OPRT Oportun Financial Corp

Risks

• We have experienced rapid growth that may not be indicative of our future growth and, if we continue to grow rapidly, we may not be able to manage our growth effectively.
• We have incurred net losses in the past and may incur net losses in the future.
• Our quarterly results are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
• Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.
• We rely extensively on models in managing many aspects of our business. If our models contain errors or are otherwise ineffective, our business could be adversely affected.
• Our business may be adversely affected by disruptions in the credit markets, including reduction in our ability to finance our business.
• We have elected the fair value option effective as of January 1, 2018, and we use estimates in determining the fair value of our loans and our asset-backed notes. If our estimates prove incorrect, we may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect our results of operations. Further, our election of the fair value option as of January 1, 2018 resulted in a significant one-time impact to our Net Revenue for the year ended December 31, 2018.
• If net charge-off rates are in excess of expected loss rates, our business and results of operations may be harmed.
• Our results of operations and financial condition and our customers’ willingness to borrow money from us and ability to make payments on their loans have been, and may in the future be, adversely affected by economic conditions and other factors that we cannot control.
• Negative publicity or public perception of our industry or our company could adversely affect our reputation, business and results of operations.
• If we do not compete effectively in our target markets, our results of operations could be harmed.
• Our success and future growth depend on our Oportun brand and our successful marketing efforts across channels, and if we are unable to attract or retain customers, our business and financial results may be harmed.
• Our current and future business growth strategy involves expanding into new markets with new retail location openings, and we may not integrate or manage new retail locations we open or acquire.
• We could experience a decline in repeat customers.
• We are, and intend in the future to continue, developing new financial products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.
• We are, and intend in the future to continue, expanding into new geographic regions, and our failure to comply with applicable laws or regulations, or accurately predict demand or growth, related to these geographic regions could have an adverse effect on our business.
• Our proprietary credit risk models rely in part on the use of third-party data to assess and predict the creditworthiness of our customers, and if we lose the ability to license or use such third-party data, or if such third-party data contain inaccuracies, it may harm our results of operations.
• If we are unable to collect payment on and service the loans we make to our customers, our business would be harmed.
• Because we receive a significant amount of cash in our retail locations through customer loan repayments, we may be subject to theft and cash shortages due to employee errors.
• We are exposed to geographic concentration risk.
• Changes in immigration patterns, policy or enforcement could affect some of our customers, including those who may be undocumented immigrants, and consequently impact the performance of our loans, our business and results of operations.
• Our current level of interest rate spread may decline in the future. Any material reduction in our interest rate spread could adversely affect our results of operations.
• In connection with our securitizations, secured financing facility, and whole loan sales, we make representations and warranties concerning these loans. If those representations and warranties are not correct, we could be required to repurchase the loans. Any significant required repurchases could have an adverse effect on our ability to operate and fund our business.
• Fraudulent activity could negatively impact our business, operating results, brand and reputation and require us to take steps to reduce fraud risk.
• Security breaches of customers’ confidential information that we store may harm our reputation, adversely affect our results of operations, and expose us to liability.
• Our ability to collect payment on loans and maintain accurate accounts may be adversely affected by computer viruses, physical or electronic break-ins, technical errors and similar disruptions.
• Any significant disruption in our computer systems could prevent us from processing or posting payments on loans, reduce the effectiveness of our credit risk models and result in a loss of customers.
• It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
• We have been, and may in the future be, sued by third parties for alleged infringement of their proprietary rights.
• Our credit risk models and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
• Some aspects of our business processes include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
• We may not be able to make technological improvements as quickly as demanded by our customers, which could harm our ability to attract customers and adversely affect our results of operations, financial condition and liquidity.
• A deterioration in the financial condition of counterparties, including financial institutions, could expose us to credit losses, limit access to liquidity or disrupt our business operations.
• Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business.
• If we lose the services of any of our key management personnel, our business could suffer.
• 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.
• 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 mission to provide inclusive, affordable financial services that empower our customers to build a better future may conflict with the short-term interests of our stockholders.
• If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
• Misconduct by our employees could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
• Our international operations and offshore service providers involve inherent risks which could result in harm to our business.
• If we discover a material weakness in our internal control over financial reporting that we are unable to remedy or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to report our financial results on a timely and accurate basis and the market price of our common stock may be adversely affected.
• Our business is subject to the risks of natural disasters and other catastrophic events, and to interruption by man-made problems.
• Unfavorable outcomes in legal proceedings may harm our business and results of operations.
• The lending industry is highly regulated. Changes in regulations or in the way regulations are applied to our business could adversely affect our business.
• Our failure to comply with the regulations in the jurisdictions in which we conduct our business could harm our results of operations.
• Financial regulatory reform relating to asset-backed securities has not been fully implemented and could have a significant impact on our ability to access the asset-backed securities market.
• Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.
• Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.
• The CFPB is a relatively new agency which has sometimes taken expansive views of its authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.
• As a prepaid debit card provider, we are subject to extensive and complex federal and state regulations, and new regulations, as well as changes to or inadvertent noncompliance with existing regulations, that could adversely affect our business.
• The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of existing or new governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
• We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.
• Our bank sponsorship products may lead to regulatory risk and may increase our regulatory burden.
• Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.
• We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete in international markets and adversely affect our business.
• 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.
• A breach of early payment triggers or covenants or other terms of our agreements with lenders could result in an early amortization, default, and/or acceleration of the related funding facilities.
• Our securitizations and whole loan sales may expose us to certain risks, and we can provide no assurance that we will be able to access the securitization or whole loan sales market in the future, which may require us to seek more costly financing.
• You may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions or otherwise.
• The price of our common stock may be volatile, and you could lose all or part of your investment.
• If financial or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
• Our directors, officers and principal stockholders have substantial control over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.
• We may need to raise additional funds in the future, including through equity, debt or convertible debt financings, to support business growth and those funds may not be available on acceptable terms, or at all.
• The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
• Certain of our market opportunity estimates, growth forecasts, and key metrics could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
• Certain provisions in our charter documents and under Delaware law could limit attempts by our stockholders to replace or remove our Board, delay or prevent an acquisition of our company, and limit the market price of our common stock.
• Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware or the U.S. federal district courts will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
• Market Information and Stockholders
• Issuer Purchases of Equity Securities
• Unregistered Sales of Equity Securities
• Customer Acquisition Cost
• Managed Principal Balance at End of Period
• Average Daily Principal Balance
• Annualized Net Charge-Off Rate
• Operating Efficiency and Adjusted Operating Efficiency
• Return on Equity and Adjusted Return on Equity
• Historical Credit Performance
• Charge-offs, net of recoveries
• Election of Fair Value Option
• Comparison of Fair Value and Amortized Cost Accounting
• Credit Performance Sensitivity
• Interest Rate Sensitivity
• Drivers of Fair Value for Fair Value Notes
• Non-GAAP Financial Measures
• Adjusted Earnings Per Share (“Adjusted EPS”)
• Adjusted Return on Equity
• Adjusted Operating Efficiency
• Cash, cash equivalents, restricted cash and cash flows
• Operating and capital expenditure requirements
• Off-Balance Sheet Arrangements
• Critical Accounting Policies and Significant Judgments and Estimates
• Fair Value of Loans Held for Investment
• Recently Issued Accounting Pronouncements
• Credit Performance Sensitivity
• Interest Rate Sensitivity
• Foreign Currency Exchange Risk
• Opinion on the Financial Statements
• Recently Adopted Accounting Standards
• Accounting Standards to be Adopted
• 2019 Equity Incentive Plan
• 2019 Employee Stock Purchase Plan
• Stock Option Exchange Offer
• Financial Instruments at Fair Value
• Financial Instruments Disclosed but Not Carried at Fair Value
• Evaluation of Disclosure Controls and Procedures
• Exemption from Management's Report on Internal Control Over Financial Reporting
• Changes in Internal Control over Financial Reporting
• Inherent Limitations on Effectiveness of Controls