Atlanticus Holdings Corporation (NASDAQ: ATLCL) is a purpose-driven financial technology company that is primarily focused on facilitating consumer credit through the use of its financial technology and related services. The company provides technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit. Atlanticus is principally engaged in providing products and services to lenders in the U.S. and, in most cases, it invests in the receivables originated by lenders who utilize its technology platform and other related services.
Financials
For the fiscal year ended December 31, 2023, Atlanticus reported annual net income of $77,647,000, annual revenue of $1,155,876,000, annual operating cash flow of $459,317,000, and annual free cash flow of $455,325,000. These strong financial results demonstrate the company's ability to consistently generate profitable growth and healthy cash flows.
In the first quarter of 2024, Atlanticus continued to deliver impressive financial performance. The company reported total operating revenue of $290,174,000, a 11.2% increase from the $260,982,000 reported in the first quarter of 2023. Net income for the quarter was $25,819,000, compared to $25,894,000 in the same period of the prior year. Operating cash flow for the quarter was $118,796,000, up from $101,698,000 in the first quarter of 2023, while free cash flow was $51,197,000, compared to $48,268,000 in the prior-year period.
Business Overview
Atlanticus' Credit as a Service (CaaS) segment, which includes the company's private label credit and general purpose credit card operations, as well as other product testing and investments, continues to be the primary driver of the company's financial performance. In the first quarter of 2024, the CaaS segment generated $279,601,000 in total operating revenue, a 11.1% increase from the $251,583,000 reported in the same period of the prior year. The segment's net margin was $86,476,000, up from $78,315,000 in the first quarter of 2023.
The company's Auto Finance segment, which principally purchases and/or services loans secured by automobiles from or for, and also provides floor-plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business, contributed $10,573,000 in total operating revenue in the first quarter of 2024, compared to $9,399,000 in the same period of the prior year. The segment's net margin was $7,052,000, down from $7,966,000 in the first quarter of 2023.
Atlanticus' private label credit and general purpose credit card receivables grew to $2,317,600,000 as of March 31, 2024, up from $2,055,000,000 as of March 31, 2023. This growth was driven by the addition of new retail partners to the private label credit origination platform, as well as the timing and size of solicitations within the general purpose credit card platform by the company's bank partners.
The company's delinquency rates have remained relatively stable, with 30-59 days past due at 4.1% of total managed receivables, 60-89 days past due at 3.8%, and 90 or more days past due at 10.5% as of March 31, 2024. These delinquency rates are consistent with the company's historical performance and reflect its disciplined approach to risk management.
Atlanticus' total managed yield ratio, annualized, was 38.9% in the first quarter of 2024, compared to 37.7% in the same period of the prior year. The company's combined principal net charge-off ratio, annualized, was 28.4% in the first quarter of 2024, up from 24.9% in the first quarter of 2023. The increase in the combined principal net charge-off ratio was primarily due to the ongoing shift in the company's receivables mix towards higher-yielding general purpose credit card products, which tend to have higher corresponding charge-off rates.
Liquidity
The company's liquidity position remains strong, with $444,809,000 in unrestricted cash and cash equivalents as of March 31, 2024. Atlanticus has been able to maintain access to a diverse array of financing sources, including revolving credit facilities, term loans, and the issuance of senior notes, to support the growth of its receivables portfolio.
In January and February 2024, Atlanticus issued an aggregate of $57,200,000 in 9.25% Senior Notes due 2029, further strengthening its balance sheet and providing additional financial flexibility. The company also has an "at-the-market" offering program in place for the sale of up to $100,000,000 of its 7.625% Series B Cumulative Perpetual Preferred Stock, which it has utilized in the past to raise additional capital.
Outlook
Looking ahead, Atlanticus remains focused on expanding the reach of its financial technology in order to grow its private label credit and general purpose credit card receivables and generate revenues from these investments. The company is also exploring opportunities to acquire additional credit card receivables portfolios and to expand its Auto Finance segment within its current geographic footprint and into new markets.
Risks and Challenges
While the company faces competition from a variety of players in the highly competitive consumer finance industry, Atlanticus' proprietary technology, data-driven underwriting capabilities, and strong relationships with its bank partners and retail partners position it well to continue delivering value to its shareholders. The company's management team has a proven track record of navigating industry challenges and capitalizing on growth opportunities.
Conclusion
Overall, Atlanticus' robust financial performance, diversified business model, and strategic initiatives make it a compelling investment opportunity in the financial technology space. The company's focus on providing inclusive financial solutions to underserved consumers, combined with its technological expertise and disciplined approach to risk management, suggest that Atlanticus is well-positioned to continue its trajectory of profitable growth and value creation for its shareholders.