OPEN LENDING CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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

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

•our financial performance;

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

•plans and opportunities for expansion;

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

•the growth in loan volume of our top ten automotive lenders relative to that of other automotive lenders, and the associated concentration of risk;

•costs of services in absolute dollars and as a percentage of revenue;

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

•sales and marketing expenses in absolute dollars and as a percentage of revenue;

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

•the impact of projected operating cash flow and free cash on our business activities in the future;

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

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

•the possibility of maintaining the listing of our common shares on Nasdaq;

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

•expenses associated with our growth due to demands on our operational, marketing, compliance and accounting infrastructure;

•regulatory agreements between us and state agencies regarding matters such as the conduct and supervision of automobile lenders and the pricing of loans;

•changes in applicable laws or regulations;

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

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

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

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

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

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

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

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

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

Executive Overview

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

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

The total turnover was $52.0 million and $102.1 million for the three and six months ended June 30, 2022respectively, compared to $61.1 million and $105.1 millionrespectively, during the same periods in 2021.

The operating result was $32.8 million and $65.1 million for the three and six months ended June 30, 2022respectively, compared to $44.9 million and $74.3 millionrespectively, at the same periods in 2021.

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

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

The table below summarizes all loans certified by lenders during the periods
indicated.

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



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

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


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

(2) Net change in the number of lenders previously integrated and using the LPP to certify loans during the period. Some lenders experience periods of inactivity followed by periods of activity, causing the number of lenders to fluctuate from period to period.

Key Performance Measures

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

Certified Auto Loans

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

Average Program Fee

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

Underwriting profit of insurers

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

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Premium earned from insurers

We define “insurers earned premium” as the total insurance premium earned by insurers during a given period. Earned premiums were $70.9 million and $138.1 millionrespectively, for the three and six month periods ended June 30, 2022 and
$53.9 million and $100.6 million for the same periods in 2021, respectively.

RECENT DEVELOPMENTS

Fourth insurance partner

On May 2, 2022, we signed a program management agreement with a fourth insurance
carrier partner, Arch Specialty Insurance Company, a part of Arch Capital Group
Ltd., who will act as an additional provider of credit default insurance
policies for LPP, from which we can earn profit share revenue and claims
administration fees.

Main factors affecting operating results

Our results of operations and future cash flows depend on a number of opportunities, challenges and other factors, including growth in the number of financial institutions and volume of transactions, competition, assumptions of profit sharing, industry trends and general economic conditions.

The main factors affecting our operating results are as follows:

Growth in the number of active auto lenders

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

Competition

We face competition to acquire and maintain automotive lenders as customers, as
well as competition to facilitate the funding of near-prime and non-prime auto
loans. For LPP, which combines lending enablement, risk analytics, near-prime
and non-prime auto loan performance data, real-time loan decisioning, risk-based
pricing and auto loan default insurance, we do not believe there are any direct
competitors. The emergence of direct competitors, providing risk analytics and
loss mitigation, which are core elements of our business, could materially
impact our ability to acquire and maintain automotive lender customers. The
near-prime and non-prime lending market is highly fragmented and competitive. We
face competition from a diverse landscape of consumer lenders, including
traditional banks and credit unions, as well as alternative technology-enabled
lenders. The emergence of other insurers, in competition with our insurers,
could materially impact our business.

Benefit sharing assumptions

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

Industry trends and general economic conditions

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

Our three largest insurance carrier partners accounted for 38%, 11% and 11% of
our total revenue during the three months ended June 30, 2022, and 38%, 13% and
10% during the six months ended June 30, 2022. Our two largest insurance
carriers accounted for 43% and 24% of the Company's total revenue during the
three months ended June 30, 2021, and accounted for 43% and 23% for the six
months ended June 30, 2021. Termination or disruption of these relationships
could materially and adversely impact our revenue.

Components of operating results

Total revenue

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

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

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

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

Cost of services and operating expenses

Cost of services. Cost of services primarily consists of fees paid to third
party partners for lead-generation efforts, compensation and benefits expenses
relating to employees engaged in lenders' services and claims administration
activities, fees paid for actuarial services related to the development of the
monthly premium program, fees for integration with loan origination systems of
automotive lenders and fees paid to credit bureaus and data service providers
for credit applicant data. In the near to intermediate term, we generally expect
cost of services to increase as a percentage of our program fee revenue as we
continue to expand our third-party partner relationships.

General and administrative expenses. General and administrative expenses are
comprised primarily of expenses relating to employee compensation and benefits,
non-cash share-based compensation, travel, meals and entertainment expenses,
data and software expenses and professional and consulting fees. In the near to
intermediate term, we expect general and administrative expenses to remain
relatively constant.

Selling and marketing expenses. Selling and marketing expenses consist primarily
of compensation and benefits of employees engaged in selling and marketing
activities. We generally expect selling and marketing expenses to increase as a
percentage of our program fee revenue in the near to immediate term as we
continue to expand our sales and marketing team.

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

Other income (expenses)

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

Loss on extinguishment of debt. The loss on extinguishment of debt primarily reflects unamortized deferred financing costs, which were written off as part of the refinancing of our term loan maturing in 2027 on March 19, 2021.

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Operating results

The following table sets forth our results of operations for the periods
indicated:

                                           Three Months Ended June 30,                            Six Months Ended June 30,
                                          2022                 2021                     % Change               2022              2021               % Change
                                                                              ($ in thousands)
Revenue
Profit share                        $       29,157          $ 38,842                           (25) %       $ 57,467          $ 66,572                    (14) %
Program fees                                20,731            20,597                             1  %         40,457            35,508                     14  %
Claims administration and other
service fees                                 2,156             1,686                            28  %          4,188             3,053                     37  %
Total revenue                               52,044            61,125                           (15) %        102,112           105,133                     (3) %
Cost of services                             5,085             4,140                            23  %          9,873             7,502                     32  %
Gross profit                                46,959            56,985                           (18) %         92,239            97,631                     (6) %
Operating expenses
General and administrative                   7,968             8,381                            (5) %         15,450            16,593                     (7) %
Selling and marketing                        3,994             2,954                            35  %          7,727             5,351                     44  %
Research and development                     2,188               773                           183  %          4,011             1,364                    194  %
Total operating expenses                    14,150            12,108                            17  %         27,188            23,308                     17  %
Operating income                            32,809            44,877                           (27) %         65,051            74,323                    (12) %

Interest expense                            (1,124)           (1,122)                            -  %         (1,927)           (4,411)                   (56) %
Interest income                                 22                58                           (62) %             47               142                    (67) %
Gain on extinguishment of tax
receivable agreement                             -            55,422                          (100) %              -            55,422                   (100) %
Loss on extinguishment of debt                   -                 -                             -  %              -            (8,778)                  (100) %
Other expense                                    -                (2)                         (100) %              -              (133)                  (100) %
Income before income taxes                  31,707            99,233                           (68) %         63,171           116,565                    (46) %
Income tax expense                           8,581            23,267                           (63) %         16,891            27,737                    (39) %
Net income                          $       23,126          $ 75,966                           (70) %       $ 46,280          $ 88,828                    (48) %


Key Performance Measures

The following table sets forth key performance measures for the periods
indicated:

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

Certified loans                             44,531             46,408                      (4) %              88,475            79,726                    11  %
Single-pay                                  39,526             41,156                      (4) %              79,087            70,098                    13  %
Monthly-pay                                  5,005              5,252                      (5) %               9,388             9,628                    (2) %
Average program fees                 $         466          $     444                       5  %       $         457          $    445                     3  %
Single-pay                           $         427          $     415                       3  %       $         423          $    416                     2  %
Monthly-pay                          $         768          $     673                      14  %       $         743          $    660                    13  %


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Comparison of three and six month periods ended June 30, 2022 and 2021

Revenue

                                                Three Months Ended               Six Months Ended
                                                     June 30,                        June 30,
                                              2022               2021                                           2022               2021
                                                                (in thousands)
Profit share
New certified loan originations           $   26,333          $ 27,017                                      $  52,002          $  49,673
Change in estimated future revenues            2,824            11,825                                          5,465             16,899
Total profit share                            29,157            38,842                                         57,467             66,572

Program fees                                  20,731            20,597                                         40,457             35,508

Claims administration and other service
fees                                           2,156             1,686                                          4,188              3,053
Total revenue                             $   52,044          $ 61,125                                      $ 102,112          $ 105,133


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

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

Profit share revenue decreased by $9.7 million and $9.1 million, or 25% and 14%,
during the three and six months ended June 30, 2022, respectively, as compared
to the same periods in 2021. During the three months ended June 30, 2022, we
recorded $26.3 million in anticipated profit share associated with 44,531
certified loans for an average of $591 per loan as compared to $27.0 million in
anticipated profit share associated with 46,408 certified loans for an average
of $582 per loan during the three months ended June 30, 2021. During the six
months ended June 30, 2022, we recorded $52.0 million in anticipated profit
share associated with 88,475 certified loans for an average of $588 per loan as
compared to $49.7 million in anticipated profit share associated with 79,726
certified loans for an average of $623 per loan during the six months ended
June 30, 2021.

In addition, during the three and six months ended June 30, 2022, we recorded
$2.8 million and $5.5 million, respectively, in estimated future revenue on
business in historic vintages as a result of lower than anticipated claims and
severity of losses, as compared to $11.8 million and $16.9 million in estimated
future revenue on business in historic vintages during the three and six months
ended June 30, 2021, respectively.

Program fees revenue increased by $0.1 million and $4.9 million or 1% and 14%,
for the three and six months ended June 30, 2022, respectively, as compared to
the same periods in 2021. The increase in program fee revenue for the three
months ended June 30, 2022 was driven by higher unit economics per certified
loan, offset by a 4% decrease in certified loan volume, as compared to the prior
year period. The increase in program fee revenue for the six months ended June
30, 2022 was driven by an 11% increase in certified loan volumes and by higher
unit economics per certified loan, as compared to the prior year period.

Revenue from claims administration and other service fees, which primarily
represents 3% of our insurance partners' annual earned premium, increased by
$0.5 million and $1.1 million, or 28% and 37% for the three and six months ended
June 30, 2022, as compared to the same periods in the prior year, due to 32% and
37% increases in total earned premiums.
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Cost of services, gross profit and gross margin

                                Three Months Ended                      Six Months Ended
                                     June 30,                               June 30,
                                2022                2021              2022                2021
                                                    ($ in thousands)
    Total revenue      $               52,044    $   61,125    $           102,112    $    105,133
    Cost of services                    5,085         4,140                  9,873           7,502
    Gross profit       $               46,959    $   56,985    $            92,239    $     97,631
    Gross margin                        90  %        93  %                   90  %         93  %


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

Gross profit decreased by $10.0 million, or 18%, during the three months ended
June 30, 2022, as compared to the same period in 2021, driven primarily by a
decrease in anticipated profit share on historic business as discussed above.
Gross profit decreased by $5.4 million, or 6%, during the six months ended June
30, 2022, as compared to the same period in 2021, driven primarily by a decrease
in anticipated profit share on historic business as discussed above, partially
offset by increases in program fees and claims administration service fees.

Operating expenses, operating income and operating margin

                                                            Three Months Ended                 Six Months Ended
                                                                 June 30,                          June 30,
                                                         2022                 2021                                             2022                 2021
                                                                           ($ in thousands)
Total revenue                                      $         52,044       $      61,125                                   $      102,112       $      105,133
Gross profit                                                 46,959              56,985                                           92,239               97,631
Operating expenses
General and administrative                                    7,968               8,381                                           15,450               16,593
Selling and marketing                                         3,994               2,954                                            7,727                5,351
Research and development                                      2,188                 773                                            4,011                1,364
Total operating expenses                                     14,150              12,108                                           27,188               23,308
Operating income                                   $         32,809       $      44,877                                   $       65,051       $       74,323
Operating margin                                             63  %               73  %                                           64  %                71  %


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

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

Research and development expenses increased by $1.4 million, or 183%, and $2.6
million, or 194%, during the three and six months ended June 30, 2022,
respectively, as compared to the same periods in the prior year, primarily due
to increases in employee compensation costs associated with the growth of our
research and development organization to support continued enhancements to our
flagship product.
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Operating income decreased by $12.1 million, or 27%, for the three months ended
June 30, 2022, as compared to the prior year period, primarily driven by
decreased estimated profit share on historic business, as well as increases in
cost of services, and operating expenses related to selling and marketing and
research and development as discussed above.

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

Interest charges

During the three and six months ended June 30, 2022, interest expense was $1.1
million and $1.9 million, respectively, as compared to $1.1 million and $4.4
million during the three and six months ended June 30, 2021, respectively.
Interest expense decreased $2.5 million or 56% for the six months ended June 30,
2022, as compared to the six months ended June 30, 2021, as a result of lower
borrowing costs and lower outstanding debt balances during 2022.

Income taxes

During the three and six months ended June 30, 2022, we recognized income tax
expense of $8.6 million and $16.9 million, respectively, as compared to $23.3
million and $27.7 million for the same periods in 2021. The effective tax rate
for the three and six months ended June 30, 2022 was 27.1% and 26.7%,
respectively, as compared to an effective tax rate of 23.4% and 23.8%,
respectively, for the same periods in 2021. Income tax expense decreased $14.7
million, or 63% and $10.8 million, or 39% during the three and six ended
June 30, 2022, respectively, as compared to the same periods in 2021, primarily
as a result of the 68% and 46% decrease in income before income taxes offset by
an increase in the effective tax rate.

Cash and capital resources

Cash flow and liquidity analysis

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

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

The following table presents a summary of the cash flow data:

                                                   Six Months Ended June 30,
                                                       2022                 2021
                                                         (in thousands)
Net cash provided by operating activities    $      53,587               $ 

32,983

Net cash used in investing activities                 (364)                 

(841)

Net cash used in financing activities               (1,625)               

(76,245)

Cash flow from operating activities

Our cash flow from operating activities reflects net earnings adjusted for certain non-cash items and changes in operating assets and liabilities.

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The following table summarizes the non-cash adjustments from operating activities in the statement of cash flows:

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

53,587 $32,983


Net cash provided by operating activities for the six months ended June 30, 2022
is primarily attributable to operating income increased by the net change in
contract assets, other assets and liabilities and reduced by income taxes paid.
The increase in net cash provided by operating activities of $20.6 million for
the six months ended June 30, 2022, as compared to the six months ended June 30,
2021, was primarily attributable to higher profit share payments from insurance
carriers and increased cash inflows from program fees related to higher
certified loan volume.

Cash flow from investing activities

For the six months ended June 30, 2022 and 2021, the net cash used in investing activities was $0.4 million and $0.8 million, respectively. For the six months ended June 30, 2022 and 2021, investments mainly relate to computer software developed for internal use.

Cash flow from financing activities

Our cash flows used and generated by financing activities consist mainly of debt repayments, deferred financing costs and debt proceeds.

For the six months ended June 30, 2022the net cash allocated to financing activities was $1.6 million and is tied to principal repayments of our term loan maturing in 2026.

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

Debt

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

Dividend

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

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate
its operating performance, generate future operating plans, and make strategic
decisions, including those relating to operating expenses and the allocation of
internal
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resources. Accordingly, we believe these measures provide useful information to
investors and others in understanding and evaluating our operating results in
the same manner as our management and Board of Directors. In addition, these
measures provide useful measures for period-to-period comparisons of our
business, as they remove the effect of certain non-cash items and certain
variable charges. Adjusted EBITDA is defined as GAAP net income excluding
interest expense, income taxes, depreciation and amortization expense,
share-based compensation expense, gain on extinguishment of tax receivable
agreement and loss on extinguishment of debt. Adjusted EBITDA margin is defined
as Adjusted EBITDA expressed as a percentage of total revenue.

The following table provides a reconciliation of GAAP net income to Adjusted EBITDA for the periods indicated:

                                                  Three Months Ended                     Six Months Ended
Adjusted EBITDA                                        June 30,                              June 30,
                                                2022               2021               2022               2021
                                                                       (in thousands)
Net income                                  $  23,126          $  75,966          $  46,280          $  88,828
Non-GAAP adjustments:
Interest expense                                1,124              1,122              1,927              4,411
Income tax expense                              8,581             23,267             16,891             27,737

Depreciation and amortization expense             226                196                447                389
Share-based compensation expense                  988                927              2,269              1,628
Gain on extinguishment of tax receivable
agreement                                           -            (55,422)                 -            (55,422)
Loss on extinguishment of debt                      -                  -                  -              8,778
Total adjustments                              10,919            (29,910)            21,534            (12,479)
Adjusted EBITDA                                34,045             46,056             67,814             76,349
Total revenue                               $  52,044          $  61,125          $ 102,112          $ 105,133
Adjusted EBITDA margin                             65  %              75  %              66  %              73  %


For the three and six months ended June 30, 2022, Adjusted EBITDA decreased by
$12.0 million, or 26% and $8.5 million, or 11%, respectively, as compared to the
same periods in 2021. The decrease in Adjusted EBITDA during the three and six
months ended June 30, 2022 reflects the decrease in operating income primarily
driven by the decrease in estimated future revenues on historical vintages.

Significant Accounting Policies and Estimates

There have not been any material changes during the three and six months ended
June 30, 2022 to the methodology applied by management for critical accounting
policies previously disclosed in our Annual Report. Please refer to "Part II,
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations-Critical Accounting Policies and Estimates" in our Annual Report
for further description of our critical accounting policies and estimates.

Contractual obligations

We had no material changes in our contractual commitments and obligations during
the three and six months ended June 30, 2022 from the amounts listed under "Part
II, Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Contractual Obligations" in our Annual Report.
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