Slide 1: Open Lending Investor Presentation
®penLending ‘Say YES to more automotive loans. INVESTOR PRESENTATION
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: Introduction to the Presenters
3 Introduction to the 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 wit
Slide 4: Business Overview
BUSINESS OVERVIEW ENVIRONMENT UPDATE FORECAST REVISION PUBLIC MARKET COMPARABLES APPENDIX ADDITIONAL FINANCIAL INFORMATION RECESSION SUPPLEMENT UNDERLYING MODEL DETAIL SAMPLE LOAN DEFAULT AND CLAIM SCENARIO
Slide 5: Environment Update, Forecast Revision, Comparables, Appendix
5 Environment Update Forecast Revision Public Market Comparables Appendix
Slide 6: Introduction to Open Lending
6 Specialized Lending Enablement Platform for the Near - Prime Market Powered by Proprietary Data , Advanced Decisioning Analytics , an Innovative Insurance Structure and Scaled Distribution $64.9m 2019A EBITDA ~50% 2019A - 2021E Revenue CAGR (1) $1.8bn 2019A Annual Loans Facilitated (2) 15+ Years o
Slide 7: Massive, Underserved Population
7 490 770 630 560 700 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 8: Driving Value Creation Across the Entire Ecosystem
8 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 9: Our Customer is the Lender
9 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 ~$1,161 in revenue per loan (1) and does not provide funding or take any balance sheet risk (1) Based on
Slide 10: Compelling Investment Thesis Intact
10 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 11: Significant, Underserved Market Segment
11 Not Near - Prime 57% Near - Prime 43% Financed 69% Not Financed 31% ~$250bn Significant, Underserved Market Segment New 54% Used 46% (1) Represents 2018 data. (2) Source: Experian, New York Federal Reserve. $584bn loan originations in 2018 Underlying Market Substantial, Underserved Population Fin
Slide 12: Specialized B2B Model
12 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 13: Attractive Fee and Profit Share Revenue Model
13 Attractive Fee and Profit Share Revenue Model Monthly Payments Insurance Premium Default Protection Access to Credit Profit Share (~$626) (1) ▪ Fixed % of the monthly underwriting profit for all lenders ▪ Recognized upfront and received from carrier over the term of the loan Program Fee (~$470) ▪
Slide 14: Illustrative Unit Economics Summary
14 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 ~$626 Profit Share ~$65 Administration Fee Illustrative Unit Ec
Slide 15: Robust, Risk Based Model is a Key Competitive Advantage
15 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 16: Open Lending's Risk Based Pricing
16 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 17: Risk Decisioning has Demonstrated Impressive Accuracy
17 Open Lending’s Risk Decisioning has Demonstrated Impressive Accuracy 2010 to 2019 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 21,579 Expected 21,
Slide 18: Strong Value Proposition for Insurance Partners
18 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 19: Value Proposition to Credit Unions & Banks
19 Strong Value Proposition to National Network of Credit Unions & Banks (1) Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter. 298 Active Automotive Lenders (1) 50 States $7bn+ Loans Facilitated 23% of 2019A Cert Count 29% of 2
Slide 20: OEM Captive Opportunity
20 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 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 (4) 2. Today, would require 100%+ increase in claims to suffer a loss (5) 3. Benefit from potentiall
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: Consistent, Strong Growth in Certified Loans
25 25,880 37,127 51,272 68,439 3,301 5,663 5,416 9,995 29,181 42,790 56,688 78,434 127% 127% 120% 121% 2016A 2017A 2018A 2019A Certs from Existing Lenders Certs from New Lenders Net Retention Consistent, Strong Growth in Certified Loans (1) (1) Net Retention represents the total year over year incre
Slide 26: Attractive Financial Metrics
26 $48 $63 $93 2017E 2018E 2019A Attractive Financial Metrics % YoY Growth ~31% ~47% $33 $40 $65 68% 64% 70% 2017E 2018E 2019A EBITDA EBITDA Margin EBITDA Growth ~21% ~62% 1) The 2017 and 2018 revenue and EBITDA figures provided above are illustrations and are not intended to be understood as actual
Slide 27: Business Overview, Forecast Revision, Comparables, Appendix
27 Business Overview Forecast Revision Public Market Comparables Appendix
Slide 28: Open Lending Q1 Update
28 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 Po
Slide 29: Strong Q1 2020 Certs Exceeded Budget
29 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 (3) Refers only to lenders that originated 5 or more certs in December 2019 ▪ Cert
Slide 30: Multi-Pronged Response to Covid
30 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 su
Slide 31: Recent Underwriting and Pricing Actions
31 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 withi
Slide 32: Refinance Opportunity for Near-Prime Borrowers
32 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 33: OEM Roll-Out and Account Performance Update
33 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 34: Insurance Partners Remain Highly Engaged
34 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 35: Lending Partner Sentiment in the Current Environment
35 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 36: Potential Growth Opportunity and Investment Upside
36 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 37: Business Overview, Environment Update, Comparables, Appendix
37 Business Overview Environment Update Public Market Comparables Appendix
Slide 38: Updated Guidance Range
38 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 39: Signs of Cert Stabilization and Rebounding
39 - 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 40: Revised Certs Forecast
40 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 41: 2020 / 2021 Certs Forecast
41 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 42: Cert Forecasts Assume Modest Additional Certs
42 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 43: Forecast Assumptions for Key Performance Parameters
43 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 44: Impact of COVID Rate Changes on Revenue Streams
44 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%) $714 14.1% Tot
Slide 45: Insurance Underwriting Profit Components Over Loan Lifetime
45 Note: COVID adjustments based on Q2 2020 cert weightings and high cert case unit economics (1) Fee based on a % of premium and is contractual (2) Loss ratio is based on Management estimates for 2019E using performance curves based on June - December 2018 actual loan experienc e (3) Premium increa
Slide 46: Insurer Unit Economics Over Loan Lifetime
46 Insurer Unit Economics Over Loan Lifetime Item % of Premium Unit Economics % Change to Historical Unadjusted Unit Economics for COVID Stress or Premium COVID Stress Scenario w/o Premium Increase COVID Stress Scenario w/ Premium Increase (1) Unadjusted Unit Economics for COVID Stress or Premium CO
Slide 47: Business Overview, Environment Update, Forecast Revision, Appendix
47 Business Overview Environment Update Forecast Revision Appendix
Slide 48: Transaction Overview
48 Transaction Overview Key Transaction Terms Illustrative Post - transaction Ownership (3) Pro Forma Enterprise Valuation at close ($m) Cash Sources and Uses ($m) ▪ Total enterprise value of $1.08bn (1) (7.4x 2021E EBITDA) ▪ $200m of PIPE committed at $10.00 per share anchored by True Wind Capital
Slide 49: Publicly Traded Comparable Companies Overview
49 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 50: Comparable Companies: Information Services and Banking Software
50 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% Business Mix / Key Verticals • Retail banking • SMBs • Corporate banking
Slide 51: Comparable Companies: Payments and Lending
51 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% Business Mix / Key Verticals • Mortgage loans • Consumer loans • Real estate • Capital m
Slide 52: Comparable Companies – Operational Benchmarking
52 Publicly Traded Comparable Companies – Operational Benchmarking Market data as of May 2020. Key metrics denote medians. “2020” and “2021” multiples, and margins for Greensky at IPO represent FY2019 and FY2020 multipl es based on estimates following IPO. Source: FactSet, company filings. $bn EV/EB
Slide 53: Comparable Companies - Valuation Benchmarking
53 0.2x 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 7.4x 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 7.4x 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 Publicly Traded Comp
Slide 54: EV / 2021E EBITDA vs. Revenue Growth
54 EV / 2021E EBITDA vs. 2019 - 2021E Revenue Growth 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 grow
Slide 55: Additional Financial Information
55 Additional Financial Information
Slide 56: Significant Covenant Cushion
56 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 57: EBITDA Reconciliation
57 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 58: Recession Supplement
58 Recession Supplement
Slide 59: Used and New Car Sales Through Recession
59 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 60: Manheim Used Vehicle Value Index
60 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 61: Diverse Borrower Base Across the United States
61 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 62: Underlying Modeling Detail
62 Underlying Modeling Detail
Slide 63: COVID-19 Adjusted Profit Share Unit Economics
63 - 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 64: Downturn Impact on Monthly Calendar Metrics
64 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 65: Sample Loan Default and Claim Scenario
65 Sample Loan Default and Claim Scenario
Slide 66: Customized Lender Pricing to Achieve Target Yield
66 Customized Lender Pricing to Achieve Target Yield Default Freq – 15% Prepay Freq – 37% Default Freq – 20% Prepay Freq – 37% Default Freq – 23% Prepay Freq – 38% Sample Lender Rate Table Example Lender Inputs For Illustrative Purposes Only. Estimates applied for purposes of illustration.
Slide 67: Open Lending Helps Lenders Grow Profitably
67 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 68: Sample Loan Default and Claim Scenario
68 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