lpro-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


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

For the transition period from ______________ to ______________

Commission File Number: 001-39326

OPEN LENDING CORPORATION

(Exact Name of Registrant as Specified in its Charter)


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

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

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

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common stock, par value $0.01 per share

LPRO

The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

As of May 4, 2022, the registrant had 126,217,955 shares of common stock, $0.01 par value per share, outstanding.

OPEN LENDING CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I.	Financial Information	3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27

Item 4.	Controls and Procedures	28

PART II.	Other Information	29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Default Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

SIGNATURES		31

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OPEN LENDING CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


	March 31, 2022		December 31, 2021

Assets
Current assets
Cash and cash equivalents	$	147,404	$	116,454
Restricted cash	3,031		3,055
Accounts receivable, net	8,060		6,525
Current contract assets, net	58,265		70,542
Income tax receivable	2,090		1,345

Other current assets	1,749		4,873

Total current assets	220,599		202,794
Property and equipment, net	2,792		2,663
Operating lease right-of-use assets, net	5,048		5,189
Non-current contract assets, net	49,187		42,414
Deferred tax asset, net	64,949		65,503
Other non-current assets	157		262
Total assets	$	342,732	$	318,825
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	195	$	1,285
Accrued expenses	5,510		3,984

Current portion of debt	3,125		3,125
Third-party claims administration liability	3,029		3,050
Other current liabilities	550		621
Total current liabilities	12,409		12,065

Long-term debt, net of deferred financing costs	142,437		143,135
Non-current operating lease liabilities	4,508		4,643

Total liabilities	$	159,354	$	159,843
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.01 par value; 550,000,000 shares authorized, 128,198,185 shares issued and 126,217,955 shares outstanding as of March 31, 2022 and 128,198,185 shares issued and 126,212,876 shares outstanding as of December 31, 2021	1,282		1,282
Additional paid-in capital	498,057		496,983
Accumulated deficit	(259,285)		(282,439)
Treasury stock at cost, 1,980,230 shares at March 31, 2022 and 1,985,309 at December 31, 2021, respectively	(56,676)		(56,844)
Total stockholders’ equity	183,378		158,982
Total liabilities and stockholders’ equity	$	342,732	$	318,825

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

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OPEN LENDING CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share data)


	Three Months Ended March 31,
	2022		2021
Revenue
Profit share	$	28,310	$	27,730
Program fees	19,726		14,911
Claims administration and other service fees	2,032		1,367
Total revenue	50,068		44,008
Cost of services	4,788		3,362
Gross profit	45,280		40,646
Operating expenses
General and administrative	7,482		8,212
Selling and marketing	3,733		2,397
Research and development	1,823		591
Total operating expenses	13,038		11,200
Operating income	32,242		29,446

Interest expense	(803)		(3,289)
Interest income	25		84
Loss on extinguishment of debt	—		(8,778)
Other expense	—		(131)
Income before income taxes	31,464		17,332
Income tax expense	8,310		4,470
Net income	$	23,154	$	12,862



Net income per common share
Basic	$	0.18	$	0.10
Diluted	$	0.18	$	0.10
Weighted average common shares outstanding
Basic	126,215,698		126,803,096
Diluted	126,216,197		126,837,832

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

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OPEN LENDING CORPORATION

Condensed Consolidated Statements of Changes in Stockholders’ Equity

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


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

Share-based compensation	—	—		1,281		—		—	—		1,281
Restricted stock units issued, net of shares withheld for taxes	—	—		(207)		—		5,079	168		(39)
Net income	—	—		—		23,154		—	—		23,154
Balance as of March 31, 2022	128,198,185	$	1,282	$	498,057	$	(259,285)	(1,980,230)	$	(56,676)	$	183,378














	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Amount		Amount		Shares	Amount		Amount
Balance as of December 31, 2020	128,198,185	$	1,282	$	491,246	$	(428,406)	(1,395,089)	$	(37,500)	$	26,622
Share-based compensation	—	—		701		—		—	—		701
Net income	—	—		—		12,862		—	—		12,862
Balance as of March 31, 2021	128,198,185	$	1,282	$	491,947	$	(415,544)	(1,395,089)	$	(37,500)	$	40,185

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

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OPEN LENDING CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net income	$	23,154	$	12,862
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	1,281		701
Depreciation and amortization	304		388
Non-cash operating lease cost	141		134

Loss on extinguishment of debt	—		8,778
Deferred income taxes	554		1,330
Changes in assets & liabilities:
Accounts receivable, net	(1,535)		(2,451)
Contract assets, net	5,504		(7,876)

Other current and non-current assets	3,066		1,979
Accounts payable	(1,090)		(611)
Accrued expenses	1,526		478
Income tax payable/receivable	(745)		3,151
Operating lease liabilities	(119)		(140)
Third-party claims administration liability	(21)		62
Other current and non-current liabilities	(88)		50
Net cash provided by operating activities	31,932		18,835
Cash flows from investing activities
Purchase of property and equipment	(186)		(3)
Net cash used in investing activities	(186)		(3)
Cash flows from financing activities
Proceeds from term loans	—		125,000
Proceeds from revolving facility	—		50,000
Payments on term loans	(781)		(166,847)

Payment of deferred financing costs	—		(1,491)
Shares withheld for taxes for restricted stock units	(39)		—



Net cash (used in) provided by financing activities	(820)		6,662
Net change in cash and cash equivalents and restricted cash	30,926		25,494
Cash and cash equivalents and restricted cash at the beginning of the period	119,509		104,148
Cash and cash equivalents and restricted cash at the end of the period	$	150,435	$	129,642
Supplemental disclosure of cash flow information:
Interest paid	$	721	$	2,722
Income tax paid (refunded), net	8,501		(16)





Non-cash investing and financing:
Internally developed software costs accrued but not paid	—		463
Deferred financing costs accrued but not paid	—		178

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

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

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

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

The Company has evaluated how it is organized and managed and has identified only 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.

Note 2—Summary of Significant Accounting and Reporting Policies

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

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

The interim data includes all adjustments that are, in the opinion of the Company’s management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the Company’s operating results for the entire fiscal year ending December 31, 2022.

Concentrations of revenue and credit risks

The Company’s two largest insurance carrier partners accounted for 38% and 14% of the Company’s total revenue during the three months ended March 31, 2022 and accounted for 44% and 22% of the Company's total revenue during the three months ended March 31, 2021. In the event that one or more of the Company’s significant insurance carriers terminates their relationship with the Company, it could have a material and adverse effect on 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.

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Cash and cash equivalents are deposited in commercial analysis and savings accounts at two financial institutions, both with high credit standing. Restricted cash relates to funds held by the Company on behalf of the insurance carriers, delegated for the use of insurance claim payments. Restricted cash is deposited in commercial analysis accounts at one financial institution. 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.

At March 31, 2022, the Company had one customer that individually accounted for 10% of the Company’s accounts receivable. At December 31, 2021, the Company had two customers that each represented 10% of the Company’s accounts receivable.

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

Use of estimates and judgments

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

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

In connection with profit share revenue recognition and the estimation of contract assets under Accounting Standards Update (“ASU”) 2014-9, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), the Company uses forecasts of loan-level earned premium and insurance claim payments. These forecasts are driven by the projection of loan defaults, prepayments and default severity rates. These assumptions are based on the Company’s observations of the historical behavior for loans with similar risk characteristics. The assumptions also take into consideration the forecast adjustments under various macroeconomic conditions, including the current mix of the underlying portfolio of our insurance partners. Management has accordingly adjusted these assumptions during the first three months of 2022 as a result of changes in facts and circumstances and general market conditions.

Recently issued but not yet adopted accounting pronouncements

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

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 3—Contract Assets

Changes 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 profit share revenue, program fee revenue and claims administration services revenue (“TPA fees”) for amounts not yet billed, and the right to consideration is conditional on something other than the passage of 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 three months ended March 31, 2022 and 2021, contract asset adjustments attributable to profit share revenue forecast adjustments were $2.6 million and $5.1 million, respectively.

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


	Contract Assets
	Profit Share		TPA Fees		Program Fees		Total
	(in thousands)
Ending balance as of December 31, 2021	$	105,486	$	1,316	$	6,154	$	112,956
Increase of contract assets due to new business generation	25,669		2,030		19,726		47,425
Adjustment of contract assets due to estimation of revenue from performance obligations satisfied in previous periods	2,641		—		—		2,641
Receivables transferred from contract assets upon billing the lending institutions	—		—		(19,800)		(19,800)
Payments received from insurance carriers	(33,831)		(1,987)		—		(35,818)
Provision for expected credit losses	43		1		4		48
Ending balance as of March 31, 2022	$	100,008	$	1,360	$	6,084	$	107,452

As of March 31, 2022 and December 31, 2021, the Company’s contract assets consisted of $58.3 million and $70.5 million, respectively, as the portion estimated to be received within one year and $49.2 million and $42.4 million, respectively, as 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.

Note 4—Debt

The following table provides a summary of the Company’s debt as of the periods indicated:


	March 31, 2022		December 31, 2021
	(in thousands)
Revolving Facility, matures in 2026	$	25,000	$	25,000
Term Loan due 2026	121,875		122,656
Less: unamortized deferred financing costs	(1,313)		(1,396)
Total debt	145,562		146,260
Less: current portion of debt	(3,125)		(3,125)
Total long-term debt, net of deferred financing costs	$	142,437	$	143,135

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Term Loan due 2027

On March 11, 2020, the Company entered into a credit agreement with UBS A.G. as the administrative agent and the lenders from time to time party thereto (the “Credit Agreement”). Pursuant to the Credit Agreement, the lenders thereto funded a term loan (the “Term Loan due 2027”) in a principal amount of $170.0 million bearing an interest rate per annum of LIBOR plus 6.5% (subject to a LIBOR floor of 1%), with a maturity date in March 2027. The Term Loan due 2027 was retired by the Company paying off its outstanding principal and interest with proceeds from issuance of the Term Loan due 2026 and the Revolving Facility (both as defined below) in March 2021. The transaction was deemed as a debt extinguishment under ASC Topic 405-20, “Liabilities—Extinguishments of Liabilities,” and accordingly, the Company recognized a non-cash debt extinguishment loss of $8.8 million, which was recorded under the caption loss on extinguishment of debt in the consolidated statements of operations during the three months ended March 31, 2021. The loss on debt extinguishment was calculated as the difference between the carrying amount of the debt and the price paid to retire the debt, which primarily consisted of the write-off of the unamortized deferred financing costs related to the Term Loan due 2027.

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

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

Interest under the Term Loan due 2026 and the Revolving Facility are, at the option of the Company, either at an Alternate Base rate (“ABR”) plus a spread ranging from 0.75% to 1.50%, or LIBOR plus a spread ranging from 1.75% to 2.50%. With respect to the ABR loans, interest will be payable at the end of each calendar quarter. With respect to the LIBOR loans, interest will be payable at the end of the selected interest period. Additionally, there is a commitment fee payable at the end of each quarter at a rate per annum ranging from 0.200% to 0.275% based on the average daily unused portion of the Revolving Facility, and other customary letter of credit fees. Pursuant to the New Credit Agreement, the interest rate spreads and commitment fees increase or decrease in increments as the Company’s Funded Secured Debt/EBITDA ratio increase or decreases.

As of March 31, 2022, both the Term Loan due 2026 and the Revolving Facility are subject a LIBOR rate of 0.21% plus a spread of 1.75% per annum. Commitment fees were accrued at 0.200% under the Revolving Facility’s unused commitment balance of $25.0 million at March 31, 2022.

In connection with the issuance of the Term Loan due 2026 and the Revolving Facility, the Company incurred total deferred financing costs of $1.7 million, of which $1.2 million was allocated to the Term Loan due 2026 and $0.5 million was allocated to the Revolving Facility. The deferred financing costs were capitalized as a contra-liability against the principal balance of the loans and are amortized as interest expense using the effective interest method. Unamortized deferred financing costs were $1.3 million as of March 31, 2022. As of March 31, 2022, the weighted average effective interest rate on the Company’s outstanding borrowings was 2.26%.

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

Note 5—Share-Based Compensation

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

The 2020 Plan, approved 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% of the number of shares of its common stock outstanding upon the Closing Date, as the “Initial Limit” for the issuance of awards under the 2020 Plan. The 2020 Plan provides that beginning on January 1, 2021, the number of shares reserved and available for issuance under the plan will automatically increase each January 1st by 4% of the outstanding number of shares of the

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Company’s common stock on the immediately preceding December 31st, or the “Annual Increase.” This limit is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of March 31, 2022, there were 19,029,306 shares reserved and available for issuance under the 2020 Plan, which includes the 4% annual increase in 2022 less restricted stock units, performance stock units and stock options granted under the 2020 Plan.

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


	Three Months Ended March 31,
	2022		2021
	(in thousands)
Time-Based Restricted Stock Units	$	907	$	233
Performance-Based Restricted Stock Units	206		277
Stock Options	168		191
Total share-based compensation expense	$	1,281	$	701

During the three months ended March 31, 2022 and 2021, share-based compensation expense was allocated to cost of services, general and administrative, selling and marketing, and research and development, generally based on the functional responsibilities of the award recipient in the accompanying condensed consolidated statements of operations as follows:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
General and administrative	$	922	$	554
Selling and marketing	180		91
Research and development	95		28
Cost of services	84		28
Total	$	1,281	$	701

The following table provides information related to the Company’s share-based compensation award activity for the three months ended March 31, 2022:


	Time-Based Restricted Stock Units			Stock Options			Performance-Based Restricted Stock Units
	Number of Awards	Weighted Average Fair Value at Grant Date		Number of Awards	Weighted Average Exercise Price		Number of Awards	Weighted Average Fair Value at Grant Date
Outstanding as of December 31, 2021	231,625	$	35.17	194,348	$	33.56	99,289	$	33.44
Granted	259,069	22.49		—	—		—	—
Vested	(7,214)	28.20		—	—		—	—
Forfeited or expired	(20,455)	23.42		(5,808)	33.56		(4,874)	33.44
Outstanding as of March 31, 2022	463,025	$	28.71	188,540	$	33.56	94,415	$	33.44

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OPEN LENDING CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table reflects the future share-based compensation expense for the outstanding awards at March 31, 2022:

Unrecognized Share-based Compensation Expense

Weighted Average Amortization Period

(in thousands)

Time-Based Restricted Stock Units

11,395

3.27 years

Stock Options

1,991

2.75 years

Performance-Based Restricted Stock Units

1,850

1.75 years

Total unrecognized share-based compensation expense

15,236

3.02 years

Note 6—Net Income per Share

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the applicable methods. The potentially dilutive common shares during the three months ended March 31, 2022 and 2021 were time-based restricted stock units. The potentially dilutive common shares during the same periods did not include unvested stock options and performance-based restricted stock units containing unmet performance conditions. The potentially dilutive common shares are included in the calculation of diluted net income per share only when their effect is dilutive.

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021
	(in thousands, except shares and per share data)
Basic net income per share:
Numerator
Net income attributable to common stockholders	$	23,154	$	12,862
Denominator
Weighted average common shares	126,215,698		126,803,096
Basic net income per share attributable to common stockholders	$	0.18	$	0.10

Diluted net income per share:
Numerator
Net income attributable to common stockholders	$	23,154	$	12,862
Denominator
Basic weighted average common shares

SEC Form 10-Q filed by Open Lending Corporation