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TAMPA, Fla., March 31, 2017 -- LM Funding America, Inc. (NASDAQ:LMFA) (NASDAQ:LMFAW), a specialty finance company offering unique funding solutions to community associations, is reporting results for the fourth quarter and full year ended December 31, 2016.
Fourth Quarter 2016 Summary vs. Year-Ago Quarter
- Revenue totaled $0.9 million compared to $1.8 million
- Rental revenue increased 114% to $117,000
- Income statement revenue per unit decreased 3.7% to $4,700
- Finalized cost reduction initiative, which is expected to reduce annual costs by an estimated $2.6 million to $3.0 million
Full Year 2016 Summary vs. 2015
- Revenue totaled $4.9 million compared to $7.0 million
- Rental revenue increased 93% to $347,000
- Income statement revenue per unit was $4,700 compared to $4,600
- REO portfolio at year-end increased 56% to 67 properties
Subsequent Event
- Received favorable court ruling in proposed class action filed by Wilmington Savings Fund Society (Wilmington)
Management Commentary
“2016 was both an exciting and challenging year for our organization,” said Bruce Rodgers, founder and CEO of LM Funding. “Our revenue results for the fourth quarter continued to be impacted by the reduction of distressed real estate transactions in Florida. However, despite the decrease in payoff occurrences, we continued to bolster our assets such as the net present value of our accounts receivable, growth of our rental real estate portfolio, and potential value in our unsecured accounts receivables.
“At the end of the fourth quarter, 95% of our properties were generating recurring rental income. We also continued to focus on collecting accounts without a mortgage, which we expect will pay out approximately five times more than a typical account.
“During the quarter, we successfully finalized our comprehensive cost cutting initiative, which led to a 34% reduction of operating expenses compared to the third quarter of 2016. We expect to continue realizing the benefits of this initiative in the months and years ahead.
“Subsequent to the quarter, in February we received a favorable ruling from a Federal District Court judge regarding a proposed class action lawsuit filed by Wilmington Savings Fund Society FSB. This was a major win for not only LM Funding, but homeowners associations and every home and condominium owner throughout Florida. Ultimately, this ruling enables associations to continue to collect what they are owed, without placing additional burden on every person who pays their fees and mortgage on time each and every month.
“In 2017, we will continue to fight against predatory lawsuits to ensure homeowners associations can rightfully collect outstanding fees. We will also continue to bolster off-balance sheet assets through our various monetization initiatives, while utilizing our unique business model to capitalize on the expected Florida real estate deceleration and corresponding price softening in several over-bought markets.”
Fourth Quarter 2016 Financial Results
Revenues in the fourth quarter of 2016 were $0.9 million compared to $1.0 million in the third quarter of 2016 and $1.8 million in the fourth quarter of 2015. The decrease in revenues was due to the decrease in payoff occurrences resulting from changes in the overall Florida real estate market. The decrease was offset by an increase in rental revenue from the company’s REO properties.
Operating expenses in the fourth quarter of 2016 were $1.5 million compared to $2.3 million in the third quarter of 2016 and $1.5 million in the year-ago quarter. The decrease in fourth quarter 2016 expenses compared to the prior quarter is a result of the company’s cost reduction initiative implemented during the third quarter of 2016.
Interest expense in the fourth quarter of 2016 was $131,000 compared to $119,000 in the third quarter of 2016 and $188,000 in the fourth quarter of 2015.
Net loss in the fourth quarter of 2016 was $524,000 compared to a net loss of $914,000 or $(0.28) per share in the third quarter of 2016 and net income of $231,000 in the year-ago quarter. In 2015, LM Funding was not publicly traded for the entire fourth quarter and organized as a Florida Limited Liability Company, so per share figures and any corporate income tax is not applicable for the entire period.
At December 31, 2016, cash and cash equivalents totaled $2.3 million compared to $3.6 million at September 30, 2016 and $9.0 million at December 31, 2015.
Full Year 2016 Financial Results
Revenues in 2016 were $4.9 million compared to $7.0 million in 2015. The decrease in revenues was due to a reduction of payoff occurrences resulting from changes in the overall Florida real estate market. The decrease in revenues was partially offset by an increase in rental revenue driven by the company’s continued focus to increase its rental base.
Operating expenses in 2016 totaled $8.0 million compared to $4.3 million in 2015. The increase was driven by increases in professional fees, legal fees, and payroll due to increased headcount.
Interest expense in 2016 was $595,000 compared to $917,000 in 2015, with the decrease attributable to the company’s refinancing of $1.8 million of debt in July 2015 at a 6% interest rate.
Net loss in 2016 was $2.4 million or $(0.72) per share compared to net income before taxes of $1.7 million in 2015. In 2015, LM Funding was not publicly traded and organized as a Florida Limited Liability Company, so per share figures and any corporate income tax is not applicable for the period.
Conference Call
Management will hold a conference call Monday, April 3 at 4:30 p.m. Eastern time to discuss these results, followed by a question and answer period.
Interested parties can listen to the live presentation by dialing the listen-only number below or by clicking the webcast link available on the Investors section of the company's website at www.lmfunding.com.
Date: Monday, April 3, 2017
Time: 4:30 p.m. Eastern time
Listen-only toll-free number: (877) 793-4355
Listen-only international number: (615) 247-0182
Conference ID: 95511268
Webcast: http://edge.media-server.com/m/p/zsicqy76
Please dial in 10 minutes before the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 949-574-3860.
A webcast replay of the call will be available after the call on the same day via the Investor Information section of the LM Funding website at www.lmfunding.com through June 3, 2017.
About LM Funding America
LM Funding America, Inc., together with its subsidiaries, is a specialty finance company that provides funding to nonprofit community associations (Associations) primarily located in the state of Florida, as well as in the states of Washington, Colorado and Illinois. The company offers funding to Associations by purchasing a certain portion of the associations’ rights to delinquent accounts that are selected by the Associations arising from unpaid Association assessments. It is also involved in the business of purchasing delinquent accounts on various terms tailored to suit each Association’s financial needs, including under its New Neighbor Guaranty™ program. The company was founded in 2008 and is based in Tampa, Florida. The company's common shares and warrants trade on the NASDAQ Capital Market under the symbols "LMFA" and "LMFAW”.
Forward-Looking Statements
This press release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company’s filings with the SEC. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company’s business, financial condition, and results of operations.
| LM FUNDING AMERICA, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Assets | ||||||||
| Cash | $ | 2,268,180 | $ | 8,997,798 | ||||
| Finance receivables: | ||||||||
| Original product (Note 2) | 1,035,832 | 1,537,101 | ||||||
| Special product - New Neighbor Guaranty program, net of allowance for credit losses of $125,000 (Note 3) | 491,597 | 715,534 | ||||||
| Due from related party (Note 10) | 1,661,360 | 406,219 | ||||||
| Prepaid expenses and other assets | 203,738 | 151,362 | ||||||
| Fixed assets, net | 109,938 | 158,692 | ||||||
| Real estate assets owned (Note 5) | 734,727 | 285,341 | ||||||
| Deferred tax asset (Note 8) | 3,509,401 | 2,162,380 | ||||||
| Total assets | $ | 10,014,773 | $ | 14,414,427 | ||||
| Liabilities and stockholders' equity | ||||||||
| Notes payable (Note 6) | ||||||||
| Principal amount | $ | 5,260,274 | $ | 7,729,605 | ||||
| Less unamortized debt issuance costs | (99,396 | ) | (197,959 | ) | ||||
| Long-term debt less unamortized debt issuance costs | 5,160,878 | 7,531,646 | ||||||
| Accounts payable and accrued expenses | 493,691 | 466,783 | ||||||
| Deferred tax liability | 77,865 | 41,803 | ||||||
| Other liabilities and obligations | 112,881 | 109,729 | ||||||
| Total liabilities | 5,845,315 | 8,149,961 | ||||||
| Stockholders' equity (Note 9) | ||||||||
| Common stock, par value $.001; 10,000,000 shares authorized; 3,300,000 shares issued and outstanding | 3,300 | 3,300 | ||||||
| Additional paid-in capital | 6,556,704 | 6,281,322 | ||||||
| Accumulated deficit | (2,390,546 | ) | (20,156 | ) | ||||
| Total stockholders' equity | 4,169,458 | 6,264,466 | ||||||
| Total liabilities and stockholders’ equity | $ | 10,014,773 | $ | 14,414,427 | ||||
| LM FUNDING AMERICA, INC. AND SUBSIDIARIES AND PREDECESSOR | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Quarters Ended December 31, | Years ended December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | ||||||||||||||||
| Interest on delinquent association fees | $ | 629,805 | $ | 1,397,373 | $ | 3,640,233 | $ | 5,588,697 | ||||||||
| Administrative and late fees | 53,743 | 129,541 | 383,773 | 544,067 | ||||||||||||
| Recoveries in excess of cost - special product | 27,139 | 122,899 | 143,106 | 345,686 | ||||||||||||
| Underwriting fees and other revenues | 53,134 | 67,736 | 385,683 | 302,154 | ||||||||||||
| Rental revenue | 117,130 | 54,785 | 347,040 | 180,157 | ||||||||||||
| Total revenues | 880,951 | 1,772,334 | 4,899,835 | 6,960,761 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Staff costs & payroll | 570,317 | 389,884 | 3,220,005 | 1,288,342 | ||||||||||||
| Professional fees | 520,097 | 319,935 | 2,105,143 | 819,343 | ||||||||||||
| Settlement costs with associations | 51,354 | 287,541 | 654,750 | 805,180 | ||||||||||||
| Selling, general and administrative | 235,677 | 193,695 | 1,080,130 | 686,721 | ||||||||||||
| Real estate management and disposal | 114,717 | 61,080 | 499,647 | 270,574 | ||||||||||||
| Depreciation and amortization | 16,200 | 3,916 | 72,114 | 47,466 | ||||||||||||
| Collection costs | 14,698 | 92,209 | 292,791 | 206,998 | ||||||||||||
| Provision for credit losses | - | 125,000 | - | 125,000 | ||||||||||||
| Other operating | 11,753 | 27,437 | 62,004 | 68,565 | ||||||||||||
| Operating expenses | 1,534,813 | 1,500,697 | 7,986,584 | 4,318,189 | ||||||||||||
| Operating (loss) income | (653,862 | ) | 271,637 | (3,086,749 | ) | 2,642,572 | ||||||||||
| Interest expense | 130,964 | 187,558 | 594,600 | 917,485 | ||||||||||||
| (Loss) income before income taxes | (784,826 | ) | 84,079 | (3,681,349 | ) | 1,725,087 | ||||||||||
| Income tax benefit | 260,468 | 146,555 | 1,310,959 | 146,555 | ||||||||||||
| Net (loss) income | (524,358 | ) | 230,634 | (2,370,390 | ) | 1,871,642 | ||||||||||
| Net (income) attributable to non-controlling interest | - | (16,172 | ) | - | (139,865 | ) | ||||||||||
| Net (income) attributable to predecessor members | - | 163,473 | - | (1,751,933 | ) | |||||||||||
| Net loss to common stockholders | $ | (524,358 | ) | $ | (20,156 | ) | $ | (2,370,390 | ) | $ | (20,156 | ) | ||||
| Loss per share attributable to the stockholders of LM Funding America, Inc. | ||||||||||||||||
| Basic | $ | (0.72 | ) | (0.01 | ) | |||||||||||
| Diluted | $ | (0.72 | ) | (0.01 | ) | |||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | 3,300,000 | 3,300,000 | ||||||||||||||
| Diluted | 3,300,000 | 3,300,000 | ||||||||||||||
| LM FUNDING AMERICA, INC. AND SUBSIDIARIES AND PREDECESSOR | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Quarters Ended December 31, | Years ended December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Interest on delinquent association fees | $ | 629,805 | $ | 1,397,374 | $ | 3,577,745 | $ | 5,588,697 | ||||||||
| Administrative and late fees | 53,743 | 129,541 | 375,259 | 544,067 | ||||||||||||
| Recoveries in excess of cost - special product | 27,139 | 122,902 | 126,818 | 345,686 | ||||||||||||
| Underwriting and origination fees | 53,134 | 42,876 | 386,657 | 291,928 | ||||||||||||
| Rental revenue | 117,130 | 56,475 | 347,040 | 180,157 | ||||||||||||
| Staff costs and payroll | (572,875 | ) | (389,885 | ) | (2,944,625 | ) | (1,288,342 | ) | ||||||||
| Other operating expenses | (903,892 | ) | (685,084 | ) | (4,725,496 | ) | (2,694,649 | ) | ||||||||
| Interest paid | (106,325 | ) | (151,117 | ) | (496,037 | ) | (717,305 | ) | ||||||||
| Net cash (used) provided by operating activities | (702,141 | ) | 523,082 | (3,352,639 | ) | 2,250,239 | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Net collections of finance receivables - original product | 135,004 | 63,002 | 498,734 | 893,355 | ||||||||||||
| Net collections of finance receivables - special product | 32,065 | 224,099 | 215,136 | 327,271 | ||||||||||||
| Capital expenditures | 19,046 | (17,412 | ) | (267,960 | ) | (43,761 | ) | |||||||||
| Payments for real estate assets owned | 30,910 | (244,209 | ) | (98,417 | ) | (242,610 | ) | |||||||||
| Net cash provided by investing activities | 217,025 | 25,480 | 347,493 | 934,255 | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Proceeds from borrowings | — | 112,600 | — | 2,172,626 | ||||||||||||
| Principal repayments | (618,006 | ) | (648,052 | ) | (2,469,331 | ) | (1,874,959 | ) | ||||||||
| Redemption of membership interest | — | — | — | (1,960,010 | ) | |||||||||||
| Distributions | — | (2,351,000 | ) | — | (3,904,459 | ) | ||||||||||
| Return of capital to non-controlling interest | — | — | — | (36,015 | ) | |||||||||||
| (Advances) repayments to related party | (271,439 | ) | (206,872 | ) | (1,255,141 | ) | 57,681 | |||||||||
| Proceeds from initial public stock offering, net | — | 9,688,196 | — | 9,688,196 | ||||||||||||
| Purchase of non-controlling interest | — | (250,000 | ) | — | (250,000 | ) | ||||||||||
| Debt issue costs | — | (2,500 | ) | — | (107,450 | ) | ||||||||||
| Net cash provided by (used in) financing activities | (889,445 | ) | 6,342,372 | (3,724,472 | ) | 3,785,610 | ||||||||||
| NET (DECREASE) INCREASE IN CASH | (1,374,561 | ) | 6,890,934 | (6,729,618 | ) | 6,970,104 | ||||||||||
| CASH - BEGINNING OF YEAR | 8,997,798 | 2,027,694 | ||||||||||||||
| CASH - END OF YEAR | $ | 2,268,180 | $ | 8,997,798 | ||||||||||||
Company Contact: Bruce Rodgers Chairman and CEO LM Funding America, Inc. Tel (813) 222-8996 [email protected] Investor Relations Contact: Sean Mansouri Liolios Group, Inc. Tel (949) 574-3860 [email protected]
