Open Lending(US:LPRO)2022-08-06 12:19Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $52 million, down from $61.1 million in Q2 2021, indicating a year-over-year decline [25] - Net income for Q2 2022 was $23.1 million compared to $76 million in Q2 2021, with the previous year including a one-time gain of $55.4 million [29] - Adjusted EBITDA for Q2 2022 was $34 million, down from $46.1 million in Q2 2021 [30] - Basic and diluted earnings per share were $0.18 in Q2 2022, compared to $0.60 in the previous year [29] Business Line Data and Key Metrics Changes - The company facilitated 44,531 certified loans in Q2 2022, compared to 46,408 in Q2 2021 [24] - Non-OEM business, primarily credit unions, grew certified loans by 27% year-over-year [11] - Profit share revenue in Q2 2022 was $29.2 million, with $26.3 million from new originations, slightly down from $27 million in Q2 2021 [25][26] Market Data and Key Metrics Changes - The average used car price reached $28,000, a 47% increase from pre-pandemic levels [18] - New vehicle sales are forecasted to grow by 5.2% over the next five years, despite current supply challenges [20] - The total addressable market (TAM) for auto loan origination is approximately $270 billion, up 8% from previous assessments [12] Company Strategy and Development Direction - The company is focused on investing in its go-to-market sales strategy to capture a larger share of the growing TAM [9] - Strategic investments are being made in technology and talent to enhance lender protection and improve onboarding processes [12][15] - The company aims to maintain growth rates exceeding industry averages while managing risk prudently [16] Management's Comments on Operating Environment and Future Outlook - Management noted that high inflation and rising borrowing costs have negatively impacted consumer sentiment, which is at a historic low [8] - Despite industry headwinds, the company expects full-year 2022 auto originations to be in line with 2021 [9] - The company remains optimistic about its long-term opportunities, citing a significant moat due to proprietary data and relationships with insurance partners [15] Other Important Information - Selling, general, and administrative expenses increased to $14.1 million in Q2 2022, primarily due to hiring to support growth [28] - The company exited Q2 2022 with $366.8 million in total assets, including $167.7 million in unrestricted cash [31] - Guidance for full-year 2022 includes total certified loans between 155,000 and 180,000 and total revenue between $175 million and $205 million [32] Q&A Session Summary Question: Market share perspective and growth rate outlook - Management expressed excitement about growth opportunities, particularly in the credit union space, and noted a significant increase in the TAM [44][43] Question: Credit quality and default rates - The average score in the portfolio is about 640, with expected defaults aligning with management's expectations [52] Question: Factors affecting affordability - Management indicated that geopolitical factors, inflation, and supply chain issues are significant drivers affecting consumer affordability [57] Question: Underwriting model adjustments - The company has expanded loan amounts and introduced longer loan terms to improve capture rates [67] Question: Resilience of the refinance market - Management noted that refinance activity remains strong, with new funding sources interested in the refinance channel [70] Question: Credit unions' interest in the program - Credit unions have adopted the program and are likely to seek more loans as delinquencies rise, making the program more appealing [88] Question: Competitive landscape - Management stated that they have not identified competitors that offer the same value proposition, noting a decline in larger banks' loan volumes [93]