Good morning, guests. Thank you, everyone, for joining us. I'm Mihir Bhatia. I cover consumer finance here at Bank of America. Next on stage here, we have the OneMain Financial session. OneMain is a leading consumer finance company that provides personal loans, auto loans, and credit cards, with a real focus on the non-prime customer. I'm delighted to be joined by Doug Shulman, CEO of OneMain. Thanks. Welcome back to the conference. Thank you for doing it. We really appreciate it. Thanks for having me here, Mihir. We've got a lot of companies at this conference. OneMain is a little different than others. I thought before we dive in, a good place to start would be, why don't you just give everyone a quick overview of what OneMain does, just for people who aren't so acquainted with the company, what makes OneMain unique, and just an overview of the company. Yeah, great. You actually did a good job introducing. I'll repeat what you said, which is we're a consumer finance company. We are focused on providing access to credit and lending. Our main product for many years has been personal loans, and that is a loan to an individual, an unsecured loan or a loan secured by an auto. Our unsecured loans, on average, are $9,000. Our auto loans are about $12,000, and that's been our bread and butter for many years. We also do auto lending through dealers, very similar to a personal loan in that it's a $15,000 car purchase loan, but it's amortizing with a fixed interest rate over time, and then we have a very small credit card portfolio that we've been building carefully and cautiously. Our mission is to be the lender of choice to the non-prime consumer. And we're the largest pure-play public company that has a focus and a specific focus and expertise on non-prime. And I use non-prime very specifically. We're not deep subprime. Our average FICO is about 630. We do a number of prime loans. We do some below that. But our average customer has $70,000, $75,000 of income. I think our differentiators are our history as a branch-based lender. And so we're nationwide. We have 1,300 branches. And we develop a relationship with our customers that allows us to outperform when it comes to credit and losses, delinquencies, and the like. So we're nationwide. We have an omnichannel structure now. We come from branches, but we now have the ability to do business with us digitally and on the phone and in a branch, which is quite unique for anyone who's not a bank. Just to give you a sense of size, we would be the seventh largest bank in the country by branch count, and so we cover the nation quite well. We also have a fortress balance sheet, and I can talk about it later, but we have long-tenured, unsecured debt. We have a lot of deep access to the ABS market. We have extra liquidity with untapped bank lines. We have a $24 billion balance sheet. We keep $7 billion of bank lines just to tap if we ever need it, and so we've got a real resilient balance sheet, and then the huge differentiator is credit. I mean, just to give you my favorite statistics, our average FICO is 630. For the last eight years, our average losses have been just over 6%, and the volatility of losses measured by standard deviation is 1.2. Prime competitors have average losses of 5%, so just 100 basis points lower. Average FICO, 100 higher than ours at 730, and a little bit more volatility of loss at 1.4. Our non-prime competitive set, their average loss is twice as high, 12%. FICO, actually a little higher at 670, and volatility of losses at 3.4. And it's that community-based, deep knowledge lending in our business model that allows those losses to happen. I do want to dig in a little bit on this point about being better credit. And I think one thing that in my discussions with investors and when I was learning about the company even, maybe it was a little underappreciated till we talked to y'all, is the branch network and how it helps with underwriting collections and basically your credit performance and outcomes, even just the loan origination. Can you talk a little bit more about that? You mentioned you're the seventh largest branch network, right, if you were a bank. But how does that branch network actually help you in the business? Yeah. So if you think about a branch, a couple just to paint the picture of a branch, it's three to seven people. Our average branch manager has 15 years' tenure. So they're deep in the community. They've been lending to people for a long time. They know a lot of people. We have a lot of repeat business. And the way we set it up is everyone in the branch is compensated both on the volume of lending and on their credit performance, so on their late payments, losses, et cetera. So we set up a small business who should only be making loans to people who can pay you back. And so first of all, just that unique business structure leads people to really set up the account right. So what's different is if you go online to an online lender, you type in your info, they try to make it as fast as possible, boom, check your credit score, go, here's your loan. We actually have either a face-to-face or a phone call or a video with everybody we lend to. And so a lot of people originate online, but then they come in. A small number in off hours when the branches are closed will go to a central location or a call center. But 95% of people, even if they're booking the loan digitally and never coming into the branch, they're on the phone with that branch who's accountable for making the loan. The setup is a huge difference. So if you're talking to somebody, you're saying, "First of all, we do a budget with you, and we lend to net disposable income. So we do 100% income verification. We figure out what your expenses are, and we see what your cushion is. "And we get you in a loan you can afford," is a key to what we do. But we also that setup, because the person on the phone knows that they're going to get paid based on the performance, they also go the extra mile and say, "Hey, do you want to set up direct deposit? Do you have another phone number? Hey, thanks for that Gmail. Do you have another email I could get just in case I have a hard time getting hold of you? Is there anyone in the household who wants to co-sign?" So the setup is very different, which, when somebody gets into an issue, it affects our ability to collect, our ability to work with them, the credit. It also allows us, I mentioned, half of our personal loans. Forget our people who book loans at an auto dealer. Half of the personal loans where you're just coming looking for money, we get security of an auto and get access to the title. So in that situation, you're at the branch, and they can have a conversation, or you're on the phone with them, and you say, "Hey, I can give you a 21% loan for $7,000, but you actually qualify. I see you've got a 2018 Toyota Camry. If you want us to refinance that for you, we can give you a 17% loan for $15,000. You can get the same amount out and pay a little less." And again, they're incentivized to get more security. They're incentivized to set it up right. And so it's a big differentiator. I think for us, eight years ago, everybody walked into a branch. We decided that the branch was a huge competitive differentiator for us, but we needed to have digital and call centers to supplement it. So we've done a lot of work to make sure we have this omnichannel model. You can set everything up. The branch is still integral, but you can do your business really easily. We've taken a lot of the non-value-added things out of the branch. Branches used to go and get in touch with the DMV and perfect a lien. Now we have central processing, and so we've driven a lot of efficiency, but the branch is still an important part of our model. No, that's great. Let's dig into the health of the non-prime customer a little bit. A lot of companies at this conference focus on the prime customer. So we've heard a lot about the prime customer. But talk to us a little bit about the non-prime customer, consumer, if you will. What is the health right now? Your guidance calls for mid to high single-digit receivable growth. So you must be seeing something that's telling you now is the time to lean back in, grow the receivable book. What are you seeing? What's going on with the non-prime customer? Yeah. So first of all, we're not leaning back in, meaning we have a very tight underwriting posture. We just are well-positioned in the market, and between our products and our marketing and our demand, we've seen receivables growth. But I always tell people, we don't manage the growth. We can make as many loans as we want. The trick is getting paid back. And so we have the underwriting posture is the key. And we're actually quite conservative. I think I'll start by talking broadly about the non-prime consumer. But for us, it matters in what's the total customer set we could address. But we make loans consumer by consumer, channel by channel, location by location. They're our own underwriting and risk. And so the loans we're booking, we're very confident in meet our hurdles. We actually have stress assumptions in our hurdles. We really like the performance we've seen for the last couple of years. I think, look, the stats on the non-prime consumer broadly are this: that inflation, while it's slowed, the cumulative effect of inflation over the last several years has been about 25%. If you look at your average basket of goods, lifestyle is about 25% higher between housing, food, clothing, all of the basics that people need. But incomes have actually now caught up with that. And so incomes on the broadest swath have exceeded that. And if you think about income being higher than expenses, net disposable income of the customers we're seeing coming through the door is higher, which is their income minus their taxes minus their expenses, so how much cushion they have. I think there's still nervousness. I think I said it to you last year because the Journal had just had a great quote before I came to this conference last year, which is people's emotions aren't indexed to inflation, so when they still see eggs and milk and gas being higher, and they go to the grocery and they pay $140 for their weekly groceries versus $105 pre-pandemic, it stresses them out. Regardless if smart people can do, net disposable income is still higher, and so I think the cumulative effects of things, I would say the consumer has stabilized, and so we've seen for the last 18 months, there hasn't been as much stress. The predictability of losses has been spot on, but I don't think we're at the place where consumers are jumping up and down, feeling great about their economics. They still feel stressed about it. With that said, we're underwriting right now, the loans we're booking have higher net disposable income. The income. The people have higher net disposable income than they did pre-pandemic. We're booking two-thirds of our loans on average for the last year in our top two risk grades, and we've cut out lower risk grades really for two and a half years, and we haven't opened it up yet, and so we've been able to manage our business in a way that has allowed us. I've said before, last year, we're very confident was our peak losses unless there's a huge macro event. Our earnings hit a trough and are now moving up, not necessarily because the non-prime consumer is significantly better than they were a year ago. It's just that's how we've been managing our business. You mentioned the two-thirds, the stat about two-thirds of customers being in the top two credit grades for the last two years. What do you think 2025 looks like? I think it looks similar. As I mentioned, we have not loosened our standards. And just to give you all a sense, we have a very disciplined analytical underwriting framework, and we call it our customer lifetime value framework. And at the margin, so any loan that we underwrite, we need to make 20% return on equity. And if you look at our balance sheet, about 15% of any loan we make is shareholder equity. The company's equity goes into it. By definition, that's actually conservative because our cost of capital is probably more like 12%-13%. You could argue that would be the hurdle. We like to keep enough cushion. So if we're wrong, we still make plenty of money, cover our cost of capital, and it's a good return for our shareholders. Second, though, and the way we get to that 20% is the interest we can charge that we charge you and the fees for our different lending products, subtract our cost of debt, so the interest we pay on the leverage part of that loan, subtract operating expenses, and then subtract losses. Right now, our models, our data science and modeling team, they come up with Doug Shulman lives in Ohio, is taking a secured loan, came to us through a digital channel. Losses on average are going to be 5%. We've added a 30% stress to all the losses. And so our hurdle to make 20% is still much higher than probably is actual. So we've tightened, and we're keeping it tight. I always say I'd rather err on the side of caution when it comes to underwriting, and we're seeing really good customer demand now. And so we're booking plenty of loans. We're seeing nice growth. We're seeing originations. We feel like we've got a lot of tailwinds without taking on more risk. If we start seeing credit outperforming our models, if we see we've got a thing called Weather vane testing. We're always booking loans just below that 20% threshold across a very infinitesimal amount. But if we start seeing those jump over the 20%, then we'll open it up and we'll see even more growth. But we're quite comfortable in we put a guidance of 5%-8% receivables growth and 6%-8% revenue growth this year. And we feel like even with a tight underwriting posture, we'd be on track to get that. Given the tight underwriting posture, should the loss content in these loans be below your typical medium-term guidance, right? I guess the one thing that the question we get a lot from investors is if OneMain is tightening so much, they're only doing the top two grades, why is the loss outlook not materially better than its typical medium-term, long-term guidance? Yeah. Look, we had a very obviously, 2020, 2021 were unusual outlier years with $6 trillion of stimulus floating around. So you should just wipe those out. I'd say our total portfolio now that we're originating is in the range of our, call it 6.5%-7% medium-term outlook where we think we underwrite to. I think a couple of things are happening. As I mentioned, the non-prime consumer still is somewhat stressed, feels stressed. And so we've been able to manufacture a book. We book better credit quality that will take you in that direction. I think second is we've added credit cards. And Jenny, our CFO, who's out in the audience because she wouldn't come up here and speak with me. No, no, no. We trade off. She was clear. Credit card is higher loss content. It's also higher interest rate content. And the returns are very good in credit card. So that's going to start shifting around our book a little bit. And so as you saw, our guidance this year, I think, is about 500 basis points lower losses than last year. Our guidance, it should keep moving down and get back into that normalized rate. But just to be very clear on a macro level for us and every other lender, like-for-like customers from 2019 are performing not as good. We're just booking not like-for-like customers. We've got plenty of demand of better customers, which allows us to kick off a lot of cash flow and a lot of income. Right. I do want to talk about the competitive environment. It has been quite favorable the last couple of years. However, we are starting to see, particularly the online lenders, starting to really ramp up originations again. Now, to a certain degree, it's in the prime category and things like that. What are you seeing from a competitive intensity standpoint? Are you seeing some more competitive pressures, or are you still very comfortable with this tight credit box and still delivering the growth? Yeah, look, it changes over time. What I would say is in 2022, when the whole industry was hit with double-digit inflation, customers started having issues. A lot of the online lenders, smaller competitors, people who don't have the kind of balance sheet we have couldn't get access to credit or couldn't get access to funding. And so they shut the spigots. And it was kind of a wide open field for us in late 2022, a lot of 2023. People also tighten their credit box to a different degree. I mean, we think we tightened a lot earlier. We move very quickly. We see stuff. We act on it. We do it. And it's one of our competitive differentiators is just the level of analytics and the speed that we can move and make decisions. But everybody, we have competitors are smart. They eventually tighten their credit box. So we had two advantages: tight credit box of competitors and lack of access to funding. Starting about 18 months ago, I think the funding markets opened for competent competition. And so we just haven't had that advantage. But we've been doing product innovation. We've been adding product. We've continued to tweak our credit box in a way that smartly doesn't take on any more risk, but allows access to credit for different kinds of customers in different pockets. And so we've seen the last, I'd say, 15 months, pretty steady competition. We have not seen a big spike up. Some of the competitors, even though their originations have jumped, they're still way below where they were pre-pandemic, and ours are, or at least pre-2022. And ours have kind of gotten back close to the levels we were back then. And again, in some ways, I don't care. I really hate. The only reason I actually give receivables growth targets is because you guys want them. I kind of hate them because I really mean it. Growth is an output of running a great business, and if you get too focused on originations and growth, you're really going to screw up a lending business, and so we got our credit box. We have a great customer experience. We have great people. We focus on product innovation, and the output usually is quite good, and so we're pretty confident that we can compete in any competitive environment. With that said, we haven't seen major shifts. Got it. One. Got it. One. I would just add, I do think a lot of people who came down into non-prime, didn't have long histories with it, really got burned the last several years, and so are kind of tracking more prime. Right. You Right. You mentioned the credit discipline. One example of that that we saw was on the credit card side, right? When you first launched it in, I think it was 2021, you had some goals. You saw the credit environment deteriorate. You were not shy about saying, "Hey, those goals, we're going to have to pull back from those goals a little bit." You still have had nice growth in that business over the last year or so. I guess just talk about the opportunity with the credit card product. How are early users interacting with it now? Yeah. I I mean, we think it's a huge opportunity for us. Just context, the personal loan market, we have a little over 20% of it with $20+ billion of receivables. It's about a $100 billion total, the non-prime personal loan market. The non-prime credit card market is $500 billion. So it's 5x the personal loan business. So we can have a very nice little ballast to our business, just getting 1% of that, making that $5 billion. Right now, we have $640-some-odd million of receivables. I think the opportunity is really clear. We did a full strategic analysis in 2019 of what are our competitive advantages, what are our core strengths, what else could we do with the platform. And credit card and auto kept coming to the top for different reasons. And we can talk about auto if you want in a bit. Credit card is the personal loan product is an episodic transaction when you need cash. Either for a want, you want to pay for your granddaughter's horseback riding lessons, or a need, my HVAC is broken, and it's $10,000 on average. You pay it down over time. You have a relationship with us, which isn't wildly interactive unless you get behind on your payments. Our best customers take a loan, set up autopay, pay it down over time. They have a great experience with us. If they get into an issue, they call us, and we work stuff out with them. A credit card, though, it's daily transactional. We take much less credit risk. They can have it for 10 or 15 years, so it lengthens the relationship. You pay off a loan, you still have a credit card, and it's used for a very different purpose. But we can use all of our non-prime lending experience, so it's a very complementary product. We built a digital-first credit card. And CEOs love to say digital-first, just so you know what that means. It means you get your card in the mail, and it says, "Sign on to the app to activate it." And so we have over 90% of people sign on to the app to activate it. And we don't advertise, call us. We have a unique value prop osition, which is progress equals payments. And so for every six months of on-time payments in a row that you make, you can either choose you get some financial benefit. The first round of it, which there's plenty of room to do, is you can decrease your APR or increase your credit line. Most people choose increased credit line. So we have on-us behavior. What that means is people are going to the app on a regular basis. You're also going to your app on a regular basis just to check what are your credit limits. We have rewards on some of our cards. What are your rewards? Make a payment. And so we actually get digital real estate in a very different way than you get with a loan. And then the cost of acquisition is about a quarter of the cost of acquiring a customer for a personal loan. So if you think about the long-term potential for us, we have a deeper relationship. We've just started offering loans to our best credit card customers in the app, and they see it. It's zero cost of acquisition. When you pay off a loan, you still have a relationship with OneMain. Then if you need a loan in the future, you're more likely to get the loan from us. And so we think it's a very great complementary product. But the thing you said at the beginning is important. We are not in a rush. This is going to build over time in the right credit environment. We're building the platform now. Great digital experience, great customer experience, high utilization rates. They're buying. They're doing the things that we'd hope they do, which you don't do with a loan. The three major transactions are restaurants, gas, and retail. And so we'll build it when the time is right, and we're building it slowly. The numbers look big because when you go from $500 million of receivables to $600 million of receivables, you get 20% growth. And so everyone says, "Oh, it's really growing." But the reality is that's off a base of $24+ billion of receivables as a company. You mentioned auto. I do want to hit that before we run out of time. So let's talk about auto a little bit. You've been in that business for a while, but Foursight, part of the company for three quarters now. Talk about how that acquisition has played out in relation to your expectations, any learnings as you've worked through the integration. Yeah. So auto, just again, just to give you the same stats of auto, $100 billion personal loan market, the non-prime auto lending market, $600 billion market. For 10 years, we've been doing secured lending with autos. And so recently, the change has been the distribution channel where we now are capturing customers at the point where they buy autos. And so that's been the shift. We had about $800 million of our own internal dealer sales team going out to independent dealers, getting them to send us loans, which we would then book online with people as they bought autos. And we decided we wanted to buy a team, a technology, and a franchise dealer network. We looked at a lot of companies. We chose Foursight for several reasons. One, great cultural fit. Two, really solid management team who's now become the core of our auto lending. So people with bespoke auto lending experience as we build this out. Really good front-end technology that the dealers interact with, which we had kind of used our personal loan technology, included it together. So we just got to purchase a scalable technology. And we did, my tech folks, look, we've looked at like 100 acquisitions since I've been here, and we've done two. I mean, we're very careful. And if you've ever done acquisitions, every technology company, "Oh, the technology sucks. Ours is better." There's one that came back and said, "Oh, it's architected right. It can scale," etc. And then we got a group of franchise dealers, which just gives us some history and origination flow. Honestly, it's a tuck-in acquisition. We paid a little over $100 million for it. And so it wasn't a big check for us. It wasn't bet the farm. The integration's gone quite well because we basically adopted their platform. We've had to do some platform work, like the origination platform, hook it into the core servicing platform, hook it into the general ledger, and those kinds of things. But it wasn't rocket science. And similar to card, what we're doing now is solidifying the platform. We're not in a rush for growth, and we will grow at the right time. And again, our mentality is super aggressive on customer innovation, product, customer experience, digital experience, team member experience, forward-leaning, innovative, very conservative on credit and balance sheet. And so given that these two products are newer to the franchise, given that they don't need to grow a lot to hit our goals for profitability, we're just being very careful and methodical. I think five years and 10 years from now, these will be significant material parts of our business. Personal loan will still be by far the biggest business in those time frames, but they will add growth and profitability to the franchise. Yeah. I don't want to recall this at the time. So why don't I open it up to the audience if anyone has questions? Because I do have a few more, but. Sure. Go for it. Oh, there you go. Hi. Thank you. Anything in the Trump agenda that excites you or that you're worried about for the company? You know, look, we pride ourselves on being a responsible lender that improves the financial well-being of our customers. And we do it right. Fixed rate, super scrupulous about disclosure, work with customers. Even though we're not a bank, we have three lines of defense. We have controls embedded in the front line. We have a fully-fledged risk organization. We have an audit function that does it. And then we treat our customers really well. And so the result is when Biden was president and Obama, we worked well in that regulatory environment. When Bush and then Trump and now Trump again. So we're going to be fine in any of it. Generally, they seem to have a more deregulatory agenda. I would say on balance, that means it less likely just hassles that aren't legitimate. We welcome regulation. We have regulation in all the states. We operate in 47 states. We have regulation in all 47 states. We have interactions with the CFPB. It's all we like. We're more than happy to comply with regulations. Look, I think the biggest thing on the Trump agenda, which isn't bespoke to OneMain, it's to every company you invest in, is what's going to be the effect: taxes, tariffs, deficit, interest rates, all of those things. So I think the government less invasive, net positive for any financial service company. The rest has potential to be quite positive. It has some downside risk like any other company. Anyone else? Not seeing any. Very quickly, I didn't want to touch on your Investor Day targets. A little bit more than a year passed since you had laid those out. I think one of them was 12-15 capital generation over the medium term. Yep. You feel good about that? Are you still on track? Yeah, we feel very good about it. I mean, we're one year into what we said were three to five-year targets. The economy didn't clear, as I mentioned. It's still like investors or customers, our customers are doing fine, but it's not like the economy open, the credit box open. So it's probably not a three-year to get there. It's going to depend on our product mix because auto's a little lower margin business, but it's also lower loss content, and it overall dampens the volatility loss in the company. So if we really ramp that up, it might take a little longer. If we're ramping up the other two products, it could be a little shorter. But we feel like current product mix, current plan, well within our reach to drive, which gets you to basically doubling your capital generation per share over the next four years or so. All right. Maybe just we'll end with this one. As investors look at OneMain and as you meet with investors, you hear the questions they're asking, what do you think is underappreciated? What are people missing? Because you look at the valuation of OneMain compared to the returns, it is lower than what you would expect for a company with this return profile. So what are investors missing? What is underappreciated in your view about OneMain? Look, I think the biggest issue, I think investors, you have two words: non-prime, wholesale funded, and people put you into a risk bucket. I think what is underappreciated is the resiliency of our business, and I think it's a little less underappreciated now. I mean, I think going through a cycle where capital markets were choppy, both in the pandemic and then a few years ago, and our access to funding, the fact that our cost of funding has risen. While interest rates have gone up 500 basis points, our cost of funding has gone up 50 basis points because we have long-tenor unsecured debt, long-tenor ABS, our spreads are really tight, and so we have a very different balance sheet than your average consumer finance company. I think that is getting more appreciated, but I don't think equity investors understand it as well as debt investors. And then I think the non-prime consumer, I mentioned before, our volatility of losses over the last eight years have been 1.2 has been our standard deviation. Prime's been 1.4, and our competitors are 3.4. I think everybody just sticks us in the like, "Oh, it's volatile. It's non-prime. It's a risky consumer." The consumer who makes $75,000, who's treated right, put in a loan they can afford with a business model like ours, is actually not that risky. And I think that's underappreciated. All right. With that, I think we're at time. So again, thank you so much for coming. Really appreciate it. Thank you. Thank you.