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Oportun Financial Corp

Oportun Financial CorpOPRTEarnings & Financial Report

Nasdaq · Financials · Finance Services

Oportun Financial Corp is a US-based fintech firm that provides accessible, responsible financial services including personal loans, credit cards, and savings products to underserved low-to-moderate income consumers, many with limited or no credit history, leveraging proprietary AI underwriting to deliver fair terms while mitigating operational risk.

What changed in Oportun Financial Corp's 10-K — 2022 vs 2023

Top changes in Oportun Financial Corp's 2023 10-K

537 paragraphs added · 529 removed · 381 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

49 edited+19 added−50 removed24 unchanged
Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing installment loan with fixed payments throughout the life of the loan. We charge fixed interest rates on our loans, which vary based on the amount disbursed and applicable state law, with a cap of 36% annual percentage rate (“APR”) in all cases.
Unsecured Personal Loans —Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing installment loan with fixed payments throughout the life of the loan. We charge fixed interest rates on our loans, which vary based on the amount disbursed and applicable state law, with a cap of 36% annual percentage rate (“APR”) in all cases.
A comprehensive business impact analysis is performed annually detailing the maximum tolerable downtime for all mission critical functions. Across our infrastructure, a robust and holistic monitoring-and-alerting practice allows for awareness and detection capabilities ensuring faster incident response and resolution time, limiting the risk of unplanned events, such as downtime or security threats.
A comprehensive business impact 9 analysis is performed annually detailing the maximum tolerable downtime for all mission critical functions. Across our infrastructure, a robust and holistic monitoring-and-alerting practice allows for awareness and detection capabilities ensuring faster incident response and resolution time, limiting the risk of unplanned events, such as downtime or security threats.
We take a holistic approach to serving our members and view it as our purpose to responsibly meet their current capital needs, help grow our members’ financial profiles, increase their financial awareness and put them on a path to a financially healthy life.
We take a holistic approach to serving our members and view it as our purpose to responsibly meet their current capital needs, help grow our members’ financial profiles, increase their financial awareness and put them on a path to a more financially healthy life.
For more information with respect to the regulatory framework affecting our business, see "Risk Factors – Risks Related to our Industry and Regulation." Our Technology Infrastructure Our applications, including our proprietary workflow management system that handles loan and credit card application, document verification, loan disbursement and servicing, as well as our systems that handle that our automated savings, investing and banking tools are architected to be highly available, resilient, scalable, and secure.
For more information with respect to the regulatory framework affecting our business, see "Risk Factors — Risks Related to our Industry and Regulation." Our Technology Infrastructure Our applications, including our proprietary workflow management system that handles loan and credit card application, document verification, loan disbursement and servicing, as well as our systems that handle that our automated savings tools are architected to be highly available, resilient, scalable, and secure.
We may also face competition from companies that have not previously competed in the consumer lending market for borrowers with limited credit history. For example, we are already seeing that the companies commonly referred to as “challenger banks” offering low-cost digital-only deposit accounts are beginning to offer lending products catered to underserved borrowers.
We may also face competition from companies that have not previously competed in the consumer lending market for borrowers with limited credit history. For example, we are already seeing that the companies commonly referred to as “challenger banks”, “digital banks”, or “neo-banks” offering low-cost digital-only deposit accounts are beginning to offer lending products catered to underserved borrowers.
While many of the people who come to us are not well served by mainstream financial institutions due to limited credit history, we use A.I. and billions of proprietary data points to score 100% of our loan applicants and offer our members responsibly designed and affordable credit products that are often otherwise unavailable to them, including personal loans and credit cards.
While many of the people who come to us are not well served by mainstream financial institutions due to limited credit history, we use A.I. and billions of proprietary data points to score 100% of our loan applicants and offer our members responsibly designed and affordable credit products that are often otherwise unavailable to them.
With 814 million algorithmic transfers over the last 8+ years based on billions of data points, we have built an A.I. engine with a long track record of making financial health effortless for our members. This serves as a major competitive advantage in delivering new types of personalized but scalable financial services.
With 932 million algorithmic transfers over the last 8+ years based on billions of data points, we have built an A.I. engine with a long track record of making financial health effortless for our members. This serves as a major competitive advantage in delivering new types of personalized and scalable financial services.
In addition, the study found that our unsecured personal loan product has helped borrowers save more than $2.3 billion in interest and fees.
In addition, the study found that our unsecured personal loan product has helped borrowers save more than $2.4 billion in interest and fees.
Credit Products Personal Loans - Personal loans allow our consumers a fast and convenient way to address pressing financial needs (for example an unplanned car repair) as well as planned purchases and personal growth opportunities (such as a deposit on a home rental).
Our Products Personal Loans —Personal loans allow our members a fast and convenient way to address pressing financial needs (for example an unplanned car repair) as well as planned purchases and personal growth opportunities (such as a deposit on a home rental).
Our competitive differentiation in personal loans comes from our segment focus, our technology, data, and A.I.-driven approach to delivering personal loans, and the way we tailor our product designs and borrowers experience to meet and exceed the expectations of our target members.
Our competitive differentiation in personal loans comes from our segment focus, our technology, data, A.I.-driven approach to delivering them, and the way we tailor our product designs and borrowers’ experience to meet and exceed the expectations of our target members.
According to a study commissioned by us on the credit options available to people with little or no credit history, the Financial Health Network found that Oportun loans are, on average, 6 times less expensive than other options and up to 24 times less expensive as compared to online-only installment products.
According to a study commissioned by us on the credit options available to people with little or no credit history, the Financial Health Network found that Oportun loans are, on average, 7 times less expensive than other options and up to 16 times less expensive as compared to online-only installment products.
Since our inception, we have utilized alternative data sets to rapidly build, test and develop our underwriting, pricing, marketing, fraud and servicing models, and with the acquisition of Digit, we now offer machine learning capabilities that help members identify the right amount of money to put towards savings and investments each day.
Since our inception, we have utilized alternative data sets to rapidly build, test and develop our underwriting, pricing, marketing, fraud and servicing models; and with Set & Save, we now offer machine learning capabilities that help members identify the right amount of money to put towards savings each day.
We help potential and current members become aware of our product offerings through brand marketing (including online and broadcast media and outdoor advertising, including the physical presence of retail locations in some of the communities we serve) and direct marketing (including SMS/text, email, mail and offers made available through our Oportun Mobile App).
Through these channels, we help potential and current members become aware of our product offerings, in addition to our brand marketing (including online and broadcast media and outdoor advertising, including the physical presence of our 129 physical retail locations in some of the communities we serve) and direct marketing (including SMS/text, email, mail and offers made available through our Oportun Mobile App).
As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 49 months and 28.3%, respectively. As part of our underwriting process, we evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria.
As of December 31, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 52 months and 28.9%, respectively. As part of our underwriting process, we evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria.
Digit's savings product utilizes machine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner.
Our savings product utilizes mac hine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner.
In addition to our direct-to-consumer channels, we reach incremental members through our Lending as a Service product offering. By entering Lending as a Service partnerships with other companies, we create new proprietary channels through which to offer our lending products and financial services and acquire new members, multiplying our membership growth potential.
In addition to our direct-to-consumer channels, we reach incremental members through our Lending as a Service lead generation program. By entering Lending as a Service partnerships with other companies, we create new proprietary channels through which to offer our lending and financial services products, and acquire new members, fortifying our membership growth potential.
In addition to ensure proper controls are in place, we have a compliance management system that leverages the five key control components of governance, compliance program risk assessments, policies, procedures and training, member complaint monitoring and internal compliance audits.
We have built our systems and processes with controls in place to ensure compliance with applicable laws. In addition to ensuring proper controls are in place, we have a compliance management system that leverages the five key control components of governance, compliance program risk assessments, policies, procedures and training, member complaint monitoring and internal compliance audits.
Serving our Members' Financial Needs Our members are among the hundreds of millions of hardworking Americans who are not well served by mainstream financial products.
Our members are among the millions of hardworking Americans who are not well served by mainstream financial products.
Credit Products— Since our founding in 2005, we have extended more than $15.5 billion in responsible credit through more than 6.3 million loans and credit cards, and helping over 1.1 million people who came to Oportun without a FICO® score to begin establishing a credit history .
Credit Products— Since our founding in 2005, we have extended more than $17.8 billion in responsible credit through more than 6.9 million loans and credit cards, and helped over 1.1 million people who came to Oportun without a FICO® score to begin establishing a credit history .
As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 38 months and 32.0%, respectively. The average loan size for loans we originated in 2022 was $4,189.
As of December 31, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 41 months and 32.9%, respectively. The average loan size for loans we originated in 2023 was $4,007.
We believe we will be able to offer Lending as a Service to additional partners and expand our membership base. 9 Our Competition In consumer finance, we compete with other consumer finance companies, credit card issuers, financial technology companies and financial institutions, as well as other nonbank lenders serving consumers who do not have access to mainstream credit, including online marketplace lenders, point-of-sale lending, payday lenders, and auto title lenders and pawn shops focused on underserved borrowers.
Our Competition In consumer finance, we compete with other consumer finance companies, credit card issuers, financial technology companies and financial institutions, as well as other nonbank lenders serving consumers who do not have access to mainstream credit, including online marketplace lenders, point-of-sale lending, payday lenders, and auto title lenders and pawn shops focused on underserved borrowers.
In addition to the challenge of capital access, millions of people in the U.S. have a difficult time trying to save and manage money. Through our digital banking products, we help our members reach their financial goals and improve their financial health by automating away the guess-work and stress of money management.
In addition to the challenge of capital access, millions of people in the U.S. have a difficult time saving and managing money. Through our Set & Save product, we help our members reach their financial goals and improve their financial health by automating away the guesswork and stress of money management.
Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $12,000 with terms of 12 to 60 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of their income. As part of our underwriting process, we only approve loans that meet our ability-to-pay criteria.
Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $10,000 with terms of 12 to 54 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of their income.
We classify financial obligations, credit, bills and paychecks based on historical data to forecast a future financial picture for each member. We employ continuous learning to update these models with the most recent financial data, so we do not miss new trends in spending habits or income changes (e.g., new employers, subscription services, insurers, side jobs, sales, etc.).
We employ continuous learning to update these models with the most recent financial data, so we do not miss new trends in spending habits or income changes (e.g., new employers, subscription services, insurers, side jobs, sales, etc.).
For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” ), as well as many state statutes provide a mechanism for state attorneys general to investigate us. In addition, the Federal Trade Commission (the "FTC") has jurisdiction to investigate aspects of our business.
For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” ), as well as many state statutes provide a mechanism for state attorneys general to investigate us.
Regulations and Compliance We are subject to various federal, state and local regulatory regimes related to the financial services that we provide.
Management's Discussion and Analysis of Financial Condition and Results of Operations for discussion of Seasonality. Regulations and Compliance We are subject to various federal, state and local regulatory regimes related to the financial services that we provide.
Most fintech platforms are focused on borrowers with more established credit histories and higher incomes and are not able to match our ability to effectively manage credit risk among people who may face challenges with aspects of their financial health.
As a result, our credit products, including unsecured personal loans and secured personal loans, are a significant differentiator from other lenders. Most fintech platforms are focused on borrowers with more established credit histories and higher incomes and are not able to match our ability to effectively manage credit risk among people who may face challenges with their financial health.
Our secured personal loans range in size from $2,525 to $18,000 with terms ranging from 27 to 63 months. The average loan size for secured personal loans we originated in 2022 was $8,304.
Our secured personal loans range in size from $2,525 to $18,500 with terms ranging from 24 to 64 months. The average loan size for secured personal loans we originated in 2023 was $7,156.
See “Risk Factors – If we do not compete effectively in our target markets, our results of operations could be harmed” and “Risk Factors – Competition for our highly skilled employees is intense, and we may not be able to attract and retain the employees we need to support the growth of our business.” In digital banking, we compete with traditional banks, both large and small, as well as other fintech companies offering mobile-centric digital banking propositions.
See “Risk Factors —If we do not compete effectively in our target markets, our 8 results of operations could be harmed” and “Risk Factors—Competition for our highly skilled employees is intense, and we may not be able to attract and retain the employees we need to support the growth of our business.” Seasonality See Item 7.
Our digital banking platform is designed to address these societal issues with a comprehensive set of financial services that help people, even those who are not well served by mainstream financial institutions, access credit and automatically budget, save, and invest, without impacting their ability to meet daily spending needs.
Our intelligent lending and savings platform is designed to help people, even those who are not well served by mainstream financial institutions, access credit and automate their savings without impacting their ability to meet daily spending needs.
We also expect to continue to 7 derive actionable insights to further drive growth of our secured personal loan and credit card products that are still early in their market adoption lifecycle. Additionally, we will continue to invest significantly in our artificial intelligence capabilities to expand the functionality and efficiency of our products.
We also expect to continue to derive actionable insights to further drive growth of our products, and we will continue to invest significantly in our A.I. capabilities to expand the functionality and efficiency of our products.
This product allows our borrowers to access larger loan sizes than they can with an unsecured loan, which is critical if the need they are facing exceeds our unsecured lending limits for that member. Our secured personal loans business has significant growth potential as we expand geographic and channel availability and make more of our members aware of the product.
Secured Personal Loans —In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans. This product allows our members to access larger loan sizes than they can with an unsecured loan, which is critical if the financial need they are addressing exceeds our unsecured lending limits for that member.
Savings – Our Savings product is designed to understand a member’s cash flows and save a calculated amount on a regular basis to effortlessly achieve savings goals.
Our secured personal loans are currently offered in California and we are in the process of planning to expand into other states. Set & Save — Our savings product, Set & Save, is designed to understand a member’s cash flows and save the right amount on a regular basis to effortlessly achieve savings goals.
In addition, as a result of our bank partnerships, prudential bank regulators with supervisory authority over our partners have the ability to regulate aspects of our business.
In addition, as a result of our bank partnerships, prudential bank regulators with supervisory authority over our partners have the ability to regulate aspects of our business. Either directly or through our bank partnership program requirements, we are subject to the USA PATRIOT Act, Office of Foreign Assets Control, Bank Secrecy Act, Anti-Money Laundering laws, and Know-Your-Customer requirements.
We ingest over 9.2 billion data points into our risk model development using traditional (e.g., credit bureau data) and alternative (e.g., transactional information, public records) data. This helps us to score 100% of the applicants who come to us seeking to borrow money, enabling us to serve more people while minimizing risk.
This helps us to score 100% of the applicants who come to us seeking to borrow money, enabling us to serve more people while minimizing risk.
By intentionally designing our products to help solve the financial health challenges facing a majority of people in the U.S., we believe our business is well positioned for long-term growth. Financial Health in America According to a January 2023 survey by Bankrate, more than half of all Americans do not have enough savings to cover an unplanned expense of $1,000.
Financial Health in America According to a January 2024 survey by Bankrate, more than half of all Americans do not have enough savings to cover an unplanned expense of $1,000. In 2023, the Financial Health Network ("FHN") reported that more than two-thirds of U.S. households "struggle with spending, saving, borrowing and planning" according to its Financial Health Pulse™ 2023 U.S.
We regularly review our consumer contracts, consumer-facing content, policies, procedures and processes to ensure compliance with applicable laws and regulations. We have built our systems and processes with controls in place in order to ensure compliance with applicable laws.
The laws and regulations applicable to us are continuing to evolve through legislative and regulatory action and judicial and regulatory interpretation and we monitor these areas closely. We regularly review our consumer contracts, consumer-facing content, policies, procedures, and processes to ensure compliance with applicable laws and regulations.
We meet our members where they are, connecting directly to their checking account to analyze spending and income patterns, regardless of whether their bank account is through Digit's partner bank or another bank.
We meet our members where they are, connecting directly to their checking account to analyze spending and income patterns, regardless of where they bank. We apply algorithms to this data, along with generalized principles of responsible finance and behavioral psychology, to make personalized money allocation decisions daily for our members.
By applying artificial intelligence ("A.I.") to automate their financial health, we believe we have a compelling suite of products and services that addresses the very real needs of the vast majority of people living in the U.S.
By applying artificial intelligence ("A.I.") to automate their financial health through adequate savings and credit when they need it, we believe we can address the very real daily financial needs of millions of people living in the U.S. Product Overview Our financial products allow us to meet our members where they are and assist them with their overall financial health.
We believe our strong Net Promoter® Score ("NPS"), 81, up from 79 in 2021 for our personal loans demonstrates our success in providing our members with effective and easy to use solutions. Our members access our products primarily through our website, our mobile application, as well as through our partners.
We believe our strong Net Promoter® Score ("NPS") of 79 for our personal loans demonstrates our success in providing our members with effective and easy to use solutions. For Oportun, serving our members means building their financial resiliency and ensuring that trustworthy and hardworking people always have access to responsible and affordable credit that fits their needs.
Item 1. Business Company Overview We are a digital banking platform that puts our members’ financial goals within reach. With intelligent borrowing, savings, budgeting, and spending capabilities, we empower members with the confidence to build a better financial future.
Item 1. Business Company Overview With intelligent borrowing, savings, and budgeting capabilities, Oportun empowers its members with the confidence to build a better financial future. We design our products to holistically address two of the most fundamental challenges to financial health and resilience - access to responsible and affordable credit, and adequate savings.
Our digital banking products include, automated savings, as well as a digital bank account and long-term investing and retirement savings available through partners. Consumers are able to become members and access our products through our mobile application, the Oportun Mobile App and the Oportun.com website, which are our primary channels for onboarding and serving members.
Consumers can become members and access our products through the Oportun Mobile App, the Oportun.com website, our telesales team, and through our retail locations. Collectively these are our primary channels for onboarding and serving members.
According to a January 2023 survey by Bankrate, more than half of all Americans do not have enough savings to cover an unplanned expense of $1,000. After one year using the automated savings product, our members have been able to increase their liquid savings by approximately 50% on average. Since 2015 Digit has helped members save over $8.9 billion .
Members integrate their existing bank accounts into the platform or they can make the Set & Save product their primary banking relationship through a bank partner. After one year using the automated savings product, members have been able to increase their liquid savings by approximately 50%. Since 2015 our savings product has helped members save more than $10.2 billion .
We apply algorithms to this data, along with generalized principles of responsible finance and behavioral psychology, to make personalized money allocation decisions on a daily basis for each of our members. The algorithms behind our digital banking products intelligently utilize the nuances in transaction data to classify income and expenses with up to 95% accuracy.
The algorithms behind our Set & Save product intelligently utilize the nuances in transaction data to classify income and expenses with up to 95% accuracy. We classify financial obligations, credit, bills, and paychecks based on historical data to forecast a future financial picture for each member.
As of December 31, 2022, we originate unsecured personal loans in 12 states through state licenses and in 30 states through our partnership with Pathward, N.A. Secured Personal Loans - In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans.
As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria. As of December 31, 2023, we originate unsecured personal loans in 6 states through state licenses and in 38 states through our partnership with Pathward, N.A.
Our technology, member-centric culture and effective use of data and analytics enable us to efficient ly help our members overcome financial challenges. Our Strategy We seek to expand our financial services to help a growing number of responsible, hardworking members to borrow, save, bank and invest through our digital banking platform and thus make financial health effortless for them.
Our technology, member-centric culture and effective use of data and analytics enable us to efficient ly help our members overcome financial challenges. Our Strategy Our strategy should be thought of in two parts, (1) short-term focus and (2) long-term focus.
Our Digital Banking Platform Consistent with our mission of financial inclusion, we have designed our integrated digital banking platform to provide products and services 6 that are financially responsible and lower cost compared to market alternatives. Our application of A.I., specifically machine learning, is designed to address the shortcomings of the modern banking system.
In addition, on the same day, Oportun announced that it was exploring strategic options for our credit card portfolio. Use of Artificial Intelligence Consistent with our mission of financial inclusion, our application of A.I., specifically machine learning, is designed to address the shortcomings of the modern banking system.
In January of 2022, we announced our first all-digital Lending as a Service partnership with Sezzle, a leading provider of Buy Now Pay Later ("BNPL") financing options which launched in the first quarter of 2023. Oportun is now available as a checkout option, through Sezzle, for larger purchases which we believe will allow us to reach more new members.
To strategically realign our resources to focus on other products, on November 6, 2023, we announced the sunsetting of our embedded finance partnership with Sezzle, a provider of Buy Now Pay Later financing options, which launched in the first quarter of 2023.
Enhance our credit and digital banking products – We leverage machine learning to rapidly build and test strategies across the member lifecycle, including through targeted digital marketing, underwriting, pricing, fraud and member servicing. We believe that as we scale our suite of digital banking products and services, we will further improve member loyalty and increase member lifetime value.
We may seek to add additional Lending as a Service partners in the future, similar to our current partnerships with DolEx Dollar Express, Inc. and Barri Financial Group (now consolidated into a single company “DolFinTech”) where we collect leads from 393 of their retail locations. 7 Enhance our credit and savings products —We leverage machine learning to rapidly build and test strategies across the member lifecycle, including through targeted digital marketing, underwriting, pricing, fraud and member servicing.
Removed
In 2022, the Financial Health Network ("FHN") reported that more than two-thirds of U.S. households "struggle with spending, saving, borrowing and planning" according to its Financial Health Pulse™ 2022 U.S. Trends Report. In addition, our research shows that while 90% of U.S. consumers believe financial health is important, 57% of those consumers do not want to think about money.
Added
Trends Report. When presented with an unexpected expense they cannot postpone, like a car that won’t start when one needs to get to work, or a broken tooth that refuses to be ignored, most people lack adequate savings and will typically require access to credit in order to cover their immediate need.
Removed
Digital Banking Products— With our acquisition of Digit on December 22, 2021, we believe we now have a strong competitive advantage over other fintechs and neobanks.
Added
Serving our Members' Financial Needs Oportun recognizes that while most everyone will face an unplanned expense or bill of one kind of another, there are more than a hundred million adults in the United States who Oportun estimates would struggle further because they lack access to responsible and affordable credit when they need it.
Removed
As a combined company, we can now offer access to a comprehensive suite of digital banking products, offered either directly or through partners, including savings and investing powered by A.I. and tailored to each member's goals to make achieving financial health automated.
Added
Many of these people are likely to be declined for any kind of loan or credit card from a mainstream financial services provider, like a bank or credit union. Without access to credit, an unplanned bill of $1,000 or more has the potential to become a life-changing crisis for millions of people.
Removed
Digit began with a savings product with the intent to apply A.I. to make financial health effortless for everyone. Following the success of the initial savings product, Digit expanded its products and services to include bank account and investment products, available through partners.
Added
For many of our members, being unable to afford a car repair can lead to them not being able to get to work, which causes loss of income, and perhaps even significant financial insecurity for a family that will now struggle to make the most basic of ends meet. This occurs daily across the country.
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Since 2015, our members have saved over $8.9 billion towards their rainy day fund and other savings goals. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 6, Acquisition , in the accompanying Notes to the Consolidated Financial Statements for further discussion of the Digit acquisition.
Added
Savings Product —Since 2015, our recently rebranded Set & Save™ product has allowed our members to set aside more than $10.2 billion for rainy days and other purposes, including an average of $1,800 in individual savings per member per year.
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Lending as a Service— In addition to reaching members through direct marketing channels, we leverage our proprietary credit scoring and underwriting model to enable us to serve consumers by partnering with other brands. Our first strategic partner for this Lending as a Service model was DolEx Dollar Express, Inc. (“DolEx”).
Added
Oportun uses algorithms that learn the financial habits of our members like when their paychecks are deposited and for how much, the timing and cost of their recurring monthly expenses like rent and digital subscriptions, along with all the other small and large payments and deposits that are not regularly recurring.
Removed
In this partnership, DolEx markets loans and enters borrower applications into Oportun’s system, and Oportun underwrites, originates and services the loans. In October 2021, we launched another Lending as a Service partnership with Barri Financial Group in select locations.
Added
Through machine learning, Oportun gets a comprehensive and personalized profile of our members’ cash flow and very quickly learns how much a member can afford to set aside today, without impacting their ongoing obligations and daily spending needs.
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We believe we will be able to offer Lending as a Service to additional partners, and expand our membership base.
Added
For our members, saving money quickly becomes effortless and their financial resiliency improves every day, as Oportun does all the hard math, budgeting, and money transferring that present the sort of daily 6 obstacles that inhibit many people from having adequate savings when they most need it. In 2023, Set & Save was ranked the #1 Savings App by Bankrate.
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Providing our Members with a Seamless Experience We recently launched a mobile application that integrates our credit and digital banking products into a seamless user experience (“Oportun Mobile App”) that further positions us as a leading fintech with one of the most comprehensive offerings.
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We believe this gives us a strong competitive advantage, which along with our lending products, provides us the opportunity to holistically address the two fundamental obstacles to financial resilience; access to responsible and affordable credit when needed and adequate savings.
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We believe that by offering our members an integrated experience through the Oportun Mobile App, we can boost member engagement and retention, as well as multi-product adoption.
Added
Through the development and utilization of our sophisticated underwriting models, we can assess credit risk more effectively compared to other companies and traditional scoring models. We ingest billions of data points into our risk model development using traditional (e.g., credit bureau data) and alternative (e.g., transactional information, public records) data.
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We believe this gives us a strong competitive advantage and an unparalleled suite of digital banking products, which allow us to offer a lower cost option to millions of people in the U.S. Through the development and utilization of our sophisticated underwriting models, we are able to assess credit risk more effectively compared to other companies and traditional scoring models.
Added
Short-term focus— our immediate priorities are to: (a) improve the efficiency of our business to boost profitability, this includes cost-cutting actions taken last year that are anticipated to deliver $105 million in annual savings in 2024; and (b) improving the quality of credit we are extending, as our members are impacted by continuing economic uncertainty, including a significant increase in inflation and interest rates.
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As a result, our credit products, including unsecured personal loans, credit cards, and secured personal loans, are a significant differentiator from other lenders and other digital banking companies.
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Long-term focus— As the macro environment stabilizes, we believe we have several significant growth opportunities. First, we believe we can more deeply penetrate the 30 states that comprise approximately 40% of our total addressable market by actively marketing to new members.
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The evolution of our proprietary risk model enables us to underwrite more applicants and make more credit available to new and returning borrowers, while maintaining consistent credit quality.
Added
We believe we can also increase the percentage of our lending that is on a secured basis, via our Secured Personal Loan product, where we see more than 300 basis points lower credit losses.
Removed
The continuous development and rapid deployment of our credit models enabled by machine learning creates a virtuous cycle that increases our member base and our alternative data set, improving our underwriting tools and ability to grow profitably.
Added
Currently, our Secured Personal Loans are available in California; however, in November of 2023, we announced that through our partnership with Pathward, N.A., we now have the opportunity to expand the coverage of our Secured Personal Loans up to approximately an additional 40 states.
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Our specific objectives are to (1) grow our members, including by organic acquisition, (2) increase the number of products that our members use and drive higher engagement of multi-product relationships, and (3) enhance our platform capabilities across all core functions to better serve our members.
Added
In addition, we plan to continue developing more cross-buying opportunities between our Set & Save savings product and our credit products, primarily through timely and relevant marketing to existing members via our mobile app.
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Our strategy to achieve these objectives is to (a) invest in our member acquisition channels, especially digital and partner channels, (b) enhance our credit and digital banking products, and (c) provide these complementary product categories with a unified and integrated mobile-first experience powered by A.I. through our Oportun Mobile App.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

172 edited+78 added−51 removed317 unchanged
In addition, our investment of resources to develop new products and services may either be insufficient, result in expenses that are excessive considering revenue originated from these new products and services, or may not be able to attract new members or retain existing members.
In addition, our investment of resources to develop products and services may either be insufficient, result in expenses that are excessive considering revenue originated from these products and services, or may not be able to attract new members or retain existing members.
Failure to accurately predict demand or growth with respect to our new products and services could adversely impact our business, and these new products and services may not become profitable, and even if they are profitable, operating margins of some new products may not be as high as the margins we have experienced historically or we may not be able to achieve target margins.
Failure to accurately predict demand or growth with respect to our products and services could adversely impact our business, and these products and services may not become profitable, and even if they are profitable, operating margins of some new products may not be as high as the margins we have experienced historically or we may not be able to achieve target margins.
A.I. and related technologies are subject to public debate and heightened regulatory scrutiny. Any negative publicity or negative public perception of A.I. could negatively impact demand for our products and services or hinder our ability to attract new members and strategic partners. The regulatory framework for A.I. and machine learning technologies is evolving and remains uncertain.
A.I. and related technologies are subject to public debate and heightened regulatory scrutiny. Any negative publicity or negative public perception of A.I. and related technologies could negatively impact demand for our products and services or hinder our ability to attract new members and strategic partners. The regulatory framework for A.I. and machine learning technologies is evolving and remains uncertain.
In addition, we are required to continuously develop and adapt our systems and infrastructure in response to the increasing sophistication of the consumer financial services market, evolving fraud and information security landscape, and regulatory developments relating to existing and planned business operations.
In addition, we are required to continuously develop and adapt our operations, systems, and infrastructure in response to the increasing sophistication of the consumer financial services market, evolving fraud and information security landscape, and regulatory developments relating to existing and planned business operations.
Overall revenue growth depends on a number of factors, including on our ability to increase the origination volume of our products and services, attract new and retain existing members, build our brand, achieve the anticipated benefits and synergies from the Digit acquisition, expand and manage our remote-first workforce, all while managing our business systems, operations and expenses.
Overall revenue growth depends on a number of factors, including on our ability to increase the origination volume of our products and services, attract new members and retain existing members, build our brand, achieve the anticipated benefits and synergies from the Digit acquisition, expand and manage our remote-first workforce, all while managing our business systems, operations and expenses.
Any event that leads, or is believed to have led, to unauthorized access, to, or use, access, loss, corruption, disclosure or other processing of our data could disrupt our business; harm our reputation; compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents; subject us to litigation, regulatory investigation and oversight, or mandatory corrective action; require us to verify the correctness of database contents; or otherwise subject us to liability under laws and contractual obligations, including those that protect the privacy and security of personal information.
Any event that leads, or is believed to have led, to unauthorized access to, or use, loss, corruption, disclosure or other processing of our data could disrupt our business; harm our reputation; compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents; subject us to litigation, regulatory investigation and oversight, or mandatory corrective action; require us to verify the correctness of database contents; or otherwise subject us to liability under laws and contractual obligations, including those that protect the privacy and security of personal information.
State attorneys general also have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws have enforcement authority under state law with respect to unfair or deceptive practices.
State attorneys general also have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws and have enforcement authority under state law with respect to unfair or deceptive practices.
The risks we face in connection with acquisitions include: • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • utilization of our financial resources for acquisitions or investments that may fail to realize the anticipated benefits; • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • coordination of technology, product development and sales and marketing functions and integration of administrative systems; • transition of the acquired company’s members to our systems; • retention of employees from the acquired company; • regulatory risks, including maintaining good standing with existing regulatory bodies or receiving any necessary approvals, as well as being subject to new regulators with oversight over an acquired business; • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt; • cultural challenges associated with integrating employees from the acquired company into our organization; 19 • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • potential write-offs of loans or intangibles or other assets acquired in such transactions that may have an adverse effect on our results of operations in a given period; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, security weaknesses and incidents, tax liabilities and other known and unknown liabilities; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property or increase our risk for liability; and • litigation, claims or other liabilities in connection with the acquired company.
The risks we face in connection with acquisitions include: • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • utilization of our financial resources for acquisitions or investments that may fail to realize the anticipated benefits; • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • coordination of technology, product development and sales and marketing functions and integration of administrative systems; • transition of the acquired company’s members to our systems; • retention of employees from the acquired company; • regulatory risks, including maintaining good standing with existing regulatory bodies or receiving any necessary approvals, as well as being subject to new regulators with oversight over an acquired business; • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt; • cultural challenges associated with integrating employees from the acquired company into our organization; • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • potential write-offs of loans or intangibles or other assets acquired in such transactions that may have an adverse effect on our results of operations in a given period; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, security weaknesses and incidents, tax liabilities and other known and unknown liabilities; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property or increase our risk for liability; and • litigation, claims or other liabilities in connection with the acquired company.
These international activities are subject to inherent risks that are beyond our control, including: • risks related to government regulation or required compliance with local laws; • local licensing and reporting obligations; • difficulties in developing, staffing and simultaneously managing a number of varying foreign operations as a result of distance, language and cultural differences; • different, uncertain, overlapping or more stringent local laws and regulations; • political and economic instability, tensions, security risks and changes in international diplomatic and trade relations; • state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf; • natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism, and other events outside our control; • compliance with applicable U.S. laws and foreign laws related to consumer protection, intellectual property, privacy, data security, corruption, money laundering, and export/trade control; • misconduct by our outsourcing partners and their employees or even unsubstantiated allegations of misconduct; • risks due to lack of direct involvement in hiring and retaining personnel; and • potentially adverse tax developments and consequences.
These international activities are subject to inherent risks that are beyond our control, including: • risks related to government regulation or required compliance with local laws; • local licensing and reporting obligations; • difficulties in developing, staffing and simultaneously managing a number of varying foreign operations as a result of distance, language and cultural differences; • different, uncertain, overlapping or more stringent local laws and regulations; • political and economic instability, tensions, security risks and changes in international diplomatic and trade relations; • state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf; • natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism, and other events outside our control; • compliance with applicable U.S. laws and foreign laws related to consumer protection, taxation, intellectual property, privacy, data security, corruption, money laundering, and export/trade control; • misconduct by our outsourcing partners and their employees or even unsubstantiated allegations of misconduct; • risks due to lack of direct involvement in hiring and retaining personnel; and • potentially adverse tax developments and consequences.
Our substantial level of indebtedness and the current constraints on our liquidity could have important consequences, including the following: • we must use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which reduces or will reduce funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, execution of growth strategies, and potential acquisitions; 26 • our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; • default and foreclosure on our and our subsidiaries’ assets if asset performance and our operating revenue are insufficient to repay debt obligations; • mandatory repurchase obligations for any loans conveyed or sold into a debt financing or under a whole loan purchase facility if the representations and warranties we made with respect to those loans were not correct when made; • acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate such covenant; • inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; • inability to obtain necessary additional financing if changes in the characteristics of our loans or our collection and other loan servicing activities change and cease to meet conditions precedent for continued or additional availability under our debt financings; • limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; • place us at a disadvantage compared to our competitors that have less debt; • defaults based on loan portfolio performance or default in our collection and loan servicing obligations could result in our being replaced by a third-party or back-up servicer and notification to our members to redirect payments; • downgrades or revisions of agency ratings for our debt financing; • monitoring, administration and reporting costs and expenses, including legal, accounting and other monitoring reporting costs and expenses, required under our debt financings; and • we may be more vulnerable to economic downturn and adverse developments in our business, including potential economic recession, inflation, and other factors outside our control.
Our substantial level of indebtedness and the current constraints on our liquidity could have important consequences, including the following: • we must use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which reduces or will reduce funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, execution of growth strategies, and potential acquisitions; • our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; • default and foreclosure on our and our subsidiaries’ assets if asset performance and our operating revenue are insufficient to repay debt obligations; • mandatory repurchase obligations for any loans conveyed or sold into a debt financing or under a whole loan purchase facility if the representations and warranties we made with respect to those loans were not correct when made; • acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate such covenant; • inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; • inability to obtain necessary additional financing if changes in the characteristics of our loans or our collection and other loan servicing activities change and cease to meet conditions precedent for continued or additional availability under our debt financings; • limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; • place us at a disadvantage compared to our competitors that have less debt; • defaults based on loan portfolio performance or default in our collection and loan servicing obligations could result in our being replaced by a third-party or back-up servicer and notification to our members to redirect payments; • downgrades or revisions of agency ratings for our debt financing; 25 • monitoring, administration and reporting costs and expenses, including legal, accounting and other monitoring reporting costs and expenses, required under our debt financings; and • we may be more vulnerable to economic downturn and adverse developments in our business, including potential economic recession, inflation, and other factors outside our control.
If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which could subject us to sanctions or investigations by the SEC or other regulatory 24 authorities, adversely affect our ability to access the credit markets and sell additional equity and commit additional financial and management resources to remediate deficiencies.
If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which could subject us to sanctions or investigations by the SEC or other regulatory authorities, adversely affect our ability to access the credit markets and sell additional equity and commit additional financial and management resources to remediate deficiencies.
Our reliance on our credit risk models and other models in other aspects of our business, including valuation, pricing, collections management, marketing targeting models, fraud prevention, liquidity and capital planning, direct mail and telesales, and savings and investing algorithms may prove in practice to be less predictive than we expect for a variety of reasons, including as a result of errors in constructing, interpreting or using the models or the use of inaccurate assumptions (including failures to update assumptions appropriately in a timely manner).
Our reliance on our credit risk models and other models in other aspects of our business, including valuation, pricing, collections management, marketing targeting models, fraud prevention, liquidity and capital planning, direct mail and telesales, and savings and investing algorithms may prove in practice to be less predictive than we expect for a variety of reasons, including as a result of errors in constructing, interpreting or using the 15 models or the use of inaccurate assumptions (including failures to update assumptions appropriately in a timely manner).
These cost reduction efforts may adversely affect us in unforeseen ways, including interfering with our ability to achieve our business objectives; challenging our ability to effectively manage all aspects of our business operations; causing concerns from current and potential employees, vendors, partners and other third parties with whom we do business; and increasing the likelihood of turnover of other key employees, all of which may have an adverse impact on our business.
These cost reduction efforts may adversely 14 affect us in unforeseen ways, including interfering with our ability to achieve our business objectives; challenging our ability to effectively manage all aspects of our business operations; causing concerns from current and potential employees, vendors, partners and other third parties with whom we do business; and increasing the likelihood of turnover of other key employees, all of which may have an adverse impact on our business.
Our assumptions may be inaccurate, and our models may not be as predictive as expected for many reasons, in particular because they often involve matters that are inherently difficult to predict and beyond our control, such as macroeconomic conditions, credit market volatility and interest rate environment, and human behavior, and they often involve complex interactions between a number of dependent and independent variables and factors.
Our assumptions may be inaccurate, and our models may not be as predictive as expected for many reasons, in particular because they often involve matters that are inherently difficult to predict and beyond our control, such as macroeconomic conditions, credit market volatility, the interest rate environment, and human behavior, and they often involve complex interactions between a number of dependent and independent variables and factors.
Negative publicity about our industry or our company, including the terms of the consumer loans, effectiveness of the proprietary credit risk model, privacy and security practices, originations, marketing, servicing and collections, use of A.I, and other business practices or initiatives, litigation, regulatory compliance and the experience of members, even if inaccurate, could adversely affect our reputation and the confidence in our brands and business model or lead to changes in our business practices.
Negative publicity about our industry or our company, including the terms of the consumer loans, effectiveness of our proprietary credit risk models, privacy and security practices, originations, marketing, servicing and collections, use of A.I, and other business practices or initiatives, litigation, regulatory compliance and the experience of members, even if inaccurate, could adversely affect our reputation and the confidence in our brands and business model or lead to changes in our business practices.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the 35 Securities Act.
We have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses or malware, and cyber-attacks that could obtain confidential information, destroy data, disrupt or degrade service, threaten the integrity and availability of our systems, distributed denial of service attacks, social engineering, security breaches and incidents, and other infiltration, exfiltration or other similar events.
We have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses or malware, and cyber-attacks that could obtain confidential information, destroy data, disrupt or degrade service, 19 threaten the integrity and availability of our systems, distributed denial of service attacks, social engineering, security breaches and incidents, and other infiltration, exfiltration or other similar events.
Our computer systems, including those provided by third-party providers and partners, may encounter service interruptions at any time due to system or software failure, natural disasters, severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, physical or electronic break-ins, technical errors, insider threats, power outages or other events.
Our computer systems, including those provided by third-party providers and partners, may encounter service interruptions at any time due to system or software failure, natural disasters, severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, physical or electronic break-ins, 20 technical errors, insider threats, power outages or other events.
If collections were insufficient to repay 27 the amounts due under our securitizations and our revolving debt facilities, the applicable lenders, trustees and noteholders could seek remedies, including against the collateral pledged under such facilities. Any of these events would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources.
If collections were insufficient to repay the amounts due under our securitizations and our revolving debt facilities, the applicable lenders, trustees and noteholders could seek remedies, including against the collateral pledged under such facilities. Any of these events would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources.
In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions. We have previously acquired, and in the future, may acquire, complementary assets or businesses.
In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions. We have previously acquired, and in 18 the future, may acquire, complementary assets or businesses.
Further, legislated increases in minimum wage, as well as increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, and compliance costs and fines, would increase our labor costs. 23 Misconduct by our employees could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
Further, legislated increases in minimum wage, as well as increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, and compliance costs and fines, would increase our labor costs. Misconduct by our employees could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
Regulation by federal and state regulators may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny and otherwise increase our regulatory burden, or may adversely affect our ability to expand our business. 33 Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.
Regulation by federal and state regulators may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny and otherwise increase our regulatory burden, or may adversely affect our ability to expand our business. Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.
As a result of challenging credit and liquidity conditions, the value of the subordinated securities we retain in our securitizations might be reduced or, in some cases, eliminated. The securitization market is subject to changing market conditions, and we may not be able to access this market when we would otherwise deem appropriate.
As a result of challenging credit and liquidity conditions, the value of the subordinated securities we retain in our securitizations might be reduced or, in some cases, eliminated. 26 The securitization market is subject to changing market conditions, and we may not be able to access this market when we would otherwise deem appropriate.
We may also decide to modify our strategy with respect to whole loan sales, including increasing or decreasing the number of loans sold. We continue to evaluate our business strategies and underwriting and servicing practices and will continue to make changes 21 to adapt to changing economic conditions, regulatory requirements and industry practices.
We may also decide to modify our strategy with respect to whole loan sales, including increasing or decreasing the number of loans sold. We continue to evaluate our business strategies and underwriting and servicing practices and will continue to make changes to adapt to changing economic conditions, regulatory requirements and industry practices.
The CFPB has called out other fees, such as pay-to-pay fees charged by debt collectors, and is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the “junk fee” initiative is likely to continue to broaden in scope.
The CFPB has called out other fees, such as pay-to-pay fees charged by debt collectors, and is actively soliciting consumer input on fee practices associated with other consumer financial products or services, 29 signaling that the “junk fee” initiative is likely to continue to broaden in scope.
We may not be able to hire or 18 retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
We may not be able to hire or retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
Conditions in the credit markets may continue to experience disruption or deterioration, including as a result of rising interest rates, which could make it difficult for us to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms.
Conditions in the credit markets may continue to experience disruption or deterioration, including as a result of rising interest rates, which could make it difficult for us to extend the maturity of or refinance our existing 12 indebtedness or obtain new indebtedness with similar terms.
Accordingly, the results for any one quarter are not necessarily an indication of future performance. Our quarterly financial results may fluctuate due 17 to a variety of factors, some of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business.
Accordingly, the results for any one quarter are not necessarily an indication of future performance. Our quarterly financial results may fluctuate due to a variety of factors, some of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business.
We do not control these analysts or the content and opinions included in their reports. If any of the analysts who cover us issue an adverse or misleading opinion regarding our stock price, our stock price would likely decline.
We do not control these analysts or the content and opinions included in their reports. If any of the analysts who cover us issue an adverse 33 or misleading opinion regarding our stock price, our stock price would likely decline.
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent or market data becomes less observable.
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent or market data becomes less 13 observable.
In addition, we may export, transfer or provide access to software and technology to non-U.S. persons such as employees and contractors, as well as third-party vendors and consultants engaged to support our business activities.
In addition, we may export, transfer or provide access to software and technology to non-U.S. persons such as employees and 32 contractors, as well as third-party vendors and consultants engaged to support our business activities.
To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to holders of our common stock and increase the number of shares 34 eligible for resale in the public market.
To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to holders of our common stock and increase the number of shares eligible for resale in the public market.
In addition, a data security incident could cause third parties, to lose trust in us or subject us to claims by third parties that we have breached our 20 privacy- and confidentiality-related obligations.
In addition, a data security incident could cause third parties, to lose trust in us or subject us to claims by third parties that we have breached our privacy- and confidentiality-related obligations.
Changes in regulations or in the way regulations are interpreted and applied to our business could adversely affect our business. We are subject to various federal, state and local regulatory regimes related to the financial services that we provide.
Changes in regulations or in the way regulations are applied to our business could adversely affect our business. We are subject to various federal, state and local regulatory regimes related to the financial services that we provide.
Our failure, or a failure by third parties with whom we do business, to comply with applicable privacy laws or regulations and contractual obligations required by our business partners, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs.
Our actual or perceived failure, or any actual or perceived failure by third parties with whom we do business, to comply with applicable privacy laws or regulations and contractual obligations required by our business partners, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs.
The Investment Company Act of 1940, as amended (the "Investment Company Act") contains substantive legal requirements that regulate the way “investment companies” are permitted to conduct their business activities.
The Investment Company Act of 1940, as amended (the “Investment Company Act”) contains substantive legal requirements that regulate the way “investment companies” are permitted to conduct their business activities.
They 35 may also have interests that differ from yours, and they may vote in a way with which you disagree or which may be adverse to your interests.
They may also have interests that differ from yours, and they may vote in a way with which you disagree or which may be adverse to your interests.
The current regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted in significant operational and compliance costs and may prevent us from providing certain products and services. There is no assurance that these regulatory matters or other factors will not, in the future, affect how we conduct our business or adversely affect our business.
The current regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted insignificant operational and compliance costs and may prevent us from providing certain products and services. There is no assurance that these regulatory matters or other factors will not, in the future, affect how we conduct our business or adversely affect our business.
See more information about our outstanding debt in Note 9, Borrowings to the Notes to the Consolidated Financial Statements included elsewhere in this report. However, there is no assurance that these sources of capital will continue to be available in the future on terms favorable to us or at all.
See more information about our outstanding debt in Note 8 , Borrowings to the Notes to the Consolidated Financial Statements included elsewhere in this report. However, there is no assurance that these sources of capital will continue to be available in the future on terms favorable to us or at all.
Factors that may cause fluctuations in our quarterly financial results include: • loan volumes, product and loan mix and the channels through which our loans are originated; • the number and extent of prepayments of loans; • the effectiveness of our direct marketing and other marketing channels; • the effectiveness of our proprietary credit risk models; • the timing and success of new products and origination channels; • the amount and timing of operating expenses and capital expenditures, including those related to member acquisition, development of new products and services, and maintenance and expansion of our business, operations and infrastructure; • net charge-off rates; • adjustments to the fair value of assets and liabilities on our balance sheet; • our involvement in litigation or regulatory enforcement efforts (or the threat thereof) or those that impact our industry generally; • changes in laws and regulations that impact our business; • our borrowing costs and access to the capital markets; and • general economic, industry, and market conditions, including economic slowdowns, recessions, rising interest and inflation rates, and tightening of credit markets.
Factors that may cause fluctuations in our quarterly financial results include: • loan volumes, product and loan mix and the channels through which our loans are originated; • the number and extent of prepayments of loans; • the effectiveness of our direct marketing and other marketing channels; • the effectiveness of our proprietary credit risk models; • the timing and success of new products and origination channels; 16 • the amount and timing of operating expenses and capital expenditures, including those related to member acquisition, development of our products and services, and maintenance and expansion of our business, operations and infrastructure; • net charge-off rates; • adjustments to the fair value of assets and liabilities on our balance sheet; • our involvement in litigation or regulatory enforcement efforts (or the threat thereof) or those that impact our industry generally; • changes in laws and regulations that impact our business; • our borrowing costs and access to the capital markets; and • general economic, industry, and market conditions, including economic slowdowns, recessions, rising interest and inflation rates, and tightening of credit markets and recent or potential bank failures.
The availability of debt financing and other sources of capital depends on many factors, some of which are outside of our control.
The availability of debt financing and other sources of capital depends on many factors, many of which are outside of our control.
For example, our Bay Area headquarters have experienced and may continue to experience, climate-related events and at an increasing frequency, including floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires.
For example, our Bay Area headquarters has experienced and may continue to experience, climate-related events and at an increasing frequency, including floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires.
It is possible that new laws and regulations will be adopted, or existing laws and regulations may be interpreted in new ways, that would affect our business, products and services and the way in which we use A.I., including with respect to fair lending laws.
It is likely that new laws and regulations will be adopted, or existing laws and regulations may be interpreted in new ways, that would affect our business, products and services and the way in which we use A.I., including with respect to fair lending laws.
Given the unprecedented nature of the COVID-19 pandemic and its impact on the economy, the amount of subjective assessment and judgment applied to develop our forecasts has increased materially, since no directly corresponding historical data set exists.
For example, given the unprecedented nature of the COVID-19 pandemic and its impact on the economy, the amount of subjective assessment and judgment applied to develop our forecasts has increased materially, since no directly corresponding historical data set exists.
We are dependent on hiring an adequate number of hourly bilingual employees to run our business and are subject to government regulations concerning these and our other employees, including minimum wage laws. Our workforce is comprised primarily of bilingual employees who work on an hourly basis.
We are dependent on hiring an adequate number of hourly bilingual employees to run our business and are subject to government regulations concerning these and our other employees, including minimum wage laws. Our workforce is comprised largely of bilingual employees who work on an hourly basis.
To the extent it is determined that any loan we make was not originated in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cashor swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements.
To the extent it is determined that any loan we make was not originated in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cash or swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements.
Any of these occurrences may interrupt the availability, or reduce or adversely affect the functionality of our websites, applications, products or services, including our ability to service our loans, process loan applications, and provide digital banking services to our members.
Any of these occurrences may interrupt the availability, or reduce or adversely affect the functionality of our websites, applications, products or services, including our ability to service our loans, process loan applications, and provide digital financial services to our members.
Factors outside our control, including interest rate changes and widening credit spreads, may require us to make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations or lead to volatility in our Net Revenue.
Factors outside our control, including interest rate changes and widening credit spreads, have required, and may continue to require us to make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations or lead to volatility in our Net Revenue.
Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflict in Ukraine.
Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflicts in Ukraine and the Middle East.
We have incurred substantial debt and may issue debt securities or otherwise incur substantial debt in the future, which may adversely affect our financial condition and negatively impact our operations. We have a substantial amount of indebtedness, which requires significant interest payments. From time to time, we may seek to obtain additional capital.
Funding and Liquidity Risks We have incurred substantial debt and may issue debt securities or otherwise incur substantial debt in the future, which may adversely affect our financial condition and negatively impact our operations. We have a substantial amount of indebtedness, which requires significant interest payments. From time to time, we may seek to obtain additional capital.
General Risk Factors You may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions or otherwise.
General Risk Factors You may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions, financings, investments or otherwise.
Our bank partnership products may lead to regulatory risk and may increase our regulatory burden. We provide our credit card products through a bank partnership program with WebBank and we have bank partnership programs with Pathward, N.A., to offer unsecured installment loans and provide deposit accounts, debit card services and other transaction services to our members.
Our bank partnership products may lead to regulatory risk and may increase our regulatory burden. We provide our credit card products through a bank partnership program with WebBank and we have bank partnership programs with Pathward, N.A., to offer unsecured personal loans, secured personal loans, and provide deposit accounts, debit card services and other transaction services to our members.
For more information on covenants, requirements and events, see Note 9, Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
For more information on covenants, requirements and events, see Note 8 , Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
As we continue to grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission.
As we continue to evolve our business, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission.
If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited, our ability to accurately evaluate potential members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations.
If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited through new regulation or otherwise, our ability to accurately evaluate potential members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations.
These provisions include the following: • a classified Board with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board; • our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill Board vacancies; • our stockholders may not act by written consent or call special stockholders’ meetings; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board may issue, without stockholder approval, shares of undesignated preferred stock, which may make it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. 36 As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions.
These provisions include the following: • a classified Board with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board; • our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill Board vacancies; • our stockholders may not act by written consent or call special stockholders’ meetings; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board may issue, without stockholder approval, shares of undesignated preferred stock, which may make it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.
These provisions and duties impose restrictions and obligations on us with respect to our dealings with our members, including for example restrictions on transactions with our affiliates. Our investment adviser has in the past and will in the future be subject to periodic SEC examinations.
These provisions and duties impose 31 restrictions and obligations on us with respect to our dealings with our members, including for example restrictions on transactions with our affiliates. Our investment adviser has in the past and may in the future be subject to periodic SEC examinations.
Digit Advisors is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is subject to regulation by the SEC.
Digit Advisors is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is subject to regulation by the SEC.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended ( the "Exchange Act"), the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing standards of the Nasdaq Stock Market, and other applicable securities rules and regulations, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended ( the "Exchange Act"), the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing standards of the Nasdaq Stock Market, and other applicable securities rules and regulations, including with regard to corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
In particular, it is important that we continue to ensure that our members with loans remain loyal to us and we continue to extend loans to members who have successfully repaid their previous loans. As of December 31, 2022 and 2021, members with repeat loans comprised 78% and 76%, respectively, of our Owned Principal Balance at End of Period.
In particular, it is important that we continue to ensure that our members with loans remain loyal to us and we continue to extend loans to members who have successfully repaid their previous loans. As of December 31, 2023 and 2022, members with repeat loans comprised 82% and 78%, respectively, of our Owned Principal Balance at End of Period.
We are unable to predict the future path or impact of any global or regional COVID-19 resurgences, including existing or future variants, or other public health crises. An extended period of disruption as a result of a health epidemic or pandemic, including COVID-19, may negatively impact us, as well as our members, vendors, and partners.
We are unable to predict the future path or impact of any global or regional health epidemics, other outbreaks, or resurgences of COVID-19, including existing or future variants. An extended period of disruption as a result of a health epidemic or pandemic, including COVID-19, may negatively impact us, as well as our members, vendors, and partners.
Certain regions of the United States from time to time will experience weaker economic conditions and higher unemployment and, consequently, will experience higher rates of delinquency and loss than on similar loans nationally. In addition, natural, man-made disasters or health epidemics or pandemics in specific geographic regions may result in higher rates of delinquency and loss in those areas.
Certain regions of the U.S. from time to time will experience weaker economic conditions and higher unemployment and, consequently, will experience higher rates of delinquency and loss than on similar loans nationally. In addition, natural, man-made disasters or health epidemics or pandemics in specific geographic regions may result in higher rates of delinquency and loss in those areas.
A number of factors, including market volatility or depressed valuations, trading prices in the equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.
A number of factors, including market volatility or depressed valuations, trading prices in the equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing. Debt financing, if available, may have a high cost of funds and may involve covenants restricting our operations or our ability to incur additional debt.
If we are not able to effectively implement new technology-driven products and services as quickly as our competitors or be successful in marketing these products and services to our members and strategic partners, demand for our products and services may decrease.
We may not be able to effectively implement technology-driven products and services as quickly as competitors or be successful in marketing these products and services to our members and strategic partners, demand for our products and services may decrease .
Competition for highly skilled personnel, particularly engineering and data analytics personnel, is extremely intense across the country and is likely to continue to increase, as more companies are offering remote or hybrid working arrangements. We have experienced and expect to continue to face difficulty identifying and hiring qualified personnel in many areas, especially as we pursue our growth strategy.
Competition for highly skilled personnel, particularly engineering and data analytics personnel, is extremely intense across the country and is likely to continue to increase, as more companies are offering remote or hybrid working arrangements. We have experienced and expect to continue to face difficulty identifying and hiring qualified personnel in many areas.
These employees provide certain English/Spanish bilingual support related to member-facing contact center activities, administrative and technology support of the contact centers and back-office support services. We have also engaged outsourcing partners in the United States that provide offshore member-facing contact center activities in Colombia, Jamaica and the Philippines, and may in the future include additional locations in other countries.
These employees provide certain English/Spanish bilingual support related to member-facing contact center activities, administrative and technology support of the contact centers and back-office support services. We have also engaged outsourcing partners in the U.S. that provide offshore member-facing contact center activities in Colombia and the Philippines, and may in the future include additional locations in other countries.
The automated nature of our business may make us attractive targets for hacking and potentially vulnerable to computer malware, physical or electronic break-ins and similar disruptions.
The automated nature of our business may make us an attractive target for hacking and potentially vulnerable to computer malware, physical or electronic break-ins and similar disruptions.
If we are unable to recover our marketing costs through increases in the size, value or overall number of credit products we originate, or other product selection and utilization, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If we are unable to recover our marketing costs, including through increases in the size, value or overall number of credit products we originate, or our savings product, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our Loans Receivable at Fair Value represented 87% of our total assets and our asset-backed notes represented 78% of our total liabilities as of December 31, 2022. The fair value of our loans receivable held for investment are determined using Level 3 inputs and the fair value of our asset-backed notes are determined using Level 2 inputs.
Our Loans Receivable at Fair Value represented 87% of our total assets and our asset-backed notes represented 79% of our total liabilities as of December 31, 2023. The fair value of our loans receivable held for investment are determined using Level 3 inputs and the fair value of our asset-backed notes are determined using Level 2 inputs.
We intend to continue expanding into new geographic regions, including through strategic partnerships or a national bank charter. In addition, each of the new states where we do not currently operate may have different laws and regulations that apply to our products and services.
We intend to continue expanding into new geographic regions, including through strategic partnerships or through our bank partnership programs. In addition, each of the new states where we do not currently operate may have different laws and regulations that apply to our products and services.
The full benefits of the acquisition, including anticipated growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
Further, the full benefits of acquisitions, including anticipated growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
The California Consumer Privacy Act (the "CCPA"), including the California Privacy Rights Act of 2020 ("CPRA") amendments imposes significant requirements on businesses processing consumer personal information – principally 32 around enabling and honoring consumer choices related to such processing.
The California Consumer Privacy Act (the “CCPA”), including the California Privacy Rights Act of 2020 amendments, imposes significant requirements on businesses processing consumer personal information – principally around enabling and honoring consumer choices related to such processing.
Worker shortages, supply chain issues, inflationary pressures, vaccine and testing requirements, the emergence of new variants and the reinstatement and subsequent lifting of restrictions and health and safety related measures in response to the emergence of new variants have occurred in the past and may occur in the future.
Worker shortages, supply chain issues, inflationary pressures, vaccine and testing requirements, the emergence of new health epidemics or outbreaks and new variants of COVID-19, and the reinstatement and subsequent lifting of restrictions and health and safety related measures in response to the emergence of new health epidemics or outbreaks and new variants of COVID-19 have occurred in the past and may occur in the future.
In February 2023, the CFPB published a proposed rule, which is currently subject to public comment, amending Regulation Z to mandate significant decreases to credit card late fees and eliminate annual inflation adjustments for late fee safe harbor amounts.
In February 2023, the CFPB published a proposed rule, which is currently pending a final rule, amending Regulation Z to mandate significant decreases to credit card late fees and eliminate annual inflation adjustments for late fee safe harbor amounts.
If any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if the cost of using these channels significantly increases or if we are not successful in generating new channels, we may not be able to attract new members in a cost-effective manner or increase the activity of our existing members, including by using additional products or services we offer.
If any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if the cost of using these channels significantly increases or if we are not successful in generating new channels, we may not be able to attract new members in a cost-effective manner or increase the activity of our existing members.
A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event (many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, pandemics or other public health crises, power outages, geopolitical unrest or other man-made problems, could have an adverse effect on our business, results of operations and financial condition.
A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event (many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, pandemics or other public health crises, power outages, geopolitical unrest, war, or other large-scale conflicts or unpredictable occurrences, could have an adverse effect on our business, results of operations and financial condition.
Any reduction in our interest rate spread could have an adverse effect on our business, results of operations, cash flows, and financial condition. We do not currently hedge our interest rate exposure associated with our debt financing or fair market valuation of our loans.
Reductions in our interest rate spread have had and could continue to have an adverse effect on our business, results of operations, cash flows, and financial condition. We do not currently hedge our interest rate exposure associated with our debt financing or fair market valuation of our loans.
For example, we’ve seen an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships through our subsidiary Digit.
For example, we’ve seen an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships.
Market interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies.
Market interest rate changes have had, and may continue to have, an adverse affect on our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies.
You should carefully consider these risks, all of the other information in this report, including our consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations," and general economic and business risks before making a decision to invest in our common stock.
You should carefully consider these risks, all of the other information in this report, including our consolidated financial statements, the notes thereto and the sections entitled “ Forward-Looking Statements ” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and general economic and business risks before making a decision to invest in our common stock.

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Item 2. Properties

Properties — owned and leased real estate

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We also operate retail locations and co-locations throughout the United States. Item 3. Legal Proceedings The information set forth under Note 16, Leases, Commitments and Contingencies , in the accompanying Notes to the Consolidated Financial Statements is incorporated herein by reference.
Legal Proceedings The information set forth under Note 16, Leases, Commitments and Contingencies , in the accompanying Notes to the Consolidated Financial Statements is incorporated herein by reference.
Item 2. Properties Our corporate headquarters is located in San Carlos, California pursuant to a lease expiring in February 2026. We are currently subleasing a portion of our headquarters space to third parties. As of December 31, 2022, we leased additional facilities and office space in California, Texas, Mexico, and India.
Item 2. Properties Our corporate headquarters is located in San Carlos, California pursuant to a lease expiring in February 2026. As of December 31, 2023, we leased additional facilities and office space in California, Texas, Mexico, and India. We also operate retail locations and co-locations throughout the United States. Item 3.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Survey results are evaluated and shared across the organization, including our Board’s compensation and leadership committee, to identify areas of progress and areas for improvement. Based on feedback received this year, management 11 implemented several initiatives to improve the employee experience through rewards and recognition, increased communication transparency, and streamlining processes and collaboration tools.
Survey results are evaluated and shared across the organization, including our Board’s compensation and leadership committee, to identify areas of progress and areas for improvement. Based on feedback received this year, management implemented several initiatives to improve the employee experience through rewards and recognition, increased communication transparency, and streamlining processes and collaboration tools.
In addition to salaries, our benefits programs include annual bonuses, equity awards, a 401(k) plan, healthcare and insurance benefits, flexible spending accounts, paid time off, family leave, paid time off for volunteering, matching gifts, employee assistance programs, family care resources, and tools to promote mental health and wellness.
In addition to salaries, our benefit programs include annual bonuses, equity awards, a 401(k) plan, healthcare and insurance benefits, flexible spending accounts, paid time off, family leave, paid time off for volunteering, matching gifts, employee assistance programs, family care resources, and tools to promote mental health and wellness/fitness.
Our welcoming and inclusive company culture is grounded in our core values - service, excellence, care, innovation, courage, and empowerment – and our people strategies are committed to fostering a culture which encourages and empowers our employees to live our core values every day. • Employee Engagement – We conduct an annual engagement survey as a means of measuring employee engagement and satisfaction, as well as a tool for improving our people strategies for the year ahead.
Our welcoming and inclusive company culture is grounded in our core values and our people strategies are committed to fostering a culture which encourages and empowers our employees to live our core values every day. • Employee Engagement – We conduct an annual engagement survey as a means of measuring employee engagement and satisfaction, as well as a tool for improving our people strategies for the year ahead.
To support our remote-first culture, we actively encourage personal well-being through initiatives, including wellness days for employees to take time to rest and recharge, engagement programs (speaker events, employee resource groups, virtual events, etc.), and recognition programs. We had 3,000 full-time and 235 part-time employees worldwide as of December 31, 2022.
To support our remote-first culture, we actively encourage personal well-being through initiatives, including wellness days for employees to take time to rest and recharge, engagement programs (speaker events, employee resource groups, virtual events, etc.), and recognition programs. We had 2,340 full-time and 125 part-time employees worldwide as of December 31, 2023.
Approximately 82% of our employees participated in our 2022 employee engagement survey, of which 85% reported that they were satisfied with Oportun as a place to work and 89% reported that they were proud to work at Oportun.
Approximately 71% of our employees participated in our 2023 employee engagement survey, of which 71% reported that they were satisfied with Oportun as a place to work and 84% reported that they were proud to work at Oportun.
We announce material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, our websites (www.oportun.com and www.digit.co), the investor relations section of our website (investor.oportun.com), as well as social media, including our LinkedIn pages (https://www.linkedin.com/company/oportun/ and https://www.linkedin.com/company/digit-co/), Twitter accounts (@Oportun and @hellodigit) and Instagram account (@hellodigit).
We announce material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, our website (www.oportun.com), the investor relations section of our website (investor.oportun.com), as well as social media, including our LinkedIn pages (https://www.linkedin.com/company/oportun/). The information on our website is not incorporated by reference into this report.
The information on our website is not incorporated by reference into this report. The website addresses listed above are provided for the information of the reader and are not intended to be active links. 12
The website addresses listed above are provided for the information of the reader and are not intended to be active links. 11
The majority of Oportun employees identify as women or members of an underrepresented group and the majority of Oportun’s leadership team identifies as either women or members of an underrepresented group. We define the leadership team as Directors, Senior Directors, Vice Presidents and above, inclusive of the Board.
Currently, 88% of our Board identifies as women or members of an underrepresented group and the majority of our leadership team identifies as either women or members of an underrepresented group. The majority of Oportun employees identify as women or members of an underrepresented group.
We have nine employee resource groups focused on our Asian, Black, Hispanic/Latinx, LGBTQ+, early career individuals, disability/accessibility, South Asian, veteran, and women communities.
We define the leadership team as Directors, Senior Directors, Vice Presidents and above, inclusive of the Board. We have ten employee resource groups focused on our Asian, Black, Hispanic/Latinx, LGBTQ+, early career individuals, disability/accessibility, South Asian, veteran, environmental enthusiasts, and women communities.
This includes 875 corporate employees in the United States, of which 274 employees are dedicated to technology, risk, analytics, A.I. and data science. On February 9, 2023, we announced that we were reducing our corporate employees by 10% in the United States, India and Mexico, or approximately 155 employees. Available Information Our website address is www.oportun.com.
During 2023, we announced a series of personnel and other cost savings measures to reduce expenses and streamline efficiency, including reducing our corporate staff by approximately 40% in the United States, India and Mexico. 10 Available Information Our website address is www.oportun.com.
We have been recognized as a Greater Bay Area’s Top Workplace for the past four years and in 2022 we were named one of Comparably’s Companies with Happiest Employees, which is a list derived from top sentiment ratings anonymously provided by employees. • Diversity and Inclusion – We b elieve that innovation starts with inclusion.
As a result of our employee engagement efforts, we have been recognized as a Greater Bay Area Top Workplace for the past five years. • Diversity and Inclusion – We believe that innovation starts with inclusion. Our focus on diversity and inclusion is reflected throughout our organization, starting at the highest level.
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Our focus on diversity and inclusion is reflected throughout our organization, starting at the highest level. Currently, 70% of our Board identifies as women or members of an underrepresented group and the majority of our leadership team identifies as either women or members of an underrepresented group.
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This includes 435 corporate employees in the United States, of which 213 employees are dedicated to technology, risk, analytics, A.I. and data science.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Stockholders Oportun's common stock has been listed for trading on the Nasdaq Global Select Market since September 26, 2019 under the symbol "OPRT". As of March 8, 2023, we had 132 registered stockholders of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Stockholders Oportun's common stock has been listed for trading on the Nasdaq Global Select Market since September 26, 2019 under the symbol "OPRT". As of March 13, 2024, we had 119 registered stockholders of our common stock.
Any future determination to pay dividends will be made at the discretion of our Board. Stock Performance As a “Smaller Reporting Company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. Issuer Purchases of Equity Securities None. Unregistered Sales of Equity Securities None. Use of Proceeds None. Item 6. Reserved 38
Any future determination to pay dividends will be made at the discretion of our Board. Stock Performance As a “Smaller Reporting Company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. Issuer Purchases of Equity Securities None.
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Unregistered Sales of Equity Securities We had no unregistered sales of our securities in the reporting period not previously reported. Use of Proceeds None. Item 6. Reserved 38

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. Reserved 38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8.
Item 6. Reserved 38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 58 Item 8.
Financial Statements and Supplementary Data 61 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 61 Consolidated Balance Sheets 63 Consolidated Statements of Operation s 64 Consolidated Statements of Changes in Stockholders' Equity 65 Consolidated Statements of Cash Flow 66 Notes to the Consolidated Financial Statements 67
Financial Statements and Supplementary Data 59 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 59 Consolidated Balance Sheets 61 Consolidated Statements of Operation s 62 Consolidated Statements of Changes in Stockholders' Equity 63 Consolidated Statements of Cash Flow 64 Notes to the Consolidated Financial Statements 65

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Cash flows from operating activities primarily include net income or losses adjusted for (i) non-cash items included in net income or loss, including depreciation and amortization expense, goodwill impairment charges, fair value adjustments, net, origination fees for loans at fair value, net, gain on loan sales, stock-based compensation expense and deferred tax provision, net, (ii) originations of loans sold and held for sale, and proceeds from sale of loans and (iii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of 54 business due to the amount and timing of various payments.
Cash flows from operating activities primarily include net income or losses adjusted for (i) non-cash items included in net income or loss, including depreciation and amortization expense, goodwill impairment charges, fair value adjustments, net, origination fees for loans at fair value, net, gain on loan sales, stock-based compensation expense and deferred tax provision, net, (ii) originations of loans sold and held for sale, and 54 proceeds from sale of loans and (iii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of various payments.
For the year ended December 31, 2022, net cash provided by financing activities was primarily driven the issuance of our Series 2022-A, Series 2022-2 and Series 2022-3 asset-backed notes and the borrowings under our Secured Financing facilities and Acquisition and Corporate Financing facilities, partially offset by repayments of borrowings on our Secured Financing facilities and scheduled amortization payments on our Acquisition Financing facility and our Series 2019-A, Series 2022-2 and Series 2022-3 asset-backed notes.
For the year ended December 31, 2022, net cash provided by financing activities was primarily driven the issuance of our Series 2022-A, Series 2022-2 and Series 2022-3 asset-backed notes and the borrowings under our Secured Financing and Acquisition and Corporate Financing, partially offset by repayments of borrowings on our Secured Financing facilities and scheduled amortization payments on our Acquisition Financing facility and our Series 2019-A, Series 2022-2 and Series 2022-3 asset-backed notes.
With intelligent borrowing, savings, budgeting, and spending capabilities, we empower members with the confidence to build a better financial future . By intentionally designing our products to help solve the financial health challenges facing a majority of people in the U.S., we believe our business is well positioned for significant growth.
With intelligent borrowing, savings, and budgeting capabilities, we empower members with the confidence to build a better financial future . By intentionally designing our products to help solve the financial health challenges facing a majority of people in the U.S., we believe our business is well positioned for significant growth in the future.
In addition to monitoring our loss and delinquency performance on an owned portfolio basis, we also monitor the performance of our loans by the period in which the loan was disbursed, generally years or quarters, which we refer to as a vintage. We calculate net lifetime loan loss rate by vintage as a percentage of original principal balance.
In addition to monitoring our loss and delinquency performance on an owned portfolio basis, we also monitor the performance of our loans by the period in which the loan was disbursed, generally years or quarters, which we refer to as a vintage. We calculate net lifetime loan loss rate by 42 vintage as a percentage of original principal balance.
Non-GAAP Financial Measures We believe that the provision of non-GAAP financial measures in this report, including Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Adjusted Operating Efficiency and Adjusted Return on Equity, can provide useful measures for period-to-period comparisons of our core business and useful information to investors and others in understanding and evaluating our operating results.
Non-GAAP Financial Measures We believe that the provision of non-GAAP financial measures in this report, including Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Adjusted Operating Efficiency and Adjusted Return on Equity, can provide useful measures for period-to-period comparisons of our core business and useful information to investors and others in understanding and evaluating our operating results.
Operating expenses Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees and general, administrative and other expenses. Technology and facilities Technology and facilities expense is the largest segment of our operating expenses, representing the costs required to build and maintain our A.I.-enabled digital platform, and consists of three components.
Operating expenses Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees and general, administrative and other expenses. 46 Technology and facilities Technology and facilities expense is the largest segment of our operating expenses, representing the costs required to build and maintain our A.I.-enabled digital platform, and consists of three components.
Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due and charge-off a credit 42 card account when it is 180 days contractually past due.
Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due and charge-off a credit card account at the earlier of when the account is determined to be uncollectible or when it is 180 days contractually past due.
Recently Issued Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies , of the Notes to the Consolidated Financial Statements included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards. 58
Recently Issued Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies , of the Notes to the Consolidated Financial Statements included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.
Fair Value of Loans Held for Investment We elected the fair value option for our loans receivable held for investment. We primarily use a discounted cash flow model to estimate fair value based on the present value of estimated future cash flows.
Fair Value of Loans Held for Investment We elected the fair value option for our loans receivable held for investment. We primarily use a discounted cash flow model to estimate fair 57 value based on the present value of estimated future cash flows.
For further information on these sales, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Consolidated Financial Statements included elsewhere in this report.
For further information on these 56 sales, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Consolidated Financial Statements included elsewhere in this report.
For a reconciliation of Return on Equity to Adjusted Return on Equity, see “Non–GAAP Financial Measures.” Historical Credit Performance Our Annualized Net Charge-off Rate ranged between 7% and 9% from 2011 to 2019 and was 9.8% in 2020, a modest variance above this range during the pandemic.
For a reconciliation of Return on Equity to Adjusted Return on Equity, see “Non–GAAP Financial Measures.” Historical Credit Performance Our Annualized Net Charge-off Rate ranged between 7% and 9% from 2011 to 2019 and was 9.8% in 2020, a modest variance above this range during the COVID-19 pandemic.
An index to our management's discussion and analysis follows: Topic Overview 39 Key Financial and Operating Metrics 41 Seasonality 44 Historical Credit Performance 42 Results of Operations 45 Fair Value Estimate Methodology for Loans Receivable at Fair Value 50 Non-GAAP Financial Measures 51 Liquidity and Capital Resources 54 Critical Accounting Policies and Significant Judgments and Estimates 57 Recently Issued Accounting Pronouncements 58 The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) is intended to help the reader understand our results of operations and financial condition.
An index to our management's discussion and analysis follows: Topic Overview 39 Key Financial and Operating Metrics 40 Seasonality 44 Historical Credit Performance 42 Results of Operations 44 Fair Value Estimate Methodology for Loans Receivable at Fair Value 50 Non-GAAP Financial Measures 51 Liquidity and Capital Resources 54 Critical Accounting Policies and Significant Judgments and Estimates 57 Recently Issued Accounting Pronouncements 58 The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) is intended to help the reader understand our results of operations and financial condition.
For the three months ended December 31, 2022, our business exhibited lower than typical originations due to our credit tightening. Prior to the pandemic, we historically experienced a seasonal decline in credit performance in the fourth quarter primarily attributable to competing demand of our borrowers' available cash flow around the holidays.
For the three months ended December 31, 2023, our business exhibited lower than typical originations due to our credit tightening. Prior to the pandemic, we historically experienced a seasonal decline in credit performance in the fourth quarter primarily attributable to competing demand of our borrowers’ available cash flow around the holidays.
Key Financial and Operating Metrics We monitor and evaluate the following key metrics in order to measure our current performance, develop and refine our growth strategies, and make strategic decisions. The following table and related discussion set forth key financial and operating metrics for our operations as of and for the years ended December 31, 2022 and 2021.
Key Financial and Operating Metrics We monitor and evaluate the following key metrics in order to measure our current performance, develop and refine our growth strategies, and make strategic decisions. The following table and related discussion set forth key financial and operating metrics for our operations as of and for the years ended December 31, 2023 and 2022.
The first component comprises costs associated with our technology, engineering, information security, cybersecurity, platform development, maintenance, and end user services, including fees for software licenses, consulting, legal and other services as a result of our efforts to grow our business, as well as personnel expenses.
The first component comprises costs associated with our technology, engineering, information security, cybersecurity, platform development, maintenance, and end user services, including fees for consulting, legal and other services as a result of our efforts to grow our business, as well as personnel expenses.
Our ability to utilize our asset-backed securitization facilities as described herein is subject to compliance with various requirements including eligibility criteria for the loan collateral and covenants and other requirements. As of December 31, 2022, we were in compliance with all covenants and requirements of all our asset-backed notes.
Our ability to utilize our asset-backed securitization facilities as described herein is subject to compliance with various requirements including eligibility criteria for the loan collateral and covenants and other requirements. As of December 31, 2023, we were in compliance with all covenants and requirements of all our asset-backed notes.
Over the past eight years, we have executed 20 bond offerings in the asset-backed securities market, the last 17 of which include tranches that have been rated investment grade. We have issued two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations at a fixed Cost of Debt.
Over the past ten years, we have executed 20 bond offerings in the asset-backed securities market, the last 17 of which include tranches that have been rated investment grade. We have generally issued two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations at a fixed Cost of Debt.
Increases in the fair value of loans increase Net Revenue. Conversely, decreases in the fair value of loans decrease Net Revenue. Increases in the fair value of asset-backed notes decrease Net Revenue. Decreases in the fair value of asset-backed notes increase Net Revenue. We also have derivative instruments related to our bank partnership program with Pathward, N.A.
Increases in the fair value of loans increase Net Revenue. Conversely, decreases in the fair value of loans decrease Net Revenue. Increases in the fair value of asset-backed notes decrease Net Revenue. Decreases in the fair value of asset-backed notes increase Net Revenue. We also have a derivative instrument related to our bank partnership program with Pathward, N.A.
The term loan now bears interest at (a) an amount payable in cash equal to 1-month term SOFR plus 9.00% plus (b) an amount payable in cash or in kind, at the Company’s option, equal to 3.00%. As of December 31, 2022, we were in compliance with all covenants and requirements on our outstanding debt and available credit.
The term loan now bears interest at (a) an amount payable in cash equal to 1-month term SOFR plus 9.00% plus (b) an amount payable in cash or in kind, at our option, equal to 3.00%. As of December 31, 2023, we were in compliance with all covenants and requirements on our outstanding debt and available credit.
For more information regarding our Secured Financing facilities and Acquisition Financing and Corporate Financing, see Note 9, Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
For more information regarding our Secured Financing facilities and Acquisition Financing and Corporate Financing, see Note 8, Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
Net lifetime loan loss rates equal the net lifetime loan losses for a given year through December 31, 2022 divided by the total origination loan volume for that year.
Net lifetime loan loss rates equal the net lifetime loan losses for a given year through December 31, 2023, divided by the total origination loan volume for that year.
Member growth is generally an indicator of future revenue, but is not directly correlated with revenue, since not all Members who sign up for one of our products fully utilize or continue to use our products. Members as of December 31, 2022 grew to 1.9 million, as compared to 1.5 million as of December 31, 2021 .
Member growth is generally an indicator of future revenue, but is not directly correlated with revenue, since not all Members who sign up for one of our products fully utilize or continue to use our products. Members as of December 31, 2023 grew to 2.2 million, as compared to 1.9 million as of December 31, 2022.
Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $12,000 with terms of 12 to 60 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of their income.
Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $10,000 with terms of 12 to 54 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of income.
The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity for the years ended December 31, 2022 and 2021.
The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity for the years ended December 31, 2023 and 2022.
The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the years ended December 31, 2022 and 2021.
The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the years ended December 31, 2023 and 2022.
We expect our sales and marketing expense to decrease in 2023 compared to 2022 as we maintain focus on our strategy to improve credit outcomes by focusing lending towards existing and returning members.
We expect our sales and marketing to decrease in 2024 compared to 2023 as we maintain focus on our strategy to improve credit outcomes by focusing on lending towards existing and returning members.
Adjusted Earnings Per Share (“Adjusted EPS”) Adjusted Earnings Per Share is a non-GAAP financial measure that allows management, investors and our Board to evaluate the operating results, operating trends and profitability of the business in relation to diluted adjusted weighted-average shares outstanding.
Adjusted EPS Adjusted Earnings (Loss) Per Share is a non-GAAP financial measure that allows management, investors, and our Board to evaluate the operating results, operating trends, and profitability of the business in relation to diluted adjusted weighted-average shares outstanding.
Our restricted cash represents collections held in our securitizations and is applied currently after month-end to pay interest expense and satisfy any amount due to whole loan buyer with any excess amounts returned to us. Operating Activities Our net cash provided by operating activities was $247.9 million and $163.4 million for the years ended December 31, 2022 and 2021, respectively.
Our restricted cash represents collections held in our securitizations and is applied currently after month-end to pay interest expense and satisfy any amount due to whole loan buyer with any excess amounts returned to us. Operating Activities Our net cash provided by operating activities was $392.8 million and $247.9 million for the years ended December 31, 2023 and 2022, respectively.
The obligations under the Credit Agreement are secured by our assets and certain of our subsidiaries guaranteeing the term loan, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by us, subject to customary exceptions.
Certain prepayments of the term loan are subject to a prepayment premium. The obligations under the Credit Agreement are secured by our assets and certain of our subsidiaries guaranteeing the term loan, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by us, subject to customary exceptions.
“Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this MD&A. Overview We are a digital banking platform that puts our members’ financial goals within reach.
“Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this MD&A. Overview We are a mission-driven fintech that puts our members’ financial goals within reach.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 1, 2022.
“Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 14, 2023.
Credit lines on our credit cards range in size from $300 to $3,000 with an APR between 24.9% to 29.9%. The average APR of the outstanding credit card receivables was 29.8% as of December 31, 2022 . The average credit line for credit cards activated in 2022 was $834.
Credit lines on our credit cards range in size from $300 to $3,000 with an APR between 24.9% to 29.9%. The 39 average APR of the outstanding credit card receivables was 29.8% as of December 31, 2023 . The average credit line for credit cards activated in 2023 was $979.
We generally target liquidity levels to support at least twelve months of our expected net cash outflows, including new originations, without access to our Corporate Financing facility or equity markets. Rising interest rates, credit trends and other macroeconomic conditions could continue to have an impact on market volatility which could adversely impact our business, liquidity, and capital resources.
We generally target liquidity levels to support at least twelve months of our expected net cash outflows, including new originations, without access to our Corporate Financing or equity markets. Volatility in the interest rate environment, credit trends and other macroeconomic conditions could continue to have an impact on market volatility which could adversely impact our business, liquidity, and capital resources.
We have managed to stabilize cumulative net loan losses since the financial crisis that started in 2008. We even achieved a net lifetime loan loss rate of 5.5% during the peak of the recession in 2009. The evolution of our credit models has allowed us to increase our average loan size and commensurately extend our average loan terms.
We were able to stabilize cumulative net loan losses after the financial crisis that started in 2008. We even achieved a net lifetime loan loss rate of 5.5% during the peak of the recession in 2009. The evolution of our credit models has allowed us to increase our average loan size and commensurately extend our average loan terms.
For details regarding the structured and other loan sales in 2022, refer to Note 5, Loans Held for Sale and Loans Sold of the Notes to the Consolidated Financial Statements included elsewhere in this report. Net decrease in fair value. Net decrease in fair value for 2022 was $218.8 million.
For details regarding other loan sales, refer to Note 5, Loans Held for Sale and Loans Sold of the Notes to the Consolidated Financial Statements included elsewhere in this report. Net decrease in fair value. Net decrease in fair value for 2023 was $596.8 million.
Our Annualized Net Charge-Off Rate increased to 10.1% for the year ended December 31, 2022 from 6.8% for the year ended December 31, 2021. Net charge-offs for the year ended December 31, 2022 increased primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022.
Our Annualized Net Charge-Off Rate increased to 12.2% for the year ended December 31, 2023, from 10.1% for the year ended December 31, 2022. Net charge-offs for the year ended December 31, 2023 increased primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022.
As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 49 months and 28.3%, respectively. As part of our underwriting process, we 39 evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria.
As of December 31, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 52 months and 28.9%, respectively. As part of our underwriting process, we evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria.
Investing Activities Our net cash used in investing activities was $1,171.5 million and $884.8 million for the years ended December 31, 2022 and 2021, respectively. Our investing activities consist primarily of loan originations and loan repayments. We invest in purchases of property and equipment and incur system development costs.
Investing Activities Our net cash used in investing activities was $286.2 million and $1,171.5 million for the years ended December 31, 2023 and 2022, respectively. Our investing activities consist primarily of loan originations and loan repayments. We invest in purchases of property and equipment and incur system development costs.
For more information regarding our VIEs and asset-backed securitizations, see Note 4, Varia ble Interest Entities and Note 9, Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
For more information regarding our VIEs and asset-backed securitizations, see Note 4 , Variable Interest Entities and Note 8 , Borrowings of the Notes to the Consolidated Financial Statements included elsewhere in this report.
Our personal loan products are also available over the phone or through over 700 retail locations, which includes 590 of our Lending as a Service partner locations. Credit Products Personal Loans - Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing installment loan with fixed payments throughout the life of the loan.
As of December 31, 2023, our personal loan products are also available over the phone or through over 560 retail locations, which includes 393 of our Lending as a Service partner locations. Credit Products Personal Loans - Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing installment loan with fixed payments throughout the life of the loan.
In our 16-year lending history, we have extended more than $15.5 billion in responsible credit through more than 6.3 million loans and credit cards . We have been certified as a Community Development Financial Institution ("CDFI") by the U.S. Department of the Treasury since 2009.
In our 17-year lending history, we have extended more than $17.8 billion in responsible credit through more than 6.9 million loans and credit cards . We have been certified as a Community Development Financial Institution ("CDFI") by the U.S. Department of the Treasury since 2009.
See Note 9, Borrowings and Note 16, Leases, Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in this report for more information.
See Note 8 , Borrowings and Note 15 , Leases, Commitments and Contingencies of the Notes to the Consolidated Financial Statements included in this report for more information.
These changes in the fair value of the Loans Receivable at Fair Value may be partially offset by changes in the fair value of the asset-backed notes, depending upon the relative duration of the instruments.
These changes in the fair value of the Loans Receivable at Fair Value may be partially offset by changes in the fair value of asset-backed notes where the fair value option has been elected, depending upon the relative duration of the instruments.
The table below illustrates a simplified calculation to aid investors in understanding how fair value may be estimated using the last eight quarters: • Subtracting the servicing fee from the weighted average portfolio yield over the remaining life of the loans to calculate net portfolio yield; • Multiplying the net portfolio yield by the weighted average life in years of the loans receivable, which is based upon the contractual amortization of the loans and expected remaining prepayments and charge-offs to calculate net cash flow; • Subtracting the remaining cumulative charge-offs from the net portfolio yield to calculate the net cash flow; • Subtracting the product of the discount rate and the average life from the net cash flow to calculate the gross fair value premium as a percentage of loan principal balance; and • Subtracting the accrued interest and fees as a percentage of loan principal balance from the gross fair value premium as a percentage of loan principal balance to calculate the fair value premium as a percentage of loan principal balance. 50 The table below reflects the application of this methodology for the eight quarters since January 1, 2021, on loans held for investment.
The table below illustrates a simplified calculation to aid investors in understanding how fair value may be estimated using the last eight quarters: • Subtracting the servicing fee from the weighted average portfolio yield over the remaining life of the loans to calculate net portfolio yield; • Multiplying the net portfolio yield by the weighted average life in years of the loans receivable, which is based upon the contractual amortization of the loans and expected remaining prepayments and charge-offs, to calculate pre-loss net cash flow; • Subtracting the remaining cumulative charge-offs from the net portfolio yield to calculate the net cash flow; • Subtracting the product of the discount rate and the average life from the net cash flow to calculate the gross fair value premium as a percentage of loan principal balance; and • Subtracting the accrued interest and fees as a percentage of loan principal balance from the gross fair value premium as a percentage of loan principal balance to calculate the fair value premium as a percentage of loan principal balance.
Reconciliations of non-GAAP to GAAP measures can be found below. Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure defined as our net income, adjusted to eliminate the effect of certain items as described below.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure defined as our net income, adjusted to eliminate the effect of certain items as described below.
In response to a sustained decline in our share price primarily driven by macroeconomic conditions, we conducted a quantitative test of its goodwill as of September 30, 2022. We recognized a $108.5 million non-cash impairment charge for the year ended December 31, 2022.
In response to a sustained decline in our share price primarily driven by macroeconomic conditions, we conducted a quantitative test of its goodwill as of September 30, 2022. We recognized a $108.5 million non-cash impairment charge for the year ended December 31, 2022. There were no triggering events or goodwill impairment charges during the year ended December 31, 2023.
In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of taxes, certain non-cash items, variable charges and timing differences. • We believe 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 believe it is useful to exclude the impact of depreciation and amortization and stock-based compensation expense because they are non-cash charges. 51 • We believe it is useful to exclude the impact of interest expense associated with the Company's Corporate Financing, as we view this expense as related to our capital structure rather than our funding. • We believe it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with a litigation reserve, our retail network optimization plan, impairment charges and acquisition and integration related expenses because these items do not reflect ongoing business operations. • We also reverse origination fees for Loans Receivable at Fair Value, net.
In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of taxes, certain non-cash items, variable charges and timing differences. • We believe 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 believe it is useful to exclude the impact of depreciation and amortization and stock-based compensation expense because they are non-cash charges. • We believe it is useful to exclude the impact of interest expense associated with the Company’s Corporate Financing, as we view this expense as related to our capital structure rather than our funding. • We believe it is useful to exclude the impact of certain non-recurring charges, such as expenses associated with our workforce optimization, acquisition and integration related expenses, and other non-recurring charges because these items do not reflect ongoing business operations.
In response to this increase, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes.
In response to this increase, we tightened our credit underwriting standards and focused lending towards existing and returning members to improve credit outcomes in the second half of 2022.
Secured Financings As of December, 31, 2022 , we had Secured Financing facilities with warehouse lines of $750.0 million in the aggregate with undrawn capacity of $430.0 million. On March 8, 2023, the Credit Card Warehouse facility was amended, reducing its commitment from $150.0 million to $120.0 million, thereby reducing the combined commitment to $720.0 million.
Secured Financings As of December 31, 2023 , we had Secured Financing facilities with warehouse lines of $700.0 million in the aggregate with undrawn capacity of $409.1 million. On March 8, 2023, the Credit Card Warehouse facility was amended, reducing its commitment from $150.0 million to $120.0 million.
Also included are franchise taxes, bank fees, foreign currency gains and losses, transaction gains and losses, debit card expenses, litigation reserve, retail network optimization expenses and Digit-related acquisition and integration expenses.
Also included are franchise taxes, bank fees, foreign currency gains and losses, transaction gains and losses, debit card expenses, litigation reserve, expenses related to workforce optimization and streamlining operations, and Digit-related acquisition and integration expenses.
As of December 31, 2022, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 38 months and 32.0%, respectively. The average loan size for loans we originated in 2022 was $4,189.
As of December 31, 2023, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 41 months and 32.9%, respectively. The average loan size for loans we originated in 2023 was $4,007.
Sources of Funds Debt and Available Credit Asset-Backed Securitizations As of December 31, 2022, we had $2.39 billion of outstanding asset-backed notes. During 2022, we issued $1.10 billion of asset-backed securities. Our securitizations utilize special purpose entities which are also variable interest entities (VIEs) that meet the requirements to be consolidated in our financial statements.
Sources of Funds Debt and Available Credit Asset-Backed Securitizations As of December 31, 2023, we had $1.78 billion of outstanding asset-backed notes at fair value. Our securitizations utilize special purpose entities which are also variable interest entities (VIEs) that meet the requirements to be consolidated in our financial statements.
Members also include individuals who have signed-up to use or are using any of our Savings, Direct, Investing and/or Retirement products. We view Members as an indication of growth of our business and our ability to establish long term relationships with the users of our products.
Members also include individuals who had signed-up to use or are using our Set & Save product or historically our checking, investing and/or retirement products. We view Members as an indication of growth of our business and our ability to establish long term relationships with the users of our products.
As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria. As of December 31, 2022, we originate unsecured personal loans in 12 states through state licenses and in 30 states through our partnership with Pathward, N.A. (formerly known as MetaBank, N.A.).
As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria. As of December 31, 2023, we originated unsecured personal loans in 4 states through state licenses and in 38 states through our partnership with Pathward, N.A.
Secured Personal Loans - In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans. Our secured personal loans range in size from $2,525 to $18,000 with terms ranging from 27 to 63 months. The average loan size for secured personal loans we originated in 2022 was $8,304.
Secured Personal Loans - In April 2020, we launched a personal installment loan product secured by an automobile, which we refer to as secured personal loans. Our secured personal loans range in size from $2,525 to $18,500 with terms ranging from 24 to 64 months. The average loan size for secured personal loans we originated in 2023 was $7,156.
Our secured personal loans are currently offered in California, Texas, Florida, Arizona and New Jersey and we are in the process of considering expansion into other states. Credit Cards - We lau nched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019, and offer credit cards in 45 states as of December 31, 2022 .
Our secured personal loans are currently offered in California and we are in the process of expanding into other states. Credit Cards - We lau nched Oportun® Visa® Credit Card, issued by WebBank, Member FDIC, in December 2019, and offer credit cards in 36 states as of December 31, 2023 .
See Note 2, Summary of Significant Accounting Policies , and Note 9, Borrowings , in the Notes to the Consolidated Financial Statements included elsewhere in this report for further information on our Interest expense and our borrowings.
See Note 2, Summary of Significant Accounting Policies , and Note 12 , Revenue , of the Notes to the Consolidated Financial Statements included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.
For the reconciliation of net income (loss) to Adjusted Net Income, see the immediately preceding table “Adjusted Net Income.” Year Ended December 31, (in thousands, except share and per share data) 2022 2021 Diluted earnings (loss) per share $ (2.37) $ 1.56 Adjusted EPS Adjusted Net Income $ 69,438 $ 78,733 Basic weighted-average common shares outstanding 32,825,772 28,191,610 Weighted average effect of dilutive securities: Stock options 252,357 1,375,915 Restricted stock units 173,092 755,669 Diluted adjusted weighted-average common shares outstanding 33,251,221 30,323,194 Adjusted Earnings Per Share $ 2.09 $ 2.60 Adjusted Return on Equity We define Adjusted Return on Equity as annualized Adjusted Net Income divided by average stockholders’ equity.
For the reconciliation of net income to Adjusted Net Income (Loss), see the immediately preceding table “Adjusted Net Income (Loss).” Year Ended December 31, (in thousands, except share and per share data) 2023 2022 Diluted earnings (loss) per share $ (4.88) $ (2.37) Adjusted EPS Adjusted Net Income $ (124,105) $ 69,438 Basic weighted-average common shares outstanding 36,875,950 32,825,772 Weighted average effect of dilutive securities: Stock options — 252,357 Restricted stock units — 173,092 Diluted adjusted weighted-average common shares outstanding 36,875,950 33,251,221 Adjusted Earnings Per Share $ (3.37) $ 2.09 Adjusted Return on Equity We define Adjusted Return on Equity as annualized Adjusted Net Income (Loss) divided by average stockholders’ equity.
Sales and marketing expenses to acquire our members decreased by $6.8 million, or 5.9%, from $116.9 million for 2021 to $110.0 million f or 2022. Our net decrease in marketing spend during the year ended December 31, 2022 was $14.8 million across various marketing channels, including digital advertising and direct mail.
Sales and marketing expenses to acquire our members decreased by $34.7 million, or 31.6%, from $110.0 million for 2022 to $75.3 million f or 2023. Our net decrease in marketing spend during the year ended December 31, 2023 was $21.6 million across various marketing channels, including pay per lead, digital advertising and direct mail.
For the reconciliation of net income (loss) to Adjusted Net Income, see the immediately preceding table “Adjusted Net Income.” As of or for the Year Ended December 31, (in thousands) 2022 2021 Return on Equity (13.5) % 8.9 % Adjusted Return on Equity Adjusted Net Income $ 69,438 $ 78,733 Average stockholders' equity $ 575,740 $ 535,255 Adjusted Return on Equity 12.1 % 14.7 % 53 Adjusted Operating Efficiency We define Adjusted Operating Efficiency as total operating expenses adjusted to exclude stock-based compensation expense and certain non-recurring charges such as expenses associated with a litigation reserve, our retail network optimization plan, impairment charges and acquisition and integration related expenses divided by total revenue.
For the reconciliation of net income to Adjusted Net Income (Loss), see the immediately preceding table “Adjusted Net Income (Loss).” As of or for the Year Ended December 31, (in thousands) 2023 2022 Return on Equity (37.8) % (13.5) % Adjusted Return on Equity Adjusted Net Income $ (124,105) $ 69,438 Average stockholders ’ equity $ 476,002 $ 575,740 Adjusted Return on Equity (26.1) % 12.1 % 53 Adjusted Operating Efficiency We define Adjusted Operating Efficiency as total operating expenses adjusted to exclude stock-based compensation expense and certain non-recurring charges such as expenses associated with our workforce optimization, acquisition and integration related expenses, and other non-recurring charges divided by total revenue.
Three Months Ended Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Weighted average portfolio yield over the remaining life of the loans 29.50 % 29.90 % 30.27 % 30.15 % 30.14 % 30.35 % 30.28 % 30.25 % Less: Servicing fee (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % Net portfolio yield 24.50 % 24.90 % 25.27 % 25.15 % 25.14 % 25.35 % 25.28 % 25.25 % Multiplied by: Weighted average life in years 1.000 0.924 0.895 0.847 0.859 0.761 0.769 0.778 Pre-loss cash flow 24.50 % 23.01 % 22.61 % 21.30 % 21.60 % 19.26 % 19.43 % 19.64 % Less: Remaining cumulative charge-offs (10.38) % (11.67) % (11.25) % (10.37) % (9.60) % (7.53) % (7.59) % (8.60) % Net cash flow 14.12 % 11.34 % 11.37 % 10.93 % 12.00 % 11.73 % 11.84 % 11.04 % Less: Discount rate multiplied by average life (11.48) % (9.42) % (8.03) % (5.73) % (5.96) % (4.96) % (5.03) % (5.17) % Gross fair value premium (discount) as a percentage of loan principal balance 2.64 % 1.92 % 3.34 % 5.21 % 6.04 % 6.77 % 6.81 % 5.87 % Less: Accrued interest and fees as a percentage of loan principal balance (1.18) % (1.19) % (1.10) % (1.09) % (1.03) % (0.90) % (0.87) % (0.92) % Fair value premium (discount) as a percentage of loan principal balance 1.45 % 0.73 % 2.24 % 4.12 % 5.01 % 5.87 % 5.94 % 4.95 % Discount Rate 11.48 % 10.19 % 8.97 % 6.76 % 6.94 % 6.52 % 6.54 % 6.65 % The illustrative table included above is designed to assist investors in understanding the impact of our election of the fair value option.
The data in the table below represents all of our credit products. 50 Three Months Ended Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Weighted average portfolio yield over the remaining life of the loans 29.10 % 29.58 % 29.85 % 29.61 % 29.34 % 29.73 % 30.14 % 30.01 % Less: Servicing fee (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % (5.00) % Net portfolio yield 24.10 % 24.58 % 24.85 % 24.61 % 24.34 % 24.73 % 25.14 % 25.01 % Multiplied by: Weighted average life in years 1.007 0.995 0.955 0.963 1.000 0.924 0.895 0.847 Pre-loss cash flow 24.26 % 24.45 % 23.74 % 23.69 % 24.34 % 22.85 % 22.50 % 21.19 % Less: Remaining cumulative charge-offs (12.10) % (11.93) % (11.35) % (11.72) % (10.38) % (11.67) % (11.25) % (10.37) % Net cash flow 12.16 % 12.52 % 12.39 % 11.97 % 13.96 % 11.18 % 11.26 % 10.82 % Less: Discount rate multiplied by average life (10.17) % (11.09) % (10.61) % (10.66) % (11.48) % (9.42) % (8.03) % (5.73) % Gross fair value premium (discount) as a percentage of loan principal balance 1.99 % 1.43 % 1.78 % 1.31 % 2.48 % 1.76 % 3.23 % 5.09 % Less: Accrued interest and fees as a percentage of loan principal balance (1.06) % (0.99) % (1.04) % (1.06) % (1.03) % (1.03) % (0.99) % (0.97) % Fair value premium (discount) as a percentage of loan principal balance 0.92 % 0.44 % 0.74 % 0.26 % 1.45 % 0.73 % 2.23 % 4.12 % Discount Rate 10.10 % 11.15 % 11.10 % 11.07 % 11.48 % 10.19 % 8.97 % 6.76 % The illustrative table included above is designed to assist investors in understanding the impact of our election of the fair value option.
We expect our personnel expense to decrease in 2023 compared to 2022 as a result of our recently announced plan to reduce headcount and streamline operations. Outsourcing and professional fees Outsourcing and professional fees consist of costs for various third-party service providers and contact center operations, primarily for the sales, customer service, collections and store operation functions.
We expect our personnel expense to decrease in 2024 compared to 2023 as a result of transitioning certain roles to lower cost jurisdictions. 47 Outsourcing and professional fees Outsourcing and professional fees consist of costs for various third-party service providers and contact center operations, primarily for the sales, customer service, collections and store operation functions.
The decrease in Return on Equity is primarily due to lower net income, primarily as a result of the goodwill impairment. For the year ended December 31, 2022 and 2021, Adjusted Return on Equity was 12.1% and 14.7%, respectively. The decrease in Adjusted Return on Equity is primarily due to lower Adjusted Net Income.
For the year ended December 31, 2023 and 2022, Adjusted Return on Equity was (26.1)% and 12.1%, respectively. The decrease in Return on Equity during the period is primarily due to lower net income as a result of higher credit losses.
Cash and cash flows The following table summarizes our cash and cash equivalents, restricted cash and cash flows for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Cash, cash equivalents and restricted cash $ 203,817 $ 192,960 Cash provided by (used in) Operating activities 247,875 163,447 Investing activities (1,171,548) (884,786) Financing activities 934,530 745,709 Our cash is held for working capital purposes and originating loans.
Cash and cash flows The following table summarizes our cash and cash equivalents, restricted cash and cash flows for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Cash, cash equivalents and restricted cash $ 206,016 $ 203,817 Cash provided by (used in) Operating activities 392,765 247,875 Investing activities (286,181) (1,171,548) Financing activities (104,385) 934,530 Our cash is held for working capital purposes and originating loans.
There were no goodwill impairment charges during the year ended December 31, 2021 . Income taxes Income taxes consist of U.S. federal, state and foreign income taxes, if any. For the years ended December 31, 2022 and 2021 we recognized tax expense attributable to U.S. federal, state and foreign income taxes.
Income taxes Income taxes consist of U.S. federal, state and foreign income taxes, if any. For the years ended December 31, 2023 and 2022 we recognized tax expense (benefit) attributable to U.S. federal, state and foreign income taxes.
Subsequently, on February 10, 2023, the Acquisition Financing facility 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. 55 Corporate Financing On September 14, 2022, we entered into an agreement to borrow $150.0 million of a senior secured term loan (the “Corporate Financing”).
Subsequently, on February 10, 2023, the Acquisition Financing facility 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.
Due to credit tightening in response to the COVID-19 pandemic and government stimulus payments our Annualized Net Charge-Off Rate decreased to 6.8% in 2021. Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due to a higher mix of first-time borrowers in 2021 and the first half of 2022.
Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due to an increasing interest rate environment, inflation and the cessation of COVID-19 stimulus payments and a higher mix of first-time borrowers in 2021 and the first half of 2022.
Year Ended December 31, 2022 vs. 2021 Change (in thousands of dollars) 2022 2021 $ % Technology and facilities $ 216,120 $ 139,564 $ 76,556 54.9 % Percentage of total revenue 22.7 % 22.3 % Technology and facilities . Technology and facilities expense increased by $76.6 million, or 54.9%, from $139.6 million for 2021 to $216.1 million for 2022.
Year Ended December 31, 2023 vs. 2022 Change (in thousands of dollars) 2023 2022 $ % Technology and facilities $ 219,406 $ 216,120 $ 3,286 1.5 % Percentage of total revenue 20.8 % 22.7 % Technology and facilities . Technology and facilities expense increased by $3.3 million, or 1.5%, from $216.1 million for 2022 to $219.4 million for 2023.
We believe Adjusted Operating Efficiency is an important measure because it allows management, investors and our Board to evaluate how efficiently we manage costs relative to revenue.
Other non-recurring charges include litigation reserve, impairment charges, and debt amendment costs related to our Corporate Financing. We believe Adjusted Operating Efficiency is an important measure because it allows management, investors, and our Board to evaluate how efficiently we manage costs relative to revenue.
The total fair value mark-to-market adjustment consists of a $(68.9) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) an increase in remaining cumulative charge-offs from 9.60% as of December 31, 2021 to 10.38% as of December 31, 2022, (b) an increase in the discount rate from 6.94% as of December 31, 2021 to 11.48% as of December 31, 2022, partially offset by (c) an increase in average life from 0.86 years as of December 31, 2021 to 1.00 years as of December 31, 2022.
The total fair value mark-to-market adjustment consists of a $(18.2) million mark-to-market adjustment on Loans Receivable at Fair Value due to an increase in remaining cumulative charge-offs from 10.38% as of December 31, 2022 to 12.10% as of December 31, 2023, partially offset by a decrease in the discount rate from 11.48% as of December 31, 2022 to 10.10% as of December 31, 2023.
For a discussion regarding our operating and financial data for the year ended December 31, 2021, as compared to the same period in 2020, refer to Part II, Item 7.
Results of Operations The following tables and related discussion set forth our Consolidated Statements of Operations for the years ended December 31, 2023 and 2022. For a discussion regarding our operating and financial data for the year ended December 31, 2022, as compared to the same period in 2021, refer to Part II, Item 7.
Our savings product utilizes mac hine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner. Members integrate their existing bank accounts into the platform or they can make Digit their primary banking relationship through a bank partner.
Our savings product utilizes mac hine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner.
The term loan bears interest, payable in cash, at an amount equal to 1-month term SOFR plus 9.00%. The term loan is scheduled to mature on September 14, 2026, and is not subject to amortization. Certain prepayments of the term loan are subject to a prepayment premium.
Corporate Financing On September 14, 2022, we entered into an agreement to borrow $150.0 million of a senior secured term loan. The term loan bears interest, payable in cash, at an amount equal to 1-month term SOFR plus 9.00%. The term loan is scheduled to mature on September 14, 2026, and is not subject to amortization.
Year Ended December 31, 2022 vs. 2021 Change (in thousands of dollars) 2022 2021 $ % General, administrative and other $ 58,838 $ 37,480 $ 21,358 57.0 % Percentage of total revenue 6.2 % 6.0 % General, administrative and other .
Year Ended December 31, 2023 vs. 2022 Change (in thousands of dollars) 2023 2022 $ % General, administrative and other $ 72,385 $ 58,838 $ 13,547 23.0 % Percentage of total revenue 6.8 % 6.2 % General, administrative and other .
Total net decrease in fair value Net increase (decrease) in fair value reflects changes in fair value of loans receivable held for investment and asset-backed notes on an aggregate basis and is based on a number of factors, including benchmark interest rates, credit spreads, remaining cumulative charge-offs and borrower payment rates.
See Note 2, Summary of Significant Accounting Policies , and Note 8 , Borrowings , in the Notes to the Consolidated Financial Statements included elsewhere in this report for further information on our Interest expense and our borrowings. 45 Total net decrease in fair value Net increase (decrease) in fair value reflects changes in fair value of loans receivable held for investment and asset-backed notes on an aggregate basis and is based on a number of factors, including benchmark interest rates, credit spreads, remaining cumulative charge-offs and borrower payment rates.
Year Ended December 31, 2022 vs. 2021 Change (in thousands of dollars, except CAC) 2022 2021 $ % Sales and marketing $ 110,033 $ 116,882 $ (6,849) (5.9) % Percentage of total revenue 11.6 % 18.6 % Customer Acquisition Cost (CAC) $ 144 $ 155 $ (11) (7.1) % 47 Sales and marketing.
Year Ended December 31, 2023 vs. 2022 Change (in thousands of dollars, except CAC) 2023 2022 $ % Sales and marketing $ 75,284 $ 110,033 $ (34,749) (31.6) % Percentage of total revenue 7.1 % 11.6 % Customer Acquisition Cost (CAC) $ 161 $ 144 $ 17 11.8 % Sales and marketing.
Interest expense increased by $45.4 million, or 95.2%, from $47.7 million for 2021 to $93.0 million for 2022. We financed approximately 91.2% of our loans receivable through debt for 2022 as compared to 88.5% for 2021, and our Average Daily Debt Balance increased from $1.55 billion to $2.50 billion for 2022, an increase of 60.9%.
Interest expense increased by $86.4 million, or 92.8%, from $93.0 million for 2022 to $179.4 million for 2023. We financed approximately 99.2% of our loans receivable through debt for 2023 as compared to 91.2% for 2022, and our Average Daily Debt Balance increased from $2.50 billion to $2.97 billion for 2023, an increase of 16.6%.
See “ Glossary ” at the end of Part II of this report for formulas and definitions of our key performance metrics. 41 Members We define Members as borrowers with an outstanding or successfully paid off loan, originated by us or under a bank partnership program that we service, or individuals who have been approved for a credit card issued under a bank partnership program.
Members We define Members as borrowers with an outstanding or successfully paid off loan, originated by us or under a bank partnership program that we service, or individuals who have been approved for a credit card issued under a bank partnership program.
Direct loan origination expenses related to application processing are expensed when incurred. In addition, outsourcing and professional fees include any financing expenses, including legal and underwriting fees, related to our asset-backed notes.
Direct loan origination expenses related to application processing are expensed when incurred. In addition, outsourcing and professional fees include any financing expenses, including legal and underwriting fees, related to our asset-backed notes. We expect our outsourcing and professional fees expense to decrease in 2024 compared to 2022 as a result of our focus to reduce our reliance on outsourced services.
Year Ended December 31, 2022 vs. 2021 Change (in thousands of dollars) 2022 2021 $ % Outsourcing and professional fees $ 67,630 $ 57,931 $ 9,699 16.7 % Percentage of total revenue 7.1 % 9.2 % Outsourcing and professional fees .
Year Ended December 31, 2023 vs. 2022 Change (in thousands of dollars) 2023 2022 $ % Outsourcing and professional fees $ 45,401 $ 67,630 $ (22,229) (32.9) % Percentage of total revenue 4.3 % 7.1 % Outsourcing and professional fees .

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