Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Nebula Acquisition Corporation    LPRO

NEBULA ACQUISITION CORPORATION

(LPRO)
  Report
SummaryQuotesChartsNewsCompanyFinancials 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

Nebula Acquisition : October 2020 Investor Presentation

10/14/2020 | 03:45am EST

INVESTOR PRESENTATION

Disclaimer

Disclaimer: This presentation (this "Presentation") is provided for informational purposes only and has been prepared to assist interes ted parties in making their own evaluation with respect to Open Lending Corporation ("Open Lending") and for no other purpose. Th is Presentation and any oral statements made in connection with this Presentation do not constitute an offer to sell, or a solicitation of an offer to buy, or a recommendation to purchase, any securities in any jurisdiction, nor shall there be any sale, issuance or transfer of any securities in any jurisdiction where, or to any person to whom, such offer, solicitation or sale may be unlawful under the laws of such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. This Presentation does not constitute either advice or a recommendation regarding any securities. The communication of this Presentation is restricted by law; it is not intended for distribution to, or use by any person in, any jurisdiction where such distribution or use would be contrary to local law or regulation.

No representations or warranties, express or implied are given in, or in respect of, this Presentation. To the fullest extent permitted by law in no circumstances will Open Lending, or any of its respective subsidiaries, stockholders, affiliates, representatives, partners, directors, officers, employees, advisers or agents be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this Presentation, its contents (including the internal economic models), its omissions, reliance on the information contained within it, or on opinions communicated in relation thereto or otherwise arising in connection therewith. Industry and market data used in this Presentation have been obtained from third -party industry publications and sources as well as from research reports prepared for other purposes. Open Lending has not independently verified the data ob tained from these sources and cannot assure you of the data's accuracy or completeness. This data is subject to change. Recipien ts of this Presentation are not to construe its contents, or any prior or subsequent communications from or with Open Lending or its representatives as investment, legal or tax advice. In addition, this Presentation does not purport to be all-inclusive or to contain all of the information that may be required to make a full analysis of Open Lending. Recipients of this Presentation should each make their own evaluation of Open Lending and of the relevance and adequacy of the information and shou ld make such other investigations as they deem necessary.

Forward Looking Statements: This Presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements related to market trends and the anticipated impact of the recent novel coronavirus (COVID-19) pandemic on factors impacting Open Lending' s business, Open Lending's new lender pipeline, consumer behavior and demand for automotive loans and future financial performance. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of h istorical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Presentation, and on the current expectations of Open Lending's management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Nothing in this Presentation should be construed as a profit forecast. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Open Lending. Some important factors that could cause actual results to differ materially from those in any forward-looking statements include: general economic, political and business conditions; the potential effects of COVID-19; applicable taxes, inflation, interest rates and the regulatory environment; the outcome of judicial proceedings to which Open Len ding is, or may become a party; failure to realize the anticipated benefits of the business combination; the amount of redemption requests made by the Company's stockholders; and those factors discussed in Open Lending's Quarterly Report on Form 10 -Q for the fiscal period ended June 30, 2020, under the heading "Risk Factors," and other documents of Open Lending filed, or to be file d, with the Securities and Exchange Commission ("SEC"). If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Open Lending presently does not know or that it currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Open Lending's expectations, plans or forecasts of future events and views as of the date of this Presentation. Open Lending anticipates that subsequent events and developments will cause their assessments to change. However, while Open Lending may elect to update the se forward-looking statements at some point in the future, Open Lending specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Open Lending's assessments as of any date subsequent to the date of this Presentation. Accordingly, undue reliance should not be placed upon the forward -looking statements.

Use of Projections: This Presentation contains financial forecast information with respect to Open Lending. Such financial forecast information constitutes forward-looking information, and is for illustrative purposes only and should not be relied upon as necessarily being indicative of future results. The assumptions and estimates underlying such financial forecast information are inherently uncertain and are subject to a wide variety of significant business, economic, competitive and other risks and uncertainties. See "Forward-Looking Statements" above. Actual results may differ materially from the results contemplated by the financial forecast information contained in this Presentation, and the inclusion of such information in this Presentation should not be regarded as a representation by any person that the results reflected in such forecasts will be achieved.

Non-GAAPFinancial Measures: Included in this Presentation is financial information that is unaudited and has not been prepared in accordance with United States generally accepted accounting principles ("GAAP"). Open Lending uses [Adjusted EBITDA, EBITDA and EBITDA Margin], non -GAAP financial measures, internally in analyzing Open Lending's financial results and believe it is useful to investors, as a supplement to GAAP measures. Open Lending believe these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Ope n Lending's financial condition and results of operations. Open Lending's management uses these non -GAAP measures to compare Open Lending's performance to that of prior periods for trend analyses, for purposes of determining management incent ive compensation, and for budgeting and planning purposes. Open Lending believes that the use of these non -GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing Open Lending's financial measures with other similar companies, many of which present similar non -GAAP financial measures to investors. Management of Open Lending does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in Open Lending's fina ncial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordan ce with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures provided in this Presentation.

2

Experienced Senior Leadership Team

John Flynn

Ross Jessup

Chuck Jehl

CEO

President and COO

CFO

Matt Roe

Kenn Wardle

Sarah Lackey

Chief Revenue Officer

Chief Risk Officer

Chief Technology Officer

3

Introduction to Open Lending

$1.8bn

15+

Years of Proprietary Data

2m+

Unique Risk Profiles

50%+

2019A Adj. EBITDA margin

$64.9m

2019A Adj. EBITDA

~50%

2019A Annual

Loans Facilitated(2)

~$250bn

2018 Underlying

Addressable Market(3)

2019A-2021E Revenue CAGR(1)

+300

Active Automotive

Lenders(4)

Specialized Lending Enablement Platform for the Near-Prime Market

Powered by Proprietary Data, Advanced Decisioning Analytics,

an Innovative Insurance Structure and Scaled Distribution

  1. Revenue CAGR calculated using midpoint of high and low 2021 revenue estimates
  2. Reflects actual loans through December.
  3. Source: Experian, New York Federal Reserve.

(4)

Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter.

4

Massive, Underserved Population

Open Lending Enables Banks, Credit Unions, OEM Captives and Other Financial Institutions to Profitably

Lend to Traditionally Underserved Near-PrimeBorrowers

~$250bn

2018 Underserved

Auto Loan Opportunity(1)

Lender Type

Banks / OEMs

Credit Unions

Finance Companies

Buy-HerePay-Here

490

560

630

700

770

Credit Score

(1)

Open Lending empowers its bank, credit union, and OEM captive customers to profitably lend to consumers with credit scores be tween 560 and 699.

5

(2)

Note: Graph is illustrative.

Driving Value Creation Across the Entire Ecosystem

  • More Customers
  • Higher Loan Volumes
  • CECL Relief
  • Lower Risk
  • Customer Satisfaction & Retention
  • Increased ROA
  • Increased Car Sales
  • Optimized Sales Process
  • Better Financing Options
  • Quicker Underwriting

Insurers

Lenders

Dealers

Consumers

  • Top-LineGrowth
  • Diversified Risk
  • Consistent Flow
  • Increased ROE
    • Increased Sales
    • Customer Satisfaction
    • More Financing Options

OEMs

Higher Retention

  • More Approvals
  • Higher Loan Amounts
  • Better Rates
  • Appropriate Down Payments

6

Compelling Investment Thesis Intact

1

2

3

4

5

6

Substantial Market

Opportunity

Attractive

Business Model

Significant Growth

Opportunities

Resilient Model Through Cycles

Experienced

Leadership Team

Compelling Financial

Profile

  • Expanding and underserved market opportunity with strong secular drivers with <1% share(1)
  • Opportunity to accelerate market share gains as credit unions prove resilience
  • Currently ~$250bn underlying market with current solution; expanding market as consumers enter near prime
  • ~$1,160 revenue per loan on Lenders Protection Program(2) without taking any balance sheet risk(3)
  • Considerable barriers to entry; 15+ years of proprietary data and 5-second underwriting decisions
  • Lack of consumer acquisition and distribution costs increasingly relevant
  • New customer growth and penetration expected to outweigh impact of slower economic growth
  • Near-termdrivers of attainable growth, guidance does not reflect potential OEM upside
  • Lending partners offer low cost solution in a large market, business model with no loss exposure
  • Compelling solution for lenders seeking to mitigate risk during uncertain market conditions
  • Historically recessions have seen a net increase in near prime consumers, increasing the addressable market
  • Visionary management team with deep domain expertise, selectively growing already strong team
  • Large financial commitment to transaction even more relevant today
  • 53% 2019A to 2021E Cert CAGR, $125-168m 2021E Adj. EBITDA, 69.9% 2019 Adj. EBITDA(4) margin
  • Base of over 300 active automotive lenders(5) lenders with 100%+ net retention(6)
  1. Based on $1.76bn loans facilitated in 2019, out of underlying TAM of $250bn of annual near-prime auto lending.
  2. The Lenders Protection Program (which we commonly refer to as "Lenders Protection") , prior to impacts of COVID or other temp orary adjustments
  3. Based on ~$23k average loan amount, consistent with Open Lending enabling loans. Represents illustrative unit economics for c redit union, bank and OEM customers based on 2019, prior to impacts of COVID or other temporary adjustments.
  4. Adj. EBITDA reconciliation of net income to consolidated adjusted EBITDA on page 26

(5)

Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter.

7

(6)

Based on net retention over last 4 years, where each year had over 100% net retention

Specialized B2B Model

Open Lending's Client

is the Lender

  • Proprietary, cloud-based platform links customers, individual loans, portfolios and Loan Origination System (LOS) platforms
  • Integrated with 20+ third-party LOS platforms
  • ~5 second decisioning and interest rate pricing

Consumer

Indirect

Dealer

Direct

Lender

Lender

Do Not Directly Serve Dealers or

Consumers

  • No consumer acquisition costs for enabling loans
  • Dealer or lender originates and communicates with the borrower
  • Automated loan fulfillment available
  • Consumers, dealers and lenders share in the benefits

Specialized B2B Model With No Consumer Acquisition & Distribution Costs in Enabling Loans

8

Attractive Fee and Profit Share Revenue Model

Today, Open Lending Generates ~$1,160 in revenue per Loan(1) on Average Comprised of

Program Fee, Admin Fee and Insurance Profit Share

Monthly Payments

Insurance Premium

Consumers

Access to Credit

Lenders

Default Protection

Insurers

1

Program Fee (~$470) (1)

1

2

3

Fee based on the initial loan amount

  • Recognized upfront and for majority of loans is paid upfront

Administration Fee (~$65)

2

Fixed % fee of monthly earned insurance premium

Paid monthly over the life of the loan

Profit Share (~$625) (2)

3

Fixed % of the monthly underwriting profit for all lenders

Recognized upfront and received from carrier over the

term of the loan

Direct model shown above. For indirect model, dealers interact with consumer.

(1) Based on 2019 numbers.9

(2) Based on ~$23k average loan amount, consistent with Open Lending enabling loans. Represents illustrative unit economics for c redit union, bank and OEM customers based on 2019, prior to impacts of COVID or other temporary adjustments.

Illustrative Unit Economics Summary

Average

Loan Principal

~$23,000

~$23,000 Principal

Expected Interest

Considering Defaults and

Prepayments

Interest

Breakdown

Program Fee

Lender Costs & Profit

Insurance Premium

Insurance Premium

Breakdown

Administration Fee

Insurance Broker

Insurance Carrier

Underwriting Profit

Budgeted Losses

Open Lending

Revenue

~$1,160(1)

~$65

Administration Fee

~$625

Profit Share

~$470

Program Fee

(1)

Based on ~$23k average loan amount, consistent with Open Lending enabling loans. Represents illustrative unit economics for c redit union, bank and OEM customers based on 2019, prior to impacts of COVID or other temporary adjustments.

10

Robust, Risk Based Model is a Key Competitive Advantage

Risk Based Pricing Means That for Each Loan Open Lending Considers Numerous Data Points on the Consumer, the Loan

Terms, and the Vehicle to Evaluate the Risk of Loss for the Individual Loan

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

11

Open Lending's Risk Based Pricing

Open Lending's Proprietary, Algorithmic, Risk Based Pricing Model Leverages Proprietary and Third-party Data Sources

to Analyze the Risk and Potential Loss for Each Loan

1 Proprietary and detailed database of $8bn+

near prime loans across 15+ years

Lenders Protection Score

3 Proprietary Open Lending score based

on both internal and external data

2

Extensive third-party data on borrowers,

vehicles and loan attributes(1)

Loan Application

Lender Parameters

Borrower Data

Cost of Funds

Vehicle Data

Default Severity

Return Target

Loan Terms

Servicing Costs

Default Frequency

%

Prepayment Risk

100% Automated Risk Model

All-in Rate That Incorporates

Differentiates 2 Million Permutations

99.1% Default Predictability

Servicing, Capital, and Insurance

of Vehicle / Borrower Characteristics

Policy Costs

& underwrites in ~5 seconds

(1)

Logos are representative.

12

Strong Value Proposition for Insurance Partners

Premium

Payment Flows

Premium

Insurance Broker

Insurance Coverage

Insurer Value Proposition

Profitable

  • Attractive underwriting profitability
  • Low correlation to traditional P&C insurance risks
  • Complete turnkey product for the insurer with little overhead cost

Lender

Program

Fee

Loss

Payment

Open Lending

IAS Subsidiary

Open Lending

Insurer

Admin

Fee

Profit Share to Open Lending

Strong Relationships

  • Carriers rely on Open Lending's underwriting that has delivered excellent results to carriers for years
  • Exclusive agreements run through 2023 with each carrier

Financial Stability

  • "A" ("Excellent")(1) rated carriers
  • Minimum credit rating required
  • $84bn of assets(2), (3)

Lenders Protection Subsidiary

  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).

Significant Appetite to Expand

Key Partners

(since 2017)

(since 2009)

13

Insurance Partners Remain Highly Engaged

Partner Since 2017

  • Exclusive agreement through 2023
  • Financial Strength Rating of "Excellent"; Outlook "Stable" (1)
  • $58bn of assets (2)

Top 3 Lines of Business by Revenue (2)

Line of Business

Specialty - Management & Professional Liability

Specialty - Warranty & Alternative Risks

Commercial - Middle Market

Partner Since 2010

  • Exclusive agreement through 2023
  • Financial Strength Rating of "Excellent"; Outlook "Stable" (1)
  • $26bn of assets (3)

Top 3 Lines of Business by Revenue (3)

Line of Business

Workers' compensation

Warranty

Commercial auto and liability, physical damage

Significant appetite to expand remains unchanged

  1. Source: A.M. Best.

(2)

Based on CNA's 2020 Q1 10-Q company filing.

14

(3)

Based on AmTrust Q3 2018 10-Q company filing (last recent publicly available disclosure).

Strong Value Proposition to National Network of Credit Unions & Banks

National Footprint

+300 Active

$8bn+ Loans

Automotive

50 States

Facilitated

Lenders(1)

Value Proposition

Uplift in Loan Originations

  • Open Lending's goal is to expand the ranges of credit scores and loan-to-value (LTV) where lenders can profitably underwrite loans allowing them to increase application flow
  • Large distribution channel with access to millions of new consumers
  • Broaden credit appetite without additional risk

Improved Lender Retention

23% of 2019A Cert

Count

15% of 2019A

Cert Count

11% of 2019A

Cert Count

  • Enables lenders to position themselves as leaders in pricing accuracy
  • Greater membership satisfaction and loyalty

Increased Profitability in Near Prime Auto

Accurate pricing results in higher yields on near prime auto loans

22% of 2019A

Cert Count

29% of 2019A

Cert Count

Effectively accounts for embedded costs incurred by lenders in risk adjusted rates

High ROA & default protection with no changes to servicing operation

Provides CECL relief

Representative Lenders

(1)

Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter.

15

OEM Captive Opportunity Overview

OEM Value Proposition

Increase Sales and Support Values

  • Facilitate new car sales by expanding credit to near-prime consumers where they are not competitive today
  • Support car values by increasing financing availability for used vehicles

Material New Fee Revenue Stream

  • Greater earnings and ROA to captives with credit performance, net of default insurance payments, comparable to prime loan
  • Leverage existing infrastructure and network to generate low risk revenues

Develop Brand Loyalty

  • Increase repeat buyers by keeping customers in the captive customer ecosystem, capitalizing on loan life milestones to localize the customer
  • Expands relationship with dealers
  • Helps dealers accept more trade-ins at higher values and minimizes off-lease residual risk

OEM Captive Opportunity

Large Captive OEMs represent 15+ Individual Opportunities…

Example OEM Captives

YTD Unit Volume(1)

TOYOTA FINANCIAL SERVICES

698,807

AMERICAN HONDA FINANCE

468,331

GM FINANCIAL AMERICREDIT

448,596

FORD MOTOR CREDIT

391,670

NISSAN INFINITI FINANCIAL SERVICES

269,792

HYUNDAI CAPITAL AMERICA

140,041

…Each with Significant Revenue Potential

Single Captive Revenue

$30m-$100m+

Opportunity(2)

Addressable OEM Captive Market

$1bn+

Opportunity for Open Lending(2)

(1)

Source: AutoCount. YTD period is January 2019 - October 2019

16

(2)

Based on management estimates.

Growth Plan

  1. Expand Core Business
  2. OEM Opportunity
  3. CECL Relief
  4. Refinance Opportunities
  5. Launch into New Channels

6 Broaden Our Offerings

17

Refinance Opportunity for Near-Prime Borrowers to Lock-in Lower Rates

Refinance Certified Loans Originated

Summary

+160% YoY Growth

1,007

380

Apr. 2019

Apr. 2020

  • 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% virtually
  • Launched internal initiatives with sales and account management teams to market refinance program capabilities
  • Our turnkey refinance program is unique value proposition for non-auto lenders
    • Work with existing Open Lending marketing partners on specific marketing campaigns
    • Servicing by third parties
    • Fully turnkey for the lender
  • Several existing lenders have launched new refinance programs
  • In Q2 2020, we partnered with 17 new refinance lenders.

Launching new refinance partners and marketing programs to continue to grow refinance certs

18

Open Lending's Resilience in a Recession

Consumers

  1. People still need to go to work: auto sales rebounded quickly during 2008 recession, particularly for used vehicles(1)
  2. Auto financing is still needed and limited financing options exist, particularly for near-prime
  3. Many consumers are in near-prime

Lenders

  1. Realize benefits from Lenders Protection - 90% of lenders hit their return targets through the financial crisis
  2. Credit Unions are resilient lenders, seeing deposit bases grow and expanding loan portfolios(6)
  3. Increased risk aversion and desire to reduce credit risk as demonstrated from Open Lending's growth during the 2008 recession of 200% YoY in monthly cert volume(2)

Insurers

  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 potentially higher post-recession profitability in excess of existing ROEs today

Constant or greater demand for auto loans

Relatively stable credit union deposit base and

Insurers remain profitable and poised to benefit

from near-prime consumers(6)

higher demand for insurance(6)

soon after a downturn(6)

Resilient to downturn

Remain highly profitable

Significant growth opportunity

  1. Used car sales by Franchise and Independent dealers represented ~14 million units in 2006 and nearly 14 million units in 2011 ; Source: Manheim.
  2. Monthly certs increased by 200%+ YoY from late 2007 to late 2008.
  3. Reflects annual default frequency / average loan count outstanding; loans outstanding is based on defaults and prepayments re ported to Open Lending by lenders.
  4. "Our Ratings on the 2006 -2008 vintage held up well as the economy progressed through the recession with only 6 amortizing auto loan ABS transactions out of 180 downgraded for poor performance and no defaults." -S&P Global Ratings.
  5. Based on YTD as of August implied loss ratio from insurer ceding statements that include earned premium paid losses and reserves.

(6)

Based on dynamics observed in the 2008 recession as described above; actual recession performance in the future may differ.

19

Key Competitive Advantages

v

Sophisticated

Technology

  • Multi-tenantarchitecture
  • Geo-diverse,Hot-Hot Data Centers
  • 5 second underwriting decisions
  • Robust internal reporting
  • 2m+ unique risk profiles
  • SOC 2 certification

v

Proprietary

Data Assets

  • 15+ years of proprietary loan data across 250k funded loans
  • Detailed database of $7bn+ near-prime loans across the cycle, which includes $1.3bn of loans during the financial crisis

v

Carrier

Relationships

  • Highly rated insurance partners
  • Exclusive relationships
  • Reliance on Open Lending data, modeling and claims
  • Fully integrated with insurer
  • Established track record

v

Lender

Relationships

  • Over 300 active automotive lenders(1)
  • Tailored pricing
  • Embedded relationships
  • Integrated with 20+ Loan Origination Systems
  • Automatic loan fulfilment

v

Regulatory Know-

How

  • Proven success in highly regulated industry
  • Established framework with regulators
  • Collateral type and loan code specific to Lenders Protection
  • Credit Bureau preferred vendor rating

Open Lending has built a sophisticated network across the value chain to secure a best-in-class offering

(1)

Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter.

20

Consistent, Strong Growth in Certified Loans

127%

127%

120%

121%

39%

78,434

2016A-2019A Cert CAGR

9,995

56,705

5,444

42,790

5,663

29,181

68,439

3,301

51,261

37,127

25,880

2016A

2017A

2018A

2019A

(1)

Certs from Existing Lenders

Certs from New Lenders

Net Retention

(1)

Net Retention represents the total year over year increase / decrease from existing clients, including both attrition and organic growth.

21

Attractive Financial Metrics

Estimated and Actual Revenue ($m)

$99

$93

$63

$48

2017E(1)

2018E(1)

2019A (2)

2020E (3)

% YoY Growth

~47%

~6%

Estimated and Actual Adj EBITDA ($m)

Adj EBITDA

Adj. EBITDA Margin

68%

70%

64%

$65

$62

63%

$40

$33

2017E(1)

2018E (1)

2019A (2)

2020E (3)

Adj. EBITDA Growth

~62%

~(5)%

  1. The 2017 and 2018 revenue and Adj. EBITDA figures provided above are illustrations and are not intended to be understood as actual reported financial results. The 2017 and 2018 revenue and Adj. EBITDA numbers are Management's estimates of 2017 and 2018

revenue and EBITDA had they been prepared in accordance with ASC 606; and do not reflect actual results.

22

2)

2019 metrics reflect audited financial metrics.

3)

2020 estimated revenue and Adj. EBITDA projections are based on the midpoint of guidance.

Recent Underwriting and Pricing Actions to Adapt to Economic Environment

Adjustment

Reason for Mitigation

Open Approval Window

45 days to 30 days

Lower performance on loans closing within 30-45 day window

Payment Deferrals

Up to 90 days

Allow customers to remain with vehicles and maximize lifetime payments

Proof of Income

Raising LP Score thresholds

Mitigate fraud and/or attempts to refinance a vehicle loan with no job

Requirements for Refi

Payment to Income Ratios

Reducing Maximum PTI Eligibility for certain lenders

Past performance has indicated the higher the PTI the riskier the loan

Increasing PTI surcharge pricing for certain lenders

Vehicle Value Discount

95%

Stay ahead of the market trends

of clean trade and wholesale values

Underwriting refinements aim to ensure Lenders Protection is well positioned in a changing

economic atmosphere

Note: All changes don't apply to all lenders

23

Additional Financial Information

Illustrative Consumer Contract Rate Waterfall

Rate

Metric

Receiver

Description

3.0%

Target ROA

Lender

Lender target return

0.8%

Cost of Funds

Expense

Interest paid to Lender depositors

1.1%

Servicing Cost

Expense

Administrative costs associated with servicing loan

4.9%

Total Lender Target Yield

Sum of items above

4.0%

Insurance Coverage

Carrier / OL

Default insurance paid to insurance carriers

1.1%

Program Fee

OL

Program fee paid to Open Lending by lenders

0.7%

Allowance for Loss on Salvage &

Expense

Budgeted losses assuming price at auction (70%) is below insurance

Repossession Expense

floor of 80% of book. Assumes $700 expenses related to repossession

and subsequent sale on default

1.0%

Origination Fees

Expense

Upfront origination fee to Dealer

11.7%

Consumer Contract Rate

Rate consumer pays fully burdened for expected costs associated

with loan to achieve the lender's target ROA

Note: Indirect loan example figures shown above for illustrative purposes only

25

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 EBITDA

$ 64,925

Total Net Revenue

$ 92,847

Adjusted EBITDA margin

69.9%

26

Guidance Ranges

2020E

2021E

Prior Guidance

Revised

Revised

Prior Guidance

Revised

Revised

Guidance -

Guidance -

(Jan '20)

Guidance - Low

(Jan '20)(1)

Guidance - Low

High

High

Total Certs

142k

85k

101k

n/a

161k

206k

% Growth(2)

81%

8%

29%

n/a

73%

122%

Revenue ($mm)

$158

$89

$108

$206-237

$184

$234

% Growth(2)

70%

(4%)

17%

30-50%

87%

137%

Adj. EBITDA ($mm)

$109

$54

$70

$144-178

$125

$168

% Growth(2)

73%

(17%)

8%

n/a

102%

172%

% Margin

68%

60%

65%

70-75%

68%

72%

Operating Cash Flow(3)

n/a

$34

$41

n/a

$81

$111

($mm)

  1. 2021E prior guidance implied from range of 30-50% YoY growth and 70-75% margins given at time of announcement

(2)

2021 YoY growth based on mid-point of 2020 guidance range

27

(3)

Operating Cash Flow -> defined as Adj. EBITDA - Capex - increase in contract assets +/- change of ASC 606 estimates adjustment

Revised Certs Forecast

Monthly Certs 2020

# in 000

Total

% of Prior

16

2020 Certs

Guidance

14

142 k

100%

101 k

71%

12

10

85 k

60%

8

6

4

2

-

Jan Feb Mar

Apr May Jun Jul Aug

Sep Oct

Nov Dec

Actuals

Prior Guidance (Jan '20)

High

Low

Scenario Assumptions(1)

  • Assumes initial state re-openings beginning in May / June
  • Expectation of severe economic downturn through end of year
  • Expectations that the world economies and markets stabilize in early 2021
  • High case differs in that it assumes quicker macro recovery and sooner OEM ramp-up vs. the low case

Key Factors of Cert Volume Growth

  • Pent-UpDemand: Consumers have been unable to go to the dealership
  • Used Car Sales: Expected shift to used cars due to recessionary pressures and reduced new car production
  • Lender Recovery: Our business is concentrated in lenders(2) that fared well during the last Financial Crisis and have capital to deploy
  • Accelerated Pipeline: Robust lender pipeline that are pending launch and in advanced marketing stages

Second half of the year forecasted to experience tempered rebound in cert volumes by year-end

(1) Scenario assumptions are consistent for high and low case unless specified in assumption

(2) Open Lending's lenders refer to credit unions

28

Recession Supplement

Multi-Pronged Response to Covid-19

Working with Our Partners

  • Insurance partners have allowed 90-daypayment deferralsupon request from our lending partners
  • Lenders are providing accommodations to allow consumers to stay current on their loans, including suspending involuntary repossessions during stay in place orders
  • Despite environment, credit unions continue to lend broadly, helping to fulfill the needs of their communities
  • Refinements have generally yielded increased profitability across the loan book for insurers

Underwriting Changes

  • We expect our unit economics to improve by 7%+(3), even accounting for the impact of increased economics stress. Increase driven by a combination of:
    • Tightening underwriting standards
    • Improved competitive dynamics
    • Move towards higher value customers
  • Tightened underwriting standards include:
    • Increased premiums(1)
    • Updating algorithms for changes in used vehicles values
    • Revamped income verification thresholds and payment to income ratio

Strategy

  • Enhanced focused on direct lendingand refinancechannels
    • Refinance applications have jumped by ~20%(2)
    • Refinance is 100% virtual, with ease of customer access in reduced interaction environment
    • Refinance applications are less riskywhen compared to indirect loans from dealerships
    • Direct loans exhibit similarly strong performance characteristics as a result of deep customer relationships at the lender level

(1)

Via model change involving vehicle values that results effectively results in higher premiums

30

(2)

From March 2020 to April 2020

  1. Over period of economic stress when there is more risk that warrants increased in pricing

Impact of COVID Rate Changes on Revenue Streams

Unit Economics By Revenue Stream(2)

Without Premium Increase

With Premium Increase (1)

Unadjusted

COVID Adjusted Unit

COVID Adjusted Unit

Revenue Stream

Unit

% Change

% Change

Economics

Economics

Economics

Program Fee

~$470

~$470

-

~$470

-

Administration Fee

~$65

~$65

-

~$65

-

Insurance Profit Share

$626

$522

(16.5%)

$714

14.1%

Total

~$1,161

~$1,057

(8.9%)

~$1,249

7.6%

Summary

  • Figures are based on Q2 2020 unit economics
    • Includes a period of stress beginning in Q2 2020 with reversion to a normalized economic environment for the remainder of the loan term
  • Unit economics for new loans are expected to increase, driven by insurance revenue streams that benefit from recent modeling updates implemented throughout the loan term
  • Initially unit economics drop significantly due to the economics stress environment, but that allows premiums to be increased (1)
    • No adjustments to program fee due to COVID
    • Higher loss frequency and severity anticipated result in increase in loss activity; recent changes to risk modeling more than offset reductions from loss activity
  • ~$12mm ASC 606 change in estimate taken in Q1 2020; change in estimates implemented due to change in economic conditions resulting in adjusted expected cash flows from historical vintages

Note: COVID adjusted unit economics based on Q2 2020 loan characteristics and weighted on high cert case in Q2 2020

31

(1)

Via model change involving vehicle values that results effectively results in higher premiums

  1. Represents total expected unit economics over the average loan lifetime

Illustrative Underwriting Profit Economics and Profitability

Insurance Underwriting Profit Components Over Loan Lifetime

Item

% of Premium

Unit Economics

% Change to Historical

Unadjusted Unit

COVID Stress

COVID Stress

Unadjusted Unit

COVID Stress

COVID Stress

COVID Stress

COVID Stress

Economics for

Scenario

Economics for

Scenario

Scenario

Scenario w/o

Scenario w/o

Scenario w/o

COVID Stress or

w/ Premium

COVID Stress or

w/ Premium

w/ Premium

Premium Increase

Premium Increase(4)

Premium Increase

Premium

Increase (3)

Premium

Increase (3)

Increase (3)

Earned Premium

-

-

$ 2,158

$ 2,150

$ 2,453

(0%)

14%

(-) Incurred Losses

48%(2)

54%

48%

$ 1,030

$ 1,167

$ 1,167

13%

13%

(-) Brokerage Fee(1)

1%

1%

1%

$ 22

$ 22

$ 25

(0%)

14%

(-) Admin Fee(1)

3%

3%

3%

$ 65

$ 65

$ 74

(0%)

14%

(-) Carrier Fee(1)

8%

8%

8%

$ 173

$ 172

$ 196

(0%)

14%

Underwriting Profit

40%

34%

40%

$ 868

$ 724

$ 991

(17%)

14%

Indicates Modeled Loss Ratio - CY2019 Calendar

Year Actual Loss Ratio ~43%

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 experience

(3)

Premium increase via model change involving vehicle values that results effectively results in higher premiums

32

  1. Earned premium only slightly lower than base case due to lower prepayments expected on loans leading to slightly more premiums over the life of the loan

Illustrative Insurer Economics and Profitability

Insurance Underwriting Profit Share Breakdown Over Loan Lifetime

Item

Unit Economics

Share

% Change to Historical

Unadjusted Unit

COVID Stress Scenario

COVID Stress Scenario

COVID Stress Scenario

COVID Stress Scenario

Economics for COVID

w/o Premium

w/ Premium Increase (1)

w/o Premium Increase

w/ Premium Increase (1)

Stress or Premium

Increase

Retained by Carrier

$ 156

$ 131

$ 178

18%

(17%)

14%

Open Lending

$ 626

$ 522

$ 714

72%

(17%)

14%

Third Parties

$ 87

$ 73

$ 99

10%

(17%)

14%

Insurer Unit Economics Over Loan Lifetime

Item

% of Premium

Unit Economics

% Change to Historical

Unadjusted Unit

COVID Stress

COVID Stress

Unadjusted Unit

COVID Stress

COVID Stress

COVID Stress

COVID Stress

Economics for

Scenario

Economics for

Scenario

Scenario

Scenario w/o

Scenario w/o

Scenario w/o

COVID Stress or

w/ Premium

COVID Stress or

w/ Premium

w/ Premium

Premium Increase

Premium Increase

Premium Increase

Premium

Increase (1)

Premium

Increase

Increase (1)

Share of Underwriting Profit

7%

6%

7%

$ 156

$ 131

$ 178

(17%)

14%

Carrier Fee

8%

8%

8%

$ 173

$ 172

$ 196

(0%)

14%

Total Insurer Profit

15%

14%

15%

$ 329

$ 303

$ 374

(8%)

14%

Note: COVID adjustments based on Q2 2020 cert weightings and high cert case unit economics

33

(1)

Premium increase via model change involving vehicle values that results effectively results in higher premiums

Resiliency of Consumers

Annual used vehicle sales remained relatively stable during the last recession, used declined by 11%, new by 25%+; the used car market performs well, particularly in contrast

to the new car market, which is more exposed to economic cycles

USED VEHICLE SALES IN THE U.S.(1)

(All figures in mm)

Used Car Sales

New Car Sales

Represents Economic Recession

43.6

42.7

44.1

42.6

41.4

38.6

39.2

40.4

40.8

36.1

36.9

36.9

37.6

36.2

37.3

35.6

35.8

16.6

16.9

17.0

16.5

16.1

13.2

11.6

12.7

14.4

15.5

16.5

17.4

17.5

17.1

17.2

17.0

10.4

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

"Used vehicle sales at franchised dealerships have also increased six consecutive years, according to NADA. The percentage increases were much smaller than for new vehicles, but that is to be expected for a market that is much more stable over the economic cycle and that declined less than half as much as new vehicles during the recession."

- Manheim 2016 Used Car Market Report

Residual Value for Used Cars

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

Manheim Used Vehicle Value

170

160

150

140

130

120

110

100

90

Manheim Used Vehicle Value Index

Increased demand and value for used

vehicles due to people being more afraid to

use public transportation / ride shares

Rapid recovery to higher values than

prior to crisis

COVID-19 outbreak

Significant drop during

height of the crisis

80

Jul-20

Jan-20

Jul-19

Jan-19

Jul-18

Jan-18

Jul-17

Jan-17

Jul-16

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Jul-99

Jan-99

Jul-98

Jan-98

Jul-97

Jan-97

Jul-96

Jan-96

Jul-95

Jan-95

Even in the worst financial crisis in decades, after the initial shock, used vehicle values recovered to

above pre-crisis levels within a few months

Source: Manheim

35

Diverse Borrower Base Across the United States

Distribution of Active Portfolio(1)

Open Lending serves customers in all 50 states and is geographically diversified

(1)

Certificates data as of 5/5/2020, representing currently open Lenders Protection loans

36

Sample Claim & Pricing Scenarios

Customized Lender Pricing to Achieve Target Yield

Example Lender Inputs

Sample Lender Rate Table

Default Freq - 15%

Prepay Freq - 37%

Default Freq - 20%

Prepay Freq - 37%

Default Freq - 23%

Prepay Freq - 38%

For Illustrative Purposes Only. Estimates applied for purposes of illustration.

38

Open Lending Helps Lenders Grow Profitably

Lenders Protection expands the ranges of credit scores and loan-to-value (LTV) where lenders can

underwrite loans allowing them to increase application flow

Typical Financial

Institution

Average Financial Institution Advance

Additional Advance with

For Illustrative Purposes Only. Estimates applied for purposes of illustration.

39

Sample Loan Default and Claim Scenario

Rules

Loan Balance at Time of Claim

Vehicle Value at Time of Claim

Greaterof:

  1. Amount Realized from Sale of Vehicle
  2. 80% NADA Trade or KBB Wholesale

Financial Institution Loss without Lenders Protection

Claim Payment (Plus 60 days interest)

Financial Institution Loss with Lenders Protection

Example

Repossess and sell the vehicle ABOVE

Repossess and sell the vehicle BELOW

80% book value

80% book value(1)

$10,000

$10,000

$4,000

$4,000

$3,400

$3,200

$2,000

$3,200

A=Sale Amt

B=80%

A=Sale Amt

B=80%

$6,600

$8,000

$6,600

$6,800

$0

$1,200

  1. Uninsured Losses can be priced for using our Custom Risk Based Pricing Tool.

For Illustrative Purposes Only. Estimates applied for purposes of illustration.

40

Disclaimer

Open Lending Corporation published this content on 13 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 October 2020 07:44:04 UTC


© Publicnow 2020
All news about NEBULA ACQUISITION CORPORATION
01/12Open Lending Signs Royal Credit Union to the Lenders Protection™ Progra..
GL
01/04Open Lending to Present at the Goldman Sachs Technology and Internet Conferen..
GL
2020Open Lending Signs Interra Credit Union to the Lenders Protection™ Prog..
GL
2020Open Lending Signs Members 1st Federal Credit Union to the Lenders Protection..
GL
2020SECTOR UPDATE : Little Movement for Financial Stocks While Stimulus Talks Drag O..
MT
2020SECTOR UPDATE : Financial Stocks Trading in Tight Range Either Side of Even
MT
2020Open Lending Prices Upsized Secondary Offering
MT
2020Open Lending Corporation Announces Pricing of Upsized Secondary Offering
GL
2020SECTOR UPDATE : Late Slide Drags Financial Stocks Underwater Again
MT
2020SECTOR UPDATE : Financial Stocks Back Near Even This Afternoon
MT
More news
Financials (USD)
Sales 2019 - - -
Net income 2019 2,59 M - -
Net cash 2019 1,30 M - -
P/E ratio 2019 140x
Yield 2019 -
Capitalization 459 M 459 M -
EV / Sales 2018 -
EV / Sales 2019 -
Nbr of Employees 3
Free-Float -
Chart NEBULA ACQUISITION CORPORATION
Duration : Period :
Nebula Acquisition Corporation Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends NEBULA ACQUISITION CORPORATION
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution