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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-30 · 82 added, 294 removed, 292 unchanged (56% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 8 - Financial Statements and Supplementary Data, of our 2023 Annual Report on Form 10-K, as well as Part I - Item 1 - Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in Item 8 - Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended December 31, 2024, as well as Part I - Item 1 - Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history.

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and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

For the three months ended September 30, 2024, consolidated net income was $78.8 million, or $6.35 per diluted share, compared to consolidated net income of $70.8 million, or $5.43 per diluted share, for the same period in 2023.

The increase was primarily due to an increase in finance charges, partially offset by an increase in interest expense.

Our results for the three months ended September 30, 2024 included:

• A similar decline in forecasted collection rates

A decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $62.8 million, or 0.6%, compared to a decrease in forecasted collection rates during the third quarter of 2023 that decreased forecasted net cash flows from our Loan portfolio by $69.4 million, or 0.7%.

• A decrease in forecasted profitability for Consumer Loans assigned in 2021 through 2024

Forecasted profitability was lower than our estimates at September 30, 2023, due to both a decline in forecasted collection rates and slower forecasted net cash flow timing since the third quarter of 2023.

The slower forecasted net cash flow timing was primarily a result of a decrease in Consumer Loan prepayments, which remain at below-average levels.

• Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio

Unit and dollar volumes grew 17.7% and 12.2%, respectively, as compared to the third quarter of 2023.

The average balance of our Loan portfolio, which is our largest-ever, increased 14.9% as compared to the third quarter of 2023.

• An increase in the initial spread on Consumer Loan assignments

The initial spread increased to 21.9% compared to 21.4% on Consumer Loans assigned in the third quarter of 2023.

• An increase in our average cost of debt

Our average cost of debt increased from 5.8% to 7.3%, primarily a result of higher interest rates on recently completed or extended secured financings and recently issued senior notes and the repayment of older secured financings and senior notes with lower interest rates.

• A decrease in common shares outstanding due to stock repurchases

Since the third quarter of 2023, we have repurchased approximately 566,000 shares, or 4.5% of the shares outstanding as of September 30, 2023.

There were no stock repurchases during the third quarter of 2024.

For the nine months ended September 30, 2024, consolidated net income was $96.0 million, or $7.68 per diluted share, compared to consolidated net income of $192.5 million, or $14.73 per diluted share, for the same period in 2023.

The decrease was primarily due to increases in interest expense and provision for credit losses on forecast changes, partially offset by an increase in finance charges.

Our results for the nine months ended September 30, 2024 included:

• A larger decline in forecasted collection rates

The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $282.9 million, or 2.8%, compared to a decrease in forecasted collection rates during the first nine months of 2023 that decreased forecasted net cash flows from our Loan portfolio by $149.3 million, or 1.7%.

The $282.9 million decrease in forecasted net cash flows for the first nine months of 2024 was composed of an ordinary decrease in forecasted net cash flows of $135.7 million, or 1.4%, and an adjustment applied to our forecasting methodology during the second quarter of 2024, which upon implementation, reduced forecasted net cash flows by $147.2 million, or 1.4%.

The $149.3 million decrease in forecasted net cash flows for the first nine months of 2023 was composed of an ordinary decrease in forecasted net cash flows of $104.8 million, or 1.2%, and an adjustment to our forecasting methodology, which upon implementation, reduced forecasted net cash flows by $44.5 million, or 0.5%.

• A decrease in forecasted profitability for Consumer Loans assigned in 2021 through 2024 as described above

• Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio

Unit and dollar volumes grew 21.0% and 16.3%, respectively, as compared to the first nine months of 2023.

The average balance of our Loan portfolio, which is our largest-ever, increased 13.5% as compared to the first nine months of 2023.

• An increase in the initial spread on Consumer Loan assignments

The initial spread increased to 22.0% compared to 21.2% on Consumer Loans assigned in the first nine months of 2023.

• An increase in our average cost of debt

Our average cost of debt increased from 5.3% to 7.2%, primarily due to the factors described above.

• A decrease in common shares outstanding due to stock repurchases as described above

• Loss on sale of building

We recognized a $23.7 million loss during the second quarter of 2024 related to the sale of one of our two office buildings.

The building was sold to reduce excess office space and eliminate the associated annual operating costs of approximately $2.1 million.

For the three months ended March 31, 2025, consolidated net income was $106.3 million, or $8.66 per diluted share, compared to consolidated net income of $64.3 million, or $5.08 per diluted share, for the same period in 2024.

The increase was primarily due to an increase in finance charges and a decrease in provision for credit losses, partially offset by an increase in interest expense.

Our results and achievements for the three months ended March 31, 2025 included the following:

• A modest decline in forecasted collection rates, which decreased forecasted net cash flows from our Loan portfolio by $20.9 million, or 0.2%, and slower forecasted net cash flow timing.

• An 11.0% increase in the average balance of our Loan portfolio from the first quarter of 2024 to $7.9 billion, which is our largest ever.

• A decline in Consumer Loan assignment unit and dollar volumes of 10.1% and 15.5%, respectively, as compared to the first quarter of 2024.

• The repurchase of approximately 329,000 shares, or 2.7% of the shares outstanding at the beginning of the quarter.

• The enrollment of 1,617 new Dealers with 10,789 active Dealers during the quarter.

• $68.0 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

• Maintained a strong liquidity position, with over $2.2 billion in unrestricted cash and cash equivalents and unused and available revolving lines of credit as of March 31, 2025.

• Named a Top Workplaces USA award winner for the fifth year in a row, with a #2 ranking among companies of our size.

Critical Success Factors

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By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast.

The following table compares our aggregated forecast of Consumer Loan collection rates as of September 30, 2024, with the aggregated forecasts as of June 30, 2024, as of December 31, 2023, and at the time of assignment, segmented by year of assignment:

The following table compares our aggregated forecast of Consumer Loan collection rates as of March 31, 2025, with the aggregated forecasts as of December 31, 2024, and at the time of assignment, segmented by year of assignment:

Forecasted Collection Percentage as of (1) Current Forecast Variance from

Consumer Loan Assignment Year September 30, 2024 June 30, 2024 December 31, 2023 Initial Forecast June 30, 2024 December 31, 2023 Initial Forecast

Consumer Loan Assignment Year March 31, 2025 December 31, 2024 Initial Forecast December 31, 2024 Initial Forecast

2016 63.9 % 63.9 % 65.4 % 0.0 % -1.5 %

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Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.

(2) The forecasted collection rate for 2024 Consumer Loans as of September 30, 2024 includes both Consumer Loans that were in our portfolio as of June 30, 2024 and Consumer Loans assigned during the most recent quarter.

The following table provides forecasted collection rates for each of these segments:

Forecasted Collection Percentage as of Current Forecast Variance from

2024 Consumer Loan Assignment Period September 30, 2024 June 30, 2024 Initial Forecast June 30, 2024 Initial Forecast

January 1, 2024 through June 30, 2024 66.4 % 66.6 % 67.2 % -0.2 % -0.8 %

July 1, 2024 through September 30, 2024 67.0 % — 67.3 % — -0.3 %

Consumer Loans assigned in 2018 through 2020 have yielded forecasted collection results significantly better than our initial estimates, while Consumer Loans assigned in 2015, 2016, and 2021 through 2023 have yielded forecasted collection results significantly worse than our initial estimates.

For all other assignment years presented, actual results have been close to our initial estimates.

For the three months ended September 30, 2024, forecasted collection rates declined for Consumer Loans assigned in 2021 through 2024 and were generally consistent with expectations at the start of the period for all other assignment years presented.

For the nine months ended September 30, 2024, forecasted collection rates improved for Consumer Loans assigned in 2019, declined for Consumer Loans assigned in 2021 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes in forecasted collection rates for the three and nine months ended September 30, 2024 and 2023 impacted forecasted net cash flows (forecasted collections less forecasted Dealer Holdback payments) as follows:

(Dollars in millions) For the Three Months Ended September 30, For the Nine Months Ended September 30,

Decrease in Forecasted Net Cash Flows 2024 2023 2024 2023

Dealer loans $ (43.6) $ (40.3) $ (173.0) $ (89.3)

Purchased loans (19.2) (29.1) (109.9) (60.0)

Total $ (62.8) $ (69.4) $ (282.9) $ (149.3)

% change from forecast at beginning of period -0.6 % -0.7 % -2.8 % -1.7 %

During the second quarter of 2024, we applied an adjustment to our methodology for forecasting the amount of future net cash flows from our Loan portfolio, which reduced the forecasted collection rates for Consumer Loans assigned in 2022 through 2024.

Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.

More recently, Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.

During the second quarter of 2024, we determined that we had sufficient Consumer Loan performance experience to estimate the magnitude by which we expected Consumer Loans assigned in 2022 through 2024 would likely underperform our historical collection rates on Consumer Loans with similar characteristics.

Accordingly, we applied an adjustment to Consumer Loans assigned in 2022 through 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.

The implementation of this forecast adjustment during the second quarter of 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million.

During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data.

We had experienced a decrease in Consumer Loan prepayments to below-average levels and as a result, slowed our forecasted net cash flow timing.

Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.

The implementation of the adjustment to our forecasting methodology during the second quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3 million.

We have experienced increased levels of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio since the beginning of 2020, with realized collections underperforming our expectations during the early stages of the COVID-19 pandemic, outperforming our expectations following the distribution of federal stimulus payments and enhanced unemployment benefits, and underperforming our expectations during the current economic environment.

For the period from January 1, 2020 through September 30, 2024, the cumulative change to our forecast of future net cash flows from our Loan portfolio has been a decrease of $269.1 million, or 3.0%, as shown in the following table:

(Dollars in millions) Increase (Decrease) in Forecasted Net Cash Flows

For the three months ended March 31, 2025, forecasted collection rates improved for Consumer Loans assigned in 2020, declined for Consumer Loans assigned in 2022, 2024, and 2025, and were generally consistent with expectations at the start of the period for all other assignment years presented.

The changes to our forecast of future net cash flows from our Loan portfolio (forecasted collections less forecasted Dealer Holdback payments) for each of the last five quarters are shown in the following table:

(Dollars in millions) Decrease in Forecasted Net Cash Flows

Three Months Ended Total Loans % Change from Forecast at Beginning of Period

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March 31, 2025 (20.9) -0.2 %

June 30, 2021 104.5 1.1 %

September 30, 2021 82.3 0.9 %

December 31, 2021 31.9 0.3 %

March 31, 2022 110.2 1.2 %

June 30, 2022 (43.4) -0.5 %

September 30, 2022 (85.4) -0.9 %

December 31, 2022 (41.1) -0.5 %

March 31, 2023 9.4 0.1 %

June 30, 2023 (89.3) -0.9 %

September 30, 2023 (69.4) -0.7 %

December 31, 2023 (57.0) -0.6 %

March 31, 2024 (30.8) -0.3 %

June 30, 2024 (189.3) -1.7 %

September 30, 2024 (62.8) -0.6 %

Total $ (269.1) -3.0 %

The following table presents information on Consumer Loan assignments for each of the last 10 years:

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(1) Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.

(2) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(2) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.

Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

(3) Represents activity for the nine months ended September 30, 2024.

(3) Represents activity for the three months ended March 31, 2025.

Information in this table for each of the years prior to 2025 represents activity for all 12 months of that year.

(4) The averages for 2024 Consumer Loans include both Consumer Loans that were in our portfolio as of June 30, 2024 and Consumer Loans assigned during the most recent quarter.

The following table provides averages for each of these segments:

2024 Consumer Loan Assignment Period Consumer Loan Advance Initial Loan Term (in months)

January 1, 2024 through June 30, 2024 $ 26,554 $ 12,033 61

July 1, 2024 through September 30, 2024 26,586 11,985 61

The profitability of our loans is primarily driven by the amount and timing of the net cash flows we receive from the spread between the forecasted collection rate and the advance rate, less operating expenses and the cost of capital.

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With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability across our portfolio, even if collection rates are less than we initially forecast.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of September 30, 2024, as well as forecasted collection rates and spreads at the time of assignment.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of March 31, 2025, as well as forecasted collection rates and spreads at the time of assignment.

All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

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Forecasted Collection % as of Spread % as of

Consumer Loan Assignment Year September 30, 2024 Initial Forecast Advance % (1) September 30, 2024 Initial Forecast % of Forecast Realized (2)

Consumer Loan Assignment Year March 31, 2025 Initial Forecast Advance % (1) March 31, 2025 Initial Forecast % of Forecast Realized (2)

2016 63.9 % 65.4 % 43.8 % 20.1 % 21.6 % 99.6 %

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2025 66.0 % 66.2 % 44.2 % 21.8 % 22.0 % 2.5 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.

(1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program as a percentage of the initial balance of the Consumer Loans.

Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

(2) Presented as a percentage of total forecasted collections.

(3) The forecasted collection rate, advance rate and spread for 2024 Consumer Loans as of September 30, 2024 include both Consumer Loans that were in our portfolio as of June 30, 2024 and Consumer Loans assigned during the most recent quarter.

The following table provides forecasted collection rates, advance rates, and spreads for each of these segments:

Forecasted Collection % as of Spread % as of

2024 Consumer Loan Assignment Period September 30, 2024 Initial Forecast Advance % September 30, 2024 Initial Forecast

January 1, 2024 through June 30, 2024 66.4 % 67.2 % 45.2 % 21.2 % 22.0 %

July 1, 2024 through September 30, 2024 67.0 % 67.3 % 45.4 % 21.6 % 21.9 %

The risk of a material change in our forecasted collection rate declines as the Consumer Loans age.

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Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.

The spread between the forecasted collection rate as of September 30, 2024 and the advance rate ranges from 13.2% to 23.7%, on an annual basis, for Consumer Loans assigned over the last 10 years.

The spread between the forecasted collection rate as of March 31, 2025 and the advance rate ranges from 12.6% to 24.0%, on an annual basis, for Consumer Loans assigned over the last 10 years.

The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented.

The spread with respect to 2022 Consumer Loans has been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented.

The higher spread for 2024 Consumer Loans relative to 2023 Consumer Loans as of September 30, 2024 was primarily a result of Consumer Loan performance, as the performance of 2023 Consumer Loans has been lower than our initial estimates by a greater margin than 2024 Consumer Loans.

Additionally, 2024 Consumer Loans had a higher initial spread, which was primarily due to a decrease in the advance rate.

The following table compares our forecast of aggregate Consumer Loan collection rates as of September 30, 2024 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately:

The spreads with respect to 2021 through 2023 Consumer Loans have been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented.

The higher spread for 2025 Consumer Loans relative to 2024 Consumer Loans as of March 31, 2025 was primarily a result of Consumer Loan performance, as the performance of 2024 Consumer Loans has been lower than our initial estimates by a greater margin than 2025 Consumer Loans.

The following table compares our forecast of aggregate Consumer Loan collection rates as of March 31, 2025 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately:

Dealer Loans Purchased Loans

Forecasted Collection Percentage as of (1) Forecasted Collection Percentage as of (1)

Consumer Loan Assignment Year September 30, 2024 Initial

Forecast Variance September 30, 2024 Initial

Consumer Loan Assignment Year March 31, 2025 Initial

Forecast Variance March 31, 2025 Initial

Forecast Variance

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The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of September 30, 2024 for Dealer Loans and Purchased Loans separately.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of March 31, 2025 for Dealer Loans and Purchased Loans separately.

All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

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(1) The forecasted collection rates and advance rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.

(2) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.

(2) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program as a percentage of the initial balance of the Consumer Loans.

Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

Although the advance rate on Purchased Loans is higher as compared to the advance rate on Dealer Loans, Purchased Loans do not require us to pay Dealer Holdback.

The spread as of September 30, 2024 on 2024 Dealer Loans was 21.2%, as compared to a spread of 18.3% on 2023 Dealer Loans.

The increase was due to Consumer Loan performance, as the performance of 2023 Dealer Loans has been lower than our initial estimates by a greater margin than 2024 Dealer Loans.

The spread as of September 30, 2024 on 2024 Purchased Loans was 21.5%, as compared to a spread of 17.8% on 2023 Purchased Loans.

The increase was primarily a result of a higher initial spread on 2024 Purchased Loans, due to a higher initial forecast and lower advance rate.

Additionally, the performance of 2023 Purchased Loans has been lower than our initial estimates by a greater margin than 2024 Purchased Loans.

The spread as of March 31, 2025 on 2025 Dealer Loans was 21.9%, as compared to a spread of 21.1% on 2024 Dealer Loans.

The increase was primarily a result of Consumer Loan performance, as the performance of 2024 Dealer Loans has been lower than our initial estimates by a greater margin than 2025 Dealer Loans.

The spread as of March 31, 2025 on 2025 Purchased Loans was 21.4%, as compared to a spread of 21.7% on 2024 Purchased Loans.

The decrease was primarily a result of a lower initial spread on 2025 Purchased Loans, due to a higher advance rate.

Access to Capital

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and (3) maintain multiple funding sources.

Our funded debt to equity ratio was 3.8 to 1 as of September 30, 2024.

Our funded debt to equity ratio was 3.9 to 1 as of March 31, 2025.

We currently utilize the following primary forms of debt financing:

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Consumer Loan Volume

The following table summarizes changes in Consumer Loan assignment volume in each of the last seven quarters as compared to the same period in the previous year:

The following table summarizes changes in Consumer Loan assignment volume in each of the last five quarters as compared to the same period in the previous year:

Year over Year Percent Change

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March 31, 2025 -10.1 % -15.5 %

June 30, 2024 20.9 % 16.3 %

September 30, 2024 17.7 % 12.2 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.

Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs, (2) the amount of capital available to fund new Loans, and (3) our assessment of the volume that our infrastructure can support.

Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints.

Unit and dollar volumes grew 17.7% and 12.2%, respectively, during the third quarter of 2024 as the number of active Dealers grew 8.8% and the average unit volume per active Dealer increased 8.4%.

Dollar volume increased less than unit volume during the third quarter of 2024 due to a decrease in the average advance paid, due to decreases in the average size of Consumer Loans assigned and the average advance rate.

Unit volume for the 28-day period ended October 28, 2024 grew 4.6% compared to the same period in 2023.

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs and (2) the amount of capital available to fund new Loans.

Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital constraints.

Unit and dollar volumes declined 10.1% and 15.5%, respectively, during the first quarter of 2025 as the number of active Dealers declined 0.1% and the average unit volume per active Dealer declined 9.7%.

Dollar volume declined by more than unit volume during the first quarter of 2025 due to a decrease in the average advance paid, resulting from decreases in the average size of Consumer Loans assigned and the average advance rate.

Unit volume for the 28-day period ended April 28, 2025 decreased 9.8% compared to the same period in 2024.

The following table summarizes the changes in Consumer Loan unit volume and active Dealers:

For the Three Months Ended September 30, For the Nine Months Ended

September 30,

2024 2023 % Change 2024 2023 % Change

For the Three Months Ended March 31,

2025 2024 % Change

Consumer Loan unit volume 100,278 111,488 -10.1 %

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The following table provides additional information on the changes in Consumer Loan unit volume and active Dealers:

For the Three Months Ended September 30, For the Nine Months Ended

September 30,

2024 2023 % Change 2024 2023 % Change

For the Three Months Ended March 31,

2025 2024 % Change

Consumer Loan unit volume from new active Dealers

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decrease in Consumer Loan unit volume from Dealers who have received funding for at least one Loan during the comparable period of the prior year but did not receive funding for any Loans during the current period divided by prior year comparable period Consumer Loan unit volume.

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last seven quarters:

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last five quarters:

Unit Volume Dollar Volume (1)

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March 31, 2025 77.0 % 23.0 % 75.1 % 24.9 %

June 30, 2024 78.5 % 21.5 % 77.3 % 22.7 %

September 30, 2024 79.5 % 20.5 % 78.4 % 21.6 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(1) Represents advances paid to Dealers on Consumer Loans assigned under the Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under the Purchase Program.

Payments of Dealer Holdback and accelerated Dealer Holdback are not included.

As of September 30, 2024 and December 31, 2023, the net Dealer Loans receivable balance was 71.6% and 67.7% , respectively, of the total net Loans receivable balance.

As of March 31, 2025 and December 31, 2024, the net Dealer Loans receivable balance was 72.7% and 72.3% , respectively, of the total net Loans receivable balance.

Results of Operations

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For additional information, see Note 3 and Note 6 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

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

The following is a discussion of our results of operations and income statement data on a consolidated basis.

(Dollars in millions, except per share data) For the Three Months Ended

September 30,

2025 2024 $ Change % Change

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Provision for claims 16.1 17.0 (0.9) -5.3 %

Loss on extinguishment of debt 1.2 — 1.2 — %

Total costs and expenses 429.4 421.6 7.8 1.9 %

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The increase of $57.5 million, or 12.3%, was primarily due to an increase in the average net Loans receivable balance, as follows:

(Dollars in millions) For the Three Months Ended September 30,

2024 2023 Change

Average net Loans receivable balance $ 7,690.9 $ 6,690.8 $ 1,000.1

Average yield on our Loan portfolio 26.4 % 26.4 % 0.0 %

The following table summarizes the impact each component had on the overall increase in finance charges for the three months ended September 30, 2024:

(In millions) Year over Year Change

Impact on finance charges:

For the Three Months Ended September 30, 2024

Due to an increase in the average net Loans receivable balance $ 66.0

Due to a decrease in the average yield (0.1)

Total increase in finance charges $ 65.9

The increase in the average net Loans receivable balance was primarily due to the dollar volume of new Consumer Loan assignments exceeding the principal collected on Loans receivable.

Premiums Earned.

The increase of $4.3 million, or 20.7%, was primarily due to growth in the size of our reinsurance portfolio, which resulted from growth in new Consumer Loan assignments and an increase in the average premium written per reinsured vehicle service contract in recent periods.

Operating Expenses.

The increase of $18.9 million, or 17.1%, was primarily due to:

• An increase in salaries and wages expense of $10.6 million, or 15.9%, primarily due to increases in (i) the number of team members as we are investing in our business with the goal of increasing the speed at which we enhance our product for Dealers and consumers and (ii) fringe benefits, primarily due to higher medical claims.

• An increase in general and administrative expenses of $7.7 million, or 36.2%, primarily due to an increase in legal expenses.

Provision for Credit Losses .

Provision for credit losses remained relatively consistent, increasing by $0.1 million, or 0.1%.

We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not expected to be realized at the time of assignment.

We also recognize provision for credit losses on forecast changes in the amount and timing of expected future net cash flows subsequent to assignment.

The following table summarizes the provision for credit losses for each of these components:

(In millions) For the Three Months Ended September 30,

Provision for Credit Losses 2024 2023 Change

Forecast changes $ 105.9 $ 106.3 $ (0.4)

New Consumer Loan assignments 78.8 78.3 0.5

Total $ 184.7 $ 184.6 $ 0.1

For additional information, see Note 6 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

The increase in interest expense of $40.7 million, or 57.7%, was due to:

• An increase in our average cost of debt, which increased interest expense by $22.6 million, primarily as a result of higher interest rates on recently completed or extended secured financings and recently issued senior notes and the repayment of older secured financings and senior notes with lower interest rates.

• An increase in our average outstanding debt balance, which increased interest expense by $18.1 million, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.

The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023:

(Dollars in millions) For the Three Months Ended September 30,

2024 2023 Change

Interest expense $ 111.2 $ 70.5 $ 40.7

Average outstanding debt balance 6,071.1 4,831.4 1,239.7

Average cost of debt 7.3 % 5.8 % 1.5 %

Provision for Income Taxes .

For the three months ended September 30, 2024, the effective income tax rate decreased to 26.0% from 26.6% for the same period in 2023.

The decrease was primarily due to the settlement of an uncertain tax position for state income taxes during the third quarter of 2024.

For additional information, see Note 12 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The following is a discussion of our results of operations and income statement data on a consolidated basis.

(Dollars in millions, except per share data) For the Nine Months Ended

September 30,

2024 2023 $ Change % Change

Finance charges $ 1,474.5 $ 1,303.8 $ 170.7 13.1 %

Premiums earned 71.3 58.0 13.3 22.9 %

Other income 50.7 48.5 2.2 4.5 %

Total revenue 1,596.5 1,410.3 186.2 13.2 %

Costs and expenses:

Salaries and wages 231.6 214.1 17.5 8.2 %

General and administrative 75.9 59.8 16.1 26.9 %

Sales and marketing 72.4 70.9 1.5 2.1 %

Total operating expenses 379.9 344.8 35.1 10.2 %

Provision for credit losses on forecast changes 430.9 319.4 111.5 34.9 %

Provision for credit losses on new Consumer Loan assignments 260.4 253.1 7.3 2.9 %

Total provision for credit losses 691.3 572.5 118.8 20.8 %

Interest 308.2 187.7 120.5 64.2 %

Provision for claims 55.8 54.1 1.7 3.1 %

Loss on sale of building 23.7 — 23.7 — %

Total costs and expenses 1,458.9 1,159.1 299.8 25.9 %

Income before provision for income taxes 137.6 251.2 (113.6) -45.2 %

Provision for income taxes 41.6 58.7 (17.1) -29.1 %

Net income $ 96.0 $ 192.5 $ (96.5) -50.1 %

Net income per share:

Basic $ 7.78 $ 14.79 $ (7.01) -47.4 %

Diluted $ 7.68 $ 14.73 $ (7.05) -47.9 %

Weighted average shares outstanding:

Basic 12,345,739 13,013,344 (667,605) -5.1 %

Diluted 12,494,011 13,068,998 (574,987) -4.4 %

Finance Charges.

The increase of $170.7 million, or 13.1%, was primarily a result of an increase in the average net Loans receivable balance, as follows:

(Dollars in millions) For the Nine Months Ended September 30,

(Dollars in millions) For the Three Months Ended March 31,

2025 2024 Change

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Average yield on our Loan portfolio 26.7 % 26.4 % 0.3 %

The following table summarizes the impact each component had on the overall increase in finance charges for the nine months ended September 30, 2024:

The following table summarizes the impact each component had on the overall increase in finance charges for the three months ended March 31, 2025:

(In millions) Year over Year Change

Impact on finance charges:

For the Nine Months Ended September 30, 2024

For the Three Months Ended March 31, 2025

Due to an increase in the average net Loans receivable balance $ 51.6

Due to a decrease in the average yield (5.0)

Due to an increase in the average yield 5.9

Total increase in finance charges $ 57.5

The increase in the average net Loans receivable balance was primarily due to the dollar volume of new Consumer Loan assignments exceeding the principal collected on Loans receivable.

Premiums Earned.

The increase of $13.3 million, or 22.9%, was primarily due to growth in the size of our reinsurance portfolio, which resulted from growth in new Consumer Loan assignments and an increase in the average premium written per reinsured vehicle service contract in recent periods.

Operating Expenses.

The increase of $35.1 million, or 10.2%, was primarily due to:

• An increase in salaries and wages expense of $17.5 million, or 8.2%, primarily due to increases in (i) the number of team members as we are investing in our business with the goal of increasing the speed at which we enhance our product for Dealers and consumers and (ii) fringe benefits, primarily due to higher medical claims.

• An increase in general and administrative expense of $16.1 million, or 26.9%, primarily due to increases in legal and technology systems expenses.

The increase of $9.4 million, or 7.5%, was primarily due to an increase in salaries and wages expense of $10.1 million, or 12.9%.

The increase was primarily due to increases in (i) the number of team members as we are investing in our business with the goal of increasing the speed at which we enhance our product for Dealers and consumers, (ii) stock-based compensation expense, primarily due to equity awards granted to our executive officers and senior leaders, and (iii) fringe benefits, primarily due to higher medical claims.

Provision for Credit Losses .

The increase of $118.8 million, or 20.8%, was primarily due to an increase in provision for credit losses on forecast changes.

The decrease of $24.1 million, or 13.0%, was due to decreases in provision for credit losses on forecast changes and provision for credit losses on new Consumer Loan assignments.

We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not expected to be realized at the time of assignment.

We also recognize provision for credit losses on forecast changes in the amount and timing of expected future net cash flows subsequent to assignment.

The following table summarizes the provision for credit losses for each of these components:

(In millions) For the Nine Months Ended September 30,

Provision for Credit Losses 2024 2023 Change

Forecast changes $ 430.9 $ 319.4 $ 111.5

New Consumer Loan assignments 260.4 253.1 7.3

Total $ 691.3 $ 572.5 $ 118.8

The increase in provision for credit losses related to forecast changes was primarily due to a greater decline in Consumer Loan performance during the first nine months of 2024 compared to the first nine months of 2023.

During the first nine months of 2024, we decreased our estimate of future net cash flows by $282.9 million, or 2.8%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect a decrease in Consumer Loan prepayments, which remain at below-average levels.

The decrease in provision for credit losses related to forecast changes was due to a smaller decline in Consumer Loan performance during the first quarter of 2025 compared to the first quarter of 2024.

During the first quarter of 2025, we decreased our estimate of future net cash flows by $20.9 million, or 0.2%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect lower-than-expected Consumer Loan prepayments, which remained below historical averages.

Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.

Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.

More recently, Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.

During the first nine months of 2023, we decreased our estimate of future net cash flows by $149.3 million, or 1.7%, to reflect a decline in Consumer Loan prepayments to below-average levels.

The $149.3 million decrease in forecasted net cash flows for the first nine months of 2023 was composed of an ordinary decrease in forecasted net cash flows of $104.8 million, or 1.2%, and an adjustment to our forecasting methodology during the second quarter of 2023, which upon implementation, decreased our estimate of future net cash flows by $44.5 million, or 0.5%, and increased our provision for credit losses by $71.3 million.

We adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data.

During the first quarter of 2024, we decreased our estimate of future net cash flows by $30.8 million, or 0.3%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect lower-than-expected Consumer Loan prepayments.

The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 10.1% decrease in Consumer Loan assignment unit volume and a 3.7% decrease in the average provision per Consumer Loan assignment.

The decrease in the average provision per Consumer Loan assignment was primarily due to a decrease in the average advance rate for 2025 Consumer Loans.

For additional information, see Note 6 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

The increase in provision for credit losses related to new Consumer Loan assignments was due to a 21.0% increase in Consumer Loan assignment unit volume, partially offset by a 15.0% decrease in the average provision per Consumer Loan assignment.

The decrease in the average provision per Consumer Loan assignment was due to a lower percentage of Purchased Loans in the mix of Consumer Loan assignments received during 2024, and a decrease in the average advance rates under our Portfolio and Purchase Programs for 2024 Consumer Loans.

The increase in interest expense of $120.5 million, or 64.2%, was due to:

• An increase in our average cost of debt, which increased interest expense by $80.2 million, primarily as a result of higher interest rates on recently completed or extended secured financings and recently issued senior notes and the repayment of older secured financings and senior notes with lower interest rates.

• An increase in our average outstanding debt balance, which increased interest expense by $40.3 million, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.

The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023:

(Dollars in millions) For the Nine Months Ended September 30,

The increase in interest expense of $22.2 million, or 24.0%, was primarily due to an increase in our average outstanding debt balance, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.

The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024:

(Dollars in millions) For the Three Months Ended March 31,

2025 2024 Change

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Average cost of debt 7.2 % 7.0 % 0.2 %

Loss on Sale of Building.

For the nine months ended September 30, 2024, we recognized a loss on the sale of a building of $23.7 million.

For additional information, see Note 7 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Provision for Income Taxes .

For the nine months ended September 30, 2024, our effective income tax rate increased to 30.2% from 23.4% for the nine months ended September 30, 2023.

The increase was primarily due to:

• An increase in the impact of state and local income taxes on our effective income tax rate, primarily due to an adjustment to an uncertain tax position estimate during the second quarter of 2024 and changes in state tax laws that were enacted during 2024.

• A decrease in the impact of excess tax benefits on our effective income tax rate, primarily due to the timing of long-term stock award grants.

• An increase in the impact of non-deductible executive compensation expense on our effective income tax rate, primarily due to a decrease in pre-tax income.

For additional information, see Note 12 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which i s incorporated herein by reference.

The COVID-19 pandemic had a significant impact on our work environment, as the vast majority of our team members began working remotely.

Because our remote operations and processes proved successful early on, we now pursue a “remote first” strategy to take advantage of the national talent pool and an increased rate of team member satisfaction.

While remote work has become the primary experience for most of our team members, we do have team members that, due to their personal preference or the nature of their responsibilities, have continued to work primarily in one of our office properties.

Additionally,

we have various on-site meetings, events, and team building activities for which in-person attendance is encouraged.

Therefore, we believe we have a continuing need for some amount of office space.

As the vast majority of our team members now work remotely, we had significant excess space in the two office buildings that we owned in Southfield, Michigan.

During the second quarter of 2024, we sold the larger building for net sales proceeds of $3.2 million, and recognized a loss on sale of the building of $23.7 million.

The loss on sale of the building represented the amount by which the $26.9 million carrying value of the building and its improvements, the related land and land improvements, and office furniture and equipment exceeded the net sales proceeds of $3.2 million.

For the three months ended March 31, 2025, the effective income tax rate decreased to 25.0% from 25.6% for the same period in 2024.

The decrease was primarily due to a decrease in the impact of state and local income taxes on our effective income tax rate, primarily related to uncertain tax position estimates, and was partially offset by the recognition of a tax deficiency in the current quarter compared to an excess tax benefit recognized during the first quarter of 2024.

For additional information, see Note 1 0 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Liquidity and Capital Resources

5 unchanged sentences

and (4) senior notes.

There are various restrictive covenants to which we are subject under each financing arrangement, and we were in compliance with those covenants as of September 30, 2024.

There are various restrictive covenants to which we are subject under each financing arrangement, and we were in compliance with those covenants as of March 31, 2025.

For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

On February 16, 2024, we extended the $100.0 million Term ABS 2021-1 financing and extended the date on which the financing will cease to revolve from December 16, 2024 to February 17, 2026.

On February 27, 2024, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

The financing has an expected average annualized cost of 7.8% (including placement agent fees and other costs), and it will revolve for 36 months, after which it will amortize based upon the cash flows on the underlying Loans.

On February 28, 2025, we issued $500.0 million of 6.625% senior notes due 2030 (the “2030 senior notes”).

We used a portion of the net proceeds from the 2030 senior notes to redeem all of the $400.0 million outstanding principal amount of our 6.625% senior notes due 2026 (the “2026 senior notes”).

We used the remaining net proceeds from the 2030 senior notes for general corporate purposes.

During the first quarter of 2025, we recognized a pre-tax loss on extinguishment of debt of $1.2 million related to the redemption of the 2026 senior notes.

On March 27, 2025, we completed a $400.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

The financing has an expected average annualized cost of 6.4% (including initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

On June 17, 2024, we extended the maturity of our revolving secured line of credit facility from June 22, 2026 to June 22, 2027.

The interest rate on borrowings under the facility has changed from the Bloomberg Short-Term Bank Yield Index rate plus 187.5 basis points to SOFR plus 197.5 basis points.

On June 20, 2024, we completed a $550.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

The financing has an expected average annualized cost of 6.5% (including initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

On June 21, 2024, we increased the financing amount on the Term ABS 2022-2 financing from $200.0 million to $300.0 million and extended the date on which the financing will cease to revolve from December 15, 2025 to June 15, 2027.

On September 19, 2024, we increased the financing amount on Warehouse Facility II from $400.0 million to $500.0 million and extended the date on which the facility will cease to revolve from April 30, 2026 to September 20, 2027.

The interest rate on borrowings under the facility has been decreased from SOFR plus 230 basis points to SOFR plus 185 basis points.

On September 19, 2024, we extended the date on which the $500.0 million Term ABS 2019-2 financing will cease to revolve from August 15, 2025 to September 15, 2026 and increased the interest rate under the financing from 5.15% to 5.43%.

On September 26, 2024, we completed a $600.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

The financing has an expected average annualized cost of 5.2% (including initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

Cash and cash equivalents were $159.7 million as of September 30, 2024 and $13.2 million as of December 31, 2023.

As of September 30, 2024 and December 31, 2023, we had $1,684.0 million and $1,505.8 million, respectively, in unused and

available lines of credit.

Our total balance sheet indebtedness increased to $6,248.9 million as of September 30, 2024 from $5,067.5 million as of December 31, 2023, primarily due to the growth in new Consumer Loan assignments and stock repurchases.

A summary of our scheduled principal debt maturities as of September 30, 2024 is as follows:

The financing has an expected average annualized cost of 5.6% (including upfront fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.

Cash and cash equivalents were $528.8 million as of March 31, 2025 and $343.7 million as of December 31, 2024.

As of March 31, 2025 and December 31, 2024, we had $1,733.6 million and $1,734.9 million, respectively, in unused and available revolving lines of credit.

Our total balance sheet indebtedness increased to $6,705.2 million as of March 31, 2025 from $6,352.9 million as of December 31, 2024, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.

A summary of our scheduled principal debt maturities as of March 31, 2025 is as follows:

(In millions)

12 unchanged sentences

Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 discusses several critical accounting estimates, which we believe involve a high degree of judgment and complexity.

There have been no material changes to the estimates and assumptions associated with these accounting estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, except as described below.

Consumer Loans assigned in 2022 had continued to underperform our expectations for several quarters.

More recently, Consumer Loans assigned in 2023 had also begun exhibiting similar trends of underperformance, although not as severe as Consumer Loans assigned in 2022.

Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses.

There have been no material changes to the estimates and assumptions associated with these critical accounting estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Forward-Looking Statements

38 unchanged sentences

• Our use of electronic contracts could impact our ability to perfect our ownership or security interest in Consumer Loans.

• Failure to properly safeguard confidential consumer and team member information could subject us to liability, decrease our profitability, and damage our reputation.

• Failure to properly safeguard our proprietary business information or confidential consumer and team member personal information could subject us to liability, decrease our profitability, and damage our reputation.

• The development and use of artificial intelligence presents risks and challenges that may adversely impact our business.

Legal and Regulatory Risks

8 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