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Open Lending Reports Third Quarter 2020 Financial Results

Open Lending, LLC
·13 min read

The Company Announces that OEM #2 Came Back Online in October as Planned

AUSTIN, Texas, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Open Lending Corporation (NASDAQ: LPRO) (the “Company” or “Open Lending”), a leading provider of lending enablement and risk analytics solutions to financial institutions, today reported financial results for its third quarter of 2020.

“We are very encouraged by our third quarter results, which include an 8% increase in certified loans, a 35% increase in revenue and a 29% increase in Adjusted EBITDA compared to the third quarter of 2019,” said John Flynn, Chairman and CEO Open Lending. “Our lending partners have proven resilient and continue to utilize our platform throughout the COVID-19 pandemic. We believe the low interest rate environment, the increased demand and value of used cars, and consumers moving out of cities and reluctant to use public modes of transportation are driving these positive trends. We are also thrilled that OEM#2 came back on to our platform in October as planned.”

Three Months Ended September 30, 2020 Highlights

  • The Company facilitated 20,696 certified loans during the third quarter of 2020, compared to 19,087 certified loans in the third quarter of 2019

  • Total revenue was $29.8 million, compared to $22.1 million in the third quarter of 2019

  • Gross profit was $27.3 million, compared to $20.2 million in third quarter of 2019

  • GAAP net loss of $(71.1) million, compared to GAAP net income of $14.7 million in third quarter 2019. The GAAP net loss was primarily attributable to $(83.1) million in change in estimated fair value of contingent consideration shares awarded as part of the business combination with Nebula Acquisition Corporation (“Nebula”) on June 10, 2020. Given the share price performance milestones for the contingent consideration have all been met as of August 2020, net income beginning in the fourth quarter of 2020 and beyond will not be burdened by any changes to the fair value of the contingent consideration shares.

  • Adjusted EBITDA was $19.7 million, compared to $15.3 million in the third quarter of 2019

Adjusted EBITDA is a non-GAAP financial measure. Reconciliations of this non-GAAP financial measure to its most directly comparable GAAP financial measure are provided in the financial tables included at the end of this press release. An explanation of this measure and how it is calculated is also included under the heading “Non-GAAP Financial Measures.”

2020 Outlook
Based on third quarter results and thoughts regarding the remainder of the year, the Company is reaffirming its previously issued guidance of the following:

Full Year 2020 Outlook

Total Certified Loans

85,000 – 101,000

Total Revenue

$89 - $108 million

Adjusted EBITDA

$54 - $70 million

Adjusted Operating Cash Flow (1)

$34 - $41 million


(1)

Adjusted Operating Cash Flow is defined as Adjusted EBITDA, minus CAPEX, plus or minus change in contract assets.

The guidance provided above includes forward-looking statements within the meaning of U.S. securities laws. While the financial guidance takes into account the anticipated impact of the global COVID-19 pandemic, the impact of the pandemic is unprecedented and the future effect of the pandemic on the global economy and our financial results remains highly uncertain, and our actual results may differ materially. See “Forward-Looking Statements” below.

Conference Call
Open Lending will host a conference call to discuss the third quarter 2020 financial results today at 5:00 pm ET. Hosting the call will be John Flynn, Chairman and CEO, Ross Jessup, President and COO, and Chuck Jehl, CFO. The conference call will be webcast live from the Company's investor relations website at https://investors.openlending.com/ under the “Events” section. A replay will be available two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13710754. The replay will be available until Tuesday, November 24, 2020. An archive of the webcast will be available at the same location on the website shortly after the call has concluded.

About Open Lending
Open Lending, through its flagship product, Lenders Protection, offers loan analytics, risk-based pricing, risk modeling and default insurance, ensuring profitable auto loan portfolios for financial institutions throughout the United States. For more information, please visit www.OpenLending.com.

Forward-Looking Statements
This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements related to market trends, the anticipated impact of the recent novel coronavirus (COVID-19) pandemic on factors impacting the Company’s business, the Company’s new lender pipeline, consumer behavior and demand for automotive loans, as well as future financial performance under the heading “2020 Outlook” above. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements are based on various assumptions and on the current expectations of the Company’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the Company’s control. These forward-looking statements are subject to a number of risks and uncertainties, including general economic, political and business conditions; the potential effects of COVID-19; applicable taxes, inflation, interest rates and the regulatory environment; the outcome of judicial proceedings to which Open Lending is, or may become a party; failure to realize the anticipated benefits of the business combination; the amount of redemption requests made by the Company’s stockholders; those factors discussed in other documents of the Company filed, or to be filed, with the SEC. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently does not know or that they currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this press release. The Company anticipates that subsequent events and developments will cause their assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Non-GAAP Financial Measures
Included in this press release is financial information that has not been prepared in accordance with GAAP. The Company uses Adjusted EBITDA, a non-GAAP financial measure, internally in analyzing our financial results and believe it is useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. The Company believes that the use of this non-GAAP financial measure provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors.

Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, the Company believes these measures provide useful information to investors and others in understanding and evaluating its operating results in the same manner as its management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain non-cash items and certain variable charges. Adjusted EBITDA is defined as net income excluding interest expense, income taxes, depreciation and amortization expense, share-based compensation expense, change in fair value of contingent consideration and transaction bonuses as a result of the Business Combination. Adjusted EBITDA margin is defined as Adjusted EBITDA expressed as a percentage of total revenue.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of Adjusted EBITDA to its most directly comparable GAAP financial measure provided in the financial statement tables included below in this press release.

Contact:
ICR for Open Lending
Investors
openlending@icrinc.com

OPEN LENDING CORPORATION

Consolidated Balance Sheets

(In thousands, except per share data)

September 30,

December 31,

2020

2019

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

115,153

$

7,676

Restricted cash

2,613

2,222

Accounts receivable

3,392

3,767

Current contract assets

27,814

29,782

Prepaid expenses

2,975

479

Other current assets

5,168

205

Deferred transaction costs

-

1,081

Total current assets

157,115

45,212

Property and equipment, net

1,315

299

Operating lease right-of-use assets, net

5,853

-

Non-current contract assets

45,174

33,169

Deferred tax asset, net

85,269

-

Other non-current assets

181

506

Total assets

$

294,907

$

79,186

Liabilities and stockholders’ equity (deficit)

Current liabilities

Accounts payable

$

2,283

$

1,337

Accrued expenses

1,409

2,006

Income tax payable

544

-

Current portion of notes payable

4,675

2,484

Other current liabilities

4,220

2,366

Total current liabilities

13,131

8,193

Long-term notes payable, net of unamortized debt issuance costs

154,139

829

Operating lease liabilities, net of current portion

5,265

-

Other long-term liabilities

88,090

-

Total liabilities

$

260,625

$

9,022

Commitment and contingencies

Redeemable convertible preferred Series C units, 0 and 14,278,603 units issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

-

304,943

Stockholders’ equity (deficit)

Preferred stock, $0.01 par value; 10,000,000 shares authorized, and 0 shares issued as of September 30, 2020 and December 31, 2019, respectively

-

-

Common stock, $0.01 par value; 550,000,000 shares authorized and 126,919,572 issued and outstanding as of September 30, 2020; 110,000,000 authorized and 37,631,052 issued an outstanding as of December 31, 2019

1,269

376

Additional paid-in capital

476,403

7,626

Accumulated deficit

(443,390

)

(242,781

)

Total stockholders’ equity (deficit)

34,282

(234,779

)

Total liabilities and stockholders’ equity (deficit)

$

294,907

$

79,186


OPEN LENDING CORPORATION

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenue

Program fees

$

10,087

$

8,950

$

31,592

$

26,407

Profit share

18,544

12,310

34,482

38,089

Claims administration service fees

1,131

844

3,185

2,275

Total revenue

29,762

22,104

69,259

66,771

Cost of services

2,496

1,923

6,818

5,517

Gross profit

27,266

20,181

62,441

61,254

Operating expenses

General and administrative

5,015

3,263

23,233

9,670

Selling and marketing

2,118

1,810

5,491

5,455

Research and development

579

291

1,286

869

Operating income

19,554

14,817

32,431

45,260

Change in fair value of contingent consideration

(83,130

)

-

(131,932

)

-

Interest expense

(3,572

)

(70

)

(7,980

)

(238

)

Interest income

36

7

97

15

Other income

-

3

3

9

Income/(loss) before income taxes

(67,112

)

14,757

(107,381

)

45,046

Provision (benefit) for income taxes

4,021

41

5,385

(58

)

Net income / (loss) attributable to Open Lending Corporation

$

(71,133

)

$

14,716

$

(112,766

)

$

45,104

Net income/(loss) per common share attributable to Open Lending Corporation:

Basic and diluted net income (loss) per share

(0.62

)

(1.25

)

(1.56

)

(1.78

)

Weighted average shares of common stock outstanding

115,189,532

37,631,052

67,828,046

37,631,052


OPEN LENDING CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended September 30,

2020

2019

Cash flows from operating activities

Net income (loss)

$

(112,766

)

$

45,104

Adjustments to reconcile net income to net cash provided by operating activities:

Share-based compensation

2,676

1,497

Depreciation and amortization

1,112

78

Change in fair value of contingent consideration

131,932

-

Deferred income taxes

4,683

-

Changes in assets & liabilities:

Accounts receivable

375

(828

)

Contract assets

(10,037

)

(16,871

)

Operating lease right-of-use assets

(523

)

-

Prepaid expenses

(1,415

)

(293

)

Other current and non-current assets

(2,002

)

(388

)

Accounts payable

946

(285

)

Accrued expenses

(597

)

829

Income tax payable

544

-

Operating lease liabilities

(280

)

-

Other liabilities

1,727

295

Net cash provided by operating activities

16,375

29,138

Cash flows from investing activities

Purchase of property and equipment

(1,097

)

(66

)

Net cash used in investing activities

(1,097

)

(66

)

Cash flows from financing activities

Repayments of notes payable

(5,443

)

(1,863

)

Proceeds from issuance of long-term debt, net of issuance costs

160,233

-

Distributions to Open Lending, LLC unitholders

(135,380

)

(30,361

)

Proceeds from stock warrant exercise

88,042

-

Recapitalization transaction, net of transaction costs

(14,862

)

-

Net cash provided by (used in) financing activities

92,590

(32,224

)

Net change in cash and cash equivalents and restricted cash

107,868

(3,152

)

Cash and cash equivalents and restricted cash at the beginning of the period

9,898

13,136

Cash and cash equivalents and restricted cash at the end of the period

$

117,766

$

9,984

Supplemental disclosure of cash flow information:

Interest paid

$

7,209

$

238

Income tax paid (refunded), net

158

(58

)

Right-of-use assets obtained in exchange for lease obligations

5,375

-

Change in fair value of Open Lending, LLC redeemable convertible preferred units

(47,537

)

104,825

Conversion of preferred stock to common stock

257,406

-


OPEN LENDING CORPORATION

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

GAAP net income (loss)

$

(71,133

)

$

14,716

$

(112,766

)

$

45,104

Less: Non-GAAP adjustments:

Change in fair value of contingent consideration (1)

83,130

-

131,932

-

Transaction bonuses (2)

-

-

9,112

-

Interest Expense

3,572

70

7,980

238

Share-based compensation (3)

-

487

2,676

1,497

Depreciation and Amortization

167

26

406

78

Income Taxes

4,021

41

5,385

(58

)

Total adjustments

90,890

624

157,491

1,755

Adjusted EBITDA

19,757

15,340

44,725

46,859

Total Revenue

$

29,762

$

22,104

$

69,259

$

66,771

Adjusted EBITDA margin

66

%

69

%

65

%

70

%

Notes:

(1)

Reflects non-cash charges for the change in the estimated fair value of contingent consideration shares from June 10, 2020 through the date when each tranche of contingent consideration shares vested as the share price performance milestone was achieved.

(2)

Reflects transaction bonuses awarded to key employees and directors in connection with the business combination with Nebula.

(3)

Represents non-cash charges associated with the Class B Unit Incentive Plan of Open Lending, LLC. For the three months ended September 30, 2020 represents accelerated vesting of the legacy plan as result of the business combination with Nebula.