Atlanticus Holdings Corp (NASDAQ: ATLCZ)

Atlanticus Holdings Corp is a financial technology company that provides technology platforms and services to enable lenders to offer credit products to underserved consumers. The company leverages data analytics and proprietary decisioning tools to facilitate instant credit decisions and to support a range of card and loan products. Its core business involves acting as a program manager for partner banks, acquiring the receivables generated by those banks and servicing the underlying accounts.

Atlanticus generates revenue primarily through fees paid by its bank partners for access to its technology platform and through the acquisition of consumer receivables from those partners. The company earns interest and fee income on the purchased loans, receives merchant fees from retail partners that enhance returns on certain receivables, and collects servicing income for managing payment processing and customer service. Additional revenue comes from gains or losses on investments in related technology ventures and from the Auto Finance segment’s interest income on purchased auto loans.

The company operates through the following segments: Credit as a Service (CaaS) and Auto Finance.

• The Credit as a Service segment provides technology and support services to partner banks that issue private label and general purpose credit cards. It enables banks to integrate a paperless process and instant decisioning platform with retail and healthcare providers. The segment earns revenue from fees for platform access, interest and fee income on purchased card receivables, merchant fees from retail partners, and servicing income for payment processing and customer management. It also includes income from gains or losses on investments in unrelated technology firms.

• The Auto Finance segment purchases and services loans secured by automobiles for a network of independent buy here pay here dealers. It generates revenue from interest earned on the face value of installment agreements, from accretion of discounts on purchased loans, and from servicing fees for managing collections on behalf of dealers. The segment also offers floor plan financing to the same dealer network.

Atlanticus holds a niche position in the financial technology sector by focusing on providing credit access to consumers with lower credit scores who are often overlooked by traditional banks. Its main competitors in the Credit as a Service space include large card issuing banks, established payment processors, mobile wallet providers such as Apple Pay and PayPal, and pay over time firms like Block and Klarna. In the Auto Finance space the company competes with a mix of national and regional auto finance firms and numerous smaller local players. The company’s competitive advantages stem from its proprietary decisioning platform that uses machine learning and alternative data, its long term relationships with several bank partners, and its ability to deliver seamless integration with merchants and healthcare providers.

Atlanticus serves a base of bank partners that issue the credit cards and loans facilitated by its platform. The named bank partners are The Bank of Missouri, WebBank and First Bank and Trust. Through these partners the company reaches a broad range of retail merchants, healthcare providers and individual consumers who seek financing options outside the traditional banking system.