SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
of
ATLANTICUS HOLDINGS CORPORATION
a
IRS Employer Identification No.
SEC File Number
(
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Act") | ||
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b- 2).
As of July 31, 2024,
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Statement of Shareholders’ Equity and Temporary Equity |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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ITEM 1. |
FINANCIAL STATEMENTS |
Atlanticus Holdings Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
Assets | ||||||||
Unrestricted cash and cash equivalents (including $ million and $ million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) | $ | $ | ||||||
Restricted cash and cash equivalents (including $ million and $ million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) | ||||||||
Loans at fair value (including $ million and $ million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) | ||||||||
Loans at amortized cost, net (including $ million and $ million of allowance for credit losses at June 30, 2024 and December 31, 2023, respectively; and $ million and $ million of deferred revenue at June 30, 2024 and December 31, 2023, respectively) | ||||||||
Property at cost, net of depreciation | ||||||||
Operating lease right-of-use assets | ||||||||
Prepaid expenses and other assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Operating lease liabilities | ||||||||
Notes payable, net (including $ million and $ million associated with variable interest entities at June 30, 2024 and December 31, 2023, respectively) | ||||||||
Senior notes, net | ||||||||
Income tax liability | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 10) | ||||||||
Preferred stock, no par value, shares authorized: | ||||||||
Series A preferred stock, shares issued and outstanding (liquidation preference - $ million) at June 30, 2024 and December 31, 2023 (Note 5) (1) | ||||||||
Class B preferred units issued to noncontrolling interests (Note 5) | ||||||||
Shareholders' Equity | ||||||||
Series B preferred stock, par value, shares issued and outstanding at June 30, 2024 (liquidation preference - $ million); shares issued and outstanding at December 31, 2023 (liquidation preference - $ million) (1) | ||||||||
Common stock, par value, shares authorized: and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
Paid-in capital | ||||||||
Retained earnings | ||||||||
Total shareholders’ equity | ||||||||
Noncontrolling interests | ( | ) | ( | ) | ||||
Total equity | ||||||||
Total liabilities, shareholders' equity and temporary equity | $ | $ |
(1) Both the Series A preferred stock and the Series B preferred stock have no par value and are part of the same aggregate 10,000,000 shares authorized.
See accompanying notes.
Atlanticus Holdings Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
For the Three Months Ended |
For the Six Months Ended |
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June 30, |
June 30, |
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2024 |
2023 |
2024 |
2023 |
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Revenue: |
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Consumer loans, including past due fees |
$ | $ | $ | $ | ||||||||||||
Fees and related income on earning assets |
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Other revenue |
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Total operating revenue |
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Other non-operating revenue |
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Total revenue |
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Interest expense |
( |
) | ( |
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) | ( |
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Provision for credit losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Changes in fair value of loans |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net margin |
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Operating expenses: |
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Salaries and benefits |
( |
) | ( |
) | ( |
) | ( |
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Card and loan servicing |
( |
) | ( |
) | ( |
) | ( |
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Marketing and solicitation |
( |
) | ( |
) | ( |
) | ( |
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Depreciation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Total operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income before income taxes |
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Income tax expense |
( |
) | ( |
) | ( |
) | ( |
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Net income |
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Net loss attributable to noncontrolling interests |
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Net income attributable to controlling interests |
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Preferred stock and preferred unit dividends and discount accretion |
( |
) | ( |
) | ( |
) | ( |
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Net income attributable to common shareholders |
$ | $ | $ | $ | ||||||||||||
Net income attributable to common shareholders per common share—basic |
$ | $ | $ | $ | ||||||||||||
Net income attributable to common shareholders per common share—diluted |
$ | $ | $ | $ |
See accompanying notes.
Atlanticus Holdings Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity and Temporary Equity (Unaudited)
For the Six Months Ended June 30, 2024 and June 30, 2023
(Dollars in thousands)
Series B Preferred Stock |
Common Stock |
Temporary Equity |
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Shares Issued |
Amount |
Shares Issued |
Amount |
Paid-In Capital |
Retained Earnings |
Noncontrolling Interests |
Total Equity |
Series A Preferred Stock |
Class B Preferred Units |
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Balance at January 1, 2024 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
Accretion of discount associated with issuance of subsidiary equity |
— | — | — | — | — | ( |
) | — | ( |
) | — | |||||||||||||||||||||||||||||
Preferred stock and preferred unit dividends |
— | — | — | — | — | ( |
) | — | ( |
) | — | — | ||||||||||||||||||||||||||||
Compensatory stock issuances, net of forfeitures |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Issuance of series B preferred stock, net |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Distributions to owners of noncontrolling interests |
— | — | — | — | — | ( |
) | ( |
) | — | — | |||||||||||||||||||||||||||||
Contributions by owners of noncontrolling interests |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation costs |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Redemption and retirement of common shares |
— | — | ( |
) | — | ( |
) | — | — | ( |
) | — | — | |||||||||||||||||||||||||||
Net income (loss) |
— | — | — | — | — | ( |
) | — | — | |||||||||||||||||||||||||||||||
Balance at March 31, 2024 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
Accretion of discount associated with issuance of subsidiary equity |
— | — | — | — | — | ( |
) | — | ( |
) | — | |||||||||||||||||||||||||||||
Preferred stock and preferred unit dividends |
— | — | — | — | — | ( |
) | — | ( |
) | — | — | ||||||||||||||||||||||||||||
Stock option exercises and proceeds related thereto |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Compensatory stock issuances, net of forfeitures |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Stock-based compensation costs |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Redemption and retirement of common shares |
— | — | ( |
) | — | ( |
) | — | — | ( |
) | — | — | |||||||||||||||||||||||||||
Net income (loss) |
— | — | — | — | — | ( |
) | — | — | |||||||||||||||||||||||||||||||
Balance at June 30, 2024 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ |
Series B Preferred Stock |
Common Stock |
Temporary Equity |
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Shares Issued |
Amount |
Shares Issued |
Amount |
Paid-In Capital |
Retained Earnings |
Noncontrolling Interests |
Total Equity |
Series A Preferred Stock |
Class B Preferred Units |
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Balance at January 1, 2023 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
Accretion of discount associated with issuance of subsidiary equity |
— | — | — | — | ( |
) | — | — | ( |
) | — | |||||||||||||||||||||||||||||
Discount associated with repurchase of preferred stock |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Preferred dividends |
— | — | — | — | ( |
) | — | — | ( |
) | — | — | ||||||||||||||||||||||||||||
Stock option exercises and proceeds related thereto |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Compensatory stock issuances, net of forfeitures |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Issuance of series B preferred stock, net |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Contributions by owners of noncontrolling interests |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation costs |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Redemption and retirement of preferred shares |
( |
) | — | — | — | ( |
) | — | — | ( |
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Redemption and retirement of shares |
— | — | ( |
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Net income (loss) |
— | — | — | — | — | ( |
) | — | — | |||||||||||||||||||||||||||||||
Balance at March 31, 2023 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
Accretion of discount associated with issuance of subsidiary equity |
— | — | — | — | ( |
) | — | — | ( |
) | — | |||||||||||||||||||||||||||||
Preferred dividends |
— | — | — | — | ( |
) | — | — | ( |
) | — | — | ||||||||||||||||||||||||||||
Stock option exercises and proceeds related thereto |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Compensatory stock issuances, net of forfeitures |
— | — | ( |
) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Issuance of series B preferred stock, net |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Stock-based compensation costs |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Redemption and retirement of shares |
— | — | ( |
) | — | ( |
) | — | — | ( |
) | — | — | |||||||||||||||||||||||||||
Net income (loss) |
— | — | — | — | — | ( |
) | — | — | |||||||||||||||||||||||||||||||
Balance at June 30, 2023 |
$ | — | $ | — | $ | $ | $ | ( |
) | $ | $ | $ |
See accompanying notes.
Atlanticus Holdings Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
For the Six Months Ended June 30, |
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2024 |
2023 |
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Operating activities |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation, amortization and accretion, net |
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Provision for credit losses |
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Income from accretion of merchant fees and discount associated with receivables purchases |
( |
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Changes in fair value of loans |
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Amortization of debt issuance costs |
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Stock-based compensation costs |
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Lease liability payments |
( |
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Changes in assets and liabilities: |
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Increase in uncollected fees on earning assets |
( |
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Increase in income tax liability |
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Increase in accounts payable and accrued expenses |
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Other |
( |
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Net cash provided by operating activities |
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Investing activities |
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Proceeds from recoveries on charged off receivables |
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Investments in earning assets |
( |
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Proceeds from earning assets |
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Purchases and development of property |
( |
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Net cash used in investing activities |
( |
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Financing activities |
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Noncontrolling interests contributions |
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Noncontrolling interests distributions |
( |
) | ||||||
Proceeds from issuance of Series B preferred stock, net of issuance costs |
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Preferred stock and preferred unit dividends |
( |
) | ( |
) | ||||
Proceeds from exercise of stock options |
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Purchase and retirement of outstanding stock |
( |
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Proceeds from issuance of Senior notes, net of issuance costs |
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Proceeds from borrowings |
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Repayment of borrowings |
( |
) | ( |
) | ||||
Net cash provided by (used for) financing activities |
( |
) | ||||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
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Net increase (decrease) in cash and cash equivalents and restricted cash |
( |
) | ||||||
Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ | $ | ||||||
Supplemental cash flow information |
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Cash paid for interest |
$ | $ | ||||||
Net cash income tax payments |
$ | $ | ||||||
Accretion of discount associated with issuance of subsidiary equity |
$ | $ | ||||||
Decrease in accrued and unpaid preferred stock and preferred unit dividends |
$ | ( |
) | $ | ( |
) |
See accompanying notes.
Atlanticus Holdings Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2024 and 2023
1. | Description of Our Business |
Our accompanying condensed consolidated financial statements include the accounts of Atlanticus Holdings Corporation (the "Company") and those entities we control.
We are a purpose driven financial technology company. We are primarily focused on facilitating consumer credit through the use of our financial technology and related services. Through our subsidiaries, we provide technology and other support services to lenders who offer an array of financial products and services to consumers who may have been declined by other providers of credit. We are principally engaged in providing these 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. From time to time, we also purchase receivables portfolios from third parties. In these Notes to Condensed Consolidated Financial Statements, "receivables" or "loans" typically refer to receivables we have purchased from our bank partners or from third parties.
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 $40 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 retailers and healthcare providers, 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 who focus exclusively on consumers with higher FICO scores. Atlanticus’ underwriting process is enhanced by artificial intelligence and machine learning, enabling fast, sound decision-making when it matters most.
We also report within our CaaS segment: 1) servicing income; and 2) gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. None of these companies are publicly-traded and the carrying values of our investments in these companies are not material.
Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business. We purchase auto loans at a discount and with dealer retentions or holdbacks that provide risk protection. Also within our Auto Finance segment, we are providing certain installment lending products in addition to our traditional loans secured by automobiles.
2. | Significant Accounting Policies and Condensed Consolidated Financial Statement Components |
The following is a summary of significant accounting policies we follow in preparing our interim condensed consolidated financial statements, as well as a description of significant components of our interim condensed consolidated financial statements. The unaudited condensed financial statements furnished have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates.
Recent rules enacted by the Consumer Financial Protection Bureau ("CFPB"), which, if implemented, would limit the late fees charged to consumers in most instances, are expected to adversely impact the revenue recognized on our receivables. In order to mitigate these impacts, our bank partners have taken a number of steps, from modifying products and policies (such as further tightening the criteria used to evaluate new loans) to changing prices (including increasing interest rates and fees charged to consumers). We believe these product, policy and pricing changes will offset the negative impact of a reduced late fee. The changes will take several quarters to fully implement. These modifications could result in changes to certain estimates such as credit losses, payment rates, servicing costs, discount rates and yields earned on credit card receivables and affect the reported amount (and changes thereon) of our Loans at fair value on our condensed consolidated balance sheets and condensed consolidated statements of income.
We maintain two categories of Loans on our condensed consolidated balance sheets: those that are carried at fair value (Loans at fair value) and those that are carried at net amortized cost (Loans at amortized cost).
Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s policy is to consolidate the financial statements of entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by evaluating whether the entity is a voting interest entity or variable interest entity ("VIE") and if the accounting guidance requires consolidation. For more information on the Company's VIEs, see Note 7 "Variable Interest Entities".
Loans at fair value. Loans at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables").
Further details concerning our loans at fair value are presented within Note 6, "Fair Values of Assets and Liabilities."
Loans at amortized cost, net. Our loans at amortized cost, net, currently consist of receivables associated with our Auto Finance segment’s operations and are presented in the condensed consolidated balance sheets net of the related allowance for credit losses and deferred revenue. We purchased auto loans with outstanding principal of $
Certain of our loans at amortized cost, net, also contain components of deferred revenue related to loan discounts on the purchase of our auto finance receivables. As of June 30, 2024 and December 31, 2023, the weighted average remaining accretion period for the $
A roll-forward (in millions) of our allowance for credit losses by class of receivable is as follows:
For the Three Months Ended June 30, | 2024 | 2023 | ||||||
Allowances for credit losses: | ||||||||
Balance at beginning of period | $ | ( | ) | $ | ( | ) | ||
Provision for credit losses | ( | ) | ( | ) | ||||
Charge-offs | ||||||||
Recoveries | ( | ) | ( | ) | ||||
Balance at end of period | $ | ( | ) | $ | ( | ) |
For the Six Months Ended June 30, | 2024 | 2023 | ||||||
Allowances for credit losses: | ||||||||
Balance at beginning of period | $ | ( | ) | $ | ( | ) | ||
Provision for credit losses | ( | ) | ( | ) | ||||
Charge-offs | ||||||||
Recoveries | ( | ) | ( | ) | ||||
Balance at end of period | $ | ( | ) | $ | ( | ) |
June 30, | December 31, | |||||||
As of | 2024 | 2023 | ||||||
Allowances for credit losses: | ||||||||
Balance at end of period individually evaluated for impairment | $ | ( | ) | $ | ||||
Balance at end of period collectively evaluated for impairment | $ | ( | ) | $ | ( | ) | ||
Loans at amortized cost: | ||||||||
Loans at amortized cost | $ | $ | ||||||
Loans at amortized cost individually evaluated for impairment | $ | $ | ||||||
Loans at amortized cost collectively evaluated for impairment | $ | $ |
We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivables is performing. An aging of our delinquent loans at amortized cost (in millions) as of June 30, 2024 and December 31, 2023 is as follows:
June 30, | December 31, | |||||||
As of | 2024 | 2023 | ||||||
30-59 days past due | $ | $ | ||||||
60-89 days past due | ||||||||
90 or more days past due | ||||||||
Delinquent loans at amortized cost | ||||||||
Current loans at amortized cost | ||||||||
Total loans at amortized cost | $ | $ | ||||||
Balance of loans greater than 90-days delinquent still accruing interest and fees | $ | $ |
Loan Modifications and Restructurings
We review our Loans at amortized cost, net, associated with our Auto Finance segment’s operations to determine if any modifications for borrowers experiencing financial difficulty were made that would qualify the receivable as a Financial Difficulty Modification ("FDM"). This could include a restructuring of the loan terms to alleviate the burden of the borrower's near-term cash requirements, such as a modification of terms to reduce or defer cash payments to help the borrower attempt to improve its financial condition. For the six months ended June 30, 2024, no Loans at amortized cost qualified as a FDM.
Income Taxes
We experienced effective tax rates of
Our effective tax rates for the three and six months ended June 30, 2024 are below the statutory rate principally due to our deduction for income tax purposes of (1) amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes, and (2) a loss related to our unrecovered investment in a foreign subsidiary—such subsidiary which ceased operations in the three months ended June 30, 2024, and with respect to which we had used “permanently reinvested earnings” accounting in our condensed consolidated financial statements. Offsetting the foregoing items were (1) state and foreign income tax expense including the effects of law changes enacted in the three months ended June 30, 2024 in certain states in which we operate, (2) taxes on global intangible low-taxed income, and (3) deduction disallowance under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to compensation paid to our covered employees.
Our effective tax rates for the three and six months ended June 30, 2023 are above the statutory rate principally due to (1) state and foreign income tax expense, (2) interest accrued on uncertain tax positions, (3) taxes on global intangible low-taxed income, and (4) deduction disallowance under the Code with respect to compensation paid to our covered employees. Partially offsetting the foregoing items was our deduction for income tax purposes of amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes.
We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our condensed consolidated statements of income. We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor. Our interest expense was $
Revenue from Contracts with Customers
Revenue from contracts with customers is included in Other revenue on our condensed consolidated statements of income. Components (in thousands) of our revenue from contracts with customers are as follows:
For the Three Months Ended June 30, 2024 | CaaS | Auto Finance | Total | |||||||||
Interchange revenues, net (1) | $ | $ | $ | |||||||||
Servicing income | ||||||||||||
Service charges and other customer related fees | ||||||||||||
Total revenue from contracts with customers | $ | $ | $ |
(1) Interchange revenue is presented net of customer reward expense.
For the Six Months Ended June 30, 2024 | CaaS | Auto Finance | Total | |||||||||
Interchange revenues, net (1) | $ | $ | $ | |||||||||
Servicing income | ||||||||||||
Service charges and other customer related fees | ||||||||||||
Total revenue from contracts with customers | $ | $ | $ |
(1) Interchange revenue is presented net of customer reward expense.
For the Three Months Ended June 30, 2023 | CaaS | Auto Finance | Total | |||||||||
Interchange revenues, net (1) | $ | $ | $ | |||||||||
Servicing income | ||||||||||||
Service charges and other customer related fees | ||||||||||||
Total revenue from contracts with customers | $ | $ | $ |
(1) Interchange revenue is presented net of customer reward expense.
For the Six Months Ended June 30, 2023 | CaaS | Auto Finance | Total | |||||||||
Interchange revenues, net (1) | $ | $ | $ | |||||||||
Servicing income | ||||||||||||
Service charges and other customer related fees | ||||||||||||
Total revenue from contracts with customers | $ | $ | $ |
(1) Interchange revenue is presented net of customer reward expense.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("Topic 740"). Topic 740 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income (loss) from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). Topic 740 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This guidance should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures" ("Topic 280"). Topic 280 enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker ("CODM"), extends certain annual disclosures to interim periods and permits more than one measure of segment profit (loss) to be reported under certain conditions. The amendments are effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective adoption to all periods presented is required, and early adoption of the amendments is permitted. We are currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures.
On March 31, 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. Topic 326 eliminates the accounting guidance for troubled debt restructurings by creditors while adding disclosures for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. This guidance requires an entity to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, Topic 326 requires disclosure of current period gross write-offs by year of origination for financing receivables. The disclosures required by Topic 326 are required for receivables held at amortized cost and exclude those accounted for using fair value. The Company adopted Topic 326 on January 1, 2023. As the significant majority of the Company's receivables are held at fair value, the adoption of Topic 326 did not have a material impact on the Company's financial results and accompanying disclosures.
3. | Segment Reporting |
We operate primarily within one industry consisting of two reportable segments by which we manage our business. Our
reportable segments are: CaaS and Auto Finance.
We have no material amounts of long lived assets located outside of the U.S.
We measure the profitability of our reportable segments based on their income after allocation of specific costs and corporate overhead; however, our segment results do not reflect any charges for internal capital allocations among our segments. Overhead costs are allocated based on headcounts and other applicable measures to better align costs with the associated revenues.
Summary operating segment information (in thousands) is as follows:
Three Months Ended June 30, 2024 | CaaS | Auto Finance | Total | |||||||||
Revenue: | ||||||||||||
Consumer loans, including past due fees | $ | $ | $ | |||||||||
Fees and related income on earning assets | ||||||||||||
Other revenue | ||||||||||||
Total operating revenue | ||||||||||||
Other non-operating revenue | ||||||||||||
Total revenue | ||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ||||||
Provision for credit losses | ( | ) | ( | ) | ||||||||
Changes in fair value of loans | ( | ) | ( | ) | ||||||||
Net margin | $ | $ | $ | |||||||||
Income before income taxes | $ | $ | $ | |||||||||
Income tax expense | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Six Months Ended June 30, 2024 | CaaS | Auto Finance | Total | |||||||||
Revenue: | ||||||||||||
Consumer loans, including past due fees | $ | $ | $ | |||||||||
Fees and related income on earning assets | ||||||||||||
Other revenue | ||||||||||||
Total operating revenue | ||||||||||||
Other non-operating revenue | ||||||||||||
Total revenue | ||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ||||||
Provision for credit losses | ( | ) | ( | ) | ||||||||
Changes in fair value of loans | ( | ) | ( | ) | ||||||||
Net margin | $ | $ | $ | |||||||||
Income before income taxes | $ | $ | $ | |||||||||
Income tax expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Total assets | $ | $ | $ |
Three Months Ended June 30, 2023 | CaaS | Auto Finance |