Form 8-K Elevate Credit, Inc. For: Feb 08

February 8, 2018 4:19 PM


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)
February 8, 2018
____________________________________________________________________
 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))
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 2.02
Results of Operations and Financial Condition.
On February 8, 2018, Elevate Credit, Inc. (the "Company") issued a press release announcing its financial results for the quarter and year ended December 31, 2017. The full text of the press release, along with the slide presentation to be used during the earnings call on February 8, 2018, are furnished herewith as Exhibits 99.1 and 99.2, respectively.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No.
Description
99.1
99.2






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:
February 8, 2018
By:
/s/ Christopher Lutes
 
 
 
Christopher Lutes
 
 
 
Chief Financial Officer







elevatelogoa14.jpg

ELEVATE CREDIT ANNOUNCES FOURTH QUARTER & FULL YEAR 2017 RESULTS
Continued strong quarterly growth and profitability excluding one-time tax adjustment
FORT WORTH, TX - February 8, 2018 - 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 fourth quarter and full year ended December 31, 2017.

“Elevate ended its first year as a public company with strong loan growth and delivered on our goals of top-line growth, margin expansion, and stable credit quality,” said Ken Rees, Chief Executive Officer of Elevate. “Between the beneficial impact of U.S. federal tax reform and the loan portfolio growth, Elevate is set up to deliver even greater levels of revenue growth and profit margin expansion in 2018.”
Fourth Quarter 2017 Financial Highlights1 

Fourth quarter GAAP net loss due to federal tax law charge, but fourth consecutive quarter of net income on an adjusted basis: Fourth quarter 2017 net loss totaled $12.2 million, or $(0.29) per diluted share, reflecting a one-time $12.5 million charge associated with the change in the federal tax law resulting from the tax reform in 2017. Excluding the impact from the tax law change, net income for the fourth quarter of 2017 would have been $0.3 million, or $0.01 per diluted share, versus a net loss of $4.4 million, or $(0.34) per diluted share, for the fourth quarter of 2016. The net loss for full-year 2017 totaled $6.9 million, or $(0.20) per diluted share. Excluding the impact of the federal tax law, net income for full year 2017 would have been $5.5 million, or $0.16 per diluted share, compared to a net loss of $22.4 million, or $(1.74) per diluted share, for full-year 2016. See "Non-GAAP Financial Measures" for a reconciliation of the tax impact to the GAAP measures of net loss and diluted earnings per share.
    
Additionally, due to strong year-end consumer demand, the Company increased its marketing spend above initial fourth quarter 2017 planned expenditures. This increased marketing spend resulted in $21 million more in year-end 2017 loan balances, which is anticipated to have a positive impact on 2018 revenue growth and profitability. The Company incurred approximately $5.3 million in additional upfront direct marketing and loan loss provision expense as a result of this decision, which negatively impacted net income in the fourth quarter of 2017 by $4.2 million, or $0.09 per diluted share.

16% year-over-year revenue growth: Revenues for the fourth quarter of 2017 increased 14.5% from the fourth quarter of 2016 and were up 16.0% for full-year 2017 versus 2016. Revenues totaled $193.4 million in the fourth quarter of 2017 compared to $169.0 million for the prior-year period. Full-year 2017 revenues totaled $673.1 million compared to $580.4 million for full-year 2016.


__________________________
1 Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal, combined loan loss reserve and combined loans receivable 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







More than 28% year-over-year growth in combined loans receivable - principal: Combined loans receivable - principal totaled $618.4 million, a 28.5% increase from $481.2 million for the prior-year period. The Rise installment loan and Elastic line of credit combined loans receivable - principal balances as of December 31, 2017 were up 19.6% and 47.4% over the prior year-end balances, respectively.

Adjusted EBITDA up 45% compared to prior year: 2017 Adjusted EBITDA totaled $87.5 million, up 44.7% from $60.4 million in 2016. Adjusted EBITDA margin was 13% for both the fourth quarter of 2017 and full-year 2017.

Continued stable credit quality: The ending combined loan loss reserve as a percentage of combined loans receivable was 14.3%, lower than the 16.1% reported for the prior-year period due to the improved credit quality and the continued maturation of the loan portfolio. Charge-offs as a percentage of originations for full-year 2017 continued to trend below previous years at less than 25% of principal originations.

Strong new customer acquisition with costs below targeted range: The total number of new customers acquired during the fourth quarter of 2017 was approximately 95,000 with an average customer acquisition cost of $231, below the targeted range of $250-$300. This represented a 34.6% increase over the approximately 70,000 new customers acquired in the fourth quarter of 2016.

Liquidity and Capital Resources
There were no material changes from a liquidity and funding standpoint during the fourth quarter of 2017. The Company borrowed an incremental $36 million during the quarter while combined loans receivable - principal increased $69.5 million, demonstrating the Company’s ability to self-fund a large portion of its loan growth. Interest expense as a percentage of revenue in the fourth quarter of 2017 was 9.5%, the lowest it has been in the last two years.

Recent Business Highlights

New Chief Credit Officer and Board Director. Elevate announced the hiring of Brian Biglin as Chief Credit Officer and the appointment of Bradley Strock as a member of the Board of Directors. Mr. Biglin was Chief Credit Officer at BillMeLater, PayPal and loanDepot.com, among other positions. Mr. Strock is currently the Chief Information Officer at PayPal, and previously held senior technology roles at Bank of America and J.P. Morgan Chase.

Elevate’s Rise product surpasses $300 million in outstandings. In November 2017, Rise surpassed $300 million in total combined loans receivable - principal. Since inception, Rise has originated more than $1.8 billion in loans and served more than 500,000 customers.

Elastic product surpasses $1 billion in total fundings. In December 2017, the Elastic line of credit product, originated by Republic Bank, surpassed $1 billion in total originations, having served more than 200,000 customers since 2013.

Sunny surpasses $100 million in revenue during 2017. The Company's profitable UK business, offering installment loans under the brand name Sunny, generated $100 million of annual revenue in 2017 for the first time since its launch in 2013.

2



Financial Outlook

For the full year 2018, the Company expects total revenue of $780 million to $820 million, net income of $20 million to $45 million, or $0.50 to $1.05 in diluted earnings per share, and Adjusted EBITDA of $120 million to $150 million.

Conference Call

The Company will host a conference call to discuss its fourth quarter and full-year 2017 financial results on Thursday, February 8th at 4:00pm Central Time / 5:00pm Eastern Time. Interested parties may access the conference call live over the phone by dialing 1-877-407-0792 (domestic) or 1-201-689-8263 (international) and requesting the Elevate Fourth Quarter 2017 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 February 22, 2018, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 13675590, 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: our future financial performance including our outlook for full fiscal year 2018 (including all statements under the heading "Financial Outlook"); our expectation that we are set up to deliver even greater levels of revenue growth and profit margin expansion in 2018; our expectation that the increased marketing spend in the fourth quarter of 2017 will have a positive impact on 2018 revenue growth and profitability; and the Company’s targeted customer acquisition cost range of $250-$300. 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 Company's 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 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) has originated $5.2 billion in non-prime credit to more than 1.9 million non-prime consumers to date. 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, Sunny and Elastic. For more information, please visit http://www.elevate.com.

Investor Relations:

Solebury Communications
Sloan Bohlen, (817) 928-1646
investors@elevate.com

or

Media Inquiries:

Vested
Ishviene Arora, (917) 765-8720
elevate@fullyvested.com








5



Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited, except year ended December 31, 2016 amounts)

 
 
Three Months Ended 
 December 31,
 
Years Ended 
 December 31,
(dollars in thousands, except share and per share amounts)
2017
 
2016
 
2017
 
2016
Revenues
 
$
193,443

 
$
169,019

 
$
673,132

 
$
580,441

Cost of sales:
 
 
 
 
 
 
 
 
      Provision for loan losses
 
106,281

 
100,316

 
357,574

 
317,821

      Direct marketing costs
 
21,900

 
14,989

 
72,222

 
65,190

      Other cost of sales
 
6,169

 
4,569

 
20,536

 
17,433

Total cost of sales
 
134,350

 
119,874

 
450,332

 
400,444

Gross profit
 
59,093

 
49,145

 
222,800

 
179,997

Operating expenses:
 
 
 
 
 
 
 
 
Compensation and benefits
 
21,115

 
15,477

 
81,969

 
65,657

Professional services
 
7,803

 
7,561

 
32,848

 
30,659

Selling and marketing
 
1,691

 
1,874

 
8,353

 
9,684

Occupancy and equipment
 
3,892

 
2,994

 
13,895

 
11,475

Depreciation and amortization
 
2,615

 
2,623

 
10,272

 
10,906

Other
 
1,505

 
1,346

 
4,600

 
3,812

Total operating expenses
 
38,621

 
31,875

 
151,937

 
132,193

Operating income
 
20,472

 
17,270

 
70,863

 
47,804

Other income (expense):
 
 
 
 
 
 
 
 
      Net interest expense
 
(18,441
)
 
(19,479
)
 
(73,043
)
 
(64,277
)
      Foreign currency transaction gain (loss)
 
80

 
(2,535
)
 
2,900

 
(8,809
)
      Non-operating income (loss)
 
(112
)
 
(43
)
 
2,295

 
(43
)
Total other expense
 
(18,473
)
 
(22,057
)
 
(67,848
)
 
(73,129
)
Income (loss) before taxes
 
1,999

 
(4,787
)
 
3,015

 
(25,325
)
Income tax expense (benefit)
 
14,193

 
(365
)
 
9,931

 
(2,952
)
Net loss
 
$
(12,194
)
 
$
(4,422
)
 
$
(6,916
)
 
$
(22,373
)
 
 
 
 
 
 
 
 
 
Basic loss per share
 
$
(0.29
)
 
$
(0.34
)
 
$
(0.20
)
 
$
(1.74
)
Diluted loss per share
 
$
(0.29
)
 
$
(0.34
)
 
$
(0.20
)
 
$
(1.74
)
Basic weighted average shares outstanding
 
41,897,080

 
13,001,220

 
33,911,520

 
12,894,262

Diluted weighted average shares outstanding
 
41,897,080

 
13,001,220

 
33,911,520

 
12,894,262





6



Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
 
December 31, 2017
 
December 31, 2016
 
 
(unaudited)
 
(audited)
ASSETS
 
 
 
 
Cash and cash equivalents*
 
$
41,142

 
$
53,574

Restricted cash
 
1,595

 
1,785
Loans receivable, net of allowance for loan losses of $87,946 and $77,451, respectively*
 
524,619

 
392,663
Prepaid expenses and other assets*
 
9,891

 
11,314
Receivable from CSO lenders
 
22,811

 
26,053
Receivable from payment processors*
 
21,126

 
19,105
Deferred tax assets, net
 
23,619

 
31,197
Property and equipment, net
 
24,249

 
16,159
Goodwill
 
16,027

 
16,027
Intangible assets, net
 
2,123

 
2,304
Total assets
 
$
687,202

 
$
570,181

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Accounts payable and accrued liabilities *
 
$
42,213

 
$
31,390

State and other taxes payable
 
469

 
1,026
Deferred revenue
 
33,023

 
28,970

Notes payable, net*
 
513,295

 
493,478
Derivative liability
 
1,972

 
1,750
Total liabilities
 
590,972

 
556,614
COMMITMENTS, CONTINGENCIES AND GUARANTEES
 
 
 
 
STOCKHOLDERS’ EQUITY
 
 
 
 
Preferred stock
 

 

Common stock
 
17

 
5
Convertible preferred stock; Series A
 

 
3
Convertible preferred stock; Series B
 

 
3
Accumulated other comprehensive income
 
2,077

 
1,087
Additional paid-in capital
 
174,090

 
88,854
Accumulated deficit
 
(79,954
)
 
(76,385
)
Total stockholders’ equity
 
96,230

 
13,567

Total liabilities and stockholders’ equity
 
$
687,202

 
$
570,181


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

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, combined loans receivable and combined loan loss reserve.

Adjusted EBITDA and Adjusted EBITDA margin

In addition to net income (loss) determined in accordance with GAAP, Elevate uses certain non-GAAP measures such as “Adjusted EBITDA” and "Adjusted EBITDA margin" 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 (loss) excluding the impact of income tax benefit or expense, non-operating income or expense, foreign currency transaction gain or loss associated with our UK operations, net interest expense, stock-based compensation expense and depreciation and amortization expense. Elevate defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.

Management believes that Adjusted EBITDA and Adjusted EBITDA margin 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 this non-GAAP financial measure 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 this non-GAAP financial measure 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 EBITDA and Adjusted EBITDA margin should not be considered as alternatives to net income (loss) or any other performance measure derived in accordance with GAAP. Management's use of Adjusted EBITDA and Adjusted EBITDA margin 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 EBITDA may not be comparable to similarly titled measures reported by other companies.

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.   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.



8



The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to Elevate’s net loss for the three and twelve months ended December 31, 2017 and 2016:

 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
(dollars in thousands)
 
2017
 
2016
 
2017
 
2016
Net loss
 
$
(12,194
)
 
$
(4,422
)
 
$
(6,916
)
 
$
(22,373
)
Adjustments:
 
 
 
 
 
 
 
 
Net interest expense
 
18,441

 
19,479

 
73,043

 
64,277

Stock-based compensation
 
1,882

 
678

 
6,318

 
1,707

Foreign currency transaction (gains) losses
 
(80
)
 
2,535

 
(2,900
)
 
8,809

Depreciation and amortization
 
2,615

 
2,623

 
10,272

 
10,906

Non-operating (income) loss
 
112

 
43

 
(2,295
)
 
43

Income tax expense (benefit)
 
14,193

 
(365
)
 
9,931

 
(2,952
)
Adjusted EBITDA
 
$
24,969

 
$
20,571

 
$
87,453

 
$
60,417

 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
 
12.9
%
 
12.2
%
 
13.0
%
 
10.4
%

Adjusted net income (loss), adjusted diluted income (loss) per share and adjusted diluted weighted average shares outstanding
The Tax Cuts and Jobs Act was enacted on December 22, 2017. U.S. GAAP requires the remeasurement of all U.S. deferred income tax assets and liabilities for temporary differences from the current tax rate of 35% to the new corporate tax rate of 21%. The cumulative adjustment of $12.5 million was recognized in income tax expense in the current period, which includes the enactment date. The following table presents a reconciliation of net loss and diluted loss per share to adjusted net income (loss) and adjusted diluted income (loss) per share, which excludes the impact of the tax reform.
 
Three Months Ended
 December 31,
 
Years Ended
 December 31,
(dollars in thousands except per share amounts)
2017
 
2016
 
2017
 
2016
Net loss
$
(12,194
)
 
$
(4,422
)
 
$
(6,916
)
 
$
(22,373
)
Impact of tax reform
12,462

 

 
12,462

 

Adjusted net income (loss)
$
268

 
$
(4,422
)
 
$
5,546

 
$
(22,373
)
 
 
 
 
 
 
 
 
Diluted loss per share
$
(0.29
)
 
$
(0.34
)
 
$
(0.20
)
 
$
(1.74
)
Impact of tax reform
0.30

 

 
0.36

 

Adjusted diluted income (loss) per share
$
0.01

 
$
(0.34
)
 
$
0.16

 
$
(1.74
)
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
41,897,080

 
13,001,220

 
33,911,520

 
12,894,262

Effect of potentially dilutive shares outstanding(1)
1,438,086

 

 
1,446,611

 

Adjusted diluted weighted average shares outstanding
43,335,166

 
13,001,220

 
35,358,131

 
12,894,262

(1) Represents potentially dilutive shares that had not been included in the Company's quarter or year-ended December 31, 2017 diluted weighted average shares outstanding as the Company is in a net loss position under U.S. GAAP. Including these shares would have been anti-dilutive when in a net loss position.

9











Supplemental Schedules

10




Revenue by Product
 
 
Three Months Ended December 31, 2017
(dollars in thousands)
 
Rise (US)(1)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Average combined loans receivable – principal(1)
 
$
301,941

 
$
236,728

 
$
538,669

 
$
44,427

 
$
583,096

Effective APR
 
141
%
 
97
%
 
121
%
 
242
%
 
130
%
Finance charges
 
$
106,954

 
$
57,751

 
$
164,705

 
$
27,046

 
$
191,751

Other
 
1,080

 
541

 
1,621

 
71

 
1,692

Total revenue
 
$
108,034

 
$
58,292

 
$
166,326

 
$
27,117

 
$
193,443

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2016
(dollars in thousands)
 
Rise (US)(1)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Average combined loans receivable – principal(1)
 
$
274,773

 
$
155,553

 
$
430,326

 
$
45,060

 
$
475,386

Effective APR
 
152
%
 
96
%
 
132
%
 
226
%
 
141
%
Finance charges
 
$
105,142

 
$
37,414

 
$
142,556

 
$
25,629

 
$
168,185

Other
 
390

 
444

 
834

 

 
834

Total revenue
 
$
105,532

 
$
37,858

 
$
143,390

 
$
25,629

 
$
169,019


(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)
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



Revenue by Product (continued)
 
 
Year Ended December 31, 2017
(dollars in thousands)
 
Rise (US)(1)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Average combined loans receivable – principal(1)
 
$
261,101

 
$
202,530

 
$
463,631

 
$
43,297

 
$
506,928

Effective APR
 
141
%
 
97
%
 
122
%
 
237
%
 
131
%
Finance charges
 
$
368,453

 
$
195,592

 
$
564,045

 
$
102,509

 
$
666,554

Other
 
4,345

 
1,926

 
6,271

 
307

 
6,578

Total revenue
 
$
372,798

 
$
197,518

 
$
570,316

 
$
102,816

 
$
673,132

 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
(dollars in thousands)
 
Rise (US)(1)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Average combined loans receivable – principal(1)
 
$
244,201

 
$
109,892

 
$
354,093

 
$
41,123

 
$
395,216

Effective APR
 
156
%
 
91
%
 
136
%
 
233
%
 
146
%
Finance charges
 
$
382,163

 
$
100,276

 
$
482,439

 
$
95,978

 
$
578,417

Other
 
572

 
1,451

 
2,023

 
1

 
2,024

Total revenue
 
$
382,735

 
$
101,727

 
$
484,462

 
$
95,979

 
$
580,441


(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)
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.


12








Loan Loss Reserve by Product

 
 
Three Months Ended December 31, 2017
(dollars in thousands)
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Combined loan loss reserve(1):
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
49,756

 
$
27,802

 
$
77,558

 
$
8,511

 
$
86,069

Net charge-offs
 
(60,024
)
 
(30,653
)
 
(90,677
)
 
(7,941
)
 
(98,618
)
Provision for loan losses
 
66,135

 
31,721

 
97,856

 
8,425

 
106,281

Effect of foreign currency
 

 

 

 
57

 
57

Ending balance
 
$
55,867

 
$
28,870

 
$
84,737

 
$
9,052

 
$
93,789

Combined loans receivable(1)(2)
 
$
342,652

 
$
261,222

 
$
603,874

 
$
54,156

 
$
658,030

Combined loan loss reserve as a percentage of ending combined loans receivable
 
16
%
 
11
%
 
14
%
 
17
%
 
14
%
Net charge-offs as a percentage of revenues
 
56
%
 
53
%
 
55
%
 
29
%
 
51
%
Provision for loan losses as a percentage of revenues
 
61
%
 
54
%
 
59
%
 
31
%
 
55
%

 
 
Three Months Ended December 31, 2016
(dollars in thousands)
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Combined loan loss reserve(1):
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
53,931

 
$
16,652

 
$
70,583

 
$
8,302

 
$
78,885

Net charge-offs
 
(66,870
)
 
(19,512
)
 
(86,382
)
 
(10,030
)
 
(96,412
)
Provision for loan losses
 
66,275

 
22,249

 
88,524

 
11,792

 
100,316

Effect of foreign currency
 

 

 

 
(413
)
 
(413
)
Ending balance
 
$
53,336

 
$
19,389

 
$
72,725

 
$
9,651

 
$
82,376

Combined loans receivable(1)(2)
 
$
289,348

 
$
174,574

 
$
463,922

 
$
46,690

 
$
510,612

Combined loan loss reserve as a percentage of ending combined loans receivable
 
18
%
 
11
%
 
16
%
 
21
%
 
16
%
Net charge-offs as a percentage of revenues
 
63
%
 
52
%
 
60
%
 
39
%
 
57
%
Provision for loan losses as a percentage of revenues
 
63
%
 
59
%
 
62
%
 
46
%
 
59
%


(1) 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.
(2) Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's consolidated financial statements.



13



Loan Loss Reserve by Product (continued)

 
 
Year Ended December 31, 2017
(dollars in thousands)
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Combined loan loss reserve(1):
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
53,336

 
$
19,389

 
$
72,725

 
$
9,651

 
$
82,376

Net charge-offs
 
(209,533
)
 
(99,283
)
 
(308,816
)
 
(38,194
)
 
(347,010
)
Provision for loan losses
 
212,064

 
108,764

 
320,828

 
36,746

 
357,574

Effect of foreign currency
 

 

 

 
849

 
849

Ending balance
 
$
55,867

 
$
28,870

 
$
84,737

 
$
9,052

 
$
93,789

Combined loans receivable(1)(2)
 
$
342,652

 
$
261,222

 
$
603,874

 
$
54,156

 
$
658,030

Combined loan loss reserve as a percentage of ending combined loans receivable
 
16
%
 
11
%
 
14
%
 
17
%
 
14
%
Net charge-offs as a percentage of revenues
 
56
%
 
50
%
 
54
%
 
37
%
 
52
%
Provision for loan losses as a percentage of revenues
 
57
%
 
55
%
 
56
%
 
36
%
 
53
%

 
 
Year Ended December 31, 2016
(dollars in thousands)
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
 
 
 
Combined loan loss reserve(1):
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
46,635

 
$
10,016

 
$
56,651

 
$
9,133

 
$
65,784

Net charge-offs
 
(214,328
)
 
(49,089
)
 
(263,417
)
 
(36,283
)
 
(299,700
)
Provision for loan losses
 
221,029

 
58,462

 
279,491

 
38,330

 
317,821

Effect of foreign currency
 

 

 

 
(1,529
)
 
(1,529
)
Ending balance
 
$
53,336

 
$
19,389

 
$
72,725

 
$
9,651

 
$
82,376

Combined loans receivable(1)(2)
 
$
289,348

 
$
174,574

 
$
463,922

 
$
46,690

 
$
510,612

Combined loan loss reserve as a percentage of ending combined loans receivable
 
18
%
 
11
%
 
16
%
 
21
%
 
16
%
Net charge-offs as a percentage of revenues
 
56
%
 
48
%
 
54
%
 
38
%
 
52
%
Provision for loan losses as a percentage of revenues
 
58
%
 
57
%
 
58
%
 
40
%
 
55
%

(1) 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.
(2) Includes loans originated by third-party lenders through the CSO programs, which are not included in the Company's consolidated financial statements.


14



Customer Loan Data by Product
 
 
Three Months Ended December 31, 2017
 
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
Beginning number of combined loans outstanding
 
123,978

 
126,677

 
250,655

 
74,924

 
325,579

New customer loans originated
 
41,856

 
30,986

 
72,842

 
21,822

 
94,664

Former customer loans originated
 
18,871

 

 
18,871

 

 
18,871

Attrition
 
(43,915
)
 
(16,991
)
 
(60,906
)
 
(16,236
)
 
(77,142
)
Ending number of combined loans outstanding
 
140,790

 
140,672

 
281,462

 
80,510

 
361,972

Customer acquisition cost
 
$
243

 
$
222

 
$
234

 
$
223

 
$
231

Average customer loan balance
 
$
2,276

 
$
1,784

 
$
2,030

 
$
584

 
$
1,708

 
 
Three Months Ended December 31, 2016
 
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
Beginning number of combined loans outstanding
 
129,524

 
75,191

 
204,715

 
76,475

 
281,190

New customer loans originated
 
23,481

 
25,336

 
48,817

 
21,503

 
70,320

Former customer loans originated
 
17,867

 
2

 
17,869

 

 
17,869

Attrition
 
(48,876
)
 
(11,376
)
 
(60,252
)
 
(19,934
)
 
(80,186
)
Ending number of combined loans outstanding
 
121,996

 
89,153

 
211,149

 
78,044

 
289,193

Customer acquisition cost
 
$
263

 
$
167

 
$
213

 
$
213

 
$
213

Average customer loan balance
 
$
2,196

 
$
1,909

 
$
2,075

 
$
551

 
$
1,664


15



Customer Loan Data by Product (continued)
 
 
Year Ended December 31, 2017
 
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
Beginning number of combined loans outstanding
 
121,996

 
89,153

 
211,149

 
78,044

 
289,193

New customer loans originated
 
116,030

 
110,145

 
226,175

 
79,011

 
305,186

Former customer loans originated
 
71,109

 

 
71,109

 

 
71,109

Attrition
 
(168,345
)
 
(58,626
)
 
(226,971
)
 
(76,545
)
 
(303,516
)
Ending number of combined loans outstanding
 
140,790

 
140,672

 
281,462

 
80,510

 
361,972

Customer acquisition cost
 
$
281

 
$
182

 
$
233

 
$
249

 
$
237

Average customer loan balance
 
$
2,276

 
$
1,784

 
$
2,030

 
$
584

 
$
1,708

 
 
Year Ended December 31, 2016
 
 
Rise (US)
 
Elastic (US)
 
Total Domestic
 
Sunny (UK)
 
Total
Beginning number of combined loans outstanding
 
118,222

 
36,487

 
154,709

 
68,014

 
222,723

New customer loans originated
 
109,686

 
82,880

 
192,566

 
85,071

 
277,637

Former customer loans originated
 
81,174

 
112

 
81,286

 

 
81,286

Attrition
 
(187,086
)
 
(30,326
)
 
(217,412
)
 
(75,041
)
 
(292,453
)
Ending number of combined loans outstanding
 
121,996

 
89,153

 
211,149

 
78,044

 
289,193

Customer acquisition cost
 
$
278

 
$
152

 
$
224

 
$
259

 
$
235

Average customer loan balance
 
$
2,196

 
$
1,909

 
$
2,075

 
$
551

 
$
1,664




16





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 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.
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 and Ohio, the Company does not make Rise loans directly, but rather act as a Credit Services Organization (which is also known as a Credit Access Business in Texas), or, collectively, “CSO,” and the loans are originated by an unaffiliated third party. 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 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 consolidated balance sheets since both revenues and cost of sales as reflected in the Company's 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 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).


17



 
 
2016
 
2017
(dollars in thousands)
 
Mar 31
 
Jun 30
 
Sep 30
 
Dec 31
 
Mar 31
 
Jun 30
 
Sep 30
 
Dec 31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company Owned Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans receivable – principal, current, company owned(4)
 
$
255,543

 
$
294,559

 
$
352,595

 
$
387,142

 
$
367,744

 
$
403,944

 
$
450,891

 
$
514,147

Loans receivable – principal, past due, company owned(4)
 
34,471

 
41,475

 
57,811

 
57,342

 
48,007

 
45,839

 
61,040

 
61,856

Loans receivable – principal, total, company owned
 
290,014

 
336,034

 
410,406

 
444,484

 
415,751

 
449,783

 
511,931

 
576,003

Loans receivable – finance charges, company owned
 
19,045

 
20,093

 
22,745

 
25,630

 
21,359

 
21,866

 
27,625

 
36,562

Loans receivable – company owned
 
309,059

 
356,127

 
433,151

 
470,114

 
437,110

 
471,649

 
539,556

 
612,565

Allowance for loan losses on loans receivable, company owned
 
(51,296
)
 
(54,873
)
 
(73,019
)
 
(77,451
)
 
(69,798
)
 
(66,030
)
 
(80,972
)
 
(87,946
)
Loans receivable, net, company owned
 
$
257,763

 
$
301,254

 
$
360,132

 
$
392,663

 
$
367,312

 
$
405,619

 
$
458,584

 
$
524,619

Third Party Loans Guaranteed by the Company:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans receivable – principal, current, guaranteed by company(4)
 
$
28,556

 
$
34,748

 
$
35,388

 
$
34,466

 
$
27,841

 
$
30,210

 
$
35,690

 
$
41,220

Loans receivable – principal, past due, guaranteed by company(4)
 
2,112

 
2,911

 
2,465

 
2,260

 
957

 
1,066

 
1,267

 
1,152

Loans receivable – principal, total, guaranteed by company(1)
 
30,668

 
37,659

 
37,853

 
36,726

 
28,798

 
31,276

 
36,957

 
42,372

Loans receivable – finance charges, guaranteed by company(2)
 
1,541

 
1,626

 
3,129

 
3,772

 
2,754

 
2,365

 
2,751

 
3,093

Loans receivable – guaranteed by company
 
32,209

 
39,285

 
40,982

 
40,498

 
31,552

 
33,641

 
39,708

 
45,465

Liability for losses on loans receivable, guaranteed by company
 
(4,296
)
 
(7,124
)
 
(5,866
)
 
(4,925
)
 
(3,565
)
 
(3,810
)
 
(5,097
)
 
(5,843
)
Loans receivable, net, guaranteed by company(3)
 
$
27,913

 
$
32,161

 
$
35,116

 
$
35,573

 
$
27,987

 
$
29,831

 
$
34,611

 
$
39,622

Combined Loans Receivable(3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined loans receivable – principal, current(4)
 
$
284,099

 
$
329,307

 
$
387,983

 
$
421,608

 
$
395,585

 
$
434,154

 
$
486,581

 
$
555,367

Combined loans receivable – principal, past due(4)
 
36,583

 
44,386

 
60,276

 
59,602

 
48,964

 
46,905

 
62,307

 
63,008

Combined loans receivable – principal
 
320,682

 
373,693

 
448,259

 
481,210

 
444,549

 
481,059

 
548,888

 
618,375

Combined loans receivable – finance charges
 
20,586

 
21,719

 
25,874

 
29,402

 
24,113

 
24,231

 
30,376

 
39,655

Combined loans receivable
 
$
341,268

 
$
395,412

 
$
474,133

 
$
510,612

 
$
468,662

 
$
505,290

 
$
579,264

 
$
658,030


18



 
 
2016
 
2017
(dollars in thousands)
 
Mar 31
 
Jun 30
 
Sep 30
 
Dec 31
 
Mar 31
 
Jun 30
 
Sep 30
 
Dec 31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined Loan Loss Reserve(3):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses on loans receivable, company owned
 
$
(51,296
)
 
$
(54,873
)
 
$
(73,019
)
 
$
(77,451
)
 
$
(69,798
)
 
$
(66,030
)
 
$
(80,972
)
 
$
(87,946
)
Liability for losses on loans receivable, guaranteed by company
 
(4,296
)
 
(7,124
)
 
(5,866
)
 
(4,925
)
 
(3,565
)
 
(3,810
)
 
(5,097
)
 
(5,843
)
Combined loan loss reserve
 
$
(55,592
)
 
$
(61,997
)
 
$
(78,885
)
 
$
(82,376
)
 
$
(73,363
)
 
$
(69,840
)
 
$
(86,069
)
 
$
(93,789
)
(1) Represents loans originated by third-party lenders through the CSO programs, which are not included in the Company's consolidated financial statements.
(2) Represents finance charges earned by third-party lenders through the CSO programs, which are not included in the Company's consolidated financial statements.
(3) Non-GAAP measure.
(4) Certain amounts in the prior periods presented here have been reclassified to conform to the current period financial statement presentation related to customers within the 16 day grace period that were reported as past due that were in fact current in accordance with the Company's policy.
 


# # #


19
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.


 
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