What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-07 · 141 added, 92 removed, 676 unchanged (26% of the section changed)

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We provide technology and other support services to lenders who offer an array of financial products and services to consumers.

Both private label and general purpose card products are originated by The Bank of Missouri and WebBank (collectively, our “bank partners”).

Both private label and general purpose card products are originated by The Bank of Missouri, WebBank and First Bank and Trust (collectively, our “bank partners”).

Our bank partners originate these accounts through multiple channels, including retail and healthcare point-of-sale locations, direct mail solicitation, digital marketing and partnerships with third parties.

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In this Report, "receivables" or "loans" typically refer to receivables we have purchased from our bank partners or from other third parties.

On September 11, 2025, the Company closed the acquisition of all outstanding equity interests of Mercury, a leading data- and tech-centric credit card platform utilized by bank partners to provide credit cards to near-prime consumers in the U.S.

The acquisition aligns with Atlanticus’ strategic objective to expand its consumer credit offerings and increase scale within its credit card operations.

At the closing, Mercury became a wholly-owned subsidiary of Atlanticus.

The acquisition of Mercury adds an established top 25 credit card program to the suite of programs that Atlanticus manages on behalf of bank partners.

Mercury’s credit card offerings, including Mercury branded and co-branded programs, complements Atlanticus’ general purpose credit card, retail credit, patient financing, and dealer solutions products.

Total purchase consideration was approximately $166.5 million in cash.

In addition to the purchase consideration, the seller has the opportunity under the purchase agreement to receive earn out payments for up to three years following the closing of the acquisition in an amount equal to 75% of the amount by which the charge-offs of Mercury’s acquired receivables are less than agreed-upon charge-off levels.

We have determined the contingent consideration meets the definition of a derivative instrument under ASC 815.

We have recorded the derivative at fair value calculated using internally-developed estimates.

These estimates on performance of the acquired portfolio include expected credit losses, payment rates, servicing costs, discount rates and yields earned on our general purpose credit card receivables.

See Note 7, "Fair Values of Assets and Liabilities" for more information.

As a result of the acquisition, the Company added approximately 1.3 million credit card accounts and $3.2 billion in credit card receivables.

These receivables have been included with our existing general purpose credit card receivables in our reported results of operations and other discussions below.

Credit as a Service Segment

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Private label credit products associated with the healthcare space are generally issued under the Curae brand while all other retail partnerships, including those in consumer electronics, furniture, elective medical procedures, and home-improvement use the Fortiva brand or use our retail partners’ brands.

Our general purpose credit cards use the Aspire, Imagine and Fortiva brand names.

General purpose credit cards use the Aspire, Imagine, Mercury and Fortiva brand names.

Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers.

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

As of September 30, 2025, our CAR operations served over 690 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 June 30,

For the Three Months Ended September 30,

Increases (Decreases)

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Marketing and solicitation

Depreciation and amortization

Total operating expenses:

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Net income attributable to controlling interests to common shareholders

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Increases (Decreases)

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Marketing and solicitation

Depreciation and amortization

Total operating expenses:

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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

Three and Nine Months Ended September 30, 2025 Compared to Three and Nine Months Ended September 30, 2024

Total operating revenue and other income.

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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 $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.

Period-over-period results primarily relate to growth in private label credit and general purpose credit card products, the receivables of which increased to $6,600.1 million as of September 30, 2025, from $2,653.8 million as of September 30, 2024.

Growth in these receivables includes general purpose credit card receivables associated with our acquisition of Mercury, which added $3,159.9 million in receivables as of September 30, 2025 and contributed $49.9 million to the period ending Total operating revenue and other income.

Absent this acquisition, receivables were $3,440.2 million as of September 30, 2025.

We experienced growth in total operating revenues for both our general purpose credit card and our private label credit receivables for the three and nine months ended September 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 active accounts of which increased over 775,000 as of September 30, 2025 when compared to September 30, 2024 (excluding those serviced accounts added as part of our acquisition of Mercury) and also due to the recognition of merchant fees associated with new private label receivable acquisitions, which increased $8.7 million and $37.8 million, for the three and nine months ended September 30, 2025, respectively, from the same periods in 2024.

For our general purpose credit card receivables, we experienced strong growth in finance and fee income (increasing $73.5 million and $158.8 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024) resulting from growth in the acquisition of receivables and our acquisition of Mercury.

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.

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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.

While the products are designed to provide for similar net returns, 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.

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.

As our private label credit receivables growth is typically strongest during the second and third quarters of each year, we expect some seasonal contraction in that portfolio in the fourth quarter of 2025.

Growth in our general purpose credit card receivables is expected to continue for the remainder of the year and outpace growth in our private label credit receivables as we continue to expand our marketing efforts.

Additionally, as part of our acquisition of Mercury, we are currently enacting a number of product, policy and pricing changes on the newly acquired portfolio of general purpose credit card receivables.

These changes should result in meaningful additions to our Total operating revenue and other income in 2026 and beyond, although certain of the changes will take several quarters to be fully realized.

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 three and six months ended June 30, 2025, when compared to the same periods 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 nine months ended September 30, 2025, when compared to the same periods in 2024.

See Note 3, "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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We earn a portion of the interchange fee the card networks charge merchants for the transaction.

Additionally, we receive network incentives for credit card transactions, associated with accounts we service, processed through interchange networks.

We earn servicing income by servicing loan portfolios for third parties.

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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 10, "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 $2,431.0 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").

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 $5,297.3 million as of September 30, 2025, from $1,976.8 million as of September 30, 2024.

This growth, period over period, included notes payable associated with our Mercury acquisition of $2,813.0 million as of September 30, 2025.

Interest expense increased $33.0 million and $61.2 million for the three and nine months ended September 30, 2025, respectively, when compared to the three and nine months ended September 30, 2024.

The majority of this increase in interest expense 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") and our recent issuance of $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 (the "2030 Senior Notes").

Recent increases in the effective interest rates on debt have increased our interest expense as we have raised additional capital (or replaced existing facilities) over the last two years.

We anticipate additional debt financing over the next few quarters as we continue to grow coupled with higher effective interest rates on new debt compared to rates on maturing debt.

As such, we expect our quarterly interest expense for these operations to increase compared to prior periods.

As such, and when coupled with the interest expense associated with the acquired Mercury debt facilities, we expect our quarterly interest expense for these operations to increase compared to prior periods.

Provision for credit losses.

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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 $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.

We have experienced a period-over-period decrease of $3.1 million and $5.3 million in our provision for credit losses (when comparing the three and nine months ended September 30, 2025 to the same periods 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 $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.

We experienced losses in our total Changes in fair value of loans of $276.9 million and $672.0 million for the three and nine months ended September 30, 2025, respectively.

This compares to losses of $203.7 million and $549.2 million for the three and nine months ended September 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 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).

The increase in losses in Changes in fair value of loans for the three and nine months ended September 30, 2025 when compared to the three and nine months ended September 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 charge-offs incurred during the period.

These impacts totaled $(45.0) million and $5.1 million for the three and nine months ended September 30, 2025, respectively, compared to $(2.3) million and $101.0 million for the three and nine months ended September 30, 2024, respectively.

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

1) net gains of $37.8 million and $95.0 million for the three and nine months ended September 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 $20.0 million and $89.8 million of such gains for the three and nine months ended September 30, 2024, respectively), 2) net losses of $48.5 million and $134.2 million for the three and nine months ended September 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 $44.1 million and $127.7 million of such losses for the three and nine months ended September 30, 2024, respectively) and 3) net (losses)/gains of $(34.3) million and $44.3 million (compared to $21.8 million and $138.9 million of such increase for the three and nine months ended September 30, 2024, respectively) related to unfavorable changes for the quarter ended September 30, 2025 but favorable changes for the nine months ended September 30, 2025, in fair value assumptions.

These unfavorable assumption changes were largely due to a marginal decline in the fair value associated with our retail assets, largely due to significant increases in retail receivables acquired, which tend to have a lower fair value on the date of acquisition than those that have matured past peak charge off periods.

This unfavorable change was offset by 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 nine months ended September 30, 2025 relative to the same periods in 2024 were largely a result of product, policy and pricing changes made during 2024 which enhanced the fair value of the portfolio in those periods.

Adding to this decline in Changes in fair value of loans were slight increases in principal and finance charge-offs (net of recoveries), which totaled $231.8 million and $677.1 million for the three and nine months ended September 30, 2025, respectively, compared to $201.5 and $650.2 million for the three and nine months ended September 30, 2024, respectively.

These charge-offs increased period over period primarily due to increases in our period end managed receivables although the increase was offset 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.

In recent periods we have removed some of this expected degradation based on observed asset stabilization, implementation of product, policy, and pricing changes and an improved inflation environment.

See Note 6 "Fair Values of Assets and Liabilities" to our condensed consolidated financial statements included herein for further discussion of this calculation.

See Note 7 "Fair Values of Assets and Liabilities" to our condensed consolidated financial statements included herein for further discussion of our fair value calculation.

We may, however, adjust our forecasts to reflect observed macroeconomic events.

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Tightened underwriting standards shifted new receivable acquisitions to consumers at the higher end of the FICO bands in which our bank partners participate, presumably resulting in improved overall credit performance of our acquired receivables.

When coupled with those existing assets negatively impacted by inflation gradually becoming a smaller percentage of the outstanding portfolio, we expect to see overall improvements in the measured fair value of our portfolios of acquired receivables.

As part of our analysis to determine the fair value of our receivables, we look at several key factors that influence the overall fair value.

Additionally, receivables acquired as part of our acquisition of Mercury were initially valued at a lower fair value than our existing portfolio of credit card receivables.

We are currently enacting a number of product, policy and pricing changes on the Mercury portfolio of general purpose credit card receivables.

Once implemented, we would expect to see continued improvement in the fair value of these receivables.

Qualitative discussion of these factors is as follows:

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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 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.

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 September 30, 2025, when compared to rates used as of September 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 partially offset the net $(44.8) million and $5.3 million of net (loss)/gains noted above for the three and nine months ended September 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.

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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 (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.

As a result, we would expect this weighted average rate to decrease in those periods (as was noted during the second and third 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 (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 was particularly influenced by strong growth in the aforementioned private label credit receivables acquired during the second and third quarters of 2024 and 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.

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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 (and the second quarter of 2025), 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 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 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 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 net $(45.0) million and $5.1 million of net (loss)/gains noted above for the three and nine months ended September 30, 2025, respectively.

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).

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Total operating expenses.

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 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 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.

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

increases in salaries and benefit costs related to both the growth in the number of employees, including those added as part of our acquisition of Mercury, and inflationary compensation pressure.

Subsequent to our acquisition of Mercury, we eliminated certain redundant positions, which resulted in termination costs of approximately $4.3 million for the nine months ended September 30, 2025.

We expect some continued increase in salaries and benefits for the remainder of 2025 and into 2026 compared to comparable periods in 2024 and 2025 due to this acquired workforce;

increases in card and loan servicing expenses for both the three and nine months ended September 30, 2025, when compared to the same periods in 2024 due to growth in receivables associated with our investments in private label credit and general purpose credit card receivables, which grew to $6,600.1 million outstanding from $2,653.8 million outstanding at September 30, 2025 and September 30, 2024, respectively, and costs associated with the implementation of product, policy, and pricing changes discussed above.

increases in marketing and solicitation costs for both the three and nine months ended September 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 2.1 million as of September 30, 2025 when compared to September 30, 2024 (including approximately 1.3 million serviced accounts added as part of the Mercury acquisition).

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 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.

As we continue to adjust our underwriting standards to reflect changes in fee and finance assumptions on new receivables, continue to expand under our newly acquired Mercury brand 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 increases in other expenses for both the three and nine months ended September 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.

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.

Increases in this category for the three and nine months ended September 30, 2025, when compared to the same period in 2024 primarily relate to ongoing increased costs associated with accounting and legal expenses as well as certain transaction costs associated with our Mercury acquisition.

These increased costs are 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.

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As we have significantly grown our managed receivables levels over the past two years with minimal increase in the fixed portion of our card and loan servicing expenses as well as our salaries and benefits costs, we have realized greater operating efficiency.

Notwithstanding our cost management activities, we expect increased levels of expenditures associated with anticipated growth in private label credit and general purpose credit card operations.

As many of our expenses associated with our card and loan servicing efforts are now variable based on the amount of underlying receivables, we would expect certain expenses to continue to grow in 2025 and 2026 commensurate with growth in our receivables balances.

These expenses will primarily relate to the variable costs of marketing efforts and card and loan servicing expenses associated with new receivable acquisitions.

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Income Taxes.

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 experienced effective tax rates of 24.0% and 24.0% for the three and nine months ended September 30, 2025, respectively, compared to 21.5% and 19.7% for the three and nine months ended September 30, 2024, respectively.

Our effective tax rates for the three and nine months ended September 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 nine months ended September 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 preferred stock (which was outstanding until its redemption in the first quarter of 2025), such amounts which constituted deductible interest expense on debt for tax purposes.

Our effective tax rates for the three and nine months ended September 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 preferred stock (which was outstanding at varying amounts in 2024), such amounts which constituted deductible interest expense on debt for tax purposes, and (2) exercises of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’ grant date values.

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

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.

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.

Such interest expense was $135 thousand for the nine months ended September 30, 2025, and $140 thousand for the nine months ended September 30, 2024.

Non-GAAP Financial Measures

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If we control through direct ownership or exert a controlling interest in the entity, we consolidate it and reflect its operations as noted above.

The following discussion of our managed receivables includes the aforementioned acquisition of Mercury and its portfolio of approximately $3,159.9 million in general purpose credit card receivables.

As we acquired the receivables on September 11, 2025, the financial impact of the acquisition on the quarter was limited to fees, billings and expenses subsequent to that date, however the receivables acquired are included in the denominator of the ratios calculated below.

Below is the reconciliation of Loans at fair value to Total managed receivables:

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Managed receivables levels.

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 continue to experience overall period-over-period quarterly receivables growth with over $3,451.5 million in net receivables growth associated with the private label credit and general purpose credit card products offered by our bank partners between September 30, 2025 and September 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 $520.0 million in the twelve months ended September 30, 2025 primarily related to seasonal expansion with one of our retail partners.

The seasonal expansion with this retail partner tends to peak in the second and third quarters and declines in the fourth quarter of each year.

Our general purpose credit card receivables grew by $3,426.4 million during the twelve months ended September 30, 2025.

This increase included receivables added as part of the Mercury acquisition which totaled $3,159.9 million as of September 30, 2025.

Some of our larger merchant partners have expanded their relationships with us and our bank partner which resulted in an increased flow of acquired receivables.

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 80% of our private label receivables outstanding as of June 30, 2025.

Our top five retail partnerships accounted for over 85% of our private label receivables outstanding as of September 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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As a result of these limited loss exposures, these receivables are not included in our delinquency rates for private label credit receivables.

Our delinquency rates for our general purpose credit cards receivables were higher in the first quarter of 2024 due to both a reduction in the growth of our managed receivables and accounts that were enrolled in short-term payment deferrals, due to hardship claims resulting from COVID-19.

Delinquency rates for our general purpose credit card receivables were higher in the first quarter of 2024 due to both a reduction in the growth of our managed receivables and accounts that were enrolled in short-term payment deferrals, due to hardship claims resulting from COVID-19.

Receivables enrolled in these short-term payment deferrals continued to accrue interest and their delinquency status did not change through their respective deferment periods.

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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.

Receivables added as part of the Mercury acquisition in the third quarter of 2025 have lower overall delinquency rates (and correspondingly lower yields) than those of our existing portfolios.

The addition of these receivables resulted in a lower combined delinquency rate as of September 30, 2025.

Increased acquisitions of private label credit receivables with limited loss exposures, the noted improvements in general purpose credit card receivables and our receivables added as part of the Mercury transaction will continue to result in lower overall delinquency and charge-off rates in the fourth quarter of 2025 and early 2026 when compared to corresponding rates in the fourth quarter of 2024 and first quarter of 2025.

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 continue to expand product offerings to a broader range of consumers.

This expected increase in delinquencies will be offset somewhat by using more restrictive product, policy, and pricing changes which we believe will result in a more profitable asset overall.

Additionally, as the receivables added from the Mercury acquisition tend to have lower delinquency and charge off rates than our existing portfolios of receivables, we expect the increase in delinquency rates noted above to be muted.

We also expect continued seasonal payment patterns on these receivables that impact our delinquencies in line with prior periods.

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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.

Additionally, receivables added as part of the Mercury acquisition tend to have lower yields (and correspondingly lower delinquency and charge off rates).

The addition of these receivables contributed to the decline in our Total managed yield ratio, annualized for the third quarter of 2025 and will serve to offset some of our expected growth in Total managed yield ratios until planned product, policy, and pricing changes for this new portfolio have taken effect.

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 and impact of the Mercury acquisition could result in some fluctuations of our Total managed yield ratio, annualized when comparing quarterly rates in 2025 and 2026 to corresponding quarterly periods in 2024 and 2025.

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.

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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.

The significant improvement noted in the third quarter of 2025 was largely due to the addition of receivables associated with the Mercury acquisition which have lower delinquencies and principal charge-offs than our existing portfolios of receivables.

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 the remainder of 2025, when compared to the comparable prior period.

These charge-off rates are expected to return to historically normalized levels, adjusted for the mix shift discussed above, and will benefit from planned growth in the underlying receivables which we expect will further reduce our combined principal net charge-off ratio.

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 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.

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 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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As such, we have seen our Interest expense ratio, annualized increase throughout 2024 and into 2025 and we expect the Interest expense ratio to increase when compared to prior quarters for the remainder of 2025 as we replace existing financing arrangements with new ones at a higher cost of capital.

The addition of debt assumed as part of the Mercury acquisition will also contribute to our Interest expense ratio although the cost of this debt is largely in-line with our existing facilities and, as such, should not result in a meaningful impact to the Interest expense ratio, annualized.

Net interest margin ratio, annualized.

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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 and second quarters of 2025 as we realized improvements in delinquencies and subsequent chargeoffs.

This trend reversed in 2025 as we realized improvements in delinquencies and subsequent charge-offs.

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.

As noted above, the lower yielding but also lower delinquent accounts associated with the Mercury acquisition should offset some of the improvements noted in our Net interest margin ratio, annualized until such time that product, policy and pricing changes associated with this portfolio have taken effect.

The average annual percentage rate ("APR") charged to customers varies by receivable type, credit history and other factors.

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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 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.

For 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.

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the loss of one or more retail partners; seasonal purchase activity by consumers; labor shortages and supply chain disruptions; or the timing of new customer originations by our issuing bank partners.

We currently expect private label credit receivable acquisitions in the third and fourth quarters of 2025 to be consistent with those in the same periods of 2024, although the timing of the receivable acquisitions may vary based on seasonal spending patterns by consumers and our retail partners overall sales cycles.

We currently expect private label credit receivable acquisitions in the fourth quarter of 2025 and first quarter of 2026 to be consistent with those in the same period of 2024 and 2025, although the timing of the receivable acquisitions may vary based on seasonal spending patterns by consumers and our retail partners overall sales cycles.

Our general purpose credit card receivable acquisitions tend to have more volatility based on the issuance of new credit card accounts by our issuing bank partners.

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Nonetheless, we expect continued growth in the acquisition of these general purpose credit card receivables throughout 2025.

The acquisition of Mercury and its portfolio of general purpose credit card receivables is also expected to result in additional receivable acquisitions in future quarters as our bank partner continues to market to new consumers.

Auto Finance Segment

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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 the first and second quarters 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 CAR rebuilds its receivables base, expands within its current geographic footprint and continues plans for service area expansion.

For the third quarter of 2025, we experienced a period over period increase in managed receivables as our receivables portfolio continues to recover from the floorplan loan losses experienced in 2024.

We expect modest growth in the level of our managed receivables for the remainder of 2025 and into 2026 as CAR continues to rebuild 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.

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Delinquent loans reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date and are considered "past due".

While we have experienced recent increases in our delinquency rates (and related charge-offs), we do not believe they will have a significantly adverse impact on our results of operations in 2025 as we have established appropriate reserves for these losses.

While we have experienced some recent increases in our delinquency rates (and related charge-offs), we do not believe they will have a significantly adverse impact on our results of operations in 2025 as we have established appropriate reserves for these losses.

Even at slightly elevated rates, we earn significant yields on CAR’s receivables and have significant dealer reserves (i.e., retainages or holdbacks on the amount of funding CAR provides to its dealer customers) and other collateral to protect against meaningful credit losses.

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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 June 30, 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 September 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

Revolving credit facility (expiring October 30, 2026) that is secured by certain receivables and restricted cash

Total short term refinancing needs (within 12 months)

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

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

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Total long term refinancing needs (in excess of 12 months)

Total refinancing needs

Based on the state of the debt capital markets, the performance of our assets that serve as security for the above facilities, and our relationships with lenders, we view imminent refunding or refinancing risks with respect to the above facilities as moderate in the current environment.

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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 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.

Amortization of these fees for the three and nine months ended September 30, 2025 and 2024 totaled $0.4 million, $1.1 million, $0.4 million and $1.1 million, respectively.

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

There have been no repurchases in 2025.

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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 and six months ended June 30, 2025 and 2024 totaled $0.3 million, $0.7 million, $0.1 million and $0.2 million, respectively.

Amortization of these fees for the three and nine months ended September 30, 2025 and 2024 totaled $0.4 million, $1.1 million, $0.3 million and $0.5 million, respectively.

In August 2025, we issued an aggregate of $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 (the "2030 Senior Notes").

The 2030 Senior Notes bear interest at the rate of 9.75% per annum.

Interest on the 2030 Senior Notes is payable semi-annually in arrears on March 1 and September 1 of each year.

The 2030 Senior Notes will mature on September 1, 2030.

We are amortizing fees associated with the issuance of the 2030 Senior Notes into interest expense over the expected life of such notes.

Amortization of these fees for the three and nine months ended September 30, 2025 totaled $0.1 million and $0.1 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 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.

During the three and nine months ended September 30, 2025 and 2024, we sold 106,319 shares, 262,583 shares, 0 shares and 44,143 shares, respectively, of our Series B preferred stock under our Preferred Stock ATM Program for net proceeds of $2.3 million, $5.8 million, $0 and $1.1 million, respectively.

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

During the three and nine months ended September 30, 2025 and 2024, we sold $5.6 million, $31.4 million, $13.5 and $13.5, respectively, principal amount of our 2029 Senior Notes under our Preferred Stock ATM Program for net proceeds of $5.5 million, $30.8 million, $13.4 and $13.4, respectively.

During the three and nine months ended September 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.

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

At September 30, 2025, we had $425.0 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 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.

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

During the nine months ended September 30, 2025, we generated $371.7 million of cash flows from operations compared to our generation of $346.8 million of cash flows from operations during the nine months ended September 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 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.

Offsetting a portion of this increase in cash provided by operations were one-time expenses associated with our acquisition of Mercury (and related severance costs) which totaled $6.8 million for the three and nine months ended September 30, 2025.

During the nine months ended September 30, 2025, we used $1,027.3 million of cash from our investing activities, compared to the use of $571.0 million of cash from investing activities during the nine months ended September 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 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.

For the nine months ended September 30, 2025, we purchased $2,678.8 million in private label and general purpose credit card receivables compared to $2,002.0 million for the nine months ended September 30, 2024.

Adding to this use of cash was the acquisition of Mercury which used net, $72.9 million ($166.5 million cash purchase price less $93.6 million of cash acquired as part of the acquisition).

Slightly offsetting this increase in cash used in operations 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 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.

During the nine months ended September 30, 2025, we generated $681.9 million of cash from financing activities, compared to our generating $225.3 million of cash from financing activities during the nine months ended September 30, 2024.

The increase in cash provided by financing activities is primarily due to the issuance $400.0 million aggregate principal amount of 9.750% Senior Notes due 2030 as well as an increase in net borrowings (proceeds from borrowings less repayment of borrowings) of $161.3 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 nine 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 nine months ended September 30, 2025 coupled with the sale of $130.8 million of 2029 Senior Notes during the nine months ended September 30, 2024 compared to sales of $31.4 million for the nine months ended September 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.

33 unchanged sentences

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

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.

In the nine months ended September 30, 2025 and 2024, we received $0.6 million and $0.6 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.

33 unchanged sentences

any decline in the use of cards as a payment mechanism or other adverse developments with respect to the credit card industry in general;

increases or decreases in interest rates and uncertainty with respect to the interest rate environment; and

increases or decreases in interest rates and uncertainty with respect to the interest rate environment;

theft and employee errors;

integration risk associated with our recent acquisition of Mercury.

Most of these factors are beyond our ability to predict or control.

5 unchanged sentences

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