oprt-20230930

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 September 30, 2023

☐ 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 November 2, 2023 was 34,230,172.


TABLE OF CONTENTS

PART I ‑ FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flow	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45

PART II ‑ OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities , Use of Proceeds , and Issuer P urchases of Equity Securities	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71

	GLOSSARY	72

Item 6.	Exhibit Index	74

Signature		75

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	September 30,		December 31,
	2023		2022
Assets
Cash and cash equivalents	$	81,886	$	98,817
Restricted cash	117,759		105,000
Loans receivable at fair value	2,940,858		3,143,653






Interest and fees receivable, net	29,021		31,796
Capitalized software and other intangibles, net	127,293		139,801

Right of use assets - operating	23,186		30,448

Other assets	109,929		64,180
Total assets	$	3,429,932	$	3,613,695

Liabilities and stockholders' equity
Liabilities
Secured financing	$	423,166	$	317,568
Asset-backed notes at fair value	1,958,273		2,387,674
Asset-backed borrowings at amortized cost	244,421		—
Acquisition and corporate financing	268,103		222,879

Lease liabilities	30,895		37,947

Other liabilities	63,711		100,028
Total liabilities	2,988,569		3,066,096
Stockholders' equity


Common stock, $0.0001 par value - 1,000,000,000 shares authorized at September 30, 2023 and December 31, 2022; 34,502,195 shares issued and 34,230,172 shares outstanding at September 30, 2023; 33,626,630 shares issued and 33,354,607 shares outstanding at December 31, 2022	7		7
Common stock, additional paid-in capital	579,690		547,799


Retained earnings (accumulated deficit)	(132,025)		6,102
Treasury stock at cost, 272,023 shares at September 30, 2023 and December 31, 2022	(6,309)		(6,309)
Total stockholders’ equity	441,363		547,599
Total liabilities and stockholders' equity	$	3,429,932	$	3,613,695

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue
Interest income	$	243,258	$	232,115	$	721,340	$	632,007
Non-interest income	24,962		17,961		72,955		58,591
Total revenue	268,220		250,076		794,295		690,598
Less:
Interest expense	46,965		26,671		127,410		57,452

Net decrease in fair value	(136,119)		(76,422)		(458,319)		(135,935)
Net revenue	85,136		146,983		208,566		497,211

Operating expenses:
Technology and facilities	52,663		56,113		164,653		158,090
Sales and marketing	18,852		21,781		57,229		88,690
Personnel	28,647		39,959		96,727		114,514
Outsourcing and professional fees	10,482		18,620		34,184		50,112
General, administrative and other	11,862		14,401		52,147		44,698
Goodwill impairment	—		108,472		—		108,472
Total operating expenses	122,506		259,346		404,940		564,576

Income (loss) before taxes	(37,370)		(112,363)		(196,374)		(67,365)
Income tax expense (benefit)	(16,232)		(6,536)		(58,247)		1,956
Net loss	$	(21,138)	$	(105,827)	$	(138,127)	$	(69,321)

Net income (loss) attributable to common stockholders	$	(21,138)	$	(105,827)	$	(138,127)	$	(69,321)

Share data:
Earnings (loss) per share:
Basic	$	(0.55)	$	(3.21)	$	(3.80)	$	(2.12)
Diluted	$	(0.55)	$	(3.21)	$	(3.80)	$	(2.12)
Weighted average common shares outstanding:
Basic	38,283,071		33,010,107		36,333,570		32,688,988
Diluted	38,283,071		33,010,107		36,333,570		32,688,988

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 Nine Months Ended September 30, 2023
	Common Stock		Warrants
		Shares	Par Value		Additional Paid-in Capital		Shares		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Treasury Stock		Total Stockholders' Equity
Balance – January 1, 2023		33,354,607	$	7	$	547,799	$	—	$	—	$	6,102	$	(6,309)	$	547,599




Stock-based compensation expense		—	—		5,329		—		—		—		—		5,329



Vesting of restricted stock units, net of shares withheld		529,739	—		(1,364)		—		—		—		—		(1,364)



Issuance of warrants to purchase common stock in connection with debt financing		—	—		—		2,096,727		6,672		—		—		6,672
Net loss		—	—		—		—		—		(102,090)		—		(102,090)
Balance – March 31, 2023		33,884,346	$	7	$	551,764	2,096,727		$	6,672	$	(95,988)	$	(6,309)	$	456,146

Issuance of common stock upon exercise of stock options, net of shares withheld		26,458	—		(95)		—		—		—		—		(95)



Stock-based compensation expense		—	—		4,754		—		—		—		—		4,754



Vesting of restricted stock units, net of shares withheld		116,539	—		(267)		—		—		—		—		(267)




Issuance of warrants to purchase common stock in connection with debt financing		—	—		—		2,096,726		12,759		—		—		12,759
Net loss		—	—		—		—		—		(14,899)		—		(14,899)
Balance – June 30, 2023		34,027,343	$	7	$	556,156	4,193,453		$	19,431	$	(110,887)	$	(6,309)	$	458,398

Issuance of common stock upon exercise of stock options, net of shares withheld		10,856	—		49		—		—		—		—		49



Stock-based compensation expense		—	—		4,706		—		—		—		—		4,706



Vesting of restricted stock units, net of shares withheld		191,973	—		(652)		—		—		—		—		(652)




Issuance of warrants to purchase common stock in connection with debt financing		—	—		—		—		—		—		—		—
Net loss		—	—		—		—		—		(21,138)		—		(21,138)
Balance – September 30, 2023		34,230,172	$	7	$	560,259	4,193,453		$	19,431	$	(132,025)	$	(6,309)	$	441,363

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 Nine Months Ended September 30, 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

Issuance of common stock upon exercise of stock options		32,345	—		78		—		—		78
Repurchase of stock options		(2,706)	—		(28)		—		—		(28)


Stock-based compensation expense		—	—		7,642		—		—		7,642



Vesting of restricted stock units, net of shares withheld		63,064	—		(273)		—		—		(273)





Net loss		—	—		—		(9,157)		—		(9,157)
Balance – June 30, 2022		32,899,596	$	7	$	534,148	$	120,352	$	(6,309)	$	648,198

Issuance of common stock upon exercise of stock options		5,261	—		29		—		—		29



Stock-based compensation expense		—	—		7,666		—		—		7,666



Vesting of restricted stock units, net of shares withheld		283,281	—		(953)		—		—		(953)





Net loss		—	—		—		(105,827)		—		(105,827)
Balance – September 30, 2022		33,188,138	$	7	$	540,890	$	14,525	$	(6,309)	$	549,113

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Condensed Consolidated Statements of Cash Flow (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(138,127)	$	(69,321)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	41,102		34,624
Goodwill impairment	—		108,472
Fair value adjustment, net	458,319		135,935
Origination fees for loans receivable at fair value, net	(19,348)		(17,699)
Gain on loan sales	(6,140)		(5,708)
Stock-based compensation expense	13,709		20,752


Other, net	(41,344)		32,183
Originations of loans sold and held for sale	(41,562)		(50,643)
Proceeds from sale of loans	47,128		56,800
Changes in other assets and other liabilities	(27,283)		(86,052)




Net cash provided by operating activities	286,454		159,343
Cash flows from investing activities
Originations of loans	(1,179,886)		(2,178,675)
Proceeds from loan sales originated as held for investment	2,758		247,943
Repayments of loan principal	1,014,147		1,055,113
Capitalization of system development costs	(25,180)		(36,824)


Other, net	(1,207)		(3,434)

Net cash used in investing activities	(189,368)		(915,877)
Cash flows from financing activities
Borrowings under secured financing	185,100		1,687,050

Repayments of secured financing	(80,581)		(1,717,050)
Borrowings under asset-backed notes at fair value	—		967,761
Repayments of asset-backed notes at fair value	(505,778)		(87,253)
Borrowings under asset-backed borrowings at amortized cost	257,639		—
Repayments of asset-backed borrowings at amortized cost	(9,839)		—
Borrowings under acquisition and corporate financing	73,355		—

Repayments of acquisition and corporate financing	(17,275)		—
Payments of deferred financing costs	(1,550)		(6,503)

Net payments related to stock-based activities	(2,329)		(8,224)
Net cash provided by (used in) financing activities	(101,258)		835,781
Net increase (decrease) in cash and cash equivalents and restricted cash	(4,172)		79,247
Cash and cash equivalents and restricted cash, beginning of period	203,817		192,960
Cash and cash equivalents and restricted cash, end of period	$	199,645	$	272,207

Supplemental disclosure of cash flow information
Cash and cash equivalents	$	81,886	$	175,857
Restricted cash	117,759		96,350
Total cash and cash equivalents and restricted cash	$	199,645	$	272,207

Cash paid for income taxes, net of refunds	$	1,420	$	(3,944)
Cash paid for interest	$	126,724	$	51,509
Cash paid for amounts included in the measurement of operating lease liabilities	$	10,772	$	7,772
Supplemental disclosures of non-cash investing and financing activities
Right of use assets obtained in exchange for operating lease obligations	$	1,382	$	2,831



Non-cash investments in capitalized assets	$	100	$	2,577
Non-cash financing activities	$	19,431	$	2,325

See Notes to the Condensed Consolidated Financial Statements.

OPORTUN FINANCIAL CORPORATION

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023


1.			Organization and Description of Business

Oportun Financial Corporation (together with its subsidiaries, "Oportun" or the "Company") is a mission-driven fintech that puts its members’ financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, the Company empowers members with the confidence to build a better financial future. Oportun 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. Oportun offers access to a comprehensive suite of digital banking products, offered either directly or through partners, including lending, savings and investing powered by A.I. The Company's credit products include personal loans, secured personal loans and credit cards. The Company's digital banking products include 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, 2022 (the "Annual Report"), filed with the Securities and Exchange Commission ("SEC") on March 14, 2023.

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 September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2023		2022		2023		2022
Net loss	$	(21,138)	$	(105,827)	$	(138,127)	$	(69,321)


Net income (loss) attributable to common stockholders	$	(21,138)	$	(105,827)	$	(138,127)	$	(69,321)

Basic weighted-average common shares outstanding	38,283,071		33,010,107		36,333,570		32,688,988
Weighted average effect of dilutive securities:



Diluted weighted-average common shares outstanding	38,283,071		33,010,107		36,333,570		32,688,988

Earnings (loss) per share:
Basic	$	(0.55)	$	(3.21)	$	(3.80)	$	(2.12)
Diluted	$	(0.55)	$	(3.21)	$	(3.80)	$	(2.12)

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 September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	2,832,953	3,456,494	3,052,422	3,596,792
Restricted stock units	3,438,484	4,696,244	3,707,561	4,285,771


Total anti-dilutive common share equivalents	6,271,437	8,152,738	6,759,983	7,882,563


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 the Company is involved, it assesses whether it is the primary beneficiary of the VIE on an ongoing basis. In circumstances where the Company has 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, it would conclude that it is the primary beneficiary of the VIE, and it consolidates the VIE. In situations where the Company is not deemed to be the primary beneficiary of the VIE, it does not consolidate the VIE and only recognizes our interests in the VIE. In addition, on June 16, 2023 and August 3, 2023, the Company entered into forward flow whole loan sale agreements that are considered secured borrowings and are not considered VIEs. See Note 8, Borrowings for additional information on the secured borrowing under the caption of asset-backed borrowings at amortized cost.

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):


	September 30,		December 31,
(in thousands)	2023		2022
Consolidated VIE assets
Restricted cash	$	95,539	$	91,395
Loans receivable at fair value	2,665,081		3,081,557

Interest and fee receivable	26,689		30,443
Total VIE assets	2,787,309		3,203,395
Consolidated VIE liabilities
Secured financing (1)	424,518		320,000
Asset-backed notes at fair value	1,958,273		2,387,674
Acquisition financing (1)	68,404		85,679
Total VIE liabilities	$	2,451,195	$	2,793,353

(1) Amounts exclude deferred financing costs. See Note 8, 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 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 Condensed Consolidated Balance Sheets (Unaudited).

Other Loan Sales - The Company enters into agreements to sell certain populations of its personal loans and credit card receivables from time to time, including non-performing loans and credit card receivables originated as held for investment. The sold loans were accounted for under the fair value option. The loan sales qualified for sale accounting treatment and the Company derecognized these loans from its Condensed Consolidated Balance Sheets (Unaudited) at the end of the quarter in which the loans were sold.

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.

In November 2022, the Company entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, the Company has a commitment to sell a minimum of $2.0 million of its 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.

On June 16, 2023 and August 3, 2023, the Company entered into forward flow whole loan sale agreements that do not qualify as a sale for accounting purposes and are reported as a secured borrowing. See Note 8, Borrowings for additional information on the secured borrowing under the caption of asset-backed borrowings at amortized cost.

The originations of loans sold and held for sale during the three months ended September 30, 2023 was $15.9 million and the Company recorded a gain on sale of $2.4 million and servicing revenue of $2.2 million. The originations of loans sold and held for sale during the three months ended September 30, 2022 were insignificant. The gain on sale recorded during the three months ended September 30, 2022 was insignificant as a result of our whole loan sale agreement expiration on March 4, 2022. Servicing revenue during the same time period was $5.3 million.

The originations of loans sold and held for sale during the nine months ended September 30, 2023 was $41.6 million and the Company recorded a gain on sale of $6.1 million and servicing revenue of $7.7 million. The originations of loans sold and held for sale during the nine months ended September 30, 2022 was $50.6 million and the Company recorded a gain on sale of $5.7 million and servicing revenue of $15.5 million.


6.			Capitalized Software and Other Intangibles

Capitalized software, net consists of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Capitalized software, net:
System development costs	$	160,630	$	135,303
Acquired developed technology	48,500		48,500
Less: Accumulated amortization	(111,236)		(79,679)
Total capitalized software, net	$	97,894	$	104,124

Capitalized software, net

Amortization of system development costs and acquired developed technology for three months ended September 30, 2023 and 2022 was $10.8 million and $9.0 million, respectively. System development costs capitalized in the three months ended September 30, 2023 and 2022 were $7.0 million and $13.8 million, respectively.

Amortization of system development costs and acquired developed technology for nine months ended September 30, 2023 and 2022 was $31.6 million and $24.7 million, respectively. System development costs capitalized in the nine months ended September 30, 2023 and 2022 were $25.3 million and $39.2 million, respectively.

Acquired developed technology was $48.5 million and is related to the acquisition of Oportun Savings (formerly known as 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:


	September 30,		December 31,
(in thousands)	2023		2022
Intangible assets:
Member relationships	$	34,500	$	34,500
Trademarks	5,626		6,426
Other	3,000		3,000
Less: Accumulated amortization	(13,727)		(8,249)
Total intangible assets, net	$	29,399	$	35,677

On March 8, 2023, the Company revealed its rebranding of Oportun and Oportun Savings (formerly known as Digit) as a single brand. Therefore, the Company wrote off its $0.8 million Digit trademark. Amortization of intangible assets for the three months ended September 30, 2023 and 2022 was $1.9 million and $2.0 million, respectively. Amortization of intangible assets for the nine months ended September 30, 2023 and 2022 was $5.5 million and $6.0 million, respectively.

Expected future amortization expense for intangible assets as of September 30, 2023 is as follows:


(in thousands)	Fiscal Years
2023 (remaining three months)	$	1,931
2024	7,539
2025	4,929
2026	4,929
2027	4,929
2028	4,780
Thereafter	—
Total	$	29,037


7.			Other Assets

Other assets consist of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Fixed assets
Total fixed assets	$	48,746	$	48,212
Less: Accumulated depreciation	(40,856)		(37,688)
Total fixed assets, net	$	7,890	$	10,524

Other Assets


Prepaid expenses	$	16,432	$	24,167
Deferred tax assets	31,985		1,793
Current tax assets	8,591		8,245
Receivable from banking partner	10,577		2,878
Derivative asset	16,046		725
Other	18,408		15,848
Total other assets	$	109,929	$	64,180

Fixed Assets

Depreciation and amortization expense related to fixed assets for the three months ended September 30, 2023 and 2022 was $0.9 million and $1.3 million, respectively, and for the nine months ended September 30, 2023 and 2022 it was $3.2 million, and $3.8 million, respectively.


8.			Borrowings

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


					September 30, 2023		December 31, 2022
Variable Interest Entity	Facility Amount		Maturity Date	Interest Rate	Balance		Balance
(in thousands)
Oportun CCW Trust (1)	$	120,000	December 1, 2024	Variable (2)	$	71,627	$	76,574
Oportun PLW Trust	600,000		September 1, 2024	Adjusted SOFR + 2.17%	351,539		240,994
Total secured financing	$	720,000			$	423,166	$	317,568

(1) The facility amount and maturity date on the Secured Financing - CCW facility (Oportun CCW Trust) were $150.0 million and December 1, 2023, respectively, as of December 31, 2022.

(2) The interest rate on the Secured Financing - CCW facility (Oportun CCW Trust) is adjusted SOFR plus 3.41% on the outstanding principal balance as of September 30, 2023. The interest rate on the CCW was 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 as of December 31, 2022.

The following table presents information regarding asset-backed notes:


	September 30, 2023
Variable Interest Entity	Initial note amount issued (1)		Initial collateral balance (2)		Current balance (1)		Current collateral balance (2)		Weighted average interest rate(3)		Original revolving period (4)
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2022-3)	$	300,000	$	310,993	$	176,078	$	198,583	9.05	%	N/A
Oportun Issuance Trust (Series 2022-2)	400,000		410,212		172,905		197,279		7.92	%	N/A
Oportun Issuance Trust (Series 2022-A)	400,000		410,211		386,100		415,426		5.59	%	2 years
Oportun Issuance Trust (Series 2021-C)	500,000		512,762		452,212		520,252		2.67	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		456,676		519,687		2.69	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		233,667		253,638		2.56	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		80,635		97,229		3.46	%	3 years
Total asset-backed notes recorded at fair value	$	2,754,412	$	2,834,687	$	1,958,273	$	2,202,094


	December 31, 2022
Variable Interest Entity	Initial note amount issued (1)		Initial collateral balance (2)		Current balance (1)		Current collateral balance (2)		Weighted average interest rate(3)		Original revolving period (4)
(in thousands)
Asset-backed notes recorded at fair value:
Oportun Issuance Trust (Series 2022-3)	$	300,000	$	310,993	$	285,218	$	301,967	8.43	%	N/A
Oportun Issuance Trust (Series 2022-2)	400,000		410,212		313,689		344,218		7.03	%	N/A
Oportun Issuance Trust (Series 2022-A)	400,000		410,211		380,313		414,293		5.44	%	2 years
Oportun Issuance Trust (Series 2021-C)	500,000		512,762		435,951		518,929		2.48	%	3 years
Oportun Issuance Trust (Series 2021-B)	500,000		512,759		432,123		519,182		2.05	%	3 years
Oportun Funding XIV, LLC (Series 2021-A)	375,000		383,632		348,046		389,740		1.79	%	2 years
Oportun Funding XIII, LLC (Series 2019-A)	279,412		294,118		192,334		218,571		3.46	%	3 years




Total asset-backed notes recorded at fair value	$	2,754,412	$	2,834,687	$	2,387,674	$	2,706,900

(1)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.

(2)Includes the unpaid principal balance of loans receivable, the balance of required reserve funds, cash, cash equivalents and restricted cash pledged by the Company.

(3)Weighted average interest rate excludes notes retained by the Company. There were no notes retained by the Company as of June 30, 2023. The weighted average interest rate for Series 2022-2 and Series 2022-3 will change over time as the notes pay sequentially (in class priority order).

(4)The revolving period for Series 2019-A ended on August 1, 2022 and Series 2021-A ended on March 1, 2023. These asset-backed notes have been amortizing since then. Series 2022-2 and Series 2022-3 are both amortizing deals with no revolving period.

Asset-backed borrowings at amortized cost - On June 16, 2023, and August 3, 2023, the Company entered into forward flow whole loan sale agreements and has agreed to sell up to $300 million and $400 million of its personal loan originations over the next twelve months, respectively. The Company will continue to service these loans upon transfer of the receivables. While the economics of these transactions are structured as a whole loan sale, the transfer of these loans receivable does not qualify as a sale for accounting purposes. Accordingly, the related assets remain on the Company's 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 these agreements, as of September 30, 2023, the Company transferred loans receivable totaling $145.0 million and $105.9 million, respectively.

The following table presents information regarding the Company's Acquisition and Corporate Financings:


					September 30, 2023		December 31, 2022
Entity	Original Balance		Maturity Date	Interest Rate	Balance		Balance
(in thousands)
Oportun Financial Corporation (1)	$	150,000	September 14, 2026	SOFR (minimum of 0.00%) + 12.00%	$	202,484	$	141,957
Oportun RF, LLC (2)	116,000		October 1, 2024	SOFR (minimum of 0.00%) + 11.00%	65,619		80,922
Total acquisition and corporate financings	$	266,000			$	268,103	$	222,879

(1) The Corporate Financing facility (Oportun Financial Corporation) was upsized and amended on March 10, 2023 to provide the ability to be able to borrow up to an additional $75.0 million. The interest rate on the Corporate Financing facility was SOFR (minimum of 0.00%) plus 9.00% as of December 31, 2022.

(2) The Acquisition Financing facility (Oportun RF, LLC) was amended and upsized several times in 2022 increasing the size of the facility to $119.5 million and amending the maturity date. The maturity date and interest rate of the Acquisition Financing facility was May 1, 2024 and SOFR (minimum of 0.00%) plus 8.00% as of December 31, 2022.

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

On March 8, 2023, the Credit Card Warehouse (Oportun CCW Trust) was amended. This amendment, among other things, extends the revolving period by a year, to December 31, 2024, and reduces the commitment amount from $150.0 million to $120.0 million.

On March 10, 2023 (the “Second Amendment Closing Date”), the Company amended its Corporate Financing (Oportun Financial Corporation) facility by entering into an Amendment No. 2 (the “Second Amendment”) by and among the Company, as borrower, the subsidiaries of the Company party thereto as guarantors, certain funds associated with Neuberger Berman Specialty Finance as lenders, and Wilmington Trust, National Association, as administrative agent and collateral agent (the “Agent”), which amended the Credit Agreement, dated as of September 14, 2022 (as amended, supplemented or otherwise modified, including by the Second Amendment, the “Amended Credit Agreement”), by and among the Company, the lenders from time to time party thereto and the Agent.

On the Second Amendment Closing Date, the Company borrowed $20.8 million of incremental term loans (the “Incremental Tranche A-1 Loans”) and borrowed an additional $4.2 million of incremental term loans (the “Incremental Tranche A-2 Loans”) on March 27, 2023. Pursuant to the Second Amendment, the Company issued warrants (the “Warrants”) to the lenders providing the Incremental Tranche A-1 Loans to purchase 1,980,242 shares of the Company’s common stock at an exercise price of $0.01 per share. On March 27, 2023, in connection with the funding of the Incremental Tranche A-2 Loans, the Company issued Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock at an exercise price of $0.01 per share.

On May 5, 2023, under the Amended Credit Agreement, the Company borrowed an additional $25.0 million of incremental term loans (the "Incremental Tranche B Loans") and issued Warrants to the lenders to purchase 1,048,363 shares of the Company's common stock at an exercise price of $0.01 per share. The Company determined that the terms of the new debt instrument upon issuance of Tranche B was substantially different when compared to the Original Credit Agreement resulting in an insignificant net loss on debt extinguishment. Accordingly, the Company extinguished the carrying value of the Corporate Financing Facility prior to issuance of Tranche B and recorded the new Corporate Financing Facility upon issuance of Tranche B at fair value of $179.5 million. This resulted in an insignificant net loss on extinguishment.

On June 30, 2023, under the Amended Credit Agreement, the Company borrowed an additional $25.0 million of incremental term loans (the "Incremental Tranche C Loans") and issued Warrants to the lenders to purchase 1,048,363 shares of the Company's common stock at an exercise price of $0.01 per share.

The loans (the “Loans”) and other obligations under the Amended Credit Agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the Loans, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company, subject to customary exceptions.

Following the Second Amendment Closing Date the Loans bear interest, at (a) an amount equal to 1-month term SOFR plus 9.00% plus (b) an amount payable in cash or in kind, at the Company's option, equal to 3.00%. The Loans are scheduled to mature on September 14, 2026, and are not subject to amortization. Certain prepayments of the Loans are subject to a prepayment premium.

See Note 10, Stockholders' Equity for additional information on the Warrants.

On October 20, 2023, in connection with the closing of a new private structured financing facility (the “Structured Financing Facility”), Oportun CL Trust 2023-A, as borrower, and Oportun, Inc. and Oportun CL Depositor, LLC, each as seller and depositor, respectively, entered into a Receivables Loan and Security Agreement (the “Receivables Loan and Security Agreement”) with certain lenders from time-to-time party thereto (the “Lenders”) and Wilmington Trust, National Association as administrative agent, paying agent and account bank, pursuant to which the borrower borrowed $197 million. Certain funds and affiliates of Castlelake, L.P. (“Castlelake”) participated as Lenders under the Structured Financing Facility. Borrowings under the Receivables Loan and Security Agreement accrue interest at a weighted average interest rate equal to 10.05%.

As of September 30, 2023, and December 31, 2022, the Company was in compliance with all covenants and requirements of the Secured Financing, Acquisition and Corporate Financing facilities and asset-backed notes.


9.			Other Liabilities

Other liabilities consist of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Accounts payable	$	6,485	$	9,670
Accrued compensation	10,822		12,502
Accrued expenses	22,157		26,193
Accrued interest	8,302		8,445
Amount due to whole loan buyer	5,794		3,073
Deferred tax liabilities	—		30,575
Current tax liabilities	7,016		5,912
Other	3,135		3,658
Total other liabilities	$	63,711	$	100,028


10.			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 September 30, 2023 or December 31, 2022.

Common Stock - As of September 30, 2023 and December 31, 2022, 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 September 30, 2023, 34,502,195 and 34,230,172 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. As of December 31, 2022, 33,626,630 and 33,354,607 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.

Warrants - On March 10, 2023, pursuant to the Second Amendment of the Corporate Financing facility, the Company issued detachable Warrants to the lenders providing the Incremental Tranche A-1 Loans to purchase 1,980,242 shares of the Company’s common stock at an exercise price of $0.01 per share. On March 27, 2023, in connection with the funding of the Incremental Tranche A-2 Loans, the Company issued Warrants to the lenders providing the Incremental Tranche A-2 Loans to purchase 116,485 shares of the Company’s common stock at an exercise price of $0.01 per share. On May 5, 2023, in connection with the funding of the Incremental Tranche B Loans, the Company issued Warrants to the lenders providing the Incremental Tranche B loans to purchase 1,048,363 shares of the Company's common stock at an exercise price of $0.01 per share. On June 30, 2023, in connection with the funding of the Incremental Tranche C Loans, the Company issued Warrants to the lenders providing the Incremental Tranche C Loans to purchase 1,048,363 shares of the Company’s common stock at an exercise price of $0.01 per share.

See Note 8, Borrowings for additional information on the Second Amendment of the Corporate Financing facility.


11.			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 September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Technology and facilities	$	1,158	$	1,739	$	3,366	$	5,175
Sales and marketing	19		37		62		106
Personnel	3,185		5,274		10,281		15,471
Total stock-based compensation (1)	$	4,362	$	7,050	$	13,709	$	20,752

(1) Amounts shown are net of $0.3 million and $1.1 million of capitalized stock-based compensation for the three and nine months ended September 30, 2023, respectively, and net of $0.6 million and $2.0 million of capitalized stock-based compensation for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, and December 31, 2022, the Company’s total unrecognized compensation cost related to unvested stock-based option awards granted to employees was $3.2 million and $6.2 million, respectively, which will be recognized over a weighted-average vesting period of approximately 2.1 years and 2.6 years, respectively. As of September 30, 2023 and December 31, 2022, the Company's total unrecognized compensation cost related to unvested restricted stock unit awards granted to employees was $26.8 million and $51.6 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.5 years and 2.7 years, respectively.

Cash flows from the tax shortfalls or benefits for tax deductions resulting from the exercise of stock options in comparison to the compensation expense recorded for those options are required to be classified as cash from financing activities. The Company recognized $3.8 million and $6.1 million of income tax benefit in its consolidated statement of operations related to stock-based compensation expense during the nine months ended September 30, 2023 and 2022, respectively. Additionally, the total income tax expense recognized in the income statement for share-based compensation exercises was $0.4 million and $3.0 million for the three and nine months ended September 30, 2023, respectively. The total income tax expense recognized in the income statement for share-based compensation exercises was $1.4 million and $2.4 million for the three and nine months ended September 30, 2022, respectively.


12.			Revenue

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Interest income
Interest on loans	$	238,824	$	226,103	$	707,052	$	615,394
Fees on loans	4,434		6,012		14,288		16,613
Total interest income	243,258		232,115		721,340		632,007

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Non-interest income
Gain on loan sales (loss)	$	2,447	$	(6)	$	6,114	$	5,708
Servicing fees	3,809		5,266		11,033		15,544
Subscription revenue	6,233		7,578		19,412		24,123