ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Page | |||||
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 (2) | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (2) | ||||||||||||||||||||||
10/1/2022-10/31/2022 | 17,327 | $ | 7.18 | — | $ | — | ||||||||||||||||||||
11/1/2022-11/30/2022 | 357,101 | $ | 6.95 | 356,525 | $ | 72.5 | ||||||||||||||||||||
12/1/2022-12/31/2022 | 2,286,781 | $ | 6.80 | 2,286,781 | $ | 57.0 | ||||||||||||||||||||
Total | 2,661,209 | 2,643,306 | ||||||||||||||||||||||||
Year ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
Certified loans | 165,211 | 171,697 | |||||||||
Value of insured loans facilitated (in thousands) | $ | 4,758,597 | $ | 4,331,508 | |||||||
Average loan size per certified loans | $ | 28,803 | $ | 25,228 | |||||||
Number of contracts signed with automotive lenders | 72 | 71 |
Year ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
Lenders certifying loans at the beginning of the period | 396 | 354 | |||||||||
New lenders (1) | 63 | 60 | |||||||||
Net change in lenders (2) | (21) | (18) | |||||||||
Lenders certifying loans at the end of the period | 438 | 396 |
Year Ended December 31, | |||||||||||||||||
2022 | 2021 | % Change | |||||||||||||||
($ in thousands) | |||||||||||||||||
Revenue | |||||||||||||||||
Profit share | $ | 90,056 | $ | 133,215 | (32)% | ||||||||||||
Program fees | 80,611 | 75,630 | 7% | ||||||||||||||
Claims administration and other service fees | 8,927 | 6,810 | 31% | ||||||||||||||
Total revenue | 179,594 | 215,655 | (17)% | ||||||||||||||
Cost of services | 19,968 | 18,621 | 7% | ||||||||||||||
Gross profit | 159,626 | 197,034 | (19)% | ||||||||||||||
Operating expenses | |||||||||||||||||
General and administrative | 35,950 | 30,393 | 18% | ||||||||||||||
Selling and marketing | 17,856 | 12,000 | 49% | ||||||||||||||
Research and development | 8,205 | 4,352 | 89% | ||||||||||||||
Total operating expenses | 62,011 | 46,745 | 33% | ||||||||||||||
Operating income | 97,615 | 150,289 | (35)% | ||||||||||||||
Interest expense | (5,832) | (5,859) | —% | ||||||||||||||
Interest income | 1,995 | 213 | 837% | ||||||||||||||
Gain on extinguishment of tax receivable agreement | — | 55,422 | (100)% | ||||||||||||||
Loss on extinguishment of debt | — | (8,778) | (100)% | ||||||||||||||
Other expense, net | (238) | (119) | 100% | ||||||||||||||
Income before income taxes | 93,540 | 191,168 | (51)% | ||||||||||||||
Income tax expense | 26,920 | 45,086 | (40)% | ||||||||||||||
Net income | $ | 66,620 | $ | 146,082 | (54)% | ||||||||||||
Year Ended December 31, | |||||||||||||||||
2022 | 2021 | % Change | |||||||||||||||
Certified loans | 165,211 | 171,697 | (4) | % | |||||||||||||
Single-pay | 144,959 | 152,629 | (5) | % | |||||||||||||
Monthly-pay | 20,252 | 19,068 | 6 | % | |||||||||||||
Average program fees | $ | 488 | $ | 440 | 11 | % | |||||||||||
Single-pay | $ | 450 | $ | 412 | 9 | % | |||||||||||
Monthly-pay | $ | 772 | $ | 670 | 15 | % | |||||||||||
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
($ in thousands) | |||||||||||
Profit share | |||||||||||
New certified loan originations | $ | 95,733 | $ | 102,324 | |||||||
Change in estimated future revenues | (5,677) | 30,891 | |||||||||
Total profit share | 90,056 | 133,215 | |||||||||
Program fees | 80,611 | 75,630 | |||||||||
Claims administration and other service fees | 8,927 | 6,810 | |||||||||
Total revenue | $ | 179,594 | $ | 215,655 |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
($ in thousands) | |||||||||||
Revenue | $ | 179,594 | $ | 215,655 | |||||||
Cost of services | 19,968 | 18,621 | |||||||||
Gross profit | $ | 159,626 | $ | 197,034 | |||||||
Gross margin | 89 | % | 91 | % |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
($ in thousands) | |||||||||||
Revenue | $ | 179,594 | $ | 215,655 | |||||||
Gross profit | 159,626 | 197,034 | |||||||||
Operating expenses | |||||||||||
General and administrative | 35,950 | 30,393 | |||||||||
Selling and marketing | 17,856 | 12,000 | |||||||||
Research and development | 8,205 | 4,352 | |||||||||
$ | 62,011 | $ | 46,745 | ||||||||
Operating income | $ | 97,615 | $ | 150,289 | |||||||
Operating margin | 54 | % | 70 | % |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 107,431 | $ | 95,156 | |||||||
Net cash used in investing activities | $ | (624) | $ | (1,987) | |||||||
Net cash used in financing activities | $ | (17,797) | $ | (77,808) |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
($ in thousands) | |||||||||||
Net income | $ | 66,620 | $ | 146,082 | |||||||
Deferred income taxes and other non-cash expenses | 7,742 | 25,536 | |||||||||
Non-cash gain, net | — | (46,644) | |||||||||
Change in contract assets | 37,527 | (23,763) | |||||||||
Change in other assets and liabilities | (4,458) | (6,055) | |||||||||
Net cash provided by operating activities | $ | 107,431 | $ | 95,156 |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
($ in thousands) | |||||||||||
Net income | $ | 66,620 | $ | 146,082 | |||||||
Non-GAAP adjustments: | |||||||||||
Interest expense | 5,832 | 5,859 | |||||||||
Income tax expense | 26,920 | 45,086 | |||||||||
Depreciation and amortization expense | 915 | 792 | |||||||||
Share-based compensation expense | 5,449 | 3,815 | |||||||||
Gain on extinguishment of tax receivable agreement | — | (55,422) | |||||||||
Loss on extinguishment of debt | — | 8,778 | |||||||||
Total adjustments | 39,116 | 8,908 | |||||||||
Adjusted EBITDA | $ | 105,736 | $ | 154,990 | |||||||
Total revenue | $ | 179,594 | $ | 215,655 | |||||||
Adjusted EBITDA margin | 59 | % | 72 | % |
Prepayment rate | Loan default rate | Default severity of loss | |||||||||||||||||||||||||||||||||
Assumption change | 10 | % | (10) | % | 10 | % | (10) | % | 10 | % | (10) | % | |||||||||||||||||||||||
Impact on revenue | (3) | % | 3 | % | (6) | % | 6 | % | (7) | % | 7 | % |
Number | Description | |||||||
2.1 | ||||||||
2.2 | ||||||||
2.3 | ||||||||
2.4 | ||||||||
3.1 | ||||||||
3.2 | ||||||||
4.1 | ||||||||
10.1 | ||||||||
10.2 | ||||||||
10.20 | ||||||||
10.21 | ||||||||
10.22 | ||||||||
10.23 | ||||||||
10.24 | Producer Agreement dated as of June 24, 2021, as amended, by and between American National Lloyds Insurance Company, ANPAC Louisiana Insurance Company, American National Property And Casualty Company and Lenders Protection LLC (incorporated by reference to Exhibit 10.1 to Open Lending Corporation’s Quarterly Report on Form 10-Q filed August 12, 2021). | |||||||
10.25 ∅ ∅∅ | ||||||||
21.1* | ||||||||
23.1* | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
32.2** | ||||||||
101* | The following materials from Open Lending Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): | |||||||
(i) Consolidated Balance Sheets | ||||||||
(ii) Consolidated Statements of Operations | ||||||||
(iii) Consolidated Statements of Stockholder’s Equity (Deficit) | ||||||||
(iv) Consolidated Statements of Cash Flows | ||||||||
(v) Notes to Consolidated Financial Statements | ||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
* | Filed herewith. | |||||||
** | Furnished herewith. | |||||||
∅ | Portions of this exhibit have been omitted pursuant to Item 601(b)10(iv) of Regulation S-K. | |||||||
∅∅ | Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request. | |||||||
OPEN LENDING CORPORATION | |||||
/s/ Charles D. Jehl | |||||
Charles D. Jehl | |||||
February 28, 2023 | Chief Financial Officer (Principal Financial and Accounting Officer) |
Signature | Title | Date | ||||||||||||
/s/ Keith A. Jezek | Chief Executive Officer and Director (Principal Executive Officer) | February 28, 2023 | ||||||||||||
Keith A. Jezek | ||||||||||||||
/s/ Charles D. Jehl | Chief Financial Officer (Principal Financial and Accounting Officer) | February 28, 2023 | ||||||||||||
Charles D. Jehl | ||||||||||||||
/s/ John J. Flynn | Director | February 28, 2023 | ||||||||||||
John J. Flynn | ||||||||||||||
/s/ Adam H. Clammer | Director | February 28, 2023 | ||||||||||||
Adam H. Clammer | ||||||||||||||
/s/ Eric A. Feldstein | Director | February 28, 2023 | ||||||||||||
Eric A. Feldstein | ||||||||||||||
/s/ Blair J. Greenberg | Director | February 28, 2023 | ||||||||||||
Blair J. Greenberg | ||||||||||||||
/s/ William Heldfond | Director | February 28, 2023 | ||||||||||||
William Heldfond | ||||||||||||||
/s/ Shubhi S. Rao | Director | February 28, 2023 | ||||||||||||
Shubhi S. Rao | ||||||||||||||
/s/ Jessica Snyder | Director | February 28, 2023 | ||||||||||||
Jessica Snyder | ||||||||||||||
/s/ Gene Yoon | Director | February 28, 2023 | ||||||||||||
Gene Yoon |
Profit Share Revenue Recognition | ||||||||
Description of the matter | As described in Note 2 to the consolidated financial statements, management uses forecasts of loan-level earned premiums and insurance claim payments to estimate profit share revenue expected to be received from third-party insurance providers over the life of each loan. Forecasts are driven by management’s projections of loan defaults, prepayments, and severity rates. These assumptions are based on expectations regarding future economic conditions as well as management’s observations of historical behavior for loans with similar risk characteristics. | |||||||
Auditing management’s estimate of profit share revenue is complex because the recognition involves significant management judgment about expected future consideration to be received from third-party insurance providers over the life of the loan. The significant assumptions used in the estimated variable consideration reflects management’s estimate of future loan defaults, prepayments and severity rates. Changes in those assumptions can have a significant effect on total profit share revenue recognized. |
How we addressed the matter in our audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to estimate the variable consideration recognized as profit share revenue. For example, we tested controls over management’s review of the variable consideration significant assumptions and the historical data utilized in the estimate for future loan defaults, prepayments and severity rates. To test the variable consideration recognized as profit share revenue, we performed audit procedures that included, among others, evaluating the methodology used to develop the significant assumptions, and tested the completeness and accuracy of the historical data used by the Company. We involved subject matter experts to assist in evaluating the appropriateness of the estimation methodology and underlying significant assumptions, including comparing to industry trends, market data and other market participants. We also evaluated the accuracy of management’s assumed profit share revenue from prior periods by comparing to subsequent actual activity. |
December 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Assets | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash | ||||||||||||||
Accounts receivable, net | ||||||||||||||
Current contract assets, net | ||||||||||||||
Income tax receivable | ||||||||||||||
Other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property and equipment, net | ||||||||||||||
Operating lease right-of-use asset, net | ||||||||||||||
Contract assets, net | ||||||||||||||
Deferred tax asset, net | ||||||||||||||
Other assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and stockholders’ equity | ||||||||||||||
Current liabilities | ||||||||||||||
Accounts payable | $ | $ | ||||||||||||
Accrued expenses | ||||||||||||||
Current portion of debt | ||||||||||||||
Third-party claims administration liability | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term debt, net of deferred financing costs | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Commitments and contingencies | ||||||||||||||
Stockholders’ equity | ||||||||||||||
Preferred stock, $ | $ | $ | ||||||||||||
Common stock, $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Accumulated deficit | ( | ( | ||||||||||||
Treasury stock at cost, | ( | ( | ||||||||||||
Total stockholders’ equity | ||||||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Revenue | ||||||||||||||||||||
Profit share | $ | $ | $ | |||||||||||||||||
Program fees | ||||||||||||||||||||
Claims administration and other service fees | ||||||||||||||||||||
Total revenue | ||||||||||||||||||||
Cost of services | ||||||||||||||||||||
Gross profit | ||||||||||||||||||||
Operating expenses | ||||||||||||||||||||
General and administrative | ||||||||||||||||||||
Selling and marketing | ||||||||||||||||||||
Research and development | ||||||||||||||||||||
Total operating expenses | ||||||||||||||||||||
Operating income | ||||||||||||||||||||
Interest expense | ( | ( | ( | |||||||||||||||||
Interest income | ||||||||||||||||||||
Gain on extinguishment of tax receivable agreement | ||||||||||||||||||||
Loss on extinguishment of debt | ( | |||||||||||||||||||
Change in fair value of contingent consideration | ( | |||||||||||||||||||
Other expense, net | ( | ( | ( | |||||||||||||||||
Income (loss) before income taxes | ( | |||||||||||||||||||
Income tax expense | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ||||||||||||||||
Preferred distribution to redeemable convertible Series C preferred units | ( | |||||||||||||||||||
Accretion to redemption value of redeemable convertible Series C preferred units | ||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | $ | ( | ||||||||||||||||
Net income (loss) per common share | ||||||||||||||||||||
Basic | $ | $ | $ | ( | ||||||||||||||||
Diluted | $ | $ | $ | ( | ||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||
Basic | ||||||||||||||||||||
Diluted |
Redeemable Convertible Series C Preferred Units | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Units | Amount | Shares | Amount | Amount | Amount | Shares | Amount | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Fair value adjustment of redemption option | — | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Distribution to Open Lending, LLC unitholders | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Recapitalization transaction, net of transaction costs | ( | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Change in deferred tax asset | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of contingent consideration as of the Closing Date | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of public warrants | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Earn-out Shares | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Release of Lock-up Shares | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Shares repurchased | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Change in deferred tax asset | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares repurchased | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units issued, net of shares withheld for taxes | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | $ | ( | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares repurchased | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock units issued, net of shares withheld for taxes | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | — | $ | $ | $ | $ | ( | ( | $ | ( | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ||||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
Share-based compensation | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Non-cash operating lease cost | ||||||||||||||||||||
Gain on extinguishment of tax receivable agreement | ( | |||||||||||||||||||
Loss on extinguishment of debt | ||||||||||||||||||||
Change in fair value of contingent consideration | ||||||||||||||||||||
Deferred income taxes | ||||||||||||||||||||
Changes in assets & liabilities | ||||||||||||||||||||
Accounts receivable, net | ( | ( | ||||||||||||||||||
Contract assets, net | ( | ( | ||||||||||||||||||
Other current and non-current assets | ( | ( | ( | |||||||||||||||||
Accounts payable | ( | ( | ||||||||||||||||||
Accrued expenses | ||||||||||||||||||||
Income tax receivable, net | ( | ( | ||||||||||||||||||
Operating lease liabilities | ( | ( | ( | |||||||||||||||||
Third-party claims administration liability | ||||||||||||||||||||
Other current and non-current liabilities | ( | |||||||||||||||||||
Net cash provided by operating activities | ||||||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Purchase of property and equipment | ( | ( | ( | |||||||||||||||||
Net cash used in investing activities | ( | ( | ( | |||||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from term loans | ||||||||||||||||||||
Proceeds from revolving credit facility | ||||||||||||||||||||
Payments on term loans | ( | ( | ( | |||||||||||||||||
Payments on revolving credit facility | ( | ( | ||||||||||||||||||
Payment of deferred financing costs | ( | ( | ( | |||||||||||||||||
Shares repurchased | ( | ( | ( | |||||||||||||||||
Shares withheld for taxes related to restricted stock units | ( | |||||||||||||||||||
Settlement of tax receivable agreement | ( | |||||||||||||||||||
Distributions to Open Lending, LLC unitholders | ( | |||||||||||||||||||
Proceeds from exercise of public warrants | ||||||||||||||||||||
Recapitalization transaction, net of transaction costs | ( | |||||||||||||||||||
Net cash (used in) provided by financing activities | ( | ( | ||||||||||||||||||
Net change in cash and cash equivalents and restricted cash | ||||||||||||||||||||
Cash and cash equivalents and restricted cash at the beginning of the year | ||||||||||||||||||||
Cash and cash equivalents and restricted cash at the end of the year | $ | $ | $ | |||||||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||||||
Interest paid | $ | $ | $ | |||||||||||||||||
Income tax paid, net | ||||||||||||||||||||
Property and equipment accrued but not paid | ||||||||||||||||||||
Right of use assets obtained in exchange for lease obligations | ||||||||||||||||||||
Non-cash investing and financing: | ||||||||||||||||||||
Change in fair value of redeemable convertible Series C preferred units | $ | $ | $ | ( | ||||||||||||||||
Conversion of preferred units to common stock |
Contract Assets | ||||||||||||||||||||||||||
Profit Share | TPA Fee | Program Fee | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Ending balance as of December 31, 2020 | $ | $ | $ | $ | ||||||||||||||||||||||
Increase of contract assets due to new business generation | ||||||||||||||||||||||||||
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods | ||||||||||||||||||||||||||
Receivables transferred from contract assets upon billing the lending institutions | ( | ( | ||||||||||||||||||||||||
Payments received from insurance carriers | ( | ( | ( | |||||||||||||||||||||||
Provision for expected credit losses | ( | ( | ( | ( | ||||||||||||||||||||||
Ending balance as of December 31, 2021 | ||||||||||||||||||||||||||
Increase of contract assets due to new business generation | ||||||||||||||||||||||||||
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods | ( | ( | ||||||||||||||||||||||||
Receivables transferred from contract assets upon billing the lending institutions | ( | ( | ||||||||||||||||||||||||
Payments received from insurance carriers | ( | ( | ( | |||||||||||||||||||||||
Provision for expected credit losses | ||||||||||||||||||||||||||
Ending balance as of December 31, 2022 | $ | $ | $ | $ |
December 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
New Term Loan due 2027 | $ | $ | |||||||||
Term Loan due 2026 | |||||||||||
2021 Revolving Credit Facility | |||||||||||
Less: Unamortized deferred financing costs | ( | ( | |||||||||
Total debt | |||||||||||
Less: Current portion of debt | ( | ( | |||||||||
Total long-term debt, net of deferred financing costs | $ | $ |
(in thousands) | |||||
2023 | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Total | $ |
(in thousands) | |||||
Fair value as of June 10, 2020 | $ | ||||
Change in fair value | |||||
Reclassification of shares to equity | ( | ||||
Fair value as of December 31, 2020 | $ |
Series | Units Authorized | Units Issued and Outstanding | Per Unit Liquidation Preference | Aggregate Liquidation Preference | Per Unit Initial Conversion Price | |||||||||||||||||||||||||||||||||
($ in thousands, except unit and per unit data) | ||||||||||||||||||||||||||||||||||||||
Non-redeemable preferred units | A | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Non-redeemable preferred units | B | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Redeemable preferred units | C | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Distributions | Non-Redeemable Preferred Units | Redeemable Preferred Units | ||||||||||||||||||
Series A | Series B | Series C | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
For the year ended December 31, 2020 | $ | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Time-based restricted stock units | $ | $ | $ | |||||||||||||||||
Performance-based restricted stock units | ( | |||||||||||||||||||
Stock options | ||||||||||||||||||||
Class B common units | ||||||||||||||||||||
Total share-based compensation expense | $ | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
General and administrative | $ | $ | $ | |||||||||||||||||
Selling and marketing | ||||||||||||||||||||
Research and development | ||||||||||||||||||||
Cost of services | ||||||||||||||||||||
Total | $ | $ | $ |
Time-Based Restricted Stock Units | ||||||||||||||
Number of Awards | Weighted Average Fair Value at Grant Date | |||||||||||||
Unvested as of December 31, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Forfeited | ( | |||||||||||||
Unvested as of December 31, 2022 | $ |
Performance-Based Restricted Stock Units | ||||||||||||||
Number of Awards | Weighted Average Fair Value at Grant Date | |||||||||||||
Unvested as of December 31, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Forfeited | ( | |||||||||||||
Unvested as of December 31, 2022 | $ |
Stock Options | ||||||||||||||||||||
Number of Awards | Weighted Average Exercise Price | Weighted Average Contractual Term (Years) | ||||||||||||||||||
Outstanding as of December 31, 2021 | $ | |||||||||||||||||||
Expired | ( | |||||||||||||||||||
Forfeited | ( | |||||||||||||||||||
Outstanding as of December 31, 2022 | $ | |||||||||||||||||||
Vested and expected to vest as of December 31, 2022 | $ | |||||||||||||||||||
Exercisable as of December 31, 2022 | $ |
Grant date | December 30, 2020 | |||||||
Weighted average grant date fair value | $ | |||||||
Risk-free interest rate (a) | ||||||||
Expected term (years) (b) | ||||||||
Expected volatility rate (c) | ||||||||
Expected dividend yield (d) |
Unrecognized Expense | Weighted Average Amortization Period (Years) | |||||||||||||
(in thousands) | ||||||||||||||
Time-based restricted stock units | $ | |||||||||||||
Performance-based restricted stock units | ||||||||||||||
Stock options | ||||||||||||||
Total unrecognized share-based compensation expense | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||||||
Basic net income (loss) per share: | ||||||||||||||||||||
Numerator | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ||||||||||||||||
Preferred distribution to redeemable convertible Series C preferred units | ( | |||||||||||||||||||
Accretion to redemption value of redeemable convertible Series C preferred units | ||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | $ | ( | ||||||||||||||||
Denominator | ||||||||||||||||||||
Weighted-average common shares outstanding | ||||||||||||||||||||
Basic net income (loss) per share attributable to common stockholders | $ | $ | $ | ( | ||||||||||||||||
Diluted net income (loss) per share: | ||||||||||||||||||||
Numerator | ||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | $ | ( | ||||||||||||||||
Denominator | ||||||||||||||||||||
Basic weighted average common shares outstanding | ||||||||||||||||||||
Dilutive effect of time-based restricted stock units outstanding | ||||||||||||||||||||
Diluted weighted average common shares outstanding | ||||||||||||||||||||
Diluted net income (loss) per share attributable to common stockholders | $ | $ | $ | ( |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Unvested and unexercised stock options | ||||||||||||||||||||
Unvested time-based restricted stock units | ||||||||||||||||||||
Unvested performance-based restricted stock units | ||||||||||||||||||||
Redeemable public warrants | ||||||||||||||||||||
Contingent Consideration | ||||||||||||||||||||
Retroactively restated redeemable convertible Series C preferred units | ||||||||||||||||||||
Total |
Total | Fair value measurement as of December 31, 2022 | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
U.S. Treasury securities | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Total | Fair value measurement as of December 31, 2021 | |||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Cash equivalents: | ||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
Total | $ | $ | $ | $ |
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
Carrying value | Fair value | Carrying value | Fair value | |||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Debt | $ | $ | $ | $ | ||||||||||||||||||||||
Total | $ | $ | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating lease expense | $ | $ | $ | |||||||||||||||||
Variable lease payments | ||||||||||||||||||||
Total lease expense | $ | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Operating cash outflows | $ | $ | $ | |||||||||||||||||
ROU assets obtained in exchange for new lease liabilities | ||||||||||||||||||||
Weighted-average remaining lease term (in years) | ||||||||||||||||||||
Weighted-average discount rate | % | % | % |
December 31, 2022 | December 31, 2021 | ||||||||||
(in thousands) | |||||||||||
Operating lease right-of-use asset | $ | $ | |||||||||
Accumulated amortization | ( | ( | |||||||||
Operating lease right-of-use asset, net | $ | $ | |||||||||
Other current liabilities | $ | $ | |||||||||
Operating lease liabilities | |||||||||||
Total operating lease liabilities | $ | $ |
As of December 31, 2022 | ||||||||
(in thousands) | ||||||||
2023 | $ | |||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
2027 | ||||||||
Thereafter | ||||||||
Total undiscounted liabilities | ||||||||
Less: Imputed interest | ||||||||
Present value of lease liabilities | $ | |||||||
Year Ended December 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
(in thousands) | |||||||||||||||||
Current tax expense | |||||||||||||||||
Federal | $ | $ | $ | ||||||||||||||
State | |||||||||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
Federal | ( | ||||||||||||||||
State | ( | ||||||||||||||||
Income tax expense | $ | $ | $ |
Year Ended December 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Income tax expense computed at the statutory rate | % | % | % | |||||||||||||||||
State income taxes | % | % | % | |||||||||||||||||
Gain on extinguishment of tax receivable agreement | % | ( | % | % | ||||||||||||||||
Contingent consideration | % | % | ( | % | ||||||||||||||||
Other | % | ( | % | % | ||||||||||||||||
Income tax expense (benefit) effective rate | % | % | ( | % |
Year Ended December 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Deferred tax assets | |||||||||||
Amortizable intangible assets | $ | $ | |||||||||
Operating lease liabilities | |||||||||||
Accrued expenses and other | |||||||||||
Total deferred tax assets (1) | $ | $ | |||||||||
Deferred tax liabilities | |||||||||||
Contract assets | ( | ( | |||||||||
Operating lease right-of-use asset | ( | ( | |||||||||
Property and equipment | ( | ( | |||||||||
Other | ( | ( | |||||||||
Total deferred tax liabilities | $ | ( | $ | ( | |||||||
Deferred tax asset, net | $ | $ | |||||||||
U.S. Federal | 2016 | ||||
State of Texas | 2016 | ||||
State of New York | 2017 | ||||
State of Illinois | 2020 |
Name of Subsidiary | Jurisdiction | Ownership | ||||||||||||||||||
Open Lending, LLC | Delaware | 100 | % | |||||||||||||||||
Lenders Protection, LLC | Delaware | 100 | % | |||||||||||||||||
Insurance Administrative Services, LLC | Delaware | 100 | % |
Date: February 28, 2023 | /s/ Keith A. Jezek | ||||
Keith A. Jezek | |||||
Chief Executive Officer (Principal Executive Officer) |
Date: February 28, 2023 | /s/ Charles D. Jehl | ||||
Charles D. Jehl | |||||
Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ Keith A. Jezek | |||||
Keith A. Jezek | |||||
Chief Executive Officer (Principal Executive Officer) | |||||
Date: February 28, 2023 |
/s/ Charles D. Jehl | |||||
Charles D. Jehl | |||||
Chief Financial Officer (Principal Financial and Accounting Officer) | |||||
Date: February 28, 2023 |
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Audit Information |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Audit Information [Abstract] | |
Auditor Firm ID | 42 |
Auditor Name | Ernst & Young LLP |
Auditor Location | Austin, Texas |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Stockholders’ equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 550,000,000 | 550,000,000 |
Common stock, shares issued (in shares) | 128,198,185 | 128,198,185 |
Common stock, shares outstanding (in shares) | 123,646,059 | 126,212,876 |
Treasury stock (in shares) | 4,552,126 | 1,985,309 |
Description of Business, Background and Nature of Operations |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Description of Business, Background and Nature of Operations | Description of Business, Background and Nature of Operations The Company, headquartered in Austin, Texas, provides loan analytics, risk-based loan pricing, risk modeling, and automated decision technology for automotive lenders throughout the U.S., which enables each lending institution to book near-prime and non-prime automotive loans, coupled with real-time underwriting of loan default insurance, out of their existing business flow. The Company also operates as a third-party administrator that adjudicates insurance claims and premium adjustments on automotive loans. The Company’s flagship product, LPP, is a cloud-based automotive lending platform. LPP supports loans made to near-prime and non-prime borrowers and is designed to underwrite default insurance by linking automotive lenders to insurance companies. The platform uses risk-based pricing models that enable automotive lenders to assess the credit risk of a potential borrower using data driven analysis. The Company’s proprietary risk models project loan performance, including expected losses and prepayments in arriving at the optimal rate. With five send decisioning, LPP generates a risk-based, all-inclusive interest rate for a loan that is customized to each automotive lender, reflecting cost of capital, loan servicing and acquisition costs, expected recovery rates and target return on assets. Nebula 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 entered into a business combination pursuant to that certain Business Combination Agreement by and among Nebula, Open Lending, LLC, the Blocker, the Blocker’s sole stockholder, Nebula Parent Corp., NBLA Merger Sub LLC, NBLA Merger Sub Corp., and Shareholder Representative Services LLC, as the security holder representative. Refer to Note 3—Business Combination for further discussion. The Company has evaluated how it is organized and managed and has identified only one operating segment. All of the Company’s operations and assets are in the U.S., and all of its revenues are attributable to U.S. customers.
|
Summary of Significant Accounting and Reporting Policies |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting and Reporting Policies | Summary of Significant Accounting and Reporting Policies a)Basis of presentation and consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of the Company 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 presentation of its consolidated financial statements as of and for the year ended December 31, 2022. The Business Combination was accounted for as a reverse recapitalization as Open Lending, LLC was determined to be the accounting acquirer under the Financial Accounting Standards Board’s ASC Topic 805, Business Combinations (“ASC 805”). The determination was primarily based on the evaluation of the following facts and circumstances: •the pre-combination unitholders of Open Lending, LLC held the majority of voting rights in the Company; •the pre-combination unitholders of Open Lending, LLC had 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 the common stock of the Company, with a par value of $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 since the consolidated assets and liabilities and results of operations prior to the Closing Date were those of Open Lending, LLC. The shares and corresponding capital amounts and net income (loss) 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 was 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 of the Business Combination. b)Use of estimates and judgments The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the 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 valuation of share-based compensation arrangements, valuation of the Contingent Consideration, as defined below, 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. c)Income taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that is greater than 50% likely of being realized. The Company records potential interest and penalties related to an underpayment of income taxes as other expenses and penalties and is recognized within general and administrative expenses within the consolidated statements of operations. d)Cash and cash equivalents Cash and cash equivalents consist of commercial analysis accounts, money market funds and U.S. Treasury securities. The Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company determines the appropriate classification of the Company’s cash and cash equivalents at the time of purchase. e)Restricted cash Restricted cash relates to deposits held in a financial institution for the processing of automated clearing house transactions and 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. As a third-party administrator of insurance claims and refund adjudication, the Company collects funds from insurance partners which are intended to be used to settle insurance claims and process funds on behalf of the insurance partners. The balance of these funds held on behalf of insurance partners was $4.1 million and $3.1 million as of December 31, 2022 and 2021 respectively, with an offsetting liability included in third-party claims administration liability on the consolidated balance sheets. f)Accounts receivable Accounts receivable includes program fees billed to customers, for which payments are expected to be received within 30 days from billing. The program fees are assessed at the time when the customer uses LPP to certify consumer loans and are billed either as an upfront fee or in 12 equal installments. The Company bills customers for the upfront fee following the month the service is provided and for the monthly installment fee over 12 months. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statement of cash flows. g)Contract assets Contract assets for program fees are increased by recognized and unbilled program fee revenues related to monthly-pay arrangements. Once the monthly-pay arrangement’s program fees for the current month are due, they are reclassified from contract assets and recognized as accounts receivable. Contract assets for profit share and claims administration fees (“TPA fees”) are increased for recognized profit share and TPA fees revenue and are decreased by payments received from insurance carriers within 60 days after month end. These payments are reported in net cash provided by operating activities within the consolidated statement of cash flows. Refer to Note 4—Contract Assets for additional information. h)Allowance for expected credit losses Effective January 1, 2021, the Company adopted ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), and as such, the Company maintains an allowance for expected credit losses on its accounts receivable and contract assets. The allowance represents an estimate based primarily on market implied lifetime probabilities of default and loss severities for assets with similar risk characteristics. As these inputs are derived from market observations, they inherently include forward-looking expectations about macro-economic conditions. The allowance is evaluated quarterly by the Company for adequacy by taking into consideration factors such as reasonableness of the market implied loss statistics, historical lifetime loss data, and credit quality of the customer base. Provisions for the allowance for expected credit losses attributable to bad debt are recorded as general and administrative expenses. Account balances deemed uncollectible are written off, net of actual recoveries. If circumstances related to specific customers change, the Company’s estimate of the recoverability of its contract asset could be further adjusted. The Company does not have any material account receivable or contract asset receivable balances that are past due and has not written off any balances in its portfolio for the periods presented. The allowance for expected credit losses on accounts receivable and contract assets receivable, in the aggregate, was less than $0.2 million as of December 31, 2022 and 2021. i)Property and equipment The Company’s property and equipment primarily consists of software developed for internal use, furniture, fixtures and equipment used in the normal course of business, and leasehold improvements. Property and equipment are recorded at cost, less accumulated depreciation, amortization and impairment losses, if any. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective asset are expensed as incurred. Depreciation and amortization expense is calculated using the straight-line method based on the estimated useful lives of the property and equipment, which ranges from to eight years. Depreciation and amortization expense was $0.9 million, $0.8 million and $0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively, and is recognized within general and administrative expenses in the consolidated statements of operations. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. The Company’s property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the amount recorded may not be recoverable, and if not deemed recoverable based on the assets’ expected undiscounted cash flows, an impairment loss is recognized to the extent that the carrying amount exceeds the fair value. j)Operating Leases The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date. The Company recognizes lease right-of-use (“ROU”) assets and lease liabilities for operating and finance leases with initial terms greater than 12 months. ROU assets represent the Company’s right to use an asset for the lease term, while lease liabilities represent the Company’s obligation to make the related lease payments. The ROU assets for operating and finance leases and liabilities are recognized based on the present value of fixed lease payments over the lease term at the lease commencement date. Lease liabilities are calculated as the present value of fixed payments not yet paid at the measurement date. Since the interest rate implicit in the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of its lease payments. The Company’s incremental borrowing rate is determined based on the interest rate paid to borrow on a collateralized basis over a similar term. Operating lease ROU assets are recognized net of any lease prepayments and incentives. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments that are not based on an index or a rate, such as common area maintenance fees, taxes and insurance, are expensed as incurred. k)Fair value measurements 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 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. l)Revenue recognition The Company’s revenue is generated through three streams: (i) profit share paid to the Company by insurance partners, (ii) program fees paid to the Company by automotive lenders and (iii) claims administration service fees paid to the Company by insurance partners. The Company disaggregates revenues by revenue source (i.e., profit share, program fees, and claims administration and other service fees), and the level of disaggregation is presented in the consolidated statements of operations. The Company accounts for a contract with a customer when (i) both parties have approved the contract and are committed to perform their respective obligations, (ii) each party’s rights and payment terms can be identified, (iii) the contract has commercial substance, and (iv) it is probable the Company will collect substantially all of the consideration it is entitled to receive. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. In compliance with ASC 606, when the Company’s performance obligations have been completed, however the final amount of transaction price is unknown, the Company estimates the amount of the transaction price it expects to be entitled to under the Company’s customer contracts. The Company recognizes subsequent adjustments to an estimated transaction price upon the receipt of additional information or final settlement, whichever occurs first. Profit Share Revenue. Profit share represents the Company’s participation in the underwriting profit of third-party insurance partners who provide automotive lenders with credit default insurance on loans those lenders make using 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 and recognizes profit share based on the amount of cash flows it expects to receive from the insurance company over the term of the underlying insured loan. On a quarterly basis, the Company uses a forecast model to estimate variable consideration based on undiscounted expected future profit share to be received from the insurance carriers. The forecast model projects loan-level earned premiums and insurance claim payments driven by projections of prepayment rate, loan default rate and severity of loss. These assumptions are derived from an analysis of the historical performance of the active loan portfolio, prevailing default and prepayment trends, and macroeconomic projections. Estimates of variable consideration generated by the forecast model are constrained to the extent that it is probable that a significant reversal of incremental revenue will not occur in future periods. The Company continually assesses the default and prepayment assumptions of its core forecast model against reported performance and lender delinquency data. The forecast model is updated to ensure that default and prepayment rate projections align with actual experience. Program fee revenue. The Company earns program fees by providing customers with access to and use of LPP. Program fee contracts contain a single performance obligation, which is complete when a loan is certified through LPP and is issued by the lending institution. Approximately 10% of loan originations are paid through 12-month financing arrangements. Claims administration services. For the insurance policies issued through the Company’s program, the Company provides adjudication services for insurance claims on the third-party insurer’s policies for auto loans processed through LPP. The Company earns a monthly service fee which is calculated by the third-party insurance providers as 3% of the monthly net insurance earned premium collected over the life of the underlying loan. 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 its performance obligations. Revenue is recognized as the service is provided over the term of the adjudication contract with the insurance carrier. m)Research and development costs Research and development costs consist primarily of compensation and benefits of employees engaged in the ongoing development of the Company’s lending enablement platform, LPP. n)Deferred financing costs Deferred financing costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense in accordance with the related debt agreement. Deferred financing costs related to the New Term Loan due 2027 are included as a reduction within long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets. Deferred financing costs related to the 2021 Revolving Credit Facility are included in other assets on the accompanying consolidated balance sheets. o)Share-based compensation The Company uses the grant date fair value of time-based restricted stock units (“RSUs”) and PSUs and utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock options. This model requires the use of input assumptions, including expected volatility, expected life, expected dividend yield, and expected risk-free rate of return. The expected life of the awards is estimated using the “Simplified Method”, which utilizes the midpoint between the vesting date and the end of the contractual term. The Company uses the Simplified Method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of awards. The expected volatility is based on the average of implied and observed historical volatility of comparable companies since the Company does not have enough history as a public company. Changes in these assumptions can materially affect the fair value estimate of the awards. The Company recognizes compensation expense for unvested awards in the consolidated statements of operations and, net of actual forfeitures in the period they occur, on a straight-line basis over the requisite service or performance period. PSUs are evaluated on a quarterly basis for probability of meeting performance metrics and any adjustments to share-based compensation expense are then made in the quarter of evaluation. For PSUs, the Company must also make assumptions regarding the likelihood of achieving performance metrics. If actual results differ significantly from these estimates, share-based compensation expense and the Company’s results of operations could be materially affected. The Company expects to issue shares from treasury stock when stock options are exercised or when RSUs and PSUs vest. p)Contingent consideration As part of the Business Combination, Open Lending, LLC unitholders and certain Nebula equity holders were entitled to additional consideration in the form of shares of the Company’s common stock to be issued when the Company’s common stock price achieved certain market share price milestones within specified periods following the Closing Date (the “Contingent Consideration”). In addition, the Nebula sponsors were restricted to transfer a portion of their founder shares unless market share price targets were achieved within the specified period. Pursuant to the guidance under ASC 815, Derivatives and Hedging, the Contingent Consideration was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period was recognized as expense or income accordingly. The fair value of the Contingent Consideration was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility. The fair value of the Contingent Consideration on each vesting date (i.e., the date when each respective share price performance milestone was achieved) was based on the closing share price of the Company's publicly traded stock on the vesting date. The Company’s Contingent Consideration was settled in July and August of 2020. Refer to Note 6—Contingent Consideration for additional information regarding the nature and timing of the Company’s Contingent Consideration. q)Treasury stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity (deficit). r)Net income (loss) per share The Company computes net income (loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributions as if all income for the period had been distributed. Prior to the Business Combination, the Company’s pre-merger LLC membership structure included common units and convertible preferred units which were regarded as participating securities. When calculating the net income (loss) per share for the presented periods, the Company has retroactively restated the number of common and preferred units issued and outstanding prior to the Closing Date to the number of shares of common stock into which they were converted, based on the exchange ratio established in the Business Combination Agreement. In accordance with the Company’s pre-merger LLC membership structure, holders of the redeemable convertible preferred units were entitled to distributions in preference to common stockholders, at specified rates, if declared. The Company also recognized adjustments to redemption amount of the redeemable convertible preferred units similar to a distribution, in temporary equity. Any remaining net income would then be distributed to the holders of common stock and non-redeemable convertible preferred units on a pro-rata basis assuming conversion of all convertible preferred units into common stock in the event that the Company had profits to be allocated to the stockholders. However, the redeemable convertible preferred units did not contractually require the holders of such participating instruments to participate in the Company’s losses. As such, net losses for the periods presented were allocated to common stock only. The Company’s basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common shares outstanding for the period, without consideration of potentially dilutive securities. The diluted net income (loss) per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net income (loss) per share is the same as basic net income (loss) per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive. s)Concentrations of revenue and credit risks The Company’s three largest insurance carrier partners accounted for 34%, 11% and 10%, respectively, of the Company’s total revenue during the year ended December 31, 2022. The Company’s two largest insurance carrier partners accounted for 41% and 22%, respectively, of the Company’s total revenue during the year ended December 31, 2021. In the event that one or more of the Company’s other significant customers terminate their relationships with the Company, or elect to utilize an alternative source for financing, the number of loans originated through LPP would decline, which would materially and adversely affect the Company’s business and, in turn, its revenue. Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, restricted cash, 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 accounts, money market funds and U.S. Treasury securities at financial institutions 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 receivable and contract assets are derived from revenue earned from customers. Effective January 1, 2021, the Company maintains an allowance for expected credit losses on its accounts receivable and contract asset receivable in accordance with CECL. As of December 31, 2022, the Company had no customers that represented at least 10% of the Company’s accounts receivable. As of December 31, 2021, the Company had two customers that each represented at least 10% of the Company’s accounts receivable. t)Recently issued accounting pronouncements not yet adopted 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 the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to 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 experienced no unintended outcomes or consequences of reference rate reform that would necessitate the adoption of this guidance. As such, the Company has considered this guidance in relation to its existing credit agreement, and determined that it is not applicable (refer to the 2022 Credit Agreement discussion within Note 5—Debt). Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or may adopt, as applicable, the Company believes none of these accounting pronouncements has materially impacted or will have a material impact on the Company’s consolidated financial position or results of operations. u) Recently adopted new accounting standards
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Business Combination |
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||
Business Combination | Business Combination On June 10, 2020, the Closing Date, Nebula entered into a Business Combination with Open Lending, LLC pursuant to the Business Combination Agreement. In accordance with ASC 805, for financial accounting and reporting purposes, Open Lending, LLC was determined to be the accounting acquirer and Nebula was treated as the accounting acquiree. Accordingly, the Business Combination was accounted for as a reverse recapitalization, whereby it 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 were deemed the historical financial statements of the Company, while the net assets of Nebula were recorded at historical costs, with no goodwill or other intangible assets in accordance with U.S. GAAP, and thereafter, 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 established 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 of the Business Combination, net of transaction expenses, (ii) $135.0 million in cash distribution from debt issued in March 2020, and (iii) 51,909,655 shares of common stock valued at $10.00 per share, totaling $519.1 million. In addition, Open Lending, LLC’s unitholders were entitled to receive additional Contingent Consideration of up to an aggregate of 22,500,000 shares if the price of the Company’s common stock trading on the Nasdaq at a given time met certain thresholds following the Business Combination. All Contingent Consideration shares were issued or released during the year ended December 31, 2020. Refer to Note 6—Contingent Consideration for additional information. In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $55.5 million related to equity issuance during the year ended December 31, 2020, which primarily included investment banking, legal, accounting and other professional fees recorded to additional paid-in capital as a reduction of related proceeds. The Company also incurred $9.1 million in transaction bonuses paid to key employees and directors and $2.2 million in share-based compensation expense due to the accelerated vesting of Open Lending, LLC’s legacy share-based compensation plan. The transaction bonuses and the accelerated share-based compensation expense were included in general and administrative expense on the Company’s consolidated statement of operations for the year ended December 31, 2020. Refer to Note 8—Share-Based Compensation for additional information.Contingent ConsiderationAs part of the Business Combination, Open Lending, LLC unitholders and certain Nebula equity holders were entitled to additional consideration in the form of shares of the Company’s common stock to be issued when the Company’s common stock price achieved certain market share price milestones within specified periods following the Closing Date. In addition, a portion of the Nebula sponsors' shares were subject to transfer restrictions unless market share price targets were achieved within the specified period. Pursuant to the guidance under ASC 815, Derivatives and Hedging, the Contingent Consideration was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period was recognized as expense or income accordingly. The fair value of the Contingent Consideration on the Closing Date and each subsequent reporting period was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility. The fair value of the Contingent Consideration on each vesting date (i.e., the date when each respective share price performance milestone was achieved) was based on the closing share price of the Company’s publicly traded stock on the vesting date. Founders Shares Subject to Transfer Restrictions Immediately following the consummation of the Business Combination, 3,437,500 shares of common stock issued and outstanding held by Nebula Holdings, LLC (“Nebula Holdings”) and its affiliates were subject to transfer restrictions (the “Lock-up Shares”). The holder of the Lock-up Shares could not sell, transfer or otherwise dispose of their respective shares until the respective lock-up provisions were achieved as described further below. The Lock-up Shares had full ownership rights including the right to vote and receive dividends and other distributions thereon, and were released from the transfer restrictions upon achieving certain market share price milestones as follows: 1)The 3,437,500 shares would be released from the lock-up restriction and no longer subject to forfeiture if the daily volume weighted average price (“VWAP”) of the Company’s common stock was greater than or equal to $12.00 for one-half of the Lock-up Shares and $14.00 per share for one-half of the Lock-up Shares, respectively, for 20 trading days over a 30-trading day period at any time within seven years after the Closing Date. 2)The Lock-up shares would be released from the lock-up restrictions on the date the Company underwent a change of control as defined in the Business Combination Agreement. Contingently Issuable Shares Pursuant to the Business Combination Agreement, Open Lending, LLC’s unitholders would be able to receive up to 22,500,000 shares of common stock contingent upon achieving certain market share price milestones within a period of 42 months subsequent to the Business Combination. The Company would issue 7,500,000 shares of common stock when each of the following conditions was met, respectively: 1)the VWAP was greater than or equal to $12.00 over any 20 trading days within any 30-trading day period prior to or as of the 24th month of the Closing Date; 2)the VWAP was greater than or equal to $14.00 over any 20 trading days within any 30-trading day period prior to or as of the 30th month of the Closing Date; and 3)the VWAP was greater than or equal to $16.00 over any 20 trading days within any 30-trading day period prior to or as of the 42nd month of the Closing Date. In connection with the Business Combination, certain Nebula equity holders would be able to receive up to 1,250,000 earn-out shares of common stock contingent upon achieving certain market share price milestones within a period of 30 months post Business Combination (the “Earn-out Shares”). The Company would issue 625,000 shares of common stock when each of the following conditions is met, respectively: 1)the VWAP was greater than or equal to $12.00 over any 20 trading days within any 30-trading day period prior to or as of the 24th month of the Closing Date; and 2)the VWAP was greater than or equal to $14.00 over any 20 trading days within any 30-trading day period prior to or as of the 30th month of the Closing Date. The Contingent Consideration and the Earn-out Shares would vest immediately in the event of a change of control as defined in the Business Combination Agreement. Settlement of Contingent Consideration On July 10, 2020, the daily VWAP of the Company’s common stock had been greater than $12.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of 7,500,000 Contingent Consideration shares and 625,000 Earn-out Shares. On July 15, 2020, the daily VWAP of the Company’s common stock had been greater than $14.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of an additional 7,500,000 Contingent Consideration shares and 625,000 Earn-out Shares. On August 11, 2020, the daily VWAP of the Company’s common stock had been greater than $16.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of an additional 7,500,000 Contingent Consideration shares. In addition, upon achievement of the daily VWAP milestones of both $12.00 per share and $14.00 per share discussed above, 3,437,500 Lock-up Shares were released from the lock-up restrictions and the holders of these shares were no longer restricted from selling and/or transferring the shares. In the three months ended September 30, 2020, 27,187,500 shares of common stock were issued or released in connection with these milestone achievements. Immediately prior to each vesting, the carrying amount of the Contingent Consideration liability on the Company’s consolidated balance sheet was marked to market, and the related change of fair value was recorded in the consolidated statements of operations. Upon vesting, the Contingent Consideration liability was reclassified to equity, the vested shares were issued and recorded as common stock at a par value of $0.01 per share, and the incremental fair value amount was recorded as additional paid-in capital. A reconciliation of changes in the Contingent Consideration liability during the year ended December 31, 2020 was as follows:
Upon inception, the initial estimated fair value of the Contingent Consideration on the Closing Date of $347.1 million was recorded as a long-term liability in the Company’s consolidated balance sheet. The related increase in fair value of $131.9 million during the year ended December 31, 2020 was recorded as a change in fair value of contingent consideration in the Company’s consolidated statements of operations. With the vesting of the Contingent Consideration shares during the year ended December 31, 2020, the contingent consideration liability was reclassified to equity, and accordingly approximately $0.3 million was recorded to common stock and $478.7 million was recorded to additional paid-in capital.
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Contract Assets |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract Assets | Contract AssetsChanges in the Company’s contract assets primarily result from 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 exchange for consideration from the customer. The Company recognizes contract assets when it transfers services to a customer, recognizes revenue for amounts not yet billed, and the right to consideration is conditional on something other than the passage of 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 revenue forecast on a quarterly basis and adjusts contract assets accordingly. During the years ended December 31, 2022 and 2021, contract asset adjustments attributable to profit share revenue forecast adjustments resulted in a reduction of $5.7 million and an increase of $30.9 million, respectively. Contract assets balances for the periods indicated below were as follows:
As of December 31, 2022 and 2021, the Company’s contract assets consisted of $54.4 million and $70.5 million, respectively, as the current portion estimated to be received within one year, and $21.0 million and $42.4 million, respectively, in the non-current portion to be received beyond one year. Contract Costs The fulfillment costs associated with the Company’s contracts with customers do not meet the criteria for capitalization and therefore are expensed as incurred
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The following table provides a summary of the Company’s debt as of the dates indicated:
Prior Credit Agreement—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 “Prior Credit Agreement”). Pursuant to the Prior Credit Agreement, the lenders thereto funded a Term Loan due 2027 in a principal amount of $170.0 million, bearing an interest rate per annum of LIBOR plus 6.50% (subject to a LIBOR floor of 1.0%) and maturing in March 2027. On March 19, 2021, the Company retired the Term Loan due 2027 by paying off its outstanding principal and interest using proceeds from the issuance of the Term Loan due 2026 and the 2021 Revolving Credit Facility (both as defined below). The transaction was deemed 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 within loss on extinguishment of debt in the consolidated statements of operations. The loss on debt extinguishment was determined 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. 2022 Credit Agreement—Term Loan due 2026, New Term Loan due 2027, and New Revolving Credit Facility On March 19, 2021, the Company entered into a credit agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) as the administrative agent, 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 “2021 Revolving Credit Facility”), collectively, the “2021 Credit Agreement”. On September 9, 2022, the Company entered into a First Amendment to the 2021 Credit Agreement with Wells Fargo, as the administrative agent, and the financial institutions party thereto, as the lenders). The First Amendment provided the Company senior secured credit facilities in an aggregate principal amount of $300.0 million, which (i) established a New Term Loan due 2027 with a principal amount of $150.0 million, and (ii) increased the borrowing capacity on the New Revolving Credit Facility to $150.0 million, both scheduled to mature on September 9, 2027. In addition, the First Amendment, among other things, (i) replaced LIBOR with Adjusted SOFR as the interest rate benchmark, (ii) decreased the unused fees and the interest rate margins applicable to the New Revolving Credit Facility, (iii) resulted in lower interest rate margins applicable to the New Term Loan due 2027 compared to those applicable to the Term Loan due 2026 that have been repaid, (iv) provided financial covenant flexibility by extending the date at which the net leverage ratio covenant steps-down from 3.5:1 to 3.0:1 to September 30, 2024, and (v) extended the date at which the required term loan amortization payments increase from 2.5% per annum to 5.0% per annum from June 30, 2023 to December 31, 2024. The Company used proceeds from the New Term Loan due 2027 to pay off all outstanding amounts under the 2021 Credit Agreement and pay transaction costs related to the First Amendment. The remaining proceeds were used for working capital and other general corporate purposes. The transaction was treated as a debt modification under ASC Topic 470-50, “Modifications and Extinguishments”. The obligations of the Company under the New Term Loan due 2027 and the New Revolving Credit 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 New Term Loan due 2027 and the New Revolving Credit Facility are, at the option of the Company, either at an Alternate Base rate (“ABR”) plus a spread ranging from 0.625% to 1.375%, or Adjusted SOFR plus a spread ranging from 1.625% to 2.375%. With respect to the ABR loans, interest will be payable at the end of each calendar quarter. With respect to the Adjusted SOFR loans, interest will be payable at the end of the selected interest period (at least quarterly). Additionally, there is a commitment fee payable at the end of each quarter at a rate per annum ranging from 0.15% to 0.225% based on the average daily unused portion of the New Revolving Credit Facility and other customary letter of credit fees. Pursuant to the 2022 Credit Agreement, the interest rate spreads and commitment fees increase or decrease in increments as the Company’s Funded Secured Debt/EBITDA ratio increases or decreases. As of December 31, 2022, the New Term Loan due 2027 and the New Revolving Credit Facility were both subject to an Adjusted SOFR rate of 3.82% plus a spread of 1.63% per annum. Commitment fees were accrued at 0.15% under the New Revolving Credit Facility’s unused commitment balance of $150.0 million as of December 31, 2022. As of December 31, 2022, the effective interest rate on the Company’s outstanding borrowings was 5.69%. In connection with the 2021 and 2022 Credit Agreements, the Company incurred aggregate deferred financing costs of $2.6 million, of which (i) $2.1 million was allocated to the related term loans and capitalized as a contra-liability against the principal balance of the term loans, and (ii) $0.5 million was allocated to the 2021 Revolving Credit Facility and is included within other assets on the consolidated balance sheets. These deferred financing costs are amortized as interest expense using the effective interest method over the term of the 2022 Credit Agreement. Unamortized deferred financing costs related to the term loans and the 2021 Revolving Credit Facility were $1.6 million and $0.3 million, respectively, as of December 31, 2022. The 2022 Credit Agreement contains a maximum total net leverage ratio financial covenant and a minimum fixed charge coverage ratio financial covenant, which are tested quarterly. The maximum total net leverage ratio is 3.5:1 for any fiscal quarter ending on or prior to June 30, 2024 and then decreases to 3.0:1 for any fiscal quarter ending after June 30, 2024. The minimum fixed charge coverage ratio is 1.25:1. As of December 31, 2022, the Company was in compliance with all required covenants under the 2022 Credit Agreement. Principal Maturities of Debt Principal maturities of debt outstanding as of December 31, 2022 are as follows:
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Contingent Consideration |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||
Contingent Consideration | Business Combination On June 10, 2020, the Closing Date, Nebula entered into a Business Combination with Open Lending, LLC pursuant to the Business Combination Agreement. In accordance with ASC 805, for financial accounting and reporting purposes, Open Lending, LLC was determined to be the accounting acquirer and Nebula was treated as the accounting acquiree. Accordingly, the Business Combination was accounted for as a reverse recapitalization, whereby it 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 were deemed the historical financial statements of the Company, while the net assets of Nebula were recorded at historical costs, with no goodwill or other intangible assets in accordance with U.S. GAAP, and thereafter, 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 established 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 of the Business Combination, net of transaction expenses, (ii) $135.0 million in cash distribution from debt issued in March 2020, and (iii) 51,909,655 shares of common stock valued at $10.00 per share, totaling $519.1 million. In addition, Open Lending, LLC’s unitholders were entitled to receive additional Contingent Consideration of up to an aggregate of 22,500,000 shares if the price of the Company’s common stock trading on the Nasdaq at a given time met certain thresholds following the Business Combination. All Contingent Consideration shares were issued or released during the year ended December 31, 2020. Refer to Note 6—Contingent Consideration for additional information. In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $55.5 million related to equity issuance during the year ended December 31, 2020, which primarily included investment banking, legal, accounting and other professional fees recorded to additional paid-in capital as a reduction of related proceeds. The Company also incurred $9.1 million in transaction bonuses paid to key employees and directors and $2.2 million in share-based compensation expense due to the accelerated vesting of Open Lending, LLC’s legacy share-based compensation plan. The transaction bonuses and the accelerated share-based compensation expense were included in general and administrative expense on the Company’s consolidated statement of operations for the year ended December 31, 2020. Refer to Note 8—Share-Based Compensation for additional information.Contingent ConsiderationAs part of the Business Combination, Open Lending, LLC unitholders and certain Nebula equity holders were entitled to additional consideration in the form of shares of the Company’s common stock to be issued when the Company’s common stock price achieved certain market share price milestones within specified periods following the Closing Date. In addition, a portion of the Nebula sponsors' shares were subject to transfer restrictions unless market share price targets were achieved within the specified period. Pursuant to the guidance under ASC 815, Derivatives and Hedging, the Contingent Consideration was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period was recognized as expense or income accordingly. The fair value of the Contingent Consideration on the Closing Date and each subsequent reporting period was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility. The fair value of the Contingent Consideration on each vesting date (i.e., the date when each respective share price performance milestone was achieved) was based on the closing share price of the Company’s publicly traded stock on the vesting date. Founders Shares Subject to Transfer Restrictions Immediately following the consummation of the Business Combination, 3,437,500 shares of common stock issued and outstanding held by Nebula Holdings, LLC (“Nebula Holdings”) and its affiliates were subject to transfer restrictions (the “Lock-up Shares”). The holder of the Lock-up Shares could not sell, transfer or otherwise dispose of their respective shares until the respective lock-up provisions were achieved as described further below. The Lock-up Shares had full ownership rights including the right to vote and receive dividends and other distributions thereon, and were released from the transfer restrictions upon achieving certain market share price milestones as follows: 1)The 3,437,500 shares would be released from the lock-up restriction and no longer subject to forfeiture if the daily volume weighted average price (“VWAP”) of the Company’s common stock was greater than or equal to $12.00 for one-half of the Lock-up Shares and $14.00 per share for one-half of the Lock-up Shares, respectively, for 20 trading days over a 30-trading day period at any time within seven years after the Closing Date. 2)The Lock-up shares would be released from the lock-up restrictions on the date the Company underwent a change of control as defined in the Business Combination Agreement. Contingently Issuable Shares Pursuant to the Business Combination Agreement, Open Lending, LLC’s unitholders would be able to receive up to 22,500,000 shares of common stock contingent upon achieving certain market share price milestones within a period of 42 months subsequent to the Business Combination. The Company would issue 7,500,000 shares of common stock when each of the following conditions was met, respectively: 1)the VWAP was greater than or equal to $12.00 over any 20 trading days within any 30-trading day period prior to or as of the 24th month of the Closing Date; 2)the VWAP was greater than or equal to $14.00 over any 20 trading days within any 30-trading day period prior to or as of the 30th month of the Closing Date; and 3)the VWAP was greater than or equal to $16.00 over any 20 trading days within any 30-trading day period prior to or as of the 42nd month of the Closing Date. In connection with the Business Combination, certain Nebula equity holders would be able to receive up to 1,250,000 earn-out shares of common stock contingent upon achieving certain market share price milestones within a period of 30 months post Business Combination (the “Earn-out Shares”). The Company would issue 625,000 shares of common stock when each of the following conditions is met, respectively: 1)the VWAP was greater than or equal to $12.00 over any 20 trading days within any 30-trading day period prior to or as of the 24th month of the Closing Date; and 2)the VWAP was greater than or equal to $14.00 over any 20 trading days within any 30-trading day period prior to or as of the 30th month of the Closing Date. The Contingent Consideration and the Earn-out Shares would vest immediately in the event of a change of control as defined in the Business Combination Agreement. Settlement of Contingent Consideration On July 10, 2020, the daily VWAP of the Company’s common stock had been greater than $12.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of 7,500,000 Contingent Consideration shares and 625,000 Earn-out Shares. On July 15, 2020, the daily VWAP of the Company’s common stock had been greater than $14.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of an additional 7,500,000 Contingent Consideration shares and 625,000 Earn-out Shares. On August 11, 2020, the daily VWAP of the Company’s common stock had been greater than $16.00 per share for 20 trading days within a 30-trading day period, which triggered the vesting of an additional 7,500,000 Contingent Consideration shares. In addition, upon achievement of the daily VWAP milestones of both $12.00 per share and $14.00 per share discussed above, 3,437,500 Lock-up Shares were released from the lock-up restrictions and the holders of these shares were no longer restricted from selling and/or transferring the shares. In the three months ended September 30, 2020, 27,187,500 shares of common stock were issued or released in connection with these milestone achievements. Immediately prior to each vesting, the carrying amount of the Contingent Consideration liability on the Company’s consolidated balance sheet was marked to market, and the related change of fair value was recorded in the consolidated statements of operations. Upon vesting, the Contingent Consideration liability was reclassified to equity, the vested shares were issued and recorded as common stock at a par value of $0.01 per share, and the incremental fair value amount was recorded as additional paid-in capital. A reconciliation of changes in the Contingent Consideration liability during the year ended December 31, 2020 was as follows:
Upon inception, the initial estimated fair value of the Contingent Consideration on the Closing Date of $347.1 million was recorded as a long-term liability in the Company’s consolidated balance sheet. The related increase in fair value of $131.9 million during the year ended December 31, 2020 was recorded as a change in fair value of contingent consideration in the Company’s consolidated statements of operations. With the vesting of the Contingent Consideration shares during the year ended December 31, 2020, the contingent consideration liability was reclassified to equity, and accordingly approximately $0.3 million was recorded to common stock and $478.7 million was recorded to additional paid-in capital.
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Stockholders' Equity (Deficit) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity (Deficit) | Stockholders’ Equity (Deficit) On June 11, 2020, the Company’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 was authorized to issue 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 with a par value of $0.01, and 9,166,659 warrants outstanding, herein referred to as public warrants. As discussed in Note 3—Business Combination, the Company retroactively adjusted the shares issued and outstanding prior to the Closing Date to give effect to the exchange ratio established per the Business Combination Agreement and determined 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 of (i) up to an aggregate of 23,750,000 shares of the Company’s common stock that may be issued as Earn-out Shares upon certain triggering events and (ii) 9,166,659 shares of the Company’s common stock that may be issued upon exercise of public warrants to purchase common stock at an exercise price of $11.50 per share of common stock. Underwritten Public Offering On April 6, 2021, the Company completed an underwritten public offering of 9,000,000 shares of the Company’s common stock at a public offering price of $34.00 per share. All shares were sold by existing stockholders, including Nebula Holdings, 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 proceeds from the offering. On December 14, 2020, the Company completed an underwritten public offering of 9,500,000 shares of the Company’s common stock at a public offering price of $28.00 per share. All shares were sold by existing stockholders, including Nebula Holdings 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 1,425,000 additional shares of common stock. The Company did not sell any shares and did not receive any proceeds from the offering. Stock Repurchase Agreements Pursuant to a Stock Repurchase Agreement, dated March 29, 2021, between the Company and the selling stockholders named therein, the Company 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. Pursuant to a Stock Repurchase Agreement, dated as of December 7, 2020, between the Company and the selling stockholders, the Company repurchased from the selling stockholders an aggregate number of 1,395,089 shares of the Company’s common stock totaling $37.5 million at the same per share price paid by the underwriters to the selling stockholders in the offering. The $37.5 million stock repurchase was recorded to treasury stock at cost. Share Repurchase Program On November 17, 2022, the Board of Directors authorized the Share Repurchase Program allowing the Company to repurchase up to $75.0 million of the Company’s outstanding common stock until November 17, 2023. Repurchases may be made at management’s discretion from time to time on the open market. The Share Repurchase Program may be suspended, amended, or discontinued at any time. Pursuant to the Share Repurchase Program, the Company repurchased 2,643,306 shares at an average price of $6.80 for a total of $18.0 million. These shares were recorded to treasury stock at cost. As of December 31, 2022, the Company had $57.0 million available under the Share Repurchase Program. Common Stock In conjunction with the Business Combination, Nebula obtained commitments from certain investors to purchase shares of Nebula Class A common stock, which were converted into 20,000,000 Private Investment in Public Entity (“PIPE”) shares for a purchase price of $10.00 per share. Of the 20,000,000 PIPE shares, 11,500,000 shares were held by other institutional investors and 8,500,000 shares were held by Nebula Holdings and its affiliates. On the Closing Date, the Company had 91,849,909 shares of common stock outstanding, which excluded 3,437,500 shares issued and outstanding that were subject to certain lock-up and forfeiture arrangements pursuant to a certain Founder Support Agreement, dated as of January 5, 2020 (as amended by that certain Amendment No.1, dated March 18, 2020, and that certain Amendment No.2, dated May 13, 2020). During the year ended December 31, 2020, the Company (i) issued a total of 32,910,776 shares of common stock related to the Contingent Consideration and exercised public warrants, (ii) released 3,437,500 shares of common stock from the lock-up restrictions, and (iii) repurchased 1,395,089 shares of common stock during its underwritten public offering in December 2020. During the year ended December 31, 2021, the Company repurchased 612,745 shares of common stock during its underwritten public offering in April 2021 and issued 22,525 shares of common stock, net of shares withheld for taxes, related to RSUs that vested during 2021. During the year ended December 31, 2022, the Company repurchased 2,643,306 shares of common stock and issued 76,489 shares of common stock, net of shares withheld for taxes, related to RSUs that vested during 2022. As a result of these events, the Company’s outstanding common stock was 123,646,059 shares, net of treasury shares, as of December 31, 2022. Preferred Units On the Closing Date, all of the Company’s preferred units outstanding were converted into common stock of the Company at the exchange rate established in the Business Combination Agreement at a par value of $0.01 per share. Prior to the Closing Date, the outstanding preferred units of Open Lending, LLC were as follows:
The number of preferred units presented on the Company’s consolidated balance sheets and consolidated statements of changes in stockholders’ equity (deficit) as of December 31, 2019 was retroactively restated to reflect conversion to the Company’s common stock as a result of the Business Combination. The rights, preferences and privileges of both the redeemable and non-redeemable preferred units were as follows: Voting Rights Each holder of the Company’s preferred unit was entitled to the number of votes equal to the number of common units into which each preferred unit is convertible. Non-Liquidation Distribution The holders of preferred units were entitled to receive distributions deemed payable when and if declared by the Company’s Board of Directors. The holders of Series C preferred units were entitled to receive distributions prior and in preference, to any payment of any distribution to other preferred units and common units. Specifically, the holders of Series C preferred units were entitled to receive a preferred return equal to 2.5% per annum, accruing daily, on the Series C Contribution Amount, until such time as the holders of Series C preferred units receive the related preferred return distributions totaling an aggregate of $100.0 million. Distributions declared in excess of the Preferred Return for Series C preferred units would be distributed among the holder of preferred units and common units pro rata on an as-converted basis (including the Series C preferred units). The distributions declared and paid by the Board of Directors to the preferred unitholders in 2020 were as follows:
Conversion Each preferred unit was convertible, at the option of the holder, according to a conversion ratio, which was subject to adjustment for dilutive unit issuance. The total number of common units into which the preferred units could be converted was determined by dividing the initial conversion price by the then-applicable conversion price, as shown in the table above. Preferred Units could not be reissued upon conversion to common units. Open Lending, LLC had reserved sufficient common units for issuance upon conversion of preferred units. The Series A and Series B Preferred Units would automatically convert to common units if (i) at any time Open Lending, LLC effected an underwritten public offering, or (ii) on the date upon which 80% of the respective Series A or Series B Preferred Units had been converted to Common Units. The Series C preferred units automatically converted into common units at the then-applicable conversion price any time (i) Open Lending, LLC effected an initial public offering with aggregate proceeds of no less than $75.0 million and the price paid by public was no less than $4.56 per unit, or (ii) upon the written election of a Series C preferred units majority. Redemption At the election of a Series C preferred units majority, as defined, each of the Series C preferred unit was subject to redemption at a price per unit equal to the greater of (a) the Series C liquidation preference payment and (b) the fair market value of the Class A Common Units into which such Series C preferred units was convertible, at any time between June 23, 2020 and December 15, 2021. Series A and Series B preferred units were not redeemable by the Company or the holders. The Series C preferred units were classified as temporary equity outside of the Company’s permanent equity due to their redemption feature. During the year ended December 31, 2020, the redemption rights were removed from the Series C preferred units upon conversion to the Company’s Class A common stock as a result of the Business Combination on the Closing Date, and as such, the Company no longer has any outstanding convertible preferred stock on its balance sheets. Public Warrants As of the Closing Date, there were 9,166,659 outstanding public warrants to purchase shares of the Company’s common stock that were issued by Nebula with other consideration prior to the Business Combination. The public warrants were set to expire on June 10, 2025 or earlier upon redemption or liquidation. Each whole warrant entitled the holder to purchase one whole share of the Company’s common stock at a price of $11.50 per share, subject to adjustments. The public warrants were exercisable 30 days after the completion of the Business Combination. Once the public warrants became exercisable, the Company had the right to redeem the outstanding public warrants in whole and not in part at a price of $0.01 per warrant (the “Redemption Price”) upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s common stock matched or exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the warrant holders (“Redemption Right”). On September 11, 2020, the Company provided notice of redemption that all public warrants may be exercised by the holders thereof until October 13, 2020 (the “Redemption Date”). Any public warrants that remained unexercised on October 13, 2020 would no longer be exercisable and would be redeemed by the Company at the Redemption Price. During the year ended December 31, 2020, 9,160,776 public warrants were exercised by the holders, from which the Company received $105.3 million in cash proceeds. 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 the Company’s Board of Directors may deem relevant. In addition, the Company’s ability to pay dividends will be limited by covenants in its existing indebtedness and may be limited by the agreements governing other indebtedness that it or its subsidiaries incur in the future.
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Share-Based Compensation |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | 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 (the “Board of Managers”) approved the Class B Plan, which was a form of long-term compensation that provided for the issuance of ownership shares to service providers for purpose 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 Closing Date, these Class B common units were converted into shares of Company’s common stock utilizing the exchange ratio established in the Business Combination Agreement, and the related 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 year ended December 31, 2020. 2020 Stock Option and Incentive Plan (the “2020 Plan”) The 2020 Plan, approved by Nebula’s stockholders on June 9, 2020, 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% 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 effective January 1, 2021, the number of shares reserved and available for issuance under the plan automatically increases on January 1 of each year by 4% of the outstanding number of shares of the Company’s common stock on December 31 of the immediately preceding year. The total reserved shares are subject to an adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of December 31, 2022, the shares available for issuance under the 2020 Plan were 17,328,581 shares, which includes the 4% annual increase in 2022 less RSUs, PSUs and stock options granted under the 2020 Plan. Share-based compensation expense recorded for each type of award is as follows:
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 year ended December 31, 2022, the Company determined certain performance goals were improbable of being achieved and recorded a reduction to its share-based compensation expense of approximately $1.0 million, which represents a change in estimate related to share-based compensation expense reported in prior periods. During the years ended December 31, 2022, 2021 and 2020, 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 unitholders in the accompanying consolidated statements of operations as follows:
Time-Based Restricted Stock Units RSUs represent the right to receive shares of common stock at the end of the vesting period in an amount equal to the number of RSUs that vest. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases providing services to the Company prior to the lapse of the restriction. The fair value used to calculate share-based compensation expense of such RSUs is determined using the closing price on the date of grant applied to the total number of shares that were anticipated to fully vest based on schedules as set forth in the respective award agreements, generally over four years. The following table summarizes the RSU activity for the year end December 31, 2022:
The total fair value of the RSUs that vested during the years ended December 31, 2022 and 2021 was $0.9 million and $1.1 million, respectively. Performance-Based Restricted Stock Units PSUs were granted with a three-year performance period. The terms and conditions of the PSUs allow for vesting of the awards ranging between forfeiture and 100% of target. PSUs represent the right to receive shares of common stock at the end of the vesting period in an amount equal to the number of PSUs that vest. PSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases providing services to the Company prior to the lapse of the restriction. The following table summarizes the PSU activity for the year ended December 31, 2022:
Stock Options The Company’s outstanding stock options vest, subject to the continued employment of the grantees, in equal annual installments over four years following the grant date. The contractual term for the exercisability of the stock options is ten years from the grant date. The following table summarizes the stock option activity for the year end December 31, 2022:
The Company’s stock options had no intrinsic value as of December 31, 2022 and 2021. The Company estimated the fair value of each stock option on the date of grant using a Black–Scholes option-pricing model, applying the following assumptions:
a.The risk-free interest rate was interpolated from the five-year and seven-year Constant Maturity Treasury rate published by the U.S. Treasury as of the date of the grant. b.The expected life was estimated using the Simplified Method, which utilizes the midpoint between the vesting date and the end of the contractual term. c.The expected volatility rate was based on the average of implied and observed historical volatility of comparable companies. d.At the grant date, no dividends were expected to be paid over the contractual term of the stock options granted, based on the Company's dividend policy, resulting in the use of a zero dividend rate. Unrecognized Share-Based Compensation Expense The following table reflects future compensation expense to be recorded for share-based compensation awards that were outstanding as of December 31, 2022:
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Net Income (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Share | Net Income (Loss) Per Share Pursuant to the Restated and Amended Certificate of Incorporation and as a result of the reverse recapitalization, the Company 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 years ended December 31, 2022, 2021 and 2020 include unvested and unexercised stock options and unvested time-based restricted stock units. The potentially dilutive common shares during the years ended December 31, 2022, 2021 and 2020 do not include performance-based restricted stock units because the performance conditions of these awards have not been satisfied. The potentially dilutive common shares are included in the calculation of diluted net income (loss) per share only when their effect is dilutive. The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the years ended December 31, 2022, 2021 and 2020:
The following potentially dilutive outstanding securities for the years ended December 31, 2022, 2021 and 2020 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 the issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the periods:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | 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 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. 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. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets are measured at fair value on a nonrecurring basis. These assets, including property and equipment and operating lease right-of-use asset, are subject to fair value adjustments whenever events or circumstances indicate the carrying value of the assets may not be recoverable and are subsequently written down to fair value when impaired. During the years ended December 31, 2022, 2021 and 2020, the Company had no impairment charges related to its property and equipment and operating lease right-of-use asset. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company’s financial assets measured at fair value on a recurring basis were as follows (in thousands):
The amounts reported in the consolidated balance sheets as current assets or current liabilities, including cash, restricted cash, accounts receivable, net, current contract assets, net, other current assets, accounts payable and accrued expenses, each approximate their fair value due to the short-term maturities of the instruments. Financial Instruments Not Carried at Fair Value The following table provides the fair value of financial assets that are not measured at fair value:
The carrying amount of the Company’s debt approximates its fair value due to its variable interest rate. The fair value was determined using the Adjusted SOFR as of December 31, 2022, and LIBOR as of December 31, 2021, plus an applicable spread, a Level 2 classification in the fair value hierarchy. 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 in or out of any level for the years ended December 31, 2022 and 2021.
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Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company has one real estate operating lease associated with its corporate headquarters, which commenced on September 1, 2020 and expires on January 31, 2029. The lease agreement provides a 60 month lease term extension option, which is not included in the Company’s lease ROU asset and lease liability balances as of December 31, 2022. The lease agreement contains lease and non-lease components that are accounted for as a single lease component. For the years ended December 31, 2022, 2021 and 2020, the Company recorded the following lease expenses:
Additional information related to the Company’s operating lease is as follows:
The Company’s operating lease ROU asset and lease liability is summarized below. The current and non-current lease liabilities are reflected in and operating lease liabilities, respectively, on the Company’s consolidated balance sheets, as follows:
The maturity of the Company’s operating lease liability is as follows:
Contingencies As of December 31, 2022, the Company was not involved in any claim, proceeding or litigation which may be deemed to have a material adverse effect on the Company’s consolidated financial statements.
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Related Party Transactions |
12 Months Ended |
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Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Pursuant to a Stock Repurchase Agreement, dated as of March 29, 2021, between the Company and the selling stockholders, the Company 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. Pursuant to a Stock Repurchase Agreement, dated as of December 7, 2020, between the Company and the selling stockholders, as part of the underwritten public offering as described above, the Company repurchased from the selling stockholders an aggregate number of 1,395,089 shares of the Company’s common stock totaling $37.5 million, at the same per share price paid by the underwriters to the selling stockholders in the offering. During the year ended December 31, 2021, the Company made cash payments to certain related parties totaling $18.5 million in connection with the early termination and settlement of the TRA, as discussed in Note 15—Tax Receivable Agreement.
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Retirement Plan |
12 Months Ended |
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Dec. 31, 2022 | |
Retirement Benefits [Abstract] | |
Retirement Plan | Retirement PlanThe Company has a 401(k) profit-sharing plan (the “401(k) Plan”) for the benefit of all employees who have attained the age of 21 years old and have completed 60 days of service. Eligible employees may contribute to the 401(k) Plan subject to certain limitations. Under the provisions of the 401(k) Plan, the Company will make a safe harbor non-elective contribution equal to 3% of each participant’s compensation and may make discretionary matching contributions, as well as profit-sharing contributions, as determined by management. The Company made no profit-sharing contributions during the years ended December 31, 2022, 2021 and 2020. The Company made safe harbor non-elective contributions of $0.7 million, $0.5 million and $0.4 million to the 401(k) Plan during the years ended December 31, 2022, 2021 and 2020, respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes During the years ended December 31, 2022, 2021 and 2020, the Company recognized income tax expense of $26.9 million, $45.1 million and $6.6 million resulting in effective tax rates of 28.8%, 23.6% and (7.2)%, respectively. The Company’s income tax expense for the year ended December 31, 2022 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to the impact of state income taxes. The Company’s income tax expense for the year ended December 31, 2021 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to the impact of state income taxes and the gain associated with the extinguishment of the TRA liability. The Company’s income tax expense for the year ended December 31, 2020 differs from amounts computed by applying the U.S. federal statutory tax rate of 21% primarily due to the impact of the change in fair value of the carrying amount of the contingent consideration recorded in the Company’s consolidated statements of operations. The components of the Company’s income tax expense attributable to operations are as follows:
The Company’s income tax expense attributable to operations differs from the expected tax benefit amount computed by applying the statutory federal income tax rate to income before taxes is as follows:
The Company’s state income taxes include an increase in expense associated with the remeasurement of the Company’s deferred tax assets for reduction in estimated tax rates expected to be applied in future years, offset by tax benefits for certain refund claims expected to be filed related to prior period operations. The components of the Company’s deferred tax assets and liabilities are as follows:
(1) Certain prior year deferred tax component amounts have been reclassified to conform to the current year presentation. As of December 31, 2022, the Company has assessed whether it is more likely than not that the Company’s 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 December 31, 2022. The total amount of unrecognized tax benefits as of December 31, 2022 that, if recognized, would impact the effective income tax rate was $3.9 million. The Company had no unrecognized tax benefits as of December 31, 2021. As of December 31, 2022, the Company recorded receivables of $5.1 million for estimated state income tax refund claims expected to be filed for prior tax years. The liability for unrecognized tax benefits includes $3.9 million of tax expense associated with these refund claims and tax uncertainties in various state jurisdictions due to the complexity of applying evolving state tax laws and uncertainties with respect to sustaining the Company’s refunds claims. The Company believes it is not reasonably possible that the unrecognized tax benefits will significantly change during the next twelve months. The Company’s policy is to recognize penalties and interest within general and administrative expenses in the consolidated statements of operations. The Company files its federal and state income tax returns and some of these returns remain open for examination, with the earliest open years in its key jurisdictions as follows:
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Tax Receivable Agreement |
12 Months Ended |
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Dec. 31, 2022 | |
Tax Receivable Agreement [Abstract] | |
Tax Receivable Agreement | Tax Receivable Agreement In connection with the Business Combination, the Company entered into the 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 is deemed to realize in certain circumstances) in periods after the Closing Date 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 TRA; and (iv) certain increases in tax basis resulting from payments the Company makes under the TRA. The Company would retain the benefit of the remaining 15% of these cash savings. As of December 31, 2020, the liability related to the TRA was $92.4 million. For the year ending December 31, 2020, other expense,net includes a $4.3 million non-cash charge related to a change in the measurement of the Company’s TRA liability as a result of changes in its blended state tax rate. The Company entered into Amendment No. 1 to the TRA (the “TRA Amendment”) effective April 9, 2021. The TRA 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 TRA Amendment) other than any Actual Interest Amounts that would be required to be paid by the Company under the TRA, using certain valuation. The TRA 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 TRA 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 in the Company’s consolidated statements of operations.
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Summary of Significant Accounting and Reporting Policies (Policies) |
12 Months Ended |
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Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of presentation and consolidation | Basis of presentation and consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of the Company 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 presentation of its consolidated financial statements as of and for the year ended December 31, 2022. The Business Combination was accounted for as a reverse recapitalization as Open Lending, LLC was determined to be the accounting acquirer under the Financial Accounting Standards Board’s ASC Topic 805, Business Combinations (“ASC 805”). The determination was primarily based on the evaluation of the following facts and circumstances: •the pre-combination unitholders of Open Lending, LLC held the majority of voting rights in the Company; •the pre-combination unitholders of Open Lending, LLC had 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 the common stock of the Company, with a par value of $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 since the consolidated assets and liabilities and results of operations prior to the Closing Date were those of Open Lending, LLC. The shares and corresponding capital amounts and net income (loss) 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 was 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 of the Business Combination.
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Use of estimates and judgements | Use of estimates and judgments The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the 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 valuation of share-based compensation arrangements, valuation of the Contingent Consideration, as defined below, 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.
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Income taxes | Income taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that is greater than 50% likely of being realized. The Company records potential interest and penalties related to an underpayment of income taxes as other expenses and penalties and is recognized within general and administrative expenses within the consolidated statements of operations.
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Cash and cash equivalents | Cash and cash equivalentsCash and cash equivalents consist of commercial analysis accounts, money market funds and U.S. Treasury securities. The Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company determines the appropriate classification of the Company’s cash and cash equivalents at the time of purchase. |
Restricted cash | Restricted cashRestricted cash relates to deposits held in a financial institution for the processing of automated clearing house transactions and 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. As a third-party administrator of insurance claims and refund adjudication, the Company collects funds from insurance partners which are intended to be used to settle insurance claims and process funds on behalf of the insurance partners. |
Accounts receivable | Accounts receivable Accounts receivable includes program fees billed to customers, for which payments are expected to be received within 30 days from billing. The program fees are assessed at the time when the customer uses LPP to certify consumer loans and are billed either as an upfront fee or in 12 equal installments. The Company bills customers for the upfront fee following the month the service is provided and for the monthly installment fee over 12 months. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statement of cash flows. |
Contract Assets and Revenue recognition | Contract assets Contract assets for program fees are increased by recognized and unbilled program fee revenues related to monthly-pay arrangements. Once the monthly-pay arrangement’s program fees for the current month are due, they are reclassified from contract assets and recognized as accounts receivable. Contract assets for profit share and claims administration fees (“TPA fees”) are increased for recognized profit share and TPA fees revenue and are decreased by payments received from insurance carriers within 60 days after month end. These payments are reported in net cash provided by operating activities within the consolidated statement of cash flows. Refer to Note 4—Contract Assets for additional information.Revenue recognition The Company’s revenue is generated through three streams: (i) profit share paid to the Company by insurance partners, (ii) program fees paid to the Company by automotive lenders and (iii) claims administration service fees paid to the Company by insurance partners. The Company disaggregates revenues by revenue source (i.e., profit share, program fees, and claims administration and other service fees), and the level of disaggregation is presented in the consolidated statements of operations. The Company accounts for a contract with a customer when (i) both parties have approved the contract and are committed to perform their respective obligations, (ii) each party’s rights and payment terms can be identified, (iii) the contract has commercial substance, and (iv) it is probable the Company will collect substantially all of the consideration it is entitled to receive. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. In compliance with ASC 606, when the Company’s performance obligations have been completed, however the final amount of transaction price is unknown, the Company estimates the amount of the transaction price it expects to be entitled to under the Company’s customer contracts. The Company recognizes subsequent adjustments to an estimated transaction price upon the receipt of additional information or final settlement, whichever occurs first. Profit Share Revenue. Profit share represents the Company’s participation in the underwriting profit of third-party insurance partners who provide automotive lenders with credit default insurance on loans those lenders make using 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 and recognizes profit share based on the amount of cash flows it expects to receive from the insurance company over the term of the underlying insured loan. On a quarterly basis, the Company uses a forecast model to estimate variable consideration based on undiscounted expected future profit share to be received from the insurance carriers. The forecast model projects loan-level earned premiums and insurance claim payments driven by projections of prepayment rate, loan default rate and severity of loss. These assumptions are derived from an analysis of the historical performance of the active loan portfolio, prevailing default and prepayment trends, and macroeconomic projections. Estimates of variable consideration generated by the forecast model are constrained to the extent that it is probable that a significant reversal of incremental revenue will not occur in future periods. The Company continually assesses the default and prepayment assumptions of its core forecast model against reported performance and lender delinquency data. The forecast model is updated to ensure that default and prepayment rate projections align with actual experience. Program fee revenue. The Company earns program fees by providing customers with access to and use of LPP. Program fee contracts contain a single performance obligation, which is complete when a loan is certified through LPP and is issued by the lending institution. Approximately 10% of loan originations are paid through 12-month financing arrangements. Claims administration services. For the insurance policies issued through the Company’s program, the Company provides adjudication services for insurance claims on the third-party insurer’s policies for auto loans processed through LPP. The Company earns a monthly service fee which is calculated by the third-party insurance providers as 3% of the monthly net insurance earned premium collected over the life of the underlying loan. 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 its performance obligations. Revenue is recognized as the service is provided over the term of the adjudication contract with the insurance carrier.
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Allowance for doubtful accounts | Allowance for expected credit lossesEffective January 1, 2021, the Company adopted ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), and as such, the Company maintains an allowance for expected credit losses on its accounts receivable and contract assets. The allowance represents an estimate based primarily on market implied lifetime probabilities of default and loss severities for assets with similar risk characteristics. As these inputs are derived from market observations, they inherently include forward-looking expectations about macro-economic conditions. The allowance is evaluated quarterly by the Company for adequacy by taking into consideration factors such as reasonableness of the market implied loss statistics, historical lifetime loss data, and credit quality of the customer base. Provisions for the allowance for expected credit losses attributable to bad debt are recorded as general and administrative expenses. Account balances deemed uncollectible are written off, net of actual recoveries. If circumstances related to specific customers change, the Company’s estimate of the recoverability of its contract asset could be further adjusted. The Company does not have any material account receivable or contract asset receivable balances that are past due and has not written off any balances in its portfolio for the periods presented. The allowance for expected credit losses on accounts receivable and contract assets receivable, in the aggregate, was less than $0.2 million as of December 31, 2022 and 2021. |
Property and equipment | Property and equipment The Company’s property and equipment primarily consists of software developed for internal use, furniture, fixtures and equipment used in the normal course of business, and leasehold improvements. Property and equipment are recorded at cost, less accumulated depreciation, amortization and impairment losses, if any. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the useful life of the respective asset are expensed as incurred. Depreciation and amortization expense is calculated using the straight-line method based on the estimated useful lives of the property and equipment, which ranges from to eight years. Depreciation and amortization expense was $0.9 million, $0.8 million and $0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively, and is recognized within general and administrative expenses in the consolidated statements of operations. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. The Company’s property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the amount recorded may not be recoverable, and if not deemed recoverable based on the assets’ expected undiscounted cash flows, an impairment loss is recognized to the extent that the carrying amount exceeds the fair value.
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Operating Leases | Operating LeasesThe Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date. The Company recognizes lease right-of-use (“ROU”) assets and lease liabilities for operating and finance leases with initial terms greater than 12 months. ROU assets represent the Company’s right to use an asset for the lease term, while lease liabilities represent the Company’s obligation to make the related lease payments. The ROU assets for operating and finance leases and liabilities are recognized based on the present value of fixed lease payments over the lease term at the lease commencement date. Lease liabilities are calculated as the present value of fixed payments not yet paid at the measurement date. Since the interest rate implicit in the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of its lease payments. The Company’s incremental borrowing rate is determined based on the interest rate paid to borrow on a collateralized basis over a similar term. Operating lease ROU assets are recognized net of any lease prepayments and incentives. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments that are not based on an index or a rate, such as common area maintenance fees, taxes and insurance, are expensed as incurred. |
Fair value measurements | Fair value measurements 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 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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Research and development costs | Research and development costsResearch and development costs consist primarily of compensation and benefits of employees engaged in the ongoing development of the Company’s lending enablement platform, LPP. |
Deferred financing costs | Deferred financing costsDeferred financing costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense in accordance with the related debt agreement. Deferred financing costs related to the New Term Loan due 2027 are included as a reduction within long-term debt, net of deferred financing costs in the accompanying consolidated balance sheets. Deferred financing costs related to the 2021 Revolving Credit Facility are included in other assets on the accompanying consolidated balance sheets. |
Share-based compensation | Share-based compensation The Company uses the grant date fair value of time-based restricted stock units (“RSUs”) and PSUs and utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock options. This model requires the use of input assumptions, including expected volatility, expected life, expected dividend yield, and expected risk-free rate of return. The expected life of the awards is estimated using the “Simplified Method”, which utilizes the midpoint between the vesting date and the end of the contractual term. The Company uses the Simplified Method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of awards. The expected volatility is based on the average of implied and observed historical volatility of comparable companies since the Company does not have enough history as a public company. Changes in these assumptions can materially affect the fair value estimate of the awards. The Company recognizes compensation expense for unvested awards in the consolidated statements of operations and, net of actual forfeitures in the period they occur, on a straight-line basis over the requisite service or performance period. PSUs are evaluated on a quarterly basis for probability of meeting performance metrics and any adjustments to share-based compensation expense are then made in the quarter of evaluation. For PSUs, the Company must also make assumptions regarding the likelihood of achieving performance metrics. If actual results differ significantly from these estimates, share-based compensation expense and the Company’s results of operations could be materially affected. The Company expects to issue shares from treasury stock when stock options are exercised or when RSUs and PSUs vest.
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Contingent consideration | Contingent consideration As part of the Business Combination, Open Lending, LLC unitholders and certain Nebula equity holders were entitled to additional consideration in the form of shares of the Company’s common stock to be issued when the Company’s common stock price achieved certain market share price milestones within specified periods following the Closing Date (the “Contingent Consideration”). In addition, the Nebula sponsors were restricted to transfer a portion of their founder shares unless market share price targets were achieved within the specified period. Pursuant to the guidance under ASC 815, Derivatives and Hedging, the Contingent Consideration was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period was recognized as expense or income accordingly. The fair value of the Contingent Consideration was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility. The fair value of the Contingent Consideration on each vesting date (i.e., the date when each respective share price performance milestone was achieved) was based on the closing share price of the Company's publicly traded stock on the vesting date. The Company’s Contingent Consideration was settled in July and August of 2020.
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Treasury stock | Treasury stockThe Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity (deficit). |
Net income (loss) per share | Net income (loss) per share The Company computes net income (loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributions as if all income for the period had been distributed. Prior to the Business Combination, the Company’s pre-merger LLC membership structure included common units and convertible preferred units which were regarded as participating securities. When calculating the net income (loss) per share for the presented periods, the Company has retroactively restated the number of common and preferred units issued and outstanding prior to the Closing Date to the number of shares of common stock into which they were converted, based on the exchange ratio established in the Business Combination Agreement. In accordance with the Company’s pre-merger LLC membership structure, holders of the redeemable convertible preferred units were entitled to distributions in preference to common stockholders, at specified rates, if declared. The Company also recognized adjustments to redemption amount of the redeemable convertible preferred units similar to a distribution, in temporary equity. Any remaining net income would then be distributed to the holders of common stock and non-redeemable convertible preferred units on a pro-rata basis assuming conversion of all convertible preferred units into common stock in the event that the Company had profits to be allocated to the stockholders. However, the redeemable convertible preferred units did not contractually require the holders of such participating instruments to participate in the Company’s losses. As such, net losses for the periods presented were allocated to common stock only. The Company’s basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common shares outstanding for the period, without consideration of potentially dilutive securities. The diluted net income (loss) per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net income (loss) per share is the same as basic net income (loss) per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive.
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Concentrations of revenue and credit risks | Concentrations of revenue and credit risks The Company’s three largest insurance carrier partners accounted for 34%, 11% and 10%, respectively, of the Company’s total revenue during the year ended December 31, 2022. The Company’s two largest insurance carrier partners accounted for 41% and 22%, respectively, of the Company’s total revenue during the year ended December 31, 2021. In the event that one or more of the Company’s other significant customers terminate their relationships with the Company, or elect to utilize an alternative source for financing, the number of loans originated through LPP would decline, which would materially and adversely affect the Company’s business and, in turn, its revenue. Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, restricted cash, 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 accounts, money market funds and U.S. Treasury securities at financial institutions 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 receivable and contract assets are derived from revenue earned from customers. Effective January 1, 2021, the Company maintains an allowance for expected credit losses on its accounts receivable and contract asset receivable in accordance with CECL. As of December 31, 2022, the Company had no customers that represented at least 10% of the Company’s accounts receivable. As of December 31, 2021, the Company had two customers that each represented at least 10% of the Company’s accounts receivable.
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Recently issued accounting pronouncements not yet adopted and recently adopted new accounting standards | Recently issued accounting pronouncements not yet adoptedIn 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 the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to 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 experienced no unintended outcomes or consequences of reference rate reform that would necessitate the adoption of this guidance. As such, the Company has considered this guidance in relation to its existing credit agreement, and determined that it is not applicable (refer to the 2022 Credit Agreement discussion within Note 5—Debt). Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or may adopt, as applicable, the Company believes none of these accounting pronouncements has materially impacted or will have a material impact on the Company’s consolidated financial position or results of operations. Recently adopted new accounting standards
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Contract Assets (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Contract Assets | Contract assets balances for the periods indicated below were as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table provides a summary of the Company’s debt as of the dates indicated:
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Schedule of Maturities of Long-term Debt | Principal maturities of debt outstanding as of December 31, 2022 are as follows:
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Contingent Consideration (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions by Acquisition, Contingent Consideration | A reconciliation of changes in the Contingent Consideration liability during the year ended December 31, 2020 was as follows:
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Stockholders' Equity (Deficit) (Tables) |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Preferred Units | Prior to the Closing Date, the outstanding preferred units of Open Lending, LLC were as follows:
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Dividends Declared | The distributions declared and paid by the Board of Directors to the preferred unitholders in 2020 were as follows:
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Share-Based Compensation (Tables) |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount | Share-based compensation expense recorded for each type of award is as follows:
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 year ended December 31, 2022, the Company determined certain performance goals were improbable of being achieved and recorded a reduction to its share-based compensation expense of approximately $1.0 million, which represents a change in estimate related to share-based compensation expense reported in prior periods. During the years ended December 31, 2022, 2021 and 2020, 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 unitholders in the accompanying consolidated statements of operations as follows:
The following table reflects future compensation expense to be recorded for share-based compensation awards that were outstanding as of December 31, 2022:
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Share-based Payment Arrangement, Activity | The following table summarizes the RSU activity for the year end December 31, 2022:
The following table summarizes the PSU activity for the year ended December 31, 2022:
Stock Options The Company’s outstanding stock options vest, subject to the continued employment of the grantees, in equal annual installments over four years following the grant date. The contractual term for the exercisability of the stock options is ten years from the grant date. The following table summarizes the stock option activity for the year end December 31, 2022:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The Company estimated the fair value of each stock option on the date of grant using a Black–Scholes option-pricing model, applying the following assumptions:
a.The risk-free interest rate was interpolated from the five-year and seven-year Constant Maturity Treasury rate published by the U.S. Treasury as of the date of the grant. b.The expected life was estimated using the Simplified Method, which utilizes the midpoint between the vesting date and the end of the contractual term. c.The expected volatility rate was based on the average of implied and observed historical volatility of comparable companies. d.At the grant date, no dividends were expected to be paid over the contractual term of the stock options granted, based on the Company's dividend policy, resulting in the use of a zero dividend rate.
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Net Income (Loss) Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Earnings Per Share | The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the years ended December 31, 2022, 2021 and 2020:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potentially dilutive outstanding securities for the years ended December 31, 2022, 2021 and 2020 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 the issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the periods:
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Fair Value of Financial Instruments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Carrying Amounts and Estimated Fair Values of the Company's Financial Instruments | The Company’s financial assets measured at fair value on a recurring basis were as follows (in thousands):
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Summary of Fair Value Assets and Liabilities Measured on Recurring Basis |
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Commitment and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | For the years ended December 31, 2022, 2021 and 2020, the Company recorded the following lease expenses:
Additional information related to the Company’s operating lease is as follows:
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Assets and Liabilities, Lessee | The Company’s operating lease ROU asset and lease liability is summarized below. The current and non-current lease liabilities are reflected in and operating lease liabilities, respectively, on the Company’s consolidated balance sheets, as follows:
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Lessee, Operating Lease, Liability, Maturity | The maturity of the Company’s operating lease liability is as follows:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | The components of the Company’s income tax expense attributable to operations are as follows:
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Schedule of Effective Income Tax Rate Reconciliation | The Company’s income tax expense attributable to operations differs from the expected tax benefit amount computed by applying the statutory federal income tax rate to income before taxes is as follows:
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Schedule of Deferred Tax Assets and Liabilities | The components of the Company’s deferred tax assets and liabilities are as follows:
(1) Certain prior year deferred tax component amounts have been reclassified to conform to the current year presentation.
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Summary of Income Tax Examinations | the earliest open years in its key jurisdictions as follows:
|
Description of Business, Background and Nature of Operations (Details) |
12 Months Ended |
---|---|
Dec. 31, 2022
segment
| |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
Contract Assets - Additional Information (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Revenue from Contract with Customer [Abstract] | ||
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods | $ (5,677) | $ 30,891 |
Current contract assets, net | 54,429 | 70,542 |
Contract assets, net | $ 21,001 | $ 42,414 |
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands |
Dec. 31, 2022
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2023 | $ 3,750 |
2024 | 4,688 |
2025 | 7,500 |
2026 | 7,500 |
2027 | 125,625 |
Total debt | $ 149,063 |
Contingent Consideration - Reconciliation of the Activity Driving Contingent Consideration Balance Changes (Details) - USD ($) $ in Thousands |
7 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Business Combination, Contingent Consideration [Roll Forward] | ||||
Beginning balance | $ 347,089 | $ 0 | ||
Change in fair value | 131,932 | $ 0 | $ 0 | $ 131,932 |
Reclassification of shares to equity | (479,021) | |||
Ending balance | $ 0 | $ 0 |
Stockholders' Equity (Deficit) - Distributions Declared (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
| |
Series A Non-Redeemable Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Non-Redeemable Preferred Units | $ 18,098 |
Series B Non-Redeemable Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Non-Redeemable Preferred Units | 34,802 |
Series C Redeemable Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Redeemable Preferred Units | $ 40,689 |
Share-Based Compensation - Share-based Compensation Expense by Award Type (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | $ 5,449 | $ 3,815 | $ 2,828 |
Time-based restricted stock units | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | 5,458 | 1,934 | 148 |
Performance-based restricted stock units | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | (727) | 1,122 | 0 |
Stock options | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | 718 | 759 | 5 |
Class B common units | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | $ 0 | $ 0 | $ 2,675 |
Share-Based Compensation - Share-based Compensation Expense Allocated to Income Statement Location (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | $ 5,449 | $ 3,815 | $ 2,828 |
General and administrative | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | 4,028 | 3,102 | 2,578 |
Selling and marketing | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | 687 | 366 | 81 |
Research and development | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | 395 | 217 | 46 |
Cost of services | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Total share-based compensation expense | $ 339 | $ 130 | $ 123 |
Share-Based Compensation - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield | 0.00% | |
Weighted average time to vest | 0 years | |
2020 Stock Option and Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average option grant date fair value (in dollars per share) | $ 15.51 | |
Risk-free interest rate | 0.55% | |
Expected life | 6 years 3 months | |
Expected volatility rate | 50.00% | |
Expected dividend yield | 0.00% | |
2020 Stock Option and Incentive Plan | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average time to vest | 5 years | |
2020 Stock Option and Incentive Plan | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average time to vest | 7 years |
Share-Based Compensation - Unrecognized Share-based Compensation Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2022 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total unrecognized share-based compensation expense | $ 20,233 | |
Weighted Average Amortization Period (Years) | 3 years 2 months 1 day | |
Time-based restricted stock units | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Unrecognized expense, restricted stock | 18,804 | |
Weighted Average Amortization Period (Years) | 3 years 3 months 7 days | |
Stock options | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Unrecognized expense, stock options | 1,242 | |
Weighted Average Amortization Period (Years) | 2 years | |
Performance-based restricted stock units | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Unrecognized expense, restricted stock | $ 187 | |
Weighted Average Amortization Period (Years) | 1 year |
Fair Value of Financial Instruments - Summary of Fair Value Assets and Liabilities Measured on Recurring Basis (Detail) - Fair Value, Recurring - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Liabilities: | ||
Debt | $ 147,433 | |
Total | 147,433 | |
Fair value | ||
Liabilities: | ||
Debt | 147,433 | |
Total | $ 147,433 | |
Carrying value | ||
Liabilities: | ||
Debt | $ 146,260 | |
Total | 146,260 | |
Fair value | ||
Liabilities: | ||
Debt | 146,260 | |
Total | $ 146,260 |
Commitment and Contingencies - Narrative (Details) - lease |
12 Months Ended | ||
---|---|---|---|
Jan. 31, 2029 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Number of operating leases | 1 | ||
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Other current liabilities | Other current liabilities | |
Forecast | |||
Operating Leased Assets [Line Items] | |||
Optional extension period (in years) | 60 months |
Commitment and Contingencies - Components of Lease Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease expense | $ 953 | $ 953 | $ 640 |
Variable lease payments | 408 | 455 | 289 |
Total lease expense | $ 1,361 | $ 1,408 | $ 929 |
Commitment and Contingencies - Other Information Related to Leases (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Operating cash outflows | $ 871 | $ 774 | $ 828 |
ROU assets obtained in exchange for new lease liabilities | $ 0 | $ 0 | $ 5,362 |
Weighted-average remaining lease term (in years) | 6 years 29 days | 7 years 29 days | 8 years 29 days |
Weighted-average discount rate | 7.72% | 7.72% | 7.72% |
Commitment and Contingencies - Balance Sheet Classification of ROU Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease right-of-use asset | $ 5,911 | $ 5,911 |
Accumulated amortization | (1,301) | (722) |
Operating lease right-of-use asset, net | 4,610 | 5,189 |
Other current liabilities | 561 | 495 |
Operating lease liabilities | 4,082 | 4,643 |
Total operating lease liabilities | $ 4,643 | $ 5,138 |
Commitment and Contingencies - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
2023 | $ 894 | |
2024 | 920 | |
2025 | 945 | |
2026 | 970 | |
2027 | 996 | |
Thereafter | 1,108 | |
Total undiscounted liabilities | 5,833 | |
Less: Imputed interest | 1,190 | |
Total operating lease liabilities | $ 4,643 | $ 5,138 |
Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Apr. 09, 2021 |
Apr. 06, 2021 |
Dec. 07, 2020 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Related Party Transaction [Line Items] | ||||||
Shares repurchased (in shares) | 612,745 | 1,395,089 | ||||
Stock repurchased during period | $ 20,000 | $ 37,500 | $ 18,018 | $ 20,000 | $ 37,500 | |
Tax Receivable Agreement | ||||||
Related Party Transaction [Line Items] | ||||||
Tax receivable agreement, termination payment right | $ 36,900 | |||||
Affiliated Entity | Tax Receivable Agreement | ||||||
Related Party Transaction [Line Items] | ||||||
Tax receivable agreement, termination payment right | $ 18,500 |
Retirement Plan (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Retirement Benefits [Abstract] | |||
Defined contribution plan, minimum employee age requirement for participation | 21 years | ||
Defined contribution plan, minimum days of service required for participation | 60 days | ||
Defined contribution plan, employer matching contribution, percent of employees' gross pay | 3.00% | ||
Defined contribution plan, cost | $ 0 | $ 0 | |
Defined contribution plan, employer discretionary contribution amount | $ 700,000 | $ 500,000 | $ 400,000 |
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Line Items] | |||
Income tax expense (benefit) | $ 26,920 | $ 45,086 | $ 6,573 |
Effective income tax rate reconciliation, percent | 28.80% | 23.60% | (7.20%) |
Deferred tax assets, net | $ 65,128 | $ 65,503 | |
Unrecognized tax benefits | 3,900 | ||
Income taxes receivable | 5,100 | ||
Other liabilities | $ 3,935 | $ 0 |
Income Taxes - Income Tax Expense (Benefit) Attributable to Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Current tax expense | |||
Federal | $ 22,029 | $ 19,537 | $ 1,234 |
State | 4,516 | 5,494 | 605 |
Deferred tax expense (benefit) | |||
Federal | (4,165) | 16,098 | 7,463 |
State | 4,540 | 3,957 | (2,729) |
Income tax expense | $ 26,920 | $ 45,086 | $ 6,573 |
Income Taxes - Components of the Income Tax Expense (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Effective Income Tax Rate Reconciliation, Percent [Abstract] | |||
Income tax expense computed at the statutory rate | 21.00% | 21.00% | 21.00% |
State income taxes | 7.70% | 3.70% | 1.90% |
Gain on extinguishment of tax receivable agreement | 0.00% | (1.00%) | 0.00% |
Contingent consideration | 0.00% | 0.00% | (30.50%) |
Other | 0.10% | (0.10%) | 0.40% |
Income tax expense (benefit) effective rate | 28.80% | 23.60% | (7.20%) |
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Deferred tax assets | ||
Amortizable intangible assets | $ 78,296 | $ 88,705 |
Operating lease liabilities | 1,113 | 1,313 |
Accrued expenses and other | 563 | 438 |
Total deferred tax assets (1) | 79,972 | 90,456 |
Deferred tax liabilities | ||
Contract assets | (12,863) | (22,923) |
Operating lease right-of-use asset | (1,105) | (1,326) |
Property and equipment | (608) | (694) |
Other | (268) | (10) |
Total deferred tax liabilities | (14,844) | (24,953) |
Deferred tax asset, net | $ 65,128 | $ 65,503 |
Tax Receivable Agreement - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Apr. 12, 2021 |
Apr. 09, 2021 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||
Gain on extinguishment of tax receivable agreement | $ 0 | $ 55,422 | $ 0 | ||
Tax Receivable Agreement | |||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||
Percent of net cash savings payable | 85.00% | ||||
Percent of cash savings retain the benefit | 15.00% | ||||
Tax receivable agreement | 92,400 | ||||
Percentage of tax benefit payments | 40.00% | ||||
Tax receivable agreement, termination payment right | $ 36,900 | ||||
Tax receivable agreement, expected cost | $ 92,400 | ||||
Gain on extinguishment of tax receivable agreement | $ 55,400 | ||||
Other noncash income (expense) | $ (4,300) |
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