Attached files
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| EX-99.1 - EXHIBIT 99.1 - Elevate Credit, Inc. | exhibit991pressrelease.htm |
| 8-K - 8-K - Elevate Credit, Inc. | a02-18pressrelease.htm |
Q4 and Full Year 2017 Earnings Call
February 2018
2
Forward-Looking Statements
This presentation and responses to various questions contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements present our current expectations and projections relating to our business, financial condition and results of operations, and do not
refer to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and
terms of similar meaning. The forward-looking statements include statements regarding: our future financial performance including our outlook for full fiscal year 2018; our perspectives on 2018, 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 2017
vintage; our growth strategies and our ability to effectively manage that growth; anticipated key marketing and underwriting initiatives; new and expanded products like a US credit card and power-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, the efficacy and cost of our marketing
efforts, including in the first quarter of 2018; expanded marketing channels and new and growing marketing partnerships; continued growth and investment in Elevate Labs; 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 in the 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; and other risks related to litigation, compliance and regulation. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in
other sections of the most recent Quarterly Report on Form 10-Q and in the Company's other current and periodic reports filed from time to time with the SEC. All written and oral forward-looking
statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements regarding risks and uncertainties that are included in our public
communications. You should evaluate all forward-looking statements made in this presentation in the context of these risks and uncertainties. Neither we nor any of our respective agents, employees or
advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation.
This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a
number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness
of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance
of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
The information and opinions contained in this presentation are provided as of the date of this presentation and are subject to change without notice. This presentation has not been approved by any
regulatory or supervisory agency.
See Appendix for additional information and definitions.
3 3
Elevate is reinventing
non-prime credit with
online products that provide
financial relief today, and
help people build a brighter
financial future.
So far, we’ve originated
$5.2 billion to 1.9 million
customers1 and saved
them more than $2 billion
over payday loans2
4
Elevate key performance highlights
Adjusted EBITDA, Adjusted EBITDA margin and combined loans receivable – principal are non-GAAP financial measures. See Appendix for a reconciliation to GAAP measures.
Elevate Goals
FY 2017 Performance
Highlights
Q4 2017 Performance
Highlights
Strong Growth
16% revenue growth YOY
1
28% combined loans receivable –
principal growth YOY
2
45% growth in Adjusted EBITDA YOY
3
14.5% revenue growth QOQ
1
28% combined loans receivable –
principal growth YOY
2
21% growth in Adjusted EBITDA YOY
3
Expanding
Margins
13% Adjusted EBITDA margin3
260 basis point expansion YOY
13% Adjusted EBITDA margin3
70 basis point expansion YOY
Stable Credit
Quality
Continued performance in target range
Charge-offs trending below previous years
Continued performance in target range
Managed CAC $237 – below target
$231 – below target
35% more customers acquired than 2016
Outsized
Customer Impact
140,000 customers improved credit score4
Continued reduction in avg. effective APR
Continued reduction in avg. effective APR
5
Recent Business Highlights
Sunny generates over $100 million in annual revenue
Profitability of UK Business continues
Elastic line of credit surpasses $1 billion in total funding
Still our fastest growing product
RISE surpasses $300 million in combined loans receivable – principal
Served more than 500,000 customers since inception
Bradley Strock Joins Board of Directors
PayPal CIO
Brian Biglin announced as Chief Credit Officer
Former PayPal, LoanDepot, Intuit exec joins team
Combined loans receivable - principal is a non-GAAP financial measure. See appendix for a reconciliation to GAAP measure
6
Key Marketing and Underwriting Initiatives
Geo-fencing Bank account transaction data
7
Regulatory update
CFPB: Pledged “the CFPB has pushed its last envelope”
– Reconsidering the proposed Small Dollar Rule
– Dropped certain lawsuits and investigations
Federal Banking Regulators: Increasing opportunities for partnerships
– OCC’s Otting urged banks to fill credit gap for underserved
– FDIC proposed guidance supporting fintech partnerships
State Regulators and Legislation: Mixed situation mitigated by Elastic
– May see some state expansion contraction
– Bank partnerships like Elastic minimize potential impact
8
$73
$202
$356
$481
$618
2013 2014 2015 2016 2017
($47) ($52)
$19
$60
$87
$120-$150
2013 2014 2015 2016 2017 2018E
$72
$274
$434
$580
$673
$780-$820
2013 2014 2015 2016 2017 2018E
Revenue
Adjusted EBITDA3
+280%
+59%
+34%
+16%
+223%
Growth in key financial measures ($mm)
+45%
Ending combined loans receivable – principal, Adjusted EBITDA and Adjusted Net Income (Loss) are non-GAAP financial measures. See appendix for a reconciliation to a GAAP measure.
Net Income / (Loss) 5
YTD
$480
+19%
2
+55%
4
($43)
($55)
($20) ($22)
$6
$20-$45
2013 2014 2015 2016 2017 2018E
(As
adjusted5)
Ending Combined Loans
Receivables - Principal
1
+177%
+77%
+35%
+28%
>3x
9
Cumulative loss rates as a % of originations by loan vintage
Consistent and improving credit quality
The 2017 vintage is not yet fully mature from a loss perspective – expected to be slightly better than 2016.
10
Continued margin expansion
Adjusted EBITDA margin is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure.
2015 2016 2017 LT Target
Gross Revenue 100% 100% 100% 100%
Loan Loss Provision 54% 55% 53% 50%
Direct Marketing and
Other Cost of Sales
18% 14% 14% 10%
Gross Margin 29% 31% 33% 40%
Operating Expenses 25% 21% 20% 20%
Adjusted EBITDA
Margin
1 4% 10% 13% 20%
% of Gross Revenues
11
2018 Outlook
Revenue = $780mm - $820mm
Diluted EPS= $0.50 - $1.05
Net Income = $20mm - $45mm
Adjusted EBITDA1 = $120mm - $150mm
Accelerating revenue growth based on
strong demand and Q4 2017 momentum
Perspective on 2018 Annual guidance
Adjusted EBITDA is a non-GAAP financial measure. See appendix for a reconciliation to GAAP measures.
Full year margin expansion as the model
continues to scale
Continued stable credit quality
CAC within range of $250 - $300
12
Key business focus areas for 2018
Expanded Marketing Channels
New and growing marketing partnerships
Scaling of digital campaigns
Risk Innovation
Continued growth and investment in Elevate Labs
Building on recent credit score successes
Additional Bank Partnerships
New and Expanded Products
US credit card, lower-priced installment product in UK
Additional states for RISE
13 13
We believe
everyone
deserves
a lift.
14
Appendix
15
Footnotes
Page 3:
1 Originations and customers from 2002-December 2017, attributable to the combined current and predecessor direct and branded products.
2 For the period from 2013 to 2017. Based on the average effective APR of 131% for the year ended December 31, 2017. 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 Fourth quarter 2017 revenue of $193 million and fourth quarter 2016 revenue of $169 million. FY 2017 revenue of $673 million and FY 2016 revenue of $580 million.
2 Combined loans receivable – principal at December 31, 2017 of $618 million and at December 31, 2016 of $481 million. Combined loans receivable - principal is not a financial measure prepared in
accordance with GAAP. Combined loans receivable – principal represents loans owned by the company plus loans originated and owned by third-party lenders pursuant to our CSO programs.
3 Fourth quarter 2017 Adjusted EBITDA of $25 million and fourth quarter 2016 Adjusted EBITDA of $21 million. FY 2017 Adjusted EBITDA of $87 million and FY 2016 Adjusted EBITDA of $60 million.
Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net loss, adjusted to exclude: net interest expense primarily associated with notes
payable under the VPC Facility and ESPV facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on
fixed assets and intangible assets; non-operating income (loss); stock-based compensation expense and income tax expense (benefit). See the Appendix for a reconciliation to GAAP net loss.
Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.
4 According to analysis of anonymized Rise customer data from a major credit bureau. Credit scores were reviewed from the customer acquisition point up to two quarters after loan completion.
Page 8:
1 Ending combined loans receivable - principal is a non-GAAP financial measure. See appendix for a reconciliation to a GAAP measure.
2 19% is based on 2018 estimate midpoint.
3 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net loss, adjusted to exclude: net interest expense primarily associated with
notes payable under the VPC Facility and ESPV facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations; depreciation and
amortization expense on fixed assets and intangible assets; non-operating income (loss); stock-based compensation expense and income tax expense (benefit). See the Appendix for a
reconciliation to GAAP net loss.
4 55% is based on 2018 estimate midpoint.
5 2017 adjusted net income of $5.5 million is not a financial measure 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.
16
Footnotes (continued)
Page 10
1 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA represents our net income (loss), adjusted to exclude: net interest expense primarily
associated with notes payable under the VPC Facility and ESPV facility used to fund or purchase loans; foreign currency gains and losses associated with our UK operations;
depreciation and amortization expense on fixed assets and intangible assets; loss on discontinued operations; non-operating income; stock-based compensation expense and income
tax expense (benefit). See the Appendix for a reconciliation to GAAP net loss. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.
Page 11
1 Adjusted EBITDA margin is not a financial measure prepared in accordance with GAAP. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA
represents our net income (loss), adjusted to exclude: net interest expense primarily associated with notes payable under the VPC Facility and ESPV facility used to fund or purchase
loans; foreign currency gains and losses associated with our UK operations; depreciation and amortization expense on fixed assets and intangible assets; loss on discontinued
operations; non-operating income; stock-based compensation expense and income tax (expense) benefit. See the Appendix for a reconciliation to GAAP net loss.
17
Non-GAAP financials reconciliation
Adjusted EBITDA Reconciliation
Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP 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.
18
Combined loans reconciliation
19
Combined loans reconciliation (continued)
1 Represents loans originated by third-party lenders through the CSO programs, which are not included in our financial statements.
2 Represents finance charges earned by third-party lenders through CSO programs, which are not included in our financial statements.
3 Non-GAAP measure.
4 The company determined that it previously misclassified certain loans relating to customers within the 16 day grace period as past due that were in fact current in accordance with our
policy. Historical periods have been adjusted accordingly.
© 2017 Elevate. All Rights Reserved.