Today, GWG Holdings, Inc. (Nasdaq: GWGH), a financial services
holding company committed to transforming the alternative asset
industry through innovative liquidity products and related services
for the owners of illiquid alternative investments, announced its
financial and operating results for the first quarter ended March
31, 2020. The results reflect consolidated accounting and financial
reporting of GWGH and The Beneficient Company Group, L.P. (Ben LP)
and related entities (collectively, Ben).
Recent Corporate
Developments
- Despite the uncertainty surrounding
the novel coronavirus pandemic (COVID-19), the Company continues to
raise capital, pay and receive interest income and dividends,
receive insurance policy benefits, and otherwise meet its ongoing
operating obligations.
- On March 30, 2020, the Company
filed a registration statement to offer up to $2.0 billion in
principal amount of L Bonds on a continuous basis until 2023. These
bonds contain terms and features that are substantially consistent
with previous L Bond offerings.
- On May 15, 2020, Ben and its lender
signed a term sheet to amend its senior credit and subordinated
credit agreements. Among other changes, the amendment would extend
the maturity date of both loans to April 10, 2021, and provides for
them to be transferred to GWGH or a subsidiary upon issuance of
Ben’s trust company charters by the Texas Department of Banking.
The amendments set forth in the term sheet are subject to, among
other things, the negotiation and execution of definitive
agreements governing the amendments and the satisfaction of closing
conditions.
- On March 6, 2020, Ben submitted
revised trust charter applications to the Texas Department of
Banking which the Department is actively reviewing and considering.
In the interim, Ben has closed a limited number of transactions to
date, but intends to significantly expand its operations if and
when the trust charters are issued.
First Quarter 2020 Financial and
Operating Highlights
- Reported first quarter 2020 net
loss of $49.4 million, compared to a net loss of $18.9 million in
the first quarter of 2019• GWGH’s investment in Ben was
accounted for as an equity method investment prior to the
change-of-control on December 31, 2019, and the first quarter of
2020 includes the consolidated results of Ben for the first
time.• Recognized $68.9 million of non-cash, equity-based
compensation expense during the first quarter of 2020 as a result
of grants under Ben’s equity incentive plans, which significantly
contributed to the consolidated net loss. The recognition of these
Ben expenses is a result of the transactions between Ben and GWGH
that created the year-end 2019 gain. The majority of those awards
vest over a four-year period beginning on the grantee’s service
date to Ben (e.g., hire date for an employee). Because many
participants in Ben’s equity incentive plans have been with the
company for multiple years, some awards vested up to 100 percent on
the grant date and that vesting required recognition of the
commensurate equity-based compensation in the first quarter 2020
filing. The grant date value of the awards was based on the recent
valuation of Ben completed in conjunction with the
change-of-control event on December 31, 2019. Equity-based
compensation expense on a quarterly basis going forward is expected
to be significantly lower based on the awards outstanding as of
March 31, 2020.
- Reported total assets of $3.7
billion as of March 31, 2020, compared to $3.6 billion as of
December 31, 2019.
- Reported continued strong life
insurance portfolio performance:• Realized $25.5 million of
face amount of policy benefits from 20 life insurance policies
during the first quarter of 2020, compared to $30.5 million from 20
life insurance policies during the first quarter of
2019.• Ended the quarter with a life insurance portfolio of
$2.0 billion in face amount of policy benefits consisting of 1,131
policies.
- Reported continued success raising
capital through the L Bond investment product with $110.8 million
of L Bond sales in the first quarter of 2020.
- Continued its shift in focus away
from new life insurance policy acquisitions and towards its
investment in Ben, while managing its existing life insurance
policy portfolio. As part of that strategic shift, the Company has
ended its Life Care Exchange program for purchasing policies.
Reported total liquidity (cash, restricted cash, policy benefits
receivable and fees receivable) increased to $188.7 million at
March 31, 2020.
“In this unprecedented time, we are working hard
to support our advisors and the clients they serve,” said Murray
Holland, GWGH’s Chief Executive Officer. “We believe our products
are uniquely positioned to provide a combination of yield and
stability as advisors and broker-dealers report a need for
liquidity at a previously unseen level among our target market of
individual and small institutional investors.”
1. Financial &
Operating Highlights
($ Thousands except per share information) |
Q1 2020 |
|
|
Q1 2019 |
|
Revenue |
$ |
33,557 |
|
|
$ |
25,217 |
|
Expenses |
|
124,050 |
|
|
|
37,904 |
|
Income Tax Benefit |
|
14,507 |
|
|
|
— |
|
Loss from Equity Method
Investments |
|
(1,530 |
) |
|
|
(1,927 |
) |
Net Loss, including Loss from
Equity Method Investment |
|
(77,516 |
) |
|
|
(14,614 |
) |
Loss Attributable to
Noncontrolling Interests |
|
32,084 |
|
|
|
— |
|
Preferred Stock Dividends |
|
3,952 |
|
|
|
4,296 |
|
Net Loss Attributable to
Common Shareholders |
|
(49,384 |
) |
|
|
(18,910 |
|
Per Share Data: |
|
|
|
|
|
|
|
Net Loss1 |
|
(1.62 |
) |
|
|
(0.57 |
) |
Capital Raised from L
Bonds |
|
110,825 |
|
|
|
125,985 |
|
Liquidity2 |
|
188,661 |
|
|
|
183,896 |
|
Life Insurance Portfolio3 |
|
2,000,680 |
|
|
|
2,098,428 |
|
Life Insurance Acquired3 |
|
— |
|
|
|
80,211 |
|
Face Value of Matured
Policies |
|
25,502 |
|
|
|
30,459 |
|
TTM Benefits / Premiums4 |
|
184.3 |
% |
|
|
154.8 |
% |
|
|
|
|
|
|
|
|
(1) Per diluted common share
outstanding(2) Includes cash, restricted cash, policy benefits
receivable and fees receivable as of the end of the period
presented(3) Face amount of policy benefits(4) The ratio
of policy benefits realized to premiums paid on a trailing twelve
month (TTM)
basis 2. Revenue
and Expense Discussion
First Quarter 2020 vs. First Quarter 2019:
• Total revenue was $33.6 million in the
current period, compared to $25.2 million in the prior period
primarily due to:
- The Ben consolidation added $9.4 million of interest income
from its financing receivables portfolio, after intercompany
eliminations, and $5.0 million in trust services and other fee
revenue.
- Interest income of $1.1 million on the LiquidTrusts promissory
note.
- These increases were partially offset by $7.0 million of lower
gains on life insurance policies primarily due to slightly lower
average face value of matured policies and no gains on
acquisitions.
• Total expenses were $124.1 million in the
current period, compared to $37.9 million in the prior period
primarily due to:
- Employee compensation and benefits
increased by $72.6 million for this period primarily due to the
inclusion of Ben’s operations, which included the recognition of
$68.9 million of non-cash, equity-based compensation expense under
Ben’s equity incentive plans.
- Interest and fees increased by $8.9
million due to $6.1 million of additional interest expense on L
Bonds as a result of increased amounts outstanding, increased
interest expense of $2.3 million from the consolidation of Ben
related to its borrowings, and increased interest expense of $0.5
million on GWGH’s senior credit facility.
- Legal and professional fees
increased by $3.2 million primarily due to additional legal and
consulting fees recognized with the full consolidation of Ben’s
operations beginning in the first quarter of 2020.
3. Life Insurance Portfolio Statistics as of and for the
quarter ended March 31, 2020
Portfolio Summary:
Total life insurance portfolio face value of policy benefits (in
thousands) |
$ |
2,000,680 |
|
Average face value per policy
(in thousands) |
$ |
1,769 |
|
Average face value per insured
life (in thousands) |
$ |
1,900 |
|
Weighted average age of
insured (years) |
|
82.6 |
|
Weighted average life
expectancy estimate (years) |
|
7.2 |
|
Total number of policies |
|
1,131 |
|
Number of unique lives |
|
1,053 |
|
Demographics |
|
74% Males; 26% Females |
|
Number of smokers |
|
47 |
|
Largest policy as % of total
portfolio face value |
|
0.7 |
% |
|
|
|
|
Average policy as % of total
portfolio |
|
0.1 |
% |
Average annual premium as % of
face value |
|
3.5 |
% |
|
|
|
|
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 |
|
101 |
|
|
20 |
|
|
$ |
42,602 |
|
|
|
1.7 |
% |
|
|
2.1 |
% |
|
|
2.1 |
|
90 |
|
94 |
|
|
147 |
|
|
|
289,269 |
|
|
|
13.0 |
% |
|
|
14.5 |
% |
|
|
3.2 |
|
85 |
|
89 |
|
|
232 |
|
|
|
544,264 |
|
|
|
20.5 |
% |
|
|
27.2 |
% |
|
|
5.0 |
|
80 |
|
84 |
|
|
247 |
|
|
|
439,948 |
|
|
|
21.9 |
% |
|
|
22.0 |
% |
|
|
7.2 |
|
75 |
|
79 |
|
|
223 |
|
|
|
369,024 |
|
|
|
19.7 |
% |
|
|
18.4 |
% |
|
|
9.9 |
|
70 |
|
74 |
|
|
199 |
|
|
|
247,346 |
|
|
|
17.6 |
% |
|
|
12.4 |
% |
|
|
11.1 |
|
60 |
|
69 |
|
|
63 |
|
|
|
68,227 |
|
|
|
5.6 |
% |
|
|
3.4 |
% |
|
|
11.3 |
|
Total |
|
|
|
|
1,131 |
|
|
$ |
2,000,680 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Ben’s
Collateral Portfolio
Information As
of March 31, 2020, Beneficient’s loan portfolio had exposure to 118
professionally managed alternative investment funds, comprised of
350 underlying investments, and approximately 92 percent of
Beneficient’s loan portfolio was collateralized by investments in
private companies. Beneficient’s loan portfolio diversification
spans across these industry sectors, geographic regions and
exposure types:
A graphic accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/823dc06d-1eee-4f28-9b3e-6e8146447718
Assets in the collateral portfolio consist
primarily of interests in alternative investment vehicles (also
referred to as funds) that are managed by a group of U.S. and
non-U.S. based alternative asset management firms that invest in a
variety of financial markets and utilize a variety of investment
strategies. The vintages of the funds in the collateral portfolio
as of December 31, 2019 ranged from 1998 to 2011.
5. Additional
Information Gain
(Loss) on Life Insurance Policies (in thousands):
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
Change in estimated probabilistic cash flows(1) |
$ |
17,851 |
|
|
$ |
17,131 |
|
Unrealized gain on acquisitions(2) |
|
— |
|
|
|
4,459 |
|
Premiums and other annual fees |
|
(17,199 |
) |
|
|
(15,832 |
) |
Face value of matured policies |
|
25,502 |
|
|
|
30,459 |
|
Fair value of matured policies |
|
(11,709 |
) |
|
|
(14,721 |
) |
Gain (loss) on life insurance policies, net |
$ |
14,445 |
|
|
$ |
21,496 |
|
|
|
|
|
|
|
|
|
(1) Change in fair value of expected future
cash flows relating to the investment in life insurance policies
that are not specifically attributable to changes in life
expectancy, discount rate changes or policy maturity
events.(2) Gain resulting from fair value in excess of the
purchase price for life insurance policies acquired during the
reporting period.
Policy Benefits Realized and Premiums Paid
(TTM):
Quarter End Date |
|
Portfolio Face Amount(in thousands) |
|
|
12-Month Trailing Benefits
Realized(in thousands) |
|
|
12-Month Trailing Premiums
Paid(in thousands) |
|
|
12-Month Trailing Benefits/Premium Coverage
Ratio |
|
March 31, 2016 |
|
1,027,821 |
|
|
21,845 |
|
|
28,771 |
|
|
75.9 |
% |
June 30, 2016 |
|
1,154,798 |
|
|
30,924 |
|
|
31,891 |
|
|
97.0 |
% |
September 30, 2016 |
|
1,272,078 |
|
|
35,867 |
|
|
37,055 |
|
|
96.8 |
% |
December 31, 2016 |
|
1,361,675 |
|
|
48,452 |
|
|
40,239 |
|
|
120.4 |
% |
March 31, 2017 |
|
1,447,558 |
|
|
48,189 |
|
|
42,753 |
|
|
112.7 |
% |
June 30, 2017 |
|
1,525,363 |
|
|
49,295 |
|
|
45,414 |
|
|
108.5 |
% |
September 30, 2017 |
|
1,622,627 |
|
|
53,742 |
|
|
46,559 |
|
|
115.4 |
% |
December 31, 2017 |
|
1,676,148 |
|
|
64,719 |
|
|
52,263 |
|
|
123.8 |
% |
March 31, 2018 |
|
1,758,066 |
|
|
60,248 |
|
|
53,169 |
|
|
113.3 |
% |
June 30, 2018 |
|
1,849,079 |
|
|
76,936 |
|
|
53,886 |
|
|
142.8 |
% |
September 30, 2018 |
|
1,961,598 |
|
|
75,161 |
|
|
55,365 |
|
|
135.8 |
% |
December 31, 2018 |
|
2,047,992 |
|
|
71,090 |
|
|
52,675 |
|
|
135.0 |
% |
March 31, 2019 |
|
2,098,428 |
|
|
87,045 |
|
|
56,227 |
|
|
154.8 |
% |
June 30, 2019 |
|
2,088,445 |
|
|
82,421 |
|
|
59,454 |
|
|
138.6 |
% |
September 30, 2019 |
|
2,064,156 |
|
|
101,918 |
|
|
61,805 |
|
|
164.9 |
% |
December 31, 2019 |
|
2,020,973 |
|
|
125,148 |
|
|
63,851 |
|
|
196.0 |
% |
March 31, 2020 |
|
2,000,680 |
|
|
120,191 |
|
|
65,224 |
|
|
184.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Webcast Details
Management will host a webcast Monday, May 18, 2020 at 4:30 p.m.
EDT to discuss financial and operating results. The webcast will
give viewers audio and access to PowerPoint slides that illustrate
points made during the presentation. To register for the webcast,
go to http://get.gwgh.com/q12020webcastinvite.
After the webcast is completed, a replay of it can be accessed
at http://get.gwgh.com/q12020webcast.
About GWG Holdings,
Inc.
GWG Holdings, Inc. (Nasdaq: GWGH), a
financial services holding company committed to transforming the
alternative asset industry through innovative liquidity products
and related services for the owners of illiquid alternative
investments, is the parent company of GWG Life,
LLC, which owns a portfolio of $2.0 billion in face value of
life insurance policy benefits as of March 31, 2020. GWGH has
executed a series of strategic transactions with The
Beneficient Company Group, L.P., a financial services company
providing proprietary liquidity solutions to owners of alternative
assets, resulting in the closer alignment of the two
companies.
For more information about GWG Holdings,
email info@gwgh.com or visit www.gwgh.com. For more
information about Beneficient,
email askben@beneficient.com or
visit www.trustben.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, including our Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission (“SEC”) on May 15, 2020, and our Annual Report on Form
10-K filed with the SEC on March 27, 2020. 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 SEC. We do not intend, and undertake no duty, to release
publicly any updates or revisions to any forward-looking statements
contained herein.
Media Contact:Dan
CallahanDirector of CommunicationGWG Holdings, Inc.(612)
787-5744dcallahan@gwgh.com
GWG HOLDINGS, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(dollars in thousands)
|
March 31, 2020 (unaudited) |
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
$ |
116,432 |
|
|
$ |
79,073 |
|
Restricted cash |
|
26,446 |
|
|
|
20,258 |
|
Investment in life insurance
policies, at fair value |
|
802,181 |
|
|
|
796,039 |
|
Life insurance policy benefits
receivable, net |
|
15,330 |
|
|
|
23,031 |
|
Loans receivable, net of
unearned income |
|
219,296 |
|
|
|
232,344 |
|
Allowance for loan losses |
|
(700 |
) |
|
|
— |
|
Loans receivable, net |
|
218,596 |
|
|
|
232,344 |
|
Fees receivable |
|
30,453 |
|
|
|
29,168 |
|
Financing receivables from
affiliates |
|
68,290 |
|
|
|
67,153 |
|
Other assets |
|
33,906 |
|
|
|
30,135 |
|
Goodwill |
|
2,372,595 |
|
|
|
2,358,005 |
|
TOTAL ASSETS |
$ |
3,684,229 |
|
|
$ |
3,635,206 |
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Senior credit facility with
LNV Corporation |
$ |
188,793 |
|
|
$ |
174,390 |
|
L Bonds |
|
1,009,781 |
|
|
|
926,638 |
|
Seller Trust L Bonds |
|
366,892 |
|
|
|
366,892 |
|
Other borrowings |
|
152,597 |
|
|
|
153,086 |
|
Interest and dividends
payable |
|
22,403 |
|
|
|
16,516 |
|
Deferred revenue |
|
39,651 |
|
|
|
41,444 |
|
Accounts payable and accrued
expenses |
|
21,139 |
|
|
|
27,836 |
|
Deferred tax liability,
net |
|
40,206 |
|
|
|
57,923 |
|
TOTAL LIABILITIES |
|
1,841,462 |
|
|
|
1,764,725 |
|
|
|
|
|
|
|
|
Redeemable noncontrolling
interests |
|
1,241,641 |
|
|
|
1,269,654 |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED
STOCK |
|
|
|
|
|
|
(par value $0.001; shares authorized 100,000; shares outstanding
69,756 and 84,636; liquidation preference of $70,163 and $85,130 as
of March 31, 2020 and December 31, 2019, respectively) |
|
59,142 |
|
|
|
74,023 |
|
SERIES 2 REDEEMABLE PREFERRED
STOCK |
|
|
|
|
|
|
(par value $0.001; shares authorized 150,000; shares outstanding
146,812 and 147,164; liquidation preference of $147,668 and
$148,023 as of March 31, 2020 and December 31, 2019,
respectively) |
|
127,516 |
|
|
|
127,868 |
|
COMMON STOCK |
|
|
|
|
|
|
(par value $0.001; shares authorized 210,000,000; shares issued and
outstanding 30,535,249 and 30,533,793 as of March 31, 2020 and
December 31, 2019, respectively) |
|
33 |
|
|
|
33 |
|
Common stock in treasury, at
cost (2,500,000 shares as of both March 31, 2020 and December 31,
2019) |
|
(24,550 |
) |
|
|
(24,550 |
) |
Additional paid-in
capital |
|
229,207 |
|
|
|
233,106 |
|
Accumulated deficit |
|
(121,933 |
) |
|
|
(76,501 |
) |
TOTAL GWG HOLDINGS
STOCKHOLDERS’ EQUITY |
|
269,415 |
|
|
|
333,979 |
|
Noncontrolling interests |
|
331,711 |
|
|
|
266,848 |
|
TOTAL STOCKHOLDERS’
EQUITY |
|
601,126 |
|
|
|
600,827 |
|
TOTAL LIABILITIES &
STOCKHOLDERS’ EQUITY |
$ |
3,684,229 |
|
|
$ |
3,635,206 |
|
|
|
|
|
|
|
|
|
GWG HOLDINGS, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS(dollars in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
REVENUE |
|
|
|
|
|
Gain on life insurance policies, net |
$ |
14,445 |
|
|
$ |
21,496 |
|
Interest and other income |
|
19,112 |
|
|
|
3,721 |
|
TOTAL REVENUE |
|
33,557 |
|
|
|
25,217 |
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
Interest expense |
|
35,871 |
|
|
|
26,975 |
|
Employee compensation and benefits |
|
77,704 |
|
|
|
5,154 |
|
Legal and professional fees |
|
6,163 |
|
|
|
2,947 |
|
Provision for loan losses |
|
700 |
|
|
|
— |
|
Other expenses |
|
3,612 |
|
|
|
2,828 |
|
TOTAL EXPENSES |
|
124,050 |
|
|
|
37,904 |
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
(90,493 |
) |
|
|
(12,687 |
) |
INCOME TAX BENEFIT |
|
(14,507 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE LOSS FROM EQUITY METHOD INVESTMENT |
|
(75,986 |
) |
|
|
(12,687 |
) |
|
|
|
|
|
|
|
|
Loss from equity method investment |
|
(1,530 |
) |
|
|
(1,927 |
) |
|
|
|
|
|
|
|
|
NET LOSS |
|
(77,516 |
) |
|
|
(14,614 |
) |
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests |
|
32,084 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends |
|
3,952 |
|
|
|
4,296 |
|
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS |
$ |
(49,384 |
) |
|
$ |
(18,910 |
) |
NET LOSS PER COMMON SHARE |
|
|
|
|
|
|
|
Basic |
$ |
(1.62 |
) |
|
$ |
(0.57 |
) |
Diluted |
$ |
(1.62 |
) |
|
$ |
(0.57 |
) |
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING |
|
|
|
|
|
|
|
Basic |
|
30,534,977 |
|
|
|
32,984,741 |
|
Diluted |
|
30,534,977 |
|
|
|
32,984,741 |
|
|
|
|
|
|
|
|
|
GWG (NASDAQ:GWGH)
Historical Stock Chart
From Jun 2024 to Jul 2024
GWG (NASDAQ:GWGH)
Historical Stock Chart
From Jul 2023 to Jul 2024