peter Poillon. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the second quarter 2025 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 Shulman, 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.

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 our 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 highlights for the quarter. Capital generation was $222 million, up 63% year-over-year. C&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 billion 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&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 2025. 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 pay down. 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 1,000 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 3.5 million 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 multi-product platform. In our credit card business, we ended the quarter with $752 million of receivables, up 61% from a year ago. We now have more than 920,000 credit card customers. The revenue yield has improved by 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. As a reminder, 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 $2.6 billion of receivables, up $119 million from the last quarter. It has now been a little over a year since we closed the acquisition of Foursight, 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 million of receivables. The auto portfolio pricing has moved up nicely, and 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. 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 our top two credit tiers. Once again, we demonstrated best-in-class access to capital markets, raising $1.8 billion 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 2025, we've repurchased about 780,000 shares for approximately $37 million, 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.

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 $1.8 billion through issuance in both the secured and unsecured markets, providing additional flexibility for future issuances. Second quarter GAAP net income of $167 million or $1.40 per diluted share was up 137% from $0.59 per diluted share in the second quarter of 2024. It is worth mentioning that last year's second quarter GAAP results included purchase accounting adjustments associated with the acquisition of Foursight, which were excluded from our C&I adjusted results. C&I adjusted net income of $1.45 per diluted share was up 42% from $1.02 in the second quarter of 2024. Capital generation, the metric against which we manage and measure our business, totaled $222 million, up $86 million or 63% from $136 million in the second quarter of 2024, 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 2025, 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 $25.2 billion, up $1.6 billion or 7% from a year ago. This compares to 6% organic growth last quarter. It has now been a year since our acquisition of Foursight, 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 second quarter of 2022 that we reached $20 billion in receivables. Since this time, we've been able to increase our receivables by 25% or $5 billion while maintaining a notably tightened credit box and driving new product growth, including $1.3 billion from the acquisition of Foursight. Second quarter originations of $3.9 billion 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 of last year. 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 $1.5 billion, up 10% compared to the second quarter of 2024. Interest income of $1.3 billion grew 10% year-over-year driven by receivables growth and the yield improvement I just mentioned. Other revenue of $195 million grew 6% compared to the second quarter of 2024, 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 million, up $22 million compared to the second quarter of 2024, 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 million, comprising net charge-offs of $446 million and a $65 million 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 million, up from $47 million in the second quarter last year. As we have said before, we expect quarterly PBMC expense in the low $50 million range. Let's turn to Slide 8 and look at consumer loan delinquency trends. 30-plus delinquency at June 30, excluding Foursight, 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 9, you see our front book vintages, comprised of consumer loans originated after August 2022, 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. 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&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&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 the 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 million 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-19% 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 continue to remain strong, amounting to $87 million 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 $2.8 billion. 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 million, up 11% compared to a year ago. Our second quarter 2024 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 9 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 $1.8 billion through two issuances. In May, we issued a 7-year $800 million unsecured bond at 7 1/8%, callable in three years. The bond proceeds were used to partially redeem a significant portion of the 7 1/8% bonds that mature in March 2026. As we proactively manage our balance sheet by reducing our nearest maturity. At quarter end, only about $400 million of the original $1.6 billion of March 2026 bonds remain outstanding with no further unsecured maturities until January 2027. In June, we also issued a 3-year revolving $1 billion 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 $3.3 billion of funding raised through the first half of 2025, we have great flexibility on amount, purpose, and timing of funding over the remainder of the year. Additionally, our bank facilities totaled $7.5 billion at quarter end with unencumbered receivables of $9.7 billion, contributing to our best-in-class liquidity profile. Net leverage at the end of the second quarter was 5.5x, 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&I net charge-offs are expected to come in between 7.5% and 7.8%, 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 second half of 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.

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.

Our first question is coming from Moshe Orenbuch with TD Cowen.

I guess, Doug and Jenny, you mentioned some aspects of the growth in originations and the changing rate of that growth. Could you elaborate a bit on the underlying competitive dynamics or other factors that are contributing to your success and how you anticipate that evolving in the future?

Sure. I will discuss the competitive environment for a moment, and then Jenny may want to add. The competitive environment is quite favorable for us. As you mentioned, we have experienced nice growth in originations despite having a very tight credit box. Our pricing indicates that our offers are competitive, with 60% of our originations in higher risk grades, where competition is typically more intense, and we seem to be capturing our fair share. Generally, there are many competitors in the market, especially for unsecured loans. Half of our loans are secured within auto, which is closely related to our auto finance business. It is a competitive market, and we need to earn our customers' trust. There is a significant amount of capital available. At times when capital markets are tight, competitors may struggle to access capital or may not get it at desirable rates, hindering their ability to lend. However, there is currently an abundance of capital, so that is not limiting the competitive landscape. We feel confident about our positioning. We have loyal customers, an expanded product set, and we are making the necessary enhancements to our products and customer experience. While competition is strong, we feel optimistic about our position within it.

The only point I would add is that it's really strong growth in high-quality originations, which we appreciate. It begins with credit and how we underwrite, and our capacity to do this while keeping a disciplined credit appetite is impressive. Additionally, achieving this with favorable pricing is another aspect that stands out. The growth we’re seeing is a result of the decisions we've made, and overall, we're quite satisfied with our current position.

Got it. As a follow-up, Jenny, you mentioned the stronger capital generation a couple of times. We see that you bought back some stock even at the higher end of your leverage target. Could you discuss how you plan to deploy that in the next 6 to 12 months, considering the stronger capital generation and a favorable environment for loan growth?

Yes. Let me address our capital generation and allocation policy. We have been consistent for many years. Our first use of capital is focused on building a strong business and investing in our products, people, digital capabilities, and data science, directing our capital toward every loan that meets our risk-return criteria. The second priority is our dividend, which currently provides about a 7% yield. It represents a significant part of the value we offer to shareholders. After that, we will allocate capital based on what we believe will yield the highest return for shareholders. There is likely to be more excess capital, as you have noticed an increase in capital generation. This has led to quarter-over-quarter and year-over-year higher share repurchases. We could choose to use that for additional share repurchases or for something strategic, and this is our approach to capital deployment.

Maybe a question for you, Doug. You kind of called out the card portfolio to kind of mature and eventually kind of reach the same return on receivables as a 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?

Yes. We are not providing any forward guidance specifically on cards, but I believe that over time, card yields will stay above 30%. Currently, they are above 30%. They may fluctuate slightly, but we are confident they will remain above that mark. Losses are around the mid-teens. Our actual operating expenses are lower because it’s a digital product and doesn’t require branch infrastructure. When you consider all these factors, we can achieve similar capital generation returns on receivables. We are not aggressively pursuing growth in the card sector; we are being cautious. At this moment, we are refining the product and ensuring we are comfortable with the cards we add to our portfolio, especially since we are in the early stages with higher unit costs. Over time, those unit costs will decrease due to increasing receivables against a fixed cost base, and we are actively working to reduce them annually. We plan to scale appropriately. We have been conservative; after 40 years, we still have less than $1 billion in receivables. Throughout this period, we encountered a challenging non-prime consumer economic cycle, so there is no urgency. We see this as a valuable product and currently have close to 1 million customers. We’re getting positive results from our cross-selling tests between cardholders and loan options, and we will proceed at a measured pace. Eventually, we may increase growth, but we are not at that stage yet.

Got it. Super helpful. As a follow-up, regarding the recently passed significant bill, you mentioned a reduction in taxes on tips and overtime, as well as expanded credits. Do you have any idea what percentage of your borrower base this would benefit?

Yes. Look, first of all, I 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, health care, 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. The question is, how much of an impact is it going to be? How much are they going to save? And is it really going to affect payment patterns at all? I think it's too early to determine. There are some other provisions like childcare benefits and child tax credits that generally could help our customers. And so that's the dimension of it. I mentioned it because it could be a net positive, but it's not something we've baked in.

With the front book now 90% of the portfolio on the back book down to 24%, how much longer should we kind of expect this year-over-year improvement in credit to persist? In other words, how much longer do we kind of have this tailwind?

Thanks. I appreciate that. Overall, it's challenging to predict exactly how long we will continue to see this trend. We are pleased with what we are observing, particularly the trends. The segment from 30 to 89 days has decreased by 8 basis points compared to last year, and those over 30 days are down 29 basis points compared to last year. We are very encouraged by this trajectory. While the improvement from quarter to quarter may fluctuate, we are optimistic about our direction. Additionally, we are witnessing better later-stage roll rates, which contribute to more favorable loss outcomes. Generally, we are feeling quite positive about this situation. However, I cannot specify when we will return to a year-over-year position without a decline.

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?

If I look at our originations growth last quarter, it was 20%. Organically, it was 13%. This quarter, we saw a 9% growth in originations. What you're observing is our focus on achieving growth while maintaining our credit standards, a strategy we have been implementing for about a year. As we begin to assess the impacts of these initiatives, you may notice some moderation in our origination growth. We're pleased with our progress and are maintaining our guidance of 5% to 8% receivables growth for the year, which reflects where we expect to land.

Just a couple of things. I mean, I guess, touching on the credit side of the business. It looked 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 tagging on to that is any impact from the, I guess, the student loan repayment update in terms of reporting and requirements.

I'll take that. I'd say in terms of payment, I don't think we see anything particularly unusual on payments. I had mentioned before, but we are seeing good trajectory on delinquency. I think what you see there is that customers are going delinquent but seem to be able to then make a payment after falling delinquent, and that's a phenomenon we've seen for a while. I don't know that I'd call it a trend yet. So that's just one interesting piece here. To move to your question on student loans. We monitor the whole portfolio very closely, and we've been highly focused on this since that deferral period ended in October of 2023. 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. Many of our customers are current on their student loans, and many are also still in deferred status. But it's clearly something that we'll be watching and closely monitor versus our other population.

Okay. And then, Doug, just maybe your updated thoughts on the branch network versus the online channel. I know the branch network is 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?

Yes. We believe we can effectively serve our customers through various channels: in-person, over the phone, and online or via a mobile app. We continuously assess which channels provide the most value to both our customers and our business model, as well as where customer preferences lie. Our primary focus with the branch network is to provide personalized service, as customers appreciate having someone to talk to for assistance with managing their debt, securing the right-sized loan, considering loan consolidation, and simplifying payments into a single monthly installment. Customers also value having support during challenging times, such as when one spouse loses a job or they experience a period of unemployment, so they have someone to call for help. The interactions our branch team members have with customers are crucial. Our branch managers typically have around 15 years of experience, enabling them to understand their customer base and collaborate effectively with them. We aim to empower our branch team members to engage in valuable work. Much of our app functionality revolves around tasks like making payments, adjusting payment dates, and checking balances, which we have made increasingly user-friendly to encourage more usage. Additionally, our central call centers assist our branches during busy times or when collections need extra support. Overall, we are optimizing for efficiency while ensuring our branches remain focused on customer engagement, which is something our customers truly appreciate.

Look, you've done a good job sort of laying out the case of on credit of dilution of the back book, tightening in 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.

Yes. Look, our consumer has been quite stable, I'd say, for over a year now. As you know, there was deterioration in '22 and into '23. I think like-for-like, we're booking better quality credit than we did if you go way back to pre-pandemic, and we're managing the book to be about the same. We've got tools in our toolkit that allow us to kind of manage what we put on the book. I think overall, the non-prime consumer has been stable. I don't think they've seen their economic situation get wildly better. It also hasn't gotten worse. It's been stable the last 12 to 18 months. I think what you've seen us do is carefully manage the business. So our numbers have continued to get better. We know how to manage within any sort of economic environment to drive positive capital generation.

Got it. And look, if we were to go back to 2022 in the April to August timeframe 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 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?

We closely monitor macro trends, including food, housing, and transportation costs. However, the key factors we assess are individual customers: their employment status, income, spending habits, net disposable income, and their ability to take a loan from us. Additionally, we consider the loan amount and pricing. The primary focus is on a customer-by-customer basis. Overall, wages have recently caught up with inflation, leading to an increase in our customers' net disposable income compared to both the downturn and pre-pandemic levels. Our underwriting process is based on net disposable income. While we utilize numerous factors in our models, the approach remains straightforward: we look at income, spending, and what remains after expenses to determine if a customer can afford a loan.

Doug, I actually wanted 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. Obviously, all lenders and not necessarily direct competitors to OneMain. It's a variety of asset classes, but credit's clearly been performing or outperforming for most. I assume that also is the case for many of your private competitors and private credit has 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. Can you provide a little more color on kind of what you're seeing on the margin?

In late 2021 and early 2022, as people became more comfortable after the pandemic, we noticed an influx of competitors in the market, and some of them captured market share. We focused on improving our core offerings, including our credit standards, products, marketing, and customer experience, working daily to refine these aspects. We adhere to our guidelines and aim to maximize bookings within these limits. There is significant price competition among some players, like Credit Karma and LendingTree, especially among those targeting higher credit scores, but we remain confident in our ability to maintain our market share. We monitor the competitive landscape closely through available data and observe that there is ample competition currently, yet we are optimistic about our position. As a management team, we always check any impulse to get too fast any given quarter about if origination growth is 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. Yes. Look, we actually looked long and hard and debated whether we were going to build it ourselves, and we found Foursight, which we think was a best-in-class auto lender; they had a very good sales team and technology, which we have converted our whole auto business onto, which includes a portal for the dealers. They have grown that nicely. I mentioned that active dealers are up, and we've seen active dealers up. I think Foursight, for a very small auto lender, was very good at competing head-to-head with the bigger auto lenders inside franchise dealers. Our growth has been in both franchise and independent dealers over time. I think you probably know in the auto business, the dealer wants a good price for their customer and fast execution so they can move cars and free up their showroom and their F&I dealer to move to the next customer. Foursight does a decision in under 15 seconds. For franchise dealers, the bigger auto loans are usually a higher credit quality customer. We're pleased with it, and we're growing it commensurate with the rest of our business. But again, we put the same discipline of stress. We're assuming we put a 30% extra stress on our underwriting models to maintain a conservative credit posture even in our auto business. 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.

Thank you. This does conclude today's OneMain Financial Second Quarter 2025 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.