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 first
quarter ended March 31, 2023. An accompanying earnings presentation
is available in the “Investors” section of the Company’s website at
www.atlanticus.com or by clicking here.
Financial and Operating
Highlights
First Quarter 2023 Highlights (all
comparisons to the First Quarter 2022)
- Total operating revenue increased
13.6% to $261.0 million.
- Purchase volume of $581.5
million.
- Over 220,000 new accounts
served during the quarter, over 3.2 million total accounts
serviced¹
- Net income attributable to common
shareholders of $20.0 million, or $1.08 per diluted common
share
- Managed receivables² increased
22.5% to $2.1 billion
¹In 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.²Managed 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.
Management Commentary
Jeff Howard, President and Chief Executive
Officer at Atlanticus stated, “We continue to be pleased with our
overall performance, which is consistent with our expectations
following our decision to tighten underwriting last year as
Everyday Americans adjusted to rapid inflation. All lines of our
business experienced growth in revenue, managed receivables, and
accounts serviced over the same period last year, with operating
revenue and managed receivables increasing approximately 13% and
23%, respectively. In addition to growth in our retail partnerships
and direct-to-consumer efforts, we continue to make progress on new
initiatives such as healthcare payments and co-brand offerings
which should open new avenues for our credit-as-a-service platform
to support and grow our partner brands.
“Consistent with our purpose of Empowering
Better Financial Outcomes For Everyday Americans, we facilitated
over 220,000 new accounts in the first quarter, bringing the total
number of accounts we serve to over 3.2 million. We have been
diligent in balancing the needs of our customers, who have been
adjusting to higher cost of living, with our focus on asset level
profitability from the receivables in which we invest. During the
quarter, lower levels of inflation and increasing wages appear to
have allowed the customers we serve to regain stability in terms of
credit activity. This stabilization in consumer behavior, combined
with the underwriting and account management strategies we have
undertaken, have resulted in improved asset performance.
“We remain excited about our long-term growth
prospects given the markets we serve and our position within those
markets. However, there is an elevated degree of
economic uncertainty near term. Our growth plans are predicated on
our confidence, based on over 25 years of experience and data
aggregation, in achieving appropriate returns on our shareholders'
capital.”
Financial
Results |
|
For Three Months EndedMarch
31, |
($ in thousands, except per share data) |
|
|
2023 |
|
|
2022 |
|
% Change |
Total operating revenue |
|
$ |
260,982 |
|
$ |
229,770 |
|
13.6% |
Other non-operating
revenue |
|
|
59 |
|
|
61 |
|
nm |
Total revenue |
|
|
261,041 |
|
|
229,831 |
|
13.6% |
|
|
|
|
|
|
|
Interest expense |
|
|
(24,234) |
|
|
(17,410) |
|
39.2% |
Provision for losses on loans,
interest and fees receivable recorded at net realizable value |
|
|
(704) |
|
|
(147) |
|
nm |
Changes in fair value of
loans, interest and fees receivable recorded at fair value |
|
|
(149,822) |
|
|
(104,680) |
|
43.1% |
Net margin |
|
|
86,281 |
|
|
107,594 |
|
(19.8)% |
|
|
|
|
|
|
|
Total operating expenses |
|
|
52,199 |
|
|
69,960 |
|
(25.4)% |
Net income |
|
|
25,894 |
|
|
44,755 |
|
(42.1)% |
Net loss attributable to
noncontrolling interests |
|
|
318 |
|
|
255 |
|
nm |
Net income attributable to
controlling interests |
|
|
26,212 |
|
|
45,010 |
|
(41.8)% |
Preferred dividends and
discount accretion |
|
|
(6,227) |
|
|
(6,206) |
|
nm |
Net income attributable to
common shareholders |
|
|
19,985 |
|
|
38,804 |
|
(48.5)% |
Net income attributable to
common shareholders per common share - basic |
|
$ |
1.38 |
|
$ |
2.62 |
|
(47.3)% |
Net income attributable to
common shareholders per common share - diluted |
|
$ |
1.08 |
|
$ |
1.96 |
|
(44.9)% |
*nm = not meaningful
Managed Receivables
Managed receivables increased 22.5% to $2.1
billion from March 31, 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 9.2% to 3.2
million. Recent recoveries in consumer spending behavior have
helped 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
beginning in the second quarter of 2022.
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 March 31, 2023, total
operating revenue increased 13.6% to $261.0 million when compared
to the quarter ended March 31, 2022. We have higher growth in our
acquisitions of general purpose credit card receivables (which tend
to have higher yields and corresponding charge-offs) than in our
acquisitions of private label credit receivables. This relative mix
of receivable acquisitions led to an increase in our corresponding
revenue.
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 March 31, 2023, compared to $17.4 million for the
quarter ended March 31, 2022. The elevated expenses were primarily
driven by the planned increases in outstanding debt in proportion
to growth in our receivables.
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 $1,206.6 million as of March 31, 2022 to $1,543.8 million as
of March 31, 2023. Recent increases in the federal funds rate have
thus far had a modest impact on our interest expense as over 90% 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.
Provision for Losses on Loans, Interest
and Fees Receivable Recorded at Net Realizable Value
Provision for losses on loans, interest and fees
receivable recorded at net realizable value decreased to $0.7
million for the quarter ended March 31, 2023, compared to $0.1
million for the quarter ended March 31, 2022. This reduction
primarily reflects the effects of our adoption of the fair value
option, which has resulted in a significant decline in the
outstanding receivables subject to this provision.
We expect that our provision for losses on loans will increase
modestly in 2023 (when compared to comparable periods in 2022) in
relation to growth in the underlying Auto Finance receivables and
increases in delinquencies, reflective of delinquencies returning
to historically normalized levels (i.e., those periods prior to
COVID-19 and the
related government stimulus programs).
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 $149.8 million
for the quarter ended March 31, 2023, compared to $104.7 million
for the quarter ended March 31, 2022. Offsetting this was a
reduction in the discount rate applied to the net cash flows
associated with these investments during the second quarter of
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 $194.6 million for the quarter ended March 31, 2022
to $219.7 million for the quarter ended March 31, 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 25.4% 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 some continued increase in portions of
this cost for 2023 as we hire talent to meet our expected growing
needs to manage increased levels of marketing, origination, and
receivables.
Net Income Attributable to Common
Shareholders
Net income attributable to common shareholders
decreased 48.5% to $20.0 million, or $1.08 per diluted share for
the quarter ended March 31, 2023.
Share Repurchases
We repurchased and retired 72,354 shares of our
common stock at an aggregate cost of $1.9 million, in the quarter
ended March 31, 2022.
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 allows 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 18 million customers and over $30 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, 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) |
|
|
March 31, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Unrestricted cash and cash
equivalents (including $186.8 million and $202.2 million associated
with variable interest entities at March 31, 2023 and December 31,
2022, respectively) |
|
$ |
389,835 |
|
|
$ |
384,984 |
|
Restricted cash and cash
equivalents (including $27.9 million and $27.6 million associated
with variable interest entities at March 31, 2023 and December 31,
2022, respectively) |
|
|
44,677 |
|
|
|
48,208 |
|
Loans, interest and fees
receivable: |
|
|
|
|
|
|
|
|
Loans, interest and fees receivable, at fair value (including
$1,735.3 million and $1,735.9 million associated with variable
interest entities at March 31, 2023 and December 31, 2022,
respectively) |
|
|
1,795,589 |
|
|
|
1,817,976 |
|
Loans, interest and fees receivable, gross |
|
|
113,367 |
|
|
|
105,267 |
|
Allowances for uncollectible loans, interest and fees
receivable |
|
|
(1,737 |
) |
|
|
(1,643 |
) |
Deferred revenue |
|
|
(18,207 |
) |
|
|
(16,190 |
) |
Net loans, interest and fees
receivable |
|
|
1,889,012 |
|
|
|
1,905,410 |
|
Property at cost, net of
depreciation |
|
|
12,160 |
|
|
|
10,013 |
|
Operating lease right-of-use
assets |
|
|
11,614 |
|
|
|
11,782 |
|
Prepaid expenses and other
assets |
|
|
27,997 |
|
|
|
27,417 |
|
Total assets |
|
$ |
2,375,295 |
|
|
$ |
2,387,814 |
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
42,006 |
|
|
$ |
44,332 |
|
Operating lease
liabilities |
|
|
20,363 |
|
|
|
20,112 |
|
Notes payable, net (including
$1,543.7 million and $1,586.0 million associated with variable
interest entities at March 31, 2023 and December 31, 2022,
respectively) |
|
|
1,614,575 |
|
|
|
1,653,306 |
|
Senior notes, net |
|
|
144,743 |
|
|
|
144,385 |
|
Income tax liability |
|
|
68,845 |
|
|
|
60,689 |
|
Total liabilities |
|
|
1,890,532 |
|
|
|
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 March 31, 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 |
|
|
100,025 |
|
|
|
99,950 |
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity |
|
|
|
|
|
|
|
|
Series B preferred stock, no
par value, 3,254,161 shares issued and outstanding at March 31,
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: 14,528,546 and 14,453,415 shares
issued and outstanding at March 31, 2023 and December 31, 2022,
respectively |
|
|
— |
|
|
|
— |
|
Paid-in capital |
|
|
115,796 |
|
|
|
121,996 |
|
Retained earnings |
|
|
230,627 |
|
|
|
204,415 |
|
Total shareholders’
equity |
|
|
346,423 |
|
|
|
326,411 |
|
Noncontrolling interests |
|
|
(1,685 |
) |
|
|
(1,371 |
) |
Total equity |
|
|
344,738 |
|
|
|
325,040 |
|
Total liabilities, preferred
stock and equity |
|
$ |
2,375,295 |
|
|
$ |
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 |
|
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Revenue: |
|
|
|
|
|
|
|
|
Consumer loans, including past
due fees |
|
$ |
209,701 |
|
|
$ |
164,806 |
|
Fees and related income on
earning assets |
|
|
44,357 |
|
|
|
54,698 |
|
Other revenue |
|
|
6,924 |
|
|
|
10,266 |
|
Total operating revenue,
net |
|
|
260,982 |
|
|
|
229,770 |
|
Other non-operating
revenue |
|
|
59 |
|
|
|
61 |
|
Total revenue |
|
|
261,041 |
|
|
|
229,831 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(24,234 |
) |
|
|
(17,410 |
) |
Provision for losses on loans,
interest and fees receivable recorded at amortized cost |
|
|
(704 |
) |
|
|
(147 |
) |
Changes in fair value of
loans, interest and fees receivable recorded at fair value |
|
|
(149,822 |
) |
|
|
(104,680 |
) |
Net margin |
|
|
86,281 |
|
|
|
107,594 |
|
|
|
|
|
|
|
|
|
|
Operating expense: |
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
10,604 |
|
|
|
11,426 |
|
Card and loan servicing |
|
|
24,335 |
|
|
|
22,675 |
|
Marketing and
solicitation |
|
|
10,406 |
|
|
|
20,573 |
|
Depreciation |
|
|
618 |
|
|
|
593 |
|
Other |
|
|
6,236 |
|
|
|
14,693 |
|
Total operating expenses |
|
|
52,199 |
|
|
|
69,960 |
|
Income before income
taxes |
|
|
34,082 |
|
|
|
37,634 |
|
Income tax (expense)
benefit |
|
|
(8,188 |
) |
|
|
7,121 |
|
Net income |
|
|
25,894 |
|
|
|
44,755 |
|
Net loss attributable to
noncontrolling interests |
|
|
318 |
|
|
|
255 |
|
Net income attributable to
controlling interests |
|
|
26,212 |
|
|
|
45,010 |
|
Preferred dividends and
discount accretion |
|
|
(6,227 |
) |
|
|
(6,206 |
) |
Net income attributable to
common shareholders |
|
$ |
19,985 |
|
|
$ |
38,804 |
|
Net income attributable to
common shareholders per common share—basic |
|
$ |
1.38 |
|
|
$ |
2.62 |
|
Net income attributable to
common shareholders per common share—diluted |
|
$ |
1.08 |
|
|
$ |
1.96 |
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Statements of Income
(Unaudited)(Dollars in thousands, except per share
data) |
|
|
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 |
|
|
|
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,
2021 |
|
|
3,188,533 |
|
|
$ |
— |
|
|
|
14,804,408 |
|
|
$ |
— |
|
|
$ |
227,763 |
|
|
$ |
60,236 |
|
|
$ |
(500 |
) |
|
$ |
287,499 |
|
|
$ |
99,650 |
|
|
$ |
40,000 |
|
Cumulative effects from
adoption of the CECL standard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,582 |
|
|
|
— |
|
|
|
8,582 |
|
|
|
— |
|
|
|
— |
|
Accretion of discount
associated with issuance of subsidiary equity |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
75 |
|
|
|
— |
|
Preferred dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,131 |
) |
|
|
— |
|
|
|
— |
|
|
|
(6,131 |
) |
|
|
— |
|
|
|
— |
|
Stock option exercises and
proceeds related thereto |
|
|
— |
|
|
|
— |
|
|
|
1,000,534 |
|
|
|
— |
|
|
|
2,788 |
|
|
|
— |
|
|
|
— |
|
|
|
2,788 |
|
|
|
— |
|
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
|
|
— |
|
|
|
— |
|
|
|
113,165 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Contributions by owners of
noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation
costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,111 |
|
|
|
— |
|
|
|
— |
|
|
|
1,111 |
|
|
|
— |
|
|
|
— |
|
Redemption and retirement of
shares |
|
|
— |
|
|
|
— |
|
|
|
(1,005,212 |
) |
|
|
— |
|
|
|
(65,214 |
) |
|
|
— |
|
|
|
— |
|
|
|
(65,214 |
) |
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
45,010 |
|
|
|
(255 |
) |
|
|
44,755 |
|
|
|
— |
|
|
|
— |
|
Balance at March 31, 2022 |
|
|
3,188,533 |
|
|
$ |
— |
|
|
|
14,912,895 |
|
|
$ |
— |
|
|
$ |
160,242 |
|
|
$ |
113,828 |
|
|
$ |
(751 |
) |
|
$ |
273,319 |
|
|
$ |
99,725 |
|
|
$ |
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 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) |
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
Loans, interest and fees receivable, at fair value |
|
$ |
1,795.6 |
|
|
$ |
1,818.0 |
|
|
$ |
1,728.1 |
|
|
$ |
1,616.9 |
|
|
$ |
1,405.8 |
|
|
$ |
1,026.4 |
|
|
$ |
846.2 |
|
|
$ |
644.7 |
|
Fair value mark against
receivable (2) |
|
$ |
260.1 |
|
|
$ |
302.1 |
|
|
$ |
322.3 |
|
|
$ |
293.0 |
|
|
$ |
272.9 |
|
|
$ |
208.9 |
|
|
$ |
182.2 |
|
|
$ |
148.6 |
|
Loans, interest and fees
receivable, at face value |
|
$ |
2,055.7 |
|
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,235.3 |
|
|
$ |
1,028.4 |
|
|
$ |
793.3 |
|
Fair value to face value ratio
(3) |
|
|
87.3 |
% |
|
|
85.8 |
% |
|
|
84.3 |
% |
|
|
84.7 |
% |
|
|
83.7 |
% |
|
|
83.1 |
% |
|
|
82.3 |
% |
|
|
81.3 |
% |
(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 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) |
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
Loans, interest and fees receivable, gross |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
375.7 |
|
|
$ |
417.8 |
|
|
$ |
454.2 |
|
Loans, interest and fees
receivable, gross from fair value reconciliation above |
|
|
2,055.7 |
|
|
|
2,120.1 |
|
|
|
2,050.4 |
|
|
|
1,909.9 |
|
|
|
1,678.7 |
|
|
|
1,235.3 |
|
|
|
1,028.4 |
|
|
|
793.3 |
|
Total managed receivables |
|
$ |
2,055.7 |
|
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,611.0 |
|
|
$ |
1,446.2 |
|
|
$ |
1,247.5 |
|
(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) |
|
Mar. 31 |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
Consumer loans, including past due fees |
|
$ |
200.5 |
|
|
$ |
202.9 |
|
|
$ |
208.9 |
|
|
$ |
182.8 |
|
|
$ |
156.5 |
|
|
$ |
144.1 |
|
|
$ |
132.7 |
|
|
$ |
114.3 |
|
Fees and related income on
earning assets |
|
|
44.3 |
|
|
|
48.0 |
|
|
|
48.5 |
|
|
|
65.8 |
|
|
|
54.7 |
|
|
|
53.8 |
|
|
|
54.1 |
|
|
|
49.5 |
|
Other revenue |
|
|
6.7 |
|
|
|
8.5 |
|
|
|
11.1 |
|
|
|
12.2 |
|
|
|
10.0 |
|
|
|
9.7 |
|
|
|
8.4 |
|
|
|
7.0 |
|
Adjustments due to
acceleration of merchant fee discount amortization under fair value
accounting |
|
|
(0.5 |
) |
|
|
3.4 |
|
|
|
(7.9 |
) |
|
|
(12.1 |
) |
|
|
1.8 |
|
|
|
(3.4 |
) |
|
|
(14.7 |
) |
|
|
(18.6 |
) |
Adjustments due to
acceleration of annual fees recognition under fair value
accounting |
|
|
7.3 |
|
|
|
7.9 |
|
|
|
10.0 |
|
|
|
(6.6 |
) |
|
|
(1.3 |
) |
|
|
(4.4 |
) |
|
|
(12.0 |
) |
|
|
(12.3 |
) |
Removal of expense accruals
under GAAP |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
(0.4 |
) |
Removal of finance
charge-offs |
|
|
(61.7 |
) |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
|
|
(14.1 |
) |
Total managed yield |
|
$ |
196.6 |
|
|
$ |
212.4 |
|
|
$ |
225.3 |
|
|
$ |
200.9 |
|
|
$ |
189.2 |
|
|
$ |
171.7 |
|
|
$ |
152.4 |
|
|
$ |
125.4 |
|
|
The calculation of Combined principal net
charge-offs is as follows:
|
|
At or for the Three Months Ended |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
Net losses on impairment of loans, interest and fees receivable
recorded at fair value |
|
$ |
191.9 |
|
|
$ |
182.3 |
|
|
$ |
134.4 |
|
|
$ |
126.5 |
|
|
$ |
101.3 |
|
|
$ |
46.7 |
|
|
$ |
25.6 |
|
|
$ |
22.7 |
|
Gross charge-offs on non-fair
value accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
38.7 |
|
|
|
27.1 |
|
|
|
27.6 |
|
Finance charge-offs (2) |
|
|
(61.7 |
) |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
|
|
(14.1 |
) |
Recoveries on non-fair value
accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.1 |
) |
|
|
(2.7 |
) |
|
|
(5.7 |
) |
Combined principal net
charge-offs |
|
$ |
130.2 |
|
|
$ |
124.0 |
|
|
$ |
89.1 |
|
|
$ |
85.3 |
|
|
$ |
68.8 |
|
|
$ |
53.2 |
|
|
$ |
33.7 |
|
|
$ |
30.5 |
|
(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 net realizable value and Changes in fair
value of loans, interest and fees receivable recorded at fair value
in the accompanying consolidated statements of income. |
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