Q2 2025 Open Lending Corp Earnings Call
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Good afternoon and welcome to the open lending. Second quarter 2025 earnings conference call.
As a reminder, today's conference call is being recorded.
on the call today, our Jessica bus chairman of the board of directors and chief executive officer
And Matthew say their Chief underwriting officer who will both be available for Q&A section of the call.
I'd like to pass the call over to Ryan Gardella, investor relations to read the Safe Harbor statement.
Thank you. I appreciate you joining us. Prior to the start of this call. The company posted the second quarter 2025 earnings release and supplemental slides. So as investor relations website,
In the release. You will find reconciliations of non-gaap financial measures the most comparable gaap Financial measures discussed on this call.
Before we begin, I would like to remind you that this call may contain estimates and other forward-looking statements that represent the company's view. As of today, August 6th. 2025 open lending. Disclaims any obligation to update the statements to reflect future events or circumstances?
Please refer to today's earnings release and our filings with the SEC for more information concerning factors that cause actual results to differ from those expressed or implied with such statement.
And now I will pass the call over to Jessica to give an update on the business and financial results for the second quarter 2025.
Thank you. Good afternoon, everyone. And thank you for joining us today.
This marks my third earnings call as CEO and I am pleased to report on our results for the second quarter which we believe are starting to reflect the progress. We are making and executing our strategy for the business.
While we are encouraged by the impact. Our actions are making on the early results from our changes. We believe that 2026 will truly demonstrate the full Financial impact of our initiatives.
Before we get into my comments and results, I will start by thanking open, lending employees, for all the work and efforts which contributed to the solid and positive. Momentum in our results and execution,
When I first stepped into this role, I laid out a Clear Vision with 4 Pryor.
First, we would focus on profitable and less volatile unit economics.
Second, we would increase our service level to improve customer retention and demonstrate value through the life cycle of the loan.
Third. We would streamline the business by eliminating unnecessary costs and refocus our investments on our core capabilities and forth. We would enable a culture of accountability and Empower our employee base.
I'm happy to report that we've made substantial progress on All 4 of these priorities in the quarter and we're going to continue pushing the business and our results forward.
As part of our third initiative, we are optimizing efficiencies and reducing expenses to put us in a position where our program and TPA fees support our expense structure.
I will also discuss progress in that area.
I want to start by reaffirming our belief, in the value proposition provided to our customers by our signature lenders, Protection Program.
Which we believe is the industry-leading solution for pricing and decisioning near and non-prime lending with credit protection.
We believe this has been reinforced further by the changes. We have made in the past 90 days and the commitment of key stakeholders.
As the only risk-based pricing solution for near and non-prime Auto industry lenders with an insurance rapper.
We believe that we are positioned to succeed in this rapidly transforming consumer Market.
We continue to take steps in an effort to solidify our foundation and make our product and Partnerships even more stable during these uncertain macroeconomic times
1 example of this is on the carrier front. I am particularly excited to announce that we just signed an early extension of our producer agreement with amateur Trust.
With the same overall terms as our existing agreement.
This extension was driven by the strength of our partnership and the value they see in our future.
Agreement was previously set to expire at the end of 2028 and has been extended through 2033.
AMT trust is our largest and longest partner providing insurance coverage to our credit unions Banks. And oems and this early extension, not only secures our credit capability and capacity but demonstrates our faith in our product team and ability to generate profitable business.
We're deeply grateful for their partnership and look forward to building value together in the years ahead.
Our collaboration with AmTrust spanning over a decade. Since 2010 has been pivotal pivotal in ensuring over a 9 billion in auto loans. Empowering Credit, Unions to extend credit to near Prime and non-prime borrowers with confidence.
We believe our relationship with our 2. Other carriers are also solid and all carriers are rated a by am best.
They have all fulfilled their promise to pay claims in a timely fashion through all Market Cycles, which me which mitigates credit union risk.
Which is exactly what our signature lenders. Protection Program was designed to do.
Next, I wanted to provide an update on our strategic priorities and the progress we have made.
First on our focus on profitable and less volatile unit economics. We facilitated 26,522 certified loans in the quarter.
down from 28,963 and the prior year period And 27,638 in the first quarter,
This decrease is largely due to typical seasonality combined with our intentionally tightened lending standards and targeted rate increases and less profitable segments.
And our updated supplemental slides. You can see that we are now including more granular information on certified loans.
Which we believe speaks to the improved quality of our portfolio.
For example, super thin borrowers, made up only 0.3% of loans in the quarter.
Down from a high of over 10% in the fourth quarter of 2024.
You'll also see that our program fees remain well over $500.
Additionally, the mix of OEM and Credit Union, business continues to shift more towards Credit Unions, which reflects a better overall profitability position for both components of unity economics.
Typically credit unions.
have better performing loss ratios which increases profit share and on average have higher program fees,
That being said with regard to cert volumes, we are hopeful that 2025 will be a transition year and the bottom of the J curve. In terms of the number of loans, we facilitate across all channels
We have made a conscious decision to focus on profitability and improving our business mix in 2025 before pursuing growth.
Simply put, we didn't want to grow without first addressing fundamental issues. In particular, how we decide and price our certified loans.
our work has also resulted in a positive book, mix shift driven by price increases
On our certified loan mixed by Channel. We significantly reduce our OEM exposure.
Which is positively impacted our overall program fees and loss ratio, and therefore improved our overall portfolio and earnings quality.
In the second quarter, our OEM mix fell to 11.1% down from 12.4% in the prior quarter and 23.9% in the prior year period.
While we expect to continue to focus more heavily on bank and credit union lenders. We're seeing encouraging progress with OEM 3 and expect them to perform more like a credit union since they don't offer a competing product.
I'd like to provide an update on OEM 3 progress with our pilot program.
While rollout has been deliberately slow, We Believe OEM 3 is very happy with the results so far.
And we are targeting a full rollout of the program by the end of 2025.
We expect to see real sir progress in 2026.
We have also made Solid progress in the area of our pricing and predictive modeling.
Both of which are ahead of schedule and utilizing more real-time data.
Pricing approach and integration of real-time TransUnion data will enable us to see the need for rate and to price for frequency and severity changes faster.
These changes are in development and we will have more to report next quarter.
We have also seen more consistent and less volatile results in our profit share. Unity economics and backbone performance.
I want to reiterate here that we always expect to see movements quarter to quarter in our backbone.
Fortunately, the back book has benefited from lower frequency and severity of claims than expected
Partially due to a sequential increase in the Manheim used vehicle value index, or movie which rose to 206.9 in mid July.
increased consumer sentiment and lower wholesale supply are also contributing to an increase in used car wholesale prices, which generally increases the average size of our facilitated loan,
We've made significant progress on rating and pricing changes in defined segments and we believe our ability to predict lost frequency has improved with the use of real-time data that I mentioned.
While we continue to constrain current unit economics, based on a 72.5%, loss ratio.
Recent vintages are expected to perform better due to rate and book mixed shifts.
Which we expect may lead to positive adjustments in the future.
This is especially true for our 2025 vintages, with the changes already discussed, which impact current loans being put on the books.
Next, an increase, our service level to drive customer retention and future growth. We've implemented 3 primary tools in the quarter.
1 enhanced lender, profitability reporting, and the buildout of real-time Champion dashboards.
2, improved claims processes leveraging automation.
3, a reinvigorated sales team with the new commission structure effective. August 1st, which rewards not just sales but retention insert volume growth.
We believe we're seeing positive early results from these changes and in fact we lost only 1 customer in the second quarter and notably they hadn't written a new search in 2 and a half years. And our continuing to pay premiums on. They're already insured loans.
We have also added an additional 12 logos this quarter or a total of 30 year to date.
Third on streamlining, the business and removing unnecessary costs. We continue to right size our organization.
Our goal heading into 2026 will be to pursue growth and maintain a cost structure supported by our program fees and TPA fees alone.
This means we are achieving profitability based on the profit share component of unity economics.
In the near term. We will continue to focus on certain quality and we are hopeful that. Once we have our new processes in place, this will eventually allow us to increase the quantity of search while mitigating, the risk of another large cie event.
With that in mind, I wanted to specifically call out that while our operating expenses were up this quarter. This was partially due to 1 time Severance charges
We've completed the work to identify substantial run, rate savings for 2026, and plan to have implemented all planned actions by year end.
This includes secondary riff, that was completed on July 15th, and changes to our commission structure.
We are also examining potential efficiencies to be gained by utilizing machine learning and scalability, which we believe have the potential to boost productivity and increase the accuracy of our claims review.
I do want to be clear that we will continue to invest, to invest in targeted areas, including our data science space.
As I mentioned earlier, we are planning to transition into an expense structure that is supported by our program and TPA fees on a run rate basis by the end of 2026.
To open Lending.
The largest impact has been seen in the combination of insurance risk and pricing under our chief underwriting officer. Matt, sather,
Where we have better feedback loops and collaboration.
We're focused on attracting top talent to further our mission of serving the underserved. And we're actively looking to bolster our team in certain areas where we feel there is room for improvement.
Overall, we have seen increased execution, clear, strategic, focus, and better collaboration.
On the credit union front, we believe there is still a large need for credit, decisioning pricing and risk mitigation in the near and non-prime space.
We continue to monitor the health of our credit unions and the macroeconomic conditions to assess growth opportunities product, and pricing enhancements, and the impact on performance.
At the macro level, we believe that Credit Union Financial positions are improving and refinancing opportunities are returning.
While we Face some headwinds, we're actively evaluating solutions to capitalize on these market conditions.
In the second quarter of 2025, we have seen a strengthening and Credit Union, balance sheets with total assets and federally insured. Credit Unions Rising by 79 billion or 3.5% to 2.3 trillion. Compared to the second quarter of 2024 reflecting resilience despite rapidly evolving economic conditions
Additionally, total loan growth. Ensure growth in the same Credit Unions. Have also seen improvement with the year-over-year growth of 3.6% and 4% respectively.
the Federal Reserve 3 interest rate Cuts in 2024 totaling a full percentage Point have stabilized inflation around 3%, spurring increased refinancing activity
Particularly in the auto loan sector.
Where we believe open, lending's, risk-based, pricing and analytics platforms are well, positioned to drive growth.
We've also seen ongoing trade tensions and proposed tariffs which could impact how consumers think about their next Auto purchase.
As discussed above open, lending is proactively responding to these challenges and opportunities. By taking steps to enhance our Partnerships with credit unions and leverage. Our lending profitability reporting to offer, tailored refinancing solutions to their customers
As part of our goal of increasing customer retention, we have made progress on the buildout of our lender. Profitability reports and Champion dashboards, which we believe will enable
Credit Unions to see the comprehensive value. They received by partnering with open Lending.
we will dive deeper into these efforts on future calls but they are important, not only for our customers, but for our internal teams to stay current on dashboards and other informative metrics with future decisioning Technologies,
Before moving on to a more detailed review of the numbers, I wanted to mention a very positive development on the leadership level. As many of you have already seen, we announced Massimo Monaco as our new CFO effective August 18th 2025.
Masimo brings over 2 Decades of experience in lending and financial services and will be a key driver of change and strategy in our organization.
We are thrilled to welcome him to our leadership team, and you will be hearing from him on our next earnings call.
Now, let me walk through the numbers for the quarter before opening the line to Q&A.
During the second quarter of 2025. We facilitated 26,522, certified loans compared to 28,963 certified loans in the second quarter of 2024
to total revenue for the second quarter of 2025 was 25.3 million and includes an 8.3 million reduction in estimated profit share Revenue associated with new originations during the quarter.
as compared to the second quarter of 2024, primarily driven by lower, further constrained profit share unit economics per certified loan.
Is a business and historic vintages as compared to 6.7 million reduction in the second quarter of 2024.
Breakdown total revenues in the second quarter of 2025 program fee revenues were 14.9 million.
Profit share Revenue was 8 million and claims administration fee and other Revenue was 2.4 million.
As a reminder profit share Revenue comprises, the expected earned premium less the expected claims to be paid over the life of the contract and less expenses attributable to the program.
The net profit share to us is 72% and any losses in the profit share are acred and carried forward for future profit share calculations.
When cash consideration, previously received is an excess of the expected profit. Share Revenue, the amount of excess funds and the forecasted losses are recorded as an excess profit, share receipts liability.
profit, share revenue, and the second quarter of 2025 associated with new, originations, with 7.7 million or 289 per certified loan as compared to 16 million or 552 per certified Loan in the second quarter of 2024,
the decrease in unit economics per certified loan is due to our current estimates of loan Performance Based on recent historical results,
In addition, as I already mentioned in our last call 1 of our steps to reduce volatility of future quarter-to-quarter change in estimates, is booking initially lower unit economics, at the time of origination.
At this unit economic, this is equivalent to a 72.5% loss ratio. And with our current pricing actions, we would expect current vintage to ultimately perform closer to a 65% loss ratio.
The positive 300,000 profit, your C recorded in the current quarter is associated with cumulative, total profit, share Revenue, previously recognized of approximately 344 million for periods. Dating back to January 2019, the ASC 6066 implementation date and represents over 409. Insured enforced loans in the portfolio.
We also expected a reasonable cie variance as a model, absorbs new information.
Operating expenses were 18.6 million in the second quarter of 2025 compared to 17 million. In the second quarter of 2024 representing an increase of 9% year-over-year,
Increase in operating expenses. Year-over-year includes 1-time Severance expenses and we expect additional 7 expenses in the third quarter. As we continue to right-size the business.
As I have discussed, we have made the controlling of operating expenses of priority going forward and the reductions we have made will have a full Financial benefit in 2026.
We'll continue to monitor our expenses, right? Sides were needed and find efficiencies in our own spending as well as in third-party spending going forward.
That income for the second quarter of 2025 was 1 million compared to 2.9 Million in the second quarter of 2024.
Diluted net income per share was 1 cent in the second quarter of 2025 as compared to 2 cents per share. In the second quarter of 2024
Adjusted even after the second quarter of 2025 was 4.1 million as compared to 6.8 million in the second quarter of 2024.
Beginning of the quarter ended June 30th 2025. We have updated, the presentation of adjusted Eva to exclude interest income. As we believe the exclusion of interest income aligns. Our definition was comparable companies,
Prior period, present prior periods, presented have been conformed to the current period presentation.
There's a Reconciliation of gaap to non-gaap financial measures. That can be found at the back of our earnings press release.
We exited the second quarter with 296.7 million of total assets of which 230.7 million was in unrestricted, cash and 29.5 million in contract assets.
We had 217.7 million in total liabilities of which 136.1 million was an outstanding debt.
We repurchase approximately 2 million shares for a total consideration of approximately $4 million.
Moving on to our capital allocation priorities.
We have 21 million remaining on our repurchase program, and intend to continue, opportunistically repurchasing shares, throughout the rest of 2025.
As I mentioned, last quarter, our intent is to utilize our balance sheet to invest in our organic business and a control and measured manner to fuel profitable growth.
Further the cash interest expense on our debt, continues to be about equal to the amount of interest income being generated on our cash and cash equivalents on a quarterly basis.
We remain in compliance with all of our covenants under our our credit agreement, and expect to remain in compliance based on a projected performance.
Finally, I wanted to address our guidance.
For the third quarter, we are expecting total certified loans to be between 22,500 and 24,500.
I believe the second quarter was another step in the right direction for the business, as we execute against our strategic priorities, both in the near and long term.
We are clearly focused on getting four things right, and we will continue to measure and report our progress against our stated strategic initiatives.
We've made significant progress in adjusting our pricing model to adequately address risk in our portfolio, which we believe will lead to less volatility and more predictable results for the business.
We announced the extension of our agreement with and Trust early which we believe demonstrates the confidence. Our partners have in the business.
We're continuing to rightsize the business and are targeting profitability based on our program and TPA fees alone.
We brought Maximum Monaco on as our new CFO, and we are actively assessing other moves to improve our leadership and bring our corporate governance in line with best-in-class practices.
We will now take your questions.
Thank you at this time. If you would like to ask a question, please press star 1 on your telephone keypad.
You may remove yourself from the queue at any time by pressing Star 2.
Once again, that is star 1 to ask a question, we will pause for a moment to allow questions to queue.
We'll move to John Davis with Raymond James, please go ahead.
Hey, good afternoon. Um just first off. Uh, what do we what drove the early extension with am trust? Just curious. Did you guys go to them and say, hey we want to extend, did they come to you? Just, you know, obviously 3 years early extension was a little bit surprising. So just curious comes back story on what drove that extension.
Yeah, thanks John for the question. This is Jessica, um, AmTrust actually came to us, wanting to extend the agreement again. Um, we have a very long-standing partnership with them, I think it was just an important signal to the market given, you know, everything that had happened in the last couple of quarters that they stood behind us and we were really um, glad that they approached us and happy to enter into the extension. Again at the same terms that the previous agreement was at and covering all the same sectors, oems Banks, and credit unions.
Okay, no, that's that's great to hear. And then just so the you had the first kind of positive profit, share cie since I think 1 Q of of 23, you know? Is that a signal? Do you guys feel pretty good? That a lot of the the negative adjustments have been taken and and are behind us at this point that you've kind of worked through the troubled 21 and 22 vintages? Just, you know, obviously you can't predict the future but just thoughts there. I mean, I think it's a very positive sign that we're going.
On the right direction for the first time in a couple years. But you know anything bigger picture that we should be aware of um or any thoughts on on the cie this quarter and going forward
Sure. Um, you know
certainly things can change, you know, moving forward but sort of our largest years as we get further out from our largest years and we have those further developed we feel better about you know, where those sit
Okay, great. And then last 1 for me, just the, the 3Q cert guide. Just to give a very clear about steps. You're taking to put higher quality lower risk,
Search on the books. So curious as we look at the the year-over-year decline, I think it was down. 8% starts around 8% in the second quarter and the midpoints you know, roughly down 14%
In 2 Q is is that Delta and and kind of deceleration, is that demand related is that your controls and kind of your restriction on higher quality asserts. Just trying to understand kind of the the puts and takes between the demand environment. Um, also Credit Unions, willingness and ability you. I think you mentioned that loan to value or sorry loan to deposit ratios that have improved their balance sheets are better. But just trying to understand that the supply demand, um, and then what your kind of, um, restricting to to do higher quality asserts like what that environment looks like in the push and pull their
Sure. Uh, yeah, I would say, you know, the largest sort of put and take in that formula is our decrease in OEM business, um, which is a result of, uh, rate increases and Tighter underwriting standards as they also have the largest amount of osc um, files that we now are writing zero of as we bring on OEM 3. Of course we would expect and and hope that in 2026 we start to see an increase in our OEM serve volume in terms of the credit unions. Um, we still do see a demand there. We're actually seeing um, an increase a significant percentage increase although it's a small part of our overall portfolio and the refi Channel, as we've seen interest rates drops and just in general, just sort of that, you know, bubble that's likely to break in terms of of refi. And we're working um to be even more refi ready as I would call it as we move into what I consider to be an environment where we think that there's a good opportunity for us to capitalize um on that channel. Uh, but in terms of over
Overall Credit Union demand. I would say that it is good or better than it was before. And really, this has come down to um, making sure again. We have better quality over quantity to position us and I think I mentioned in the call hopefully that we're at the bottom of the inflection point of of getting there and that will be in a position to be in a growth mode in 2026.
Okay, great. Michelle of color. Thanks.
And once again, if you would like to ask a question, please press star 1 on your telephone keypad now.
It appears that we have no further questions at this time. I would now like to turn the program back over to Jessica bus for any additional or closing remarks.
We appreciate your interest in support. And I'd like to again. Thank all the team members at open, lending for your hard work, and dedication to our company. Thanks and have a great day.
Thank you, ladies and gentlemen, that does conclude today's program. We thank you for your participation. You may disconnect at this time.