Q1 2026 Atlanticus Holdings Corp Earnings Call

May 7, 2026

Speaker #1: Hello, and welcome to Atlanticus First Quarter 2026 earnings conference call. At this time, all participants on and listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Operator: Hello, and welcome to Atlanticus's Q1 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Dan Mauch. Please go ahead.

Operator: Hello, and welcome to Atlanticus's Q1 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the conference over to Dan Mauch. Please go ahead.

Speaker #1: To ask the question during the session, you will need to press Start 11 on your telephone. You will then hear an automated message advising you hand is raised.

Speaker #1: To withdraw your question, please press Start 11 again. I would now like to hand the conference over to Dan Mount. Please go ahead.

Speaker #2: Thank you, Operator, and good afternoon, everyone. Atlanticus released results for the first quarter ended March 31, 2026, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at investors.atlanticus.com.

Dan Mauch: Thank you, operator, and good afternoon, everyone. Atlanticus's released results for Q1 ended 31 March 2026 this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the investor relations section of our website at investors.atlanticus.com. We have also posted an updated investor presentation. With me on today's call are Jeff Howard, President and Chief Executive Officer, and Bill McCamey, Chief Financial Officer. This call is being webcast and will be archived on the investor relations section of our website. Today's discussion may contain forward-looking statements that reflect the company's current views with respect to, among other things, earnings growth, returns on equity, portfolio performance, the benefits of the acquisition of Mercury, including expected synergies and future financial and operating results.

Dan Mauch: Thank you, operator, and good afternoon, everyone. Atlanticus's released results for Q1 ended 31st March 2026 this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the investor relations section of our website at investors.atlanticus.com. We have also posted an updated investor presentation. With me on today's call are Jeff Howard, President and Chief Executive Officer, and Bill McCamey, Chief Financial Officer. This call is being webcast and will be archived on the investor relations section of our website. Today's discussion may contain forward-looking statements that reflect the company's current views with respect to, among other things, earnings growth, returns on equity, portfolio performance, the benefits of the acquisition of Mercury, including expected synergies and future financial and operating results.

Speaker #2: We have also posted an updated investor presentation. With me on today's call are Jeff Howard, President and Chief Executive Officer; and Bill McCamey, Chief Financial Officer.

Speaker #2: This call is being webcast and will be archived on the Investor Relations section of our website. Today's discussion may contain forward-looking statements that reflect the company's current views with respect to, among other things: earnings growth, returns on equity, portfolio performance, the benefits of the acquisition of Mercury (including expected synergies), and future financial and operating results.

Speaker #2: These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. Please review our earnings release and the risk factors discussed in our SEC filings.

Dan Mauch: These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. Please review our earnings release and the risk factors discussed in our SEC filings. The forward-looking statements speak only as of the date on which they are made, except to the extent required by federal securities laws, the company disclaims any obligation to update any forward-looking statement. In addition, during this call, we may refer to certain non-GAAP financial measures. Please refer to our earnings release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Jeff.

Speaker #2: The forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, the company disclaims any obligation to update any forward-looking statement.

Speaker #2: In addition, during this call, we may refer to certain non-GAAP financial measures. Please refer to our earnings release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

Speaker #2: And with that, I'll turn the call over to Jeff.

Speaker #3: Thanks, Dan. Good afternoon, everyone, and thank you for joining us. 2026 is off to a very good start, combining strong legacy asset performance with continued momentum from our recent acquisition of Mercury Financial.

Jeff Howard: Thanks, Dan Mauch. Good afternoon, everyone, thank you for joining us. 2026 is off to a very good start, combining strong legacy asset performance with continued momentum from our recent acquisition of Mercury Financial. We're now 2 full quarters into the Mercury acquisition, the integration continues to progress well. Last quarter, we noted that we were ahead of plan, that pace continued throughout the Q1. We're encouraged by the early results from our portfolio management actions, which are ahead of our acquisition model, as well as better-than-planned origination volumes and unit-level economics. Most importantly, we are ahead of schedule on our operational integration and the creation of one Atlanticus. As I stated in our earnings release, we are a more scaled, better resourced, more talented, and capable company than we were at this time last year.

Jeff Howard: Thanks, Dan. Good afternoon, everyone, thank you for joining us. 2026 is off to a very good start, combining strong legacy asset performance with continued momentum from our recent acquisition of Mercury Financial. We're now two full quarters into the Mercury acquisition, the integration continues to progress well. Last quarter, we noted that we were ahead of plan, that pace continued throughout the Q1. We're encouraged by the early results from our portfolio management actions, which are ahead of our acquisition model, as well as better-than-planned origination volumes and unit-level economics. Most importantly, we are ahead of schedule on our operational integration and the creation of one Atlanticus. As I stated in our earnings release, we are a more scaled, better resourced, more talented, and capable company than we were at this time last year.

Speaker #3: We're now two full quarters into the Mercury acquisition, and the integration continues to progress well. Last quarter, we noted that we were ahead of plan, and that pace continued throughout the first quarter.

Speaker #3: We're encouraged by the early results from our portfolio management actions, which are ahead of our acquisition model, as well as better-than-planned origination volumes and unit-level economics.

Speaker #3: And most importantly, we are ahead of schedule on our operational integration, and the creation of one Atlanticus. As I stated in our earnings release, we are a more scaled, better-resourced, more talented, and capable company than we were at this time last year.

Speaker #3: And I will further add, with the ability to serve an even broader customer base. We're excited about the opportunity to build on these enhancements in the periods ahead.

Jeff Howard: I will further add, with the ability to serve an even broader customer base. We're excited about the opportunity to build on these enhancements in the periods ahead. Aside from the Mercury acquisition, we also experienced growth in our legacy portfolios, which reinforces the underlying strength of the platform, with managed receivables growth excluding Mercury of 35%. This growth remains broad-based across both our private label and general purpose product lines, supported by increased customer acquisition on behalf of our bank partners and deeper customer engagement, as well as retail partners' organic growth and market share gains within those partnerships. From an overall portfolio perspective, we continue to see favorable asset level performance. Payment behavior remains consistent, purchase activity is steady, and newer customer cohorts are performing well as they season. While macro uncertainty persists, we have not observed any material change in underlying trends.

Speaker #3: Aside from the Mercury acquisition, we also experienced growth in our legacy portfolios, which reinforces the underlying strength of the platform, with managed receivables growth excluding Mercury of 35%.

Speaker #3: This growth remains broad-based across both our private label and general-purpose product lines. Supported by increased customer acquisition on behalf of our bank partners and deeper customer engagement, as well as retail partners' organic growth and market share gains within those partnerships.

Speaker #3: From an overall portfolio perspective, we continue to see favorable asset-level performance. Payment behavior remains consistent, purchase activity is steady, and newer customer cohorts are performing well as they season.

Speaker #3: While macro uncertainty persists, we have not observed any material change in underlying trends. In fact, we continue to see stable and rational consumer behavior across the portfolio.

Jeff Howard: In fact, we continue to see stable and rational consumer behavior across the portfolio. Through our deep data-driven insights, we're closely monitoring our book of managed receivables for any signs of stress, particularly given the market's concern regarding recent increases in gas prices. Utilization rates, payment rates, first pay default, early delinquency trends, percent of consumers making on-time payments, percent of consumers making more than the monthly minimum payment all exhibit normal behaviors. Yes, spending patterns have shown some changes. The percent being spent on gas did increase in March, but remains in line with 2023 and 2024 spending levels and well below 2022 levels. Conversely, we're actually seeing higher levels of discretionary spending and dining out expenditures. While we are mindful of the risk associated with inflation and specifically the continued rise in gas prices, we also note that the economy at large is in reasonably good shape.

Speaker #3: Through our deep data-driven insights, we're closely monitoring our book of managed receivables for any signs of stress, particularly given the market's concern regarding recent increases in gas prices.

Speaker #3: Utilization rates, payment rates, first-pay defaults, early delinquency trends, percent of consumers making on-time payments, percent of consumers making more than the monthly minimum payment, all exhibit normal behaviors.

Speaker #3: Yes, spending patterns have shown some changes. The percent being spent on gas did increase in March. But remains in line with 2023 and 2024 spending levels.

Speaker #3: And well below 2022 levels. Conversely, we're actually seeing higher levels of discretionary spending in dining-out out expenditures. While we are mindful of the risk associated with inflation, and specifically the continued rise in gas prices, we also note that the economy at large is in reasonably good shape.

Speaker #3: Unemployment rates are steady, jobless claims are at a 50-year low, and, according to published reports, deposits as a percent of disposable income and inflation-adjusted deposit levels for middle-income consumers remain substantially higher than pre-pandemic levels.

Jeff Howard: Unemployment rates are steady, jobless claims are at a 50-year low, and according to published reports, deposits as a percent of disposable income and inflation-adjusted deposit levels for middle-income consumers remain substantially higher than pre-pandemic levels. As a result, we continue to feel confident in our portfolio performance and the continued achievement of our unit-level return targets. From a competitive standpoint, as mentioned last quarter, the general purpose card environment remains active, with continued elevated solicitation levels across the markets we serve. As a result, we are seeing somewhat lower response rates. Despite this increased competition, we continue to see opportunities for prudent growth and attractive asset-level returns, which are supported by our differentiated analytics, multiple product offerings, and omni-channel origination capabilities.

Speaker #3: As a result, we continue to feel confident in our portfolio performance and the continued achievement of our unit-level return targets. From a competitive standpoint, as mentioned last quarter, the general-purpose card environment remains active, with continued elevated solicitation levels across the markets we serve.

Speaker #3: As a result, we are seeing somewhat lower response rates. Despite this increased competition, we continue to see opportunities for prudent growth and attractive asset-level returns which are supported by our differentiated analytics, multiple product offerings, and omnichannel origination capabilities.

Speaker #3: Turning to financial performance, we delivered another strong quarter of earnings with net income attributable to common shareholders of $41.9 million, or $2.23 per diluted share, up 50% year over year and 27% sequentially.

Jeff Howard: Turning to financial performance, we delivered another strong quarter of earnings, with net income attributable to common shareholders of $41.9 million, or $2.23 per diluted share, up 50% year-over-year and 27% sequentially. We also achieved a return on average equity of 26.8%. As we look ahead, we believe the business is better positioned than we have ever been. We remain focused on further optimizing the Mercury portfolio, leveraging our scale, driving disciplined growth, and maintaining stable credit performance as we continue to seek to serve the more than 100 million everyday Americans looking for a trusted financial partner. We're excited about the momentum we have coming out of Q1 and continue to expect to deliver earnings growth and returns on equity at or above our targets of 20%.

Speaker #3: We also achieved a return on average equity of 26.8%. As we look ahead, we believe the business is better positioned than we have ever been.

Speaker #3: We remain focused on further optimizing the Mercury portfolio, leveraging our scale, driving disciplined growth, and maintaining stable credit performance as we continue to seek to serve the more than 100 million everyday Americans looking for a trusted financial partner.

Speaker #3: We are excited about the momentum we have coming out of Q1 and continue to expect to deliver earnings growth and returns on equity at or above our targets of 20%.

Speaker #3: With that, I'll turn the call over to Bill.

Jeff Howard: With that, I'll turn the call over to Bill.

Speaker #4: Awesome. Thanks, Jeff. Thank you, everyone, for joining us. I'll begin with revenue. For the first quarter, total operating revenue and other income increased 97% year over year to $680 million.

Bill McCamey: Awesome. Thanks, Jeff. Thank you everyone for joining us. I'll begin with revenue. For Q1, total operating revenue and other income increased 97% year over year to $680 million, including $224 million from the Mercury portfolio, reflecting its continued contribution along with ongoing growth in our legacy receivables and customer base. Net margin increased over 60% year over year to $190 million, reflecting the earnings contribution from a larger receivable base, partially offset by higher funding costs and the higher fair value impacts associated with portfolio growth.

Speaker #4: Including $224 million from the Mercury portfolio, reflecting its continued contribution along with ongoing growth in our legacy receivables and customer base. Net margin increased over 60% year over year to $190 million, reflecting the earnings contribution from a larger receivable base partially offset by higher funding costs and the higher fair value impacts associated with portfolio growth.

Speaker #4: Changes in fair value of loans were negative $366 million, an increase of 105% year over year, reflecting the larger receivables base and the corresponding charge-offs, particularly offset or partially offset by favorable assumption changes and continued improvement in newer customer cohorts.

Bill McCamey: Changes in fair value of loans were -$366 million, an increase of 105% year-over-year, reflecting the larger receivables base and the corresponding charge-offs, particularly offset or partially offset by favorable assumption changes and continued improvement in newer customer cohorts. Q1 seasonal dynamics, including tax-related paydowns and typical moderation in new receivable growth, along with continued portfolio seasoning, provided a modest benefit to fair value. The quarter also included approximately $13 million of favorable impact related to reduction in contingent consideration associated with the Mercury acquisition. Delinquency and charge-off trends remain stable and consistent with our expectations. As anticipated, we are seeing the benefit of tax season in Q1, with lower delinquency levels and corresponding improvements in charge-offs versus last year.

Speaker #4: First quarter seasonal dynamics, including tax-related paydowns and typical moderation in new receivable growth, along with continued portfolio seasoning provided a modest benefit to fair value.

Speaker #4: The quarter also included approximately $13 million of favorable impact related to reduction in contingent consideration associated with the Mercury acquisition. Delinquency and charge-off trends remain stable and consistent with our expectations.

Speaker #4: As anticipated, we are seeing the benefit of tax season in the first quarter, with lower delinquency levels and corresponding improvements in charge-offs versus last year.

Speaker #4: Interest expense increased 158% year over year to $123 million, reflecting higher debt balances associated with receivables growth, higher borrowing costs, and financing associated with the Mercury portfolio.

Bill McCamey: Interest expense increased 158% year over year to $123 million, reflecting higher debt balances associated with receivables growth, higher borrowing costs, and financing associated with the Mercury portfolio. Total operating expenses increased 69% year over year to $131 million, reflecting the scale of the combined platform, higher marketing and customer acquisition activity, and increased servicing costs as the portfolio continues to grow. As we continue to scale the platform, we are seeing the benefits of operating leverage begin to emerge.

Speaker #4: Total operating expenses increased 69% year over year to $131 million, reflecting the scale of the combined platform, higher marketing and customer acquisition activity, and increased servicing costs as the portfolio continues to grow.

Speaker #4: As we continue to scale the platform, we are seeing the benefits of operating leverage begin to emerge. Turning to the balance sheet, we ended the quarter with total assets of $7.5 billion.

Jeff Howard: Turning to the balance sheet, we ended Q1 with total assets of $7.5 billion and total equity of $644 million, along with $650 million of unrestricted cash, providing ample capital to support continued growth. Q1 reflects the continued revenue growth, stable credit performance, meaningful integration progress, and solid earnings expansion. Looking ahead, we remain focused on disciplined, profitable growth to most effectively deploy our capital. With that, I will turn the call back to the operator for questions.

Speaker #4: And total equity of $644 million along with $650 million of unrestricted cash, providing ample capital to support continued growth. The first quarter performance, meaningful integration progress, and solid earnings expansion.

Speaker #4: Looking ahead, we remain focused on disciplined profitable growth to most effectively deploy our capital. With that, I'll turn the call back to the operator for questions.

Speaker #5: Thank you. Ladies and gentlemen, as a reminder to ask the question, please first start one-one on your telephone. And wait for your name to be announced.

Operator: Thank you. Our first question comes from the line of David Scharf with Citizens Capital Markets. Your line is open.

Speaker #5: To withdraw your question, please first start one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Shaw with Citizens Capital Markets.

Speaker #5: Your line is open.

Speaker #6: Hi. Good afternoon. Thanks for taking my questions. Congrats on a very strong start to the year. And I guess one of the things I was curious to get some color on, Jeff, is maybe how you define a head of plan in so many of the aspects of the Mercury deal.

David Scharf: Hi, good afternoon. Thanks for thanks for taking my questions. Congrats on a very strong start to the year. I guess one of the things I was, well, curious to get some color on, Jeff, is maybe how you define ahead of plan in so many of the aspects of the Mercury deal. You obviously were looking at this target for quite a while. Can you provide a little more color, maybe first on why you think you're kind of performing ahead of pace on originations, in that asset, whether it's something that is deliberate in terms of kind of a lean into marketing or if there was just something about the product that seems to be capturing share?

Speaker #6: You obviously were looking at this target for quite a while. And can you provide a little more color? Maybe first on why you think your kind of performing ahead of pace on originations in that asset, whether it's something that is deliberate in terms of kind of a lean into marketing or if it was just something about the product that seems to be capturing share.

Speaker #6: And then, I guess, secondly, on the integration front—does being ahead of plan refer to just timing, or are there potentially greater cost synergies than you originally anticipated?

David Scharf: I guess secondly, on the integration front, does being ahead of plan refer to just timing, or are there potentially greater cost synergies than you originally anticipated?

Speaker #7: Yeah. Thanks, David. I'll try to go through those sequentially as you ask them. But obviously, a lot of good questions there. Really getting behind the detail of why we're so excited about what we've been able to accomplish and look forward to accomplishing with the Mercury acquisition.

Jeff Howard: Yeah. Thanks, David. I'll try to go through those sequentially as you ask them. Obviously a lot of good questions there. Really getting behind the detail of why we're so excited about what we've been able to accomplish and look forward to accomplishing with the Mercury acquisition. You rightly point out that, you know, we had a lot of time to due diligence and build models and come up with an operating and financial plan for the Mercury acquisition. You know, that included repricing and change in terms activities that include operational integration, that include overhead reduction, a whole host of things that we had, you know, well laid out as our operating plan. I think the biggest driver of it thus far has been the change in terms were able to be executed more quickly.

Speaker #7: You rightly point out that we had a lot of time to do diligence and build models and come up with an operating and financial plan for the Mercury acquisition.

Speaker #7: That included repricing and changing terms activities. That included operational integration. That included overhead reduction. A whole host of things that we had well laid out as our operating plan.

Speaker #7: I think the biggest driver of it thus far has been the change in terms we're able to be executed more quickly. And the adoption rate, and I'll call it stickiness and response from consumers, has been better than modeled.

Jeff Howard: The adoption rate, and I'll call it stickiness and response from consumers, has been better than modeled. We're getting better financial performance on that repricing than we had originally modeled. Additionally, we're seeing, I guess the more rapid realization of some of the operating synergies, and therefore the leveraging of the combined infrastructure. We're putting the companies together from a technology and infrastructure perspective, ahead of our schedule. Across all of the metrics that you've mentioned as the possibilities for areas where we, quote-unquote, "say we're ahead of plan," we're checking all of those boxes. As it relates to new originations and being a bit ahead of tempo there as well, we were really conservative. I'd say we were conservative in terms of our acquisition model and the change in terms.

Speaker #7: And so we're getting better financial performance on that repricing than we had originally modeled. Additionally, we're seeing I guess the more rapid realization of some of the operating synergies and therefore the leveraging of the combined infrastructure.

Speaker #7: And then we're putting the companies together from a technology and infrastructure perspective ahead of our schedule. So across all of the metrics that you've mentioned as the possibilities for areas where we "say we're ahead of plan," we're checking all of those boxes.

Speaker #7: As it relates to new originations and being a bit ahead of tempo, there as well, we were really conservative. I'd say we were conservative in terms of our acquisition model and the change in terms.

Speaker #7: We were also very conservative in terms of what we thought we might be able to do from an origination perspective. And I would say having the capital to put behind the team and to lean into opportunities where we see at or above unit-level target return opportunities in the market, we've been able to put capital to work there.

Jeff Howard: We were also very conservative in terms of what we thought we might be able to do from an origination perspective. I would say having the capital to put behind the team, and to lean into opportunities where we see, at or above unit-level target return opportunities in the market, we've been able to put capital to work there. That supported the team to, you know, find those opportunities, bring those opportunities up, and increase the mail velocity, increase some of our online partnerships, and really expand at a rate that is a bit faster than we had anticipated in terms of new account origination.

Speaker #7: And that's supported the team to find those opportunities, bring those opportunities up, and increase the mail velocity, increase some of our online partnerships, and really expand at a rate that is a bit faster than we had anticipated in terms of new account origination.

Speaker #6: Got it. No, I appreciate that color. And maybe just as a follow-up, this is more in the weeds. The $13 million kind of contingency release, where would we see that in the P&L?

David Scharf: Got it. No, I appreciate that color. Maybe just as a follow-up, this is more in the weeds. The $13 million kind of contingency release, where would we see that in the P&L?

Speaker #7: Well, that's in our fair value mark, David. It's going to be a reduction.

Jeff Howard: Well, that's in our fair value mark, David.

Speaker #6: Oh, okay. Got it. Okay. Understood. Great. Thank you.

David Scharf: Oh. Oh, okay. Got it.

Jeff Howard: It's gonna be a reduction.

David Scharf: Okay. Understood. Great. Thank you.

Speaker #7: Yep.

Jeff Howard: Yep.

Speaker #5: Our next question comes from the line of Vincent Kantik with BTIG. Your line is open.

Operator: Our next question comes from the line of Vincent Caintic with BTIG. Your line is open.

Speaker #8: Hey, thank you. Good afternoon. Thanks for taking my questions and congratulations on that great quarter. First, I wanted to talk about the relative competition comments.

Vincent Caintic: Hey, thank you. Good afternoon. Thanks for taking my questions, and congratulations on that great quarter. First, I wanted to talk about the relative competition comments. I know you talked earlier about maybe competition increasing a little bit. It's pretty amazing to see, you know, the same company manage receivables growth 35% year-over-year. I don't cover any other company that's growing that fast. It seems like loan growth, you know, with other credit card and purchase finance providers are slowing down. Should we read that to mean that you're taking shares, maybe some prime lenders and others are tightening? Would you attribute it to Atlanticus's own sales efforts?

Speaker #8: I know you talked earlier about maybe competition increasing a little bit. But it's pretty amazing to see same company managed receivables growth 35% year over year.

Speaker #8: I don't think of I don't cover any of the company that's growing that fast. And it seems like loan growth with other credit card and purchase finance providers are slowing down.

Speaker #8: So should we read that to mean that you're taking share as maybe some prime lenders and others are tightening? Would you attribute it to Atlanticus's own sales efforts?

Vincent Caintic: I did note on the press release, there was a paragraph about expanding with one of your retail partners. If you could maybe describe that in more detail. Is that retailer shifting away from another provider towards Atlanticus, or is that a new kind of greenfield opportunity for expansion? Thank you.

Speaker #8: I did note on the press release there was a paragraph about expanding with one of your retail partners if you could maybe describe that in more detail.

Speaker #8: Is that retailer shifting away from another provider towards Atlanticus, or is that a new kind of greenfield opportunity for expansion? Thank you.

Speaker #7: Yeah. Thanks, Vincent. Appreciate the questions. On the general purpose side, I think that the competition is increased as people have realized that there's stability in the consumer segment that we market in.

Jeff Howard: Thanks, Vincent. Appreciate the questions. On the general purpose side, I think that the competition has increased as people have realized that there's stability in the consumer segment that we market in, and I think that's indicative of not just our view, but, like, what our competitors are seeing as well. You know, we had a massive amount of what I would consider irrational competition during the quote-unquote "fintech bubble." You know, call that from kinda, you know, 2015 to 2021, 2022. That competition is rationalized. I think it's consolidated amongst, you know, 5 or 6 players in this space that are, you know, have a long history of serving this consumer. They, like us, are seeing a good, stable consumer and are leaning into those market opportunities.

Speaker #7: And I think that's indicative of not just our view, but what our competitors are seeing as well. We had a massive amount of what I would consider irrational competition during the "fintech bubble," to call that from kind of 2015 to 2021, 2022.

Speaker #7: That competition is rationalized. I think it's consolidated amongst five or six players in the space that are have a long history of serving this consumer.

Speaker #7: And they, like us, are seeing a good, stable consumer and are leaning into those marketing opportunities. And we're just seeing more mail volume in the direct mail channel than we've seen in a while.

Jeff Howard: We're just seeing more mail volume in the direct mail channel than we've seen in a while. As a result, you know, we've seen slightly lower response rates. For the most part, it's rationally priced competition. You know, we're all trying to serve that 100 million consumers, so it's a really big market at a time where we're seeing more rational pricing coming from fewer competitors. I think that's really the summation of it. I think a lot of concern or headline-grabbing quotes have been made about the K-shaped economy, and I think a lot of that has more to do with the separation between the top half and the bottom half. The bottom part of that K shape is really doing fine. It's stable. It's not decreasing.

Speaker #7: And as a result, we've seen slightly lower response rates. But for the most part, it's rationally priced competition. We're all trying to serve that $100 million consumer.

Speaker #7: So it's a really, really, really big market at a time where we're seeing more rational pricing coming from fewer competitors. And I think that's really the summation of it.

Speaker #7: I think a lot of concern or headline grabbing quotes have been made about the K-shaped economy and I think a lot of that has more to do with the separation between the top half and the bottom half.

Speaker #7: But the bottom part of that K-shape is really doing fine. It's stable. It's not decreasing. It's not showing any real signs of stress. And I think the market in total is just leaning into that and continue to serve that consumer more fully.

Jeff Howard: It's not showing any real signs of stress. I think the market in total is just leaning into that and continuing to serve that consumer more fully. On the retail credit side, I think you hit the nail on the head. We are taking share. You might recall that we bought a portfolio from another competitor in this space back in October, so there's some consolidation of competition there as well. The merchant partners that competitor served, we've grown our share within, as well as continue to grow with existing merchants who are, you know, having some organic growth of their own. I'd say we're sort of checking the boxes across all of those variables. We are taking share.

Speaker #7: On the retail credit side, I think you hit the nail on the head. We are taking share. You might recall that we bought a portfolio from another competitor in this space.

Speaker #7: Back in October. So there's some consolidation of competition there as well. The merchant partners that that competitor served, we've grown our share within. As well as continue to grow with existing merchants who are having some organic growth of their own.

Speaker #7: So I'd say we're sort of checking the boxes across all of those variables. We are taking share. We're continuing to grow and supporting some of the organic growth that exists at our merchant partners.

Jeff Howard: We're continuing to grow and supporting some of the organic growth that exists at our merchant partners. As a result, we're seeing, you know, good, attractive growth across the entire portfolio.

Speaker #7: And as a result, we're seeing good, attractive growth across the entire portfolio.

Speaker #8: Okay. That's great. Thank you. And then wanted to kind of touch back on that Mercury acquisition update and maybe just a follow-up on David's question.

Vincent Caintic: Okay. That's great. Thank you. Wanted to kind of touch back on that Mercury acquisition update, and maybe just follow up on David's question. It sounds like things are, you know, better relative to the guidance. Maybe if you could help us understand, because you provided the multi-year guidance framework on the acquisition slide deck when Mercury was announced. You know, where are we in that path? Has your view of guidance changed in the terms of are we still in line with guidance or are things looking, you know, better than that guidance pathway? If you could also talk about what's left in terms of the integration pathway. Thank you.

Speaker #8: But so it sounds like things are better relative to the guidance. Maybe if you could help us understand because you provided a multi-year guidance framework on the acquisition slide deck when Mercury was announced.

Speaker #8: Where are we in that path? Has your view of guidance changed in the terms of are we still in line with guidance? Are things looking better than that guidance pathway?

Speaker #8: And if you could also talk about what's left in terms of the integration pathway. Thank you.

Speaker #7: Yeah. Good question. Thank you. I think we feel very good about the guidance we provided. Obviously, we provided a range of guidance for both '26 and '27.

Jeff Howard: Yeah. A good question. Thank you. I think we feel very good about the guidance we provided. Obviously, we provided a range of guidance for both 2026 and 2027, and feel very good about our progression towards the achievement of those financial outcomes within that range. As to what's left, you know, there's ongoing opportunities within the portfolio to optimize it, to continue to undertake portfolio management activities that we think will result in long-term value creation, whether it be, you know, continued repricing, credit line increases, in some cases APR reductions to help stimulate retention and growth with existing lower-risk account holders. That's just an ongoing exercise that we now have a more scaled portfolio to undertake those portfolio management activities on. You know, that will be an ongoing process for us.

Speaker #7: And feel very good about our progression towards the achievement of those financial outcomes within that range. As to what's left, there's ongoing opportunities in the portfolio to optimize it, to continue to undertake portfolio management activities that we think will result in long-term value creation.

Speaker #7: Whether it be continue repricing, credit line increases. In some cases, APR reductions to help stimulate retention and growth with existing lower-risk account holders. And that's just an ongoing exercise that we now have a more scaled portfolio to undertake those portfolio management activities on.

Speaker #7: And so that will be an ongoing process for us as it relates to sort of the operational integration. There's some more technology work that needs to be done.

Jeff Howard: As it relates to sort of the operational integration, there's some more technology work that needs to be done. Obviously, we had two disparate infrastructures that we're trying to bring together. You know, those are gonna happen over the course of, as we had outlined before, about an 18-month timeline. We feel good about that timeline. Feel like we'll probably come in before that 18-month period expires, but there's still some work to be done there. You know, multiple databases, decision engine, system of records, all that needs to get consolidated, and it's work that's well underway. We feel like we have a very thoughtful plan in place and a team that's extraordinarily adept at accomplishing those tasks.

Speaker #7: Obviously, we had two disparate infrastructures that we're trying to bring together. Those are going to happen over the course of as we had outlined before, about an 18-month timeline.

Speaker #7: We feel good about that timeline and feel like we'll probably come in before that 18-month period expires, but there's still some work to be done there.

Speaker #7: Multiple databases decision engine, system of records, all of that needs to get consolidated. And it's work that's well underway. And we feel like we have a very thoughtful plan in place.

Speaker #7: And a team that's extraordinarily adept at accomplishing those tasks.

Speaker #8: Okay. Great. Thank you.

Vincent Caintic: Okay. Great. Thank you.

Speaker #9: Thank you. As a reminder, ladies and gentlemen, let's start 1:1 to ask the question. Please stand by for our next question. Our next question comes from the line of Randy Benner with Texas Capital.

Operator: Thank you. As a reminder, ladies and gentlemen, that is star one one to ask the question. Please stand by for our next question. Our next question comes from the line of Randy Binner with Texas Capital. Your line is open.

Speaker #9: Your line is open.

Randy Binner: Hey. Thanks for taking the question. I had a couple if I could. I guess the first one is just on the lower response rates. There's a lot of competition, but is it, is it also kind of a read on your target market, like, maybe not reaching as much for credit? Is there, is there another way to look at, you know, lower response rates in addition to just being a lot of competition? Is that, is that kind of a sign of stability that you're not getting, you know, like, really high responses?

Speaker #10: Hey. Thanks for taking the question. I had a couple if I could. I guess the first one is just on the lower response rates.

Speaker #10: And so there's a lot of competition. But is it also kind of a read on your target market not maybe not reaching as much for credit?

Speaker #10: Is there another way to look at lower response rates in addition to just being a lot of competition? Is that kind of a sign of stability—that you're not getting really high responses?

Speaker #7: Yeah. I think there's two ways to look at it. One, do we have a supply issue? Or two, do we have a demand issue?

Jeff Howard: Yeah. I think there's two ways to look at it. 1, do we have a supply issue, or 2, do we have a demand issue? We are certainly seeing, based on third-party data, an increase of supply. We're certainly seeing more mail. You know, you're right to point out that if there are early signs of stress, you typically see demand from consumers, and therefore response rates go up. We're not seeing that across any of our channels per se. Like we said before, we're seeing good, stable performance across all of our early indicators, you know, response rates or demand for credit being one of them. I think it's just indicative of stability. I think we see a lot of people using the term resilience.

Speaker #7: We are certainly seeing based on third-party data an increase of supply. We're certainly seeing more mail. But you're right to point out that if there are early signs of stress, you typically see demand from consumers.

Speaker #7: And therefore, response rates go up. And we're not seeing that across any of our channels, per se. Like we said before, we're seeing good, stable performance across all of our early indicators.

Speaker #7: Response rates or demand for credit being one of them. But I think it's just indicative of stability. I think we see a lot of people using the term resilience I like the term stable better because we haven't seen anything in our data that suggests that customer is struggling against some headwind.

Jeff Howard: I like the term stable better because we haven't seen anything in our data that suggests the customer is struggling against some headwind. We know that gas prices are going up. We haven't really seen it affect credit yet. We've seen some changes in other payment behavior. Like we've seen over our 30-year history, if our consumer is given time to adjust to whatever headwind, they have found a way to do that. That's what, you know, why we like the space that we're in. The utility they see in our product, they treat accordingly. Therefore we see, you know, better performance over time, as long as the consumer's had a chance to have time to adjust to that. I think that's what we're seeing now.

Speaker #7: We know that gas prices are going up. We haven't really seen it affect credit yet. We've seen some changes in other payment behavior. And like we've seen over our 30-year history, if our consumer is given time to adjust to whatever headwind they have, they have found a way to do that.

Speaker #7: And that's what why we like the space that we're in. The utility they see in our product, they treat accordingly. And therefore, we see better performance over time.

Speaker #7: As long as the consumer has had a chance to have time to adjust to that, I think that's where we're sitting now. They can we're seeing some indications that consumers are driving less because gas prices are up.

Jeff Howard: You know, we're seeing some indications that consumers are driving less because gas prices are up. We saw when food inflation was up, a shift from dining out to groceries. Our consumer is typically gonna try to find ways to adjust their lifestyle, whether it be through changing expenditures or supplementing income, to continue to meet their credit obligations, and that's the sort of steady performance we're seeing and has not led, back to your original question, to what we've seen as an unusual demand for credit.

Speaker #7: We saw when food inflation was up, a shift from dining out to groceries. So our consumer is typically going to try to find ways to adjust their lifestyle.

Speaker #7: Whether it be through changing expenditures or supplementing income to continue to meet their credit obligations. And that's the sort of steady performance we're seeing.

Speaker #7: It has not led back to your original question until what we've seen is an unusual demand for credit.

Speaker #10: All right. That's helpful. And then I guess and I came into the call, so I apologize if I missed this. But just on tax refunds, that was a big it's been a big talking point, I guess, going into earnings.

Randy Binner: All right. That's helpful. I came into the call late, so I apologize if I missed this, but just on tax refunds, that was a big, you know, it's been a big talking point, I guess, going into earnings, but it's broadly reported at this point that, you know, the refunds were, you know, maybe 9% to 12% higher than last year. It depends on the source you look at. I think, I'm wondering if you saw like kind of a typical, like your experience with tax refunds because of the, you know, the One Big Beautiful Bill Act. Did you see that? Was most of it kind of front-loaded, like meaning it was in these Q1 numbers, or would we still see it in the Q2?

Speaker #10: But it's broadly reported at this point that the refunds were maybe 9% to 12% higher than last year. It depends on the source you look at.

Speaker #10: But I think I'm wondering if you saw kind of a typical your experience with tax refunds because of the big, beautiful bill, tax reforms.

Speaker #10: Did you see that? Was most of it kind of front-loaded? Meaning it was in these first-quarter numbers? Or would we still see it in the second quarter?

Speaker #10: And did that help organic growth at all? Does it affect anything on the delinquency numbers? Just kind of interested in how that it came through the first-quarter numbers.

Randy Binner: Did that, you know, did that help organic growth at all? You know, did it affect anything on the delinquency numbers? Just kind of interested in how it came through the Q1 numbers and if it, if it could be something to consider as we think about Q2.

Speaker #10: And if it could be something to consider as we think about second quarter.

Speaker #7: Yeah. Good question. And let me answer the growth part of that question first. And that is no, it did not affect our growth or leaning into originations in any way, shape, or form.

Jeff Howard: Yeah, good question. Let me answer the growth part of that question first. That is, no, it didn't affect our growth or leaning into originations in any way, shape, or form. Obviously, we've got now 30 years' worth of modeling to understand how seasonality works for our consumer space and, you know, don't tend to try to play the timing game as it relates to tax season. I will say that, you know, our portfolio now is obviously much larger than it was a year ago. We have more data in the near-prime space than we did before. We're able to see the impact of tax season across a broader subsegment of the less than prime consumer space.

Speaker #7: Obviously, we've got now 30 years' worth of modeling to understand how seasonality works for our consumer space. And don't tend to try to play the timing game as it relates to tax season.

Speaker #7: I will say that our portfolio now is obviously much larger than it was a year ago. We have more data in the near-prime space than we did before.

Speaker #7: So we're able to see the impact of tax season across a broader subsegment of the less-than-prime consumer space. And what we did see was what I would consider a better tax season.

Jeff Howard: You know, what we did see was what I would consider a better tax season in the deeper subprime. We saw greater reduction in early delinquencies. We saw it's what I would consider a longer tax season in the near-prime space. Importantly is how do things look coming out of tax season? I would say as we look at it right now, coming out of tax season looks very much like it did last year.

Speaker #7: In the deeper subprime, we saw greater reduction in early delinquencies. We saw what I would consider a longer tax season in the near-prime space.

Speaker #7: But importantly is how do things look coming out of tax season? And I would say as we look at it right now, coming out of tax season looks very much like it did last year.

Speaker #10: Okay. Just one because I feel like I've heard different accounts of this earnings season. Do you feel like a lot of that impact was before March 31st or will that kind of continue into some of the second-quarter numbers?

Randy Binner: Okay. Just like 'cause I feel like I've heard different accounts of this earnings season. Do you feel like a lot of that impact was before March 31st, or will that kind of continue into some of the Q2 numbers?

Speaker #7: No, we see tax benefit that does lean into April. And, like I said, particularly on the near-prime portfolio, that tax season was a little bit more extended.

Jeff Howard: No, we see tax benefit that does lean into, you know, into April. Like I said, particularly on the near-prime portfolio, that tax season was a little bit more extended. It started a little later, ended a little later. Across our entire portfolio, we see the benefit of tax pay down, through 31 March and into the early parts of Q1.

Speaker #7: It started a little later, ended a little later. But across our entire portfolio, we see the benefit of tax pay down through March 31st and into the early parts of first quarter.

Randy Binner: Okay.

Jeff Howard: Across our entire portfolio, we see the benefit of tax pay down, through 31 March and into the early parts of Q1.

Speaker #10: Okay. I see what you're saying. That's helpful. Yeah. Understood. All right. Well, I'll leave it there. Thank you.

Randy Binner: Okay. Yeah, I see what you're saying.

Jeff Howard: Q2, excuse me.

Randy Binner: Yeah, that's helpful. Yeah. Understood. All right. Well, I'll leave it there. Thank you.

Speaker #7: Yeah. Thank you.

Jeff Howard: Yeah, thank you.

Speaker #11: Thank you. Ladies and gentlemen, this concludes the question-and-answer session. I would now like to turn the call back to Jeff Howard for closing remarks.

Operator: Thank you. Ladies and gentlemen, this concludes the question and answer session. I would now like to turn the call back to Jeff Howard for closing remarks.

Speaker #7: Yeah. Thank you. And I want to thank everyone for their interest. We're obviously very pleased with Q1. And equally so in the positioning of our business on a go-forward basis.

Jeff Howard: Yeah, thank you. I want to thank everyone for their interest. We're obviously very pleased with Q1 and equally so in the positioning of our business on a go-forward basis. We're excited about the opportunities that lie ahead for us, not just with the Mercury acquisition and integration and obviously the leveraging of that platform and the ongoing profit growth for us, but the organic opportunities that exist across our entire platform, whether it be retail credit, general purpose, healthcare, all of our lines of business. We're excited about the positioning of our business, excited about what lies ahead for us, and we're certainly looking forward to sharing that results with you in the next quarter. Thank you all.

Speaker #7: We're excited about the opportunities that lie ahead for us, not just with the Mercury acquisition and integration. And obviously, the leveraging of that platform and the ongoing profit growth for us.

Speaker #7: But the organic opportunities that exist across our entire platform, whether it be retail credit, general-purpose, healthcare, all of our lines of business. So we're excited about the positioning of our business, excited about what lies ahead for us.

Speaker #7: And we're certainly looking forward to sharing that results with you in the next quarter. So thank you all.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect.