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 fourth
quarter and full year ended December 31, 2022. 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
Fourth Quarter 2022 Highlights (all
comparisons to the Fourth Quarter 2021)
- Total operating revenue increased
24.1% to $268.7 million.
- Purchase volume increased 1.4% to
$625.2 million.
- Net income attributable to common
shareholders of $17.7 million, or $0.98 per diluted common
share.
Full Year 2022 Highlights (all
comparisons to the prior year period)
- Total operating revenue increased
40.6% to $1.05 billion.
- Purchase volume increased 33.2% to
$2.7 billion.
- Total number of accounts serviced1
at period end increased 22.3% to 3.3 million.
- Over 600,000 (net) new serviced1
accounts added during the year.
- Managed receivables2 increased
31.6% to $2.1 billion.
- Net income attributable to common
shareholders of $110.5 million, or $5.83 per diluted common
share.
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 are pleased to report continued
expansion despite the ongoing inflationary pressures felt across
our serviced customers and partners. Both of our operating
segments experienced meaningful growth with managed receivables and
revenue increasing approximately 32% and 41% respectively during
the year despite tightening in underwriting that led to materially
slower growth in the second half. Even as receivables performance
is coming off of historic lows in delinquency in 2020 and 2021, we
are proud to report net income of $111 million and earnings per
share of $5.83 for the year.
“Over our 25 plus year history, our actions have
been guided by, in order of priority, asset level profitability,
capital availability, then growth. As the consumers we serve
experienced a rapid rise in the cost of living, we prudently
revised our outlook for asset level profitability and rapidly
deployed underwriting changes, portfolio management strategies, and
customer service and collections programs to help everyday
Americans adjust to increases in costs they care about the most –
gas, food, and housing. Beginning in the third quarter of 2022, we
have seen continued improvement in early asset performance metrics
as a result of the actions mentioned, reductions in prices,
particularly gas, and increases in wages experienced by the
customer segment we serve.
“We are also confident in our capital
availability, as we have a strong cash position, attractive fixed
rate financings, and no material financing need in 2023. As a
result, as we observe improvements in the performance of the
consumers we serve, we will look to increase our growth rate,
albeit not likely to the rate we achieved in the first half of
2022.
“Our ongoing investment in technology continues
to bear fruit. Our bank, retail and healthcare partners benefit
from our ease of integration. Our marginal cost to service accounts
has declined by almost 50% over the previous 5 years allowing us to
bring lower cost products to our partners’ customers. We see
further opportunities to deploy technology, including artificial
intelligence, to enhance the customer journey. Most importantly,
the customers we service benefit from a unique customer experience
through our ever-expanding Financial Empowerment Platform that
offers curated features and functionality to help better manage
their finances – to Empower Better Financial Outcomes.
“Although we have prudently slowed our rate of
growth in the near term, we believe we are well positioned for
sustained long term growth. The addressable market for our general
purpose, private label, and healthcare categories is estimated to
exceed $1 trillion in annual purchase volume.
“Our decades of experience, unique combination
of service offerings, and ample market size within each of our
business lines creates substantial opportunity for long term value
creation for our shareholders.”
Financial
Results($ in thousands, except per share data) |
For Three Months EndedDecember
31, |
For Year EndedDecember 31, |
2022 |
|
2021 |
|
% Change |
|
2022 |
|
2021 |
|
% Change |
|
Total operating revenue |
$ |
268,664 |
|
$ |
216,524 |
|
24.1 |
|
$ |
1,046,104 |
|
$ |
743,855 |
|
40.6 |
|
Other non-operating
revenue |
|
429 |
|
|
743 |
|
nm |
|
|
809 |
|
|
4,201 |
|
nm |
|
Total Revenue |
|
269,093 |
|
|
217,267 |
|
23.9 |
|
|
1,046,913 |
|
|
748,056 |
|
40.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(24,002 |
) |
|
(15,669 |
) |
53.2 |
|
|
(81,851 |
) |
|
(54,127 |
) |
51.2 |
|
Provision for losses on loans,
interest and fees receivable recorded at net realizable value |
|
(542 |
) |
|
(11,986 |
) |
(96.5 |
) |
|
(1,252 |
) |
|
(36,455 |
) |
(96.6 |
) |
Changes in fair value of
loans, interest and fees receivable and notes payable associated
with structured financings recorded at fair value |
|
(162,206 |
) |
|
(73,752 |
) |
119.9 |
|
|
(577,069 |
) |
|
(218,733 |
) |
163.8 |
|
Net margin |
|
82,343 |
|
|
115,860 |
|
(28.9 |
) |
|
386,741 |
|
|
438,741 |
|
(11.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expense |
|
52,561 |
|
|
52,905 |
|
(0.7 |
) |
|
237,469 |
|
|
189,729 |
|
25.2 |
|
Loss on repurchase and
redemption of convertible senior notes |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
29,439 |
|
nm |
|
Net income |
|
23,690 |
|
|
49,839 |
|
(52.5 |
) |
|
134,612 |
|
|
177,789 |
|
(24.3 |
) |
Net loss attributable to
noncontrolling interests |
|
301 |
|
|
138 |
|
nm |
|
|
985 |
|
|
113 |
|
nm |
|
Net income attributable to
controlling interests |
|
23,991 |
|
|
49,977 |
|
(52.0 |
) |
|
135,597 |
|
|
177,902 |
|
(23.8 |
) |
Preferred dividends and
discount accretion |
|
(6,317 |
) |
|
(6,309 |
) |
nm |
|
|
(25,076 |
) |
|
(22,363 |
) |
nm |
|
Net income attributable to
common shareholders |
|
17,674 |
|
|
43,668 |
|
(59.5 |
) |
|
110,521 |
|
|
155,539 |
|
(28.9 |
) |
Net income attributable to
common shareholders per common share - basic |
|
1.22 |
|
|
2.91 |
|
(57.7 |
) |
|
7.55 |
|
|
10.32 |
|
(26.8 |
) |
Net income attributable to
common shareholders per common share - diluted |
$ |
0.98 |
|
$ |
2.13 |
|
(54.0 |
) |
$ |
5.83 |
|
$ |
7.56 |
|
(22.9 |
) |
*nm = not meaningful
Managed Receivables
Managed receivables increased 31.6% to $2.1
billion from December 31, 2021 largely driven by growth in the
private label credit and general purpose credit card products
offered by our bank partners. Total customers served increased
22.3% to 3.3 million. Recent recoveries in consumer spending
behavior have helped increase the overall combined managed
receivables levels and we currently expect this trend to continue
into 2023, although we expect the pace of growth to slow when
compared to earlier periods.
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 and full year ended December
31, 2022, total operating revenue increased 24.1% to $268.7 million
and 40.6% to $1.05 billion, respectively. 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 CAR receivables. We expect net period-over-period
growth in our total interest income and related fees for these
operations for the majority of 2023. Future periods’ growth 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 $24.0 million and $81.9
million for the quarter and year ended December 31, 2022,
respectively, compared to $15.7 million and $54.1 million for the
quarter and year ended December 31, 2021, respectively. The
elevated expenses were primarily driven by the planned increases in
outstanding debt related to the addition of multiple revolving
credit facilities during 2021 and 2022.
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 $1,223.5 million as of December 31, 2021 to $1,586.0 million
as of December 31, 2022. 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 and additional
anticipated 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 $0.5
million and $1.3 million for the quarter and year ended December
31, 2022, respectively, compared to $12.0 million and $36.5 million
for the quarter and year ended December 31, 2021, respectively.
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
delinquency levels 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 and notes payable associated with structured
financings recorded at fair value
Changes in fair value of loans, interest and
fees receivable and notes payable associated with structured
financings recorded at fair value increased to $162.2 million and
$577.1 million for the quarter and year ended December 31, 2022,
respectively, compared to $73.8 million and $218.7 million for the
quarter and year ended December 31, 2021, respectively. 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 $366.3 million for the year ended December 31, 2021
to $874.7 million for the year ended December 31, 2022. 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.
Offsetting this was a reduction in the discount rate applied to the
net cash flows associated with these investments.
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 expense
Total operating expense decreased 0.7% in the
quarter but increased 25.2% for the full year when compared to the
same periods in 2021.
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.
On a full year basis, operating expenses
increased for the following reasons: 1) increases in salaries
and benefit costs related to both the growth in the number of
employees and inflationary compensation pressure, 2) increases in
card and loan servicing expenses and marketing and solicitation
costs due to growth in receivables, and 3) other costs associated
with occupancy or other third party expenses including legal and
travel expenses.
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 59.5% to $17.7 million, or $0.98 per diluted share, and
28.9% to $110.5 million, or $5.83 per diluted share, for the
quarter and year ended December 31, 2022, respectively.
Share Repurchases
We repurchased and retired 1,674,161 shares of
our common stock at an aggregate cost of $88.9 million, for the
year ended December 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 CAR 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, 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, value creation for shareholders, technology investments 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)
|
|
December 31, |
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Unrestricted cash and cash
equivalents (including $202.2 million and $209.5 million associated
with variable interest entities at December 31, 2022 and December
31, 2021, respectively) |
|
$ |
384,984 |
|
|
$ |
409,660 |
|
Restricted cash and cash
equivalents (including $27.6 million and $75.9 million associated
with variable interest entities at December 31, 2022 and December
31, 2021, respectively) |
|
|
48,208 |
|
|
|
96,968 |
|
Loans, interest and fees
receivable: |
|
|
|
|
|
|
|
|
Loans, interest and fees receivable, at fair value (including
$1,735.9 million and $925.5 million associated with variable
interest entities at December 31, 2022 and December 31, 2021,
respectively) |
|
|
1,817,976 |
|
|
|
1,026,424 |
|
Loans, interest and fees receivable, gross (including $369.6
million associated with variable interest entities at December 31,
2021) |
|
|
105,267 |
|
|
|
470,293 |
|
Allowances for uncollectible loans, interest and fees receivable
(including $55.1 million associated with variable interest entities
at December 31, 2021) |
|
|
(1,643 |
) |
|
|
(57,201 |
) |
Deferred revenue (including $8.2 million associated with variable
interest entities at December 31, 2021) |
|
|
(16,190 |
) |
|
|
(29,281 |
) |
Net loans, interest and fees
receivable |
|
|
1,905,410 |
|
|
|
1,410,235 |
|
Property at cost, net of
depreciation |
|
|
10,013 |
|
|
|
7,335 |
|
Operating lease right-of-use
assets |
|
|
11,782 |
|
|
|
4,016 |
|
Prepaid expenses and other
assets |
|
|
27,417 |
|
|
|
15,649 |
|
Total assets |
|
$ |
2,387,814 |
|
|
$ |
1,943,863 |
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
44,332 |
|
|
$ |
42,287 |
|
Operating lease
liabilities |
|
|
20,112 |
|
|
|
4,842 |
|
Notes payable, net (including
$1,586.0 million and $1,223.4 million associated with variable
interest entities at December 31, 2022 and December 31, 2021,
respectively) |
|
|
1,653,306 |
|
|
|
1,278,864 |
|
Senior notes, net |
|
|
144,385 |
|
|
|
142,951 |
|
Income tax liability |
|
|
60,689 |
|
|
|
47,770 |
|
Total liabilities |
|
|
1,922,824 |
|
|
|
1,516,714 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value,
10,000,000 shares authorized: |
|
|
|
|
|
|
|
|
Series A preferred stock,
400,000 shares issued and outstanding at December 31, 2022
(liquidation preference - $40.0 million); 400,000 shares issued and
outstanding at December 31, 2021 (1) |
|
|
40,000 |
|
|
|
40,000 |
|
Class B preferred units issued
to noncontrolling interests |
|
|
99,950 |
|
|
|
99,650 |
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
|
|
Series B preferred stock, no
par value, 3,204,640 shares issued and outstanding at December 31,
2022 (liquidation preference - $80.1 million); 3,188,533 shares
issued and outstanding at December 31, 2021 (1) |
|
|
— |
|
|
|
— |
|
Common stock, no par value,
150,000,000 shares authorized: 14,453,415 and 14,804,408 shares
issued and outstanding at December 31, 2022 and December 31, 2021,
respectively |
|
|
— |
|
|
|
— |
|
Paid-in capital |
|
|
121,996 |
|
|
|
227,763 |
|
Retained earnings |
|
|
204,415 |
|
|
|
60,236 |
|
Total shareholders’
equity |
|
|
326,411 |
|
|
|
287,999 |
|
Noncontrolling interests |
|
|
(1,371 |
) |
|
|
(500 |
) |
Total equity |
|
|
325,040 |
|
|
|
287,499 |
|
Total liabilities, preferred
stock and equity |
|
$ |
2,387,814 |
|
|
$ |
1,943,863 |
|
(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 Year Ended |
|
|
|
2022 |
|
|
2021 |
|
Revenue: |
|
|
|
|
|
|
|
|
Consumer loans, including past due fees |
|
$ |
786,235 |
|
|
$ |
518,783 |
|
Fees and related income on earning assets |
|
|
217,071 |
|
|
|
194,466 |
|
Other revenue |
|
|
42,798 |
|
|
|
30,606 |
|
Total operating revenue,
net |
|
|
1,046,104 |
|
|
|
743,855 |
|
Other non-operating revenue |
|
|
809 |
|
|
|
4,201 |
|
Total revenue |
|
|
1,046,913 |
|
|
|
748,056 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(81,851 |
) |
|
|
(54,127 |
) |
Provision for losses on loans,
interest and fees receivable recorded at net realizable value |
|
|
(1,252 |
) |
|
|
(36,455 |
) |
Changes in fair value of
loans, interest and fees receivable and notes payable associated
with structured financings recorded at fair value |
|
|
(577,069 |
) |
|
|
(218,733 |
) |
Net margin |
|
|
386,741 |
|
|
|
438,741 |
|
|
|
|
|
|
|
|
|
|
Operating expense: |
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
43,063 |
|
|
|
34,024 |
|
Card and loan servicing |
|
|
95,428 |
|
|
|
75,397 |
|
Marketing and solicitation |
|
|
62,403 |
|
|
|
56,635 |
|
Depreciation |
|
|
2,175 |
|
|
|
1,493 |
|
Other |
|
|
34,400 |
|
|
|
22,180 |
|
Total operating expense |
|
|
237,469 |
|
|
|
189,729 |
|
Loss on repurchase and
redemption of convertible senior notes |
|
|
— |
|
|
|
29,439 |
|
Income before income
taxes |
|
|
149,272 |
|
|
|
219,573 |
|
Income tax expense |
|
|
(14,660 |
) |
|
|
(41,784 |
) |
Net income |
|
|
134,612 |
|
|
|
177,789 |
|
Net loss attributable to
noncontrolling interests |
|
|
985 |
|
|
|
113 |
|
Net income attributable to
controlling interests |
|
|
135,597 |
|
|
|
177,902 |
|
Preferred dividends and
discount accretion |
|
|
(25,076 |
) |
|
|
(22,363 |
) |
Net income attributable to
common shareholders |
|
$ |
110,521 |
|
|
$ |
155,539 |
|
Net income attributable to
common shareholders per common share—basic |
|
$ |
7.55 |
|
|
$ |
10.32 |
|
Net income attributable to
common shareholders per common share—diluted |
|
$ |
5.83 |
|
|
$ |
7.56 |
|
|
|
|
|
|
|
|
|
|
Atlanticus Holdings Corporation and
SubsidiariesConsolidated Statements of Cash Flows
(Unaudited)(Dollars in thousands)
|
|
Series B Preferred Stock |
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary Equity |
|
|
|
Shares Issued |
|
Amount |
|
Shares Issued |
|
Amount |
|
Paid-In Capital |
|
Retained Earnings (Deficit) |
|
Noncontrolling Interests |
|
Total Equity |
|
Class B Preferred Units |
|
Series A Preferred Stock |
|
Balance at December 31, 2020 |
|
— |
|
$ |
— |
|
16,115,353 |
|
$ |
— |
|
$ |
194,950 |
|
$ |
(117,666 |
) |
$ |
(774 |
) |
$ |
76,510 |
|
$ |
99,350 |
|
$ |
40,000 |
|
Accretion of discount
associated with issuance of subsidiary equity |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(300 |
) |
|
— |
|
|
— |
|
|
(300 |
) |
|
300 |
|
|
— |
|
Preferred dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(22,063 |
) |
|
— |
|
|
— |
|
|
(22,063 |
) |
|
— |
|
|
— |
|
Stock option exercises and
proceeds related thereto |
|
— |
|
|
— |
|
526,015 |
|
|
— |
|
|
1,885 |
|
|
— |
|
|
— |
|
|
1,885 |
|
|
— |
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
|
— |
|
|
— |
|
56,654 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of series B preferred
stock, net |
|
3,188,533 |
|
|
— |
|
— |
|
|
— |
|
|
75,270 |
|
|
— |
|
|
— |
|
|
75,270 |
|
|
— |
|
|
— |
|
Contributions by owners of
noncontrolling interests |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
387 |
|
|
387 |
|
|
— |
|
|
— |
|
Deferred stock-based
compensation costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
3,240 |
|
|
— |
|
|
— |
|
|
3,240 |
|
|
— |
|
|
— |
|
Redemption and retirement of
shares |
|
— |
|
|
— |
|
(1,893,614 |
) |
|
— |
|
|
(25,219 |
) |
|
— |
|
|
— |
|
|
(25,219 |
) |
|
— |
|
|
— |
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
177,902 |
|
|
(113 |
) |
|
177,789 |
|
|
|
|
|
— |
|
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 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(300 |
) |
|
— |
|
|
— |
|
|
(300 |
) |
|
300 |
|
|
— |
|
Discount associated with
repurchase of preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
18 |
|
|
— |
|
|
— |
|
|
18 |
|
|
— |
|
|
— |
|
Preferred dividends |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(24,794 |
) |
|
— |
|
|
— |
|
|
(24,794 |
) |
|
— |
|
|
— |
|
Stock option exercises and
proceeds related thereto |
|
— |
|
|
— |
|
1,211,141 |
|
|
— |
|
|
3,731 |
|
|
— |
|
|
— |
|
|
3,731 |
|
|
— |
|
|
— |
|
Compensatory stock issuances,
net of forfeitures |
|
— |
|
|
— |
|
112,027 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of series B preferred
stock, net |
|
19,607 |
|
|
— |
|
— |
|
|
— |
|
|
437 |
|
|
— |
|
|
— |
|
|
437 |
|
|
— |
|
|
— |
|
Contributions by owners of
noncontrolling interests |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
114 |
|
|
114 |
|
|
— |
|
|
— |
|
Deferred stock-based
compensation costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
4,167 |
|
|
— |
|
|
— |
|
|
4,167 |
|
|
— |
|
|
— |
|
Redemption and retirement of
preferred shares |
|
(3,500 |
) |
|
— |
|
— |
|
|
— |
|
|
(87 |
) |
|
— |
|
|
— |
|
|
(87 |
) |
|
— |
|
|
— |
|
Redemption and retirement of
common shares |
|
— |
|
|
— |
|
(1,674,161 |
) |
|
— |
|
|
(88,939 |
) |
|
— |
|
|
— |
|
|
(88,939 |
) |
|
— |
|
|
— |
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
135,597 |
|
|
(985 |
) |
|
134,612 |
|
|
— |
|
|
— |
|
Balance at December 31,
2022 |
|
3,204,640 |
|
$ |
— |
|
14,453,415 |
|
$ |
— |
|
$ |
121,996 |
|
$ |
204,415 |
|
$ |
(1,371 |
) |
$ |
325,040 |
|
$ |
99,950 |
|
$ |
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-K 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 |
|
|
|
2022 |
|
|
|
2021 |
|
(in
Millions) |
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
Loans, interest and fees receivable, at fair value |
|
$ |
1,818.0 |
|
|
$ |
1,728.1 |
|
|
$ |
1,616.9 |
|
|
$ |
1,405.8 |
|
|
$ |
1,026.4 |
|
|
$ |
846.2 |
|
|
$ |
644.7 |
|
|
$ |
481.4 |
|
Fair value mark against
receivable (2) |
|
$ |
302.1 |
|
|
$ |
322.3 |
|
|
$ |
293.0 |
|
|
$ |
272.9 |
|
|
$ |
208.9 |
|
|
$ |
182.2 |
|
|
$ |
148.6 |
|
|
$ |
112.3 |
|
Loans, interest and fees
receivable, at face value |
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,235.3 |
|
|
$ |
1,028.4 |
|
|
$ |
793.3 |
|
|
$ |
593.7 |
|
Fair value to face value
ratio |
|
|
85.8 |
% |
|
|
84.3 |
% |
|
|
84.7 |
% |
|
|
83.7 |
% |
|
|
83.1 |
% |
|
|
82.3 |
% |
|
|
81.3 |
% |
|
|
81.1 |
% |
(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 |
|
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
Loans, interest and fees receivable, gross |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
375.7 |
|
|
$ |
417.8 |
|
|
$ |
454.2 |
|
|
$ |
498.8 |
|
Loans, interest and fees
receivable, gross from fair value reconciliation above |
|
|
2,120.1 |
|
|
|
2,050.4 |
|
|
|
1,909.9 |
|
|
|
1,678.7 |
|
|
|
1,235.3 |
|
|
|
1,028.4 |
|
|
|
793.3 |
|
|
|
593.7 |
|
Total managed receivables |
|
$ |
2,120.1 |
|
|
$ |
2,050.4 |
|
|
$ |
1,909.9 |
|
|
$ |
1,678.7 |
|
|
$ |
1,611.0 |
|
|
$ |
1,446.2 |
|
|
$ |
1,247.5 |
|
|
$ |
1,092.5 |
|
(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 |
|
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
Consumer loans, including past due fees |
|
$ |
202.9 |
|
|
$ |
208.9 |
|
|
$ |
182.8 |
|
|
$ |
156.5 |
|
|
$ |
144.1 |
|
|
$ |
132.7 |
|
|
$ |
114.3 |
|
|
$ |
94.1 |
|
Fees and related income on
earning assets |
|
|
48.0 |
|
|
|
48.5 |
|
|
|
65.8 |
|
|
|
54.7 |
|
|
|
53.8 |
|
|
|
54.1 |
|
|
|
49.5 |
|
|
|
37.0 |
|
Other revenue |
|
|
8.5 |
|
|
|
11.1 |
|
|
|
12.2 |
|
|
|
10.0 |
|
|
|
9.7 |
|
|
|
8.4 |
|
|
|
7.0 |
|
|
|
4.2 |
|
Adjustments due to
acceleration of merchant fee discount amortization under fair value
accounting |
|
|
3.4 |
|
|
|
(7.9 |
) |
|
|
(12.1 |
) |
|
|
1.8 |
|
|
|
(3.4 |
) |
|
|
(14.7 |
) |
|
|
(18.6 |
) |
|
|
(5.5 |
) |
Adjustments due to
acceleration of annual fees recognition under fair value
accounting |
|
|
7.9 |
|
|
|
10.0 |
|
|
|
(6.6 |
) |
|
|
(1.3 |
) |
|
|
(4.4 |
) |
|
|
(12.0 |
) |
|
|
(12.3 |
) |
|
|
(4.6 |
) |
Removal of expense accruals
under GAAP |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
(0.4 |
) |
|
|
0.2 |
|
Removal of finance
charge-offs |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
|
|
(14.1 |
) |
|
|
(10.7 |
) |
Total managed yield |
|
$ |
212.4 |
|
|
$ |
225.3 |
|
|
$ |
200.9 |
|
|
$ |
189.2 |
|
|
$ |
171.7 |
|
|
$ |
152.4 |
|
|
$ |
125.4 |
|
|
$ |
114.7 |
|
The calculation of Combined principal net charge-offs is as
follows:
|
|
At or for the Three Months Ended |
|
|
|
2022 |
|
|
2021 |
|
(in
Millions) |
|
Dec. 31 (1) |
|
|
Sep. 30 (1) |
|
|
Jun. 30 (1) |
|
|
Mar. 31 (1) |
|
|
Dec. 31 |
|
|
Sep. 30 |
|
|
Jun. 30 |
|
|
Mar. 31 |
|
Net losses on impairment of loans, interest and fees receivable
recorded at fair value |
|
$ |
182.3 |
|
|
$ |
134.4 |
|
|
$ |
126.5 |
|
|
$ |
101.3 |
|
|
$ |
46.7 |
|
|
$ |
25.6 |
|
|
$ |
22.7 |
|
|
$ |
14.3 |
|
Gross charge-offs on non-fair
value accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
38.7 |
|
|
|
27.1 |
|
|
|
27.6 |
|
|
|
26.3 |
|
Finance charge-offs (2) |
|
|
(58.3 |
) |
|
|
(45.3 |
) |
|
|
(41.2 |
) |
|
|
(32.5 |
) |
|
|
(28.1 |
) |
|
|
(16.3 |
) |
|
|
(14.1 |
) |
|
|
(10.7 |
) |
Recoveries on non-fair value
accounts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.1 |
) |
|
|
(2.7 |
) |
|
|
(5.7 |
) |
|
|
(3.4 |
) |
Combined principal net
charge-offs |
|
$ |
124.0 |
|
|
$ |
89.1 |
|
|
$ |
85.3 |
|
|
$ |
68.8 |
|
|
$ |
53.2 |
|
|
$ |
33.7 |
|
|
$ |
30.5 |
|
|
$ |
26.5 |
|
(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 and
notes payable associated with structured financings recorded at
fair value in the accompanying consolidated statements of
income.
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