The J.G. Wentworth Company (OTCQX:JGWE) today reports financial results for the third quarter of 2016. “We continue to execute on our key strategic priorities. Home Lending reported its second consecutive quarter of record locked and closed loan volume and our Structured Settlements segment is showing signs of stabilizing. Additionally, we begin piloting next week a combined Visa Virtual Gift Card and State Lottery Scratch-off ticket which represents our entry into this category,” said Stewart A. Stockdale, Chief Executive Officer, The J.G. Wentworth Company.
The following are highlights from the third quarter:
Third Quarter 2016 Consolidated Results:
| • | Consolidated revenues were $68.8 million, an increase of $4.9 million from the $63.9 million reported in the third quarter of 2015. The increase was due primarily to the $19.4 million increase in revenue generated by the Home Lending segment (“Home Lending”) that we acquired on July 31, 2015, offset by a $14.5 million decline in our Structured Settlement Payments segment’s (“Structured Settlements”) revenue driven principally by a $68.9 million decrease in Total Receivable Balances (“TRB”) purchases when compared to the comparable period in the prior year. |
| ▪ | Home Lending generated mortgage lock volume of $1.6 billion and closed loan volume of $1.0 billion in the third quarter of 2016. |
| ▪ | The Company had $4.2 billion in VIE and other finance receivables, at fair value, and $4.0 billion in VIE long-term debt issued by securitization and permanent financing trusts, at fair value, as of September 30, 2016. The debt issued by our VIE securitization and permanent financing trusts is recourse only to the respective entities that issued the debt and is non-recourse to the Company and its other subsidiaries. |
| • | Consolidated net loss was $38.8 million compared to the $57.6 million consolidated net loss in the third quarter of 2015. The $18.8 million change was due to a $4.9 million increase in consolidated total revenues coupled with a $17.3 million decline in consolidated total expenses, partially offset by a $3.4 million decrease in our consolidated benefit for income taxes. The $4.9 million increase in consolidated total revenues was driven by a $19.4 million increase in Home Lending’s revenues that was partially offset by a $14.5 million decline in Structured Settlements’ revenues. The $17.3 million decline in consolidated total expenses reflects the impact of the $29.9 million impairment charge recorded during the three months ended September 30, 2015 for which there was not an equivalent impairment charge recorded in the current year. Excluding the impact of this impairment charge, consolidated total expenses increased $12.6 million over the prior year due in part to Home Lending’s $682.5 million increase in closed loan volume that resulted in increased compensation and benefits expense during the third quarter of 2016. Home Lending was acquired on July 31, 2015 and, therefore, the consolidated results for the third quarter of 2015 include only two months of Home Lending’s operations. |
Third Quarter 2016 Segment Results:
| • | Segment Adjusted Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization (“Segment Adjusted EBITDA*”) for Home Lending was $9.4 million for the third quarter of 2016 compared to $2.0 million for the third quarter of 2015. The increase was due in part to the prior year’s third quarter including only two months of activity combined with growth in loan lock volume in the third quarter of 2016 over the third quarter of 2015. |
| • | Segment Adjusted EBITDA* for Structured Settlements was $4.6 million for the third quarter of 2016 compared to $16.6 million for the third quarter of 2015. The $11.9 million decrease in Segment Adjusted EBITDA* for Structured Settlements was primarily due to a $19.2 million decline in realized and unrealized gains on unsecuritized finance receivables and related derivatives driven by a $68.9 million decrease in TRB purchases, partially offset by reduced operating expenses reflecting the results to date of our previously announced cost savings initiatives. |
Roger O. Gasper, J.G. Wentworth’s Chief Financial Officer, said, “Overall, we continued to make progress during the third quarter against our initiatives of: (i) improving Structured Settlements, (ii) growing Home Lending, and (iii) launching our prepaid business. Home Lending generated $9.4 million in Segment Adjusted EBITDA*, which represents a $1.4 million improvement over the segment’s 2016’s second quarter results that were driven by a $181.6 million (12.7%) and $189.9 million (22.5%) increase in locked loan and closed loan volume, respectively, over the second quarter. Structured Settlements’ TRB purchases of $171.5 million in the third quarter of 2016 were essentially flat with 2016 second quarter’s TRB purchases of $172.6 million and the segment generated $4.6 million in Segment Adjusted EBITDA*, a $1.6 million improvement over second quarter results.”
Other Highlights:
| • | In September 2016, the Company issued $207.5 million in notes collateralized by the cash flows from residual interests related to 36 of our securitizations. The proceeds were used in part to repay $131.4 million in previously outstanding VIE long-term debt and to pay related legal and broker fees. The Company received net proceeds of $65.9 million from the transaction. |
| • | As of September 30, 2016, the Company had cash and cash equivalents of $86.7 million, an increase of $49.1 million over the $37.6 million in cash and cash equivalents as of June 30, 2016. |
| • | The Company recorded a lease termination charge of $0.8 million in the third quarter of 2016 resulting in total restructuring expense on a year-to-date basis of $3.5 million. As a result of the cost savings initiatives implemented to date, the Company expects to have reduced annual operating expenses approximately $33 million by the end of 2016 (from 2015 full-year levels). The Company expects to further reduce annual operating expenses by approximately $7 million in 2017. |
| • | On October 26, 2016, the Company completed its 2016-1 securitization which consisted of $104.3 million Class A Fixed Rate Asset Backed Notes that will pay 3.41% (the “Class A Notes”) and $13.0 million Class B Fixed Rate Asset Backed Notes that will pay 5.19% (the “Class B Notes”). The Class A Notes were rated AAA (DBRS) and Aaa (Moody’s). The Class B Notes were rated BBB (DBRS) and Baa2 (Moody’s). As a result of this transaction, the Company received net proceeds of $16.5 million. |
* This earnings press release includes Segment Adjusted EBITDA, which we use as a measure of our segments’ operating performance. We report Segment Adjusted EBITDA because our Chief Operating Decision Maker (“CODM”), as that term is defined in Accounting Standards Codification 280 – Segment Reporting (“ASC 280”), uses Segment Adjusted EBITDA to evaluate our segments’ performance. Not all companies calculate Segment Adjusted EBITDA in the same fashion and, therefore, these amounts as presented may not be comparable to other similarly titled measures of other companies. Results for the three and nine months ended September 30, 2016 and 2015, a description of the segment profitability measure and reconciliations of Segment Adjusted EBITDA to Loss Before Income Taxes are included in the accompanying financial information.
About The J.G. Wentworth Company®
The J.G. Wentworth Company® is focused on providing direct-to-consumer access to financing needs through a variety of solutions, including: mortgage lending and refinancing, structured settlement, annuity and lottery payment purchasing, prepaid cards, and access to providers of personal loans.
Mortgage loans are offered by J.G. Wentworth Home Lending, LLC NMLS ID # 2925 (www.nmlsconsumeraccess.org), 3350 Commission Court, Woodbridge, VA 22192; 888-349-3773.
For more information about The J.G. Wentworth Company®, visit www.jgw.com or use the information provided below.
Conference Call and Webcast
Management will host a webcast to discuss the third quarter 2016 financial results today, November 8, 2016, at 10:00 AM Eastern time. The webcast will include remarks from J.G. Wentworth’s Chief Executive Officer, Stewart Stockdale, and Executive Vice President & Chief Financial Officer, Roger Gasper.
This call will be accompanied by a presentation and will be available via a webcast of the conference call live on the Investor Relations section of the Company’s website listed below.
The J.G. Wentworth Company® Third Quarter 2016 Webcast.
Interested parties unable to access the conference call and view the presentation via the webcast through this link: The J.G. Wentworth Company® Third Quarter 2016 Webcast, may dial the Participant conference number: (866) 393-4306, Conference ID: 7882146.
A playback will be available through Tuesday, November 15th, 2016. To participate, utilize the dial-in information listed below:
Playback conference number: (855) 859-2056, Conference ID: 7882146. The presentation will be posted to the Company’s website after the call.