Open Lending Corp: A Deep Dive into Q4 2024 Earnings

Ladies and gentlemen, buckle up! We're diving headfirst into the earnings call of Open Lending Corporation for Q4 2024. This isn't just any earnings call; it's a rollercoaster ride of financial highs and lows that you won't want to miss. So, grab your popcorn and let's get started!



First things first, let's talk about the elephant in the room: the significant reduction in estimated profit share revenues. Open Lending took a massive hit of $81.3 million in the fourth quarter of 2024. That's a jaw-dropping number, folks! But why did this happen? Well, it's a combination of factors, including heightened delinquencies and defaults on loans originated between 2021 and 2024. The company's 2021 and 2022 vintages, which were generated when used car values reached an all-time high, saw a subsequent decline in values. This decline increased the likelihood of default on vehicles that are now worth significantly less than their corresponding outstanding loan balances. Adjustments to the forecasted performance of these vintages accounted for approximately 40% of the Company's total negative change in estimate for the fourth quarter of 2024.

But that's not all! Continued elevated delinquencies and ultimate defaults as a result of broader macroeconomic conditions accounted for approximately 20% of the Company's total negative change in estimate for the fourth quarter of 2024. And if that wasn't enough, the Company identified two cohorts of borrowers—those with credit builder tradelines and those with fewer positive tradelines—that caused its 2023 and 2024 vintages to underperform. Adjustments to the forecasted performance of loans to these two cohorts of borrowers accounted for approximately 40% of the Company's total negative change in estimate for the fourth quarter of 2024.

Now, let's talk about the financial impact of these issues. For the fourth quarter of 2024, the Company reported a net loss of $144.4 million, compared to a net loss of $4.8 million in the fourth quarter of 2023. The fourth quarter of 2024 was also negatively impacted by the recording of a valuation allowance on deferred tax assets of $86.1 million, which increased the income tax expense during the period. Adjusted EBITDA was $(73.1) million during the fourth quarter of 2024, compared to $(2.1) million in the fourth quarter of 2023.

For the full year ended December 31, 2024, the Company facilitated 110,652 certified loans, compared to 122,984 certified loans in the prior year. Total revenue was $24.0 million, compared to $117.5 million in the prior year. The year was negatively impacted by a $96.1 million reduction in estimated profit share revenues related to business in historic vintages, compared to a $22.8 million reduction in the prior year. Gross profit was $0.2 million, compared to $95.2 million in the prior year. Net loss was $135.0 million, compared to net income of $22.1 million in the prior year. Adjusted EBITDA was $(42.9) million, compared to $50.2 million in the prior year.

But don't despair, folks! Open Lending is taking action. The Board of Directors appointed Jessica Buss, Chairman of the Board, as Chief Executive Officer, effective immediately. The Board also appointed Michelle Glasl as Chief Operating Officer, and Charles Jehl will continue to serve as Interim Chief Financial Officer and as a member of the Board. These strategic appointments aim to stabilize the company's financial performance and guide it through the current economic challenges.

So, what's the bottom line? Open Lending is facing some serious headwinds, but they're not going down without a fight. The company is taking decisive action to address the issues and stabilize its financial performance. It's a bumpy ride, but if you're a long-term investor, this could be a great opportunity to buy low and ride the wave as the company works to turn things around. Stay tuned, folks, because this story is far from over!