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EX-99.1 - EXHIBIT 99.1 - Elevate Credit, Inc. | exhibit991pressreleaseq320.htm |
8-K - 8-K - Elevate Credit, Inc. | a10-17pressrelease.htm |
Third Quarter 2017 Earnings Call
October 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, our perspectives on the fourth
quarter of 2017 and our outlook for 2018 and beyond, 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 and 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 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 most recent Quarterly Report on Form 10-Q and in the Company's other 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
$4.9 billion to 1.8 million
customers1 and saved
them more than $2 billion
over payday loans2
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 non-prime credit
5
Fintech lending sector assessment
Non-prime Prime Small Business
Market
size
160mm (U.S.)1 82mm (U.S.)1 27mm (U.S.)2
Barriers
to entry
Analytics, Regulatory Few Few
Competitive
dynamics
Payday, Title,
Storefront
Banks, Credit Cards Banks, Credit Cards
6
53%
40%
42%
39%
21%
0%
10%
20%
30%
40%
50%
60%
Super prime Prime plus Prime Near prime Non-prime
Personal Loan delinquency volatility after the Great Recession 2006-20171
(standard deviation divided by the tier’s average delinquency)
Non-prime lending is the least volatile sector
While overall delinquency is positively correlated to credit score, the
volatility of delinquency is inversely correlated to credit score
7
CFPB rules have added needed regulatory clarity
Rule Expected Elevate Impact
No more cycle of debt
Significant limitations on payday and balloon payment loans
None
Focus on underwriting not collections
Requirement for ability-to-repay analysis
None
Consumers control their bank accounts
Limitations on re-presenting payments
Minimal
Effective date – August 2019
8
Recent Business Highlights
RISE enters Tennessee
17th state, second state with a RISE line of credit offering
$2 billion in savings to Elevate customers
Lowered cost of funds and extended maturity date on UK
and sub-debt funding facilities
CFPB small dollar lending rule issued
Minimal to no changes to Elevate business
Elevate surpasses $500mm in outstandings
Now serving more than 325,000 existing customers
9
Q3 2017 continues strong performance
Adjusted EBITDA margin and combined loans receivable – principal are non-GAAP financial measures. See Appendix for a reconciliation to GAAP measures.
Elevate Goals Q3 2017 Performance Highlights
Strong Growth
15% revenue growth QOQ
1
22% loans receivable growth YOY
2
YTD $62mm Adjusted EBITDA>FY 2016 Adjusted EBITDA3
Improving Margins
13% YTD Adjusted EBITDA margin3
Positive net income
Stable Credit Quality Continued performance in target range
Managed CAC YTD $239, Q3 $222
Outsized Customer Impact
$2 billion saved over payday loans4
Continued reduction in average effective APR
10
($47) ($53)
$19
$60
$90-$100
2013 2014 2015 2016 2017E
$72
$274
$434
$580
$670-$680
2013 2014 2015 2016 2017E
Revenue
Adjusted EBITDA1
+281%
+58%
+34%
+16%
+223%
Growth in key financial measures ($mm)
+58%
Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
Net Income / (Loss)
YTD
$480
YTD
$62
($43)
($55)
($20) ($22)
$10-$15
2013 2014 2015 2016 2017E
YTD
$5
11
12
Continued margin expansion
Adjusted EBITDA margin is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
2015 2016 YTD 2017 LT Target
Gross Revenue 100% 100% 100% 100%
Loan Loss Provision 54% 55% 52% 50%
Direct Marketing and
Other Cost of Sales
18% 14% 14% 10%
Gross Margin 29% 31% 34% 40%
Operating Expenses 25% 21% 21% 20%
Adjusted EBITDA
Margin
1 4% 10% 13% 20%
% of Gross Revenues
13
2017 Outlook
Revenue = $670mm - $680mm
Net Income = $10mm - $15mm
Adjusted EBITDA1 = $90mm - $100mm
• Lowering fiscal year 2017 guidance
due to the delay in the 2017 tax refund
season and the impact of the recent
hurricanes
• Customer acquisition costs expected
to remain lower than our target
• Continued stable credit quality
expected
Perspective on Q4 Annual guidance
Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
14
Looking ahead to 2018 and beyond
Key Areas Expectations for 2018
Revenue Growth
Increased revenue growth over 2017
- Strong consumer demand
- Next generation of underwriting scores
- New Rise states and Elastic marketing channels
- New products and partnerships
Margin Improvement Increased margins continuing toward 20% long-term target
Net Income
At least 3X 2017 net income
- Combined effect of growth and margin improvements
15 15
We believe
everyone
deserves
a lift.
16
Appendix
17
Footnotes
Page 3:
1 Originations and customers from 2002-September 2017, attributable to the combined current and predecessor direct and branded products.
2 Based on the average effective APR of 129% for the quarter. This estimate, which has not been independently confirmed, is based on our 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 the "CFPB."
Page 5
1 According to an analysis of TransUnion data through the third quarter of 2014 by the Corporation for Enterprise Development and FICO, Expanding Credit Opportunities, July 2015
2 U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371. In 2010 there
were 27.9 million small businesses, and 18,500 firms with 500 employees or more.
Page 6:
1 TransUnion data on 90 day delinquency rates of balances for different Vantage Score bands from Q1 2005 through Q1 2017. Volatility is calculated by dividing the standard deviation of Vantage Score bands from Q1 2006 to
Q1 2017 by the average during the same period.
Page 9:
1 Q3 2017 revenue of $173 million and Q2 2017 revenue of $150 million.
2 Combined loans receivable – principal at September 30, 2017 of $549 million and at September 30, 2016 of $448 million. Combined loans receivable-principal is 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; loss on
discontinued operations; non-operating income; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income/ (loss). Adjusted EBITDA margin is Adjusted EBITDA divided by
revenue.
4 Based on the average effective APR of 129% for the quarter. This estimate, which has not been independently confirmed, is based on our 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 the "CFPB."
18
Footnotes (continued)
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; loss on
discontinued operations; non-operating income; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income (loss).
Page 12
1 Adjusted EBITDA margin is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. 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; loss on discontinued operations; non-operating income; 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; loss on
discontinued operations; non-operating income; stock compensation expense and income taxes. See the Appendix for a reconciliation to GAAP net income (loss).
19
Q3 2017 Performance
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; non-operating income; 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.
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
($mm) 2017 2016 2017 2016 2017 2016 2017 2016
Revenues 173$ 154$ 94$ 101$ 53$ 29$ 26$ 24$
Provision for Loan Losses (96) (91) (56) (65) (32) (18) (9) (8)
Direct Marketing Costs & Other (26) (28) (12) (14) (6) (4) (8) (10)
Gross Profit 51$ 35$ 27$ 22$ 15$ 6$ 9$ 7$
Adjusted EBITDA 1 17$ 3$
Net Income (Loss) 1$ (16)$
Combined loans receivable -
principal 2 548$ 448$ 283$ 269$ 225$ 138$ 40$ 41$
Loan Loss Provision % of Revenue 56% 59% 59% 65% 60% 63% 34% 32%
Gross Margin 29% 23% 29% 22% 28% 22% 34% 27%
Adjusted EBITDA Margin 1 10% 2%
Consolidated Rise Elastic Sunny
20
YTD 2017 Performance
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; non-operating income; 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 YTD YTD YTD YTD YTD YTD YTD
($mm) 2017 2016 2017 2016 2017 2016 2017 2016
Revenues 480$ 411$ 265$ 277$ 139$ 64$ 76$ 70$
Provision for Loan Losses (251) (218) (146) (155) (77) (36) (28) (27)
Direct Marketing Costs & Other (65) (63) (28) (31) (14) (9) (23) (24)
Gross Profit 164$ 131$ 91$ 92$ 48$ 19$ 24$ 20$
Adjusted EBITDA 1 62$ 40$
Net Income (Loss) 5$ (18)$
Combined loans
receivable - principal 2 548$ 448$ 283$ 269$ 225$ 138$ 40$ 41$
Loan Loss Provision % of Revenue 52% 53% 55% 56% 55% 57% 37% 38%
Gross Margin 34% 32% 34% 33% 35% 30% 32% 28%
Adjusted EBITDA Margin 1 13% 10%
Consolidated Rise Elastic Sunny
21
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, 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)$ 1$ (16) 5$ (18)
Adjustments:
Net interest expense 64 37 13 - 17 17 55 45
Stock-based compensation 2 1 1 - 2 1 4 1
Foreign currency transaction (gain) loss 9 2 1 - (1) 1 (3) 6
Depreciation and amortization 11 9 8 5 3 3 8 8
Income tax expense (benefit) (3) (5) (21) (9) (4) (3) (4) (2)
Non-operating expense (income) - (6) - (1) - - (3) -
Loss on discontinued operations - - - 2 - - - -
Adjusted EBITDA 60$ 19 (53) (47) 18$ 3$ 62$ 40$
Adjusted EBITDA Margin 10% 4% -19% -65% 10% 2% 13% 10%
Three months ended
September 30,For the years ended December 31,
Nine months ended
September, 30
22
Combined loans reconciliation
(dollars in thousands)
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
March 31,
2016
Company Owned Loans
Loans receivable - principal, current, company owned4
$450,891
403,944
367,744
387,142
352,595 294,559
255,543
Loans receivable - principal, past due, company owned4
61,040
45,839
48,007
57,342
57,811 41,475
34,471
Loans receivable - principal, total, company owned
511,931
449,783
415,751
444,484
410,406 336,034
290,014
Loans receivable - finance charges, company owned
27,625
21,866
21,359
25,630
22,745 20,093
19,045
Loans receivable - company owned
539,556
471,649
437,110
470,114
433,151 356,127
309,059
Allowance for loan losses on loans receivable, company owned
(80,972)
(66,030)
(69,798)
(77,451)
(73,019) (54,873)
(51,296)
Loans receivable, net, company owned
$458,584
405,619
367,312
392,663
360,132 301,254
257,763
Third Party Loans Company Guaranteed
Loans receivable - principal, current, guaranteed by company4
$35,690
30,210
27,841
34,466
35,388 34,748
28,556
Loans receivable - principal, past due, guaranteed by company4
1,267
1,066
957
2,260
2,465 2,911
2,112
Loans receivable - principal, total, guaranteed by company1
36,957
31,276
28,798
36,726
37,853 37,659
30,668
Loans receivable - finance charges, guaranteed by company2
2,751
2,365
2,754
3,772
3,129 1,626
1,541
Loans receivable - guaranteed by company
39,708
33,641
31,552
40,498
40,982 39,285
32,209
Liability for losses on loans receivable, guaranteed by company
(5,097)
(3,810)
(3,565)
(4,925)
(5,866) (7,124)
(4,296)
Loans receivable, net, guaranteed by company3
$34,611
29,831
27,987
35,573
35,116 32,161
27,913
23
Combined loans reconciliation (continued)
(dollars in thousands)
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
March 31,
2016
Combined Loans Receivable 3 :
Combined loans receivable - principal, current4
$486,581
434,154
395,585
421,608
387,983 329,307
284,099
Combined loans receivable - principal, past due4
62,307
46,905
48,964
59,602
60,276 44,386
36,583
Combined loans receivable - principal
548,888
481,059
444,549
481,210
448,259 373,693
320,682
Combined loans receivable - finance charges
30,376
24,231
24,113
29,402
25,874 21,719
20,586
Combined loans receivable
$579,264
505,290
468,662
510,612
474,133 395,412
341,268
Combined Loan Loss Reserve 3 :
Allowance for loan losses on loans receivable, company owned
$(80,972)
(66,030)
(69,798)
(77,451)
(73,019)
(54,873)
(51,296)
Liability for losses on loans receivable, guaranteed by company
(5,097)
(3,810)
(3,565)
(4,925)
(5,866)
(7,124)
(4,296)
Combined loan loss reserve
$(86,069)
(69,840)
(73,363)
(82,376)
(78,885)
(61,997)
(55,592)
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 CSO programs, which are not included in our financial statements.
3 Non-GAAP measure.
4 The company determined that it previously misclassified certain loans relating to customers within the 16 day grace period as past due that were in fact current in accordance with our
policy. Historical periods have been adjusted accordingly.
© 2017 Elevate. All Rights Reserved.