Open Lending Corporation · NASDAQ:LPRO
Open Lending — SPAC Merger (January 2020)
41 slides from Open Lending's SPAC merger presentation, Jan 6, 2020
Slide 1: Open Lending Investor Presentation
@penLending S to more automotive loans. INVESTOR PRESENTATION
Slide 2: Disclaimer
2 This presentation (this “Presentation”) is provided for informational purposes only and has been prepared to assist intereste d p arties in making their own evaluation with respect to a potential business combination between Open Lending, LLC (“Open Lendi ng” ) and Nebula Acquisition Corporation (
Slide 3: Introduction To Presenters
3 Introduction To Presenters John Flynn President & CEO ▪ Previously the CEO at Washington Gas Light Federal Credit Union and the co - founder of Objective Advisors ▪ EY Entrepreneur of the Year 2019 Award Winner in Central Texas Ross Jessup CFO & COO ▪ Previously worked in public accounting with na
Slide 4: Financial Overview, Transaction Overview, Appendix
4 Financial Overview Transaction Overview Appendix
Slide 5: Introduction to Open Lending
5 Specialized Lending Enablement Platform for the Near - Prime Market Powered by Proprietary Data , Advanced Decisioning Analytics , an Innovative Insurance Structure and Scaled Distribution $109m 2020E EBITDA (1) 80%+ 2020E Revenue Growth (1) $1.7bn+ 2019E Annual Loans Facilitated (2) 15+ Years of
Slide 6: Massive, Underserved Population
6 490 770 630 560 700 Credit Score Banks / OEMs Credit Unions Finance Companies Buy - Here Pay - Here Lender Type Massive, Underserved Population ~$250bn 2018 Underserved Auto Loan Opportunity (1) Open Lending Enables Banks, Credit Unions, OEM Captives and Other Financial Institutions to Profitably
Slide 7: Driving Value Creation Across the Entire Ecosystem
7 Driving Value Creation Across the Entire Ecosystem Insurers Consumers Lenders Dealers OEMs x More Customers x Higher Loan Volumes x CECL Relief x Lower Risk x Customer Satisfaction & Retention x Increased ROA x Increased Sales x Customer Satisfaction x More Financing Options x Higher Retention x I
Slide 8: Our Customer is the Lender
8 Our Customer is the Lender Typical Loan Workflow Lender Loan Origination System ~5 seconds Approval Return all - in rate for insured loan Dealer Consumer Direct Indirect Open Lending generates ~$1,150 in revenue per loan (1) and does not provide funding or take any balance sheet risk (1) Based on
Slide 9: Investment Highlights
9 Investment Highlights ▪ Visionary management team with deep domain expertise ▪ Large financial commitment to transaction Experienced Management Team 5 ▪ Substantial, underserved market opportunity with strong secular drivers ▪ Significant opportunity within existing core market with <1% share (1)
Slide 10: Significant, Underserved Market Segment
10 Not Near - Prime 57% Near - Prime 43% Financed 69% Not Financed 31% ~$250bn Significant, Underserved Market Segment New 54% Used 46% Represents 2018 data. Source: Experian, New York Federal Reserve. $584bn loan originations in 2018 Underlying Market Substantial, Underserved Population Financing f
Slide 11: Specialized B2B Model With No Consumer Acquisition Costs
11 Specialized B2B Model Specialized B2B Model With No Consumer Acquisition & Distribution Costs in Enabling Loans Open Lending’s Client is the Lender x Proprietary, cloud - based platform links customers, individual loans, portfolios and Loan Origination System (LOS) platforms x Integrated with 20+
Slide 12: Attractive Fee and Profit Share Revenue Model
12 Attractive Fee and Profit Share Revenue Model Monthly Payments Insurance Premium Default Protection Access to Credit Profit Share (~$615) ▪ Fixed % of the monthly underwriting profit for all lenders ▪ Recognized upfront and received from carrier over the term of the loan Program Fee (~$470) ▪ Fee
Slide 13: Illustrative Unit Economics Summary
13 Insurance Broker Insurance Carrier Expected Interest Considering Defaults and Prepayments ~$23,000 Principal Lender Costs & Profit Insurance Premium Program Fee Budgeted Losses Underwriting Profit Administration Fee ~$470 Program Fee ~$615 Profit Share ~$65 Administration Fee Illustrative Unit Ec
Slide 14: Robust, Risk Based Model is a Key Competitive Advantage
14 Robust, Risk Based Model is a Key Competitive Advantage Data FICO Bands Term LTV Make and Model of Vehicle Mileage Credit Thickness Long History (Across the Credit Cycle) Alternative Data CECL Relief Over 2 Million Unique Risk Profiles 2 Risk Based Pricing Means That for Each Loan Open Lending Co
Slide 15: Open Lending's Risk Based Pricing
15 Open Lending’s Risk Based Pricing 100% Automated Risk Model Differentiates 2 Million Permutations of Vehicle / Borrower Characteristics & underwrites in ~5 seconds Lender Parameters ▪ Cost of Funds ▪ Return Target ▪ Servicing Costs Prepayment Risk Default Frequency Default Severity % Loan Applica
Slide 16: Risk Decisioning has Demonstrated Impressive Accuracy
16 Open Lending’s Risk Decisioning has Demonstrated Impressive Accuracy 2010 to 2019 YTD Claims Analysis (1) % of Clients Within Target Yield (2010 - 2018) The Accuracy of Open Lending’s Model has Enabled over 90% of Lenders to Achieve within 10% of or Greater than their Target Yield 20,371 Expected
Slide 17: Strong Value Proposition for Insurance Partners
17 Strong Value Proposition for Insurance Partners Profitable x Attractive underwriting profitability x Low correlation to traditional P&C insurance risks x Complete turnkey product for the insurer with little overhead cost Strong Relationships x Carriers rely on Open Lending’s underwriting that has
Slide 18: Strong Value Proposition to Credit Unions & Banks
18 Strong Value Proposition to National Network of Credit Unions & Banks (1) Lenders are defined as banks, credit unions, and OEM Captives with at least 4 LTM certs. 275+ Lenders (1) 50 States ~$7bn Loans Facilitated 24% of Q3 2019 YTD Cert Count 31% of Q3 2019 YTD Cert Count 19% of Q3 2019 YTD Cert
Slide 19: OEM Captive Opportunity Overview
19 Increase Sales and Support Values OEM Captive Opportunity Overview OEM Value Proposition OEM Captive Opportunity x Facilitate new car sales by expanding credit to near - prime consumers where they are not competitive today x Support car values by increasing financing availability for used vehicle
Slide 20: OEM Captives Showing Significant Traction
20 OEM Captives Showing Significant Traction Recent Growth in Weekly Applications from OEM Captives Two OEM Captives have gone live in the second half of 2019 and are continuing to ramp / roll out Lenders Protection Three additional OEM Captives are in the near and medium term pipelines Jul-28 Aug-0
Slide 21: Significant Growth Opportunities
21 » Increase OEM Captive Penetration Significant Growth Opportunities Near Term 3 Medium Term Long Term Existing Products and Current Services Offered » Expansion of Lender Base and Capital » Expansion into Adjacent Asset Classes (e.g., leases) » Establish Broader Auto Platform (e.g., hub and spoke
Slide 22: Open Lending's Resilience in a Recession
22 Open Lending’s Resilience in a Recession Consumers 1. During 2008 recession ~30% increase in losses (3) – consistent with auto lending and ABS markets that are more stable than other asset classes in a recession (4) 2. Today, would require 100%+ increase in claims to suffer a loss (5) 3. Benefit
Slide 23: Deep Bench of Experienced Management
23 Deep Bench of Experienced Management 5 Steve Martin VP, Insurance Sales Julie Nielsen VP, Channel Partnerships Sarah Lackey SVP, IT Operations David Rodriguez VP, Software Development Stephanie Dawson VP, Account Management Kenn Wardle Chief Risk Officer Chris Silk SVP, Sales Eastern Region Drue
Slide 24: Key Competitive Advantages
24 Key Competitive Advantages Sophisticated Technology Lender Relationships Proprietary Data Assets Regulatory Know - How Carrier Relationships v v v v v x Multi - tenant architecture x Geo - diverse, Hot - Hot Data Centers x 5 second underwriting decisions x Robust internal reporting x 2m+ unique r
Slide 25: Business Overview, Transaction Overview, Appendix
25 Business Overview Transaction Overview Appendix
Slide 26: Compelling Financial Profile
26 Compelling Financial Profile Growth is Strong and Accelerating o 35% revenue CAGR from 2017 – 2019E (1,2) o High visibility into our 2020 pipeline Attractive Revenue Profile o Meaningful upfront fee with performance driven profit share o No balance sheet risk Strong, Predictable Performance from
Slide 27: Strong Key Performance Indicator Growth
27 Strong Key Performance Indicator Growth 25,880 37,127 51,272 67,021 78,927 3,301 5,663 5,416 7,559 20,181 - - - 4,242 42,700 29,181 42,790 56,688 78,822 141,808 127% 127% 120% 118% 2016A 2017A 2018A 2019E 2020E Existing New Adds OEMs Net Retention (2) (1) (1) 2019 net retention is based on actual
Slide 28: Attractive Financial Metrics
28 $48 $63 $88 $160 2017A 2018A 2019E 2020E Attractive Financial Metrics % YoY Growth 72.7% 31.6% 39.4% 82.2% $33 $40 $59 $109 68% 64% 67% 68% 2017A 2018A 2019E 2020E EBITDA EBITDA Margin EBITDA Growth 98.9% 23.4% 46.1% 85.6% LTM (9/30/2019): Revenue $78m, EBITDA $50m. 2017 financials reflect insura
Slide 29: Financial Forecast
29 Financial Forecast 2019E 2020E 2021E Revenue Growth (YoY) 39% 82% 30 - 50% EBITDA Margin 67% 68% 70 - 75% This Presentation includes our estimates of certain financial metrics had they been prepared in accordance with ASC 606 and a re based on our historical audited financials that have been prep
Slide 30: Business Overview, Financial Overview, Appendix
30 Business Overview Financial Overview Appendix
Slide 31: True Wind Partners
31 True Wind Partners Adam Clammer and Jamie Greene’s Experience with Public Companies Selected Public Companies Years Spent on Public Company Boards 125+ IPOs Executed 15+ Public Company Boards 20+ Deep Expertise Helps True Wind Drive Long - Term Value in a Public Company Context
Slide 32: Transaction Overview
32 Transaction Overview Key Transaction Terms Illustrative Post - transaction Ownership (2) Pro Forma Enterprise Valuation at close ($m) Cash Sources and Uses ($m) ▪ Total enterprise value of ~$1.3bn (1) (12.2x 2020E EBITDA) ▪ Raised $200m of committed PIPE at $10.00 per share, including $85m from T
Slide 33: Publicly Traded Comparable Companies Overview
33 Publicly Traded Comparable Companies Overview High Growth FinTech 7.1% 40.3% 17.2x 21.4x x Risk analytics businesses that leverage unique datasets x Mix of recurring transaction - based revenue and subscription - based revenue Lower growth profile ’19E - ’21E Revenue CAGR 2020E EBITDA Margin EV
Slide 34: Comparable Companies Financial Benchmarking
34 Revenue CAGR EBITDA CAGR Gross margin EBITDA margin EV ($bn) '19E-21E '19E-21E 2019E 2020E 2019E 2020E Open Lending $1.3 59.7% 66.0% 93.2% 93.6% 67.1% 68.3% High Growth FinTech Square 29.3 28.3% 35.6% 83.2% 86.2% 18.4% 18.8% Adyen 20.9 35.6% 41.4% NM NM 56.3% 57.9% Median 31.9% 38.5% 83.2% 86.2%
Slide 35: Publicly Traded Comparable Companies - Valuation Benchmarking
35 12.2x 68.8x 52.4x 24.2x 21.4x 21.3x 31.2x 22.1x 21.3x 18.4x NA 15.6x 7.9x 14.1x NA 16.2x NA NA 0.2x 2.0x 1.4x 2.8x 2.2x 2.7x 1.5x 3.0x 3.9x 1.7x NA 1.5x 0.4x 0.7x 0.8x 2.3x 4.5x 1.4x 12.2x 55.2x 48.1x 20.2x 17.2x 15.6x 25.2x 20.4x 17.6x 17.5x NA 13.7x 7.6x 13.7x 19.6x 15.0x 20.1x 49.8x Publicly T
Slide 36: Regression Analysis Shows Considerable Premium for Revenue Growth
36 Verisk Analytics TransUnion Equifax Temenos Jack Henry Black Knight FleetCor Technologies WEX Brown & Brown Erie Indemnity Goosehead Square Adyen R² = 0.8828 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% EV / 2020E EBITDA 2019E - 2021E Revenue growth
Slide 37: Appendix
Appendix
Slide 38: Open Lending Helps Lenders Grow Profitably
38 Open Lending Helps Lenders Grow Profitably Typical Financial Institution Lenders Protection expands the ranges of credit scores and loan - to - value (LTV) where lenders can underwrite loans allowing them to increase application flow Average Financial Institution Advance Additional Advance with F
Slide 39: Highly Customizable Risk Based Solution
39 Highly Customizable Risk Based Solution Default Freq – 15% Prepay Freq – 37% Default Freq – 20% Prepay Freq – 37% Default Freq – 23% Prepay Freq – 38% Example Lender Inputs Example Loan Pricing Outputs
Slide 40: Sample Loan Default and Claim Scenario
40 Sample Loan Default and Claim Scenario Loan Balance at Time of Claim Vehicle Value at Time of Claim Greater of: (A) Amount Realized from Sale of Vehicle (B) 80% NADA Trade or KBB Wholesale Financial Institution Loss without Lenders Protection Claim Payment (Plus 60 days interest) Financial Instit
Slide 41: High Confidence in 2020 Cert Growth and Retention
41 78.8 23.1 19.7 20.2 141.8 2019E Certs 2020E Certs High Confidence in 2020 Cert Growth and Retention 56% 16% 14% 14% 100% % of 2020 56% 72% 86% 100% 100% Cumulative Growth from Existing Lenders (1) Existing OEMs Run Rate (# m) Growth from New Lenders (1) Management run rate estimates based on appl