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GreenSky, Inc. Reports Record Net Income and Adjusted EBITDA; Raises Full Year Net Income and Adjusted EBITDA Guidance

  • Wednesday, July 28, 2021, 2:35 pm
  • ACROFAN=Businesswire
  • webmaster@businesswire.com

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%


ATLANTA--(BUSINESS WIRE)--$GSKY--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 https://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)