Update on $ELVT 2Q earnings for anyone that is following this one. Bottom line - thought it was a fine quarter, with elements of my thesis generally intact or confirmed. More detail below 👇
Most important point: the Company is back in growth mode. Consolidated portfolio grew by +13% sequentially on a QoQ basis. Majority of growth happened in May and June, with momentum continuing into July. Very good to see - the overhang of tepid credit demand is lifting
Second - credit quality remains strong. Loan loss provisions were 35% of revenues for the quarter, still at the bottom of historical ranges. Credit quality will probably revert to historical norms at some point, but still a tailwind for the biz for the time being
Crazy pace of share buybacks continues. They bought back $8mm worth of shares in 2Q, and reduced share count by 2.3mm (average buyback price of ~$3.5/share). Mgmt. guided to $6mm of additional buybacks for 3Q'21, so more on the way as expected. Nothing new, but good confirmation
Mgmt. is guiding to $475-500mm of loans receivable by the end of the year - robust growth in 2H'21 expected, but reading between the lines, mgmt. also seems to be focused on sound underwriting and credit quality control rather than blindly chasing growth, in my opinion
Small potatoes for now, but Today Card is growing really nicely and offers some optionality for value creation in the future as well. Nice to diversify into the near-prime category too, as long as the economics justify this effort. I guess the jury's out on this for now
Finally - they guided to $50-60mm of EBITDA for the full year. This is of course a 50%+ decline vs. prior year, but this is NOT a cause for alarm. Because of upfront loan loss provisioning, this was well expected as portfolio returns to growth this year from a low base
Also they are turning the marketing engine back on, which will pressure EBITDA in the near term but this is part and parcel of their strategy of growing profitably again. As long as CACs remain in historical ranges, I don't see this as an issue at all.
In sum, I think this was a fine quarter, and expect the stock to grind tighter in the coming weeks/months as people get additional comfort with the story, and the Company keep buying back stock at deep discounts to intrinsic value
In terms of buybacks - this is not sustainable of course. At some point, something will need to give way... either the Company buys back the entire float over the next couple years or the share price responds appropriately. Not too long to wait imo
$ELVT is already a huge position for me so I am happily holding here, and may even buy a little bit more on any severe dislocations. I see someone freaked out (wrongly, imho) after hours at $3.30 and got snapped up quite quickly... Just in case anyone was wondering about this
GLTA and DYODD. Happy to hear from anyone with differing takes or opinions. Always respect other views as long as there is reasoning behind them
• • •
Missing some Tweet in this thread? You can try to
force a refresh
