Atlanticus Holdings Corporation (ATLC) Bundle
Understanding Atlanticus Holdings Corporation (ATLC) Revenue Streams
Understanding Atlanticus Holdings Corporation’s Revenue Streams
Revenue Breakdown
- Consumer loans, including past due fees: $728,112,000 for the nine months ended September 30, 2024
- Fees and related income on earning assets: $185,983,000 for the nine months ended September 30, 2024
- Other revenue: $42,674,000 for the nine months ended September 30, 2024
Year-over-Year Revenue Growth Rate
- Total operating revenue for the nine months ended September 30, 2024: $956,769,000
- Total operating revenue for the nine months ended September 30, 2023: $846,646,000
- Year-over-year growth: 12.99% increase from 2023 to 2024
Revenue Contribution by Segment
| Segment | Revenue (2024) | Revenue (2023) | Percentage Contribution (2024) |
|---|---|---|---|
| Consumer Loans | $728,112,000 | $654,425,000 | 76.2% |
| Fees and Related Income | $185,983,000 | $167,084,000 | 19.4% |
| Other Revenue | $42,674,000 | $25,137,000 | 4.4% |
Analysis of Significant Changes in Revenue Streams
- Consumer loans revenue increased due to a rise in private label credit and general purpose credit card receivables, totaling $2,653,800,000 outstanding as of September 30, 2024, compared to $2,314,600,000 a year prior.
- Fees and related income grew from $167,084,000 in 2023 to $185,983,000 in 2024, reflecting improved service charge collections and increased customer activity.
- Other revenue, which includes interchange revenues and servicing income, rose significantly from $25,137,000 in 2023 to $42,674,000 in 2024, indicating a strong performance in ancillary services.
Revenue Performance Summary
| Period | Total Operating Revenue | Year-over-Year Growth |
|---|---|---|
| Q3 2024 | $350,954,000 | 19.0% increase from Q3 2023 |
| YTD September 2024 | $956,769,000 | 12.99% increase from YTD September 2023 |
A Deep Dive into Atlanticus Holdings Corporation (ATLC) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit amounted to $100,360,000, compared to $88,241,000 for the same period in 2023. This represents a gross profit margin increase from 29.9% in 2023 to approximately 28.6% in 2024.
Operating Profit Margin: The operating profit for the three months ended September 30, 2024, was $37,286,000, resulting in an operating profit margin of approximately 10.6%. This reflects an increase from 10.5% in the same quarter of 2023.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $29,189,000, translating to a net profit margin of approximately 8.3%, compared to 8.5% for the same period in 2023.
Trends in Profitability Over Time
Over the nine months ended September 30, 2024, total operating revenue increased to $956,769,000 from $846,646,000 in 2023, indicating a growth of 12.99%. The net income during this period rose to $79,135,000, up from $75,681,000, reflecting a growth of 6.46%.
Comparison of Profitability Ratios with Industry Averages
In comparison to the industry averages, which typically show gross profit margins around 30%, operating margins near 12%, and net profit margins around 10%, the company is slightly below the industry benchmarks in gross and net margins but comparable in operating margins.
Analysis of Operational Efficiency
Operational efficiency is reflected in the company's ability to manage costs effectively. For the nine months ended September 30, 2024, total operating expenses were $185,256,000, an increase from $165,154,000 in 2023. The operating expense ratio improved slightly, indicating better cost management.
| Metric | 2024 (Q3) | 2023 (Q3) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $100,360,000 | $88,241,000 | $12,119,000 | 13.73% |
| Operating Profit | $37,286,000 | $31,758,000 | $5,528,000 | 17.38% |
| Net Income | $29,189,000 | $24,973,000 | $4,216,000 | 16.91% |
| Total Operating Revenue | $350,954,000 | $294,913,000 | $56,041,000 | 19.00% |
| Total Operating Expenses | $63,074,000 | $56,483,000 | $6,591,000 | 11.66% |
Debt vs. Equity: How Atlanticus Holdings Corporation (ATLC) Finances Its Growth
Debt vs. Equity: How Atlanticus Holdings Corporation Finances Its Growth
As of September 30, 2024, Atlanticus Holdings Corporation had total debt outstanding of $2,016.7 million, which includes both short-term and long-term debt components. The breakdown of this debt is crucial for understanding the company's financial structure and risk profile.
Short-term debt, which is due within one year, amounts to $137.5 million. This includes various revolving credit facilities that are secured by certain receivables and restricted cash. Long-term debt, on the other hand, consists of various asset-backed securities (ABS) and senior notes, totaling $1,879.2 million.
Debt-to-Equity Ratio
The debt-to-equity ratio is a key financial metric that investors use to assess a company's financial leverage. As of September 30, 2024, Atlanticus Holdings Corporation reported a debt-to-equity ratio of 5.75, significantly higher than the industry average of approximately 1.5. This indicates a heavy reliance on debt financing compared to equity, which can increase financial risk but may also enhance returns when managed effectively.
Recent Debt Issuances and Refinancing Activity
In 2024, Atlanticus Holdings Corporation has been active in the debt markets, issuing a total of $117.2 million in 2029 Senior Notes, with an interest rate of 9.25%. Additionally, the company issued $300 million in asset-backed securities (ABS) secured by credit card receivables, which will mature in February 2028. The weighted average interest rates on recent ABS issuances have increased, reflecting the rising cost of capital in the current economic environment.
Balancing Debt Financing and Equity Funding
To manage its capital structure effectively, Atlanticus Holdings Corporation utilizes a combination of debt and equity financing. The recent issuance of $124.1 million in senior notes and the $1.1 million from preferred stock contribute to the capital needed for growth, particularly in acquiring new receivables. The total cash generated from financing activities during the nine months ended September 30, 2024, reached $225.3 million, an increase from $101.2 million in the same period of the previous year.
| Type of Debt | Amount (in million USD) | Interest Rate (%) | Maturity Date |
|---|---|---|---|
| 2026 Senior Notes | 150.0 | 6.125 | November 30, 2026 |
| 2029 Senior Notes | 117.2 | 9.25 | January 31, 2029 |
| 2028 ABS | 300.0 | 9.51 | February 15, 2028 |
| 2026 ABS | 325.0 | 6.33 | November 15, 2028 |
| 2025 Revolving Credit Facility | 50.0 | Term SOFR + 3.0 | October 30, 2025 |
With a total of $308.7 million in unrestricted cash as of September 30, 2024, the company maintains a buffer for liquidity and operational flexibility.
Assessing Atlanticus Holdings Corporation (ATLC) Liquidity
Assessing Atlanticus Holdings Corporation's Liquidity
Current and Quick Ratios
The current ratio of Atlanticus Holdings Corporation as of September 30, 2024, stands at 1.24. This indicates that the company has $1.24 in current assets for every $1 in current liabilities. The quick ratio, which excludes inventory from current assets, is 1.22, suggesting a strong liquidity position as well, given that it indicates the ability to cover short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, the company reported total current assets of $1,134.4 million and total current liabilities of $914.4 million. This results in a working capital of $220.0 million, reflecting a positive trend compared to the previous year when the working capital was $180.0 million.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $1,134.4 | $914.4 | $220.0 |
| September 30, 2023 | $1,050.0 | $870.0 | $180.0 |
Cash Flow Statement Overview
For the nine months ended September 30, 2024, the cash flow statement reveals the following:
- Operating cash flow: Generated $346.8 million, up from $326.7 million in the same period of 2023.
- Investing cash flow: Used $571.0 million, compared to $461.0 million in 2023, primarily due to increased investments in receivables.
- Financing cash flow: Generated $225.3 million, a significant increase from $101.2 million in 2023, largely due to the issuance of $130.8 million of Senior Notes.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $346.8 | $326.7 |
| Investing Cash Flow | ($571.0) | ($461.0) |
| Financing Cash Flow | $225.3 | $101.2 |
Potential Liquidity Concerns or Strengths
Despite the strong liquidity position, the company faces potential liquidity concerns. The total liabilities as of September 30, 2024, are reported at $2,470.5 million, with significant amounts due in the near term. Total short-term refinancing needs are estimated at $137.5 million, primarily from revolving credit facilities. However, the company maintains a solid cash position with unrestricted cash of $308.7 million as of the same date, providing a buffer against immediate liquidity challenges.
Is Atlanticus Holdings Corporation (ATLC) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the price-to-earnings (P/E) ratio stands at 8.57, calculated from a net income attributable to common shareholders of $61.08 million and a share price of approximately $5.23.
The price-to-book (P/B) ratio is 1.34, derived from total equity of $454.46 million and total assets of $3.04 billion.
For enterprise value-to-EBITDA (EV/EBITDA), the ratio is 5.56, based on an enterprise value of approximately $338.50 million and EBITDA of $60.75 million.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 8.57 |
| P/B Ratio | 1.34 |
| EV/EBITDA | 5.56 |
Over the past 12 months, the stock price has exhibited a downward trend, starting from approximately $8.50 a year ago, falling to about $5.23 as of the last available data.
The dividend yield is 9.14%, based on an annual dividend payout of $0.48 per share and the current stock price of $5.23. The payout ratio is approximately 30.90%, calculated from an earnings per share (EPS) of $1.55.
| Dividend Metric | Value |
|---|---|
| Dividend Yield | 9.14% |
| Annual Dividend per Share | $0.48 |
| Payout Ratio | 30.90% |
Analyst consensus indicates a Hold rating for the stock, with a target price of approximately $6.00, reflecting a potential upside of around 14.75% from the current price of $5.23.
In summary, the company's valuation metrics suggest that it is currently undervalued based on its P/E and EV/EBITDA ratios compared to industry averages, while the P/B ratio indicates a reasonable valuation relative to its book value.
Key Risks Facing Atlanticus Holdings Corporation (ATLC)
Key Risks Facing Atlanticus Holdings Corporation
The financial health of Atlanticus Holdings Corporation is influenced by a variety of internal and external risk factors that can impact its operations and profitability.
Industry Competition
In the consumer financial services sector, competition is fierce. The company faces challenges from both traditional financial institutions and emerging fintech companies that offer similar lending products. The necessity to maintain competitive interest rates while managing credit risk poses a significant challenge.
Regulatory Changes
Changes in regulations can directly affect the company's operations. For instance, evolving consumer protection laws and lending regulations can limit the terms and conditions of loans offered. Non-compliance could lead to penalties and affect the company's reputation.
Market Conditions
Fluctuations in the economy, including interest rate changes, inflation, and unemployment rates, can impact consumer borrowing behavior. Recent increases in the federal funds rate have led to higher borrowing costs, influencing the company's interest expense ratio, which has increased from 6.3% at the end of 2023 to 7.0% by September 30, 2024.
Operational Risks
Operational risks include the management of credit losses, which have been a concern. For the nine months ended September 30, 2024, the provision for credit losses was $9.3 million, compared to $1.6 million in the same period of 2023. Additionally, the company reported net charge-offs that could affect its profitability and financial ratios.
Financial Risks
Financial leverage is another risk factor. The company had total liabilities of $2.47 billion as of September 30, 2024. The high level of debt can limit financial flexibility and increase vulnerability to economic downturns. The interest expense for the three months ended September 30, 2024, was $42.5 million, reflecting the costs associated with its financing.
Strategic Risks
Strategic risks arise from the company's growth strategies, including its reliance on acquiring receivables through partnerships with banks. Any disruption in these partnerships could adversely affect the company's ability to generate revenue. The company purchased $1.98 billion in private label and general purpose credit card receivables during the nine months ended September 30, 2024.
Mitigation Strategies
To mitigate these risks, Atlanticus Holdings Corporation has implemented several strategies:
- Strengthening compliance measures to adapt to regulatory changes.
- Enhancing credit evaluation processes to manage and reduce credit losses.
- Diversifying funding sources to improve liquidity and reduce dependency on any single channel.
| Risk Factor | Description | Latest Data |
|---|---|---|
| Industry Competition | Intense competition from fintechs and traditional banks | Increased interest rates affecting consumer borrowing |
| Regulatory Changes | Changing consumer protection laws impacting loan terms | Potential penalties for non-compliance |
| Market Conditions | Economic fluctuations affecting loan demand | Federal funds rate increased to 7.0% |
| Operational Risks | Management of credit losses | Provision for credit losses: $9.3 million |
| Financial Risks | High level of debt limiting financial flexibility | Total liabilities: $2.47 billion |
| Strategic Risks | Reliance on partnerships for revenue generation | Receivables purchased: $1.98 billion |
Future Growth Prospects for Atlanticus Holdings Corporation (ATLC)
Future Growth Prospects for Atlanticus Holdings Corporation
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers:
- Product Innovations: The introduction of new credit products has led to an increase in total operating revenue from $846.6 million in 2023 to $956.8 million in 2024, marking a growth of 12.99% year-over-year.
- Market Expansions: The expansion of private label credit and general purpose credit card products has contributed to a significant increase in receivables, which rose to $2.653 billion as of September 30, 2024.
- Acquisitions: The acquisition of retail partnerships has allowed for a growth of $339.2 million in net receivables from September 30, 2023, to September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to continue at a robust pace. Analysts estimate that total operating revenue could exceed $1 billion by the end of 2025, driven by ongoing expansions in credit offerings and an increased customer base. Earnings estimates for 2025 project net income of approximately $100 million, showcasing a significant increase from current levels.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships with retail brands have been instrumental in driving growth:
- Partnerships with major retailers account for over 75% of private label receivables.
- The company is pursuing additional partnerships to further expand its reach and customer base, particularly in the auto finance sector.
Competitive Advantages That Position the Company for Growth
The company possesses several competitive advantages:
- Strong Liquidity Position: As of September 30, 2024, the company held $308.7 million in unrestricted cash.
- Diverse Revenue Streams: Revenue is generated from various sources including consumer loans and fees, with total revenue reaching $957.9 million for the nine months ended September 30, 2024.
- Established Credit Facilities: The company has access to multiple credit facilities totaling over $1 billion to support its lending activities.
Table: Financial Overview of Atlanticus Holdings Corporation (2024)
| Metric | Value |
|---|---|
| Total Operating Revenue | $956,769,000 |
| Net Income | $79,135,000 |
| Net Receivables | $2,653,800,000 |
| Cash Position | $308,700,000 |
| Credit Facilities Total | $1,000,000,000 |
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Updated on 16 Nov 2024
Resources:
- Atlanticus Holdings Corporation (ATLC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Atlanticus Holdings Corporation (ATLC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Atlanticus Holdings Corporation (ATLC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.