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

ELEVATE CREDIT, INC.

(ELVT)
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Elevate Credit : PRESENTATION

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11/04/2019 | 04:20pm EST

Third Quarter 2019 Earnings Call

November 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 clarity on 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 any of the forward-looking statements contained in this presentation.

This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.

The information and opinions contained in this presentation are provided as of the date of this presentation and are subject to change without notice. This presentation has not been approved by any regulatory or supervisory agency.

See Appendix for additional information and definitions.

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 customers1 and saved them more than $6.1 billion over payday loans2

33

Third Quarter 2019 Highlights

  • Net Income of $4.8 million compared to a loss of ($4.2) million in Q3 2018
  • Strong credit quality - 2019 vintage charge-off curve is best in history
  • YoY Adjusted EBITDA margin expansion of ~600bps1
  • $184 CAC- 18% lower than Q3 2018
  • Revenues increased $15 million, or 8.4%, from Q2 2019

4

Strategy Updates

Priorities

2019 Impact

Dedication to strong credit

• Deployment of enhanced credit models complete

• All credit quality metrics have improved

• Driven by 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

5

Business updates

  • Bank Partner Expansion
    • Additional growth in licensing of underwriting technology to bank partners
  • Deployment of enhanced credit models
    • All models deployed and will continue to tune, specifically partner channels

• UK Sunny Product

    • Remains profitable despite lack of regulatory clarity
  • Leadership Promotions
    • Scott Greever to serve as EVP of Rise, Sunny, and Elastic, previously UK Managing Director
    • Steve Grice to serve as UK Managing Director, previously UK Chief Technical Officer

6

Growth in key financial measures ($ in millions)

Ending Combined Loans

Revenue

+17%

Receivables - Principal1

+5%

+28%

$618

$649

$634

$629

+16%

$787

$740-$750

$673

+35%

+34%

$481

$580

+77%

$356

+59%

$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%

$135-$140

$28-$32

+45%

$116

$87

$13

+223%

$6

YTD $24

$60

YTD

$19

$108

(-$20)

(-$22)

As adjusted

(-$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.

7

Improving credit quality and customer acquisition costs

35%

30%

25%

Cumulative principal loss rates as a percentage of

originations by loan vintage

Customer Acquisition Cost

$325

$300

$297

$275

$256

$255

20%

15%

10%

5%

0%

2018

YTD Sept 2018

YTD Sept 2019

2017

$250

$245

$225

$235

$237

$200

$184

$175

$150

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.

8

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.

9

We believe everyone deserves

a lift.

10

Appendix

11

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

Page 4:

1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income (loss), adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility, EF SPV Facility, and ESPV Facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; non-operating income (loss); share-based compensation expense and income tax expense (benefit). See the Appendix for a reconciliation to GAAP net income (loss).

Page 7:

  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 with GAAP. Adjusted EBITDA represents ournet income (loss), adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility, EF SPV Facility, and ESPV Facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; non-operating income (loss); share-based compensation expense and income tax expense (benefit). See the Appendix for a reconciliation to GAAP net income (loss).
  3. 2017 adjusted net income of $5.5 million is not a financial measures prepared in accordance with 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 9:

1 Adjusted EBITDA margin is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA represents our net income (loss), adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility, EF SPV Facility, and ESPV Facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; loss on discontinued operations; non-operating income (loss); share-based compensation expense and income tax expense (benefit). See the Appendix for a reconciliation to GAAP net income (loss).

12

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 with our UK operations, net interest expense, stock-based compensation expense and depreciation and amortization expense, among others. The Company is not able to provide a reconciliation of the Company's non-GAAP financial guidance to the corresponding GAAP measure without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

13

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, which are not included in our financial statements.
  2. Represents finance charges earned by third-party lenders through CSO programs, which are not included in our financial statements.
  3. Non-GAAPmeasure.

.

14

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)

  1. Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements.
  2. Represents finance charges earned by third-party lenders through CSO programs, which are not included in our financial statements.
  3. Non-GAAPmeasure.

.

15

© 2017 Elevate. All Rights Reserved.

Disclaimer

Elevate Credit Inc. published this content on 04 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 November 2019 21:19:03 UTC

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Financials (USD)
Sales 2019 750 M
EBIT 2019 112 M
Net income 2019 30,6 M
Debt 2019 -
Yield 2019 -
P/E ratio 2019 5,97x
P/E ratio 2020 4,67x
Capi. / Sales2019 0,24x
Capi. / Sales2020 0,23x
Capitalization 180 M
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Technical analysis trends ELEVATE CREDIT, INC.
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 8
Average target price 5,67  $
Last Close Price 4,18  $
Spread / Highest target 67,5%
Spread / Average Target 35,6%
Spread / Lowest Target 19,6%
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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