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 third quarter ended
September 30, 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
Third Quarter 2023 Highlights (all comparisons to the
Third Quarter 2022)
-
Managed receivables2 increased 12.9% to $2.3 billion
-
Total operating revenue increased 6.1% to $294.9 million.
-
Return on average shareholders’ equity of 20.4%3
-
Purchase volume of $706.5 million.
-
Over 380,000 new accounts served during the quarter, over 3.4
million total accounts serviced1
-
Net income attributable to common shareholders of $18.9 million, or
$1.03 per diluted common share
1 )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 information3 )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 September 30, 2023 and June 30, 2023 as
the denominator, annualized. Management
Commentary
Jeff Howard, President and Chief Executive Officer at Atlanticus
stated, “Our third quarter results once again deliver strong
profitability, attractive return on capital, and reasonable growth
as we navigate an evolving macro-economic landscape. We have
maintained our conservative approach to underwriting that began in
mid-2022 and we continue to monitor the consumers we serve as they
adjust to a higher cost of living and benefit from higher wage
growth. Despite this conservative approach, we are seeing growth
across each of our product offerings. While some of our retail
credit partners have experienced volume reductions, our
year-over-year retail credit purchase activity grew by double
digits in the quarter. This growth is attributable to our diverse
array of industry segments served and continued product
enhancements that allow us to bring greater value to our partners
by serving more of their customers. Our general purpose managed
receivables also grew year-over-year, despite our tightened
underwriting and the run-off of higher delinquency receivables
purchased prior to the rapid increase in inflation. Our more
conservative underwriting has also led to a meaningful reduction in
portfolio delinquency compared to the same period last year.
“While our current rate of growth is predicated on our
confidence in achieving attractive returns on our shareholders’
capital in this environment, we remain excited about long term
growth potential that exists across our various product lines.
Throughout our history, we have seen the greatest opportunities
coming out of periods of economic uncertainty. As prime originators
tighten, our second-look offering provides even greater value to
our retail partners. As capital becomes more restrictive, many
newer entrants to the general purpose card space have reduced their
offerings. Across our retail credit, general purpose credit card,
healthcare payments and auto lines of business, we make up a small
percentage of the total addressable market. With these industry
dynamics, our ample liquidity, and well-structured balance sheet,
we are positioned for long term sustained growth.”
Financial
Results |
|
For the Three Months Ended September
30, |
|
|
($ in thousands,
except per share data) |
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
Total operating revenue |
|
$ |
294,913 |
|
|
$ |
277,874 |
|
|
6.1 |
% |
Other non-operating revenue |
|
|
(6 |
) |
|
|
80 |
|
|
nm |
|
Total revenue |
|
|
294,907 |
|
|
|
277,954 |
|
|
6.1 |
% |
Interest expense |
|
|
(28,274 |
) |
|
|
(21,514 |
) |
|
31.4 |
% |
Provision for losses on loans, interest and fees receivable
recorded at amortized cost |
|
|
(538 |
) |
|
|
(381 |
) |
|
nm |
|
Changes in fair value of loans, interest and fees receivable
recorded at fair value |
|
|
(177,854 |
) |
|
|
(163,624 |
) |
|
8.7 |
% |
Net
margin |
|
$ |
88,241 |
|
|
$ |
92,435 |
|
|
-4.5 |
% |
Total operating
expenses |
|
$ |
56,483 |
|
|
$ |
53,119 |
|
|
6.3 |
% |
Net
income |
|
$ |
24,973 |
|
|
$ |
32,370 |
|
|
-22.9 |
% |
Net income
attributable to controlling interests |
|
$ |
25,240 |
|
|
$ |
32,571 |
|
|
-22.5 |
% |
Preferred dividends
and discount accretion |
|
$ |
(6,341 |
) |
|
$ |
(6,296 |
) |
|
nm |
|
Net income
attributable to common shareholders |
|
$ |
18,899 |
|
|
$ |
26,275 |
|
|
-28.1 |
% |
Net income
attributable to common shareholders per common
share—basic |
|
$ |
1.30 |
|
|
$ |
1.81 |
|
|
-28.2 |
% |
Net income
attributable to common shareholders per common
share—diluted |
|
$ |
1.03 |
|
|
$ |
1.41 |
|
|
-27.0 |
% |
*nm = not meaningful
Managed Receivables
Managed receivables increased 12.9% to $2.3 billion with over
$265.1 million in net receivables growth from September 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 4.6% to 3.4 million. While some of our
merchant partners continue to face year-over-year growth
challenges, others are still benefiting from continued consumer
spending and a growing economy. Our general purpose credit card
portfolio continues to grow in terms of total customers served and
therefore we continue to experience growth in total managed
receivables. We expect the pace of growth, near-term, to slow
however, when compared to earlier periods due to tightened
underwriting standards adopted during the second quarter 2022 (and
continued in 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 September 30, 2023, total operating
revenue increased 6.1% to $294.9 million when compared to the
quarter ended September 30, 2022. Fee billings on our fair value
receivables increased from $229.7 million for the quarter ended
September 30, 2022 to $248.0 million for the quarter ended
September 30, 2023.
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
fourth quarter of 2023, albeit at a decreased growth rate to that
experienced in 2022. Growth in future periods is dependent on the
addition of new retail partners and the expansion of existing
relationships to expand the reach of private label credit
operations and the level of marketing investment for the general
purpose credit card operations.
Interest Expense
Interest expense was $28.3 million for the quarter ended
September 30, 2023, compared to $21.5 million for the quarter ended
September 30, 2022. The elevated expenses were primarily driven by
the planned increases in outstanding debt in proportion to growth
in our receivables coupled with 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 $1,473.1
million as of September 30, 2022 to $1,719.7 million as of
September 30, 2023. Recent increases in the federal funds rate have
started to increase our interest expense as we have raised
additional capital (or replaced existing facilities) over the last
two years. We anticipate additional debt financing over the next
few quarters as we continue to grow, coupled with increased
effective interest rates resulting from federal funds rate
increases. As such, we expect our quarterly interest expense for
these operations to increase compared to prior
periods. However, we do not expect our interest expense to
increase significantly in the short term (absent raising additional
capital) because over 85% of interest rates on our outstanding
debt are fixed.
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 $177.9 million for the quarter
ended September 30, 2023, compared to $163.6 million for the
quarter ended September 30, 2022. This increase was largely driven
by growth in underlying receivables.
We include asset performance 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. As receivables associated with both 1) assets acquired
prior to our tightened underwriting standards (mentioned above) and
2) those assets negatively impacted by inflation, gradually become
a smaller percentage of the portfolio, we expect to see overall
improvements in the measured fair value of our portfolios of
acquired receivables.
Total Operating Expenses
Total operating expenses increased 6.3% in the quarter when
compared to the same period in 2022.
For the quarter, operating expenses increased, driven by
increases in variable servicing costs associated with growth in our
receivables as well as growth in both the number of employees
and inflationary compensation pressure. Marketing costs,
corresponding to growth in our serviced accounts also contributed
to increases for the quarter.
We expect continued increases in many of these costs for the
remainder of 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 28.1%
to $18.9 million, or $1.03 per diluted share for the quarter ended
September 30, 2023.
Share Repurchases
We repurchased and retired 285,906 shares of our common stock at
an aggregate cost of $9.4 million, in the quarter ended September
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 $38 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, long-term growth plans, operations, financial
performance, revenue, amount and pace of growth of managed
receivables, total interest income and related fees and charges,
debt financing, liquidity, interest expense, operating expense,
fair value of 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 COVID-19 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) |
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
Assets |
|
|
|
|
Unrestricted cash and cash
equivalents (including $162.7 million and $202.2 million associated
with variable interest entities at September 30, 2023 and December
31, 2022, respectively) |
$ |
355,707 |
|
|
$ |
384,984 |
|
|
Restricted cash and cash
equivalents (including $25.6 million and $27.6 million associated
with variable interest entities at September 30, 2023 and December
31, 2022, respectively) |
|
44,315 |
|
|
|
48,208 |
|
|
Loans, interest and fees
receivable: |
|
|
|
|
Loans, interest and fees
receivable, at fair value (including $2,031.3 million and $1,735.9
million associated with variable interest entities at September 30,
2023 and December 31, 2022, respectively) |
|
2,049,993 |
|
|
|
1,817,976 |
|
|
Loans, interest and fees
receivable, gross |
|
118,007 |
|
|
|
105,267 |
|
|
Allowances for uncollectible
loans, interest and fees receivable |
|
(1,831 |
) |
|
|
(1,643 |
) |
|
Deferred revenue |
|
(18,288 |
) |
|
|
(16,190 |
) |
|
Net loans, interest and fees
receivable |
|
2,147,881 |
|
|
|
1,905,410 |
|
|
Property at cost, net of
depreciation |
|
12,014 |
|
|
|
10,013 |
|
|
Operating lease right-of-use
assets |
|
11,344 |
|
|
|
11,782 |
|
|
Prepaid expenses and other
assets |
|
25,640 |
|
|
|
27,417 |
|
|
Total assets |
$ |
2,596,901 |
|
|
$ |
2,387,814 |
|
|
Liabilities |
|
|
|
|
Accounts payable and accrued
expenses |
$ |
48,170 |
|
|
$ |
44,332 |
|
|
Operating lease
liabilities |
|
20,363 |
|
|
|
20,112 |
|
|
Notes payable, net (including
$1,719.7 million and $1,586.0 million associated with variable
interest entities at September 30, 2023 and December 31, 2022,
respectively) |
|
1,788,098 |
|
|
|
1,653,306 |
|
|
Senior notes, net |
|
144,352 |
|
|
|
144,385 |
|
|
Income tax liability |
|
81,176 |
|
|
|
60,689 |
|
|
Total liabilities |
|
2,082,159 |
|
|
|
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 September 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 |
|
100,175 |
|
|
|
99,950 |
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
Series B preferred stock, no
par value, 3,256,561 shares issued and outstanding at September 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: 14,651,321 and 14,453,415 shares
issued and outstanding at September 30, 2023 and December 31, 2022,
respectively |
|
— |
|
|
|
— |
|
|
Paid-in capital |
|
95,838 |
|
|
|
121,996 |
|
|
Retained earnings |
|
280,956 |
|
|
|
204,415 |
|
|
Total shareholders’
equity |
|
376,794 |
|
|
|
326,411 |
|
|
Noncontrolling interests |
|
(2,227 |
) |
|
|
(1,371 |
) |
|
Total equity |
|
374,567 |
|
|
|
325,040 |
|
|
Total liabilities, preferred
stock and equity |
$ |
2,596,901 |
|
|
$ |
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 Nine Months Ended |
|
September 30, |
|
September 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenue: |
|
|
|
|
|
|
|
Consumer loans, including past
due fees |
$ |
224,682 |
|
|
$ |
218,016 |
|
|
$ |
654,425 |
|
|
$ |
574,369 |
|
Fees and related income on
earning assets |
|
59,853 |
|
|
|
48,518 |
|
|
|
167,084 |
|
|
|
169,055 |
|
Other revenue |
|
10,378 |
|
|
|
11,340 |
|
|
|
25,137 |
|
|
|
34,016 |
|
Total operating revenue,
net |
|
294,913 |
|
|
|
277,874 |
|
|
|
846,646 |
|
|
|
777,440 |
|
Other non-operating
revenue |
|
(6 |
) |
|
|
80 |
|
|
|
140 |
|
|
|
380 |
|
Total revenue |
|
294,907 |
|
|
|
277,954 |
|
|
|
846,786 |
|
|
|
777,820 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(28,274 |
) |
|
|
(21,514 |
) |
|
|
(76,723 |
) |
|
|
(57,849 |
) |
Provision for losses on loans,
interest and fees receivable recorded at amortized cost |
|
(538 |
) |
|
|
(381 |
) |
|
|
(1,551 |
) |
|
|
(710 |
) |
Changes in fair value of
loans, interest and fees receivable recorded at fair value |
|
(177,854 |
) |
|
|
(163,624 |
) |
|
|
(505,505 |
) |
|
|
(414,863 |
) |
Net margin |
|
88,241 |
|
|
|
92,435 |
|
|
|
263,007 |
|
|
|
304,398 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Salaries and benefits |
|
11,360 |
|
|
|
10,363 |
|
|
|
32,593 |
|
|
|
31,888 |
|
Card and loan servicing |
|
25,864 |
|
|
|
24,775 |
|
|
|
74,013 |
|
|
|
71,447 |
|
Marketing and
solicitation |
|
12,599 |
|
|
|
11,053 |
|
|
|
37,491 |
|
|
|
51,857 |
|
Depreciation |
|
647 |
|
|
|
488 |
|
|
|
1,908 |
|
|
|
1,630 |
|
Other |
|
6,013 |
|
|
|
6,440 |
|
|
|
19,149 |
|
|
|
28,086 |
|
Total operating expenses |
|
56,483 |
|
|
|
53,119 |
|
|
|
165,154 |
|
|
|
184,908 |
|
Income before income
taxes |
|
31,758 |
|
|
|
39,316 |
|
|
|
97,853 |
|
|
|
119,490 |
|
Income tax expense |
|
(6,785 |
) |
|
|
(6,946 |
) |
|
|
(22,172 |
) |
|
|
(8,568 |
) |
Net income |
|
24,973 |
|
|
|
32,370 |
|
|
|
75,681 |
|
|
|
110,922 |
|
Net loss attributable to
noncontrolling interests |
|
267 |
|
|
|
201 |
|
|
|
860 |
|
|
|
684 |
|
Net income attributable to
controlling interests |
|
25,240 |
|
|
|
32,571 |
|
|
|
76,541 |
|
|
|
111,606 |
|
Preferred dividends and
discount accretion |
|
(6,341 |
) |
|
|
(6,296 |
) |
|
|
(18,857 |
) |
|
|
(18,759 |
) |
Net income attributable to
common shareholders |
$ |
18,899 |
|
|
$ |
26,275 |
|
|
$ |
57,684 |
|
|
$ |
92,847 |
|
Net income attributable to
common shareholders per common share—basic |
$ |
1.30 |
|
|
$ |
1.81 |
|
|
$ |
3.99 |
|
|
$ |
6.32 |
|
Net income attributable to
common shareholders per common share—diluted |
$ |
1.03 |
|
|
$ |
1.41 |
|
|
$ |
3.14 |
|
|
$ |
4.85 |
|
|
|
|
|
|
|
|
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Statements of
Shareholders’ Equity and Temporary Equity
(Unaudited)For the Three and Nine Months
Ended September 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 |
|
Accretion of discount
associated with issuance of subsidiary equity |
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
(75 |
) |
|
|
— |
|
|
— |
|
|
|
(75 |
) |
|
|
75 |
|
|
— |
|
Preferred dividends |
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
(6,266 |
) |
|
|
— |
|
|
— |
|
|
|
(6,266 |
) |
|
|
— |
|
|
— |
|
Stock option exercises and
proceeds related thereto |
— |
|
|
|
— |
|
510,028 |
|
|
|
— |
|
|
3,031 |
|
|
|
— |
|
|
— |
|
|
|
3,031 |
|
|
|
— |
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
— |
|
|
|
— |
|
(840 |
) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
Issuance of series B preferred
stock, net |
300 |
|
|
|
— |
|
— |
|
|
|
— |
|
|
6 |
|
|
|
— |
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
— |
|
Stock-based compensation
costs |
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
908 |
|
|
|
— |
|
|
— |
|
|
|
908 |
|
|
|
— |
|
|
— |
|
Redemption and retirement of
common shares |
— |
|
|
|
— |
|
(285,906 |
) |
|
|
— |
|
|
(9,399 |
) |
|
|
— |
|
|
— |
|
|
|
(9,399 |
) |
|
|
— |
|
|
— |
|
Net income (loss) |
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
— |
|
|
|
25,240 |
|
|
(267 |
) |
|
|
24,973 |
|
|
|
— |
|
|
— |
|
Balance at September 30,
2023 |
3,256,561 |
|
|
$ |
— |
|
14,651,321 |
|
|
$ |
— |
|
$ |
95,838 |
|
|
$ |
280,956 |
|
$ |
(2,227 |
) |
|
$ |
374,567 |
|
|
$ |
100,175 |
|
$ |
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) |
Sep. 30 (1) |
Jun. 30 (1) |
Mar. 31 (1) |
Dec. 31 (1) |
Sep. 30 (1) |
Jun. 30 (1) |
Mar. 31 (1) |
Dec. 31 (1) |
Loans, interest and fees
receivable, at fair value |
$ |
2,050.0 |
|
$ |
1,916.1 |
|
$ |
1,795.6 |
|
$ |
1,818.0 |
|
$ |
1,728.1 |
|
$ |
1,616.9 |
|
$ |
1,405.8 |
|
$ |
1,026.4 |
|
Fair value mark against
receivable (2) |
$ |
265.2 |
|
$ |
257.9 |
|
$ |
260.1 |
|
$ |
302.1 |
|
$ |
322.3 |
|
$ |
293.0 |
|
$ |
272.9 |
|
$ |
208.9 |
|
Loans, interest and fees
receivable, at face value |
$ |
2,315.2 |
|
$ |
2,174.0 |
|
$ |
2,055.7 |
|
$ |
2,120.1 |
|
$ |
2,050.4 |
|
$ |
1,909.9 |
|
$ |
1,678.7 |
|
$ |
1,235.3 |
|
Fair value to face value ratio
(3) |
|
88.5 |
% |
|
88.1 |
% |
|
87.3 |
% |
|
85.8 |
% |
|
84.3 |
% |
|
84.7 |
% |
|
83.7 |
% |
|
83.1 |
% |
(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
September 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) |
Sep. 30 (1) |
Jun. 30 (1) |
Mar. 31 (1) |
Dec. 31 (1) |
Sep. 30 (1) |
Jun. 30(1) |
Mar. 31 (1) |
Dec. 31 |
Loans, interest and fees
receivable, gross |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
375.7 |
Loans, interest and fees
receivable, gross from fair value reconciliation above |
|
2,315.2 |
|
2,174.0 |
|
2,055.7 |
|
2,120.1 |
|
2,050.4 |
|
1,909.9 |
|
1,678.7 |
|
1,235.3 |
Total managed receivables |
$ |
2,315.2 |
$ |
2,174.0 |
$ |
2,055.7 |
$ |
2,120.1 |
$ |
2,050.4 |
$ |
1,909.9 |
$ |
1,678.7 |
$ |
1,611.0 |
(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. |
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) |
Sep. 30 |
Jun. 30 |
Mar. 31 |
Dec. 31 |
Sep. 30 |
Jun. 30 |
Mar. 31 |
Dec. 31 |
Consumer loans, including past
due fees |
$ |
214.6 |
|
$ |
210.3 |
|
$ |
200.5 |
|
$ |
202.9 |
|
$ |
208.9 |
|
$ |
182.8 |
|
$ |
156.5 |
|
$ |
144.1 |
|
Fees and related income on
earning assets |
|
59.8 |
|
|
62.9 |
|
|
44.3 |
|
|
48.0 |
|
|
48.5 |
|
|
65.8 |
|
|
54.7 |
|
|
53.8 |
|
Other revenue |
|
10.2 |
|
|
7.6 |
|
|
6.7 |
|
|
8.5 |
|
|
11.1 |
|
|
12.2 |
|
|
10.0 |
|
|
9.7 |
|
Adjustments due to
acceleration of merchant fee discount amortization under fair value
accounting |
|
(6.8) |
|
|
(10.6) |
|
|
(0.5) |
|
|
3.4 |
|
|
(7.9) |
|
|
(12.1) |
|
|
1.8 |
|
|
(3.4) |
|
Adjustments due to
acceleration of annual fees recognition under fair value
accounting |
|
(3.1) |
|
|
(9.8) |
|
|
7.3 |
|
|
7.9 |
|
|
10.0 |
|
|
(6.6) |
|
|
(1.3) |
|
|
(4.4) |
|
Removal of finance
charge-offs |
|
(47.1) |
|
|
(54.2) |
|
|
(61.7) |
|
|
(58.3) |
|
|
(45.3) |
|
|
(41.2) |
|
|
(32.5) |
|
|
(28.1) |
|
Total managed yield |
$ |
227.6 |
|
$ |
206.2 |
|
$ |
196.6 |
|
$ |
212.4 |
|
$ |
225.3 |
|
$ |
200.9 |
|
$ |
189.2 |
|
$ |
171.7 |
|
The calculation of Combined principal net charge-offs is as
follows:
|
At or for the Three Months Ended |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
Sep. 30 (1) |
Jun. 30 (1) |
Mar. 31 (1) |
Dec. 31 (1) |
Sep. 30 (1) |
Jun. 30 (1) |
Mar. 31 (1) |
Dec. 31 |
Net losses on impairment of
loans, interest and fees receivable recorded at fair value |
$ |
173.5 |
|
$ |
180.0 |
|
$ |
191.9 |
|
$ |
182.3 |
|
$ |
134.4 |
|
$ |
126.5 |
|
$ |
101.3 |
|
$ |
46.7 |
|
Gross charge-offs on non-fair
value accounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
38.7 |
|
Finance charge-offs (2) |
|
(47.1) |
|
|
(54.2) |
|
|
(61.7) |
|
|
(58.3) |
|
|
(45.3) |
|
|
(41.2) |
|
|
(32.5) |
|
|
(28.1) |
|
Recoveries on non-fair value
accounts |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4.1) |
|
Combined principal net
charge-offs |
$ |
126.4 |
|
$ |
125.8 |
|
$ |
130.2 |
|
$ |
124.0 |
|
$ |
89.1 |
|
$ |
85.3 |
|
$ |
68.8 |
|
$ |
53.2 |
|
(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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