Summary of Significant Accounting and Reporting Policies (Policies) |
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Dec. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and include the accounts of the Company and all its subsidiaries that are directly or indirectly owned or controlled by the Company. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidation | All intercompany transactions and balances have been eliminated upon consolidation. Certain prior year amounts have been reclassified to conform to the Company’s presentation of its consolidated financial statements as of and for the year ended December 31, 2024. Such reclassifications had no effect on the Company’s previously reported net income, earnings per share, cash flow or accumulated deficit.
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| Use of estimates and judgements | Use of estimates and judgments The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and those differences may be material. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. The most significant items subject to such estimates and assumptions include, but are not limited to, profit share revenue recognition and the corresponding impact on contract assets and excess profit share receipts liability and assessing the realizability of deferred tax assets. The Company bases its estimates on historical trends and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.
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| Income taxes | Income taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company establishes valuation allowances when necessary to reduce deferred tax assets to the amounts expected to be realized. On a quarterly basis, the Company evaluates the need for, and the adequacy of, valuation allowances based on the expected realization of our deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, the Company considers all available positive and negative evidence and made certain assumptions including, among other things, the reversal of its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future earnings. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step requires a determination whether the weight of available evidence indicates that the tax position has met the threshold for recognition. Therefore, the Company must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires a measurement of the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This measurement step is inherently complex and requires subjective estimations of such amounts to determine the probability of various possible outcomes. The Company re-evaluates the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period. The Company recognizes interest and penalties related to income taxes as a component of income tax expense.
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| Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents consist of commercial analysis accounts, money market funds and U.S. Treasury securities, including accrued interest earned. The Company considers securities that are highly liquid, readily convertible into cash and have original maturities of less than three months when purchased to be cash equivalents. The Company determines the appropriate classification of the Company’s cash and cash equivalents at the time of purchase.
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| Restricted cash | Restricted cash Restricted cash relates to deposits held in a financial institution for the processing of automated clearing house transactions and funds held by the Company on behalf of our insurance partners, delegated for the use of insurance claim payments. Restricted cash is deposited in commercial analysis accounts at one financial institution. As a third-party administrator of insurance claims and refund adjudication, the Company collects funds from insurance partners which are intended to be used to settle insurance claims and process funds on behalf of the insurance partners.
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| Accounts receivable | Accounts receivable Accounts receivable includes program fees billed to customers, for which payments are expected to be received within 30 days from billing. The program fees are assessed at the time when the customer uses LPP to certify consumer loans and are billed either as an upfront fee or in 12 equal installments. The Company bills customers for the upfront fee following the month the service is provided and for the monthly installment fee over 12 months.
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| Contract assets and Revenue recognition | Contract assets Contract assets for program fees are increased by recognized and unbilled program fee revenues related to monthly-pay arrangements. Once the program fees for the monthly-pay arrangements for the current month are due, they are reclassified from contract assets and recognized as accounts receivable. Contract assets for profit share and claims administration fees are increased for recognized profit share and claims administration fees revenue and are decreased by payments received from insurance partners. In addition, for profit share variable consideration related to performance obligations that were satisfied in previous periods, the Company evaluates and updates its profit share revenue forecast on a quarterly basis and adjusts its contract assets accordingly. Revenue recognition The Company’s revenue is generated through three streams: (i) program fees paid to the Company by automotive lenders, (ii) profit share paid to the Company by insurance partners and (iii) claims administration service fees paid to the Company by insurance partners. The Company accounts for a contract with a customer when (i) both parties have approved the contract and are committed to perform their respective obligations, (ii) each party’s rights and payment terms can be identified, (iii) the contract has commercial substance, and (iv) it is probable the Company will collect substantially all of the consideration it is entitled to receive. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. In compliance with Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, when the Company’s performance obligations have been completed, the Company estimates the amount of the transaction price it expects to be entitled to under the Company’s customer contracts. The Company recognizes subsequent adjustments to an estimated transaction price upon the receipt of additional information or final settlement, whichever occurs first. Program fee revenue. The Company earns program fees by providing customers with access to and use of LPP. Program fee contracts contain a single performance obligation, which is complete when a loan is certified through LPP and is issued by the lending institution. Approximately 10% of loan originations are paid through 12-month financing arrangements. Profit share revenue. Profit share represents the Company’s participation in the net underwriting profit of third-party insurance partners who provide automotive lenders with credit default insurance on loans those lenders make using LPP. The Company receives a percentage of the aggregate net monthly insurance underwriting profit over the term of the underlying insured loan. 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. In periods where the expenses and losses on the aggregated loan portfolio exceed the monthly earned premiums, no profit share payments are received and future monthly insurance underwriting profits earned are reduced until the earned premiums for the aggregate loan portfolio exceed the accumulated losses at the insurance partner level. The Company fulfills its performance obligation upon placement of the insurance and recognizes profit share revenue based on the amount of cash flows it expects to receive from the insurance company over the term of the underlying insured loan. The Company uses a forecast model to estimate variable consideration based on undiscounted expected future profit share to be received from its insurance partners. The forecast model projects loan-level earned premiums and insurance claim payments driven by projections of prepayment rate, loan default rate and severity of loss on the Company’s remaining active loan portfolio as of the reporting date. These assumptions are derived from an analysis of the historical portfolio performance, prevailing default and prepayment trends, and macroeconomic projections. Estimates of variable consideration generated by the forecast model are constrained to the extent that it is probable that a significant reversal of revenue will not occur in future periods. On a quarterly basis, the Company updates the assumptions used in the forecast model and recognizes a change in estimate adjustment to profit share revenue, contract assets and excess profit share receipts liability in the period. The Company assesses the default and prepayment assumptions of the forecast model against reported performance and lender delinquency data. The forecast model is updated to consider the actual prepayment rate, default, and severity of results and macroeconomic conditions. Claims administration services. For the insurance policies issued through the Company’s program, the Company provides adjudication services for insurance claims on the third-party insurer’s policies for auto loans processed through LPP. The Company earns a monthly service fee which is calculated by the third-party insurance providers as 3% of the monthly net insurance earned premium collected over the life of the underlying loan. In this arrangement, the performance obligation to provide claims administration services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. Revenue is recognized as the service is provided over the term of the adjudication contract with the insurance partner.
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| Allowance for current expected credit losses ("CECL") | Allowance for current expected credit losses (“CECL”) The Company maintains a CECL allowance on its accounts receivable and contract assets. The allowance represents an estimate based primarily on market implied lifetime probabilities of default and loss severities for assets with similar risk characteristics. As these inputs are derived from market observations, they inherently include forward-looking expectations about macro-economic conditions. The allowance is evaluated quarterly by the Company for adequacy by taking into consideration factors such as reasonableness of the market implied loss statistics, historical lifetime loss data, and credit quality of the customer base. Provisions for the allowance for expected credit losses attributable to bad debt are recorded as general and administrative expenses. Account balances deemed uncollectible are written off, net of actual recoveries. The Company does not have any material accounts receivable or contract assets receivable balances that are past due and has not written off any material balances in its portfolio for the periods presented.
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| Property and equipment, net | Property and equipment, net Property and equipment related to furniture, fixtures and equipment and leasehold improvements are recorded at cost, less accumulated depreciation and impairment losses, if any. Maintenance and repairs that do not improve or extend the useful life of the respective asset are expensed as incurred. Depreciation expense is calculated using the straight-line method based on the estimated useful lives of the assets, which ranges from to eight years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Depreciation expense related to our property and equipment was $0.3 million for each of the years ended December 31, 2024, 2023 and 2022, and is recognized within the General and administrative line item in the Consolidated Statements of Operations. The Company’s property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the amount recorded may not be recoverable, and if not deemed recoverable based on the assets’ expected undiscounted cash flows, an impairment loss is recognized to the extent that the carrying amount exceeds the fair value.
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| Capitalized software development costs, net | Capitalized software development costs, net Costs related to internally developed software, including development of the Company’s cloud-based LPP solution, are capitalized when preliminary development efforts are successfully completed, and it is probable that the project will be completed and the software will be used as intended. Salaries and compensation costs for employees and fees paid to third-party consultants who are directly involved in development efforts and costs incurred for upgrades and enhancements that result in additional functionality of the software are capitalized and included in Capitalized software development costs, net on the Consolidated Balance Sheets. Related training and maintenance costs are expensed as incurred. Amortization of internal-use software begins when the software is ready for its intended use and is generally amortized over three years, the period for which the software is expected to contribute to future cash flows.
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| Operating leases | Operating leases The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date. The Company recognizes lease right-of-use (“ROU”) assets and lease liabilities for operating and finance leases with initial terms greater than 12 months. ROU assets represent the Company’s right to use an asset for the lease term, while lease liabilities represent the Company’s obligation to make the related lease payments. The ROU assets for operating and finance leases and liabilities are recognized based on the present value of fixed lease payments over the lease term at the lease commencement date. Lease liabilities are calculated as the present value of fixed payments not yet paid at the measurement date. Since the interest rate implicit in the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of its lease payments. The Company’s incremental borrowing rate is determined based on the interest rate paid to borrow on a collateralized basis over a similar term. Operating lease ROU assets are recognized net of any lease prepayments and incentives. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments that are not based on an index or a rate, such as common area maintenance fees, taxes and insurance, are expensed as incurred.
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| Fair value measurements | Fair value measurements Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, the Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following: • Level 1 — Quoted prices in active markets for identical assets or liabilities; • Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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| Excess profit share receipts liability | Excess profit share receipts liability The excess profit share receipts liability represents the profit share cash consideration received that is in excess of the estimated profit share variable consideration generated by the profit share forecast model in the current period at the individual loan level. The excess profit share receipts liability is increased for payments received from insurance partners to the extent the payments are related to performance obligations satisfied in previous periods related to historic vintages. In addition, the Company evaluates and updates its profit share revenue forecast on a quarterly basis and adjusts its excess profit share receipts liability accordingly. The excess profit share receipts liability is classified as current or non-current on the Consolidated Balance Sheet based on the estimated timing of realizing forecasted losses.
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| Contingencies | Contingencies The Company accounts for claims and contingencies in accordance with authoritative guidance that requires it to record an estimated loss from a claim or loss contingency when information available prior to issuance of the consolidated financial statements indicates a liability has been incurred at the date of the consolidated financial statements and the amount of the loss can be reasonably estimated. If the Company determines that it is reasonably possible but not probable that an asset has been impaired or a liability has been incurred, it discloses the amount or range of estimated loss if material or that the loss cannot be reasonably estimated. Accounting for claims and contingencies requires the Company to use judgment.
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| Research and development costs | Research and development costs Research and development costs consist primarily of employee compensation and benefits, software and data services to support the ongoing development of the Company’s lending enablement platform, LPP.
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| Advertising costs | Advertising costs Advertising costs are typically expensed as incurred and are included in Selling and marketing in the accompanying Consolidated Statements of Operations.
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| Deferred financing costs | Deferred financing costs Deferred financing costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense in accordance with the related debt agreement. Deferred financing costs related to the Term Loan due 2027 (as defined hereinafter) are included as a reduction within Long-term debt, net of deferred financing costs in the accompanying Consolidated Balance Sheets and amortized as interest expense using the effective interest method over the term of the debt agreement. Deferred financing costs related to the Revolving Credit Facility (as defined hereinafter) are included in Other assets on the accompanying Consolidated Balance Sheets and amortized using the straight-line method over the life of the Revolving Credit Facility.
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| Share-based compensation | Share-based compensation The Company issues restricted stock units (“RSUs”) with service (time-based) vesting criteria and performance-based restricted stock units (“PSUs”) with market or performance criteria. The Company uses the grant date fair value of RSUs to measure share-based compensation. The Company utilizes the Monte Carlo simulation to measure share-based compensation for PSUs with market conditions. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value. The Company uses the grant date fair value for PSUs in which vesting is tied to specific performance criteria. The Company evaluates the probability of achieving performance goals on a quarterly basis and recognizes share-based compensation to the extent achievement of performance goals is considered probable. Any change in estimate affecting the number of shares expected to be issued upon vesting of the PSUs is accounted for as a cumulative adjustment to the compensation expense in the period in which the change occurs. If actual results differ significantly from these estimates, share-based compensation expense and the Company’s results of operations could be materially affected. The Company recognizes compensation expense for unvested awards in the Consolidated Statements of Operations, net of actual forfeitures in the period they occur, on a straight-line basis over the requisite service or performance period. Share-based compensation expense is generally allocated based on the functional responsibilities of the awarded unitholders in the accompanying Consolidated Statements of Operations. The Company expects to issue shares from treasury stock when stock options are exercised or when RSUs and PSUs vest.
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| Treasury stock | Treasury stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity.
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| Net income (loss) per share | Net income (loss) per share The Company’s basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common shares outstanding for the period, without consideration of potentially dilutive securities. The diluted net income (loss) per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net income (loss) per share is the same as basic net income (loss) per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive.
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| Concentrations of revenue and credit risks | Concentrations of revenue and credit risks The following table provides a summary of insurance partners contributing more than 10% of total revenue, excluding the profit share revenue change in estimate adjustments, for the years ended December 31, 2024, 2023 and 2022:
* Represents less than 10% of total revenue. Financial instruments that potentially subject the Company to credit risk consist of Cash and cash equivalents, Restricted cash, Accounts receivable, net and Contract assets to the extent of the amounts recorded on the balance sheets. Cash and cash equivalents are deposited in commercial analysis accounts, money market funds and U.S. Treasury securities at financial institutions with high credit standing. Restricted cash relates to funds held by the Company on behalf of our insurance partners, designated for the use of insurance claim payments. Restricted cash is deposited in commercial analysis accounts at one financial institution. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and management believes the Company is not exposed to significant risks on such accounts. The Company’s accounts receivable and contract assets are derived from revenue earned from customers. The Company maintains an allowance for expected credit losses on its accounts receivable and contract asset receivable in accordance with CECL.
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| Recently issued accounting pronouncements not yet adopted and Recently adopted new accounting standards | Recently issued accounting pronouncements not yet adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires additional disclosure related to rate reconciliation, income taxes paid, and other disclosures to improve the effectiveness of income tax disclosures. The ASU is effective for annual periods beginning after December 15, 2024, and applied on a prospective basis. Early adoption and retrospective application is permitted. The Company believes this ASU will have no impact on its consolidated financial statements but may result in additional disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires new disclosures, in a separate note to financial statements, of specified information about certain costs and expenses. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company believes this ASU will have no impact on its consolidated financial statements but will result in additional disclosures. Recently adopted new accounting standards In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which provides amendments to improve reportable segments disclosure requirements. The Company adopted ASU 2023-07 for the fiscal year beginning January 1, 2024. As a result, the Company has included the additional required disclosures in Note 13 — Segment Reporting with retrospective presentation to all prior periods presented in the financial statements. The adoption of ASU 2023-07 did not impact the Company’s results of operations, cash flows, or balance sheets.
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