• Certified Loans: 27,435 loans certified in Q3 2024.
• Total Revenue: $23.5 million in Q3 2024.
• Adjusted EBITDA: $7.8 million in Q3 2024.
• Profit Share Change in Estimate: Negative impact of $7 million in Q3 2024.
• Operating Expenses: $15.5 million in Q3 2024.
• Operating Income: $1.9 million in Q3 2024.
• Net Income: $1.4 million in Q3 2024.
• Basic and Diluted Net Income Per Share: $0.01 in Q3 2024.
• Program Fee Revenues: $14.2 million in Q3 2024.
• Profit Share Revenues: $6.8 million in Q3 2024.
• Claims Administration Fees and Other Revenue: $2.5 million in Q3 2024.
• Total Assets: $395.7 million at the end of Q3 2024.
• Unrestricted Cash: $250.2 million at the end of Q3 2024.
• Total Liabilities: $175.2 million at the end of Q3 2024.
• Outstanding Debt: $141.5 million at the end of Q3 2024.
• Q4 2024 Guidance - Certified Loans: Between 20,000 and 24,000.
• Q4 2024 Guidance - Total Revenue: Between $22 million and $26 million.
• Q4 2024 Guidance - Adjusted EBITDA: Between $7 million and $10 million.

• Warning! GuruFocus has detected 6 Warning Signs with LPRO.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Open Lending Corp (NASDAQ:LPRO) achieved near or above the high end of their guidance range for certified loans, revenue, and adjusted EBITDA in Q3 2024.
• The company signed a record 21 new customers in Q3 2024, demonstrating strong customer acquisition despite challenging market conditions.
• Open Lending Corp (NASDAQ:LPRO) is actively developing technology solutions to improve lender and borrower experiences, such as automating the proof of income verification process.
• The company is making progress in assisting lenders with accessing alternative sources of capital to increase lending capacity through economic cycles.
• Open Lending Corp (NASDAQ:LPRO) is seeing early signs of stabilization in loan growth and improvement in lending capacity among its core credit union customers.

Negative Points

• The company's results were negatively impacted by a $7 million profit share change in estimate due to elevated delinquencies and defaults from 2021 and 2022 loan vintages.
• Open Lending Corp (NASDAQ:LPRO) anticipates lower approval rates and a negative impact on certified loan volume due to recent credit tightening actions.
• The automotive industry continues to face affordability challenges for consumers, with high auto loan interest rates and vehicle prices.
• The company has experienced six or seven consecutive quarters of negative revisions to profit sharing, indicating ongoing volatility in profit share revenue.
• Open Lending Corp (NASDAQ:LPRO) reported a decrease in total revenue and net income for Q3 2024 compared to the same quarter in 2023.

Q & A Highlights

Q: Can you elaborate on the tightening of underwriting standards and its impact on approval rates? A: Charles Jehl, CEO, explained that the tightening is due to an increase in thin credit files, which are higher risk. This decision will impact Q4 volume, with approval rates expected to decrease by about 4%. The company is focusing on quality loans and has increased pricing on these thin files.

Q: Could you discuss the alternative sources of capital and their potential impact on unit economics? A: Charles Jehl noted that Open Lending is helping customers with loan participations and capital market transactions to increase lending capacity. This service aims to facilitate volume rather than change unit economics, providing more opportunities for lending partners.

Q: Regarding the $7 million profit share revision, do you still expect peak claims to pass soon? A: Charles Jehl stated that while peak claims from 2021 and 2022 vintages are starting to decline, it's too early to declare a full recovery. However, delinquencies on newer pools are decreasing, indicating progress.

Q: What drove the record client signings in the quarter, and where are you seeing the most success? A: Charles Jehl highlighted that all 21 new clients in Q3 were credit unions, with a focus on larger institutions. The success is attributed to strategic changes in sales and account management, with over half of the new clients being $1 billion-plus institutions.

Q: Is there a possibility of returning to annual guidance and stabilizing profit share revisions? A: Charles Jehl expressed optimism about stabilizing profit share and returning to annual guidance. The company is working through challenging vintages and expects less volatility moving forward, with new scorecards and risk management improvements showing positive results.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.