Revenue of $125.2 million Net Income
of $12.1 million; Diluted EPS of $0.05 Adjusted Pro Forma
Net Income of $15.2 million; Adjusted Pro Forma Diluted EPS of
$0.08 Adjusted EBITDA of $35.1 million
GreenSky, Inc. (NASDAQ: GSKY), a leading financial technology
company Powering Commerce at the Point of Sale®, reported financial
results today for the first quarter ended March 31, 2021.
“I am delighted to share that GreenSky’s strong performance for
the first quarter of the year has us on an early pace to materially
exceed our 2021 performance goals,” said David Zalik, GreenSky’s
Chairman and CEO. “During the first quarter, we delivered strong
profitability across all key metrics and are encouraged by the
continued momentum in transaction volume growth. Specifically, our
Home Improvement business saw a record amount of first quarter
application approvals, while our Elective Healthcare business
continued to restore and normalize. Enterprise-wide transaction
volume was up 28% from February to March, compared to 21% for the
same period in 2019, reflecting accelerated growth compared to
pre-pandemic levels. Moreover, during the quarter we enjoyed
tremendous Home Improvement new merchant enrollments in the windows
& doors, HVAC, roofing and kitchen and bath categories,
positioning us for exceptional volumes in the coming quarters.”
Zalik continued, “For the first quarter, when compared to the first
quarter of 2020, GreenSky’s Net Income increased by $23 million,
Pro Forma Net Income increased by $24 million and Adjusted EBITDA
more than doubled to a record $35 million, reflecting a first
quarter Adjusted EBITDA margin of 28%.”
Andrew Kang, Chief Financial Officer, said, “Building off a
successful launch to grow and diversify our funding in 2020,
through the first four months of 2021, we have completed an
additional $2.3 billion in new funding initiatives across a diverse
set of investors and with improved economics compared to 2020. We
increased the commitment of our existing forward flow agreement,
completed additional loan sales in the quarter and increased our
bank waterfall commitment with an existing, long-standing bank
partner and extended that commitment for an additional 2 years.”
Mr. Kang continued, “Our strong first quarter results were driven
by an 11% year-over-year improvement in Cost of Revenue and the
ongoing positive credit performance of our servicing portfolio,
which has us well positioned to exceed budget for the full year. As
a result, we are raising our 2021 net income and Adjusted EBITDA
guidance.”
First Quarter Financial Highlights:
- Transaction Volume: First quarter transaction volume was
$1.3 billion, compared to $1.4 billion in the first quarter of
2020, as supply chains continued to normalize, and application
momentum continued to build throughout the quarter. This momentum
continued into the month of April, which saw monthly transaction
volume exceed April 2020 transaction volume by 38%.
- Transaction Fee Rate: The average transaction fee rate
was 6.61% in the first quarter, an increase of 6 basis points from
an average transaction fee rate of 6.55% in the first quarter of
2020. Excluding certain sponsor rebates that have been consistent
in the first quarter, the average transaction fee rate was
6.89%.
- Revenue: First quarter total revenue increased 3%
year-over-year, from $121.9 million to $125.2 million.
- Transaction fee revenue was $85.7 million compared to $89.9
million in the first quarter of 2020.
- Total servicing revenue increased 11% to $34.7 million.
Servicing fees earned during the quarter decreased due to an
average servicing fee rate of 1.17% compared to 1.29% in the first
quarter of 2020, reflecting changes in the composition of our
servicing portfolio, while the fair value change of our servicing
asset in the first quarter of 2021 increased servicing revenue by
$5.4 million when compared to the same quarter of 2020 due to
improved portfolio performance and faster prepayments.
- Interest and other revenue increased to $4.8 million from $690
thousand for the first quarter of 2020, primarily related to
interest income earned on loan receivables held for sale.
- Cost of Revenue: Total cost of revenue decreased $8.3
million, or 11%, compared to the first quarter of 2020, primarily
due to the diversification of our funding model and higher
incentive payments received from our bank partners.
- Credit Quality: The weighted-average FICO score for
originations in the first quarter of 2021 increased to 782, from
773 in the first quarter of 2020. Credit performance continued to
be very strong with March 31, 2021 thirty-day plus delinquencies of
0.76%, versus 1.23% at March 31, 2020.
- Net Income and Diluted Earnings per Share: For the first
quarter of 2021, the Company recognized net income of $12.1 million
compared to a net loss of $(10.9) million for the same period of
2020, resulting in diluted earnings per share of $0.05, compared to
diluted earnings per share of $(0.05) in the first quarter of
2020.
- Adjusted Pro Forma Net Income and Adjusted Earnings per
Share (1): For the first quarter of 2021, the Company
recognized adjusted pro forma net income of $15.2 million compared
to $(8.4) million for the first quarter of 2020, which resulted in
adjusted pro forma diluted earnings per share of $0.08, compared to
$(0.05) for the first quarter of 2020.
- Adjusted EBITDA(1): First quarter Adjusted EBITDA was
$35.1 million, an increase of 105% from $17.1 million for the first
quarter in 2020. Adjusted EBITDA margin improved to 28% in the
first quarter of 2021, up from 14% in the first quarter of
2020.
(1) Adjusted Pro Forma Net Income, Adjusted Pro Forma Diluted
Earnings per Share, Adjusted EBITDA and Adjusted EBITDA Margin are
non-GAAP measures. Refer to “Non-GAAP Financial Measures” for
important additional information.
Business Updates:
- Merchants: During the quarter, GreenSky solidified its
market leading position in the Windows and Doors business segment
by expanding its strategic relationship with one of our largest
sponsors.
- Funding: Through the first four months of 2021, GreenSky
completed an additional $2.3 billion in new funding initiatives. In
the first quarter, the Company executed asset sales of
approximately $315 million and closed a $1 billion, 1-year forward
flow agreement with a global life insurance company. Subsequent to
quarter-end, the forward flow commitment was further increased by
$500 million to a total $1.5 billion. Additionally, the Company
increased an existing bank partner’s funding commitment by $500
million to a total $2.0 billion and extended that commitment for
another two years into the fourth quarter of 2023.
- Liquidity: At March 31, 2021, the Company had $296
million available corporate liquidity, consisting of unrestricted
cash of $196 million, a $49 million increase from December 31,
2020, and $100 million available under a revolving credit
facility.
- COVID-19 Assistance: The balances of loans remaining in
COVID-19 payment deferral status declined materially, representing
approximately 0.21%, or less than $20 million, of the total $9.3
billion in loans serviced on our platform as of March 31, 2021,
contrasted with 0.80% of total loans serviced on our platform at
December 31, 2020.
- Legal Proceedings: In April, the Company entered into a
binding memorandum of understanding to settle its outstanding IPO
litigation in its entirety, which settlement is subject to court
approval. Substantially all amounts payable under the proposed
settlement will be paid by the Company’s insurers.
Updated 2021 Guidance:
- GreenSky's updated 2021 guidance is as follows:
- Transaction volume of $6.2 billion to $6.5 billion
- Revenues of $560 to $570 million
- Net Income of $35 million to $45 million
- Adjusted EBITDA of $95 million to $105 million
- Adjusted EBITDA Margin of 17% to 19%
Conference call and webcast:
As previously announced, the Company’s management will host a
conference call to discuss first quarter 2021 results at 9:00 a.m.
ET on May 5, 2021. A live webcast of the conference call, together
with a slide presentation that includes supplemental financial
information and reconciliation of non-GAAP measures to their most
directly comparable GAAP measure, can be accessed through the
Company's Investor Relations website at
http://investors.greensky.com. A replay of the webcast will be
available within 2 hours of the completion of the call and will be
archived at the same location for one year.
About GreenSky, Inc.
GreenSky, Inc. (NASDAQ: GSKY), headquartered in Atlanta, is a
leading technology company Powering Commerce at the Point of Sale®
for a growing ecosystem of merchants, consumers and banks. Our
highly scalable, proprietary and patented technology platform
enables merchants to offer frictionless promotional payment options
to consumers, driving increased sales volume and accelerated cash
flow. Banks leverage our technology to provide loans to super-prime
and prime consumers nationwide. We currently service a $9.3 billion
loan portfolio, and since our inception, approximately 3.9 million
consumers have financed approximately $29 billion of commerce using
our paperless, real time “apply and buy” technology. For more
information, visit https://www.greensky.com.
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; and 2021 performance and financial
guidance. 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 Securities and Exchange Commission and include,
but are not limited to, risks related to the extent and duration of
the COVID-19 pandemic and its impact on the Company, its bank
partners and merchants, GreenSky program borrowers, loan demand
(including, in particular, for elective healthcare procedures), the
capital markets (including the Company's ability to obtain
additional funding or facilitate additional whole loan or loan
participation sales) and the economy in general; the Company's
ability to retain existing, and attract new, merchants and bank
partners or other funding sources, including the risk that one or
more bank partners do not renew their funding commitments or reduce
existing commitments; its future financial performance, including
trends in revenue, cost of revenue, gross profit or gross margin,
operating expenses, and free cash flow; changes in market interest
rates; increases in loan delinquencies; its ability to operate
successfully in a highly regulated industry; the outcome of
litigation and regulatory matters; the effect of management
changes; cyberattacks and security vulnerabilities in its products
and services; and the Company's ability to compete successfully in
highly competitive markets. The forward-looking statements speak
only as of the date on which they are made, and, except to the
extent required by federal securities laws, GreenSky disclaims any
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events. In light
of these risks and uncertainties, there is no assurance that the
events or results suggested by the forward-looking statements will
in fact occur, and you should not place undue reliance on these
forward-looking statements.
Non-GAAP Financial Measures
This press release presents information about the Company’s
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Pro Forma Net
Income, and Adjusted Pro Forma Diluted Earnings Per Share, which
are non-GAAP financial measures provided as supplements to the
results provided in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). We believe that
Adjusted EBITDA and Adjusted EBITDA Margin are key financial
indicators of our business performance over the long term and
provide useful information regarding whether cash provided by
operating activities is sufficient to maintain and grow our
business. We believe that this methodology for determining Adjusted
EBITDA and Adjusted EBITDA Margin can provide useful supplemental
information to help investors better understand the economics of
our platform. We believe that Adjusted Pro Forma Net Income is a
useful measure because it makes our results more directly
comparable to public companies that have the vast majority of their
earnings subject to corporate income taxation.
We are presenting these non-GAAP measures to assist investors in
evaluating our financial performance and because we believe that
these measures provide an additional tool for investors to use in
comparing our core financial performance over multiple periods with
other companies in our industry.
These non-GAAP measures are presented for supplemental
informational purposes only. These non-GAAP measures have
limitations as analytical tools 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 measures
GreenSky uses may differ from the non-GAAP measures used by other
companies. A reconciliation of these non-GAAP financial measures to
the most directly comparable GAAP financial measure is provided
below for each of the fiscal periods indicated.
(tables follow)
GreenSky, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited)
(Dollars in thousands, except
share data)
March 31, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
196,298
$
147,775
Restricted cash
300,414
319,879
Loan receivables held for sale, net
342,943
571,415
Accounts receivable, net of allowance of
$431 and $313, respectively
18,489
21,958
Property, equipment and software, net
21,826
21,452
Deferred tax assets, net
386,116
387,951
Other assets
88,333
52,643
Total assets
$
1,354,419
$
1,523,073
Liabilities and Equity
(Deficit)
Liabilities
Accounts payable
$
31,117
$
15,418
Accrued compensation and benefits
10,299
13,666
Other accrued expenses
12,115
5,207
Finance charge reversal liability
167,436
185,134
Term loan
452,269
452,806
Warehouse facility
295,877
502,830
Tax receivable agreement liability
310,624
310,425
Financial guarantee liability
124,217
131,894
Other liabilities
112,629
81,169
Total liabilities
1,516,583
1,698,549
Commitments, Contingencies and
Guarantees
Equity (Deficit)
Class A common stock, $0.01 par value and
93,461,197 shares issued and 78,405,311 shares outstanding at March
31, 2021 and 91,317,225 shares issued and 76,734,106 shares
outstanding at December 31, 2020
933
912
Class B common stock, $0.001 par value and
106,059,097 shares issued and outstanding at March 31, 2021 and
106,165,105 shares issued and outstanding at December 31, 2020
107
107
Additional paid-in capital
112,534
110,938
Retained earnings
37,506
33,751
Treasury stock
(147,918
)
(147,360
)
Accumulated other comprehensive income
(loss)
(3,712
)
(4,340
)
Noncontrolling interests
(161,614
)
(169,484
)
Total equity (deficit)
(162,164
)
(175,476
)
Total liabilities and equity (deficit)
$
1,354,419
$
1,523,073
GreenSky, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except
per share data)
Three Months Ended March
31,
2021
2020
Revenue
Transaction fees
$
85,657
$
89,884
Servicing
34,667
31,283
Interest and other
4,848
690
Total revenue
125,172
121,857
Costs and expenses
Cost of revenue (exclusive of depreciation
and amortization shown separately below)
63,997
72,305
Compensation and benefits
22,473
22,164
Property, office and technology
4,459
3,921
Depreciation and amortization
3,316
2,445
Sales, general and administrative
14,642
9,929
Financial guarantee expense (benefit)
(3,883
)
18,408
Related party
452
477
Total costs and expenses
105,456
129,649
Operating profit
19,716
(7,792
)
Other income (expense), net
Interest and dividend income
137
622
Interest expense
(6,614
)
(5,620
)
Other gains (losses), net
758
976
Total other income (expense), net
(5,719
)
(4,022
)
Income (loss) before income tax expense
(benefit)
13,997
(11,814
)
Income tax expense (benefit)
1,872
(895
)
Net income (loss)
$
12,125
$
(10,919
)
Less: Net income (loss) attributable to
noncontrolling interests
8,327
(7,585
)
Net income (loss) attributable to
GreenSky, Inc.
$
3,798
$
(3,334
)
Earnings per share of Class A common
stock:
Basic
$
0.05
$
(0.05
)
Diluted
$
0.05
$
(0.05
)
Weighted average shares of Class A
common stock outstanding:
Basic
71,859,110
63,650,697
Diluted
179,532,426
63,650,697
GreenSky, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Three Months Ended March
31,
2021
2020
Cash flows from operating
activities
Net income (loss)
$
12,125
$
(10,919
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
3,316
2,445
Share-based compensation expense
3,707
3,495
Equity-based payments to non-employees
4
4
Fair value change in servicing assets and
liabilities
(7,505
)
(2,306
)
Operating lease liability payments
(37
)
(145
)
Financial guarantee expense (benefit)
(7,677
)
18,408
Amortization of debt related costs
847
416
Original issuance discount on term loan
payment
(18
)
(10
)
Income tax expense (benefit)
1,870
(895
)
Loss on remeasurement of tax receivable
agreement liability
—
—
Impairment losses
—
72
Mark to market on loan receivables held
for sale
3,466
—
Changes in assets and liabilities:
(Increase) decrease in loan receivables
held for sale
225,006
30,867
(Increase) decrease in accounts
receivable
3,469
428
(Increase) decrease in other assets
(30,099
)
418
Increase (decrease) in accounts
payable
15,699
7,941
Increase (decrease) in finance charge
reversal liability
(17,698
)
7,123
Increase (decrease) in guarantee
liability
(3,794
)
—
Increase (decrease) in other
liabilities
42,454
(16,295
)
Net cash provided by operating
activities
245,135
41,047
Cash flows from investing
activities
Purchases of property, equipment and
software
(3,452
)
(3,354
)
Net cash used in investing activities
(3,452
)
(3,354
)
Cash flows from financing
activities
Proceeds from term loan
—
—
Repayments of term loan
(1,170
)
(990
)
Proceeds from Warehouse facility
31,917
—
Repayments of Warehouse facility
(238,870
)
—
Class A common stock repurchases
—
—
Member distributions
(4,529
)
(32,798
)
Payments under tax receivable
agreement
—
—
Proceeds from option exercises
27
—
Payment of option exercise taxes
—
(73
)
Payment of taxes on Class B common stock
exchanges
—
—
Net cash used in financing activities
(212,625
)
(33,861
)
Net increase (decrease) in cash and cash
equivalents and restricted cash
29,058
3,832
Cash and cash equivalents and restricted
cash at beginning of period
467,654
445,841
Cash and cash equivalents and restricted
cash at end of period
$
496,712
$
449,673
Supplemental non-cash investing and
financing activities
Distributions accrued but not paid
1,995
4,317
Capitalized software costs accrued but not
paid
395
66
Tax withholding on equity awards accrued
but not paid
600
654
Reconciliation of Adjusted
EBITDA
(Dollars in thousands)
Three Months Ended March
31,
2021
2020
Net income (loss)
$
12,125
$
(10,919
)
Interest expense(1)
6,614
5,620
Income tax expense (benefit)
1,872
(895
)
Depreciation and amortization
3,316
2,445
Share-based compensation expense(2)
3,712
3,499
Financial guarantee liability -
Escrow(3)
—
18,408
Servicing asset and liability
changes(4)
(7,505
)
(2,306
)
Mark-to-market on sales facilitation
obligations(5)
8,608
—
Transaction and non-recurring
expenses(6)
6,340
1,233
Adjusted EBITDA
$
35,082
$
17,085
Total revenue
$
125,172
$
121,857
Adjusted EBITDA Margin
28.0
%
14.0
%
(1)
Interest expense on the Warehouse Facility
and interest income on the loan receivables held for sale are not
included in the adjustment above as amounts are components of cost
of revenue and revenue, respectively.
(2)
See Note 12 to the Notes to Unaudited
Condensed Consolidated Financial Statements included in Part I,
Item 1 for additional discussion of share-based compensation.
(3)
Includes non-cash charges related to our
financial guarantee arrangements with our ongoing Bank Partners,
which are primarily a function of new loans facilitated on our
platform during the period increasing the contractual escrow
balance and the associated financial guarantee liability. In the
fourth quarter of 2020, due to expectations that some of these
financial guarantees may require cash settlement, the Company
discontinued adjusting EBITDA for financial guarantees.
(4)
Includes the non-cash changes in the fair
value of servicing assets and liabilities related to our servicing
arrangements with Bank Partners and other contractual
arrangements.
(5)
Mark-to-market on sales facilitation
obligations reflects changes in the fair value in the embedded
derivative for sales facilitation obligations. The changes in fair
value are recognized as a mark-to-market expense in cost of revenue
for the period. See Note 3 to the Notes to Unaudited Condensed
Consolidated Financial Statements included in Part I, Item 1 for
additional discussion.
(6)
The three months ended March 31, 2021
primarily includes legal fees associated with IPO litigation and
regulatory matter. The three months ended March 31, 2020, includes
legal fees associated with IPO litigation and professional fees
associated with our strategic alternatives review process.
Reconciliation of Adjusted Pro
Forma Net Income
(Dollars in thousands)
Three Months Ended March
31,
2021
2020
Net income (loss)
$
12,125
$
(10,919
)
Transaction and non-recurring
expenses(1)
6,340
1,233
Incremental pro forma tax expense(2)
(3,263
)
1,283
Adjusted Pro Forma Net Income
$
15,202
$
(8,403
)
(1)
The three months ended March 31, 2021
primarily includes legal fees associated with IPO litigation and
regulatory matter. The three months ended March 31, 2020, includes
legal fees associated with IPO litigation and professional fees
associated with our strategic alternatives review process.
(2)
Represents the incremental tax effect on
net income, adjusted for transaction and non-recurring expenses,
assuming that all consolidated net income was subject to corporate
taxation at a full year effective tax rate of 25.25% and 20.58% for
the three months ended March 31, 2021 and 2020, respectively.
Reconciliation of Adjusted Pro Forma Diluted EPS
(Dollars in thousands)
Three Months Ended March
31,
2021
2020
GAAP Diluted EPS
$
0.05
$
(0.05
)
Transaction and non-recurring expenses
0.04
0.01
Incremental pro forma tax expense(1)
(0.01
)
(0.01
)
Adjusted Pro Forma Diluted
EPS(2)
$
0.08
$
(0.05
)
Weighted average shares of Class A common
stock outstanding – diluted
179,532,426
63,650,697
(1)
Represents the incremental tax effect on
GAAP diluted EPS of the items noted above, and assuming that all
consolidated net income was subject to corporate taxation for the
periods presented at a full year effective tax rate of 25.25% and
20.58% for the three months ended March 31, 2021 and 2020,
respectively.
(2)
Adjusted Pro Forma Diluted EPS represents
Adjusted Pro Forma Net Income divided by GAAP weighted average
diluted shares outstanding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210504006354/en/
Brinker Dailey 470.284.7017 investors@greensky.com
GreenSky (NASDAQ:GSKY)
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