What Atlanticus (ATLC) Said on Its Q3 Earnings Call

Key Points

• Record results were boosted by asset-sale gains: Atlanticus reported $93 million in net income, or $4.87 per diluted share; excluding $1.87 per share from one-time transaction gains, adjusted earnings were $3 per share and adjusted return on equity was 30%.
• Core consumer-credit growth remained strong: Revenue rose 60% to $776 million, while managed receivables reached $7.1 billion. Management estimated organic top-line growth, excluding Mercury, in the high teens to low 20% range.
• Asset sales will fund a strategic shift: Atlanticus sold its auto finance operations and Mercury intellectual property, planning to reinvest the proceeds in higher-growth, higher-return credit businesses. Credit was stable, though management expects delinquencies to rise marginally.

Atlanticus NASDAQ: ATLC reported record third-quarter operating performance, with earnings boosted by gains from the sale of its auto finance operations and Mercury intellectual property. Management said it plans to direct the proceeds toward higher-return consumer credit businesses.

Net income attributable to common shareholders was $93 million, or $4.87 per diluted share, up 300% from a year earlier, Chief Financial Officer Bill McCamey said. The per-share result included $1.87 from one-time items associated with the two transactions. Excluding those items, adjusted diluted earnings were $3 per share, and adjusted return on average equity was 30%, above the company’s 20% return goal.

Total operating revenue and other income rose 60% to $776 million for the quarter ended Sept. 30, 2026. The increase reflected growth in general-purpose and private-label receivables and a $205 million contribution from Mercury, McCamey said.

Mercury and Organic Growth Lift Results

President and CEO Jeff Howard said Atlanticus set records for managed receivables, account originations on behalf of bank partners, customers served, purchase activity, revenue and profitability. Managed receivables ended the quarter at $7.1 billion, up 8% from a year earlier and 3.4% sequentially.

Howard estimated that top-line growth excluding Mercury was in the high teens to low 20% range. He attributed retail credit growth to increased business with strategic partners, while investment in digital marketing channels and channel-specific models helped drive growth in general-purpose credit cards.

Atlanticus acquired Mercury near the end of the third quarter of the prior year, affecting comparisons. McCamey said quarter-end measures reflected the full Mercury portfolio at both reporting dates, while quarter-long measures such as revenue and charge-offs included Mercury for only part of the prior-year quarter.

Howard said the acquired portfolio and new originations continued to perform better than modeled. He also said the company’s higher originations were not the result of risk expansion, adding that unit-level profitability guides its growth decisions.

Asset Sales Support Strategic Shift

Atlanticus sold its CAR auto finance operations to an unaffiliated buyer for approximately $71.2 million in total consideration, producing a gain of about $20 million. McCamey said CAR comprised the company’s entire auto finance segment and will be reported as discontinued operations going forward.

The company also sold the Mercury word mark and related intellectual property for $27.5 million in cash. The sale did not include credit card receivables associated with the Mercury-branded program. Atlanticus can continue using the brand for marketing for 12 months and for servicing for an additional five years, allowing time for a rebranding, Howard said.

Management plans to invest the proceeds from both transactions in higher-growth, higher-return lines of business.

Credit Stable, but Delinquencies Could Rise

The combined principal net charge-off ratio declined to 17.3% from 17.7% in the preceding quarter. McCamey said credit remained stable quarter over quarter, though he expects delinquency ratios to increase marginally as bank partners’ offerings shift toward a broader range of consumers.

Howard said consumers reached through digital channels tend to have higher delinquencies but also higher yields and returns. He described those customers as an attractive investment opportunity and said Atlanticus continues to adjust its models while seeking returns at or above target levels.

Howard said the customers Atlanticus serves remain resilient despite inflation, volatile gas prices and economic uncertainty. He added that the company continues to monitor portfolio and customer data and can adjust underwriting when necessary.

Expenses Rise With Larger Platform

Interest expense increased to $118 million from $75 million a year earlier, reflecting a larger receivables base and its financing. Operating expenses rose to $162 million from $103 million as servicing and marketing activity increased and the platform expanded. McCamey said revenue growth outpaced expense growth and the operating expense ratio improved modestly.

Howard said portfolio-wide customer acquisition costs are more likely than not to continue rising as general-purpose credit cards, which have higher acquisition costs than some other businesses, grow more quickly. He also noted heightened but rational competition in direct mail.

At quarter end, Atlanticus reported $7.8 billion in total assets, $808 million in total equity and $736 million in cash and restricted cash. Howard said the company now serves almost 7 million Americans.

About Atlanticus (NASDAQ:ATLC)

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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