Open Lending Corporation · NASDAQ:LPRO
Open Lending — SPAC Merger (May 2020)
55 slides from Open Lending's SPAC merger presentation, May 8, 2020
Slide 1: Open Lending Investor Update Q1 2020
@penLending S to more automotive loans. Investor Update Qi 2020
Slide 2: Disclaimer
2 Disclaimer: This presentation (this “Presentation”) is provided for informational purposes only and has been prepared to assi st interested parties in making their own evaluation with respect to a potential business combination between Open Lending, LLC (“O pen Lending”) and Nebula Acquisition Cor
Slide 3: Table of Contents
BUSINESS & ENVIRONMENT UPDATE FORECAST REVISION PUBLIC MARKET COMPARABLES APPENDIX ADDITIONAL FINANCIAL INFORMATION RECESSION SUPPLEMENT UNDERLYING MODEL DETAIL Table of
Slide 4: Business & Environment Update
4 Forecast Revision Public Market Comparables Appendix
Slide 5: Compelling Investment Thesis Intact
5 Compelling Investment Thesis Intact ▪ Visionary management team with deep domain expertise, selectively growing already strong team ▪ Large financial commitment to transaction even more relevant today Experienced Management Team 5 ▪ Expanding and underserved market opportunity with strong secular
Slide 6: Open Lending Q1 Update
6 Open Lending Q1 Update ▪ Record quarterly cert (1) originations of ~28k certs in Q1 2020, representing 65% YoY growth ▪ In mid - March Open Lending successfully raised $170mm in debt financing Q1 Ahead of Plan Swift Response to Challenged Economic Environment Open Lending and Partners Strongly Pos
Slide 7: Strong Q1 2020 Certs Exceeded Budget
7 16,945 28,024 Q1 19 Q1 20 Strong Q1 2020 Certs Exceeded Budget Certs Originated (1) 14 lenders launched in Q1 2019; growth is measured on a quarterly basis (2) Lenders closed in Q4 2019 and Q1 2020 that have signed ▪ Cert growth driven by OEM Captives and new credit union and bank lenders ▪ OEM ca
Slide 8: Multi-Pronged Response to Covid - Working with Our Partners
8 Multi - Pronged Response to Covid - 19 Working with Our Partners Underwriting Changes Strategy ▪ Insurance partners have allowed 90 - day payment deferrals upon request from our lending partners ▪ Lenders are providing accommodations to allow consumers to stay current on their loans, including sus
Slide 9: Recent Underwriting and Pricing Actions to Adapt to Economic Environment
9 Recent Underwriting and Pricing Actions to Adapt to Economic Environment Underwriting refinements aim to ensure Lenders Protection is well positioned in a changing economic atmosphere Adjustment Reason for Mitigation Open Approval Window 45 days to 30 days Lower performance on loans closing within
Slide 10: Refinance Opportunity for Near-Prime Borrowers to Lock-in Lower Rates
10 Refinance Opportunity for Near - Prime Borrowers to Lock - in Lower Rates ▪ Refinancing opportunity with near - prime consumers to allow them to lock in a lower rate ▪ Particularly in these times, helping the average consumer save money is important to us ▪ Refinance process can be completed 100%
Slide 11: OEM Roll-Out and Account Performance Update
11 16,800 28,740 30,828 31,344 47,772 20,000+ 50,000+ (2) OEM Roll - Out and Account Performance Update (1) Based on 2020 actual results for Q1 and management estimates for the balance of 2020. (2) Based on management estimates for December 2020 ▪ OEM captive cert originations were strong in Q1, dem
Slide 12: Insurance Partners Remain Highly Engaged
12 Insurance Partner Remain Highly Engaged Partner Since 2017 Partner Since 2010 (1) Source: A.M. Best. (2) Based on CNA’s 2020 Q1 10 - Q company filing. (3) Based on AmTrust Q3 2018 10 - Q company filing (last recent publicly available disclosure). x Exclusive agreement through 2023 x Financial Str
Slide 13: Lending Partner Sentiment in the Current Environment
13 Lending Partner Sentiment in the Current Environment Lenders are more enthusiastic about Lenders Protection than ever and have exhibited resilience to market forces “Lenders Protection continues to be an important part of our risk mitigation strategy related to COVID19 but also to help alleviate
Slide 14: Potential Growth Opportunity and Investment Upside
14 Potential Growth Opportunity and Investment Upside ▪ Significant growth opportunity due to anticipated pent up demand and enhanced focus on private modes of transportation resulting from health concerns v Open Lending is primed for significant growth as economy reopens ▪ Macroeconomic instability
Slide 15: Forecast Revision
15 Business & Environment Update Public Market Comparables Appendix
Slide 16: Updated Guidance Range
16 Updated Guidance Range 2020E 2021E Prior Guidance (Jan ‘20) Revised Guidance - Low Revised Guidance - High Prior Guidance (Jan ‘20) (1) Revised Guidance - Low Revised Guidance - High Total Certs 142k 85k 101k n/a 161k 206k % Growth (2) 81% 8% 29% n/a 73% 122% Revenue ($mm) $158 $89 $108 $206 - 23
Slide 17: Signs of Cert Stabilization and Rebounding in Recent Weeks
17 - 500 1,000 1,500 2,000 2,500 3,000 Feb 02 Feb 09 Feb 16 Feb 23 Mar 01 Mar 08 Mar 15 Mar 22 Mar 29 Apr 05 Apr 12 Apr 19 Apr 26 Signs of Cert Stabilization and Rebounding in Recent Weeks Weekly Cert Originations Feb 2 nd – May 2 nd Certs appeared to stabilize in recent weeks Note: Reduction in OEM
Slide 18: Revised Certs Forecast
18 Revised Certs Forecast # in 000 Monthly Certs 2020 Second half of the year forecasted to experience tempered rebound in cert volumes by year - end Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec - 2 4 6 8 10 12 14 16 Thousands Actuals Prior Guidance (Jan '20) High Low Total 2020 Certs % of Prior
Slide 19: 2020 / 2021 Certs Forecast
19 2020 / 2021 Certs Forecast Certs Forecast The second half of the year is forecasted to bring monthly cert volumes closer to the original 2020 budget by year - end 85,000 161,000 78,434 101,000 206,000 2019A 2020E 2021E
Slide 20: Cert Forecasts Assume Modest Additional Certs Over Current Run Rate
20 Cert Forecasts Assume Modest Additional Certs Over Current Run Rate (1) April run rate ~4,800 net of OEM 2 certs 32,779 38,400 13,755 84,934 April YTD April Runrate Through YE Additional Certs Above RR 2020 Low Case Cumulative Certs 32,779 71,179 84,934 84,934 32,779 38,400 29,682 100,861 April Y
Slide 21: Forecast Assumptions for Key Performance Parameters
21 Forecast Assumptions for Key Performance Parameters Stress adjustment factors are considered for profit share revenue from new loans, as well as to adjust the receivable associated with originations from prior to the current period Default Frequency Stress ▪ We assume that the market will begin t
Slide 22: Impact of COVID Rate Changes on Revenue Streams
22 Without Premium Increase With Premium Increase (1) Revenue Stream Unadjusted Unit Economics COVID Adjusted Unit Economics % Change COVID Adjusted Unit Economics % Change Program Fee ~$470 ~$470 - ~$470 - Administration Fee ~$65 ~$65 - ~$65 - Insurance Profit Share $626 $522 (16.5%) $714 14.1% Tot
Slide 23: Insurance Underwriting Profit Components Over Loan Lifetime
23 Note: COVID adjustments based on Q2 2020 cert weightings and high cert case unit economics (1) Fee based on a % of premium and is contractual (2) Loss ratio is based on Management estimates for 2019E using performance curves based on June - December 2018 actual loan experienc e (3) Premium increa
Slide 24: Insurer Unit Economics Over Loan Lifetime
24 Insurer Unit Economics Over Loan Lifetime Item % of Premium Unit Economics % Change to Historical Unadjusted Unit Economics for COVID Stress or Premium COVID Stress Scenario w/o Premium Increase COVID Stress Scenario w/ Premium Increase (1) Unadjusted Unit Economics for COVID Stress or Premium CO
Slide 25: Public Market Comparables
25 Business & Environment Update Forecast Update Appendix
Slide 26: Publicly Traded Comparable Companies Overview
26 Publicly Traded Comparable Companies Overview High Growth FinTech 2.5% 37.6% 17.0x 21.3x x Risk analytics businesses that leverage unique datasets x Mix of recurring transaction - based revenue and subscription - based revenue Lower growth profile ’19E - ’21E Revenue CAGR 2020E EBITDA Margin EV
Slide 27: Comparable Companies: Business Mix and Considerations
27 Company Core Business Info Services & Risk Analytics Info Services & Risk Analytics Info Services & Risk Analytics Banking Software Banking Software ‘19 - ’21 Revenue CAGR 6% 2% 1% 3% 5% EBITDA Margin ’21 48% 33% 40% 49% 33% Op. CF Conversion ’20 83% 77% 81% 81% NA Business Mix / Key Verticals •
Slide 28: Comparable Companies: Business Mix and Considerations (continued)
28 Company Core Business Banking Software Payments for Consumer Lending Corporate Payments Corporate Payments Home Improvement Loans ‘19 - ’21 Revenue CAGR 5% 31% 1% 3% (5%) EBITDA Margin ’21 49% 45% 44% 58% 27% Op. CF Conversion ’20 83% 100% 86% 95% 94% Business Mix / Key Verticals • Mortgage loans
Slide 29: Publicly Traded Comparable Companies – Operational Benchmarking
29 Publicly Traded Comparable Companies – Operational Benchmarking Market data as of May 2020. Key metrics denote medians. “2020” and “2021” multiples, margins, and Operating Cash Flow convers ion for Greensky at IPO represent FY2019 and FY2020 multiples based on estimates following IPO. Source: Fac
Slide 30: Publicly Traded Comparable Companies - Valuation Benchmarking
30 60.9x 56.7x 24.5x 21.3x 21.1x 25.9x NA 22.7x 15.0x NA 12.0x 7.5x 14.1x 18.3x NA NA NA 50.7x 52.1x 20.4x 16.5x 17.0x 21.0x 20.6x 18.8x 14.3x NA 10.3x 7.0x 13.7x 18.3x 14.7x NA 52.6x 1.5x 1.4x 3.4x 5.8x 2.5x 1.7x 3.6x 1.9x 1.3x NA 0.9x 0.2x 0.7x 0.9x 3.0x NA 1.9x Publicly Traded Comparable Companie
Slide 31: Regression Analysis Shows Considerable Premium for Revenue Growth
31 Verisk Analytics TransUnion Equifax Temenos Jack Henry Black Knight FleetCor Technologies WEX Brown & Brown Goosehead Square Adyen R² = 0.902 0x 10x 20x 30x 40x 50x 60x 70x 0% 5% 10% 15% 20% 25% 30% 35% EV / 2021E EBITDA 2019E - 2021E Revenue growth High Growth FinTech Information Services & Risk
Slide 32: Additional Financial Information
32 Additional Financial Information
Slide 33: Open Lending has a significant covenant cushion
33 Open Lending has a significant covenant cushion Leverage Ratio Relative to Maximum Covenant Levels Estimated Covenant Net Leverage as of Q1 2020 (1) Total Net Leverage Ratio allowable on or after June 30, 2020 to June 30, 2021 Preliminary Net Leverage Ratio Estimate Per Covenant 3.11x Relevant Co
Slide 34: EBITDA Reconciliation of Net Income to Consolidated Adjusted EBITDA
34 EBITDA Reconciliation of Net Income to Consolidated Adjusted EBITDA $ in 000 For Year Ended December 31, 2019 Net Income $ 62,544 Less Non-GAAP adjustments: Interest Expense $ 322 Income taxes $ (30) Deprecation expense $ 105 Unit-based compensation $ 1,984 Total Adjustments $ 2,381 Adjusted EBIT
Slide 35: Recession Supplement
35 Recession Supplement
Slide 36: Used vehicle sales during the last recession
36 43.6 42.7 44.1 42.6 41.4 36.1 35.6 36.9 36.9 37.6 35.8 36.2 37.3 38.6 39.2 40.4 16.6 16.9 17.0 16.5 16.1 13.2 10.4 11.6 12.7 14.4 15.5 16.5 17.4 17.5 17.1 17.2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Used Car Sales New Car Sales Source: Bureau of Economic A
Slide 37: Manheim Used Vehicle Value Index
37 80 90 100 110 120 130 140 150 Manheim Used Vehicle Value Manheim Used Vehicle Value Index Lenders’ Protection is designed around an important asset, the automobile, which has a liquid resale market used to payoff all or a majority of loan balances throughout the life of a loan Rapid recovery to h
Slide 38: Diverse Borrower Base Across the United States
38 Diverse Borrower Base Across the United States (1) Certificates data as of 5/5/2020, representing currently open Lenders Protection loans Open Lending serves customers in all 50 states and is geographically diversified Distribution of Active Portfolio (1)
Slide 39: Underlying Modeling Detail
39 Underlying Modeling Detail
Slide 40: COVID-19 Adjusted Profit Share Unit Economics
40 - 18% 14% 20% 27% 22% 15% 7% 0% Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 COVID - 19 Adjusted Profit Share Unit Economics Cohort Insurance Profit Share Unit Economics Adjustments (1) (1) Q1 2020 unit economics includes stress effects before premium adjustment; Premium increase via model cha
Slide 41: Downturn Impact on Monthly Calendar Metrics
41 0% 5% 10% 15% 20% 25% 30% Default Frequency Unadjusted Default Frequency Forecasted Scenario Downturn Impact on Monthly Calendar Metrics Loss Ratio (3) Severity Impact ($) (2) Default Frequency Per Earned Contract (1) 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Loss Cost Unadjusted Loss Cost
Slide 42: Old / Graveyard
42 OLD / GRAVEYARD
Slide 43: Default Rate vs. Unemployment Rate
43 [Default Rate vs. Unemployment Rate] To confirm whether possible / what to show 4.4 50.0% 78.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 0.0 1.0 2.0 3.0 4.0 5.0 2018-01-01 2018-04-01 2018-07-01 2018-10-01 2019-01-01 2019-04-01 2019-07-01 2019-10-01 2020-01-01 2020-04-01 2020-07-
Slide 44: Strong Performance During the Great Recession
44 Strong Performance During the Great Recession Change tag line Accident Year Loss Ratio Evaluated in 2012 2006 2007 2008 2009 Lenders Protection did not initially have attractive underwriting margins; this only came with development of Open Lending’s risk decisioning analytics and the proprietary
Slide 45: Resilience of Credit Unions
45 5.8% 10.1% 7.7% 5.8% 8.4% 8.3% (4.0%) 11.3% 9.4% 7.5% 2008 2009 2010 2011 2012 Credit Unions Banks Deposits – YoY Growth Rates 13.1% 1.1% (0.7%) 3.9% 5.1% 0.6% (15.7%) 13.7% 10.3% 4.1% 2008 2009 2010 2011 2012 Credit Unions Banks Net Loans – YoY Growth Rates Credit unions can take advantage of br
Slide 46: Resilience of Financing Market for the Auto Asset Class
46 Source: S&P Global Ratings U.S. Structured Finance 2017 "Despite unemployment reaching 10%, very few auto loan ABS were downgraded, none defaulted , and none of the subprime auto loan ABS transactions that we rated from 2007 – 2009 experienced losses exceeding our 'BBB' expected loss levels" Auto
Slide 47: Insurer Loss Ratio
47 Insurer Loss Ratio Loss Ratio (1)(2)(3) Premium Effect on Loss Ratio (4) 0% 20% 40% 60% 80% 100% 120% 140% 0 6 12 18 24 30 36 42 48 54 60 66 72 Without Increase With Increase 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 0 6 12 18 24 30 36 42 48 54 60 66 72 Unadjusted Adjusted (1) Weighted av
Slide 48: Vintage Loss Curves
48 Vintage Loss Curves Vintage Modeled Frequency Curve (1)(2) Vintage Modeled Severity Curve (1)(2) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 6 12 18 24 30 36 42 48 54 60 66 72 Unadjusted Adjusted 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 0 6 12 18 24 30 36 42 48 54 60 66 72 Unadjusted Adjusted (1) Weighted
Slide 49: Certs Volumes by Potential Length of Crisis - 2020
49 8,450 8,325 9,455 10,000 10,807 11,631 12,453 12,977 13,922 14,558 14,655 14,574 8,448 8,583 10,994 4,888 4,372 4,763 5,372 7,131 9,215 11,155 12,756 13,184 3,875 4,176 4,697 5,532 6,736 8,056 8,919 10,032 3,502 3,765 4,259 4,631 5,023 6,358 7,441 8,418 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Slide 50: Certs Volumes by Potential Length of Crisis - 2021
50 14,502 29,439 44,824 60,671 76,993 93,805 111,121 128,956 147,327 166,249 185,738 205,812 11,427 23,426 36,025 49,253 63,143 77,728 93,041 109,121 126,004 143,732 162,346 181,890 9,554 19,680 30,415 41,793 53,854 66,639 80,191 94,556 109,783 125,923 143,032 161,167 Jan Feb Mar Apr May Jun Jul Aug
Slide 51: 2021 Cert Projections
51 Dec - 20 Run - Rate Certs 2021 Cert Projections Certs Volumes by Potential Length of Crisis - 2021 Owner – GPW, OL Execs & FTP FT to Reformat 174.9 158.2 120.4 101.4 Budget Moderate Worse Severe 205.8 181.9 161.2 Moderate Worse Severe % Relative to Budget 100% 90% 69% 58% % Growth 104% 114% 111%
Slide 52: Open Lending Resiliency to an Economic Downturn
52 Open Lending Resiliency to an Economic Downturn Consumers 1. Underwriting changes implemented in March that improves credit quality of new originations and results in [15%] higher premium 2. Benefit from higher expected profitability on loans originated today 3. Estimates are far below level for
Slide 53: 2020 Sensitivities
53 2020 Sensitivities Run-Rate Certs End of Shelter-in-Place Date End of Shelter-in-Place Date ### Certs ### Certs ### Certs ##/##/2020 ##/##/2020 ##/##/2020 ##/##/2020 ##/##/2020 ##/##/2020 ##% ## ## ## ##% ## ## ## ## ## ## ## ##% ## ## ## ##% ## ## ## ## ## ## ## ##% ## ## ## ##% ## ## ## ## ## #
Slide 54: Insurance Profit Share True-up
54 Insurance Profit Share True - up 20% 30% 40% 50% 2016 2017 2018 2019 (1) Includes all prior cohorts (1) Unadjusted Adjusted $100 $100 $100 $100 $100 $100 $100 $100 Ultimate Loss Ratio Receivable True - Up Insurer Profit [Placeholder] Unadjusted Adjusted $100 $100 $100 $100 $100 $100 $100 $100 Una
Slide 55: Projected Certs Volume in 2021
55 Projected Certs Volume in 2021 # in 000 Monthly Certs 2021 TBD Key Factors of Cert Volume Growth Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 6 8 10 12 14 16 18 20 22 Thousands High Low Total 2022 Certs % of Guidance Midpoint 205.8k 104% 161.2k 81% ▪ Additional CU & Banks: TBD ▪ Additional OEM