• Stock: The J.G. Wentworth Company® OTCQX:JGWE
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The J.G. Wentworth Company® Reports First Quarter 2016 Results
Home Lending’s Results Exceed Expectations; First Quarter Closed Mortgage Loans of $568.3 million

Total Receivable Balances Purchased of $203.7 million

RADNOR, Pa.–(BUSINESS WIRE)–The J.G. Wentworth Company® (“J.G. Wentworth” or the “Company”) (NYSE:JGW), a diversified financial services company, today reports financial results for the first quarter 2016. “We are pleased with the improvements of business drivers in the quarter compared to the fourth quarter. Our Home Lending business exceeded expectations and we are looking forward to a bright future in the segment as we lay the foundation to scale the business. The Structured Settlement Payments business benefited from the actions taken to improve our cost structure and the marketing and operations initiatives are making an impact,” said Stewart A. Stockdale, Chief Executive Officer, The J.G. Wentworth Company.

The following are highlights from the first quarter:

GAAP First Quarter 2016 Results:

  • Consolidated revenues were $66.6 million, a decrease of $20.2 million from the $86.8 million reported in the first quarter 2015. The decrease was due to a $42.1 million decline in the Structured Settlement Payments segment’s (“Structured Settlements”) revenue that was primarily the result of a decline in realized and unrealized gains on VIE and other finance receivables, long-term debt and derivatives. The decline was partially offset by $21.9 million in revenue generated by the Home Lending segment (“Home Lending”) that we acquired on July 31, 2015.
    • The Company had $4.4 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 March 31, 2016.
  • Consolidated net loss was $35.1 million compared to the $5.5 million consolidated net loss in the first quarter 2015. The $29.6 million unfavorable change was principally due to a $38.5 million increase in Structured Settlement’s pre-tax loss driven by the $42.1 million decline in the segment’s revenue, partially offset by a net $3.6 million reduction in Structured Settlement’s operating expenses that have begun to reflect the benefits of our recently implemented cost savings initiatives. Partially offsetting the increase in Structured Settlement’s pre-tax loss was Home Lending’s $5.5 million in pre-tax income driven by $1.1 billion of locked loan volume and a $3.5 million favorable change in our consolidated provision (benefit) for income taxes.

Adjusted Non-GAAP* First Quarter 2016 Results:

  • Consolidated adjusted total revenues* were $57.1 million, a decrease of $5.3 million from $62.4 million in the first quarter 2015. The decrease was primarily due to a $26.8 million decline in Structured Settlement’s Spread Revenue* (i.e., realized & unrealized gains on unsecuritized finance receivables and related derivatives adjusted for the impact of prefundings) resulting from a decrease in Total Receivable Balances (“TRB”) purchases and a combination of changes in cost of funds and purchase yields. Partially offsetting the decline in Structured Settlement’s Spread Revenue* was $21.9 million in revenue generated by Home Lending.
    • Structured Settlement’s guaranteed and life contingent structured settlement, annuity and lottery TRB purchases were $203.7 million in the first quarter of 2016, a $50.8 million decrease from $254.5 million in the first quarter of 2015.
    • Home Lending generated mortgage lock volume of $1,077.1 million and closed loan volume of $568.3 million in the first quarter of 2016.
  • Consolidated Adjusted Net Income (“ANI”)* was a loss of $4.1 million compared to ANI* of $8.2 million in the first quarter 2015. The $12.3 million unfavorable change was due to an $18.2 million decline in Structured Settlement’s ANI* that was principally the result of the $26.8 million decline in Spread Revenue*. Partially offsetting the decline in Structured Settlement’s ANI* was $5.9 million in ANI* generated by Home Lending.
    • Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA*”) was $8.0 million for the first quarter of 2016 compared to $21.9 million for the first quarter of 2015.

Scott Stevens, J.G. Wentworth’s Chief Financial Officer, said, “We continue to execute on our strategic initiatives including growing the Home Lending business, stabilizing the Structured Settlements segment and maintaining strong fiscal discipline, which contributed to the $5.0 million improvement in 2016’s first quarter Adjusted EBITDA over the fourth quarter of 2015.”

Operating Highlights

  • For the three months ended March 31, 2016, the Company generated Adjusted EBITDA* of $8.0 million and had cash and cash equivalents of $26.5 million as of March 31, 2016.
  • Expense initiatives are on target to realize $25-$30 million of annual savings; Structured Settlements’ adjusted total expenses* decreased $9.0 million in the first quarter of 2016 from the first quarter of 2015.
  • In February 2016, we executed a direct asset sale of $161.3 million in discounted TRB purchases based on a discount rate of 5.02% that consisted of two pools. The first pool closed on February 18, 2016, consisted of $91.3 million of discounted TRB purchases and generated net cash proceeds to us of $27.0 million. The second pool closed on April 21, 2016, consisted of $70.0 million of discounted TRB purchases and generated net cash proceeds to us of $21.6 million.

Other News

The Company expects to receive notice from the New York Stock Exchange (“NYSE”) of being below the NYSE’s continued listing standards. The Company is considered below criteria established by NYSE because the Company’s average market capitalization was below $50 million over a consecutive 30 trading-day period, and its stockholders’ equity being reported today was less than $50 million as of March 31, 2016. The Company intends to remain a listed company and plans to develop and submit a business plan to the NYSE demonstrating how it expects to regain compliance with the NYSE’s continued listing standards. The Company has reviewed the criteria for the NYSE-MKT, and, as an alternative, may also consider transferring its stock listing to the NYSE-MKT if that platform proves to be a better long-term option.

The NYSE notification does not affect the Company’s business operations or its SEC reporting requirements and does not conflict with or cause an event of default under any of the Company’s material debt or other agreements.

* This earnings press release contains non-GAAP measures, which as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Results for the three month period ended March 31, 2016 and 2015, as well as our reconciliation of non-GAAP measures, are included in the accompanying financial information.

About The J.G. Wentworth Company®

The J.G. Wentworth Company is a diversified financial services company that specializes in providing solutions to consumers in need of cash. Our direct-to-consumer businesses use the internet, television, direct mailing, and other channels to offer a variety of solutions including structured settlement payment purchasing, mortgage origination (both purchase and refinancing), prepaid cards, and access to personal lending. We warehouse, securitize, sell or otherwise finance the financial assets that we purchase in transactions that are structured to ultimately generate cash proceeds to us that exceed the purchase price we paid for those assets. For more information about The J.G. Wentworth Company, visitwww.jgw.com or use the contact information provided below.

Conference Call and Webcast

Management will host a webcast to discuss the first quarter 2016 financial results today, May 10, 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, Scott Stevens.

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® First 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® First Quarter 2016 Webcast, may dial the Participant conference number: (877) 648-7976, Conference ID: 98405380.

A playback will be available through Tuesday, May 17th, 2016. To participate, utilize the dial-in information listed below: Playback conference number: (855) 859-2056, Conference ID: 98405380. The presentation will be posted to the Company’s website after the call.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking statements.” All statements, other than statements of historical fact, are forward-looking statements. You can identify such statements because they contain words such as ‘‘plans,’’ ‘‘expects’’ or ‘‘does expect,’’ ‘‘budget,’’ ‘‘forecasts,’’ ‘‘anticipates’’ or ‘‘does not anticipate,’’ ‘‘believes,’’ ‘‘intends,’’ and similar expressions or statements that certain actions, events or results ‘‘may,’’ ‘‘could,’’ ‘‘would,’’ ‘‘might,’’ or ‘‘will,’’ be taken, occur or be achieved. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking statements. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results, performance and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. Consideration should also be given to the areas of risk set forth under the heading “Risk Factors” in our filings with the Securities and Exchange Commission, and as set forth more fully under “Part 1, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, these risks and uncertainties include, among other things: our ability to execute on our business strategy; our ability to successfully compete in the industries in which we operate; our dependence on the effectiveness of direct response marketing; our ability to retain and attract qualified senior management; any improper use of or failure to protect the personally identifiable information of past, current and prospective customers to which we have access; our ability to upgrade and integrate our operational and financial information systems, maintain uninterrupted access to such systems and adapt to technological changes in the industries in which we operate; our dependence on third parties, including our ability to maintain relationships with such third parties and our potential exposure to liability for the actions of such third parties; damage to our reputation and increased regulation of our industries which could result from unfavorable press reports about our business model; the accuracy of the estimates and assumptions of our financial models; infringement of our trademarks or service marks; our ability to maintain our state licenses or obtain new licenses in new markets; changes in, and our ability to comply with, federal, state and local laws and regulations governing us; our business model being susceptible to litigation; our ability to continue to purchase structured settlement payments and other financial assets; the public disclosure of the identities of structured settlement holders maintained in our proprietary database; our dependence on the opinions of certain credit rating agencies of the credit quality of our securitizations; our ability to complete future securitizations or other financings on favorable terms; the insolvency of a material number of structured settlement issuers; adverse changes in the residential mortgage lending and real estate markets, including any increases in defaults or delinquencies, especially in geographic areas where our loans are concentrated; our ability to grow our loan origination volume, acquire mortgage servicing rights and recapture loans that are refinanced; changes in the guidelines of government-sponsored entities, or GSEs, or any discontinuation of, or significant reduction in, the operation of GSEs; potential misrepresentations by borrowers, counterparties and other third-parties; changes in prevailing interest rates and our ability to mitigate interest rate risk through hedging strategies; our ability to obtain sufficient working capital at attractive rates or obtain sufficient capital to meet the financing requirements of our business; our ability to remain in compliance with the terms of our substantial indebtedness; and our ability to meet the continued listing requirements of the New York Stock Exchange.

Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to publicly revise any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

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Schedule C

The J.G. Wentworth Company

Reconciliation of Net Loss to Adjusted Net (Loss) Income and Adjusted EBITDA and other Non-GAAP Measures Used in this Release and the Related Presentation

We use the Non-GAAP financial measures of Adjusted Net (Loss) Income (“ANI”) and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) as measures of our results from operations. We define ANI as our net (loss) income under U.S. GAAP before non-cash compensation expenses, certain other expenses, provision for or benefit from income taxes, and for our Structured Settlement’s segment, amounts related to the consolidation of the securitization and permanent financing trusts we use to finance the segment’s business. We define Adjusted EBITDA as ANI before term loan interest expense, debt issuance costs, broker and legal fees incurred in connection with sale of finance receivables and depreciation and amortization. The Company believes ANI and Adjusted EBITDA are useful to investors and management as measures of our operating performance, as the operations of the associated variable interest entities do not impact the Structured Settlements segment’s performance. In addition, the add-backs described above are consistent with adjustments permitted under our term loan agreement.

We also use the non-GAAP measures of total adjusted revenue and adjusted realized & unrealized gains on unsecuritized finance receivables and related derivatives (“Spread Revenue”) as measures of our revenues, which we define as those measures under U.S. GAAP before the amounts related to the consolidation of the securitization and permanent financing trusts we use to finance our Structured Settlements business and adjusted for the impact of prefundings on unsecuritized finance receivables,as applicable. We also use the non-GAAP measure of adjusted total expense, which we define as total expense under U.S. GAAP before non-cash compensation expenses, certain other expenses, provision for or benefit from income taxes, and for our Structured Settlement’s segment, amounts related to the consolidation of the securitization and permanent financing trusts we use to finance the segment’s business. We use these measures because we believe they represent useful measures of our revenues and expenses, as the operations of these variable interest entities also do not impact business performance.

We use Adjusted Cash Flow, a Non-GAAP financial measure, as a measure of our cash flows from operations. We define Adjusted Cash Flow as it is presented on the accompanying table. The Company believes Adjusted Cash Flow is useful to investors and management as a measure of cash generated by business operations that can be used to repay debt, invest in future growth or repurchase stock. This metric can also be used to evaluate the Company’s ability to generate cash flow from business operations and the impact that this cash flow has on the Company’s liquidity.

You should not consider ANI, Adjusted EBITDA, Total Adjusted Revenue, Spread Revenue, Total Adjusted Expense, or Adjusted Cash Flow in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Because not all companies use identical calculations, our presentation of ANI, Adjusted EBITDA, Total Adjusted Revenue, Spread Revenue, Total Adjusted Expense and Adjusted Cash Flow may not be comparable to other similarly titled measures of other companies.

A reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) to Adjusted EBITDA, which includes line items for Total Adjusted Revenue, Spread Revenue, and Total Adjusted Expense, for the three months ended March 31, 2016 and 2015, respectively, is provided below. Certain prior period numbers have been reclassified to conform with current period’s presentation.

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Contacts
The J.G. Wentworth Company®
Erik Hartwell, 866-386-3853
VP, Investor Relations
investor@jgwentworth.com

or

Media Inquiries
The Glover Park Group
Ray Conger, 202-292-6961
rconger@gpg.com