GWGH Announces share repurchase
program
GWG Holdings, Inc. (Nasdaq:GWGH), a leading provider of liquidity
to consumers owning life insurance policies, an owner of a
portfolio of alternative assets, and the developer of epigenetic
technology for the life insurance industry, today announced its
financial and operating results for the third quarter ended
September 30, 2018.
GWGH Common Stock Repurchase
Program
The Company’s Board of Directors has approved a
common stock repurchase program authorizing the Company to purchase
up to $1.5 million in shares of the common stock. The timing and
exact amount of repurchases will be subject to various factors,
including the Company’s capital position, liquidity, alternative
uses of capital, stock trading price and general market conditions,
and it may be modified, suspended or terminated at any time.
Financial and Operating Highlights for
the Quarter
- On August 10, 2018, we completed the initial transfer of our
$695 million strategic transaction with The Beneficient Company
Group, L.P. (Beneficient Transaction).
- On November 9, 2018, we filed a preliminary information
statement with the Securities and Exchange Commission (SEC) which
represents an important step and further progress towards the final
closing of the Beneficient Transaction. This document can be found
on the SEC’s website and on our website
(http://investors.gwgh.com).
- Achieved strong life insurance policy acquisition volume
totaling over $120 million of face value of policy benefits
acquired.
- Reached a total life insurance policy portfolio of nearly $2
billion in face value of policy benefits.
- Continued to expand the number of independent broker dealers
and registered investment advisors in our investment securities
selling group.
- Reduced the outstanding amount on senior credit facility with
net pay-downs totaling $18.4 million for the quarter and $50.6
million year to date through the end of the third quarter.
- Reported a total liquidity position of $131 million at
quarter-end that includes cash, restricted cash and policy benefits
receivable.
- On October 18, 2018 received notice from ITM TwentyFirst, LLC
and, on November 12, 2018 from AVS, LLC, that the companies, two of
our primary independent third-party medical actuarial underwriting
firms, released updated mortality tables and medical underwriting
methodologies. Further information regarding these changes can be
found in our Quarterly Report on Form 10-Q filed with the SEC on
November 19, 2018.
- Achieved significant milestones within our insurtech strategy:
- Launched YouSurance (https://www.yousurance.com/), a digital
life insurance agency that is working to apply epigenetic
signatures to better assess life insurance applicants’ health and
wellness.
- Initiated a self-designed research study that includes 1,300
individuals aimed at identifying epigenetic signatures that mirror
traditional biomarkers used in life insurance underwriting, as well
as replicating underwriting risk classifications.
“The Beneficient Transaction is transformative
for our growth as we expand our alternative asset portfolio to
include new assets managed by Beneficient and look to offer
Beneficient’s suite of liquidity products to the independent-broker
dealer and RIA channels,” said Jon Sabes, GWGH Chief Executive
Officer. “And our insurtech initiative to bring step-change
epigenetic technology into the life insurance industry is under way
with our groundbreaking research study. We believe both parts of
our business present strong opportunities for growth as we continue
to build from our core competencies.”1. Financial
& Operating Highlights
($ Thousands
except per share information) |
|
Q3 2018 |
|
Q3 2017 |
|
YTD Q3 2018 |
|
YTD Q3 2017 |
Revenue |
|
$ |
16,653 |
|
|
$ |
14,697 |
|
|
$ |
55,509 |
|
|
$ |
46,453 |
|
Expenses |
|
|
27,175 |
|
|
|
21,524 |
|
|
|
75,267 |
|
|
|
62,737 |
|
Per Share Data1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)2 |
|
|
(2.52 |
) |
|
|
(1.31 |
) |
|
|
(5.50 |
) |
|
|
(2.96 |
) |
Adjusted
Non-GAAP Net Income (Loss)3,4 |
|
|
(0.11 |
) |
|
|
0.69 |
|
|
|
2.20 |
|
|
|
2.88 |
|
Capital Raised5 |
|
|
66,627 |
|
|
|
64,782 |
|
|
|
218,515 |
|
|
|
178,615 |
|
Liquidity6 |
|
|
131,416 |
|
|
|
135,762 |
|
|
|
131,416 |
|
|
|
135,762 |
|
Life Insurance
Portfolio7 |
|
|
1,961,598 |
|
|
|
1,622,627 |
|
|
|
1,961,598 |
|
|
|
1,622,627 |
|
Life Insurance
Acquired7 |
|
|
120,430 |
|
|
|
106,871 |
|
|
|
333,078 |
|
|
|
300,366 |
|
Face Value of Matured
Policies |
|
|
7,973 |
|
|
|
9,747 |
|
|
|
50,100 |
|
|
|
39,657 |
|
TTM Benefits /
Premiums8 |
|
|
135.8 |
% |
|
|
115.4 |
% |
|
|
135.8 |
% |
|
|
115.4 |
% |
- Attributable to common shareholders
- Per basic and fully diluted share outstanding
- Per fully diluted share outstanding
- See Non-GAAP Financial Measures below
- Excludes the Series B Convertible Preferred Stock and Seller
Trust L Bonds issued in conjunction with the initial transfer of
the Beneficient Transaction
- Includes cash, restricted cash and policy benefits receivable,
if any
- Face amount of policy benefits
- The ratio of policy benefits recognized to premiums paid on a
trailing twelve month (TTM) basis
2. Revenue and Expense Discussion
Third Quarter 2018 vs. Third Quarter 2017:
- Total revenue was $16.7 million in the current period, compared
to $14.7 million in the prior period primarily related to:
- Higher unrealized gain from policy acquisitions reflecting
higher policy acquisition volume – $120.4 million of face value
acquired in the current period compared to $106.9 million in the
prior period.
- No charges relating to the fair value impact of updating life
expectancy estimates in the current period, compared to a charge of
$5.4 million in the prior period.
- Lower gain from policy benefits due to decreased realization of
policy benefits – $8.0 million of life insurance policy benefits
realized in the current period compared to $9.7 million in the
prior period.
- Total expenses were $27.2 million in the current period,
compared to $21.5 million in the prior period primarily related to:
- Increased interest expense of $4.2 million due to increased
debt outstanding and higher interest rates on our amended and
restated senior credit facility partially offset by a lower balance
outstanding on this facility.
- Increased incentive compensation costs including expense
related to stock-based compensation.
- Costs of $1.3 million relating to our YouSurance and Life
Epigenetics wholly owned insurtech subsidiaries in the current
period compared to $0.3 million in the prior period.
- Increased sales and marketing costs associated with our
expanding network of independent financial advisors and insurance
agents in the current period.
Third Quarter Year-to-Date 2018 vs. Third
Quarter Year-to-Date
2017:
- Total revenue of $55.5 million in the current period, compared
to $46.5 million in the prior period primarily related to:
- Higher realization of policy benefits – $50.1 million of life
insurance policy benefits realized in the current period compared
to $39.7 million in the prior period.
- Lower charges relating to the fair value impact of updated life
expectancy estimates on certain policies in our portfolio: a charge
of $4.9 million in the current period compared to a charge of $14.0
million in the prior period.
- Lower unrealized gain from policy acquisitions due to lower
purchase yields which was partially offset by a higher amount of
policy purchases.
- Total expenses were $75.3 million in the current period,
compared to $62.7 million in the prior period primarily related to:
- Increased interest expense of $12.0 million due to increased
debt outstanding and higher interest rates on our amended and
restated senior credit facility partially offset by a lower balance
outstanding on this facility.
- Higher employee compensation and benefits expenses.
- Increased technology costs relating to systems development and
cybersecurity initiatives.
- Costs of $2.9 million relating to our YouSurance and Life
Epigenetics wholly owned insurtech subsidiaries in the current
period compared to $1.0 million in the prior period.
- Increased sales and marketing costs associated with our
expanding network of independent financial advisors and insurance
agents in the current period.
3. Life Insurance Portfolio
Statistics
Portfolio Summary:
Total portfolio face
value of policy benefits |
|
$ |
1,961,598,000 |
|
Average face value per
policy |
|
$ |
1,805,000 |
|
Average face value per
insured life |
|
$ |
2,018,000 |
|
Average age of insured
(years) |
|
|
82.1 |
|
Average life expectancy
estimate (years) |
|
|
6.7 |
|
Total number of
policies |
|
|
1,087 |
|
Number of unique
lives |
|
|
972 |
|
Demographics |
|
|
76% Males; 24% Females |
|
Number of smokers |
|
|
43 |
|
Largest policy as % of
total portfolio |
|
|
0.68 |
% |
Average policy as % of
total portfolio |
|
|
0.09 |
% |
Average annual premium
as % of face value |
|
|
2.90 |
% |
Distribution of Policies and Benefits by Current
Age of Insured:
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Total |
|
|
|
|
Min Age |
|
|
Max Age |
|
|
Number of Policies |
|
|
Policy Benefits |
|
|
Number of Policies |
|
|
Policy Benefits |
|
|
Wtd. Avg.LE
(yrs.) |
|
|
95 |
|
|
|
100 |
|
|
|
14 |
|
|
$ |
19,954,000 |
|
|
|
1.3 |
% |
|
|
1.0 |
% |
|
|
1.2 |
|
|
90 |
|
|
|
94 |
|
|
|
129 |
|
|
|
254,332,000 |
|
|
|
11.9 |
% |
|
|
13.0 |
% |
|
|
2.8 |
|
|
85 |
|
|
|
89 |
|
|
|
215 |
|
|
|
458,646,000 |
|
|
|
19.8 |
% |
|
|
23.4 |
% |
|
|
4.6 |
|
|
80 |
|
|
|
84 |
|
|
|
239 |
|
|
|
468,474,000 |
|
|
|
22.0 |
% |
|
|
23.9 |
% |
|
|
6.2 |
|
|
75 |
|
|
|
79 |
|
|
|
212 |
|
|
|
383,160,000 |
|
|
|
19.5 |
% |
|
|
19.5 |
% |
|
|
8.9 |
|
|
70 |
|
|
|
74 |
|
|
|
195 |
|
|
|
289,030,000 |
|
|
|
17.9 |
% |
|
|
14.7 |
% |
|
|
10.5 |
|
|
60 |
|
|
|
69 |
|
|
|
83 |
|
|
|
88,002,000 |
|
|
|
7.6 |
% |
|
|
4.5 |
% |
|
|
9.7 |
|
|
Total |
|
|
|
|
|
|
|
1,087 |
|
|
$ |
1,961,598,000 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
6.7 |
|
4. Life Insurance Policy Origination
Life Insurance Portfolio Activity:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
|
September
30, 2018 |
|
|
September
30, 2017 |
|
|
September
30, 2018 |
|
|
September
30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total policy benefits
purchased |
|
$ |
120,418,000 |
|
$ |
106,871,000 |
|
$ |
333,078,000 |
|
$ |
300,366,000 |
|
Total
life insurance policies purchased |
|
|
89 |
|
|
65 |
|
|
233 |
|
|
187 |
|
Average policy benefit purchased |
|
$ |
1,353,000 |
|
$ |
1,644,000 |
|
$ |
1,430,000 |
|
$ |
1,606,000 |
|
Direct policy benefits purchased |
|
$ |
16,524,000 |
|
$ |
2,734,000 |
|
$ |
29,561,000 |
|
$ |
43,878,000 |
|
Direct insurance policies purchased |
|
|
17 |
|
|
10 |
|
|
39 |
|
|
40 |
|
- Life insurance policy purchases were marginally higher in both
the third quarter of 2018 and year-to-date 2018 reflecting improved
pipeline management and pull-through rates. All of our policy
acquisition channels were highly price competitive for all reported
periods and we expect this to continue for the foreseeable future.
We expect capital allocated to future policy purchases will be
tempered as long as these conditions are present.
5. Beneficient
Transaction
As we reported in our second quarter earnings
release on August 10, 2018, we completed the initial transfer of
the Beneficient Transaction. As part of the initial transfer, and
among other consideration exchanged, we received a $50 million
investment in a newly issued Series B preferred stock that will
convert into common stock at $10.00 per share upon the final
closing.
On November 9, 2018, we filed a Preliminary
Information statement with the SEC which represents an important
step and further progress towards the final closing of the
Beneficient Transaction. The preliminary information statement can
be found on the SEC’s website. We are optimistic that we will reach
a final closing at or near year-end 2018.
Since the consummation of the initial transfer
in August 2018, the parties have made substantial progress in
exploring the strategic opportunities that we envisioned since
first evaluating this transaction. We anticipate that these
opportunities will be realized for the parties’ mutual benefit in
the coming quarters.
6. Insurtech
Initiatives
We expanded our insurtech capability through the
addition of YouSurance, a new subsidiary that seeks to deliver on
the promise of epigenetic technology. “The launch of YouSurance.com
where consumers can purchase life insurance and receive information
about their health and wellness demonstrates the confidence that we
have in our ability to commercialize epigenetic technology,” Sabes
said. “In combination with the findings we anticipate receiving
from our research study of 1,300 individuals, we expect to have a
profound impact on the way life insurance is underwritten and
sold.”
Insurtech highlights:
- Collected biological samples from 1,300 individuals for ground
truth assessment of traditional biomarkers of health and wellness,
as well as traditional life insurance underwriting information for
supervised machine learning epigenetic analysis.
- CEO Jon Sabes presented at two significant events: the
InsureTech Connect 2018 conference in Las Vegas and Plug and Play’s
Insurtech event in Silicon Valley.
- Our Chief Science Officer Dr. Brian Chen and our technology
were mentioned prominently in the November/December issue of MIT
Technology Review and in a paper published by the National Center
for Biotechnology Information.
7. Additional Information
Gain on Life Insurance Policies:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Change in estimated
probabilistic cash flows (1) |
|
$ |
19,069,000 |
|
|
$ |
12,568,000 |
|
|
$ |
55,483,000 |
|
|
$ |
40,033,000 |
|
Unrealized gain on
acquisitions (2) |
|
|
9,021,000 |
|
|
|
7,217,000 |
|
|
|
21,790,000 |
|
|
|
25,863,000 |
|
Premiums and other
annual fees |
|
|
(14,765,000 |
) |
|
|
(13,174,000 |
) |
|
|
(39,670,000 |
) |
|
|
(36,124,000 |
) |
Change in discount
rates (3) |
|
|
- |
|
|
|
7,987,000 |
|
|
|
- |
|
|
|
12,130,000 |
|
Change in life
expectancy evaluation (4) |
|
|
73,000 |
|
|
|
(5,370,000 |
) |
|
|
(4,890,000 |
) |
|
|
(13,974,000 |
) |
Face value of matured
policies |
|
|
7,973,000 |
|
|
|
9,747,000 |
|
|
|
50,100,000 |
|
|
|
39,657,000 |
|
Fair value of matured
policies |
|
|
(5,650,000 |
) |
|
|
(4,554,000 |
) |
|
|
(29,883,000 |
) |
|
|
(22,468,000 |
) |
Gain on life insurance
policies, net |
|
$ |
15,721,000 |
|
|
$ |
14,421,000 |
|
|
$ |
52,930,000 |
|
|
$ |
45,117,000 |
|
- Change in fair value of expected future cash flows relating to
our investment in life insurance policies that are not specifically
attributable to changes in life expectancy, discount rate or policy
maturity events.
- Gain resulting from fair value in excess of transaction price
for policies acquired during the reporting period.
- The discount rate of 10.45% as of September 30, 2018 remained
unchanged from both the prior quarter and year-end dates. The
discount rate of 10.54% as of September 30, 2017 reflected a
decrease from the 10.81% rate used at June 30, 2017 and 10.96% used
at December 31, 2016.
- The change in fair value due to updating life expectancy
estimates on certain life insurance policies in our portfolio.
Policy
Benefits Recognized and Premiums Paid (TTM):
Quarter End Date |
|
PortfolioFace Amount ($) |
|
12-MonthTrailingBenefits
Realized ($) |
|
12-MonthTrailing Premiums Paid
($) |
|
12-MonthTrailingBenefits/PremiumCoverage
Ratio |
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 |
|
40,239,000 |
|
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 |
% |
September 30, 2017 |
|
1,622,627,000 |
|
53,742,000 |
|
46,559,000 |
|
115.4 |
% |
December 31, 2017 |
|
1,676,148,000 |
|
64,719,000 |
|
52,263,000 |
|
123.8 |
% |
March
31, 2018 |
|
1,758,066,000 |
|
60,248,000 |
|
53,169,000 |
|
113.3 |
% |
June
30, 2018 |
|
1,849,079,000 |
|
76,936,000 |
|
53,886,000 |
|
142.8 |
% |
September 30, 2018 |
|
1,961,598,000 |
|
75,161,000 |
|
55,365,000 |
|
135.8 |
% |
Webcast/Conference Call
Details
Management will host a webcast/conference call Wednesday,
November 21 at 8:30 a.m. EST to discuss our financial and operating
results. The webcast will give viewers audio and access to
PowerPoint slides that illustrate points made during the call. To
register for the call and webcast, go to
http://get.gwgh.com/q32018webcastinvite.
After the webcast is completed, a replay of it can be accessed
at http://get.gwgh.com/q32018webcast.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq:GWGH), the parent
company of GWG Life, Life Epigenetics and YouSurance, is a leading
provider of liquidity to consumers owning life insurance policies,
an owner of a portfolio of alternative assets, and the developer of
epigenetic technology for the life insurance industry and beyond.
GWG Life provides value to consumers owning illiquid life insurance
products across America, delivering them more than $564 million for
their policies since 2006. GWG Life owns a life insurance policy
portfolio of $1.96 billion in face value of policy benefits as of
September 30, 2018. Life Epigenetics is commercializing epigenetic
technology for life insurance industry and beyond. YouSurance, a
digital life insurance agency, is working to embed epigenetic
testing into life insurance purchasing to provide consumers a
value-added ecosystem that supports their health and wellness while
reducing the cost of their insurance.
For more information about GWG Holdings,
email info@gwgh.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 that 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.
Media Contacts:Dan
CallahanDirector of CommunicationGWG Holdings, Inc.(612)
746-1935dcallahan@gwgh.com
GWG HOLDINGS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
September 30, 2018 |
|
|
December 31, 2017 |
|
|
|
(unaudited) |
|
|
|
|
A S S
E T S |
|
|
|
Cash and cash
equivalents |
|
$ |
117,873,668 |
|
|
$ |
114,421,491 |
|
Restricted cash |
|
|
3,069,759 |
|
|
|
28,349,685 |
|
Investment in life
insurance policies, at fair value |
|
|
791,468,587 |
|
|
|
650,527,353 |
|
Life insurance policy
benefits receivable |
|
|
10,472,696 |
|
|
|
16,658,761 |
|
Other assets |
|
|
13,022,023 |
|
|
|
8,898,884 |
|
TOTAL ASSETS |
|
$ |
935,906,733 |
|
|
$ |
818,856,174 |
|
|
|
|
|
|
|
|
|
|
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 facility
with LNV Corporation |
|
$ |
162,469,172 |
|
|
$ |
212,238,192 |
|
L Bonds |
|
|
570,199,704 |
|
|
|
447,393,568 |
|
Accounts payable |
|
|
2,579,323 |
|
|
|
6,394,439 |
|
Interest and dividends
payable |
|
|
16,228,341 |
|
|
|
15,427,509 |
|
Other accrued
expenses |
|
|
3,272,758 |
|
|
|
3,730,723 |
|
TOTAL LIABILITIES |
|
|
754,749,298 |
|
|
|
685,184,431 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED
STOCK |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 100,000; shares outstanding 97,534
and 98,611; liquidation preference of $98,103,000 and $99,186,000
as of September 30, 2018 and December 31, 2017, respectively) |
|
|
86,920,335 |
|
|
|
92,840,243 |
|
SERIES 2 REDEEMABLE
PREFERRED STOCK |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 150,000; shares outstanding 148,444
and 88,709; liquidation preference of $149,310,000 and $89,208,000
as of September 30, 2018 and December 31, 2017, respectively) |
|
|
129,147,704 |
|
|
|
80,275,204 |
|
SERIES B CONVERTIBLE
PREFERRED STOCK |
|
|
|
|
|
|
|
|
(par
value $0.001; stated value $10; shares authorized and outstanding
5,000,000) |
|
|
50,000,000 |
|
|
|
- |
|
COMMON STOCK |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 210,000,000; shares issued and
outstanding 5,980,124 as of September 30, 2018 and 5,813,555 as of
December 31, 2017) |
|
|
5,980 |
|
|
|
5,813 |
|
Additional paid-in
capital |
|
|
- |
|
|
|
- |
|
Accumulated
deficit |
|
|
(84,916,584 |
) |
|
|
(39,449,517 |
) |
TOTAL STOCKHOLDERS’ EQUITY |
|
|
181,157,435 |
|
|
|
133,671,743 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES &
EQUITY |
|
$ |
935,906,733 |
|
|
$ |
818,856,174 |
|
GWG HOLDINGS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2018 |
|
|
September 30, 2017 |
|
|
September 30, 2018 |
|
|
September 30, 2017 |
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on life insurance
policies, net |
|
$ |
15,721,513 |
|
|
$ |
14,421,353 |
|
|
$ |
52,930,008 |
|
|
$ |
45,117,438 |
|
Interest
and other income |
|
|
931,145 |
|
|
|
275,690 |
|
|
|
2,579,270 |
|
|
|
1,335,535 |
|
TOTAL
REVENUE |
|
|
16,652,658 |
|
|
|
14,697,043 |
|
|
|
55,509,278 |
|
|
|
46,452,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
17,514,962 |
|
|
|
13,275,407 |
|
|
|
50,726,149 |
|
|
|
38,765,647 |
|
Employee
compensation and benefits |
|
|
5,548,771 |
|
|
|
3,792,096 |
|
|
|
12,527,139 |
|
|
|
10,696,455 |
|
Legal and
professional fees |
|
|
1,421,964 |
|
|
|
1,657,090 |
|
|
|
3,751,321 |
|
|
|
3,934,027 |
|
Other
expenses |
|
|
2,688,970 |
|
|
|
2,799,196 |
|
|
|
8,262,324 |
|
|
|
9,340,617 |
|
TOTAL
EXPENSES |
|
|
27,174,667 |
|
|
|
21,523,789 |
|
|
|
75,266,933 |
|
|
|
62,736,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES |
|
|
(10,522,009 |
) |
|
|
(6,826,746 |
) |
|
|
(19,757,655 |
) |
|
|
(16,283,773 |
) |
INCOME
TAX EXPENSE (BENEFIT) |
|
|
- |
|
|
|
(2,764,243 |
) |
|
|
- |
|
|
|
(6,481,917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) |
|
|
(10,522,009 |
) |
|
|
(4,062,503 |
) |
|
|
(19,757,655 |
) |
|
|
(9,801,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
4,313,542 |
|
|
|
3,548,165 |
|
|
|
12,356,513 |
|
|
|
7,447,022 |
|
NET INCOME (LOSS)
ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(14,835,551 |
) |
|
$ |
(7,610,668 |
) |
|
$ |
(32,114,168 |
) |
|
$ |
(17,248,878 |
) |
NET
INCOME (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.52 |
) |
|
$ |
(1.31 |
) |
|
$ |
(5.50 |
) |
|
$ |
(2.96 |
) |
Diluted |
|
$ |
(2.52 |
) |
|
$ |
(1.31 |
) |
|
$ |
(5.50 |
) |
|
$ |
(2.96 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
5,894,639 |
|
|
|
5,797,800 |
|
|
|
5,840,880 |
|
|
|
5,829,808 |
|
Diluted |
|
|
5,894,639 |
|
|
|
5,797,800 |
|
|
|
5,840,880 |
|
|
|
5,829,808 |
|
Non-GAAP Financial Measures
We use non-GAAP (generally accepted accounting
principles) financial measures for evaluating financial results,
planning and forecasting, and maintaining compliance with covenants
contained in our borrowing agreements. The application of current
GAAP standards during a period of significant growth in our
business, in which period we are building a large and actuarially
diverse portfolio of life insurance policies, results in current
period operating performance that may not be reflective of our
long-term earnings potential. Management believes that our non-GAAP
financial measures permit investors to better focus on this
long-term earnings performance without regard to the volatility in
GAAP financial results that can occur during this phase of
growth.
Non-GAAP financial measures disclosed by us are
provided as additional information to investors in order 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.
We calculate the adjusted net income by recognizing the actuarial
gain accruing within our life insurance policies at the expected
internal rate of return 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 EndedSeptember
30,(unaudited) |
|
|
Nine Months EndedSeptember
30,(unaudited) |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
GAAP net loss
attributable to common shareholders |
$ |
(14,836,000 |
) |
|
$ |
(7,611,000 |
) |
|
$ |
(32,114,000 |
) |
|
$ |
(17,249,000 |
) |
Unrealized fair value gain (1) |
|
(24,840,000 |
) |
|
|
(20,182,000 |
) |
|
|
(56,058,000 |
) |
|
|
(49,301,000 |
) |
Adjusted cost basis increase (2) |
|
29,704,000 |
|
|
|
24,207,000 |
|
|
|
83,154,000 |
|
|
|
68,667,000 |
|
Accrual of unrealized actuarial gain (3) |
|
9,325,000 |
|
|
|
9,032,000 |
|
|
|
20,898,000 |
|
|
|
21,448,000 |
|
Total
adjusted non-GAAP net income attributable to common
shareholders |
$ |
(647,000 |
) |
|
$ |
5,446,000 |
|
|
$ |
15,880,000 |
|
|
$ |
23,565,000 |
|
Non-GAAP net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(0.11 |
) |
|
|
0.94 |
|
|
|
2.72 |
|
|
|
4.04 |
|
Diluted |
|
(0.11 |
) |
|
|
0.69 |
|
|
|
2.20 |
|
|
|
2.88 |
|
Average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
5,894,639 |
|
|
|
5,797,800 |
|
|
|
5,840,880 |
|
|
|
5,829,808 |
|
Diluted |
|
5,894,639 |
|
|
|
9,264,817 |
|
|
|
7,880,678 |
|
|
|
9,000,574 |
|
- Reversal of unrealized GAAP fair value gain on life insurance
policies for current period.
- Adjusted cost basis is increased to include interest, premiums
and servicing fees that are expensed 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.
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