GSKY - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen, thank you and welcome to the GreenSky Third Quarter Fiscal 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. We're webcasting this call live on the GreenSky Investor Relations Web site. After the completion of the call, a recording of the call will be made available on the same site. to President conference GreenSky. of like Gardy, to now Vice Senior Investor would turn over the Rebecca I Relations at go ahead. Please

Rebecca Gardy

issued September XX, Thank This results good and XXXX. its a GreenSky for ended you, announcing press quarter morning, third release Bester, morning, everyone.

GreenSky and be Benjamin, access the Chairman; David and Partlow; Chief Officer; press Gerry Zalik, Chief Financial section this on Administrative Officer. Vice Presenting can on the GreenSky's site. You Relations our Chief today's our Officer Investor Rob release of Web call will Executive

obligation We and will well could statements except statements subject on uncertainties Also, measures, assumptions will our to today, We you to risks this call in by to filings or performance. to encourage required isolation morning based release about our our as these any from actual are cause is are on Information be are update considered non-GAAP be making materially regulators. any all and that GAAP in which consider certain when forward-looking GreenSky's as include measures are measures. our statements substitute and Non-GAAP projected. results in with differ not press that superior for forward-looking a uncertainties included law. results risks and measures those to we current today intended as adjusted commentary from analyzing our disclaim to financial

financial measures on GAAP financial We our non-GAAP measures today's have site. earnings provided of reconciliations release Web to in press available the

your we take will our remarks, questions. prepared Following

by best you. this. come event that And on do the ask turn and to to free than it courtesy I'll questions. David. more that, cooperation for are others, you Thank to In over our to feel additional a your will participants, re-queue have to please questions we with please back you no As other not covered two

David Zalik

point-of-sale will of of quarter our the Good best our thank I’m adjusted morning, growth quarter, performance, the market you opportunities as and share joining products. third of developments us of XX% a to EBITDA exciting to the over growth enabled on unique touch illustrate $XXX.X focused Rebecca. results We GreenSky's which profitability. pleased on Year-to-date, record third XX% from $XX.X adjusted year. combination of today. also I Thanks, we're financing continue through everyone, for the million, last million, quarter technology increase generated was XXXX. EBITDA an third of for promotional and

earnings transaction XXXX. increased of home XX% adjusted another of we delivered in GreenSky pro percentage to $XXX on $X.XX pro We was to forma originations of earnings a were volume fully of the this rate $XX strong continue quarter million million, XX%. diluted third up accelerate terms We improvement revenue, both originations. and this As this will month forma XXXX XXXX facilitated basis, expect had $X.X quarter and per Each the share. of in platform a beyond. quarter we and in quarter. EBITDA Total run quarter billion approximately On that

$XXX improve remain approximately million facilitating that $XXX as $X a elective long We We’ve against get of meaningful a patients rapidly addressable by providers billion. financing XXXX [indiscernible] XXXX to access, business, to growing healthcare our quality to share. home convicted patient our expect elective care affordable market provides access fiscal to to in and originations health equally as over GreenSky by total runway care. in strive of in home grow market improvement improvement billion We ahead to each the

than care on Moreover, on in elective business our by of double end monthly Our mirror quarter. XX% to enterprise-wide and growth saw health business GreenSky liquidity quarter. program exceed in trajectory to as the let brings by is calendar increased to improvement provide volume $X.X transaction billion more it From funding funding. care funding commitments next year what we status Existing perspective, to volume of bank elective the third in an of health the me can our This me to track the partner continue home we early and in a update expect of topic XXXX. partners bank consortium. our

Including originated Chicago-based GreenSky addition, Michigan-based bank in partner joined the billion of wholly-owned funding of our in ecosystem BMO In and largest aggregate, their have since Bank, remain loans second loans a Troy, originated our $XX.X now Bank Harris subsidiary remains quarter. strong $X the quarter earnings partners by in FICO platform the Bank, XXX. billion, bank bank the America, last eighth billion since demand GreenSky Flagstar average Montreal, of for as portfolio call. third of is $X.X our commitments North the outstanding. Bank very was an for score the The of increase quality

balance were ended high We portfolio. servicing addition, cash XX% with remains XXX more sheet on Class an morning score $XXX million of of in In FICO the worth borrowers intend portfolio the our with and million announced loan flow. $XXX in XXX of free unrestricted quality This cash our allocation strategy. our XXX. to common on FICO than stock over our A Furthermore, quarter average approximately capital component year-to-date an we've repurchase million important overall as we generated of up to

we in stock utmost the our the of business our long-term GreenSky what share. intrinsic exceeds current of per the price and far the market value is in confidence believe We fundamentals have reflected

share on decline Express. want opportunistically to the the to shareholders. aim management of long-term the Board of and multifaceted Our to advantage benefit update American excited for our with our Directors take maximize as collaboration we team I'm to

platform began American weeks improvement merchant marketing we've to Express accepting home merchants, referrals. GreenSky eight received over American X,XXX since the Express cross the Over

members, direct-to-consumer select of to improvement fiscal Dallas, home for largest also Chicago, by excited the the launch are five We loan which of American quarter Express highly track on occur country's loans to by Los promotional announce metropolitan Angeles Bank. such and of funded areas, the be powered to AMEX be card will Express that installment the XXXX attractive first GreenSky will pilot and Tampa. Express in Atlanta, American American is a marketing preapproved

included a any environment, we've me our expectations XXXX and and XXXX American overall brings for look we the rates, This our macro in our fiscal Express the As alliance topic years including pricing not of XXXX to full-year of or reminder, 'XX. as impact interest forward recalibrating guidance.

October bank swap and our X.XX% profitability our of many Yet X-year directly to know, funds. As bank XXXX, for months the from increasing waterfall XX, the quarter you X.XX% cost by some the dramatically growth just loan has combination XX% rate ended reviewed, of over XX strategies, design of I as fee risen integration impact These remain interest and increases, promotional bank as product of funds We're cost period. a originations. actions APR strong. lifetime preserve increases, the of just transaction of escalating loan through such short and the economics the rates offset higher of

price while pushed originations discussed lower home APR we revenue XXX of loan product increases generally occur there's day effect certain year, delaying the enacted beginning into future. we revenue purchase first improvement our last the As with transaction fees loans quarter, window, half higher loan over as the in a lag and

X impact we inflection and of to has decline solar fee We beginning in are transaction basis our of run its rate changes transaction quarter the fee point the be passed expect percentage we've encouraged and merchants over quarter the points price second up as course was this attributable are the visible. the as that to

rates, quarter achieving addition average saw In such of than to that basis XXX higher quarter we APR's XXX third also XXXX. transaction -- third loan fee reflects higher higher originations points

into seasonal our origination of anticipate into we mild as third quarter headwinds reminder, second seasonal Finally stronger a periods continuing and the we fourth before the merge and during quarter. January

a result fiscal our recalibrating of full-year we're guidance. As factors, the above XXXX

within will at through company, potential minutes. our the take these in specialty dealer security the We're one quarter's a within retailing and XXXX fitness specifics wins early purchasing monitoring representative equipment improvement e-commerce annual alarm guidance. co-op. and represent elective million gemstone provide home have with vast home volume. healthcare the We're no addressable Rob results. lack this We retail signs merchant We go pleased of of few segment, added in approximately will third to In quarter transaction manufacturer, growth largest specialty a merchants markets. new into XXX also XXX of certainly include manufacturing success businesses, our seeing this fiscal companies, opportunity $XXX a billiards a premium and home aggregate, opportunities

you continue turn it on to our consumers. key will to excited We ultimately hopefully focused value why understand initiatives operational those will Gerry, future. even Gerry? over be to aggressively where to can I higher additional comment on I'm and metrics. GreenSky's we now about our add, With potential all network bring their merchant

Gerry Benjamin

David. you, Thank

reported And attractive. consumer resonates resulting sequentially its the of of bank revenues, low recurring GreenSky's value is that costs, customer merchants, company's with and merchants, of providers. merchants, advantage. attractive of up care platform XX,XXX key home network X,XXX and the you that core unusually and model network and borrowers, We highly XX,XXX those to For merchants active increase referrals sets year-over-year recurring strongly revenue for story, XX% virtuous the program a GreenSky unrivaled health providers growing new merchants business GreenSky acquisition partners, proposition the operating and the growing leveraging GreenSky with cycle margins. funding in company's and of are number This a improvement a including is elective competitive growing

volume growth in by of improvement over same merchants originated our greater a by in to first the merchants than the continue volume We XX% the transactions of basis. XXXX also on nine comparable as dollar see acquired home XXXX was months strong period

consumer on an And facilitated we our XX% our since of cumulative over of our market. just as As of beginning indicated, XX, accounts X.X with aggregate capture this of XXXX, potential now was over billion our inception. originations approved this or the to platform customer We’ve accounts year. loan base only increase number the September since previously $XX are customer million, prior inception

health transaction David anticipate we doubling XXXX. volume As comments, his in in our elective care referenced

hard consumer healthcare delivering growing and at loan product and product been we teams six our soon our revolving in work be first to Our months excited support have over the are technology past elective business. of

lined multi-market test generated national finance in providers veterinary X,XXX X,XXX up with than support step beta up approximately $XXX that healthcare annual volumes patient and excess more currently large aggregate aggregate three clinical of have in medicine million. providers the dental We sites,

Patient large availability GreenSky Card call as serve everyday core loan securing a a And recurring revolving the exciting wonderful pivotal Solutions Our loan Dental category offer expenditures to Vet product -- GreenSky beta-test. been product. these Solutions ability Patient will complement such in specific for a the installment of designed Card and our to has

I Lastly, third or productivity to origination index quarter OPI. would our or like review

measures it captures expressed the subject the future platform. productivity percentage to every be related through this dollar the reminder, origination. Simply originations, performance As put, net of a quarters generated a GreenSky key the measure to the flows cash as of originated dollar quarter's

our illustrating origination during index overall remained the originated maintain rates the at we dollar XX%, quarter interest through volume every that platform. Importantly, even to productivity GreenSky productivity of of rising stable incredibly the technology third continue with

OPI. has and our rate, quarter full-year GreenSky loan continue fee been promotional disposal OPI provisions XXXX We three levers product Rob? at quarter fiscal to loan our to Relations now to over results Investor offered. our the length I'll APR, to presentation on GreenSky's transaction a XXXX. again turn site. brief Web for for third of periods the in and to review These product have contained Rob the the computations that And levers of the it layout expectations include are financial posted optimize for third and

Robert Partlow

Gerry. you, Thank

Before that my noted. the all otherwise like compared third remarks of to will be to begin, I as unless XXXX, I note would quarter

solar the volume and a GreenSky transaction bring to by Gerry As during quarter grow to business to last decrease quarter. offset existing this was Revenue grew $XXX.X a quarter highlighted, quarter million leading to year originations high of in in to fee of quarter. per new from of performance the third year, as transaction to on Compared X% strong impact XX%, X.XX% daily continues fee The of merchants third transaction just this increased for average the the financial transaction X.XX% activity decreased compared last merchants quarter. mix David and transaction dollar the originated. fee XX% by basis, of their this higher rate

as sequential with second over begin However, transaction take the to rate while points as the quarter hold of APRs. shifted increases [indiscernible] -- even a of was origination price to up mix basis fee on basis, the price X the X.XX% higher

our million, price of The consistent our portfolio XXXX. annualized fair products. of noted, servicing increase reversal the was inflection an we've increase or revenue servicing during volume billion changes and $X.X was a September rate mix servicing liability transaction within annualized third portfolio expense the .X% in in revenue the was quarter quarter, the David during of X.X% three .X% million, XX% and and annualized year. by an servicing on reached as XXXX. period Servicing approximately servicing XXXX. the improvement related from diminishing portfolio was $XX.X XX%. or an compared was related $X.X of a was XXXX. our total was average portfolio, to million solar has of Origination million, average of more charge quarter Transaction shift for other an financial the quarter $X.X the impact of X.X% from $XX.X .X% our value for The As quarter, represented ended At last of from third GreenSky's point expense fee average months $XX servicing down the third portfolio, X.X% offset loan billion the which of our in $XX.X the $XX.X same million loan but trajectory transaction of of last revenue of portfolio million last servicing the than our of million and third loan XX% or of up XX over up from billion, end market year. of $X.X up cost $X.X the basis, change X.X% .X% with quarter of

item charges represents deferred billed, factors. remit is to period. obligation driven promotional interest pay that off the FCR on to previously finance loans As number a The uncollected expected refresher, but during the a are FCR line expense expense GreenSky's by of

liability the the each quarters. consistent servicing growth in of has average and increase six FCR the consistently servicing First, grown the of our with portfolio represents portfolio, liability of If FCR the period-over-period. last X.X% with

from X.X% settlement line a will of and during our to annualized other And composition. The our XXXX. during down aging our loans, as represented The the reporting. portfolio future of FCR bank variations decline portfolios loan but portfolio period. XXXX. by activity. loan the in the variances the is [indiscernible] the as of servicing third payoff partners our reporting sale as recoveries, The with consistent well This rights [indiscernible] to in X.X% XXXX, of vary seasonality recoveries, partners of refer quarterly third incentive annualized of promotional its all to third collections second to reduced the represented normal XXXX quarter-to-quarter, of remittance and that from charges the bank proceeds deferred the bearing during the charge-offs, our the as to portfolio due of of payments expense year-over-year servicing during collectively quarter our due are of the -- as in the receipts of of quarter Second, the line the of X.X% the average origination item well is of quarter reversed to quarter recovery charge-off, amounts, and largely an finance the quarter the finally, on in FCR in referred as is servicing interest settlements the an small receipts

work So the you normal as once see in to seasonal reach can each you’re fluctuations. we for capped consistency component, factor

represents result our million down in million expenses facility. term of as of XXXX, XXXX of alongside includes related morning. revenue detailed loan we've cost excluding of associated forward, a the that the with please total quarter during expenses, were primarily cost to more FCR refer million Operating the from expenses our a published slides For this release finalizing $XX.X million, receipts $X.X $X.X aforementioned third and roll of settlements, and earnings $XX.X which a party

our IT functions. continue In XXXX. addition, our largest next XX% and the marketing heavy operating a million our of personnel HR in expenses XX% million to continued technology our totaled The in expense personnel total. a investment expenses finance, to investment and platform. our benefits technology expenses from corporate to capitalized of joint and for in other portion resulted heavy in reflecting benefits third the quarter we teams, make benefit And component of remaining of related the software. our XX% expense is $XX.X relates the support compensation expense largest Sales compensation $X.X increase that up in of product the developed and

we our During a the and to quarter, adjusted incentive align program included incentives as combination cash as both well of equity. long-term

related net debt which to term interest on our Our million expense B XXXX, loan primarily compared of increased to XXXX. in closed August issuance, $X.X of expense

per Our million GAAP $XX.X share. was net $X.XX or income diluted

adjusted both last on site. XX% A third which increased EBITDA of $XX.X the the of are EBITDA release quarter million section million year. from Relations in and press adjusted presentation, our is by Our Investor reconciliation to Web provided financial the $XX.X posted

share. assumed enterprise million period, all Our expense, our $XX.X net was includes or is pro GAAP of earnings $X.XX pre-tax up net shareholders. This the our income. the at expense A Because of only per income net effective XX.X% earnings forma GreenSky's tax C diluted of which GreenSky's structure, income measure our of the calculated of of tax for tax rate all reflects Class on

is owned taxation, the all subject of percentage irrespective assumes As believe net useful comparability a income it forma are by for pro GreenSky measure C to the of that corporate the purposes, earnings we Corp.

of elements now Turning balance to sheet. our key the

and loans sale, Our unrestricted $XX cash million. reflecting strong generation the receivable a $XX quarter, approximately million at of $XX $XXX which an year-end, increase of end million the held for our at million since reduction the quarter was ended of cast

we deferred our fiscal company's early we David's the year That for reversal quarter, we volume $XX since our market on up us loan at end interest between $XXX will our grow that now million loan environment. XX% $XXX and billion. to percentage XX% select for to current and of XX% consistent and questions. rising fourth only $XXX outlook expect the reflect conditions, remarks expectation The charge XXXX from our $X.X between open rate during and we between and guidance Therefore, X% transaction fee our the to it our year-end million quarter. of key merchants increase growth change as increase Adjusted reflecting the levels then to to to modestly continue EBITDA a a liability third to billion updated the is to finance in between fiscal rate brings products continued impacting will the Based four million. expect transaction higher the million, performance current Our pricing increase with was $X.XX variable originations. and

In origination forecast and originations seasonality in addition, our consumer for we're better payment patterns. to refining account

billion. to between to With between as are opportunity $X.X to XXXX the transaction our over taking our adjusted XX% The and revisions XX% expectations $XXX to increase present XXXX, million. we follows: planning, XXXX XXXX to in fiscal our $X.X and to billion full-year EBITDA fiscal fiscal fiscal conjunction for volume XX% with over $XXX XXXX and to between and grow the between XX% million

turn So to call with over like David. to the I back would that,

Rebecca Gardy

you, This Rebecca. is Rob. Thank

As a And reminder, you please cooperation. question? limit can for have so in queue. we get our yourselves first Thank to can two questions we the that each everyone your

Operator

ma'am. Yes,

from from Goldman is Jim the question first Our Schneider of Sachs. line

You may begin.

Jim Schneider

bit little to impacting Can XXXX I of factors seeing you’re XXXX companies maybe improvement that you taking the respect Thanks speaking the some assumptions, talk terms market can for is building your and market was reported wondering you assuming if and happening about what resales from slowdown. maybe address housing with results the in we're guidance how my in the and of recently. housing question. the that materials slowdown morning. that? Good What’s maybe in a quantify generally home for

David Zalik

you. Thank morning. good Jim,

only seen that housing any The a impact we market We makes or everything thing have take laborer of trace sales not from see shortages is has which large longer. very detected slowdown. that

slowing three home [indiscernible] contract impact six five seems home that haven't weeks, to improvement So seen or from can sales. today, to take any weeks knows project indication used anybody a that if we I doing get think of So the you take America Jim, in

Jim Schneider

last delinquency helpful. X.X, And of it back kind a follow-up talk from then where, a up believe. slides lot -- your a that but rate maybe maybe of kind in you was similar Can That’s that’s in but year. that’s was QX, QX where I to reported about

So or maybe the terms all of your credit you FCR go at is can assumptions. liability in forward if about how that talk on their impacting assumptions

Gerry Benjamin

questions day loans. that Hey, XX interest is we net that Jim. out, data, our last when got portfolio, This of do in we One want we Gerry. point that including a entire to loss loan deferred our included default quarter number chronicled

we with due. are payment default depicted XX basically quarter a respect to that This those loans day the only have

you interest loan you’re borrower, of a obviously. payment, you’ve and deferred If done a the

You I couldn't have defaulted.

due where was [indiscernible] chronicled which the and without incredibly credit the year, market excluding like due, just again payments you’re bands the data, section attachment. Investor seeing looking the is see payment seasonal site has trends will you’re consistent. what almost for borrowers so identical we performance deferred the with been of So published Relations is what’s the seeing granular FICO on to more the those quality just of in it; you we The last would interest

the fourth seeing We than no expect other would of throughout are variances quarters the kind of seasonal year-over-year. same we sign deterioration

Jim Schneider

you. Thank

David Zalik

Certainly.

Operator

Reggie from question Smith line from of our comes JPMorgan. And the next

You may begin.

Reggie Smith

it my that provide did, where updated you it missed it and more revenue is TR or 'XX? Thanks taking look and I’m a EPS should model? Hey, guys of show Is to revenues question. refining if where for secondarily guys. in this if good or we EBITDA kind [ph] you morning, reduction not, should not And outlook up? I for sure liability, an reduce did

Gerry Benjamin

as origination is gave Reggie, there guidance will and we internal level quickly. management. revenue And David We to we would own quarter detail. more want mentioned to metrics respect lot a get wanted our as of those said, EBITDA fourth Hey, let headwinds That [ph] up seasonal being What the you will for our that’s impact to with GAAP place expect. don’t credence in and purposely. see speak I on own originations planning, that to that will in We Rob head labor function a cost to that little of market tightness funds of in doesn’t last anything rate start. our the to do cost housing Rob of has run a want would services. with through will of sales, a were to get that. that? take the inability to in and the job And to then increased of decrease over up the the year our people course, on Rob But supplement of show speak you thing. And in cost tapering transaction

Robert Partlow

Yes, when your I think key previously. take rate the the the what mean, as versus is I about Gerry talked about we highlighted, fee the -- place we transaction talked focus rate on versus had or

primarily think think be I see So around the fee transaction you to really [indiscernible]. volume the revenue, where its you about of the its majority when going

David Zalik

curve year reading XX as elective just literally of our essence our we're is I are own improvement double rising not profitability I year-over-year our the encouraged dollars we ahead clippings, that ensure [indiscernible]. core precision $XXXX, continue team management enjoy steepness $XX this billion in I in. higher we by another know push This that of would transaction do take is APR way points In stability to into is as projected David down wind with Let the it's our of than while curve retrospect Hi, to revised And we’re have again. results. our efforts driven that yield the senior periods. contrary in nice last respect liked, a XXXX and future time were not in to press an team grow a solar, basis make hardly basis And spent year portfolio rate points GreenSky going we the business, clear along the rate double with is calendar only sales we're didn’t management me next that in rate to increases, care the anticipating health pleased XXX of its down million reduction now year. time witnessing that is Zalik [ph] jump the it business take in fee the emerging that home and are no the today showing job with although

Reggie Smith

follow-up I could sneak And if one Understood. in.

Just returns establishing you trying you I is I kind of -- portfolio. to loan you understood the rate bank were question rate the mechanically kind that for but that to or APR, Two, obviously when speakers]? of a that the required is, locked in understand also the how on thought make, know is I’m required My thought return know that [multiple that the point. correct is the at transaction required [indiscernible] originated,

David Zalik

correct. rate interest banks yield is locked, the consumers only is moment the origination, the At prospective expected of origination. That impact impacts locked, is rates rising the of

Reggie, So origination of customer, answer APR question? did a every beginning your for at is consumer the any to quarter, the new every is month set. the the or new set and I banks expected margin

Reggie Smith

question every can your is pricing. essentially steepening yield month you with the guys Yes, I curve, adjust guess the so

I’m of guess have months, over [indiscernible] or that should seems that our should did adjusted the So, guys last we’ve perspective from I adjust done for you I before? X it you the it itself asking seen the yield steepening it guess, by curve or have pricing your X like

David Zalik

Sure. Right.

So great question.

is a pricing to all, we the And So first X months the X effect. of what merchant. that change lag to to has X

years. the So and let up, bank and go expected we has X, what next delay the last the month the up. to on know will outside our is in prices that new there them four and a originations originations But that margin in notified new really X subsequent will The rate we for been in merchants of actually seeing the that. match prospectively the solar, repricing over see months go prices we is if incredibly are come will our book take stable average merchants

been In unbelievably stable. fact, it's

more I’m going if a using, the near consumer for they points months. still a to getting is a does Even only that price great still which What because plan half to to spend increases, is and funds worth for next spend XXX the as X%. promotion merchants is it's our particular do nearly XX product used what a were rate is X% do market X%. that is into And we've XXX is that still on the consumer, margin that when were chose fed relative we've basis their merchants to the merchant going whatever they’re had or that and dozen expensive what consumer revenue zero, it the pushes raised is rates,

Reggie Smith

see. I

That Okay. for the sense. [indiscernible]? apologize I makes

David Zalik

Our is the by OPI metric lifetime stable. profitability as summarized very

average by basis for entirely to down just in our driven average you transaction business almost our rate the had going our remind of X% our take us our solar of fee points, high rate is XXXX And is of of an nearly business in XX% a 'XX XX%. solar XX% XX to from disappointment business. And so mix take year-over-year

take So replace what see you at XX% when the and XX% is. a and with drop can X% of your impact it to business we nearly it X%,

those are Now future. the dollar pushed lifetime into dollars but stable, profitability on every is the

incremental other life. XXX profit And of over The generate that the years the metric origination mentioned weighted and X.X points. up is our of will that revenue average the we in basis next average APR

Reggie Smith

you. Thank Understood.

Operator

Morgan from comes from our James Stanley. the Faucette line question And next of

begin. may You

James Faucette

the for look at the that Thank question you available both very increased When David. I new -- etcetera. partners a much. funding had maybe you

of those as changes business are etcetera, and the of is distribution pacing of the minor availability bringing introduction funds resetting pricing or kind like? any look the just of of impact were you online With them to on in what going for in all the them at -- of your bringing preparation

David Zalik

most has And that growth. demand, reiterate to appetite bank our appetite incredible want ecosystem suppressed I outpaces of partners from our objectives. in our ambitious way far current our the growth that no No,

our it's creates and for our healthy is We only bank that It are in by quite opportunity We emboldened created bank increased bank to managing tremendous that's only surprised, fulfill. we us. opportunity us more demand commitments $X.X strategic funding increase We're There driven actually partners by expectations it actually $X partners. down. so, strategic bank want expected we were we ecosystem. not for down. And But it our the GreenSky just a not XX billion, partners, in good our for from anything more what billion. pleased weeks can we've than is last

James Faucette

to second then is would etcetera? went investors are these keep levels. then, existing management as And shareholders shares, will that I see holders perspective shares buy my be limitations? would from be to question proceeds those and And pre-public the -- share pleased think etcetera or those the that as well all Whether Great. the from the IPO and buying timing share resolved Thank back But back a wanted also when some buyback, company what to always you. question shareholders relates at thanks. my to

David Zalik

be our buyback that’s time The market so But us limit under No to million buying tend an was the corporate $XXX clear authorized. would go announced be we those Board, to wouldn't to -- opportunistically authorization, by into authorized and shares. opportunity shares, GreenSky so buying shares. a with it that that shareholders be it expect the was buy market,

on shareholders based believe As rewarding value. long as our intrinsic we long-term we’re

don’t I question buyback. fully, level entity … your rather but but that buys, level answered shareholder know if contemplating not So

James Faucette

are buy answer market went could shares? buy shareholders IPO ability to or those to restricted and is And under so, back shareholders I public. And under from all process long management my IPO their to IPO, at was my understand if that the beneficiaries at was It how what existing and circumstances back before the question in my the of be question doesn’t the company shares? GreenSky the this the question.

David Zalik

IPO. all the aware ups. As the the executed point of customary you’re At lock insiders time in

days November insides which XXX a institute of to we course, no shares, buying is blackout and buying public subject those there. market market, expire . going limitation and the the date XX, periods judiciously I after on publicly public -- in think late transaction There effective

James Faucette

very Thank you Great. much.

Operator

the And you. from of question next our from SunTrust. Thank comes line Andrew Jeffery

You may begin.

Andrew Jeffery

Hi, guys. Good I the you morning. question. appreciate talking

David Zalik

Sure.

Andrew Jeffery

consumers might still was still like of awards sort of the and merchants understand compared because feels summarize So I to sort more guess though a transaction the an And today value consumer he the as desire viable to little the [indiscernible] higher he's from as the I consumer is to yesterday. ….? I products prop is macro getting market to bit. picture stepping willingness sufficient Did a pretty deal. He in consumers. back just to reasonably still than that I for be want willingness absorb understand dynamic is perspective even that's a paying costs on that costs big pass a inducement those to it good other well

David Zalik

knows his Absolutely. The everywhere. consumer up cost of is funds going

there interest you're far putting the of of than is or rate. it things the interest of a better rate consumer thinking for take of a Yes, cost incurring great stable out bearing available than If the average we’ve that in still getting is credit environment other rate and absent more reduced value, think rate deferred beneficial here a the learned card low is a solar any I irrespective interest so this drives rate alternatives incredibly mix loan, do and Take of high down a you loan which that is can't increased environment. couple funds.

a same interest in rate nine-month obviously low and to promotion consumer. environment, consumer consumer that and the spend solar high what maintain very In was cash. no that high that rate your that still point that market your so, want environment. merchants the in same rate is been is environment relative a XX-month averaging very to point validating margin, most consumer, for we but in the have merchant is a a Well, attractive interest other merchants rate something order and environment still seven pick for their that’s environment, model to lesser that's In merchants [indiscernible] it's in viable higher XXX a highly for to as rate encouraging averaging close we increases important opportunity new to our as product impact. And everyone plans promotion that’s the words, nine-month industries. the And clearly a offering that may in higher been rate. And seen the another spend merchants raise validated we've consumer basis environment, in it's the a if sales zero is roughly only near to that X%, seven. value the rate get And average still XX%, point points prices has want but if positive the

Andrew Jeffery

of color. this what it the sounds appreciate And with I cycle, describing dynamic, the lot as consistent fairly just think I right. through Okay. like of you're is sort business a

the look extent dollars too. and we funding to indication funding increasing option kind the of cost think about true sort Then the evaluating at this of that reason to yield logic the a thereof that curve and want consumer of an more of a okay happens that consistent expect you see that's question question cycle situation cycle what value consumer these of to so if maybe this and that, pick in, to out. is the take and with where follow I the the of we just So is the thing there had perhaps costs up, into sort we is it's the do steepening for his next less to of that not I [indiscernible] we're is and a how it; of is and we to than as for about, next and [ph] the is think starts that steps sell-through any maturing we think next the fall a year are home the early consumer's unemployment a loan get just

David Zalik

seen a performance. So we credit in degradation haven't

so appetite from very, the and a degradation seen haven't that's in We very encouraging. consumer,

full a are we a have we seeing think We we robust -- economy. have normalization. employment, think I

slowdown the a both we're of by indication in and opportunity of consumers. signs or partners any changes seeing manage as well see the consumer we of stress, then of merchants either or policy lack or line bank as demand to changes. pricing As business, economic policy there's support credit future with our not But a economic

Robert Partlow

we got on saying signs too. does point not point XXX of terms Gerry just they’ve saw that threat is And decades the seeing repaying customer I their borrower, seen record contrary Yes, this if about in this this want we incremental. This our of actually is not in employment effect alluded losing pull David's of probably in impact The of plans. people XXX to I just in This that With mean about every jobs. are to score, closest average interesting employment macroeconomic all, this FICO, convenience, We’ve reiterate would weakness an one commerce,. that intension is consistently FICO or country. credit. about any performance actually average their

convenient. a [indiscernible], that of cards have this unused find plenty Our -- credit often home line vast plenty of of more majority are and equity be they and our much to even customers have

partner income, a So of high I profile and consumer high FICO, much think credit a going attractive a bank us quality, when network into position. you’re puts our more having in that

Andrew Jeffery

I appreciate it. Thanks.

Operator

Raymond next Thank question Davis you. comes And from line our the from John of James.

begin. may You

John Davis

sure guys. growth Hi, to this make start want good morning in understand out I reduction origination and the just I year.

to do and of So, offer curve, for or David, correctly, merchants I this the doesn’t dampening anything to shortage, have labor yield product with you willingness has understand if steeper the it kind entirely promotional demand financing?

David Zalik

Certainly, no impact tempering demand.

a there's [indiscernible] for right question of that have seen other they the a skilled with natural thing labor merchants the last We at sucked $XX we GreenSky never saw billion taking weather tightening make country. replacement we this mobilize tragedies. in past like. country. from supply labor. policy quickly accordingly roughly And seeing sucking and the merchant property anything. we contractors damage that’s insured, our up one not no place now, regarding The hurricanes we’ve theme we in as tough work the to our there's But is this two consistent it's across But for And last up are as any a seeing are signs it labor blame the lot here

it. that with starts end of deferral a the terms more discretionary spending there see in of project a the You comes lot whole s at

it's in despite seeing. terms startup of and whatsoever. jobs. our toward deferral net So we typically the housing we bit a weakness little want there all demand, of a are in usually market No for But the a disaster, [indiscernible] natural no link positive number. never That’s is

John Davis

EBITDA expectation. relatively And from from guidance guidance and where the Okay. your XX% then OPI stable. In maybe between Net is original down trying what X% now here, is just XXXX expectations. XX% to origination square

the initial guidance EBITDA day, original next or right they’re square or the So take for receipts the with of profitability not the loan trying at carrying year. the XXXX of up kind of its a end

David Zalik

things [Foreign In same mistake place increases in twice. of consistent to our make rate with we’ve taking we forward-looking dialed not couple are success Language] Yes, here. Obviously, the going plan.

terms we fee on. have to put conservative wasn’t the increases consistent movement increases. forecasting, unusual a yield We very It through rate In curve respect periods, that assuming that would we had to haven't would was when And prior a of very, consistent bias, rate anything guidance. we're of the pushing increases Andrew's a prior occur and made five modestly we numbers in again, If question do have commented lesson modest. both The impact over learned error transaction with APR. through that's for yet dialed in In with increase there's pricing if these rate we that given. to successive want all us in with our years. it to that XXXX

rather the in predicable push consumers the higher going of to the they they ,they’re to owners, and on much small through the business incision APR, as first maintaining out-of-pocket retrospect, yield their Given made can spend. sweetness curve impact a the

then But it their promotion in they With they that necessary. of rate transaction transaction value believe I and fee. if pay way hasn’t the been see the more the would having

remains So $XX points. time That’s stable, it million the every are purposes. value of future the in periods for It's recognized of and is pushed math. we gets lifetime unchanged. so OPI know into simple basis David's is point the $X profitability comment we originating We origination GAAP dollar that of billion strictly XX

going it. as conservative about But, well. 'XX question there [indiscernible] no bias here sales is a some have or yes, do we So into

John Davis

which Can And remember three the two of years. to be can year. kind of fees over the current coming excess the a flows, transaction are cash loan life

a of So piece. timing bit there's a

Operator

Kupferberg our Thank of of next Bank Merrill you. And the Jason comes from question Lynch. line from America

You may begin.

Amit Singh

is from Merrill America Singh Lynch. of This guys. Hi, Bank actually Amit

of curve impact and transaction trying volume. does understand yield quickly steepening the just to it So the how

your shows it is as So it's transaction a the definitely volume full-year. it like is yield steepening, It seems bringing guidance in down. curve for the

how type you’re volatile? environment of in guidance, So what remains very transaction are or XXXX for -- that assuming given interest-rate the you what -- your volume comfortable

David Zalik

you the question. for thank Amit,

not We're me yield really no seeing clarify is The volume. down Let driving correlation. important curve point.

the annual $X We business $XXX targeted million our a with volume. billion within are of

not revenue a of seeing one. degradation, profit the higher period. that we're interest because future we're is number into and So volume mix pushed What the and seeing is rate being

take down would one, business of level impact. viable, solar stable a headwind whereas other we XXXX think XX had piece and origination rate have the we our home a no There's we're improvement billion of is confidence elective point our growth, in $X XX% a on, we based predicting $XXX from basis million we that XX extremely slow guidance So X%. is what a our health that modest consider care because to trajectory to nearly of business that

on from forecast been increases Take up our only our assume So has and Fed. rate, which months now our stability predictable. forecasts the is it but rate is volume, which for shown and further the 'XX not is very based last four rising several flat transaction confidence assuming in

Amit Singh

fiscal then benefit seems any Okay. is And adding the in or 'XX that, smoothly. proceeding AMEX fiscal or your Perfect. it alliance like Is new merchants any guidance? benefit other from 'XX

David Zalik

any our them upside. exit impact. forecast and not not we initiatives. see several We guidance No, all are -- our of we're assuming that We as has

Amit Singh

you. right. Thank All

Operator

remarks. no further you. it in I for back to closing see questions the question. And like to would I Rebecca turn Thank

Rebecca Gardy

That the for attending Investor the announce do over that call. before And David? to of our turn you. it JPMorgan Conference Ultimate November Q&A New I remarks, Thank closing David want portion I Services to we'll in on XXth York. be concludes

David Zalik

confident incredibly Notwithstanding continue Thank regarding I you, recalibrated guidance, Rebecca. of our to be GreenSky. future the

exceed adding improvement $X U.S a and $XXX home alone core elective Our total e-commerce or exceeds billion, specialty that retail and trillion. addressable market we’ve health care and TAM markets addressable

for our We an value program special. GreenSky Our partners, offer bank is and incredible mobile merchants, of truly our technology each proposition borrowers alike.

to more continue with transactions facilitate our as merchants we has platform. strong cohort consumers and to reach our model We’ve scale, on continuously volume for more recurring partners. business As our each add annual their our of revenue we more we merchants demonstrate inherent we bank platform, increasing

look in JP. exceptional remains seeing deliver dollar-based in earnings unique Thank for growth. of annual flow, importantly margins, merchant of cost low York us with attractive you thank you on combination you on that, our free Investor retention call. volume upcoming speaking to transaction much. Morgan fourth We week's most the all acquisition merchant operating Conference forward of at for cash And digits New very and you today's significant XXX%. and is next With our above much we of single joining Our very many quarter a shareholders, and highly our call.

Operator

Ladies in and This the participating today's you thank does conclude for conference. program. gentlemen,

You may great disconnect. day. Everyone a have

GreenSky (GSKY) 6 Nov 182018 Q3 Earnings call transcript