Funding Circle H1 Earnings Call Highlights

Key Points

• Strong first-half performance: Funding Circle increased credit extended 52% year over year to £1.7 billion, revenue 50% to £138 million and profit before tax fourfold to £24 million. It raised 2026 guidance to revenue above £255 million and profit before tax above £40 million.
• Growth in newer products: FlexiPay and credit card transaction volumes rose 71%, with revenue up 83% to £30 million and assets under management up 78% to £300 million. Although the division remained loss-making, management said it was approaching profitability and had reached free-cash-flow breakeven before further credit-line investment.
• Capital returns and leadership transition: The company plans an additional share buyback of up to £25 million after its current program, having already repurchased about £72 million of shares since March 2024. CEO Lisa intends to step down by the end of September 2027, allowing time for a successor transition.

Funding Circle LON: FCH raised its full-year 2026 outlook after reporting strong first-half growth in lending, revenue and profit, supported by demand for its term loans, FlexiPay and business card products.

The company said credit extended rose 52% year over year to £1.7 billion in the first half, while revenue increased 50% to £138 million. Profit before tax climbed fourfold to £24 million, and assets under management rose 15% to £3.3 billion.

Management increased its 2026 guidance to revenue of more than £255 million and profit before tax of more than £40 million. The revised profit outlook would represent a doubling from the prior year, according to the company.

Funding Circle also announced plans for a further share buyback of up to £25 million once its current program concludes. Since March 2024, the company said it has repurchased about £72 million of shares, equal to roughly 18% of its issued share capital. Chief Financial Officer Tony Nicol said unrestricted cash stood at £136 million at the end of June, with £88 million of deployable cash after accounting for the remaining current buyback commitment and a management buffer.

Term Loans Drive Revenue and Margin Expansion

Nicol said the term loans business extended 43% more credit than a year earlier, aided by product innovation, including the full six-month contribution from a shorter-term loan product introduced near the end of the first half of 2025. Assets under management in term loans rose 11%.

Term loan revenue increased 43% to £108 million, driven by transaction revenue and servicing fees. The unit generated £29 million in profit before tax, lifting its profit-before-tax margin from nearly 17% a year earlier to more than 26%.

At the group level, operating expenses increased 27% to £99 million, compared with the 50% increase in revenue. Nicol said the company’s operating expense ratio has declined in each half-year period over the last two years, while its group profit-before-tax margin reached 17% in the first half, up from 1% a year earlier.

Marketing spending remained around 30% of revenue. Nicol said the company was seeing a greater share of business flow through brokers than direct channels, with the mix currently around 60% broker and 40% direct marketing.

FlexiPay and Card Products Continue to Scale

Funding Circle’s FlexiPay and credit card products recorded 71% transaction growth during the first half. Revenue from the products rose 83% to £30 million, while assets under management grew 78% to £300 million.

The faster expansion also increased expected credit losses, which rose to £15 million for FlexiPay and the credit card as outstanding balances grew. Nicol said the company expects expected credit losses to remain between 10% and 12% of average balances outstanding, while historic net annualized loss rates have remained around 7%.

While FlexiPay and the card business remained loss-making in the first half, Nicol said the products were approaching profitability. He said that, if the company stopped spending on new customer marketing, the existing business would be profitable on an annualized basis by about £10 million. He also said all customer cohorts other than those acquired in the first half of 2026 were profitable when costs were allocated by cohort.

The business has reached free-cash-flow breakeven before investment to fund additional credit lines, Nicol said. Funding Circle renewed its Citi facility in April at £320 million, alongside its own equity funding. Its exposure to FlexiPay and card lending is limited to £71 million of equity held in a ring-fenced special purpose vehicle, he added.

Funding Capacity and Medium-Term Outlook

About 91% of the company’s £3.3 billion of assets under management was in term loans funded by institutional investors, including asset managers and banks. Funding Circle originates and services those loans, while investors own the loans and bear the credit risk.

The company had approximately £2.4 billion of forward-flow funding arrangements for future originations, up from £2.2 billion at the end of 2025. Nicol said Funding Circle had signed three new deals during the year, including two with existing investors and a £500 million arrangement with a new investor signed in August.

Management said its credit models differentiate risk about three times better than standard bureau scores. The company has accumulated 16 years of proprietary data, representing 10 billion data points, and said more than 75% of lending decisions are made instantly through its platform.

For the medium term, Nicol reiterated guidance for 2029 revenue of £300 million to £350 million and low- to mid-20% profit margins. He said Funding Circle was trending toward the upper end of its revenue range, subject to current macroeconomic conditions, and would provide a further update at year-end.

Nicol said the third quarter was tracking in line with expectations despite typically quieter summer trading. While management noted uncertainty surrounding the U.K. budget, it said it had not observed a broader slowdown in small-business demand.

CEO Plans Transition

Lisa said she intends to step down as chief executive by the end of September 2027, allowing the board time to identify a successor and manage a transition. She said she would remain focused on delivering the company’s plan during that period.

“Given the strength of the business performance, team, foundations, and our strong platform for future growth, now feels like the right time for me to start the process of handing over the reins,” Lisa said.

The company said about one-third of its customers now use more than one Funding Circle product. It reported a customer transaction every 20 seconds, compared with every 38 seconds at the end of last year. More than half of card customers are new to Funding Circle, management said.

Funding Circle also highlighted its efforts to expand artificial intelligence usage across the business. Management said more than 90% of employees frequently use AI tools, while AI-native engineering teams improved speed to market by more than 30% in the second quarter. The company reported a 20% improvement in revenue per employee compared with the prior year, attributing the gain to AI and related initiatives.

About Funding Circle (LON:FCH)

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