Atlanticus (NASDAQ:ATLC) Issues Earnings Results, Beats Expectations By $1.88 EPS

Key Points

• Atlanticus reported $4.87 in quarterly EPS, beating the $2.99 consensus by $1.88; the figure included $1.87 in one-time transaction gains. Adjusted diluted EPS was $3, and adjusted return on average equity reached 30%, above the company’s 20% goal.
• Growth remained strong: managed receivables rose 8% year over year to $7.1 billion, while management estimated top-line growth of nearly 20% excluding the Mercury acquisition. Credit performance improved slightly, with the net charge-off ratio easing to 17.3% from 17.7% in the prior quarter.
• Management expects customer acquisition costs to continue rising and delinquencies to increase marginally as the business reaches more consumers. Atlanticus also sold its auto finance operations and Mercury-related intellectual property, planning to invest the proceeds in higher-growth, higher-return businesses.

Atlanticus (NASDAQ:ATLC - Get Free Report) posted its earnings results on Thursday. The credit services provider reported $4.87 earnings per share for the quarter, beating analysts' consensus estimates of $2.99 by $1.88, FiscalAI reports. Atlanticus had a net margin of 5.80% and a return on equity of 25.17%. The business had revenue of $775.85 million for the quarter, compared to analysts' expectations of $775.08 million.

Here are the key takeaways from Atlanticus' conference call:

• Atlanticus reported record operating results, with adjusted diluted EPS of $3 and adjusted return on average equity of 30%, above its 20% goal. Reported diluted EPS was $4.87, including $1.87 from one-time transaction-related gains.
• Growth remained strong beyond Mercury: management estimated top-line growth of nearly 20% excluding the acquisition. Managed receivables rose 8% year over year to $7.1 billion, supported by record originations and growth in both retail and general-purpose credit.
• Credit performance was stable, with the combined principal net charge-off ratio easing to 17.3% from 17.7% in the prior quarter. Management said Mercury’s back book and new originations were performing better than modeled.
• Management expects portfolio-wide customer acquisition costs to keep rising, citing greater spending on higher-cost channels and a growing share of general-purpose credit. It also expects delinquencies to increase marginally as partner offerings reach a broader range of consumers.
• The company sold its CAR auto finance operations for about $71.2 million and the Mercury word mark and related intellectual property for $27.5 million. Management said it plans to direct the proceeds toward higher-growth, higher-return businesses; the Mercury credit card portfolio was not part of the IP sale and will be rebranded over time.

Atlanticus Price Performance

ATLC stock traded down $3.30 during midday trading on Thursday, reaching $96.45. 151,913 shares of the company's stock traded hands, compared to its average volume of 98,907. The company has a 50-day simple moving average of $92.32 and a two-hundred day simple moving average of $80.93. Atlanticus has a 1-year low of $47.50 and a 1-year high of $114.34. The company has a market cap of $1.46 billion, a price-to-earnings ratio of 12.54 and a beta of 1.80. The company has a quick ratio of 1.26, a current ratio of 1.26 and a debt-to-equity ratio of 0.99.

Analyst Ratings Changes

A number of research firms have weighed in on ATLC. Citigroup reaffirmed an "outperform" rating on shares of Atlanticus in a report on Thursday, July 16th. Wall Street Zen raised Atlanticus from a "buy" rating to a "strong-buy" rating in a report on Sunday, October 11th. Weiss Ratings reissued a "hold (c)" rating on shares of Atlanticus in a report on Tuesday, September 8th. Zacks Research downgraded Atlanticus from a "strong-buy" rating to a "hold" rating in a research report on Monday, July 13th. Finally, Texas Capital upgraded Atlanticus from a "hold" rating to a "strong-buy" rating in a research report on Monday, July 13th. One investment analyst has rated the stock with a Strong Buy rating, five have assigned a Buy rating and two have assigned a Hold rating to the company. According to MarketBeat, Atlanticus currently has a consensus rating of "Moderate Buy" and an average target price of $129.00.

About Atlanticus

Atlanticus Holdings Corporation is a financial technology and services company that provides credit and related financial products to consumers, primarily in the United States. Through its subsidiaries, the company focuses on serving consumers who may have limited access to traditional forms of credit.

Atlanticus operates businesses offering private-label and general-purpose credit products, including credit cards and installment loans. Its offerings are distributed through direct-to-consumer channels and partnerships with merchants, giving consumers access to financing for purchases and other personal needs.

The company also operates an auto finance business that provides vehicle-related lending solutions.

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