Earnings Supplement
Q2 2020
Introduction to Open Lending
2m+ | 50%+ |
Unique Risk Profiles | 2019A EBITDA |
margin | |
15+ | |
$64.9m | |
Years of | 2019A EBITDA |
Proprietary Data | |
$1.8bn | ~50% |
2019A Annual | 2019A-2021E Revenue CAGR(1) |
Loans Facilitated(2) | +300 |
~$250bn | |
2018 Underlying | Active Automotive |
Lenders(4) | |
Addressable Market(3) | |
Specialized Lending Enablement Platform for the Near-Prime Market
Powered by Proprietary Data, Advanced Decisioning Analytics,
an Innovative Insurance Structure and Scaled Distribution
- Revenue CAGR calculated using midpoint of high and low 2021 revenue estimates
- Reflects actual loans through December.
- 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. | 2 |
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. | 3 |
(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
4
Compelling Investment Thesis Intact
1
2
3
4
5
6
Substantial Market
Opportunity
Attractive
Business Model
Significant Growth
Opportunities
Resilient Model Through Cycles
Experienced
Management 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 EBITDA, 69.9% 2019 Adjusted EBITDA(4) margin
- Base of over 300 active automotive lenders(5) lenders with 100%+ net retention(6)
- Based on $1.76bn loans facilitated in 2019, out of underlying TAM of $250bn of annual near-prime auto lending.
- The Lenders Protection Program (which we commonly refer to as "Lenders Protection") , prior to impacts of COVID or other temp orary adjustments
- 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.
- EBITDA reconciliation of net income to consolidated adjusted EBITDA on page 14
(5) | Active automotive lender is defined as an automotive lender that issued at least one insured loan in the previous quarter. | 5 |
(6) | Based on net retention over last 4 years, where each year had over 100% net retention |
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 (~$626) (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.7
(2) Based on ~$23k average loan amount, consistent with Open Lending enabling loans. Represents illustrative unit economics for c redit union, bank and OEM customers based on 2019, prior to impacts of COVID or other temporary adjustments.
Financial Highlights
Total Certs
Revenue
($mm)
Adj. EBITDA
($mm)
Adj. Operating Cash Flow1
($mm)
Q2 2020
18,684
$22.1 million
$15.4 million
$11.1 million
(1) Defined as Adj. EBITDA, minus CAPEX, plus or minus change in contract assets | 8 |
Recent Accomplishments
Company Highlights
- Closed the business combination with Nebula Acquisition Corp. on June 10, 2020
- LPRO began trading on the Nasdaq Stock Market on June 11, 2020
- Named a winner of NAFCU (National Association of Federally-Insured Credit Unions) Services' 2020 Innovation Awards
Swift Response to
Challenged Economic
Environment
- Implemented changes to underwriting model - largely took effect by April 1
- Tightened underwriting standards and increased premiums(1)
- Enhanced focus on Refinance Program to drive additional cert volume
| Credit union and bank lenders are well capitalized and expected to have ample liquidity | |
Open Lending and | | Insurers modestly impacted relative to other industries and anticipating profitability through 2020 |
Partners Strongly | ||
| Low interest rate environment, traditional lenders retrenching, and commuters shifting away from public modes of | |
Positioned | ||
transportation are driving positive trends | ||
| Partnered with 17 new refinance lenders in Q2 | |
| Added 28 customers in the first six months of 2020; 11 new lender contracts executed in Q2 | |
Q2 Update | | 12 active implementations with "go live" dates in the next 60 days, which is projected to produce approximately |
4,000 certified loans annually, once fully implemented | ||
| New credit union partnerships such as GreenState Credit Union, US Eagle Federal Credit Union and Clark | |
Country Credit Union. |
(1) | Premium increase via model change involving vehicle values that results effectively results in higher premiums | 9 |
Growth Plan
- Expand Core Business
- OEM Opportunity
- CECL Relief
- Launch into New Channels
- Broaden Our Offerings
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Q2 2020 Key Performance Indicators
Three Months Ended June 30, | Six Months Ended June 30, | Years ended December 31, | ||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2019 | 2018 | 2017 | ||||||||||||||||
Certs | ||||||||||||||||||||||
CU & Bank Certs | 16,242 | 20,008 | 35,104 | 36,953 | 74,242 | 56,705 | 42,790 | |||||||||||||||
OEM Certs | 2,442 | - | 11,604 | - | 4,192 | - | - | |||||||||||||||
Total Certs | 18,684 | 20,008 | 46,708 | 36,953 | 78,434 | 56,705 | 42,790 | |||||||||||||||
Unit Economics | ||||||||||||||||||||||
Avg. Profit Share Revenue per Cert | $ | 651 | $ | 747 | $ | 341 | $ | 698 | $ | 676 | N/A(1) | N/A(1) | ||||||||||
Avg. Program Fee Revenue per Cert | 471 | 474 | 460 | 472 | 468 | 443 | 399 | |||||||||||||||
Originations | ||||||||||||||||||||||
Facilitated Loan Origination Volume ($ in 000) | $ | 409,934 | $ | 447,331 | $ | 1,037,031 | $ | 821,452 | $ | 1,755,175 | $ | 1,246,551 | $ | 937,553 | ||||||||
Average Loan Size | 21,940 | 22,358 | 22,202 | 22,230 | 22,377 | 21,983 | 21,911 | |||||||||||||||
Channel Overview | ||||||||||||||||||||||
New Vehicle Certs as a % of Total | 11.9% | 10.7% | 14.4% | 10.5% | 12.0% | 12.7% | 15.5% | |||||||||||||||
Used Vehicle Certs as a % of Total | 88.2% | 89.3% | 85.6% | 89.5% | 88.0% | 87.3% | 84.5% | |||||||||||||||
Indirect Certs as a % of Total | 72.3% | 61.2% | 75.8% | 61.4% | 63.3% | 61.2% | 68.0% | |||||||||||||||
Direct Certs as a % of Total | 27.8% | 38.8% | 24.3% | 38.6% | 36.7% | 38.8% | 32.0% |
- Effective January 1, 2019, the Company adopted ASC 606 which requires us to recognize the full amount of profit share revenue up front. This was not retroactively applied to prior periods and therefore 2018 and 2017 are not comparable.
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Q2 2020 Financial Update
Three Months | Six Months | ||||||||||
($ in 000) | Ended June 30 | Ended June 30 | Years Ended December 31, | ||||||||
2020 | 2020 | 2019 | 2018 | 2017 |
Revenue | |||
Program fees | $ | 8,793 | $ |
Profit share | 12,163 | ||
Claims administration service fees | 1,111 | ||
Total revenue | 22,067 | ||
Cost of services | 1,827 | ||
Gross profit | 20,240 | ||
Operating expenses | |||
General and administrative | 14,650 | ||
Selling and marketing | 1,295 | ||
Research and development | 349 | ||
Operating income | 3,946 | ||
Other income/expense | |||
Change in fair value of contingent consideration | (48,802) | ||
Interest expense | (3,644) | ||
Interest income | 44 | ||
Other income | 3 | ||
Net income (loss) before income taxes | (48,453) | ||
Provision (benefit) for income taxes | 1,352 | ||
Net income (loss) | $ | (49,805) | $ |
Adjusted EBITDA | $ | 15,414 | $ |
21,505 | $ | 36,667 | $ | 25,044 | $ | 17,064 | ||
15,938 | 53,038 | 24,835 | 13,735 | |||||
2,054 | 3,142 | 2,313 | 1,581 | |||||
39,497 | 92,847 | 52,192 | 32,380 | |||||
4,322 | 7,806 | 4,603 | 3,019 | |||||
35,175 | 85,041 | 47,589 | 29,361 | |||||
18,218 | 13,774 | 12,125 | 7,986 | |||||
3,373 | 7,482 | 6,188 | 4,532 | |||||
707 | 1,170 | 802 | 691 | |||||
12,877 | 62,615 | 28,474 | 16,152 | |||||
(48,802) | - | - | - | |||||
(4,408) | (322) | (341) | (418) | |||||
61 | 24 | 13 | 10 | |||||
3 | 197 | 170 | 85 | |||||
(40,269) | 62,514 | 28,316 | 15,829 | |||||
1,364 | (30) | 37 | 59 | |||||
(41,633) | $ | 62,544 | $ | 28,279 | $ | 15,770 | ||
24,971 | $ | 64,925 | $ | 31,309 | $ | 17,273 |
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Reconciliation of Net Income (Loss) to Consolidated Adjusted EBITDA
($ in 000) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Net Income (Loss) | $ | (49,805) | $ | 17,484 | $ | (41,633) | $ | 30,388 | |||
Less: Non-GAAP adjustments: | |||||||||||
Change in fair value of contingent consideration(1) | 48,802 | - | 48,802 | - | |||||||
Transaction bonuses(2) | 9,112 | - | 9,112 | - | |||||||
Interest Expense | 3,644 | 82 | 4,408 | 168 | |||||||
Share-based compensation(3) | 2,189 | 487 | 2,676 | 1,010 | |||||||
Depreciation and amortization | 120 | 26 | 242 | 52 | |||||||
Income Taxes | 1,352 | 21 | 1,364 | (99) | |||||||
Total adjustments | 65,219 | 616 | 66,604 | 1,131 |
Adjusted EBITDA | $ | 15,414 | $ | 18,100 | $ | 24,971 | $ | 31,519 | |||
Total Revenue | $ | 22,067 | $ | 25,183 | $ | 39,497 | $ | 44,667 | |||
Adjusted EBITDA margin | 69.9% | 71.9% | 63.2% | 70.6% |
- Reflects non-cash charges for the change in the estimated fair value of contingent consideration earn-out shares from June 10 through June 30, 2020.
- Reflects transaction bonuses awarded to key employees and directors in connection with the business combination.
- Represents non-cash charges associated with the Class B Unit Incentive Plan of Open Lending, LLC. For the three months ended June 30, 2020 represents accelerated vesting of the legacy plan as result of the business combination.
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Share Count
Shares | In millions |
Total Shares Outstanding at June 30, 2020 | 95.3 |
Contingent Consideration Shares Achieved | 23.8 |
Total Shares Outstanding at August 10, 2020 | 119.1 |
Dilutive Effect of Public Warrants (1) (2) | 3.4 |
Total Diluted Shares Outstanding | 122.5 |
- Calculated using the Treasury Stock Method which assumes cashless exercise by warrant holders utilizing the closing market price of our common stock on August 10, 2020 of $18.37. There are 9,166,659 warrants outstanding that have an exercise price of $11.50 per whole share.
- The Company may call the warrants for redemption: in whole and not in part; at a price of $0.01 per warrant; upon not less than 30 days' prior written notice of redemption to each warrant holder; and if, and only if, the reported last sale price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-day trading period ending three business days before we send the notice of redemption to the warrant holders. Please see our effective Form S-1 Registration Statement for complete details.
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Disclaimer
Open Lending Corporation published this content on 11 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2020 20:27:20 UTC