Open Lending(LPRO) - 2025 Q1 - Quarterly Report

PART I. Financial Information Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2025, showing a decline in total revenue to $24.4 million and net income to $0.6 million, primarily due to lower profit share revenue Key Financial Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $24.4 million | $30.7 million | | Operating Income | $0.8 million | $7.3 million | | Net Income | $0.6 million | $5.1 million | | Diluted EPS | $0.01 | $0.04 | | Net Cash (used in) provided by Operating Activities | ($3.8 million) | $11.0 million | - Total assets increased to $304.2 million as of March 31, 2025, from $296.4 million at December 31, 2024, while total liabilities also increased to $224.4 million from $218.3 million over the same period[12] - A shareholder class action lawsuit was filed against the company in May 2025[67] - On May 1, 2025, the Board of Directors authorized a new share repurchase program for up to $25.0 million of the company's common stock[71] Condensed Consolidated Balance Sheets As of March 31, 2025, total assets reached $304.2 million and total liabilities $224.4 million, with notable increases in contract assets and excess profit share receipts liability Balance Sheet Summary (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $304,223 | $296,368 | | Cash and cash equivalents | $236,226 | $243,164 | | Total contract assets, net | $29,845 | $15,067 | | Total Liabilities | $224,394 | $218,281 | | Total debt, net | $137,929 | $139,717 | | Total excess profit share receipts | $56,556 | $47,556 | | Total Stockholders' Equity | $79,829 | $78,087 | Condensed Consolidated Statements of Operations For Q1 2025, total revenue decreased 21% to $24.4 million, primarily due to a 52% drop in profit share revenue, leading to a sharp decline in operating and net income Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $24,393 | $30,745 | | - Program fees | $15,210 | $14,309 | | - Profit share | $6,730 | $13,882 | | Gross Profit | $18,309 | $24,995 | | Operating Income | $762 | $7,323 | | Net Income | $617 | $5,087 | | Diluted EPS | $0.01 | $0.04 | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from $78.1 million to $79.8 million, primarily driven by net income and share-based compensation, partially offset by tax withholdings - Total stockholders' equity increased by $1.7 million during the quarter, from $78.1 million to $79.8 million[17] Condensed Consolidated Statements of Cash Flows The company reported a net cash outflow from operating activities of $3.8 million in Q1 2025, a significant negative shift from the prior year, primarily due to lower net income and increased contract assets Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(3,838) | $11,006 | | Net cash used in investing activities | $(606) | $(642) | | Net cash used in financing activities | $(2,633) | $(1,959) | | Net change in cash | $(7,077) | $8,405 | Notes to Condensed Consolidated Financial Statements (Unaudited) The notes detail accounting policies for profit share revenue, debt structure, a pending shareholder class action lawsuit, and a new $25 million share repurchase program - Profit share revenue recognition relies on a forecast model projecting loan performance. In Q1 2025, this resulted in a $0.9 million reduction in estimated revenue from performance obligations satisfied in previous periods[33][35] - As of March 31, 2025, the company had $138.75 million outstanding on its Term Loan due 2027 and was in compliance with all debt covenants[50][55] - A shareholder class action lawsuit was filed in May 2025, alleging misleading statements about the company's business and prospects. The company cannot predict the outcome[67][70] - A new share repurchase program was authorized on May 1, 2025, allowing for the repurchase of up to $25.0 million of common stock[71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant downturn in Q1 2025 financial performance, with total revenue decreasing 21% to $24.4 million and operating income falling 90% to $0.8 million, primarily due to a 52% drop in profit share revenue Key Performance Indicators (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Certified loans | 27,638 | 28,189 | (2)% | | Average program fees | $550 | $508 | 8% | | Total Revenue | $24.4M | $30.7M | (21)% | | Operating Income | $0.8M | $7.3M | (90)% | | Adjusted EBITDA | $5.7M | $12.5M | (55)% | - The primary driver of the revenue and profit decline was a 52% decrease in profit share revenue, caused by a drop in anticipated profit per loan from $533 in Q1 2024 to $278 in Q1 2025[111][112] - The company authorized a new $25.0 million share repurchase program on May 1, 2025[89] Results of Operations A detailed analysis of Q1 2025 versus Q1 2024 reveals a $6.4 million (21%) revenue decrease, primarily driven by a 52% drop in profit share revenue due to lower anticipated profit per new loan Revenue Breakdown (in thousands) | Revenue Stream | Q1 2025 (in thousands) | Q1 2024 (in thousands) | $ Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Program fees | $15,210 | $14,309 | $901 | 6% | | Profit share | $6,730 | $13,882 | $(7,152) | (52)% | | Claims admin & other | $2,453 | $2,554 | $(101) | (4)% | | Total Revenue | $24,393 | $30,745 | $(6,352) | (21)% | - The average anticipated profit share per new loan decreased from $533 in Q1 2024 to $278 in Q1 2025 due to revised estimates of loan default rates, prepayment rates, and loss severity[112] - Gross margin contracted from 81% in Q1 2024 to 75% in Q1 2025[115] - Operating margin fell drastically from 24% in Q1 2024 to 3% in Q1 2025[117] Liquidity and Capital Resources The company's liquidity position shifted to a net cash outflow from operating activities of $3.8 million in Q1 2025, a $14.8 million decrease from the prior year, primarily due to reduced revenues and increased contract assets - Net cash used in operating activities was $3.8 million, a $14.8 million decrease from the prior year, primarily due to reduced revenues and a significant increase in contract assets[125][126] - As of March 31, 2025, the company had $137.9 million outstanding under its Term Loan due 2027 and no amounts outstanding under its Revolving Credit Facility[131] Non-GAAP Financial Measures Management uses Adjusted EBITDA to evaluate operating performance, which decreased 55% to $5.7 million in Q1 2025, with the margin contracting to 23% from 41% in the prior-year period Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net income | $617 | $5,087 | | Interest expense | $2,589 | $2,770 | | Income tax expense | $56 | $2,437 | | Depreciation and amortization | $544 | $372 | | Share-based compensation | $1,846 | $1,854 | | Adjusted EBITDA | $5,652 | $12,520 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including general economic conditions, concentration risk with insurance partners, and interest rate risk on its $138.8 million variable-rate term loan - The company faces concentration risk, relying on three active insurance partners for a significant portion of its profit share and claims administration revenue[141] - The company is exposed to interest rate risk through its variable-rate Term Loan, which had an outstanding balance of $138.8 million as of March 31, 2025[142][143] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[144] - There were no material changes in the company's internal control over financial reporting during the quarter[145] PART II. Other Information Legal Proceedings A shareholder class action lawsuit was filed in May 2025 against the company and former CEOs, alleging misleading statements regarding risk models, profit share revenue, and loan vintage performance - A shareholder class action lawsuit was filed in May 2025 against the Company and three former CEOs in the U.S. District Court for the Western District of Texas[148] - The complaint alleges misrepresentation of the company's risk-based pricing models, misleading statements on profit share revenue, and failure to disclose underperformance of recent loan vintages[148] Risk Factors This section updates the company's risk factors, emphasizing increased litigation and regulatory action risks, citing the recent shareholder class action lawsuit as a key example - The company highlights its subjection to increased risks of litigation and regulatory actions due to the highly regulated nature of the financial services industry[150] - The May 2025 shareholder class action lawsuit is cited as a materialization of this risk, which could result in substantial costs and divert management's attention[152][153] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 175,142 shares for tax withholding, and on May 1, 2025, authorized a new $25.0 million share repurchase program Share Repurchases (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | Jan 1 - 31, 2025 | 13,119 | $5.84 | | Feb 1 - 28, 2025 | — | $— | | Mar 1 - 31, 2025 | 162,023 | $4.20 | | Total | 175,142 | N/A | - On May 1, 2025, the Board authorized a new share repurchase program for up to $25.0 million, effective through May 1, 2026[157] Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the reporting period - None[158] Mine Safety Disclosures This item is not applicable to the company - None[159] Other Information The company disclosed that no director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2025 - No director or officer of the Company adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the first quarter of 2025[160] Exhibits This section lists the exhibits filed with the 10-Q report, including CEO and CFO certifications and various employment and service agreements - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[161] - Financial statements are provided in iXBRL format[161]