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Open Lending Corporation's Q4 2025 results reflect a strategic pivot toward underwriting discipline and product diversification. CEO Jessica Buss highlighted the successful launch of Apex One Auto and the ongoing development of Project Red Rocks, which aim to broaden the company's credit spectrum reach and improve pricing precision. Despite a temporary Q4 volume headwind caused by pricing tests—which has since been corrected—the company reported improved credit performance, with 2025 vintage delinquencies tracking 200 basis points lower than previous years. For the full year 2025, the company generated $93.2 million in revenue and $15.6 million in adjusted EBITDA. Management introduced 2026 guidance forecasting 100,000 to 110,000 certified loans and $25 million to $29 million in adjusted EBITDA, representing an 8% increase at the midpoint. This outlook is supported by a strengthening credit union sector with improved loan-to-share ratios, the expansion of the OEM 3 channel into major markets, and a revamped sales strategy. The company also prioritized balance sheet strength by paying down $50 million in debt. Management’s commitment to quality over quantity suggests a more stable future for profit-share revenue and long-term shareholder value.

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Full Earnings Call Transcript — Q4 • 2026-03-12

Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please stand by. Your meeting will begin. Hello, and welcome, everyone, to today's Open Lending Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note, this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Ryan Gardella, Investor Relations. Please go ahead.
Ryan Gardella: Thanks, Leo. Prior to the start of this call, the company posted their fourth quarter and full year 2025 earnings release and supplemental slides to its investor website. In the release, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. Before we begin, I would like to remind you this call may contain estimates or other forward-looking statements that represent the company's view as of today, 03/12/2026. Open Lending Corporation disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to today's earnings press release and our filings with the SEC for more information concerning factors that could cause actual results to differ from those expressed or implied in such statements. Now I will pass the call over to Jessica to give an update on the business and financial results for the fourth quarter and full year 2025.
Jessica Buss: Full year as CEO. From day one, my focus has been clear: stabilize the business and position it for durable growth. That meant improving profitability, reducing volatility in our profit share revenue, growing total revenue and customer retention, strengthening operational execution, and building a culture of accountability. I am pleased to report that one year in, we believe we have made meaningful progress on executing these goals. We have improved the stability of our profit share unit economics, strengthened underwriting standards, and expanded our platform through Apex One Auto. With that launch, we are evolving from a single-product company into a full-spectrum decisioning and dynamic pricing engine. We believe this progress is reflected in our full year results and, more importantly, in the stronger foundation we have built to drive higher-quality growth in the years ahead. Over the past year, we have also strengthened the leadership team by bringing in new executives and elevating internal leaders across the organization as we position Open Lending Corporation for the next phase of growth. Before jumping into our results, I want to put a finer point on the strategic reasons behind the significance for maintaining tighter underwriting standards and appropriately pricing risk, both of which contributed to our CERT results in the fourth quarter. As an experienced executive coming from the underwriting and insurance industry, I believe that we have positioned ourselves to deliver disciplined, profitable growth to our stakeholders over multiple credit cycles, not just the one we currently find ourselves in. Trust, relevance, and discipline combined with our unique product offering define Open Lending Corporation. As I have said many times in the past, we are, at our core, an auto credit pricing and decisioning engine. The name of our flagship product, Lenders Protection Program, is not branding; it is our operating philosophy. When we look at the current commercial credit environment, the importance of this discipline is clear. Over the last few years of volatility, we have seen several auto lenders go out of business, largely due to overextension, loosened underwriting standards, and rates that were not balancing the actual risk. When economic pressures and delinquencies rose, they could not sustain the losses they had at the prices they were charging. I mention this to say that we have clearly chosen a different path for our company, our employees, and our stakeholders. The decisive changes made in 2025 and the strategic initiatives we have put into place and outlined on all of the earnings calls since I became CEO have all contributed to our continued relevance in the near and non-prime space. We believe that these changes are working and driving real value for our stakeholders in the form of sustainable, profitable growth regardless of the changing macroeconomic environment. With that as a backdrop, I would like to move on to results. For the full year, we facilitated 97,348 certified loans and recorded total revenue of $93.2 million, resulting in adjusted EBITDA of $15.6 million. For the fourth quarter, we facilitated 19,308 loans, generating revenue of $19.3 million and adjusted EBITDA of $2.8 million. We believe that our deliberate tightening of lending standards will result in a higher-quality book, and we have already observed improved 2025 vintage performance as compared to prior year vintages. For vintage year 2025, the over-60-day delinquency at twelve months on book is approximately 200 basis points lower than both the 2023 and 2024 vintages. In the fourth quarter, our certified loan shortfall compared to guidance was driven by a temporary headwind in conversion rates as we actively managed risk and made targeted adjustments to how retail vehicle values were treated in our pricing models. As new information became available, we tested price elasticity, measured the response results, and then refined our response accordingly. After reviewing the performance of the quarter, we determined that certain rate increases implemented were creating unnecessary obstacles in our certified loan pipeline. After rolling back a subset of the changes in phases, concluding the week of January 16, we are now seeing improved momentum and sustainable growth while credit performance remains strong. This is disciplined risk management: test, measure, and refine. Exercising this process and creating this muscle memory is essential not just to our LPP product, but for our Apex One Auto platform and the full spectrum of credit products. Ultimately, our decision to maintain a tighter credit box and appropriate pricing was deliberately done to reinforce the strategic principles we have emphasized all year of discipline in our underwriting and pricing. We believe this approach reduces exposure to elevated defaults, rising delinquencies, and adverse loss ratios over time. While that discipline may have resulted in fewer certified loans in the fourth quarter, intentionally avoiding business that we believe is mispriced or inconsistent with long-term profitability is ultimately in the best interest of Open Lending Corporation and our stakeholders. While we were not happy with the impact on CERTs, the silver lining is that our controls and feedback loops are working as intended. I am also pleased to report that since February 1, we have averaged 353 CERTs per business day compared to 293 CERTs during the impacted period. Importantly, the 353 level is consistent with the average CERTs per business day we experienced in the sixty days prior to the change being implemented. Additionally, through February, our application flow was approximately 20% up year over year. We are getting more at-bats with the business we want, which is direct evidence that our lender profitability initiatives and newly launched dashboards are working and that our customers see tangible value in the full life cycle of the Open Lending Corporation relationship. Now I would like to move on to talk about our ongoing initiatives across the company. First, as discussed on our prior earnings call, we have been actively working with our third-party modeling partner on a more sophisticated real-time simulation engine that we have internally called Project Red Rocks. Once completed, we expect Red Rocks will allow us to instantly see the impact of any proposed rate or credit box change on volume, loss ratio, and profitability before we implement it. It will also serve as a safety valve and control check on the trade-off between rate and market acceptance, which we believe will prevent future headwinds like we experienced in the fourth quarter. We remain committed to disciplined pricing and building more sophisticated models to predict our actions on the market. Understanding the dynamics of price elasticity, volume, and profitability is critical to being best in class, and we believe Project Red Rocks will deliver that for us. This project is running on time and on budget, and we are seeing preliminary benefits as we roll components of the model quarterly. We also entered 2026 with a strengthened go-to-market engine. Anthony Capazano joined us early in the first quarter as Chief Growth Officer. His first four priorities are clear. One, increase wallet share with existing credit union partners and continue to focus on existing customer retention. Two, penetrate larger credit unions, banks, and other institutions which we have historically underserved. Three, build the go-to-market strategy around Apex One Auto platform and the additional product and credit spectrums we now service with this introduction. And four, reorient and expand the sales team with additional hunters focused on new logo acquisition and deeper penetration. Anthony will also begin exploring opportunities to organically expand our platform into additional credit products, leveraging our proprietary data and analytics to extend the reach of our model. Anthony has hit the ground running and quickly made an impact in the sales organization. We have been operating without a Chief Growth/Revenue Officer for several months and believe there are significant opportunities for Anthony to help us accelerate our growth throughout the year. Now I would like to report on the impacts of our initiatives to improve profitability and drive CERT volume growth. Mas will do a deeper dive into the fourth quarter and full year results, but our profit share unit economics for the 2025 vintage continue to be booked at a constrained 72.5% loss ratio, and we believe will perform at our target loss ratio of mid-60%. For the full year, our profit share change in estimate resulted in a $400,000 positive impact to adjusted EBITDA or, in essence, was non-volatile and flat. Our Apex One Auto platform was launched in the fourth quarter with two customers in the prime credit auto segment, making us a full credit spectrum dynamic pricing auto solution. Applications flowing through the platform from customers and our pilot partners are already in the mid–five figures, all in a subscription-based minimum volume model. The pipeline has more than doubled since launch, with several new potential customers in various stages of diligence. Importantly, because Apex One Auto sits on top of the prime credit funnel, it seamlessly routes declined prime loans into our core LPP product and increases application flow. Not only does Apex One Auto operate on a subscription-based, recurring revenue model, but it increases stickiness with customers and gives us an opportunity to capitalize on the $500 million prime decisioning market. The introduction of Apex One Auto platform also means we now have exposure to the entire spectrum of credit scores. Given the massive amount of historical data we have access to, we believe we are well positioned to find new ways to leverage and monetize that across the full spectrum of credit and markets that rely on this data to price loans. Next, on to OEM 3. The ramp-up continues as planned. Volume has grown steadily through Q4, and we are now deploying in Southern California and Texas, which make up a substantial portion of the opportunity. Longer term, we see a substantial opportunity in non-branded business for OEM 3 dealers, where we will become the first-look decisioning engine. Early performance is in line with credit union loss ratios, and we expect OEM 3 to contribute positively to both channel mix and overall book quality in 2026. Credit union health also continues to improve. Share growth, deposit recovery, and lending capacity are all trending positive. I recently attended the Governmental Affairs Conference in Washington, DC, and sat with many of our credit union customers and prospects. One message was clear: they are looking to grow, looking for solutions, and have the capital to do it. Credit unions have seen improved strength with loan-to-share ratios at 83.2% in 2025. We believe this supports an environment where our platform and relationships are poised to organically grow more products and solutions, driving a deeper relationship. Our responsibility is to ensure that growth occurs with the right loans, at the right price. Without that discipline, the industry risks repeating the performance challenges seen in 2021 and 2022 vintage years. Discipline is precisely why they trust us. Moving on to our customer retention efforts, we lost zero customers in the fourth quarter and four in the full year of 2025. We added six new logos in the fourth quarter and 46 in the full year, and saw existing clients send us materially higher application volumes. The lender profitability dashboards have been universally well received and are driving deeper engagement. We are also prioritizing annual profitability reviews with each customer, which is an initiative championed by our new Chief Growth Officer. Our increased same-customer application flow is another proof point that our retention efforts are driving more stickiness. We are of the opinion that the auto refinance market remains an opportunity across the credit union ecosystem, particularly following the elevated interest rate environment of the past several years. While auto loan rates remain higher than pre-pandemic levels, they have begun to moderate following the Federal Reserve's 75 basis points of cumulative easing that began in 2025. Historically, this type of rate environment has driven increased rate refi activity. As borrowers who originate loans during peak rate environments seek payment relief, we expect the refinance channels to show renewed momentum. Against this backdrop, we believe Open Lending Corporation is well positioned to capture incremental certification and partner expansion within the credit union market if rates decline further in 2026. We are actively working with our credit union partners to appropriately and timely loosen ROA targets in response to rate drops to remain competitive. The next area I want to address is our book mix and full-year impact of credit builders and super thin files. As we discussed on prior calls, we virtually eliminated our exposure to super thin files following underwriting guideline changes implemented in 2024. At one point, these represented approximately 11% of quarterly certifications, and today, we underwrite none, making them a negligible part of our portfolio. With respect to credit builders, they remain a relatively small portion of the book. As a reminder, we took a more blunt approach initially with approximately 100% insurance premium rate increase to ensure appropriate risk-adjusted returns. In 2025, credit builders represented approximately percent of our new certifications and are performing as expected. Each quarter, we continue refining our definitions and segmentation of credit builders across cohorts, and we are confident in our ability to screen, price, and underwrite these applications with increasing precision, allowing us to responsibly grow this segment while maintaining strong profitability. Much of this has been made possible by the model enhancements we are already seeing from Project Red Rocks. Next, we turn to the elements of our business that we considered in shaping our outlook for 2026. We feel strongly that our conversion rate headwind from the fourth quarter has been completely solved at this point, and we believe we are well positioned for growth in 2026. However, we believe that growth will compound over each quarter in 2026, or, said another way, will be greater in the latter quarters and is likely to increase incrementally each quarter. This is also impacted by the fact that we had super thins and credit builders in 2025, and we have to replace that volume with growth that we want, which is why we believe our 2025 vintage is performing better than expected. We believe our new models, sales strategy, and underwriting clarity will drive that. In addition, we believe the strength of our go-to-market strategy will improve customer retention and drive new logos in 2026. We believe these factors, coupled with the expected impacts of the refinance market and the anticipated ramp of OEM 3, will be drivers that position us for growth in 2026. As we discussed earlier, due to the increased health of credit union partners, we believe credit unions are in one of the strongest capital positions they have been in over recent years and are seeking responsible growth. Lastly, with the introduction of Apex One Auto, we now have full credit spectrum dynamic pricing and decision capabilities that we believe will help facilitate additional certified loans. This enables customized growth strategies aligned with each institution's risk appetite, with and without insurance, while preserving our core commitment to protecting lenders and serving the underserved. We plan to continue to innovate and deepen our relationships. Taken together, we are providing full-year certified loan guidance of 100,000 to 110,000 for 2026, with between 21,000 and 22,000 expected in the first quarter, and full-year adjusted EBITDA guidance of $25 million to $29 million for 2026. We believe introducing annual guidance for the first time since 2022 reflects our confidence in the growth trajectory of our business in 2026 following the strong execution on improving profitability we delivered in 2025. On the capital allocation side, in the fourth quarter, we paid down approximately $50 million of our senior secured term loan, which, based on projected forward interest rate curves, will result in quarterly interest expense savings of approximately $575,000. With our strong cash balance, partially due to favorable profit share cash flows, our Board of Directors and management team ultimately decided that this was the best use of capital for our shareholders. We also repurchased approximately 564,000 shares in the quarter at an average price of $1.66 per share. We will continue to evaluate capital allocation strategies each quarter and focus our priorities where we believe we are driving the best strategic returns for our shareholders. I would like to conclude with this. By all accounts, 2025 was a successful year for Open Lending Corporation. We set the company on the right course with largely flat CIEs, or back book adjustments, we generated meaningful revenue and adjusted EBITDA in our core business, and we reinforced the strategic pillars of our business and cut unnecessary costs out of our organization. By remaining disciplined in our underwriting and pricing, we believe we have avoided the fate of those who overextended and prioritized volume over building a durable, cycle-agnostic business. As a result, we believe we are positioned to capitalize on future opportunities from a position of strength. And, importantly, we are protecting our carriers, our credit union partners, and our broader financial institution relationships. I am personally excited about the future. We believe this positions us well for growth in 2026, but growth in the right business at the right price and within the right risk framework. This philosophy is embedded in our full-year guidance. Our number one priority is ensuring the durability of our portfolio in order to grow responsibly. Making disciplined decisions in challenging markets is what sustains long-term relevance and long-term shareholder value. We have remained relevant and intend to keep it that way. We have the models, data, and talent to grow profitably at a time when others have lost their way. This is the definition of opportunity. I will now turn the call over to Mas to discuss the financials in detail. Mas?
Massimo Monaco: Thanks, Jessica. Before walking through the results, I will highlight a few key financial takeaways from the quarter. First, the business delivered stable financial performance as we continue to move beyond last year's change in estimate adjustment. Second, we made good progress on expense discipline while continuing to invest in key growth initiatives. And third, we strengthened the balance sheet through debt reduction and ongoing share repurchases. Now let me walk through the numbers for the quarter and guidance before Jessica and I open it up for Q&A. During the fourth quarter, we facilitated 19,308 certified loans compared to 26,065 certified loans in 2024. As Jessica mentioned, the shortfall in certified loans was driven by a temporary headwind in conversion rates as we tested pricing adjustments in response to emerging credit trends. These adjustments had an outsized impact on certain segments. Select changes were rolled back in phases and completed by mid-January. Based on current trends, we do not expect this issue to create any ongoing disruptions. Certified loan volume in the quarter also reflected typical seasonal patterns along with further strategic implementation of enhanced underwriting standards aimed at building a higher-quality loan portfolio. Looking ahead, we expect volumes to accelerate throughout 2026, as anticipated in our guidance. We believe the business is well positioned to capitalize on new growth channels such as the Apex One Auto platform and the continued rollout of OEM 3. We are also placing increased emphasis on CERTs from our credit union and bank partners, which typically carry higher program fees and more attractive unit economics compared to OEM CERTs. Total revenue for the fourth quarter was $19.3 million compared to a negative $56.9 million in the prior-year period. The current quarter included an insignificant change in estimate profit share revenue, compared to an $81.3 million reduction in 2024. As a reminder, 2024 included a significant negative change in estimate adjustment driven by macroeconomic factors and unexpected performance issues in certain newer vintage cohorts. Breaking down total revenues in the current quarter, program fee revenues were $10.9 million, profit share revenues were $6.2 million, and claims administration fees and other revenue were $2.3 million. As a reminder, profit share revenue represents our share of the expected earned premiums less the expected lifetime claims and program expenses. Open Lending Corporation receives 72% of net profit share, and any losses in the net profit share are accrued and carried forward for future profit share calculations. When cash consideration previously received is in excess of the expected profit share revenue, the amount of excess funds and the forecasted losses are recorded as an excess profit share receipt liability. Profit share revenue in 2025 associated with new originations was $6.2 million, or $322 per certified loan, as compared to $8.2 million, or $314 per certified loan, in 2024. As we have previously mentioned, we have taken steps to reduce volatility and future change in estimate adjustments by booking more conservative unit economics at the time of certification. At this level, initial booking reflects an implied loss ratio of approximately 72.5%. Based on our current pricing actions and expected credit performance, we believe these vintages will ultimately perform closer to a mid-60s percent loss ratio. Operating expenses were $13.9 million in the fourth quarter compared to $15.4 million in 2024, representing a decrease of 9.3% year over year. As I mentioned last quarter, one of my priorities moving forward will be to closely monitor and control operating expenses. I continue to find efficiencies in our spending. Net income for the fourth quarter was $1.7 million compared to a net loss of $144 million in 2024. Diluted net income per share was $0.10 in the fourth quarter compared to a net loss of $1.21 per share in 2024. Adjusted EBITDA for the quarter was $2.8 million compared to a negative $75.9 million in 2024. Beginning in the quarter ended 06/30/2025, we updated the presentation of adjusted EBITDA to exclude interest income to better align our definition with comparable companies. In addition, beginning in the quarter ended 09/30/2025, we updated the presentation of adjusted EBITDA to exclude certain other nonrecurring expenses that do not contribute directly to management's evaluation of its operating results. Prior periods have been conformed to the current period presentation. A reconciliation of GAAP to non-GAAP financial measures can be found at the back of our earnings press release. Turning to cash flow and balance sheet, for the full year 2025, our cash flow from operating activities was a negative $3.2 million. However, excluding the one-time payment of $11 million made to Allied in Q3, cash flows from operating activities were $7.8 million, inclusive of approximately $16.8 million in profit share cash received. We exited the fourth quarter with $230.7 million in total assets, of which $176.6 million was unrestricted cash. We had $161.7 million in total liabilities, of which $84.8 million was outstanding debt. During the quarter, we used $50 million in cash to pay down a portion of our senior secured term loan. In conjunction with our board, we determined that reducing leverage represented the most prudent use of capital at this time. While the remaining debt continued to carry attractive terms and favorable cost of funds, this action strengthens the balance sheet, reduces leverage, and preserves financial flexibility going forward. Importantly, we remain disciplined in how we deploy capital and continue to prioritize investments that support organic growth and long-term shareholder value. Based on current interest rate expectations, this paydown is expected to reduce quarterly interest expense by approximately $575,000. We believe this will allow further value to accrue to shareholders in the future. In the fourth quarter, we repurchased approximately 564,000 shares for a total consideration of approximately $900,000. We have approximately $20.1 million remaining on our current share repurchase program, which expires in May 2026. Our capital allocation priorities remain consistent: first, investing in the organic growth of the platform; second, maintaining a strong balance sheet; and third, returning capital to shareholders through share repurchases when appropriate. Finally, I wanted to address our guidance. For the first quarter, we are expecting total certified loans to be between 21,000 and 22,000 units. For the full year, we are expecting total certified loans to be between 100,000 and 110,000. At the midpoint of our guidance, this represents an 8% increase over our 2025 results. We are also expecting adjusted EBITDA for the full year to be between $25 million and $29 million. We intend to maintain our dedication to quality over quantity in our book of business, ensuring that this growth rate is additive to our loan portfolio. We believe our strategy and performance have become increasingly strong and predictable, striking the right balance between growth and profitability as we continue to scale Open Lending Corporation and deliver consistent results for our stakeholders across the market cycle. Most importantly, as we move into 2026, we believe the strength of our platform and the investments we have discussed continue to deepen our relevance with partners and position us well for the opportunities ahead. With that, we will open it up for questions. Operator? Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. And we will pause for just a moment to allow everyone a chance to join the queue.
Operator: Thank you. Our first question comes from Madison Soor with Raymond James. Please go ahead. Your line is open.
Madison Soor: Hi. Good afternoon, and thanks for taking the questions. I wanted to start here just at a very high level. Obviously, there is a lot of concern in the marketplace around AI and AI disruption across both software and payments and all kinds of technology names. So, with that context, I would love to just hear your high-level thoughts about how you view AI both from an opportunity standpoint and then what risks you are assessing as it relates to potential AI threats.
Jessica Buss: Hi, Madison, and thank you for your question today. You know, we, as a technology company, obviously use many forms of AI in our tools and in our models, not as much in our pricing mechanisms, but certainly in the build-out of Red Rocks. And so, where we are going as a company, we have built AI—you have probably seen in some of our press releases—and some of the mechanical tools resolved in our claims process as well. Now, we do have humans in the loop, and we are obviously validating those AI processes as we bring them on board. But, again, we believe that our models and what we have built, which are primarily using machine learning, and the data that we have is far superior to what you could build with just a straight AI tool. So we believe the combination of what we have in AI, what we have in terms of proprietary data, what we have built with our machine learning tools and our Project Red Rocks is superior to what anybody else has out in the market.
Madison Soor: Okay. Thank you for that. And then I did want to ask on the CERT outlook both for 1Q and 2026. So, obviously, 1Q implies that CERTs are going to be down in the mid-20% range. You mentioned full year up in the high single digits. Can you just help us kind of bridge how we get from the down mid-20s? I know there were some pricing changes and things of that nature that have since been rolled back. But can you just help us frame how we get from kind of that down mid-20s to up high singles? And kind of how quickly do you think the business can return to CERT growth as 2026 progresses? Thank you. Yes.
Jessica Buss: That is a great question. So first quarter compared to first quarter last year, if you had been following in 2025, you would know that the first quarter of last year contained a high number of credit builders and super thins, which we had, in essence, eliminated all super thins in 2025 and significantly reduced the amount of credit builders that we approved by implementing almost a 100% rate increase. And then, also, we took a tighter credit stance and put a tighter credit box in our OEM. So that is sort of influencing the change quarter over quarter. Now, the good news is that we do believe that incrementally, quarter over quarter, we are going to experience the growth that we have in our CERT projection, and that is going to come from a variety of different things that I would like to outline for you. So one, we are already seeing application volume up 20%. Second thing is that we have now found, through our Project Red Rocks, a solution to write credit builders at a profitable level. And credit builders currently represent about 30% of our applications. We believe that they are here to stay. We believe that we can price the good ones correctly and write those and not be adversely selected against. We have been monitoring the performance and, again, based on our new model, have additional applicant data that we believe is a better predictor. We have our strategy that we are implementing with OEM 3. We have seen that certification volume jump significantly quarter over quarter, of 76% in the fourth quarter over the third quarter. So OEM 3 will be a driver. We believe if rates continue to go down, refinance. But, as importantly, both Apex One and our new go-to-market strategy and engine with what we are doing with retention tools, with additional hunters, with our profitability tools, is something that is also going to drive growth. So we have many tailwinds, I believe, to our growth story. We believe those will start to ramp up, as I say in my script, incrementally, and get stronger quarter over quarter. It will be, sort of, third and fourth quarter loaded. We did have the issue that was the headwind in the fourth quarter that was reversed on January 16. So the first quarter is slightly impacted by that. But, again, we have a new Chief Growth Officer. We will start to see that in the second quarter. And then from the third and fourth quarter on, we believe those fundamentals will really drive growth for us.
Madison Soor: Okay. I appreciate all the color. Thank you so much.
Operator: Thank you. We will move now to Joseph Vafi of Canaccord. Your line is open.
Joseph Vafi: Hey, everyone. Thanks for taking my questions this afternoon. Nice to see an outlook showing some sequential increases here in Q1. Maybe we just start with that on the CERT line. Maybe could you walk us through a little bit, you know, maybe Q4 to Q1 on kind of a CERT walk? You know, there is OEM 3—would be interested in some commentary on, you know, also how OEM 1 and 2 are doing in terms of stability—and then if you wanted to just drill down a little bit more into health of the credit union channel with some more comments, that would be appreciated.
Jessica Buss: Sure, Joe. So I would be happy to do that. So our walk from fourth quarter to first quarter—again, we have the sort of reversal of the headwind, the rate issue that we discussed. That will help. We have OEM 1 and OEM 2 that remain stable and flat to where they have been in the last couple of quarters. We will see a ramp-up in OEM 3. I think you may have heard us talk on prior earnings calls and even in the current script that they will be launching two of our largest states sometime at the end of the first quarter, beginning of the second quarter. So while we are seeing pretty large increases, as I mentioned, 79% fourth quarter over third quarter, we would expect that to continue. We will see that sort of magnify as they add those states on throughout the year and even in the first quarter. So we are excited about that piece as well. We will have the solution to the credit builders that will probably impact more of the second quarter. But, again, we have seen significant increases in applications, the hiring of our Chief Growth Officer. I think all those things will have the impact going from Q4 to Q1. And then if that is kind of the cadence you are looking for.
Joseph Vafi: That is great. Thank you, Jessica. And then just want to double click on the health of the credit union channel and, you know, how you see that—potentially, you know, how that could evolve if we get another 50 bps here in 2026 on rate cuts.
Jessica Buss: Yes, that is a great question. So, you know, I just spent four or five days in Washington, DC, with our credit unions at GAC, as I mentioned in my script. And one of the messages that was clear is that their loan-to-share values are—and I will not say at all-time lows—but lower than they have been probably the last couple of years, to the 80% mark, and they are looking to grow. They are looking to grow in the auto space, and they are looking to do it in a disciplined way. A lot of their boards are concerned, obviously, with what is going on in consumer credit. That is why our tool is even more important, and our insurance carriers and the credit projection they provide with our insurance product is even more important. That is why we are expanding our conversations with Apex One, which allows us to do both prime and near-prime decisioning and pricing with and without insurance. So the health of the credit unions is good. They have gotten more sophisticated. They are looking to grow. Now with rates, one of the other interesting things that we are working on is working with our credit unions to be more nimble in reducing their ROA targets. Typically, it takes them a little bit longer than, let us say, a sophisticated bank to react to rate changes. We have been working with them to bring those down quicker. As those begin to come down, both with rate cuts from the Fed and with our working with them on their ROA targets, we believe that there is a very large refinance opportunity for us in the future. And we have been opening up and continuing to open up refi channels with our credit union partners. So we are really excited about that as an opportunity for 2026 as well.
Joseph Vafi: Great. Thank you for that color, Jessica.
Operator: Thank you. And once again, if you would like to ask a question, please press 1 on your telephone keypad now. We will now move on to Mike Grondahl with Northland Securities. Please go ahead. Your line is open.
Keaton Chokey: Hi. This is Keaton Chokey on for Mike. You have made a lot of moves in the management with the new Chief Growth Officer, new CFO, and becoming a new CEO. Is the team built out now, or are there any more that you would be expecting for 2026?
Jessica Buss: Thank you for the question, and I am really excited to talk about our management team. I think the most important thing to having a great business is having a great team, and the people that we have brought on board and all of the key management positions, all of my direct reports, with most recently the addition of Anthony, as you mentioned, Mas earlier this year or at the end of last year, are all key players to how we are going to be able to execute on these priorities. At this point, all positions are—all sort of senior executive positions that report to me and have accountability for running all aspects of our business—are now filled. I can tell you that team is working very well together. And I think that you can see that sort of in the execution that Open Lending Corporation has been able to deliver this year. The first time, we delivered a new product. Increased our EBITDA. We have had flat CIE. We are in the process of implementing Project Red Rocks. Those are things that were not possible before. And that is really a tribute to our senior management team and all of our employees as well. We spent a lot of time on culture and breaking down silos and focusing on getting four things right this year, and I feel like we have delivered on those promises to our shareholders.
Keaton Chokey: Great. And then, I was hoping to get a little more color on your current outlook for delinquencies or credit quality for auto loans in your book.
Jessica Buss: So I will start, and I will let Mas jump in here. I think I said in my script that the delinquencies that we are seeing on our most recent vintage are running about 200 basis points better at the sixty-day delinquency mark than they were in vintage years 2023 and 2024. We do not participate in the full subprime market. We are near and non-prime. So we actually feel like we are pricing correctly for the delinquencies. We are seeing better-than-expected outcomes. So we are excited about that. Again, it had to do with our tighter credit underwriting and our pricing mechanism we put into place, and investments that we have made into models. But I will let Mas add any color that he wants.
Massimo Monaco: I think you covered most of it. We are seeing it across all measures of delinquency—30-day delinquency, 60-day, 90-day. Every measure that we look at shows favorable improvements in vintage year 2025. So we are very comfortable with where we are pricing our book today. We look forward to a strong performance into the future.
Jessica Buss: And I guess the only other piece of color I would add that is sort of an indicator of that is that we have had a flat change in estimate—in essence, a positive $0.4 million for the year in total—on our back book of business, which would indicate that we have correctly sized, we believe we have correctly sized, the delinquencies for our back book as well.
Keaton Chokey: Awesome. Thank you for that. I will return to the queue.
Operator: Thank you. And once again, that is star one if you would like to ask a question. We will now move on to Peter Heckmann with Davidson. Your line is open.
Peter Heckmann: Hey. Good afternoon. Thanks for providing the guidance for full year 2026. I think that is helpful for investors to think about how management is thinking about the full year. Wanted to see if you could maybe give a range about thinking about the conversion from EBITDA to free cash flow for 2026. I know you have a few working capital needs in the form of the excess profit share receipts. But I guess, could you give us a little bit of additional detail to maybe give us some pieces that can help us get to a—maybe even if it is a wide—free cash flow range.
Jessica Buss: Sure, Peter. This is Jessica. Nice to hear from you. So first off, again, we are really excited and feel confident in providing our full-year guidance. And that was a nice thing to be able to do after years of not being in a position to do that. So thank you for recognizing that. In terms of free cash flows, we obviously do not provide guidance on free cash flows. And I will let Mas jump in here in a minute. I would say that we did collect profit share this year. We do not have a capital allocation or capital set-aside for the liability you are referring to in terms of a cash flow mechanism. If you remember, that would be collected from the future cash flows, yes, but that is not a cash flow set-aside. Again, so we are not actually predicting that. What we can tell you is what we have talked about before in terms of profitability, in terms of how we are booking our loss ratio at a more constrained level, how we think that book is actually performing, and that sort of drives how our cash flows from profit share come in. But I do not know, Mas, do you want to add anything to that?
Massimo Monaco: Yes. Hey, Peter. How are you? I think, as we have mentioned in the past, it is difficult for us to predict when the losses will come in with that book. But as the forecast stands right now, the free cash flows would be relatively in line with the EBITDA guidance we are giving.
Peter Heckmann: Okay. That is great.
Massimo Monaco: Again, I do caution that it is difficult to forecast the losses—the timing of the losses.
Peter Heckmann: Right. Right. Okay. I appreciate it. I look forward to seeing the ramp through the year. At this time, there are no further questions in queue. I would be happy to return the call to Jessica for closing comments.
Jessica Buss: Thank you all for your time today, and thank you to our shareholders, investors, credit unions, and insurance carriers for your continued support. I would also like to thank the entire Open Lending Corporation team for their dedication over the past year. We laid the foundation for sustainable, profitable growth in 2025, and we believe we are well positioned to build on that momentum in 2026 while maintaining disciplined risk management. We appreciate your confidence in our strategy and look forward to updating you on our continued progress on our next call. Thank you.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.