Atlanticus Holdings Corporation Q1 FY2026 earnings call

• 2026 started well with strong legacy asset performance and momentum from Mercury acquisition. Integration of Mercury continues well, ahead of plan. Legacy portfolios grew with 35% managed receivables growth excluding Mercury. Favorable asset-level performance with stable payment behavior, steady purchase activity, and good performance of newer customer cohorts. Confident in portfolio performance and unit level return targets. Competitive landscape in general purpose card with elevated solicitation levels but opportunities due to differentiated analytics, multiple product offerings, and omnichannel origination capabilities. Excited about building on enhancements and serving broader customer base.

Total operating revenue and other income increased 97% year-over-year to $680 million, including $224 million from the Mercury portfolio. Managed receivables growth excluding mercury was 35%. Net income attributable to common shareholders was $41.9 million, or $2.23 per diluted share, up 50% year-over-year and 27% sequentially. Return on average equity was 26.8%. Interest expense increased 158% year-over-year to $123 million. Total operating expenses increased 69% year-over-year to $131 million. Ended the quarter with total assets of $7.5 billion and total equity of $644 million, along with $650 million of unrestricted cash.

• Believe the business is better positioned than ever. Focus on optimizing Mercury portfolio, driving disciplined growth, and maintaining stable credit performance. Expect to deliver earnings growth and returns on equity at or above 20% targets. Feel good about guidance provided for 2026 and 2027 within the range, with ongoing opportunities to optimize the Mercury portfolio and continue portfolio management activities.

• Macro uncertainty persists, including concern regarding recent increases in gas prices. Risk associated with inflation and continued rise in gas prices. Certain risks and uncertainties could cause actual results to differ materially from forward-looking statements. Need to review earnings release and risk factors in SEC filings.

Q: How do you define ahead of plan in the Mercury deal, especially on originations and integration?

A: Change in terms executed more quickly with better adoption and response from consumers than modeled. More rapid realization of operating synergies and leveraging combined infrastructure ahead of schedule. Conservative in acquisition model and origination perspective, but able to put capital to work for new originations.

Q: Where is the $13 million contingency release in the P&L?

A: In the fair value mark.

Q: Relative competition comments, about managed receivables growth and retail credit?

A: Competition increased but rationalized. Seeing good, stable performance. Taking share in retail credit, including buying a portfolio from another competitor and growing share with existing merchant partners.

Q: Mercury acquisition update, where are we in the guidance path and integration?

A: Feel good about guidance, progression towards achievement within range. Ongoing opportunities to optimize Mercury portfolio and ongoing operational integration with technology work still needed.

Q: Lower response rates, other ways to look at it?

A: Indicative of stability as not seeing unusual demand for credit, consumer adjusting to headwinds like gas prices.

Q: Tax refunds impact on growth and delinquency?

A: Tax benefit leans into April, saw better tax season in deeper subprime and longer tax season in near prime, but coming out of tax season looks like last year