Atlanticus Holdings Corporation, a leading financial technology company, has been empowering its bank, retail, and healthcare partners to offer more inclusive financial services to millions of everyday Americans. With a focus on leveraging data, analytics, and innovative technology, Atlanticus has established itself as a trailblazer in the industry, providing accessible and tailored financial solutions to underserved consumers.
Company Background and Evolution
Founded in 1996, Atlanticus has a rich history of adaptability and forward-thinking. The company started as a subprime credit card issuer, but quickly evolved its business model to meet the changing needs of the market. In 2005, Atlanticus expanded its operations by acquiring CAR, an auto finance platform that principally purchases and/or services loans secured by automobiles from a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. This acquisition allowed Atlanticus to diversify its product offerings and revenue streams.
During the global financial crisis of 2008-2009, Atlanticus faced challenges in acquiring receivables and securing funding. However, the company successfully navigated these turbulent times and continued to grow its business. In 2019, Atlanticus further strengthened its balance sheet by issuing 400,000 shares of Series A preferred stock in exchange for a $40 million term loan facility. This transaction allowed Atlanticus to retire its existing term loan and provided the company with the flexibility to pursue new opportunities.
Business Segments
Today, Atlanticus operates through two key segments: Credit as a Service (CaaS) and Auto Finance. The CaaS segment applies the company’s technology solutions, coupled with its extensive experience and infrastructure, to support lenders in offering more inclusive financial services. This includes private label credit cards and general-purpose credit cards, which are originated by the company’s bank partners and serve a diverse customer base, including those with less than prime credit scores.
The CaaS segment is Atlanticus’ primary focus, providing private label credit cards under the Fortiva and Curae brand names, as well as merchant-associated brands. The company also offers general purpose credit cards under the Aspire, Imagine and Fortiva brand names. Private label credit products associated with the healthcare space are generally issued under the Curae brand, while other retail partnerships use the Fortiva brand or the retailer’s own brand.
Atlanticus’ flexible technology solutions allow its bank partners to integrate the company’s paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers, and other service providers. Using Atlanticus’ technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources, enabling them to offer credit to consumers overlooked by many providers that focus exclusively on consumers with higher FICO scores.
In the Auto Finance segment, Atlanticus’ CAR subsidiary primarily purchases and services loans secured by automobiles from a network of independent automotive dealers and finance companies in the buy-here, pay-here used car market. This segment has consistently generated stable returns and positive cash flows, further strengthening Atlanticus’ overall financial position. CAR also provides floorplan financing for these dealers.
Financials
Atlanticus’ financial performance has been commendable, with the company reporting robust growth in recent years. In the latest reported quarter (Q3 2024), the company posted total operating revenue of $350.95 million, representing a 19.0% increase over the prior-year period. This growth was driven by strong performance in both the CaaS and Auto Finance segments, as well as the company’s continued focus on acquiring new customers and expanding its product offerings.
The CaaS segment reported total operating revenue of $340.68 million for the three months ended September 30, 2024, up from $284.60 million in the prior year period. This growth was driven by increases in private label credit and general purpose credit card receivables, which grew to $2.65 billion as of September 30, 2024, from $2.31 billion a year earlier.
The Auto Finance segment reported total operating revenue of $10.30 million for the three months ended September 30, 2024, relatively flat compared to the prior year period. The segment’s period-end managed receivables declined to $110.64 million as of September 30, 2024, from $118.01 million a year earlier, as Atlanticus navigated recent stress at some dealer locations which resulted in higher than anticipated credit losses associated with floorplan loans.
For the most recent fiscal year (2023), Atlanticus reported revenue of $256.34 million, net income of $102.84 million, operating cash flow of $459.32 million, and free cash flow of $455.32 million. In the most recent quarter (Q3 2024), the company reported net income of $29.54 million, operating cash flow of $112.36 million, and free cash flow of $112.50 million.
The year-over-year revenue growth of 19.0% was driven by consistent growth in the company’s private label credit and general purpose credit card receivables, which increased 14.6% to $2.7 billion as of September 30, 2024. The increase in revenue was also attributable to higher finance charges, merchant fees, and other fees associated with the growing receivables portfolio.
Liquidity and Balance Sheet
Despite the challenging macroeconomic environment, Atlanticus has demonstrated its ability to navigate these conditions. The company’s prudent approach to credit underwriting, coupled with its diversified revenue streams, has enabled it to maintain a healthy financial position. As of September 30, 2024, Atlanticus reported a strong balance sheet, with total assets of $3.04 billion and a debt-to-equity ratio of 4.99, indicating a stable capital structure.
The company’s liquidity position remains robust, with $308.65 million in cash and cash equivalents. Atlanticus has access to $2.04 billion in total credit facilities, with $284.20 million in short-term and long-term refinancing needs. The company’s current ratio and quick ratio both stand at 2.33, reflecting its ability to meet short-term obligations.
Technological Innovation
One of the key strengths of Atlanticus is its focus on technological innovation. The company’s flexible technology solutions allow its bank partners to seamlessly integrate Atlanticus’ paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers, and other service providers. This integration enables lenders to make credit decisions quickly, utilizing Atlanticus’ proprietary predictive analytics and machine learning capabilities.
Future Outlook and Challenges
Looking ahead, Atlanticus remains optimistic about its growth prospects. The company continues to explore new partnerships and expand its product suite to better serve the evolving needs of its customers. Additionally, Atlanticus is actively monitoring the regulatory landscape, including recent rule changes proposed by the Consumer Financial Protection Bureau (CFPB), and is working collaboratively with its bank partners to mitigate any potential impact on its operations.
Despite the challenges posed by the ongoing CFPB rulemaking process, Atlanticus remains committed to its mission of empowering everyday Americans with greater access to financial services. The company’s focus on innovation, partnerships, and prudent risk management has positioned it well to navigate the uncertain economic environment and capitalize on future growth opportunities.
Atlanticus’ ability to continue growing its higher-margin CaaS business while managing credit risks in Auto Finance will be key factors influencing the company’s financial performance going forward. The company’s geographic focus remains primarily in the United States, with no material international operations reported.
It is worth noting that there are no publicly reported scandals, short seller reports, or CEO departures for Atlanticus, which speaks to the company’s stability and ethical business practices. As Atlanticus continues to innovate and expand its offerings, it remains well-positioned to capitalize on the growing demand for inclusive financial services in the United States.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.