Part I [Business](index=6&type=section&id=Item%201.%20Business) Open Lending provides a lending enablement and risk analytics platform (LPP) to automotive lenders, facilitating near-prime and non-prime loans with risk-based pricing and default insurance - The company's core product, the Lenders Protection Platform (LPP), enables automotive lenders to serve near-prime and non-prime borrowers through risk-based pricing and default insurance underwriting[18](index=18&type=chunk)[19](index=19&type=chunk)[21](index=21&type=chunk) - Revenue is derived from program fees (averaging **$527 per loan** in 2023), claims administration fees (3% of earned premium), and a **72% share** of insurance underwriting profit from carrier partners[25](index=25&type=chunk)[26](index=26&type=chunk) - The company partners with insurance carriers for auto loan default insurance, with a new agreement signed with Core Specialty on February 15, 2024, following the expiration of the CNA agreement[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The company operates in a heavily regulated industry, subject to numerous federal and state consumer protection laws including the Truth-in-Lending Act, FCRA, GLBA, and the Dodd-Frank Act[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - As of December 31, 2023, the company had **210 employees**, primarily located in Austin, Texas[61](index=61&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across business operations, regulatory compliance, and stock ownership, including lender dependence, revenue concentration, economic sensitivity, and regulatory complexities [Risks Related to Our Business](index=12&type=section&id=Risks%20Related%20to%20Our%20Business) Key business risks include revenue concentration with top lenders and insurance carriers, sensitivity to macroeconomic conditions, and operational vulnerabilities like security breaches and model errors - A significant percentage of program fee revenue is concentrated with the **top ten automotive lenders**, posing a risk if one or more are lost[81](index=81&type=chunk) - The company relies on a small number of insurance carriers, and the loss of key partners without replacement could materially harm the business, as seen with the CNA agreement expiration[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Rising market interest rates have adversely impacted consumer borrowing, potentially leading to lower loan volume and higher delinquencies and defaults[87](index=87&type=chunk)[88](index=88&type=chunk) - The business is heavily concentrated in the U.S. automobile consumer lending industry, making it susceptible to market fluctuations[118](index=118&type=chunk) [Risks Related to Our Regulatory Environment](index=24&type=section&id=Risks%20Related%20to%20Our%20Regulatory%20Environment) Operating in a highly regulated industry, the company faces risks from complex and evolving federal and state consumer protection, lending, and insurance laws, including potential licensing violations and UDAAP enforcement - The business is subject to extensive and changing federal, state, and local laws, with non-compliance potentially leading to lawsuits, governmental actions, and reputational damage[139](index=139&type=chunk) - Operating without necessary state or local licenses for consumer finance or insurance activities could result in fines, penalties, and unenforceability of facilitated loans[150](index=150&type=chunk) - The Dodd-Frank Act's UDAAP prohibition poses a risk, as the CFPB could deem certain loan features facilitated by the company as unfair, deceptive, or abusive[153](index=153&type=chunk) [Risks Related to Ownership of Our Common Stock](index=28&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Stockholders face risks including stock price volatility, lack of dividends, concentrated ownership by insiders, and anti-takeover provisions that could deter a change in control - The market price of the company's common stock has been and may continue to be volatile[160](index=160&type=chunk) - The company has no current plans to pay cash dividends, limited by covenants in existing debt agreements[168](index=168&type=chunk) - Executive officers, directors, and principal stockholders control a significant portion of voting stock, enabling material influence over corporate and management policies[167](index=167&type=chunk) - Certain provisions in the certificate of incorporation and bylaws, including a classified board, could hinder or prevent a change in control[171](index=171&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - No unresolved staff comments exist[175](index=175&type=chunk) [Cybersecurity](index=31&type=section&id=Item%201C.%20Cybersecurity) Cybersecurity risk is managed through an ERM process, including automated testing and NIST alignment, with oversight from the Audit Committee, and no material threats identified to date - Cybersecurity risk is managed via an enterprise risk management (ERM) process, utilizing automated scanning, annual NIST evaluations, and bi-annual third-party penetration testing for SOC II compliance[176](index=176&type=chunk)[177](index=177&type=chunk) - The Audit Committee of the Board of Directors provides oversight for cybersecurity risks, receiving regular reports from the CIO and CTO[183](index=183&type=chunk)[184](index=184&type=chunk) - To date, the company is unaware of any cybersecurity threats that have materially affected its business, strategy, or financial condition[182](index=182&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters located in Austin, Texas - The company leases its office space at 1501 South MoPac Expressway, Suite 450, Austin, TX 78746[185](index=185&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) As of the filing date, the company is not a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[186](index=186&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This disclosure item is not applicable[187](index=187&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Open Lending's common stock trades on Nasdaq (LPRO), with no current dividend plans, and a **$75.0 million** share repurchase program with **$19.6 million** remaining - The company's common stock is traded on the Nasdaq under the symbol **LPRO**[189](index=189&type=chunk) - There are no current plans to pay cash dividends, limited by covenants in existing debt agreements[190](index=190&type=chunk) - A share repurchase program for up to **$75.0 million** is authorized through March 31, 2024, with **$19.6 million** available as of December 31, 2023[193](index=193&type=chunk)[194](index=194&type=chunk) Issuer Purchases of Equity Securities | Period | Total number of shares purchased | Average price paid per share (USD) | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions USD) | | :--- | :--- | :--- | :--- | :--- | | 10/1/2023-10/31/2023 | 127,347 | $6.84 | — | $25.6 | | 11/1/2023-11/30/2023 | 527,787 | $6.08 | 519,663 | $22.5 | | 12/1/2023-12/31/2023 | 423,238 | $6.83 | 416,475 | $19.6 | | **Total** | **1,078,372** | | **936,138** | | [Reserved](index=36&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, financial performance declined significantly with **35%** lower revenue and **70%** lower operating income, driven by reduced loan volume and profit share adjustments, while liquidity remained solid with cash from operations of **$82.7 million** [Executive Overview](index=38&type=section&id=Executive%20Overview) The company's financial performance declined in 2023, with certified loans, total revenue, net income, and Adjusted EBITDA all significantly decreasing compared to 2022 Key Financial and Operational Metrics | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Certified Loans | 122,984 | 165,211 | | Value of Insured Loans ($B) | $3.61 | $4.76 | | Total Revenue ($M) | $117.5 | $179.6 | | Operating Income ($M) | $29.1 | $97.6 | | Net Income ($M) | $22.1 | $66.6 | | Adjusted EBITDA ($M) | $50.2 | $105.7 | - The number of active lenders certifying loans increased slightly from **438** at year-end 2022 to **454** at year-end 2023[208](index=208&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Total revenue decreased **35%** to **$117.5 million** in 2023, driven by lower program fees and a **52%** decline in profit share revenue, leading to a **70%** drop in operating income Consolidated Statements of Operations Highlights | Line Item | 2023 (in thousands USD) | 2022 (in thousands USD) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $117,460 | $179,594 | (35)% | | Gross Profit | $95,178 | $159,626 | (40)% | | Total Operating Expenses | $66,103 | $62,011 | 7% | | Operating Income | $29,075 | $97,615 | (70)% | | Net Income | $22,070 | $66,620 | (67)% | - The **52%** decrease in profit share revenue resulted from lower new loan originations and a **$22.8 million** negative adjustment for historic vintages due to higher loan default and prepayment rates[238](index=238&type=chunk)[239](index=239&type=chunk) - General and administrative expenses increased by **20%** (**$7.1 million**), primarily due to higher corporate employee compensation and benefit costs[244](index=244&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Principal liquidity sources are cash from operations and a revolving credit facility; 2023 saw **$82.7 million** in operating cash flow and **$42.3 million** used in financing, primarily for share repurchases Cash Flow Summary | Cash Flow Activity (Year Ended Dec 31) | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,658 | $107,431 | | Net cash used in investing activities | $(2,178) | $(624) | | Net cash used in financing activities | $(42,330) | $(17,797) | - Net cash used in financing activities totaled **$42.3 million** in 2023, primarily for the repurchase of **5,233,065 shares** of common stock for **$37.3 million**[257](index=257&type=chunk) - As of December 31, 2023, **$145.3 million** was outstanding under the Term Loan due 2027, with no borrowings on the Revolving Credit Facility[259](index=259&type=chunk) [Non-GAAP Financial Measures](index=46&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, decreased **53%** to **$50.2 million** in 2023, with the margin declining from **59%** to **43%**, reflecting lower operating income Reconciliation of Net Income to Adjusted EBITDA | Reconciliation to Adjusted EBITDA (Year Ended Dec 31) | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | **Net income** | **$22,070** | **$66,620** | | Interest expense | 10,661 | 5,832 | | Income tax expense | 6,788 | 26,920 | | Depreciation and amortization | 1,159 | 915 | | Share-based compensation | 9,492 | 5,449 | | **Adjusted EBITDA** | **$50,170** | **$105,736** | | **Adjusted EBITDA margin** | **43%** | **59%** | [Critical Accounting Policies and Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Profit share revenue recognition is a critical accounting estimate, relying on a forecast model to project loan performance based on prepayment, default, and loss severity assumptions, which can materially impact reported revenue - Profit share revenue recognition is a primary critical accounting estimate, relying on a forecast model to project loan-level earned premiums and claim payments based on assumptions for prepayment, default, and loss severity[267](index=267&type=chunk) Sensitivity Analysis on Profit Share Revenue (as of December 31, 2023) | Assumption | 10% Increase Impact | (10)% Decrease Impact | | :--- | :--- | :--- | | Prepayment rate | (3)% | 3% | | Loan default rate | (7)% | 8% | | Default severity of loss | (7)% | 7% | [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks including general economic conditions, concentration risk with its largest insurance partner, and interest rate risk from its variable-rate term loan and investments - The company faces concentration risk, relying on its largest insurance partner for a significant portion of its profit share and claims administration revenue[280](index=280&type=chunk) - The company is exposed to interest rate risk as its **$145.3 million** Term Loan due 2027 has a variable interest rate based on SOFR[281](index=281&type=chunk)[282](index=282&type=chunk) [Financial Statements and Supplementary Data](index=50&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the consolidated financial statements and supplementary data included later in the report, starting on page F-1 - This item refers to the consolidated financial statements and supplementary data included later in the report[284](index=284&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=50&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure are reported[285](index=285&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes identified during the period - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period[286](index=286&type=chunk) - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of December 31, 2023[288](index=288&type=chunk) - No material changes in internal control over financial reporting were identified during the period[290](index=290&type=chunk) [Other Information](index=51&type=section&id=Item%209B.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of 2023 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended December 31, 2023[291](index=291&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=51&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - This disclosure item is not applicable[292](index=292&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=52&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[294](index=294&type=chunk) [Executive Compensation](index=52&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[295](index=295&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=52&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[296](index=296&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=52&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[297](index=297&type=chunk) [Principal Accountant Fees and Services](index=52&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[298](index=298&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=53&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This item lists the documents filed as part of the report, including financial statements, schedules, and various exhibits[300](index=300&type=chunk)[301](index=301&type=chunk) [Form 10-K Summary](index=56&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for its Form 10-K - No Form 10-K summary is provided[303](index=303&type=chunk)

Open Lending Corporation (NASDAQ:LPRO) Q4 2023 Earnings Conference Call February 27, 2024 5:00 PM ET Company Participants Keith Jezek - CEO Chuck Jehl - CFO Conference Call Participants Peter Heckmann - D.A. Davidson David Scharf - JMP Securities Kyle Peterson - Needham & Company John Hecht - Jefferies Operator Good afternoon, and welcome to Open Lending's Fourth Quarter and Full Year 2023 Earnings Conference Call. As a reminder, today's conference call is being recorded. On the call today are Keith Jezek, ...

Financial Performance - Revenue for FY 2023 was $11746 million, compared to $179594 million in 2022[39] - Gross profit for FY 2023 was $95178 million, compared to $159626 million in 2022[39] - Net income (loss) was $(4842) million in Q4 2023 and $(4189) million in Q4 2022, while for FY 2023 it was $22070 million and $66620 million in 2022[38, 39] - Adjusted EBITDA for FY 2023 was $5017 million, compared to $105736 million in 2022[38, 45] - Adjusted EBITDA margin was (14)% in Q4 2023, 32% in Q4 2022, 43% for FY 2023 and 59% for FY 2022[38] Key Performance Indicators - Total Certs were 26263 in Q4 2023 and 34550 in Q4 2022, while for FY 2023 it was 122984 and 165211 in 2022[12, 32, 45] - Facilitated Loan Origination Volume was $764149 thousand in Q4 2023 and $1036327 thousand in Q4 2022, while for FY 2023 it was $3614303 thousand and $4758597 thousand in 2022[12] - New Vehicle Certs as a % of Total were 139% in Q4 2023 and 153% in Q4 2022, while for FY 2023 it was 134% and 103% in 2022[12] - Used Vehicle Certs as a % of Total were 861% in Q4 2023 and 847% in Q4 2022, while for FY 2023 it was 866% and 897% in 2022[12] Shares Information - Total Shares Outstanding as of February 27, 2024, were 118877 thousand[59] - Total Shares Issued were 128198 thousand[59]

[Financial Results Overview](index=1&type=section&id=Open%20Lending%20Reports%20Fourth%20Quarter%20and%20Full%20Year%202023%20Financial%20Results) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Keith Jezek highlighted exceeding Q4 guidance and outlined 2024 priorities to optimize the core business and expand into the bank segment - Exceeded the high-end of guidance for certified loans and revenues in Q4, excluding a negative change in estimate for profit share[2](index=2&type=chunk) - Priorities for 2024 include optimizing the core business and expanding into the bank segment to capture pent-up demand from an anticipated industry recovery[2](index=2&type=chunk) [Fourth Quarter 2023 Highlights](index=1&type=section&id=Three%20Months%20Ended%20December%2031%2C%202023%20Highlights) Q4 2023 saw significant declines in certified loans and total revenue to **$14.9 million**, resulting in a net loss of **$4.8 million** and negative Adjusted EBITDA of **$(2.1) million**, largely due to profit share adjustments Q4 2023 vs Q4 2022 Financial Performance | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Certified Loans | 26,263 | 34,550 | -24.0% | | Total Revenue | $14.9 million | $26.8 million | -44.3% | | Gross Profit | $9.6 million | $21.9 million | -56.1% | | Net Loss | $(4.8) million | $(4.2) million | Increased Loss | | Adjusted EBITDA | $(2.1) million | $8.5 million | Negative Swing | - Q4 2023 results were negatively impacted by a **$14.3 million** reduction in estimated future profit share revenues from historic vintages, compared to a **$12.8 million** reduction in Q4 2022[5](index=5&type=chunk) [Full Year 2023 Highlights](index=1&type=section&id=Twelve%20Months%20Ended%20December%2031%2C%202023%20Highlights) Full year 2023 results showed a decline across all key financial indicators, with total revenue at **$117.5 million** and significant reductions in net income and Adjusted EBITDA, impacted by profit share adjustments Full Year 2023 vs Full Year 2022 Financial Performance | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Certified Loans | 122,984 | 165,211 | -25.6% | | Total Revenue | $117.5 million | $179.6 million | -34.6% | | Gross Profit | $95.2 million | $159.6 million | -40.4% | | Net Income | $22.1 million | $66.6 million | -66.8% | | Adjusted EBITDA | $50.2 million | $105.7 million | -52.5% | - Full year 2023 results were negatively impacted by a **$22.8 million** reduction in estimated future profit share revenues from historic vintages, compared to a **$5.7 million** reduction in 2022[5](index=5&type=chunk) [First Quarter 2024 Outlook](index=2&type=section&id=First%20Quarter%202024%20Outlook) The company projects Q1 2024 total certified loans between **24,000 and 28,000**, total revenue between **$26 million and $30 million**, and Adjusted EBITDA between **$10 million and $14 million** Q1 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Total Certified Loans | 24,000 - 28,000 | | Total Revenue | $26 - $30 million | | Adjusted EBITDA | $10 - $14 million | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=4&type=section&id=OPEN%20LENDING%20CORPORATION%20Consolidated%20Balance%20Sheets) As of December 31, 2023, total assets slightly decreased to **$374.0 million**, with cash increasing to **$240.2 million** and contract assets significantly declining, while total liabilities rose and stockholders' equity decreased Balance Sheet Summary (as of December 31, in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | **Total Assets** | **$374,037** | **$379,631** | | Cash and cash equivalents | $240,206 | $204,450 | | Total contract assets, net | $29,314 | $75,430 | | **Total Liabilities** | **$168,457** | **$166,807** | | Long-term debt, net | $139,357 | $143,683 | | **Total Stockholders' Equity** | **$205,580** | **$212,824** | [Consolidated Statements of Operations](index=5&type=section&id=OPEN%20LENDING%20CORPORATION%20Consolidated%20Statements%20of%20Operations) Full year 2023 total revenue decreased **34.6%** to **$117.5 million**, leading to sharp declines in operating income to **$29.1 million** and net income to **$22.1 million**, with diluted EPS falling to **$0.18** Statement of Operations Summary (Full Year Ended December 31, in thousands) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenue | $117,460 | $179,594 | | Gross Profit | $95,178 | $159,626 | | Operating Income | $29,075 | $97,615 | | Net Income | $22,070 | $66,620 | | Diluted EPS | $0.18 | $0.53 | - In Q4 2023, the company reported a net loss of **$(4.8) million** compared to a net loss of **$(4.2) million** in Q4 2022. The loss was driven by a revenue decline to **$14.9 million** and an operating loss of **$(8.3) million**[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=OPEN%20LENDING%20CORPORATION%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to **$82.7 million** in 2023, primarily due to lower net income, while financing activities used **$42.3 million**, largely for share repurchases, ending the year with **$246.7 million** in cash Cash Flow Summary (Full Year Ended December 31, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,658 | $107,431 | | Net cash used in investing activities | $(2,178) | $(624) | | Net cash (used in) provided by financing activities | $(42,330) | $(17,797) | | **Net change in cash** | **$38,150** | **$89,010** | | **Cash at end of period** | **$246,669** | **$208,519** | - Share repurchases were a significant use of cash in financing activities, totaling **$37.3 million** in 2023, up from **$18.0 million** in 2022[20](index=20&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=2&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) [Non-GAAP Financial Measures Explanation](index=2&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) The company uses non-GAAP measures like Adjusted EBITDA to supplement GAAP results, providing investors with insights into operational performance by excluding non-cash and non-recurring items - The company uses non-GAAP financial measures internally to analyze financial results and believes they are useful for investors in evaluating ongoing operational performance[10](index=10&type=chunk)[11](index=11&type=chunk) - Adjusted EBITDA is defined as GAAP net income excluding interest expense, income taxes, depreciation and amortization, and share-based compensation expense[12](index=12&type=chunk) [Reconciliation Analysis](index=7&type=section&id=Reconciliation%20Table%20Analysis) Full year 2023 Net Income of **$22.1 million** adjusted to Adjusted EBITDA of **$50.2 million**, a significant decrease from 2022, with Adjusted EBITDA margin contracting to **43%** Reconciliation of Net Income to Adjusted EBITDA (Full Year, in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $22,070 | $66,620 | | Total adjustments | $28,100 | $39,116 | | **Adjusted EBITDA** | **$50,170** | **$105,736** | Reconciliation of Net Income (Loss) to Adjusted EBITDA (Q4, in thousands) | Line Item | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net income (loss) | $(4,842) | $(4,189) | | Total adjustments | $2,702 | $12,710 | | **Adjusted EBITDA** | **$(2,140)** | **$8,521** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number: 001-39326 OPEN LENDING CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware ...

146, 192, 219 166, 166, 166 | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------------------------------------------|-------|-------|-------|-------------------------------------------|-------|-----------------------------------------------|-------|-----------------------------| | | | 2023 | | Three Months Ended September 30, \n2022 | | Nine Months Ended September 30, \n2023 | | 2022 | | Certs | | | | | | | | | | Credit Union & Bank 22,660 36,446 76,069 113,553 | | | | | | | | | | OEM 7,2 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number: 001-39326 OPEN LENDING CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 84-50 ...

Open Lending Corporation (NASDAQ:LPRO) Q2 2023 Earnings Conference Call August 9, 2023 5:00 PM ET Company Participants Keith Jezek - Chief Executive Officer and Director Charles Jehl - Executive Vice President, Chief Financial Officer and Treasurer Conference Call Participants Kyle Peterson - Needham John Davis - Raymond James Faiza Alwy - Deutsche Bank Joseph Vafi - Canaccord James Faucette - Morgan Stanley Alexander Villalobos - Jefferies Vincent Caintic - Stephens Operator Good afternoon, and welcome to ...

Financial Data and Key Metrics Changes - In Q1 2023, total revenue was $38.4 million, down from $50.1 million in Q1 2022, representing a 23% decrease [13] - Net income for Q1 2023 was $12.5 million compared to $23.2 million in Q1 2022, a decline of 46% [40] - Adjusted EBITDA for Q1 2023 was $21.2 million, down from $33.8 million in Q1 2022, a decrease of 37% [40] - Certified loans facilitated in Q1 2023 were 32,408, down 26% from 43,944 in Q1 2022 [13] Business Line Data and Key Metrics Changes - Profit share revenue in Q1 2023 was $18.6 million, while program fees were $17.3 million, and claims administration fees were $2.5 million [13] - The average credit default insurance premium increased by an additional 5% in Q1 2023, following a 12% increase in Q2 2022 [7] Market Data and Key Metrics Changes - The new light vehicle market saw sales of 16 million units in April 2023, up 13.5% sequentially from December and up 10% year-over-year [3] - Used retail market sales declined 8% in April from March and were down 8% year-over-year [6] Company Strategy and Development Direction - The company is focusing on refining sales channels, enhancing technology offerings, and attracting talent to strengthen long-term competitive advantages [10] - A transition to the public cloud is underway to improve cost efficiency and security [12] - The company aims to gain market share by signing new accounts and is well-positioned to meet pent-up demand as the industry recovers [36] Management's Comments on Operating Environment and Future Outlook - Management noted that near and non-prime consumers are disproportionately affected by rising interest rates, impacting affordability and demand [5] - The company is monitoring economic conditions and expects improvements if the Federal Reserve adopts a more dovish stance [16] - Despite liquidity constraints, credit unions have maintained their leadership in loan originations, producing 35% of all new loan originations [19] Other Important Information - The company has approximately $36 million remaining under its share repurchase program [16] - The Manheim Used Vehicle Value Index increased by 6.2% in Q1 2023, a positive sign for contract assets [39] Q&A Session Summary Question: Update on credit union funding sources and origination pool - Credit unions maintained their leadership in loan originations, producing 35% of all new loan originations in Q1 2023 [19] Question: Impact of premium increases on competitiveness - The costs of the program are success-based and passed on to consumers, not credit unions, maintaining competitiveness [20] Question: Guidance assumptions regarding affordability - The midpoint of guidance assumes some incremental improvements in affordability, with slight signs of relief noted [25] Question: OEM dynamics and sustainability - OEMs showed a 12% year-over-year increase, with discussions ongoing for new partnerships and programs [71] Question: Changes in behavior from financial institutions - Despite liquidity challenges, credit unions are still making loans and have increased certified loans by 13% quarter-on-quarter [80]

Part I. Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) For the quarter ended March 31, 2023, Open Lending reported total revenue of **$38.4 million**, a **23% decrease** year-over-year, and net income of **$12.5 million**, a **46% decrease**. The balance sheet shows total assets of **$372.9 million** and total stockholders' equity of **$205.5 million**. Cash flow from operations was strong at **$29.5 million**, though down slightly from the prior year. The financial statements reflect a challenging quarter with reduced loan certifications impacting top and bottom-line results [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets were **$372.9 million**, a slight decrease from **$379.6 million** at year-end 2022. The decrease was primarily in current contract assets. Total liabilities remained stable at **$167.3 million**. Stockholders' equity declined to **$205.5 million** from **$212.8 million**, largely due to an increase in treasury stock from share repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$372,898** | **$379,631** | | Cash and cash equivalents | $210,589 | $204,450 | | Total current assets | $271,995 | $280,744 | | **Total Liabilities** | **$167,349** | **$166,807** | | Long-term debt, net | $142,829 | $143,683 | | **Total Stockholders' Equity** | **$205,549** | **$212,824** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2023, total revenue decreased **23%** year-over-year to **$38.4 million**, driven by a significant drop in Profit Share revenue. Operating income fell **47%** to **$17.1 million**. Net income was **$12.5 million**, a **46% decrease** from the prior-year period, resulting in diluted EPS of **$0.10** compared to **$0.18** Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $38,361 | $50,068 | -23.4% | | Gross Profit | $32,930 | $45,280 | -27.3% | | Operating Income | $17,096 | $32,242 | -47.0% | | Net Income | $12,538 | $23,154 | -45.8% | | Diluted EPS | $0.10 | $0.18 | -44.4% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2023, the company generated **$29.5 million** in cash from operating activities, a slight decrease from **$31.9 million** in the prior-year period. A significant use of cash was **$22.4 million** for financing activities, primarily driven by **$21.3 million** in share repurchases. The company's cash, cash equivalents, and restricted cash balance increased by **$6.8 million** to end the period at **$215.3 million** Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,508 | $31,932 | | Net cash used in investing activities | ($335) | ($186) | | Net cash used in financing activities | ($22,390) | ($820) | | **Net change in cash** | **$6,783** | **$30,926** | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail the company's business as a provider of loan analytics and risk modeling for automotive lenders via its Lenders Protection Platform (LPP). Key accounting policies highlight significant estimates in profit share revenue recognition. The company has significant revenue concentration, with its two largest insurance partners accounting for **45%** of total revenue in Q1 2023. Total debt stood at **$146.6 million**, and the effective tax rate for the quarter was **25.2%** - The company's flagship product is the Lenders Protection Platform ("LPP"), a cloud-based automotive lending platform that links automotive lenders to insurance companies for near-prime and non-prime borrowers[19](index=19&type=chunk) - There is a significant concentration of revenue, with the two largest insurance carrier partners accounting for **33%** and **12%** of total revenue during Q1 2023[27](index=27&type=chunk) - Profit share revenue recognition requires significant estimates using a forecast model that projects loan performance, including prepayment rates, default rates, and loss severity[34](index=34&type=chunk) Long-Term Debt Summary (in thousands) | Component | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Term Loan due 2027 | $148,125 | $149,063 | | **Total debt** | **$146,579** | **$147,433** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **23%** year-over-year revenue decline to a **26% decrease** in certified loan volume, reflecting broader economic headwinds. The decrease in profit share revenue was the primary driver. Operating expenses increased by **21%**, mainly due to higher G&A costs, leading to a significant contraction in operating margin from **64%** to **45%**. The company maintained strong liquidity, generating **$29.5 million** in operating cash flow and executed **$21.5 million** in share repurchases. Adjusted EBITDA fell **37%** to **$21.2 million** [Business Overview](index=19&type=section&id=Business%20Overview) Open Lending is a leading provider of lending enablement and risk analytics for automotive lenders, focusing on the underserved near-prime and non-prime borrower market. Its core product, the Lenders Protection Platform (LPP), uses proprietary data and risk models to facilitate loan origination with default insurance. The company estimates the near-prime and non-prime auto loan market to be **$270 billion** annually, of which it currently serves approximately **2%** - The company targets the near-prime and non-prime automotive loan origination market, which is estimated at **$270 billion** annually[80](index=80&type=chunk) - As of the report date, the company serves **437 active lenders** and has facilitated over **$19.2 billion** in automotive loans since its inception in 2000[75](index=75&type=chunk) [Executive Overview and Highlights](index=19&type=section&id=Executive%20Overview%20and%20Highlights) The first quarter of 2023 saw a significant year-over-year decline in business volume and financial performance. Certified loans decreased **26%** to **32,408**, and the value of insured loans facilitated fell to **$951.9 million** from **$1.2 billion**. This slowdown directly impacted financial results, with revenue, operating income, and net income all decreasing substantially compared to Q1 2022 Key Operational Metrics | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Certified loans | 32,408 | 43,944 | | Value of insured loans facilitated (in thousands) | $951,893 | $1,182,567 | | Average loan size per certified loan | $29,372 | $26,911 | | Number of contracts signed with automotive lenders | 8 | 18 | [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Total revenue for Q1 2023 decreased by **23%** to **$38.4 million**, primarily due to a **34% decline** in profit share revenue resulting from lower loan certification volumes. Program fees also fell **12%**. Cost of services rose **13%**, and total operating expenses increased **21%**, driven by higher G&A costs. Consequently, operating income dropped **47%** to **$17.1 million**, and net income fell **46%** to **$12.5 million** Results of Operations Summary (in thousands) | Line Item | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $38,361 | $50,068 | (23)% | | Gross Profit | $32,930 | $45,280 | (27)% | | Operating Income | $17,096 | $32,242 | (47)% | | Net Income | $12,538 | $23,154 | (46)% | - The decrease in revenue was driven by a **$9.7 million (34%) decrease** in profit share revenue and a **$2.4 million (12%) decrease** in program fees, linked to a **26% decline** in certified loan volume[110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - General and administrative expenses increased by **$2.7 million (36%)**, primarily due to higher professional fees, employee compensation, and business taxes[118](index=118&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a solid liquidity position, with **$210.6 million** in cash and cash equivalents. Net cash from operations was **$29.5 million** for the quarter. The company actively returned capital to shareholders, repurchasing **3.1 million shares** for **$21.5 million** under its share repurchase program. As of March 31, 2023, **$148.1 million** was outstanding under its Term Loan, with no borrowings on its revolving credit facility - Under its Share Repurchase Program, the company repurchased **3,095,334 shares** for a total of **$21.5 million** during the quarter, leaving **$35.5 million** available for future repurchases[133](index=133&type=chunk)[135](index=135&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,508 | $31,932 | | Net cash used in financing activities | ($22,390) | ($820) | [Non-GAAP Financial Measures](index=30&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, was **$21.2 million** for Q1 2023, a **37% decrease** from **$33.8 million** in Q1 2022. The Adjusted EBITDA margin contracted significantly to **55%** from **67%** in the prior-year period, reflecting the impact of reduced revenue and increased operating expenses Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $12,538 | $23,154 | | Interest expense | $2,387 | $803 | | Income tax expense | $4,235 | $8,310 | | Depreciation and amortization | $244 | $221 | | Share-based compensation | $1,844 | $1,281 | | **Adjusted EBITDA** | **$21,248** | **$33,769** | | **Adjusted EBITDA margin** | **55%** | **67%** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks include general economic conditions affecting consumer auto lending, concentration risk with its key insurance partners, and interest rate risk. The interest rate risk stems from its variable-rate Term Loan due 2027, which had an outstanding balance of **$148.1 million**, and from its investments in money market funds and U.S. Treasury securities - The company faces concentration risk, relying on its three largest insurance partners for a significant portion of its profit share and claims administration revenue[145](index=145&type=chunk) - The company is exposed to interest rate risk on its **$148.1 million** outstanding variable-rate Term Loan due 2027, where borrowings bear interest at a rate equal to Adjusted SOFR plus a spread[146](index=146&type=chunk)[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2023, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective at a reasonable assurance level. No material changes were made to the company's internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[148](index=148&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[149](index=149&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) As of the filing date, the company was not a party to any material legal proceedings - The company reports that it was not a party to any material legal proceedings as of the date of the Quarterly Report[151](index=151&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The company states there have been no material changes in its risk factors from those described in its Annual Report[152](index=152&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2023, the company repurchased a total of **3,113,382 shares** of its common stock. Of this amount, **3,095,334 shares** were repurchased as part of the publicly announced share repurchase program, leaving approximately **$35.5 million** available for future repurchases under the program Share Repurchases for Q1 2023 | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Plan | Value Remaining Under Plan (in millions) | | :--- | :--- | :--- | :--- | :--- | | Jan 2023 | 17,342 | $7.08 | — | $57.0 | | Feb 2023 | 97,606 | $7.32 | 96,900 | $56.3 | | Mar 2023 | 2,998,434 | $6.95 | 2,998,434 | $35.5 | | **Total** | **3,113,382** | | **3,095,334** | | [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company disclosed that on March 15, 2023, John J. Flynn, Chairman of the Board of Directors, entered into a 10b5-1 sales plan for the potential sale of up to **1,200,000 shares** of the company's common stock - On March 15, 2023, the Chairman of the Board, John J. Flynn, entered into a 10b5-1 sales plan covering the sale of up to **1,200,000 shares** of common stock, effective until June 14, 2024, or until all shares are sold[158](index=158&type=chunk)