Atlanticus (ATLC) - 2024 Q2 - Quarterly Report

Financial Performance - Total operating revenue for the three months ended June 30, 2024, was $315,641,000, an increase of $24,890,000 (approximately 8.6%) from $290,751,000 in 2023[142] - Net income for the three months ended June 30, 2024, was $24,127,000, a decrease of $687,000 (approximately 2.8%) from $24,814,000 in 2023[142] - Total operating revenue for the six months ended June 30, 2024, was $605,815,000, an increase of $54,082,000 (approximately 9.8%) from $551,733,000 in 2023[143] - The net margin for the six months ended June 30, 2024, was $183,606,000, an increase of $8,840,000 (approximately 5.1%) from $174,766,000 in 2023[143] - Total operating revenue for the CaaS segment was $305.2 million for the three months ended June 30, 2024, an increase from $279.6 million in the previous quarter[172] Credit Losses and Provisions - Provision for credit losses for the six months ended June 30, 2024, was $(4,690,000), an increase of $3,677,000 (approximately 363.5%) from $(1,013,000) in 2023[143] - The provision for credit losses increased, particularly in the Auto Finance segment, with expectations for continued modest growth in 2024 due to anticipated growth in underlying receivables[150] - The combined principal net charge-off ratio is expected to decrease for the remainder of 2024, returning to historically normalized levels[193] - The combined principal net charge-offs for the three months ended June 30, 2024, were $154.1 million, compared to $168.0 million in the previous quarter, indicating a reduction of 8.8%[173] Interest and Expenses - Interest expense for the six months ended June 30, 2024, was $(73,011,000), an increase of $24,562,000 (approximately 50.7%) from $(48,449,000) in 2023[143] - Total operating expenses increased due to higher salaries and benefits costs, card and loan servicing expenses, and other variable costs associated with growth in receivables[153] - The interest expense ratio has increased throughout 2023 and 2024 due to rising federal funds borrowing rates[194] - The interest expense ratio, annualized, increased to 6.3% from 5.8% in the prior quarter[177] Receivables and Delinquency - Private label credit and general purpose credit card receivables increased to $2,414.7 million as of June 30, 2024, up from $2,173.4 million as of June 30, 2023, reflecting consistent quarterly growth[146] - Total managed receivables as of June 30, 2024, reached $2,415.1 million, up from $2,318.1 million in March 31, 2024, reflecting a growth of 4.2%[170] - The percentage of managed receivables 30-59 days past due was not specified, but the overall delinquency and charge-off data reflect the credit performance of managed receivables[175] - Delinquency rates for 30-59 days past due increased to 7.8% as of June 30, 2024, compared to 6.4% in the previous year[204] Cash Flow and Financing - The company generated $234.4 million in cash flows from operations for the six months ended June 30, 2024, compared to $209.8 million for the same period in 2023, reflecting an increase in finance and fee collections[230] - Cash used in investing activities increased to $264.8 million for the six months ended June 30, 2024, from $241.4 million in the prior year, primarily due to higher net investments in general purpose credit card receivables[230] - The company generated $53.8 million in cash from financing activities for the six months ended June 30, 2024, compared to a cash outflow of $7.2 million in the same period of 2023[230] Strategic Initiatives and Market Conditions - The company expects additional debt financing in the coming quarters to support growth, with anticipated increases in quarterly interest expense compared to prior periods[148] - Recent rules from the Consumer Financial Protection Bureau (CFPB) may adversely impact revenue from receivables, prompting the company to modify products and pricing strategies[146] - The company is exploring growth opportunities, including potential acquisitions and expansion into new markets[242] - The company continues to face risks related to economic conditions, credit losses, and regulatory changes that could materially affect future financial performance[243] Operational Efficiency - The company has experienced greater operating efficiency due to minimal increases in fixed costs despite significant growth in managed receivables over the past two years[154] - The company emphasizes account management strategies throughout the life of receivables, including credit line management and pricing based on risks[175] - The company has adequate dealer reserves to mitigate losses across the majority of its pool of receivables, despite recent increases in delinquency rates[210] Shareholder and Debt Management - The company plans to repurchase up to 2,000,000 shares of common stock and 500,000 shares of Series B preferred stock through June 30, 2026[231] - The company has moderate imminent refunding or refinancing risks associated with certain notes payable due within the next 24 months[219] - The company issued $57.2 million of 9.25% Senior Notes due 2029 in January and February 2024, with interest payable quarterly[222]