LPRO - Earnings call transcript Q2 2022 | Open Lending Corporation

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Operator

Good afternoon, and welcome to Open Lending’s Second Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, today’s conference call is being recorded.

On the call today are John Flynn, Chairman and CEO; Ross Jessup, President and COO; and Chuck Jehl, CFO. Earlier today, the company posted second quarter 2022 earnings release to its Investor Relations website. In the release, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call.

August like and you represent other view of I’d may this the begin, as estimates contain forward-looking today, we to that remind call company’s Before XXXX. X, statements that events any disclaims these reflect to Open or Lending obligation circumstances. statements update to future more results implied Please for to from expressed earnings or differ such the today’s that statements. factors to and our materially concerning refer with could with filings release SEC information cause actual those pass the call Mr. over And now to I’ll Flynn. ahead. go Please

John Flynn

industry afternoon, Thanks I quarter XXXX of again good And discuss Open us prior for and trends performance in given the for Open quarter and lastly, the the then for relative year. joining and highlights operator, and will second today industry current are performing earnings you, Thank economic auto conditions. the Lending’s cycles. and will remainder of everyone. we our thoughts results the Ross financials will go Chuck the for over how Lending’s call. conference briefly current then discuss

For line to levels semiconductor continued supply with still with shortages The low the is results headwinds inventory industry dealer challenges. modestly chain our were global our our to industry in results economic and despite growing challenging facing expectations the quarter-over-quarter. the quarter, continued of due our second chip business and

continued both the Ukraine, XXXX, Russia’s half and equally and indications transaction dampened of of of In lockdowns were stabilize near would Instead, auto to the we at on consumers. XX fuel monetary July. year and non-prime lead recovery. impact collectively our beginning results basis quarter first has performed high been the compared The expectation second there year. these the addition, to of and notable were Federal our tightening significant, inflation to budgets impact consumer borrowing invasion Even When business record Reserve’s conditions volume of effects on of the and Asia lowest impact in sentiment inflationary and the of in seen the and our inflated Despite half and year that values the in response higher XX used the pushed that headwinds, well. of affordability history. higher more June level car the to high point industry the hike then has to consumer’s began fundamentals second the costs have company’s supply

Our XXXX. current full to auto year full expectations for with projected at XXXX in Open year are line originations Lending be

auto originations run While XX% lending the many year-over-year. over at current down will the be rates implies banks universal of

remain growing deep control, to our So banks. In management with what by on we can increased our we focused particular we including credit TAM. the significant of have we’ve individuals experience The XX%. strategy more hired and of and half loan and in the teams year, first in in go-to-market our auto sales the space investing unions account capture sales origination

to take even of ourselves players some base actively quality in market flat holding period employee are share. we during this hiring our talent and high are reducing or economic While their uncertainty, ecosystem positioning

worth have XX% loans unions, It we early, grew primarily business, noting investments. year-over-year. Although tractions seen non-OEM credit certified the these on our during quarter, is second good that

lenders quarter, customers certify XX the had in new and the During signed XX first we quarter. their loan

their second base XXXX. QX grew as compared quarter in certification our non-OEM also XXXX, volume with top We of existing XX the by customer our increasing further XX% customers to

growing development onboarding and and signing from invest our support large associated as auto has Early loan and loan support focus protection for to prior up totals prepared our listing. administration certified our contract to billion recent times study for of investing resources. well $XXX revenue. us to from prepared the origination, a These and initiatives claims the is reporting and indications now improving continuing growth, a according first approximately support by area infrastructure and by platform our public lenders improved are as third-party in enhancing Another TAM, to lender which investments on capabilities which to been assessment in X% to cycle all onboarding, the

is to penetrated analysis, addition, perform leaving In a billion than macroeconomic backdrop. continue on significant our in X% less TAM the $XX test market approximately is for there which quarter to auto of the certs with current even represents recent we well, TAM related have refinance opportunity, the XX% to share, growth. room Based and expected

the is The consumer is beneficiary the credit being we non-prime lenders lender. down underserved offer ecosystem needed to customers receives to not various their of loans to make existing and near provide customers. prime other retail range otherwise now are and even relationships offering environment The access The a deepening As you a consumers loans bring in together that where each. program players more value from larger the We than squeezed. and higher forge today’s new the more compelling who to with often that to in portfolio consumer’s Lenders benefits risk amounts, very payments, auto which proposition with important loan know, we made Protection lenders ultimate that helping enable our with rates ever. through of relationships yields our customer’s better exceed make appropriate affordability lower with is would

economic A-rated proposition In consumers, and data, and A investments proprietary slower widen years potentially various with data, business excited retail gets head we business XX addition and partners. our talent. underserved as moat our growth. even resiliency strategic continues to technology our the in new auto ecosystem the our make to over any through our X long-term We players This more few and the help the reminders we considerable about our and cycle a in to value our around in supports mission exclusive us confidence opportunities. we both decision business second have as of believe relationships with into and massive X about of lenders moat insurance TAM underwriting to our growing

First economic the our contractions. our this optimize all underwriting at models portfolio and our risk in process of second the discipline maintain adjusted from during will foremost, quarter, and perspective. underwriting we And to a for times we our rigor health in

not risk As we managing we flexibility. financial target you rates will will to do balance and we maintain ensure balance rates, never in were but the prudently expense we all sheet at end, growth commitment of industry continue excess to risk. take our aware, growth continue the to manage to our sheet of In

details recession are currently the will like I the performed Our to industry, comparison auto business XXXX. fundamentals as seeing what strong. are to well to the to how provide call on outlook lending XXXX we in more during our not of and over Ross? would turn industry the Ross long-term as the who

Ross Jessup

Thanks, John.

I stated, like focus John As on to two would today. topics

increase vehicle historical the half value June First, the up used remain an still now decreased XXXX, continued May used X.X% at used pre-pandemic, of prices and is compared versus let in year me increase X.X% noticeably in trends. turn highs. from the year but first to to prices to $XX,XXX $XX,XXX XX%. vehicle XX index Manheim for auto industry Wholesale Average we’re of car XXXX year. price June

clearly and XXXX. inventory began this continued SAAR year. is to have X.X an vehicle expectations new year, this indication vehicle XXXX more The downward by rate we estimates million building been New measured units at of Xx industry dollars are compared a a of revised approximately per June vehicle levels. offering indicator June Average noticeably vehicle per in per challenges. historical supply side XXXX, to incentives vehicle, we’re below of as incentive $X,XXX In leading inventory OEMs availability $X,XXX compared

ever million units And been sales levels. vehicle SAAR X the the While grow as on further at has the below us of these been XX high vehicle road average forecasted of of X.X% next million currently opportunity old, grow demand AUM a years facing quickly as finally, adding the considering but are running units at to age our headwinds new ahead. X number over the per is the for years, could is and historical clearly industry, to five the new of pent-up to vehicle number over it’s more

my move on second topic. to to Now

continue compare conditions XXXX prior contrast specifically against current to and XXXX. and We economic recessions,

deposits can that volumes value volumes return credit the And and used through to suggesting auto year. both within sales downturn. pre-crisis a declined recession, levels last time while in last of grew the vehicles grow in unions to used that loan recession, decreased a the year continue During each in

the will reached lenders its during normal remaining tight using the lessons it levels of thick to protection Given supply, score. financial learned our belief company the that not is versus the LP price as lenders decline precipitously goals. versus risk-based XX% have crisis. model from XX% enabled improve the The pricing targeted their great and thin current as did

due market to total Some into creating will prime in market. economic near-prime growth addressable our fall the customers the conditions,

the in consumer be to lending space. about industry and to appetite carrier issue to turn are Auto further to cars great need that payments you QX we can increase as as and an spending. in an as the full over call XXXX the are loss but our performed not the defaults Chuck? to work. the Chuck well expect asset auto levels economic car discretionary you your better would typically drive Accordingly, financial to lending create updated than to the insurers. an your year for With our We consumer other over I on has classes thoughts can’t competencies crisis adage car, as optimistic house will sleep core in provide in capacity like review Xx that, outlook. There’s prioritized other detail,

Chuck Jehl

Ross. Thanks,

certified During XXXX of QX the XX,XXX certified XX,XXX loans certified and XX,XXX XXXX, we to QX in in loans second facilitated compared XXXX. quarter of loans of

QX estimated if in exclude had of executed $XX quarter To share the certified million, our fees was $X.X loans the a million flat as claimed XX quality XXX lenders million. credit were program portfolio. $XX.X focus John second Total quarter ASC in profit on point stated approximately revenue each the second down of in were others of we revenue out to quarter. higher profit with from quarter our million result I for share XXXX, In and $XX.X new earlier, $XX.X year-over-year revenues as loan quarter, second number administration and million fees to customers certified the XX with represented during break that XXXX new contracts economics a total the like revenues quarter you and revenue of and the of associated as first average change their on would is XXXX compared unity in of addition, lower in XXXX.

of quarter second $XX.X result million future was and compared certified profit loan included expected per in breakdown estimated million million as on XXXX go-to-market the of second income of in revenue focus XXXX. of earlier. XX% in revenues investment primarily of our in in a higher support XXXX, per of quarter originations in $XXX share administrative a in due revenue quarter second increase million and the of share portfolio further was of $XX.X lower was from income to million compared second XXXX. gross new $XX.X in quarter in XXXX quarter XXXX QX. and which was was the losses, second million million in $XX.X John $XX periods, quarter due future to Change was of originated quarter or change certified profit technology share both quarter in compared the losses to with of $XX.X performance the certified future quarter $XX.X realized additional to previous QX $XXX as margin of or XXXX. strategy with gross positive revenues claims second quarter. million loan primarily with quarter increasing our of the previous to growth the estimated to in the of were which and XX% in is and Now loans by Profits periods. associated profit million second Also was $XX compared lower the our year to the sales mentioned million of XXXX million XXXX. expenses in in Net severity in the The general Gross was severity Selling, second $X.X in employees compared offset $XX second XXXX partially $XX.X margin of the and Operating prepaids to second of as for million $XX.X in to in XXXX. $XX million

year $X.XX quarter of $XXX.X which million $XXX.X of assets million of outstanding $XX.X million the million $XX.X As a had compared extinguishment was release. million previous of the Adjusted was the share be GAAP in Adjusted XXXX, million million we tax of $XXX.X exited of in $XXX.X diluted recognized liabilities in measures the quarter EBITDA our reminder, one-time assets second million the second second $XX on of unrestricted was $XX.X reconciliation the increase cash, million in total as assets. $XXX.X quarter to There’s quarter in non-GAAP XXXX earnings net XXXX. $XX.X at to for million. financial of $X.XX which agreement a quarter. compared in contract in operating second quarter total back $XX.X XX% XXXX in a tax quarter and the receivable the quarter of million press was was as Basic the can XXXX, the to of compared deferred earnings with flow gain We for was to in and cash in per We of year-over-year. found as that debt. second a

to be moving be in third trends to Based $XXX million; million. remain affordability revising guidance be we and on cash the $XXX to the our XXXX are loans $XXX operating $XXX results confident total $XXX,XXX; million we for of certified to $XXX adjusted and headwinds, $XXX,XXX navigate as between ability and between industry XXXX. resiliency and and million supply be to the $XXX EBITDA total business for revenue between Despite our the million through and million constraints. flow the ranges adjusted between year our our to into XXXX follows: half and of Now first guidance quarter, and full

of However, from making of and the outlook a business; with factors disruption levels sentiment; are raw shortages, challenges portfolio program and consideration: quality guidance, program global In inventory we and dealer a index these in of the health proposition low consumer took on had of guidance value near-term. we financial XX% the of to our transportation our semiconductor our the rate of waiting car the continue the in credit and which of impacted sentiment, growth perspective; peaked and for and adjusted optimizing and the in into industry have index second chip and most score growth perhaps credit our negative significant used our continued the shortages; following it economic material affordability which the refinance we due continued in the institutions, quarter lender XXXX; underwriting XXXX in strength X% investments target networks rising contracted our the dealer consumers; inflation second of and offers values public at auto an has to focus finally inflated the interest rates on overall considerations. quarter

visibility model chain conditions, we the can analyze on field policy be and Federal less in supply clear. and While industry the market Reserve

the dramatically considerably. tighter of they inflation assess and pace As cumulative from and Fed the the and guidance will how slow that would slow likely the that Fed’s adjustments affect changed as to become be to economy consumer a transitory sentiment noted has monetary inflation. dealer dropped view policy appropriate consumer policy, it spending With increases

to FOMC outlook. continue keep that on policy a addition will to our fundamentals matter eye most the the We in sales to watchful

we impact like nearly from Now, grew of full in closing, XXXX, grew certified is revenue with value year, year change to note our as XX% revised revenues, excluding the it any line our that provide proposition I’d estimated guidance true XX% which which XXX last relates in loans, in to customers. to in and midpoint ASC a

and have investment near-term We our capital near-term maturities on no limited requirements debt.

ready business everyone today capitalize now challenging want position We strong And balance flexibility questions. financial to continue during and overall your pen-up policy, the economic maintain financial us in cash time. to and joining a while demand. take we on an to with our for sheet will conservative thank will stand We and investing a we

Operator

[Operator Instructions] All right.

the from Blair. Our comes first question Napoli William of from line

You may now proceed.

Bob Napoli

Thank afternoon, Chuck. you. the Ross Appreciate John, Good question. and

John Flynn

Hey, How Bob. you’re doing?

Bob Napoli

you’re Hope right. doing All well.

space environment the right So in a just difficult it’s mean, – auto now. obviously, I

if think, your perspective? lap thoughts are from into what growth we look XXXX you’re guidance So a you right company? what the rate your surprise, be And share tougher should no on I how is doing year, feel and on huge for what as your for a But adjustments. market ongoing, the

Chuck Jehl

This is Bob. Chuck. ahead, Thanks, Yes. Go John.

John Flynn

just was credit given else. company we It’s how asked to when done billion be to to started think these excited But hitting greater the percentage, actually the takes I to kind given those are the we be I about the gone No, unions we’re TAM are what what the way all going side, and the get TAM we out always two from of about, billion answer was think the you same about $XXX combined other to the status this the excited that see lenders. funding That had refinance took thrilled it. it’s didn’t but on us, can was And I we new public, to how than of at out just we offer, we that Chuck. here. below company on and that say not billion $XX have going we everybody purchase up to of numbers to Their path offer just rates continuing point side I tried that are ahead $XX public when grown. growth the numbers

And lot credit we’re that starting that runway think up, of space. the a there’s I bank the back space, come So was There’s I us. to see primarily a – the space, think growth. huge with going to think of cars ahead in the and union again, refinance I

Chuck Jehl

just though Bob. go – I’ll ahead, add Yes,

Bob Napoli

go ahead. No, Sure.

Chuck Jehl

that XXXX values a but how the there’s we they’re are is supply not level folks forecasting near – the of loans non-prime you we that going a conservative see think we’re them – be in believe we’re pretty them to if going to lot demand. it’s car advantage early was on this and that increases, more and in going as into I attractive. in that. on the to result see we well will our we a late been soon change, the used down – taking And be forecast slowly, I being as are realistic and say, to to it’s going we before what be declining as They and believe have track our sidelines. making going XXXX, to affordability pent-up

the after our the pivot consumers in help to these ability going lenders we and better and think a I meantime, keep in to have refinance put state.

Bob Napoli

What quality do the you sorry. side? think I’m credit on

Chuck Jehl

No, problem.

Ross Jessup

Yes. Yes.

our score our in about right. average So portfolio XXX, is all

So uptick, expected I don’t with our it’s first and subprime past in line – are steel is the on with mind, of looking the our are and than an – be that our us default – – defaults we’re side, and non-prime. delinquency When all, seeing. at actually consider seeing this we but seeing expectations month in in to are we’re quarter, actually we higher just even the

is showing up. it So

we’re than just auction more much claims at have we still at side, the the because And yielding lows. On we’re still record that’s forecasted.

So it was headwind kind of that. on a

Chuck Jehl

significant Bob, your used before said, we inventory business a price historically, three mean, CAGR Ross through the back restocks. comments restocking. the to, and quick comes the I we inventory bit well get the normalize. get if impact revenue a feel, down has past just values prepared rates production, things and well look normalize, as business, you like the challenging come back obviously, on both XX% can we we the down as Ross as as affordability rate, been – years growth John feel things a all said, SAAR, pandemic, performed the and has on big And and the a as been normalize it’s times. this But real things to bit, as things growth in

Bob Napoli

Thank you much. very

Chuck Jehl

Thank you.

Operator

right. All

from Our next question comes JMP from David the line Scharf of Security.

proceed. You now may

David Scharf

afternoon. question. for Great. taking Thanks. Thanks my Good

is function Or – you which was Is to more elevated of think you looks a answered ask, which to I it is You updated think it prices, a the outlook was went I guidance, about and internally the function Is higher through consumer thinking of you of should more was a supply much I there is trends for size wow, it us think the I few this confirm, And FICO. and sentiment? when – and car sounded about, used on loan was level sort than be that about is actions consumer what visibility you’re actually to trends average it – inputs so chain than to used like have seeing I because how $XX,XXX are Chuck, more high? be a just it believe credit been XXX stubbornly thinking a any the wanted as prepared this affordability. quarter, like your think Fed just next latter. over we inflation, the here? we of of which about as quarters, broader average lot we issues comfort seem

Chuck Jehl

from sector. years No, gas Yes. mentioned, in question, a it changed And the chip. the a impact. work in yes, phone David. and But to since I as then Oil real the lockdown notably prices into geopolitical has inflation price highs three perspective. a environment and And disrupted drivers high, at input that the inputs are thanks of the the – XX our – big here to kind we through in were and index prices. the energy are bottoms-up has Asia lot and definitely like point at containment last just consumer went war is maybe big as was X%, that’s just at there of you we Ukraine for on And in

orders. So that is macro in dynamic chip and there the definitely getting a still good back issue auto

really thought we sector, were we phone. like the auto what last the when it hasn’t on in improved So

just the many control. supply, it’s the chips, it’s inputs SAAR, outside it’s So of much and industry, it’s our affordability, it’s

demand yes, continue and on of ready. Fed on rate from flow come biggest business the the we’re better of of it’s action going and focusing for do and shareholders the range back, when really it a pent-up it’s is running the through the the what it all of on blend the So executing focused factor the is this and probably But cash lot and and and really company comes guidance and for really a generating the increases is here is months That’s down to range in to on as biggest the going – going the get really what’s consumer Fed’s prices we is to to next are affordability ease the the I of factors, the sentiment over that. Manheim. several normalize think, the going

just to So just in supply the auto yes, and general has improve space. in

inputs know answer, a long-winded thought I of So what but here. about it’s it’s lot a to we

David Scharf

No, no, of question. is no, just a this it’s very a sort Maybe as structural helpful. follow-up, more

elevated the are actually we fall does and Within all a portion carriers, per arrangements to of – think just true maybe profit our of the pre-pandemic loss now that in which Does levels terms become unemployment-driven any recession the profit splits that absolute the the based profit at about share changes significantly if so we’re to change on $XXX. normalization, they how share sharing under profit cert? keep, that loan, their were lower As into does any trigger seeing we calculated? of rates But with not in potentially levels. per share credit

Chuck Jehl

No sir. It does not.

David Scharf

Thank Okay. you. Terrific.

John Flynn

Thank you, David.

Operator

Genuity. Joe the from Our next comes Canaccord of from line Vafi question

now may You proceed.

Joe Vafi

unions sound keeping finish it’s – channel And credit of equation to off, then quarter. sound if that’s the of guess, guys. just does little down more Good clearly tweaked underwriting the is have that. one probably like that know model mentioned then activity high. I And lot follow-up. most point? really the a on OEM And in the got the want and it there detail basically, grew to afternoon. your you quick kind this quarter, a And confirm the you that things the refi in maybe still a does Hey, the kind non-OEMs I it that’s may bit of at that’s one like I

Ross Jessup

to we’re in address just as been we we has that when just – line control, underwriting and we things the loan our Joe, looking I growing. indirect. months. XX April amounts It’s was can’t Yes, definitely with uptick our trying We expectation. in as expanded launched for far

improved was as seeing which actually capture We’re well. overall rates, our intent

our So takes basically that of expect of and we capture from on larger here to a getting box. opportunity, our continues and improve underwriting instead institutions countering to while our to adopt rate improve, for that it continue out not to because some

so we yes, continue we And that about through excited underwriting And this. look we help when at navigate it. other are to can changes

it’s that are as refi the on expanding far refi we As it’s opportunities. – are speak our wallet can and accounts that have to coming we’re John it, new serve of – new share we still how and – kind with

have up at they We refi-only accounts that before look launched signed have doing other just and channels. initially

we’re able consumer still pivot because of supplies that’s So limited, payment when to our – and ability to help the getting fits their in I credit think just what’s about is them out great business a model by the is quality. originations

Chuck Jehl

I’ll Yes. And jump in. Joe,

XX,XXX of it the XX,XXX about the was our On XX% so we certs refi, quarter, of generated.

about And non-OEM it XX% there. union the or or up business business. back up So still core performance then strong was was actually actually really – credit the

being it down So at inventory. as look – the your the They’re you with OEMs should point and down. are incentives about with most – customers where the supply be things and but and expected

performed core out. just business So well. of Yes, that’s very we the rounded capital. of But cost where kind the

John Flynn

to We’ve some thing new a get all. downtick some funding of only that sources value, we’re think see some liquidity. that interested may of awesome. of out I in the funding are refi at I sources got running waiting is refinance when they’re you the totally going channel. our in bit there other think look And that sitting the little think, be I up don’t fact a of the huge lined at to is,

are about to even they with in did with applications David if worded, was forget what’s to of past I the the think unemployment like continue question the going And economy than because I the stronger thinking and in about anything, but how on it I that. those that asked previous economy. come think going things and the it we’re the was – things

higher-priced you have rates, these fall – X things, they’re little performance to going loan, of make The happening. the but recognize their will. to. standpoint, a to or it help delinquency, look a get gets but at. where going to over are the some as unemployment going bucket, If a sure to share differently, consumers but at we a And – look able premium million do From we’ll all to we stayed these profiles they’re fall collecting those worse, it we scores it’s enough as all needs into we’re risk premium if still that them, little that is be perform different profit things you might unique still

those even for So category. we’re though every are factors in that pricing happening, outside

Joe Vafi

just of we this Yes. Protection OEMs new this guys. line at Thanks, And on then That of program? sense. on Lender Thanks a John. view makes on point? has macro kind an lot changed time the And adopting do have their update here a

Ross Jessup

good – really folks see to of the in losses, still except what No, last quarter, a we actually have a we to is of thing. which Joe. discussions seeing activity going on ironically is some a lot not are There’s going starting just lot trying some are Yes, from on. change

ours. As the showing prop the – of far as value

because lot going losses to of originations And the the of when so that’s is out to timing I have decline compared to are index happen that there, and are going the car where they think it now risk more with the used happen. new a

lot forward continue look – pursue to, And been so still talking and the a ones of there’s we’ve we to interest. we

this to pleased where at but the trying get are So we we on radar and – point. we’re we’re

Chuck Jehl

thing. more one add I’ll Joe,

of kind your said, to impacts and the bottomed. the as peaked, incentives, the pent-up things we on ready when the dynamics very are, that that We and as maybe strong about demand most you there’s stand the are are the about bottomed, ready for fundamentals comment Just improving. kind Ross improving. units think and OEMs prices X of comment significant if we that, things sector normalize, have has outlook, we And outlook, script, are because believe SAAR believe, guidance our capitalize said but David’s in guidance to million business in

Joe Vafi

guys. Thanks,

Chuck Jehl

Thank you, Joe.

Operator

right. All

line Our next Heckmann of from Pete question the Davidson. from comes

proceed. now may You

Pete Heckmann

Good afternoon, taking gentlemen. the Thanks question. for

per to – car revenue goes also the updated million that to thinking about run fee and how that certainly is expect right – the guidance, that obviously, solid, per like uptick way Is But Just million profit to imply to your and implied that the the default you’re something up $XXX pretty think up. about the looking loan it at in average rates? per that. as is the of $XXX you the loan continue seems origination price share going

Chuck Jehl

$XXX bit that feels mix million up you million modeling yes, loan of amount a program just also increases a to $XXX times. then good But and fees from at perspective. as fees, year-over-year, premiums. pointed Well, feel economics, relate the at is and as yes, on risk that on Not share, you profit program there’s to mix million are business. unit And to of good all $XXX million out, created $XXX yes, we equal

good feel yes, numbers. about we So those

Pete Heckmann

Okay.

program loans about just Okay. refi correspond think way concern that? a was maybe first someone to major quarter and about that this the I remnant Or about refinanced second rates, this, mailing program that down the mailing does quarter? a is Was of with asked XX% And a perhaps not sorry absolute was in over the but already like in number sequentially. of or think that then just if any – thinking

John Flynn

not of to union it’s over lend XXX% any liquidity largest able on two-month think It’s out. bit simply Yes, a mailing rates, all taking anything. of by issues, concern out. credit were pause They one cash to is over kind lent be excess finding funding a our I of source little driven concern over not or

a of and it’s just fine-tuning back sheet their So balance getting matter into it.

Chuck Jehl

– John is this But Chuck.

You still would – XX.X% we under a for QX. almost yes, but XX% obviously were peak in QX, strong little

as strong So still said. John our piece of a opportunity,

John Flynn

yes. Sure,

Pete Heckmann

Definitely, I it. appreciate

Operator

move James question All right. Faucette We’ll then our from from on next comes to Morgan line the of Stanley.

now may You proceed.

Sandy Beatty

on Beatty Sandy is for This James. Hi.

credit rates there reacts this question and can interest interested? Or maybe conceptual use color on terms differently, less offer does less are a credit for and basis? and periods into color. unions more conversations increasing? or can cyclical you do usage help expectations demand Framed factoring more they into unions how even product where, in the the or would say, And just like just you here, of let’s that a had with Just product the Are be well? then that as Any defaults great. pricing equation in

John Flynn

I don’t anymore. they use us think

I think they’ve all adopted the program.

program, If to safely And they adopt they lenders, them the loan. prime you that few look of near our became with back tied fees line more with led in to safety when of below in started prime realizing to could a they the insurance traditionally XXX. consumer our history, to net for unions credit lend XXX very every

the them, of event some want So default, to data to were the able of didn’t going loans be they to appropriately. it. in ones, underwrite the the The get largest even simply yield still have of they these majority

the conditioned – simply consumer the Exeters and the they point denied to it they poor out So Santander. sent the it was subjected in or where to

So is the appropriately few a to bit to back I to us delinquencies think I program. up to been the answer want for more become rise the out earlier we even that we’ve sign for of from priced ago, mean yet and targeting as haven’t point lot to we’re benefit. us again, we that to some start about a appealing. more I made they a our losses a standpoint more going I’ll And gotten do Ross little see prone the more current think there, that see shops be beauty as to start into to and minutes And from you come see delinquency,

cyclical. to think they game. not not try try I in – it’s be to They stay the So

seen and it dealers the with ability some the unions, what do credit the for loans One get One the we’ve buying they’re the things they’re and hate banks. and become in with XXXs lead lights funded. Well, getting those to the some stay big of their of day, source the – game the not. of dealers next day, we

Sandy Beatty

helpful. That’s it. Got

Ross Jessup

to XXXX, rate clients wanted I and we and add credit in something had about our to back John I union John’s XXXX capture – then. talk nothing when comment. could with Basically

today. it capture rate was what is Our double then

So definitely were very results very, for positive able see to times, increased, demand we product from that. our those the during and

add I want think to anything? Chuck, you do

Chuck Jehl

And Yes. more just one thing.

only above a for above less delinquencies and X% If and are than you second, go delinquencies defaults XXX or FICO XXX our to and X%.

Our FICO score or said. the FICO and Ross range, John in score as XXX is

So trailing that’s the in performance. XX-year line with

Sandy Beatty

How release? Got the pretty it. six? to there rates. as obviously, pushing, interest a changing landscape. this seeing in Helpful. a Refi, Competitive is Anything press great. particularly three evolved rapidly, respect be to well. Obviously, an impact out would that of or environment competitors with more question. little there high-level obviously, Maybe you’re share past the has bit called Any color pulling you back market

John Flynn

do rising. say because likes sources, banks. do them competitor you competitive sure down. know their other I’m identify don’t of they’ve a competitors, of yet the the to what we’ve way We their overpriced see their way loans I’m identified any larger we we funds, cost When or we’ve that of But sure, is a it. not from that’s standpoint, numbers, funding some the if are I does

Sandy Beatty

good know. That’s Perfect. Thank to you.

Ross Jessup

Thank you.

Operator

right. All

of John the from Jefferies. from question line Hecht Next coming

now proceed. may You

John Hecht

is an expect rates that thanks over for you But Hey, discussions that had that you time. of some And guys. the other guess, would and market question. have mentioned refi some my pretty just, is of here. I taking right extension rising Afternoon resilient this But on the we’ve might influence now.

guess your question to you So guess, other OEMs. considering mix the quarters? I car that’s guidance, next over think a economic of, in of your I from considering used of production judgments, guess just then prices is what normalization side happens and some I and happened direction the do happens several the – is, and rates What on also the the what

John Flynn

the mix refi of You purchase? mean

John Hecht

and OEM Refi banks credit and unions channels, and forth. even purchase versus so

John Flynn

you to add anything? want do Chuck,

Chuck Jehl

of may can I and I piece going absolute of dealer will it to go increase, that more environment. the if think continue number percent to Yes. don’t The OEMs I there’s absolute to forward percent start. of sustain OEM think and the bigger that? believe refi. X the Yes, be normalizes, down as refi we think about John, could – business slightly, the add as through we rise a rate certs and but OEMs floors our the want to rising the X John, anything of inventory know, way you even is in or

John Flynn

I say exactly just No, that. would

people from. And A the remarks, their consumers’ a is afford alluded where his Ross make of their of prepared that, lower. think in bit I lot think drive to it payments. in just a I addition regardless are to of coming the scores to can’t to going loans lot little economy –

a is the credit what big going XX% factor increased up. using food be So I in to That rate. cards, which score. outflow, they’re for are think prices, at people today interest think looking they’re And gas economy payment that a in ways you’re and to these prices your to car now drive monthly getting their the XX% lot squeezed, going are is refi considering going a reduce looking of past are a FICO which a to is I weren’t month making find $XXX with that

XXs We’re funds. union credit and still using coming back with XXs

getting going it smaller. I or So see – going it I don’t think just it’s away to

John Hecht

very that’s Guys, Great. helpful thanks.

Chuck Jehl

John Thanks,

Operator

of Alwy Our from next Deutsche line question from the Bank. Faiza comes

You may proceed. now

Faiza Alwy

Yes. Thank Hi. you.

So I because to in about some et cetera. wanted data, outlook mentioned you just investments ask EBITDA the

So you’re or I’m is EBITDA too? curious impacts in change because additional of of if most the there, outlook revenue some investment spending embedding if

Chuck Jehl

this really, the Yes. guidance change is strategy there as more well seen we investing technology How you’re Hi, Faiza. revenue is really you’ve about sales line. in And previous year. as from our Chuck. the just that This to talked doing? top this obviously, Yes, we’re go-to-market

guidance to XXXX. investments year for XX% maintain the EBITDA to we’re making our going in the We’re margin, net and XX% in approximately that’s of

all that’s So baked in.

guidance. that’s margin in the So the profile

Faiza Alwy

mentioned how are using several position. and Like during maintaining you of balance cash that sheet, financial sort about times to then this thinking flexibility And you your Understood. Okay. time? your benefit strong

Chuck Jehl

We’ll and cash and foremost. to that, on the from in focused time first uncertain on tag you that front. I’ll look investing flexibility at we’re we something time as through demand going But just and a investments we’re foremost, opportunities the in we’re to flexibility, think when And pent-up and as the to the other to I challenging that now, back business position right is That’s the primary things obviously, having recover. just the business now is ready and and in definitely making opportunities these very maintain – maintaining M&A at being capitalize focus. and Well, that strong the on first go-to-market financial say business is times look right times. sales on matures, in

Faiza Alwy

Great. you. Thank

Operator

from of Stephens. the coming line from Vincent question Caintic next Our

now may You proceed.

Vincent Caintic

Thanks. Good afternoon.

guess partners you’re – the discuss partners the volume implied to with I you lending having with up. have at conversations shrinking. the First, about second and your with the signed I talk if of even do you’ve could the half, lending you midpoint the guidance, non-OEM wanted –

by limits one wondering But seeing could your they what you. may are if wanting And environment current like partnership? So union pause. just thinking? these this two know about banks other maybe lenders or do higher you how mentioned a of maybe credit you reached sort or taking Or lenders – Thank returns exposure? broadly month thinking are union their I’m to what reduce and you requiring discuss I credit be and

John Flynn

cash believe additional And get going just back some lowest cost that they big think of even it’s to point, our market still they’re up of that refinance successful think have don’t even in just to even I going funds program. funds, reduce their X.X to they’re Because program find seen of years, exposure we’re lend. where an a going situation our after. be town Yes. in where over with truly the need credit trying that XXXX, I don’t the that it’s those a or to unions the XXXX, if they their comes interest to issue. cost I rate relative to been successful that this we’ve really

they’re kind So balance what is reorganize to sheet. trying their just do of

at asset three Xx where climbing go. on of asset with to to The rates where mix of liability knowing loans yield going these auto the are is they that’s don’t loan. other that rates X.X If to are they’re classes to – hold an a on still these years prime with that, perfect a loan, union all credit long-term look average rates probably you got an life for not mortgage going want and not our

think matter deploy it’s cash a get to from of to where prioritizing just it. where I So the and

Ross Jessup

and want couple add our to other even John, calls and the meetings situation temporarily, to a we we regarding – having that I actively partners is reallocate of Yes, something, in to though partners that. that do have are trying

at So we’re and sources OEM – those and everybody is was – applications place take of one but there. QX actually, from to a out at them And trying – the was little our still work a other those little volume participating QX. up customers

now. So trending I line think where for should it in with be the balance year, it’s right the of

Vincent Caintic

your of yes, balance on balance I is talked cash Okay. Great. in is sheet kind the M&A, $XXX know one the earlier. million position you investing about but very question and very your business capital But of builds just nicely. you. light. follow-up Thank And sheet kind a

is the capital are there doing stock since where share the have return now? Thank you’ve past higher stock if share Or in about to like at wondering Just any bought repurchases prices limitations than thought buybacks? you you.

Chuck Jehl

level that but at the don’t and Board the Yes. right there’s Thanks, – limitations current evaluate back flexibility no, for authorization and buybacks. doing to again, what And investing No, focused at buy on now. financial maintaining building is decisions us to through. have cash we’re in to Vincent. business a no that We thoughtful share think We back. stock Board

Vincent Caintic

very Great. much. Thanks Okay.

Operator

We in Northland from It’s question Grondahl. more line of queue. have Mike Capital from coming Instructions] It’s the one [Operator Markets.

may You now proceed.

Michael Pochucha

is Mike for Thanks Grondahl. Michael the questions. on This Pochucha taking for Hi.

year-over-year First second that quarter, Was discount. think, share profit comparison just the last you a value reminder the vehicle dropped year, impact on I like early there? average an on

Ross Jessup

XXXX, April we X% discount. of got the Last rid Yes. last – believe actually I

contract But rate premium capture that the from because rates we drop reduced in place. would it, that. did reduce Our and increase basically,

Chuck Jehl

share that and drive well. just I’d amounts profit premium as loan higher But out higher point higher

Ross Jessup

And well. rates the addition of XX months came as with higher premium

Michael Pochucha

call versus to that? loans of then on performance prospective realized X. vintage Slide maybe for there out any And it. been the Has Got just on

Chuck Jehl

repeat Can I Michael? that, your question. you follow didn’t

Michael Pochucha

Sure.

asset any in share segment and ahead the realized revenue, far has been vintage there as Just estimates as been contract on broad-based the out profit of pretty expectations? call there have coming the like

Chuck Jehl

Yes.

and think lower putting in for component. coming I down defaults million had forward-looking of as used more the $X.X with originally severity realized and increase prices, loss us $X.X loss just well of we was really increased higher just values as the the car increased than the claims and And periods was stress that prepayments then severity negative in million forward-looking. modeled

is. that all what that’s So

Michael Pochucha

Thank you.

Chuck Jehl

Thank you.

Operator

presenters over further turn I’ll We closing any ahead. queued Please up. for questions have remarks. the no go our call back to

John Flynn

said, As everybody, and continued support company. thanks, we in interest for your the

great got continue ahead doing grow looking and to us so that, here roads we’ve I to forward to of again. we’re think

Chuck Jehl

you. Thank

Operator

Thank very will you and All your your the right. call gentlemen, thank conclude now Ladies that for much you. conference may today. participation, We for disconnect and you lines.

Open Lending (LPRO) 6 Aug 222022 Q2 Earnings call transcript