Industry News
Elevate Posts Loss in “Unexpectedly Challenging” Third Quarter
November 7, 2018Elevate 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.
Payroll Costs Still Exceed Revenues at StreetShares
November 7, 2018
According to the June 30 fiscal year-end earnings report for StreetShares, the veteran-run small business lender, the company’s annual payroll expenses of $4,580,130 exceeded its annual revenue of $3,078,766.
StreetShares, which focuses on lending to veteran-owned small businesses, posted a loss of $6,559,702, more than last year’s loss of $6,193,154. But revenue did increase year over year, from $2,168,067 to $3,078,766.
“Our patient approach means we’re not going to be profitable for a couple more years,” StreetShares CEO Mark Rockefeller told deBanked back in January in response to the fact that the company’s losses from 2017 exceeded its revenues by about 4 million. “But it also means we’ll still be here in 50 years.”
The gulf between StreetShares’ losses and revenues is narrower this year, but still considerable. In January 2018, StreetShares completed a $23 million series B funding round led by Rotunda Capital Partners, LLC.
StreetShares offers term loans and business lines of credit from $2,000 to $250,000. This in an increase from last year’s maximum loan amount of $150,000. Loans can be repaid between three months and three years.
Founded in 2013 and based in Reston, VA, StreetShares now employs 46 people, up from 32 last year.
OnDeck Reports Record Origination Volume in Third Quarter Report
November 6, 2018
Today, OnDeck released its third quarter earnings report, which revealed origination volume of $648 million, a record high for the company and an increase of 22% from a year ago. OnDeck recently passed the $10 billion mark in total originations. The average term loan size of $56,000 remained largely unchanged from last quarter.
“Lending volume from our strategic funding advisor and referral partner channels continues to build, reflecting growth at our network of partners and alignment between the quality of applications coming in and our risk appetite,” said OnDeck CEO Noah Breslow, “…[and] we were pleased that we saw increased website traffic leading to higher applications.”
Gross revenue increased to $103 million, up 8% from the previous quarter and up 23% from a year ago. This was driven by higher Interest income due to portfolio growth and higher yields, according to the company earnings statement.
In the middle of October, OnDeck announced the creation of ODX, which will focus on providing an online lending platform to banks to help them serve their clients more efficiently. At the end of the month, and coinciding with the Money 20/20 conference, OnDeck announced that PNC Bank was ODX’s first customer. ODX grew out of a successful partnership that OnDeck has developed with Chase bank, starting in 2016.
In response to a question after this morning’s earnings call, Breslow said that about $10 million is being spent on startup costs and infrastructure for ODX, and that the revenue model will be slightly different depending on the bank client.
“The revenue model [for ODX] does differ a bit between banks,” Breslow said. “But generally speaking, there is a technology licensing component, there is a professional services or customization component and then there is a volume-based component.”
Shopify Capital Issued $76.4M in Merchant Cash Advances in Q3
October 25, 2018Shopify Capital, Shopify’s funding arm, issued $76.4 million in merchant cash advances in the third quarter, the company revealed. That brings the total to $375 million advanced since April 2016.
Overall, the company reported Q3 revenue of $270.1 million and a net loss of $23.2 million.
The company operates an e-commerce platform for online stores and retail POS systems.
OnDeck (ODX) Adds PNC Bank as Second Bank Client
October 22, 2018
PNC Bank announced today that in 2019 it plans to offer fully digital business lines of credit by using OnDeck’s Platform-as-a-Service solution, ODX, a new subsidiary of the online lender.
Last week, OnDeck announced the creation of ODX, which is an OnDeck subsidiary that will focus soleIy on helping banks become faster, more efficient online lenders to small businesses. A successful partnership with Chase bank in 2016 prompted OnDeck leadership to created a separate entity and PNC Bank is ODX’s first major client.
“We decided strategically this year to really make a big bet… [and be a] company that’s going to support many banks,” OnDeck CEO Noah Breslow told deBanked.
In New Jersey, Yellowstone Capital Buoys Volunteer Ambulance Organization
October 19, 2018
Hatzalah of Union County, New Jersey, a volunteer ambulance organization, has saved hundreds of lives thanks to its volunteer-only team and its three ambulances, all funded by donations from Yellowstone Capital CEO Isaac Stern and the company’s employees over the past seven years. Total donations from Yellowstone Capital, including from Stern, have exceeded $300,000.
“[Stern] is our largest supporter and he spreads through Yellowstone the opportunity to give,” said Yudi Abraham, chief of the Union County Hatzalah operation. “He’s gotten everyone there into the idea of giving back.”
In 2015, Stern held a fundraiser barbecue dinner at his home and in a subsequent year, he organized a fundraiser barbecue in a public New Jersey park, to accommodate more people.
While Hatzalah (which means “rescue” in Hebrew) is primarily a Jewish organization, anyone – regardless of background – can call the hotline and get emergency medical attention, free of charge. The emergency number varies depending on where you live. The first Hatzalah emergency team was founded in Brooklyn in the late 1960s and the Hatzalah of Union County was started in 2004.
Abraham explained that the Hatzalah model is different from 911 ambulances in that the all-volunteer force generally arrives within three minutes in their own personal vehicles that are equipped with oxygen, a defibrillator, a full trauma kit and an emergency childbirth kit. The Hatzalah ambulance then arrives at the scene shortly minutes later.
Over the past year, with donations from Yellowstone, Hatzalah of Union County has upgraded its emergency radio dispatch system from analog to digital, Abraham said.
“Yellowstone has truly been a partner for us,” Abraham said.
OnDeck Launches New Subsidiary
October 16, 2018
OnDeck announced today that it has created a new subsidiary, called ODX, which will help banks become more efficient online lenders. OnDeck’s CEO Noah Breslow told deBanked that ODX is an expansion of OnDeck’s successful partnership with JPMorgan, which started in 2016.
“We created what at the time was I think a pretty groundbreaking partnership with the largest bank in the country,” Breslow said. “Now today, we’re funding loans very efficiently using our platform and [Chase’s] marketing and their balance sheet. And it really is sort of the promise of a fintech working with a bank. So we decided strategically this year to really make a big bet in this area…[and create] a company that’s going to support many banks.”
OnDeck has chosen Brian Geary to serve as president of ODX. Breslow said this is because Geary launched and oversaw the collaboration with Chase, whereby OnDeck built a digital bank originations platform for the bank.
“Geary has really been the focal point of that entire effort,” Breslow said, “so he was a very natural choice to head this up.”
OnDeck has drawn talent from among its existing employees to create this company, but it also hired Raj Kolluri to serve as Head of Product and Technology for ODX. And Geary said they are actively hiring to build the team. Kolluri comes from SS&C Primatics, a software company, where he served as Vice President of Product and Engineering, helping to build the company’s software as a service analytics platform for banks.
When asked if helping banks to become faster online lenders is a way of aiding OnDeck’s own competitors, Geary said he didn’t see it that way.
“We don’t view it as competitive,” Geary said. “The banks and OnDeck are playing in different segments of the market. [Banks] have a tighter risk tolerance and certain customers they can serve. So we’re enabling them to serve those customers more efficiently.”
Breslow said that ODX, which he described as “a company within a company,” will soon be announcing its next bank partnership.
ODX will operate within the offices of OnDeck, including its offices in New York, Arlington, VA and Denver, CO.
Congressman Tom MacArthur Visits CFG Merchant Solutions’ NYC Office
October 15, 2018United States Representative Tom MacArthur, who represents New Jersey’s 3rd District, visited the NYC office of CFG Merchant Solutions on Monday. MacArthur has been in office since 2014.
CFG Merchant Solutions moved into the 180 Maiden Lane office earlier this year. The company is a member of the Commercial Finance Coalition (CFC). Adam Sloane of Cresthill Capital, another CFC member, was also in attendance.
