UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q


(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 001-39326
logo lpro.jpg
OPEN LENDING CORPORATION
(Exact Name of Registrant as Specified in its Charter)

Delaware84-5031428
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1501 S. MoPac Expressway
Suite 450
Austin, Texas
78746
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (512) 892-0400

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common stock, par value $0.01 per shareLPROThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 3, 2022,May 9, 2023, the registrant had 126,225,550120,653,954 shares of common stock, $0.01 par value per share, outstanding.





OPEN LENDING CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Page



Table of Contents
PART I.    FINANCIAL INFORMATION
Item 1. Financial Statements
OPEN LENDING CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
June 30, 2022December 31, 2021March 31, 2023December 31, 2022
  
AssetsAssetsAssets
Current assetsCurrent assetsCurrent assets
Cash and cash equivalentsCash and cash equivalents$167,695 $116,454 Cash and cash equivalents$210,589 $204,450 
Restricted cashRestricted cash3,412 3,055 Restricted cash4,713 4,069 
Accounts receivable, netAccounts receivable, net6,960 6,525 Accounts receivable, net6,620 5,721 
Current contract assets, netCurrent contract assets, net73,338 70,542 Current contract assets, net41,711 54,429 
Income tax receivableIncome tax receivable4,309 1,345 Income tax receivable6,530 9,714 
Other current assetsOther current assets3,341 4,873 Other current assets1,832 2,361 
Total current assetsTotal current assets259,055 202,794 Total current assets271,995 280,744 
Property and equipment, netProperty and equipment, net2,791 2,663 Property and equipment, net2,664 2,573 
Operating lease right-of-use assets, net4,904 5,189 
Non-current contract assets, net33,410 42,414 
Operating lease right-of-use asset, netOperating lease right-of-use asset, net4,459 4,610 
Contract assets, netContract assets, net24,231 21,001 
Deferred tax asset, netDeferred tax asset, net66,501 65,503 Deferred tax asset, net63,907 65,128 
Other non-current assets152 262 
Other assetsOther assets5,642 5,575 
Total assetsTotal assets$366,813 $318,825 Total assets$372,898 $379,631 
Liabilities and stockholders’ equityLiabilities and stockholders’ equityLiabilities and stockholders’ equity
Current liabilitiesCurrent liabilitiesCurrent liabilities
Accounts payableAccounts payable$421 $1,285 Accounts payable$741 $288 
Accrued expensesAccrued expenses6,105 3,984 Accrued expenses6,369 6,388 
Current portion of debtCurrent portion of debt3,906 3,125 Current portion of debt3,750 3,750 
Third-party claims administration liabilityThird-party claims administration liability3,037 3,050 Third-party claims administration liability4,713 4,055 
Other current liabilitiesOther current liabilities546 621 Other current liabilities1,173 626 
Total current liabilitiesTotal current liabilities14,015 12,065 Total current liabilities16,746 15,107 
Long-term debt, net of deferred financing costsLong-term debt, net of deferred financing costs140,959 143,135 Long-term debt, net of deferred financing costs142,829 143,683 
Non-current operating lease liabilities4,371 4,643 
Operating lease liabilitiesOperating lease liabilities3,930 4,082 
Other liabilitiesOther liabilities3,844 3,935 
Total liabilitiesTotal liabilities$159,345 $159,843 Total liabilities167,349 166,807 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies
Stockholders’ equityStockholders’ equityStockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstandingPreferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding— — Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding— — 
Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 126,225,550 shares outstanding as of June 30, 2022 and 128,198,185 shares issued and 126,212,876 shares outstanding as of December 31, 20211,282 1,282 
Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 120,591,873 shares outstanding as of March 31, 2023 and 128,198,185 shares issued and 123,646,059 shares outstanding as of December 31, 2022Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 120,591,873 shares outstanding as of March 31, 2023 and 128,198,185 shares issued and 123,646,059 shares outstanding as of December 31, 20221,282 1,282 
Additional paid-in capitalAdditional paid-in capital498,745 496,983 Additional paid-in capital500,530 499,625 
Accumulated deficitAccumulated deficit(236,159)(282,439)Accumulated deficit(203,281)(215,819)
Treasury stock at cost, 1,972,635 shares at June 30, 2022 and 1,985,309 at December 31, 2021, respectively(56,400)(56,844)
Treasury stock at cost, 7,606,312 shares at March 31, 2023 and 4,552,126 at December 31, 2022Treasury stock at cost, 7,606,312 shares at March 31, 2023 and 4,552,126 at December 31, 2022(92,982)(72,264)
Total stockholders’ equityTotal stockholders’ equity207,468 158,982 Total stockholders’ equity205,549 212,824 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$366,813 $318,825 Total liabilities and stockholders’ equity$372,898 $379,631 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Table of Contents
OPEN LENDING CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share data)

Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended March 31,
202220212022202120232022
RevenueRevenueRevenue
Profit shareProfit share$29,157 $38,842 $57,467 $66,572 Profit share$18,602 $28,310 
Program feesProgram fees20,731 20,597 40,457 35,508 Program fees17,301 19,726 
Claims administration and other service feesClaims administration and other service fees2,156 1,686 4,188 3,053 Claims administration and other service fees2,458 2,032 
Total revenueTotal revenue52,044 61,125 102,112 105,133 Total revenue38,361 50,068 
Cost of servicesCost of services5,085 4,140 9,873 7,502 Cost of services5,431 4,788 
Gross profitGross profit46,959 56,985 92,239 97,631 Gross profit32,930 45,280 
Operating expensesOperating expensesOperating expenses
General and administrativeGeneral and administrative7,968 8,381 15,450 16,593 General and administrative10,195 7,482 
Selling and marketingSelling and marketing3,994 2,954 7,727 5,351 Selling and marketing4,409 3,733 
Research and developmentResearch and development2,188 773 4,011 1,364 Research and development1,230 1,823 
Total operating expensesTotal operating expenses14,150 12,108 27,188 23,308  Total operating expenses15,834 13,038 
Operating incomeOperating income32,809 44,877 65,051 74,323 Operating income17,096 32,242 
Interest expenseInterest expense(1,124)(1,122)(1,927)(4,411)Interest expense(2,387)(803)
Interest incomeInterest income22 58 47 142 Interest income2,064 25 
Gain on extinguishment of tax receivable agreement— 55,422 — 55,422 
Loss on extinguishment of debt— — — (8,778)
Other expense— (2)— (133)
Income before income taxesIncome before income taxes31,707 99,233 63,171 116,565 Income before income taxes16,773 31,464 
Income tax expenseIncome tax expense8,581 23,267 16,891 27,737 Income tax expense4,235 8,310 
Net incomeNet income$23,126 $75,966 $46,280 $88,828 Net income$12,538 $23,154 
Net income per common shareNet income per common shareNet income per common share
BasicBasic$0.18 $0.60 $0.37 $0.70 Basic$0.10 $0.18 
DilutedDiluted$0.18 $0.60 $0.37 $0.70 Diluted$0.10 $0.18 
Weighted average common shares outstandingWeighted average common shares outstandingWeighted average common shares outstanding
BasicBasic126,221,689 126,230,752 126,218,710 126,515,343 Basic123,122,014 126,215,698 
DilutedDiluted126,222,366 126,274,197 126,219,115 126,554,082 Diluted123,424,322 126,216,197 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Table of Contents
OPEN LENDING CORPORATION
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited, in thousands, except share and unit data)




Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Treasury StockTotal Stockholders’
Equity
Common StockAdditional
 Paid-in
Capital
Accumulated
Deficit
Treasury StockTotal Stockholders’
Equity
SharesAmountAmountAmountSharesAmountAmountSharesAmountAmountAmountSharesAmountAmount
Balance as of December 31, 2021128,198,185 $1,282 $496,983 $(282,439)(1,985,309)$(56,844)$158,982 
Balance as of December 31, 2022Balance as of December 31, 2022128,198,185 $1,282 $499,625 $(215,819)(4,552,126)$(72,264)$212,824 
Share-based compensationShare-based compensation— — 1,281 — — — 1,281 Share-based compensation— — 1,844 — — — 1,844 
Restricted stock units issued, net of shares withheld for taxesRestricted stock units issued, net of shares withheld for taxes— — (207)— 5,079 168 (39)Restricted stock units issued, net of shares withheld for taxes— — (939)— 41,148 810 (129)
Shares repurchased, including excise taxShares repurchased, including excise tax— — — — (3,095,334)(21,528)(21,528)
Net incomeNet income— — — 23,154 — — 23,154 Net income— — — 12,538 — — 12,538 
Balance as of March 31, 2022128,198,185 $1,282 $498,057 $(259,285)(1,980,230)$(56,676)$183,378 
Share-based compensation— — 988 — — — 988 
Restricted stock units issued, net of shares withheld for taxes— — (300)— 7,595 276 (24)
Net income— — — 23,126 — — 23,126 
Balance as of June 30, 2022128,198,185 $1,282 $498,745 $(236,159)(1,972,635)$(56,400)$207,468 
Balance as of March 31, 2023Balance as of March 31, 2023128,198,185 $1,282 $500,530 $(203,281)(7,606,312)$(92,982)$205,549 
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Treasury StockTotal Stockholders’
Equity
SharesAmountAmountAmountSharesAmountAmount
Balance as of December 31, 2020128,198,185 $1,282 $491,246 $(428,406)(1,395,089)$(37,500)$26,622 
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Treasury StockTotal Stockholders’
Equity
SharesAmountAmountAmountSharesAmountAmount
Balance as of December 31, 2021Balance as of December 31, 2021128,198,185 $1,282 $496,983 $(282,439)(1,985,309)$(56,844)$158,982 
Share-based compensationShare-based compensation— — 701 — — — 701 Share-based compensation— — 1,281 — — — 1,281 
Restricted stock units issued, net of shares withheld for taxesRestricted stock units issued, net of shares withheld for taxes— — (207)— 5,079 168 (39)
Net incomeNet income— — — 12,862 — — 12,862 Net income— — — 23,154 — — 23,154 
Balance as of March 31, 2021128,198,185 $1,282 $491,947 $(415,544)(1,395,089)$(37,500)$40,185 
Share-based compensation— — 927 — — — 927 
Share repurchase— — — — (612,745)(20,000)(20,000)
Net income— — — 75,966 — — 75,966 
Balance as of June 30, 2021128,198,185 $1,282 $492,874 $(339,578)(2,007,834)$(57,500)$97,078 
Balance as of March 31, 2022Balance as of March 31, 2022128,198,185 $1,282 $498,057 $(259,285)(1,980,230)$(56,676)$183,378 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents
OPEN LENDING CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

Six Months Ended June 30,Three Months Ended March 31,
2022202120232022
Cash flows from operating activitiesCash flows from operating activitiesCash flows from operating activities
Net incomeNet income$46,280 $88,828 Net income$12,538 $23,154 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensationShare-based compensation2,269 1,628 Share-based compensation1,844 1,281 
Depreciation and amortization614 537 
Depreciation and amortization of property and equipmentDepreciation and amortization of property and equipment244 221 
Amortization of debt issuance costsAmortization of debt issuance costs101 83 
Non-cash operating lease costNon-cash operating lease cost285 268 Non-cash operating lease cost151 141 
Gain on extinguishment of tax receivable agreement— (55,422)
Loss on extinguishment of debt— 8,778 
Deferred income taxesDeferred income taxes(998)16,903 Deferred income taxes1,221 554 
Changes in assets & liabilities:Changes in assets & liabilities:Changes in assets & liabilities:
Accounts receivable, netAccounts receivable, net(435)(3,217)Accounts receivable, net(899)(1,535)
Contract assets, netContract assets, net6,208 (22,591)Contract assets, net9,488 5,504 
Other current and non-current assetsOther current and non-current assets1,477 (1,133)Other current and non-current assets515 3,066 
Accounts payableAccounts payable(885)(1,455)Accounts payable454 (1,090)
Accrued expensesAccrued expenses2,094 1,377 Accrued expenses(19)1,526 
Income tax payable/receivable(2,964)(1,720)
Income tax receivable, netIncome tax receivable, net2,817 (745)
Operating lease liabilitiesOperating lease liabilities(240)(349)Operating lease liabilities(135)(119)
Third-party claims administration liabilityThird-party claims administration liability(13)299 Third-party claims administration liability658 (21)
Other current and non-current liabilitiesOther current and non-current liabilities(105)252 Other current and non-current liabilities530 (88)
Net cash provided by operating activitiesNet cash provided by operating activities53,587 32,983 Net cash provided by operating activities29,508 31,932 
Cash flows from investing activitiesCash flows from investing activitiesCash flows from investing activities
Purchase of property and equipmentPurchase of property and equipment(364)(841)Purchase of property and equipment(36)(56)
Capitalized software development costsCapitalized software development costs(299)(130)
Net cash used in investing activitiesNet cash used in investing activities(364)(841)Net cash used in investing activities(335)(186)
Cash flows from financing activitiesCash flows from financing activitiesCash flows from financing activities
Proceeds from term loans— 125,000 
Proceeds from revolving facility— 50,000 
Payments on term loans(1,562)(167,628)
Payments on revolving facility— (25,000)
Payment of deferred financing costs— (1,669)
Shares withheld for taxes for restricted stock units(63)— 
Settlement of tax receivable agreement— (36,948)
Share repurchase— (20,000)
Payments on term loansPayments on term loans(938)(781)
Shares repurchasedShares repurchased(21,323)— 
Shares withheld for taxes related to restricted stock unitsShares withheld for taxes related to restricted stock units(129)(39)
Net cash used in financing activitiesNet cash used in financing activities(1,625)(76,245)Net cash used in financing activities(22,390)(820)
Net change in cash and cash equivalents and restricted cashNet change in cash and cash equivalents and restricted cash51,598 (44,103)Net change in cash and cash equivalents and restricted cash6,783 30,926 
Cash and cash equivalents and restricted cash at the beginning of the periodCash and cash equivalents and restricted cash at the beginning of the period119,509 104,148 Cash and cash equivalents and restricted cash at the beginning of the period208,519 119,509 
Cash and cash equivalents and restricted cash at the end of the periodCash and cash equivalents and restricted cash at the end of the period$171,107 $60,045 Cash and cash equivalents and restricted cash at the end of the period$215,302 $150,435 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Interest paidInterest paid$1,756 $3,776 Interest paid$2,537 $721 
Income tax paid, net20,853 12,452 
Income tax paid (refunded), netIncome tax paid (refunded), net197 8,501 
Non-cash investing and financing:Non-cash investing and financing:
Non-cash investing and financing:
Internally developed software costs accrued but not paid27 660 
Property and equipment accrued but not paid21 — 
Share-based compensation for capitalized software developmentShare-based compensation for capitalized software development11 — 
Capitalized software development costs accrued but not paidCapitalized software development costs accrued but not paid20 — 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1—Description of Business, Background and Nature of Operations
Open Lending Corporation (individually(either individually or together with its subsidiaries, as the context requires, the “Company”), headquartered in Austin, Texas, provides loan analytics, risk-based loan pricing, risk modeling and automated decision technology for automotive lenders throughout the United States (“U.S.of America (the “U.S.”), which allowsenables each lending institution to book incremental near-prime and non-prime automotive loans, coupled with real-time underwriting of loan default insurance, out of their existing business flow. The Company also operates as a third-party administrator that adjudicates insurance claims and refundspremium adjustments on its automotive loans.
The Company’s flagship product, Lenders Protection Platform (“LPP”), is a cloud-based automotive lending platform. LPP supports loans made to near-prime and non-prime borrowers and is designed to underwrite default insurance by linking automotive lenders to insurance companies. The platform uses risk-based pricing models that enable automotive lenders to assess the credit risk of a potential borrower using data driven analysis. The Company’s proprietary risk models project loan performance, including expected losses and prepayments in arriving at the optimal rate. LPP generates a risk-based, all-inclusive interest rate for a loan that is customized to each automotive lender, reflecting cost of capital, loan servicing and acquisition costs, expected recovery rates and target return on assets.
Nebula Acquisition Corporation (“Nebula”), our predecessor, was originally incorporated in Delaware on October 2, 2017 as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On June 10, 2020 (the “Closing Date”), Nebula consummatedcompleted a business combination (the “Business Combination”) pursuant to that certain Business Combination Agreement dated as of January 5, 2020 (as amended by that certain Amendment No. 1 and Waiver, dated as of March 18, 2020, that certain Amendment No. 2 and Consent, dated as of March 26, 2020, that certain Amendment No. 3, dated as of May 13, 2020, and that certain amendment No. 4, dated as of June 9, 2020, the “Business Combination Agreement”) by and among Nebula, Open Lending, LLC, a Texas limited liability company, BRP Hold 11, Inc., a Delaware corporation (“Blocker” (the “Blocker”), the Blocker’s sole stockholder, Nebula Parent Corp., a Delaware Corporation (“ParentCo”), NBLA Merger Sub LLC, a Texas limited liability company, NBLA Merger Sub Corp., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, as the Securityholder Representative.security holder representative, each as defined in the Business Combination Agreement (the “Business Combination”).
Unless the context otherwise requires, “we,” “us,” “our,” “Open Lending,” and the “Company” refers to Open Lending Corporation, the combined company and its subsidiaries following the Business Combination. “Open Lending, LLC” and “Nebula” refersrefer to Open Lending, LLC and Nebula Acquisition Corporation, respectively, prior to the Closing Date.
The Company has evaluated how it is organized and managed and has identified only 1one operating segment. All of the Company’s operations and assets are in the U.S., and all of its revenues are attributable to U.S. customers.
Note 2—Summary of Significant Accounting and Reporting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of Open Lending and all its subsidiaries that are directly or indirectly owned or controlled by the Company. All intercompany transactions and balances have been eliminated upon consolidation. Certain prior year amounts have been reclassified to conform to the Company’s current presentation. Such reclassifications had no effect on the Company’s previously reported net income, earnings per share, cash flows or retained earnings.accumulated deficit.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted from these unaudited condensed consolidated financial statements, as permitted by Securities and Exchange Commission (“SEC”) rules and regulations. The Company believes the disclosures made in these unaudited condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these unaudited condensed consolidated financial statements be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 (“Annual Report”).
The interim data includes all adjustments that are of a normal recurring nature, in the opinion of the Company’s management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three and six months ended June 30, 2022March 31, 2023 are not necessarily indicative of the Company’s operating results for the entire fiscal year ending December 31, 2022.
Concentrations of revenue and credit risks
The Company’s three largest insurance carrier partners accounted for 38%, 11% and 11% of the Company’s total revenue during the three months ended June 30, 2022 and 38%, 13% and 10% during the six months ended June 30, 2022. The Company’s two largest insurance carriers accounted for 43% and 24% of the Company’s total revenue during the three months ended June 30, 2021 and accounted for 43% and 23% for the six months ended June 30, 2021. In the event that one or more of the Company’s significant insurance carriers terminates their relationship with the Company, it could have a material and adverse effect on the Company’s business and, in turn, its revenue. Financial instruments that potentially subject the Company2023.
7

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(a) Concentrations of revenue and credit risks
The Company’s two largest insurance carrier partners accounted for 33% and 12% of the Company’s total revenue during the three months ended March 31, 2023 and accounted for 38% and 14% of the Company's total revenue during the three months ended March 31, 2022.
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, restricted cash, accounts receivable and contract assets to the extent of the amounts recorded on the balance sheets.
Cash and cash equivalents are deposited in commercial analysis accounts, money market funds and savings accountsU.S. Treasury securities at two financial institutions both with high credit standing. Restricted cash relates to funds held by the Company on behalf of the insurance carriers, delegated for the use of insurance claim payments. Restricted cash is deposited in commercial analysis accounts at one financial institution. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits of $250,000 per institution. The Company has not experienced any losses on its deposits of cash and cash equivalents and management believes the Company is not exposed to significant risks on such accounts.
At June 30, 2022,The Company’s accounts receivable and contract assets are derived from revenue earned from customers. The Company maintains an allowance for expected credit losses, which represents an estimate based primarily on market implied lifetime probabilities of default and loss severities for assets with similar risk characteristics. As these inputs are derived from market observations, they inherently include forward-looking expectations about macro-economic conditions. The allowance is evaluated quarterly by the Company had one customer that individually accounted for 10%adequacy by taking into consideration factors such as reasonableness of the Company’s net accounts receivable. At December 31, 2021, the Company had two customers that each represented 10%market implied loss statistics, historical lifetime loss data and credit quality of the customer base. Provisions for the allowance for expected credit losses attributable to bad debt are recorded as general and administrative expenses. Account balances deemed uncollectible are written off, net of actual recoveries. If circumstances related to specific customers change, the Company’s net accounts receivable.
estimate of the recoverability of its contract asset could be further adjusted. The Company does not have any material accounts receivable or contract assetassets receivable balances that are past due and has not written off any material balancebalances in its portfolio for the periods presented. The allowance for expected credit losses on accounts receivable and contract assets receivable, in the aggregate, was less than $0.2$0.1 million at June 30, 2022March 31, 2023 and December 31, 2021.2022.
At March 31, 2023 and December 31, 2022, the Company had one customer that individually accounted for 12% of the Company’s accounts receivable.
(b) Use of estimates and judgments
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and those differences may be material. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.
The most significant items subject to such estimates and assumptions include, but are not limited to, profit share revenue recognition and the corresponding impact on contract assets, the recognition of the valuations of share-based compensation arrangements and assessing the realizability of deferred tax assets. TheseThe Company bases its estimates although based on historical trends and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual historical trend and modeling, may potentially show significant variances over time.results could be materially different from those estimates.
In connection with profit share revenue recognition and the estimation of contract assets, under Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), the Company uses forecasts ofa forecast model to estimate variable consideration based on undiscounted expected future profit share to be received from the insurance carriers. The forecast model projects loan-level earned premiumpremiums and insurance claim payments. These forecasts arepayments driven by the projectionprojections of prepayment rate, loan defaults, prepaymentsdefault rate and default severity rates.of loss. These assumptions are based on the Company’s observationsderived from an analysis of the historical behavior for loans with similar risk characteristics. The assumptions also take intoperformance of the active loan portfolio, prevailing default and prepayment trends, and macroeconomic projections. Estimates of variable consideration generated by the forecast adjustments under various macroeconomic conditions, includingmodel are constrained to the current mixextent that it is probable that a significant reversal of revenue will not occur in future periods.
8

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company continually assesses the default and prepayment assumptions of the underlying portfolio of our insurance partners. As a result offorecast model against reported performance and lender delinquency data. The forecast model is updated to align the changes in factsdefault and circumstances and general market conditions for the three and six months ended June 30, 2022, management has accordingly adjusted these assumptions.prepayment rate projections with actual experience.
(c) Recently issued but not yet adopted accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform within Topic 848, which provides optional expedients and exceptions to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and are retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied.reform. The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company has not experienced anyno unintended outcomes or consequences of reference rate reform that would necessitate the adoption of this guidance. TheAs such, the Company will not need to consider the application ofhas considered this guidance relatedin relation to its credit agreementsexisting Credit Agreement, as such agreements provide for a replacement rate when LIBORdefined in Note 4—Debt and determined that it is discontinued. Thenot applicable (refer to the Credit Agreement discussion within Note 4—Debt).
Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or may adopt, as applicable, the Company believes none of these accounting pronouncements has materially impacted or will continue to closely monitor all potential instancesmaterially impact the Company’s consolidated financial position or results of reference rate reform to determine if the adoption of ASU 2020-04 becomes necessary in the future.operations.
8

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3—Contract Assets
Changes in the Company’s contract assets primarily result from the timing difference between the satisfaction of its performance obligation and the customer’s payment. The Company fulfills its obligation under a contract with a customer by transferring services in exchange for consideration from the customer. The Company recognizes contract assets when it transfers services to a customer, recognizes profit share revenue program fee revenue and claims administration services revenue (“TPA fees”) for amounts not yet billed and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional.
For performance obligations satisfied in previous periods, the Company evaluates and updates its profit share revenue forecast on a quarterly basis and adjusts contract assets accordingly. During the three and six months ended June 30,March 31, 2023 and 2022, contract asset adjustments attributable to profit share revenue forecast were $2.8adjustments resulted in an increase of $0.7 million and $5.5$2.6 million, respectively, as compared to contract asset adjustments of $11.8 million and $16.9 million, during the three and six months ended June 30, 2021, respectively.
Contract assets balances for the periods indicated below arewere as follows:
 Contract Assets
Profit
Share
TPA FeesProgram
Fees
Total
(in thousands)
Ending balance as of March 31, 2022$100,008 $1,360 $6,084 $107,452 
Increase due to new business generation26,333 2,155 20,731 49,219 
Change in estimates of revenue from performance obligations satisfied in previous periods2,824 — — 2,824 
Receivables transferred from contract assets upon billing the lending institutions— — (20,178)(20,178)
Payments received from insurance carriers(30,496)(2,078)— (32,574)
Provision for expected credit losses— 
Ending balance as of June 30, 2022$98,672 $1,437 $6,639 $106,748 
 
 Contract Assets
Profit
Share
TPA FeesProgram
Fees
Total
(in thousands)
Ending balance as of December 31, 2021$105,486 $1,316 $6,154 $112,956 
Increase due to new business generation52,002 4,185 40,457 96,644 
Change in estimates of revenue from performance obligations satisfied in previous periods5,465 — — 5,465 
Receivables transferred from contract assets upon billing the lending institutions— — (39,978)(39,978)
Payments received from insurance carriers(64,327)(4,065)— (68,392)
Provision for expected credit losses46 53 
Ending balance as of June 30, 2022$98,672 $1,437 $6,639 $106,748 
 Contract Assets
Profit
Share
Program
Fees
Claims Administration and Other Service FeesTotal
(in thousands)
Ending balance as of December 31, 2022$65,889 $7,932 $1,609 $75,430 
Increase of contract assets due to new business generation17,888 17,301 2,458 37,647 
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods714 — — 714 
Receivables transferred from contract assets upon billing the lending institutions— (17,577)— (17,577)
Payments received from insurance carriers(27,882)— (2,428)(30,310)
Provision for expected credit losses32 38 
Ending balance as of March 31, 2023$56,641 $7,661 $1,640 $65,942 
9


Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of June 30, 2022March 31, 2023 and December 31, 2021,2022, the portionCompany’s contract assets consisted of $41.7 million and $54.4 million, respectively, as the contract assets’ balanceportion estimated to be received within one year consisted of $73.3and $24.2 million and $70.5$21.0 million, respectively, andas the non-current portion of estimated to be received beyond one year consisted of $33.4 million and $42.4 million, respectively.year.
Contract Costs
The fulfillment costs associated with the Company’s contracts with customers do not meet the criteria for capitalization and therefore are expensed as incurred.
9

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4—Long-term Debt
Debt balances forThe following table provides a summary of the Company’s debt as of the periods indicated below were as follows:indicated:
June 30, 2022December 31, 2021March 31, 2023December 31, 2022
(in thousands)(in thousands)
Revolving Facility, matures in 2026$25,000 $25,000 
Term Loan due 2026121,094 122,656 
Less: unamortized deferred financing costs(1,229)(1,396)
Term Loan due 2027Term Loan due 2027$148,125 $149,063 
Revolving Credit FacilityRevolving Credit Facility— — 
Less: Unamortized deferred financing costsLess: Unamortized deferred financing costs(1,546)(1,630)
Total debtTotal debt144,865 146,260 Total debt146,579 147,433 
Less: current portion of debtLess: current portion of debt(3,906)(3,125)Less: current portion of debt(3,750)(3,750)
Total long-term debt, net of deferred financing costsTotal long-term debt, net of deferred financing costs$140,959 $143,135 Total long-term debt, net of deferred financing costs$142,829 $143,683 
Credit Agreement—Term Loan due 2027 and Revolving Credit Facility
On March 11, 2020,September 9, 2022, the Company entered into a credit agreementFirst Amendment to its existing Credit Agreement (“First Amendment”) with UBS A.G.Wells Fargo Bank, N.A., as the administrative agent, and the lenders from time to timefinancial institutions party thereto, (the “Credit Agreement”). Pursuant toas the Credit Agreement, the lenders thereto funded a term loan (the “Term Loan due 2027”) in a principal amount of $170.0 million bearing an interest rate per annum of LIBOR plus 6.5% (subject to a LIBOR floor of 1%), with a maturity date in March 2027.lenders. The Term Loan due 2027 was retired byFirst Amendment provided the Company paying off its outstanding principal and interest with proceeds from issuance of the Term Loan due 2026 and the Revolving Facility (both as defined below) in March 2021. The transaction was deemed a debt extinguishment under ASC Topic 405-20, “Liabilities—Extinguishments of Liabilities,” and accordingly, the Company recognized a non-cash debt extinguishment loss of $8.8 million, which was recorded under the caption loss on extinguishment of debt in the consolidated statements of operations during the six months ended June 30, 2021. The loss on debt extinguishment was calculated as the difference between the carrying amount of the debt and the price paid to retire the debt, which primarily consisted of the write-off of the unamortized deferred financing costs related to the Term Loan due 2027.
New Credit Agreement—Term Loan due 2026 and Revolving Credit Facility
On March 19, 2021, the Company entered into a credit agreement with Wells Fargo Bank, N.A. as the administrative agent (the “New Credit Agreement”), pursuant to which the lenders thereto (i) funded a senior secured term loancredit facilities in an aggregate principal amount of $125.0$300.0 million, maturing in March 2026which (i) established a term loan due 2027 with a principal amount of $150.0 million (the “Term Loan due 2026”2027”), and (ii) committed to provide a $50.0 million senior securedincreased the borrowing capacity on the existing revolving credit facility including a $10.0to $150.0 million letter of credit sub-facility, maturing in March 2026 (the “Revolving Credit Facility”), both scheduled to mature on September 9, 2027 (collectively, the “Credit Agreement”).
The Company used proceeds from the Term Loan due 2027 to pay off all outstanding amounts under its prior credit agreement and pay transaction costs related to the First Amendment. The remaining proceeds were used for working capital and other general corporate purposes. The transaction was treated as a debt modification under ASC Topic 470-50, Debt —Modifications and Extinguishments.
The obligations of the Company under the Term Loan due 2026 and the Revolving FacilityCredit Agreement are guaranteed by all of the Company’s U.S. subsidiaries and are secured by substantially all of the assets of the Company and its U.S. subsidiaries, subject to customary exceptions.
InterestBorrowings under the Term Loan due 2026 and the Revolving Facility are,Credit Agreement bear interest at the option of the Company,a rate equal to either at(i) an Alternate Base rate (“ABR”) or (ii) the term Secured Overnight Financing Rate (“SOFR”) plus 0.100% (“Adjusted SOFR”) plus a spread rangingthat is based upon the Company’s total net leverage ratio. The spread ranges from 0.75%0.625% to 1.50%, or LIBOR plus a spread ranging from 1.75%1.375% per annum for ABR loans and 1.625% to 2.50%.2.375% per annum for Adjusted SOFR loans. With respect to the ABR loans, interest will be payable at the end of each calendar quarter. With respect to the LIBORAdjusted SOFR loans, interest will be payable at the end of the selected interest period.period (at least quarterly). Additionally, there is aan unused commitment fee payable at the end of each quarter at a rate per annum ranging from 0.200%0.150% to 0.275%0.225% based on the average daily unused portion of the Revolving Credit Facility and other customary letter of credit fees. Pursuant to the New Credit Agreement, the interest rate spreadsspread and commitment fees increase or decrease in increments as the Company’s Funded Secured Debt/EBITDA ratio increaseincreases or decreases.
As of June 30, 2022, bothMarch 31, 2023, the Term Loan due 2026 and the Revolving Facility areCredit Agreement was subject a LIBORto an Adjusted SOFR rate of 1.66%4.776% plus a spread of 1.75%1.625% per annum. Commitment fees were accrued at 0.20%0.150% under the Revolving Credit Facility’s unused commitment balance of $25.0 million at June 30, 2022.
In connection with the issuance of the Term Loan due 2026 and the Revolving Facility, the Company incurred total deferred financing costs of $1.7 million, of which $1.2 million was allocated to the Term Loan due 2026 and $0.5 million was allocated to the Revolving Facility. The deferred financing costs were capitalized as a contra-liability against the principal balance of the loans and are amortized as interest expense using the effective interest method. Unamortized deferred financing costs were $1.2$150.0 million as of June 30, 2022.March 31, 2023. As of June 30, 2022,March 31, 2023, the weighted average effective interest rate on the Company’s outstanding borrowings was 3.64%6.647%.
10

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In connection with the Credit Agreement, the Company incurred aggregate deferred financing costs of $2.6 million, of which (i) $2.1 million was allocated to the related term loans and capitalized as a contra-liability against the principal balance of the term loans, and (ii) $0.5 million was allocated to the Revolving Credit Facility and included within Other assets on the unaudited Condensed Consolidated Balance Sheets. These deferred financing costs are amortized as interest expense using the effective interest method over the term of the Credit Agreement. Unamortized deferred financing costs related to the Term Loan due 2027 and the Revolving Credit Facility were $1.5 million and $0.3 million, respectively, as of March 31, 2023.
The New Credit Agreement contains a maximum total net leverage ratio financial covenant and a minimum fixed charge coverage ratio financial covenant, thatwhich are tested quarterly. The maximum total net leverage ratio is 3.5 to 1.03.5:1 for periodsany fiscal quarter ending on or prior to December 31, 2022,June 30, 2024 and then decreases to 3.0 to 1.03.0:1 for any fiscal quarter ending after December 31, 2022.June 30, 2024. The minimum fixed charge coverage ratio is 1.25 to 1.0.1.25:1. As of June 30, 2022,March 31, 2023, the Company was in compliance with all required covenants under the New Credit Agreement.
Note 5—Share-Based CompensationIncome Taxes
2020 Stock Option and Incentive Plan (the “2020 Plan”)
The 2020 Plan, approved on June 9, 2020, provides for the grant of stock options, stock appreciation rights, restricted stock units and other stock or cash-based awards. The Company initially reserved 9,693,750 shares, approximately 10% of the number of shares of its common stock outstanding upon the Closing Date, as the “Initial Limit” for the issuance of awards under the 2020 Plan. The 2020 Plan provides that beginning on January 1, 2021, the number of shares reserved and available for issuance under the plan will automatically increase each January 1st by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31st, or the “Annual Increase.” This limit is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of June 30, 2022, there were 18,801,465 shares reserved and available for issuance under the 2020 Plan, which includes the 4% annual increase in 2022 less restricted stock units, performance stock units and stock options granted under the 2020 Plan.
Share-based compensation expense recorded for each type of award is as follows:
Three Months Ended June 30,Six Months Ended
June 30,
2022202120222021
(in thousands)
Time-Based Restricted Stock Units$1,005 $458 $1,912 $691 
Performance-Based Restricted Stock Units(195)276 11 553 
Stock Options178 193 346 384 
Total share-based compensation expense$988 $927 $2,269 $1,628 
For performance-based restricted units, the Company evaluates the probability of achieving performance goals on a quarterly basis and recognizes share based compensation to the extent achievement of performance goals is considered probable. During the three months ended June 30,March 31, 2023 and 2022, the Company determined certain performance goals are improbablerecognized income tax expense of being achieved$4.2 million and recorded a reduction to share-based compensation$8.3 million, respectively, resulting in effective tax rates of $0.3 million representing a change in estimate from previously reported share-based compensation.25.2% and 26.5%, respectively. The Company evaluated the probability of achieving performance goals related to the performance-based restricted stock units awarded duringCompany’s income tax expense for the three months ended June 30,March 31, 2023 and March 31, 2022 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to state income tax expenses and determinedthe officer’s compensation limitation under Section 162m.
As of March 31, 2023, the Company has assessed whether it is more likely than not that achievementthe Company’s deferred tax assets will be realized. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, the reversal of its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years. The Company believes it is more-likely-than-not all deferred tax assets will be realized and has not recorded any valuation allowance as of March 31, 2023.
In 2023, the Company changed its policy to recognize interest and penalties related to income taxes as a component of income tax expense to better align the classification with the substance of the performance goals is not probable,associated transactions. This accounting policy change has no impact to net income or basic and accordingly, share-based compensation has not been recorded relateddiluted earnings per share, or to the awards.
During the three and six months ended June 30, 2022 and 2021, share-based compensation expense was allocated to cost of services, general and administrative, selling and marketing, and research and development, generally based on the functional responsibilities of the award recipient in the accompanying condensed consolidated statements of operations as follows:
 Three Months Ended June 30,Six Months Ended
June 30,
 2022202120222021
(in thousands)
General and administrative$643 $773 $1,565 $1,327 
Selling and marketing150 91 330 182 
Research and development111 34 206 62 
Cost of services84 29 168 57 
Total$988 $927 $2,269 $1,628 
11

Table of Contents
OPEN LENDING CORPORATION
Notes tounaudited Condensed Consolidated Financial Statements
(Unaudited)
The following table provides information related to the Company’s share-based compensation award activity of Operations, for the six months ended June 30, 2022:
Time-Based
Restricted Stock Units
Stock OptionsPerformance-Based
Restricted Stock Units
Number of AwardsWeighted Average Fair Value at Grant DateNumber of AwardsWeighted Average Exercise PriceNumber of AwardsWeighted Average Fair Value at Grant Date
Outstanding as of December 31, 2021231,625 $35.17 194,348 $33.56 99,289 $33.44 
Granted352,177 20.80 — — 139,662 16.11 
Vested(17,691)30.95 — — — — 
Forfeited or expired(22,752)23.32 (8,440)33.56 (4,874)33.44 
Outstanding as of June 30, 2022543,359 $26.49 185,908 $33.56 234,077 $23.10 
The following table reflects the future share-based compensation expense for the outstanding awards at June 30, 2022:
Unrecognized Share-based Compensation ExpenseWeighted Average Amortization Period
(in thousands)
Time-Based Restricted Stock Units$11,837 3.13 years
Performance-Based Restricted Stock Units4,296 2.07 years
Stock Options1,800 2.50 years
Total unrecognized share-based compensation expense$17,9332.81 years
any previous period.
Note 6—Net Income per Share
Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the applicable methods. The potentially dilutive common shares during the three and six months ended June 30,March 31, 2023 and 2022 include unvested and 2021 wereunexercised stock options and unvested time-based restricted stock units. The potentially dilutive common shares during the same periods did not include unvested stock options and performance-based restricted stock units containing unmetbecause the performance conditions.conditions of these awards have not been satisfied. The potentially dilutive common shares are included in the calculation of diluted net income per share only when their effect is dilutive.

1211

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders for the three and six months ended June 30, 2022March 31, 2023 and 2021:2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended March 31,
202220212022202120232022
(in thousands, except shares and per share data)(in thousands, except shares and per share data)
Basic net income per share:Basic net income per share:Basic net income per share:
NumeratorNumeratorNumerator
Net income attributable to common stockholdersNet income attributable to common stockholders$23,126 $75,966 $46,280 $88,828 Net income attributable to common stockholders$12,538 $23,154 
DenominatorDenominatorDenominator
Weighted average common shares126,221,689 126,230,752 126,218,710 126,515,343 
Weighted-average common shares outstandingWeighted-average common shares outstanding123,122,014 126,215,698 
Basic net income per share attributable to common stockholdersBasic net income per share attributable to common stockholders$0.18 $0.60 $0.37 $0.70 Basic net income per share attributable to common stockholders$0.10 $0.18 
Diluted net income per share:Diluted net income per share:Diluted net income per share:
NumeratorNumeratorNumerator
Net income attributable to common stockholdersNet income attributable to common stockholders$23,126 $75,966 $46,280 $88,828 Net income attributable to common stockholders$12,538 $23,154 
DenominatorDenominatorDenominator
Basic weighted average common shares126,221,689 126,230,752 126,218,710 126,515,343 
Dilutive effect of outstanding Time-Based Restricted Stock Units677 43,445 405 38,739 
Diluted weighted average common shares126,222,366 126,274,197 126,219,115 126,554,082 
Basic weighted-average common shares outstandingBasic weighted-average common shares outstanding123,122,014 126,215,698 
Dilutive effect of time-based restricted stock units outstandingDilutive effect of time-based restricted stock units outstanding302,308 499 
Diluted weighted average common shares outstandingDiluted weighted average common shares outstanding123,424,322 126,216,197 
Diluted net income per share attributable to common stockholdersDiluted net income per share attributable to common stockholders$0.18 $0.60 $0.37 $0.70 Diluted net income per share attributable to common stockholders$0.10 $0.18 
The following potentially dilutive outstanding securities as of June 30,March 31, 2023 and 2022 and 2021 were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive for the periods presented, or issuance of such shares is contingent upon the satisfaction of certain conditions that were not satisfied by the end of the periods:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Unvested Time-Based Restricted Stock Units543,359 — 543,359 — 
Unvested Performance-Based Restricted Stock Units234,077 99,289 234,077 99,289 
Unvested and not exercised Stock Options185,908 199,764 185,908 199,764 
Total963,344 299,053 963,344 299,053 
Three Months Ended March 31,
20232022
Unvested and unexercised stock options155,897 188,540 
Unvested time-based restricted stock units362,751 459,431 
Unvested performance-based restricted stock units159,965 94,415 
Total678,613 742,386 
Note 7—Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, the Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following:
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
13

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would
12

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.
Assets and Liabilities Measured at Fair Value Hierarchyon a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. These assets, including property and equipment and operating lease right-of-use asset, are subject to fair value adjustments whenever events or circumstances indicate the carrying value of the assets may not be recoverable and are subsequently written down to fair value when impaired. During the three months ended March 31, 2023 and 2022, the Company had no impairment charges related to its property and equipment or operating lease right-of-use asset.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company’s financial assets measured at fair value on a recurring basis were as follows:
 TotalFair value measurement as of March 31, 2023
Level 1Level 2Level 3
(in thousands)
Cash equivalents:
Money market funds$4,955 $4,955 $— $— 
U.S. Treasury securities169,305 169,305 — — 
Total$174,260 $174,260 $ $ 
 TotalFair value measurement as of December 31, 2022
Level 1Level 2Level 3
(in thousands)
Cash equivalents:
Money market funds$35,915 $35,915 $— $— 
U.S. Treasury securities151,511 151,511 — — 
Total$187,426 $187,426 $ $ 
The amounts reported in the unaudited Condensed Consolidated Balance Sheets as current assets or current liabilities, including Cash, Restricted cash, Accounts receivable, net, Current contract assets, net, Other current assets, Accounts payable and Accrued expenses, each approximate their fair value due to the short-term maturities of the instruments.
Financial Instruments Not Carried at Fair Value
The following table presents the placement inprovides the fair value hierarchy of the Company’s debt, net of deferred financing costsfinancial assets that are not measured at June 30, 2022 and December 31, 2021:fair value:
 Carrying valueFair value measurement at June 30, 2022
Level 1Level 2Level 3
(in thousands)
Liabilities:
Debt at fair value$144,865 $— $144,865 $— 
Total$144,865 $ $144,865 $ 
Carrying valueFair value measurement at December 31, 2021March 31, 2023December 31, 2022
Level 1Level 2Level 3
(in thousands)
(in thousands)(in thousands)Carrying valueFair valueCarrying valueFair value
Liabilities:Liabilities:Liabilities:
Debt at fair value$146,260 $— $146,260 $— 
DebtDebt$146,579 $146,579 $147,433 $147,433 
TotalTotal$146,260 $ $146,260 $ Total$146,579 $146,579 $147,433 $147,433 
 
The carrying amount of the Company’s debt approximates its fair value due to its variable interest rate that is tied torate. The fair value was determined using the current LIBORAdjusted SOFR as of March 31, 2023 and December 31, 2022 plus an applicable spread. spread, a Level 2 classification in the fair value hierarchy.
13

Table of Contents
OPEN LENDING CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of any level for the periods ended June 30, 2022March 31, 2023 and December 31, 2021.
The Company does not have any long-lived asset which is being measured at fair value on a recurring basis.
Note 8—Income Taxes
During the three and six months ended June 30, 2022, the Company recognized income tax expense of $8.6 million and $16.9 million, respectively, as compared to income tax expense of $23.3 million and $27.7 million, respectively, during the three and six months ended June 30, 2021. The effective tax rate for the three and six months ended June 30, 2022 was 27.1% and 26.7%, respectively, as compared to 23.4% and 23.8%, respectively during the three and six months ended June 30, 2021. The Company’s income tax expense for the three and six months ended June 30, 2022 and June 30, 2021 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to state income tax expenses and the officer’s compensation limitation under Section 162m.
As of June 30, 2022, the Company has assessed whether it is more likely than not that its deferred tax assets will be realized. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, the reversal of its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years. The Company believes it is more-likely-than-not all deferred tax assets will be realized and has not recorded any valuation allowance as of June 30, 2022.
The Company has evaluated the aggregate exposure for uncertain tax positions for all open tax years and concluded that the Company and its predecessor have no material uncertain tax positions as of June 30, 2022 or for any open tax years. When applicable, tax penalties and interest are recognized within general and administrative expenses in the condensed consolidated statements of operations. The Company has not recorded any penalties or interest related to uncertain tax positions as of June 30, 2022 or for any open tax years.
14

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of Open Lending Corporation’s unaudited condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the condensedaudited consolidated financial statements and notes thereto on Form 10-K for the year ended December 31, 2021.in our Annual Report. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” set forth elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our Annual Report. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is intended to mean the business and operations of Open Lending Corporation and its condensed consolidated subsidiaries.
15

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our financial performance;
changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
expansion plans and opportunities;
the impact of the relative strength of the overall economy, including its effect on unemployment, consumer spending and consumer demand for automotive products;
the growth in loan volume from our top ten automotive lenders relative to that of other automotive lenders and associated concentration of risks;
the costs of services in absolute dollars and as a percentage of revenue;
general and administrative expenses, in absolute dollars and as a percentage of revenue;
selling and marketing expenses in absolute dollars and as a percentage of revenue;
research and development expenses in absolute dollars and as a percentage of revenue;
the impact of projected operating cash flows and available cash on hand on our business operations in the future;
the turnover in automotive lenders, as well as varying activation rates and volatility in usage of our Lenders Protection Platform (“LPP”)LPP by automotive lenders;
the outcome of any known and unknown litigation and regulatory proceedings, including such legal proceedings that may be instituted in connection with the Business Combination and transactions contemplated thereby;
the ability to maintain the listing of our common stock on Nasdaq;the Nasdaq Stock Market LLC;
our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably;
expenses associated with our growth as a result of demands on our operational, marketing, compliance and accounting infrastructure;
regulatory agreements between us and state agencies regarding issues including automotive lender conduct and oversight and loan pricing;
changes in applicable laws or regulations;
applicable taxes, inflation, supply chain disruptions, including global hostilities and responses thereto, interest rates and the regulatory environment; and
the effects of the ongoing COVID-19coronavirus (“COVID-19”) pandemic on our business.
All forward-looking statements are based on information and estimates available to us at the time of this Quarterly Report on Form 10-Q and are not guarantees of future financial performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.Report. You should not rely upon forward-looking statements as predictions of future events.
16

Table of Contents
Business Overview
We are a leading provider of lending enablement and risk analytics to credit unions, regional banks, finance companies and Original Equipment Manufacturers.the captive finance companies of automakers. Our clients,customers, collectively referred to herein as automotive lenders, make automotive consumer loans to underserved near-prime and non-prime borrowers by harnessing our risk-based interest rate pricing models, powered by our proprietary data and real-time underwriting of automotive loan default insurance coverage from insurers. Since our inception in 2000, we have facilitated approximately $16.0over $19.2 billion in automotive loans, accumulating overaccumulated more than 20 years of proprietary data and developingdeveloped over two million unique risk profiles. We currently serve 437 active lenders.
We specialize in risk-based pricing and modeling and provide automated decision-technology for automotive lenders throughout the U.S. We believe that we addresstarget the financing needs of near-prime and non-prime borrowers, or borrowers with a credit bureau score generally between 560 and 699, who are underserved in the automotive finance industry. Traditional lenders focus on prime borrowers, where an efficient market has developed with interest rate competition that benefits borrowers. Independent finance companies focus on sub-prime borrowers. Borrowers thatwho must utilize the near-prime and non-prime automotive lending market have fewer lenders focused on loans with longer terms or higher advance rates. As a result, many near-prime and non-prime borrowers turn to sub-prime lenders, resulting in higher interest rate loan offerings than such borrower’s credit profile often merits or warrants. We seek to make this market more competitive, resulting in more attractive loan terms.
Our flagship product, LPP, enablesis a cloud-based automotive lending platform. LPP supports loans made to near-prime and non-prime borrowers and is designed to underwrite default insurance by linking automotive lenders to make loans that are largely insured against losses from defaults. We have been developing and advancing the proprietary underwritinginsurance companies. The platform uses risk-based pricing models used by LPP for over 20 years. We believe LPP provides significant benefits to our growing ecosystem ofwhich enable automotive lenders automobile dealers, borrowersto assess the credit risk of a potential borrower using data driven analysis. Our proprietary risk models project loan performance, including expected losses and insurers.
A key element ofprepayments in arriving at the optimal rate. With five-second decisioning, LPP is the ability to facilitategenerates a risk-based, all-inclusive interest rates that are appropriaterate for each loan and lender and electronically submitted to our automotive lenders within approximately five seconds after we receive a loan application. Our interest rate pricingthat is customized to each automotive lender, reflecting the cost of capital, loan servicing costs, loanand acquisition costs, expected recovery rates and target return on assets of each automotive lender. Using ourassets. LPP risk models we project monthlyuse a proprietary score in assessing and pricing risk on automotive loan performance results, including expected lossesapplications. This score combines credit bureau data and prepaymentsFair Credit Reporting Act-compliant alternative consumer data to more effectively assess risk and determine the appropriate insurance premium for automotive lendersany given loan application.
LPP is powered by technology that use LPP. The product of this process is a risk-baseddelivers speed and scalability in providing interest rate inclusivedecisioning to automotive lenders. It supports the full transaction lifecycle, including credit application, underwriting, real-time insurance approval, settlement, servicing, invoicing of elements to recover all projected costs, programinsurance premiums and fees and insurance premiums, givenadvance data analytics of automotive lender’s portfolio under the program. Through electronic system integration, our software technology connects us to certain parties in our ecosystem.
A key element of LPP is the unique database that drives risk decisioning using data accumulated for more than 20 years. When a loan is insured at origination, all attributes of the transaction are stored in our database. Through the claims management process, we ultimately obtain loan life performance data on each insured loan. Having granular origination and performance data allows our data scientists and actuaries to return a targeted returnconstantly evolve and refine risk models, based on asset goal.actual experience and third-party information sources.
We believe that our market opportunitythe automotive industry is significant.still seeking solutions to address the near-prime and non-prime borrower market. The near-prime and non-prime automotive loan origination market is a large, underserved sector, estimated at $270 billion annually. We are currently serving less thanserve approximately 2% of this market, providing a significant growth opportunity. In addition, our market opportunity related to the refinancing of near-prime and non-prime automotive loans is estimated at $40 billion annually.
Executive Overview
We facilitate certified loans and have achieved financial success by increasing our penetration of the near-prime and non-prime automotive loan market while diversifying our customer base and refining our data analysis capabilities.
We facilitated 44,531 and 88,47532,408 certified loans during the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to 46,408 and 79,72643,944 certified loans during the same periods in 2021, respectively.three months ended March 31, 2022.
Total revenue was $52.0 million and $102.1$38.4 million for the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to $61.1$50.1 million and $105.1 million, respectively, during the same periods in 2021.three months ended March 31, 2022.
Operating income was $32.8 million and $65.1$17.1 million for the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to $44.9$32.2 million and $74.3 million, respectively, in same periods in 2021.the three months ended March 31, 2022.
17

Table of Contents
Net income was $23.1 million and $46.3$12.5 million for the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to net income of $76.0$23.2 million and $88.8 million, respectively, for the same periods in 2021.three months ended March 31, 2022.
Adjusted EBITDA was $34.0 million and $67.8$21.2 million for the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to $46.1$33.8 million and $76.3 million, respectively, during the same periods in 2021.three months ended March 31, 2022. Information regarding use of Adjusted EBITDA, a non-GAAP measure, and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, is included in “Non-GAAP Financial Measures.”
17

Table of Contents
Highlights
The table below summarizes allthe dollar value of insured loans certified byfacilitated and the number of new contracts we signed with automotive lenders duringfor the periods indicated.three months ended March 31, 2023 and 2022.
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Certified loans44,531 46,408 88,475 79,726 
Value of insured loans facilitated (in thousands)$1,293,525 $1,170,461 $2,475,898 $1,950,822 
Average loan size per certified loan$29,043 $25,221 $27,984 $24,469 
Number of contracts signed with automotive lenders18223636

Three Months Ended March 31,
20232022
Certified loans32,408 43,944 
Value of insured loans facilitated (in thousands)$951,893 $1,182,567 
Average loan size per certified loan$29,372 $26,911 
Number of contracts signed with automotive lenders818
Historically, we have defined active“active lenders” as lenders as certifyingwho certify at least one loan during the preceding 12 months. As of June 30,March 31, 2023 and 2022, and 2021, we had 414437 and 380411 active lenders, respectively. The table below represents lender count information for lenders with certified loan activity during the periods indicated.
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Lenders certifying loans at the beginning of the period377 328 396 354 
New lenders (1)10 20 31 33 
Net change in lenders (2)(16)(31)(25)
Lenders certifying loans at the end of the period371348396362

Three Months Ended March 31,
20232022
Lenders certifying loans at beginning of period (1)
396 357 
New lenders (2)
21 
Net change in lenders (3)
(11)(1)
Lenders certifying loans at end of period394 377 
(1) Lenders certifying loans at the beginning of the period represents lenders who certified loans during the three months ended December 31, 2022 and 2021, respectively.
(2) New lenders using LPP to certify loans for the first time during the period.
(2)(3) Net change in the number of lenders previously onboarded and using LPP to certify loans during the period. Certain lenders experience periods of inactivity followed by periods of activity, causing the lender count to fluctuate from period to period.
Key Performance Measures
We review several key performance measures, discussed below, to evaluate business and results, measure performance, identify trends, formulate plans and make strategic decisions. We believe that the presentation of such metrics is useful to our investors and counterparties because such metrics are used to measure and model the performance of similar companies, such as ours, with recurring revenue streams.
Certified Automotive Loans
We refer to “certified loans” as the number of loans facilitated through LPP during a given period. Additionally, we refer to loans with a one-time upfront program fee payment as “single-pay” loans. For certain loans, the program fee is paid to us over 12 monthly installments and we refer to these loans as “monthly-pay” loans.
Average Program Fee
We define “average program fee” as the total program fee revenue recognized for a period divided by the number of certified loans in that period.
Insurers’
18

Table of Contents
Underwriting Profit
We define “insurers’ underwriting“underwriting profit” as the total underwriting profit expected to be received by insurers over the expected life of the insured loans.
18

Table of Contents
Insurers’ Earned Premium
We define “insurers’ earned“earned premium” as the total insurance premium earned by insurers in a given period. Earned premiums were $70.9$81.8 million and $138.1$59.5 million, respectively, for the three and six months ended June 30,March 31, 2023 and 2022, and $53.9 million and $100.6 million for the same periods in 2021, respectively.
Recent Developments
Fourth Insurance Carrier Partner
On May 2, 2022, we signed a program management agreement with a fourth insurance carrier partner, Arch Specialty Insurance Company, a part of Arch Capital Group Ltd., who will act as an additional provider of credit default insurance policies for LPP, from which we can earn profit share revenue and claims administration fees.
Key Factors Affecting Operating Results
Our future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including the growth in the number of financial institutions and transaction volume, competition, profit share assumptions and industry trends and general economic conditions.
Key factors affecting our operating results include the following:
Growth in the Number of Active Automotive LendersFinancial Institutions
The growth trend in active automotive lenders using LPP is a critical factor directly affecting revenue and financial results. It influences the number of loans funded on LPP, and, therefore,thus the fees that we earn and the cost of the services that we provide. Growth in our active automotive lender relationships will depend on our ability to retain existing automotive lenders and add new automotive lenders.ones.
Competition
We face competition to acquire and maintain automotive lenders as customers, as well as competition to facilitate the funding of near-prime and non-prime auto loans. For LPP, which combines lending enablement, risk analytics, near-prime and non-prime auto loan performance data, real-time loan decisioning, risk-based pricing and auto loan default insurance, is a unique solution for which we dohave not believe there areidentified any direct competitors. The emergence of direct competitors, providing risk, analytics and loss mitigation, which are core elements of our business, could materially impact our ability to acquire and maintain automotive lender customers. The near-prime and non-prime lending market is highly fragmented and competitive. We face competition from a diverse landscape of consumer lenders, including traditional banks and credit unions, as well as alternative technology-enabled lenders. The emergence of other insurers, in competition with our insurers, could materially impact our business.
Profit Share Assumptions
We rely on assumptions to calculate the value of profit share revenue, which is our share of insurance partners’ underwriting profit. For example, positive change in estimates associated with historicalhistoric vintages generate an increase in our contract asset, additional revenues and future expected cash flows, while negative change in estimates generate a decrease in our contract asset, a reduction in revenues and future expected cash flows. To the extent these assumptions change, our profit share revenue will be adjusted. Please refer to Critical Accounting Policies and Estimates for more information on these assumptions.
Industry Trends and General Economic Conditions
Our results of operations may be impacted by the relative strength of the overall economy and its effect on unemployment, consumer spending and consumer demand for automotive products. As general economic conditions improve or deteriorate, the amount of disposable income consumers have tends to fluctuate, which in turn impacts consumer spending levels and the willingness of consumers to take out loans to finance purchases. Specific economic factors such as inflation, rising interest rate levels, changes in monetary and related policies, market volatility, supply chain disruptions, consumer confidence, the impact of the pandemic and, particularly, the unemployment rate also influence consumer spending and borrowing patterns.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 which includes, among other provisions, changes to the U.S. corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” exceeding $1 billion and a 1% excise tax on net repurchases of stock after December 31, 2022.
19

Table of Contents
Concentration
Our threetwo largest insurance carrier partners accounted for 38%, 11%33% and 11%12% of our total revenue during the three months ended June 30, 2022,March 31, 2023 and 38%, 13% and 10% during the six months ended June 30, 2022. Our two largest insurance carriers accounted for 43%38% and 24%14% of the Company’sour total revenue during the three months ended June 30, 2021, and accounted for 43% and 23% for the six months ended June 30, 2021.March 31, 2022. Termination or disruption of these relationships could materially and adversely impact our revenue. See “Item 1A—Risk Factors—Risks Related to Our Business—If we lose one or more of our insurance carriers and are unable to replace their commitments, it could have a material adverse effect on our business” in our Annual Report.
Components of Results of Operations
Total Revenues
Our revenue is generated through three streams: (i) profit share paid to us by insurance partners, (ii) program fees paid to us by automotive lenders and (iii) claims administration service fees paid to us by insurance partners.
Profit share. Profit share represents our participation in the underwriting profit of third-party insurance partners who provide automotive lenders with credit default insurance on loans thethose lenders make using LPP. We receive a percentage of the aggregate monthly insurance underwriting profit. Monthly insurance underwriting profit is calculated as the monthly earned premium less expenses and losses (including reserves for incurred but not reported losses), with losses accrued and carried forward for future profit share calculations.
Program fees. Program fees are paid by automotive lenders for the use of LPP, which provides loan analytics solutions and automated issuance of credit default insurance with third-party insurance providers. These fees are based on a percentage of each certified loan’s original principal balance and are recognized as revenue upfront upon receiptcertification of the loan by the consumer.lending institution. The fee percentage rate varies by type of loan.based on the agreement with each lender. For loans with a one-time upfront payment, there is a sliding scale of rates representing volume discounts to the lender with fees generallyfor certain lenders. Fees are typically capped at $600 per loan. This cap may vary for certain large volume lenders.loan or calculated as a percentage of the funded loan amount. For monthly paymonthly-pay loans, the fee paid by the lender is a flat 3% of the totalinitial amount of the loan and is not capped.
Claims administration service fees. Claims administration service fees are paid to us by third-party insurers for credit default insurance claims adjudication services performed by our subsidiary Insurance Administrative Services, LLC on its insured servicing portfolio. The administration fee is equal to 3% of the monthly insurance earned premium for as long as the loan remains outstanding.
Cost of Services and Operating Expenses
Cost of services. Cost of services primarily consists of fees paid to third partythird-party partners for lead-generation efforts, compensation and benefits expenses relating to employees engaged in lenders’ servicesautomotive lender customer service, product support and claims administration activities, fees paid for actuarial services related to the development of the monthly premium program, fees for integration with the loan origination systems of automotive lenders and fees paid to credit bureaus and data service providers for credit applicant data. In the near to intermediate term, we generally expect cost of services to increaseremain constant as a percentage of our program fee revenue as we continue to expand our third-party partner relationships.revenue.
General and administrative expenses. General and administrative expenses are comprised primarily of expenses relating to corporate-level employee compensation and benefits, non-cash share-based compensation, travel, meals and entertainment expenses, data and software expenses and professional and consulting fees. In the near to intermediate term, we expect general and administrative expenses to remain relatively constant.increase as a result of our headcount growth.
Selling and marketing expenses. Selling and marketing expenses consist primarily of compensation and benefits of employees engaged in selling and marketing activities. We generally expect selling and marketing expenses to increase as a percentage of our program fee revenue in the near to immediate term as we continue to expandfocus on our sales and marketing team.go-to-market strategy.
Research and development expenses. Research and development expenses primarily consist of employee compensation and benefits expenses for employees engaged in ongoing research and development of our software technology platform. We generally expect our research and development costsexpenses to increaseremain constant in absolute dollars as our business continues to grow.the near term.
20

Table of Contents
Other Income (Expense)
Interest expense. Interest expense primarily includes interest payments and the amortization of deferred financing costs in connection with the issuance of theour debt.
Loss on extinguishment of debtInterest income. LossInterest income primarily includes interest earned on extinguishment of debt primarily reflects unamortized deferred financing costs, which were written off in connection with the refinancing of our Term Loan due 2027 on March 19, 2021.money market funds and U.S. Treasury securities.
20

Table of Contents
Results of Operations
The following table sets forth our results of operations for the periods indicated:three months ended March 31, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended March 31,
20222021% Change20222021% Change20232022% Change
($ in thousands)($ in thousands)
RevenueRevenueRevenue
Profit shareProfit share$29,157 $38,842 (25)%$57,467 $66,572 (14)%Profit share$18,602 $28,310 (34)%
Program feesProgram fees20,731 20,597 %40,457 35,508 14 %Program fees17,301 19,726 (12)%
Claims administration and other service feesClaims administration and other service fees2,156 1,686 28 %4,188 3,053 37 %Claims administration and other service fees2,458 2,032 21 %
Total revenueTotal revenue52,044 61,125 (15)%102,112 105,133 (3)%Total revenue38,361 50,068 (23)%
Cost of servicesCost of services5,085 4,140 23 %9,873 7,502 32 %Cost of services5,431 4,788 13 %
Gross profitGross profit46,959 56,985 (18)%92,239 97,631 (6)%Gross profit32,930 45,280 (27)%
Operating expensesOperating expensesOperating expenses
General and administrativeGeneral and administrative7,968 8,381 (5)%15,450 16,593 (7)%General and administrative10,195 7,482 36 %
Selling and marketingSelling and marketing3,994 2,954 35 %7,727 5,351 44 %Selling and marketing4,409 3,733 18 %
Research and developmentResearch and development2,188 773 183 %4,011 1,364 194 %Research and development1,230 1,823 (33)%
Total operating expensesTotal operating expenses14,150 12,108 17 %27,188 23,308 17 % Total operating expenses15,834 13,038 21 %
Operating incomeOperating income32,809 44,877 (27)%65,051 74,323 (12)%Operating income17,096 32,242 (47)%
Interest expenseInterest expense(1,124)(1,122)— %(1,927)(4,411)(56)%Interest expense(2,387)(803)197 %
Interest incomeInterest income22 58 (62)%47 142 (67)%Interest income2,064 25 8156 %
Gain on extinguishment of tax receivable agreement— 55,422 (100)%— 55,422 (100)%
Loss on extinguishment of debt— — — %— (8,778)(100)%
Other expense— (2)(100)%— (133)(100)%
Income before income taxesIncome before income taxes31,707 99,233 (68)%63,171 116,565 (46)%Income before income taxes16,773 31,464 (47)%
Income tax expenseIncome tax expense8,581 23,267 (63)%16,891 27,737 (39)%Income tax expense4,235 8,310 (49)%
Net incomeNet income$23,126 $75,966 (70)%$46,280 $88,828 (48)%Net income$12,538 $23,154 (46)%
Key Performance Measures
The following table sets forth key performance measures for the periods indicated:three months ended March 31, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended March 31,
20222021% Change20222021% Change20232022% Change
Certified loansCertified loans44,531 46,408 (4)%88,475 79,726 11 %Certified loans32,408 43,944 (26)%
Single-paySingle-pay39,526 41,156 (4)%79,087 70,098 13 %Single-pay27,534 39,561 (30)%
Monthly-payMonthly-pay5,005 5,252 (5)%9,388 9,628 (2)%Monthly-pay4,874 4,383 11 %
Average program feesAverage program fees$466 $444 %$457 $445 %Average program fees$534 $449 19 %
Single-paySingle-pay$427 $415 %$423 $416 %Single-pay$493 $420 17 %
Monthly-payMonthly-pay$768 $673 14 %$743 $660 13 %Monthly-pay$767 $714 %
21

Table of Contents
Comparison of Three and Six Months Ended June 30,March 31, 2023 and 2022 and 2021
Revenue
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended March 31,
202220212022202120232022
(in thousands)(in thousands)
Profit share
Profit ShareProfit Share
New certified loan originationsNew certified loan originations$26,333 $27,017 $52,002 $49,673 New certified loan originations$17,888 $25,669 
Change in estimated future revenuesChange in estimated future revenues2,824 11,825 5,465 16,899 Change in estimated future revenues714 2,641 
Total profit shareTotal profit share29,157 38,842 57,467 66,572 Total profit share18,602 28,310 
Program feesProgram fees20,731 20,597 40,457 35,508 Program fees17,301 19,726 
Claims administration and other service feesClaims administration and other service fees2,156 1,686 4,188 3,053 Claims administration and other service fees2,458 2,032 
Total revenueTotal revenue$52,044 $61,125 $102,112 $105,133 Total revenue$38,361 $50,068 
Total revenue decreased by $9.1$11.7 million, or 15%23%, duringfor the three months ended June 30, 2022, as compared to the same period last year, driven primarily by a $9.0 million decrease in estimated future revenue on loans originated in historic vintages associated with changes in expected portfolio performance between periods.
Total revenue decreased by $3.0 million, or 3%, during the six months ended June 30, 2022,March 31, 2023, as compared to the same period in 2021,2022, driven primarily by the $11.4a $9.7 million decrease in estimated future revenue on loans originated in historic vintages associated with changes in expected portfolio performance between periods and offset by the $2.3 million increase in anticipated profit share associated with new certified loan originations, as well asrevenue and a $4.9$2.4 million increasedecrease in program fees, and a $1.1 million increase inwhich was partially offset by increased claims administration and other service feesfee revenues of $0.4 million, as compared to the same period in 2021.three months ended March 31, 2022.
Profit share revenue decreased by $9.7 million, and $9.1 million, or 25% and 14%34%, during the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to the same periodsperiod in 2021.2022. During the three months ended June 30, 2022,March 31, 2023, we recorded $26.3$17.9 million in anticipated profit share associated with 44,53132,408 new certified loans for an average of $591$552 per loan as compared to $27.0$25.7 million in anticipated profit share associated with 46,40843,944 certified loans for an average of $582$584 per loan during the three months ended June 30, 2021. During the six months ended June 30, 2022, we recorded $52.0 million in anticipated profit share associated with 88,475 certified loans for an average of $588 per loan as compared to $49.7 million in anticipated profit share associated with 79,726 certified loans for an average of $623 per loan during the six months ended June 30, 2021.March 31, 2022.
In addition, during the three and six months ended June 30, 2022,March 31, 2023 we recorded $2.8$0.7 million and $5.5 million, respectively, in estimated future revenue onprofit share related to business in historic vintages as a result ofprimarily due to lower than anticipated claimsseverity of losses and prepayment rates, partially offset by higher loan defaults. During the three months ended March 31, 2022, we recorded $2.6 million in estimated future profit share revenues on certified loans originated in historic vintages primarily due to lower than anticipated loan default rates and severity of losses, as compared to $11.8 million and $16.9 million in estimated future revenue on business in historic vintages during the three and six months ended June 30, 2021, respectively.partially offset by higher prepayment rates.
Program fees revenue increaseddecreased by $0.1 million and $4.9$2.4 million, or 1% and 14%12%, for the three and six months ended June 30, 2022, respectively,March 31, 2023 as compared to the same periodsperiod in 2021.2022. The increasedecrease in program feefees revenue for the three months ended June 30, 2022 was driven by higher unit economics per certified loan, offset by a 4%26% decrease in certified loan volume, as compared to the prior year period. Thepartially offset by a 19% increase in program fee revenue for the six months ended June 30, 2022 was driven by an 11% increase in certified loan volumes and by higher unit economics per certified loan, as compared to the prior year period.
Revenue from claims administration and other service fees, which primarily represents 3% of our insurance partners’ annual earned premium, increased by $0.5$0.4 million, and $1.1 million, or 28% and 37%21%, for the three and six months ended June 30, 2022,March 31, 2023 as compared to the same periodsperiod in the prior year, due to 32% anda 37% increasesincrease in total earned premiums.
Cost of Services, Gross Profit and Gross Margin
Three Months Ended March 31,
20232022
(in thousands)
Total revenue$38,361 $50,068 
Cost of services5,431 4,788 
Gross profit$32,930 $45,280 
Gross margin86 %90 %
Cost of services increased $0.6 million, or 13% during the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to higher employee compensation and benefit costs associated with the growth of our implementation, claims administration and product support operations.
Gross profit decreased by $12.4 million, or 27%, during the three months ended March 31, 2023, as compared to the same period in 2022, primarily driven by a decrease in anticipated profit share, program fees and change in estimated future revenues based on historic vintages as discussed above.
22

Table of Contents
Cost of Services, Gross ProfitOperating Expenses, Operating Income and GrossOperating Margin
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended March 31,
202220212022202120232022
($ in thousands)(in thousands)
Total revenueTotal revenue$52,044$61,125$102,112$105,133Total revenue$38,361$50,068
Cost of services5,0854,1409,8737,502
Gross profitGross profit$46,959$56,985$92,239$97,631Gross profit32,93045,280
Gross margin90 %93 %90 %93 %
Operating expensesOperating expenses
General and administrativeGeneral and administrative10,1957,482
Selling and marketingSelling and marketing4,4093,733
Research and developmentResearch and development1,2301,823
Total operating expensesTotal operating expenses15,83413,038
Operating incomeOperating income$17,096$32,242
Operating marginOperating margin45 %64 %
Cost of servicesGeneral and administrative expenses increased by $1.0$2.7 million, or 23%, and $2.3 million, or 32%36%, during the three and six months ended June 30, 2022, respectively,March 31, 2023, as compared to the same periods in the priorperiod last year, primarily driven by increased professional fees of $1.0 million, higher employee compensation and benefit costs of $0.8 million due to increases in employee compensation costs associated with the growthexpansion of our implementationcorporate administration team in 2022 and claims administration organizations, increases in fees paid to third party partners for lead-generation efforts, increases in actuarial fees,business taxes of $0.8 million.
Selling and increases in credit applicant data fees.
Gross profit decreasedmarketing expenses increased by $10.0$0.7 million, or 18%, during the three months ended June 30, 2022, as compared to the same period in 2021, driven primarily by a decrease in anticipated profit share on historic business as discussed above. Gross profit decreased by $5.4 million, or 6%, during the six months ended June 30, 2022, as compared to the same period in 2021, driven primarily by a decrease in anticipated profit share on historic business as discussed above, partially offset by increases in program fees and claims administration service fees.
Operating Expenses, Operating Income and Operating Margin
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
($ in thousands)
Total revenue$52,044$61,125$102,112$105,133
Gross profit46,95956,98592,23997,631
Operating expenses
General and administrative7,9688,38115,45016,593
Selling and marketing3,9942,9547,7275,351
Research and development2,1887734,0111,364
Total operating expenses14,15012,10827,18823,308
Operating income$32,809$44,877$65,051$74,323
Operating margin63 %73 %64 %71 %
General and administrative expenses decreased by $0.4 million, or 5%, during the three months ended June 30, 2022 as compared to the same period last year, driven primarily by decreases in performance-based employee compensation expenses. General and administrative expenses decreased by $1.1 million, or 7%, during the six months ended June 30, 2022, as compared to the same period last year, driven primarily by $1.3 million of decreases in professional fees as we reduce our reliance on outside consultants in conducting financial reporting and compliance functions, and partially offset by $0.4 million in increased travel expenses associated with the lifting of related restrictions.
Selling and marketing expenses increased by $1.0 million, or 35%, during the three months ended June 30, 2022, as compared to the same period last year, driven primarily by increases in travel and business development associated with increased levels of activity as a result of the lifting of related restrictions. Selling and marketing expenses increased by $2.4 million, or 44%, during the six months ended June 30, 2022, as compared to the prior year period, primarily due to an increase in employee compensation and recruiting costs associated with the growth of our sales and marketing organization, as well as increases in expenses related to travel and business development associated with increased levels of activity as a result of the lifting of related restrictions.
Research and development expenses increased by $1.4 million, or 183%, and $2.6 million, or 194%, during the three and six months ended June 30, 2022, respectively, as compared to the same periods in the prior year, primarily due to increases in employee compensation costs associated with the growth of our research and development organization to support continued enhancements to our flagship product.
23

Table of Contents
Operating income decreased by $12.1 million, or 27%, for the three months ended June 30, 2022,March 31, 2023 as compared to the prior year period, primarily driven by decreased estimated profit share on historic business, as well as increases in cost of services, and operating expenses related to selling andincreased marketing and researchbusiness development costs of $0.5 million.
Research and development expenses decreased by $0.6 million, or 33%, during the three months ended March 31, 2023, as discussed above.compared to the same period in the prior year, primarily due to decreased employee compensation and benefits in line with our shift in focus to product support and the development of internal use software.
Operating income for the three months ended March 31, 2023 decreased by $9.3$15.1 million, or 12%47%, for the six months ended June 30, 2022, as compared to the prior year period, primarily driven by a decrease indecreased estimated profit share, on historic business as well as increases in cost of services and operating expenses offset by increases in anticipated profit share associated with new certified loan originationsrelated to general and administrative and selling and marketing, as well as increases in program fees and claims administration service fees.discussed above.
Interest Expense
During the three months ended March 31, 2023 and 2022, interest expense was $2.4 million and $0.8 million, respectively. Interest expense increased $1.6 million or 197% for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, as a result of higher borrowing costs and higher outstanding debt balances during 2023.
Interest Income
During the three and six months ended June 30, 2022,March 31, 2023 interest expense was $1.1income increased $2.0 million and $1.9 million, respectively, as comparedprimarily due to $1.1 million and $4.4 million during the three and six months ended June 30, 2021, respectively. Interest expense decreased $2.5 million or 56% for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, as a result of lower borrowing costs and lower outstanding debt balances during 2022.interest earned on U.S. Treasury securities.
Income Taxes
During the three and six months ended June 30,March 31, 2023 and 2022, we recognized income tax expense of $8.6$4.2 million and $16.9$8.3 million, respectively, as compared to $23.3 million and $27.7 million for the same periods in 2021.respectively. The effective tax rate for the three and six months ended June 30, 2022March 31, 2023 was 27.1% and 26.7%25.2%, respectively, as compared to an effective tax rate of 23.4% and 23.8%, respectively,26.5% for the same periods in 2021.three months ended March 31, 2022. Income tax expense decreased $14.7$4.1 million or 63% and $10.8 million, or 39%49% during the three and sixmonths ended June 30, 2022, respectively,March 31, 2023 as compared to the same periods in 2021,three months ended March 31, 2022, primarily as a result of the 68% and 46% decrease in income before income taxes offset by an increase in the effective tax rate.taxes.
Liquidity and Capital Resources
Cash Flow and Liquidity Analysis
We assess liquidity primarily in terms of our ability to generate cash to fund operating and investing activities. A significant portion of our cash from operating activities is derived from our profit share arrangements with our insurance partners, which are subject to judgments and assumptions and is, therefore, subject to variability. We
23

Table of Contents
believe that our existing cash resources and revolving credit facilityRevolving Credit Facility will provide sufficient liquidity to fund our near-term working capital needs. We regularly evaluate alternatives for managing our capital structure and liquidity profile in consideration of expected cash flows, growth and operating capital requirements and capital market conditions. Refer to “CriticalCritical Accounting Policies and Estimates”Estimates in this Quarterly Report on Form 10-Q and our Annual Report for a full description of the related estimates, assumptions and judgments.
Based on our assessment of the underlying provisions and circumstances of our contractual obligations, other than the risks that we and other similarly situated companies face with respect to the condition of the capital markets (as described in “Risk Factors” in our Annual Report), there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur that would have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.
The following table provides a summary of cash flow data:
Six Months Ended June 30,Three Months Ended March 31,
2022202120232022
(in thousands)(in thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$53,587 $32,983 Net cash provided by operating activities$29,508 $31,932 
Net cash used in investing activitiesNet cash used in investing activities(364)(841)Net cash used in investing activities(335)(186)
Net cash used in financing activitiesNet cash used in financing activities(1,625)(76,245)Net cash used in financing activities(22,390)(820)
Cash Flows from Operating Activities
Our cash flows provided by operating activities reflect net income adjusted for certain non-cash items and changes in operating assets and liabilities.
24

Table of Contents
The following table summarizes the non-cash adjustments in the operating activities in the statementunaudited Condensed Statement of cash flows:Cash Flows:
Six Months Ended June 30,Three Months Ended March 31,
2022202120232022
(in thousands)(in thousands)
Net incomeNet income$46,280 $88,828 Net income$12,538 $23,154 
Deferred income taxes and other non-cash expenses2,170 19,336 
Non-cash losses— (46,644)
Non-cash reconciling adjustmentsNon-cash reconciling adjustments3,561 2,280 
Change in contract assetsChange in contract assets6,208 (22,591)Change in contract assets9,488 5,504 
Change in other assets and liabilitiesChange in other assets and liabilities(1,071)(5,946)Change in other assets and liabilities3,921 994 
Net cash provided by operating activitiesNet cash provided by operating activities$53,587 $32,983 Net cash provided by operating activities$29,508 $31,932 
Net cash provided by operating activities for the six months ended June 30, 2022 is primarily attributable to operating income increaseddecreased by the net change in contract assets, other assets and liabilities and reduced by income taxes paid. The increase in net cash provided by operating activities of $20.6$2.4 million for the sixthree months ended June 30, 2022,March 31, 2023 as compared to the sixthree months ended June 30, 2021,March 31, 2022. The decrease was primarily attributable to higherdecreased cash collections of $7.1 million related to reduced profit share, payments from insurance carriers and increased cash inflows from program fees and claims administration service fee revenues, a $4.5 million increase in cash payments related to higher certified loan volume.cost of services and operating expenses and a $1.8 million increase in interest payments. This decrease in cash was offset by an $8.3 million reduction in income tax payments and $2.0 million increase in interest income received during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
Cash Flows from Investing Activities
For the sixthree months ended June 30,March 31, 2023 and 2022, and 2021, net cash used in investing activities was $0.4$0.3 million and $0.8$0.2 million, respectively. For the sixthree months ended June 30,March 31, 2023 and 2022, and 2021, the investments primarily related to computer software developed for internal use.
Cash Flows from Financing Activities
Our cash flows used in and provided by financing activities primarily consist of share repurchases, payments of debt and deferred financing costs and proceeds from debt.costs.
24

Table of Contents
For the sixthree months ended June 30, 2022,March 31, 2023, net cash used in financing activities was $1.6$22.4 million and is primarily related to principal payments of our Term Loan due 2026.
For the six months ended June 30, 2021, net cash used in financing activities was $76.2 million. The cash used primarily consisted of $36.9 million in early termination and settlement of the tax receivable agreement, $20.0 million related to our repurchase of 612,7453,095,334 shares of our common stock held in treasury stock for a total of $21.5 million, including commissions and debt principal payments of $167.6excise tax.
For the three months ended March 31, 2022, net cash provided by financing activities was $0.8 million and is primarily related to thea principal payment in full of the Term Loanour term loan due 2027. In addition, we paid down our Revolving Facility by $25.0 million. The cash inflow includes $175.0 million in proceeds associated with our New Credit Agreement entered into March 19, 2021 which refinanced our existing debt, less $1.7 million in deferred financing costs associated with this facility.2026.
Debt
As of June 30, 2022,March 31, 2023, we had no amounts outstanding amounts of $121.1under our Revolving Credit Facility and $148.1 million related to theoutstanding under our Term Loan due 2026 and $25.02027.
Share Repurchase Program
On November 17, 2022, the Board of Directors authorized a share repurchase program allowing the Company to repurchase up to $75.0 million relatedof the Company’s outstanding common stock until November 17, 2023 (the “Share Repurchase Program”). Repurchases may be made at management’s discretion from time to time on the open market. The Share Repurchase Program may be suspended, amended, or discontinued at any time. Pursuant to the Revolving FacilityShare Repurchase Program, the Company repurchased 3,095,334 shares at an average price of $6.87 for a total of $21.3 million, excluding excise tax, during the three months ended March 31, 2023, leaving $35.5 million available under our Share Repurchase Program as of March 31, 2023. These shares were recorded to Treasury stock, at cost in the New Credit Agreement that we entered into on March 19, 2021, proceeds fromunaudited Condensed Consolidated Balance Sheets, which were used primarilyincludes $0.2 million of excise tax expected to paybe paid in April 2024. This excise tax payable is included within Other liabilities in the Term Loan due 2027 in full and provide cash for general corporate purposes.unaudited Condensed Consolidated Balance Sheets.
DividendDividends
Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants in our existing indebtedness and may be limited by the agreements governing other indebtedness that we or our subsidiaries may incur in the future.
Non-GAAP Financial Measures
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate its operating performance, generate future operating plans and make strategic decisions, including those relating to operating expenses and the allocation of internal
25

Table of Contents
resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. In addition, these measures provideThis measure further provides useful measures foranalysis of period-to-period comparisons of our business, as they removeit excludes the effect of certain non-cash items and certain variable charges. Adjusted EBITDA is defined as GAAP net income excluding interest expense, income taxes, depreciation and amortization expense of property and equipment and share-based compensation expense, gain on extinguishment of tax receivable agreement and loss on extinguishment of debt.expense. Adjusted EBITDA margin is defined as Adjusted EBITDA expressed as a percentage of total revenue.
25

Table of Contents
The following table presents a reconciliation of GAAP net income to Adjusted EBITDA for each of the periods indicated:
Adjusted EBITDAAdjusted EBITDAThree Months Ended
June 30,
Six Months Ended
June 30,
Adjusted EBITDAThree Months Ended March 31,
202220212022202120232022
(in thousands)(in thousands)
Net incomeNet income$23,126 $75,966 $46,280 $88,828 Net income$12,538 $23,154 
Non-GAAP adjustments:Non-GAAP adjustments:Non-GAAP adjustments:
Interest expenseInterest expense1,124 1,122 1,927 4,411 Interest expense2,387 803 
Income tax expenseIncome tax expense8,581 23,267 16,891 27,737 Income tax expense4,235 8,310 
Depreciation and amortization expense226 196 447 389 
Share-based compensation expense988 927 2,269 1,628 
Gain on extinguishment of tax receivable agreement— (55,422)— (55,422)
Loss on extinguishment of debt— — — 8,778 
Depreciation and amortization of property and equipmentDepreciation and amortization of property and equipment244 221 
Share-based compensationShare-based compensation1,844 1,281 
Total adjustmentsTotal adjustments10,919 (29,910)21,534 (12,479)Total adjustments8,710 10,615 
Adjusted EBITDAAdjusted EBITDA34,045 46,056 67,814 76,349 Adjusted EBITDA$21,248 $33,769 
Total revenueTotal revenue$52,044 $61,125 $102,112 $105,133 Total revenue$38,361 $50,068 
Adjusted EBITDA marginAdjusted EBITDA margin65 %75 %66 %73 %Adjusted EBITDA margin55 %67 %
For the three and six months ended June 30, 2022,March 31, 2023, Adjusted EBITDA decreased by $12.0$12.5 million, or 26% and $8.5 million, or 11%37%, respectively, as compared to the same periodsthree months ended March 31, 2022. Adjusted EBITDA margin for the three months ended March 31, 2023 decreased to 55% as compared to 67% in 2021.the three months ended March 31, 2022. The decrease in Adjusted EBITDA during the three and six months ended June 30, 2022March 31, 2023 reflects our reduced revenue and increased cost of services and operating expenses during the decrease in operating income primarily driven by the decrease in estimated future revenues on historical vintages.current quarter.
Critical Accounting Policies and Estimates
There have not been any material changes during the three and six months ended June 30, 2022March 31, 2023 to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report. Please refer to “PartPart II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”Estimates in our Annual Report for further description of our critical accounting policies and estimates.
Contractual Obligations
We had no material changes in our contractual commitments and obligations during the three and six months ended June 30, 2022March 31, 2023 from the amounts listed under “PartPart II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations”Obligations in our Annual Report.

26

Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our operations include activities in the U.S. These operations expose us to a variety of market risks, including the effects of changes in interest rates and changes in consumer attitudes toward vehicle ownership. We monitor and manage these financial exposures as an integral part of our overall risk management program.
Market Risk
In the normal course of business, we are exposed to market risk and have established policies designed to protect against the adverse effects of this exposure. We are exposed to risks associated with general economic conditions and the impact of the economic environment on the willingness of consumers to finance auto purchases. Consumer spending and borrowing patterns related to auto purchases are influenced by economic factors such as unemployment rates, inflation, interest rate levels, changes in monetary and related policies, market volatility and overall consumer confidence. We also face risk from competition to acquire, maintain and develop new relationships with autoautomotive lenders as well as competition from a wide variety of autoautomotive lenders who are (or are affiliated) with financial institutions and have capacity to hold loans on their balance sheets.
Concentration Risk
We rely on our three largest insurance partners for a significant portion of our profit share and claims administration service fee revenue. Termination or disruption of these relationships could materially and adversely impact our revenue. See “Item 1A—Risk Factors—Risks Related to Our Business—If we lose one or more of our insurance carriers and are unable to replace their commitments, it could have a material adverse effect on our business” in our Annual Report.
Interest Rate Risk
Our earnings and cash flows are subject to fluctuations due to changes in interest rates on investment of available cash balances in money market funds and U.S. Treasury securities. Our New Term Loan due 2027 also exposes us to changes in short-term interest rates since interest rates on the underlying obligations are variable.
As of June 30, 2022,March 31, 2023, we had outstanding amounts of $121.1$148.1 million under the Term Loan due 2026 and $25.0 million under the Revolving Facility, both of2027, which areis scheduled to mature on September 9, 2027. There were no amounts outstanding under the Revolving Credit Facility as of March 19, 2026.31, 2023. Borrowings under the New Credit FacilityAgreement bear interest at a rate equal to either the ABR or LIBORAdjusted SOFR plus a spread that is based upon our total net leverage ratio. The spread ranges from 1.75%1.625% to 2.50%2.375% per annum for LIBOR loans and 0.75% to 1.50% for ABRAdjusted SOFR loans. We are also charged an unused commitment fee that ranges from 0.200%0.150% to 0.275%0.225% per annum on the average daily unused portion of the Revolving Credit Facility, which is paid quarterly in arrears and is based on our total net leverage ratio.
27

Table of Contents
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, or SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matterregardless of how well they were designed and operated,are operating, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, on Form 10-Q, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(f) or 15d-15(f) of the Exchange Act during the period covered by this Quarterly Report, on Form 10-Q, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28

Table of Contents
PART II.    OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this Quarterly Report, on Form 10-Q, we were not a party to any material legal proceedings. In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
This section supplementsIn addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and updates certain of the information foundother cautionary statements described under Part I, Item 1A. “Risk Factors” ofin our Annual Report, based on information currently known to us and recent developments since the date of the Annual Report filing. The matters discussed below should be read in conjunction with the risks described in Part I, Item 1A. “Risk Factors” ofwhich could materially affect our Annual Report. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the Annual Report.business, financial condition or future results. Additional risks and uncertainties not presentlycurrently known to us or that we currently believedeem to be immaterial also may alsomaterially and adversely affect our business, financial condition or future results.
The global economic impacts of Russia’s invasion of Ukraine could adversely affect There have been no material changes in our business, financial condition or operating results.
Russia’sinvasion of Ukraine and the resulting economic sanctions imposed by the international community have impacted the global economy, particularly with respect to shortages in materials and increased costs for transportation and energy. These events have disrupted and may continue to disrupt the supply chains of Original Equipment Manufacturers and their captive finance companies, which may lead to fewer vehicles being produced, fewer automotive loans overall and diminished demand for LPP. Theinvasion of Ukraine by Russia also could lead to other supply chain disruptions, increased inflationary pressures, and volatility in global markets and industries that could negatively impact our operations. Furthermore, the potential for retaliatory acts of cyberwarfarerisk factors from Russia against U.S. companies in response to increasing sanctions on Russia could result in increased cyber-attacks against us. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results, and the effects of the ongoing conflict in Ukraine could heighten many of our known risksthose described in Part I, Item 1A, “Risk Factors” in ourthe Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information with respect to our repurchases of shares of common stock during the three months ended June 30, 2022.March 31, 2023.
PeriodTotal number of shares purchased (1)Average price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs
4/1/2022-4/30/2022— — 
5/1/2022-5/31/20221,684$14.20 
6/1/2022-6/30/2022
Total1,684$14.20 
Period
Total number of shares purchased (1)
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs (2)
Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (2)
1/1/2023-1/31/202317,342 $7.08 — $57.0 
2/1/2023-2/28/202397,606$7.32 96,900 $56.3 
3/1/2023-3/31/20232,998,434$6.95 2,998,434 $35.5 
Total3,113,3823,095,334 
(1)    Consists ofIncludes 17,342 shares in January 2023, 706 shares in February 2023 and no shares in March 2023 which were purchased from employees to satisfy their tax withholding obligations related to share-based awards that vested during those months.
(2)    On November 17, 2022, our Board of Directors authorized share repurchases under the period.

Share Repurchase Program for up to $75.0 million, effective through November 17, 2023.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
29

Table of Contents
Item 5. Other Information
None.Insider Trading Arrangements
On March 15, 2023, John J. Flynn, Chairman of our Board of Directors, entered into a 10b5-1 sales plan (the “Flynn 10b5-1 Sales Plan”) intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Flynn 10b5-1 Sales Plan will be in effect until the earlier of (1) June 14, 2024 and (2) the date on which an aggregate of 1,200,000 shares of the Company’s common stock have been sold under the 10b5-1 Sales Plan.
3029

Table of Contents
Item 6. Exhibits
NumberDescription
10.1Ø ØØ3.1
3.2
10.1
31.1*
31.2*
32.1**
32.2**
101*The following financial statements from Open Lending Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022,March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets
(ii) Condensed Consolidated Statement of Operations
(iii) Condensed Consolidated Statements of Stockholder’sChanges in Stockholders’ Equity
(iv) Condensed Consolidated Statements of Cash Flows
(v) Notes to Condensed Consolidated Financial Statements
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
ØPortions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
ØØCertain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request.
*Filed herewith.
**Furnished herewith.


3130

Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
OPEN LENDING CORPORATION
/s/ John FlynnKeith A. Jezek
John J. FlynnKeith A. Jezek
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Charles D. Jehl
Charles D. Jehl
August 5, 2022May 10, 2023Chief Financial Officer
(Principal Financial and Accounting Officer)

3231