Elevate Credit Announces Second Quarter 2019 Results

July 29, 2019 4:15 PM

Elevate Credit announces strong second quarter earnings growth

Names Jason Harvison as Interim CEO

FORT WORTH, Texas--(BUSINESS WIRE)-- 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, 2019. The Company grew year-over-year net income by approximately 87%, primarily due to improved credit quality and lower customer acquisition costs. Additionally, the Company announced the resignation of CEO Ken Rees. Jason Harvison has been named as interim CEO, and Saundra Schrock as Chairman of the Board of Directors. Ken Rees will remain on the Elevate Board.

“Elevate continues to deliver strong earnings growth as a result of new underwriting models and strategies that have significantly reduced both fraud and credit losses” said outgoing CEO Ken Rees. “We remain on track to double net income for the second straight year. On a personal note, I have decided now is a good time to step aside as CEO. I am very proud to have led Elevate during this period of growth and transformation alongside Jason Harvison and the rest of the incredible leadership team. I look forward to continuing to serve on the Elevate Board of Directors.”

“On behalf of the Board and the Company, I want to thank Ken for his contributions to Elevate’s success,” said Saundra Schrock, Chairman of the Board. “I am confident the leadership transition will be seamless. The world-class leadership at Elevate, led by interim CEO Jason Harvison, is well-positioned to achieve even greater levels of earnings growth and shareholder value.”

“I am honored to have the opportunity to lead Elevate and build on the successes of the past few years as a public company,” said interim CEO Jason Harvison. “Thus far in 2019, we have delivered excellent performance with net income significantly higher than all of 2018. In the second half of the year, we intend to continue our focus on building a strong foundation for measured growth, further improving credit quality, and delivering value to our shareholders.”

Second Quarter 2019 Financial Highlights1

__________________________

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

Year-to-date 2019 Financial Highlights1

Liquidity and Capital Resources

The Company repaid $17.0 million in subordinated debt early during the second quarter of 2019. As previously disclosed in a press release issued on February 11, 2019, the Company announced amendments to the credit facilities for its four products with Victory Park Capital.

Additionally, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to $10 million of our common stock through July 31, 2024. Repurchases will be made in accordance with applicable securities laws from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. The stock buyback plan does not require the purchase of any minimum number of shares and may be implemented, modified, suspended or discontinued in whole or in part at any time without further notice. Any repurchased shares will be available for use in connection with equity plans and for other corporate purposes.

__________________________

1 Adjusted EBITDA, Adjusted EBITDA margin, combined loans receivable - principal 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.

Financial Outlook

The Company is revising the full year 2019 revenue guidance down while leaving the net income, diluted earnings per share and Adjusted EBITDA guidance unchanged. For the full year 2019, the Company expects total revenue of $750 million to $770 million, net income of $25 million to $30 million, or $0.55 to $0.65 in diluted earnings per share, and Adjusted EBITDA of $130 million to $140 million.

Conference Call

The Company will host a conference call to discuss its second quarter 2019 financial results on Monday, July 29th 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 Credit Second Quarter 2019 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 12, 2019, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 13692053, or by accessing Elevate’s website.

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 expectations of future financial performance including our outlook for full fiscal year 2019 (including all statements under the heading "Financial Outlook"); our potential to drive long-term earnings growth; our expectation of continued strong earnings through 2019 and that we will see the added benefit from new credit models and reduced cost of capital; 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 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.

About Elevate

Elevate (NYSE: ELVT), together with its bank partners, has originated $7.4 billion in non-prime credit to more than 2.3 million non-prime consumers to date and has saved its customers more than $5.6 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, Sunny and Today Card. For more information, please visit http://www.elevate.com.

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)

2019

2018

2019

2018

Revenues

$

177,760

$

184,377

$

367,264

$

377,914

Cost of sales:

Provision for loan losses

78,025

88,598

165,456

180,740

Direct marketing costs

16,194

22,180

27,348

42,875

Other cost of sales

8,562

6,566

13,622

12,895

Total cost of sales

102,781

117,344

206,426

236,510

Gross profit

74,979

67,033

160,838

141,404

Operating expenses:

Compensation and benefits

25,638

23,380

51,348

45,807

Professional services

8,860

8,374

18,559

16,686

Selling and marketing

2,205

2,403

4,051

5,355

Occupancy and equipment

5,179

4,630

10,231

8,749

Depreciation and amortization

4,324

2,962

8,590

5,677

Other

1,710

1,568

3,017

2,785

Total operating expenses

47,916

43,317

95,796

85,059

Operating income

27,063

23,716

65,042

56,345

Other expense:

Net interest expense

(17,947

)

(19,263

)

(37,166

)

(38,476

)

Foreign currency transaction loss

(710

)

(1,231

)

(97

)

(475

)

Non-operating loss

(38

)

Total other expense

(18,657

)

(20,494

)

(37,263

)

(38,989

)

Income before taxes

8,406

3,222

27,779

17,356

Income tax expense

2,634

94

8,649

4,745

Net income

$

5,772

$

3,128

$

19,130

$

12,611

Basic income per share

$

0.13

$

0.07

$

0.44

$

0.30

Diluted income per share

$

0.13

$

0.07

$

0.43

$

0.29

Basic weighted average shares outstanding

43,681,159

42,561,403

43,514,862

42,386,660

Diluted weighted average shares outstanding

44,291,816

44,239,007

44,142,947

43,937,066

Elevate Credit, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

(Dollars in thousands)

June 30, 2019

December 31, 2018

ASSETS

Cash and cash equivalents*

$

63,399

$

58,313

Restricted cash.

2,491

2,591

Loans receivable, net of allowance for loan losses of $75,896 and $91,608, respectively*

535,405

561,694

Prepaid expenses and other assets*

11,990

11,418

Operating lease right of use assets

11,858

Receivable from CSO lenders

10,246

16,183

Receivable from payment processors*

27,129

21,716

Deferred tax assets, net

13,605

21,628

Property and equipment, net

47,629

41,579

Goodwill

16,027

16,027

Intangible assets, net

1,462

1,712

Derivative assets, net*

412

Total assets

$

741,241

$

753,273

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued liabilities*

$

41,445

$

44,950

Operating lease liabilities

16,160

State and other taxes payable

1,222

681

Deferred revenue*

15,246

28,261

Notes payable, net*

527,237

562,590

Total liabilities

601,310

636,482

COMMITMENTS, CONTINGENCIES AND GUARANTEES

STOCKHOLDERS’ EQUITY

Preferred stock

Common stock

18

18

Additional paid-in capital

187,521

183,244

Accumulated deficit

(47,395

)

(66,525

)

Accumulated other comprehensive income (loss)

(213

)

54

Total stockholders’ equity

139,931

116,791

Total liabilities and stockholders’ equity

$

741,241

$

753,273

* 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.

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 - principal, combined loans receivable and combined loan loss reserve.

Adjusted EBITDA and Adjusted EBITDA margin

In addition to net income 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 excluding the impact of income tax expense, non-operating loss, foreign currency transaction loss associated with our UK operations, net interest expense, share-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 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:

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.

The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to Elevate’s net income for the three and six months ended June 30, 2019 and 2018:

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in thousands)

2019

2018

2019

2018

Net income

$

5,772

$

3,128

$

19,130

$

12,611

Adjustments:

Net interest expense

17,947

19,263

37,166

38,476

Share-based compensation

2,476

2,010

4,911

3,647

Foreign currency transaction loss

710

1,231

97

475

Depreciation and amortization

4,324

2,962

8,590

5,677

Non-operating loss

38

Income tax expense

2,634

94

8,649

4,745

Adjusted EBITDA

$

33,863

$

28,688

$

78,543

$

65,669

Adjusted EBITDA margin

19.0

%

15.6

%

21.4

%

17.4

%

Supplemental Schedules

Revenue by Product

Three Months Ended June 30, 2019

(Dollars in thousands)

Rise (US)(1)

Elastic (US)(2)

Total Domestic

Sunny (UK)

Total

Average combined loans receivable – principal(3)

$

287,073

$

243,691

$

530,764

$

50,173

$

580,937

Effective APR

126

%

98

%

113

%

219

%

122

%

Finance charges

$

90,384

$

59,317

$

149,701

$

27,330

$

177,031

Other

387

288

675

54

729

Total revenue

$

90,771

$

59,605

$

150,376

$

27,384

$

177,760

Three Months Ended June 30, 2018

(Dollars in thousands)

Rise (US)(1)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Average combined loans receivable – principal(3)

$

277,281

$

244,583

$

521,864

$

52,092

$

573,956

Effective APR

137

%

97

%

118

%

226

%

128

%

Finance charges

$

94,716

$

59,298

$

154,014

$

29,380

$

183,394

Other

435

460

895

88

983

Total revenue

$

95,151

$

59,758

$

154,909

$

29,468

$

184,377

(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, which expanded its test launch in November 2018.

(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.

Revenue by Product, Continued

Six Months Ended June 30, 2019

(Dollars in thousands)

Rise (US)(1)

Elastic (US)(2)

Total Domestic

Sunny (UK)

Total

Average combined loans receivable – principal(3)

$

288,941

$

254,980

$

543,921

$

51,254

$

595,174

Effective APR

129

%

98

%

115

%

223

%

124

%

Finance charges

$

185,269

$

124,050

$

309,319

$

56,701

$

366,020

Other

738

384

1,122

122

1,244

Total revenue

$

186,007

$

124,434

$

310,441

$

56,823

$

367,264

Six Months Ended June 30, 2018

(Dollars in thousands)

Rise (US)(1)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Average combined loans receivable – principal(3)

$

289,565

$

244,980

$

534,545

$

51,970

$

586,515

Effective APR

138

%

97

%

119

%

231

%

129

%

Finance charges

$

197,924

$

118,201

$

316,125

$

59,527

$

375,652

Other

1,265

825

2,090

172

2,262

Total revenue

$

199,189

$

119,026

$

318,215

$

59,699

$

377,914

(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, which expanded its test launch in November 2018.

(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.

Loan Loss Reserve by Product

Three Months Ended June 30, 2019

(Dollars in thousands)

Rise (US)

Elastic (US)(1)

Total Domestic

Sunny (UK)

Total

Combined loan loss reserve(2):

Beginning balance

$

39,350

$

28,341

$

67,691

$

12,008

$

79,699

Net charge-offs

(40,970

)

(27,130

)

(68,100

)

(11,509

)

(79,609

)

Provision for loan losses

43,013

25,268

68,281

9,744

78,025

Effect of foreign currency

(236

)

(236

)

Ending balance

$

41,393

$

26,479

$

67,872

$

10,007

$

77,879

Combined loans receivable(2)(3)

$

324,620

$

258,200

$

582,820

$

51,852

$

634,672

Combined loan loss reserve as a percentage of ending combined loans receivable

13

%

10

%

12

%

19

%

12

%

Net charge-offs as a percentage of revenues

45

%

46

%

45

%

42

%

45

%

Provision for loan losses as a percentage of revenues

47

%

42

%

45

%

36

%

44

%

Three Months Ended June 30, 2018

(Dollars in thousands)

Rise (US)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Combined loan loss reserve(2):

Beginning balance

$

44,209

$

28,098

$

72,307

$

11,939

$

84,246

Net charge-offs

(49,494

)

(28,490

)

(77,984

)

(13,772

)

(91,756

)

Provision for loan losses

46,081

29,786

75,867

12,731

88,598

Effect of foreign currency

(557

)

(557

)

Ending balance

$

40,796

$

29,394

$

70,190

$

10,341

$

80,531

Combined loans receivable(2)(3)

$

305,674

$

265,959

$

571,633

$

52,128

$

623,761

Combined loan loss reserve as a percentage of ending combined loans receivable

13

%

11

%

12

%

20

%

13

%

Net charge-offs as a percentage of revenues

52

%

48

%

50

%

47

%

50

%

Provision for loan losses as a percentage of revenues

48

%

50

%

49

%

43

%

48

%

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(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.

Loan Loss Reserve by Product, Continued

Six Months Ended June 30, 2019

(Dollars in thousands)

Rise (US)

Elastic (US)(1)

Total Domestic

Sunny (UK)

Total

Combined loan loss reserve(2):

Beginning balance

$

50,597

$

36,050

$

86,647

$

9,405

$

96,052

Net charge-offs

(98,010

)

(64,401

)

(162,411

)

(21,183

)

(183,594

)

Provision for loan losses

88,806

54,830

143,636

21,820

165,456

Effect of foreign currency

(35

)

(35

)

Ending balance

$

41,393

$

26,479

$

67,872

$

10,007

$

77,879

Combined loans receivable(2)(3)

$

324,620

$

258,200

$

582,820

$

51,852

$

634,672

Combined loan loss reserve as a percentage of ending combined loans receivable

13

%

10

%

12

%

19

%

12

%

Net charge-offs as a percentage of revenues

53

%

52

%

52

%

37

%

50

%

Provision for loan losses as a percentage of revenues

48

%

44

%

46

%

38

%

45

%

Six Months Ended June 30, 2018

(Dollars in thousands)

Rise (US)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Combined loan loss reserve(2):

Beginning balance

$

55,867

$

28,870

$

84,737

$

9,052

$

93,789

Net charge-offs

(112,941

)

(58,175

)

(171,116

)

(22,682

)

(193,798

)

Provision for loan losses

97,870

58,699

156,569

24,171

180,740

Effect of foreign currency

(200

)

(200

)

Ending balance

$

40,796

$

29,394

$

70,190

$

10,341

$

80,531

Combined loans receivable(2)(3)

$

305,674

$

265,959

$

571,633

$

52,128

$

623,761

Combined loan loss reserve as a percentage of ending combined loans receivable

13

%

11

%

12

%

20

%

13

%

Net charge-offs as a percentage of revenues

57

%

49

%

54

%

38

%

51

%

Provision for loan losses as a percentage of revenues

49

%

49

%

49

%

40

%

48

%

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

(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.

Customer Loan Data by Product

Three Months Ended June 30, 2019

Rise (US)

Elastic (US)(1)

Total Domestic

Sunny (UK)

Total

Beginning number of combined loans outstanding

125,021

145,760

270,781

93,898

364,679

New customer loans originated

30,177

13,826

44,003

26,647

70,650

Former customer loans originated

18,850

18

18,868

18,868

Attrition

(38,277

)

(17,043

)

(55,320

)

(27,659

)

(82,979

)

Ending number of combined loans outstanding

135,771

142,561

278,332

92,886

371,218

Customer acquisition cost

$

243

$

271

$

252

$

192

$

229

Average customer loan balance

$

2,253

$

1,738

$

1,989

$

512

$

1,620

Three Months Ended June 30, 2018

Rise (US)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Beginning number of combined loans outstanding

127,263

138,555

265,818

86,791

352,609

New customer loans originated

27,149

26,305

53,454

31,692

85,146

Former customer loans originated

22,816

127

22,943

22,943

Attrition

(46,331

)

(15,847

)

(62,178

)

(25,928

)

(88,106

)

Ending number of combined loans outstanding

130,897

149,140

280,037

92,555

372,592

Customer acquisition cost

$

307

$

234

$

271

$

243

$

260

Average customer loan balance

$

2,187

$

1,711

$

1,934

$

519

$

1,582

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

Customer Loan Data by Product, Continued

Six Months Ended June 30, 2019

Rise (US)

Elastic (US)(1)

Total Domestic

Sunny (UK)

Total

Beginning number of combined loans outstanding

142,758

166,397

309,155

89,449

398,604

New customer loans originated

47,542

18,664

66,206

54,920

121,126

Former customer loans originated

36,641

27

36,668

36,668

Attrition

(91,170

)

(42,527

)

(133,697

)

(51,483

)

(185,180

)

Ending number of combined loans outstanding

135,771

142,561

278,332

92,886

371,218

Customer acquisition cost

$

276

$

277

$

276

$

165

$

226

Six Months Ended June 30, 2018

Rise (US)

Elastic (US)

Total Domestic

Sunny (UK)

Total

Beginning number of combined loans outstanding

140,790

140,672

281,462

80,510

361,972

New customer loans originated

49,414

47,185

96,599

58,682

155,281

Former customer loans originated

38,199

216

38,415

38,415

Attrition

(97,506

)

(38,933

)

(136,439

)

(46,637

)

(183,076

)

Ending number of combined loans outstanding

130,897

149,140

280,037

92,555

372,592

Customer acquisition cost

$

318

$

252

$

286

$

260

$

276

(1)

Includes immaterial balances related to the Today Card, which expanded its test launch in November 2018.

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 licenses its Rise installment loan brand to a third party lender, FinWise Bank, which originates Rise installment loans in nineteen states. FinWise Bank initially provides all of the funding and retains 5% of the balances of all of the loans originated and sells a 95% loan participation in those Rise installment loans to a third party SPV, EF SPV, Ltd. 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 95% 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:

As of each of the period ends indicated, the following table presents a reconciliation of:

2018

2019

(Dollars in thousands)

March 31

June 30

September 30

December 31

March 31

June 30

Company Owned Loans:

Loans receivable – principal, current, company owned

$

471,996

$

493,908

$

525,717

$

543,405

$

491,208

$

523,785

Loans receivable – principal, past due, company owned

60,876

58,949

69,934

68,251

55,286

55,711

Loans receivable – principal, total, company owned

532,872

552,857

595,651

611,656

546,494

579,496

Loans receivable – finance charges, company owned

31,181

31,519

36,747

41,646

32,491

31,805

Loans receivable – company owned

564,053

584,376

632,398

653,302

578,985

611,301

Allowance for loan losses on loans receivable, company owned

(80,497

)

(76,575

)

(89,422

)

(91,608

)

(76,457

)

(75,896

)

Loans receivable, net, company owned

$

483,556

$

507,801

$

542,976

$

561,694

$

502,528

$

535,405

Third Party Loans Guaranteed by the Company:

Loans receivable – principal, current, guaranteed by company

$

33,469

$

35,114

$

36,649

$

35,529

$

27,941

$

21,099

Loans receivable – principal, past due, guaranteed by company

1,123

1,494

1,661

1,353

696

596

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

34,592

36,608

38,310

36,882

28,637

21,695

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

2,612

2,777

3,103

2,944

2,164

1,676

Loans receivable – guaranteed by company

37,204

39,385

41,413

39,826

30,801

23,371

Liability for losses on loans receivable, guaranteed by company

(3,749

)

(3,956

)

(4,510

)

(4,444

)

(3,242

)

(1,983

)

Loans receivable, net, guaranteed by company(3)

$

33,455

$

35,429

$

36,903

$

35,382

$

27,559

$

21,388

Combined Loans Receivable(3):

Combined loans receivable – principal, current

$

505,465

$

529,022

$

562,366

$

578,934

$

519,149

$

544,884

Combined loans receivable – principal, past due

61,999

60,443

71,595

69,604

55,982

56,307

Combined loans receivable – principal

567,464

589,465

633,961

648,538

575,131

601,191

Combined loans receivable – finance charges

33,793

34,296

39,850

44,590

34,655

33,481

Combined loans receivable

$

601,257

$

623,761

$

673,811

$

693,128

$

609,786

$

634,672

Combined Loan Loss Reserve(3):

Allowance for loan losses on loans receivable, company owned

$

(80,497

)

$

(76,575

)

$

(89,422

)

$

(91,608

)

$

(76,457

)

$

(75,896

)

Liability for losses on loans receivable, guaranteed by company

(3,749

)

(3,956

)

(4,510

)

(4,444

)

(3,242

)

(1,983

)

Combined loan loss reserve

$

(84,246

)

$

(80,531

)

$

(93,932

)

$

(96,052

)

$

(79,699

)

$

(77,879

)

Combined loans receivable – principal, past due(3)

$

61,999

$

60,443

$

71,595

$

69,604

$

55,982

$

56,307

Combined loans receivable – principal(3)

567,464

589,465

633,961

648,538

575,131

601,191

Percentage past due

11

%

10

%

11

%

11

%

10

%

9

%

Combined loan loss reserve as a percentage of combined loans receivable(3)(4)

14

%

13

%

14

%

14

%

13

%

12

%

Allowance for loan losses as a percentage of loans receivable – company owned

14

%

13

%

14

%

14

%

13

%

12

%

(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.

Investor Relations:

Solebury Trout

Sloan Bohlen, (817) 928-1646

investors@elevate.com

or

Media Inquiries:

Vested

Ishviene Arora, (917) 765-8720

elevate@fullyvested.com

Source: Elevate Credit, Inc.

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