Overview

Atlanticus is a financial technology company that provides more inclusive financial solutions for everyday Americans. They leverage data, analytics, and innovative technology to unlock access to financial products for the millions of Americans with lower credit scores who are often underserved by larger financial institutions.

Atlanticus primarily operates in two segments:

Credit as a Service (CaaS): This segment provides technology solutions and other support services to lenders who offer private label credit cards and general purpose credit cards to consumers. Atlanticus acquires the receivables generated by these credit products from its bank partners.

Auto Finance: This segment 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 business.

Financial Performance

In 2024, Atlanticus reported total operating revenue and other income of $1.31 billion, up from $1.16 billion in 2023. This growth was driven by continued expansion of their private label credit and general purpose credit card receivables, which increased to $2.72 billion as of December 31, 2024, from $2.41 billion a year earlier.

The company’s net income attributable to controlling interests also grew, reaching $111.3 million in 2024 compared to $102.8 million in 2023. This increase was primarily due to higher revenues, partially offset by higher operating expenses, interest expense, and provision for credit losses.

Revenue and Profit Trends

Atlanticus’ revenues come from several sources, including:

• Interest, finance charges, and late fees on consumer loans
• Annual, monthly, and other fees on credit products
• Interchange and servicing income on loan portfolios

The company has experienced consistent growth in both its private label credit and general purpose credit card receivables, which has driven increases in total operating revenue. However, the relative mix of these receivables can impact overall revenue, as general purpose credit cards typically generate higher yields than private label credit.

Atlanticus has also seen increases in its provision for credit losses, which rose $14.2 million in 2024 compared to 2023. This was primarily due to higher loss estimates associated with the company’s auto finance floorplan loans, as well as some provisions related to notes receivable from consumer technology platforms.

The company’s operating expenses have also increased, with notable rises in salaries and benefits, card and loan servicing, and other costs. These increases are largely tied to the growth in Atlanticus’ receivables and supporting infrastructure.

Despite these higher expenses, Atlanticus has maintained profitability, with net income attributable to controlling interests growing 8.2% in 2024.

Strengths and Weaknesses

Strengths:

• Innovative technology platform that enables flexible credit solutions for underserved consumers
• Diversified revenue streams from private label credit, general purpose credit cards, and auto finance
• Consistent profitability and cash flow generation
• Access to capital markets to fund growth

Weaknesses:

• Exposure to credit risk, with potential for higher delinquencies and charge-offs
• Reliance on bank partners to originate credit products
• Increasing interest expense as cost of capital rises
• Regulatory risks, such as potential CFPB rule changes on late fees

Atlanticus’ key strength is its technology-driven approach to providing credit access to a large segment of consumers overlooked by traditional lenders. This has allowed the company to grow its receivables and generate consistent profitability.

However, Atlanticus faces risks common to consumer lending businesses, including credit quality challenges and regulatory uncertainty. The company’s reliance on bank partners and rising interest expense also present potential headwinds.

Outlook

Going forward, Atlanticus expects to continue growing its private label credit and general purpose credit card receivables, driven by expansion of existing retail partnerships and the addition of new ones. The company also anticipates further investments in its technology and infrastructure to support this growth.

Atlanticus believes its receivables will continue to generate attractive returns, allowing it to fund growth through debt financing on favorable terms. The company also plans to take advantage of opportunities to raise additional capital through debt and equity issuances when market conditions are favorable.

Key risks to Atlanticus’ outlook include the potential impact of CFPB rule changes on late fees, ongoing macroeconomic uncertainty, and the ability to effectively manage credit quality and operating expenses as the business scales. However, the company’s diversified revenue streams, access to capital, and technology-driven approach position it well to navigate these challenges and continue its growth trajectory.

Overall, Atlanticus appears to be a well-positioned financial technology company serving an important need in the consumer credit market. While it faces some risks, the company’s financial performance, strategic initiatives, and growth prospects suggest it is poised to deliver value for shareholders in the years ahead.