UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-39050 OPORTUN FINANCIAL CORPORATION (Exact Name of Registrant as Specified in its Charter) State or Othe ...

1Q 2023 Earnings Presentation May 8, 2023 Forward-looking statements This presentation also contains estimates and other statistical data made by independent parties and by the Company relating to market size and growth and other industry data. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. The Company has not independently verified the statistical and other industry data generated by independent parties and contained in this pre ...

Oportun Financial Corporation (NASDAQ:OPRT) Q1 2023 Earnings Conference Call May 8, 2023 5:00 PM ET Company Participants Dorian Hare - Senior Vice President-Investor Relations Raul Vazquez - Chief Executive Officer Jonathan Coblentz - Chief Financial Officer and Chief Administrative Officer Conference Call Participants John Hecht - Jefferies Rick Shane - JPMorgan Steven Kwok - KBW Operator Welcome to Oportun Financial Corporation’s First Quarter 2023 Earnings Conference Call. All lines have been placed on m ...

Funding & Liquidity - Oportun delayed a $42 million residual financing facility amortization to 2024 and increased the capacity of a senior secured term loan by up to $75 million[1] - Oportun kept 2H22 Adjusted Operating Expenses flat from 1H22[1] Cost Measures - Oportun achieved a 524% 4Q adjusted operating efficiency ratio, a 1,215 bps improvement[2] - Oportun is targeting $48-53 million in 2023 run-rate expense savings, aiming for a 75% reduction in hiring and backfills[2] Loan Performance & Credit Tightening - Post-July credit tightening loans are performing better or near 2019 pre-pandemic vintages and growing in proportion[10] - First Payment Defaults have been driven down to 2019 pre-pandemic levels[6] - 4Q22 total cash was $204 million, with operating cash flow of $89 million[90] ESG Impact - Oportun's lending is 6x less expensive on average vs lending alternatives for people with little or no credit history, and 24x vs online-only lenders[18] - Oportun has helped 11 million people establish a credit history[18] - Oportun members have cumulatively saved over $23 billion in interest and fees[18] - Digit Member Savings total $89 billion+, with an average of $1,800+ saved annually per member[18] Financial Performance - Oportun projects YE 2023 portfolio yield to be over 200 basis points higher than YE 2022[90] - Oportun's total revenue for 2023 is projected to grow 52% year-over-year[41] - Oportun members using our seven credit and digital banking products are 19 million[51]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number 001-39050 OPORTUN FINANCIAL CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 45-336198 ...

Oportun Financial Corporation (NASDAQ:OPRT) Q4 2022 Earnings Conference Call March 13, 2023 5:00 PM ET Company Participants Dorian Hare – Vice President-Investor Relations Raul Vazquez – Chief Executive Officer Jonathan Coblentz – Chief Financial Officer and Chief Administrative Officer Conference Call Participants Sanjay Sakhrani – KBW Matthew Hurwit – Jefferies Rick Shane – JPMorgan Hal Goetsch – Loop Capital Markets David Scharf – JMP Securities Operator Hello and welcome to the Oportun Financial Fourth ...

March 13, 2023 In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate," "continue," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "should," "target," "will," "would," or the negative of these terms or other similar words. These forward-looking statements are subject to the safe harbor provisions under the Private Securities Litigation Reform Ac ...

Oportun Financial Corp. (NASDAQ:OPRT) Q3 2022 Results Conference Call November 7, 2022 5:00 PM ET Company Participants Dorian Hare - SVP, IR Raul Vazquez - CEO Jonathan Coblentz - CFO, CAO Conference Call Participants Mark DeVries - Barclays Sanjay Sakhrani - KBW Rick Shane - JPMorgan David Scharf - JMP John Hecht - Jefferies Hal Goetsch - Loop Capital Operator Good evening, and welcome to Oportun Financial Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note, this event is bein ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, detailing the company's financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total assets | $3,539,994 | $2,946,625 | 20.1% | | Loans receivable at fair value | $2,991,334 | $2,386,807 | 25.3% | | Goodwill | $— | $104,014 | -100.0% | | Total liabilities | $2,990,881 | $2,342,744 | 27.7% | | Asset-backed notes at fair value | $2,238,331 | $1,651,706 | 35.5% | | Total stockholders' equity | $549,113 | $603,881 | -9.1% | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Unaudited) - Key Figures (in thousands, except per share data) **Three Months Ended September 30, 2022 vs 2021** | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $250,076 | $159,084 | $90,992 | 57.2% | | Net decrease in fair value | $(76,422) | $(8,987) | $(67,435) | 750.4% | | Net revenue | $146,983 | $139,523 | $7,460 | 5.3% | | Total operating expenses | $259,346 | $111,401 | $147,945 | 132.8% | | Net income (loss) | $(105,827) | $22,979 | $(128,806) | -560.5% | | Diluted EPS | $(3.21) | $0.75 | $(3.96) | -528.0% | **Nine Months Ended September 30, 2022 vs 2021** | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $690,598 | $432,651 | $257,947 | 59.6% | | Net decrease in fair value | $(135,935) | $(26,457) | $(109,478) | 413.8% | | Net revenue | $497,211 | $369,953 | $127,258 | 34.4% | | Total operating expenses | $564,576 | $328,053 | $236,523 | 72.1% | | Net income (loss) | $(69,321) | $33,248 | $(102,569) | -308.5% | | Diluted EPS | $(2.12) | $1.11 | $(3.23) | -291.0% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Key Figures (in thousands) | Metric | Jan 1, 2022 | Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $603,881 | $549,113 | $(54,768) | -9.1% | **Drivers of Change (Nine Months Ended Sep 30, 2022):** * Net loss: $(69,321) (includes $(105,827) in Q3 2022 and $(9,157) in Q2 2022) * Stock-based compensation expense: $20,752 * Issuance of common stock upon exercise of stock options: $(4,641) (net of additional paid-in capital adjustment) * Vesting of restricted stock units, net of shares withheld: $(3,553) [Condensed Consolidated Statements of Cash Flow](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) Condensed Consolidated Statements of Cash Flow (Unaudited) - Key Figures (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $159,343 | $103,728 | $55,615 | 53.6% | | Net cash used in investing activities | $(915,877) | $(316,741) | $(599,136) | 189.1% | | Net cash provided by financing activities | $835,781 | $268,178 | $567,603 | 211.7% | | Net increase in cash and cash equivalents and restricted cash | $79,247 | $55,165 | $24,082 | 43.7% | | Cash and cash equivalents and restricted cash, end of period | $272,207 | $223,755 | $48,452 | 21.7% | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization and Description of Business](index=8&type=section&id=1.%20Organization%20and%20Description%20of%20Business) Oportun is an AI-powered digital banking platform offering inclusive financial services, expanded through the acquisition of Hello Digit, Inc - Oportun's mission is to provide inclusive, affordable financial services that empower its members to build a better future[20](index=20&type=chunk) - The acquisition of Hello Digit, Inc on December 22, 2021, expanded the Company's AI and digital banking capabilities, offering a comprehensive suite of digital banking products including lending, savings, and investing[20](index=20&type=chunk) - The Company's product offerings include credit products (personal loans, secured personal loans, credit cards) and digital banking products (automated savings, digital banking, long-term investing, retirement savings)[20](index=20&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) The unaudited financial statements are prepared in accordance with GAAP, with no significant changes to accounting policies - The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP, reflecting all normal, recurring adjustments[22](index=22&type=chunk) - The Company's operations constitute a single reportable segment, with financial information reviewed on a consolidated basis by the CODM[21](index=21&type=chunk) - There have been no changes to the Company's significant accounting policies from those described in its Annual Report on Form 10-K for the year ended December 31, 2021, and no new accounting pronouncements were recently adopted[24](index=24&type=chunk)[25](index=25&type=chunk) [3. Earnings (Loss) per Share](index=9&type=section&id=3.%20Earnings%20(Loss)%20per%20Share) This note details the calculation of basic and diluted earnings per share, highlighting the impact of net loss and anti-dilutive securities Earnings (Loss) per Share (Unaudited) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) (in thousands) | $(105,827) | $22,979 | $(69,321) | $33,248 | | Basic EPS | $(3.21) | $0.82 | $(2.12) | $1.19 | | Diluted EPS | $(3.21) | $0.75 | $(2.12) | $1.11 | - For the three months ended September 30, 2022, **8,152,738 common share equivalent securities** (stock options and restricted stock units) were excluded from the diluted weighted-average common shares outstanding calculation because their effect was anti-dilutive[27](index=27&type=chunk) [4. Variable Interest Entities](index=9&type=section&id=4.%20Variable%20Interest%20Entities) The company consolidates Variable Interest Entities (VIEs) used for asset-backed financing as it is deemed the primary beneficiary - The Company consolidates VIEs where it is the primary beneficiary, having the power to direct activities that significantly impact economic performance and the obligation to absorb losses or right to receive benefits that could be significant[29](index=29&type=chunk)[30](index=30&type=chunk) Consolidated VIE Assets and Liabilities (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Consolidated VIE assets:** | | | | Restricted cash | $82,712 | $41,803 | | Loans receivable at fair value | $2,924,567 | $2,267,205 | | Interest and fee receivable | $29,748 | $19,869 | | **Total VIE assets** | **$3,037,027** | **$2,328,877** | | **Consolidated VIE liabilities:** | | | | Secured financing | $368,000 | $398,000 | | Asset-backed notes at fair value | $2,238,331 | $1,651,706 | | Acquisition financing | $104,764 | $116,000 | | **Total VIE liabilities** | **$2,711,095** | **$2,165,706** | - Creditors of the consolidated VIEs have no recourse to the general credit of the Company, as liabilities can only be settled by the respective VIE's assets[31](index=31&type=chunk) [5. Loans Held for Sale and Loans Sold](index=10&type=section&id=5.%20Loans%20Held%20for%20Sale%20and%20Loans%20Sold) Loan sale activities in 2022 included a securitization and other sales, with the whole loan sale program expiring in March 2022 - In March 2022, the Company sold approximately **$227.6 million in loans** as part of a securitization (2022-1 transaction), receiving **$245.0 million in net proceeds**[33](index=33&type=chunk) - The Company sold approximately **$16.3 million in loans** in April 2022 (Q2 2022 Loan Sale) and **$22.2 million in loans** during Q3 2022 (Q3 2022 Loan Sales), derecognizing these loans from its balance sheets[34](index=34&type=chunk) Loan Sale Performance (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Originations of loans sold and held for sale | Insignificant | $61,300 | $50,600 | $136,300 | | Gain on sale | Insignificant | $7,300 | $5,700 | $17,100 | | Servicing revenue | $5,300 | $3,300 | $15,500 | $9,300 | [6. Acquisition](index=10&type=section&id=6.%20Acquisition) Oportun acquired Hello Digit, Inc for approximately $205.3 million in December 2021, incurring significant integration costs - Oportun completed the acquisition of Hello Digit, Inc on December 22, 2021, for approximately **$205.3 million in total consideration** (cash and equity)[38](index=38&type=chunk) - The acquisition expanded Oportun's A.I and digital banking capabilities, adding automated savings, banking, and investing tools[38](index=38&type=chunk) Acquisition and Integration Related Costs (in thousands) | Period | Amount | | :--- | :--- | | Three months ended Sep 30, 2022 | $8,100 | | Nine months ended Sep 30, 2022 | $22,400 | [7. Capitalized Software, Other Intangibles and Goodwill](index=11&type=section&id=7.%20Capitalized%20Software,%20Other%20Intangibles%20and%20Goodwill) Goodwill from the Digit acquisition was fully impaired by a $108.5 million charge in Q3 2022 due to a decline in share price Capitalized Software, Net (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | System development costs | $122,998 | $84,550 | | Acquired developed technology | $48,500 | $48,500 | | Less: Accumulated amortization | $(70,104) | $(45,433) | | **Total capitalized software, net** | **$101,394** | **$87,617** | Goodwill Changes (in thousands) | Metric | Amount | | :--- | :--- | | Balance as of December 31, 2021 | $104,014 | | Measurement adjustments during period | $4,458 | | Impairment | $(108,472) | | **Balance as of September 30, 2022** | **$—** | - A non-cash pre-tax **goodwill impairment charge of $108.5 million** was recognized for the three and nine months ended September 30, 2022, due to a sustained decline in the Company's share price primarily driven by macroeconomic conditions, reducing goodwill to zero[51](index=51&type=chunk) [8. Other Assets](index=13&type=section&id=8.%20Other%20Assets) This note details the composition of other assets, which saw a significant reduction in loans held for sale Other Assets (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total fixed assets, net | $9,442 | $9,915 | | Loans held for sale | $42 | $491 | | Prepaid expenses | $25,057 | $25,355 | | Deferred tax assets | $1,869 | $3,923 | | Current tax assets | $17,978 | $13,330 | | Other | $20,311 | $19,330 | | **Total other assets** | **$74,699** | **$72,344** | [9. Borrowings](index=14&type=section&id=9.%20Borrowings) The company increased its borrowings through asset-backed notes and a new $150 million corporate term loan in Q3 2022 Borrowings (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Secured financing | $365,147 | $393,889 | | Asset-backed notes at fair value | $2,238,331 | $1,651,706 | | Acquisition and corporate financing | $241,838 | $114,092 | | **Total Borrowings** | **$2,845,316** | **$2,159,687** | - On September 14, 2022, the Company entered into a credit agreement for a new **$150.0 million senior secured term loan** (Corporate Financing) maturing on September 14, 2026, bearing interest at 1-month term SOFR plus 9.00%[60](index=60&type=chunk) - The Acquisition Financing Facility was amended on May 24, 2022, and July 28, 2022, increasing its size and replacing LIBOR with SOFR as the interest rate benchmark (SOFR plus 8.00%)[57](index=57&type=chunk)[58](index=58&type=chunk) - As of September 30, 2022, the Company was **in compliance with all covenants** and requirements of its Secured Financing, Acquisition and Corporate Financing facilities, and asset-backed notes[62](index=62&type=chunk) [10. Other Liabilities](index=15&type=section&id=10.%20Other%20Liabilities) Other liabilities decreased overall, driven by lower accrued compensation and amounts due to whole loan buyers Other Liabilities (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Accounts payable | $3,470 | $8,343 | | Accrued compensation | $11,300 | $36,417 | | Accrued expenses | $30,332 | $36,464 | | Accrued interest | $7,842 | $3,276 | | Amount due to whole loan buyer | $2,585 | $14,062 | | Deferred tax liabilities | $39,568 | $28,424 | | Current tax liabilities and other | $10,319 | $8,372 | | **Total other liabilities** | **$105,416** | **$135,358** | [11. Stockholders' Equity](index=16&type=section&id=11.%20Stockholders'%20Equity) The number of issued and outstanding common shares increased as of September 30, 2022, with no preferred stock issued - As of September 30, 2022, the Company was authorized to issue **1,000,000,000 shares of common stock** ($0.0001 par value)[65](index=65&type=chunk) Common Stock Issued and Outstanding | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Shares issued | 33,460,161 | 32,276,419 | | Shares outstanding | 33,188,138 | 32,004,396 | | Treasury stock | 272,023 | 272,023 | - No shares of undesignated preferred stock were issued or outstanding as of September 30, 2022, or December 31, 2021[64](index=64&type=chunk) [12. Equity Compensation and Other Benefits](index=16&type=section&id=12.%20Equity%20Compensation%20and%20Other%20Benefits) Stock-based compensation expense increased significantly in 2022, with substantial unrecognized costs for nonvested awards Total Stock-Based Compensation Expense (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $7,050 | $4,598 | $2,452 | 53.3% | | Nine Months Ended Sep 30 | $20,752 | $14,542 | $6,210 | 42.7% | - As of September 30, 2022, total unrecognized compensation cost for nonvested stock-based option awards was **$7.2 million** (weighted-average vesting period of 2.7 years)[66](index=66&type=chunk) - As of September 30, 2022, total unrecognized compensation cost for nonvested restricted stock unit awards was **$58.5 million** (weighted-average vesting period of 2.9 years)[66](index=66&type=chunk) [13. Revenue](index=16&type=section&id=13.%20Revenue) Total revenue grew significantly, driven by higher interest income and a substantial rise in non-interest income from Digit subscriptions Total Revenue (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Interest income | $232,115 | $145,444 | $632,007 | $401,224 | | Non-interest income | $17,961 | $13,640 | $58,591 | $31,427 | | **Total revenue** | **$250,076** | **$159,084** | **$690,598** | **$432,651** | - Interest income increased by **59.6%** for the three months and **57.5%** for the nine months ended September 30, 2022, primarily due to a higher Average Daily Principal Balance[140](index=140&type=chunk)[141](index=141&type=chunk) - Non-interest income increased by **31.7%** for the three months and **86.4%** for the nine months ended September 30, 2022, primarily driven by Digit subscription income (**$9.7 million in Q3, $28.1 million YTD**) and increased servicing revenue[142](index=142&type=chunk)[143](index=143&type=chunk) [14. Income Taxes](index=17&type=section&id=14.%20Income%20Taxes) The company recorded an income tax benefit in Q3 2022 due to lower pretax income and discrete tax benefits Income Tax Expense (Benefit) (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (benefit) | $(6,536) | $5,143 | $1,956 | $8,652 | | Effective tax rate | 5.8% | 18.3% | (2.9)% | 20.7% | - The shift to an income tax benefit for the three months ended September 30, 2022, and the decrease in expense for the nine-month period were primarily due to **lower pretax income** and discrete tax benefits from return-to-provision adjustments[72](index=72&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - Differences from statutory tax rates were primarily due to **non-deductible goodwill impairment**, tax optimization adjustments, stock-based awards, and R&D tax credits[72](index=72&type=chunk) [15. Fair Value of Financial Instruments](index=17&type=section&id=15.%20Fair%20Value%20of%20Financial%20Instruments) The fair value of loans receivable and asset-backed notes increased, with significant changes in unobservable inputs like charge-offs and discount rates Fair Value of Financial Instruments (in thousands) | Metric | September 30, 2022 (Fair Value) | December 31, 2021 (Fair Value) | | :--- | :--- | :--- | | Loans receivable | $2,991,334 | $2,386,807 | | Asset-backed notes | $2,238,331 | $1,651,706 | Significant Unobservable Inputs for Loans Receivable at Fair Value | Input | Sep 30, 2022 (Weighted Average) | Dec 31, 2021 (Weighted Average) | | :--- | :--- | :--- | | Remaining cumulative charge-offs | 11.67% | 9.60% | | Remaining cumulative prepayments | 31.08% | 32.47% | | Principal payment rate | 15.83% | 18.07% | | Average life (years) | 0.92 | 0.86 | | Discount rate | 10.19% | 6.94% | - As of September 30, 2022, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was **$7.0 million**, with an unpaid principal balance of **$39.2 million**[80](index=80&type=chunk) [16. Leases, Commitments and Contingencies](index=19&type=section&id=16.%20Leases,%20Commitments%20and%20Contingencies) This note details lease liabilities, purchase commitments, and ongoing legal proceedings, including a CFPB inquiry and a consent order for Digit Operating Lease Liabilities (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total leases | $40,149 | $48,584 | | Weighted average remaining lease term | 3.4 years | 3.9 years | | Weighted average discount rate | 3.97% | 4.01% | Purchase Commitments (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2022 (remaining) | $9,100 | | 2023 | $23,400 | | 2024 | $13,100 | | 2025 | $4,800 | | 2026 and thereafter | $2,000 | - Unfunded loan and credit card commitments increased to **$49.9 million** at September 30, 2022, from **$39.8 million** at December 31, 2021[91](index=91&type=chunk) - Oportun received a NORA letter from the CFPB on September 15, 2022, regarding alleged violations related to timely dismissal of lawsuits and COVID-19 hardship treatments, which the Company disputes[93](index=93&type=chunk) - Digit agreed to a consent order with the CFPB on August 11, 2022, to pay at least **$68,145 in consumer redress** and a **$2.7 million civil penalty**, with a reserve established in Q2 2022[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides its perspective on financial condition and results, analyzing key metrics, revenue, expenses, and liquidity [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements based on current expectations that involve risks and uncertainties - The report contains forward-looking statements concerning business, operations, financial performance, plans, objectives, and expectations[98](index=98&type=chunk) - These statements are based on management's current expectations, estimates, forecasts, and projections, but involve known and unknown risks, uncertainties, and other factors beyond the Company's control[100](index=100&type=chunk) - Actual future results, levels of activity, performance, and achievements may be materially different from what is expected, and readers are advised to review the 'Risk Factors' section[100](index=100&type=chunk)[101](index=101&type=chunk) [Overview](index=23&type=section&id=Overview) Oportun is an AI-powered digital banking platform offering inclusive financial services, expanded through the acquisition of Digit - Oportun is a financial technology company and digital banking platform with a mission to provide inclusive, affordable financial services, having extended over **$14.7 billion in credit** through more than **6.0 million loans and credit cards**[102](index=102&type=chunk) - The acquisition of Digit expanded the Company's offerings to include a comprehensive suite of AI-powered digital banking products (lending, savings, investing) alongside credit products (personal loans, secured personal loans, credit cards)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The Company employs a diversified capital markets funding program, including asset-backed securitizations, warehouse facilities, and loan sales, to fund growth efficiently[114](index=114&type=chunk)[116](index=116&type=chunk) - Retail network optimization efforts included closing **136 retail locations in 2021** and an additional **27 in April 2022** to streamline operations[118](index=118&type=chunk)[119](index=119&type=chunk) [Key Financial and Operating Metrics](index=25&type=section&id=Key%20Financial%20and%20Operating%20Metrics) Key metrics show significant growth in members and products, but also an increase in delinquency and net charge-off rates Key Financial and Operating Metrics | Metric | As of/for Three Months Ended Sep 30, 2022 | As of/for Three Months Ended Sep 30, 2021 | As of/for Nine Months Ended Sep 30, 2022 | As of/for Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Members | 1,858,335 | 772,361 | 1,858,335 | 772,361 | | Products | 1,981,310 | 772,361 | 1,981,310 | 772,361 | | Aggregate Originations | $634,193 | $662,105 | $2,312,485 | $1,430,383 | | 30+ Day Delinquency Rate | 5.4% | 2.8% | 5.4% | 2.8% | | Annualized Net Charge-Off Rate | 9.8% | 5.5% | 9.0% | 6.8% | | Return on Equity | (70.1)% | 18.3% | (16.1)% | 9.1% | | Adjusted Return on Equity | 5.6% | 19.0% | 15.0% | 14.4% | - The increase in Members and Products is primarily due to the **acquisition of Digit** and its users[123](index=123&type=chunk)[125](index=125&type=chunk) - The increase in **30+ Day Delinquency Rate** and **Annualized Net Charge-Off Rate** reflects a higher mix of first-time borrowers and a return to pre-pandemic underwriting criteria, with the Company tightening credit standards in mid-2022[128](index=128&type=chunk)[129](index=129&type=chunk) [Historical Credit Performance](index=28&type=section&id=Historical%20Credit%20Performance) The Annualized Net Charge-Off Rate increased in 2022 due to a higher mix of first-time borrowers, despite credit tightening efforts - The Annualized Net Charge-Off Rate increased to **9.8% for Q3 2022** and **9.0% for YTD Q3 2022**, up from 5.5% and 6.8% respectively in 2021, primarily due to a higher mix of first-time borrowers[129](index=129&type=chunk)[133](index=133&type=chunk) - In response to rising delinquencies, the Company **tightened credit underwriting standards** and focused lending towards existing and returning members in mid-2022[128](index=128&type=chunk)[133](index=133&type=chunk) Net Lifetime Loan Loss Rate by Year of Origination (as of Sep 30, 2022) | Year of Origination | Net lifetime loan losses as a percentage of original principal balance | | :--- | :--- | | 2018 | 9.8% | | 2019 | 10.5%* | | 2020 | 6.8%* | | 2021 | 6.0%* | *Vintage is not yet fully mature from a loss perspective - The **2021 vintage** shows a higher net lifetime loan loss rate primarily due to a higher percentage of loan disbursements to new members[135](index=135&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Revenue grew significantly, but a substantial increase in operating expenses, led by a goodwill impairment charge, resulted in net losses Revenue Performance (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Interest income | $232,115 | $145,444 | $632,007 | $401,224 | | Non-interest income | $17,961 | $13,640 | $58,591 | $31,427 | | **Total revenue** | **$250,076** | **$159,084** | **$690,598** | **$432,651** | - Interest income increased by **59.6% (QoQ)** and **57.5% (YoY)** primarily due to a higher Average Daily Principal Balance, partially offset by a decrease in portfolio yield[140](index=140&type=chunk)[141](index=141&type=chunk) - Non-interest income increased by **31.7% (QoQ)** and **86.4% (YoY)**, largely driven by Digit subscription income (**$9.7 million in Q3, $28.1 million YTD**) and increased servicing revenue[142](index=142&type=chunk)[143](index=143&type=chunk) Key Expenses and Net Income (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Interest expense | $26,671 | $10,574 | $57,452 | $36,241 | | Net decrease in fair value | $(76,422) | $(8,987) | $(135,935) | $(26,457) | | Total operating expenses | $259,346 | $111,401 | $564,576 | $328,053 | | Goodwill impairment | $108,472 | $— | $108,472 | $— | | Net income (loss) | $(105,827) | $22,979 | $(69,321) | $33,248 | - Interest expense increased by **152.2% (QoQ)** and **58.5% (YoY)** due to higher Average Daily Debt Balance and increased interest rates/credit spreads[145](index=145&type=chunk)[146](index=146&type=chunk) - Net decrease in fair value significantly worsened to **$(76.4) million (QoQ)** and **$(135.9) million (YoY)**, driven by mark-to-market reductions on loans (due to increased charge-offs and discount rates) and fair value mark on loans sold[151](index=151&type=chunk)[152](index=152&type=chunk) - Total operating expenses surged by **132.8% (QoQ)** and **72.1% (YoY)**, primarily due to a **$108.5 million non-cash goodwill impairment charge**[140](index=140&type=chunk)[171](index=171&type=chunk) [Fair Value Estimate Methodology for Loans Receivable at Fair Value](index=37&type=section&id=Fair%20Value%20Estimate%20Methodology%20for%20Loans%20Receivable%20at%20Fair%20Value) Fair value is estimated by discounting expected cash flows, with changes in inputs like interest rates significantly impacting net revenue - The fair value of Loans Receivable at Fair Value is calculated using a model that projects and discounts expected cash flows, based on portfolio yield, average life, prepayments, remaining cumulative charge-offs, and discount rate[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - Changes in interest rates, credit spreads, realized and projected credit losses, and cash flow timing lead to changes in fair value, directly impacting Net Revenue[177](index=177&type=chunk) Fair Value Premium as a Percentage of Loan Principal Balance | Period | Fair value premium as a percentage of loan principal balance | | :--- | :--- | | Sep 30, 2022 | 0.73% | | Jun 30, 2022 | 2.24% | | Mar 31, 2022 | 4.12% | | Dec 31, 2021 | 5.01% | - The internal valuation committee provides governance and oversight, challenging assumptions and reviewing methodology for fair value pricing[183](index=183&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations for non-GAAP measures used to evaluate core business performance by excluding certain items Adjusted EBITDA (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $(6,161) | $18,064 | | Nine Months Ended Sep 30 | $23,277 | $23,266 | Adjusted Net Income (in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $8,376 | $23,837 | | Nine Months Ended Sep 30 | $64,863 | $52,673 | Adjusted EPS | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $0.25 | $0.78 | | Nine Months Ended Sep 30 | $1.95 | $1.75 | Adjusted Return on Equity | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 5.6% | 19.0% | | Nine Months Ended Sep 30 | 15.0% | 14.4% | Adjusted Operating Efficiency | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 54.2% | 67.1% | | Nine Months Ended Sep 30 | 59.1% | 68.7% | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity increased in Q3 2022 due to new financing, with the company aiming to maintain at least twelve months of expected net cash outflows - The Company funds its operating liquidity and needs through cash flows from operations, securitizations, secured borrowings, Corporate Financing, and whole loan sales[204](index=204&type=chunk) - Available liquidity increased in Q3 2022 due to the **Corporate Financing facility** and another asset-backed securitization issuance[205](index=205&type=chunk) - The Company targets liquidity levels to support at least **twelve months of expected net cash outflows** without access to new debt financing[205](index=205&type=chunk) Cash and Cash Flows (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $272,207 | $223,755 | | Net cash provided by operating activities | $159,343 | $103,728 | | Net cash used in investing activities | $(915,877) | $(316,741) | | Net cash provided by financing activities | $835,781 | $268,178 | - As of September 30, 2022, the Company was **in compliance with all covenants** and requirements on its outstanding debt and available credit[217](index=217&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statements rely on estimates, particularly for fair value and goodwill, with a significant goodwill impairment charge recognized in Q3 2022 - The preparation of condensed consolidated financial statements requires management to make estimates and assumptions, particularly for **fair value measurements** of financial instruments and **goodwill impairment**[224](index=224&type=chunk) - A **$108.5 million non-cash goodwill impairment charge** was recognized for the three and nine months ended September 30, 2022, in response to a sustained decline in the Company's share price driven by macroeconomic conditions[226](index=226&type=chunk) - There have been **no material changes** in critical accounting policies from those disclosed in the Company's 2021 Annual Report on Form 10-K[227](index=227&type=chunk) [Recently Issued Accounting Pronouncements](index=45&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 2 of the financial statements for a discussion of recent and future accounting pronouncements - For a discussion of recent accounting pronouncements and future application of accounting standards, refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements[228](index=228&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to market risk disclosures, with rising interest rates and credit trends continuing to pose risks - There have been **no material changes** to the Company's market risk disclosures as previously reported in its 2021 Form 10-K[230](index=230&type=chunk) - Rising interest rates, credit trends, and other macroeconomic conditions continue to impact market volatility and could adversely affect the Company's financial results[230](index=230&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes identified - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were **effective at the reasonable assurance level** as of September 30, 2022[231](index=231&type=chunk) - There were **no changes** in the Company's internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[233](index=233&type=chunk) - The effectiveness of controls has inherent limitations, including the possibility of human error and circumvention[232](index=232&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not party to any legal proceedings expected to have a material adverse effect on its business - For a description of legal proceedings, refer to Note 16, Leases, Commitments and Contingencies, in the accompanying Notes to the Condensed Consolidated Financial Statements[235](index=235&type=chunk) - The Company is not presently a party to any other legal proceedings that, if determined adversely, would individually or taken together have a **material adverse effect** on its business, financial condition, cash flows, or results of operations[235](index=235&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant business, industry, and financial risks that could materially and adversely affect the company [Summary of Risk Factors](index=47&type=section&id=Summary%20of%20Risk%20Factors) - Investing in Oportun's common stock involves a **high degree of risk**, with potential for material adverse effects on business, financial condition, liquidity, results of operations, and prospects[236](index=236&type=chunk)[237](index=237&type=chunk) - The market price of common stock could decline, leading to a **loss of investment**[236](index=236&type=chunk) [Risks Related to Our Business](index=47&type=section&id=Risks%20Related%20to%20Our%20Business) - Rapid growth and challenges in managing it, retaining/attracting members, and developing new products could adversely affect results[241](index=241&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk) - Ineffective risk management, errors in AI-driven credit models, and intense competition pose significant threats to operations and financial performance[249](index=249&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk) - Adverse economic conditions (e.g., inflation, rising interest rates) can negatively impact demand, loan quality, and increase charge-offs, as evidenced by the **$105.8 million net loss in Q3 2022** due to goodwill impairment[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Negative publicity, fraudulent activity, security breaches, and system disruptions could harm reputation, results of operations, and expose the Company to liability[278](index=278&type=chunk)[290](index=290&type=chunk)[292](index=292&type=chunk)[301](index=301&type=chunk) - Geographic concentration of loan originations (e.g., California, Texas, Florida, Illinois) exposes the Company to increased regional risks[308](index=308&type=chunk)[309](index=309&type=chunk) - Reliance on third-party data and vendors introduces risks related to data inaccuracies, service failures, and compliance with regulatory requirements[310](index=310&type=chunk)[313](index=313&type=chunk) - International operations and offshore service providers involve inherent risks such as regulatory compliance, political instability, and management challenges[320](index=320&type=chunk)[321](index=321&type=chunk) [Risks Related to Our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Difficulty and cost in protecting proprietary technology (copyright, trade secret, trademark) without patent protection could adversely affect the ability to compete[334](index=334&type=chunk) - Risk of third-party intellectual property infringement claims, which could result in significant damages, licensing fees, or costly litigation[336](index=336&type=chunk) - Reliance on highly technical and complex internally developed software (credit risk models, AI capabilities) that may contain undetected errors, leading to negative member experiences, data compromise, or approval of unacceptably risky loans[338](index=338&type=chunk) - Incorporation of open source software into business processes carries risks of non-compliance with license terms, potentially requiring public release of proprietary code or changes to business activities[339](index=339&type=chunk)[340](index=340&type=chunk) [Risks Related to Our Industry and Regulation](index=62&type=section&id=Risks%20Related%20to%20Our%20Industry%20and%20Regulation) - The financial services industry is highly regulated, and changes in laws, regulatory interpretations, or enforcement actions could adversely affect business operations, increase compliance costs, and limit the ability to originate loans[342](index=342&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - Litigation, regulatory actions, and compliance issues, including class actions and CFPB investigations, could result in significant fines, penalties, judgments, and reputational harm[346](index=346&type=chunk)[347](index=347&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk) - Evolving data privacy regulations (e.g., CCPA, CPRA, Safeguards Rule) could lead to liabilities, increased costs, and required changes to data processing practices[356](index=356&type=chunk) - Bank partnership products face regulatory risks, including **'true lender' challenges** and increased compliance burdens from prudential bank regulators[360](index=360&type=chunk)[361](index=361&type=chunk) - Failure to comply with anti-money laundering, anti-terrorism financing, and economic sanctions laws could lead to significant sanctions and reputational harm[363](index=363&type=chunk) [Risks Related to Our Indebtedness](index=66&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) - Substantial debt incurred to fund loan activities, with reliance on securitization transactions, warehouse facilities, and other debt financing, may adversely affect financial condition and operations[366](index=366&type=chunk) - Breach of early payment triggers or covenants in debt agreements could result in early amortization, default, or acceleration of funding facilities, severely impacting liquidity and ability to originate new loans[368](index=368&type=chunk)[370](index=370&type=chunk) - The securitization market is subject to changing market conditions, increased regulation, and decreased investor demand, which could increase funding costs or limit access to this critical financing source[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk) - The ability to sell loans for a premium is crucial for earnings; economic slowdowns could reduce premiums or require discounts, negatively impacting results of operations[377](index=377&type=chunk) - Floating rate debt exposes the Company to interest rate increases, which could adversely affect results of operations[367](index=367&type=chunk) [General Risk Factors](index=68&type=section&id=General%20Risk%20Factors) - Future issuance of additional common stock under equity incentive plans or for acquisitions could dilute existing stockholders' percentage ownership[378](index=378&type=chunk) - The trading price of common stock may be volatile due to various factors, including operating performance, market conditions, and analyst coverage, potentially leading to investment losses[379](index=379&type=chunk)[380](index=380&type=chunk) - Directors, executive officers, and principal stockholders have **substantial control** over the Company, which could limit other stockholders' ability to influence key transactions or a change of control[382](index=382&type=chunk) - The Company may need to raise additional funds through equity, debt, or convertible debt financings, which may not be available on acceptable terms or could involve dilution and restrictive covenants[383](index=383&type=chunk) - Being a public company strains resources, diverts management's attention, and increases legal and financial compliance costs[385](index=385&type=chunk) - Certain provisions in the Company's charter documents and Delaware law could limit attempts by stockholders to replace the Board or delay/prevent an acquisition[388](index=388&type=chunk)[389](index=389&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities occurred during the period[394](index=394&type=chunk) - No use of proceeds to report for the period[395](index=395&type=chunk) [Item 3. Defaults Upon Senior Securities](index=71&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities occurred during the period[396](index=396&type=chunk) [Item 4. Mine Safety Disclosures](index=71&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures to report for the period - No mine safety disclosures are applicable or required for the period[397](index=397&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) There was no other information to report for the period - No other information is required to be disclosed for the period[398](index=398&type=chunk) [GLOSSARY](index=72&type=section&id=GLOSSARY) [Terms and Abbreviations](index=72&type=section&id=Terms%20and%20abbreviations%20used%20in%20this%20report%20are%20defined%20below.) This section defines key terms and abbreviations used throughout the report for clarity on financial and operational metrics - The glossary defines key financial and operating metrics such as **'30+ Day Delinquency Rate'**, **'Adjusted EBITDA'**, **'Aggregate Originations'**, and **'Annualized Net Charge-Off Rate'**[401](index=401&type=chunk)[402](index=402&type=chunk) - It also clarifies company-specific terms like **'Acquisition Financing'**, **'Corporate Financing'**, **'Loans Receivable at Fair Value'**, **'Members'**, and **'Products'**[401](index=401&type=chunk)[402](index=402&type=chunk) [Item 6. Exhibit Index](index=74&type=section&id=Item%206.%20Exhibit%20Index) [Exhibit List](index=74&type=section&id=Exhibit%20List) This section lists all exhibits filed with the Form 10-Q, including credit agreements, amendments, and officer certifications - The exhibit index includes various credit agreements and amendments, such as the Credit Agreement dated September 14, 2022, and the Fourth Amendment to Loan and Security Agreement[403](index=403&type=chunk) - It also lists certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications)[403](index=403&type=chunk) - Interactive data files (XBRL format) for the financial statements are included as Exhibit 101[403](index=403&type=chunk) [Signature](index=75&type=section&id=Signature) [Report Signature](index=75&type=section&id=Report%20Signature) The report was formally signed on behalf of Oportun Financial Corporation by its Chief Financial Officer on November 8, 2022 - The report was signed by **Jonathan Coblentz**, Chief Financial Officer and Chief Administrative Officer of Oportun Financial Corporation[407](index=407&type=chunk) - The signing date of the report was **November 8, 2022**[407](index=407&type=chunk)

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Oportun's Q2 2022 unaudited financials show asset and liability growth, a net loss for the quarter due to fair value adjustments, but increased net income for the six-month period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$3.35 billion** by June 30, 2022, funded by increased liabilities, while stockholders' equity also rose Consolidated Balance Sheet Data | Account | June 30, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | **Total Assets** | **$3,350,022** | **$2,946,625** | | Loans receivable at fair value | $2,854,594 | $2,386,807 | | **Total Liabilities** | **$2,701,824** | **$2,342,744** | | Secured financing | $505,727 | $393,889 | | Asset-backed notes at fair value | $1,935,842 | $1,651,706 | | **Total Stockholders' Equity** | **$648,198** | **$603,881** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2022 saw a net loss of **$9.2 million** due to fair value adjustments, contrasting with a net income of **$36.5 million** for the six-month period Consolidated Statements of Operations Data | Metric ($ thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $225,802 | $138,254 | $440,522 | $273,567 | | Net decrease in fair value | ($63,484) | ($5,902) | ($59,513) | ($17,470) | | Total operating expenses | $157,886 | $110,386 | $305,230 | $216,652 | | **Net income (loss)** | **($9,157)** | **$7,250** | **$36,506** | **$10,269** | | **Diluted EPS** | **($0.28)** | **$0.24** | **$1.10** | **$0.34** | [Condensed Consolidated Statements of Cash Flow](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) Operating cash flow was **$91.6 million**, but significant investing outflows led to a **$59.1 million** net cash decrease for the six months Consolidated Statements of Cash Flow Data | Cash Flow Activity ($ thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $91,642 | $53,838 | | Net cash used in investing activities | ($638,024) | ($57,151) | | Net cash provided by financing activities | $487,278 | $192,692 | | **Net (decrease) increase in cash** | **($59,104)** | **$189,379** | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business, accounting policies, Digit acquisition, VIE funding, loan sales, and ongoing CFPB regulatory matters - The company acquired Hello Digit, Inc. on December 22, 2021, to expand its A.I. and digital banking capabilities, offering a suite of products including lending, savings, and investing[22](index=22&type=chunk)[40](index=40&type=chunk) - Oportun uses wholly-owned special-purpose subsidiaries (VIEs) to collateralize asset-backed financing. As of June 30, 2022, these consolidated VIEs held **$2.86 billion** in assets and **$2.56 billion** in liabilities[32](index=32&type=chunk)[34](index=34&type=chunk) - In March 2022, the company sold loans with an unpaid principal balance of **$227.6 million** in a securitization transaction. In April 2022, it sold another population of loans with a principal balance of **$14.7 million**[35](index=35&type=chunk)[36](index=36&type=chunk) - The company received a Civil Investigative Demand (CID) from the CFPB in March 2021 regarding its collection practices. Additionally, a separate CFPB matter related to Digit has reached an agreement in principle, for which a reserve of approximately **$2.8 million** has been established[85](index=85&type=chunk)[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong origination growth, Q2 net loss due to fair value adjustments, and strategic Digit acquisition for diversified digital banking [Overview](index=22&type=section&id=Overview) Oportun is a digital banking platform offering diverse financial services, leveraging the Digit acquisition and a diversified funding strategy - Oportun's credit products include personal loans (unsecured and secured) and credit cards, while its digital banking products (via Digit) include automated savings, checking, and investing[98](index=98&type=chunk) - The company leverages a 'Lending as a Service' model, partnering with brands like DolEx, Barri Financial, and Sezzle to expand its member base[107](index=107&type=chunk) - In Q1 2022, the company decided to close an additional 27 retail locations as part of its network optimization plan, incurring **$2.1 million** in related expenses for the first six months of the year[113](index=113&type=chunk) [Key Financial and Operating Metrics](index=24&type=section&id=Key%20Financial%20and%20Operating%20Metrics) Q2 2022 metrics show strong origination growth but increased delinquency and charge-off rates due to credit normalization Key Financial and Operating Metrics Summary | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Members | 1,818,588 | 684,843 | | Aggregate Originations | $878,177 thousand | $433,039 thousand | | 30+ Day Delinquency Rate | 4.3% | 2.5% | | Annualized Net Charge-Off Rate | 8.6% | 6.4% | | Return on Equity | (5.7)% | 6.1% | | Adjusted Return on Equity | 2.3% | 14.2% | - The increase in delinquency and charge-off rates is attributed to a higher mix of first-time borrowers and the return to pre-pandemic underwriting criteria in late 2021[122](index=122&type=chunk)[123](index=123&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q2 2022 revenue grew **63.3%** YoY, but a **$63.5 million** net decrease in fair value led to a net loss, alongside rising operating expenses - Q2 2022 total revenue grew **63.3%** YoY, primarily due to a **61.5%** increase in interest income driven by growth in the Average Daily Principal Balance from **$1.60 billion** to **$2.58 billion**[135](index=135&type=chunk) - The net decrease in fair value for Q2 2022 was **$63.5 million**, a significant change from a **$5.9 million** decrease in Q2 2021. This was driven by a mark-to-market reduction on loans due to increased charge-off assumptions (**11.25%** vs. **7.59%** in Q2 2021) and a higher discount rate (**8.97%** vs. **6.54%**), partially offset by a positive mark-to-market adjustment on asset-backed notes[145](index=145&type=chunk) - Total operating expenses in Q2 2022 increased by **$47.5 million** YoY to **$157.9 million**, with notable increases in Technology and facilities (**+$19.7 million**), Personnel (**+$10.1 million**), and Sales and marketing (**+$8.6 million**)[134](index=134&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures for Q2 2022 show declines in Adjusted EBITDA, Net Income, and EPS, reflecting core business performance Non-GAAP Financial Measures Summary | Non-GAAP Metric ($ thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Adjusted EBITDA | ($4,488) | $4,510 | | Adjusted Net Income | $3,751 | $16,964 | | Adjusted EPS | $0.11 | $0.56 | | Adjusted Return on Equity | 2.3% | 14.2% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Oportun funds operations via securitizations and secured borrowings, maintaining liquidity to cover twelve months of expected outflows - Primary funding sources include asset-backed securitizations, secured financing facilities, and loan sales[195](index=195&type=chunk) - As of June 30, 2022, the company had **$1.94 billion** in outstanding asset-backed notes and **$241.0 million** in undrawn capacity from its **$750.0 million** secured financing facilities[201](index=201&type=chunk)[203](index=203&type=chunk) - In May 2022, the company issued **$400.0 million** of two-year asset-backed notes, and issued another **$400.0 million** in July 2022[54](index=54&type=chunk)[55](index=55&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk from 2021 Form 10-K, but rising interest rates and macro conditions pose ongoing impact - There have been no material changes to market risk from the 2021 Form 10-K, but the company notes that rising interest rates and macroeconomic conditions could impact financial results[215](index=215&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level[216](index=216&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[218](index=218&type=chunk) [PART II - OTHER INFORMATION](index=41&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 16 for legal proceedings, stating no other material adverse legal matters are pending - For details on legal proceedings, the company refers to Note 16 of the financial statements[220](index=220&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include reliance on credit models, fair value accounting volatility, funding dependence, and regulatory oversight - **Business Risks:** The company faces risks related to managing its rapid growth, retaining customers, competing effectively, and successfully integrating the Digit acquisition[223](index=223&type=chunk) - **Financial & Market Risks:** The business is exposed to disruptions in credit markets, rising interest rates, and the effectiveness of its risk management models. The use of fair value estimates for loans and notes can lead to earnings volatility[223](index=223&type=chunk)[242](index=242&type=chunk) - **Regulatory & Legal Risks:** The financial services industry is highly regulated, with the CFPB having broad authority. The company faces risks from litigation, changes in regulation, and compliance issues, particularly concerning its bank partnership model[224](index=224&type=chunk)[338](index=338&type=chunk) - **Indebtedness Risks:** The company has substantial debt and relies on securitizations and other facilities for funding. A breach of covenants or an inability to access capital markets could negatively impact liquidity and operations[225](index=225&type=chunk)[354](index=354&type=chunk) [Items 2-6](index=68&type=section&id=Items%202-6) This section reports 'None' for unregistered sales, defaults, mine safety, and other information, concluding with an exhibit index - No unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, or other information were reported for the period[382](index=382&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk)