Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nyse  >  Elevate Credit, Inc.    ELVT

ELEVATE CREDIT, INC.

(ELVT)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsPress ReleasesOfficial PublicationsSector news

ELEVATE CREDIT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

share with twitter share with LinkedIn share with facebook
05/08/2020 | 11:08am EDT
You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and the related notes and other financial information
included elsewhere in this Quarterly Report on Form 10-Q. Some of the
information contained in this discussion and analysis, including information
with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. You should
review the "Note About Forward-Looking Statements" section of this Quarterly
Report on Form 10-Q for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by
the forward-looking statements contained in the following discussion and
analysis. We generally refer to loans, customers and other information and data
associated with each of our brands (Rise, Elastic, Sunny and Today Card) as
Elevate's loans, customers, information and data, irrespective of whether
Elevate directly originates the credit to the customer or whether such credit is
originated by a third party.
OVERVIEW
We provide online credit solutions to consumers in the US and the UK who are not
well-served by traditional bank products and who are looking for better options
than payday loans, title loans, pawn and storefront installment loans. Non-prime
consumers now represent a larger market than prime consumers but are risky to
underwrite and serve with traditional approaches. We're succeeding at it - and
doing it responsibly - with best-in-class advanced technology and proprietary
risk analytics honed by serving more than 2.5 million customers with $8.4
billion in credit. Our current online credit products, Rise, Elastic and Sunny,
and our recently test launched Today Card reflect our mission to provide
customers with access to competitively priced credit and services while helping
them build a brighter financial future with credit building and financial
wellness features. We call this mission "Good Today, Better Tomorrow."
We earn revenues on the Rise and Sunny installment loans, on the Rise and
Elastic lines of credit and on the Today Card credit card product. Our revenue
primarily consists of finance charges and line of credit fees. Finance charges
are driven by our average loan balances outstanding and by the average annual
percentage rate ("APR") associated with those outstanding loan balances. We
calculate our average loan balances by taking a simple daily average of the
ending loan balances outstanding for each period. Line of credit fees are
recognized when they are assessed and recorded to revenue over the life of the
loan. We present certain key metrics and other information on a "combined" basis
to reflect information related to loans originated by us and by our bank
partners that license our brands, Republic Bank, FinWise Bank and Capital
Community Bank, as well as loans originated by third-party lenders pursuant to
CSO programs, which loans originated through CSO programs are not recorded on
our balance sheet in accordance with US GAAP. See "-Key Financial and Operating
Metrics" and "-Non-GAAP Financial Measures."
We use our working capital, funds provided by third-party lenders pursuant to
CSO programs and our credit facility with Victory Park Management, LLC ("VPC"
and the "VPC Facility") to fund the loans we make to our Rise and Sunny
customers and provide working capital. Since originally entering into the VPC
Facility, it has been amended several times to increase the maximum total
borrowing amount available from the original amount of $250 million to
approximately $492 million at March 31, 2020. See "-Liquidity and Capital
Resources-Debt facilities."
Beginning in the fourth quarter of 2018, the Company also licenses its Rise
installment loan brand to a third-party lender, FinWise Bank, which originates
Rise installment loans in 18 states. FinWise Bank initially provides all of the
funding and retains a percentage of the balances of all of the loans originated
and sells the remaining loan participation in those Rise installment loans to a
third-party SPV, EF SPV, Ltd. ("EF SPV"). Prior to August 1, 2019, FinWise Bank
retained 5% of the balances and sold a 95% participation to EF SPV. On August 1,
2019, EF SPV purchased an additional 1% participation in the outstanding
portfolio with the participation percentage revised going forward to 96%. These
loan participation purchases are funded through a separate financing facility
(the "EF SPV Facility"), effective February 1, 2019, and through cash flows from
operations generated by EF SPV. The EF SPV Facility has a maximum total
borrowing amount available of $150 million. We do not own EF SPV, but we have a
credit default protection agreement with EF SPV whereby we provide credit
protection to the investors in EF SPV against Rise loan losses in return for a
credit premium. Elevate is required to consolidate EF SPV as a variable interest
entity under GAAP and the condensed consolidated financial statements include
revenue, losses and loans receivable related to the 96% of the Rise installment
loans originated by FinWise Bank and sold to EF SPV.




                                       40
--------------------------------------------------------------------------------


The Elastic line of credit product is originated by a third-party lender,
Republic Bank, which initially provides all of the funding for that product.
Republic Bank retains 10% of the balances of all loans originated and sells a
90% loan participation in the Elastic lines of credit. An SPV structure was
implemented such that the loan participations are sold by Republic Bank to
Elastic SPV, Ltd. ("Elastic SPV") and Elastic SPV receives its funding from VPC
in a separate financing facility (the "ESPV Facility"), which was finalized on
July 13, 2015. We do not own Elastic SPV but we have a credit default protection
agreement with Elastic SPV whereby we provide credit protection to the investors
in Elastic SPV against Elastic loan losses in return for a credit premium. Per
the terms of this agreement, under US GAAP, the Company is the primary
beneficiary of Elastic SPV and is required to consolidate the financial results
of Elastic SPV as a VIE in its consolidated financial results.

The ESPV Facility has also been amended several times and the original commitment amount of $50 million has grown to $350 million as of March 31, 2020. See "-Liquidity and Capital Resources-Debt facilities."

Our management assesses our financial performance and future strategic goals through key metrics based primarily on the following three themes: • Revenue growth. Key metrics related to revenue growth that we monitor by

product include the ending and average combined loan balances outstanding,

the effective APR of our product loan portfolios, the total dollar value of

loans originated, the number of new customer loans made, the ending number of

customer loans outstanding and the related customer acquisition costs ("CAC")

associated with each new customer loan made. We include CAC as a key metric

when analyzing revenue growth (rather than as a key metric within margin

expansion).

• Stable credit quality. Since the time they were managing our legacy US

products, our management team has maintained stable credit quality across the

loan portfolio they were managing. Additionally, in the periods covered in

this Management's Discussion and Analysis of Financial Condition and Results

of Operations, we have improved our credit quality. The credit quality

metrics we monitor include net charge-offs as a percentage of revenues, the

combined loan loss reserve as a percentage of outstanding combined loans,

total provision for loan losses as a percentage of revenues and the

percentage of past due combined loans receivable - principal.

• Margin expansion. We expect that our operating margins will continue to

expand over the long term as we lower our direct marketing costs and

efficiently manage our operating expenses while continuing to improve our

credit quality. Over the next several years, as we continue to scale our loan

portfolio, we anticipate that our direct marketing costs primarily associated

with new customer acquisitions will decline to approximately 10% of revenues

and our operating expenses will decline to approximately 20% of revenues. We

aim to manage our business to achieve a long-term operating margin of 20%,

and do not expect our operating margin to increase beyond that level, as we

intend to pass on any improvements over our targeted margins to our customers

in the form of lower APRs. We believe this is a critical component of our

responsible lending platform and over time will also help us continue to

attract new customers and retain existing customers.



Impact of COVID-19
In March 2020, the outbreak of the novel Coronavirus Disease 2019 ("COVID-19")
was recognized as a pandemic by the World Health Organization. The spread of
COVID-19 has created a global public health crisis that has resulted in
unprecedented uncertainty, volatility and disruption in financial markets and in
governmental, commercial and consumer activity in the United States and
globally, including the markets that we serve. Governmental responses to the
pandemic have included orders closing businesses not deemed essential and
directing individuals to restrict their movements, observe social distancing and
shelter in place. These actions, together with responses to the pandemic by
businesses and individuals, have resulted in rapid decreases in commercial and
consumer activity, temporary closures of many businesses that have led to a loss
of revenues and a rapid increase in unemployment, material decreases in oil and
gas prices and in business valuations, disrupted global supply chains, market
downturns and volatility, changes in consumer behavior related to pandemic
fears, related emergency response legislation and an expectation that Federal
Reserve policy will maintain a low interest rate environment for the foreseeable
future.
As COVID-19 began to impact our locations in the US and the UK, we successfully
transitioned our employee base to a remote working environment. We have sought
to ensure our employees feel secure in their jobs and have the flexibility and
resources they need to stay safe and healthy. As an 100% online lending
solutions provider, our technology and underwriting platform has continued to
serve our customers and the bank originators that we support.




                                       41
--------------------------------------------------------------------------------


In response to the COVID-19 pandemic, we, along with the banks we support, have
also expanded our payment flexibility programs to provide temporary payment
relief to certain customers who meet the program's qualifications. This program
allows for a deferral of payments for an initial period of 60 days, which we may
extend for an additional 60 days, for a maximum of 180 days on a cumulative
basis. The customer will return to their normal payment schedule after the end
of the deferral period with the extension of their maturity date equivalent to
their deferral period not to exceed an additional 180 days. For Rise and Sunny
installment loans, finance charges continue to accrue at a lower effective APR
over the expected extended term of the loan considering the deferral periods
provided. For Elastic lines of credit, no fees accrue during the payment
deferral period. As a result, we expect the average APR of our products to
decrease due to the impact of the COVID pandemic and the payment flexibility
programs that have been implemented. As of March 31, 2020, 4.7% of customers
have been provided relief through a COVID-19 payment deferral program for a
total of $26.4 million in loans with deferred payments. As of April 30, 2020,
10.8% of customers have been provided relief through a COVID-19 payment deferral
program for a total of $53.4 million in loans with deferred payments. We believe
the Allowance for loan losses is adequate to absorb the losses inherent in the
portfolio as of March 31, 2020.

Both we and the bank originators are closely monitoring early credit quality
indicators such as first payment defaults, deferred payments and line of credit
utilization. We have also seen a slight increase in delinquencies and expect an
increase in net charge-offs as compared to prior periods. Both we, and the bank
originators we support, have implemented underwriting changes to address credit
risk associated with originations during the economic crisis created by the
COVID-19 pandemic and have reduced loan origination applications and loan
origination volume since the beginning of the COVID-19 pandemic. The portfolio
of loan products we and the bank originators provide has experienced decreased
demand in the US and UK as the COVID-19 pandemic began impacting those markets.

Due to the impact of COVID-19, we determined that a triggering event had
occurred as of March 31, 2020, and accordingly, performed interim impairment
testing on the goodwill balances of our UK and Elastic reporting units (there is
no goodwill associated with the Rise or Today Card reporting units). We
performed a detailed qualitative and quantitative assessment of each reporting
unit and concluded that the goodwill associated with the UK reporting unit was
impaired as the fair value of the UK reporting unit was less than its carrying
amount. While there was a decline in the fair value of the Elastic reporting
unit, there was no impairment identified during the quantitative assessment. We
recognized an impairment of the UK reporting unit's $9.3 million goodwill
balance and the charge was recognized to Impairment loss on the Condensed
Consolidated Statements of Operations.

Significant uncertainties as to future economic conditions exist, and we have
taken deliberate actions in response, including assessing our minimum cash and
liquidity requirement, monitoring our debt covenant compliance and implementing
measures to ensure that our strong liquidity position is maintained through the
current economic cycle. We continue to monitor the impact of COVID-19 closely,
as well as any effects that may result from the CARES Act; however, the extent
to which the COVID-19 pandemic will impact our operations and financial results
during the remainder of 2020 is highly uncertain.
KEY FINANCIAL AND OPERATING METRICS
As discussed above, we regularly monitor a number of metrics in order to measure
our current performance and project our future performance. These metrics aid us
in developing and refining our growth strategies and in making strategic
decisions.
Certain of our metrics are non-GAAP financial measures. We believe that such
metrics are useful in period-to-period comparisons of our core business.
However, non-GAAP financial measures are not an alternative to any measure of
financial performance calculated and presented in accordance with US GAAP. See
"-Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to
US GAAP.





                                       42
--------------------------------------------------------------------------------

Revenue Growth

                                                        As of and for the three months ended March 31,
Revenue metrics (dollars in thousands, except as
noted)                                                         2020                         2019
Revenues                                            $            177,455           $            189,504
Period-over-period change in revenue                                  (6 )%                          (2 )%
Ending combined loans receivable - principal(1)                  577,697                        575,131
Average combined loans
receivable - principal(1)(2)                                     613,585                        609,192
Total combined loans originated - principal                      250,227                        298,264
Average customer loan balance (in dollars)(3)                      1,707                          1,577
Number of new customer loans                                      46,590                         50,476
Ending number of combined loans outstanding                      338,415                        364,679
Customer acquisition costs (in dollars)                              259                            221
Effective APR of combined loan portfolio                             116  %                         126  %


_________

(1) Combined loans receivable is defined as loans owned by the Company and

consolidated VIEs plus loans originated and owned by third-party lenders

pursuant to our CSO programs. See "-Non-GAAP Financial Measures" for more

information and for a reconciliation of Combined loans receivable to Loans

receivable, net, the most directly comparable financial measure calculated in

accordance with US GAAP.

(2) Average combined loans receivable - principal is calculated using an average

of daily Combined loans receivable - principal balances.

(3) Average customer loan balance is an average of all four products and is

calculated for each product by dividing the ending Combined loans receivable

- principal by the number of loans outstanding at period end.



Revenues.  Our revenues are composed of Rise finance charges, Rise CSO fees
(which are fees we receive from customers who obtain a loan through the CSO
program for the credit services, including the loan guaranty, we provide),
finance charges on Sunny installment loans and revenues earned on the Rise and
Elastic lines of credit. Finance charge and fee revenues from the Today Card
credit card product, which expanded its test launch in November 2018, were
immaterial. See "-Components of our Results of Operations-Revenues."
Ending and average combined loans receivable - principal.  We calculate the
average combined loans receivable - principal by taking a simple daily average
of the ending combined loans receivable - principal for each period. Key metrics
that drive the ending and average combined loans receivable - principal include
the amount of loans originated in a period and the average customer loan
balance. All loan balance metrics include only the 90% participation in the
related Elastic line of credit advances (we exclude the 10% held by Republic
Bank) and the 96% participation in FinWise Bank originated Rise installment
loans, but include the full loan balances on CSO loans, which are not presented
on our Condensed Consolidated Balance Sheet.
Total combined loans originated - principal.  The amount of loans originated in
a period is driven primarily by loans to new customers as well as new loans to
prior customers, including refinancings of existing loans to customers in good
standing.
Average customer loan balance and effective APR of combined loan portfolio. 

The

average loan amount and its related APR are based on the product and the
underlying credit quality of the customer. Generally, better credit quality
customers are offered higher loan amounts at lower APRs. Additionally, new
customers have more potential risk of loss than prior or existing customers due
to lack of payment history and the potential for fraud. As a result, newer
customers typically will have lower loan amounts and higher APRs to compensate
for that additional risk of loss. The effective APR is calculated based on the
actual amount of finance charges generated from a customer loan divided by the
average outstanding balance for the loan and can be lower than the stated APR on
the loan due to waived finance charges and other reasons. For example, a Rise
customer may receive a $2,000 installment loan with a term of 24 months and a
stated rate of 180%. In this example, the customer's monthly installment loan
payment would be $310.86. As the customer can prepay the loan balance at any
time with no additional fees or early payment penalty, the customer pays the
loan in full in month eight. The customer's loan earns interest of $2,337.81
over the eight-month period and has an average outstanding balance of $1,948.17.
The effective APR for this loan is 180% over the eight-month period calculated
as follows:




                                       43
--------------------------------------------------------------------------------


($2,337.81 interest earned / $1,948.17 average balance outstanding)
x 12 months per year = 180%
8 months
In addition, as an example for Elastic, if a customer makes a $2,500 draw on the
customer's line of credit and this draw required bi-weekly minimum payments of
5% (equivalent to 20 bi-weekly payments), and if all minimum payments are made,
the draw would earn finance charges of $1,148. The effective APR for the line of
credit in this example is 109% over the payment period and is calculated as
follows:

($1,148.00 fees earned / $1,369.05 average balance outstanding) x 26 bi-weekly periods per year = 109%
20 payments
The actual amount of revenue we realize on a loan portfolio is also impacted by
the amount of prepayments and charged-off customer loans in the portfolio. For a
single loan, on average, we typically expect to realize approximately 60% of the
revenues that we would otherwise realize if the loan were to fully amortize at
the stated APR. From the Rise example above, if we waived $400 of interest for
this customer, the effective APR for this loan would decrease to 149%.
Number of new customer loans.  We define a new customer loan as the first loan
made to a customer for each of our products (so a customer receiving a Rise
installment loan and then at a later date taking their first cash advance on an
Elastic line of credit would be counted twice). The number of new customer loans
is subject to seasonal fluctuations. New customer acquisition is typically
slowest during the first six months of each calendar year, primarily in the
first quarter, compared to the latter half of the year, as our existing and
prospective US customers usually receive tax refunds during this period and,
thus, have less of a need for loans from us. Further, many US customers will use
their tax refunds to prepay all or a portion of their loan balance during this
period, so our overall loan portfolio typically decreases during the first
quarter of the calendar year. Overall loan portfolio growth and the number of
new customer loans tends to accelerate during the summer months (typically June
and July), at the beginning of the school year (typically late August to early
September) and during the winter holidays (typically late November to early
December).
Customer acquisition costs.  A key expense metric we monitor related to loan
growth is our CAC. This metric is the amount of direct marketing costs incurred
during a period divided by the number of new customer loans originated during
that same period. New loans to former customers are not included in our
calculation of CAC (except to the extent they receive a loan through a different
product) as we believe we incur no material direct marketing costs to make
additional loans to a prior customer through the same product.
The following tables summarize the changes in customer loans by product for the
three months ended March 31, 2020 and 2019.
                                                  Three Months Ended March 

31, 2020

                         Rise (US)       Elastic (US)(1)     Total Domestic      Sunny (UK)          Total
Beginning number of
combined loans
outstanding                 152,435             149,524           301,959            72,525           374,484
New customer loans
originated                   24,413              11,337            35,750            10,840            46,590
Former customer
loans originated             16,556                 131            16,687                 -            16,687
Attrition                   (50,771 )           (22,139 )         (72,910 )         (26,436 )         (99,346 )
Ending number of
combined loans
outstanding                 142,633             138,853           281,486            56,929           338,415
Customer acquisition
cost                   $        309     $           303     $         307      $        102$        259
Average customer
loan balance           $      2,269     $         1,656     $       1,966$        425$      1,707






                                       44
--------------------------------------------------------------------------------

                                                   Three Months Ended March 31, 2019
                         Rise (US)       Elastic (US)(1)     Total Domestic      Sunny (UK)           Total
Beginning number of
combined loans
outstanding                 142,758             166,397           309,155            89,449            398,604
New customer loans
originated                   17,365               4,838            22,203            28,273             50,476
Former customer
loans originated             17,791                   9            17,800                 -             17,800
Attrition                   (52,893 )           (25,484 )         (78,377 )         (23,824 )         (102,201 )
Ending number of
combined loans
outstanding                 125,021             145,760           270,781            93,898            364,679
Customer acquisition
cost                   $        333     $           294     $         324      $        140      $         221
Average customer
loan balance           $      2,241     $         1,685     $       1,941$        527$       1,577


(1) Includes immaterial balances related to the Today Card, which expanded its
test launch in November 2018.
Recent trends.  Our revenues for the three months ended March 31, 2020 totaled
$177.5 million, a decrease of 6% versus the three months ended March 31, 2019.
Both Elastic and UK Sunny products experienced year-over-year declines in
revenues, partially offset by an increase in revenues from our Rise product.
Almost all the decline in Elastic and Sunny revenues resulted from a decrease in
loan balances. Elastic loan balances at March 31, 2020, totaled $224.7 million,
down roughly $20 million from a year ago. Elastic was the product that was
initially most impacted by the COVID-19 pandemic as customer multidraw activity
(or line utilization on this line of credit product) was surprisingly lower than
expected. Elastic originations were almost $10 million lower in the month of
March 2020 versus what we had originally expected at the beginning of the
quarter, and this trend has continued through April 2020. As a result of these
lower loan balances, Elastic revenues declined almost $6.0 million in the first
quarter of 2020 compared to a year ago.
Our Sunny loan portfolio has decreased from $49.4 million at the end of the
first quarter of 2019 down to just $24.2 million at the end of the 2020 first
quarter. As has been previously disclosed, despite very low customer acquisition
costs due to a lack of competition, we continue to approve fewer new customers
each quarter because of ever-stringent customer affordability regulations in the
UK. We only approved just over ten thousand new customer loans in the first
quarter of 2020, at a very low CAC of $102, but down from almost thirty thousand
new customer loans in the first quarter of 2019. As a result of these lower loan
balances, Sunny revenue declined $14.4 million in the first quarter of 2020
compared to a year ago.
Rise revenue increased $8.4 million on a year-over-year basis, partially
offsetting the decline from the other two products. Rise installment loan
balances were up $43.5 million to $323.6 million at March 31, 2020, compared to
$280.1 million a year ago. Most of the increase in the Rise loan balances
resulted from loans originated by FinWise Bank, which began originating Rise
loans in the fourth quarter of 2018.
In response to the COVID-19 pandemic, we have also expanded our payment
flexibility programs to provide temporary payment relief to certain customers
who meet the program's qualifications. This program allows for a deferral of
payments for an initial period of 60 days, for a maximum of 180 days on a
cumulative basis. The customer will return to their normal payment schedule
after the end of the deferral period with the extension of their maturity date
equivalent to their deferral period not to exceed an additional 180 days. For
Rise and Sunny installment loans, finance charges continue to accrue at a lower
effective APR over the expected extended term of the loan considering the
deferral periods provided. For Elastic lines of credit, no fees accrue during
the payment deferral period. As a result, we expect the average APR of our
products to decrease due to the impact of the COVID pandemic and the payment
flexibility programs that have been implemented.




                                       45
--------------------------------------------------------------------------------


Additionally, all products were impacted by the COVID-19 pandemic as we
experienced reduced demand and application volume in March for both new and
former customers in addition to implementing underwriting changes that limited
the volume of new customer loan originations in March 2020. As a result, our CAC
was higher in the first quarter of 2020 as compared to the first quarter of 2019
but was within our long-term targeted range of $250 to $300. In the first
quarter of 2019, we moderated our customer growth and marketing spend, primarily
for the Elastic product, as we focused on rolling out new credit models for the
remainder of the year. Prior to COVID-19, we had resumed our seasonal marketing
efforts in the first quarter of 2020, which experienced increased new loan
volume as compared to prior year as well as increased our direct marketing
costs. The CAC for our US products decreased due to more efficient marketing
spend. The Sunny CAC also decreased for the three months ended March 31, 2020
from $140 to $102 due to more efficient marketing spend coupled with diminished
competition in the UK market. We believe our CAC in future quarters will remain
within or below our long-term target range of $250 to $300 as we continue to
optimize the efficiency of our marketing channels with our recently launched
credit models and benefit from continued less competition in the UK market.
Credit quality

                                                       As of and for the three months ended March 31,
Credit quality metrics (dollars in thousands)                    2020                     2019
Net charge-offs(1)                                     $             88,064         $       103,985
Additional provision for loan losses(1)                              (5,311 )               (16,554 )
Provision for loan losses                              $             82,753         $        87,431
Past due combined loans receivable - principal as a
percentage of combined loans receivable -
principal(2)                                                             10 %                    10 %
Net charge-offs as a percentage of revenues(1)                           50 %                    55 %

Total provision for loan losses as a percentage of revenues

                                                                 47 %                    46 %
Combined loan loss reserve(3)                          $             83,387         $        79,699
Combined loan loss reserve as a percentage of
combined loans receivable(3)(4)                                          14 %                    13 %


_________

(1) Net charge-offs and additional provision for loan losses are not financial

measures prepared in accordance with US GAAP. Net charge-offs include the

amount of principal and accrued interest on loans that are more than 60 days

past due, or sooner if we receive notice that the loan will not be collected,

such as a bankruptcy notice or identified fraud, offset by any recoveries.

Additional provision for loan losses is the amount of provision for loan

losses needed for a particular period to adjust the combined loan loss

reserve to the appropriate level in accordance with our underlying loan loss

reserve methodology. See "-Non-GAAP Financial Measures" for more information

and for a reconciliation to Provision for loan losses, the most directly

comparable financial measure calculated in accordance with US GAAP.

(2) Combined loans receivable is defined as loans owned by the Company and

consolidated VIEs plus loans originated and owned by third-party lenders

pursuant to our CSO programs. See "-Non-GAAP Financial Measures" for more

information and for a reconciliation of Combined loans receivable to Loans

receivable, net, the most directly comparable financial measure calculated in

accordance with US GAAP.

(3) Combined loan loss reserve is defined as the loan loss reserve for loans

originated and owned by the Company plus the loan loss reserve for loans

owned by third-party lenders and guaranteed by the Company. See "-Non-GAAP

Financial Measures" for more information and for a reconciliation of Combined

loan loss reserve to Allowance for loan losses, the most directly comparable

financial measure calculated in accordance with US GAAP.

(4) Combined loan loss reserve as a percentage of combined loans receivable is

    determined using period-end balances.






                                       46
--------------------------------------------------------------------------------


Net principal charge-offs as a percentage of
average combined loans receivable -             First      Second     Third      Fourth
principal (1) (2) (3)                          Quarter    Quarter    Quarter    Quarter
2020                                             11%        N/A        N/A        N/A
2019                                             13%        11%        11%        13%
2018                                             13%        12%        13%        14%


_________

(1) Net principal charge-offs is comprised of gross principal charge-offs less

recoveries.

(2) Average combined loans receivable - principal is calculated using an average

of daily Combined loans receivable - principal balances during each quarter.

(3) Combined loans receivable is defined as loans owned by the Company and

consolidated VIEs plus loans originated and owned by third-party lenders

pursuant to our CSO programs. See "-Non-GAAP Financial Measures" for more

information and for a reconciliation of Combined loans receivable to Loans

receivable, net, the most directly comparable financial measure calculated in

accordance with US GAAP.



In reviewing the credit quality of our loan portfolio, we break out our total
provision for loan losses that is presented on our statement of operations under
US GAAP into two separate items-net charge-offs and additional provision for
loan losses. Net charge-offs are indicative of the credit quality of our
underlying portfolio, while additional provision for loan losses is subject to
more fluctuation based on loan portfolio growth, recent credit quality trends
and the effect of normal seasonality on our business. The additional provision
for loan losses is the amount needed to adjust the combined loan loss reserve to
the appropriate amount at the end of each month based on our loan loss reserve
methodology.

Net charge-offs.  Net charge-offs comprise gross charge-offs offset by
recoveries on prior charge-offs. Gross charge-offs include the amount of
principal and accrued interest on loans that are more than 60 days past due, or
sooner if we receive notice that the loan will not be collected, such as a
bankruptcy notice or identified fraud. Any payments received on loans that have
been charged off are recorded as recoveries and reduce the total amount of gross
charge-offs. Recoveries are typically less than 10% of the amount charged off,
and thus, we do not view recoveries as a key credit quality metric.
Net charge-offs as a percentage of revenues can vary based on several factors,
such as whether or not we experience significant growth or lower the APR of our
products. Additionally, although a more seasoned portfolio will typically result
in lower net charge-offs as a percentage of revenues, we do not intend to drive
down this ratio significantly below our historical ratios and would instead seek
to offer our existing products to a broader new customer base to drive
additional revenues.
Net charge-offs as a percentage of average combined loans receivable-principal
allow us to determine credit quality and evaluate loss experience trends across
our loan portfolio.
Additional provision for loan losses.  Additional provision for loan losses is
the amount of provision for loan losses needed for a particular period to adjust
the combined loan loss reserve to the appropriate level in accordance with our
underlying loan loss reserve methodology.
Additional provision for loan losses relates to an increase in future inherent
losses in the loan portfolio as determined by our loan loss reserve methodology.
This increase could be due to a combination of factors such as an increase in
the size of the loan portfolio or a worsening of credit quality or increase in
past due loans. It is also possible for the additional provision for loan losses
for a period to be a negative amount, which would reduce the amount of the
combined loan loss reserve needed (due to a decrease in the loan portfolio or
improvement in credit quality). The amount of additional provision for loan
losses is seasonal in nature, mirroring the seasonality of our new customer
acquisition and overall loan portfolio growth, as discussed above. The combined
loan loss reserve typically decreases during the first quarter or first half of
the calendar year due to a decrease in the loan portfolio from year end. Then,
as the rate of growth for the loan portfolio starts to increase during the
second half of the year, additional provision for loan losses is typically
needed to increase the reserve for future losses associated with the loan
growth. Because of this, our provision for loan losses can vary significantly
throughout the year without a significant change in the credit quality of our
portfolio.




                                       47
--------------------------------------------------------------------------------


The following provides an example of the application of our loan loss reserve
methodology and the break-out of the provision for loan losses between the
portion associated with replenishing the reserve due to net charge-offs and the
amount related to the additional provision for loan losses. If the beginning
combined loan loss reserve were $25 million, and we incurred $10 million of net
charge-offs during the period and the ending combined loan loss reserve needed
to be $30 million according to our loan loss reserve methodology, our total
provision for loan losses would be $15 million, comprising $10 million in net
charge-offs (provision needed to replenish the combined loan loss reserve) plus
$5 million of additional provision related to an increase in future inherent
losses in the loan portfolio identified by our loan loss reserve methodology.

Example (dollars in thousands)
Beginning combined loan loss reserve                  $ 25,000
Less: Net charge-offs                                  (10,000 )
Provision for loan losses:
Provision for net charge-offs               10,000

Additional provision for loan losses 5,000 Total provision for loan losses

                         15,000
Ending combined loan loss reserve balance             $ 30,000



Loan loss reserve methodology.  Our loan loss reserve methodology is calculated
separately for each product and, in the case of Rise loans originated under the
state lending model (including CSO program loans), is calculated separately
based on the state in which each customer resides to account for varying state
license requirements that affect the amount of the loan offered, repayment terms
and other factors. For each product, loss factors are calculated based on the
delinquency status of customer loan balances: current, 1 to 30 days past due or
31 to 60 days past due. These loss factors for loans in each delinquency status
are based on average historical loss rates by product (or state) associated with
each of these three delinquency categories. Hence, another key credit quality
metric we monitor is the percentage of past due combined loans receivable -
principal, as an increase in past due loans will cause an increase in our
combined loan loss reserve and related additional provision for loan losses to
increase the reserve. For customers that are not past due, we further stratify
these loans into loss rates by payment number, as a new customer that is about
to make a first loan payment has a significantly higher risk of loss than a
customer who has successfully made ten payments on an existing loan with us.
Based on this methodology, during the past three years we have seen our combined
loan loss reserve as a percentage of combined loans receivable fluctuate between
approximately 12% and 17% depending on the overall mix of new, former and past
due customer loans.

Recent trends.  Total loan loss provision for the three months ended March 31,
2020 was 47% of revenues, which was within our targeted range of 45% to 55%, and
slightly higher than the 46% for the three months ended March 31, 2019. For the
three months ended March 31, 2020, net charge-offs as a percentage of revenues
decreased to 50% compared to 55% in the prior year period. In the near-term, due
to the impact of the COVID-19 pandemic, we expect to see an increase in our net
charge-offs as a percentage of revenues. We continue to monitor the portfolio
during this economic crisis resulting from COVID-19 and continue to adjust our
underwriting and credit policies to mitigate any potential negative impacts. In
the long-term (post-COVID-19), we expect to continue to manage our total loan
loss provision as a percentage of revenues to continue to remain within our
targeted range due to ongoing maturation of the loan portfolio and continued
improvements in our underwriting models and processes.

The combined loan loss reserve as a percentage of combined loans receivable
totaled 13.6% and 13.1% as of March 31, 2020 and March 31, 2019, respectively.
Historically, our combined loan loss reserve has decreased by 3-6% during the
first quarter of the year due to the seasonal loan paydowns and slower new
customer loan origination activities during that period. As of March 31, 2020,
our combined loan loss reserve was 13.6%, an increase of 4% from the combined
loan loss reserve rate of 13.1% at December 31, 2019. This increase in the loan
loss reserve is due to a shift in the mix of the portfolio products and a slight
increase in our delinquencies due to COVID-19 at March 31, 2020. Past due loan
balances at March 31, 2020 were 10.2% of total combined loans receivable -
principal, slightly up from 9.7% from a year ago.





                                       48
--------------------------------------------------------------------------------


Additionally, we also look at principal loan charge-offs (including both credit
and fraud losses) by vintage as a percentage of combined loans originated -
principal. As the below table shows, our cumulative principal loan charge-offs
through March 31, 2020 for each annual vintage since the 2013 vintage are
generally under 30% and continue to trend at or slightly below our 25% to 30%
long-term targeted range. In the beginning of 2019, we implemented new fraud
tools that have helped lower fraud losses for the 2019 vintage. Additionally, we
rolled out our next generation of credit models during the second quarter of
2019 and continued refining the models during the third and fourth quarters of
2019. The preliminary data on the 2019 vintage is that it is performing better
than both 2017 and 2018 vintages. We expect that the cumulative loss rates on
all vintages will increase and may exceed our recent historical cumulative loss
experience due to the impact of the economic crisis resulting from the COVID-19
pandemic.
[[Image Removed: cumulativecreditloss32020a01.jpg]]
1) The 2019 and 2020 vintages are not yet fully mature from a loss perspective.




                                       49
--------------------------------------------------------------------------------

Margins

                                              Three Months Ended
                                                   March 31,
Margin metrics (dollars in thousands)         2020           2019

Revenues                                  $ 177,455$ 189,504
Net charge-offs(1)                          (88,064 )     (103,985 )
Additional provision for loan losses(1)       5,311         16,554
Direct marketing costs                      (12,071 )      (11,154 )
Other cost of sales                          (8,330 )       (5,060 )
Gross profit                                 74,301         85,859
Operating expenses                          (48,619 )      (47,880 )
Operating income                          $  25,682$  37,979
As a percentage of revenues:
Net charge-offs                                  50  %          55  %
Additional provision for loan losses             (3 )           (9 )
Direct marketing costs                            7              6
Other cost of sales                               5              3
Gross margin                                     42             45
Operating expenses                               27             25
Operating margin                                 14  %          20  %


_________

(1) Non-GAAP measure. See "-Non-GAAP Financial Measures-Net charge-offs and

additional provision for loan losses."



Gross margin is calculated as revenues minus cost of sales, or gross profit,
expressed as a percentage of revenues, and operating margin is calculated as
operating income expressed as a percentage of revenues. Due to the uncertain
impact of COVID-19, we are monitoring our margins closely. Long-term, we expect
our margins to increase as we continue to scale our business while maintaining
stable credit quality. We allocate all marketing spend only to new customer
loans. As our loan portfolio continues to mature with more customer loans that
are from repeat customers, we will be generating revenue from those repeat
customer loans without incurring any related marketing expense. As a result, we
expect marketing expense as a percentage of revenue to continue to decline over
time resulting in an increased gross profit margin. Additionally, being an
online fintech company, we believe that as we continue to scale our business, we
will generate operating efficiencies and our operating expense as a percentage
of revenues will decline resulting in an increased operating margin. However,
short-term, due to the expected impact of COVID-19, we expect our operating
margin to decrease as both net charge-offs and operating expenses as a
percentage of revenue are expected to increase, due to a combination of higher
net charge-offs combined with a decrease in revenues and operating expenses that
will be flat to slightly declining.
Recent operating margin trends.  For the three months ended March 31, 2020, our
operating margin was 14%, which was a decrease from 20% in the prior year
period. This decrease was primarily driven by a decrease in revenue, higher
total loan loss provision due to an increased combined loan loss reserve as
compared to the prior year, higher direct marketing costs due to expanded
marketing activities during the period and increased other cost of sales.




                                       50
--------------------------------------------------------------------------------


NON-GAAP FINANCIAL MEASURES
We believe that the inclusion of the following non-GAAP financial measures in
this Quarterly Report on Form 10-Q can provide a useful measure for
period-to-period comparisons of our core business, provide transparency and
useful information to investors and others in understanding and evaluating our
operating results, and enable investors to better compare our operating
performance with the operating performance of our competitors. Management uses
these non-GAAP financial measures frequently in its decision-making because they
provide supplemental information that facilitates internal comparisons to the
historical operating performance of prior periods and give an additional
indication of the Company's core operating performance. However, non-GAAP
financial measures are not a measure calculated in accordance with US generally
accepted accounting principles, or US GAAP, and should not be considered an
alternative to any measures of financial performance calculated and presented in
accordance with US GAAP. Other companies may calculate these non-GAAP financial
measures differently than we do.
Adjusted Net (Loss) Income
Adjusted net (loss) income represents our net (loss) income, adjusted to
exclude:
• Impairment on goodwill


• Contingent loss related to a legal matter

• Cumulative tax effect of adjustments




Adjusted diluted earnings per share is Adjusted net income divided by Diluted
weighted average shares outstanding.
The following table presents a reconciliation of net (loss) income and diluted
(loss) earnings per share to Adjusted net income and Adjusted diluted earnings
per share, which excludes the impact of the contingent loss for each of the
periods indicated:
                                                             Three Months 

Ended

                                                                  March 31,
(Dollars in thousands except per share amounts)             2020            2019
Net (loss) income                                       $    (4,911 )$     13,358
Impact of impairment loss (1)                                 9,251                -
Impact of contingent legal loss                               4,263         

-

Cumulative tax effect of adjustments                         (1,006 )       

-

Adjusted net income                                     $     7,597     $   

13,358


Diluted (loss) earnings per share                       $     (0.11 )   $   

0.30

Impact of impairment loss (1)                                  0.21         

-

Impact of contingent legal loss                                0.09         

-

Cumulative tax effect of adjustments                          (0.02 )       

-

Adjusted diluted earnings per share                     $      0.17     $   

0.30


Diluted weighted average shares outstanding              43,161,716       

43,875,410

Effect of potentially dilutive shares outstanding (2) 470,021

-

Adjusted diluted weighted average shares outstanding 43,631,737 43,875,410



(1) No tax effect as impairment loss relates to UK goodwill.
(2) Represents potentially dilutive shares that had not been included in the
Company's quarter-ended March 31, 2020 diluted weighted average shares
outstanding as the Company is in a net loss position under U.S. GAAP. Including
these shares would have been anti-dilutive when in a net loss position.





                                       51
--------------------------------------------------------------------------------

Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA represents our net (loss) income, adjusted to exclude: • Net interest expense, primarily associated with notes payable under the VPC

Facility, EF SPV Facility and ESPV Facility used to fund the loan portfolios;

• Share-based compensation;

• Foreign currency gains and losses associated with our UK operations;

• Depreciation and amortization expense on fixed assets and intangible assets;

• Impairment loss on goodwill;

• Gains and losses from fair value adjustments, dispositions or contingent

losses related to legal matters included in non-operating losses; and

• Income taxes.



Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.
Management believes that Adjusted EBITDA and Adjusted EBITDA margin are useful
supplemental measures to assist management and investors in analyzing the
operating performance of the business and provide greater transparency into the
results of operations of our core business.
Adjusted EBITDA and Adjusted EBITDA margin should not be considered as
alternatives to net (loss) income or any other performance measure derived in
accordance with US GAAP. Our use of Adjusted EBITDA and Adjusted EBITDA margin
has limitations as an analytical tool, and you should not consider it in
isolation or as a substitute for analysis of our results as reported under US
GAAP. Some of these limitations are:
•   Although depreciation and amortization are non-cash charges, the assets being

depreciated and amortized may have to be replaced in the future, and Adjusted

EBITDA does not reflect expected cash capital expenditure requirements for

such replacements or for new capital assets;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our

working capital needs; and

• Adjusted EBITDA does not reflect interest associated with notes payable used

for funding the loan portfolios, for other corporate purposes or tax payments

that may represent a reduction in cash available to us.

The following table presents a reconciliation of net (loss) income to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods indicated:

                                              Three Months Ended March 31,
(Dollars in thousands)                           2020               2019
Net (loss) income                          $      (4,911 )$      13,358
Adjustments:
Net interest expense                              14,195              19,219
Share-based compensation                           2,777               2,435
Foreign currency transaction loss (gain)             812                (613 )
Depreciation and amortization                      4,797               4,266
Impairment loss                                    9,251                   -
Non-operating loss                                 4,263                   -
Income tax expense                                 2,072               6,015
Adjusted EBITDA                            $      33,256$      44,680

Adjusted EBITDA margin                                19 %                24 %






                                       52
--------------------------------------------------------------------------------


Free cash flow
Free cash flow ("FCF") represents our net cash provided by operating activities,
adjusted to include:
• Net charge-offs - combined principal loans; and


• Capital expenditures.

The following table presents a reconciliation of net cash provided by operating activities to FCF for each of the periods indicated:

                                                  Three Months Ended March 31,
(Dollars in thousands)                               2020               2019

Net cash provided by operating activities(1)   $      76,699$      97,762
Adjustments:
Net charge-offs - combined principal loans           (67,352 )           (81,166 )
Capital expenditures                                  (5,565 )            (7,105 )
FCF                                            $       3,782$       9,491


 _________

(1) Net cash provided by operating activities includes net charge-offs - combined

finance charges.



Net charge-offs and additional provision for loan losses
We break out our total provision for loan losses into two separate items-first,
the amount related to net charge-offs, and second, the additional provision for
loan losses needed to adjust the combined loan loss reserve to the appropriate
amount at the end of each month based on our loan loss provision methodology. We
believe this presentation provides more detail related to the components of our
total provision for loan losses when analyzing the gross margin of our business.

Net charge-offs.  Net charge-offs comprise gross charge-offs offset by
recoveries on prior charge-offs. Gross charge-offs include the amount of
principal and accrued interest on loans that are more than 60 days past due, or
sooner if we receive notice that the loan will not be collected, such as a
bankruptcy notice or identified fraud. Any payments received on loans that have
been charged off are recorded as recoveries and reduce the total amount of gross
charge-offs.
Additional provision for loan losses.  Additional provision for loan losses is
the amount of provision for loan losses needed for a particular period to adjust
the combined loan loss reserve to the appropriate level in accordance with our
underlying loan loss reserve methodology.
                                           Three Months Ended March 31,
(Dollars in thousands)                       2020                2019

Net charge-offs                        $      88,064$      103,985
Additional provision for loan losses          (5,311 )            (16,554 )
Provision for loan losses              $      82,753$       87,431


Combined loan information
The Elastic line of credit product is originated by a third-party lender,
Republic Bank, which initially provides all of the funding for that product.
Republic Bank retains 10% of the balances of all of the loans originated and
sells a 90% loan participation in the Elastic lines of credit to a third-party
SPV, Elastic SPV, Ltd. Elevate is required to consolidate Elastic SPV, Ltd. as a
VIE under US GAAP and the condensed consolidated financial statements include
revenue, losses and loans receivable related to the 90% of Elastic lines of
credit originated by Republic Bank and sold to Elastic SPV.




                                       53
--------------------------------------------------------------------------------


Beginning in the fourth quarter of 2018, the Company also licenses its Rise
installment loan brand to a third-party lender, FinWise Bank, which originates
Rise installment loans in 18 states. Prior to August 1, 2019, Finwise Bank
retained 5% of the balances of all originated loans and sold a 95% loan
participation in those Rise installment loans to a third-party SPV, EF SPV. On
August 1, 2019, EF SPV purchased an additional 1% participation in the
outstanding portfolio with the participation percentage revised going forward to
96%. We do not own EF SPV, but we are required to consolidate EF SPV as a VIE
under US GAAP and the condensed consolidated financial statements include
revenue, losses and loans receivable related to the 96% of Rise installment
loans originated by FinWise Bank and sold to EF SPV.
The information presented in the tables below on a combined basis are non-GAAP
measures based on a combined portfolio of loans, which includes the total amount
of outstanding loans receivable that we own and that are on our balance sheet
plus outstanding loans receivable originated and owned by third parties that we
guarantee pursuant to CSO programs in which we participate. See "-Basis of
Presentation and Critical Accounting Policies-Allowance and liability for
estimated losses on consumer loans" and "-Basis of Presentation and Critical
Accounting Policies-Liability for estimated losses on credit service
organization loans."
We believe these non-GAAP measures provide investors with important information
needed to evaluate the magnitude of potential loan losses and the opportunity
for revenue performance of the combined loan portfolio on an aggregate basis. We
also believe that the comparison of the combined amounts from period to period
is more meaningful than comparing only the amounts reflected on our balance
sheet since both revenues and cost of sales as reflected in our financial
statements are impacted by the aggregate amount of loans we own and those CSO
loans we guarantee.
Our use of total combined loans and fees receivable has limitations as an
analytical tool, and you should not consider it in isolation or as a substitute
for analysis of our results as reported under US GAAP. Some of these limitations
are:
• Rise CSO loans are originated and owned by a third-party lender and


• Rise CSO loans are funded by a third-party lender and are not part of the VPC

Facility.

As of each of the period ends indicated, the following table presents a reconciliation of: • Loans receivable, net, Company owned (which reconciles to our Condensed

Consolidated Balance Sheets included elsewhere in this Quarterly Report on

Form 10-Q);

• Loans receivable, net, guaranteed by the Company (as disclosed in Note 3 of

our condensed consolidated financial statements included elsewhere in this

Quarterly Report on Form 10-Q);

• Combined loans receivable (which we use as a non-GAAP measure); and

• Combined loan loss reserve (which we use as a non-GAAP measure).






                                       54
--------------------------------------------------------------------------------


                                                             2019                                   2020
(Dollars in thousands)            March 31       June 30       September 30

December 31March 31


Company Owned Loans:
Loans receivable - principal,
current, company owned          $  491,208$  523,785$     543,565$    559,169$ 506,408
Loans receivable - principal,
past due, company owned             55,286         55,711            65,824           63,413        58,119
Loans receivable - principal,
total, company owned               546,494        579,496           609,389          622,582       564,527
Loans receivable - finance
charges, company owned              32,491         31,805            35,702           38,091        33,959
Loans receivable - company
owned                              578,985        611,301           645,091          660,673       598,486
Allowance for loan losses on
loans receivable, company
owned                              (76,457 )      (75,896 )         (89,667 )        (86,996 )     (81,816 )
Loans receivable, net,
company owned                   $  502,528$  535,405$     555,424$    573,677$ 516,670
Third Party Loans Guaranteed
by the Company:
Loans receivable - principal,
current, guaranteed by
company                         $   27,941$   21,099$      18,633$     17,474$  12,606
Loans receivable - principal,
past due, guaranteed by
company                                696            596               697              723           564
Loans receivable - principal,
total, guaranteed by
company(1)                          28,637         21,695            19,330           18,197        13,170
Loans receivable - finance
charges, guaranteed by
company(2)                           2,164          1,676             1,553            1,395         1,150
Loans receivable - guaranteed
by company                          30,801         23,371            20,883           19,592        14,320
Liability for losses on loans
receivable, guaranteed by
company                             (3,242 )       (1,983 )          (1,972 )         (2,079 )      (1,571 )
Loans receivable, net,
guaranteed by company(2)        $   27,559$   21,388$      18,911$     17,513$  12,749
Combined Loans Receivable(3):
Combined loans receivable -
principal, current              $  519,149$  544,884$     562,198$    576,643$ 519,014
Combined loans receivable -
principal, past due                 55,982         56,307            66,521           64,136        58,683
Combined loans receivable -
principal                          575,131        601,191           628,719          640,779       577,697
Combined loans receivable -
finance charges                     34,655         33,481            37,255           39,486        35,109
Combined loans receivable       $  609,786$  634,672$     665,974$    680,265$ 612,806
Combined Loan Loss
Reserve(3):
Allowance for loan losses on
loans receivable, company
owned                           $  (76,457 )$  (75,896 )$     (89,667 )$    (86,996 )$ (81,816 )
Liability for losses on loans
receivable, guaranteed by
company                             (3,242 )       (1,983 )          (1,972 )         (2,079 )      (1,571 )
Combined loan loss reserve      $  (79,699 )$  (77,879 )$     (91,639 )$    (89,075 )$ (83,387 )
Combined loans receivable -
principal, past due(3)          $   55,982$   56,307$      66,521$     64,136$  58,683
Combined loans receivable -
principal(3)                       575,131     $  601,191$     628,719$    640,779$ 577,697
Percentage past due(1)                  10 %            9 %              11 %             10 %          10 %
Combined loan loss reserve as
a percentage of combined
loans receivable(3)(4)                  13 %           12 %              14 %             13 %          14 %
Allowance for loan losses as
a percentage of loans
receivable - company owned              13 %           12 %              14 %             13 %          14 %


_________

(1) Represents loans originated by third-party lenders through the CSO programs,

which are not included in our condensed consolidated financial statements.

(2) Represents finance charges earned by third-party lenders through the CSO

programs, which are not included in our condensed consolidated financial

    statements.


(3) Non-GAAP measure.


(4) Combined loan loss reserve as a percentage of combined loans receivable is

    determined using period-end balances.








                                       55
--------------------------------------------------------------------------------


COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenues
Our revenues are composed of Rise finance charges and CSO fees (inclusive of
finance charges attributable to the participation in Rise installment loans
originated by FinWise Bank), finance charges on Sunny installment loans, cash
advance fees attributable to the participation in Elastic lines of credit that
we consolidate and marketing and licensing fees received from third-party
lenders related to the Rise, Rise CSO and Elastic products. See "-Overview"
above for further information on the structure of Elastic. Finance charge and
fee revenues related to the test launch of the Today Card credit card product
were immaterial.
Cost of sales
Provision for loan losses.  Provision for loan losses consists of amounts
charged against income during the period related to net charge-offs and the
additional provision for loan losses needed to adjust the loan loss reserve to
the appropriate amount at the end of each month based on our loan loss
methodology.
Direct marketing costs.  Direct marketing costs consist of online marketing
costs such as sponsored search and advertising on social networking sites, and
other marketing costs such as purchased television and radio air time and direct
mail print advertising. In addition, direct marketing cost includes affiliate
costs paid to marketers in exchange for referrals of potential customers. All
direct marketing costs are expensed as incurred.
Other cost of sales.  Other cost of sales includes data verification costs
associated with the underwriting of potential customers, automated clearing
house ("ACH") transaction costs associated with customer loan funding and
payments, and settlement expense associated with UK affordability claims.
Operating expenses
Operating expenses consist of compensation and benefits, professional services,
selling and marketing, occupancy and equipment, depreciation and amortization as
well as other miscellaneous expenses.
Compensation and benefits.  Salaries and personnel-related costs, including
benefits, bonuses and share-based compensation expense, comprise a majority of
our operating expenses and these costs are driven by our number of employees.
Professional services.  These operating expenses include costs associated with
legal, accounting and auditing, recruiting and outsourced customer support and
collections.
Selling and marketing.  Selling and marketing costs include costs associated
with the use of agencies that perform creative services and monitor and measure
the performance of the various marketing channels. Selling and marketing costs
also include the production costs associated with media advertisements that are
expensed as incurred over the licensing or production period. These expenses do
not include direct marketing costs incurred to acquire customers, which
comprises CAC.
Occupancy and equipment.  Occupancy and equipment includes rent expense on our
leased facilities, as well as telephony and web hosting expenses.
Depreciation and amortization.  We capitalize all acquisitions of property and
equipment of $500 or greater as well as certain software development costs.
Costs incurred in the preliminary stages of software development are expensed.
Costs incurred thereafter, including external direct costs of materials and
services as well as payroll and payroll-related costs, are capitalized.
Post-development costs are expensed. Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable assets.




                                       56
--------------------------------------------------------------------------------


Other expense
Net interest expense.  Net interest expense primarily includes the interest
expense associated with the VPC Facility that funds the Rise and Sunny
installment loans, the EF SPV Facility that funds Rise installment loans
originated by FinWise Bank and the interest expense associated with the ESPV
Facility related to the Elastic lines of credit and related Elastic SPV entity.
For the three months ended March 31, 2019, amortization of the costs of and
realized gains from the interest rate caps on the VPC and ESPV Facility are
included within Net interest expense.
Foreign currency transaction (loss) gain.  We incur foreign currency transaction
gains and losses related to activities associated with our UK entity, Elevate
Credit International, Ltd., primarily with regard to the VPC Facility used to
fund Sunny installment loans.
Impairment loss.  Impairment loss for the three months ended March 31, 2020
included a charge recognized related to the goodwill impairment on our UK
reporting unit.
Non-operating loss.  Non-operating loss for the three months ended March 31,
2020 included a contingent loss related to a legal matter.




                                       57

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
Latest news on ELEVATE CREDIT, INC.
11:03aELEVATE CREDIT : Open Letter from CEO
PU
06/30ELEVATE CREDIT : KPMG - Administrators appointed to Elevate Credit International
AQ
06/29ELEVATE CREDIT, INC. : Completion of Acquisition or Disposition of Assets (form ..
AQ
06/29ELEVATE CREDIT : to Exit UK Market
BU
05/08ELEVATE CREDIT : Management's Discussion and Analysis of Financial Condition and..
AQ
05/06ELEVATE CREDIT : First Quarter Earnings Release Available on its Investor Relati..
BU
05/06ELEVATE CREDIT, INC. : Results of Operations and Financial Condition (form 8-K)
AQ
05/06ELEVATE CREDIT : Announces first quarter 2020 results
PU
05/06ELEVATE CREDIT : Q1 2020 earnings releases
PU
05/05ELEVATE CREDIT, INC. : Submission of Matters to a Vote of Security Holders (form..
AQ
More news