Elevate Credit Announces Second Quarter 2019 Results

Elevate Credit announces strong second quarter earnings growth

Names Jason Harvison as Interim CEO

FORT WORTH, Texas--()--Elevate Credit, Inc. (NYSE: ELVT) (“Elevate” or the “Company”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced results for the second quarter ended June 30, 2019. The Company grew year-over-year net income by approximately 87%, primarily due to improved credit quality and lower customer acquisition costs. Additionally, the Company announced the resignation of CEO Ken Rees. Jason Harvison has been named as interim CEO, and Saundra Schrock as Chairman of the Board of Directors. Ken Rees will remain on the Elevate Board.

“Elevate continues to deliver strong earnings growth as a result of new underwriting models and strategies that have significantly reduced both fraud and credit losses” said outgoing CEO Ken Rees. “We remain on track to double net income for the second straight year. On a personal note, I have decided now is a good time to step aside as CEO. I am very proud to have led Elevate during this period of growth and transformation alongside Jason Harvison and the rest of the incredible leadership team. I look forward to continuing to serve on the Elevate Board of Directors.”

“On behalf of the Board and the Company, I want to thank Ken for his contributions to Elevate’s success,” said Saundra Schrock, Chairman of the Board. “I am confident the leadership transition will be seamless. The world-class leadership at Elevate, led by interim CEO Jason Harvison, is well-positioned to achieve even greater levels of earnings growth and shareholder value.”

“I am honored to have the opportunity to lead Elevate and build on the successes of the past few years as a public company,” said interim CEO Jason Harvison. “Thus far in 2019, we have delivered excellent performance with net income significantly higher than all of 2018. In the second half of the year, we intend to continue our focus on building a strong foundation for measured growth, further improving credit quality, and delivering value to our shareholders.”

Second Quarter 2019 Financial Highlights1

  • Net income: Net income for the three months ended June 30, 2019 totaled $5.8 million, up $2.7 million, or 87.1%, compared to $3.1 million in the second quarter of 2018. Fully diluted earnings per share for the second quarter of 2019 was $0.13, an increase from $0.07 per fully diluted share a year ago.
  • Revenue: Revenues decreased 3.6% for the second quarter of 2019 totaling $177.8 million compared to $184.4 million for the second quarter of 2018 due to a decline in the effective APR of the combined loans receivable. Revenues less net charge-offs totaled $98.2 million for the second quarter of 2019, an increase of 6.0% from $92.6 million in the second quarter of 2018.

__________________________

1 Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal, combined loans receivable, and combined loan loss reserve are non-GAAP financial measures. These terms are defined elsewhere in this release. Please see the schedules appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.

  • Combined loans receivable - principal: Combined loans receivable - principal totaled $601.2 million, an increase of $11.7 million, or 2.0%, from $589.5 million for the prior-year quarter.
  • Improving credit quality: The ending combined loan loss reserve, as a percentage of combined loans receivable, was 12.3%, lower than 12.9% reported for the prior-year period due to an improvement in credit quality and the continued maturation of the loan portfolio.
  • Customer acquisition cost: The average customer acquisition cost was $229 in the second quarter of 2019, which is lower than the targeted range of $250-$300 and lower than $260 for the prior-year quarter. The total number of new customer loans decreased from approximately 85,000 in the second quarter of 2018 to 71,000 in the second quarter of 2019.
  • Adjusted EBITDA margin: Adjusted EBITDA increased to $33.9 million, up 18.0% from $28.7 million in the second quarter of 2018. The Adjusted EBITDA margin for the second quarter of 2019 was 19.0%, up from 15.6% in the prior-year quarter.

Year-to-date 2019 Financial Highlights1

  • Net income: Net income for the six months ended June 30, 2019 totaled $19.1 million, up $6.5 million, or 51.6%, compared to $12.6 million in the first half of 2018. Fully diluted earnings per share was $0.43, an increase from $0.29 fully diluted per share a year ago.
  • Revenue: Revenues decreased 2.8% for the first half of 2019 totaling $367.3 million compared to $377.9 million for the first half of 2018 due to a decline in the effective APR of the combined loans receivable. Revenues less net charge-offs totaled $183.7 million for the first six months of 2019, down slightly from $184.1 million for the first six months of 2018.
  • Customer acquisition cost: The average customer acquisition cost was $226 in the first half of 2019, which is lower than the targeted range of $250-$300 and lower than $276 for the first half of 2018. The total number of new customer loans decreased from approximately 155,000 in the first half of 2018 to 121,000 in the first half of 2019.
  • Adjusted EBITDA margin: Adjusted EBITDA increased to $78.5 million, up 19.6% from $65.7 million in the first half of 2018. The Adjusted EBITDA margin for the first half of 2019 was 21.4%, up from 17.4% in the prior-year.

Liquidity and Capital Resources

The Company repaid $17.0 million in subordinated debt early during the second quarter of 2019. As previously disclosed in a press release issued on February 11, 2019, the Company announced amendments to the credit facilities for its four products with Victory Park Capital.

Additionally, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to $10 million of our common stock through July 31, 2024. Repurchases will be made in accordance with applicable securities laws from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. The stock buyback plan does not require the purchase of any minimum number of shares and may be implemented, modified, suspended or discontinued in whole or in part at any time without further notice. Any repurchased shares will be available for use in connection with equity plans and for other corporate purposes.

__________________________

1 Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal and combined loans receivable are non-GAAP financial measures. These terms are defined elsewhere in this release. Please see the schedules appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.

Financial Outlook

The Company is revising the full year 2019 revenue guidance down while leaving the net income, diluted earnings per share and Adjusted EBITDA guidance unchanged. For the full year 2019, the Company expects total revenue of $750 million to $770 million, net income of $25 million to $30 million, or $0.55 to $0.65 in diluted earnings per share, and Adjusted EBITDA of $130 million to $140 million.

Conference Call

The Company will host a conference call to discuss its second quarter 2019 financial results on Monday, July 29th at 4:00pm Central Time / 5:00pm Eastern Time. Interested parties may access the conference call live over the phone by dialing 1-877-407-0792 (domestic) or 1-201-689-8263 (international) and requesting the Elevate Credit Second Quarter 2019 Earnings Conference Call. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live through Elevate’s website at http://www.elevate.com/investors.

An audio replay of the conference call will be available approximately three hours after the conference call until 11:59 pm ET on August 12, 2019, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 13692053, or by accessing Elevate’s website.

Forward-Looking Statements

This press release 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. Such statements contain words such as "may," "will," "might," "expect," "believe," "anticipate," "could," "would," "estimate," "continue," "pursue," or the negative thereof or comparable terminology, and may include (without limitation) information regarding the Company's expectations, goals or intentions regarding future performance. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and terms of similar meaning. The forward-looking statements include statements regarding: our expectations of future financial performance including our outlook for full fiscal year 2019 (including all statements under the heading "Financial Outlook"); our potential to drive long-term earnings growth; our expectation of continued strong earnings through 2019 and that we will see the added benefit from new credit models and reduced cost of capital; and the Company’s targeted customer acquisition cost range of $250-$300. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. These risks and uncertainties include, but are not limited to: the Company’s limited operating history in an evolving industry; new laws and regulations in the consumer lending industry in many jurisdictions that could restrict the consumer lending products and services the Company offers, impose additional compliance costs on the Company, render the Company’s current operations unprofitable or even prohibit the Company’s current operations; scrutiny by regulators and payment processors of certain online lenders’ access to the Automated Clearing House system to disburse and collect loan proceeds and repayments; a lack of sufficient debt financing at acceptable prices or disruptions in the credit markets; the impact of competition in our industry and innovation by our competitors; our ability to prevent security breaches, disruption in service and comparable events that could compromise the personal and confidential information held in our data systems, reduce the attractiveness of our platform or adversely impact our ability to service loans; and other risks related to litigation, compliance and regulation. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in other sections of the Company's most recent Annual Report on Form 10-K, and in the Company's other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this press release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.

About Elevate

Elevate (NYSE: ELVT), together with its bank partners, has originated $7.4 billion in non-prime credit to more than 2.3 million non-prime consumers to date and has saved its customers more than $5.6 billion versus the cost of payday loans. Its responsible, tech-enabled online credit solutions provide immediate relief to customers today and help them build a brighter financial future. The company is committed to rewarding borrowers’ good financial behavior with features like interest rates that can go down over time, free financial training and free credit monitoring. Elevate’s suite of groundbreaking credit products includes RISE, Elastic, Sunny and Today Card. For more information, please visit http://www.elevate.com.

 

Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

(Dollars in thousands, except share and per share amounts)

2019

 

2018

 

2019

 

2018

Revenues

 

$

177,760

 

 

$

184,377

 

 

$

367,264

 

 

$

377,914

 

Cost of sales:

 

 

 

 

 

 

 

 

Provision for loan losses

 

78,025

 

 

88,598

 

 

165,456

 

 

180,740

 

Direct marketing costs

 

16,194

 

 

22,180

 

 

27,348

 

 

42,875

 

Other cost of sales

 

8,562

 

 

6,566

 

 

13,622

 

 

12,895

 

Total cost of sales

 

102,781

 

 

117,344

 

 

206,426

 

 

236,510

 

Gross profit

 

74,979

 

 

67,033

 

 

160,838

 

 

141,404

 

Operating expenses:

 

 

 

 

 

 

 

 

Compensation and benefits

 

25,638

 

 

23,380

 

 

51,348

 

 

45,807

 

Professional services

 

8,860

 

 

8,374

 

 

18,559

 

 

16,686

 

Selling and marketing

 

2,205

 

 

2,403

 

 

4,051

 

 

5,355

 

Occupancy and equipment

 

5,179

 

 

4,630

 

 

10,231

 

 

8,749

 

Depreciation and amortization

 

4,324

 

 

2,962

 

 

8,590

 

 

5,677

 

Other

 

1,710

 

 

1,568

 

 

3,017

 

 

2,785

 

Total operating expenses

 

47,916

 

 

43,317

 

 

95,796

 

 

85,059

 

Operating income

 

27,063

 

 

23,716

 

 

65,042

 

 

56,345

 

Other expense:

 

 

 

 

 

 

 

 

Net interest expense

 

(17,947

)

 

(19,263

)

 

(37,166

)

 

(38,476

)

Foreign currency transaction loss

 

(710

)

 

(1,231

)

 

(97

)

 

(475

)

Non-operating loss

 

 

 

 

 

 

 

(38

)

Total other expense

 

(18,657

)

 

(20,494

)

 

(37,263

)

 

(38,989

)

Income before taxes

 

8,406

 

 

3,222

 

 

27,779

 

 

17,356

 

Income tax expense

 

2,634

 

 

94

 

 

8,649

 

 

4,745

 

Net income

 

$

5,772

 

 

$

3,128

 

 

$

19,130

 

 

$

12,611

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

$

0.13

 

 

$

0.07

 

 

$

0.44

 

 

$

0.30

 

Diluted income per share

 

$

0.13

 

 

$

0.07

 

 

$

0.43

 

 

$

0.29

 

Basic weighted average shares outstanding

 

43,681,159

 

 

42,561,403

 

 

43,514,862

 

 

42,386,660

 

Diluted weighted average shares outstanding

 

44,291,816

 

 

44,239,007

 

 

44,142,947

 

 

43,937,066

 

 
 

Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

 

(Dollars in thousands)

 

June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Cash and cash equivalents*

 

$

63,399

 

 

$

58,313

 

Restricted cash.

 

2,491

 

 

2,591

 

Loans receivable, net of allowance for loan losses of $75,896 and $91,608, respectively*

 

535,405

 

 

561,694

 

Prepaid expenses and other assets*

 

11,990

 

 

11,418

 

Operating lease right of use assets

 

11,858

 

 

 

Receivable from CSO lenders

 

10,246

 

 

16,183

 

Receivable from payment processors*

 

27,129

 

 

21,716

 

Deferred tax assets, net

 

13,605

 

 

21,628

 

Property and equipment, net

 

47,629

 

 

41,579

 

Goodwill

 

16,027

 

 

16,027

 

Intangible assets, net

 

1,462

 

 

1,712

 

Derivative assets, net*

 

 

 

412

 

Total assets

 

$

741,241

 

 

$

753,273

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Accounts payable and accrued liabilities*

 

$

41,445

 

 

$

44,950

 

Operating lease liabilities

 

16,160

 

 

 

State and other taxes payable

 

1,222

 

 

681

 

Deferred revenue*

 

15,246

 

 

28,261

 

Notes payable, net*

 

527,237

 

 

562,590

 

Total liabilities

 

601,310

 

 

636,482

 

COMMITMENTS, CONTINGENCIES AND GUARANTEES

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

Preferred stock

 

 

 

 

Common stock

 

18

 

 

18

 

Additional paid-in capital

 

187,521

 

 

183,244

 

Accumulated deficit

 

(47,395

)

 

(66,525

)

Accumulated other comprehensive income (loss)

 

(213

)

 

54

 

Total stockholders’ equity

 

139,931

 

 

116,791

 

Total liabilities and stockholders’ equity

 

$

741,241

 

 

$

753,273

 

* These balances include certain assets and liabilities of variable interest entities (“VIEs”) that can only be used to settle the liabilities of that respective VIE. All assets of the Company are pledged as security for the Company’s outstanding debt, including debt held by the VIEs.

Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal, combined loans receivable and combined loan loss reserve.

Adjusted EBITDA and Adjusted EBITDA margin

In addition to net income determined in accordance with GAAP, Elevate uses certain non-GAAP measures such as “Adjusted EBITDA” and "Adjusted EBITDA margin" in assessing its operating performance. Elevate believes these non-GAAP measures are appropriate measures to be used in evaluating the performance of its business.

Elevate defines Adjusted EBITDA as net income excluding the impact of income tax expense, non-operating loss, foreign currency transaction loss associated with our UK operations, net interest expense, share-based compensation expense and depreciation and amortization expense. Elevate defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

Management believes that Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental measures to assist management and investors in analyzing the operating performance of the business and provide greater transparency into the results of operations of our core business. Management uses this non-GAAP financial measure frequently in its decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and gives an additional indication of Elevate’s core operating performance. Elevate includes this non-GAAP financial measure in its earnings announcement in order to provide transparency to its investors and enable investors to better compare its operating performance with the operating performance of its competitors.

Adjusted EBITDA and Adjusted EBITDA margin should not be considered as alternatives to net income or any other performance measure derived in accordance with GAAP. Management's use of Adjusted EBITDA and Adjusted EBITDA margin has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are:

  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect expected cash capital expenditure requirements for such replacements or for new capital assets;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; and
  • Adjusted EBITDA does not reflect interest associated with notes payable used for funding customer loans, for other corporate purposes or tax payments that may represent a reduction in cash available to the Company.

Additionally, Elevate’s definition of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The Company’s Adjusted EBITDA guidance does not include certain charges and costs. The adjustments in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods. The Company is not able to provide a reconciliation of the Company’s non-GAAP financial guidance to the corresponding GAAP measure without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to Elevate’s net income for the three and six months ended June 30, 2019 and 2018:

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

(Dollars in thousands)

 

2019

 

2018

 

2019

 

2018

Net income

 

$

5,772

 

 

$

3,128

 

 

$

19,130

 

 

$

12,611

 

Adjustments:

 

 

 

 

 

 

 

 

Net interest expense

 

17,947

 

 

19,263

 

 

37,166

 

 

38,476

 

Share-based compensation

 

2,476

 

 

2,010

 

 

4,911

 

 

3,647

 

Foreign currency transaction loss

 

710

 

 

1,231

 

 

97

 

 

475

 

Depreciation and amortization

 

4,324

 

 

2,962

 

 

8,590

 

 

5,677

 

Non-operating loss

 

 

 

 

 

 

 

38

 

Income tax expense

 

2,634

 

 

94

 

 

8,649

 

 

4,745

 

Adjusted EBITDA

 

$

33,863

 

 

$

28,688

 

 

$

78,543

 

 

$

65,669

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

19.0

%

 

15.6

%

 

21.4

%

 

17.4

%

 

Supplemental Schedules

 

 

Revenue by Product

 

 

Three Months Ended June 30, 2019

(Dollars in thousands)

 

Rise (US)(1)

 

Elastic (US)(2)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Average combined loans receivable – principal(3)

 

$

287,073

 

 

$

243,691

 

 

$

530,764

 

 

$

50,173

 

 

$

580,937

 

Effective APR

 

126

%

 

98

%

 

113

%

 

219

%

 

122

%

Finance charges

 

$

90,384

 

 

$

59,317

 

 

$

149,701

 

 

$

27,330

 

 

$

177,031

 

Other

 

387

 

 

288

 

 

675

 

 

54

 

 

729

 

Total revenue

 

$

90,771

 

 

$

59,605

 

 

$

150,376

 

 

$

27,384

 

 

$

177,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

(Dollars in thousands)

 

Rise (US)(1)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Average combined loans receivable – principal(3)

 

$

277,281

 

 

$

244,583

 

 

$

521,864

 

 

$

52,092

 

 

$

573,956

 

Effective APR

 

137

%

 

97

%

 

118

%

 

226

%

 

128

%

Finance charges

 

$

94,716

 

 

$

59,298

 

 

$

154,014

 

 

$

29,380

 

 

$

183,394

 

Other

 

435

 

 

460

 

 

895

 

 

88

 

 

983

 

Total revenue

 

$

95,151

 

 

$

59,758

 

 

$

154,909

 

 

$

29,468

 

 

$

184,377

 

(1)

Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

(2)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(3)

Average combined loans receivable - principal is calculated using daily principal balances. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.

 

Revenue by Product, Continued

 

 

Six Months Ended June 30, 2019

(Dollars in thousands)

 

Rise (US)(1)

 

Elastic (US)(2)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Average combined loans receivable – principal(3)

 

$

288,941

 

 

$

254,980

 

 

$

543,921

 

 

$

51,254

 

 

$

595,174

 

Effective APR

 

129

%

 

98

%

 

115

%

 

223

%

 

124

%

Finance charges

 

$

185,269

 

 

$

124,050

 

 

$

309,319

 

 

$

56,701

 

 

$

366,020

 

Other

 

738

 

 

384

 

 

1,122

 

 

122

 

 

1,244

 

Total revenue

 

$

186,007

 

 

$

124,434

 

 

$

310,441

 

 

$

56,823

 

 

$

367,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

(Dollars in thousands)

 

Rise (US)(1)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Average combined loans receivable – principal(3)

 

$

289,565

 

 

$

244,980

 

 

$

534,545

 

 

$

51,970

 

 

$

586,515

 

Effective APR

 

138

%

 

97

%

 

119

%

 

231

%

 

129

%

Finance charges

 

$

197,924

 

 

$

118,201

 

 

$

316,125

 

 

$

59,527

 

 

$

375,652

 

Other

 

1,265

 

 

825

 

 

2,090

 

 

172

 

 

2,262

 

Total revenue

 

$

199,189

 

 

$

119,026

 

 

$

318,215

 

 

$

59,699

 

 

$

377,914

 

(1)

Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

(2)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(3)

Average combined loans receivable - principal is calculated using daily principal balances. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.

 

Loan Loss Reserve by Product

 

 

Three Months Ended June 30, 2019

(Dollars in thousands)

 

Rise (US)

 

Elastic (US)(1)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Combined loan loss reserve(2):

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

39,350

 

 

$

28,341

 

 

$

67,691

 

 

$

12,008

 

 

$

79,699

 

Net charge-offs

 

(40,970

)

 

(27,130

)

 

(68,100

)

 

(11,509

)

 

(79,609

)

Provision for loan losses

 

43,013

 

 

25,268

 

 

68,281

 

 

9,744

 

 

78,025

 

Effect of foreign currency

 

 

 

 

 

 

 

(236

)

 

(236

)

Ending balance

 

$

41,393

 

 

$

26,479

 

 

$

67,872

 

 

$

10,007

 

 

$

77,879

 

Combined loans receivable(2)(3)

 

$

324,620

 

 

$

258,200

 

 

$

582,820

 

 

$

51,852

 

 

$

634,672

 

Combined loan loss reserve as a percentage of ending combined loans receivable

 

13

%

 

10

%

 

12

%

 

19

%

 

12

%

Net charge-offs as a percentage of revenues

 

45

%

 

46

%

 

45

%

 

42

%

 

45

%

Provision for loan losses as a percentage of revenues

 

47

%

 

42

%

 

45

%

 

36

%

 

44

%

 

 

Three Months Ended June 30, 2018

(Dollars in thousands)

 

Rise (US)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Combined loan loss reserve(2):

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

44,209

 

 

$

28,098

 

 

$

72,307

 

 

$

11,939

 

 

$

84,246

 

Net charge-offs

 

(49,494

)

 

(28,490

)

 

(77,984

)

 

(13,772

)

 

(91,756

)

Provision for loan losses

 

46,081

 

 

29,786

 

 

75,867

 

 

12,731

 

 

88,598

 

Effect of foreign currency

 

 

 

 

 

 

 

(557

)

 

(557

)

Ending balance

 

$

40,796

 

 

$

29,394

 

 

$

70,190

 

 

$

10,341

 

 

$

80,531

 

Combined loans receivable(2)(3)

 

$

305,674

 

 

$

265,959

 

 

$

571,633

 

 

$

52,128

 

 

$

623,761

 

Combined loan loss reserve as a percentage of ending combined loans receivable

 

13

%

 

11

%

 

12

%

 

20

%

 

13

%

Net charge-offs as a percentage of revenues

 

52

%

 

48

%

 

50

%

 

47

%

 

50

%

Provision for loan losses as a percentage of revenues

 

48

%

 

50

%

 

49

%

 

43

%

 

48

%

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(2)

Not a financial measure prepared in accordance with GAAP. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.

(3)

Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

 
 

Loan Loss Reserve by Product, Continued

 

 

 

Six Months Ended June 30, 2019

(Dollars in thousands)

 

Rise (US)

 

Elastic (US)(1)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Combined loan loss reserve(2):

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

50,597

 

 

$

36,050

 

 

$

86,647

 

 

$

9,405

 

 

$

96,052

 

Net charge-offs

 

(98,010

)

 

(64,401

)

 

(162,411

)

 

(21,183

)

 

(183,594

)

Provision for loan losses

 

88,806

 

 

54,830

 

 

143,636

 

 

21,820

 

 

165,456

 

Effect of foreign currency

 

 

 

 

 

 

 

(35

)

 

(35

)

Ending balance

 

$

41,393

 

 

$

26,479

 

 

$

67,872

 

 

$

10,007

 

 

$

77,879

 

Combined loans receivable(2)(3)

 

$

324,620

 

 

$

258,200

 

 

$

582,820

 

 

$

51,852

 

 

$

634,672

 

Combined loan loss reserve as a percentage of ending combined loans receivable

 

13

%

 

10

%

 

12

%

 

19

%

 

12

%

Net charge-offs as a percentage of revenues

 

53

%

 

52

%

 

52

%

 

37

%

 

50

%

Provision for loan losses as a percentage of revenues

 

48

%

 

44

%

 

46

%

 

38

%

 

45

%

 

 

Six Months Ended June 30, 2018

(Dollars in thousands)

 

Rise (US)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

 

 

 

Combined loan loss reserve(2):

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

55,867

 

 

$

28,870

 

 

$

84,737

 

 

$

9,052

 

 

$

93,789

 

Net charge-offs

 

(112,941

)

 

(58,175

)

 

(171,116

)

 

(22,682

)

 

(193,798

)

Provision for loan losses

 

97,870

 

 

58,699

 

 

156,569

 

 

24,171

 

 

180,740

 

Effect of foreign currency

 

 

 

 

 

 

 

(200

)

 

(200

)

Ending balance

 

$

40,796

 

 

$

29,394

 

 

$

70,190

 

 

$

10,341

 

 

$

80,531

 

Combined loans receivable(2)(3)

 

$

305,674

 

 

$

265,959

 

 

$

571,633

 

 

$

52,128

 

 

$

623,761

 

Combined loan loss reserve as a percentage of ending combined loans receivable

 

13

%

 

11

%

 

12

%

 

20

%

 

13

%

Net charge-offs as a percentage of revenues

 

57

%

 

49

%

 

54

%

 

38

%

 

51

%

Provision for loan losses as a percentage of revenues

 

49

%

 

49

%

 

49

%

 

40

%

 

48

%

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(2)

Not a financial measure prepared in accordance with GAAP. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.

(3)

Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

 
 

Customer Loan Data by Product

 

 

 

Three Months Ended June 30, 2019

 

 

Rise (US)

 

Elastic (US)(1)

 

Total Domestic

 

Sunny (UK)

 

Total

Beginning number of combined loans outstanding

 

125,021

 

 

145,760

 

 

270,781

 

 

93,898

 

 

364,679

 

New customer loans originated

 

30,177

 

 

13,826

 

 

44,003

 

 

26,647

 

 

70,650

 

Former customer loans originated

 

18,850

 

 

18

 

 

18,868

 

 

 

 

18,868

 

Attrition

 

(38,277

)

 

(17,043

)

 

(55,320

)

 

(27,659

)

 

(82,979

)

Ending number of combined loans outstanding

 

135,771

 

 

142,561

 

 

278,332

 

 

92,886

 

 

371,218

 

Customer acquisition cost

 

$

243

 

 

$

271

 

 

$

252

 

 

$

192

 

 

$

229

 

Average customer loan balance

 

$

2,253

 

 

$

1,738

 

 

$

1,989

 

 

$

512

 

 

$

1,620

 

 

 

Three Months Ended June 30, 2018

 

 

Rise (US)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

Beginning number of combined loans outstanding

 

127,263

 

 

138,555

 

 

265,818

 

 

86,791

 

 

352,609

 

New customer loans originated

 

27,149

 

 

26,305

 

 

53,454

 

 

31,692

 

 

85,146

 

Former customer loans originated

 

22,816

 

 

127

 

 

22,943

 

 

 

 

22,943

 

Attrition

 

(46,331

)

 

(15,847

)

 

(62,178

)

 

(25,928

)

 

(88,106

)

Ending number of combined loans outstanding

 

130,897

 

 

149,140

 

 

280,037

 

 

92,555

 

 

372,592

 

Customer acquisition cost

 

$

307

 

 

$

234

 

 

$

271

 

 

$

243

 

 

$

260

 

Average customer loan balance

 

$

2,187

 

 

$

1,711

 

 

$

1,934

 

 

$

519

 

 

$

1,582

 

 (1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

 
 

Customer Loan Data by Product, Continued

 

 

 

Six Months Ended June 30, 2019

 

 

Rise (US)

 

Elastic (US)(1)

 

Total Domestic

 

Sunny (UK)

 

Total

Beginning number of combined loans outstanding

 

142,758

 

 

166,397

 

 

309,155

 

 

89,449

 

 

398,604

 

New customer loans originated

 

47,542

 

 

18,664

 

 

66,206

 

 

54,920

 

 

121,126

 

Former customer loans originated

 

36,641

 

 

27

 

 

36,668

 

 

 

 

36,668

 

Attrition

 

(91,170

)

 

(42,527

)

 

(133,697

)

 

(51,483

)

 

(185,180

)

Ending number of combined loans outstanding

 

135,771

 

 

142,561

 

 

278,332

 

 

92,886

 

 

371,218

 

Customer acquisition cost

 

$

276

 

 

$

277

 

 

$

276

 

 

$

165

 

 

$

226

 

 

 

 

Six Months Ended June 30, 2018

 

 

Rise (US)

 

Elastic (US)

 

Total Domestic

 

Sunny (UK)

 

Total

Beginning number of combined loans outstanding

 

140,790

 

 

140,672

 

 

281,462

 

 

80,510

 

 

361,972

 

New customer loans originated

 

49,414

 

 

47,185

 

 

96,599

 

 

58,682

 

 

155,281

 

Former customer loans originated

 

38,199

 

 

216

 

 

38,415

 

 

 

 

38,415

 

Attrition

 

(97,506

)

 

(38,933

)

 

(136,439

)

 

(46,637

)

 

(183,076

)

Ending number of combined loans outstanding

 

130,897

 

 

149,140

 

 

280,037

 

 

92,555

 

 

372,592

 

Customer acquisition cost

 

$

318

 

 

$

252

 

 

$

286

 

 

$

260

 

 

$

276

 

 

 (1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

 

Combined Loan Information

The Elastic line of credit product is originated by a third party lender, Republic Bank, which initially provides all of the funding for that product. Republic Bank retains 10% of the balances of all of the loans originated and sells a 90% loan participation in the Elastic lines of credit to a third party SPV, Elastic SPV, Ltd. Elevate is required to consolidate Elastic SPV, Ltd. as a variable interest entity under GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 90% of Elastic lines of credit originated by Republic Bank and sold to Elastic SPV, Ltd.

Beginning in the fourth quarter of 2018, the Company also licenses its Rise installment loan brand to a third party lender, FinWise Bank, which originates Rise installment loans in nineteen states. FinWise Bank initially provides all of the funding and retains 5% of the balances of all of the loans originated and sells a 95% loan participation in those Rise installment loans to a third party SPV, EF SPV, Ltd. Elevate is required to consolidate EF SPV, Ltd. as a variable interest entity under GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 95% of Rise installment loans originated by FinWise Bank and sold to EF SPV, Ltd.

Elevate defines combined loans receivable - principal as loans owned by the Company plus loans originated and owned by third-party lenders pursuant to our CSO programs. In Texas, the Company does not make Rise loans directly, but rather acts as a Credit Services Organization (which is also known as a Credit Access Business), or, “CSO,” and the loans are originated by an unaffiliated third party. There are no new loan originations in Ohio commencing in April 2019, but the Company continues to have obligations as the CSO until the wind-down of this portfolio is complete. Elevate defines combined loan loss reserve as the loan loss reserve for loans owned by the Company plus the loan loss reserve for loans originated and owned by third-party lenders and guaranteed by the Company. The information presented in the tables below on a combined basis are non-GAAP measures based on a combined portfolio of loans, which includes the total amount of outstanding loans receivable that the Company owns and that are on the Company's condensed consolidated balance sheets plus outstanding loans receivable originated and owned by third parties that the Company guarantees pursuant to CSO programs in which the Company participates.

The Company believes these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the combined loan portfolio on an aggregate basis. The Company also believes that the comparison of the combined amounts from period to period is more meaningful than comparing only the amounts reflected on the Company's condensed consolidated balance sheets since both revenues and cost of sales as reflected in the Company's condensed consolidated financial statements are impacted by the aggregate amount of loans the Company owns and those CSO loans the Company guarantees.

The Company's use of total combined loans and fees receivable has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are:

  • Rise CSO loans are originated and owned by a third party lender; and
  • Rise CSO loans are funded by a third party lender and are not part of the VPC Facility.

As of each of the period ends indicated, the following table presents a reconciliation of:

  • Loans receivable, net, Company owned (which reconciles to the Company's condensed consolidated balance sheets included elsewhere in this press release);
  • Loans receivable, net, guaranteed by the Company;
  • Combined loans receivable (which the Company uses as a non-GAAP measure); and
  • Combined loan loss reserve (which the Company uses as a non-GAAP measure).

 

 

2018

 

2019

(Dollars in thousands)

 

March 31

 

June 30

 

September 30

 

December 31

 

March 31

 

June 30

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Owned Loans:

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable – principal, current, company owned

 

$

471,996

 

 

$

493,908

 

 

$

525,717

 

 

$

543,405

 

 

$

491,208

 

 

$

523,785

 

Loans receivable – principal, past due, company owned

 

60,876

 

 

58,949

 

 

69,934

 

 

68,251

 

 

55,286

 

 

55,711

 

Loans receivable – principal, total, company owned

 

532,872

 

 

552,857

 

 

595,651

 

 

611,656

 

 

546,494

 

 

579,496

 

Loans receivable – finance charges, company owned

 

31,181

 

 

31,519

 

 

36,747

 

 

41,646

 

 

32,491

 

 

31,805

 

Loans receivable – company owned

 

564,053

 

 

584,376

 

 

632,398

 

 

653,302

 

 

578,985

 

 

611,301

 

Allowance for loan losses on loans receivable, company owned

 

(80,497

)

 

(76,575

)

 

(89,422

)

 

(91,608

)

 

(76,457

)

 

(75,896

)

Loans receivable, net, company owned

 

$

483,556

 

 

$

507,801

 

 

$

542,976

 

 

$

561,694

 

 

$

502,528

 

 

$

535,405

 

Third Party Loans Guaranteed by the Company:

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable – principal, current, guaranteed by company

 

$

33,469

 

 

$

35,114

 

 

$

36,649

 

 

$

35,529

 

 

$

27,941

 

 

$

21,099

 

Loans receivable – principal, past due, guaranteed by company

 

1,123

 

 

1,494

 

 

1,661

 

 

1,353

 

 

696

 

 

596

 

Loans receivable – principal, total, guaranteed by company(1)

 

34,592

 

 

36,608

 

 

38,310

 

 

36,882

 

 

28,637

 

 

21,695

 

Loans receivable – finance charges, guaranteed by company(2)

 

2,612

 

 

2,777

 

 

3,103

 

 

2,944

 

 

2,164

 

 

1,676

 

Loans receivable – guaranteed by company

 

37,204

 

 

39,385

 

 

41,413

 

 

39,826

 

 

30,801

 

 

23,371

 

Liability for losses on loans receivable, guaranteed by company

 

(3,749

)

 

(3,956

)

 

(4,510

)

 

(4,444

)

 

(3,242

)

 

(1,983

)

Loans receivable, net, guaranteed by company(3)

 

$

33,455

 

 

$

35,429

 

 

$

36,903

 

 

$

35,382

 

 

$

27,559

 

 

$

21,388

 

Combined Loans Receivable(3):

 

 

 

 

 

 

 

 

 

 

 

 

Combined loans receivable – principal, current

 

$

505,465

 

 

$

529,022

 

 

$

562,366

 

 

$

578,934

 

 

$

519,149

 

 

$

544,884

 

Combined loans receivable – principal, past due

 

61,999

 

 

60,443

 

 

71,595

 

 

69,604

 

 

55,982

 

 

56,307

 

Combined loans receivable – principal

 

567,464

 

 

589,465

 

 

633,961

 

 

648,538

 

 

575,131

 

 

601,191

 

Combined loans receivable – finance charges

 

33,793

 

 

34,296

 

 

39,850

 

 

44,590

 

 

34,655

 

 

33,481

 

Combined loans receivable

 

$

601,257

 

 

$

623,761

 

 

$

673,811

 

 

$

693,128

 

 

$

609,786

 

 

$

634,672

 

Combined Loan Loss Reserve(3):

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses on loans receivable, company owned

 

$

(80,497

)

 

$

(76,575

)

 

$

(89,422

)

 

$

(91,608

)

 

$

(76,457

)

 

$

(75,896

)

Liability for losses on loans receivable, guaranteed by company

 

(3,749

)

 

(3,956

)

 

(4,510

)

 

(4,444

)

 

(3,242

)

 

(1,983

)

Combined loan loss reserve

 

$

(84,246

)

 

$

(80,531

)

 

$

(93,932

)

 

$

(96,052

)

 

$

(79,699

)

 

$

(77,879

)

Combined loans receivable – principal, past due(3)

 

$

61,999

 

 

$

60,443

 

 

$

71,595

 

 

$

69,604

 

 

$

55,982

 

 

$

56,307

 

Combined loans receivable – principal(3)

 

567,464

 

 

589,465

 

 

633,961

 

 

648,538

 

 

575,131

 

 

601,191

 

Percentage past due

 

11

%

 

10

%

 

11

%

 

11

%

 

10

%

 

9

%

Combined loan loss reserve as a percentage of combined loans receivable(3)(4)

 

14

%

 

13

%

 

14

%

 

14

%

 

13

%

 

12

%

Allowance for loan losses as a percentage of loans receivable – company owned

 

14

%

 

13

%

 

14

%

 

14

%

 

13

%

 

12

%

(1)

Represents loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

(2)

Represents finance charges earned by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.

(3) 

Non-GAAP measure.

(4)

Combined loan loss reserve as a percentage of combined loans receivable is determined using period-end balances.

 

Contacts

Investor Relations:
Solebury Trout
Sloan Bohlen, (817) 928-1646
investors@elevate.com
or
Media Inquiries:
Vested
Ishviene Arora, (917) 765-8720
elevate@fullyvested.com

Contacts

Investor Relations:
Solebury Trout
Sloan Bohlen, (817) 928-1646
investors@elevate.com
or
Media Inquiries:
Vested
Ishviene Arora, (917) 765-8720
elevate@fullyvested.com