SOURCE: Fincera Inc.

Fincera Inc.

December 30, 2015 18:10 ET

Fincera Reports 2015 Third Quarter and Nine Month Financial Results

SHIJIAZHUANG, CHINA--(Marketwired - Dec 30, 2015) - Fincera Inc. ("Fincera" or the "Company") (OTCQB: AUTCF), a leading provider of web-based financing and ecommerce services for China's transportation and automobile industries, today reported financial results for the third quarter and nine months ended September 30, 2015.

Q3 2015 Operational Highlights

  • The Company began to wind down its legacy truck-leasing business in August 2015, and expects to continue servicing and collecting payments on existing commercial vehicle leases until all obligations related to the individual leases are met.
  • The Company's Internet-based business segment, which was launched in November 2014, continues to grow: the electronic payments platform CeraPay was used to make payment transactions totaling over RMB1.1 billion during the month of September 2015. The online marketplace lending platform CeraVest has originated over RMB2 billion in loans since its launch in November 2014 and had a loan portfolio of approximately RMB1.6 billion at September 30, 2015.

Q3 2015 Financial Highlights (comparisons are year over year)

  • Total revenues of $30.2 million, compared to $179.7 million, as a result of the decrease in commercial vehicle leases initiated during the period
  • Gross profit of $22.1 million, or 73.0% of total revenues, compared to $21.4 million, or 11.9% of total revenues
  • Net loss of $676,000, or $0.03 per diluted share, compared to net income of $3.0 million, or $0.13 per diluted share
  • Adjusted EBITDA of $7.7 million, compared to $12.2 million

Nine Months 2015 Financial Highlights (comparisons are year over year)

  • Total revenues of $178.0 million, compared to $591.3 million, as a result of the decrease in commercial vehicle leases initiated during the period
  • Gross profit of $62.9 million, or 35.3% of total revenues, compared to $65.8 million, or 11.1% of total revenues
  • Net income of $5.0 million, or $0.21 per diluted share, a 4.7% increase from $4.8 million, or $0.20 per diluted share, primarily as a result of the one-time litigation expenses incurred to settle the SEC lawsuit in the first quarter of 2014
  • Adjusted EBITDA of $28.8 million, compared to $34.4 million

Management Comments
Mr. Yong Hui Li, Chairman and CEO of Fincera, stated, "The 2015 third quarter marked a critical juncture in our Company's history as we made the decision to begin winding down our legacy truck-leasing business. At the same time, I am very pleased that our CeraPay and CeraVest products continue to gain traction and have already begun to make significant contributions to our Company financially. Despite our revenues decreasing during this period, the much higher profit margins of our new Internet-based businesses, compared to that of our legacy truck-leasing business, are already quite evident. For example, although our third quarter revenues decreased by over 80% from the prior-year period, primarily as a result of the winding down of our legacy truck-leasing business, our gross profit actually posted a slight increase. In leveraging our brand and experience in China's transportation industry and extensive geographic coverage, we remain confident in the long-term growth potential of these new businesses, which will continue to lead to higher margins and profitability. On October 15, we also launched TruShip (www.che001.com), our new ecommerce platform for merchants, such as dealerships and leasing companies, in the trucking industry to establish an online presence. The TruShip platform is a natural extension of our existing CeraPay and CeraVest offerings as Fincera provides CeraVest-financing incentives to merchants that use TruShip to transact and collect payments online using CeraPay. We have been pleased thus far with TruShip's initial reception and expect to launch additional features on the platform in the near future. We continue looking to explore ways in which we can help small businesses in the transportation industry take advantage of technology to thrive in today's digital age."

Internet-based Business for the Transportation Industry
From its inception in November 2014 through September 30, 2015, the Company's small business lending platform CeraVest (https://www.qingyidai.com/) has originated over RMB2 billion in loans. CeraVest had a loan portfolio of approximately RMB1.6 billion at September 30, 2015. Fincera created CeraVest as an online lending marketplace that provides short-term operating capital for small businesses in the transportation industry. CeraVest is also a platform through which Fincera can originate loans and then sell these loans to the public. Currently, individuals may invest on the CeraVest platform and earn an annual interest rate of approximately 8.6%. Fincera earns origination fees on CeraVest loans.

Also launched in November 2014, the Company's electronic payments platform CeraPay (https://www.dianfubao.com/) was used to make payment transactions totaling over RMB1.1 billion during the month of September 2015. Fincera developed CeraPay as a convenient platform through which customers could make electronic payments and the Company could make credit advances to its customers, allowing customers to pay for their everyday truck-operating needs at participating merchants within the CeraPay network. Fincera earns transaction fees through its CeraPay platform. The CeraPay network had over 28,000 active users (individuals and merchants) during the month of September. The Company continues to actively market CeraPay to potential customers and merchants in the transportation industry in an effort to increase the user base.

Fincera's Internet-based business segment generated revenues of $13.1 million in the third quarter ended September 30, 2015, and $24.7 million in the nine months ended September 30, 2015. This business did not exist in the prior-year periods. Quarter over quarter, revenues from Fincera's Internet-based business segment increased 65.8% from $7.9 million in the second quarter ended June 30, 2015.

Legacy Truck-Leasing Business
The Company leased 160 commercial vehicles in the third quarter of 2015, compared to 3,409 in the prior-year period. The year-over-year decrease in commercial vehicle leases initiated was largely due to the Company winding down its legacy truck-leasing business. At September 30, 2015, the Company had 15,017 leased vehicles under its sales-type leasing program.

The Company repossessed 112 vehicles whose lessees had defaulted on installment payments, sold 123 repossessed vehicles (repossessed in the quarter or in prior periods), and recognized 1 lost vehicle during the quarter ended September 30, 2015. In comparison, there were 91 vehicles repossessed, 110 vehicles sold and 7 lost vehicles recorded in the quarter ended September 30, 2014. 

Specialty Finance Store Network
During the 2015 third quarter, the Company closed two service centers located in Hebei and Shandong provinces. As of September 30, 2015, Fincera operated 553 centers in 26 provinces, municipalities, and autonomous regions in China. The Company operates service centers in the Anhui, Beijing, Chongqing, Fujian, Gansu, Guangdong, Guangxi, Guizhou, Hebei, Henan, Hubei, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Liaoning, Ningxia, Shaanxi, Shandong, Shanghai, Shanxi, Sichuan, Tianjin, Yunnan, and Zhejiang areas of China. In the second half of 2015, the focus of these locations has shifted to promoting the Company's Internet-based financing businesses. The Company anticipates these service centers will be crucial to the development of its Internet-based businesses to aid in new user acquisitions.

Financial Review

2015 Third Quarter

Revenues

  • Total revenues for the third quarter ended September 30, 2015, were $30.2 million, compared to $179.7 million in the prior-year period.
(in thousands) Three months ended
September 30, 2015
  Three months ended
September 30, 2014
   
   
  Amount % of Revenue   Amount % of Revenue   YoY % Change
Commercial vehicles $ 7,560 25.0 %   $ 159,795 88.9 %   (95.3 )%
Finance   9,189 30.4 %     14,572 8.1 %   (36.9 )%
Insurance and service   11,013 36.4 %     3,730 2.1 %   195.3 %
Property lease and management   2,486 8.2 %     1,575 0.9 %   57.8 %
Total revenues $ 30,248 100.0 %   $ 179,672 100.0 %   (83.2 )%
  • Commercial vehicle revenue decreased to $7.6 million, compared to $159.8 million in the prior-year period, primarily as a result of a decrease in new commercial vehicle leases following the Company's decision to begin winding down the legacy truck-leasing business in August 2015. Fincera plans to continue servicing and collecting payments on existing commercial vehicle leases until all obligations related to the individual leases are met. The decrease in commercial vehicles revenue was slightly offset by an increase in average price per vehicle, from $46,900 per vehicle in the 2014 third quarter to $47,300 per vehicle in the 2015 third quarter.
  • Finance revenue decreased to $9.2 million, or 30.4% of total revenues, during the third quarter of 2015, from $14.6 million in the prior-year period, as a result of the decrease in the total outstanding number of commercial vehicle sales, servicing, leasing and support contracts in effect. This was partially offset by an increase in finance revenue from CeraVest as this business did not exist in the prior-year period.
  • Insurance and service revenue increased 195.3% to $11.0 million, from $3.7 million in the prior-year period, primarily as a result of an increase in CeraPay revenues, which was partially offset by a decrease in insurance commissions due to a decrease in the number of trucks leased directly from Fincera's stores during the period as compared to those leased through peer stores for which it does not sell the truck insurance.
  • Property lease and management revenue from the Company's office-leasing business totaled $2.5 million, compared to $1.6 million in the prior-year period. This business commenced in April 2013.

Gross Profit/Margin

  • Gross profit increased 3.4% to $22.1 million in the three months ended September 30, 2015, from $21.4 million in the prior-year period.
  • Gross margin increased to 73.0% for the three months ended September 30, 2015, from 11.9% in the prior-year period, primarily due to increased contributions from the Internet-based businesses CeraVest and CeraPay. In addition, there were a higher number of leases outstanding and lower number of new leases initiated during the period, which resulted in a higher proportion of monthly amortized finance income. An increase in property lease and management revenue also contributed to the increase in gross margin.

Net Income/Loss

  • Net loss was $676,000 million, or $0.03 per diluted share based on 24.0 million diluted weighted average shares outstanding, in the three months ended September 30, 2015, compared to net income of $3.0 million, or $0.13 per share based on 23.7 million diluted weighted average shares outstanding, in the three months ended September 30, 2014.

Adjusted EBITDA

  • Adjusted EBITDA, which is EBITDA excluding stock-based compensation and the previously mentioned one-time litigation expense, was $7.7 million for the quarter ended September 30, 2015, compared to $12.2 million in the prior-year quarter.

Nine Months 2015

Revenues

  • Total revenues for the nine months ended September 30, 2015, were $178.0 million, compared to $591.3 million in the prior-year period.
(in thousands)   Nine months ended
September 30, 2015
    Nine months ended
September 30, 2014
 
 
    Amount   % of Revenue   Amount   % of Revenue   YoY % Change
Commercial vehicles   $ 115,076   64.7 %   $ 533,430   90.2 %   (78.4 )%
Finance     31,916   17.9 %     41,234   7.0 %   (22.6 )%
Insurance and service     24,005   13.5 %     13,669   2.3 %   75.6 %
Property lease and management     6,977   3.9 %     2,977   0.5 %   134.4 %
Total revenues   $ 177,974   100.0 %   $ 591,310   100.0 %   (69.9 )%
  • Commercial vehicle revenues decreased to $115.1 million from $533.4 million in the prior-year period, primarily as a result of the decrease in new leases initiated during the first nine months of 2015. Fincera's legacy commercial vehicle sales, servicing, leasing and support business recorded 2,567 new leases in the nine months ended September 30, 2015, compared to 10,828 new leases in the nine months ended September 30, 2014. A decrease in average price per vehicle, from $49,300 per vehicle in the first nine months of 2014 to $44,800 per vehicle in the first nine months of 2015, also contributed to the decrease in commercial vehicle revenues.
  • Finance revenues decreased to $31.9 million, or 17.9% of total revenues, during the nine months ended September 30, 2015, compared to $41.2 million in the prior-year period, as a result of the decrease in the total outstanding number of commercial vehicle sales, servicing, leasing and support contracts in effect.
  • The Company's insurance and service revenue increased 75.6% to $24.0 million during the first nine months of 2015 from $13.7 million in the first nine months of 2014.
  • Property lease and management revenue from the Company's office-leasing business totaled $7.0 million during the period, compared to $3.0 million in the prior-year period. This business commenced in April 2013.

Gross Profit/Margin

  • Gross profit for the nine months ended September 30, 2015, was $62.9 million, representing gross margin of 35.3%, an increase from gross margin of 11.1% in the first nine months of 2014, which is primarily due to reasons stated in the 2015 third quarter financial review.

Net Income

  • Net income for the nine months ended September 30, 2015, increased 4.7% to $5.0 million, or $0.21 per share based on 24.0 million diluted weighted average shares outstanding, from $4.8 million, or $0.20 per share based on 23.8 million diluted weighted average shares outstanding, in the prior-year period. The increase in net income was primarily due to a one-time $4.35 million litigation expense incurred to settle the SEC lawsuit in the 2014 first quarter.

Adjusted EBITDA

  • Adjusted EBITDA, which is EBITDA excluding stock-based compensation and the previously mentioned one-time litigation expense, for the nine months ended September 30, 2015, was $28.8 million, compared to $34.4 million in the prior-year period.

See "Non-GAAP Financial Measures" below for a description of Adjusted EBITDA.

Balance Sheet Highlights
At September 30, 2015, Fincera's cash and cash equivalents (not including restricted cash) were $156.0 million, working capital was $172.0 million, total debt was $570.1 million (including due to affiliates and accounts payable, related parties), and stockholders' equity was $257.9 million, compared to $26.0 million, $141.5 million, $327.5 million, and $263.1 million, respectively, at December 31, 2014. 

About Fincera Inc.
Founded in 2005, Fincera Inc. (OTCQB: AUTCF) provides innovative web-based financing and ecommerce services for China's transportation and automobile industries. The Company also operates over 550 finance and service centers in 26 provinces, municipalities, and autonomous regions across China. Fincera's current service offerings include a B2B payment network and a web-based small business lending platform. The Company's website is http://www.fincera.net. Fincera trades on the OTCQB venture stage marketplace for early stage and developing U.S. and international companies. OTCQB companies are current in their reporting and undergo an annual verification and management certification process.

Safe Harbor Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the Company. Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of the Company's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to meaningfully differ from those set forth in the forward-looking statements:

  • Changing principles of generally accepted accounting principles;
  • Continued compliance with government regulations;
  • Legislation or regulatory environments, requirements or changes adversely affecting the transportation or financial services industry in China;
  • Fluctuations in consumer demand in the transportation industry;
  • Management of rapid growth;
  • General economic conditions;
  • Changes in government policy;
  • China's overall economic conditions and local market economic conditions;
  • The Company's ability to expand through strategic acquisitions;
  • The Company's business strategy and plans, including whether its new financial services products are accepted by consumers;
  • The results of future financing efforts; and
  • Geopolitical events.

The information set forth herein should be read in light of such risks. The Company does not assume any obligation to update the information contained in this press release.

 
FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(in thousands except share and per share data)
 
    Three months ended September 30,     Nine months ended September 30,  
    2015     2014     2015     2014  
                         
Revenues                        
  Commercial vehicles   $ 7,560     $ 159,795     $ 115,076     $ 533,430  
  Finance     9,189       14,572       31,916       41,234  
  Insurance and service     11,013       3,730       24,005       13,669  
  Property lease and management     2,486       1,575       6,977       2,977  
    Total revenues     30,248       179,672       177,974       591,310  
                                 
Cost of sales                                
  Commercial vehicles     --       14,010       4,038       32,096  
  Commercial vehicles, related parties     6,617       143,189       108,096       489,825  
  Insurance and service     869       433       1,166       1,702  
  Property lease and management     673       674       1,799       1,919  
    Total cost of sales     8,159       158,306       115,099       525,542  
                                 
Gross profit     22,089       21,366       62,875       65,768  
                                 
Operating (income) expenses                                
  Selling and marketing     2,849       2,599       8,304       8,026  
  General and administrative     15,402       11,227       39,917       35,833  
  Litigation expense     --       --       --       4,350  
  Interest expense     5,745       3,034       13,703       8,830  
  Interest expense, related parties     2,564       3,505       5,510       8,154  
  Other income, net     (2,979 )     (3,429 )     (11,265 )     (8,376 )
    Total operating expenses     23,581       16,936       56,169       56,817  
                                 
(Loss) income from operations     (1,492 )     4,430       6,706       8,951  
                                 
Other income                                
  Interest income     256       55       298       127  
    Other income     256       55       298       127  
                                 
(Loss) income before income taxes     (1,236 )     4,485       7,004       9,078  
                                 
Income tax (benefit) provision     (560 )     1,508       2,002       4,301  
                                 
Net (loss) income     (676 )     2,977       5,002       4,777  
                                 
Foreign currency translation adjustment     (10,531 )     14       (10,271 )     (2,656 )
                                 
Comprehensive (loss) income   $ (11,207 )   $ 2,991     $ (5,269 )   $ 2,121  
(Loss) earnings per share                          
  Basic   $ (0.03 )   $ 0.13   $ 0.21   $ 0.20
  Diluted   $ (0.03 )   $ 0.13   $ 0.21   $ 0.20
                           
Weighted average shares outstanding                          
  Basic     23,549,644       23,549,644     23,549,644     23,548,933
  Diluted     24,012,958       23,703,997     24,046,939     23,787,245
                             
                             
 
FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
 
    September 30,   December 31,
    2015   2014
    (unaudited)    
ASSETS        
Current assets        
  Cash and cash equivalents   $ 156,000   $ 26,027
  Restricted cash     160     988
  Accounts receivable, net of provision for doubtful debts of $36,396 and $29,074 as of September 30, 2015 and December 31, 2014, respectively     52,584     28,915
  Inventories     5,592     4,746
  Deposits for inventories     894     --
  Prepaid expenses and other current assets     5,079     5,520
  Prepaid expenses, related parties     24     50
  Loans receivable, net     227,096     19,105
  Other financing receivables, net     161,031     29,401
  Other financing receivables, net, related party     --     782
  Short-term net investment in sales-type leases     16,561     56,975
  Current maturities of long-term net investment in direct financing and sales-type leases, net of provision for doubtful accounts of nil and $22 as of September 30, 2015 and December 31, 2014, respectively     111,657     285,983
  Deferred income tax assets     11,410     8,751
    Total current assets     748,088     467,243
             
Noncurrent assets            
Property, equipment and leasehold improvements, net     74,990     80,152
Deferred income tax assets     6,191     6,080
Long-term net investment in direct financing and sales-type leases, net of current maturities     8,550     59,170
             
Total assets   $ 837,819   $ 612,645
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities            
  Short-term borrowings (including short-term borrowings of the consolidated variable interest entities ("VIEs") without recourse to Fincera of $78,600 and $138,912 as of September 30, 2015 and December 31, 2014, respectively)   $ 94,320   $ 155,342
  Note financing payables     131,111     --
  Note financing payables, related parties     2,801     --
  Short-term bonds payable     99,580     --
  Long-term borrowings, current portion     14,148     2,451
  Long-term payables, current portion     --     899
  Accounts payable (including accounts payable of the consolidated VIEs without recourse to Fincera of $92,559 and $384 as of September 30, 2015 and December 31, 2014, respectively)     23,630     5,692
  Accounts payable, related parties (including accounts payable, related parties of the consolidated VIEs without recourse to Fincera of $140,030 and $106,525 as of September 30, 2015 and December 31, 2014, respectively)     140,464     108,211
  Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to Fincera of $13,532 and $13,206 as of September 30, 2015 and December 31, 2014, respectively)     40,383     20,121
  Due to affiliates (including due to affiliates of the consolidated VIEs without recourse to Fincera of $1,053 and $1,002 as of September 30, 2015 and December 31, 2014, respectively)     19,758     25,644
  Customer deposits (including customer deposits of the consolidated VIEs without recourse to Fincera of $2826 and $460 as of September 30, 2015 and December 31, 2014, respectively)     7,821     4,912
  Income tax payable (including income tax payable of the consolidated VIEs without recourse to Fincera of $848 and $1,508 as of September 30, 2015 and December 31, 2014, respectively)     2,032     2,511
             
 
 
FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(in thousands except share and per share data)
 
    September 30,     December 31,  
    2015     2014  
    (unaudited)        
             
Total current liabilities     576,048       325,783  
                 
Noncurrent liabilities                
Long-term borrowings     --       14,708  
Long-term payables (including long-term payables of the consolidated VIEs without recourse to Fincera of $3,859 and $9,102 as of September 30, 2015 and December 31, 2014, respectively)     3,859       9,102  
                 
Total liabilities     579,907       349,593  
                 
Commitments and Contingencies     --       --  
                 
Stockholders' equity                
  Preferred shares, $0.001 par value authorized - 1,000,000 shares; issued - none     --       --  
  Ordinary shares - $0.001 par value authorized - 1,000,000,000 shares; issued and outstanding - 23,549,644 shares at September 30, 2015 issued and outstanding - 23,549,644 shares at December 31, 2014     24       24  
  Additional paid-in capital     329,013       328,884  
  Statutory reserves     26,222       26,222  
  Accumulated losses     (117,716 )     (122,718 )
  Accumulated other comprehensive income     20,369       30,640  
  Total stockholders' equity     257,912       263,052  
                 
    Total liabilities and stockholders' equity   $ 837,819     $ 612,645  
 
 
 
FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
    Nine Months Ended September 30,  
    2015     2014  
             
Net cash (used in) operating activities   $ (75,433 )   $ (57,947 )
                 
Cash flow from investing activities:                
  Purchase of property, equipment and leasehold improvements     (1,814 )     (6,645 )
                 
Net cash (used in) investing activities     (1,814 )     (6,645 )
                 
Cash flow from financing activities:                
  Proceeds from borrowings and note financing payable     448,124       186,944  
  Repayments of borrowings and note financing payable     (267,862 )     (183,853 )
  Proceeds from affiliates     48,701       51,464  
  Repayment to affiliates     (53,764 )     (75,777 )
  Increase in accounts payable, related parties     113,606       489,825  
  Repayment to accounts payable, related parties     (76,256 )     (414,050 )
                 
Net cash provided by financing activities     212,549       54,553  
                 
Net cash provided by (used in) operating, investing and financing activities     135,302       (10,039 )
                 
Effect of foreign currency translation on cash and cash equivalents     (5,329 )     (638 )
                 
Net increase (decrease) in cash and cash equivalents     129,973       (10,677 )
                 
Cash and cash equivalents, beginning of the period     26,027       31,370  
                 
Cash and cash equivalents, end of the period   $ 156,000     $ 20,693  
                 
Supplemental disclosure of cash flow information:                
  Interest paid   $ 16,829     $ 11,419  
  Income taxes paid   $ 5,250     $ 7,990  
 
 
 
Non-GAAP Financial Measures ($ in thousands)
 
A reconciliation of Adjusted EBITDA to net income is provided below:
 
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2015     2014     2015     2014  
                                 
Net income attributable to shareholders   $ (676 )   $ 2,977     $ 5,002     $ 4,777  
                                 
Interest expenses     8,309       6,539       19,213       16,984  
                                 
Interest income     (256 )     (55 )     (298 )     (127 )
                                 
Income tax provision     (560 )     1,508       2,002       4,301  
                                 
Stock-based compensation     23       276       129       1,147  
                                 
Depreciation & Amortization     887       966       2,764       2,932  
                                 
Litigation expense     -       -       -       4,350  
                                 
Adjusted EBITDA   $ 7,727     $ 12,211     $ 28,812     $ 34,364  
                                 

USE OF NON-GAAP MEASURES
Fincera defines Adjusted EBITDA as net income before interest expense (income), income taxes, depreciation and amortization, as well as the exclusion of stock-based compensation and one-time litigation expenses. Adjusted EBITDA excludes certain financial information that would be included in net income (loss), the most directly comparable GAAP financial measure. Users of this financial information should consider the type of material events and transactions that are excluded from Adjusted EBITDA, and the material limitations associated therewith. For example, Adjusted EBITDA does not include net interest expense, but because Fincera has borrowed money to finance its operations, interest expense is a necessary and ongoing part of its costs and has assisted Fincera in generating revenue; Adjusted EBITDA does not include taxes, although payment of taxes is a necessary and ongoing part of Fincera's operations; and Adjusted EBITDA does not include depreciation and amortization expense, but because Fincera uses capital assets to generate revenue, depreciation and amortization expense is a necessary element of its cost structure. Therefore, Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, as determined in accordance with GAAP. 

Fincera believes that the presentation of these non-GAAP financial measures is warranted and useful to its shareholders because it provides an additional analytical tool for understanding the Company's financial performance by excluding certain items that may obscure trends in the core operating performance of the Company's business. Using Adjusted EBITDA also facilitates management's internal comparisons to Fincera's historical performance and liquidity. Fincera computes Adjusted EBITDA using the same consistent method from quarter to quarter. The table above has more details on the reconciliations between GAAP financial measures that are most directly comparable to Non-GAAP financial measures.

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