ATLANTICUS HOLDI(ATLCP) - 2025 Q3 - Quarterly Report

Acquisition and Expansion - Atlanticus acquired Mercury for approximately $166.5 million in cash, adding 1.3 million credit card accounts and $3.2 billion in credit card receivables[187][188] - The acquisition of Mercury aligns with Atlanticus's strategic objective to expand consumer credit offerings and increase scale within credit card operations[187] - The contingent consideration from the Mercury acquisition may result in earn-out payments based on charge-off performance over three years[188] - The acquisition of Mercury added approximately $3,159.9 million in general purpose credit card receivables to the company's portfolio[236] - The company expects continued growth in the acquisition of general purpose credit card receivables throughout 2025, aided by the Mercury acquisition[259] Financial Performance - Total operating revenue and other income for the three months ended September 30, 2025, was $495,292,000, an increase of $144,338,000 (approximately 41%) from $350,954,000 in 2024[202] - Total operating revenue and other income for the nine months ended September 30, 2025, reached $1,233,985,000, up by $277,216,000 (approximately 29%) from $956,769,000 in 2024[202] - Net income for the three months ended September 30, 2025, was $24,588,000, a decrease of $4,601,000 (approximately 15.7%) from $29,189,000 in 2024[202] - Total operating expenses for the three months ended September 30, 2025, were $108,333,000, an increase of $45,259,000 (approximately 71.6%) from $63,074,000 in 2024[202] - The company generated $371.7 million in cash flows from operations for the nine months ended September 30, 2025, an increase from $346.8 million in the same period of 2024[287] Receivables and Credit Quality - Private label credit and general purpose credit card receivables increased to $6,600.1 million as of September 30, 2025, from $2,653.8 million as of September 30, 2024, with the acquisition of Mercury contributing $3,159.9 million[205] - The total number of accounts increased by over 2.1 million as of September 30, 2025, including approximately 1.3 million accounts added from the Mercury acquisition[219] - The Expected net principal credit loss rate has decreased due to a higher number of private label credit accounts acquired with limited loss exposure[217] - The percentage of managed receivables 90 or more days past due was 5.7% as of September 30, 2025, down from 6.9% in the previous year, indicating better delinquency management[243] - The combined principal net charge-off ratio, annualized, was 4.4% for the third quarter of 2025, compared to 4.1% in the second quarter of 2025, indicating a return to historically normalized levels[263] Interest and Expenses - Interest expense increased by $33,000,000 (approximately 77.7%) for the three months ended September 30, 2025, compared to the same period in 2024, totaling $75,464,000[210] - The interest expense ratio for Q2 2025 was 6.2%, a decrease from 7.4% in Q2 2024, suggesting improved cost management[243] - The interest expense ratio, annualized, has increased due to rising federal funds borrowing rates and is expected to continue increasing throughout 2025[256] - The company anticipates additional debt financing in the coming quarters, with outstanding notes payable increasing to $5,297.3 million as of September 30, 2025, from $1,976.8 million in 2024[210] Strategic Initiatives - The company plans to expand its retail partnerships to enhance private label credit operations and increase marketing investments for general purpose credit card operations[207] - The company continues to evaluate bulk purchases of receivables, although timing and size remain difficult to predict[265] - The company expects to continue raising additional capital to fund investments in credit card receivables and potential acquisitions[288] Risks and Forward-Looking Statements - Forward-looking statements include expectations regarding revenue, income ratios, and credit quality, which are subject to substantial risks and uncertainties[299] - The company faces risks such as economic conditions affecting interest rates and consumer confidence, which could impact revenue and charge-offs[300] - The company has identified integration risk associated with the recent acquisition of Mercury as a potential challenge[300] - The company does not have an obligation to update forward-looking statements except as required by law[302]