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Form 8-K Elevate Credit, Inc. For: Aug 06

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August 6, 2020 4:18 PM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 8-K
____________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 31, 2020
____________________________________________________________________
 ELEVATE CREDIT, INC.
(Exact name of registrant as specified in its charter)
____________________________________________________________________

 
Delaware
 
001-37680
 
46-4714474
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
4150 International Plaza, Suite 300
Fort Worth, Texas 76109
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code (817) 928-1500
Not Applicable
(Former name or former address, if changed since last report.)
____________________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act.
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, $0.0004 par value
ELVT
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x




Item 1.01
Entry into a Material Definitive Agreement.
On July 31, 2020, Elevate Credit, Inc. (the "Company") and certain subsidiaries, consolidated variable interest entities (VIEs) and Victory Park Management, LLC, as administrative agent and collateral agent for the lenders and the holders (in such capacity, the “Agent”) entered into amendments to the following agreements: Fifth Amended and Restated Financing Agreement by and among Rise SPV, LLC; Today Card, LLC; Elevate Credit International Ltd.; and Elevate Credit Service, LLC, as borrowers, the guarantors party thereto, the lenders party thereto, and the Agent ("the VPC Facility"); the Amended and Restated Financing Agreement by and among Elastic SPV, Ltd. as borrower, the guarantors party thereto, the lenders party thereto and the Agent ("the ESPV Facility"); and the Financing Agreement by and among EF SPV, Ltd. as borrower, the guarantors party thereto, the lenders party thereto and the Agent ("the EF SPV Facility" and, together with the VPC Facility and the ESPV Facility, the "Amended Financing Agreements”). In addition, the Company and certain subsidiaries, a VIE and the Agent entered into the Financing Agreement by and among EC SPV, Ltd. as borrower, the guarantors party thereto, the lenders party thereto and the Agent ("the EC SPV Facility"). EC SPV, Ltd. is a third-party SPV created to purchase participations in installment loans originated by banks that license services from the Company.
The Amended Financing Agreements provide for no change in pricing terms or debt covenants and a 25 bps reduction in the cost of funds in 2021 subject to meeting a 2020 net income threshold. The total net commitment of the Amended Financing Agreements has been reduced by $50 million for a combined commitment amount of $835 million and references to the EC SPV Facility have been incorporated into the Amended Financing Agreements.
The EC SPV Facility provides for a total maximum commitment amount of $100 million; a 20% revolver in the first quarter of each year and a 25 bps reduction in the cost of funds in 2021 subject to meeting a 2020 net income threshold; and a maturity date of January 1, 2024. All assets of the Company and EC SPV, Ltd. are pledged as collateral to secure the EC SPV Facility, consistent with the Company’s other financing agreements with the Agent. The EC SPV Facility includes certain financial covenants for the product portfolio underlying the facility, including excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios, and certain financial covenants for the Company, consistent with the covenants within the Company’s other financing agreements with the Agent.
The foregoing description of the Amended Financing Agreements and EC SPV Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Financing Agreements and EC SPV Facility, copies of which will be filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2020 and are incorporated herein by reference.
Item 2.02
Results of Operations and Financial Condition.
On August 6, 2020, Elevate Credit, Inc. (the "Company") issued a press release announcing its financial results for the quarter ended June 30, 2020. The full text of the press release, along with the slide presentation to be used during the earnings call on August 6, 2020, are furnished herewith as Exhibits 99.1 and 99.2, respectively.
Item 2.03
Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 above is incorporated by reference.
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 4, 2020, Elevate Credit, Inc. (the "Company") amended the Employment, Confidentiality and Non-Compete Agreement (as amended from time to time, the "Employment Agreement") with Scott Greever, the Company's Executive Vice President, Products. The amendment (i) amends the "Change in Control Period" definition provided in the Employment Agreement to provide that "Change in Control Period" means the period in time that begins three months prior to and ends 24 months after a Change in Control, (ii) provides for additional severance in the form of lump-sum payments equal to (x) 50% of Mr. Greever's annual base salary upon a termination without Cause or resignation for Good Reason during a Change in Control Period and (y) 12 months of COBRA premiums upon any qualifying termination, (iii) provides for a Section 280G "best net" provision, (iv) provides for Company-paid tax preparation assistance and (v) makes other technical changes to the Employment Agreement. These amendments were made to generally provide consistency with the terms of other executive employment agreements within the Company and to align the Employment Agreement with current market practice. The foregoing description of the amendment to the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the Employment Agreement and amendments, which will be filed as Exhibit 10.2, Exhibit 10.3, Exhibit 10.4, Exhibit 10.5 and Exhibit 10.6 to the Company's quarterly report on Form 10-Q for the period ended June 30, 2020 and incorporated herein by reference.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Elevate Credit, Inc.
Date:
August 6, 2020
By:
/s/ Christopher Lutes
 
 
 
Christopher Lutes
 
 
 
Chief Financial Officer







image2a18.jpg
ELEVATE CREDIT ANNOUNCES SECOND QUARTER 2020 RESULTS1 
2020 Second Quarter Net Income From Continuing Operations
Up 92% From Prior Year

FORT WORTH, TX - August 6, 2020 - Elevate Credit, Inc. (NYSE: ELVT) (“Elevate” or the “Company”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced results for the second quarter ended June 30, 2020.

“I am pleased with our strong bottom line performance this quarter, which can in large part be attributed to our ability to move quickly and add consumer friendly features," said Elevate CEO Jason Harvison. “We also made several difficult decisions, including our exit of the UK market, and implemented our operating expense reduction plan in the U.S. While the pandemic has affected our loan and revenue growth in 2020, I am very confident in Elevate's market position and ability to drive future growth."

The Company announced on June 29, 2020 that its UK subsidiary, Elevate Credit International Limited, ("ECIL") would cease operations in the UK. The ECIL board of directors placed ECIL in administration under the UK Insolvency Act 1986 and appointed insolvency practitioners from KPMG LLP to take control and management of the UK business. Elevate has deconsolidated ECIL as of June 29, 2020 and has presented ECIL as discontinued operations starting in the second quarter of 2020.
Second Quarter 2020 Financial Results2 

•
Net income: Net income for the three months ended June 30, 2020 totaled $8.6 million, up $2.8 million compared to $5.8 million in net income in the second quarter of 2019. Fully diluted earnings per share for the second quarter of 2020 totaled $0.20, an increase from $0.13 per fully diluted share a year ago. Net income from continuing operations for the second quarter of 2020 (excluding the net loss from the discontinued operations of ECIL) totaled $16.1 million, an increase of $7.7 million, or 92%, compared to $8.4 million in the second quarter of 2019.
•
Adjusted earnings: Excluding an after-tax increase of $1.0 million in a non-operating loss related to a legal matter and the discontinued ECIL operations, adjusted earnings were $17.1 million for the three months ended June 30, 2020, up $8.7 million from $8.4 million in the second quarter of 2019. Adjusted diluted earnings per share for the second quarter of 2020 totaled $0.40 per fully diluted share, a 110% increase from $0.19 per fully diluted share in the second quarter of 2019. See "Non-GAAP Financial Measures" for a reconciliation of the non-GAAP measures of adjusted earnings and adjusted diluted earnings per share.

__________________________
1 Second quarter 2020 and the first six months of 2020 results and comparable periods are presented on a continuing operations basis and exclude the results of discontinued operations in the UK. Elevate exited the UK market in the second quarter of 2020.
2Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal, combined loans receivable, combined loan loss reserve, adjusted earnings and adjusted diluted earnings per share are non-GAAP financial measures. These terms are defined elsewhere in this release. Please see the schedules appearing later in this release for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.

1


•
Revenue: Revenues decreased during the second quarter of 2020 to $118.0 million compared to $150.4 million for the second quarter of 2019. The decrease in revenue is attributable to reductions in loan origination volume and lower effective APRs for the loan portfolio due to the economic crisis created by the COVID-19 pandemic beginning in March 2020.
•
Combined loans receivable - principal: Combined loans receivable - principal totaled $413.7 million at June 30, 2020, a decrease of $140 million, or 25.3%, from $553.7 million at June 30, 2019.
•
Credit quality: The combined loan loss reserve at June 30, 2020 totaled $60.6 million, or 14% of combined loans receivable compared to 12% a year ago. Combined loans receivable - principal that were past due at the end of the second quarter of 2020 totaled 5%, down from 9% a year ago.
•
Adjusted EBITDA: Adjusted EBITDA totaled $45.2 million in the second quarter of 2020, up 31.2% from $34.4 million in the second quarter of 2019. The Adjusted EBITDA margin for the second quarter of 2020 was 38.3%, up from 22.9% in the prior-year quarter.

Year-to-date 2020 Financial Results2 

•
Net income: Net income for the six months ended June 30, 2020 totaled $3.6 million, down $15.5 million compared to $19.1 million for the first half of 2019. Fully diluted earnings per share for the first half of 2020 totaled $0.09, a decrease from $0.43 per fully diluted share for the first six months of 2019. Net income from continuing operations for the six months ended June 30, 2020 (excluding the net loss from the discontinued operations of ECIL) totaled $24.0 million, an increase of $4.7 million, or 24%, compared to $19.3 million in the first half of 2019.
•
Adjusted earnings: Adjusted earnings were $28.1 million for the six months ended June 30, 2020, up $8.8 million from $19.3 million in the prior year period. Adjusted diluted earnings per share for the six months ended June 30, 2020 totaled $0.65, a 48% increase from $0.44 per fully diluted share in the first half of 2019. See "Non-GAAP Financial Measures" for a reconciliation of the non-GAAP measures of adjusted earnings and adjusted diluted earnings per share.
•
Revenue: Revenues decreased 9.7% for the six months ended June 30, 2020 totaling $280.5 million compared to $310.4 million for the six months ended June 30, 2019. The decrease in revenue is attributable to reductions in loan origination volume and lower effective APRs for the loan portfolio due to the economic crisis created by the COVID-19 pandemic beginning in March 2020.
•
Adjusted EBITDA: Adjusted EBITDA totaled $80.1 million for the six months ended June 30, 2020, up 5.9% from $75.7 million in the first half of 2019. The Adjusted EBITDA margin for the six months ended June 30, 2020 was 28.6%, up from 24.4% in the prior-year period.



Impact of COVID-19 on Credit Quality

The Company and the bank originators it supports have expanded their payment flexibility programs to allow customers to extend their next payment. As of June 30, 2020, 12.5% of customers have been provided relief through a COVID-19 payment deferral program for a total of $50.7 million in loans with deferred payments. Both the Company and the bank originators are closely monitoring the performance of the payment deferral program and key credit quality indicators such as payment defaults, continued payment deferrals, and line of credit utilization. The Company and the bank originators it supports have implemented underwriting changes to address credit risk associated with loan originations during the economic crisis created by the COVID-19 pandemic and have seen reduced loan origination applications and loan origination volume since the beginning of the pandemic in March 2020.



2


Operating Expense Reduction Plan Implemented

The Company implemented an operating expense reduction plan in response to the impact of the COVID-19 pandemic on the loan portfolio. The Company has completed the following actions under its operating expense reduction plan:

•
Reduction of its U.S. workforce by approximately 17% effective July 8, 2020;
•
Suspension of its 2020 short-term incentive plan (bonus pool) effective as of June 30, 2020;
•
Reduction of executive salaries and board compensation beginning July 2020; and
•
Elimination of discretionary operating expense items and renegotiated terms with key vendors.


Liquidity and Capital Resources
The Company paid down its debt facilities by approximately $87.5 million during the first half of 2020 ($103.8 million including the discontinued operations of ECIL).

Although the Company deconsolidated ECIL as of June 30, 2020, it still guarantees the repayment of ECIL's outstanding debt, which was approximately £10.2 million as of June 30, 2020. The Company believes ECIL will be able to repay their debt from the liquidation of ECIL's remaining assets.

Interest expense in the second quarter of 2020 declined to $12.2 million as compared to $16.9 million in the second quarter of 2019. This decrease resulted from a lower cost of funds related to the amendment of the debt facilities in February 2019, which decreased to approximately 10.5% in the second quarter of 2020, versus 13.8% in the second quarter of 2019, respectively.

During the second quarter of 2020, the Company purchased $3.8 million of common shares under the Company's previously approved common stock repurchase program.

The Company is continuing to assess its minimum cash and liquidity requirements and implementing measures to ensure that its strong liquidity position is maintained through the current economic cycle. As of June 30, 2020, the Company is in compliance with all debt facility covenants.


Financial Outlook

As previously announced, the Company withdrew its full-year 2020 earnings guidance due to the uncertain impact on our business and results of operations resulting from the COVID-19 pandemic.


Conference Call

The Company will host a conference call to discuss its second quarter 2020 financial results on Thursday, August 6, at 4:00pm Central Time / 5:00pm Eastern Time. Interested parties may access the conference call live over the phone by dialing 1-866-269-4260 (domestic) or 1-929-477-0591 (international) and requesting the Elevate Credit Second Quarter 2020 Earnings Conference Call. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live through Elevate’s website at http://www.elevate.com/investors.
An audio replay of the conference call will be available approximately three hours after the conference call until 11:59 pm ET on August 20, 2020, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 8266199, or by accessing Elevate’s website.



3


Forward-Looking Statements
This press release contains 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. Such statements contain words such as "may," "will," "might," "expect," "believe," "anticipate," "could," "would," "estimate," "continue," "pursue," or the negative thereof or comparable terminology, and may include (without limitation) information regarding the Company's expectations, goals or intentions regarding future performance. 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: the Company's ability to drive future growth; the Company's expectations with regard to ECIL's repayment of its outstanding debt obligations; our expectations regarding the underwriting changes implemented by us and the bank originators we support to address credit risk associated with loan originations during the economic crisis created by the COVID-19 pandemic; and our plans with respect to assessing minimum cash and liquidity requirements and implementing measures to ensure that our strong liquidity position is maintained through the current economic cycle. 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 effect of the COVID-19 pandemic and various policies being implemented to prevent its spread on the Company's business, financial condition and results of operations; the Company’s limited operating history in an evolving industry; the Company’s ability to grow revenue and maintain or achieve consistent profitability in the future; 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 Company's most recent Annual Report on Form 10-K, and in the Company's other current and periodic reports filed from time to time with the SEC. All forward-looking statements in this press release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.














4


About Elevate
Elevate (NYSE: ELVT), together with the banks that license its marketing and technology services, has originated $8.5 billion in non-prime credit to more than 2.5 million non-prime consumers to date and has saved its customers more than $7.3 billion versus the cost of payday loans. Its responsible, tech-enabled online credit solutions provide immediate relief to customers today and help them build a brighter financial future. The company is committed to rewarding borrowers’ good financial behavior with features like interest rates that can go down over time, free financial training and free credit monitoring. Elevate’s suite of groundbreaking credit products includes RISE, Elastic and Today Card. For more information, please visit http://www.elevate.com.

Investor Relations:

Solebury Trout
Sloan Bohlen, (817) 928-1646

or

Media Inquiries:

Solebury Trout
Lisa Wolford, (917) 846-0881






























5


Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(Dollars in thousands, except share and per share amounts)
2020
 
2019
 
2020
 
2019
Revenues
 
$
117,991

 
$
150,374

 
$
280,458

 
$
310,440

Cost of sales:
 
 
 
 
 
 
 
 
      Provision for loan losses
 
41,477

 
68,282

 
120,052

 
143,637

      Direct marketing costs
 
344

 
11,074

 
11,313

 
18,271

      Other cost of sales
 
1,607

 
2,508

 
4,277

 
4,786

Total cost of sales
 
43,428

 
81,864

 
135,642

 
166,694

Gross profit
 
74,563

 
68,510

 
144,816

 
143,746

Operating expenses:
 
 
 
 
 
 
 
 
Compensation and benefits
 
16,844

 
21,938

 
40,318

 
44,139

Professional services
 
8,471

 
7,686

 
16,397

 
15,864

Selling and marketing
 
904

 
1,460

 
1,858

 
2,552

Occupancy and equipment
 
4,843

 
4,013

 
9,479

 
7,835

Depreciation and amortization
 
4,529

 
3,955

 
8,825

 
7,811

Other
 
907

 
1,505

 
1,978

 
2,622

Total operating expenses
 
36,498

 
40,557

 
78,855

 
80,823

Operating income
 
38,065

 
27,953

 
65,961

 
62,923

Other expense:
 
 
 
 
 
 
 
 
      Net interest expense
 
(12,177
)
 
(16,936
)
 
(25,833
)
 
(34,936
)
      Non-operating loss
 
(1,422
)
 
—

 
(5,685
)
 
—

Total other expense
 
(13,599
)
 
(16,936
)
 
(31,518
)
 
(34,936
)
Income from continuing operations before taxes
 
24,466

 
11,017

 
34,443

 
27,987

Income tax expense
 
8,373

 
2,634

 
10,428

 
8,649

Net income from continuing operations
 
16,093

 
8,383

 
24,015

 
19,338

Net loss from discontinued operations
 
(7,540
)
 
(2,611
)
 
(20,373
)
 
(208
)
Net income
 
$
8,553

 
$
5,772

 
$
3,642

 
$
19,130

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.38

 
$
0.19

 
$
0.56

 
$
0.44

Discontinued operations
 
(0.18
)
 
(0.06
)
 
(0.47
)
 
—

Basic earnings per share
 
$
0.20

 
$
0.13

 
$
0.09

 
$
0.44

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.38

 
$
0.19

 
$
0.56

 
$
0.44

Discontinued operations
 
(0.18
)
 
(0.06
)
 
(0.47
)
 
(0.01
)
Diluted earnings per share
 
$
0.20

 
$
0.13

 
$
0.09

 
$
0.43

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
42,182,412

 
43,681,159

 
42,673,879

 
43,514,862

Diluted weighted average shares outstanding
 
42,511,808

 
44,291,816

 
43,090,730

 
44,142,947




6


Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
 
June 30, 2020
 
December 31, 2019
ASSETS
 
 
 
 
Cash and cash equivalents*
 
$
167,735

 
$
71,215

Restricted cash
 
2,135

 
2,235

Loans receivable, net of allowance for loan losses of $59,438 and $79,912, respectively*
 
373,024

 
542,073

Prepaid expenses and other assets*
 
9,492

 
6,737

Operating lease right of use assets
 
9,286

 
10,191

Receivable from CSO lenders
 
3,854

 
8,696

Receivable from payment processors*
 
6,603

 
8,681

Deferred tax assets, net
 
22,887

 
8,784

Property and equipment, net
 
36,686

 
35,944

Goodwill, net
 
6,776

 
6,776

Intangible assets, net
 
1,193

 
1,253

Assets from discontinued operations
 
—

 
81,002

Total assets
 
$
639,671

 
$
783,587

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Accounts payable and accrued liabilities*
 
$
25,404

 
$
38,679

Operating lease liabilities
 
13,207

 
14,352

Income taxes payable
 
235

 
—

Deferred revenue*
 
5,310

 
12,087

Notes payable, net*
 
438,174

 
525,439

Liabilities from discontinued operations
 
1,209

 
36,541

Total liabilities
 
483,539

 
627,098

COMMITMENTS, CONTINGENCIES AND GUARANTEES
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
Preferred stock
 
—

 
—

Common stock
 
18

 
18

Additional paid-in capital
 
198,188

 
193,061

Treasury stock
 
(7,955
)
 
(3,344
)
Accumulated deficit
 
(34,119
)
 
(34,342
)
Accumulated other comprehensive income
 
—

 
1,096

Total stockholders’ equity
 
156,132

 
156,489

Total liabilities and stockholders’ equity
 
$
639,671

 
$
783,587


* These balances include certain assets and liabilities of variable interest entities (“VIEs”) that can only be used to settle the liabilities of that respective VIE. All assets of the Company are pledged as security for the Company’s outstanding debt, including debt held by the VIEs.

7


Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted earnings, adjusted diluted earnings per share, combined loans receivable - principal, combined loans receivable and combined loan loss reserve.

Adjusted Earnings Measures

In addition to the financial information prepared in accordance with GAAP, Elevate uses certain non-GAAP measures such as “Adjusted EBITDA”, "Adjusted EBITDA margin", "Adjusted earnings", and "Adjusted diluted earnings per share" (collectively, "Adjusted Earnings Measures") in assessing its operating performance. Elevate believes these non-GAAP measures are appropriate measures to be used in evaluating the performance of its business.

Elevate defines Adjusted EBITDA as net income from continuing operations excluding the impact of income tax expense, non-operating loss, net interest expense, share-based compensation expense and depreciation and amortization expense. Elevate defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

Elevate defines Adjusted earnings as net income from continuing operations excluding the impact of a contingent loss related to a legal matter (tax effected). Elevate defines Adjusted diluted earnings per share as Adjusted earnings divided by Diluted weighted average shares outstanding.

Management believes that Adjusted Earnings Measures are useful supplemental measures to assist management and investors in analyzing the operating performance of the business and provide greater transparency into the results of operations of our core business. Management uses these non-GAAP financial measures frequently in its decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and gives an additional indication of Elevate’s core operating performance. Elevate includes these non-GAAP financial measures in its earnings announcement in order to provide transparency to its investors and enable investors to better compare its operating performance with the operating performance of its competitors.

Adjusted Earnings Measures should not be considered as alternatives to net income or any other performance measure derived in accordance with GAAP. Management's use of Adjusted Earnings Measures has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are:
•
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect expected cash capital expenditure requirements for such replacements or for new capital assets;
•
Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; and
•
Adjusted EBITDA does not reflect interest associated with notes payable used for funding customer loans, for other corporate purposes or tax payments that may represent a reduction in cash available to the Company.

Additionally, Elevate’s definition of Adjusted Earnings Measures may not be comparable to similarly titled measures reported by other companies.





8


The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to Elevate’s net income from continuing operations for the three and six months ended June 30, 2020 and 2019:
 
 
Three Months Ended 
 June 30,

Six Months Ended 
 June 30,
(Dollars in thousands)
 
2020

2019

2020

2019
Net income from continuing operations
 
$
16,093


$
8,383


$
24,015


$
19,338

Adjustments:
 
 
 
 
 
 
 
 
Net interest expense
 
12,177

 
16,936

 
25,833

 
34,936

Share-based compensation
 
2,599

 
2,510

 
5,347

 
4,922

Depreciation and amortization
 
4,529

 
3,955

 
8,825

 
7,811

Non-operating loss
 
1,422

 
—

 
5,685

 
—

Income tax expense
 
8,373

 
2,634

 
10,428

 
8,649

Adjusted EBITDA
 
$
45,193

 
$
34,418

 
$
80,133

 
$
75,656

 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
 
38.3
%
 
22.9
%
 
28.6
%
 
24.4
%

Adjusted earnings and adjusted diluted earnings per share

For the three and six months ended June 30, 2020, the Company recognized $1.4 million and $5.7 million, respectively, of charges related to a contingent loss on a legal matter in Non-operating loss. The following table presents a reconciliation of Net income from continuing operations and diluted earnings per share to Adjusted earnings and Adjusted diluted earnings per share, which excludes the impact of the contingent loss.
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(Dollars in thousands except per share amounts)
 
2020
 
2019
 
2020
 
2019
Net income from continuing operations
 
$
16,093

 
$
8,383

 
$
24,015

 
$
19,338

Impact of contingent loss related to a legal matter
 
1,422

 
—

 
5,685

 
—

Cumulative tax effect of adjustments
 
(395
)
 
—

 
(1,580
)
 
—

Adjusted earnings
 
$
17,120

 
$
8,383

 
$
28,120

 
$
19,338

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.38

 
$
0.19

 
$
0.56

 
$
0.44

Impact of contingent loss related to a legal matter
 
0.03

 
—

 
0.13

 
—

Cumulative tax effect of adjustments
 
(0.01
)
 
—

 
(0.04
)
 
—

Adjusted diluted earnings per share
 
$
0.40

 
$
0.19

 
$
0.65

 
$
0.44





9










Supplemental Schedules

10



Revenue by Product
 
 
Three Months Ended June 30, 2020
(Dollars in thousands)
 
Rise (1)
 
Elastic (2)
 
Total
Average combined loans receivable – principal(3)
 
$
273,898

 
$
192,796

 
$
466,694

Effective APR
 
110
%
 
88
%
 
101
%
Finance charges
 
$
75,533

 
$
42,270

 
$
117,803

Other
 
9

 
179

 
188

Total revenue
 
$
75,542

 
$
42,449

 
$
117,991

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2019
(Dollars in thousands)
 
Rise (1)
 
Elastic (2)
 
Total
Average combined loans receivable – principal(3)
 
$
287,073

 
$
243,691

 
$
530,764

Effective APR
 
126
%
 
98
%
 
113
%
Finance charges
 
$
90,384

 
$
59,317

 
$
149,701

Other
 
385

 
288

 
673

Total revenue
 
$
90,769

 
$
59,605

 
$
150,374



 
 
Six Months Ended June 30, 2020
(Dollars in thousands)
 
Rise (1)
 
Elastic (2)
 
Total
Average combined loans receivable – principal(3)
 
$
306,581

 
$
218,351

 
$
524,932

Effective APR
 
117
%
 
93
%
 
107
%
Finance charges
 
$
179,038

 
$
100,844

 
$
279,882

Other
 
108

 
468

 
576

Total revenue
 
$
179,146

 
$
101,312

 
$
280,458

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
(Dollars in thousands)
 
Rise (1)
 
Elastic (2)
 
Total
Average combined loans receivable – principal(3)
 
$
288,941

 
$
254,980

 
$
543,921

Effective APR
 
129
%
 
98
%
 
115
%
Finance charges
 
$
185,269

 
$
124,050

 
$
309,319

Other
 
737

 
384

 
1,121

Total revenue
 
$
186,006

 
$
124,434

 
$
310,440


(1)
Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.
(2)
Includes immaterial balances related to the Today Card.
(3)
Average combined loans receivable - principal is calculated using daily principal balances. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.


11


Loan Loss Reserve by Product
 
 
Three Months Ended June 30, 2020
(Dollars in thousands)
 
Rise
 
Elastic (1)
 
Total
Combined loan loss reserve(2):
 
 
 
 
 
 
Beginning balance
 
$
51,707

 
$
26,053

 
$
77,760

Net charge-offs
 
(38,100
)
 
(20,543
)
 
(58,643
)
Provision for loan losses
 
27,007

 
14,470

 
41,477

Ending balance
 
$
40,614

 
$
19,980

 
$
60,594

Combined loans receivable(2)(3)
 
$
260,384

 
$
179,500

 
$
439,884

Combined loan loss reserve as a percentage of ending combined loans receivable
 
16
%
 
11
%
 
14
%
Net charge-offs as a percentage of revenues
 
50
%
 
48
%
 
50
%
Provision for loan losses as a percentage of revenues
 
36
%
 
34
%
 
35
%

 
 
Three Months Ended June 30, 2019
(Dollars in thousands)
 
Rise
 
Elastic (1)
 
Total
Combined loan loss reserve(2):
 
 
 
 
 
 
Beginning balance
 
$
39,350

 
$
28,341

 
$
67,691

Net charge-offs
 
(40,970
)
 
(27,131
)
 
(68,101
)
Provision for loan losses
 
43,013

 
25,269

 
68,282

Ending balance
 
$
41,393

 
$
26,479

 
$
67,872

Combined loans receivable(2)(3)
 
$
324,620

 
$
258,200

 
$
582,820

Combined loan loss reserve as a percentage of ending combined loans receivable
 
13
%
 
10
%
 
12
%
Net charge-offs as a percentage of revenues
 
45
%
 
46
%
 
45
%
Provision for loan losses as a percentage of revenues
 
47
%
 
42
%
 
45
%

(1)
Includes immaterial balances related to the Today Card.
(2
Not a financial measure prepared in accordance with GAAP. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.
(3)
Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.



12


Loan Loss Reserve by Product, Continued
 
 
Six Months Ended June 30, 2020
(Dollars in thousands)
 
Rise
 
Elastic (1)
 
Total
Combined loan loss reserve(2):
 
 
 
 
 
 
Beginning balance
 
$
52,099

 
$
29,893

 
$
81,992

Net charge-offs
 
(93,061
)
 
(48,389
)
 
(141,450
)
Provision for loan losses
 
81,576

 
38,476

 
120,052

Ending balance
 
40,614

 
19,980

 
60,594

Combined loans receivable(2)(3)
 
$
260,384

 
$
179,500

 
$
439,884

Combined loan loss reserve as a percentage of ending combined loans receivable
 
16
%
 
11
%
 
14
%
Net charge-offs as a percentage of revenues
 
52
%
 
48
%
 
50
%
Provision for loan losses as a percentage of revenues
 
46
%
 
38
%
 
43
%

 
 
Six Months Ended June 30, 2019
(Dollars in thousands)
 
Rise
 
Elastic (1)
 
Total
Combined loan loss reserve(2):
 
 
 
 
 
 
Beginning balance
 
$
50,597

 
$
36,050

 
$
86,647

Net charge-offs
 
(98,010
)
 
(64,402
)
 
(162,412
)
Provision for loan losses
 
88,806

 
54,831

 
143,637

Ending balance
 
41,393

 
26,479

 
67,872

Combined loans receivable(2)(3)
 
$
324,620

 
$
258,200

 
$
582,820

Combined loan loss reserve as a percentage of ending combined loans receivable
 
13
%
 
10
%
 
12
%
Net charge-offs as a percentage of revenues
 
53
%
 
52
%
 
52
%
Provision for loan losses as a percentage of revenues
 
48
%
 
44
%
 
46
%

(1)
Includes immaterial balances related to the Today Card.
(2
Not a financial measure prepared in accordance with GAAP. See the "Combined Loan Information" section for a reconciliation of this non-GAAP measure to the most comparable GAAP measure.
(3)
Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.


13


Customer Loan Data by Product
 
 
Three Months Ended June 30, 2020
 
 
Rise
 
Elastic (1)
 
Total
Beginning number of combined loans outstanding
 
142,633

 
138,853

 
281,486

New customer loans originated
 
627

 
2,188

 
2,815

Former customer loans originated
 
7,593

 
9

 
7,602

Attrition
 
(43,728
)
 
(25,931
)
 
(69,659
)
Ending number of combined loans outstanding
 
107,125

 
115,119

 
222,244

Customer acquisition cost
 
$
306

 
$
69

 
$
122

Average customer loan balance
 
$
2,249

 
$
1,501

 
$
1,862

 
 
Three Months Ended June 30, 2019
 
 
Rise
 
Elastic (1)
 
Total
Beginning number of combined loans outstanding
 
125,021

 
145,760

 
270,781

New customer loans originated
 
30,177

 
13,826

 
44,003

Former customer loans originated
 
18,850

 
18

 
18,868

Attrition
 
(38,277
)
 
(17,043
)
 
(55,320
)
Ending number of combined loans outstanding
 
135,771

 
142,561

 
278,332

Customer acquisition cost
 
$
243

 
$
271

 
$
252

Average customer loan balance
 
$
2,253

 
$
1,738

 
$
1,989

 
 
Six Months Ended June 30, 2020
 
 
Rise
 
Elastic (1)
 
Total
Beginning number of combined loans outstanding
 
152,435

 
149,524

 
301,959

New customer loans originated
 
25,040

 
13,525

 
38,565

Former customer loans originated
 
24,149

 
140

 
24,289

Attrition
 
(94,499
)
 
(48,070
)
 
(142,569
)
Ending number of combined loans outstanding
 
107,125

 
115,119

 
222,244

Customer acquisition cost
 
$
309

 
$
265

 
$
293

 
 
Six Months Ended June 30, 2019
 
 
Rise
 
Elastic (1)
 
Total
Beginning number of combined loans outstanding
 
142,758

 
166,397

 
309,155

New customer loans originated
 
47,542

 
18,664

 
66,206

Former customer loans originated
 
36,641

 
27

 
36,668

Attrition
 
(91,170
)
 
(42,527
)
 
(133,697
)
Ending number of combined loans outstanding
 
135,771

 
142,561

 
278,332

Customer acquisition cost
 
$
276

 
$
277

 
$
276

(1)
Includes immaterial balances related to the Today Card.





14


Combined Loan Information
The Elastic line of credit product is originated by a third-party lender, Republic Bank, which initially provides all of the funding for that product. Republic Bank retains 10% of the balances of all of the loans originated and sells a 90% loan participation in the Elastic lines of credit to a third party SPV, Elastic SPV, Ltd. Elevate is required to consolidate Elastic SPV, Ltd. as a variable interest entity under GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 90% of Elastic lines of credit originated by Republic Bank and sold to Elastic SPV, Ltd.
Beginning in the fourth quarter of 2018, the Company also licensed its Rise installment loan brand to a third-party lender, FinWise Bank, which originates Rise installment loans in eighteen states. FinWise Bank initially provides all of the funding and retains a percentage of the balances of all of the loans originated and sells the remaining loan participation in those Rise installment loans to a third party SPV, EF SPV, Ltd. Prior to August 1, 2019, FinWise Bank retained 5% of the balances, and sold a 95% participation to EF SPV, Ltd. Starting August 1, 2019, the participation percentage changed to 96%. Elevate is required to consolidate EF SPV, Ltd. as a variable interest entity under GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 96% of Rise installment loans originated by FinWise Bank and sold to EF SPV, Ltd.
Elevate defines combined loans receivable - principal as loans owned by the Company plus loans originated and owned by third-party lenders pursuant to our CSO programs. In Texas, the Company does not make Rise loans directly, but rather acts as a Credit Services Organization (which is also known as a Credit Access Business), or, “CSO,” and the loans are originated by an unaffiliated third party. There are no new loan originations in Ohio commencing in April 2019, but the Company continues to have obligations as the CSO until the wind-down of this portfolio is complete. Elevate defines combined loan loss reserve as the loan loss reserve for loans owned by the Company plus the loan loss reserve for loans originated and owned by third-party lenders and guaranteed by the Company. The information presented in the tables below on a combined basis are non-GAAP measures based on a combined portfolio of loans, which includes the total amount of outstanding loans receivable that the Company owns and that are on the Company's condensed consolidated balance sheets plus outstanding loans receivable originated and owned by third parties that the Company guarantees pursuant to CSO programs in which the Company participates.
The Company believes these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the combined loan portfolio on an aggregate basis. The Company also believes that the comparison of the combined amounts from period to period is more meaningful than comparing only the amounts reflected on the Company's condensed consolidated balance sheets since both revenues and cost of sales as reflected in the Company's condensed consolidated financial statements are impacted by the aggregate amount of loans the Company owns and those CSO loans the Company guarantees.
The Company's use of total combined loans and fees receivable has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are:
•
Rise CSO loans are originated and owned by a third-party lender; and
•
Rise CSO loans are funded by a third-party lender and are not part of the VPC Facility.
As of each of the period ends indicated, the following table presents a reconciliation of:
•
Loans receivable, net, Company owned (which reconciles to the Company's condensed consolidated balance sheets included elsewhere in this press release);
•
Loans receivable, net, guaranteed by the Company;
•
Combined loans receivable (which the Company uses as a non-GAAP measure); and
•
Combined loan loss reserve (which the Company uses as a non-GAAP measure).

15


 
 
2019
 
2020
(Dollars in thousands)
 
March 31
 
June 30
 
September 30
 
December 31
 
March 31
 
June 30
Company Owned Loans:
 
 
 
 
 
 
 
 
 
 
 
 
Loans receivable – principal, current, company owned
 
$
451,298

 
$
484,131

 
$
507,551

 
$
530,463

 
$
486,396

 
$
387,939

Loans receivable – principal, past due, company owned
 
45,757

 
47,846

 
59,240

 
58,489

 
53,923

 
18,917

Loans receivable – principal, total, company owned
 
497,055

 
531,977

 
566,791

 
588,952

 
540,319

 
406,856

Loans receivable – finance charges, company owned
 
27,520

 
27,472

 
31,698

 
33,033

 
31,621

 
25,606

Loans receivable – company owned
 
524,575

 
559,449

 
598,489

 
621,985

 
571,940

 
432,462

Allowance for loan losses on loans receivable, company owned
 
(64,450
)
 
(65,889
)
 
(80,537
)
 
(79,912
)
 
(76,188
)
 
(59,438
)
Loans receivable, net, company owned
 
$
460,125

 
$
493,560

 
$
517,952

 
$
542,073

 
$
495,752

 
$
373,024

Third Party Loans Guaranteed by the Company:
 
 
 
 
 
 
 
 
 
 
 
 
Loans receivable – principal, current, guaranteed by company
 
$
27,941

 
$
21,099

 
$
18,633

 
$
17,474

 
$
12,606

 
$
6,755

Loans receivable – principal, past due, guaranteed by company
 
696

 
596

 
697

 
723

 
564

 
117

Loans receivable – principal, total, guaranteed by company(1)
 
28,637

 
21,695

 
19,330

 
18,197

 
13,170

 
6,872

Loans receivable – finance charges, guaranteed by company(2)
 
2,164

 
1,676

 
1,553

 
1,395

 
1,150

 
550

Loans receivable – guaranteed by company
 
30,801

 
23,371

 
20,883

 
19,592

 
14,320

 
7,422

Liability for losses on loans receivable, guaranteed by company
 
(3,242
)
 
(1,983
)
 
(1,972
)
 
(2,080
)
 
(1,571
)
 
(1,156
)
Loans receivable, net, guaranteed by company(3)
 
$
27,559

 
$
21,388

 
$
18,911

 
$
17,512

 
$
12,749

 
$
6,266

Combined Loans Receivable(3):
 
 
 
 
 
 
 
 
 
 
 
 
Combined loans receivable – principal, current
 
$
479,239

 
$
505,230

 
$
526,184

 
$
547,937

 
$
499,002

 
$
394,694

Combined loans receivable – principal, past due
 
46,453

 
48,442

 
59,937

 
59,212

 
54,487

 
19,034

Combined loans receivable – principal
 
525,692

 
553,672

 
586,121

 
607,149

 
553,489

 
413,728

Combined loans receivable – finance charges
 
29,684

 
29,148

 
33,251

 
34,428

 
32,771

 
26,156

Combined loans receivable
 
$
555,376

 
$
582,820

 
$
619,372

 
$
641,577

 
$
586,260

 
$
439,884

Combined Loan Loss Reserve(3):
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses on loans receivable, company owned
 
$
(64,450
)
 
$
(65,889
)
 
$
(80,537
)
 
$
(79,912
)
 
$
(76,188
)
 
$
(59,438
)
Liability for losses on loans receivable, guaranteed by company
 
(3,242
)
 
(1,983
)
 
(1,972
)
 
(2,080
)
 
(1,571
)
 
(1,156
)
Combined loan loss reserve
 
$
(67,692
)
 
$
(67,872
)
 
$
(82,509
)
 
$
(81,992
)
 
$
(77,759
)
 
$
(60,594
)
Combined loans receivable – principal, past due(3)
 
$
46,453

 
$
48,442

 
$
59,937

 
$
59,212

 
$
54,487

 
$
19,034

Combined loans receivable – principal(3)
 
525,692

 
553,672

 
586,121

 
607,149

 
553,489

 
413,728

Percentage past due
 
9
%
 
9
%
 
10
%
 
10
%
 
10
%
 
5
%
Combined loan loss reserve as a percentage of combined loans receivable(3)(4)
 
12
%
 
12
%
 
13
%
 
13
%
 
13
%
 
14
%
Allowance for loan losses as a percentage of loans receivable – company owned
 
12
%
 
12
%
 
13
%
 
13
%
 
13
%
 
14
%

(1)
Represents loans originated by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.
(2)
Represents finance charges earned by third-party lenders through the CSO programs, which are not included in the Company's condensed consolidated financial statements.
(3)
Non-GAAP measure.
(4)
Combined loan loss reserve as a percentage of combined loans receivable is determined using period-end balances.


16
Second Quarter 2020 Earnings Call August 2020

 
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: the Company’s ability to drive future growth; the Company’s expectations with regards to the UK subsidiary’s repayment of its outstanding debt obligations; our expectations regarding the impact of COVID-19 as well as related government actions and stimulus programs, on our business, customers, results of operations and financial condition, including on loan originations, demand for our products, credit quality, marketing expense and net charge-offs; our expectations regarding the cumulative loss rate as a percentage of originations for the 2019 and 2020 vintages; our expectations with respect to our liquidity position and requirements for additional debt to fund loans; our expectations with respect to our stock repurchase plan; and our expectations regarding the cost of customer acquisition, new customer originations, and the efficacy and cost of our marketing efforts. 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 effect of the COVID-19 pandemic and various policies being implemented to prevent its spread on the Company’s business, financial condition and results of operations; the Company’s limited operating history in an evolving industry; the Company’s ability to grow revenue and maintain or achieve consistent profitability in the future; 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 Annual Report on Form 10-K; most recent Form 10-Q and in the Company's other current and periodic reports filed from time to time with the SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements regarding risks and uncertainties that are included in our public communications. You should evaluate all forward-looking statements made in this presentation in the context of these risks and uncertainties. Neither we nor any of our respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. The information and opinions contained in this presentation are provided as of the date of this presentation and are subject to change without notice. This presentation has not been approved by any regulatory or supervisory agency. See Appendix for additional information and definitions. 2

 
Elevate is reinventing non-prime credit with online products that provide financial relief today, and help people build a brighter financial future. We, along with the banks that license our technology, have originated $8.5 billion to 2.5 million customers1 and have saved them more than $7.3 billion over payday loans2 33

 
COVID-19 Impact Operational Customer Credit • Continued work from home • Existing brand features • Consumers exhibiting restraint • 100% online – No late or NSF fees • Reduced loan originations – Payment flexibility • Decrease in demand and • Additional features utilization – Multiple extension forbearance periods at • Positive post-deferral no cost customer behavior – Options to restructure terms and rate 4

 
Non-Prime Sentiment Tracker Day-to-day expenses less manageable Respondents with more debt than savings “Overall, compared to a year ago, are your day-to-day expenses more manageable, about the same, or less manageable?” CNMC Non-prime Tracker, July 2020 Self-Reported Savings vs Debt $ Amounts; CNMC Non-prime Tracker, July 2020 – Marketing Analytics Pre-COVID avg reflects March 2019 through February 2020 5

 
Second Quarter 2020 Summary Revenue of Net income Adjusted Record $118 million, a from continuing earnings of Adjusted decrease of operations $17 million, or EBITDA 22% YoY1 increased 92% $0.40 per fully margin of YoY to $16 diluted share2 38%2 million1 Adjusted earnings and Adjusted EBITDA margin are non-GAAP financial measures. See appendix for a reconciliation to a GAAP measure. 6

 
Business Updates • Exit of U.K. Market – Continued regulatory uncertainty – $7.5 million Q2 net loss • Operating expense reduction plan implemented – 17% reduction of U.S. workforce – Suspension of 2020 bonus plan – Reduction of executive salaries and board compensation 7

 
Key Financial Measures ($ in millions) Ending Combined Loans Revenue 1 Receivables - Principal $649 $618 $607 $787 $554 $481 $673 $639 $414 $580 $356 $434 $310 $202 $280 $274 2014 2015 2016 2017 2018 2019 1H 2019 1H 2020 2014 2015 2016 2017 2018 2019 1H 2019 1H 2020 Adjusted EBITDA2 Adjusted Earnings / (Loss) 3 $127 $116 $26 $28 $13 $19 $87 $76 $80 $60 $6 $19 As adjusted As adjusted As adjusted As adjusted (-$20) (-$22) (-$55) (-$53) 2014 2015 2016 2017 2018 2019 1H 2019 1H 2020 2014 2015 2016 2017 2018 2019 1H 2019 1H 2020 Ending combined loans receivable – principal, Adjusted EBITDA and Adjusted Earnings are non-GAAP financial measures. See appendix for a reconciliation to a GAAP measure. U.K. operations presented in 2014-2018 only. 8

 
Credit Quality and Customer Acquisition Cost Cumulative principal loss rates as a percentage of Customer Acquisition Cost originations by loan vintage 35% $325 30% $300 $297 $293* 25% $275 20% 2017 2018 $255 $256 $245 $250 2019 15% $241 $235 $237 $225 10% YTD 2020 $200 5% 0% $175 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 2013 2014 2015 2016 2017 2018 2019 YTD 2020 Months since origination CAC Top Target Range $300 Bottom Target Range $250 2013 2014 2015 2016 2017 2018 2019 YTD 2020 The 2019 and 2020 vintages are not yet fully mature from a loss perspective. U.K. operations are only presented in the 2013-2018 CAC. U.K. operations are only presented in the 2013-2017 vintages. *YTD 2020 represents limited marketing expense and customer acquisition. 9

 
Margin Profile % of Gross Revenues 2017 2018 2019 2Q 2019 2Q 2020 Gross Revenue 100% 100% 100% 100% 100% Loan Loss Provision 53% 52% 51% 45% 35% Direct Marketing and 14% 13% 7% 9% 2% Other Cost of Sales Gross Margin 33% 35% 42% 46% 63% Operating Expenses 20% 20% 22% 23% 25% Adjusted EBITDA 1 13% 15% 20% 23% 38% Margin Adjusted EBITDA margin is a non-GAAP financial measure. See Appendix for a reconciliation to GAAP measure. U.K. operations presented in 2017-2018 only. 10

 
We believe everyone deserves a lift. 1111

 
Appendix 12

 
Footnotes Page 3: 1 Originations and customers from 2002-June 2020, attributable to the combined current, predecessor direct, discontinued operations and branded products. 2 For the period from 2013 to June 30, 2020. Based on the average effective APR of 107% for the six months ended June 30, 2020. 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 6: 1 Excludes results from discontinued operations in accordance with GAAP. 2 Adjusted earnings and Adjusted EBITDA margin are not financial measures prepared in accordance with GAAP. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. See the appendix for a reconciliation to a GAAP measure. Page 8: 1 Ending combined loans receivable - principal is a non-GAAP financial measure. See the appendix for a reconciliation to a GAAP measure. 2 Adjusted EBITDA is not a financial measure prepared in accordance with GAAP. See the appendix for a reconciliation to a GAAP measure. 3 Adjusted earnings is not a financial measure prepared in accordance with GAAP. See the appendix for a reconciliation to a GAAP measure. Page 10: 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. See the appendix for a reconciliation of Adjusted EBITDA to a GAAP measure. 13

 
Non-GAAP financials reconciliation – Adjusted EBITDA Year ended Three months ended June 30, Six months ended June 30, December 31, ($mm) 2020 2019 2020 2019 2019 Net income from continuing operations $ 16 8 24 19 $ 26 Adjustments: Net interest expense 12 17 26 35 63 Stock-based compensation 3 3 5 5 10 Depreciation and amortization 5 4 9 8 16 Non-operating expense 1 - 6 - 1 Income tax expense 8 2 10 9 11 Adjusted EBITDA $ 45 34 80 76 $ 127 Adjusted EBITDA Margin 38% 23% 29% 24% 20% UK operations excluded as discontinued operations in 2019-2020. Adjusted EBITDA is a non-GAAP financial measure. The Company’s Adjusted EBITDA guidance does not include certain charges and costs. The adjustments in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as the impact of income tax benefit or expense, non-operating income, net interest expense, goodwill impairment loss, share-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. 14

 
Non-GAAP financials reconciliation – Adjusted EBITDA (continued) For the years ended December 31, ($mm) 2018 2017 2016 2015 2014 Net income (loss) $ 13 (7) (22) (20) $ (55) Adjustments: Net interest expense 79 73 64 37 13 Stock-based compensation 8 6 2 1 1 Foreign currency transaction (gain) loss 2 (3) 9 2 1 Depreciation and amortization 13 10 11 9 8 Non-operating expense (income) - (2) - (6) - Income tax expense (benefit) 1 10 (3) (5) (21) Adjusted EBITDA $ 116 87 60 19 $ (53) Adjusted EBITDA Margin 15% 13% 10% 4% -19% UK operations presented in 2014-2018. Adjusted EBITDA is a non-GAAP financial measure. The Company’s Adjusted EBITDA guidance does not include certain charges and costs. The adjustments in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as the impact of income tax benefit or expense, non-operating income, net interest expense, goodwill impairment loss, share-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. 15

 
Non-GAAP financials reconciliation – Adjusted Earnings Year ended Three months ended June 30, Six months ended June 30, December 31, ($mm) 2020 2019 2020 2019 2019 Net income from continuing operations $ 16 8 24 19 $ 26 Adjustments: Impact of contingent loss related to a legal matter 1 - 6 - - Cumulative tax effect of adjustments - - (2) - - Adjusted earnings $ 17 8 28 19 $ 26 Diluted earnings per share $ 0.38 0.19 0.56 0.44 $ 0.59 Adjustments: Impact of contingent loss related to a legal matter 0.03 - 0.13 - - Cumulative tax effect of adjustments (0.01) - (0.04) - - Adjusted diluted earnings per share $ 0.40 0.19 0.65 0.44 $ 0.59 UK operations excluded as discontinued operations in 2019-2020. Adjusted earnings and Adjusted diluted earnings per share are non-GAAP financial measures. The Company’s Adjusted earnings exclude the impact of a contingent loss related to a legal matter and the cumulative tax effect of the contingent loss adjustment. Adjusted diluted earnings per share is Adjusted earnings divided by diluted weighted shares outstanding for the period. 16

 
Non-GAAP financials reconciliation – Adjusted Earnings (continued) For the years ended December 31, ($mm) 2018 2017 2016 2015 2014 Net income (loss) $ 13 (7) (22) (20) $ (55) Adjustments: Tax Cuts and Jobs Act tax expense - 13 - - - Adjusted earnings (loss) $ 13 6 (22) (20) $ (55) Diluted earnings (loss) per share $ 0.28 (0.20) (1.74) (1.59) $ (4.64) Adjustments: Tax Cuts and Jobs Act tax expense - 0.37 - - - Adjusted diluted earnings (loss) per share $ 0.28 0.17 (1.74) (1.59) $ (4.64) UK operations presented in 2014-2018. Adjusted earnings and Adjusted diluted earnings per share are non-GAAP financial measures. The Company’s Adjusted earnings exclude the impact of the Tax Cuts and Jobs Act tax expense. Adjusted diluted earnings per share is Adjusted earnings divided by diluted weighted shares outstanding for the period. 17

 
Combined loans reconciliation (excluding UK) Combined Loan Adjustment Summary (dollars in thousands) Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019   Company Owned Loans Loans receivable – principal, current, company owned 387,939 486,396 530,463 507,551 484,131 Loans receivable – principal, past due, company owned 18,917 53,923 58,489 59,240 47,846 Loans receivable – principal, total, company owned 406,856 540,319 588,952 566,791 531,977 Loans receivable – finance charges, company owned 25,606 31,621 33,033 31,698 27,472 Loans receivable – company owned 432,462 571,940 621,985 598,489 559,449 Allowance for loan losses on loans receivable, company owned (59,438) (76,188) (79,912) (80,537) (65,889) Loans receivable, net, company owned 373,024 495,752 542,073 517,952 493,560 Third Party Loans Guaranteed by the Company Loans receivable – principal, current, guaranteed by company 6,755 12,606 17,474 18,633 21,099 Loans receivable – principal, past due, guaranteed by company 117 564 723 697 596 Loans receivable – principal, total, guaranteed by company1 6,872 13,170 18,197 19,330 21,695 Loans receivable – finance charges, guaranteed by company2 550 1,150 1,395 1,553 1,676 Loans receivable – guaranteed by company 7,422 14,320 19,592 20,883 23,371 Liability for losses on loans receivable, guaranteed by company (1,156) (1,571) (2,080) (1,972) (1,983) Loans receivable, net, guaranteed by company2 6,266 12,749 17,512 18,911 21,388 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. . 18

 
Combined loans reconciliation - continued (excluding UK) Combined Loan Adjustment Summary (dollars in thousands) Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Combined Loans Receivable3 Combined loans receivable – principal, current 394,694 499,002 547,937 526,184 505,230 Combined loans receivable – principal, past due 19,034 54,487 59,212 59,937 48,442 Combined loans receivable – principal 413,728 553,489 607,149 586,121 553,672 Combined loans receivable – finance charges 26,156 32,771 34,428 33,251 29,148 Combined loans receivable 439,884 586,260 641,577 619,372 582,820 Combined Loan Loss Reserve3 Allowance for loan losses on loans receivable, company owned (59,438) (76,188) (79,912) (80,537) (65,889) Liability for losses on loans receivable, guaranteed by company (1,156) (1,571) (2,080) (1,972) (1,983) Combined loan loss reserve (60,594) (77,759) (81,992) (82,509) (67,872) 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. . 19

 
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