Open Lending(LPRO) - 2023 Q4 - Annual Results

Financial Results Overview Management Commentary 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] - 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] Fourth Quarter 2023 Highlights 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] Full Year 2023 Highlights 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] First Quarter 2024 Outlook 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 Consolidated Balance Sheets 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 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] Consolidated Statements of Cash Flows 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] Reconciliation of GAAP to Non-GAAP Financial Measures Non-GAAP Financial Measures Explanation 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][11] - Adjusted EBITDA is defined as GAAP net income excluding interest expense, income taxes, depreciation and amortization, and share-based compensation expense[12] Reconciliation Analysis 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 |