What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 115 added, 87 removed, 653 unchanged (24% of the section changed)

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We offer a number of other products to our network of buy-here, pay-here dealers (including our floor-plan financing offering), but the majority of our activities are represented by our purchases of auto loans at discounts and our servicing of auto loans for a fee.

As of March 31, 2025, our CAR operations served over 670 dealers in 33 states and two U.S.

As of June 30, 2025, our CAR operations served over 680 dealers in 33 states and two U.S.

The core operations continue to achieve profitability and generate positive cash flows.

CONSOLIDATED RESULTS OF OPERATIONS

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Increases (Decreases)

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Net income attributable to controlling interests to common shareholders

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

For the Six Months Ended June 30,

Increases (Decreases)

(In Thousands)

from 2024 to 2025

Total operating revenue and other income

Other non-operating income

Interest expense

Provision for credit losses

Changes in fair value of loans at fair value

Operating expenses:

Salaries and benefits

Card and loan servicing

Marketing and solicitation

Total operating expenses:

Net loss attributable to noncontrolling interests

Net income attributable to controlling interests

Net income attributable to controlling interests to common shareholders

Three and Six Months Ended June 30, 2025 Compared to Three and Six Months Ended June 30, 2024

Total operating revenue and other income.

Total operating revenue and other income consists of:

1) interest income, finance charges and late fees on consumer loans, 2) other fees on credit products including annual and merchant fees and 3) interchange and servicing income on loan portfolios and other customer related fees.

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $2,706.3 million as of March 31, 2025, from $2,317.6 million as of March 31, 2024.

We experienced growth in total operating revenues for both our general purpose credit card and our private label credit receivables for the three months ended March 31, 2025, when compared to the same period in 2024.

These increases were primarily due to quarterly growth in both new credit card and private label customers serviced, the total accounts of which increased over 230,000 as of March 31, 2025 when compared to March 31, 2024 and also due to the recognition of merchant fees associated with new private label receivable acquisitions, which increased $9.3 million quarter over quarter.

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $3,046.5 million as of June 30, 2025, from $2,414.7 million as of June 30, 2024.

We experienced growth in total operating revenues for both our general purpose credit card and our private label credit receivables for the three and six months ended June 30, 2025, when compared to the same period in 2024.

These increases were primarily due to quarterly growth in both new credit card and private label customers serviced, the total accounts of which increased over 400,000 as of June 30, 2025 when compared to June 30, 2024 and also due to the recognition of merchant fees associated with new private label receivable acquisitions, which increased $19.7 million and $29.1 million, for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024.

Growth also reflected increased fee and finance pricing requirements for all new receivable acquisitions in response to increased costs of capital used to finance these receivable acquisitions.

For our general purpose credit cards, we experienced strong growth in finance and fee income (increasing $47.7 million and $85.3 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024) resulting from growth in the acquisition of receivables coupled with our bank partners modification of prices on both existing and new consumer accounts.

The relative mix of receivable acquisitions can lead to some variation in our corresponding revenue as general purpose credit card receivables typically generate higher gross yields than private label credit receivables do.

We are currently experiencing continued period-over-period growth in private label credit and general purpose credit card receivables—growth that we expect to result in net period-over-period growth in our total interest income and related fees for these operations throughout 2025.

During 2024 we experienced higher growth rates for our private label credit receivables than for our general purpose credit card receivables.

As discussed above, these private label receivables typically generate lower gross yields than our general purpose credit card receivables.

We are currently experiencing continued period-over-period increases in private label credit and general purpose credit card receivables.

Therefore, we expect net period-over-period growth in our total interest income and related fees for these operations throughout 2025.

During 2024 and so far in 2025, we experienced higher growth rates for our private label credit receivables than for our general purpose credit card receivables.

As discussed above, these private label receivables typically generate lower gross yields and lower gross losses than our general purpose credit card receivables.

This growth in private label credit receivables, relative to growth in general purpose credit card receivables offset some of the increased fee and finance pricing requirements discussed above.

We expect growth in our private label credit receivables to exceed growth in our general purpose receivables through the second quarter of 2025.

As our private label credit receivables growth is typically strongest during the second and third quarters of each year, we expect growth in this category of receivables to moderate late in the third quarter and into the fourth quarter of 2025.

Growth in our general purpose credit card receivables is expected to continue for the remainder of the year in line with, for the third quarter of 2025, and then exceeding, for the fourth quarter of 2025, growth in our private label credit receivables as we continue to expand our marketing efforts.

Future periods’ growth is dependent on the addition of new retail partners to expand the reach of private label credit operations as well as growth within existing partnerships and the level of marketing investment for the general purpose credit card operations.

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Growth in customer related fees was largely due to the use of new marketing channels which increased customer engagement with these products.

When coupled with increases in interchange revenues which are largely impacted by growth in our receivables, this resulted in an increase in this category of revenues for the quarter ended March 31, 2025, when compared to the same period in 2024.

When coupled with increases in interchange revenues which are largely impacted by growth in our receivables, this resulted in an increase in this category of revenues for the three and six months ended June 30, 2025, when compared to the same periods in 2024.

See Note 2, "Significant Accounting Policies and Condensed Consolidated Financial Statement Components" to our condensed consolidated financial statements for additional information related to this revenue from contracts with customers.

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Variations in interest expense are due to new borrowings and increased costs of capital associated with growth in private label credit and general purpose credit card receivables and CAR operations as evidenced within Note 9, "Notes Payable," to our condensed consolidated financial statements, offset by our debt facilities being repaid commensurate with net liquidations of the underlying credit card, auto finance and installment loan receivables that serve as collateral for the facilities.

Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform increased to $2,137.6 million as of March 31, 2025, from $1,795.4 million as of March 31, 2024.

Interest expense increased $12.5 million for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024.

Outstanding notes payable, net of unamortized debt issuance costs and discounts, associated with our private label credit and general purpose credit card platform increased to $2,431.0 million as of June 30, 2025, from $1,816.8 million as of June 30, 2024.

Interest expense increased $15.7 million and $28.2 million for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024.

The majority of this increase in outstanding debt relates to the addition of multiple credit facilities in 2024 and 2025 associated with growth in our card and loan receivables, coupled with the issuances of 9.25% Senior Notes due 2029 (the "2029 Senior Notes").

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All proceeds received associated with charged-off accounts, are credited to the allowance for credit losses.

We have experienced a period-over-period decrease of $1.9 million in our provision for credit losses (when comparing the three months ended March 31, 2025 to the same period in 2024) primarily associated with lower receivable balances and decreases in loss estimates associated with our Auto Finance segment's floorplan loans.

We have experienced a period-over-period decrease of $0.4 million in our provision for credit losses (when comparing the three months ended June 30, 2025 to the same period in 2024) primarily associated with lower receivable balances and decreases in loss estimates associated with our Auto Finance segment's floorplan loans.

Most risk of loss in our Auto Finance segment is widely diversified with consumer auto loans across the U.S.

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Changes in fair value of loans.

We experienced losses in our total Changes in fair value of loans of $178.3 million for the three months ended March 31, 2025.

This compares to losses of $159.2 million for the three months ended March 31, 2024.

We experienced losses in our total Changes in fair value of loans of $216.8 million and $395.1 million for the three and six months ended June 30, 2025, respectively.

This compares to losses of $186.3 million and $345.4 million for the three and six months ended June 30, 2024, respectively.

Changes in fair value of loans includes 1) current period principal and finance charge-offs of fair value receivables, 2) the normal accretion of fair value related to finance charges and fees in excess of the contractual amounts billed, which is recognized in revenue during the period, and gains typically recognized in earnings as the fair value of finance charges and fees is greater than the contractual amounts billed during a period, 3) losses on acquisitions of our private label receivables and 4) the impact of changes in the assumptions underlying receivables at the end of the measurement period.

The increase in losses in Changes in fair value of loans for the three months ended March 31, 2025 when compared to the three months ended March 31, 2024, were largely due to a decrease in the Changes in fair value of loans at fair value, included in earnings, which totaled $55.2 million for the three months ended March 31, 2025 compared to $72.5 million for the three months ended March 31, 2024.

Results impacting the $55.2 million and $72.5 million of Changes in fair value of loans at fair value, included in earnings for the three months ended March 31, 2025 and 2024, respectively, are as follows:

1) net gains of $31.4 million associated with the normal accretion of fair value related to finance charges and fees in excess of the contractual amounts billed, which is recognized in revenue during the period, and gains typically recognized in earnings as the fair value of finance charges and fees is greater than the contractual amounts billed during a period (compared to $34.9 million of such gains for the three months ended March 31, 2024), 2) net losses of $37.7 million on the acquisition of private label credit receivables, which often have below market pricing and for which we often receive merchant fees which ensure we earn adequate returns (compared to $28.7 million of such losses for the three months ended March 31, 2024) and 3) net gains of $61.5 million (compared to $66.3 million of such increase for the three months ended March 31, 2024) related to favorable changes in fair value assumptions due to improvements in the underlying performance in the form of improved delinquencies and improved net returns.

Marginally contributing to this decline in Changes in fair value of loans were slight increases in principal and finance charge-offs (net of recoveries), which totaled $233.5 million for the three months ended March 31, 2025, compared to $231.7 million for the three months ended March 31, 2024.

These charge-offs increased period over period primarily due to overall increases in our acquisition and relative mix of receivables and not due to specific changes in the underlying performance of the receivables (see additional discussion related to delinquencies and charge-offs below).

The increase in losses in Changes in fair value of loans for the three and six months ended June 30, 2025 when compared to the three and six months ended June 30, 2024, were largely due to a decrease in the net positive impacts of Changes in fair value of loans at fair value, included in earnings, which offset chargeoffs incurred during the period.

These impacts totaled $(5.1) million and $50.1 million for the three and six months ended June 30, 2025, respectively, compared to $30.8 million and $103.3 million for the three and six months ended June 30, 2024, respectively.

Results impacting the Changes in fair value of loans at fair value, included in earnings for the three and six months ended June 30, 2025 and 2024, respectively, are as follows:

1) net gains of $25.8 million and $57.2 million for the three and six months ended June 30, 2025, respectively, associated with the normal accretion of fair value related to finance charges and fees in excess of the contractual amounts billed, which is recognized in revenue during the period, and gains typically recognized in earnings as the fair value of finance charges and fees is greater than the contractual amounts billed during a period (compared to $34.9 million and $69.8 million of such gains for the three and six months ended June 30, 2025, respectively), 2) net losses of $48.0 million and $85.7 million for the three and six months ended June 30, 2025, respectively, on the acquisition of private label credit receivables, which often have below market pricing and for which we often receive merchant fees which ensure we earn adequate returns (compared to $54.9 million and $83.6 million of such losses for the three and six months ended June 30, 2024, respectively) and 3) net gains of $17.1 million and $78.6 million (compared to $50.8 million and $117.1 million of such increase for the three and six months ended June 30, 2024, respectively) related to favorable changes in fair value assumptions due to improvements in the underlying performance in the form of lower delinquencies and higher net returns.

The decreased impacts due to favorable changes in fair value assumptions for the three and six months ended June 30, 2025 relative to the same periods in 2024 were largely a result of policy and pricing changes made during 2024 which enhanced the fair value of the portfolio in those periods.

Marginally offsetting this decline in Changes in fair value of loans were slight decreases in principal and finance charge-offs (net of recoveries), which totaled $211.8 million and $445.3 million for the three and six months ended June 30, 2025, respectively, compared to $217.0 and $448.7 million for the three and six months ended June 30, 2024, respectively.

These charge-offs decreased period over period despite increases in our period end managed receivables, primarily due to the improved performance in both our private label credit and general purpose credit card delinquencies rates over the past several quarters as well as changes to our relative mix of receivables that include significant increases in the acquisition of private label credit receivables for which we have limited loss exposure due to agreements with retail partners (see additional discussion related to delinquencies and charge-offs below).

For all periods presented, we included asset performance degradation in our forecasts to reflect both changes in assumed asset level economics and the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that current trends would suggest.

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As the size and composition of our portfolio fluctuates, or as we experience periods of growth or decline in our acquisition of new receivables, this rate can fluctuate.

We have experienced marginal increases in our weighted-average, Gross yield, net of finance charge charge-offs rate used in our fair value calculations as of March 31, 2025, when compared to rates used as of March 31, 2024 largely due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

Our general purpose credit card receivables experienced an increase in this same rate for the noted periods due to the aforementioned product, policy, and pricing changes which contributed to the $55.2 million of net gains noted above for the three months ended March 31, 2025.

As these product policy and pricing changes continue to further positively impact both newly acquired and existing private label credit receivables and general purpose credit card receivables, we expect our gross yield, net of finance charge charge-offs rate to increase over time although the pace and timing of purchases for new general purpose credit card receivables, relative to those of private label credit receivables, could result in near term declines in this rate.

We have experienced marginal declines in our weighted-average, Gross yield, net of finance charge charge-offs rate used in our fair value calculations of our private label credit receivables as of June 30, 2025, when compared to rates used as of June 30, 2024 largely due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

Largely offsetting this decline, our general purpose credit card receivables experienced an increase in this same rate for the noted periods due to the aforementioned product, policy, and pricing changes which contributed to the net $(5.1) million and $50.1 million of net (loss)/gains noted above for the three and six months ended June 30, 2025, respectively.

As these product policy and pricing changes continue to further positively impact both newly acquired and existing private label credit receivables and general purpose credit card receivables.

We expect our gross yield, net of finance charge charge-offs rate to increase over time although the pace and timing of purchases for new general purpose credit card receivables, relative to those of private label credit receivables, could result in near term declines in this rate.

The acquisition of private label credit receivables, particularly those noted above, is largely seasonal in nature, peaking in the second and third quarters of each year.

As a result, we would expect this weighted average rate to decrease in those periods absent the offset of our higher yielding general purpose credit card receivables acquired during the same period.

As a result, we would expect this weighted average rate to decrease in those periods (as was noted during the second quarter of 2025) absent the offset of our higher yielding general purpose credit card receivables acquired during the same period.

While our bank partners have enacted product, policy, and pricing changes on our existing receivables (and all newly acquired receivables), some of these changes will take several quarters to be fully realized.

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As a result, payment rates on private label credit receivables are naturally lower than those associated with our general purpose credit card receivables.

This was particularly influenced by strong growth in the aforementioned private label credit receivables acquired during the second and third quarters of 2024 that have limited loss exposure and tend to have longer associated terms and lower effective payment rates.

This decline in payment rates is not evident in our credit card portfolio, which maintained relatively stable payment rates for the quarters ended March 31, 2025 and 2024.

This was particularly influenced by strong growth in the aforementioned private label credit receivables acquired during the second and third quarters of 2024 (and also noted in the second quarter of 2025) that have limited loss exposure and tend to have longer associated terms and lower effective payment rates.

This decline in payment rates is not evident in our credit card portfolio, which has maintained relatively stable payment rates for all periods in 2025 and 2024.

Servicing Rate – Our servicing rate has fluctuated marginally over time as we continue to implement processes and strategies to more efficiently and effectively service the accounts underlying our outstanding receivables portfolios.

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Expected Net Principal Credit Loss Rate – Our Expected net principal credit loss rate is chiefly impacted by the relative makeup of receivables within our pools rather than changes in expected performance of those underlying pools.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners, particularly in the second and third quarters of 2024, our Expected net principal credit loss rate has decreased.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners, particularly in the second and third quarters of 2024 (and the second quarter of 2025), our Expected net principal credit loss rate has decreased.

Additionally, we have noted reductions in the Expected net principal credit loss rate associated with our general purpose credit card receivables, which have shown continued overall improvements in delinquency rates.

With growth in the acquisition of our private label credit receivables, particularly those noted above with limited loss exposure, and growth in better performing general purpose credit card receivables, we expect this weighted average rate to decrease over the next several quarters (when compared to similar periods in prior years) before stabilizing.

As changes in expected losses for receivables at the individual pool level did not change meaningfully, the overall impact on our fair value calculation was not meaningful although the positive impact of the improvement noted in delinquencies is included as a component of the $55.2 million of net gains noted above.

Discount Rate – Our weighted average discount rate has remained relatively consistent over the past several quarters (and is expected to continue to remain consistent or go down).

Primarily impacting modest changes in our weighted average discount rate are mix shifts in the type of receivables acquired, as different receivable types (general purpose credit card receivables versus private label credit receivables) have different expected return requirements used by third-party market participants.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners that reimburse us for credit losses, our weighted average discount rate has decreased marginally.

As we have acquired a higher number of receivables associated with our private label credit accounts for which we have limited loss exposure due to agreements with retail partners that reimburse us for credit losses, our weighted average discount rate has decreased marginally as these receivables have appropriately lower return requirements.

While changes in this mix do impact the weighted average discount rate, they do not have a direct impact on the calculation of fair value for our individual pools.

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Total operating expenses.

Total operating expenses variances for the three months ended March 31, 2025, relative to the three months ended March 31, 2024, reflect the following:

Total operating expenses variances for the three and six months ended June 30, 2025, relative to the three and six months ended June 30, 2024, reflect the following:

increases in salaries and benefit costs related to both the growth in the number of employees and inflationary compensation pressure.

We expect some continued increase in this cost in 2025 compared to 2024 as we expect to continue to invest in technology, risk underwriting and compliance and as a result we expect to increase our number of employees;

increases in card and loan servicing expenses due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew to $2,706.3 million outstanding from $2,317.6 million outstanding at March 31, 2025 and March 31, 2024, respectively, and costs associated with the implementation of product, policy, and pricing changes discussed above.

increases in card and loan servicing expenses for both the three and six months ended June 30, 2025, when compared to the same period in 2024 due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew to $3,046.5 million outstanding from $2,414.7 million outstanding at June 30, 2025 and June 30, 2024, respectively, and costs associated with the implementation of product, policy, and pricing changes discussed above.

As many of the expenses associated with our card and loan servicing efforts are now variable based on the amount of underlying receivables, we would expect this number to continue to grow in 2025 commensurate with growth in our receivables.

Offsetting a portion of this increase are significant reductions in our servicing costs per account, resulting from the realization of greater economies of scale and increased use of automation as our receivables have grown;

increases in marketing and solicitation costs for the three months ended March 31, 2025, when compared to the same period in 2024, primarily due to quarterly growth in both new credit card and private label customers serviced, the total accounts of which increased over 230,000 as of March 31, 2025 when compared to March 31, 2024.

increases in marketing and solicitation costs for both the three and six months ended June 30, 2025, when compared to the same period in 2024, primarily due to quarterly growth in both new credit card and private label customers serviced, the total accounts of which increased over 400,000 as of June 30, 2025 when compared to June 30, 2024.

These increases in marketing and solicitation costs are a direct result of the increased costs associated with assisting our bank partners to acquire new consumers.

As we continue to adjust our underwriting standards to reflect changes in fee and finance assumptions on new receivables, and allow for overall increases in the cost to successfully market to consumers, we expect period over period marketing costs for 2025 to increase relative to those experienced in 2024, although the frequency and timing of increased marketing efforts could vary and are dependent on macroeconomic factors such as national unemployment rates and federal funds rates; and

slight decreases in other expenses primarily relate to costs associated with occupancy or other third party expenses that are largely fixed in nature.

slight increases in other expenses for both the three and six months ended June 30, 2025, when compared to the same period in 2024, primarily related to costs associated with occupancy or other third party expenses that are largely fixed in nature.

Some costs including occupancy, legal and travel expenses can be variable based on growth and have grown as we expand our marketing and growth efforts.

Decreases in this category for the three months ended March 31, 2025, when compared to the same period in 2024 primarily relate to certain nonrecurring costs associated with accounting and legal expenditures experienced in the first quarter of 2024.

While we expect some increase in these costs as we continue to grow our receivable portfolios, we do not anticipate the increase to be meaningful.

Increases in this category for the three and six months ended June 30, 2025, when compared to the same period in 2024 primarily relate to ongoing increased costs associated with accounting and legal expenses offset by certain nonrecurring costs in these categories experienced in the first quarter of 2024.

While we expect some continued increase in these associated costs as we continue to grow our receivable portfolios, we do not anticipate the increase to be meaningful.

Certain operating costs are variable based on the levels of accounts and receivables we service (both for our own receivables and for others) and the pace and breadth of our growth in receivables.

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The units carried a 16% preferred return paid quarterly.

The units had both call and put rights and were also subject to various covenants including a minimum book value.

In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms.

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Income Taxes.

We experienced effective tax rates of 23.6% and 21.1% for the three months ended March 31, 2025, and 2024, respectively.

These effective tax expense rates were above the statutory rate principally due to (1) state and foreign income tax expense, (2) interest accrued on uncertain tax positions, (3) taxes on global intangible low-taxed income, and (4) deduction disallowance under Section 162(m) of the Internal Revenue Code of 1986, as amended, with respect to compensation paid to our covered employees.

Offsetting the foregoing items were deductions associated with the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values.

Another offsetting item of a greater magnitude in the three months ended March 31, 2024, versus the three months ended March 31, 2025, was our deduction of income tax expense on debt for tax purposes that was repaid in the three months ended March 31, 2025, such financial instrument which was characterized in our consolidated financial statements as dividend-paying preferred stock.

We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our consolidated statements of income.

We experienced effective tax rates of 24.4% and 24.0% for the three and six months ended June 30, 2025, respectively, compared to 15.6% and 18.5% for the three and six months ended June 30, 2024, respectively.

Our effective tax rates for the three and six months ended June 30, 2025, are above the statutory rate principally due to our (1) state and foreign income tax expense, including the effects of law changes enacted in the three months ended June 30, 2025, in certain states in which we operate, (2) the tax effects of deduction disallowance under Section 162(m) of the Internal Revenue Code of 1986 as amended (the “Code”) with respect to compensation paid to our covered employees, and (3) taxes on global intangible low-taxed income.

Offsetting the foregoing items were the tax effects of deductions (1) associated with the exercises of stock options and the vesting of restricted stock at the times when the fair value of our stock exceeded such share-based awards’ grant date values, and (2) of amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts which constituted deductible interest expense on a debt issuance for tax purposes.

Our effective tax rates for the three and six months ended June 30, 2024, are below the statutory rate principally due to the tax effects of our deduction of (1) amounts characterized in our condensed consolidated financial statements as dividends on a preferred stock issuance, such amounts which constituted deductible interest expense on a debt issuance for tax purposes, and (2) a loss related to our unrecovered investment in a foreign subsidiary—such subsidiary which ceased operations in the three months ended June 30, 2024, and with respect to which we had used permanently reinvested earnings” accounting in our condensed consolidated financial statements.

Offsetting the foregoing items were (1) state and foreign income tax expense including the effects of law changes enacted in the three months ended June 30, 2024 in certain states in which we operate, (2) taxes on global intangible low-taxed income, and (3) the tax effects of deduction disallowance under Section 162(m) of the Code with respect to compensation paid to our covered employees.

We report interest expense associated with our income tax liabilities (including accrued liabilities for uncertain tax positions) within our income tax line item on our condensed consolidated statements of income.

We likewise report within such line item the reversal of interest expense associated with our accrued liabilities for uncertain tax positions to the extent we resolve such liabilities in a manner favorable to our accruals therefor.

Such interest expense was de minimis in both the three months ended March 31, 2025, and 2024.

Our interest expense was $90 thousand for the six months ended June 30, 2025, and $93 thousand for the six months ended June 30, 2024.

Non-GAAP Financial Measures

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First, managed receivables data include the undiscounted contractual amounts due on the underlying consumer receivable plus fee billings (including fees and finance charges), less actual charge-offs.

Managed receivables data are also based on actual charge-offs as they occur and without regard to any merchant fees , changes in fair value of loans or changes in our allowances for credit losses (in periods where applicable).

Second, for managed receivables data, we amortize certain fees (such as annual and merchant fees) and expenses (such as marketing expenses) associated with our Fair Value Receivables over the expected life of the corresponding receivable and recognize other costs, such as claims made under credit deferral programs, when paid.

Under fair value accounting, these fees are recognized when billed or in the case of merchant fees, are recognized when the merchant confirms the transaction with us, which fulfills the terms of the associated merchant and marketing expenses are recognized when incurred.

A reconciliation of our operating revenues and other income, net of finance and fee charge-offs, to comparable amounts used in our calculation of Total managed yield ratios is as follows:

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Managed receivables levels.

We continue to experience overall period-over-period quarterly receivables growth with over $388.7 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners from March 31, 2025 to March 31, 2024.

The addition of large private label credit retail partners and ongoing purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped grow our private label credit receivables by $345.8 million in the twelve months ended March 31, 2025.

Our general purpose credit card receivables grew by $42.8 million during the twelve months ended March 31, 2025.

While some of our merchant partners continue to face year-over-year growth challenges, others are benefiting from continued consumer spending and a growing economy and have expanded their relationship with us.

We continue to experience overall period-over-period quarterly receivables growth with over $631.8 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners from June 30, 2025 to June 30, 2024.

The increased purchases of receivables arising in accounts issued by our bank partners to customers of our existing retail partners helped grow our private label credit receivables by $510.9 million in the twelve months ended June 30, 2025.

Our general purpose credit card receivables grew by $120.9 million during the twelve months ended June 30, 2025.

Some of our larger merchant partners are benefiting from continued consumer spending and a growing economy and have expanded their relationship with us.

We currently expect continued period-over-period quarterly receivables growth in our general purpose credit card and private label credit receivables.

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Similarly, the loss of existing retail partner relationships could adversely affect new loan acquisition levels.

Our top five retail partnerships accounted for over 75% of our private label receivables outstanding as of March 31, 2025.

Our top five retail partnerships accounted for over 80% of our private label receivables outstanding as of June 30, 2025.

The volume of receivables purchased each period varies based on a number of factors, including seasonal consumer purchase patterns and growth (or contraction) within merchant retail locations.

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Delinquency rates in the third and fourth quarter of 2024 remained largely consistent with those noted in the same period of prior year.

For the first quarter of 2025 we have observed lower overall delinquency rates in both our general purpose credit card receivables and our private label credit receivables.

The lower delinquency rates should result in lower overall charge-off rates in the second and third quarter of 2025 when compared to rates in the second and third quarters of 2024.

For the first and second quarters of 2025 we have observed lower overall delinquency rates in both our general purpose credit card receivables and our private label credit receivables.

Increased acquisitions of private label credit receivables with limited loss exposures and the noted improvements in general purpose credit card receivables will continue to result in lower overall charge-off rates in the third and fourth quarters of 2025 when compared to rates in the third and fourth quarters of 2024.

As we continue to acquire newer private label credit and general purpose credit card receivables, we expect our delinquency rates to marginally increase when compared to the same periods in prior years due to a planned shift in our general purpose and private label credit receivables originated as our bank partners expand product offerings to a broader range of consumers.

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For example, delinquency rates historically are lower in the second quarter of each year due to the benefits of seasonally strong payment patterns associated with tax refunds for many consumers.

Included in this expected decrease in delinquencies is continued growth in the portfolio which will also mute delinquency metrics.

Offsetting this expected increase in delinquencies is continued growth in the portfolio which will mute delinquency metrics.

Our beliefs for future delinquency rates are predicated on the assumption that the slowing rate of inflation will continue and our recent tightened underwriting standards will prove effective at reducing account delinquencies.

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General purpose credit card receivables tend to have higher total yields than private label credit receivables (and corresponding higher charge-off rates).

As a result, in periods where we have declines in rates of growth of these general purpose credit card receivables, as was noted in 2024 (relative to growth in private label credit receivables), we expect to have slightly lower total managed yield ratios.

We currently expect increases in the rates of acquisition of our general purpose credit card receivables relative to private label credit receivables and correspondingly higher period-over-period operating revenue and other income for 2025 (and a correspondingly higher Total managed yield ratio) although the timing of these acquisitions could result in some fluctuations of our Total managed yield ratio, annualized when comparing quarterly rates in 2025 to corresponding quarterly periods in 2024.

This growth also includes an expected seasonal shift in our mix of acquired private label receivables to higher FICO receivables that have lower gross yields (and correspondingly lower charge-off expectations) in the third quarter of each year, which may result in marginally lower managed yield ratios when compared to the corresponding periods in prior years.

As a result, in periods where we have slower rates of growth of general purpose credit card receivables, as was noted in 2024 (relative to growth in private label credit receivables), we expect to have slightly lower total managed yield ratios.

We currently expect increases in the rates of acquisition of our general purpose credit card receivables relative to private label credit receivables and correspondingly higher period-over-period operating revenue and other income for the remainder of 2025 (and a correspondingly higher Total managed yield ratio) although the timing of these acquisitions could result in some fluctuations of our Total managed yield ratio, annualized when comparing quarterly rates in 2025 to corresponding quarterly periods in 2024.

Our managed yield ratios, however, may be marginally lower due to an expected seasonal shift in our mix of acquired private label receivables to higher FICO receivables that have lower gross yields (and correspondingly lower charge-off expectations) in the third quarter of each year.

Combined principal net charge-off ratio, annualized.

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Additionally, inflation, particularly as it relates to higher gas prices, negatively impacted some consumers' ability to make payments on outstanding loans and fees receivable.

We noted improvements in this rate in the fourth quarter of 2024 and into the first quarter of 2025 as delinquencies continued to improve and noted improvements in consumer payment behavior and strong growth in our receivables base.

We noted improvements in this rate in the fourth quarter of 2024 and in the first and second quarters of 2025 as delinquencies continued to improve, consumer payment behavior improved and we experienced strong growth in our receivables base.

Despite expected marginal increases in delinquency rates as discussed above, we expect our overall combined principal net charge-off ratios to continue to decrease for 2025, when compared to the comparable prior periods.

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Our charge-off ratio has also been impacted due to (and will continue to be impacted by):

1) higher expected charge-off rates on the private label credit and general purpose credit card receivables corresponding with higher yields on these receivables, (2) continued testing of receivables with higher risk profiles, leading to periodic increases in combined principal net charge offs, (3) the aforementioned tightened underwriting standards that will slow the pace of growth in our receivables base, and (4) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of inflation pressures.

1) higher expected charge-off rates on the private label credit and general purpose credit card receivables corresponding with higher yields on these receivables, (2) continued testing of receivables with higher risk profiles, leading to periodic increases in combined principal net chargeoffs, (3) the aforementioned tightened underwriting standards that slowed the pace of growth in our receivables base, and (4) negative impacts on some consumers' ability to make payments on outstanding loans and fees receivable as a result of inflation pressures.

While charge-offs associated with previously mentioned accounts enrolled in short-term payment deferrals had a negative impact on our Combined principal net charge-off ratio, annualized through the second quarter of 2024, they did not have a material impact on our condensed consolidated statements of income as the majority of these accounts were already considered in our changes in fair value.

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Recent declines in this ratio, when compared to corresponding prior periods, relate primarily to recent increases in our principal net charge-offs as noted above.

This trend reversed in the first quarter of 2025 as we realized improvements in delinquencies.

We currently expect continued marginal improvements in our Combined principal net charge-off ratio, annualized, relative to corresponding periods in 2024.

This trend reversed in the first and second quarters of 2025 as we realized improvements in delinquencies and subsequent chargeoffs.

We currently expect continued marginal improvements in our Combined principal net charge-off ratio, annualized, relative to corresponding periods in 2024 which should continue to result in an improved net interest margin ratio.

Changes in the mix shift of acquired receivables, noted above, will also lead to increases in the Net interest margin, annualized as the higher yielding receivables become a larger component of our total portfolio.

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Our average APRs for general purpose credit card receivables remained largely consistent throughout 2024 with some increases noted as new product, policy, and pricing changes were implemented which raised the APRs associated with new receivable acquisitions.

We expect some continued improvements in our average APRs as newly acquired receivables with higher APRs become a larger part of our overall portfolio of receivables.

Our average APRs for private label credit fell throughout 2024 and into the first quarter of 2025 due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

We expect this declining trend to continue, however, the timing and relative mix of receivables acquired could cause some minor fluctuations.

We expect some continued improvements in our general purpose credit card receivable average APRs as newly acquired receivables with higher APRs become a larger part of our overall portfolio of receivables.

Our average APRs for private label credit fell throughout 2024 and in 2025 due to a shift in the overall portfolio mix towards private label credit receivables acquired that tend to have lower effective yields but also for which we have limited loss exposure due to agreements with retail partners.

This trend continued in the second quarter of 2025 with increased acquisitions of these receivables.

We expect this declining trend to continue into the third quarter of 2025, however, the timing and relative mix of receivables acquired could cause some minor fluctuations.

We do not acquire or service receivables that have an APR above 36.0%.

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Receivables purchased during period reflect the gross amount of investments we have made in a given period, net of any credits issued to consumers during that same period.

For the first quarter of 2025 we noted slight increases in the amount of receivables purchased associated with our General Purpose Credit Card receivables and also a larger increase in receivables purchased associated with our Private Label Credit receivables.

This growth in Private Label Credit Receivables purchased primarily relates to growth in purchases associated with our largest retail partner, growth which we expect to continue to produce quarter over quarter growth in the second quarter of 2025.

For the first and second quarters of 2025 we noted increases in the amount of receivables purchased associated with our General Purpose Credit Card receivables and also a larger increase in receivables purchased associated with our Private Label Credit receivables.

This growth in Private Label Credit Receivables purchased primarily relates to growth in purchases associated with our largest retail partner.

For most periods presented in 2024, our private label credit receivable purchases experienced overall growth, when compared to the same periods in 2023, largely based on the addition of new private label credit retail partners as well as growth within existing retail partnerships, as previously discussed.

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Managed receivables.

Recent stress noted at some dealer locations has resulted in higher than anticipated credit losses associated with floorplan loans during 2024.

When coupled with increased delinquencies associated with the underlying consumers loans, we have experienced period over period declines in our managed receivables for the third and fourth quarter of 2024 and first quarter of 2025.

We expect modest growth in the level of our managed receivables throughout 2025 although we may continue to be below managed receivables levels (when compared to the same periods in prior years ) for the next few quarters as we rebuild our receivables base and CAR expands within its current geographic footprint and continues plans for service area expansion.

Stress noted at some dealer locations resulted in higher than anticipated credit losses associated with floorplan loans during 2024.

We expect modest growth in the level of our managed receivables throughout 2025, although we may continue to be below managed receivables levels (when compared to the same periods in prior years ) for the next few quarters as CAR rebuilds its receivables base, expands within its current geographic footprint and continues plans for service area expansion.

Although we continue to expand our CAR operations, the Auto Finance segment faces strong competition from other specialty finance lenders, as well as the indirect effects on us of our buy-here, pay-here dealership partners’ competition with other franchise dealerships for consumers interested in purchasing automobiles.

We continually evaluate bulk purchases of receivables and experienced good growth in our receivables base throughout 2023 resulting from several bulk purchases; however, the timing and size of such purchases are difficult to predict.

We continually evaluate bulk purchases of receivables, however, the timing and size of such purchases are difficult to predict.

Delinquencies and charge-offs.

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All of our CaaS segment’s structured financing facilities are expected to amortize down with collections on the receivables within their underlying trusts and should not represent significant refunding or refinancing risks to our condensed consolidated balance sheets.

Facilities that could represent near-term and longer-term refunding or refinancing needs as of March 31, 2025 are those associated with the following notes payable in the amounts indicated (in millions):

Facilities that could represent near-term and longer-term refunding or refinancing needs as of June 30, 2025 are those associated with the following notes payable in the amounts indicated (in millions):

Revolving credit facility (expiring July 20, 2026) that is secured by certain receivables and restricted cash

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Revolving credit facility (expiring December 1, 2026) that is secured by certain assets

Revolving credit facility (expiring July 15, 2027) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring August 30, 2027) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring March 31, 2028) that is secured by certain receivables and restricted cash

Revolving credit facility (expiring April 7, 2028) that is secured by certain receivables and restricted cash

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We are amortizing fees associated with the issuance of the 2026 Senior Notes into interest expense over the expected life of such notes.

Amortization of these fees for the three months ended March 31, 2025 and 2024 totaled $0.4 million and $0.4 million, respectively.

We repurchased $0.0 million and $0.4 million of the outstanding principal amount of these 2026 Senior Notes in the three months ended March 31, 2025 and 2024, respectively.

Amortization of these fees for the three and six months ended June 30, 2025 and 2024 totaled $0.3 million, $0.7 million, $0.3 million and $0.7 million, respectively.

We repurchased $0.0 and $0.4 million of the outstanding principal amount of these 2026 Senior Notes in the three and six months ended June 30, 2024, respectively.

There have been no repurchases in 2025.

In January and February 2024, we issued an aggregate of $57.2 million aggregate principal amount of 2029 Senior Notes.

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We are amortizing fees associated with the issuance of the 2029 Senior Notes into interest expense over the expected life of such notes.

Amortization of these fees for the three months ended March 31, 2025 and 2024 totaled $0.3 million and $0.1 million, respectively.

Amortization of these fees for the three and six months ended June 30, 2025 and 2024 totaled $0.3 million, $0.7 million, $0.1 million and $0.2 million, respectively.

In June and July 2021, we issued an aggregate of 3,188,533 shares of 7.625% Series B Cumulative Perpetual Preferred Stock, liquidation preference of $25.00 per share (the "Series B preferred stock"), for net proceeds of approximately $76.5 million after deducting underwriting discounts and commissions, but before deducting expenses and the structuring fee.

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The sales agents will make all sales using commercially reasonable efforts consistent with their normal trading and sales practices up to the amount specified in, and otherwise in accordance with the terms of, the placement notices.

During the three months ended March 31, 2025 and 2024, we sold 13,661 shares and 44,143 shares, respectively, of our Series B preferred stock under our Preferred Stock ATM Program for net proceeds of $0.3 million and $1.1 million, respectively.

During the three months ended March 31, 2025 and 2024, no 2026 Senior Notes were sold under the Company's Preferred Stock ATM Program.

During the three months ended March 31, 2025 and 2024, we sold $17.7 million and $0, respectively, principal amount of our 2029 Senior Notes under our Preferred Stock ATM Program for net proceeds of $17.4 million and $0, respectively.

During the three months ended March 31, 2025 and 2024, we sold 200,000 and 0 common shares, respectively, under the Company’s Common Stock ATM Program for net proceeds of $11.6 million and $0, respectively.

During the three and six months ended June 30, 2025 and 2024, we sold 142,603 shares, 156,264 shares, 0 shares and 44,143 shares, respectively, of our Series B preferred stock under our Preferred Stock ATM Program for net proceeds of $3.2 million, $3.5 million, $0 and $1.1 million, respectively.

During the three and six months ended June 30, 2025 and 2024, no 2026 Senior Notes were sold under the Company's Preferred Stock ATM Program.

During the three and six months ended June 30, 2025 and 2024, we sold $8.1 million, $25.8 million, $0 and $0, respectively, principal amount of our 2029 Senior Notes under our Preferred Stock ATM Program for net proceeds of $7.9 million, $25.3 million, $0 and $0, respectively.

During the three and six months ended June 30, 2025 and 2024, we sold 0 common shares, 200,000 common shares, 0 common shares and 0 common shares, respectively, under the Company’s Common Stock ATM Program for net proceeds of $0, $11.6 million, $0 and $0, respectively.

On November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $1.00 per unit to an unrelated third party.

The units carried a 16% preferred return to be paid quarterly.

The units had both call and put rights and were subject to various covenants including a minimum book value.

In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms.

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Upon the election by the holders of a majority of the shares of Series A preferred stock, each share of the Series A preferred stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $10 per share, subject to adjustment in certain circumstances to prevent dilution.

At March 31, 2025, we had $350.4 million in unrestricted cash held by our various business subsidiaries.

At June 30, 2025, we had $329.4 million in unrestricted cash held by our various business subsidiaries.

Because the characteristics of our assets and liabilities change, liquidity management is a dynamic process for us, driven by the pricing and maturity of our assets and liabilities.

We historically have financed our business through cash flows from operations, asset-backed structured financings and the issuance of debt and equity.

Details concerning our cash flows for the three months ended March 31, 2025 and 2024 are as follows:

During the three months ended March 31, 2025, we generated $131.6 million of cash flows from operations compared to our generation of $118.8 million of cash flows from operations during the three months ended March 31, 2024.

Details concerning our cash flows for the six months ended June 30, 2025 and 2024 are as follows:

During the six months ended June 30, 2025, we generated $264.3 million of cash flows from operations compared to our generation of $234.4 million of cash flows from operations during the six months ended June 30, 2024.

While payment rates for our consumers stayed consistent period over period, we experienced an increase in cash provided by operating activities principally related to finance and fee collections associated with growing private label credit and general purpose credit card receivables and increased recoveries on charged-off receivables.

Most of this change was due to growth in the underlying receivables (and collections thereon) along with the implementation of product, policy and pricing changes, which effectively increased the minimum payment amounts required by consumers.

During the three months ended March 31, 2025, we used $114.9 million of cash from our investing activities, compared to use of $67.5 million of cash from investing activities during the three months ended March 31, 2024.

During the six months ended June 30, 2025, we used $520.4 million of cash from our investing activities, compared to the use of $264.8 million of cash from investing activities during the six months ended June 30, 2024.

This increase in cash used is primarily due to marginal increases in the level of net investments in private label credit and general purpose credit card receivables relative to the same period in 2023.

For the three months ended March 31, 2025, we purchased $621 million in private label and general purpose credit card receivables compared to $560 million for the three months ended March 31, 2024.

For the six months ended June 30, 2025, we purchased $1,550 million in private label and general purpose credit card receivables compared to $1,238 million for the six months ended June 30, 2024.

Slightly offsetting this increase were increased recoveries associated with the sale of charged off receivables due to increases in the contractual purchase rates we receive from third parties.

As we continue to grow our receivables base, we would expect for purchases of new receivables to outpace payments thereon throughout 2025.

During the three months ended March 31, 2025, we used $54.9 million of cash from financing activities, compared to our generating $47.5 million of cash from financing activities during the three months ended March 31, 2024.

The increase in cash used in financing activities is primarily due to the redemption of the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon during the three months ended March 31, 2025 coupled with the sale of $57.2 million of 2029 Senior Notes during the three months ended March 31, 2024 compared to sales of $17.7 million for the three months ended March 31, 2025.

During the six months ended June 30, 2025, we generated $239.8 million of cash from financing activities, compared to our generating $53.8 million of cash from financing activities during the six months ended June 30, 2024.

The increase in cash provided by financing activities is primarily due to an increase in net borrowings (proceeds from borrowings less repayment of borrowings) of $259.9 million.

Additionally, we received proceeds from the issuance of 200,000 shares of common stock for net proceeds of $11.6 million in the first six months of 2025.

This increase was offset by the redemption of the remaining 50.0 million of Class B preferred units at $1.00 per unit plus accrued but unpaid interest thereon during the six months ended June 30, 2025 coupled with the sale of $57.2 million of 2029 Senior Notes during the six months ended June 30, 2024 compared to sales of $25.8 million for the six months ended June 30, 2025.

In both periods, the data reflect borrowings associated with private label credit and general purpose credit card receivables offset by net repayments of amortizing debt facilities as payments are made on the underlying receivables that serve as collateral.

For the quarter ended March 31, 2025, compared to the quarter ended March 31, 2024, these net repayments on debt facilities increased $26.4 million.

These increases in cash used in financing activities was partially offset by proceeds from the issuance of 200,000 shares of common stock for net proceeds of $11.6 million.

As discussed above, we expect to have continued growth in our receivables base and as a result, expect to continue raising additional capital to fund these acquisitions.

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HBR reimburses us for the full cost of the employees, based on the amount of time devoted to HBR.

In the three months ended March 31, 2025 and 2024, we received $0.2 million and $0.2 million, respectively, of reimbursed costs from HBR associated with these leased employees.

In the six months ended June 30, 2025 and 2024, we received $0.4 million and $0.4 million, respectively, of reimbursed costs from HBR associated with these leased employees.

On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis