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

ELEVATE CREDIT, INC.

(ELVT)
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Elevate Credit : Investor Presentation December 2019

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12/12/2019 | 04:31pm EDT

Investor Presentation

December 2019

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 2019; our expectation that our new credit models will be rolled out in 2019 and that our partner credit models and strategies will be rolled out in 2019; our perspectives on 2019, including our expectations regarding revenue, growth rate of revenue, net charge-offs, gross margin, operating expenses, operating margins, Adjusted EBITDA, net income, loan loss provision, direct marketing and other cost of sales and Adjusted EBITDA margin; our expectations regarding regulatory trends; our expectations regarding the cumulative loss rate as a percentage of originations for the 2018 and 2019 vintages; our growth strategies and our ability to effectively manage that growth; anticipated key marketing and underwriting initiatives; new and expanded products like a lower-priced installment product in the UK; our expectations regarding the future expansion of the states in which our products are offered; the cost of customer acquisition, new customer originations, the efficacy and cost of our marketing efforts, our plan to maintain our UK portfolio balances through the second half of 2019 in advance of regulatory clarityon complaints; expanded marketing channels and new and growing marketing partnerships; continued growth and investment in data science and analytics; and additional bank partnerships. 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 inthe credit markets; the impact of competition in our industry and innovation by our competitors; 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; the impact of litigation or potential or perceived litigation; customer complaints or negative public perception could harm our business 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 Annual Report on Form 10-K; most recent 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 anyof 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 necessarilysubjectto a high degree ofuncertaintyand 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 regulatoryor supervisoryagency.

See Appendix for additional information and definitions.

2

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 $7.8 billion to 2.4 million customers1and saved them more than $6.1 billion over payday loans2

33

Experienced team

20+

10+

year average experience in technology & financial services

years working together

in non-prime marketJason Harvison

CEO

Chris Lutes

Sarah Fagin Cutrona

Kate Vanderkolk

Sharon Clarey

CFO

Chief Counsel

CRO

CHRO

Joan Khuel

Scott Greever

David Peterson

CIO

EVP Product

CCO

4

Building a great company

Guided by our Values

Geographic Diversity

San Diego

London

Bury St. Edmonds

Dallas

Fort Worth

Financial Health

2019 Diversity &

Network Leader

Inclusion Award

Great Place to Work®

Certified Great Place to Work 4 consecutive years

Based on anonymous employee feedback

5

Why Elevate?

Huge underserved market - larger than "prime"

170 million consumers who deserve better solutions

More responsible online and mobile credit

Innovative products, focus on financial health

10+ year investment in technology &analytics

Significant competitive advantages and barriers to entry

Proven track record through recession

Low charge-off volatility from 2006-2011

Compelling economics

Strong growth in net income with expanding margins

6

Non-prime consumers - the New Middle Class

US non-prime populationlarger than prime

Prime1

Non-prime

34%

Non-prime1

Prime

44%

Credit invisible

Credit

invisible2

22%

US and UK non-prime population>170MMpeople

Elevate customer profile4

US

UK

Average income

~ $54K (RISE)

~ £19K (Sunny)

~ $40K (Elastic)

Average college

~ 82%

~ 54%

Own home

~ 22%

~ 19%

FICOrange (mean)

511-6265

N/A

Banks not serving non-prime

$142B

Total reduction in non-prime credit since 20086

109MM

53MM

10MM

US non-prime1

US credit invisible2

UK non-prime3

7

Non-prime consumers have different credit needs

% Ranked in the Top 31

Solve financial needs

74%

Fast and Easy

51%

Money quick

49%

No hidden fees

32%

Few documents

30%

Terms clear

29%

Afford payment

26%

Builds credit

23%

Lowest APR

16%

Multiple payments

15%

Key differences for non-prime borrowers

  • APR much less important
  • Speed of funding much more important
  • Credit building more important
  • Hardship handling more important
  • Ease of application process more important

0%

20%

40%

60%

80%

The next generation of responsible online credit

Installment and

Line of credit

Credit card

Installment

line of credit

Geographies

40 US states

40 US states

US - Nationwide

UK

Originator

Elevate through state license

Republic Bank

Capital Community Bank

Elevate

and FinWise Bank

Loan size

$500-$7,000

$400-$4,500

$1,000-$3,500

£100-£2,500

Loan term

4-26 months

Up to 10 months

n/a

6-14 months

Pricing

36%-299%, rates drop by 50%

Initially $5 per $100 borrowed

29.99%-34.99% variable

10.5% to 24% monthly

after 24 months

plus up to 5% of outstanding

principal per billing cycle

Elevate customer acquisition

Multi-channel Marketing1

Customer acquisition cost below targets

TV & Mass

Media

8%

Digital 23%

Strategic Partners

15%

TV & Mass Media

Strategic Partners

Direct Mail 54%

Digital Direct Mail

10

Industry-leading technology and analytics

History

2.3MM

customers served

$7Billion

in loans originated

10MM+

applications processed

Data

Mainstream

Alternate Bureau

Bank

Other

Advanced Analytics

Across underwriting process

Credit

Scores

Fraud

Scores

Affordability

Assessment

Instant Decision

& Line Offer

Fraud &

Verifications

Customer

Management

Bank Transaction

Data

15+ years of innovation and investment

11

Proven track record through credit downturn

12

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

13

Growth in key financial measures ($ in millions)

Ending CombinedLoans

+5%

Revenue

+17%

Receivables - Principal

1

+28%

$649

$634

$629

+16%

$787

$618

$740-$750

$673

+35%

$481

+34%

$580

+59%

+77%

$356

$434

YTD

+177%

+280%

$202

$274

$560

$73

$72

2013

2014

2015

2016

2017

2018

3Q18

3Q19

2013

2014

2015

2016

2017

2018

2019

Guidance

Adjusted EBITDA2

+16-21%

Net Income / (Loss)3

+115-146%

+33%

116%

+45%

$135-$140

$28-$32

$116

$87

$13

+223%

$6

YTD $24

$60

YTD

$19

$108

As adjusted

(-$20)

(-$22)

(-$43)

(-$55)

(-$47)(-$52)

2013

2014

2015

2016

2017

2018

2019

2013

2014

2015

2016

2017

2018

2019

Guidance

Guidance

Ending combined loans receivable - principal, Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. See appendix for a reconciliation to a GAAP measure.

14

Improving credit quality and customer acquisition costs

35%

30%

25%

Cumulativeprincipal loss rates as a percentage of

originations by loan vintage

Customer Acquisition Cost

$325

$300

$297

$275

$256

$255

20%

2018

2017

$250

$245

15%

10%

5%

0%

YTD Sept 2018

YTD Sept 2019

$225

$200

$175

$150

$235 $237

$184

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

Months since origination

2013

2014

2015

2016

2017

2018

YTD Sept 2018

YTD Sept 2019

2013

2014

2015

2016

2017

2018

3Q19

CAC

Top Target Range $300

Bottom Target Range $250

2019 loan vintage is not yet fully matured.

15

Continued margin expansion

% of Gross Revenues

2015

2016

2017

2018

YTD 2019

3Q 2018

3Q 2019

Gross Revenue

100%

100%

100%

100%

100%

100%

100%

Loan Loss Provision

54%

55%

53%

52%

48%

57%

52%

Direct Marketing and

18%

14%

14%

13%

11%

14%

11%

Other Cost of Sales

Gross Margin

29%

31%

33%

35%

41%

29%

37%

Operating Expenses

25%

21%

20%

20%

22%

20%

22%

Adjusted EBITDA

4%

10%

13%

15%

19%

9%

15%

Margin1

Adjusted EBITDA margin is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.

16

Strategy Updates

Priorities

2019 Impact

Dedication to strong credit

• Deployment of enhanced credit models complete

• All credit quality metrics have improved

Drivenby lower charge-offs, lower CAC, and cost

Margin expansion

of funding reduction

• Net Income and EPS guidance raised despite

lower revenue

• New approach to measured growth in conjunction

Measured growth

with confirming data from our credit models

• Addressable market opportunity remains

significant

17

Elevate positioned for long-term growth

Demand

40%

170 MM

Enormous Market

Americans living paycheck

underserved consumers in

to paycheck1

US and UK2

Limited Competitive

$142 B

Legacy

Pressures

reduction

competitorsprimarily high

in bank non-prime lending3

cost and inconvenient

Regulatory and

4

3

2

Product

Diversification

Products

Bank

Countries

partners

18

We believe everyone deserves

a lift.

19

Appendix

20

Footnotes

Page 3:

1 Originations and customers from 2002 - September 2019, attributable to the combined current and predecessor direct and branded products.

2 For the period from 2013 to December 31, 2018. Based on the average effective APR of 123% for the nine months ended September 30, 2019. This estimate, w hich has not been independently confirmed, is based on our internal comparison of revenues from our combined loan portfolio and the same portfolio w ith an APR of 400%, w hich is the approximate average APR for a payday loan according to the Consumer Financial Protection Bureau, or the "CFPB."

Page 7:

1 According to an analysis of TransUnion data through the third quarter of 2014 by the Corporation for Enterprise Development.

2 FICO, Expanding Credit Opportunities, July 2015.

3 House of Commons Welsh Affairs Committee, The Impact of Changes Benefit in Wales, October 2013.

4 Elevate analysis 2018; US income and home ow nership data from Elevate internal database for customers acquired in 2018; other data from self-reported customer research.

  1. Range of middle quintile of Elevate US customers (2018).
  2. According to our analysis of master pool trust data of securitizations for the five major credit card issuers, w e estimate that from 2008 to 2016, revolving credit to US borrow ers w ith FICO scores of less than 660 w as reduced by approximately $142 billion.

Page 8:

1 According to research conducted by the Center for the New Middle Class in April 2018

Page 10:

1 Marketing mix as of December 31, 2018.

Page 12:

1

Elevate legacy predecessor credit product from 2006-2011 - Includes losses related to credit and fraud.

2

Credit card charge-offs based on Federal Reserve data.

Page 13:

1 TransUnion data on 90 day delinquency rates of balances for different Vantage Score bands from Q1 2006 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.

21

Footnotes

Page 14:

1 Ending combined loans receivable - principal is a non-GAAP financial measure. See appendix for a reconciliation to a GAAP measure.

2

Adjusted EBITDA is not a financial measure prepared in accordance w ith GAAP. Adjusted EBITDA represents our net loss, adjusted to exclude: net interest expense primarily associated w ith notes

payable under the VPC Facility and ESPV Facility used to fund or purchase loans; foreign currency gains and losses associated w ith our UK operations; depreciation and amortization expense on fixed assets

and intangible assets; non-operating income; stock-based compensation expense and income tax expense. See the Appendix for a reconciliation to GAAP net income (loss).

3 2017 adjusted net income of $5.5 million is not a financial measure prepared in accordance w ith GAAP. Adjusted net income for 2017 represents our $6.9 million net loss for the year ended December 31, 2017, adjusted to exclude the impact of $12.5 million in tax expense incurred during the fourth quarter of 2017 due to the enactment of the Tax Cuts and Jobs Act.

Page 16:

1 Adjusted EBITDA is not a financial measure prepared in accordance w ith GAAP. Adjusted EBITDA represents our net income, adjusted to exclude: net interest expense primarily associated w ith notes payable under the VPC Facility and ESPV Facility used to fund or purchase loans; foreign currency gains and losses associated w ith our UK operations; depreciation and amortization expense on fixed assets and

intangible assets; loss on discontinued operations; non-operating income; stock-based compensation expense and income tax expense. See the Appendix for a reconciliation to GAAP income. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.

Page 18:

1

According to the Federal Reserve's Board Report

on the Economic Well-Being of US Households in 2017.

2

According to our analysis based on CFSP report,

"Data Point: Credit Invisibles." May 2015 and 2018 Average US FICO data.

3 According to our analysis of master pool trust data of securitizations for the five major credit card issuers, w e estimate that from 2008-2016, revolving credit US borrow ers w ith FICO scores less than 680 w as reduced by approximately $142 billion.

.

22

Non-GAAP financials reconciliation

Adjusted EBITDA Reconciliation

Three months ended

Nine months ended

For the years ended December 31,

September 30,

September 30,

($mm)

2018

2017

2016

2015

2014

2013

2019

2018

2019

2018

Net income (loss)

$

13

(7)

(22)

(20)

(55)

$

(45)

$

5

(4)

24

$

8

Adjustments:

Net interest expense

79

73

64

37

13

-

15

20

52

58

Stock-based compensation

8

6

2

1

1

-

2

2

7

6

Foreign currency transaction (gain) loss

2

(3)

9

2

1

-

1

-

1

1

Depreciation and amortization

13

10

11

9

8

5

4

4

13

9

Non-operating expense (income)

-

(2)

-

(6)

-

(1)

1

-

1

-

Income tax expense (benefit)

1

10

(3)

(5)

(21)

(9)

1

(3)

10

2

Loss on discontinued operations

-

-

-

-

-

2

-

-

-

-

Adjusted EBITDA

$

116

87

60

19

(53)

$

(47)

$

29

19

108

$

84

Adjusted EBITDA Margin

15%

13%

10%

4%

-19%

-65%

15%

9%

19%

15%

Adjusted EBITDA is a non-GAAP financial measure. 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 w ith 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 w ithout unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

23

Combined loans reconciliation

Combined Loan Adjustment Summary

(dollars in thousands)

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Sep 30, 2018

Company Owned Loans

Loans receivable - principal, current, company owned

543,565

523,785

491,208

543,405

525,717

Loans receivable - principal, past due, company owned

65,824

55,711

55,286

68,251

69,934

Loans receivable - principal, total, company owned

609,389

579,496

546,494

611,656

595,651

Loans receivable - finance charges, company owned

35,702

31,805

32,491

41,646

36,747

Loans receivable - company owned

645,091

611,301

578,985

653,302

632,398

Allowance for loan losses on loans receivable, company owned

(89,667)

(75,896)

(76,457)

(91,608)

(89,422)

Loans receivable, net, company owned

555,424

535,405

502,528

561,694

542,976

Third Party Loans Company Guaranteed

Loans receivable - principal, current, guaranteed by company

18,633

21,099

27,941

35,529

36,649

Loans receivable - principal, past due, guaranteed by company

697

596

696

1,353

1,661

Loans receivable - principal, total, guaranteed by company1

19,330

21,695

28,637

36,882

38,310

Loans receivable - finance charges, guaranteed by company2

1,553

1,676

2,164

2,944

3,103

Loans receivable - guaranteed by company

20,883

23,371

30,801

39,826

41,413

Liability for losses on loans receivable, guaranteed by company

(1,972)

(1,983)

(3,242)

(4,444)

(4,510)

Loans receivable, net, guaranteed by company2

18,911

21,388

27,559

35,382

36,903

1

Represents loans originated by third-party lenders through the CSO programs, w hich are not included in our financial statements.

2

Represents finance charges earned by third-party lenders through CSO programs, w hich are not included in our financial statements.

3

Non-GAAP measure.

.

24

Combined loans reconciliation (continued)

Combined Loan Adjustment Summary

(dollars in thousands)

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Sep 30, 2018

Combined Loans Receivable3

Combined loans receivable - principal, current

562,198

544,884

519,149

578,934

562,366

Combined loans receivable - principal, past due

66,521

56,307

55,982

69,604

71,595

Combined loans receivable - principal

628,719

601,191

575,131

648,538

633,961

Combined loans receivable - finance charges

37,255

33,481

34,655

44,590

39,850

Combined loans receivable

665,974

634,672

609,786

693,128

673,811

Combined Loan Loss Reserve3

Allowance for loan losses on loans receivable, company owned

(89,667)

(75,896)

(76,457)

(91,608)

(89,422)

Liability for losses on loans receivable, guaranteed by company

(1,972)

(1,983)

(3,242)

(4,444)

(4,510)

Combined loan loss reserve

(91,639)

(77,879)

(79,699)

(96,052)

(93,932)

1Represents

loans originated by third-party lenders through the CSO programs, w hich are not included in our financial statements.

2Represents

finance charges earned by third-party lenders through CSO programs, w hich are not included in our financial statements.

3Non-GAAP measure.

.

25

Single year illustrative Rise unit economics

Economics to Elevate assuming an amortizing two-year$2,000 loan at 180% APR1

($1,400)

Unit operating margin:

16%

Note:

1 For illustrativepurposes using targeted expense ratios. Does not necessarily reflect historical performance

26

© 2017 Elevate. All Rights Reserved.

Disclaimer

Elevate Credit Inc. published this content on 12 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 December 2019 21:30:03 UTC

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Financials (USD)
Sales 2020 629 M - -
Net income 2020 -14,9 M - -
Net Debt 2020 - - -
P/E ratio 2020 -4,90x
Yield 2020 -
Capitalization 72,4 M 72,4 M -
EV / Sales 2019
Capi. / Sales 2020 0,12x
Nbr of Employees 695
Free-Float 69,2%
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Technical analysis trends ELEVATE CREDIT, INC.
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 7
Average target price 3,50 $
Last Close Price 1,70 $
Spread / Highest target 253%
Spread / Average Target 106%
Spread / Lowest Target 17,6%
EPS Revisions
Managers
NameTitle
Jason D. Harvison President, Chief Executive Officer & Director
Saundra D. Schrock Chairman
Christopher T. Lutes Chief Financial Officer
Joan Kuehl Chief Information Officer
Robert L. Johnson Independent Director
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