ATLANTA, Aug. 08, 2024 (GLOBE NEWSWIRE) -- Atlanticus Holdings Corporation (NASDAQ:ATLC) (Atlanticus, the Company, we, our or us), a financial technology company that 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 second quarter ended June 30, 2024. An accompanying earnings presentation is available in the Investors section of the Company's website at www.atlanticus.com or by clicking here. Financial and Operating Highlights Second Quarter 2024 Highlights (all comparisons to the Second Quarter 2023) Managed receivables2 increased 11.1% to $2.4 billion Total operating revenue increased 8.6% to $315.6 million Return on average equity of 17.0%3 Purchase volume of $727.9 million Over 325,000 new accounts served during the quarter, 3.6 million total accounts served1 Net income attributable to common shareholders of $18.0 million, or $0.99 per diluted common share 1) In our calculation of total accounts served, we include all accounts with account activity and accounts that have open lines of credit at the end of the referenced period.2) Managed receivables is a non-GAAP financial measure and excludes the results of our Auto Finance receivables. See calculation of Non-GAAP Financial Measures for important additional information.3) Return on average equity is calculated using Net income attributable to common shareholders as the numerator and the average of Total equity as of June 30, 2024 and March 31, 2024 as the denominator, annualized. Management Commentary Jeff Howard, President and Chief Executive Officer at Atlanticus stated, "We continue to be pleased with over fifty consecutive quarters of year over year growth in revenue, managed receivables and serviced accounts. Even as consumer spending has moderated and we have prudently tightened credit, we have been able to achieve double digit receivables growth, record quarterly purchase volume, and attractive returns on our shareholders' capital. "A highlight of the quarter was the announcement of our partnership with Synchrony. This partnership aligns us with the largest provider of credit at point of sale. Through this deeper partnership and technology integration, our platform will be available to the thousands of merchant partners served by Synchrony and access, over time, to millions of declined applications annually. This partnership was the result of an extensive diligence process and served to highlight our best-in-class technology, collaborative approach to partnership, and analytics-led flexibility upon which we have built our Fortiva brand. This is but one indication of the opportunities we see in the second look point of sale market. As prime providers continue to pull back and newer entrants vacate this market, we see meaningful opportunities for continued long term growth. One illustration of that opportunity is the record purchase volume we experienced during the second quarter in our retail credit business and expectation for continued substantial purchase volume increases for the remainder of year. "We also continued to execute on our mitigation strategies in anticipation of a potential change in the allowable late fee. While the new rule issued by the Consumer Financial Protection Bureau continues to be litigated, we are positioning our portfolio and receivables originations for that eventuality. These product, policy and pricing changes are realized over time and we have undertaken changes on the majority of our back book and new originations. We believe that these actions will fully offset the economic impact of the new late fee rule if implemented. "We continue to be pleased with the stability the consumers we serve are exhibiting. Performance within our various product lines has shown resiliency as everyday Americans have benefited from increases in wages in excess of inflation for several quarters."   For the Three Months Ended Financial Results June 30, (Dollars in thousands, except per share data)   2024       2023     % Change                       Total operating revenue   $315,641       $290,751     8.6%   Other non-operating revenue   382       87     nm   Total revenue   316,023       290,838     8.7%   Interest expense   (37,948)       (24,215)     56.7%   Provision for credit losses   (1,746)       (309)     nm   Changes in fair value of loans   (186,251)       (177,829)     4.7%   Net margin   $90,078       $88,485     1.8%                         Total operating expenses   ($61,475 )     ($56,472)     8.9%                         Net income   $24,127       $24,814     (2.8%)                         Net income attributable to controlling interests   $24,280       $25,089     (3.2%)   Preferred stock and preferred unit dividends and discount accretion   (6,308)       (6,289)     nm   Net income attributable to common shareholders   $17,972       $18,800     (4.4%)                         Net income attributable to common shareholders per common share—basic   $1.22       $1.30     (6.2%)                         Net income attributable to common shareholders per common share—diluted   $0.99       $1.02     (2.9%)   *nm = not meaningful Managed Receivables Managed receivables increased 11.1% to $2.4 billion with over $241.1 million in net receivables growth from June 30, 2023, driven by growth both in the private label credit and general purpose credit card products offered by our bank partners. Total accounts served increased 8.4% to 3.6 million. New large private label credit retail partners and ongoing purchases by customers of our existing retail partners helped grow our private label credit receivables by $121.1 million in the twelve months ended June 30, 2024. Our general purpose credit card receivables grew by $120.2 million during the twelve months ended June 30, 2024. While some of our merchant partners continue to face year-over-year growth challenges, others are benefiting from continued consumer spending and a growing economy. Our general purpose credit card portfolio continues to grow in terms of total customers served and therefore we continue to experience growth in total managed receivables. We expect continued growth in our managed receivables when compared to prior periods in 2023. 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.  We are currently experiencing continued period-over-period growth in private label credit and general purpose credit card receivables and to a lesser extent in our CAR receivables—growth that we expect to result in net period-over-period growth in our total interest income and related fees for these operations for 2024. Future periods' growth is also dependent on the addition of new retail partners to expand the reach of private label credit operations as well as growth within existing partnerships and the level of marketing investment for the general purpose credit card operations. During the quarter ended June 30, 2024, total operating revenue increased 8.6% to $315.6 million. General purpose credit card receivables tend to have higher total yields than private label credit receivables (and corresponding higher charge off rates). As a result, in periods where we have declines in rates of growth of these receivables, as was noted in the first quarter of 2024, we expect to have slightly lower total managed yield ratios. We expect increases in the acquisition of receivables, and correspondingly higher period-over-period operating revenue for the remainder of 2024. This growth includes an expected shift in our mix of acquired private label receivables to higher FICO receivables that have lower gross yields (and correspondingly lower charge-off expectations) which may result in marginally lower managed yield ratios when compared to the corresponding periods in 2023. Interest Expense Interest expense was $37.9 million for the quarter ended June 30, 2024, compared to $24.2 million for the quarter ended June 30, 2023. The higher expenses were primarily driven by the increases in outstanding debt in proportion to growth in our receivables coupled with increases in the cost of borrowing. Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform increased to $1,816.8 million as of June 30, 2024 from $1,595.8 million as of June 30, 2023. The majority of this increase in outstanding debt relates to the addition of multiple revolving credit facilities during 2023. Recent increases in the effective interest rates on debt have increased our interest expense as we have raised additional capital (or replaced existing facilities) over the last two years. We anticipate additional debt financing over the next few quarters as we continue to grow coupled with increased effective interest rates. As such, we expect our quarterly interest expense for these operations to increase compared to prior periods. Changes in Fair Value of Loans Changes in fair value of loans, interest and fees receivable recorded at fair value increased to $186.3 million for the quarter ended June 30, 2024, respectively, compared to $177.8 million for the quarter ended June 30, 2023, respectively. This increase was largely driven by growth in underlying receivables as well as changes in assumptions due to recent rules enacted by the CFPB, which, if implemented, would limit the late fee charged to consumers in most instances. We include asset performance degradation in our forecasts to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that current trends would suggest. Based on observed asset performance, implementation of mitigants to a potential change in late fee billings and general improvements in U.S. economic expectations, some expected degradation has been removed in recent periods. Additionally, as receivables associated with both 1) assets acquired prior to our tightened underwriting standards (mentioned above) and 2) those assets negatively impacted by inflation, gradually become a smaller percentage of the portfolio, we expect to see overall improvements in the measured fair value of our portfolios of acquired receivables. Total Operating Expenses Total operating expenses increased 8.9% in the quarter when compared to the same period in 2023, driven primarily by increases in variable servicing costs associated with growth in our receivables and costs associated with the implementation of product, policy and pricing changes discussed above. In addition, we experienced growth in both the number of employees and inflationary compensation pressure. We expect some continued increase in both servicing costs and salaries and benefits in 2024 compared to corresponding periods in 2023 as we expect our receivables to continue to grow. We expect increased levels of expenditures associated with anticipated growth in private label credit and general purpose credit card operations. These expenses will primarily relate to the variable costs of marketing efforts and card and loan servicing expenses associated with new receivable acquisitions. In addition, as we continue to adjust our underwriting standards to reflect changes in fee and finance assumptions on new receivables, we expect period over period marketing costs for 2024 to increase relative to those experienced in 2023, particularly towards the third and fourth quarters of 2024 , although the frequency and timing of increased marketing efforts could vary and are dependent on macroeconomic factors such as national unemployment rates and federal funds rates. Net Income Attributable to Common Shareholders Net income attributable to common shareholders decreased 4.4% to $18.0 million, or $0.99 per diluted share for the quarter ended June 30, 2024. Share Repurchases We repurchased and retired 49,203 shares of our common stock at an aggregate cost of $1.3 million, in the quarter ended June 30, 2024. We will continue to evaluate the best use of our capital to increase shareholder value over time. About Atlanticus Holdings Corporation 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 technology and analytics. We apply the experience gained and infrastructure built from servicing over 20 million customers and over $40 billion in consumer loans over more than 25 years of 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 Auto Finance 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, long-term growth plans and opportunities, operations, financial performance, revenue, amount and pace of growth of managed receivables, mix of receivables, underwriting approach, total interest income and related fees and charges, the Company's partnership with Synchrony, growth of the point-of-sale market, the new CFPB late fee rules and our response thereto, debt financing, liquidity, interest rates, interest expense, operating expense, fair value of receivables, managed yield ratio, charge-offs, credit conditions, consumer spending, and the economy. 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, 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. Contact:Investor Relations(770) Atlanticus Holdings Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) (Dollars in thousands)     June 30,   December 31,       2024       2023   Assets         Unrestricted cash and cash equivalents (including $146.0 million and $158.0 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) $ 350,907     $ 339,338   Restricted cash and cash equivalents (including $33.0 million and $20.5 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively)   56,256       44,315   Loans at fair value (including $2,168.0 million and $2,128.6 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively)   2,277,379       2,173,759   Loans at amortized cost, net (including $2.4 million and $1.8 million of allowance for credit losses at June 30, 2024 and December 31, 2023, respectively; and $18.1 million and $17.9 million of deferred revenue at June 30, 2024 and December 31, 2023, respectively)     97,469       98,425   Property at cost, net of depreciation     10,269       11,445   Operating lease right-of-use assets     11,111       11,310   Prepaid expenses and other assets     33,870       27,853   Total assets   $ 2,837,261     $ 2,706,445             Liabilities         Accounts payable and accrued expenses   $ 70,579     $ 61,634   Operating lease liabilities     19,679       20,180   Notes payable, net (including $1,816.7 million and $1,795.9 million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively)   1,879,071       1,861,685   Senior notes, net     199,496       144,453   Income tax liability     97,128       85,826   Total liabilities     2,265,953       2,173,778