MONEYLION INC. The following Management's Discussion and Analysis of Financial Condition and Results of Operations summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources ofMoneyLion and is intended to help the reader understandMoneyLion , our operations and our present business environment. This discussion should be read in conjunction withMoneyLion's unaudited consolidated financial statements and notes to those financial statements included in Part I, Item 1 "Financial Statements" within this Quarterly Report on Form 10-Q. References to "we," "us," "our," "Company" or "MoneyLion" refer toMoneyLion Technologies Inc. and, as context requires, its wholly-owned subsidiaries for the periods prior to the Business Combination Closing Date and toMoneyLion Inc. and, as context requires, its wholly-owned subsidiaries for the period thereafter. "Fusion" refers toFusion Acquisition Corp. for the periods prior to the Business Combination Closing Date. Reclassification-The acquisitions of MALKA and Even Financial and related ongoing integration activities have caused significant changes to the revenue and cost structure of the Company such that the organization of financial statement line items in both the consolidated balance sheets and the consolidated statements of operations used in prior reporting periods were no longer sufficient to properly present the Company's financial condition and results of operations as ofMarch 31, 2022 . Reclassifications have been performed relative to the previous presentation of the consolidated balance sheet as ofDecember 31, 2021 and the consolidated statement of operations for the three and nine months endedSeptember 30, 2021 to present in a new format that better represents the new revenue and cost structure of the Company. The reclassifications had no impact on previously reported total assets, total liabilities or net income (loss) and an immaterial impact on total revenue, net. There was no impact on the consolidated statements of cash flows or consolidated statements of redeemable convertible preferred stock, redeemable noncontrolling interests and stockholders' equity (deficit). There are also related reclassifications and expanded disclosure, where necessary, contained within the notes to the consolidated financial statements.
Overview
MoneyLion is the go-to destination for personalized financial content, products and advice. We provide consumers a full suite of financial and non-financial solutions, bundling proprietary, low-cost financial products with products that are offered through our marketplace and network affiliate partners. We engage and educate our customers with daily, money-related and money-adjacent content, delivered through a personalized feed, to empower our customers at all times. When our customers enjoy periods of financial excess, we provide tools for them to easily manage their spending and saving goals through our digital banking and automated investing solutions. When our customers experience moments of financial need, we provide them immediate access to innovative lending or earned income advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health. We also leverage our distinct data, technology and network advantages to deliver leading embedded finance marketplace solutions for ourEnterprise Partners , allowing them to better connect with existing end-users and reach new potential end-users, complemented by advertising services and digital media and content production services custom designed to promoteEnterprise Partners' products and services. We believe that the combination of solutions thatMoneyLion provides uniquely positions us to disrupt how financial products are consumed, unlocking a total addressable market that we estimate to be over$274 billion . 31 --------------------------------------------------------------------------------
The Company's key consumer product offerings include:
RoarMoney Premium Mobile Banking - RoarMoney is ourFederal Deposit Insurance Corporation -insured digital demand deposit account with zero minimums, premium features and rewards. Our RoarMoney demand deposit accounts are currently issued byPathward, N.A. ("Pathward") (f/k/aMetaBank, N.A. ), aSouth Dakota -based, nationally chartered bank owned by Pathward Financial, Inc. (NASDAQ: CASH) (f/k/a M. Customers can open a RoarMoney account in minutes through theMoneyLion mobile application, add funds to their account and begin spending using a RoarMoney virtual debit card. RoarMoney accounts also include a physical MoneyLion Debit Mastercard that can be used at any of the approximately 55,000 Allpoint ATM network locations to make no-fee withdrawals. We earn revenue from interchange fees from payment networks based on customer expenditures on the debit card, as well as transaction volume-based incentive payments from the payment network. We also earn revenue from cardholder fees such as a small monthly administrative fee charged to our customers, a fee charged to customers when an out-of-network ATM is utilized to withdraw cash, a foreign transaction fee charged to our customers on purchases outside of theU.S. or in a currency other thanU.S. dollars and instant transfer fees. Both interchange fees, payment network payments and cardholder fees are reflected in service and subscription fees. We incur direct costs in connection with the RoarMoney account offering, which include fees paid to the payment networks and our partner bank. Personalized Investing - MoneyLion Investing is an online investment account that offers access to separately managed accounts invested based on model portfolios comprised of ETFs and managed on a discretionary basis. Advisory services related to theMoneyLion investment account are provided byML Wealth LLC ("ML Wealth"), anSEC -registered investment adviser and an indirect wholly-owned subsidiary ofMoneyLion . Brokerage and custodial services are provided byDriveWealth LLC , a third-party provider. This fully-managed account model allows customers to set their investment strategy and let ML Wealth manage investment decisions to implement that strategy on a discretionary basis. An investment account holder simply identifies their investing comfort zone to receive a personalized portfolio, a mix of stock and bond ETFs. Our managed investment account is available on a standalone basis. ThroughMoneyLion Investing, customers are able to develop sound investing habits by enabling certain account features, including auto-investing and round ups. Auto-investing allows our customers to automatically contribute into their investment account with recurring deposits directly into the account. With round ups, customers can also choose to automatically round up purchases made either on their RoarMoney account or an external bank account to the nearest dollar. The accrued round ups can then be transferred into the customer's MoneyLion Investing account and invested in accordance with the customer's chosen investment strategy. We earn revenue from a small monthly administration fee from our customers who use this product, which is reflected in service and subscription fees. Crypto - MoneyLion Crypto is an online cryptocurrency account that enables customers to buy, sell and hold cryptocurrency. The account is provided byZero Hash LLC and its affiliate,Zero Hash Liquidity Services LLC (collectively, "Zero Hash"). The Zero Hash entities are registered as money services businesses with FinCEN and hold active money transmitter licenses (or the state equivalent of such licenses) in allU.S. states and theDistrict of Columbia except for (i)California ,Indiana andWisconsin , where Zero Hash relies upon licensing exemptions; (ii)Montana , which does not currently have a money transmitter licensing requirement; and (iii)Hawaii . The Zero Hash entities currently engage in crypto asset activities in allU.S. states and theDistrict of Columbia except forHawaii . RoarMoney accountholders can open a MoneyLion Crypto account through theMoneyLion mobile application and fund it via their RoarMoney account. In addition, customers can also choose to automatically round up purchases made either on their RoarMoney account or an external bank account to the nearest dollar. The accrued round ups can then be transferred into the customer's MoneyLion Crypto account and invested in Bitcoin. As ofDecember 31, 2021 , the only cryptocurrencies available through the MoneyLion Crypto account were Bitcoin and Ether. InJanuary 2022 , MoneyLion Crypto expanded to include Bitcoin Cash and Litecoin. BothMoneyLion and Zero Hash must consent in writing before adding any additional digital assets to the program. We earn revenue from Zero Hash as they pay us a share of the fees that they earn from our customers in exchange forMoneyLion enabling Zero Hash to effect digital currency-related transactions for our customers. This revenue is reflected in service and subscription fees. 32 -------------------------------------------------------------------------------- Instacash - Instacash is our 0% APR advance product that gives customers early access to their recurring income deposits. Customers can access Instacash advances at any time during a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary cash needs and avoid costly overdraft fees. There are no fees associated with regular delivery of funds to either a RoarMoney account (typically delivered within 12-48 hours) or an external checking account (typically delivered within two to five business days). However, customers have the option to pay an additional fee in order to receive their funds on an expedited basis (typically within minutes or less), the amount of which is based on the amount of the disbursement and whether the funds are delivered to a RoarMoney account or an external checking account. Customers may also choose to leaveMoneyLion an optional tip for use of the Instacash service. We earn revenue from tips and instant transfer fees, both reflected in service and subscription fees. Credit Builder Plus - Our Credit Builder Plus membership program offers a proven path for our customers to access credit and establish or rebuild history, build savings, establish financial literacy and track their financial health. For a monthly cost of$19.99 , customers receive a suite of services including banking and investment accounts, credit tracking and financial literacy content, rewards programs and access to loans of up to$1,000 at competitive rates offered byMoneyLion lending subsidiaries, allowing our customers to establish up to twelve months of payment history with all three credit bureaus. We offer our Credit Builder Plus members access to the Lion's Share Loyalty Program, where members can earn rewards of up to$19.99 per month. We earn revenue from monthly subscription fees paid by our customers. These fees are reflected in service and subscription fees. As part of the Credit Builder Plus membership program, members may apply for a Credit Builder Plus secured personal loan. In addition to a free standard disbursement option, we also offered our customers an option to disburse their funds to theirMoneyLion -serviced RoarMoney bank account or external bank account on an expedited basis for an instant transfer fee. This instant disbursement option for Credit Builder Plus loans was removed in the second quarter of 2021. We earn revenue from interest income, reflected in net interest income on finance receivables, and, prior to the removal of the instant disbursement option, instant transfer fees, reflected in service and subscription fees. Financial Tracking - We offer our customers access to financial tracking tools such as Financial Heartbeat,GamePlan and credit score tracking. Financial Heartbeat is an intelligent, automated tool that guides customers on their financial journey. Financial Heartbeat evaluates customers' financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface, customers can review the key issues impacting their financial situation, decide what actions to take, evaluate which products to use and receive guidance on how to stay motivated on their journey towards financial wellness.GamePlan provides our customers with a personalized action plan, including a checklist with tasks, meant to help them reach their financial goals across different categories such as spending, saving and more. Financial tracking tools are offered to our customers at no cost and we do not earn revenue from these services. MoneyLife - Consistent with our vision of establishingMoneyLion as a lifestyle brand, in 2021 we introduced MoneyLife, an online financial education content destination which is delivered to customers in theMoneyLion mobile application via a content feed. MoneyLife is an influencer-focused, video content-driven educational platform where customers can share and discover ideas, advice and insights regarding their financial lives. MoneyLife includes highly personalized content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Our acquisition of MALKA, a creator network and content platform, accelerated our ability to engage with consumers across all digital and emerging channels, allowing us to directly connect with communities natively inside and outside of our platform. Through MoneyLife and the content feed, we provide an additional daily destination site for current customers, drive additional prospective customers toMoneyLion and increase customer engagement and cross-sell opportunities for bothMoneyLion and its affiliate partners. 33 --------------------------------------------------------------------------------
The Company's key enterprise service offerings include:
Affiliate Marketing Program - We work with various affiliate partners that offer products or services that we may recommend to our customers via display ads, offers or campaigns through our digital platforms. Our customers can access these offers on a standalone basis. We earn revenue from fees from our affiliate partners based on a range of criteria depending on each affiliate relationship including, but not limited to, customers' clicks, impressions, completed transactions or a share of revenue generated for the affiliate partner. This revenue is reflected in enterprise service revenues. EvenFinancial Marketplace - Through Even Financial's software platform, we connect and match consumers with real-time personalized financial product recommendations from banks, insurance and fintech companies on mobile apps and websites by enabling the display of offers for financial products to consumers. Our infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, bridgingProduct Partners andChannel Partners via Even Financial's API and embedded finance marketplaces. Even Financial's network includes over 400Product Partners and 550Channel Partners , covering a breadth of financial services including loans, credit cards, mortgages, savings, and insurance products. We earn revenue, which is reflected in enterprise service revenue, from ourProduct Partners based on performance structure. We incur direct costs related to the fees paid to ourChannel Partners . Digital Media and Content Production - Through MALKA, we offer digital media and content production services provided to enterprise clients in entertainment, sports, gaming, live streaming and other sectors. We produce content across every digital medium, from creative advertising campaigns and original branded content to e-gaming livestreams, podcast series, feature length documentaries, sports representation and marketing. We earn revenue, which is reflected in enterprise service revenue, from our enterprise clients based on performance obligations within our contracts with them.
Recent Developments
Recent events impacting our business are as follows:
COVID-19 - The COVID-19 pandemic has caused substantial changes in consumer
behavior, restrictions on business and individual activities and high
unemployment rates, which led to reduced economic activity and may continue to
cause economic volatility. There continue to be significant uncertainties
associated with the COVID-19 pandemic, including with respect to the ultimate
course, duration and severity of the virus and additional variants, future
actions that may be taken by governmental authorities and private businesses to
contain the COVID-19 pandemic or to mitigate its impact and the effectiveness of
such actions, the timing and speed of economic recovery and the ultimate
effectiveness of vaccinations for COVID-19.
In response to the economic uncertainty caused by the pandemic, during 2021, we
made certain operational changes and implemented certain consumer support
programs which were immaterial to our performance. For example, we reduced our
marketing activities such as advertising through digital platforms, which have
since returned to pre-pandemic levels, and also reduced our sponsorship
arrangements with third parties. In addition, we implemented underwriting policy
changes on a targeted basis to more closely manage credit risk while we further
evaluated market conditions. Our underwriting models are dynamic relative to
real time changes in our customer's income and credit profiles and our credit
performance remained steady as our underwriting models quickly adapted to these
changes. To further support our customers, we expanded our payment deferral
options and reduced certain fees, while providing them with relevant content and
resources on topics like unemployment insurance and stimulus checks. For
instance, for our secured personal loan customers with no prior missed payments,
we offered payment deferrals based on a customer's payment frequency, ranging
from one payment deferral for monthly payments and up to three payment deferrals
for weekly payments. For our Instacash customers with an outstanding advance, we
allowed them to change the scheduled repayment date by up to 14 days. Once the
advance was repaid, the customer could request another change to the scheduled
repayment on another advance. While there is no limit to the number of changes a
customer may be granted, they are limited to one at a time and per advance.
Despite the economic uncertainty as a result of COVID-19, we have increased the
number of customers on our platform.
34
--------------------------------------------------------------------------------Management will continue to monitor the nature and extent of potential impact to the business as the pandemic continues.
Business Combinations - Since
•
Merger with Fusion - OnSeptember 22, 2021 , Legacy MoneyLion completed the Business Combination with Fusion and became a publicly traded company. The Business Combination was accounted for as a reverse recapitalization in accordance withU.S. GAAP, for which Legacy MoneyLion was determined to be the accounting acquirer. Since the Business Combination was accounted for as a reverse recapitalization, no goodwill or other intangible assets were recorded, in accordance withU.S. GAAP. Under this method of accounting, Fusion was treated as the "acquired" company for financial reporting purposes. Operations prior to the Business Combination are those of Legacy MoneyLion. See Part II, Item 8 "Business Combination" in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 for additional information.
•
MALKA Acquisition - OnNovember 15, 2021 ,MoneyLion completed its acquisition of MALKA (the "MALKA Acquisition"). MALKA is a creator network and content platform that provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors. The MALKA Acquisition acceleratedMoneyLion's ability to engage with consumers across all digital and emerging channels, allowingMoneyLion to directly connect with communities natively inside and outside of its existing platform. MALKA operates as an indirect, wholly-owned subsidiary ofMoneyLion Inc. with MALKA's pre-acquisition management team leading day-to-day operations. Related to the closing of the MALKA Acquisition,MoneyLion issued 3,206,167 in restricted shares of MoneyLion Class A Common Stock and paid approximately$10.0 million in cash to the sellers in exchange for all of the issued and outstanding membership interests of MALKA. The Closing Make-Whole Provision (as defined herein) related to the restricted shares of MoneyLion Class A Common Stock issued was valued at$10,870 as of the MALKA Acquisition Closing Date.MoneyLion also paid down approximately$2.2 million of MALKA debt facilities. The sellers may earn up to an additional$35 million payable in restricted shares of MoneyLion Class A Common Stock if MALKA's revenue and EBITDA exceeds certain targets in 2021 and 2022. The total purchase price of the MALKA Acquisition was approximately$52.7 million .
•
Even Acquisition - OnFebruary 17, 2022 ,MoneyLion completed its acquisition of Even Financial (the "Even Acquisition"). Even Financial utilizes its software platform to connect and match consumers with real-time personalized financial product recommendations from banks, insurance and fintech companies on mobile apps and websites by enabling the display of offers for financial products to consumers through its platform. Even Financial's infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridgingProduct Partners andChannel Partners via its industry-leading API and embedded finance marketplaces. The Even Acquisition strengthenedMoneyLion's platform by improving consumers' abilities to find and access the right financial products to help them manage their financial lives. Even Financial's growing network includes over 400Product Partners and 550Channel Partners , covering a breadth of financial services including loans, credit cards, mortgages, savings and insurance products. The Even Acquisition also expandedMoneyLion's addressable market, extended the reach ofMoneyLion's own products, diversified its revenue mix and furtheredMoneyLion's ambition to be the premier financial super app for hardworking Americans. 35 -------------------------------------------------------------------------------- At the closing of the Even Acquisition, the Company (i) issued to the equityholders of Even Financial an aggregate of 28,164,811 shares of the Company's Series A Redeemable Convertible Preferred Stock, along with an additional 529,120 shares of Series A Redeemable Convertible Preferred Stock to advisors of Even Financial for transaction expenses, valued at$0.2 million , (ii) paid to certain Even Financial management equityholders approximately$14.5 million in cash and (iii) exchanged 8,883,228 options to acquire Even Financial common stock for 5,901,846 options to acquire MoneyLion Class A Common Stock, of which the vested portion at the acquisition date was valued at$8.9 million . The equityholders and advisors of Even Financial are also entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Redeemable Convertible Preferred Stock, based on the attributed revenue of Even Financial's business during the 13-month period commencingJanuary 1, 2022 (the "Earnout"), and certain recipients of options to acquire shares of MoneyLion Class A Common Stock are entitled to receive dividend equivalents in lieu of receiving Series A Redeemable Convertible Preferred Stock, subject to certain conditions (the "Preferred Stock Equivalents"). The combined value of the Earnout and Preferred Stock Equivalents was$45.3 million as of the closing of the Even Acquisition. The total purchase price was approximately$270 million , subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately$5.7 million of existing indebtedness of Even Financial and pay$2.9 million of seller transaction costs.
Factors Affecting Our Performance
The Company is subject to a number of risks including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, dependence on key individuals and risks associated with changes in information technology.
New customer growth and increasing usage across existing customers
Our ability to effectively acquire new customers through our acquisition and marketing efforts and drive usage of our products across our existing customers is key to our growth. We invested in the platform approach and believe our customers' experience is enhanced by using our full product suite as we can better tailor the insights and recommendations. In turn, this generates higher revenue and lifetime value from our customer base.
Product expansion and innovation
We believe in the platform approach and providing relevant products to our customers to help them better manage their financial lives, both in times of need and excess. We will continue to invest in enhancing our existing suite of products and developing new products. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers.
General economic and market conditions
Our performance is impacted by the relative strength of the overall economy, market volatility, consumer spending behavior and consumer demand for financial products and services. The willingness of our customers to spend, invest, or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers' behavior and our own ability to fund advances and loan volume.
Competition
We compete with several larger financial institutions and technology platforms
that offer similar products and services. We compete with those that offer both
single point solutions similar to any one of our products as well as more
integrated, complete solutions. Some of our competitors may have access to more
resources than we do and thus may be able to offer better pricing or benefits to
our customers.
36--------------------------------------------------------------------------------
Pricing of our products
We derive a substantial portion of our revenue from fees earned from our products. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts to customers who utilize multiple products to expand usage of our platform. We may also lower pricing on our products to acquire new customers. For example, we offer our customers discounts such as Shake 'N' Bank cashback and other cashback rewards opportunities as part of our RoarMoney bank account product offering and such discounts are provided to customers based on eligibleMoneyLion debit card transactions. On average, approximately 40% of our eligible RoarMoney bank account customers receive this benefit. We also offer our Credit Builder Plus members access to our Lion's Share Loyalty Program where members can earn up to$19.99 per month. The size of the Lion's Share reward depends on a customer's number of logins into theMoneyLion app and purchases using their RoarMoney account in that month. On average, approximately 25% of our Credit Builder Plus members who met the minimum eligibility criteria received a Lion's Share reward.
Product mix
We offer various products and services on our platform, including a membership program, loans, cash advances, affiliate offers and cryptocurrency, investment and bank accounts. Each product has a different profitability profile. The relative usage of products with high or low profitability and their lifetime value could have an impact on our performance.
Access and cost of financing
Our credit products and other receivables were primarily financed through IIA until the end of the fourth quarter of 2021. Beginning in the fourth quarter of 2021, we transitioned our primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. Loss of one or more of the financing sources we have for our credit products and other receivables could have an adverse impact on our performance, and it could be costly to obtain new financing.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Total Customers
We define Total Customers as the cumulative number of customers that have opened at least one account, including banking, membership subscription, secured personal loan, cash advance, managed investment account, cryptocurrency account and customers that are monetized through our marketplace and affiliate products. Total Customers also include customers that have submitted for, received or clicked on at least one marketplace loan offer. Previously, Total Customers included all customers that submitted for or clicked on an offer through our marketplace but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management's view of our customers. We consider Total Customers to be a key performance metric as it can be used to understand lifecycle efforts of our customers, as we look to cross-sell products to our customer base and grow our platform. Total Customers were 5.4 million and 2.7 million as ofSeptember 30, 2022 and 2021, respectively. Total Customers for all prior periods have been recast to present the updated definition of Total Customers. 37 --------------------------------------------------------------------------------
Total Products
We define Total Products as the total number of products that our Total Customers have opened, including banking, membership subscription, secured personal loan, cash advance, managed investment account, cryptocurrency account and monetized marketplace and affiliate products, as well as customers who signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. Total Products also include marketplace loan offers that our Total Customers have submitted for, received or clicked on through our marketplace. If a customer has funded multiple secured personal loans or cash advances or opened multiple products through our marketplace, it is only counted once for each product type. Previously, Total Products included all products for which our Total Customers submitted or clicked on an offer but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management's view of our products. We consider Total Products to be a key performance metric as it can be used to understand the usage of our products across our customer base. Total Products were 11.3 million and 6.9 million as ofSeptember 30, 2022 and 2021, respectively. Total Products for all prior periods have been recast to present the updated definition of Total Products.
Enterprise Partners is comprised ofProduct Partners andChannel Partners . We defineProduct Partners as financial institutions and financial service providers. We defineChannel Partners as organizations that allow us to reach a wide base of consumers, including but not limited to news sites, content publishers, product comparison sites and financial institutions.Enterprise Partners were 1,024 as ofSeptember 30, 2022 , comprising 441Product Partners and 583Channel Partners . The number ofEnterprise Partners prior to the Even Acquisition was not significant.
Total Originations
We define Total Originations as the dollar volume of the secured personal loans originated and cash advances funded within the stated period. We consider Total Originations to be a key performance metric as it can be used to measure the usage and engagement of the customers across our secured personal lending and Instacash products and is a significant driver of net interest income on finance receivables and service and subscription fees. Total Originations were$446 million and$274 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$1,292 million and$700 million for the nine months endedSeptember 30, 2022 and 2021, respectively. All originations were originated directly byMoneyLion .
Adjusted Revenue
Adjusted Revenue is defined as total revenue, net, plus amortization of loan origination costs less provision for loss on subscription receivables, provision for loss on fees receivables and revenue derived from phased out products. We believe that Adjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes. Adjusted Revenue is a non-GAAP measure and should not be viewed as a substitute for total revenue, net. Refer to the "- Non-GAAP Measures" section below for further discussion.
Our Adjusted Revenue is further broken into the following categories:
Three Months Ended September 30, Nine Months Ended September
30,
2022 2021 2022 2021
(in thousands)
Consumer $ 50,987 $ 38,803 $ 146,713 $ 104,475
Enterprise 34,288 3,175 89,095 6,442
Adjusted Revenue $ 85,275 $ 41,978 $ 235,808 $ 110,917
This breakdown of Adjusted Revenue across the categories of consumer revenue and
enterprise revenue helps provide our management with a better understanding of
Adjusted Revenue by type and may help to inform strategic pricing and resource
allocations across our products.
38
--------------------------------------------------------------------------------Adjusted Gross Profit and Adjusted EBITDA
Adjusted Gross Profit is defined as gross profit less revenue derived from phased out products. Adjusted EBITDA is defined as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrants, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe Adjusted Gross Profit and Adjusted EBITDA provide a meaningful understanding of an aspect of profitability based on our current product portfolio. These are non-GAAP measures and should not be viewed as a substitute for gross profit nor net income (loss). Refer to the "- Non-GAAP Measures" section below for further discussion.
Results of Operations for the Three and Nine Months Ended
Revenues
The following table is reference for the discussion that follows.
Three Months Ended Nine Months Ended September
September 30, Change 30, Change
2022 2021 $ % 2022 2021 $ %
(In thousands, except for percentages)
Consumer revenues
Service and
subscription fees $ 52,109 $ 38,748 $ 13,361 34.5 % $ 149,271 $ 103,368 $ 45,903 44.4 %
Net interest income
on finance
receivables 2,351 2,294 57 2.5 % 7,436 5,717 1,719 30.1 %
Total consumer
revenues 54,460 41,042 13,418 32.7 %156,707 109,085 47,622 43.7 % Enterprise service revenues
34,288 3,175 31,113 979.9 % 89,095 6,442 82,653 1,283.0 %
Total revenue, net
We generate revenues primarily from various product-related fees, providing membership subscriptions, performing enterprise services and originating loans.
Total revenues increased by$44.5 million , or 100.7%, to$88.7 million for the three months endedSeptember 30, 2022 , as compared to$44.2 million for the same period in 2021. Total revenues increased by$130.3 million , or 112.8%, to$245.8 million for the nine months endedSeptember 30, 2022 , as compared to$115.5 million for the same period in 2021.
Service and subscription fees
Service and subscription fees increased by$13.4 million , or 34.5%, to$52.1 million for the three months endedSeptember 30, 2022 , as compared to$38.7 million for the same period in 2021. The increase in service and subscription fees were driven by increases in fee income related to instant transfer fees and tips from Instacash of$11.1 million driven by the growth of Instacash advances across both existing and new customers, an increase in cardholder fees from RoarMoney accounts of$0.4 million due to an increased number of customers using RoarMoney and new foreign transaction and instant transfer fees and an increase of$1.9 million in revenue from a new transaction volume-based incentive payment program from a third-party payment network, of which$1.6 million is related to prior periods. 39
-------------------------------------------------------------------------------- Service and subscription fees increased by$45.9 million , or 44.4%, to$149.3 million for the nine months endedSeptember 30, 2022 , as compared to$103.4 million for the same period in 2021. The increase in service and subscription fees were driven by increases in fee income related to instant transfer fees and tips from Instacash of$42.9 million driven by the growth of Instacash advances across both existing and new customers, an increase in subscription fees of$2.1 million due to an increased number of customers using the Credit Builder Plus membership program and an increase of$1.9 million in revenue from a new transaction volume-based incentive payment program from a third-party payment network, of which$1.2 million is related to prior periods. These increases were partially offset by decreases in fee income related to interchange, cardholder and administration fees from our bank and investment accounts of$1.0 million driven by lower payment volume.
Net interest income on finance receivables
Net interest income on finance receivables is generated by interest earned on Credit Builder Plus loans, which is partially offset by the amortization of loan origination costs. Net interest income on finance receivables increased by$0.1 million , or 2.5%, to$2.4 million for the three months endedSeptember 30, 2022 , as compared to$2.3 million for the same period in 2021. The increase in net interest income on finance receivables was driven by the historical origination growth on our Credit Builder Plus loan program across both existing and new customers. The amortization of loan origination costs decreased by$0.1 million to$0.3 million for the three months endedSeptember 30, 2022 , as compared to$0.5 million for the same period in 2021. Net interest income on finance receivables increased by$1.7 million , or 30.1%, to$7.4 million for the nine months endedSeptember 30, 2022 , as compared to$5.7 million for the same period in 2021. The increase in net interest income on finance receivables was driven by the historical origination growth on our Credit Builder Plus loan program across both existing and new customers. The amortization of loan origination costs decreased by$0.2 million to$0.8 million for the nine months endedSeptember 30, 2022 , as compared to$1.0 million for the same period in 2021. Enterprise service revenues Enterprise service revenues increased by$31.1 million , or 979.9%, to$34.3 million for the three months endedSeptember 30, 2022 , as compared to$3.2 million for the same period in 2021. This increase was primarily attributable to the acquisitions of Even Financial and MALKA, which significantly expanded the Company's enterprise service offerings. Enterprise service revenues increased by$82.7 million , or 1,283.0%, to$89.1 million for the nine months endedSeptember 30, 2022 , as compared to$6.4 million for the same period in 2021. This increase was primarily attributable to the acquisitions of Even Financial and MALKA, which significantly expanded the Company's enterprise service offerings. 40 --------------------------------------------------------------------------------
Operating Expenses
The following table is reference for the discussion that follows:
Three Months Ended Nine Months Ended September
September 30, Change 30, Change
2022 2021 $ % 2022 2021 $ %
(In thousands, except for percentages)
Operating expenses
Provision for credit
losses on consumer
receivables 27,428 15,238 12,190 80.0 % 77,453 36,644 40,809 111.4 %
Compensation and
benefits 25,619 15,471 10,148 65.6 % 74,160 30,700 43,460 141.6 %
Marketing 6,954 13,531 (6,577 ) -48.6 % 27,847 27,060 787 2.9 %
Direct costs 28,837 10,885 17,952 164.9 % 79,427 31,331 48,096 153.5 %
Professional services 7,546 4,678 2,868 61.3 % 21,486 12,715 8,771 69.0 %
Technology-related
costs 5,327 1,498 3,829 255.6 % 15,241 5,954 9,287 156.0 %
Other operating
expenses 11,209 8,261 2,948 35.7 % 31,820 10,618 21,202 199.7 %
Total operating
expenses 112,920 69,562 43,358 62.3 % 327,434 155,022 172,412 111.2 %
Other (expense) income
Interest expense (7,880 ) (1,627 ) (6,253 ) 384.3 % (21,638 ) (4,947 ) (16,691 ) 337.4 %
Change in fair value of
warrant liability 414 (5,495 ) 5,909 nm 7,275 (54,285 ) 61,560 nm
Change in fair value of
subordinated
convertible notes - 7,684 (7,684 ) nm - (41,877 ) 41,877 nm
Change in fair value of
contingent
consideration from
mergers and
acquisitions 10,214 - 10,214 nm 14,034 - 14,034 nm
Other income (expense) 460 137 323 235.8 % (447 ) 3,405 (3,852 ) nm
Total other (expense)
income 3,208 699 2,509 358.9 % (776 ) (97,704 ) 96,928 -99.2 %
Income tax expense
(benefit) 53 (1 ) 54 nm (28,348 ) 41 (28,389 ) nm
Our operating expenses consist of the following:
Provision for credit losses on consumer receivables
Provision for credit losses on consumer receivables consists of amounts charged during the period to maintain an allowance for credit and advance losses. The allowance represents management's estimate of the credit losses in our consumer receivable portfolio and is based on management's assessment of many factors, including changes in the nature, volume and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the customer's ability to pay. Provision for credit losses on consumer receivables increased by$12.2 million , or 80.0%, to$27.4 million for the three months endedSeptember 30, 2022 , as compared to$15.2 million for the same period in 2021. This increase resulted primarily from an increase to provision related to Instacash advance receivables of$11.3 million and Instacash instant transfer fees and tips of$0.9 million , evidenced by the increase in Total Originations from approximately$274 million for the three months endedSeptember 30, 2021 compared to approximately$446 million for the same period in 2022, and partially offset by a decrease to provision related to Credit Builder Plus loan receivables of$0.5 million . Provision related to subscription fees increased by$0.2 million . Related to the ML Plus loans, a legacy product we transitioned from in the second quarter of 2020, the provision decreased by$0.3 million . 41 -------------------------------------------------------------------------------- Provision for credit losses on consumer receivables increased by$40.8 million , or 111.4%, to$77.5 million for the nine months endedSeptember 30, 2022 , as compared to$36.6 million for the same period in 2021. This increase resulted primarily from an increase to provision related to Instacash advance receivables of$32.7 million , Instacash instant transfer fees and tips of$3.2 million and Credit Builder Plus loan receivables of$2.1 million , evidenced by the increase in Total Originations from approximately$700 million for the nine months endedSeptember 30, 2021 compared to approximately$1,292 million for the same period in 2022. Provision related to subscription fees increased by$1.8 million . Related to the ML Plus loans, a legacy product we transitioned from in the second quarter of 2020, the provision decreased by$0.9 million .
Compensation and benefits
Compensation and benefits increased by$10.1 million , or 65.6%, to$25.6 million for the three months endedSeptember 30, 2022 , as compared to$15.5 million for the same period in 2021. This increase was driven primarily by$9.8 million of additional compensation and benefits expenses related to Even Financial and MALKA, a$1.9 million increase related to increased headcount, an increase in stock-based compensation of$4.5 million and$0.2 million related to severance costs incurred in the third quarter of 2022. This increase was partially offset by the$6.3 million non-recurring, discretionary bonus incentive expense related to the Business Combination that occurred in the third quarter of 2021. Compensation and benefits increased by$43.5 million , or 141.6%, to$74.2 million for the nine months endedSeptember 30, 2022 , as compared to$30.7 million for the same period in 2021. This increase was driven primarily by$26.6 million of additional compensation and benefits expenses related to Even Financial and MALKA, a$3.8 million increase related to increased headcount, an increase in stock-based compensation of$11.2 million , a$1.1 million increase related to the amortization of salaries related to origination expenses incurred in 2021 and$0.8 million related to severance costs incurred in 2022.
Marketing
Marketing decreased by$6.6 million , or 48.6%, to$7.0 million for the three months endedSeptember 30, 2022 , as compared to$13.5 million for the same period in 2021. This decrease resulted primarily from a$6.7 million decrease in costs related to advertising through digital platforms, partially offset by a$0.1 million increase in general marketing-related activities.
Marketing increased by
Direct costs
Direct costs increased by$18.0 million , or 164.9%, to$28.8 million for the three months endedSeptember 30, 2022 , as compared to$10.9 million for the same period in 2021. The increase was primarily driven by$18.8 million of direct costs related to Even Financial and MALKA, an increase in payment processing fees of$0.3 million and underwriting expenses of$0.1 million , driven by growth in Total Originations and Total Customers, partially offset by a$1.4 million decrease in costs related to our bank account offering. Direct costs increased by$48.1 million , or 153.5%, to$79.4 million for the nine months endedSeptember 30, 2022 , as compared to$31.3 million for the same period in 2021. The increase was primarily driven by$48.3 million of direct costs related to Even Financial and MALKA, an increase in payment processing fees of$3.5 million and underwriting expenses of$1.3 million , driven by growth in Total Originations and Total Customers, partially offset by a$5.5 million decrease in costs related to our bank account offering.
Professional services
42
--------------------------------------------------------------------------------
Professional services increased by $2.9 million , or 61.3%, to $7.5 million for
the three months ended September 30, 2022 , as compared to $4.7 million for the
same period in 2021. This increase resulted primarily from an increase in
professional costs related to Even Financial and MALKA of $0.9 million and other
consulting costs of $2.0 million to help support business growth.
Professional services increased by $8.8 million , or 69.0%, to $21.5 million for
the nine months ended September 30, 2022 , as compared to $12.7 million for the
same period in 2021. This increase resulted primarily from an increase in
professional costs related to Even Financial and MALKA of $3.2 million , legal
services of $1.4 million and other consulting costs of $4.2 million to help
support our public reporting requirements and business growth.
Technology-related costs
Technology-related costs increased by$3.8 million , or 255.6%, to$5.3 million for the three months endedSeptember 30, 2022 , as compared to$1.5 million for the same period in 2021. This increase resulted primarily from an increase in software licenses and subscriptions of$2.0 million , depreciation and amortization related to equipment and software of$1.1 million and costs related to other technology services of$0.7 million . Technology-related costs increased by$9.3 million , or 156.0%, to$15.2 million for the nine months endedSeptember 30, 2022 , as compared to$6.0 million for the same period in 2021. This increase resulted primarily from an increase in software licenses and subscriptions of$4.9 million , depreciation and amortization related to equipment and software of$2.7 million and costs related to other technology services of$1.8 million .
Other operating expenses
Other operating expenses increased by$2.9 million , or 35.7%, to$11.2 million for the three months endedSeptember 30, 2022 , as compared to$8.3 million for the same period in 2021. The increase was driven by$4.5 million of intangible amortization expenses attributable to the acquisitions of Even Financial and MALKA,$1.1 million of additional expenses as a result of the acquisitions of Even Financial and MALKA and a$0.7 million increase in insurance-related expenses, partially offset by reductions in losses for unrecovered customer purchase transactions and other banking charges of$4.4 million . Other operating expenses increased by$21.2 million , or 199.7%, to$31.8 million for the nine months endedSeptember 30, 2022 , as compared to$10.6 million for the same period in 2021. The increase was driven by$11.3 million of intangible amortization expenses attributable to the acquisitions of Even Financial and MALKA, a$4.8 million increase in insurance-related expenses and$3.9 million of additional expenses as a result of the acquisitions of Even Financial and MALKA.
Our other (expense) income consists of the following:
Interest expense
Interest expense increased by$6.3 million , or 384.3%, to$7.9 million for the three months endedSeptember 30, 2022 , as compared to$1.6 million for the same period in 2021. This increase resulted from an increase in average debt outstanding during the three months endedSeptember 30, 2022 compared to the same period in 2021. See Part I, Item 1 "Financial Statements - Debt" for more information. Interest expense increased by$16.7 million , or 337.4%, to$21.6 million for the nine months endedSeptember 30, 2022 , as compared to$4.9 million for the same period in 2021. This increase resulted from an increase in average debt outstanding during the nine months endedSeptember 30, 2022 compared to the same period in 2021. See Part I, Item 1 "Financial Statements - Debt" for more information.
Change in fair value of warrant liability
Change in fair value of warrant liability was a benefit of$0.4 million for the three months endedSeptember 30, 2022 , as compared to an expense of$5.5 million for the same period in 2021. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations. 43 -------------------------------------------------------------------------------- Change in fair value of warrant liability was a benefit of$7.3 million for the nine months endedSeptember 30, 2022 , as compared to an expense of$54.3 million for the same period in 2021. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations.
Change in fair value of subordinated convertible notes
Change in fair value of subordinated convertible notes had no expense for the three and nine months endedSeptember 30, 2022 compared to a benefit of$7.7 million and an expense$41.9 million for the three and nine months endedSeptember 30, 2021 , respectively. There was no activity for the three and nine months endedSeptember 30, 2022 because the subordinated convertible notes were converted into common stock immediately prior to the Business Combination Closing inSeptember 2021 ; the noteholders subsequently received shares of MoneyLion Class A Common Stock upon the Business Combination Closing.
Change in fair value of contingent consideration from mergers and acquisitions
Change in fair value of contingent consideration from mergers and acquisitions was a benefit of$10.2 million for the three months endedSeptember 30, 2022 , as compared to zero for the same period in 2021. No contingent consideration from mergers and acquisitions was outstanding for the three months endedSeptember 30, 2021 . Change in fair value of contingent consideration from mergers and acquisitions was a benefit of$14.0 million for the nine months endedSeptember 30, 2022 , as compared to zero for the same period in 2021. No contingent consideration from mergers and acquisitions was outstanding for the nine months endedSeptember 30, 2021 . Other income (expense) Other income increased by$0.3 million to other income of$0.5 million for the three months endedSeptember 30, 2022 , as compared to$0.1 million for the same period in 2021. The increase was primarily related to interest income earned on interest bearing deposits funded during 2022, partially offset by foreign currency translation losses during the three months endedSeptember 30, 2022 . Other expense increased by$3.9 million to other expense of$0.4 million for the nine months endedSeptember 30, 2022 , as compared to other income of$3.4 million for the same period in 2021. The majority of other expense in the nine months endedSeptember 30, 2022 was related to expenses from debt transactions during the period. The majority of other income in the nine months endedSeptember 30, 2021 related to a gain from the forgiveness of SBA's PPP loan of$3.2 million as the SBA approved the Company's application for forgiveness with respect to the entire outstanding balance of the PPP loan.
Income tax (benefit) expense
See Part I, Item 1 "Financial Statements - Income Taxes" for an explanation of
the significant income tax benefit recorded during the nine months ended
Non-GAAP Measures
In addition to total revenue, net, net income (loss) and gross profit, which are measures presented in accordance withU.S. GAAP, management believes that Adjusted Revenue, Adjusted Gross Profit and Adjusted EBITDA provide relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted Revenue, Adjusted Gross Profit and Adjusted EBITDA are supplemental measures ofMoneyLion's performance that are neither required by nor presented in accordance withU.S. GAAP. Adjusted Revenue, Adjusted Gross Profit and Adjusted EBITDA should not be considered as substitutes forU.S. GAAP metrics such as total revenue, net, net income (loss), gross profit or any other performance measures derived in accordance withU.S. GAAP and may not be comparable to similar measures used by other companies.
We define Adjusted Revenue as total revenue, net plus amortization of loan origination costs less provision for loss on subscription receivables, provision for loss on fees receivables and revenue derived from phased out products. We
44
--------------------------------------------------------------------------------believe that Adjusted Revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes.
We define Adjusted Gross Profit as gross profit less revenue derived from phased out products. We define Adjusted EBITDA as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrant liability, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe that these measures provide a meaningful understanding of an aspect of profitability based on our current product portfolio.
Adjusted Revenue, Adjusted Gross Profit and Adjusted EBITDA are useful to an investor in evaluating our performance because these measures:
•
are widely used by investors to measure a company's operating performance;
•
are metrics used by rating agencies, lenders and other parties to evaluate our credit worthiness; and
•
are used by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting.
The reconciliation of total revenue, net to Adjusted Revenue for the three and
nine months ended
Three Months Ended September 30, Nine Months Ended September
30,
2022 2021 2022 2021
(in thousands)
Total revenues, net $ 88,748 $ 44,217 $ 245,802 $ 115,527
Add back:
Amortization of loan origination costs1 335 464 802 1,039
Less:
Provision for credit losses on (1,256 ) (1,025 ) (4,018 ) (2,204 ) receivables - subscription receivables2 Provision for credit losses on (2,553 ) (1,671 ) (6,758 ) (3,563 ) receivables - fees receivables3 Revenue derived from products that have (0 ) (6 ) (21 ) 119 been phased out4 Adjusted Revenue$ 85,275 $ 41,978 $ 235,808 $ 110,917 (1)
Amortization of loan origination costs are included within net interest income from finance receivables.
(2)
We deduct provision for credit losses on receivables related to subscription receivables from total revenue, net as it is related to revenue-based receivables. ForU.S. GAAP reporting purposes, provision for loss on receivables related to subscription receivables is included within provision for loss on receivables on the statement of operations. Refer to Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for further discussion.
(3)
We deduct provision for credit losses on receivables related to fees receivables from total revenue, net as it is related to revenue-based receivables. ForU.S. GAAP reporting purposes, provision for loss on receivables related to fees receivables is included within provision for loss on receivables on the statement of operations. Refer to Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for further discussion. 45 --------------------------------------------------------------------------------
(4)
Revenue derived from products that have been phased out includes net interest income and fees related to unsecured personal loans, which are included within net interest income from finance receivables and service and subscription fees, respectively. Revenue from unsecured personal loans was$0.0 and$0.0 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$0.0 and$(0.1) million for the nine months endedSeptember 30, 2022 and 2021, respectively. The reconciliation of gross profit, which is prepared in accordance withU.S. GAAP, to Adjusted Gross Profit for the three and nine months endedSeptember 30, 2022 and 2021 is as follows: Three Months Ended Nine Months Ended September September 30, 30, 2022 2021 2022 2021 (in thousands) Total revenue, net$ 88,748 $ 44,217 $ 245,802 $ 115,527 Less: Cost of Sales Direct costs (28,837 ) (10,885 ) (79,427 ) (31,331 ) Provision for credit losses on (1,256 ) (1,025 ) (4,018 ) (2,204 ) receivables - subscription receivables1 Provision for credit losses on (2,553 ) (1,671 ) (6,758 ) (3,563 ) receivables - fees receivables2 Technology related costs (2,410 ) (1,633 ) (7,396 ) (4,493 ) Professional services (1,665 ) (978 ) (3,850 ) (2,460 ) Compensation and benefits (2,780 ) (1,015 ) (6,451 ) (2,805 ) Other operating expenses (121 ) (54 ) (344 ) (163 ) Gross Profit$ 49,126 $ 26,957 $ 137,559 $ 68,506 Less: Revenue derived from products that have (0 ) (6 ) (21 ) 119 been phased out3 Adjusted Gross Profit$ 49,126 $ 26,951 $ 137,538 $ 68,625 (1) We deduct provision for credit losses on receivables related to subscription receivables from total revenue, net as it is related to revenue-based receivables. ForU.S. GAAP reporting purposes, provision for loss on receivables related to subscription receivables is included within provision for loss on receivables on the statement of operations. Refer to Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for further discussion.
(2)
We deduct provision for credit losses on receivables related to fees receivables from total revenue, net as it is related to revenue-based receivables. ForU.S. GAAP reporting purposes, provision for loss on receivables related to fees receivables is included within provision for loss on receivables on the statement of operations. Refer to the Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for further discussion.
(3)
Revenue derived from products that have been phased out includes net interest income and fees related to unsecured personal loans, which are included within net interest income from finance receivables and service and subscription fees, respectively. Revenue from unsecured personal loans was$0.0 and$0.0 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$0.0 and$(0.1) million for the nine months endedSeptember 30, 2022 and 2021, respectively. 46 -------------------------------------------------------------------------------- The reconciliation of net loss, which is prepared in accordance withU.S. GAAP, to Adjusted EBITDA for the three and nine months endedSeptember 30, 2022 and 2021 is as follows: Three Months Ended
Nine Months Ended
September 30,
2022 2021 2022 2021
(in thousands)
Net income (loss) $ (21,017 ) $ (24,645 ) $ (54,060 ) $ (137,240 )
Add back:
Interest related to corporate debt1 2,896 1,627 6,937 4,947
Income tax expense (benefit) 53 (1 ) (28,348 ) 41
Depreciation and amortization expense 6,157 486 15,584 1,502
Changes in fair value of warrant (414 ) 5,495 (7,275 ) 54,285
liability
Changes in fair value of subordinated - (7,684 ) - 41,877
convertible notes
Change in fair value of contingent
consideration from mergers and (10,214 ) - (14,034 ) -
acquisitions
Stock-based compensation expense 5,127 586 13,643 2,425 One-time expenses2 3,068 7,183 9,887 6,247
Less:
Origination financing cost of capital3 - (3,520 ) - (9,364 ) Adjusted EBITDA$ (14,346 ) $ (20,474 ) $ (57,669 ) $ (35,280 ) (1) We add back the interest expense related to all outstanding corporate debt, excluding outstanding principal balances related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility. ForU.S. GAAP reporting purposes, interest expense related to corporate debt is included within interest expense in the statement of operations.
(2)
We add back other one-time expenses, including those related to transactions, including mergers and acquisitions and financings, that occurred, litigation-related expenses and non-recurring costs or gains. Generally, these expenses are included within other expenses or professional fees in the statement of operations.
(3)
Origination financing cost of capital represents the preferred return
attributable to IIA investors. This is included within temporary equity on
historical consolidated balance sheets. Since we transitioned away from IIA in
47
--------------------------------------------------------------------------------
Changes in Financial Condition to
September 30, December 31, Change
2022 2021 $ %
Assets
Cash and restricted cash $ 189,209 $ 246,224 $ (57,015 ) -23.2 %
Consumer receivables 152,718 153,741 (1,023 ) -0.7 %
Allowance for credit losses on
consumer receivables (22,633 ) (22,323 ) (310 ) 1.4 %
Consumer receivables, net 130,085 131,418 (1,333 ) -1.0 %
Enterprise receivables 20,825 6,002 14,823 247.0 %
Property and equipment, net 2,896 1,801 1,095 60.8 %
Goodwill and intangible assets, net 366,931 77,665 289,266 372.5 %
Other assets 48,854 28,428 20,426 71.9 %
Total assets $ 758,800 $ 491,538 $ 267,262 54.4 %
Liabilities and Stockholders' Equity
Liabilities:
Debt agreements 241,645 186,591 55,054 29.5 %
Accounts payable and accrued
liabilities 54,049 36,868 17,181 46.6 %
Warrant liability 985 8,260 (7,275 ) -88.1 %
Other liabilities 60,051 38,135 21,916 57.5 %
Total liabilities 356,730 269,854 86,876 32.2 %
Redeemable convertible preferred stock 173,142
(Series A) - 173,142 nm
Stockholders' equity:
Common Stock 25 23 2 8.7 %
Additional paid-in capital 761,576 701,234 60,342 8.6 %
Accumulated deficit (522,973 ) (469,873 ) (53,100 ) 11.3 %
Treasury stock (9,700 ) (9,700 ) - 0.0 %
Total stockholders' equity 228,928 221,684 7,244 3.3 %
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity $ 758,800 $ 491,538 $ 267,262 54.4 %
Assets
Cash and restricted cash
Cash and restricted cash decreased by $57.0 million , or 23.2%, to $189.2 million
as of September 30, 2022 , as compared to $246.2 million as of December 31, 2021 .
Refer to the "- Cash Flows" section below for further discussion on the net
change in cash and restricted cash from operating activities, investing
activities and financing activities during the period.
Consumer receivables, net
Consumer receivables, net decreased by$1.3 million , or 1.0%, to$130.1 million as ofSeptember 30, 2022 , as compared to$131.4 million as ofDecember 31, 2021 . The decrease was primarily attributable to a decrease in loan receivables, which was mostly offset by an increase in Instacash receivables fromDecember 31, 2021 toSeptember 30, 2022 . Enterprise receivables Enterprise receivables increased by$14.8 million , or 247.0%, to$20.8 million as ofSeptember 30, 2022 , as compared to$6.0 million as ofDecember 31, 2021 . This increase was primarily attributable to the acquisition of Even Financial, which significantly expanded the Company's enterprise service offering. 48 --------------------------------------------------------------------------------
Goodwill and intangible assets, net increased by$289.3 million , or 372.5%, to$366.9 million as ofSeptember 30, 2022 , as compared to$77.7 million as ofDecember 31, 2021 . This increase was attributable to the Even Acquisition, which closed in the first quarter of 2022.
Other assets
Other assets increased by$20.4 million , or 71.9%, to$48.9 million as ofSeptember 30, 2022 , as compared to$28.4 million as ofDecember 31, 2021 . This was primarily attributable to an increase in receivables from payment processors and the new lease accounting standard adopted during the first quarter of 2022, which resulted in an operating lease right-of-use asset of$8.8 million as ofSeptember 30, 2022 . Liabilities Debt agreements Debt agreements increased by$55.1 million , or 29.5%, to$241.6 million as ofSeptember 30, 2022 , as compared to$186.6 million as ofDecember 31, 2021 . Refer to the Part I, Item 1 "Financial Statements - Debt" for further discussion of financing transactions.
Accounts payable and accrued expenses
Accounts payable and accrued expenses increased by$17.2 million , or 46.6%, to$54.0 million as ofSeptember 30, 2022 , as compared to$36.9 million as ofDecember 31, 2021 , which was primarily attributable to new accounts payable and accruals of$12.9 million associated with Even Financial, which the Company acquired during the first quarter of 2022, and an accrual related to dividends on the Series A Redeemable Convertible Preferred Stock, which was partially offset by a reduction in transaction costs payable related to the Business Combination which were outstanding as ofDecember 31, 2021 .
Warrant liability
Warrant liability decreased by$7.3 million , or 88.1%, to$1.0 million as ofSeptember 30, 2022 , as compared to$8.3 million as ofDecember 31, 2021 . Refer to the "- Results of Operations for the Three and Nine Months EndedSeptember 30, 2022 and 2021" section above for further discussion on the change in fair value of warrant liability. Other liabilities Other liabilities increased by$21.9 million , or 57.5%, to$60.1 million as ofSeptember 30, 2022 , as compared to$38.1 million as ofDecember 31, 2021 . The increase was primarily attributable to an increase in liabilities related to contingent consideration from mergers and acquisitions of$8.7 million primarily related to the Even Acquisition and an increase from the new lease accounting standard adopted during the first quarter of 2022, which resulted in an operating lease liability of$9.4 million as ofSeptember 30, 2022 . 49 --------------------------------------------------------------------------------
Liquidity and Capital Resources
As a result of the Business Combination, we raised net proceeds of$293.2 million , including the contribution of cash held in Fusion's trust account from its initial public offering of$91.1 million , post redemption of Fusion's common stock held by Fusion's public stockholders prior to the Business Combination, and$250.0 million of private investment in public equity ("PIPE") at$10.00 per share of MoneyLion Class A Common Stock, net of transaction expenses. Prior to the Business Combination, the funds received from previous common stock and redeemable convertible preferred stock equity financings, as well as the Company's ability to obtain lending commitments, provided the liquidity necessary for the Company to fund its operations. We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital needs for at least the next twelve months. Our future financing requirements will depend on several factors including our growth, the timing and level of spending to support continued development of our platform, the expansion of marketing activities and merger and acquisition activity. In addition, growth of our finance receivables increases our liquidity needs, and any failure to meet those liquidity needs could adversely affect our business. Additional funds may not be available on terms favorable to us or at all. If the Company is unable to generate positive operating cash flows, additional debt and equity financings or refinancing of existing debt financings may be necessary to sustain future operations. Receivables originated on our platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through IIA until the end of the fourth quarter of 2021. Beginning in the fourth quarter of 2021,MoneyLion transitioned its primary source of funding for originated receivables from IIA to special purpose vehicle financings from third-party institutional lenders. As ofSeptember 30, 2022 , there was an outstanding principal balance of$83.0 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of$73.0 million under the ROAR 2 SPV Credit Facility. See Part I, Item 1 "Financial Statements - Variable Interest Entities" for more information on the ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility.
The following table presents the Company's cash, restricted cash and receivable
from payment processor, as of
September 30, December 31,
2022 2021
Cash $ 126,369 $ 201,763
Restricted cash 62,840 44,461
Receivable from payment processor
Cash Flows
The following table presents net change in cash and restricted cash from operating, investing and financing activities during the nine months endedSeptember 30, 2022 and 2021: Nine Months EndedSeptember 30, 2022 2021
Net cash used in operating activities $ (9,896 ) $
(2,062 ) Net cash used in investing activities (101,607 ) (91,215 ) Net cash provided by financing activities 54,488
371,352
Net change in cash and restricted cash $ (57,015 )
50
--------------------------------------------------------------------------------Operating Activities
Net cash used in operating activities was$9.9 million for the nine months endedSeptember 30, 2022 compared to net cash used in operating activities of$2.1 million for the nine months endedSeptember 30, 2021 . This increase in net cash used in operating activities was primarily driven by changes in working capital, partially offset by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately$5.8 million during the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . Investing Activities Net cash used in investing activities was$101.6 million for the nine months endedSeptember 30, 2022 compared to net cash used in investing activities of$91.2 million for the nine months endedSeptember 30, 2021 . The increase in net cash used in investing activities was primarily related to$18.6 million spent on the Even Acquisition, net of cash received, and increased spending on internal-use software, which was partially offset by a reduction in net originations and collections of finance receivables during the nine months endedSeptember 30, 2022 . Financing Activities Net cash provided by financing activities was$54.5 million for the nine months endedSeptember 30, 2022 compared to net cash provided by financing activities of$371.4 million for the nine months endedSeptember 30, 2021 . The decrease in cash provided by financing activities was primarily attributable to the net proceeds received from the reverse capitalization in connection with the Business Combination and from IIA during the nine months endedSeptember 30, 2021 compared to 2022. Financing Arrangements
Refer to the Part I, Item 1 "Financial Statements - Debt" for further discussion on financing transactions during the period.
Contractual Obligations
The table below summarizes debt, lease and other long-term minimum cash
obligations outstanding as of
Total Remainder 2022 2023 - 2024 2025 - 2026 Thereafter
Monroe Term Loans 90,000 - 20,000 70,000 -
ROAR 1 SPV Credit Facility 83,000 - - 83,000 -
ROAR 2 SPV Credit Facility 73,000 - - 73,000 -
Operating lease obligations 12,619 793 6,270 3,884 1,672
Vender unconditional purchase
obligations 37,957 - 12,457 17,000 8,500
Total $ 296,576 $ 793 $ 38,727 $ 246,884 $ 10,172 Secured Loans and Other Debt
For more information regarding our secured loans and other debt, see Part I, Item 1 "Financial Statements - Debt" in this Quarterly Report on Form 10-Q.
Equity
Series A Redeemable Convertible Preferred Stock
In connection with the acquisition of Even Financial, the Company issued
28,693,931 shares of Series A Redeemable Convertible Preferred Stock. For more
information regarding the Series A Redeemable Convertible Preferred Stock, see
Part I, Item 1 "Financial Statements - Common and Preferred Stock."
51
--------------------------------------------------------------------------------Off-Balance Sheet Arrangements
At
Critical Accounting Policies and Estimates
See Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for a description of critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for a description of recently issued accounting pronouncements that may potentially impact our results of operations, financial condition or cash flows.
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