Open Lending Corp Q3 FY2024 earnings call

• Chuck Jehl welcomes everyone and expresses gratitude for the Board's trust, focusing on driving new customer acquisitions and certified loan growth, optimizing results, and making targeted investments. - Highlights automotive industry trends like stabilized inventory levels, improved affordability, but ongoing affordability challenges and high auto loan rates. - Core credit union customers face elevated loan-to-share ratios but show signs of share growth improvement. - Announced partnership with Point Predictive to automate proof of income verification, aiming to increase close rates. - Made progress in assisting lenders with alternative sources of capital to increase lending capacity through economic cycles.

In the third quarter of 2024, Open Lending certified 27,435 loans. Total revenue was $23.5 million. Program fee revenues were $14.2 million, profit share revenues (net of a $7 million change in estimate) were $6.8 million, and claims administration fees and other revenue were $2.5 million. Adjusted EBITDA was $7.8 million. Operating expenses were $15.5 million, operating income was $1.9 million, net income was $1.4 million, and basic and diluted net income per share was $0.01.

• Fourth quarter 2024 guidance: total certified loans between 20,000 and 24,000, total revenue between $22 million and $26 million, adjusted EBITDA between $7 million and $10 million. - Factors considered: continued elevated auto loan interest rates, affordability challenges, near historic high loan-to-share ratios, additional credit tightening actions in Q3 2024, implementation of automated proof of income, and seasonality. - Anticipates the Point Predictive partnership to have a positive uplift, but credit tightening will impact Q4 volume.

• Elevated delinquencies and defaults from 2021-2022 vintages, an industry-wide headwind. - Thin credit files posing higher exposure and risk due to lack of deep credit history. - Near historic high loan-to-share ratios limiting credit unions' lending capacity.

Q: Joseph Vafi asked about underwriting standards tightening and approval rates.

A: Chuck Jehl said tightening will impact Q4 volume, approval rates are estimated to be down about 4%, and the Point Predictive partnership will be a positive uplift.

Q: Joseph Vafi then asked about alternative sources of capital.

A: Chuck Jehl mentioned working with customers on capital market transactions like forward flow agreements, loan participations, and sales of seasoned loan portfolios to help increase Lenders Protection volumes.

Q: Unidentified Analyst asked about profit share revisions and client signings.

A: Chuck Jehl said delinquencies are starting to lower on newer pools but still working through older pools, and 21 new customers were signed in Q3 2024, mostly credit unions with large asset sizes.

Q: Peter Heckmann asked about annual guidance and share repurchase.

A: Chuck Jehl said they expect to get back to annual guidance as the company stabilizes, and the previous share repurchase authorization expired, with capital allocation being a Board-level decision.