Atlanticus Holdings Corporation 7.625% Series B Cumulative Perpetual Preferred Stock

Company Overview

Business Model: Atlanticus Holdings Corporation is a financial technology company focused on providing inclusive financial solutions to underserved consumers in the U.S. The Company leverages data, analytics, and proprietary technology, including machine learning, to power instant credit decisioning platforms for its bank partners. These bank partners (The Bank of Missouri, WebBank, and First Bank and Trust) originate private label and general purpose credit card products through various channels, including retail and healthcare point-of-sale, direct mail, digital marketing, and third-party partnerships. Atlanticus acts as a program manager, acquiring the receivables generated by these products for the principal amount of the loan and earning merchant fees from retail partners for certain receivables. The Company also compensates its bank partners monthly for regulatory oversight and ongoing account servicing, including payment processing, customer service, and fraud claims.

Market Position: Atlanticus targets the segment of "Everyday Americans" with FICO® scores below 700, a population estimated at over 100 million, whose financial needs are often unmet by larger financial institutions. The Company aims to empower better financial outcomes by facilitating appropriately priced consumer credit. The acquisition of Mercury Financial LLC in September 2025 added an established top 25 credit card program to Atlanticus’ portfolio, expanding its scale in credit card operations. The Company benefits from a seasoned management team with an average tenure of over 16 years, providing experience across macroeconomic cycles.

Recent Strategic Developments:

• Acquisition of Mercury Financial LLC: On September 11, 2025, Atlanticus acquired all outstanding equity interests of Mercury Financial LLC, a data- and tech-centric credit card platform for near-prime consumers. The acquisition, valued at approximately $166.5 million in cash, added approximately $3.2 billion in gross credit card receivables and 1.3 million customers. Mercury’s offerings, including Mercury-branded and co-branded programs, complement Atlanticus’ existing general purpose credit card, retail credit, patient financing, and dealer solutions products. Atlanticus is implementing product, policy, and pricing changes to the Mercury portfolio, expecting increased yield and revenue contributions in 2026 and beyond.
• Investment in Consumer Technology Platforms: Atlanticus engages in testing and limited investment in consumer technology platforms. Notably, one such investment, Fintiv Inc., which has approximately 150 patents related to secure money transfer, has sued Apple, Inc. and Walmart, Inc. for patent infringement, with claimed losses potentially in the billions of dollars. Atlanticus believes it will own over 10% of Fintiv Inc. on a diluted basis.

Geographic Footprint: Atlanticus’ operations and all revenue generation are exclusively within the U.S. The Company is headquartered in Atlanta, Georgia. Its Auto Finance segment, operating through its CAR subsidiary, serves over 700 dealers across 33 states and two U.S. territories. The Mercury acquisition added leased office spaces in Wilmington, Delaware, and Austin, Texas.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin: 8.1% (2025) vs. 10.6% (2024)
• Net Margin: 6.1% (2025) vs. 8.4% (2024)

Investment in Growth:

• Capital Expenditures: $5.0 million (2025) vs. $1.8 million (2024)
• Strategic Investments: The acquisition of Mercury Financial LLC for approximately $166.5 million in cash, which added $3.2 billion in gross credit card receivables.

Business Segment Analysis

Credit as a Service (CaaS)

Financial Performance:

• Revenue: $1,928.7 million (+52.0% YoY)
• Operating Margin: 7.7%
• Key Growth Drivers: The segment experienced significant growth in private label credit and general purpose credit card receivables, which increased to $6,953.4 million as of December 31, 2025, from $2,724.8 million as of December 31, 2024. This growth was substantially driven by the Mercury Financial LLC acquisition, which contributed $3.2 billion in receivables and $309.0 million to total operating revenue and other income in 2025. Excluding Mercury, receivables were $3,739.4 million. Growth was also supported by an increase of over 1.0 million active customer accounts (excluding Mercury) and a $52.8 million increase in merchant fees from new private label receivable acquisitions. General purpose credit card finance and fee income increased by $558.2 million in 2025 compared to 2024.

Product Portfolio:

• Private Label Credit Cards: Offered under Fortiva and Curae brand names, as well as merchant-associated brands. Curae is used for healthcare financing, while Fortiva and retail partners’ brands are used for other retail partnerships (e.g., consumer electronics, furniture, elective medical procedures, home-improvement).
• General Purpose Credit Cards: Offered under Aspire, Imagine, Mercury, and Fortiva brand names.
• Services: Provides loan servicing, risk management, and customer service outsourcing for third parties.

Market Dynamics:

• The segment primarily serves consumers with FICO scores below 700.
• Customer concentration exists, with the top five retail partners accounting for 85% of private label credit receivables as of December 31, 2025.
• Texas is the only state with a receivables concentration exceeding 10% of the total pool.

Sub-segment Breakdown:

• Private Label Credit:
  • Period-end managed receivables: $1,856.8 million (Dec 31, 2025) (+50.8% YoY)
  • Average APR: 9.6% (Dec 31, 2025)
  • Receivables purchased during Q4 2025: $414.0 million
  • 90 or more days past due: $74.9 million (Dec 31, 2025)
• General Purpose Credit Card:
  • Period-end managed receivables: $5,096.6 million (Dec 31, 2025) (+241.4% YoY)
  • Average APR: 28.2% (Dec 31, 2025)
  • Receivables purchased during Q4 2025: $1,348.0 million
  • 90 or more days past due: $370.5 million (Dec 31, 2025)

Auto Finance

Financial Performance:

• Revenue: $39.7 million (-3.7% YoY)
• Operating Margin: 27.3%
• Key Growth Drivers: The CAR subsidiary purchases and/or services auto-secured loans and provides floor-plan financing for a network of independent automotive dealers and finance companies in the buy-here, pay-here used car business. Revenues are generated from interest on purchased loans and accretion of discounts. The segment also earns fees from servicing loans for dealers and providing back-up servicing for third parties. Modest growth in managed receivables is expected for 2026 as CAR rebuilds its receivables base and expands its service area.

Product Portfolio:

• Auto Loans: Purchases and services loans secured by automobiles.
• Floor-plan Financing: Provides financing for auto inventory to pre-qualified independent automotive dealers and automotive finance companies.
• Installment Lending Products: Offers certain installment lending products in addition to traditional auto-secured loans.

Market Dynamics:

• Serves over 700 dealers in 33 states and two U.S. territories as of December 31, 2025.
• The segment operates profitably and generates positive cash flows.
• Faces strong competition from other specialty finance lenders and indirect competition from franchise dealerships.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Atlanticus repurchased $19.6 million of common stock (363,380 shares) in 2025 and $2.2 million (79,354 shares) in 2024. No Series B preferred stock was repurchased in either year.
• Dividend Payments: Paid $2.4 million in Series A preferred stock dividends and $6.6 million in Series B preferred stock dividends in 2025. Class B preferred unit dividends totaled $1.4 million in 2025 before the units were redeemed in March 2025.
• Future Capital Return Commitments: The Board of Directors has authorized repurchases of up to 2,000,000 shares of common stock and 500,000 shares of Series B preferred stock through June 30, 2026.

Balance Sheet Position:

• Cash and Equivalents: $621.1 million (unrestricted) and $146.3 million (restricted) as of December 31, 2025.
• Total Debt: $6,517.3 million as of December 31, 2025, comprising $5,818.8 million in notes payable (net) and $698.6 million in senior notes (net).
• Net Cash Position: $(5,749.9) million as of December 31, 2025.
• Debt Maturity Profile: Total refinancing needs are $534.9 million, with $215.6 million due within 12 months and $319.2 million in excess of 12 months. Key maturities include $829.1 million in 2026, $2,010.4 million in 2027, $1,411.9 million in 2028, $1,419.9 million in 2029, and $893.1 million in 2030.

Cash Flow Generation:

• Operating Cash Flow: $638.0 million (2025) vs. $469.4 million (2024).

Operational Excellence

Production & Service Model: Atlanticus operates as a financial technology company, leveraging its proprietary predictive analytics and machine learning-enhanced decisioning platform to enable bank partners to make instant credit decisions. The Company provides comprehensive loan servicing, including risk management and customer service outsourcing, for the receivables it acquires. For its Auto Finance segment, the CAR subsidiary purchases and services auto loans and provides floor-plan financing, managing credit quality and loss mitigation at the dealer portfolio level.

Supply Chain Architecture:

• Key Suppliers & Partners:
  • Bank Partners: The Bank of Missouri, WebBank, and First Bank and Trust originate all private label and general purpose card products and provide regulatory oversight.
  • Retail Partners: Collaborates with retail and healthcare partners for private label credit offerings, with the top five partners accounting for 85% of private label credit receivables.
  • Automotive Dealers & Finance Companies: A pre-qualified network of over 700 independent dealers and finance companies for the Auto Finance segment.
  • Third-Party Service Providers: Utilizes third-party collectors for CaaS segment and reputable repossession firms for Auto Finance.
• Facility Network:
  • Headquarters: Atlanta, Georgia (99,257 sq ft leased office space).
  • Auto Finance: Lake Mary, Florida (2,670 sq ft leased office space) with additional offices and branch locations in various states and territories.
  • Acquired Offices: Wilmington, Delaware, and Austin, Texas (approximately 30,000 sq ft combined) from the Mercury acquisition.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Distribution Channels: Atlanticus supports its bank partners in originating accounts through direct mail solicitation, digital marketing, and partnerships with third parties. For private label credit, financing offers are presented through retail point-of-sale locations, online transactions, or in-home sales.
• Customer Portfolio:
  • Enterprise Customers: Key relationships include its bank partners and a concentrated base of retail partners, with the top five accounting for 85% of private label credit receivables.
  • Customer Concentration: Receivables are spread across individual consumers in the U.S., with only Texas having a concentration exceeding 10% of the total pool as of December 31, 2025.

Geographic Revenue Distribution: All revenue is generated within the U.S.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The financial services industry is characterized by rapid technological change and constant innovation, particularly in digital payments and consumer loans. Atlanticus operates in a broad and competitive consumer lending market, facing intensity that varies with economic and liquidity cycles. Economic slowdowns, recessions, and rising inflation rates typically increase credit losses and impact consumer spending and borrowing capacity.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Atlanticus faces substantial competition from a diverse range of entities, including:

• Legacy Payment & Consumer Loan Providers: Credit and debit card issuers (including large banks).
• Financial Technology & Payment Companies: Technology solutions providers, mobile wallets (e.g., Apple, PayPal), and pay-over-time solutions providers (e.g., Block, Klarna).
• Auto Finance Sector: A handful of national and regional specialty finance lenders, numerous smaller regional private companies, and individual dealers with direct access to capital.

Emerging Competitive Threats: The industry's rapid technological advancements, including in artificial intelligence and agentic artificial intelligence, pose threats from new entrants and large financial incumbents innovating their services. Superior AI models or products developed by competitors could adversely affect Atlanticus’ market position.

Competitive Response Strategy: Atlanticus aims to maintain competitiveness by providing its bank partners with a comprehensive suite of products, continuously refining account management activities through adaptive control systems, and routinely testing new collection tools. The Company anticipates further investments in large language models to enhance customer service and collections.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic Conditions: Economic slowdowns, recessions, or rapidly rising inflation rates can increase delinquencies and credit losses. Higher interest rates can reduce consumer spending and borrowing, leading to increased payment obligations, defaults, and charge-offs.
• Technology Disruption: Failure to anticipate or respond to rapid technological developments, including superior AI models from competitors, could negatively impact profitability.
• Customer Concentration: Reliance on a few large retail partners (top five account for 85% of private label credit receivables) poses a risk if a significant partner reduces or terminates its relationship.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Substantial dependence on borrowed funds from financing facilities and reliance on relationships with bank partners and auto dealers for loan origination. Disruption or termination of these outsourcing relationships could harm the business.

Financial & Regulatory Risks

Market & Financial Risks:

• Funding Dependence: Substantial reliance on borrowed funds through finite-duration financing facilities, which require extension or replacement and contain financial covenants. Disruptions in capital markets could limit access to funding and growth.
• Indebtedness: Existing and future indebtedness levels could adversely affect financial health, ability to obtain future financing, and flexibility to react to business changes.
• Accounting Estimates: Significant portions of reported income are based on management’s estimates of future receivable performance (e.g., credit losses, payment rates, servicing costs, discount rates, yields), which, if incorrect, could lead to material write-downs and fluctuations in net income.
• Allowance for Credit Losses: The allowance for credit losses, based on objective and subjective factors, may not be adequate to absorb all credit losses, potentially impacting financial results.

Regulatory & Compliance Risks:

• Heavy Regulation: Operations are heavily regulated by federal and state consumer protection laws (e.g., CARD Act, Dodd-Frank, TILA, FTC Act, Gramm-Leach-Bliley Act). Changes in laws or interpretations, or enforcement actions by regulators (e.g., FDIC, CFPB, FTC), could require changes to business practices, product terms, or marketing, potentially leading to fines, restitution, or litigation.
• "True Lender" Risk: Evolving case law on "true lender" could re-characterize loans originated by bank partners as loans made by Atlanticus, potentially subjecting the Company to state usury limits, licensing requirements, and substantial penalties.
• Interest Rate Caps: Proposed legislation and presidential administration proposals to cap credit card interest rates (e.g., at 10%) could significantly lower or eliminate profitability.
• Data Privacy: Compliance with evolving data privacy laws (e.g., Gramm-Leach-Bliley Act, CCPA, CPRA) could increase compliance and technology costs, and non-compliance could result in significant fines and penalties.
• Cybersecurity: Security breaches involving IT networks and systems could lead to unauthorized disclosure of confidential information, costly litigation, civil/criminal penalties, and reputational damage.

Geopolitical & External Risks

Geopolitical Exposure: Unfavorable economic and political conditions, including geopolitical turmoil and foreign hostilities, energy disruptions, inflation, disease, and pandemics, could increase funding costs and limit capital market access.

Innovation & Technology Leadership

Research & Development Focus:

• Core Technology Areas: Atlanticus focuses on leveraging data, analytics, and innovative technology, including proprietary predictive analytics and machine learning, to enhance its credit decisioning platform.
• Innovation Pipeline: The Company anticipates further investments in large language models to refine its customer service and collections approach, continually testing and evaluating new tools to improve efficiency and service.

Intellectual Property Portfolio:

• Patent Strategy: Atlanticus has investments in companies with significant IP, such as Fintiv Inc., which holds approximately 150 patents related to secure money transfer on computer and mobile devices.
• IP Litigation: Fintiv Inc. is currently engaged in patent infringement litigation against Apple, Inc. and Walmart, Inc., with potential claimed losses in the billions of dollars.

Technology Partnerships: Atlanticus’ flexible technology solutions enable seamless integration with the existing infrastructure of its bank partners and participating retailers, healthcare providers, and other service providers.

Leadership & Governance

Executive Leadership Team

Information regarding the Executive Leadership Team is incorporated by reference from Atlanticus Holdings Corporation's Proxy Statement for its 2026 Annual Meeting of Shareholders. The Company's management team members, on average, possess over 16 years of tenure, providing extensive experience across macroeconomic cycles.

Board Composition: Information regarding Board Composition is incorporated by reference from Atlanticus Holdings Corporation's Proxy Statement for its 2026 Annual Meeting of Shareholders.

Human Capital Strategy

Workforce Composition:

• Total Employees: As of December 31, 2025, Atlanticus had 576 employees.
• Geographic Distribution: All employees are based in the U.S.

Talent Management:

• Acquisition & Retention: Atlanticus emphasizes attracting, developing, and retaining top talent by offering career growth opportunities, fair compensation, benefits, and health and wellness programs.
• Development Programs: The Company maintains a 401(k) plan with matching contributions for U.S. employees and an Employee Stock Purchase Plan (ESPP) allowing employees to purchase common stock at a discount.

Environmental & Social Impact

Environmental Commitments:

• Climate Strategy: Atlanticus acknowledges that climate change and related regulatory responses may impact its business, primarily through increased energy costs affecting consumers' ability to incur and repay debt. No specific emissions targets or carbon neutrality commitments are disclosed.

Social Impact Initiatives: Atlanticus is a purpose-driven company focused on powering more inclusive financial solutions for "Everyday Americans," aiming to unlock access to financial solutions for the underserved and empower better financial outcomes.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Private label credit receivables typically experience strongest growth in the second and third quarters, with seasonal contraction in other quarters. Delinquency rates are historically lower in the second quarter due to tax refunds.
• Economic Sensitivity: The Company's financial performance is sensitive to general economic conditions, with economic slowdowns and rising interest rates increasing credit losses and impacting consumer repayment ability.
• Industry Cycles: Competition intensity in the financial services industry varies with economic and liquidity cycles.

Planning & Forecasting: Atlanticus continually assesses and adjusts its collection strategies, leveraging new technologies and anticipating further investments in large language models to refine its customer-centric approach.

Regulatory Environment & Compliance

Regulatory Framework: Atlanticus operates in a heavily regulated industry, subject to various federal and state consumer protection laws, including the CARD Act, Dodd-Frank, TILA, Equal Credit Opportunity Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, FTC Act, Gramm-Leach-Bliley Act, and Telemarketing and Consumer Fraud and Abuse Prevention Act. The Company and its bank partners face scrutiny due to serving customers at the lower end of the credit score range, which entails higher credit risk and associated interest/fees. The regulatory landscape is dynamic, with ongoing changes in rules, interpretations, and potential enforcement actions.

Legal Proceedings: Atlanticus is involved in various legal proceedings incidental to its business, none of which are currently expected to be material. However, an investment in Fintiv Inc., in which Atlanticus expects to own over 10% on a diluted basis, is involved in patent infringement litigation against Apple, Inc. and Walmart, Inc., with claimed losses potentially in the billions of dollars.

Tax Strategy & Considerations

Tax Profile: Atlanticus reported an effective income tax rate of 24.2% in 2025, up from 20.4% in 2024. The 2025 rate was above the statutory rate primarily due to state income taxes (including law changes) and taxes on global intangible low-taxed income, partially offset by deductions from stock option exercises and preferred stock dividends treated as deductible interest.

Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, introduced significant changes to U.S. federal and international tax provisions, but these did not result in material changes to Atlanticus’ reported effective income tax rates for 2025 and 2024.

Insurance & Risk Transfer

Risk Management Framework: Atlanticus employs various strategies to mitigate risks. Credit risk is minimized through robust underwriting, fraud detection, and extensive experience in customer service and collections. Interest rate risk is mitigated by minimizing floating-rate debt, with the majority of debt facilities bearing fixed interest rates. For the Auto Finance segment, credit quality and loss mitigation are managed at the dealer portfolio level through dealer-specific loss reserve accounts and diversification among multiple dealers. Counterparty risk is addressed by maintaining sufficient borrowing capacity with a variety of well-established counterparties.