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Why GreenSky Stock Plummeted Today

By Evan Niu, CFA – May 12, 2020 at 5:03PM

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The financial tech specialist reported first-quarter earnings.

What happened

Shares of GreenSky (GSKY) have plummeted today, closing down 18% after the company reported first-quarter earnings. The financial tech specialist missed expectations for both the top and bottom lines.

So what

Revenue in the first quarter came in at $121.2 million, shy of the $123.5 million that analysts were modeling for. That led to a net loss of $10.9 million, or $0.05 per share. Wall Street was looking for EPS of $0.05. GreenSky adopted the new current expected credit loss (CECL) methodology during the quarter, which led to the recognition of a noncash increase in reserves of $18.4 million and a liability of $118 million.

Red stock chart going down

Image source: Getty Images.

Transaction volumes increased 10% to $1.4 billion in the first quarter. Volumes were up a stronger 16% in January and February before COVID-19 started to impact the business, the company said. GreenSky's transaction fee rate was 6.6%, down slightly due to promotional activity.

Now what

"Notwithstanding the impact of COVID-19 commencing in mid-March, GreenSky produced strong first quarter operating results, exceeding our seasonal expectations," CEO David Zalik said in a statement. The company's loan servicing portfolio grew to $9.3 billion, and GreenSky had over 17,700 active merchants at the end of the first quarter. The fintech has now migrated its workforce to a remote work model due to the coronavirus outbreak.

GreenSky has also closed a new $500 million asset-backed revolver to diversify its funding and bolster liquidity. Total unused bank partner funding capacity is now $1.6 billion, and GreenSky says it has enough funding capacity through 2021.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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