Oportun Financial Corp [OPRT] Filings

10-Q 1 oprt-20220331.htm 10-Q oprt-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-39050

OPORTUN FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		45-3361983
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

2 Circle Star Way
San Carlos,	CA	94070
Address of Principal Executive Offices		Zip Code

(650) 810-8823

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	OPRT	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Smaller reporting company	☐
Accelerated filer	☒	Emerging growth company	☐
Non-accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of May 3, 2022 was 32,814,113.


TABLE OF CONTENTS
GLOSSARY

PART I ‑ FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flow	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II ‑ OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibit Index	65

Signature		66

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	March 31,		December 31,
	2022		2021
Assets
Cash and cash equivalents	$	109,864	$	130,959
Restricted cash	60,694		62,001
Loans receivable at fair value	2,450,987		2,386,807






Interest and fees receivable, net	22,823		20,916
Capitalized software and other intangibles, net	133,093		131,181
Goodwill	104,162		104,014
Right of use assets - operating	36,689		38,403

Other assets	74,239		72,344
Total assets	$	2,992,551	$	2,946,625

Liabilities and stockholders' equity
Liabilities
Secured financing	$	473,311	$	393,889
Asset-backed notes at fair value	1,593,435		1,651,706
Acquisition financing	103,869		114,092

Lease liabilities	44,959		47,699

Other liabilities	127,041		135,358
Total liabilities	2,342,615		2,342,744
Stockholders' equity


Common stock, $0.0001 par value - 1,000,000,000 shares authorized at March 31, 2022 and December 31, 2021; 33,078,916 shares issued and 32,806,893 shares outstanding at March 31, 2022; 32,276,419 shares issued and 32,004,396 shares outstanding at December 31, 2021	7		6
Common stock, additional paid-in capital	526,729		526,338


Retained earnings	129,509		83,846
Treasury stock at cost, 272,023 shares at March 31, 2022 and December 31, 2021	(6,309)		(6,309)
Total stockholders’ equity	649,936		603,881
Total liabilities and stockholders' equity	$	2,992,551	$	2,946,625

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended March 31,
	2022		2021
Revenue
Interest income	$	192,237	$	127,191
Non-interest income	22,483		8,122
Total revenue	214,720		135,313
Less:
Interest expense	13,677		13,504

Net increase (decrease) in fair value	3,971		(11,568)
Net revenue	205,014		110,241

Operating expenses:
Technology and facilities	49,189		32,924
Sales and marketing	34,541		23,893
Personnel	35,926		26,827
Outsourcing and professional fees	14,327		12,625
General, administrative and other	13,361		9,997
Total operating expenses	147,344		106,266

Income before taxes	57,670		3,975
Income tax expense	12,007		956
Net income	$	45,663	$	3,019

Net income attributable to common stockholders	$	45,663	$	3,019

Share data:
Earnings per share:
Basic	$	1.42	$	0.11
Diluted	$	1.37	$	0.10
Weighted average common shares outstanding:
Basic	32,216,641		27,770,063
Diluted	33,323,134		29,620,034

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(in thousands, except share data)


For the Three Months Ended March 31, 2022
	Common Stock
		Shares	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2022		32,004,396	$	6	$	526,338	$	83,846	$	(6,309)	$	603,881
Issuance of common stock upon exercise of stock options		505,945	1		(4,749)		—		—		(4,748)



Stock-based compensation expense		—	—		7,467		—		—		7,467



Vesting of restricted stock units, net of shares withheld		296,552	—		(2,327)		—		—		(2,327)




Net income		—	—		—		45,663		—		45,663
Balance – March 31, 2022		32,806,893	$	7	$	526,729	$	129,509	$	(6,309)	$	649,936

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(in thousands, except share data)


For the Three Months Ended March 31, 2021
	Common Stock
		Shares	Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2021		27,679,263	$	6	$	436,499	$	36,432	$	(6,309)	$	466,628
Issuance of common stock upon exercise of stock options		33,526	—		307		—		—		307



Stock-based compensation expense		—	—		5,088		—		—		5,088



Vesting of restricted stock units, net		261,794	—		(2,794)		—		—		(2,794)





Net income		—	—		—		3,019		—		3,019
Balance – March 31, 2021		27,974,583	$	6	$	439,100	$	39,451	$	(6,309)	$	472,248

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Cash Flow (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net income	$	45,663	$	3,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,697		6,957
Fair value adjustment, net	(3,971)		11,568
Origination fees for loans receivable at fair value, net	(4,685)		(1,422)
Gain on loan sales	(5,715)		(4,434)
Stock-based compensation expense	6,773		5,088


Other, net	20,226		15,325
Originations of loans sold and held for sale	(48,665)		(33,464)
Proceeds from sale of loans	54,872		38,372
Changes in other assets and other liabilities	(36,630)		(22,853)




Net cash provided by operating activities	38,565		18,156
Cash flows from investing activities
Originations of loans	(707,108)		(263,148)
Proceeds from structured loan sale	245,019		—
Repayments of loan principal	351,324		278,659
Capitalization of system development costs	(10,641)		(5,651)


Other, net	(1,090)		(873)

Net cash provided by (used in) investing activities	(122,496)		8,987
Cash flows from financing activities
Borrowings under secured financing	699,000		—

Borrowings under asset-backed notes and acquisition financing	—		371,719
Repayments of secured financing	(620,000)		(181,780)
Repayments of asset-backed notes and acquisition financing	(10,395)		(200,004)


Net payments related to stock-based activities	(7,076)		(2,487)
Net cash provided by (used in) financing activities	61,529		(12,552)
Net increase (decrease) in cash and cash equivalents and restricted cash	(22,402)		14,591
Cash and cash equivalents and restricted cash, beginning of period	192,960		168,590
Cash and cash equivalents and restricted cash, end of period	$	170,558	$	183,181

Supplemental disclosure of cash flow information
Cash and cash equivalents	$	109,864	$	140,416
Restricted cash	60,694		42,765
Total cash and cash equivalents and restricted cash	$	170,558	$	183,181

Cash paid for income taxes, net of refunds	$	328	$	240
Cash paid for interest	$	13,816	$	13,625
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,238	$	4,292
Supplemental disclosures of non-cash investing and financing activities
Right of use assets obtained in exchange for operating lease obligations	$	1,064	$	1,093



Non-cash investments in capitalized assets	$	565	$	625

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Notes to the Condensed Consolidated Financial Statements (Unaudited)

March 31, 2022


1.			Organization and Description of Business

Oportun is a financial technology company and digital banking platform driven by its mission to provide inclusive, affordable financial services that empower its members to build a better future. Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the "Company") takes a holistic approach to serving its members and views as its purpose to responsibly meet their current capital needs, help grow its members' financial profiles, increase their financial awareness and put them on a path to a financially healthy life. With its acquisition of Hello Digit, Inc. ("Digit") on December 22, 2021, the Company can now offer access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I. and tailored to each member's goals to make achieving financial health automated. The Company's credit products include personal loans, secured personal loans and credit cards. The Company's digital banking products include digital banking, automated savings, long-term investing and retirement savings. The Company is headquartered in San Carlos, California. The Company has been certified by the United States Department of the Treasury as a Community Development Financial Institution ("CDFI") since 2009.

Segments

Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer and the Company's Chief Financial Officer are collectively considered to be the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s operations constitute a single reportable segment.


2.			Summary of Significant Accounting Policies

Basis of Presentation ‑ The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These statements are unaudited and reflect all normal, recurring adjustments that are, in management's opinion, necessary for the fair presentation of results. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior-period financial information has been reclassified to conform to current period presentation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), filed with the Securities and Exchange Commission ("SEC") on March 1, 2022.

Use of Estimates ‑ The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates and assumptions.

Accounting Policies - There have been no changes to the Company's significant accounting policies from those described in Part II, Item 8 - Financial Statements and Supplementary Data in the Annual Report, except for the new accounting pronouncements subsequently adopted as noted below.

Recently Adopted Accounting Standards

None.


3.			Earnings (Loss) per Share

Basic and diluted earnings (loss) per share are calculated as follows:


	Three Months Ended March 31,
(in thousands, except share and per share data)	2022		2021
Net income	$	45,663	$	3,019


Net income (loss) attributable to common stockholders	$	45,663	$	3,019

Basic weighted-average common shares outstanding	32,216,641		27,770,063
Weighted average effect of dilutive securities:
Stock options	733,503		1,274,818
Restricted stock units	372,990		575,153

Diluted weighted-average common shares outstanding	33,323,134		29,620,034

Earnings per share:
Basic	$	1.42	$	0.11
Diluted	$	1.37	$	0.10

The following common share equivalent securities have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:


	Three Months Ended March 31,
	2022	2021
Stock options	2,723,777	2,822,785
Restricted stock units	1,692,599	45,306


Total anti-dilutive common share equivalents	4,416,376	2,868,091


4.			Variable Interest Entities

Variable interest entities ("VIEs") are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of equity investment at risk lack the ability to direct the entity's activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.

For all VIEs in which we are involved, we assess whether we are the primary beneficiary of the VIE on an ongoing basis. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, we would conclude that we are the primary beneficiary of the VIE, and we consolidate the VIE. In situations where we are not deemed to be the primary beneficiary of the VIE, we do not consolidate the VIE and only recognize our interests in the VIE.

Consolidated VIEs

As part of the Company’s overall funding strategy, the Company transfers a pool of designated loans receivable to wholly owned special-purpose subsidiaries ("VIEs") to collateralize certain asset-backed financing transactions. For these VIEs where the Company has determined that it is the primary beneficiary because it has the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb the losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs the VIEs assets and related liabilities are consolidated with the results of the Company. Such power arises from the Company’s contractual right to service the loans receivable securing the VIEs’ asset-backed debt obligations. The Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the VIEs because it retains the residual interest of each asset-backed financing transaction in the form of an asset-backed certificate. Accordingly, the Company includes the VIEs’ assets, including the assets securing the financing transactions, and related liabilities in its condensed consolidated financial statements.

Each consolidated VIE issues a series of asset-backed securities that are supported by the cash flows arising from the loans receivable securing such debt. Cash inflows arising from such loans receivable are distributed monthly to the transaction’s lenders and related service providers in accordance with the transaction’s contractual priority of payments. The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets. The Company retains the most subordinated economic interest in each financing transaction through its ownership of the respective residual interest in each VIE. The Company has no obligation to repurchase loans receivable that initially satisfied the financing transaction’s eligibility criteria but subsequently became delinquent or a defaulted loans receivable.

The following table represents the assets and liabilities of consolidated VIEs recorded on the Company’s Condensed Consolidated Balance Sheets (Unaudited):


	March 31,		December 31,
(in thousands)	2022		2021
Consolidated VIE assets
Restricted cash	$	33,246	$	41,803
Loans receivable at fair value	2,344,635		2,267,205

Interest and fee receivable	20,767		19,869
Total VIE assets	2,398,648		2,328,877
Consolidated VIE liabilities
Secured financing (1)	477,000		398,000
Asset-backed notes at fair value	1,593,435		1,651,706
Acquisition financing (1)	105,605		116,000
Total VIE liabilities	$	2,176,040	$	2,165,706

(1) Amounts exclude deferred financing costs. See Note 9, Borrowings for additional information.


5.			Loans Held for Sale and Loans Sold

Structured Loan Sales - On March 31, 2022, the Company participated in a securitization whereby the Company and funds managed by Ellington Management Group both contributed collateral and were co-sponsors of the transaction, which totaled $400.0 million in issued asset-backed notes. As part of the securitization, the Company sold loans to OPTN Funding Grantor Trust 2022-1 ("Grantor Trust") through the issuance of amortizing asset-backed notes secured by a pool of its unsecured and secured personal installment loans. The Company also sold its share of the residual interest in the pool. The Company's continued involvement in the unconsolidated VIEs is in the form of servicer of these loans. The Company does not have variable interest in the Grantor Trust or the issuer established for this transaction. The sold loans were accounted for under the fair value option and at the point they were designated as held for sale had an aggregate unpaid principal balance of approximately $227.6 million, a cumulative fair value mark of $15.9 million and unpaid interest of $1.5 million. The Company received $245.0 million of net proceeds and by selling both its notes and residual interest, the Company derecognized these loans from its Consolidated Balance Sheets.

Whole Loan Sale Program ‑ In November 2014, the Company entered into a whole loan sale agreement with an institutional investor. Pursuant to the agreement, the Company sold at least 10% of its unsecured loan originations, with an option to sell an additional 5%, subject to certain eligibility criteria and minimum and maximum volumes. The Company chose not to renew the arrangement and allowed the agreement to expire on its terms on March 4, 2022.

The originations of loans sold and held for sale during the three months ended March 31, 2022 related to our whole loan sale program was $48.7 million and the Company recorded a gain on sale of $5.7 million and servicing revenue of $4.0 million. The originations of loans sold and held for sale during the three months ended March 31, 2021 was $33.5 million and the Company recorded a gain on sale of $4.4 million and servicing revenue of $3.1 million.


6.			Acquisition

On December 22, 2021, the Company completed its acquisition of all the voting interests of Hello Digit, Inc. (or "Digit"). Digit is a digital banking platform that provides automated savings, banking and investing tools. Digit members can keep and integrate their existing bank accounts into the platform, or they can make Digit their primary banking relationship by opening new accounts via Digit’s bank partner. By acquiring Digit, Oportun further expanded its A.I. and digital banking capabilities, adding to its services to provide its members a holistic offering built to address their financial needs. The total consideration the Company provided for Digit, which consisted of cash and equity, was approximately $205.3 million.

The Company recognized acquisition and integration related costs of approximately $7.3 million in the three months ended March 31, 2022 which are included in the General, administrative and other expense in the Condensed Consolidated Statements of Operations (Unaudited).


7.			Capitalized Software, Other Intangibles and Goodwill

Capitalized software, net consists of the following:


	March 31,		December 31,
(in thousands)	2022		2021
Capitalized software, net:
System development costs	$	95,800	$	84,550
Acquired developed technology	48,500		48,500
Less: Accumulated amortization	(52,864)		(45,433)
Total capitalized software, net	$	91,436	$	87,617

Capitalized software, net

Amortization of system development costs and acquired developed technology for three months ended March 31, 2022 and 2021 was $7.4 million and $3.5 million, respectively. System development costs capitalized in the three months ended March 31, 2022 and 2021 were $11.2 million and $5.8 million, respectively. Acquired developed technology was $48.5 million and is related to the acquisition of Digit on December 22, 2021.

Intangible Assets

The gross carrying amount and accumulated amortization, in total and by major intangible asset class are as follows:


	March 31,		December 31,
(in thousands)	2022		2021
Intangible assets:
Member relationships	$	34,500	$	34,500
Trademarks	6,426		6,364
Other	3,000		3,000
Less: Accumulated amortization	(2,269)		(300)
Total intangible assets, net	$	41,657	$	43,564

Amortization of intangible assets for the three months ended March 31, 2022 was $2.0 million. There were no intangible assets subject to amortization for the three months ended March 31, 2021. Expected future amortization expense for intangible assets as of March 31, 2022 is as follows:


(in thousands)	Fiscal Years
2022 (remaining nine months)	$	(5,980)
2023	(7,949)
2024	(7,798)
2025	(4,929)
2026	(4,929)
2027	(4,929)
Thereafter	(4,779)
Total	$	(41,293)

Goodwill

The Company recorded goodwill of $104.0 million arising from the acquisition of Digit on December 22, 2021. During the three months ended March 31, 2022, the Company recorded a $0.1 million adjustment to goodwill. There was no impairment for the periods presented.


8.			Other Assets

Other assets consist of the following:


	March 31,		December 31,
(in thousands)	2022		2021
Fixed assets
Total fixed assets	$	44,955	$	44,100
Less: Accumulated depreciation	(35,370)		(34,185)
Total fixed assets, net	$	9,585	$	9,915

Other Assets

Loans held for sale	—		491
Prepaid expenses	26,244		25,355
Deferred tax assets	3,565		3,923
Current tax assets	17,235		13,330
Other	17,610		19,330
Total other assets	$	74,239	$	72,344

Fixed Assets

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $1.3 million and $3.5 million, respectively.


9.			Borrowings

The following table presents information regarding the Company's Secured Financing facilities:


					March 31, 2022		December 31, 2021
Variable Interest Entity	Facility Amount		Maturity Date (1)	Interest Rate	Balance		Balance
(in thousands)
Oportun CCW Trust (1)(2)	$	150,000	December 1, 2023	Variable (1)	$	59,223	$	40,108
Oportun PLW Trust	600,000		September 1, 2024	LIBOR (minimum of 0.00%) + 2.17%	414,088		353,781
Total secured financing	$	750,000			$	473,311	$	393,889

(1) The interest rate on the Secured Financing - CCW facility is LIBOR (minimum of 1.00%) plus 6.00% on the first $18.8 million of principal outstanding and LIBOR (minimum of 0.00%) plus 3.41% on the remaining outstanding principal balance.

(2) The Credit Card Warehouse has an aggregate borrowing capacity of up to $150.0 million; comprised of $75.0 million committed purchase amount and $75.0 million uncommitted purchase amount.

The following table presents information regarding asset-backed notes:


	March 31, 2022
Variable Interest Entity	Initial note amount issued (a)		Initial collateral balance (b)		Current balance (a)		Current collateral balance(b)		Weighted average interest rate(c)		Original revolving period
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2021-C)	$	500,000	$	512,762	$	472,972	$	519,735	2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		475,772		520,594		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		364,808		390,705		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		279,883		299,832		3.46	%	3 years
Total asset-backed notes recorded at fair value	$	1,654,412	$	1,703,271	$	1,593,435	$	1,730,866


	December 31, 2021
Variable Interest Entity	Initial note amount issued (a)		Initial collateral balance (b)		Current balance (a)		Current collateral balance(b)		Weighted average interest rate(c)		Original revolving period
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2021-C)	$	500,000	$	512,762	$	497,774	$	525,436	2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		498,487		521,174		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		374,363		391,325		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		281,082		299,310		3.46	%	3 years




Total asset-backed notes recorded at fair value	$	1,654,412	$	1,703,271	$	1,651,706	$	1,737,245

(a)Initial note amount issued includes notes retained by the Company as applicable. The current balances are measured at fair value for asset-backed notes recorded at fair value.

(b)Includes the unpaid principal balance of loans receivable, cash, cash equivalents and restricted cash pledged by the Company.

(c)Weighted average interest rate excludes notes retained by the Company.

The following table presents information regarding the Company's Acquisition Financing:

March 31, 2022

December 31, 2021

Variable Interest Entity

Original Balance

Maturity Date

Interest Rate

Balance

(in thousands)

Oportun RF, LLC

116,000

October 1, 2024

LIBOR (minimum of 0.00%) + 8.00%

103,869

114,092

As of March 31, 2022, and December 31, 2021, the Company was in compliance with all covenants and requirements of the Secured Financing and Acquisition Financing facilities and asset-backed notes.


10.			Other Liabilities

Other liabilities consist of the following:


	March 31,		December 31,
(in thousands)	2022		2021
Accounts payable	$	4,253	$	8,343
Accrued compensation	18,824		36,417
Accrued expenses	28,946		36,464
Accrued interest	2,714		3,276
Amount due to whole loan buyer	17,289		14,062
Deferred tax liabilities	43,415		28,424
Current tax liabilities and other	11,600		8,372
Total other liabilities	$	127,041	$	135,358


11.			Stockholders' Equity

Preferred Stock - The Board has the authority, without further action by the Company's stockholders, to issue up to 100,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the Board. There were no shares of undesignated preferred stock issued or outstanding as of March 31, 2022 or December 31, 2021.

Common Stock - As of March 31, 2022 and December 31, 2021, the Company was authorized to issue 1,000,000,000 shares of common stock with a par value of $0.0001 per share. As of March 31, 2022, 33,078,916 and 32,806,893 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. As of December 31, 2021, 32,276,419 and 32,004,396 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.


12.			Equity Compensation and Other Benefits

The Company's stock-based plans are described and informational disclosures are provided in the Notes to the Consolidated Financial Statements included in the Annual Report.

Stock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
Technology and facilities	$	1,870	$	728
Sales and marketing	31		32
Personnel	4,872		4,067
Total stock-based compensation (1)	$	6,773	$	4,827

(1) Amounts shown are net of $0.7 million of capitalized stock-based compensation for the three months ended March 31, 2022 and net of $0.3 million of capitalized stock-based compensation for the three months ended March 31, 2021.

As of March 31, 2022, and December 31, 2021, the Company’s total unrecognized compensation cost related to unvested stock-based option awards granted to employees was $9.5 million and $6.9 million, respectively, which will be recognized over a weighted-average vesting period of approximately 2.8 years and 2.2 years, respectively. As of March 31, 2022 and December 31, 2021, the Company's total unrecognized compensation cost related to unvested restricted stock unit awards granted to employees was $72.2 million and $54.1 million, respectively, which will be recognized over a weighted average vesting period of approximately 3.1 years and 2.6 years, respectively.

Cash flows from the tax benefits for tax deductions resulting from the exercise of stock options in excess of the compensation expense recorded for those options (excess tax benefits) are required to be classified as cash from financing activities. The total income tax expense recognized in the income statement for stock-based compensation arrangements for the three months ended March 31, 2022 was $0.7 million. The total income tax expense recognized in the income statement for the stock-based compensation arrangements for the three months ended March 31, 2021 was insignificant.


13.			Revenue

Interest Income - Total interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
Interest income
Interest on loans	$	187,387	$	125,682
Fees on loans	4,850		1,509
Total interest income	192,237		127,191

Non-interest Income - Total non-interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
Non-interest income
Gain on loan sales	$	5,715	$	4,434
Servicing fees	3,957		3,078
Other income	12,811		610
Total non-interest income	$	22,483	$	8,122


14.			Income Taxes

For the three months ended March 31, 2022 and 2021, the Company calculates its year-to-date income tax expense (benefit) by applying the estimated annual effective tax rate to the year-to-date income from operations before income taxes and adjusts the income tax expense (benefit) for discrete tax items recorded in the period.

During the three months ended March 31, 2022 and 2021, the Company recorded income tax expense of $12.0 million and $1.0 million, respectively, related to continuing operations. The Company’s reported effective tax rates were 20.8% and 24.1% for the three months ended March 31, 2022 and 2021, respectively. Our effective tax rates for the three months ended March 31, 2022 and 2021 differ from the statutory tax rates primarily due to the impacts of the R&D tax credit and a one-time exercise of stock-based awards.


15.			Fair Value of Financial Instruments

Financial Instruments at Fair Value

The table below compares the fair value of loans receivable and asset-backed notes to their contractual balances for the periods shown:


	March 31, 2022				December 31, 2021
(in thousands)	Unpaid Principal Balance		Fair Value		Unpaid Principal Balance		Fair Value
Assets
Loans receivable	$	2,353,981	$	2,450,987	$	2,272,864	$	2,386,807
Liabilities
Asset-backed notes	1,654,412		1,593,435		1,654,412		1,651,706

The Company calculates the fair value of the asset-backed notes using independent pricing services and broker price indications, which are based on quoted prices for identical or similar notes, which are Level 2 input measures.

The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for Loans Receivable at Fair Value.


	March 31, 2022			December 31, 2021
	Minimum	Maximum	Weighted Average (3)	Minimum	Maximum	Weighted Average
Remaining cumulative charge-offs (1)	6.14%	47.89%	10.37%	6.75%	51.86%	9.60%
Remaining cumulative prepayments (1)	—	41.11%	33.16%	—	44.25%	32.47%
Principal payment rate (1)(2)	—%	—%	16.55%	—%	—%	18.07%
Average life (years)	0.20	1.51	0.85	0.22	1.51	0.86
Discount rate	6.69	8.79	6.76%	6.90	8.35	6.94%

(1) Figure disclosed as a percentage of outstanding principal balance.

(2) Remaining cumulative prepayments are estimated to calculate fair value on the unsecured and secured loan receivables and principal payment rates are estimated on the credit card receivables.

(3) Unobservable inputs were weighted by outstanding principal balance, which are grouped by risk (type of customer, original loan maturity terms).

Fair value adjustments related to financial instruments where the fair value option has been elected are recorded through earnings for the three months ended March 31, 2022 and 2021. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input.

The Company developed internal models to estimate the fair value of loans receivable held for investment. To generate future expected cash flows, the models combine receivable characteristics with assumptions about borrower behavior based on the Company’s historical loan performance. These cash flows are then discounted using a required rate of return that management estimates would be used by a market participant.

The Company tested the fair value models by comparing modeled cash flows to historical loan performance to ensure that the models were complete, accurate and reasonable for the Company’s use. The Company also engaged a third party to create an independent fair value estimate for the Loans Receivable at Fair Value, which provides a set of fair value marks using the Company’s historical loan performance data and whole loan sale prices to develop independent forecasts of borrower behavior. Their model generates expected cash flows which were then aggregated and compared to the Company’s actual cash flows within an acceptable range.

The Company's internal valuation committee provides governance and oversight over the fair value pricing calculations and related financial statement disclosures. Additionally, this committee provides a challenge of the assumptions used and outputs of the model, including the appropriateness of such measures and periodically reviews the methodology and process to determine the fair value pricing. Any significant changes to the process must be approved by the committee.

The table below presents a reconciliation of loans receivable at fair value on a recurring basis using significant unobservable inputs:


	Three Months Ended March 31,
(in thousands)	2022		2021
Balance – beginning of period	$	2,386,807	$	1,696,526

Principal disbursements	779,719		309,009
Principal payments from customers (1)	(636,044)		(315,887)
Gross charge-offs	(62,558)		(40,959)
Net increase (decrease) in fair value (1)	(16,937)		21,562
Balance – end of period	$	2,450,987	$	1,670,251

(1) The principal payment from customers shown for the three months ended March 31, 2022 includes $227.6 million of unpaid principal balance of loans sold in the 2022-1 transaction. The net increase (decrease) in fair value shown for the three months ended March 31, 2022 includes $15.9 million related to the cumulative fair value mark on the loans sold in the 2022-1 transaction. For details regarding the 2022-1 transaction, refer to Note 5, Loans Held for Sale and Loans Sold.

As of March 31, 2022, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $3.7 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $23.0 million. As of December 31, 2021, the aggregate fair value of loans that are 90 days or more past due and in non-accrual status was $3.5 million, and the aggregate unpaid principal balance for loans that are 90 days or more past due was $20.7 million.

Financial Instruments Disclosed But Not Carried at Fair Value

The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy:


	March 31, 2022
	Carrying value		Estimated fair value		Estimated fair value
(in thousands)					Level 1		Level 2	Level 3
Assets
Cash and cash equivalents	$	109,864	$	109,864	$	109,864	$

Oportun Financial Corp [OPRT] Filings
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-04]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-23]
10-Q	[2020-11-12]
10-Q	[2020-08-07]
10-Q	[2020-05-15]
10-K	[2020-02-28]
10-Q	[2019-11-13]
S-1	[2019-07-17]