MoneyLion Inc.
11/07/2024 | Press release | Distributed by Public on 11/07/2024 08:32
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
10-Q
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 September 30, 2024
OR
☐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: 001-39346
MoneyLion Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
85-0849243 |
|
|
(State or other jurisdiction of |
(I.R.S. Employer |
|
|
249 West 17thStreet, 4th Floor New York, New York |
10011 |
|
|
(Address of principal executive offices) |
(Zip Code) |
(212) 300-9865
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
|
Class A common stock, par value $0.0001 per share |
ML |
The New York Stock Exchange |
||
|
Redeemable warrants, each whole warrant exercisable for 1/30th of one share of Class A common stock |
ML WS |
The 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 |
☐ |
Accelerated filer |
☒ |
|
Non-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 ☒
There were 11,101,233shares of the registrant's Class A common stock, par value $0.0001 per share, outstanding as of October 31, 2024.
MoneyLion Inc.
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2024
|
Page |
||
|
PART I - FINANCIAL INFORMATION |
||
|
Item 1. |
Financial Statements |
1 |
|
Unaudited Consolidated Balance Sheets |
1 |
|
|
Unaudited Consolidated Statements of Operations |
2 |
|
|
Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity |
3 |
|
|
Unaudited Consolidated Statements of Cash Flows |
5 |
|
|
Notes to Unaudited Consolidated Financial Statements |
6 |
|
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
25 |
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
41 |
|
Item 4. |
Controls and Procedures |
42 |
|
PART II - OTHER INFORMATION |
||
|
Item 1. |
Legal Proceedings |
44 |
|
Item 1A. |
Risk Factors |
46 |
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
46 |
|
Item 3. |
Defaults Upon Senior Securities |
46 |
|
Item 4. |
Mine Safety Disclosures |
46 |
|
Item 5. |
Other Information |
46 |
|
Item 6. |
Exhibits |
47 |
|
Signatures |
49 |
i
INTRODUCTORY NOTE
General
As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to "MoneyLion," the "Company," "we," "us," "our" and similar references refer to MoneyLion Inc. and, as context requires, its consolidated subsidiaries. "MALKA" refers to Malka Media Group LLC, a wholly-owned subsidiary of MoneyLion Technologies Inc., and "Engine" refers to ML Enterprise Inc., doing business as the brand "Engine by MoneyLion," a wholly-owned subsidiary of MoneyLion Technologies Inc. which was previously named "Even Financial Inc." and subsequently renamed in February 2023.
For convenience, the trademarks and service marks referred to in this Quarterly Report on Form 10-Q are listed without the ®, TM and SM symbols, but we intend to assert, and notify others of, our rights in and to these trademarks and service marks to the fullest extent under applicable law.
Reverse Stock Split
On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reverse stock split (the "Reverse Stock Split") of the Class A common stock, par value $0.0001 per share (the "Class A Common Stock"). At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the New York Stock Exchange (the "NYSE"). The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company's outstanding equity awards, the number of shares issuable upon the exercise of the Company's outstanding warrants and the number of shares issuable under the Company's equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company's previously outstanding Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock"), converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in this Quarterly Report on Form 10-Q for all periods presented.
ii
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the information incorporated herein by reference, contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of MoneyLion. These statements are based on the beliefs and assumptions of the management of MoneyLion. Although MoneyLion believes that its respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, MoneyLion cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believes," "estimates," "expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans," "scheduled," "anticipates," or "intends" or similar expressions. The forward-looking statements are based on projections prepared by, and are the responsibility of, MoneyLion's management.
Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which may be beyond MoneyLion's control. Forward-looking statements are not guarantees of future performance or outcomes, and MoneyLion's actual performance and outcomes, including, without limitation, actual results of operations, financial condition and liquidity, and the development of the market in which MoneyLion operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:
•
factors relating to the business, operations and financial performance of MoneyLion, including market conditions and global and economic factors beyond MoneyLion's control;
•
MoneyLion's ability to acquire, engage and retain customers and clients and sell or develop additional functionality, products and services to them on the MoneyLion platform;
•
MoneyLion's reliance on third-party partners, service providers and vendors, including its ability to comply with applicable requirements of such third parties;
•
demand for and consumer confidence in MoneyLion's products and services, including as a result of any adverse publicity concerning MoneyLion;
•
any inaccurate or fraudulent information provided to MoneyLion by customers or other third parties;
•
MoneyLion's ability to realize strategic objectives and avoid difficulties and risks of any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions;
•
MoneyLion's success in attracting, retaining and motivating its senior management and other key personnel;
•
MoneyLion's ability to renew or replace its existing funding arrangements and raise financing in the future, to comply with restrictive covenants related to its long-term indebtedness and to manage the effects of changes in the cost of capital;
•
MoneyLion's ability to achieve or maintain profitability in the future;
•
intense and increasing competition in the industries in which MoneyLion and its subsidiaries operate;
•
risks related to the proper functioning of MoneyLion's information technology systems and data storage, including as a result of cyberattacks, data security breaches or other similar incidents or disruptions suffered by MoneyLion or third parties upon which it relies;
•
MoneyLion's ability to protect its intellectual property and other proprietary rights and its ability to obtain or maintain intellectual property, proprietary rights and technology licensed from third parties;
iii
•
MoneyLion's ability to comply with extensive and evolving laws and regulations applicable to its business and the outcome of any legal or governmental proceedings that may be instituted against MoneyLion;
•
MoneyLion's ability to establish and maintain an effective system of internal controls over financial reporting;
•
MoneyLion's ability to maintain the listing of its Class A Common Stock and its publicly traded warrants to purchase Class A Common Stock (the "Public Warrants") on the NYSE and any volatility in the market price of MoneyLion's securities; and
•
other factors detailed under Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q.
These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including the "Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2023, and Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q.
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management's current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iv
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of your investment:
•
If we are unable to acquire new customers and clients, engage and retain our existing customers and clients or sell additional functionality, products and services to them on our platform, our business will be adversely affected.
•
Any failure to effectively match consumer leads from our Channel Partners with product offerings from our Product Partners or any reduced marketing spend by such Product Partners on our Enterprise platform could have a material adverse effect on our business, financial condition, results of operations and cash flows.
•
We depend on various third-party partners, service providers and vendors, and any adverse changes in our relationships with these third parties could materially and adversely affect our business, including if we fail to comply with applicable requirements of such third parties.
•
Adverse publicity concerning us, our business or our personnel or our failure to maintain our brand in a cost-effective manner could materially and adversely affect our business.
•
Demand for our products or services may decline if we do not continue to innovate or respond to evolving technology or other changes.
•
If the information provided to us by customers or other third parties is incorrect or fraudulent, we may misjudge a customer's qualifications to receive our products and services and our results of operations may be harmed and could subject us to regulatory scrutiny or penalties.
•
Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm its business and negatively impact our results of operations.
•
We depend on our senior management team and other key personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected.
•
If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. We may be unsuccessful in managing the effects of changes in the cost of capital on our business.
•
We have a history of losses and may not achieve or maintain profitability in the future.
•
Our risk management processes and procedures may not be effective.
•
We operate in highly competitive industries, and our inability to compete successfully would materially and adversely affect our business, financial condition, results of operations and cash flows.
•
Our business may be adversely affected by economic conditions and other factors, including adverse developments affecting financial institutions or the financial services industry generally, that we cannot control.
•
Cyberattacks, data security breaches or other similar incidents or disruptions suffered by us or third parties upon which we rely could have a material adverse effect on our business, harm our reputation and expose us to public scrutiny or liability.
v
•
Defects, failures or disruptions in our systems or those of third parties upon which we rely and resulting interruptions in the availability of our platform could harm our business and financial condition, harm our reputation, result in significant costs to us and expose us to substantial liability.
•
We may be unable to sufficiently obtain, maintain, protect or enforce our intellectual property and other proprietary rights, or we may be unable to obtain or maintain intellectual property, proprietary rights and technology licensed from third parties, which could reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.
•
We have in the past, and continue to be, subject to inquiries, subpoenas, exams, pending investigations, enforcement matters and litigation by state and federal regulators, the outcomes of which are uncertain and could cause reputational and financial harm to our business, financial condition, results of operations and cash flows.
•
Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows.
•
If we are unable to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
•
Our business is subject to extensive regulation, examination and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations. The legal and regulatory regimes governing certain of our products and services are uncertain and evolving.
•
If we fail to operate in compliance with state or local licensing requirements, it could adversely affect our business, financial condition, results of operations and cash flows.
•
The highly regulated environment in which our third-party financial institution partners operate may subject us to regulation and could have an adverse effect on our business, financial condition, results of operations and cash flows.
•
The collection, processing, use, storage, sharing and transmission of personally identifiable information ("PII") and other sensitive data is subject to stringent and changing state and federal laws, regulations, standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.
•
The market price of our securities, including the Class A Common Stock, may be volatile. Our failure to meet the continued listing requirements of the NYSE could result in a delisting of our securities.
The risks described above should be read together with the "Cautionary Statement Regarding Forward-Looking Statements" herein, any other risk factors set forth under Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, the "Risk Factors" section in the Annual Report on Form 10-K for the year ended December 31, 2023, our consolidated financial statements and the related notes presented in Part I, Item 1 "Financial Statements" in this Quarterly Report on Form 10-Q and the other documents that we file with the SEC. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial.
vi
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MONEYLION INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
(Unaudited)
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Assets |
||||||||
|
Cash |
$ |
111,944 |
$ |
92,195 |
||||
|
Restricted cash, including amounts held by variable interest entities (VIEs) of $1,217 and $128 |
4,415 |
2,284 |
||||||
|
Consumer receivables |
218,642 |
208,167 |
||||||
|
Allowance for credit losses on consumer receivables |
(33,511 |
) |
(35,329 |
) |
||||
|
Consumer receivables, net, including amounts held by VIEs of $160,037 and $131,283 |
185,131 |
172,838 |
||||||
|
Consumer receivables held for sale |
4,401 |
- |
||||||
|
Enterprise receivables, net |
24,279 |
15,978 |
||||||
|
Property and equipment, net |
1,906 |
1,864 |
||||||
|
Intangible assets, net |
165,380 |
176,541 |
||||||
|
Other assets |
33,260 |
53,559 |
||||||
|
Total assets |
$ |
530,716 |
$ |
515,259 |
||||
|
Liabilities and Stockholders' Equity |
||||||||
|
Liabilities: |
||||||||
|
Secured loans, net |
$ |
64,497 |
$ |
64,334 |
||||
|
Accounts payable and accrued liabilities |
53,529 |
52,396 |
||||||
|
Warrant liability |
405 |
810 |
||||||
|
Other debt, net, including amounts held by VIEs of $106,588 and $125,419 |
106,588 |
125,419 |
||||||
|
Other liabilities |
23,225 |
15,077 |
||||||
|
Total liabilities |
248,244 |
258,036 |
||||||
|
Commitments and contingencies (Note 15) |
||||||||
|
Stockholders' equity: |
||||||||
|
Class A Common Stock, $0.0001 par value; 66,666,666 shares authorized as of September 30, 2024 and December 31, 2023, 11,162,735 and 11,105,735 issued and outstanding, respectively, as of September 30, 2024 and 10,444,627 and 10,412,294 issued and outstanding, respectively, as of December 31, 2023 |
1 |
1 |
||||||
|
Additional paid-in capital |
988,446 |
969,641 |
||||||
|
Accumulated deficit |
(695,299 |
) |
(702,719 |
) |
||||
|
Treasury stock at cost, 56,738 and 32,333 shares as of September 30, 2024 and December 31, 2023, respectively |
(10,676 |
) |
(9,700 |
) |
||||
|
Total stockholders' equity |
282,472 |
257,223 |
||||||
|
Total liabilities and stockholders' equity |
$ |
530,716 |
$ |
515,259 |
The accompanying notes are an integral part of these consolidated financial statements.
1
MONEYLION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share amounts)
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Revenue |
|||||||||||||||
|
Service and subscription revenue |
$ |
132,098 |
$ |
107,000 |
$ |
378,061 |
$ |
300,978 |
|||||||
|
Net interest income on loan receivables |
3,368 |
3,258 |
9,257 |
9,490 |
|||||||||||
|
Total revenue, net |
135,466 |
110,258 |
387,318 |
310,468 |
|||||||||||
|
Operating expenses |
|||||||||||||||
|
Provision for credit losses on consumer receivables |
26,833 |
25,121 |
80,494 |
67,194 |
|||||||||||
|
Loss on sale of consumer receivables |
3,510 |
- |
3,510 |
- |
|||||||||||
|
Compensation and benefits |
25,820 |
23,511 |
75,458 |
70,491 |
|||||||||||
|
Marketing |
10,591 |
7,029 |
31,987 |
19,970 |
|||||||||||
|
Direct costs |
38,349 |
32,813 |
104,187 |
94,845 |
|||||||||||
|
Professional services |
10,820 |
4,968 |
27,593 |
14,485 |
|||||||||||
|
Technology-related costs |
7,323 |
5,891 |
20,421 |
17,540 |
|||||||||||
|
Other operating expenses |
8,217 |
9,824 |
22,875 |
30,038 |
|||||||||||
|
Total operating expenses |
131,463 |
109,157 |
366,525 |
314,563 |
|||||||||||
|
Net income (loss) before other (expense) income and income taxes |
4,003 |
1,101 |
20,793 |
(4,095 |
) |
||||||||||
|
Interest expense |
(6,504 |
) |
(7,088 |
) |
(20,035 |
) |
(21,929 |
) |
|||||||
|
Change in fair value of warrant liability |
405 |
(81 |
) |
405 |
(68 |
) |
|||||||||
|
Change in fair value of contingent consideration from mergers and acquisitions |
- |
- |
- |
6,613 |
|||||||||||
|
Goodwill impairment loss |
- |
- |
- |
(26,721 |
) |
||||||||||
|
Other income |
2,613 |
2,358 |
7,353 |
5,264 |
|||||||||||
|
Net income (loss) before income taxes |
517 |
(3,710 |
) |
8,516 |
(40,936 |
) |
|||||||||
|
Income tax expense |
3,309 |
400 |
1,096 |
114 |
|||||||||||
|
Net (loss) income |
(2,792 |
) |
(4,110 |
) |
7,420 |
(41,050 |
) |
||||||||
|
Reversal of previously accrued dividends on preferred stock |
- |
- |
- |
690 |
|||||||||||
|
Net (loss) income attributable to common shareholders |
$ |
(2,792 |
) |
$ |
(4,110 |
) |
$ |
7,420 |
$ |
(40,360 |
) |
||||
|
Net (loss) income per share, basic |
$ |
(0.25 |
) |
$ |
(0.40 |
) |
$ |
0.69 |
$ |
(4.30 |
) |
||||
|
Net (loss) income per share, diluted |
$ |
(0.25 |
) |
$ |
(0.40 |
) |
$ |
0.62 |
$ |
(4.30 |
) |
||||
|
Weighted average shares used in computing net (loss) income per share, basic |
11,089,933 |
10,221,956 |
10,827,363 |
9,375,221 |
|||||||||||
|
Weighted average shares used in computing net (loss) income per share, diluted |
11,089,933 |
10,221,956 |
11,974,447 |
9,375,221 |
The accompanying notes are an integral part of these consolidated financial statements.
2
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCKAND STOCKHOLDERS' EQUITY
(amounts in thousands, except share amounts)
(Unaudited)
|
Total |
||||||||||||||||||||||||
|
Class A Common Stock |
Additional |
Accumulated |
Treasury |
Stockholders' |
||||||||||||||||||||
|
Shares |
Amount |
Paid-in Capital |
Deficit |
Stock |
Equity |
|||||||||||||||||||
|
Balances at July 1, 2024 |
10,945,658 |
$ |
1 |
$ |
980,662 |
$ |
(692,507 |
) |
$ |
(9,700 |
) |
$ |
278,456 |
|||||||||||
|
Stock-based compensation |
- |
- |
7,282 |
- |
- |
7,282 |
||||||||||||||||||
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
184,744 |
- |
358 |
- |
- |
358 |
||||||||||||||||||
|
Repurchases of Class A Common Stock |
(24,405 |
) |
- |
- |
- |
(976 |
) |
(976 |
) |
|||||||||||||||
|
Other |
- |
- |
144 |
- |
- |
144 |
||||||||||||||||||
|
Net loss |
- |
- |
- |
(2,792 |
) |
- |
(2,792 |
) |
||||||||||||||||
|
Balances at September 30, 2024 |
11,105,997 |
$ |
1 |
$ |
988,446 |
$ |
(695,299 |
) |
$ |
(10,676 |
) |
$ |
282,472 |
|
Total |
||||||||||||||||||||||||
|
Class A Common Stock |
Additional |
Accumulated |
Treasury |
Stockholders' |
||||||||||||||||||||
|
Shares |
Amount |
Paid-in Capital |
Deficit |
Stock |
Equity |
|||||||||||||||||||
|
Balances at January 1, 2024 |
10,412,294 |
$ |
1 |
$ |
969,641 |
$ |
(702,719 |
) |
$ |
(9,700 |
) |
$ |
257,223 |
|||||||||||
|
Stock-based compensation |
- |
- |
21,310 |
- |
- |
21,310 |
||||||||||||||||||
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
718,108 |
- |
(2,649 |
) |
- |
- |
(2,649 |
) |
||||||||||||||||
|
Repurchases of Class A Common Stock |
(24,405 |
) |
- |
- |
- |
(976 |
) |
(976 |
) |
|||||||||||||||
|
Other |
- |
- |
144 |
- |
- |
144 |
||||||||||||||||||
|
Net income |
- |
- |
- |
7,420 |
- |
7,420 |
||||||||||||||||||
|
Balances at September 30, 2024 |
11,105,997 |
$ |
1 |
$ |
988,446 |
$ |
(695,299 |
) |
$ |
(10,676 |
) |
$ |
282,472 |
3
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(amounts in thousands, except share amounts)
(Unaudited)
|
Redeemable Convertible |
Total |
||||||||||||||||||||||||||||||||
|
Preferred Stock (Series A) |
Class A Common Stock |
Additional |
Accumulated |
Treasury |
Stockholders' |
||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Paid-in Capital |
Deficit |
Stock |
Equity |
||||||||||||||||||||||||||
|
Balances at July 1, 2023 |
- |
$ |
- |
10,135,675 |
$ |
1 |
$ |
957,778 |
$ |
(694,414 |
) |
$ |
(9,700 |
) |
$ |
253,665 |
|||||||||||||||||
|
Stock-based compensation |
- |
- |
- |
- |
5,702 |
- |
- |
5,702 |
|||||||||||||||||||||||||
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
- |
- |
146,227 |
- |
723 |
- |
- |
723 |
|||||||||||||||||||||||||
|
Net loss |
- |
- |
- |
- |
- |
(4,110 |
) |
- |
(4,110 |
) |
|||||||||||||||||||||||
|
Balances at September 30, 2023 |
- |
$ |
- |
10,281,902 |
$ |
1 |
$ |
964,203 |
$ |
(698,524 |
) |
$ |
(9,700 |
) |
$ |
255,980 |
|
Redeemable Convertible |
Total |
||||||||||||||||||||||||||||||||
|
Preferred Stock (Series A) |
Class A Common Stock |
Additional |
Accumulated |
Treasury |
Stockholders' |
||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares (1) |
Amount (1) |
Paid-in Capital(1) |
Deficit |
Stock |
Equity |
||||||||||||||||||||||||||
|
Balances at January 1, 2023 |
25,655,579 |
$ |
173,208 |
8,587,345 |
$ |
1 |
$ |
766,839 |
$ |
(657,979 |
) |
$ |
(9,700 |
) |
$ |
99,161 |
|||||||||||||||||
|
Stock-based compensation |
- |
- |
- |
- |
16,657 |
- |
- |
16,657 |
|||||||||||||||||||||||||
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
- |
- |
319,152 |
- |
(59 |
) |
- |
- |
(59 |
) |
|||||||||||||||||||||||
|
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
- |
- |
110,925 |
- |
1,914 |
- |
- |
1,914 |
|||||||||||||||||||||||||
|
Issuance of equity in connection with Engine Acquisition and the related contingent consideration, net of working capital adjustments |
4,400,172 |
1,560 |
23,453 |
- |
304 |
- |
- |
304 |
|||||||||||||||||||||||||
|
Voluntary conversion of preferred stock to common stock |
(6,698 |
) |
(45 |
) |
230 |
- |
45 |
- |
- |
45 |
|||||||||||||||||||||||
|
Reversal of previously accrued dividends on preferred stock |
- |
- |
- |
- |
690 |
- |
- |
690 |
|||||||||||||||||||||||||
|
Settlement of accrued dividends on preferred stock |
- |
- |
229,605 |
- |
2,976 |
- |
- |
2,976 |
|||||||||||||||||||||||||
|
Automatic conversion of redeemable convertible preferred stock (Series A) |
(30,049,053 |
) |
(174,723 |
) |
1,012,093 |
- |
174,849 |
- |
- |
174,849 |
|||||||||||||||||||||||
|
Other |
- |
- |
(901 |
) |
- |
(12 |
) |
505 |
- |
493 |
|||||||||||||||||||||||
|
Net loss |
- |
- |
- |
- |
- |
(41,050 |
) |
- |
(41,050 |
) |
|||||||||||||||||||||||
|
Balances at September 30, 2023 |
- |
$ |
- |
10,281,902 |
$ |
1 |
$ |
964,203 |
$ |
(698,524 |
) |
$ |
(9,700 |
) |
$ |
255,980 |
(1)
Prior period results have been adjusted to reflect the Reverse Stock Split of the Class A Common Stock at a ratio of 1-for-30that became effective April 24, 2023. See Note 1, "Description of Business and Basis of Presentation," for details.
The accompanying notes are an integral part of these consolidated financial statements.
4
MONEYLION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Cash flows from operating activities: |
|||||||||||||||
|
Net (loss) income |
$ |
(2,792 |
) |
$ |
(4,110 |
) |
$ |
7,420 |
$ |
(41,050 |
) |
||||
|
Adjustments to reconcile net (loss) income to net cash from operating activities: |
|||||||||||||||
|
Provision for losses on receivables |
26,833 |
25,121 |
80,494 |
67,194 |
|||||||||||
|
Loss on sale of consumer receivables |
3,271 |
- |
3,271 |
- |
|||||||||||
|
Depreciation and amortization expense |
6,509 |
6,106 |
19,052 |
18,403 |
|||||||||||
|
Change in deferred fees and costs, net |
314 |
380 |
992 |
1,778 |
|||||||||||
|
Change in fair value of warrants |
(405 |
) |
81 |
(405 |
) |
68 |
|||||||||
|
Change in fair value of contingent consideration from mergers and acquisitions |
- |
- |
- |
(6,613 |
) |
||||||||||
|
Loss (gain) on foreign currency translation |
497 |
- |
444 |
(178 |
) |
||||||||||
|
Goodwill impairment loss |
- |
- |
- |
26,721 |
|||||||||||
|
Stock compensation expense |
7,282 |
5,702 |
21,310 |
16,657 |
|||||||||||
|
Deferred income taxes |
(131 |
) |
(17 |
) |
340 |
(510 |
) |
||||||||
|
Changes in assets and liabilities: |
|||||||||||||||
|
Accrued interest receivable |
(112 |
) |
(166 |
) |
(188 |
) |
(404 |
) |
|||||||
|
Enterprise receivables, net |
(1,234 |
) |
2,144 |
(8,301 |
) |
(278 |
) |
||||||||
|
Other assets |
15,985 |
(733 |
) |
17,738 |
3,627 |
||||||||||
|
Accounts payable and accrued liabilities |
4,048 |
2,771 |
689 |
(5,878 |
) |
||||||||||
|
Other liabilities |
277 |
(1,207 |
) |
(1,077 |
) |
(5,422 |
) |
||||||||
|
Net cash provided by operating activities |
60,342 |
36,072 |
141,779 |
74,115 |
|||||||||||
|
Cash flows from investing activities: |
|||||||||||||||
|
Net originations and collections of finance receivables |
(11,745 |
) |
(26,448 |
) |
(81,143 |
) |
(79,280 |
) |
|||||||
|
Originations of finance receivables held for sale |
(46,681 |
) |
- |
(46,681 |
) |
- |
|||||||||
|
Proceeds from the sale of consumer receivables |
39,009 |
- |
39,009 |
- |
|||||||||||
|
Purchase of property and equipment and software development |
(3,388 |
) |
(1,527 |
) |
(7,789 |
) |
(4,202 |
) |
|||||||
|
Settlement of contingent consideration related to mergers and acquisitions |
- |
- |
- |
(1,116 |
) |
||||||||||
|
Net cash used in investing activities |
(22,805 |
) |
(27,975 |
) |
(96,604 |
) |
(84,598 |
) |
|||||||
|
Cash flows from financing activities: |
|||||||||||||||
|
Net repayments to special purpose vehicle credit facilities |
(23,600 |
) |
- |
(19,600 |
) |
(24,000 |
) |
||||||||
|
Repayments to secured/senior lenders |
- |
(10,000 |
) |
- |
(15,000 |
) |
|||||||||
|
Repurchases of Class A Common Stock |
(976 |
) |
- |
(976 |
) |
- |
|||||||||
|
Payment of deferred financing costs |
(70 |
) |
- |
(70 |
) |
(132 |
) |
||||||||
|
Payments related to the automatic conversion of redeemable convertible preferred stock (Series A) in lieu of fractional shares of common stock and dividends on preferred stock |
- |
- |
- |
(3,007 |
) |
||||||||||
|
Proceeds (payments) related to issuance of common stock related to exercise of stock options and warrants, net of tax withholdings related to vesting of stock-based compensation |
358 |
723 |
(2,649 |
) |
(59 |
) |
|||||||||
|
Other |
- |
22 |
- |
(12 |
) |
||||||||||
|
Net cash used in financing activities |
(24,288 |
) |
(9,255 |
) |
(23,295 |
) |
(42,210 |
) |
|||||||
|
Net change in cash and restricted cash |
13,249 |
(1,158 |
) |
21,880 |
(52,693 |
) |
|||||||||
|
Cash and restricted cash, beginning of period |
103,110 |
102,174 |
94,479 |
153,709 |
|||||||||||
|
Cash and restricted cash, end of period |
$ |
116,359 |
$ |
101,016 |
$ |
116,359 |
$ |
101,016 |
|||||||
|
Supplemental disclosure of cash flow information: |
|||||||||||||||
|
Cash paid for interest |
$ |
6,310 |
$ |
6,738 |
$ |
19,158 |
$ |
21,246 |
|||||||
|
Supplemental disclosure of non-cash investing and financing activities: |
|||||||||||||||
|
Voluntary conversion of preferred stock to common stock |
$ |
- |
$ |
- |
$ |
- |
$ |
45 |
|||||||
|
Automatic conversion of redeemable convertible preferred stock (Series A) to common stock |
$ |
- |
$ |
- |
$ |
- |
$ |
174,849 |
|||||||
|
Reversal of previously accrued dividends on preferred stock |
$ |
- |
$ |
- |
$ |
- |
$ |
690 |
|||||||
|
Issuance of common stock to settle accrued dividends on preferred stock and Preferred Stock Equivalents |
$ |
- |
$ |
- |
$ |
- |
$ |
3,280 |
|||||||
|
Equity issued as consideration for mergers and acquisitions |
$ |
- |
$ |
- |
$ |
- |
$ |
1,864 |
|||||||
|
Equity issued as settlement of contingent consideration related to Malka Acquisition |
$ |
- |
$ |
- |
$ |
- |
$ |
1,914 |
|||||||
|
Equity issued as settlement of contingent consideration related to Engine Acquisition |
$ |
- |
$ |
- |
$ |
- |
$ |
1,440 |
|||||||
|
Lease liabilities incurred in exchange for operating right-of-use assets |
$ |
- |
$ |
- |
$ |
8,885 |
$ |
- |
The accompanying notes are an integral part of these consolidated financial statements.
5
MONEYLION INC.
NOTES TOCONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share amounts or as otherwise indicated)
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
MoneyLion Inc. ("MoneyLion" or the "Company") was founded in 2013 and is headquartered in New York, New York. On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the "Business Combination") with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion Inc. became a publicly traded company, with MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion Inc. MoneyLion Inc.'s Class A common stock, par value $0.0001per share (the "Class A Common Stock"), is listed on the New York Stock Exchange (the "NYSE") under the ticker symbol "ML." "MALKA" refers to Malka Media Group LLC, a wholly-owned subsidiary of MoneyLion Technologies Inc., and "Engine" refers to ML Enterprise Inc., doing business as the brand "Engine by MoneyLion," a wholly-owned subsidiary of MoneyLion Technologies Inc. which was previously named "Even Financial Inc." and subsequently renamed in February 2023.
MoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American consumers. MoneyLion designs and offers modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to its users. MoneyLion also operates and distributes embedded finance marketplace solutions that match consumers with personalized third-party offers from its partners, providing convenient access to an expansive breadth of financial solutions that enable consumers to borrow, spend, save and achieve better financial outcomes. In addition, MoneyLion provides creative media and brand content services to clients across industries through its media division and leverages its adaptive, in-house content studio to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings.
Basis of Presentation-The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of MoneyLion Inc. and its wholly owned subsidiaries and consolidated variable interest entities ("VIEs") for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have any items of other comprehensive income (loss); therefore, there is no difference between net (loss) income and comprehensive (loss) income for the three and nine months ended September 30, 2024 and 2023.
Reclassification-Disaggregation of consumer revenue relative to previous filings has been implemented in Note 2, "Summary of Significant Accounting Policies" to provide more transparency for users of the consolidated financial statements. The reclassifications had no impact on previously reported total assets, total liabilities, total revenue, net or net (loss) income. There was no impact on the consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows or consolidated statements of redeemable convertible preferred stock and stockholders' equity.
Reverse Stock Split-On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reversestock split (the "Reverse Stock Split") of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000shares to 66,666,666shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
6
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company's outstanding equity awards, the number of shares issuable upon the exercise of the Company's outstanding warrants and the number of shares issuable under the Company's equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company's previously outstanding Series A Convertible Preferred Stock, par value $0.0001per share (the "Series A Preferred Stock"), were converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in these consolidated financial statements and the accompanying footnotes for all periods presented, which includes adjusting the description of any activity that may have been transacted on a pre-Reverse Stock Split basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments and adjustments to eliminate intercompany transactions and balances, necessary for a fair presentation of its financial position and its results of operations, changes in redeemable convertible preferred stock and stockholders' equity and cash flows.
The Company's accounting policies are set forth in Note 2, "Summary of Significant Accounting Policies" of the Company's Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Included herein are certain updates to those policies and the related disclosures.
Revenue Recognition and Related Receivables-The following table summarizes revenue by type for the three and nine months ended September 30, 2024 and 2023:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Consumer revenue |
||||||||||||||||
|
Banking revenue |
$ |
78,604 |
$ |
58,863 |
$ |
233,928 |
$ |
169,686 |
||||||||
|
Membership subscription revenue |
8,016 |
8,743 |
26,879 |
26,120 |
||||||||||||
|
Net interest income on finance receivables |
3,368 |
3,258 |
9,257 |
9,490 |
||||||||||||
|
Other consumer revenue |
207 |
235 |
673 |
741 |
||||||||||||
|
Total consumer revenue |
90,195 |
71,099 |
270,737 |
206,037 |
||||||||||||
|
Enterprise service revenue |
45,271 |
39,159 |
116,581 |
104,431 |
||||||||||||
|
Total revenue, net |
$ |
135,466 |
$ |
110,258 |
$ |
387,318 |
$ |
310,468 |
7
Fair Value of Financial Instruments-Accounting Standards Codification ("ASC") 820, Fair Value Measurement("ASC 820"), provides a single definition of fair value and a common framework for measuring fair value as well as disclosure requirements for fair value measurements used in financial statements. Under ASC 820, fair value is determined based upon the exit price that would be received by a company to sell an asset or paid by a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company uses the most advantageous market, which is the market from which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. ASC 820 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The Company had noassets measured at fair value on a recurring or non-recurring basis as of September 30, 2024 or December 31, 2023 except for consumer receivables held for sale (Level 2) which were measured at fair value on a recurring basis based on prices in markets that are not active for similar assets as of September 30, 2024 and are further described in Note 4, "Sale of Consumer Receivables." The Private Placement Warrants (as defined herein) were measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 and are further described in Note 13, "Stock Warrants."The Company had noliabilities measured at fair value on a non-recurring basis as of September 30, 2024 or December 31, 2023. There have been notransfers between levels during the nine months ended September 30, 2024 and 2023.
The Company also has financial instruments which are not measured at fair value. The Company has evaluated cash (Level 1), restricted cash (Level 1) and consumer receivables, net (Level 3) and believes the carrying value approximates the fair value due to the short-term nature of these balances. The carrying value of the secured loans approximates their fair value based on the relatively short duration these instruments have been outstanding and the secured loans' variable interest rate based on market rates. The carrying value of other debt approximates its fair value based on the relatively short duration these instruments have been outstanding and availability of alternative financing sources at similar interest rates with the same terms. The fair value of secured loans and other debt is based on Level 2 fair value measurements.
8
Recently Adopted Accounting Pronouncements-The Company adoptedASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, along with subsequent related ASUs, creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of operations as the amounts expected to be collected change. The Company adopted ASU 2016-13 and the related subsequent ASUs effective January 1, 2023, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. Upon adoption, the Company increased consumer receivables, net by $692, decreased enterprise receivables, net by $187and reduced accumulated deficit by $505. The adoption of the new guidance did not impact the Company's unaudited consolidated interim statements of operations or cash flows.
Recently Issued Accounting Pronouncements Not Yet Adopted-The Company currently qualifies as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012. Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance expands the disclosures required for reportable segments in the Company's annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for the Company beginning with the Company's annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this standard on its disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. The standard will be effective for the Company beginning with the Company's annual reporting for fiscal year 2026 and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this standard on its income tax disclosures.
3. CONSUMER RECEIVABLES
The Company's finance receivables consist of secured personal loans and principal amounts of Instacash advances. Secured loan principal balances are either partially or fully deposited into an escrow account upon origination with any remaining balance being given to the borrower. The funds in the escrow account may be used to pay the secured personal loan in full or can be released to the borrower once the secured personal loan is paid in full. Until such time, the funds in the escrow account may be collected by the Company in the event the borrower becomes contractually past due. Accrued interest receivables represent the interest accrued on the loan receivables based upon the daily principal amount outstanding except for loans that are on nonaccrual status.
9
The Company's policy is to suspend recognition of interest income on secured personal loans and place the secured personal loan on nonaccrual status when the account is more than 60 days past due on a contractual basis or when, in the Company's estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due. The Company has elected to not measure an allowance for losses on accrued interest receivable. Any accrued interest receivable that becomes 90 days past due on a contractual basis is charged-off by reversing net interest income on loan receivables. Net charge-offs of accrued interest income were $260and $396for the three months ended September 30, 2024 and 2023 and $769and $1,069for the nine months ended September 30, 2024 and 2023.
Fees receivable represent the amounts due to the Company for tips and instant transfer fees related to the Instacash earned wage access product. Subscription receivables represent the amounts billed to customers for subscription services.
The credit quality and future repayment of consumer receivables are dependent upon the customer's ability to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer's ability to perform under the loan or Instacash advance terms though no direct correlation between charge-off rates and these factors has been identified in the Company's analysis. When assessing provision for losses on consumer receivables, the Company takes into account the composition and delinquency status of the outstanding consumer receivables and the related forecasted principal loss rates based on recent historical experience. Recent historical loss rates are updated on a quarterly basis. Charge-offs of consumer receivable balances occur after becoming 90 days past contractually due unless specific circumstances are identified on an individual or group of receivables that indicate charge-off is not appropriate. The level of exceptions to charge-offs occurring once 90 days past due is not material. Consumer receivable charge-offs typically occur within one year of origination. The tables below show consumer receivables balances as of September 30, 2024 and December 31, 2023 and the consumer receivables activity, charge-off rates and aging by product for the three and nine months ended September 30, 2024 and 2023.
Consumer receivables consisted of the following:
|
September 30, |
December 31, |
||||||
|
2024 |
2023 |
||||||
|
Loan receivables |
$ |
84,002 |
$ |
66,815 |
|||
|
Instacash receivables |
114,457 |
120,336 |
|||||
|
Finance receivables |
198,459 |
187,151 |
|||||
|
Fees receivable |
15,300 |
16,137 |
|||||
|
Subscription receivables |
3,297 |
3,491 |
|||||
|
Deferred loan origination costs |
96 |
86 |
|||||
|
Accrued interest receivable |
1,490 |
1,302 |
|||||
|
Consumer receivables, before allowance for credit losses |
$ |
218,642 |
$ |
208,167 |
Changes in the allowance for losses on loan receivables were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Beginning balance |
$ |
4,521 |
$ |
6,249 |
$ |
5,761 |
$ |
5,784 |
|||||||
|
Provision for credit losses on receivables |
995 |
3,205 |
2,395 |
6,808 |
|||||||||||
|
Loan receivables charged off |
(1,454 |
) |
(3,660 |
) |
(5,176 |
) |
(10,417 |
) |
|||||||
|
Recoveries |
420 |
808 |
1,502 |
4,427 |
|||||||||||
|
Ending balance |
$ |
4,482 |
$ |
6,602 |
$ |
4,482 |
$ |
6,602 |
10
Changes in the allowance for losses on Instacash receivables were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Beginning balance |
$ |
31,497 |
$ |
22,311 |
$ |
25,992 |
$ |
23,240 |
|||||||
|
Provision for credit losses on receivables |
21,012 |
17,846 |
65,349 |
46,348 |
|||||||||||
|
Instacash receivables charged off |
(32,912 |
) |
(23,217 |
) |
(82,162 |
) |
(62,815 |
) |
|||||||
|
Recoveries |
5,583 |
4,820 |
16,001 |
14,987 |
|||||||||||
|
Ending balance |
$ |
25,180 |
$ |
21,760 |
$ |
25,180 |
$ |
21,760 |
Changes in the allowance for losses on fees receivable were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Beginning balance |
$ |
3,111 |
$ |
2,100 |
$ |
2,552 |
$ |
908 |
|||||||
|
Provision for credit losses on receivables |
4,444 |
2,628 |
9,970 |
10,671 |
|||||||||||
|
Fees receivable charged off |
(5,144 |
) |
(2,957 |
) |
(11,477 |
) |
(11,082 |
) |
|||||||
|
Recoveries |
733 |
627 |
2,099 |
1,901 |
|||||||||||
|
Ending balance |
$ |
3,144 |
$ |
2,398 |
$ |
3,144 |
$ |
2,398 |
Changes in the allowance for losses on subscription receivables were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Beginning balance |
$ |
1,394 |
$ |
1,095 |
$ |
1,024 |
$ |
1,292 |
|||||||
|
Provision for credit losses on receivables |
382 |
1,442 |
2,780 |
3,367 |
|||||||||||
|
Subscription receivables charged off |
(1,401 |
) |
(1,452 |
) |
(4,478 |
) |
(4,173 |
) |
|||||||
|
Recoveries |
330 |
228 |
1,379 |
827 |
|||||||||||
|
Ending balance |
$ |
705 |
$ |
1,313 |
$ |
705 |
$ |
1,313 |
The following is an assessment of the repayment performance of loan receivables as of September 30, 2024 and December 31, 2023 and presents the contractual delinquency of the loan receivables portfolio:
|
September 30, 2024 |
December 31, 2023 |
||||||||||||||
|
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Current |
$ |
71,373 |
85.0 |
% |
$ |
58,980 |
88.2 |
% |
|||||||
|
Delinquency: |
|||||||||||||||
|
31 to 60 days |
7,637 |
9.1 |
% |
4,451 |
6.7 |
% |
|||||||||
|
61 to 90 days |
4,992 |
5.9 |
% |
3,384 |
5.1 |
% |
|||||||||
|
Total delinquency |
12,629 |
15.0 |
% |
7,835 |
11.8 |
% |
|||||||||
|
Loan receivables before allowance for credit losses |
$ |
84,002 |
100.0 |
% |
$ |
66,815 |
100.0 |
% |
11
Loan receivables that are 61 to 90 days contractually past due are placed on non-accrual status.
The following is an assessment of the repayment performance of Instacash receivables as of September 30, 2024 and December 31, 2023 and presents the contractual delinquency of the Instacash receivables portfolio:
|
September 30, 2024 |
December 31, 2023 |
||||||||||||||
|
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Current |
$ |
91,313 |
79.8 |
% |
$ |
104,541 |
86.9 |
% |
|||||||
|
Delinquency: |
|||||||||||||||
|
31 to 60 days |
12,795 |
11.2 |
% |
8,829 |
7.3 |
% |
|||||||||
|
61 to 90 days |
10,349 |
9.0 |
% |
6,966 |
5.8 |
% |
|||||||||
|
Total delinquency |
23,144 |
20.2 |
% |
15,795 |
13.1 |
% |
|||||||||
|
Instacash receivables before allowance for credit losses |
$ |
114,457 |
100.0 |
% |
$ |
120,336 |
100.0 |
% |
The following is an assessment of the repayment performance of fees receivable as of September 30, 2024 and December 31, 2023 and presents the contractual delinquency of the fees receivable portfolio:
|
September 30, 2024 |
December 31, 2023 |
||||||||||||||
|
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Current |
$ |
12,392 |
81.0 |
% |
$ |
13,971 |
86.6 |
% |
|||||||
|
Delinquency: |
|||||||||||||||
|
31 to 60 days |
1,619 |
10.6 |
% |
1,197 |
7.4 |
% |
|||||||||
|
61 to 90 days |
1,289 |
8.4 |
% |
969 |
6.0 |
% |
|||||||||
|
Total delinquency |
2,908 |
19.0 |
% |
2,166 |
13.4 |
% |
|||||||||
|
Fees receivable before allowance for credit losses |
$ |
15,300 |
100.0 |
% |
$ |
16,137 |
100.0 |
% |
12
The following is an assessment of the repayment performance of subscription receivables as of September 30, 2024 and December 31, 2023 and presents the contractual delinquency of the subscription receivables portfolio:
|
September 30, 2024 |
December 31, 2023 |
||||||||||||||
|
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Current |
$ |
2,463 |
74.7 |
% |
$ |
2,786 |
79.8 |
% |
|||||||
|
Delinquency: |
|||||||||||||||
|
31 to 60 days |
476 |
14.4 |
% |
407 |
11.7 |
% |
|||||||||
|
61 to 90 days |
358 |
10.9 |
% |
298 |
8.5 |
% |
|||||||||
|
Total delinquency |
834 |
25.3 |
% |
705 |
20.2 |
% |
|||||||||
|
Subscription receivables before allowance for credit losses |
$ |
3,297 |
100.0 |
% |
$ |
3,491 |
100.0 |
% |
4. SALE OF CONSUMER RECEIVABLES
On June 30, 2024 (the "Closing Date"), ML Plus LLC, an indirect, wholly-owned subsidiary of the Company (the "Seller"), entered into a Master Receivables Purchase Agreement (the "Purchase Agreement") with Sound Point Capital Management LP, as purchaser agent ("Sound Point"), and SP Main Street Funding I LLC and each additional purchaser from time to time party thereto, as purchasers (the "Purchasers"). The Purchase Agreement provides for the purchase, subject to certain conditions precedent, by the Purchasers from time to time during the term of the Purchase Agreement, on a committed basis, of a majority of the Company's eligible Instacash receivables, subject to certain concentration limits, up to an aggregate facility limit of $175,000, which amount may be increased by up to $75,000. The obligations of the Seller under the Purchase Agreement will be guaranteed by MoneyLion Technologies Inc., a direct, wholly-owned subsidiary of the Company. The Purchase Agreement terminates on the two-year anniversary of the Closing Date and may be extended for an additional one-year period upon mutual agreement of the Seller and Sound Point.
The initial price at which the Purchasers will purchase the eligible Instacash receivables with respect to each monthly cohort is based on the average loss rate at 360 days past the repayment date of the three most recent matured monthly cohorts and will be subject to adjustment for future monthly cohorts based on the performance of monthly cohorts at specified intervals past the repayment date compared to the expected loss rates of the reference matured monthly cohorts established at sale and a fixed discount percentage.
The Purchase Agreement contains customary representations and warranties; repurchase rights and obligations of the Seller upon the occurrence of certain events (subject to specified limitations); affirmative and negative covenants, including, among other things, financial reporting and notice requirements and restrictions on the ability of the Seller to incur liens on the purchased receivables; and events of default (subject to specified cure provisions), the occurrence of which will give Sound Point the right to terminate the Purchase Agreement.
In connection with the Seller's entry into the Purchase Agreement, on the Closing Date, MoneyLion Technologies Inc. (in such capacity, the "Servicer") entered into a Servicing Agreement (the "Servicing Agreement") with Sound Point and the Purchasers pursuant to which the Purchasers appointed the Servicer to, among other things, service the purchased Instacash receivables in accordance with agreed upon servicing guidelines, collect and remit collections therefrom and provide certain reporting and other information relating to its servicing duties. The Seller will receive a fixed percentage of net collections.
The Seller will pay the Purchasers a non-refundable fee, payable monthly, in an amount equal to 2.00% per annum times the daily average available facility limit, subject to a maximum aggregate amount of $1,750. The expense related to the fee is presented within loss on sale of consumer receivables in the consolidated statements of operations.
13
The sales of eligible Instacash receivables are accounted for as a sale based on the Company's determination that these receivables met all the necessary criteria for such accounting, including legal isolation for transferred assets, lack of constraint on the transferee to pledge or exchange the transferred assets that provides a benefit to the Company and the transfer of control. Therefore, the Company no longer records these receivables on the consolidated financial statements. The Company also concluded that continuing involvement in the arrangement does not invalidate this determination. The Company retains the servicing rights for all Instacash receivables sold and receives a market-based service fee for servicing the assets sold.
During the three and nine months ended September 30, 2024, the Company sold $41,949of Instacash receivables under the Purchase Agreement and had $175,000of unused capacity as of September 30, 2024.
Consumer receivables held for sale as of September 30, 2024 represent Instacash receivables that the Company originated and intends to sell under the Purchase Agreement. Consumer receivables held for sale are recorded at the lower of cost or fair value. If recorded at fair value, the difference between cost and fair value of consumer receivables held for sale is recorded as a component of loss on sale of consumer receivables in the consolidated statements of operations. If the Company no longer has the intent to sell consumer receivables held for sale, such receivables would be reclassified to Consumer receivables, net. When a consumer receivable is reclassified to held for investment, any amounts previously recorded in order to measure the consumer receivable at the lower of cost or fair value are reversed on the consolidated statements of operations and the consumer receivable is recorded consistent with Instacash originated as held for investment.
Servicing revenue is recognized as Instacash receivables are collected on behalf of the purchaser. Servicing revenue for the three and nine months ended September 30, 2024 was $335and is presented within service and subscription revenue in the consolidated statements of operations.
As of September 30, 2024, the Company was responsible for servicing $19,643of Instacash receivables sold and outstanding under the Purchase Agreement. The following is an assessment of the repayment performance of Instacash receivables sold and outstanding as of September 30, 2024 and presents the contractual delinquency of the Instacash receivables sold and outstanding:
|
September 30, 2024 |
|||||||
|
Amount |
Percent |
||||||
|
Current |
$ |
19,632 |
99.9 |
% |
|||
|
Delinquency: |
|||||||
|
31 to 60 days |
11 |
0.1 |
% |
||||
|
61 to 90 days |
- |
0.0 |
% |
||||
|
Total delinquency |
11 |
0.1 |
% |
||||
|
Instacash receivables sold and outstanding |
$ |
19,643 |
100.0 |
% |
14
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Leasehold improvements |
$ |
1,990 |
$ |
1,932 |
||||
|
Furniture and fixtures |
295 |
361 |
||||||
|
Computers and equipment |
2,967 |
2,551 |
||||||
|
5,252 |
4,844 |
|||||||
|
Less: accumulated depreciation |
(3,346 |
) |
(2,980 |
) |
||||
|
Property and equipment, net |
$ |
1,906 |
$ |
1,864 |
Total depreciation expense related to property and equipment was $221and $225for the three months ended September 30, 2024 and 2023, respectively, and $612and $812for the nine months ended September 30, 2024 and 2023, respectively.
6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
September 30, |
December 31, |
|||||||||
|
Useful Life |
2024 |
2023 |
||||||||
|
Proprietary technology and capitalized internal-use software |
3 - 7 years |
$ |
50,160 |
$ |
43,105 |
|||||
|
Work in process |
1,882 |
1,695 |
||||||||
|
Customer relationships |
10 - 15 years |
160,500 |
160,500 |
|||||||
|
Trade names |
9 - 15 years |
15,960 |
15,960 |
|||||||
|
Less: accumulated amortization |
(63,122 |
) |
(44,719 |
) |
||||||
|
Intangible assets, net |
$ |
165,380 |
$ |
176,541 |
The Company capitalizes certain internal-use software development costs, consisting primarily of contractor costs and employee salaries and benefits allocated to the software. Capitalization of costs incurred in connection with internally developed software commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended. Costs incurred for enhancements that are expected to result in additional functionalities are capitalized in a similar manner. Capitalization of costs ceases no later than the point at which the project is substantially complete and ready for its intended use, at which point amortization of capitalized costs begins. All other costs are expensed as incurred. Costs capitalized in connection with internal-use software were $1,822and $1,454for the three months ended September 30, 2024 and 2023, respectively, and were $5,734and $4,305during the nine months ended September 30, 2024 and 2023, respectively.
For the three months ended September 30, 2024 and 2023, total amortization expense was $6,288and $5,881, respectively. For the nine months ended September 30, 2024 and 2023, total amortization expense was $18,440and $17,591, respectively.
15
The following table summarizes estimated future amortization expense of intangible assets placed in service at September 30, 2024 for the years ending:
|
Remainder of 2024 |
$ |
6,319 |
||||||
|
2025 |
25,275 |
|||||||
|
2026 |
25,275 |
|||||||
|
2027 |
24,703 |
|||||||
|
2028 |
22,394 |
|||||||
|
Thereafter |
59,532 |
|||||||
|
$ |
163,498 |
7. OTHER ASSETS
Other assets consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Receivable from payment processors |
$ |
12,499 |
$ |
37,362 |
||||
|
Prepaid expenses |
4,861 |
5,987 |
||||||
|
Operating lease right-of-use assets |
12,670 |
6,159 |
||||||
|
Other |
3,230 |
4,051 |
||||||
|
Total other assets |
$ |
33,260 |
$ |
53,559 |
8. DEBT
The Company's debt as of September 30, 2024 and December 31, 2023 is presented below:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Monroe Term Loans |
$ |
65,000 |
$ |
65,000 |
||||
|
Unamortized discounts and debt issuance costs |
(503 |
) |
(666 |
) |
||||
|
Total secured loans, net |
$ |
64,497 |
$ |
64,334 |
||||
|
ROAR 1 SPV Credit Facility |
$ |
42,900 |
$ |
64,500 |
||||
|
ROAR 2 SPV Credit Facility |
64,500 |
62,500 |
||||||
|
Unamortized discounts and debt issuance costs |
(812 |
) |
(1,581 |
) |
||||
|
Total other debt, net |
$ |
106,588 |
$ |
125,419 |
For more information regarding debt instruments outstanding as of December 31, 2023, see Note 7, "Debt" in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Monroe Term Loans-The Monroe Term Loans (as defined below) are comprised of term loans with a principal balance of $65.0million(the "Term A-1 Loans") and term loans that were fully repaid during 2023 (the "Term A-2 Loans" and together with the Term A-1 Loans, the "Monroe Term Loans"). The interest rate as of September 30, 2024 on the Term A-1 Loans was 12.25%.
Other Debt-In September 2021, ROAR 1 SPV Finance LLC, an indirect wholly owned subsidiary of the Company (the "ROAR 1 SPV Borrower"), entered into a $100,000credit agreement, which, during the first quarter of 2024, decreased to $80,000(the "ROAR 1 SPV Credit Facility"), with a lender for the funding of finance receivables, which secure the ROAR 1 SPV Credit Facility. The ROAR 1 SPV Credit Facility allows for increases in maximum borrowings under the agreement of up to $200,000, bears interest at a rate of 12.5% and matures in March 2025, unless it is extended to March 2026. Under the terms of the ROAR 1 SPV Credit Facility, the ROAR 1 SPV Borrower is subject to certain covenants including minimum asset requirements to be held by ROAR 1 SPV Borrower.
16
9. LEASES
The Company is party to operating leases for all of its offices. Many leases contain options to renew and extendlease terms and options to terminateleases early. Reflected in the right-of-use asset and lease liability on the consolidated balance sheets are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain not to exercise. All long-term leases identified by the Company are classified as operating leases. Lease expenses related to long-term leases were $1,315and $1,092for the three months ended September 30, 2024 and 2023, respectively, and $3,702and $2,673for the nine months ended September 30, 2024 and 2023, respectively. Short-term lease expense and variable lease expense were not material for the three and nine months ended September 30, 2024 and 2023. Net rental income from subleases of $174and $506was recorded in other incomefor the three and nine months ended September 30, 2024 and was not material for the three and nine months ended September 30, 2023.
Maturities of the Company's long-term operating lease liabilities, which are included in other liabilities on the consolidated balance sheet, were as follows:
|
September 30, 2024 |
||||
|
Remainder of 2024 |
$ |
1,346 |
||
|
2025 |
4,723 |
|||
|
2026 |
3,486 |
|||
|
2027 |
3,334 |
|||
|
2028 |
3,271 |
|||
|
Thereafter |
2,939 |
|||
|
Total lease payments |
19,099 |
|||
|
Less: imputed interest |
4,857 |
|||
|
Lease liabilities |
$ |
14,242 |
||
|
Weighted-average remaining lease term (years) |
4.6 |
|||
|
Weighted-average discount rate |
13.4 |
% |
10. INCOME TAXES
In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at the interim period. The effective tax rate for the nine months ended September 30, 2024 was 12.9%and -0.3%for the nine months ended September 30, 2023. The increase in the effective tax rate for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily attributable to the change in the valuation allowance, an increase in nondeductible compensation and certain discrete items related to stock-based compensation.
11. COMMON AND PREFERRED STOCK
Class A Common Stock-Each holder of the shares of Class A Common Stock is entitled to onevote for each share of Class A Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote, as provide by the Company's Certificate of Incorporation (as amended from time to time). The holders of the shares of Class A Common Stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by the holders of Class A Common Stock must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast present in person or represented by proxy, unless otherwise specified by law, the Company's Certificate of Incorporation or the Company's Amended and Restated Bylaws (as amended from time to time).
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of Class A Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by MoneyLion's Board of Directors out of funds legally available therefor.
17
In the event of any voluntary or involuntary liquidation, dissolution or winding up of MoneyLion's affairs, the holders of the shares of Class A Common Stock are entitled to share ratably in all assets remaining after payment of MoneyLion's debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the shares of Class A Common Stock, then outstanding, if any.
The holders of shares of Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares of Class A Common Stock. The rights, preferences and privileges of holders of shares of Class A Common Stock will be subject to those of the holders of any shares of the preferred stock MoneyLion may issue in the future.
On August 26, 2024, the Company announced that its Board of Directors approved a share repurchase program with authorization to purchase up to $20,000of the Company's outstanding Class A common stock (the "Repurchase Program"). Under the Repurchase Program, the Company may repurchase from time to time shares of Class A common stock for cash through any manner, including open market transactions (including pursuant to broker plans in accordance with Rule 10b5-1 and Rule 10b-18), privately negotiated transactions with third parties or accelerated share repurchase amounts, and in such amounts as the Company deems appropriate, subject to legal requirements and other corporate considerations. The volume and timing of any repurchases will be subject to general market conditions, as well as the Company's management of capital, other investment opportunities and other factors. The Repurchase Program does not obligate the Company to repurchase any specific dollar amount or number of shares, has no fixed expiration date and may be modified, suspended or discontinued at any time at the Company's discretion. During the nine months ended September 30, 2024, the Company repurchased 24,405shares of its common stock for $976.
Series A Preferred Stock-Prior to the Automatic Conversion Event (as described below), the Company had shares of Series A Preferred Stock outstanding. Holders of the shares of Series A Preferred Stock (other than certain regulated holders subject to the Bank Holding Company Act of 1956, as amended) were entitled to vote as a single class with the holders of the Class A Common Stock and the holders of any other class or series of capital stock of MoneyLion then entitled to vote.
Holders of the Series A Preferred Stock were entitled to a 30 cent cumulative annual dividend per share, payable at the Company's election in either cash or Class A Common Stock (or a combination thereof), with any dividends on the Class A Common Stock valued based on the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE for the 20 trading days ending on the trading day immediately prior to the dividend payment date.
Holders of the Series A Preferred Stock were entitled to a liquidation preference in the event of the Company's liquidation equal to the greater of $10.00per share or the amount per share that such holder would have received had the Series A Preferred Stock been converted into Class A Common Stock immediately prior to the liquidation.
Shares of Series A Preferred Stock were convertible into shares of Class A Common Stock on a one-for-thirty basis, subject to customary anti-dilution adjustments.The Series A Preferred Stock was convertible (i) at any time upon the holder's election and (ii) automatically in the event that the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00on any 20 trading days (consecutive or nonconsecutive) within any consecutive 30 trading day period ending no later than the last day of the lockup period applicable to such shares of Series A Preferred Stock.
As of the close of trading on the NYSE on May 26, 2023, the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equaled or exceeded $10.00for the twentieth trading day within a consecutive thirty trading day period ending no earlier than the last day of the lockup period applicable to such shares of Series A Preferred Stock (the "Automatic Conversion Event"). Accordingly, as a result of the Automatic Conversion Event, following the close of trading on the NYSE on May 26, 2023, all 30,049,053shares of Series A Preferred Stock issued and outstanding automatically converted into 1,012,293shares of newly issued Class A Common Stock based on the conversion rate provided in the Certificate of Designations of the Series A Preferred Stock (the "Certificate of Designations"). In lieu of any fractional shares otherwise issuable to any holder of the Series A Preferred Stock, the Company issued cash in accordance with the terms of the Certificate of Designations.
18
On June 30, 2023, the Company paid the accrued annual dividend on the previously outstanding shares of Series A Preferred Stock for the dividend payment period ending December 31, 2022 to all holders of record as of the applicable dividend record date (the "2022 Annual Dividend"). The 2022 Annual Dividend was paid in a mixture of Class A Common Stock and cash through the issuance of 229,605shares of Class A Common Stock and payment of approximately $3.0million of cash.
12. STOCK-BASED COMPENSATION
Omnibus Incentive Plan
At the Company's 2022 Annual Meeting of Stockholders (the "2022 Annual Meeting"), Company stockholders approved the Company's Amended and Restated Omnibus Incentive Plan (as may be amended or restated from time to time, the "Incentive Plan"), as further described in the Company's Definitive Proxy Statement for the 2022 Annual Meeting, filed with the SEC on April 29, 2022.
Stock-based compensation of $7,282and $5,702was recognized during the three months ended September 30, 2024 and 2023, respectively, and stock-based compensation of $21,310and $16,657was recognized during the nine months ended September 30, 2024 and 2023, respectively.
The number of units awarded under the Incentive Plan are generally based on a weighted average of the Class A Common Stock in the days leading up to the grant. Fair values for restricted stock units ("RSUs") and performance stock units ("PSUs") based on the Company's operating performance are valued based on the price of the Class A Common Stock at the time of grant. Fair values for options are calculated using a Black-Scholes option pricing model and PSUs with market conditions are fair valued using a Monte Carlo simulation model. The following table represents activity within the Incentive Plan for the nine months ended September 30, 2024:
|
Type |
Vesting Conditions |
Units Granted |
Weighted Average Grant Date Fair Value |
Weighted Average Strike Price |
||||||||
|
Restricted Stock Unit |
Service-based |
425,120 |
$ |
54.54 |
n/a |
|||||||
|
Performance Stock Unit |
Service and performance-based |
95,090 |
$ |
54.06 |
n/a |
The following table represents outstanding equity awards as of September 30, 2024:
|
Type |
Vesting Conditions |
Units Outstanding |
Weighted Average Grant Date Fair Value |
Weighted Average Strike Price |
||||||||||
|
Restricted Stock Unit |
Service-based |
843,631 |
$ |
40.82 |
n/a |
|||||||||
|
Performance Stock Unit |
Service and performance-based |
199,394 |
$ |
36.68 |
n/a |
|||||||||
|
Performance Stock Unit |
Service and market-based |
223,894 |
$ |
14.08 |
n/a |
|||||||||
|
Options |
Service-based |
511,014 |
$ |
21.00 |
$ |
32.48 |
13. STOCK WARRANTS
Public Warrants and Private Placement Warrants
As a result of the Business Combination, MoneyLion acquired from Fusion Acquisition Corp., as of September 22, 2021, public warrants outstanding to purchase an aggregate of 583,333shares of the Class A Common Stock (the "Public Warrants") and private placement warrants outstanding to purchase an aggregate of 270,000shares of the Class A Common Stock (the "Private Placement Warrants") that expire on September 22, 2026.
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40. The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the consolidated balance sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrants liability in the consolidated statement of operations.
19
The Private Placement Warrants are valued based on the per warrant price of the Public Warrants, subject to adjustments to account for differences in contractual terms between the Private Placement Warrants and the Public Warrants. The per warrant price of the Public Warrants as of September 30, 2024 was $0.05.
The following table presents the changes in the liability related to the Private Placement Warrants:
|
Private Placement |
||||
|
Warrants |
||||
|
Warrants payable balance, December 31, 2023 |
$ |
810 |
||
|
Mark-to-market adjustment |
(405 |
) |
||
|
Warrants payable balance, September 30, 2024 |
$ |
405 |
For more information regarding the Public Warrants and Private Placement Warrants, see Note 12, "Stock Warrants" in Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
14. NET (LOSS) INCOME PER SHARE
The following table sets forth the computation of net (loss) income per share of Class A Common Stock for the three and nine months ended September 30, 2024 and 2023:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Numerator: |
|||||||||||||||
|
Net (loss) income |
$ |
(2,792 |
) |
$ |
(4,110 |
) |
$ |
7,420 |
$ |
(41,050 |
) |
||||
|
Reversal of previously accrued dividends on preferred stock |
- |
- |
- |
690 |
|||||||||||
|
Net (loss) income attributable to common shareholders |
$ |
(2,792 |
) |
$ |
(4,110 |
) |
$ |
7,420 |
$ |
(40,360 |
) |
||||
|
Denominator: |
|||||||||||||||
|
Weighted-average common shares outstanding - basic |
11,089,933 |
10,221,956 |
10,827,363 |
9,375,221 |
|||||||||||
|
Plus: dilutive effect of common stock equivalents |
- |
- |
1,147,084 |
- |
|||||||||||
|
Weighted-average common shares outstanding - diluted |
11,089,933 |
10,221,956 |
11,974,447 |
9,375,221 |
|||||||||||
|
Net (loss) income per share attributable to common stockholders - basic |
$ |
(0.25 |
) |
$ |
(0.40 |
) |
$ |
0.69 |
$ |
(4.30 |
) |
||||
|
Net (loss) income per share attributable to common stockholders - diluted |
$ |
(0.25 |
) |
$ |
(0.40 |
) |
$ |
0.62 |
$ |
(4.30 |
) |
For the nine months ended September 30, 2024, 233,420options to purchase Class A Common Stock and other rights to acquire Class A Common Stock were outstanding and anti-dilutive and, therefore, are excluded from the computation of diluted net income per share attributable to common stockholders. In addition, 85,090PSUs are excluded from the computation of diluted net income per share attributable to common stockholders as the contingency has not yet been satisfied for the nine months ended September 30, 2024. All Public Warrants and Private Placement Warrants to purchase Class A Common Stock and rights to receive Earnout Shares (as defined below) are excluded from the computation of diluted net income per share attributable to common stockholders as the relevant purchase price and milestones, respectively, were above the average price of the Class A Common Stock during the nine months ended September 30, 2024.
20
For the three months ended September 30, 2024 and the three and nine months ended September 30, 2023, the Company's potentially dilutive securities, which include stock options, RSUs, PSUs, preferred stock, the rights to receive Earnout Shares (as defined below) and warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same for the three months ended September 30, 2024 and the three and nine months ended September 30, 2023.
The following potential shares of Class A Common Stock have been excluded from the computation of diluted net (loss) income per share for the three and nine months ended September 30, 2024 and 2023:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Warrants to purchase common stock |
853,330 |
853,330 |
853,330 |
853,330 |
|||||||||||
|
PSUs, RSUs and options to purchase common stock |
1,777,933 |
2,319,858 |
318,510 |
2,319,858 |
|||||||||||
|
Right to receive Earnout Shares |
583,333 |
583,333 |
583,333 |
583,333 |
|||||||||||
|
Total common stock equivalents |
3,214,596 |
3,756,521 |
1,755,173 |
3,756,521 |
In connection with the Business Combination, rights to receive Class A Common Stock (the "Earnout Shares") were issued, with the right to receive Class A Common Stock contingent upon the Class A Common Stock reaching certain price milestones. 250,000and 333,333shares of Class A Common Stock will be issued if the Class A Common Stock share price equals or is greater than $375and $495, respectively, for twenty out of any thirty consecutive trading days. The right to receive the Earnout Shares will expire on September 22, 2026.
15. COMMITMENTS AND CONTINGENCIES
Legal Matters-From time to time, the Company is subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. The Company is also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this Note 15, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact the Company's business, financial condition, operating results and cash flows. See Part I, Item 1A "Risk Factors - Risks Relating to Legal and Accounting Matters - Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
The Company has determined, based on its current knowledge, that the aggregate amount or range of losses that are estimable with respect to its legal proceedings, including the matters described below, would not have a material adverse effect on its business, financial position, results of operations or cash flows. As of September 30, 2024, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to the Company's business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
The Company holds a number of state licenses in connection with its business activities, and must also comply with other applicable compliance and regulatory requirements in the states where it operates. In most states where the Company operates, one or more regulatory agencies have authority with respect to regulation and enforcement of the Company's business activities under applicable state laws, and the Company may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require the Company, among other potential consequences, to provide refunds to customers or to modify its internal controls and/or business practices.
21
In the ordinary course of its business, the Company is and has been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of its activities by state agencies, certain of which could result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. The Company has responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
On September 29, 2022, the Consumer Financial Protection Bureau (the "CFPB") initiated a civil action in the United States District Court for the Southern District of New York ("SDNY") against MoneyLion Technologies Inc., ML Plus LLC and the Company's 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, the Company moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, the Company moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. On October 9, 2023, the Company moved for a stay of the action pending a decision from the United States Supreme Court in CFPB v. Community Financial Services Association of America, Ltd., No. 22-448 (U.S. argued Oct. 3, 2023) ("CFSA"). On December 1, 2023, the Court issued an order granting the Company's motion and staying the action pending the United State Supreme Court's decision in CFSA. On May 16, 2024, the Supreme Court decided CFSA. Accordingly, the Company's motion to dismiss is now pending with the SDNY. The Company continues to maintain that the CFPB's claims are meritless and is vigorously defending against the lawsuit. Nevertheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on its business, financial condition, results of operations or cash flows.
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the "Seller Members"), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement (the "MIPA") governing the acquisition of MALKA (the "MALKA Acquisition"). Among other claims, the Seller Members allege that they are entitled to payment of $25.0million of Class A Common Stock pursuant to the earnout provisions set forth in the MIPA, based on the Seller Members' assertion that MALKA achieved certain financial targets for the year ended December 31, 2022 (such payment, the "2022 Earnout Payment"). The Company believes that the Seller Members are not entitled to any portion of the 2022 Earnout Payment under the terms of the MIPA and filed counterclaims against the Seller Members, alleging, among other things, fraud, negligent misrepresentation, conversion, breach of fiduciary duties and breach of contract and seeking compensatory damages and other remedies as a result of wrongdoing by the Seller Members. On October 17, 2023, the SDNY denied, in full, the Seller Members' motion for a preliminary injunction to remove the restrictive legends on certain shares of Class A Common Stock previously issued to the Seller Members. Separately, on November 3, 2023, the Seller Members moved to dismiss the Company's amended counterclaims and third-party complaint. On May 14, 2024, the SDNY denied the Seller Members' motion to dismiss with respect to the Company's counterclaims alleging fraud, negligent misrepresentation, breach of fiduciary duty and certain conversion and breach of contract claims. The SDNY dismissed certain of the Company's counterclaims relating to declaratory judgment, unjust enrichment and conversion as duplicative of the fraud and misrepresentation counterclaims, as well as certain other breach of contract counterclaims. The Company continues to vigorously pursue its remaining counterclaims and defend against the Seller Members' claims, which the Company believes are meritless. However, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on its business, financial condition, results of operations or cash flows.
22
As previously reported, on July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former holders of the Company's Series A Preferred Stock (collectively, the "Former Preferred Stockholders"), brought a civil action in the SDNY against MoneyLion Inc., the Company's Board of Directors and certain officers asserting claims under Section 14(a) relating to the Definitive Proxy Statement we filed with the SEC on March 31, 2023 in connection with the Special Meeting of Stockholders relating to the 1-for-30Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 and related state law claims. On May 15, 2024, the SDNY granted the Company's motion to dismiss the Former Preferred Stockholders' complaint in its entirety. On June 14, 2024, Canaan X L.P., Canaan XI L.P. and GreatPoint Ventures Innovation Fund II, L.P. filed a notice of appeal with the United States Court of Appeals for the Second Circuit. On August 13, 2024, the parties filed a joint stipulation of voluntary dismissal, which resulted in the matter being withdrawn with prejudice. The Company believes the lawsuit is now fully resolved.
16. MERGERS AND ACQUISITIONS
Engine-On February 17, 2022, the Company completed the acquisition of all voting interest in Even Financial Inc., which was subsequently renamed to Engine. Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations.
At the closing of the Engine Acquisition, the equityholders and advisors of Even Financial Inc. were entitled to receive a payment from the Company of up to an aggregate of 8,000,000shares of Series A Preferred Stock, based on the attributed revenue of Engine's business during the 13-month period commencing January 1, 2022 (the "Earnout"), and certain recipients of options to acquire shares of the Company's Class A common stock were entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the "Preferred Stock Equivalents").
The $6,433decline in fair value of the Earnout and the Preferred Stock Equivalents for the nine months ended September 30, 2023 was included on the consolidated statement of operations as a component of the change in fair value of contingent consideration from mergers and acquisitions.
In May 2023, the Earnout was settled through the issuance of 4,354,092shares of Series A Preferred Stock, with cash paid in lieu of any fractional shares of Series A Preferred Stock. Cash payments relating to the settlement of the Earnout were $459. In June 2023, the Preferred Stock Equivalents were settled through the issuance of 23,453shares of Class A Common Stock, with cash paid in lieu of any fractional shares of Class A Common Stock. Cash payments relating to the settlement of the Preferred Stock Equivalents were $307. Upon the Automatic Conversion Event, the MoneyLion Inc. Preferred Share Dividend Replacement Program governing the Preferred Stock Equivalents immediately and automatically terminated in accordance with its terms, following which all Preferred Stock Equivalents were forfeited.
MALKA-On November 15, 2021, MoneyLion completed the MALKA Acquisition. MALKA is a creator network and content platform that provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors.
The unsettled restricted shares payable relating to the MALKA Acquisition earnout and the related make-whole were settled during the first quarter of 2023. The $180decline in fair value for the nine months ended September 30, 2023 was included on the consolidated statement of operations as a component of the change in fair value of contingent consideration from mergers and acquisitions.
23
17. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through November 7, 2024, the date on which these consolidated financial statements were available to be issued, and concluded that the following subsequent events were required to be disclosed:
In October 2024, the Company paid down the outstanding balance of the ROAR 1 SPV Credit Facility and terminated the facility.
In November 2024, the Company entered into the Third Amendment to Credit Agreement related to the ROAR 2 SPV Credit Facility (the "Third Amendment"). The Third Amendment extended the maturity date of the ROAR 2 SPV Credit Facility by an additional six months to June 2026.
24
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 summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of MoneyLion and is intended to help the reader understand MoneyLion, our operations and our present business environment. This discussion should be read in conjunction with MoneyLion's unaudited consolidated financial statements and notes to those financial statements included in Part I, Item 1 "Financial Statements" within this Quarterly Report on Form 10-Q. References to "we," "us," "our," "Company" or "MoneyLion" refer to MoneyLion Inc. and, as context requires, its wholly-owned subsidiaries.
Overview
MoneyLion is a leader in financial technology, powering the next generation of personalized products and financial content for American consumers. MoneyLion was founded in 2013 with a vision to rewire the financial system. Our mission is to give everyone the power to make their best financial decisions. We believe that the financial wellness gap in America can be addressed by bridging the financial literacy and the financial access gaps, shortening the distance between education and action.
We design and offer modern personal finance products, tools and features and curate money-related content that delivers actionable insights and guidance to our users. We also operate and distribute embedded finance marketplace solutions that match consumers with personalized third-party offers from our partners, providing convenient access to an expansive breadth of financial solutions that enable consumers to borrow, spend, save and achieve better financial outcomes. Our leading marketplace solutions provide valuable distribution, acquisition, growth and monetization channels for our partners. In addition, we provide creative media and brand content services to clients across industries through our media division and leverage our adaptive, in-house content studio to produce and deliver engaging and dynamic content in support of our product and service offerings.
We have purposefully built our platform to help consumers navigate all of their financial inflection points, combining our deep first-party product expertise, engaging content, marketplaces, innovative technology, data and AI capabilities to create the ultimate marketplace solution. As of September 30, 2024, we had 18.7 million Total Customers who used 30.7 million Total Products and over 1,200 Enterprise Partners in our network. We strategically employ comprehensive, data-driven analytics and cutting-edge technology to enhance our platform, creating personalized experiences for our users based on our rich datasets. Utilizing innovative approaches to financial guidance that engage and educate our users within a peer community, we seek to empower consumers to take control of their financial lives.
In our Consumer business, we primarily earn revenue as follows:
•
RoarMoney Banking: We earn revenue from interchange fees from payment networks based on customer expenditures on the debit card, as well as transaction volume-based incentive payments from the payment network. We also earn revenue from cardholder fees charged to our customers, such as an out-of-network ATM fee, a foreign transaction fee and instant transfer fees. Interchange fees, payment network payments and cardholder fees are reflected in banking revenue. As of November 1, 2024, we no longer charge a $1 monthly administrative fee on each RoarMoney account.
•
Instacash: We earn revenue from optional tips and instant transfer fees, both reflected in banking revenue.
•
Membership Programs: We earn revenue from the monthly subscription fee paid by our customers, which is reflected in membership subscription revenue. Membership programs also provide customers access to Credit Builder Loans from which we earn revenue from interest income, which is reflected in net interest income on finance receivables.
•
MoneyLion Investing: We earn revenue from the monthly administration fee paid by our customers, which is reflected in other consumer revenue.
25
•
MoneyLion Crypto: We earn revenue from Zero Hash, which is reflected in other consumer revenue. Zero Hash pays us a share of the fees that they earn from our customers in exchange for us enabling Zero Hash to affect digital currency-related transactions for our customers. Strategically, we intend to wind down MoneyLion Crypto by the end of 2024 and expect to replace the offering with access to third-party cryptocurrency providers through our Consumer Marketplace.
In our Enterprise business, we primarily earn revenue, reflected in enterprise service revenue, as follows:
•
Consumer Marketplace: We earn revenue from fees from our Product Partners based on a range of criteria depending on each Product Partner relationship, including, but not limited to, customers' clicks, impressions, completed transactions or a share of revenue generated for the Product Partner.
•
Enterprise Marketplace: We earn revenue from fees from our Enterprise Partners based on a range of criteria depending on each Enterprise Partner relationship, including, but not limited to, customers' clicks, completed transactions or a share of revenue generated for the Product Partner. We also earn various SaaS and platform fees from our Enterprise Partners.
•
Media Services: We earn revenue from our clients based on performance obligations within our contracts with them.
•
Finance Receivable Servicing: We service Instacash receivables purchased from us in accordance with agreed upon servicing guidelines, collect and remit collections therefrom and provide certain reporting and other information relating to our servicing duties. We receive a fixed percentage of net collections.
Recent Developments
In October 2024, we paid down the outstanding balance of the ROAR 1 SPV Credit Facility and terminated the facility.
In November 2024, we entered into the Third Amendment to Credit Agreement related to the ROAR 2 SPV Credit Facility (the "Third Amendment"). The Third Amendment extended the maturity date of the ROAR 2 SPV Credit Facility by an additional six months to June 2026.
Factors Affecting Our Performance
We are subject to a number of risks including, but not limited to, the need for successful development of products, services and functionality; the need for additional capital (or financing) to fund operating losses; competition with substitute products and services from larger companies; protection of proprietary technology and information; dependence on key individuals; and risks associated with changes in information technology. For additional information, see the "Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2023.
New Customer and Client Growth and Increasing Usage Across Existing Customers and Clients
Our ability to effectively acquire new customers and clients through our acquisition and marketing efforts and drive usage of our products and services across our existing customers and clients is key to our growth, particularly as a significant portion of the revenue we generate in our business is derived from transaction-based fees. We believe our customers' experience is enhanced by using our full suite of first-party financial products and services, complemented by the full spectrum of offers available in our marketplace, as we can better tailor the insights and recommendations we provide to them. In order to grow our business, we must engage and retain customers and continue to expand their use of our platform by cross-selling additional functionality, products and services to them. In our Enterprise business, we are dependent in part on our relationships with our Enterprise Partners, and any failure to effectively match consumers leads from our Channel Partners with product and service offerings from our Product Partners, or any reduced marketing spend by such Product Partners on our Enterprise platform, could adversely affect our business and results of operations.
26
Expansion and Innovation of Products, Services and Functionality
We will continue to invest in expanding and enhancing the products, services and functionality available through our platform for our customers and clients. Our ability to expand, enhance and sell additional functionality, products and services to our existing customers and clients may require more sophisticated and costly development, sales or engagement efforts. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers and clients.
General Economic and Market Conditions
Our performance is impacted by the relative strength of the overall economy, market volatility, consumer spending behavior and consumer demand for financial products and services. For example, with respect to our Consumer business, the willingness of our customers to spend, invest or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers' behavior and our own ability to fund Instacash advances and loan volume. In addition, in our Enterprise business, adverse macroeconomic conditions, such as significant tightening of credit markets, may cause our Product Partners to reduce their marketing spend or advertising on our platform or may cause a reduction in client spending in our Media Services division, which could adversely affect our business and results of operations.
Seasonality
We may experience seasonal fluctuations in our revenue. During the fourth quarter, revenue in our Consumer business may benefit from increased consumer spending during the holiday season, which may increase demand for our advance product as consumers seek additional liquidity. During the first quarter, we may see stronger collections on Instacash receivables resulting in a relatively lower provision for credit losses on consumer receivables as a result of the impact of tax refunds, as well as stronger demand for our banking and investment products and services. Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on our business, as described above.
Competition
We compete across our business lines with a variety of competitors, including traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or earned wage access products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform, embedded finance and marketplace competitors, which aggregate and connect consumers to financial product and service offerings. In addition to competing for customers for our product and service offerings, we also compete to attract viewership of the content to which we connect customers, as there are other sources of financial-related content and news, many of which are more established and have a larger subscriber base. Furthermore, we compete with other advertising agencies and other service providers to attract marketing budget spending from our Enterprise clients. With respect to our Media Services division, we compete with others in the digital media and content creation industry, which range from large and established media companies, including social media companies, advertising agencies and production studios, to emerging start-ups. We expect our competition to continue to increase. The success of our business depends on our ability to compete effectively and attract new and retain existing customers and clients, which depends upon many factors both within and beyond our control.
27
Pricing of Our Products and Services
We derive a substantial portion of our revenue from fees earned from our products and services. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts or other incentives and rewards that we pay to customers who utilize multiple products and services to expand usage of our platform. We may also lower pricing on our products and services to acquire new customers. As the market for our platform matures, or as new or existing competitors introduce new products, services or functionality that compete with ours, we may experience pricing pressure and be unable to retain current customers and clients and attract new customers and clients at prices that are consistent with our pricing model and operating budget. Our pricing strategy may prove to be unappealing to our customers and clients, and our competitors could choose to bundle certain products and services competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could adversely affect our business.
Product and Service Mix
We offer various products and services on our platform, including our core suite of first-party financial products and services, a broad range of financial and non-financial offers in our Consumer Marketplace, Enterprise Marketplace and Media Services in our Enterprise business. Each product and service has a different profitability profile. The relative usage of products and services with high or low profitability and their lifetime value could have an impact on our performance.
Access and Cost of Financing; Forward Flow Arrangement
Our credit products and Instacash product are financed by special purpose vehicle financings from third-party institutional lenders and, with respect to Instacash, a forward flow financing arrangement pursuant to which we sell a portion of our eligible Instacash receivables to third-party purchasers (the "Purchase Agreement") and receive a stable stream of servicing fee income, as described further under Part I, Item 1 "Financial Statements - Sale of Consumer Receivables." The loss of one or more of the financing sources we have for our credit products and Instacash product could have an adverse impact on our performance, and it could be costly to obtain new financing. In addition, the initial price at which we sell Instacash receivables under the Purchase Agreement is based on the average loss rate at 360 days past the repayment date of the three most recent matured monthly cohorts and is subject to adjustment for future monthly cohorts based on the performance of monthly cohorts at specified intervals past the repayment date compared to the expected loss rates of the reference matured monthly cohorts established at sale and a discount percentage. As a result, the loss on sale of the Instacash receivables sold under the Purchase Agreement is variable depending on the performance of the previously sold Instacash receivables.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Total Customers
We define Total Customers as the cumulative number of customers that have opened at least one account, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and customers that are monetized through our marketplace and affiliate products. Total Customers also include customers that have submitted for, received or clicked on at least one marketplace credit offer. We consider Total Customers to be a key performance metric as it can be used to understand lifecycle efforts of our customers, as we look to cross-sell products to our customer base and grow our platform. Total Customers were 18.7 million and 12.1 million as of September 30, 2024 and 2023, respectively.
28
Total Products
We define Total Products as the total number of products that our Total Customers have opened, including banking, membership subscription, secured personal loan, Instacash advance, managed investment account, cryptocurrency account and monetized marketplace and affiliate products, as well as customers who signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. Total Products also include marketplace credit offers that our Total Customers have submitted for, received or clicked on through our marketplace. If a customer has funded multiple secured personal loans or Instacash advances or opened multiple products through our marketplace, it is only counted once for each product type. We consider Total Products to be a key performance metric as it can be used to understand the usage of our products across our customer base. Total Products were 30.7 million and 20.3 million as of September 30, 2024 and 2023, respectively.
Enterprise Partners
Enterprise Partners is comprised of Product Partners and Channel Partners. We define Product Partners as providers of the financial and non-financial products and services that we offer in our marketplaces, including financial institutions, financial services providers and other affiliate partners. We define Channel Partners as organizations that allow us to reach a wide base of consumers, including but not limited to news sites, content publishers, product comparison sites and financial institutions. Enterprise Partners were 1,271, comprising 622 Product Partners and 649 Channel Partners, and 1,126, comprising 508 Product Partners and 618 Channel Partners, as of September 30, 2024 and 2023, respectively.
Total Originations
We define Total Originations as the dollar volume of the secured personal loans originated and Instacash advances funded within the stated period. We consider Total Originations to be a key performance metric as it can be used to measure the usage and engagement of the customers across our secured personal lending product and Instacash earned wage access product and is a significant driver of net interest income on finance receivables and banking revenue. Total Originations were $776 million and $564 million for the three months ended September 30, 2024 and 2023, respectively, and $2,264 million and $1,619 million for the nine months ended September 30, 2024 and 2023, respectively. All originations were originated directly by MoneyLion.
Adjusted EBITDA (Non-GAAP Measure)
Management believes Adjusted EBITDA, a non-U.S. GAAP measure, provides relevant and useful information to investors regarding the performance of the company. Refer to the "- Non-GAAP Measures" section below for further discussion of Adjusted EBITDA.
29
Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023
Revenue
The following table is reference for the discussion that follows.
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change |
|||||||||||||||||||||||||||||
|
2024 |
2023 |
$ |
% |
2024 |
2023 |
$ |
% |
|||||||||||||||||||||||||
|
(In thousands, except for percentages) |
||||||||||||||||||||||||||||||||
|
Consumer revenue |
||||||||||||||||||||||||||||||||
|
Banking revenue |
$ |
78,604 |
$ |
58,863 |
$ |
19,741 |
33.5 |
% |
$ |
233,928 |
$ |
169,686 |
$ |
64,242 |
37.9 |
% |
||||||||||||||||
|
Membership subscription revenue |
8,016 |
8,743 |
(727 |
) |
-8.3 |
% |
26,879 |
26,120 |
759 |
2.9 |
% |
|||||||||||||||||||||
|
Net interest income on finance receivables |
3,368 |
3,258 |
110 |
3.4 |
% |
9,257 |
9,490 |
(233 |
) |
-2.5 |
% |
|||||||||||||||||||||
|
Other consumer revenue |
207 |
235 |
(28 |
) |
-11.9 |
% |
673 |
741 |
(68 |
) |
-9.2 |
% |
||||||||||||||||||||
|
Total consumer revenue |
90,195 |
71,099 |
19,096 |
26.9 |
% |
270,737 |
206,037 |
64,700 |
31.4 |
% |
||||||||||||||||||||||
|
Enterprise service revenue |
45,271 |
39,159 |
6,112 |
15.6 |
% |
116,581 |
104,431 |
12,150 |
11.6 |
% |
||||||||||||||||||||||
|
Total revenue, net |
$ |
135,466 |
$ |
110,258 |
$ |
25,208 |
22.9 |
% |
$ |
387,318 |
$ |
310,468 |
$ |
76,850 |
24.8 |
% |
We generate revenue primarily from various product-related fees, providing membership subscriptions, performing enterprise services and originating loans.
Banking revenue
Banking revenue is generated by fees and payments relating to our RoarMoney Banking product and fees and tips relating to our Instacash product.
Banking revenue increased by $19.7 million, or 33.5%, to $78.6 million for the three months ended September 30, 2024, as compared to $58.9 million for the same period in 2023. The increase in banking revenue was driven by increases in fee income related to instant transfer fees and tips from Instacash advances of $20.3 million due to the growth of Instacash advances across both existing and new customers, which was partially offset by a $0.3 million decrease in revenue from a transaction volume-based incentive payment program from a third-party payment network and a $0.3 million decrease in cardholder and interchange fees from RoarMoney accounts compared to the three months ended September 30, 2023.
Banking revenue increased by $64.2 million, or 37.9%, to $233.9 million for the nine months ended September 30, 2024, as compared to $169.7 million for the same period in 2023. The increase in banking revenue was driven by increases in fee income related to instant transfer fees and tips from Instacash advances of $63.7 million due to the growth of Instacash advances across both existing and new customers, an increase in cardholder and interchange fees from RoarMoney accounts of $0.1 million due to an increased number of customers using RoarMoney and an increase of $0.5 million in revenue from a transaction volume-based incentive payment program from a third-party payment network compared to the nine months ended September 30, 2023.
30
Membership subscription revenue
Membership subscription revenue decreased by $0.7 million, or 8.3%, to $8.0 million for the three months ended September 30, 2024, as compared to $8.7 million for the same period in 2023. The decrease in membership subscription revenue was driven by a $0.8 million revenue reduction due to transitioning subscribers off legacy memberships.
Membership subscription revenue increased by $0.8 million, or 2.9%, to $26.9 million for the nine months ended September 30, 2024, as compared to $26.1 million for the same period in 2023. The increase in membership subscription revenue was primarily driven by increased revenue from the WOW membership launched in January 2024, which was partially offset by revenue reductions due to transitioning subscribers off legacy memberships.
Net interest income on finance receivables
Net interest income on finance receivables is generated by interest earned on Credit Builder Loans, which is partially offset by the amortization of loan origination costs.
Net interest income on finance receivables increased by $0.1 million, or 3.4%, to $3.4 million for the three months ended September 30, 2024, as compared to $3.3 million for the same period in 2023. The increase in net interest income on finance receivables of $0.1 million was driven by higher average outstanding principal balances during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Net interest income on finance receivables decreased by $0.2 million, or 2.5%, to $9.3 million for the nine months ended September 30, 2024, as compared to $9.5 million for the same period in 2023. The decrease in net interest income on finance receivables was primarily driven by a higher provision for past due interest collections of $0.3 million.
Other consumer revenue
Other consumer revenue consists of MoneyLion Investing and MoneyLion Crypto revenue and was $0.2 million and $0.7 million for the three and nine months, respectively, ended September 30, 2024.
Enterprise service revenue
Enterprise service revenue increased by $6.1 million, or 15.6%, to $45.3 million for the three months ended September 30, 2024, as compared to $39.2 million for the same period in 2023. This increase was primarily driven by stronger performance within our Enterprise and Consumer Marketplaces and, to a lesser extent, new servicing fee revenue pursuant to the Purchase Agreement as we began transitioning to the forward flow financing arrangement, which was partially offset by lower performance within Media Services division.
Enterprise service revenue increased by $12.2 million, or 11.6%, to $116.6 million for the nine months ended September 30, 2024, as compared to $104.4 million for the same period in 2023. This increase was primarily driven by stronger performance within our Enterprise Marketplace and, to a lesser extent, new servicing fee revenue pursuant to the Purchase Agreement as we began transitioning to the forward flow financing arrangement, which was partially offset by lower performance in our Consumer Marketplace and Media Services division.
31
Operating Expenses
The following table is reference for the discussion that follows:
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change |
|||||||||||||||||||||||||||||
|
2024 |
2023 |
$ |
% |
2024 |
2023 |
$ |
% |
|||||||||||||||||||||||||
|
(In thousands, except for percentages) |
||||||||||||||||||||||||||||||||
|
Operating expenses |
||||||||||||||||||||||||||||||||
|
Provision for credit losses on consumer receivables |
$ |
26,833 |
$ |
25,121 |
$ |
1,712 |
6.8 |
% |
$ |
80,494 |
$ |
67,194 |
$ |
13,300 |
19.8 |
% |
||||||||||||||||
|
Loss on sale of consumer receivables |
3,510 |
- |
3,510 |
nm |
3,510 |
- |
3,510 |
nm |
||||||||||||||||||||||||
|
Compensation and benefits |
25,820 |
23,511 |
2,309 |
9.8 |
% |
75,458 |
70,491 |
4,967 |
7.0 |
% |
||||||||||||||||||||||
|
Marketing |
10,591 |
7,029 |
3,562 |
50.7 |
% |
31,987 |
19,970 |
12,017 |
60.2 |
% |
||||||||||||||||||||||
|
Direct costs |
38,349 |
32,813 |
5,536 |
16.9 |
% |
104,187 |
94,845 |
9,342 |
9.8 |
% |
||||||||||||||||||||||
|
Professional services |
10,820 |
4,968 |
5,852 |
117.8 |
% |
27,593 |
14,485 |
13,108 |
90.5 |
% |
||||||||||||||||||||||
|
Technology-related costs |
7,323 |
5,891 |
1,432 |
24.3 |
% |
20,421 |
17,540 |
2,881 |
16.4 |
% |
||||||||||||||||||||||
|
Other operating expenses |
8,217 |
9,824 |
(1,607 |
) |
-16.4 |
% |
22,875 |
30,038 |
(7,163 |
) |
-23.8 |
% |
||||||||||||||||||||
|
Total operating expenses |
$ |
131,463 |
$ |
109,157 |
$ |
22,306 |
20.4 |
% |
$ |
366,525 |
$ |
314,563 |
$ |
51,962 |
16.5 |
% |
||||||||||||||||
|
Other (expense) income |
||||||||||||||||||||||||||||||||
|
Interest expense |
$ |
(6,504 |
) |
$ |
(7,088 |
) |
$ |
584 |
-8.2 |
% |
$ |
(20,035 |
) |
$ |
(21,929 |
) |
$ |
1,894 |
-8.6 |
% |
||||||||||||
|
Change in fair value of warrant liability |
405 |
(81 |
) |
486 |
nm |
405 |
(68 |
) |
473 |
nm |
||||||||||||||||||||||
|
Change in fair value of contingent consideration from mergers and acquisitions |
- |
- |
- |
nm |
- |
6,613 |
(6,613 |
) |
-100.0 |
% |
||||||||||||||||||||||
|
Goodwill impairment loss |
- |
- |
- |
nm |
- |
(26,721 |
) |
26,721 |
-100.0 |
% |
||||||||||||||||||||||
|
Other income |
2,613 |
2,358 |
255 |
10.8 |
% |
7,353 |
5,264 |
2,089 |
39.7 |
% |
||||||||||||||||||||||
|
Total other expense |
$ |
(3,486 |
) |
$ |
(4,811 |
) |
$ |
1,325 |
-27.5 |
% |
$ |
(12,277 |
) |
$ |
(36,841 |
) |
$ |
24,564 |
-66.7 |
% |
||||||||||||
|
Income tax expense |
$ |
3,309 |
$ |
400 |
$ |
2,909 |
727.3 |
% |
$ |
1,096 |
$ |
114 |
$ |
982 |
861.4 |
% |
Our operating expenses consist of the following:
Provision for credit losses on consumer receivables
Provision for credit losses on consumer receivables consists of amounts charged during the period to maintain an allowance for credit losses. The allowance represents management's estimate of the credit losses in our consumer receivable portfolio and is based on management's assessment of many factors, including changes in the nature, volume and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the customer's ability to pay.
Provision for credit losses on consumer receivables increased by $1.7 million, or 6.8%, to $26.8 million for the three months ended September 30, 2024, as compared to $25.1 million for the same period in 2023. This resulted primarily from an increase to provision related to Instacash advance receivables of $4.9 million, which was partially offset by a decrease to provision related to Credit Builder Plus loan receivables of $2.2 million and a decrease to provision related to subscription fees of $1.1 million.
32
Provision for credit losses on consumer receivables increased by $13.3 million, or 19.8%, to $80.5 million for the nine months ended September 30, 2024, as compared to $67.2 million for the same period in 2023. This resulted primarily from an increase to provision related to Instacash advance receivables of $18.3 million, which was partially offset by a decrease to provision related to Credit Builder Plus loan receivables of $4.4 million and a decrease to provision related to subscription fees of $0.6 million.
Loss on sale of consumer receivables
Loss on sale of consumer receivables relating to the Instacash receivables sold under the Purchase Agreement was $3.3 million for the three and nine months ended September 30, 2024. There is no loss on sale of consumer receivables for the three and nine months ended September 30, 2023 as the Company entered into the Purchase Agreement during the three months ended September 30, 2024.
Compensation and benefits
Compensation and benefits increased by $2.3 million, or 9.8%, to $25.8 million for the three months ended September 30, 2024, as compared to $23.5 million for the same period in 2023. This increase was primarily driven by an increase in stock-based compensation of $1.6 million, an increase in employee salary and benefits expenses of $1.3 million and an increase in severance of $0.3 million. This was partially offset by a decrease in incentive compensation of $0.5 million due to a year to date catchup during the same period in 2023 and higher capitalized salaries of $0.4 million.
Compensation and benefits increased by $5.0 million, or 7.0%, to $75.5 million for the nine months ended September 30, 2024, as compared to $70.5 million for the same period in 2023. This increase was primarily driven by an increase in stock-based compensation of $4.6 million, an increase in employee salary and benefits of $1.1 million, an increase in incentive compensation of $0.1 million due to company performance and an increase in severance costs of $0.6 million. This was partially offset by higher capitalized salaries of $1.4 million.
Marketing
Marketing increased by $3.6 million, or 50.7%, to $10.6 million for the three months ended September 30, 2024, as compared to $7.0 million for the same period in 2023. This increase resulted primarily from higher spend related to advertising through digital platforms and sponsorships.
Marketing increased by $12.0 million, or 60.2%, to $32.0 million for the nine months ended September 30, 2024, as compared to $20.0 million for the same period in 2023. This increase resulted primarily from higher spend related to advertising through digital platforms and sponsorships.
Direct costs
Direct costs increased by $5.5 million, or 16.9%, to $38.3 million for the three months ended September 30, 2024, as compared to $32.8 million for the same period in 2023. The increase was primarily driven by $4.5 million of direct costs related to the growth of Enterprise revenue, an increase in payment processing fees of $0.9 million and a $0.2 million increase in costs related to our RoarMoney Banking and MoneyLion Investing offering. This was partially offset by a $0.1 million decrease in underwriting expenses.
Direct costs increased by $9.3 million, or 9.8%, to $104.2 million for the nine months ended September 30, 2024, as compared to $94.8 million for the same period in 2023. The increase was primarily driven by $5.6 million of direct costs related to the growth of Enterprise revenue, an increase in payment processing fees of $3.4 million and an increase in underwriting expenses of $0.6 million, driven by growth in Total Originations and Total Customers, which was partially offset by a $0.2 million decrease in costs related to our RoarMoney Banking and MoneyLion Investing offering.
33
Professional services
Professional services increased by $5.9 million, or 117.8%, to $10.8 million for the three months ended September 30, 2024, as compared to $5.0 million for the same period in 2023. This increase resulted primarily from an increase in outside legal expenses of $5.1 million, an increase in accounting and auditing fees of $0.5 million driven by regulatory compliance requirements and an increase in outside consulting expenses of $0.2 million.
Professional services increased by $13.1 million, or 90.5%, to $27.6 million for the nine months ended September 30, 2024, as compared to $14.5 million for the same period in 2023. This increase resulted primarily from an increase in outside legal expenses of $10.6 million, an increase in accounting and auditing fees of $0.8 million driven by regulatory compliance requirements, an increase in outside consulting expenses of $1.0 million and an increase in recruiting fees of $0.7 million.
Technology-related costs
Technology-related costs increased by $1.4 million, or 24.3%, to $7.3 million for the three months ended September 30, 2024, as compared to $5.9 million for the same period in 2023. This increase resulted primarily from an increase in expenses for software licenses and subscriptions of $1.0 million and depreciation and amortization related to equipment and software of $0.4 million.
Technology-related costs increased by $2.9 million, or 16.4%, to $20.4 million for the nine months ended September 30, 2024, as compared to $17.5 million for the same period in 2023. This increase resulted primarily from an increase in depreciation and amortization related to equipment and software of $0.8 million and an increase in expenses for software licenses and subscriptions of $2.1 million.
Other operating expenses
Other operating expenses decreased by $1.6 million, or 16.4%, to $8.2 million for the three months ended September 30, 2024, as compared to $9.8 million for the same period in 2023. The decrease was primarily driven by a $1.0 million decrease in expenses related to processing transactions in our Consumer business and a decrease in insurance expenses of $0.6 million.
Other operating expenses decreased by $7.2 million, or 23.8%, to $22.9 million for the nine months ended September 30, 2024, as compared to $30.0 million for the same period in 2023. The decrease was primarily driven by lower costs related to legal matters of $7.0 million, a decrease in the provision for bad debts and increased recoveries of receivables in our Enterprise business of $0.9 million, a decrease in insurance expenses of $1.7 million, a decrease of $0.5 million in dues & subscriptions, $0.2 million of lower depreciation and amortization of intangible assets and other assets, and $0.6 million decrease in other corporate expenses, which was partially offset by a $2.9 million increase in expenses related to processing transactions in our Consumer business and $0.9 million of higher facility expenses.
Our other (expense) income consists of the following:
Interest expense
Interest expense decreased by $0.6 million, or 8.2%, to $6.5 million for the three months ended September 30, 2024, as compared to $7.1 million for the same period in 2023. This decrease was primarily driven by a decrease in interest expense on secured debt of $0.7 million due to a decrease in average outstanding principal of secured debt and a decrease in the variable interest rate. See Part I, Item 1 "Financial Statements - Debt" for more information.
Interest expense decreased by $1.9 million, or 8.6%, to $20.0 million for the nine months ended September 30, 2024, as compared to $21.9 million for the same period in 2023. This decrease was primarily driven by a decrease in interest expense on secured debt of $2.3 million due to a decrease in average outstanding principal of secured debt and a decrease in the variable interest rate, which was partially offset by an increase of $0.5 million in interest expense on other debt due to an increase in the average outstanding principal of other debt. See Part I, Item 1 "Financial Statements - Debt" for more information.
34
Change in fair value of warrant liability
Change in fair value of warrant liability was a benefit of $0.4 million for the three months ended September 30, 2024, as compared to an expense of $0.1 million for the same period in 2023. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations.
Change in fair value of warrant liability was a benefit of $0.4 million for the nine months ended September 30, 2024, as compared to an expense of $0.1 million in 2023. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations.
Change in fair value of contingent consideration from mergers and acquisitions
There was no change in fair value of contingent consideration from mergers and acquisitions for the three or nine months ended September 30, 2024 since there was no unsettled contingent consideration outstanding during the three or nine months ended September 30, 2024.
Goodwill impairment loss
There was no goodwill impairment loss for the three or nine months ended September 30, 2024 since all goodwill had been written off by the end of the fiscal year ended December 31, 2023.
Other income
Other income increased by $0.3 million to $2.6 million for the three months ended September 30, 2024, as compared to other income of $2.4 million for the same period in 2023. The increase was primarily driven by an increase in gains from foreign currency translation of $0.3 million.
Other income increased by $2.1 million to $7.4 million for the nine months ended September 30, 2024, as compared to other income of $5.3 million for the same period in 2023. The increase was primarily driven by an increase in interest income earned on interest bearing deposits of $1.1 million, lower losses on debt extinguishments of $0.5 million, an increase in rental income of $0.4 million and an increase in gains from foreign currency translation of $0.3 million. These increases were partially offset by a reduction in non-recurring trademark use settlement income of $0.2 million.
Income tax expense
See Part I, Item 1 "Financial Statements - Income Taxes" for an explanation of the tax activity recorded during the nine months ended September 30, 2024.
Non-GAAP Measures
In addition to net (loss) income, which is a measure presented in accordance with U.S. GAAP, management believes that Adjusted EBITDA provides relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted EBITDA is a supplemental measure of our performance that is neither required by nor presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as a substitute for U.S. GAAP metrics such as net (loss) income or any other performance measures derived in accordance with U.S. GAAP and may not be comparable to similar measures used by other companies.
We define Adjusted EBITDA as net (loss) income plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrant liability, change in fair value of contingent consideration from mergers and acquisitions, goodwill impairment loss, stock-based compensation expense and certain other expenses that management does not consider in measuring performance. We believe that Adjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio. In addition, Adjusted EBITDA is useful to an investor in evaluating our performance because it:
35
•
is a measure widely used by investors, analysts and competitors to measure a company's operating performance;
•
is a metric used by rating agencies, lenders and other parties to evaluate our credit worthiness; and
•
is used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting.
The reconciliation of net (loss) income to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 is as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
(unaudited) |
(unaudited) |
|||||||||||||||
|
Net (loss) income |
$ |
(2,792 |
) |
$ |
(4,110 |
) |
$ |
7,420 |
$ |
(41,050 |
) |
|||||
|
Add back: |
||||||||||||||||
|
Interest related to corporate debt(1) |
2,469 |
3,191 |
7,840 |
10,226 |
||||||||||||
|
Income tax expense |
3,309 |
400 |
1,096 |
114 |
||||||||||||
|
Depreciation and amortization expense |
6,509 |
6,106 |
19,052 |
18,403 |
||||||||||||
|
Changes in fair value of warrant liability |
(405 |
) |
81 |
(405 |
) |
68 |
||||||||||
|
Change in fair value of contingent consideration from mergers and acquisitions |
- |
- |
- |
(6,613 |
) |
|||||||||||
|
Goodwill impairment loss |
- |
- |
- |
26,721 |
||||||||||||
|
Stock-based compensation expense |
7,282 |
5,702 |
21,310 |
16,657 |
||||||||||||
|
Other expenses(2) |
8,030 |
1,982 |
10,092 |
5,355 |
||||||||||||
|
Adjusted EBITDA |
$ |
24,402 |
$ |
13,352 |
$ |
66,405 |
$ |
29,881 |
(1)
We add back the interest expense related to all outstanding corporate debt, excluding outstanding principal balances related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility. For U.S. GAAP reporting purposes, interest expense related to corporate debt is included within interest expense in the consolidated statement of operations.
(2)
We add back other expenses, including those related to transactions, including mergers and acquisitions and financings, that occurred, litigation-related expenses and certain costs or gains that management does not consider in measuring performance. Generally, these expenses are included within other expenses or professional fees in the consolidated statement of operations.
36
Changes in Financial Condition to September 30, 2024 from December 31, 2023
|
September 30, |
December 31, |
Change |
||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
Assets |
||||||||||||||||
|
Cash and restricted cash |
$ |
116,359 |
$ |
94,479 |
$ |
21,880 |
23.2 |
% |
||||||||
|
Consumer receivables |
218,642 |
208,167 |
10,475 |
5.0 |
% |
|||||||||||
|
Allowance for credit losses on consumer receivables |
(33,511 |
) |
(35,329 |
) |
1,818 |
-5.1 |
% |
|||||||||
|
Consumer receivables, net |
185,131 |
172,838 |
12,293 |
7.1 |
% |
|||||||||||
|
Consumer receivables held for sale |
4,401 |
- |
4,401 |
nm |
||||||||||||
|
Enterprise receivables, net |
24,279 |
15,978 |
8,301 |
52.0 |
% |
|||||||||||
|
Property and equipment, net |
1,906 |
1,864 |
42 |
2.3 |
% |
|||||||||||
|
Intangible assets, net |
165,380 |
176,541 |
(11,161 |
) |
-6.3 |
% |
||||||||||
|
Other assets |
33,260 |
53,559 |
(20,299 |
) |
-37.9 |
% |
||||||||||
|
Total assets |
$ |
530,716 |
$ |
515,259 |
$ |
15,457 |
3.0 |
% |
||||||||
|
Liabilities and Stockholders' Equity |
||||||||||||||||
|
Liabilities: |
||||||||||||||||
|
Debt agreements |
$ |
171,085 |
$ |
189,753 |
$ |
(18,668 |
) |
-9.8 |
% |
|||||||
|
Accounts payable and accrued liabilities |
53,529 |
52,396 |
1,133 |
2.2 |
% |
|||||||||||
|
Warrant liability |
405 |
810 |
(405 |
) |
-50.0 |
% |
||||||||||
|
Other liabilities |
23,225 |
15,077 |
8,148 |
54.0 |
% |
|||||||||||
|
Total liabilities |
248,244 |
258,036 |
(9,792 |
) |
-3.8 |
% |
||||||||||
|
Stockholders' equity: |
||||||||||||||||
|
Common Stock |
1 |
1 |
- |
0.0 |
% |
|||||||||||
|
Additional paid-in capital |
988,446 |
969,641 |
18,805 |
1.9 |
% |
|||||||||||
|
Accumulated deficit |
(695,299 |
) |
(702,719 |
) |
7,420 |
-1.1 |
% |
|||||||||
|
Treasury stock |
(10,676 |
) |
(9,700 |
) |
(976 |
) |
10.1 |
% |
||||||||
|
Total stockholders' equity |
282,472 |
257,223 |
25,249 |
9.8 |
% |
|||||||||||
|
Total liabilities and stockholders' equity |
$ |
530,716 |
$ |
515,259 |
$ |
15,457 |
3.0 |
% |
Assets
Cash and restricted cash
Cash and restricted cash increased by $21.9 million, or 23.2%, to $116.4 million as of September 30, 2024, as compared to $94.5 million as of December 31, 2023. Refer to the "- Cash Flows" section below for further discussion on the net change in cash and restricted cash from operating activities, investing activities and financing activities during the period.
Consumer receivables, net
Consumer receivables, net increased by $12.3 million, or 7.1%, to $185.1 million as of September 30, 2024, as compared to $172.8 million as of December 31, 2023. The increase was primarily attributable to an increase in loan receivables, net of allowance for credit losses, of $18.5 million. The increase was partially offset by a decrease in Instacash receivables, net of allowance for credit losses, of $5.1 million. Refer to Part I, Item 1 "Financial Statements - Consumer Receivables" for additional information.
Consumer receivables held for sale
Consumer receivables held for sale as of September 30, 2024 represent Instacash receivables that the Company originated and intends to sell under the Purchase Agreement. Consumer receivables held for sale are recorded at the lower of cost or fair value.
37
Consumer receivables held for sale were $4.4 million as of September 30, 2024. There were no consumer receivables held for sale as of December 31, 2023 as the Company entered into the Purchase Agreement during the three months ended September 30, 2024.
Enterprise receivables, net
Enterprise receivables, net increased by $8.3 million, or 52.0%, to $24.3 million as of September 30, 2024, as compared to $16.0 million as of December 31, 2023. This increase was primarily attributable to an increase in Enterprise Marketplace receivables of $6.4 million, an increase in Consumer Marketplace receivables of $1.0 million and an increase in Media Services receivables of $0.9 million.
Intangible assets, net
Intangible assets, net decreased by $11.2 million, or 6.3%, to $165.4 million as of September 30, 2024, as compared to $176.5 million as of December 31, 2023. This decrease was primarily attributable to the amortization of intangible assets of $18.4 million, which was partially offset by an increase in capitalized software of $7.2 million.
Other assets
Other assets decreased by $20.3 million, or 37.9%, to $33.3 million as of September 30, 2024, as compared to $53.6 million as of December 31, 2023. This decrease was primarily attributable to a decrease in the receivable from payment processors and a decrease in prepaid expenses, which was partially offset by an increase in operating lease right-of-use assets due to a lease of the Company's new corporate headquarters entered into during the nine months ended September 30, 2024. Refer to Part I, Item 1 "Financial Statements - Other Assets" for additional information.
Liabilities
Debt agreements
Debt agreements decreased by $18.7 million, or 9.8%, to $171.1 million as of September 30, 2024, as compared to $189.8 million as of December 31, 2023. Refer to Part I, Item 1 "Financial Statements - Debt" for further discussion of financing transactions.
Accounts payable and accrued expenses
Accounts payable and accrued expenses increased by $1.1 million, or 2.2%, to $53.5 million as of September 30, 2024, as compared to $52.4 million as of December 31, 2023. The increase was primary attributable to a $7.5 million dollar increase in accounts payable and accrued expenses related to increased operating costs which was partially offset by a reduction in litigation accruals of $5.3 million and taxes payable of $0.8 million.
Warrant liability
Warrant liability activity between September 30, 2024 and December 31, 2023 was not significant. Refer to the "- Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023" section above for further discussion on the change in fair value of warrant liability.
Other liabilities
Other liabilities increased by $8.1 million, or 54.0%, to $23.2 million as of September 30, 2024, as compared to $15.1 million as of December 31, 2023. The increase was primarily driven by an increase in operating lease liabilities due to a lease of the Company's new corporate headquarters entered into during the nine months ended September 30, 2024.
38
Liquidity and Capital Resources
We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital needs for at least the next twelve months. Our future financing requirements will depend on several factors, including our growth, the timing and level of spending to support continued development of our platform, the expansion of marketing activities and merger and acquisition activity. In addition, growth of our finance receivables increases our liquidity needs, and any failure to meet those liquidity needs could adversely affect our business. Additional funds may not be available on terms favorable to us or at all. If the Company is unable to generate positive operating cash flows, additional debt and equity financings or refinancing of existing debt financings may be necessary to sustain future operations.
Receivables originated on our platform, including Credit Builder Loans and Instacash advances, were primarily financed through special purpose vehicle financings from third-party institutional lenders. As of September 30, 2024, there was an outstanding principal balance of $42.9 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of $64.5 million under the ROAR 2 SPV Credit Facility. For more information, see Note 7, "Debt" and Note 2, "Summary of Significant Accounting Policies" of the Company's Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility and VIE considerations related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility, respectively.
In the future, substantially all of our receivables for our Instacash product will be financed pursuant to the Purchase Agreement under which we will sell substantially all of our eligible Instacash receivables at a discount to third-party purchasers and receive a stable stream of servicing fee income based on net collections. For more information, see Part I, Item 1 "Financial Statements - Sale of Consumer Receivables."
The following table presents the Company's cash, restricted cash and receivable from payment processor as of September 30, 2024 and December 31, 2023:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Cash |
$ |
111,944 |
$ |
92,195 |
||||
|
Restricted cash |
4,415 |
2,284 |
||||||
|
Receivable from payment processor |
$ |
12,499 |
$ |
37,362 |
Cash Flows
The following table presents net change in cash and restricted cash from operating, investing and financing activities during the three and nine months ended September 30, 2024 and 2023:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net cash provided by operating activities |
$ |
60,342 |
$ |
36,072 |
$ |
141,779 |
$ |
74,115 |
||||||||
|
Net cash used in investing activities |
(22,805 |
) |
(27,975 |
) |
(96,604 |
) |
(84,598 |
) |
||||||||
|
Net cash used in financing activities |
(24,288 |
) |
(9,255 |
) |
(23,295 |
) |
(42,210 |
) |
||||||||
|
Net change in cash and restricted cash |
$ |
13,249 |
$ |
(1,158 |
) |
$ |
21,880 |
$ |
(52,693 |
) |
39
Operating Activities
Net cash provided by operating activities was $60.3 million for the three months ended September 30, 2024 compared to net cash provided by operating activities of $36.1 million for the three months ended September 30, 2023. This increase in net cash provided by operating activities was primarily driven by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately $8.1 million and an increase of $16.2 million related to changes in working capital.
Net cash provided by operating activities was $141.8 million for the nine months ended September 30, 2024 compared to net cash provided by operating activities of $74.1 million for the nine months ended September 30, 2023. This increase in net cash provided by operating activities was primarily driven by an increase in profitability, after adjusting for non-cash activity included in our net income (loss), of approximately $50.4 million and an increase of $17.2 million related to changes in working capital.
Investing Activities
Net cash used in investing activities was $22.8 million for the three months ended September 30, 2024 compared to net cash used in investing activities of $28.0 million for the three months ended September 30, 2023. The decrease in net cash used in investing activities was primarily related to a decrease in cash used in net finance receivable originations and sales activity of $7.0 million, partially offset by increased spending on software development of $1.9 million.
Net cash used in investing activities was $96.6 million for the nine months ended September 30, 2024 compared to net cash used in investing activities of $84.6 million for the nine months ended September 30, 2023. The increase in net cash used in investing activities was primarily related to increases in cash used in net finance receivable originations and sales activity of $9.5 million and increased spending on software development of $3.6 million, partially offset by reduced spending on settlement of contingent consideration related to mergers and acquisitions of $1.1 million.
Financing Activities
Net cash used in financing activities was $24.3 million for the three months ended September 30, 2024 compared to net cash used in financing activities of $9.3 million for the three months ended September 30, 2023. The increase in net cash used for financing activities was primarily attributable to an increase in payments of debt principal of $13.6 million and repurchases of Class A Common Stock pursuant to the new Repurchase Program (as described below) of $1.0 million.
Net cash used in financing activities was $23.3 million for the nine months ended September 30, 2024 compared to net cash used in financing activities of $42.2 million for the nine months ended September 30, 2023. The decrease in net cash used in financing activities was primarily attributable to a decrease in payments of debt principal of $19.4 million and a decrease in preferred stock settlement payments of $3.0 million, which was partially offset by an increase of $2.6 million in cash used for tax payments owed on the vesting of stock compensation and an increase in repurchases of Class A Common Stock of $1.0 million.
Share Repurchase Program
On August 26, 2024, we announced that our Board of Directors had approved a share repurchase program with authorization to purchase up to $20 million of outstanding Class A Common Stock (the "Repurchase Program").
Under the Repurchase Program, we may repurchase from time to time shares of Class A Common Stock for cash through any manner, including open market transactions (including pursuant to broker plans in accordance with Rule 10b5-1 and Rule 10b-18), privately negotiated transactions with third parties or accelerated share repurchase agreements, and in such amounts as we deem appropriate, subject to legal requirements and other corporate considerations.
40
The volume and timing of any repurchases will be subject to general market conditions, as well as our management of capital, other investment opportunities and other factors. The Repurchase Program does not obligate us to repurchase any specific dollar amount or number of shares, has no fixed expiration date and may be modified, suspended or discontinued at any time at our discretion.
We currently expect to fund the Repurchase Program from existing cash on hand and future cash flows. For additional information on purchases of Class A Common Stock under the Repurchase Program for the three months ended September 30, 2024, see Part II, Item 2. "Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities."
Financing Arrangements
Refer to Part I, Item 1 "Financial Statements - Debt" for further discussion on financing transactions during the period.
Contractual Obligations
The table below summarizes debt, lease and other long-term minimum cash obligations outstanding as of September 30, 2024:
|
Total |
Remainder of 2024 |
2025 - 2026 |
2027 - 2028 |
Thereafter |
||||||||||||||||
|
Monroe Term Loans |
$ |
65,000 |
$ |
- |
$ |
65,000 |
$ |
- |
$ |
- |
||||||||||
|
ROAR 1 SPV Credit Facility |
42,900 |
- |
42,900 |
- |
- |
|||||||||||||||
|
ROAR 2 SPV Credit Facility |
64,500 |
- |
64,500 |
- |
- |
|||||||||||||||
|
Operating lease obligations |
19,099 |
1,346 |
8,209 |
6,605 |
2,939 |
|||||||||||||||
|
Vendor unconditional purchase obligations |
20,116 |
- |
11,616 |
8,500 |
- |
|||||||||||||||
|
Total |
$ |
211,615 |
$ |
1,346 |
$ |
192,225 |
$ |
15,105 |
$ |
2,939 |
Secured Loans and Other Debt
For more information regarding our secured loans and other debt, see Part I, Item 1 "Financial Statements - Debt" in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
At September 30, 2024, the Company did not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
See Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for a description of critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Part I, Item 1 "Financial Statements - Summary of Significant Accounting Policies" for a description of recently issued accounting pronouncements that may potentially impact our results of operations, financial condition or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
41
Interest Rates Risk
Interest rates may adversely impact our customers' level of engagement on our platform and ability and willingness to pay outstanding amounts owed to us. While we do not charge interest on a lot of our products, higher interest rates could deter customers from utilizing our credit products and other loans. Moreover, higher interest rates may lead to increased delinquencies, charge-offs and allowances for loans and interest receivable, which could have an adverse effect on our operating results.
The Monroe Term Loans and future funding arrangements may bear a variable interest rate. The ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility have fixed interest rates. Given the fixed interest rates charged on many of our loans, a rising variable interest rate would reduce our interest margin earned in these funding arrangements. Dramatic increases in interest rates may make these forms of funding nonviable. A one percent change in the interest rate on our variable interest rate debt, based on principal balances as of September 30, 2024, would result in an approximately $0.7 million impact to annual interest expense.
Item 4. Controls and Procedures
Material Weakness
During the quarter ended September 30, 2024, recently enhanced internal controls over our Credit Builder Loan product identified a population of cash disbursements made to customer escrow accounts that were not in accordance with the terms of the Credit Builder Loan product. While the financial reporting of these transactions was properly reported and no misstatements of our consolidated financial statements were identified, this control deficiency could result in improperly authorized disbursements of cash. Accordingly, we determined that this control deficiency constituted a material weakness.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of September 30, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective in providing reasonable assurance that the information required for disclosure in reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, result of operations and cash flows for the periods presented.
42
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting, other than as described below with respect to our ongoing remediation efforts.
In light of the material weakness identified, we are in the process of implementing additional controls intended to enhance our monitoring of cash disbursements and the information technology resources related to the Credit Builder Loan product. We continue to develop formal processes in consultation with our third-party professional advisors, including formalizing our control evidence and processes, that are intended to ensure a sufficient level of precision is embedded in all financial reporting control activities. In order to fully remediate the material weaknesses identified, we intend to continue to re-evaluate the design of, and validate, our internal controls to ensure that they appropriately address changes in our business that could impact our system of internal controls, review our current processes and procedures to identify potential control design enhancements to ensure that our financial reporting is complete and accurate and develop a monitoring protocol to enable management to validate the operating effectiveness of key controls over financial reporting. We believe that these actions will ultimately be effective in remediating the material weaknesses we have identified and will continue to evaluate our remediation efforts and report regularly to the Audit Committee of the Board of Directors on the progress and results of our remediation plan. We intend to complete the remediation by June 30, 2025, but these remediation measures may be time consuming and costly, and there is no assurance that we will be able to complete the remediation and put in place the appropriate controls within this timeframe or that these initiatives will ultimately have the intended effects.
43
Part II- OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. We are also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this section, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact our business, financial condition, operating results and cash flows. See Part I, Item 1A "Risk Factors - Risks Relating to Legal and Accounting Matters - Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
We have determined, based on our current knowledge, that the aggregate amount or range of losses that are estimable with respect to our legal proceedings, including the matters described below, would not have a material adverse effect on our business, financial position, results of operations or cash flows. As of September 30, 2024, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to our business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
State Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities, and must also comply with other applicable compliance and regulatory requirements in the states where we operate. In most states where we operate, one or more regulatory agencies have authority with respect to regulation and enforcement of our business activities under applicable state laws, and we may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require us, among other potential consequences, to provide refunds to customers or to modify our internal controls and/or business practices.
In the ordinary course of our business, we are and have been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of our activities by state agencies, certain of which could result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. We have responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
44
CFPB Litigation
On September 29, 2022, the Consumer Financial Protection Bureau (the "CFPB") initiated a civil action in the United States District Court for the Southern District of New York ("SDNY") against MoneyLion Technologies Inc., ML Plus LLC and our 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, we moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. On June 13, 2023, the CFPB filed its first amended complaint, alleging substantially similar claims as those asserted in its initial complaint. On July 11, 2023, we moved to dismiss the lawsuit, again asserting various constitutional and merit-based arguments. On October 9, 2023, we moved for a stay of the action pending a decision from the United States Supreme Court in CFPB v. Community Financial Services Association of America, Ltd., No. 22-448 (U.S. argued Oct. 3, 2023) ("CFSA"). On December 1, 2023, the Court issued an order granting our motion and staying the action pending the United State Supreme Court's decision in CFSA. On May 16, 2024, the Supreme Court decided CFSA. Accordingly, our motion to dismiss is now pending with the SDNY. We continue to maintain that the CFPB's claims are meritless and are vigorously defending against the lawsuit. Nevertheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on our business, financial condition, results of operations or cash flows.
MALKA Seller Members Litigation
On July 21, 2023, Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former equity owners of MALKA (collectively, the "Seller Members"), brought a civil action in the SDNY against MoneyLion Technologies Inc. alleging, among other things, breaches of the Membership Interest Purchase Agreement (the "MIPA") governing our acquisition of MALKA. Among other claims, the Seller Members allege that they are entitled to payment of $25.0 million of Class A Common Stock pursuant to the earnout provisions set forth in the MIPA, based on the Seller Members' assertion that MALKA achieved certain financial targets for the year ended December 31, 2022 (such payment, the "2022 Earnout Payment"). We believe that the Seller Members are not entitled to any portion of the 2022 Earnout Payment under the terms of the MIPA and filed counterclaims against the Seller Members, alleging, among other things, fraud, negligent misrepresentation, conversion, breach of fiduciary duties and breach of contract and seeking compensatory damages and other remedies as a result of wrongdoing by the Seller Members. On October 17, 2023, the SDNY denied, in full, the Seller Members' motion for a preliminary injunction to remove the restrictive legends on certain shares of Class A Common Stock previously issued to the Seller Members. Separately, on November 3, 2023, the Seller Members moved to dismiss our amended counterclaims and third-party complaint. On May 14, 2024, the SDNY denied the Seller Members' motion to dismiss with respect to our counterclaims alleging fraud, negligent misrepresentation, breach of fiduciary duty and certain conversion and breach of contract claims. The SDNY dismissed certain of our counterclaims relating to declaratory judgment, unjust enrichment and conversion as duplicative of our fraud and misrepresentation counterclaims, as well as certain other breach of contract counterclaims. We continue to vigorously pursue our remaining counterclaims and defend against the Seller Members' claims, which we believe are meritless. However, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations in the lawsuit may have on our business, financial condition, results of operations or cash flows.
Former Series A Preferred Stockholders Litigation
As previously reported, on July 27, 2023, MassMutual Ventures US II LLC, Canaan X L.P., Canaan XI L.P., F-Prime Capital Partners Tech Fund LP and GreatPoint Ventures Innovation Fund II, L.P., each of which are former holders of the Company's Series A Preferred Stock (collectively, the "Former Preferred Stockholders"), brought a civil action in the SDNY against MoneyLion Inc., our Board of Directors and certain officers asserting claims under Section 14(a) relating to the Definitive Proxy Statement we filed with the SEC on March 31, 2023 in connection with the Special Meeting of Stockholders relating to the 1-for-30 Reverse Stock Split of the Class A Common Stock effected on April 24, 2023 and related state law claims. On May 15, 2024, the SDNY granted our motion to dismiss the Former Preferred Stockholders' complaint in its entirety. On June 14, 2024, Canaan X L.P., Canaan XI L.P. and GreatPoint Ventures Innovation Fund II, L.P. filed a notice of appeal with the United States Court of Appeals for the Second Circuit. On August 13, 2024, the parties filed a joint stipulation of voluntary dismissal, which resulted in the matter being withdrawn with prejudice. We believe the lawsuit is now fully resolved.
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Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, other than as set forth in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, filed with the SEC on August 6, 2024. We may disclose additional changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities, Use of Proceedsand Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
Our purchases of our Class A Common Stock during the quarterly period ended September 30, 2024 were as follows:
|
Total Number of Shares Purchased(1) |
Weighted Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of |
|||||||||||||
|
July 1, 2024 - July 31, 2024 |
$ |
- |
$ |
- |
- |
$ |
- |
|||||||||
|
August 1, 2024 - August 31, 2024 |
- |
- |
- |
$ |
20,000 |
|||||||||||
|
September 1, 2024 - September 30, 2024 |
24,405 |
39.99 |
24,405 |
$ |
19,024 |
|||||||||||
|
Total |
$ |
24,405 |
$ |
39.99 |
$ |
24,405 |
(1) On August 26, 2024, we announced that our Board of Directors had approved a share repurchase program with authorization to purchase up to $20.0 million of Class A Common Stock. All shares repurchased during the quarterly period ended September 30, 2024 were repurchased as part of the Repurchase Program. The Repurchase Program does not obligate us to repurchase any specific dollar amount or number of shares, has no fixed expiration date and may be modified, suspended or discontinued at any time at our discretion. SeePart I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Share Repurchase Program" for additional information.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the quarter ended September 30, 2024, no director or officer (as defined in Rule 16a-1 under the Exchange Act) of the Company adoptedor terminateda Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K).
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Item 6. Exhibits
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, the representations, warranties, covenants and agreements contained in such exhibits were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to such agreements instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Unless otherwise explicitly stated therein, investors and security holders are not third-party beneficiaries under any of the agreements attached as exhibits hereto and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its affiliates or businesses. Moreover, the assertions embodied in the representations and warranties contained in each such agreement are qualified by information in confidential disclosure letters or schedules that the parties have exchanged. Moreover, information concerning the subject matter of the representations and warranties may change after the respective dates of such agreements, which subsequent information may or may not be fully reflected in the Company's public disclosures.
|
Exhibit No. |
Description |
|
|
3.1 |
||
|
3.1.1 |
||
|
3.2 |
||
|
10.1* |
Amendment No. 1 to Master Receivables Purchase Agreement, dated as of July 19, 2024, by and among Sound Point Capital Management LP, as purchaser agent, SP Main Street Funding I LLC, as initial purchaser, and ML Plus LLC, as seller. |
|
|
10.2* |
Omnibus Amendment No. 2 to Purchase Agreement and Amendment No. 1 to Servicing Agreement, dated as of August 23, 2024, by and among MoneyLion Technologies Inc., as servicer, Sound Point Capital Management LP, as purchaser agent, SP Main Street Funding I LLC, as initial purchaser, and ML Plus LLC, as seller. |
|
|
10.3* |
Amendment No. 4 to the Amended and Restated Carrying Agreement, dated July 10, 2024, by and between DriveWealth, LLC and ML Wealth, LLC. |
|
|
31.1* |
Certification of the Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2* |
Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1** |
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2** |
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101.INS |
Inline XBRL Instance 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 Label Linkbase Document. |
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
104 |
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
47
* Filed herewith.
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
Certain schedules and exhibits to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5), or certain portions of this exhibit have been redacted pursuant to Regulation S-K Item 601(b)(10)(iv).
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
MONEYLION INC. |
||
|
Date: November 7, 2024 |
By: |
/s/ Richard Correia |
|
Richard Correia President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
||
|
Date: November 7, 2024 |
By: |
/s/ Mark Torossian |
|
Mark Torossian (Principal Accounting Officer) |
49