Oportun Financial (OPRT) - 2023 Q4 - Annual Report

PART I Item 1. Business Oportun is a mission-driven fintech company providing AI-powered financial services to underserved individuals - Oportun has extended over $17.8 billion in responsible credit through more than 6.9 million loans and credit cards since 2005, helping over 1.1 million people establish credit history[26] - Oportun loans save borrowers over $2.4 billion in interest and fees, being on average 7 times less expensive than other options[26] - The Set & Save™ product has helped members set aside over $10.2 billion since 2015, with an average of $1,800 in individual savings per member per year[27][28] - The company's short-term strategy focuses on improving business efficiency, targeting $105 million in annual savings in 2024, and enhancing credit quality[35] - Long-term growth opportunities include deeper penetration in 30 states, increasing secured personal loans, and cross-selling between savings and credit products[36] - As of December 31, 2023, Oportun had 2,340 full-time and 125 part-time employees worldwide, with 435 corporate employees in the U.S[61] Company Overview - Oportun is a mission-driven fintech empowering members with intelligent borrowing, savings, and budgeting capabilities to build financial health[18][23] - More than half of all Americans lack $1,000 in savings for unplanned expenses, highlighting the need for Oportun's services[19] - The company has a Net Promoter® Score (NPS) of 79 for its personal loans, indicating strong member satisfaction[22] Product Overview - Oportun offers credit products (unsecured/secured personal loans, credit cards) and a savings product (Set & Save™) via multiple channels[24][25][26][27] - Unsecured personal loans range from $300 to $10,000 with a cap of 36% APR; the 2023 average loan was $4,007 at 32.9% APR[41] - Secured personal loans range from $2,525 to $18,500; the 2023 average loan was $7,156 at 28.9% APR[42][43] - On November 6, 2023, Oportun announced it was exploring strategic options for its credit card portfolio and sunsetting its partnership with Sezzle[29] Use of Artificial Intelligence - Oportun uses AI and machine learning for underwriting, pricing, marketing, fraud, servicing models, and its automated Set & Save product[29] - The company's underwriting models ingest billions of data points to score 100% of loan applicants, minimizing risk[30] - Set & Save algorithms classify income and expenses with up to 95% accuracy, enabling personalized savings decisions[33] Our Strategy - Short-term priorities include improving business efficiency, with cost-cutting actions expected to save $105 million annually in 2024, and enhancing credit quality[35] - Long-term growth focuses on expanding market penetration, increasing secured personal loans, and developing cross-buying opportunities[36] - The company plans to invest in AI-driven marketing and expand its Lending as a Service program through partnerships[37][38] Our Competition - Oportun competes with consumer finance companies, credit card issuers, fintechs, and various nonbank lenders[45] - Competitive factors include approval parameters, price, flexibility, and convenience, with Oportun differentiating through its technology and AI platform[46] Regulations and Compliance - Oportun is subject to various federal, state, and local regulatory regimes, including examination by the CFPB and state agencies[48][49][50] - The company's bank partnerships also subject it to prudential bank regulators and compliance with laws like the Bank Secrecy Act[51] Our Technology Infrastructure - Oportun's technology infrastructure is designed for high availability, resilience, scalability, and security, using multiple cloud availability zones[53] - A comprehensive cybersecurity program is in place to safeguard data and systems, including a cyber incident response plan[54] Our Intellectual Property - Oportun protects its intellectual property through trademarks, copyrights, and trade secrets, including its proprietary risk model[57] - The company does not currently patent its proprietary risk model or underwriting process to maintain them as trade secrets[57] Our People - As of December 31, 2023, Oportun had 2,340 full-time and 125 part-time employees; corporate staff was reduced by approximately 40% in 2023[61] - The company fosters an inclusive culture, with 88% of its Board identifying as women or members of an underrepresented group[61] Available Information - Oportun's SEC filings are available on its investor relations website and the SEC's website[62][63] Item 1A. Risk Factors The company faces significant business, financial, operational, regulatory, and macroeconomic risks - The company faces intense competition from various financial institutions and fintechs, which could harm its results of operations[67][68] - Oportun relies heavily on Pathward, N.A. for a substantial portion of its loan originations (45% in 2023), and termination of this relationship could adversely affect the business[73][74] - The company's fair value estimates for loans receivable and asset-backed notes, constituting 87% of total assets and 79% of total liabilities, are based on subjective Level 3 inputs[77][78] - Macroeconomic conditions have adversely affected the company's net income, with losses of $180.0 million in 2023 and $77.7 million in 2022[82][83] - The highly regulated financial services industry poses risks from changes in laws, which could increase compliance costs and litigation risk[105][188][190] Business, Financial and Operational Risks - Cost-saving measures, including workforce reductions, may disrupt business and not achieve anticipated benefits[69] - Reliance on proprietary AI credit risk models carries risks of errors, potentially leading to higher loan losses[91][93] - The company's unsecured loans and credit card receivables are not collateralized, increasing the risk of losses from defaults[95] - Quarterly results are highly seasonal, with lower loan originations in Q1, and are subject to significant fluctuations[99][100] Funding and Liquidity Risks - Oportun relies on securitization and debt financing, but availability on favorable terms is not assured, especially with rising interest rates[71][72] - Breaches of covenants in lending agreements could lead to early amortization or default, severely impacting liquidity[166][168] - Inability to securitize loans could force the company to seek more costly alternative financing, negatively impacting results[171][173] - The company maintains cash deposits exceeding federally insured limits, exposing it to risks from bank failures[179][180] Intellectual Property Risks - Protecting proprietary technology, including AI algorithms, is difficult and costly, and failure to do so could harm competitiveness[181] - The company may be sued for alleged infringement of third-party intellectual property, leading to significant damages or fees[182][183] - Undetected errors in software for credit risk models could lead to approval of risky loans and reputational harm[184] Industry and Regulatory Risks - The financial services industry is highly regulated, and changes in laws could adversely affect operations and increase costs[188][190][191] - Litigation and regulatory actions, including class actions and CFPB scrutiny, could result in significant fines and reputational harm[192][193][194][195] - The CFPB's broad authority could significantly increase regulatory burden and compliance costs for the company[199][203][204] - Bank partnership products carry regulatory risks, including challenges to the 'true lender' theory, which could impact profitability[209][210] General Risk Factors - Future issuance of common stock could dilute existing stockholders' ownership[215] - The price of common stock may be volatile due to various factors, potentially leading to loss of investment[217][218] - Directors, officers, and principal stockholders have substantial control, potentially limiting other stockholders' influence[223] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC Item 1C. Cybersecurity Oportun maintains a comprehensive Cybersecurity Program overseen by senior management and the Audit and Risk Committee - Oportun's Cybersecurity Program includes ongoing monitoring, third-party audits, penetration tests, and a cyber incident response plan[237][238][239] - The Audit and Risk Committee oversees cybersecurity risk, with the CISO providing quarterly updates on the program[242][243] - As of the report date, no cybersecurity threats have materially affected the company's business, operations, or financial condition[244] Risk Management and Strategy - The Cybersecurity Program includes administrative and technical controls, policies, and management oversight to safeguard data and systems[237] - Third-party risk management involves pre-onboarding security evaluations and ongoing monitoring for service providers[238] Governance - The Audit and Risk Committee of the Board is responsible for cybersecurity risk oversight, with the CISO leading the program[242][243] Item 2. Properties Oportun leases its corporate headquarters, additional offices, and retail locations across the U.S, Mexico, and India - Corporate headquarters are in San Carlos, CA, with a lease expiring in February 2026[245] - Additional facilities are leased in California, Texas, Mexico, and India, alongside 129 physical retail locations[25][245] Item 3. Legal Proceedings The company is subject to various legal proceedings, none of which are currently expected to have a material adverse effect - The company is involved in legal proceedings and claims, but none are currently expected to have a material adverse effect[246] - Information on legal proceedings is incorporated by reference from Note 16 in the Consolidated Financial Statements[246] Item 4. Mine Safety Disclosures The company has no disclosures related to mine safety PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Oportun's common stock trades on Nasdaq, and the company does not currently pay cash dividends - Oportun's common stock trades on the Nasdaq Global Select Market under the symbol "OPRT" since September 26, 2019[249] - As of March 13, 2024, there were 119 registered stockholders of common stock[249] - The company has no plans to pay cash dividends in the foreseeable future, intending to retain all funds for operations[250] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $180.0 million in 2023 amid tightened underwriting and deteriorating credit quality Key Financial and Operating Metrics (2023 vs. 2022) | Metric | 2023 | 2022 | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | | Members | 2,224,302 | 1,877,260 | 18.5% | | Products | 2,387,745 | 2,006,245 | 19.0% | | Aggregate Originations | $1,813,058 | $2,922,871 | (38.0)% | | Portfolio Yield | 32.2% | 32.0% | 0.2% | | 30+ Day Delinquency Rate | 5.9% | 5.6% | 0.3% | | Annualized Net Charge-Off Rate | 12.2% | 10.1% | 2.1% | | Return on Equity | (37.8)% | (13.5)% | (24.3)% | | Adjusted Return on Equity | (26.1)% | 12.1% | (38.2)% | | Managed Principal Balance at End of Period | $3,182,148 | $3,406,981 | (6.7)% | | Owned Principal Balance at End of Period | $2,904,683 | $3,098,609 | (6.3)% | | Average Daily Principal Balance | $2,992,592 | $2,740,318 | 9.2% | Consolidated Statements of Operations (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | Total revenue | $1,056,919 | $952,545 | $104,374 | 11.0% | | Interest expense | $179,414 | $93,046 | $86,368 | 92.8% | | Net decrease in fair value | $(596,839) | $(218,842) | $(377,997) | * | | Net revenue | $280,666 | $640,657 | $(359,991) | (56.2)% | | Total operating expenses | $534,319 | $715,943 | $(181,624) | (25.4)% | | Net income (loss) | $(179,951) | $(77,744) | $(102,207) | (131.5)% | - Workforce optimization and streamlining operations in 2023 resulted in $21.3 million in expenses and the closure of 32 retail locations[269][270] Overview - Oportun is a CDFI-certified fintech offering AI-powered lending and savings products through multiple channels[258][259] - As of December 31, 2023, unsecured personal loans were offered in 4 states directly and 38 states via its Pathward, N.A. partnership[260][261] - The company is exploring strategic options for its credit card portfolio and sunsetting its embedded finance partnership with Sezzle[263][267] Key Financial and Operating Metrics Key Financial and Operating Metrics (2023 vs. 2022) | Metric | 2023 | 2022 | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | | Members | 2,224,302 | 1,877,260 | 18.5% | | Products | 2,387,745 | 2,006,245 | 19.0% | | Aggregate Originations | $1,813,058 | $2,922,871 | (38.0)% | | Portfolio Yield | 32.2% | 32.0% | 0.2% | | 30+ Day Delinquency Rate | 5.9% | 5.6% | 0.3% | | Annualized Net Charge-Off Rate | 12.2% | 10.1% | 2.1% | | Return on Equity | (37.8)% | (13.5)% | (24.3)% | | Adjusted Return on Equity | (26.1)% | 12.1% | (38.2)% | | Managed Principal Balance at End of Period | $3,182,148 | $3,406,981 | (6.7)% | | Owned Principal Balance at End of Period | $2,904,683 | $3,098,609 | (6.3)% | | Average Daily Principal Balance | $2,992,592 | $2,740,318 | 9.2% | - Member growth to 2.2 million (18.5% YoY) and Product growth to 2.4 million (19.0% YoY) were driven by marketing and new Set & Save activations[276][278] - Aggregate Originations decreased by 38.0% to $1.81 billion in 2023, due to tightened underwriting and a focus on existing members[279] - The 30+ Day Delinquency Rate increased to 5.9% and the Annualized Net Charge-Off Rate rose to 12.2% in 2023, attributed to seasoning of older loans and macroeconomic pressures[281][282][283] Seasonality - Oportun's business is highly seasonal, with Q4 typically being the strongest for originations and Q1 the weakest[291] - In Q4 2023, originations were lower than typical due to credit tightening, and a seasonal decline in credit performance is historically observed[291] Historical Credit Performance - The Annualized Net Charge-Off Rate increased to 12.2% in 2023 from 10.1% in 2022, driven by deterioration in older loan vintages[283][285] - In response to increased charge-offs, Oportun tightened credit underwriting standards in H2 2022 and H2 2023[283][285] Net Lifetime Loan Loss Rate by Annual Vintage (as of Dec 31, 2023) | Year of Origination | Dollar weighted average original term for vintage in months | Net lifetime loan losses as of December 31, 2023 as a percentage of original principal balance | | :------------------ | :-------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | 2007 | 9.3 | 7.7% | | 2008 | 9.9 | 8.9% | | 2009 | 10.2 | 5.5% | | 2010 | 11.7 | 6.4% | | 2011 | 12.3 | 6.2% | | 2012 | 14.5 | 5.6% | | 2013 | 16.4 | 5.6% | | 2014 | 19.1 | 6.1% | | 2015 | 22.3 | 7.1% | | 2016 | 24.2 | 8.0% | | 2017 | 26.3 | 8.2% | | 2018 | 29.0 | 9.8% | | 2019 | 30.0 | 10.8% | | 2020 | 32.0 | 8.7%* | | 2021 | 33.3 | 15.4%* | | 2022 | 37.8 | 9.5%* | Results of Operations Revenue (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :--------- | :--------- | :--------- | :--------- | | Interest income | $963,496 | $876,114 | $87,382 | 10.0% | | Non-interest income | $93,423 | $76,431 | $16,992 | 22.2% | | Total revenue | $1,056,919 | $952,545 | $104,374 | 11.0% | - Interest income increased by 10.0% to $963.5 million in 2023, driven by growth in Average Daily Principal Balance[294] - Non-interest income increased by 22.2% to $93.4 million, primarily due to higher interest earned on Set & Save accounts and fees from Pathward[295] Expenses (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | Interest expense | $179,414 | $93,046 | $86,368 | 92.8% | | Total net decrease in fair value | $(596,839) | $(218,842) | $(377,997) | * | | Technology and facilities | $219,406 | $216,120 | $3,286 | 1.5% | | Sales and marketing | $75,284 | $110,033 | $(34,749) | (31.6)% | | Personnel | $121,843 | $154,850 | $(33,007) | (21.3)% | | Outsourcing and professional fees | $45,401 | $67,630 | $(22,229) | (32.9)% | | General, administrative and other | $72,385 | $58,838 | $13,547 | 23.0% | | Goodwill impairment | — | $108,472 | $(108,472) | (100.0)% | | Income tax expense (benefit) | $(73,702) | $2,458 | $(76,160) | (3098.5)% | - Interest expense surged by 92.8% to $179.4 million, driven by a higher Average Daily Debt Balance and increased Cost of Debt[297] - Net decrease in fair value was $(596.8) million in 2023, primarily due to a $(109.5) million mark-to-market decrease and $363.8 million in charge-offs[300] - Sales and marketing expenses decreased by 31.6% to $75.3 million, reflecting reduced marketing spend and headcount[307] - Personnel expense decreased by 21.3% to $121.8 million, and Outsourcing and professional fees decreased by 32.9% to $45.4 million[308][310] - Income tax benefit of $73.7 million was recognized in 2023, compared to an expense of $2.5 million in 2022[314] Fair Value Estimate Methodology for Loans Receivable at Fair Value - Oportun uses a discounted cash flow model to estimate the fair value of its loans, considering yield, life, prepayments, charge-offs, and discount rate[318][319][320][321][322] - Fair value is a market-based measurement, and the model uses unobservable Level 3 inputs reflecting management's best estimates[370][382] Fair Value Premium (Discount) as a Percentage of Loan Principal Balance | Quarter Ended | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Fair value premium (discount) as a percentage of loan principal balance | 0.92% | 0.44% | 0.74% | 0.26% | 1.45% | 0.73% | 2.23% | 4.12% | | Discount Rate | 10.10% | 11.15% | 11.10% | 11.07% | 11.48% | 10.19% | 8.97% | 6.76% | Non-GAAP Financial Measures - Oportun uses non-GAAP measures like Adjusted EBITDA and Adjusted Net Income to provide insights into core business performance[325][326][330][335][337][339] Adjusted EBITDA (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Net income (loss) | $(179,951) | $(77,744) | | Adjustments (selected) | | | | Income tax expense (benefit) | $(73,702) | $2,458 | | Interest on corporate financing | $37,684 | $5,987 | | Depreciation and amortization | $42,978 | $35,182 | | Stock-based compensation expense | $17,997 | $27,620 | | Workforce optimization expenses | $22,485 | $1,882 | | Acquisition and integration related expenses | $27,640 | $29,682 | | Fair value mark-to-market adjustment | $109,548 | $(119,711) | | Adjusted EBITDA | $1,667 | $(10,267) | Adjusted Net Income and EPS (2023 vs. 2022) | Metric (in thousands, except per share) | 2023 | 2022 | | :-------------------------------------- | :--------- | :--------- | | Adjusted Net Income | $(124,105) | $69,438 | | Diluted adjusted weighted-average common shares outstanding | 36,875,950 | 33,251,272 | | Adjusted Earnings Per Share | $(3.37) | $2.09 | Adjusted Operating Efficiency and Return on Equity (2023 vs. 2022) | Metric | 2023 | 2022 | | :-------------------------- | :--------- | :--------- | | Operating Efficiency | 50.6% | 75.2% | | Adjusted Operating Efficiency | 42.7% | 57.3% | | Return on Equity | (37.8)% | (13.5)% | | Adjusted Return on Equity | (26.1)% | 12.1% | Liquidity and Capital Resources - Oportun funds operations through cash flows, securitizations, secured financings, and corporate financing[341][342] Cash and Cash Flows (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------------------------- | :--------- | :--------- | | Cash, cash equivalents and restricted cash | $206,016 | $203,817 | | Net cash provided by operating activities | $392,765 | $247,875 | | Net cash used in investing activities | $(286,181) | $(1,171,548) | | Net cash (used in) provided by financing activities | $(104,385) | $934,530 | - Net cash provided by operating activities increased to $392.8 million in 2023, while net cash used in investing activities decreased to $286.2 million[344][346] - Net cash used in financing activities was $(104.4) million in 2023, a shift from $934.5 million provided in 2022, due to principal payments on debt[347] - As of December 31, 2023, outstanding debt included $1.78 billion in asset-backed notes and $289.95 million in secured financing[348][350][388] - The company amended its financing facilities in late 2023 and early 2024 to defer principal payments and modify covenants[354][355][357][476][478][479][485] Critical Accounting Policies and Significant Judgments and Estimates - Critical accounting policies involve significant estimates, particularly for the fair value of loans held for investment[367][369][370][376] - Goodwill is tested for impairment annually; a $108.5 million non-cash impairment charge was recognized in 2022, with no charge in 2023[373][374] Recently Issued Accounting Pronouncements - ASU 2023-09 (Income Taxes) requires expanded disclosures for income tax rate reconciliation, effective for annual periods after December 15, 2024[449] - ASU 2023-07 (Segment Reporting) enhances disclosures about significant segment expenses, effective for fiscal years after December 15, 2023[450] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a "Smaller Reporting Company," Oportun is not required to provide these disclosures Item 8. Financial Statements and Supplementary Data This section presents Oportun's audited consolidated financial statements and the independent auditor's report - Deloitte & Touche LLP issued an unqualified opinion on Oportun's consolidated financial statements and internal controls for the year ended December 31, 2023[377][378][551][552] - The fair value estimate of unsecured personal loans was identified as a critical audit matter due to the subjective nature of its valuation model inputs[382][383] Consolidated Balance Sheets (as of Dec 31, 2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | Assets | | | | Cash and cash equivalents | $91,187 | $98,817 | | Restricted cash | $114,829 | $105,000 | | Loans receivable at fair value | $2,962,352 | $3,175,449 | | Capitalized software and other intangibles, net | $114,735 | $139,801 | | Total assets | $3,411,888 | $3,613,695 | | Liabilities and stockholders' equity | | | | Secured financing | $289,951 | $317,568 | | Asset-backed notes at fair value | $1,780,005 | $2,387,674 | | Asset-backed borrowings at amortized cost | $581,468 | — | | Acquisition and corporate financing | $258,746 | $222,879 | | Total liabilities | $3,007,484 | $3,066,096 | | Total stockholders' equity | $404,404 | $547,599 | | Total liabilities and stockholders' equity | $3,411,888 | $3,613,695 | Consolidated Statements of Operations (2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Total revenue | $1,056,919 | $952,545 | | Interest expense | $179,414 | $93,046 | | Net decrease in fair value | $(596,839) | $(218,842) | | Net revenue | $280,666 | $640,657 | | Total operating expenses | $534,319 | $715,943 | | Income (loss) before taxes | $(253,653) | $(75,286) | | Income tax expense (benefit) | $(73,702) | $2,458 | | Net income (loss) | $(179,951) | $(77,744) | | Basic earnings (loss) per share | $(4.88) | $(2.37) | | Diluted earnings (loss) per share | $(4.88) | $(2.37) | Consolidated Statements of Cash Flow (2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $392,765 | $247,875 | | Net cash used in investing activities | $(286,181) | $(1,171,548) | | Net cash (used in) provided by financing activities | $(104,385) | $934,530 | | Net increase in cash and cash equivalents and restricted cash | $2,199 | $10,857 | | Cash and cash equivalents and restricted cash, end of period | $206,016 | $203,817 | Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP provided an unqualified opinion on the consolidated financial statements and internal controls of Oportun as of December 31, 2023[377][378][551][552] - The fair value estimate of unsecured personal loans was identified as a critical audit matter due to the subjective nature of its valuation model inputs[382][383] Consolidated Balance Sheets Consolidated Balance Sheets (as of Dec 31, 2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | Assets | | | | Cash and cash equivalents | $91,187 | $98,817 | | Restricted cash | $114,829 | $105,000 | | Loans receivable at fair value | $2,962,352 | $3,175,449 | | Capitalized software and other intangibles, net | $114,735 | $139,801 | | Right of use assets - operating | $21,105 | $30,448 | | Other assets | $107,680 | $64,180 | | Total assets | $3,411,888 | $3,613,695 | | Liabilities and stockholders' equity | | | | Secured financing | $289,951 | $317,568 | | Asset-backed notes at fair value | $1,780,005 | $2,387,674 | | Asset-backed borrowings at amortized cost | $581,468 | — | | Acquisition and corporate financing | $258,746 | $222,879 | | Lease liabilities | $28,376 | $37,947 | | Other liabilities | $68,938 | $100,028 | | Total liabilities | $3,007,484 | $3,066,096 | | Common stock, additional paid-in capital | $584,555 | $547,799 | | Retained earnings (accumulated deficit) | $(173,849) | $6,102 | | Total stockholders' equity | $404,404 | $547,599 | | Total liabilities and stockholders' equity | $3,411,888 | $3,613,695 | Consolidated Statements of Operations Consolidated Statements of Operations (2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Interest income | $963,496 | $876,114 | | Non-interest income | $93,423 | $76,431 | | Total revenue | $1,056,919 | $952,545 | | Interest expense | $179,414 | $93,046 | | Net decrease in fair value | $(596,839) | $(218,842) | | Net revenue | $280,666 | $640,657 | | Technology and facilities | $219,406 | $216,120 | | Sales and marketing | $75,284 | $110,033 | | Personnel | $121,843 | $154,850 | | Outsourcing and professional fees | $45,401 | $67,630 | | General, administrative and other | $72,385 | $58,838 | | Goodwill impairment | — | $108,472 | | Total operating expenses | $534,319 | $715,943 | | Income (loss) before taxes | $(253,653) | $(75,286) | | Income tax expense (benefit) | $(73,702) | $2,458 | | Net income (loss) | $(179,951) | $(77,744) | | Basic earnings (loss) per share | $(4.88) | $(2.37) | | Diluted earnings (loss) per share | $(4.88) | $(2.37) | | Basic weighted average common shares outstanding | 36,875,950 | 32,825,772 | | Diluted weighted average common shares outstanding | 36,875,950 | 32,825,772 | Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Changes in Stockholders' Equity (2023 vs. 2022) | (in thousands, except share data) | Balance - Jan 1, 2023 | Issuance of common stock upon exercise of stock options, net of shares withheld | Stock-based compensation expense | Vesting of restricted stock units, net of shares withheld | Issuance of warrants to purchase common stock in connection with debt financing | Net loss | Balance - Dec 31, 2023 | | :-------------------------------- | :-------------------- | :---------------------------------------------------------------------------- | :----------------------------- | :------------------------------------------------------- | :---------------------------------------------------------------------------- | :--------- | :--------------------- | | Common Stock (Shares) | 33,354,607 | 37,314 | - | 1,077,132 | - | - | 34,469,053 | | Common Stock (Par Value) | $7 | - | - | - | - | - | $7 | | Additional Paid-in Capital | $547,799 | $(46) | $20,024 | $(2,653) | $19,431 | - | $565,124 | | Warrants (Shares) | - | - | - | - | 4,193,453 | - | 4,193,453 | | Warrants (Additional Paid-in Capital) | - | - | - | - | $19,431 | - | $19,431 | | Retained Earnings (Accumulated Deficit) | $6,102 | - | - | - | - | $(179,951) | $(173,849) | | Treasury Stock | $(6,309) | - | - | - | - | - | $(6,309) | | Total Stockholders' Equity | $547,599 | $(46) | $20,024 | $(2,653) | $19,431 | $(179,951) | $404,404 | Consolidated Statements of Cash Flow Consolidated Statements of Cash Flow (2023 vs. 2022) | (in thousands) | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | Cash flows from operating activities | | | | Net loss | $(179,951) | $(77,744) | | Net cash provided by operating activities | $392,765 | $247,875 | | Cash flows from investing activities | | | | Originations and purchases of loans held for investment | $(1,580,134) | $(2,762,828) | | Repayments of loan principal | $1,322,601 | $1,396,896 | | Capitalization of system development costs | $(31,261) | $(48,892) | | Net cash used in investing activities | $(286,181) | $(1,171,548) | | Cash flows from financing activities | | | | Borrowings under secured financing | $245,700 | $1,972,000 | | Repayments of secured financing | $(274,751) | $(2,050,000) | | Borrowings under asset-backed notes at fair value | — | $1,262,059 | | Repayments of asset-backed notes at fair value | $(707,619) | $(232,675) | | Borrowings under asset-backed borrowings at amortized cost | $626,405 | — | | Net cash (used in) provided by financing activities | $(104,385) | $934,530 | | Net increase in cash and cash equivalents and restricted cash | $2,199 | $10,857 | | Cash and cash equivalents and restricted cash, end of period | $206,016 | $203,817 | Notes to the Consolidated Financial Statements - Oportun operates as a single reportable segment, with the U.S. dollar as its functional currency for foreign subsidiaries[399][403] - As of December 31, 2023, 46% of the owned principal balance was from California and 26% from Texas, indicating geographic concentration risk[404] - The company elected the fair value option for all loans receivable and asset-backed notes, with changes impacting Net Revenue[408][424] - Total interest income increased by 10.0% to $963.5 million in 2023, while non-interest income increased by 22.2% to $93.4 million[503][504] - As of December 31, 2023, Oportun had federal net operating loss carryforwards of $189.1 million and state NOLs of $199.0 million[509] - The company issued warrants to purchase 4,193,453 shares of common stock in connection with debt financing in 2023[490] - In February 2024, Oportun issued $199.5 million in two-year asset-backed notes with a weighted average yield of 8.600%[542] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - As of December 31, 2023, Oportun's disclosure controls and procedures were effective, ensuring timely and accurate reporting[545] - Management assessed internal control over financial reporting as effective, based on COSO criteria, and received an unqualified audit opinion[547][548][551] - No material changes in internal control over financial reporting occurred during Q4 2023[549] Item 9B. Other Information The company reported no other information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reported no disclosures regarding foreign jurisdictions that prevent inspections GLOSSARY This section provides definitions for key terms and abbreviations used throughout the report PART III Item 10. Directors, Executive Officers and Corporate Governance Information is incorporated by reference from the 2024 Annual Meeting of Stockholders proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement[563] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2024 proxy statement - Information on executive compensation is incorporated by reference from the 2024 Proxy Statement[564] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2024 proxy statement - Information on security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement[565] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions and director independence is incorporated by reference from the 2024 proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement[566] Item 14. Principal Accountant Fees and Services Information regarding accountant fees and services is incorporated by reference from the 2024 proxy statement - Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement[567] PART IV Item 15. Exhibit and Financial Statement Schedules This section lists the consolidated financial statements and references the Exhibit Index - The consolidated financial statements are included in Part II, Item 8[569] - All other financial statement schedules are omitted as not required or inapplicable[569] Item 16. Form 10-K Summary The company does not provide a Form 10-K summary in this section Exhibit Index This section provides a comprehensive list of exhibits filed with the Form 10-K Signatures This section contains the required signatures certifying the filing of the Annual Report - The report is signed by Jonathan Coblentz (Chief Financial Officer and Chief Administrative Officer) on March 15, 2024[582] - Signatures include Raul Vazquez (President, CEO, and Director), Jonathan Coblentz (CFO and CAO), and other key officers and directors[586][587]