Attached files
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| EX-99.1 - EXHIBIT 99.1 - Elevate Credit, Inc. | exhibit991pressrelease1.htm |
| 8-K - 8-K - Elevate Credit, Inc. | a07-17pressrelease.htm |
Second Quarter 2017 Earnings Call
August 2017
2
Forward-Looking Statements
This presentation and responses to various questions contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements present our current expectations and projections relating to our business, financial condition and results of operations, and do not
refer to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and
terms of similar meaning. The forward-looking statements include statements regarding: our future financial performance including our outlook for full fiscal year 2017 and our perspectives on the third
quarter of 2017 and our expectations regarding revenue, cost of revenue, growth rate of revenue, cost of borrowing, credit losses, marketing costs, net charge-offs, gross profit or gross margin, operating
expenses, operating margins, Adjusted EBITDA or Adjusted EBITDA margin, ability to generate cash flow and ability to achieve and maintain future profitability; the availability of debt financing, funding
sources and disruptions in credit markets; anticipated trends, growth rates, seasonal fluctuations and challenges in our business and in the markets in which we operate; our growth strategies and our
ability to effectively manage that growth; our expectations regarding the future expansion of the states in which our products are offered; customer demand for the our products; the cost of customer
acquisition; the ability of customers to repay loans; interest rates and origination fees on loans; the impact of competition in our industry and innovation by our competitors; the efficacy and cost of our
marketing efforts and relationships with marketing affiliates; continued innovation of our analytics platform and our ability to prevent security breaches, disruption in service and comparable events that
could compromise the personal and confidential information held in our data systems, reduce the attractiveness of our platform or adversely impact our ability to service loans. Forward‐looking statements
involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. These risks and uncertainties include, but are not limited to: the Company’s
limited operating history in an evolving industry; new laws and regulations in the consumer lending industry in many jurisdictions that could restrict the consumer lending products and services the
Company offers, impose additional compliance costs on the Company, render the Company’s current operations unprofitable or even prohibit the Company’s current operations; scrutiny by regulators and
payment processors of certain online lenders’ access to the Automated Clearing House system to disburse and collect loan proceeds and repayments; a lack of sufficient debt financing at acceptable
prices or disruptions in the credit markets; and other risks related to litigation, compliance and regulation. Additional factors that could cause actual results to differ are discussed under the heading "Risk
Factors" and in other sections of the Prospectus related to the Company’s initial public offering of common stock filed pursuant to Rule 424(b) under the Securities Act of 1933, and in the Company's
current and periodic reports filed from time to time with the SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety
by the cautionary statements regarding risks and uncertainties that are included in our public communications. You should evaluate all forward-looking statements made in this presentation in the context
of these risks and uncertainties. Neither we nor any of our respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-
looking statements contained in this presentation.
This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a
number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness
of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance
of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
The information and opinions contained in this presentation are provided as of the date of this presentation and are subject to change without notice. This presentation has not been approved by any
regulatory or supervisory agency.
See Appendix for additional information and definitions.
3 3
Elevate is reinventing
non-prime credit with
online products that
provide financial relief
today, and help people
build a brighter
financial future.
So far, we’ve
originated $4.5 billion
to 1.7 million
customers1
4
Approval in seconds Rates that go down over time Financial wellness features
Credit building features Flexible payment terms
Good Today, Better Tomorrow
The next generation of responsible online credit
5
109MM
US non-prime1
53MM
US credit invisible2
10MM
UK non-prime3
US non-prime population larger than prime
US and UK non-prime population >170MM people
Elevate customer profile4
Non-prime Prime Credit invisible
Prime1
34%
Non-prime1
44%
Credit
invisible2
22%
Banks not serving non-prime
$142B
Total reduction in
non-prime credit
since 20086
1
1
2
US UK
Average income
Attended college
Own home
$48K
~ 79%
~ 39%
£20K
~ 58%
~ 12%
Typical FICO range5 560-600 N/A
Non-prime consumers – the New Middle Class
6
Strong Growth
19% revenue growth YOY
1
29% loans receivable growth YOY
2
Stable Credit Quality Continued performance in target range
Improving Margins
13% Adjusted EBITDA margin ($20mm Adjusted EBITDA)
3
Net income of $3.0mm
Managed CAC High end of range at $294
Outsized Customer
Impact
Continued reduction in average effective APR
Saved customers $300mm vs. payday loans 4
Q2 2017 continues strong performance
Elevate Goals Q2 2017 Performance Highlights
Adjusted EBITDA margin and combined loans receivable – principal are non-GAAP financial measures. See Appendix for a reconciliation to GAAP measures.
7
2Q17 Business Update
RISE enters Kansas
16th state, first state with a RISE line of credit offering
Launch of Elevate Labs
Supports continued leadership in advanced analytics and data science
Expanded funding capacity for Elastic
From $150mm to $250mm
Retirement of Chief Credit Officer, Walt Ramsey
Elastic passes $200mm in outstandings
Now serving more than 120,000 open accounts with Elastic
8
Growth in revenue and combined loans receivable-principal1
Combined loans receivable – principal is a non-GAAP financial measure. See Appendix for a reconciliation to the GAAP measure.
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Co
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L
oa
ns
R
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eiv
ab
le
-P
rin
cip
al
($
m
illi
on
s)
Re
ve
nu
es
($
m
illi
on
s)
Revenues Combined Loans Receivable - Principal
S
e
a
s
o
n
a
l
s
lo
w
p
e
rio
d
S
ea
s
ona
l s
low
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ona
l s
low
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d
9
Revenue
Adjusted EBITDA1
+281%
+58%
+34%
+20%
+223%
Growth in key financial measures ($mm)
+66%
Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
Net Income / (Loss)
10
Q2 2017 Performance
Adjusted EBITDA and combined loans receivable – principal are non-GAAP financial measures. See Appendix for a reconciliation to GAAP measures.
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
($mm) 2017 2016 2017 2016 2017 2016 2017 2016
Gross Revenue 150.5$ 126.8$ 81.4$ 85.3$ 44.2$ 18.7$ 24.9$ 22.8$
Provision for Loan Losses (72.3) (67.1) (41.7) (47.2) (23.2) (10.6) (7.4) (9.3)
Direct Marketing & Other (24.0) (22.1) (11.0) (10.6) (4.4) (3.1) (8.6) (8.4)
Gross Profit 54.2$ 37.6$ 28.7$ 27.5$ 16.6$ 5.0$ 8.9$ 5.1$
Adjusted EBITDA
1
19.8$ 7.3$
Net Income (Loss) 3.0$ (7.5)$
Combined loans receivable -
principal 2 481.1$ 373.7$ 245.6$ 235.7$ 196.6$ 102.2$ 38.9$ 35.8$
Loan Loss Provision % of Revenue 48% 53% 51% 55% 52% 57% 30% 41%
Gross Margin 36% 30% 35% 32% 38% 27% 36% 22%
Adjusted EBITDA Margin
1
13% 6%
Total Company RISE ELASTIC SUNNY
11
Consistent and improving credit quality
Cumulative loss rates as a % of originations by loan vintage
Months since origination
12
Rapidly expanding margins
% of Gross Revenues
2015 2016 Q2 2017
YTD
2017
LT
Target
Gross Revenue 100% 100% 100% 100% 100%
Loan Loss
Provision
54% 55% 48% 50% 50%
Direct Marketing
and
Other Cost of Sales
18% 14% 16% 13% 10%
Gross Margin 29% 31% 36% 37% 40%
Operating
Expenses
25% 21% 23% 22% 20%
Adjusted EBITDA
Margin
1 4% 10% 13% 15% 20% ➡
Adjusted EBITDA margin is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
13
2017 Outlook
Revenue = $680mm - $720mm
Net Income = $13mm - $19mm
Adjusted EBITDA1 = $95mm - $105mm
• Continuing portfolio growth with
revenue at the lower end of the range
• Customer acquisition costs will
decrease to middle of target range
based on channel tuning
• Net charge-offs as a percentage of
revenue will decrease
Perspective on Q3 Annual guidance
Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
14 14
We believe
everyone
deserves
a lift.
15
Appendix
16
YTD 2017 Performance
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and
ESPV facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent
consideration payable related to companies previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net loss.
2 Combined loans receivable-principal is a not a financial measure prepared in accordance with GAAP. Combined loans receivable – principal represents loans owned by the company plus loans originated and owned by third-party
lenders pursuant to our CSO programs.
YTD Q2 YTD Q2 YTD Q2 YTD Q2 YTD Q2 YTD Q2 YTD Q2 YTD Q2
($mm) 2017 2016 2017 2016 2017 2016 2017 2016
Gross Revenue 306.8$ 257.5$ 170.7$ 176.6$ 86.4$ 34.6$ 49.7$ 46.3$
Provision for Loan Losses (155.1) (126.2) (90.4) (89.7) (45.2) (17.8) (19.5) (18.7)
Direct Marketing & Other (38.6) (35.2) (16.3) (16.7) (7.7) (4.4) (14.6) (14.1)
Gross Profit 113.1$ 96.1$ 64.0$ 70.2$ 33.5$ 12.4$ 15.6$ 13.5$
Adjusted EBITDA
1
44.7$ 36.7$
Net Income (Loss) 4.7$ (1.7)$
Combined loans receivable -
principal 2 481.1$ 373.7$ 245.6$ 235.7$ 196.6$ 102.2$ 38.9$ 35.8$
Loan Loss Provision % of Revenue 51% 49% 53% 51% 52% 51% 39% 40%
Gross Margin 37% 37% 37% 40% 39% 36% 31% 29%
Adjusted EBITDA Margin
1
15% 14%
Total Company RISE ELASTIC SUNNY
17
Footnotes
Page 3:
1 Originations and customers from 2002-June 2017, attributable to the combined current and predecessor direct and branded products
Page 5:
1 According to an analysis of TransUnion data through the third quarter of 2014 by the Corporation for Enterprise Development
2 FICO, Expanding Credit Opportunities, July 2015
3 House of Commons Welsh Affairs Committee, The Impact of Changes Benefit in Wales, October 2013
4 Elevate analysis 2015-2016; US income and home ownership data from Elevate internal database for customers acquired in 2016; other data from self-reported customer research.
5 Range of middle quintile of Elevate US customers (2016)
6 According to our analysis of master pool trust data of securitizations for the five major credit card issuers, we estimate that from 2008 to 2016, revolving credit to US borrowers with FICO scores of less than 660 was reduced by approximately $142 billion
Page 6:
1 Q2 2016 revenue of $127 million and Q2 2017 revenue of $150 million.
2 Combined loans receivable – principal at June 30, 2016 of $374 million and at June 30, 2017 of $481 million. Combined loans receivable-principal is a not a financial measure prepared in accordance with GAAP. Combined loans receivable – principal
represents loans owned by the company plus loans originated and owned by third-party lenders pursuant to our CSO programs.
3 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income/loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV facility
used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent consideration payable related to companies
previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/loss.
4 Based on an average APR of 131% for the quarter. This estimate, which has not been independently confirmed, is based on our own internal comparison of revenues from our combined loan portfolio and the same portfolio with an APR of 400%, which is
the approximate average APR for a payday loan according to the Consumer Financial Protection Bureau, or “CFPB.”
Page 8
1 Combined loans receivable-principal is a not a financial measure prepared in accordance with GAAP. Combined loans receivable – principal represents loans owned by the company plus loans originated and owned by third-party lenders pursuant to our
CSO programs. For additional reconciliations, see the Prospectus related to the Company’s initial public offering, filed pursuant to Rule 424(b) under the Securities Act of 1933 on April 7, 2017.
Page 9
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income/loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV facility
used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent consideration payable related to companies
previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/loss.
Page 10
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income/loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV facility
used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent consideration payable related to companies
previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/loss.
2 Combined loans receivable-principal is a not a financial measure prepared in accordance with GAAP. Combined loans receivable – principal represents loans owned by the company plus loans originated and owned by third-party lenders pursuant to our
CSO programs.
18
Footnotes (continued)
Page 12
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income/loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV facility
used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent consideration payable related to companies
previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/loss.
Page 13
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income/loss, adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV
facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; adjustments to contingent consideration payable related to
companies previously acquired prior to the spin-off; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/loss.
19
Non-GAAP financials reconciliation
Adjusted EBITDA Reconciliation
The Company’s Adjusted EBITDA guidance does not include certain charges and costs. The adjustments in future periods are generally expected to be similar to the kinds of charges and costs excluded
from Adjusted EBITDA in prior periods, such as the impact of income tax benefit or expense, non-operating income or expense, foreign currency transaction gain or loss associated with our UK
operations, net interest expense, stock-based compensation expense and depreciation and amortization expense, among others. The Company is not able to provide a reconciliation of the Company’s
non-GAAP financial guidance to the corresponding GAAP measure without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.
($mm) 2016 2015 2014 2013 2017 2016 2017 2016
Net income (22)$ (20) (55) (45)$ 3$ (7) 5$ (2)
Adjustments:
Net interest expense 64 37 13 - 18 14 37 28
Stock-based compensation 2 1 1 - 2 - 3 -
Foreign currency transaction (gain) loss 9 2 1 - (2) 3 (2) 5
Depreciation and amortization 11 9 8 5 2 3 5 6
Income tax expense (benefit) (3) (5) (21) (9) (1) (6) - -
Non-operating expense (income) - (6) - (1) (2) - (3) -
Loss on discontinued operations - - - 2 - - - -
Adjusted EBITDA 60$ 19 (53) (47) 20$ 7$ 45$ 37$
Adjusted EBITDA Margin 10% 4% -19% -65% 13% 5% 15% 14%
Three months ended
June 30,For the years ended December 31,
Six months ended
June, 30
20
Combined loans reconciliation
June 30, March 31, December 31, June 30, March 31,
(dollars in thousands) 2017 2017 2016 2016 2016
Company Owned Loans:
Loans receivable – principal, current, company owned 398,719 363,336 380,062 293,375 254,607
Loans receivable – principal, past due, company owned 51,064 52,415 64,422 42,659 35,407
Loans receivable – principal, total, company owned 449,783 415,751 444,484 336,034 290,014
Loans receivable – finance charges, company owned 21,866 21,359 25,630 20,093 19,045
Loans receivable – company owned 471,649 437,110 470,114 356,127 309,059
Allowance for loan losses on loans receivable, company owned (66,030) (69,798) (77,451) (54,873) (51,296)
Loans receivable, net, company owned 405,619 367,312 392,663 301,254 257,763
Third Party Loans Guaranteed by the Company:
Loans receivable – principal, current, guaranteed by company 29,107 26,888 33,637 34,748 28,556
Loans receivable – principal, past due, guaranteed by company 2,169 1,910 3,089 2,911 2,112
Loans receivable – principal, total, guaranteed by company1 31,276 28,798 36,726 37,659 30,668
Loans receivable – finance charges, guaranteed by company2 2,365 2,754 3,772 1,626 1,541
Loans receivable – guaranteed by company 33,641 31,552 40,498 39,285 32,209
Liability for losses on loans receivable, guaranteed by company (3,810) (3,565) (4,925) (7,124) (4,296)
Loans receivable, net, guaranteed by company3 29,831 27,987 35,573 32,161 27,913
21
Combined loans reconciliation (continued)
June 30, March 31, December 31, June 30, March 31,
(dollars in thousands) 2017 2017 2016 2016 2016
Combined Loans Receivable3:
Combined loans receivable – principal, current 427,826 390,224 413,699 328,957 283,163
Combined loans receivable – principal, past due 53,233 54,325 67,511 44,736 37,519
Combined loans receivable – principal 481,059 444,549 481,210 373,693 320,682
Combined loans receivable – finance charges 24,231 24,113 29,402 21,719 20,586
Combined loans receivable 505,290 468,662 510,612 395,412 341,268
Combined Loan Loss Reserve3:
Allowance for loan losses on loans receivable, company owned (66,030) (69,798) (77,451) (54,873) (51,296)
Liability for losses on loans receivable, guaranteed by company (3,810) (3,565) (4,925) (7,124) (4,296)
Combined loan loss reserve (69,840) (73,363) (82,376) (61,997) (55,592)
3 Non-GAAP measure.
1 Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial
statements.
2 Represents finance charges earned by third-party lenders through the CSO programs, which are not included in our financial
statements.
© 2017 Elevate. All Rights Reserved.