Earnings call transcript: Oportun Financial beats Q1 2025 forecasts, stock surges

Oportun Financial Corp (OPRT) reported its Q1 2025 earnings, surpassing market expectations with an EPS of $0.40 compared to the forecasted $0.05. The company’s revenue also exceeded predictions, reaching $235.9 million against an anticipated $228.66 million. Following the announcement, Oportun’s stock surged by 10.61% in regular trading, closing at $6.17 in aftermarket trading. According to InvestingPro, the company maintains a "GOOD" overall financial health score, and analysis suggests the stock is currently undervalued. This performance highlights the company’s robust financial health and strategic execution amid challenging macroeconomic conditions.

Key Takeaways

• Oportun Financial significantly beat EPS and revenue forecasts for Q1 2025.
• The stock price increased by 10.61% following the earnings announcement.
• The company reported a 59% year-over-year growth in secured personal loans.
• Operating expenses were reduced by 15% year-over-year.
• Oportun maintained a cautious growth approach due to macroeconomic uncertainties.

Company Performance

Oportun Financial, with a market capitalization of $223 million, demonstrated strong performance in Q1 2025, with notable improvements in both net income and adjusted EBITDA of $73.1 million. The company’s focus on secured personal loans, which grew by 59% year-over-year, and cost management strategies contributed to its success. Despite a 6% decline in total revenue compared to the previous year, Oportun’s strategic initiatives and operational efficiencies have positioned it well within the competitive landscape. InvestingPro subscribers can access 8 additional key tips about OPRT’s financial health and growth prospects in their comprehensive Pro Research Report.

Financial Highlights

• Revenue: $236 million, a decrease of 6% year-over-year
• Net Income: $9.8 million, an increase of $36 million year-over-year
• Adjusted Net Income: $19 million, up $15 million year-over-year
• Adjusted EBITDA: $34 million, an increase of $32 million year-over-year
• Operating Expenses: $93 million, reduced by 15% year-over-year

Earnings vs. Forecast

Oportun Financial’s Q1 2025 earnings per share of $0.40 significantly exceeded the forecast of $0.05, marking a substantial positive surprise. The revenue of $235.9 million also surpassed the expected $228.66 million. This marked improvement over forecasts reflects the company’s effective cost management and strategic focus on high-quality customer acquisition and secured loans.

Market Reaction

Following the earnings announcement, Oportun’s stock price surged by 10.61%, closing at $6.17 in aftermarket trading. This positive market reaction underscores investor confidence in the company’s financial health and growth prospects. InvestingPro data shows impressive returns of 99.68% over the past six months and 68.96% over the last year. The stock’s performance was notably strong compared to its 52-week range of $2.37 to $9.24, highlighting the market’s favorable reception of the earnings results.

Outlook & Guidance

Oportun reiterated its full-year 2025 guidance, projecting adjusted EPS growth of 53-81% within the range of $1.1 to $1.3. While the company reduced its originations growth expectation to 10%, it remains focused on achieving a GAAP return on equity of 20-28% in the long term. Analyst consensus shows optimism, with price targets ranging from $5 to $11 per share. The potential for increased marketing spend in the latter half of 2025 indicates a strategic push to drive further growth. Get detailed analysis and real-time updates on OPRT’s valuation metrics through the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

CEO Raul Vazquez stated, "We started 2025 with a strong first quarter, building on our momentum from last year." He emphasized the company’s proactive stance in monitoring macroeconomic conditions and adjusting strategies accordingly. Paul Appleton, Treasurer and Interim CFO, highlighted the goal of delivering GAAP ROEs of 20% to 28% annually, underscoring the company’s long-term financial objectives.

Risks and Challenges

• Macroeconomic Uncertainty: Potential impacts from inflation, unemployment, and government policies could affect growth.
• Competitive Landscape: Maintaining competitive pricing and credit standards is crucial.
• Market Saturation: The focus on secured loans requires continuous innovation to sustain growth.
• Regulatory Environment: Changes in financial regulations could impact operational strategies.
• Cost Management: Continued emphasis on reducing operating expenses is essential for profitability.

Q&A

During the earnings call, analysts inquired about the balance between digital and in-branch loan applications, the growth strategy for secured loans, and the impact of the new underwriting model (V12) on loan quality. The management reiterated its focus on prudent growth and adapting to economic conditions, emphasizing the importance of secured loans in their portfolio strategy.

Full transcript - Oportun Financial Corp (OPRT) Q1 2025:

Conference Operator: Good morning, ladies and gentlemen, welcome to the Oportun Financial First Quarter twenty twenty five Earnings Conference Call. At this time, all lines are in listen only mode. And following the presentation, there will be a question and answer session. This call is being recorded on Thursday, 05/08/2025. I would now like to turn the conference call over to Mr.

Dorian Hare. Please go ahead.

Dorian Hare, Investor Relations, Oportun Financial: Thanks, and hello, everyone. With me to discuss Oportun’s first quarter twenty twenty five results are Raul Vazquez, Chief Executive Officer and Paul Appleton, our Treasurer, Head of Capital Markets and Interim Chief Financial Officer. I’ll remind everyone on the call or webcast that some of the remarks made today will include forward looking statements related to our business, future results of operations and financial position, including projected adjusted ROE attainment and expected origination growth, planned products and services, business strategy, expense savings measures and plans and objectives of management for our future operations. Actual results may differ materially from those contemplated or implied by these forward looking statements, and we caution you not to place undue reliance on these forward looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially are set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors, including our upcoming Form 10 Q filing for the quarter ended 03/31/2025.

Any forward looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today’s call, we will present both GAAP and non GAAP financial measures, which we believe can be useful measures for the period to period comparison of our core business and which will provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available at the Investor Relations section on our website. Non GAAP financial measures are presented in addition substitute for financial measures calculated in accordance with GAAP. A reconciliation of non GAAP to GAAP financial measures is included in our earnings press release, our first quarter twenty twenty five financial supplement and the appendix section of the first quarter twenty twenty five earnings presentation, all of which are available at the Investor Relations section of our website at investor.oportunin.com.

In addition, this call is being webcast and an archived version will be available after the call along with a copy of our prepared remarks. With that, I will now turn the call over to Raul.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. I’d also like to welcome Paul to the call for the first time. We started 2025 with a strong first quarter, building on our momentum from last year. We’ve now met or exceeded guidance for six consecutive quarters, while consistently driving financial and operational improvements across the business.

Before key headlines from Q1 are continuing GAAP profitability, improving credit performance, responsible originations growth and ongoing expense discipline. First, we were GAAP profitable again in Q1 continuing the momentum we regained in Q4. Our Q1 net income of $9,800,000 was a $36,000,000 improvement year over year and drove an ROE of 11%. Adjusted net income of $19,000,000 represented a $15,000,000 year over year increase. Moreover, we generated $34,000,000 of adjusted EBITDA, a $32,000,000 increase.

We achieved these results primarily through a combination of originations growth, ongoing expense discipline and improved credit performance. I want to reiterate that we expect to be profitable on a GAAP basis for full year 2025. Regarding improved credit performance, our annualized net charge off rate was 12.2%, which was at the low end of our guidance range. Importantly, our underlying trends remain positive with dollar net charge offs down year over year for the sixth consecutive quarter. Our thirty plus day delinquency rate was 4.7% marking the fifth consecutive year over year decline in this instance by 56 basis points.

I’m pleased to inform you that following the first quarter our thirty day plus day delinquency rate declined further to 4.5 at the April. The guidance Paul will share reflects lower net charge off rates in the quarters ahead. Third, originations were $469,000,000 during Q1, up 39% year over year. It’s important to note that this growth reflects the unusually low baseline from 1Q twenty twenty four. Secured personal loans accounted for 19% of our 1Q twenty twenty five personal loan growth.

This is constructive to credit quality because losses on secured personal loans were approximately 500 basis points lower than unsecured personal loans last year. Furthermore, dollars 32,000,000 or 7% of Q1 originations were sold to partners. For Q2, we expect year over year growth in the 10% range supported by continued outperformance in secured personal loans. Sequentially, we still expect originations to rise from Q1’s ’4 ’60 ’9 million dollars to a higher level in Q4 aligning with our typical seasonal pattern. However, given current macroeconomic uncertainty, we’re prudently moderating our full year 2025 originations growth outlook to approximately 10%, down from our prior 10% to 15% range while maintaining tight credit standards.

And lastly, we reported $93,000,000 in operating expenses, 15% year over year. We reduced total expenses while increasing our marketing expenditure by $4,000,000 or 24%, which drove our originations growth. We continue to expect 2025 GAAP operating expenses of approximately $390,000,000 or $97,500,000 per quarter on average. Now let me update you on our progress across our three strategic priorities, improving credit outcomes, strengthening business economics and identifying high quality originations. Regarding improving credit outcomes, we continue to adjust our models based upon member behavior and the trends observed in the communities we serve.

We’re making further adjustments to better align risk levels by loan amount based upon recent vintage performance and to enhance our V12 credit model with additional data on new members. On strengthening business economics, I’m pleased that our Q1 adjusted ROE was 21%. We are confident in our progress towards consistently attaining full year GAAP ROEs in the 20% to 28% range over the long term. And we’re continuing to identify high quality originations by reinvesting in marketing, targeting new members with higher levels of free cash flow and supporting our best existing members, all within our conservative credit standards. We also remain focused on expanding our secured personal loans portfolio, which we grew by 59% year over year to $178,000,000 or the 7% of our own portfolio in the first quarter.

Finally, I’d like to preview our revised 2025 guidance. While we acknowledge the uncertainty in today’s economic environment, it’s worth noting that Oportun founded in 02/2005 has weathered multiple macro shocks beginning with the global financial crisis and consistently emerged stronger. We continue to monitor key indicators such as inflation, unemployment, fuel prices and evolving government policies alongside our internal performance metrics. Supported by our more efficient cost structure and improved credit performance, this positions us to remain agile and well prepared as conditions evolve. Despite the uncertain environment, our guidance reflects our commitment to continue to drive performance improvement.

Paul will share with you that factoring both our Q1 performance and the tapering of our originations growth expectations to 10%, we’re reiterating our full year 2025 adjusted EPS expectations. Our adjusted EPS guidance range of 1.1 to $1.3 continues to reflect strong growth of 53% to 81% over twenty twenty four’s adjusted EPS of $0.72 In summary, we turned the corner in 2024 and continued to make progress in Q1. We are focused on executing our three strategic priorities and ensuring that momentum continues. With that, I will turn it over to Paul for additional details on our financial and credit performance as well as our guidance.

Paul Appleton, Treasurer, Head of Capital Markets and Interim CFO, Oportun Financial: Thanks, Raul, and good afternoon, everyone. As you can see on slide five, we had a strong first quarter exceeding the high end of our total revenue and adjusted EBITDA guidance, while coming in at the favorable end of our annualized net charge off rate guidance. As shown on slide six, we delivered total revenue of $236,000,000 in the first quarter. We were GAAP profitable for the second consecutive quarter with $9,800,000 of net income and diluted EPS of $0.21 We were also profitable on an adjusted basis for the fifth consecutive quarter with adjusted net income of $18,600,000 and an adjusted EPS of $0.40 While maintaining credit discipline, originations of $469,000,000 were up 39% year over year, which as Raul mentioned, reflected an unusually low baseline in Q4 twenty twenty four. Sequentially, originations were down 10% from Q4’s ’5 ’20 ’2 million dollars consistent with the typical seasonality we’ve observed in prior years.

Total revenue of $236,000,000 declined by $15,000,000 or 6% year over year. This decline was primarily due to the absence of $11,000,000 of credit card revenue in the prior year quarter. As a reminder, we completed the sale of our credit card portfolio in November of last year, which was accretive to our bottom line. Our total net decrease in fair value of $73,000,000 was primarily driven by current period net charge offs of $81,000,000 Furthermore, higher yielding assets drove a favorable $12,000,000 mark to market adjustment on our loan portfolio. First quarter interest expense of $57,000,000 was up $3,000,000 year over year as sub 3% pandemic era ABS issuances continue to pay down.

Net revenue was $106,000,000 up 34% year over year as lower fair value marks and lower net charge offs more than offset lower total revenue and higher interest expense. As a reminder, we elected to stop accounting for new debt financings using the fair value method in 2023. And as a result, we expect the fair value impact on our asset backed notes to be minimal after this year as prior financings approach maturity. Operating expenses of $93,000,000 down 15% from the prior year, reflecting our ongoing cost discipline. As Raul mentioned, we continue to expect full year 2025 operating expenses of approximately $390,000,000 averaging $97,500,000 a quarter for a 5% reduction from 2024.

Adjusted EBITDA, which excludes the impact of fair value mark to market adjustments on our loan portfolio and notes was $34,000,000 in the first quarter. This reflected a significant year over year increase of $32,000,000 driven by cost reductions and credit performance improvement. As a result, our adjusted EBITDA margin increased year over year by 13.4 percentage points from 0.8% to 14.2%. Adjusted net income increased to $19,000,000 an improvement of $15,000,000 from last year, principally driven by our reduced operating expenses along with improved credit performance. Adjusted EPS increased year over year from $09 to $0.40 Next, I’d like to provide some additional color on our strong Q1 credit performance.

Our front book of loans originated since July 2022 continues to perform quite well, while our back book of pre July 2022 loans continues to roll off. As you can see on Slide seven, our more recent credit vintages have generally outperformed their predecessors and as a result, the losses on our front book twelve months after disbursement are now generally running approximately 600 basis points lower than our back book. Furthermore, you can see our annualized net charge off rate for the quarter by front book versus back book on slide eight. In Q1, the front book had an annualized net charge off rate of 11.5%, near the 9% to 11% net charge off range that we target in our unit economics model. The back book continues to decline, representing just 4% of the loan portfolio at quarter end, but accounting for 14% of gross charge offs.

We expect the back book to further diminish to 1% of our portfolio by the end of twenty twenty five. Finally, as you can see on slide nine, our net charge off rate was 12.2% in the first quarter, which was at the low end of guidance. Our Q1 net charge off dollar declined by 5%, while we reduced our thirty plus day delinquency rate by 56 basis points, which bodes well for future credit performance. So in summary, we continue to feel good about the quality of the credit we are originating. Regarding our capital and liquidity, as shown on Slide 11, we deleveraged by reducing our debt to equity ratio from 7.9 times to 7.6 times quarter over quarter, supported by GAAP profitability and $101,000,000 in operating cash flow, of which $29,000,000 was used to pay down debt.

We’ve now reduced leverage meaningfully from 3Q24’s peak level of 8.7 times. In late April and following the close of the first quarter, we fully satisfied the $12,500,000 in mandatory payments due by July 31 on our corporate debt facility, completing the payments three months ahead of schedule. Consequently, Opportune has no further mandatory corporate debt repayment obligations during the remainder of 2025. As of March 31, total cash was $231,000,000 of which $79,000,000 was unrestricted and $152,000,000 was restricted. Further bolstering our liquidity was $317,000,000 in available funding capacity under our warehouse lines.

Our continued access to the capital markets is well established. Since June 2023, Optune has raised approximately $3,000,000,000 in diversified financings, including whole loan sales, securitizations and warehouse facilities from fixed income investors and banks. The company maintains an exemplary record in the ABS market having completed 24 transactions and issued $6,300,000,000 in notes to date from the opportunity shelf. As a reminder, in January, we issued $425,000,000 in ABS notes, which freed up warehouse capacity for future originations. The transaction was a significant success, oversubscribed by more than seven times and pricing at a 6.95% weighted average yield, 127 basis points lower than our previous transaction in August 2024.

We also closed on a two year one hundred and eighty seven point five million dollars committed warehouse facility in April. This transaction increased our total committed warehouse capacity to $954,000,000 with a diversified group of lenders and our available funding capacity at the April was $417,000,000 Turning now to our guidance, as shown on Slide 12, our outlook for the second quarter is total revenue of $237,000,000 to $242,000,000 annualized net charge off rate of 11.9% plus or minus 15 basis points and adjusted EBITDA of 29,000,000 to $34,000,000 Our Q2 total revenue guidance reflects a 4% year over year decline at the midpoint, which is almost entirely due to the absence of the prior year’s credit card revenue. Our Q2 adjusted EBITDA guidance of 32,000,000 at the midpoint reflects disciplined expense management and growth over 2Q24’s level of $30,000,000 We expect our Q2 annualized net charge off rate to be 11.9% at the midpoint of guidance, down approximately 40 basis points year over year. We are reiterating all aspects of our full year 2025 guidance, including total revenue of $945,000,000 to $970,000,000 annualized net charge off rate of 11.5% plus or minus 50 basis points adjusted EBITDA of $135,000,000 to $145,000,000 adjusted net income of 53,000,000 to $63,000,000 and adjusted EPS of $1.1 to $1.3 Our full year guidance reflects our first quarter performance, the uncertain macroeconomic environment and a slight tapering of our full year originations growth expectation from our prior 10% to 15% range to around 10%.

Before I turn it back to Raul, I’d like to update you on our progress towards our long term unit economics targets. While our long term targets are GAAP targets, I’ll be using adjusted metrics for comparison because they remove non recurring items and provide a better sense of our future run rate. It’s clear on Slide 14 that we continue to make significant progress in Q1. Adjusted ROE was 21%, which was a 17 percentage point year over year improvement. The increase was driven principally by cost reductions, improved credit performance and a higher loan yield.

Our North Star continues to be delivering GAAP ROEs of 20% to 28% annually driven by reduced annualized net charge offs to 9% to 11%, lowering operating expenses to 12.5% of our owned portfolio and attaining annual growth of 10% to 15% in our owned loan portfolio. We also intend to return to our six:one debt to equity leverage ratio over the longer term by reducing our corporate debt outstanding and continuing to increase our GAAP profitability. Raul, back over to you.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thanks, Paul. To close, I’d like to emphasize three key points. First, we’re pleased to have carried twenty twenty four’s momentum into 2025 by being GAAP profitable for the second consecutive quarter with a GAAP ROE of 11% and an adjusted ROE of 21%. Second, we are closely monitoring the macroeconomic environment, have factored it into our outlook and are adjusting our underwriting and expenses as needed. And finally, we’re reiterating our full year 2025 guidance expectations for revenue, adjusted earnings and adjusted EBITDA.

Our adjusted EPS guidance range from $1.1 to $1.3 reflects strong growth of 53% to 81% and we continue to expect to be GAAP profitable on a full year basis. Our strategic focus on improving credit performance, strengthening business economics and prioritizing high quality originations is delivering consistent improvements in our performance. I’m deeply grateful to our employees and shareholders for their unwavering commitment as we continue advancing on this journey. With that, operator, let’s open up the lines for questions.

Conference Operator: Thank Your first question comes from John from Jefferies. Please go ahead.

John Hecht, Analyst, Jefferies: Hey guys, how are you? It’s John Hecht. My name is not John Jefferies, but I work at Jefferies. Anyway, congratulations on a lot of the progress here. I guess, Raul, maybe can you give us an update on online or digital loan application activity versus in branch?

And are you seeing any changes there in terms of mix and behavior on the front end of the loan originations?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Yes. Hi, John. Thank you for let me start with thank you for the congratulations. We felt really good about the way that the team executed in Q1. You’re going to see when we print our investor deck, we give a quick update on originations.

You’re going to see pretty stable. There’s been a small shift, I think, on the order of two points from physical to online quarter over quarter. As you know, we manage the business at a portfolio level. We develop the channels so that they all work together. So we’re not seeing any big changes, just very, very modest change.

John Hecht, Analyst, Jefferies: Okay. And then I know you’re targeting a higher you’re growing the secured business relative to the overall book. Is that a is there a way to kind of execute that involves kind of trying to steer customers to that product or is it finding all new customers or how does I guess maybe give us the update on that strategic objective?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Sure. So I’m really pleased with the performance of secured personal loans in Q1. The book grew about 59% year over year. So we were able to add about $66,000,000 to the principal balance of that book. Average loan size came down, right?

We think that this environment, it makes sense for us to continue to be very discerning and very thoughtful. So average loan size came down about $2,200 year over year for secured personal loans. So I like the growth. I like the fact that the growth was driven by units, not by loan size. And from a strategy perspective, it’s both the things that you talked about.

So from a user experience perspective, we continue to focus on presenting both products to our members and giving them the option of picking whichever product is going to meet their needs. And at the same time, our marketing group is certainly trying to figure out how do we create some specific strategies to try to bring in more people that are going to be interested in that product. It’s now about 7% of our book and our goal this year is to continue to drive growth faster in that part of the business and to continue to increase the penetration of that as a percentage of our book.

John Hecht, Analyst, Jefferies: Okay. It makes sense. And then last question is maybe just any comments on competition just given to call it the uncertainty in the macro backdrop and what opportunities or challenges that presents for you guys?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Yes. We’ve always felt that we compete very well with others. When you look at the all in cost for our product, it is very favorable to some of the alternatives that are out there. Thankfully, we think that the competitors continue to behave in a very rational way, right? I think pricing still reflects elevated cost of funds across the board.

So we think that the competitive environment right now continues to be very constructive for us and that’s part of what’s allowing us to perform in this manner.

John Hecht, Analyst, Jefferies: Great. Appreciate that guys. Thank you.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thank you, John.

Conference Operator: Thank you. And your next question comes from Chris Sakai from Singular Research. Please go ahead.

Chris Sakai, Analyst, Singular Research: Yes, hi. I’m in for Gaussi. Just let’s see, how much is in app features such as payment reminders and dynamic pricing, reduce customer acquisition costs for secured loans versus unsecured? Is this replicable in newer markets?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Yes, it’s a great question. So when we look at our cost to acquire, we look at it across the entire business. I’m really pleased with the fact that our cost to acquire was very stable on a year over year basis. So it was $139 this quarter, 138 a year ago in Q1. In terms of whether it’s the app, whether it is direct mail, our referral program was also something that grew a lot.

We have three fifty fifty two percent year over year growth in referrals. We really try to take a holistic approach to how we make people aware, number one, that opportunity exists and that we’re a great value relative to other options. And then to your point, Chris, we also try to make them aware, as John was just asking about as well, we try to make them aware of the fact that we have both an unsecured product and then a secured product. The secured product gives us an opportunity to make loans that are about twice as large. We love the product also because it has losses that last year ran 500 basis points lower than the loss rate for unsecured loans.

So we’re really focused across all touch points, Chris. We’re focused on driving awareness of secured personal loans.

Chris Sakai, Analyst, Singular Research: Okay, great. Have you noticed any unexpected shifts in repayment patterns or customer engagement since phasing out physical checks? And how does this trend influence your fraud prevention strategy?

Raul Vazquez, Chief Executive Officer, Oportun Financial: So no, I wouldn’t say we’ve noticed anything unexpected. When we think about both delinquencies and losses, you can see that where we expected to be from a guidance perspective. So the fact that delinquencies, for example, came in at 4.7%, down 56 basis points year over year for the quarter, we gave a sense of where April came in. April delinquencies were even lower, so we like that downward trend. So when we think about both payment behavior and the potential for fraud, there’s nothing alarming and nothing unexpected.

We’re performing in line with guidance and obviously this is an area that our team is very, very focused on.

Chris Sakai, Analyst, Singular Research: Okay, great. And then last from me. Returning borrowers drove originations it looks like is this shift intentional to improve unit economics? And if so, what’s the long term feeling for new customer acquisition?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Yes. From an acquisition perspective, the things that we’ve been focused on have been number one, to your point, are returning borrowers we know are among our best borrowers. They generally get access to more capital. They have a lower cost to acquire. The loss levels are lower.

So we’re very pleased with growth on the returning side of the business. From a cost to acquire perspective, I wouldn’t say that it’s going to drive any shift there. We want to continue to acquire high quality new borrowers. We’ve mentioned in the past that we look in this environment, in particular, we look for new borrowers that are going to do better in the different scores that we use from an underwriting perspective. I think as you know, we use a few proprietary scores.

We’re looking for new borrowers that have higher levels of free cash flow. We think that, that helps position them well for any unexpected macroeconomic environment that may develop. So the new borrowers with those characteristics, we know become attractive returning borrowers in the future. So we’re going continue to look for both high quality new borrowers and then focus on our great returning borrowers.

Chris Sakai, Analyst, Singular Research: Okay. Thanks for those answers.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thank you, Chris.

Conference Operator: Thank you. And your next question comes from Brandon McCarthy from Sidoti. Please go ahead.

Brandon McCarthy, Analyst, Sidoti: Great. Good afternoon. Thanks for taking my questions here. I just wanted to start off on the macro outlook. You mentioned you’re tapering the outlook for originations for this year down to 10% at the lower level of that original 10% to 15% outlook.

But, I guess what are you just curious as to what you’re seeing in the macroeconomic picture to drive this decision, or is it more just of a cautious approach for the rest of the year?

Raul Vazquez, Chief Executive Officer, Oportun Financial: It’s the latter. I mean, think Chair Powell, right, stated it very well yesterday that there is uncertainty in the macro, right? It’s not clear, what level of tariffs are going to exist over what time period. And I think as he stated yesterday, there is the potential for higher unemployment and for higher inflation. We’re not seeing it yet, right?

We think the job market for a blue collar worker that earns $50,000 that’s our core customer. We think the job market is really, really strong for our customer. But we think it makes sense right now to take a bit of a wait and see perspective from a macro perspective, wait a little bit. Hopefully, will be more deals like the ones announced this morning by the administration. And if that happens, right, and the macro gets clearer that it’s going to be a strong environment, then we’ll just move back up within the range of the 10% to 15%.

But right now, Brendan, we just think it’s prudent to be on the lower end of that range and just to wait and see.

Brandon McCarthy, Analyst, Sidoti: Understood. Thanks for that, Raul. Pivoting to the operating expense outlook, it looks like for the first quarter, the number of $93,000,000 came in well below the outlook for the average of right around $98,000,000 I guess what factors could cause meaningful underperformance there or higher operating expenses there for the year end? What factors could cause that number to stay fairly low on a quarterly basis going forward?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Well, we’re clearly focused on continuing to be disciplined from an OpEx perspective, Brendan. I liked your question because one of the things we’ve done, again, within this kind of framework of really thinking about what’s the prudent level of growth today and then being able to watch the environment and see how it develops. Within that framework, we decided that we were going to push some of the marketing dollars into the back half of the year. So that way, if there’s more clarity on the macro environment, if inflation continues to stay low, the job market is as strong as it is today, then we’ve got some dry powder from a marketing perspective to drive growth at the back half of the year and position us for a great 2026. If the macro remains uncertain, right, then we won’t spend those dollars, and we’ll have a lower OpEx than the $390,000,000 we’re projecting today.

Brandon McCarthy, Analyst, Sidoti: Understood. Thanks, Rui. I appreciate the color. One last question from me. I saw the announcement yesterday on the forward evolution of Oportun.

And just curious if you could provide additional color, I guess, on the decision to ultimately shrink the size of the Board and how investors can really think about that?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Sure. So the Board determined that a smaller Board size would be both more conventional and more efficient. The Board also felt that this reflects feedback that we’ve heard from shareholders and it really underscores our commitment to thoughtful Board evolution. The Board regularly reviews its composition, ensures that it’s got the right mix of skills and expertise to effectively oversee the business. So I’d say those were the drivers Brendan.

Brandon McCarthy, Analyst, Sidoti: Thanks, Harlow. Appreciate the insight. That’s all for me.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thank you.

Conference Operator: Thank you. And your next question comes from Hal Gottschitch from B. Riley Securities. Please go ahead.

Hal Gottschitch, Analyst, B. Riley Securities: Hey, guys. Good continued performance here. Could you just go over some of data you gave on the whole loan sales again? I mean, you grew originations quite nicely above your target. Can you just go over the whole loan sales and maybe how that impacted the quarter?

Raul Vazquez, Chief Executive Officer, Oportun Financial: Sure, Hal. First, thank We feel really good about the quarter. So within the $469,000,000 of originations that we had, there are a couple of ways to think about that. Number one, secured personal loans drove about 19% of that Q1 growth, right? So for all the reasons that we’ve talked about already, that’s a big strategic priority.

We think of those as very high quality originations, given the fact that it’s twice the revenue, losses that are 500 basis points lower. To your point, when we’re able to grow at these levels, one of the things that we also want to do is be able to sell loans to partners. So we had about $32,000,000 of loans that were sold to our partners, right? Those are people that like the cash flows. We think of it as a signal that these are high quality assets that partners want to own.

So that’s those are two of the ways to think about kind of the growth that took place in Q1. Okay. Okay. Thank you. Thank you.

Conference Operator: And your next question comes from Rick Shane from JPMorgan. Please go ahead.

Rick Shane, Analyst, JPMorgan: Hey, Raul. Hope you’re well. I actually am sitting here and wondering if Jonathan is ignoring this call or is off listening and having a beer. But either way, I

John Hecht, Analyst, Jefferies: think we all wish him

Rick Shane, Analyst, JPMorgan: well. Did want to have question. And I apologize if this was covered. We’ve had multiple calls this afternoon. You guys had talked last quarter about incorporating risk associated with inflation into your underwriting models.

Can you talk a little bit about how you do that? It feels to me like given where we are, that’s probably the most important consideration. Who knows what’s going to happen, but it is the wildcard.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Yes. I really appreciate that question, Rick. So I’d say at a high level, there are two ways to think about this. So just for context for others that may not be quite as aware, one of the things that we do with our underwriting engine is much as happens with our phones, there are major upgrades and then minor upgrades. So the major ones we think of is going from V9 to V10 to V11.

And what you’re referring to, Rick, is V12, which we introduced for the first time last year. So V12, one of the benefits of V12 is it was trained using data from this inflationary period that we’ve had recently. So the underwriting model, V12, is much more equipped to think about who are going to be the borrowers that we want to approve within this environment that still has the compounding effects of inflation that have taken place over the last few years. So V12 was built in that way. And one of the things that’s already planned is in the coming weeks, we’re actually going to do one of the minor updates in V12.

So we’re going to look at the performance over the last year, and we’re going to go ahead and make some tweaks to V12 and then introduce that as part of our new underwriting approach. So that’s one of the things that’s going to help us in this uncertain environment. The other thing that we’ve talked about in the past is one of the things that we were able to do was to look for some signals of individuals who are applying today who are likely to take on additional debt either at the same time or after taking on debt from Oportun, right? This has been one of the challenges in our industry in the past. It’s been loan stacking, in particular, when the economic times get a bit more challenging.

So I think that that’s another set of signals and data that our data scientists and engineers have been able to build into our underwriting approach. And both of those things are going to help us in this environment.

Rick Shane, Analyst, JPMorgan: Got it. Look, you guys had made the comment about sort of shifting to the lower end of your origination guidance. When is that a function of increasing the importance of the inflationary factor in your model? And can you really dial things up and down like that within the model on real time basis, say, hey, here are the 17 factors, inflation is assigned to 4%, we’re more worried about it now, so we’re going to wait that 7%?

Raul Vazquez, Chief Executive Officer, Oportun Financial: I mean, there are a lot of factors that we take into consideration. So the short answer is yes, we can dial it up and down. That’s the short answer. But we’re not just looking at inflation. For example, the team also looks at trends at a state level, at a metro level, even within states, at an industry level.

And then we do take into consideration, to your point, Rick, we take into consideration things like inflation, fuel prices, unemployment, again, at a national and a state level. So all those things are taken into account when we decide what adjustments we want to make to the credit box. As a reminder, throughout the year, when we have targeted this 10% to 15% growth, it wasn’t going to be by opening up the credit box. It was going to be by funding more marketing investments, right, to flow through the currently conservative credit parameters. So one of the things that we’ve done, as I mentioned earlier, is just dial back on the marketing and push that into the back half of the year to be at the lower end of our 10% to 15% range.

Rick Shane, Analyst, JPMorgan: Got it. Okay. And that was a comment I missed. I appreciate the feedback and for the answers. It’s a fun part of this job.

It really is interesting and appreciate the insight. Thank you.

Raul Vazquez, Chief Executive Officer, Oportun Financial: Thank you, Rick.

Conference Operator: Thank you. And there are no further questions at this time. Mr. Vasquez, you may continue your conference.

Raul Vazquez, Chief Executive Officer, Oportun Financial: I want to thank everyone once again for joining us on today’s call and we look forward to speaking with you again soon. Thank you.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation, and we ask that you please disconnect. Have a great day.

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