Elevate Credit, Inc. (Form: 10-Q, Received: 05/07/2021 10:22:54)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-37680

ELEVATE CREDIT, INC.

(Exact name of registrant as specified in its charter)

Delaware

46-4714474

State or Other Jurisdiction of
Incorporation or Organization

I.R.S. Employer Identification Number

4150 International Plaza,

Suite 300

Fort Worth,

76109

Address of Principal Executive Offices

Zip Code

(817)

928-1500

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $0.0004 par value	ELVT	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes			☒			No			☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).


Yes			☒			No			☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Non-accelerated filer	☒
Accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class						Outstanding at May 5, 2021
Common Shares, $0.0004 par value						35,752,680

TABLE OF CONTENTS


Note About Forward-Looking Statements			4
Part I - Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	6
		Unaudited Condensed Consolidated Statements of Operations for the three months ended M arch 3 1 , 202 1 and 20 20	7
		Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 3 1 , 202 1 and 20 20	8
		Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 3 1 , 202 1 and 20 20	9
		Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 1 and 20 20	10
		Notes to Unaudited Condensed Consolidated Financial Statements	12
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70
	Item 4.	Controls and Procedures	71
Part II - Other Information
	Item 1.	Legal Proceedings	72
	Item 1A.	Risk Factors	73
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78



	Item 6.	Exhibits	79
SIGNATURES			80

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained throughout this Quarterly Report on Form 10-Q, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Risk Factors." Forward-looking statements include information concerning our strategy, future operations, future financial position, future revenues, projected expenses, margins, prospects and plans and objectives of management. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our expectations regarding our revenue, cost of revenue, growth rate of revenue, cost of borrowing, credit losses, marketing costs, net charge-offs, gross profit or gross margin, operating expenses, operating margins, loans outstanding, credit quality, ability to generate cash flow and ability to achieve and maintain future profitability;

•the effects of the outbreak and continuation of the novel coronavirus ("COVID-19") on demand for our products, our business, our financial condition and results of operations, including as a result of the expansion of our payment flexibility program to provide temporary relief to certain customers, underwriting changes we and the bank originators we support are implementing to address credit risk associated with originations during the economic crisis created by the COVID-19 pandemic, and new legislation or other governmental responses to the pandemic;

•the availability of debt financing, funding sources and disruptions in credit markets;

•our ability to meet anticipated cash operating expenses and capital expenditure requirements, including our plans with respect to assessing minimum cash and liquidity requirements and implementing measures to ensure that our cash and liquidity position is maintained through the current economic cycle;

•anticipated trends, growth rates, seasonal fluctuations and challenges in our business and in the markets in which we operate;

•our ability to anticipate market needs and develop new and enhanced or differentiated products, services and mobile apps to meet those needs, and our ability to successfully monetize them;

•our expectations with respect to trends in our average portfolio effective annual percentage rate;

•our anticipated growth and growth strategies and our ability to effectively manage that growth;

•our anticipated expansion of relationships with strategic partners, including banks;

•customer demand for our product and our ability to respond to fluctuations in demand;

•our ability to attract potential customers and retain existing customers and our cost of customer acquisition;

•the ability of customers to repay loans;

•interest rates and origination fees on loans;

•the impact of competition in our industry and innovation by our competitors;

•our ability to attract and retain necessary qualified directors, officers and employees to expand our operations;

•our reliance on third-party service providers;

•our access to the automated clearing house system;

•the efficacy of our marketing efforts and relationships with marketing affiliates;

•our anticipated direct marketing costs and spending;

•the evolution of technology affecting our products, services and markets;

•continued innovation of our analytics platform, including releases of new credit models;

•our ability to prevent security breaches, disruption in service and comparable events that could compromise the personal and confidential information held in our data systems, reduce the attractiveness of the platform or adversely impact our ability to service loans;

•our ability to detect and filter fraudulent or incorrect information provided to us by our customers or by third parties;

•our ability to adequately protect our intellectual property;

•our compliance with applicable local, state, federal and foreign laws;

•our compliance with, and the effects on our business and results of operations from, current or future applicable regulatory developments and regulations, including developments or changes from the Consumer Financial Protection Bureau ("CFPB") and developments or changes in state law;

•regulatory developments or scrutiny by agencies regulating our business or the businesses of our third-party partners;

•public perception of our business and industry;

•the anticipated effect on our business of litigation or regulatory proceedings to which we or our officers are a party;

•the anticipated effect on our business of natural or man-made catastrophes;

•the increased expenses and administrative workload associated with being a public company;

•failure to maintain an effective system of internal controls necessary to accurately report our financial results and prevent fraud;

•our liquidity and working capital requirements;

•the estimates and estimate methodologies used in preparing our consolidated financial statements;

•the utility of non-GAAP financial measures;

•the future trading prices of our common stock and the impact of securities analysts’ reports on these prices;

•our anticipated development and release of certain products and applications and changes to certain products;

•our anticipated investing activity;

•trends anticipated to continue as our portfolio of loans matures; and

•any future repurchases under our share repurchase program, including the timing and amount of repurchases thereunder.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.


Elevate Credit, Inc. and Subsidiaries

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS


(Dollars in thousands except share amounts)	March 31, 2021		December 31, 2020
	(unaudited)
ASSETS
Cash and cash equivalents*	$	140,300	$	197,983
Restricted cash	3,035		3,135
Loans receivable, net of allowance for loan losses of $39,037 and $48,399, respectively*	335,285		374,832
Prepaid expenses and other assets*	10,806		10,060
Operating lease right of use assets	7,304		8,320
Receivable from CSO lenders	198		1,255
Receivable from payment processors*	5,263		6,147
Deferred tax assets, net	22,600		25,958
Property and equipment, net	32,547		34,000
Goodwill, net	6,776		6,776
Intangible assets, net	230		1,133

Total assets	$	564,344	$	669,599

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities (See Note 13)*	$	42,816	$	52,252
Operating lease liabilities	11,294		11,952

Deferred revenue*	2,226		3,134
Notes payable, net (See Note 5)*	341,035		438,403

Total liabilities	397,371		505,741
COMMITMENTS, CONTINGENCIES AND GUARANTEES (Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock; $0.0004 par value; 24,500,000 authorized shares; none issued and outstanding at March 31, 2021 and December 31, 2020.	—		—
Common stock; $0.0004 par value; 300,000,000 authorized shares; 44,960,438 and 44,960,438 issued; 35,654,988 and 37,954,138 outstanding, respectively	18		18


Additional paid-in capital	201,618		200,433
Treasury stock; at cost; 9,305,450 and 7,006,300 shares of common stock, respectively	(26,611)		(16,492)
Accumulated deficit	(8,052)		(20,101)

Total stockholders’ equity	166,973		163,858
Total liabilities and stockholders’ equity	$	564,344	$	669,599

* These balances include certain assets and liabilities of variable interest entities (“VIEs”) that can only be used to settle the liabilities of that respective VIE. All assets of the Company are pledged as security for the Company’s outstanding debt, including debt held by the VIEs. For further information regarding the assets and liabilities included in the Company's consolidated accounts, see Note 4—Variable Interest Entities.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
(Dollars in thousands, except share and per share amounts)	2021		2020
Revenues	$	89,733	$	162,467
Cost of sales:
Provision for loan losses	20,970		78,575
Direct marketing costs	4,383		10,969
Other cost of sales	2,047		2,670
Total cost of sales	27,400		92,214
Gross profit	62,333		70,253
Operating expenses:
Compensation and benefits	19,008		23,474
Professional services	7,079		7,926
Selling and marketing	533		954
Occupancy and equipment	4,956		4,636
Depreciation and amortization	5,243		4,296
Other	775		1,071
Total operating expenses	37,594		42,357
Operating income	24,739		27,896
Other expense:
Net interest expense (See Note 13)	(8,786)		(13,656)


Non-operating income (loss)	207		(4,263)
Total other expense	(8,579)		(17,919)
Income from continuing operations before taxes	16,160		9,977
Income tax expense	3,444		2,055
Net income from continuing operations	12,716		7,922
Net loss from discontinued operations	—		(12,833)
Net income (loss)	$	12,716	$	(4,911)

Basic earnings per share
Continuing operations	$	0.35	$	0.18
Discontinued operations	—		(0.29)
Basic earnings (loss) per share	$	0.35	$	(0.11)

Diluted earnings per share
Continuing operations	$	0.34	$	0.18
Discontinued operations	—		(0.29)
Diluted earnings (loss) per share	$	0.34	$	(0.11)

Basic weighted average shares outstanding	36,582,502		43,161,716
Diluted weighted average shares outstanding	37,579,050		43,631,737

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


(Dollars in thousands)	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	12,716	$	(4,911)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0 and $(14), respectively	—		(2,003)


Total other comprehensive income (loss), net of tax	—		(2,003)
Total comprehensive income (loss)	$	12,716	$	(6,914)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

For the periods ended March 31, 2021 and 2020


(Dollars in thousands except share amounts)	Preferred Stock		Common Stock			Additional paid-in capital		Treasury Stock			Accumulated deficit		Accumulated other comprehensive income (loss)		Total
	Shares	Amount	Shares	Amount				Shares	Amount
Balances at December 31, 2019	—	—	43,676,826	$	18	$	193,061	768,910	$	(3,344)	$	(34,342)	$	1,096	$	156,489
Share-based compensation -US	—	—	—	—		2,748		—	—		—		—		2,748
Share-based compensation -UK	—	—	—	—		27		—	—		—		—		27
Exercise of stock options, net	—	—	34,185	—		(51)		—	—		—		—		(51)
Vesting of restricted stock units, net	—	—	28,913	—		(314)		—	—		—		—		(314)


Comprehensive loss:
Foreign currency translation adjustment net of tax of $(14)	—	—	—	—		—		—	—		—		(2,003)		(2,003)

Treasury stock acquired	—	—	(928,386)	—		—		928,386	(4,203)		—		—		(4,203)
Treasury stock reissued for RSUs vesting	—	—	188,961	—		—		(188,961)	830		(830)		—		—
Net income from continuing operations	—	—	—	—		—		—	—		7,922		—		7,922
Net loss from discontinued operations	—	—	—	—		—		—	—		(12,833)		—		(12,833)
Balances at March 31, 2020	—	—	43,000,499	$	18	$	195,471	1,508,335	$	(6,717)	$	(40,083)	$	(907)	$	147,782

Balances at December 31, 2020	—	—	37,954,138	18		200,433		7,006,300	(16,492)		(20,101)		—		163,858
Share-based compensation -US	—	—	—	—		1,602		—	—		—		—		1,602








Treasury stock acquired	—	—	(2,480,741)	—		—		2,480,741	(10,813)		—		—		(10,813)
Treasury stock reissued for RSUs vesting	—	—	169,091	—		(417)		(169,091)	621		(621)		—		(417)
Treasury stock reissued for Stock Option Exercise	—	—	12,500	—		—		(12,500)	73		(46)		—		27
Net income from continuing operations	—	—	—	—		—		—	—		12,716		—		12,716

Balances at March 31, 2021	—	—	35,654,988	$	18	$	201,618	9,305,450	$	(26,611)	$	(8,052)	$	—	$	166,973

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Dollars in thousands)	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	12,716	$	(4,911)
Less: Net loss from discontinued operations, net of tax	—		12,833
Net income from continuing operations	12,716		7,922
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	5,243		4,296
Provision for loan losses	20,970		78,575
Share-based compensation	1,602		2,748
Amortization of debt issuance costs	182		171
Amortization of loan premium	946		1,523


Amortization of operating leases	(191)		(116)
Deferred income tax expense, net	3,359		416


Non-operating (gain) loss	(207)		4,263
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(744)		(52)

Income taxes payable	—		1,639
Receivables from payment processors	884		1,600
Receivables from CSO lenders	1,057		1,875
Interest receivable	(4,334)		(18,054)


Deferred revenue	(873)		(2,811)
Accounts payable and accrued liabilities	(8,730)		(10,694)
Net cash provided by continuing operating activities	31,880		73,301
Net cash provided by discontinued operating activities	—		3,398
Net cash provided by operating activities	31,880		76,699
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans receivable originated or participations purchased	(133,899)		(226,399)
Principal collections and recoveries on loans receivable	156,203		210,883
Participation premium paid	(1,081)		(1,400)
Purchases of property and equipment	(3,383)		(4,520)
Proceeds from sale of intangible assets	1,250		—
Net cash provided by (used in) continuing investing activities	19,090		(21,436)
Net cash provided by discontinued investing activities	—		2,978
Net cash provided by (used in) investing activities	19,090		(18,458)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable	$	5,000	$	6,500
Payments of notes payable	(102,550)		(34,000)



Debt issuance costs paid	—		(51)



Common stock repurchased	(10,813)		(4,203)
Proceeds from stock option exercises	27		27
Taxes paid related to net share settlement of equity awards	(417)		(314)
Net cash used in continuing financing activities	(108,753)		(32,041)
Net cash used in discontinued financing activities	—		(12,939)
Net cash used in financing activities	(108,753)		(44,980)

Net increase (decrease) in cash, cash equivalents and restricted cash	(57,783)		13,261
Change in cash, cash equivalents and restricted cash from discontinued operations	—		6,563
Change in cash, cash equivalents and restricted cash from continuing operations	(57,783)		19,824

Cash and cash equivalents, beginning of period	197,983		71,215
Restricted cash, beginning of period	3,135		2,235
Cash, cash equivalents and restricted cash, beginning of period	201,118		73,450

Cash and cash equivalents, end of period	140,300		91,139
Restricted cash, end of period	3,035		2,135
Cash, cash equivalents and restricted cash, end of period	$	143,335	$	93,274

Supplemental cash flow information:
Interest paid	$	9,603	$	13,677
Taxes paid	$	41	$	—

Non-cash activities:
CSO fees charged-off included in Deferred revenues and Loans receivable	$	30	$	423

CSO fees on loans paid-off prior to maturity included in Receivable from CSO lenders and Deferred revenue	$	5	$	21
Annual membership fee included in Deferred revenues and Loans receivable	$	—	$	1
Reissuances of Treasury stock	$	694	$	830

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three months ended March 31, 2021 and 2020

NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING CHANGES

Business Operations

Elevate Credit, Inc. (the “Company”) is a Delaware corporation. The Company provides technology-driven, progressive online credit solutions to non-prime consumers. The Company uses advanced technology and proprietary risk analytics to provide more convenient and more responsible financial options to its customers, who are not well-served by either banks or legacy non-prime lenders. The Company currently offers unsecured online installment loans, lines of credit and credit cards in the United States (the “US”). The Company’s products, Rise, Elastic and Today Card, reflect its mission of “Good Today, Better Tomorrow” and provide customers with access to competitively priced credit and services while helping them build a brighter financial future with credit building and financial wellness features. In the United Kingdom ("UK"), the Company previously offered unsecured installment loans via the internet through its wholly owned subsidiary, Elevate Credit International Limited, (“ECIL”) under the brand name of Sunny. On June 29, 2020, ECIL entered into administration in accordance with the provisions of the UK Insolvency Act 1986 and pursuant to a resolution of the board of directors of ECIL. The onset of Coronavirus Disease 2019 ("COVID-19") coupled with the lack of clarity within the UK regulatory environment led to the decision to place ECIL into administration. The management, business, affairs and property of ECIL have been placed into the direct control of the appointed administrators, KPMG LLP. Accordingly, the Company deconsolidated ECIL as of June 29, 2020 and presents ECIL's results as discontinued operations for all periods presented. See Note 12—Discontinued Operations for more information regarding the presentation of ECIL.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three month periods ended March 31, 2021 and 2020 include the accounts of the Company, its wholly owned subsidiaries and variable interest entities ("VIEs") where the Company is the primary beneficiary. All significant intercompany transactions and accounts have been eliminated.

The unaudited condensed consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted in the US (“US GAAP”) for interim financial information and Article 10 of Regulation S-X and conform, as applicable, to general practices within the finance company industry. The principles for interim financial information do not require the inclusion of all the information and footnotes required by US GAAP for complete financial statements. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020 in the Company's Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission ("SEC") on February 26, 2021. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. The Company's business is seasonal in nature so the results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant items subject to such estimates and assumptions include the valuation of the allowance for loan losses, goodwill, long-lived and intangible assets, deferred revenues, contingencies, the income tax provision, valuation of share-based compensation, operating lease right of use assets, operating lease liabilities and the valuation allowance against deferred tax assets. The Company bases its estimates on historical experience, current data and assumptions that are believed to be reasonable. Actual results in future periods could differ from those estimates.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

As the impact of the COVID-19 pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the condensed consolidated financial statements as new events occur and additional information becomes known. To the extent the Company’s actual results differ materially from those estimates and assumptions, the Company's future financial statements could be affected.

Revenue Recognition

The Company recognizes consumer loan fees as revenues for each of the loan products it offers. Revenues on the Condensed Consolidated Statements of Operations include: finance charges, lines of credit fees, fees for services provided through CSO programs (“CSO fees”), and interest, as well as any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. Other revenues also include marketing and licensing fees received from the originating lender related to the Elastic product and Rise bank-originated loans and from CSO fees related to the Rise product. Revenues related to these fees are recognized when the service is performed.

The Company accrues finance charges on installment loans on a constant yield basis over their terms. The Company accrues and defers fixed fees such as CSO fees and lines of credit fees when they are assessed and recognizes them to earnings as they are earned over the life of the loan. The Company accrues interest on credit cards based on the amount of the credit card balance outstanding and the related contractual interest rate. Credit card membership fees are amortized to revenue over the card membership period. Other credit card fees, such as late payment fees and returned payment fees, are accrued when assessed. The Company does not accrue finance charges and other fees on installment loans or lines of credit for which payment is greater than 60 days past due. Credit card interest charges are recognized based on the contractual provisions of the underlying arrangements and are not accrued when payment is past due more than 90 days. Installment loans and lines of credit are considered past due if a grace period has not been requested and a scheduled payment is not paid on its due date. Credit cards have a grace period of 25 days and are considered delinquent after the grace period. Payments received on past due loans are applied against the loan and accrued interest balance to bring the loan current. Payments are generally first applied to accrued fees and interest and then to the principal loan balance.

The spread of COVID-19 since March 2020 has created a global public health crisis that has resulted in unprecedented disruption to businesses and economies. In response to the pandemic's effects, and in accordance with federal and state guidelines, the Company expanded its payment flexibility programs for its customers, including payment deferrals. This program allows for a deferral of payments for an initial period of 30 to 60 days, and generally up to a maximum of 180 days on a cumulative basis. A customer will return to the normal payment schedule after the end of the deferral period with the extension of the maturity date equivalent to the deferral period, which is generally not to exceed an additional 180 days. The finance charges will continue to accrue at a lower effective interest rate over the expected term of the loan as adjusted for the deferral period provided (not to exceed an amount greater than the amount at which the borrower could settle the loan) or placed on non-accrual status.

The Company’s business is affected by seasonality, which can cause significant changes in portfolio size and profit margins from quarter to quarter. Although this seasonality does not impact the Company’s policies for revenue recognition, it does generally impact the Company’s results of operations by potentially causing an increase in its profit margins in the first quarter of the year and decreased margins in the second through fourth quarters.

Installment Loans, Lines of Credit and Credit Cards

Installment loans, lines of credit and credit cards, including receivables for finance charges, fees and interest, are unsecured and reported as Loans receivable, net of allowance for loan losses on the Condensed Consolidated Balance Sheets. Installment loans are multi-payment loans that require the pay-down of portions of the outstanding principal balance in multiple installments through the Rise brand. Line of credit accounts include customer cash advances made through the Elastic brand and the Rise brand in two states (which were discontinued in September 2020). Credit cards represent credit card receivable balances, uncollected billed interest and fees through the Today Card brand.

The Company offers Rise installment products directly to customers. Elastic lines of credit, Rise bank-originated installment loans and Today credit card receivables represent participation interests acquired from third-party lenders through a wholly owned subsidiary or by a VIE. Based on agreements with the third-party lenders, the VIEs pay a loan premium on the participation interests purchased. The loan premium is amortized over the expected life of the outstanding loan amount. See Note 4—Variable Interest Entities for more information regarding these participation interests in Rise and Elastic receivables.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

The Company considers impaired loans as accounts over 60 days past due (for installment loans and lines of credit) or 120 days past due (for credit cards), or loans which become uncollectible based on information that the Company becomes aware of (e.g., receipt of customer bankruptcy notice). The impaired loans are charged-off at the time that they are deemed to be uncollectible.

A modification of finance receivable terms is considered a troubled debt restructuring ("TDR") if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise have considered to a borrower. The Company typically considers TDRs to include all installment and line of credit loans that were modified by granting principal and interest forgiveness or by extension of the maturity date for more than 60 days as a part of a loss mitigation strategy.

On March 22, 2020, federal and state banking regulators issued a joint statement on working with customers affected by COVID-19 (the "Interagency Statement"). The Interagency Statement includes guidance on accounting for loan modifications. In accordance with the Interagency Statement, the Company, and the bank originators the Company supports, have elected to not recognize modified loans as TDRs if the borrower was both: 1) not more than 30 days past due as of March 1, 2020 (or at the requested modification date if originated on or after March 1, 2020); and 2) the modification stems from the effects of the COVID-19 outbreak. The modifications offered by the Company to borrowers that meet both qualifications may include short-term payment deferrals less than six months, interest or fee waivers, extensions of payment terms or delays in payment that are insignificant. If the borrower was not current at March 1, 2020, the Company offers similar modifications that are considered TDRs. This election is applicable from March 1, 2020 until the earlier of 60 days following the date the COVID-19 national emergency comes to an end or January 1, 2022.

Operating Segments

The Company determines operating segments based on how its chief operating decision-maker manages the business, including making operating decisions, deciding how to allocate resources and evaluating operating performance. The Company's chief operating decision-maker is its Chief Executive Officer, who reviews the Company's operating results monthly on a consolidated basis.

The Company has one reportable segment, which provides online financial services for non-prime consumers. The Company has aggregated all components of its business into a single reportable segment based on the similarities of the economic characteristics, the nature of the products and services, the distribution methods, the type of customers and the nature of the regulatory environments. With the disposal of ECIL, all of the Company's assets and revenue are in one geographic location, therefore, segment reporting based on geography has been discontinued.

Property and Equipment, net

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The following table summarizes the components of net property and equipment. In January 2021, certain assets were determined to be impaired in relation to a sublease of facility space.


(Dollars in thousands)	March 31, 2021		December 31, 2020
Property and equipment, gross	$	119,483	$	116,748
Accumulated depreciation and amortization	(86,936)		(82,748)
Property and equipment, net	$	32,547	$	34,000


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Goodwill and Indefinite Lived Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification ("ASC") 350-20-35, Goodwill— Subsequent Measurement, the Company performs a quantitative approach method impairment review of goodwill and intangible assets with an indefinite life annually at October 1 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. As a result of the recent global economic impact and uncertainty due to COVID-19, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the goodwill balances of its reporting units. The Company performed a detailed qualitative and quantitative assessment of each reporting unit and concluded that the goodwill associated with the previously consolidated UK reporting unit was impaired as the fair value of the UK reporting unit was less than its carrying amount. The impairment loss of $9.3 million was included in Loss from discontinued operations due to the deconsolidation of ECIL. While there was a decline in the fair value of the Elastic reporting unit at March 31, 2020, there was no impairment identified during the quantitative assessment. The Company completed its annual test as of October 1, 2020 and determined that there was no evidence of impairment of goodwill or indefinite lived intangible assets. The Company has $6.8 million of goodwill (all related to the Elastic reporting unit) remaining on the Condensed Consolidated Balance Sheets as of March 31, 2021.

Prior to the adoption of ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), the Company’s impairment evaluation of goodwill was already based on comparing the fair value of the Company’s reporting units to their carrying value. The adoption of ASU 2017-04 as of January 1, 2020 had no impact on the Company's evaluation procedures. The fair value of the reporting units is determined based on a weighted average of the income and market approaches. The income approach establishes fair value based on estimated future cash flows of the reporting units, discounted by an estimated weighted-average cost of capital developed using the capital asset pricing model, which reflects the overall level of inherent risk of the reporting units. The income approach uses the Company’s projections of financial performance for a six- to nine-year period and includes assumptions about future revenues growth rates, operating margins and terminal values. The market approach establishes fair value by applying cash flow multiples to the reporting units’ operating performance. The multiples are derived from other publicly traded companies that are similar but not identical to the Company from an operational and economic standpoint.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in Operating lease right of use (“ROU”) assets and Operating lease liabilities on its Condensed Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset may also include initial direct costs incurred and excludes any lease payments made and lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components. The lease and non-lease components are accounted for as a single lease component. In accordance with ASC 360-10-35, Property, Plant & Equipment— Subsequent Measurement, the Company evaluates its ROU assets along with its Property and equipment, net for impairment annually and between annual tests as needed based on changes in circumstances or other triggering events. During the first quarter, the Company entered into a sublease for facility space, triggering an impairment assessment. The Company determined the asset group with the subleased ROU asset and related LHI was impaired. A total impairment loss of $742 thousand is included in Non-operating income (loss) in the Condensed Consolidated Statements of Operations.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Treasury Stock

The Company evaluates each stock repurchase transaction in the period in which it is completed. If the repurchase transaction is significantly in excess of the current market price at purchase, the Company will identify whether the price paid included payment for other agreements, rights, and privileges. Repurchase transactions that do not contain these elements or are not significantly in excess of the current market price at purchase are accounted for using the cost method. The Company anticipates using its treasury stock to fulfill certain employee stock compensation grants and settlements. The Company has elected to use a first in, first out ("FIFO") method for assigning share cost at reissuance. Any gain or loss in the stock value will be credited or charged to paid in capital upon subsequent reissuance of the shares, with losses in excess of previously recognized gains charged to retained earnings. The Company is not obligated to purchase or reissue any shares at any time in accordance with its previously disclosed share repurchase plan.

Recently Adopted Accounting Standards

In August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The purpose of ASU 2018-15 is to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company elected to adopt this ASU prospectively as of January 1, 2020 and has implemented a control structure to identify cloud computing arrangements for appropriate accounting treatment similar to its procedures for right of use assets. At March 31, 2021, the Company has capitalized implementation costs associated with cloud computing arrangements of $1.0 million. At adoption, ASU 2018-15 did not have a material impact on the Company's condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The purpose of ASU 2018-13 is to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. This guidance is effective for public companies for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and requires both a prospective and retrospective approach to adoption based on amendment specifications. Early adoption of any removed or modified disclosures is permitted. Additional disclosures may be delayed until their effective date. The adoption of ASU 2018-13 at January 1, 2020 did not have a material impact on the Company's condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). The purpose of ASU 2017-04 is to simplify the subsequent measurement of goodwill. The amendments modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This guidance is effective for public companies for goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company has adopted all of the amendments of ASU 2017-04 as of January 2020 with no impact to the Company's condensed consolidated financial statements. The Company used the simplified subsequent measurement requirements per ASU 2017-04 in its impairment analysis.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to COVID-19. Among other things, the CARES Act provides income tax relief inclusive of permitting NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has reviewed the tax relief provisions of the CARES Act regarding its eligibility and determined that the impact is likely to be insignificant with regard to its effective tax rate. Certain portions of the CARES Act were amended by the Consolidated Appropriations Act ("CAA") on December 27, 2020. The Company continues to monitor and evaluate its eligibility for the amended CARES Act tax relief provisions to identify any that may become applicable in the future.

On March 11, 2021, the American Rescue Plan Act ("ARP Act") was signed into law. The Company reviewed the tax relief provisions of the ARP Act, including the Company's eligibility for such provisions, and determined that the impact is likely to be insignificant with regard to the Company's effective tax rate. The Company continues to monitor and evaluate its eligibility under the ARP Act tax relief provisions to identify any portions that may become applicable in the future.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The purpose of ASU 2019-12 is to reduce complexity in the accounting standards for income taxes by removing certain exceptions as well as clarifying certain allocations. This update also addresses the split recognition of franchise taxes that are partially based on income between income-based tax and non-income-based tax. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2019-12 at January 1, 2021 did not have a material impact on the Company's condensed consolidated financial statements.

Accounting Standards to be Adopted in Future Periods

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments ("ASU 2020-03"). The purpose of ASU 2020-03 is to clarify, correct errors in or make minor improvements to the codification. Among other revisions, the amendments clarify that an entity should record an allowance for credit losses when an entity regains control of financial assets sold in accordance with Topic 326. ASU 2020-03 also clarifies disclosure requirements for debt securities under Topic 942 and affirms that all entities are required to provide the fair value option disclosures within paragraphs 825-10-50-24 through 50-32 of the codification. The amendments in this update are effective on the latter of the issuance of ASU 2020-03 or the effective date of their related topic. The Company does not anticipate the adoption of ASU 2020-03 to have a material impact on the Company's condensed consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting. It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates. The amendments and expedients in this update are effective as of March 12, 2020 through December 31, 2022 and may be elected by topic. The Company is assessing the potential impact of electing all or portions of ASU 2020-04 on the Company's condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 is intended to replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates to improve the quality of information available to financial statement users about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments ("ASU 2019-04"). This amendment clarifies the guidance in ASU 2016-13. The guidance in ASU 2016-13 was further clarified by ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments ("ASU 2019-11") issued in November 2019. ASU 2019-11 provides transition relief such as permitting entities an accounting policy election regarding existing TDRs, among other things. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief ("ASU 2019-05"). The purpose of this amendment is to provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, on an instrument-by-instrument basis. Election of this option is intended to increase comparability of financial statement information and reduce costs for certain entities to comply with ASU 2016-13. For public entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates ("ASU 2019-10"). The purpose of this amendment is to create a two-tier rollout of major updates, staggering the effective dates between larger public companies and all other entities. This granted certain classes of companies, including Smaller Reporting Companies ("SRCs"), additional time to implement major FASB standards, including ASU 2016-13. Larger public companies will still have an effective date for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All other entities are permitted to defer adoption of ASU 2016-13, and its related amendments, until the earlier of fiscal periods beginning after December 15, 2022. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments - Credit Losses (Topic 326), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-12 ("ASU 2020-02"). ASU 2020-02 updates the SEC staff guidance related to ASU 2016-13 and all contingent amendments. Under the current SEC definitions, the Company meets the definition of an SRC as of the ASU 2019-10 issuance date and is adopting the deferral period for ASU 2016-13.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

NOTE 2 - EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing net income (loss) by the weighted average number of common shares outstanding ("WASO") during each period. Also, basic EPS includes any fully vested stock and unit awards that have not yet been issued as common stock. There are no unissued fully vested stock and unit awards at March 31, 2021 and 2020.

Diluted EPS is computed by dividing net income (loss) by the WASO during each period plus any unvested stock option awards granted, vested unexercised stock options and unvested restricted stock units ("RSUs") using the treasury stock method but only to the extent that these instruments dilute earnings per share.

The computation of earnings per share was as follows for three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(Dollars in thousands, except share and per share amounts)	2021		2020
Numerator (basic and diluted):
Net income from continuing operations	$	12,716	$	7,922
Net loss from discontinued operations	—		(12,833)
Net income (loss)	$	12,716	$	(4,911)






Denominator (basic):
Basic weighted average number of shares outstanding	36,582,502		43,161,716

Denominator (diluted):
Basic weighted average number of shares outstanding	36,582,502		43,161,716
Effect of potentially dilutive securities:

Employee share plans (options, RSUs and ESPP)	996,548		470,021
Diluted weighted average number of shares outstanding	37,579,050		43,631,737

Basic and diluted earnings (loss) per share:
Continuing operations	$	0.35	$	0.18
Discontinued operations	—		(0.29)
Basic earnings (loss) per share	$	0.35	$	(0.11)

Continuing operations	$	0.34	$	0.18
Discontinued operations	—		(0.29)
Diluted earnings (loss) per share	$	0.34	$	(0.11)

For the three months ended March 31, 2021 and 2020, the Company excluded the following potential common shares from its diluted earnings (loss) per share calculation because including these shares would be anti-dilutive:

•1,008,359 and 1,862,170 common shares issuable upon exercise of the Company's stock options; and

•615,439 and 3,584,019 common shares issuable upon vesting of the Company's RSUs.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

NOTE 3 - LOANS RECEIVABLE AND REVENUE

Revenues generated from the Company’s consumer loans for the three months ended March 31, 2021 and 2020 were as follows:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Finance charges	$	53,192	$	96,164
Lines of credit fees	35,480		58,574
CSO fees	551		7,341
Other	510		388
Total revenues	$	89,733	$	162,467

The Company's portfolio consists of installment loans, lines of credit and credit card receivables, which are considered the portfolio segments for all periods presented. The Rise product is primarily installment loans with lines of credit offered in two states, which ceased lines of credit origination activity in September 2020. The Elastic product is a line of credit product and the Today Card, is a credit card product, both offered in the US.

The following reflects the credit quality of the Company’s loans receivable as of March 31, 2021 and December 31, 2020 as delinquency status has been identified as the primary credit quality indicator. The Company classifies its loans as either current or past due. A customer in good standing may request up to a 16-day grace period when or before a payment becomes due and, if granted, the loan is considered current during the grace period. In response to the COVID-19 pandemic, the Company, along with the banks it supports, has also expanded existing payment flexibility programs to provide temporary payment relief to certain customers who meet the program’s qualifications. These programs allow for a deferral of payments for an initial period of 30 to 60 days, which the Company may extend for an additional 30 days, generally for a maximum of 180 days on a cumulative basis. A customer will return to the normal payment schedule after the end of the deferral period, with the extension of the maturity date equivalent to the deferral period, which is generally not to exceed an additional 180 days. Customers that were 30 days past due or less as of March 1, 2020 or the date the customer requested the deferral are considered current. Customers more than 30 days past due as of March 1, 2020 or the date the customer requested the deferral are considered delinquent. As of March 31, 2021, 3.4% of customers have been provided relief through a COVID-19 payment deferral program for a total of $11.8 million in loans with deferred payments. The Company believes that the allowance for loan losses is adequate to absorb the losses inherent in the portfolio as of March 31, 2021.

Installment loans, lines of credit and credit cards not impacted by COVID are considered past due if a grace period has not been requested and a scheduled payment is not paid on its due date. All impaired loans that were not accounted for as a TDR as of March 31, 2021 and December 31, 2020 have been charged off.


	March 31, 2021
(Dollars in thousands)	Rise		Elastic		Today		Total
Current loans	$	197,952	$	134,680	$	13,636	$	346,268
Past due loans	19,322		5,711		1,516		26,549
Total loans receivable	217,274		140,391		15,152		372,817
Net unamortized loan premium	248		1,257		—		1,505
Less: Allowance for loan losses	(26,470)		(10,749)		(1,818)		(39,037)
Loans receivable, net	$	191,052	$	130,899	$	13,334	$	335,285


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020


	December 31, 2020
(Dollars in thousands)	Rise		Elastic		Today		Total
Current loans	$	222,937	$	154,950	$	12,954	$	390,841
Past due loans	22,383		6,926		1,564		30,873
Total loans receivable	245,320		161,876		14,518		421,714
Net unamortized loan premium	239		1,278		—		1,517
Less: Allowance for loan losses	(33,288)		(13,201)		(1,910)		(48,399)
Loans receivable, net	$	212,271	$	149,953	$	12,608	$	374,832

Total loans receivable includes approximately $13.3 million and $19.2 million of loans in a non-accrual status at March 31, 2021 and December 31, 2020, respectively.

Additionally, total loans receivable includes approximately $21.4 million and $25.3 million of interest receivable at March 31, 2021 and December 31, 2020, respectively. The carrying value for Loans receivable, net of the allowance for loan losses approximates the fair value due to the short-term nature of the loans receivable.

The changes in the allowance for loan losses for the three months ended March 31, 2021 and 2020 are as follows:


	Three Months Ended March 31, 2021
(Dollars in thousands)	Rise		Elastic		Today		Total
Balance beginning of period	$	33,968	$	13,201	$	1,910	$	49,079
Provision for loan losses	15,298		5,091		581		20,970
Charge-offs	(24,773)		(8,383)		(709)		(33,865)
Recoveries of prior charge-offs	2,099		840		36		2,975

Total	26,592		10,749		1,818		39,159
Accrual for CSO lender owned loans	(122)		—		—		(122)
Balance end of period	$	26,470	$	10,749	$	1,818	$	39,037


	Three Months Ended March 31, 2020
(Dollars in thousands)	Rise		Elastic		Today		Total
Balance beginning of period	$	52,099	$	28,852	$	1,041	$	81,992
Provision for loan losses	54,569		23,497		509		78,575
Charge-offs	(60,137)		(29,648)		(666)		(90,451)
Recoveries of prior charge-offs	5,176		2,443		24		7,643

Total	51,707		25,144		908		77,759
Accrual for CSO lender owned loans	(1,571)		—		—		(1,571)
Balance end of period	$	50,136	$	25,144	$	908	$	76,188

As of March 31, 2021 and December 31, 2020, estimated losses of approximately $0.1 million and $0.7 million for the CSO owned loans receivable guaranteed by the Company of approximately $0.2 million and $2.2 million, respectively, are initially recorded at fair value and are included in Accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Troubled Debt Restructurings

In certain circumstances, the Company modifies the terms of its finance receivables for borrowers experiencing financial difficulties. Modifications may include principal and/or interest forgiveness. A modification of finance receivable terms is considered a TDR if the Company grants a concession to a borrower for economic or legal reasons related to the borrower’s financial difficulties that would not otherwise have been considered. Management considers TDRs to include all installment and line of credit loans that were granted principal and interest forgiveness as a part of a loss mitigation strategy for Rise and Elastic, unless excluded by policy. Once a loan has been classified as a TDR, it is assessed for impairment based on the present value of expected future cash flows discounted at the loan's original effective interest rate considering all available evidence.

The following table summarizes the financial effects, excluding impacts related to credit loss allowance and impairment, of TDRs for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Outstanding recorded investment before TDR	$	5,134	$	6,428
Outstanding recorded investment after TDR	5,039		6,110
Total principal and interest forgiveness included in charge-offs within the Allowance for loan losses	$	95	$	318

A loan that has been classified as a TDR remains classified as a TDR until it is liquidated through payoff or charge-off. The table below presents the Company's average outstanding recorded investment and interest income recognized on TDR loans for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Average outstanding recorded investment(1)	$	25,154	$	17,199
Interest income recognized	$	2,814	$	3,730
1. Simple average as of March 31, 2021 and 2020, respectively.

The table below presents the Company's loans modified as TDRs as of March 31, 2021 and December 31, 2020:


(Dollars in thousands)	2021		2020
Current outstanding investment	$	17,253	$	21,261
Delinquent outstanding investment	6,261		5,532
Outstanding recorded investment	23,514		26,793
Less: Impairment included in Allowance for loan losses	(5,975)		(7,533)
Outstanding recorded investment, net of impairment	$	17,539	$	19,260

A TDR is considered to have defaulted upon charge-off when it is over 60 days past due or earlier if deemed uncollectible. There were loan restructurings accounted for as TDRs that subsequently defaulted of approximately $5.9 million and $5.8 million for the three months ended March 31, 2021 and 2020, respectively. The Company had commitments to lend additional funds of approximately $5.2 million to customers with available and unfunded lines of credit as of March 31, 2021.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

NOTE 4—VARIABLE INTEREST ENTITIES

The Company is involved with five entities that are deemed to be a VIE: Elastic SPV, Ltd., EF SPV, Ltd., EC SPV, Ltd. and two Credit Services Organization ("CSO") lenders. Under ASC 810-10-15, Variable Interest Entities, a VIE is an entity that: (1) has an insufficient amount of equity investment at risk to permit the entity to finance its activities without additional subordinated financial support by other parties; (2) the equity investors are unable to make significant decisions about the entity’s activities through voting rights or similar rights; or (3) the equity investors do not have the obligation to absorb expected losses or the right to receive residual returns of the entity. The Company is required to consolidate a VIE if it is determined to be the primary beneficiary, that is, the enterprise has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE. The Company evaluates its relationships with VIEs to determine whether it is the primary beneficiary of a VIE at the time it becomes involved with the entity and it re-evaluates that conclusion each reporting period.

Elastic SPV, Ltd.

On July 1, 2015, the Company entered into several agreements with a third-party lender and Elastic SPV, Ltd. (“ESPV”), an entity formed by third-party investors for the purpose of purchasing loan participations from the third-party lender. Per the terms of the agreements, the Company provides customer acquisition services to generate loan applications submitted to the third-party lender. In addition, the Company licenses loan underwriting software and provides services to the third-party lender to evaluate the credit quality of those loan applications in accordance with the third-party lender’s credit policies. ESPV accounts for the loan participations acquired in accordance with ASC 860-10-40, Transfers and Services, Derecognition, as the lines of credit acquired meet the criteria of a participation interest.

Once the third-party lender originates the loan, ESPV has the right, but not the obligation, to purchase a 90% interest in each Elastic line of credit. Victory Park Management, LLC (“VPC”) entered into an agreement (the "ESPV Facility") under which it loans ESPV all funds necessary up to a maximum borrowing amount to purchase such participation interests in exchange for a fixed return (see Note 5—Notes Payable—ESPV Facility). The Company entered into a separate credit default protection agreement with ESPV whereby the Company agreed to provide credit protection to the investors in ESPV against Elastic loan losses in return for a credit premium. The Company does not hold a direct ownership interest in ESPV, however, as a result of the credit default protection agreement, ESPV was determined to be a VIE and the Company qualifies as the primary beneficiary.

The following table summarizes the assets and liabilities of the VIE that are included within the Company’s Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020:


(Dollars in thousands)	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	63,606	$	97,345
Loans receivable, net of allowance for loan losses of $10,749 and $13,202, respectively	130,899		149,951
Prepaid expenses and other assets	7		—

Receivable from payment processors	3,153		3,652
Total assets	$	197,665	$	250,948
LIABILITIES AND SHAREHOLDER’S EQUITY
Accounts payable and accrued liabilities ($10,536 and $23,337, respectively, eliminates upon consolidation)	$	14,387	$	27,663
Deferred revenue	2,054		2,300
Reserve deposit liability ($23,150 and $23,150, respectively, eliminates upon consolidation)	23,150		23,150
Notes payable, net	158,074		197,835


Total liabilities and shareholder’s equity	$	197,665	$	250,948


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

EF SPV, Ltd.

On October 15, 2018, the Company entered into several agreements with a third-party lender and EF SPV, Ltd. (“EF SPV”), an entity formed by third-party investors for the purpose of purchasing loan participations from the third-party lender. Per the terms of the agreements, the Company provides customer acquisition services to generate loan applications submitted to the third-party lender. In addition, the Company licenses loan underwriting software and provides services to the third-party lender to evaluate the credit quality of those loan applications in accordance with the third-party lender’s credit policies. EF SPV accounts for the loan participations acquired in accordance with ASC 860-10-40, Transfers and Services, Derecognition, as the installment loans acquired meet the criteria of a participation interest.

Once the third-party lender originates the loan, EF SPV has the right, but not the obligation, to purchase a 96% interest in each Rise bank originated installment loan. VPC lends EF SPV all funds necessary up to a maximum borrowing amount to purchase such participation interests in exchange for a fixed return (see Note 5—Notes Payable—EF SPV Facility). The Company entered into a separate credit default protection agreement with EF SPV whereby the Company agreed to provide credit protection to the investors in EF SPV against Rise bank originated loan losses in return for a credit premium. The Company does not hold a direct ownership interest in EF SPV, however, as a result of the credit default protection agreement, EF SPV was determined to be a VIE and the Company qualifies as the primary beneficiary.

The following table summarizes the assets and liabilities of the VIE that are included within the Company’s Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020:


(Dollars in thousands)	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	20,471	$	35,450
Loans receivable, net of allowance for loan losses of $9,816 and $14,342, respectively	78,007		83,869

Receivable from payment processors ($365 and $231, respectively, eliminates upon consolidation)	822		713
Total assets	$	99,300	$	120,032
LIABILITIES AND SHAREHOLDER’S EQUITY
Accounts payable and accrued liabilities ($14,575 and $16,459, respectively, eliminates upon consolidation)	$	15,566	$	17,599
Reserve deposit liability ($8,950 and $8,950, respectively, eliminates upon consolidation)	8,950		8,950
Notes payable, net	74,784		93,483

Total liabilities and shareholder’s equity	$	99,300	$	120,032

EC SPV, Ltd.

In July 2020, the Company entered into several agreements with a third-party lender and EC SPV, Ltd. (“EC SPV”), an entity formed by third-party investors for the purpose of purchasing loan participations from the third-party lender. Per the terms of the agreements, the Company provides customer acquisition services to generate loan applications submitted to the third-party lender. In addition, the Company licenses loan underwriting software and provides services to the third-party lender to evaluate the credit quality of those loan applications in accordance with the third-party lender’s credit policies. EC SPV accounts for the loan participations acquired in accordance with ASC 860-10-40, Transfers and Services, Derecognition, as the installment loans acquired meet the criteria of a participation interest.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Once the third-party lender originates the loan, EC SPV has the right to purchase an interest in each Rise bank originated installment loan. The third-party lender retains 5% of the balances of all the loans originated and sells the remaining 95% participation to EC SPV. VPC will lend EC SPV all funds necessary up to a maximum borrowing amount to purchase such participation interests in exchange for a fixed return (see Note 5—Notes Payable—EC SPV Facility). The Company entered into a separate credit default protection agreement with EC SPV whereby the Company agreed to provide credit protection to the investors in EC SPV against Rise bank originated loan losses in return for a credit premium. The Company does not hold a direct ownership interest in EC SPV, however, as a result of the credit default protection agreement, EC SPV was determined to be a VIE and the Company qualifies as the primary beneficiary.

The following table summarizes the assets and liabilities of the VIE that are included within the Company’s Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020:


(Dollars in thousands)	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	9,723	$	9,377
Restricted cash	1,000		1,000
Loans receivable, net of allowance for loan losses of $4,294 and $1,634, respectively	23,656		19,231

Receivable from payment processors ($12 and $6, respectively, eliminates upon consolidation)	321		211
Total assets	$	34,700	$	29,819
LIABILITIES AND SHAREHOLDER’S EQUITY
Accounts payable and accrued liabilities ($827 and $803, respectively, eliminates upon consolidation)	$	1,404	$	1,541
Reserve deposit liability ($3,500 and $3,500,respectively, eliminates upon consolidation)	3,500		3,500
Notes payable, net	29,796		24,778

Total liabilities and shareholder’s equity	$	34,700	$	29,819

CSO Lenders

The two CSO lenders are considered VIE's of the Company; however, the Company does not have any ownership interest in the CSO lenders, does not exercise control over them, and is not the primary beneficiary, and therefore, does not consolidate the CSO lenders’ results with its results.

NOTE 5—NOTES PAYABLE, NET

The Company has four debt facilities with VPC, the Rise SPV, LLC credit facility (the "VPC Facility"), the ESPV Facility, the EF SPV Facility, and effective July 31, 2020, the EC SPV Facility. The facilities had the following terms as of March 31, 2021.

VPC Facility

The VPC Facility is primarily used to fund the Rise loan portfolio and also had a subordinated debt component used for general corporate purposes, which was repaid in January 2021. It provides the following term notes at:

•A maximum borrowing amount of $200 million (amended as of July 31, 2020) used to fund the Rise loan portfolio (“US Term Note”). Upon the February 1, 2019 amendment date, the interest rate on the debt outstanding as of the amendment date was fixed through the January 1, 2024 maturity date at 10.23% (base rate of 2.73% plus 7.5%, which was reduced to 7.25% and 7.00% on January 1, 2020 and 2021, respectively, as part of the amendment). At December 31, 2020, the weighted average base rate on the outstanding balance was 2.73% and the overall interest rate was 9.98%. At March 31, 2021, the weighted average base rate on the outstanding balance was 2.73% and the overall interest rate was 9.73%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

•Revolving feature providing the option to pay down up to 20% of the outstanding balance, excluding the 4th Tranche Term Note, once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.

The US Term Note matures on January 1, 2024. There are no principal payments due or scheduled until the maturity date. All assets of the Company are pledged as collateral to secure the VPC Facility. The VPC Facility contains certain covenants for the Company such as minimum cash requirements and a minimum book value of equity requirement. There are also certain covenants for the product portfolio underlying the facility including, among other things, excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios. The Company was in compliance with all covenants related to the VPC Facility as of March 31, 2021 and December 31, 2020.

The VPC Facility previously included a term note (the "4th Tranche Term Note") used to fund working capital with a maximum borrowing amount of $18 million and a base rate of 2.73% plus 13%. The interest rate at December 31, 2020 was 15.73%. In January 2021, the Company paid off this term note prior to its maturity on February 1, 2021.

Prior to ECIL entering administration and being classified a discontinued operation by the Company on June 29, 2020, the VPC Facility included a note used to fund the UK Sunny loan portfolio (“UK Term Note”). Upon deconsolidation of ECIL, this note was removed from the Company's Condensed Consolidated Balance Sheets and was presented within Liabilities from discontinued operations in all prior periods presented. Under the terms of the VPC Facility, Elevate Credit, Inc. (the "Parent") had provided a guarantee to VPC for the repayment of the debt of any subsidiary, which included the outstanding debt of ECIL. Repayment of the UK Term Note was completed by ECIL in the third quarter of 2020 and any guarantee obligation associated with the UK Term Note was released with the repayment.

ESPV Facility

The ESPV Facility has a maximum borrowing amount of $350 million used to purchase loan participations from a third-party lender. Upon the February 1, 2019 amendment date, the interest rate on the debt outstanding as of the amendment date was fixed at 15.48% (base rate of 2.73% plus 12.75%). Effective July 1, 2019, the interest rate on the debt outstanding as of the amendment date was set at 10.23% (base rate of 2.73% plus 7.5%, which was reduced to 7.25% and 7.00% on January 1, 2020 and 2021, respectively, as part of the amendment). At December 31, 2020 the weighted average base rate on the outstanding balance was 2.72% and the overall interest rate was 9.97%. At March 31, 2021, the weighted average base rate on the outstanding balance was 2.72% and the overall interest rate was 9.72%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The ESPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.

The ESPV Term Note matures on January 1, 2024. There are no principal payments due or scheduled until the maturity date. All assets of the Company and ESPV are pledged as collateral to secure the ESPV Facility. The ESPV Facility contains certain covenants for the Company such as minimum cash requirements and a minimum book value of equity requirement. There are also certain covenants for the product portfolio underlying the facility including, among other things, excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios. The Company was in compliance with all covenants related to the ESPV Facility as of March 31, 2021 and December 31, 2020.

EF SPV Facility

The EF SPV Facility has a maximum borrowing amount of $250 million (amended as of July 31, 2020) used to purchase loan participations from a third-party lender. Prior to execution of the agreement with VPC effective February 1, 2019, EF SPV was a borrower on the US Term Note under the VPC Facility and the interest rate paid on this facility was a base rate (defined as 3-month LIBOR, with a 1% floor) plus 11%. Upon the February 1, 2019 amendment date, $43 million was re-allocated into the EF SPV Facility and the interest rate on the debt outstanding as of the amendment date was fixed through the January 1, 2024 maturity date at 10.23% (base rate of 2.73% plus 7.5%, which was reduced to 7.25% and 7.00% on January 1, 2020 and 2021, respectively, as part of the amendment). The weighted average base rate on the outstanding balance at December 31, 2020 was 2.45% and the overall interest rate was 9.70%. The weighted average base rate on the outstanding balance at March 31, 2021 was 2.45% and the overall interest rate was 9.45%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The EF SPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

The EF SPV Term Note matures on January 1, 2024. There are no principal payments due or scheduled until the maturity date. All assets of the Company and EF SPV are pledged as collateral to secure the EF SPV Facility. The EF SPV Facility contains certain covenants for the Company such as minimum cash requirements and a minimum book value of equity requirement. There are also certain covenants for the product portfolio underlying the facility including, among other things, excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios. The Company was in compliance with all covenants related to the EF SPV Facility as of March 31, 2021 and December 31, 2020.

EC SPV Facility

VPC entered into a new debt facility with EC SPV on July 31, 2020. The EC SPV Facility has a maximum borrowing amount of $100 million used to purchase loan participations from a third-party lender. The weighted average base rate on the outstanding balance at December 31, 2020 was 2.73% and the overall interest rate was 9.98%. The weighted average base rate on the outstanding balance at March 31, 2021 was 2.73% and the overall interest rate was 9.73%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The EC SPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.

The EC SPV Term Note matures on January 1, 2024. There are no principal payments due or scheduled until the maturity date. All assets of the Company and EC SPV are pledged as collateral to secure the EC SPV Facility. The EC SPV Facility contains certain covenants for the Company such as minimum cash requirements and a minimum book value of equity requirement. There are also certain covenants for the product portfolio underlying the facility including, among other things, excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios. The Company was in compliance with all covenants related to the EC SPV Facility as of March 31, 2021 and December 31, 2020.

VPC, ESPV, EF SPV and EC SPV Facilities:

The outstanding balances of Notes payable, net of debt issuance costs, are as follows:


(Dollars in thousands)	March 31, 2021		December 31, 2020
US Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	$	78,600	$	104,500
4th Tranche Term Note bearing interest at the base rate + 13%	—		18,050
ESPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	159,600		199,500
EF SPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	74,800		93,500
EC SPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	30,000		25,000
Debt issuance costs	(1,965)		(2,147)
Total	$	341,035	$	438,403

The change in the facility balances includes the following:

•US Term Note - Paydown of $25.9 million in the first quarter of 2021;

•4th Tranche Term Note - Debt obligation of $18.1 million paid off in the first quarter of 2021;

•ESPV Term Note - Paydown of $39.9 million in the first quarter of 2021;

•EF SPV Term note - Paydown of $18.7 million in the first quarter of 2021; and

•EC SPV Term Note - Draw of $5 million in the first quarter of 2021.

Per the terms of the February 2019 amendments and the July 31, 2020 EC SPV agreement, the Company qualified for a 25 bps rate reduction on the VPC, ESPV, EF SPV and EC SPV facilities effective January 1, 2021. The Company has evaluated the interest rates for its debt and believes they represent market rates based on the Company’s size, industry, operations and recent amendments. As a result, the carrying value for the debt approximates the fair value.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Future debt maturities as of March 31, 2021 are as follows:


Year (dollars in thousands)	March 31, 2021
Remainder of 2021	$	—
2022	—
2023	—
2024	343,000
2025	—
Thereafter	—
Total	$	343,000

NOTE 6—GOODWILL AND INTANGIBLE ASSETS

The Company’s goodwill represents the excess purchase price over the estimated fair market value of the net assets acquired by the predecessor parent company, Think Finance, Inc. (“Think Finance”) related to the Elastic and previously consolidated UK reporting units. The Company performs an impairment review of goodwill and intangible assets with an indefinite life annually at October 1. As a result of the recent global economic impact and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the goodwill balances of its reporting units. The Company performed a detailed qualitative and quantitative assessment of each reporting unit and concluded that the goodwill associated with the previously consolidated UK reporting unit was impaired as the fair value of the UK reporting unit was less than its carrying amount. The impairment loss of $9.3 million was included in Loss from discontinued operations due to the deconsolidation of ECIL. While there was a decline in the fair value of the Elastic reporting unit at March 31, 2020, there was no impairment identified during the quantitative assessment. The annual test was completed as of October 1, 2020 and the Company determined that there was no evidence of impairment of goodwill or indefinite life intangible assets. No events or circumstances occurred between October 2, 2020 and March 31, 2021 that would more likely than not reduce the fair value of the Elastic reporting unit below the carrying amount. The Company has $6.8 million of goodwill (all related to the Elastic reporting unit) on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively. Of the total goodwill balance, approximately $270 thousand is deductible for tax purposes.

The Company's impairment evaluation of goodwill is based on comparing the fair value of the respective reporting unit to its carrying value. The fair value of the reporting unit is determined based on a weighted average of the income and market approaches. The income approach establishes fair value based on estimated future cash flows of the reporting unit, discounted by an estimated weighted-average cost of capital developed using the capital asset pricing model, which reflects the overall level of inherent risk of the reporting unit. The income approach uses the Company's projections of financial performance for a six- to nine-year period and includes assumptions about future revenue growth rates, operating margins and terminal values. The market approach establishes fair value by applying cash flow multiples to the respective reporting unit's operating performance. The multiples are derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint. The Company’s estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from those used in these valuations which could result in additional impairment charges in the future.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

The carrying value of acquired intangible assets as of March 31, 2021 is presented in the table below:


(Dollars in thousands)	Cost		Accumulated Amortization		Net
Assets subject to amortization:
Acquired technology	$	211	$	(211)	$	—
Non-compete	2,461		(2,461)		—
Customers	126		(126)		—
Assets not subject to amortization:
Domain names	230		—		230
Total	$	3,028	$	(2,798)	$	230

The carrying value of acquired intangible assets as of December 31, 2020 is presented in the table below:


(Dollars in thousands)	Cost		Accumulated Amortization		Net
Assets subject to amortization:
Acquired technology	$	211	$	(211)	$	—
Non-compete	2,461		(1,859)		602
Customers	126		(126)		—
Assets not subject to amortization:
Domain names	531		—		531
Total	$	3,329	$	(2,196)	$	1,133

With Robert Johnson's decision to not run for reelection to the Company's Board of Directors in March 2021, the remaining non-compete agreements expired and the Company accelerated the amortization of the assets to coincide with his announcement. Total amortization expense recognized for the three months ended March 31, 2021 and 2020 was approximately $602 thousand and $30 thousand, respectively. As of March 31, 2021, there were no intangible assets subject to amortization with any remaining life.

Additionally, in January 2021, the Company sold a domain name that was held for a gain of $949 thousand, included in Non-operating income (loss) in the Condensed Consolidated Statements of Operations.

NOTE 7—LEASES

The Company has non-cancelable operating leases for facility space and equipment with varying terms. All of the leases for facility space qualified for capitalization under FASB ASC 842, Leases. These leases have remaining lease terms of two to six years, and some may include options to extend the leases for up to ten years. The extension terms are not recognized as part of the right-of-use assets. The Company has elected not to capitalize leases with terms equal to, or less than, one year. As of March 31, 2021 and December 31, 2020, net assets recorded under operating leases totaled $7.3 million and $8.3 million, respectively, and net lease liabilities totaled $11.3 million and $12.0 million, respectively.

The Company analyzes contracts above certain thresholds to identify leases and lease components. Lease and non-lease components are not separated for facility space leases. The Company uses its contractual borrowing rate to determine lease discount rates when an implicit rate is not available.

In January 2021, the Company entered into a sublease contract with an independent third party for facility space related to a right-of-use asset. The Company's obligation under the original lease was not relieved. As the sublease income is immaterial, payments received are recognized as an offset to Occupancy and equipment in the Condensed Consolidated Statements of Operations. The signing of the sublease triggered an impairment evaluation and the Company determined the related right-of-use asset was impaired. An impairment loss of $549 thousand was recognized in Non-operating income (loss) in the Condensed Consolidated Statements of Operations.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Total gross lease cost for the three months ended March 31, 2021 and 2020, included in Occupancy and equipment in the Condensed Consolidated Statements of Operations, is detailed in the table below:


	Three Months Ended March 31,
Lease cost (dollars in thousands)	2021		2020
Operating lease cost	$	768	$	808
Short-term lease cost	—		—

Total lease cost	$	768	$	808

Further information related to leases is as follows:


	Three Months Ended March 31,
Supplemental cash flows information (dollars in thousands)	2021			2020
Cash paid for amounts included in the measurement of lease liabilities	$	958		$	924
Right-of-use assets obtained in exchange for lease obligations	$	—		$	—
Weighted average remaining lease term	3.3 years			4.7 years
Weighted average discount rate	10.23		%	10.23		%

Future minimum lease payments as of March 31, 2021 are as follows:


Year (dollars in thousands)	Operating Leases
2021	$	2,918
2022	3,984
2023	3,486
2024	1,438
2025	1,254
Thereafter	638
Total future minimum lease payments	$	13,718
Less: Imputed interest	(2,424)
Operating lease liabilities	$	11,294

NOTE 8—SHARE-BASED COMPENSATION

Share-based compensation expense recognized for the three months ended March 31, 2021 and 2020 totaled approximately $1.6 million and $2.7 million, respectively.

2016 Omnibus Incentive Plan

The 2016 Omnibus Incentive Plan ("2016 Plan") was adopted by the Company’s Board of Directors on January 5, 2016 and approved by the Company’s stockholders thereafter. The 2016 Plan became effective on June 23, 2016. The 2016 Plan provides for the grant of incentive stock options to the Company’s employees, and for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSUs, dividend equivalent rights, cash-based awards (including annual cash incentives and long-term cash incentives), and any combination thereof to the Company’s employees, directors and consultants. In connection with the 2016 Plan, the Company has reserved but not issued 8,523,799 shares of common stock, which includes shares that would otherwise return to the 2014 Equity Incentive Plan (the "2014 Plan") as a result of forfeiture, termination, or expiration of awards previously granted under the 2014 Plan and outstanding when the 2016 Plan became effective.

The 2016 Plan will automatically terminate 10 years following the date it became effective, unless the Company terminates it sooner. In addition, the Company’s Board of Directors has the authority to amend, suspend or terminate the 2016 Plan provided such action does not impair the rights under any outstanding award.

As of March 31, 2021, the total number of shares available for future grants under the 2016 Plan was 3,570,917 shares.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

The Company has in the past and may in the future make grants of share-based compensation as inducement awards to new employees who are outside the 2016 Plan. The Company's board may rely on the employment inducement exception under NYSE Rule 303A.08 in order to approve the grants.

2014 Equity Incentive Plan

The Company adopted the 2014 Plan on May 1, 2014. The 2014 Plan permitted the grant of incentive stock options, non-statutory stock options, and restricted stock. On April 27, 2017, the Company's Board of Directors terminated the 2014 Plan as to future awards and confirmed that underlying shares corresponding to awards under the 2014 Plan that were outstanding at the time the 2016 Plan became effective, that are forfeited, terminated or expired, will become available for issuance under the 2016 Plan.

For the three months ended March 31, 2021, the Company had the following activity related to outstanding share-based awards:

Stock Options

Stock options are awarded to encourage ownership of the Company's common stock by employees and to provide increased incentive for employees to render services and to exert maximum effort for the success of the Company. The Company's stock options generally permit net-share settlement upon exercise. The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator of the applicable plan. The Company's stock options generally have a 10-year contractual term and vest over a 4-year period.

A summary of stock option activity as of and for the three months ended March 31, 2021 is presented below:


Stock Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2020	886,685	$	5.94
Granted	—	—
Exercised	(12,500)	2.13
Expired	(1,250)	6.31
Forfeited	—	—
Outstanding at March 31, 2021	872,935	6.00		3.74
Options exercisable at March 31, 2021	872,935	$	6.00	3.74

At March 31, 2021, there were no unrecognized compensation costs related to unvested stock options to be recognized. The total intrinsic value of options exercised for the three months ended March 31, 2021 was $30 thousand.

Restricted Stock Units

RSUs are awarded to serve as a key retention tool for the Company to retain its executives and key employees. RSUs will transfer value to the holder even if the Company’s stock price falls below the price on the date of grant, provided that the recipient provides the requisite service during the period required for the award to “vest.”

The weighted-average grant-date fair value for RSUs granted under the 2016 Plan during the three months ended March 31, 2021 was $4.46. These RSUs primarily vest 25% on the first anniversary of the effective date, and 25% each year thereafter, until full vesting on the fourth anniversary of the effective date.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

A summary of RSU activity as of and for the three months ended March 31, 2021 is presented below:


RSUs	Shares	Weighted Average Grant-Date Fair Value
Unvested at December 31, 2020	2,924,086	$	4.17
Granted	1,489,435	4.46
Vested(1)	(265,857)	3.91
Forfeited	(67,720)	4.65
Unvested at March 31, 2021	4,079,944	4.28
Expected to vest at March 31, 2021	2,996,212	$	4.35

(1)During the year ended March 31, 2021, certain RSUs were net share-settled to cover the required withholding tax and the remaining amounts were converted into an equivalent number of shares of the Company's common stock. The Company withheld 96,766 shares for applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities.

At March 31, 2021, there was approximately $9.3 million of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 2.8 years. During the three months ended March 31, 2021, the total intrinsic value of RSUs that vested during the period was approximately $1.1 million. As of March 31, 2021, the aggregate intrinsic value of the vested and expected to vest RSUs was approximately $8.7 million.

Employee Stock Purchase Plan

The Company offers an Employee Stock Purchase Plan ("ESPP") to eligible US employees. There are currently 2,196,257 shares authorized and 1,083,949 reserved for the ESPP. There were no shares purchased under the ESPP for the three months ended March 31, 2021. For the three months ended March 31, 2021 and 2020, $171 thousand and $141 thousand, respectively, relates to the ESPP within share-based compensation expense.

NOTE 9—FAIR VALUE MEASUREMENTS

The accounting guidance on fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

The Company groups its assets and liabilities measured at fair value in three levels of the fair value hierarchy, based on the fair value measurement technique, as described below:

Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets and liabilities in active exchange markets that the Company has the ability to access at the measurement date.

Level 2—Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques with significant assumptions and inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3—Valuation is derived from model-based techniques that use inputs and significant assumptions that are supported by little or no observable market data. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of pricing models, discounted cash flow models and similar techniques.

The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company discloses the fair value measurement at the beginning of the reporting period during which the transfer occurred. For the three month periods ended March 31, 2021 and 2020, there were no significant transfers between levels.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

The level of fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is most significant to the fair value measurement in its entirety. In the determination of the classification of assets and liabilities in Level 2 or Level 3 of the fair value hierarchy, the Company considers all available information, including observable market data, indications of market conditions, and its understanding of the valuation techniques and significant inputs used. Based upon the specific facts and circumstances, judgments are made regarding the significance of the Level 3 inputs to the fair value measurements of the respective assets and liabilities in their entirety. If the valuation techniques that are most significant to the fair value measurements are principally derived from assumptions and inputs that are corroborated by little or no observable market data, the asset or liability is classified as Level 3.

Financial Assets and Liabilities Not Measured at Fair Value

The Company has evaluated Loans receivable, net of allowance for loan losses, Receivable from CSO lenders, Receivable from payment processors and Accounts payable and accrued expenses, and believes the carrying value approximates the fair value due to the short-term nature of these balances. The Company has also evaluated the interest rates for Notes payable, net and believes they represent market rates based on the Company’s size, industry, operations and recent amendments. As a result, the carrying value for Notes payable, net approximates the fair value. The Company classifies its fair value measurement techniques for the fair value disclosures associated with Loans receivable, net of allowance for loan losses, Receivable from CSO lenders, Receivable from payment processors, Accounts payable and accrued liabilities and Notes payable, net as Level 3 in accordance with ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”).

NOTE 10—INCOME TAXES

Income tax expense for the three months ended March 31, 2021 and 2020 consists of the following:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Current income tax expense:
Federal	$	—	$	1,152
State	86		487

Total current income tax expense	86		1,639

Deferred income tax expense (benefit):
Federal	3,577		73
State	(219)		343



Total deferred income tax expense	3,358		416

Total income tax expense	$	3,444	$	2,055

No material penalties or interest related to taxes were recognized for the three months ended March 31, 2021 and 2020.

The Company’s effective tax rates for continuing operations for the three months ended March 31, 2021 and 2020, including discrete items, were 21.3% and 20.6%, respectively. For the three months ended March 31, 2021 and 2020, the Company’s effective tax rate differed from the standard corporate federal income tax rate of 21% due to permanent non-deductible items and corporate state tax obligations in the states where it has lending activities. The Company's cash effective tax rate was approximately 1.0%.

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company would make a cumulative adjustment in that quarter.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

For purposes of evaluating the need for a deferred tax valuation allowance, significant weight is given to evidence that can be objectively verified. The following provides an overview of the assessment that was performed for the deferred tax assets, net.

Deferred tax assets, net

At March 31, 2021 and December 31, 2020, the Company did not establish a valuation allowance for its deferred tax assets (“DTA”) based on management’s expectation of generating sufficient taxable income in a look forward period over the next one to three years. The Federal net operating loss ("NOL") carryforward from operations at December 31, 2020 was approximately $64.8 million. Any research and development credits recognized as a deferred tax asset expire beginning in 2036. The ultimate realization of the resulting deferred tax asset is dependent upon generating sufficient taxable income prior to the expiration of this carryforward. The Company considered the following factors when making its assessment regarding the ultimate realizability of the deferred tax assets.

Significant factors included the following:

•The Company is in a three-year cumulative pre-tax income position in 2021. Additionally, the Company has a history utilizing its past NOL carryforwards.

•Due to the short-term nature of the loan portfolio and the other material items that comprise the deferred tax assets, net, the Company estimates that the majority of these deferred tax items will reverse within one to three years.

The Company has given due consideration to all the factors and has concluded that the deferred tax asset is expected to be realized based on management’s expectation of generating sufficient taxable income and the reversal of tax timing differences in a look-forward period over the next one to three years. Although realization is not assured, management believes it is more likely than not that all of the recorded deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted in the future if estimates of future taxable income change. As a result, as of March 31, 2021 and December 31, 2020, the Company did not establish a valuation allowance for the DTA.

NOTE 11—COMMITMENTS, CONTINGENCIES AND GUARANTEES

Contingencies

Currently and from time to time, the Company may become a defendant in various legal and regulatory actions that arise in the ordinary course of business. The Company generally cannot predict the eventual outcome, the timing of the resolution or the potential losses, fines or penalties of such legal and regulatory actions. Actual outcomes or losses may differ materially from the Company's current assessments and estimates, which could have a material adverse effect on the Company's business, prospects, results of operations, financial condition or cash flows.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation, regulatory matters and other legal proceedings when those matters present material loss contingencies that are both probable and reasonably estimable. Even when an accrual is recorded, the Company may be exposed to loss in excess of any amounts accrued.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Other Matters:

In December 2019, the Think Finance, Inc. ("TFI") bankruptcy plan was confirmed, and any potential future claims from the TFI Creditors' Committee were assigned to the Think Finance Litigation Trust (“TFLT”). On August 14, 2020, the TFLT filed an adversary proceeding against Elevate Credit, Inc. in the United States Bankruptcy Court for the Northern District of Texas, alleging certain avoidance claims related to Elevate's spin-off from TFI under the Bankruptcy Code and the Texas Uniform Fraudulent Transfer Act ("TUFTA"). If it were determined that the spin-off constituted a fraudulent conveyance or that there were other avoidance actions associated with the spin-off, then the spin-off could be deemed void and there could be a number of different remedies imposed against Elevate, including without limitation, the requirement that Elevate has to pay money damages. While the TFLT values this claim at $246 million, the Company believes that it has valid defenses to the claim and intends to vigorously defend itself against this claim. Additionally, a class action lawsuit against Elevate was filed on August 14, 2020 in the Eastern District of Virginia alleging violations of usurious interest and aiding and abetting various racketeering activities related to the operations of TFI prior to and immediately after the 2014 spin-off. Elevate views this lawsuit as without merit and intends to vigorously defend its position. Based upon preliminary settlement discussions in the fourth quarter of 2020, the Company accrued a contingent loss in the amount of $17 million for estimated losses related to the TFLT and class action disputes within Accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

On June 5, 2020, the District of Columbia (the "District") sued Elevate in the Superior Court of the District of Columbia alleging that Elevate may have violated the District's Consumer Protection Procedures Act and the District of Columbia's Municipal Regulations in connection with loans issued by banks in the District of Columbia. This action has been removed to federal court, but the District has filed a motion to remand to the Superior Court on August 3, 2020. Elevate disagrees that it has violated the above referenced laws and regulations and it intends to vigorously defend its position.

In addition, on January 27, 2020, an Elevate wholly-owned subsidiary and other non-affiliated service providers to banks were sued in a class action lawsuit in Washington state. The Plaintiff in the case claims that Elevate and the other non-affiliated service providers to banks have violated Washington’s Consumer Protection Act by engaging in unfair or deceptive practices. The lawsuit was removed to federal court. On January 12, 2021, the court granted Rise's motion to dismiss, however Plaintiffs amended the complaint on January 25, 2021, suing Elevate alleging it is the true lender and violated Washington's Consumer Protection Act. Elevate disagrees that it has violated the above referenced law and it intends to vigorously defend its position.

In California, two separate actions have been filed seeking damages and public injunctive relief and alleging unconscionable interest rates on Rise loans - one lawsuit in the Superior Court of California, and one demand for arbitration. The Plaintiffs in these actions assert claims under the “unlawful,” “unfair,” and “fraudulent” prongs of the California Unfair Competition Law (“UCL”) and for breach of contract and civil conspiracy. The “unlawful” UCL claims are premised upon alleged violations of (a) the California Financing Law’s prohibition on unconscionable loans and (b) the California False Advertising Law. The arbitration claimant further alleges violations of the Electronic Fund Transfer Act and the Rosenthal Fair Debt Collection Practices Act. Plaintiff dismissed the state court actions. Elevate disagrees that it has violated the above referenced laws and it intends to vigorously defend its position.

Commitments

The Elastic product, which offers lines of credit to consumers, had approximately $287.6 million and $275.9 million in available and unfunded credit lines at March 31, 2021 and December 31, 2020, respectively. The Today Card product had approximately $9.0 million and $5.4 million in available and unfunded credit lines as of March 31, 2021 and December 31, 2020, respectively. From May 2017 through September 2020, the Rise product offered lines of credit to consumers in certain states. At both March 31, 2021 and December 31, 2020, there were no remaining available and unfunded Rise credit lines. While these amounts represented the total available unused credit lines, the Company has not experienced and does not anticipate that all line of credit customers will access their entire available credit lines at any given point in time. The Company has not recorded a loan loss reserve for unfunded credit lines as the Company has the ability to cancel commitments within a relatively short timeframe.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

Effective June 2017, the Company entered into a seven-year lease agreement for office space in California. Upon the commencement of the lease, the Company was required to provide the lessor with an irrevocable and unconditional $500 thousand letter of credit. Provided the Company is not in default of any terms of the lease agreement, the outstanding required balance of the letter of credit will be reduced by $100 thousand per year beginning on the second anniversary of the lease commencement and ending on the fifth anniversary of the lease agreement. The minimum balance of the letter of credit will be at least $100 thousand throughout the duration of the lease. At March 31, 2021 and December 31, 2020, the Company had $200 thousand and $300 thousand, respectively, of cash balances securing the letter of credit which is included in Restricted cash within the Condensed Consolidated Balance Sheets.

Guarantees

CSO Program:

In connection with its CSO programs, the Company guarantees consumer loan payment obligations to CSO lenders and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default.

UK Debt Guarantee:

Under the terms of the VPC Facility, Elevate Credit, Inc. (the "Parent") had provided a guarantee to VPC for the repayment of the UK Term Note. ECIL completed payment of the UK Term Note in the third quarter of 2020 and any guarantee obligation associated with the UK Term Note was released with the repayment.

Indemnifications and contingent loss accrual

In the ordinary course of business, the Company may indemnify customers, vendors, lessors, investors, and other parties for certain matters subject to various terms and scopes. For example, the Company may indemnify certain parties for losses due to the Company's breach of certain agreements or due to certain services it provides. As the Company has previously disclosed, the Company has also entered into separate indemnification agreements with the Company’s directors and executive officers, in addition to the indemnification provided for in the Company’s amended and restated bylaws. These agreements, among other things, provide that the Company will indemnify its directors and executive officers for certain expenses, including attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s or, where applicable, TFI’s directors or executive officers, or any of the Company’s subsidiaries or any other company or enterprise to which the person provides services at the Company’s request. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

As of March 31, 2021 and December 31, 2020, the Company accrued approximately $0.0 million and $4.4 million, respectively, for a contingent loss related to a legal matter. This contingent loss was based on a probable settlement composed of both cash and certain amounts that were subject to valuation adjustments until the final settlement. The accrual was recognized as Non-operating loss in the Condensed Consolidated Statements of Operations and as Accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. The Company accrued $4.3 million at March 31, 2020. As of March 31, 2021, the contingent loss was settled and no further accrual remains. The table below presents a rollforward of the amounts accrued and paid for the three months ended March 31, 2021 and 2020.


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Beginning balance	$	4,424	$	—
Accruals	—		4,263
Payments	(4,424)		—
Net contingent loss related to a legal matter	$	—	$	4,263


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

NOTE 12—DISCONTINUED OPERATIONS

As a result of the recent global economic impact and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the goodwill balances of its reporting units. The Company performed a detailed qualitative and quantitative assessment of each reporting unit and concluded that the goodwill associated with the previously consolidated UK reporting unit was impaired as the fair value of the UK reporting unit was less than its carrying amount. The impairment loss of $9.3 million was included in Loss from discontinued operations due to the deconsolidation of ECIL.

On June 29, 2020, ECIL entered into administration in accordance with the provisions of the UK Insolvency Act 1986 and pursuant to a resolution of the board of directors of ECIL. The management, business, affairs and property of ECIL have been placed into the direct control of the appointed administrators, KPMG LLP. Accordingly, the Company deconsolidated ECIL as of June 29, 2020 and presents ECIL's results as Discontinued operations for all periods presented.

The table below presents the financial results of ECIL, which are considered Discontinued operations and are excluded from the Company's results of continuing operations:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Revenues	$	—	$	14,988
Cost of sales:
Provision for loan losses	—		4,178
Direct marketing costs	—		1,102
Other cost of sales	—		5,660
Total cost of sales	—		10,940
Gross profit	—		4,048
Operating expenses:
Compensation and benefits	—		2,717
Professional services	—		1,281
Selling and marketing	—		470
Occupancy and equipment	—		1,113
Depreciation and amortization	—		501
Other	—		180
Total operating expenses	—		6,262
Operating (loss) income	—		(2,214)
Other expense:
Net interest expense	—		(539)
Foreign currency transaction loss	—		(812)
Impairment loss	—		(9,251)

Total other expense	—		(10,602)


Gain (loss) from discontinued operations before taxes	—		(12,816)
Income tax benefit	—		(17)
Net income (loss) from discontinued operations	$	—	$	(12,833)

At March 31, 2021 and December 31, 2020, the Company had no assets or liabilities related to the discontinued operations of ECIL.


Elevate Credit, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

For the three months ended March 31, 2021 and 2020

NOTE 13—RELATED PARTIES

Expenses related to the Company's board of directors, including board fees, travel reimbursements, share-based compensation and a consulting arrangement with a related party for the three months ended March 31, 2021 and 2020 are included in Professional services within the Condensed Consolidated Statements of Operations and were as follows:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020
Fees and travel expenses	$	122	$	133
Stock compensation (1)	79		979
Consulting	—		100
Total board related expenses	$	201	$	1,212

(1) Includes Elevate's former CEO from January 1, 2020 through July 17, 2020.

During the year ended December 31, 2017, a member of the board of directors entered into a direct investment of $800 thousand in the Rise portion of the VPC Facility. For the three months ended March 31, 2021 and 2020, the interest payments on this loan were $19.6 thousand and $20.2 thousand, respectively.

At March 31, 2021 and December 31, 2020, the Company had approximately $122 thousand and $110 thousand, respectively, due to board members related to the above expenses, which is included in Accounts payable and accrued liabilities within the Condensed Consolidated Balance Sheets.

NOTE 14—SUBSEQUENT EVENTS

The Company evaluated subsequent events as of the date these financial statements are made available and determined there has been no material subsequent events that required recognition or additional disclosure in these condensed consolidated financial statements, except as follows:

For the period from April 1, 2021 to May 4, 2021, the Company repurchased 1,159,502 shares of its common stock on the open market for a total purchase price of $3.6 million, including any fees or commissions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our business, our results of operations and our financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.

Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Note About Forward-Looking Statements" section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. We generally refer to loans, customers and other information and data associated with each of our brands (Rise, Elastic and Today Card) as Elevate’s loans, customers, information and data, irrespective of whether Elevate directly originates the credit to the customer or whether such credit is originated by a third party.

OVERVIEW

We provide online credit solutions to consumers in the US who are not well-served by traditional bank products and who are looking for better options than payday loans, title loans, pawn and storefront installment loans. Non-prime consumers now represent a larger market than prime consumers but are risky to underwrite and serve with traditional approaches. We’re succeeding at it - and doing it responsibly - with best-in-class advanced technology and proprietary risk analytics honed by serving more than 2.5 million customers with $9.0 billion in credit. Our current online credit products, Rise, Elastic and Today Card, reflect our mission to provide customers with access to competitively priced credit and services while helping them build a brighter financial future with credit building and financial wellness features. We call this mission "Good Today, Better Tomorrow."

Prior to June 29, 2020, we provided services in the United Kingdom ("UK") through our wholly-owned subsidiary, Elevate Credit International Limited (“ECIL”) under the brand name ‘Sunny.’ During the year ended December 31, 2018, ECIL began to receive an increased number of customer complaints initiated by claims management companies ("CMCs") related to the affordability assessment of certain loans. The CMCs' campaign against the high cost lending industry increased significantly during the third and fourth quarters of 2018 and continued through 2019 and into the first half of 2020, resulting in a significant increase in affordability claims against all companies in the industry over this period. The Financial Conduct Authority ("FCA"), a regulator in the UK financial services industry, began regulating the CMCs in April 2019 in order to ensure that the methods used by the CMCs are in the best interests of the consumer and the industry. Separately, the FCA asked all industry participants to review their lending practices to ensure that such companies are using an appropriate affordability and creditworthiness analysis. However, there continued to be a lack of clarity within the regulatory environment in the UK. This lack of clarity, coupled with the ongoing impact of the Coronavirus Disease 2019 ("COVID-19") on the UK market for Sunny, led the ECIL board of directors to place ECIL into administration under the UK Insolvency Act 1986 and appoint insolvency practitioners from KPMG LLP to take control and management of the UK business. As a result, we have deconsolidated ECIL and are presenting its results as discontinued operations.

We earn revenues on the Rise installment loans, on the Rise and Elastic lines of credit and on the Today Card credit card product. Our revenue primarily consists of finance charges and line of credit fees. Finance charges are driven by our average loan balances outstanding and by the average annual percentage rate (“APR”) associated with those outstanding loan balances. We calculate our average loan balances by taking a simple daily average of the ending loan balances outstanding for each period. Line of credit fees are recognized when they are assessed and recorded to revenue over the life of the loan. We present certain key metrics and other information on a “combined” basis to reflect information related to loans originated by us and by our bank partners that license our brands, Republic Bank, FinWise Bank and Capital Community Bank ("CCB"), as well as loans originated by third-party lenders pursuant to CSO programs, which loans originated through CSO programs are not recorded on our balance sheet in accordance with US GAAP. See “—Key Financial and Operating Metrics” and “—Non-GAAP Financial Measures.”

We use our working capital, funds provided by third-party lenders pursuant to CSO programs and our credit facility with Victory Park Management, LLC ("VPC” and the "VPC Facility") to fund the loans we directly make to our Rise customers and provide working capital. The VPC Facility has a maximum total borrowing amount available of $200 million at March 31, 2021. See “—Liquidity and Capital Resources—Debt facilities.”

We also license our Rise installment loan brand to two banks. FinWise Bank originates Rise installment loans in 17 states. This bank initially provides all of the funding, retains 4% of the balances of all of the loans originated and sells the remaining 96% loan participation in those Rise installment loans to a third-party SPV, EF SPV, Ltd. ("EF SPV"). These loan participation purchases are funded through a separate financing facility (the "EF SPV Facility"), effective February 1, 2019, and through cash flows from operations generated by EF SPV. The EF SPV Facility has a maximum total borrowing amount available of $250 million. We do not own EF SPV, but we have a credit default protection agreement with EF SPV whereby we provide credit protection to the investors in EF SPV against Rise loan losses in return for a credit premium. Elevate is required to consolidate EF SPV as a variable interest entity ("VIE") under US GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 96% of the Rise installment loans originated by FinWise Bank and sold to EF SPV.

Beginning in the third quarter of 2020, we also license our Rise installment loan brand to an additional bank, CCB, which originates Rise installment loans in three different states than FinWise Bank. Similar to the relationship with FinWise Bank, CCB initially provides all of the funding, retains 5% of the balances of all of the loans originated and sells the remaining 95% loan participation in those Rise installment loans to a third-party SPV, EC SPV, Ltd. ("EC SPV"). These loan participation purchases are funded through a separate financing facility (the "EC SPV Facility"), and through cash flows from operations generated by EC SPV. The EC SPV Facility has a maximum total borrowing amount available of $100 million. We do not own EC SPV, but we have a credit default protection agreement with EC SPV whereby we provide credit protection to the investors in EC SPV against Rise loan losses in return for a credit premium. Elevate is required to consolidate EC SPV as a VIE under US GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 95% of the Rise installment loans originated by CCB and sold to EC SPV.

The Elastic line of credit product is originated by a third-party lender, Republic Bank, which initially provides all of the funding for that product. Republic Bank retains 10% of the balances of all loans originated and sells a 90% loan participation in the Elastic lines of credit. An SPV structure was implemented such that the loan participations are sold by Republic Bank to Elastic SPV, Ltd. (“Elastic SPV”) and Elastic SPV receives its funding from VPC in a separate financing facility (the “ESPV Facility”), which was finalized on July 13, 2015. We do not own Elastic SPV, but we have a credit default protection agreement with Elastic SPV whereby we provide credit protection to the investors in Elastic SPV against Elastic loan losses in return for a credit premium. Per the terms of this agreement, under US GAAP, we are the primary beneficiary of Elastic SPV and are required to consolidate the financial results of Elastic SPV as a VIE in our condensed consolidated financial statements. The ESPV Facility has a maximum total borrowing amount available of $350 million at March 31, 2021. See “—Liquidity and Capital Resources—Debt facilities.”

Today Card is a credit card product designed to meet the spending needs of non-prime consumers by offering a prime customer experience. Today Card is originated by CCB under the licensed Mastercard brand, and a 95% participation interest in the credit card receivable is sold to us. As the lowest APR product in our portfolio, Today Card allows us to serve a broader spectrum of non-prime Americans. During 2020, the Today Card experienced significant growth in its portfolio size despite the pandemic due to the success of our direct mail campaigns, the primary marketing channel for acquiring new Today Card customers. We followed a specific growth plan beginning in 2020 to grow the product while monitoring customer responses and credit quality. Customer response to the Today Card is very strong, as we continue to see extremely high response rates, high customer engagement, and positive customer satisfaction scores.

Our management assesses our financial performance and future strategic goals through key metrics based primarily on the following three themes:

•Revenue growth. Key metrics related to revenue growth that we monitor by product include the ending and average combined loan balances outstanding, the effective APR of our product loan portfolios, the total dollar value of loans originated, the number of new customer loans made, the ending number of customer loans outstanding and the related customer acquisition costs (“CAC”) associated with each new customer loan made. We include CAC as a key metric when analyzing revenue growth (rather than as a key metric within margin expansion).

•Stable credit quality. Since the time they were managing our US legacy products, our management team has maintained stable credit quality across the loan portfolio they were managing. Additionally, in the periods covered in this Management's Discussion and Analysis of Financial Condition and Results of Operations, we have improved our credit quality and lowered our credit losses. The credit quality metrics we monitor include net charge-offs as a percentage of revenues, the combined loan loss reserve as a percentage of outstanding combined loans, total provision for loan losses as a percentage of revenues and the percentage of past due combined loans receivable – principal.

•Margin expansion. We aim to manage our business to achieve a long-term operating margin of 20%. While our operating margins may exceed 20% in certain years, such as in 2020 when we incurred lower levels of direct marketing expense and materially lower credit losses due to a lack of customer demand for loans resulting from the effects of COVID-19, we do not expect our operating margin to increase beyond that level over the long-term, as we intend to pass on any improvements over our targeted margins to our customers in the form of lower APRs. We believe this is a critical component of our responsible lending platform and over time will also help us continue to attract new customers and retain existing customers.

Impact of COVID-19

The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals caused unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States, including the markets that we serve. As the restrictive measures have been eased in certain geographic locations during late 2020 and the first quarter of 2021, the U.S. economy has begun to recover, and with the availability and distribution of a COVID-19 vaccine, we anticipate continued improvements in commercial and consumer activity and the U.S. economy.

While positive headwinds exist, we recognize that certain of our customers are experiencing varying degrees of financial distress, which is expected to continue into the second quarter of 2021, especially if new COVID-19 variant infections increase and new economic restrictions are mandated. Commercial and consumer activity has improved but has not returned to the levels existing prior to the outbreak of the pandemic.

The portfolio of loan products we and the bank originators provide has experienced significantly decreased demand and application volume for both new and former customers since the COVID-19 pandemic began, largely because of the effects of monetary stimulus provided by the US government reducing demand for loan products. These events are resulting in materially lower new customer loans and a corresponding decrease in revenues compared to a year ago. While we have continued marketing campaigns to acquire new customer loans during the first quarter of 2021, our overall loan origination volumes during the first quarter of 2021 were still below our historical origination volumes due to continued reduction in loan demand for our products. While we believe that customer loan demand for our products will increase during the second quarter of 2021, given the uncertainty surrounding the COVID-19 pandemic, we are currently unable to determine when demand for our loan products will return to prior historical levels. Until demand increases, our loan balances and revenue will continue to be materially lower than the prior year periods.

In response to the COVID-19 pandemic, we, along with the banks we support, have also expanded our payment flexibility tools to provide payment assistance programs to certain customers who meet the program’s qualifications. These tools include a deferral of payments for an initial period of 30 to 60 days, which we may extend for an additional 30 days, for generally a maximum of 180 days on a cumulative basis. The customer will return to their normal payment schedule after the end of the deferral period with the extension of their maturity date equivalent to their deferral period not to generally exceed an additional 180 days. For Rise installment loans, finance charges continue to accrue at a lower effective APR over the expected extended term of the loan considering the deferral periods provided. For Elastic lines of credit, no fees accrue during the payment deferral period. As a result, the average APR of our products decreased due to the impact of the COVID-19 pandemic and the payment assistance tools that have been implemented. As the economy continues to expand and customers find financial stability, we've seen a decrease in the number of customers in an active payment flexibility program. As of March 31, 2021, 3.4% of customers have been provided relief through our COVID-19 payment deferral programs for a total of $11.8 million in loans with deferred payments. This is a marked decrease in the volume of customers in an active payment deferral program and compares to $34.6 million in loans with deferred payments, or 8.7% of customers, as of December 31, 2020. We are also seeing that customers generally are meeting their scheduled payments once they exit the payment deferral program as our past due delinquency rate is 6% at March 31, 2021 and has remained relatively flat over the past year.

Both we and the bank originators are closely monitoring the performance of the payment assistance tools and key credit quality indicators such as payment defaults, continued payment deferrals, and line of credit utilization. While we initially anticipated that the COVID-19 pandemic would have a negative impact on our credit quality, instead the monetary stimulus programs provided by the US government to our customer base have generally allowed customers to continue making payments on their loans. At the beginning of the pandemic, we expected an increase in net charge-offs as compared to prior periods. However, the historically low net charge-offs as a percentage of revenue that we experienced in the second half of 2020 continued into the first quarter of 2021. Further, we believe that the allowance for loan losses is adequate to absorb the losses inherent in the portfolio as of March 31, 2021, including loans that are part of the payment assistance tools.

As COVID-19 has continued to impact our office locations, our employee base is working in a hybrid remote environment in which employees may choose to remain remote or return to the office on a limited basis. We have sought to ensure our employees feel secure in their jobs, have flexibility in their work location and have the resources they need to stay safe and healthy. As an 100% online lending solutions provider, our technology and underwriting platform has continued to serve our customers and the bank originators that we support without any material interruption in services.

Significant uncertainties as to future economic conditions exist, and we have taken deliberate actions in response, including assessing our minimum cash and liquidity requirement, monitoring our debt covenant compliance and implementing measures to ensure that our cash and liquidity position is maintained through the current economic cycle. We continue to monitor the impact of COVID-19 closely, as well as any effects that may result from the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the American Rescue Plan Act ("ARP Act"), and any further economic relief, stimulus payments or legislation by the federal government; however, the extent to which the COVID-19 pandemic will continue to impact our operations and financial results during the remainder of 2021 is highly uncertain.

KEY FINANCIAL AND OPERATING METRICS

As discussed above, we regularly monitor a number of metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and in making strategic decisions.

Certain of our metrics are non-GAAP financial measures. We believe that such metrics are useful in period-to-period comparisons of our core business. However, non-GAAP financial measures are not an alternative to any measure of financial performance calculated and presented in accordance with US GAAP. See “—Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to US GAAP.

Revenues


	As of and for the three months ended March 31,
Revenue metrics (dollars in thousands, except as noted)	2021			2020
Revenues	$	89,733		$	162,467
Period-over-period change in revenue	(45)		%	2		%
Ending combined loans receivable – principal(1)	$	353,089		$	553,489
Average combined loans receivable – principal(1)(2)	$	378,877		$	583,170
Total combined loans originated – principal	$	133,514		$	236,896
Average customer loan balance (in dollars)(3)	$	1,817		$	1,966
Number of new customer loans	13,890			35,750
Ending number of combined loans outstanding	194,331			281,486
Customer acquisition costs (in dollars)	$	316		$	307
Effective APR of combined loan portfolio	96		%	112		%

_________

(1)Combined loans receivable is defined as loans owned by us and consolidated VIEs plus loans originated and owned by third-party lenders pursuant to our CSO programs. See “—Non-GAAP Financial Measures” for more information and for a reconciliation of Combined loans receivable to Loans receivable, net, the most directly comparable financial measure calculated in accordance with US GAAP.

(2)Average combined loans receivable – principal is calculated using an average of daily Combined loans receivable – principal balances.

(3)Average customer loan balance is an average of all three products and is calculated for each product by dividing the ending Combined loans receivable – principal by the number of loans outstanding at period end.

Revenues. Our revenues are composed of Rise finance charges, Rise CSO fees (which are fees we receive from customers who obtain a loan through the CSO program for the credit services, including the loan guaranty, we provide), revenues earned on the Elastic line of credit, and finance charges and fee revenues from the Today Card credit card product. See “—Components of our Results of Operations—Revenues.”

Ending and average combined loans receivable – principal. We calculate the average combined loans receivable – principal by taking a simple daily average of the ending combined loans receivable – principal for each period. Key metrics that drive the ending and average combined loans receivable – principal include the amount of loans originated in a period and the average customer loan balance. All loan balance metrics include only the 90% participation in the related Elastic line of credit advances (we exclude the 10% held by Republic Bank), the 96% participation in FinWise Bank originated Rise installment loans and the 95% participation in CCB originated Rise installment loans and the 95% participation in the CCB originated Today Card credit card receivables, but include the full loan balances on CSO loans, which are not presented on our Condensed Consolidated Balance Sheets.

Total combined loans originated – principal. The amount of loans originated in a period is driven primarily by loans to new customers as well as new loans to prior customers, including refinancing of existing loans to customers in good standing.

Average customer loan balance and effective APR of combined loan portfolio. The average loan amount and its related APR are based on the product and the underlying credit quality of the customer. Generally, better credit quality customers are offered higher loan amounts at lower APRs. Additionally, new customers have more potential risk of loss than prior or existing customers due to lack of payment history and the potential for fraud. As a result, newer customers typically will have lower loan amounts and higher APRs to compensate for that additional risk of loss. The effective APR is calculated based on the actual amount of finance charges generated from a customer loan divided by the average outstanding balance for the loan and can be lower than the stated APR on the loan due to waived finance charges and other reasons. For example, a Rise customer may receive a $2,000 installment loan with a term of 24 months and a stated rate of 180%. In this example, the customer’s monthly installment loan payment would be $310.86. As the customer can prepay the loan balance at any time with no additional fees or early payment penalty, the customer pays the loan in full in month eight. The customer’s loan earns interest of $2,337.81 over the eight-month period and has an average outstanding balance of $1,948.17. The effective APR for this loan is 180% over the eight-month period calculated as follows:

($2,337.81 interest earned / $1,948.17 average balance outstanding) x 12 months per year = 180%

8 months

In addition, as an example for Elastic, if a customer makes a $2,500 draw on the customer’s line of credit and this draw required bi-weekly minimum payments of 5% (equivalent to 20 bi-weekly payments), and if all minimum payments are made, the draw would earn finance charges of $1,148. The effective APR for the line of credit in this example is 109% over the payment period and is calculated as follows:

($1,148.00 fees earned / $1,369.05 average balance outstanding) x 26 bi-weekly periods per year = 109%

20 payments

The actual total revenue we realize on a loan portfolio is also impacted by the amount of prepayments and charged-off customer loans in the portfolio. For a single loan, on average, we typically expect to realize approximately 60% of the revenues that we would otherwise realize if the loan were to fully amortize at the stated APR. From the Rise example above, if we waived $400 of interest for this customer, the effective APR for this loan would decrease to 149%.

Number of new customer loans. We define a new customer loan as the first loan or advance made to a customer for each of our products (so a customer receiving a Rise installment loan and then at a later date taking their first cash advance on an Elastic line of credit would be counted twice). The number of new customer loans is subject to seasonal fluctuations. New customer acquisition is typically slowest during the first six months of each calendar year, primarily in the first quarter, compared to the latter half of the year, as our existing and prospective customers usually receive tax refunds during this period and, thus, have less of a need for loans from us. Further, many customers will use their tax refunds to prepay all or a portion of their loan balance during this period, so our overall loan portfolio typically decreases during the first quarter of the calendar year. Overall loan portfolio growth and the number of new customer loans tends to accelerate during the summer months (typically June and July), at the beginning of the school year (typically late August to early September) and during the winter holidays (typically late November to early December).

Customer acquisition costs. A key expense metric we monitor related to loan growth is our CAC. This metric is the amount of direct marketing costs incurred during a period divided by the number of new customer loans originated during that same period. New loans to former customers are not included in our calculation of CAC (except to the extent they receive a loan through a different product) as we believe we incur no material direct marketing costs to make additional loans to a prior customer through the same product.

The following tables summarize the changes in customer loans by product for the three months ended March 31, 2021 and 2020.


	Three Months Ended March 31, 2021
	Rise		Elastic		Today
	(Installment Loans)		(Lines of Credit)		(Credit Card)		Total
Beginning number of combined loans outstanding	103,940		100,105		10,803		214,848
New customer loans originated	8,656		2,852		2,382		13,890
Former customer loans originated	12,856		94		—		12,950
Attrition	(33,944)		(13,030)		(383)		(47,357)
Ending number of combined loans outstanding	91,508		90,021		12,802		194,331
Customer acquisition cost	$	327	$	475	$	83	$	316
Average customer loan balance	$	2,209	$	1,514	$	1,149	$	1,817


	Three Months Ended March 31, 2020
	Rise		Elastic		Today
	(Installment Loans)		(Lines of Credit)		(Credit Card)		Total
Beginning number of combined loans outstanding	152,435		146,317		3,207		301,959
New customer loans originated	24,413		9,765		1,572		35,750
Former customer loans originated	16,556		131		—		16,687
Attrition	(50,771)		(21,973)		(166)		(72,910)
Ending number of combined loans outstanding	142,633		134,240		4,613		281,486
Customer acquisition cost	$	309	$	334	$	110	$	307
Average customer loan balance	$	2,269	$	1,674	$	1,134	$	1,966

Recent trends. Our revenues for the three months ended March 31, 2021 totaled $89.7 million, a decrease of 45% versus the three months ended March 31, 2020. Both the Rise and Elastic products experienced a year-over-year decline in revenues of 48% and 41%, respectively, which were attributable to reductions in loan origination volume and lower effective APRs for the loan portfolio due to the economic crisis created by the COVID-19 pandemic beginning in March 2020, which resulted in substantial government assistance to our potential customers that lowered demand for our products. This decline in revenue was partially offset by a year-over-year increase in revenues for the Today Card product, which has tripled its average principal balance outstanding year-over year. We believe Today Card balances increased over the past year despite the impact of COVID-19 due to the nature of the product (credit card versus installment loan or line of credit), the lower APR of the product (effective APR of 32% in the first quarter of 2021 compared to Rise at 100% and Elastic at 95%) as customers receiving stimulus payments would be more apt to pay down more expensive forms of credit, and the added convenience of having a credit card for online purchases of day-to-day items such as groceries or clothing (whereas the primary usage of a Rise installment loan or Elastic line of credit is for emergency financial needs such as a medical deductible or automobile repair).

In response to the COVID-19 pandemic, we expanded our payment flexibility tools to provide temporary payment relief to certain customers who meet the program’s qualifications. This program allows for a deferral of payments for an initial period of 30 to 60 days, for generally a maximum of 180 days on a cumulative basis. The customer will return to their normal payment schedule after the end of the deferral period with the extension of their maturity date equivalent to their deferral period not to generally exceed an additional 180 days. For Rise installment loans, finance charges continue to accrue at a lower effective APR over the expected extended term of the loan considering the deferral periods provided. For Elastic lines of credit, no fees accrue during the payment deferral period. As a result, the average APR of our Rise and Elastic products has decreased due to the impact of the COVID pandemic and the payment flexibility tools that have been implemented.

Additionally, the portfolio of loan products we and the bank originators provide has experienced significantly decreased loan demand for both new and former customers since the COVID-19 pandemic began, including the effects of monetary stimulus provided by the US government reducing demand for loan products. These events are resulting in materially lower new customer loans and a corresponding decrease in revenues compared to a year ago. While we have rolled out marketing campaigns to acquire new customer loans during the first quarter of 2021, our overall loan origination volumes during the first quarter of 2021 are still below our historical origination volumes due to continued reduction in loan demand for our products. As a result of the COVID-19 pandemic, Rise and Elastic principal loan balances at March 31, 2021 totaled $202.1 million and $136.3 million, respectively, down roughly $121.5 million and $88.4 million, respectively, from a year ago. Conversely, Today Card principal loan balances at March 31, 2021 totaled $14.7 million, up $9.5 million from a year ago.

While we believe that customer loan demand for our products will increase during the second quarter of 2021, given the uncertainty surrounding the COVID-19 pandemic, we are currently unable to determine when demand for our loan products will return to prior historical levels. Until demand increases, our loan balances and revenue will continue to be materially lower than the prior year periods.

Credit quality


	As of and for the three months ended March 31,
Credit quality metrics (dollars in thousands)	2021			2020
Net charge-offs(1)	$	30,890		$	82,808
Additional provision for loan losses(1)	(9,920)			(4,233)
Provision for loan losses	$	20,970		$	78,575
Past due combined loans receivable – principal as a percentage of combined loans receivable – principal(2)	6		%	10		%
Net charge-offs as a percentage of revenues(1)	34		%	51		%
Total provision for loan losses as a percentage of revenues	23		%	48		%
Combined loan loss reserve(3)	$	39,159		$	77,759
Combined loan loss reserve as a percentage of combined loans receivable(3)(4)	10		%	13		%

_________

(1)Net charge-offs and additional provision for loan losses are not financial measures prepared in accordance with US GAAP. Net charge-offs include the amount of principal and accrued interest on loans that are more than 60 days past due (Rise and Elastic) or 120 days past due (Today Card), or sooner if we receive notice that the loan will not be collected, such as a bankruptcy notice or identified fraud, offset by any recoveries. Additional provision for loan losses is the amount of provision for loan losses needed for a particular period to adjust the combined loan loss reserve to the appropriate level in accordance with our underlying loan loss reserve methodology. See “—Non-GAAP Financial Measures” for more information and for a reconciliation to Provision for loan losses, the most directly comparable financial measure calculated in accordance with US GAAP.

(2)Combined loans receivable is defined as loans owned by us and consolidated VIEs plus loans originated and owned by third-party lenders pursuant to our CSO programs. See “—Non-GAAP Financial Measures” for more information and for a reconciliation of Combined loans receivable to Loans receivable, net, the most directly comparable financial measure calculated in accordance with US GAAP.

(3)Combined loan loss reserve is defined as the loan loss reserve for loans originated and owned by us plus the loan loss reserve for loans owned by third-party lenders and guaranteed by us. See “—Non-GAAP Financial Measures” for more information and for a reconciliation of Combined loan loss reserve to Allowance for loan losses, the most directly comparable financial measure calculated in accordance with US GAAP.

(4)Combined loan loss reserve as a percentage of combined loans receivable is determined using period-end balances.


Net principal charge-offs as a percentage of average combined loans receivable - principal (1) (2) (3)	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
2021	6%	N/A	N/A	N/A
2020	11%	10%	4%	5%
2019	13%	10%	10%	12%

_________

(1)Net principal charge-offs is comprised of gross principal charge-offs less recoveries.

(2)Average combined loans receivable - principal is calculated using an average of daily Combined loans receivable - principal balances during each quarter.

(3)Combined loans receivable is defined as loans owned by us and consolidated VIEs plus loans originated and owned by third-party lenders pursuant to our CSO programs. See “—Non-GAAP Financial Measures” for more information and for a reconciliation of Combined loans receivable to Loans receivable, net, the most directly comparable financial measure calculated in accordance with US GAAP.

The above chart depicts the positive impact COVID-19 has had on credit quality. Due to the lack of new customer loan demand, our implementation of payment assistance tools, and government stimulus payments received by our customers, net principal charge-offs as a percentage of average combined loans receivable-principal for the first quarter of 2021 is approximately half of the first quarter of 2020.

In reviewing the credit quality of our loan portfolio, we break out our total provision for loan losses that is presented on our statement of operations under US GAAP into two separate items—net charge-offs and additional provision for loan losses. Net charge-offs are indicative of the credit quality of our underlying portfolio, while additional provision for loan losses is subject to more fluctuation based on loan portfolio growth, recent credit quality trends and the effect of normal seasonality on our business. The additional provision for loan losses is the amount needed to adjust the combined loan loss reserve to the appropriate amount at the end of each month based on our loan loss reserve methodology.

Net charge-offs. Net charge-offs comprise gross charge-offs offset by recoveries on prior charge-offs. Gross charge-offs include the amount of principal and accrued interest on loans that are more than 60 days past due (Rise and Elastic) or 120 days (Today Card), or sooner if we receive notice that the loan will not be collected, such as a bankruptcy notice or identified fraud. Any payments received on loans that have been charged off are recorded as recoveries and reduce the total amount of gross charge-offs. Recoveries are typically less than 10% of the amount charged off, and thus, we do not view recoveries as a key credit quality metric.

Net charge-offs as a percentage of revenues can vary based on several factors, such as whether or not we experience significant growth or lower the APR of our products. Additionally, although a more seasoned portfolio will typically result in lower net charge-offs as a percentage of revenues, we do not intend to drive down this ratio significantly below our historical ratios and would instead seek to offer our existing products to a broader new customer base to drive additional revenues.

Net charge-offs as a percentage of average combined loans receivable-principal allow us to determine credit quality and evaluate loss experience trends across our loan portfolio.

Additional provision for loan losses. Additional provision for loan losses is the amount of provision for loan losses needed for a particular period to adjust the combined loan loss reserve to the appropriate level in accordance with our underlying loan loss reserve methodology.

Additional provision for loan losses relates to an increase in future inherent losses in the loan portfolio as determined by our loan loss reserve methodology. This increase could be due to a combination of factors such as an increase in the size of the loan portfolio or a worsening of credit quality or increase in past due loans. It is also possible for the additional provision for loan losses for a period to be a negative amount, which would reduce the amount of the combined loan loss reserve needed (due to a decrease in the loan portfolio or improvement in credit quality). The amount of additional provision for loan losses is seasonal in nature, mirroring the seasonality of our new customer acquisition and overall loan portfolio growth, as discussed above. The combined loan loss reserve typically decreases during the first quarter or first half of the calendar year due to a decrease in the loan portfolio from year end. Then, as the rate of growth for the loan portfolio starts to increase during the second half of the year, additional provision for loan losses is typically needed to increase the reserve for future losses associated with the loan growth. Because of this, our provision for loan losses can vary significantly throughout the year without a significant change in the credit quality of our portfolio.

The following provides an example of the application of our loan loss reserve methodology and the break-out of the provision for loan losses between the portion associated with replenishing the reserve due to net charge-offs and the amount related to the additional provision for loan losses. If the beginning combined loan loss reserve were $25 million, and we incurred $10 million of net charge-offs during the period and the ending combined loan loss reserve needed to be $30 million according to our loan loss reserve methodology, our total provision for loan losses would be $15 million, comprising $10 million in net charge-offs (provision needed to replenish the combined loan loss reserve) plus $5 million of additional provision related to an increase in future inherent losses in the loan portfolio identified by our loan loss reserve methodology.


Example (dollars in thousands)
Beginning combined loan loss reserve		$	25,000
Less: Net charge-offs		(10,000)
Provision for loan losses:
Provision for net charge-offs	10,000
Additional provision for loan losses	5,000
Total provision for loan losses		15,000
Ending combined loan loss reserve balance		$	30,000

Loan loss reserve methodology. Our loan loss reserve methodology is calculated separately for each product and, in the case of Rise loans originated under the state lending model (including CSO program loans), is calculated separately based on the state in which each customer resides to account for varying state license requirements that affect the amount of the loan offered, repayment terms and other factors. For each product, loss factors are calculated based on the delinquency status of customer loan balances: current, 1 to 30 days past due, 31 to 60 days past due or 61-120 past due (for Today Card only). These loss factors for loans in each delinquency status are based on average historical loss rates by product (or state) associated with each of these three delinquency categories. Hence, another key credit quality metric we monitor is the percentage of past due combined loans receivable – principal, as an increase in past due loans will cause an increase in our combined loan loss reserve and related additional provision for loan losses to increase the reserve. For customers that are not past due, we further stratify these loans into loss rates by payment number, as a new customer that is about to make a first loan payment has a significantly higher risk of loss than a customer who has successfully made ten payments on an existing loan with us. Based on this methodology, during the past two years we have seen our combined loan loss reserve as a percentage of combined loans receivable fluctuate between approximately 10% and 14% depending on the overall mix of new, former and past due customer loans.

Recent trends. Total loan loss provision for the three months ended March 31, 2021 was 23% of revenues which was below our targeted range of 45% to 55%, and below the 48% in the prior year period. Net charge-offs as a percentage of revenues for the three months ended March 31, 2021 were 34% compared to 51% in the prior year period. While we initially anticipated that the COVID-19 pandemic would have a negative impact on our credit quality, instead the large quantity of monetary stimulus provided by the US government to our customer base has generally allowed customers to continue making payments on their loans. However, this has also caused weaker customer demand for additional loans resulting in lower overall loan balances and revenues. We continue to monitor the portfolio during the economic recovery resulting from COVID-19 and continue to adjust our underwriting and credit policies to mitigate any potential negative impacts. In the near-term we expect that net charge-offs as a percentage of revenues will continue to trend lower than our targeted range of 45% to 55% of revenue. In the long-term (post-COVID-19) as loan demand returns and the loan portfolio grows, we expect to continue to manage our total loan loss provision as a percentage of revenues to continue to remain within our targeted range of approximately 45% to 55% of revenue.

The combined loan loss reserve as a percentage of combined loans receivable totaled 10% and 13% as of March 31, 2021 and March 31, 2020, respectively. This year-over-year decrease is due to the overall decline in the loan portfolio as a result of the COVID-19 pandemic, customers using stimulus payments received in the first quarter of 2021 to pay down loan balances, and lower new customer loan origination activities as a result of the COVID-19 pandemic. Past due loan balances at March 31, 2021 were 6% of total combined loans receivable - principal, down from 10% from a year ago, which is attributable to the COVID-19 payment flexibility tools. We are continuing to see that customers are meeting their scheduled payments once they exit the payment deferral program as evidenced by our low delinquency rate at March 31, 2021 which has remained relatively flat over the past year.

We also look at Rise and Elastic principal loan charge-offs (including both credit and fraud losses) by loan vintage as a percentage of combined loans originated - principal. As the below table shows, our cumulative principal loan charge-offs for Rise and Elastic through March 31, 2021 for each annual vintage since the 2013 vintage are generally under 30% and continue to generally trend at or slightly below our 25% to 30% long-term targeted range. During 2019, we implemented new fraud tools that have helped lower fraud losses for the 2019 vintage and rolled out our next generation of credit models during the second quarter of 2019 and continued refining the models during the third and fourth quarters of 2019. Our payment deferral programs have also assisted in reducing losses in our 2019 and 2020 vintages coupled with a lower volume of new loan originations in our 2020 vintage. The 2019 and 2020 vintages are both performing better than the 2017 and 2018 vintages. However, it is possible that the cumulative loss rates on all vintages will increase and may exceed our recent historical cumulative loss experience due to the impact of a prolonged economic crisis resulting from the COVID-19 pandemic.

1) The 2019 and 2020 vintages are not yet fully mature from a loss perspective.

2) UK included in the 2013 to 2017 vintages only.

We also look at Today Card principal loan charge-offs (including both credit and fraud losses) by account vintage as a percentage of account principal originations. As the below table shows, our cumulative principal credit card charge-offs through March 31, 2021 for the 2020 annual vintage is under 4%. Our 2021 annual vintage also is trending in line with the 2020 vintage. Our 2018 and 2019 vintages are considered to be test vintages and were comprised of limited originations volume and not reflective of our current underwriting standards.

Margins


	Three Months Ended March 31,
Margin metrics (dollars in thousands)	2021			2020

Revenues	$	89,733		$	162,467
Net charge-offs(1)	(30,890)			(82,808)
Additional provision for loan losses(1)	9,920			4,233
Direct marketing costs	(4,383)			(10,969)
Other cost of sales	(2,047)			(2,670)
Gross profit	62,333			70,253
Operating expenses	(37,594)			(42,357)
Operating income	$	24,739		$	27,896
As a percentage of revenues:
Net charge-offs	34		%	51		%
Additional provision for loan losses	(11)			(3)
Direct marketing costs	5			7
Other cost of sales	2			2
Gross margin	69			43
Operating expenses	42			26
Operating margin	28		%	17		%

_________

(1)Non-GAAP measure. See “—Non-GAAP Financial Measures—Net charge-offs and additional provision for loan losses.”

Gross margin is calculated as revenues minus cost of sales, or gross profit, expressed as a percentage of revenues, and operating margin is calculated as operating income expressed as a percentage of revenues. Due to the negative impact of COVID-19 on our loan balances and revenue, we are monitoring our profit margins closely. Long-term, we intend to continue to manage the business to a targeted 20% operating margin.

Recent operating margin trends. For the three months ended March 31, 2021, our operating margin was 28%, which was an increase from 17% in the prior year period. This margin increase was primarily driven by lower net charge-offs due to improved credit quality and by lower additional provisions for loan losses due to the decrease in the loan balances resulting from the COVID-19 pandemic. We also incurred lower marketing expenses for the three months ended March 31, 2021 due to reduced marketing activities resulting from the reduced demand for our loan products during the COVID-19 pandemic.

While gross margins are currently above our targeted 40%, operating expenses as a percentage of revenue is relatively flat with the fourth quarter of 2020 and up from the prior year period in 2020. Our operating expense metrics have been negatively impacted by the COVID-19 pandemic on its impact on loan balances and revenue. In addition to the expense reduction plan that was implemented in 2020, management continues to look for opportunities to reduce our expenses as we continue to experience lower revenues as a result of the COVID-19 pandemic.

NON-GAAP FINANCIAL MEASURES

We believe that the inclusion of the following non-GAAP financial measures in this Quarterly Report on Form 10-Q can provide a useful measure for period-to-period comparisons of our core business, provide transparency and useful information to investors and others in understanding and evaluating our operating results, and enable investors to better compare our operating performance with the operating performance of our competitors. Management uses these non-GAAP financial measures frequently in its decision-making because they provide supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and give an additional indication of our core operating performance. However, non-GAAP financial measures are not a measure calculated in accordance with US generally accepted accounting principles, or US GAAP, and should not be considered an alternative to any measures of financial performance calculated and presented in accordance with US GAAP. Other companies may calculate these non-GAAP financial measures differently than we do.

Adjusted Earnings

There was no difference between reported net income from continuing operations and Adjusted Earnings for the first quarter of 2021. Adjusted earnings for the three months ended March 31, 2020 represent our net income from continuing operations, adjusted to exclude:

•Contingent loss related to a legal matter

•Cumulative tax effect of adjustments

Adjusted diluted earnings per share is Adjusted earnings divided by Diluted weighted average shares outstanding.

The following table presents a reconciliation of net income from continuing operations and diluted earnings per share to Adjusted earnings and Adjusted diluted earnings per share, which excludes the impact of the contingent loss for each of the periods indicated:


	Three Months Ended March 31,
(Dollars in thousands except per share amounts)	2021		2020
Net income from continuing operations	$	12,716	$	7,922

Impact of contingent loss related to a legal matter	—		4,263
Cumulative tax effect of adjustments	—		(1,006)
Adjusted earnings	$	12,716	$	11,179

Diluted earnings per share - continuing operations	$	0.34	$	0.18

Impact of contingent loss related to a legal matter	—		0.10
Cumulative tax effect of adjustments	—		(0.02)
Adjusted diluted earnings per share	$	0.34	$	0.26

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents our net income from continuing operations, adjusted to exclude:

•Net interest expense primarily associated with notes payable under the VPC Facility, ESPV Facility, EF SPV Facility and EC SPV Facility used to fund the loan portfolios;

•Share-based compensation;

•Depreciation and amortization expense on fixed assets and intangible assets;

•Gains and losses from dispositions or a contingent loss related to a legal matter included in non-operating loss; and

•Income taxes.

Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.

Management believes that Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental measures to assist management and investors in analyzing the operating performance of the business and provide greater transparency into the results of operations of our core business.

Adjusted EBITDA and Adjusted EBITDA margin should not be considered as alternatives to net income from continuing operations or any other performance measure derived in accordance with US GAAP. Our use of Adjusted EBITDA and Adjusted EBITDA margin has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are:

•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect expected cash capital expenditure requirements for such replacements or for new capital assets;

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and

•Adjusted EBITDA does not reflect interest associated with notes payable used for funding the loan portfolios, for other corporate purposes or tax payments that may represent a reduction in cash available to us.

The following table presents a reconciliation of net income from continuing operations to Adjusted EBITDA and Adjusted EBITDA margin for each of the periods indicated:


	Three Months Ended March 31,
(Dollars in thousands)	2021			2020
Net income from continuing operations	$	12,716		$	7,922
Adjustments:
Net interest expense	8,786			13,656
Share-based compensation	1,602			2,748

Depreciation and amortization	5,243			4,296

Non-operating (income) loss	(207)			4,263
Income tax expense	3,444			2,055
Adjusted EBITDA	$	31,584		$	34,940

Adjusted EBITDA margin	35.2		%	21.5		%

Free cash flow

Free cash flow (“FCF”) represents our net cash provided by continuing operating activities, adjusted to include:

•Net charge-offs – combined principal loans; and

•Capital expenditures.

The following table presents a reconciliation of net cash provided by continuing operating activities to FCF for each of the periods indicated:


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020

Net cash provided by continuing operating activities(1)	$	31,880	$	73,301
Adjustments:
Net charge-offs – combined principal loans	(22,632)		(63,765)
Capital expenditures	(3,383)		(4,520)
FCF	$	5,865	$	5,016

_________

(1)Net cash provided by continuing operating activities includes net charge-offs – combined finance charges.

Net charge-offs and additional provision for loan losses

We break out our total provision for loan losses into two separate items—first, the amount related to net charge-offs, and second, the additional provision for loan losses needed to adjust the combined loan loss reserve to the appropriate amount at the end of each month based on our loan loss provision methodology. We believe this presentation provides more detail related to the components of our total provision for loan losses when analyzing the gross margin of our business.

Net charge-offs. Net charge-offs comprise gross charge-offs offset by recoveries on prior charge-offs. Gross charge-offs include the amount of principal and accrued interest on loans that are more than 60 days past due, or sooner if we receive notice that the loan will not be collected, such as a bankruptcy notice or identified fraud. Any payments received on loans that have been charged off are recorded as recoveries and reduce total gross charge-offs.


	Three Months Ended March 31,
(Dollars in thousands)	2021		2020

Net charge-offs	$	30,890	$	82,808
Additional provision for loan losses	(9,920)		(4,233)
Provision for loan losses	$	20,970	$	78,575

Combined loan information

Beginning in the fourth quarter of 2018, we started licensing our Rise installment loan brand to a third-party lender, FinWise Bank, which originates Rise installment loans in 17 states. FinWise Bank retains 4% of the balances of all the loans originated and sells a 96% participation to a third-party SPV, EF SPV, Ltd. We do not own EF SPV, but we are required to consolidate EF SPV as a VIE under US GAAP and the condensed consolidated financial statements include revenue, losses and loans receivable related to the 96% of Rise installment loans originated by FinWise Bank and sold to EF SPV.

Beginning in 2018, we started licensing the Today Card brand and our underwriting services and platform to launch a credit card product originated by CCB, which initially provides all of the funding for that product. CCB retains 5% of the credit card receivable balance of all the receivables originated and sells a 95% participation in the Today Card credit card receivables to us. The Today Card program was expanded beginning in 2020.

The information presented in the tables below on a combined basis are non-GAAP measures based on a combined portfolio of loans, which includes the total amount of outstanding loans receivable that we own and that are on our balance sheets plus outstanding loans receivable originated and owned by third parties that we guarantee pursuant to CSO programs in which we participate. See “—Basis of Presentation and Critical Accounting Policies—Allowance and liability for estimated losses on consumer loans” and “—Basis of Presentation and Critical Accounting Policies—Liability for estimated losses on credit service organization loans.”

We believe these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the combined loan portfolio on an aggregate basis. We also believe that the comparison of the combined amounts from period to period is more meaningful than comparing only the amounts reflected on our balance sheet since both revenues and cost of sales as reflected in our financial statements are impacted by the aggregate amount of loans we own and those CSO loans we guarantee.

Our use of total combined loans and fees receivable has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under US GAAP. Some of these limitations are:

•Rise CSO loans are originated and owned by a third-party lender and

•Rise CSO loans are funded by a third-party lender and are not part of the VPC Facility.

As of each of the period ends indicated, the following table presents a reconciliation of:

•Loans receivable, net, Company owned (which reconciles to our Condensed Consolidated Balance Sheets included elsewhere in this Quarterly Report on Form 10-Q);

•Loans receivable, net, guaranteed by the Company (as disclosed in Note 3 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q);

•Combined loans receivable (which we use as a non-GAAP measure); and

•Combined loan loss reserve (which we use as a non-GAAP measure).


	2020												2021
(Dollars in thousands)	March 31			June 30			September 30			December 31			March 31

Company Owned Loans:
Loans receivable – principal, current, company owned	$	486,396		$	387,939		$	346,380		$	372,320		$	331,251
Loans receivable – principal, past due, company owned	53,923			18,917			21,354			25,563			21,678
Loans receivable – principal, total, company owned	540,319			406,856			367,734			397,883			352,929
Loans receivable – finance charges, company owned	31,621			25,606			24,117			25,348			21,393
Loans receivable – company owned	571,940			432,462			391,851			423,231			374,322
Allowance for loan losses on loans receivable, company owned	(76,188)			(59,438)			(49,909)			(48,399)			(39,037)
Loans receivable, net, company owned	$	495,752		$	373,024		$	341,942		$	374,832		$	335,285
Third Party Loans Guaranteed by the Company:
Loans receivable – principal, current, guaranteed by company	$	12,606		$	6,755		$	9,129		$	1,795		$	145
Loans receivable – principal, past due, guaranteed by company	564			117			314			144			15
Loans receivable – principal, total, guaranteed by company(1)	13,170			6,872			9,443			1,939			160
Loans receivable – finance charges, guaranteed by company(2)	1,150			550			679			299			22
Loans receivable – guaranteed by company	14,320			7,422			10,122			2,238			182
Liability for losses on loans receivable, guaranteed by company	(1,571)			(1,156)			(1,421)			(680)			(122)
Loans receivable, net, guaranteed by company(2)	$	12,749		$	6,266		$	8,701		$	1,558		$	60
Combined Loans Receivable(3):
Combined loans receivable – principal, current	$	499,002		$	394,694		$	355,509		$	374,115		$	331,396
Combined loans receivable – principal, past due	54,487			19,034			21,668			25,707			21,693
Combined loans receivable – principal	553,489			413,728			377,177			399,822			353,089
Combined loans receivable – finance charges	32,771			26,156			24,796			25,647			21,415
Combined loans receivable	$	586,260		$	439,884		$	401,973		$	425,469		$	374,504
Combined Loan Loss Reserve(3):
Allowance for loan losses on loans receivable, company owned	$	(76,188)		$	(59,438)		$	(49,909)		$	(48,399)		$	(39,037)
Liability for losses on loans receivable, guaranteed by company	(1,571)			(1,156)			(1,421)			(680)			(122)
Combined loan loss reserve	$	(77,759)		$	(60,594)		$	(51,330)		$	(49,079)		$	(39,159)
Combined loans receivable – principal, past due(3)	$	54,487		$	19,034		$	21,668		$	25,707		$	21,693
Combined loans receivable – principal(3)	$	553,489		$	413,728		$	377,177		$	399,822		$	353,089
Percentage past due(1)	10		%	5		%	6		%	6		%	6		%
Combined loan loss reserve as a percentage of combined loans receivable(3)(4)	13		%	14		%	13		%	12		%	10		%
Allowance for loan losses as a percentage of loans receivable – company owned	13		%	14		%	13		%	11		%	10		%

_________

(1)Represents loans originated by third-party lenders through the CSO programs, which are not included in our condensed consolidated financial statements.

(2)Represents finance charges earned by third-party lenders through the CSO programs, which are not included in our condensed consolidated financial statements.

(3)Non-GAAP measure

(4)Combined loan loss reserve as a percentage of combined loans receivable is determined using period-end balances.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Revenues

Our revenues are composed of Rise finance charges and CSO fees (inclusive of finance charges attributable to the participation in Rise installment loans originated by FinWise Bank and CCB), cash advance fees attributable to the participation in Elastic lines of credit that we consolidate, finance charges and fee revenues related to the Today Card credit card product, and marketing and licensing fees received from third-party lenders related to the Rise, Rise CSO, Elastic, and Today Card products. See “—Overview” above for further information on the structure of Elastic.

Cost of sales

Provision for loan losses. Provision for loan losses consists of amounts charged against income during the period related to net charge-offs and the additional provision for loan losses needed to adjust the loan loss reserve to the appropriate amount at the end of each month based on our loan loss methodology.

Direct marketing costs. Direct marketing costs consist of online marketing costs such as sponsored search and advertising on social networking sites, and other marketing costs such as purchased television and radio advertising and direct mail print advertising. In addition, direct marketing cost includes affiliate costs paid to marketers in exchange for referrals of potential customers. All direct marketing costs are expensed as incurred.

Other cost of sales. Other cost of sales includes data verification costs associated with the underwriting of potential customers and automated clearing house (“ACH”) transaction costs associated with customer loan funding and payments.

Operating expenses

Operating expenses consist of compensation and benefits, professional services, selling and marketing, occupancy and equipment, depreciation and amortization as well as other miscellaneous expenses.

Compensation and benefits. Salaries and personnel-related costs, including benefits, bonuses and share-based compensation expense, comprise a majority of our operating expenses and these costs are driven by our number of employees.

Professional services. These operating expenses include costs associated with legal, accounting and auditing, recruiting and outsourced customer support and collections.

Selling and marketing. Selling and marketing costs include costs associated with the use of agencies that perform creative services and monitor and measure the performance of the various marketing channels. Selling and marketing costs also include the production costs associated with media advertisements that are expensed as incurred over the licensing or production period. These expenses do not include direct marketing costs incurred to acquire customers, which comprises CAC.

Occupancy and equipment. Occupancy and equipment include rent expense on our leased facilities, as well as telephony and web hosting expenses.

Depreciation and amortization. We capitalize all acquisitions of property and equipment of $500 or greater as well as certain software development costs. Costs incurred in the preliminary stages of software development are expensed. Costs incurred thereafter, including external direct costs of materials and services as well as payroll and payroll-related costs, are capitalized. Post-development costs are expensed. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets.

Other expense

Net interest expense. Net interest expense primarily includes the interest expense associated with the VPC Facility that funds the Rise installment loans, the ESPV Facility related to the Elastic lines of credit and related Elastic SPV entity, and the EF SPV and EC SPV Facilities that fund Rise installment loans originated by FinWise Bank and CCB, respectively. Interest expense also includes any amortization of deferred debt issuance cost and prepayment penalties incurred associated with the debt facilities.

STATEMENTS OF OPERATIONS

The following table sets forth our condensed consolidated statements of operations data for each of the periods indicated. Effective June 29, 2020, ECIL was placed into administration in the UK, and we deconsolidated ECIL and present it as discontinued operations for all periods presented.


	Three Months Ended March 31,
Condensed consolidated statements of operations data (Dollars in thousands)	2021		2020

Revenues	$	89,733	$	162,467
Cost of sales:
Provision for loan losses	20,970		78,575
Direct marketing costs	4,383		10,969
Other cost of sales	2,047		2,670
Total cost of sales	27,400		92,214
Gross profit	62,333		70,253
Operating expenses:
Compensation and benefits	19,008		23,474
Professional services	7,079		7,926
Selling and marketing	533		954
Occupancy and equipment	4,956		4,636
Depreciation and amortization	5,243		4,296
Other	775		1,071
Total operating expenses	37,594		42,357
Operating income	24,739		27,896
Other expense:
Net interest expense	(8,786)		(13,656)


Non-operating income (loss)	207		(4,263)
Total other expense	(8,579)		(17,919)
Income from continuing operations before taxes	16,160		9,977
Income tax expense	3,444		2,055
Net income from continuing operations	12,716		7,922
Net loss from discontinued operations	—		(12,833)
Net income (loss)	$	12,716	$	(4,911)


	Three Months Ended March 31,
As a percentage of revenues	2021		2020

Revenues
Cost of sales:
Provision for loan losses	23	%	48	%
Direct marketing costs	5		7
Other cost of sales	2		2
Total cost of sales	31		57
Gross profit	69		43
Operating expenses:
Compensation and benefits	21		14
Professional services	8		5
Selling and marketing	1		1
Occupancy and equipment	6		3
Depreciation and amortization	6		3
Other	1		1
Total operating expenses	42		26
Operating income	28		17
Other expense:
Net interest expense	(10)		(8)


Non-operating income (loss)	—		(3)
Total other expense	(10)		(11)
Income from continuing operations before taxes	18		6
Income tax expense	4		1
Net income from continuing operations	14		5
Net loss from discontinued operations	—		(8)
Net income (loss)	14	%	(3)	%

Comparison of the three months ended March 31, 2021 and 2020

Revenues


	Three Months Ended March 31,
	2021				2020				Period-to-period change
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Finance charges	$	89,223	99	%	$	162,079	100	%	$	(72,856)	(45)	%
Other	510		1		388		—		122		31
Revenues	$	89,733	100	%	$	162,467	100	%	$	(72,734)	(45)	%

Revenues decreased by $72.7 million, or 45%, from $162.5 million for the three months ended March 31, 2020 to $89.7 million for the three months ended March 31, 2021. Total revenue from both the Rise and Elastic products decreased for the three months ended March 31, 2021 compared to the same time period in 2020. This decrease was partially offset by an increase in total revenue for the Today Card due to the growth of this portfolio over the past year.

The tables below break out this change in revenue (including CSO fees and cash advance fees) by product:


	Three Months Ended March 31, 2021
	Rise(1)			Elastic			Today
(Dollars in thousands)	(Installment Loans)			(Lines of Credit)			(Credit Card)			Total

Average combined loans receivable – principal(2)	$	217,679		$	147,063		$	14,135		$	378,877
Effective APR	100		%	95		%	32		%	96		%
Finance charges	$	53,743		$	34,370		$	1,110		$	89,223
Other	62			50			398			510
Total revenue	$	53,805		$	34,420		$	1,508		$	89,733


	Three Months Ended March 31, 2020
	Rise(1)			Elastic			Today
(Dollars in thousands)	(Installment Loans)			(Lines of Credit)			(Credit Card)			Total

Average combined loans receivable – principal(2)	$	339,264		$	239,289		$	4,617		$	583,170
Effective APR	123		%	98		%	35		%	112		%
Finance charges	$	103,505		$	58,175		$	399		$	162,079
Other	99			171			118			388
Total revenue	$	103,604		$	58,346		$	517		$	162,467

________

(1) Includes loans originated by third-party lenders through the CSO programs, which are not included in our condensed consolidated financial statements.

(2) Average combined loans receivable - principal is calculated using daily Combined loans receivable – principal balances. Not a financial measure prepared in accordance with US GAAP. See reconciliation table accompanying this release for a reconciliation of non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with US GAAP.

Our average combined loans receivable - principal decreased $204 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. This decrease in average balance is primarily due to reductions in the Rise and Elastic loan origination volume due to the impacts of the COVID-19 pandemic and substantial government assistance to our potential customers accounted for approximately $51 million of the reduction in revenue for the period. Our average APR declined from 112% for the three months ended March 31, 2020 to 96% for the three months ended March 31, 2021. This reduction in the effective APR is due to the lower effective interest rates earned on loans in a deferral status under the payment flexibility tools that were implemented in response to the COVID-19 pandemic coupled with reduced new customer loan originations which generally have a higher effective APR. The lower effective APR accounted for approximately $21 million of the reduction in revenue for the period. The overall effective APR of the loan portfolio will continue to slightly decline as more loans are originated at near-prime rates, such as the Today Card.

Cost of sales


	Three Months Ended March 31,								Period-to-period change
	2021				2020
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Cost of sales:
Provision for loan losses	$	20,970	23	%	$	78,575	48	%	$	(57,605)	(73)	%
Direct marketing costs	4,383		5		10,969		7		(6,586)		(60)
Other cost of sales	2,047		2		2,670		2		(623)		(23)
Total cost of sales	$	27,400	31	%	$	92,214	57	%	$	(64,814)	(70)	%

Provision for loan losses. Provision for loan losses decreased by $57.6 million, or 73%, from $78.6 million for the three months ended March 31, 2020 to $21.0 million for the three months ended March 31, 2021.

The tables below break out these changes by loan product:


	Three Months Ended March 31, 2021
	Rise			Elastic			Today
(Dollars in thousands)	(Installment Loans)			(Lines of Credit)			(Credit Card)			Total

Combined loan loss reserve(1):
Beginning balance	$	33,968		$	13,201		$	1,910		$	49,079
Net charge-offs	(22,674)			(7,543)			(673)			(30,890)
Provision for loan losses	15,298			5,091			581			20,970

Ending balance	$	26,592		$	10,749		$	1,818		$	39,159
Combined loans receivable(1)(2)	$	217,705		$	141,647		$	15,152		$	374,504
Combined loan loss reserve as a percentage of ending combined loans receivable	12		%	8		%	12		%	10		%
Net charge-offs as a percentage of revenues	42		%	22		%	45		%	34		%
Provision for loan losses as a percentage of revenues	28		%	15		%	39		%	23		%


	Three Months Ended March 31, 2020
	Rise			Elastic			Today
(Dollars in thousands)	(Installment Loans)			(Lines of Credit)			(Credit Card)			Total

Combined loan loss reserve(1):
Beginning balance	$	52,099		$	28,852		$	1,041		$	81,992
Net charge-offs	(54,961)			(27,205)			(642)			(82,808)
Provision for loan losses	54,569			23,497			509			78,575

Ending balance	$	51,707		$	25,144		$	908		$	77,759
Combined loans receivable(1)(2)	$	346,212		$	234,644		$	5,404		$	586,260
Combined loan loss reserve as a percentage of ending combined loans receivable	15		%	11		%	17		%	13		%
Net charge-offs as a percentage of revenues	53		%	47		%	124		%	51		%
Provision for loan losses as a percentage of revenues	53		%	40		%	98		%	48		%

_________

(1) Not a financial measure prepared in accordance with US GAAP. See “—Non-GAAP Financial Measures” for more information and for a reconciliation to the most directly comparable financial measure calculated in accordance with US GAAP.

(2) Includes loans originated by third-party lenders through the CSO programs, which are not included in our condensed consolidated financial statements.

Total loan loss provision for the three months ended March 31, 2021 was 23% of revenues, which was below our targeted range of 45% to 55%, and lower than the 48% for the three months ended March 31, 2020. For the three months ended March 31, 2021, net charge-offs as a percentage of revenues decreased to 34% compared to 51% in the prior year period. We continue to monitor the portfolio during the economic recovery from COVID-19 and continue to adjust our underwriting and credit policies to mitigate any potential negative impacts. In the near-term, we expect that net charge-offs as a percentage of revenues will continue to trend lower than our targeted range of 45% to 55% of revenue. In the long-term (post-COVID-19) as loan demand returns and the loan portfolio grows, we expect to manage our total loan loss provision as a percentage of revenues to continue to remain within our targeted range.

The combined loan loss reserve as a percentage of combined loans receivable totaled 10% and 13% as of March 31, 2021 and March 31, 2020, respectively. This decrease year-over-year is due to the overall decrease in the loan portfolio as a result of the COVID-19 pandemic, customers using stimulus payments received in the first quarter of 2021 to pay down loan balances, and slower new customer loan origination activities as a result of the COVID-19 pandemic. Past due loan balances at March 31, 2021 were 6% of total combined loans receivable - principal, down from 10% from a year ago, attributable to the COVID-19 payment flexibility tools and reduced new loan origination volume. We are continuing to see that customers are meeting their scheduled payments once they exit the payment deferral program as evidenced by our low delinquency rate at March 31, 2021 which has remained relatively flat over the past year.

Direct marketing costs. Direct marketing costs decreased by $6.6 million, or 60%, from $11.0 million for the three months ended March 31, 2020 to $4.4 million for the three months ended March 31, 2021. The Rise and Elastic products continue to be impacted by the COVID-19 pandemic as the payments received from the federal government's stimulus programs have resulted in reduced new customer loan demand. For the three months ended March 31, 2021, the number of new customers acquired decreased to 13,890 compared to 35,750 during the three months ended March 31, 2020. We anticipate our direct marketing costs to increase in the future as demand for our product grows during the remainder of the year.

Other cost of sales. Other cost of sales decreased by $0.6 million, or 23%, from $2.7 million for the three months ended March 31, 2020 to $2.0 million for the three months ended March 31, 2021 due to decreased data verification costs and program expenses resulting from reduced loan origination volume.

Operating expenses


	Three Months Ended March 31,								Period-to-period change
	2021				2020
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Operating expenses:
Compensation and benefits	$	19,008	21	%	$	23,474	14	%	$	(4,466)	(19)	%
Professional services	7,079		8		7,926		5		(847)		(11)
Selling and marketing	533		1		954		1		(421)		(44)
Occupancy and equipment	4,956		6		4,636		3		320		7
Depreciation and amortization	5,243		6		4,296		3		947		22
Other	775		1		1,071		1		(296)		(28)
Total operating expenses	$	37,594	42	%	$	42,357	26	%	$	(4,763)	(11)	%

Compensation and benefits. Compensation and benefits decreased by $4.5 million, or 19%, from $23.5 million for the three months ended March 31, 2020 to $19.0 million for the three months ended March 31, 2021 primarily due to the reduction in staff related to operating expense reductions implemented in 2020 as a result of the COVID-19 pandemic.

Professional services. Professional services decreased by $0.8 million, or 11%, from $7.9 million for the three months ended March 31, 2020 to $7.1 million for the three months ended March 31, 2021 due to decreased board stock-based compensation expense due to the departure of a board member and other outside services, partially offset by increased legal expenses and directors and officer insurance costs.

Selling and marketing. Selling and marketing decreased by $0.4 million, or 44%, from $1.0 million for the three months ended March 31, 2020 to $0.5 million for the three months ended March 31, 2021 primarily due to decreased marketing agency fees.

Occupancy and equipment. Occupancy and equipment increased by $0.3 million, or 7%, from $4.6 million for the three months ended March 31, 2020 to $5.0 million for the three months ended March 31, 2021 primarily due to increased web hosting expenses, partially offset by decreased data center costs and license expenses.

Depreciation and amortization. Depreciation and amortization increased by $0.9 million, or 22%, from $4.3 million for the three months ended March 31, 2020 to $5.2 million for the three months ended March 31, 2021 primarily due to the acceleration of a board member's non-compete agreement and depreciation on internally developed software.

Other. Other operating expenses decreased by $0.3 million, or 28%, from $1.1 million for the three months ended March 31, 2020 to $0.8 million for the three months ended March 31, 2021 primarily due to decreased travel, meals and entertainment expenses, partially offset by an increase in dues and subscriptions.

Net interest expense


	Three Months Ended March 31,								Period-to-period change
	2021				2020
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Net interest expense	$	8,786	10	%	$	13,656	8	%	$	(4,870)	(36)	%

Net interest expense decreased 36% during the three months ended March 31, 2021 as compared to the prior year period. Our average balance of notes payable outstanding under the debt facilities in the first quarter of 2021 decreased $182 million from the first quarter of 2020 due to debt paydowns associated with a decrease in the loan portfolio due to COVID-19, as well as the maturity of one of our term notes. This year-over-year reduction resulted in a decrease in interest expense of approximately $4.4 million. In addition, our average effective interest rate on notes payable outstanding has decreased from 10.4% for the three months ended March 31, 2020 to 10.1% for the three months ended March 31, 2021, resulting in a decrease in interest expense of approximately $0.4 million.

The following table shows the effective cost of funds of each debt facility for the period:


	Three Months Ended March 31,
(Dollars in thousands)	2021			2020

VPC Facility
Average facility balance during the period	$	88,758		$	196,077
Net interest expense	2,279			5,212


Effective cost of funds	10.4		%	10.7		%


ESPV Facility
Average facility balance during the period	$	160,930		$	224,929
Net interest expense	4,049			5,807
Effective cost of funds	10.2		%	10.4		%

EF SPV Facility
Average facility balance during the period	$	75,423		107,429
Net interest expense	1,783			2,637
Effective cost of funds	9.6		%	9.9		%

EC SPV Facility
Average facility balance during the period	$	26,556		$	—
Net interest expense	665			—
Effective cost of funds	10.2		%	—		%

In July 2020, we entered into a new facility, the EC SPV Facility. As of March 31, 2021 we have drawn $30 million on the EC SPV facility. Per the terms of the February 2019 amendments and the July 31, 2020 EC SPV agreement, we qualified for a 25 bps rate reduction on the VPC, ESPV, EF SPV and EC SPV facilities effective January 1, 2021.

Non-operating income (loss)

For the three months ended March 31, 2020, we accrued a $4.3 million contingent loss related to a legal matter. As of March 31, 2021, the contingent loss was settled and no further accrual remains. For the three months ended March 31, 2021, we recognized a gain on the sale of an intangible asset of $0.9 million, partially offset by an impairment loss related to a subleased asset of $0.7 million, resulting in non-operating income of $0.2 million.

Income tax expense


	Three Months Ended March 31,								Period-to-period change
	2021				2020
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Income tax expense	$	3,444	4	%	$	2,055	1	%	$	1,389	68	%

Our income tax expense increased $1.4 million, from $2.1 million for the three months ended March 31, 2020 to $3.4 million for the three months ended March 31, 2021. Our effective tax rates for continuing operations for the three months ended March 31, 2021 and 2020, including discrete items, were 21.3% and 20.6%, respectively. Our effective tax rate differed from the standard corporate federal income tax rate of 21% due to permanent non-deductible items and corporate state tax obligations in the states where we have lending activities. Our cash effective tax rate was approximately 1.0% for the first quarter of 2021.

Net loss from discontinued operations

Our loss from discontinued operations on our UK entity (ECIL) for the three months ended March 31, 2020 primarily consists of revenue of $15 million less total cost of sales and operating expenses of $17.2 million and a goodwill impairment loss of $9.3 million for a net loss from discontinued operations of $12.8 million.

Net income (loss)


	Three Months Ended March 31,								Period-to-period change
	2021				2020
(Dollars in thousands)	Amount		Percentage of revenues		Amount		Percentage of revenues		Amount		Percentage

Net income (loss)	$	12,716	14	%	$	(4,911)	(3)	%	$	17,627	359	%

Our net income increased $17.6 million or 359% from a net loss of $4.9 million for the three months ended March 31, 2020 to net income of $12.7 million for the three months ended March 31, 2021 due to eliminating the discontinued operations of the UK of $12.8 million and improved net income from continuing operations of $4.8 million

LIQUIDITY AND CAPITAL RESOURCES

As previously discussed, we are closely monitoring the impacts of the COVID-19 pandemic across our business, including the resulting uncertainties around customer demand, credit performance of the loan portfolio, our levels of liquidity and our ongoing compliance with debt covenants. We had cash and cash equivalents available of $143 million as of March 31, 2021. Our principal debt payment obligation of $18.1 million was paid off in January 2021 prior to its maturity in February 2021, and there are no additional required principal payments on our outstanding debt until January 2024. While the ultimate impact of COVID-19 on our business, financial condition, liquidity and results of operations is dependent on future developments which are highly uncertain, we believe that our actions taken to date, future cash provided by operating activities, availability under our debt facilities with VPC, and possibly the capital markets, as well as certain potential measures within our control that could be put in place to maintain a sound financial position and liquidity will provide adequate resources to fund our operating and financing needs. We are continuing to assess minimum cash and liquidity requirements and implementing measures to ensure that our strong liquidity position is maintained through the current economic cycle created by the COVID-19 pandemic. We principally rely on our working capital and our credit facility with VPC to fund the loans we make to our customers.

Stock Repurchase Program

The amended stock repurchase program provides that up to a maximum aggregate amount of $25 million shares may be repurchased in any given fiscal year. Repurchases will be made in accordance with applicable securities laws from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. The share repurchase program does not require the purchase of any minimum number of shares and may be implemented, modified, suspended or discontinued in whole or in part at any time without further notice. Any repurchased shares will be available for use in connection with equity plans and for other corporate purposes.

Debt Facilities

VPC Facility

VPC Facility Term Notes

On January 30, 2014, we entered into the VPC Facility in order to fund our Rise product and provide working capital. The VPC Facility has been amended several times, with the most recent amendment effective July 31, 2020, to decrease the maximum total borrowing amount available and other terms of the VPC Facility.

The VPC Facility provided the following term notes as of March 31, 2021:

•A revolving feature which provides the option to pay down up to 20% of the outstanding balance, excluding the 4th Tranche Term note, once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.

There are no principal payments due or scheduled under the VPC Facility until the maturity date of the US Term Note. In January 2021, we paid down approximately $21 million, or 20%, of the current outstanding debt on the VPC Facility under the revolving feature noted above. The remaining outstanding debt on the US Term Note matures on January 1, 2024.

All of our assets are pledged as collateral to secure the VPC Facility. The agreement contains customary financial covenants, including minimum cash and excess spread requirements, maximum roll rate and charge-off rate levels, maximum loan-to-value ratios and a minimum book value of equity requirement. We were in compliance with all covenants as of March 31, 2021.

The VPC Facility previously included a term note (the "4th Tranche Term Note") used to fund working capital with a maximum borrowing amount of $18 million and a base rate of 2.73% plus 13%. The interest rate at December 31, 2020 was 15.73%. In January 2021, we paid off this term note prior to its maturity on February 1, 2021.

ESPV Facility

ESPV Facility Term Note

The ESPV Facility has a maximum borrowing amount of $350 million to be used to purchase loan participations from a third-party lender. Upon the February 1, 2019 amendment date, the interest rate on the debt outstanding as of the amendment date was fixed at 15.48% (base rate of 2.73% plus 12.75%). Effective July 1, 2019, the interest rate on the debt outstanding as of the amendment date was set at 10.23% (base rate of 2.73% plus 7.5%, which was reduced to 7.25% and 7.00% on January 1, 2020 and 2021, respectively, as part of the amendment). At December 31, 2020 the weighted average base rate on the outstanding balance was 2.72% and the overall interest rate was 9.97%. At March 31, 2021, the weighted average base rate on the outstanding balance was 2.72% and the overall interest rate was 9.72%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The ESPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity. In January 2021, we paid down approximately $40 million, or 20%, of the current outstanding debt balance on the ESPV Facility under the revolving feature. The remaining outstanding debt on the ESPV Term Note matures on January 1, 2024.

All of our assets are pledged as collateral to secure the ESPV Facility. The agreement contains customary financial covenants, including minimum cash and excess spread requirements, maximum roll rate and charge-off rate levels, maximum loan-to-value ratios and a minimum book value of equity requirement. We were in compliance with all covenants related to the ESPV facility as of March 31, 2021.

EF SPV Facility

EF SPV Facility Term Note

The EF SPV Facility has a maximum borrowing amount of $250 million (amended as of July 31, 2020) to be used to purchase Rise installment loan participations from a third-party bank, FinWise Bank. Prior to execution of the agreement with VPC effective February 1, 2019, EF SPV was a borrower on the US Term Note under the VPC Facility and the interest rate paid on this facility was a base rate (defined as 3-month LIBOR, with a 1% floor) plus 11%. Upon the February 1, 2019 amendment date, $43 million was re-allocated into the EF SPV Facility and the interest rate on the debt outstanding as of the amendment date was fixed through the January 1, 2024 maturity date at 10.23% (base rate of 2.73% plus 7.5%, which was reduced to 7.25% and 7.00% on January 1, 2020 and 2021, respectively, as part of the amendment). The weighted average base rate on the outstanding balance at December 31, 2020 was 2.45% and the overall interest rate was 9.70%. The weighted average base rate on the outstanding balance at March 31, 2021 was 2.45% and the overall interest rate was 9.45%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The EF SPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity. In January 2021, we paid down approximately $19 million, or 20%, of the current outstanding debt balance on the EF SPV Facility under the revolving feature. The remaining outstanding debt on the EF SPV Term Note matures on January 1, 2024.

All of our assets are pledged as collateral to secure the EF SPV Term Note. The agreement contains customary financial covenants, including minimum cash and excess spread requirements, maximum roll rate and charge-off rate levels, maximum loan-to-value ratios and a minimum book value of equity requirement. We were in compliance with all covenants related to the EF SPV facility as of March 31, 2021.

EC SPV Facility

EC SPV Facility Term Note

VPC entered into a new debt facility with EC SPV on July 31, 2020. The EC SPV Facility has a maximum borrowing amount of $100 million used to purchase Rise installment loan participations from a third-party bank, Capital Community Bank. The weighted average base rate on the outstanding balance at December 31, 2020 was 2.73% and the overall interest rate was 9.98%. The weighted average base rate on the outstanding balance at March 31, 2021 was 2.73% and the overall interest rate was 9.73%. All future borrowings under this facility will bear an interest rate at a base rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus 7.0% at the borrowing date. The EC SPV Term Note has a revolving feature providing the option to pay down up to 20% of the outstanding balance once per year during the first quarter. Amounts paid down may be drawn again at a later date prior to maturity.

The EC SPV Term Note matures on January 1, 2024. There are no principal payments due or scheduled until the maturity date. All of our assets and EC SPV are pledged as collateral to secure the EC SPV Facility. The EC SPV Facility contains certain covenants for us such as minimum cash requirements and a minimum book value of equity requirement. There are also certain covenants for the product portfolio underlying the facility including, among other things, excess spread requirements, maximum roll rate and charge-off rate levels, and maximum loan-to-value ratios. We were in compliance with all covenants related to the EC SPV facility as of March 31, 2021.

Outstanding Notes Payable

The outstanding balances of notes payable as of March 31, 2021 and December 31, 2020 are as follows:


(Dollars in thousands)	March 31, 2021		December 31, 2020
US Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	$	78,600	$	104,500
4th Tranche Term Note bearing interest at the base rate + 13%	—		18,050
ESPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	159,600		199,500
EF SPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	74,800		93,500
EC SPV Term Note bearing interest at the base rate + 7.0% (2021) or + 7.25% (2020)	30,000		25,000
Total	$	343,000	$	440,550

The change in the facility balances includes the following:

•US Term Note - Paydown of $25.9 million in the first quarter of 2021;

•4th Tranche Term Note - Debt obligation of $18.1 million paid off in the first quarter of 2021;

•ESPV Term Note - Paydown of $39.9 million in the first quarter of 2021;

•EF SPV Term note - Paydown of $18.7 million in the first quarter of 2021; and

•EC SPV Term Note - Draw of $5 million in the first quarter of 2021.

The following table presents the future debt maturities as of March 31, 2021:


Year (dollars in thousands)	March 31, 2021
Remainder of 2021	$	—
2022	—
2023	—
2024	343,000
2025	—
Thereafter	—
Total	$	343,000

Cash and cash equivalents, restricted cash, loans (net of allowance for loan losses), and cash flows

The following table summarizes our cash and cash equivalents, restricted cash, loans receivable, net and cash flows for the periods indicated:


	As of and for the three months ended March 31,
(Dollars in thousands)		2021		2020

Cash and cash equivalents		$	140,300	$	91,139
Restricted cash		3,035		2,135
Loans receivable, net		335,285		495,752
Cash provided by (used in):
Operating activities - continuing operations		31,880		73,301
Investing activities - continuing operations		19,090		(21,436)
Financing activities - continuing operations		(108,753)		(32,041)

Our cash and cash equivalents at March 31, 2021 were held primarily for working capital purposes. We may, from time to time, use excess cash and cash equivalents to fund our lending activities, paydown debt or repurchase stock. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate working capital requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our excess cash is invested primarily in demand deposit accounts that are currently providing only a minimal return.

Net cash provided by operating activities

We generated $31.9 million in cash from our operating activities-continuing operations for the three months ended March 31, 2021, primarily from revenues derived from our loan portfolio. This was down $41.4 million from the $73.3 million of cash provided by operating activities-continuing operations during the three months ended March 31, 2020 due to a decrease in revenues.

Net cash provided by (used in) investing activities

For the three months ended March 31, 2021 and 2020, cash provided by (used in) investing activities-continuing operations was $19.1 million and $(21.4) million, respectively. The increase was primarily due to a decrease in net loans issued to customers related to reduced origination volume attributed to the COVID-19 pandemic. The following table summarizes cash used in investing activities for the periods indicated:


	Three Months Ended March 31,
(Dollars in thousands)		2021		2020

Cash provided by (used in) investing activities - continuing operations
Net loans issued to consumers, less repayments		$	22,304	$	(15,516)
Participation premium paid		(1,081)		(1,400)
Purchases of property and equipment		(3,383)		(4,520)


Proceeds from sale of intangible assets		1,250		$	—
		$	19,090	$	(21,436)

Net cash used in financing activities

Cash flows from financing activities-continuing operations primarily include cash received from issuing notes payable, payments on notes payable, and activity related to stock awards. For the three months ended March 31, 2021 and 2020, cash used in financing activities was $108.8 million and $32.0 million, respectively. The following table summarizes cash used in financing activities for the periods indicated:


	Three Months Ended March 31,
(Dollars in thousands)		2021		2020

Cash used in financing activities - continuing operations
Proceeds from issuance of Notes payable, net		$	5,000	$	6,500
Payments on Notes payable		(102,550)		(34,000)
Debt issuance costs paid		—		(51)

Common stock repurchased		(10,813)		(4,203)
Proceeds from stock option exercises		27		27
Taxes paid related to net share settlement		(417)		(314)
		$	(108,753)	$	(32,041)

The increase in cash used in financing activities-continuing operations for the three months ended March 31, 2021 versus the comparable period of 2020 was primarily due to increased payments made on notes payable and increased repurchases of common stock.

Free Cash Flow

In addition to the above, we also review FCF when analyzing our cash flows from operations. We calculate free cash flow as cash flows from operating activities-continuing operations, adjusted for the principal loan net charge-offs and capital expenditures incurred during the period. While this is a non-GAAP measure, we believe it provides a useful presentation of cash flows derived from our core continuing operating activities. The below tables provides a reconciliation of free cash flow to our cash flows from operations.


	Three Months Ended March 31,
(Dollars in thousands)		2021		2020

Net cash provided by continuing operating activities		$	31,880	$	73,301
Adjustments:
Net charge-offs – combined principal loans		(22,632)		(63,765)
Capital expenditures		(3,383)		(4,520)
FCF		$	5,865	$	5,016

Our FCF was $5.9 million for the first three months of 2021 compared to $5.0 million for the comparable prior year period. While our net cash provided by continuing operating activities decreased by $41.4 million, this was offset by a similar decrease in net charge-offs - combined principal loans and a $1.2 million decrease in capital expenditures.

Operating and capital expenditure requirements

We are continuing to assess our minimum cash and liquidity requirements and implementing measures to ensure that our cash and liquidity position is maintained through the current economic cycle created by the COVID-19 pandemic. We believe that our existing cash balances, together with the available borrowing capacity under the VPC Facility, ESPV Facility, EF SPV Facility and EC SPV Facility, will be sufficient to meet our anticipated cash operating expense and capital expenditure requirements through at least this year. If our loan growth exceeds our expectations, our available cash balances may be insufficient to satisfy our liquidity requirements, and we may seek additional equity or debt financing. This additional capital may not be available on reasonable terms, or at all.

CONTRACTUAL OBLIGATIONS

Our principal commitments consist of obligations under our debt facilities and operating lease obligations. There have been no material changes to our contractual obligations since December 31, 2020.

OFF-BALANCE SHEET ARRANGEMENTS

We provide services in connection with installment loans originated by independent third-party lenders (“CSO lenders”) whereby we act as a credit service organization/credit access business on behalf of consumers in accordance with applicable state laws through our “CSO program.” The CSO program includes arranging loans with CSO lenders, assisting in the loan application, documentation and servicing processes. Under the CSO program, we guarantee the repayment of a customer’s loan to the CSO lenders as part of the credit services we provide to the customer. A customer who obtains a loan through the CSO program pays us a fee for the credit services, including the guaranty, and enters into a contract with the CSO lenders governing the credit services arrangement. We estimate a liability for losses associated with the guaranty provided to the CSO lenders using assumptions and methodologies similar to the allowance for loan losses, which we recognize for our consumer loans.

RECENT REGULATORY DEVELOPMENTS

On April 7, 2021, the Consumer Financial Protection Bureau ("CFPB") proposed extending the effective date of two recent debt collection rules to give affected parties more time to comply due to the ongoing COVID-19 pandemic. The CFPB issued a Notice of Proposed Rulemaking ("NPRM") to delay by 60 days the effective date of two final rules issued under the Fair Debt Collection Practices Act ("FDCPA"). The debt collection rules, issued in late 2020, are scheduled to take effect on November 30, 2021. The CFPB is proposing to extend the effective date of both rules to January 29, 2022. The proposed delay would allow stakeholders affected by the pandemic additional time to review and implement the rules.

The first debt collection rule, issued in October 2020, focuses on the use of communications related to debt collection, and clarifies prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt. The second debt collection rule, issued in December 2020, clarifies disclosures debt collectors must provide to consumers at the beginning of collection communications. The rule also prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debt. The rule requires debt collectors to take specific steps to disclose the existence of a debt to consumers before reporting information about the debt to a consumer reporting agency.

On March 31, the Federal Reserve Board, the CFPB, the Federal Deposit Insurance Corporation ("FDIC"), the National Credit Union Administration ("NCUA") and the Office of the Comptroller of the Currency ("OCC") announced the request for information ("RFI") to gain input from financial institutions, trade associations, consumer groups, and other stakeholders on the growing use of Artificial Intelligence ("AI") by financial institutions. The request seeks comments regarding the use of AI, including machine learning, by financial institutions; appropriate governance, risk management and controls over AI; as well as challenges in developing, adopting and managing AI. Comments are due on May 30, 2021.

In August 2020, final implementing regulations were approved to guide covered businesses' implementation of the California Consumer Privacy Act ("CCPA"), and since that time, the California Attorney General has proposed four sets of modifications to these regulations. We are closely tracking these amendments as they are released. In November 2020, the California Privacy Rights Act ("CPRA") became law. The CPRA significantly expands the CCPA, establishes the California Privacy Protection Agency, removes the CCPA's thirty-day cure period, and imposes a number of GDPR-styled obligations on businesses, among other requirements. Most of the substantive provisions of the CPRA take effect January 1, 2023, with certain provisions having gone into effect in late 2020. Ongoing implementation of and changes to the CCPA, the CPRA and related requirements will increase costs and create further challenges in the California market.

The CFPB’s Payday, Vehicle Title and Certain High-Cost Installment Loan rule continues to be stayed pursuant to litigation in a Texas federal court. If this rule becomes effective, it will place limitations on the ability to re-present failed ACH and debit card payments and to continue taking such payments pursuant to a valid authorization. The rule also requires substantial disclosures. The parties to the litigation have filed summary judgment briefs, but it is unclear when or if the stay will be lifted. Elevate is prepared to comply with the rule when and if it becomes effective.

BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Revenue recognition

We recognize consumer loan fees as revenues for each of the loan products we offer. Revenues on the Condensed Consolidated Statements of Operations include: finance charges, lines of credit fees, fees for services provided through CSO programs (“CSO fees”), and interest, as well as any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. Other revenues also include marketing and licensing fees received from the originating lender related to the Elastic product and Rise bank-originated loans and from CSO fees related to the Rise product. Revenues related to these fees are recognized when the service is performed.

We accrue finance charges on installment loans on a constant yield basis over their terms. We accrue and defer fixed charges such as CSO fees and lines of credit fees when they are assessed and recognize them to earnings as they are earned over the life of the loan. We accrue interest on credit cards based on the amount of the loan outstanding and their contractual interest rate. Credit card membership fees are amortized to revenue over the card membership period. Other credit card fees, such as late payment fees and returned payment fees, are accrued when assessed. We do not accrue finance charges and other fees on installment loans or lines of credit for which payment is greater than 60 days past due. Credit card interest charges are recognized based on the contractual provisions of the underlying arrangements and are not accrued for which payment is greater than 90 days past due. Installment loans and lines of credit are considered past due if a grace period has not been requested and a scheduled payment is not paid on its due date. Credit cards have a grace period of 25 days and are considered delinquent after the grace period. Payments received on past due loans are applied against the loan and accrued interest balance to bring the loan current. Payments are generally first applied to accrued fees and interest, and then to the principal loan balance.

The spread of COVID-19 since March 2020 has created a global public health crisis that has resulted in unprecedented disruption to businesses and economies. In response to the pandemic's effects and in accordance with federal and state guidelines, we expanded our payment flexibility programs for our customers, including payment deferrals. This program allows for a deferral of payments for an initial period of 30-60 days, and generally up to a maximum of 180 days on a cumulative basis. The customer will return to their normal payment schedule after the end of the deferral period with the extension of their maturity date equivalent to the deferral period, which is generally not to exceed an additional 180 days. Per FASB guidance, the finance charges will continue to accrue at a lower effective interest rate over the expected term of the loan considering the deferral period provided (not to exceed an amount greater than the amount at which the borrower could settle the loan) or placed on non-accrual status.

Our business is affected by seasonality, which can cause significant changes in portfolio size and profit margins from quarter to quarter. Although this seasonality does not impact our policies for revenue recognition, it does generally impact our results of operations by potentially causing an increase in its profit margins in the first quarter of the year and decreased margins in the second through fourth quarters.

Allowance and liability for estimated losses on consumer loans

We have adopted Financial Accounting Standards Board (“FASB”) guidance for disclosures about the credit quality of financing receivables and the allowance for loan losses (“allowance”). We maintain an allowance for loan losses for loans and interest receivable for loans not classified as TDRs at a level estimated to be adequate to absorb credit losses inherent in the outstanding loans receivable. We primarily utilize historical loss rates by product, stratified by delinquency ranges, to determine the allowance, but we also consider recent collection and delinquency trends, as well as macro-economic conditions that may affect portfolio losses. Additionally, due to the uncertainty of economic conditions and cash flow resources of our customers, the estimate of the allowance for loan losses is subject to change in the near-term and could significantly impact the condensed consolidated financial statements. If a loan is deemed to be uncollectible before it is fully reserved, it is charged-off at that time. For loans classified as TDRs, impairment is typically measured based on the present value of the expected future cash flows discounted at the original effective interest rate. As permitted by the SEC, we have elected to not adopt the Current Expected Credit Losses ("CECL") model which would require a broader range of reasonable and supportable information to inform credit loss estimates. See "- Recently Issued Accounting Pronouncements And JOBS Act Election" for more information.

We classify loans as either current or past due. An installment loan or line of credit customer in good standing may request a 16-day grace period when or before a payment becomes due and, if granted, the loan is considered current during the grace period. Credit card customers have a 25-day grace period for each payment. Installment loans and lines of credit are considered past due if a grace period has not been requested and a scheduled payment is not paid on its due date. Credit cards are considered past due if the grace period has passed and the scheduled payment has not been made. Increases in the allowance are created by recording a Provision for loan losses in the Condensed Consolidated Statements of Operations. Installment loans and lines of credit are charged off, which reduces the allowance, when they are over 60 days past due or earlier if deemed uncollectible. Credit cards are charged off, which reduces the allowance, when they are over 120 days past due or earlier if deemed uncollectible. Recoveries on losses previously charged to the allowance are credited to the allowance when collected.

Liability for estimated losses on credit service organization loans

Under the CSO program, we guarantee the repayment of a customer’s loan to the CSO lenders as part of the credit services we provide to the customer. A customer who obtains a loan through the CSO program pays us a fee for the credit services, including the guaranty, and enters into a contract with the CSO lenders governing the credit services arrangement. We estimate a liability for losses associated with the guaranty provided to the CSO lenders using assumptions and methodologies similar to the allowance for loan losses, which we recognize for our consumer loans.

Goodwill

Prior to the adoption of ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), our impairment evaluation of goodwill was already based on comparing the fair value of our reporting units to their carrying value. The adoption of ASU 2017-04 as of January 1, 2020 had no impact on our evaluation procedures. The fair value of the reporting units is determined based on a weighted average of the income and market approaches. The income approach establishes fair value based on estimated future cash flows of the reporting units, discounted by an estimated weighted-average cost of capital developed using the capital asset pricing model, which reflects the overall level of inherent risk of the reporting units. The income approach uses our projections of financial performance for a six to nine-year period and includes assumptions about future revenues growth rates, operating margins and terminal values. The market approach establishes fair value by applying cash flow multiples to the reporting units’ operating performance. The multiples are derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint.

Internal-use software development costs

We capitalize certain costs related to software developed for internal use, primarily associated with the ongoing development and enhancement of our technology platform. Costs incurred in the preliminary development and post-development stages are expensed. These costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally three years.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not to be realized.

Relative to uncertain tax positions, we accrue for losses we believe are probable and can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. If the amounts recorded are not realized or if penalties and interest are incurred, we have elected to record all amounts within income tax expense.

We have no recorded liabilities for US uncertain tax positions at March 31, 2021 and December 31, 2020. Tax periods from fiscal years 2014 to 2019 remain open and subject to examination for US federal and state tax purposes. As we had no operations nor had filed US federal tax returns prior to May 1, 2014, there are no other US federal or state tax years subject to examination.

Share-Based Compensation

In accordance with applicable accounting standards, all share-based compensation, consisting of stock options and restricted stock units (“RSUs") issued to employees is measured based on the grant-date fair value of the awards and recognized as compensation expense on a straight-line basis over the period during which the recipient is required to perform services in exchange for the award (the requisite service period). We also have an employee stock purchase plan (“ESPP”). The determination of fair value of share-based payment awards and ESPP purchase rights on the date of grant using option-pricing models is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, actual and projected employee stock option exercise activity, risk-free interest rate, expected dividends and expected term. We use the Black-Scholes-Merton Option Pricing Model to estimate the grant-date fair value of stock options. We also use an equity valuation model to estimate the grant-date fair value of RSUs. Additionally, the recognition of share-based compensation expense requires an estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND JOBS ACT ELECTION

Under the Jumpstart Our Business Startups Act (the “JOBS Act”), we meet the definition of an emerging growth company. We have irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

Recently Adopted Accounting Standards

See Note 1 in the Notes to the Consolidated Condensed Financial Statements included in this report for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We are exposed to market risk related to changes in interest rates. We do not use derivative financial instruments for speculative or trading purposes, although in the future we may enter into interest rate hedging arrangements to manage the risks described below.

Interest rate sensitivity

Our cash and cash equivalents as of March 31, 2021 consisted of demand deposit accounts. Our primary exposure to market risk for our cash and cash equivalents is interest income sensitivity, which is affected by changes in the general level of interest rates. Given the currently low interest rates, we generate only a de minimis amount of interest income from these deposits.

All of our customer loan portfolios are fixed APR loans and not variable in nature. Additionally, given the high APRs associated with these loans, we do not believe there is any interest rate sensitivity associated with our customer loan portfolio.

On February 1, 2019, the VPC and ESPV Facilities were amended and a new EF SPV Facility was added. As part of these amendments, the base interest rate on existing debt outstanding on February 1, 2019 was locked to the 3-month LIBOR as of February 1, 2019 of 2.73% until note maturity. Any additional borrowings on the facilities (excluding the 4th Tranche Term Note) after February 1, 2019 bear a base interest rate (defined as the greater of 3-month LIBOR, the five-year LIBOR swap rate or 1%) plus the applicable spread at the borrowing date. On July 31, 2020, the new EC SPV Facility was added. This facility does not have a rate lock and is tied to the 3-month LIBOR rate.

Any increase in the base interest rate on future borrowings will result in an increase in our net interest expense. The outstanding balance of our VPC Facility at March 31, 2021 was $78.6 million and the balance at December 31, 2020 was $122.6 million. The outstanding balance of our ESPV Facility was $159.6 million and $199.5 million at March 31, 2021 and December 31, 2020, respectively. The outstanding balance of our EF SPV Facility was $74.8 million at March 31, 2021 and the balance at December 31, 2020 was $93.5 million. The outstanding balance of our EC SPV Facility was $30.0 million and $25 million at March 31, 2021 and December 31, 2020, respectively. Based on the average outstanding indebtedness through the three months ended March 31, 2021, a 1% (100 basis points) increase in interest rates would have increased our interest expense by approximately $0.6 million for the period.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In addition to the matters discussed below, in the ordinary course of business, from time to time, we have been and may be named as a defendant in various legal proceedings arising in connection with our business activities. We may also be involved, from time to time, in reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business (collectively, “regulatory matters”). We contest liability and/or the amount of damages as appropriate in each such pending matter. We do not anticipate that the ultimate liability, if any, arising out of any such pending matter will have a material effect on our financial condition, results of operations or cash flows.

In December 2019, the TFI bankruptcy plan was confirmed, and any potential future claims from the TFI Creditors' Committee were assigned to the Think Finance Litigation Trust (“TFLT”). On August 14, 2020, the TFLT filed an adversary proceeding against Elevate in the United States Bankruptcy Court for the Northern District of Texas, alleging certain avoidance claims related to Elevate’s spin-off from TFI under the Bankruptcy Code and TUFTA. If it were determined that the spin-off constituted a fraudulent conveyance or that there were other avoidance actions associated with the spin-off, then the spin-off could be deemed void and there could be a number of different remedies imposed against Elevate, including without limitation, the requirement that Elevate has to pay money damages. While the TFLT values this claim at $246 million, we believe that we have valid defenses to the claim and intend to vigorously defend ourselves against this claim. In November 2020, Elevate made a settlement proposal to the TFLT and established a reserve based on its settlement offer amount. Additionally, a class action lawsuit against Elevate was filed on August 14, 2020 in the Eastern District of Virginia alleging violations of usurious interest and aiding and abetting various racketeering activities related to the operations of TFI prior to and immediately after the 2014 spin-off. On October 26, 2020, Elevate filed a motion to dismiss and awaits a ruling on that motion. Elevate views this lawsuit as without merit and intends to vigorously defend its position. We accrued a contingent loss in the amount of $17 million for estimated loss related to the TFLT and class action disputes at March 31, 2021. The accrual is recognized as Non-operating loss in the Consolidated Statements of Operations and as Accounts payable and accrued liabilities on the Consolidated Balance Sheets. Even when an accrual is recorded, we may be exposed to loss in excess of any amounts accrued. While Elevate can provide no assurances as to the duration or potential outcome of such proceedings, in the event that for either proceeding there is a settlement and Elevate is unable to pay any amount resulting from such settlement, it could have a material adverse effect on Elevate’s financial condition, or, if there is no settlement and Elevate is deemed to ultimately be liable in these matters, Elevate could be obligated to file for bankruptcy.

On June 5, 2020, the District of Columbia (the "District"), sued Elevate in the Superior Court of the District of Columbia alleging that Elevate may have violated the District's Consumer Protection Procedures Act and the District of Columbia's Municipal Regulations in connection with loans issued by banks in the District of Columbia. This action has been removed to federal court, but the District filed a motion to remand to the Superior Court on August 3, 2020. Elevate disagrees that it has violated the above referenced laws and regulations and it intends to vigorously defend its position.

In addition, on January 27, 2020, Sopheary Sanh filed a class action complaint in the Western District Court in the state of Washington against Rise Credit Service of Texas, LLC d/b/a Rise, Opportunity Financial, LLC and Applied Data Finance, LLC d/b/a Personify Financial. The Plaintiff in the case claims that Rise and Personify Financial have violated Washington’s Consumer Protection Act by engaging in unfair or deceptive practices, and seeks class certification, injunctive relief to prevent solicitation of consumers to apply for loans, monetary damages and other appropriate relief, including an award of costs, pre- and post-judgment interest, and attorneys' fees. The lawsuit was removed to federal court. On January 12, 2021, the court granted Rise's motion to dismiss, however Plaintiffs amended their complaint on January 25, 2021, suing Elevate alleging it is the true lender and violated Washington's Consumer Protection Act. Elevate disagrees that it has violated the above referenced law and it intends to vigorously defend its position.

On March 3, 2020, Heather Crawford filed a lawsuit in the Superior Court of the state of California, county of Los Angeles, against Elevate Credit, Inc., Elevate Credit Service, LLC and Rise Credit of California, LLC alleging unconscionable interest rates on Rise loans and seeking damages and public injunctive relief. Elevate filed a motion to compel arbitration, and Ms. Crawford dismissed the lawsuit without prejudice to refile in arbitration. Ms. Crawford has not filed any arbitration demand as of the date of this Annual Report on Form 10-K. In addition, on April 6, 2020, Danh Le made a demand for arbitration against Elevate Credit, Inc., Elevate Credit Service, LLC and Rise Credit of California, LLC similarly alleging unconscionable interest rates on Rise loans and seeking damages and public injunctive relief. Mr. Le later filed an amended demand, dropping his request for public injunctive relief but adding alleged violations of the Electronic Fund Transfer Act and the Rosenthal Fair Debt Collection Practices Act. The Plaintiffs in these actions assert claims under the “unlawful,” “unfair,” and “fraudulent” prongs of the California Unfair Competition Law (“UCL”) and for breach of contract and civil conspiracy. The “unlawful” UCL claims are premised upon alleged violations of (a) the California Financing Law’s prohibition on unconscionable loans and (b) the California False Advertising Law. Elevate disagrees that it has violated the above referenced laws and it intends to vigorously defend its position.

Item 1A. Risk Factors

There have been no material changes from the Risk Factors described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, except as set forth below.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

The consumer lending industry continues to be subject to new laws and regulations in many jurisdictions that could restrict the consumer lending products and services we offer, impose additional compliance costs on us, render our current operations unprofitable or even prohibit our current operations.

State and federal governments regulatory bodies may seek to impose new laws, direct contractual arrangements with us, regulatory restrictions or licensing requirements that affect the products or services we offer, the terms on which we may offer them, and the disclosure, compliance and reporting obligations we must fulfill in connection with our lending business. They may also interpret or enforce existing requirements in new ways that could restrict our ability to continue our current methods of operation or to expand operations, impose significant additional compliance costs and may have a negative effect on our business, prospects, results of operations, financial condition or cash flows. In some cases, these measures could even directly prohibit some or all of our current business activities in certain jurisdictions or render them unprofitable or impractical to continue.

In recent years, consumer loans, and in particular the category commonly referred to as “payday loans,” have come under increased regulatory scrutiny that has resulted in increasingly restrictive regulations and legislation that makes offering consumer loans in certain states in the US less profitable or unattractive. On July 7, 2020, the CFPB issued a final rule concerning small dollar lending in order to maintain consumer access to credit and competition in the marketplace. The final rule rescinds the mandatory underwriting provisions of the previously proposed 2017 rule after re-evaluating the legal and evidentiary bases for these provisions and finding them to be insufficient. The final rule does not rescind or alter the payments provisions of the 2017 rule.

In order to serve our non-prime customers profitably we need to sufficiently price the risk of the transaction into the APR of our loans. If individual states or the federal government impose rate caps lower than those at which we can operate our current business profitably or otherwise impose stricter limits on non-prime lending, we would need to exit such states or dramatically reduce our rate of growth by limiting our products to customers with higher creditworthiness. For example, on January 1, 2020, California lending law changed to impose a rate cap of 36% plus the Federal Funds Rate set by the Federal Reserve Board for all consumer-purpose installment loans, including personal loans, car loans, and auto title loans, as well as open-end lines of credit made under its California Financing Law where the amount of credit is $2,500 or more but less than $10,000. Rise loans originated by Elevate were impacted by this law and as a result, on January 1, 2020, no new Rise loans have been originated in California.

On January 13, 2021, the Illinois state legislature passed a bill that would prohibit lenders from charging more than 36% APR on all consumer loans. The legislation applies to all non-commercial loans, including closed-end and open-end credit, retail installment sales contracts and motor vehicle retail installment sales contracts. The Illinois legislation broadly defines “lender” to include any (i) affiliate or subsidiary of a lender or (ii) person or entity that buys a whole or partial interest in a loan, arranges a loan for a third party or acts as an agent for a third party in making a loan. The definition of “lender” also includes any other person or entity if the Department of Financial and Professional Regulation determines that the person or entity is engaged in a transaction that it is in substance a disguised loan or a subterfuge for the purpose of avoiding this legislation.

The Illinois legislation exempts federal and state-chartered banks. The legislation includes a “no evasion” provision that emphasizes that a person or entity is a lender subject to the requirements of the legislation notwithstanding the fact that the entity purports to act as an agent, service provider or in another capacity for another entity that is exempt from the legislation, if, among other things: (i) the entity holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan, (ii) the entity markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase loans, receivables or interests in the loans or (iii) the totality of the circumstances indicate that the entity is the lender and the transaction is structured to evade the requirements of such legislation. The Illinois legislation requires lenders subject to its requirements to calculate the 36% APR using the system for calculating a military APR under Section 232.4 of the Military Lending Act. The legislation provides that any loan made in excess of 36% APR would be considered null and void. The Illinois legislation became effective on March 23, 2021. Rise Credit of Illinois will no longer originate loans that are not in compliance with the new law.

On April 16, 2021, the North Dakota Governor signed a bill that amends the North Dakota Money Brokers Act to limit the annual interest rate that licensees may charge to 36%. The law is effective August 1, 2021. On or before that date, Rise Credit of North Dakota will no longer originate loans that are not in compliance with the new law.

At the national level, bills that would create a national interest rate cap of 36% on consumer loans have been proposed at various times, including in 2009, 2013, 2015, 2017 and 2019.

Furthermore, legislative or regulatory actions may be influenced by negative perceptions of us and our industry, even if such negative perceptions are inaccurate, attributable to conduct by third parties not affiliated with us (such as other industry members) or attributable to matters not specific to our industry.

Any of these or other legislative or regulatory actions that affect our consumer loan business at the national, state and local level could, if enacted or interpreted differently, have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows and prohibit or directly or indirectly impair our ability to continue current operations.

OTHER RISKS RELATED TO COMPLIANCE AND REGULATION

The regulatory landscape in which we operate is continually changing due to new CFPB rules, regulations and interpretations, as well as various legal actions that have been brought against others in marketplace lending, including several lawsuits that have sought to re-characterize certain loans made by federally insured banks as loans made by third parties. If litigation on similar theories were brought against us when we work with a federally insured bank that makes loans, rather than making loans ourselves and were such an action to be successful, we could be subject to state usury limits and/or state licensing requirements, in addition to the state consumer protection laws to which we are already subject, in a greater number of states, loans in such states could be deemed void and unenforceable, and we could be subject to substantial penalties in connection with such loans.

The case law involving whether an originating lender, on the one hand, or third parties, on the other hand, are the “true lenders” of a loan is still developing and courts have come to different conclusions and applied different analyses. The determination of whether a third-party service provider is the “true lender” is significant because third-parties risk having the loans they service becoming subject to a consumer’s state usury limits. A number of federal courts that have opined on the “true lender” issue have looked to who is the lender identified on the borrower’s loan documents. A number of state courts and at least one federal district court have considered a number of other factors when analyzing whether the originating lender or a third party is the “true lender,” including looking at the economics of the transaction to determine, among other things, who has the predominant economic interest in the loan being made. If we were re-characterized as a “true lender” with respect to Elastic, or Rise of Texas or FinWise or CCB states, loans could be deemed to be void and unenforceable in some states, the right to collect finance charges could be affected, and we could be subject to fines and penalties from state and federal regulatory agencies as well as claims by borrowers, including class actions by private plaintiffs.

Even if we were not required to change our business practices to comply with applicable state laws and regulations or cease doing business in some states, we could be required to register or obtain lending licenses or other regulatory approvals that could impose a substantial cost on us. If Republic Bank, FinWise Bank, CCB or the CSO lenders in Texas were subject to such a lawsuit, they may elect to terminate their relationship with us voluntarily or at the direction of their regulators, and if they lost the lawsuit, they could be forced to modify or terminate the programs.

On August 13, 2018, the California Supreme Court in Eduardo De La Torre, et al. v. CashCall, Inc., held that interest rates on consumer loans of $2,500 or more could be found unconscionable under section 22302 of the California Financial Code, despite not being subject to certain statutory interest rate caps and that such a finding requires a full unconscionability analysis, which is fact-intensive. The California Supreme Court did not hold that any particular loan or loans were unconscionable. In its opinion, the California Supreme Court noted that the unconscionability determination is not an easy one, that high interest rates may indeed be justified for higher risk borrowers. As a result of the California Supreme Court’s ruling, the case was remanded to the Northern District of California. The Judge for the Northern District of California dismissed the case, on the basis that the unconscionability analysis and class action determination are matters of state law for evaluation by a state court.

On April 13, 2021, a case was decided in the Northern District of California involving FinWise Bank and its non‑bank service provider, Opportunity Financial, LLC, challenging the validity of loans and business practices associated with a bank partnership program. The plaintiff, a California consumer, alleged that the defendants operated a “rent-a-bank” scheme to issue high-cost loans although the bank was listed as the lender on the loan. The plaintiffs claimed the bank was lender in name only, with the service provider marketing the loan, purchasing the loan and then servicing and collecting the loan, which plaintiffs alleged were to evade California interest rate restrictions.

Plaintiff claims were under both California and Utah law for unfair and unconscionable conduct. The defendants challenged all claims based on the doctrine of federal preemption and alternatively that if preemption failed that the action failed to state a cognizable claim under either state’s law.

The court found that all of the plaintiff’s claims failed on the merits. In part, the Court held that the plaintiff failed to show that the defendants were subject to the California Financial Code which contains wording that the California statute does not apply to any person doing business under any law of any state relating to banks. In that regard, the Court upheld existing precedent that as to usury, the court may look only to the face of the transaction and not to the intent of the parties, citing Beechum v. Navient Sols., Inc., 2016 WL 5340454 (C.D. Cal. 2016). On the face of the loan agreement, it was not subject to California law. The court noted that arguments as to evasion of California law are irrelevant since the bank is the lender on the documents. The court also reviewed the service provider’s website and found that it was not misleading as to who was the lender on the loans. The Court also dismissed claims under Utah law for unconscionability in that Utah law allows any rate of interest to be charged on a loan.

A claim was also made under the Electronic Funds Transfer Act ("EFTA") that a preauthorized transfer was required as a condition of the loan and therefore violated EFTA and Regulation E. The court found this claim to be insufficient based on language in the loan agreement allowing for alternative payment methods.

Similarly, on April 7, 2021, in Robinson and Spears v. Nat’l. Collegiate Student Loan Trust 2006-2, 2021 WL 1293707, Case No. 20-cv-10203 ADB (D. Mass. April 7, 2021),the court upheld the concept of “valid when made” and found that Section 85 of the National Bank Act preempts conflicting Pennsylvania law and national banks have the power to purchase and sell loans (citing 12 CFR 7.4008(a)). The Court ruled that the interest rate on the original loan was non-usurious and therefore could not become usurious upon assignment. The Court gave deference to the OCC’s recently enacted valid when made regulation. As to the true lender challenge, the Court held that the plaintiffs had not identified any binding authority that would require it to apply the true lender doctrine. In addition, the Court saw that the bank was named as the lender on the loan document, funded the loan and could be required to hold the loan for an extended period of time. Therefore, the Court did not deem it necessary to address the OCC’s true lender rule that is being challenged in court and in Congress.

On August 31, 2016, the United States District Court for the Central District of California ruled in CFPB v. CashCall, Inc. et. al. that CashCall was the “true lender” and consequently was engaged in deceptive practices by servicing and collecting on payday loans in certain states where the interest rate on the loans exceeded the state usury limit and/or where CashCall was not a licensed lender. The CashCall case is related to a tribally related lending program. In reaching its decision, the court adopted a “totality of the circumstances” test to determine which party to the transaction had the “predominant economic interest” in the transaction. Given the fact-intensive nature of a “totality of the circumstances” assessment, the particular and varied details of marketplace lending and other bank partner programs may lead to different outcomes to those reached in CashCall, even in those jurisdictions where courts adopt the “totality of the circumstances” approach. Notably, CashCall did not address the federal preemption of state law under the National Bank Act or any other federal statute. Although CashCall is appealing the decision in the Ninth Circuit, on January 26, 2018, the District Court ordered CashCall to pay approximately $10.2 million in civil money penalties, but no consumer restitution. In issuing the judgment, which was significantly less than the $280 million the CFPB sought in penalties and consumer restitution, the Court found that CashCall had not knowingly or recklessly violated consumer protection laws, and that the CFPB had not demonstrated that consumer restitution was an appropriate remedy.

In addition to true lender challenges, a question regarding the applicability of state usury rates may arise when a loan is sold from a bank to a non-bank entity. In Madden v. Midland Funding, LLC, the Court of Appeals for the Second Circuit held that the federal preemption of state usury laws did not extend to the purchaser of a loan issued by a national bank. In its brief urging the US Supreme Court to deny certiorari, the US Solicitor General, joined by the Office of the Comptroller of the Currency (“OCC”), noted that the Second Circuit (Connecticut, New York and Vermont) analysis was incorrect. On remand, the United States District Court for the Southern District of New York concluded on February 27, 2017 that New York’s state usury law, not Delaware's state usury law, was applicable and that the plaintiff’s claims under the FDCPA and state unfair and deceptive acts and practices could proceed. To that end, the court granted Madden’s motion for class certification. It is unknown whether Madden will be applied outside of the defaulted debt context in which it arose; however, recently two class actions, Cohen v Capital One Funding, LLC, et al and Chase Card Funding, LLC, et al, have relied on Madden to challenge the interest rate charged once debt was sold to securitization trusts. The facts in CashCall, Navient and Madden are not directly applicable to our business, as we do not engage in practices similar to those at issue in CashCall, Navient or Madden, and we do not purchase whole loans or engage in business in states within the Second Circuit. However, to the extent that either the holdings in CashCall or Madden were broadened to cover circumstances applicable to our business, or if other litigation on related theories were brought against us and were successful, or we were otherwise found to be the "true lender," we could become subject to state usury limits and state licensing laws, in addition to the state consumer protection laws to which we are already subject, in a greater number of states, loans in such states could be deemed void and unenforceable, and we could be subject to substantial penalties in connection with such loans.

In response to the uncertainty Madden created as to the validity of interest rates of bank-originated loans, both the OCC and FDIC issued final rules to clarify that when a bank sells, assigns or otherwise transfers a loan, the interest permissible prior to the transfer continues to be permissible following the transfer. The OCC final rule was effective on August 3, 2020. The FDIC final rule was effective on August 21, 2020. On July 29, 2020, the attorneys general from California, Illinois and New York filed a lawsuit against the OCC challenging the rule. Then in August 2020, attorneys general from California, Illinois, Massachusetts, Minnesota, New Jersey, New York, North Carolina and D.C. sued the FDIC alleging the core of the rulemaking "is beyond the FDIC's power to issue, is contrary to statute, and would facilitate predatory lending through sham 'rent-a-bank' partnerships designed to evade state law."

Relatedly, both agencies have signaled they are working on a rule to remove uncertainty surrounding the “true lender” theory-which involves a claim by a borrower or regulator that the supposed “true lender” of a loan funded by a bank is a non-bank service provider of the bank, rather than the bank itself. This controversial theory poses a growing threat to banks’ ability to enter into contractual partnerships with non-bank service providers to extend responsible credit products that are far superior to payday loans. Such a theory threatens to undermine the long-established lending powers of national and state-chartered banks and the validity of their originated loans and could cause substantial disruption to the financial system upon which all Americans rely. On July 20, 2020, the OCC proposed a rule that would determine when a national bank or federal savings association makes a loan and is the "true lender" in the context of a partnership between a bank and a third party. The proposed rule would resolve this uncertainty by specifying that a bank makes a loan and is the "true lender" if, as of the date of origination, it (1) is named as the lender in the loan agreement or (2) funds the loan.

On October 27, 2020, the OCC issued its final rule as proposed. In addition to the bright line test as to who is the "true lender", the rule also clarifies that as the "true lender" of a loan, the bank retains the compliance obligations associated with the origination of that loan, thus negating concern regarding harmful rent-a-charter arrangements. The rule became effective December 29, 2020.

On July 20, 2020, the FDIC announced that is seeking the public's input on the potential for a public/private standard-setting partnership and voluntary certification program to promote the efficient and effective adoption of innovative technologies at FDIC-supervised financial institutions. The Request for Information asks whether the proposed program might reduce the regulatory and operational uncertainty that may prevent financial institutions from deploying new technology or entering into partnerships with technology firms, including "fintechs." The deadline for comments was September 22, 2020. We are awaiting further developments from the FDIC.

On January 1, 2021, the California Consumer Financial Protection Law ("CCFPL"), expanded the enforcement powers of the California Department of Financial Protection and Innovation (previously known as the California Department of Business Oversight). The new law extends state oversight of financial services providers not currently subject to state supervision.

In 2017, the Colorado Attorney General filed complaints in state court against marketplace lenders Marlette Funding LLC and Avant of Colorado LLC on behalf of the administrator of Colorado’s Uniform Consumer Credit Code (“UCCC”), alleging violations of the UCCC based on “true lender” and loan assignment (Madden) cases with respect to lending programs sponsored by WebBank and Cross River Bank, respectively. After years of litigation, on August 7, 2020, all parties entered into a settlement of all claims comprising of a civil money penalty of $1,050,000 and a $500,000 contribution to a Colorado financial literacy program. The settlement provides a safe harbor for the marketplace lending programs at issue in the suits, as well as certain of the banks’ other marketplace lending programs if certain criteria related to oversight, disclosure, funding, licensing, consumer terms, and structure are followed. Only the parties to the litigation are bound by this settlement and further, it only applies to closed-end loans offered by banks in conjunction with non-bank partners or fintechs partnering with banks that involve origination of loans through an online platform. Another marketplace lender, Kabbage, Inc. and its bank, Celtic Bank, were sued in Massachusetts federal court in 2017, with the defendant alleging that Kabbage, not Celtic Bank, is the “true lender.” Kabbage, Inc. was successful in compelling arbitration in that case. In October 2019, Kabbage was sued in the Southern District of New York by several small businesses alleging violations of state usury laws (California, Massachusetts, Colorado, New York) and racketeering and conspiracy under federal RICO statutes. It also includes claims for violations of various state laws other than usury laws, including the California Financing Law Code ("CFLC"). This case was settled and dismissed in August 2020.

In the last few months, we have seen increased activity by some state regulatory authorities seeking to understand the services we provide to our Bank Partners. We cannot predict the final outcome of these inquiries or to what extent any obligations arising out of such final outcome will be applicable to our Company, business or officers, if at all. It is possible that some state regulators could conclude that we are subject to state laws, including licensing or registration in connection with services we provide to our Bank Partners. The recent and anticipated further clarifications of federal interest rate preemption by the OCC and FDIC should provide clarification to such conclusions.

2. Unregistered Sales of Equity Securities and Use of Proceeds.

Repurchases of Equity Securities

At March 31, 2021, we had an outstanding stock repurchase program authorized by our Board of Directors providing for the repurchase of up to $55 million of our common stock through July 31, 2024; after our Board of Directors authorized a $25 million increase to the plan in January 2021. The Company purchased $3.3 million of common shares under its $10 million authorization during the second half of 2019 and during the year ended December 31, 2020, an additional 7,694,896 shares were repurchased at a total cost of $19.8 million, inclusive of any transactional fees or commissions. The share repurchase program, as amended, provides that up to a maximum aggregate amount of $25 million shares may be repurchased in any given fiscal year. Repurchases will be made in accordance with applicable securities laws from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. The share repurchase plan does not require the purchase of any minimum number of shares and may be implemented, modified, suspended or discontinued in whole or in part at any time without further notice. All repurchased shares may potentially be withheld for the vesting of RSUs.

The following table provides information about our common stock repurchases during the quarter ended March 31, 2021.


Period	Total number of shares purchased	Average price paid per share (1)		Total number of shares purchased as part of the publicly announced program	Approximate dollar value of shares that may yet be purchased under the program (1)
January 1, 2021 to January 31, 2021	1,241,513	$	4.28	1,241,513	$	26,524,544
February 1, 2021 to February 28, 2021	463,127	$	4.32	463,127	$	24,524,551
March 1, 2021 to March 31, 2021	776,101	$	4.51	776,101	$	21,024,574
Total	2,480,741	$	4.36	2,480,741

(1) Includes fees and commissions associated with the shares repurchased.

Item 6. Exhibits


Exhibit number			Description
10.1+			Employment, Confidentiality and Non-Solicitation Agreement, dated May 1, 2014, by and between Sarah Fagin Cutrona and Elevate Credit Service, LLC
10.2+			First Amendment to Employment, Confidentiality and Non-Compete Agreement, dated December 11, 2015, by and between Sarah Fagin Cutrona and Elevate Credit Service, LLC
10.3+			Second Amendment to Employment, Confidentiality and Non-Compete Agreement, dated March 1, 2017, by and between Sarah Fagin Cutrona and Elevate Credit Service, LLC
10.4+			Third Amendment to Employment, Confidentiality and Non-Compete Agreement, dated January 24, 2019, by and between Sarah Fagin Cutrona and Elevate Credit Service, LLC
31.1			Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended
31.2			Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended
32.1&			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2&			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document.
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104			XBRL for cover page of the Company's Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.


#						Previously filed.
∞						Confidential treatment has been requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the Securities and Exchange Commission.
+						Indicates a management contract or compensatory plan.
&						This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

(1) Filed as an exhibit to our Quarterly Report on Form 10-Q filed on August 7, 2020.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.


		Elevate Credit, Inc.

Date:	May 7, 2021	By:	/s/ Jason Harvison
			Jason Harvison
			Chief Executive Officer (Principal Executive Officer)

Date:	May 7, 2021	By:	/s/ Christopher Lutes
			Christopher Lutes
			Chief Financial Officer (Principal Financial Officer)

EMPLOYMENT, CONFIDENTIALITY AND NON-SOLICITATION AGREEMENT

THIS EMPLOYMENT, CONFIDENTIALITY AND NON-SOLICITATION AGREEMENT (this "Agreement") is entered into between Sarah Fagin Cutrona, an individual resident of the State of Texas ("Employee") and Elevate Credit Service, LLC, a Delaware limited liability company ("Company" or "Employer") collectively referred to as the "Parties," with an "Effective Date" of May 1, 2014.

1. Employee's Duties. Employee shall dedicate all of his or her working time, skill and attention to the business of Company and other entities within the Elevate Group (as defined below), agrees to remain loyal to Elevate Group, and not to engage in any conduct that creates a conflict of interest to, or damages the reputation of, any entity within the Elevate Group. Employee understands that he or she will be placed in a position of special trust and confidence concerning the interests of Company and other entities within the Elevate Group. The specific position(s) and duties assigned to Employee may be altered by Company in its sole discretion. Employee will work diligently to perform the duties of any position to which he or she is assigned in a reasonable, timely and professional manner, and shall comply with all applicable policies and rules of Company. Employee's duties are understood to include one or more of the following: (a) developing goodwill for the benefit of the Elevate Group; (b) assisting in development of strategies and other intellectual property; and (c) helping to identify business opportunities for the Elevate Group.

2. Employee's Employment.

2.1 Term. Employee's employment will commence on the Effective Date, and will continue until terminated in accordance with this Agreement. The termination of Employee's employment shall not affect any obligation that expressly extends beyond, or is not contingent upon, continued employment, including the obligations in Section 3.2 and Section 4.

2.2 Termination. Employee's employment may be terminated as follows:

2.2.1 Termination without Cause prior to a Change in Control. If Employer terminates Employee's employment without Cause (as defined below) prior to a Change in Control (as defined below), then Employer shall pay Employee severance pay in an amount equal to the base salary that would be payable to Employee over the period commencing on the date of termination and ending twelve (12) months thereafter (the "Severance Period"), which severance pay shall be paid during the Severance Period in equal installments as set forth in Section 2.3.1.

2.2.2 Termination after a Change in Control. If Employer terminates Employee's employment with Employer without Cause, or Employee terminates his or her employment with Employer for Good Reason (as defined below), following the effective date of a Change in Control, then Employer shall pay Employee severance pay in an amount equal to the base salary that would be payable to Employee over the Severance Period, which severance pay shall be paid during the Severance Period in equal installments as set forth in Section 2.3.1.

2.2.3 Termination with Cause. If Employer terminates Employee’s employment with Employer with Cause, then Employer shall pay any base salary earned by Employee through the date of termination plus any other amounts required to be paid pursuant to applicable law. No severance pay shall be applicable.

2.2.4 Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

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A. The term "Cause" shall mean:

(i) Failure of Employee to be present for work and duties as set forth herein for ten (10) or more consecutive business days (except during vacation and periods of illness as set forth herein) without giving prior written notice to the President of Company and receiving approval of the President of Company or the CEO or the Board of Directors (“Board”) of Think Finance, Inc., a Delaware corporation ("EC") for such absence;

(ii) Employee's conviction for a felony offense or commission by Employee of any act abhorrent to the community that the President of Company or the CEO or the Board consider materially damaging to or tending to discredit the reputation of Employer, EC, any affiliate or subsidiary of EC, or any of their respective successors and assigns (collectively, the "Elevate Group");

(iii) Dishonesty, fraud, willful misconduct, unlawful discrimination or theft on the part of Employee (whether within the workplace or elsewhere);

(iv) Employee's using for his or her own benefit or the benefit of any third party any material, non-public information, confidential information or proprietary information of any entity within the Elevate Group, or willfully or negligently divulging any such information to third parties without the prior written consent of the President of Company or the CEO or the Board of EC, or any violation by Employee of any of his or her obligations under Section 4;

(v) Employee's use, possession, or distribution of illegal substances or being under the influence of alcohol or illegal substances in the workplace. Employee may consume alcohol reasonably and responsibly, if he or she so chooses, at legitimate business events and functions where alcohol is legally available; and

(vi) The determination by the President of Company or the CEO or the Board of EC that Employee has continually failed or refused, after written notice of and a reasonable opportunity to cure such failure or refusal, to perform the duties of Employee’s position in a satisfactory manner, in accordance with the policies, standards, regulations, instructions, or directions of Employer as they currently exist or as they may be reasonably modified from time to time.

B. The term "Change in Control" shall mean:

(i) A merger or consolidation involving EC as a consequence of which those persons who held all of the equity shares of EC immediately prior to such merger or consolidation do not hold either directly or indirectly a majority of the equity shares of EC (or, if applicable, the surviving company of such merger or consolidation) after the consummation of such merger or consolidation;

(ii) A transfer, in a single transaction or a series of related transactions, of voting or beneficial control of a majority of EC's then outstanding equity shares to persons who do not own prior to the transaction or series of transactions any equity interests of EC; or

(iii) The sale of all or substantially all of the assets of EC to any person or "group" of persons (other than to any person who owns a majority or more of the equity shares of EC, or to a subsidiary of EC, or to an entity whose equity interests are owned directly or indirectly either by EC or by any person who owns directly or indirectly a majority or more of the equity shares of EC).

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For purposes of clarification, the mere incorporation of Employer from its current limited liability company structure shall not be deemed to be a Change of Control. Further, a sale of Company or all or substantially all of the assets or outstanding equity securities of Company to, or any merger with, Elevate Credit, Inc., a Delaware corporation, or any of its affiliates or subsidiaries, shall not be deemed to be a Change of Control.

C. The term "Good Reason" shall mean:

(i) Employer shall substantially diminish the responsibilities of Employee (other than in connection with Employee's availability by reason of disability or otherwise); or

(ii) Employer shall reduce the base salary of Employee.

2.2.5 Offset of Severance Pay. Notwithstanding the provisions of Section 2.2.1 and Section 2.2.2, if (a) Employer terminates Employee’s employment without Cause, (b) Elevate Credit Service, LLC or any of its affiliates or subsidiaries (“Elevate”) offers Employee employment effective as of the date of such termination with a base salary at least as much as Employee’s most recent base salary with Employer and (c) Employee does not accept such offer, then Employer shall not have any obligation to pay Employee any severance pay pursuant to either Section 2.2.1 or Section 2.2.2.

2.2.6 Change of Employer. Employee acknowledges and agrees that she is not entitled to any severance as a result of the termination of her employment agreement with TCLS effective as of the Effective Date.

2.3 Compensation. Company shall provide Employee with compensation in the form of wages and benefits, subject to adjustment in the discretion of Company.

2.3.1 Base Salary. As compensation for services rendered under this Agreement, Employee shall be entitled to receive from Company an aggregate minimum base salary of Three Hundred Forty Thousand Dollars ($340,000) per annum for each twelve (12) month period from the date hereof. The base salary to be paid to Employee shall be paid $13,076.93 bi-weekly in accordance with Company's payroll policies, less all applicable withholding or taxes which may be adjusted at the sole discretion of Company. Employee authorizes Company to make any deductions from his or her compensation, including from the final paycheck, that are deemed necessary by Company to comply with state or federal laws on withholdings, to compensate for property not returned, or to recover any advances paid to Employee.

2.3.2 Discretionary Bonus. Employee shall be eligible for a bonus of fifty percent (50%) of base salary as determined by the Board. Any bonus is discretionary and not earned or accrued until paid and shall be paid less any applicable withholdings or taxes.

2.3.3 Paid Time Off. Employee shall be entitled to four (4) weeks paid time off per annum.

2.3.4 Employee Benefit Plans. Employee shall be entitled to participate in Employer’s employee benefit plans.

2.3.5 Bonus Advance.

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A. Employee acknowledges that she has received an advance payment of bonuses that could be awarded pursuant to Section 2.3.2. Accordingly, if Employee is awarded a bonus at any time after the Effective Date, then the amount of such bonus shall be deemed to have already been paid to, and received by, Employee.

B. As of the Effective Date, the total amount of such advance payment of bonuses actually awarded to Employee was equal to Thirty One Thousand Six Hundred Sixty Six and 69/100 Dollars ($31,666.69). Accordingly, after Employee has been awarded at least Thirty One Thousand Six Hundred Sixty Six and 69/100 Dollars ($31,666.69) of bonuses after the Effective Date, then this Section 2.3.5 shall automatically terminate.

C. If Employee’s employment with Employer terminates for any reason prior to Employer being awarded at least Thirty One Thousand Six Hundred Sixty Six and 69/100 Dollars ($31,666.69) of bonuses after the Effective Date, then Employee shall pay Employer an amount equal to the difference between (i) Thirty One Thousand Six Hundred Sixty Six and 69/100 Dollars ($31,666.69) and (ii) the aggregate amount of bonuses awarded and paid to Employee after the Effective Date, within thirty (30) calendar days of the day of termination of Employee’s employment with Employer. Employer may offset any amounts due to Employee upon termination such as vacation pay from the amounts which would be due to Employer pursuant to this Section 2.3.5 C.

3. Business Interests and Obligations.

3.1 Definitions. The following definitions are used herein:

3.1.1 Trade Secrets means all technical information and business information that generally facilitates the sale of products, increases revenues, or provides an advantage over the competition (hereinafter referred to collectively as “Proprietary Information”) and is not generally known, and is identified as such.

3.1.2 Know-How means all factual knowledge and information related to any entity within the Elevate Group’s business which is not capable of precise, separate description but which, in accumulated form, after being acquired, gives to the one acquiring it the ability to produce and market something which one would otherwise not have known how to produce and market with the same accuracy or precision necessary for commercial success, provided, however, that such knowledge and information is not in the public domain or readily available to any third party other than a limited number of persons who have agreed to keep that information secret.

3.1.3 Confidential Information means all information acquired by Employee in the course and scope of his or her employment that is designated by any entity within the Elevate Group as confidential or that any entity within the Elevate Group indicates through its policies, procedures, or other instructions should not be disclosed to anyone outside the Elevate Group except through controlled means. Confidential Information need not be a Trade Secret, Proprietary Information or Know-How to be protected under this Agreement. “Confidential Information” shall not include (i) information that was known by Employee prior to Employee’s employment with Employer, (ii) information that lawfully came into Employee’s possession, directly or indirectly, from persons who were not under any obligation to maintain the confidentiality of such information, (iii) information that has become part of the public domain through no act or fault on the part of Employee in breach of this Agreement, (iv) information that Employer has approved for release by written authorization, or (v) information that was independently developed by or for Employee without the use of Confidential Information.

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3.1.4 Company Information means all Trade Secrets, Proprietary Information, Know-How and Confidential Information (recognizing that certain information and material will fall into multiple categories), including, without limitation, proposals, concepts, diagrams, models, ID’s or email addresses, client or projections and reports, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), software systems and processes and any information that is not readily available to the public, the information gathering techniques and processes of any entity within the Elevate Group, internally created client lists and associated data and pricing arrangements, and strategic plans, financial and personnel records, but not including information that is intentionally disclosed to the general public by any entity within the Elevate Group.

3.1.5 Intellectual Property means all compositions, articles of manufacture, processes, apparatus, and inventions; data, writings and other works of authorship (including, without limitation, software, protocols, rules, program codes, audiovisual effects created by program code, and documentation related thereto, drawings); mask works; and certain tangible items (including, without limitation, materials, samples, components, tools, and operating devices) related to any Elevate Group entity's business; and

3.1.6 Intellectual Property Rights means patents, trademarks, copyrights, mask rights, Trade Secrets, and Know-How covering the Intellectual Property.

3.2 Ancillary Employee Covenants. Employee shall not, directly or indirectly; participate in the unauthorized use, disclosure or conversion of any Company Information. Specifically, Employee shall not use any Company Information for his or her sole benefit, or for the benefit of any competitor or in any other way that harms any Elevate Group entity or diminishes the value of any Company Information. Employee shall also use the specialized training, goodwill and contacts developed with any customers and contractors of any entity within the Elevate Group for the exclusive benefit of such entity within the Elevate Group, and shall not use these items in a way that would harm the business interests of any entity within the Elevate Group during the term of this Agreement and for a period of twelve (12) months thereafter.

3.3 Intellectual Property. Employee shall promptly inform and disclose to Company all Intellectual Property created or developed during the course of his or her employment with Company. Employee hereby agrees and acknowledges that all such Intellectual Property shall be the exclusive property of Company. During the employment and as necessary thereafter, Employee shall assist Company to obtain, perfect and maintain all Intellectual Property Rights covering such Intellectual Property, and shall execute all documents and do all things necessary to obtain for such entity within the Elevate Group all such Intellectual Property Rights for such entity within the Elevate Group. Employee hereby assigns, and agrees to assign, to Company or its designee all right, title, and interest in and to all Intellectual Property and Intellectual Property Rights covered by the foregoing that Employee may now own or may own at any time during his or her employment with Company.

3.4 Prior Works/Rights. Employee represents and acknowledges that no works relating to or incorporating any Intellectual Property or covered by Intellectual Property Rights existed prior to the Effective Date that are owned by Employee or licensable to any entity within the Elevate Group by Employee, or in which Employee has any other interest (collectively the “Prior Works”) that have not been assigned or licensed to Company. If any such Prior Works are incorporated into any Elevate Groups entity’s products or process contrary to this representation so that Company is unable to use the Prior Works as contemplated by any entity within the Elevate Group without infringing such Intellectual Property Rights, then Employee hereby grants a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license to Company to make, have made, use, sell, offer to sell, import or otherwise commercially exploit such Prior Works as part of or in connection with any Elevate Group entity's products and/or services.

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4. Protective Covenants. Employee agrees that the following covenants are reasonable and necessary agreements for the protection of the business of the Elevate Group:

4.1 Definitions.

4.1.1 "Competing Business" means any person or entity that provides technology, analytical, administrative or support services or products that would compete with or displace any technology, analytical, administrative or support services or products sold, licensed or being developed for sale or license by any entity within the Elevate Group during Employee's employment with Company, or any other activities so similar in nature or purpose to those offered by or engaged in by any entity within the Elevate Group that they would displace business opportunities or customers of such entity within the Elevate Group.

4.1.2 "Covered Client and Customer" means any person or entity (Clients and Customers such as financial institutions or intermediaries, retailers, wholesalers and self-distribution chains) that (a) any entity within the Elevate Group has provided services to (including, without limitation, any corporate office, headquarter, retail, or dedicated team services) and (b) Employee either had contact with, supervised employees who had contact with, or received Proprietary Information about within the last twenty-four (24) month period that Employee was employed with Company.

4.2 Recordkeeping and Handling of Covered Items. Employee shall keep and maintain current written records of all customer contacts, inventions, enhancement, and plans she develops regarding matters that are within the scope of the business operations or that relate to research and development on behalf of the Elevate Group entities, and agrees to maintain any records necessary to inform Company of such business opportunities. All Company Information and other documents and materials maintained or entrusted to Employee by any entity within the Elevate Group shall remain the exclusive property of such entity within the Elevate Group at all times; such materials shall, together with all copies thereof, be returned and delivered to Company by Employee immediately without demand, upon the termination of Employee's employment with Company, and shall be returned at a prior time if Company so demands.

4.3 Restriction on Interfering with Personnel Relationships. For a period of twenty-four (24) months following the termination of Employee's employment with Company, Employee will not, either directly or indirectly, participate in recruiting or hiring away any employees or independent contractors of any entity within the Elevate Group, or encourage or induce any employees, agents, independent contractors or investors of any Elevate Group entity to terminate their relationship with Company or such Elevate Group entity.

4.4 Restriction on Interfering with Other Relationships. Employee agrees that during employment with Company, Employee will not induce or attempt to induce any Covered Client or Customer to diminish, curtail, divert or cancel its business relationship with any entity within the Elevate Group. For a period of twelve (12) months following the termination of Employee's employment with Company, Employee will not, directly or indirectly service, call on, solicit, divert or take away, any Covered Clients or Customers of any entity within the Elevate Group. This Section 4.4 is geographically limited to, where a Covered Client or Customer is present and available for solicitation at that time. Employee may not avoid the purpose and intent of this Section 4.4 by engaging in conduct within the geographically limited area from a remote location through means such as telecommunications, written correspondence, computer generated or assisted communications, or other similar methods.

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4.5 Ratification of Professional and Ethical Obligations. Nothing in this Agreement prohibits or restricts Employee from working for, supervising, assisting or participating in any Competing Business in any capacity (as owner, employee, consultant, contractor, officer, director, lender, investor, agent, or otherwise) following the termination of Employee’s employment with the Company, provided that in doing so Employee adheres in all respects to Employee’s professional and ethical obligations as an attorney under the Texas Rules of Disciplinary Procedure and the Texas Disciplinary Rules of Professional Conduct. Employee hereby ratifies and confirms in all respects her professional and ethical obligations as an attorney under the Texas Rules of Disciplinary Procedure and the Texas Disciplinary Rules of Professional Conduct.

4.6. Survival of Covenants. This Section 4 shall survive the termination of Employee's employment with Company. The existence of any claim or cause of action of Employee against Company whether predicated on this Agreement or otherwise shall not constitute a defense to that enforcement by Company of said covenant. If any enforcement remedy is sought under Section 4.7, then the time periods provided for in Section 4 shall be extended by one (1) day for each day Employee failed to comply with the restriction at issue.

4.7. Remedies. In the event of breach or threatened breach by Employee of any provision of Section 4, each Elevate Group entity shall be entitled to (i) injunctive relief by temporary restraining order, temporary injunction, and/or permanent injunction, (ii) recovery of all attorneys' fees and costs incurred by any Elevate Group entity in obtaining such relief, and (iii) any other legal and equitable relief to which may be entitled, including without limitation any and all monetary damages which such Elevate Group entity may incur as a result of said breach or threatened breach. An agreed amount for the bond to be posted if an injunction is sought by such Elevate Group entity is One Thousand Dollars ($1,000.00). Each Elevate Group entity may pursue any remedy available, including declaratory relief, concurrently or consecutively in any order as to any breach, violation, or threatened breach or violation, and the pursuit of one such remedy at any time will not be deemed an election of remedies or waiver of the right to pursue any other remedy. Each Elevate Group entity is an express third-party beneficiary of this Agreement with the right to enforce its terms against Employee as it such Elevate Group entity were a party.

4.8. Early Resolution Conference. This Agreement is understood to be clear and enforceable as written and is executed by both Parties. However, should Employee later challenge any provision as unclear or unenforceable, Employee will first notify Company in writing and meet with a Company representative and a neutral mediator (if Company elects to retain one at its expense) to discuss resolution of any disputes between the Parties. Employee will provide this notification at least fourteen (14) days before Employee engages in any activity that could foreseeably fall within a questioned restriction. The failure to comply with this requirement shall waive Employee's right to challenge the reasonable scope, clarity, applicability, or enforceability of the Agreement and its restrictions at a later time. All rights of the Parties will be preserved if the Early Resolution Conference requirement is complied with even if no agreement is reached in the conference.

5. Merger or Acquisition Disposition and Assignment. If Company or any Elevate Group entity consolidates, merges into another entity, or transfers all or substantially all of its assets or operations to another entity, or divide its assets or operations among a number of entities, then this Agreement shall continue in full force and effect with regard to the surviving entity and may be assigned by Company.

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Employee's obligations under this Agreement are personal in nature and may not be assigned by Employee to another person or entity.

6. Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date deposited in a receptacle maintained by the United States Postal Service for such purpose, postage prepaid, by certified mail, return receipt requested, or by express mail addressed to the address indicated under the signature block for that party provided below. Either party may designate a different address by providing written notice of a new address to the other party.

7. Severability. If any provision of this Agreement is determined to be void, illegal or enforceable, in whole or in part, then the other provisions shall remain in full force and effect as if the provision that was determined to be void, illegal, of unenforceable had not been contained herein. If the restrictions in Section 4 are deemed unenforceable as written, then the Parties expressly authorize the court or arbitrator to revise, delete, or add to the restrictions contained in Section 4 to the extent necessary to enforce the intent of the Parties and to provide the Elevate Groups’ goodwill, Company Information, and other business interests with effective protection.

8. Waiver, Construction, Modification, and Integration. The waiver by a party of any breach of this Agreement shall not operate or be construed as a waiver of any subsequent breach by such party. Except as otherwise provided below, this instrument contains the entire agreement of the Parties concerning the matters covered in it. Without limiting the foregoing, if Employee has an existing agreement with Employer, then such existing agreement shall be deemed to be amended and superseded in its entirety by this Agreement. This Agreement may not be modified, altered or amended except by written agreement of both Parties, except as provided in Section 4.8 or by order of the court or arbitrator pursuant to Section 7.

9. Governing Law and Venue. The laws of the State of Texas should govern the validity of this Agreement, the construction of its terms, and the interpretation of the rights and duties of the Parties without regard to any contrary conflicts of laws principles. It is stipulated that Texas has a compelling state interest in the subject matter of this Agreement and that Employee has or will have regular contact with Texas in the performance of this Agreement. The agreed venue and personal jurisdiction for the Parties on any claims or disputes under this Agreement is Tarrant County, Texas.

10. Representation of Employee. Employee represents and warrants to Company that Employee has not previously assumed any obligations inconsistent with those contained in this Agreement, and will not use, disclose, or otherwise rely upon any confidential information or trade secrets derived from any previous employment, if Employee has any, in the performance of his duties on behalf of Company. Further, Employee acknowledges that he or she has read and fully understands this Agreement, has had a reasonable opportunity to consider this Agreement and to seek legal counsel, and after such review, Employee stipulates that the promises made by him or her in this Agreement are not greater than necessary for the protection of Company's goodwill, Company Information, and other legitimate business interests and do not create undue hardship for Employee or the public.

11. Arbitration. If there is any unresolved legal dispute between the Parties that involves legal rights or remedies arising from this Agreement or the employment relationship between Employee and Company, then the Parties shall submit their dispute to binding arbitration under the authority of the Federal Arbitration Act; provided, however, that Company may pursue a temporary restraining order and/or preliminary injunctive relief in accordance with Section 4.7, with related expedited discovery for the Parties, in a court of law, and, thereafter, require arbitration of all issues of final relief. This Section 11 does not prohibit Employee from filing or cooperating in a charge before a federal administrative agency without pursuing

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private litigation. Insured workers compensation claims (other than wrongful discharge claims), and claims for unemployment insurance are excluded from arbitration under this Section 11. The arbitration will be conducted by the American Arbitration Association, or another, mutually agreeable, arbitration service. The arbitrator(s) shall be duly licensed to practice law in the State of Texas. Each party will be allowed at least one deposition. The arbitrator(s) shall be required to state in a written opinion all facts and conclusions of law relied upon to support any decision rendered. No arbitrator will have authority to render a decision that contains an outcome determinative error of state or federal law, or to fashion a cause of action or remedy not otherwise provided for under applicable state or federal law. Any dispute over whether the arbitrator(s) has failed to comply with the foregoing will be resolved by summary judgment in a court of law. In all other respects, the arbitration process will be conducted in accordance with the American Arbitration Association's employment dispute resolution rules or other mutually agreeable, arbitration service rules. Company will pay the arbitration costs and arbitrator's fees beyond $500, subject to a final arbitration award on who should bear costs and fees. All proceedings shall be conducted in Fort Worth, Texas, or other mutually agreeable site. Company will reimburse Employee for reasonable travel expenses for Employee and his or her legal counsel to attend the arbitration in Fort Worth if necessary. The duty to arbitrate described above shall survive the termination of this Agreement. Except as otherwise provided above, the Parties hereby waive trial in a court of law or by jury. All other rights, remedies, statutes of limitation and defenses applicable to claims asserted in a court of law will apply in the arbitration.

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IN WITNESS WHEREOF, the Parties agree to each of the terms of this Agreement as of the Effective Date.

EMPLOYEE:

By: /s/ Sarah Fagin Cutrona

Printed Name: Sarah Fagin Cutrona

Address: 6817 Lahontan Drive

Fort Worth, TX 76132

COMPANY:

ELEVATE CREDIT SERVICE, LLC

By: /s/ Ken Rees

Printed Name: Ken Rees

Title: President

Address: 4150 International Plaza, Suite 300

Fort Worth, Texas 76109

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FIRST AMENDMENT TO

EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETE AGREEMENT

This First Amendment to Employment, Confidentiality and Non-Compete Agreement (this “Amendment”), dated as of December 11, 2015 (“Amendment Date”), is by and between Elevate Credit Service, LLC, a Delaware limited liability company (“Company” or “Employer”) and Sarah Fagin Cutrona (“Employee”).

Recitals

A. The Parties entered into that certain Employment, Confidentiality and Non-Compete Agreement, dated as of May 1, 2014 (the “Original Agreement”).

B. The Parties mutually desire to amend the Original Agreement as set forth in this Amendment.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows.

Agreement

1.Definition. The Agreement shall mean the Original Agreement as amended by this Amendment. Capitalized terms used but not defined in this Amendment shall have the respective definitions given to such terms in the Original Agreement.

2.Term. Section 2.1 of the Original Agreement is hereby amended and restated, in its entirety, to provide as follows:

“2.1 Term. Employee’s employment will continue until April 30, 2018, unless earlier terminated in accordance with this Agreement. Thereafter, this Agreement shall automatically renew for successive terms of one (1) year each unless either Employee or Employer provides written notice of nonrenewal at least sixty (60) days prior to the end of the then-current term. Nonrenewal of the term by Employer shall constitute a termination of Employee’s employment by Employer without Cause. The expiration or termination of Employee’s employment shall not affect any obligation that expressly extends beyond, or is not contingent upon, continued employment, including but not limited to the obligations in Section 3.2 and Section 4.”

3.Termination.

A. Section 2.2.1 of the Original Agreement is hereby amended and restated, in its entirety, to provide as follows:

“2.2.1 Termination without Cause outside of a Change in Control Period. If Employer terminates Employee’s employment without Cause (as defined below) outside of a Change in Control Period (as defined below), then Employer shall (i) pay Employee severance pay in an amount equal to the base salary that would be payable to Employee over a period commencing on the date of termination and ending twelve (12) months thereafter, which severance pay shall be paid in equal bi-weekly installments commencing with the Company’s first regular payroll that occurs on or following the sixtieth (60th) day after termination and (ii) pay Employee an amount equal to twelve (12) times the monthly premiums that Employee would be required to pay if Employee and Employee’s eligible dependents then participating in the Company’s group health insurance plan elected to continue their current level of healthcare coverage pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, regardless of whether such election is made (the “Health Payment”). The Health Payment shall be paid in lump-sum with the Company’s first regular payroll that occurs on or following the sixtieth (60th) day

after termination. The payments in this Section 2.2.1 shall be contingent on Employee executing and letting become irrevocable, prior to the fifty-third (53rd) day following termination, a general release of claims in favor of the Company and its affiliates in a form provided by the Company. The payments in this Section 2.2.1 shall be subject to required withholdings.”

B. Section 2.2.2 of the Original Agreement is hereby amended and restated, in its entirety, to provide as follows:

“2.2.2 Termination with a Change in Control Period. If Employer terminates Employee’s employment without Cause, or Employee terminates Employee’s employment with Employer for Good Reason (as defined below), within a Change in Control Period:

(A) then Employer shall (i) pay Employee severance pay in an amount equal to the base salary that would be payable to Employee over a period commencing on the date of termination and ending twelve (12) months thereafter, which severance pay shall be paid in equal bi-weekly installments commencing with the Company’s first regular payroll that occurs on or following the sixtieth (60th) day after termination and (ii) pay Employee a one-time bonus equal to (a) fifty percent (50%) of Employee’s annual base salary plus (b) the Health Payment, to be paid in lump-sum with the Company’s first regular payroll that occurs on or following the later of (1) sixty (60) days after termination and (2) the Change in Control to which such Change in Control Period applies; and

(B) Employee shall be entitled to 100% vesting of any unvested portion of all equity awards previously granted to Employee effective on the later of (i) sixty (60) days after termination and (ii) such Change in Control, provided that with respect to restricted stock and restricted stock units intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), such vesting shall apply only if such Change in Control constitutes a “change of ownership or control” (within the meaning of Treasury Regulation Section 1.162-27e(2)(v)).

(C) The payments and benefits in this Section 2.2.2 shall be contingent on Employee executing and letting become irrevocable, prior to the fifty-third (53rd) day following termination, a general release of claims in favor of the Company and its affiliates in a form provided by the Company, shall be subject to required withholdings, and shall not be duplicative of any payments to which Employee has become entitled in respect of such termination pursuant to Section 2.2.1.”

4.Certain Definitions. The following shall be inserted to the end of Section 2.2.3(B) of the Original Agreement:

“The initial public offering of EC’s equity shares shall not be a Change of Control.”

5.Certain Definitions. Section 2.2.3(C) of the Original Agreement shall become Section 2.2.3(D), and the following new Section 2.2.3(C) shall be inserted:

“C. The term “Change in Control Period” shall mean: the period in time that begins three (3) months prior to and ends twenty-four (24) months after a Change in Control, provided that the Change in Control constitutes a change in control event under Treasury Regulation Section 1.409A-3(i)(5)(i).”

6.Base Salary. The following shall be inserted to the end of Section 2.3.1 of the Original Agreement:

“The base salary shall not be decreased without Employee’s consent.”

7.Limitation on Payments. The following new Section 2.2.7 shall be inserted:

“2.2.7 Limitation of Payments and Section 409A.

(a) If the severance and other benefits provided for in this Agreement or otherwise payable to Employee (i) constitute "parachute payments" within the meaning of Section 280G of the Code and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then Employee's severance and other benefits under this Agreement shall be either:

(i) delivered in full; or

(ii) delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Employee on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless the Company and Employee otherwise agree in writing, any determination required under this Section 2.2.7 shall be made in writing by the Company's independent public accountants (the "Accountants"), whose determination shall be conclusive and binding upon Employee and the Company for all purposes. For purposes of making the calculations required by this Section 2.2.7, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. The Company and Employee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 2.2.7. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 2.2.7. Any reduction of payments and benefits under this Section 2.2.7 shall be in the following order: (i) cash payments; (ii) equity-based payments that are taxable; (iii) equitybased payments that are not taxable; (iv) equity-based acceleration; and (v) other non-cash forms of benefits. Within any such category of payments and benefits (that is, (i), (ii), (iii), (iv) or (v)), a reduction shall occur first with respect to amounts that are not "deferred compensation” within the meaning of Section 409A of the Code (“Section 409A”) and then with respect to amounts that are. In no event will Employee have any discretion with respect to the ordering of payment reductions.

(b) No severance pay or benefits to be paid or provided to Employee, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the "Deferred Payments") shall be paid or otherwise provided until Employee has had a "separation from service" within the meaning of Section 409A. Similarly, no severance payable to Employee, if any, that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section l.409A-l(b)(9) shall be payable until Employee has had a "separation from service" within the meaning of Section 409A. Each payment and benefit payable under this Agreement is intended to constitute a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. If Employee is a "specified employee" within the meaning of Section 409A at the time of his "separation from service" (within the meaning of Section 409A), then the Deferred Payments that would otherwise be payable within the six (6) month period following his separation

from service shall be paid in a lump sum on the date six (6) months and one ( 1) day following the date of his separation from service ( or the next business day if such date is not a business day). All subsequent Deferred Payments, if any, shall be payable in accordance with the payment schedule applicable to each payment or benefit. If Employee dies following his separation from service, but prior to the six (6) month anniversary of his separation from service, then any payments delayed in accordance with this paragraph shall be payable in a lump sum as soon as administratively practicable after the date of his death and all other Deferred Payments shall be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything to the contrary in the Agreement, Good Reason shall not exist unless (i) Employee provides the Company written notice of the condition giving rise to such Good Reason within ninety (90) days after he becomes aware of such event, (ii) the Company fails to cure such condition within thirty (30) days thereafter, and (iii) Employee terminates his employment due to such Good Reason within ninety (90) days following such failure. It is the intent of this Agreement to comply with, or be exempt from, the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder shall be subject to the additional tax imposed under Section 409A, and any ambiguities herein shall be interpreted to so comply. The parties agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid the imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A."

8.Entire Agreement. The Original Agreement, as amended by this Amendment, constitutes the entire understanding and agreement among the parties regarding the subject matter hereof. Except as specifically amended by this Amendment, the Original Agreement is ratified and confirmed in all respects.

9.Signatures. This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument. Signatures received by facsimile, PDF file or other electronic format shall be deemed to be original signatures.

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IN WITNESS WHEREOF, in accordance with Section 8 of the Original Agreement, the undersigned have executed this Amendment to be effective on the Amendment Date.


ELEVATE CREDIT SERVICE, LLC Signature: /s/ Kenneth E. Rees Name: Kenneth E. Rees Title: CEO			Sarah Fagin Cutrona Signature: /s/ Sarah Fagin Cutrona Name: Sarah Fagin Cutrona

SECOND AMENDMENT TO

EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETE AGREEMENT

This Second Amendment to the Employment, Confidentiality and Non-Compete Agreement (this “Second Amendment”), dated as of March 1, 2017 (“Amendment Date”), is by and between Elevate Credit Service, LLC, a Delaware limited liability company (the “Company” or “Employer”) and Sarah Fagin Cutrona (“Employee”).

Recitals

WHEREAS, the Parties entered into that certain Employment, Confidentiality and Non-Compete Agreement, dated as of May I, 2014 (the "Agreement");

WHEREAS, the Agreement was amended by that certain First Amendment to Employment, Confidentiality and Non-Compete Agreement, dated as of December 11, 2015 (the "First Amendment"); and

WHEREAS, the Parties mutually desire to further amend the Agreement as set forth in this Second Amendment.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows.

Agreement

1. Definitions. Capitalized terms used but not defined in this Second Amendment shall have the respective definitions given to such terms in the Agreement.

2. Certain Definitions. Section 2.2.4(A)(iv) of the Agreement is hereby amended and restated, in its entirety, to read as follows:

“(iv) Employee’s using for Employee’s own benefit or the benefit of any third party any material, non-public information, confidential information or proprietary information of any entity within the Elevate Group, or willfully or negligently disclosing any such information to third parties without the prior written consent of Company's CEO or the Board of EC, or any violation by Employee of any of Employee's obligations under Section i; provided, however, that any such use or disclosure is subject to the whistleblower provisions of Employer's Code of Business Conduct and Ethics Policy, and provided further, that nothing in this Agreement restricts Employee from initiating communications with, responding to any inquiry from, or providing testimony before the SEC, FINRA, any other self-regulatory organization or any other state or federal regulatory authority without the prior consent of Employer;"

3. Base Salary. Section 2.3.1 of the Agreement is hereby amended and restated, in its entirety, to read as follows:

“2.3.1 As compensation for services rendered under this Agreement, Employee shall be entitled to receive from Company an aggregate minimum base salary of Three Hundred and FiftySeven Thousand Dollars ($357,000) per annum for each twelve (12) month period from the date hereof, or such other amount as agreed to by the Parties from time to time. The base

salary to be paid to Employee shall be paid bi-weekly in accordance with Company's payroll policies less all applicable withholding or taxes which may be adjusted at the sole discretion of Company. Employee authorizes Company to make any deductions from his or her compensation, including from the final paycheck that are deemed necessary by Company to comply with state or federal laws on withholdings, to compensate for property not returned, or to recover any advances paid to Employee."

4. Discretionary Bonus. Section 2.3.2 of the Agreement is hereby amended and restated, in its entirety, to read as follows:

“2.3.2 Discretionary Bonus. Each fiscal year, Employee shall be eligible to receive a bonus with a target value of fifty percent (50%) of base salary, or such other target value as agreed to by the Parties from time to time. Any bonus is discretionary and subject to ultimate determination by the Board. Furthermore, any bonus is not earned or accrued until paid and shall be paid less any applicable withholdings or taxes."

5. Protective Covenants. The following new Section 4.9 is added to the Agreement:

“4.9 D18 U.S.C. § 1833(b) Notice. The Parties are hereby notified that 18 U.S.C. § 1833(b) states as follows:

A. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that--{A) is made--{i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

B. Accordingly, notwithstanding anything to the contrary in this Agreement, the Parties understand that they have the right to disclose in confidence trade secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Parties understand that they also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. The Parties understand and acknowledge that nothing in this Agreement is intended to conflict with 18 U .S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b)."

6. Entire Agreement. The Agreement, as amended by the First Amendment and this Second Amendment, constitutes the entire understanding and agreement among the Parties regarding the subject matter hereof. Except as specifically amended by this Second Amendment, the Agreement and the First Amendment are ratified and confirmed in all respects.

7. Signatures. This Second Amendment may be executed in any number of counterparts, each of which shall be enforceable against the Parties that execute such counterparts, and all of which together shall constitute one instrument. Signatures received by facsimile, PDF file or other electronic format shall be deemed to be original signatures.

IN WITNESS WHEREOF, in accordance with Section 8 of the Original Agreement, the undersigned have executed this Second Amendment to be effective as of the Amendment Date, regardless of the actual date of execution.


ELEVATE CREDIT SERVICE, LLC Signature: /s/ Kenneth E. Rees Name: Kenneth E. Rees Title: CEO			SARAH FAGIN CUTRONA Signature: /s/ Sarah Fagin Cutrona

THIRD AMENDMENT TO

EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETE AGREEMENT

This Third Amendment to Employment, Confidentiality and Non-Compete Agreement (this “Amendment”), dated as of January 24, 2019 (“Amendment Date”), is by and between Elevate Credit Service, LLC, a Delaware limited liability company (“Company” or “Employer”) and Sarah Fagin Cutrona (“Employee”).

Recitals

A. The parties entered into that certain Employment, Confidentiality and Non-Compete Agreement, dated as of May 1, 2014, as amended on December 11, 2015 and March 1, 2017 (as amended, the “Original Agreement”).

B. The parties mutually desire to amend the Original Agreement as set forth in this Amendment.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows.

Agreement

1. Certain Definitions. Section 2.2.4(C) of the Original Agreement is hereby amended and restated, in its entirety, as follows:

“C. The term “Good Reason” shall mean:

(i) A material reduction in Employee’s base salary or cash incentive bonus opportunity;

(ii) A material reduction in Employee’s duties, responsibilities or authority;

(iii) A requirement to relocate, except for office relocations that would not increase Employee’s one-way commuting distance by more than thirty-five (35) miles; or

(iv) A material violation by the Company of a material term of any agreement between Employee and the Company.”

2. Entire Agreement. The Original Agreement, as amended by this Amendment, constitutes the entire understanding and agreement among the parties regarding the subject matter hereof. Except as specifically amended by this Amendment, the Original Agreement is ratified and confirmed in all respects.

3. Signatures. This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument. Signatures received by facsimile, PDF file or other electronic format shall be deemed to be original signatures.

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IN WITNESS WHEREOF, in accordance with Section 8 of the Original Agreement, the undersigned have executed this Amendment on the Amendment Date.


ELEVATE CREDIT SERVICE, LLC Signature: /s/ Kenneth E. Rees Name: Kenneth E. Rees Title: CEO			Sarah Fagin Cutrona Signature: /s/ Sarah Fagin Cutrona Name: Sarah Fagin Cutrona

[Signature Page to Amendment to Employment Agreement]

sf-3933276

Exhibit 31.1

CERTIFICATION

I, Jason Harvison, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Elevate Credit, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	May 7, 2021	By:	/s/ Jason Harvison
			Jason Harvison
			Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION

I, Christopher Lutes, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Elevate Credit, Inc.;

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	May 7, 2021	By:	/s/ Christopher Lutes
			Christopher Lutes
			Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jason Harvison, Chief Executive Officer of Elevate Credit, Inc. (the "Company"), hereby certify, that, to my knowledge:

i.The Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

ii.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	May 7, 2021	By:	/s/ Jason Harvison
			Jason Harvison
			Chief Executive Officer (Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Christopher Lutes, Chief Financial Officer of Elevate Credit, Inc. (the "Company"), hereby certify, that, to my knowledge:

ii.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	May 7, 2021	By:	/s/ Christopher Lutes
			Christopher Lutes
			Chief Financial Officer (Principal Financial Officer)