Open Lending(US:LPRO)2022-11-04 20:05Financial Performance - Total revenue for the three and nine months ended September 30, 2022, was $50.7 million and $152.8 million, respectively, compared to $58.9 million and $164.0 million for the same periods in 2021, reflecting a decrease of 14.8% and 6.9%[81] - The company's total revenue for the three months ended September 30, 2022, was $50.661 million, a decrease of 14% compared to $58.892 million in the same period in 2021[110] - Profit share revenue decreased by $8.9 million, or 25%, during the three months ended September 30, 2022, totaling $26.523 million compared to $35.447 million in 2021[114] - Gross profit for the three months ended September 30, 2022, was $45.462 million, a decrease of 13% from $52.512 million in the same period in 2021[118] - Net income for the three months ended September 30, 2022, was $24.529 million, a decrease of 17% from $29.414 million in 2021[110] - Adjusted EBITDA for the three and nine months ended September 30, 2022, was $29.4 million and $97.2 million, respectively, down from $42.1 million and $118.4 million in the same periods of 2021, reflecting decreases of 30.2% and 17.9%[83] Loan Activity - The company facilitated 42,186 certified loans in Q3 2022, down from 49,332 in Q3 2021, while the total number of certified loans for the nine months ended September 30, 2022, was 130,661, slightly up from 129,058 in the same period of 2021[80] - The average loan size per certified loan increased to $29,542 in Q3 2022 from $25,700 in Q3 2021, indicating a growth of 7.2%[85] - Certified loans decreased by 14% to 42,186 for the three months ended September 30, 2022, compared to 49,332 in 2021[111] Revenue Sources - Earned premiums for the three and nine months ended September 30, 2022, were $76.3 million and $214.5 million, respectively, compared to $58.7 million and $158.9 million for the same periods in 2021, representing increases of 30% and 35%[92] - Program fees increased by $0.2 million, or 1%, for the three months ended September 30, 2022, totaling $21.845 million compared to $21.638 million in 2021[116] - Claims administration service fees increased by $0.5 million, or 27%, for the three months ended September 30, 2022, totaling $2.293 million compared to $1.807 million in 2021[117] Expenses - General and administrative expenses increased by 30% to $9.335 million for the three months ended September 30, 2022, compared to $7.197 million in 2021[110] - Selling and marketing expenses increased by 81% to $5.981 million for the three months ended September 30, 2022, compared to $3.308 million in 2021[110] - Research and development expenses increased by 86% to $2.355 million for the three months ended September 30, 2022, compared to $1.268 million in 2021[110] Market Potential - The near-prime and non-prime automotive loan origination market is estimated at $270 billion annually, with the company currently serving less than 2% of this market, indicating significant growth potential[79] - The company signed 17 new contracts with automotive lenders in Q3 2022, compared to 16 in Q3 2021, indicating a slight growth in partnerships[85] Financial Position and Risks - The company amended its Credit Agreement on September 9, 2022, securing senior secured credit facilities totaling $300 million, which will be used for working capital and general corporate purposes[93] - The company is exposed to market risks including changes in interest rates and consumer attitudes toward vehicle ownership, which are monitored as part of the overall risk management program[143] - The company relies on its three largest insurance partners for a significant portion of profit share and claims administration service fee revenues, indicating a concentration risk[145] - The company has established policies to protect against adverse effects of market risks associated with general economic conditions and consumer financing willingness[144] Tax and Legal Matters - The company is evaluating the potential impact of the Inflation Reduction Act of 2022, which includes a 15% minimum tax on adjusted financial statement income exceeding $1 billion[98] - Income tax expense decreased by $8.7 million, or 83%, during the three months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in income before income taxes[127] - The effective tax rate for the three months ended September 30, 2022, was 6.6%, down from 26.1% for the same period in 2021[127] - The company is not currently a party to any material legal proceedings that could adversely impact its financial position or results of operations[152] Internal Controls - As of the end of the reporting period, the company's disclosure controls and procedures were deemed effective at the reasonable assurance level[149] - There were no changes in the internal control over financial reporting that materially affected the company's financial reporting during the period covered[150] - There were no material changes in the company's contractual commitments and obligations during the three and nine months ended September 30, 2022[142] Cash Flow - Net cash provided by operating activities for the nine months ended September 30, 2022, was $85.0 million, an increase of $16.6 million compared to the same period in 2021[130] - As of September 30, 2022, the company had $150.0 million related to its New Term Loan due 2027, which was used primarily to pay off outstanding amounts under the previous credit agreement[137] - As of September 30, 2022, the company had outstanding amounts of $150.0 million under the New Term Loan due 2027, with no amounts outstanding under the New Revolving Credit Facility[147] - The interest rates on borrowings under the Credit Agreement range from 1.625% to 2.375% per annum for Adjusted SOFR loans, based on the total net leverage ratio[147]