Open Lending (LPRO) 8 Aug 24 2024 Q2 Earnings call transcript

In the recent earnings call, Open Lending provided insights into its financial performance for the second quarter of 2024. The company reported near or above the high end of its guidance range for certified loans, revenue, and adjusted EBITDA, despite facing challenges from a negative change in profit share estimate.

Performance Highlights

Open Lending certified nearly 29,000 loans in the second quarter of 2024, marking a 3% sequential growth from the first quarter. The company delivered total revenue of $26.7 million and adjusted EBITDA of $9.9 million. However, a $6.7 million profit share change in estimate impacted the company's results, primarily due to elevated delinquencies and defaults associated with vintages originated in 2021 and 2022.

Strategic Actions and Market Conditions

Open Lending has taken multiple steps to address these challenges, including increased insurance premiums, a newly enhanced lenders protection scorecard, and targeted price optimization. The company is optimistic about a return to normalcy in delinquencies and is committed to protecting the profitability of all stakeholders.

The automotive industry is showing signs of improvement, with inventory levels increasing and retail sales volumes up 4.1% year-over-year. However, the company's core credit union customers continue to face challenges with high loan-to-share ratios, low share or deposit growth, and low loan growth. These challenges are expected to ease as the industry recovers from the current economic conditions.

Product Development and Partnerships

Open Lending is actively working on developing solutions to assist lenders in automating decision-making processes and exploring opportunities to expand insurance coverages. The company recently added Securian Financial Group as an insurance partner for its Lenders Protection program, expanding its premium capacity.

Guidance for the Third Quarter

For the third quarter of 2024, Open Lending expects total certified loans to be between 25,000 and 28,000, total revenue to be between $28 million and $31 million, and adjusted EBITDA to be between $11 million and $14 million. The company's strong balance sheet and positive cash flow position it well to make targeted investments to accelerate revenue growth and capture pent-up demand.

Conclusion

Open Lending's second quarter 2024 earnings call provided valuable insights into the company's financial performance and strategic actions. Despite the challenges posed by lower-performing vintages, Open Lending remains optimistic about its future prospects, particularly with the improving automotive industry and credit union recovery. The company's focus on product development, partnerships, and cost control positions it well for growth in the coming quarters.