Executive Summary

Q2 2023 delivered solid topline growth with Total operating revenue of $290.8M (+7.8% YoY) and managed receivables of ~$2.17B, while diluted EPS was $1.02; both revenue and EPS were above street proxies (rev $290.84M vs $280.16M; EPS $1.02 vs $0.88) despite elevated charge-offs and higher funding costs .
Net income attributable to common shareholders was $18.8M (vs $27.8M in Q2’22), reflecting higher expected credit costs embedded in fair-value marks and higher interest expense, partially offset by lower marketing spend .
Management emphasized continued growth across retail credit and general-purpose cards, adding 350K+ new accounts (3.3M total), with ROAE of 21.2%, while reiterating expectations for rising interest expense and continued elevated charge-offs near term as portfolios season post-inflation shock .
Stock catalysts: continued receivables growth, resilience of yields, and any signs of credit normalization (delinquencies/charge-offs) versus expectations; lack of formal guidance puts focus on quarterly trend and funding costs .

What Went Well and What Went Wrong

What Went Well
- Revenue and EPS exceeded external proxies for consensus: Q2 revenue $290.84M vs $280.16M expected; EPS $1.02 vs $0.88 expected, aided by receivables growth and cost discipline (marketing down YoY) .
- Strong growth engine: managed receivables increased to ~$2.17B; over 350K new accounts in-quarter and 3.3M accounts served in total; purchase volume $696.1M .
- CEO tone confident on long-term growth across retail, general-purpose credit, healthcare, and auto finance; quote: “We are pleased to once again deliver strong profitability and return on capital… we are well positioned for long term sustained growth” .
What Went Wrong
- Profitability compression: Net income to common fell to $18.8M (from $27.8M in Q2’22) as fair-value changes (reflecting higher expected losses) and interest expense rose; net margin dollars also declined YoY .
- Credit normalization headwinds: Combined principal net charge-offs (managed) remain elevated YoY as newer vintages season and inflation pressured consumers; management expects elevated charge-offs through Q3 2023 before normalization .
- Higher funding costs: interest expense rose to $24.2M (from $18.9M) and management expects further increases with additional financing and higher effective rates, albeit majority of debt is fixed-rate .

Financial Results

Overall performance and trend (oldest → newest):

Metric	Q4 2022	Q1 2023	Q2 2023
Total Operating Revenue ($M)	268.664	260.982	290.751
Net Income Attributable to Common ($M)	17.674	19.985	18.800
Diluted EPS ($)	0.98	1.08	1.02
Net Margin ($M)	82.343	86.281	88.485
Interest Expense ($M)	24.002	24.234	24.215

Q2’23 actual vs prior quarter, prior year, and external consensus proxy:

Metric	Q2 2023 Actual	Q1 2023	Q2 2022	Consensus (proxy)
Revenue ($M)	290.751	260.982	269.796	280.16
Diluted EPS ($)	1.02	1.08	1.46	0.88

Segment revenue:

Segment Revenue ($M)	Q2 2022	Q2 2023
CaaS	261.044	280.836
Auto Finance	8.991	10.002
Total	270.035	290.838

KPIs (Q2 2023 unless noted):

KPI	Value
Managed Receivables ($B)	2.174
Purchase Volume ($M)	696.1
New Accounts Added (000s)	350+
Total Accounts Served (MM)	3.3
Return on Avg Shareholders’ Equity (%)	21.2

Notes:

“Net margin” shown is the company’s “Net margin” line item in the income statement (dollars) .
External “consensus” used MarketBeat due to S&P Global access limitations this period; see Estimates Context section for details .

Guidance Changes

No formal quantitative guidance ranges were provided. Management reiterated directional expectations:

Metric/Topic	Period	Previous Commentary	Current Commentary	Change
Total interest income & related fees	FY 2023	Expect net period-over-period growth, but slower than 2022	Reiterated continued growth as receivables expand	Maintained
Managed receivables growth	FY 2023	Growth to continue but at slower pace due to tightened underwriting from Q2’22	Reiterated; broad-based growth across products	Maintained
Interest expense	Near-term	Expect increases as growth + higher rates flow through; >85% fixed-rate debt	Reiterated expectation for higher quarterly interest expense	Maintained
Fair-value change on receivables	FY 2023	Expect increases consistent with receivables growth	Reiterated; fair values sensitive to macro/credit	Maintained
Marketing/solicitation expense	2H 2023	Q1 commentary: lower H1 vs 2022; some increase later in 2023	Q2: marketing down YoY; expects period-over-period increases later in 2023	Maintained (timing later in year)

Earnings Call Themes & Trends

Note: A Q2’23 earnings call transcript could not be located in our document set or the company site; themes synthesized from the Q2’23 press release and Q1’23/Q2’23 10-Q MD&A.

Topic	Previous Mentions (Q4 2022, Q1 2023)	Current Period (Q2 2023)	Trend
Credit normalization/charge-offs	Q4’22: Delinquencies rising toward normalized levels; fair-value marks higher on growth and fees . Q1’23: Charge-offs elevated; expected to increase into Q3’23 then normalize .	Charge-offs remain elevated; expect elevated through Q3’23 before normalization, tied to inflation and portfolio seasoning .	Stable trajectory toward normalization after Q3
Underwriting & marketing	Tightened underwriting since Q2’22; lower marketing H1 2023, with increases later in 2023 .	Marketing down YoY; underwriting still tight; some increases later in 2023 .	Unchanged
Funding costs/liquidity	Majority fixed-rate; expect interest expense increases with growth/higher rates .	Reiterated; interest expense up YoY; additional facilities added; >85% fixed .	Mildly negative near-term
Product performance (retail & GP cards)	Growth across products, slower pace expected due to tighter underwriting .	Continued growth across offerings; 350k+ new accounts in Q2 .	Positive growth continued
Technology/AI	Ongoing tech investment; AI-enhanced underwriting (Q1 MD&A) .	Reiterated AI/analytics-enabled decisioning .	Ongoing focus

Management Commentary

CEO Jeff Howard: “We are pleased to once again deliver strong profitability and return on capital, even as we navigate elevated charge-offs… As… consumers… benefit from higher wages and adjust to higher cost of living, we have returned to quarter over quarter increases in new accounts… leading to… managed receivables and revenue growth.”
“Our retail credit offering grew through new client roll outs… General purpose managed receivables also grew year-over-year… due to higher credit line utilization… and an increase in… new customers on a quarter over quarter basis.”
“Our future growth will be dependent on our confidence in achieving attractive returns… with ample liquidity… we are well positioned for long term sustained growth” .

Q&A Highlights

Not available. A Q2’23 earnings call transcript was not found in our document set or on the company’s IR site; therefore, Q&A highlights and clarifications are unavailable.

Estimates Context

External proxy for consensus indicates an EPS and revenue beat: EPS $1.02 vs $0.88; revenue $290.84M vs $280.16M .
S&P Global (Capital IQ) consensus could not be retrieved within current access constraints for this request; therefore, results vs S&P consensus are not shown.
Implications: modest positive estimate revisions bias likely centers on revenue momentum, while EPS trajectory remains sensitive to credit costs and funding spreads .

Key Takeaways for Investors

Revenue strength with continued receivables growth drove a beat vs external proxies for consensus; however, EPS reflect credit normalization and higher funding costs—monitor the pace of charge-off moderation post-Q3 as a key earnings sensitivity .
Growth mix remains favorable (retail PLCC and general-purpose cards) with 350K+ new accounts and 3.3M total served; sustained partner additions and utilization underpin topline .
Funding profile is largely fixed-rate, but management still expects higher interest expense with incremental financing and rate effects—spread management and securitization execution are near-term focus areas .
Operating discipline evident in lower YoY marketing; expect some increase later in 2023 as underwriting remains tight—watch for the balance of growth vs risk control .
No formal guidance; management reiterates revenue/receivables growth with slower pace and elevated charge-offs through Q3—trajectory of delinquencies/charge-offs and discount-rate assumptions in fair-value marks are central to valuation .
Potential positive catalysts: stabilization in delinquency trends, evidence of margin resilience (managed yield less charge-offs), and new partner wins; risks: macro headwinds to subprime consumer, credit normalization running longer/higher than expected, and higher-for-longer rates .

Other Relevant Q2 2023 Press Releases

Quarterly preferred stock dividend announcements around the period (May 17, 2023 and Aug 11, 2023) .

Appendix: Additional Context (Prior Two Quarters)

Q1 2023: Total operating revenue $261.0M; diluted EPS $1.08; net income to common $20.0M; marketing down YoY given tightened underwriting; charge-offs elevated with expectations to normalize after Q3 .
Q4 2022: Total operating revenue $268.7M; diluted EPS $0.98; net income to common $17.7M; continued receivables growth; expectation for higher interest expense but majority fixed-rate .

Atlanticus Holdings Corp (ATLC)·Q2 2023 Earnings Summary