Q4 2021 Elevate Credit Inc Earnings Call
Speaker 1: Greetings. Welcome to the Elevate Credit fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Daniel Ray, Director of Public Affairs. You may be—
Readings welcomed to the elevate credit fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now.
Turn the conference over to your host Daniel Wright Director of Public Affairs, you may begin.
Good afternoon, and thanks for joining us on elevate fourth quarter and full year 2021 earnings conference call earlier today, we issued a press release with our fourth quarter and full year results a copy of that really is available on our website at investors elevate dot com.
Today's call is being webcast is accompanied by a slide presentation, which is also available on our website. Please refer now to slide two of that presentation.
Speaker 2: Our remarks and answers will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
Our remarks and answers will include forward looking statements within the meaning of the private Securities Litigation Reform Act.
These forward looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward. Looking statements. These risks include among others matters that we have described in our press release issued today, including impacts related to COVID-19, and our most recent annual report on Form 10-K .
Speaker 2: These risks include, among others, matters that we have described in our press release issue today, including impacts related to COVID-19 and our most recent annual report on board 10k and other filings we make with the SEP.
Other filings, we make with the SEC.
Speaker 2: Please note that all forward looking statements speak only at the date of this call and we disclaim any obligation to update these forward looking statements during our call today. We'll make reference to non.
Please note that all forward looking statements speak only as of the date of this call and we disclaim any obligation to update these forward looking statements during our call today, we'll make reference to non-GAAP financial measures for a complete reconciliation of historical non-GAAP to GAAP financial measures. Please refer to our press release issued today and our slide presentation both.
Speaker 2: For a complete reconciliation of historical non-GAP to GAAP financial measures, please refer to our press release issued today and our slide.
Speaker 2: both of which have been furnished to the SEC and are available on our website at investors.elevate.com. Joining me on the call today are our President and Chief Executive Officer Jason Harbison, Interim Chief Financial Officer Chad Bradford, and Chief Strategy Officer Chris Lutes. I will now turn the call over to Jason. Thank you, Daniel. And thank you.
Of which have been furnished to the SEC and are available on our website at investors day.
Elevate dot com joining me on the call today are president and Chief Executive Officer, Jason Harvison interim Chief Financial Officer, Chad, Bradford and Chief Strategy Officer, Chris Lewis I will now turn the call over to Jason.
Thank you Daniel and thank you everyone for joining us today.
Speaker 3: Before I speak to our strong fourth quarter results, I'd like to start with a broader review of what Elevate has navigated and accomplished over the past years. Let's start with the things we didn't expect.
Before I speak to our strong fourth quarter results I'd like to start with a broader review of elevated navigated and accomplished over the past years, let's start with the things we didn't expect.
Speaker 2: As you know, Elevate and other participants in near-prime credit often face skepticism about the resilience of the model in the face of challenging credit.
As you know elevate and other participants and near Prime credit often faced scepticism about the resilience of the model in the face of challenging credit.
Speaker 2: We certainly believe our decades of experience, especially within the last two years, we was very optimistic for the future and what we can deliver for stakeholders.
We certainly believe our decades of experience, especially within the last two years. He was very optimistic for the future and what we can deliver for stakeholders.
Speaker 2: It has been nearly two years since the pandemic began, and over that time, Elevate had its best every year of credit performance and profitability in 2020, as well as best every year in growth in 2021.
It has been nearly two years since the pandemic began and over that time elevate had its best every year credit performance and profitability in 2020.
As well as best every year in growth in 2021.
Speaker 2: Best of all, we have managed through the pandemic by helping three of our most important stakeholders, consumers, employees and shareholders.
First of all we have managed through the pandemic by helping three of our most important stakeholders consumers employees and shareholders.
Speaker 2: For consumers, we enhance market leading credit assistant programs when they need it at most. And similarly, we and the banks we support have been there to provide credit where other financial services firms have not, especially as the pandemic has persisted and governments' seamless efforts have ended.
Tumors, we enhanced market, leading credit assistant programs when they needed it most and similarly, we and our banks we support have been there to provide credit where other financial services firms have thought, especially as the pandemic has persisted and government stimulus efforts have ended.
Speaker 2: For employees, Elevate has also delivered. We were named a 2021 Best Workplace in Texas by Great Places to Work. We are focused on creating an exceptional workplace and launched a new partnership with Gallup to identify strengths and improvement opportunities to make Elevate an even better place to work.
For our employees all of it has also delivered we were named a 2021 best workplace in Texas by Great Places to work.
Our focus on creating an exceptional workplace and launched a new partnership with Gallup to identify strengths and improvement opportunities to make elevate an even better place to work.
Speaker 2: We also expanded employee resource groups, which are employee-led groups that help connect communities, raise broader awareness around diversity, equity, and inclusion, and enable us to leverage our differences.
We also expanded employee resource groups, which are employee led groups that help connect communities like broader awareness around diversity equity and inclusion.
It was to leverage our differences lastly, we have adopted a hybrid work approach that is designed to enable collaboration while offering our employees great flexibility.
Speaker 2: Lastly, we have adopted a hybrid work approach that is designed to enable collaboration while offering our employees great flexibility.
Speaker 2: For shareholders, we put our capital to work. By repurchasing approximately 33% of shares outstanding over the last two years, we're a total of 15 million common shares.
For shareholders, we put our capital to work by repurchasing approximately 33% of shares outstanding over the last two years for a total of 15 million common shares.
Speaker 2: Additionally, as you saw in recent filings, Elevate recently settled a longstanding legal matter tied to the spinoff of our predecessor company in 2014.
Additionally, as you saw in recent filings elevate recently settled a long standing legal matter tied to the spin off of our predecessor company in 2014.
Speaker 2: We are happy to have the matter behind us, less because of the dispute itself, but more because of the freedom we now have with the capital our model generates, and some of the exciting ways it can add value in the quarters and years ahead.
We are happy to have the matter behind us less because of the dispute itself, but more because of the freedom. We now have with the capital our model generates some of the exciting ways, we can add value in the quarters and years ahead.
Speaker 2: From a equity standpoint, we are extremely fortunate to have a business that generates the free cash flow necessary to settle these legal disputes while also growing our core business and investing in new ideas which I'll detail in a moment.
From a liquidity standpoint, we are extremely fortunate to have a business that generates the free cash flow necessary to settle these legal disputes while also growing our core business and investing in new ideas, which I'll detail in a moment.
Speaker 2: We are obviously proud of how the company has navigated the past two years. We are even more excited about the strategies we're pursuing in the future. Candidly, we feel a lot of elevated strategic progress has been masked by the noise in the world over the past two years and illegal overhang.
We're obviously proud of how the company has navigated the past few years, we were even more excited about the strategies, we're pursuing in the future candidly, we feel a lot of elevate strategic progress has been masked by the noise in the world in the past two years and the legal overhang.
Speaker 2: First, it's hard to overstate how important the overhaul of our tech stack and the approach to growth was back in 2018. Elevate effectively went from a direct mail-focused credit provider to an engine that can market and credit decision across a wide range of partner and consumer touchpoints.
First its hard to overstate how important the overhaul of our tech stack and the approach of growth was back in 2018.
Elevate effectively went from my direct mail focused credit provider to an engine that can market and credit decision across a wide range of partner because consumer touch points.
Speaker 2: Best of all, with the Today card and the newest initiatives, Elevate has significantly broadened the credit spectrum that the Blueprint platform can serve, including a new offering that I'll detail in a moment.
First of all with the today card and the newest initiatives elevate has significantly broaden the credit spectrum that the blueprint platform conserve including a new offerings are detailed in a moment.
Speaker 2: The power of the Elevate Blueprint tech stack is immense, and I look forward to demonstrating this power and versatility with new offerings and partners in the near future.
Power of the elevated blueprint Tech stack is a mess and I look forward to demonstrating the power and versatility with new offerings and partnerships in the near future.
Speaker 2: In our view, the pandemic has validated the strategic shift and as a result, the years ahead for Elevate are brighter than they ever have been.
And our view of the pandemic has validated the strategic shift and as a result, the years ahead for elevate a brighter than they ever have been.
Speaker 2: Lastly, on the point of capital, the legal settlement only frees the company to pursue more value creation.
Lastly on the point of capital illegal settlement only frees the company to pursue more value creation over the last two years, we certainly have not been constrained as evidenced by our share repurchases in fact over that time, we have bought back approximately 33% of the company given the significant value we still see in our stock.
Speaker 2: Over the last two years, we certainly have not been constrained, as evidenced by our share repurchases. In fact, over that time, we have bought back approximately 33 percent of the company, given the significant value we still see in our stock. With removal of the legal matter, our flexibility to deploy capital is even greater. We see substantial opportunity in the free cash flow the model generates, and we will always seek to deploy in a manner that prioritizes stakeholder value.
With removal of the legal matter our flexibility to deploy capital is even greater we see substantial opportunity in our free cash flow. The model generates we will always seek to deploy in a manner that prioritize stakeholder value.
Speaker 2: With the recent expenses associated with the legal matters, recent new product investments, and portfolio growth, we will briefly pause our buyback with plans to return in the near future.
With the recent expenses associated with the legal matters recent new product investments and portfolio growth, we will briefly pause our buyback plans to return in the near future.
Speaker 2: I would also like to reiterate that our recent settlement included a repurchase of approximately 925,000 shares outstanding.
I would also like to reiterate that our recent settlement included a repurchase of approximately 925000 shares outstanding.
Speaker 2: I'm going to turn to our fourth quarter next, but as you can see, it's important to take a step back every once in a while and frame where we have been and more critically, where we can go.
I'm going to turn to our fourth quarter next but as you can see it was important to take a step back every once in a while and frame where we have been more critically where we can go.
Speaker 2: With that, let's turn to slide five and I can provide the highlights from another strong quarter for elevation.
With that let's turn to slide five and I can provide the highlights from another strong quarter for elevate.
Speaker 2: Revenue grew 43% compared to the fourth quarter a year ago. The growth represents the continued impact of the loan receivables we've added this year and stable APR.
Revenue grew 43% compared to the fourth quarter a year ago.
This represents the continued impact of a loan receivables we've added this year and stable a P r's.
Speaker 2: Combined loan receivable principal balances ended the year close to $560 million, which is 40% higher than a year ago and is now back above levels at the start of the pandemic. It is an important milestone, not just to validate the significant market demand, but also a testament to how well our team and our business model performed to a very volatile market.
Combined loans receivable principal balances ended the year close to $560 million, which is 40% higher than a year ago and is now back above levels at the start of the pandemic. It was an important milestone not just to validate the significant market demand, but also a testament to how well our team and our business model performed through a very volatile market.
Speaker 2: All three products experienced long growth during the fourth quarter of 21. We saw consistent distribution of new customers between direct mail and strategic marketing channels in the fourth quarter as we continue to diversify our marketing channel mix and add additional strategic partners.
All three products experienced loan growth during the fourth quarter of 'twenty. One we saw consistent distribution of new customers between direct mail and strategic marketing channels in the fourth quarter as we continue to diversify our marketing channel mix and add additional strategic partners.
Speaker 2: I would also note that Elevate and the banks we support purposely slowed down growth over the fourth quarter to optimize the mix of new versus repeat borrowers in origination.
I would also note that elevate and our banks, we support purposely slowed down growth over the fourth quarter to optimize the mix of new versus repeat borrowers and originations.
Speaker 2: We are very pleased with the mix of originations year-to-date, but consistent with our returns-focused philosophy, we took the opportunity to moderate growth with a high mix of repeat customers that have lower cash and better credit performance.
We were very pleased with a mix of both originations year to date, but consistent with our returns focused philosophy, we took the opportunity to moderate growth with a high mix of repeat customers that have lower cat and better credit performance.
Speaker 2: Turning to credit, as we noted on our third quarter call, past-due balances reverted back to historical averages coming in at 10% for the fourth quarter compared to historically low rates of 6% to 7% earlier in the year. We expect this rate to remain near 10% over the first quarter of 2022, but decrease into the 9% range over 2022 based on the increased mix of repeat borrowers I mentioned.
Turning to credit as we noted on our third quarter call past due balances reverted back to historical averages coming in at 10% for the fourth quarter compared to historically low rates of 6% to 7% earlier in the year.
We expect this rates remain near 10% over the first quarter of 2022, a decrease into the 9% range over 2022 based on an increased mix of repeat borrowers I mentioned.
Speaker 2: Bottom line, the overall returns and margin profile of the loan book is very healthy, and we feel good about those trends over 2022 as well.
Bottom line, the overall returns and margin profile of the loan book is very healthy and we feel good about those trends over 2022 as well.
Speaker 2: Lastly, on profitability, as you know, 21 represents a year of recovering growth from the pandemic, and as a result, near-term EBITDA has been compressed, driven by initial customer acquisition cost and credit provision.
Lastly on profitability.
No 21 represents a year of recovery and growth from the pandemic and as a result near term EBITDA had been compressed driven by initial customer acquisition cost and credit provisioning.
Speaker 2: For context, we think it's important for analysts and investors to remember that profitability is best viewed over the life of the loan.
For context, we think it's important for analysts and investors to remember the profitability is best viewed over the last little alone.
Speaker 2: Based on our expectations for credit, we believe the 21 vintage represents a very attractive most margin profile in line with the long term targeted range of 15 to 20.
Based on our expectations for credit we believe the 'twenty one vintage represents a very attractive margin profile in line with our long term targeted range of 15 to 20 per cent chat.
Speaker 2: Chad will review our outlook for 2022 but bottom line is 2021's growth has established a very strong foundation to continue to grow and scale the profitability of the business in 2022 and beyond.
Chad will review our outlook for 2022, but bottom line is 2020 one's growth has established a very strong foundation to continue to grow and scale the profitability of the business in 2022 and beyond.
Speaker 2: If we turn to slide six, I'd like to provide some context around a collaboration with Central Pacific Bank and the newly formed Fintech Swell that we announced late last month.
If we turn to slide six I'd like to provide some context around our collaboration with Central Pacific Bank and the newly formed Fintech swell that we announced late last month.
Speaker 2: swirling part of Central Pacific Bank's growth beyond its core Hawaii footprint through a consumer banking app that includes services ranging from checking, savings, and credit.
Swollen Park Central Pacific Bank growth, you honest core Hawaii footprint, where consumer banking App and include services ranging from checking savings and credit.
Speaker 2: Elevate's credit technology, specifically the Blueprint platform, will embed within Swell to help Central Pacific Bank offer personal lines of credit at APRs below 24% across the mainland U.S.
Elevates credit technology, specifically, the blueprint platform will embed within swell to help central Pacific Bank offer personal lines of credit at Apr's below 24% across the mainland U S.
Speaker 2: We are extremely proud that Central Pacific Bank chose to partner with Elevate on six-siding in the office.
We're extremely proud that central Pacific Bank chose a partner with elevate on six adding new offering.
Speaker 2: We believe that this investment, in collaboration with Swell, is an important milestone for Elevate in a number of ways.
We believe that this investment in collaboration with swell and important milestone for elevate and a number of ways.
Speaker 2: First, we believe the trust in our technology by a broad set of bank partners validates our approach and our track record for performance.
First we believe the trust in our technology by broadening set of Bank partners validates our approach and our track record of performance.
Speaker 2: Second, we also feel validated in our strategic focus on Elevate Blueprint, which we believe positions our company as a leading partner for the rapidly growing banking of the service market. Look for more to come this year on the.
We also feel validated in our strategic focus on elevate blueprint, which we believe positions our company as a leading partner with a rapidly growing they give you the service market.
Look for more to come this year on the product and brand front.
Speaker 2: I'll conclude my remarks with a summary of why we're so excited about Elevate's current position. First, the past two years have effectively battle-tested the model and Elevate's financial performance was strong.
I'll conclude my remarks, the summary of why we're so excited about elevates current position.
First the past few years have effectively battle tested the model and elevate financial performance was strong.
Speaker 2: Second, our core business continues to perform well with a broader set of marketing capabilities and direct mail in an increasing number of bank partners.
Second our core business continues to perform well with a broader set of marketing capabilities and direct mail and an increasing number of bank partners.
Speaker 2: Lastly, we believe Elevate's technology capabilities, combined with the rapidly growing banking as a service market, and a large and growing population of underbanked Americans, positions Elevate right at the intersection of two massive trends in financial services. With that, let me turn the call over to Chad.
Lastly, we believe elevates technology capabilities combined with a rapidly growing banking as a service market a large and growing population of Underbanked Americans positions elevate the intersection of two massive trends in financial services with that let me turn the call over to Chad.
Thanks, Jason and good afternoon everybody.
Speaker 4: Turning to slide 7, I'll start with discussing the loan portfolio growth, which was more moderate in the fourth quarter of 21 after the exceptionally strong growth we experienced in the third quarter.
Turning to slide seven I'll start with discussing the loan portfolio growth, which was more moderate in the fourth quarter of 'twenty. One after the exceptionally strong growth we experienced in the third quarter combined.
Speaker 4: Combined loans receivable principal totaled $559 million as of December 31, 2021, up $159 million or 40% from $400 million a year.
Combined loans receivable principal totaled $559 million I think.
At December 31, 2021 .
$159 million or 40% from 400 million a year ago.
Speaker 4: This total was at 46 million, or 9%, from September 30th of this year. Our end-of-year combined loans receivable principal balance places us at the midpoint of the guidance range we issued.
This total was at 46 million or 9% from September 30 of this year.
Our end of year combined loans receivable principal balance places us at the midpoint of the guidance range we issued.
Speaker 4: What's remarkable is that within one year, we returned to portfolio balances slightly above where the portfolio was positioned in March 2020 as the pandemic was taking effect in the U.S.
What's remarkable is that within one year, we've returned to portfolio balances slightly at that with the portfolio was positioned in March 2020 at the pandemic was taking effect in the U S.
Speaker 4: In the fourth quarter, we intentionally moderated growth to ensure that we maintain the proper mix of new and returning customers to the portfolio, which allows us to achieve our charge-off metric of 45 to 55 percent of revenue.
In the fourth quarter, we intentionally moderated quote to ensure that we maintain the proper mix of new and returning customers to the portfolio, which allows us to achieve our charge off metric of 45% to 55% of revenue.
Speaker 4: As we discussed during our last call, with the heavier mix of new customers entering the portfolio during the third quarter, we expect the credit performance of the portfolio to be at or slightly above the high end of our rank.
As we discussed during our last call, but the heavier mix of new customers entering the portfolio. During the third quarter, we expect the credit performance of the portfolio to be at or slightly above the high end of our range.
Speaker 4: The new and returning mix of customers in the fourth quarter had a 70-30 mix as compared to an 80-20 mix during the third quarter.
New and returning customers in the fourth quarter had a 70 30 mix as compare to an 80 20 mix during the third quarter.
Speaker 4: Credit quality remains consistent as the credit profile of the portfolio reverts back to a normalized mix of new and former customers with past-due balances at 10% of combined loans receivable principal at the end of the fourth quarter of 2021, which is consistent with historical past-due percentages and aligns with our past-due balances of 9% to 10% during 2019.
Credit quality remains consistent at the credit profile of the portfolio reverts back to a normalized net new and former customers that past due balances at 10% of combined loans receivable principal at the end of the fourth quarter of 'twenty one.
Which is consistent with historical past few percentages and aligns with our past due balances of 9% to 10% during 2019.
Speaker 4: Staying on this slide, revenue for Q4-21 was at 43% from the fourth quarter a year ago due to an increase in the average outstanding portfolio balance resulting from the third quarter of 21 growth, while the APR was relatively flat between the two periods.
Staying on this slide revenue for Q4, 'twenty, one but is that 43% from the fourth quarter a year ago due to an increase in the average outstanding portfolio balance, resulting from the third quarter of 'twenty one growth while the APR was relatively flat between the two periods.
Speaker 4: Our full year of 21 revenue was down 10% from the prior year due to a lower average balance for the full year of 21 as the portfolio growth has been concentrated in the second half of the year and a lower portfolio APR primarily coming from the RISE installment loan product.
Our full year 'twenty, one revenue was down 10% from the prior year due to a lower average balance for the full year of 'twenty. One is the portfolio growth has been concentrated in the second half of the year and a lower portfolio. A P are primarily coming from the rise installment loan product.
Speaker 4: Looking at the bottom of this slide, adjusted EBITDA and adjusted earnings for the fourth quarter and the full year of 21 as compared to the prior year periods were compressed due to the upfront marketing and credit provisioning costs as the portfolio returned to growth during 2021, specifically in the second half of the year.
Looking at the bottom of this slide adjusted EBITDA and adjusted earnings for the fourth quarter and the full year of 'twenty, one as compared to the prior year periods, where a compressed due to the upfront marketing and credit provisioning costs as the portfolio. We're trying to growth during 2021 specifically in the second half of the year.
Speaker 4: In addition, we've experienced an increase in credit provisioning during the third and fourth quarters due to the higher mix of new loan originations within the portfolio, primarily due to the volume of new loan originations during the third quarter of 21.
In addition, we experienced an increase in credit provisioning during the third and fourth quarters due to the higher mix of new loan originations within our portfolio, primarily due to the volume of new loan originations during the third quarter, a 21 well.
Speaker 4: While we have an initial increase in credit losses on these loans within our fourth quarter results continuing into the first quarter of 2022 as expected, these ones continue to meet our overall unit economics and will become more profitable as advantages aid.
Well, we have an initial increase in credit losses on these loans within our fourth quarter results continuing into the first quarter R. 22 as expected. These funds continue to meet our overall unit economics, and what become more profitable that's advantage a page.
Speaker 4: As Jason previously discussed, we recognize legacy legal accruals as previously filed and announced with an after-tax amount of $19 million.
It's Jason previously discussed we recognized legacy legal accruals as previously filed and announced but an after tax amount of $19 million.
Speaker 4: As a result, we incurred a net loss of $32 million or a loss of $0.99 per share for the fourth quarter, with a net loss of $34 million or a loss of $0.98 per share for the full year ended December 31, 2021.
As a result, we incurred a net loss of $32 million or a loss of 99 cents per share for the fourth quarter.
With a net loss of 34 million or a loss of 98 cents per share for the full year ended December 31, 2021 .
Speaker 4: Excluding the one-time non-operating loss items associated with the legacy legal accruals.
Excluding the onetime nonoperating loss items associated with the legacy legal accruals.
Speaker 4: and the discrete tax expense associated with our Texas State R&D credits discussed last quarter.
And the discrete tax expense associated with our Texas State R&D credits discussed last quarter.
Speaker 4: we had an adjusted net loss of $13.8 million or a loss of $0.42 per share for the fourth quarter, with an adjusted net loss of $13.6 million or $0.40 per share for the full year ended December 31, 2021.
We had an adjusted net loss of $13 8 million or a loss of 42 cents per share for the fourth quarter.
With an adjusted net loss of $13 6 million or <unk> 40 per share for the full year ended December 31 2021.
On slide eight the cumulative loss rate as a percentage of loan originations for the 2020 advantage its the lowest loss rate ever due to the tightening of the underwriting.
Speaker 4: On slide eight, the cumulative loss rate as a percentage of loan originations for the 2020 advantage is the lowest loss rate ever due to the tightening of underwriting, slowdown in new loan originations, increased government stimulus, and improved payment flexibility tool.
Slowdown in new loan originations increased government stimulus and improved payment flexibility tools.
Speaker 4: We continue to expect the 2021 vintage to be at 2018 levels or slightly lower due to the new customer mix that entered the portfolio during the second half of 2021 as we rebuilt the portfolio. On this slide, we...
We continue to expect the 2021 vintage to be at 2018 levels or slightly lower due to the new customer mix that entered the portfolio. During the second half of 2021 as we rebuilt the portfolio.
On this slide we also show the customer acquisition cost we continue to maintain our CAC target that allow us to achieve our unit economics.
Speaker 4: We continue to maintain our TAC targets that allow us to achieve our unit economics.
Speaker 4: These targets are between $250 to $300 for the Ryzen Elastic products and sub $100 for the Today card, continuing to diversify our marketing mix between direct mail, strategic partner, and digital channels.
These targets are between 250 to $300 for the rise and elastic products and sub $100 for the today card continuing to diversify our marketing mix between direct mail strategic partner and digital channels.
Speaker 4: Slide nine shows the adjusted EBITDA margin, which was 11% for the full year of 2021 due to compressed earnings experience and the strong new customer loan growth and the associated upfront costs we incurred on these loans related to marketing and credit provisioning related to a higher mix of new customer loans.
Slide nine shows the adjusted EBITDA margin, which was 11% for the full year of 2020 , one due to compressed earnings experienced strong new customer loan growth and the associated upfront costs, we incurred on these loans related to marketing and credit provisioning related to a higher mix of new customer alone.
Speaker 4: Long-term, we expect the adjusted EBITDA margin to return to 15 to 20 percent depending on the pace of growth.
Long term, we expect the adjusted EBITDA margin to return to 15% to 20% depending on the pace of growth.
Speaker 4: On slide 10, I'd now like to address our planned adoption of fair value accounting for the loan portfolio beginning January 1, 2022.
On slide 10, I'd now like to address our planned adoption of fair value accounting for the loan portfolio beginning January one 2022.
Speaker 4: We have not had to adopt the Life of Loan Reserve requirements for CECL that others had to adopt on January 1, 2020, due to our qualifications under certain relief provisions as a smaller reporting company, which will expire in January 2023.
We have not had to adopt a life of loan reserve apartments or seasonal that others had to adopt on January one 'twenty 'twenty due to our qualifications under certain relief provisions as a smaller reporting company, which will expire in January 2023.
Speaker 4: Under CECL, GAAP allows companies adopting the new life alone reserve methodology to apply the fair value option on certain assets as an alternative accounting model.
Under Cecil GAAP allows companies adopting the new life of loan reserve methodology to apply the fair value option on certain asset as an alternative accounting model.
Speaker 4: In evaluating between the life of loan reserve requirements and the fair value option, we believe that the fair value option best reflects the value of the combined loans receivable portfolio and its future economic performance.
In evaluating between the life of loan reserve requirements and the fair value option, we believe that the fair value option best reflects the value of the combined loans receivable portfolio and its future economic performance.
Speaker 4: Fair value aligns more closely with how we view and manage business, especially since our portfolio decision making process is anchored in unit economics that align with discounted cash flow methodologies that will also be utilized in fair value.
Fair value aligns more closely with how we view and manage the business, especially since our portfolio decision, making process is anchored in unit economics that align with discounted cash flow methodologies.
I'll also be utilized in fair value accounting.
Speaker 4: For our business where we're focused on driving growth with meaningful profitability, financial performance under fair value should be positively correlated to portfolio growth.
For our business, where we're focused on driving growth with meaningful profitability financial performance under fair value should be positively correlated to portfolio growth.
Speaker 4: Beginning January 1, 2022, we'll be utilizing the fair value option for the entire combined loans receivable portfolio.
Beginning January one 2022 we'll be utilizing the fair value option for the entire combined loans receivable portfolio.
Speaker 4: Adoption requires an initial measurement of the existing combined loans receivable portfolio at fair value as of January 1, 2022, which will be recognized as an increase to retain earned.
Adoption requires an initial measurement of the existing combined loans receivable portfolio at fair value as of January one 2022 .
It will be recognized as an increase to retained earnings.
Speaker 4: The premium associated with the combined most receivable portfolio is currently estimated at 10%.
The premium associated with the combined loans receivable portfolio is currently estimated at 10%.
Speaker 4: This premium represents the percentage that the fair value of the portfolio exceeds the outstanding principle.
It's premium represents the percentage that the fair value of the portfolio.
The outstanding principle.
Speaker 4: The adoption of fair value to comply with the new loss of loan loss requirements will have no impact on cash.
The adoption of fair value to comply with the new lots of loan loss requirements will have no impact on cash earnings.
Speaker 4: For financial reporting, the most significant change to earnings will be related to recognizing the change in fair value of the combined loans receivable each quarter, rather than a provision for loan loss.
For financial reporting and most significant change to earnings will be related to recognizing the change in fair value of the combined loans receivable each quarter, rather than a provision for loan losses. The change in fair value will be comprised of gross charge offs net of recoveries and valuation impact associated with changes in both the portfolio and valley.
Speaker 4: The change in fair value will be comprised of gross charge-offs, net-of-recoveries, and valuation impacts associated with changes in both the portfolio and valuation effects.
Uhm assumptions.
Speaker 4: Continuing on this slide, we'll discuss a few points regarding our outlet for 2022.
Continuing on this slide will discuss a few points regarding our outlook for 2022.
Speaker 4: With the change to fair value and its expected impact to our financial performance, we'll be able to provide a more complete guidance during our first quarter earnings call.
But the change to fair value and its expected impact to our financial performance will be able to provide a more complete guidance during our first quarter earnings call.
Speaker 4: We continue to manage the portfolio consistent with our unit economics and long-term metrics that we've previously discussed.
We continue to manage the portfolio consistent with our unit economics and long term metrics that we've previously discussed.
Speaker 4: We expect continued growth in the portfolio with end-of-year combined loans receivable principal increasing 15 to 20 percent from where we ended 2021.
We expect continued growth in the portfolio with end of year combined loans receivable principal increasing 15%, 20% from where we ended 2021.
Speaker 4: we would expect revenue to increase 20% to 25% due to the portfolio growth experienced in the second half of 2021 and during 2022 while the APRs on the portfolio are expected to remain relatively flat year-over-year.
We would expect revenue to increase 20% to 25% due to the portfolio growth experienced in the second half of 2021 and during 2022, while the APR is on the portfolio are expected to remain relatively flat year over year.
Speaker 4: Turning to liquidity and capital on slide 11, as previously announced, we closed on a $50 million financing facility with an ability to increase the facility up to $100 million to fund continued growth of the TodayCard product at a lower cost.
Turning to liquidity and capital on Slide 11, as previously announced we closed on a $50 million financing facility.
It's an ability to increase the facility up to 100 million to fund continued growth of the today card product at a lower cost of funds.
Speaker 4: We continue to draw on all the facilities that fund the portfolio loan growth during the fourth quarter of 2021 with a total debt balance of approximately $500 million at December 31, 2021.
We continue to draw on all of the facilities that upon the portfolio loan growth during the fourth quarter of 'twenty, one with a total debt balance of approximately 500 million at December 31, 2021 .
Speaker 4: Also, incremental new borrowings under our RISE and Alaska Debt Facilities are priced at approximately 8%.
Also incremental new borrowings under our rising in Alaska that facilities are priced at approximately 8%.
Speaker 4: And today cards at 6.85% resulting in an overall decrease in the weighted average cost of funds to 9% at December 31, 2021 from 10.2% at December 31, 2021.
And today card at $6 eight 5%, resulting in an overall decrease in the weighted average cost of funds to 9% at December 31, 2020 one from 10.
10, 2% at December 31, 2020.
Speaker 4: Lastly, during the fourth quarter of 21, we will purchase over $3 million for approximately 1 million common shares under our existing common share repurchase program.
Lastly, during the fourth quarter of 'twenty, one, we repurchased over $3 million or approximately 1 million common shares under our existing common share repurchase program.
Speaker 4: For the full year of 2021, we will purchase $27.5 million of common shares or approximately 7.3 million common shares, representing approximately 19% of common shares outstanding as of the beginning of 2021.
For the full year of 2021, we were purchased $27 $5 million of common shares or approximately $7 3 million common shares.
Representing approximately 19% of common shares outstanding as of the beginning of 2021 .
Speaker 4: Since beginning our share repurchases in August 2019, we have repurchased approximately 33% of all shares that were outstanding and issued or reissued since that point in time. As part of.
Since beginning our share repurchases in August 2019, we have repurchased approximately 33% of all shares that were outstanding and issued a we issued since that point in time.
As part of the settlement of the legacy litigation.
Speaker 4: We will repurchase approximately 925,000 shares of Elevate stock that was contributed to the Bankruptcy Trust by a shareholder in Q1 2022.
We will repurchase approximately 925000 shares and elevate stock that was contributed to the bankruptcy trust by shareholder in Q1, 2022 .
Speaker 4: This will represent approximately 3% of our common shares outstanding at December 31, 2021.
This will represent approximately 3% of our common shares outstanding at December 31, 2021.
Speaker 4: We'll evaluate further purchases under the share repurchase plan in the near term as cash allows.
We'll evaluate further purchases under the share repurchase plan in the near term as cash allowed.
Speaker 4: With that, let me turn the call back over to the operator to open it up for Q&A.
With that let me turn the call back over to the operator to open it up for Q&A.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker 1: At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please.
One moment, please while we poll for questions.
Speaker 1: Our first question is from Moshe Orenboek with Credit Suisse. Please proceed with your question.
Our first question is from Moshe Orenbuch with Credit Suisse. Please proceed with your question.
Speaker 5: Hi, this is Phuong, filling in for Moshe, and thanks for the call, guys. My first question is on your revenue guidance, and if it...
Hi, this is filling in for Moshe.
For the call guys.
My first question.
On your revenue guidance.
You bet.
Speaker 5: Assuming you guys don't change your accounting, is it comparable with your current standard of accounting? Can you walk us through what is your assumption into that revenue guidance and maybe loan growth from how you're seeing consumer demand right now?
I mean, you guys I mean change of accounting I mean is it comparable with the current standard accounting and I mean can you walk us through I mean, what is your assumption into that revenue guide and maybe loan growth.
From how you were seeing consumer demand.
Right now thanks.
Speaker 4: Yeah, Hong, this is Chad. So thanks for the question. Yeah, so that revenue guidance is based off our existing, you know, core products. And, you know, it's based off a increase in our combined most receivable 15 to 20 percent. And, you know, with the carryover of higher balances coming from 2021 and the growth in the current year, that's what's leading to the increase. The APRs are relatively flat as well in that assumption.
Yes, Chad so thanks for the question, yes. The net revenue guidance is based off our existing core products and you know what it's based on let's say a increase in our.
Combined loans receivable, a 15% to 20%.
And you know with the carryover of higher balances coming from 2021 and the growth.
In the current year and that's what's leading to that increase the APR is a relatively flat as well.
Assumption.
Okay.
Okay.
Speaker 5: I mean, based on what you guys are seeing right now in terms of the tax refund, I mean, how do you imagine mean balance growth would progress throughout the year?
Gotcha and I mean based on what you guys are seeing right now in terms of the tax refund I mean, how do you imagine mean balance growth.
Progress throughout the year.
Speaker 4: Yeah, right now we're modeling Q1 seasonality with growth taking place in Q2 through Q4. The open question I think with us and with others as well is just exactly how the Q1 seasonality plays out as being an item that we're closely monitoring.
Yeah right now we're modeling you know Q1 seasonality with growth taking place in Q2 through Q4, and you know the open question I think but that's and with others as well, it's just exactly how how the Q1 seasonality plays out and it's paying off.
We're closely monitoring.
Okay.
Okay.
Speaker 5: And if I may ask about your new initiative, I mean, the Swell product, as well as, I mean, today's cart. So, just wondering, I mean, in terms of these new initiatives, I mean, how have we think about the contributions going forward and in the long run, and, I mean, maybe if you could include some color on Blueprint, how you plan to market that to more banks as well?
And if I may ask about.
Issue too.
Well, that's why I asked I mean.
Today. These cart. So we're just wondering I mean, because if you didn't even shifted I mean, how how do we think about the contribution.
And going forward and in the long run and I mean, maybe if you could include some kind of a blueprint how do you plan to market that the more bands as well.
Speaker 2: Yeah, this is Jason. Thanks for the question. Yeah, I think we're really excited about
Yeah. This is Jason thanks. Thanks for the question Yeah, I think we're really excited about the announcement of the small partnership with Central Pacific Bank and a small team and also the continued growth and today card I think from the swell perspective, it's a great chance for other elevate to show how the technology, we built over the last few years and the blueprint technology.
Speaker 2: The announcement of the Swell partnership with Central Pacific Bank and the Swell team and also the continued growth in TodayCard. I think from the Swell perspective, it's a great chance for us at Elevate to show how the technology we've built over the last few years and the blueprint technology stack can embed with some third parties and help them expand access to credit. And I think this is a great opportunity to help Central Pacific move to the mainland here in the U.S.
Will be stacking in bed with some third parties to help them expand access to credit and I think there's a great opportunity to help so from second move in the mainland here in the U S and we see that you know just you know one when we have the business there that will help from a contribution.
Speaker 2: And we see that, you know, just, you know, when we have the business there that will help from a contribution from the licensing of the platform, but also the equity investment long term. So this is a little bit different kind of partnership that we've done in the past.
<unk> from the licensing of the platform, but also the equity investment in long term. So this is a little bit different kind of partnership that we've done in the past. So we're hopeful that not only will we see some some revenue streams coming in for the license of our tech platform, but also over the years to come from some from the equity investment as well and then on the today card here we saw.
Speaker 2: So we're hopeful that not only will we see some revenue streams coming in from the licensing of our tech platform, but also over the years to come, some from the equity investment as well. And then on the today card, we saw some pretty good growth in 2021 with that portfolio. And we're really excited about what that continued growth can be for us here in 2022. It's still, we're not hitting the gas as hard as we could hit it with that portfolio.
Some pretty good growth in 'twenty, one without portfolio.
And we're really excited about what that continued growth can be for us here in 'twenty two it's still Oh, we're not hitting the gas as hard as we could hit it with that portfolio, we want to make sure. We're very measured with that but we're seeing some good good signs there and wanted to make sure that we.
Speaker 2: We want to make sure we're very measured with that, but we're seeing some good signs there and want to make sure that we continue to grow that at a very prudent pace. So excited about these two new opportunities. I think it adds to a nice mix.
We continue to grow that in a very prudent pace. So are excited about these two new opportunities I think it adds to a nice mix with our core base of ryzen elastic and how we work with banks near and those products are.
Speaker 2: with our core base, Verizon, Elastic, and how we work with banks there and those products. And it sets us up for a very strong 22 as we go through the year.
And it sets us up for a very strong 22, as we go through the year.
Gotcha. Thank.
Thank you.
Speaker 1: We have reached the end of the question and answer session, and I will now turn the call over to Jason Harveson for closing remarks.
We have reached the end of the question and answer session and I will now turn the call over to Jason Harvison for closing remarks.
Speaker 2: Just wanted to thank everyone for joining us this afternoon with the fourth quarter call. I think when we look back on 21 we're very happy with those results.
I just wanted to thank everyone for joining us this afternoon for the fourth quarter call I think when we look back on 'twenty. One we're very happy with those results you know coming into the 2021 and there was a lot of uncertainty about what the growth of the portfolio could look like and see it at the end of the year at around 40% growth in the portfolio balances with some new product launches we can.
Speaker 2: Coming into 2021, there was a lot of uncertainty about what the growth of the portfolios could look like. And seeing us end the year at around 40% growth in the portfolio balances with some new product launches. We got to talk about the beginning of this year and wrapping up some legacy litigation there. I think sets us up a nice foundation for 22 and really excited about what new technology, the new partnerships, and our core products can do this year. So look forward to talking more about that in future calls.
Got to talk about at the beginning of this year and wrapping up some legacy litigation there I think sets us up in a nice foundation for 'twenty, two and really excited about what the new technology, the new partnerships in our core products and do this year. So look forward to talking more about that in future calls as well.
Speaker 2: the rest of this year. Thanks so much for your time. Thanks so much for your investment and we'll talk to you soon.
This year. Thanks, so much for your time and thanks, so much for your investment and we'll talk to you soon.
Speaker 1: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
[music].