Earnings season is upon us once again, and while long-term investors shouldn't put too much weight on any company's results from any single quarter, these regular check-ins can certainly give investors more clarity about how businesses and the broader economy are performing. Quarterly reports can also provide insights into the trajectory of a company's growth.
1. Silvergate Capital
Silvergate Capital started out as a traditional bank, but in 2013, it pivoted to digital currency customers, offering fee-based solutions for people trying to navigate the underdeveloped regulatory environment around cryptocurrencies. This has driven growth for the bank as Bitcoin and other tokens surged in value.
Silvergate has grown its total deposits at an eye-popping rate. As of the end of the second quarter, deposits totaled $11.4 billion, up 117% from the end of 2020. However, one aspect I'm interested in is how its Silvergate Exchange Network (SEN) has grown. Through the first six months of this year, the bank facilitated $406 billion in transfers through this network, compared to just $40 billion in transfers in the first half of 2020.
Digging deeper, I'm interested in the growth of Silvergate's SEN Leverage product, which it rolled out in January. This allows institutional investors to enter into loan agreements with Silvergate for U.S.-dollar financing using Bitcoin as collateral. As of the end of the second quarter, Silvergate had a total balance of $203.4 million in SEN Leverage loans, up from $117.3 million at the end of the first quarter and $77.2 million at the end of 2020.
On average, analysts expect revenue of $48.25 million for the third quarter, which would amount to growth of 111% year over year, and EPS of $0.71, which would be up 92% from the prior-year period.
Silvergate is scheduled to report before market open on Oct. 19.
2. Live Oak Bancshares
Live Oak Bancshares is the nation's largest small-business lender as measured by the Small Business Administration's 7(a) lending program, with 1,552 loans approved totaling $2.3 billion through Sept. 30. Its next closest rival was Huntington National Bank, with loans totaling $927 million.
According to the SBA, small businesses account for 99.9% of businesses in the United States and employ 47.1% of workers. How Live Oak performs this quarter could give us an idea of the health of small-business lending, which could provide some insight into the strength of the economic recovery.
One metric I'll be watching is Live Oak's loan and lease generation. Loan growth could be indicative of future spending by small businesses, and it's also key to Live Oak's strategy to grow its recurring revenue. During the first half of this year, originations totaled nearly $1.8 billion, and on the second-quarter earnings call, CEO James Mahan forecast that originations for the full year would be in the $3.3 billion to $3.5 billion range.
Analysts' average expectation for Live Oak's Q3 revenue is $98.6 million, which would amount to growth of 0.2% from last year. The average estimate for earnings per share (EPS) is $0.65, which would be a decline of nearly 20% from last year. While third-quarter growth may be slow, the fourth quarter should be better -- analysts are expecting revenue growth of 33.8%.
Live Oak is scheduled to report earnings after market close on Oct. 27.
3. Goosehead Insurance
Insurance broker Goosehead sells policies through both its corporate channel and a rapidly expanding franchise channel.
One aspect of the business that I like is that franchise channel, and I'm curious to see what kind of growth the insurer will see from here. At the end of 2018, Goosehead had 457 franchises operating, and by June 30, that figure had grown at a compound annual rate of 40.7% to 1,072. Not only that, but it has 1,801 franchisees in total, showing it has further room for growth once these franchisees are up and operating.
On last quarter's earnings call, CEO Mark Jones said: "Because of our rapid growth rates, 63% of our total franchise base is either in their first year or preparing to onboard. While this cohort provides minimal premiums and revenue today, their predictable launch and production ramp, combined with our increasing retention rates should fuel powerful growth over the next decade and beyond."
Analysts' average estimate for the insurance broker's Q3 revenue is around $40 million, which would equate to 25.2% growth from last year. EPS is expected to decline by 26% to $0.17. This would be consistent with the pattern so far this year, which has featured strong revenue growth even as the bottom line lagged due to the costs the company has incurred as it rapidly expanded its franchise channel.
Goosehead has not yet announced a date for its third-quarter report.