Demo
LPRO Nasdaq· Open Lending Corporation
FundamentalsNews digest Peer analysis
Login
LPRO Nasdaq· Open Lending Corporation
Earnings report Q4 2023

LPRO Reports Decline in Revenue for Latest Quarter

Segments of Revenue

LPRO generates its revenue through three streams: program fees paid by automotive lenders, profit share received from insurance partners, and claims administration service fees paid by insurance partners.

  • Program fees: These fees are paid by automotive lenders for the use of LPP (loan analytics solutions and automated issuance of credit default insurance). The fees are based on a percentage of each certified loan's original principal balance and recognized as revenue upfront upon loan certification. The fee percentage rate varies based on the agreement with each lender.

  • Profit share revenue: LPRO participates in the underwriting profit of third-party insurance partners who provide credit default insurance on loans made using LPP. The company receives a percentage of the monthly insurance underwriting profit.

Strengths

Despite a decline in revenue for the latest quarter, LPRO has shown strength in certain areas. The company's program fees revenue decreased by 26% due to a decrease in certified loan volume. However, this decline was partially offset by an 8% increase in unit economics per certified loan. This suggests that LPRO has been able to generate higher revenue per loan, which could be attributed to improved pricing or increased demand for their loan analytics solutions.

Additionally, LPRO has entered into a program management agreement with Core Specialty, which is expected to provide auto loan default insurance policies for LPP certified loans. This partnership is anticipated to contribute to profit share revenue and claims administration fees, indicating potential growth opportunities for the company.

Challenges

LPRO faced challenges in its profit share revenue during the latest quarter. The company recorded a significant decrease of $46.8 million, or 52%, in profit share revenue compared to the previous year. This decline can be attributed to multiple factors. Firstly, there was a decrease in the number of certified loans, resulting in lower anticipated profit share. Secondly, the average profit share per loan also decreased from $579 to $538. These factors indicate a decline in underwriting profit from insurance partners, potentially due to higher loan default rates.

Noteworthy

During the latest quarter, LPRO recorded a reduction of $22.8 million in estimated profit share revenues related to business in historic vintages. This reduction was primarily due to higher than anticipated loan default rates. This highlights the importance of accurately assessing and managing credit risk in the company's operations.

Summary

LPRO reported a decline in revenue for the latest quarter, primarily driven by a decrease in program fees and profit share revenue. However, the company demonstrated strength in generating higher unit economics per certified loan, indicating potential pricing or demand improvements. LPRO's partnership with Core Specialty presents growth opportunities in profit share revenue and claims administration fees. The challenges faced by LPRO include a decrease in the number of certified loans and a decline in average profit share per loan, potentially due to higher loan default rates. The reduction in estimated profit share revenues related to historic vintages emphasizes the importance of effective credit risk management. Overall, LPRO's latest quarter performance reflects a mixed outcome with both strengths and challenges to address in the future.

Source documents

Form 10-K  filed on Feb 28, 2024
15 pages scanned

Reference data

Company financials Q4 revenue 14.9M
Analyst estimates Q4 EPS missed by -159.58%
Sign up to Fey

Get in-depth analysis on thousands of stocks for just $30/month. Cancel anytime.