A report published last year estimated the global consumer lending balances outstanding at the end of 2015 at $42.3 trillion, recording a growth of 3.3% since 2011. Within the sector, residential mortgage accounted for $32.9 trillion and non-mortgage consumer lending accounted for $7.5 trillion, excluding credit card loans and credit card balances of $1.8 trillion. Over the past few years, this non-mortgage lending industry has seen the emergence of newer, non-traditional banking institutions such as Lending Club, OnDeck, Prosper, and Elevate Credit. Elevate Credit is now looking to list on the stock market after delaying those plans for over two years.
Elevate Credit’s Offerings
Fort Worth, Texas-based Elevate Credit was formed in 2014 after an organizational restructuring. It was initially a part of Think Finance, a leading provider of analytics and technology that helps lenders meet the needs of non-prime consumers. As business for Think Finance grew, it decided to spin off its portfolio of branded consumer lending products into another online lending platform called Elevate. Elevate began with Think Finance’s key products Rise, Elastic, and Sunny while Think Finance retained the business of providing analytics and technology services to third-party lenders.
Today, Elevate still focuses on providing technology-driven, progressive online credit solutions to non-prime consumers. Non-prime consumers normally have credit scores of less than 700 and find it difficult to get loans from banks. Elevate uses advanced technology and proprietary risk analytics to provide more convenient and responsible financial options to these customers. It currently offers online installment loans and lines of credit in the US and UK.
Elevate’s Rise is available in 15 states in the US and allows for consumers to take loans ranging from $500 to $5,000 payable in 4-26 months at interest rates starting at 36%. Sunny is a similar product with different interest terms, but available only in the UK. Elastic is also a US-based product, available in 40 states and allows consumers to take loans ranging from $500 to $3,500 payable within ten months. Instead of charging an interest rate, Elastic charges its customers an initial price of $5 per $100 borrowed and an additional fee of up to 5% of outstanding principal per billing period.
However, along with the products, Elevate also inherited some bad press from Think Finance. Think Finance had become known for its extremely high costs of credit. The Annual Percentage Rate on its loans had reached as high as 365% around the time of the spin-off. But Elevate has managed to contain some of that growth. APR for Rise has fallen to 158% and Elastic operates at an APR of 89%.
Elevate Credit’s Financials
Elevate has seen rapid growth since launching its product offerings. Together, Rise, Elastic, and Sunny, have provided nearly $2.2 billion in credit to approximately 714,000 customers. Revenues for the fiscal year ended December 2015 grew 59% to $434 million. For the nine months ended September 2016, revenues were $411.4 million. After years of losses, Elevate finally appears to be turning profitable. Operating income for the year ended December 2015 came in at $9 million compared with a loss of $61 million a year ago. For the nine months ended September 2016, operating income improved to $31 million compared with a loss of $4 million a year ago. Analysts estimate its 2016 revenues to be nearly $550 million.
Elevate has raised $615 million since it split from Think Finance in the form of loans. It also has backing from Sequoia Capital and TCV, both of which had invested in venture rounds in Think Finance. In 2015, Elevate filed its S-1 to go public on the NYSE under the ticker ELVT, offering 3.6 million shares and expecting them to be priced between $20 and $22 per share. But depressed stock market conditions and economic volatility forced it to delay its IPO. In January, it filed an amended S-1 registration and analysts expect it to go public this year.
Elevate should still be watching out for some of its peers who haven’t had a very strong run on the public markets. Peer-to-peer lending firm Lending Club listed in 2014 at $15 a share. Today, the stock is trading at $5.21 with a market capitalization of just over $2 billion. Lending Club had reported revenues of $500 million for 2016 and an operating loss of $150 million. Small business lender OnDeck hasn’t fared much better. It listed in 2014 at $20 a share and is now trading at $4.48 with a market capitalization of $322 million. OnDeck is much smaller with revenues of $140.9 million for 2016 and an operating loss of $85.5 million. Clearly Elevate, with its profitability and size is at a comparative advantage.
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This segment is a part in the series : 2017 IPO Prospects