Revenue of $136.5 million Net Income
of $46.7 million; Diluted EPS of $0.22 Adjusted EBITDA of
$60.8 million with an Adjusted EBITDA Margin of 45%
GreenSky, Inc. (NASDAQ: GSKY), a leading financial technology
company Powering Commerce at the Point of Sale®, reported financial
results today for the second quarter ended June 30, 2021.
“GreenSky set company records for Net Income and Adjusted EBITDA
in the second quarter, and our strong performance has enabled us to
materially raise our full-year 2021 profitability guidance,” said
David Zalik, GreenSky’s Chairman and Chief Executive Officer.
“We delivered on a number of key initiatives this quarter that
positions GreenSky for continued success in the second half of the
year, 2022 and beyond.” Zalik continued, “We expanded our
technology advantages with the release of an updated mobile
application providing borrowers with enhanced access to credit
through GreenSky’s platform. Our unparalleled commitment to
technology, service and innovation led to the win of several new or
expanded strategic merchant and sponsor partnerships, including an
exclusive five‑year, first‑look agreement with EGIA, one of the
nation’s largest association of HVAC contractors. Looking ahead, we
are excited to announce the launch of a new residential solar
program later this year, which will further contribute to our
continued strong momentum.”
GreenSky grew second quarter transaction volume by 14%
year-over-year, notwithstanding recent challenges in the home
improvement supply chain and labor market. Consumer demand remained
strong, with approved credit lines at an all-time record high at
the end of the second quarter.
“Our margins increased substantially in the second quarter,
reflecting lower cost of operations, lower cost of funds and strong
portfolio performance. Net Income increased by $33 million and
Adjusted EBITDA increased by $21 million, compared to the prior
year,” said Andrew Kang, GreenSky’s Chief Financial Officer. “Our
Adjusted EBITDA margin was 45% in the second quarter, and we now
expect to outperform the long-term profitability goals we set out
at the beginning of this year,” Mr. Kang added.
In addition to achieving record profitability, GreenSky’s
unrestricted cash position improved to over $200 million at the end
of the quarter. The Company also increased its existing bank
partner and forward flow commitments by a combined $1.1 billion in
the quarter and sold an additional $547 million in loans,
contributing to the Company’s lower cost of funds and higher
margins.
Second Quarter Financial Highlights:
- Transaction Volume: Second quarter transaction volume
was $1.5 billion, an increase of 14% when compared to the second
quarter of 2020. Approved credit lines for the quarter were the
highest in Company history and are a positive leading indicator of
momentum as home improvement supply chain and labor market
shortages ease.
- Transaction Fee Rate and APR at Origination: When
compared to the first quarter of 2021, the average transaction fee
rate increased 2 bps to 6.63%. APR at origination for the second
quarter was 13.5%.
- Revenue: Second quarter total revenue was $136.5
million, compared to $133.0 million during the same period in the
prior year.
- Transaction fee revenue was $102.4 million compared to $101.8
million in the second quarter of 2020 with the increase
attributable to 14% growth in transaction volume.
- Total servicing revenue was $31.4 million in the second quarter
compared to $28.5 million in the same period of the prior
year.
- Cost of Revenue: Total cost of revenue decreased $21.4
million, or 33%, compared to the second quarter of 2020. This
improvement includes $16.8 million related to strong credit
performance in our bank waterfall and reflects the current benefit
of prior loan sales.
- Credit Quality: Credit performance was stable, with
thirty-day plus delinquencies of 0.70% at June 30, 2021, an
improvement of 29 basis points versus 0.99% at year end December
31, 2020.
- Net Income and Diluted Earnings per Share: For the
second quarter of 2021, the Company recognized net income of $46.7
million compared to net income of $13.4 million for the same period
of 2020, resulting in diluted earnings per share of $0.22, compared
to diluted earnings per share of $0.06 in the second quarter of
2020.
- Adjusted Pro Forma Net Income and Adjusted Earnings per
Share(1): For the second quarter of 2021, the Company
recognized adjusted pro forma net income of $44.6 million, compared
to $12.7 million for the second quarter of 2020, which resulted in
adjusted pro forma diluted earnings per share of $0.25, compared to
$0.07 for the second quarter of 2020.
- Adjusted EBITDA(1): Second quarter Adjusted EBITDA was a
company record $60.8 million, an increase of 53% from $39.8 million
in the second quarter in 2020. Adjusted EBITDA margin improved to
45% in the second quarter of 2021, up from 30.0% in the second
quarter of 2020. The Company’s year-to-date Adjusted EBITDA margin
is 36.6%.
(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 and Sponsors: During the second quarter,
GreenSky added or expanded several significant merchant and sponsor
partnerships including:
- An exclusive five-year contract with existing merchant sponsor,
Electric & Gas Industries Association (“EGIA”), which reflects
a market share win against our competitors. The relationship is
expected to generate an incremental $300 million in 2022
transaction volumes and to reach up to $1 billion in annual
transaction volumes during the exclusivity period;
- An innovative new alliance with a leading digital marketplace
for home services; and
- New merchant agreements with two national manufacturers in the
kitchens and bathrooms category.
- Our total merchant and sponsor additions in the second quarter
are expected to contribute up to $500 million in incremental 2022
annual transaction volumes, with the opportunity for additional
significant growth.
- Funding: During the second quarter, GreenSky increased
existing bank partner commitments by $640 million and increased our
forward flow commitments by $500 million for a combined increase of
$1.1 billion; and completed $547 million in forward flow and other
asset sales.
- Liquidity: At June 30, 2021, the Company had $303
million available corporate liquidity, consisting of unrestricted
cash of $203 million and $100 million undrawn and available under a
revolving credit facility.
- Resolution of Regulatory Inquiry: In July, the Company
entered into an agreement with the Consumer Financial Protection
Bureau to resolve its inquiry regarding consumer complaints related
to allegedly unauthorized loans initiated by certain merchants. As
of June 30, 2021, the Company was fully reserved with respect to
the agreement, which had a $6.5 million impact on second quarter
pre-tax income, with such amount reflected as a non‑recurring item
in deriving the Company’s adjusted EBITDA.
Updated 2021 Guidance:
- Transaction volume of $6.0 billion to $6.2 billion
- Revenue of $520 million to $540 million
- Net Income of $100 million to $110 million
- Adjusted EBITDA of $160 million to $175 million
- Adjusted EBITDA Margin of 30% to 35%
Conference call and webcast:
As previously announced, the Company’s management will host a
conference call to discuss second quarter 2021 results at 9:00 a.m.
ET on July 29, 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 billion
loan portfolio, and since our inception, approximately 4 million
consumers have financed more than $30 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; strategic initiatives; 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, merchants and sponsors,
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 the 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.
GreenSky, Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited)
(Dollars in thousands, except
share data)
June 30, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
203,289
$
147,775
Restricted cash
266,529
319,879
Loan receivables held for sale, net
309,383
571,415
Accounts receivable, net of allowance of
$196 and $313, respectively
17,337
21,958
Property, equipment and software, net
22,350
21,452
Deferred tax assets, net
382,672
387,951
Other assets
109,407
52,643
Total assets
$
1,310,967
$
1,523,073
Liabilities and Equity
(Deficit)
Liabilities
Accounts payable
$
15,905
$
15,418
Accrued compensation and benefits
11,824
13,666
Other accrued expenses
16,939
5,207
Finance charge reversal liability
141,605
185,134
Term loan
451,731
452,806
Warehouse facility
256,628
502,830
Tax receivable agreement liability
307,595
310,425
Financial guarantee liability
115,073
131,894
Other liabilities
112,133
81,169
Total liabilities
1,429,433
1,698,549
Commitments, Contingencies and
Guarantees
Equity (Deficit)
Class A common stock, $0.01 par value and
94,251,161 shares issued and 78,792,505 shares outstanding at June
30, 2021 and 91,317,225 shares issued and 76,734,106 shares
outstanding at December 31, 2020
942
912
Class B common stock, $0.001 par value and
105,451,261 shares issued and outstanding at June 30, 2021 and
106,165,105 shares issued and outstanding at December 31, 2020
106
107
Additional paid-in capital
115,309
110,938
Retained earnings
53,827
33,751
Treasury stock
(149,490)
(147,360)
Accumulated other comprehensive income
(loss)
(3,335)
(4,340)
Noncontrolling interests
(135,825)
(169,484)
Total equity (deficit)
(118,466)
(175,476)
Total liabilities and equity (deficit)
$
1,310,967
$
1,523,073
GreenSky, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except
per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Revenue
Transaction fees
$
102,440
$
101,777
$
188,097
$
191,661
Servicing
31,375
28,481
66,042
59,764
Interest and other
2,703
2,704
7,551
3,394
Total revenue
136,518
132,962
261,690
254,819
Costs and expenses
Cost of revenue (exclusive of depreciation
and amortization shown separately below)
43,935
65,377
107,932
137,682
Compensation and benefits
21,918
21,724
44,391
43,888
Property, office and technology
4,529
4,178
8,988
8,099
Depreciation and amortization
3,479
2,762
6,795
5,207
Sales, general and administrative
10,881
8,526
25,523
18,455
Financial guarantee expense (benefit)
(5,880)
10,248
(9,763)
28,656
Related party
452
477
904
954
Total costs and expenses
79,314
113,292
184,770
242,941
Operating profit
57,204
19,670
76,920
11,878
Other income (expense), net
Interest and dividend income
140
246
277
868
Interest expense
(6,721)
(5,894)
(13,335)
(11,514)
Other gains, net
670
830
1,428
1,806
Total other income (expense), net
(5,911)
(4,818)
(11,630)
(8,840)
Income before income tax expense
51,293
14,852
65,290
3,038
Income tax expense
4,582
1,497
6,454
602
Net income
$
46,711
$
13,355
$
58,836
$
2,436
Less: Net income attributable to
noncontrolling interests
30,381
9,222
38,708
1,637
Net income attributable to GreenSky,
Inc.
$
16,330
$
4,133
$
20,128
$
799
Earnings per share of Class A common
stock:
Basic
$
0.23
$
0.06
$
0.28
$
0.01
Diluted
$
0.22
$
0.06
$
0.27
$
0.01
Weighted average shares of Class A
common stock outstanding:
Basic
72,546,876
65,150,317
72,204,893
64,400,507
Diluted
179,827,920
177,185,705
179,682,073
177,256,166
GreenSky, Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended June
30,
2021
2020
Cash flows from operating
activities
Net income (loss)
$
58,836
$
2,436
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
6,795
5,207
Share-based compensation expense
7,736
6,972
Equity-based payments to non-employees
7
8
Fair value change in servicing assets and
liabilities
(11,494)
(1,738)
Operating lease liability payments
(371)
(305)
Financial guarantee expense (benefit)
(16,820)
28,656
Amortization of debt related costs
1,692
968
Original issuance discount on term loan
payment
(36)
(10)
Income tax expense
6,452
602
Impairment losses
—
174
Mark to market on loan receivables held
for sale
3,863
10,072
Changes in assets and liabilities:
(Increase) decrease in loan receivables
held for sale
258,169
(369,098)
(Increase) decrease in accounts
receivable
4,621
(573)
(Increase) decrease in other assets
(48,483)
(3,632)
Increase (decrease) in accounts
payable
487
1,444
Increase (decrease) in finance charge
reversal liability
(43,529)
(7,280)
Increase (decrease) in guarantee
liability
(26,583)
(63)
Increase (decrease) in other
liabilities
74,921
(7,682)
Net cash provided by (used in) operating
activities
276,263
(333,842)
Cash flows from investing
activities
Purchases of property, equipment and
software
(7,361)
(8,524)
Net cash used in investing activities
(7,361)
(8,524)
Cash flows from financing
activities
Proceeds from term loan
—
70,494
Repayments of term loan
(2,339)
(2,073)
Proceeds from Warehouse facility
215,800
299,000
Repayments of Warehouse facility
(462,002)
—
Member distributions
(11,920)
(33,419)
Payments under tax receivable
agreement
(4,098)
—
Proceeds from option exercises
27
—
Tax withholding payments on stock
compensation
(2,206)
(73)
Net cash provided by (used in) financing
activities
(266,738)
333,929
Net increase (decrease) in cash and cash
equivalents and restricted cash
2,164
(8,437)
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
$
469,818
$
437,404
Supplemental non-cash investing and
financing activities
Distributions accrued but not paid
1,570
4,073
Capitalized software costs accrued but not
paid
395
317
Beneficial interest in contingent
consideration
12,479
—
Reconciliation of Adjusted
EBITDA
(Dollars in thousands)
Three Months Ended June
30,
Six Months Ended
June 30,
2021
2020
2021
2020
Net income (loss)
$
46,711
$
13,355
$
58,836
$
2,436
Interest expense(1)
6,721
5,894
13,335
11,514
Income tax expense (benefit)
4,582
1,497
6,454
602
Depreciation and amortization
3,479
2,762
6,795
5,207
Equity-based compensation expense(2)
4,031
3,481
7,743
6,980
Financial guarantee liability -
Escrow(3)
—
10,248
—
28,656
Servicing asset and liability
changes(4)
(3,989)
568
(11,494)
(1,738)
Mark-to-market on sales facilitation
obligations(5)
(7,827)
—
781
—
Transaction and non-recurring
expenses(6)
7,111
2,025
13,451
3,258
Adjusted EBITDA
$
60,819
$
39,830
$
95,901
$
56,915
Total revenue
$
136,518
$
132,962
$
261,690
$
254,819
Adjusted EBITDA Margin
44.6%
30.0%
36.6%
22.3%
(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 servicing liabilities related to our
servicing assets associated with Bank Partner agreements 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 June 30, 2021
primarily includes legal fees associated with IPO litigation and
regulatory matter. The six months ended June 30, 2020, includes
legal fees associated with IPO litigation and regulatory matter and
professional fees associated with our strategic alternatives review
process.
Reconciliation of Adjusted Pro
Forma Net Income
(Dollars in thousands)
Three Months Ended June
30,
Six Months Ended
June 30,
2021
2020
2021
2020
Net income (loss)
$
46,711
$
13,355
$
58,836
$
2,436
Transaction and non-recurring
expenses(1)
7,111
2,025
13,451
3,258
Incremental pro forma tax expense(2)
(9,178)
(2,652)
(12,441)
(1,378)
Adjusted Pro Forma Net Income
$
44,644
$
12,728
$
59,846
$
4,316
(1)
The three months ended June 30, 2021
primarily includes legal fees associated with IPO litigation and
regulatory matter. The six months ended June 30, 2020, includes
legal fees associated with IPO litigation and regulatory matter 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 a full year effective tax rate of 23.56% and 24% for the
three and six months ended June 30, 2021, respectively, and for the
three and six months ended June 30, 2020, a tax rate of 24.58%.
Reconciliation of Adjusted Pro
Forma Diluted EPS
(Dollars in thousands)
Three Months Ended June
30,
Six Months Ended
June 30,
2021
2020
2021
2020
GAAP Diluted EPS
$
0.22
$
0.06
$
0.27
$
0.01
Transaction and non-recurring expenses
0.04
0.01
0.07
0.02
Incremental pro forma tax expense(1)
(0.01)
—
(0.02)
(0.01)
Adjusted Pro Forma Diluted
EPS(2)
$
0.25
$
0.07
$
0.32
$
0.02
Weighted average shares of Class A common
stock outstanding – diluted
179,827,920
177,185,705
179,682,073
177,256,166
(1)
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 a full year effective tax rate of 23.56% and 24%
for the three and six months ended June 30, 2021, respectively, and
for the three and six months ended June 30, 2020, a tax rate of
24.58%.
(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/20210728006079/en/
Brinker Dailey (470) 284-7017 investors@greensky.com
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