Atlanticus Holdings Corporation (NASDAQ: ATLC) (“Atlanticus,” “the
Company”, “we,” “our” or “us”), a financial technology company
which enables its bank, retail and healthcare partners to offer
more inclusive financial services to millions of everyday
Americans, today announced its financial results for the first
quarter ended March 31, 2022.
First Quarter 2022 Highlights (all comparisons
to the prior year period)
- Total operating revenue increased 59.7% to $229.8 million, 6.1%
over fourth quarter 2021.
- Purchase volume increased 55.2% to $594.1 million.
- Number of total customers served(1) at period end increased
58.1% to 2.9 million.
- Over 395,000 new customers serviced during the quarter.
- Managed receivables(2) at period end associated with Credit as
a Service Segment increased 53.6% to $1.7 billion, and 4.1% over
fourth quarter 2021.
- Earnings per diluted common share increased 2.6% to $1.96 per
diluted common share.
- Over 1 million shares retired during the quarter.
(1) In our calculation of total customers, we
include all customers with account activity and customers who have
open lines of credit at the end of the referenced period.
(2) Managed receivables is a non-GAAP financial
measure. See “Non-GAAP Financial Measures” for important additional
information.
Management
Commentary
Jeff Howard, President and Chief Executive
Officer, stated, "The first quarter of 2022 continued to show
strong growth in revenue, managed receivables, and both new and
total accounts serviced. We generated a 2.6% increase in earnings
per share year-over-year even with a significant increase in our
marketing investment and comparing against historically low
charge-offs in 2021. We are off to a great start in the second
quarter, exceeding a meaningful milestone in early April 2022 as we
now serve over 3.0 million card customers. This is yet another
indication of the success our team is having in enabling our
partners to offer more inclusive financial solutions as we continue
to execute on our Purpose of Empowering Better Financial Outcomes
for Everyday Americans.”
Mr. Howard continued, “While we are pleased with
our results, we are mindful of rising interest rates and the
potential for economic stress. Today, over 90% of our
receivables-based debt is fixed-rate financing, providing us with
meaningful protection from rising rates. The customers we serve
continue to exhibit strong purchasing and payment activity, and
delinquency rates remain below levels seen in the first quarter of
2020, prior to the pandemic. Our partners continue to enjoy strong
customer engagement and repeat purchase behavior. Purchase volume
was up 55.2%, while payment rates continue to reflect a healthy
consumer. Given these recent consumer performance trends and the
value our partners continue to place on our credit-as-a-service
platform, we remain optimistic about what lies ahead. Our
technology, 25 years of data aggregation, diversity of product
offerings and marketing channels, and history of managing through
economic cycles provide for a truly differentiated platform from
which to continue our growth.
“Finally, we retired over 1 million shares of
our common stock during the quarter. At current market prices,
these repurchases represent a strong return opportunity for our
shareholders.”
First Quarter 2022
Financial Results (all comparisons to the
prior year period)
|
|
For the Three Months Ended March 31, |
|
Income Increases (Decreases) |
|
Percentage Increases (Decreases) |
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
Change |
|
Change |
|
Total operating revenue |
$ |
229,770 |
|
|
$ |
143,895 |
|
|
85,875 |
|
|
59.7 |
% |
|
Other non-operating
revenue |
|
61 |
|
|
|
840 |
|
|
(779 |
) |
|
-92.7 |
% |
|
Total revenue |
|
229,831 |
|
|
|
144,735 |
|
|
85,096 |
|
|
58.8 |
% |
|
Interest
expense |
|
(17,410 |
) |
|
|
(12,298 |
) |
|
(5,112 |
) |
|
41.6 |
% |
|
Provision for losses
on loans, interest and fees receivable recorded at net realizable
value |
|
(147 |
) |
|
|
(4,135 |
) |
|
3,988 |
|
|
-96.4 |
% |
|
Changes in fair value
of loans, interest and fees receivable and notes payable associated
with structured financings recorded at fair value |
|
(104,680 |
) |
|
|
(27,491 |
) |
|
(77,189 |
) |
|
280.8 |
% |
|
Net
margin |
|
107,594 |
|
|
|
100,811 |
|
|
6,783 |
|
|
6.7 |
% |
|
Total Operating
Expense |
|
69,960 |
|
|
|
41,207 |
|
|
(28,753 |
) |
|
69.8 |
% |
|
Loss on repurchase of
convertible senior notes |
|
— |
|
|
|
7,807 |
|
|
7,807 |
|
|
|
|
Net
income |
$ |
44,755 |
|
|
$ |
44,027 |
|
|
728 |
|
|
1.7 |
% |
|
Net income
attributable to controlling interests |
$ |
45,010 |
|
|
$ |
44,075 |
|
|
935 |
|
|
2.1 |
% |
|
Preferred dividends
and discount accretion |
|
(6,206 |
) |
|
|
(4,687 |
) |
|
(1,519 |
) |
|
32.4 |
% |
|
Net income
attributable to controlling interests to common
shareholders |
$ |
38,804 |
|
|
$ |
39,388 |
|
|
(584 |
) |
|
-1.5 |
% |
|
Net income
attributable to common shareholders per common
share—basic |
$ |
2.62 |
|
|
$ |
2.62 |
|
|
— |
|
|
0.0 |
% |
|
Net income
attributable to common shareholders per common
share—diluted |
$ |
1.96 |
|
|
$ |
1.91 |
|
|
0.05 |
|
|
2.6 |
% |
Managed Receivables
Managed receivables increased 53.6% to $1.7
billion as of March 31, 2022, from $1.1 billion as of March 31,
2021 as total customers served increased 58.1% to 2.9 million.
Managed receivables also increased 4.1% or $66.6 million from
December 31, 2021. Continued strong consumer spending behavior on
our general purpose credit cards during the first quarter of 2022
helped grow our period-end managed receivables. This growth was
offset slightly by seasonal declines in demand for private label
credit products. We expect growth in both our general purpose
credit card and private label credit products to continue into
2022.
Total
revenue
During the quarter ended March 31, 2022, total
operating revenue increased 59.7% to $229.8 million. Total
operating revenue consists of interest income, finance charges,
fees and ancillary, interchange and servicing income on loan
portfolios.
Period-over-period increases in operating
revenue primarily relate to growth in private label credit and
general purpose credit card receivables. Additionally, on January
1, 2022, we adopted Accounting Standards Update 2016-13,
Measurement of Credit Losses on Financial Instruments. Upon
adoption, we elected the fair value option for all remaining
loans receivable associated with our private label credit and
general-purpose credit card platform previously measured at
amortized cost.
Given our expectation for continued
period-over-period growth in private label credit and general
purpose credit card receivables, coupled with increased revenue
recognition as a result of our adoption of the fair value option
for all remaining loans receivable associated with our private
label credit and general purpose credit card platform measured at
amortized cost, we expect continued net period-over- period growth
in our total interest income and related fees and charges for these
operations in 2022.
Interest
expense
Interest expense was $17.4 million for the
quarter ended March 31, 2022, compared to $12.3 million in the
prior year period.
Outstanding notes payable, net, associated with
private label credit and general purpose credit card products
increased to $1.2 billion as of March 31, 2022 from $781.1 million
as of March 31, 2021 helping drive the increase in interest
expense. Additionally, the issuance of $150.0 million of senior
notes in November 2021 also served to increase interest expense
during the period. Offsetting these increases in interest expense
was an overall decrease in the weighted average cost of funds,
coupled with the repurchase and redemption of our convertible
senior notes. We anticipate additional debt financing over the next
few quarters as we continue to grow coupled with increased
effective interest rates resulting from anticipated federal funds
rate increases, and as such, we expect our quarterly interest
expense to be above that experienced in the prior periods for these
operations.
Provision for
losses on loans,
interest and
fees receivable
recorded at net
realizable value
Provision for losses on loans, interest and fees
receivable recorded at net realizable value decreased to $0.1
million for the quarter ended March 31, 2022, compared to $4.1
million in the prior year period.
We have experienced a period-over-period
decrease in this category primarily reflecting: 1) the effects of
our adoption of the fair value option under ASU 2016-13 on January
1, 2022, which has resulted in a significant decline in the
outstanding receivables subject to this provision and 2) the
overall reduction in delinquencies (and related charge-offs)
associated with these receivables in part due to government
stimulus programs, which have served to increase payments on
outstanding receivables. Given our adoption of ASU 2016-13, our
provision on loans will relate solely to our Auto Finance segment
going forward.
Total
operating expense
Total operating expense increased 69.8% to $70.0
million for the quarter ended March 31, 2022, compared to $41.2
million for the same period in 2021. Total annualized operating
expense as a percentage of total assets increased to 14.6% from
13.7% in the prior year period.
Certain operating costs are variable based on
the levels of accounts and receivables we service (both for our own
receivables and for others) and the pace and breadth of our growth
in receivables. Increases in operating expenses were largely due to
increases in receivables acquisition volume as well as increased
marketing expenses that often precede the revenues generated from
the subsequently acquired assets. The average cost to acquire this
volume remained largely consistent between periods.
Net
Income
Attributable
to
Common
Shareholders
Net income attributable to common shareholders
decreased 1.5% to $38.8 million for the quarter ended March 31,
2022, compared to $39.4 million for the same period in 2021.
Net
Income
Attributable
to
Common
Shareholders
Per
Common
Share –
basic and
diluted
Net income attributable to common shareholders
per basic common share was $2.62 for both the quarter ended March
31, 2022, and March 31, 2021.
Net income attributable to common shareholders per common share
diluted increased to $1.96 for the quarter ended March 31, 2022,
compared to $1.91 for the same period in 2021. The increase in our
diluted earnings per share was largely driven by decreases in our
outstanding share count both through open market purchases as well
as shares of stock returned to us by employees in satisfaction of
withholding tax requirements on exercised stock options and vested
stock grants.
Balance
Sheet
and
Cash
Flow
Information
At March 31, 2022, unrestricted cash and cash
equivalents totaled $373.5 million.
During the quarter ended March 31, 2022, cash
flow from operations equaled $80.7 million, compared to $52.8
million during 2021. The increase in cash provided by operating
activities was principally related to an increase in finance
and fee collections associated with growing private label
credit and general purpose credit card receivables and increased
recoveries on charged-off receivables. Offsetting these collections
were increased year over year payments made to pay federal and
state taxes. Collections on receivables have generally benefited
from increased consumer payments because of government stimulus
payments. As the impact of these stimulus payments decreases,
we expect consumer payments to return to historical levels.
We will continue to invest in the profitable assets generated in
both our general purpose and retail credit operations throughout
2022.
About
Atlanticus Holdings
Corporation
Empowering Better Financial Outcomes for
Everyday Americans
Atlanticus’ technology allows 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 18 million customers and $27 billion in consumer loans over
our 25 year operating history to support lenders that originate a
range of consumer loan products. These products include retail and
healthcare private label credit and general purpose credit cards
marketed through our omnichannel platform, including retail
point-of-sale, healthcare-point of-care, direct mail solicitation,
internet-based marketing, and partnerships with third parties.
Additionally, through our CAR subsidiary, Atlanticus serves the
individual needs of automotive dealers and automotive non-prime
financial organizations with multiple financing and service
programs.
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, managed receivables, total interest income and related
fees and charges, debt financing and interest expense, interest
rates, underwriting, consumer performance trends 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 Securities and Exchange Commission and
include, but are not limited to, risks related to the extent and
duration of the COVID-19 pandemic and its impact on the Company,
bank partners, merchant partners, consumers, loan demand, the
capital markets, labor availability, supply chains and the economy
in general; the Company's ability to retain existing, and attract
new, merchant partners and funding sources; changes in market
interest rates; increases in loan delinquencies; its ability to
operate successfully in a highly regulated industry; the outcome of
litigation and regulatory matters; the effect of management
changes; cyberattacks and security vulnerabilities in its products
and services; and the Company's ability to compete successfully in
highly competitive markets. The forward-looking statements speak
only as of the date on which they are made, and, except to the
extent required by federal securities laws, the Company disclaims
any obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events. In light
of these risks and uncertainties, there is no assurance that the
events or results suggested by the forward-looking statements will
in fact occur, and you should not place undue reliance on these
forward-looking statements.
Non-GAAP
Financial Measure
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 the United States of
America (“GAAP”). This non-GAAP financial measure aids in the
evaluation of the performance of our credit portfolios, including
our risk management, servicing and collection activities and our
valuation of purchased receivables. The credit performance of our
managed receivables provides information concerning the quality of
loan origination and the related credit risks inherent with the
portfolios. Management relies heavily upon financial data and
results prepared on the “managed basis” in order to manage our
business, make planning decisions, evaluate our performance and
allocate resources.
This non-GAAP financial measure is presented for
supplemental informational purposes only. This non-GAAP financial
measure has limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, GAAP
financial measures. This non-GAAP financial measure may differ from
the non-GAAP financial measures used by other companies. The
calculation of managed receivables is provided below under
“Calculation of Non-GAAP Financial Measure” for each of the fiscal
periods indicated.
Contact:Investor RelationsKarin
Daly, Vice President The Equity Group Inc. (212)
836-9623kdaly@equityny.com
Atlanticus
Holdings Corporation
and Subsidiaries Consolidated
Statements of
Operations (Unaudited)
(Dollars
in
thousands,
except
per
share data)
|
For the Three Months Ended |
|
March 31, |
|
|
2022 |
|
|
|
2021 |
|
Revenue: |
|
|
|
Consumer loans, including past
due fees |
$ |
164,806 |
|
|
$ |
102,296 |
|
Fees and related income on
earning assets |
|
54,698 |
|
|
|
37,020 |
|
Other revenue |
|
10,266 |
|
|
|
4,579 |
|
Total operating revenue,
net |
|
229,770 |
|
|
|
143,895 |
|
Other non-operating
revenue |
|
61 |
|
|
|
840 |
|
Total revenue |
|
229,831 |
|
|
|
144,735 |
|
|
|
|
|
Interest expense |
|
(17,410 |
) |
|
|
(12,298 |
) |
Provision for losses on loans,
interest and fees receivable recorded at net realizable value |
|
(147 |
) |
|
|
(4,135 |
) |
Changes in fair value of
loans, interest and fees receivable and notes payable associated
with structured financings recorded at fair value |
|
(104,680 |
) |
|
|
(27,491 |
) |
Net margin |
|
107,594 |
|
|
|
100,811 |
|
|
|
|
|
Operating expense: |
|
|
|
Salaries and benefits |
|
11,426 |
|
|
|
8,239 |
|
Card and loan servicing |
|
22,675 |
|
|
|
17,387 |
|
Marketing and
solicitation |
|
20,573 |
|
|
|
10,301 |
|
Depreciation |
|
593 |
|
|
|
312 |
|
Other |
|
14,693 |
|
|
|
4,968 |
|
Total operating expense |
|
69,960 |
|
|
|
41,207 |
|
Loss on repurchase and
redemption of convertible senior notes |
|
— |
|
|
|
7,807 |
|
Income before income
taxes |
|
37,634 |
|
|
|
51,797 |
|
Income tax benefit
(expense) |
|
7,121 |
|
|
|
(7,770 |
) |
Net income |
|
44,755 |
|
|
|
44,027 |
|
Net loss attributable to
noncontrolling interests |
|
255 |
|
|
|
48 |
|
Net income attributable to
controlling interests |
|
45,010 |
|
|
|
44,075 |
|
Preferred dividends and
discount accretion |
|
(6,206 |
) |
|
|
(4,687 |
) |
Net income attributable to
common shareholders |
$ |
38,804 |
|
|
$ |
39,388 |
|
Net income attributable to
common shareholders per common share—basic |
$ |
2.62 |
|
|
$ |
2.62 |
|
Net income attributable to
common shareholders per common share—diluted |
$ |
1.96 |
|
|
$ |
1.91 |
|
Atlanticus
Holdings Corporation
and Subsidiaries
Consolidated
Balance
Sheets
(Unaudited) (Dollars
in thousands)
|
March 31, |
|
December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
Assets |
|
|
|
Unrestricted cash and cash
equivalents (including $211.6 million and $209.5 million associated
with variable interest entities at March 31, 2022 and December 31,
2021, respectively) |
$ |
373,468 |
|
|
$ |
409,660 |
|
Restricted cash and cash
equivalents (including $12.5 million and $75.9 million associated
with variable interest entities at March 31, 2022 and December 31,
2021, respectively) |
|
32,009 |
|
|
|
96,968 |
|
Loans, interest and fees
receivable: |
|
|
|
Loans, interest and fees
receivable, at fair value (including $1,293.2 million and $925.5
million associated with variable interest entities at March 31,
2022 and December 31, 2021, respectively) |
|
1,405,765 |
|
|
|
1,026,424 |
|
Loans, interest and fees
receivable, gross (including $369.6 million associated with
variable interest entities at December 31, 2021) |
|
99,916 |
|
|
|
470,293 |
|
Allowances for uncollectible
loans, interest and fees receivable (including $55.1 million
associated with variable interest entities at December 31,
2021) |
|
(1,612 |
) |
|
|
(57,201 |
) |
Deferred revenue (including
$8.2 million associated with variable interest entities at December
31, 2021) |
|
(15,878 |
) |
|
|
(29,281 |
) |
Net loans, interest and fees
receivable |
|
1,488,191 |
|
|
|
1,410,235 |
|
Property at cost, net of
depreciation |
|
6,819 |
|
|
|
7,335 |
|
Operating lease right-of-use
assets |
|
2,592 |
|
|
|
4,016 |
|
Prepaid expenses and other
assets |
|
18,558 |
|
|
|
15,649 |
|
Total assets |
$ |
1,921,637 |
|
|
$ |
1,943,863 |
|
Liabilities |
|
|
|
Accounts payable and accrued
expenses |
$ |
50,905 |
|
|
$ |
42,287 |
|
Operating lease
liabilities |
|
2,457 |
|
|
|
4,842 |
|
Notes payable, net (including
$1,206.6 million and $1,223.4 million associated with variable
interest entities at March 31, 2022 and December 31, 2021,
respectively) |
|
1,268,821 |
|
|
|
1,278,864 |
|
Senior notes, net |
|
143,310 |
|
|
|
142,951 |
|
Income tax liability |
|
43,100 |
|
|
|
47,770 |
|
Total liabilities |
|
1,508,593 |
|
|
|
1,516,714 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Preferred stock, no par value,
10,000,000 shares authorized: |
|
|
|
Series A preferred stock,
400,000 shares issued and outstanding at March 31, 2022
(liquidation preference - $40.0 million); 400,000 shares issued and
outstanding at December 31, 2021(1) |
|
40,000 |
|
|
|
40,000 |
|
Class B preferred units issued
to noncontrolling interests |
|
99,725 |
|
|
|
99,650 |
|
|
|
|
|
Shareholders'
Equity |
|
|
|
Series B preferred stock, no
par value, 3,188,533 shares issued and outstanding at March 31,
2022 (liquidation preference - $79.7 million); 3,188,533 shares
issued and outstanding at December 31, 2021(1) |
|
— |
|
|
|
— |
|
Common stock, no par value,
150,000,000 shares authorized: 14,912,895 and 14,804,408 shares
issued at March 31, 2022 and December 31, 2021, respectively;
14,912,895 and 14,804,408 shares outstanding at March 31, 2022 and
December 31, 2021, respectively |
|
— |
|
|
|
— |
|
Paid-in capital |
|
160,242 |
|
|
|
227,763 |
|
Retained earnings |
|
113,828 |
|
|
|
60,236 |
|
Total shareholders’
equity |
|
274,070 |
|
|
|
287,999 |
|
Noncontrolling interests |
|
(751 |
) |
|
|
(500 |
) |
Total equity |
|
273,319 |
|
|
|
287,499 |
|
Total liabilities, preferred
stock and equity |
$ |
1,921,637 |
|
|
$ |
1,943,863 |
|
(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.
Calculation of
Non-GAAP
Financial
Measure
Loans, interest and fees receivable, at face value
|
At or for the Three Months Ended |
|
2022 |
2021 |
2020 |
($ in
Millions) |
Mar. 31(1) |
Dec. 31(1) |
Sep. 30(1) |
Jun. 30(1) |
Mar. 31(1) |
Dec. 31(1) |
Sept. 30(1) |
Jun. 30(1) |
Loans, interest and fees receivable, at fair value |
$ |
1,405.8 |
$ |
1,026.4 |
$ |
846.2 |
$ |
644.7 |
$ |
481.4 |
$ |
417.1 |
$ |
310.8 |
$ |
177.9 |
Fair value mark against
receivable (2) |
$ |
272.9 |
$ |
208.9 |
$ |
182.2 |
$ |
148.6 |
$ |
112.3 |
$ |
99.0 |
$ |
71.8 |
$ |
42.7 |
Loans, interest and fees
receivable, at face value |
$ |
1,678.7 |
$ |
1,235.3 |
$ |
1,028.4 |
$ |
793.3 |
$ |
593.7 |
$ |
516.1 |
$ |
382.6 |
$ |
220.6 |
(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 are acquired on or after
January 1, 2020. On January 1, 2022, we elected the fair value
option under ASU 2016-13 for those private label credit and
general purpose credit card receivables that were accounted for
under the amortized cost method.
(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.
Managed receivables
Below is the calculation of managed receivables (in
millions):
|
At or for the Three Months Ended |
|
2022 |
2021 |
2020 |
($ in
Millions) |
Mar. 31 (1) |
Dec. 31 |
Sep. 30 |
Jun. 30 |
Mar. 31 |
Dec. 31 |
Sept. 30 |
Jun. 30 |
Loans, interest and fees receivable, gross |
$ |
— |
$ |
375.7 |
$ |
417.8 |
$ |
454.2 |
$ |
498.8 |
$ |
574.3 |
$ |
604.8 |
$ |
679.6 |
Loans, interest and fees
receivable, gross from fair value reconciliation above |
|
1,678.7 |
|
1,235.3 |
|
1,028.4 |
|
793.3 |
|
593.7 |
|
516.1 |
|
382.6 |
|
220.6 |
Total managed receivables |
$ |
1,678.7 |
$ |
1,611.0 |
$ |
1,446.2 |
$ |
1,247.5 |
$ |
1,092.5 |
$ |
1,090.4 |
$ |
987.4 |
$ |
900.2 |
(1) On January 1, 2022, we elected the fair value option
under ASU 2016-13 for those private label credit and general
purpose credit card receivables that were accounted for under the
amortized cost method.
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