Elevate Credit, Inc. (NYSE:ELVT) Q3 2018 Earnings Conference Call - Final Transcript

Oct 29, 2018 • 05:00 pm ET


Elevate Credit, Inc. (NYSE:ELVT) Q3 2018 Earnings Conference Call - Final Transcript


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Greetings and welcome to Elevate Credit Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is been recorded. I would now like to turn the conference over to your host Al Comeaux, Chief Communications Officer.

Al Comeaux

Good afternoon and thanks for joining us on Elevate's Third Quarter 2018 Earnings Conference Call. Earlier today we issued a press release with our third quarter 2018 results. A copy of the release is available on our website at elevate.com/investors. Today's call is being webcast and is accompanied by a slide presentation which is also available on our website. Please refer now to slide two of that presentation.

(Forward-Looking Cautionary Statements)

Joining me on the call today are our Chairman and CEO, Ken Rees; as well as our CFO, Chris Lutes. I'll now turn the call over to Ken.

Kenneth Rees

Thank you Al, and thank you all for joining us on our call today. As indicated in our earnings release it was a challenging quarter for Elevate. Turning to slide three, we experienced a number of issues that resulted in a $4.2 million loss for the quarter. The number one driver was related to charge-offs and loan loss provision, because of several important growth opportunities including the FinWise Bank partnership that we'll discuss later. We delayed underwriting-related initiatives, so we're (ph) expected to support improved performance and new customer originations.

Without the benefits expected from these underwriting initiatives, new customer advantages generated higher charge-offs and loan loss provision than originally forecast, and margins didn't improve in line with expectations. This will impact loan growth until we begin rolling out the new underwriting technology and analytics capabilities later this year and into 2019. Additionally the combination of a worsening UK FX rate and increased cost for complaint management had a negative impact on the contribution from our UK product Sunny. While the FX issue was clear, I should spend a minute discussing the UK complaint situation.

In the UK for all financial products, customers can complain to lenders that they shouldn't have been given the loan due to the lack of affordability. If the company declines to reimburse the loan, the customer can also complain to regulators who investigate the charge. This has led to the growth of claims management companies who drive up the volume of complaints in many cases through false complaints. In fact we found many patches 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.

Given that Sunny is an unsecured loan that follows the government's (ph) recent affordability assessment requirement, this is a frustrating situation, made worse by the fact that the regulators assessed (inaudible) GBP550 to investigate the claim. Note that this fee is assessed on our loan that has an average size of GBP400 irrespective of whether they find in the