Oportun Financial Corp

Results of Operations

The following tables and related discussion set forth our Condensed Consolidated Statements of Operations (Unaudited) for each of the three and six months ended June 30, 2025 and 2024.

Total revenue

Interest Income. Total interest income decreased by $13.1 million, or 5.7%, from $231.4 million for the three months ended June 30, 2024 to $218.3 million for the three months ended June 30, 2025. This decrease wasprimarily due to the sale of the credit card portfolio on November 12, 2024 resulting ina decrease in portfolio yield of 106 basis points in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and a decline in our Average Daily Principal Balance, which decreased from $2.75 billion for the three months ended June 30, 2024 to $2.67 billion for the three months ended June 30, 2025, a decrease of 2.9%.

Total interest income decreased by $23.5 million, or 5.1%, from $462.0 million for the six months ended June 30, 2024 to $438.5 million for the six months ended June 30, 2025. This decrease wasprimarily due to the sale of the credit card portfolio on November 12, 2024 resulting inadecline in our Average Daily Principal Balance, which decreased from $2.80 billion for the six months ended June 30, 2024 to $2.69 billion for the six months ended June 30, 2025, a decrease of 4.0%, and a decrease in portfolio yield of 27 basis points in the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Non-interest income. Total non-interest income decreased by $3.0 million, or 15.5%, from $19.0 million for the three months ended June 30, 2024 to $16.1 million for the three months ended June 30, 2025. This decrease is primarily due to a $4.5 million decrease related to interest earned on our Set & Set product, including the recognition of $3.4 million of non-recurring interest during the three months ended June 30, 2024, $1.1 million decrease in subscription revenue on our Set & Save product, $1.0 million decrease in credit card related and other fees, and $0.6 million decrease in gain on loan sales. These decreases were partially offset by a $3.4 million increase in fees related to our Pathward program and $0.8 million increase in transaction fees, partnership referrals, and servicing fees.

Total non-interest income decreased by $7.2 million, or 18.4%, from $38.9 million for the six months ended June 30, 2024 to $31.7 million for the six months ended June 30, 2025. This decrease is primarily due to a $4.7 million decrease related to interest earned on our Set & Set product, including the recognition of $2.3 million of non-recurring interest during the six months ended June 30, 2024, a $2.1 million decrease in credit card related and other fees, a $2.1 million decrease in subscription revenue related to our Set & Save product, and a $0.6 million decrease in gain on loan sales. These decreases were partially offset by a $1.2 million increasein fees related to our Pathward program and $0.8 million increase in transaction and servicing fees.

See Note 2, Summary of Significant Accounting Policies, and Note 12, Revenue, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.

Interest expense

Interest expense increased by $5.3 million, or 9.8%, from $54.2 million for the three months ended June 30, 2024 to $59.5 million for the three months ended June 30, 2025. The increase was driven by an 85 basis point increase in our Cost of Debt partially offset by a decrease to our Average Daily Debt Balance. Our Average Daily Debt Balance decreased from $2.82 billion for the three months ended June 30, 2024 to $2.78 billion for the three months ended June 30, 2025, adecrease of 1.3%. Our Cost of Debt has increased due to higher interest rates and credit spreads on current debt issuances as compared to lower cost funding issued in 2021 that is amortizing.

Interest expense increased by $8.2 million, or 7.6%, from $108.7 million for the six months ended June 30, 2024 to $116.9 million for the six months ended June 30, 2025. The increase was driven by a 76 basis point increase in our Cost of Debt partially offset by a decline in our Average Daily Debt Balance. Our Average Daily Debt Balance decreased from $2.86 billion for the six months ended June 30, 2024 to $2.81 billion for the six months ended June 30, 2025, a decrease of 1.8%. Our Cost of Debt has increased due to higher interest rates and credit spreads on current debt issuances as compared to lower cost funding issued in 2021 that is amortizing.

See Note 8, Borrowings, in the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further information on our Interest expense and our Secured Financing and asset-backed notes.

Total net increase (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 at fair value 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. 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. Changes in the fair value of the derivative instrument are reflected in the total fair value mark-to-market adjustment below.

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Net decrease in fair value for the three months ended June 30, 2025 was $70.3 million. This amount represents $79.0 million of charge-offs, net of recoveries on Loans Receivable at Fair Value, a total fair value mark-to-market increase of $5.7 million, and $3.0 million increase related to the Pathward excess interest. The total fair value mark-to-market adjustment consists of a$9.1 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) adecrease in the discount rate from 7.69% as of March 31, 2025 to 7.03%, partially offset by (b) anincrease in remaining cumulative charge-offs from 11.83% as of March 31, 2025 to 11.96% as of June 30, 2025. The$3.4 million mark-to-market loss on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.

Net decrease in fair value for the three months ended June 30, 2024 was $136.1 million. This amount represents a total fair value mark-to-market decrease of $37.7 million, and $83.9 million of charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair value mark-to-market adjustment consists of a$36.7 million mark-to-market loss on Loans Receivable at Fair Value due to (a) $36.2 million mark-to-market loss in the fair value of our credit cards receivable related to management's decision to sell the portfolio and (b) $0.5 million mark-to-market loss on loans receivable at fair value. The $0.5 million mark-to-market loss on loans receivable at fair value was driven by a 0.9% decrease in weighted average life of the portfolio offset by a 44 basis point decrease in the discount rate and a 4 basis point decrease in the remaining cumulative charge offs. The$1.9 million mark-to-market loss on asset-backed notes is due to tighter credit spreads. The total net decrease in fair value for the three months ended June 30, 2024 also includes a$18.4 million loss related to the fair value mark on the loans sold as part of the other loan sales for the three months ended June 30, 2024.

Net decrease in fair value for the six months ended June 30, 2025 was $142.9 million. This amount represents a total fair value mark-to-market increase of $10.7 million, and $160.3 million of charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair value mark-to-market adjustment consists of a$21.5 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a)a decrease in discount rate from 7.92% as of December 31, 2024 to 7.03% as of June 30, 2025, partially offset by (b) an increase in remaining cumulative charge-offs from 11.68% as of December 31, 2024 to 11.96% as of June 30, 2025, and (c) a decrease in average life from 1.11 as of December 31, 2024 to 1.08 years as of June 30, 2025. The $11.3 million mark-to-market loss on asset-backed notes isdue to lower medium-term interest rates and tighter credit spreads.

Net decrease in fair value for the six months ended June 30, 2024 was $253.0 million. This amount represents a total fair value mark-to-market decrease of $34.7 million, and $169.2 million of charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair value mark-to-market adjustment consists of a $7.8 million mark-to-market loss on Loans Receivable at Fair Value due to (a) $36.2 million mark-to-market loss in the fair value of our credit cards receivable related to management's decision to sell the portfolio, and (b) $28.4 million mark-to-market adjustment on loans receivable at fair value. The $28.4 million mark-to-market on loans receivable at fair value was driven by (a) a decrease in discount rate from 10.10% as of December 31, 2023 to 8.66% as of June 30, 2024, (b) a decrease in remaining cumulative charge-offs from 11.80% as of December 31, 2023 to 11.57% as of June 30, 2024, and (c) an increase in average life from 1.006 as of December 31, 2023 to 1.015 years as of June 30, 2024. The $29.0 million mark-to-market loss on asset-backed notes isdue to lower medium-term interest rates and tighter credit spreads. The total net increase (decrease) in fair value for thesix months ended June 30, 2024 includes $51.8 million in loss related to the fair value mark on loans sold as part of the other loan sales for the six months ended June 30, 2024.

Charge-offs, net of recoveries

Our Annualized Net Charge-Off Rate decreased to 11.9% and 12.0% for the three and six months ended June 30, 2025, respectively, from 12.3% and 12.2% for the three and six months ended June 30, 2024, respectively. The decrease is primarily driven by a$4.9 million and$9.0 million decrease in our Net Charge-Offs; partially offset by a decrease in our Average Daily Principal Balance of$78.9 million and$112.8 million for the three and six months ended June 30, 2025, respectively. The decline in Net Charge-offs is primarily due to improvement in credit performance driven by increased front book vintages in our portfolio mix for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024. Our front book vintages have lower charge-off rates compared to our back book. As of June 30, 2025, loans from our back-book represented only 2% of our owned receivables balance, and as a result, we expect the back book to become less impactful in 2025. 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 the loan is 120 days contractually past due and we charge-off a credit card account when it is 180 days contractually past due.

Operating expenses

Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees, and general, administrative and other expenses. We anticipate operating expenses to decrease in 2025 as compared to 2024, primarily driven by the continued diversification of the workforce to lower-cost geographies and a reduction in non-essential vendor spend. This will be partially offset by additional investments in loan originations.

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 multi-channel platform, and consists of three components. 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. The second component includes rent for retail and corporate locations, utilities, insurance, telephony costs, property taxes, equipment rental expenses, licenses and fees, and depreciation and amortization. Lastly, the third component includes all software licenses, subscriptions, and technology service costs to support our corporate operations, excluding sales and marketing.

Technology and facilities expense decreased by $4.0 million, or 9.8%, from $40.6 million for the three months ended June 30, 2024 to $36.6 million for the three months ended June 30, 2025. The decrease is primarily due to a $2.3 million decrease in depreciation, $1.2 million increased capitalization of internally developed software and other expenses, and $1.0 million decrease in outsourcing and professional fees.

Technology and facilities expense decreased by $14.6 million, or 16.7%, from $87.7 million for the six months ended June 30, 2024 to $73.1 million for the six months ended June 30, 2025. The decrease is primarily due to a $4.4 million decrease in depreciation, $3.0 million decrease in software and service costs, $2.8 million increased capitalization of internally developed software, $2.4 million decrease in outsourcing and professional fees, and $2.1 million decrease in office rent.

Sales and marketing

Sales and marketing expenses consist of two components and represents the costs to acquire our members. The first component is comprised of the expense to acquire a member through various paid marketing channels including direct mail, digital marketing, and brand marketing. The second component is comprised of the costs associated with our telesales, lead generation and retail operations, including personnel expenses, but excluding costs associated with retail locations.

Sales and marketing expenses to acquire our members increased by $1.8 million, or 11.2%, from $16.3 million for the three months ended June 30, 2024 to $18.1 million for the three months ended June 30, 2025. The increase is primarily attributable to $1.0 million increase in marketing costs, such as direct mail and pay-per lead and $0.4 million increase in services costs. As a result of our increase in number of loans originated duringthe three months ended June 30, 2025, our CACdecreased by 5.7% from$122 for the three months ended June 30, 2024 to$115 for the three months ended June 30, 2025.

Sales and marketing expenses to acquire our members increased by $5.7 million, or 17.7%, from $32.3 million for the six months ended June 30, 2024 to $38.0 million for the six months ended June 30, 2025. The increase is primarily attributable to a $4.6 million increase in marketing costs and a $0.8 million increase in service costs. As a result of our increase in number of loans originated during thesix months ended June 30, 2025, our CAC decreased by 8.6% from $139 for thesix months ended June 30, 2024, to $127 for thesix months ended June 30, 2025.

Personnel

Personnel expense represents compensation and benefits that we provide to our employees, and include salaries, wages, bonuses, commissions, related employer taxes, medical and other benefits provided and stock-based compensation expense for all of our staff with the exception of our telesales, lead generation, and retail operations which are included in sales and marketing expenses and technology which is included in technology and facilities.

Personnel expense decreased by $1.7 million, or 7.6%, from $21.9 million for the three months ended June 30, 2024 to $20.2 million for the three months ended June 30, 2025, primarily driven by our workforce optimization efforts which occurred in 2024.

Personnel expense decreased by $5.2 million, or 11.2%, from $46.4 million for the six months ended June 30, 2024 to $41.2 million for the six months ended June 30, 2025, primarily driven by our workforce optimization efforts in 2024.

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 costs related to our third-party contact centers that were located in Colombia and the Philippines are included in outsourcing and professional fees for the three months ended June 30, 2024. These third-party contact centers previously provided business support, including application processing, verification, customer service and collections. Professional fees also include the cost of legal and audit services, credit reports, recruiting, cash transportation, collection services and fees and consultant expenses. 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 at fair value.

Outsourcing and professional fees increased by $1.3 million, or 15.8%, from $8.4 million for the three months ended June 30, 2024 to $9.7 million for the three months ended June 30, 2025. The increase is primarily attributable to $1.1 million increase in debt recovery and court filing fees, $0.7 million increase in credit reports, and $0.6 million increase in debt financing fees. These were partially offset by a $0.9 million decrease in professional services and legal fees.

Outsourcing and professional fees decreased by $0.9 million, or 4.9%, from $18.6 million for the six months ended June 30, 2024 to $17.7 million for the six months ended June 30, 2025. The decrease is primarily attributable to a $2.4 million decrease in professional services and legal fees and $0.9 million decrease in outsourcing services. These were partially offset by $2.1 million increase in debt recovery and court filing fees.

General, administrative and other

General, administrative and other expense includes non-compensation expenses for employees, who are not a part of the technology and sales and marketing organization, which include travel, lodging, meal expenses, political and charitable contributions, office supplies, printing and shipping. 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, acquisition related expenses, and shareholder activism.

General, administrative and other expense decreased by $12.2 million, or 55.6%, from $22.0 million for the three months ended June 30, 2024 to $9.8 million for the three months ended June 30, 2025, primarily due to $6.4 million decrease related to the prior year impairment of the San Carlos office right-of-use asset and disposal of related fixed assets, $2.8 million decrease primarily related to the November 14, 2024 termination of Oportun RF, $2.7 million decrease related to prior year debt modification and amendment fees, $2.0 million decrease of workforce optimization costs, and $1.0 million decrease due to gains on foreign currency exchange. These were partially offset by $1.8 million increase related to shareholder activism and $0.5 million increase in fraud loans and franchise tax.

General, administrative and other expense decreased by $16.7 million, or 49.3%, from $33.8 million for the six months ended June 30, 2024 to $17.1 million for the six months ended June 30, 2025, primarily due to $6.8 million decrease related to the prior year impairment of the San Carlos and San Francisco office right-of-use asset and disposal of related fixed assets, $5.8 million decrease primarily related to the November 14, 2024 termination of Oportun RF, $4.0 million decrease related to prior year debt modification and amendment fees, and $2.2 million decrease of workforce optimization costs. These were partially offset by $1.4 million increase related to shareholder activism, $0.9 million increase in postage and printing, and $0.9 million increase due to the write-off of uncollectible receivables.

In connection with a previously announced cost reduction plan, the Company implemented a series of expense management actions during 2024, including a reduction of approximately 12% of corporate staff (excluding retail and contact center agents) and the closure of 39 retail locations. For the three andsix months ended June 30, 2024, the Company recorded non-recurring, pre-tax charges of $2.0 million related to corporate workforce reductions and $0.2 million and $0.9 million, respectively, related to retail closures, primarily consisting of severance, benefits, and other associated costs. Charges incurred during the corresponding periods in 2025 were insignificant.

Income taxes

Income taxes consist of U.S. federal, state and foreign income taxes, if any. For the periods ended June 30, 2025 and 2024, we recognized tax expense (benefit) attributable to U.S. federal, state and foreign income taxes.

Income tax expense increased by $21.4 million or 118%, from $18.1 million for the three months ended June 30, 2024 to $3.2 million expense for the three months ended June 30, 2025, primarily as a result of having a higher pre-tax income for the three months ended June 30, 2025.

Income tax expense increased by $28.8 million or 130%, from $22.2 million benefit for the six months ended June 30, 2024 to $6.6 million expense for the six months ended June 30, 2025, primarily as a result of having a higher pre-tax income for the six months ended June 30, 2025.

As of June 30, 2025, we have $78.0 million of U.S. net deferred tax assets, of which $68.4 million is related to the tax-effected net operating losses, tax credits, and other carryforwards that can be used to offset future U.S. taxable income. Certain of these carryforwards will expire if they are not used within a specified timeframe. At this time, we consider it more likely than not that we will have sufficient U.S. taxable income in the future that will allow us to realize these net deferred tax assets. However, it is possible that some, or all, of these tax attributes could ultimately expire unused. Therefore, if we are unable to generate sufficient U.S. taxable income from our operations, a valuation allowance to reduce the U.S. net deferred tax assets may be required, which would materially increase income tax expense in the period in which the valuation allowance is recorded.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.

See Note 2, Summary of Significant Accounting Policies, and Note 13, Income Taxes, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our income taxes.