lpro-20240930

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 September 30, 2024


☐			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

OPEN LENDING CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware			84-5031428
(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 class

Trading
Symbol(s)

Name of each exchange
on which registered

Common stock, par value $0.01 per share

LPRO

The 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 filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller 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 November 7, 2024, the registrant had 119,350,001 shares of common stock, $0.01 par value per share, outstanding.

OPEN LENDING CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I.	Financial Information	2

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	2

	Condensed Consolidated Balance Sheets	2

	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	30

PART II.	Other Information	31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Default Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

SIGNATURES		33

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OPEN LENDING CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


	September 30, 2024		December 31, 2023

Assets
Current assets
Cash and cash equivalents	$	250,233	$	240,206
Restricted cash	10,714		6,463
Accounts receivable, net	4,566		4,616
Current contract assets, net	17,810		28,704
Income tax receivable	8,041		7,035
Other current assets	3,364		2,852
Total current assets	294,728		289,876
Fixed assets, net	5,534		3,913
Operating lease right-of-use asset, net	4,071		3,990
Contract assets	22,098		610
Deferred tax asset, net	65,614		70,113
Other assets	3,662		5,535
Total assets	$	395,707	$	374,037
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	282	$	375
Accrued expenses	10,303		8,131

Current portion of debt	7,500		4,688
Third-party claims administration liability	10,750		6,464
Other current liabilities	2,445		932
Total current liabilities	31,280		20,590
Long-term debt, net of deferred financing costs	134,002		139,357
Operating lease liabilities	3,463		3,450
Other liabilities	6,499		5,060
Total liabilities	$	175,244	$	168,457

Stockholders’ equity
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 119,255,709 shares outstanding as of September 30, 2024 and 128,198,185 shares issued and 118,819,795 shares outstanding as of December 31, 2023	1,282		1,282
Additional paid-in capital	501,918		502,032
Accumulated deficit	(184,323)		(193,749)
Treasury stock at cost, 8,942,476 shares at September 30, 2024 and 9,378,390 at December 31, 2023	(98,414)		(103,985)
Total stockholders’ equity	$	220,463	$	205,580
Total liabilities and stockholders’ equity	$	395,707	$	374,037

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue
Program fees	$	14,161	$	15,416	$	43,306	$	50,610
Profit share	6,822		8,022		30,037		44,433
Claims administration and other service fees	2,493		2,568		7,605		7,478
Total revenue	23,476		26,006		80,948		102,521
Cost of services	6,127		5,369		17,590		16,917
Gross profit	17,349		20,637		63,358		85,604
Operating expenses
General and administrative	9,594		9,875		33,318		31,041
Selling and marketing	4,897		4,509		13,260		13,136
Research and development	992		1,717		3,601		4,075
Total operating expenses	15,483		16,101		50,179		48,252
Operating income	1,866		4,536		13,179		37,352
Interest expense	(2,962)		(2,799)		(8,468)		(7,841)
Interest income	3,221		2,801		9,278		7,317
Other expense, net	—		(3)		—		(9)
Income before income taxes	2,125		4,535		13,989		36,819
Income tax expense	688		1,532		4,563		9,907
Net income	$	1,437	$	3,003	$	9,426	$	26,912
Net income per common share
Basic	$	0.01	$	0.02	$	0.08	$	0.22
Diluted	$	0.01	$	0.02	$	0.08	$	0.22
Weighted average common shares outstanding
Basic	119,252,503		120,217,857		119,128,801		121,318,872
Diluted	119,480,577		121,298,880		119,427,952		122,065,718

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited, in thousands, except share data)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2023	128,198,185	$	1,282	$	502,032	$	(193,749)	(9,378,390)	$	(103,985)	$	205,580
Share-based compensation	—	—		1,892		—		—	—		1,892
Restricted stock units issued, net of shares withheld for taxes	—	—		(5,307)		—		331,366	4,286		(1,021)
Net income	—	—		—		5,087		—	—		5,087
Balance as of March 31, 2024	128,198,185	$	1,282	$	498,617	$	(188,662)	(9,047,024)	$	(99,699)	$	211,538
Share-based compensation	—	—		2,459		—		—	—		2,459
Restricted stock units issued, net of shares withheld for taxes	—	—		(1,344)		—		100,134	1,228		(116)
Net income	—	—		—		2,902		—	—		2,902
Balance as of June 30, 2024	128,198,185	$	1,282	$	499,732	$	(185,760)	(8,946,890)	$	(98,471)	$	216,783
Share-based compensation	—	—		2,253		—		—	—		2,253
Restricted stock units issued, net of shares withheld for taxes	—	—		(67)		—		4,414	57		(10)

Net income	—	—		—		1,437		—	—		1,437
Balance as of September 30, 2024	128,198,185	$	1,282	$	501,918	$	(184,323)	(8,942,476)	$	(98,414)	$	220,463












The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents


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



	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2022	128,198,185	$	1,282	$	499,625	$	(215,819)	(4,552,126)	$	(72,264)	$	212,824
Share-based compensation	—	—		1,844		—		—	—		1,844
Restricted stock units issued, net of shares withheld for taxes	—	—		(939)		—		41,148	810		(129)
Shares repurchased, including excise tax	—	—		—		—		(3,095,334)	(21,528)		(21,528)
Net income	—	—		—		12,538		—	—		12,538
Balance as of March 31, 2023	128,198,185	$	1,282	$	500,530	$	(203,281)	(7,606,312)	$	(92,982)	$	205,549
Share-based compensation	—	—		2,361		—		—	—		2,361
Restricted stock units issued, net of shares withheld for taxes	—	—		(1,517)		—		104,283	1,386		(131)

Net income	—	—		—		11,371		—	—		11,371
Balance as of June 30, 2023	128,198,185	$	1,282	$	501,374	$	(191,910)	(7,502,029)	$	(91,596)	$	219,150
Share-based compensation	—	—		2,684		—		—	—		2,684
Restricted stock units issued, net of shares withheld for taxes	—	—		(77)		—		4,941	72		(5)
Shares repurchased, including excise tax	—	—		—		—		(1,201,593)	(10,107)		(10,107)
Net income	—	—		—		3,003		—	—		3,003
Balance as of September 30, 2023	128,198,185	$	1,282	$	503,981	$	(188,907)	(8,698,681)	$	(101,631)	$	214,725

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net income	$	9,426	$	26,912
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	6,408		6,826
Depreciation and amortization of fixed assets	1,281		824
Amortization of debt issuance costs	321		319
Non-cash operating lease cost	511		461
Deferred income taxes	4,499		386
Other	37		10
Changes in assets & liabilities:
Accounts receivable, net	50		455
Contract assets, net	(10,594)		26,199
Other current and non-current assets	(576)		(789)
Accounts payable	(92)		(67)
Accrued expenses	2,164		2,299
Income tax receivable, net	881		513
Operating lease liabilities	(464)		(412)
Third-party claims administration liability	4,286		1,749
Other current and non-current liabilities	2,838		218
Net cash provided by operating activities	20,976		65,903
Cash flows from investing activities
Purchase of property and equipment	(161)		(103)
Capitalized software development costs	(2,577)		(1,485)
Net cash used in investing activities	(2,738)		(1,588)
Cash flows from financing activities


Payments on term loans	(2,813)		(2,813)


Shares repurchased	—		(31,322)
Shares withheld for taxes related to restricted stock units	(1,147)		(288)
Net cash used in financing activities	(3,960)		(34,423)
Net change in cash and cash equivalents and restricted cash	14,278		29,892
Cash and cash equivalents and restricted cash at the beginning of the period	246,669		208,519
Cash and cash equivalents and restricted cash at the end of the period	$	260,947	$	238,411
Supplemental disclosure of cash flow information:
Interest paid	$	7,981	$	7,593
Income tax paid (refunded), net	$	(817)	$	9,008
Right-of-use assets obtained in exchange for lease obligations	$	592	$	—

Non-cash investing and financing:
Fixed assets accrued but not paid	$	—	$	2
Share-based compensation for capitalized software development	$	196	$	63
Capitalized software development costs accrued but not paid	$	244	$	230
Accrued excise tax associated with share repurchases	$	—	$	290

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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 (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 of America (the “U.S.”), which enables each lending institution to book 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 premium adjustments on automotive loans.

The Company’s flagship product, Lenders ProtectionTM platform (“LPP”), is a cloud-based automotive lending enablement platform. LPP supports loans made to near-prime and non-prime borrowers and is designed to underwrite default insurance by linking automotive lenders to our insurance partners. 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 contract interest rate. LPP recommends 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.

Unless the context otherwise requires, “we,” “us,” “our,” “Open Lending,” and the “Company” refers to Open Lending Corporation, the combined company and its subsidiaries.

The Company has evaluated how it is organized and managed and has identified one 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 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, 2023 (the “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 nine months ended September 30, 2024 are not necessarily indicative of the Company’s operating results for the entire fiscal year ending December 31, 2024.

(a) Concentrations of revenue and credit risks

The Company’s largest insurance carrier partner accounted for 35% of the Company’s total revenue during the three and nine months ended September 30, 2024. The Company’s largest insurance carrier partners accounted for 29% and 10% of the Company's total revenue during the three months ended September 30, 2023 and 32% and 11% during the nine months ended September 30, 2023.

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.

Table of Contents

OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Cash and cash equivalents are deposited in commercial analysis accounts, money market funds and U.S. Treasury securities at financial institutions with high credit standing. Restricted cash relates to funds held by the Company on behalf of the insurance partners, designated 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.

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 for adequacy by taking into consideration factors such as reasonableness of the 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 estimate of the recoverability of its contract assets could be further adjusted. The Company does not have any material accounts receivable or contract assets receivable balances that are past due and has not written off any balances 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 $0.1 million at September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023, the Company had one customer that represented at least 10% of the Company’s accounts receivable, net.

(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 and assessing the realizability of deferred tax assets. The Company bases its estimates on historical trends and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.

In connection with profit share revenue recognition and the estimation of contract assets, the Company uses a forecast model to estimate variable consideration based on undiscounted expected future profit share to be received from the insurance partners. The forecast model projects loan-level earned premiums and insurance claim payments driven by projections of prepayment rate, loan default rate and severity of loss. These assumptions are derived from an analysis of the historical performance of the active loan portfolio, prevailing default and prepayment trends, and macroeconomic projections. Estimates of variable consideration generated by the forecast model are constrained to the extent that it is probable that a significant reversal of revenue will not occur in future periods.

The Company continually assesses the default and prepayment assumptions of the forecast model against reported performance and lender delinquency data. The forecast model is updated to consider the actual prepayment rate, default, and severity experience with macroeconomic conditions.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves the disclosures about a public entity's reportable segments through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied retrospectively to all prior periods presented

Table of Contents

OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

in the financial statements. Early adoption is permitted. The Company believes this ASU will have no impact on its consolidated financial statements, but will result in additional disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires additional disclosure related to rate reconciliation, income taxes paid, and other disclosures to improve the effectiveness of income tax disclosures. The ASU is effective for annual periods beginning after December 15, 2024, and applied on a prospective basis. Early adoption and retrospective application is permitted. The Company believes this ASU will have no impact on its consolidated financial statements, but may result in additional disclosures.

Although there may be 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 materially impact the Company’s consolidated financial position or results of operations.

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 receipt of 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 revenue 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 related to profit share revenue that were 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 nine months ended September 30, 2024, contract asset adjustments attributable to profit share revenue forecast revisions resulted in decreases of $7.0 million and $14.8 million, respectively, as compared to decreases of $8.1 million and $8.5 million, respectively, during the three and nine months ended September 30, 2023.

Table of Contents

OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Contract assets balances for the periods indicated below were as follows:


	Contract Assets
	Profit Share		Program Fees		Claims Administration and Other Service Fees		Total
	(in thousands)
Ending balance as of December 31, 2023	$	22,855	$	4,738	$	1,721	$	29,314
Increase of contract assets due to new business generation	44,801		43,377		7,605		95,783
Change in estimates of revenue from performance obligations satisfied in previous periods(1)