EX-99.1 2 a5197011ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Advanta Reports Strong Second Quarter Results and Increases Full Year 2006 Guidance; Substantial Receivable Growth and Record Transaction Volume SPRING HOUSE, Pa.--(BUSINESS WIRE)--July 27, 2006--Advanta Corp. (NASDAQ: ADVNB; ADVNA) today reported second quarter 2006 net income from continuing operations of $23.0 million or $0.79 per diluted share for Class A and Class B shares combined. Advanta Business Cards earned net income of $23.0 million compared to $13.6 million for second quarter 2005. "I am happy to report another excellent quarter for the Company as demonstrated by outstanding earnings, substantial portfolio and transaction volume, and the continued strong credit performance of our customers," said Dennis Alter, Chairman and CEO. "As a result, we are increasing our guidance for 2006 full year earnings from continuing operations to a range of $2.60 to $2.70 per combined diluted share. Our success is founded in our focused strategy of acquiring and retaining high credit quality customers, and we believe we are well positioned to grow the business and our earnings into the future. We expected very strong results for 2006 but what we are seeing is substantially exceeding those expectations." For full year 2006, the Company anticipates growth in owned and managed receivables in the range of 20% to 30%, with transaction volume increasing 20% to 25%. In addition, the Company plans on investing more in acquisition and marketing activities which should result in new account growth in 2006 to be 45% to 50% higher than full year 2005 new account growth. "We believe that investing in this growth will benefit Advanta in future years and we will continue to produce very strong results for 2006," said Mr. Alter. Consistent with prior periods, the earnings per share estimate assumes no venture capital investment gains or losses as such amounts are based on future market conditions which cannot be reliably forecasted. Details of the 2006 second quarter results for Advanta Business Cards include ending managed receivables of $4.4 billion, reflecting growth of 25% over the $3.5 billion reported at June 30, 2005. Owned Business Cards receivables were $1.1 billion at June 30, 2006, reflecting growth of 28% over the $829 million reported at June 30, 2005. Transaction volume reached record levels for the quarter at $3.0 billion, exceeding second quarter 2005 volume by 24%. Conference Call Details Advanta management will hold a conference call with analysts and institutional investors today, July 27, at 9:00 a.m. Eastern time to review second quarter results and expectations for full year 2006. The call can be accessed by dialing 719-457-2680 and referring to pass code 1711364. The call will also be webcast simultaneously via a Vcall link on the Company's Web site, www.advanta.com, or at www.vcall.com. Those interested in listening to the webcast should go to the Web site at least fifteen minutes before the call to register and download any necessary software. Replays of the call will be available beginning at noon today on the Internet at www.advanta.com or www.vcall.com or by dialing 719-457-0820 and referring to confirmation code 1711364. The conference call may include a discussion of non-GAAP financial measures, which are reconciled to the most directly comparable GAAP financial measure in the press releases or the statistical supplements available at www.advanta.com in the "Corporate Info" section. Advanta focuses on the small business market and related community, providing funding and support to the nation's small businesses and business professionals through innovative products and services. Using its direct marketing and information-based expertise, Advanta identifies potential customers and provides a high level of service tailored to the needs of small businesses. Advanta is one of the nation's largest issuers (through Advanta Bank Corp.) of MasterCard business credit cards to small businesses. Since 1951, Advanta has pioneered many of the marketing techniques common in the financial services industry today, including remote lending, and direct mail, affinity and relationship marketing. Learn more about Advanta at www.advanta.com. This Press Release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The most significant among these risks and uncertainties are: (1) the Company's managed net interest income including changes resulting from fluctuations in the volume of receivables and the range and timing of pricing offers to cardholders; (2) competitive pressures, including product development and pricing, among financial institutions; (3) political conditions, social conditions, monetary and fiscal policies and general economic and other environmental conditions that affect the level of new account originations, customer spending, delinquencies and charge-offs; (4) factors affecting fluctuations in the number of accounts or receivable balances, including the retention of cardholders after promotional pricing periods have expired; (5) interest rate fluctuations; (6) the level of expenses; (7) the timing of the securitizations of the Company's receivables; (8) the effects of government regulation, including restrictions and limitations imposed by banking laws, regulators and examinations; (9) effect of, and changes in, tax laws, rates, regulations and policies; (10) effect of legal and regulatory developments, including changes in bankruptcy laws and regulations and the ultimate resolution of the industry-related judicial proceedings relating to the legality of certain interchange rates; (11) relationships with customers, significant vendors and business partners; (12) difficulties or delays in the Company's ability to develop, acquire, produce, test and market products or services, including the ability and cost to obtain intellectual property rights or a failure to implement new products or services when anticipated; (13) the amount and cost of financing available to the Company; (14) the ratings on the debt of the Company and its subsidiaries; (15) the effect of changes in accounting policies or practices as may be required by changes in U.S. generally accepted accounting principles; (16) the impact of litigation, including judgments, settlements and actual or anticipated insurance recoveries for costs or judgments; (17) the proper design and operation of the Company's disclosure controls and procedures; and (18) the ability to attract and retain key personnel. Additional risks that may affect the Company's future performance are detailed in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. In addition to the GAAP results provided throughout this document, the Company has provided managed receivable data and other non-GAAP financial measurements. Management believes that the non-GAAP financial measures used to manage the business may provide users additional useful information. The tables attached to this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure and a description of why the non-GAAP financial measures are useful to investors. ADVANTA SEGMENT INCOME STATEMENT (in thousands) Three Months Ended June 30, 2006 ---------------------------------------------------------------------- Advanta Business Cards Other (A) Total ---------- ---------- ---------- Interest income $ 34,450 $ 6,061 $ 40,511 Interest expense 10,400 7,079 17,479 ---------- ---------- ---------- Net interest income 24,050 (1,018) 23,032 Provision for credit losses 10,145 0 10,145 ---------- ---------- ---------- Net interest income after provision for credit losses 13,905 (1,018) 12,887 Noninterest revenues: Interchange income 51,217 0 51,217 Securitization income 29,686 0 29,686 Servicing revenues 15,329 0 15,329 Business credit card rewards (16,295) 0 (16,295) Other revenues, net 6,167 1,208 7,375 ---------- ---------- ---------- Total noninterest revenues 86,104 1,208 87,312 Operating expenses 62,545 191 62,736 ---------- ---------- ---------- Income (loss) before income taxes 37,464 (1) 37,463 Income tax expense 14,423 0 14,423 ---------- ---------- ---------- Income (loss) from continuing operations 23,041 (1) 23,040 Gain on discontinuance of mortgage and leasing businesses, net of tax 0 738 738 ---------- ---------- ---------- Net income $ 23,041 $ 737 $ 23,778 ========== ========== ========== Three Months Ended June 30, 2005 ---------------------------------------------------------------------- Advanta Business Cards Other (A) Total ---------- ---------- ---------- Interest income $ 26,640 $ 4,205 $ 30,845 Interest expense 7,884 5,834 13,718 ---------- ---------- ---------- Net interest income 18,756 (1,629) 17,127 Provision for credit losses 8,603 0 8,603 ---------- ---------- ---------- Net interest income after provision for credit losses 10,153 (1,629) 8,524 Noninterest revenues: Interchange income 40,738 0 40,738 Securitization income 30,066 0 30,066 Servicing revenues 12,819 0 12,819 Business credit card rewards (12,779) 0 (12,779) Other revenues, net 3,278 3,182 6,460 ---------- ---------- ---------- Total noninterest revenues 74,122 3,182 77,304 Operating expenses 61,920 331 62,251 ---------- ---------- ---------- Income before income taxes 22,355 1,222 23,577 Income tax expense 8,718 477 9,195 ---------- ---------- ---------- Income from continuing operations 13,637 745 14,382 Gain on discontinuance of mortgage and leasing businesses, net of tax 0 3,965 3,965 ---------- ---------- ---------- Net income $ 13,637 $ 4,710 $ 18,347 ========== ========== ========== (A) Other includes venture capital operations as well as investment and other activities not attributable to the Advanta Business Card segment. ADVANTA HIGHLIGHTS (in thousands, except per share data) Three Months Ended Percent Change From ---------------------------- June 30, Mar. 31, June 30, Prior Prior EARNINGS 2006 2006 2005 Quarter Year ---------------------------------------------------------------------- Basic income from continuing operations per common share: Class A $ 0.84 $ 0.79 $ 0.53 6.3% 58.5% Class B 0.87 0.82 0.56 6.1 55.4 Combined (A) 0.86 0.81 0.55 6.2 56.4 Diluted income from continuing operations per common share: Class A 0.78 0.73 0.49 6.8 59.2 Class B 0.79 0.74 0.50 6.8 58.0 Combined (A) 0.79 0.73 0.50 8.2 58.0 Basic net income per common share: Class A 0.86 0.79 0.68 8.9 26.5 Class B 0.90 0.82 0.71 9.8 26.8 Combined (A) 0.89 0.81 0.70 9.9 27.1 Diluted net income per common share: Class A 0.81 0.73 0.63 11.0 28.6 Class B 0.81 0.74 0.64 9.5 26.6 Combined (A) 0.81 0.73 0.64 11.0 26.6 Return on average common equity 17.99% 16.63% 15.22% 8.2 18.2 COMMON STOCK DATA ---------------------------------------------------------------------- Weighted average common shares used to compute: Basic earnings per common share Class A 8,854 8,846 8,821 0.1% 0.4% Class B 17,945 18,107 17,433 (0.9) 2.9 --------- --------- --------- Total 26,799 26,953 26,254 (0.6) 2.1 Diluted earnings per common share Class A 8,854 8,846 8,821 0.1 0.4 Class B 20,459 20,876 20,013 (2.0) 2.2 --------- --------- --------- Total 29,313 29,722 28,834 (1.4) 1.7 Ending shares outstanding: Class A 9,607 9,607 9,607 0.0 0.0 Class B 17,865 18,890 18,611 (5.4) (4.0) --------- --------- --------- Total 27,472 28,497 28,218 (3.6) (2.6) Stock price: Class A High $ 38.24 $ 34.74 $ 27.19 10.1 40.6 Low 31.52 28.82 20.49 9.4 53.8 Closing 32.79 34.09 25.89 (3.8) 26.7 Class B High 41.74 37.44 29.44 11.5 41.8 Low 34.50 30.84 22.48 11.9 53.5 Closing 35.95 36.87 28.16 (2.5) 27.7 Cash dividends declared: Class A 0.2125 0.1134 0.1134 87.4 87.4 Class B 0.2550 0.1361 0.1361 87.4 87.4 Book value per common share 19.53 19.44 18.40 0.5 6.1 (A) Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding. ADVANTA BUSINESS CREDIT CARD STATISTICS ($ in thousands) Percent Change Three Months Ended From ----------------------------------- June 30, Mar. 31, June 30, Prior Prior 2006 2006 2005 Quarter Year --------------------------------------------------- New account originations 86,398 82,617 70,044 4.6% 23.3% Average number of active accounts (A) 687,912 649,384 589,751 5.9 16.6 Ending number of accounts 978,517 921,841 822,773 6.1 18.9 Transaction volume $3,031,493 $2,733,922 $2,446,510 10.9 23.9 Securitization volume increase excluding replenishment sales $ 275,000 $ 165,000 $ 120,000 66.7 129.2 Average receivables: Owned $ 997,754 $ 929,795 $ 727,253 7.3 37.2 Securitized 3,222,380 2,957,309 2,707,045 9.0 19.0 ----------- ----------- ----------- Managed (B) 4,220,134 3,887,104 3,434,298 8.6 22.9 Ending receivables: Owned $1,062,249 $ 982,251 $ 828,724 8.1 28.2 Securitized 3,323,869 3,045,600 2,685,504 9.1 23.8 ----------- ----------- ----------- Managed (B) 4,386,118 4,027,851 3,514,228 8.9 24.8 ---------------------------------------------------------------------- CREDIT QUALITY - OWNED ------------------ Receivables 30 days or more delinquent $ 25,482 $ 26,335 $ 26,085 Receivables 90 days or more delinquent 12,560 11,637 12,798 As a percentage of gross receivables: Receivables 30 days or more delinquent 2.40% 2.68% 3.15% (10.4)% (23.8)% Receivables 90 days or more delinquent 1.18 1.18 1.54 0.0 (23.4) Net principal charge-offs: Amount $ 7,520 $ 8,084 $ 8,603 As a percentage of average gross receivables (annualized) 3.01% 3.48% 4.73% (13.5) (36.4) CREDIT QUALITY - SECURITIZED ------------------ Receivables 30 days or more delinquent $ 90,987 $ 91,029 $ 100,283 Receivables 90 days or more delinquent 45,008 40,131 49,583 As a percentage of gross receivables: Receivables 30 days or more delinquent 2.74% 2.99% 3.73% (8.4)% (26.5)% Receivables 90 days or more delinquent 1.35 1.32 1.85 2.3 (27.0) Net principal charge-offs: Amount $ 26,633 $ 27,095 $ 38,324 As a percentage of average gross receivables (annualized) 3.31% 3.66% 5.66% (9.6) (41.5) CREDIT QUALITY - MANAGED (B) ------------------ Receivables 30 days or more delinquent $ 116,469 $ 117,364 $ 126,368 Receivables 90 days or more delinquent 57,568 51,768 62,381 As a percentage of gross receivables: Receivables 30 days or more delinquent 2.66% 2.91% 3.60% (8.6)% (26.1)% Receivables 90 days or more delinquent 1.31 1.29 1.78 1.6 (26.4) Net principal charge-offs: Amount $ 34,153 $ 35,179 $ 46,927 As a percentage of average gross receivables (annualized) 3.24% 3.62% 5.47% (10.5) (40.8) (A) Active accounts are defined as accounts with a balance at month- end. Active account statistics do not include charged-off accounts. The statistics reported above are the average number of active accounts for the periods presented. (B) Managed statistics are non-GAAP financial measures and represent the sum of owned (GAAP) business credit card statistics and securitized business credit card statistics. We believe that performance on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. ADVANTA RECONCILIATION OF FORWARD-LOOKING NON-GAAP FINANCIAL MEASURES (in thousands) In addition to evaluating the financial performance of the Advanta Business Cards segment under U.S. generally accepted accounting principles (GAAP), we evaluate Advanta Business Cards' performance on a managed basis. Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. We believe that performance on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. The data below provides reconciliations of forward-looking managed receivables and managed net principal charge-offs as a percentage of average managed receivables (non-GAAP financial measures) to owned receivables and owned net principal charge-offs as a percentage of average owned receivables (the most directly comparable GAAP financial measures). In the forward-looking business credit card credit data below, the Low End of Range column assumes the forward-looking average receivable balances multiplied by our Low End of Range charge-off rate expectations, and the High End of Range column assumes the forward-looking average receivable balances multiplied by our High End of Range charge-off rate expectations. The data presented below depicts only certain possibilities out of a large set of possible scenarios. Forward- Looking Business Ending Projected Estimate at December 31, 2006 Credit Card Balance at --------------------------------------------- Receivable Dec. 31, Low End Percentage High End Percentage Balances: 2005 of Range Increase of Range Increase ----------- ----------- ---------- ----------- ---------- Owned $ 879,468 $1,055,000 20% $1,143,000 30% Securitized 2,880,401 3,457,000 20% 3,745,000 30% ----------- ----------- ----------- Managed $3,759,869 $4,512,000 20% $4,888,000 30% Forward-Looking Average Business Credit Year Ended Card Receivable December 31, Balances: 2006 ------------ Owned $ 1,022,000 Securitized 3,277,000 ------------ Managed $ 4,299,000 Year Ended December 31, 2006 ------------------------ Forward-Looking Business Credit Card Low End High End Credit Data: of Range of Range ----------- ------------ Owned net principal charge-offs $ 33,900 $ 36,000 As a percentage of average receivables 3.32% 3.52% Securitized net principal charge- offs $ 116,600 $ 123,100 As a percentage of average receivables 3.56% 3.76% Managed net principal charge- offs $ 150,500 $ 159,100 As a percentage of average receivables 3.50% 3.70% CONTACT: Advanta Corp. Amy B. Holderer Vice President, Investor Relations 215-444-5335 aholderer@advanta.com or David M. Goodman Director, Communications 215-444-5073 dgoodman@advanta.com