Atlanticus Reports First Quarter 2021 Financial Results

Monday, 17. May 2021 13:00

ATLANTA, May 17, 2021 (GLOBE NEWSWIRE) -- Atlanticus Holdings Corporation (NASDAQ: ATLC) (“Atlanticus,” “the Company”, “we,” “our” or “us”), a technology-enabled financial services company that assists financial institutions in offering credit to millions of everyday Americans, today announced its financial results for the quarter ended March 31, 2021.

Financial and Operating Highlights (all comparisons to the prior year period)

2021 First Quarter Highlights compared to 2020 First Quarter

  • Net income attributable to common shareholders increased to $39.4 million, or $2.62 per basic common share, compared to $2.7 million, or $0.18 per basic common share
  • Net income to common shareholders increased to $1.91 per diluted common share, compared to $0.17 per diluted common share
  • Net income attributable to common shareholders on a trailing twelve months basis increased to $7.76 per basic common share from $1.52 per basic common share.
  • Managed receivables,(1) associated with our Credit and Other Investments Segment, increased 19.0% to $1.1 billion as of March 31, 2021
  • Total operating revenue increased 2.4% to $143.9 million
  • Combined net charge-off ratio, annualized(1) associated with our Credit and Other Investments Segment, improved to 13.6% from 29.0%
  • The number of total customers we serve at March 31, 2021 increased 31.7% to 1.9 million(2)

(1) Managed receivables and combined net charge-off ratio, annualized are non-GAAP financial measures. See “Non-GAAP Financial Measures” for important additional information.
(2) In our calculation of total customers, we include all customers with account activity or customers who have open lines of credit at the end of the referenced period.

Management Commentary

Jeff Howard, President and Chief Executive Officer, stated, "Our results for the first quarter of 2021 demonstrated our ongoing success in enabling our bank partner, through our technology platform, to empower better financial outcomes for everyday Americans. Our technology allows our bank partner to extend credit across multiple asset classes and marketing channels. This flexibility, and leveraging our almost 25 years of data aggregation, allowed us to increase customers served by 31.7% and grow point-of-sale and direct-to-consumer receivables by 19.0% despite high payment rates resulting from federal stimulus. With our proven approach to analytics, our omnichannel origination capabilities across point-of-sale and general-purpose asset classes, and extremely low level of delinquencies, we believe we are in an excellent position to continue benefiting from the economic recovery throughout 2021.”

Quarterly Highlights

  
For the Quarter Ended March 31,
 Income
Increases (Decreases)
(In Thousands)  
2021
   
2020
  From 2020
to 2021
Total operating revenue $143,895  $140,518  3,377 
Other non-operating revenue  840   (10) 830 
Total revenue  144,735   140,508  4,227 
Interest expense     (12,298)  (13,584) 1,286 
Loss on repurchase of convertible senior notes  (7,807)  -  (7,807)
Provision for losses on loans, interest and fees receivable recorded at net realizable value   (4,135)  (67,336) 63,201 
Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value  (27,491)  (15,191) (12,300)
Net margin $93,004  $44,397  48,607 
Total operating expense $        41,207  $37,750  3,457 
Net income $44,027  $       5,362  38,665 
Net income attributable to controlling interests $44,075  $        5,425  38,650 
Preferred dividends and discount accretion $         (4,687) $(2,759) (1,928)
Net income attributable to common shareholders $39,388  $2,666  36,722 
Net income attributable to common shareholders per common share—basic $2.62  $      0.18  2.44 
Net income attributable to common shareholders per common share—diluted $1.91  $   0.17  1.74 

2021 First Quarter Financial Results (all comparisons to the prior year period)

Total revenue

Period-over-period increases in operating revenue primarily relate to growth in point-of-sale finance and direct-to-consumer accounts and receivables. Managed receivables increased from $917.5 million as of March 31, 2020 to $1.1 billion as of March 31, 2021 as total customers increased from 1.4 million to 1.9 million. This increase in managed receivables was achieved despite reduced consumer purchase behavior, higher than expected payment behavior and overall decreased demand for general-purpose card products.

During the quarter ended March 31, 2021, total operating revenue increased 2.4% to $143.9 million, compared to $140.5 million in the prior year. 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. Offsetting period over period growth in total operating revenue from account and receivables growth are lower finance and fee yield due to lower overall utilization by consumers on credit products and historically low delinquency rates.

We are currently experiencing continued period-over-period growth in point-of-sale and direct-to-consumer receivables, which we expect to continue and to result in net period-over-period growth in our total interest income and related fees and charges for these operations throughout 2021.

Interest expense

Interest expense was $12.3 million for the quarter ended March 31, 2021, compared to $13.6 million in the prior year period. Outstanding notes payable, net, associated with our point-of-sale and direct-to-consumer operations increased from $682.1 million as of March 31, 2020 to $781.0 million as of March 31, 2021. Despite, this increase, an overall decrease in the weighted average cost of funds, coupled with repurchases of our convertible senior notes, resulted in a year over year decline in interest expense. We anticipate additional debt financing over the next few quarters as we continue to grow, 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 $4.1 million for the quarter ended March 31, 2021, compared to $67.3 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 to account for certain loans receivable that are acquired on or after January 1, 2020 which has resulted in a decline in the outstanding receivables subject to this provision and 2) the overall reduction in delinquencies associated with these receivables in part due to recent government stimulus programs, which have served to increase payments on outstanding receivables. This reduction in provision has been offset somewhat due to additional reserves associated with accounts that have been impacted due to COVID-19. Based on delinquencies levels we are currently experiencing and the ongoing expected impacts of government stimulus payments, we expect to see continued period-over-period reductions in our provision for loan losses for the coming quarters.

Total operating expense

Total operating expense increased 9.2% to $41.2 million, compared to $37.8 million in the prior year period. Total annualized operating expense as a percentage of total assets decreased to 13.7% from 15.5% in the prior year period. Certain operating costs are variable based on the levels of accounts and receivables we service and the pace and breadth of our growth in receivables. Increases in operating expenses were largely due to increases in staffing levels based on new and expected increases in receivables acquisition volume as well as increased marketing expenses that often precede the revenues generated from the subsequently acquired assets.

Net Income Attributable to Common Shareholders

Net income attributable to common shareholders increased 1,377% to $39.4 million for the quarter ended March 31, 2021, compared to $2.7 million in the prior year. On a per share basis, net income attributable to common shareholders per basic common share increased to $2.62 for the period ended March 31, 2021, compared to $0.18 for the same period in 2020. Similarly, net income attributable to common shareholders per common share diluted increased to $1.91 for the period ended March 31, 2021, compared to $0.17 for the same period in 2020. On a trailing twelve-month basis, net income attributable to common shareholders increased to $7.76 per basic common share from $1.52 per basic common share.

Balance Sheet and Cash Flow Information

At March 31, 2021, we had $203.1 million in unrestricted cash and cash equivalents.

During the quarter ended March 31, 2021, we generated $52.8 million of cash from operations compared to our generation of $34.9 million of cash from operations during the quarter ended March 31, 2020. The increase in cash provided by operating activities was principally related to increases in finance and fee collections associated with growing point-of-sale and direct-to-consumer receivables. These collections continue to be positively impacted by government stimulus programs as many consumers are electing to pay down outstanding balances.

About Atlanticus Holdings Corporation
Empowering Better Financial Outcomes for Everyday Americans

Founded in 1996, our business utilizes proprietary analytics and a flexible technology platform to enable financial institutions to provide various credit and related financial services and products to everyday Americans. We apply the experience gained and infrastructure built from servicing over 18 million customers and $25 billion in consumer loans over our 24-year operating history to support lenders that originate a range of consumer loan products. These products include retail and healthcare 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, debt financing and the macroeconomic environment. 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, merchants, consumers, loan demand, the capital markets and the economy in general; the Company's ability to retain existing, and attract new, merchants 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 Measures

This press release presents information about managed receivables and combined net charge-off ratio, annualized, which are non-GAAP financial measures provided as supplements to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP financial measures aid 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.

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. The calculation of each of these non-GAAP financial measures is provided below for each of the fiscal periods indicated.

Contact:
Investor Relations
Adam Prior
Senior Vice President
The Equity Group Inc.
(212) 836-9606
aprior@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, 
  2021  2020 
Revenue:        
Consumer loans, including past due fees $102,296  $103,147 
Fees and related income on earning assets  37,020   34,645 
Other revenue  4,579   2,726 
Total operating revenue  143,895   140,518 
Other non-operating revenue  840   (10)
Total revenue  144,735   140,508 
         
Interest expense  (12,298)  (13,584)
Loss on repurchase of convertible senior notes  (7,807)   
Provision for losses on loans, interest and fees receivable recorded at net realizable value  (4,135)  (67,336)
Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value  (27,491)  (15,191)
Net margin  93,004   44,397 
         
Operating expense:        
Salaries and benefits  8,239   7,510 
Card and loan servicing  17,387   15,837 
Marketing and solicitation  10,301   9,317 
Depreciation  312   285 
Other  4,968   4,801 
Total operating expense  41,207   37,750 
Income before income taxes  51,797   6,647 
Income tax expense  (7,770)  (1,285)
Net income  44,027   5,362 
Net loss attributable to noncontrolling interests  48   63 
Net income attributable to controlling interests  44,075   5,425 
Preferred dividends and discount accretion  (4,687)  (2,759)
Net income attributable to common shareholders $39,388  $2,666 
Net income attributable to common shareholders per common share—basic $2.62  $0.18 
Net income attributable to common shareholders per common share—diluted $1.91  $0.17 

Atlanticus Holdings Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

  March 31,  December 31, 
  2021  2020 
         
Assets        
Unrestricted cash and cash equivalents (including $131.7 million and $96.6 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively) $203,050  $178,102 
Restricted cash and cash equivalents (including $29.0 million and $70.2 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  40,477   80,859 
Loans, interest and fees receivable:        
Loans, interest and fees receivable, at fair value (including $424.5 million and $374.2 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  481,434   417,098 
Loans, interest and fees receivable, gross (including $489.0 million and $560.2 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  592,934   667,556 
Allowances for uncollectible loans, interest and fees receivable (including $102.7 million and $120.9 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  (105,881)  (124,961)
Deferred revenue (including $7.4 million and $10.3 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  (33,995)  (39,456)
Net loans, interest and fees receivable  934,492   920,237 
Property at cost, net of depreciation  2,002   2,240 
Investments in equity-method investee  1,244   1,415 
Operating lease right-of-use assets  8,011   9,181 
Prepaid expenses and other assets  10,219   15,180 
Total assets $1,199,495  $1,207,214 
Liabilities        
Accounts payable and accrued expenses $41,153  $41,731 
Operating lease liabilities  11,697   13,776 
Notes payable, net (including $781.0 million and $827.1 million associated with variable interest entities at March 31, 2021 and December 31, 2020, respectively)  839,251   882,610 
Notes payable associated with structured financings, at fair value (associated with variable interest entities)  2,791   2,919 
Convertible senior notes  13,818   24,386 
Income tax liability  33,566   25,932 
Total liabilities  942,276   991,354 
         
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, 2021 (liquidation preference - $40.0 million); 400,000 shares issued and outstanding at December 31, 2020  40,000   40,000 
Class B preferred units issued to noncontrolling interests  99,425   99,350 
         
Shareholders' Equity        
Common stock, no par value, 150,000,000 shares authorized: 16,640,267 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at March 31, 2021; and 16,115,353 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2020      
Paid-in capital  192,207   194,950 
Retained deficit  (73,591)  (117,666)
Total shareholders’ equity  118,616   77,284 
Noncontrolling interests  (822)  (774)
Total equity  117,794   76,510 
Total liabilities, preferred stock and shareholders' equity $1,199,495  $1,207,214 

Calculation of non-GAAP financial measures

Loans, interest and fees receivable, at face value

Below are the reconciliation of Loans, interest and fees receivable, at fair value to Loans, interest and fees receivable, at face value (in millions):

 As of 
 March 31,March 31, 
  2021 2020 
Loans, interest and fees receivable, at fair value$481.4$89.4 
Fair value mark against receivable(1) 112.3 17.5 
Loans, interest and fees receivable, at face value$593.7$106.9 
    

   (1)   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):

 As of
 March 31,March 31,
 20212020
Loans, interest and fees receivable, gross$498.8$810.6
Loans, interest and fees receivable, gross from fair value reconciliation above                     593.7 106.9
Total managed receivables$1,092.5$917.5

Combined net charge-off ratio, annualized

The calculation of Combined net charge-offs used in our Combined net charge-off ratio, annualized is as follows (in millions):

 For the Three Months Ended
 March 31,March 31,
 20212020
Net losses on impairment of loans, interest and fees receivable recorded at fair value$14.3 $0.3 
Gross charge-offs on non fair value accounts                       26.3                        70.5 
Recoveries on non fair value accounts (3.4)                     (4.4)
Combined net charge-offs$37.2 $66.4 

The Combined net charge-off ratio, annualized is calculated using the annualized combined net charge-offs as the numerator and period-end average managed receivables as the denominator.


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