UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-39326

OPEN LENDING CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware			~~EIN~~ 84-5031428
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1501 S. MoPac Expressway Suite 450 Austin, Texas			78746
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (512) 892-0400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common stock, par value $0.01 per share

LPRO

The ~~NASDAQ~~Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	☐

Non-accelerated filer	☒☐	Smaller reporting company	☐

		Emerging growth company	☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~10, 2021,~~3, 2022, the registrant had ~~126,190,351~~ 126,225,550shares of common stock, $0.01 par value per share, outstanding.

OPEN LENDING CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I.	Financial Information	3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations ~~and Comprehensive Income (Loss)~~	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity ~~(Deficit)~~	5

	Condensed Consolidated Statements of Cash Flows	76

	Notes to Condensed Consolidated Financial Statements	87

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2115

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3527

Item 4.	Controls and Procedures	3628

PART II.	Other Information	3729

Item 1.	Legal Proceedings	3729

Item 1A.	Risk Factors	3729

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3829

Item 3.	Default Upon Senior Securities	3829

Item 4.	Mine Safety Disclosures	3829

Item 5.	Other Information	3830

Item 6.	Exhibits	3931

SIGNATURES		4032

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. ~~Condensed Consolidated~~ Financial Statements

OPEN LENDING CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021

Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	57,154	$	101,513	Cash and cash equivalents	$	167,695	$	116,454
Restricted cash	Restricted cash	2,891		2,635		Restricted cash	3,412		3,055
Accounts receivable		7,569		4,352
Current contract assets		61,032		50,386
Accounts receivable, net						Accounts receivable, net	6,960		6,525
Current contract assets, net						Current contract assets, net	73,338		70,542
Income tax receivable	Income tax receivable	80		0		Income tax receivable	4,309		1,345
Prepaid expenses		4,390		1,873

Other current assets	Other current assets	634		2,018		Other current assets	3,341		4,873

Total current assets	Total current assets	133,750		162,777		Total current assets	259,055		202,794
Property and equipment, net	Property and equipment, net	2,581		1,201		Property and equipment, net	2,791		2,663
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	5,465		5,733		Operating lease right-of-use assets, net	4,904		5,189
Non-current contract assets		50,901		38,956
Non-current contract assets, net						Non-current contract assets, net	33,410		42,414
Deferred tax asset, net	Deferred tax asset, net	68,315		85,218		Deferred tax asset, net	66,501		65,503
Other non-current assets	Other non-current assets	124		124		Other non-current assets	152		262
Total assets	Total assets	$	261,136	$	294,009	Total assets	$	366,813	$	318,825
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	1,987	$	3,442	Accounts payable	$	421	$	1,285
Accrued expenses	Accrued expenses	5,070		3,033		Accrued expenses	6,105		3,984
Income tax payable		0		1,640

Current portion of debt	Current portion of debt	3,125		4,888		Current portion of debt	3,906		3,125
Third-party claims administration liability						Third-party claims administration liability	3,037		3,050
Other current liabilities	Other current liabilities	4,460		4,005		Other current liabilities	546		621
Total current liabilities	Total current liabilities	14,642		17,008		Total current liabilities	14,015		12,065

Long-term debt, net of deferred financing costs	Long-term debt, net of deferred financing costs	144,518		152,859		Long-term debt, net of deferred financing costs	140,959		143,135
Non-current operating lease liabilities	Non-current operating lease liabilities	4,898		5,138		Non-current operating lease liabilities	4,371		4,643
Tax receivable agreement liability		0		92,369
Other non-current liabilities		0		13

Total liabilities	Total liabilities	$	164,058	$	267,387	Total liabilities	$	159,345	$	159,843
Commitment and contingencies		0		0
Commitments and contingencies						Commitments and contingencies	0		0
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, NaN issued and outstanding		0		0
Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 126,190,351 shares outstanding as of June 30, 2021 and 128,198,185 shares issued and 126,803,096 shares outstanding as of December 31, 2020		1,282		1,282
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding						Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 126,225,550 shares outstanding as of June 30, 2022 and 128,198,185 shares issued and 126,212,876 shares outstanding as of December 31, 2021						Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 126,225,550 shares outstanding as of June 30, 2022 and 128,198,185 shares issued and 126,212,876 shares outstanding as of December 31, 2021	1,282		1,282
Additional paid-in capital	Additional paid-in capital	492,874		491,246		Additional paid-in capital	498,745		496,983
Accumulated deficit	Accumulated deficit	(339,578)		(428,406)		Accumulated deficit	(236,159)		(282,439)
Treasury stock at cost, 2,007,834 shares at June 30, 2021 and 1,395,089 at December 31, 2020, respectively		(57,500)		(37,500)
Treasury stock at cost, 1,972,635 shares at June 30, 2022 and 1,985,309 at December 31, 2021, respectively						Treasury stock at cost, 1,972,635 shares at June 30, 2022 and 1,985,309 at December 31, 2021, respectively	(56,400)		(56,844)
Total stockholders’ equity	Total stockholders’ equity	97,078		26,622		Total stockholders’ equity	207,468		158,982
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	261,136	$	294,009	Total liabilities and stockholders’ equity	$	366,813	$	318,825

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Operations ~~and Comprehensive Income (Loss)~~

(Unaudited, in thousands, except share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue	Revenue									Revenue
Profit share										Profit share	$	29,157	$	38,842	$	57,467	$	66,572
Program fees	Program fees	$	20,597	$	8,793	$	35,508	$	21,505	Program fees	20,731		20,597		40,457		35,508
Profit share		38,842		12,163		66,572		15,938
Claims administration service fees		1,686		1,111		3,053		2,054
Claims administration and other service fees										Claims administration and other service fees	2,156		1,686		4,188		3,053
Total revenue	Total revenue	61,125		22,067		105,133		39,497		Total revenue	52,044		61,125		102,112		105,133
Cost of services	Cost of services	4,140		1,827		7,502		4,322		Cost of services	5,085		4,140		9,873		7,502
Gross profit	Gross profit	56,985		20,240		97,631		35,175		Gross profit	46,959		56,985		92,239		97,631
Operating expenses	Operating expenses									Operating expenses
General and administrative	General and administrative	8,381		14,650		16,593		18,218		General and administrative	7,968		8,381		15,450		16,593
Selling and marketing	Selling and marketing	2,954		1,295		5,351		3,373		Selling and marketing	3,994		2,954		7,727		5,351
Research and development	Research and development	773		349		1,364		707		Research and development	2,188		773		4,011		1,364
Total operating expenses										Total operating expenses	14,150		12,108		27,188		23,308
Operating income	Operating income	44,877		3,946		74,323		12,877		Operating income	32,809		44,877		65,051		74,323

Interest expense	Interest expense	(1,122)		(3,644)		(4,411)		(4,408)		Interest expense	(1,124)		(1,122)		(1,927)		(4,411)
Interest income	Interest income	58		44		142		61		Interest income	22		58		47		142
Gain on extinguishment of tax receivable agreement	Gain on extinguishment of tax receivable agreement	55,422		0		55,422		0		Gain on extinguishment of tax receivable agreement	—		55,422		—		55,422
Loss on extinguishment of debt	Loss on extinguishment of debt	0		0		(8,778)		0		Loss on extinguishment of debt	—		—		—		(8,778)
Change in fair value of contingent consideration		0		(48,802)		0		(48,802)
Other (expense) income		(2)		3		(133)		3
Income (loss) before income taxes		99,233		(48,453)		116,565		(40,269)
Provision for income taxes		23,267		1,352		27,737		1,364
Net income (loss) and comprehensive income (loss)		$	75,966	$	(49,805)	$	88,828	$	(41,633)
Preferred distribution to redeemable convertible Series C preferred units		0		(214)		0		(40,689)
Accretion to redemption value of redeemable convertible Series C preferred units		0		0		0		47,537
Net income (loss) attributable to common stockholders		$	75,966	$	(50,019)	$	88,828	$	(34,785)
Net income (loss) and comprehensive income (loss) per common share
Other expense										Other expense	—		(2)		—		(133)
Income before income taxes										Income before income taxes	31,707		99,233		63,171		116,565
Income tax expense										Income tax expense	8,581		23,267		16,891		27,737
Net income										Net income	$	23,126	$	75,966	$	46,280	$	88,828

Net income per common share										Net income per common share
Basic	Basic	$	0.60	$	(1.01)	$	0.70	$	(0.80)	Basic	$	0.18	$	0.60	$	0.37	$	0.70
Diluted	Diluted	$	0.60	$	(1.01)	$	0.70	$	(0.80)	Diluted	$	0.18	$	0.60	$	0.37	$	0.70
Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Basic	Basic	126,230,752		49,547,284		126,515,343		43,589,168		Basic	126,221,689		126,230,752		126,218,710		126,515,343
Diluted	Diluted	126,274,197		49,547,284		126,554,082		43,589,168		Diluted	126,222,366		126,274,197		126,219,115		126,554,082

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited, in thousands, except share and unit data)

Common Stock Additional
Paid-in
Capital Accumulated
Deficit Treasury Stock Total
Stockholders’
Equity
Shares Amount Amount Amount Shares Amount Amount
Balance as of December 31, 2020 128,198,185 $ 1,282 $ 491,246 $ (428,406) (1,395,089) $ (37,500) $ 26,622
Share-based compensation — — 701 — — — 701
Net income — — — 12,862 — — 12,862
Balance as of March 31, 2021 128,198,185 $ 1,282 $ 491,947 $ (415,544) (1,395,089) $ (37,500) $ 40,185
Share-based compensation — — 927 — — — 927
Share repurchase — — — — (612,745) (20,000) (20,000)
Net income — — — 75,966 — — 75,966
Balance as of June 30, 2021 128,198,185 $ 1,282 $ 492,874 $ (339,578) (2,007,834) $ (57,500) $ 97,078

~~Table of Contents~~

~~OPEN LENDING CORPORATION~~

~~Condensed Consolidated Statements of Changes in Stockholders’ (Deficit)~~

~~(Unaudited, in thousands, except share and unit data)~~

Redeemable
Convertible Series C
Preferred Units Common Units Series A and B
Preferred Units Common Stock Additional
Paid-in
Capital Accumulated
Deficit Total
Stockholders’
(Deficit)
Units Amount Units Amount Units Amount Shares Amount Amount Amount Amount
Balance as of December 31, 2019, as originally reported 21,906,852 $ 304,943 25,381,873 $ 7,524 29,058,266 $ 478 0 $ 0 $ 0 $ (242,781) $ (234,779)
Retroactive application of the recapitalization (7,628,249) — (25,381,873) (7,524) (29,058,266) (478) 37,631,052 376 7,626 — 0
Balance as of December 31, 2019, as adjusted 14,278,603 $ 304,943 0 0 0 0 37,631,052 $ 376 $ 7,626 $ (242,781) $ (234,779)
Fair value adjustment of redemption option — (47,537) — — — — — — — 47,537 47,537
Share-based compensation — — — — — — — — 487 — 487
Distribution to Open Lending, LLC unitholders — — — — — — — — — (135,380) (135,380)
Net income — — — — — — — — — 8,172 8,172
Balance as of March, 31 2020 14,278,603 $ 257,406 0 $ 0 0 $ 0 37,631,052 $ 376 $ 8,113 $ (322,452) $ (313,963)
Recapitalization transaction, net of transaction costs (14,278,603) (257,406) — — — — 54,218,857 542 242,001 — 242,543
Deferred tax asset — — — — — — — — 1,874 — 1,874
Estimated fair value of contingent consideration at June 10, 2020 — — — — — — — — (347,089) — (347,089)
Share-based compensation — — — — — — — — 2,189 — 2,189
Net loss — — — — — — — — — (49,805) (49,805)
Balance as of June 30, 2020 0 $ 0 0 $ 0 0 $ 0 91,849,909 $ 918 $ (92,912) $ (372,257) $ (464,251)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2021	128,198,185	$	1,282	$	496,983	$	(282,439)	(1,985,309)	$	(56,844)	$	158,982

Share-based compensation	—	—		1,281		—		—	—		1,281
Restricted stock units issued, net of shares withheld for taxes	—	—		(207)		—		5,079	168		(39)
Net income	—	—		—		23,154		—	—		23,154
Balance as of March 31, 2022	128,198,185	$	1,282	$	498,057	$	(259,285)	(1,980,230)	$	(56,676)	$	183,378
Share-based compensation	—	—		988		—		—	—		988
Restricted stock units issued, net of shares withheld for taxes	—	—		(300)		—		7,595	276		(24)
Net income	—	—		—		23,126		—	—		23,126
Balance as of June 30, 2022	128,198,185	$	1,282	$	498,745	$	(236,159)	(1,972,635)	$	(56,400)	$	207,468



	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2020	128,198,185	$	1,282	$	491,246	$	(428,406)	(1,395,089)	$	(37,500)	$	26,622
Share-based compensation	—	—		701		—		—	—		701
Net income	—	—		—		12,862		—	—		12,862
Balance as of March 31, 2021	128,198,185	$	1,282	$	491,947	$	(415,544)	(1,395,089)	$	(37,500)	$	40,185
Share-based compensation	—	—		927		—		—	—		927
Share repurchase	—	—		—		—		(612,745)	(20,000)		(20,000)
Net income	—	—		—		75,966		—	—		75,966
Balance as of June 30, 2021	128,198,185	$	1,282	$	492,874	$	(339,578)	(2,007,834)	$	(57,500)	$	97,078

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income (loss)		$	88,828	$	(41,633)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income						Net income	$	46,280	$	88,828
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	Share-based compensation	1,628		2,676		Share-based compensation	2,269		1,628
Depreciation and amortization	Depreciation and amortization	537		483		Depreciation and amortization	614		537
Amortization of right-of-use assets		268		188
Non-cash operating lease cost						Non-cash operating lease cost	285		268

Gain on extinguishment of tax receivable agreement	Gain on extinguishment of tax receivable agreement	(55,422)		0		Gain on extinguishment of tax receivable agreement	—		(55,422)
Loss on extinguishment of debt	Loss on extinguishment of debt	8,778		0		Loss on extinguishment of debt	—		8,778
Change in fair value of contingent consideration		0		48,802
Deferred income taxes	Deferred income taxes	16,903		775		Deferred income taxes	(998)		16,903
Changes in assets & liabilities:	Changes in assets & liabilities:					Changes in assets & liabilities:
Accounts receivable		(3,217)		574
Contract assets		(22,591)		225
Accounts receivable, net						Accounts receivable, net	(435)		(3,217)
Contract assets, net						Contract assets, net	6,208		(22,591)

Prepaid expenses		(2,517)		(1,150)
Deferred transaction costs		0		1,081
Other current and non-current assets	Other current and non-current assets	1,384		322		Other current and non-current assets	1,477		(1,133)
Accounts payable	Accounts payable	(1,455)		176		Accounts payable	(885)		(1,455)
Accrued expenses	Accrued expenses	1,377		(1,184)		Accrued expenses	2,094		1,377
Income tax payable/receivable	Income tax payable/receivable	(1,720)		569		Income tax payable/receivable	(2,964)		(1,720)
Operating lease liabilities	Operating lease liabilities	(349)		(178)		Operating lease liabilities	(240)		(349)
Third-party claims administration liability						Third-party claims administration liability	(13)		299
Other current and non-current liabilities	Other current and non-current liabilities	551		280		Other current and non-current liabilities	(105)		252
Net cash provided by operating activities	Net cash provided by operating activities	32,983		12,006		Net cash provided by operating activities	53,587		32,983
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Purchase of property and equipment	Purchase of property and equipment	(841)		(424)		Purchase of property and equipment	(364)		(841)
Net cash used in investing activities	Net cash used in investing activities	(841)		(424)		Net cash used in investing activities	(364)		(841)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from term loans	Proceeds from term loans	125,000		170,000		Proceeds from term loans	—		125,000
Proceeds from revolving facility	Proceeds from revolving facility	50,000		0		Proceeds from revolving facility	—		50,000
Payments on term loans	Payments on term loans	(167,628)		(4,380)		Payments on term loans	(1,562)		(167,628)
Payments on revolving facility	Payments on revolving facility	(25,000)		0		Payments on revolving facility	—		(25,000)
Payment of deferred financing costs	Payment of deferred financing costs	(1,669)		(9,767)		Payment of deferred financing costs	—		(1,669)
Shares withheld for taxes for restricted stock units						Shares withheld for taxes for restricted stock units	(63)		—
Settlement of tax receivable agreement						Settlement of tax receivable agreement	—		(36,948)
Share repurchase	Share repurchase	(20,000)		0		Share repurchase	—		(20,000)
Settlement of tax receivable agreement		(36,948)		0
Distributions to Open Lending, LLC unitholders		0		(135,380)

Recapitalization transaction, net of transaction costs		0		(13,289)
Net cash (used in) provided by financing activities		(76,245)		7,184

Net cash used in financing activities						Net cash used in financing activities	(1,625)		(76,245)
Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash	(44,103)		18,766		Net change in cash and cash equivalents and restricted cash	51,598		(44,103)
Cash and cash equivalents and restricted cash at the beginning of the period	Cash and cash equivalents and restricted cash at the beginning of the period	104,148		9,898		Cash and cash equivalents and restricted cash at the beginning of the period	119,509		104,148
Cash and cash equivalents and restricted cash at the end of the period	Cash and cash equivalents and restricted cash at the end of the period	$	60,045	$	28,664	Cash and cash equivalents and restricted cash at the end of the period	$	171,107	$	60,045
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	3,776	$	3,958	Interest paid	$	1,756	$	3,776
Income tax paid, net	Income tax paid, net	12,452		20		Income tax paid, net	20,853		12,452

Non-cash investing and financing:						Non-cash investing and financing:
Internally developed software costs accrued but not paid						Internally developed software costs accrued but not paid	27		660
Property and equipment accrued but not paid						Property and equipment accrued but not paid	21		—

Non-cash investing and financing:
Internally developed software costs accrued but not paid		660		0

Change in fair value of redeemable convertible Series C preferred units		0		(47,537)

Conversion of preferred stock to common stock		0		257,406

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1—Description of Business, Background and Nature of Operations

Open Lending Corporation (individually or together with its subsidiaries, as the context requires, the “Company”), headquartered in Austin, Texas, provides loan analytics, risk-based loan pricing, risk modeling, and automated decision technology for automotive lenders throughout the United States ~~of America,~~(“U.S.”), which allows each lending institution to book incremental near-prime and non-prime automotive loans out of their existing business flow. The Company also operates as a third-party administrator that adjudicates insurance claims and refunds on ~~those~~its automotive loans.

Nebula Acquisition Corporation (“Nebula”), our predecessor, was originally incorporated in Delaware on October 2, 2017 as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On June 10, 2020 (the “Closing Date”), Nebula consummated a business combination (the “Business Combination”) pursuant to that certain Business Combination Agreement, dated as of January 5, 2020 (as amended by that certain Amendment No. 1 and Waiver, dated as of March 18, 2020, that certain Amendment No. 2 and Consent, dated as of March 26, 2020, that certain Amendment No. 3, dated as of May 13, 2020, and that certain amendment No. 4, dated as of June 9, 2020, the “Business Combination Agreement”) by and among Nebula, Open Lending, LLC, a Texas limited liability company, BRP Hold 11, Inc., a Delaware corporation (“Blocker”), the Blocker’s sole stockholder, Nebula Parent Corp., a Delaware Corporation (“ParentCo”), NBLA Merger Sub LLC, a Texas limited liability company, NBLA Merger Sub Corp., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, as the Securityholder Representative.

Immediately upon the completion of the Business Combination and the other transactions contemplated by the Business Combination Agreement (the “Transactions”, and such completion, the “Closing”), Open Lending, LLC became a wholly-owned subsidiary of ParentCo, and, ParentCo changed its name to Open Lending Corporation. The Company is now listed on NASDAQ under the symbol “LPRO.”

Unless the context otherwise requires, “we,” “us,” “our,” “Open Lending,” and the “Company” refers to Open Lending Corporation, the combined company and its subsidiaries following the Business Combination. “Open Lending, LLC” and “Nebula” refers to Open Lending, LLC and Nebula Acquisition Corporation prior to the Closing Date.

The Company has evaluated how it is organized and managed and has identified only 1 operating segment. All of the Company’s operations and assets are in the ~~United States,~~U.S., and all of its revenues are attributable to ~~United States~~U.S. customers.

Note 2—Summary of Significant Accounting and Reporting Policies ~~and Recent Developments~~

~~The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying condensed consolidated financial statements.~~

a)~~Basis of presentation and consolidation~~

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of Open Lending and all its subsidiaries that are directly or indirectly owned or controlled by the Company. All intercompany transactions and balances have been eliminated upon consolidation. Certain prior year amounts have been reclassified to conform to the Company’s current presentation. Such reclassifications had no effect on the Company’s previously reported net income, earnings per share, cash flows or retained earnings.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted from these condensed consolidated financial statements, as permitted by ~~SEC~~Securities and Exchange Commission (“SEC”) rules and regulations. The Company believes the disclosures made in these condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these condensed consolidated financial statements ~~should~~ be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 (“Annual Report”).

The interim data includes all ~~adjustments, consisting only of normal recurring~~ adjustments that are, in the opinion of the Company’s management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three and six months ended June 30, ~~2021~~2022 are not necessarily indicative of the Company’s operating results for the entire fiscal year ending December 31, ~~2021.~~2022.

Concentrations of revenue and credit risks

The ~~Business Combination is~~Company’s three largest insurance carrier partners accounted for as38%, 11% and 11% of the Company’s total revenue during the three months ended June 30, 2022 and 38%, 13% and 10% during the six months ended June 30, 2022. The Company’s two largest insurance carriers accounted for 43% and 24% of the Company’s total revenue during the three months ended June 30, 2021 and accounted for 43% and 23% for the six months ended June 30, 2021. In the event that one or more of the Company’s significant insurance carriers terminates their relationship with the Company, it could have a ~~reverse recapitalization as Open Lending, LLC was determined to be~~material and adverse effect on the ~~accounting acquirer under~~Company’s business and, in turn, its revenue. Financial ~~Accounting Standards Board’s Accounting Standards Codification Topic 805,~~instruments that potentially subject the Company

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Business Combinations (“ASC 805”). The determination is primarily based on the evaluation of the following facts and circumstances:~~

•~~the pre-combination unitholders of Open Lending, LLC hold the majority of voting rights in the Company;~~

•~~the pre-combination unitholders of Open Lending, LLC have the right to appoint the majority of the directors of the Company;~~

•~~senior management of Open Lending, LLC became the senior management of the Company; and~~

•~~operations of Open Lending, LLC comprise the ongoing operations of the Company.~~

In connection with the Business Combination, all outstanding units of Open Lending, LLC were converted into common stock of the Company, par value $0.01 per share, representing a recapitalization, and the net assets of Nebula were acquired at historical cost, with no goodwill or intangible assets recorded. Open Lending, LLC was deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing are those of Open Lending, LLC. The shares and corresponding capital amounts and net income per share available to common stockholders, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination Agreement. The number of Series C preferred units in mezzanine equity was also retroactively restated in shares reflecting the exchange ratio, and the carrying amount of the Series C preferred units is based on the fair value of its redemption amount on each reporting date. All Series C preferred units were converted to the Company’s common stock on the Closing Date.

b)~~COVID-19~~

The COVID-19 pandemic continues to create uncertainty regarding the U.S. and global economies and our operating results, financial condition and cash flows. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and continued spread of variants of COVID-19; the impact on our revenues, which are generated with automobile lenders and insurance company partners and driven by consumer demand for automobiles and automotive loans; extended closures of businesses, the effectiveness of the vaccine distribution program and the vaccines themselves; unemployment levels and the overall impact on our customer behavior, all of which are uncertain and cannot be predicted. The Company is diligently working to ensure that we can continue to operate with minimal disruption, mitigate the impact of the pandemic on our employees’ health and safety, and address potential business interruptions on ourselves and our customers. The Company believes that the COVID-19 pandemic, the mitigation efforts and the resulting economic impact have had, and may continue to have, an overall adverse effect on our business, results of operations and financial condition. The Company saw a reduction in loan applications and certified loans throughout the majority of 2020. As consumers and lenders have adjusted to the pandemic, application and certification levels have increased in 2021. Lenders’ forbearance programs, government stimulus packages, extended unemployment benefits and other government assistance have resulted in a reduction in expected defaults since the onset of the pandemic. As these programs end, defaults may increase. The potential increase in defaults may impact our revenues and subsequent recovery as the automotive finance industry and overall economy recover. The Company continues to closely monitor the current macro environment, particularly monetary and fiscal policies.

c)~~Emerging growth company~~

The Company is an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act (“JOBS Act”). As such, the Company is eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

The Company will remain an emerging growth company until the earliest of (i) the Company is deemed to be a “large accelerated filer,” as defined in the Exchange Act, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year, (iii) the date on which it has issued more than $1 billion in non-

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~~Notes to Condensed Consolidated Financial Statements~~

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convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the Company’s common stock in the Company’s initial public offering. The Company expects to be deemed a large accelerated filer beginning January 1, 2022.

d)~~Concentrations of revenue and credit risks~~

The Company’s business relationships with its two insurance partners currently producing revenue generate approximately 66% of the Company’s total revenue for each of the three and six months ended June 30, 2021, with the top insurance partner accounting for approximately 64% of the total profit share revenue. In the event that one or more of our other significant customers terminate their relationships with us, or elect to utilize an alternative source for financing, the number of loans originated through the Lender’s Protection Platform (“LPP”) would decline, which would materially and adversely affect our business and, in turn, our revenue.

~~Financial instruments that potentially subject the Company~~ to credit risk consist of cash and cash equivalents, restricted cash, ~~and~~ accounts receivable and contract assets to the extent of the amounts recorded on the balance sheets.

Cash and cash equivalents are deposited in commercial analysis and savings accounts at two financial institutions, both with high credit standing. Restricted cash relates to funds held by the Company on behalf of the insurance carriers, delegated for the use of insurance claim payments. Restricted cash is deposited in commercial analysis accounts at one financial institution. ~~At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits of $250,000 per institution.~~ The Company has not experienced any losses on its deposits of cash and cash equivalents and management believes the Company is not exposed to significant risks on such accounts.

The Company’s accounts receivables are derived from revenue earned from customers. The Company performs credit evaluations of its customers’ financial condition. As of June 30, 2021 and December 31, 2020, there was no allowance for doubtful accounts. At June 30, ~~2021,~~2022, the Company had one customer that ~~represented 16%~~individually accounted for 10% of the ~~Company's~~Company’s net accounts receivable. At December 31, ~~2020,~~2021, the Company had ~~one customer~~two customers that each represented ~~19%~~10% of the Company’s net accounts receivable.

e)The Company does not have material accounts receivable or contract asset balances that are past due and has not written off any material balance in its portfolio for the periods presented. The allowance for expected credit losses on accounts receivable and contract assets receivable was less than $0.2 million at June 30, 2022 and December 31, 2021.

Use of estimates and judgments

The preparation of condensed consolidated financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and those differences may be material. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

The most significant items subject to such estimates and assumptions include, but are not limited to, profit share revenue recognition and the corresponding impact on contract assets, the recognition of the valuations of share-based compensation arrangements, and assessing the realizability of deferred tax assets. These estimates, although based on actual historical trend and modeling, may potentially show significant variances over time.

In connection with profit share revenue recognition and the estimation of contract ~~asset~~assets under Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), ~~we use~~the Company uses forecasts of loan-level earned premium and insurance claim payments. These forecasts are driven by the projection of loan defaults, prepayments and default severity rates. These assumptions are based on ~~our~~the Company’s observations of the historical behavior for loans with similar risk characteristics. The assumptions also take into consideration the forecast adjustments under various macroeconomic conditions, including the ~~potential impact from the COVID-19 pandemic, and the~~ current mix of the underlying portfolio of our insurance partners. As the Company closely monitors the development of the pandemic and its ongoing impact on Open Lending's business, management has accordingly adjusted these assumptions during the three and six months of 2021 as a result of the changes in facts and circumstances and general market conditions ~~derived from~~for the ~~COVID-19 pandemic.~~three and six months ended June 30, 2022, management has accordingly adjusted these assumptions.

f)~~Property and equipment~~

The Company's property and equipment balance primarily consists of furniture, fixtures and equipment used in the normal course of business, as well as leasehold improvements and computer software developed for internal use.

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

g)~~Recently adopted new accounting standards~~

On January, 1, 2021, the Company adopted ASU 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The impact of the adoption of this standard was immaterial to the condensed consolidated financial statements.

On January 1, 2021, the Company adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal—Use Software, Subtopic, 350-40, which provides guidance on a customer’s accounting for implementation costs incurred in a cloud-computing arrangement when hosted by a vendor. The guidance provides that, in a hosting arrangement that is a service contract, certain implementation costs should be capitalized and amortized over the term of the arrangement. The Company adopted this guidance using the prospective method. The impact of the adoption of this standard was immaterial to the condensed consolidated financial statements.

h)Recently issued ~~accounting pronouncements~~but not yet adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing after December 31, 2022. The Company is in the process of assessing the impact of this ASU on our condensed consolidated financial statements and disclosures. accounting pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform within Topic 848, which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and are retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied. The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company has not experienced any unintended outcomes or consequences of reference rate reform that would necessitate the adoption of this guidance. The Company will not need to consider the application of this guidance related to its credit agreements as such agreements provide for a replacement rate when LIBOR is ~~evaluating~~discontinued. The Company will continue to closely monitor all potential instances of reference rate reform to determine if the ~~effect~~adoption of ASU 2020-04 ~~on the Company’s condensed consolidated financial statements.~~

Although there are several other new accounting pronouncements issued or proposed by the FASB, which we have adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial position or results of operations.

~~Note 3—Business Combination~~

On June 10, 2020, Nebula consummated a business combination with Open Lending, LLC pursuant to the Business Combination Agreement. Pursuant to ASC 805, for financial accounting and reporting purposes, Open Lending, LLC was deemed the accounting acquirer and Nebula was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Accordingly, the Business Combination was treated as the equivalent of Open Lending, LLC issuing equity for the net assets of Nebula, accompanied by a recapitalization. Under this method of accounting, the consolidated financial statements of Open Lending, LLC are the historical financial statements of Open Lending Corporation. The net assets of Nebula were stated at historical costs, with no goodwill or other intangible assets recorded in accordance with U.S. GAAP, and are consolidated with Open Lending, LLC’s financial statements on the Closing Date. The shares and net income (loss) per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio establishedbecomes necessary in the ~~Business Combination Agreement.~~

As a result of the Business Combination, Open Lending, LLC’s unitholders received aggregate consideration of approximately $1.0 billion, which consisted of (i) $328.8 million in cash at the Closing, net of transaction expenses, (ii) $135.0 million in cashfuture.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~distribution~~Note 3—Contract Assets

Changes in the Company’s contract assets primarily result from ~~debt issued~~the timing difference between the satisfaction of its performance obligation and the customer’s payment. The Company fulfills its obligation under a contract with a customer by transferring services in ~~March 2020,~~exchange for consideration from the customer. The Company recognizes contract assets when it transfers services to a customer, recognizes profit share revenue, program fee revenue and ~~(iii) 51,909,655 shares~~claims administration services revenue (“TPA fees”) for amounts not yet billed, and the right to consideration is conditional on something other than the passage of ~~common stock valued at $10.00 per~~time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional.

For performance obligations satisfied in previous periods, the Company evaluates and updates its profit share ~~totaling $519.1 million. In addition, Open Lending, LLC’s unitholders received additional contingent consideration~~revenue forecast on a quarterly basis and adjusts contract assets accordingly. During the three and six months ended June 30, 2022, contract asset adjustments attributable to profit share revenue forecast were $2.8 million and $5.5 million, respectively, as compared to contract asset adjustments of ~~22,500,000 shares based on meeting certain thresholds following the Business Combination. All contingent consideration shares were issued or released~~$11.8 million and $16.9 million, during the ~~third quarter~~three and six months ended June 30, 2021, respectively.

Contract assets balances for the periods indicated below are as follows:


	Contract Assets
	Profit Share		TPA Fees		Program Fees		Total
	(in thousands)
Ending balance as of March 31, 2022	$	100,008	$	1,360	$	6,084	$	107,452
Increase due to new business generation	26,333		2,155		20,731		49,219
Change in estimates of revenue from performance obligations satisfied in previous periods	2,824		—		—		2,824
Receivables transferred from contract assets upon billing the lending institutions	—		—		(20,178)		(20,178)
Payments received from insurance carriers	(30,496)		(2,078)		—		(32,574)
Provision for expected credit losses	3		—		2		5
Ending balance as of June 30, 2022	$	98,672	$	1,437	$	6,639	$	106,748


	Contract Assets
	Profit Share		TPA Fees		Program Fees		Total
	(in thousands)
Ending balance as of December 31, 2021	$	105,486	$	1,316	$	6,154	$	112,956
Increase due to new business generation	52,002		4,185		40,457		96,644
Change in estimates of revenue from performance obligations satisfied in previous periods	5,465		—		—		5,465
Receivables transferred from contract assets upon billing the lending institutions	—		—		(39,978)		(39,978)
Payments received from insurance carriers	(64,327)		(4,065)		—		(68,392)
Provision for expected credit losses	46		1		6		53
Ending balance as of June 30, 2022	$	98,672	$	1,437	$	6,639	$	106,748

As of ~~2020.~~June 30, 2022 and December 31, 2021, the portion of the contract assets’ balance estimated to be received within one year consisted of $73.3 million and $70.5 million, respectively, and the portion of estimated to be received beyond one year consisted of $33.4 million and $42.4 million, respectively.

~~In connection~~Contract Costs

The fulfillment costs associated with the ~~Business Combination,~~Company’s contracts with customers do not meet the ~~Company incurred direct~~criteria for capitalization and ~~incremental costs~~therefore are expensed as incurred.

Table of ~~approximately $55.5 million related~~Contents

OPEN LENDING CORPORATION

Notes to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds. In addition, the Company incurred $9.1 million in transaction bonuses paid to key employees and directors and $2.2 million in non-cash share-based compensation expense due to the accelerated vesting of Open Lending, LLC’s legacy share-based compensation plan in the second quarter of 2020. The transaction bonuses and share-based compensation are included in general and administrative expense on our consolidated statements of operations and comprehensive income (loss) during the second quarter of 2020. See ~~Note 7—Share-Based Compensation~~ ~~for additional information.~~Condensed Consolidated Financial Statements

(Unaudited)

Note 4—Debt

~~The following table provides a summary of~~Debt balances for the ~~Company’s debt~~periods indicated below were as ~~of the dates indicated:~~follows:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
		(in thousands)					(in thousands)
Revolving Facility, matures in 2026	Revolving Facility, matures in 2026	$	25,000	$	0	Revolving Facility, matures in 2026	$	25,000	$	25,000
Term Loan due 2026	Term Loan due 2026	124,219		0		Term Loan due 2026	121,094		122,656
Term Loan due 2027		0		166,813
Less: unamortized deferred financing costs	Less: unamortized deferred financing costs	(1,576)		(9,066)		Less: unamortized deferred financing costs	(1,229)		(1,396)
Total debt	Total debt	147,643		157,747		Total debt	144,865		146,260
Less: current portion of debt	Less: current portion of debt	(3,125)		(4,888)		Less: current portion of debt	(3,906)		(3,125)
Total long-term debt, net of deferred financing costs	Total long-term debt, net of deferred financing costs	$	144,518	$	152,859	Total long-term debt, net of deferred financing costs	$	140,959	$	143,135

Term Loan due 2027

On March 11, 2020, the Company entered into a credit agreement with UBS A.G. as the administrative agent and the lenders from time to time party thereto (the “Credit Agreement”). Pursuant to the Credit Agreement, the lenders thereto funded a term loan (the “Term Loan due 2027”) in a principal amount of $170.0 million bearing an interest rate per annum of LIBOR plus 6.5% (subject to a LIBOR floor of 1%), with a maturity date in March 2027. The Term Loan due 2027 was retired by the Company paying off its outstanding principal and interest with proceeds from issuance of the Term Loan due 2026 and the Revolving Facility (both as defined below) in March 2021. The transaction was deemed as a debt extinguishment under ASC Topic 405-20, “Liabilities—Extinguishments of Liabilities,” and accordingly, the Company recognized a non-cash debt extinguishment loss of $8.8 million, which was recorded under the caption loss on extinguishment of debt in the ~~condensed~~ consolidated statements of operations ~~and comprehensive income~~ during the six months ended June 30, 2021. The loss on debt extinguishment was calculated as the difference between the carrying amount of the debt and the price paid to retire the debt, which primarily consisted of the write-off of the unamortized deferred financing costs related to the Term Loan due 2027.

New Credit Agreement—Term Loan due 2026 and Revolving Credit Facility

On March 19, 2021, the Company entered into a credit agreement with Wells Fargo Bank, N.A. as the administrative agent (the “New Credit Agreement”), pursuant to which the lenders thereto (i) funded a senior secured term loan in an aggregate principal amount of $125.0 million maturing in March 2026 (the “Term Loan due 2026”) and (ii) committed to provide a $50.0 million senior secured revolving credit facility, including a $10.0 million letter of credit sub-facility, maturing in March 2026 (the “Revolving Facility”). The obligations of the Company under the Term Loan due 2026 and the Revolving Facility are guaranteed by all of the Company’s U.S. subsidiaries and are secured by substantially all of the assets of the Company and its U.S. subsidiaries, subject to customary exceptions.

Interest under the Term Loan due 2026 and the Revolving Facility are, at the option of the Company, either at an Alternate Base ~~Rate~~rate (“ABR”) plus a spread ranging from 0.75% to 1.50%, or LIBOR plus a spread ranging from 1.75% to 2.50%. With respect to the ABR loans, interest will be payable at the end of each calendar quarter. With respect to the LIBOR loans, interest will be

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~~Notes to Condensed Consolidated Financial Statements~~

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payable at the end of the selected interest period. Additionally, there is a commitment fee payable at the end of each quarter at a rate per annum ranging from 0.200% to 0.275% based on the average daily unused portion of the Revolving Facility, and other customary letter of credit fees. Pursuant to the New Credit Agreement, the interest rate spreads and commitment fees increase or decrease in increments as ~~our~~the Company’s Funded Secured Debt/EBITDA ratio increase or decreases.

As of June 30, ~~2021,~~2022, both the Term Loan due 2026 and the Revolving Facility are subject toa LIBOR rate of ~~0.098%~~1.66% plus a spread of ~~2.00%~~1.75% per annum. ~~In June 2021, the Company made a payment of $25.0 million to the outstanding balance of~~Commitment fees were accrued at 0.20% under the Revolving ~~Facility and has an~~Facility’s unused commitment balance of $25.0 million ~~under the Revolving Facility~~ at June 30, ~~2021. Commitment fees will be accrued at 0.225% per annum on the unused commitment balance.~~2022.

In connection with the issuance of the Term Loan due 2026 and the Revolving Facility, the Company incurred total deferred financing costs of $1.7 million, of which $1.2 million was allocated to the Term Loan due 2026 and $0.5 million was allocated to the Revolving Facility. The deferred financing costs were capitalized as a contra-liability against the principal balance of the loans and are amortized as interest expense using the effective interest method. Unamortized deferred financing costs were ~~$1.6~~$1.2 million as of June 30, ~~2021.~~2022. As of June 30, ~~2021,~~2022, the weighted average effective interest rate on ~~our~~the Company’s outstanding borrowings was ~~2.38%~~3.64%.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The New Credit Agreement contains a maximum total net leverage ratio financial covenant and a minimum fixed charge coverage ratio financial covenant that are tested ~~quarterly starting with the quarter ending June 30, 2021.~~quarterly. The maximum total net leverage ratio is 3.5 to 1.0 for periods on or prior to December 31, 2022, and then decreases to 3.0 to 1.0 after December 31, 2022. The minimum fixed charge coverage ratio is 1.25 to 1.0. As of June 30, ~~2021,~~2022, the Company was in compliance with all required covenants under the New Credit Agreement.

Note 5—~~Stockholders’ Equity~~

On June 11, 2020, Open Lending Corporation’s common stock began trading on the NASDAQ under the symbol “LPRO.” Pursuant to the terms of the Amended and Restated Certificate of Incorporation, the Company is authorized and has available for issuance the following shares and classes of capital stock, each with a par value of $0.01 per share: (i) 550,000,000 shares of common stock; and (ii) 10,000,000 shares of preferred stock. Immediately following the Business Combination, there were 91,849,909 shares of common stock, which excluded 3,437,500 shares issued and outstanding that were subject to certain lock-up and forfeiture arrangements, with a par value of $0.01 per share, and 9,166,659 warrants outstanding. In addition to the shares issued on the Closing Date, Open Lending, LLC’s unitholders received additional contingent consideration of 22,500,000 shares and certain Nebula’s equity holders received 1,250,000 earn-out shares of common stock as the price of the Company’s common stock trading on the NASDAQ met certain thresholds following the Business Combination. As discussed in ~~Note 3—Business Combination~~, the Company has retroactively adjusted the shares issued and outstanding prior to June 10, 2020 to give effect to the exchange ratio established in the Business Combination Agreement to determine the number of shares of common stock into which they were converted.

In connection to the Business Combination, on July 1, 2020, the Company filed a Registration Statement on Form S-1 to register 52,916,659 shares of common stock for the issuance by the Company of (i) up to an aggregate of 23,750,000 shares of our common stock that may be issued as earn-out consideration upon certain triggering events, and (ii) 9,166,659 shares of our common stock that may be issued upon exercise of warrants to purchase common stock at an exercise price of $11.50 per share of common stock, herein referenced as public warrants.

~~Underwritten Public Offering~~

On April 6, 2021, the Company completed an underwritten public offering of 9,000,000 shares of our common stock at a public offering price of $34.00 per share. All shares were sold by existing stockholders, including Nebula Holdings, LLC and its affiliates, Bregal Sagemount, and certain executive officers of the Company. The selling stockholders also granted the underwriters a 30-day option to purchase up to 1,350,000 additional shares of common stock. The Company did not issue any shares and did not receive any of the proceeds of the offering.

~~Share Repurchase~~

Pursuant to a Stock Repurchase Agreement, dated as of March 29, 2021, between Open Lending and the selling stockholders named therein, the Company repurchased from the selling stockholders on April 6, 2021 an aggregate number of 612,745

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~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

shares of its common stock totaling $20.0 million at the same per share price paid by the underwriters to the selling stockholders in the offering. The $20.0 million stock repurchase was recorded in treasury stock at cost.

~~Dividend~~

Any decision to declare and pay dividends in the future will be made at the sole discretion of the Company’s Board of Directors and will depend on, among other things, results of operations, cash requirements, financial condition, contractual restrictions and other factors that Company’s Board of Directors may deem relevant. In addition, the Company’s ability to pay dividends is limited by covenants in the Company’s existing indebtedness and may be limited by the agreements governing other indebtedness that it or its subsidiaries incur in the future.

~~Note 6—Revenue~~

The Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights and payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

~~Revenue from contracts with lending institutions~~

Program fees are derived from contracts with automotive lenders. Through the Company’s proprietary LPP, the Company enables automotive lenders to make loans that are insured against certain credit losses from defaults. The Company generates program fee revenue from our proprietary, cloud-based software platform that enables automotive lenders, Original Equipment Manufacturing (“OEM”) captive finance companies and other financial institutions (collectively “lending institutions”) to approve loans to traditionally underserved non-prime or near-prime borrowers.

The Company receives program fees for providing loan decision-making analytics solutions and automated issuance of credit default insurance with third-party insurance providers. The Company’s performance obligation is complete when a loan is certified through LPP and is issued by the lending institution. Program fee contracts contain a single performance obligation, which consist of a series of distinct services that are substantially the same with the same pattern of transfer to customers.

Program fees are based on a percentage of the initial principal amount of the loans processed by the Company. There are two types of payment arrangements: i) a single pay program fee is due based on the volume of loans originated by the lending institution in a calendar month; or ii) a monthly pay program fee is due in equal monthly installments within 12 months of loan origination.

The Company bills the customer for an amount calculated based on the actual number of loans processed in a calendar month, which corresponds directly with the value of service transferred to the customer in that month.

~~Revenue from contracts with insurance carriers~~

~~At June 30, 2021, the Company has producer agreements with three insurance carrier partners from which the Company earns or will earn profit share revenue and claims administration service fees.~~

In the profit share arrangement, the Company facilitates placement of credit default insurance policies with lending institutions on behalf of our insurance partners. Profit share revenue represents our participation in the underwriting profit of our third-party insurance partners who provide lenders with credit default insurance on loans the automotive lenders make using our LPP. The Company receives a percentage of the aggregate monthly insurance underwriting profit. Monthly insurance underwriting profit is calculated as the monthly earned premium less expenses and losses (including reserves for incurred but not reported losses), with losses accrued and carried forward for future profit share calculations. The Company fulfills its performance obligation upon placement of the insurance, at which point the Company is entitled to the profit share of all future net premiums earned by the insurance carrier on the policy.

To determine the profit share revenue, the Company uses forecasts of loan-level earned premium and insurance claim payments. These forecasts are driven by the projection of loan defaults, prepayments and severity rates. These assumptions are based on our observations of the historical behavior for loans with similar risk characteristics. The assumptions also take

~~Table of Contents~~

~~OPEN LENDING CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

consideration of the forecast adjustments under various macroeconomic conditions and the current mix of the underlying portfolio of our insurance partners. To the extent these assumptions change, our profit share revenue is adjusted.

In accordance with ASC 606, at the time of the placement of a policy by an insurance company, the Company estimates the variable consideration based on undiscounted expected future profit share to be received from the insurance carriers. The Company applies economic stress factors in the Company’s forecast to constrain its estimation of future profit share revenue to an amount reflecting the Company’s belief that a significant reversal in the cumulative amount of revenue is not probable of occurring when the uncertainty is resolved.

Claims administration service fees are generated from us acting as a third-party administrator to process and adjudicate the credit default insurance claims on behalf of the insurance companies. In this arrangement, the performance obligation to provide claims administration services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies our performance obligations.

~~Contract Balances~~

~~Contract assets for the periods indicated below were as follows:~~

Contract Assets
Profit
Share TPA Fee Program
Fee Total
(in thousands)
Ending balance as of December 31, 2020 $ 83,177 $ 822 $ 5,343 $ 89,342
Increase of contract assets due to new business generation 49,673 3,053 35,508 88,234
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods 16,899 0 0 16,899
Receivables transferred from contract assets upon billing the lending institutions 0 0 (34,903) (34,903)
Payments received from insurance carriers (44,863) (2,776) 0 (47,639)
Ending balance as of June 30, 2021 $ 104,886 $ 1,099 $ 5,948 $ 111,933

As of June 30, 2021 and December 31, 2020, our contract assets consisted of $61.0 million and $50.4 million, respectively, as the portion estimated to be received within one year, and $50.9 million and $39.0 million, respectively, in the non-current portion to be received beyond one year. During the six months ended June 30, 2021, the profit share component of our contract assets increased $49.7 million in anticipated profit share associated with 79,726 new certified loans for an average of $623 per loan, and a $16.9 million positive adjustment in the contract asset related to performance obligations satisfied in previous periods as a result of the continued positive portfolio performance due to lower than projected default frequency and severity stress and overall fewer claims for loss. This positive change in estimate of $16.9 million in the first six months of 2021 resulted in an increase in the contract asset, revenues and expected future cash flows from historical vintages. The Company received $24.9 million and $44.9 million, respectively, in profit share payments from our insurance carriers, during the three and six months ended June 30, 2021, an increase in collections over our previous quarters. The increase is primarily the result of an increase in certified loan volumes and our carriers releasing reserves established due to uncertainty related to the COVID-19 pandemic. More specifically, reserves were established to reflect the potential for higher defaults, increased severity of defaults and accelerated prepayments. These risks have not materialized as the portfolio has performed better than expected.

~~Contract Costs~~

~~The fulfillment costs associated with our contracts with customers do not meet the criteria for capitalization and therefore are expensed as incurred.~~

~~Disaggregation of Revenues~~

The Company disaggregates revenues by revenue source (i.e. program fee, profit share and claims administration service fee), and the level of disaggregation is presented in the condensed consolidated statement of operations and comprehensive income.

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~~OPEN LENDING CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note 7—~~Share-Based Compensation

~~Class B Common Unit Incentive Plan (the “Class B Plan”)~~

Prior to the Business Combination, commencing in 2013, the Board of Managers of Open Lending, LLC approved the Class B Unit Incentive Plan (the “Class B Plan”), which was a form of long-term compensation that provided for the issuance of ownership shares to service providers for purposes of retaining them and enabling such individuals to participate in the long-term growth and financial success of Open Lending, LLC. As a result of the Business Combination, the Board of Managers approved an acceleration of the awards granted in connection with the Class B Plan, to allow accelerated vesting of the units at the consummation of the Business Combination. On the date of the Closing, the Class B common units were converted into shares of Company common stock utilizing the exchange ratio established in the Business Combination Agreement, and the accelerated vesting of 571,983 awards resulted in $2.2 million of non-cash share-based compensation expense recorded to general and administrative expense during the three months ended June 30, 2020.

2020 Stock Option and Incentive Plan (the “2020 Plan”)

~~Prior to the closing of the Business Combination,~~The 2020 Plan, approved on June 9, 2020, ~~Nebula’s stockholders approved the 2020 Plan. The 2020 Plan~~ provides for the grant of stock options, stock appreciation rights, restricted stock units and other stock or cash-based awards. The Company initially reserved 9,693,750 shares, approximately 10% of the number of shares of its common stock outstanding upon the Closing Date, as the “Initial Limit” for the issuance of awards under the 2020 Plan. The 2020 Plan provides that beginning on January 1, 2021, the number of shares reserved and available for issuance under the plan will automatically increase each January ~~1, beginning on January 1, 2021,~~1st by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding December ~~31,~~31st, or the “Annual Increase.” This limit is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of June 30, ~~2021, the~~2022, there were 18,801,465 shares reserved and available for issuance under the 2020 Plan, ~~is 14,206,901,~~ which includes the 4% annual increase in ~~2021~~2022 less restricted stock units, performance stock units and stock options granted under the 2020 Plan.

Share-based compensation expense recorded for each type of award is as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in thousands)									(in thousands)
Time-Based Restricted Stock Units	Time-Based Restricted Stock Units	$	458	$	0	$	691	$	0	Time-Based Restricted Stock Units	$	1,005	$	458	$	1,912	$	691
Performance-Based Restricted Stock Units	Performance-Based Restricted Stock Units	276		0		553		0		Performance-Based Restricted Stock Units	(195)		276		11		553
Stock Options	Stock Options	193		0		384		0		Stock Options	178		193		346		384
Class B Common Units		0		2,189		0		2,676
Total share-based compensation expense	Total share-based compensation expense	$	927	$	2,189	$	1,628	$	2,676	Total share-based compensation expense	$	988	$	927	$	2,269	$	1,628

For performance-based restricted units, the Company evaluates the probability of achieving performance goals on a quarterly basis and recognizes share based compensation to the extent achievement of performance goals is considered probable. During the three months ended June 30, 2022 the Company determined certain performance goals are improbable of being achieved and recorded a reduction to share-based compensation of $0.3 million representing a change in estimate from previously reported share-based compensation. The Company evaluated the probability of achieving performance goals related to the performance-based restricted stock units awarded during the three months ended June 30, 2022, and determined that achievement of the performance goals is not probable, and accordingly, share-based compensation has not been recorded related to the awards.

During the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, share-based compensation expense was allocated to cost of services, general and administrative, selling and marketing, and research and development, generally based on the functional responsibilities of the ~~awarded unit holders~~award recipient in the accompanying condensed consolidated statements of operations ~~and comprehensive income~~ as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in thousands)									(in thousands)
General and administrative	General and administrative	$	773	$	2,189	$	1,327	$	2,633	General and administrative	$	643	$	773	$	1,565	$	1,327
Selling and marketing	Selling and marketing	91		0		182		12		Selling and marketing	150		91		330		182
Research and development										Research and development	111		34		206		62
Cost of services	Cost of services	29		0		57		25		Cost of services	84		29		168		57
Research and development		34		0		62		6
Total	Total	$	927	$	2,189	$	1,628	$	2,676	Total	$	988	$	927	$	2,269	$	1,628

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table provides information related to the Company’s share-based compensation award activity for the six months ended June 30, ~~2021:~~2022:

Time-Based
Restricted Stock Units Stock Options Performance-Based
Restricted Stock Units
Number of Awards Weighted Average Fair Value at Grant Date Number of Awards Weighted Average Exercise Price Number of Awards Weighted Average Fair Value at Grant Date
Outstanding as of December 31, 2020 109,920 $ 28.20 199,764 $ 33.56 0 $ 0
Granted 150,000 38.65 0 0 99,289 33.44
Vested/Exercised 0 0 0 0 0 0
Forfeited 0 0 0 0 0 0
Outstanding as of June 30, 2021 259,920 $ 34.23 199,764 $ 33.56 99,289 $ 33.44


	Time-Based Restricted Stock Units			Stock Options			Performance-Based Restricted Stock Units
	Number of Awards	Weighted Average Fair Value at Grant Date		Number of Awards	Weighted Average Exercise Price		Number of Awards	Weighted Average Fair Value at Grant Date
Outstanding as of December 31, 2021	231,625	$	35.17	194,348	$	33.56	99,289	$	33.44
Granted	352,177	20.80		—	—		139,662	16.11
Vested	(17,691)	30.95		—	—		—	—
Forfeited or expired	(22,752)	23.32		(8,440)	33.56		(4,874)	33.44
Outstanding as of June 30, 2022	543,359	$	26.49	185,908	$	33.56	234,077	$	23.10

The ~~unrecognized~~following table reflects the future share-based compensation expense for the outstanding awards at June 30, ~~2021 was as follows:~~2022:

Unrecognized Share-based Compensation Expense

Weighted Average Amortization Period

(in thousands)

Time-Based Restricted Stock Units

~~8,059~~11,837

~~3.46 years~~

~~Stock Options~~

~~2,710~~

~~3.50~~3.13 years

Performance-Based Restricted Stock Units

~~2,767~~4,296

2.07 years

Stock Options

1,800

2.50 years

Total unrecognized share-based compensation expense

~~13,536~~17,933

~~3.28~~2.81 years

Note 8—6—Net Income ~~(Loss)~~ per Share

Pursuant to the Restated and Amended Certificate of Incorporation and as a result of the reverse recapitalization, the Company has retrospectively adjusted the weighted average shares outstanding prior to June 10, 2020 to give effect to the exchange ratio used to determine the number of shares of common stock into which they were converted.

Basic net income ~~(loss)~~ per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income ~~(loss)~~ per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the applicable methods. The potentially dilutive common shares during the three and six months ended June 30, 2022 and 2021 were time-based restricted stock units. The potentially dilutive common shares during the same periods did not include unvested stock options ~~time-based restricted stock units,~~ and performance-based restricted stock units containing conditions that are based on the operating results of the Company, which are considered contingently issuable in the diluted net income (loss) calculation, and which are accounted for using the treasury stock method.unmet performance conditions. The potentially dilutive common shares are included in the calculation of diluted net income ~~(loss)~~ per share only when their effect is dilutive.

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table sets forth the computation of basic and diluted net income ~~(loss)~~ per share attributable to common stockholders for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in thousands, except shares and per share data)
Basic net income (loss) per share:
Numerator
Net income (loss) $ 75,966 $ (49,805) $ 88,828 $ (41,633)
Preferred distribution to redeemable convertible Series C preferred units 0 (214) 0 (40,689)
Non-cash adjustment to redemption amount of the redeemable convertible Series C preferred units 0 0 0 47,537
Net income (loss) attributable to common stockholders $ 75,966 $ (50,019) $ 88,828 $ (34,785)
Denominator
Weighted average common shares 126,230,752 49,547,284 126,515,343 43,589,168
Basic net income (loss) per share attributable to common stockholders $ 0.60 $ (1.01) $ 0.70 $ (0.80)
Diluted net income (loss) per share:
Numerator
Net income (loss) attributable to common stockholders $ 75,966 $ (50,019) $ 88,828 $ (34,785)
Denominator
Basic weighted average common shares 126,230,752 49,547,284 126,515,343 43,589,168
Dilutive effect of outstanding Time-Based Restricted Stock Units 43,445 0 38,739 0
Diluted weighted average common shares 126,274,197 49,547,284 126,554,082 43,589,168
Diluted net income (loss) per share attributable to common stockholders $ 0.60 $ (1.01) $ 0.70 $ (0.80)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except shares and per share data)
Basic net income per share:
Numerator
Net income attributable to common stockholders	$	23,126	$	75,966	$	46,280	$	88,828
Denominator
Weighted average common shares	126,221,689		126,230,752		126,218,710		126,515,343
Basic net income per share attributable to common stockholders	$	0.18	$	0.60	$	0.37	$	0.70

Diluted net income per share:
Numerator
Net income attributable to common stockholders	$	23,126	$	75,966	$	46,280	$	88,828
Denominator
Basic weighted average common shares	126,221,689		126,230,752		126,218,710		126,515,343
Dilutive effect of outstanding Time-Based Restricted Stock Units	677		43,445		405		38,739
Diluted weighted average common shares	126,222,366		126,274,197		126,219,115		126,554,082
Diluted net income per share attributable to common stockholders	$	0.18	$	0.60	$	0.37	$	0.70

The following potentially dilutive outstanding securities ~~for the three and six months ended~~as of June 30, ~~2021~~2022 and ~~2020~~2021 were excluded from the computation of diluted net income ~~(loss)~~ per share because their effect would have been anti-dilutive for the periods presented, or issuance of such shares is contingent upon the satisfaction of certain conditions ~~which~~that were not satisfied by the end of the periods:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Unvested Stock Options 199,764 0 199,764 0
Unvested Performance-Based Restricted Stock Units 99,289 0 99,289 0
Redeemable stock warrants 0 9,166,659 0 9,166,659
Contingency consideration 0 27,187,500 0 27,187,500
Retroactively restated Series C preferred units 0 14,278,603 0 14,278,603
Total 299,053 50,632,762 299,053 50,632,762


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Unvested Time-Based Restricted Stock Units	543,359	—	543,359	—
Unvested Performance-Based Restricted Stock Units	234,077	99,289	234,077	99,289
Unvested and not exercised Stock Options	185,908	199,764	185,908	199,764
Total	963,344	299,053	963,344	299,053

Note 9—7—Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, the Company uses a fair value hierarchy based on three

~~Table of Contents~~

~~OPEN LENDING CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following:

•Level 1 — Quoted prices in active markets for identical assets or liabilities;

•Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

Fair Value Hierarchy

The following table presents the placement in the fair value hierarchy of the Company’s debt, ~~instruments~~net of deferred financing costs at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021:


		Carrying value		Fair value measurement at June 30, 2021							Carrying value		Fair value measurement at June 30, 2022
				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		(in thousands)									(in thousands)
Liabilities:	Liabilities:									Liabilities:
Debt at fair value	Debt at fair value	$	147,643	$	0	$	147,643	$	0	Debt at fair value	$	144,865	$	—	$	144,865	$	—
Total	Total	$	147,643	$	0	$	147,643	$	0	Total	$	144,865	$	—	$	144,865	$	—


		Carrying value		Fair value measurement at December 31, 2020							Carrying value		Fair value measurement at December 31, 2021
				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		(in thousands)									(in thousands)
Liabilities:	Liabilities:									Liabilities:
Debt at fair value	Debt at fair value	$	157,747	$	0	$	157,747	$	0	Debt at fair value	$	146,260	$	—	$	146,260	$	—
Total	Total	$	157,747	$	0	$	157,747	$	0	Total	$	146,260	$	—	$	146,260	$	—

The carrying amount of the Company’s debt approximates its fair value due to its variable interest rate that is tied to the current LIBOR plus an applicable spread. The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of any level for the periods ended June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The Company does not have any long-lived asset which is being measured at fair value on a recurring basis.

Note ~~10—~~8—Income Taxes

During the three and six months ended June 30, ~~2021,~~2022, the Company recognized income tax expense of $8.6 million and $16.9 million, respectively, as compared to income tax expense of $23.3 million and $27.7 ~~million. For each of~~million, respectively, during the three and six months ended June 30, ~~2020, the Company recognized income tax expense of $1.4 million.~~2021. The effective tax rate for the three and six months ended June 30, ~~2021~~2022 was 27.1% and 26.7%, respectively, as compared to 23.4% and 23.8%, respectively ~~as compared to effective tax rate of (2.8)% and (3.4)% for~~during the three and six months ended June 30, ~~2020, respectively.~~2021. The Company’s income tax expense for the three and six months ended June 30, 2022 and June 30, 2021 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to ~~the early termination of the~~state income tax ~~receivable agreement,~~expenses and the officer’s compensation limitation under Section 162(m), and state income tax expenses. The Company’s income tax expense for the three and six months ended June 30, 2020 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to the flow-thru entity structure prior to the Business Combination.

~~Table of Contents~~

~~OPEN LENDING CORPORATION~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

162m.

As of June 30, ~~2021,~~2022, the Company has assessed whether it is more likely than not that ~~our~~its deferred tax assets will be realized. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, the reversal of its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years. The Company believes it is more-likely-than-not all deferred tax assets will be realized and has not recorded any valuation allowance as of June 30, ~~2021.~~2022.

~~Management of the~~The Company has evaluated the aggregate exposure for uncertain tax positions for all open tax years and concluded that the Company and its predecessor have no material uncertain tax positions as of June 30, ~~2021~~2022 or for any open tax years. ~~Tax~~When applicable, tax penalties and interest ~~if any, would be reflected~~are recognized within general and administrative expenses in the condensed consolidated statements of ~~operations and comprehensive income in other expenses.~~operations. The Company has not recorded any penalties or interest related to uncertain tax positions as of June 30, ~~2021~~2022 or for any open tax years.

~~Note 11—Tax Receivable Agreement~~

In connection with the Business Combination, the Company entered into the Tax Receivable Agreement (“TRA”). The TRA generally provides for the payment by the Company to the Open Lending LLC unitholders and Blocker’s sole shareholder (the “TRA holders”), as applicable, of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or are deemed to realize in certain circumstances) in periods after the Closing as a result of: (i) certain tax attributes of Blocker and/or Open Lending, LLC that existed prior to the Business Combination and were attributable to the Blocker; (ii) certain increases in the tax basis of Open Lending, LLC’s assets resulting from the Transactions; (iii) imputed interest deemed to be paid by the Company as a result of payments the Company makes under the Tax Receivable Agreement; and (iv) certain increases in tax basis resulting from payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings. The liability for the TRA was $92.4 million at December 31, 2020, which is shown as tax receivable agreement liability on the Company’s condensed consolidated balance sheets.

The Company entered into Amendment No. 1 (the “Amendment”) to the TRA effective April 9, 2021. The Amendment provides that in lieu of early termination payments, the TRA holders are instead entitled to payments equal to 40% of all Tax Benefit Payments (all definitions used herein and otherwise not defined herein shall have the meanings set forth in the Amendment) other than any Actual Interest Amounts that would be required to be paid by the Company under the TRA, using certain valuation. The Amendment provides the Company with the right to terminate and settle all present and future obligations under the TRA with a single payment by the Company to the TRA holders of $36.9 million (the “Early Termination Right”). Absent the Amendment and the exercise of the Early Termination Right, the Company anticipated making TRA payments totaling $92.4 million, undiscounted, over the life of the TRA.

On April 12, 2021, an independent committee of disinterested members of the Board of Directors approved the Company’s decision to exercise the Early Termination Right. With the early settlement of the TRA, the Company recognized a gain of $55.4 million, which is included in gain on extinguishment of tax receivable agreement on the Company’s condensed consolidated statements of operations and comprehensive income.

~~Note 12—Related Party Transactions~~

In the second quarter of 2021, cash payments were made to certain related parties totaling $18.5 million in connection with the early termination and settlement of the tax receivable agreement, as discussed in~~Note 11—Tax Receivable Agreement~~.

On March 25, 2020, Ross Jessup, the Company’s President, borrowed $6.0 million from Open Lending, LLC in accordance with the promissory note in place and the loan was paid in full by Mr. Jessup on March 30, 2020, with proceeds received as result of the non-liquidating distribution paid by Open Lending, LLC to its members.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information ~~which~~that management believes is relevant to an assessment and understanding of Open Lending Corporation’s condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto on Form 10-K for the year ended December 31, ~~2020.~~2021. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” set forth elsewhere in this Quarterly Report on Form 10-Q and our Annual ~~Report on Form 10-K.~~Report. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is intended to mean the business and operations of Open Lending Corporation, and its condensed consolidated subsidiaries.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our financial performance;

•changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

•expansion plans and opportunities;

•the impact of the relative strength of the overall economy, including its effect on unemployment, consumer spending and consumer demand for automotive products;

•the growth in loan volume from ~~Original Equipment Manufacturers (“OEM Captives”)~~our top ten automotive lenders relative to that of other automotive lenders, and associated concentration of risks;

•the costs of services in absolute dollars and as a percentage of ~~our program fee~~ revenue;

•general and administrative expenses in absolute dollars and as a percentage of revenue;

•selling and marketing expenses in absolute dollars and as a percentage of ~~program fee~~ revenue;

•research and development expenses in absolute dollars and as a percentage of revenue;

•the impact of projected operating cash flows and available cash on hand on our business operations in the future;

•the turnover in automotive lenders, as well as varying activation rates and volatility in usage of our Lenders Protection Platform (“LPP”) by automotive lenders;

•the outcome of any known and unknown litigation and regulatory proceedings, including such legal proceedings that may be instituted in connection with the Business Combination and transactions contemplated thereby;

•the ability to maintain the listing of our common stock on ~~NASDAQ;~~Nasdaq;

•our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and manage growth profitably;

•expenses associated with ~~Open Lending’s~~our growth as a result of demands on ~~its~~our operational, marketing, compliance and accounting infrastructure;

•regulatory agreements between ~~Open Lending~~us and state agencies regarding issues including automotive lender conduct and oversight and loan pricing;

•changes in applicable laws or regulations;

•applicable taxes, inflation, supply chain disruptions, including global hostilities and responses thereto, interest rates and the regulatory environment; and

•the effects of the ongoing COVID-19 pandemic on our business.

All forward-looking statements are based on information and estimates available to ~~the Company~~us at the time of this Quarterly Report on Form 10-Q and are not guarantees of future financial performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and our Annual ~~Report on Form 10-K.~~Report. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

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Business Overview

We are a leading provider of lending enablement and risk analytics to credit unions, regional banks and ~~the captive finance companies of OEM Captives.~~Original Equipment Manufacturers. Our clients, collectively referred to herein as automotive lenders, make automotive consumer loans to underserved near-prime and non-prime borrowers by harnessing our risk-based pricing models, powered by our proprietary data and real-time underwriting of automotive loan default insurance coverage from insurers. Since our inception in 2000, we have facilitated ~~over $11.1~~approximately $16.0 billion in automotive loans, accumulating over 20 years of proprietary data and developing over two million unique risk profiles. ~~We currently cater to 380 active automotive lenders.~~

We specialize in risk-based pricing and modeling and provide automated ~~decisioning-technology~~decision-technology for automotive lenders throughout the ~~United States.~~U.S. We believe that we address the financing needs of near-prime and non-prime borrowers, or borrowers with a credit bureau score between 560 and 699, who are underserved in the automotive finance industry. Traditional lenders focus on prime borrowers, where an efficient market has developed with interest rate competition that benefits borrowers. Independent finance companies focus on sub-prime borrowers. Borrowers that utilize the near-prime and non-prime automotive lending market have fewer lenders focused on loans with longer terms or higher advance rates. As a result, many near-prime and non-prime borrowers turn to sub-prime lenders, resulting in higher interest rate loan offerings than such ~~borrower's~~borrower’s credit profile often merits or warrants. We seek to make this market more competitive, resulting in more attractive loan terms.

Our flagship product, LPP, enables automotive lenders to make loans that are largely insured against losses from defaults. We have been developing and advancing the proprietary underwriting models used by LPP for ~~approximately~~over 20 years. We believe LPP provides significant benefits to our growing ecosystem of automotive lenders, automobile dealers, borrowers and insurers.

A key element of LPP is the ability to facilitate risk-based interest rates that are appropriate for each loan and lender and electronically submitted to our automotive lenders within approximately five seconds after we receive a loan application. Our interest rate pricing is customized to each automotive lender, reflecting the cost of capital, loan servicing costs, loan acquisition costs, expected recovery rates and target return on assets of each automotive lender. Using our risk models, we project monthly loan performance results, including expected losses and prepayments for automotive lenders that use LPP. The product of this process is a risk-based interest rate, inclusive of elements to recover all projected costs, program fees and insurance premiums, given the risk of the loan, to return a targeted return on asset goal.

We believe that our market opportunity is significant. The near-prime and non-prime automotive loan origination market is ~~$250~~estimated at $270 billion ~~annually, resulting in an approximately $14.4 billion annual revenue opportunity.~~annually. We are currently serving less than 1%2% of this market, providing a significant growth opportunity. In addition, our market opportunity related to the refinancing of near-prime and non-prime automotive loans is estimated at $40 billion annually.

Executive Overview

We facilitate certified loans and have achieved financial success by increasing our penetration of the near-prime and non-prime automotive loan market while diversifying our customer base and refining our data analysis capabilities.

We facilitated ~~46,408~~44,531 and ~~79,726~~88,475 certified loans during the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to ~~18,684~~46,408 and ~~46,708~~79,726 certified loans during the ~~three and six months ended June 30, 2020,~~same periods in 2021, respectively.

Total revenue was ~~$61.1~~$52.0 million and ~~$105.1 million for three and six months ended June 30, 2021, respectively, as compared to $22.1 million and $39.5 million during the three and six months ended June 30, 2020, respectively.~~

Operating income was $44.9 million and $74.3 million for three and six months ended June 30, 2021, respectively, as compared to $3.9 million and $12.9 million in the three and six months ended June 30, 2020, respectively.

~~Net income was $76.0 million and $88.8 million for three and six months ended June 30, 2021, respectively, as compared to net loss of $(49.8) million and $(41.6)~~$102.1 million for the three and six months ended June 30, ~~2020, respectively.~~

~~Adjusted EBITDA was $46.1~~2022, respectively, as compared to $61.1 million and ~~$76.3~~$105.1 million, respectively, during the same periods in 2021.

Operating income was $32.8 million and $65.1 million for the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to ~~$15.4~~$44.9 million and ~~$25.0~~$74.3 million, ~~during~~respectively, in same periods in 2021.

Net income was $23.1 million and $46.3 million for the three and six months ended June 30, ~~2020, respectively.~~2022, respectively, as compared to net income of $76.0 million and $88.8 million, respectively, for the same periods in 2021.

Adjusted EBITDA was $34.0 million and $67.8 million for the three and six months ended June 30, 2022, respectively, as compared to $46.1 million and $76.3 million, respectively, during the same periods in 2021. Information regarding use of Adjusted EBITDA, a non-GAAP measure, and a reconciliation of Adjusted EBITDA to net income, ~~(loss),~~ the most comparable GAAP measure, is included in “Non-GAAP Financial Measures.”

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Highlights

The table below summarizes all loans certified by lenders during the ~~total dollar value~~periods indicated.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Certified loans	44,531		46,408		88,475		79,726
Value of insured loans facilitated (in thousands)	$	1,293,525	$	1,170,461	$	2,475,898	$	1,950,822
Average loan size per certified loan	$	29,043	$	25,221	$	27,984	$	24,469
Number of contracts signed with automotive lenders	18		22		36		36

Historically, we have defined active lenders as certifying at least one loan during the preceding 12 months. As of ~~insured~~June 30, 2022 and 2021, we had 414 and 380 active lenders, respectively. The table below represents lender count information for lenders with certified loan activity during the periods indicated.


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Lenders certifying loans at the beginning of the period	377	328	396	354
New lenders (1)	10	20	31	33
Net change in lenders (2)	(16)	—	(31)	(25)
Lenders certifying loans at the end of the period	371	348	396	362

(1) New lenders using LPP to certify loans ~~facilitated and~~for the first time during the period.

(2) Net change in the number of ~~contracts signed with automotive~~ lenders previously onboarded and using LPP to certify loans during the ~~three and six months ended June 30, 2021 and 2020.~~

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in thousands, except number of contracts)
Value of insured loans facilitated (1) $ 1,170,461 $ 409,934 $ 1,950,822 $ 1,037,031
Number of contracts signed with automotive lenders 22 11 36 28

~~(1)Value~~period. Certain lenders experience periods of ~~insured loans are calculated as~~inactivity followed by periods of activity, causing the ~~total original loan amount of all loans certified for active institutions during each reporting~~lender count to fluctuate from period to period.

Key Performance Measures

We review several key performance measures, discussed below, to evaluate business and results, measure performance, identify trends, formulate plans and make strategic decisions. We believe that the presentation of such metrics is useful to our investors and counterparties because ~~they~~such metrics are used to measure and model the performance of companies such as ~~Open Lending,~~ours, with recurring revenue streams.

Certified Automotive Loans

We refer to “certified loans” as the number of loans facilitated through LPP during a given period. Additionally, we refer to loans with a one-time upfront program fee payment as “single-pay” loans. For certain loans, ~~and those~~the program fee is paid to us over ~~twelve~~12 monthly installments and we refer to these loans as “monthly-pay” loans.

Average Program Fee

We define “average program fee” as the total program fee revenue recognized for a period divided by the number of certified loans in that period.

Insurers’ ~~Aggregate~~ Underwriting Profit

We define “insurers’ ~~aggregate~~ underwriting profit” as the total underwriting profit expected to be received by insurers over the expected life of the insured loans.

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Insurers’ Earned Premium

We define “insurers’ earned premium” as the total insurance premium earned by insurers in a given period. Earned premiums were ~~$52.9~~$70.9 million and ~~$99.3~~$138.1 million, respectively, for the three and six months ended June 30, ~~2021~~2022 and ~~were $35.9~~$53.9 million and ~~$69.5~~$100.6 million for the ~~three and six months ended June 30, 2020.~~same periods in 2021, respectively.

Recent Developments

~~Term Loan due 2027~~

On March 11, 2020, the Company entered into a credit agreement with UBS A.G. as the administrative agent and the lenders from time to time party thereto (the “Credit Agreement”). Pursuant to the credit agreement, the lenders thereto funded a term loan (the “Term Loan due 2027”) in a principal amount of $170.0 million bearing an interest rate per annum of LIBOR plus 6.5% (subject to a LIBOR floor of 1%), with a maturity date in March 2027. The Term Loan due 2027 was retired by the Company paying off its outstanding principal and interest with proceeds from issuance of the Term Loan due 2026 and the Revolving Facility (both as defined below) in March 2021. The transaction was deemed as a debt extinguishment under ASC Topic 405-20, “Liabilities—Extinguishments of Liabilities,” and accordingly, the Company recognized a non-cash debt extinguishment loss of $8.8 million during the six months ended June 30, 2021, and is recorded under the caption loss on extinguishment of debt in the condensed consolidated statements of operations and comprehensive Income. The loss on debt

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extinguishment was calculated as the difference between the carrying amount of the debt and the price paid to retire the debt, which primarily consisted of the write off of the unamortized deferred financing costs related to the Term Loan due 2027.

~~New Credit Agreement—Term Loan due 2026 and Revolving Credit Facility~~

Interest under the Term Loan due 2026 and the Revolving Facility are, at the option of the Company, either at an Alternate Base rate (“ABR”) plus a spread ranging from 0.75% to 1.50%, or LIBOR plus a spread ranging from 1.75% to 2.50%. With respect to the ABR loans, interest will be payable at the end of each calendar quarter. With respect to LIBOR loans, interest will be payable at the end of the selected interest period. Additionally, there is a commitment fee payable at the end of each quarter at a rate per annum ranging from 0.200% to 0.275% based on the average daily unused portion of the Revolving Facility, and other customary letter of credit fees. Pursuant to the New Credit Agreement, the interest rate spreads and commitment fees increase or decrease in increments as our Funded Secured Debt/EBITDA ratio increase or decreases. As of June 30, 2021, both the Term Loan due 2026 and the Revolving Facility are subject to LIBOR of 0.098% plus a spread of 2.00% per annum, and we do not have an unused commitment balance under the Revolving Facility. In June 2021, the Company made a payment of $25.0 million to the outstanding balance of the Revolving Facility and has an unused commitment balance of $25.0 million under the Revolving Facility at June 30, 2021. Commitment fees will be accrued at 0.225% per annum on the unused commitment balance.

In connection with the issuance of the Term Loan due 2026 and the Revolving Facility, the Company incurred total deferred financing costs of $1.7 million, of which $1.2 million was allocated to the Term Loan due 2026 and $0.5 million was allocated to the Revolving Facility. The deferred financing costs were capitalized as a contra-liability against the principal balance of the loans and are amortized as interest expense using the effective interest method. As of June 30, 2021, the weighted average effective interest rate on our outstanding borrowings was 2.38%.

The New Credit Agreement contains a maximum total net leverage ratio financial covenant and a minimum fixed charge coverage ratio financial covenant that are tested quarterly starting with the quarter ending June 30, 2021. The maximum total net leverage ratio is 3.5 to 1.0 for periods on or prior to December 31, 2022, and then decreases to 3.0 to 1.0 after December 31, 2022. The minimum fixed charge coverage ratio is 1.25 to 1.0. As of June 30, 2021, we were in compliance with all required covenants under the New Credit Agreement.

~~Underwritten Public Offering~~

On April 6, 2021, we completed an underwritten public offering of 9,000,000 shares of our common stock at a public offering price of $34.00 per share. All shares were sold by existing stockholders, including Nebula Holdings, LLC and its affiliates, Bregal Sagemount and certain executive officers of the Company. The selling stockholders also granted the underwriters a 30-day option to purchase up to 1,350,000 additional shares of common stock. We did not issue any shares and did not receive any of the proceeds of the offering.

~~Share Repurchase~~

Pursuant to a Stock Repurchase Agreement, dated as of March 29, 2021, between Open Lending and the selling stockholders, we repurchased from the selling stockholders on April 6, 2021 an aggregate number of 612,745 shares of its common stock totaling $20.0 million at the same per share price paid by the underwriters to the selling stockholders in the offering. The $20.0 million stock repurchase was recorded in treasury stock at cost in April of 2021.

~~Tax Receivable Agreement Amendment~~

We entered into Amendment No. 1 (the “Amendment”) to the TRA effective April 9, 2021. The Amendment provides that in lieu of early termination payments, the TRA Holders will instead be entitled to payments equal to 40% of all Tax Benefit Payments (all definitions used here in and otherwise not defined here in shall have the meanings set forth in the Amendment) other than any Actual Interest Amounts that would be required to be paid by the us under the TRA, using certain valuation. The Amendment provides us with the right to terminate and settle all present and future obligations under the TRA with a single

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payment by us to the TRA Holders of $36.9 million (the “Early Termination Right”). Absent the Amendment and the exercise of the Early Termination Right, we anticipated making TRA payments totaling $92.4 million, undiscounted, over the life of the TRA.

On April 12, 2021, an independent committee of disinterested members of the Board of Directors approved our decision to exercise the Early Termination Right. As of June 30, 2021, we paid $36.9 million to terminate and settle the TRA liability and recognized a gain of $55.4 million, which is included in gain on extinguishment of tax receivable agreement on the Company’s condensed consolidated statements of operations and comprehensive income.

~~Third~~Fourth Insurance Carrier Partner

On ~~June 24, 2021, the Company~~May 2, 2022, we signed a ~~producer~~program management agreement with a ~~third~~fourth insurance carrier partner, ~~American National Lloyds~~Arch Specialty Insurance Company, ~~and ANPAC Louisiana Insurance Company, both affiliates~~a part of ~~American National~~Arch Capital Group ~~Inc, enabling both companies to be~~Ltd., who will act as an additional ~~providers~~provider of credit default insurance policies for LPP, from which ~~the Company expects to~~we can earn profit share revenue and claims administration ~~fees in the future. The Producer Agreement was subsequently amended to add American National Property and Casualty Company, an affiliate of American National Group, Inc., as an additional party.~~

~~COVID-19~~

The COVID-19 pandemic continues to create uncertainty regarding the U.S. and global economies and our operating results, financial condition and cash flows. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and continued spread of variants of COVID-19; the impact on our revenues, which are generated with automobile lenders and insurance company partners and driven by consumer demand for automobiles and automotive loans; extended closures of businesses, the effectiveness of the vaccine distribution program and the vaccines themselves; unemployment levels and the overall impact on our customer behavior, all of which are uncertain and cannot be predicted. The Company is diligently working to ensure that we can continue to operate with minimal disruption, mitigate the impact of the pandemic on our employees’ health and safety, and address potential business interruptions on ourselves and our customers. The Company believes that the COVID-19 pandemic, the mitigation efforts and the resulting economic impact have had, and may continue to have, an overall adverse effect on our business, results of operations and financial condition. The Company saw a reduction in loan applications and certified loans throughout the majority of 2020. As consumers and lenders have adjusted to the pandemic, application and certification levels have increased in 2021. Lenders’ forbearance programs, government stimulus packages, extended unemployment benefits and other government assistance have resulted in a reduction in expected defaults since the onset of the pandemic. As these programs end defaults may increase. The potential increase in defaults may impact our revenues and subsequent recovery as the automotive finance industry and overall economy recover. The Company continues to closely monitor the current macro environment, particularly monetary and fiscal policies.fees.

Key Factors Affecting Operating Results

Our future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including the growth in the number of financial institutions and transaction volume, competition, profit share assumptions and industry trends and general economic conditions.

Key factors affecting our operating results include the following:

Growth in the Number of ~~Financial Institutions~~Active Automotive Lenders

The growth trend in active automotive lenders using LPP is a critical ~~variable~~factor directly affecting revenue and financial results. It influences the number of loans funded on LPP and, therefore, the fees that we earn and the cost of the services that we provide. Growth in our active automotive lender relationships will depend on our ability to retain existing automotive lenders and add new automotive ~~lenders, and expand to new industry verticals.~~lenders.

Competition

We face competition to acquire and maintain automotive lenders as customers, as well as competition to ~~fund~~facilitate the funding of near-prime and non-prime auto loans. For LPP, which combines lending enablement, risk analytics, near-prime and non-prime auto loan performance data, real-time loan decisioning, risk-based pricing and auto loan default insurance, we do not believe there are any direct competitors. The emergence of direct competitors, providing risk analytics and loss mitigation, which are core elements of our business, could materially impact our ability to acquire and maintain automotive ~~lenders~~lender customers.

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The near-prime and non-prime lending market is highly fragmented and competitive. We face competition from a diverse landscape of consumer lenders, including traditional banks and credit unions, as well as alternative technology-enabled lenders. The emergence of other insurers, in competition with our insurers, could materially impact our business. ~~Increased competition for loans, which reduce the ability of our automotive lenders to source loan application flow and or capture loans, could also materially and adversely impact our business.~~

Profit Share Assumptions

We rely on assumptions to calculate the value of profit share revenue, which is our share of insurance partners’ underwriting profit. ~~To the extent these assumptions change, our profit share revenue will be adjusted.~~ For example, positive change in estimates associated with historical vintages generate an increase in our contract asset, additional revenues and future expected cash flows, while negative change in estimates generate a decrease in our contract asset, a reduction in revenues and future expected cash flows. To the extent these assumptions change, our profit share revenue will be adjusted. Please refer to “Critical Accounting Policies and Estimates” for more information on these assumptions.

Industry Trends and General Economic Conditions

Our results of operations ~~have in the past been fairly resilient to economic downturns but in the future~~ may be impacted by the relative strength of the overall economy and its effect on unemployment, consumer spending and consumer demand for automotive products. As general economic conditions improve or deteriorate, the amount of disposable income consumers have tends to fluctuate, which in turn impacts consumer spending levels and the willingness of consumers to take out loans to finance purchases. Specific economic factors such as inflation, interest rate levels, changes in monetary and related policies, market volatility, supply chain disruptions, consumer confidence, the impact of the pandemic ~~crisis~~ and, particularly, the unemployment rate also influence consumer spending and borrowing patterns.

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Concentration

Our three largest insurance ~~partner~~carrier partners accounted for ~~the vast majority~~38%, 11% and 11% of our ~~profit share and claims administration service fee~~total revenue induring the three months ended June 30, 2022, and 38%, 13% and 10% during the six months ended June 30, 2022. Our two largest insurance carriers accounted for 43% and 24% of the Company’s total revenue during the three months ended June 30, 2021, and ~~2020, respectively.~~accounted for 43% and 23% for the six months ended June 30, 2021. Termination or disruption of ~~this relationship~~these relationships could materially and adversely impact our revenue.

~~Basis of Presentation~~

~~We conduct business through one operating segment, and we operate in one geographic region, the United States. See~~ ~~Note 2—Summary of Significant Accounting and Reporting Policies and Recent Developments~~ ~~of the accompanying condensed consolidated financial statements for more information.~~

Components of Results of Operations

Total Revenues

Our revenue is generated through three streams: (i) profit share paid to us by insurance partners, (ii) program fees paid to us by lenders ~~(ii) profit share~~ and (iii) claims administration service fees paid to us by insurance partners.

~~Program fees~~. Program fees are paid by automotive lenders for use of our LPP and analytics. These fees are based on a percentage of each certified loan’s original principal balance and are recognized as revenue upfront upon receipt of the loan by the consumer. The fee percentage rate varies by type of loan. For loans with a one-time upfront payment, there is a sliding scale of rates representing volume discounts to the lender and with fees generally capped at $600 per loan. This cap may vary for certain large volume lenders. For loans with 12 equal, monthly installments, the fee paid by the lender is a flat 3% of the total amount of the loan and is not capped.

Profit share. Profit share represents our participation in the underwriting profit of third-party insurance partners who provide lenders with credit default insurance on loans the lenders make using LPP. We receive a percentage of the aggregate monthly insurance underwriting profit. Monthly insurance underwriting profit is calculated as the monthly earned premium less expenses and losses (including reserves for incurred but not reported losses), with losses accrued and carried forward for future profit share calculations.

Program fees. Program fees are paid by automotive lenders for the use of LPP, which provides loan analytics solutions and automated issuance of credit default insurance with third-party insurance providers. These fees are based on a percentage of each certified loan’s original principal balance and are recognized as revenue upfront upon receipt of the loan by the consumer. The fee percentage rate varies by type of loan. For loans with a one-time upfront payment, there is a sliding scale of rates representing volume discounts to the lender with fees generally capped at $600 per loan. This cap may vary for certain large volume lenders. For monthly pay loans, the fee paid by the lender is a flat 3% of the total amount of the loan and is not capped.

Claims administration service fees. Claims administration service fees are paid to us by third-party insurers for credit default insurance claims adjudication services performed by our subsidiary Insurance Administrative Services, LLC on its insured servicing portfolio. The administration fee is equal to 3% of the monthly insurance earned premium for as long as the loan remains outstanding.

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Cost of Services and Operating Expenses

Cost of services.Cost of services primarily consists of fees paid to third party ~~resellers~~partners for lead-generation efforts, compensation and benefits expenses relating to employees engaged in lenders’ services and claims administration activities, fees paid for actuarial services related to the development of the monthly premium program, ~~and~~ fees for integration with loan origination systems of automotive ~~lenders. We~~lenders and fees paid to credit bureaus and data service providers for credit applicant data. In the near to intermediate term, we generally expect cost of services to increase ~~in absolute dollars as the total number of certified loans continues to grow; however, we expect the cost of services to remain relatively constant in the near to immediate term~~ as a percentage of our program fee ~~revenue.~~revenue as we continue to expand our third-party partner relationships.

General and administrative expenses.General and administrative expenses are comprised primarily of expenses relating to employee compensation and benefits, non-cash share-based compensation, travel, meals and entertainment expenses, ITdata and software expenses and professional and consulting fees. In the near to intermediate term, we expect general and administrative expenses to increase in absolute dollar terms and as a percentage of revenue as we continue to implement the internal control, compliance and reporting requirements of public companies. In the intermediate term, we ex~~pect general and administrative expenses to continue to increase in absolute dollars as the total number of certified loans continues to grow.~~remain relatively constant.

Selling and marketing expenses.Selling and marketing expenses consist primarily of ~~compensatio~~ncompensation and benefits of employees engaged in selling and marketing activities. We generally expect selling and marketing expenses to increase ~~in absolute dollars~~ as ~~the total number~~a percentage of ~~certified loans continues to grow in the long term; however, we expect selling and marketing expenses to remain relatively constant~~our program fee revenue in the near to immediate term as ~~a percentage of program fee revenue.~~we continue to expand our sales and marketing team.

Research and development expenses.Research and development expenses primarily consist of employee compensation and benefits expenses for employees engaged in ongoing research and development of our software technology platform. We generally expect our research and development ~~expenses~~costs to increase in absolute dollars as our business continues to grow.

Other Income (Expense)

Interest expense. Interest expense primarily includes interest payments and the amortization of deferred financing costs in connection with the issuance of the debt.

~~Gain on extinguishment of tax receivable agreement.~~ ~~Gain on extinguishment of tax receivable agreement is related to the early termination and settlement of the TRA to the TRA holders.~~

Loss on extinguishment of debt. Loss on extinguishment of debt primarily reflects unamortized deferred financing costs, which were written off in connection with the refinancing of our Term Loan due 2027 on March 19, 2021.

~~Change in fair value of contingent consideration.~~ Change in fair value of contingent consideration reflects the non-cash impact of changes in the fair value of Company common stock expected to be issued as contingent consideration in connection with our Business Combination on June 10, 2020. The fair value of contingent consideration is based on a Monte Carlo simulation of the Company’s common stock as compared to certain market share price milestones, and is primarily based on our peer group due to our limited history, as well as our future implied volatility, a significant unobservable input. The change in the estimated fair value of contingent consideration was driven by the change in estimated fair value from June 10, 2020 through June 30, 2020.

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Results of Operations

The following table sets forth our results of operations for the ~~three and six months ended June 30, 2021 and 2020:~~periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended June 30,								Six Months Ended June 30,
		2021		2020		% Change		2021		2020			% Change			2022		2021			% Change		2022		2021		% Change
		($ in thousands)										($ in thousands)
Revenue	Revenue														Revenue
Profit share															Profit share	$	29,157	$	38,842		(25)	%	$	57,467	$	66,572	(14)	%
Program fees	Program fees	$	20,597	$	8,793	134	%	$	35,508	$	21,505		65	%	Program fees	20,731		20,597			1	%	40,457		35,508		14	%
Profit share		38,842		12,163		219	%	66,572		15,938			318	%
Claims administration service fees		1,686		1,111		52	%	3,053		2,054			49	%
Claims administration and other service fees															Claims administration and other service fees	2,156		1,686			28	%	4,188		3,053		37	%
Total revenue	Total revenue	61,125		22,067		177	%	105,133		39,497			166	%	Total revenue	52,044		61,125			(15)	%	102,112		105,133		(3)	%
Cost of services	Cost of services	4,140		1,827		127	%	7,502		4,322			74	%	Cost of services	5,085		4,140			23	%	9,873		7,502		32	%
Gross profit	Gross profit	56,985		20,240		182	%	97,631		35,175			178	%	Gross profit	46,959		56,985			(18)	%	92,239		97,631		(6)	%
Operating expenses	Operating expenses														Operating expenses
General and administrative	General and administrative	8,381		14,650		(43)	%	16,593		18,218			(9)	%	General and administrative	7,968		8,381			(5)	%	15,450		16,593		(7)	%
Selling and marketing	Selling and marketing	2,954		1,295		128	%	5,351		3,373			59	%	Selling and marketing	3,994		2,954			35	%	7,727		5,351		44	%
Research and development	Research and development	773		349		121	%	1,364		707			93	%	Research and development	2,188		773			183	%	4,011		1,364		194	%
Total operating expenses															Total operating expenses	14,150		12,108			17	%	27,188		23,308		17	%
Operating income	Operating income	44,877		3,946		1037	%	74,323		12,877			477	%	Operating income	32,809		44,877			(27)	%	65,051		74,323		(12)	%

Interest expense	Interest expense	(1,122)		(3,644)		(69)	%	(4,411)		(4,408)			—	%	Interest expense	(1,124)		(1,122)			—	%	(1,927)		(4,411)		(56)	%
Interest income	Interest income	58		44		32	%	142		61			133	%	Interest income	22		58			(62)	%	47		142		(67)	%
Gain on extinguishment of tax receivable agreement	Gain on extinguishment of tax receivable agreement	55,422		—		100	%	55,422		—			100	%	Gain on extinguishment of tax receivable agreement	—		55,422			(100)	%	—		55,422		(100)	%
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		—	%	(8,778)		—			(100)	%	Loss on extinguishment of debt	—		—			—	%	—		(8,778)		(100)	%
Change in fair value of contingent consideration		—		(48,802)		(100)	%	—		(48,802)			(100)	%
Other (expense) income		(2)		3		(167)	%	(133)		3			(4,533)	%
Income (loss) before income taxes		99,233		(48,453)		(305)	%	116,565		(40,269)			(389)	%
Provision for income taxes		23,267		1,352		1,621	%	27,737		1,364			1,934	%
Net income (loss) and comprehensive income (loss)		$	75,966	$	(49,805)	(253)	%	$	88,828	$	(41,633)		(313)	%
Other expense															Other expense	—		(2)			(100)	%	—		(133)		(100)	%
Income before income taxes															Income before income taxes	31,707		99,233			(68)	%	63,171		116,565		(46)	%
Income tax expense															Income tax expense	8,581		23,267			(63)	%	16,891		27,737		(39)	%
Net income															Net income	$	23,126	$	75,966		(70)	%	$	46,280	$	88,828	(48)	%

Key Performance Measures

The following table sets forth key performance measures for the ~~three and six months ended June 30, 2021 and 2020:~~periods indicated:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2021		2020		% Change		2021		2020		% Change			2022		2021		% Change		2022		2021		% Change

Certified loans	Certified loans	46,408		18,684		148	%	79,726		46,708		71	%	Certified loans	44,531		46,408		(4)	%	88,475		79,726		11	%
Single-pay	Single-pay	41,156		14,480		184	%	70,098		37,916		85	%	Single-pay	39,526		41,156		(4)	%	79,087		70,098		13	%
Monthly-pay	Monthly-pay	5,252		4,204		25	%	9,628		8,792		10	%	Monthly-pay	5,005		5,252		(5)	%	9,388		9,628		(2)	%
Average program fees	Average program fees	$	444	$	471	(6)	%	$	445	$	460	(3)	%	Average program fees	$	466	$	444	5	%	$	457	$	445	3	%
Single-pay	Single-pay	$	415	$	434	(4)	%	$	416	$	430	(3)	%	Single-pay	$	427	$	415	3	%	$	423	$	416	2	%
Monthly-pay	Monthly-pay	$	673	$	616	9	%	$	660	$	613	8	%	Monthly-pay	$	768	$	673	14	%	$	743	$	660	13	%

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Comparison of Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021

Revenue


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		% Change		2021		2020		% Change			2022		2021			2022		2021
		($ in thousands)
Program fees		$	20,597	$	8,793	134	%	$	35,508	$	21,505	65	%
															(in thousands)
Profit share	Profit share													Profit share
New certified loan originations	New certified loan originations	27,017		13,105		106	%	49,673		28,918		72	%	New certified loan originations	$	26,333	$	27,017		$	52,002	$	49,673
Change in estimated future revenues	Change in estimated future revenues	11,825		(942)		1,355	%	16,899		(12,980)		230	%	Change in estimated future revenues	2,824		11,825			5,465		16,899
Total profit share	Total profit share	38,842		12,163		219	%	66,572		15,938		318	%	Total profit share	29,157		38,842			57,467		66,572

Claims administration service fees		1,686		1,111		52	%	3,053		2,054		49	%
Program fees														Program fees	20,731		20,597			40,457		35,508

Claims administration and other service fees														Claims administration and other service fees	2,156		1,686			4,188		3,053
Total revenue	Total revenue	$	61,125	$	22,067	177	%	$	105,133	$	39,497	166	%	Total revenue	$	52,044	$	61,125		$	102,112	$	105,133

Total revenue ~~increased~~ decreased by ~~$39.1 million and $65.6~~$9.1 million, or ~~177% and 166%~~15%, ~~respectively, for~~during the three ~~and~~months ended June 30, 2022, as compared to the same period last year, driven primarily by a $9.0 million decrease in estimated future revenue on loans originated in historic vintages associated with changes in expected portfolio performance between periods.

Total revenue decreased by $3.0 million, or 3%, during the six months ended June 30, ~~2021,~~2022, as compared to the same period in 2021, driven primarily by the $11.4 million decrease in estimated future revenue on loans originated in historic vintages associated with changes in expected portfolio performance between periods ~~in 2020, driven~~and offset by anthe $2.3 million increase in anticipated profit share associated with new certified loan originations, as well as a $4.9 million increase in program fees and a $1.1 million increase in claims ~~administrative revenues on new originations~~administration service fees as compared to the same period in 2021.

Profit share revenue decreased by $9.7 million and ~~the change in estimated future revenues on historical vintages. As the loan default rate, default severity~~$9.1 million, or 25% and ~~prepayment rate continued to improve~~14%, during the three and six months ended June 30, ~~2021, our anticipated profit share on historic business increased.~~

~~Program fees revenue increased by $11.8 million and $14.0 million, or 134% and 65%,~~2022, respectively, ~~for the three and six months ended June 30, 2021,~~ as compared to the same periods in ~~2020. The increases were driven by 148% and 71% increases in certified loan volume during the three and six months ended June 30, 2021 as compared to the prior year periods, respectively.~~

~~Profit share revenue increased by $26.7 million and $50.6 million, or 219% and 318%, respectively, during the three and six months ended June 30, 2021, as compared to the same periods in 2020.~~2021. During the three months ended June 30, ~~2021,~~2022, we recorded $26.3 million in anticipated profit share associated with 44,531 certified loans for an average of $591 per loan as compared to $27.0 million in anticipated profit share associated with 46,408 ~~new~~ certified loans for an average of $582 per ~~new certified loan, as compared to $13.1 million recorded in anticipated profit share, associated with 18,684 new certified loans, for an average of $701 per new certified~~ loan during the three months ended June 30, 2020. In April 2021, we removed the vehicle value discount established as part of our underwriting changes implemented at the onset of COVID-19, which had the effect of increasing credit default insurance premiums and corresponding profit share during the pandemic by approximately 15% per certified loan. As a result of this underwriting change, in April 2021, our average profit share per certified loan decreased in the second quarter 2021 and is comparable to pre-COVID-19 profit share unit economics. In addition, this change had a positive impact by increasing our closure rates on certified loans in second quarter 2021. During the six months ended June 30, ~~2021,~~2022, we recorded $52.0 million in anticipated profit share associated with 88,475 certified loans for an average of $588 per loan as compared to $49.7 million in anticipated profit share associated with 79,726 ~~new~~ certified loans for an average of $623 per ~~new certified loan, as compared to $28.9 million in anticipated profit share associated with 46,708 certified loans for an average of $619 per new certified~~ loan during the six months ended June 30, ~~2020.~~2021.

In addition, during the three and six months ended June 30, ~~2021,~~2022, we recorded $2.8 million and $5.5 million, respectively, in estimated future revenue on business in historic vintages as a result of lower than anticipated claims and severity of losses, as compared to $11.8 million and $16.9 million ~~respectively,~~ in estimated future ~~profit share~~revenue on business ~~written~~ in ~~historic periods, as compared to a $0.9 million reduction and a $13.0 million reduction, respectively, in estimated future profit share on~~ historic vintages during the three and six months ended June 30, ~~2020. The positive adjustment during~~2021, respectively.

Program fees revenue increased by $0.1 million and $4.9 million or 1% and 14%, for the three and six months ended June 30, ~~2021 resulted~~2022, respectively, as compared to the same periods in 2021. The increase in program fee revenue for the three months ended June 30, 2022 was driven by higher unit economics per certified loan, offset by a ~~$12.8 million change quarter over quarter~~4% decrease in certified loan volume, as compared to the prior year period. The increase in program fee revenue for the six months ended June 30, 2022 was driven by an 11% increase in certified loan volumes and ~~$29.9 million change~~by higher unit economics per certified loan, as compared to the prior year over year and represents the continued improvement of our portfolio performance from a risk perspective related to defaults, severity of defaults and prepayments over what we anticipated last year when the COVID-19 pandemic began. This positive adjustments in anticipated future profit share is a change in estimated variable consideration in accordance with ASC 606 and represents additional revenue and expected cash flow from historical vintages as a result of better than expected performance from a risk perspective.period.

Revenue from claims administration and other service fees, which primarily represents 3% of our insurance partners’ annual earned premium, increased by ~~$0.6~~$0.5 million and $1.1 million, or ~~52%,~~28% and ~~$1.0 million, or 49%,~~37% for the three and six months ended June 30, ~~2021~~2022, as compared to the same periods in the prior year, ~~driven by 47%~~due to 32% and ~~43%~~37% increases in total earned ~~premiums and 148% and 71% increases in new loan certifications, as compared to the same periods in the prior year.~~premiums.

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Cost of Services, Gross Profit and Gross Margin


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			% Change		2021			2020			% Change			2022			2021			2022			2021
		(S in thousands)																	($ in thousands)
Total revenue	Total revenue	$	61,125		$	22,067		177	%	$	105,133		$	39,497		166	%	Total revenue	$	52,044		$	61,125		$	102,112		$	105,133
Cost of services	Cost of services	4,140			1,827			127	%	7,502			4,322			74	%	Cost of services	5,085			4,140			9,873			7,502
Gross profit	Gross profit	$	56,985		$	20,240		182	%	$	97,631		$	35,175		178	%	Gross profit	$	46,959		$	56,985		$	92,239		$	97,631
Gross margin	Gross margin	93		%	92		%	1	%	93		%	89		%	4	%	Gross margin	90		%	93		%	90		%	93		%

~~Gross profit~~Cost of services increased by ~~$36.7~~$1.0 million, or ~~182%~~23%, and ~~$62.5~~$2.3 million, or ~~178%~~32%, during the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to the same periods in ~~2020,~~the prior year, primarily due to increases in employee compensation costs associated with the growth of our implementation and claims administration organizations, increases in fees paid to third party partners for lead-generation efforts, increases in actuarial fees, and increases in credit applicant data fees.

Gross profit decreased by $10.0 million, or 18%, during the three months ended June 30, 2022, as compared to the same period in 2021, driven primarily by ~~an increase~~a decrease in anticipated profit share on historic business as discussed above. Gross profit decreased by $5.4 million, or 6%, during the six months ended June 30, 2022, as compared to the same period in 2021, driven primarily by a decrease in anticipated profit share on historic business as discussed above, partially offset by increases in program fees and claims ~~administrative revenues on new originations and change in estimated future revenues based on historical vintages as discussed above.~~administration service fees.

Operating Expenses, Operating Income and Operating Margin


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			% Change		2021			2020			% Change			2022			2021				2022			2021
		($ in thousands)																	($ in thousands)
Total revenue	Total revenue	$	61,125		$	22,067		177	%	$	105,133		$	39,497		166	%	Total revenue	$	52,044		$	61,125			$	102,112		$	105,133
Gross profit	Gross profit	56,985			20,240			182	%	97,631			35,175			178	%	Gross profit	46,959			56,985				92,239			97,631
Operating expenses	Operating expenses																	Operating expenses
General and administrative	General and administrative	8,381			14,650			(43)	%	16,593			18,218			(9)	%	General and administrative	7,968			8,381				15,450			16,593
Selling and marketing	Selling and marketing	2,954			1,295			128	%	5,351			3,373			59	%	Selling and marketing	3,994			2,954				7,727			5,351
Research and development	Research and development	773			349			121	%	1,364			707			93	%	Research and development	2,188			773				4,011			1,364
Total operating expenses																		Total operating expenses	14,150			12,108				27,188			23,308
Operating income	Operating income	$	44,877		$	3,946		1037	%	$	74,323		$	12,877		477	%	Operating income	$	32,809		$	44,877			$	65,051		$	74,323
Operating margin	Operating margin	73		%	18		%	55	%	71		%	33		%	38	%	Operating margin	63		%	73		%		64		%	71		%

General and administrative expenses decreased by ~~$6.3~~$0.4 million, or ~~43%~~5%, during the three months ended June 30, 2022 as compared to the same period last year, driven primarily by decreases in performance-based employee compensation expenses. General and ~~$1.6~~administrative expenses decreased by $1.1 million, or 9%7%, during the six months ended June 30, 2022, as compared to the same period last year, driven primarily by $1.3 million of decreases in professional fees as we reduce our reliance on outside consultants in conducting financial reporting and compliance functions, and partially offset by $0.4 million in increased travel expenses associated with the lifting of related restrictions.

Selling and marketing expenses increased by $1.0 million, or 35%, during the three months ended June 30, 2022, as compared to the same period last year, driven primarily by increases in travel and business development associated with increased levels of activity as a result of the lifting of related restrictions. Selling and marketing expenses increased by $2.4 million, or 44%, during the six months ended June 30, 2022, as compared to the prior year period, primarily due to an increase in employee compensation and recruiting costs associated with the growth of our sales and marketing organization, as well as increases in expenses related to travel and business development associated with increased levels of activity as a result of the lifting of related restrictions.

Research and development expenses increased by $1.4 million, or 183%, and $2.6 million, or 194%, during the three and six months ended June 30, ~~2021,~~2022, respectively, as compared to the same periods ~~last year.~~ in the prior year, primarily due to increases in employee compensation costs associated with the growth of our research and development organization to support continued enhancements to our flagship product.

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Operating income decreased by $12.1 million, or 27%, for the three months ended June 30, 2022, as compared to the prior year period, primarily driven by decreased estimated profit share on historic business, as well as increases in cost of services, and operating expenses related to selling and marketing and research and development as discussed above.

Operating income decreased by $9.3 million, or 12%, for the six months ended June 30, 2022, as compared to the prior year period, primarily driven by a decrease in estimated profit share on historic business as well as increases in cost of services and operating expenses, offset by increases in anticipated profit share associated with new certified loan originations as well as increases in program fees and claims administration service fees.

Interest Expense

During the three and six months ended June 30, 2020, general and administrative expenses included a $9.1 million transaction bonus awarded to key employees and directors of Open Lending, LLC and $2.2 million of non-cash charges incurred in connection with the accelerated vesting of share-based awards, as a result of the Business Combination. Excluding the impact of these one-time charges associated with the Business Combination in the prior year, we experienced a quarter over quarter increase of $5.0 million in general and administrative expenses in 2021, which is primarily attributable to $1.6 million in professional and consulting fees associated with continuing efforts to enhance internal controls, financial reporting and compliance functions,2022, interest expense was $1.1 million ~~in employee compensation~~ and ~~benefits~~$1.9 million, respectively, as compared to $1.1 million and ~~$0.8~~$4.4 million ~~in share-based compensation as we continue to expand our business and $0.6 million increase in Directors and Officers insurance.~~

~~Selling and marketing expenses increased by $1.7 million, or 128%, and $2.0 million, or 59%,~~ during the three and six months ended June 30, 2021, ~~respectively,~~respectively. Interest expense decreased $2.5 million or 56% for the six months ended June 30, 2022, as compared to the ~~prior year periods, primarily due to an increase in employee compensation and commissions costs driven by both increased headcounts in sales and account management and increased sales.~~

~~Research and development expenses increased by $0.4 million and $0.7 million, or 121% and 93%, during the three and~~ six months ended June 30, 2021, ~~respectively,~~ as ~~compared to the same periods in prior year, due to an increase in headcount~~a result of lower borrowing costs ~~associated with the software development personnel.~~

~~Operating income for the three~~ and six months ended June 30, 2021 increased by $40.9 million and $61.4 million, or 1037% and 477%, respectively, as compared to the prior year periods, driven by an increase in anticipated profit share from new originations and estimated future underwriting profits on historic business.lower outstanding debt balances during 2022.

Income Taxes

During the three and six months ended June 30, ~~2021,~~2022, we recognized income tax expense of $8.6 million and $16.9 million, respectively, as compared to $23.3 million and $27.7 million ~~respectively, as compared to income~~for the same periods in 2021. The effective tax ~~expense of $1.4 million during each of~~rate for the three and six months ended June 30, ~~2020.~~

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~~For the three months ended June 30, 2021 our effective tax rate~~2022 was ~~23.4%~~27.1% and 26.7%, respectively, as compared to an effective tax rate of ~~(2.8)%~~23.4% and 23.8%, respectively, for the same periods in 2021. Income tax expense decreased $14.7 million, or 63% and $10.8 million, or 39% during the three ~~months~~and six ended June 30, ~~2020. Our effective tax rate for the six months ended June 30, 2021 was 23.8%~~2022, respectively, as compared to the same periods in 2021, primarily as a result of the 68% and 46% decrease in income before income taxes offset by an ~~effective tax rate of (3.4)% for the six months ended June 30, 2020. The change~~increase in the effective tax ~~rate is primarily due to the taxable entity structure adopted in conjunction with the Business Combination that was consummated on June 10, 2020.~~rate.

Liquidity and Capital Resources

Cash Flow and Liquidity Analysis

We assess liquidity primarily in terms of our ability to generate cash to fund operating and investing activities. A significant portion of our cash from operating activities is derived from our profit share arrangements with our insurance partners, which are subject to judgments and assumptions and is, therefore, subject to variability. We believe that our existing cash resources and revolving credit facility will provide sufficient liquidity to fund our near-term working capital needs. We regularly evaluate alternatives for managing our capital structure and liquidity profile in consideration of expected cash flows, growth and operating capital requirements and capital market conditions. Refer to “Critical Accounting Policies and Estimates” in this Quarterly Report on Form 10-Q and our Annual Report for a full description of the related estimates, assumptions, and judgments.

Based on our assessment of the underlying provisions and circumstances of our contractual obligations, other than the risks that we and other similarly situated companies face with respect to the condition of the capital markets (as described in “Risk Factors” in our Annual Report), there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur that would have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.

The following table provides a summary of cash flow data:


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
		(in thousands)					(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	32,983	$	12,006	Net cash provided by operating activities	$	53,587	$	32,983
Net cash used in investing activities	Net cash used in investing activities	(841)		(424)		Net cash used in investing activities	(364)		(841)
Net cash (used in) provided by financing activities		(76,245)		7,184
Net cash used in financing activities						Net cash used in financing activities	(1,625)		(76,245)

Cash Flows from Operating Activities

Our cash flows provided by operating activities ~~primarily consists of operating~~reflect net income ~~and adjustments~~adjusted for ~~net~~certain non-cash items and changes in operating assets and ~~liabilities, including changes~~liabilities.

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The following table summarizes the non-cash adjustments in ~~accounts receivable, prepaid expenses, contract assets, accounts payable, income tax payable/receivable and accrued expenses.~~the operating activities in the statement of cash flows:

~~Our net~~


	Six Months Ended June 30,
	2022		2021
	(in thousands)
Net income	$	46,280	$	88,828
Deferred income taxes and other non-cash expenses	2,170		19,336
Non-cash losses	—		(46,644)
Change in contract assets	6,208		(22,591)
Change in other assets and liabilities	(1,071)		(5,946)
Net cash provided by operating activities	$	53,587	$	32,983

Net cash ~~from~~provided by operating activities for the six months ended June 30, ~~2021 was $33.0 million. For~~2022 is primarily attributable to operating income increased by the net change in contract assets, other assets and liabilities and reduced by income taxes paid. The increase in net cash provided by operating activities of $20.6 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, ~~net cash provided by operating activities~~ was primarily attributable to higher profit share payments from insurance carriers and increased cash inflows from program fees ~~and~~related to higher ~~profit share payments from our insurance carriers, primarily as a result of an increased~~ certified loan volume and our carriers releasing reserves established due to uncertainty related to the COVID-19 pandemic last year and the continued improved performance of our portfolio. In addition, net income was increased by an $8.8 million non-cash loss on extinguishment of debt which was offset by a $55.4 million gain on the extinguishment of the TRA, a $22.6 million increase in contract assets and a $3.2 million increase in accounts receivable.

Our net cash from operating activities for the six months ended June 30, 2020 was $12.0 million. Operating cash flow was driven primarily by net income excluding the impact of fair value adjustment of contingent considerations recorded. Cash provided by operating activities was impacted by a $0.2 million decrease in contract assets which was partially offset by $1.1 million in deferred transaction costs.volume.

Cash Flows from Investing Activities

For the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, net cash used in investing activities was ~~$0.8~~$0.4 million and ~~$0.4~~$0.8 million, respectively. For the six months ended June 30, 2022 and 2021, the investments primarily related to computer software developed for internal use. ~~For the six months ended June 30, 2020, the investments primarily consisted of purchases of furniture and equipment.~~

Cash Flows from Financing Activities

Our cash flows used in and provided by ~~and used in~~ financing activities primarily consist of ~~proceeds from debt,~~ payments of debt, ~~and~~ deferred financing costs ~~member distributions~~ and ~~equity recapitalization transactions.~~proceeds from debt.

For the six months ended June 30, 2022, net cash used in financing activities was $1.6 million and is related to principal payments of our Term Loan due 2026.

For the six months ended June 30, 2021, net cash used in financing activities was $76.2 million. The cash used primarily consisted of $36.9 million in early termination and settlement of the tax receivable agreement, $20.0 million related to our repurchase of 612,745 shares of our common stock held in treasury stock and debt principal payments of $167.6 million, primarily related to the payment in full of the Term Loan due 2027. In addition, we paid down our ~~revolving facility~~Revolving Facility by $25.0 million. The cash inflow includes $175.0 million in proceeds associated with our New Credit Agreement entered into March 19, 2021 which refinanced our existing debt, less $1.7 million in deferred financing costs associated with this facility.

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For the six months ended June 30, 2020, net cash provided by financing activities was $7.2 million. The cash inflow consisted of $170.0 million in proceeds associated with the Credit Agreement entered into March 1, 2020 less $9.8 million in deferred financing costs, which was partially offset by a $135.4 million distribution to Open Lending, LLC’s unitholders, $13.3 million in connection with our recapitalization, net of transaction costs, and $4.4 million of debt principal payments.

Debt

As of June 30, ~~2021, our long-term debt consists~~2022, we had outstanding amounts of ~~a $124.2~~$121.1 million related to the Term Loan due in 2026 and $25.0 million ~~under~~related to the Revolving Facility under the New Credit Agreement that we entered into on March 19, 2021, proceeds from which were used primarily to pay the Term Loan due 2027 in full and provide cash for general corporate purposes.

Dividend

Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants in our existing indebtedness and may be limited by the agreements governing other indebtedness that we or our subsidiaries may incur in the future.

Non-GAAP Financial Measures

Adjusted EBITDA

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

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resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. In addition, ~~they~~these measures 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 GAAP net income ~~(loss)~~ excluding interest expense, income taxes, depreciation and amortization expense, ~~(including amortization of right-of-use assets),~~ share-based compensation expense, gain on extinguishment of tax receivable agreement and loss on extinguishment of ~~debt, transaction bonuses and change in fair value of contingent consideration.~~debt. Adjusted EBITDA margin is defined as Adjusted EBITDA expressed as a percentage of total revenue.

The following table presents a reconciliation of GAAP net income ~~(loss)~~ to Adjusted EBITDA for ~~each of~~ the periods indicated:


Adjusted EBITDA	Adjusted EBITDA	Three Months Ended June 30,								Six Months Ended June 30,								Adjusted EBITDA	Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020			% Change		2021			2020			% Change			2022			2021			2022			2021
		($ in thousands)																	(in thousands)
Net Income (loss)		$	75,966		$	(49,805)		(253)	%	$	88,828		$	(41,633)		(313)	%
Net income																		Net income	$	23,126		$	75,966		$	46,280		$	88,828
Non-GAAP adjustments:	Non-GAAP adjustments:																	Non-GAAP adjustments:
Interest expense	Interest expense	1,122			3,644			(69)	%	4,411			4,408			—	%	Interest expense	1,124			1,122			1,927			4,411
Provision for income taxes		23,267			1,352			1621	%	27,737			1,364			1934	%
Depreciation and amortization		196			120			64	%	389			242			61	%
Share-based compensation		927			2,189			(58)	%	1,628			2,676			(39)	%
Income tax expense																		Income tax expense	8,581			23,267			16,891			27,737

Depreciation and amortization expense																		Depreciation and amortization expense	226			196			447			389
Share-based compensation expense																		Share-based compensation expense	988			927			2,269			1,628
Gain on extinguishment of tax receivable agreement	Gain on extinguishment of tax receivable agreement	(55,422)			—			100	%	(55,422)			—			100	%	Gain on extinguishment of tax receivable agreement	—			(55,422)			—			(55,422)
Loss on extinguishment of debt	Loss on extinguishment of debt	—			—			—	%	8,778			—			100	%	Loss on extinguishment of debt	—			—			—			8,778
Transaction bonuses		—			9,112			(100)	%	—			9,112			(100)	%
Change in fair value of contingent consideration		—			48,802			(100)	%	—			48,802			(100)	%
Total adjustments	Total adjustments	(29,910)			65,219			(146)	%	(12,479)			66,604			(119)	%	Total adjustments	10,919			(29,910)			21,534			(12,479)
Adjusted EBITDA	Adjusted EBITDA	46,056			15,414			199	%	76,349			24,971			206	%	Adjusted EBITDA	34,045			46,056			67,814			76,349
Total revenue	Total revenue	$	61,125		$	22,067		177	%	$	105,133		$	39,497		166	%	Total revenue	$	52,044		$	61,125		$	102,112		$	105,133
Adjusted EBITDA margin	Adjusted EBITDA margin	75		%	70		%	5	%	73		%	63		%	10	%	Adjusted EBITDA margin	65		%	75		%	66		%	73		%

For the three and six months ended June 30, ~~2021,~~2022, Adjusted EBITDA ~~increased~~decreased by ~~$30.6~~$12.0 million, or ~~199%~~26% and ~~$51.4~~$8.5 million, or ~~206%~~11%, respectively, as compared to the ~~three and six months ended June 30, 2020. Adjusted EBITDA margin for the three and six months ended June 30, 2021 increased to 75% and 73% as compared to 70% and 63%~~same periods in ~~the three and six months ended June 30, 2020.~~2021. The ~~increase~~decrease in Adjusted EBITDA during the three and six months ended June 30, ~~2021~~2022 reflects ~~an increase~~the decrease in ~~certified loan volume and an increase~~operating income primarily driven by the decrease in estimated future ~~profit share as a result of the continued positive portfolio performance due to lower than projected default frequency and severity stress and overall fewer claims for loss associated with~~revenues on historical ~~vintages, partially offset by an increase in cost of services in the current quarter.~~vintages.

~~Table of Contents~~

Critical Accounting Policies and Estimates

There have not been any material changes during the three and six months ended June 30, ~~2021~~2022 to the methodology applied by management for critical accounting policies previously disclosed in our Annual ~~Report on Form 10-K for the year ended December 31, 2020.~~Report. Please ~~read~~refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report ~~on Form 10-K for the year ended December 31, 2020~~ for further description of our critical accounting ~~policies.~~

~~Off Balance Sheet Arrangements~~

~~We have not engaged in off-balance sheet financing arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.~~policies and estimates.

Contractual Obligations

We had no material changes ~~other than the refinancing of our Term Loan due 2027 on March 19, 2021 as discussed in~~ ~~Note—4 Debt~~, in our contractual commitments and obligations during the three and six months ended June 30, ~~2021~~2022 from the amounts listed under “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in ~~the~~our Annual ~~Report on Form 10-K.~~Report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our operations include activities in the ~~United States.~~U.S. These operations expose us to a variety of market risks, including the effects of changes in interest rates and changes in consumer attitudes toward vehicle ownership. We monitor and manage these financial exposures as an integral part of our overall risk management program.

Market Risk

In the normal course of business, we are exposed to market risk and have established policies designed to protect against the adverse effects of this exposure. We are exposed to risks associated with general economic conditions and the impact of the economic environment on the willingness of consumers to finance auto purchases. ~~Specifically,~~Consumer spending and borrowing patterns related to auto purchases are influenced by economic factors such as unemployment rates, inflation, interest rate levels, changes in monetary and related policies, market volatility, and overall consumer ~~confidence and, unemployment rates in particular also influence consumer spending and borrowing patterns.~~confidence. We also face risk from competition to acquire, maintain and develop new relationships with auto lenders as well as competition from a wide variety of auto lenders who are (or are affiliated) with financial institutions and have capacity to hold loans on their balance sheets.

Concentration Risk

Historically, we have not had significant concentration risk in our client base. However, for some period of time in the future, we expect a significant portion of certified loan volume to come from OEM Captives. Additionally, weWe rely on our three largest insurance ~~partner~~partners for a significant portion of our profit share and claims administration service fee revenue. Termination or disruption of ~~this relationship~~these relationships could materially and adversely impact our revenue.

Interest Rate Risk

As of June 30, ~~2021,~~2022, we had outstanding amounts of ~~$124.2~~$121.1 million under the Term Loan due 2026 and $25.0 million under the Revolving Facility, both of which are scheduled to mature on March 19, 2026. Borrowings under the New Credit Facility bear interest at a rate equal to either the ABR or LIBOR plus a spread that is based upon our total net leverage ratio. The spread ranges from 1.75% to 2.50% for LIBOR loans and 0.75% to 1.50% for ABR loans. We are also charged an unused commitment fee that ranges from 0.200% to 0.275% per annum on the average daily unused portion of the Revolving Facility, which is paid quarterly in arrears and is based on our total net leverage ratio.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules ~~13a15(e)~~13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, or SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to ~~the company’s~~our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule ~~13a-15(d)~~13a-15(f) or ~~15d-15(d)~~15d-15(f) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this Quarterly Report on Form 10-Q, we were not a party to any material legal proceedings. In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on ~~its~~our financial position, results of operations or cash flows.

Item 1A. Risk Factors

This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our Annual Report, ~~on Form 10-K for the year ended December 31, 2020 the Annual Report,~~ based on information currently known to us and recent developments since the date of the Annual Report filing.The matters discussed below should be read in conjunction with the risks described in Part I.I, Item 1A. “Risk Factors” of our Annual Report.However, the risks and uncertainties that we face are not limited to those described below and those set forth in the Annual Report.Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business, financial condition or future results.

The ~~New Credit Agreement that governs Open Lending’s credit facility contains various covenants that~~global economic impacts of Russia’s invasion of Ukraine could ~~limit its ability to engage in activities that may be in Open Lending’s best long-term interests.~~adversely affect our business, financial condition or operating results.

Open Lending’s New Credit Agreement provides for Credit Facilities consisting of a senior secured term loan facility of up to $125.0 million along with a senior secured revolving loan facility of up to $50.0 million at any time outstanding.Russia’s ~~Borrowings under~~invasion of Ukraine and the ~~New Credit Agreement bear interest at a variable rate based~~resulting economic sanctions imposed by the international community have impacted the global economy, particularly with respect to shortages in materials and increased costs for transportation and energy. These events have disrupted and may continue to disrupt the supply chains of Original Equipment Manufacturers and their captive finance companies, which may lead to fewer vehicles being produced, fewer automotive loans overall and diminished demand for LPP. Theinvasion of Ukraine by Russia also could lead to other supply chain disruptions, increased inflationary pressures, and volatility in global markets and industries that could negatively impact our operations. Furthermore, the potential for retaliatory acts of cyberwarfare from Russia against U.S. companies in response to increasing sanctions on Russia could result in increased cyber-attacks against us. The impact of any one or more of these or other factors could adversely affect our business, financial condition or operating results, and the ~~net secured leverage ratio, subject to a floor of 0.0%. The obligations of Open Lending under the New Credit Agreement are guaranteed by all of its subsidiaries and secured by substantially all~~effects of the ~~assets~~ongoing conflict in Ukraine could heighten many of ~~Open Lending and its subsidiaries,~~our known risks described in ~~each case, subject to certain customary exceptions. The Credit Facilities mature on of March 19, 2026.~~Part I, Item 1A, “Risk Factors” in our Annual Report.

The New Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict the ability of the Loan Parties, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses.

The New Credit Agreement also contains customary events of default (subject to thresholds and grace periods), including payment default, covenant default, cross default to other material indebtedness, and judgment defaults.

Open Lending’s ability to comply with these covenants may be affected by events beyond its control, such as market fluctuations impacting net income. Breaches of these covenants will result in a default under the New Credit Agreement, subject to any applicable cure rights, in which case the administrative agent may accelerate the outstanding Term Loan.

~~If such acceleration under the New Credit Agreement occurs, Open Lending’s ability to fund its operations could be seriously harmed.~~

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to our repurchases of shares of common stock during the three months ended June 30, ~~2021.~~2022.

Period Total number of shares purchased(1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs
4/1/2021-4/30/2021 612,745 $ 32.64 — —
5/1/2021-5/31/2021 — — — —
6/1/2021-6/30/2021 — — — —
Total 612,745 $ 32.64 — —
(1) In connection with an underwritten public offering by certain selling stockholders, on April 6, 2021, Company repurchased from those selling stockholders an aggregate of 612,745 shares of the Company’s common stock totaling $20.0 million at per share price of $32.64, the same price per share as paid by the underwriters.


Period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
4/1/2022-4/30/2022	—	—		—	—
5/1/2022-5/31/2022	1,684	$	14.20	—	—
6/1/2022-6/30/2022	—	—		—	—
Total	1,684	$	14.20	—	—

(1) Consists of shares purchased from employees to satisfy tax withholding obligations related to share-based awards that vested during the period.

Item 3. Default Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

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Item 5. Other Information

None.

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Item 6. Exhibits


Number						Description

10.1*10.1Ø ØØ						~~Producer~~Program Management Agreement dated ~~June 24, 2021, as amended,~~May 2, 2022 by and between ~~American National Lloyds~~Arch Specialty Insurance ~~Company, ANPAC Louisiana Insurance Company~~, ~~American National Property And Casualty~~ Company and Lenders Protection, ~~LLC~~.LLC.

31.1*						Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

32.2**						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

101*						The following financial statements from Open Lending Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language):

						(i) Condensed Consolidated Balance Sheets

						(ii) Condensed Consolidated ~~Statements~~Statement of Operations

						(iii) Condensed Consolidated Statements of Stockholder’s Equity ~~(Deficit)~~

						(iv) Condensed Consolidated Statements of Cash Flows

						(v) Notes to ~~unaudited condensed consolidated~~Condensed Consolidated Financial Statements

104						Cover Page Interactive Data File (embedded within the Inline XBRL document).

Ø						Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

ØØ						Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request.

*						Filed herewith.

**						Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			OPEN LENDING CORPORATION

			/s/ John Flynn
			John J. Flynn
			Chairman and Chief Executive Officer (Principal Executive Officer)

			/s/ Charles Jehl
			Charles D. Jehl
August ~~12, 2021~~5, 2022			Chief Financial Officer (Principal Financial and Accounting Officer)

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	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock				Total Stockholders’ Equity
			Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2020			128,198,185	$	1,282	$	491,246	$	(428,406)	(1,395,089)	$	(37,500)	$	26,622
Share-based compensation			—	—		701		—		—	—		701
Net income			—	—		—		12,862		—	—		12,862
Balance as of March 31, 2021			128,198,185	$	1,282	$	491,947	$	(415,544)	(1,395,089)	$	(37,500)	$	40,185
Share-based compensation			—	—		927		—		—	—		927
Share repurchase			—	—		—		—		(612,745)	(20,000)		(20,000)
Net income			—	—		—		75,966		—	—		75,966
Balance as of June 30, 2021			128,198,185	$	1,282	$	492,874	$	(339,578)	(2,007,834)	$	(57,500)	$	97,078


	Redeemable Convertible Series C Preferred Units			Common Units			Series A and B Preferred Units			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ (Deficit)
	Units	Amount		Units	Amount		Units	Amount		Shares	Amount		Amount		Amount			Amount
Balance as of December 31, 2019, as originally reported	21,906,852	$	304,943	25,381,873	$	7,524	29,058,266	$	478	0	$	0	$	0	$	(242,781)		$	(234,779)
Retroactive application of the recapitalization	(7,628,249)	—		(25,381,873)	(7,524)		(29,058,266)	(478)		37,631,052	376		7,626		—			0
Balance as of December 31, 2019, as adjusted	14,278,603	$	304,943	0	0		0	0		37,631,052	$	376	$	7,626	$	(242,781)		$	(234,779)
Fair value adjustment of redemption option	—	(47,537)		—	—		—	—		—	—		—		47,537			47,537
Share-based compensation	—	—		—	—		—	—		—	—		487		—			487
Distribution to Open Lending, LLC unitholders	—	—		—	—		—	—		—	—		—		(135,380)			(135,380)
Net income	—	—		—	—		—	—		—	—		—		8,172			8,172
Balance as of March, 31 2020	14,278,603	$	257,406	0	$	0	0	$	0	37,631,052	$	376	$	8,113	$	(322,452)		$	(313,963)
Recapitalization transaction, net of transaction costs	(14,278,603)	(257,406)		—	—		—	—		54,218,857	542		242,001		—			242,543
Deferred tax asset	—	—		—	—		—	—		—	—		1,874		—			1,874
Estimated fair value of contingent consideration at June 10, 2020	—	—		—	—		—	—		—	—		(347,089)		—			(347,089)
Share-based compensation	—	—		—	—		—	—		—	—		2,189		—			2,189
Net loss	—	—		—	—		—	—		—	—		—		(49,805)			(49,805)
Balance as of June 30, 2020	0	$	0	0	$	0	0	$	0	91,849,909	$	918	$	(92,912)	$	(372,257)		$	(464,251)


	Contract Assets
	Profit Share		TPA Fee		Program Fee		Total
	(in thousands)
Ending balance as of December 31, 2020	$	83,177	$	822	$	5,343	$	89,342
Increase of contract assets due to new business generation	49,673		3,053		35,508		88,234
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods	16,899		0		0		16,899
Receivables transferred from contract assets upon billing the lending institutions	0		0		(34,903)		(34,903)
Payments received from insurance carriers	(44,863)		(2,776)		0		(47,639)
Ending balance as of June 30, 2021	$	104,886	$	1,099	$	5,948	$	111,933


Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
4/1/2021-4/30/2021	612,745	$	32.64	—	—
5/1/2021-5/31/2021	—	—		—	—
6/1/2021-6/30/2021	—	—		—	—
Total	612,745	$	32.64	—	—

(1) In connection with an underwritten public offering by certain selling stockholders, on April 6, 2021, Company repurchased from those selling stockholders an aggregate of 612,745 shares of the Company’s common stock totaling $20.0 million at per share price of $32.64, the same price per share as paid by the underwriters.