Atlanticus Holdings Corporation (NASDAQ: ATLC) (Atlanticus, the
Company, we, our or us), a financial technology company which
enables its bank, retail and healthcare partners to offer more
inclusive financial services to millions of everyday Americans,
today announced its financial results for the second quarter ended
June 30, 2023.
Financial and Operating Highlights
Second Quarter 2023 Highlights (all comparisons to the
Second Quarter 2022)
-
Managed receivables2 increased 13.9% to $2.2 billion
-
Total operating revenue increased 7.8% to $290.8 million.
-
Return on average shareholders' equity of 21.2%3
-
Purchase volume of $696.1 million.
-
Over 350,000 new accounts served during the quarter, over 3.3
million total accounts serviced1
-
Net income attributable to common shareholders of $18.8 million, or
$1.02 per diluted common share
1 Receviables growth is calculated based on the increase
in Loans, interest and fees receivable, at fair value as of June
30, 2023, compared to June 30, 2022; In our calculation of
total accounts serviced, we include all accounts with
account activity and accounts that have open lines of credit at the
end of the referenced period.
2 Managed receivables is a non-GAAP financial measure and
excludes the results of our Auto Finance receivables. See Non-GAAP
Financial Measures for important additional information.
3 Return on average shareholders' equity is calculated
using Net income attributable to common shareholders as the
numerator and the average of Total shareholders' equity as of June
30, 2023 and March 31, 2023 as the denominator, annualized.
Management Commentary
Jeff Howard, President and Chief Executive
Officer at Atlanticus stated, “We are pleased to once again deliver
strong profitability and return on capital, even as we navigate
elevated charge-offs following consumer stress caused by rapid
inflation in the second half of last year. As we have observed the
consumers we serve benefit from higher wages and adjust to higher
cost of living, we have returned to quarter over quarter increases
in new accounts served leading to our continued trend of year over
year managed receivables and revenue growth.
“We are seeing growth across each of our product
offerings. Our retail credit offering grew through new client roll
outs as well as period over period growth from existing clients.
Our general purpose managed receivables also grew year-over-year,
even as the total number of customers served by that business line
declined due to our tightened underwriting beginning in the second
quarter of last year. General purpose receivables growth was due to
higher credit line utilization as the portfolio matures, as well as
an increase in the number of new customers on a quarter over
quarter basis. In total, we added over 350,000 new accounts on
behalf of our bank partners in the quarter, up from aproximately
220,000 in the first quarter of 2023.
“As has been our focus historically, our future
growth will be dependent on our confidence in achieving attractive
returns on our shareholders’ capital. As the consumers we serve
have regained stable performance, and with ample liquidity
available to us, we are well positioned for long term sustained
growth through each of our retail credit, general purpose credit
card, healthcare payments and auto finance lines of business.”
Financial
Results |
|
For the Three Months Ended June 30, |
|
|
($ in thousands,
except per share data) |
|
2023 |
|
2022 |
|
% Change |
Total operating revenue |
|
$ |
290,751 |
|
|
$ |
269,796 |
|
|
7.8 |
% |
Other non-operating
revenue |
|
|
87 |
|
|
|
239 |
|
|
nm |
|
Total revenue |
|
|
290,838 |
|
|
|
270,035 |
|
|
7.7 |
% |
Interest expense |
|
|
(24,215 |
) |
|
|
(18,925 |
) |
|
28.0 |
% |
Provision for losses on loans, interest and fees receivable
recorded at amortized cost |
|
|
(309 |
) |
|
|
(182 |
) |
|
nm |
|
Changes in fair value of loans, interest and fees receivable
recorded at fair value |
|
|
(177,829 |
) |
|
|
(146,559 |
) |
|
21.3 |
% |
Net
margin |
|
$ |
88,485 |
|
|
$ |
104,369 |
|
|
-15.2 |
% |
Total operating
expenses |
|
$ |
56,472 |
|
|
$ |
61,829 |
|
|
-8.7 |
% |
Net
income |
|
$ |
24,814 |
|
|
$ |
33,797 |
|
|
-26.6 |
% |
Net income
attributable to controlling interests |
|
$ |
25,089 |
|
|
$ |
34,025 |
|
|
-26.3 |
% |
Preferred dividends
and discount accretion |
|
$ |
(6,289 |
) |
|
$ |
(6,257 |
) |
|
nm |
|
Net income
attributable to common shareholders |
|
$ |
18,800 |
|
|
$ |
27,768 |
|
|
-32.3 |
% |
Net income
attributable to common shareholders per common
share—basic |
|
$ |
1.30 |
|
|
$ |
1.88 |
|
|
-30.9 |
% |
Net income
attributable to common shareholders per common
share—diluted |
|
$ |
1.02 |
|
|
$ |
1.46 |
|
|
-30.1 |
% |
*nm = not meaningful
Managed Receivables
Managed receivables increased 13.9% to $2.2
billion from June 30, 2022 largely driven by growth in the private
label credit and general purpose credit card products offered by
our bank partners. Total accounts served increased 2.0% to 3.3
million. We have continued to experience overall period-over-period
quarterly receivables growth with over $264.5 million in net
receivables growth associated with the private label credit and
general purpose credit card products offered by our bank partners
from June 30, 2022 to June 30, 2023. The addition of large
private label credit retail partners and ongoing purchases of
receivables arising in accounts issued by our bank partners to
customers of our existing retail partners helped grow our private
label credit receivables by $130.1 million in the twelve months
ended June 30, 2023. Our general purpose credit card receivables
grew by $134.3 million during the twelve months ended June 30,
2023. We have noted recent recoveries in consumer spending behavior
that have helped to increase the overall combined managed
receivables levels and we currently expect this trend to
continue further into 2023, although we expect the pace of
growth to slow when compared to earlier periods due to tightened
underwriting standards adopted during the second quarter 2022 (and
subsequent quarters).
Total Operating Revenue
Total operating revenue consists of: 1) interest
income, finance charges and late fees on consumer loans, 2) other
fees on credit products including annual and merchant fees and 3)
ancillary, interchange and servicing income on loan
portfolios.
During the quarter ended June 30, 2023, total
operating revenue increased 7.8% to $290.8 million when compared to
the quarter ended June 30, 2022.
We continue to experience period-over-period
growth in all segments of our business including private label
credit and general purpose credit card receivables and to a lesser
extent in our Auto Finance receivables. We expect net
period-over-period growth in our total interest income and related
fees for these operations for the majority of 2023, albeit at a
decreased growth rate to that experienced in 2022. Growth in future
periods is also dependent on the addition of new retail partners
and the expansion of existing relationships to expand the reach of
private label credit operations and effective marketing for the
general purpose credit card operations.
Interest Expense
Interest expense was $24.2 million for the
quarter ended June 30, 2023, compared to $18.9 million for the
quarter ended June 30, 2022. The elevated expenses were primarily
driven by the planned increases in outstanding debt in proportion
to growth in our receivables coupled with some increases in the
cost of capital.
Outstanding notes payable, net of unamortized
debt issuance costs and discounts, associated with our private
label credit and general purpose credit card platform increased
from $1,359.7 million as of June 30, 2022 to $1,595.8 million
as of June 30, 2023. Recent increases in the federal funds rate
have thus far had a modest impact on our interest expense as over
85% of interest rates on our outstanding debt are fixed.
We anticipate additional debt financing over the
next few quarters as we continue to grow coupled with increased
effective interest rates resulting from recent federal funds rate
increases. As such, we expect our quarterly interest expense for
these operations to increase compared to prior
periods.
Changes in Fair Value of Loans, Interest and Fees
Receivable Recorded at Fair Value
Changes in fair value of loans, interest and
fees receivable recorded at fair value increased to $177.8 million
for the quarter ended June 30, 2023, compared to $146.6 million for
the quarter ended June 30, 2022.
This increase was largely driven by growth in
underlying receivables coupled with increased fee billings on those
receivables.
Fee billings on our fair value receivables
increased from $217.9 million for the quarter ended June 30, 2022
to $234.1 million for the quarter ended June 30, 2023. We include
expected market degradation in our forecasts to reflect the
possibility of delinquency rates increasing in the near term (and
the corresponding increase in charge-offs and decrease in payments)
above the level that historical and current trends would
suggest.
We expect our change in fair value of credit
card receivables recorded at fair value to increase throughout 2023
consistent with growth in these receivables.
Total Operating Expenses
Total operating expenses decreased 8.7% in the
quarter when compared to the same period in 2022.
For the quarter, operating expenses decreased,
primarily driven by reductions in marketing, corresponding to
strategic underwriting, tightening and selectively slowing our
growth in receivables and new customers on behalf of our bank
partners.
We expect increases in portions of this cost for
2023 as we continue to grow the number of consumers served and hire
additional talent to meet our anticipated levels of marketing,
origination, and receivables.
Net Income Attributable to Common
Shareholders
Net income attributable to common shareholders
decreased 32.3% to $18.8 million, or $1.02 per diluted share for
the quarter ended June 30, 2023.
Share Repurchases
We repurchased and retired 105,447 shares of our
common stock at an aggregate cost of $3.0 million, in the quarter
ended June 30, 2023.
We will continue to evaluate the best use of our
capital to increase shareholder value over time.
About Atlanticus Holdings Corporation
Empowering Better Financial Outcomes for Everyday Americans
Atlanticus™ technology enables bank, retail, and
healthcare partners to offer more inclusive financial services to
everyday Americans through the use of proprietary analytics. We
apply the experience gained and infrastructure built from servicing
over 20 million customers and over $37 billion in consumer loans
over more than 25 years of operating history to support lenders
that originate a range of consumer loan products. These products
include retail and healthcare private label credit and general
purpose credit cards marketed through our omnichannel platform,
including retail point-of-sale, healthcare-point of-care, direct
mail solicitation, internet-based marketing, and partnerships with
third parties. Additionally, through our Auto Finance subsidiary,
Atlanticus serves the individual needs of automotive dealers and
automotive non-prime financial organizations with multiple
financing and service programs.
Forward-Looking Statements
This press release contains forward-looking
statements that reflect the Company's current views with respect
to, among other things, its business, operations, financial
performance, revenue, amount and pace of growth of managed
receivables, consumer spending, growth in partner brands, total
interest income and related fees and charges, debt financing,
liquidity, interest expense, operating expense, fair value of
credit card receivables, provision for losses on
loans, delinquencies on receivables and economic
developments. You generally can identify these statements by the
use of words such as outlook, potential, continue, may, seek,
approximately, predict, believe, expect, plan, intend, estimate or
anticipate and similar expressions or the negative versions of
these words or comparable words, as well as future or conditional
verbs such as will, should, would, likely and could. These
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those included
in the forward-looking statements. These risks and uncertainties
include those risks described in the Company's filings with the
Securities and Exchange Commission and include, but are not limited
to, risks related to the extent and duration of the COVID-19
pandemic and its impact on the Company, bank partners, merchant
partners, consumers, loan demand, the capital markets, labor
availability, supply chains and the economy in general; the
Company's ability to retain existing, and attract new, merchant
partners and funding sources; changes in market interest rates;
increases in loan delinquencies; its ability to operate
successfully in a highly regulated industry; the outcome of
litigation and regulatory matters; the effect of management
changes; cyberattacks and security vulnerabilities in its products
and services; and the Company's ability to compete successfully in
highly competitive markets. The forward-looking statements speak
only as of the date on which they are made, and, except to the
extent required by federal securities laws, the Company disclaims
any obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events. In light
of these risks and uncertainties, there is no assurance that the
events or results suggested by the forward-looking statements will
in fact occur, and you should not place undue reliance on these
forward-looking statements.
Contact:Investor Relations(770)
828-2000investors@atlanticus.com
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Balance Sheets
(Unaudited)(Dollars in thousands) |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Unrestricted cash and cash
equivalents (including $172.1 million and $202.2 million associated
with variable interest entities at June 30, 2023 and December 31,
2022, respectively) |
|
$ |
342,616 |
|
|
$ |
384,984 |
|
Restricted cash and cash
equivalents (including $30.3 million and $27.6 million associated
with variable interest entities at June 30, 2023 and December 31,
2022, respectively) |
|
|
51,791 |
|
|
|
48,208 |
|
Loans, interest and fees
receivable: |
|
|
|
|
|
|
|
|
Loans, interest and fees receivable, at fair value (including
$1,868.3 million and $1,735.9 million associated with variable
interest entities at June 30, 2023 and December 31, 2022,
respectively) |
|
|
1,916,063 |
|
|
|
1,817,976 |
|
Loans, interest and fees receivable, gross |
|
|
115,055 |
|
|
|
105,267 |
|
Allowances for uncollectible loans, interest and fees
receivable |
|
|
(1,700 |
) |
|
|
(1,643 |
) |
Deferred revenue |
|
|
(18,863 |
) |
|
|
(16,190 |
) |
Net loans, interest and fees
receivable |
|
|
2,010,555 |
|
|
|
1,905,410 |
|
Property at cost, net of
depreciation |
|
|
12,549 |
|
|
|
10,013 |
|
Operating lease right-of-use
assets |
|
|
11,373 |
|
|
|
11,782 |
|
Prepaid expenses and other
assets |
|
|
25,818 |
|
|
|
27,417 |
|
Total assets |
|
$ |
2,454,702 |
|
|
$ |
2,387,814 |
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
47,468 |
|
|
$ |
44,332 |
|
Operating lease
liabilities |
|
|
20,543 |
|
|
|
20,112 |
|
Notes payable, net (including
$1,595.8 million and $1,586.0 million associated with variable
interest entities at June 30, 2023 and December 31, 2022,
respectively) |
|
|
1,665,246 |
|
|
|
1,653,306 |
|
Senior notes, net |
|
|
144,316 |
|
|
|
144,385 |
|
Income tax liability |
|
|
75,640 |
|
|
|
60,689 |
|
Total liabilities |
|
|
1,953,213 |
|
|
|
1,922,824 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value,
10,000,000 shares authorized: |
|
|
|
|
|
|
|
|
Series A preferred stock,
400,000 shares issued and outstanding at June 30, 2023 (liquidation
preference - $40.0 million); 400,000 shares issued and outstanding
at December 31, 2022 (1) |
|
|
40,000 |
|
|
|
40,000 |
|
Class B preferred units issued
to noncontrolling interests |
|
|
100,100 |
|
|
|
99,950 |
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
|
|
Series B preferred stock, no
par value, 3,256,261 shares issued and outstanding at June 30, 2023
(liquidation preference - $81.4 million); 3,204,640 shares issued
and outstanding at December 31, 2022 (1) |
|
|
— |
|
|
|
— |
|
Common stock, no par value,
150,000,000 shares authorized: 14,428,039 and 14,453,415 shares
issued and outstanding at June 30, 2023 and December 31, 2022,
respectively |
|
|
— |
|
|
|
— |
|
Paid-in capital |
|
|
107,633 |
|
|
|
121,996 |
|
Retained earnings |
|
|
255,716 |
|
|
|
204,415 |
|
Total shareholders’
equity |
|
|
363,349 |
|
|
|
326,411 |
|
Noncontrolling interests |
|
|
(1,960 |
) |
|
|
(1,371 |
) |
Total equity |
|
|
361,389 |
|
|
|
325,040 |
|
Total liabilities, preferred
stock and equity |
|
$ |
2,454,702 |
|
|
$ |
2,387,814 |
|
(1) |
|
Both the Series A preferred stock and the Series B preferred stock
have no par value and are part of the same aggregate 10,000,000
shares authorized |
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Statements of Income
(Unaudited)(Dollars in thousands, except per share
data) |
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans, including past
due fees |
|
$ |
220,042 |
|
|
$ |
191,547 |
|
|
$ |
429,743 |
|
|
$ |
356,353 |
|
Fees and related income on
earning assets |
|
|
62,874 |
|
|
|
65,839 |
|
|
|
107,231 |
|
|
|
120,537 |
|
Other revenue |
|
|
7,835 |
|
|
|
12,410 |
|
|
|
14,759 |
|
|
|
22,676 |
|
Total operating revenue,
net |
|
|
290,751 |
|
|
|
269,796 |
|
|
|
551,733 |
|
|
|
499,566 |
|
Other non-operating
revenue |
|
|
87 |
|
|
|
239 |
|
|
|
146 |
|
|
|
300 |
|
Total revenue |
|
|
290,838 |
|
|
|
270,035 |
|
|
|
551,879 |
|
|
|
499,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(24,215 |
) |
|
|
(18,925 |
) |
|
|
(48,449 |
) |
|
|
(36,335 |
) |
Provision for losses on loans,
interest and fees receivable recorded at amortized cost |
|
|
(309 |
) |
|
|
(182 |
) |
|
|
(1,013 |
) |
|
|
(329 |
) |
Changes in fair value of
loans, interest and fees receivable recorded at fair value |
|
|
(177,829 |
) |
|
|
(146,559 |
) |
|
|
(327,651 |
) |
|
|
(251,239 |
) |
Net margin |
|
|
88,485 |
|
|
|
104,369 |
|
|
|
174,766 |
|
|
|
211,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
10,629 |
|
|
|
10,099 |
|
|
|
21,233 |
|
|
|
21,525 |
|
Card and loan servicing |
|
|
23,814 |
|
|
|
23,997 |
|
|
|
48,149 |
|
|
|
46,672 |
|
Marketing and
solicitation |
|
|
14,486 |
|
|
|
20,231 |
|
|
|
24,892 |
|
|
|
40,804 |
|
Depreciation |
|
|
643 |
|
|
|
549 |
|
|
|
1,261 |
|
|
|
1,142 |
|
Other |
|
|
6,900 |
|
|
|
6,953 |
|
|
|
13,136 |
|
|
|
21,646 |
|
Total operating expenses |
|
|
56,472 |
|
|
|
61,829 |
|
|
|
108,671 |
|
|
|
131,789 |
|
Income before income
taxes |
|
|
32,013 |
|
|
|
42,540 |
|
|
|
66,095 |
|
|
|
80,174 |
|
Income tax expense |
|
|
(7,199 |
) |
|
|
(8,743 |
) |
|
|
(15,387 |
) |
|
|
(1,622 |
) |
Net income |
|
|
24,814 |
|
|
|
33,797 |
|
|
|
50,708 |
|
|
|
78,552 |
|
Net loss attributable to
noncontrolling interests |
|
|
275 |
|
|
|
228 |
|
|
|
593 |
|
|
|
483 |
|
Net income attributable to
controlling interests |
|
|
25,089 |
|
|
|
34,025 |
|
|
|
51,301 |
|
|
|
79,035 |
|
Preferred dividends and
discount accretion |
|
|
(6,289 |
) |
|
|
(6,257 |
) |
|
|
(12,516 |
) |
|
|
(12,463 |
) |
Net income attributable to
common shareholders |
|
$ |
18,800 |
|
|
$ |
27,768 |
|
|
$ |
38,785 |
|
|
$ |
66,572 |
|
Net income attributable to
common shareholders per common share—basic |
|
$ |
1.30 |
|
|
$ |
1.88 |
|
|
$ |
2.68 |
|
|
$ |
4.50 |
|
Net income attributable to
common shareholders per common share—diluted |
|
$ |
1.02 |
|
|
$ |
1.46 |
|
|
$ |
2.11 |
|
|
$ |
3.43 |
|
|
|
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Statements of
Shareholders’ Equity and Temporary Equity
(Unaudited)For the Three and Six Months Ended June
30, 2023(Dollars in thousands) |
|
|
|
Series B Preferred Stock |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary Equity |
|
|
|
Shares Issued |
|
Amount |
|
Shares Issued |
|
Amount |
|
Paid-In Capital |
|
Retained Earnings |
|
Noncontrolling Interests |
|
Total Equity |
|
|
Class B Preferred Units |
|
Series A Preferred Stock |
|
Balance at December 31, 2022 |
|
3,204,640 |
|
$ |
— |
|
14,453,415 |
|
$ |
— |
|
$ |
121,996 |
|
$ |
204,415 |
|
$ |
(1,371 |
) |
$ |
325,040 |
|
|
$ |
99,950 |
|
$ |
40,000 |
|
Accretion of discount
associated with issuance of subsidiary equity |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(75 |
) |
|
— |
|
|
— |
|
|
(75 |
) |
|
|
75 |
|
|
— |
|
Discount associated with
repurchase of preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
16 |
|
|
— |
|
|
— |
|
|
16 |
|
|
|
— |
|
|
— |
|
Preferred dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(6,168 |
) |
|
— |
|
|
— |
|
|
(6,168 |
) |
|
|
— |
|
|
— |
|
Stock option exercises and
proceeds related thereto |
|
— |
|
|
— |
|
1,258 |
|
|
— |
|
|
19 |
|
|
— |
|
|
— |
|
|
19 |
|
|
|
— |
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
|
— |
|
|
— |
|
146,227 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Issuance of series B preferred
stock, net |
|
51,327 |
|
|
— |
|
— |
|
|
— |
|
|
1,069 |
|
|
— |
|
|
— |
|
|
1,069 |
|
|
|
— |
|
|
— |
|
Contributions by owners of
noncontrolling interests |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4 |
|
|
4 |
|
|
|
— |
|
|
— |
|
Stock-based compensation
costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
931 |
|
|
— |
|
|
— |
|
|
931 |
|
|
|
— |
|
|
— |
|
Redemption and retirement of
preferred shares |
|
(1,806 |
) |
|
— |
|
— |
|
|
— |
|
|
(45 |
) |
|
— |
|
|
— |
|
|
(45 |
) |
|
|
— |
|
|
— |
|
Redemption and retirement of
common shares |
|
— |
|
|
— |
|
(72,354 |
) |
|
— |
|
|
(1,947 |
) |
|
— |
|
|
— |
|
|
(1,947 |
) |
|
|
— |
|
|
— |
|
Net income (loss) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
26,212 |
|
|
(318 |
) |
|
25,894 |
|
|
|
— |
|
|
— |
|
Balance at March 31, 2023 |
|
3,254,161 |
|
$ |
— |
|
14,528,546 |
|
$ |
— |
|
$ |
115,796 |
|
$ |
230,627 |
|
$ |
(1,685 |
) |
$ |
344,738 |
|
|
$ |
100,025 |
|
$ |
40,000 |
|
Accretion of discount
associated with issuance of subsidiary equity |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(75 |
) |
|
— |
|
|
— |
|
|
(75 |
) |
|
|
75 |
|
|
— |
|
Preferred dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(6,214 |
) |
|
— |
|
|
— |
|
|
(6,214 |
) |
|
|
— |
|
|
— |
|
Stock option exercises and
proceeds related thereto |
|
— |
|
|
— |
|
5,160 |
|
|
— |
|
|
40 |
|
|
— |
|
|
— |
|
|
40 |
|
|
|
— |
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
|
— |
|
|
— |
|
(220 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Issuance of series B preferred
stock, net |
|
2,100 |
|
|
— |
|
— |
|
|
— |
|
|
43 |
|
|
— |
|
|
— |
|
|
43 |
|
|
|
— |
|
|
— |
|
Stock-based compensation
costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
1,031 |
|
|
— |
|
|
— |
|
|
1,031 |
|
|
|
— |
|
|
— |
|
Redemption and retirement of
common shares |
|
— |
|
|
— |
|
(105,447 |
) |
|
— |
|
|
(2,988 |
) |
|
— |
|
|
— |
|
|
(2,988 |
) |
|
|
— |
|
|
— |
|
Net income (loss) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
25,089 |
|
|
(275 |
) |
|
24,814 |
|
|
|
— |
|
|
— |
|
Balance at June 30, 2023 |
|
3,256,261 |
|
$ |
— |
|
14,428,039 |
|
$ |
— |
|
$ |
107,633 |
|
$ |
255,716 |
|
$ |
(1,960 |
) |
$ |
361,389 |
|
|
$ |
100,100 |
|
$ |
40,000 |
|
Additional Information
Additional trends and data with respect to our
private label credit and general purpose credit card receivables
can be found in our latest Form 10-Q filing with the Securities and
Exchange Commission under Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Calculation of Non-GAAP Financial Measures
This press release presents information about
managed receivables, which is a non-GAAP financial measure provided
as a supplement to the results provided in accordance with
accounting principles generally accepted in the United States of
America (GAAP). In addition to financial measures presented in
accordance with GAAP, we present managed receivables, total managed
yield, combined principal net charge-offs, and fair value to face
value ratio, all of which are non-GAAP financial measures. These
non-GAAP financial measures aid in the evaluation of the
performance of our credit portfolios, including our risk
management, servicing and collection activities and our valuation
of purchased receivables. The credit performance of our managed
receivables provides information concerning the quality of loan
originations and the related credit risks inherent with the
portfolios. Management relies heavily upon financial data and
results prepared on the managed basis in order to manage our
business, make planning decisions, evaluate our performance and
allocate resources.
These non-GAAP financial measures are presented
for supplemental informational purposes only. These non-GAAP
financial measures have limitations as analytical tools and should
not be considered in isolation from, or as a substitute for, GAAP
financial measures. These non-GAAP financial measures may differ
from the non-GAAP financial measures used by other companies. A
reconciliation of non-GAAP financial measures to the most directly
comparable GAAP financial measures or the calculation of the
non-GAAP financial measures are provided below for each of the
fiscal periods indicated.
These non-GAAP financial measures include only
the performance of those receivables underlying consolidated
subsidiaries (for receivables carried at amortized cost basis and
fair value) and exclude the performance of receivables held by our
former equity method investee. As the receivables underlying our
former equity method investee reflect a small and diminishing
portion of our overall receivables base, we do not believe their
inclusion or exclusion in the overall results is material.
Additionally, we calculate average managed receivables based on the
quarter-end balances.
The comparison of non-GAAP managed receivables
to our GAAP financial statements requires an understanding that
managed receivables reflect the face value of loans, interest and
fees receivable without any consideration for potential loan losses
or other adjustments to reflect fair value.
A reconciliation of Loans, interest and fees
receivable, at fair value to Loans, interest and fees receivable,
at face value is as follows:
|
|
At or for the Three Months Ended |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
Loans, interest and fees receivable, at fair value |
|
$ |
1,916.1 |
|
|
$ |
1,795.6 |
|
|
$ |
1,818.0 |
|
|
$ |
1,728.1 |
|
|
$ |
1,616.9 |
|
|
$ |
1,405.8 |
|
|
$ |
1,026.4 |
|
|
$ |
846.2 |
|
Fair value mark against
receivable (2) |
|
$ |
257.9 |
|
|
$ |
260.1 |
|
|
$ |
302.1 |
|
|
$ |
322.3 |
|
|
$ |
293.0 |
|
|
$ |
272.9 |
|
|
$ |
208.9 |
|
|
$ |
182.2 |
|
Loans, interest and fees
receivable, at face value |
|
$ |
2,174.0 |
|
|
$ |
2,055.7 |
|
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,235.3 |
|
|
$ |
1,028.4 |
|
Fair value to face value ratio
(3) |
|
|
88.1 |
% |
|
|
87.3 |
% |
|
|
85.8 |
% |
|
|
84.3 |
% |
|
|
84.7 |
% |
|
|
83.7 |
% |
|
|
83.1 |
% |
|
|
82.3 |
% |
(1) |
|
We elected the fair value option to account for certain loans
receivable associated with our private label credit and general
purpose credit card platform that were acquired on or after January
1, 2020, and, as discussed in more detail in the Form 10-Q for the
quarter ended June 30, 2023, on January 1, 2022, we elected the
fair value option under ASU 2016-13 for those private label credit
and general purpose credit card receivables that were previously
accounted for under the amortized cost method. |
(2) |
|
The fair value mark against receivables reflects the difference
between the face value of a receivable and the net present value of
the expected cash flows associated with that receivable. |
(3) |
|
The Fair value to face value ratio is calculated using Loans,
interest and fees receivable, at fair value as the numerator, and
Loans, interest and fees receivable, at face value, as the
denominator. |
The calculation of managed receivables is as follows:
|
|
At or for the Three Months Ended |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
Loans, interest and fees receivable, gross |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
375.7 |
|
|
$ |
417.8 |
|
Loans, interest and fees
receivable, gross from fair value reconciliation above |
|
|
2,174.0 |
|
|
|
2,055.7 |
|
|
|
2,120.1 |
|
|
|
2,050.4 |
|
|
|
1,909.9 |
|
|
|
1,678.7 |
|
|
|
1,235.3 |
|
|
|
1,028.4 |
|
Total managed receivables |
|
$ |
2,174.0 |
|
|
$ |
2,055.7 |
|
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,611.0 |
|
|
$ |
1,446.2 |
|
(1) |
|
On January 1, 2022, we elected the fair value option under ASU
2016-13 for those private label credit and general purpose credit
card receivables that were accounted for under the amortized cost
method. |
A reconciliation of our operating revenues, net
of finance and fee charge-offs, to comparable amounts used in our
calculation of Total managed yield is as follows:
|
|
At or for the Three Months Ended |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Jun. 30 |
|
|
Mar. 31 |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
Consumer loans, including past due fees |
|
$ |
210.3 |
|
|
$ |
200.5 |
|
|
$ |
202.9 |
|
|
$ |
208.9 |
|
|
$ |
182.8 |
|
|
$ |
156.5 |
|
|
$ |
144.1 |
|
|
$ |
132.7 |
|
Fees and related income on
earning assets |
|
|
62.9 |
|
|
|
44.3 |
|
|
|
48.0 |
|
|
|
48.5 |
|
|
|
65.8 |
|
|
|
54.7 |
|
|
|
53.8 |
|
|
|
54.1 |
|
Other revenue |
|
|
7.6 |
|
|
|
6.7 |
|
|
|
8.5 |
|
|
|
11.1 |
|
|
|
12.2 |
|
|
|
10.0 |
|
|
|
9.7 |
|
|
|
8.4 |
|
Adjustments due to
acceleration of merchant fee discount amortization under fair value
accounting |
|
|
(10.6 |
) |
|
|
(0.5 |
) |
|
|
3.4 |
|
|
|
(7.9 |
) |
|
|
(12.1 |
) |
|
|
1.8 |
|
|
|
(3.4 |
) |
|
|
(14.7 |
) |
Adjustments due to
acceleration of annual fees recognition under fair value
accounting |
|
|
(9.8 |
) |
|
|
7.3 |
|
|
|
7.9 |
|
|
|
10.0 |
|
|
|
(6.6 |
) |
|
|
(1.3 |
) |
|
|
(4.4 |
) |
|
|
(12.0 |
) |
Removal of expense accruals
under GAAP |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
Removal of finance
charge-offs |
|
|
(54.2 |
) |
|
|
(61.7 |
) |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
Total managed yield |
|
$ |
206.2 |
|
|
$ |
196.6 |
|
|
$ |
212.4 |
|
|
$ |
225.3 |
|
|
$ |
200.9 |
|
|
$ |
189.2 |
|
|
$ |
171.7 |
|
|
$ |
152.4 |
|
The calculation of Combined principal net charge-offs is as
follows:
|
|
At or for the Three Months Ended |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
Net losses on impairment of loans, interest and fees receivable
recorded at fair value |
|
$ |
180.0 |
|
|
$ |
191.9 |
|
|
$ |
182.3 |
|
|
$ |
134.4 |
|
|
$ |
126.5 |
|
|
$ |
101.3 |
|
|
$ |
46.7 |
|
|
$ |
25.6 |
|
Gross charge-offs on non-fair
value accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
38.7 |
|
|
|
27.1 |
|
Finance charge-offs (2) |
|
|
(54.2 |
) |
|
|
(61.7 |
) |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
Recoveries on non-fair value
accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.1 |
) |
|
|
(2.7 |
) |
Combined principal net
charge-offs |
|
$ |
125.8 |
|
|
$ |
130.2 |
|
|
$ |
124.0 |
|
|
$ |
89.1 |
|
|
$ |
85.3 |
|
|
$ |
68.8 |
|
|
$ |
53.2 |
|
|
$ |
33.7 |
|
(1) |
|
On January 1, 2022, we implemented the fair value method under ASU
2016-13 for those private label credit and general purpose credit
card receivables that were previously accounted for under the
amortized cost method. |
(2) |
|
Finance charge-offs are included
as a component of our Provision for losses on loans, interest and
fees receivable recorded at amortized cost and Changes in fair
value of loans, interest and fees receivable recorded at fair value
in the consolidated statements of income. |
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