GreenSky, Inc. (GSKY) Tops Q4 EPS by 5c, Revenues Beat; Offers FY21 Revenue Outlook

GreenSky, Inc. (NASDAQ: GSKY) reported Q4 EPS of $0.11, $0.05 better than the analyst estimate of $0.06. Revenue for the quarter came in at $128.8 million versus the consensus estimate of $125.32 million.

Fourth Quarter and Fiscal Year 2020 Financial Highlights:

• Transaction Volume: Transaction volume in the fourth quarter of 2020 was $1.3 billion compared to $1.5 billion in the fourth quarter of 2019. The change in year-over-year volumes continued to be largely driven by the COVID-19 impact on our elective healthcare business, and ongoing supply chain issues that shifted home improvement volumes from the fourth quarter of 2020 into 2021. In addition, our average ticket size in 2020 increased more than 10% from prior year.
• Transaction Fee Rate: The average transaction fee rate for the fourth quarter of 2020 was 7.2%, an increase of 40 basis points from 6.8% in the fourth quarter of 2019. For 2020, the average transaction fee rate was 7.1% compared to 6.8% in 2019, reflecting continued demand for certain products offered by our merchants and consumer preferences for promotional financing.
• Revenue: Fourth quarter revenue was $128.8 million compared to $135.9 million in the fourth quarter of 2019. Total revenue for the year ended December 31, 2020 was $525.6 million compared to $532.6 million during the year ended December 31, 2019.
  • Transaction fee revenue was $93.9 million in the fourth quarter of fiscal 2020 compared to $100.7 million in the fourth quarter of 2019, and $393.1 million for the year compared to $405.9 million in 2019, as the impact of the halt in elective medical procedures during 2020 was partially offset by an improvement in the transaction fee rate.
  • Total servicing revenue for the quarter and full year 2020 reflect an increase in servicing fees earned on GreenSky's $9.5 billion servicing portfolio and by a lower contribution from changes in the fair value of our servicing assets.
    • In the fourth quarter, our servicing fees were consistent with the same quarter in 2019. For the year, our servicing fees increased by $21.9 million driven by an increase in the average servicing fee and the increase in the size of the portfolio.
    • Our servicing revenues from changes in the fair value of our servicing asset contributed $0.4 million to revenues in the fourth quarter of 2020, compared to $5.1 million in the fourth quarter of 2019. For the full year 2020, the fair value change of our servicing assets contributed $0.3 million in servicing revenues compared to $30.5 million in 2019.
  • Interest and other revenue increased to $6.6 million for the quarter and to $17.1 million for the full year, up from $2.1 million and $3.0 million, respectively, primarily due to increased interest income earned on loan receivables held for sale in our warehouse facility.
• Cost of Revenue: Fourth quarter cost of revenue was $78.5 million, compared to $69.8 million in the fourth quarter of 2019. Full year 2020 cost of revenue was $307.9 million compared to $249.9 million in 2019.
  • We incurred $29.7 million in loan sales costs in the fourth quarter of 2020, which were offset by a $12.6 million reduction in bank waterfall costs (the fair value of the FCR liability) in cost of revenue, and $7.6 million reduction of the non-cash mark-to-market expense related to sales facilitation obligations in the fourth quarter of 2020.
  • For the year, we had $72.4 million in loan sales costs and $10.7 million non-cash mark-to-market expense related to sales facilitation obligations, offset by a $23.4 million decrease in bank waterfall costs (reflected in the fair value of the FCR liability).
  • Loan sales in 2020 provided an important diversification to our funding in the second half of the year while maintaining our targeted level of lifetime profitability for these transaction volumes.
• Net Income and Diluted Earnings per Share: For the fourth quarter of 2020, the Company recognized net income of $23.4 million compared to net income of $5.3 million for the same period in 2019, which resulted in a diluted earnings per share of $0.11, compared to diluted earnings per share of $0.03 in the fourth quarter of 2019. For the year ended December 31, 2020, the Company recognized net income of $28.7 million compared to net income of $96.0 million for the same period in 2019, which resulted in a diluted earnings per share of $0.14, compared to diluted earnings per share of $0.49 for the year ended December 31, 2019.
• Adjusted EBITDA(1): Fourth quarter 2020 Adjusted EBITDA was $10.2 million compared to $23.7 million in the fourth quarter 2019. For fiscal year 2020, Adjusted EBITDA increased by 1% to $105.9 million from $105.0 million in 2019. Adjusted EBITDA margin in the fourth quarter of 2020 was 8% compared to Adjusted EBITDA of 17% in the fourth quarter of 2019. Fiscal year 2020 and 2019 Adjusted EBITDA margin were both 20%.

“The momentum witnessed at the end of last year has continued into 2021 and we are optimistic with respect to transaction volume growth and lower costs in the upcoming year,” said David Zalik, GreenSky Chairman and CEO. “Despite a challenging year, we reported 2020 revenue in line with our 2019 results, and I am extremely proud of the dedication and commitment of our associates who delivered annual transaction volume in excess of $5.5 billion. Looking ahead, I am encouraged by the improving consumer credit trends being observed, and I am cautiously optimistic that 2021 performance will likely be better than initially estimated. GreenSky is poised to deliver transaction volume growth in excess of 15% this year and we continue to make solid progress on strategic initiatives outside of our core home improvement business and expect to see the results of those strategies over the coming months.”

“During the last four months of the year, GreenSky secured over $1 billion in new funding, demonstrating the successful roll-out of our diversified funding model,” said Andrew Kang, Chief Financial Officer. “We set a goal to gain access to new sources of liquidity, and we now have a proven track record of asset sales to both institutional investors and banks. I am very excited to also announce that earlier this month, we executed a $1 billion forward flow sale agreement with a leading life insurance company that will further support our transaction volume growth into 2022. As market pricing has improved and restored to pre-pandemic levels, the economics of our recent sales and forward flow agreement are now consistent with GreenSky’s historical cost of funds, in contrast to our initial sale in 2020. With tailwinds in funding and optimism regarding credit performance, we are raising our 2021 net income and Adjusted EBITDA guidance.”

GUIDANCE:

GreenSky, Inc. sees FY2021 revenue of $584 million, versus the consensus of $584.18 million.

GreenSky's updated 2021 guidance is as follows:

• Transaction volumes of $6.2 to $6.5 billion;
• Revenues of approximately $584 million;
• Net Income of +/-$0;
• Adjusted EBITDA of $45 to $55 million; and
• Adjusted EBITDA Margin of 8% to 10%.

For earnings history and earnings-related data on GreenSky, Inc. (GSKY) click here.

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