Full Year Transaction Volume of $5.5
Billion; Net Income of $28.7 Million; Diluted EPS of
$0.14; Adjusted EBITDA of $105.9 Million Fourth
Quarter Net Income of $23.4 Million; Diluted EPS of $0.11
GreenSky, Inc. (NASDAQ: GSKY), a leading financial technology
company Powering Commerce at the Point of Sale®, reported financial
results today for the fourth quarter and fiscal year ended December
31, 2020.
“The momentum witnessed at the end of last year has continued
into 2021 and we are optimistic with respect to transaction volume
growth and lower costs in the upcoming year,” said David Zalik,
GreenSky Chairman and CEO. “Despite a challenging year, we reported
2020 revenue in line with our 2019 results, and I am extremely
proud of the dedication and commitment of our associates who
delivered annual transaction volume in excess of $5.5 billion.
Looking ahead, I am encouraged by the improving consumer credit
trends being observed, and I am cautiously optimistic that 2021
performance will likely be better than initially estimated.
GreenSky is poised to deliver transaction volume growth in excess
of 15% this year and we continue to make solid progress on
strategic initiatives outside of our core home improvement business
and expect to see the results of those strategies over the coming
months.”
“During the last four months of the year, GreenSky secured over
$1 billion in new funding, demonstrating the successful roll-out of
our diversified funding model,” said Andrew Kang, Chief Financial
Officer. “We set a goal to gain access to new sources of liquidity,
and we now have a proven track record of asset sales to both
institutional investors and banks. I am very excited to also
announce that earlier this month, we executed a $1 billion forward
flow sale agreement with a leading life insurance company that will
further support our transaction volume growth into 2022. As market
pricing has improved and restored to pre-pandemic levels, the
economics of our recent sales and forward flow agreement are now
consistent with GreenSky’s historical cost of funds, in contrast to
our initial sale in 2020. With tailwinds in funding and optimism
regarding credit performance, we are raising our 2021 net income
and Adjusted EBITDA guidance.”
Fourth Quarter and Fiscal Year 2020 Financial
Highlights:
- Transaction Volume: Transaction volume in the fourth
quarter of 2020 was $1.3 billion compared to $1.5 billion in the
fourth quarter of 2019. The change in year-over-year volumes
continued to be largely driven by the COVID-19 impact on our
elective healthcare business, and ongoing supply chain issues that
shifted home improvement volumes from the fourth quarter of 2020
into 2021. In addition, our average ticket size in 2020 increased
more than 10% from prior year.
- Transaction Fee Rate: The average transaction fee rate
for the fourth quarter of 2020 was 7.2%, an increase of 40 basis
points from 6.8% in the fourth quarter of 2019. For 2020, the
average transaction fee rate was 7.1% compared to 6.8% in 2019,
reflecting continued demand for certain products offered by our
merchants and consumer preferences for promotional financing.
- Revenue: Fourth quarter revenue was $128.8 million
compared to $135.9 million in the fourth quarter of 2019. Total
revenue for the year ended December 31, 2020 was $525.6 million
compared to $532.6 million during the year ended December 31, 2019.
- Transaction fee revenue was $93.9 million in the fourth quarter
of fiscal 2020 compared to $100.7 million in the fourth quarter of
2019, and $393.1 million for the year compared to $405.9 million in
2019, as the impact of the halt in elective medical procedures
during 2020 was partially offset by an improvement in the
transaction fee rate.
- Total servicing revenue for the quarter and full year 2020
reflect an increase in servicing fees earned on GreenSky's $9.5
billion servicing portfolio and by a lower contribution from
changes in the fair value of our servicing assets.
- In the fourth quarter, our servicing fees were consistent with
the same quarter in 2019. For the year, our servicing fees
increased by $21.9 million driven by an increase in the average
servicing fee and the increase in the size of the portfolio.
- Our servicing revenues from changes in the fair value of our
servicing asset contributed $0.4 million to revenues in the fourth
quarter of 2020, compared to $5.1 million in the fourth quarter of
2019. For the full year 2020, the fair value change of our
servicing assets contributed $0.3 million in servicing revenues
compared to $30.5 million in 2019.
- Interest and other revenue increased to $6.6 million for the
quarter and to $17.1 million for the full year, up from $2.1
million and $3.0 million, respectively, primarily due to increased
interest income earned on loan receivables held for sale in our
warehouse facility.
- Cost of Revenue: Fourth quarter cost of revenue was
$78.5 million, compared to $69.8 million in the fourth quarter of
2019. Full year 2020 cost of revenue was $307.9 million compared to
$249.9 million in 2019.
- We incurred $29.7 million in loan sales costs in the fourth
quarter of 2020, which were offset by a $12.6 million reduction in
bank waterfall costs (the fair value of the FCR liability) in cost
of revenue, and $7.6 million reduction of the non-cash
mark-to-market expense related to sales facilitation obligations in
the fourth quarter of 2020.
- For the year, we had $72.4 million in loan sales costs and
$10.7 million non-cash mark-to-market expense related to sales
facilitation obligations, offset by a $23.4 million decrease in
bank waterfall costs (reflected in the fair value of the FCR
liability).
- Loan sales in 2020 provided an important diversification to our
funding in the second half of the year while maintaining our
targeted level of lifetime profitability for these transaction
volumes.
- Net Income and Diluted Earnings per Share: For the
fourth quarter of 2020, the Company recognized net income of $23.4
million compared to net income of $5.3 million for the same period
in 2019, which resulted in a diluted earnings per share of $0.11,
compared to diluted earnings per share of $0.03 in the fourth
quarter of 2019. For the year ended December 31, 2020, the Company
recognized net income of $28.7 million compared to net income of
$96.0 million for the same period in 2019, which resulted in a
diluted earnings per share of $0.14, compared to diluted earnings
per share of $0.49 for the year ended December 31, 2019.
- Adjusted EBITDA(1): Fourth quarter 2020 Adjusted EBITDA
was $10.2 million compared to $23.7 million in the fourth quarter
2019. For fiscal year 2020, Adjusted EBITDA increased by 1% to
$105.9 million from $105.0 million in 2019. Adjusted EBITDA margin
in the fourth quarter of 2020 was 8% compared to Adjusted EBITDA of
17% in the fourth quarter of 2019. Fiscal year 2020 and 2019
Adjusted EBITDA margin were both 20%.
(1)
Adjusted EBITDA is a non-GAAP measure.
Refer to “Non-GAAP Financial Measures” for important additional
information.
Business Update:
- Merchants. For the full year 2020,
we added more exclusive relationships with merchants who are
expected to generate $10 million or more in annual transaction
volumes than in any prior year. Importantly, we recently renewed
our agreement with our largest single merchant, The Home
Depot.
- Funding Diversification. During
the fourth quarter, GreenSky executed asset sales of approximately
$685 million, and increased the Company's committed warehouse
funding to $555 million. Subsequent to year-end, the Company closed
a $1 billion, 1 year forward flow agreement and executed an
incremental upfront asset sale of approximately $135 million with a
leading life insurance company.
- Credit quality. Our consumer
credit profile in the fourth quarter and full year 2020 continues
to be very high quality. For loans originated on our platform
during 2020, the weighted average FICO credit score was 780.
Consumers with FICO scores over 700 comprised over 88% of the loan
servicing portfolio as of December 31, 2020.
- The 30-day delinquency rate as of December 31, 2020 was 0.99%,
an improvement of 39 basis points over December 31, 2019, and an
improvement of 5 basis points compared to the third quarter of
2020.
- The balances of loans in COVID-19 payment deferral status
represented approximately 0.8% of the total loans serviced by our
platform as of December 31, 2020.
2021 Guidance:
- GreenSky's updated 2021 guidance is as follows:
- Transaction volumes of $6.2 to $6.5 billion;
- Revenues of approximately $584 million;
- Net Income of +/-$0;
- Adjusted EBITDA of $45 to $55 million; and
- Adjusted EBITDA Margin of 8% to 10%.
Conference Call and Webcast:
As previously announced, the Company’s management will host a
conference call today to discuss fourth quarter and full year 2020
results at 9:00 a.m. EST. A live webcast of the conference call,
together with a slide presentation that includes supplemental
financial information and reconciliations of certain non-GAAP
measures to their most directly comparable GAAP measures, will be
accessible through the Company's Investor Relations website at
http://investors.greensky.com. A
replay of the webcast will be available within two 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 $9.5 billion
loan portfolio, and since our inception, over 3.7 million consumers
have financed approximately $28 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; its financial performance; transaction
volume; costs; 2021 performance and financial guidance; the impact
of COVID-19; post-COVID-19 recovery of the elective healthcare
business and the elective healthcare industry; and strategic
initiatives in new industry verticals. 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 and Adjusted EBITDA Margin, 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 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.
Consolidated Balance
Sheets
(United States Dollars in
thousands, except share data)
December 31,
2020
2019
Assets
Cash and cash equivalents
$
147,775
$
195,760
Restricted cash
319,879
250,081
Loan receivables held for sale, net
571,415
51,926
Accounts receivable, net
21,958
19,493
Property, equipment and software, net
21,452
18,309
Deferred tax assets, net
387,951
364,841
Other assets
52,643
50,638
Total assets
$
1,523,073
$
951,048
Liabilities and Equity
(Deficit)
Liabilities
Accounts payable
$
15,418
$
11,912
Accrued compensation and benefits
13,666
10,734
Other accrued expenses
5,207
3,244
Finance charge reversal liability
185,134
206,035
Term loan
452,806
384,497
Warehouse facility
502,830
—
Tax receivable agreement liability
310,425
311,670
Financial guarantee liability
131,894
16,698
Other liabilities
81,169
61,201
Total liabilities
1,698,549
1,005,991
Commitments, Contingencies and
Guarantees
Equity (Deficit)
Class A common stock, par value $0.01 and
91,317,225 shares issued and 76,734,106 shares outstanding at
December 31, 2020 and 80,089,739 shares issued and 66,424,838
shares outstanding at December 31, 2019
912
800
Class B common stock, par value $0.001 and
106,165,105 and 113,517,198 shares issued and outstanding at
December 31, 2020 and 2019, respectively
107
114
Additional paid-in capital
110,938
115,782
Retained earnings
33,751
56,109
Treasury stock
(147,360
)
(146,234
)
Accumulated other comprehensive income
(loss)
(4,340
)
(756
)
Noncontrolling interest
(169,484
)
(80,758
)
Total equity (deficit)
(175,476
)
(54,943
)
Total liabilities and equity (deficit)
$
1,523,073
$
951,048
GreenSky, Inc.
Consolidated Statements of
Operations
(United States Dollars in
thousands, except per share data)
Three Months Ended
December 31,
Year Ended December
31,
2020
2019
2020
2019
(unaudited)
Revenue
Transaction fees
$
93,938
$
100,710
$
393,137
$
405,905
Servicing
28,245
33,119
115,455
123,696
Interest and other
6,624
2,114
17,057
3,021
Total revenue
128,807
135,943
525,649
532,622
Costs and expenses
Cost of revenue (exclusive of depreciation
and amortization shown separately below)
78,506
69,779
307,948
249,878
Compensation and benefits
21,891
22,161
88,049
84,052
Property, office and technology
4,374
4,023
16,616
16,671
Depreciation and amortization
3,150
2,187
11,330
7,304
Sales, general and administrative
12,408
10,507
42,476
33,350
Financial guarantee
(23,402
)
16,664
4,952
20,699
Related party
434
617
1,738
2,412
Total costs and expenses
97,361
125,938
473,109
414,366
Operating profit
31,446
10,005
52,540
118,256
Other income (expense), net
Interest and dividend income
142
590
1,167
3,080
Interest expense
(6,735
)
(5,660
)
(25,024
)
(23,860
)
Other gains (losses), net
(640
)
(3,228
)
1,576
(8,628
)
Total other income (expense), net
(7,233
)
(8,298
)
(22,281
)
(29,408
)
Income before income tax expense
(benefit)
24,213
1,707
30,259
88,848
Income tax expense (benefit)
798
(3,597
)
1,597
(7,125
)
Net income
$
23,415
$
5,304
$
28,662
$
95,973
Less: Net income attributable to
noncontrolling interests
15,210
3,265
18,697
63,993
Net income attributable to GreenSky,
Inc.
$
8,205
$
2,039
$
9,965
$
31,980
Earnings per share of Class A common
stock:
Basic
$
0.11
$
0.03
$
0.15
$
0.52
Diluted
$
0.11
$
0.03
$
0.14
$
0.49
GreenSky, Inc.
Consolidated Statements of
Cash Flows
(United States Dollars in
thousands)
Year Ended December
31,
2020
2019
Cash flows from operating
activities
Net income
$
28,662
$
95,973
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
11,330
7,304
Share-based compensation expense
14,907
13,754
Equity-based payments to non-employees
16
15
Fair value change in servicing assets and
liabilities
(2,157
)
(29,679
)
Operating lease liability payments
(478
)
(394
)
Financial guarantee losses (gains)
(2,816
)
16,072
Amortization of debt related costs
2,549
1,675
Original issuance discount on term loan
payment
(57
)
(42
)
Income tax expense (benefit)
1,597
(7,125
)
Loss on remeasurement of tax receivable
agreement liability
1,386
9,790
Impairment losses
188
—
Mark to market on loan receivables held
for sale
6,342
—
Changes in assets and liabilities:
(Increase) decrease in loan receivables
held for sale
(525,831
)
(49,050
)
(Increase) decrease in accounts
receivable
(2,465
)
(4,049
)
(Increase) decrease in other assets
(5,295
)
(448
)
Increase (decrease) in accounts
payable
3,506
6,860
Increase (decrease) in finance charge
reversal liability
(20,901
)
67,446
Increase (decrease) in guarantee
liability
(7,768
)
—
Increase (decrease) in other
liabilities
29,184
25,225
Net cash provided by/(used in) operating
activities
$
(468,101
)
$
153,327
Cash flows from investing
activities
Purchases of property, equipment and
software
$
(14,567
)
$
(15,381
)
Net cash used in investing activities
$
(14,567
)
$
(15,381
)
Cash flows from financing
activities
Proceeds from term loan
$
70,494
$
—
Repayments of term loan
(4,318
)
(3,958
)
Proceeds from Warehouse Facility
852,060
—
Repayments of Warehouse Facility
(349,230
)
—
Class A common stock repurchases
—
(104,272
)
Member distributions
(51,041
)
(23,468
)
Proceeds from option exercises after
Reorganization Transactions
470
307
Payment of option exercise taxes after
Reorganization Transactions
(1,199
)
(12,351
)
Payment of taxes on Class B common stock
exchanges
—
(2,198
)
Payments under tax receivable
agreement
(12,755
)
(4,664
)
Net cash provided by/(used in) financing
activities
$
504,481
$
(150,604
)
Net increase (decrease) in cash and cash
equivalents and restricted cash
21,813
(12,658
)
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
$
467,654
$
445,841
Supplemental cash flow
information
Interest paid
$
27,612
$
22,429
Income taxes paid
$
13
$
11
Supplemental non-cash investing and
financing activities
Capitalized software accrued but not
paid
$
395
$
—
Distributions accrued but not paid
$
3,136
$
5,978
Reconciliation of Adjusted
EBITDA
(United States Dollars in
thousands)
Three Months Ended
December 31,
Year Ended December
31,
2020
2019
2020
2019
Net income
$
23,415
$
5,304
$
28,662
$
95,973
Interest expense(1)
6,735
5,660
25,024
23,860
Tax expense (benefit)
798
(3,597
)
1,597
(7,125
)
Depreciation and amortization
3,150
2,187
11,330
7,304
Equity-based compensation expense(2)
3,605
4,045
14,923
13,769
Financial guarantee liability -
Non-renewal of Bank Partner(3)
—
16,215
—
16,215
Financial guarantee liability -
Escrow(4)
(26,274
)
(205
)
—
(241
)
Servicing asset and liability
changes(5)
(787
)
(4,870
)
(2,157
)
(29,679
)
Mark-to-market on sales facilitation
obligations(6)
(7,607
)
—
10,655
—
Discontinued charged-off receivables
program(7)
—
(6,487
)
—
(29,190
)
Transaction and non-recurring
expenses(8)
7,193
5,477
15,818
14,149
Adjusted EBITDA
$
10,228
$
23,729
$
105,852
$
105,035
Adjusted EBITDA margin
8
%
17
%
20
%
20
%
(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 Consolidated
Financial Statements included in Item 8 for additional discussion
of share-based compensation.
(3)
Includes losses recorded in the fourth
quarter of 2019 associated with the financial guarantee arrangement
for a Bank Partner that did not renew its loan origination
agreement when it expired in November 2019. See Note 14 to the
Notes to Consolidated Financial Statements included in Item 8 for
additional discussion of financial guarantee arrangements.
(4)
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 and
recognized a cumulative adjustment to reverse all previous amounts
adjusted in 2020.
(5)
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.
2019 and 2018 amounts have been updated to be consistent with the
Company's 2020 presentation in accordance with our Non-GAAP policy.
See Note 3 to the Notes to Consolidated Financial Statements
included in Item 8 for additional discussion of servicing assets
and liabilities.
(6)
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 Consolidated Financial
Statements included in Item 8 for additional discussion.
(7)
Includes the amounts related to the now
discontinued program of transferring our rights to charged-off
receivables to third parties. 2019 and 2018 amounts have been
updated to be consistent with the Company's 2020 presentation in
accordance with our Non-GAAP policy.
(8)
For the years ended December 31, 2020 and
2019, includes (i) legal fees associated with IPO litigation and
regulatory matter, (ii) professional fees associated with our
strategic alternatives review process, and (iii) loss on
remeasurement of our tax receivable agreement liability. The year
ended December 31, 2020 also includes increased costs resulting
from the COVID-19 pandemic.
Reconciliation of Forecasted
2021 Adjusted EBITDA
(United States Dollars in
millions)
Year Ended December 31,
2021
Net income
$
0
Interest expense(1)
25
Tax expense (benefit)
1
Depreciation and amortization
13
Equity-based compensation expense(2)
17
Servicing asset and liability
changes(3)
(10
)
Mark-to-market on sales facilitation
obligations(4)
4
Adjusted EBITDA
$
50
Adjusted EBITDA margin
9
%
(1)
Interest expense on the SPV Facility and
its related loans receivables held for sale are excluded from the
adjustment above as such amounts are a component of cost of revenue
in our on-going business.
(2)
Includes equity-based compensation to
employees and directors, as well as equity-based payments to
non-employees.
(3)
Includes the non-cash changes in the fair
value of servicing assets and servicing liabilities related to our
servicing assets associated with Bank Partner agreements and other
contractual arrangements.
(4)
Mark-to-market on sales facilitation
obligations reflects changes in the fair value in the embedded
derivative for sales facilitation obligations. The balance of these
obligations after December 31, 2021 is expected to be relatively
consistent over the remaining forecasted periods presented. The
changes in fair value are recognized as a mark-to-market expense in
cost of revenue for the period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210310005152/en/
Tom Morabito 470.284.7013 investors@greensky.com
GreenSky (NASDAQ:GSKY)
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