Finance Receivables, Net

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Finance Receivables, Net

Note 3. Finance Receivables, Net

Finance receivables are reported at their determined principal balances net of any unearned income, cumulative charge-offs and unamortized deferred fees and costs. Unearned income and deferred fees and costs are amortized to interest income based on all cash flows expected using the effective interest method.

As of September 30, 2022 and December 31, 2021, the Company had a credit loss allowance of $8.4 million. Of the total $8.4 million, $1.2 million and $0.6 million are associated with the Company’s Cambia® and Besivance® royalties, respectively. The remaining $6.6 million is related to the ABT Molecular Imaging, Inc., now known as Best ABT, Inc. (“Best”), second lien term loan that was recognized in order to reflect the Best royalty at its estimated fair value. Approximately $21,000 of cash receipts received from the Company’s Besivance® royalty during the nine months ended September 30, 2022 were applied toward the allowance for credit losses.

The carrying values of finance receivables are as follows (in thousands):

	September 30, 2022			December 31, 2021
Term loans	$	180,537		$	136,312
Royalty purchases		40,779			53,629
Total before allowance for credit losses		221,316			189,941
Allowance for credit losses		(8,357	)		(8,388	)
Total carrying value	$	212,959		$	181,553

The following table presents nonaccrual and performing finance receivables by portfolio segment, net of credit loss allowance (in thousands):

	September 30, 2022						December 31, 2021
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
Term loans	$	9,789	$	170,748	$	180,537	$	18,288	$	118,024	$	136,312
Royalty purchases, net of credit loss allowance		3,037		29,385		32,422		3,362		41,879		45,241
Total carrying value	$	12,826	$	200,133	$	212,959	$	21,650	$	159,903	$	181,553

As of September 30, 2022, the Company had two finance receivables in nonaccrual status: (1) the term loan to Flowonix Medical, Inc. (“Flowonix”), with a net carrying value of $9.8 million and (2) the Best royalty, with a net carrying value of $3.0 million. As of December 31, 2021, the Company had three finance receivables in nonaccrual status: (1) the term loan to Flowonix, with a net carrying value of $10.0 million, (2) the term loan with B&D Dental Corporation (“B&D”), with a carrying amount of $8.3 million, and (3) the Best royalty, with a carrying amount of $3.4 million. Although in nonaccrual status, the Flowonix and B&D term loans were not considered impaired as of September 30, 2022 and December 31, 2021. The Company collected $11.4 million on its nonaccrual finance receivables during the nine months ended September 30, 2022, which includes $10.7 million to settle the term loan with B&D.