Q4 2020 Open Lending Corp Earnings Call

Good afternoon, and welcome to open lending fourth quarter 2020 earnings Conference call. As a reminder, today's conference call is being recorded on the call today are John Quinn, Chairman, and CEO, and Ron <unk>, President and CEO and Chuck <unk> CFO.

Earlier today, the company posted its fourth quarter 2020 earnings release to its Investor Relations Web site and the release you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial financial measures discussed on this call before we begin I'd like to remind you that this call may contain estimates and other forward looking statements that represent the company's views as of today.

March nine 2021.

Open lending disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to today's earnings and earnings release, and our filings with the SEC for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements and now I'll pass the call over to you.

John for your opening remarks.

Thank you operator, and good afternoon, everyone. Thanks again for joining us for the fourth quarter, 2020 earnings Conference call.

I'd like to start today by reviewing our fourth quarter and our full year 2020 highlight and.

As well as the progress we've made on our growth objectives, and Ross is going to provide and update on our OEM opportunity and finally, Chuck is going to review, our Q4 financials in greater detail and discuss our outlook for 2020 one.

During the fourth quarter, we certified 26822 loans, which was an increase of 19% as compared to the fourth quarter of 2019.

We reported revenue of $39 6 million, which was an increase of 52% and adjusted EBITDA of $24 8 million, which was an increase of 37% as compared to the fourth quarter of 2019 and.

And fourth quarter was a great and to a very productive year for open lending.

For the full year, we reported a 20% increase and certified loan growth, 17% increase and revenue and a 7% increase and adjusted EBITDA.

Also added 55, new customers and 2020, including large partnerships with several billion dollar institutions.

We experienced strong OEM captive circ growth, despite COVID-19, which Ross is going to discuss shortly.

Also enhanced our focus on direct lending and refinance channels and also made progress on our initiative to provide seasonal relief or OEM bank and credit Union customers.

And of course in 2020, we went public which was an incredible milestone for us after building the business for the past 20 years.

And with that and a strong board as well and and expanded management team, which has positioned us well for many years to come and I'm.

And going to spend a few minutes on our fourth quarter 2020.

Our lending partners continue to be very resilient. During this time a combination of a recent influx of deposits as a result of Covid and addition to a low interest rate environment.

And that lenders the search for higher risk adjusted yields.

This has led to growth and auto loan originations further down the credit spectrum.

During the quarter, we added 16, new customers and we currently have approximately 355 active customers on our platform and are generating certified loans. This year, we continue to bring in additional resellers as well.

We announced the new large partnerships and the fourth quarter as well, including O E. Federal credit Union, a 1.2 billion dollar institution based and Livermore, California members first federal credit Union, a $5 3 billion dollar institution based and Mechanicsburg, Pennsylvania.

And and Tara credit Union, a 1.3 billion dollar institution based and Goshen, Indiana.

Our integration and to the F. I S originate platform is going well as well.

Currently live with one bank partner and a platform and we continue to believe that this partnership is going to open up doors for us to market. This to other banks that use that platform.

Our enhanced focus on our refinance program to drive additional certified loan volume and 10.

And use to be a great additional growth channel share.

During the quarter, we grew our business with existing channel partners, and we signed eight new credit unions and banks to refinance program.

We've also been working on other funding sources with third parties to expand our funding sources outside the banks credit unions and the Oems that we currently partner with.

And then lastly on day insurance partner side, our current insurance partners include CNA and Amtrust. We are in active discussions with various top insurance carriers to potentially partner with as a third insurance relationship and we now feel as if there's enough volume to support three insurance carriers without jeopardizing our relationship.

And with our two existing partners and we'll provide an update on that when we have more details.

So with that I'm going to go ahead and turn it over to Ross. So he can jump into the OEM opportunity that we currently have in front of us. Thank you John.

OEM captive certification and originations were strong and the fourth quarter, which demonstrates tremendous growth. Despite the COVID-19 pandemic.

As we laid out before the OEM captive market is substantial with each captive opportunity, representing a 30 $200 million annual revenue opportunity and collectively more than $1 billion annual revenue opportunity.

Today, we currently serve two OEM captives, which we expect to continue to ramp and will be key drivers of growth in 2020 one.

Starting first with OEM and number two which came back online in October.

They have begun to ramp production back up and we are encouraged the number of applications being submitted loans booked and certified and the opportunity ahead with this OEM moving.

Moving on jewelry and the number one.

And we experienced certification growth of over 200% from April to December and are.

Currently seeing applications from over 100% of their nationwide dealerships.

We also officially launched our expanded credit score offering for them and.

In addition to the PA 66, 19 credit scores and all regions. They are now.

<unk> our platform.

And I 66, 79 credit scores and one of their four regions. They service and look to expand to the other three over the next few months. This is a great example of how our customer has expanded their usage and saw tremendous benefit from our product.

So vision will also increase the opportunities at both current Oems, we launched subvention and OEM number two and January and are very encourage by the opportunity ahead.

In addition, we took our findings from the seasonal relief and the OEM number two received from the SEC as well as their independent auditors and created a white paper on the topic.

We only recently published a paper and I've gotten many inquiries on how would you help others.

Lastly, on Oems have been very active and discussions with others and continuing to build and our pipeline and work together on data studies and the value proposition we offer our platform.

Again, we do not have any additional Oems and our 2021 guidance.

Continue to book loan book was on this.

With that I would like to turn it over to Chuck to discuss the financials in greater detail Chuck.

Thanks, Ross now, let's move to our solid Q4, and full year financial results before I review, our outlook for full year 2021.

We were pleased to report 2020 financial results that are large that largely beat our expectations for the year.

The full year as compared to 2019 total certified loans increased 20% total revenue increased 17% gross profit increased approximately 17% and adjusted EBITDA increased 7% and.

In 2020, we signed 55, new contracts with auto lenders compared to 77, new contracts signed in 2019 with a focus on larger institutions in 2020.

During the quarter ended December 31, we facilitated and 26822 certified loans and 16, new contracts were executed with new lenders. In addition, we have 14 active implementations with go live dates and the next 60 days.

Total revenue for the fourth quarter of 'twenty, and 'twenty increased 52% to $39 6 million as compared to fourth quarter 2019.

With profit share and making up $25 9 million, including $7 5 million from performance obligations that were satisfied and previous periods. As a result of improved macro and economic conditions and the continued overall portfolio performing better than we expected and the fourth quarter of 2020.

Program fees were $12 4 million and claims administration fees were $1 3 million and the fourth quarter 2020.

Gross profit was $36 $7 million and fourth quarter, 2020, and increase of 54% due to higher levels of loan certified as compared to fourth quarter 2019, and the ASC 606 change and estimate discussed above.

Gross margin was 93% and fourth quarter compared to 91, 2% and the same period of 2019.

Selling general and administrative expenses were $12 4 million and the fourth quarter of 'twenty, and 'twenty compared to $6 4 million and the previous year quarter.

The increase in SG&A cost as a result of incremental costs related to becoming a public company as we continue implementing and the internal control and compliance procedures required of public companies.

Operating income was $24 $3 million and fourth quarter, 'twenty, and 'twenty compared to $17 4 million and the previous year quarter.

And the increase was primarily driven by a 19% increase and certified loans as compared to the fourth quarter of 2019, and the recognition of the $7 5 million and profit share related to historical vintages. As a result, as a result of better than expected performance for the portfolio due to our and enhanced underwriting standards and corresponding lower than expected defaults.

And claims.

Net income for the fourth quarter of 2020 was $15 2 million compared to $17 4 million net income and fourth quarter 2019. The decrease was primarily due to onetime transaction cost associated with the merger and the incremental cost and tell me that.

Click company.

Adjusted EBITDA for the fourth quarter of 2020 was $24 8 million as compared to $18 1 million and fourth quarter 2019.

The reconciliation from GAAP to non-GAAP financial measures can be found at the back of our press release.

We exited 2020 with $294 million and total assets of which a $101 5 million was unrestricted cash and $89 3 million was contract assets, we had $267 4 million and total liabilities of which $157 7 million was in debt and approximately $92 four.

Associated with our obligations under the tax receivable agreement associated with the merger.

On December nine 2020, we announced the pricing of and Upsized underwritten public offering of $9 5 million shares of our common stock at an offering price of $28 per share.

Open lending and did not sell any shares and we did not receive any proceeds from the offering.

Upon closing and the offering on December 14th 2020, we purchased from the selling stockholders approximately one 4 million shares of our common stock for $37 5 million.

Also I wanted to briefly give you an update on our share count.

The offering we had approximately $126 8 million shares outstanding at December 31, and 2020.

We posted an updated investor presentation, and fourth quarter 2020 earnings supplemental to our Investor Relations site, which includes a slide that lays out our current share count.

Now moving to our guidance for 2021.

Based on fourth quarter results and trends into March we are reaffirming our previously announced guidance range as follows total certified loans to be between 161000 and 206000.

Total revenue to be between $184 million and $234 million.

Adjusted EBITDA to be between $125 million and 168 million and.

And adjusted operating cash flow to be between $81 million and $111 million.

And with that we'll turn it back over to the operator, and we're happy to take some questions from from the group. Thank you.

And at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question and Keith You May Press star two if you'd like to remove your question from the queue from participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Because of the amount of questions and we do ask that each participant ask only one question and one follow up question.

And our first question is from.

Ashish the Badger with Deutsche Bank. Please proceed with your question.

Thanks for taking my question. Good results I was wondering if you can provide any update on OEM number three you talked about the data study that you had kind of per foot that OEM any progress on signing up the OEM number two tanks.

You bet Ashish this is Ross.

So when we are we did a data study we presented to them.

And late in <unk> and.

2020, it was kind of a one sided study because at that point and time, they had not given us the status is.

Of whether they had approved or decline that well they actually did provide that to us about two weeks ago. We finished that side of it and presented that.

Steady back to them last week. The results were fantastic basically of the applications. They sent US we provided them a 51%.

<unk> and approvals.

41% of those were actually as requested approval so.

There was no counters and that so we're very pleased with that and.

And we presented that back to them. They are meeting this week on the results of that.

And in the meantime, they've actually asked us for sample program agreement and insurance policy. So that they can review that internally.

From a from their accounting side.

Basically from their interest and.

Getting their arms around the seasonal really benefit.

And that's great news and thanks for that color and.

And maybe just my follow up question would be on the Cecil relief you talked about the white paper that was published and you just talk about the opportunity there any conversation with regional banks and how do you think about the seafood and equal.

And if opportunity on the bank front. Thanks.

Yeah, you bet.

Really it has resonated with quite a few institutions, we've talked about we have another OEM.

Captive that.

And wanted to actually specifically ask some questions to our and we brought our advisers in to that call and and basically they were they were helping with the questions. They also ask for a sample copy of the program agreement and insurance policy last week, and we provided that to them and.

And hopefully.

And as discussions will continue which we definitely pursue that happening.

We've also provided that document.

Back to OEM number one as well as the other ones were Talbot too and.

And of course and we.

We actually are doing a.

Webinar, you talked John about there and I think you would ask too on the bank side what impact that's had.

We've got probably the most active are the most.

Highest number of bank prospects that we've had.

Since we started the company and I think it's resignation well.

<unk> got a number of these larger banks that have reached out looking for that seasonal document that we put together.

Provided that to a few of them.

We do have two or three of them now asking for what data is necessary to do that same data study that Ross just alluded to from a standpoint of what impact. We can have for these different bank. So and I think it's been very positively received and that's also the point, where and the process of putting together.

Hey, a webinar, where we're going to host.

The do's and don'ts of Cecil.

Our advisors are going to do about a 30 minute presentation on what they need to be doing to prepare for seasonal.

And then we're going to fill in some some backdrop information about how we feel this product fits that need.

And I think it should be very well received.

That's very helpful color and congrats once again thank you.

Thank you.

Our next question is from Peter Heckmann with Davidson. Please proceed with your question.

Hi, good afternoon, gentlemen, thanks for taking my question.

Can you give us a little bit of.

Maybe a percentage relative percentage.

And by the two Oems in the quarter and and then maybe talk about any change and you relative to expectations of where those Oems may be able to ramp to.

By the mid to the end of this year and they are fully ramped.

Yes.

And as Chuck and.

And our supplemental filing that we have on the website, we actually have the Oems and total there. So we don't actually break out the <unk>.

Actual.

OEM, one and two so and.

And fourth quarter, we had a little under 8000 and search of our 26822 that were related to OEM wanting too so.

How they're ramping.

As we think about 2021 and OEM to came back on and in October and and Ross can jump in but we are encouraged by the ramp that that OEM has done through and into 2021, even and but we think the full ramp to for OEM too to be back to the eight to 10000 and that we've talked about is a later part of the year.

And the ramp and.

And one.

As you know as we talked about had 200% growth from April through December and continues to grow into 'twenty, one and we feel like they will soon be it.

And search per month level and growing by the end of the year to call. It 1200, and 1500 towards that late year.

Got it got it Okay and then just.

With some unusual comparisons with last year anything that's worth calling out just in terms of cadence.

Quarterly earnings and the first half.

I guess and extend that you reviewed the consensus.

Appear to be approximately and and the right range or any additional color.

As regards to that issue.

And obviously March is seasonality as it was a great month for the company and.

And we're encouraged by where we are heading into the year.

December and January was really good for us and then and I'll tell you that just like everybody in the United States, Texas got hit really hard on weather in February about a week. There it was very difficult and does and that'll impact us a bit and the in the and.

And the February period, but I will tell you that we as we reaffirmed our guidance today.

We feel good about full year, 'twenty, one and which is why we reaffirmed it in the range is so you think about our growth I mean on the on the low end of the range, it's 70% year over year growth on the high end of the range is 120% growth. So so we feel good about where we're heading for the year and.

And apps App flow is really high and coming in strong and had a record company this month, perhaps and coming in and so we feel encouraged.

Good to hear and I appreciate it.

You bet.

Our next question is from Randy Binner with B Riley. Please proceed with your question.

Hey, Thank you I wanted to just focus on the expense line a little bit you mentioned in your script that there was some public company expenses G&A was a little bit higher and that there was kind of and other expense item of $4 4 million. So I just wanted to clarify.

Each was elevated.

If the G&A was elevated to map higher revenue and and then.

Where the pulp.

Public company expenses fit into that.

You bet How're you doing Randy as Chuck Yes, if you think about Q Q4, 'twenty over 19, and really we hired 27 people in 2020 as we've navigated to become a public company going public in June.

And it's really comp and benefits increase of hiring and the 27 folks accounting and legal associated with taking the company public and getting ready for Sarbanes Oxley and compliance and that kind of thing and and then some insurance related cost and the public domain and particular D&O. So that's really what I was referring to and the prepared remarks about.

Increased costs.

In the SG&A line in the other expense line the $4 3 million that you are referring to and then we will file our 10-K later in the week that what that is is one it's a noncash charge to basically related to a change and the measurement of our tax receivable agreement that was part of the merger transaction. So we had a change in this day.

Apportionment rate for state taxes in the fourth quarter that drove that up and we adjusted that out and EBITDA. If you want to look back at the reconciliation and the table. It's just kind of a merger related transaction costs associated with that change that rate change.

Okay, and that's that's one time that's caught up.

Right.

Alright, thank you.

You bet. Thanks Randy.

Our next question is from Joseph <unk> with Canaccord. Please proceed with your question.

Hey, guys good afternoon, and great to see all the continued progress.

Just circling back on the Oems is it fair to say do you think that.

After OEM number one ramps those those increased FICO score ranges across those.

Three extra regions that you would say kind of OEM number one at that point kind of fully ramped.

Other than their own organic growth and their business.

And is there a is there any OEM number for discussions Thats worth talking about right now and I have a quick follow up.

Yes.

Good day catch up here, yes, OEM number one basically.

I do not think that theyre capped after the rollout of the three different markets.

And there's still a lot of opportunity that we are in discussion with for them to consider adopting and.

So Vincent and the way we use it and we're having those discussions we provided them some information actually a document to show them.

What data points, we would need to have from cert.

Through our API from them to us so we could render back submitted.

Approvals and so they've they're digesting that now and we are going to have those discussions here.

Soon.

And then the <unk>.

OEM number four there is one that we've talked to for for a while and and and.

We're pleased to announce that.

And if they are back they are engaged they want us.

Asked them about a day to study.

We actually.

Received that.

Information from them yesterday and.

And so our risk team is.

We're gonna be country and through the numbers and see what kind of lift we can give them and so this is kind of very very current news.

And it's an opportunity that we believe really pissed the wheelhouse of what makes sense from a product standpoint.

Great that's really exciting looking forward and hearing more on that and then just secondly, just you know I know this was a very different year clearly and also your first as a public company and.

And maybe Chuck if you could kind of walk us through.

Things kind of normalized kind of on and economic basis and.

Performance related revenue normalizes and other things how should we think in any year, how revenue tracks to circ growth because I.

I mean, it looks like some quarters certs are up more and or in revenues up less and and vice versa. So kind of as a business if we get to a normalized world.

And we think of circ growth versus revenue growth. Thanks.

You bet.

Joe So the one thing I would tell you is and when we file our 10-K, we got a really good disclosure and the back where we break out what's truly originations on new business for particular profit share versus what is the change in estimate based on better than expected performance like we had and in Q4.

So I'd tell you it's pretty linear as you go.

And where search will grow with revenue and you'll just need to kind of focus on that disclosure and the MBNA.

And it kind of backs out the adjustments related to historical vintages. So.

And you could think about that they grow together pretty linear growth.

Alright.

Great results guys.

Thanks, Craig Thank you.

Our next question is from John Davis with Raymond James. Please proceed with your question.

Hey, Good afternoon, guys first just wanted to touch on OEM and number two and the ramp I guess relative to your expectations or are they kind of where you thought they would be by now given the October ramp or just any kind of color there would be helpful.

Yes.

John.

I'd say that.

The relaunch is definitely.

On track like we thought it would be as far as putting them and getting them back log with the division that operating outside of their dealerships.

The rollout to the inside their dealerships for the used.

And that took place.

It is on schedule and and I think ramping over the next two or three months to where we think it will be.

But the subvention rollout.

As more of a.

Controlled rollout there they've got the one market. This active day, even in the second market and they targeted.

And it was was here in Texas and and it was it was targeted during the during the storm that we just experienced and so that got delayed a little bit but.

There is ongoing.

The good news is it seems like everything.

It is going like day, we wanted it to from from not getting any negative from the dealer feedback and it's just a progress that they are rolling this out and are very involved and.

But I would have hoped it would be a little bit further along with that it is but but but I'm still.

Very pleased and above.

About where it's going to be as soon as that ramp.

Continuous.

Okay. That's great color and then if I look at <unk> profit share it was a good bit better than and what we were expecting and I'm guessing that credit across.

All asset classes is pretty phenomenal right now and it was more stimulus on the way. So if I look at 'twenty. One guide obviously, it's reiterated all else equal should better profit share from better credit drive potential upside or are there any kind of moving pieces that maybe offset that as.

As we look out into 'twenty one.

Yes.

Yes, I mean listen.

And I mean, obviously in Q4, we had the $7 5 million change that.

Lower claims lower default rates I mean back when we earlier part of the 2020, when Covid hit none of US expected unemployment to go down so quickly.

And it spiked the stimulus and none of US has seen a pandemic like this so so we really are excited and our book and it really.

We performed better than we all expected, which is why we had the change in estimate so I would and they're in our Kpis, we've normalized the kpis to exclude the change in estimate due to ASC 606 on historical vintages. So it doesn't spike the averages on the profit share, but I think if you think about if you're going into 'twenty.

One <unk>.

$650 $700.

Per search is a good average to use and that's really kind of for the three months ended December 31, we average about $686 on the profit share and in full year. It was $6 58. So so I would think about it that way.

Okay. That's great. Thanks, guys.

You bet.

Our next question is from Bob Napoli with William Blair. Please proceed with your question.

Good afternoon, John and Chad, Please John Baugh from Bob.

Sure.

Thank you I guess.

Growth and see you and bank starts.

Were flattish and then up a little bit year over year.

The OEM side, so obviously, you're up tremendously and just your thought on the growth rate of.

The credit Union and bank.

Starts in 2021, and the long term potential.

Sure.

I think if you remember some of the conversations.

We purposely.

You will kind of mutated the book to look ratio by chip.

And making some underwriting changes and if you talked we talked about.

Discounting the advance from nine from 100% of clean and trade down to 95% and yes.

Yes, we've looked at that right now and we feel like again to the point about profit share and we felt like we were booking better paper by doing what we did and cut.

Cut back on starts a little bit which is what made that flat.

I think where we are currently looking at.

Right now changing that back to taken.

<unk> taken that advance up to a 100% stat, and 95% and we've gone and and done a study that shows that had the book to look ratio.

Stayed at what it was prior to that change there would've been about 11005 hundred more search done and that same time frame from the credit unions.

Yes, it was purposely done I think youll see.

Yeah, we are signing right now some of the bigger credit unions and we had hoped to go after I think Chuck alluded to the number of shops that are and implementation right. Now 14, Ron Yes, we had a bunch of them signing up near the end of 2020 that didn't get launched.

At the end of the year, so they're launching now and I'll jump in there Bob and.

The 55 customers that we had we signed up and in 2020, we had.

And the 30 of those 14 went live in Q4, and then 16 of those are going live in January and February. So so you know a lot of the implementation delay you know COVID-19, and and a difficulty there and the challenges, but we're really encouraged by those going live now coming back on and ramping and and that will help and our growth going into 'twenty one for the credit Union.

And banks like one thing I'd add to that and you'll see.

And what we've really enhanced the refi channel partners lately.

And again I'll, just use and you've heard me talk about Pentagon and launching a few of those.

And their volume has doubled.

And the last two months and that's with only launching.

One of the <unk> refi channel partners that are on their list of launch.

We're starting to see a lot of a lot of uptick and the same store sales, which I think is going to be a big lift this year.

Great.

He used my next question was going to be and refi. So I'll guess I'll get it third.

Youre welcome.

Thank you.

And just how.

How do you step back and you're a public company now you're generating some.

Pretty slick model generating very attractive returns and cash flows.

What are you most concerned where do you think competition, where do you how do you think about competition and potential competition.

And when you have and attractive model.

Good day.

And your competitors and your customers can now see.

Do you have any where do you have concerns about competition and how do you stay in front of that.

I'll certainly let any of these guys add to that and this is John <unk>.

Again, we feel like and I alluded to this and the opening comments, yes. We are at 20 year old company and it's taken 20 years to build these models to build the interfaces the build the relationships.

Yeah Ross has always made the comment if you had a big bank come out with something like we've created a try to get more applications and.

Youre not going to see 350 credit unions and jump on the bandwagon of wanting to run their business through a bank.

And through somebody you know other than.

And so somebody that diagnostic like we are to that set of channels.

Yes, we've got 20 years worth of data, we continue to fine tune that data, we've not our exclusive relationships with the carriers exist and if somebody is going to have to really gather up a lot of what we've spent 20 years gathering to attract another carrier that would be interested and writing something like this.

Yes, I think we've built a pretty strong moat around the company.

Having said all of that.

$250 billion market.

We've underwritten $2 billion worth of loans last year, and there's a lot of room in this space. If somebody were to try to compete there's a lot of white space on the Tam I mean, what John said about 1% is all we're penetrating and growing so I think the main thing is.

Sitting around.

Patting ourselves on the back of what our underwriting and looks like today when without looking at what we can do from an enhancement, bringing in additional alternative data data scorecards.

And the best of breed.

Breed underwriting and the latest and our risk team is all over trying to make sure that we're on top of that.

Thank you I appreciate it.

And thanks Paul.

Our next question is from Vincent.

And <unk> with Stephens. Please proceed with your question.

Hey, Thanks, good afternoon, and thanks for taking my questions.

Eventually, especially says hey, good afternoon.

First the two questions I should just add.

Quick follow up.

So on the non OEM.

Opportunity could you give how much of say how much of 2020 was from Refis and and how you think about refis.

Going forward.

Yes, I think if you think about full year search for 2020, the refis probably call it 12% to 13% of that.

For that for 2020 year, one thing to keep in mind Vinson as the Oems ramp there'll be there'll be that percentage will be diluted by the OEM growth, even though even though the actual right.

And our refi, we didn't really focus on refi until the Covid hit.

Yes, we were a lot of our business is all indirect and direct and we really kind of pivoted our sales force to go out and start selling.

The channel partners that we were and the process of creating relationships with so I don't think you really started to see any left from the refi side of that before June or July from a standpoint, and getting any real volume.

We're really looking at six months out of the year from a standpoint of trying to tie a percentage and that's a great point and in our Investor presentation up a supplement we've got a slide that talks about the refi program and I think February over February 2000, and 'twenty to 'twenty 'twenty, one application up on refi, 51%.

Okay. That's great. Thank you for that second just a quick clarifying thing.

So.

The code or the the change in estimate so I think first quarter you had 12.

12 million decrease to the profit share estimate and then last quarter, you took it up $4 million and this quarter Youre, taking it up seven five points, you're kind of youre back to.

Where you were expecting before and profit share expectations going forward should be about the same as that.

And my understanding that at that rate.

Vince and you're understanding it right I mean, I will tell you that I think it was about $13 million negative second quarter had a slight downward adjustment as well and so for the year and like I said, when we file our 10-K, you'll see a table that that historical vintages were adjusted downward about one six for the full year. So we recovered.

Most of the change in estimate from the pre Covid period are the Covid period. So as we think we got a robust process on the 606.

It's a.

Executive level, we're all involved.

Our risk team does a great job I mean, it's a process. We go through every quarter and and we've got a great model that we're enhancing and so we'll keep you posted but.

As that changes.

And we'll make changes and the estimates, but but we were we're very pleased how the book performed and the performance with less default and claims.

Okay, Great. That's very helpful. Thanks, so much.

You bet. Thanks Vincent.

And our next question is from David Scharf with JMP Securities. Please proceed with your question.

Thank you good afternoon guys.

And David.

Hey.

Maybe.

First on the guidance and this is.

As mory.

Sort of general question Slash observation it's.

It's a fairly wide range still from the top to the bottom and.

And the guidance metrics, you know approaching sort of 30% CASM between the low end and high end.

And just trying to get a sense I mean, you've painted a picture of.

Fairly good visibility into the progress of the Oems.

Into the go live roadmap over the next 60 days of a lot of New Bank partners and so on and so forth.

It is.

Maintaining this 30% GAAP between high and low and <unk>.

I'm merely a function of still COVID-19 related uncertainty sort of macro issues as it related more to and.

Industry competitive factors. Other unknown is just trying to get a sense for how we ought to be thinking about.

What are some of the <unk>.

Major factors that would lead one to navigate to the low and versus the high end.

Yes, Dave This is Chuck I mean, one and.

It's early it's early and the year.

We were encouraged are encouraged pinot from Q4 into into March now.

Youre right and there is unknowns out there with with Covid and we.

The second wave and the vaccination rollout and all of that so we felt like it was prudent.

We reaffirmed and Phil feel really good about where those ranges are.

Maybe its wide, but I will tell you that 70% on the low end of growth versus the 120 is phenomenal growth and.

Any point and that guidance and I think the mid points and 95% so.

Well, obviously the time period between reporting now from full year 'twenty to Q1 is pretty short and we're going to watch March March a great month for us and historically, it's from a seasonality perspective and and.

We'll give more.

Thoughts around you know full year 'twenty, one and when we come back and in May and talk again.

Got it.

So clearly there are a few companies very few that would be disappointed with the low end up true growth range.

And the context for the.

Arent variables at play.

A quick follow up on the on the carrier side.

Kind of looking at my notes I believe that you would.

I mentioned on the third quarter call that a third carrier.

And again.

Close to the short strokes.

And actually be onboard.

April and May this year.

Is that still the case it sounded like perhaps you were.

Widening the net in terms of who you are talking with.

And you just hit the nail on the head and this is John Flynn.

As a result of some inbound calls from our existing carriers, we slowed that down.

And part of it to make sure that we are going to have the volumes there to be able to feed the different carriers that we did bring on.

And as a result of that what the use of our broker and our independent actuarial firm, we've identified upwards of four or five other carriers that are extremely interested and what we're doing our and under NDA with quite a few of them were just trying to see which is the right fit.

Where can they help us grow.

And what introductions can they make versus us just taking somebody that can write the paper.

And we're looking at geographic growth opportunities or different areas like that so we're in the process of narrowing that down we.

We do believe we will have one onboard this year just like we.

We did.

Mentioned in the previous calls and.

Based on the interest that we're seeing and the volumes that we're anticipating seeing coming in from the different Oems and banks.

Conceivably bring on two of them.

Sure it's not for a lack of interest from insurance carriers, that's been more of a.

Just making sure that we're dotting, our i's and crossing our t's to make sure we bring on the right partner.

Got it thank you congratulations.

Thank you.

Our next question.

It's from John Hecht with Jefferies. Please proceed with your question.

Absolutely thanks, and thanks for taking my questions guys.

And good afternoon.

E C.

Circling back a little bit to the profit share because I understand you've recaptured some of the revenue that you thought you might get you when things were really uncertain earlier last year, but you also revise your underwriting your.

Underwriting fees and so forth I think middle of the year to account for increased rhetoric credit risk that was obviously logical at the time, but we just we haven't seen that.

That credit cycle, yet so I guess the question is.

Are you underwriting to increased risk or less risk number one and number two.

We expect the margins and the profit share to at least remain elevated relative to and maybe where they were before until we do see that charge offs cycle occur.

Okay. John This is Ross, yeah, you're exactly right, we whenever we saw.

Valuations drop back in April and we went ahead and we took a 5% decrease to the value of the vehicles.

And we've left that in place obviously that.

And that move made a lot of sense at that point and time and Theres still was a risk with the hertz situations situations and and all that out there we are.

We are definitely looking at.

Across credit unions are banks.

Asking our carriers to two two.

And look into that and and consider moving that.

Back to where it was pre COVID-19 the purpose being we get are.

Values at the level that tracks with what's happening from the Manheim index that will cause our interest rates to be lower and our close ratios will be higher we actually did a study looking at.

The top 20 lenders by credit score and.

And what their interest rates did.

During the last.

<unk> compared to what they were in the first quarter and almost all of them answered all their interest rates decreased.

And a time, where ours, we're actually increasing and so we believe it will be a great move from a competitive.

Standpoint, and just kind of realize that.

Now what that means from all the all we have booked is there is future.

Assumptions of that will be affected by a change and removal of that 5%. If we think the values will.

Normalize.

It actually could help.

<unk> increased.

Increased future profit share accordingly.

But as we look out into 'twenty, one we still have some stress levels on our profit share that.

With the unknowns of.

With the vaccine and Covid, So I think thats part of the answer to us.

Those stress levels are still out there just with the unknown and some of that could free up if we could absolutely free up absolutely.

Okay great.

For context and color I appreciate that and second non-religious question. It sounds like you're it sounds like you.

You have and active bank that you brought on the platform and recently and you've got a lot of banks and the pipeline and maybe can you just characterize what is the what's the bank not who is but what's the characteristics from the bank Youre working with and how is that ramp going and and then you mentioned and the pipeline and maybe talk about what is the sales process or sales cycle book.

Like and and how what's the cadence that we might expect to see other banks coming out and the platform.

You may talk about one of them that we that went live in December one of our finance company banks that.

And that went live and basically and and had a great.

It came out of the gates.

With over 100 loans and the month and is tracking to a 400 level and Thats, just basically and the first four months and.

It just it proves out that and the in the finance side of it and John will talk about some other banks and yet when I want.

And I mentioned, one bank live on a platform that was in reference to.

A particular interface that we have built and to the Fas platform.

Thanks, Adam.

Yeah, It's a bank out of Memphis and.

Yeah. They they launched with just a few car dealerships to get started they have now just taken us back out to I think upwards of a few hundred dealerships and we're anticipating that ramp to take off but my comment about growing from there was one of the hurdles. We always face is making sure the interfaces belt that any.

<unk> Bank is currently working on and in this case that was the Fas, what's known as the originate platform.

Well now that that one bank is up and running and all the bugs are knocked off the interface.

<unk> will actually help us market to 12.

12, 14, other banks that are on that identical platform. So what.

Removing those hurdles and you've always heard us talk about doing Rev shares instead of going out and hiring big sales force.

We will do now is utilize the <unk> sales force to help US open some doors to the banks that are on that other platform and then they generate back a portion of our program fee.

And payment for building the interface. So it's been a great model for us over the years every interface we built.

They then go out and help sell it to the users that are on that platform and it just saves us a lot of a door knocking so it's it's been a great great way for us to open doors.

Great I appreciate the color thanks, guys.

Thank you John.

Our next question is from Mike Grondahl with Northland Securities. Please proceed with your question.

Yes, thanks, guys.

And with OEM, three and potentially OEM number four.

Clearly, you're working with them exchanging some data, but everything takes time and what sort of the odds or is it practical that they could be delivering certs later this year.

Yeah.

Are you doing Mike this is Chuck.

And as I'm learning the business with John and Ross I mean, these Oems and these these large banks or they're long sales cycle and you know our 'twenty. One guidance just includes one and two and we're doing everything we can and and Ross is boardrooms and focused on it and the team and and we'd rather really just talk about it and in past tense and not really and.

Come back to you when that happens and and not really try to give you odds on what might happen. So.

But listen we're focused on it and working every day to do that.

Got it got it and then.

As a follow up you guys I think implemented a price increase may of 2020.

Any thoughts on keeping that price increase or adjusting for the environment.

Yeah and.

Mike.

So the price increase was a.

Indirect.

Of that because because whenever we decreased the value of vehicles by 5% what that did is that actually made it.

Our price that actually cause a 15% increase and premium so we technically we didn't increased premium by 15%, but by reducing the value of all the vehicles collateral that came through.

Put it into a higher loan to value and so it track to a higher premium. So so and just so that is what we're considering basically evaluating and and seeing if we need to have that.

That 5% discount as it relates to the vehicle values and and certainly it doesn't appear that that that there's issues with vehicle values and the future like we thought they were back in April share.

Sure.

That was the comment I made about the.

The book to look ratio shorted upstate.

Like it was before we made that change what it represented and an additional 11000 starts.

Sure.

And do you roughly know when you'll make a decision by on that or is it just sort of month to month look at it.

Yeah, we've had some initial discussions with our carriers and and we've been preparing the data here to look at that and so when.

When we get.

And get sign off and feel comfortable with that on our side, we can make an adjustment and have it effective.

30 45 days.

After through and through technology release.

Got it okay. Thank you.

Okay.

And as a quick reminder, if anyone has any questions you May press Star one channel and Pizza and our next question is from Matt O'neill with Goldman Sachs. Please proceed with your question.

Yeah, Good afternoon, gentlemen, and thanks for squeezing me and towards the end here and just had a couple of true nuanced follow ups and thanks for all the transparency around the business and the update here. So I guess first can you help us just think through the <unk>.

And it sort of.

And the constituents our pillars in the decisioning around the Remeasurement and I know, we've talked a lot about it so far but as far as like what are the kind of one two and three biggest factors that you guys look at you know, whether it's kind of credit performance used car prices and just kind of wondering if there's a way to rank order those types of things that we could think about how they had never measure.

And it may try and going forward understanding that we've gotten much of the way back to kind of where we were a year ago.

Hello.

Yes.

Matt I think a lot of the first first of all as in regards to default.

Have defaults taken place compared to where we thought they would be.

Are we seeing claims being filed.

Higher than the levels that we we thought they would be.

And so by tracking that first we're looking at.

Are we kicking the can down the road and and the defaults will happen. We're just not seeing it. So what we're doing is we do get data from the Bureau is looking at 30, 60, 90 day delinquency trends and that maps very very close now to when we're seeing claims.

And possibly come in and its much lower than we would have anticipated and certainly what we've modeled the second part of it deals with claims severity and.

And whatever.

And whatever our prior.

Claim severity level was from from a dollar standpoint, we are actually seeing claims at a much lower severity and thats because of much higher vehicle value value, which is the cause of <unk>.

A limited number of inventory of new cars out there and the demand. So I think those two are some of the largest.

Components of that and just from the macro perspective, I mean, your strength and car sales you think about.

Used car values.

And the Manheim index and.

Unemployment rates and things like that and obviously, we're focused on that.

Yes, that's really helpful.

A follow up and you guys are having but it sounds like an increase amount of sort of inbound from potential third and maybe fourth and beyond insurance.

Partners is it is it safe to assume that day.

And the existing economic share that you you have contractually with your two primary providers today is effectively table Stakes that you would be and discussions with subsequent or additional insurers because otherwise you guys would theoretically be.

And kind of economically agnostic as far as which.

I can share to kind of pair with subsequent loan rate if they werent in the team.

And kind of economic arrangement as the FERC partners is that logical.

Yeah that'd be identical.

Yes, okay understood.

That's it from me Thanks, a lot.

Thanks, Matt.

And we have reached the end of the question answer session and I'll now turn the call over to Jonathan and then for closing remarks.

Hey, guys. We really appreciate you, taking the time to listen and and the.

Addressed and if we'd love addressing these kind of questions where.

Very wide open about where we're going with the company and where we've been so I. Appreciate you. Following us I appreciate our investors and are looking forward to grow and us into the next year. Thanks, and thanks, everyone for your time.

And this concludes today's conference and you may disconnect. Your line at this time. Thank you for your participation.

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