Good afternoon and welcome to Open Lending's First Quarter 2021 Earnings Conference Call. As a reminder, today's conference call is being recorded. On the call, today are John Flynn, Chairman and CEO; and Ross Jessup, President and COO; and Chuck Jehl, CFO.

Earlier today, the company posted its first quarter 2021 earnings release to its Investor Relations website. In the release, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call.

Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent the company's views as of today, May 11, 2021. Open Lending disclaims any obligation to update these statements to reflect future events or circumstances.

Please refer to today's earnings release and our filings with the SEC for more information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. And now, I'll pass the call over to you John for your opening remarks..

Thank you, operator. Good afternoon, everyone. Thanks again for joining us for our first quarter 2021 earnings conference call. I'd like to start today by reviewing our first quarter highlights, as well as the progress we've made on our growth objectives.

Then Ross is going to provide an update on our OEM opportunity, along with some recent changes to our underwriting. And finally, Chuck is going to review our Q1 financials and our outlook for full year 2021. During the first quarter, we certified 33,318 loans, which was an increase of 19% as compared to the first quarter of 2020.

We reported revenue of $44 million, which was an increase of 152%. And the adjusted EBITDA of $30.3 million, which was an increase of 217% as compared to the first quarter of 2020 as well.

The first quarter was a record quarter for the company and March was especially notable, as it was a record month in our company's history from a certified loan perspective. We certified over 14,500 loans in March and the momentum has continued into the second quarter. We also continue to make solid progress on our growth opportunities.

During the quarter 14 contracts were executed with new customers and we currently have over 360 active customers on our platform that have generated certified loans in the past 12 months. We announced a new partnership with Noble Credit Union, which is a $1 billion institution based in Fresno, California.

And we've also recently signed six other large institutions, which we will announce once they go live on our platform. We continue to show progress on the Credit Union Front, and we believe we still have a huge runway for growth ahead of us.

We continue to have productive conversations with multiple regional bank prospects, and we are currently working on two data studies for these types of institutions. We've begun making traction with companies in the online lending channel who funnel applications to funding sources.

We are currently working on a data study with one of these institutions to look at their applications that were not funded in the last quarter, which represents approximately 270,000 applications at various credit scores.

Also during the quarter, we added seven new credit unions and banks to the refinance program and have 28 credit unions that are acting as funding sources behind the refinance channel partners. We noticed an uptick in volume and it was a greater than 75% increase in applications in March of 2021 as compared to March of last year.

PenFed Credit Union has grown its third volume from approximately 700 loans in February to over 1,000 in March. In March, we cohosted a webinar with KPMG and we published a white paper on CECL relief that can be found on our website.

The webinar had over one hundred attendees and has generated positive feedback in inbound calls from current and prospective OEM bank and credit union partners, inquiring as to how we can help. We plan to do more of these webinars in an ongoing basis to educate potential partners on our offerings.

As the CECL deadline approaches for credit unions, we believe this is a great growth opportunity for us to expand our wallet share. And then lastly, we continue to make very good progress on adding additional insurance carrier partners to our platform.

We are in active discussions with various top insurance carriers, as we feel there is enough volume to support a third or fourth insurance carrier without jeopardizing our relationship with the other two carriers.

This is an important initiative for us, and we will continue to provide a more meaningful update on our progress as we execute this initiative. So, with that, I'm going to turn it over to Ross to review our OEM business and our progress on that front, as well as talk about some of the underwriting changes that we're currently making..

Thanks, John. As we have spoken previously, the OEM captive market is substantial and a major growth opportunity for us. As of today, we currently serve two OEM captives, which we expect to continue to ramp, and we continue our ongoing discussions building out our pipeline of other OEMs for the future.

Now let me provide an update on our progress growing OEM No. 1 and 2. OEM No. 1, we experienced certification growth of approximately 164% in the first quarter of 2021 as compared to the first quarter 2020. We are very happy with this progress and growth. OEM No.

1 is currently utilizing our platform for an expanded credit score offering, which is 560 to 679 in all four regions that they service. They launched one region in January and the remaining three regions last week for the credit score ranges 620 to 679. We anticipate this could add an additional 300 certs per month taking OEM No.

1 to approximately 1,300 certs per month, once fully ramped. In addition, this week, we are launching expanded loan terms from 72 to 75 months in one of their four regions initially as a pilot. Moving on to OEM No. 2. As you may recall, OEM No.

2 launched originally in October, 2019 with their captive finance arm and pause doing business in April, 2020 due to the COVID-19 pandemic. They came back online in October, 2020, and production has ramped to near pre-COVID levels. Certified loan growth was approximately 60% in Q1 2021 as compared to Q4 2020.

We are now active for both new and used across the nation for OEM No. 2. Production continues to ramp up, and we're making good progress moving forward towards a full ramp of 8,000 to 10,000 certs per month by the end of 2021. We launched subvention in January in one market, and we're delayed for the February launch due to the Texas storms.

As of early March, we are alive across the nation with subvention. We expanded terms to 75 months in early April, and the initial feedback is very positive. So, for both new and used, they're ramping in line with expectations, and we're excited about the opportunities to continue to broaden our services with them as our relationship grows. OEM No. 3.

As we previously disclosed, we completed a data study for OEM No. 3, and it included a 51% increase in approvals demonstrating a strong value proposition to their business. We both are encouraged by the results, and we'll update you as our relationship moves forward. Moving onto OEM No. 4.

As previously disclosed, we completed our data study, which included a 57% increase in approvals from applications they're denying. We're also encouraged by these results and the progression of our discussions. And we'll update you as well on the relationships as they move forward. Let's move on to the update on the underwriting initiatives.

When COVID-19 hit last year, we tightened our underwriting standards by incorporating a 5% vehicle valuation discount, which resulted in higher loan-to-values, LTVs, that increased premiums and improve the quality of the credit of our book during that pandemic. And we changed our income verification thresholds.

With the macro economic environment improving, we felt it was the appropriate time to change these standards back to where they were pre-pandemic, as we have had fewer defaults in claims than expected.

We removed the 5% vehicle discount in mid-April and/or removing the proof of income for 620 to 680 credit scores for direct and the refinance channels in May. We expect both of these changes will increase our certified loan volume through more attractive rate offerings. And now, I'll turn it over to Chuck to discuss our Q1 financials in more detail..

Total certified loans to be between 161,000 and 206,000; total revenue to be between $184 million and $234 million; adjusted EBITDA to be between $125 million and $168 million; and adjusted operating cash flow to be between $81 million and $111 million.

Now with that, we will turn it back over to the operator, and we're happy to take some questions from the group. Thank you..

At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question is from Peter Heckmann from D.A. Davidson. Please go ahead..

Hey. Good afternoon, everyone. Nice results.

Wanted to ask, with the underwriting standard change, that's going to take place here in May, can you talk about what that might represent in terms of a change in the average revenue per loan, or as well as any other thoughts for modeling purposes?.

Yeah. Peter, this is Ross. The change actually will not affect the average revenue per loan, but should change our capture rate, meaning, that many more closed loans compared to the number that are approved. So, there is -- the change that would happen on -- potentially on the revenue side was, we do have a reduced amount of premium coming in.

But I think, whenever you factor that in, as well as, our continual reduction of claims and prepayments compared to where we've estimated, I think there's a balance in there. So, we don't actually think our overall per cert revenue is going to change that materially. Mainly we're just going to be able to capture that many more..

Yeah. It is Chuck, Peter. I would just say on that profit share, I think in that range, let call it, 650 per start, which is what we've kind of been discussing kind of longer term for the average there and about 1,150 per certified loan in total..

Okay. That's helpful. And then, my other -- just as regard to the loans by OEM, did you say you continue to expect OEM No.

2 should be able to ramp to -- you say 8,000 to 10,000 loans per month? And if so, what kind of timeframe are you thinking about there?.

Yeah. I still think we're writing -- we're tracking right along with that towards the end of the year. And so, it is eight to 10 number..

Okay. Great. Thank you..

And thanks, Pete..

The next question is from David Scharf from JMP Securities. Please go ahead..

Great. Good afternoon. Thanks for taking my question. I was just wondering -- we're at the tail end of a reporting season in which obviously consumer lenders pretty much across every asset class experienced much better credit performance than maybe initially anticipated. Obviously, you're no exception and it's reflected in the profit share.

As we think about just some of the puts and takes that impact the demand for your service from your lending partners, does -- sort of this benign credit environment and perhaps evidence of other lenders, even OEM captives or credit unions potentially loosening some of their underwriting requirements, does that represent any sort of headwind in which maybe their approvals internally could be supported or does it just sort of -- trying to really understand sort of the puts and takes, if you will? Whether or not there's any evidence that some of your lending partners might relax and therefore not require as much incremental help from you and your prime borrowers..

Hey, guys. This is John. I'll take the first stab at that. Ross or Chuck if you want to jump in. We talked to all of our clients on regular basis, and what we're finding is every one of them, particularly credit unions have [technical difficulty] cash that they're trying to find a home for it.

They have virtually no yield on an easement and they're all trying to find out how they can get more yields out of these auto loans. And when you dig into what they actually get on [technical difficulty] loan, it's next to nothing.

I mean, you got to be so razor thin margins when doing a 1.9 -- interest rate on a new car loan versus being able to generate up to 300 basis points net on a near prime loan.

I had a call yesterday with the gentleman that runs about a $900 million credit union, and it's [technical difficulty] to find a home for a hundred million dollar, it just flows through the credit union.

Can we sign up for your refinance, your channel partner or capturing those people that got stuck with the higher rate and refinance them into something here? So, I personally don't see -- again, some of the banks might get a little bit more competitive.

I don't think they can ever compete with the credit unions, a, cost of funds, the fact that they don't pay income taxes. I think we have such a good opportunity ahead of us with all of these credit unions that -- I don't see them filling up those buckets, but they're applying loans, but that's my sense.

Ross or Chuck, do you want to add anything?.

Yeah. I'll just -- I'll add one thing to pile on that, John, is, a lot of the data studies we're doing are from time periods, just over the past five, six months. So, we're still seeing that these lenders are declining applications that we can improve and help with. We also are seeing that from our capture rates that, are ticking up.

So, I don't see that as a current threat that -- but we certainly have our eye on it to manage.

Got it. No. No, no, that's helpful. And I mean, it sounds like none -- it sounds like a credit universe is not using the -- kind of current credit environment to sort of open their funnel and dip down into more near prime themselves. Just one quick follow-up.

Any update on just some -- I believe conversions with bank core processors and sort of that channel. Because I believe you were in the process of potentially integrating with one or more in the near term..

Yeah. We -- as recently as last week, we've had a number of really productive call with Sagent, which I think you've heard us talk about as the LOS or at least three of the captives that we're aware of.

And they are the LOS for the one captive that Ross alluded to in the earnings call that, moving pretty quickly down the path, that was wanting to do something. So, they heard from that captive that they believe it was that something had happened.

All of a sudden they're all reaching out to get the specs in place, get this thing laid out, but they hope their fourth quarter once. So, we've got that one going.

We've talked to the other day with a very large shop, kind of a platform know as Atap [ph], which is more of an antiquated LOS, but it's an experience that large shot funds of [technical difficulty] every month. We are -- try to reach out and figure out how to work with a number of these.

But the other one that is coming to fruition, we launched [technical difficulty] I think I meant to you, the FIS platform originate within iBank, but now we have one or two more banks that have come pretty close to finishing due diligence that have mentioned that they are on that same platform. So, a lot of good things coming out in that realm..

Got it. Terrific. Congratulations. Thank you..

Thanks, guys..

The next question is from Joseph Vafi from Canaccord. Please go ahead..

Hey, guys. Good afternoon. Really good results. Lots of good stuff here. Maybe we'll start. I think you said that the March cert number was 14,500. And if that's right then, relative to a run rate off of the full Q1, that's a big bump for the month.

So, I was wondering if you could maybe discuss a little bit -- any more breakout on what happened in March to bring that run rate up so much. And if it's sustainable, and then maybe I have a follow up after that. Thanks..

Yeah. Hey Joe, it's Chuck. Yeah. We -- as we stated in our prepared comments, March -- Q1 was a record quarter for the company at 33,300 certs in March, notable is a record month. And as we said in the prepared comments, that momentum -- it has gone into the second quarter. So, we're very encouraged by that, as we continue to ramp and grow the business.

App volume is up significantly in all channels. And that's driving the increase, obviously with the stimulus that's out there and the economies performing, even though we're coming out of a worldwide pandemic. Our businesses is doing well.

And I think we proved it in 2020 as well as it had into 2021, this business performs through cycles and is resilient through recessions and downturns. So -- but the out volume is driving, obviously, a lot of the volume and where we're heading..

Okay. Maybe just -- maybe a little quick follow-up there though. Any other color, like -- I mean, that's kind of a -- that's a big bump relative to the quarter.

And so just -- was it OEM driven? Was it more broad-base? Kind of some more color on what was the -- where did those cert from in March?.

You bet. I mean, it came from all channels. And on our website, we've got an updated Q1 supplemental on the KPIs, Joe. So, if you think about the credit union and banks just quarter-over-quarter, and I can also talk to Q4 to Q1, but our credit union banks are up 16% and then the OEMs are up 24% over Q1 of 2020.

And that's what -- in a blended basis, that's 19% cert growth Q1 of 2021 over 2020.

I think you heard in Ross's prepared comments about OEM 1 and 2, they're performing in ramping as well over -- OEM 1 is up 164% over Q1 of 2020 and OEM 2, as they came back online in the fourth quarter, is up 60% in cert growth, just compared to Q1 of 2021 back to Q4 of 2020. So, it's the board.

The credit unions, banks and OEMs are growing and that's what we've expected from the business..

Hey, Chuck, the thing I'd like to add that -- John Flynn. You remember, we had signed a bunch of accounts in 2020 that we couldn't get launched until the first quarter of 2021, just because of COVID and the house itself.

I think you're starting to see what we had talked about last year, the last few shops that had a little bit of it [technical difficulty]. I think bringing back to the fact that Chuck just alluded to, it's across the board [technical difficulty] Chuck, 14 or somewhere..

Yeah. That's right. John, I think that's a great point. Of the 55 new contract signed in 2020, we had about 20 of those that came online in Q1 of 2021. So that's driving a lot of the inquiries. And of those 55, 52 of them are live and in writing search and contributing to the growth in Q1..

I think you add to it, Joe, the fact that, tax refunds were a little delayed this year. So, we certainly are seeing that momentum continue into Q2, which is great..

That's great. So, it sounds like pretty broad-based. Maybe just one more quick one. This online lending channel that I think you mentioned. That seems pretty intriguing.

So, a lot of potential, and I know it's early there, but kind of -- how do you look at that versus kind of your other core markets, which are different in some respects, just to help us understand to frame the opportunity relative to kind of the overall backdrop. Thanks a lot. Great results, guys..

John, do you want to handle online lending?.

I don’t know. I think what we're seeing from the online lending standpoint is, a lot of our refinance channel partners get applications from them. A lot of these guys -- they don't have a real funding source behind it. They farm it out.

I think when we even put it up, was it [technical difficulty] the analysis, So there that -- had to fund sources behind them that represented like one funding source was like, I don't know, 30% of their [technical difficulty] and the other 30 some percent. And one of them just said they weren't going to go forward with that.

But I think it is beautiful about our model.

That was the fact whether Napster coming from an online leading source, whether it's -- COB lending truly, or channel partners that go out and look for through the use of soft polls, people that got too high of an interest rate when they did the cart and then -- market to those people to rethink [technical difficulty] got over three plus lending sources sitting behind these applications.

It has a huge runway ahead of it.

I alluded to the fact that in my comments about the [technical difficulty] online lending platform that we just did a data before, they pointed out that they have 270,000 apps a quarter up through the cracks, whether because the rate was too high, that they were coming back or they're requiring for down payment, we're starting to get inbound calls from the likes of people like that, that are looking for us to bring our funding source for their platform.

I think it will continue to grow..

Great. Thanks very much, John..

The next question is from John Davis from Raymond James. Please go ahead..

Hey. Good afternoon, guys. Just wanted to follow up a little bit on the certs, the strength in March. Yeah. Thank you. Any comments on April.

Specifically, I think your guide implies pretty healthy triple digit growth from here on out, but just use the midpoint and I'm curious, I think the underwriting changes are new, so I assume those weren't contemplated in the original guide.

And so, I guess theoretically, if that does drive higher capture rate, that could drive upsides to the cert, but just kind of curious there, if that was contemplated or if that was a new decision that was made recently?.

Hey, John, How are you doing? This is Chuck. Yeah. I mean, if you think about -- I'll start with the guidance and what we reaffirmed today for full year 2021. We did come off the record quarter or the record month, but I'd also tell you 161,000 certs to 200, 6,000 certs is a wide range. However, our business is running well.

We're executing against our plan and we feel good going into the second quarter and beyond with the growth and what our business can generate from adding the underwriting changes and the impact being that the range is that broad, we'd like to think that that's built in and that's the upside and the opportunity between the low and the high.

I would point you, on the low end of the range of that guide is 70% year-over-year growth. And on the high end, it's 120% growth. The midpoint, you referenced is 95%. So, we're very focused on continuing to grow the business and it's tremendous growth at any point in that range..

Okay. Great. Anything we should think about just from sequentially, that I was saying. So, the balance of the three quarters you need even to get to 70% pretty close to triple digit growth.

So just as we got to think about the cadence through 2Q through 4Q, do you expect the growth to just build, I mean, obviously 2Q you have I guess, easier COVID related comp, but just curious if there's any call-outs sequentially from here?.

Yeah. I think, Q3 and Q4, a little heavier growth there and we're modestly into Q2. But the business is -- again, we feel operating and executing very well..

Okay. Great. And then just as a follow-up. Ross, I think you gave an update on OEM No. 3 and No. 4, we have a situation now where you're just -- you've kind of done everything you can do for OEM No. 3 and you're waiting on them. And then, where are we with OEM No.

4, as far as -- you're done with the study or is there more follow-up? Just any more color you can give would be helpful..

Yeah. We definitely have had numerous meetings with our teams, IT-wise as well as finance and I think they have a lot -- that they are looking at and figuring out where we need to be scheduled in.

I think both of them is really not a matter of if, but when, and certainly, the meetings that John alluded to earlier with the Sagent folks will certainly benefit, one of those that are looking to try to measure out what the IT endeavors are and to get those on the table to discuss moving forward. So, yeah, we're very excited about it, for sure.

And as well as you know some of the status of other conversations. So, looking forward to being able to report more here next quarter..

Thanks. Thanks, guys..

Thank you..

The next question is from Vincent Caintic from Stephens. Please go ahead..

Hey, thanks. Good afternoon. Thanks for taking my questions. First question actually on the non-OEM side. So, you highlighted a couple of opportunities. So, the seven unique, five partners, 14 new customer contracts, and sort of getting implemented within 60 days.

With the OEMs, you've kind of given what you think is the upside and the monthly certification volume. I'm wondering for this, non-OEM opportunities, if you can talk about the potential monthly certification volume, and what's the -- what's upside from here. Thank you..

Chuck, I don't know ….

Yeah. Go ahead, John..

I'd just say one of the things we found over the past year and even more prevalent than this last quarter, in this quarter is, signing some of the larger shops versus multiple little shops. So, I think now the upside is obviously there. I don't know. I don't know you put a number to it.

I know you've done some graphs that show where our growth is coming from.

Did you want to use any specifics or no?.

No. I mean, Vincent, hi. It’s Chuck. From -- obviously the credit union is doing to get to the range of the guide that we've talked about, not only do OEM 1 and 2 two execute sort to the core -- credit union and bank business. So -- but we're not giving guidance out on individual customers at the credit union and bank level.

But we feel like that business year-over-year, with the pent-up demand, with the accounts that came on in Q1, from that were signed last year, we're going to have really nice growth in the credit union and bank business as well. I mean, you can see in Q1, it was 16%..

That's helpful. Are you able -- maybe without talking about specific customer, just kind of broadly and I know there's different sizes of credit unions, but there's a say it typical credit union do, a couple of hundred a month versus a bank would be a couple of thousand a month.

I've just kind of wondering if maybe there's a sense of size that you could help with us if there's any you could offer..

I think the fact that we're looking at the credit unions that can certainly do a couple of hundred a month, for sure. We did just sign and they're getting ready to launch a bank. And we believe one fully ramped, they do up to a thousand a month, because it's launching through a finance channel partner.

And that's the goal they've given us, but it's not going to happen in the first 90 days. Yeah. They're launching it in certain states to get it started, and then they'll roll it out as they get comfortable with it. But I think some of the credit unions that we're talking about can certainly do 300 a month, some 400 a month.

You heard me speak to the fact that once we get Pentagon fully launched on just one of the refinance channel partners, their cert growth went from 700 in February to was over a thousand in March or March to April. I forget the months.

But you can see that kind of -- from summit shops that have the liquidity that they want to get up there and especially since we launched them into a refinance channel partner..

And Vincent, we usually -- tier credit union opportunities. Tier 1 is a hundred or more. Tier 2 is 50 or more than we go to 10 or more and then below that. So, we do that. And so we kind of have those tiers that we assigned based off of our expectations. And then we kind of double those around.

So, I wish there were more 500 a month, but we liked the tier threes, twos and ones equally, just more of them..

Okay. Great. That's helpful. Thank you. Because I don't think -- I think it's under appreciated about the non-OEM opportunity since we don't talk about it too much. So thank you for that. Second question kind of on the profit share and expectations.

So, your profit share was really good this quarter and I saw the $5 million positive profit share adjustment. We're just wondering when you think about profit share going forward, credit has been great.

What's built into your future credit expectations? Like when you think about the loss curves that you put on your slide deck in the past and the recoveries you've had, has it gotten appreciably better? And I'm thinking about future quarters in 2020, is there potential upside the profit share that you have? Thank you..

Yeah, I'll start. And then Ross can jump in. But as it relates to the $5.1 million and change in estimate and profit share in Q1, that is attributable to the business performing better than expected, less defaults and less claims. And as we've talked about on various other calls, we've got a very robust process that John, Ross and I are involved in.

We've got a very talented risk team that evaluates this on a monthly and quarterly basis. And we believe -- there's unknown still in the future, but we believe that 650 per cert on average, we think is a good average to use and your modeling purposes. As it relates to loss curves and things like that, out into the future, we look at it quarterly.

We have that robust process that we follow. We sit down with the risk team and we evaluate. And if the stress that we had in the model didn't materialize, we'll have a positive adjustment, which is what we had in the first quarter. So..

Yeah. We all know that we're benefiting certainly from is a used car index being at record levels, which are certainly helping our LTVs and rates, but it is helping others as well. So, there obviously is a risk out there. Once the chip shortage is made up and new cars are back being produced and all that, what the effect of that is on used cars.

And that's one of the reason we continue to stress the future, not knowing when that's going to happen, but having these various probabilities in place to look at that. And so -- but clearly, we know that we -- there's a tailwind right now..

Okay. That's very helpful. Thank you so much..

Thanks, Vincent..

The next question is from James Faucette from Morgan Stanley. Please go ahead..

Yeah. Thanks for all the great color and commentary. I want to follow-up on that last comment. And that actually was my key question was, any way to, at least, guesstimate, how much of a benefit you are getting from the -- right now from the strength of the used car market and the value of used cars specifically.

And then can you outline for us a little bit how you're -- in your planning, how you're expecting that to normalize over what period and at what rate and kind of how we should think about that impact?.

You bet. So, I think, first of all, on the used car side, one thing to know that we still are close to 85% used versus new. So, from an origination and a forecast standpoint, the effect of the decrease in new should not materially impact us, because I think we made up from the used side of it.

On the -- the underwriting and our profit share, I'll let Chuck continue on this. But obviously we have stress on what claim severities could be out in the future when you have that depreciation of value, and it's built into our model. And that's something obviously that we true up poorly. Chuck, do you want to ….

Yeah. James, I'll jump back in. But yeah, that's something we -- as I said to Vincent's comment that we look at it on a quarterly basis and we've got some stress severity throughout 2021 and into 2022 in our model that we have in there. So, from a planning perspective, that's how we assess it.

But we reassess it on a quarterly basis based on new facts and circumstances..

Got it. Got it. And from a -- as you kind of play that out and think about like an eventual return in availability of new cars, et cetera. Do you think that that overlaid with the people that you're talking to in the OEMs, et cetera, is that we should see a change in that used versus new car mix in a meaningful way.

And anything we should take into account that way..

I'll just tell you, when you talk to the OEM, they want to talk to you about how much you can help them move metal. When you talk to the captive finance side, they want to talk to you about how to monetize some of these trade-ins and used cars that are out there. And so, really it's a win-win deal and both sides of it benefit.

Now that we have subvention launched throughout the country for OEM No. 2 and as they continue to get used to that in the various tiers that it is working in, I think that really bodes well for -- into Q3 and Q4 when we was -- chip shortage, hopefully can get back to a level that's -- that can meet the demand.

And we certainly will benefit from that from the new side..

That's great. Thank you so much, guys..

Yeah. Thanks, James..

Thanks, James..

The next question is from Sameer Kalucha from Deutsche Bank. Please go ahead..

Hi. Thanks for taking my question. What I wanted to get a sense on was the insurers you were working with. You mentioned you're working with the insurance three and four.

Any color you can provide on the timelines when you expect them to be live?.

John, do you want to take the first part of that?.

Yeah. We're -- we work closely with at least four different carriers throughout the year. Our hope would be to have at least one of them up and running by third quarter. So, that's our game plan. We're in the process of dating the final cracks. Other three to [technical difficulty] on that one, are all very strong, strong financial.

So, again, us picking the right time so that we can commit to good amount of premium each of them. So, the game plan is to hopefully have one up and running by the third quarter here..

Got it. And the -- a quick follow-up I had on the online channel, you've mentioned conversations with one and a little bit color on the scale of applications.

Any sense on -- any more you're talking to who are at similar scale or other people you're talking to are much lower?.

I think it's a matter of all the 250,000 to 270,000 turned down order. But I think by the nature of the -- that we're aggregating a bunch of them, I think there's a significant for -- of applications that will be flowing through from that grouping, if you will, of online lenders.

And again, these aren't just people that are have sites out there, like, lending clubs increase. This is coming from the seven different refinance channel partners that we have that go out and target consumers.

Like I mentioned earlier by pulling crowd, soft polls on zip code people to be able to find out who within a specific area bought a car for the last six months. And they come back in and look at it and their FICA score and target that consumer directly.

That's not necessarily just the online lenders that are out there that people can jump in [technical difficulty] people that are actually being directly market to that we know can save $100, $150 a month, which really increases the close rate significantly..

Got it. Great. Thank you..

The next question is from Mike Grondahl from Northland Securities. Please go ahead..

Yeah. Hey. Thanks, guys. I think you commented that you're doing a data study for two different regional banks.

How far are you along with that? And any guess at sort of how long that sales cycle is?.

I can tell you that one of the banks who reached out to us earlier this week and said that we've made a podcast there, first grouping of due diligence and that we're now starting to talk with them about the interface look like and things like that.

That one -- and the other one that we mentioned out of the Houston area, we believe should be live -- would probably within the next 60 days through one of our refinance channel partner. So, we're getting pretty good traction from the grouping sized bank, so that we think can generate some pretty good volume significantly quickly..

Got it. Thank you..

The next question is from John Hecht from Jefferies. Please go ahead..

Afternoon. Thanks for taking my questions. And many of have been asked and answered. But I'm wondering if you guys talk about tightening your LTVs in the quarter.

But I'm wondering if you look out at the overall end markets, is there anything you're seeing with respect to other banks, either losing or tightening or taking down or up their LTVs and anything that's going on with pricing that is worth noting?.

Yeah. I think, in the past, when we talked about tightening LTVs, when we did that 5% decrease in value that didn't necessarily tighten our LTVs, but it basically put an application in a higher LTV classification was generated more premium. So, our LTVs are still -- I believe are higher than most lenders in the first place.

And that's besides just buying deeper, expanding on that right side on the LTV is the other side of the value prop in there. So, I would imagine that the vehicle values themselves remaining at highs -- record highs kind of takes care of that.

And just through the math works out to be higher LTVs than a lender typically would go assuming they use an ADA, trader or Kelly [ph] wholesale on that..

I think the thing I'd add to that, Ross, just take all we're in essence may have going back to pre-COVID underwriting rules. We tighten those things up. As Ross mentioned, bumping them up in the LTV area, really just because we weren't sure where COVID was going. Our results pre-COVID were pretty stellar.

And I think that's not going to hurt us [technical difficulty] the fact that the fair values have stayed up.

They will put that into the fact that we're going back to the COVID underwriting rules, I think is really just going to help us, again, the point earlier, get our book ratio up significantly in area where our [technical difficulty] was always good..

Yeah. One other thing to add, John, if you recall from our comments earlier, we actually are offering a little bit longer term than we have in the past where 72 months was our cap before, and we're going to 75 and we're doing that.

Not only with a couple of the OEMs, but initially with a handful of other customers before we spread it to all our clientele..

Okay. That's all very helpful.

And you've watched subvention out two OEMs, I'm wondering, does that -- obviously that gives you more breadth to take more volume with them to visit -- also you to go into different products like leases or is it still mostly lending products?.

Yeah. So, just to be clear, subvention is only live in OEM No. 2. We have not launched it in OEM No. 1, that's certainly on the table to discuss, they've asked us to circle back once we have some experience with that.

And so, we're just waiting for Tom and experienced to circle back, but that clearly is an opportunity that can get them well ahead of that 1,300 run rate that have, that we talked about earlier in that..

So, it really just increases the -- I guess the opportunity set within the OEM, or does it also bring you into different products?.

Well, I think it just allows us more wallet share per OEM. But I think the leasing side is something that is -- something that we're -- we will explore. It's not on the radar this year. But it's a gigantic market. If we can figure out how to underwrite and provide that credit risk for the credit side, but not take on residual risk.

That's what we're kind of trying to go through the process of evaluating now..

Great. Thank you guys very much..

Thank you..

This concludes today's conference call and the question-and-answer session. I'd like to turn the call back over to John Flynn for any closing remarks..

Yeah. Thank you very much operator. And again, thanks to everybody that stayed on the line, ask questions. Again, we're very excited about where the company's come to and where it's going. As you know, we're kind of an open book. So, any questions you have, feel free to reach out whenever and we're happy to jump on the phone.

So, thanks again for all of your input and questions..

Yeah. Thank you..

Thank you..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..