GWG Holdings, Inc. (Nasdaq:GWGH), the parent company of GWG Life, a
financial services company committed to transforming the life
insurance industry through disruptive and innovative products and
services, today announced its financial results for the second
quarter ended June 30, 2017.
Highlights for the Three Months Ended
June 30, 2017
- GAAP Financial Information
- Total revenue of $11.7 million
- GAAP net loss attributable to common shareholders of $7.7
million, or ($1.34) per basic and fully diluted share
- Adjusted Non-GAAP Financial Information1
- Non-GAAP income attributable to common shareholders of $7.3
million2
- Increased the number of financial advisors able to sell our
investment products to 5,520 – the largest network of advisors in
the Company’s history
- Raised $66.2 million of capital from investment product
offerings – our second highest quarterly amount on record
- Continued to improve our capital structure with our planned
redemption of Series I Secured Notes and Series A Preferred Stock
in conjunction with a pending extension of our senior credit
facility expected to close by September 2017 that will be used to
fund premium expenses of the portfolio over a renewed ten-year
term
- Completed a nationwide rollout of the LifeCare Xchange suite of
products to Insurance Marketing Organizations (IMOs), Brokerage
General Agencies (BGAs) and life insurance agents
- Increased the number of financial advisors and life insurance
agents appointed to source life insurance policies (referred to as
Appointed Agents) to 3,950 – the largest network of Appointed
Agents in the Company’s history
- Received recognition in the National Association of Insurance
Commissioners’ (NAIC) Policy Bulletin supporting innovative
solutions that provide private-market options for financing
long-term care services
- Took a definitive organizational step to further M-Panel
technology by naming Tom Nodine as Executive Vice President of the
division charged with commercializing our epigenetic-based
predictive technologies for the global life insurance industry
- Purchased $88.7 million in face value of policy benefits
comprised of 49 policies
- Acquired 20 percent of the purchased policies directly from
Appointed Agents, as compared to 32 percent in the second quarter
of 2016
- Recognized $11.0 million in policy benefits from nine life
insurance policies during the quarter, and an additional $0.4
million in policy benefits from two policies since quarter end
- Reported a total portfolio of $1.53 billion in face value of
life insurance policy benefits, covering 709 unique lives;
representing a net year-over-year growth of $371 million or 32
percent
- Reported a total liquidity position of $105 million at June 30,
20173
“We believe we may be reaching the tipping point
of widespread adoption of insurance-based planning and products
that utilize the advantages of the life insurance secondary
market,” said GWG Holdings’ Chairman and CEO Jon Sabes. “While the
credit crisis and other factors derailed the growth of this market
for years, we have seen innovators and early adopters continue to
advance this market forward, and, now, with the NAIC Policy
Bulletin and other market factors signaling change, we believe
adoption may begin occurring at rates we have not before
experienced. Our company is uniquely positioned to lead the
continued development of this marketplace that analysts have long
suggested is a multi-billion dollar opportunity. We have built a
strategy, team, and infrastructure to lead the development of this
marketplace and I am highly optimistic in our future role in a
large and growing marketplace – to say nothing of the insurtech
resources we now own and are in the process of
commercializing.”
“We continue to execute our business plan and
achieve many of the operating metric goals we have set for
ourselves,” said William Acheson, Chief Financial Officer. “While
quarter-to-quarter actuarial and mortality variability challenge
our near-term GAAP results, the main lever of long-term
profitability – maintaining a large, profitable life insurance
portfolio – is strong. Our industry continues to draw increasing
amounts of positive attention and capital in-flows as consumers and
investors alike wake up to its unique value proposition. From a
capital markets perspective, the competition for life insurance
policy assets in the secondary market has never been stronger –
making our current portfolio of life insurance and, importantly,
our direct origination strategy and operating infrastructure
increasingly valuable.”
Second Quarter 2017 Financial
Summary
Total revenue for the quarter ended June 30,
2017 was $11.7 million, as compared to $20.8 million for the same
period in 2016. Revenue was negatively affected by a charge of $6.6
million relating to the periodic update of life expectancy
estimates on certain insured lives within our portfolio. This
impact was partially offset by an unrealized gain of $4.1 million
due to a decrease in the discount rate used to value our portfolio
of life insurance policies. Realized gain from policy benefits for
the second quarter was $7.9 million, as compared to $8.1 million
for the same period in 2016. The Company recognized $10.9 million
of life insurance policy benefits from nine policies during the
quarter, as compared to $9.8 million from six policies for the same
period in 2016. Total unrealized gain from policy acquisitions
during the second quarter was $8.0 million, as compared to $9.8
million for the same period in 2016, reflecting lower acquisition
volumes quarter over quarter.
Total expenses for the second quarter of 2017
were $21.1 million, as compared to $16.5 million for the same
period in 2016. Included in the second quarter numbers is a charge
of $0.9 million relating to a secured loan made by one of our
subsidiaries in the merchant cash advance industry. The remainder
of the increase in expenses versus the prior-year period was
related to increased interest and financing costs due to higher
debt balances outstanding. General and administrative costs also
increased year over year as a result of continued investment in
headcount and infrastructure - although the sequential growth rate
of these costs has decreased significantly in recent
quarters.
- See non-GAAP Financial Measures below.
- We calculate non-GAAP net income by recognizing the actuarial
gain accruing within our life insurance policies at the expected
internal rate of return, exclusive of interest costs, of the
policies we own without regard to fair-value measurements required
by GAAP. We net this actuarial gain against our adjusted costs
during the same period to calculate adjusted non-GAAP net
income.
- Includes cash, restricted cash, policy benefits receivable, if
any, and amounts available, if any, on our senior credit
facilities.
Other Information
Reconciliation of Gain on Life Insurance
Policies
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
2016 |
|
2017 |
|
|
2016 |
Change
in estimated probabilistic cash flows |
|
$ |
16,446,000 |
|
|
$ |
17,972,000 |
|
|
$ |
32,849,000 |
|
|
$ |
27,425,000 |
|
Unrealized gain on acquisitions |
|
|
8,044,000 |
|
|
|
9,822,000 |
|
|
|
18,646,000 |
|
|
|
17,841,000 |
|
Premiums
and other annual fees |
|
|
(11,859,000 |
) |
|
|
(8,995,000 |
) |
|
|
(22,949,000 |
) |
|
|
(17,441,000 |
) |
Change
in discount rate |
|
|
4,143,000 |
|
|
|
629,000 |
|
|
|
4,143,000 |
|
|
|
838,000 |
|
Change
in life expectancy evaluation |
|
|
(6,662,000 |
) |
|
|
(1,545,000 |
) |
|
|
(8,604,000 |
) |
|
|
(914,000 |
) |
Realized
gain on maturities |
|
|
7,920,000 |
|
|
|
8,137,000 |
|
|
|
24,526,000 |
|
|
|
22,765,000 |
|
Fair
value of matured policies |
|
|
(6,736,000 |
) |
|
|
(5,637,000 |
) |
|
|
(17,915,000 |
) |
|
|
(12,417,000 |
) |
Gain on
life insurance contracts, net |
|
$ |
11,296,000 |
|
|
$ |
20,383,000 |
|
|
$ |
30,696,000 |
|
|
$ |
38,097,000 |
|
Life Insurance
Portfolio Summary
Total
portfolio face value of policy benefits |
|
|
$ |
1,525,363,000 |
|
Average face value per policy |
|
|
$ |
1,924,000 |
|
Average age of insured (yrs.)* |
|
|
|
81.5 |
|
Average life expectancy estimate (yrs.)* |
|
|
|
6.9 |
|
Total
number of policies |
|
|
|
793 |
|
Number of unique lives |
|
|
|
709 |
|
Demographics |
|
|
|
74% Males; 26% Females |
|
Number of smokers |
|
|
|
30 |
|
Largest policy as % of total portfolio |
|
|
|
0.87 |
% |
Average policy as % of total portfolio |
|
|
|
0.13 |
% |
Average annual premium as % of face value |
|
|
|
3.21 |
% |
Distribution of Policies
and Policy Benefits by Current Age of Insured
|
|
|
|
|
|
|
|
|
|
Percentage of Total |
|
Min Age |
|
Max Age |
|
Policies |
|
Policy Benefits |
|
Wtd. Avg. Life Expectancy (yrs.)* |
|
|
Number of Policies |
|
|
|
Policy Benefits |
|
95 |
|
99 |
|
8 |
|
$ |
12,392,000 |
|
1.1 |
|
|
1.0 |
% |
|
|
0.8 |
% |
90 |
|
94 |
|
71 |
|
$ |
135,898,000 |
|
2.9 |
|
|
8.9 |
% |
|
|
8.9 |
% |
85 |
|
89 |
|
195 |
|
$ |
393,983,000 |
|
4.7 |
|
|
24.6 |
% |
|
|
25.8 |
% |
80 |
|
84 |
|
171 |
|
$ |
401,496,000 |
|
6.3 |
|
|
21.6 |
% |
|
|
26.3 |
% |
75 |
|
79 |
|
144 |
|
$ |
270,779,000 |
|
9.0 |
|
|
18.2 |
% |
|
|
17.8 |
% |
70 |
|
74 |
|
133 |
|
$ |
210,775,000 |
|
10.2 |
|
|
16.8 |
% |
|
|
13.8 |
% |
60 |
|
69 |
|
71 |
|
$ |
100,040,000 |
|
11.3 |
|
|
8.9 |
% |
|
|
6.6 |
% |
Total |
|
|
|
793 |
|
$ |
1,525,363,000 |
|
6.9 |
|
|
100.0 |
% |
|
|
100.0 |
% |
(*) Weighted average by face amount of policy
benefits
Life Insurance Portfolio
Activity
Insurance policy purchases for the three months
ended:
|
|
Three months ended June 30, |
|
Three months ended June 30, |
|
|
2017 |
|
2016 |
|
|
$ |
|
% |
|
# |
|
% |
|
Avg. Face |
|
$ |
|
% |
|
# |
|
% |
|
Avg. Face |
Broker4 |
|
71,100,000 |
|
80.1 |
|
39 |
|
79.6 |
|
1,823,000 |
|
120,660,000 |
|
88.2 |
|
60 |
|
68.2 |
|
2,011,000 |
Direct5 |
|
17,640,000 |
|
19.9 |
|
10 |
|
20.4 |
|
1,764,000 |
|
16,182,000 |
|
11.8 |
|
28 |
|
31.8 |
|
578,000 |
Total |
|
88,740,000 |
|
100.0 |
|
49 |
|
100.0 |
|
1,811,000 |
|
136,842,000 |
|
100.0 |
|
88 |
|
100.0 |
|
1,555,000 |
Insurance policy purchases for the six months
ended:
|
|
Six months ended June 30, |
|
Six months ended June 30, |
|
|
2017 |
|
2016 |
|
|
$ |
|
% |
|
# |
|
% |
|
Avg. Face |
|
$ |
|
% |
|
# |
|
% |
|
|
Broker4 |
|
152,351,000 |
|
78.7 |
|
92 |
|
75.4 |
|
1,656,000 |
|
219,665,000 |
|
91.9 |
|
126 |
|
77.3 |
|
1,743,000 |
Direct5 |
|
41,144,000 |
|
21.3 |
|
30 |
|
24.6 |
|
1,371,000 |
|
19,341,000 |
|
8.1 |
|
37 |
|
22.7 |
|
523,000 |
Total |
|
193,495,000 |
|
100.0 |
|
122 |
|
100.0 |
|
1,586,000 |
|
239,006,000 |
|
100.0 |
|
163 |
|
100.0 |
|
1,466,000 |
(4) Licensed life settlement
brokers(5) Includes Appointed Agent,
internet and other lead sources
Insurance Benefits Realized
Three Months Ended |
|
Six Months Ended |
June 30, 2017 |
|
June 30, 2016 |
|
June 30, 2017 |
|
June 30, 2016 |
$ |
|
# |
|
$ |
|
#
|
|
$ |
|
#
|
|
$ |
|
#
|
10,935,000 |
|
9 |
|
9,829,000 |
|
6 |
|
29,910,000 |
|
19 |
|
29,067,000 |
|
12 |
Trailing 12 Month Policy Benefits
Recognized and Premiums Paid
Quarter End Date |
|
Portfolio Face Amount
($) |
|
|
12-MonthTrailing Benefits
Collected ($) |
|
|
12-Month Trailing
Premiums Paid ($) |
|
|
12-MonthTrailing Benefits/Premium Coverage
Ratio |
December 31, 2014 |
|
|
779,099,000 |
|
|
|
18,050,000 |
|
|
|
23,265,000 |
|
|
|
77.6 |
% |
March
31, 2015 |
|
|
754,942,000 |
|
|
|
46,675,000 |
|
|
|
23,786,000 |
|
|
|
196.2 |
% |
June
30, 2015 |
|
|
806,274,000 |
|
|
|
47,125,000 |
|
|
|
24,348,000 |
|
|
|
193.5 |
% |
September 30, 2015 |
|
|
878,882,000 |
|
|
|
44,482,000 |
|
|
|
25,313,000 |
|
|
|
175.7 |
% |
December 31, 2015 |
|
|
944,844,000 |
|
|
|
31,232,000 |
|
|
|
26,650,000 |
|
|
|
117.2 |
% |
March
31, 2016 |
|
|
1,027,821,000 |
|
|
|
21,845,000 |
|
|
|
28,771,000 |
|
|
|
75.9 |
% |
June
30, 2016 |
|
|
1,154,798,000 |
|
|
|
30,924,000 |
|
|
|
31,891,000 |
|
|
|
97.0 |
% |
September 30, 2016 |
|
|
1,272,078,000 |
|
|
|
35,867,000 |
|
|
|
37,055,000 |
|
|
|
96.8 |
% |
December 31, 2016 |
|
|
1,361,675,000 |
|
|
|
48,452,000 |
|
|
|
40,240,000 |
|
|
|
120.4 |
% |
March
31, 2017 |
|
|
1,447,558,000 |
|
|
|
48,189,000 |
|
|
|
42,753,000 |
|
|
|
112.7 |
% |
June
30, 2017 |
|
|
1,525,363,000 |
|
|
|
49,295,000 |
|
|
|
45,414,000 |
|
|
|
108.5 |
% |
Conference Call Details
Management will host a conference call today at
4:00 pm Eastern Time to discuss the Company's financial and
operating results. The conference call number for U.S. participants
is (844) 423-9895 and the conference call number for participants
outside the U.S. is (716) 247-5865. The conference ID number for
both conference call numbers is 62234062. The call may also be
accessed via webcast on the Company’s website
at investors.gwglife.com.
A replay of the call will be available through
Thursday, August 17, 2017 by dialing (855) 859-2056 (U.S.) or (404)
537-3406 (international), using the passcode 62234062.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq:GWGH) the parent
company of GWG Life, is a financial services company committed to
transforming the life insurance industry through disruptive and
innovative products and services. The company has developed a new
suite of options for the life insurance secondary market called
LifeCare Xchange (LCX). This new capability provides seniors with
the exchange value of their life insurance policies they can apply
to long-term care and other post-retirement needs. GWG Life seeks
to further transform the industry by applying proprietary M-Panel
epigenetic technology to disrupt traditional life insurance
underwriting practices. Since 2006 GWG Life has provided seniors
over $436 million in exchange value for their life insurance and,
as of June 30, 2017, owned a portfolio of over $1.53 billion in
face value of policy benefits.
For more information about GWG Holdings, Inc.
email info@gwglife.com or visit www.gwgh.com.
Cautionary Statement Regarding
Forward-Looking Statements
This press release contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included in
this press release regarding our strategy, future operations,
future financial position, future revenue, projected costs,
prospects, plans and objectives of management are forward-looking
statements. The words "anticipate," "believe," "estimate,"
"expect," "intend," "may," "plan," "would," "target" and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. These forward-looking statements include, among
other things, statements about our estimates regarding future
revenue and financial performance. We may not actually achieve the
expectations disclosed in our forward-looking statements, and you
should not place undue reliance on our forward-looking statements.
Actual results or events could differ materially from the
expectations disclosed in the forward-looking statements we make.
More information about potential factors that could affect our
business and financial results is contained in our filings with the
Securities and Exchange Commission. Additional information will
also be set forth in our future quarterly reports on Form 10-Q,
annual reports on Form 10-K and other filings that we make with the
Securities and Exchange Commission. We do not intend, and undertake
no duty, to release publicly any updates or revisions to any
forward-looking statements contained herein.
GWG HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
|
|
June 30, 2017(unaudited) |
|
|
December 31, 2016 |
|
A S S E T S |
Cash
and cash equivalents |
|
$ |
52,293,472 |
|
|
$ |
78,486,982 |
|
Restricted cash |
|
|
46,159,631 |
|
|
|
37,826,596 |
|
Investment in life insurance policies, at fair value |
|
|
577,049,552 |
|
|
|
511,192,354 |
|
Secured MCA advances |
|
|
3,525,381 |
|
|
|
5,703,147 |
|
Life
insurance policy benefits receivable |
|
|
6,970,000 |
|
|
|
5,345,000 |
|
Deferred taxes, net |
|
|
1,620,303 |
|
|
|
- |
|
Other
assets |
|
|
3,875,810 |
|
|
|
4,688,103 |
|
TOTAL
ASSETS |
|
$ |
691,494,149 |
|
|
$ |
643,242,182 |
|
|
|
|
|
|
|
|
|
|
L I A B I L I T I E S & S T O C K H O L
D E R S’ E Q U I T Y |
LIABILITIES |
|
|
|
|
|
|
|
|
Senior Credit Facilities |
|
$ |
149,008,826 |
|
|
$ |
156,064,818 |
|
Series I Secured Notes |
|
|
6,680,961 |
|
|
|
16,404,836 |
|
L
Bonds |
|
|
400,832,308 |
|
|
|
381,312,587 |
|
Accounts payable |
|
|
4,160,097 |
|
|
|
2,226,712 |
|
Interest payable |
|
|
14,387,044 |
|
|
|
16,160,599 |
|
Other
accrued expenses |
|
|
2,535,674 |
|
|
|
1,676,761 |
|
Deferred taxes, net |
|
|
- |
|
|
|
2,097,371 |
|
TOTAL
LIABILITIES |
|
$ |
577,604,910 |
|
|
$ |
575,943,684 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONVERTIBLE PREFERRED STOCK |
|
|
|
|
|
|
|
|
(par value $0.001; shares authorized 40,000,000; shares outstanding
2,671,663 and 2,640,521; liquidation preference of $20,037,000 and
$19,804,000 as of June 30, 2017 and December 31, 2016,
respectively) |
|
|
19,732,262 |
|
|
|
19,701,133 |
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 100,000; shares outstanding 99,127
and59,183; liquidation preference of $99,127,000 and $59,183,000 as
of June 30, 2017 and December 31, 2016, respectively) |
|
|
97,728,821 |
|
|
|
59,025,164 |
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK SERIES 2 |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 100,000; shares outstanding 22,536
and 0; liquidation preference of $22,536,000 and $0 as of June 30,
2017 and December 31, 2016, respectively) |
|
|
20,979,019 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
COMMON STOCK |
|
|
|
|
|
|
|
|
(par value $0.001: shares authorized 210,000,000; shares issued and
outstanding 5,783,555 and 5,941,790 on June 30, 2017 and December
31, 2016) |
|
|
5,784 |
|
|
|
5,980 |
|
Additional paid-in capital |
|
|
- |
|
|
|
7,383,515 |
|
Accumulated
deficit |
|
|
(24,556,647 |
) |
|
|
(18,817,294 |
) |
TOTAL STOCKHOLDERS’ EQUITY |
|
|
113,889,239 |
|
|
|
67,298,498 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES & EQUITY |
|
$ |
691,494,149 |
|
|
$ |
643,242,182 |
|
GWG HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited) |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on life insurance policies, net |
|
$ |
11,296,266 |
|
$ |
20,383,347 |
|
$ |
30,696,086 |
|
$ |
38,097,059 |
MCA income |
|
|
133,583 |
|
|
223,255 |
|
|
380,159 |
|
|
368,216 |
Interest and other income |
|
|
237,737 |
|
|
170,880 |
|
|
679,686 |
|
|
216,100 |
TOTAL REVENUE |
|
|
11,667,586 |
|
|
20,777,482 |
|
|
31,755,931 |
|
|
38,681,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
12,246,025 |
|
|
9,764,657 |
|
|
25,490,241 |
|
|
18,913,811 |
Employee compensation and benefits |
|
|
3,741,299 |
|
|
3,071,507 |
|
|
6,904,360 |
|
|
5,537,705 |
Legal and professional fees |
|
|
1,330,589 |
|
|
1,304,353 |
|
|
2,276,937 |
|
|
2,510,481 |
Provision for MCA advances |
|
|
878,000 |
|
|
300,000 |
|
|
878,000 |
|
|
400,000 |
Other expenses |
|
|
2,883,098 |
|
|
2,032,685 |
|
|
5,663,420 |
|
|
4,344,845 |
TOTAL EXPENSES |
|
|
21,079,011 |
|
|
16,473,202 |
|
|
41,212,958 |
|
|
31,706,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(9,411,425 |
) |
|
4,304,280 |
|
|
(9,457,027 |
) |
|
6,974,533 |
INCOME TAX EXPENSE (BENEFIT) |
|
|
(3,717,174 |
) |
|
1,822,030 |
|
|
(3,717,674 |
) |
|
2,906,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(5,694,251 |
) |
$ |
2,482,250 |
|
$ |
(5,739,353 |
) |
$ |
4,067,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
2,031,097 |
|
|
600,924 |
|
|
3,898,857 |
|
|
1,112,155 |
NET INCOME
(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(7,725,348 |
) |
$ |
1,881,326 |
|
$ |
(9,638,210 |
) |
$ |
2,955,631 |
NET INCOME (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.34 |
) |
$ |
0.32 |
|
$ |
(1.69 |
) |
$ |
0.50 |
Diluted |
|
$ |
(1.34 |
) |
$ |
0.30 |
|
$ |
(1.69 |
) |
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
5,777,724 |
|
|
5,967,098 |
|
|
5,710,909 |
|
|
5,954,944 |
Diluted |
|
|
5,777,724 |
|
|
8,017,349 |
|
|
5,710,909 |
|
|
8,002,335 |
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures for
evaluating financial results, planning and forecasting, and
maintaining compliance with covenants contained in borrowing
agreements. The application of current GAAP fair value standards,
especially during a period of significant growth of our portfolio
and our company may result in current period GAAP financial results
that may be not be reflective of our long term earnings potential
or overall financial condition. Management believes that the
Company’s non-GAAP financial measures permit investors to better
focus on our long-term earnings performance without regard to the
volatility in GAAP financial results that can and do occur during
this phase of our portfolio and company growth.
We disclose these non-GAAP financial measures to
investors to provide an alternative method for assessing our
financial condition and operating results. These non-GAAP financial
measures are not in accordance with GAAP and may be different from
non-GAAP measures used by other companies, including other
companies within our industry. The presentation of non-GAAP
financial information is not meant to be considered in isolation or
as a substitute for comparable amounts prepared in accordance with
GAAP. A reconciliation of GAAP to the non-GAAP financial measures
described above can be found below.
Adjusted Non-GAAP Net Income.
Our DZ Bank/Autobahn senior revolving credit facility requires us
to maintain a positive net income calculated on an adjusted
non-GAAP basis. We calculate our adjusted non-GAAP net income by
recognizing the actuarial gain accruing within our life insurance
policies at the expected internal rate of return, exclusive of
interest costs, of the policies we own without regard to fair
value. We net this actuarial gain against our adjusted costs during
the same period to calculate our net income on a non-GAAP
basis.
|
Three Months EndedJune
30, |
|
Six Months EndedJune
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
GAAP
net income/loss |
$ |
(5,694,251 |
) |
|
$ |
2,482,250 |
|
|
$ |
(5,739,353 |
) |
|
$ |
4,067,786 |
|
Unrealized fair value gain (6) |
|
(15,235,502 |
) |
|
|
(21,241,376 |
) |
|
|
(29,119,335 |
) |
|
|
(32,772,929 |
) |
Adjusted cost basis increase (7) |
|
22,739,544 |
|
|
|
16,372,918 |
|
|
|
44,460,622 |
|
|
|
31,739,965 |
|
Accrual of unrealized actuarial gain (8) |
|
7,505,266 |
|
|
|
7,460,000 |
|
|
|
12,415,448 |
|
|
|
13,527,000 |
|
Total adjusted non-GAAP
income (9) |
$ |
9,315,057 |
|
|
$ |
5,073,791 |
|
|
$ |
22,017,382 |
|
|
$ |
16,561,822 |
|
Preferred stock dividends |
|
2,031,097 |
|
|
|
600,924 |
|
|
|
3,898,857 |
|
|
|
1,112,155 |
|
Non-GAAP income
attributable to common shareholders
|
|
7,283,960 |
|
|
|
4,472,867 |
|
|
|
18,118,525 |
|
|
|
15,449,667 |
|
|
- Reversal of GAAP unrealized fair value gain of life
insurance policies.
- Adjusted cost basis is increased to include those acquisition,
financing and servicing expenses that are not capitalized under
GAAP (non-GAAP Investment Cost Basis)
- Accrual of actuarial gain at the expected internal rate of
return based on the non-GAAP Investment Cost Basis for the
applicable period.
- We must maintain an annual positive consolidated adjusted
non-GAAP income to maintain compliance with our DZ Bank/Autobahn
revolving credit facility.
Media Contact:
Dan Callahan
Director of Communication
GWG Holdings, Inc.
(612) 746-1935
dcallahan@gwglife.com
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