Yahoo Finance Open Lending Corp (LPRO) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and ...
Certified Loans: 28,189 in Q1 2024, a 7% increase from Q4 2023.
Total Revenue: $30.7 million in Q1 2024.
Adjusted EBITDA: $12.5 million in Q1 2024.
Net Income: $5.1 million in Q1 2024.
Earnings Per Share (EPS): $0.04 in Q1 2024.
Operating Income: $7.3 million in Q1 2024.
Total Assets: $380.6 million at the end of Q1 2024.
Unrestricted Cash: $247 million at the end of Q1 2024.
Total Liabilities: $169.1 million at the end of Q1 2024.
Outstanding Debt: $143.2 million at the end of Q1 2024.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Open Lending Corp (NASDAQ:LPRO) exceeded its guidance range for certified loans, revenue, and adjusted EBITDA in Q1 2024.
The company observed a 7% sequential increase in certified loans compared to Q4 2023, demonstrating growth amidst challenging conditions.
Automotive industry forecasts have improved, with anticipated growth in new and used auto sales, which could positively impact Open Lending Corp (NASDAQ:LPRO)'s business.
Open Lending Corp (NASDAQ:LPRO) added 11 new accounts in Q1 2024, a 40% increase year over year, enhancing its market penetration and customer base.
The company's enhanced lenders protection proprietary scorecard, launched in Q4 2023, is performing well, improving the ability to predict and price risk, which is expected to enhance portfolio performance.
Negative Points
Despite overall growth, total revenue and net income in Q1 2024 were lower compared to Q1 2023, indicating potential challenges in profitability.
The automotive market, while showing signs of recovery, still faces issues with high interest rates and vehicle affordability that could affect consumer demand.
Credit union lending capacity remains constrained with loan to share ratios at approximately 85%, indicating ongoing liquidity challenges in this sector.
Open Lending Corp (NASDAQ:LPRO) reported a negative change in estimate of $1.1 million associated with profit share, reflecting adjustments that could impact future earnings.
The company faces a challenging macroeconomic environment with high interest rates and elevated vehicle prices, which may continue to pose risks to loan affordability and demand.
Q & A Highlights
Q: Hey, guys, good afternoon and nice to see the steady results here in the quarter. Just wanted to drill down into the sequentially up starts a little bit on if we could kind of maybe discuss seasonality if tax season really had anything to do you think with Q1 or do you think it's just the number of partners growing and maybe some other incremental improvements to the backdrop. And then I'll have a follow-up. A: Yes, just Chuck, yes, I think I think Q1, obviously March, I would say Q1 seasonally is our best quarter. I'd say March is usually one of our best months of the year, and that is driven by the tax season and the uptick there in tax refunds, but we're encouraged by the the app volume and what we're seeing into the second quarter as well. And so at the March was a good month, though, for us to do about due to the tax season.
Q: Okay. That's great. And then maybe on some of these larger strategic partners and discussions and integrations and the like, but do you think it's do you think it's feasible to see some of these bank partners kind of go live this year at this point? Or or do you think that or are there some other factors that we should consider here relative to the pace of uptake with them? Thanks a lot. A: Yes, if you think about the bank initiative, we've hired the team there onboard. They bring strong relationships to us. They're in the process of getting fully licensed and all that and at speed on our products. So there will be some obviously some ramp time once those actually go live in their comp, more complex integrations with their LOS as we've stated. But yes, we think we think we can get, you know, some of those wins to maybe begin to sort of find loans later this year.
Q: Good afternoon, guys. Thanks for taking the question. And I wanted to touch a little bit on you guys mentioned some of the credit tightening initiatives that you guys took and I guess can you clarify, I guess one in the quarter you guys took those actions and any estimate on kind of what percentage of the book or like loans are volume and that applied to? A: Yes, we'll call this. I'll start. We implemented the new scorecard in October, our LP. 2.0. So we had a full quarter in Q1 under the new card enhanced scorecard and the credit tightening that we took in the quarter was more around our score, a score cut off, raising it from 475 to 575 cutoff. So we're just taking less risk on those more risky credit bins. And it's about a 5% reduction in our in our volume. But as we said in the prepared remarks, in this environment, what we want to do is it is with the enhanced scorecard will be ability to predict default, more ability of higher predictability there and then take less risk. So that's what the card is doing. And we're pleased with the 1.2 million apps to date that we've processed underwritten and the ability to do that and execute. So so that's really the main tightening. And as you know, over the last couple of years, we've increased insurance premiums as well, 5% less than Q2 of last year and about 13% in Q2 of 22. And those are also been benefiting from those and actually cutting off higher risk premiums for that and actually pricing some of those loans out that more risky, and we'll be in better capture rate of that we're seeing under the new card for the better credits as well. So that's another good result. And that's a positive flow into our our profit share as well as we will see that over time.
Q: That's helpful. And then maybe just a follow up on the outlook, looks like it implies flattish trends in revenue and search. I guess just kind of thinking about some fundamentals should should we expect whether it's well in certain volumes or revenue, is this a good run rate? And given them if macro kind of stays in this kind of uncertain malaise with where rates are in such or just how should we think about know the fundamentals if we can remain in this environment. A: Yes. I mean, if you think about I'll come back maybe to the outlook, but if you think about the improving conditions that we're seeing in the auto market. Inventories are improving for new and used slightly. Affordability is getting a little better for the consumer. You know, consumer sentiment has been it's been it's been a tough spot. And as you think about the used and new retail, so store is forecast for improving. So all those are positive signs that the rate environment is still high, like you said, and the vehicle prices are still 30% above pre-pandemic. So it's not there are signs of improvement, but still returning to normalcy over time. So if you think about, you know, the bottoming process of any, you know, market, you know, we're encouraged to see even with our credit unions loan to share ratios now for a couple of quarters have remained at that 85% and not gone up loan to share and share growth, as we said in the report improving now for a couple of quarters, which is their deposit growth, which which has that improved as we've seen in past cycles, that will ultimately go to more lending activity with the credit unions and it's just kind of a process. But but we believe that maybe we're close to that bottom and making it making a recovery, but it does take time.
Q: Thank you for asking my question. We were working through the 2Q guidance, and we kind of wanted to get a better sense of what the profit share may look like for dynamics in the next quarter and also the next few quarters? A: Yes, if you think about the profit share we book, we put the current vintage, you know, the Q1 on it about little over 530, a unit economics for circa 33 to be exact. That's again under the new scorecard with our decisioning as well as stress that we've put on the portfolio. We've talked about it on prior calls that, you know, in this environment, you know, we've actually stressed there's three components to a profit share. As you know, that go into the revenue model. It's the severity of loss. It's the default frequency as well as prepay speeds. And as we think about that, we put those on the books at about a 62% loss ratio in the first quarter. So we feel like that's adequately stressed based on these conditions and feel like that in that range of, call it 500 to 5 50 is a good range for to think about for profit share.
Q:
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
