GSKY - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you and welcome to the GreenSky First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the prepared remarks.

As a reminder, this event is streaming live on the GreenSky Investor Relations website, and a replay will be available on the same site approximately two hours after the completion of the call.

It is my pleasure to introduce your host, Amelia Freeman, Vice President of Tax and Equity at GreenSky. ma'am. ahead, go Please

Amelia Freeman

for and today. to market After issued announcing yesterday, Demetrius, XX, ended for XXXXX. trading our joining GreenSky results release press us the a first thank you, quarter all March you listeners hours its Thank close of

this on can GreenSky Relations the the section access You Investor of website. press release

which to during refer In also our posted will addition, first call. we we’ve quarter investor presentation, today's

Chairman Officer; and we today, David Chairman Gerry have Rob Benjamin, Executive Executive Chief Vice Administrative On President the call Partlow, Chief and Zalik, and Officer; and Chief Vice Financial Officer.

that let remind projected. assumptions well in cause materially will about law. current statements by any in differ our issued to disclaim started, as get we update actual and press uncertainties These included obligation are with presentation Information that except that statements any that discussions is as are We Before release from our results as those filings forward-looking forward-looking are could regulators. statements. me required uncertainties you subject on these and our risks to to based include and risks yesterday,

on XX, and counterparts their when presentation analyzing XXXX, considered We for measures website. isolation you also Greensky’s discussing Investor materials, dated performance. financial be non-GAAP are These of from described measures all and consider will in to are our the GAAP May our to intended press a These certain non-GAAP substitute reconciled GAAP to to or not encourage superior measures. Relations results, measures be and in non-GAAP the we page release the

over to like now would turn David. I call the that, with And to

David Zalik

us. to are thank to first and XXXX review It's good today These with you Thank be Good Amelia. everyone, times. results. you quarter our you unprecedented for morning, joining

indirectly thoughts environment. navigate consumers, out impacted and to are GreenSky all bank committed go or merchants, the to this helping directly challenging our to We by pandemic. partners at those Our teammates

of all partners, safety aspects family to work-at-home, customer plan, bank consumer migrating remote to associates in the implemented their GreenSky successfully provide workforce announced, our GreenSky mid-March, our As and the loan of borrowers. business company's of the levels our GreenSky continuing working service world-class on program merchants servicing and previously to focusing members and entire continuity while

and Of GreenSky have serving Officer President Vice and entire of GreenSky of innovative operations, team Technology to in capabilities note, our remote. constituents, our technology These Chief enabled by infrastructure provided talented true the accomplishments the Executive a while to Management workforce are our working our particular. our continue leadership us testament Senior and the

severity partners associated mid-March, became When together pandemic the any the GreenSky GreenSky the of and potential came bank the in of voicing payment voluntary funding deferrals for offer impacts more program borrower to economic hardship. XXX% clear

portfolio, received exceptional in borrowers. of of payment program have GreenSky is our that deferrals servicing of $X.X the hardship consumer borrowers deferral X.X% in customers is billion program indicative payment credit received company's Approximately programs and other relative The loan to response rate such low quality many requests to of the the the reflected GreenSky requests.

results. quarterly our to turning Now

saying by we cylinders. firing entered on that begin me XXXX Let all

billion, the over the of increase first transaction quarter $X.X reflecting XXXX. history, quarter for volume a GreenSky's an any Our in for quarter XX% was of first record

incentive Slide in last payment compared XX%. Presentation published GreenSky Investor indicated that mid-March, began for our February first to XXXX. quarter on business first XX%, XXXX comparable were COVID-XX together as and the XX company disrupting up same in have Moreover, the the amounts receipts exceeded of Before activity transaction quarter volumes period achieved January by night, X-month that

recovery taking first million quarter into the for $X.X the with increase XXXX charge-off reliable reflecting of most million year. over recovery sale charge-off this company, was believed first Adjusted for sale the we EBITDA, XXXX XX% operating no last which of to quarter, after indicator $XX.X the a account be corresponding year a performance

elective our has of expect, negligible states by business health care the origination small procedures component of overall As driven shutdown rate to the the volumes. you'd all of current this run

pleased the business pandemic, of share particularly to home be notwithstanding that, the durable. to I'm continues However, impact improvement quite our

For April, were applications, leading approved the April of a approximately indicator XXXX key levels. monthly XX%

Importantly, we’ve for consecutive the weeks. recovery seen continued three last

key results. provide you Gerry In a the a will the Rob will and detailed moment, operating impacting trends and review walk then our through operating business, the of metrics quarter's

on model However, our diversification two you initiatives, our of I board and key business alternatives process. want to funding strategic update review

First, funding.

unused first aggregate bank quarter we funding of of XXXX, $X.X end the of As capacity had billion. of the

billion anticipate In or the existing $X.X loans as months XX addition, next down we pay off. over approximately of capacity additional pay

to continued alternative investors, our funding have one institutional or structures and include other to with diversify actively sources. also We institutions financial funding more

by front, million that yesterday lender credit committed participations that to $XXX a consent. vehicle, $XXX special revolving facility sponsored backed asset subject J.P. pleased additional facility Chase credit SPV. On on an we $XXX to to loans finance purchase announce are an GreenSky accordion GreenSky is million, This million with closed purpose and Morgan in with

conduct the the of or participations backed expect financed be which issuances parties, facility. of We that to asset allow SPV will revolving purchases sales then securities as to additional would periodically loan third

of substantial facility transaction in through GreenSky's a As loan those revolving increase sales platform. issuances could velocity the occur, facilitate the volume

institutional we manager a programs by facility, sale revolving work flow new whole both and investors our also financing partner institutional complement to the to multiple funding and forward with continue loan leading to a arrangements. bank addition asset In

We close one half these or second the more expect to financings of XXXX. in of

and has and maximizing specific stockholder review regarding board value. or The comment the further these alternatives with outside matters or not of and a alternative make its public unless process to and commenced advisors, intend does a a ongoing, is Directors, Board's until the team strategic the concludes approved financial transaction XXXX, legal evaluate company explore, otherwise announced review and range focused of our potential as Lastly, to August working together Board in review. Management Senior on company's

later announcement XXXX no fiscal regard an expect than this We our releasing quarter when make second results. operating to in

I'll to it Gerry. over now turn

Gerry Benjamin

first of billion X.X the which XXXX. in through markets finance consumers. Thank From you, of GreenSky competes holds market one vertical. now believe morning. home million number company's The over the $XX has end quarter David, are in good for the transactions point-of-sale GreenSky immense. improvement firmly the nearly and GreenSky the enabled We inception position the

As David launch. years We three a we've improvement point-of-sale proven has be healthcare 'XX, market resilient to pandemic. the number shared, position fiscal COVID-XX the in face our achieved just from that home of entering vertical four in believe elective after finance, extremely

has more on impact COVID-XX much been this The vertical severe.

elective enacted of the of states. procedures virtually by However, due to dental and the all prohibition medical

small Fortunately, volume. very this only overall of a origination represents our piece

market Despite modest normal our growth verticals, share allowing material highly fragmented back years for continued times. both leadership come and room position in these to economic two our these to once get large sizable accordingly, of for industry we remains are

continued manner have calls, moat we've truly adapt new services prior makes that we distinctive on innovate As discussing commented products, our in for in and capabilities technology to and the and GreenSky a merchants providers, our marketplace.

evidence outright home the emerge While declare from premature fully improvement GreenSky of tangible enjoy to pandemic, impacts we're gains. market ultimately meaningful suggests what we economic share that will the victory, seeing

dealers for company's home outdoor months more multiple enrollment in in Representative April million revenue, as improvement its of of the include XXXX million these HVAC surpassing aggregating greatest and annual ASR national large March in sales by network, merchants. growth recently GreenSky measured than sponsors HVAC history, in remodelers in March large network. merchant a national ASR, $X Of merchants multiple added note, April hardscape than new billion of and more and merchants regional or and the in aggregating ASR, ASR $XX alone, enjoyed $XXX exterior added million regional million ASR $XX $XXX a enrolled

to progress targets, performance advancing improvement in product that our and larger with enhancing Moreover, to XXXX, plan extremely we while our date. continuing both risk we procedures. offerings, merchants processes credit invest our and the retain of focus on to our quality be management through and productivity meet continue to As XXXX pleased particular effectiveness our those adding in we home

weighted first in Presentation, same last first of FICO was strong compared the Slide dollar for XXX XXXX created year. quarter, origination on depicted the the at XX exceptionally As quarter XXX at score of the Investor to average quarter consumers

press yesterday's quality portfolio As loan the release, remains highlighted earnings credit servicing exceptional. of in the company's earnings --

XXst excess of point servicing in As credit portfolio, of observed have XXX to of at the company's compared improvement X.XX%, XX% March X the borrowers weighted basis in and an FICO average loan excess the of a XX% first scores XX-day and was originated delinquencies an quarter year-ago. end XXX. of

credit continue improvements to which throughout investments deliver to enhance and believe XXXX. merchant tools make We our additional will systems, material and we proprietary management

early lowest healthcare facilitated has and credit distribution XXXX delinquencies early home vintage Importantly, is the loan weighted dollar average any vintage same show originations. the XXXX highest from improvement origination true FICO elective and of indicators the of of for inception the that we vintage

rigid XX,XXX XX, the months March in high more have GreenSky to focus for merchants is we not We many, taken businesses, productivity partner we've quality merchants increased technology technology platform, last with those total to the actively years. of quality on platform quality important from XX the the successfully merchants these the on the active the many of their of growth call these of XX% As upon merchants merchant also than don't grow been standards. of merchants, but our than meet merchants of nearly merchants. the only who had substantial several each on generating our network GreenSky that We and active part addition steps

bank once restore good to enjoy our quality we of in As exceptional. a Moreover, we was GreenSky today, to loans extremely of here sit first our the in facilitated servicing feel conditions quarter share is GreenSky normal. economic the for the quality well-positioned increase about significant the We market portfolio. believe partners very

by virus we back safety. of whether volumes, and we What can't resources based recovery. the softer states their both or quarantine yet to technology virus at available period economies, of for origination we the note, plan April an are for with the offs. whether moderates the support and upon rapid increase results, while not stage corner to however, is delinquencies folks or growth seeing reopen shelter driving have economic extended charge predict, Of home in human the in a spike summing another associated witness the which we rate early months any we Therefore,

over performance it financial to now to the that I'll turn review On for Rob? company's the first Rob quarter. note,

Robert Partlow

Gerry. you, Thank

I XXXX the the corresponding for presentation. comparisons the will quarter, during otherwise to unless stated. the As quarter I note first all that review also refer of of Please to numbers first my the results remarks, relative page will be

of current the change standard expected losses. accounting on As requirements we adoption discussed the our estimating with call, CECL credit year-end March accounting the for or Xnd credit you new company's loss

the on risk bank secured is than Instead, by a financial Our different guaranty are is loan. are financial significant restricted of component cash which credit that which bank our escrow, impact has credit the a scope with our our arrangements CECL in our balance bank our sheet. for on primary the instruments partners,

key nature waterfall programmatic the portfolios partners partners guarantees creates structure bank durable originations is loan of the forecasts to Under our guarantee feature for future accounting very new partner that portfolio portfolios. of grow calculation. the of for as their by both under loan well are purposes new The the continual not of back replace GreenSky's originations reserve for as runoff bank to our CECL, bank bank performance partners

originations into guidance runoff model loan whereby any the we standard, the with now must assume a new goes loan CECL consumer of losses portfolio. no the portfolio in Under

a As results of The cash XXXX. was January $X.X for our loan balance level usage X, reserve than portfolio of you as on XXXX of billion $XXX materially ongoing escrow a anticipated higher impact our our significant note, escrow partners. is December adoption this XX, and on bank that servicing portion million, will in

the have that our bank we continue arrangements be payments like immaterial ongoing our been anticipate under the would cash I for to actual to to this historically partners, case. required and note guarantee financial

first approximately For the reserve escrow growth [indiscernible] with to $X.X quarter on forecasted due escrow the non-cash forecast. the and relates portfolio charge to to balance elevated our related additional financial the the modeled first quarter, we of additional our primarily guarantees. associated included The of of million the $XX.X levels of impact recognized usage a million during unemployment

The company's XXXX. notional down X.XX% normal increase first the volume first the to to financial merchants. of was period quarter in in offered was the fee X.XX%, of in which from results, billion $X.X first billion, transaction our $X.X our XX quarter XX% rate products marginally platform the XXXX, of a XXXX our originated transaction same presentation, Turning variation quarter by correspond our reflecting in on the approximately in over in Page

percentage to calls, transaction sales merchants products throughout and volume the offer drive fee As products to their to causes prior promotional the we've our choose on transaction merchants in which as providers discussed a based year on the consumer variability the fluctuate activity. our promotional to use of our

Total $XX.X year. the last million, XX% fees our servicing first and asset, $XX.X a quarter up to in bank Servicing and grew revenue other $XXX included with in service totaling driven $X.X over XX% transaction the portfolios servicing higher revenue increased with the and increase than by partner million, million million market X% fees. growth of to

fees, for The servicing starting to second bank several servicing among are things, other year, last partner fees QX the servicing partners the fee cash X.XX% servicing partner the with excess portfolio in X.XX% their to of throughout As were from you that servicing XXXX, which amended of senior quarter than fees, increased occurred may increase of arrangements servicing the asset. in the our our create higher the The fixed increased a waterfalls rate and are XXXX. fees. recall, XXXX, reflecting in bank fixed flows market bank servicing servicing

of XX, liability. consistent costs servicing of change quarter, management million, into three totaled of a QX, with XXXXs the origination cost or Turning rate of components: assets distinct $XX.X revenue first Cost divided value and FCR to under X.X% X.X%. in is fair in the costs, revenue Slide

down the XXXXs related X.XX% first average QX $XX.X Servicing portfolio servicing loan of were expenses the for or million quarter X.XX%. and from

of from to technology down our customers. in in together find new operations X.XX% reflect X.XX% expenses totaled efficiency million of quarter improvements For our help or the ways working $X.X XXXX. related The first the originations, year-over-year origination our quarter, first measures and to innovative teams

change On provided $XX.X X.XX% the Slide for was in the FCR value components FCR liability have the in quarter The XX, detail million fair liability. the value of of X.XX%. fair loans $XX.X within of change first the we increase or portfolio. average for the million portfolio, interest of largely the The rate of of loan servicing $XX.X a balance up QX reflects from million of XXXXs growth deferred our the year-over-year

quarter in charge-off we sale a from did note, the Please quarter, pursue first the sale. $X.X we million during XXXX realized recovery not whereas

the As to we will the not retaining receivables more make do these forward. to versus selling over plan going time we investors, continue by our receivables sales

the of XX paid thereby GreenSky increase in effect to during the XX comparing expense approximately servicing $X.X GreenSky basis or item. the XXXX, a by note basis to receipts fees QX liability which million increase the the when in the In results points the addition, impact of value partners, change reducing past in have And to bank FCR point corresponding fair line quarter. aforementioned by in paid

improvement This changed the points the of fees our reflects our partner rate value the servicing Adjusting improved sale FCR bank to servicing program, fair expense the basis to by -- performance cessation for year-over-year FCR the would service for XX of in revenue liability shift receipts from portfolios. year-over-year. the have and to the recovery strong

of up portfolio, breakout we quarter change for the value I'll X.X% for XX and this our The line deferred drivers future expense in FCR expense the sheet the finance the to larger X.XX%. building of interest first FCR indicative expense -- the is of the a expense charge for item. an the loan finance in from liability This expense On reversals. $XX.X charge million $XX.X servicing balance loans balance which our is was fair that million portfolio. of in XX, increase in reversals, XXXX's future by rate on related this with liability begin the also of the Slide the

X to to higher year of out, sequential transactions due can the modest in on noted, on FCR rates impact loans the deferred higher elective rate the previously from billed the see point in APRs the basis in our has deferred played higher the itself largely change of has rate. loans impact mix as interest interest healthcare The increased interest As vertical. you

the of to have though line. of we quarter quarters, we as reversals. strong not Receipts future this servicing receivables materially reduce of for X.XX% incentive prior sale from offer quarter, in servicing for from finance strategy nonetheless within increased was the driver or expense million, receipts portfolio Even this QX past our charge-off improvement million, portfolio. the average $XX.X X.XX% the The the payments loan or portfolio average loan $XX.X to the year-over-year servicing XXXX did

and combination to basis point X.XX%. First improvement payments QX XXXX's The of was totaled fees our quarter of incentive operations. X.XX% loans. bank $XX.X we rate the and of portfolio the from driven reduced aforementioned servicing The for XX made or compared yields on agreed basis charges XX the finance higher charge-off lower a interest deferred by average in from the point net decline rates in rate higher rate, impact improvements benefited of servicing despite loan and in benefited interest fees, rate partner the portfolios portfolio million, both and for upon the have risk

Operating certain charge Turning expect totaled of expenses, of as invest not as in team over up to non-cash to million and non-cash and from Slide million, incurring million $XX.X well do which exclude, our legal $XX we other and expenses, recurring XX% charge $XX cost long-term. we the XX. to build as continue the back revenue CECL --

non-cash charge during the QX charge-off the the $XX.X versus million during the of proceeds coupled million, sale both a income decrease in loss net for million of the a QX recognition GAAP quarter to $X.X income primarily due the of with CECL compared quarter $X.X XXXX. The $XX.X XXXX. to the of expense, was first was the million, guarantee recovery financial a of net combination absence

provides the one business sufficient in by provided the and operating business. over we’ve of of indicated performance and cash grow EBITDA financial is key information indicators regarding to maintain activities we our is our the calls, whether long-term As our useful prior believe adjusted earnings

Adjusted million We receivable XX% in reflect in quarter $XX.X adjustment first sale charge-off million in XXXX, million XXXX's was in non-cash previously improvement million sales. charge-off compared $X.X receivable its reflecting charge EBITDA discussed results. an for CECL year-over-year $XX.X given strong year-over-year in the the accounting construct. was Absent quarter the XXXX. the the year-over-year, include the growth a of as EBITDA $XX.X first non-cash the to

And to with to Amelia that, up it back the over Q&A. I'll turn set

Amelia Freeman

are modeling Please question. first detailed Thank our you, prepared take operator, offline. happy That have we let's that And concludes please our to Rob. remember, remarks. with questions

Operator

from question first Raymond comes Davis John our James. And with

proceed. may You

John Davis

… XX% exit volume March tore down XX% a to on perspective.

David Zalik

-- I’m I first the morning. missed missed the sorry, part. hey, first good I

I think Could there was you connection. a over? start

John Davis

Okay. Yes, sorry. Can you me hear now?

David Zalik

great. Can you Good morning. hear

John Davis

Okay. Good morning.

down. The appreciate first suggests just what Just trying between trends. XX% the down the was you're to then I I -- put April March, And out that volume math is home like. in you improvement improved seeing funded from it Obviously, loan. what's to funded? perspective. elective call volume was XX% Just sorry, trying one And trends. exited to on total April a medical XX% difference approved and down figure with what

David Zalik

April, leading we the in business, improvement was from for home our as prior indicated indicator So year. XX% down

that detail this some to I providing color? you also provide we're don't any the a at more We Gerry, time. seen indicated resurgence. more do we've weeks X last think want

Gerry Benjamin

John. morning, Good No.

back emergency slowly. our we really anything not procedures? said virtually prohibited business all to the was comments, in online coming other states than As They're driven elective

'XX a year a in will, David As terms ago we're of if tapering same and in distance, between new the 'XX applications. day seeing commented, you

improves, health of which though. you probably feel XX% early The it's than the business and that say, from improve is less too And monthly will to is we care bottom of our origination. XX% sort it there. it rate So recall, by if that the

John Davis

get want the just Then a Thanks. minute. for to SPV Okay. on

and just And to these economics loans the to finally, then the sit make waterfall on on First, creating thoughts then why I we the should benefits? the relative second sheet. is sure model? think And it that how about will understand balance

David Zalik

it's nonbank that of a loan and whole diversify to opportunistic. that, see to balance or us, flow good we small for relatively whether assets are and sheet it's these facilities, We potentially as see facilitate a For this amount expand it's opportunities forward to we securitization, there see high and leverage way velocity.

us, add do for comments? Gerry, want to it's some you opportunistic. So

Gerry Benjamin

Yes.

for really lock arrangement thing just to credit it put not we're to markets other If just it until now, in markets create right lot were The afterburners are, on close does of John. to a inclined settle where we flow us, given long-term the bit. that all rates flexibility forward a

that a The allows of parties. bit quality book you arrangement. people It's any a entering holding these time assets, No of buy for superb. as don't we have arrangements. it's good to super us of us into to in serves we've permanent proven a for good will, the demand prime doing want of this the assets. What more is and counter mispriced lack interest if tank, So that is

of a provides this tank holding as of turn So and David's this lot to flexibility over of velocity. think lot a point, a with we can that

year, So in $X.X Xx real money. you're a billion but a it's about terms Xx only that you talking or turn sticker, of over

structural really or that in it put was place. a we vehicle So flexibility

John Davis

Okay. economics think should about to relative And we just model? waterfall then how the the

Gerry Benjamin

We loans to buckets, multiple in of all reduced in investors like late As ZILs, pleased we've been our by of pricing. different these as regarding we coupon. three loans, zero said refer almost product gotten type. and the views marks And they different think we loans, each bps, and that basically a we've with earlier, vary deferred really have

to flexibility we want ability of swap we choose and optimize where So the we pick sort maintain to and the these.

partner environment. the beta So, seeing economics remove the what our from overall model of business said, bank fact as that terribly in is not we're lot different notwithstanding, our a than we we

John Davis

last then Okay. one me. And for

already half last seems come the talked time had to table to we on It forward but of this, think pushed quarter. then and a last that's two of billion back $X like agreement kind down the we year. to loan you I alluded the out

it in said, rates going to same two. commentary? for that, where you're markets leading lock is I'm the On given are that to assuming the looking management just that that's you credit you with billion don't deal do $X want asset still what So

Just any commentary there would be helpful?

David Zalik

can Yes. provide I …

Gerry Benjamin

a it's multi-year deal. Yes,

David Zalik

Go ahead, Gerry.

Gerry Benjamin

that billion. remember is $X said I All

David Zalik

ahead, Go Gerry.

Gerry Benjamin

All is, was $X multiyear deal. remember I said that X-year a billion

the So Jump true. holds arithmetic much David. in pretty there,

David Zalik

Yes.

asset question, structurally that with engaged your in emerged to still of hasn't answer was Other billion have It But it asset going So manager. always to billion. particular changed pool well as terms billion for managers $X $X here. loans. $X

John Davis

All Okay. right. guys. Thanks,

Gerry Benjamin

Thank you.

David Zalik

you. Thank

Operator

question And Stanley. Steven our next Wald comes Morgan from with

You may proceed.

Steven Wald

guys you Can hear Yes. me?

David Zalik

you Hear great.

Steven Wald

in you been term. guys we can are are or Great. have bank, I far just the you what impacts? the color touch well. by as could provide Maybe four funding bank one months tend be partners, beyond year But that's if piece. Hope at you advance touched so I … know only least on virus year. here, think conversations if those the any side your to on of with non another those top adjustments. extended How the just to year track done partner five BMO we piece the any partners or one and of with your trending us Wondering like this I is bank on renewals the the think back guys

David Zalik

constructive. remains been that relationships think beyond, else news. extended. to Everything The next that I year extension conversations think Well I one be new so the I that later expecting have been been year one have extended. we’ve -- This is already material will and already extended. this be the has think most [indiscernible] not we’re only actually into

the financial I I have has done own tests institutions feedback encouraging. think been, And the their portfolio. and on think, confident stress the

in we're shape that our good really feel legacy we partners. So with bank

Steven Wald

the as reserving like areas towards items top to just out Okay, you can on deal base expense sort to, go how great. we as a environment a guys maybe side. But that expense tougher months. I with what what looking didn't are about are And feel few guys wondering the the through line as just that, doing and really of see ton you adjustments you you’re you on all the take backing out? thinking next CECL shifting like granularity we are of

David Zalik

Yes.

we prolonged So a in although, lot see, And business, as as origination this related much we to we're are hire we our year, we extent as expecting variable of a reduction have more. revenue growth not are a expenses. expenses the less growing reduction,

As we grows we'll have less less that quickly. quickly, hire a business

scale see time. of So there deal don't certainly we as the appropriate. and is can that variable down cost need this we for that a But up at great scale

Steven Wald

Okay, If these great. On squeeze your of -- could what of partner think lot a just one in now in I the I general side, your terms, partners halting? -- be things to down on Depot. shutting small tend businesses last right the from are businesses aside seeing? like there, like you one. is health what Home and temporarily health merchant terms there's What's of merchant going in are furloughing, What's

David Zalik

are to these doing in are the medium sized million $XX $X call revenue. amazing typically They it of business companies. and our bulk So small million

and businesses. continue mighty seeing tiny to they're operate. small, we're Generally, they're not they what So they're is

market rebound their that them of they're but business reductions, in. have Some XX%, depending seeing the XX% seen XX%, on they're

ability their ceased majority can or become than we as recently all answer again. of expected our it slowdown markets think I many there less It dramatically, much And slowdown to to vast them, furloughed the Some few but that them of available have a your in surprise, our sales to teams. reported a improvement. we really their extent have the make the to in say record seems I that from sale. But was much we either that's Did earnest. would or are job restarted very a slowdown, I what of that operations seeing tell, finish evidence home to was that merchants And question?

Steven Wald

very That's Yes. Okay, great. helpful.

David Zalik

Okay.

Steven Wald

Thank you.

Operator

Smith And our next JPMorgan. question Reggie comes with from

may You proceed.

Reggie Smith

you Hey, me? Hello? hear good Can morning, gentlemen.

David Zalik

can Yes, you great. Good hear morning.

Reggie Smith

Few Yes, questions. sorry.

touched I One I on, to of has on. kind go guess, kind commentary of back them April to wanted your trends. been of

and a I resurgence called tapering. Gerry think it a David

trying Just the the guess, understand, of magnitude to I discussion there.

some the of you down expenses, about if Second A in declining? us quarter? the second before when the should are or next volume a the of revenues are EBITDA kick offset natural remind part negative question, where can that situation originations business quarter? could help transaction in operating are but And question or you is year-over-year asked how what works us see

David Zalik

the repeat you last very the beginning Can question, cut out.

Reggie Smith

Yes.

in So if flow. natural revenues would second kind are XX%, could -- have see a the are in a originations presuming you similar And the EBITDA offsets What quarter negative? of transaction imagine I with business scenario expense right? wise? down the

Robert Partlow

a origination the going EBITDA and is second are are -- scenario variable. And costs original negative. the see to don't offsets We where -- majority the of vast quarter back the

those are the so natural And offsets.

to As month, in consecutive the leading the weeks ago. we’ve trough XX%. it we think X reported about down weeks that seen was a April what the last from X And we for that the growth was indicator relates

Reggie Smith

then or they just obviously, model? does about thinking have little the I the that impact expecting does the And in know lower rates headwind. Are how on impact a business? that you what it went as interest it. Got profitability rates coming in least from up, was that your

David Zalik

or neutral, if we think interest and So at not headwind it's environment, this you suggest that I it's this a would tailwind in take think rates a time.

Reggie Smith

was That Got [indiscernible]? it.

Gerry Benjamin

or Reggie. a sorry, Same question I’m follow-up?

Reggie Smith

it, -- non-GAAP count. about overlooked asked non-GAAP see I share I when providing or guys heard no. EPS and And a timing. I I I someone you didn't didn't at No, last, calculation the anymore? thought not Are EPS maybe

Gerry Benjamin

Rob?

Robert Partlow

not. No, we're Yes.

do what the you of think other and there's with terms things adjustments. in can with -- really limitations -- CECL I on

EBITDA adjusted non-GAAP our on kind measure. focused we as core of So

Gerry Benjamin

… a giving upon if The an is pro frowning derive it it. right about will but work effect to it SEC little now, we to that do think hoping was adjusted forma inclination, our I'm analyst

Robert Partlow

The noncash charge.

Gerry Benjamin

our truly. charge to noncash business model got it's no the … just CECL because relevance charge -- the

Reggie Smith

All though right. it. Got And …

Gerry Benjamin

return we last something akin reported EPS reported year. that GAAP to to To what

Reggie Smith

something a down I showed that year. is it a in share the So think previous million presentation, count the range, $XX …? or that -- of from is in typo which the Was considerably

Gerry Benjamin

typo. It referencing. sound must sure what you're That right. be doesn't not a I'm

Reggie Smith

Weighted average share.

Gerry Benjamin

That's shares. just [indiscernible] the

gives a the XX-Q, -- on actually If detail, to you go XX-Q the yes, you Reggie.

Reggie Smith

Thank Okay. you.

Gerry Benjamin

you. Thank

David Zalik

Thank you.

Operator

next question Chris Sandler. with from our comes And Piper Donat

proceed. may You

Christopher Donat

I looked through question detail quarter on good first I everyone. morning, Good Slide ask to to your XX. Hi. It's hear the your trends. wanted voices. on volume one

lease, like a Solar XX%, math down it right construction to of by quarter-on-quarter. roofing But and now, XX%, big HVAC sort are looks XX% my jump. that's

weaker are your is Just April but HVAC trends in construction roofing the May? solar kind the side persisting wondering that on are spectrum like of way, and strong, if of and

Gerry Benjamin

reference Are to pie chance on XX? making you chart that’s the by

Christopher Donat

pie the we transaction take taken Yes, those Yes. that chart up chart and the health to percentages volume then slice care. X and pie use

it. Is a So big core a that's around XX%, still solar strong, question I'm the here? jump. little really doing is the of at that But math

Gerry Benjamin

a XX have That chime. Slide may Yes, I think candidly. doesn't mislabeling on we

David Zalik

to Chris, and what windows, we'll HVAC that broadly And get we've affected update it you is to than that bathrooms been has if less Slide XX, circulate need kitchens, seen as solar. and we well.

It's it's has more one, is Northeast, what is that much number city HVAC what you’re been impacted more, and anywhere seen the So else. impacted we've driver than less. bigger in state

in Southeast least business Northeast, impacted. much in more windows. still

even the May, in -- West bathroom and modeling and Southeast coast the seeing from least already in and impacted west state Southeast. in kitchen

So, have not windows we else. No, faster is growing even than anything durable HVAC anything no, not than seen is solar But solar not, growing than kitchens. be else. faster and is more

Gerry Benjamin

actually XX, solar It turn see you you volume. was actual can to If X%. our Slide

Christopher Donat

Yes.

wonder rather the I Okay. It larger or some like any what projects can quarter Got anything of than change, them. looks really in then that financing? in to because right. hearing the suggested anything average they're of sizes just I out we're or improvement if it some -- companies for like me. guess you're ticket All data see that home we of more And makes that on, you'd But sense gather small like from that also is of consumers, or first the anything that not engaging something projects. saw on more you it.

David Zalik

Yes.

So consumer. from the what is demand we're a seeing durable

what average We we tell, sale windows down, the not have for for material are are bigger promotions financed expensive so seemingly go But not down. can drive more in seeing any of paying are short their interestingly amount is or merchants windows purchase -- even that answer amount. often from in They're is are more. we consumers buying promotions. more more are coming more are or using paying value They are any financing Cost spending merchants money. order change for businesses. value is average transaction and we change not to -- using that traffic seen amount more seeing, What enough, less

Christopher Donat

some dealers Gerry, you’ve HVAC Okay. And comment made then, and hardscape.

than Just a and wondering [technical we you pipeline tougher in are because business what call? merchant merchants things or quarter if it's a are understand merchant -- those And now? those add difficulty] I'm -- trying adds weaker two to of sales sort Zoom additions, with a able that been had see do the just rather the might meeting on a face-to-face in them to to in

David Zalik

that, Gerry. speak me to Let

them really face-to-face. is like continue So so routine. business interfering and merchant face-to-face their don't enrollment tend -- But businesses they're with that. we'll of busy not and support people most not they to doing daily it's We these owners, our and

forward not So you financing of, either competitors their drastic have to had changes sort that invited. a started think competitors What be interruptions, reference, some we were us is business What suddenly where actually need in I at. operating that merchants shifting using using procedures. or not getting was we pull as the you were saw to saw Chris,

that future -- been we've getting moving we a used that not us entrenched so either over on has And merchants that present long Christmas previously think for elsewhere, based merchants have it's financing. or

Christopher Donat

very Thanks much. All right.

David Zalik

Thank you.

Operator

Research. with Wildhack our Rob from next question Autonomous comes And

may You proceed.

Rob Wildhack

can know tapped financial escrow financial Good increase But guarantees the and morning, past have to have with payments before much into? guys. been said the I share you the guarantees would immaterial. the are on losses just us in you how

David Zalik

I’m Gerry going defer to Rob. that and to

Gerry Benjamin

where your I construct loans. guess couple [indiscernible] originate Yes, to norm I continue mean, a of

excess different you'd that But have of start it's escrow in portfolio more typically state of stresses to of I think under under usage steady a growth environment. see levels would XX% kind environment. you seeing potential before or

Rob Wildhack

interest structure? existing SPV, does and questions. you're to guys. ratio work for reserving paying? the How covenants? just your follow-up debt mean that the What SPV that of rate then And Okay. a on for handful And Thanks, then leverage does what

Robert Partlow

Great of questions. things. Couple

if perspective bank First, than cost typical actually the spread financing it a partners. -- you from is a our from will, lower,

from efficient cost. very from a for actually an funding us So standpoint, efficiency it's

leverage The indebtedness our ratio affect does other part nonrecourse. standpoint, ratio. is is a it securitization your of this how question was leverage From

not it's calculation. part So of that

Rob Wildhack

Okay. SPV? to And any reserving be for do you have through then the do the loans will funded that

Robert Partlow

the Great it's Related sale, directly see you a be question. for loss sales, to will related book for you typical loans loans held and is will. These such that. as perspective. that your to if CECL have then reserve -- a there's from charge, -- loans mark-to-market to any CECL on loans it of a impairments But kind not that, a held for not you loans charges

Rob Wildhack

Okay.

Operator

from Ashwin Citi question You And proceed. next our may with comes Shirvaikar

Ashwin Shirvaikar

Good guys. are you. morning, Good morning. How Thank you?

David Zalik

Great. Thank you.

Ashwin Shirvaikar

the could was situation? capacity so, using on Hey, additional of so or that to Is normal one question of any to you your assumptions? or current based given on those $X.X And modified used the in I you pay billion through sort newer sort if some XXXX had patterns, referenced one of assumptions of that talk slides. down have

David Zalik

months. next on what pay the XX Very see to in we expect downs simply it's based in

Ashwin Shirvaikar

you're the economy, Right. making I forth? are consumer what about so assumptions underlying the about the that. and But so on, understand

David Zalik

don't weighted expect, beta X-year well, downs, on as not seen And yet. terribly our what deteriorated is know stage to loans. today, now. X.XX going we early connected and estimate indicated, merchants. -- to yes, consumer pay goes. is average volatility, we what The be -- these think high, are it's the considering life based the think as we've not it's And Gerry are indicated earlier But have delinquencies We on it's based yes, which not what we that

Ashwin Shirvaikar

Okay.

Gerry Benjamin

don't X.X% what have this kind note billion pretty of borrowers in with estimating. that minimis would of But only requested be hardship portfolios, comment small But have programs. would weighted average the is very, It's relieved. our one it imprecise sensitized have Actually We enough servicing portfolio when compare definition loan the what it's we been you to any relief. that really $X.X very that the hardship we consumer other life percentage of the add de small. provide for know

Ashwin Shirvaikar

it. Got

should X.XX rate, fee up X.X, transaction year, closer to the then through excluding in the XQ we the 'XX, that X, the allowances? maybe promotional And see was at Okay. expect to which tick

David Zalik

seen Yes, We've -- it we a to already tick lately. certainly expect expect that up here would little it bit. do

Ashwin Shirvaikar

many quarters off time Okay. proceeds first you The in -- haven't any that is this the charge transfers. had receivables

a is the reflection a market you? more So in or is by that of that change approach

David Zalik

that? to speak you don’t why Gerry,

Gerry Benjamin

Yes.

such served and use investors dimension of retaining for these we're drive rate cost benefit, accounts that use review on collection that we it'll the return capital. our that our by part strategic we're that the cost paying is and good capital it to ARR that procedures, exceeds sort And clear became Board the by procedures our best economic has of those As would of that assets. undertaken, our our of suggest the enjoy our by of continuing collection own up

in improvement paying investors. and those So for made mindset as collection been, them not we keeping process, of meaningful economics we're better ourselves where those have programmatically we've out opposed off like a to to monetizing and we're and

Ashwin Shirvaikar

other it. given such other has strategic know. about good Okay. any implementing, don't review you're review normally there as to talk conclusion your useful to investors you of I any know? -- Are the that would know That's you for there part Are a or that be that

Gerry Benjamin

I in. the market today. economic it's the counterparty. their We're given internally and we're nature mean, not design same focused Everybody's dynamic any focused just on that now in all of related just to probably the given by right candor, for generally surprising the times prospective business

Ashwin Shirvaikar

you, it. Thank Okay. guys That’s

David Zalik

Thank you.

Gerry Benjamin

you. Thank

Operator

SunTrust. And our last Andrew from with question Jeffrey comes

may You proceed.

Andrew Jeffrey

here I we than of subsidizing to Appreciate rather you dig taking little GreenSky in continue, cost at on terms, just better morning. merchants question that promotions. offering sounds the those sales Gerry, expect the promotions bit wonder the date Is to will -- by you merchant good or the like if that could should I example? borne end. Hey, It for have them. a support

Gerry Benjamin

we I be them respect we But would of That's business. of way holiday run. we have only the of going it business have responsive. will it we're product whether we're seek rate let if programs, our new otherwise, note wasn't expand would accommodating, there close our sort the specials that tools, their question, I David, we any occur a run is impacted with getting financial for That to we bring. being creative, and in creative the we and to merchants capital to we're And targeted return we financing new first clear Xth But to them. that be a July can fee or do cost to quarter. promotions, rebates we're stay transaction optimize to last this. and new QX's on seasonal enable irrespective said, math by a in to want

see see our one tick year? would came questions you So David of yes. the up And -- a would responded, you prior rate expect in throughout up to merchant

can For having anything no been expect the case. you reason other line? that than rebates David, be behind us, to along you'd those add that

David Zalik

there's a businesses to grow you, that. for-profit. just to and want would is their And model help delight I remind to customers, we do business Yes, are but our cost

Gerry's earlier, which So pay point fee. a fee they the platform, echoing we We're to are my their to The fee sales. that the merchants. in point, go use seeing up. not us a pay To actually merchants increases subsidize a position

uptick that's merchants using the we see on more more today. important and our you. often. thing, to more So answer we're it I And to expect think your perhaps question we for important to platform, drive seeing paying is, they're one incremental short continue yes, growth an to can them Thank in paying -- to what promotions based

Andrew Jeffrey

at you’ve I and we're seasonality what protracted said to that in more promotions. Does downturn trying out, and I'm if gets underwriting sensible there of about become the right. XQ there like sense. it's I all mean, I consistent, all little a not extent volume at guess just wonder, …? I and to sounds makes which parse a which guess the in Okay. point makes some between a tradeoff attention the it tighter, yield, past sense

David Zalik

have credit. Yes, the standpoint, pressured they phone seen time the likely time ring money more getting on you often more harder our expensive from or merchants I tell revenue project, we've directly very use a with your service spend seen that moving I are which we speaks promotional obviously April, that can more merchants with we've to so more more think what comfortable That's a to often When having consumers question. are more something seen is what is with the harder are a products. being to they forward a in

Andrew Jeffrey

That's And quick Okay. Rob. thanks. for one then helpful,

servicing On asset, portfolio run off barring and the servicing asset portfolio, the down? bank any on pricing increase that at that servicing we changes, should [indiscernible] is see declined, the does servicing

Robert Partlow

-- Yes, it's great question. a a yes. That’s

servicing quarter, to you to kind last portfolios decrease, bank saw the increase if from related If fee, higher it's higher they extend net yield, see and of in as if were servicing you activity, you asset. -- to asset real services -- saw partner like for an net or the that. to amortization So servicing the gain the portfolio you or have slight portfolios steady, would seeing a that more no were that start increase potentially the would

Andrew Jeffrey

Right.

Robert Partlow

-- particular growth portfolios. it somewhat the But the is correlated those servicing to of

Andrew Jeffrey

Got you. helpful. it. Thank Very

David Zalik

Thank you.

Amelia Freeman

a day. has and everyone you, us Thank you, today. great everyone, for We joining operator, hope thank

Operator

this today's participation. for your conference. that, gentlemen, With Thank and ladies concludes you

disconnect. now may You a great Everyone, have day.

GreenSky (GSKY) 12 May 202020 Q1 Earnings call transcript