OppFi (OPFI) risk factors, FY2025 10-K

Other

1. 01Summary of Risk Factors Related to Our Business30% rewritten

Risks Related to Our Business and Industry

1. 02We are a growing company with a relatively limited history operating at our current scale, which may result in increased risks, uncertainties, expenses and difficulties, and makes it difficult to evaluate our future prospects
2. 03Our revenue growth rate may fluctuate or decline, and our financial performance in recent periods may not be indicative of future performance89% rewritten
3. 04We may be unable to maintain or increase our profitability, operating leverage, or unit economics, even if revenues remain stableNew
4. 05We may experience fluctuations in our quarterly operating results
5. 06If we are unable to continue to improve our machine learning models or if our machine learning models contain errors or are otherwise ineffective, our growth prospects, business, financial condition and results of operations would be adversely affected
6. 07platform and harm our ability to maintain diverse and robust sources of capital and could adversely affect our business, financial condition and results of operationsNew
7. 08Our business is highly dependent on our existing bank partners, and any disruption to these or new bank partner relationships could adversely affect our business, financial condition and results of operationsNew
8. 09The sales and onboarding process of new bank partners could take longer than expected, leading to fluctuations or variability in expected revenues and results of operations
9. 10Our business has been, and may continue to be, adversely affected by economic conditions and other factors that we cannot control80% rewritten
10. 11Many consumers who access our platform have limited or no credit history. Accordingly, such borrowers have historically been, and may in the future become, disproportionately affected by adverse macroeconomic conditions, such as the aforementioned events that have occurred or may occur again in the future24% rewritten
11. 12Decreased demand for loans, including as a result of increased savings or income, could result in a loss of revenues or decline in profitability if we are unable to successfully adapt to such changes
12. 13Our models have not yet been extensively tested during a full and prolonged down-cycle economic environment. If our models do not accurately reflect a borrower’s credit risk in such conditions, the performance of loans facilitated on our platform may be worse than anticipated74% rewritten
13. 14Substantially all of our revenue is derived from a single loan product, and we are thus particularly susceptible to fluctuations in the unsecured personal loan market. We also do not currently offer a broad suite of products that bank partners and consumers may find desirable
14. 15We have developed and may develop in the future new loan products and services offerings, and if we are unable to manage the related risks, our growth prospects, business, financial condition and results of operations could be adversely affected71% rewritten
15. 16effectively manage the foregoing risks, our growth prospects, business, financial condition and results of operations could be adversely affectedNew
16. 17If we do not compete effectively in our target markets, our business, results of operations and financial condition could be harmed
17. 18If we are unable to manage the risks associated with fraudulent activity, our brand and reputation, business, financial condition and results of operations could be adversely affected
18. 19We depend on our key personnel and other highly skilled personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected
19. 20Cybersecurity attacks or technology failures could disrupt business operations, result in breaches of borrowers’ confidential information that we store and expose us to significant liabilities, reputational damage, loss of customers and regulatory action
20. 21We have entered into, and may in the future enter into, joint venture or other minority investments that could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners, and other uncertainties outside of our control38% rewritten
21. 22We face increased competition within our industry and risks concerning innovation and emerging technologies, including artificial intelligence and increasing customer demand for machine learning technologies88% rewritten
22. 23If we are unable to manage the risks related to our loan servicing and collections obligations, our business, financial condition and results of operations could be adversely affected
23. 24The soundness of other financial institutions or the financial services industry generally, such as actual concerns or events involving liquidity, defaults or non-performance, may adversely affect us25% rewritten
24. 25Borrowers may prepay a loan at any time without penalty, which could reduce our servicing fees and deter our bank partners and investors from investing in loans facilitated by our platform
25. 26Our marketing efforts and brand promotion activities may not be effective, which could adversely affect our ability to grow our business50% rewritten
26. 27services and products, which could prevent us from appearing in a favorable location or any location in the organic rankings or paid search results when certain search terms are used by the consumerNew
27. 28We may face disruptions with the development and implementation of our new loan management software system which could adversely affect our business operations and financial performance
28. 29Unfavorable outcomes in legal proceedings may harm our business and results of operations
29. 30We may evaluate and consummate acquisitions, or strategic investments, including minority investments, which could require significant management attention, consume our financial resources, disrupt our business and adversely affect our financial results24% rewritten
30. 31Our business is subject to the risks of natural disasters and other catastrophic events, and to interruption by man-made problems, any of which could have an adverse effect on our business, results of operations and financial condition

Risks Related to Our Financial Reporting and Risk Management

1. 32If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected
2. 33The determination of the fair values of our finance receivables portfolio involves unobservable inputs that can be highly subjective and may prove to be materially different than the actual economic outcome
3. 34We have, in the past, and may, in the future, conclude that our internal control over financial reporting is not effective due to the presence of significant deficiencies and material weakness
4. 35We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting
5. 36If our risk management framework does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, which could have a material adverse effect on our business
6. 37Our projections are subject to significant risks, assumptions, estimates and uncertainties. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations

Risks Related to Our Intellectual Property and Platform Development

1. 38It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection
2. 39Any significant disruption in our platform could prevent us from processing loan applicants and servicing loans, reduce the effectiveness of our machine learning models and result in a loss of bank partners or borrowers
3. 40Our platform and internal systems rely on software that is highly technical, and if our software contains undetected errors, our business could be adversely affected
4. 41Some 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
5. 42Some open source licenses contain requirements that we make source code available at no cost for modifications or derivative works we create based upon the type of open source software we use59% rewritten
6. 43could negatively affect our business operations and potentially our intellectual property rights. If we were required to publicly disclose any portion of our proprietary models, it is possible we could lose the benefit of trade secret protection for our modelsNew

Risks Related to Our Dependence on Third Parties

1. 44We rely on strategic relationships with loan aggregators to attract applicants to our platform, and if we cannot maintain effective relationships with loan aggregators or successfully replace their services, or if loan aggregators begin offering competing products, our business could be adversely affected
2. 45Our proprietary machine learning models rely in part on the use of loan applicant and borrower data and other third-party data, and if we lose the ability to use such data, or if such data contain inaccuracies, our business could be adversely affected
3. 46We rely on third-party vendors and if such third parties do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected42% rewritten
4. 47standards or safety concerns, could adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation exposureNew
5. 48Failure by our third-party vendors or our failure to comply with legal or regulatory requirements or other contractual requirements could have an adverse effect on our business
6. 49If the DFPI is successful on appeal or otherwise prevails in future proceedings in asserting that we are subject to the CFL, our bank partners’ ability to originate loans in California could suffer, which could have a material adverse effect on our business, results of operations and financial condition41% rewritten
7. 50Regulators and payment processors are scrutinizing certain online lenders’ access to the ACH system to disburse and collect loan proceeds and repayments, and any interruption or limitation on our ability to access this critical system would materially adversely affect our business35% rewritten
8. 51Our offshore service providers involve inherent risks which could result in harm to our business

Risks Related to Our Regulatory Environment

1. 52Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses
2. 53We contest our liability and the amount of damages, as appropriate, in each pending matter. The outcome of pending and future matters could be material to our results of operations, financial condition and cash flows, and could materially adversely affect our business
3. 54We are subject to or facilitate compliance with a variety of federal, state, and local laws, including those related to consumer protection, privacy and loan financings, and if we fail to comply with such laws, our business could be adversely affected
4. 55Internet-based loan origination processes may give rise to greater risks than paper-based processes and may not always be allowed under state law
5. 56If we are found to be operating without having obtained necessary state or local licenses, our business, financial condition and results of operations could be adversely affected
6. 57The CFPB 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
7. 58Uncertainty regarding the authority, priorities and operations of the CFPB, as well as shifting federal and state enforcement priorities, could adversely affect our businessNew
8. 59We are actively monitoring developments related to the CFPB, state attorneys general, and other federal and state regulators. However, continued regulatory uncertainty could materially affect our business operations and financial performance
9. 60The 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
10. 61As the regulatory framework for machine learning technology evolves, our business, financial condition and results of operations may be adversely affected
11. 62If we are required to register under the Investment Company Act, our ability to conduct business could be materially adversely affected
12. 63Anti-money laundering, anti-terrorism financing, anti-corruption and economic sanctions laws could have adverse consequences for us

Risks Related to Loan Funding and Indebtedness

1. 64Our warehouse facilities expose us to certain risks, and we may not be able to access the whole loan sales markets, or secured warehouse credit facilities, in the future, which may require us to seek more costly financing21% rewritten
2. 65If we are unable to maintain diverse and robust sources of capital, our growth prospects, business, financial condition and results of operations could be adversely affected
3. 66In connection with our credit facilities, we make representations and warranties concerning the loans or participation rights sold, and if such representations and warranties are not accurate when made, we could be required to repurchase such loans or participation rights
4. 67We rely on borrowings under our warehouse credit facilities to fund certain aspects of our operations, and any inability to meet our obligations as they come due or to comply with various covenants could harm our business72% rewritten
5. 68Changes in interest rates could adversely affect our performance21% rewritten
6. 69We 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

Risks Related to Ownership of our Securities

1. 70Having a minority share position may reduce the influence of stockholders on the management of the Company
2. 71We may not be able to comply with the continued listing standards of the NYSE
3. 72Future resales of Class A Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well37% rewritten
4. 73Our only significant asset is our ownership interest in OppFi-LLC and the ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Class A Common Stock or satisfy our other financial obligations
5. 74We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could negatively affect our financial condition, results of operations and our stock price
6. 75Our Certificate of Incorporation (“Charter”) includes a forum selection clause, which could discourage claims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders
7. 76Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations
8. 77A market for our securities may not continue, which would adversely affect the liquidity and price of our securities
9. 78Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price
10. 79If securities or industry analysts do not publish or cease publishing research or reports about us our business, or our market, or if they change their recommendations regarding our Class A Common Stock adversely, then the price and trading volume of our securities could decline
11. 80We may be unable to obtain additional financing to fund our operations and growth
12. 81Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business
13. 82We are a “controlled company” within the meaning of NYSE rules and, as a result, are exempt from certain corporate governance requirements
14. 83The SCG Holders and their affiliates will have significant influence or control and their interests may conflict with those of other stockholders40% rewritten
15. 84Warrants are exercisable for our Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
16. 85We may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to the holders of outstanding Public Warrants, thereby making the Public Warrants worthless
17. 86There is no guarantee that the Warrants will be in the money, and they may expire worthless
18. 87Anti-takeover provisions contained in the Charter and Amended and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt
19. 88We are no longer a “smaller reporting company” within the meaning of Regulation S-K which subjects us to expanded public reporting requirements that may increase our costsNew
20. 89Our only principal asset is our interest in OppFi-LLC, and accordingly we depend on distributions from OppFi-LLC to pay distributions, taxes, other expenses, and make any payments required to be made by us under the Tax Receivable Agreement
21. 90Increases in our income tax rates, changes in income tax laws or disagreements with tax authorities can adversely affect our business, financial condition or results of operations
22. 91Tax Risks Related to Our Tax Structure and Taxes
23. 92In certain cases, payments under the Tax Receivable Agreement may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement25% rewritten
24. 93We may not be able to realize all or a portion of the tax benefits that are expected to result from the acquisition of Retained OppFi-LLC Units from OppFi-LLC Members54% rewritten
25. 94is required on an ongoing basis to evaluate applicable tax obligations and as a result amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain and could exceed the amount of applicable reserve, if anyNew
26. 95Changes in U.S. tax laws could have a material adverse effect on our business, financial condition and results of operations77% rewritten