EX-99.1 2 gskyexhibit991q12019.htm EXHIBIT 99.1 Exhibit


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GreenSky, Inc. Reports First Quarter 2019 Financial Results

Transaction Volume up 20% to $1.2 Billion
Net Income of $7.4 Million; Adjusted EBITDA of $18.7 Million
Diluted EPS of $0.05
Fiscal 2019 Guidance Reaffirmed

Atlanta, May 7, 2019, GreenSky, Inc. (“GreenSky” or the “Company”) (NASDAQ: GSKY), a leading financial technology company Powering Commerce at the Point of SaleSM, reported financial results today for the three months ended March 31, 2019.

"We are off to a solid start in 2019. Our first quarter operating results, which were in line with our seasonal expectations, demonstrate strong demand and a deep competitive moat," said David Zalik, Chairman and CEO of GreenSky. "Our momentum has continued nicely into the second quarter, and we continue to have confidence in our full year plan of top-line revenue growth with strong profitability, supported by more than ample liquidity. We will continue to take an aggressive approach to investing in innovation, leveraging our expense infrastructure with a continued emphasis upon increasing shareholder value."

First Quarter Financial Highlights:

•
Transaction Volume and Transaction Fee Rate: First quarter transaction volume increased 20% over the prior year to $1.2 billion. The average transaction fee rate was 6.8% in the first quarter, compared to 6.9% the prior year.

•
Revenue: First quarter revenue grew 22% over the prior year to $103.7 million from $85.3 million.

•
Net Income and Pro Forma Net Income (1): GAAP Net Income for the first quarter of 2019 was $7.4 million or $0.05 per diluted share. First quarter Pro Forma Net Income was $6.5 million, which reflected incremental pro forma tax expense assuming all of our noncontrolling interests were subject to corporate income taxation at our full year expected tax rate of 19.25%.

•
Adjusted EBITDA and Adjusted EBITDA Margin (1): First quarter Adjusted EBITDA was $18.7 million and 18% of revenue compared to $27.5 million and 32% of revenue for the first quarter of 2018. Consistent with the Company’s expectations, the combination of investing in the growth of its elective healthcare vertical, the lag effect of higher APR originations (which will translate into higher incentive payments in the second half of 2019 and into 2020), continued investment in sales and technology, as well as the higher costs of being a public company served to offset revenue growth in the first quarter.  Notwithstanding first quarter seasonality, the Company expects full year Adjusted EBITDA margin of approximately 40%.

•
Bank Partner Commitments: As of March 31, 2019, the Company had aggregate commitments of $11.8 billion from its nine Bank Partners, $4.5 billion of which were unused.

•
Liquidity: As of March 31, 2019, the Company had unrestricted cash of $268 million, in addition to an unused $100 million working capital line of credit available.









Key business metrics:

 
 
Three Months Ended March 31,
 
 
 
 
2019
 
2018
 
Growth
Active Merchants (at end of period)
 
15,745

 
12,231

 
29
%
Transaction Volume ($ millions)
 
$
1,242

 
$
1,033

 
20
%
Loan Servicing Portfolio ($ millions)(2)
 
$
7,612

 
$
5,693

 
34
%
Cumulative Consumer Accounts (in thousands)
 
2,415

 
1,709

 
41
%
Origination Productivity Index(3)
 
21.9
%
 
21.9
%
 
n/m

__________________________
(1)
Pro Forma Net Income and Adjusted EBITDA are non-GAAP measures. Refer to “Non-GAAP Financial Measures” for important additional information.
(2)
The average loan servicing portfolio for the three months ended March 31, 2019 and 2018 was $7,477 million and $5,541 million, respectively.
(3)
This index captures projected future gross cash flows related to the respective period's originations, expressed as a percentage of the period's originations. Refer to the First Quarter 2019 Earnings Presentation for additional information.

Business update:

•
American Express Alliance: Over 3,600 merchants have been referred to GreenSky for enrollment evaluation since the American Express alliance launched in early September 2018. The program was extended to include elective healthcare in February 2019.

•
Sponsor Relationships: In the first quarter, the Company signed key sponsor relationships with a field services software company, a dental practice management software company, and an HVAC home services software enterprise, whereby the GreenSky financing platform will be integrated into the Sponsors' software offerings to provide seamless promotional payment options to prospective consumer borrowers.

•
Share Repurchases: During the first quarter of 2019, the Company repurchased approximately 4.3 million shares of its Class A common stock at a cost of $50.9 million under the Company's Board-approved $150 million share repurchase program. From March 31, 2019 through April 30, 2019, the Company repurchased an additional 0.1 million shares at an incremental cost of $1.3 million. Since announcing the share repurchase program, the Company has repurchased 9.1 million shares of its Class A common stock at a cost of $96.1 million.

2019 Financial Guidance:

Based on the Company's first quarter 2019 performance, its fiscal 2019 planning and current market conditions, GreenSky reaffirms the fiscal 2019 guidance that it issued on March 5, 2019 and, in that regard, expects to achieve the following during fiscal 2019:

•
Transaction Volume to increase 27% to 35% over fiscal 2018 to between $6.4 and $6.8 billion.
•
Revenue to grow between 30% and 38% over fiscal 2018 to between $538 and $572 million.
•
Pro Forma Net Income to grow between 17% and 28% over fiscal 2018 to between $128 and $140 million using an assumed 19.25% effective tax rate (previously 21.5%).
•
Adjusted EBITDA to grow between 22% and 31% over fiscal 2018 to between $210 and $225 million.
•
Average fully diluted shares outstanding in fiscal 2019 of approximately 184 million (previously 185 million).

Conference call and webcast:

As previously announced, the Company’s management will host a conference call to discuss first quarter 2019 results at 8:00 a.m. EST today. 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, 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) is a leading technology company Powering Commerce at the Point of SaleSM for a growing ecosystem of merchants, consumers and banks. Our highly scalable, proprietary technology platform enables nearly 16,000 merchants to offer frictionless promotional payment options to consumers, driving increased sales volume and accelerated cash flow. Banks leverage GreenSky’s technology to provide loans to super-prime and prime consumers nationwide. Since our inception, over 2.4 million consumers have financed over $17 billion of commerce using our paperless, real time “apply and buy” technology. GreenSky is headquartered in Atlanta, Georgia. For more information, visit https://www.greensky.com.

Forward-Looking Statements

This press release contains forward-looking statements that reflect our current views with respect to, among other things, our operations and financial performance; transaction volume, profitability; 2019 financial guidance; demand for our products; and launch of new products. 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 our filings with the Securities and Exchange Commission and include, but are not limited to, risks related to our ability to retain existing, and attract new, merchants and Bank Partners; our 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; our ability to operate successfully in a highly regulated industry; the effect of management changes; cyberattacks and security vulnerabilities in our products and services; and our 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, we disclaim 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 Pro Forma Net Income, 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 is one of the key financial indicators of our business performance over the long term and provides 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 can provide useful supplemental information to help investors better understand the economics of our platform. We believe that 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 substitutes 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 each of the foregoing non-GAAP financial measures to the most directly comparable GAAP financial measure is provided below for each of the fiscal periods indicated.


Contacts:
Investor Relations    
Rebecca Gardy
404-334-7334
Rebecca.gardy@greensky.com

Media
Julia Sahin, Edelman
212.738.6131
media@greensky.com

(tables follow)





GreenSky, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except share data)
 
 
March 31, 2019
 
December 31, 2018
 
 
Assets
 
 
 
 
Cash and cash equivalents
$
267,798

 
$
303,390

 
Restricted cash
174,860

 
155,109

 
Loan receivables held for sale, net
1,999

 
2,876

 
Accounts receivable, net
18,073

 
15,400

 
Related party receivables
125

 
142

 
Property, equipment and software, net
12,156

 
10,232

 
Operating lease right-of-use assets
10,657

 
—

 
Deferred tax assets, net
337,758

 
306,979

 
Other assets
9,299

 
8,777

 
Total assets
$
832,725

 
$
802,905

 
 
 
 
 
 
Liabilities and Equity (Deficit)
 
 
 
 
Liabilities
 
 
 
 
Accounts payable
$
19,764

 
$
5,357

 
Accrued compensation and benefits
3,032

 
8,484

 
Other accrued expenses
2,239

 
1,015

 
Finance charge reversal liability
149,598

 
138,589

 
Term loan
386,243

 
386,822

 
Tax receivable agreement liability
286,557

 
260,901

 
Related party liabilities
825

 
825

 
Operating lease liabilities
13,325

 
—

 
Other liabilities
44,402

 
35,677

 
Total liabilities
905,985

 
837,670

 
 
 
 
 
 
       Commitments, Contingencies and Guarantees
 
 
 
 
 
 
 
 
 
Equity (Deficit)
 
 
 
 
Class A common stock, par value $0.01 and 71,170,387 shares issued and 62,151,547 shares outstanding at March 31, 2019 and 59,197,863 shares issued and 54,504,902 shares outstanding at December 31, 2018
711

 
591

 
Class B common stock, par value $0.001 and 119,187,862 and 128,549,555 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
119

 
129

 
Additional paid-in capital
80,543

 
44,524

 
Retained earnings
27,030

 
24,218

 
Treasury stock
(94,828
)
 
(43,878
)
 
Noncontrolling interest
(86,835
)
 
(60,349
)
 
Total equity (deficit)
(73,260
)
 
(34,765
)
 
Total liabilities and equity (deficit)
$
832,725

 
$
802,905






GreenSky, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share data)
 
Three Months Ended
March 31,
2019
 
2018
Revenue
 
 
 
Transaction fees
$
84,048

 
$
70,940

Servicing and other
19,652

 
14,386

Total revenue
103,700

 
85,326

Costs and expenses
 
 
 
Cost of revenue (exclusive of depreciation and amortization shown separately below)
58,037

 
36,130

Compensation and benefits
19,633

 
16,343

Sales and marketing
1,203

 
828

Property, office and technology
4,414

 
2,722

Depreciation and amortization
1,467

 
970

General and administrative
6,922

 
4,173

Related party expenses
536

 
583

Total costs and expenses
92,212

 
61,749

Operating profit
11,488

 
23,577

Other income/(expense), net
 
 
 
Interest and dividend income
1,596

 
1,320

Interest expense
(6,243
)
 
(5,591
)
Other gains/(losses)
(35
)
 
(702
)
Total other income/(expense), net
(4,682
)
 
(4,973
)
Income before income tax expense/(benefit)
6,806

 
18,604

Income tax expense/(benefit)
(595
)
 
—

Net income
$
7,401

 
$
18,604

Less: Net income attributable to noncontrolling interests
4,502

 
N/A

Net income attributable to GreenSky, Inc.
$
2,899

 
N/A

 
 
 
 
Earnings per share of Class A common stock(1)
 
 
 
Basic
$
0.05

 
N/A

Diluted
$
0.05

 
N/A


(1)    Basic and diluted earnings per share of Class A common stock are not applicable prior to the initial public offering and related Reorganization Transactions.





GreenSky, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
 
Three Months Ended March 31,
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
7,401

 
$
18,604

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
1,467

 
970

Share-based compensation expense
2,665

 
1,001

Equity-based payments to non-employees
3

 
4

Operating lease liability payments
(145
)
 
(94
)
Amortization of debt related costs
421

 
417

Fair value change in assets and liabilities
181

 
116

Original issuance discount on term loan payment
(10
)
 
—

Deferred tax expense/(benefit)
(595
)
 
—

Changes in assets and liabilities:
 
 
 
(Increase)/decrease in loan receivables held for sale
878

 
6,315

(Increase)/decrease in accounts receivable
(2,672
)
 
991

(Increase)/decrease in related party receivables
17

 
60

(Increase)/decrease in other assets
(273
)
 
(177
)
Increase/(decrease) in accounts payable
14,713

 
5,005

Increase/(decrease) in finance charge reversal liability
11,009

 
6,765

Increase/(decrease) in related party liabilities
—

 
(76
)
Increase/(decrease) in other liabilities
8,395

 
(4,353
)
Net cash provided by operating activities
43,455

 
35,548

 
 
 
 
Cash flows from investing activities
 
 
 
Purchases of property, equipment and software
(3,391
)
 
(792
)
Net cash used in investing activities
(3,391
)
 
(792
)
 
 
 
 
Cash flows from financing activities
 
 
 
Proceeds from term loan
—

 
399,000

Repayments of term loan
(990
)
 
(349,125
)
Member distributions
(2,724
)
 
(19,259
)
Purchases of treasury stock
(51,047
)
 
—

Payment of equity transaction expenses
—

 
(32
)
Payment of taxes on Class B common stock exchanges
(742
)
 
—

Proceeds from option exercises
174

 
—

Payment of option exercise taxes
(576
)
 
—

Net cash provided by/(used in) financing activities
(55,905
)
 
30,584

 
 
 
 
Net increase/(decrease) in cash and cash equivalents and restricted cash
(15,841
)
 
65,340

Cash and cash equivalents and restricted cash at beginning of period
458,499

 
353,838

Cash and cash equivalents and restricted cash at end of period
$
442,658

 
$
419,178

 
 
 
 
Supplemental non-cash financing activities
 
 
 
Equity transaction costs accrued but not paid
$
—

 
$
82

Distributions accrued but not paid
8,247

 
12,024

Treasury stock traded but not settled
1,934

 
—












Reconciliation of Adjusted EBITDA
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income
$
7,401

 
$
18,604

Interest expense
6,243

 
5,591

Tax expense/(benefit)(1)
(498
)
 
66

Depreciation and amortization
1,467

 
970

Equity-related expense(2)
2,668

 
1,005

Fair value change in servicing liabilities(3)
181

 
116

Transaction expenses(4)
—

 
1,123

Non-recurring expenses(5)
1,216

 
—

Adjusted EBITDA
$
18,678

 
$
27,475

(1) Includes both corporate and non-corporate tax expense/(benefit). Non-corporate tax expense is included within general and administrative expenses in our Unaudited Condensed Consolidated Statements of Operations. Prior to the IPO and Reorganization Transactions, we did not have any corporate income taxes.
(2) Includes equity-based compensation to employees and directors, as well as equity-based payments to non-employees.
(3) Includes the non-cash impact of the initial recognition of servicing liabilities and subsequent fair value changes in such servicing liabilities during the periods presented.
(4) 
For the first three months of 2018, includes certain costs, such as legal and debt arrangement costs, related to our March 2018 term loan upsizing.
(5) 
For the first three months of 2019, includes the following: (i) legal fees associated with IPO related litigation of $435 thousand, (ii) one-time tax compliance fees related to filing the final tax return for the Former Corporate Investors associated with the Reorganization Transactions of $160 thousand, and (iii) lien filing expenses related to certain Bank Partner solar loans of $621 thousand.

Reconciliation of Pro Forma Net Income
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income
$
7,401

 
$
18,604

Transaction expenses(1)
—

 
1,123

Non-recurring expenses(2)
1,216

 
—

Incremental pro forma tax expense(3)
(2,139
)
 
(4,401
)
Pro Forma Net Income
$
6,478

 
$
15,326

(1) For the first three months of 2018, includes certain costs, such as legal and debt arrangement costs, related to our March 2018 term loan upsizing.
(2) For the first three months of 2019, includes the following: (i) legal fees associated with IPO related litigation of $435 thousand (ii) one-time tax compliance fees related to filing the final tax return for the Former Corporate Investors associated with the Reorganization Transactions of $160 thousand, and (iii) lien filing expenses related to certain Bank Partner solar loans of $621 thousand.
(3) Represents the incremental tax effect on net income, adjusted for non-recurring transaction and other expenses, assuming that all consolidated net income was subject to corporate taxation assuming a full year effective tax rate of 19.25% for March 31, 2019 and 22.3% for March 31, 2018.