Open Lending(US:LPRO)2024-08-10 16:03Financial Data and Key Metrics Changes - In Q2 2024, the company certified nearly 29,000 loans, representing approximately 3% sequential growth compared to Q1 2024 [3] - Total revenue for Q2 2024 was $26.7 million, down from $38.2 million in Q2 2023, primarily due to a $6.7 million negative change in profit share estimate [17][20] - Adjusted EBITDA for Q2 2024 was $9.9 million, compared to $20.7 million in Q2 2023 [20] - Net income for Q2 2024 was $2.9 million, down from $11.4 million in Q2 2023 [20] Business Line Data and Key Metrics Changes - Program fee revenues in Q2 2024 were $14.8 million, profit share revenues were $9.3 million, and claims administration fees and other revenue were $2.6 million [18] - Profit share revenue associated with new originations was $16 million in Q2 2024, compared to $19 million in Q2 2023 [19] Market Data and Key Metrics Changes - New vehicle inventory levels improved by 52% year-over-year, while used vehicle inventory stabilized at approximately 2.2 million units [7] - Used retail sales volumes increased by 4.1% year-over-year, but new retail sales volumes decreased by 7.6% year-over-year [7] - Average auto loan interest rates remained near recent highs, with new vehicle loans at nearly 9% and used vehicle loans at over 14% [8] Company Strategy and Development Direction - The company is focused on protecting profitability by appropriately pricing for risk and selectively approving loans [6] - The company signed 13 new credit union customers in Q2 2024, with a total of 24 new customers year-to-date [12] - The company aims to enhance its product offerings and improve lender customer experiences through automation and technology [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the early performance of recent certified loans due to tightened underwriting standards [4] - The company anticipates that profit share revenue performance should be less volatile as it navigates past lower-performing vintages [6] - Management noted that while challenges remain, there are signs of improvement in the automotive industry and credit union lending capacity [10] Other Important Information - The company exited Q2 2024 with total assets of $382.8 million, including $248 million in unrestricted cash [21] - The guidance for Q3 2024 includes total certified loans expected 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 [22] Q&A Session Summary Question: Impact of CDK outage on sales - Management indicated that the CDK outage primarily impacted new auto vehicle sales, with limited effect on used auto sales [24] Question: Fed rate cut considerations in guidance - Management noted that the Q3 guidance was based on continued elevated interest rates, but they are hopeful for a Fed rate cut in September [26] Question: Profit share make whole period - Management explained that there is a recapture mechanism for profit share adjustments, but they do not write checks if profit share goes negative due to high claims [29] Question: Future of refinancing - Management stated that refinancing constituted 3% of Q2 2024 volume, down from over 40% in early 2022, and emphasized the importance of healthy lending capacity at credit unions [30] Question: Profit share adjustments - Management discussed the $6.7 million adjustment being primarily associated with lower-performing vintages from 2021 and 2022, and they expect profit share to be less volatile moving forward [34][35] Question: OEM certification volume outlook - Management indicated that they expect a similar mix of credit union and OEM certification volume in the future [39] Question: Year-over-year decline in OEM - Management attributed the decline in OEM volume to the overall environment and credit tightening actions taken by the company [41]