What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-12 · 102 added, 143 removed, 424 unchanged (37% of the section changed)

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For the year ended December 31, 2025, consolidated net income was $423.9 million, or $36.38 per diluted share, compared to $247.9 million, or $19.88 per diluted share, for the same period in 2024.

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

The increase in consolidated net income was primarily due to a decrease in provision for credit losses and an increase in finance charges, partially offset by an increase in operating expenses.

Our results for the year ended December 31, 2025 included:

• A larger decline in forecasted collection rates

The decline in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $314.0 million, or 3.1%, compared to a decrease in forecasted collection rates during 2023 that decreased forecasted net cash flows from our Loan portfolio by $206.3 million, or 2.3%.

The $314.0 million decrease in forecasted net cash flows during 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, 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 $206.3 million decrease in forecasted net cash flows during 2023 was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, 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

Forecasted profitability was lower than our estimates at December 31, 2023, due to both a decline in forecasted collection rates and slower forecasted net cash flow timing since 2023.

The slower forecasted net cash flow timing was primarily a result of a decrease in Consumer Loan prepayments, which remain below historical averages.

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

Unit and dollar volumes grew 16.1% and 11.3%, respectively, as compared to 2023.

The average balance of our Loan portfolio, which is our largest-ever, increased 13.6% as compared to 2023.

• An increase in the initial spread on Consumer Loan assignments

The initial spread increased to 22.1% compared to 21.3% on Consumer Loans assigned in 2023.

• An increase in our average cost of debt

Our average cost of debt increased from 5.5% to 7.2%, 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.

• A decrease in common shares outstanding due to stock repurchases

We repurchased approximately 590,000 shares, or 4.7% of the shares outstanding at the beginning of the year.

• 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.

• $8.0 billion average balance of our Loan portfolio, which represented a 5.7% increase from 2024.

• A 12.6% and 16.5% year-over-year decline in Consumer Loan unit and dollar volumes, respectively, as compared to 2024.

• $169.5 million, or 1.5%, decrease in forecasted net cash flows from our Loan portfolio, which represented a smaller decrease compared to 2024.

• $725.4 million in the repurchase of approximately 1,514,000 shares, or 12.6% of the shares outstanding at the beginning of the year.

• The enrollment of 5,752 new Dealers, with 15,745 active Dealers during 2025, which is our highest ever number of active Dealers in a calendar year.

• $230.8 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

• $74.2 million contingent loss related to previously disclosed legal matters.

• $1.7 billion in unrestricted cash and cash equivalents and unused and available revolving lines of credit as of December 31, 2025.

• 12 workplace awards, including reaching #34 on Great Place to Work ® and Fortune magazine's 100 Best Companies to Work For ® list and #2 on the 2025 Top Workplaces USA list in the 1,000-2,499 employee company size category.

For the year ended December 31, 2024, consolidated net income was $247.9 million, or $19.88 per diluted share, compared to $286.1 million, or $21.99 per diluted share, for the same period in 2023.

The decrease in consolidated net income was primarily due to increases in provision for credit losses and interest expense.

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

Our results for the year ended December 31, 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 $206.3 million, or 2.3%, compared to a decrease in forecasted collection rates during 2022 that decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%.

• A decrease in forecasted profitability for Consumer Loans assigned in 2020 through 2022

Forecasted profitability was lower than our estimates at December 31, 2022, due to a decline in forecasted collection rates during 2023 and slower forecasted net cash flow timing during 2023, primarily as a result of a decrease in Consumer Loan prepayments to below-average levels.

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

Unit and dollar volumes grew 18.6% and 14.4%, respectively, as compared to 2022.

The average balance of our Loan portfolio increased 5.0% as compared to 2022.

• An increase in the initial spread on Consumer Loan assignments

The initial spread increased to 21.3% compared to 20.1% on Consumer Loans assigned in 2022.

• An increase in our average cost of debt

Our average cost of debt increased from 3.6% to 5.5%, primarily as a result of higher interest rates on recently completed or extended secured financings and the repayment of older secured financings with lower interest rates.

• A decrease in common shares outstanding due to stock repurchases

We repurchased 0.4 million shares, or 2.8% of the shares outstanding at the beginning of the year.

• $7.5 billion average balance of our Loan portfolio, which represented a 13.6% increase from 2023.

• A 16.1% and 11.3% year-over-year growth in Consumer Loan unit and dollar volumes, respectively, as compared to 2023.

• $314.0 million, of 3.1%, decrease in forecasted net cash flows from our Loan portfolio, which represented a larger decrease compared to 2023.

• An increase in our cost of debt from 5.5% to 7.2%.

• $313.3 million in the repurchase of approximately 590,000 shares, or 4.7% of the shares outstanding at the beginning of the year.

• The enrollment of 6,088 new Dealers, with 15,463 active Dealers during 2024.

• $300.2 million in Dealer Holdback and accelerated Dealer Holdback payments to Dealers.

• $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.

• 13 workplace awards, including reaching #39 on Great Place to Work ® and Fortune magazine's 100 Best Companies to Work For ® list and #9 on the 2024 Top Workplaces USA list in the 1,000-2,499 employee company size category.

Critical Success Factors

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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.

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 year ended December 31, 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.

For the year ended December 31, 2025, forecasted collection rates improved for Consumer Loans assigned in 2020 and 2025, declined for Consumer Loans assigned in 2022 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 impacted forecasted net cash flows (forecasted collections less forecasted Dealer Holdback payments) as follows:

(In millions) For the Years Ended December 31,

Decrease in Forecasted Net Cash Flows 2024 2023 2022

Dealer Loans $ (204.6) $ (125.3) $ (41.6)

Purchased Loans (109.4) (81.0) (18.1)

Total $ (314.0) $ (206.3) $ (59.7)

% change from forecast at beginning of period -3.1 % -2.3 % -0.7 %

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

(Dollars in millions) Decrease in Forecasted Net Cash Flows

For the Years Ended December 31, Total Loans % Change from Forecast at Beginning of Period

2023 $ (206.3) -2.3 %

2024 (314.0) -3.1 %

2025 (169.5) -1.5 %

The decreases in forecasted net cash flows for the years ended December 31, 2025, 2024, and 2023, were composed of ordinary decreases in forecasted net cash flows and the following adjustments applied to our forecasting methodology:

During the second quarter of 2025, 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 2024.

Consumer Loans assigned in 2024 prior to the implementation of our scorecard adjustment during the third quarter of 2024 had underperformed relative to the forecast adjustment we implemented during the second quarter of 2024.

Accordingly, in the second quarter of 2025, we applied an adjustment to that segment of the Consumer Loans assigned in 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 2025 reduced forecasted net cash flows by $18.6 million, or 0.2%, and increased provision for credit losses by $16.5 million.

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.

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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.

The quarterly changes to our forecast of future net cash flows from our Loan portfolio for the period from January 1, 2020 through December 31, 2024 are shown in the following table:

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

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

March 31, 2020 $ (206.5) -2.3 %

June 30, 2020 24.4 0.3 %

September 30, 2020 138.5 1.5 %

December 31, 2020 (2.7) 0.0 %

March 31, 2021 107.4 1.1 %

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 %

December 31, 2024 (31.1) -0.3 %

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

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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 December 31, 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 spreads with respect to 2022 and 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 December 31, 2025 was primarily a result of Consumer Loan performance, as the performance of 2025 Consumer Loans has exceeded our initial estimates while the performance of 2024 Consumer Loans has been lower than our initial estimates.

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

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The spread as of December 31, 2025 on 2025 Dealer Loans was 22.5%, as compared to a spread of 20.0% on 2024 Dealer Loans.

The increase was primarily 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 December 31, 2024 on 2024 Purchased Loans was 21.8%, as compared to a spread of 17.9% 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.

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

The spread as of December 31, 2025 on 2025 Purchased Loans was 21.5%, as compared to a spread of 21.0% on 2024 Purchased Loans, reflecting the net impact of two offsetting factors.

Consumer Loan performance increased the spread from 2024 to 2025, as the performance of 2025 Purchased Loans has exceeded our initial estimates while the performance of 2024 Purchased Loans has been lower than our initial estimates.

This impact of Consumer Loan performance was partially offset by the impact of a lower initial spread on 2025 Purchased Loans, due to the advance rate increasing by a greater margin than the initial forecast in our Purchased Loan portfolio.

Access to Capital

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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.

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.

During 2025, unit and dollar volumes declined 12.6% and 16.5%, respectively, as the number of active Dealers increased 1.8% while average unit volume per active Dealer declined 14.4%.

Dollar volume declined by more than unit volume in 2025 primarily due to a decrease in the average size of Consumer Loans assigned, which resulted in a decrease in the average advance paid.

During 2024, unit and dollar volumes increased 16.1% and 11.3%, respectively, as the number of active Dealers increased 9.1% while average volume per active Dealer increased 6.4%.

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

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

Unit volume for 2024 was the highest unit volume in our history.

During 2023, unit and dollar volumes increased 18.6% and 14.4%, respectively, as the number of active Dealers increased 19.1% while average volume per active Dealer decreased 0.4%.

Dollar volume increased less than unit volume in 2023 due to a decrease in the average advance paid, due to decreases in the average advance rate and the average size of Consumer Loans assigned.

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

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• a significant provision for credit losses expense at the time of the Loan’s assignment to us for contractual net cash flows we do not expect to realize;

• finance charge revenue in subsequent periods that is significantly in excess of our expected yields.

• finance charge revenue in subsequent periods that is significantly in excess of our expected yield.

Due to the GAAP treatment of contractual net cash flows we do not expect to realize at the time of loan assignment (i.e.

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Finance Charges.

The increase of $237.3 million, or 13.5%, was primarily due to an increase in the average net Loans receivable balance, as follows:

The increase of $149.1 million, or 7.5%, was the result of increases in the average net Loans receivable balance and the average yield on our Loan portfolio, as follows:

(Dollars in millions) For the Years Ended December 31,

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Due to an increase in the average net Loans receivable balance $ 112.6

Due to a decrease in the average yield (1.8)

Due to an increase in the average yield 36.5

Total increase in finance charges $ 149.1

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 $16.5 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.

The increase in the average yield of our Loan portfolio was primarily due to higher contractual yields on more recent Consumer Loan assignments.

Operating Expenses .

The increase of $98.4 million, or 19.6%, was primarily due to:

• An increase in salaries and wages expense of $29.0 million, or 10.3%, 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) fringe benefits, primarily due to higher medical claims, and (iii) stock-based compensation expense, primarily due to equity awards granted to our executive officers and senior leaders.

▪ An increase in general and administrative expense of $10.7 million, or 12.3%, primarily due to increases in legal and technology systems expenses.

• An increase in general and administrative expense of $63.5 million, or 64.9%, primarily due to an increase in legal expenses, which included a $74.2 million contingent loss recognized during 2025, compared to a $8.4 million contingent loss recognized during 2024, both related to previously disclosed legal matters as to which we have recognized cumulative contingent losses of $82.6 million through 2025.

The cumulative amount reflects, among other things, preliminary alignment between us and representatives of the agencies involved in the previously disclosed multi-state and New York Attorney General legal matters on certain material terms of a potential settlement of those legal matters, including a potential cash payment by us of $75.5 million.

• An increase in salaries and wages expense of $27.9 million, or 9.0%, primarily due to increases in (i) the number of team members in Engineering 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 $78.5 million, or 10.7%, was primarily due to an increase in provision for credit losses on forecast changes.

The decrease of $198.6 million, or 24.4%, was primarily due to a decrease in provision for credit losses on forecast changes.

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.

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Total $ 616.1 $ 814.7 $ (198.6)

The increase in provision for credit losses related to forecast changes was due to a greater decline in Consumer Loan performance during 2024 compared to 2023 and slower net cash flow timing during 2024 compared to 2023.

During 2024, we decreased our estimate of future net cash flows by $314.0 million, or 3.1%, 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 below historical averages.

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

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

During 2025, we decreased our estimate of future net cash flows by $169.5 million, or 1.5%, 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.

The $169.5 million decrease in forecasted net cash flows for the year ended December 31, 2025 was composed of an ordinary decrease in forecasted net cash flows of $150.9 million, or 1.3%, and an adjustment applied to our forecasting methodology, which upon implementation, reduced forecasted net cash flows by $18.6 million, or 0.2%, and increased our provision for credit losses by $16.5 million.

Accordingly, during the second quarter of 2025, we applied an adjustment to that segment of the Consumer Loans assigned in 2024 to reduce forecasted collection rates to what we believed the ultimate collection rates would be based on these trends.

The $314.0 million decrease in forecasted net cash flows for the year ended December 31, 2024 was composed of an ordinary decrease in forecasted net cash flows of $166.8 million, or 1.7%, 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%, and increased our provision for credit losses by $127.5 million.

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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.

During 2023, we decreased our estimate of future net cash flows by $206.3 million, or 2.3%, to reflect a decline in Consumer Loan prepayments to below-average levels.

The $206.3 million decrease in forecasted net cash flows during 2023 was composed of an ordinary decrease in forecasted net cash flows of $161.8 million, or 1.8%, 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.

For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.

The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 14.3% decrease in the average provision per new Consumer Loan assignment, partially offset by a 16.1% increase in Consumer Loan assignment unit volume.

The decrease in average provision per new Consumer Loan assignment was primarily due to a decrease in the average advance rate for 2024 Consumer Loans and a lower percentage of Purchased Loans in the mix of Consumer Loan assignments received during 2024.

The increase in interest expense of $153.0 million, or 57.4%, was due to:

• An increase in our average cost of debt, which increased interest expense by $93.7 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 $59.3 million, primarily due to borrowings used to fund the growth of our Loan portfolio and stock repurchases.

The decrease in provision for credit losses related to new Consumer Loan assignments was primarily due to a 12.6% decrease in Consumer Loan assignment unit volume.

The increase in interest expense of $43.4 million, or 10.3%, was primarily due to an increase in our average outstanding debt balance.

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

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Provision for Income Taxes.

For the year ended December 31, 2024, the effective income tax rate increased to 24.8% from 22.2% for the year ended December 31, 2023.

The increase was primarily due to:

• 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 non-deductible executive compensation expense.

• 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 the second quarter of 2024.

For the year ended December 31, 2025, the effective income tax rate increased to 25.0% from 24.8% as compared with the year ended December 31, 2024.

The increase was primarily due to an increase in state income taxes due to a revision of deferred tax estimates during 2025 and a reduction in excess tax benefits due to an increase in pre-tax income in 2025, partially offset by a decrease in non-deductible executive compensation expense.

For additional information, see Note 10 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.

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We periodically adjust our statistical pricing model for new trends that we identify through our evaluation of these forecasted collection rate variances.

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

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The below-average levels of Consumer Loan prepayments continued through the fourth quarter of 2023.

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 COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.

During the first quarter of 2020, we applied a subjective adjustment to our forecasting model to reflect our best estimate of the future impact of the COVID-19 pandemic on future net cash flows (“COVID forecast adjustment”), which reduced our estimate of future net cash flows by $162.2 million.

We continued to apply the COVID forecast adjustment through the end of 2021, as it continued to represent our best estimate.

During the first quarter of 2022, we determined that we had sufficient Consumer Loan performance experience since the lapse of federal stimulus payments and enhanced unemployment benefits to refine our estimate of future net cash flows.

Accordingly, during the first quarter of 2022, we removed the COVID forecast adjustment and enhanced our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent data and new forecast variables.

Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit losses in the period of change.

The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows:

(In millions) Increase / (Decrease) in

Forecasting Methodology Changes Forecasted Net Cash Flows Provision for Credit Losses

Removal of COVID forecast adjustment $ 149.5 $ (118.5)

Implementation of enhanced forecasting methodology (53.8) 47.9

Total $ 95.7 $ (70.6)

Our provision for credit losses for the year ended December 31, 2025, included:

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A 1% decline in the forecasted future net cash flows on Loans as of December 31, 2025 would have reduced 2025 consolidated net income by approximately $56.4 million.

During periods of economic slowdown or recession, delinquencies, defaults, repossessions, and losses may increase on our Consumer Loans, and Consumer Loan prepayments may decline.

During periods of economic slowdown or recession, delinquencies, defaults, repossessions, and losses may increase on our Consumer Loans, and Consumer Loan prepayments, which historically have been lower in periods with less availability of consumer credit, may decline.

These periods are also typically accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding Consumer Loans, which weakens collateral coverage and increases the amount of a loss in the event of default.

Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales.

Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan payments, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.

Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan payments, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, tariffs, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.

Because our business is focused on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn.

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For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, 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 upfront 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.

We endeavor to run our business conservatively, with a large margin of safety in Loan pricing in the aggregate, low leverage on the balance sheet, and significant unused availability on our revolving credit facilities.

Our forecasting models have performed best during relatively stable economic periods but have been less accurate during periods of volatility like we have experienced in recent years.

Since forecasting collection rates is challenging, our business model is designed to produce acceptable returns in the aggregate even if Loan performance is worse than forecasted.

When needed, we have made adjustments to our forecasts on both new and existing Loans, and our recent forecasts incorporate underperformance of post-pandemic vintages.

We have also reduced advance rates to the Dealer on more recent vintages, which we believe increases the margin of safety in our business.

Based on our estimates as of December 31, 2025 , total forecasted collections for the portfolio were $12.2 billion, which provides $4.5 billion of cushion to our lenders after considering $1.3 billion of estimated interest and operating expenses and $6.4 billion of outstanding debt.

Since 1998, we have completed 60 term securitizations totaling $17.1 billion of debt issued.

We believe our securitization trusts contain a significant margin of safety for investors, including structural features such as overcollateralization, subordination, and reserve accounts to protect our investors against credit risk.

Our securitization trusts have paid timely interest and principal of all maturing securities in full and have never experienced an early amortization event, event of default, or other adverse event that would cause early or late repayment.

Our securitization transactions are generally structured to withstand a 35% decline in the forecasted collection rate before the most junior bond is at risk of taking a principal loss.

Accordingly, we believe future net cash flows from collateral securing our outstanding securitization debt are more than sufficient to repay all future obligations of our outstanding securitization trusts.

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.

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On June 24, 2025, we extended the maturity of our revolving secured line of credit facility from June 22, 2027 to June 22, 2028.

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 the Secured Overnight Financing Rate (“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 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.

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 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.

On December 5, 2024, we increased the financing amount on Warehouse Facility V from $200.0 million to $250.0 million and extended the date on which the facility will cease to revolve from December 29, 2025 to December 29, 2027.

The maturity of the facility was also extended from December 27, 2027 to December 27, 2029.

The interest rate on borrowings under the facility has been decreased from SOFR plus 245 basis points to SOFR plus 185 basis points.

On December 20, 2024, we completed a $300.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.

On July 11, 2025, we extended the date on which our $75.0 million Warehouse Facility VI will cease to revolve from September 30, 2026 to September 30, 2028.

The interest rate on borrowings under the facility was decreased from the Secured Overnight Financing Rate (“SOFR”) plus 210 basis points to SOFR plus 185 basis points.

The servicing fee was also decreased from 6.0% to 4.0% of collections on the underlying consumer loans.

On July 30, 2025, we extended the date on which our $300.0 million Warehouse Facility IV will cease to revolve from December 29, 2026 to July 30, 2028.

The interest rate on borrowings under the facility was decreased from the Secured Overnight Financing Rate plus 221.4 basis points to SOFR plus 205 basis points.

On September 19, 2025, we extended the date on which our $200.0 million Warehouse Facility VIII will cease to revolve from September 21, 2026 to September 19, 2028.

The interest rate on borrowings under the facility was decreased from SOFR plus 225 basis points to SOFR plus 185 basis points.

On November 13, 2025, we completed a $500.0 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 5.1% (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 increased to $343.7 million as of December 31, 2024 from $13.2 million as of December 31, 2023.

On January 15, 2026, we extended the date on which our $100.0 million Term ABS 2021-1 financing will cease to revolve from February 17, 2026 to January 18, 2028.

The interest rate on borrowings under the financing was decreased from SOFR plus 220 basis points to SOFR plus 140 basis points.

Cash and cash equivalents decreased to $22.8 million as of December 31, 2025 from $343.7 million as of December 31, 2024.

As of December 31, 2025 and December 31, 2024, we had $1,627.7 million and $1,734.9 million, respectively, in unused and available lines of credit.

Our total balance sheet indebtedness increased to $6,352.9 million as of December 31, 2024 from $5,067.5 million as of December 31, 2023, primarily due to the growth in new Consumer Loan assignments and stock repurchases.

Our total balance sheet indebtedness as of December 31, 2025 and 2024 was $6,353.9 million and $6,352.9 million, respectively.

A summary as of December 31, 2025 of our material financial obligations requiring future repayments is as follows:

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As of December 31, 2025, we had $107.3 million of floating rate debt outstanding under our revolving secured lines of credit, without interest rate protection.

For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by a negligible amount, assuming we maintain a level amount of floating rate debt.

As of December 31, 2024, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility V and Warehouse Facility VIII.

However, as of December 31, 2024, there was no floating rate debt outstanding under these facilities.

As of December 31, 2024, we did not have a balance outstanding under Warehouse Facility II, Warehouse IV, and Warehouse Facility VI, which do not have interest rate protection.

For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.

As of December 31, 2025, we had an interest rate cap agreement outstanding to manage the interest rate risk on Warehouse Facility V.

However, as of December 31, 2025, there was no floating rate debt outstanding under this facility.

As of December 31, 2025, we did not have a balance outstanding under Warehouse Facility II, Warehouse Facility IV, Warehouse Facility VI, and Warehouse VIII, which do not have interest rate protection.

As of December 31, 2025, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, without interest rate protection.

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Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative

• Improvements to Income Tax Disclosures

• Disaggregation of Income Statement Expenses

• Targeted Improvements to the Accounting for Internal-Use Software

Forward-Looking Statements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis