Elevate Credit, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following Unaudited Pro Forma Condensed Consolidated Financial Statement information is based on the historical financial statements of Elevate Credit, Inc. ("Elevate" or the "Company"), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of Elevate Credit International Limited ("ECIL") entering into administration and deconsolidation effective June 29, 2020.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and the years ended December 31, 2019 and 2018 assume that ECIL's entrance into administration occurred at the beginning of the period presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2020 is presented as if ECIL entered into administration as of March 31, 2020.
The Unaudited Pro Forma Condensed Consolidated Financial Statement information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The Unaudited Pro Forma Condensed Consolidated Financial Statement information is not necessarily indicative of the financial position or the results of operations that might have occurred had the administration occurred as of the dates stated above. The pro forma adjustments are described in the notes below.
The Unaudited Pro Forma Condensed Consolidated Financial Statement information should be read in conjunction with the Financial Statements and Notes and related Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") included in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and the Company's Annual Report on Form 10-K for the years ended December 31, 2019 and 2018.
Elevate Credit, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2020
|
| | | | | | | | | | | | |
| (Dollars in thousands) | | Historical | | Pro Forma Adjustments for ECIL (a) | | Unaudited Pro Forma Consolidated Balance Sheet |
| ASSETS | | | | | | |
| Cash and cash equivalents* | | $ | 101,429 |
| | $ | 10,291 |
| | $ | 91,138 |
|
| Restricted cash | | 2,190 |
| | 55 |
| | 2,135 |
|
| Loans receivable, net of allowance for loan losses | | 516,670 |
| | 20,918 |
| | 495,752 |
|
| Prepaid expenses and other assets* | | 13,038 |
| | 3,729 |
| | 9,309 |
|
| Operating lease right of use assets | | 9,746 |
| | — |
| | 9,746 |
|
| Receivable from CSO lenders | | 6,822 |
| | — |
| | 6,822 |
|
| Receivable from payment processors* | | 9,278 |
| | 2,198 |
| | 7,080 |
|
| Deferred tax assets, net | | 9,737 |
| | 1,369 |
| | 8,368 |
|
| Property and equipment, net | | 49,905 |
| | 13,707 |
| | 36,198 |
|
| Goodwill, net | | 6,776 |
| | — |
| | 6,776 |
|
| Intangible assets, net | | 1,371 |
| | — |
| | 1,371 |
|
| Total assets | | $ | 726,962 |
| | $ | 52,267 |
| | $ | 674,695 |
|
| | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| Accounts payable and accrued liabilities* | | $ | 41,179 |
| | $ | 6,627 |
| | $ | 34,552 |
|
| Operating lease liabilities | | 13,790 |
| | — |
| | 13,790 |
|
| Income taxes payable | | 1,174 |
| | — |
| | 1,174 |
|
| Deferred revenue* | | 8,831 |
| | — |
| | 8,831 |
|
| Notes payable, net* | | 514,206 |
| | 16,147 |
| | 498,059 |
|
| Total liabilities | | 579,180 |
| | 22,774 |
| | 556,406 |
|
| COMMITMENTS, CONTINGENCIES AND GUARANTEES | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | |
| Preferred stock | | — |
| | — |
| | — |
|
| Common stock | | 18 |
| | — |
| | 18 |
|
| Additional paid-in capital | | 195,471 |
| | — |
| | 195,471 |
|
| Treasury stock | | (6,717 | ) | | — |
| | (6,717 | ) |
| Accumulated deficit | | (40,083 | ) | | 30,400 |
| (b) | (70,483 | ) |
| Accumulated other comprehensive (loss) income | | (907 | ) | | (907 | ) | (b) | — |
|
| Total stockholders’ equity | | 147,782 |
| | 29,493 |
| | 118,289 |
|
| Total liabilities and stockholders’ equity | | $ | 726,962 |
| | $ | 52,267 |
| | $ | 674,695 |
|
* 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.
Elevate Credit, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the three months ended March 31, 2020
|
| | | | | | | | | | | | |
| (Dollars in thousands, except share and per share amounts) | | Historical | | Pro Forma Adjustments for ECIL | | Unaudited Pro Forma Consolidated Statement of Operations |
| Revenues | | $ | 177,455 |
| | $ | 14,988 |
| (c) | $ | 162,467 |
|
| Cost of sales: | | | | | | |
| Provision for loan losses | | 82,753 |
| | 4,178 |
| (d) | 78,575 |
|
| Direct marketing costs | | 12,071 |
| | 1,102 |
| (d) | 10,969 |
|
| Other cost of sales | | 8,330 |
| | 5,660 |
| (d) | 2,670 |
|
| Total cost of sales | | 103,154 |
| | 10,940 |
| | 92,214 |
|
| Gross profit | | 74,301 |
| | 4,048 |
| | 70,253 |
|
| Operating expenses: | | | | | | |
| Compensation and benefits | | 26,191 |
| | 2,717 |
| (d) | 23,474 |
|
| Professional services | | 9,207 |
| | 1,281 |
| (d) | 7,926 |
|
| Selling and marketing | | 1,424 |
| | 470 |
| (d) | 954 |
|
| Occupancy and equipment | | 5,749 |
| | 1,113 |
| (d) | 4,636 |
|
| Depreciation and amortization | | 4,797 |
| | 501 |
| (d) | 4,296 |
|
| Other | | 1,251 |
| | 180 |
| (d) | 1,071 |
|
| Total operating expenses | | 48,619 |
| | 6,262 |
| | 42,357 |
|
| Operating income | | 25,682 |
| | (2,214 | ) | | 27,896 |
|
| Other expense: | |
| | | | |
| Net interest expense | | (14,195 | ) | | (539 | ) | (d) | (13,656 | ) |
| Foreign currency transaction loss | | (812 | ) | | (812 | ) | (d) | — |
|
| Impairment loss | | (9,251 | ) | | (9,251 | ) | (e) | — |
|
| Non-operating loss | | (4,263 | ) | | — |
| | (4,263 | ) |
| Total other expense | | (28,521 | ) | | (10,602 | ) | | (17,919 | ) |
| (Loss) income before taxes | | (2,839 | ) | | (12,816 | ) | | 9,977 |
|
| Income tax expense | | 2,072 |
| | 17 |
| (d) | 2,055 |
|
| Net (loss) income | | $ | (4,911 | ) | | $ | (12,833 | ) | | $ | 7,922 |
|
| | | | | | | |
| Basic (loss) earnings per share | | $ | (0.11 | ) | | | | $ | 0.18 |
|
| Diluted (loss) earnings per share | | $ | (0.11 | ) | | | | $ | 0.18 |
|
| Basic weighted average shares outstanding | | 43,161,716 |
| | | | 43,161,716 |
|
| Diluted weighted average shares outstanding | | 43,161,716 |
| | 470,021 |
| (f) | 43,631,737 |
|
Elevate Credit, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2019
|
| | | | | | | | | | | | |
| (Dollars in thousands, except share and per share amounts) | | Historical | | Pro Forma Adjustments for ECIL | | Unaudited Pro Forma Consolidated Statement of Operations |
| Revenues | | $ | 746,962 |
| | $ | 108,089 |
| (c) | $ | 638,873 |
|
| Cost of sales: | | | | | | |
| Provision for loan losses | | 364,241 |
| | 38,579 |
| (d) | 325,662 |
|
| Direct marketing costs | | 51,283 |
| | 12,735 |
| (d) | 38,548 |
|
| Other cost of sales | | 28,846 |
| | 18,763 |
| (d) | 10,083 |
|
| Total cost of sales | | 444,370 |
| | 70,077 |
| | 374,293 |
|
| Gross profit | | 302,592 |
| | 38,012 |
| | 264,580 |
|
| Operating expenses: | | | | | | |
| Compensation and benefits | | 103,070 |
| | 13,653 |
| (d) | 89,417 |
|
| Professional services | | 36,715 |
| | 4,881 |
| (d) | 31,834 |
|
| Selling and marketing | | 7,381 |
| | 2,608 |
| (d) | 4,773 |
|
| Occupancy and equipment | | 20,712 |
| | 4,723 |
| (d) | 15,989 |
|
| Depreciation and amortization | | 17,380 |
| | 1,501 |
| (d) | 15,879 |
|
| Other | | 5,911 |
| | 792 |
| (d) | 5,119 |
|
| Total operating expenses | | 191,169 |
| | 28,158 |
| | 163,011 |
|
| Operating income | | 111,423 |
| | 9,854 |
| | 101,569 |
|
| Other expense: | | | | | | |
| Net interest expense | | (66,646 | ) | | (4,113 | ) | (d) | (62,533 | ) |
| Foreign currency transaction gain | | 334 |
| | 334 |
| (d) | — |
|
| Non-operating loss | | (681 | ) | | — |
| | (681 | ) |
| Total other expense | | (66,993 | ) | | (3,779 | ) | | (63,214 | ) |
| Income before taxes | | 44,430 |
| | 6,075 |
| | 38,355 |
|
| Income tax expense | | 12,247 |
| | 88 |
| (d) | 12,159 |
|
| Net income | | $ | 32,183 |
| | $ | 5,987 |
| | $ | 26,196 |
|
| | | | | | | |
| Basic earnings per share | | $ | 0.73 |
| | | | $ | 0.60 |
|
| Diluted earnings per share | | $ | 0.73 |
| | | | $ | 0.59 |
|
| Basic weighted average shares outstanding | | 43,805,845 |
| | | | 43,805,845 |
|
| Diluted weighted average shares outstanding | | 44,338,205 |
| | | | 44,338,205 |
|
Elevate Credit, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the year ended December 31, 2018
|
| | | | | | | | | | | | |
| (Dollars in thousands, except share and per share amounts) | | Historical | | Pro Forma Adjustments for ECIL | | Unaudited Pro Forma Consolidated Statement of Operations |
| Revenues | | $ | 786,682 |
| | $ | 122,966 |
| (c) | $ | 663,716 |
|
| Cost of sales: | | | | | | |
| Provision for loan losses | | 411,979 |
| | 49,780 |
| (d) | 362,199 |
|
| Direct marketing costs | | 77,605 |
| | 22,882 |
| (d) | 54,723 |
|
| Other cost of sales | | 26,359 |
| | 14,220 |
| (d) | 12,139 |
|
| Total cost of sales | | 515,943 |
| | 86,882 |
| | 429,061 |
|
| Gross profit | | 270,739 |
| | 36,084 |
| | 234,655 |
|
| Operating expenses: | | | | | | |
| Compensation and benefits | | 94,382 |
| | 13,524 |
| (d) | 80,858 |
|
| Professional services | | 35,864 |
| | 6,040 |
| (d) | 29,824 |
|
| Selling and marketing | | 9,435 |
| | 3,241 |
| (d) | 6,194 |
|
| Occupancy and equipment | | 17,547 |
| | 3,733 |
| (d) | 13,814 |
|
| Depreciation and amortization | | 12,988 |
| | 1,512 |
| (d) | 11,476 |
|
| Other | | 5,649 |
| | 932 |
| (d) | 4,717 |
|
| Total operating expenses | | 175,865 |
| | 28,982 |
| | 146,883 |
|
| Operating income | | 94,874 |
| | 7,102 |
| | 87,772 |
|
| Other expense: | | | | | | |
| Net interest expense | | (79,198 | ) | | (5,900 | ) | (d) | (73,298 | ) |
| Foreign currency transaction loss | | (1,409 | ) | | (1,409 | ) | (d) | — |
|
| Non-operating loss | | (350 | ) | | — |
| | (350 | ) |
| Total other expense | | (80,957 | ) | | (7,309 | ) | | (73,648 | ) |
| Income (loss) before taxes | | 13,917 |
| | (207 | ) | | 14,124 |
|
| Income tax expense | | 1,408 |
| | 114 |
| (d) | 1,294 |
|
| Net income (loss) | | $ | 12,509 |
| | $ | (321 | ) | | $ | 12,830 |
|
| | | | | | | |
| Basic earnings per share | | $ | 0.29 |
| | | | $ | 0.30 |
|
| Diluted earnings per share | | $ | 0.28 |
| | | | $ | 0.29 |
|
| Basic weighted average shares outstanding | | 42,791,061 |
| | | | 42,791,061 |
|
| Diluted weighted average shares outstanding | | 44,299,304 |
| | | | 44,299,304 |
|
Elevate Credit, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements give effect to the pro forma adjustments necessary to reflect ECIL's entrance into administration as if it occurred at the beginning of the period presented in the Pro Forma Statement of Operations for the three months ended March 31, 2020 and the years ended December 31, 2019 and 2018 and as of March 31, 2020 in the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
2. Pro Forma Adjustments
The Unaudited Pro Forma Condensed Consolidated Statements of Operations and Balance Sheet reflect the effect of the following pro forma adjustments:
|
| |
| | |
| a. | The elimination of assets and liabilities associated with ECIL included in the Company's historical consolidated financial statements. |
| | |
| b. | Stockholders' equity was adjusted as a result of adjustments noted above. |
| | |
| c. | Elimination of revenue historically reported by ECIL that would not have been recognized by Elevate as a result of the entrance into administration. |
| | |
| d. | Reduction of activity as a result of the disposition of ECIL. For the indicated line items, all historical activity reported as part of ECIL has been eliminated. There have been no adjustments made to reflect any potential reductions in corporate costs in response to this change as ECIL operated separately from the Company with no shared corporate services between the two entities. |
| | |
| e. | For the quarter ended March 31, 2020, Goodwill impairment charge was reduced for impairment taken related to ECIL. |
| | |
| f. | Represents potentially dilutive shares that were anti-dilutive in the Company's quarter-ended March 31, 2020 diluted weighted average shares outstanding as the Company was in a net loss position. The pro forma adjustments result in net income for the period and therefore result in inclusion of the anti-dilutive shares. |
