Elevate Posts Loss in “Unexpectedly Challenging” Third Quarter

Elevate reported a $4.2 million loss for the third quarter of 2018 and also lowered its outlook for full-year 2018 net income to between $10 million to $14 million.

“Despite strong year-to-date growth in revenue and stable credit quality, the third quarter of 2018 was unexpectedly challenging,” said CEO of Elevate Ken Rees in prepared remarks. “We experienced delays in rolling out new technology and credit models that are needed to drive continued improvements in credit quality for our US products. As a result of these and other issues, new customer acquisition and credit quality were both relatively flat with the prior year and anticipated improvements in margins were not realized.”

Rees also explained in the company earnings call that Elevate incurred unexpected costs in its UK operation related to an increase in complaints about its Sunny product, encouraged by UK claims management companies.

“We found many batches of complaints from claims management companies in which the majority of complaints that are made about Sunny, don’t even come from actual Sunny customers,” Rees said.

Still, year over year revenue did increase nearly 17% for the third quarter of 2018, totaling $201.5 million compared to $172.9 million last year at the same time.

The third quarter loss comes not long after a robust first quarter of 2018 which saw a 459% increase in net income year over year from $1.7 million in Q1 2017 to $9.5 million in Q1 2018.     

During the third quarter earnings call, Rees announced an agreement between Elevate (NYSE: ELVT) and Utah-based FinWise Bank that will expand Elevate’s RISE product to an additional 18 states. According to Rees, FinWise will use Elevate’s marketing and underwriting expertise for the RISE branded loans that the bank originates. This is similar to Elevate’s current relationship with Republic Bank, which originates Elevate’s Elastic line of credit.

“FinWise clearly appreciates what we’ve built and wanted to take this established product and offer it to more consumers in more places,” Rees said. “This will not only offer more Americans more and better credit options, but it will also make marketing the RISE product much more efficient, spreading out the per-loan cost of national advertising,” Rees said during the earnings call.

At Money 20/20 this year, Rees conveyed that he’s an advocate for banks working with fintech companies and expressed an interest in working with more banks.

Elevate offers three products to non-prime customers: RISE, a state-licensed online lender that offers up to $5,000 in unsecured installment loans and lines of credit, Elastic, a bank-issued line of credit, and Sunny, a short-term loan product for customers in the UK. RISE and Elastic serve the US market.   

Founded in 2014, the Fort Worth, TX-based company has originated $6.3 billion in credit to more than 2.1 million consumers.