What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-03-13 compared with 2024-03-04 · 71 added, 51 removed, 170 unchanged (42% of the section changed)

8 unchanged sentences

We leverage data, analytics, and innovative technology to unlock access to financial solutions for the millions of Americans who would otherwise be underserved.

We are principally engaged in providing products and services to lenders in the U.S.

and, in most cases, we invest in the receivables originated by lenders who utilize our technology platform and other related services.

In the private label credit channel, we partner with retailers, health care providers and service providers in various industries across the U.S.

to allow them to provide credit to their customers for the purchase of a variety of goods and services including consumer electronics, furniture, elective medical procedures, healthcare, and home-improvements.

From time to time, we also purchase receivables portfolios from third parties.

Subject to the availability of capital at attractive terms and pricing, we plan to continue to evaluate and pursue a variety of activities, including:

(1) investments in additional financial assets associated with private label credit and general purpose credit card activities as well as the acquisition of interests in receivables portfolios;

(2) investments in other assets or businesses that are not necessarily financial services assets or businesses and (3) the repurchase or retirement of debt and equity securities.

In this Report, "receivables" or "loans" typically refer to receivables we have purchased from our bank partners or from third parties.

The types of revenues we earn from our investments in receivables portfolios and services primarily include fees and finance charges, and merchant fees or annual fees associated with the private label credit and general purpose credit card receivables.

We provide technology and other support services to lenders who offer an array of 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”).

Our 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.

The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions.

Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers.

Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing which focus exclusively on consumers with higher FICO scores.

Atlanticus’ decisioning platform is enhanced by machine learning, enabling lenders to make fast, sound decisions when it matters most.

In this Report, "receivables" or "loans" typically refer to receivables we have purchased from our bank partners or from other third parties.

We are principally engaged as a program manager, providing a technology platform and corresponding services to lenders in the U.S.

to assist those lenders with offering products to consumers.

These lenders pay us a fee and, in most circumstances, the lenders are then obligated to sell us the receivables they generate from these products.

We acquire these receivables for the principal amount of the loan.

For certain of our receivables, we also receive merchant fees from our retail partners that are used to enhance our returns for those receivables.

We compensate our bank partners monthly for the regulatory oversight they provide associated with our acquired receivables, the underlying accounts of which they continue to own and service.

This compensation is based on both a fixed and variable component dependent on the underlying performance of the acquired receivables (collectively, "Bank partner fees").

As we are obligated to compensate our bank partners for the duration of the underlying account, we recognize the fair value of these Bank partner fees within Card and loan servicing on the accompanying Consolidated Statements of Income on the date we acquire the underlying receivable.

We service the underlying receivables on behalf of our bank partners by providing and/or managing the ongoing customer service activities in the form of processing payments, providing regular notices of statement activity, and resolving customer complaints, billing disputes, and fraud claims.

Our bank partners continue to own the underlying consumer accounts that they originate and provide regulatory oversight in the form of reviewing and approving the development of consumer finance programs and approving all related marketing materials, establishing the policies and procedures that govern the operation of the consumer finance programs, reviewing and approving customer complaint correspondence, performing ongoing compliance monitoring and testing and audits of the consumer finance programs, and providing settlement services between us and our retail partners.

From time to time, we also purchase receivables portfolios from third parties other than our bank partners.

These products and services are reported through two reportable segments, Credit as a Service ("CaaS") and Auto Finance.

Market Overview

8 unchanged sentences

Credit as a Service Segment

Currently, within our Credit as a Service ("CaaS") segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $39 billion in consumer loans over more than 25 years of operating history, to support lenders in offering more inclusive financial services.

These products include private label credit and general purpose credit cards originated by lenders through multiple channels, including retail and healthcare, direct mail solicitation, digital marketing and partnerships with third parties.

The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions.

Currently, within our CaaS segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $42 billion in consumer loans over more than 25 years of operating history, to support lenders in offering more inclusive financial services.

These products include private label credit cards using the Fortiva and Curae brand names as well as merchant associated brands.

Private label credit products associated with the healthcare space are generally issued under the Curae brand while all other retail partnerships, including those in consumer electronics, furniture, elective medical procedures, and home-improvement use the Fortiva brand or use our retail partners’ brands.

Our general purpose credit cards use the Aspire, Imagine and Fortiva brand names.

Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores.

Atlanticus’ underwriting process is enhanced by large language models and machine learning, enabling lenders to make fast, sound decision-making when it matters most.

Using our infrastructure and technology, we also provide loan servicing, including risk management and customer service outsourcing, for third parties.

Also, through our CaaS segment, we engage in testing and limited investment in consumer finance technology platforms as we seek to capitalize on our expertise and infrastructure.

Also, through our CaaS segment, we engage in testing and limited investment in consumer technology platforms as we seek to capitalize on our expertise and infrastructure.

Additionally, we report within our CaaS segment:

1) servicing income; and 2) gains or losses associated with investments previously made in consumer finance technology platforms.

1) servicing income; and 2) gains or losses associated with notes receivable and equity investments previously made in consumer technology platforms.

These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies.

11 unchanged sentences

The recurring cash flows we receive within our CaaS segment principally include those associated with (1) private label credit and general purpose credit card receivables, (2) servicing compensation and (3) credit card receivables portfolios that are unencumbered or where we own a portion of the underlying structured financing facility.

For information regarding our concentration with certain retail partners, See Note 11, "Commitments and Contingencies–Concentrations," to our consolidated financial statements included herein.

Our credit and other operations are heavily regulated, which may cause us to change how we conduct our operations either in response to regulation or in keeping with our goal of leading the industry in adherence to consumer-friendly practices.

As discussed above, our bank partners continue to provide ongoing account management and oversight for both our Private label credit and General purpose credit card receivables, for which we compensate the bank partners monthly.

All finance charges, fees and merchant fees are recognized into earnings through our Consumer loans, including past due fees (consisting of interest income, including finance charges, late payment fees on loans and merchant fees), Fees and related income on earning assets (for annual or monthly maintenance fees, cash advance fees and other fees directly associated with the extension of credit) and Other revenue (for servicing income, service charges and other customer related fees), on our Consolidated Statements of Income when they are billed to consumers or, in the case of merchant fees, upon completion of our services, which coincides with the funding of the loan by our bank partners.

We value these loan and fee receivables within Changes in fair value of loans on our Consolidated Statements of Income to reflect our best estimate of ongoing economics and cash flows associated with existing consumer accounts including future estimates of finance and fee billings and consumer payment rates typical of the assumptions a market participant would use to calculate fair value.

Our credit and other operations are heavily regulated, potentially causing us to change how we conduct our operations either in response to regulation or in keeping with our goal of leading the industry in adherence to consumer-friendly practices.

We have made meaningful changes to our practices over the past several years, and because our account management practices are evolutionary and dynamic, it is possible that we may make further changes to these practices, some of which may produce positive, and others of which may produce adverse, effects on our operating results and financial position.

1 unchanged sentence

As a result, the products we support are priced to reflect expected loss rates for our various risk categories.

See "Consumer and Debtor Protection Laws and Regulations—CaaS Segment" in Part I, Item 1A, "Risk Factors."

See "Consumer and Debtor Protection Laws and Regulations—CaaS Segment" below and "We operate in a heavily regulated industry" in Part I, Item 1A "Risk Factors" contained in this Report.

Subject to possible disruptions caused by inflation, rising interest rates, and supply chain interruptions, we believe that our private label credit and general purpose credit card receivables are generating, and will continue to generate, attractive returns on assets, thereby facilitating debt financing under terms and conditions (including advance rates and pricing) that will support attractive returns on equity, and we continue to pursue growth in this area.

Private Label Credit

Our bank partners work with both us and with our retail partners to provide financing options to retail consumers.

These financing options vary by retail partner and consists of a range in APRs of 0% - 36% and a range in merchant fees of 0% - 65%.

Merchant fees, which vary by retail partner, offset the purchase price our bank partners remit to the retail partner on a consumer transaction.

These merchant fees are used to enhance the return on products when contractual APRs or other terms are insufficient due to promotional or other below market pricing retail merchants may offer to consumers (such as 0% APR offers).

Financing arrangements may include fees to enhance yields on a product including annual and/or monthly maintenance fees.

Additionally, terms of these products offered by our bank partners to consumers may include deferred interest options whereby consumers pay no interest on their purchases over periods ranging from 6-12 months.

Terms of these products can range from 12 months to 84 months based on the retail merchant partner.

Each offer is customized for retail clients based on the expected performance of the underlying receivables, receivable purchase volumes and overall return requirements.

Our flexible technology allows retail partners to present financing offers to their customers through a variety of delivery options including retail point of sale locations, online transactions, or through in home sales.

These financing arrangements are based on underwriting standards tailored to each retail partner and are the result of a close collaboration between our bank partners and us to ensure all products are compliant with regulatory requirements and to ensure they provide attractive terms to consumers.

Under agreements with our bank partners, we are required to purchase these receivables for amounts that may be in excess of fair value.

In these instances, a fair value assessment that is less than the purchase price of the receivable can occur on the date we initially acquire the receivable, resulting in a loss on acquisition of the receivable.

This negative fair value assessment is included in Changes in fair value of loans on our Consolidated Statements of Income.

In cases where we acquire these below market receivables, we charge merchant fees to our retail partners to facilitate the transaction and ensure we earn adequate returns.

These merchant fees are based on the value of the goods purchased from our retail partners, the consumer’s credit risk and the terms of our bank partners' related product offering.

These fees are recognized upon completion of our services, which coincides with the funding of the loan by our bank partners, in Consumer loans, including past due fees on our Consolidated Statements of Income.

These merchant fees often offset the negative impact of the initial acquisition of the underlying receivable.

As such, it is not always necessary for us to collect the aggregate unpaid gross balance of the underlying receivable to achieve desired returns.

General Purpose Credit Cards

We work closely with our bank partners to assist them in creating general purpose credit card offers.

These offers have varying lines of credit ranging from $350 to $3,000, annual percentage rates (“APRs”) ranging from 19.99% to 36%, annual fees ranging from $0 to $175 and monthly maintenance fees ranging from $0 to $15.

Working collaboratively with our bank partners, each offer our bank partners extend to a consumer is tailored based on the consumer’s individual risk profile.

These offers include finance and fee structures designed to provide us with an adequate return on invested capital upon acquisition of any associated receivable.

As a result, at the time an offer is extended to a consumer, the offer reflects market value and, when combined with other pooled receivables that have similar characteristics, would result in earnings associated with any upfront fees (such as annual or monthly maintenance fees) on the date of acquisition, net of any fair value assessment that may value the receivables at less than the gross amount of the receivable.

Our agreements with our bank partners obligate them to sell and for us to acquire the receivables associated with underlying purchases and subsequent fee and finance billings.

We acquire these receivables for the principal amount of any related purchase which best reflects the receivables fair value at the time of acquisition with no gain or loss recognized beyond those described above.

Auto Finance Segment

4 unchanged sentences

We offer a number of other products to our network of buy-here, pay-here dealers (including our floor-plan financing offering), but the majority of our activities are represented by our purchases of auto loans at discounts and our servicing of auto loans for a fee.

As of December 31, 2023, our CAR operations served 650 dealers in 32 states and two U.S.

The core operations continue to perform well (achieving consistent profitability and generating positive cash flows and growth).

As of December 31, 2024, our CAR operations served over 670 dealers in 34 states and two U.S.

The core operations continue to achieve consistent profitability and generate positive cash flows.

Fair Value Option

We account for certain loans receivable associated with our private label credit and general purpose credit card platform using fair value accounting.

We account for loans receivable associated with our private label credit and general purpose credit card platform using fair value accounting.

We believe the use of fair value for these receivables more closely approximates the true economics of these receivables, better matching the yields and corresponding charge-offs.

3 unchanged sentences

As a result of this fair value adoption, our loans, interest and fees receivable are carried at fair value with changes in fair value recognized directly in earnings, and certain fee billings (such as annual membership fees and merchant fees) and origination costs associated with these receivables no longer being deferred.

We reevaluate the fair value of our Fair Value Receivables at the end of each quarter.

As discussed elsewhere in this Report we adopted ASU 2016-13 on January 1, 2022.

This ASU requires the use of an impairment model (the current expected credit loss ("CECL") model) that is based on expected rather than incurred losses.

The ASU also allows for a one-time fair value election for receivables.

Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously recorded at amortized cost and recorded an increase to our Allowances for credit losses

for our remaining Loans at amortized cost associated with our Auto Finance Segment.

See Note 2, "Significant Accounting Policies and Consolidated Financial Statement Components-Recent Accounting Pronouncements" to our consolidated financial statements included herein for further discussion of our adoption of ASU 2016-13.

Impact of the COVID-19 Pandemic on Atlanticus and our Markets

In March 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus.

The reaction to the COVID-19 pandemic negatively impacted global supply chains and business operations.

In addition, rising inflation in 2021 and 2022 resulted in increased costs for many goods and services.

As a result of persistently high inflation, interest rates have been on the rise.

Russia’s invasion of Ukraine and the ongoing regional conflict in the Middle East have intensified supply chain disruptions and heightened uncertainty surrounding the near-term outlook for the broader economy.

The impacts of responses to the COVID-19 pandemic by both consumers and governments, rising energy costs, inflation, rising interest rates, and unresolved geopolitical tensions could significantly affect the economic outlook.

The duration and severity of the effects of these impacts on our financial condition, results of operations and liquidity remain uncertain.

Borrowers impacted by COVID-19 requesting hardship assistance may have received temporary relief from payments or fee waivers.

While these measures mitigated credit losses, related economic disruptions subsequently resulted in increased portfolio credit losses.

The Biden administration ended the COVID-19 national and public health emergencies on May 11, 2023.

The long term impact that the cessation of certain benefits provided under emergency relief programs will have on our consumers is uncertain although the remaining financial statement impact for those customers previously provided the aforementioned short-term payment deferrals and fee waivers is not material.

The Company remains committed to serving our bank partners, merchant partners, health care providers and consumers.

For more information, refer to Part I, Item 1A "Risk Factors" and, in particular, "Other Risks of our Business – The reaction to COVID-19 has caused severe disruptions in the U.S.

economy and may have a further adverse impacts on our performance, results of operations and access to capital " and "Other Risks of our Business – Our business and operations may be negatively affected by rising prices and interest rates ."

Additionally, we recognize the fair value of Bank partner fees based on internally-developed estimates of payment rates and discount rates.

We reevaluate the fair value of our Fair Value Receivables and Bank partner fees at the end of each quarter.

Receivables Management and Risk Mitigation

23 unchanged sentences

CaaS Segment.

The goal of the collections process is to collect as much of the account balance that is owed in the most customer-friendly and cost-effective manner possible.

The goal of the collections process is to collect as much of the account balance that is owed to our bank partners in the most customer-friendly and cost-effective manner possible.

This collection process has continued to evolve over the course of more than 25 years of operating history, with the utilization of digital and mobile processes helping to both facilitate better communication with the consumer and aid in collections throughout the collection process.

We oversee and manage third-party collectors, who employ these digital and mobile processes along with the traditional cross-section of letters, emails and telephone calls to encourage payment.

On behalf of our bank partners and in accordance with their policies and procedures, we oversee and manage third-party collectors, who employ these digital and mobile processes along with the traditional cross-section of letters, emails and telephone calls to encourage payment.

Collectors also sometimes offer flexibility with respect to the application of payments in order to encourage larger or prompter payments.

18 unchanged sentences

Interest and fees for most credit products are discontinued when loans, interest and fees receivable become contractually 90 or more days past due.

Loans, interest and fees receivable are charged off when they become contractually more than 180 days past due.

Loans, interest and fees receivable are charged off when they become contractually more than 180 days past due or 120 days past due if they are enrolled in an installment loan product.

For all products, receivables are charged off within 30 days of notification and confirmation of bankruptcy or death of the obligor.

However, in some cases of death, receivables are not charged off if there is a surviving, contractually liable individual or an estate large enough to pay the debt in full.

The determination of whether an account is contractually past due is relevant to the delinquency and charge-off data provided under the "Consolidated Results of Operations—CaaS Segment" caption within Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Various factors are relevant in analyzing whether an account is contractually past due (e.g., whether an account has not satisfied its minimum payment due requirement), which is the trigger for moving receivables through various delinquency stages and ultimately to charge-off status.

For private label credit and general purpose credit card accounts, a cardholder's account is considered to be delinquent if the cardholder has not made the required payment as of the payment due date.

The determination of whether an account is contractually past due is relevant to the delinquency and charge-off data provided under the "Consolidated Results of Operations—CaaS Segment" caption within Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Various factors are relevant in analyzing whether an account is contractually past due which is the trigger for moving receivables through various delinquency stages and ultimately to charge-off status.

These can include whether an account has not satisfied its minimum payment due requirement, is part of a collection program or if the account qualifies for other assistance programs that may preclude or defer a payment in a given period, such as a state or national emergency declaration due to weather, public health emergencies or other natural disasters .

For private label credit and general purpose credit card accounts, a cardholder's account is considered delinquent if the cardholder is not party to one of the aforementioned scenarios and has not made the required payment as of the payment due date.

Additionally, collectors may re-age accounts that meet qualifications for re-aging consistent with FFIEC guidelines.

30 unchanged sentences

This segment is regulated directly and indirectly under various federal and state consumer protection and other laws, rules and regulations, including the federal TILA, the federal Equal Credit Opportunity Act, the federal Fair Credit Reporting Act, the federal Fair Debt Collection Practices Act, Dodd-Frank, the federal Gramm-Leach-Bliley Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act.

In addition, various state statutes limit the interest rates and fees that may be charged, limit the types of interest computations (e.g., interest bearing or pre-computed) and refunding processes, prohibit discriminatory practices in extending credit, impose limitations on fees and other ancillary products and restrict the use of consumer credit reports and other account-related information.

In addition, various state statutes limit the interest rates and fees that may be charged, limit the types of interest computations (e.g., interest bearing or pre-computed) and refunding processes, prohibit discriminatory practices in extending credit, impose limitations on fees and other customer related charges and restrict the use of consumer credit reports and other account-related information.

Many of the states in which this segment operates have various licensing requirements and impose certain financial or other conditions in connection with these licensing requirements.

38 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business