ATLANTICUS HOLDI(ATLCP) - 2023 Q3 - Quarterly Report

Financial Performance - Total operating revenue for Q3 2023 was $294,913,000, an increase of $17,039,000 (approximately 6.1%) from $277,874,000 in Q3 2022[152] - Net income for Q3 2023 was $24,973,000, a decrease of $7,397,000 (approximately 22.8%) compared to $32,370,000 in Q3 2022[152] - Total operating revenue for the nine months ended September 30, 2023, was $846,646,000, an increase of $69,206,000 (approximately 8.9%) from $777,440,000 in the same period of 2022[152] - Net income for the nine months ended September 30, 2023, was $75,681,000, a decrease of $35,241,000 (approximately 31.8%) compared to $110,922,000 in the same period of 2022[152] Loan and Receivables Management - The company has serviced over $38 billion in consumer loans over more than 25 years, leveraging this experience to support lenders in offering inclusive financial services[141] - The company reported a provision for losses on loans of $1,551,000 for the nine months ended September 30, 2023, an increase of $841,000 (approximately 118.4%) from $710,000 in the same period of 2022[152] - Changes in fair value of loans for the nine months ended September 30, 2023, resulted in a loss of $505,505,000, an increase of $90,642,000 (approximately 21.8%) from a loss of $414,863,000 in the same period of 2022[152] - The provision for losses on loans is expected to increase modestly in 2023, driven by growth in underlying Auto Finance receivables and slight increases in delinquency rates[158] - The company has implemented a strategy for managing delinquency and receivables losses, focusing on account management throughout the life of the receivable[184] Operating Expenses and Efficiency - The company’s operating expenses for the nine months ended September 30, 2023, were $165,154,000, a decrease of $19,754,000 (approximately 10.7%) from $184,908,000 in the same period of 2022[152] - Total operating expenses for the three and nine months ended September 30, 2023, reflect greater operating efficiency due to minimal increase in fixed costs despite significant growth in managed receivables[161] - Marketing and solicitation costs decreased significantly for the nine months ended September 30, 2023, compared to the same period in 2022, due to tightened underwriting standards[164] Receivables Growth - Private label credit and general purpose credit card receivables increased from $2,049.5 million as of September 30, 2022, to $2,314.6 million as of September 30, 2023, reflecting strong growth in private label credit acquisitions[154] - Outstanding notes payable associated with private label credit and general purpose credit card platform rose from $1,473.1 million as of September 30, 2022, to $1,719.7 million as of September 30, 2023, primarily due to new revolving credit facilities[156] - Managed receivables as of September 30, 2023, totaled $2,315.2 million, an increase from $2,174.0 million in the previous quarter[179] - Managed receivables for private label credit reached $944,197 thousand in Q3 2023, an increase from $892,387 thousand in Q2 2023[189] - Managed receivables for general purpose credit card reached $1,370,445 thousand in Q3 2023, up from $1,280,979 thousand in Q2 2023[189] Credit Quality and Delinquency - The combined principal net charge-off ratio, annualized, decreased to 22.5% in Q3 2023 from 23.8% in Q2 2023, indicating improved credit quality[185] - The company has experienced good growth in its receivables base throughout 2022 due to several bulk purchases, although the timing and size of future purchases are unpredictable[209] - Delinquency rates are expected to increase due to the acquisition of newer receivables, with higher delinquency rates anticipated compared to historical levels[193] - Delinquency rates have increased recently, but the company does not expect a significant adverse impact on operations due to strong yields on receivables and dealer reserves[210] Cash Flow and Financing - For the nine months ended September 30, 2023, the company generated $326.7 million in cash flows from operations, an increase from $245.6 million during the same period in 2022, primarily due to higher finance and fee collections[235] - Cash used in investing activities decreased to $461.0 million for the nine months ended September 30, 2023, compared to $524.4 million in the same period in 2022, attributed to reduced net investments in general purpose credit card receivables[235] - Financing activities generated $101.2 million in cash for the nine months ended September 30, 2023, down from $158.9 million in the prior year, reflecting borrowings offset by net repayments of amortizing debt facilities[235] Market Presence and Strategy - As of September 30, 2023, the CAR operations served more than 650 dealers across 32 states and two U.S. territories, indicating significant market presence[147] - The company continues to pursue growth in private label credit and general purpose credit card receivables, which are generating attractive returns on assets despite economic challenges[146] - The company anticipates continued growth in the acquisition of general purpose credit card receivables during the fourth quarter of 2023 and into 2024[201] - The company has a focus on expanding its financial technology to grow private label credit and general purpose credit card receivables[219] Risks and Outlook - The company faces risks related to economic conditions, credit losses, regulatory changes, and competition that could materially affect future financial performance[248] - The company has a forward-looking outlook that includes expectations regarding revenue, receivables, and market conditions, which are subject to significant risks and uncertainties[244] - The company is closely monitoring the impacts of COVID-19 on consumer spending and credit quality, which may affect future operations[217]