Good day and welcome to Oportun Financial First Quarter 2022 Earnings Conference Call. Please note this event is being recorded. I'd now like to turn the conference over to Dorian Hare, SVP of Investor Relations. Please go ahead.

Thanks and hello everyone. Some of you are aware that I started in this role a few weeks ago and I am very excited to be joining you today for my first earnings call while leading Oportun's investor relations effort. With me to discuss Oportun's first quarter 2022 results are Raul Vazquez, Chief Executive Officer and Jonathan Coblentz, Chief Financial Officer and Chief Administrative 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, planned products and services, business strategy 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 March 31, 2022. 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 comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operation. A full list of definitions and reconciliations can be found in our earnings materials, available at the investor relations section on our website. Non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, our first quarter 2022 financial supplement and the appendix section of the first quarter 2022 earnings presentation, all of which are available at the investor relations section of our website. In addition, this call is being webcast and an archive version will be available after the call, along with a script of our prepared remarks. With that, I will now turn the call over to Raul.

Thanks, Dorian. Jonathan and I are glad to have you here and I know you are keen to get to know our investment community. Good afternoon, everyone and thank you for joining us. I'm incredibly proud of our record results for the first quarter which reflected the power of our product offerings and exceeded all of our expectations. As you know, we have very ambitious goals for 2022, so we are pleased that the year is off to a great start. Let me start by sharing the headlines. We achieved record first quarter originations of $800 million, up 139% from the first quarter of 2021. Originations continued to be driven by our expansion into new states where we are taking share. New borrowers represented over 51% of our total loans, up from 40% a year ago. We delivered record revenue of $215 million and adjusted net income of $53 million, for adjusted EPS of $1.58 and adjusted ROE of 34%. We are continuing to deliver strong credit performance, as evidenced by our annualized net charge-off rate of 8.6% which was on par with the prior-year quarter and was 17 basis points better than the midpoint of our expectation. Given the favorable trends in our business, we are raising our full-year 2022 guidance. Now, let me tell you about our progress on our three strategic priorities for the year that support our outlook for strong, profitable and sustainable growth. Our first priority is to grow our members. We ended the first quarter with 1.7 million members up from 1.5 million at the start of the year, a 48% annualized growth rate for the quarter, so we are very pleased with the pace of member growth. Our second strategic priority is to increase multi-product relationships with our members. As proof of our ability to do so, in the first quarter products grew at an annualized rate of 58%, faster than our member growth of 48%. Additionally, at the end of the first quarter, 12% of our members with an Oportun credit card also had a personal loan with Oportun, which is up from 7% at the start of the year. We also began developing multi-product relationships across our credit and digital banking products during the first quarter and are enthusiastic about expanding this aspect of our business as a growth lever. Our third strategic priority is enhancing our platform capabilities to meet the everyday financial needs of hardworking people. In our last earnings call, we talked about creating a seamless, integrated acquisition funnel across all our products to increase member conversion and decrease the cost of member acquisition. In Q1, we made important progress toward that vision as we began offering Digit products to our applicants whom we were not yet able to approve for a loan, as well as to current and previous loan customers. I'm also happy to announce that the Digit integration into our credit card funnel went live a couple of weeks ago. While there is more work required this year to create a fully integrated funnel, we are beginning to gather valuable learnings from members we have started serving with multiple products. Now, let me share with you more detail regarding our progress across our different products. The growth of our unsecured personal loan product continues to benefit from our expansion across the nation. As of the end of the first quarter, our personal loans were available in 39 states and we plan further geographic expansion this year. I want to emphasize how differentiated this geographic expansion is for us compared to other fintechs that have already had nationwide operations. By introducing our superior customer value proposition in new geographies, we are taking share from other lenders who have never had to compete with Oportun. In addition, having access to new members allows us to grow selectively, without having to expand the credit box. We are seeing strong growth in states such as Pennsylvania, North Carolina, Michigan, Virginia and Ohio. Overall, we have added more than 22 million potential members in the 27 states we have entered with MetaBank through the end of the first quarter. For our secured personal loan product, we ended the first quarter with $79 million in receivables, up 1,375% year-over-year and on track to meet our year-end target of $140 million. In April, we also expanded our secured personal loan product to Arizona. Our secured personal loan growth continues to benefit from the fact that it is offered through the same acquisition funnel along with our unsecured personal loans, providing proof of the low member acquisition cost opportunity that a single unified acquisition funnel for all Oportun products will offer in the future. We also saw excellent progress this quarter from our credit card product. Receivables grew 996% year-over-year to $90 million, also on track to meet our year-end goal of $150 million. We now have more than 153,000 members who have an Oportun branded credit card. We have also continued to make great progress with our Lending-as-a-Service product. During the first quarter, we scaled our Lending-as-a-Service network to include 284 partner locations, up from 28 a year ago and we still expect to complete 2022 with over 500 partner locations. Additionally, our partnership with Sezzle, a Buy Now, Pay later company and our first digital Lending-as-a-Service relationship, remains on track to launch in the second half of the year. We are in discussions with multiple potential partners to expand our Lending-as-a-Service channel, including both retail and fully digital businesses. Finally, our Digit integration is progressing nicely. We are now offering Digit products at multiple points in the Oportun application and servicing experiences and we have enabled Oportun members to obtain our Digit products at a discount. All of these activities are being conducted while of course, honoring our members' privacy preferences. Finally, I'd like to tell you about how well Oportun is positioned to both meet the needs of our hardworking members and create shareholder value in the current macro environment. Our members are benefiting from a strong job market and in our 16 years of lending, we have found that a robust employment environment is the leading driver of both origination levels and the health of our loan portfolio. I've never been more confident about our ability to grow the company and create long-term shareholder value by providing inclusive, affordable financial services that empower our members to build a better future. I'll now turn the call over to Jonathan who will walk you through a more in-depth discussion of our financial results and provide our outlook for the second quarter and full year.

Thanks and good afternoon everyone. As Raul mentioned, we generated record results in the first quarter and 2022 is off to a great start. In the first quarter, we generated $215 million of total revenue and $53 million of adjusted net income, or $1.58 of adjusted EPS. Our aggregate originations were $800 million, up 139% year-over-year and well ahead of our expectation of $625 million. Loan application volume and originations have remained strong since the end of the quarter and we expect continued strength in aggregate originations throughout 2022. Total revenue of $215 million was up 59% year-over-year, also well above our expectations and reflected higher receivables due to increased originations. We expect continued strong origination volume across all of our credit products to drive increased growth in total revenue throughout the year. Net revenue was $205 million, up 86% year-over-year. Net revenue improved from the prior year period due to higher total revenue, consistent interest expense and greater increase in fair value. Interest expense of $14 million was up 1% year-over-year, primarily driven by increased debt issuance to fund our growth, partially offset by the decrease in our cost of debt to 2.6% versus 3.9% in the year-ago period. As a reminder, last year we locked in $1.4 billion of fixed-rate, term asset-backed funding at a weighted average interest rate of 2.2% and negotiated better terms on our $750 million warehouse lines of credit. At the end of the first quarter, 73% of our debt was fixed-rate, providing us with protection from rising interest rates. For our net change in fair value, we had a $4 million net increase in fair value which consisted mainly of a $41 million mark-to-market net increase on our loans and our debt, a $16 million cumulative mark adjustment related to the sale of $228 million in loans through the structured loan sale at the end of the quarter and current period charge-offs of $51 million. For the mark-to-market, the fair value price of our loans decreased to 104.1% as of March 31 and resulted in a $17 million mark-to-market decrease. The $58 million mark-to-market increase in our asset-backed notes resulted from a 353 basis point decrease in the weighted average price to 96.3%, due to the increase in interest rates and credit spreads during the quarter. Turning to expenses, our first quarter total operating expense was $147 million, an increase of 39% compared to the prior-year quarter. Adjusted operating expense, which excludes stock-based compensation expense and certain non-recurring charges increased 42% year-over-year to $133 million, growing more slowly than total revenue and net revenue which grew 59% and 86%, respectively year-over-year, thus increasing our profit margins. The increase in expense was primarily related to the addition of $15 million of Digit operating expenses, post-merger which were not present in the prior-year quarter. We also increased our investment in technology to enhance our platform and increased marketing spend to drive growth in new markets where we are taking share. Our customer acquisition cost was $151, down 27% from the year-ago period. This decrease was partially driven by our investment in AI, which has increased the efficiency of our marketing programs and the reduction of our cost base achieved through last year's rationalization of our retail network. Furthermore, as our business continues to become more digital-first, we have decided to close 27 retail locations this year which will save almost $20 million of operating expenses over the next five years. In the first quarter, we took a $600,000 charge relating to these closures and expect an additional $1.5 million charge in the second quarter. Our net income was $46 million, well above the $3 million in net income generated in the prior-year quarter. This equated to earnings per diluted share of $1.37, a significant increase from $0.10 in the first quarter of 2021. On a non-GAAP basis, we delivered adjusted net income of $53 million, more than quadrupling $12 million in the prior-year quarter and adjusted EPS of $1.58 versus $0.41, respectively. Adjusted EBITDA was $34 million, a $36 million increase compared to a loss of $2 million in the prior-year quarter. Adjusted return on equity was 34%, versus 11% in the prior-year quarter. For the last twelve months, adjusted ROE was 21%. Turning now to credit, our first quarter results were further evidence of our portfolio's continued strength and our ability to manage credit and deliver specific outcomes. Our annualized net charge-off rate was 8.6%, equivalent to the prior-year period and 17 basis points better than our midpoint guidance. As of March 31, our 30-plus day delinquency rate would have been 4.1% had we not sold $228 million of loans, or approximately 9% of our owned portfolio, at the end of the quarter. The loan sale reduced the denominator of the delinquency calculation, increasing our reported 30-plus day delinquency rate from 4.1% to 4.5%. In comparison, our 30-plus day delinquency rate was 24 basis points higher than the 3.9% level as of December 31, 2021. As a reminder, our sophisticated AI-driven underwriting algorithms allow us to manage our credit exposure on a highly granular basis. Our fully-centralized and fully-automated credit model consists of over 1,000 different end nodes, each of which represents a different gradation of credit risk, enabling us to make adjustments on a node-by-node basis to target desired outcomes. We have further enhanced our underwriting capability by incorporating cash flow information from banking data, a new and highly predictive alternative data source that we have not previously leveraged. Additionally, we are in the process of implementing machine learning models to enhance the efficiency of our collections, which will allow us to further optimize borrower outcomes and achieve better credit results. We continue to be very pleased with the credit quality of the loans we are booking, while simultaneously adding to our membership. As Raul mentioned, our growth through geographic expansion is a key differentiator and will allow us to be more selective in underwriting because of access to new markets. For example, we've actually been tightening our underwriting standards since the third quarter of last year and continued to make some adjustments through the first quarter of this year. We've also been allocating our marketing spend across channels to optimize for credit outcomes. While taking these prudent measures, our strong growth in new loans continues to drive our performance. In the first quarter, new loans represented 51% of total loans originated as compared to 40% in the prior-year quarter, as we continued to expand in new geographic markets and take share. Most of the new borrowers we are adding today will become future returning borrowers who will be less expensive to acquire, will safely qualify for larger loans on average and are expected to have lower charge-off rates. To give you a sense of this, in the first quarter our average loan size to a new borrower was $3,100 as compared to $5,100 for a returning borrower and net charge-off rates for returning borrowers have been running at approximately 2/3 the rate for new borrowers. In short, new member growth in 2022 sets us up for continued success in 2023 and beyond. Regarding our capital and liquidity, as of March 31, total cash was $171 million. Additionally, net cash flow from operations for the first quarter was $39 million. Our debt-to-equity ratio was 3.3x and $273 million of our combined $750 million in warehouse lines was undrawn and available to fund our growth. We have maintained our track record of consistent access to the capital markets. In March during a choppy market, we successfully closed a structured loan sale which was an amortizing asset backed securitization that included the sale of the residual cash flows. Through this transaction, we sold loans at an attractive price while reducing our balance sheet and credit exposure. And, we are currently in the market with a $400 million securitization which we expect to price this week, which will free up significant warehouse capacity to fund the strong growth in originations we are projecting for the remainder of the year. Given the rising rate environment, we are enacting select pricing actions with respect to new loan originations, while remaining committed to growing our membership base, taking share and maintaining a 36% APR cap. On average, these pricing actions will increase portfolio yield by 65 basis points this year, helping to offset higher cost of funds. Turning to our expectations for the rest of 2022, we will continue to leverage multiple vectors for growth including the expansion of our addressable market, products, channels and digital banking capabilities. We expect this growth to accelerate over time, as our annualized member growth is combined in the future with expanded multi-product relationships. In terms of guidance, our outlook for the second quarter is, aggregate originations of between US$825 million and US$850 million. Total revenue of between US$214 million and US$218 million; adjusted net income between US$2 million and US$4 million and adjusted EPS between US$0.06 and US$0.12. I want to point out that the reason our second quarter adjusted net income and adjusted EPS guidance is below our first quarter results is due to timing differences with respect to the net change in fair value caused by the increase in interest rates. However, the trends in our business remain strong, as demonstrated by the fact that we are taking up each of our full-year guidance metrics including adjusted net income and adjusted EPS. Our updated guidance for the full year is: Aggregate originations of between US$3.45 billion and US$3.5 billion, total revenue between US$910 million and US$930 million; adjusted net income between US$83 million and US$87 million; and adjusted EPS between US$2.45 and US$2.56. We are maintaining our forecast for $140 million of year-end receivables for our secured personal loans and maintaining $150 million for credit cards. We expect our second quarter annualized net charge-off rate to be 8.6% plus or minus 10 basis points and we are reaffirming our expectation for the full year net charge-off rate to be 8.8% plus or minus 15 basis points. In summary, I'm pleased that we delivered a terrific quarter and that our outlook for the remainder of 2022 remains strong. And, I believe that the exceptional growth in members, originations and total revenue that we are seeing so far this year will set us up for a great 2023. With that, I will now turn it back over to Raul for some final comments before we open the line for questions.

Thanks, Jonathan. Before I open up the call for questions, I wanted to share with you that our 2021 corporate responsibility & sustainability report will be released soon. With that in mind, I wanted to share with you some of the ways in which Oportun enables a better financial future for our members. Oportun has extended more than $12 billion of credit to hardworking individuals, saving them over $2 billion in interest and fees. Likewise, our digital banking platform has helped members effortlessly save more than $7.2 billion through the application of its AI-driven algorithms. Digit members have annually, on average, set aside over $3,000 as rainy day funds. We were pleased to share with you in our prepared remarks how Oportun is off to a strong start this year which combined with our ongoing ability to execute on our strategic initiatives has allowed us to raise our full-year 2022 guidance. With that, operator, let's open up the line for questions.

The first question today comes from John Hecht with Jefferies.

Congratulations on a great quarter, I appreciate the guidance and thanks for taking my questions. Just a better not a different growth opportunities here but one of them that's a little newer to us is the Lending-as-a-Service component of the business. And I'm wondering, what are the characteristics of your partners in that category and how are the revenue arrangements?

Yes, John, this is Raul. Thanks for the question. We're really pleased with the way that program is progressing. As you heard us announce, we've got 284 locations now, so about 10 times what we had at the end of last quarter. The revenue arrangement is really one that is accretive to the business and that we're very happy with. As we've disclosed before, we like the fact that we only compensate the partner when a loan actually takes place, and we don't have any of the costs related to trying to draw in the customer. We don't have any of the labor associated when you think about partners like DolEx and Barri, who were the two partners that have driven that growth to 284 in-person locations, and we're excited about Sezzle later this year that will have a similar structure where we compensate them for helping to bring the numbers to us. So we continue to be really pleased with how the program is progressing and we like the pipeline that we have in place.

Great. That's helpful. And then just thinking about you guys talked during the call about interest rates and modifying certain loans. I'm wondering, number one, which zones is across the board, we will be raising rates? Or is there some loans that you are less willing to? And then second, on the rates, are you seeing any behavioral change in the causation of loans or use of the loan proceeds, given the inflation outlook?

So I'll go ahead and take those. So from a pricing perspective, we took a look at where in the portfolio it made sense to go ahead and raise prices. And we always want to do it in a way that is going to have a very small impact on the payment made by our borrower. We've done this in the past at various moments in our history and we've always been trying to keep that payment at about the same rate that it is today. And we have found success in the past in terms of ensuring that we continue to get good outcomes and ensure that we don't get any kind of negative selection. So we're really happy with the pricing. And again, it was done in a very precise manner because one of the things we want to continue to do, John, is we want to continue to show a superior value proposition and we want to keep taking share. Because when we look at the 139% year-over-year growth in originations, we feel like we're really taking share. So we took that into account as well as keeping our pricing under 36% APR. So that's what we thought about the pricing piece. In terms of what's creating demand for our loans and if we see anything different, not really. What we've seen over our 16 years of lending is anytime that dollars get a little tight, it means that someone can need a little bit of credit when they've got a lot of work that needs medical attention and require that doesn’t start or a planned purchase. So we're still seeing the same kinds of use cases driving demand for our loans.

Okay. My last question before I return to the queue is about your loans. It seems you had significant loan sales at the end of the first quarter. You have been transparent about a portion of your originations for a while. Is there anything we should consider going forward regarding your willingness to sell and how much you might sell at any time?

Yes, John, great question. Given that we sold about 9% of the loan portfolio at the end of the quarter and we were selling whole loans up until the beginning of March through a flow arrangement which has now expired. We've actually sold a large portion of the loans we originally targeted for this year. So we're continuing to evaluate what's optimal between keeping loans on balance sheet and the option to sell them either directly to counterparties or through the securitization markets.

The next question comes from Sanjay Sakhrani with KBW.

I guess my first question is on the guidance. Obviously, revenue is coming in stronger than expected but the expenses are a little bit higher as well for the rest of the year as well as some of the impact, I assume, from mark-to-market but maybe Jonathan, can you walk us through the breakdown of each of those factors as we think about the rest of the year and then sort of what the variables might be on those specific lines, if things don't pan out as expected on revenues?

Sure. Look, first of all, we feel really good about our guidance and we've taken up originations and that is going to drive the increase in revenues that we forecast. As we increase our revenues, we would expect to have the opportunity to invest more in the business, both on the marketing side and on the technology side. So when we think about a comparable tour for the operating expenses, I think looking at our pre-pandemic timing is probably a good thing to take a look at. We'd expect each subsequent quarter. As demand increases, we're probably going to be spending more on sales and marketing. And similarly, we're making investments in the business and that will need to increase other operating expenses outside of sales and marketing. Is that helpful context?

Yes. As we consider the mark-to-market moving forward, could you provide some insight into whether it is expected to increase or decrease? Any information on this would be appreciated.

Sure, that's a great question. First of all, we provided guidance for the second quarter, which considers our perspective on mark-to-market. The first quarter, as I mentioned, benefited from a timing difference because interest rates increased significantly, pulling a substantial amount of net revenue into that quarter due to changes in fair value. However, when you look at the entire year, we are actually raising our guidance for adjusted net income and adjusted earnings per share. As for why we are guiding lower for Q2 and what is suggested for the rest of the year, part of that relates to the timing of mark-to-market as well as our expense timing.

Got it. And then go ahead, Raul.

Yes, I wanted to add two quick things. First, highlighting what Jonathan mentioned, we are clearly investing in the business. We have ongoing Digit expenses that we didn't have last year. As you know, we started the year with guidance for profit levels that were better than the previous year, and as Jonathan stated, we have raised our profit guidance. We are being thoughtful and disciplined with our expenses while focusing on long-term success for the business. The second point I want to add to Jonathan's response is that you have known us for some time, and in moments like now when interest rates fluctuate, there can be some noise in the adjusted net income. In the past, we have pointed to adjusted EBITDA since it is not affected by macro events like what we are experiencing currently. Adjusted EBITDA was $34 million compared to a negative $2 million in Q1 of last year. The growth we are focused on delivering is reflected in the P&L, even as we continue to invest in long-term success. I wanted to highlight the EBITDA numbers because I think they can be helpful at this time.

No, I appreciate that. And maybe a question for you, Raul. Obviously, intense growth for me on the part of investors on the low-end consumer, in your prepared remarks, you talked about how employment sort of the guiding light for you, I'm just curious because there's a lot of discussion about the Fed remember having an impact on employment, right? Like, of course, employment to get weaker. And I'm just curious what you're looking at to inform yourself of the direction you want to go in terms of handling the growth? I understand you have a green light right now. But maybe you can just talk about some of the metrics you're looking at. And just one question for Jonathan on the delinquency rate, right and I just wondered from mechanically thinking about this correct. If we think about the delinquency year-over-year, excluding the noise related to the loan sale, it's still higher year-over-year, as you're expecting the charge-off rate to be kind of stable on a go-forward basis. And maybe you can just help us think through that dynamic as well. I mean should we expect a rise in the charge-off rate or is there some offsetting dynamics?

Sure. So I'll start. I think one of the benefits of Oportun for investors is not a company that's probably 2 years ago or even 3 years ago. We've been around for 16 years. So to your point, Sanjay, we mentioned this in our comments, a robust employment environment is the leading driver of both origination levels and the health of our loan portfolio. So the things that we look at, we certainly look at the unemployment rate, we look at wages and in particular, if wages are moving even if there was a softening in the market over the next few months as a result of that action, the market is so strong right now that relative softening would still look like a good market relative to the history and the model that we have. So we feel that our models are well after 16 years of lending and we can make adjustments if the macroeconomic picture changes. But if we look at the results, even that have been shared lately, the unemployment rate is still incredibly low. Our particular customer continues to see year-over-year increases in wages and we still know that there are companies paying bonuses to employees either to stay or to start a new job. So today, we continue to be very, very confident both in terms of the quality of our loan portfolio and in terms of our ability to keep driving origination. Jonathan, do you want to take the next part?

Sure. Regarding the delinquency trend, we expect it to align with our net charge-off guidance. For Q2, we projected 8.6%, plus or minus 10 basis points, which is consistent with what we achieved in the first quarter. For the full year, we have reaffirmed our guidance of 8.8%, plus or minus 15 basis points. One reason delinquencies have been slightly higher than last year, even after the adjustment you mentioned, is that many of our borrowers received their tax refunds later than usual and those refunds were smaller due to the earned income tax credit. However, we remain optimistic about our credit outlook, and our guidance on losses reflects that confidence.

Okay.

And just a tiny bit more color because we're trying to be very intentional in giving you and our investors a sense of the business and why we're so excited about it right now. One new statistic that we started to disclose is the percent of loans that are going to new borrowers. I just mentioned in our comments that new borrowers are 51% of loans, if you look at this quarter last year, it was 40%. So you know that new borrowers tend to have higher delinquencies, they've got slightly on losses. And when you think about where we compare this 4.1% here, I would go all the way back to 2019 and the rate then was 3.6% but with a much, much lower percentage of new borrowers. So the guidance that we provide and how we think about the business at the beginning of the year, we want to get from kind of where we end 2021 to where we think we'll end 2022 and if you look at our results relative to our guidance, we're exactly where we wanted to be at this point and we're really excited about the number of new borrowers we have because they turn into more valuable repeat borrowers. But in the short term, it is going to create slightly higher delinquency and slightly higher losses, while losses continue to be in that 7% to 9% range that we've always targeted to optimize our growth and profitability.

Thank you.

The next question comes from David Scharf with JMP Securities.

I think Jonathan asked about everything on my mind, but I would like to get some clarification to ensure I have a clear understanding of the collection cadence for the rest of the year. It seems that in Q1 and Q2, there were some timing issues affecting the fair value mark. However, when looking at the last nine months as a whole, it appears that the guidance for this period is coming in half from a couple of months ago. Comparing the prior full year guidance, I'm examining the Q1 guidance against the updated full year guidance and the Q1 actual results, and it looks like we're finishing the year at approximately a $0.40 per quarter earnings run rate. I would like to know if there is a certain level of operating expenses that you would classify as above trend or if it's just front-end loading due to the volume push. Essentially, I am trying to understand what has led to this change beyond the fair value timing issues in Q1 and Q2 for the remaining three quarters of the year.

David, the change is primarily due to timing differences. First, I want to remind you that we've raised our full-year guidance for the bottom line. We still anticipate generating more adjusted net income and adjusted EPS than we projected a quarter ago. Regarding top line growth, we've also revised those expectations upwards for both originations and revenue, which are performing well. Typically, we expect sales and marketing expenses to increase in subsequent quarters to meet demand, but there will be some rises in operating expenses as we invest in the business. Ultimately, it’s just a matter of timing in the market; we've essentially earned a significant portion of this year's revenue earlier than expected. I hope that provides some useful clarity.

It seems like there's been a significant pull forward. I might not have covered all the details regarding the highlights on the fair value mark, but could you clarify how much of the additional pull forward is related to the mark on the debt and the ABS instruments? I also wonder if this might lead to a broader discussion about investor education, particularly since Oportun is the only company we follow that uses fair value accounting to mark both debt and assets. Is there any consideration to possibly aligning with a practice of marking assets quarterly, and how would Q1 earnings appear if that were the case?

Sure. Well, I think as we stated before, we believe the way we manage our accounting is the best fit for our business. So we're not planning any changes. I think the slide you're referring to is Slide 30 in the earnings deck. What that shows is we break out the mark-to-market on the notes versus the mark-to-market on the notes, and $58 million of the mark-to-market that was beneficial was on the note. And that's because interest rates went up. That took the prices down. Now, obviously, what interest rates do in the future will have an influence. But assuming the Fed keeps doing what the forward curve is saying, then we would anticipate that the prices of our bonds will head back up to par because eventually the nature of that will pull back some of that $58 million. So when we talk about the timing difference, that's why I refer to it as a timing difference.

The next question comes from Rick Shane with J.P. Morgan.

Thanks, everybody, for taking questions this afternoon. First of all, I just want to make sure I understand the owned principal balance tab in the Excel file. Nominally, it looks like the principal payments went up significantly in the first quarter. But I'm assuming that that is a function of selling loans in bulk versus selling them on a low basis because you held them on balance sheet, that's the differential there.

That's correct, Rick. The $228 million loan sale basically closed close to the last day of the quarter.

Okay. So actual repayment activity, the payment rate on the portfolio was generally speaking, consistent with what you would expect in the first quarter, except for the comment you made earlier that perhaps a little bit of drag due to delay in tax refunds?

That's correct.

Okay, great. I know there have been many questions on this, but I want to revisit the topic. Both Sanjay and David have discussed it. We should consider operating expenses for Q1 as a new baseline, and anticipate growth from there at a more modest pace. That's a fitting way to describe it, and I'll go with that. As for the last question, Raul, you mentioned pricing actions. I'm curious about your historical focus on staying below the 36% APR number. How much flexibility do you feel you have in a rising rate environment? Can you adjust pricing to reflect the changes in the bond market, or do you need to tighten credit at slightly higher rates to maintain your risk-adjusted margin?

Well, we're definitely still committed to the 36%. But we do know that there are still opportunities to take some more actions if we need to. We're not going to try to capture all of the increase, say, in our cost of debt because we need to do so would be shortsighted and wouldn't let us go ahead and take the kind of market share that's available. If you look at our Q2 guidance for the quarter relative to last year in origination, we're guiding to 93% growth in originations, guiding a 56% growth in total revenue for the quarter. And we think that to continue to stay sharp in pricing can give us an opportunity to keep gathering members that we can create kind of long-term relationships with and be able to grow their value. So we will take more actions if necessary but we're not going to try to capture the full increase that we see in the market right now. We think that would be short-sighted for our business.

Got it. Okay. That's it for me, guys. Thank you so much.

The next question comes from Hal Goetsch with Loop Capital.

Great quarter, everyone. I have a few questions for you. Could you discuss the new area you've entered this quarter and the states you still plan to enter using your licenses with MetaBank? Also, is it fair to say that you are just beginning to leverage cross-selling opportunities with the Digit acquisition?

Sure. Regarding the new space, we haven't shared the specific status of a few states. Our primary focus is on expanding in the 27 states we entered through the MetaBank partnership. We've learned more about the increase in our addressable market, noting that there are 22 million potential new members in these 27 states. We also highlighted five states where we are particularly pleased with the results, which reflect the overall success of our collaboration with MetaBank. On the second part of your question about cross-selling, we provided an update on the percentage of credit card lenders who also offer unsecured personal loans. That figure has risen from 7% at the start of the year to 12% now. We are dedicated to learning more and enhancing cross-selling between our credit members and digital banking members. I agree that we are just beginning this process, but it presents a promising opportunity to increase both the value and revenue of our business. I am really happy with our progress so far.

This concludes our question-and-answer session. I would like to turn the conference back over to Raul Vazquez, CEO, for any closing remarks.

I simply 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 very much.