Q4 2023 Open Lending Corp Earnings Call
Participants
Keith Jezek; CEO & Director; Open Lending Corp
Chuck Jehl; EVP, CFO and Treasurer; Open Lending Corp
Peter Heckmann; Analyst; D.A. Davidson & Co.
David Scharf; Analyst; JMP Securities LLC
Presentation
Operator
Good afternoon, and welcome to Open Lending's Fourth Quarter and Full Year 2023 earnings conference call. As a reminder, today's conference call is being recorded. On the call today are Keith Jezek, CEO; and Chuck Jehl, CFO. I'm here today. Company posted its fourth quarter and full year 2020 earnings release and supplemental. It's 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 isn't the Company's view as of today, February 27, 2024. Open Lending disclaims any obligation to update these statements to reflect future events or second. Please refer to today's earnings release and a filing with the SEC for more information concerning factors that could cause actual results to differ from those expressed or.
And now I'll pass the call over to Mr. Keith Jezek, please goahead.
Keith Jezek
Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Open Lending's Fourth Quarter and Full Year 2023 earnings conference call. I am pleased to report that excluding a negative change in estimate associated with our profit share, we exceeded the high end of our guidance range for certified loans and revenues in the fourth quarter.
I am proud of our team, and I'd like to thank each of our team members for delivering these results. For the full year 2023, we certified nearly 123,000 loans and delivered total revenue of $117.5 million, adjusted EBITDA of $50.2 million and generated $75.5 million in cash before repurchasing $37.3 million in our common stock.
As I reflect on 2023, the automotive lending environment, which directly impacts Open Lending faced constrained inventory levels, the highest Fed funds rate in over 20 years, a high consumer affordability index, which represents the weeks of income needed to purchase a vehicle and worsening credit availability and credit performance metrics.
Additionally, credit unions experienced decade's low share growth and the highest loan to share ratio since prior to the pandemic. Against this market backdrop, we continue to improve our product and technology, further refine our go-to-market strategy and invest in key talent to position us well for growth.
As industry conditions improve. We remain focused on our mission to change lives by making TRANSPORTATION affordable. Notably, one of our most significant accomplishments in 2023 was launching an enhanced lenders protection proprietary scorecard in the fourth quarter. Our new scorecard includes three additional alternative data sources. Beyond LexisNexis.
The additional data provides us with access to 350 million detailed transactions over 170 million consumer checking accounts and an expanded suite of credit report, attributes developed and maintained by TransUnion. Our model leverages AI and machine learning algorithms and is trained and validated against a large set of proprietary lenders' protection data to identify the most predictive credit risk attributes for our borrowers.
We anticipate that over time, the new scorecard could lower default frequency by better predicting risk, which we expect will improve our lenders, our carriers and ultimately Open Lending's performance. This effort was recently recognized by the National Association of Federal Credit Unions, or NAFCU, who selected Open Lending as the winner of the 2023 NAFCU Innovation Award for our enhanced lenders protection scorecard.
The award recognizes companies making the most valuable and innovative contributions to credit union success, including groundbreaking advancements in technology and software. In addition to the new scorecard, the team delivered on additional improvements to our product and technology in 2023, including improved our core application underwriting logic to further align with our default probabilities, implemented a qualified decision, helping bolster our lenders' ability to provide a better direct to consumer experience, developed and deployed a new claims adjudication platform to improve internal efficiency and turnaround time of our claims process and corporate, a complex logic for decisioning that is difficult for lenders to implement and loan origination systems, thereby enhancing and improving our customers' daily workflows. Through these actions and others, we have and will continue to implement improvements to our product and technology with the expectation of making it easier to do business with Open Lending.
Turning to our go-to-market execution. In the fourth quarter of 2023, we added 15 new accounts as compared to 19 in the prior year quarter of the accounts recently added. I am pleased to report that 20% of these were larger accounts with combined total assets of almost $20 billion.
In comparison, in Q4 2022, only 5% were of a similar size. This is a testament to our focus on signing new accounts that are more likely to contribute meaningful certified loan volume, have lending capacity and operate loan origination systems for which we already have existing successful technology integrations. In addition, we continue to closely monitor macroeconomic and auto sector conditions.
First, I would like to provide further insights into the challenges we faced in 2023. On affordability, consumers faced elevated vehicle prices brought on by supply and demand shock, high interest rates and higher total cost of ownership with gas insurance and maintenance expenses up almost 15% year over year. Auto industry loan delinquency rates reached 15 plus year rise as consumers continue to be stretched with declining savings rates, which was 3.7% in December 2023, down from a peak of over 30% in April 2020.
In addition, total credit card debt is now $1.13 trillion, which is up almost 15% year over year, indicating even more pressure on the consumer in this environment, we have seen most all auto lenders tighten their underwriting standards and shift towards prime and super-prime consumers as lenders seek to perceived safety of these borrowers.
Credit unions continue to be challenged as they experienced the slowest share or deposit growth since 1991 with Q3 2023 share growth of 1.7% compared to the lowest level before FY 2023 of approximately 3.5%. This combined with high loan to share ratios, has led to a slowdown in loan growth throughout 2023 impacting Open Lending as credit unions represent approximately 75% of our total search volume.
Looking ahead to 2024, we do anticipate market stabilization. Cox Automotive recently released its 2024 forecast and called for a return to normalcy in the US auto market. The report predicts 2024 will be the best year for buyers since the pandemic. Cox is expecting vehicle inventory to rise in 2024, prices declined slightly and incentives to be higher. Additionally, the interest rate environment has been stable since August 2023 in many signs point to potentially lower rates later this year. Should that happen?
We would expect that to be a benefit to consumer affordability for used vehicles, specifically the Manheim Used Vehicle Value Index or movie, a leading indicator of wholesale used auto prices declined to 7% in 2023 compared to 2022. So the index remains approximately 35% higher than pre-pandemic levels.
Cox's current forecast projects only a 0.5% increase in the movie in 2024, suggesting used auto prices are unlikely to increase materially in the near term, which would be a net benefit for Open Lending. Historically, these cycles in the automotive industry have always proven to rebound and are nearly always led by used autos. As you may have heard me say previously, consumers can defer the purchase of a new vehicle, but ultimately they cannot defer the purchase of transportation.
Now turning to our core customers, credit unions, there are early signs of increased share growth. Preliminary data suggest average credit union share growth in Q4 2023 was 2% and almost 20% sequential increase compared to Q3 2023. This represents the first increase in share growth since Q1 2021. But as seen in prior cycles, it will take time for loan growth to improve as credit unions build up shares so that their loan to share ratio can decrease from their near 10-year plus highs of 85% in Q4 2023.
Lastly, auto loan growth in Q4 2023 was 2.9% near the lowest levels observed since the beginning of the pandemic, which was 1.8%. Based on this data and absent any further deterioration, the slowdown of lending at credit unions may be approaching a bottom.
Moving to the OEM captive segment, in Q3 2023, these lenders had the highest market share of all lender types at 30% of total autos finance in the U.S., up from only 21.5% in Q3 2022. This fact is reflected in Open Lending's certified loan volumes from OEMs, which for full year 2023 increased over 15% compared to prior year should these lenders continue to capture share in the market.
We anticipate we will continue to benefit with the automotive market expected to stabilize and credit union lending possibly nearing a bottom and growth in the OEM segment. We believe there are signs that the market conditions will improve in the near future. Our goal is to be well positioned for that inevitable return to growth.
Now let me turn to our priorities for 2024, which we anticipate will help us maximize near-term opportunities and allow us to capture the growth. First, we will optimize the core business. We plan to further enhance our sales and account management capabilities to better serve our existing clients and more rapidly and effectively acquire new credit union customers to capture market share over time. We will continue to closely monitor developing market conditions, particularly around credit metrics such as defaults and delinquencies and make underwriting and pricing adjustments as needed throughout the year to optimize performance and profitability.
We will continue to evaluate the appropriate number of carrier partners with a balanced allocation across our partners based on our current certified loan volume along with anticipated future growth. To that end, we recently signed a program management agreement with core Specialty Insurance Holdings, enabling them to be an additional provider of credit default insurance policies for our lenders' protection platform.
One of the central reasons why auto lenders have come to rely on Entrust Open Lending is that we have the stability and firm backing of our A rated insurance carrier partners. We are pleased to have core specialty join us and adding to that stability on behalf of our lenders and the consumers they serve.
Secondly, we plan to expand our focus in the bank segment, where we already have dozens of producing lenders and signed two new bank customers in FY 2023. We are investing in a dedicated team with existing relationships within community and regional banks who are capable of selling the unique value proposition of our product to this segment.
Based on our analysis, this is a very significant opportunity. And importantly, most participants in this market are larger than our average credit union customer. Additionally, based on our conversations with bank prospects, they have the lending capacity and the appetite to lend in this environment.
To wrap up, I would like to express my continued confidence in the long-term opportunities before us. I'm encouraged by the response of our team during these difficult times in our industry. I would like to again sincerely thank all of our team members for their efforts. I remain confident about our position in 2024 and beyond as we execute on our mission to change lives by making transportation affordable, I believe our value proposition to the various players in the auto retail ecosystem as strong in fact, as strong as ever and by executing on our priorities in 2024 will be well positioned to capture the pent-up demand as the auto industry inevitably recovers.
With that, I'd like to turn the call over to Chuck to review Q4 results in further detail, as well as provide our thoughts on the outlook for Q1 2024. Chuck?
Chuck Jehl
Thanks, Keith. During the fourth quarter of 2023, we facilitated 26,263 certified loans compared to 34,550 certified loans in the fourth quarter of 2022. Total revenue for the fourth quarter of 2023 was $14.9 million, which includes an ASC six oh six negative change in estimate of $14.3 million associated with our profit share compared to $26.8 million in revenue in the fourth quarter of 2022, which includes a negative change in estimate of $12.8 million.
Excluding the negative change in estimate in Q4 of 2023, we exceeded the high end of our guidance range for both certified loans and revenues to break down total revenues in the fourth quarter, program fee revenues were $13.5 million and claims administration fees and other revenue were $2.6 million, while profit share revenue was negative $1.1 million due to the impact of the previously mentioned negative change in estimate.
As a reminder, profit share revenues comprise of the expected earned premiums, less the expected claims to be paid over the life of the contracts and less expenses attributable to the program. The net profit share to us is 72%, and the monthly receipts from our insurance carrier partners reduced our contract assets, profit share revenue in the fourth quarter of 2023 associated new originations was $13.2 million or $501 per certified loan as compared to $18.9 million or $546 per certified loan in the fourth quarter of 2022.
As a reminder, US GAAP revenue recognition rules related to variable consideration require that we reevaluate the reported profit share revenue estimate for prior periods based on new available information each quarter. This process requires the evaluation of both internal and external information available during the period.
To quantify the change in estimate for the quarter, profit share change in estimate is a measure of current quarter cumulative actual data combined with changes to previously forecasted frequency of default, severity of loss and prepayments and applying this accounting standard to the extent new information presents and negative impact to previous forecast.
The change in estimate will result in a negative impact to our operating results and vice versa that when new available information represents a positive adjustment to previous forecast. This will result in a positive impact to our operating results.
Q4 2023, $14.3 million negative change in estimate is associated with cumulative total profit share revenue recognized of over $380 million for periods dating back to ASC six oh six implementation date in January of 2019 and represents over 400,000 insured in-force loans in the portfolio. Importantly, to put this in perspective, the cumulative profit share change in estimate since 2019 is a positive $5.6 million, which includes the impact of the negative adjustment recognized in the fourth quarter of 2023.
As Keith mentioned, auto industry delinquency rates have increased to 15 plus year highs, which we considered in combination with the higher than expected claim submissions and adjusting projections to reflect higher frequency of default. The primary driver of the current quarter negative change in estimate. In addition, the Manheim Used Vehicle Value Index or movie declined faster than industry projections at the end of Q3. And as a result, severity of loss was also a negative factor in the current quarter.
Lastly, lower than expected prepayments were a slightly favorable factor as premiums on loans in force remained in the portfolio longer than previously projected. As you may recall, we implemented multiple price increases over the past two years to appropriately price for the risk that we're taking, and we will continue to evaluate further price adjustments. In addition to pricing.
As Keith mentioned earlier, we launched an enhanced scorecard in late Q4 2023, which we anticipate will lower default frequency by better predicting risks. We are now better positioned to take additional targeted credit and pricing actions with a focus on driving improved performance for our lenders, our carrier partners and ultimately Open Lending.
Operating expenses were $17.9 million in the fourth quarter of 2023 compared to $17.2 million in the fourth quarter of 2022. Operating loss was $8.3 million in the fourth quarter of 2023 compared to operating income of $4.8 million in the fourth quarter of 2022. Net loss for the fourth quarter of 2023 was $4.8 million compared to a net loss of $4.2 million in the fourth quarter of 2022. Basic and diluted loss per share was $0.04 in the fourth quarter of 2023 as compared to a loss of $0.03 in the previous year quarter.
Adjusted EBITDA for the fourth quarter of 2023 was a loss of $2.1 million as compared to a profit of $8.5 million in the fourth quarter of 2022. Excluding profit share revenue change in estimate, we generate $12.2 million in adjusted EBITDA in the fourth quarter of 2023.
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 quarter with $374 million in total assets, of which $240.2 million was an unrestricted cash, $29.3 million in contract assets and $70.1 million in net deferred tax assets.
We had $168.5 million and total liabilities, of which $145.3 million was an outstanding debt. In fiscal year 2023. We generated $75.5 million in cash before acquiring 37.3 million or 5.2 million shares of our common stock at an average price of $7.13 per share. We have $20 million remaining under our current share repurchase program, which expires at the end of the first quarter of 2024.
Now moving on to our Q1 2024 guidance. While we are encouraged that market conditions appear to be stabilizing, the following factors were considered in our Q1 2024 guidance. The continued impact of affordability due to constrained inventory levels, continued elevated vehicle prices and high interest rates, total cost of ownership and of course, inflation continued lending capacity challenges at our credit unions elevated cost of funds, making credit unions less competitive when consumers have other options tighter underwriting standards as lenders continue to shift their focus towards prime and super-prime borrowers and high percentage of cash buyers due to elevated interest rate environment.
Accordingly, our guidance for the first quarter of 2024 is as follows total certified loans to be between 24,000 and 28,000 total revenue to be between $26 million and $30 million dollars and adjusted EBITDA to be between $10 million and $14 million.
We have a strong balance sheet, no near-term debt maturities and generate positive cash flow, all of which afford us the resilience needed to navigate current market conditions had open lending. We have navigated through these economic cycles before based on our analysis and experience, what is different in this cycle versus the prior two is the impact of inflation and how it is impacting our target market consumer as the sector and macroeconomic conditions inevitably recover, we expect to capture pent-up demand and capitalize on the thoughtful and measured investments we have made during economically challenging times. We'd like to thank everyone for joining us today, and we'll now take your questions.
Question and Answer Session
Operator
Thank you. (Operator Instructions)
Peter Heckmann, D.A. Davidson.
Peter Heckmann
Yes, hey, good afternoon. Thanks for taking my question. Can you talk a little bit about the outlook for refinancing of auto loans that we rate seem to have it reached a plateau here and may moderate. We didn't expect much in the fourth quarter. But yes, what do you think in terms of the appetite for some of your lending customers to resume financing?
Chuck Jehl
Yes, hi, Peter, it's Chuck. I'll start and then Keith can jump in. But the O. is you're right. I mean, we've seen rates stabilize since August, I guess is the timeframe that we've not seen any further actions we're unlikely to see of a cut in March is what I think what we're all hearing now, but they have stabilized a bit. I think the key to us as we think about our refinance business and what really how it will really come back for us is really our primary customer credit unions in the lending capacity and just kind of being lent out.
And even if even if there's an opportunity to refi, it's just having the ability to do that loan. So we believe you know that that's the we've seen signs that escaped in the prepared comments said that that's and we've seen signs of improvement of that. But I don't know if you want to add anything else?
Keith Jezek
Yes, that's a great question. And we certainly believe that there will be a very large pent-up demand for refi as these rates have been put on the books, as you're probably noting in the last year at the highest rates in the last 25 years. And so we anticipate a large pent-up demand for refi volume in the future. And in fact, it tipped up ever. So slightly just call it 1-percentage-point and our certified loans in Q4.
Peter Heckmann
Right, got it. Got it. And then just in terms of the average size of institution. I haven't run all the numbers yet. I guess we're really not seeing the benefit of that just because of the appetite for or the lack of appetite, we're underwriting a whole lot of loans below prime. Is that is that I mean, certainly the number of I think, yes, year with about 470 or so active financial institutions. I mean, certainly, if we find some and the metrics that we saw in prior periods to that, I mean there really significant potential for higher loan volumes in the market normalize?
Keith Jezek
Well, you raise a good point. Again, just keep speaking. There is no doubt, as you're well aware, our strategy over the last 18 months has been to focus solely on the larger accounts. And as and as we begin to ramp up these, these institutions will begin to add what we hope is significant volume as reflected in their larger asset size in general. And as you've heard me talk about, we just want to make sure that we have the successful integrations already with their MLSs. So we can install faster. And in fact, our time to first cert volume for certain of our revenue has gone from roughly 180 days, down below 100 days. So not only are we targeting the bigger accounts that we're able to get to first revenue much, much faster.
Okay.
Peter Heckmann
All right. Thank you. I'll get back in the queue.
Keith Jezek
Thanks, Pete.
Operator
David Scharf, JMP.
David Scharf
Yeah, Thanks for taking my questions today. One wanted to follow and credit union growth. You noticed the slowest deposit 20 were used indicating I writing down to too quickly. Did you start to see some first signs of a rebound? Yes, trying to get us there, you know it in different rate environment, you know what Got it?
Yes, yes. How they typically respond to a lower rate environment, what advantages in interest, how your value they're more or less compelling to a credit union in various rate environments because increasingly like in recent quarters, the discussions have been focusing more on the know liquidity, what's now a familiar refrain tumor size, OccuLogix, I'm sorry, can you repeat that last sentence and I'm sorry, really trying to get a sense.
(multiple speakers) I mean, do you have a job are you getting increasing conviction that credit union when
Keith Jezek
well yes, we saw signs and that's what I tried to say referred to in my opening remarks that we've seen an increase in share growth, which gives us great, great sign for optimism. But let's just first just take a quick step back. Many lenders, including credit unions have taken a pause with the lag effect of the Fed's actions and the Fed intended to tighten and slow down the economy.
And lo and behold, they did all of consumer finance is down to what we're seeing is a continued or start to share growth in our credit unions. And we think that the coming interest rate in relief will lead the reversal of deposit outflows and and will lead to that that will lead to the current tightening of consumer credit being only a temporary thing.
Prior cycles have shown us. It's only temporary and they will get back to their core mission of community-based lending.
David Scharf
Got it up maybe as a follow-up, again, sort of taking a step back from all of the different external shocks and unique aspects of the psyche. One of the things the Company has always communicated is that part of the value two potential new lenders is Cecil and instinctively, I would think at a higher loss environment where you're even where you're having to reserve for even greater lifetime losses that the value prop would potentially be even greater. Seems like in this environment that hasn't necessarily been the case.
Can you just talk about conversations with potential clients during the sales cycle, how CECL relief is sort of playing into those discussions? Are you just finding that a lot potential lenders are just so bogged down right now? And uncertainty, not as much of a factor just well, and again, this is Keith speaking.
Keith Jezek
I love the nuance of your question because what we are seeing is in addition to being what we call it in the industry lent out. So their loan to share ratios being at decades high and with share growth being a decade's low, they had two and 2023 for the first time take on the [CCL] reserves. So it was this almost this triple whammy to slow down the potential growth in lending. Our value proposition. The discussions that we have around Cecil are just as valid and just as valuable as ever before. And we're engaged weekly in conversations with current customers and prospective customers about the value of the program to get them this much-needed relief.
David Scharf
Thank you very much. Very helpful.
Keith Jezek
Thank you.
Operator
Kyle Peterson, Needham & Company.
Hey, great. Good afternoon, guys. Thanks for taking the question. I wanted to start off on and some of the profit share in it's developments to CAC. six or six adjustment. Just wanted to kind of get a sense of how you guys are thinking about, at least in the 1Q guide a little bit different macro assumptions, just so we can and a modeling what the expected changes on the prior-period developments are? Obviously you've taken a couple negative revisions last couple of quarters, but what are you guys assuming at least over the next couple of months here on that front,
Chuck Jehl
it's Chuck. I'll start maybe just step back and just kind of think about the industry a bit. The credit market is worsened throughout fiscal 23 for all participants in consumer savings eroded credit card debt, increased delinquency rates increased and then loan loss across lenders continue to grow throughout the year delinquency for auto, it at 15 year-plus highs in despite Open Lending.
If you think about our strength of our decision and pricing engine, we're not immune to the overall performance of credit like a lender, but it's important to note, we're not the lender and we're dependent on defaults and delinquencies and defaults of lenders and their servicing. So we're not a servicer. So I think that backdrop kind of points to note the delinquencies, 60 plus day delinquencies in our book, you know, have are 100 basis points better than the 60 plus in the non-prime in the industry.
So we're 4.5%, 60 plus and the industry's 5.5%. I think what if we as we think about the $14.3 million in what we booked in the quarter. And you think about the Manheim Used Vehicle Value Index, the movie, what we're seeing right now are the worst performing vintages in, call it late '21 and into '22. Those vintages are put on at the peak of the Manheim, the highs, and that's the peak claims and defaults are 18 to 24 months out. So that's what we're seeing in working through a company and everybody in the industry has.
So if you think about the $14.3 million we booked it was merely just frequency of default with the main was the main driver in the quarter and then also severity of loss in the Manheim via the movie came down more than the industry expected more than Cox expected, and that impacted us as well. So those were two negative impacts. And then there was prepay speeds were better than we projected and that was a positive impact.
So you put all that together. That's what generated the back book adjustment of the $14.3 million in the books. So as we think about moving forward, your comment, we feel like 18 to 24 months past those worst performing vintages. We feel like we're well into and and feel like hopefully that's something that is going to be behind us soon.
So but I hope that's helpful. I just want to give a little bit of perspective on the on the kind of the back end and the measures that we've taken, you know, Keith mentioned in the prepared comments, we've implemented a new scorecard, our OP 2.0 card. That's going to be a better predictor of default delinquencies then default and appropriate price for the risk and take less risk on certain different scores and credits. So so we believe we're taking the appropriate actions you know, to continue to protect our book.
(inaudible) I appreciate the color. And maybe just to follow up on a little bit. I know there's been a lot of conversation and what's some of the different bank volatility and no concerns about concentration. It's just been like some commercial real estate assets and such, but how have your conversations gone, I guess, particularly with bank clients and given some of the regulatory impetus to diversify the loan book, has there been more appetite, some banks that might have historically skewed a little more commercial to maybe partner with you guys to diversify the loan book for you guys and any impacts from from some of the recent volatility with like you're credit banks and such as of late?
Keith Jezek
Yes, this is Keith speaking. If it's a good question. We were just at a large automotive finance conference last couple of weeks ago, and there is a heightened interest from banks to grow the book of business around auto and then specifically to kind of grow this book of business around around this newer non-prime sector, as you well know, they need to check all types of fair lending boxes and Chief among those is the CRA, the community Relief Act. So there's a great deal of interest in growing this book of business with the bank segment. That's one of the reasons why, as I noted in our 24 priorities, but we're focusing more heavily on that on that cohort.
Peter Heckmann
Can you help us I guess. Thank you.
Keith Jezek
Thank you.
Operator
John Hecht, Jefferies
Yes, afternoon, guys. Thanks very much. A first question is going to how do we think about, I guess, seasonality?
Yes, out of service this year. I mean, usually there is a seasonal element to the business, but at the same time, you're talking about maybe transpiring out and maybe as you go through the year, you might get some organic growth kind of same store sales type of activity with the newer counterparties that you guys have signed up. So I mean, do you do we take debt?
Yes, sir, which is kind of in the middle of the range, you kind of said flat in the first quarter from Q4. Is there a chance or an expectation that the search activity would grow throughout the year? Or will it follow more seasonal trends as we think about forecasting?
Chuck Jehl
Yes, John, it's Chuck? Yes, as we think about it, you know, we're just putting out the quarterly guidance still as you saw, and there's just so much going on in the puts and takes of the guide and the affordability around the consumer, you know, inventory levels, elevated prices I could go on and on we talked about lending capacity at the credit unions. You know, Keith talked about the share growth in our deposit growth in the tightening of what's really going on focused on prime and super-prime.
It's a difficult time to really project that. So you think about in our flat from Q4 to Q1 in the guide, you know, March is seasonally, you know, obviously a strong month for the Company and but you know, is the best in Q1 is not always the best quarter, but March is a seasonally strong month due to tax season. But you probably read as we did that the delay in tax refunds and even dollar amounts of the refunds are even smaller.
So and so all of those things went into, you know, our, you know, inputs to the quarter and as we think about full year, you know, the timing of a Fed cut. We thought there might be a cut in March. Looks like that's not going to happen now and you know, hopefully later in the year, we'll start to see that, but it's really hard to project.
Okay. And then I'm thinking about program fees and profit share levels per search. I mean, yes, is the current range? I mean, I think you've been around 520 of program fees per search for a little while the profit share, it has kind of drifted lower. But as you reprice some of the premiums, where do we think those go took on a trajectory basis?
Chuck Jehl
Yes, I will start with program fees. You know, and it's all based on mix, right? I mean in volume and we have the volume discounts on our program fees. So but I think modeling that 20 range on average for a program fee is fine on on profit share, you know, around that 500 I think is a good number to model, but we do have a new scorecard in place that we've talked about and we're going to be better predicting this risk and the probability of default.
But even if even at the $500 profit share, we've talked about this before to an ultimate loss ratio. We've stressed that new vintage, the Q4 vintage to about a 64%T loss ratio. So we're seeing the new vintage. The new vintages perform better than the older vintages that I talked about on a previous comment about the end of the '20, late '21, '22 vintages performing worse. So So there could be some room there, but that's we put it on the books at 500 with that stress in the current environment. But they're hopeful it'll it'll perform a little better and get --
Thank you very much.
Keith Jezek
Thank you.
Chuck Jehl
Thank you.
Operator
Thank you. John Davis, Raymond James.
Mr. Davis, Please go ahead with your question.
(multiple speakers) Thanks for taking the question. This is Taylor on for JD. Probably just a follow up on the refi question, and it looks like refis were about 5% of total certs during the quarter. So it's obviously been much higher previously, but still up quarter over quarter. So just curious how we should think about refi as a percent of total search in 2024, just with the mentioned large pent up,
Chuck Jehl
will you period in quarter over quarter, refi 5% in the fourth quarter '23 is actually down from 14% in Q4 '22. So it's been since the rate hikes and you don't even started in what I guess, early 22. And when the Fed started taking action, we went from a peak of 43% in favor '22 down to just single digits on the refi. We still believe it's a great opportunity for us.
And as our lenders have capacity in and free up the balance sheets, it will come back because there's obviously affordability we talked about is huge to the nonprime consumer and there's a lot of opportunity there to refi. But to give you the, you know, the exact percent of what that's going to be in '24. It's hard to say right now, just based on the kind of the impact to our core customer and lending capacity challenges.
Keith Jezek
And I would just add in the security that we just think of it as a potential nice upside to the business? Absolutely. We know it will happen and we know this we call it a refi tsunami will hit our shores. We're just we're just not sure exactly when that will happen.
Yes, that's helpful. And then just on you're adding new OEM.s I think recently, you've mentioned multiple OEMs in the pipeline. So just curious if there's any update there and how conversations are progressing.
Keith Jezek
Yeah. Great question. And this Keith progressing really nicely, as you've heard me say before, in a multiple large prospects in the pipeline, solid material progression through milestones throughout the sales process. These are long sales cycles and we're cautiously optimistic that that term that we'll have success with a couple of them. In addition to that, we keep adding just kind of larger enterprise type accounts in and around the OEM captive space as well.
So the pipeline is growing. The progress through the pipeline is growing objectively, and we're very optimistic about about the future with traditional captives. As you heard us say in the prepared remarks, the captives have now eclipsed all other lender types as the number one source of auto loan originations in the US?
Yes. Thanks for taking the question.
Keith Jezek
Thank you.
Chuck Jehl
Thank you.
Operator
Thank you. (Operator Instructions) There are no further questions at this time. I would now like to turn the floor over to Keith Jezek closing comments.
Keith Jezek
Well, thank you, operator, and thank you, everyone, for your time today. I just wanted to say as we look forward, it's important to remember that the near and non-prime thin file and credit invisible borrowers are not going away.
These borrowers will find access to credit. Open Lending offers a unique solution that combines over two decades of credit risk with default insurance that allows all lenders to offer fair rates to these borrowers while meeting their individual yield targets. Thank you again.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
