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Oportun will lay off 18% of corporate staff, eliminate products

"This is not how we anticipated or wanted to close 2023," Oportun CFO Jonathan Coblentz says of the fintech's expense-reduction plan. "Nevertheless, my conviction remains fortified by the decisive actions we announced today." Credit: Olivier Le Moal/Olivier Le Moal -

The consumer lender Oportun Financial is laying off 18% of its corporate staff and scaling back some of its ambitions as part of a broader effort to slash costs.

The San Carlos, California-based fintech, whose main product is offering installment loans to consumers, said this week it's "exploring strategic options" for a credit card portfolio that it has been growing for a few years. It's also discontinuing its investment and retirement products and sunsetting a recently launched partnership with the buy now/pay later platform Sezzle.

The company's stock price sank by 49% after Oportun announced the cutbacks in its third-quarter earnings release on Monday. CEO Raul Vasquez said he was "disappointed" in the company's quarterly results, which were hampered by rising interest expenses and the harder time Oportun borrowers are having with loan repayments.

The company focuses on borrowers with lower credit scores, a sector of the population that started facing challenges last year as inflation and higher interest rates pinched their pocketbooks.

"This is not how we anticipated or wanted to close 2023," said Jonathan Coblentz, Oportun's chief financial officer. "Nevertheless, my conviction remains fortified by the decisive actions we announced today."

An Oportun spokesperson said the job cuts will affect 185 of its staff, reducing the company's total headcount by 7%. The layoffs add to earlier cuts Oportun made this year in its corporate division.

Its earnings release highlighted that total operating expenses were $123 million during the quarter, the lowest level in two years.

The cost-cutting should boost Oportun's earnings going forward, wrote John Hecht, an analyst at Jefferies. But the company's guidance for the rest of 2024 was "largely below our forecast and continues to represent a tough environment," Hecht wrote in a note to clients.

Oportun underperformed its prior expectations for earnings, with adjusted earnings before interest, taxes, depreciation and amortization coming in at $16 million during the quarter, below its prior guidance of more than $35 million.

The decrease was largely due to higher interest expenses and adjustments the company made in the value of its loans as more borrowers struggled to repay them.

The company wrote off more loans during the third quarter, with its annualized charge-off rate rising to 11.8%, up from 9.8% a year earlier. The primary driver was loans that Oportun made before July 2022, when the company became pickier in its underwriting criteria as inflation took a bite on its borrowers' pocketbooks.
Oportun is continuing to tighten its underwriting criteria because the macroeconomic environment remains uncertain and rising gas prices have put pressure on consumers.

The tighter lending stance meant Oportun focused on "quality rather than quantity" when making new loans last quarter, said Jonathan Coblentz, Oportun's chief financial officer. The company made $483 million of loans during the quarter, down 24% from $634 million a quarter earlier.

Vazquez said Oportun is focusing on growth in the "most proven and profitable parts of the business": an automated savings app that charges $5 a month, and its main product of unsecured personal loans.

It's also working on rolling out its secured personal loan product to about 40 states, an auto title loan that's collateralized by borrowers' cars. The loans are "highly synergistic" with Oportun's unsecured loans, which are not collateralized, and will help serve customers who need larger loans while reducing the company's credit exposure, Vazquez said.

The company expects to complete the expansion of secured loans by the end of 2025.