What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-09 · 203 added, 176 removed, 645 unchanged (37% of the section changed)

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

• our ability to successfully manage and complete th e refinance of our Corporate Financing;

• our expectations regarding our costs and seasonality;

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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 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 financial services company;

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

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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.

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

With intelligent borrowing, savings, and budgeting capabilities, we empower members with the confidence to build a better financial future .

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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 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.

As of September 30, 2024 our personal loan products are also available over the phone or through our 129 retail locations, and 500 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 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.

As of September 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 33.9%, respectively.

The average loan size for loans we originated during the three months ended September 30, 2024 was $3,173.

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 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.

As of September 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 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.

The average loan size for secured personal loans we originated during the three months ended September 30, 2024 was $7,088.

As of September 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 30.7%, 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 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 Cards - We lau nched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019.

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 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.

The average APR of the outstanding credit card receivables was 34.1% as of September 30, 2024 .

The average credit line for credit cards activated during the three months ended September 30, 2024 was $1,000.

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

On November 12, 2024, we completed the sale of the credit cards receivable portfolio.

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.

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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.

Through this new program, we believe we will be able to offer our Lending as a Service Lead Generation program to additional partners with a much faster lead-to-market time while expanding our membership base with a true Oportun service experience.

In order to strategically realign our resources to focus on other products, on November 6, 2023, we announced the sunsetting of our embedded finance partnership with Sezzle, a provider of Buy Now Pay Later financing options, which launched in the first quarter of 2023.

In addition, we recently announced a collaboration with Western Union.

As part of these programs, Oportun originates, underwrites, and services the loan.

We believe we will be able to offer our Lending as a Service Lead Generation program to additional partners with a much faster lead-to-market time while expanding our membership base with a true Oportun service experience.

Capital Markets Funding

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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 $0.2 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.

For the nine month period ended September 30, 2024, 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).

No amount of additional workforce optimization expense was recorded for the three month period ended September 30, 2024.

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 June 30,

As of or for the Six Months

Ended June 30,

Ended September 30,

As of or for the Nine Months

Ended September 30,

(in thousands of dollars) 2024 2023 2024 2023

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Aggregate Originations

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.

Aggregate Originations decreased to $480.2 million for the three months ended September 30, 2024 from $482.7 million for the three months ended September 30, 2023, representing a 0.5% decrease.

The decrease is primarily driven by a reduction in average loan size from $3,975 to $3,244 for the three months ended September 30, 2023 and September 30, 2024, respectively, which was partially offset by a 26,591 increase in the number of loans originated.

We originated 148,022 and 121,431 loans for the three months ended September 30, 2024 and 2023, respectively.

Aggregate Originations decreased to $1,253.1 million for the nine months ended September 30, 2024 from $1,375.8 million for the nine months ended September 30, 2023, representing an 8.9% decrease.

The decrease is primarily driven by a reduction in average loan size from $4,053 to $3,302 for the nine months ended September 30, 2023 and September 30, 2024, respectively, which was partially offset by a 40,026 increase in the number of loans originated.

We originated 379,519 and 339,493 loans for the nine months ended September 30, 2024 and 2023, respectively.

Portfolio Yield

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.

Portfolio yield increased to 33.2% for the three months ended September 30, 2024, from 32.5% for the three months ended September 30, 2023, and increased to 33.2% for the nine months ended September 30, 2024, from 32.0% for the nine months ended September 30, 2023, primarily attributable to higher origination fees on loans originated through our bank partnership.

30+ Day Delinquency Rate

Our 30+ Day Delinquency Rate was 5.0% and 5.3% as of June 30, 2024 and 2023, respectively.

Our 30+ Day Delinquency Rate was 5.2% and 5.5% as of September 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 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.

Annualized Net Charge-Off Rate for the three months ended September 30, 2024 and 2023 was 11.9% and 11.8%, respectively.

The increase is primarily driven by a decrease in our Average Daily Principal balance by $212.2 million from $3.0 billion to $2.8 billion for the three months ended September 30, 2023 and September 30, 2024, respectively, partially offset by a $5.6 million decrease in Net Charge-offs.

Annualized Net Charge-Off Rate for the nine months ended September 30, 2024 and 2023 was relatively flat to 12.1%, a 6 basis points improvement.

While the Annualized Net Charge-off Rate increased for the three months ended September 30, 2024 and was flat for the nine months ended September 30, 2024, actual net charge-offs decreased by $5.6 million and $21.5 million , respectively.

This improvement was a result of significantly tightening underwriting standards in the second half of 2022 and continued 2023 efforts to tighten credit standards throughout the second half of 2023.

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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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 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 six months ended June 30, for the indicated fiscal year.

The Annualized Net Charge-Off Rate for the three months ended September 30, 2024 and 2023 was 11.9% and 11.8%, respectively.

Annualized Net Charge-Off Rate for the nine months ended September 30, 2024 and 2023 was relatively flat to 12.1%, a 6 basis points improvement .

This improvement was primarily due to a $21.5 million decrease in Net Charge-offs.

For the nine months ended September 30, 2024, the back book continued to season and made-up 30% of gross charge-offs while only making up approximately 8% of the loans receivable (excluding credit cards).

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 nine months ended September 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 June 30, 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 September 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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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.

In the second half of 2023 we did further tightening and shortened average term length which resulted in stronger performance of the 2023 vintages in the second half of the year as compared to the 2022 vintages for the same period.

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.

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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 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%

Net lifetime loan losses as of September 30, 2024 as a percentage of original principal balance 6.1% 7.1% 8.0% 8.2% 9.8% 10.8% 9.0% 17.5%* 17.0%* 3.9%*

Outstanding principal balance as of September 30, 2024 as a percentage of original amount disbursed —% —% —% —% —% 0.1% 0.5% 5.6% 30.4% 70.6%

* 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 and six months ended June 30, 2024 and 2023.

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

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, 2024 and 2023.

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

(in thousands of dollars) 2024 2023 2024 2023

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Three Months Ended

Period-to-period Change Six Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

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Interest Income.

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.

Total interest income decreased by $13.2 million, or 5.4%, from $243.3 million for the three months ended September 30, 2023 to $230.0 million for the three months ended September 30, 2024.

This decrease was primarily attributable to a decline in our Average Daily Principal Balance, which decreased from $2.97 billion for the three months ended September 30, 2023 to $2.76 billion for the three months ended September 30, 2024, a decrease of 7.2%.

The decrease was partially offset by an increase in portfolio yield of 69 basis points in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Total interest income decreased by $29.3 million, or 4.1%, from $721.3 million for the nine months ended September 30, 2023 to $692.0 million for the nine months ended September 30, 2024.

This decrease was primarily attributable to a decline in our Average Daily Principal Balance, which decreased from $3.01 billion for the nine months ended September 30, 2023 to $2.78 billion for the nine months ended September 30, 2024, a decrease of 7.5%.

The decrease was partially offset by an increase in portfolio yield of 116 basis points in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Non-interest income.

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.

Total non-interest income decreased by $5.1 million, or 20.3%, from $25.0 million for the three months ended September 30, 2023 to $19.9 million for the three months ended September 30, 2024.

This decrease is primarily due to a $2.1 million decrease in fees related to our Pathward program, a $1.8 million decrease in gain on loan sales, and a $1.7 million decrease transaction fees, servicing fees, and in subscription revenue related to our Set & Save product.

These decreases were partially offset by a $0.5 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.

Total non-interest income decreased by $14.1 million, or 19.4%, from $73.0 million for the nine months ended September 30, 2023 to $58.8 million for the nine months ended September 30, 2024.

This decrease is primarily due to a $9.9 million decrease in fees related to our Pathward program, a $2.6 million decrease in credit card related and other fees, a $2.4 million decrease in subscription revenue related to our Set & Save product, and a $1.9 million decrease in gain on loan sales.

These decreases were partially offset by a $2.7 million increase in interest earned on Set & Save member accounts.

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Three Months Ended

Period-to-period Change Six Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

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Interest expense.

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.

Interest expense increased by $8.8 million, or 18.7%, from $47.0 million for the three months ended September 30, 2023 to $55.7 million for the three months ended September 30, 2024.

The increase was driven by a 153 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.

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.

Our Average Daily Debt Balance decreased from $2.96 billion for the three months ended September 30, 2023 to $2.84 billion for the three months ended September 30, 2024, a decrease of 4.2%.

Our Cost of Debt has increased due to higher interest rates and credit spreads on current debt issuances as compared to lower cost funding issued in 2021 that is amortizing.

Interest expense increased by $37.0 million, or 29.1%, from $127.4 million for the nine months ended September 30, 2023 to $164.5 million for the nine months ended September 30, 2024.

The increase was driven by a 199 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.

Our Average Daily Debt Balance decreased from $2.98 billion for the nine months ended September 30, 2023 to $2.85 billion for the nine months ended September 30, 2024, a decrease of 4.4%.

Our Cost of Debt has increased due to higher interest rates and credit spreads on current debt issuances as compared to lower cost funding issued in 2021 that is amortizing.

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.

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Three Months Ended

Period-to-period Change Six Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

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* Not meaningful

(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.

(1) The fair value mark-to-market adjustment on Loans Receivable at Fair Value for the three and nine months ended September 30, 2024 includes a fair value mark-to-market adjustment of $1.9 million and $(34.3) million, respectively, related to the credit cards receivable portfolio reclassified as held for sale.

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.

(2) The fair value mark on loans sold shown for the three and nine months ended September 30, 2024 includes $(13.6) million related to the cumulative fair value mark on the loans sold in other loan sales in Q3 2024.

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 loans sold in other loan sales in Q3 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 June 30, 2024 was $136.1 million.

Net decrease in fair value for the three months ended September 30, 2024 was $131.6 million.

This amount represents a total fair value mark-to-market decrease of $38.6 million, and $82.3 million of charge-offs, net of recoveries on Loans Receivable at Fair Value.

The total fair value mark-to-market adjustment consists of a $(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 $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 total fair value mark-to-market adjustment consists of a $(5.4) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) an increase in remaining cumulative charge-offs from 11.57% as of June 30, 2024 to 11.94% , partially offset by (b) a decrease in the discount rate from 8.66% as of June 30, 2024 to 8.33% as of September 30, 2024 .

The $(34.6) 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.

The total net decrease in fair value for the three months ended September 30, 2024 also includes a $(13.6) 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, 2024.

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 $(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 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, and (b) an increase in the discount rate from 11.10% as of June 30, 2023 to 11.15% as of September 30, 2023, partially offset by (c) an increase in the weighted average life from 0.96 years as of June 30, 2023 to 1.00 years as of September 30, 2023 .

The $(14.9) 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.

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

Net decrease in fair value for the nine months ended September 30, 2024 was $384.6 million.

This amount represents a total fair value mark-to-market decrease of $73.3 million, and $251.6 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 total fair value mark-to-market adjustment consists of a $(13.1) 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 partially offset by (b) a decrease in discount rate from 10.10% as of December 31, 2023 to 8.33% as of September 30, 2024 , (c) a decrease in remaining cumulative charge-offs from 12.10% as of December 31, 2023 to 11.94% as of September 30, 2024, and (d) an increase in average life from 1.01 as of December 31, 2023 to 1.11 years as of September 30, 2024.

The $(63.6) million mark-to-market adjustment on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.

The total net 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.

The total net decrease in fair value for the nine months ended September 30, 2024 includes $(65.4) million in adjustments related to the fair value mark on loans sold as part of the other loan sales for the nine months ended September 30, 2024 .

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 adjustment 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, 2023 and (b) a decrease in average life from 0.998 as of December 31, 2022 to 0.995 years as of September 30, 2023, partially offset by (c) a decrease in 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 credit spreads.

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

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

1 unchanged sentence

Three Months Ended

Period-to-period Change Six 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 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.

Our Annualized Net Charge-Off Rate increased to 11.9% and remained flat at 12.1% for the three and nine months ended September 30, 2024, respectively, from 11.8% and 12.1% for the three and nine months ended September 30, 2023, respectively.

When measured in dollars, net charge-offs decreased by $5.6 million and $21.5 million for the three and nine months ended September 30, 2024, respectively.

Net charge-offs for the three and nine months ended September 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.

8 unchanged sentences

Three Months Ended

Period-to-period Change Six 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 $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.

Technology and facilities expense decreased by $12.1 million, or 23.0%, from $52.7 million for the three months ended September 30, 2023 to $40.6 million for the three months ended September 30, 2024.

The decrease is primarily due to a $5.0 million decrease in wages, salaries, bonus, benefits, and stock compensation expense as a result of our workforce optimization efforts that occurred in 2023 and 2024, $3.6 million decrease in service costs, $2.1 million decrease in outsourcing and professional fees, $1.8 million decrease in office rent and utilities,

$0.9 million decrease in software and depreciation.

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

Technology and facilities expense decreased by $36.4 million, or 22.1%, from $164.7 million for the nine months ended September 30, 2023 to $128.3 million for the nine months ended September 30, 2024.

The decrease is primarily due to $20.0 million decrease in wages, salaries, bonus, benefits and stock compensation expense as a result of our workforce optimization efforts that occurred in 2023 and 2024, $7.3 million decrease in service costs, $6.5 million decrease in outsourcing and professional fees, $3.8 million decrease in office rent and utilities, $3.6 million decrease in software and depreciation.

These decreases were offset by $5.2 million lower capitalization of internally developed software.

4 unchanged sentences

Three Months Ended

Period-to-period Change Six Months Ended

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

5 unchanged sentences

Sales and marketing.

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.

Sales and marketing expenses to acquire our members decreased by $1.4 million, or 7.7%, from $18.9 million for the three months ended September 30, 2023 to $17.4 million for the three months ended September 30, 2024 .

The decrease is attributable to a $1.5 million net decrease in wages, salaries, bonus, benefits 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 September 30, 2024, our CAC decreased by 23.9% from $155 for the three months ended September 30, 2023 to $118 for the three months ended September 30, 2024.

Sales and marketing expenses to acquire our members decreased by $7.6 million, or 13.2%, from $57.2 million for the nine months ended September 30, 2023 to $49.7 million for the nine months ended September 30, 2024 .

The decrease is attributable to a $6.2 million net decrease in wages, salaries, bonus, benefits and stock compensation expense 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 nine months ended September 30, 2024 , our CAC decreased by 22.5%% from $169 for the nine months ended September 30, 2023 , to $131 for the nine months ended September 30, 2024 .

We expect sales and marketing expense to be lower 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

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

2 unchanged sentences

Percentage of total revenue 8.4 % 10.7 % 9.0 % 12.2 %

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.

Personnel expense decreased by $7.6 million, or 26.6%, from $28.6 million for the three months ended September 30, 2023 to $21.0 million for the three months ended September 30, 2024, primarily driven by our workforce optimization efforts which occurred in 2023 and 2024.

Personnel expense decreased by $29.3 million, or 30.3%, from $96.7 million for the nine months ended September 30, 2023 to $67.5 million for the nine months ended September 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.

7 unchanged sentences

Three Months Ended

Period-to-period Change Six 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 $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.

Outsourcing and professional fees decreased by $0.4 million, or 3.8%, from $10.5 million for the three months ended September 30, 2023 to $10.1 million for the three months ended September 30, 2024.

The decrease is primarily attributable to $1.8 million decrease in outsourcing services and legal fees.

These decreases were partially offset by a $1.4 million increase in debt recovery and court filing fees, and consulting services.

Outsourcing and professional fees decreased by $5.5 million, or 16.0%, from $34.2 million for the nine months ended September 30, 2023 to $28.7 million for the nine months ended September 30, 2024.

The decrease is primarily attributable to $5.4 million decrease in outsourcing and consulting services.

4 unchanged sentences

Three Months Ended

Period-to-period Change Six 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 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.

General, administrative and other expense increased by $1.1 million, or 9.5%, from $11.9 million for the three months ended September 30, 2023 to $13.0 million for the three months ended September 30, 2024, primarily due to $2.7 million increase related to the expected sale of the credit card portfolio, partially offset by a $1.6 million decrease in acquisition and integration related expenses.

General, administrative and other expense decreased by $5.4 million, or 10.3%, from $52.1 million for the nine months ended September 30, 2023 to $46.8 million for the nine months ended September 30, 2024, primarily due to a $12.5 million decrease related to our workforce optimization efforts and by a $4.0 million decrease in acquisition and integration related expenses.

These decreases were partially offset by $6.4 million increase related to the impairment of the San Carlos office right-of-use asset and disposal of related fixed assets, a $2.7 million increase related to the expected sale of the credit card portfolio, and a $2.1 million increase due to partial debt extinguishment expense not present in the prior period and increase related to the impairment of the San Francisco office right-of-use asset.

Income taxes consist of U.S.

federal, state and foreign income taxes, if any.

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

For the periods ended September 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

September 30,

Period-to-period Change Nine Months Ended

September 30,

Period-to-period Change

4 unchanged sentences

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 .

Income tax benefit decreased by $6.7 million or 41%, from $16.2 million for the three months ended September 30, 2023 to $9.5 million benefit for the three months ended September 30, 2024, primarily as a result of the discrete tax impacts of unrecognized tax benefits and return to provision adjustments for the three months ended September 30, 2023.

Income tax benefit decreased by $26.6 million or 46%, from $58.2 million for the nine months ended September 30, 2023 to $31.7 million for the nine months ended September 30, 2024, primarily as a result of having a lower pretax loss for the nine months ended September 30, 2024 .

Valuation Allowance .

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.

As of September 30, 2024 , we have $79.6 million of U.S.

net deferred tax assets, of which $83.4 million is related to the 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 six quarters since January 1, 2023, on loans held for investment.

The table below reflects the application of this methodology for the seven 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)

Sep 30, 2024 Jun 30, 2024 (1)

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

11 unchanged sentences

Discount Rate 8.33 % 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.

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

On September 24, 2024, we entered into a definitive agreement to sell the credit cards receivable portfolio.

As such, the credit card portfolio has been excluded from June 30, 2024 and September 30, 2024 data.

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

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

40 unchanged sentences

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

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

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

2024 2023 2024 2023

8 unchanged sentences

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 six months ended June 30, 2024 and 2023:

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

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

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

Adjusted EBITDA (in thousands)

14 unchanged sentences

(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 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.

The values for three and nine months ended September 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 $15.6 million and $(4.5) million, respectively.

Adjusted Net Income (Loss)

7 unchanged sentences

• 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 and six months ended June 30, 2024 and 2023:

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

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

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

Adjusted Net Income (Loss) (in thousands)

9 unchanged sentences

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 and six months ended June 30, 2024 and 2023 is based on a normalized statutory rate.

(1) Income tax rate for the three and nine months ended September 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 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.

The values for three and nine months ended September 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 $(17.6) million and $(103.5) 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 Diluted Adjusted EPS for the three and six months ended June 30, 2024 and 2023.

The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the three and nine months ended September 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 June 30, Six Months Ended June 30,

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

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

9 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 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.

The values for three and nine months ended September 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 $(0.46) and $(2.85), 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 and six months ended June 30, 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 nine months ended September 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 June 30, As of or for the Six Months Ended June 30,

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

(in thousands) 2024 2023 (1)

6 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 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.

The values for three and nine months ended September 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 (15.5)% and (28.0)%, respectively.

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

5 unchanged sentences

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,

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

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

(in thousands) 2024 2023 (1)

17 unchanged sentences

(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.

The values for three and nine months ended September 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 40.8% and 44.2%, respectively.

Liquidity and Capital Resources

3 unchanged sentences

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.

Rising interest rates, credit trends and other macroeconomic conditions could continue to have an impact on market volatility which could adversely impact our business, liquidity, and capital resources.

Elevated interest rates, credit trends and other macroeconomic conditions could continue to have an impact on market volatility which could adversely impact our business, liquidity, and capital resources.

Future decreases in cash flows from operations resulting from delinquencies, defaults, losses, would decrease the cash available for the capital uses described above.

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.

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:

June 30, 2024

(in thousands) Total capacity

Amount borrowed/utilized

Remaining available capacity

Cash and cash equivalents

$ 72,871 N/A $ 72,871

Restricted cash

163,765 N/A 163,765

September 30, 2024

(in thousands) Total capacity Amount borrowed/utilized Remaining available capacity

Cash and cash equivalents $ 71,838 N/A $ 71,838

Restricted cash 156,699 N/A 156,699

Secured financing 611,652 128,722 482,930

680,000 156,696 523,304

Whole loan forward flow agreements (1)

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Total liquidity $ 1,440,189 $ 704,886 $ 735,303

$ 1,737,531 $ 796,814 $ 940,717

(1) The remaining available capacity for whole loan forward flow agreements represents future committed and uncommitted whole loan sales under existing agreements of $7.4 million and $16.4 million, respectively.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2024 2023

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Operating Activities

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.

Our net cash provided by operating activities was $302.1 million and $286.5 million for the nine months ended September 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.

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Investing Activities

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 net cash used in investing activities was $(137.3) million and $(189.4) million for the nine months ended September 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 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.

The change in our net cash used in investing activities is due to $75.6 million lower loan disbursements which were partially offset by a $36.3 million decrease in repayments of loan principal and $12.1 million lower capitalization of system development costs for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Financing Activities

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.

Our net cash used in financing activities was $(142.3) million and $(101.3) million for the nine months ended September 30, 2024 and 2023, respectively.

For the nine months ended September 30, 2024, net cash used in financing activities was primarily driven by amortization payments on our Series 2021-A, Series 2021-B, Series 2022-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, PLW II Facility, CCW and Acquisition and Corporate Financing facilities, partially offset by borrowings under our asset-backed borrowings at amortized cost.

For the nine months ended September 30, 2023, net cash used in financing activities was primarily driven by borrowings under the PLW 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 2021-A, Series 2022-2 and Series 2022-3 asset-backed notes.

Sources of Funds

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Asset-Backed Securitizations

As of June 30, 2024, we had $1.9 billion of outstanding asset-backed notes.

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

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

Secured Financings

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.

As of September 30, 2024 , we had Secured Financing facilities with warehouse lines of $611.7 million in the aggregate with undrawn capacity of $482.9 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 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.

Additionally, our commitment amount reduced from $100.0 million to $80.0 million.

On September 24, 2024, we further amended the Credit Card Warehouse facility and reduced the commitment amount from $80.0 million to $60.0 million.

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.

On August 5, 2024, in connection with the closing of the PLW II Facility, Oportun PLW II Trust, entered into a loan and security agreement with certain lenders from time to time party thereto, Wilmington Trust, National Association as collateral agent, administrative agent, paying agent, securities intermediary and depositary bank.

The PLW II Facility has a three year term and a borrowing capacity of $245.2 million.

Borrowings under the loan and security agreement accrue interest at a rate equal to Term SOFR plus a weighted average spread of 3.08%.

The advance rate for the PLW II Facility is 95.0%, subject to certain triggers that could lower the advance rate to 92.0%.

Asset-Backed Borrowings at Amortized Cost

On August 29, 2024, we announced the issuance of $223.3 million of series 2024-2 fixed-rate asset-backed notes secured by a pool of its unsecured and secured personal installment loans (the "2024-2 Securitization").

The 2024-2 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 8.22% per annum and weighted average coupon of 8.07% per annum.

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").

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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 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.

As part of this agreement, during the nine months ended September 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.

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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.

As part of this agreement, during the nine months ended September 30, 2024, we transferred loans receivable totaling $145.7 million, bringing the total loans receivable sold under the agreement to $291.1 million.

Acquisition Financing

On December 20, 2021, Oportun RF, LLC, our wholly-owned subsidiary, issued a $116.0 million asset-backed floating rate variable funding note, and an asset-backed residual certificate, both of which are secured by certain residual cash flows from our securitizations and guaranteed by Oportun, Inc.

Oportun, Inc.

The note was used to fund the cash consideration paid for the acquisition of Digit.

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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.

As of September 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.

For the six months ended June 30, 2024 , we sold approximately $54.1 million of such loans.

For the nine months ended September 30, 2024 , we sold approximately $68.3 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 six months ended June 30, 2024 was $28.4 million.

The originations of loans sold and held for sale during the nine months ended September 30, 2024 was $83.0 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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The material cash requirements for our contractual and other obligations primarily include those related our outstanding borrowings under our asset-backed notes, Acquisition Financing and Secured Financing, corporate and retail leases, and purchase commitments for technology used in the business.

See Note 8, Borrowings and Note 15, Leases, Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for more information.

See Note 8, Borrowings and Note 15, Leases, Commitments and Contingencies of the Notes to the Condensed Consolidated Financial

Statements (Unaudited) included elsewhere in this report for more information.

Liquidity Risks

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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,

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

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