Open Lending Corp Q2 FY2024 earnings call

• Second quarter results were near or above guidance range for certified loans, revenue, and adjusted EBITDA, though impacted by a $6.7 million profit share change in estimate due to elevated delinquencies/defaults in 2021 - 2022 vintages. - Recent vintages show improved performance with tightened underwriting standards, including decreased 60 - plus day delinquency rates. - Market conditions: Automotive industry has improving inventory levels but new retail sales down; credit union customers face elevated loan - to - share ratios, low share/deposit growth, and low loan growth. - Product and technology: Working on solutions to improve lender and borrower experience, leveraging enhanced scorecard for targeted actions. - Added Securian Financial Group as insurance partner. - Taking measured approach to control costs, focusing on incremental costs driving near - term revenue growth.

In the second quarter of 2024, Open Lending certified nearly 29,000 loans, representing approximately 3% sequential growth compared to Q1 2024. Total revenue was $26.7 million, with program fee revenues at $14.8 million, profit share revenues (net of a $6.7 million negative change in estimate) at $9.3 million, and claims administration fees and other revenue at $2.6 million. Adjusted EBITDA was $9.9 million. Operating expenses were $17 million, operating income was $4 million, net income was $2.9 million, and basic and diluted net income per share was $0.02.

Third quarter 2024 guidance: Total certified loans to be between $25,000 and $28,000, total revenue between $28 million and $31 million, and adjusted EBITDA between $11 million and $14 million. Considered factors like elevated interest rates, macroeconomic conditions, auto inventory and sales volumes, credit union lending capacity, and seasonality.

• Elevated delinquencies and defaults in 2021 - 2022 vintages as an industry - wide headwind. - Continued challenging macroeconomic conditions including elevated interest rates, uncertain job growth, and low credit union lending capacity. - Potential impact of interest rate fluctuations on consumer affordability and lending volume.

Q: About CDK impact, could you quantify and if it self - corrected into July?

A: CDK outage impacted new auto vehicle sales more, had limited impact on used, and didn't affect Q2 volume and not expected to go forward on new much.

Q: Have you factored in a Fed rate cut in September in the guide and impact on refi?

A: Guidance has continued elevated rates, hopeful Fed cuts in September, and rate cuts could help refi channel.

Q: On profit share, any make whole period with financial partners?

A: No write checks for negative profit share, recapture comes back to carriers.

Q: On profit share adjustment, what's baked in and what causes downward adjustments?

A: Profit share has components like loss severity, default frequency, prepay speed. $6.7 million adjustment in Q2 was for '21 - '22 vintages, working through them as claim period is 18 - 24 months.

Q: Differentiate OEM certification volume vs bank and credit union volume in outlook?

A: Similar mix to Q2 between credit unions and OEMs.