GreenSky, Inc. Reports First Quarter 2020 Financial Results
Transaction Volume Growth up 10% to First Quarter Record
Adjusted EBITDA of
"Notwithstanding the impact of COVID-19 commencing in mid-March, GreenSky produced strong first quarter operating results, exceeding our seasonal expectations. Of note, the
First Quarter Financial Highlights:
-
Transaction Volume: Transaction volume originated on our technology platform in the first quarter of 2020 increased 10% over the first quarter of 2019 to
$1.4 billion . For January andFebruary 2020 , before COVID-19 began disrupting business activity, GreenSky's transaction volume was up 16% over the comparable 2019 two-month period. -
Transaction
Fee Rate : The average transaction fee rate was 6.6% in the first quarter, down marginally from 6.8% in the prior year, reflecting normal variations in the mix of promotional products offered by our merchants. -
Revenue: First quarter revenue grew 17% over the prior year to
$121.2 million from$103.7 million . The increase reflects both a 7% increase in transaction fees to$89.9 million as well as a 59% increase in servicing and other revenue to$31.3 million , including a$1.8 million increase in our servicing asset. -
Credit Quality: Credit performance continued to be strong. As of
March 31, 2020 , the 30-day delinquencies were 1.23%, an 8 basis point improvement over the 30 day-delinquencies atMarch 31, 2019 , and the weighted-average FICO score for originations in the first quarter of 2020 was 773. -
Adoption of new accounting standard: The adoption of the new current expected credit loss ("CECL") standard in the first quarter of 2020 impacted the Company's accounting for the financial guarantees it provides to its bank partners. This adoption resulted in the recognition of a non-cash increase of
$18.4 million in the reserve associated with these financial guarantees for the three months endedMarch 31, 2020 , and the recognition of a liability of$118 million onJanuary 1, 2020 . -
Operating Profit (Loss): For the first quarter of 2020, the Company had a net operating loss of
$5.9 million , inclusive of the$18.4 million non-cash increase in financial guarantees reserve. Without this$18.4 million non-cash item, the Company had a net operating profit of$12.5 million , compared to$11.5 million in the first quarter of 2019. -
Net Income (Loss) and Diluted Earnings (Loss) per Share: For the first quarter of 2020, primarily as a result of CECL, the Company recognized a net loss of
$10.9 million compared to net income of$7.4 million for the same period in 2019, which resulted in a diluted loss per share of$(0.05) , compared to earnings per share of$0.05 in the first quarter of 2019. -
Adjusted EBITDA(1) and Operating Cash Flow: First quarter Adjusted EBITDA was
$19.4 million (which does not include any charged-off recovery sales) compared to$18.4 million for the first quarter of 2019 (which includes the sale of$7.4 million of charged-off recoveries). For the three months endedMarch 31, 2020 , cash flows from operating activities were$41.0 million compared to$43.5 million a year ago. -
Liquidity: As of
March 31, 2020 , the Company had$277 million of available liquidity, consisting of unrestricted cash of$177 million and an undrawn$100 million revolving credit facility.
Key business metrics:
|
|
Three Months Ended |
|
|
|||||||
|
|
2020 |
|
2019 |
|
Growth |
|||||
Transaction Volume ($ millions) |
|
$ |
1,372 |
|
|
$ |
1,242 |
|
|
10 |
% |
Loan Servicing Portfolio ($ millions, at end of period)(2) |
|
$ |
9,260 |
|
|
$ |
7,612 |
|
|
22 |
% |
Active Merchants (at end of period) |
|
17,761 |
|
|
15,745 |
|
|
13 |
% |
||
Cumulative Consumer Accounts (in thousands, at end of period) |
|
3,205 |
|
|
2,415 |
|
|
33 |
% |
________________ | |
(1) |
Adjusted EBITDA is a non-GAAP measure. Refer to “Non-GAAP Financial Measure” for important additional information. |
(2) |
The average loan servicing portfolio for the three months ended |
Business Update:
- COVID-19 workforce impacts: In mid-March the Company successfully migrated its workforce to a work-at-home program, allowing its associates to continue safely delivering uninterrupted, best-in-class service to its merchants and consumers.
-
Funding Diversification: GreenSky continues to actively diversify its funding to include alternative funding structures with one or more institutional investors, financial institutions and other sources.
-
Earlier today,
GreenSky andJPMorgan Chase Bank, N.A . closed on an asset-backed revolving credit facility of$500 million ($300 million is committed at closing, and an additional$200 million may be available to GreenSky, upon the lender's consent, in an "accordion") to finance purchases by a Company-sponsored special purpose vehicle (the "SPV") of participations in loans originated through the GreenSky program (the "SPV Facility"). The Company is in the final stages of finalizing an agreement governing the participation sales with an existing bank partner necessary to access funding under the SPV Facility. The Company expects the SPV to conduct periodic sales of the loan participations to third parties or issue asset-backed securities, which would allow additional purchases to be financed through the SPV Facility. To the extent that such sales occur, the SPV Facility could facilitate substantial incremental GreenSky program loan volume. The Company expects the SPV Facility to be operational inMay 2020 . - GreenSky continues to work with multiple institutional investors, including a leading institutional asset manager, on both a whole loan sales program and a material forward flow financing arrangement (collectively, "New Institutional Financings"). GreenSky expects to close on one or more of these transactions in the second half of 2020.
-
Based on current unused bank partner funding capacity of
$1.6 billion atMarch 31, 2020 , approximately$3.4 billion of additional capacity created as existing loans pay down or pay off, and identified possible alternative funding sources, including, but not limited to, the SPV Facility and the New Institutional Financings, the Company believes that it should have funding capacity that is sufficient to fund its business through 2021.
-
Earlier today,
-
Strategic Alternatives Review Process: As previously announced, in
August 2019 , the Company's Board of Directors, working together with its senior management team and legal and financial advisors, commenced a process to explore, review and evaluate a range of potential strategic alternatives focused on maximizing stockholder value. The Board's review is ongoing, and the Company does not intend to make further public comment regarding these matters unless and until the Board has approved a specific transaction or alternative or otherwise concludes its review. The Company would expect to make an announcement in this regard no later than when it reports second quarter 2020 financial results.
Conference call and webcast:
As previously announced, the Company’s management will host a conference call to discuss first quarter 2020 results at
About
Forward-Looking Statements
This press release contains forward-looking statements that reflect the Company's current views with respect to, among other things, its operations; its financial performance; the impact of COVID-19; bank partner commitments; the SPV Facility; sales of loan participations or issuances of asset-backed securities by the SPV; completion of New Institutional Financings; the strategic alternatives review; its funding capacity; and its credit losses. You generally can identify these statements by the use of words such as “outlook,” “potential,” “continue,” “may,” “seek,” “approximately,” “predict,” “believe,” “expect,” “plan,” “intend,” “estimate” or “anticipate” and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as “will,” “should,” “would,” “likely” and “could.” These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include those risks described in GreenSky's filings with the
Non-GAAP Financial Measure
This press release presents information about the Company’s Adjusted EBITDA which is a non-GAAP financial measure provided as a supplement to the results provided in accordance with accounting principles generally accepted in
We are presenting this non-GAAP measure to assist investors in evaluating our financial performance and because we believe that this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
This non-GAAP measure is presented for supplemental informational purposes only. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, such as net income. The non-GAAP measure GreenSky uses may differ from the non-GAAP measures used by other companies. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is provided below for each of the fiscal periods indicated.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share data) |
||||||||
|
|
|
|
|||||
Assets |
|
|
|
|||||
Cash and cash equivalents |
$ |
176,707 |
|
|
$ |
195,760 |
|
|
Restricted cash |
272,966 |
|
|
250,081 |
|
|||
Loan receivables held for sale, net |
21,059 |
|
|
51,926 |
|
|||
Accounts receivable, net of allowance of |
19,065 |
|
|
19,493 |
|
|||
Related party receivables |
113 |
|
|
156 |
|
|||
Property, equipment and software, net |
19,417 |
|
|
18,309 |
|
|||
Operating lease right-of-use assets |
10,437 |
|
|
11,268 |
|
|||
Deferred tax assets, net |
377,988 |
|
|
364,841 |
|
|||
Other assets |
40,626 |
|
|
39,214 |
|
|||
Total assets |
$ |
938,378 |
|
|
$ |
951,048 |
|
|
|
|
|
|
|||||
Liabilities and Equity (Deficit) |
|
|
|
|||||
Liabilities |
|
|
|
|||||
Accounts payable |
$ |
19,853 |
|
|
$ |
11,912 |
|
|
Accrued compensation and benefits |
3,853 |
|
|
10,734 |
|
|||
Other accrued expenses |
5,041 |
|
|
3,244 |
|
|||
Finance charge reversal liability |
213,158 |
|
|
206,035 |
|
|||
Term loan |
383,913 |
|
|
384,497 |
|
|||
Tax receivable agreement liability |
312,326 |
|
|
311,670 |
|
|||
Operating lease liabilities |
13,111 |
|
|
13,884 |
|
|||
Financial guarantee liability |
153,117 |
|
|
16,698 |
|
|||
Other liabilities |
47,502 |
|
|
47,317 |
|
|||
Total liabilities |
1,151,874 |
|
|
1,005,991 |
|
|||
|
|
|
|
|||||
Commitments, Contingencies and Guarantees |
|
|
|
|||||
|
|
|
|
|||||
Equity (Deficit) |
|
|
|
|||||
Class A common stock, |
802 |
|
|
800 |
|
|||
Class B common stock, |
114 |
|
|
114 |
|
|||
Additional paid-in capital |
116,093 |
|
|
115,782 |
|
|||
Retained earnings |
20,379 |
|
|
56,109 |
|
|||
|
(146,888) |
|
|
(146,234) |
|
|||
Accumulated other comprehensive income (loss) |
(4,294) |
|
|
(756) |
|
|||
Noncontrolling interests |
(199,702) |
|
|
(80,758) |
|
|||
Total equity (deficit) |
(213,496) |
|
|
(54,943) |
|
|||
Total liabilities and equity (deficit) |
$ |
938,378 |
|
|
$ |
951,048 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except per share data) |
||||||||
|
Three Months Ended
|
|||||||
|
2020 |
|
2019 |
|||||
Revenue |
|
|
|
|
||||
Transaction fees |
|
$ |
89,884 |
|
|
$ |
84,048 |
|
Servicing and other |
|
31,286 |
|
|
19,652 |
|
||
Total revenue |
|
121,170 |
|
|
103,700 |
|
||
Costs and expenses |
|
|
|
|
||||
Cost of revenue (exclusive of depreciation and amortization shown separately below) |
|
71,775 |
|
|
58,037 |
|
||
Compensation and benefits |
|
22,434 |
|
|
19,633 |
|
||
Sales and marketing |
|
789 |
|
|
1,203 |
|
||
Property, office and technology |
|
4,022 |
|
|
4,414 |
|
||
Depreciation and amortization |
|
2,445 |
|
|
1,467 |
|
||
General and administrative |
|
6,711 |
|
|
5,700 |
|
||
Financial guarantee |
|
18,408 |
|
|
1,222 |
|
||
Related party |
|
477 |
|
|
536 |
|
||
Total costs and expenses |
|
127,061 |
|
|
92,212 |
|
||
Operating profit (loss) |
|
(5,891 |
) |
|
11,488 |
|
||
Other income (expense), net |
|
|
|
|
||||
Interest and dividend income |
|
1,309 |
|
|
1,596 |
|
||
Interest expense |
|
(5,620 |
) |
|
(6,243 |
) |
||
Other gains (losses), net |
|
(1,612 |
) |
|
(35 |
) |
||
Total other income (expense), net |
|
(5,923 |
) |
|
(4,682 |
) |
||
Income (loss) before income tax expense (benefit) |
|
(11,814 |
) |
|
6,806 |
|
||
Income tax expense (benefit) |
|
(895 |
) |
|
(595 |
) |
||
Net income (loss) |
|
$ |
(10,919 |
) |
|
$ |
7,401 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
(7,585 |
) |
|
4,502 |
|
||
Net income (loss) attributable to |
|
$ |
(3,334 |
) |
|
$ |
2,899 |
|
|
|
|
|
|
||||
Earnings (loss) per share of Class A common stock: |
|
|
|
|
||||
Basic |
|
$ |
(0.05 |
) |
|
$ |
0.05 |
|
Diluted |
|
$ |
(0.05 |
) |
|
$ |
0.05 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) |
||||||||
Three Months Ended |
||||||||
2020 |
|
2019 |
||||||
Cash flows from operating activities |
|
|
|
|||||
Net income (loss) |
$ |
(10,919) |
|
|
$ |
7,401 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|||||
Depreciation and amortization |
2,445 |
|
|
1,467 |
|
|||
Share-based compensation expense |
3,495 |
|
|
2,665 |
|
|||
Equity-based payments to non-employees |
4 |
|
|
3 |
|
|||
Fair value change in servicing assets and liabilities |
(2,306) |
|
|
181 |
|
|||
Operating lease liability payments |
(145) |
|
|
(145) |
|
|||
Financial guarantee losses |
18,408 |
|
|
417 |
|
|||
Amortization of debt related costs |
416 |
|
|
421 |
|
|||
Original issuance discount on term loan payment |
(10) |
|
|
(10) |
|
|||
Income tax expense (benefit) |
(895) |
|
|
(595) |
|
|||
Impairment losses |
72 |
|
|
— |
|
|||
Changes in assets and liabilities: |
|
|
|
|||||
(Increase) decrease in loan receivables held for sale |
30,867 |
|
|
878 |
|
|||
(Increase) decrease in accounts receivable |
428 |
|
|
(2,672) |
|
|||
(Increase) decrease in related party receivables |
43 |
|
|
17 |
|
|||
(Increase) decrease in other assets |
375 |
|
|
(273) |
|
|||
Increase (decrease) in accounts payable |
7,941 |
|
|
14,713 |
|
|||
Increase (decrease) in finance charge reversal liability |
7,123 |
|
|
11,009 |
|
|||
Increase (decrease) in other liabilities |
(16,295) |
|
|
7,978 |
|
|||
Net cash provided by operating activities |
41,047 |
|
|
43,455 |
|
|||
Cash flows from investing activities |
|
|
|
|||||
Purchases of property, equipment and software |
(3,354) |
|
|
(3,391) |
|
|||
Net cash used in investing activities |
(3,354) |
|
|
(3,391) |
|
|||
Cash flows from financing activities |
|
|
|
|||||
Repayments of term loan |
(990) |
|
|
(990) |
|
|||
Class A common stock repurchases |
— |
|
|
(51,047) |
|
|||
Member distributions |
(32,798) |
|
|
(2,724) |
|
|||
Proceeds from option exercises |
— |
|
|
174 |
|
|||
Payment of option exercise taxes |
(73) |
|
|
(576) |
|
|||
Payment of taxes on Class B common stock exchanges |
— |
|
|
(742) |
|
|||
Net cash used in financing activities |
(33,861) |
|
|
(55,905) |
|
|||
Net increase (decrease) in cash and cash equivalents and restricted cash |
3,832 |
|
|
(15,841) |
|
|||
Cash and cash equivalents and restricted cash at beginning of period |
445,841 |
|
|
458,499 |
|
|||
Cash and cash equivalents and restricted cash at end of period |
$ |
449,673 |
|
|
$ |
442,658 |
|
|
|
|
|
|
|||||
Supplemental non-cash investing and financing activities |
|
|
|
|||||
Tax withholding on equity awards accrued but not paid |
$ |
654 |
|
|
$ |
— |
|
|
Distributions accrued but not paid |
4,317 |
|
|
8,247 |
|
|||
Capitalized software costs accrued but not paid |
66 |
|
|
— |
|
|||
|
— |
|
|
1,934 |
|
Reconciliation of Adjusted EBITDA (Dollars in thousands) |
||||||||
|
|
Three Months Ended
|
||||||
|
|
2020 |
|
2019 |
||||
Net income (loss) |
|
$ |
(10,919) |
|
|
$ |
7,401 |
|
Interest expense |
|
5,620 |
|
|
6,243 |
|
||
Income tax expense (benefit) |
|
(895) |
|
|
(595) |
|
||
Depreciation and amortization |
|
2,445 |
|
|
1,467 |
|
||
Equity-based compensation expense(1) |
|
3,499 |
|
|
2,668 |
|
||
Change in financial guarantee liability(2) |
|
18,408 |
|
|
— |
|
||
Transaction expenses(3) |
|
262 |
|
|
— |
|
||
Non-recurring expenses(4) |
|
971 |
|
|
1,216 |
|
||
Adjusted EBITDA |
|
$ |
19,391 |
|
|
$ |
18,400 |
|
(1) |
Includes equity-based compensation to employees and directors, as well as equity-based payments to non-employees. |
(2) |
Includes non-cash charges related to our financial guarantee arrangements with our ongoing |
(3) |
For the three months ended |
(4) |
For the three months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200511005916/en/
Investor Relations
404.380.1093
investors@greensky.com
Media
212.738.6131
media@greensky.com
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