Atlanticus Holdings Corporation (NASDAQ: ATLC), is a FinTech company specializing in providing credit and related financial services to underserved consumer segments, particularly those classified as subprime. According to Experian, at least 40% of Americans have a credit score below 700 which may imply over 100 million US citizens could need access to credit. If true, Atlanticus has room to grow and the company’s proof of concept is in the numbers. For example, over the prior five years, customers served grew from 1.4 million to 3.8 million, or at a 22.4% CAGR.
Let us explain.
Atlanticus provides technology and other support services to lenders who offer financial products and services to consumers. Both private label and general-purpose card products are originated by The Bank of Missouri and WebBank (collectively, our “bank partners”). The bank partners originate these accounts through multiple channels, including retail and healthcare point-of-sale locations, direct mail solicitation, digital marketing and partnerships with third parties. These services are often extended to consumers who may not have access to financing options with larger financial institutions.
Atlanticus manages its operations through two primary reportable segments: Credit as a Service (CaaS) and Auto Finance. The CaaS segment includes private-label credit and general-purpose credit cards issued through bank partners, financing solutions for retail purchases and personal credit needs. This segment targets subprime consumers, providing access to credit for everyday purchases, often through partnerships with retailers and financial institutions. The Auto Finance segment focuses on purchasing and servicing auto loans, working with independent automotive dealers and finance companies to offer financing options secured by vehicles.
Impressive Track Record.
From 2019 to 2024 revenues have grown at a 31% CAGR from $343 million to $1.3 billion, managed receivables have grown from $914.8 million to $2.7 billion, or a 24.4% CAGR, and the market cap for shares of ATLC has grown from $143 million to $831 million. In our opinion, equally impressive, the company has maintained a 20% return on equity, a Net Promoter Score of 70 and an attrition rate of less than 4%.
Atlanticus faces inherent challenges in subprime lending, including economic risks such as interest rate fluctuations and credit default risks, which could impact profitability. We are mindful of the evolving regulatory landscape, including stricter immigration and ID verification policies (e.g., cross-referencing multiple agency databases). Such policies could complicate customer onboarding or increase compliance costs, though their precise impact remains uncertain. Despite these risks, Atlanticus’s track record suggests resilience, supported by its diversified revenue streams and scalable technology platform.
