8-K
Atlanticus Holdings Corp (ATLC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 8, 2023
Atlanticus Holdings Corporation
(Exact name of registrant as specified in its charter)
| Georgia | 000-53717 | 58-2336689 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Five Concourse Parkway, Suite 300, Atlanta, Georgia 30328
(Address of principal executive offices)
Registrant’s telephone number, including area code: 770-828-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
|---|---|---|
| Common stock, no par value per share | ATLC | NASDAQ Global Select Market |
| Series B Preferred Stock, no par value per share | ATLCP | NASDAQ Global Select Market |
| Senior Notes due 2026 | ATLCL | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On November 8, 2023, Atlanticus Holdings Corporation (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2023. A copy of the Company’s press release is attached and furnished herewith as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.
Note: Information in this report (including Exhibit 99.1) furnished pursuant to Item 2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| Exhibit<br><br> <br>Number | Description |
| --- | --- |
| 99.1 | Press Release, dated November 8, 2023 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ATLANTICUS HOLDINGS CORPORATION | ||
|---|---|---|
| Date: November 8, 2023 | By: | /s/William R. McCamey |
| Name: William R. McCamey<br><br> <br>Title: Chief Financial Officer |
2
ex_593927.htm
Exhibit 99.1
Atlanticus Reports Third Quarter 2023 Financial Results
November 8, 2023 | Source:Atlanticus Holdings Corp
Third Quarter 2023 Receivables growth of 18.1% over prior year, with over 3.4 million accounts served ^(1)^ , allowing for continued strong results
ATLANTA, November 7, 2023 (GLOBE NEWSWIRE) -- 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 receivables^2^ 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 serviced^1^ |
| --- | --- |
| ● | 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 information^
^3 )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) 828-2000
investors@atlanticus.com
Atlanticus Holdings Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
| December 31, | |||||
|---|---|---|---|---|---|
| 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 |
All values are in US Dollars.
(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 Subsidiaries
Consolidated 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 Subsidiaries
Consolidated 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<br><br> <br>and general purpose credit card platform that were acquired on or after January 1, 2020, and, as discussed in<br><br> <br>more detail in the Form 10-Q for the quarter ended September 30, 2023, on January 1, 2022, we elected the fair value<br><br> <br>option under ASU 2016-13 for those private label credit and general purpose credit card receivables that were<br><br> <br>previously accounted for under the amortized cost method. | |||||||||||||||||||||||
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| (2) | The fair value mark against receivables reflects the difference between the face value of a receivable and the<br><br> <br>net present value of the expected cash flows associated with that receivable. | |||||||||||||||||||||||
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| (3) | The Fair value to face value ratio is calculated using Loans, interest and fees receivable, at fair value as the<br><br> <br>numerator, and Loans, interest and fees receivable, at face value, as the denominator. | |||||||||||||||||||||||
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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. | |||||||||||||||
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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. | |||||||||||||||||||||||
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| (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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