ELEVATE CREDIT ANNOUNCES THIRD QUARTER 2020 RESULTS1
Record Quarterly Net Income and Continued Strong Credit Quality
FORT WORTH, TX - November 9, 2020 - 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 third quarter ended September 30, 2020.
“I am exceptionally proud of our record net income this quarter,” said Elevate CEO Jason Harvison. “While 2020 has brought on a host of unexpected challenges, our team has executed well across each aspect of our business. We improved upon our market-leading customer assistance tools through the COVID-19 crisis, and did so while also driving record profitability. Elevate is also well equipped with the right tools and models to reaccelerate growth as customer loan demand returns.”
Third Quarter 2020 Financial Results2
•Net income: Net income for the three months ended September 30, 2020 totaled $21.1 million, up $16.3 million compared to $4.8 million in net income in the third quarter of 2019. Fully diluted earnings per share for the third quarter of 2020 totaled $0.52, an increase from $0.11 per fully diluted share a year ago. Net income from continuing operations for the third quarter of 2020 (excluding net income from the discontinued operations of the UK) totaled $16.6 million, an increase of $14.0 million, compared to $2.6 million in the third quarter of 2019.
•Adjusted earnings: Excluding an after-tax increase of $0.8 million in a non-operating loss related to a legal matter and the discontinued UK operations, adjusted earnings were $17.4 million for the three months ended September 30, 2020, up $14.8 million from $2.6 million in the third quarter of 2019. Adjusted diluted earnings per share for the third quarter of 2020 totaled $0.42 per fully diluted share, a 600% increase from $0.06 per fully diluted share in the third quarter of 2019. See "Non-GAAP Financial Measures" for a reconciliation of the non-GAAP measures of adjusted earnings and adjusted diluted earnings per share.
•Revenue: Revenues decreased during the third quarter of 2020 to $94.2 million, compared to $164.3 million for the third quarter of 2019. The decrease in revenue is attributable to reductions in loan origination volume and lower effective APRs earned on the loan portfolio due to the economic crisis created by the COVID-19 pandemic beginning in March 2020.
•Combined loans receivable - principal: Combined loans receivable - principal totaled $377.2 million at September 30, 2020, a decrease of $209 million, or 35.6%, from $586.1 million at September 30, 2019. The number of new and former customer loans originated during the third quarter of 2020 totaled approximately 23,000 loans, a decrease from approximately 72,500 in the prior year third quarter.
__________________________
1Third quarter 2020 and the first nine months of 2020 results and comparable periods are presented on a continuing operations basis and exclude the results of discontinued operations in the UK, unless otherwise stated. Elevate exited the UK market in the second quarter of 2020.
2Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal, combined loans receivable, combined loan loss reserve, adjusted earnings and adjusted diluted earnings per share 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.
•Credit quality: The combined loan loss reserve at September 30, 2020 totaled $51.3 million, or 13% of combined loans receivable consistent with the same period for the prior year. Combined loans receivable - principal that were past due at the end of the third quarter of 2020 totaled 6%, down from 10% for the third quarter of 2019.
•Adjusted EBITDA: Adjusted EBITDA totaled $39.8 million in the third quarter of 2020, up 61.1% from $24.7 million in the third quarter of 2019. The Adjusted EBITDA margin for the third quarter of 2020 was 42.3%, up from 15.0% in the prior-year third quarter.
Year-to-date 2020 Financial Results2
•Net income: Net income for the nine months ended September 30, 2020 totaled $24.7 million, up $0.8 million compared to $23.9 million for the first nine months of 2019. Fully diluted earnings per share for the first nine months of 2020 totaled $0.58, an increase from $0.54 per fully diluted share for the first nine months of 2019. Net income from continuing operations for the nine months ended September 30, 2020 (excluding the net loss from the discontinued operations of the UK) totaled $40.6 million, an increase of $18.6 million, or 85%, compared to $22.0 million in the nine months ended September 30, 2019.
•Adjusted earnings: Adjusted earnings were $45.7 million for the nine months ended September 30, 2020, up $23.7 million from $22.0 million in the prior year period. Adjusted diluted earnings per share for the nine months ended September 30, 2020 totaled $1.07, a 114% increase from $0.50 per fully diluted share in the first nine months of 2019. See "Non-GAAP Financial Measures" for a reconciliation of the non-GAAP measures of adjusted earnings and adjusted diluted earnings per share.
•Revenue: Revenues decreased 21.1% for the nine months ended September 30, 2020 totaling $374.6 million, compared to $474.7 million for the nine months ended September 30, 2019. The decrease in revenue is attributable to reductions in loan origination volume and lower effective APRs for the loan portfolio due to the economic crisis created by the COVID-19 pandemic beginning in March 2020.
•Adjusted EBITDA: Adjusted EBITDA totaled $120.0 million for the nine months ended September 30, 2020, up 19.5% from $100.4 million in the first nine months of 2019. The Adjusted EBITDA margin for the nine months ended September 30, 2020 was 32.0%, up from 21.1% in the prior-year period.
Impact of COVID-19 on Credit Quality
The Company and the bank originators it supports have expanded their payment flexibility programs to allow customers to extend their next payment. As of September 30, 2020, 10.4% of customers have been provided relief through a COVID-19 payment deferral program for a total of $38.7 million in loans with deferred payments. This compares to $50.7 million in loans with deferred payments, or 12.5% of customers, as of June 30, 2020. Both the Company and the bank originators are closely monitoring the performance of the payment deferral program and key credit quality indicators such as payment defaults, continued payment deferrals, and line of credit utilization. The Company and the bank originators it supports have implemented underwriting changes to address credit risk associated with loan originations during the economic crisis created by the COVID-19 pandemic and have seen reduced loan origination applications and loan origination volume since the beginning of the pandemic in March 2020.
Liquidity and Capital Resources
The Company paid down its debt facilities by approximately $87.5 million during the first nine months of 2020 ($103.8 million including the discontinued operations of the UK). The Company’s outstanding debt on its discontinued UK operations was completely repaid during the third quarter of 2020 as part of the UK administration process and the Company has no further obligations outstanding related to its discontinued UK operations.
During the third quarter of 2020, the Company purchased $6.7 million of common shares (3.2 million common shares) under the Company's previously approved common stock repurchase program. During the first nine months of 2020 the Company has purchased $14.7 million of common shares (6.1 million common shares or roughly 14% of common shares outstanding as of the beginning of 2020).
The Company is continuing to assess its minimum cash and liquidity requirements and implementing measures to ensure that its cash and liquidity position is maintained through the current economic cycle. As of September 30, 2020, the Company is in compliance with all debt facility covenants.
Financial Outlook
As previously announced, the Company withdrew its full-year 2020 earnings guidance due to the uncertain impact on our business and results of operations resulting from the COVID-19 pandemic.
Conference Call
The Company will host a conference call to discuss its third quarter 2020 financial results on Monday, November 9, at 4:00pm Central Time / 5:00pm Eastern Time. Interested parties may access the conference call live over the phone by dialing 1-855-327-6837 (domestic) or 1-631-891-4304 (international) and requesting the Elevate Credit Third Quarter 2020 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 November 23, 2020, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 10011467, 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 belief that we are well equipped with the right tools and models to reaccelerate growth as customer loan demand returns; our expectations regarding the underwriting changes implemented by us and the bank originators we support to address credit risk associated with loan originations during the economic crisis created by the COVID-19 pandemic; and our plans with respect to assessing minimum cash and liquidity requirements and implementing measures to ensure that our strong liquidity position is maintained through the current economic cycle. 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 effect of the COVID-19 pandemic and various policies being implemented to prevent its spread on the Company's business, financial condition and results of operations; the Company’s limited operating history in an evolving industry; the Company’s ability to grow revenue and maintain or achieve consistent profitability in the future; 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 the banks that license its marketing and technology services, has originated $8.6 billion in non-prime credit to more than 2.5 million non-prime consumers to date and has saved its customers more than $7.6 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 and Today Card. For more information, please visit http://www.elevate.com.
Investor Relations:
Solebury Trout
Sloan Bohlen, (817) 928-1646
investors@elevate.com
or
Media Inquiries:
Solebury Trout
Lisa Wolford, (917) 846-0881
lwolford@soleburytrout.com
Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (Dollars in thousands, except share and per share amounts) | 2020 | | 2019 | | 2020 | | 2019 |
| Revenues | | $ | 94,164 | | | $ | 164,296 | | | $ | 374,622 | | | $ | 474,736 | |
| Cost of sales: | | | | | | | | |
| Provision for loan losses | | 13,164 | | | 91,702 | | | 133,216 | | | 235,339 | |
| �� Direct marketing costs | | 2,585 | | | 10,927 | | | 13,898 | | | 29,198 | |
| Other cost of sales | | 1,672 | | | 2,447 | | | 5,949 | | | 7,233 | |
| Total cost of sales | | 17,421 | | | 105,076 | | | 153,063 | | | 271,770 | |
| Gross profit | | 76,743 | | | 59,220 | | | 221,559 | | | 202,966 | |
| Operating expenses: | | | | | | | | |
| Compensation and benefits | | 23,921 | | | 23,289 | | | 64,239 | | | 67,428 | |
| Professional services | | 8,236 | | | 7,552 | | | 24,633 | | | 23,416 | |
| Selling and marketing | | 610 | | | 1,117 | | | 2,468 | | | 3,669 | |
| Occupancy and equipment | | 4,717 | | | 3,887 | | | 14,196 | | | 11,722 | |
| Depreciation and amortization | | 4,588 | | | 4,013 | | | 13,413 | | | 11,824 | |
| Other | | 590 | | | 1,045 | | | 2,568 | | | 3,667 | |
| Total operating expenses | | 42,662 | | | 40,903 | | | 121,517 | | | 121,726 | |
| Operating income | | 34,081 | | | 18,317 | | | 100,042 | | | 81,240 | |
| Other expense: | | | | | | | | |
| Net interest expense | | (11,575) | | | (13,629) | | | (37,408) | | | (48,565) | |
| | | | | | | | |
| | | | | | | | |
| Non-operating loss | | (1,007) | | | (695) | | | (6,692) | | | (695) | |
| Total other expense | | (12,582) | | | (14,324) | | | (44,100) | | | (49,260) | |
| Income from continuing operations before taxes | | 21,499 | | | 3,993 | | | 55,942 | | | 31,980 | |
| Income tax expense | | 4,883 | | | 1,345 | | | 15,311 | | | 9,994 | |
| Net income from continuing operations | | 16,616 | | | 2,648 | | | 40,631 | | | 21,986 | |
| Net income (loss) from discontinued operations | | 4,465 | | | 2,116 | | | (15,908) | | | 1,908 | |
| Net income | | $ | 21,081 | | | $ | 4,764 | | | $ | 24,723 | | | $ | 23,894 | |
| | | | | | | | |
| Basic earnings per share | | | | | | | | |
| Continuing operations | | $ | 0.41 | | | $ | 0.06 | | | $ | 0.97 | | | $ | 0.50 | |
| Discontinued operations | | 0.11 | | | 0.05 | | | (0.38) | | | 0.05 | |
| Basic earnings per share | | $ | 0.52 | | | $ | 0.11 | | | $ | 0.59 | | | $ | 0.55 | |
| | | | | | | | |
| Diluted earnings per share | | | | | | | | |
| Continuing operations | | $ | 0.41 | | | $ | 0.06 | | | $ | 0.95 | | | $ | 0.50 | |
| Discontinued operations | | 0.11 | | | 0.05 | | | (0.37) | | | 0.04 | |
| Diluted earnings per share | | $ | 0.52 | | | $ | 0.11 | | | $ | 0.58 | | | $ | 0.54 | |
| | | | | | | | |
| Basic weighted average shares outstanding | | 40,230,256 | | | 44,169,964 | | | 41,856,894 | | | 43,736,458 | |
| Diluted weighted average shares outstanding | | 40,762,330 | | | 44,743,944 | | | 42,624,808 | | | 44,320,427 | |
Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | | | | |
| (Dollars in thousands) | | September 30, 2020 | | December 31, 2019 |
| ASSETS | | | | |
| Cash and cash equivalents* | | $ | 224,259 | | | $ | 71,215 | |
| Restricted cash | | 3,135 | | | 2,235 | |
Loans receivable, net of allowance for loan losses of $49,909 and $79,912, respectively* | | 341,942 | | | 542,073 | |
| Prepaid expenses and other assets* | | 9,576 | | | 6,737 | |
| Operating lease right of use assets | | 8,811 | | | 10,191 | |
| Receivable from CSO lenders | | 5,260 | | | 8,696 | |
| Receivable from payment processors* | | 5,210 | | | 8,681 | |
| Deferred tax assets, net | | 22,742 | | | 8,784 | |
| Property and equipment, net | | 35,488 | | | 35,944 | |
| Goodwill, net | | 6,776 | | | 6,776 | |
| Intangible assets, net | | 1,163 | | | 1,253 | |
| Assets from discontinued operations | | — | | | 81,002 | |
| Total assets | | $ | 664,362 | | | $ | 783,587 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Accounts payable and accrued liabilities* | | $ | 35,457 | | | $ | 38,679 | |
| Operating lease liabilities | | 12,593 | | | 14,352 | |
| Income taxes payable | | 691 | | | — | |
| Deferred revenue* | | 5,911 | | | 12,087 | |
| Notes payable, net* | | 438,200 | | | 525,439 | |
| Liabilities from discontinued operations | | — | | | 36,541 | |
| Total liabilities | | 492,852 | | | 627,098 | |
| COMMITMENTS, CONTINGENCIES AND GUARANTEES | | | | |
| STOCKHOLDERS’ EQUITY | | | | |
| Preferred stock | | — | | | — | |
| Common stock | | 18 | | | 18 | |
| Additional paid-in capital | | 199,194 | | | 193,061 | |
| Treasury stock | | (13,775) | | | (3,344) | |
| Accumulated deficit | | (13,927) | | | (34,342) | |
| Accumulated other comprehensive income | | — | | | 1,096 | |
| Total stockholders’ equity | | 171,510 | | | 156,489 | |
| Total liabilities and stockholders’ equity | | $ | 664,362 | | | $ | 783,587 | |
* 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, Adjusted earnings, adjusted diluted earnings per share, combined loans receivable - principal, combined loans receivable and combined loan loss reserve.
Adjusted Earnings Measures
In addition to the financial information prepared in accordance with GAAP, Elevate uses certain non-GAAP measures such as “Adjusted EBITDA”, "Adjusted EBITDA margin", "Adjusted earnings", and "Adjusted diluted earnings per share" (collectively, "Adjusted Earnings Measures") 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 from continuing operations excluding the impact of income tax expense, non-operating loss, net interest expense, share-based compensation expense and depreciation and amortization expense. Elevate defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.
Elevate defines Adjusted earnings as net income from continuing operations excluding the impact of a contingent loss related to a legal matter (tax effected). Elevate defines Adjusted diluted earnings per share as Adjusted earnings divided by Diluted weighted average shares outstanding.
Management believes that Adjusted Earnings Measures 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 these non-GAAP financial measures 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 these non-GAAP financial measures 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 Earnings Measures should not be considered as alternatives to net income or any other performance measure derived in accordance with GAAP. Management's use of Adjusted Earnings Measures 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 Earnings Measures may not be comparable to similarly titled measures reported by other companies.
The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to Elevate’s net income from continuing operations for the three and nine months ended September 30, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (Dollars in thousands) | | 2020 | | 2019 | | 2020 | | 2019 |
| Net income from continuing operations | | $ | 16,616 | | | $ | 2,648 | | | $ | 40,631 | | | $ | 21,986 | |
| Adjustments: | | | | | | | | |
| Net interest expense | | 11,575 | | | 13,629 | | | 37,408 | | | 48,565 | |
| Share-based compensation | | 1,166 | | | 2,364 | | | 6,513 | | | 7,286 | |
| | | | | | | | |
| Depreciation and amortization | | 4,588 | | | 4,013 | | | 13,413 | | | 11,824 | |
| Non-operating loss | | 1,007 | | | 695 | | | 6,692 | | | 695 | |
| Income tax expense | | 4,883 | | | 1,345 | | | 15,311 | | | 9,994 | |
| Adjusted EBITDA | | $ | 39,835 | | | $ | 24,694 | | | $ | 119,968 | | | $ | 100,350 | |
| | | | | | | | |
| Adjusted EBITDA margin | | 42.3 | % | | 15.0 | % | | 32.0 | % | | 21.1 | % |
Adjusted earnings and adjusted diluted earnings per share
For the three and nine months ended September 30, 2020, the Company recognized $1.0 million and $6.7 million, respectively, of charges related to a contingent loss on a legal matter in Non-operating loss. The following table presents a reconciliation of Net income from continuing operations and diluted earnings per share to Adjusted earnings and Adjusted diluted earnings per share, which excludes the impact of the contingent loss.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (Dollars in thousands except per share amounts) | | 2020 | | 2019 | | 2020 | | 2019 |
| Net income from continuing operations | | $ | 16,616 | | | $ | 2,648 | | | $ | 40,631 | | | $ | 21,986 | |
| Impact of contingent loss related to a legal matter | | 1,007 | | | — | | | 6,692 | | | — | |
| Cumulative tax effect of adjustments | | (239) | | | — | | | (1,590) | | | — | |
| Adjusted earnings | | $ | 17,384 | | | $ | 2,648 | | | $ | 45,733 | | | $ | 21,986 | |
| | | | | | | | |
| Diluted earnings per share | | $ | 0.41 | | | $ | 0.06 | | | $ | 0.95 | | | $ | 0.50 | |
| Impact of contingent loss related to a legal matter | | 0.02 | | | — | | | 0.16 | | | — | |
| Cumulative tax effect of adjustments | | (0.01) | | | — | | | (0.04) | | | — | |
| Adjusted diluted earnings per share | | $ | 0.42 | | | $ | 0.06 | | | $ | 1.07 | | | $ | 0.50 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Supplemental Schedules
Revenue by Product
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2020 |
| (Dollars in thousands) | | Rise (1) | | Elastic (2) | | | | | | | | Total |
| Average combined loans receivable – principal(3) | | $ | 225,041 | | | $ | 164,660 | | | | | | | | | $ | 389,701 | |
| Effective APR | | 101 | % | | 89 | % | | | | | | | | 96 | % |
| Finance charges | | $ | 57,169 | | | $ | 36,759 | | | | | | | | | $ | 93,928 | |
| Other | | 6 | | | 230 | | | | | | | | | 236 | |
| Total revenue | | $ | 57,175 | | | $ | 36,989 | | | | | | | | | $ | 94,164 | |
| | | | | | | | | | | | |
| | | Three Months Ended September 30, 2019 |
| (Dollars in thousands) | | Rise (1) | | Elastic (2) | | | | | | | | Total |
| Average combined loans receivable – principal(3) | | $ | 320,104 | | | $ | 256,470 | | | | | | | | | $ | 576,574 | |
| Effective APR | | 126 | % | | 96 | % | | | | | | | | 113 | % |
| Finance charges | | $ | 101,403 | | | $ | 62,174 | | | | | | | | | $ | 163,577 | |
| Other | | 294 | | | 425 | | | | | | | | | 719 | |
| Total revenue | | $ | 101,697 | | | $ | 62,599 | | | | | | | | | $ | 164,296 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2020 |
| (Dollars in thousands) | | Rise (1) | | Elastic (2) | | | | | | | | Total |
| Average combined loans receivable – principal(3) | | $ | 279,202 | | | $ | 200,324 | | | | | | | | | $ | 479,526 | |
| Effective APR | | 113 | % | | 92 | % | | | | | | | | 104 | % |
| Finance charges | | $ | 236,207 | | | $ | 137,603 | | | | | | | | | $ | 373,810 | |
| Other | | 114 | | | 698 | | | | | | | | | 812 | |
| Total revenue | | $ | 236,321 | | | $ | 138,301 | | | | | | | | | $ | 374,622 | |
| | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2019 |
| (Dollars in thousands) | | Rise (1) | | Elastic (2) | | | | | | | | Total |
| Average combined loans receivable – principal(3) | | $ | 299,443 | | | $ | 255,482 | | | | | | | | | $ | 554,925 | |
| Effective APR | | 128 | % | | 97 | % | | | | | | | | 114 | % |
| Finance charges | | $ | 286,670 | | | $ | 186,224 | | | | | | | | | $ | 472,894 | |
| Other | | 1,034 | | | 808 | | | | | | | | | 1,842 | |
| Total revenue | | $ | 287,704 | | | $ | 187,032 | | | | | | | | | $ | 474,736 | |
(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.
(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 September 30, 2020 |
| (Dollars in thousands) | | Rise | | Elastic (1) | | | | | | | | Total |
| Combined loan loss reserve(2): | | | | | | | | | | | | |
| Beginning balance | | $ | 40,614 | | | $ | 19,980 | | | | | | | | | $ | 60,594 | |
| Net charge-offs | | (15,336) | | | (7,092) | | | | | | | | | (22,428) | |
| Provision for loan losses | | 9,039 | | | 4,125 | | | | | | | | | 13,164 | |
| | | | | | | | | | | | |
| Ending balance | | $ | 34,317 | | | $ | 17,013 | | | | | | | | | $ | 51,330 | |
| Combined loans receivable(2)(3) | | $ | 234,277 | | | $ | 167,696 | | | | | | | | | $ | 401,973 | |
| Combined loan loss reserve as a percentage of ending combined loans receivable | | 15 | % | | 10 | % | | | | | | | | 13 | % |
| Net charge-offs as a percentage of revenues | | 27 | % | | 19 | % | | | | | | | | 24 | % |
| Provision for loan losses as a percentage of revenues | | 16 | % | | 11 | % | | | | | | | | 14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2019 |
| (Dollars in thousands) | | Rise | | Elastic (1) | | | | | | | | Total |
| Combined loan loss reserve(2): | | | | | | | | | | | | |
| Beginning balance | | $ | 41,393 | | | $ | 26,479 | | | | | | | | | $ | 67,872 | |
| Net charge-offs | | (49,179) | | | (27,886) | | | | | | | | | (77,065) | |
| Provision for loan losses | | 58,290 | | | 33,412 | | | | | | | | | 91,702 | |
| | | | | | | | | | | | |
| Ending balance | | $ | 50,504 | | | $ | 32,005 | | | | | | | | | $ | 82,509 | |
| Combined loans receivable(2)(3) | | $ | 349,264 | | | $ | 270,108 | | | | | | | | | $ | 619,372 | |
| Combined loan loss reserve as a percentage of ending combined loans receivable | | 14 | % | | 12 | % | | | | | | | | 13 | % |
| Net charge-offs as a percentage of revenues | | 48 | % | | 45 | % | | | | | | | | 47 | % |
| Provision for loan losses as a percentage of revenues | | 57 | % | | 53 | % | | | | | | | | 56 | % |
(1) Includes immaterial balances related to the Today Card.
(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
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2020 |
| (Dollars in thousands) | | Rise | | Elastic (1) | | | | | | | | Total |
| Combined loan loss reserve(2): | | | | | | | | | | | | |
| Beginning balance | | $ | 52,099 | | | $ | 29,893 | | | | | | | | | $ | 81,992 | |
| Net charge-offs | | (108,397) | | | (55,481) | | | | | | | | | (163,878) | |
| Provision for loan losses | | 90,615 | | | 42,601 | | | | | | | | | 133,216 | |
| | | | | | | | | | | | |
| Ending balance | | 34,317 | | | 17,013 | | | | | | | | | 51,330 | |
| Combined loans receivable(2)(3) | | $ | 234,277 | | | $ | 167,696 | | | | | | | | | $ | 401,973 | |
| Combined loan loss reserve as a percentage of ending combined loans receivable | | 15 | % | | 10 | % | | | | | | | | 13 | % |
| Net charge-offs as a percentage of revenues | | 46 | % | | 40 | % | | | | | | | | 44 | % |
| Provision for loan losses as a percentage of revenues | | 38 | % | | 31 | % | | | | | | | | 36 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2019 |
| (Dollars in thousands) | | Rise | | Elastic (1) | | | | | | | | Total |
| Combined loan loss reserve(2): | | | | | | | | | | | | |
| Beginning balance | | $ | 50,597 | | | $ | 36,050 | | | | | | | | | $ | 86,647 | |
| Net charge-offs | | (147,190) | | | (92,287) | | | | | | | | | (239,477) | |
| Provision for loan losses | | 147,097 | | | 88,242 | | | | | | | | | 235,339 | |
| | | | | | | | | | | | |
| Ending balance | | 50,504 | | | 32,005 | | | | | | | | | 82,509 | |
| Combined loans receivable(2)(3) | | $ | 349,264 | | | $ | 270,108 | | | | | | | | | $ | 619,372 | |
| Combined loan loss reserve as a percentage of ending combined loans receivable | | 14 | % | | 12 | % | | | | | | | | 13 | % |
| Net charge-offs as a percentage of revenues | | 51 | % | | 49 | % | | | | | | | | 50 | % |
| Provision for loan losses as a percentage of revenues | | 51 | % | | 47 | % | | | | | | | | 50 | % |
(1) Includes immaterial balances related to the Today Card.
(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 September 30, 2020 |
| | Rise | | Elastic (1) | | | | | | | | Total |
| Beginning number of combined loans outstanding | | 107,125 | | | 115,119 | | | | | | | | | 222,244 | |
| New customer loans originated | | 6,794 | | | 1,695 | | | | | | | | | 8,489 | |
| Former customer loans originated | | 14,466 | | | 72 | | | | | | | | | 14,538 | |
| Attrition | | (28,426) | | | (6,958) | | | | | | | | | (35,384) | |
| Ending number of combined loans outstanding | | 99,959 | | | 109,928 | | | | | | | | | 209,887 | |
| Customer acquisition cost | | $ | 317 | | | $ | 253 | | | | | | | | | $ | 305 | |
| Average customer loan balance | | $ | 2,157 | | | $ | 1,470 | | | | | | | | | $ | 1,797 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2019 |
| | Rise | | Elastic (1) | | | | | | | | Total |
| Beginning number of combined loans outstanding | | 135,771 | | | 142,561 | | | | | | | | | 278,332 | |
| New customer loans originated | | 33,108 | | | 20,248 | | | | | | | | | 53,356 | |
| Former customer loans originated | | 19,168 | | | 21 | | | | | | | | | 19,189 | |
| Attrition | | (39,796) | | | (10,183) | | | | | | | | | (49,979) | |
| Ending number of combined loans outstanding | | 148,251 | | | 152,647 | | | | | | | | | 300,898 | |
| Customer acquisition cost | | $ | 215 | | | $ | 188 | | | | | | | | | $ | 205 | |
| Average customer loan balance | | $ | 2,208 | | | $ | 1,695 | | | | | | | | | $ | 1,948 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 |
| | Rise | | Elastic (1) | | | | | | | | Total |
| Beginning number of combined loans outstanding | | 152,435 | | | 149,524 | | | | | | | | | 301,959 | |
| New customer loans originated | | 31,834 | | | 15,220 | | | | | | | | | 47,054 | |
| Former customer loans originated | | 38,615 | | | 212 | | | | | | | | | 38,827 | |
| Attrition | | (122,925) | | | (55,028) | | | | | | | | | (177,953) | |
| Ending number of combined loans outstanding | | 99,959 | | | 109,928 | | | | | | | | | 209,887 | |
| Customer acquisition cost | | $ | 311 | | | $ | 264 | | | | | | | | | $ | 295 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2019 |
| | Rise | | Elastic (1) | | | | | | | | Total |
| Beginning number of combined loans outstanding | | 142,758 | | | 166,397 | | | | | | | | | 309,155 | |
| New customer loans originated | | 80,650 | | | 38,912 | | | | | | | | | 119,562 | |
| Former customer loans originated | | 55,809 | | | 48 | | | | | | | | | 55,857 | |
| Attrition | | (130,966) | | | (52,710) | | | | | | | | | (183,676) | |
| Ending number of combined loans outstanding | | 148,251 | | | 152,647 | | | | | | | | | 300,898 | |
| Customer acquisition cost | | $ | 251 | | | $ | 230 | | | | | | | | | $ | 244 | |
| | | | | | | | | | | | |
(1) Includes immaterial balances related to the Today Card.
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.
Since the fourth quarter of 2018, the Company licensed its Rise installment loan brand to a third-party lender, FinWise Bank, which originates Rise installment loans in eighteen states. FinWise Bank initially provides all of the funding, retains a percentage of the balances of all of the loans originated and sells the remaining loan participation in those Rise installment loans to a third party SPV, EF SPV, Ltd. Prior to August 1, 2019, FinWise Bank retained 5% of the balances, and sold a 95% participation to EF SPV, Ltd. Starting August 1, 2019, the participation percentage changed to 96%. 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 96% of Rise installment loans originated by FinWise Bank and sold to EF SPV, Ltd.
Since the third quarter of 2020, the Company also licenses its Rise installment loan brand to an additional third-party lender, Capital Community Bank ("CCB"), which originates Rise installment loans in two states. Similar to the relationship with FinWise Bank, CCB initially provides all of the funding, retains 5% of the balances of all of the loans originated and sells the remaining 95% loan participation in those Rise installment loans to a third-party SPV, EC SPV, Ltd. Elevate is required to consolidate EC 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 the Rise installment loans originated by CCB and sold to EC 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).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 | | 2020 |
| (Dollars in thousands) | | March 31 | | June 30 | | September 30 | | December 31 | | March 31 | | June 30 | | September 30 |
| Company Owned Loans: | | | | | | | | | | | | | | |
| Loans receivable – principal, current, company owned | | $ | 451,298 | | | $ | 484,131 | | | $ | 507,551 | | | $ | 530,463 | | | $ | 486,396 | | | $ | 387,939 | | | $ | 346,380 | |
| Loans receivable – principal, past due, company owned | | 45,757 | | | 47,846 | | | 59,240 | | | 58,489 | | | 53,923 | | | 18,917 | | | 21,354 | |
| Loans receivable – principal, total, company owned | | 497,055 | | | 531,977 | | | 566,791 | | | 588,952 | | | 540,319 | | | 406,856 | | | 367,734 | |
| Loans receivable – finance charges, company owned | | 27,520 | | | 27,472 | | | 31,698 | | | 33,033 | | | 31,621 | | | 25,606 | | | 24,117 | |
| Loans receivable – company owned | | 524,575 | | | 559,449 | | | 598,489 | | | 621,985 | | | 571,940 | | | 432,462 | | | 391,851 | |
| Allowance for loan losses on loans receivable, company owned | | (64,450) | | | (65,889) | | | (80,537) | | | (79,912) | | | (76,188) | | | (59,438) | | | (49,909) | |
| Loans receivable, net, company owned | | $ | 460,125 | | | $ | 493,560 | | | $ | 517,952 | | | $ | 542,073 | | | $ | 495,752 | | | $ | 373,024 | | | $ | 341,942 | |
| Third Party Loans Guaranteed by the Company: | | | | | | | | | | | | | | |
| Loans receivable – principal, current, guaranteed by company | | $ | 27,941 | | | $ | 21,099 | | | $ | 18,633 | | | $ | 17,474 | | | $ | 12,606 | | | $ | 6,755 | | | $ | 9,129 | |
| Loans receivable – principal, past due, guaranteed by company | | 696 | | | 596 | | | 697 | | | 723 | | | 564 | | | 117 | | | 314 | |
| Loans receivable – principal, total, guaranteed by company(1) | | 28,637 | | | 21,695 | | | 19,330 | | | 18,197 | | | 13,170 | | | 6,872 | | | 9,443 | |
| Loans receivable – finance charges, guaranteed by company(2) | | 2,164 | | | 1,676 | | | 1,553 | | | 1,395 | | | 1,150 | | | 550 | | | 679 | |
| Loans receivable – guaranteed by company | | 30,801 | | | 23,371 | | | 20,883 | | | 19,592 | | | 14,320 | | | 7,422 | | | 10,122 | |
| Liability for losses on loans receivable, guaranteed by company | | (3,242) | | | (1,983) | | | (1,972) | | | (2,080) | | | (1,571) | | | (1,156) | | | (1,421) | |
| Loans receivable, net, guaranteed by company(3) | | $ | 27,559 | | | $ | 21,388 | | | $ | 18,911 | | | $ | 17,512 | | | $ | 12,749 | | | $ | 6,266 | | | $ | 8,701 | |
| Combined Loans Receivable(3): | | | | | | | | | | | | | | |
| Combined loans receivable – principal, current | | $ | 479,239 | | | $ | 505,230 | | | $ | 526,184 | | | $ | 547,937 | | | $ | 499,002 | | | $ | 394,694 | | | $ | 355,509 | |
| Combined loans receivable – principal, past due | | 46,453 | | | 48,442 | | | 59,937 | | | 59,212 | | | 54,487 | | | 19,034 | | | 21,668 | |
| Combined loans receivable – principal | | 525,692 | | | 553,672 | | | 586,121 | | | 607,149 | | | 553,489 | | | 413,728 | | | 377,177 | |
| Combined loans receivable – finance charges | | 29,684 | | | 29,148 | | | 33,251 | | | 34,428 | | | 32,771 | | | 26,156 | | | 24,796 | |
| Combined loans receivable | | $ | 555,376 | | | $ | 582,820 | | | $ | 619,372 | | | $ | 641,577 | | | $ | 586,260 | | | $ | 439,884 | | | $ | 401,973 | |
| Combined Loan Loss Reserve(3): | | | | | | | | | | | | | | |
| Allowance for loan losses on loans receivable, company owned | | $ | (64,450) | | | $ | (65,889) | | | $ | (80,537) | | | $ | (79,912) | | | $ | (76,188) | | | $ | (59,438) | | | $ | (49,909) | |
| Liability for losses on loans receivable, guaranteed by company | | (3,242) | | | (1,983) | | | (1,972) | | | (2,080) | | | (1,571) | | | (1,156) | | | (1,421) | |
| Combined loan loss reserve | | $ | (67,692) | | | $ | (67,872) | | | $ | (82,509) | | | $ | (81,992) | | | $ | (77,759) | | | $ | (60,594) | | | $ | (51,330) | |
| Combined loans receivable – principal, past due(3) | | $ | 46,453 | | | $ | 48,442 | | | $ | 59,937 | | | $ | 59,212 | | | $ | 54,487 | | | $ | 19,034 | | | $ | 21,668 | |
| Combined loans receivable – principal(3) | | 525,692 | | | 553,672 | | | 586,121 | | | 607,149 | | | 553,489 | | | 413,728 | | | 377,177 | |
| Percentage past due | | 9 | % | | 9 | % | | 10 | % | | 10 | % | | 10 | % | | 5 | % | | 6 | % |
| Combined loan loss reserve as a percentage of combined loans receivable(3)(4) | | 12 | % | | 12 | % | | 13 | % | | 13 | % | | 13 | % | | 14 | % | | 13 | % |
| Allowance for loan losses as a percentage of loans receivable – company owned | | 12 | % | | 12 | % | | 13 | % | | 13 | % | | 13 | % | | 14 | % | | 13 | % |
(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.
