What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-09 · 284 added, 342 removed, 462 unchanged (58% of the section changed)

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Forward-Looking Statements

This report contains forward-looking statements, within the meani ng of the Private Securities Litigation Reform Act of 1995, Sec tion 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition.

This report contains forward-looking statements, within the meani ng of the Private Securities Litigation Reform Act of 1995, Sec tion 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition.

Any statements contained herein that are not statements of historical facts are forward-looking statements.

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• our expectations regarding the effect of fair value mark-to-market adjustments on our loan portfolio and asset-backed notes;

• our expectations and management of future growth, including expanding our markets served, member base and product and service offerings, including our digital banking services;

• the successful integration of Hello Digit, Inc.

("Digit") with our business;

• our expectations and management of future growth, including expanding our markets served, member base and product and service offerings, and realizing the benefits and synergies from acquisitions;

• our ability to successfully adjust our proprietary credit risk models and products in response to changing macroeconomic conditions and fluctuations in the credit market;

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• our expectation regarding the transfer of certain loans receivable;

• our ability to realize the expected benefits from the reduction in workforce and other streamlining measures announced in February, May, and November 2023, including our estimate of the charges and expenditures, and the timing thereof;

• our ability to realize the expected benefits from reductions in workforce and other streamlining measures, including our estimate of the changes and expenditures, and the timing thereof;

• our plans to review strategic options for our credit card portfolio;

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• our ability to maintain or expand our relationships with our current partners, including bank partners, and our plans to acquire additional partners using our Lending as a Service model;

• our ability to provide an attractive and comprehensive user experience through our recently launched mobile application, the Oportun Mobile App, and further our position as a leading fintec h;

• our ability to provide an attractive and comprehensive user experience through our recently launched mobile application, the Oportun Mobile App, and further our position as a leading fintec h company;

• our ability to maintain the terms on which we lend to our borrowers;

• our ability to manage fraud risk;

• our ability to develop our technology, including our artificial intelligence (“A.I.”) enabled digital platform;

• our ability to effectively secure and maintain the confidentiality of the information provided and utilized across our systems;

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We qualify all of our forward-looking statements by these cautionary statements.

As used in this report, the terms “Oportun Financial Corporation,” “Oportun,” “Company,” “we,” “us,” and “our” mean Oportun Financial Corporation and its subsidiaries unless the context indicates otherwise.

We are a mission-driven fintech that puts our members’ financial goals within reach.

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Department of the Treasury since 2009.

We offer access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I.

We offer access to a comprehensive suite of financial products, offered either directly or through partners, including lending, and savings

Our financial products allow us to meet our members where they are and assist them with their overall financial health, resulting in opportunities to present multiple relevant products to our members.

Our credit products include personal loans, secured personal loans

and credit cards.

Our digital banking products include automated savings, long-term investing and retirement savings.

Consumers are able to become members and access our products through our Oportun Mobile App and the Oportun.com website, which are our primary channels for onboarding and serving members.

As of September 30, 2023 our personal loan products are also available over the phone or through our 170 Oportun retail locations, and at 363 of our Lending as a Service partner locations.

Our credit products include unsecured and secured personal loans.

We also offer automated savings, through our Set & Save platform.

Consumers are able to become members and access our products through the Oportun Mobile App and the Oportun.com website, which are our primary channels for onboarding and serving members.

As of March 31, 2024 our personal loan products are also available over the phone or through our 129 retail locations, and 426 of our Lending as a Service partner locations.

Credit Products

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We charge fixed interest rates on our loans, which vary based on the amount disbursed and applicable state law, with a cap of 36% annual percentage rate (“APR”) in all cases.

As of September 30, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 40 months and 32.6%, respectively.

The average loan size for loans we originated during the three months ended September 30, 2023 was $4,036.

Our loans do not have prepayment penalties or balloon payments, and typically range in size from $300 to $10,000 with terms of 12 to 54 months.

Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of their income.

As of March 31, 2024, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 41 months and 33.2%, respectively.

The average loan size for loans we originated during the three months ended March 31, 2024 was $2,993.

Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $10,000 with terms of 12 to 54 months.

Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of income.

As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria.

As of September 30, 2023, we originate unsecured personal loans in 6 states through state licenses and in 36 states through our partnership with Pathward, N.A.

(formerly known as MetaBank, N.A.).

As of March 31, 2024, we originated unsecured personal loans in 4 states through state licenses and in 39 states through our partnership with Pathward, N.A.

Secured Personal Loans - In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans.

Our secured personal loans range in size from $2,525 to $18,500 with terms ranging from 24 to 64 months.

The average loan size for secured personal loans we originated during the three months ended September 30, 2023 was $7,190.

As of September 30, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 51 months and 28.6%, respectively.

The average loan size for secured personal loans we originated during the three months ended March 31, 2024 was $6,234.

As of March 31, 2024, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 52 months and 29.1%, respectively.

As part of our underwriting process, we evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria.

Our secured personal loans are currently offered in California and we are in the process of considering expansion into other states.

Credit Cards - We lau nched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019, and offer credit cards in 44 states as of September 30, 2023 .

Our secured personal loans are currently offered in California and we are in the process of expanding into other states.

Credit Cards - We lau nched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019, and offered credit cards in 44 states as of March 31, 2024 .

Credit lines on our credit cards range in size from $300 to $3,000 with an APR between 24.9% to 29.9%.

The average APR of the outstanding credit card receivables was 29.8% as of September 30, 2023 .

The average credit line for credit cards activated during the three months ended September 30, 2023 was $990.

Digital Banking Products

Savings and Investing – Our Savings product is designed to understand a member’s cash flows and save a calculated amount on a regular basis to effortlessly achieve savings goals.

Our Savings product utilizes mac hine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner.

Members integrate their existing bank accounts into the platform.

The average APR of the outstanding credit card receivables was 29.8% as of March 31, 2024 .

The average credit line for credit cards activated during the three months ended March 31, 2024 was $998.

On November 6, 2023, the Company announced that it was exploring strategic options for our credit card portfolio.

Oportun Savings

Savings – Our Savings product, Set & Save, is designed to understand a member’s cash flows and save the right amount on a regular basis to effortlessly achieve savings goals.

Set & Save utilizes mac hine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner.

Members integrate their existing bank accounts into the platform or they can make the Set & Save product their primary banking relationship through a bank partner.

After one year using the automated savings product, members have been able to increase their liquid savings by approximately 50%.

Since 2015, we have helped members save more than $9.9 billion.

Our investment products are a longer-term savings solution via an A.I.-driven portfolio allocation into low-cost investments based upon risk-tolerance.

Our long-term investment solutions automatically allocate our members' savings into low-cost risk-adjusted portfolios held in brokerage accounts or tax-advantaged IRAs.

Since 2020, our members have invested more than $85.8 million into long-term goals through low-cost ETF portfolios.

The investment products include a general investing account and a retirement account for our members’ longer term goals, utilizing smart recommendations to invest savings in risk-adjusted portfolios.

On November 6, 2023, we announced we are reviewing strategic options for our credit card portfolio, as well as discontinuing our investing and retirement products, in order to strategically realign our resources to focus on other products, as well as to reduce our expenses and simplify our business.

The funds in these savings and investing accounts are owned by our members and are not the assets of the Company.

Since 2015, our savings product has helped members save more than $10.5 billion.

The funds in these savings accounts are owned by members of our products and are not the assets of the Company.

Therefore, these funds are not included in the Condensed Consolidated Balance Sheets (Unaudited) .

Lending as a Service

Beyond our core direct-to-consumer lending business, we believe that we can leverage our proprietary credit scoring and underwriting model to partner with other consumer brands and expand our member base.

Beyond our core direct-to-consumer lending business, we leverage our proprietary credit scoring and underwriting model to partner with other consumer brands and expand our member base.

Our first Lending as a Service strategic partner was DolEx Dollar Express, Inc.

with an initial launch in December 2020.

In October of 2021, we launched another Lending as a Service partnership with Barri Financial Group in select locations.

We recently re-launched our Lending as a Service program with a new streamlined Lead Generation program through which we are able to offer loans through our existing channels by phone, online, or in our retail locations.

In October of 2021, we launched another Lending as a Service partnership with Barri Financial Group in select locations (with both DolEx Dollar Express, Inc.

and Barri Financial Group now consolidated into a single company “DolFinTech”).

We recently re-launched our Lending as a Service program with a new streamlined Lead Generation program through which DolFinTech provides us with information for potential members and we are able to offer loans through our existing channels by phone, online, or in our retail locations.

Oportun originates, underwrites, and services the loan.

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To fund our growth at a low and efficient cost, we have built a diversified and well-established capital markets funding program, which allows us to partially hedge our exposure to rising interest rates or credit spreads by locking in our interest expense for up to three years.

Over the past ten years, we have executed 20 bond offerings in the asset-backed securities market, the last 17 of which include tranches that have been rated investment grade.

Over the past ten years, we have executed 21 bond offerings in the asset-backed securities market, the last 18 of which include tranches that have been rated

investment grade.

We have generally issued two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations at a fixed Cost of Debt.

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Workforce Optimization and Streamlining Operations

On February 9, 2023 and May 8, 2023, we announced a series of personnel and other cost saving measures to reduce expenses and streamline efficiency, including reducing the size of our corporate staff by approximately 10% and 19%, respectively.

In relation to these and other personnel related activities, the income statement impact of $0.3 million and $14.4 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2023, respectively.

On November 6, 2023, we announced a series of personnel and other cost saving measures to reduce expenses and streamline efficiency, including reducing the size of our corporate staff by approximately 18%.

We routinely evaluate the balance of investment and productivity of our retail locations.

During the second quarter of 2023, we made the decision to close 32 retail locations and reduce a portion of the workforce who manage and operate these retail locations.

The income statement impact of $0.2 million and $1.1 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2023, respectively.

These amounts included expenses related to the retail location closures and all severance and benefits-related costs.

While we do not expect any significant additional expenses to be incurred related to these closures, we are continually evaluating the performance of retail and partner locations.

During the first quarter of 2022, we made the decision to close 27 retail locations in April 2022 and reduce a portion of the workforce who manage and operate these retail locations.

The income statement impact of $0.2 million and $1.9 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2022, respectively .

During the first quarter of 2024, we made the decision to close 39 retail locations and reduce a portion of the workforce who manage and operate these retail locations.

The income statement impact of $0.8 million and was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2024, respectively.

These amounts included expenses related to the retail location closures and all severance and benefits-related costs.

While we do not expect any significant additional expenses to be incurred related to these closures, we are continually evaluating the performance of retail and partner locations.

During the first quarter of 2023, we announced a series of personnel and other cost savings measures to reduce expenses and streamline efficiency.

In relation to these and other personnel related activities, the income statement impact of $6.8 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2023, respectively.

Key Financial and Operating Metrics

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As of or for the Three Months

Ended September 30,

As of or for the Nine Months

Ended September 30,

Ended March 31,

(in thousands of dollars) 2024 2023

Key Financial and Operating Metrics

Members 2,098,172 1,858,335 2,098,172 1,858,335

Products 2,259,464 1,981,310 2,259,464 1,981,310

Aggregate Originations $ 338,216 $ 407,961

30+ Day Delinquency Rate

Portfolio Yield

32.5 % 31.4 %

30+ Day Delinquency Rate

Annualized Net Charge-Off Rate

12.0 % 12.1 %

Return on Equity (18.6) % (70.1) % (37.3) % (16.1) %

Adjusted Return on Equity (15.5) % 5.6 % (28.0) % 15.0 %

Other Metrics

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See “ Glossary ” at the end of Part II of this report for formulas and definitions of our key performance metrics.

We define Members as borrowers with an outstanding or successfully paid off loan, originated by us or under a bank partnership program that we service, or individuals who have been approved for a credit card issued under a bank partnership program.

Members also include individuals who have signed-up to use or are using any of our Savings, Direct, Investing and/or Retirement products.

We view Members as an indication of growth of our business and our ability to establish long term relationships with the users of our products.

Member growth is generally an indicator of future revenue, but is not directly correlated with revenue, since not all Members who sign up for one of our products fully utilize or continue to use our products.

Members as of September 30, 2023 grew to 2.1 million, as compared to 1.9 million as of September 30, 2022.

This increase was due to the success in our marketing efforts.

New members seeking our personal loan and credit card products are discovering and also activating the Savings product via the Oportun Mobile App.

Products refers to the aggregate number of personal loans and/or credit card accounts that our Members have had or been approved for that have been originated by us or through one of our bank partners.

Products also include the aggregate number of digital banking products we offer as a result of our acquisition of Digit, including Savings, Direct, Investing and Retirement, that our Members use or have signed-up to use.

We view Products as an indicator of the effectiveness of our member acquisition efforts and multiproduct adoption.

Products as of September 30, 2023 grew to 2.3 million as compared to 2.0 million as of September 30, 2022.

Aggregate Originations

Aggregate Originations decreased to $482.7 million for the three months ended September 30, 2023 from $634.2 million for the three months ended September 30, 2022, representing a 23.9% decrease.

The decrease is primarily driven by a decrease in the number of loans originated and the decrease in average loan size.

We originated 121,431 and 153,680 loans for the three months ended September 30, 2023 and 2022, respectively.

The decrease is primarily due to actions taken to focus lending towards existing members to improve credit outcomes and lower marketing spend.

In July 2022, we took numerous actions to improve the credit performance on newly originated loans, including significantly tightening our underwriting standards for all borrowers.

Aggregate Originations decreased to $1,375.8 million for the nine months ended September 30, 2023 from $2,312.5 million for the nine months ended September 30, 2022, representing a 40.5% decrease.

The decrease is primarily driven by a decrease in the number of loans originated .

We originated 339,493 and 623,664 loans for the nine months ended September 30, 2023 and 2022, respectively.

The decrease is primarily due to actions taken to focus lending towards existing members to improve credit outcomes and lower marketing spend.

Further, given macroeconomic factors, such as inflation, our borrowers are facing higher costs for food, fuel and rent.

In July 2022, we took numerous actions to improve the credit performance on newly originated loans, including significantly tightening our underwriting standards for all borrowers.

The decrease in number of loans originated was partially offset by growth in average loan size due to a focus on returning members.

Aggregate Originations decreased to $338.2 million for the three months ended March 31, 2024 from $408.0 million for the three months ended March 31, 2023, representing a 17.1% decrease.

The decrease is primarily driven by a $115.8 million decrease driven by a reduction in average loan size from $4,075 to $2,918 for the three months ended March 31, 2023 and March 31, 2024, respectively, which was partially offset by a $46.1 million increase as a result of a 15.8 thousand increase in the number of loans originated.

We originated 115,912 and 100,122 loans for the three months ended March 31, 2024 and 2023, respectively.

The increase is primarily due to increased approval rates and additional marketing efforts to new members.

Portfolio Yield

Portfolio yield increased to 32.5% for the three months ended March 31, 2024, from 31.4% for the three months ended March 31, 2023, primarily attributable to higher fees on loans originated through our bank partnership.

30+ Day Delinquency Rate

Our 30+ Day Delinquency Rate was 5.5% and 5.4% as of September 30, 2023 and 2022, respectively.

The increase reflects the higher mix of first-time borrowers and the return to pre-COVID-19 pandemic underwriting criteria in late 2021 and early 2022.

In mid-2022, we took numerous actions to improve the credit performance on newly originated loans;

including significantly tightening our underwriting standards for all borrowers, particularly for higher risk digital marketing channels, and adjusting loan size based on member free cash flow.

We also focused lending towards existing and returning members to address rising delinquencies.

Our 30+ Day Delinquency Rate was 5.2% and 5.5% as of March 31, 2024 and 2023, respectively.

The decrease was primarily due to improved credit quality as a result of our 2023 efforts to tighten credit standards throughout the second half of 2023 after significantly tightening underwriting standards in 2022.

Annualized Net Charge-Off Rate

Annualized Net Charge-Off Rate for the three months ended September 30, 2023 and 2022 was 11.8% and 9.8%, respectively.

Annualized Net Charge-Off Rate for the nine months ended September 30, 2023 and 2022 was 12.1% and 9.0%, respectively.

The increase is primarily driven by credit deterioration in our back book and deterioration of the early stage vintages post initial tightening.

Further, given macroeconomic factors, such as inflation, our borrowers are facing higher costs for food, fuel and rent.

In July 2022, we took numerous actions to improve the credit performance on newly originated loans, including significantly tightening our underwriting standards for all borrowers, particularly for higher risk digital marketing channels, and adjusting loan size based on member free cash flow.

Since July 2022, we have continued to take additional credit tightening actions.

Annualized Net Charge-Off Rate for the three months ended March 31, 2024 and 2023 was 12.0% and 12.1%, respectively.

Net Charge-offs for the three months ended March 31, 2024 decreased primarily due to our efforts to tighten our credit underwriting standards and focus lending towards existing and returning members to improve credit outcomes.

Beginning in July 2022, we took numerous actions to improve the credit performance on newly originated loans, including significantly tightening our underwriting standards for all borrowers, particularly for higher risk digital marketing channels, and adjusting loan size based on member free cash flow.

We also focused lending towards existing and returning members to improve credit outcomes as existing and returning members historically have had lower loss rates.

We refer to the post-July 2022 underwriting vintages as our front book and the originations made prior to our significant credit-tightening in July 2022 we refer to as the back book.

As the average life of our loans is only one year, we expect the back book to become less impactful on our losses by the end of 2023.

Return on Equity and Adjusted Return on Equity

For the three months ended September 30, 2023 and 2022, Return on Equity was (18.6)% and (70.1)%, respectively, and Adjusted Return on Equity was (15.5)% and 5.6%, respectively, For the nine months ended September 30, 2023 and 2022, Return on Equity was (37.3)% and (16.1)%, respectively, and Adjusted Return on Equity was (28.0)% and 15.0%, respectively.

The increase in Return on Equity for the three months ended September 30, 2023 is primarily due to higher net income.

Net income was higher primarily due to a 53% decrease in total operating expenses and increase in total revenue partially offset by a net decrease in fair value for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

The decrease in Return on Equity for the nine months ended September 30, 2023 was primarily due to lower net income.

Net income was lower primarily due to net decrease in fair value and higher cost of funds, partially offset by increased revenue and decreased operating expenses for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease in Adjusted Return on Equity for the three and nine months ended September 30, 2023 was primarily due to lower Adjusted Net Income.

Adjusted Net Income was lower primarily due to increased fair value of our asset-backed notes, higher credit losses, and higher cost of funds, partially offset b y i ncreased revenue and decreased operating expenses for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022.

For a reconciliation of Return on Equity to Adjusted Return on Equity, see “Non–GAAP Financial Measures.”

As the average life of our loans is only one year, we expect the back book to become less impactful on our losses throughout 2024.

We anticipate our Annualized Net Charge-Off Rate will decline during 2024 as our back book of loans amortize down.

Historical Credit Performance

Our Annualized Net Charge-Off Rate ranged between 7% and 9% from 2011 to 2019 and was 9.8% in 2020, a modest variance above this range during the COVID-19 pandemic.

Our Annualized Net Charge-off Rate ranged between 7% and 10.1% from 2014 to 2022.

Even in 2020, during the pandemic, our Annualized Net Charge-off Rate was 9.8%.

Due to credit tightening in response to the COVID-19 pandemic and government stimulus payments, our Annualized Net Charge-Off Rate decreased to 6.8% in 2021.

Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022.

In response to this increase, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes.

Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due and charge-off a credit card account when it is 180 days contractually past due.

*Numbers shown reflect year-to-date amounts for the nine months ended September 30, for the indicated fiscal year.

Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due to an increasing interest rate environment, inflation and the cessation of COVID-19 stimulus payments and a higher mix of first-time borrowers in 2021 and the first half of 2022.

In response to this increase, in the second half of 2022 and continuing throughout 2023, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes.

Continued elevated charge-offs for the three months ended March 31, 2024 is primarily due to deterioration in our back book and deterioration of the vintages originated in the second half of 2022 prior to further tightening underwriting standards for returning members in December 2022.

For the three months ended March 31, 2024, the back book continued to season and made-up 40% of gross charge-offs while only making up approximately 16% of the loans receivable (excluding credit cards).

In addition, the increase was partially caused by decreasing originations which caused receivables to decrease throughout 2023 and first quarter of 2024 as we continued to tighten credit standards throughout the second half of 2023.

*Numbers shown reflect year-to-date amounts for the three months ended March 31, for the indicated fiscal year.

In addition to monitoring our loss and delinquency performance on an owned portfolio basis, we also monitor the performance of our loans by the period in which the loan was disbursed, generally years or quarters, which we refer to as a vintage.

We calculate net lifetime loan loss rate by vintage as a percentage of original principal balance.

Net lifetime loan loss rates equal the net lifetime loan losses for a given year through September 30, 2023 divided by the total origination loan volume for that year.

The below chart and table show our net lifetime loan loss rate for each annual vintage of our personal loan product since we began lending in 2006, excluding loans originated from July 2017 to August 2020 under a loan program for borrowers who did not meet the qualifications for our core loan origination program.

Net lifetime loan loss rates equal the net lifetime loan losses for a given year through March 31, 2024 divided by the total origination loan volume for that year.

The below chart and table show our net lifetime loan loss rate for each annual vintage of our personal loan product since 2014, excluding loans originated from July 2017 to August 2020 and from December 2023 under a loan program for borrowers who did not meet the qualifications for our core loan origination program.

100% of those loans were sold pursuant to a whole loan sale agreement.

We were able to stabilize cumulative net loan losses after the financial crisis that started in 2008.

We even achieved a net lifetime loan loss rate of 5.5% during the peak of the recession in 2009.

Cumulative net lifetime loan losses for the 2015, 2016, 2017, and 2018 vintages increased partially due to the delay in tax refunds in 2017 and 2019, the impact of natural disasters such as Hurricane Harvey, and the longer duration of the loans.

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The 2021 vintage is experiencing higher charge-offs than prior vintages primarily due to a higher percentage of loan disbursements to new members.

We tightened credit, reduced loan size and loan term, and began reducing loan volumes to new and returning members in the third quarter of 2022 and reduced significantly in the second half of 2022.

We refer to the post-July 2022 underwriting vintages as our front book and the originations made prior to our significant credit-tightening in July 2022 we refer to as the back book.

As the average life of our loans is only one year, we expect the back book to become less impactful on our losses by the end of 2023.

Net Lifetime Loan Loss Rates on vintages originated since significant July 2022 credit tightening are performing near comparable vintages originated in 2019.

First Payment Defaults on newly-originated loans continue to come in at pre-pandemic 2019 levels.

We regard First Payment Defaults to be an early indicator of credit performance as the outstanding principal balance of loans that have their first payment past due are regarded as more likely to default and result in a charge-off.

First Payment Defaults are calculated as the principal balance of any loan whose first payment becomes 30 days past due, divided by the aggregate principal balance of all loans originated during that same week.

We have tightened credit, reduced loan size and loan term, and began reducing loan volumes to new and returning members in the third quarter of 2022 and reduced significantly in the second half of 2022.

We refer to the post-July 2022 underwriting vintages as our front book and we refer to the originations made prior to our significant credit-tightening in July 2022 as the back book.

Net Lifetime Loan Loss Rates on vintages originated since significant July 2022 credit tightening are performing near comparable vintages originated in 2019 for the first 7 to 9 months on books but start to diverge due to underperformance of larger loans relative to 2019 and due to longer average term length.

Due to macroeconomic factors, such as inflation, our borrowers are facing higher costs for food, fuel, and rent that are also putting pressure on our members.

We employ collection strategies and tools to help customers make ongoing payments against their loans, with new efforts launched that:

expanded the frequency and content of our digital and telephony communications;

broadened eligibility for collection tools that help customers address payment difficulties;

and eased customer access to those collection tools via new online and mobile app self-enrollment capability, supported by a new collections strategy system that enables centralized, faster, and more-targeted application of strategies.

Year of Origination

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Dollar weighted average original term for vintage in months 19.1 22.3 24.2 26.3 29.0 30.0 32.0 33.3 37.8 39.2

Net lifetime loan losses as of September 30, 2023 as a percentage of original principal balance 7.7% 8.9% 5.5% 6.4% 6.2% 5.6% 5.6% 6.1% 7.1% 8.0% 8.2% 9.8% 10.7% 8.6%* 14.3%* 6.3%*

Outstanding principal balance as of September 30, 2023 as a percentage of original amount disbursed —% —% —% —% —% —% —% —% —% —% —% —% 0.8% 2.3% 14.3% 52.8%

Net lifetime loan losses as of March 31, 2024 as a percentage of original principal balance 6.1% 7.1% 8.0% 8.2% 9.8% 10.8% 8.9%* 16.4%* 12.4%* 0.0%*

Outstanding principal balance as of March 31, 2024 as a percentage of original amount disbursed —% —% —% —% —% 0.4% 1.3% 11.7% 47.6% 91.0%

* Vintage is not yet fully mature from a loss perspective.

Our quarterly results of operations may not necessarily be indicative of the results for the full year or the results for any future periods.

We experience significant seasonality in demand for our loans, which is generally lower in the first quarter.

The seasonal slowdown is primarily attributable to high loan demand around the holidays in the fourth quarter and the general increase in our members’ available cash flows in the first quarter, including cash received from tax refunds, which temporarily reduces their borrowing needs.

Results of Operations

The following tables and related discussion set forth our Condensed Consolidated Statements of Operations (Unaudited) for each of the three and nine months ended September 30, 2023 and 2022.

Three Months Ended September 30, Nine Months Ended September 30,

The following tables and related discussion set forth our Condensed Consolidated Statements of Operations (Unaudited) for each of the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(in thousands of dollars) 2024 2023

11 unchanged sentences

General, administrative and other 11,777 19,162

Goodwill impairment — 108,472 — 108,472

Total operating expenses 109,642 146,338

Income before taxes (37,370) (112,363) (196,374) (67,365)

Income tax expense (benefit) (16,232) (6,536) (58,247) 1,956

Loss before taxes (30,475) (141,533)

Income tax benefit (4,036) (39,443)

Net loss $ (26,439) $ (102,090)

1 unchanged sentence

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

8 unchanged sentences

Interest income.

Total interest income increased by $11.1 million, or 4.8%, from $232.1 million for the three months ended September 30, 2022 to $243.3 million for the three months ended September 30, 2023.

This increase was primarily attributable to growth in our Average Daily Principal Balance, which increased from $2.90 billion for the three months ended September 30, 2022 to $2.97 billion for the three months ended September 30, 2023, an increase of 2.2%.

The increase was further enhanced by an increase in portfolio yield of 81 basis points in the three months ended September 30, 2023 compared to the three months ended September 30, 2022 driven by an increase in origination fees.

Total interest income increased by $89.3 million, or 14.1%, from $632.0 million for the nine months ended September 30, 2022 to $721.3 million for the nine months ended September 30, 2023.

This increase was primarily attributable to growth in our Average Daily Principal Balance, which increased from $2.63 billion for the nine months ended September 30, 2022 to $3.01 billion for the nine months ended September 30, 2023, an increase of 14.3%.

The increase was partially offset by a decrease in portfolio yield of 5 basis points in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 driven by lower originations and origination fees due to our tightening of credit underwriting standards and focusing lending towards existing and returning members in the second half of 2022.

Existing and returning members generally receive lower APRs, but historically have lower loss rates compared to new members.

Total interest income decreased by $7.0 million, or 3.0%, from $237.6 million for the three months ended March 31, 2023 to $230.6 million for the three months ended March 31, 2024.

The decrease is primarily attributable to a $218.3 million decrease in our Average Daily Principal Balance from $3.1 billion for the three months ended March 31, 2023 to $2.9 billion for the three months ended March 31, 2024 , a decrease of 7.1% .

The decrease was partially offset by an increase in portfolio yield of 113 basis points in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Non-interest income.

Total non-interest income increased by $7.0 million, or 39.0%, from $18.0 million for the three months ended September 30, 2022 to $25.0 million for the three months ended September 30, 2023.

This increase is primarily due to $4.3 million increase in interest earned on neobanking deposit accounts, $3.3 million increase in documentation fees on the Pathward retained loans and $2.4 million increase related to our gain on loan sales, partially offset by $1.5 million decrease in subscription revenue and $0.6 million decrease in sublease income.

Total non-interest income increased by $14.4 million, or 24.5%, from $58.6 million for the nine months ended September 30, 2022 to $73.0 million for the nine months ended September 30, 2023.

This increase is primarily due to $17.4 million increase in interest earned on neobanking deposit and other deposit accounts, $8.9 million increase in documentation fees on the Pathward retained loans, partially offset by $6.4 million decrease in servicing revenue, $5.5 million decrease in subscription revenue, and $1.6 million decrease in credit card and sublease income.

See Note 2, Summary of Significant Accounting Policies , and Note 12, Revenue , of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.

Total non-interest income decreased by $2.0 million, or 9.1%, from $21.9 million for the three months ended March 31, 2023 to $19.9 million for the three months ended March 31, 2024.

The decrease is primarily due to a $2.6 million decrease in subscription revenue, interest income earned on Set & Save member accounts.

See Note 2, Summary of Significant Accounting Policies , and Note 12, Revenu e , of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.

Interest expense

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

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Cost of Debt 7.5 % 5.2 %

Leverage as a percentage of Average Daily Principal Balance 92.2 % 92.7 % 92.7 % 90.9 %

Interest expense.

Interest expense increased by $20.3 million, or 76.1%, from $26.7 million for the three months ended September 30, 2022 to $47.0 million for the three months ended September 30, 2023.

$19.8 million of the increase was driven by a 286 bps increase in interest rate.

$0.5 million of the increase was due to an increase in our Average Daily Debt Balance.

Our Average Daily Debt Balance increased from $2.69 billion for the three months ended September 30, 2022 to $2.74 billion for the three months ended September 30, 2023, an increase of 1.7% .

We financed approximately 92.2% of our loans receivable through debt for the three months ended September 30, 2023, as compared to 92.7% for the three months ended September 30, 2022.

Our Cost of Debt has increased due to increases in interest rates and wider credit spreads on our new asset-backed securitization issuances.

Interest expense increased by $70.0 million, or 121.8%, from $57.5 million for the nine months ended September 30, 2022 to $127.4 million for the nine months ended September 30, 2023.

$61.5 million of the increase was driven by a 289 bps increase in interest rate.

$8.5 million of the increase was due to an increase in our Average Daily Debt Balance.

Our Average Daily Debt Balance increased from $2.39 billion for the nine months ended September 30, 2022 to $2.79 billion for the nine months ended September 30, 2023, an increase of 16.7% .

We financed approximately 92.7% of our loans receivable through debt for the nine months ended September 30, 2023, as compared to 90.9% for the nine months ended September 30, 2022.

Interest expense increased by $15.5 million, or 39.7%, from $39.0 million for the three months ended March 31, 2023 to $54.5 million for the three months ended March 31, 2024.

Our Cost of Debt has increased due to increases in interest rates and wider credit spreads on our new asset-backed securitization issuances.

We expect our interest expense to increase as our asset-backed notes issued at lower interest rates amortize and are replaced with more expensive current funding.

See Note 8, Borrowings , in the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further information on our Interest expense and our borrowings.

We expect our interest expense to increase as our asset-backed notes issued at lower interest rates amortize and are replaced with more expensive funding at current interest rates.

Total net increase (decrease) in fair value

Net increase (decrease) in fair value reflects changes in fair value of loans receivable held for investment and asset-backed notes on an aggregate basis and is based on a number of factors, including benchmark interest rates, credit spreads, remaining cumulative charge-offs and borrower payment rates.

Net increase (decrease) in fair value reflects changes in fair value of loans receivable held for investment and asset-backed notes at fair value on an aggregate basis and is based on a number of factors, including benchmark interest rates, credit spreads, remaining cumulative charge-offs and borrower payment rates.

Increases in the fair value of loans increase Net Revenue.

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Decreases in the fair value of asset-backed notes increase Net Revenue.

We also have derivative instruments related to our bank partnership program with Pathward, N.A.

We also have a derivative instrument related to our bank partnership program with Pathward, N.A.

Changes in the fair value of the derivative instrument are reflected in the total fair value mark-to-market adjustment below.

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

2 unchanged sentences

Fair value mark-to-market adjustment on Loans Receivable at Fair Value $ 28,938 $ (37,319) $ 66,257 *

Fair value mark-to-market adjustment on asset-backed notes (14,859) 61,204 (76,063) * (76,377) 163,952 (240,329) *

Fair value mark-to-market adjustment on asset-backed notes at fair value

(27,123) (48,895) 21,772 *

Fair value mark-to-market adjustment on derivatives 1,176 1,696 (520) *

1 unchanged sentence

Charge-offs, net of recoveries on Loans Receivable at Fair Value

(85,328) (91,585) 6,257 *

Net settlements on derivative instruments (1,056) (2,438) 1,382 *

5 unchanged sentences

Charge-offs, net of recoveries on Loans Receivable at Fair Value

(34.1) % (35.3) %

Total net increase (decrease) in fair value (32.9) % (67.9) %

3 unchanged sentences

* Not meaningful

(1) The fair value mark on loans sold shown for the three and nine months ended September 30, 2023 includes $(31.3) million related to the cumulative fair value mark on the loans sold in other loan sales in Q3 2023.

The fair value mark on loans sold shown for the nine months ended September 30, 2023 also includes $(18.9) million and $(37.2) million related to the cumulative fair value mark on the loans sold in other loan sales in Q2 2023 and Q1 2023, respectively.

The fair value mark on loans sold shown for the three and nine months ended September 30, 2022 includes $(21.1) million related to the cumulative fair value mark on loans sold in other loan sales in Q3 2022.

The fair value mark on loans sold shown for the nine months ended September 30, 2022 also includes $15.9 million related to the cumulative fair value mark on the loans sold in the 2022-1 transaction and $(14.1) million related to the cumulative fair value mark on loans sold in other loan sales in Q2 2022.

(1) The fair value mark on loans sold shown for the three months ended March 31, 2024 includes $(33.5) million related to the cumulative fair value mark on the loans sold in other loan sales in Q1 2024.

The fair value mark on loans sold shown for the three months ended March 31, 2023 includes $(37.2) million related to the cumulative fair value mark on loans sold in other loan sales in Q1 2023.

This fair value mark on loans sold represents the life-to-date mark-to-market adjustment for the loans sold and is presented separately for the loans sold to assist in reconciling to our non-GAAP measure, Adjusted EBITDA.

For details regarding other loan sales, refer to Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Net increase (decrease) in fair value.

Net decrease in fair value for the three months ended September 30, 2023 was $136.1 million.

This amount represents a total fair value mark-to-market decrease of $16.5 million, and $88.0 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(9.0) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) an increase in remaining cumulative charge-offs from 11.35% as of June 30, 2023 to 11.93% as of September 30, 2023, (b) an increase in the discount rate from 11.10% as of June 30, 2023 to 11.15% as of September 30, 2023 , p artially offset by (c) an increase in average life from 0.96 as of June 30, 2023 to 0.995 as of September 30, 2023.

The $(14.9) million mark-to-market adjustment on asset-backed notes is due to tighter credit spreads.

The total net decrease in fair value for the three months ended September 30, 2023 and September 30, 2022 also includes a $(31.3) million and $(21.1) million adjustment related to the fair value mark on the loans sold as part of the other loan sales for the three months ended September 30, 2023 and September 30, 2022, respectively.

Net decrease in fair value for the nine months ended September 30, 2023 was $458.3 million.

This amount represents a total fair value mark-to-market decrease of $93.2 million, and $273.0 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(32.1) million mark-to-market reduction on Loans Receivable at Fair Value due to (a) an increase in remaining cumulative charge-offs from 10.38% as of December 31, 2022 to 11.93% as of September 30, 2023, (b) a decrease in average life from 1.00 years as of December 31, 2022 to 0.995 years as of September 30, 2023, partially offset by (c) a decrease in the discount rate from 11.48% as of December 31, 2022 to 11.15% as of September 30, 2023.

The $(76.4) million mark-to-market adjustment on asset-backed notes is due to lower medium-term interest rates and tighter spreads.

The total net increase (decrease) in fair value for the nine months ended September 30, 2023 and September 30, 2022 includes $(87.4) million and $(19.4) million in adjustments related to the fair value mark on loans sold as part of the structured and other loan

sales for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Through the remainder of 2023, we expect to continue to see volatility in fair value primarily as a result of macroeconomic conditions.

Net decrease in fair value for the three months ended March 31, 2024 was $116.9 million.

This amount represents a total fair value mark-to-market increase of $3.0 million, and $85.3 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $28.9 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a decrease in the discount rate from 11.07% as of March 31, 2023 to 9.10% as of March 31, 2024 (b) an increase in average life from 0.96 years as of March 31, 2023 to 1.03 years as of March 31, 2024, (c) offset by an increase in remaining cumulative charge-offs from 11.72% as of March 31, 2023 to 11.92% as of March 31, 2024.

The $(27.1) million mark-to-market adjustment on asset-backed notes is due to increasing prices on our asset-backed notes due to lower medium-term interest rates and tighter spreads.

The total net increase (decrease) in fair value includes a $(33.5) million and a $(37.2) million adjustment related to the fair value mark on loans sold for the three months ended March 31, 2024 and March 31, 2023, respectively.

Charge-offs, net of recoveries

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

4 unchanged sentences

Charge-offs, net of recoveries.

Our Annualized Net Charge-Off Rate increased to 11.8% and 12.1% for the three and nine months ended September 30, 2023, respectively, from 9.8% and 9.0% for the three and nine months ended September 30, 2022, respectively.

Net charge-offs for the three months and nine months ended September 30, 2023 increased primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022.

In response to this increase, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes in the second half of 2022.

We refer to the post-July 2022 underwriting vintages as our front book and the originations made prior to our significant credit-tightening in July 2022 we refer to as the back book.

Our Annualized N et Charge-Off Rate decreased to 12.0% for the three months ended March 31, 2024 from 12.1% for the three months ended March 31, 2023.

As the average life of our loans is only one year, we expect the back book to become less impactful on our losses by the end of 2023.

1 unchanged sentence

Operating expenses

Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees and general, administrative and other expense.

Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees and general, administrative and other expenses.

Technology and facilities

4 unchanged sentences

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

3 unchanged sentences

Technology and facilities.

Technology and facilities expense decreased by $3.5 million, or (6.1)%, from $56.1 million for the three months ended September 30, 2022 to $52.7 million for the three months ended September 30, 2023.

The decrease is primarily due to $4.7 million decrease in salaries and benefits as a result of our workforce optimization efforts and $2.5 million decrease in outsourcing and professional fees.

These decreases were offset by $1.8 million increase in service cost and $1.7 million increase in depreciation.

Technology and facilities expense increased by $6.6 million, or 4.2%, from $158.1 million for the nine months ended September 30, 2022 to $164.7 million for the nine months ended September 30, 2023.

The increase is primarily due to $6.9 million increased depreciation commensurate with growth in our internally developed software balance, $4.2 million increase due to a decrease in capitalization of internally developed software costs related to fewer employees working on software development as a result of our workforce optimization efforts, $2.2 million increase in services cost and $1.8 million increase in software.

These increases were offset by $4.0 million decrease in outsourcing and professional fees, $2.4 million decrease in other expenses and utilities and $1.8 million decrease in salaries and benefits.

We expe ct our technology and facilities expense may increase in 2023 compared to 2022 due to increased depreciation related to internally developed software and increased service costs due to higher usage of software and cloud services.

Technology and facilities expense decreased by $9.8 million, or 17.2%, from $56.9 million for the three months ended March 31, 2023 to $47.1 million for the three months ended March 31, 2024.

The decrease is primarily due to a $8.6 million decrease in wages and salaries, benefits and bonuses due to the 2023 reductions in force, a $2.3 million decrease in outsourcing and professional fees and a $1.8 million decrease in service costs, software and office rent.

The decrease was partially offset by a $3.3 million decrease in capitalization of internally developed software following the 2023 reductions in force.

Sales and marketing

Sales and marketing expense consists of two components and represents the costs to acquire our customers.

The first component is comprised of the expense to acquire a customer through various paid marketing channels including direct mail, digital marketing and brand marketing.

Sales and marketing expenses consist of two components and represents the costs to acquire our members.

The first component is comprised of the expense to acquire a member through various paid marketing channels including direct mail, digital marketing, and brand marketing.

The second component is comprised of the costs associated with our telesales, lead generation and retail operations, including personnel expenses, but excluding costs associated with retail locations.

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

3 unchanged sentences

Customer Acquisition Cost (“CAC”)

$ 138 $ 192 $ (54) (28.1) %

Sales and marketing.

Sales and marketing expenses to acquire our customers decreased by $2.9 million, or 13.4%, from $21.8 million for the three months ended September 30, 2022 to $18.9 million for the three months ended September 30, 2023 .

We decreased marketing spend as we shifted our strategy to focus lending towards existing and returning members to improve credit outcomes.

The decrease was also attributable to a $2.6 million decrease in salaries and benefits due to the decrease in headcount following our efforts to streamline operations and $2.5 million decrease related to outsourcing and profession al fees, partially offset by a net increase in marketing spend.

As a result of our decrease in number of loans originated during the three months ended September 30, 2023, our CAC increased by 9.2% as compared to the three months ended September 30, 2022.

Sales and marketing expenses to acquire our customers decreased by $31.5 million, or 35.5%, from $88.7 million for the nine months ended September 30, 2022 to $57.2 million for the nine months ended September 30, 2023 .

Our decrease in marketing spend during the nine months ended September 30, 2023 was $21.4 million across various marketing channels, including direct mail and digital advertising.

We decreased marketing spend as we shifted our strategy to focus lending towards existing and returning members to improve credit outcomes.

The decrease was also attributable to a $6.3 million decrease related to outsourcing and professional fees and $4.5 million decrease in salaries and benefits due to the decrease in headcount following our efforts to streamline operations.

As a result of our decrease in number of loans originated during the nine months ended September 30, 2023, our CAC increased by 19.0% as compared to the nine months ended September 30, 2022.

We expect our sales and marketing expense to decrease in 2023 compared to 2022 as we maintain focus on our strategy to improve credit outcomes by focusing lending towards existing and returning members.

Personnel expense represents compensation and benefits that we provide to our employees and includes salaries, wages, bonuses, commissions, related employer taxes, medical and other benefits provided and stock-based compensation expense for all of our staff with the exception of our telesales, lead generation, and retail operations which are included in sales and marketing expenses and technology which is included in technology and facilities.

Sales and marketing expense to acquire our members decreased by $3.2 million, or 16.6%, from $19.2 million for the three months ended March 31, 2023 to $16.0 million for the three months ended March 31, 2024.

The decrease was attributable to a $3.2 million decrease in wages and salaries and benefits due to streamlining operations and reduction in outsourcing and professional fees.

As a result of our increase in number of loans originated during the three months ended March 31, 2024, our CAC decreased by 28.1%, from $192 thousand the three months ended March 31, 2023 to $138 for the three months ended March 31, 2024.

We expect sales and marketing to decrease in 2024 compared to 2023, as we continue to optimize marketing investment allocation across channels, focus on higher credit quality segments, and drive efficiency in telesales and retail operations.

Personnel expense represents compensation and benefits that we provide to our employees, and include salaries, wages, bonuses, commissions, related employer taxes, medical and other benefits provided and stock-based compensation expense for all of our staff with the exception of our telesales, lead generation, and retail operations which are included in sales and marketing expenses and technology which is included in technology and facilities.

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

2 unchanged sentences

Percentage of total revenue 9.8 % 14.4 %

Personnel expense decreased by $11.3 million, or 28.3%, from $40.0 million for the three months ended September 30, 2022 to $28.6 million for the three months ended September 30, 2023, primarily driven by the workforce optimization announced in February and May 2023.

Personnel expense decreased by $17.8 million, or 15.5%, from $114.5 million for the nine months ended September 30, 2022 to $96.7 million for the nine months ended September 30, 2023, primarily driven by the workforce optimization announced in February and May 2023.

We expect our personnel expense to decrease in 2023 compared to 2022 as a result of the reduction in headcount due to actions taken in February, May 2023, and November 2023 .

Personnel expense decreased by $12.8 million, or 34.3%, from $37.3 million for the three months ended March 31, 2023 to $24.5 million for the three months ended March 31, 2024.

The decrease is attributable to a $12.9 million reduction in wages and salary, bonuses, stock-based compensation expense and benefits primarily driven by the 2023 reductions in force.

We expect our personnel expense to decrease in 2024 compared to 2023 due to further cost reductions.

Outsourcing and professional fees

Outsourcing and professional fees consist of costs for various third-party service providers and contact center operations, primarily for the sales, customer service, collections and store operation functions.

The costs related to our third-party contact centers located in Colombia, Jamaica and the Philippines are included in outsourcing and professional fees.

The costs related to our third-party contact centers located in Colombia and the Philippines are included in outsourcing and professional fees.

These third-party contact centers provide business support, including application processing, verification, customer service and collections.

1 unchanged sentence

Direct loan origination expenses related to application processing are expensed when incurred.

In addition, outsourcing and professional fees include any financing expenses, including legal and underwriting fees, related to our asset-backed notes.

In addition, outsourcing and professional fees include any financing expenses, including legal and underwriting fees, related to our asset-backed notes at fair value.

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

3 unchanged sentences

Outsourcing and professional fees.

Outsourcing and professional fees decreased by $8.1 million, or 44%, from $18.6 million for the three months ended September 30, 2022 to $10.5 million for the three months ended September 30, 2023.

The decrease is primarily attributable to $4.3 million decrease in professional service and outsourcing services related to credit card programs, a transition to in-house call services, and other

consulting services, $2.8 million lower debt financing fees not present in the current year, and $1.0 million decrease in credit report expenses due to the decline in loan application volume.

Outsourcing and professional fees decreased by $15.9 million, or 32%, from $50.1 million for the nine months ended September 30, 2022 to $34.2 million for the nine months ended September 30, 2023.

The decrease is primarily attributable to $7.9 million decrease in professional service and outsourced services costs related to credit card programs, a transition to in-house call services, and other consulting services, $5.6 million lower debt financing fees not present in current year, and $2.4 million decrease in credit report expenses due to the decline in loan application volume.

Outsourcing and professional fees decreased by $3.6 million, or 25.8%, from $13.8 million for the three months ended March 31, 2023 to $10.2 million for the three months ended March 31, 2024 .

The decrease is primarily attributable to a $2.1 million decrease in outsourced call center professionals due to a shift to in-house call centers and a $1.4 million decrease in consulting services related to our credit card program and professional recruiting services.

We expect our outsourcing and professional fees to decrease in 2024 compared to 2023 as a result of our continued focus on strong expense discipline and streamlining operations.

3 unchanged sentences

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

3 unchanged sentences

General, administrative and other.

General, administrative and other expense decreased by $2.5 million, or 18%, from $14.4 million for the three months ended September 30, 2022 to $11.9 million for the three months ended September 30, 2023, due to $1.3 million decrease in acquisition and integration related expenses and $1.1 million decrease in postage, printing, travel and entertainment and other expenses.

General, administrative and other expense increased by $7.4 million, or 17%, from $44.7 million for the nine months ended September 30, 2022 to $52.1 million for the nine months ended September 30, 2023, primarily due to the establishment of a $14.4 million reserve related to the workforce optimization announced in February and May 2023.

These increases were partially offset by $2.6 million decrease in legal expenses, $1.7 million decrease in travel expenses, and $1.3 million decrease in acquisition and integration related expenses.

General, administrative and other expense decreased by $7.4 million, or 38.5%, from $19.2 million for the three months ended March 31, 2023 to $11.8 million for the three months ended March 31, 2024, primarily due to the $6.8 million reserve related to the February 2023 reductions in force not present in the current period.

We expect our general, administrative and other expense to decrease in 2024 compared to 2023 as a result of our continued focus on strong expense discipline.

Income taxes consist of U.S.

federal, state and foreign income taxes, if any.

For the periods ended September 30, 2023 and 2022, we recognized tax expense (benefit) attributable to U.S.

For the periods ended March 31, 2024 and 2023, we recognized tax expense (benefit) attributable to U.S.

federal, state and foreign income taxes.

Three Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

(in thousands, except percentages) 2024 2023 $ %

Income tax expense (benefit) $ (16,232) $ (6,536) $ (9,696) 148.3 % $ (58,247) $ 1,956 $ (60,203) 3,077.9 %

Income tax benefit $ (4,036) $ (39,443) $ 35,407 (89.8) %

Percentage of total revenue (1.6) % (15.2) %

Effective tax rate 13.2 % 27.9 %

Income tax expense (benefit).

Income tax benefit increased by $9.7 million or 148%, from $6.5 million for the three months ended September 30, 2022 to $16.2 million benefit for the three months ended September 30, 2023, primarily as a result of having a larger pretax loss for the three months ended September 30, 2023.

Income tax expense decreased by $60.2 million or 3078%, from $2.0 million expense for the nine months ended September 30, 2022 to $58.2 million benefit for the nine months ended September 30, 2023, primarily as a result of having a larger pretax loss for the nine months ended September 30, 2023 and the 2022 goodwill impairment adjustment not present in the current year .

Income tax expense .

Income tax benefit decreased by $35.4 million or 89.8%, from $39.4 million for the three months ended March 31, 2023 to $4.0 million for the three months ended March 31, 2024, primarily due to lower pretax loss for the three months ended March 31, 2024 .

Valuation Allowance .

As of March 31, 2024, we have $50.5 million of U.S.

net deferred tax assets, of which $75.6 million is related to tax-effected net operating losses, tax credits, and other carryforwards that can be used to offset future U.S.

taxable income.

Certain of these carryforwards will expire if they are not used within a specified timeframe.

At this time, we consider it more likely than not that we will have sufficient U.S.

taxable income in the future that will allow us to realize these net deferred tax assets.

However, it is possible that some, or all, of these tax attributes could ultimately expire unused.

Therefore, if we are unable to generate sufficient U.S.

taxable income from our operations, a valuation allowance to reduce the U.S.

net deferred tax assets may be required, which would materially increase income tax expense in the period in which the valuation allowance is recorded.

See Note 2, Summary of Significant Accounting Policies , and Note 13, Income Taxes , of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our income taxes.

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Changes in interest rates, credit spreads, realized and projected credit losses and cash flow timing will lead to changes in fair value and therefore impact earnings.

These changes in the fair value of the Loans Receivable at Fair Value may be partially offset by changes in the fair value of the asset-backed notes, depending upon the relative duration of the instruments.

These changes in the fair value of the Loans Receivable at Fair Value may be partially offset by changes in the fair value of the asset-backed notes where the fair value option has been elected, depending upon the relative duration of the instruments.

Fair Value Estimate Methodology for Loans Receivable at Fair Value

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• Subtracting the product of the discount rate and the average life from the net cash flow to calculate the gross fair value premium as a percentage of loan principal balance.

• Subtracting the accrued interest and fees as a percentage of loan principal balance from the gross fair value premium as a percentage of loan principal balance to calculate the fair value premium as a percentage of loan principal balance.

The table below reflects the application of this methodology for the seven quarters since January 1, 2022, on loans held for investment.

The table below reflects the application of this methodology for the five quarters since January 1, 2023, on loans held for investment.

The data in the table below represents all of our credit products.

Three Months Ended

Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022

Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023

Weighted average portfolio yield over the remaining life of the loans 28.87 % 29.10 % 29.58 % 29.85 % 29.61 %

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Gross fair value premium as a percentage of loan principal balance 3.24 % 1.99 % 1.43 % 1.78 % 1.31 %

Accrued interest and fees as a percentage of loan principal balance (1.16) % (1.20) % (1.22) % (1.18) % (1.19) % (1.10) % (1.09) %

Fair value premium as a percentage of loan principal balance 0.39 % 0.74 % 0.26 % 1.45 % 0.73 % 2.24 % 4.12 %

Discount Rate 9.10 % 10.10 % 11.15 % 11.10 % 11.07 %

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▪ Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.

Beginning in 2024, we updated the definitions of Adjusted EBITDA, Adjusted Net Income and Adjusted Operating Efficiency to better represent how we view the results of operations and make management decisions.

Comparable prior period Non-GAAP financial measures are included in addition to the previously reported metrics.

Adjusted EBITDA Rationale for Change

Interest on Corporate Financing We have updated the interest on corporate financing adjustment to include interest on our acquisition related financing previously included within the adjustment for acquisition and integration related expenses.

Depreciation and amortization We have updated the adjustment related to depreciation and amortization to include the amortization of acquired intangibles.

This amortization was previously included within the adjustment for acquisition and integration related expenses.

Acquisition and integration related expenses We have removed the adjustment related to acquisition and integration related expenses.

Interest expense related to our acquisition related financing has been reclassified to the adjustment for corporate financing.

Amortization of acquired intangibles has been reclassified to depreciation and amortization.

Origination fees for loans receivable at fair value, net We have removed the adjustment related to origination fees for loans receivable at fair value, net as we believe this better aligns with common practices within our industry.

Adjusted Net Income (Loss)

Rationale for Change

Acquisition and integration related expenses We have removed the adjustment related to acquisition and integration related expenses.

Interest expense related to our acquisition related financing has been reclassified to the adjustment for corporate financing, including the senior secured term loan and residual financing facility, as it views this expense as related to its capital structure rather than funding.

Fair value mark-to-market adjustment on Asset-Backed Notes at Fair Value We have added an adjustment to exclude the Fair value mark-to-market adjustments related to Asset-Backed Notes at Fair Value.

This adjustment aligns with our decision in 2023 to stop electing the fair value option for new debt financings.

By the end of 2025 nearly all our existing Asset-Backed Notes at Fair Value will have paid down to zero, so after that there will be no mark-to-market adjustment for our debt.

Adjusted Operating Efficiency

Rationale for Change

Acquisition and integration related expenses We have removed the adjustment related to acquisition and integration related expenses, to maintain consistency with the revised Adjusted EBITDA and Adjusted Net Income (Loss) calculations.

Reconciliations of non-GAAP to GAAP measures can be found below.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure defined as our net income, adjusted to eliminate the effect of certain items as described below.

We believe that Adjusted EBITDA is an important measure because it allows management, investors and our Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making the adjustments described below.

In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of taxes, certain non-cash items, variable charges and timing differences.

• We believe it is useful to exclude the impact of income tax expense (benefit), as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations.

• We believe it is useful to exclude the impact of depreciation and amortization and stock-based compensation expense because they are non-cash charges.

• We believe it is useful to exclude the impact of interest expense associated with the Company's Corporate Financing, as we view this expense as related to our capital structure rather than our funding.

• We believe it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, acquisition and integration related expenses and other non-recurring charges because these items do not reflect ongoing business operations.

Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our Corporate Financing facility.

• We also reverse origination fees for Loans Receivable at Fair Value, net.

We recognize the full amount of any origination fees as revenue at the time of loan disbursement in advance of our collection of origination fees through principal payments.

As a result, we believe it is beneficial to exclude the uncollected portion of such origination fees, because such amounts do not represent cash that we received.

• We also reverse the fair value mark-to-market adjustment because it is a non-cash adjustment as shown in the table below.

We define Adjusted EBITDA as net income, adjusted to eliminate the effect of certain items as described below.

We believe that Adjusted EBITDA is an important measure because it allows management, investors and our board of directors to evaluate and compare operating results, including return on capital and operating efficiencies, from period to period by making the adjustments described below.

In addition, it provides a useful measure for period-to-period comparisons of Oportun's business, as it removes the effect of income taxes, certain non-cash items, variable charges and timing differences.

• We believe it is useful to exclude the impact of income tax expense, as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations.

• We believe it is useful to exclude depreciation and amortization and stock-based compensation expense because they are non-cash charges.

• We believe it is useful to exclude the impact of interest expense associated with our corporate financing facilities, including the senior secured term loan and the residual financing facility, as we view this expense as related to our capital structure rather than our funding.

• We exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, and other non-recurring charges because we do not believe that these items reflect ongoing business operations.

Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our corporate financing facilities.

• We also exclude fair value mark-to-market adjustments on the loans receivable portfolio and asset-backed notes carried at fair value because these adjustments do not impact cash.

Components of Fair Value Mark-to-Market Adjustment (in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Fair value mark-to-market adjustment on loans receivable at fair value (1)

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See the section titled " Total net increase (decrease) in fair valu e" in the Results of Operations section for additional information regarding the fair value mark on loans sold.

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Adjusted EBITDA (in thousands)

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Net income (loss) $ (26,439) $ (102,090)

Income tax expense (benefit) (16,232) (6,536) (58,247) 1,956

Income tax benefit (4,036) (39,443)

Interest on corporate financing

11,528 871 26,457 871

Depreciation and amortization 13,198 13,389

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Workforce optimization expenses

466 183 15,692 1,881

Acquisition and integration related expenses 6,854 8,132 21,032 22,363

Origination fees for loans receivable at fair value, net 821 (6,348) (14,522) (17,699)

Other non-recurring charges

1,592 108,472 4,683 111,222

Fair value mark-to-market adjustment (2,991) 84,518

Adjusted EBITDA $ 1,939 $ (20,237)

(1) Certain prior-period financial information has been reclassified to conform to current period presentation.

(1) Our calculation of Adjusted EBITDA was updated in Q1 2024 to more closely align with management’s internal view of the performance of the business.

The Q1 2023 value for Adjusted EBITDA shown in the table above has been revised and presented on a comparable basis.

Prior to these revisions the Q1 2023 value would have been $(24.5) million.

Adjusted Net Income (Loss)

We define Adjusted Net Income (Loss) as our net income, adjusted to exclude income tax expense, stock-based compensation expenses and certain non-recurring charges.

We believe that Adjusted Net Income (Loss) is an important measure of operating performance because it allows management, investors, and our Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period to period.

• We believe it is useful to exclude the impact of income tax expense, as reported, because historically it has included irregular tax items that do not reflect our ongoing business operations.

Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our Corporate Financing facility.

We define Adjusted Net Income as net income adjusted to eliminate the effect of certain items as described below.

We believe that Adjusted Net Income is an important measure of operating performance because it allows management, investors, and our Board to evaluate and compare our operating results, including return on capital and operating efficiencies, from period to period, excluding the after-tax impact of non-cash, stock-based compensation expense and certain non-recurring charges.

We also include the impact of normalized income tax expense by applying a normalized statutory tax rate.

• We believe it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, and other non-recurring charges because we do not believe that these items reflect our ongoing business operations.

Other non-recurring charges include litigation reserve, impairment charges, debt amendment and warrant amortization costs related to our corporate financing facilities.

• We believe it is useful to exclude stock-based compensation expense because it is a non-cash charge.

• We include the impact of normalized statutory income tax expense by applying the income tax rate noted in the table.

The following table presents a reconciliation of net income to Adjusted Net Income (Loss) for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

• We also exclude the fair value mark-to-market adjustment on our asset-backed notes carried at fair value to align with the 2023 accounting policy decision to account for new debt financings at amortized cost.

The following table presents a reconciliation of net income to Adjusted Net Income (Loss) for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Adjusted Net Income (Loss) (in thousands)

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Net income (loss) $ (26,439) $ (102,090)

Income tax expense (benefit) (16,232) (6,536) (58,247) 1,956

Income tax benefit (4,036) (39,443)

Stock-based compensation expense 3,982 4,500

Workforce optimization expenses

466 183 15,692 1,881

Acquisition and integration related expenses 6,854 8,132 21,032 22,363

Other non-recurring charges

Mark-to-market adjustment on asset-backed notes

27,123 48,895

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27.0 % 27.0 %

(1) Certain prior-period financial information has been reclassified to conform to current period presentation.

(2) Income tax rate for the three and nine months ended September 30, 2023 and 2022 is based on a normalized statutory rate.

(1) Income tax rate for the three months ended March 31, 2024 and 2023 is based on a normalized statutory rate.

(2) Our calculation of Adjusted Net Income (Loss) was updated in Q1 2024 to more closely align with management’s internal view of the performance of the business.

The Q1 2023 value for Adjusted Net Income (Loss) shown in the table above has been revised and presented on a comparable basis.

Prior to these revisions the Q1 2023 value would have been $(88.3) million.

Adjusted Earnings (Loss) Per Share (“Adjusted EPS”)

Adjusted Earnings (Loss) Per Share is a non-GAAP financial measure that allows management, investors and our Board to evaluate the operating results, operating trends and profitability of the business in relation to diluted adjusted weighted-average shares outstanding.

The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the three and nine months ended September 30, 2023 and 2022.

The following table presents a reconciliation of diluted EPS to Adjusted EPS for the three months ended March 31, 2024 and 2023.

For the reconciliation of net income to Adjusted Net Income (Loss), see the immediately preceding table “Adjusted Net Income (Loss).”

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except share and per share data) 2024 2023 (1)

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Adjusted Earnings (Loss) Per Share $ 0.09 $ (1.70)

Adjusted Return on Equity

(1) Our calculation of Adjusted Net Income (Loss) was updated in Q1 2024 to more closely align with management’s internal view of the performance of the business.

The Q1 2023 value for Adjusted EPS shown in the table above has been revised and presented on a comparable basis.

Prior to these revisions the Q1 2023 value would have been $(2.60).

Return on Equity and Adjusted Return on Equity

We define Adjusted Return on Equity as annualized Adjusted Net Income (Loss) divided by average stockholders’ equity.

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We believe Adjusted Return on Equity is an important measure because it allows management, investors and our Board to evaluate the profitability of the business in relation to stockholders' equity and how efficiently we generate income from stockholders' equity.

The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity as of and for the three and nine months ended September 30, 2023 and 2022.

The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity as of and for the three months ended March 31, 2024 and 2023.

For the reconciliation of net income to Adjusted Net Income (Loss), see the immediately preceding table “Adjusted Net Income (Loss).”

As of or for the Three Months Ended September 30, As of or for the Nine Months Ended September 30,

As of or for the Three Months Ended March 31,

(in thousands) 2024 2023 (1)

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Adjusted Return on Equity 3.7 % (46.6) %

(1) Our calculation of Adjusted Net Income (Loss) was updated in Q1 2024 to more closely align with management’s internal view of the performance of the business.

The Q1 2023 value for Adjusted Return on Equity shown in the table above has been revised and presented on a comparable basis.

Prior to these revisions the Q1 2023 value would have been (71.3)%.

Adjusted Operating Efficiency

We define Adjusted Operating Efficiency as total operating expenses adjusted to exclude stock-based compensation expense and certain non-recurring charges such as expenses associated with our workforce optimization, acquisition and integration related expenses and other non-recurring charges divided by total revenue.

We define Adjusted Operating Efficiency as total operating expenses adjusted to exclude stock-based compensation expense and certain non-recurring charges such as expenses associated with our workforce optimization, and other non-recurring charges divided by total revenue.

Other non-recurring charges include litigation reserve, impairment charges, and debt amendment costs related to our Corporate Financing facility.

We believe Adjusted Operating Efficiency is an important measure because it allows management, investors and our Board to evaluate how efficiently we manage costs relative to revenue.

The following table presents a reconciliation of Operating Efficiency to Adjusted Operating Efficiency for the three and nine months ended September 30, 2023 and 2022:

As of or for the Three Months Ended September 30, As of or for the Nine Months Ended September 30,

The following table presents a reconciliation of Operating Efficiency to Adjusted Operating Efficiency for the three months ended March 31, 2024 and 2023:

As of or for the Three Months Ended March 31,

(in thousands) 2024 2023 (1)

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(800) (6,818)

Acquisition and integration related expenses (6,854) (8,132) (21,032) (22,363)

Other non-recurring charges (1)

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Adjusted Operating Efficiency 40.6 % 51.1 %

(1) Certain prior-period financial information has been reclassified to conform to current period presentation.

(1) Our calculation of Adjusted Net Income (Loss) was updated in Q1 2024 to more closely align with management’s internal view of the performance of the business.

The Q1 2023 value for Adjusted Operating Efficiency shown in the table above has been revised and presented on a comparable basis.

Prior to these revisions the Q1 2023 value would have been 48.5%.

Liquidity and Capital Resources

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Our material cash requirements relate to funding our lending activities, our debt service obligations, our operating expenses, and investments in the long-term growth of the Company.

During the nine months ended September 30, 2023, available liquidity increased primarily due to draws under our PLW facility, the amendment and upsizing of our Corporate Financing facility and our asset-backed borrowings at amortized cost.

We generally target liquidity levels to support at least twelve months of our expected net cash outflows, including new originations, without access to our Corporate Financing facility or equity markets.

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We may incur additional indebtedness or issue equity in order to meet our capital spending and liquidity requirements, as well as to fund growth opportunities that we may pursue.

The following table summarizes our total liquidity reserves:

March 31, 2024

(in thousands) Amount available

Amount borrowed/utilized

Remaining available capacity

Cash and cash equivalents

Restricted cash

Secured financing

680,000 72,108 607,892

Whole loan forward flow agreements (1)

750,000 491,848 258,152

Total liquidity

$ 1,626,553 $ 563,956 $ 1,062,597

(1) The remaining available capacity for whole loan forward flow agreements represents future committed and uncommitted whole loan sales under existing agreements of $33.2 million and 225.0 million, respectively.

Cash and cash flows

The following table summarizes our cash and cash equivalents, restricted cash and cash flows for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

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Our cash is held for working capital purposes and originating loans.

Our restricted cash represents collections held in our securitizations and is applied currently after month-end to pay interest expense and satisfy any amount due to whole loan buyer with any excess amounts returned to us.

Our restricted cash represents collections held in our securitizations and is applied currently after month-end to pay principal, interest expense, and satisfy any amount due to whole loan buyers with any excess amounts returned to us.

Operating Activities

Our net cash provided by operating activities was $286.5 million and $159.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Cash flows from operating activities primarily include net income or losses adjusted for (i) non-cash items included in net income or loss, including depreciation and amortization expense, goodwill impairment charges, fair value adjustments, net, origination fees for loans at fair value, net, gain on loan sales, stock-based compensation expense and deferred tax provision, net, (ii) originations of loans sold and held for sale, and proceeds from sale of loans and (iii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of

business due to the amount and timing of various payments.

Our net cash provided by operating activities was $85.9 million and $76.8 million for the three months ended March 31, 2024 and 2023, respectively.

The $9.1 million increase in our net cash provided by operating activities is primarily driven by a $75.7 million increase as a result of the decline in our Net Loss, a $35.8 million increase as a result of the decrease in our deferred tax provision, partially offset by a $98.9 million decline in our fair value mark to market adjustment.

Investing Activities

Our net cash provided by (used in) investing activities was $(189.4) million and $(915.9) million for the nine months ended September 30, 2023 and 2022, respectively.

Our net cash provided by (used in) investing activities was $36.5 million and $(39.6) million for the three months ended March 31, 2024 and 2023, respectively.

Our investing activities consist primarily of loan originations and loan repayments.

Our net cash provided by (used in) investing activities for the nine months ended September 30, 2023, includ es $2.8 million of proceeds related to the loans sold in other loan sales in 2023.

Our net cash provided by (used in) investing activities for the nine months ended September 30, 2022, includes $247.2 million of proceeds related to a structured loan sale in the first quarter 2022 and other loan sales in the second quarter of 2022.

We invest in purchases of property and equipment and incur system development costs.

Purchases of property and equipment, and capitalization of system development costs may vary from period to period due to the timing of the expansion of our operations, the addition of employee headcount and the development cycles of our system development.

The change in our net cash provided by (used in) investing activities is due to disbursements on originations of loans increasing by $998.8 million while repayments of loan principal decreased by $41.0 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 and our proceeds from loan sales originated as held for investment decreased b y $245.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The change in our net cash provided by (used in) investing activities is due to lower disbursements on originations of loans, which decreased by $78.1 million.

Lower disbursements were partially offset by a $11.7 million decrease in repayments of loan principal for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 and $8.6 million driven by the impact of lower capitalization of system development costs.

Financing Activities

Our net cash provided by (used in) financing activities was $(101.3) million and $835.8 million for the nine months ended September 30, 2023 and 2022, respectively.

For the nine months ended September 30, 2023, net cash used in financing activities was primarily driven by amortization payments on our Acquisition Financing facility, our Series 2019-A, Series 2021-A, Series 2022-2 and Series 2022-3 asset-backed notes, and repayments of borrowings on our PLW facility and Acquisition Financing facility, partially offset by borrowings under our PLW facility, Corporate Financing facility, and our asset-backed borrowings at amortized cost.

For the nine months ended September 30, 2022, net cash provided by financing activities was primarily driven by the issuance of our Series 2022-A and Series 2022-2 asset-backed notes and the borrowings under our Secured Financing facilities and Acquisition and Corporate Financing facilities, partially offset by repayments of borrowings on our Secured Financing facilities and scheduled amortization payments on our Acquisition Financing facility and our Series 2019-A and Series 2022-2 asset-backed notes.

Our net cash provided by (used in) financing activities was $(131.8) million and $(39.1) million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024, net cash used in financing activities was primarily driven by amortization payments on our Series 2021-A, Series 2022-2, Series 2022-3 asset-backed notes and Series 2024-1 asset-backed borrowing, and our other asset-backed borrowings and repayments of borrowings on our PLW facility, CCW facility and Acquisition and Corporate Financing facilities, partially offset by borrowings under our asset-backed borrowings at amortized cost.

For the three months ended March 31, 2023, net cash used in financing activities was primarily driven by borrowings under our PLW and Corporate Financing facility, partially offset by repayments of borrowings on our CCW and scheduled amortization payments on our Acquisition Financing facility and our Series 2019-A, Series 2022-2 and Series 2022-3 asset-backed notes.

Sources of Funds

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Asset-Backed Securitizations

As of September 30, 2023, we had $1.96 billion of outstanding asset-backed notes.

For additional information, see Note 8 , Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Our securitizations utilize special purpose entities (SPEs) which are also variable inter est entities (VIEs).

For VIEs where we have determined we are the primary beneficiary, the financial results of the VIE are consolidated in our financial statements.

For VIEs where we have determined we are not the primary beneficiary, the financial results of the VIE are not consolidated in our financial statements.

As of March 31, 2024, we had $2.1 billion of outstanding asset-backed notes.

Our securitizations utilize special purpose entities which are also variable interest entities (“VIEs”) that meet the requirements to be consolidated in our financial statements.

For more information regarding our VIEs and asset-backed securitizations, see Note 4, Variable Interest Entities and Note 8, Borrowings , respectively, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Our ability to utilize our asset-backed securitization facilities as described herein is subject to compliance with various requirements including eligibility criteria for the loan collateral and covenants and other requirements .

As of September 30, 2023, we were in compliance with all covenants and requirements of all our asset-backed notes.

As of March 31, 2024, we were in compliance with all covenants and requirements of all our asset-backed notes.

Secured Financings

As of September 30, 2023 , we had Secured Financing facilities with warehouse lines of $720.0 million in the aggregate with undrawn capacity of $295.5 million.

As of March 31, 2024 , we had Secured Financing facilities with warehouse lines of $680.0 million in the aggregate with undrawn capacity of $607.3 million.

On March 8, 2023, the Credit Card Warehouse facility was amended, reducing its commitment from $150.0 million to $120.0 million.

On December 22, 2023, the Credit Card Warehouse facility was further amended, reducing its commitment from $120.0 million to $100.0 million, thereby reducing the combined commitment to $700.0 million.

On January 31, 2024, we further amended the Credit Card Warehouse facility to adjust our payment rate, advance rate, and other loan sales.

Additionally, our commitment amount reduced from $100.0 million to $80.0 million, and will reduce again from $80.0 million to $75.0 million effective October 1, 2024.

Our ability to utilize our Secured Financing facilities as described herein is subject to compliance with various requirements, including eligibility criteria for collateral, concentration limits for our collateral pool, and covenants and other requirements.

Asset-Backed Borrowings at Amortized Cost

On February 13, 2024, we announced the issuance of $199.5 million of asset-backed notes by Oportun Issuance Trust 2024-1 and secured by a pool of its unsecured and secured personal installment loans (the "2024-1 Securitization").

The 2024-1 Securitization included four classes of fixed rate notes.

The Notes were offered and sold in a private placement in reliance on Rule 144A under the U.S.

Securities Act of 1933, as amended, and were priced with a weighted average yield of 8.600% per annum and weighted average coupon of 8.434% per annum.

On October 20, 2023, we entered into a Receivables Loan and Security Agreement (the “Receivables Loan and Security Agreement”), pursuant to which the Company borrowed $197 million.

Borrowings under the Receivables Loan and Security Agreement accrue interest at a weighted average interest rate equal to 10.05%.

On August 3, 2023, we entered into a forward flow whole loan sale agreement with an institutional investor.

Pursuant to this agreement, we have a commitment to sell up to $400.0 million of our personal loan originations over the next twelve months.

We will continue to service these loans upon transfer of the receivables.

While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes.

Accordingly, the related assets remain on our balance sheet and cash proceeds received are reported as a secured borrowing under the caption of asset-backed borrowings at amortized cost with related interest expense recognized over the life of the related borrowing.

As part of this agreement, during the three months ended March 31, 2024, we transferred loans receivable totaling $58.3 million.

On June 16, 2023, we entered into a forward flow whole loan sale agreement with an institutional investor.

Pursuant to this agreement, we have a commitment to sell up to $300.0 million of our personal loan originations over the next twelve months.

We will continue to service these loans upon transfer of the receivables.

While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes.

As part of this agreement, during the three months ended March 31, 2024, we transferred loans receivable totaling $0.4 million, bringing the total loans receivable sold under the original agreement to $220.9 million.

On April 26, 2024, we amended the existing forward flow whole loan sale agreement we entered into on June 16, 2023 to extend the term through October 2024 and committed to sell an additional $150.0 million of our personal loan originations.

Acquisition Financing

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Subsequently, on February 10, 2023, the Acquisition Financing facility was further amended, including among other things, revising the interest rate to SOFR plus 11.00% and adjusting the amortization schedule to defer $42.0 million in principal payments through July 2023, with final payment in October 2024.

On December 20, 2023, Oportun RF, LLC was amended to provide for the exclusion of certain events with respect to Oportun Funding XIV, LLC, a subsidiary of the Company, including a Rapid Amortization Event (as defined in the Sixth RF Indenture Amendment), the release of the RF Issuer’s (as defined in the Sixth RF Indenture Amendment) lien on certain residual certificates and notes, and makes certain other immaterial changes.

On March 8, 2024, the Acquisition Financing facility (Oportun RF, LLC) was further amended to provide for a three-month principal payment holiday for the months of March, April and May 2024, in amounts equal to $5.7 million per month.

addition, the amendment extended the term of the Acquisition Financing facility to January 10, 2025.

Corporate Financing

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The term loan now bears interest at (a) an amount payable in cash equal to 1-month term SOFR plus 9.00% plus (b) an amount payable in cash or in kind, at our option, equal to 3.00%.

As of September 30, 2023, we were in compliance with all covenants and requirements on our outstanding debt and available credit.

On March 12, 2024, the Company entered into an amendment, which includes modifications to the minimum asset coverage ratio covenant levels, provides for an interest rate step-up of 3.00% per annum for certain months beginning in August 2024 in which the asset coverage ratio is less than 1.00 to 1.00, and requires certain principal payments in amounts equal to $5.7 million per month to be made on the last business day of each of March, April and May 2024.

In addition, the Third Amendment requires principal payments equal to 100% of the net cash proceeds of any indebtedness junior in priority to the obligations under the Corporate Financing.

As of March 31, 2024, we were in compliance with all covenants and requirements on our outstanding debt and available credit.

For more information regarding our Secured Financing facilities and Acquisition and Corporate Financing, see Note 8, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Asset-Backed Borrowings at Amortized Cost

On June 16, 2023, we entered into a forward flow whole loan sale agreement with an institutional investor.

Pursuant to this agreement, we have a commitment to sell up to $300.0 million of our personal loan originations over the next twelve months.

We will continue to service these loans upon transfer of the receivables.

While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes.

As part of this agreement, during the three months ended September 30, 2023, we transferred loans receivable totaling $120.0 million.

On August 3, 2023, we entered into a forward flow whole loan sale agreement with an institutional investor.

Pursuant to this agreement, we have a commitment to sell up to $400.0 million of our personal loan originations over the next twelve months.

We will continue to service these loans upon transfer of the receivables.

While the economics of this transaction are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes.

As part of this agreement, during the three months ended September 30, 2023, we transferred loans receivable totaling $105.9 million.

Structured loan sales

In March 2022, we participated in a securitization and sold loans through the issuance of amortizing asset-backed notes secured by a pool of our unsecured and secured personal installment loans.

We also sold our share of the residual interest in the pool.

The sold loans had an aggregate unpaid principal balance of approximately $227.6 million.

For further information on the structured loan sale transactions, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Other loan sales

We have entered into agreements to sell certain populations of our personal loans and credit card receivables from time to time, including non-performing loans and credit card receivables originated as held for investment, of approximately $38.2 million during the first quarter of 2023, of approximately $19.5 million during the second quarter of 2023, and of approximately $32.5 million during the third quarter of 2023.

During 2023, we entered into agreements to sell certain populations of our personal loans and credit card receivables from time to time, including non-performing loans and credit card receivables originated as held for investment.

As of March 31, 2024 , we sold approximately $34.9 million of such loans.

For further information on these sales, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

Whole loan sales

Through March 4, 2022, we had a commitment to sell to a third-party institutional investor 10% of our unsecured loan originations that satisfy certain eligibility criteria, and an additional 5% subject to certain eligibility criteria and minimum and maximum volumes.

We chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022.

In November 2022, we entered into a forward flow whole loan sale agreement with an institutional investor.

Pursuant to this agreement, we have a commitment to sell a minimum of $2.0 million of our unsecured loan originations each month, with an option to sell an additional $4.0 million each month, over an approximately one-year period, subject to certain eligibility criteria.

The originations of loans sold and held for sale during the three and nine months ended September 30, 2023 was $15.9 million and $41.6 million, respectively.

The originations of loans sold and held for sale during the three months ended March 31, 2024 was $22.2 million.

For further information on the whole loan sale transactions, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.

In November 2023, the Company entered into a forward flow whole loan sale agreement with an institutional investor to sell up to $70 million of its unsecured personal loans over a one-year period beginning December 2023.

Bank Partnership Program and Servicing Agreement

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Pursuant to these agreements, we have a commitment to sell up to $300 million and $400 million of its personal loan originations over the following twelve-month periods.

If our available cash balances are insufficient to satisfy our liquidity requirements, we will seek additional debt or equity financing and we may have to take additional actions to decrease expenses, curtail the origination of loans, and our ability to continue to support our growth and to respond to challenges could be impacted.

During October 2023, we closed Oportun CL Trust 2023-A Asset-backed notes in the amount of $197 million.

Lastly, during February 2024, we announced the issuance of $199.5 million of Series 2024-1 fixed rate asset-backed notes.

If our available cash balances are insufficient to satisfy our liquidity requirements, we will seek additional debt or equity financing and we may have to take

additional actions to decrease expenses, curtail the origination of loans, and our ability to continue to support our growth and to respond to challenges could be impacted.

In a rising interest rate environment, our ability to issue additional equity or incur debt may be impaired and our borrowing costs may increase.

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Recently Issued Accounting Pronouncements

See Note 2 of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.

See Note 2, Summary of Significant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk as previously disclosed in our 2022 Form 10-K.

Interest rates, credit trends and other macroeconomic conditions could continue to have an impact on market volatility which could impact our financial results .

As a "Smaller Reporting Company" as defined by Item 10 of Regulations S-K, the Company is not required to provide this information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis