Open Lending Corporation (LPRO) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Open Lending's Third Quarter 2021 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] 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 third quarter 2021 earnings release to its Investor Relations website. In the release, you'll 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 view as of today, November 9, 2021. The 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 opening remarks. John?

Thank you, operator, and good afternoon, everyone. Thanks for joining us for Open Lending's third quarter 2021 earnings conference call. I'd like to start today by reviewing our third quarter highlights and the progress we've made on our growth objectives, then Ross is going to discuss the broader car manufacturing and lending landscape and provide an update on our OEM opportunity. Finally, Chuck is going to review our Q3 financials and our updated outlook for full year 2021. Now to our high-level results, we're very pleased to report another record quarter at Open Lending. Q3 '21 certified loans increased by 138% to 49,332 certs. We reported revenue of $58.9 million, which was an increase of 98% and adjusted EBITDA of $42.1 million, which was an increase of 113% as compared to the third quarter of 2020. We're very encouraged by the continued growth in our credit union and bank line, where we achieved a 91% year-over-year increase in certs for the third quarter 2021. This was driven by the addition of new accounts, further penetrating existing customers and expansion of our refinance program. First, on the existing customer side. During the quarter, our top 10 customers, excluding OEMs have increased their certification volume by 185% year-to-date 2021 as compared to the same period in 2020. One way we are growing our existing customer wallet share is by adding new credit unions and banks to the refinance program. During the quarter, we onboarded 11 new accounts and now have over 40 credit unions and banks that are acting as funding sources behind these refinance channel partners. Our refinance volume was nearly 30% of our total certs in the third quarter '21. As a result of our flexible business model, our refinance channel has accommodated consumers by allowing them to modify their existing terms and lower their payments during these challenging times. We mentioned on our last call that our largest credit union customer had recently implemented our refinance program, lowering the bottom credit score from the 620 to 560. As a result of this implementation, we're happy to announce that this initiative has been a huge success and they have increased their volume by 5x and continue to grow. This is one example out of many of how impactful our partnership can be with our customers. Continuing to grow the refinance channel is one way we'll be able to help offset the temporary headwinds associated with affordability due to inflated values of used cars and the chip shortage, which are, in turn, impacting car sales, both new and used. Again, Ross is going to touch base on this topic in a few minutes. On the new customer side, we signed 16 new accounts in the third quarter, and four of these were Tier 1 accounts classified as over $1 billion in assets and two with assets over $8 billion. Momentum has also continued into the fourth quarter with seven new contracts signed and nearly 20 have active implementations underway. In certain cases, where permissible, we will announce the names of these large new customers once they've go online on the lenders protection program. Many of the inbound calls that we're getting from the larger credit unions are related to the fact that they're all going to need to comply with CECL in 2023. And based on the recent webinar that we co-hosted with KPMG, these financial institutions all have less than a year to prepare. We will continue to focus on this very important growth opportunity over the next 12 months. We're also focused on three other initiatives that position us for long-term growth. First, I know we've touched on this previously, but we continue to explore third-party funding sources to purchase loans, what we call a permanent capital vehicle. While the initiative is young, we're very encouraged by the progress to date of these third-party funding institutions utilizing our lenders protection platform to underwrite and decision loans. To clarify, we will not have any legal ownership in these funding sources. Second, we are in the early stages of work towards the ability to provide additional products to include better decisioning on prime loans as well as the ability to ensure other asset classes. Third, expanding our business insurance partnership relationships, as you know, we provided tremendous value to our insurance carrier partners, and we believe the ROE generated for the insurer are well in excess of other lines of business due to high underwriting profitability and low capital charges. Our current partners are very pleased, and we're in discussions with a few more that will give us even more capacity as well as help us with our initiative to possibly expand into other verticals. As a reminder, these are unique and value-added partnerships, which are exclusive in nature. On October 25 through the 27, we held our annual executive lending roundtable. We had over 200 credit union and bank executives joining us here in Austin, Texas, for three days of roundtable discussion. This event was the largest attended conference we've hosted since founding the Company. It was a clear indication that our lending partners are hungry for new ideas on how to grow their auto portfolio in the absence of chips and new car inventory. Before I turn it over to Ross to review our OEM business as well as the global semiconductor supply chain impact to our business, I would like to remind everyone of a few key points. As you've heard us say on previous calls, over 80% of our business is typically used cars. With inflated used car values, it's making it increasingly difficult for our target market, that's consumers with scores of 560 to 680 to be able to qualify for a loan due to the payment to income threshold that we have in place. With that, I'd like to offer a couple of insights based on our prior experiences during these types of cycles. For starters, this pandemic-induced recessionary cycle has presented patterns that we're familiar with based on over 20 years of data and history. Heading into recessions, we typically see supply in excess of demand as end market conditions soften. Conversely, off the market trough, we experience a period of insufficient supply as demand returns. We also see specific metrics that at times can forecast the inflection point. Currently, we are experiencing very low levels of dealer inventory, low levels of incentives offered by dealers and dealers transacting with the highest quality of buyer from a credit score perspective. In some instances, new vehicles are selling over MSRP and used car inventories are being priced up. While it can be challenging to know when we have precisely turned the corner, and reached that inflection point, we do know that in prior cycles, the recovery spans a period of 6 to 18 months. Over that time frame, pricing inevitably moderates and consequently, volumes increased notably. We do believe that we will be well positioned to capture our share of the estimated 5 million plus units of excess demand that currently are forecasted. It is important to note that we continue to be disciplined in the way we run our business. While others in the market are relaxing underwriting standards, we remain steadfast in our position that we want to set our partners up for long-term success by delivering appropriate risk-adjusted returns on their auto loan portfolio. And with that, I'm going to go ahead and turn this over to Ross.

Thanks, John. As John mentioned, I want to spend a few minutes to talk about the general auto lending landscape. First, on the chip shortage, OEMs are allocating the limited production of chips to the most profitable units, generally the more expensive and less affordable units. Due to this new vehicle inventory continues to decline down 67% from a year ago. This has also led to less incentives being offered, which impacts the near-term opportunity for our subvention offering. Average incentive spending per unit in October 2021 is expected to reach a record low of approximately $1,600, which is down from almost $3,500 in October 2020. This will obviously impact our business if the shortage continues for a long time. However, there are a few stats that are suggesting that we may be in a trough and that we should see an inventory recovery in the coming months. As an example, the Vice President of Sales Operations at Key America recently said that despite ongoing supply chain issues and chip shortages, we expect our available supply and robust customer interest will help us have a strong finish for the year. In addition, some of the largest OEMs have seen more optimistic on supply. Ford recently predicted an increased volume in the final months of 2021. GM plans to resume production of the Malibu for the first time since February 2021 as an indication that its chip supplies are stable enough to build even its lowest priority vehicles. Despite all these short-term conditions, we are still seeing a lot of engagement and excitement with the current and prospective OEM partners, similar to the credit unions of bank space. As a reminder, there are many benefits to them to partner with us. First, greater earnings and ROAs to captives, with credit performance net of default insurance payments comparable to prime loans. Second, they are able to generate low-risk revenues by leveraging their existing infrastructure and network. Third, they experienced increased profitability due to credit loss release under the CECL standards, and most importantly, increase repeat buyers by keeping consumers in the captive customer ecosystem. With that backdrop, I want to give you a brief update on OEM number one and two, which combined have grown 205% year-to-date in 2021, first for the OEM number one. In the third quarter of 2021, we experienced certification growth of approximately 38% compared to Q3 of '20. I mentioned the chip shortage earlier, and this is impacting new car volumes as over 65% of their volume was new vehicles earlier this year. For OEM number two, certified loan growth continues in Q3 of '21. As a reminder, OEM number two came back online in October 2020 after going offline due to the COVID-19 pandemic. The chip shortage is also impacting this OEM, but we are excited by our ramp, and it's working just as design and will be a major part of our growth plan with affordability and the supply of chips returns to normal levels. Fortunately, we've been able to grow our used volumes across all three channels, which has allowed us to continue growing our business during this time. We expanded terms of 75 months in early April 2021 as requested by the OEM and have seen the 75-month loans represent about 17% of their originations since April 2021. We continue to work through contractual and IT implementation workflows. We are entering into an SOW with one of these OEMs IT provider to expand our current integration to include the bells and whistles that their clients will need to include, for example, subvention and other dealer-facing enhancements. This work will enable our systems to be ready. We continue to make good progress on the IT provider and OEM, and we'll keep you updated on our progress. In summary, even though the light vehicle SAR is down nearly 25%, we continue to grow our year-over-year volumes with our two existing OEMs. We are optimistic that when inventories begin to build, and the SAR returns to a positive trend line, we will benefit based on the pent-up demand in the market. I'll now turn it over to Chuck to discuss our Q3 financials and outlook in more detail.

Thanks, Ross. During the third quarter of 2021, we facilitated 49,332 certified loans compared to 20,696 certified loans in Q3 of '20, a 138% increase year-over-year. We executed 16 contracts with new customers. In addition, we have nearly 20 active implementations with go-live dates in the next 60 to 90 days. Total revenue for third quarter of 2021 increased 98% to $58.9 million as compared to $29.8 million in third quarter 2020. Profit share revenue consisted of $35.4 million of total revenue, program fees were $21.6 million and claims administration fees were $1.8 million. Now we'd like to further break down the $35.4 million in profit share revenue recognized in the third quarter of 2021. Profit share associated with new originations in the third quarter of '21 was $27.9 million or $566 per certified loan as compared to $14.7 million or $711 per certified loan in the third quarter of 2020. As previously disclosed, in April of 2021, we removed the vehicle value discount established as part of our underwriting changes implemented at the onset of COVID-19, which had the effect of increasing insurance premiums and corresponding profit share to us during the pandemic by approximately 15% per certified loan. As a result of transitioning back to pre-COVID normalized underwriting standards, our average profit share unit economics in third quarter 2021 are comparable to pre-COVID profit share economics. This change in underwriting has improved our closure rates, driven record certified loan volumes and expanded our competitive position in the market. Also included in profit share revenue in the third quarter of 2021 was $7.5 million change in estimated revenues from certified loans originated in previous periods. As a result of improved macroeconomic conditions, and the continued overall portfolio performing better than we expected due to lower defaults and claims. As a reminder, profit shares paid to us monthly by the insurance carriers from the underwriting profit associated with Lenders Protection's risk. Under ASC 606, we recognized the estimated profit share upfront in the month loan is certified based on our forecast of defaults, prepayments, severity, outstanding principal and premium on a loan by loan basis. We have adjustments to our contract assets due to estimation of revenue from loans originated in previous periods on a prospective basis. In our supplemental earnings slides posted on our website we have slides to further explain changes in contract assets, profit share revenue and unit economic trends. Consistent with last quarter, we break down the change in estimates over the past quarters between realized portfolio performance and prospective changes and assumptions for future periods. We would like to point out that during the last 12 months, almost 90% of our positive changes in estimates related to profit share revenue were due to actual realized portfolio performance. Basically lower-than-projected claims and severity of losses in historical periods drove these positive changes, which increased our estimate in our contract asset, profit share revenues and in turn, drives near-term cash flows. Continued strong loan performance from a risk perspective will result in additional positive changes in our contract assets profit share revenues and near-term cash flows. Gross profit was $52.5 million in the third quarter of 2021, an increase of 93%, driven primarily by the increase in certified loans in the third quarter of 2021 as compared to third quarter of 2020. Gross margin was nearly 90% in the third quarter of '21 compared to 92% in the third quarter of 2020. Now let's turn to selling and general administrative expenses, which were $11.8 million in the third quarter of 2021 compared to $7.7 million in the previous year quarter. The increase primarily represents employee compensation and benefits including share-based compensation related to headcount addition to enhance internal controls, financial reporting and compliance functions, risk and information technology for a public company. Operating income was $40.7 million in the third quarter of 2021 compared to $19.5 million in the third quarter of 2020. Net income in the third quarter of 2021 was $29.4 million compared to a net loss of $71.1 million in the third quarter of 2020. As a reminder, we had $83.1 million in expenses in the third quarter of 2020 that were associated with the business combination, specifically a noncash charge as a result of the change in fair value of contingent consideration earn out shares, which were accounted for as liability awards. All contingent earn-out share milestones were met in the third quarter of 2020. Adjusted EBITDA for the third quarter of 2021 was $42.1 million as compared to $19.7 million in the third quarter of 2020. There's a reconciliation from GAAP to non-GAAP financial measures that can be found at the back of our earnings release. We exited the quarter with $293.2 million in total assets, of which $90.9 million was in unrestricted cash, $114.3 million was in contract assets and $66 million in net deferred tax assets. We had $165.7 million in total liabilities, of which $147 million was an outstanding debt. We had approximately 126.2 million shares outstanding on September 30, 2021. We posted an updated investor presentation and third quarter 2021 earnings supplemental to our Investor Relations website, which includes a slide that lays out our current share count. Now moving to our guidance for 2021. Based on third quarter results and trends into the fourth quarter of 2021, we are narrowing our previously announced guidance ranges as follows: total certified loans to be between $165,000 and $174,000. At the midpoint, our growth is approximately 80% against the backdrop of a SAR that has contracted over 25%. Total revenue to be between $200 million and $212 million, adjusted EBITDA to be between $140 million and $150 million and adjusted operating cash flow to be between $110 million and $125 million. Even though we are narrowing our previously reported guidance ranges, we're excited about the resiliency of our business despite inflated car values and the global semiconductor chip shortages. Further, we are still within the guidance ranges provided 18 months ago, which demonstrates the predictability of our business model and narrowing our guidance, we took the following factors into consideration. Affordability Index for our target credit score of 560 to 680 due to continued inflated used car values, the global semiconductor chip shortage, OEMs that have streamlined their supply chain, having moved toward just-in-time manufacturing processes, disruption in the transportation networks and raw material shortages and low levels of dealer inventory. With that, I will now turn it back over to John, who will make a few closing comments before moving to Q&A. John?

Thank you, Chuck. I want to thank everyone for joining us today for our third quarter 2021 earnings call. We remain excited about the future and the opportunity ahead for us. I do want to leave you with a couple of thoughts here. We successfully navigated through the first phase of COVID-19 in 2020. We also navigated through the surge of the delta variant throughout 2021, continuing to grow our business, and we will navigate through the inventory and affordability constraints. Our business model has proven that it's very resilient, and we are well positioned as these headwinds subside. As you may recall, our TAM is over $250 billion. We've only have low single-digit penetration today, which leads to significant wide space and more opportunity. I want to thank everybody again for joining us. Thank you.

[Operator Instructions] And we do have a question from Vincent Caintic with Stephens. Please go ahead. Your line is open.

I guess just first, I wanted to touch on the guidance and what's implied for the fourth quarter. So if I look at the midpoint of the range for the fourth quarter, it implies about 4,500 of certs. And I was just wondering, when we look at the third quarter, it's down. And just when we think about the fourth quarter guidance and looking into '22, it's the fourth quarter a good run rate, and you've been adding lenders, non-OEM lenders as an example. I'm just wondering when you think about those additions and when they generate -- start to generate certification volumes, is that enough to offset some of these industry headwinds?

This is Chuck. Yes. I mean basically, our guidance has been in the market for over 18 months. And the recent -- we really saw the impact of the chips as well as the affordability on our target FICO, our credit score really impact us beginning late kind of September time frame into the fourth quarter here. So it's really more around the inflated car values, affordability as well as just inventory. And the SAR is down 25%, both new and used. And it's just -- that's -- we felt it was time to basically narrow that guidance a bit from the 18-month-old guidance. We came off a record Q3. The business is strong. We feel really good about where we're heading into 2022. There's a lot of pent-up demand out there that we believe we're well positioned for when things correct and the inventories get restocked.

And Vince, the one thing I'd add to that, we mentioned the refinance channel during the call as well, and the number of attendees that we had at our user group meeting, I think you're going to see -- we had a lot of interest in credit unions that we're not aware of that and banks looking to sign up for that refinance channel. And there's a lot of opportunity there as we bring them on. These are accounts that are live with us today. That's not a six-month ramp to get them up and running on the refinance channel. So I think you're going to see some good tailwinds here to refinance.

Yes. And I'll add on a little bit more. We believe these are temporary headwinds, and this will work itself out over time. So I think we've already added 60-plus new customers in 2021 through October, and that's ahead of last year, full year. So continue having a lot of interest in new customers coming to board, as John said.

Okay. Great. Yes, I appreciate that. And so the 60-plus new customers, I guess, when you think about what an average customer could generate once to mature, and how long does it take for them to be I'm not sure when you think about that non-OEM opportunity?

Four to six months from the time we get them producing their first cert that ramp up, unless it's refi, again, refi is not -- that's more of a turnkey program, Vincent, where once we hook them up with one of the five or six different refinance channels we have live, they can start producing loans as early as 30 days out.

Okay. And last one for me. I know you talked about kind of the OEM engagement is still high. Just maybe any updates you can provide on the OEM pipeline. And we saw in the quarter, one of your lending partners is becoming a captive OEM lender, just if there's any thoughts you can provide on the pipeline?

Yes, Vincent, it's Ross. Yes, we have a great relationship with the party you're talking about and with that announcement with the just closing last week. We're excited about it. We've actually been in discussions with that particular captive for 14 or 15 months separately. But we are ready to have those deeper discussions. We are we will let our client direct that, but we certainly have -- are excited about it and happy for their success and the opportunity is going to be big, and we certainly are ready to have those deeper discussions whenever they direct us. But that's about all I talk about today with that. As it relates to the other OEMs that is extremely close with the -- our work we're doing with that IT partner, we're looking at it citing a statement of work here. We're financially obligating ourselves for that work, which shows our commitment and belief that this is going to go through. And we have lots of implementation-type meetings ongoing with them, legal work right now, contractual work evaluating the documents. And yes, we're excited about that as well. And certainly, we look forward to giving more updates as we can on that opportunity, very exciting.

Our next question is from Joseph Vafi with Canaccord. Please go ahead. Your line is open.

Nice to see the continued growth despite the headwinds. Just following up on Vincent's question there and maybe this one is for Ross. On -- it sounds like OEM number three is moving forward, and you're moving through kind of IT and legal. To the extent you can talk about it, is this -- is there more to do with this OEM relative to their internal check boxes versus some of the other OEMs you've signed as the maybe follow-up after that?

I think there the level of enthusiasm on that side has not changed at all. The integration that we're building with the third party will have subvention. We'll have all of our certification piece of technology that needed to be added to our current integration with them. And they will start the work and get it done here early next year, and we'll be able to launch afterwards. So at the same time, we're working through the business side of it, about how we're going to use our program, where we are in legal. We've gotten management buy in from this. And so we're working through it. And certainly, we look forward to when we could actually share a signing date and kind of that implementation plan, which will definitely affect 2022.

That's great to hear, Ross. And then do you think -- I mean, I know you'll probably provide a '22 guide on maybe on your Q4 numbers. Do you think if all goes well, you'll be able to incorporate some of that OEM number three and to the '22 guide at this point? Or is it -- you; have to make maybe a game time decision on that as we get closer, and how you describe it?

I think that's certainly our plan. And hopefully, there's another one as well. But for sure, that's part of our plan. We haven't finished the development of it yet. We're working with it, but it sure looks like that's going to be a part of it.

[Operator Instructions] We have a question from Peter Heckmann with D.A. Davidson. Please go ahead. Your line is open.

Continued really strong growth on the bank and credit union side, just for just so I have the number right, how many bank FI customers that you have at the end of the quarter?

You have at the end or you can sign during the course.

You have resigned, Peter, or you're talking about total customers approximately 400 total active customers.

Okay. All right. And then so when you think about relative sizing, you've had these top 10 customers that generally, I have characterized as a kind of mid-tier credit union, but you've talked in the past, up into the higher tiers, and how do you see that progression happening? And just a little bit, any additional thoughts. I mean, right now, it looks to me like you're doing something like 100 certs per FI customer, but you talked about maybe some larger institutions that could potentially do a couple of thousand. Can you give us a little more color on some of those discussions?

Sure. This is Charles. We mentioned earlier, too, that the ones that we signed in the last quarter, there was four, I think, Tier 1 accounts over $1 billion in assets and two of those were over $8 billion. And to your point, the average of 100 certs of an institution is kind of misleading and that we've got some shops doing as high as 2,500 a month and then some of the smaller shops might do 50 to 100 and they're a good account. I think with the onslaught of CECL coming into light in 2023, we had a lot of interest at our user group meeting. We actually had KPMG as one of our presenters at the function that we had here a couple of weeks ago. And they made it very clear that these larger institutions all need to be compliant by 2023, which is really just a year out. So they're all starting to ask the right questions, position themselves for the ability to take advantage of that CECL reduction as a result of having these loans insured. So I think some of our larger shops that we're signing on are anticipating doing certainly more than 100 deals per month in those upper tiers.

Okay. That's really helpful. And then just if I could do one more. I mean how are you thinking about capital allocation going forward? Somebody's been generating really strong cash flow and should be in a net cash position according to my model about a year out? And how do you think about allocating that between potentially M&A, share repurchase, dividend, what are your -- what are your early thoughts there?

Yes. Peter, it's Chuck. Yes, I mean, obviously, we think about capital allocation all the time. And first and foremost, investing in our business, our technology enhancements and development as we think about lenders protection going forward and our human resources, we invested in a lot of folks this past year, and we'll continue to invest in sales, marketing and technology. We look at M&A and we first are focused on the organic just because the white space and the TAM is so large. And as John was talking about, the credit unions, I think we're 400, call it, 390 credit unions today out of 5,000-plus. There's a great opportunity to continue penetrating there. So -- but yes, M&A for the right opportunity, that would definitely be something we'd look at as the created value for shareholders and accretive to our business. And then, of course, on the balance sheet, we've historically, as you know, we've done a couple of share buybacks and participated in the secondaries. We believe in the stock and the story and that's definitely a priority and an allocation opportunity for us. So all of the above and low leverage and not a lot of debt on the balance sheet, so those are all opportunities for us.

Our next question is from Mike Grondahl with Northland Capital Markets. Please go ahead. Your line is open.

This is Michael on for Mike. Maybe first off, Chuck, you mentioned one large credit union customer moving from 620 to 560 for their credit scores with refi. Would you say that's sort of an average move that bottom of bracket? Or does that vary quite a bit across the customer base?

It's a mixed bag. We have some institutions that come out of the chutes doing 560 to whatever their cutoff is of $680, 660. They all get to pick what they consider to be their triggers. But this was a big move for a big shop to go that low, and I think it's going to generate some significant volume in those lower tiers. But we have a lot of shops to go that low right now.

Got it. And then you just mentioned KPMG with your sort of customer conference. Do you get a lot of sort of inbound interest through their conversations they're having with their customers?

We do. And I think we even mentioned that in the call, but people -- it is a great presentation, probably 30-minute presentation at our roundtable. And since then, we've gotten quite a bit of calls from the large -- any size shop, knowing that they need to comply with that. They laid out a really good schedule of events, if you will, of what needs to happen between now and going live. I think it prompted a lot of interest in a lot of our shelves.

Our next question is from James Faucette with Morgan Stanley. Please go ahead. Your line is open.

I just wanted to ask on pure economics, et cetera. It seemed like it was ticked down a little bit maybe, we're just trying to -- in terms of getting our modeling correctly, -- Where do you see that average profit share revenue per cert settling? And we've seen this tick down a little bit as conditions have normalized, but just want to make sure that we understand the puts and takes of what's happening there and where you think it may settle out.

James, this is Chuck. Yes, I mean, we talked about a little bit on the last quarter. In April of '21, we removed our vehicle value discount that we had in place on the onset of COVID, which increased premium and profit share to '20 and into '21. What we had in Q2, we only had two months of that impact, if you will. So, that 582 and profit share that we recognized on the new originations in Q2 came down slightly in Q3 just based on having three full months in there for that being removed. So we feel like that 565 cert is based on the mix that we had this quarter is a good number to model. And I think I'll compare that back to Q1 of '20 prior to the underwriting changes when COVID came about, and we were about $564 a search. So we're right in that pre-COVID normalized level.

That's very detail. Really appreciate that. And then when you think -- going back to, I think, one of your first questions was just like as you're looking at the market right now, and obviously, you've got the benefit of additional banks coming on, perhaps OEM in next year. But at the same time, is that you're hopefully, you're going to see a bottom in the overall size of the market. I mean, what are you -- is this kind of low 40s the right run rate to start the year '22 on or like what -- like -- I'm trying to get a sense of your ambitions and what the puts and takes are for next year as we think about, like all the different potential drivers.

Yes. No, that's a great question. Our early thoughts on '22 and we'll provide more on '22 on the next quarter call. As the economy fully reopens, we're going to be a direct beneficiary of that. I mean there's pent-up demand. I think in Ross's comments, there's over 5 million units of demand out there in the marketplace. We monitor inventory levels, pricing dynamics, the supply chain shortages. And we believe we'll return to significant growth profile as inventory restocks. So the pace of recovery, we believe, based on the current data that we're close to a trough. And we have no reason to believe that we can't get back to significant growth in Q3 record levels. We just came off a record quarter at the Company and believe we can get back to that soon and continue beyond that as our growth continues.

And there are no further questions. I'll turn the call back to management.

Appreciate everybody coming on today and the questions have been great. Anything else we can answer. We're an open book here. So look forward to continuing working with you and moving this forward. Thanks, everybody.

Thanks for your time, and good night.

That concludes the call for today. We thank you for your participation and ask you please disconnect your lines.