Open Lending Corp Q4 FY2024 earnings call

• Chuck discussed the deterioration of back book loans, particularly 2021 and 2022 vintages, impacted by declining used vehicle values. - Identified issues with credit builder tradelines and borrowers with limited positive tradelines, with corrective actions taken including adjusting underwriting rules and pricing. - Positive areas: Lenders Protection program saw strong interest with 58 new customers in 2024. - Jessica emphasized bringing an insurance industry perspective to focus on profitable unit economics, predictive modeling, and data-driven pricing to enhance predictability and reduce volatility in profit share components.

In the fourth quarter of 2024, Open Lending facilitated 26,065 certified loans, compared to 26,263 in the fourth quarter of 2023. Total revenue for the fourth quarter was negative $56.9 million, with program fee revenues at $13.7 million, profit share revenue negative $73.2 million, and claims administration fees and other revenue at $2.5 million. Operating expenses in the fourth quarter of 2024 were $15.4 million, down from $17.9 million in the same period of 2023.

• Expect total certified loans in the first quarter of 2025 to be between 27,000 and 28,000. - Plan to provide additional outlook metrics as soon as reasonably practical.

• Deterioration of 2021 and 2022 vintage loans due to declining used vehicle values, increasing default likelihood. - Challenges with credit builder tradelines, where borrowers with such tradelines performed twice as poorly as others. - Impact of borrowers with limited positive tradelines on underwriting performance.

Q: Vincent Caintic asked Jessica about her insurance industry perspective and what needs to change for the company.

A: Jessica stated she would bring an insurance approach to pricing, claims, and operations to enhance predictability and reduce volatility in profit share.

Q: John Hecht asked about the impact of credit builder tradelines on addressable market and OEMs.

A: Chuck responded that credit builder tradelines were a smaller part of the business, and they're taking corrective actions, while Jessica mentioned replacing super thins with better-performing business through segmented pricing.

Q: Peter Heckmann asked about insurance carrier capacity and refi positioning.

A: Chuck said carrier capacity is sufficient, and Jessica noted credit unions are improving deposit growth, which should benefit refi.

Q: John Davis asked about insurance carrier profitability and profit share per cert.

A: Jessica said carrier long-term profitability is strong, and profit share per cert is constrained currently but expected to improve with better pricing and predictive modeling.