EX-99.1 2 ea121987ex99-1_gwghold.htm PRESS RELEASE DATED MAY 15, 2020

Exhibit 99.1

 

 

GWG HOLDINGS, Inc. ReportS Results for THE FIRST Quarter ENDED MARCH 31, 2020

 

DALLAS – May 15, 2020 – Today, GWG Holdings, Inc. (Nasdaq: GWGH), a financial services holding company committed to transforming the alternative asset industry through innovative liquidity products and related services for the owners of illiquid alternative investments, announced its financial and operating results for the first quarter ended March 31, 2020. The results reflect consolidated accounting and financial reporting of GWGH and The Beneficient Company Group, L.P. (Ben LP) and related entities (collectively, Ben).

 

Recent Corporate Developments

 

Despite the uncertainty surrounding the novel coronavirus pandemic (COVID-19), the Company continues to raise capital, pay and receive interest income and dividends, receive insurance policy benefits, and otherwise meet its ongoing operating obligations.
On March 30, 2020, the Company filed a registration statement to offer up to $2.0 billion in principal amount of L Bonds on a continuous basis until 2023. These bonds contain terms and features that are substantially consistent with previous L Bond offerings.
On May 15, 2020, Ben and its lender signed a term sheet to amend its senior credit and subordinated credit agreements. Among other changes, the amendment would extend the maturity date of both loans to April 10, 2021, and provides for them to be transferred to GWGH or a subsidiary upon issuance of Ben’s trust company charters by the Texas Department of Banking. The amendments set forth in the term sheet are subject to, among other things, the negotiation and execution of definitive agreements governing the amendments and the satisfaction of closing conditions.
On March 6, 2020, Ben submitted revised trust charter applications to the Texas Department of Banking which the Department is actively reviewing and considering. In the interim, Ben has closed a limited number of transactions to date, but intends to significantly expand its operations if and when the trust charters are issued.

 

First Quarter 2020 Financial and Operating Highlights

 

Reported first quarter 2020 net loss of $49.4 million, compared to a net loss of $18.9 million in the first quarter of 2019
oGWGH’s investment in Ben was accounted for as an equity method investment prior to the change-of-control on December 31, 2019, and the first quarter of 2020 includes the consolidated results of Ben for the first time.
oRecognized $68.9 million of non-cash, equity-based compensation expense during the first quarter of 2020 as a result of grants under Ben’s equity incentive plans, which significantly contributed to the consolidated net loss. The recognition of these Ben expenses is a result of the transactions between Ben and GWGH that created the year-end 2019 gain. The majority of those awards vest over a four-year period beginning on the grantee’s service date to Ben (e.g., hire date for an employee). Because many participants in Ben’s equity incentive plans have been with the company for multiple years, some awards vested up to 100 percent on the grant date and that vesting required recognition of the commensurate equity-based compensation in the first quarter 2020 filing. The grant date value of the awards was based on the recent valuation of Ben completed in conjunction with the change-of-control event on December 31, 2019. Equity-based compensation expense on a quarterly basis going forward is expected to be significantly lower based on the awards outstanding as of March 31, 2020.
Reported total assets of $3.7 billion as of March 31, 2020, compared to $3.6 billion as of December 31, 2019.
Reported continued strong life insurance portfolio performance:
oRealized $25.5 million of face amount of policy benefits from 20 life insurance policies during the first quarter of 2020, compared to $30.5 million from 20 life insurance policies during the first quarter of 2019.
oEnded the quarter with a life insurance portfolio of $2.0 billion in face amount of policy benefits consisting of 1,131 policies.
Reported continued success raising capital through the L Bond investment product with $110.8 million of L Bond sales in the first quarter of 2020.

 

1

 

 

Continued its shift in focus away from new life insurance policy acquisitions and towards its investment in Ben, while managing its existing life insurance policy portfolio. As part of that strategic shift, the Company has ended its Life Care Exchange program for purchasing policies.

 

Reported total liquidity (cash, restricted cash, policy benefits receivable and fees receivable) increased to $188.7 million at March 31, 2020.

 

“In this unprecedented time, we are working hard to support our advisors and the clients they serve,” said Murray Holland, GWGH’s Chief Executive Officer. “We believe our products are uniquely positioned to provide a combination of yield and stability as advisors and broker-dealers report a need for liquidity at a previously unseen level among our target market of individual and small institutional investors.”

 

1.Financial & Operating Highlights

 

($ Thousands except per share information)  Q1 2020   Q1 2019 
Revenue  $33,557   $25,217 
Expenses   124,050    37,904 
Income Tax Benefit   14,507     
Loss from Equity Method Investments   (1,530)   (1,927)
Net Loss, including Loss from Equity Method Investment   (77,516)   (14,614)
Loss Attributable to Noncontrolling Interests   32,084     
Preferred Stock Dividends   3,952    4,296 
Net Loss Attributable to Common Shareholders   (49,384)   (18,910)
Per Share Data:          
  Net Loss1   (1.62)   (0.57)
Capital Raised from L Bonds   110,825    125,985 
Liquidity2   188,661    183,896 
Life Insurance Portfolio3   2,000,680    2,098,428 
Life Insurance Acquired3       80,211 
Face Value of Matured Policies   25,502    30,459 
TTM Benefits / Premiums4   184.3%   154.8%

 

(1)Per diluted common share outstanding
(2)Includes cash, restricted cash, policy benefits receivable and fees receivable as of the end of the period presented
(3)Face amount of policy benefits
(4)The ratio of policy benefits realized to premiums paid on a trailing twelve month (TTM) basis

 

2.Revenue and Expense Discussion

 

First Quarter 2020 vs. First Quarter 2019:

 

Total revenue was $33.6 million in the current period, compared to $25.2 million in the prior period primarily due to:
oThe Ben consolidation added $9.4 million of interest income from its financing receivables portfolio, after intercompany eliminations, and $5.0 million in trust services and other fee revenue.
oInterest income of $1.1 million on the LiquidTrusts promissory note.
oThese increases were partially offset by $7.0 million of lower gains on life insurance policies primarily due to slightly lower average face value of matured policies and no gains on acquisitions.
Total expenses were $124.1 million in the current period, compared to $37.9 million in the prior period primarily due to:
oEmployee compensation and benefits increased by $72.6 million for this period primarily due to the inclusion of Ben’s operations, which included the recognition of $68.9 million of non-cash, equity-based compensation expense under Ben’s equity incentive plans.
oInterest and fees increased by $8.9 million due to $6.1 million of additional interest expense on L Bonds as a result of increased amounts outstanding, increased interest expense of $2.3 million from the consolidation of Ben related to its borrowings, and increased interest expense of $0.5 million on GWGH’s senior credit facility.
oLegal and professional fees increased by $3.2 million primarily due to additional legal and consulting fees recognized with the full consolidation of Ben’s operations beginning in the first quarter of 2020.

 

2

 

 

3.Life Insurance Portfolio Statistics as of and for the quarter ended March 31, 2020

 

Portfolio Summary:

 

Total life insurance portfolio face value of policy benefits (in thousands)  $2,000,680 
Average face value per policy (in thousands)  $1,769 
Average face value per insured life (in thousands)  $1,900 
Weighted average age of insured (years)   82.6 
Weighted average life expectancy estimate (years)   7.2 
Total number of policies   1,131 
Number of unique lives   1,053 
Demographics   74% Males;
26% Females
 
Number of smokers   47 
Largest policy as % of total portfolio face value   0.7%
Average policy as % of total portfolio   0.1%
Average annual premium as % of face value   3.5%

 

Distribution of Policies and Benefits by Current Age of Insured:

 

              Percentage of Total     
Min Age  Max Age  Number of
Policies
   Policy
Benefits
   Number of
Policies
   Policy
Benefits
   Wtd. Avg.
LE (yrs.)
 
95  101   20   $42,602    1.7%   2.1%   2.1 
90  94   147    289,269    13.0%   14.5%   3.2 
85  89   232    544,264    20.5%   27.2%   5.0 
80  84   247    439,948    21.9%   22.0%   7.2 
75  79   223    369,024    19.7%   18.4%   9.9 
70  74   199    247,346    17.6%   12.4%   11.1 
60  69   63    68,227    5.6%   3.4%   11.3 
Total      1,131   $2,000,680    100.0%   100.0%   7.2 

 

4.Ben’s Collateral Portfolio Information

 

As of March 31, 2020, Beneficient’s loan portfolio had exposure to 118 professionally managed alternative investment funds, comprised of 350 underlying investments, and approximately 92 percent of Beneficient’s loan portfolio was collateralized by investments in private companies. Beneficient’s loan portfolio diversification spans across these industry sectors, geographic regions and exposure types:

 

 

 

Assets in the collateral portfolio consist primarily of interests in alternative investment vehicles (also referred to as funds) that are managed by a group of U.S. and non-U.S. based alternative asset management firms that invest in a variety of financial markets and utilize a variety of investment strategies. The vintages of the funds in the collateral portfolio as of December 31, 2019 ranged from 1998 to 2011.

 

3

 

 

5.Additional Information

 

Gain (Loss) on Life Insurance Policies (in thousands):

 

   Three Months Ended
March 31,
 
   2020   2019 
Change in estimated probabilistic cash flows(1)  $17,851   $17,131 
Unrealized gain on acquisitions(2)       4,459 
Premiums and other annual fees   (17,199)   (15,832)
Face value of matured policies   25,502    30,459 
Fair value of matured policies   (11,709)   (14,721)
Gain (loss) on life insurance policies, net  $14,445   $21,496 

 

(1)Change in fair value of expected future cash flows relating to the investment in life insurance policies that are not specifically attributable to changes in life expectancy, discount rate changes or policy maturity events.
(2)Gain resulting from fair value in excess of the purchase price for life insurance policies acquired during the reporting period.

 

Policy Benefits Realized and Premiums Paid (TTM):

 

Quarter End Date  Portfolio
Face Amount
(in thousands)
   12-Month
Trailing
Benefits
Realized
(in thousands)
   12-Month
Trailing
Premiums
Paid
(in thousands)
   12-Month
Trailing
Benefits/
Premium
Coverage
Ratio
 
March 31, 2016   1,027,821    21,845    28,771    75.9%
June 30, 2016   1,154,798    30,924    31,891    97.0%
September 30, 2016   1,272,078    35,867    37,055    96.8%
December 31, 2016   1,361,675    48,452    40,239    120.4%
March 31, 2017   1,447,558    48,189    42,753    112.7%
June 30, 2017   1,525,363    49,295    45,414    108.5%
September 30, 2017   1,622,627    53,742    46,559    115.4%
December 31, 2017   1,676,148    64,719    52,263    123.8%
March 31, 2018   1,758,066    60,248    53,169    113.3%
June 30, 2018   1,849,079    76,936    53,886    142.8%
September 30, 2018   1,961,598    75,161    55,365    135.8%
December 31, 2018   2,047,992    71,090    52,675    135.0%
March 31, 2019   2,098,428    87,045    56,227    154.8%
June 30, 2019   2,088,445    82,421    59,454    138.6%
September 30, 2019   2,064,156    101,918    61,805    164.9%
December 31, 2019   2,020,973    125,148    63,851    196.0%
March 31, 2020   2,000,680    120,191    65,224    184.3%

 

Webcast/Conference Call Details

 

Management will host a webcast/conference call Monday, May 18, 2020 at 4:30 p.m. EDT to discuss financial and operating results. The webcast will give viewers audio and access to PowerPoint slides that illustrate points made during the call. To register for the call and webcast, go to http://get.gwgh.com/q12020webcastinvite.

 

After the webcast is completed, a replay of it can be accessed at http://get.gwgh.com/q12020webcast.

 

4

 

 

About GWG Holdings, Inc. 

 

GWG Holdings, Inc. (Nasdaq: GWGH), a financial services holding company committed to transforming the alternative asset industry through innovative liquidity products and related services for the owners of illiquid alternative investments, is the parent company of GWG Life, LLC, which owns a portfolio of $2.0 billion in face value of life insurance policy benefits as of March 31, 2020. GWGH has executed a series of strategic transactions with The Beneficient Company Group, L.P., a financial services company providing proprietary liquidity solutions to owners of alternative assets, resulting in the closer alignment of the two companies. 

 

For more information about GWG Holdings, email info@gwgh.com or visit www.gwgh.com. For more information about Beneficient, email askben@beneficient.com or visit www.trustben.com.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “would,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about our estimates regarding future revenue and financial performance. We may not actually achieve the expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the expectations disclosed in the forward-looking statements that we make. More information about potential factors that could affect our business and financial results is contained in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on May 15, 2020, and our Annual Report on Form 10-K filed with the SEC on March 27, 2020. Additional information will also be set forth in our future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that we make with the SEC. We do not intend, and undertake no duty, to release publicly any updates or revisions to any forward-looking statements contained herein.

 

Media Contact:

 

Dan Callahan

Director of Communication

GWG Holdings, Inc.

(612) 787-5744

dcallahan@gwgh.com

 

5

 

 

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

   March 31,
2020
(unaudited)
   December 31,
2019
 
ASSETS        
Cash and cash equivalents  $116,432   $79,073 
Restricted cash   26,446    20,258 
Investment in life insurance policies, at fair value   802,181    796,039 
Life insurance policy benefits receivable, net   15,330    23,031 
Loans receivable, net of unearned income   219,296    232,344 
Allowance for loan losses   (700)    
Loans receivable, net   218,596    232,344 
Fees receivable   30,453    29,168 
Financing receivables from affiliates   68,290    67,153 
Other assets   33,906    30,135 
Goodwill   2,372,595    2,358,005 
TOTAL ASSETS  $3,684,229   $3,635,206 
           
LIABILITIES & STOCKHOLDERS’ EQUITY          
LIABILITIES          
Senior credit facility with LNV Corporation  $188,793   $174,390 
L Bonds   1,009,781    926,638 
Seller Trust L Bonds   366,892    366,892 
Other borrowings   152,597    153,086 
Interest and dividends payable   22,403    16,516 
Deferred revenue   39,651    41,444 
Accounts payable and accrued expenses   21,139    27,836 
Deferred tax liability, net   40,206    57,923 
TOTAL LIABILITIES   1,841,462    1,764,725 
           
Redeemable noncontrolling interests   1,241,641    1,269,654 
           
STOCKHOLDERS’ EQUITY          
           
REDEEMABLE PREFERRED STOCK          
(par value $0.001; shares authorized 100,000; shares outstanding 69,756 and 84,636; liquidation preference of $70,163 and $85,130 as of March 31, 2020 and December 31, 2019, respectively)   59,142    74,023 
SERIES 2 REDEEMABLE PREFERRED STOCK          
(par value $0.001; shares authorized 150,000; shares outstanding 146,812 and 147,164; liquidation preference of $147,668 and $148,023 as of March 31, 2020 and December 31, 2019, respectively)   127,516    127,868 
COMMON STOCK          
(par value $0.001; shares authorized 210,000,000; shares issued and outstanding 30,535,249 and 30,533,793 as of March 31, 2020 and December 31, 2019, respectively)   33    33 
Common stock in treasury, at cost (2,500,000 shares as of both March 31, 2020 and December 31, 2019)   (24,550)   (24,550)
Additional paid-in capital   229,207    233,106 
Accumulated deficit   (121,933)   (76,501)
TOTAL GWG HOLDINGS STOCKHOLDERS’ EQUITY   269,415    333,979 
Noncontrolling interests   331,711    266,848 
TOTAL STOCKHOLDERS’ EQUITY   601,126    600,827 
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY  $3,684,229   $3,635,206 

 

6

 

 

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)

(unaudited)

 

   Three Months Ended
March 31,
 
   2020   2019 
REVENUE        
Gain on life insurance policies, net  $14,445   $21,496 
Interest and other income   19,112    3,721 
TOTAL REVENUE   33,557    25,217 
           
EXPENSES          
Interest expense   35,871    26,975 
Employee compensation and benefits   77,704    5,154 
Legal and professional fees   6,163    2,947 
Provision for loan losses   700     
Other expenses   3,612    2,828 
TOTAL EXPENSES   124,050    37,904 
           
LOSS BEFORE INCOME TAXES   (90,493)   (12,687)
INCOME TAX BENEFIT   (14,507)    
           
NET LOSS BEFORE LOSS FROM EQUITY METHOD INVESTMENT   (75,986)   (12,687)
           
Loss from equity method investment   (1,530)   (1,927)
           
NET LOSS   (77,516)   (14,614)
           
Net loss attributable to noncontrolling interests   32,084     
           
Less: Preferred stock dividends   3,952    4,296 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $(49,384)  $(18,910)
NET LOSS PER COMMON SHARE          
Basic  $(1.62)  $(0.57)
Diluted  $(1.62)  $(0.57)
           
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          
Basic   30,534,977    32,984,741 
Diluted   30,534,977    32,984,741 

 

 

7