What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-10 · 233 added, 158 removed, 588 unchanged (40% of the section changed)

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• our ability to effectively estimate the fair value of our loans receivable held for investment and our asset-backed notes;

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

• our expectations regarding the effect of and trends in 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, and realizing the benefits and synergies from acquisitions;

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• 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;

• our ability to successfully manage and complete the sale of our credit card portfolio;

• our expectations regarding our costs and seasonality;

• our ability to successfully build our brand and protect our reputation from negative publicity;

• our ability to expand our digital capabilities for origination and increase the volume of loans originated through our digital channels;

• our ability to increase the effectiveness of our marketing efforts;

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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 company;

• our ability to provide an attractive and comprehensive user experience through our 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 manage fraud risk, including regulatory intervention and impacts on our brand reputation;

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

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• our ability to attract, integrate and retain qualified employees;

• the effect of macroeconomic conditions on our business, including the impact of rising interest rates and recession or slowing growth;

• the effect of macroeconomic conditions on our business, including the impact of elevated interest rates and inflation;

• our ability to effectively manage and expand the capabilities of our contact centers, outsourcing relationships and other business operations abroad;

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Department of the Treasury since 2009.

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

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

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 unsecured and secured personal loans.

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

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.

As of June 30, 2024 our personal loan products are also available over the phone or through our 130 retail locations, and 519 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 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.

As of June 30, 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 33.5%, respectively.

The average loan size for loans we originated during the three months ended June 30, 2024 was $3,252.

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.

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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 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.

As of June 30, 2024, we originated unsecured personal loans in 3 states through state licenses and in 38 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 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.

The average loan size for secured personal loans we originated during the three months ended June 30, 2024 was $6,789.

As of June 30, 2024, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 51 months and 29.9%, 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 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 .

Our secured personal loans are currently offered in 6 states 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 June 30, 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 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, our savings product has helped members save more than $10.5 billion.

The average APR of the outstanding credit card receivables was 29.8% as of June 30, 2024 .

The average credit line for credit cards activated during the three months ended June 30, 2024 was $999.

On November 6, 2023, we announced that we were exploring strategic options for our credit card portfolio.

On June 21, 2024, we entered into a nonbinding letter of intent with a third-party to sell the credit card receivable portfolio originated under our credit card program.

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

Members link their bank account with the platform and 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.

Since 2015, our savings product has helped members save more than $10.8 billion and helped our members save an average of more than $1,800 annually.

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

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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.

In higher interest rate environments we may consider issuing amortizing bonds.

In higher interest rate environments we have also issued amortizing bonds.

Workforce Optimization and Streamlining Operations

On March 12, 2024, during our fourth quarter and full year earnings call, we announced a plan to reduce operating expenses by an additional $30 million on an annualized basis to continue to streamline efficiency and improve profitability.

In connection with the plan, on May 22, 2024, we took a series of personnel and other cost saving measures inclusive of roles eliminated due to recent attrition, representing a reduction of approximately 12% of the Company’s corporate staff, which excludes retail and contact center agents.

We incurred non-recurring, pre-tax charges of $2.0 million, consisting primarily of severance payments, employee benefits contributions and related costs which were recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2024.

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.

The income statement impact of $0.2 million and $0.9 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 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.

During 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 $8.4 million and $15.2 million was recorded through General, administrative and other on the Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2023 , respectively.

Key Financial and Operating Metrics

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As of or for the Three Months

Ended March 31,

Ended June 30,

As of or for the Six Months

Ended June 30,

(in thousands of dollars) 2024 2023 2024 2023

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30+ Day Delinquency Rate

5.0 % 5.3 % 5.0 % 5.3 %

Annualized Net Charge-Off Rate

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Aggregate Originations

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.

Aggregate Originations decreased to $434.8 million for the three months ended June 30, 2024 from $485.1 million for the three months ended June 30, 2023, representing a 10.4% decrease.

The decrease is primarily driven by a reduction in average loan size from $4,113 to $3,261 for the three months ended June 30, 2023 and June 30, 2024, respectively, which was partially offset by a 15,370 increase in the number of loans originated.

We originated 133,310 and 117,940 loans for the three months ended June 30, 2024 and 2023, respectively.

Aggregate Originations decreased to $773.0 million for the six months ended June 30, 2024 from $893.1 million for the six months ended June 30, 2023, representing a 13.4% decrease.

The decrease is primarily driven by a reduction in average loan size from $4,096 to $3,339 for the three months ended June 30, 2023 and June 30, 2024, respectively, which was partially offset by a 13,435 increase in the number of loans originated.

We originated 231,497 and 218,062 loans for the six months ended June 30, 2024 and 2023, respectively.

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.

Portfolio yield increased to 33.9% for the three months ended June 30, 2024, from 32.2% for the three months ended June 30, 2023, and increased to 33.2% for the six months ended June 30, 2024, from 31.8% for the six months ended June 30, 2023, primarily attributable to higher fees on loans originated through our bank partnership.

30+ Day Delinquency Rate

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

Our 30+ Day Delinquency Rate was 5.0% and 5.3% as of June 30, 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 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.

Annualized Net Charge-Off Rate for the three months ended June 30, 2024 and 2023 was 12.3% and 12.5%, respectively.

Annualized Net Charge-Off Rate for the six months ended June 30, 2024 and 2023 was 12.2% and 12.3%, respectively.

Net Charge-offs for the three and six months ended June 30, 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.

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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 throughout 2024.

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

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

Historical Credit Performance

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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.

Continued elevated charge-offs for the three months ended June 30, 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 six months ended June 30, 2024, the back book continued to season and made-up 34% of gross charge-offs while only making up approximately 17% 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 half of 2024 as we continued to tighten credit standards throughout the second half of 2023.

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 at the earlier of when the account is determined to be uncollectible or when it is 180 days contractually past due.

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

*Numbers shown reflect year-to-date amounts for the six months ended June 30, 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 March 31, 2024 divided by the total origination loan volume for that year.

Net lifetime loan loss rates equal the net lifetime loan losses for a given year through June 30, 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;

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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 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.

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.

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.

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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 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%

Net lifetime loan losses as of June 30, 2024 as a percentage of original principal balance 6.1% 7.1% 8.0% 8.2% 9.8% 10.8% 9.0% 17.0%* 15.0%* 1.4%*

Outstanding principal balance as of June 30, 2024 as a percentage of original amount disbursed —% —% —% —% —% 0.4% 0.8% 8.1% 38.6% 81.3%

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

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Results of Operations

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,

The following tables and related discussion set forth our Condensed Consolidated Statements of Operations (Unaudited) for each of the three and six months ended June 30, 2024 and 2023.

Three Months Ended June 30, Six Months Ended June 30,

(in thousands of dollars) 2024 2023 2024 2023

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Total operating expenses 109,182 136,096 218,824 282,434

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

Income before taxes (49,149) (17,471) (79,624) (159,004)

Income tax benefit (18,124) (2,572) (22,160) (42,015)

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Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

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Interest Income.

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.

Total interest income decreased by $9.1 million, or 3.8%, from $240.5 million for the three months ended June 30, 2023 to $231.4 million for the three months ended June 30, 2024.

This decrease was primarily attributable to a decline in our Average Daily Principal Balance, which decreased from $2.99 billion for the three months ended June 30, 2023 to $2.75 billion for the three months ended June 30, 2024, a decrease of 8.3%.

The decrease was partially offset by an increase in portfolio yield of 167 basis points in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Total interest income decreased by $16.1 million, or 3.4%, from $478.1 million for the six months ended June 30, 2023 to $462.0 million for the six months ended June 30, 2024.

This decrease was primarily attributable to a decline in our Average Daily Principal Balance, which decreased from $3.03 billion for the six months ended June 30, 2023 to $2.80 billion for the six months ended June 30, 2024, a decrease of 7.7%.

The decrease was partially offset by an increase in portfolio yield of 139 basis points in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Non-interest income.

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.

Total non-interest income decreased by $7.1 million, or 27.1%, from $26.1 million for the three months ended June 30, 2023 to $19.0 million for the three months ended June 30, 2024.

This decrease is primarily due to a $8.2 million decrease in fees related to our Pathward program, and a $1.4 million decrease in subscription revenue related to our Set & Save product.

These decreases were partially offset by a $2.8 million increase in interest earned on Set & Save member accounts.

Total non-interest income decreased by $9.1 million, or 18.9%, from $48.0 million for the six months ended June 30, 2023 to $38.9 million for the six months ended June 30, 2024.

This decrease is primarily due to a $7.8 million decrease in fees related to our Pathward program, and $3.0 million decrease in subscription revenue related to our Set & Save product.

These decreases were partially offset by a $2.2 million increase in interest earned on Set & Save member accounts.

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.

Interest expense

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

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Interest expense.

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.

Interest expense increased by $12.8 million, or 30.9%, from $41.4 million for the three months ended June 30, 2023 to $54.2 million for the three months ended June 30, 2024.

The increase was driven by a 215 basis point increase in our Cost of Debt partially offset by a decrease to our Average Daily Debt Balance.

Our Average Daily Debt Balance decreased from $2.98 billion for the three months ended June 30, 2023 to $2.82 billion for the three months ended June 30, 2024, a decrease of 5.3%.

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 funding at current interest rates.

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 Secured Financing and asset-backed notes.

Interest expense increased by $28.3 million, or 35.1%, from $80.4 million for the six months ended June 30, 2023 to $108.7 million for the six months ended June 30, 2024.

The increase was driven by a 222 basis point increase in our Cost of Debt partially offset by a decline in our Average Daily Debt Balance.

Our Average Daily Debt Bala nce decreased from $2.99 billion for the six months ended June 30, 2023 to $2.86 billion for the six months ended June 30, 2024, a decrease of 4.5%.

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.

Total net increase (decrease) in fair value

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Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

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Fair value mark-to-market adjustment on Loans Receivable at Fair Value (1)

$ (36,692) $ 14,186 $ (50,878) * $ (7,754) $ (23,133) $ 15,379 *

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

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* Not meaningful

(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.

(1) The fair value mark-to-market adjustment on Loans Receivable at Fair Value includes the fair value mark-to-market adjustment of $(36.2) million related to the credit card portfolio reclassified to held for sale.

See Note 5 , Loans Held for Sale and Loans Sol d in the Notes to the Condensed Financial Statements (Unaudited) included elsewhere in this report for further information on Credit cards receivable held for sale.

(2) The fair value mark on loans sold shown for the three and six months ended June 30, 2024 includes $(18.4) million related to the cumulative fair value mark on the loans sold in other loan sales in Q 2 2024.

The fair value mark on loans sold shown for the three and six months ended June 30, 2023 includes $(18.9) million related to the cumulative fair value mark on loans sold in other loan sales in Q 2 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.

Net increase (decrease) in fair value.

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

Net decrease in fair value for the three months ended June 30, 2024 was $136.1 million.

This amount represents a total fair value mark-to-market decrease of $37.7 million, and $83.9 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(36.7) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) $(36.2) million mark-to-market adjustment in the fair value of our credit cards receivable related to management's decision to sell the portfolio and (b) $(0.5) million mark-to-market adjustment on loans receivable at fair value.

The $(0.5) million mark-to-market on loans receivable at fair value was driven by a 0.9% decrease in weighted average life of the portfolio offset by a 44 basis point decrease in the discount rate and a 4 basis point decrease in the remaining cumulative charge offs.

The $(1.9) 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 June 30, 2024 also includes a $(18.4) million adjustment related to the fair value mark on the loans sold as part of the other loan sales for the three months ended June 30, 2024.

Net decrease in fair value for the three months ended June 30, 2023 was $106.5 million.

This amount represents a total fair value mark-to-market increase of $7.8 million, and $93.5 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.

The total fair value mark-to-market adjustment consists of a $14.2 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a decrease in remaining cumulative charge-offs from 11.72% as of March 31, 2023 to 11.35% as of June 30, 2023, partially offset by (b) a decrease in the weighted average life from 0.963 years as of March 31, 2023 to 0.955 years as of June 30, 2023 and (c) an increase in the discount rate from 11.07% as of March 31, 2023 to 11.10% as of June 30, 2023.

The $(12.6) million mark-to-market adjustment on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.

The total net decrease in fair value for the three months ended June 30, 2023 also includes a $(18.9) million adjustment related to the fair value mark on the loans sold as part of the other loans sales for the three months ended June 30, 2023.

Net decrease in fair value for the six months ended June 30, 2024 was $253.0 million.

This amount represents a total fair value mark-to-market decrease of $34.7 million, and $169.2 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(7.8) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) $(36.2) million mark-to-market adjustment in the fair value of our credit cards receivable related to management's decision to sell the portfolio, and (b) $28.4 million mark-to-market adjustment on loans receivable at fair value.

The $28.4 million mark-to-market on loans receivable at fair value was driven by (a) a decrease in discount rate from 10.10% as of December 31, 2023 to 8.66% as of June 30, 2024, (b) a decrease in remaining cumulative charge-offs from 11.80% as of December 31, 2023 to 11.57% as of June 30, 2024, and (c) an increase in average life from 1.006 as of December 31, 2023 to 1.015 years as of June 30, 2024.

The $(29.0) million mark-to-market adjustment on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.

The total net increase (decrease) in fair value for the six months ended June 30, 2024 includes $(51.8) million in adjustments related to the fair value mark on loans sold as part of the other loan sales for the six months ended June 30, 2024 .

Net decrease in fair value for the six months ended June 30, 2023 was $322.2 million.

This amount represents a total fair value mark-to-market decrease of $76.7 million, and $185.1 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(23.1) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a decrease in average life from 0.998 as of December 31, 2022 to 0.955 years as of June 30, 2023 and (b) an increase in remaining cumulative charge-offs from 10.38% as of December 31, 2022 to 11.35% as of June 30, 2023, partially offset by (c) a decrease in discount rate from 11.48% as of December 31, 2022 to 11.10% as of June 30, 2023.

The $(61.5) million mark-to-market adjustment on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.

The total net increase (decrease) in fair value for the six months ended June 30, 2023 includes $(56.1) in adjustments related to the fair value mark on loans sold as part of the other loan sales for the six months ended June 30, 2023.

We expect to continue to see volatility in fair value primarily as a result of macroeconomic conditions.

Charge-offs, net of recoveries

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

4 unchanged sentences

Charge-offs, net of recoveries.

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.

Our Annualized Net Charge-Off Rate decreased to 12.3% and 12.2% for the three and six months ended June 30, 2024, respectively, from 12.5% and 12.3% for the three and six months ended June 30, 2023, respectively.

Net charge-offs for the three and six months ended June 30, 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.

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

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 the loan is 120 days contractually past due and we charge-off a credit card account w hen it is 180 days contractually past due.

7 unchanged sentences

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

3 unchanged sentences

Technology and facilities.

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.

Technology and facilities expense decreased by $14.5 million, or 26.3%, from $55.1 million for the three months ended June 30, 2023 to $40.6 million for the three months ended June 30, 2024.

The decrease is primarily due to a $6.5 million decrease in wages, salaries and benefits as a result of our workforce optimization efforts that occurred in 2023 and 2024, $3.1 million decrease in service costs, $2.4 million decrease in software and office rent, $2.1 million decrease in outsourcing and professional fees, and $1.2 million decrease in depreciation and other expenses.

These decreases were offset by $1.2 million lower capitalization of internally developed software.

Technology and facilities expense decreased by $24.3 million, or 21.7%, from $112.0 million for the six months ended June 30, 2023 to $87.7 million for the six months ended June 30, 2024.

The decrease is primarily due to $15.0 million decrease in wages, salaries and benefits as a result of our workforce optimization efforts that occurred in 2023 and 2024, $4.5 million decrease in outsourcing and professional fees, $3.7 million decrease in service costs and $3.6 million decrease in software and office rent.

These decreases were offset by $4.5 million lower capitalization of internally developed software.

Sales and marketing

3 unchanged sentences

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

5 unchanged sentences

Sales and marketing.

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.

Sales and marketing expenses to acquire our members decreased by $2.9 million, or 15.3%, from $19.2 million for the three months ended June 30, 2023 to $16.3 million for the three months ended June 30, 2024 .

The decrease is attributable to a $2.1 million decrease in wages, salaries, benefits, bonus and stock compensation expense due to our streamlining operations efforts.

As a result of our increase in number of loans originated during the three months ended June 30, 2024, our CAC decreased by 25.2% from $163 for the three months ended June 30, 2023 to $122 for the three months ended June 30, 2024.

Sales and marketing expenses to acquire our members decreased by $6.1 million, or 15.9%, from $38.4 million for the six months ended June 30, 2023 to $32.3 million for the six months ended June 30, 2024 .

The decrease is attributable to a $4.7 million net decrease in wages, salaries and benefits related to our streamlining operation efforts, and a $1.4 million decrease in service costs.

As a result of our increase in number of loans originated during the six months ended June 30, 2024, our CAC decreased by 21.0% from $176 for the six months ended June 30, 2023, to $139 for the six months ended June 30, 2024.

We expect sales and marketing expense to be consistent in 2024 compared to 2023, as we continue to optimize marketing investment allocation across channels.

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

Period-to-period Change Six Months Ended

Period-to-period Change

2 unchanged sentences

Percentage of total revenue 8.7 % 11.5 % 9.3 % 12.9 %

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.

Personnel expense decreased by $8.9 million, or 28.8%, from $30.8 million for the three months ended June 30, 2023 to $21.9 million for the three months ended June 30, 2024, primarily driven by our workforce optimization efforts which occurred in 2023 and 2024.

Personnel expense decreased by $21.7 million, or 31.8%, from $68.1 million for the six months ended June 30, 2023 to $46.4 million for the six months ended June 30, 2024, primarily driven by our workforce optimization efforts in 2023 and 2024.

Driven by our 2023 and 2024 workforce optimization efforts, we expect our personnel expense to decrease in 2024 compared to 2023.

Outsourcing and professional fees

6 unchanged sentences

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

3 unchanged sentences

Outsourcing and professional fees.

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.

Outsourcing and professional fees decreased by $1.5 million, or 15.4%, from $9.9 million for the three months ended June 30, 2023 to $8.4 million for the three months ended June 30, 2024.

The decrease is primarily attributable to $1.7 million decrease in outsourcing services and a $0.7 million decrease in professional fees and other expenses.

These decreases were partially offset by a $0.8 million increase in debt recovery and court filing fees, legal fees, and consulting services.

Outsourcing and professional fees decreased by $5.1 million, or 21.5%, from $23.7 million for the six months ended June 30, 2023 to $18.6 million for the six months ended June 30, 2024.

The decrease is primarily attributable to $5.2 million decrease in outsourcing and consulting 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

Period-to-period Change Six Months Ended

Period-to-period Change

3 unchanged sentences

General, administrative and other.

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.

General, administrative and other expense increased by $0.9 million, or 4.2%, from $21.1 million for the three months ended June 30, 2023 to $22.0 million for the three months ended June 30, 2024, due to $6.4 million increase related to the impairment of the San Carlos office right-of-use asset and disposal of related fixed assets and a $1.7 million increase due to partial debt extinguishment expense not present in the prior period.

These increases were partially offset by a $5.4 million decrease due to lower reserve related to our workforce optimization efforts in 2024 compared to 2023, a $1.4 million decrease in acquisition and integration related expenses and a $0.8 million decrease related to our streamlining operations efforts.

General, administrative and other expense decreased by $6.5 million, or 16%, from $40.3 million for the six months ended June 30, 2023 to $33.8 million for the six months ended June 30, 2024, primarily due to a $12.1 million decrease due to a lower reserve related to our workforce optimization efforts in 2024 compared to 2023, $2.4 million decrease in acquisition and integration related expenses, and a $1.2 million decrease in postage and printing.

These increases were partially offset by $6.4 million impairment of the San Carlos office right-of-use asset and disposal of related fixed assets and $3.7 million increase due to a partial debt extinguishment expense not present in the prior period and other expenses.

Income taxes consist of U.S.

federal, state and foreign income taxes, if any.

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

For the periods ended June 30, 2024 and 2023, we recognized tax expense (benefit) attributable to U.S.

federal, state and foreign income taxes.

Three Months Ended

Period-to-period Change Six Months Ended

Period-to-period Change

3 unchanged sentences

Effective tax rate 36.9 % 14.7 % 27.8 % 26.4 %

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 .

Income tax benefit.

Income tax benefit increased by $15.6 million or 605%, from $2.6 million for the three months ended June 30, 2023 to $18.1 million benefit for the three months ended June 30, 2024, primarily as a result of having a larger pretax loss for the three months ended June 30, 2024.

Income tax benefit decreased by $19.9 million or 47%, from $42.0 million benefit for the six months ended June 30, 2023 to $22.2 million benefit for the six months ended June 30, 2024, primarily as a result of having a lower pretax loss for the six months ended June 30, 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.

As of June 30, 2024 , we have $69.4 million of U.S.

net deferred tax assets, which includes $91.5 million of tax-effected net operating losses, tax credits, and other carryforwards that can be used to offset future U.S.

taxable income.

37 unchanged sentences

• 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.

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

The table below reflects the application of this methodology for the six 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

Jun 30, 2024 (1)

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

11 unchanged sentences

Discount Rate 8.66 % 9.10 % 10.10 % 11.15 % 11.10 % 11.07 %

(1) On June 21, 2024, we entered into a nonbinding letter of intent with a third-party to sell the credit card receivable portfolio and was classified as held-for-sale at June 30, 2024.

As such, the credit card portfolio was excluded from June 30, 2024 data.

All prior periods presented in the table above include the fair value components of the credit card receivables portfolio.

The illustrative table included above is designed to assist investors in understanding the impact of our election of the fair value option.

Non-GAAP Financial Measures

We believe that the provision of non-GAAP financial measures in this report, including Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Adjusted Operating Efficiency and Adjusted Return on Equity, can provide useful measures for period-to-period comparisons of our core business and useful information to investors and others in understanding and evaluating our operating results.

We believe that the provision of non-GAAP financial measures in this report, including Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Adjusted Operating Expense, Adjusted Operating Expense Ratio, Adjusted Operating Efficiency and Adjusted Return on Equity, can provide useful measures for period-to-period comparisons of our core business and useful information to investors and others in understanding and evaluating our operating results.

However, non-GAAP financial measures are not calculated in accordance with United States generally accepted accounting principles, or GAAP, and should not be considered as an alternative to any measures of financial performance calculated and presented in accordance with GAAP.

33 unchanged sentences

• 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.

• We exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization efforts, 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.

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

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

3 unchanged sentences

Total fair value mark-to-market adjustment $ (37,652) $ 7,821 $ (34,661) $ (76,697)

(1) The fair value mark-to-market adjustment on loans receivable at fair value excludes mark-to-market adjustments associated with loans sold.

See Note 5 , Loans Held for Sale and Loans Sold in the Notes to the Condensed Financial Statements (Unaudited) included elsewhere in this report for further information on Credit cards receivable held for sale.

In addition, t he fair value mark-to-market adjustment on loans receivable at fair value excludes mark-to-market adjustments associated with loans sold.

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 months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

Adjusted EBITDA (in thousands)

2024 2023 (1)

Net income (loss) $ (31,025) $ (14,899) $ (57,464) $ (116,989)

1 unchanged sentence

Interest on corporate financing

13,229 12,611 27,123 22,398

Depreciation and amortization 13,005 13,760 26,203 27,149

1 unchanged sentence

Workforce optimization expenses

2,207 8,408 3,007 15,226

Other non-recurring charges

10,273 580 13,804 3,089

Fair value mark-to-market adjustment 37,652 (7,821) 34,661 76,697

1 unchanged sentence

(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.

The values for three and six months ended June 30, 2023 for Adjusted EBITDA shown in the table above have been revised and presented on a comparable basis, prior to these revisions the values would have been $4.3 million and $(20.1) million, respectively.

Adjusted Net Income (Loss)

3 unchanged sentences

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.

• We believe it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization efforts, 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.

1 unchanged sentence

• 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,

The following table presents a reconciliation of net income to Adjusted Net Income (Loss) for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

Adjusted Net Income (Loss) (in thousands)

2024 2023 (2)

Net income (loss) $ (31,025) $ (14,899) $ (57,464) $ (116,989)

2 unchanged sentences

Workforce optimization expenses

2,207 8,407 3,007 15,226

Other non-recurring charges

10,273 580 13,804 3,089

Net decrease in fair value of credit cards receivable

36,177 — 36,177 —

Mark-to-market adjustment on asset-backed notes

5 unchanged sentences

27.0 % 27.0 % 27.0 % 27.0 %

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

(1) Income tax rate for the three and six months ended June 30, 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.

The values for three and six months ended June 30, 2023 for Adjusted Net Income (Loss) shown in the table above have been revised and presented on a comparable basis, prior to these revisions the values would have been $2.3 million and $(85.9) million, respectively.

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 Adjusted EPS for the three months ended March 31, 2024 and 2023.

The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the three and six months ended June 30, 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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

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

2024 2023 (1)

Diluted earnings (loss) per share $ (0.78) $ (0.41) $ (1.46) $ (3.31)

7 unchanged sentences

(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).

The values for three and six months ended June 30, 2023 for Adjusted EPS shown in the table above have been revised and presented on a comparable basis, prior to these revisions the values would have been $0.06 and $(2.43), respectively.

Return on Equity and Adjusted Return on Equity

2 unchanged sentences

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 months ended March 31, 2024 and 2023.

The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity as of and for the three and six months ended June 30, 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 March 31,

As of or for the Three Months Ended June 30, As of or for the Six Months Ended June 30,

(in thousands) 2024 2023 (1)

2024 2023 (1)

Return on Equity (33.9) % (13.1) % (30.5) % (46.9) %

4 unchanged sentences

(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, and other non-recurring charges divided by total revenue.

The values for three and six months ended June 30, 2023 for Adjusted Return on Equity shown in the table above have been revised and presented on a comparable basis, prior to these revisions the values would have been 2.0% and (34.4)%, respectively.

Adjusted Operating Expense, Adjusted Operating Efficiency and Adjusted Operating Expense Ratio

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

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 months ended March 31, 2024 and 2023:

As of or for the Three Months Ended March 31,

We define Adjusted Operating Efficiency as total Adjusted Operating Expense divided by total revenue.

We define Adjusted Operating Expense Ratio as Adjusted Operating Expense divided by Average Daily Principal Balance.

We believe Adjusted Operating Expense is an important measure because it allows management, investors and our Board to evaluate and compare its operating costs from period to period, excluding the impact of non-cash, stock-based compensation expense and certain non-recurring charges.

We believe Adjusted Operating Efficiency and Adjusted Operating Expense Ratio are important measures because they allow management, investors and our Board to evaluate how efficiently we are managing costs relative to revenue and Average Daily Principal Balance.

The following table presents a reconciliation of Operating Efficiency to Adjusted Operating Efficiency, Operanting Expense to Adjusted Operating Expense and Operating Expense Ratio to Adjusted Operating Expense Ratio for the three and six months ended June 30, 2024 and 2023:

As of or for the Three Months Ended June 30, As of or for the Six Months Ended June 30,

(in thousands) 2024 2023 (1)

2024 2023 (1)

Operating Efficiency 43.6 % 51.1 % 43.7 % 53.7 %

6 unchanged sentences

Other non-recurring charges (9,876) (344) (13,014) (2,628)

(3,138) (2,284)

Total adjusted operating expenses $ 94,095 $ 122,960 $ 195,817 $ 255,696

Adjusted Operating Efficiency 37.6 % 46.1 % 39.1 % 48.6 %

(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 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%.

Average Daily Principal Balance

$ 2,745,667 $ 2,993,598 $ 2,798,654 $ 3,031,639

Operating Expense Ratio

16.0 % 18.2 % 15.7 % 18.8 %

Adjusted Operating Expense Ratio

13.8 % 16.5 % 14.1 % 17.0 %

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

The values for three and six months ended June 30, 2023 shown in the table above have been revised and presented on a comparable basis, prior to these revisions the values would have been 43.4% and 45.9%, respectively.

Liquidity and Capital Resources

7 unchanged sentences

The following table summarizes our total liquidity reserves:

March 31, 2024

(in thousands) Amount available

June 30, 2024

(in thousands) Total capacity

Amount borrowed/utilized

1 unchanged sentence

Cash and cash equivalents

$ 72,871 N/A $ 72,871

Restricted cash

163,765 N/A 163,765

Secured financing

7 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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Operating Activities

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.

Our net cash provided by operating activities was $193.6 million and $179.4 million for the six months ended June 30, 2024 and 2023, 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.

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.

The $14.3 million increase in our net cash provided by operating activities is primarily driven by a $59.5 million decrease in our Net Loss, a $20.5 million decrease in our deferred tax asset, partially offset by a $69.2 million decline in our fair value mark to market adjustment for the current year compared to prior year, respectively.

Investing Activities

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 net cash used in investing activities was $(27.0) million and $(104.0) million for the six months ended June 30, 2024 and 2023, respectively.

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

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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 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.

The change in our net cash used in investing activities is due to $101.2 million lower loan disbursements which were partially offset by a $35.7 million decrease in repayments of loan principal and $10.4 million lower capitalization of system development costs for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Financing Activities

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.

Our net cash used in financing activities was $(136.0) million and $(76.8) million for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, net cash used in financing activities was primarily driven by amortization payments on our Series 2021-A, Series 2021-B, 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, CCW and Acquisition and Corporate Financing facilities, partially offset by borrowings under our asset-backed borrowings at amortized cost.

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

Sources of Funds

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Asset-Backed Securitizations

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

As of June 30, 2024, we had $1.9 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.

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

As of June 30, 2024, we were in compliance with all covenants and requirements of all our asset-backed notes.

Secured Financings

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.

As of June 30, 2024 , we had Secured Financing facilities with warehouse lines of $680.0 million in the aggregate with undrawn capacity of $523.3 million.

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

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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.

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

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

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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.

As part of this agreement, during the six months ended June 30, 2024, we transferred loans receivable totaling $123.2 million, bringing the total loans receivable sold under the agreement to $319.1 million.

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

On April 26, 2024, we amended the agreement to extend the term through October 2024 and committed to sell $150.0 million of personal loan originations.

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

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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.

As part of this agreement, during the six months ended June 30, 2024, we transferred loans receivable totaling $70.6 million, bringing the total loans receivable sold under the agreement to $291.1 million.

Acquisition Financing

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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.

In 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%.

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.

On March 12, 2024, the Company entered into an amendment (the “Third 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 required 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 future issuance of indebtedness junior in priority to the obligations under the Corporate Financing.

As of June 30, 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.

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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 the six months ended June 30, 2024 , we sold approximately $54.1 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.

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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 months ended March 31, 2024 was $22.2 million.

The originations of loans sold and held for sale during the six months ended June 30, 2024 was $28.4 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.

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We do not have any significant unused sources of liquid assets.

On the Second Amendment Closing Date, we borrowed $20.8 million of Incremental Tranche A-1 Loans and borrowed an additional $4.2 million of Incremental Tranche A-2 Loans on March 27, 2023.

Under the Amended Credit Agreement, we borrowed an additional $25.0 million of Incremental Tranche B Loans on May 5, 2023 and an additional amount of $25.0 million of Incremental Tranche C Loans on June 30, 2023.

During June 2023 and August 2023, we entered into forward flow whole loan sale agreements with two institutional investors.

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.

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.

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

If we raise additional funds through the issuance of additional debt, the agreements governing such debt could contain covenants that would restrict our operations and such debt would rank senior to shares of our common stock.

The sale of equity may result in dilution to our stockholders and those securities may have rights senior to those of our common stock.

We may require additional capital beyond our currently anticipated amounts and additional capital may not be available on reasonable terms, or at all.

We may require additional capital beyond our currently anticipated amounts and additional capital may not be available on reasonable terms,

Critical Accounting Policies and Significant Judgments and Estimates

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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