Oportun Fourth Quarter Revenue Up 19 Percent, Full Year Revenue Up 21 Percent

Full Year Net Income of $61.6 Million and Adjusted Net Income of $62.8 Million

SAN CARLOS, Calif., Feb. 27, 2020 (GLOBE NEWSWIRE) -- Oportun Financial Corporation (Nasdaq: OPRT) (“Oportun” and the "Company") today reported financial results for the fourth quarter and full year ended December 31, 2019.

“2019 was a very successful year for Oportun as we generated significant growth across both our customer base and aggregate originations, successfully completed our initial public offering, and launched two new products--auto lending and credit card--to support our customers’ financial needs all while achieving strong bottom-line performance,” said Raul Vazquez, CEO of Oportun. “Looking ahead, we will continue to focus on driving strong overall returns through greater Operating Efficiency and scale, while executing on our strategic growth initiatives. We enter 2020 well positioned to continue delivering on our mission to provide inclusive, affordable financial services for our customers.”

Fourth Quarter 2019 Financial Results

• Total revenue of $165.3M, up 19% year over year ("Y/Y") and Fair Value Pro Forma ("FVPF") Total Revenue of $165.2M, up 20% Y/Y.
• Net income of $23.2M, down 8% Y/Y and Adjusted Net Income of $26.9M, up 91% Y/Y.
• Diluted earnings per share ("EPS") of $0.81, down 20% Y/Y, and Adjusted EPS of $0.94, up 52% Y/Y.
• Adjusted EBITDA of $17.0M, up 12% Y/Y.
• Annualized Net Charge-Off Rate of 9.0% and 30+ Day Delinquency Rate of 4.0% as of December 31, 2019.
• Aggregate Originations were $619.3M, up 17% Y/Y and total Managed Principal Balance at End of Period was $2.2B, up 23% Y/Y.

Full Year 2019 Financial Results

• Total revenue of $600.1M, up 21% Y/Y, and FVPF Total Revenue of $598.4M, up 23% Y/Y.
• Net Income of $61.6M, down 50% Y/Y, and Adjusted Net Income of $62.8M, up 42%, Y/Y.
• Diluted earnings per share of $0.40, down 91% Y/Y, and Adjusted EPS of $2.53 up 32% Y/Y.
• Adjusted EBITDA of $74.3M, flat Y/Y.
• Annualized Net Charge-Off Rate of 8.3% for the full year-ended December 31, 2019.
• Aggregate Originations were $2.1B, up 17% Y/Y and total Managed Principal Balance at End of Period was $2.2B, up 23% Y/Y.

Fourth Quarter and Full Year 2019 – Financial and Operating Highlights

To facilitate useful measures for period-to-period comparisons of its business, the Company has provided below unaudited financial information for the three- and twelve-month periods ended December 31, 2019 and 2018 on a GAAP basis as well as a Fair Value Pro Forma (“FVPF”) Adjusted basis. The FVPF and adjusted financial results reflect the Company's performance as if the fair value option had been elected since inception for all loans originated and held for investment and all asset-backed notes issued.

Fourth Quarter 2019 Financial Results

Total Revenue and FVPF Total Revenue – Total revenue for the fourth quarter was $165.3 million, increasing 19% compared to the prior-year quarter.  FVPF total revenue was $165.2 million for the fourth quarter, up 20% compared to the prior-year quarter.  The increase in total revenue and FVPF total revenue was driven by Aggregate Originations in the quarter growing 17% year over year to $619.3 million, and Managed Principal Balance at End of Period growing 23% year over year to $2.2 billion.

Net Income and Adjusted Net Income – Net income was $23.2 million, as compared to $25.3 million in the prior-year quarter.  The difference was primarily due to the impact of the Company's transition to fair value accounting in 2018.  Adjusted Net Income was $26.9 million, a 91% increase compared to $14.1 million in the prior-year quarter. The increase reflects stronger revenue due to greater originations, better-than-expected credit performance, and an increase in the fair value of the Company's loan portfolio in the fourth quarter based upon longer duration loans, improved lifetime loan losses, lower interest rates and credit spreads as compared to the prior-year quarter, and investments associated with new products and services.

Earnings Per Share and Adjusted EPS – GAAP earnings per share, basic and diluted, were $0.86 and $0.81, respectively, as compared to basic and diluted earnings per share of $1.23 and $1.01, respectively, in the prior-year quarter. Adjusted EPS, which includes convertible preferred stock on an as-converted basis in the common share count and thus all Adjusted Net Income was allocated to common stockholders, was $0.94 as compared to $0.62 in the prior-year quarter.

Adjusted EBITDA – Adjusted EBITDA was $17.0 million, up from $15.2 million in the prior-year quarter. Adjusted EBITDA as a percentage of FVPF total revenue was 10.3% and 11.0% for the fourth quarter 2019 and 2018, respectively. The lower Adjusted EBITDA Margin compared to the prior-year quarter was primarily due to investments associated with new products and services as well as additional investments in technology, engineering, data science and public company readiness.

Full Year 2019 Financial Results

Total Revenue and FVPF Total Revenue – Total revenue was $600.1 million, increasing 21% compared to the prior full year.  FVPF total revenue was $598.4 million, up 23% compared to the prior full year.  The increase in total revenue and FVPF total revenue was driven by Aggregate Originations in the year growing 17% year over year to $2.1 billion, and Managed Principal Balance at End of Period growing 23% year over year to $2.2 billion.

Net Income and Adjusted Net Income – Net income was $61.6 million, compared to $123.4 million in the prior full year.  The difference was primarily due to the impact of the Company's transition to fair value accounting in 2018.  Adjusted Net Income was $62.8 million, a 42% increase compared to $44.3 million in the prior full year. The difference reflects stronger revenue due to greater originations, better-than-expected credit performance, an improvement in loan value in 2019 based upon longer duration loans, improved lifetime loan losses, lower interest rates and credit spreads as compared to 2018, and investments associated with new products and services.

Earnings Per Share and Adjusted EPS – GAAP earnings per share, basic and diluted, was $0.46 and $0.40, respectively, for the full year 2019 as compared to basic and diluted earnings per share of $6.42 and $4.47, respectively, in the prior year. In accordance with GAAP, the Company allocated net income to convertible preferred stockholders due to a beneficial conversion feature triggered upon completion of its initial public offering. Adjusted EPS, which includes convertible preferred stock on an as-converted basis in common share count and thus all Adjusted Net Income was allocated to common stockholders, was $2.53 in 2019 as compared to $1.92 in the prior year.

Adjusted EBITDA – Adjusted EBITDA was $74.3 million, up from $74.3 million in the prior full year. Adjusted EBITDA as a percentage of FVPF total revenue was 12.4% and 15.3% for 2019 and 2018, respectively. The lower Adjusted EBITDA Margin compared to the prior full year was primarily due to investments associated with new products and services as well as additional investments in technology, engineering, data science and public company readiness.

Credit and Operating Metrics

Net Charge-Off Rate – The Annualized Net Charge-Off Rate for the fourth quarter was 9.0%, compared to 8.1% for the prior-year quarter, and was 8.3% for the full year 2019, compared to 7.4% for the prior full year. Net charge-offs for the year were better than anticipated, and management's credit outlook remains stable.

Delinquency Rate – 30+ Day Delinquency Rates were 4.0% at the end of 2019, compared to 4.0% at the end of the prior year end, consistent with expectations. Delinquency rates converged to the prior year level as credit performance strengthened.

Operating Efficiency and Adjusted Operating Efficiency – Operating Efficiency for the fourth quarter was 60.8% as compared to 59.9% in the corresponding prior-year quarter. Adjusted Operating Efficiency for the fourth quarter was 57.8%, as compared to 59.4% in the corresponding prior-year quarter. Adjusted Operating Efficiency improved due to strong expense discipline and prudent capital allocation in order to permit investments in new products in the fourth quarter of 2019, as well as additional investments in technology, engineering, data science and public company readiness.

Operating Efficiency for the year was 60.4% as compared to 57.7% in the prior year. Adjusted Operating Efficiency for the year was 57.2%, as compared to 57.8% in the prior year. Adjusted Operating Efficiency improved due to strong expense discipline and prudent capital allocation in order to permit investments in new products, as well as additional investments in technology, engineering, data science and public company readiness.

Return on Equity ("ROE") and Adjusted ROE – ROE for the fourth quarter was 19.5%, compared to 30.3% in the corresponding prior-year quarter.  Adjusted ROE for the fourth quarter was 22.8%, compared to 16.1% in the corresponding prior-year quarter.

ROE for the year was 14.7%, as compared to 43.8% in the prior year. Adjusted ROE for the year was 14.9%, as compared to 13.2% in the prior year.

Funding and Liquidity

As of December 31, 2019, cash and cash equivalents were $72.2 million and restricted cash was $64.0 million.  Cash and cash equivalents benefited from the completion of Oportun's initial public offering, which closed on September 30, 2019. FVPF Cost of Debt and FVPF Debt-to-Equity were 4.1% and 3.2x, respectively, for and at the end of 2019 as compared to 3.9% and 3.7x, respectively, for and at the end of the prior year.

Oportun and the Oportun logo are registered trademarks of Oportun, Inc.

The press release dated February 27, 2020 contains non-GAAP financial measures. The following tables reconcile the non-GAAP financial measures in that press release to the most directly comparable financial measures prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP"). These non-GAAP financial measures include FVPF total revenue, Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Efficiency and Adjusted Return on Equity.

The Company believes that the provision of these non-GAAP financial measures can provide useful measures for period-to-period comparisons of Oportun's core business and useful information to investors and others in understanding and evaluating its operating results. However, non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.

Fair Value Pro Forma
Oportun has elected the fair value option to account for all loans held for investment that were originated on or after January 1, 2018, (the "Fair Value Loans"), and for all asset-backed notes issued on or after January 1, 2018, (the "Fair Value Notes"). The Company made this election because, for a fast-growing company that produces high-quality assets such as Oportun, fair value accounting brings its GAAP net income closer to the net cash flow generated by its business, and more in line with its more mature public peers. In order to facilitate comparisons to prior periods, the Company has provided financial information for the three months ended December 31, 2019 and for prior periods on a pro forma basis, or the Fair Value Pro Forma, as if the fair value option had been elected since inception for all loans originated and held for investment and all asset-backed notes issued.

Adjusted EBITDA
The Company defines Adjusted EBITDA as net income (loss), adjusted for the impact of our election of the fair value option and further adjusted to eliminate the effect of certain items as described below. The Company believes that Adjusted EBITDA is an important measure because it allows management, investors and its board of directors to evaluate and compare operating results, including return on capital and operating efficiencies, from period-to-period by making the adjustments described below. In addition, it provides a useful measure for period-to-period comparisons of Oportun's business, as it removes the effect of income taxes, certain non-cash items, variable charges and timing differences.

• The Company believes it is useful to exclude the impact of income tax expense (benefit), as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations.
• The Company believes it is useful to exclude stock-based compensation expense, net of income tax, because it is a non-cash charge.
• The Company believes it is useful to exclude depreciation and amortization expense because it is a non-cash charge.
• The Company excludes the impact of the litigation reserve because it does not believe that this item reflects ongoing business operations.
• The Company also reverses origination fees for Fair Value Loans, net. As a result of Oportun's election of the fair value option for Fair Value Loans, the Company recognizes the full amount of any origination fees as revenue at the time of loan disbursement in advance of collection of origination fees through principal payments. As a result, the Company believes it is beneficial to exclude the uncollected portion of such origination fees, because such amounts do not represent cash received.
• The Company also reverses the fair value mark-to-market adjustment because it is a non-cash adjustment.

Adjusted Net Income
The Company defines Adjusted Net Income as net income (loss) adjusted for the impact of our election of the fair value option and further adjusted to eliminate the effect of certain items as described below. The Company believes that Adjusted Net Income is an important measure of operating performance because it allows management, investors, and Oportun's board of directors to evaluate and compare its operating results, including return on capital and operating efficiencies, from period to period, excluding the after-tax impact of non-cash, stock-based compensation expense and one-time, non-recurring items such as litigation reserves.

• The Company believes it is useful to exclude the impact of income tax expense (benefit), as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations. We also include the impact of normalized income tax expense by applying the income tax rate noted in the table.
• The Company believes it is useful to exclude stock-based compensation expense, net of income tax, because it is a non-cash charge.
• The Company excludes the impact of the litigation reserve, net of tax, because it does not believe that this item reflects its ongoing business operations.

Adjusted Operating Efficiency
The Company defines Adjusted Operating Efficiency as total Fair Value Pro Forma operating expenses excluding stock-based compensation expense divided by Fair Value Pro Forma Total Revenue. The Company believes Adjusted Operating Efficiency is an important measure because it allows management, investors and Oportun's board of directors to evaluate how efficient the Company is at managing costs relative to revenue.

Adjusted Return on Equity
The Company defines Adjusted Return on Equity (“ROE”) as annualized Adjusted Net Income divided by Fair Value Pro Forma average shareholders’ equity. The Company believes adjusted ROE is an important measure because it allows management, investors and Oportun's board of directors to evaluate the profitability of the business in relation to equity and how well the Company generates income from the equity available.

Adjusted EPS
The Company defines Adjusted EPS as Adjusted Net Income divided by weighted average diluted shares outstanding.  Weighted-average diluted common shares outstanding have been adjusted to reflect the conversion of all convertible preferred shares as of the beginning of each annual period.

Released February 27, 2020