Abacus Life(ABL) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited H1 2025 financial statements show total assets decreased to $848.4 million, while revenues surged to $100.4 million and net income reached $23.0 million Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $848.4 million, primarily due to a drop in cash, while total liabilities also decreased to $426.8 million Consolidated Balance Sheet Summary ($ Thousands) | Balance Sheet Item | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $74,837 | $131,944 | | Life settlement policies, at fair value | $386,145 | $370,398 | | Goodwill | $238,921 | $238,296 | | Total Assets | $848,358 | $874,165 | | Liabilities & Equity | | | | Current portion of long-term debt, at fair value | $117,870 | $37,430 | | Long-term debt, net | $224,896 | $224,742 | | Total Liabilities | $426,825 | $450,870 | | Total Stockholders' Equity | $416,533 | $423,295 | - Cash and cash equivalents decreased by $57.1 million, from $131.9 million at the end of 2024 to $74.8 million as of June 30, 2025[5] - The current portion of long-term debt measured at fair value increased significantly to $117.9 million from $37.4 million, reflecting upcoming maturities, including the LMAIS II redemption window opening in March 2026[5][33] Consolidated Statements of Operations Q2 2025 total revenues surged to $56.2 million, driving net income to $17.6 million, while H1 2025 revenues doubled to $100.4 million, resulting in $23.0 million net income Key Performance Indicators (Q2 2025 vs Q2 2024, $M) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $56.2 | $29.1 | +93.4% | | Gross Profit | $50.2 | $26.3 | +90.8% | | Operating Income | $22.5 | $6.8 | +232.3% | | Net Income | $17.6 | $0.7 | +2414.3% | | Diluted EPS | $0.18 | $0.01 | +1700% | Key Performance Indicators (Six Months Ended June 30, $M) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $100.4 | $50.6 | +98.4% | | Gross Profit | $87.2 | $45.1 | +93.4% | | Operating Income | $43.5 | $9.0 | +383.3% | | Net Income (Loss) | $23.0 | ($0.6) | NM | | Diluted EPS | $0.23 | ($0.01) | NM | Consolidated Statements of Mezzanine Equity and Stockholders' Equity During H1 2025, total stockholders' equity decreased to $416.5 million due to common stock repurchases, partially offset by net income and preferred stock issuance - The company repurchased 5,081,477 shares of common stock for $35.1 million during the second quarter of 2025[10] - Issued 5,000 shares of Series A Convertible Preferred Stock for $5.0 million, classified as mezzanine equity[10] - Net income attributable to the company of $22.2 million for the six months ended June 30, 2025, increased retained earnings (reduced accumulated deficit)[8][10] Consolidated Statements of Cash Flows For H1 2025, net cash provided by operating activities was $14.5 million, a significant improvement from the prior year, while financing activities used $57.9 million, resulting in a net cash decrease of $57.1 million Cash Flow Summary (Six Months Ended June 30, $M) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from Operating Activities | $14.5 | ($64.5) | | Net cash from Investing Activities | ($13.7) | ($0.7) | | Net cash from Financing Activities | ($57.9) | $131.0 | | Net Change in Cash | ($57.1) | $65.7 | - Financing activities in H1 2025 included $35.1 million for common stock repurchases and a net debt repayment of $21.9 million, contrasting with $92.0 million raised from a common stock sale in H1 2024[15] Condensed Notes to Consolidated Financial Statements The notes detail significant accounting policies, recent business combinations like the NIB acquisition, revenue disaggregation, and segment reporting changes, including a subsequent warrant exchange offer - On April 24, 2025, the Company acquired National Insurance Brokerage, LLC ("NIB") for approximately $2.1 million in cash, recognizing $0.7 million in goodwill assigned to the Life Solutions segment[49][51] - In Q1 2025, the company updated its structure to three reportable segments: Asset Management, Life Solutions, and Technology Services, reflecting how management now reviews the business[81] - Subsequent to the quarter end, on June 30, 2025, the company commenced an exchange offer to redeem all outstanding Public and Private Placement Warrants for common stock[181] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes significant H1 2025 revenue and profit growth to successful acquisitions and strong segment performance, with Q2 Adjusted EBITDA reaching $31.5 million and sufficient liquidity Results of Operations For Q2 2025, total revenue increased 93.4% to $56.2 million, driven by surges in Asset Management and Life Solutions revenue, leading to a 232% increase in operating income to $22.5 million - Asset management revenue for Q2 2025 increased by $8.6 million, or 4176.4%, primarily due to the Carlisle and FCF acquisitions completed in December 2024[189] - Life solutions revenue for Q2 2025 grew by $18.4 million, or 63.8%, mainly from a $49.6 million increase in realized gains from life policies, partially offset by changes in unrealized gains and premiums paid[191] - General and administrative expenses for Q2 2025 increased by $4.4 million (30.0%), driven by higher legal/professional fees and payroll related to acquisitions, though partially offset by lower stock-based compensation expense[203] Segment Results For Q2 2025, Asset Management gross profit skyrocketed due to acquisitions, Life Solutions gross profit increased 70.3%, while the new Technology Services segment reported a gross loss Segment Gross Profit (Q2 2025 vs Q2 2024) | Segment | Q2 2025 Gross Profit | Q2 2024 Gross Profit | Change | | :--- | :--- | :--- | :--- | | Asset Management | $5,714,783 | $36,217 | +15679.3% | | Life Solutions | $44,790,299 | $26,296,351 | +70.3% | | Technology Services | ($335,106) | $0 | NM | Non-GAAP Financial Measures and Key Business Metrics The company reported Q2 2025 non-GAAP Adjusted Net Income of $21.9 million and Adjusted EBITDA of $31.5 million, driven by a 303% increase in life policies sold and Assets Under Management reaching $2.87 billion Non-GAAP Reconciliation Summary (Q2 2025 vs Q2 2024, $M) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income Attributable to Co. | $17.6 | $0.8 | | Adjusted Net Income | $21.9 | $11.7 | | Adjusted EPS - Diluted | $0.22 | $0.17 | | Adjusted EBITDA | $31.5 | $16.7 | - The number of life policies sold under the fair value method increased dramatically to 399 in Q2 2025 from 99 in Q2 2024, a 303% increase[261] - As of June 30, 2025, Assets Under Management (AUM) reached $2.87 billion, a key driver for the Asset Management segment[264] Liquidity and Capital Resources As of June 30, 2025, the company had $74.8 million in cash and cash equivalents, with management believing current liquidity is sufficient for the next 12 months, following $35.1 million in stock repurchases during H1 2025 - The company's principal source of liquidity as of June 30, 2025, was cash and cash equivalents of $74.8 million[267] - The Board of Directors has authorized stock repurchase plans totaling $50 million, with $2.9 million remaining available for repurchases as of June 30, 2025[269] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company, Abacus is exempt from providing quantitative and qualitative disclosures about market risk[280] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[281] - No material changes were identified in the company's internal control over financial reporting during the three months ended June 30, 2025[282] PART II. OTHER INFORMATION Legal Proceedings The company is not a party to any litigation that would be considered material to its ongoing operations as of June 30, 2025 - As of the period ended June 30, 2025, the Company is not involved in any material legal proceedings[283] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K have occurred as of the date of this report[284] Unregistered Sales of Equity Securities and Use of Proceeds This section refers to Note 15 of the financial statements for details regarding the company's stock repurchase program and activities during the first six months of 2025 - Information regarding the company's stock repurchase program and shares repurchased during the period is detailed in Note 15 of the financial statements[285] Other Information During the second quarter of 2025, no company officers or directors adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - No officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[286]