Open Lending (LPRO) Canaccord Genuity 44th Annual Growth Conference & Private Company Showcase 2024 summary

Business overview and value proposition

• Specializes in lending enablement, risk analytics, and decisioning for near and non-prime auto loans, serving over 400 financial institutions.

• Offers a Lenders Protection program with credit default insurance, partnering with four A-rated carriers.

• Revenue streams include technology/program fees, profit sharing with carriers, and claims adjudication services.

• Enables credit unions to serve a broader member base by embedding insurance and fees into loan rates, improving affordability for consumers.

• Maintains strong operating margins and continues to gain market share in a challenging auto lending environment.

Market and industry dynamics

• Auto market shows signs of improvement: new inventory up 52% YoY, used inventory stable at 2.2 million units.

• Used vehicle prices have moderated, with the Manheim Used Vehicle Value Index down 9% YoY through June, slightly up in July.

• Interest rates remain high (new vehicles ~9%, used ~14%), but affordability is improving.

• Refinance (refi) volumes have dropped from 40% of business in early 2022 to 3% in Q2 2023, but are expected to rebound as rates stabilize and credit union liquidity improves.

• Credit unions' loan-to-share ratios are trending down, and deposit growth has been positive for three consecutive quarters.

Financial performance and portfolio quality

• Q2 results: just under 29,000 certs, $27 million in revenue, $10 million in Adjusted EBITDA.

• Results included a $6.7 million negative contract asset adjustment related to 2021-2022 vintages, reflecting industry-wide lower performance.

• Excluding the adjustment, results would have exceeded guidance.

• Recent vintages (2023-2024) show improved delinquency rates (1-1.5%) compared to 2022 (2%+).

• Insurance partners remain profitable and committed, with four carriers providing ample capacity for future growth.