Second Quarter 2023 Receivables growth of 18.5% over prior year, with over 3 million accounts served, allowing for continued strong results(1)
Financial and Operating Highlights
Second Quarter 2023 Highlights (all comparisons to the Second Quarter 2022)
- Managed receivables2 increased 13.9% to
$2.2 billion - Total operating revenue increased 7.8% to
$290.8 million . - Return on average shareholders' equity of 21.2%3
- Purchase volume of
$696.1 million . - Over 350,000 new accounts served during the quarter, over 3.3 million total accounts serviced1
- Net income attributable to common shareholders of
$18.8 million , or$1.02 per diluted common share
1 Receviables growth is calculated based on the increase in Loans, interest and fees receivable, at fair value as of
2 Managed receivables is a non-GAAP financial measure and excludes the results of our Auto Finance receivables. See Non-GAAP Financial Measures for important additional information.
3 Return on average shareholders' equity is calculated using Net income attributable to common shareholders as the numerator and the average of Total shareholders' equity as of
Management Commentary
“We are seeing growth across each of our product offerings. Our retail credit offering grew through new client roll outs as well as period over period growth from existing clients. Our general purpose managed receivables also grew year-over-year, even as the total number of customers served by that business line declined due to our tightened underwriting beginning in the second quarter of last year. General purpose receivables growth was due to higher credit line utilization as the portfolio matures, as well as an increase in the number of new customers on a quarter over quarter basis. In total, we added over 350,000 new accounts on behalf of our bank partners in the quarter, up from aproximately 220,000 in the first quarter of 2023.
“As has been our focus historically, our future growth will be dependent on our confidence in achieving attractive returns on our shareholders’ capital. As the consumers we serve have regained stable performance, and with ample liquidity available to us, we are well positioned for long term sustained growth through each of our retail credit, general purpose credit card, healthcare payments and auto finance lines of business.”
Financial Results | For the Three Months Ended | ||||||||||
($ in thousands, except per share data) | 2023 | 2022 | % Change | ||||||||
Total operating revenue | $ | 290,751 | $ | 269,796 | 7.8 | % | |||||
Other non-operating revenue | 87 | 239 | nm | ||||||||
Total revenue | 290,838 | 270,035 | 7.7 | % | |||||||
Interest expense | (24,215 | ) | (18,925 | ) | 28.0 | % | |||||
Provision for losses on loans, interest and fees receivable recorded at amortized cost | (309 | ) | (182 | ) | nm | ||||||
Changes in fair value of loans, interest and fees receivable recorded at fair value | (177,829 | ) | (146,559 | ) | 21.3 | % | |||||
Net margin | $ | 88,485 | $ | 104,369 | -15.2 | % | |||||
Total operating expenses | $ | 56,472 | $ | 61,829 | -8.7 | % | |||||
Net income | $ | 24,814 | $ | 33,797 | -26.6 | % | |||||
Net income attributable to controlling interests | $ | 25,089 | $ | 34,025 | -26.3 | % | |||||
Preferred dividends and discount accretion | $ | (6,289 | ) | $ | (6,257 | ) | nm | ||||
Net income attributable to common shareholders | $ | 18,800 | $ | 27,768 | -32.3 | % | |||||
Net income attributable to common shareholders per common share—basic | $ | 1.30 | $ | 1.88 | -30.9 | % | |||||
Net income attributable to common shareholders per common share—diluted | $ | 1.02 | $ | 1.46 | -30.1 | % |
*nm = not meaningful
Managed Receivables
Managed receivables increased 13.9% to
Total Operating Revenue
Total operating revenue consists of: 1) interest income, finance charges and late fees on consumer loans, 2) other fees on credit products including annual and merchant fees and 3) ancillary, interchange and servicing income on loan portfolios.
During the quarter ended
We continue to experience period-over-period growth in all segments of our business including private label credit and general purpose credit card receivables and to a lesser extent in our Auto Finance receivables. We expect net period-over-period growth in our total interest income and related fees for these operations for the majority of 2023, albeit at a decreased growth rate to that experienced in 2022. Growth in future periods is also dependent on the addition of new retail partners and the expansion of existing relationships to expand the reach of private label credit operations and effective marketing for the general purpose credit card operations.
Interest Expense
Interest expense was
Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform increased from
We anticipate additional debt financing over the next few quarters as we continue to grow coupled with increased effective interest rates resulting from recent federal funds rate increases. As such, we expect our quarterly interest expense for these operations to increase compared to prior periods.
Changes in Fair Value of Loans, Interest and Fees Receivable Recorded at Fair Value
Changes in fair value of loans, interest and fees receivable recorded at fair value increased to
This increase was largely driven by growth in underlying receivables coupled with increased fee billings on those receivables.
Fee billings on our fair value receivables increased from
We expect our change in fair value of credit card receivables recorded at fair value to increase throughout 2023 consistent with growth in these receivables.
Total Operating Expenses
Total operating expenses decreased 8.7% in the quarter when compared to the same period in 2022.
For the quarter, operating expenses decreased, primarily driven by reductions in marketing, corresponding to strategic underwriting, tightening and selectively slowing our growth in receivables and new customers on behalf of our bank partners.
We expect increases in portions of this cost for 2023 as we continue to grow the number of consumers served and hire additional talent to meet our anticipated levels of marketing, origination, and receivables.
Net Income Attributable to Common Shareholders
Net income attributable to common shareholders decreased 32.3% to
Share Repurchases
We repurchased and retired 105,447 shares of our common stock at an aggregate cost of
We will continue to evaluate the best use of our capital to increase shareholder value over time.
About
Empowering Better Financial Outcomes for Everyday Americans
Atlanticus™ technology enables bank, retail, and healthcare partners to offer more inclusive financial services to everyday Americans through the use of proprietary analytics. We apply the experience gained and infrastructure built from servicing over 20 million customers and over
Forward-Looking Statements
This press release contains forward-looking statements that reflect the Company's current views with respect to, among other things, its business, operations, financial performance, revenue, amount and pace of growth of managed receivables, consumer spending, growth in partner brands, total interest income and related fees and charges, debt financing, liquidity, interest expense, operating expense, fair value of credit card receivables, provision for losses on loans, delinquencies on receivables and economic developments. You generally can identify these statements by the use of words such as outlook, potential, continue, may, seek, approximately, predict, believe, expect, plan, intend, estimate or anticipate and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as will, should, would, likely and could. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include those risks described in the Company's filings with the
Contact:
Investor Relations
(770) 828-2000
investors@atlanticus.com
Consolidated Balance Sheets (Unaudited) (Dollars in thousands) | ||||||||
2023 | 2022 | |||||||
Assets | ||||||||
Unrestricted cash and cash equivalents (including | $ | 342,616 | $ | 384,984 | ||||
Restricted cash and cash equivalents (including | 51,791 | 48,208 | ||||||
Loans, interest and fees receivable: | ||||||||
Loans, interest and fees receivable, at fair value (including | 1,916,063 | 1,817,976 | ||||||
Loans, interest and fees receivable, gross | 115,055 | 105,267 | ||||||
Allowances for uncollectible loans, interest and fees receivable | (1,700 | ) | (1,643 | ) | ||||
Deferred revenue | (18,863 | ) | (16,190 | ) | ||||
Net loans, interest and fees receivable | 2,010,555 | 1,905,410 | ||||||
Property at cost, net of depreciation | 12,549 | 10,013 | ||||||
Operating lease right-of-use assets | 11,373 | 11,782 | ||||||
Prepaid expenses and other assets | 25,818 | 27,417 | ||||||
Total assets | $ | 2,454,702 | $ | 2,387,814 | ||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 47,468 | $ | 44,332 | ||||
Operating lease liabilities | 20,543 | 20,112 | ||||||
Notes payable, net (including | 1,665,246 | 1,653,306 | ||||||
Senior notes, net | 144,316 | 144,385 | ||||||
Income tax liability | 75,640 | 60,689 | ||||||
Total liabilities | 1,953,213 | 1,922,824 | ||||||
Commitments and contingencies | ||||||||
Preferred stock, no par value, 10,000,000 shares authorized: | ||||||||
Series A preferred stock, 400,000 shares issued and outstanding at | 40,000 | 40,000 | ||||||
Class B preferred units issued to noncontrolling interests | 100,100 | 99,950 | ||||||
Shareholders' Equity | ||||||||
Series B preferred stock, no par value, 3,256,261 shares issued and outstanding at | — | — | ||||||
Common stock, no par value, 150,000,000 shares authorized: 14,428,039 and 14,453,415 shares issued and outstanding at | — | — | ||||||
Paid-in capital | 107,633 | 121,996 | ||||||
Retained earnings | 255,716 | 204,415 | ||||||
Total shareholders’ equity | 363,349 | 326,411 | ||||||
Noncontrolling interests | (1,960 | ) | (1,371 | ) | ||||
Total equity | 361,389 | 325,040 | ||||||
Total liabilities, preferred stock and equity | $ | 2,454,702 | $ | 2,387,814 |
(1) | Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized |
Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) | ||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenue: | ||||||||||||||||
Consumer loans, including past due fees | $ | 220,042 | $ | 191,547 | $ | 429,743 | $ | 356,353 | ||||||||
Fees and related income on earning assets | 62,874 | 65,839 | 107,231 | 120,537 | ||||||||||||
Other revenue | 7,835 | 12,410 | 14,759 | 22,676 | ||||||||||||
Total operating revenue, net | 290,751 | 269,796 | 551,733 | 499,566 | ||||||||||||
Other non-operating revenue | 87 | 239 | 146 | 300 | ||||||||||||
Total revenue | 290,838 | 270,035 | 551,879 | 499,866 | ||||||||||||
Interest expense | (24,215 | ) | (18,925 | ) | (48,449 | ) | (36,335 | ) | ||||||||
Provision for losses on loans, interest and fees receivable recorded at amortized cost | (309 | ) | (182 | ) | (1,013 | ) | (329 | ) | ||||||||
Changes in fair value of loans, interest and fees receivable recorded at fair value | (177,829 | ) | (146,559 | ) | (327,651 | ) | (251,239 | ) | ||||||||
Net margin | 88,485 | 104,369 | 174,766 | 211,963 | ||||||||||||
Operating expenses: | ||||||||||||||||
Salaries and benefits | 10,629 | 10,099 | 21,233 | 21,525 | ||||||||||||
Card and loan servicing | 23,814 | 23,997 | 48,149 | 46,672 | ||||||||||||
Marketing and solicitation | 14,486 | 20,231 | 24,892 | 40,804 | ||||||||||||
Depreciation | 643 | 549 | 1,261 | 1,142 | ||||||||||||
Other | 6,900 | 6,953 | 13,136 | 21,646 | ||||||||||||
Total operating expenses | 56,472 | 61,829 | 108,671 | 131,789 | ||||||||||||
Income before income taxes | 32,013 | 42,540 | 66,095 | 80,174 | ||||||||||||
Income tax expense | (7,199 | ) | (8,743 | ) | (15,387 | ) | (1,622 | ) | ||||||||
Net income | 24,814 | 33,797 | 50,708 | 78,552 | ||||||||||||
Net loss attributable to noncontrolling interests | 275 | 228 | 593 | 483 | ||||||||||||
Net income attributable to controlling interests | 25,089 | 34,025 | 51,301 | 79,035 | ||||||||||||
Preferred dividends and discount accretion | (6,289 | ) | (6,257 | ) | (12,516 | ) | (12,463 | ) | ||||||||
Net income attributable to common shareholders | $ | 18,800 | $ | 27,768 | $ | 38,785 | $ | 66,572 | ||||||||
Net income attributable to common shareholders per common share—basic | $ | 1.30 | $ | 1.88 | $ | 2.68 | $ | 4.50 | ||||||||
Net income attributable to common shareholders per common share—diluted | $ | 1.02 | $ | 1.46 | $ | 2.11 | $ | 3.43 | ||||||||
Consolidated Statements of Shareholders’ Equity and Temporary Equity (Unaudited) For the Three and Six Months Ended (Dollars in thousands) | ||||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Temporary Equity | ||||||||||||||||||||||||||||
Shares Issued | Amount | Shares Issued | Amount | Retained Earnings | Noncontrolling Interests | Total Equity | Class B Preferred Units | Series A Preferred Stock | ||||||||||||||||||||||
Balance at | 3,204,640 | $ | — | 14,453,415 | $ | — | $ | 121,996 | $ | 204,415 | $ | (1,371 | ) | $ | 325,040 | $ | 99,950 | $ | 40,000 | |||||||||||
Accretion of discount associated with issuance of subsidiary equity | — | — | — | — | (75 | ) | — | — | (75 | ) | 75 | — | ||||||||||||||||||
Discount associated with repurchase of preferred stock | — | — | — | — | 16 | — | — | 16 | — | — | ||||||||||||||||||||
Preferred dividends | — | — | — | — | (6,168 | ) | — | — | (6,168 | ) | — | — | ||||||||||||||||||
Stock option exercises and proceeds related thereto | — | — | 1,258 | — | 19 | — | — | 19 | — | — | ||||||||||||||||||||
Compensatory stock issuances, net of forfeitures | — | — | 146,227 | — | — | — | — | — | — | — | ||||||||||||||||||||
Issuance of series B preferred stock, net | 51,327 | — | — | — | 1,069 | — | — | 1,069 | — | — | ||||||||||||||||||||
Contributions by owners of noncontrolling interests | — | — | — | — | — | — | 4 | 4 | — | — | ||||||||||||||||||||
Stock-based compensation costs | — | — | — | — | 931 | — | — | 931 | — | — | ||||||||||||||||||||
Redemption and retirement of preferred shares | (1,806 | ) | — | — | — | (45 | ) | — | — | (45 | ) | — | — | |||||||||||||||||
Redemption and retirement of common shares | — | — | (72,354 | ) | — | (1,947 | ) | — | — | (1,947 | ) | — | — | |||||||||||||||||
Net income (loss) | — | — | — | — | — | 26,212 | (318 | ) | 25,894 | — | — | |||||||||||||||||||
Balance at | 3,254,161 | $ | — | 14,528,546 | $ | — | $ | 115,796 | $ | 230,627 | $ | (1,685 | ) | $ | 344,738 | $ | 100,025 | $ | 40,000 | |||||||||||
Accretion of discount associated with issuance of subsidiary equity | — | — | — | — | (75 | ) | — | — | (75 | ) | 75 | — | ||||||||||||||||||
Preferred dividends | — | — | — | — | (6,214 | ) | — | — | (6,214 | ) | — | — | ||||||||||||||||||
Stock option exercises and proceeds related thereto | — | — | 5,160 | — | 40 | — | — | 40 | — | — | ||||||||||||||||||||
Compensatory stock issuances, net of forfeitures | — | — | (220 | ) | — | — | — | — | — | — | — | |||||||||||||||||||
Issuance of series B preferred stock, net | 2,100 | — | — | — | 43 | — | — | 43 | — | — | ||||||||||||||||||||
Stock-based compensation costs | — | — | — | — | 1,031 | — | — | 1,031 | — | — | ||||||||||||||||||||
Redemption and retirement of common shares | — | — | (105,447 | ) | — | (2,988 | ) | — | — | (2,988 | ) | — | — | |||||||||||||||||
Net income (loss) | — | — | — | — | — | 25,089 | (275 | ) | 24,814 | — | — | |||||||||||||||||||
Balance at | 3,256,261 | $ | — | 14,428,039 | $ | — | $ | 107,633 | $ | 255,716 | $ | (1,960 | ) | $ | 361,389 | $ | 100,100 | $ | 40,000 |
Additional Information
Additional trends and data with respect to our private label credit and general purpose credit card receivables can be found in our latest Form 10-Q filing with the
Calculation of Non-GAAP Financial Measures
This press release presents information about managed receivables, which is a non-GAAP financial measure provided as a supplement to the results provided in accordance with accounting principles generally accepted in
These non-GAAP financial measures are presented for supplemental informational purposes only. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, GAAP financial measures. These non-GAAP financial measures may differ from the non-GAAP financial measures used by other companies. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures or the calculation of the non-GAAP financial measures are provided below for each of the fiscal periods indicated.
These non-GAAP financial measures include only the performance of those receivables underlying consolidated subsidiaries (for receivables carried at amortized cost basis and fair value) and exclude the performance of receivables held by our former equity method investee. As the receivables underlying our former equity method investee reflect a small and diminishing portion of our overall receivables base, we do not believe their inclusion or exclusion in the overall results is material. Additionally, we calculate average managed receivables based on the quarter-end balances.
The comparison of non-GAAP managed receivables to our GAAP financial statements requires an understanding that managed receivables reflect the face value of loans, interest and fees receivable without any consideration for potential loan losses or other adjustments to reflect fair value.
A reconciliation of Loans, interest and fees receivable, at fair value to Loans, interest and fees receivable, at face value is as follows:
At or for the Three Months Ended | ||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
(in Millions) | (1) | (1) | (1) | (1) | (1) | (1) | (1) | (1) | ||||||||||||||||||||||||
Loans, interest and fees receivable, at fair value | $ | 1,916.1 | $ | 1,795.6 | $ | 1,818.0 | $ | 1,728.1 | $ | 1,616.9 | $ | 1,405.8 | $ | 1,026.4 | $ | 846.2 | ||||||||||||||||
Fair value mark against receivable (2) | $ | 257.9 | $ | 260.1 | $ | 302.1 | $ | 322.3 | $ | 293.0 | $ | 272.9 | $ | 208.9 | $ | 182.2 | ||||||||||||||||
Loans, interest and fees receivable, at face value | $ | 2,174.0 | $ | 2,055.7 | $ | 2,120.1 | $ | 2,050.4 | $ | 1,909.9 | $ | 1,678.7 | $ | 1,235.3 | $ | 1,028.4 | ||||||||||||||||
Fair value to face value ratio (3) | 88.1 | % | 87.3 | % | 85.8 | % | 84.3 | % | 84.7 | % | 83.7 | % | 83.1 | % | 82.3 | % |
(1) | We elected the fair value option to account for certain loans receivable associated with our private label credit and general purpose credit card platform that were acquired on or after | |
(2) | The fair value mark against receivables reflects the difference between the face value of a receivable and the net present value of the expected cash flows associated with that receivable. | |
(3) | The Fair value to face value ratio is calculated using Loans, interest and fees receivable, at fair value as the numerator, and Loans, interest and fees receivable, at face value, as the denominator. |
The calculation of managed receivables is as follows:
At or for the Three Months Ended | ||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
(in Millions) | ||||||||||||||||||||||||||||||||
Loans, interest and fees receivable, gross | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 375.7 | $ | 417.8 | ||||||||||||||||
Loans, interest and fees receivable, gross from fair value reconciliation above | 2,174.0 | 2,055.7 | 2,120.1 | 2,050.4 | 1,909.9 | 1,678.7 | 1,235.3 | 1,028.4 | ||||||||||||||||||||||||
Total managed receivables | $ | 2,174.0 | $ | 2,055.7 | $ | 2,120.1 | $ | 2,050.4 | $ | 1,909.9 | $ | 1,678.7 | $ | 1,611.0 | $ | 1,446.2 |
(1) | On |
A reconciliation of our operating revenues, net of finance and fee charge-offs, to comparable amounts used in our calculation of Total managed yield is as follows:
At or for the Three Months Ended | ||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
(in Millions) | ||||||||||||||||||||||||||||||||
Consumer loans, including past due fees | $ | 210.3 | $ | 200.5 | $ | 202.9 | $ | 208.9 | $ | 182.8 | $ | 156.5 | $ | 144.1 | $ | 132.7 | ||||||||||||||||
Fees and related income on earning assets | 62.9 | 44.3 | 48.0 | 48.5 | 65.8 | 54.7 | 53.8 | 54.1 | ||||||||||||||||||||||||
Other revenue | 7.6 | 6.7 | 8.5 | 11.1 | 12.2 | 10.0 | 9.7 | 8.4 | ||||||||||||||||||||||||
Adjustments due to acceleration of merchant fee discount amortization under fair value accounting | (10.6 | ) | (0.5 | ) | 3.4 | (7.9 | ) | (12.1 | ) | 1.8 | (3.4 | ) | (14.7 | ) | ||||||||||||||||||
Adjustments due to acceleration of annual fees recognition under fair value accounting | (9.8 | ) | 7.3 | 7.9 | 10.0 | (6.6 | ) | (1.3 | ) | (4.4 | ) | (12.0 | ) | |||||||||||||||||||
Removal of expense accruals under GAAP | — | — | — | — | — | — | — | 0.2 | ||||||||||||||||||||||||
Removal of finance charge-offs | (54.2 | ) | (61.7 | ) | (58.3 | ) | (45.3 | ) | (41.2 | ) | (32.5 | ) | (28.1 | ) | (16.3 | ) | ||||||||||||||||
Total managed yield | $ | 206.2 | $ | 196.6 | $ | 212.4 | $ | 225.3 | $ | 200.9 | $ | 189.2 | $ | 171.7 | $ | 152.4 |
The calculation of Combined principal net charge-offs is as follows:
At or for the Three Months Ended | ||||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
(in Millions) | ||||||||||||||||||||||||||||||||
Net losses on impairment of loans, interest and fees receivable recorded at fair value | $ | 180.0 | $ | 191.9 | $ | 182.3 | $ | 134.4 | $ | 126.5 | $ | 101.3 | $ | 46.7 | $ | 25.6 | ||||||||||||||||
Gross charge-offs on non-fair value accounts | — | — | — | — | — | — | 38.7 | 27.1 | ||||||||||||||||||||||||
Finance charge-offs (2) | (54.2 | ) | (61.7 | ) | (58.3 | ) | (45.3 | ) | (41.2 | ) | (32.5 | ) | (28.1 | ) | (16.3 | ) | ||||||||||||||||
Recoveries on non-fair value accounts | — | — | — | — | — | — | (4.1 | ) | (2.7 | ) | ||||||||||||||||||||||
Combined principal net charge-offs | $ | 125.8 | $ | 130.2 | $ | 124.0 | $ | 89.1 | $ | 85.3 | $ | 68.8 | $ | 53.2 | $ | 33.7 |
(1) | On | |
(2) | Finance charge-offs are included as a component of our Provision for losses on loans, interest and fees receivable recorded at amortized cost and Changes in fair value of loans, interest and fees receivable recorded at fair value in the consolidated statements of income. |
Source:
2023 GlobeNewswire, Inc., source