Atlanticus Holdings Corporation Q4 FY2025 earnings call

• 2025 was transformative: completed acquisition of Mercury Financial, doubling balance sheet to ~$7 billion, adding over 1.3 million customers, deepening data, analytics, and product capabilities. • Integration of Mercury progressed well ahead of plan, phase one of portfolio management completed and performing better than modeled. • Acquired a $165 million retail credit portfolio from a competitor. • Historical business drove results in 2025: excluding Mercury, managed receivables, originations, purchase volume, and revenue all increased. • Consumers served remain stable with consistent payment performance, steady purchase activity, and stable delinquency trends. • Competitive landscape has robust solicitations, but company confident in long-term positioning due to diversified offerings, broad consumer reach, and multiple origination channels. • Long-term objectives: target long-term earnings growth of 20% or more annually with return on average equity of 20% or greater. • Team, technology, platform, capital, product offering, and marketing capability are strengths. • Integration of Mercury moderates asset growth rates but company well positioned for durable growth.

For the fourth quarter, diluted earnings per share grew 23% year over year, and for the full year, grew 25% over prior year. Return on average equity was above 20%. Excluding Mercury, managed receivables increased 37% year-over-year. New account originations increased 73% to more than 2.2 million for the year, up 56% in the fourth quarter. Purchase volume increased 54% for the quarter and 32% for the year. Revenue increased 27% for the full year and 35% in the fourth quarter. Fourth quarter total operating revenue and other income increased 107% year-over-year to $734 million. Net income attributable to common shareholders increased approximately 25% year over year to $32.8 million in the fourth quarter, or $1.75 per diluted share. Interest expense increased consistent with receivable growth and higher funding costs. Total operating expenses increased 67% year-over-year.

• Over the next five years, target long-term earnings growth of 20% or more annually while delivering returns on average equity of 20% or greater. • Integration plan was around 18 months, with realization of integration and synergy continuing into 2027 and 2028. • Anticipate fair value marks to improve over time as Mercury portfolio seasons and product policy and pricing adjustments are implemented. • Expect revenue enhancements and cost benefits from Mercury acquisition to contribute increasingly to earnings growth in 2027 and 2028.

• Forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. • Competitive landscape with robust solicitations leading to softening in response rates and marketing efficiency. • Macro factors such as gas prices and their impact on consumer behavior and portfolio performance. • Concentration risk with merchant partners, but company not concerned as it's part of a bigger portfolio and has good underwriting and counterparty risk management.

Q: Talk about integration of Mercury, where we're at, what's been achieved, what's left, and higher yields.

A: Integration of Mercury well ahead of plan. Repricing and repositioning of portfolio effective December, with risk segment by segment actions. System of record integration to be undertaken later this year. Entire integration plan around 18 months, realization of synergy continuing into 2027 and 2028. Newer balances take time to replace older protected balances for yield realization.

Q: Funding structure of Atlanticus.

A: Diversified funding sources including banks, life insurance companies, sovereign wealth funds, private credit. Routinely access securitization market with no deterioration in spreads. Have almost a billion dollars of committed and undrawn bank warehouse lines. Studying possibility of becoming a bank.

Q: Thoughts on tax refund season and implications to portfolio and receivables growth.

A: Expect robust tax season, consumers will pay down with tax dollars and re-borrow. Portfolio positioned well, tax season in line with expectations.

Q: Customer concentration, relationship with largest partner, managing concentration risk.

A: Have thousands of merchant partners, integration with them is technology driven. Relationship has scaled, not a concern as part of bigger portfolio with good underwriting and counterparty risk.

Q: Macro side, oil prices and impact on consumers.

A: Watching oil prices closely, will react to change in consumer behavior. Similar to 2022, have toolbox and experience to respond. Price assets for through the cycle performance.

Q: Fair value mark, mix versus other impacts.

A: Mark down due to Mercury portfolio being different asset and conservative underwriting of newer receivables. Anticipate fair value mark improving as Mercury book improves and origination tempo advances.

Q: Integration costs and revenue, new dollar savings from system of record integration, yield increase from repricing.

A: Don't disclose specific synergies, anticipated $2 to $4 a share accretion in 2027. Impact of repricing varies by risk spectrum.

Q: Tuck-in acquisition of VIVE portfolio, how Atlanticus will improve economics.

A: Bought it properly for better yield, lower servicing costs, and more organic originations through inherited partnerships.