Q2 2023 Open Lending Corporation Earnings Call
Good afternoon, and welcome tightened lending second quarter 2023 earnings conference call.
As a reminder, today's conference call is being recorded.
On the call today are Keith Jezic C. I am Chuck Yale C. S I.
Earlier today, the company posted its second quarter, 'twenty, 'twenty, three and he's release and supplemental slides to its investor Relations website.
In the release you will find the reconciliations of non-GAAP financial measures to the most comparable GAAP 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 represents the company's view as of today August eight 2023.
<unk> disclaims any obligation to update these statements to reflect future events or circumstances.
Yes.
Please refer to today's earnings release, and our filings with the SEC. Some more information concerning factors that could cause actual results to differ from those expressed or implied with such statements.
And now I'll pass the call over to Mr. Keith Jezic. Please go ahead.
Well, thank you operator, and good afternoon, everyone. Thank you for joining us today for open lending second quarter 2023 earnings conference call I am pleased to announce we exceeded the high end of our Q2 guidance range for all metrics certified loans revenue and adjusted EBITDA during the quarter, we certified 34350.
For loans generated total revenue of $38 $2 million and adjusted EBITDA of $27 million.
I'd like to thank all of our team members had opened lending who executed and delivered these positive results despite challenging sector and macroeconomic conditions.
As we know the auto industry continues to navigate through multiple challenges as of June there were $1 9 million new vehicles on dealer lots or in transit, representing a 75% increase compared to a year ago.
Industry continues to deal with the supply constrained environment.
Retail prices have declined only 3% to an average used vehicle price of approximately 2000 $700000. This is still close to 40% higher than pre pandemic levels trading continued affordability challenges for the near an nonprime consumer.
Understandably consumers are holding under their vehicles longer than historical periods with the average age of a passenger car on the road now exceeding 13 five years as cars age. The typical consumer is at risk for major repairs versus just routine maintenance costs are accordingly, we believe there is a significant pent up demand but.
The used auto market treating a great opportunity for which we will be well positioned as the sector and macroeconomic conditions improve.
Shifting to affordability. It remains the most significant challenge for the near Nonprime consumer and ultimately our business Cox Moody's vehicle affordability Index reported the median weeks of income needed to purchase a new vehicle in June deep.
Decreased to 43 weeks down slightly from 44 weeks in December .
Even though this is moving in the right direction. It is still much higher than the historical average of approximately 35 weeks, while Otto prices up slightly decreased financing costs of not as borrowing cost remain elevated due to the continued tightening actions by the Federal Reserve for example, the average used auto loan interest rate increase too.
Approximately $13, 5%, while the average new auto loan interest rate exceeded 9% for the first time in over a decade.
As we have seen in prior cycles as supply returns vehicle prices are expected to moderate interest rates are likely to decline, which should lead to improved affordability.
For the near an Nonprime consumer.
Now, let's turn to our credit Union customers, who as you will recall became the market leader of all auto loan originators in Q3 2022.
Reaching 28, 4% market share however over the past three quarters, they have shrunk their market share due to continued liquidity challenges, we have seen credit unions tightened our underwriting standards in this environment.
And most recently they turned our focus to prime and Super Prime borrowers in fact fed data reflects auto loan originations and the 627 19 FICO band decreased 21% from Q4 2022 to Q1 2000 2003 and.
In this environment, all lenders are being extra cautious against going too far down the credit spectrum as a result auto loan rejection rates hit all time highs in June with the greatest increase occurring among near and Nonprime borrows, which we serve.
As market conditions improve.
We expect credit unions to adjust underwriting standards and returned to serving all of their members.
As a company we remain focused on positioning ourselves for the future by making measured and controlled investments with demonstrable RLI. Among these we continue to refine and optimize our sales channels.
Enhance our technology offering and attract and retain top tier talent.
First on the sales front, we had 13 new accounts in Q2 2023 as.
As compared to 18, new accounts in Q2, 2022 importantly, we expect to generate more certified loans from the 13, new accounts added in Q2 2023. The end from the 18 accounts that were added in Q2 of 2022.
This is a result of our continued focus on adding mostly larger accounts the new accounts added during the quarter represent a doubling in the average target sure to us per financial institutions signed as compared to the prior period. These.
<unk> speak to the enduring an ever growing value that open learning brings to all players in the automotive retail ecosystem.
Additionally, we continue to enroll financial institutions, who operate loan originations systems for which we already have existing successful technology integrations, resulting in improved meantime to revenue over 20% on several of our <unk> implementations.
It is significant improvement in operational efficiency will serve us well.
As conditions improve.
Now turning to marketing, we released our second proprietary research report loans within reach lending enablement benchmark distrust take on the automotive lending industry gathers insights from a group of U S based auto lenders to determine the role lending enablement solutions play, an increasing RIAA, reducing risks exposure and <unk>.
Proving decisioning speed in this report we reveal how using alternate data sources and AI driven analytics help lenders strategically cater to near and non prime borrowers a crucial component of a balanced portfolio.
We found that lending enablement solutions provider clear performance advantage to financial institutions surrounding speed.
Growth and personalization.
Least of the report garnered tremendous earned media, including alive Bloomberg Radio segment coverage from Pentech Nexus News Global Fintech series used car news and automotive technology. This earns media and prudent investments in marketing continue to lead to a growth and marketing qualified leads.
During this time, we are also making enhancements in our technology.
Few highlights.
First we completed our migration to the Azure cloud removing our dependency on legacy data center co locations and improving our already fast Decisioning response time by 25%.
This important accomplishment provides enhanced stability.
That our performance and reduce costs we've.
We've already seen meaningful savings on compute and storage costs alone and we now have scalable resources immediately available to provide services within the application without manual intervention.
Most importantly, this allows us to modernize our platform architecture and automate the delivery of code more safely and securely with less development overhead further our application data is more accessible to our machine learning platforms, which empowers us to streamline modeling used in decisioning in pricing auto loans.
In addition to completing our cloud migration, we are making enhancements within lenders protection to further support our lenders evolving needs. For example, we incorporated complex logic for decision, which cannot be easily changed by our linder customers within their own loan originations systems, thereby enhancing and <unk>.
Moving their daily workflows.
We also implemented enhancements that bolster our lenders ability to provide a better direct to consumer digital car buying experience such as providing a pre qualified decision without impacting the consumer's credit score.
This enhancement is critical given the industry's progress towards a digital retail transaction as you can see what these examples we are laser focused on supporting in assisting our lender customers.
Lastly on talent.
Hiring and retaining top talent continues to be a priority for us. We recently supplemented our executive leadership team by hiring mats either as our first dedicated chief underwriting Officer Man is an experienced insurance executive.
With over 30 years and specialty programme underwriting at large insurance carriers. He is responsible for leading our underwriting claims and actuarial teams. In addition, we.
We remain focused on building a strong people strategy that fosters a diverse and collaborative environment.
Open lendings longterm growth objectives.
Now I'd like to take a moment to thank John Flynn for us more than 20 years of leadership is a founder.
And chairman of the board of open lending as we announced last week, John will be passing over the reigns to Jessica Snyder as our new chairman of the board.
It is important to note John will remain a valuable member of our board of directors, ensuring continuity and an orderly transition of leadership Jessica congratulations on assuming the chairman role, we look forward to partnering with both you and John in the future.
As discussed having previously managed scaled businesses in retail auto sector through the great recession, I remain confident about our future opportunity as we execute on our mission to help both lenders and underserved borrowers we.
We are delivering on our previously outlined plans and initiatives of gaining profitable market share by only signing targeted new accounts, adding.
Adding technology capabilities relevant to our customers and most importantly.
Thoughtfully growing our team.
Given these actions we expect to capture the pent up demand as the sector and macroeconomic conditions inevitably recover.
Now that I would like to turn the call over to Chuck to review key too in further detail as well as provide our thoughts on the outlook for Q3.
Thanks, Keith during the second quarter of 2023, we facilitated 34354 certified loans compared to 44531 certified loans in the second quarter of 2022.
It is important to note that if we exclude.
The refinance channel volume from both periods, which as we know has been significantly impacted by interest rate increases over the past 18 months.
Certified loan volume was up 2% quarter over quarter.
Total revenue for the second quarter of 2023 was $38.2 million compared to $52 million in the second quarter of 2022, notably excluding the profit share revenue change an estimate impact in both Q2 and Q1 total revenues were up $4, 5% sequentially compared to Q1 of 2023.
To break down total revenues in the second quarter of 2023 profit share revenue represented $17.8 million program fees were $17 $9 million and claims administration fees and others totaled $2.5 million.
Now, let's turn to profit share.
As a reminder, profit share revenues comprised of the expected earned premiums less you expected claims to be paid over the life of the contracts less expenses attributable to the program.
The net profit share to us is 72% and the monthly receipts from our insurance carriers reduce our contract asset each period.
Profit share revenue in the second quarter of 2023 associated with new originations was $19 million or $553 per certified loan as compared to $26 $3 million or $591 per certified loan in the second quarter of 2022.
And the second quarter of 2023, we recorded a $1.2 million negative change an estimated future profit share related to business and historical vintages.
Primarily due to higher than anticipated prepayments and default frequency, partially offset by lower than anticipated severity of losses in the near term.
Concerning severity the.
The Mannheim used vehicle value index. The movie experienced the worst may and June in the history of the index.
Despite the significant decline I will note that are conservative forecast in in modeling. We're in line with the movie as we exited the second quarter of 2023.
As you may recall and for reference and Q1 of 2023, we recorded a 700000 positive change an estimate.
Looking at this on a year to date basis or profit share changing estimate was approximately $500000 negative a nominal impact on cumulative profit share revenue.
Gross profit was $32 million in gross margin was approximately 84% in the second quarter of 2023 as compared to $47 million in gross margin approximately 90% in the second quarter of 2022.
Operating expenses were $16.3 million in the second quarter of 2023 compared to $14.2 million in the second quarter of 2022 as compared to $15.8 million in the first quarter of 2023.
We continued to be prudent and adding incremental costs in the current environment. However.
However, given the strength of our balance sheet cash and margin profile, we're making measured and controlled investments in our business to ensure we are well positioned for growth as market conditions improve.
Operating income was $15.7 million in the second quarter of 2023 compared to $32.8 million in the second quarter of 2022.
Net income for the second quarter of 2023 was $11.4 million compared to net income of $23 $1 million in the second quarter of 2022.
Basic and diluted earnings per share were nine in the second quarter of 2023 as compared to 18 in the previous year quarter.
Adjusted EBITDA for the second quarter of 2023 was $27 million as compared to $34 million in the second quarter of 2022.
A reconciliation of GAAP to non-GAAP financial measures that can be found at the back of our earnings press release.
We exited the quarter with $386 $8 million in total assets of which $224.4 million was an unrestricted cash $59.7 million was in contract assets.
<unk> $63.3 million in net deferred tax assets.
We had $167.7 million in total liabilities of which $145 seven was outstanding debt year.
Year to date, we generated $42.6 million in cash before acquiring $21.3 million or 3.1 million shares of our common stock at an average price of $6.87 per share.
Now moving to our queue three guidance. We are encouraged that auto supply appears to have troughed in apps and a potential uaw's strike supply is expected to continue to improve.
However on the demand side, we are looking for signs of incremental improvements and I've taken the following factors into consideration in our guidance.
The impact of affordability on our target borrower due to elevated used car prices inflation and rising interest rates near.
Near term liquidity challenges for our credit unions.
Tightening underwriting standards, leading to a shift towards prime and Super Prime borrowers.
Lenders exiting the indirect auto lending channel as a response to current market conditions.
Increase percentage of cash buyers due to the current interest rate environment.
And continued federal reserved actions and potential impact on our refinance channel volumes. Accordingly, with these considerations are guidance for the third quarter of 2023 is as follows total.
Total certified loans to be between 26030 thousand.
Total revenue to be between $29 million, and 34 million and adjusted EBITDA to be between $13 million and $17 million.
In closing, we have a strong balance sheet, no near term debt maturities and generate significant cash flow, which provides us with the financial flexibility to thoughtfully invest in our business is Keith outline previously.
Given these actions we expect to capture the pent up demand as the sector and macroeconomic conditions inevitably recover.
We would like to thank everyone for joining us today, and we will now take your questions.
Thank you we don't have to give me a question and answer session to ask a question.
And one on your touch.
If you're using a speaker fine please pick up your handset before pressing the keys.
You said anytime you questions have been addressed and you would like to withdraw your question. Please press.
N T.
Yeah first question comes from Kyle Peterson.
Go ahead.
Okay, great. Good afternoon gas thanks for taking the question.
Touch a little bit on the reef hi.
I guess just kind of looking at this first one Q level here.
Scenes stable to slightly better as a percentage of total starts and just kind of an absolute number here.
Barring any additional.
Additional rate hikes or big spikes in and rates.
Do you guys have comfort that <unk>.
Hi is kind of approaching a bottom are showing some signs of stabilization here in in the overall mix.
Yeah, Hey College Chuck Thank.
Thank you for the question refi and in the second quarter was almost 11% of our volume that was up a little bit from about 8% in Q1 and on a year to date basis about 9.3%. So as we've always said, we're very close to our <unk> channel partners in with the fed actions and what we've seen over the last 18.
Months, you know 525 basis point increase in total.
We don't need rates to come back down to the pre fed actions, we just need rates to stabilize for a call at four to six month period to wear or refinance channel. We believe is going to really come back in and there is.
Overprice loans are that we can go after with our channel partners. So so it's.
Again.
Had a recent action I think 25 more beeps.
Still maybe some signals to.
Maybe 50% of the governors.
Let's see thanks, possibly maybe an action maybe not but again, we just need it to stabilize and not necessary come down we just need to stabilize to get it to get that business going again.
To follow up on some of the new logo wins and going to see the 13 the quarter. It sounds like they can be in deep counts for you guys over time, how should we think about the ramp timeframe.
From these guys weather.
Are you going to start out at and whether it's kind of testing volley.
<unk> they are a little lower and then kind of fully ramp later or how quickly should we think about the spigot being turned on with these new logos.
Yeah, Great question and this is Keith speaking.
Truth be told they're all over the map.
Whether they're a large or small importantly, none of these are pilots. These are all launches to go live and they will just kind of ramp to their full maturity.
In each individual case kind of on their own accord, but I think the important point is just that given the selection that we're making with these targeted accounts is that because of integrations that we have with their lls's and other factors were able to get them installed in moving to first served production much more quickly than we have historically.
Got it that makes sense and that's helpful. Thanks, guys.
Okay. Thanks.
Thank you the next question.
Davis from Raymond James Please go ahead.
Hi, Good afternoon, guys nice to see the sequential increase.
But.
Sharp just kiara Chuck named several factors and kind of what's weighing on the <unk> guide the Navy relatively <unk> cough that most influential ones hope.
Hopefully.
Just trying to understand causal sequential decline expected uncertain kind of one of the biggest factors that you are seeing it as a credit union appetite for loans.
Portability, and maybe the top two or three of the kind of laundry once you laid out.
Yeah.
Good to good to talk to you.
Maybe you know thanks for the comment on Q2, and we're pleased with the positive results in the second quarter, but I think it's important maybe on as we think about the guide and step back into a year or more here record inflation.
<unk> began raising rates now at your study as I mentioned 525 bps in total.
Thought we were heading into a recession earlier.
Earlier this year with a hard landing and I think the biggest impact and then Keith said in the prepared comments is.
Consumers and affordability on the consumer with with his right environment with prices.
Prices are a moderating a bit but there's still elevated 40% a bulb pre pandemic levels. So those are some of the biggest things that impact affordability as price and your interest rates.
So if I had to point those out but we are encouraged though as we said in the prepared comments that supplier has appeared to have troughed in an absent. This potential you EW strike. We think supply is going to continue to improve and then on the demand side, which is driven by you know if you think about the the affordability, we're looking for incremental sign.
As of improvement there, but it's just not there yet so.
And I'll also point that seasonally Q3, and the auto industry seasonally lower auto sales quarter, and then with an uptick in the fourth quarter. So so.
Liquidity challenges at the credit unions and also.
A longer list, but but it's although all impact our decision on the guide and.
Cash buyers for example.
24% increase in cash buyers.
Recently as in it's above 60%.
We need alone.
To participate it opened lending so so all of those went into our factors and and.
In our conserve guide to to to put the guide out.
So hopefully I'll quit.
And another participant.
Fair to say demand and seasonality.
More of an impact in it and then kind of credit Union.
For auto loans I understand it's a factor, but it seems like it's more demand.
Yeah anything else okay.
Absolutely Keith you would agree around on the demand side on the affordability the pricing yeah for sure I mean, I think the best metric that we track is affordability and the reason for that is it kind of come flights or combines two different metrics and one is simply the price of the vehicle and just interest rates and what we are seeing is that as we've said in the prepared remarks.
We're all seeing and the data is that we are seeing prices began to moderate if ever so slightly on the new sides and again if ever so slightly on the <unk> side.
Okay. Thanks, and then encouraging to hear that supply should be finger.
Fingers crossed improving here just curious any updates on conversations with the Lcm's, obviously that as they have supply come back online.
Maybe there'll be more demand for them, just curious kind of any conversations with only a number three or four anybody else Ellis conversations are going.
Well I mean first I will address our existing Oems number one and number two and when we couldn't be more pleased are encouraged with the performance that they've provided over the last couple of quarters and there were up 23% Q2 versus Q2 of last year up 21% sequentially in up 17% year to date over prior year. So the performance of our existing OEM Harbor.
One a number two is fantastic concerning our pipeline.
Great news on that front for new.
Captives.
First and foremost the number of prospects that are in the pipeline.
R as high as they've ever been the frequency of interaction with them are as high as of Ben and then kind of the flow through what I clinical at a different stage gates from a prospect to a sale. The quantifiable stage gates that are being crossed are getting better everyday turning our attention to large lenders and other enterprise type accounts, we've added a <unk>.
<unk> sales executive in our pipeline from that cohort, including banks is double and higher than what it's ever been.
And the final stronger.
Yeah, and I would just add a final thought there is just that.
<unk> CR value proper value prop just keeps getting stronger each and every day as we look at potential future accelerated depreciation I mean, that's the safety net that we create for our winter partners to help them protect against that future potential accelerated depreciation.
Okay, great. Thanks.
Okay. Thank you.
Thank you the next question.
Dutch Bank. Please go ahead.
Yes, hi, Thank you. So I wanted to talk about affordability that you just mentioned.
Biggest factor here.
How do you feel that gets resolved scope of doesn't to look like an appointment answering my appointment so sorry.
Come down and I'm curious like if the price <unk>.
Score vehicles comes down it seems like bold Paul.
<unk> adjustments to your <unk>.
So <unk> so how do you also need to think about.
The risk associated with that and maybe give us a sense of what you're assuming in terms of sobriety have lost I think as long as you're not allowed.
No profit sharing that means.
Yeah, I've osseous, Chuck Yeah, I'll start with maybe the back side of that question and you know if you think about the moderation of price and the impact the Mannheim used vehicle value index with the movie as we call. It are they call it.
We monitor that and as I mentioned in the prepared comments, we were in line with the both.
Both may and June were two of the single largest months on record of the of May and June on history declines and we exited with in line with the movie. So we have we have a robust process with our <unk> team. So we're in good shape. There we continue to as we look out.
And project into the future with the future profit share estimation, we look at that and have stress built in for further declines of the Mannheim. So the movie. So we feel really good about where we exited Q2, there and into the future is it affects our profit sure. So we <unk> unless it's outside of what we've already <unk>.
<unk>.
We've got that managed in our in our modeling and forecasting.
And I hope that hope I answered your question and then as it relates to affordability.
Clearly.
We want the.
The prices to come down because we want an affordability for the near Nonprime consumer to be.
Healthier, which is going to drive our business and drive our short volume so.
Okay.
That that helps and then just hold on the credit Union side, you know it seems like the sort of these two interrelated 0.1 being just the funding issues that.
Mhm.
And then there's the issue about the shift the legs.
Prime multiple crying.
<unk> to <unk> cause I would've taught in I'll take your value proposition is that they'll credit unions can go off and do business a lot.
The New York Times, and <unk>, So I'm curious what about the dynamic.
What what.
Kenneth Union.
Yeah, we received multiple things I mean first of all it's important to note that there are still the number one source of new loan originations in the U S and so they are still larger than banks and still larger than captive. So doing a great job and then very healthy they've added over 5 million almost 6 million new members over the past year.
As we mentioned in the prepared remarks, I think what we're simply seeing there isn't a liquidity constrained environment.
They are seeking just just fulfil their mandate, which is to serve their members, which is people over profit says they call. It and so kind of the first order of business is to is to make that loan to an existing member which in many cases, just happens to already be a prime or a super prime customer. So those are some of the the <unk>.
Dynamics that we're seeing there I would say also it's important to note in the credit Union space is at a few back out refi. So if you look at credit unions X refi year to date this year compared to urinate last year actually up 7%. So our credit unions are doing are doing very very well in this environment.
Alright, thank you so much.
Yeah. Thank you. Thank you.
Thank you.
Kenneth.
Go ahead.
Hey, guys. Good afternoon, nice to see the solid results here in Q2, maybe any update or color on your insurance partners. We didn't hear anything about it at on your prepared remarks.
So any so anything we should be aware of there and they'll have a quick follow up.
Yeah, Hey, Joe It's Chuck Yeah, Yeah, I'll jump in yeah.
We had recently we had all of our carriers in for.
Annual carrier round table and had great sessions with with our partners.
Relationships with the carriers and.
No capacity issues as it relates to volume or anything like that.
Concerns on the we talked on the queue for a call, but yeah, everything's going really well, we we just hired as Keith pointed.
Matt say there are first dedicate chief underwriting officer.
We're welcoming mat and brings a wealth of of insurance experience to the team and.
Will further that.
The good work that John and Ross and we've done over the years. So so everything's really good on that front have ample capacity.
Great and then.
Secondly, maybe on the on the pipeline of new logos I know.
We talked about some of the Oems and the like.
And the fact that you're bringing on more.
You could call it market share or more.
Larger larger lenders and kind of each quarter's worth of new cohorts just get a feel for it even if we exclude the large Oems.
How that pipeline of.
You know, maybe new logos looks over the next few quarters relative to what seems like a really good performance here in queue too. Thanks a lot.
Thank you for the question.
The pipeline a strong I won't give absolute numbers, but the pipeline of qualified prospects is actually up compared to this time last year and importantly, it's comprised of what I would call. The right target accounts. So we we feel good about that the pipeline is comprised of of prospects in Leeds generated from our own.
Marketing efforts and equally as importantly, some of our our marketing.
Representatives that help us do business for which we're grateful for those are help constantly I would just say also that the targeting is very specific I mean, we have to want to have the propensity to want alone in this environment either because it's the way you want to do business at a credit union or you're trying to get something like CRA relief, if you're a bank.
You are large enough to have our target sure that's going to help us move our needle and help them move their needle that as I mentioned, they have alone a loan origination system for which we already have integration that they have adequate liquidity for which to fund. These these programs and then finally that they're going to open up into three channels, both will be called direct indirect and <unk>. So it is kind of.
Tough to make it onto that prospect list on that pipeline and a pipeline is larger than an announcement.
Great guys, good luck with that and thanks for.
Thanks for thanks for the time.
Yeah. Thank you Jeff.
Thank you once again.
Question. Please press stop.
Then one.
Six question comes in Janesville set for.
Morgan Stanley .
Alright. Thank you just wanted to ask him for sure.
Commentary, so far but I wanted to ask.
Part of the value add for for open lending has been to help with.
Underwriting history, and and and and put their all that been trending for for open lending and what adjustments if any of you been recommending that your your partner's mate they're.
Underwriting standards et cetera.
Yeah, Yeah, Hey, James This Chuck I mean I'll start.
I think from if we think about it from a we announced I think it was Q2 of 2022 and then again recently in Q1 of twenty-three you think about underwriting and risk.
We put a premium increase about a 12% premium increase back in queue.
Q, what do you want a 22, and then about 5% and Q2 of 23, so as we think about risk in the environment, we wanna be prepaid not only us that are in our customers as well as our carrier partners. So so we appropriately price for the risks that were taken in the environment. So if you think about profit share.
And how that impacts that we're seeing better credit with the tightening and as well as more of a.
Credit shift mixed improved.
Improve credit and with that you'll be charged lower premiums, but with the actions. We took we have preserved our profit sharing unit economics and that 550 assert range. So so that's how we kind of think about it and.
And then we do that through a vehicle value discount of the collateral so to make sure we're pricing appropriately so.
So hopefully I answered your question.
That's helpful. Thanks.
Thank you yes.
Alright.
Alexander.
Please go ahead.
Hey, guys. Thank you for taking my question.
Just wanted to get maybe yes, sorry, so in order to get a little more color maybe on the mix between kind of credit unions and banks on on the pipeline side. I know you guys are originating more certs port per per relationship, but just you know you guys mentioned in the last quarter I just wanted to see how you guys are doing this quarter and then on the risk side.
Are you guys also continuing to originate longer duration loans kind of those 84 month term loans and.
And kind of what composition of the portfolio of those were thank you.
Yeah, I'll I'll stay on the credit Union versus versus bank discussed up the pipeline I was speaking primarily of of the.
Credit Union pipeline.
Just momentarily goes Piper.
Pipeline is up on the bank pipeline, but the addition of that senior sales leader that I mentioned.
Pipeline is multifold. So we're looking to be you know primarily our customers have been OEM captives credit unions and banks as you well know with with with with banks being a bigger percentage of the captives and the credit unions being the majority, but we're targeting banks in that pipeline is more.
More than doubled for bank conditions.
Okay, great so ill.
I've been on the on the four month term you'd asked about that while still early we're encouraged in performing as expected and actually better than expected.
We talked a lot about affordability for the near Nonprime consumer and obviously the term actually helps that for the payment buyers and we didn't really see we're not seeing the incremental risks and we're pricing port and our risk pricing. So in our portfolio to day of the year to date Twenty-twenty Three's about 14% is 84 month term so.
Perfect. Thank you so much geyser and congrats on the get quarter.
Yeah. Thank you.
Thank you.
It comes from.
Some stevens.
Ed.
Good afternoon. Thanks for taking my question first question kind of broad question about the.
The demand environment or the volume.
If you could maybe describe the conversations you're having with your certain partners is the when when we think about the volume is.
Sir Vol.
Volume changes due to changing partners appetite.
Or or is that maybe the the change in consumer landscape in terms of consumer credit. Thank you.
Yeah I think.
And is Chuck it's more if you think about.
Our app volume is still very robust.
If we think about it but lenders in this environment.
Pushing the credit Union space, which is our primary customer.
If tightened a bit obviously, you we've talked about the continued liquidity constraints, so but with what they are lending is to that more super prime to prime lender or tomorrow or today. So we.
We support the near Nonprime, but the opportunity is.
To continue to be there for us the pent up demand.
For for the near Nonprime is there and we're going to be well positioned and we believe the liquidity crisis, we kind of think forward into the last half of this year into 2024 that there's going to be improvement there and we will continue to see that and be ready for it.
Okay.
And I would just add I think an important.
Factor in the question you answer as we think about future volumes as Chuck mentioned earlier, let's all just recall that we we've raised premiums.
2% open lending has never and will never chase volume. So we're we're pricing risk appropriate to the market as we see it and and that obviously has those raised premium rates, obviously have an impact on volume.
Okay. That's helpful. Thank you.
Second question, you got kind of a different question, but in terms of the refinancing volume.
Come down a little bit but for the for the volume you are generating I guess, how much of that is kind of an improvement too.
The consumers right that they're getting on the loan versus.
Consumers.
May be wanting to extend out the terms of lowering the monthly payment that was sort of one of the things I've been hearing about in terms of.
As consumers are maybe stressed out a little bit that they're looking to manage the cash flows. So it just kind of wondering in terms of refi volume, how how that checking up thank you.
Yes. This is Keith what we're seeing there is is I think as you kind of guessed it as an extension of term and that extension of term translates into roughly a $65 a month savings. So most refi right now is being pulled through with an extension to charm.
Okay. That's very helpful. Thanks, so much.
Okay. Thanks.
I'd like to turn the call back.
Jessica.
In.
Well. Thank you everyone for joining us today, we are pleased with results regenerated in Q2, 2023, again and I want to send a sincere heartfelt. Thank you to entire open looking team for making these results possible.
You heard me say it before but I think that's worth repeating again these cycles in the automotive industry rebounds, and are always led by used autos simply stated consumers can defer the purchase of a new vehicle, but ultimately they cannot defer the purchase of transportation. Thank you all again for joining us today and we look forward to speaking with you on our next earnings conference call.
Thank you.
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