ELVT - Earnings call transcript Q1 2019

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Operator

Greetings, and welcome to the Elevate Credit First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Daniel Rhea, Manager of Communications. Please go ahead.

Daniel Rhea

Good afternoon, and thanks for joining us on Elevate's first quarter 2019 earnings conference call. a with issued XXXX first we results. today, press our release quarter Earlier the on is investors.elevate.com. copy release A of available our at website Today's on is which webcast call a is presentation, slide accompanied is website. our by available also being Please refer presentation. now X that Slide to of

answers to as forward-looking statements by and our be cause results forward-looking risks the we that Please meaning within the have forward-looking SEC. filings These statements. materially include call this described these These Reform our risks release disclaim date in matters and others, statements. those make forward-looking to on we implied press note report Litigation could such Securities Act. will that expressed different statements recent obligation of Form other remarks the of XX-K of among to we most update Our Private only are or from subject actual and annual all include, the today, any forward-looking with issued speak statements that

our During will non-GAAP to reference measures. make financial today, call we

inability For reconciliation our of our of furnished expenses. financial project provide special forward-looking to and the been refer today which measures are complete release and reconciliation on our to of due investors.elevate.com. to to available at We non-GAAP SEC do issued both certain please our press measures, and to GAAP have website a slide historical presentation, a not non-GAAP charges financial

our call to turn Chairman over our Rees; are the CEO, now the Chris well on will CFO, today Ken. me I Joining as and as Lutes. Ken call

Ken Rees

short million middle our as over past marks to Xth paid alternatives. why proud consumers UK that in of as positive company. technology class. in consumers estimated we each time, call highly we successful Starting we million with current and successful are using call joining the launched savings have for press has consumer anniversary new of what XXXX. of those making proof the products this service banks. they these leading are billion us we've five great the release, on but day period enabled lending four would that also very have so products from saved XXXX originated in to customers you The our in these to underserved than the you, develop in loan million Thank $XX and financial to thank now provide our We $XXX XXXX% proud these Helping our growth. is million been our our years XXXX revenues Daniel, more payday more impact. friendly and to We're have come industry what product The Slide U.S. the in and figures of and $X is XXX more customers an X.X been than grew approach X in Elevate and and relationships and work portfolio three accomplished that billion and even today. has credit U.S. response Elevate terms our constrained $X.X loans of a noted all on

driving forward growth income in beyond. five this started. is we Elevate again. the yet the in $XX double next double further that years incredible Over our of in the gain most net we look $XXX a over XXXX. million expanded years, adjusted to million $XX income from we to recently, Despite which just We net five was same growth a XXXX, In loss period, of our earned and of profitable can XXXX, and we believe EBITDA adjusted million getting income past net feel

first lists some quarter in our share performance. enabled be. income of per our QX technology powerful year performance business XXXX. more QX very generating out $X.XX Slide the share for $X.XX how model of net than just can all started QX strong versus in of XXXX. full for financial We per the X year Our highlights XXXX by demonstrates of XXXX

First this was excellent and by credit quality. driven performance foremost,

our also are acquisition XX% highlight at overall less the quality lower past improvements of an than to balances under end period strong In than million $XXX, XXXX. fact, them the to was the $XX our cost customer already FinWise. our credit principle all QX expanded In capital QX same low, for quarter higher acquisition in new due wasn't the cost XX% the although the portfolio. performance our note February. like costs. time portfolio to credit at effective of come of and was of newest I'd order of It's Customer of loan late launched important We with partner XXXX. pricing that and we until new their the of facility, as bank than more in cost of also XXXX lowered

impact and top and in be limited only Hence will in favor year. improved positive first half previously, as margin we the growth deprioritizing larger of roll new line the net had of it expected a rest driver the strategies. year throughout we of as of discussed the out we're earnings QX performance. it credit on growth And models So income

the given XXXX. the receivable setbacks strong that approximately performance is As were Elevate half some XXXX. loan principle revenue quarter reassuring a result, with flat in second followed of and combined for QX

turn we're So challenges X give how update to addressing Slide we on let me faced. the to an

models origination models XXXX. our that strong have These to tools is of are the improvements. expect and of with and are that strategies generation also in implemented drive pleased to We've report as lower showing further a of we our updated expected fraud been deployment progressing and models we're suite testing credit high lift half leverage new previous defaults completed planned and strategies and credit the of and new growth had First, models. the over credit very back to these

roll on and are quality QX models mail on partners direct growth and obvious the tuning half focused of strategies half the the The and deploying process organic the in and in improved strategies of expect early models credit products all in in and second are in the expanded affiliate primarily out results, Although to new we're the XXXX of and across support still year. our traffic we improvements impact first channels. to of

Lastly, clarity we're going loans plan market growth pleased get to the continuing report the Sunny to slowed loan said, That installment rule had address how we're new compliant binds these to we in forward. regulators UK until more on our significantly. complaints to constrain related

it to review and let remain well Over in credit the long-term, greater our to is Sunny a detail. leader market. me in over that performance Chris financials turn we're to however, this positioned strong With confident that,

Chris Lutes

Thanks, everybody. Ken and good afternoon,

were X $X.X the million at of Looking X.X%. half Slide or receivable principle top a combined loans basis year-over-year up on

regulatory during models more new discussed rollout XXXX conference call, on XXXX credit during await FinWise clarity the prior new expecting as to we fairly the our the QX we UK U.S. relatively half are and U.S. our of was focus growth customers. and products regarding the we in As flat quarter loan primarily limited first affordability customers Thus complaints. for marketing Rise, bank during

of did from season. XXXX approximately March during strong see As of loans increased loan the end million portfolio given loan the XXXX, of at $XX normal a the end at tax FinWise seasonal growth very refund the the to result, $XX million paydown we

the product, the was saw of products, taxes license For the marketing new and and limited there and loan state normalized customer U.S. Rise paydown balances. Elastic other we portfolio

to December UK from loan loan the XXXX XXXX. quarter XX, Additionally, portfolio million XX, a decline first a flat in March relatively of Sunny Overall, XXXX. X% balances decreased kept decline XXXX, the $XX.X XX% our were of compared during quarter of of first to

$XXX.X XXXX. down from X.X% Our first QX XXXX quarter revenue totaled of million, the

first combined principal portfolio a quarter $XX in our primarily first APR, of have increased of XXXX, dropped year-over-year While the typically APR. was in basis. to higher effective million new new in XXX% on decrease to revenue as the in XXXX about a a customer which the slowdown loans overall the average to from decline The customer marketing, receivable average related in loans due XXX% quarter

as of remainder strategies to continue XXXX, Elastic our RISE. both year expect new the year-over-year flat fiscal and tune generation XXXX, we declining for credit roll and growth Looking to of to and we of ahead during first models half the slightly out

growth half continue we expect second XXXX, the XX%. to to revenue X% of of annualized For

share in with from Looking year approximately or QX quarter. of quarter $XX.X up the million first at the year-over-year growth X, XX%, XXXX XXXX. fully of XXXX diluted $X.XX quarter adjusted from pleased up our ago. we quarter our the Further, or the share, per year $X.XX and first up Bottom net increased bottom for first Adjusted profitability prior for million QX half $XX.X EBITDA XX% very are diluted was of for fully of million, to per $X.X income XX% first a XXXX. from the the Slide for XXXX line margin EBITDA totaled

roll XXXX, year to and start leaving new to provisioning year Looking income to increased the ahead as remainder see year XXXX, spend the unchanged. we to strong out the of the we second credit are lower in million of third in loan and XXXX, models than $XX we due loan be net quarters experienced quarter $XX guidance the full of expect marketing to QX income fiscal income of first net growth. Despite million and net loss

flat rolling continue in to loan scores than that slide, On our performing read generation acquisition That we show we that Turning XXXX early both our is vintage a XXXX better is to now and it XXXX. or and vintage the XXXX this on originations with strategies are of credit we is rates Slide of X, out hopeful CAC. our drive are as cumulative our vintage cost relatively customer new loss can rates XXXX coming percentage for said, years. loss our and also and lower the

the the $XXX in CAC quarter $XXX XXXX, For of quarter of down first first our from was XXXX.

to our a CAC first EBITDA the the the one of volatility of Slide was $XXX expansion of gross from margin of quarterly XXXX, the FinWise the XX% ago. benefiting CAC from XX% for lower in RISE drivers the partnership believe the to may X we XX% historical happened and the continued and XXXX XX% down We will year XXXX. our see fiscal to pleased in expansion although, some expected provisioning to QX into loss margin, due through diminish All UK, spend. is quarter year loan up believe for our adjusted anticipated range the biggest which which our in state in competition shows XXXX, and XXXX We continue it efficiency marketing prior coverage our margin, that within $XXX drop increased QX of and up this $XXX CAC. be Bank Primarily $XXX. range from from with expanded

happen will expansion discussed fiscal As margin during conference quarter's believe in call, we year last XXXX. continued

believe that we cost expanded in Additionally, our also in income funds result will an XXXX. in net of the decrease margin

our The will amended July RISE and X-month tied to LIBOR our X, Lastly, the Terms to the February effective have for XXXX, previously the product summarize LIBOR on is that facility. a would to following: turning X-month risk for pricing in rate in facilities I drawdowns X.X% excluding all existing be debt, debt the million of will and products, future XXXX. maturity. separate date drawdown. $XX effective press announced February amended we the pricing facilities facilities for the Only roughly facilities release XX.X% X, which on issued Slide for X, of the like plus will include for in have facilities fixed at until XXXX, Sunny interest Elastic sub-debt, ESPV

have now and commitments available combined $X in products Our billion over debt.

to for both not income fiscal has There in of been revolver in for subject a facilities XXXX certain the QX will is net year facility None each determined. facilities. available thresholds. for million is approximately unused reduction XXXX. The each in under income in net capacity income facility basis reduction fees. We have commitment in funds and cost of XXXX, of meeting net income XXXX XX threshold a product XX% XXXX net year point each $XX the threshold the in these $XXX yet million The and have product

January XXXX, quarter a and the $XX payment prepayment a other then. million them. the down amortize X, paid the years first this expanded over revolver. the monthly quarter The all No interest continues of with we XXXX. a due in no-call maturity. provision we for net the until penalties until the date of associated is in There covenants February date maturity in of to except is fee, which currently compliance and other with sub-debt, maturity on XXXX, are which we'll than and million X, $XX debt There During X.X in and is There of in have is million two of XXXX facilities facilities five-year the under no a three-year life we amendment the last penalties paid first prepayment are amended amendment.

Now over the call to back let Ken. me turn

Ken Rees

Thanks, Chris. Turn to Page XX.

me roadmap XXXX. for our Let summarize

the very with more mentioned, growth significantly XXXX and well and expanded Chris drive completion is of lower As believe in our beyond. $X billion, than credit costs sheet a balance to Elevate's we positioned facilities

continue Although, origination we portfolio growth. all to models products transition getting all to and full benefit of expect significant across channels to XXXX of advance focus a and use as new on rolled new year out the

in we plan UK, I relatively as Sunny get regulatory loan more balances flat until earlier, the we keep Lastly, noticed to installment clarity.

and net well income. or to We of our prior Overall, pleased full to results. to remain million from XXXXs million more EBITDA $XXX of as reaffirming are we $XXX results detailed positioned double to far guidance $XXX $X.XX per $XX million $X.XX financial revenues for year than income million $XXX to believe track Slide share. As Elevate full and with $XX XXXX year net million, deliver adjusted million we're on as XX, to in cents our

to we're let with back your you as operator year. Just reaccelerate in much. that, importantly, to the me it be so of turn excited And Thank half able second the for to growth questions. the

Operator

with of question. this At Instructions] Scharf Securities. question Our JMP question-and-answer your be you. comes the from session. Please with proceed we'll line Thank [Operator first a conducting time, David

David Scharf

tax think loan and than I I'm ago, you QX half loss but that things the release and at in lot a a loan Ken, of on the related and provision there point a the stronger and to from loss, for that a the – lenders we've that maybe quarter taking things afternoon few wondering hearing lot it with Maybe a during questions. from Good strong stable with it's a of certainly front that, couple sort to a Hi. thanks obviously, unfolded provisioning low will year the this to refunds call – months last or my credit reporting of notes on lower guided anything reserves number? start at just was in something strong earnings a was my wondering looking the and for quarter of front, ago, outlook I'm season. this been I'm a that second came consistent lead

Ken Rees

Well.

everything's better of course we're into were, ways, year, together, be going in we anticipated. in our trying even to think, conservative I the somewhat guidance. coming than But many really

new Some the strong leading overall, a and portfolio early of we've think, tools I right rolled out. conditions now. the The just really fraud to are mail direct scores, results macro of performance

originations we're record as we performance strong it's and going the current portfolio be ever mentioned, the can the the mentioned, of to I we as the Default looking rates at it's we what been. like percentage portfolio yet. as on tell percentage as are a across board at best As charge-offs of a from read and overall early as lows feel

well we business and just kind of coming the together shown loss the loan core terms everything's us that's of from leading to be So provision. in the have results

David Scharf

second customer you where acquisition is or… is lowered guidance range. of about beyond, to we of below it. maybe the this for think to about to it with partnership, I outlook term, the it, think sustainable on follow-up And in closer think to XXXX that and even that quarters level year. possible costs $XXX FinWise longer number considerably you've sort the Got you little that, the about a a of Do $XXX thinking FinWise, quite now mean, sort margin of the the had that half initial come outlook a And as prior

Ken Rees

$XXX with target Yes. It's benefits acquisition XXXX as realistically already a it's see range had continue seeing and think strong, to we new demand and Chris we're The into down we're allow that $XXX. fund more higher drive customer already we question. our said us to it And which to so originations do actually suggest, $XXX come costs. XXXX. be a was we're going products credit I overall $XXX, did the probably are great the to percentage and going believe to in the down. will we taking for capabilities down get We're to suggesting

be So yes, is I we demand, overnight. something to mean, be it given it the do I over it's going strong going see is, to that as but think don't time, that's

$XXX that referenced. measured to of couple getting be to going and it's just that $XXX to $XXX think hopefully, in to $XXX then $XXX to $XXX closer from years, I that the to next the Chris? down you

Chris Lutes

Yes, agree that. would with I

Operator

you. Thank

question William the line next your Blair. Please from with comes question. Napoli of with Our Bob proceed

Bob Napoli

Chris, – mean, credit a color models time. out little it models. new Ken Question Thank new at out credit you. you're bit the little new – I expecting the credit a Thanks different obviously, and always, good what think and credit and And rolling you're is better just models maybe I the rolling like afternoon. on I bit be out models mean, is tricky suggesting more that on credit about you're same of can quality

of You're down your cost cost. bringing acquisition

you little on acquisition lower models. confident are that a costs into and credit maybe much models? changing does tie just how So done the How you? even on How testing credit have these give color

Ken Rees

the is are the is of core made that our Well, potential now bit or well strong the from performance little a Yes. and the better. I mean that expected company business far at we've performing as least perspective, changes certainly right proof performing so

direct scores clearly tools and testing date. early direct fraud as early and indicators our for really been as some customers some But of mentioned, The the an we're a fraud have primary well reads in that's of made focus rollout our performing fashion. mail positive out credit we scores. I new the and new also. originate things, of have see in traffic been lot on the new we that's both And impact well mail to of that having headway has some So of to developed organic on the organic starting a

measured because are we being this just this so, year. us We're focused earnings how most very out. roll on For we growth in

the that's the I for and getting the of need getting ourselves. are. tuning the we're why we that seeing we're each channels of think we each products, not So ahead of And results,

Bob Napoli

the not you as with are and and others lenders guess in I the those area marketplace an good is out out LendingTree know Thank marketplace of is working coming you that partnerships, changing Credit you. generally relative now past channel more in on other Did credit I Karma, lenders is focusing the incrementally channel marketplace quality partnerships, lenders? mail where pointed maybe direct – to that the

Ken Rees

Yes.

secondarily, terms organic, how In direct foremost it's scores, the of out the third first we're mail, rolling affiliate new absolutely, and partnerships.

real side affiliate that the focus remain optimistic on of we long-term in some focus. we we our been channels, that's support we'll the saw make again, of part organic we pretty but growth. So in turn measured the that to but could really latter mail wins the direct And and fashion, about said, channel, the as quick they're year

Bob Napoli

mix give on much expect? of us last then out some can that channels? question, direct versus the originations other you How mail And of you color

Ken Rees

the that. That's until pointed you we'll in now we year. focused of to affiliate of But a and way our on small latter that channel. granularity the year, lot We of of last part really pretty around remain percentage the latter traffic, part out, don't the as a expanding get were

really mentioned the direct it's likely digital and to we focusing – a the when to channels. as So third standard other quarter, on expanding through primarily, mail campaigns going start be

Chris Lutes

to I'll one the is continues channels the of only add be thing in that, Lead The UK the primary there. Bob Gen

end So traffic kind good do in makes to we in for UK dropping UK. competition that one so, affiliate I XX-K pretty the it'll the think a year-over-year the customer of disclosure the UK marketing at our significantly. acquisition And the a that competition and portion customer decrease The the I in where drop up up channel. mix continue mean, biggest of decreased I was think especially with you result acquisition the disclosing of that's by big cost drivers UK. look the of if costs, primarily

Bob Napoli

Thank you. it. Appreciate

Ken Rees

Thanks Bob.

Operator

from Suisse. Credit comes Instructions] [Operator line Orenbuch with next question. of with Our Please the question Moshe proceed your

Moshe Orenbuch

had calls. apologize, between I And of Thanks. bounce to couple a I

that's decline some and credit is reduced something thing apology. Elastic, ask balances The or there is to that's I asked, in of that new we're of other for kind time or going So back period in going? bounce longer something a see the in already that there as models

Ken Rees

seasonal other question, models. and the fact out that we I is We that it just also the Now, and Moshe. the down out on Finwise as direct mean, and you're new some great products we then mail, slow that focusing to getting, have and other Rise Rise of credit really rolling the just that rolled channels.

opportunity So because behind Elastic customer support the bit a Rise partly Rise great saw right profitability. grow products customer in acquisition to is Finwise, Rise so at a costs Finwise, good now. just little that strong of a that and We well performing

will So of the the get focus in coming month. Elastic more

Moshe Orenbuch

that's And that out Could a XXXX there is kind be there going you some fair. of that maybe flesh progresses? is of as little significant mean, a opportunity to from developments is competitive in XXXX the the more. an you – and standpoint. Yes, to just more alluded just UK I Maybe

Ken Rees

other the Wonga that We perspective, leaving complaints by view been the leaving under people, not the market, solid imagination, rear But in product. yielding the in certainly and to and seem mirror of consistently stretch profitability find on Certainly any issue control we've to lot but profitable it's the my is From of a Chris about market. will been market. expand the this. Curo that

give resolved. be in that get Great to these we're rest there's continue we the – see positioned be more the flat. right as to market. to feel just uncertainty we're – leader We keep issues well we still reason So year. business things in business to aggressively a how positioned a that that us that some to now, we're regulatory clarity business, But well see regulators to portfolio again, think ultimate grow turn grow going the things we'll as some out of don't very of

Moshe Orenbuch

tell you the – the Anything maybe great. of about Okay, us card can credit product? development

Ken Rees

Yes. product, relatively I foremost, When a first we've it's mentioned new launching progress. campaigns, think the mean, couple and about we're different response. with happy seeing of before, very and And customer we Card had the I this now a higher response cross-sell offers than the in actually to will are mail of seen I've Those customers to card. my rate. Today respond we're was very, we X% offer so and it the take high, career ever very

clearly and do niche an can to demand the meeting there. variety today. think a a the We But out measured the – improvements we and being company So the given you the how of market, constrained credit right trying higher we're product pretty things we're consumers. of being is of for availability as in credit roll is expect all now products, making we're as across important our

XXXX. features, today a product we Elastic until in expect to of tremendous sure all in I our So, working up. on product and to going we're given wouldn't making largely various on it's year keep profitability, that Sunny, the focus customer this really the And ramp place continue growth amount before

Moshe Orenbuch

much. very Thanks

Ken Rees

you, Thank Moshe.

Operator

Rees, Ken end closing remarks. Ladies we and the I the back question-and-answer to session. CEO turn the would And for like have gentlemen, of call to reached

Ken Rees

results track end just to great have confident but a exciting quarter obviously Well, to to everybody. one deliver we're QX we're thanks we're XXXX. great and feeling on I'm pretty

who to customers. Good So, services everybody. thanks the our and our growth all here products night, better at our are driving and people Elevate amazing consistently earnings for making

Operator

concludes today's This conference.

at for this you participation. You disconnect your Thank your lines may time.

Elevate Credit (ELVT) 29 Apr 192019 Q1 Earnings call transcript