Financial Data and Key Metrics Changes - The company reported a decline in forecasted net cash flows by 0.5% or $56 million during the quarter [4][48] - The loan portfolio reached a record high of $9.1 billion on an adjusted basis, up 6% from the previous Q2 [4][48] - The adjusted return on capital was reported at 8.5%, with a cost of capital of 7.4%, resulting in a spread of 110 basis points [26][70] Business Line Data and Key Metrics Changes - Loan performance declined, particularly in the 2022, 2023, and 2024 vintages, while the 2025 vintage exceeded expectations [4][48] - The company financed over 85,000 contracts for dealers and consumers during the quarter [7][51] - The unit volume was impacted by a scorecard change in Q3 2024, resulting in lower advance rates [4][48] Market Data and Key Metrics Changes - The market share in the core segment of used vehicles financed by subprime consumers decreased to 5.4% from 6.6% in the same period of 2024 [4][48] - The competitive environment has intensified, affecting volume per dealer [39][81] Company Strategy and Development Direction - The company aims to maximize intrinsic value and positively impact five key constituents: dealers, consumers, team members, investors, and communities [5][49] - Continued investment in modernizing technology architecture and loan origination systems is a priority [8][52] - The company received recognition as one of the 100 best companies to work for, indicating a focus on employee satisfaction [9][53] Management's Comments on Operating Environment and Future Outlook - Management noted that forecasting models perform well during stable economic periods but struggle during volatility, with inflation impacting loan performance [15][58] - The company expects a different mix of business to drive future performance, adjusting expectations accordingly [22][65] - The competitive environment remains challenging, with expectations of potential pullbacks from traditional credit providers [39][81] Other Important Information - The company raised over $270,000 for charitable causes, supporting community engagement [10][53] - The engineering team has made significant progress in modernizing systems, enhancing operational efficiency [8][52] Q&A Session Summary Question: Collection trends and adjusted yield - The decline in forecasted collections typically drives adjusted yield down, but new loan originations have offset this decline [12][56] Question: Loan size trends - A different mix of consumers has contributed to the decline in loan size, not necessarily indicating lower quality borrowers [18][61] Question: Economic return on capital - The business model is designed to produce acceptable returns even with loan underperformance, with current vintages still generating economic profit [26][70] Question: Share repurchases - The company repurchased 530,000 shares at an average price of $490, with plans to review additional capacity for repurchases [30][74] Question: Competitive environment outlook - The competitive landscape is challenging, with expectations of increased costs impacting consumers, but it is too early to determine long-term effects [39][81]

[PART I. — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and related notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20-%20As%20of%20June%2030,%202025%20and%20December%2031,%202024) This section presents the company's financial position, detailing assets, liabilities, and equity at June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | | :----------------------------- | :----------------------- | :---------------------- | :---------------- | | Cash and cash equivalents | $70.0 | $343.7 | $(273.7) | | Restricted cash and cash equivalents | $493.8 | $501.3 | $(7.5) | | Loans receivable, net | $8,001.9 | $7,850.3 | $151.6 | | Total assets | $8,724.6 | $8,854.6 | $(130.0) | | Total liabilities | $7,169.9 | $7,105.0 | $64.9 | | Total shareholders' equity | $1,554.7 | $1,749.6 | $(194.9) | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20-%20Three%20and%20six%20months%20ended%20June%2030,%202025%20and%202024) This section presents the company's financial performance, detailing revenues, expenses, and net income for the three and six months ended June 30 Consolidated Statements of Income (Three Months Ended June 30) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | % Change | | :------------------------------------ | :----------------- | :----------------- | :---------------- | :------- | | Total revenue | $583.8 | $538.2 | $45.6 | 8.5% | | Total operating expenses | $155.5 | $124.4 | $31.1 | 25.0% | | Total provision for credit losses | $172.6 | $320.6 | $(148.0) | -46.2% | | Interest expense | $118.1 | $104.5 | $13.6 | 13.0% | | Net income (loss) | $87.4 | $(47.1) | $134.5 | 285.6% | | Basic EPS | $7.55 | $(3.83) | $11.38 | 297.1% | | Diluted EPS | $7.42 | $(3.83) | $11.25 | 293.7% | Consolidated Statements of Income (Six Months Ended June 30) | Metric | H1 2025 (Millions) | H1 2024 (Millions) | Change (Millions) | % Change | | :------------------------------------ | :----------------- | :----------------- | :---------------- | :------- | | Total revenue | $1,154.9 | $1,046.2 | $108.7 | 10.4% | | Total operating expenses | $291.0 | $250.5 | $40.5 | 16.2% | | Total provision for credit losses | $334.5 | $506.6 | $(172.1) | -34.0% | | Interest expense | $232.8 | $197.0 | $35.8 | 18.2% | | Net income | $193.7 | $17.2 | $176.5 | 1026.2% | | Basic EPS | $16.37 | $1.39 | $14.98 | 1077.7% | | Diluted EPS | $16.11 | $1.37 | $14.74 | 1075.9% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20-%20Three%20and%20six%20months%20ended%20June%2030,%202025%20and%202024) This section presents the company's comprehensive income, including net income and other comprehensive income, for the three and six months ended June 30 Consolidated Statements of Comprehensive Income (Three and Six Months Ended June 30) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | | :-------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net income (loss) | $87.4 | $(47.1) | $193.7 | $17.2 | | Other comprehensive income (loss), net of tax | $0.4 | $0.0 | $1.3 | $(0.2) | | Comprehensive income (loss) | $87.8 | $(47.1) | $195.0 | $17.0 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20-%20Three%20and%20six%20months%20ended%20June%2030,%202025%20and%202024) This section details changes in shareholders' equity, reflecting net income, stock repurchases, and stock-based compensation for the periods ended June 30 - Total shareholders' equity decreased from **$1,749.6 million** as of December 31, 2024, to **$1,554.7 million** as of June 30, 2025, primarily due to **$426.6 million** in common stock repurchases, partially offset by **$193.7 million** in net income and **$25.6 million** in stock-based compensation[9](index=9&type=chunk)[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20-%20Six%20months%20ended%20June%2030,%202025%20and%202024) This section presents the company's cash flows from operating, investing, and financing activities for the six months ended June 30 Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | H1 2025 (Millions) | H1 2024 (Millions) | Change (Millions) | | :------------------------------------ | :----------------- | :----------------- | :---------------- | | Net cash provided by operating activities | $485.9 | $514.0 | $(28.1) | | Net cash used in investing activities | $(485.8) | $(1,109.9) | $624.1 | | Net cash provided by (used in) financing activities | $(281.3) | $642.6 | $(923.9) | | Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents | $(281.2) | $46.7 | $(327.9) | | Cash and cash equivalents and restricted cash and cash equivalents end of period | $563.8 | $517.6 | $46.2 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies and key financial items [1. BASIS OF PRESENTATION](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) The unaudited consolidated financial statements are prepared under GAAP for interim reporting, relying on management's estimates and assumptions - The financial statements are unaudited and prepared in accordance with GAAP for interim reporting, not including all footnotes required for complete annual statements[21](index=21&type=chunk) - Management's estimates and assumptions are critical to the financial statements, and actual results could vary[22](index=22&type=chunk) [2. DESCRIPTION OF BUSINESS](index=9&type=section&id=2.%20DESCRIPTION%20OF%20BUSINESS) The company provides auto financing solutions to dealers for consumers with impaired credit, operating Portfolio and Purchase Programs - The company facilitates vehicle ownership by providing financing solutions to dealers for consumers with impaired or limited credit histories, helping consumers improve their credit scores[24](index=24&type=chunk)[25](index=25&type=chunk) - The majority of Consumer Loans (**78.5%** in Q2 2025) are assigned to consumers with FICO scores below 650 or no FICO scores[27](index=27&type=chunk) Consumer Loan Assignment Volume by Program | Program Type | Q2 2025 (Unit Volume) | Q2 2025 (Dollar Volume) | Q2 2024 (Unit Volume) | Q2 2024 (Dollar Volume) | | :------------- | :-------------------- | :---------------------- | :-------------------- | :---------------------- | | Dealer Loans | 71.6% | 68.3% | 78.5% | 77.3% | | Purchased Loans | 28.4% | 31.7% | 21.5% | 22.7% | - In 2025, the company expanded Dealer access to the Purchase Program for consumers with higher credit ratings, leading to an increase in Purchased Loans volume[30](index=30&type=chunk) [3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=3.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company operates as a single auto financing segment, detailing policies for cash, securities, and loans, including the CECL model and seasonal impacts - The company operates in a single reportable segment, providing financing solutions to auto dealers[41](index=41&type=chunk) - The business is seasonal, with peak Consumer Loan assignments and collections in the first quarter, leading to a significant provision for credit losses expense at the time of assignment[40](index=40&type=chunk) - The company adopted the CECL model on January 1, 2020, requiring an initial allowance for credit losses at the time of loan assignment[51](index=51&type=chunk)[52](index=52&type=chunk) - New accounting updates (ASU 2023-06, 2023-09, 2024-03) are being evaluated for their impact on financial statements and disclosures[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [4. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=17&type=section&id=4.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The company estimates fair values for financial instruments using market-based measurements, with loans receivable showing a higher fair value than carrying amount Carrying Amount vs. Estimated Fair Value (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 Carrying Amount (Millions) | June 30, 2025 Estimated Fair Value (Millions) | Dec 31, 2024 Carrying Amount (Millions) | Dec 31, 2024 Estimated Fair Value (Millions) | | :----------------------------- | :--------------------------------------- | :-------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Loans receivable, net | $8,001.9 | $9,098.3 | $7,850.3 | $8,922.7 | | Secured financing | $5,383.3 | $5,448.5 | $5,361.5 | $5,431.9 | | Senior notes | $1,086.4 | $1,141.0 | $991.3 | $1,035.3 | - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs); Loans receivable, net, are valued using Level 3 inputs[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) [5. RESTRICTED SECURITIES AVAILABLE FOR SALE](index=19&type=section&id=5.%20RESTRICTED%20SECURITIES%20AVAILABLE%20FOR%20SALE) Restricted securities available for sale, primarily corporate and government bonds, totaled **$107.1 million** as of June 30, 2025, showing a net unrealized gain Restricted Securities Available for Sale (June 30, 2025 vs. Dec 31, 2024) | Category | June 30, 2025 Amortized Cost (Millions) | June 30, 2025 Estimated Fair Value (Millions) | June 30, 2025 Gross Unrealized Gains (Millions) | June 30, 2025 Gross Unrealized Losses (Millions) | | :------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------------------------------- | | Corporate bonds | $52.6 | $53.2 | $0.7 | $(0.1) | | U.S. Government and agency securities | $33.3 | $33.7 | $0.4 | $0.0 | | Asset-backed securities | $18.3 | $18.5 | $0.2 | $0.0 | | Mortgage-backed securities | $1.7 | $1.7 | $0.0 | $0.0 | | **Total** | **$105.9** | **$107.1** | **$1.3** | **$(0.1)** | - The majority of restricted securities have contractual maturities between one and five years[93](index=93&type=chunk) [6. LOANS RECEIVABLE](index=20&type=section&id=6.%20LOANS%20RECEIVABLE) Net loans receivable increased to **$8,001.9 million** as of June 30, 2025, with a significant decrease in credit loss provision due to smaller loan performance decline Loans Receivable and Allowance for Credit Losses (June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :-------------------------- | :----------------------- | :---------------------- | | Loans receivable | $11,563.0 | $11,289.1 | | Allowance for credit losses | $(3,561.1) | $(3,438.8) | | Loans receivable, net | $8,001.9 | $7,850.3 | Total Provision for Credit Losses | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :------------------------------------ | :---------------- | :---------------- | :---------------- | :------- | | Three Months Ended June 30 | $172.6 | $320.6 | $(148.0) | -46.2% | | Six Months Ended June 30 | $334.5 | $506.6 | $(172.1) | -34.0% | - In Q2 2025, the company adjusted its forecasting methodology, reducing forecasted net cash flows by **$18.6 million** (**0.2%**) and increasing provision for credit losses by **$16.5 million**, primarily for 2024 Consumer Loans that underperformed[122](index=122&type=chunk) - In Q2 2024, a larger adjustment was made, reducing forecasted net cash flows by **$147.2 million** (**1.4%**) and increasing provision for credit losses by **$127.5 million**, affecting 2022-2024 Consumer Loans due to underperformance[123](index=123&type=chunk) Forecasted Collection Percentage (Total Loans) | Assignment Year | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Initial Forecast | Variance from Initial Forecast | | :-------------- | :------------ | :------------- | :----------- | :--------------- | :----------------------------- | | 2022 | 59.7% | 60.0% | 60.2% | 67.5% | -7.8% | | 2023 | 64.1% | 64.3% | 64.3% | 67.5% | -3.4% | | 2024 | 65.7% | 66.3% | 66.5% | 67.2% | -1.5% | | 2025 | 66.9% | 66.0% | — | 66.9% | 0.0% | [7. REINSURANCE](index=31&type=section&id=7.%20REINSURANCE) VSC Re, the company's subsidiary, reinsures vehicle service contracts, reporting **$24.1 million** in net premiums earned for Q2 2025 and **$47.6 million** for H1 2025 Reinsurance Activity (Three and Six Months Ended June 30, 2025 vs. 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net assumed written premiums | $23.7 | $27.3 | $49.3 | $58.5 | | Net premiums earned | $24.1 | $24.3 | $47.6 | $46.2 | | Provision for claims | $19.8 | $20.3 | $35.9 | $37.3 | - VSC Re's trust assets include **$0.8 million** in restricted cash and **$107.1 million** in restricted securities as of June 30, 2025[126](index=126&type=chunk) [8. OTHER INCOME](index=31&type=section&id=8.%20OTHER%20INCOME) Other income increased to **$19.0 million** for Q2 2025 and **$39.9 million** for H1 2025, driven by ancillary product profit sharing and interest income Other Income (Three and Six Months Ended June 30, 2025 vs. 2024) | Source | Q2 2025 (Millions) | Q2 2024 (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | | :-------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Ancillary product profit sharing | $7.5 | $6.4 | $16.2 | $13.7 | | Interest | $7.8 | $6.4 | $16.2 | $12.2 | | Remarketing fees | $3.3 | $2.9 | $6.7 | $6.2 | | Total | $19.0 | $16.2 | $39.9 | $33.1 | - Ancillary product profit sharing and interest income are recognized over time, while remarketing fees are recognized at the point of sale[130](index=130&type=chunk) [9. DEBT](index=32&type=section&id=9.%20DEBT) Total debt increased to **$6,471.2 million** as of June 30, 2025, utilizing diverse financing, and the company remained in compliance with debt covenants Debt Overview (June 30, 2025 vs. Dec 31, 2024) | Debt Type | June 30, 2025 Carrying Amount (Millions) | Dec 31, 2024 Carrying Amount (Millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Revolving secured lines of credit | $1.5 | $0.1 | | Secured financing | $5,383.3 | $5,361.5 | | Senior notes | $1,086.4 | $991.3 | | **Total debt** | **$6,471.2** | **$6,352.9** | - The company issued **$500.0 million** of **6.625%** senior notes due 2030 in February 2025, using a portion to redeem **$400.0 million** of 2026 senior notes, incurring a **$1.2 million** pre-tax loss on extinguishment[156](index=156&type=chunk)[157](index=157&type=chunk) - Warehouse Facility VI's revolving period was extended to September 30, 2028, with a reduced interest rate (SOFR + **185 bps**) and servicing fee (**4.0%**); Warehouse Facility IV's revolving period was extended to July 30, 2028, with a reduced interest rate (SOFR + **205 bps**)[194](index=194&type=chunk)[195](index=195&type=chunk) - As of June 30, 2025, the company was in compliance with all debt covenants[162](index=162&type=chunk) [10. INCOME TAXES](index=41&type=section&id=10.%20INCOME%20TAXES) The effective income tax rate for Q2 2025 increased to **25.8%** due to state tax changes, while H1 2025 decreased to **25.4%** due to higher pre-tax income Effective Income Tax Rate Reconciliation | Factor | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | U.S. federal statutory income tax rate | 21.0% | 21.0% | 21.0% | 21.0% | | State and local income taxes | 3.6% | -3.7% | 3.2% | 16.9% | | Non-deductible executive compensation expense | 1.0% | -2.6% | 1.0% | 8.2% | | Tax deficiency (excess tax benefit) from stock-based compensation | 0.1% | 0.0% | 0.1% | -1.7% | | Other | 0.1% | 0.1% | 0.1% | 0.3% | | **Effective income tax rate** | **25.8%** | **14.8%** | **25.4%** | **44.7%** | - Changes in state tax laws enacted in Q2 2024, effective retroactively, significantly impacted the Q2 2024 effective tax rate due to a pre-tax loss in that period[167](index=167&type=chunk) [11. NET INCOME PER SHARE](index=42&type=section&id=11.%20NET%20INCOME%20PER%20SHARE) Basic net income per share for Q2 2025 was **$7.55** and diluted EPS was **$7.42**, significantly improving from prior year Weighted Average Shares Outstanding | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :---------- | :---------- | :---------- | :---------- | | Basic number of weighted average shares outstanding | 11,574,018 | 12,282,174 | 11,831,094 | 12,381,656 | | Diluted number of weighted average shares outstanding | 11,771,525 | 12,282,174 | 12,023,903 | 12,533,246 | - Certain stock options and restricted stock units were excluded from diluted EPS calculation as their inclusion would have been anti-dilutive, particularly in Q2 2024 due to a net loss[172](index=172&type=chunk) [12. STOCK REPURCHASES](index=42&type=section&id=12.%20STOCK%20REPURCHASES) The company repurchased **529,605 shares** for **$262.2 million** in Q2 2025 and **858,669 shares** for **$426.6 million** in H1 2025 Stock Repurchases | Period | Number of Shares Repurchased (Q2 2025) | Cost (Q2 2025, Millions) | Number of Shares Repurchased (H1 2025) | Cost (H1 2025, Millions) | | :-------------------------- | :--------------------------------------- | :----------------------- | :--------------------------------------- | :----------------------- | | Open Market | 528,462 | $261.6 | 853,960 | $424.2 | | Other | 1,143 | $0.6 | 4,709 | $2.4 | | **Total** | **529,605** | **$262.2** | **858,669** | **$426.6** | - As of June 30, 2025, the company had authorization to repurchase an additional **391,131 shares** of common stock[174](index=174&type=chunk) [13. STOCK-BASED COMPENSATION PLANS](index=43&type=section&id=13.%20STOCK-BASED%20COMPENSATION%20PLANS) Stock-based compensation expense for Q2 2025 was **$12.7 million** and **$25.6 million** for H1 2025, driven by new equity awards Stock-Based Compensation Expense | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | | :-------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Restricted stock units | $11.3 | $2.4 | $21.9 | $5.1 | | Stock options | $1.4 | $8.2 | $3.7 | $16.4 | | **Total** | **$12.7** | **$10.6** | **$25.6** | **$21.5** | - The company expects to recognize **$219.5 million** in total projected stock-based compensation expense from the remainder of 2025 through thereafter, with **$24.1 million** in the remainder of 2025[177](index=177&type=chunk) [14. BUSINESS SEGMENT AND OTHER INFORMATION](index=44&type=section&id=14.%20BUSINESS%20SEGMENT%20AND%20OTHER%20INFORMATION) The company operates as a single reportable operating segment, providing auto financing solutions in the United States, with all revenues and assets domestic - The Chief Executive Officer (CODM) reviews consolidated financial statements to assess performance and allocate resources, confirming a single reportable operating segment[179](index=179&type=chunk)[180](index=180&type=chunk) - All revenues and long-lived assets are exclusively within the United States[181](index=181&type=chunk) - No single dealer represents **10%** or more of the company's revenue or total loans receivable[183](index=183&type=chunk) [15. COMMITMENTS AND CONTINGENCIES](index=45&type=section&id=15.%20COMMITMENTS%20AND%20CONTINGENCIES) The company faces ongoing consumer claims, litigation, and regulatory investigations, with a **$31.8 million** accrual, posing potential material financial impacts - The company is frequently subject to consumer claims, litigation, and regulatory investigations alleging violations of various consumer-oriented laws[185](index=185&type=chunk) - Potential outcomes include substantial damages, fines, statutory penalties, and injunctive relief, with possible material adverse impacts on financial position, liquidity, and results of operations[182](index=182&type=chunk) - A putative class action was filed on April 7, 2025, alleging TCPA violations for unsolicited calls using artificial or prerecorded voices[187](index=187&type=chunk) - The lawsuit jointly filed by the Office of the New York State Attorney General and the CFPB on January 4, 2023, is ongoing, with the CFPB withdrawing as a plaintiff on April 29, 2025[192](index=192&type=chunk) - Multi-state investigations by the Attorneys General of Maryland and New Jersey into origination and collection policies, expanding to 41 other states and D.C., are ongoing, though Kansas, Texas, and Iowa have withdrawn[193](index=193&type=chunk) [16. SUBSEQUENT EVENTS](index=46&type=section&id=16.%20SUBSEQUENT%20EVENTS) Subsequent to June 30, 2025, the company extended revolving periods and adjusted terms for Warehouse Facilities VI and IV, enhancing financing - On July 11, 2025, Warehouse Facility VI's revolving period was extended to September 30, 2028, with interest rate reduced from SOFR + **210 bps** to SOFR + **185 bps**, and servicing fee decreased from **6.0%** to **4.0%**[194](index=194&type=chunk) - On July 30, 2025, Warehouse Facility IV's revolving period was extended to July 30, 2028, with interest rate reduced from SOFR + **221.4 bps** to SOFR + **205 bps**[195](index=195&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=47&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and operational results, highlighting increased net income from lower credit loss provisions and higher finance charges [Overview](index=47&type=section&id=Overview) This section provides a high-level summary of the company's financial performance, noting significant increases in net income for Q2 and H1 2025 - Q2 2025 net income was **$87.4 million**, a substantial increase from a **$47.1 million** net loss in Q2 2024, primarily due to lower credit loss provision and higher finance charges[199](index=199&type=chunk) - H1 2025 net income was **$193.7 million**, up from **$17.2 million** in H1 2024, driven by decreased credit loss provision and increased finance charges[200](index=200&type=chunk) - Forecasted collection rates declined by **0.5%** in Q2 2025 and **0.7%** in H1 2025, with slower forecasted net cash flow timing[201](index=201&type=chunk) - The average balance of the Loan portfolio increased by **6.8%** in Q2 2025 (to **$8.0 billion**) and **8.9%** in H1 2025 (to **$7.9 billion**) compared to the prior year periods[201](index=201&type=chunk) - Consumer Loan assignment unit and dollar volumes declined by **14.6%** and **18.8%** respectively in Q2 2025, and by **12.2%** and **17.1%** in H1 2025, compared to the prior year periods[201](index=201&type=chunk) [Critical Success Factors](index=48&type=section&id=Critical%20Success%20Factors) Key success factors include accurate Consumer Loan performance forecasts, access to capital, and growing loan volume to maximize economic profit - Key to success are accurate Consumer Loan performance forecasts, access to capital, and maintaining/growing loan volume to maximize economic profit[202](index=202&type=chunk) - Economic profit is a non-GAAP measure used to evaluate financial results, determine profit-sharing, and guide business decisions, focusing on return on capital in excess of cost of capital[202](index=202&type=chunk) [Consumer Loan Metrics](index=48&type=section&id=Consumer%20Loan%20Metrics) This section details key Consumer Loan metrics, including forecasted collection percentages and the spread between collection and advance rates Forecasted Collection Percentage (Total Loans) | Assignment Year | June 30, 2025 | Initial Forecast | Variance from Initial Forecast | | :-------------- | :------------ | :--------------- | :----------------------------- | | 2021 | 63.8% | 66.3% | -2.5% | | 2022 | 59.7% | 67.5% | -7.8% | | 2023 | 64.1% | 67.5% | -3.4% | | 2024 | 65.7% | 67.2% | -1.5% | | 2025 | 66.9% | 66.9% | 0.0% | - Forecasted collection rates for 2025 Consumer Loans improved in Q2 2025, while those for 2022-2024 declined[205](index=205&type=chunk) - The spread between forecasted collection rate and advance rate for 2025 Consumer Loans (**22.0%**) is higher than for 2024 (**20.6%**), primarily due to underperformance of 2024 loans[211](index=211&type=chunk)[214](index=214&type=chunk) - The risk of material change in forecasted collection rates decreases as Consumer Loans age, with over **90%** of expected collections realized for 2020 and prior assignments[212](index=212&type=chunk) [Access to Capital](index=52&type=section&id=Access%20to%20Capital) The company's funded debt to equity ratio was **4.2 to 1** as of June 30, 2025, supported by multiple funding sources - The company's funded debt to equity ratio was **4.2 to 1** as of June 30, 2025[221](index=221&type=chunk) - Multiple funding sources include revolving secured lines of credit, Warehouse facilities, Term ABS financings, and senior notes[221](index=221&type=chunk) [Consumer Loan Volume](index=52&type=section&id=Consumer%20Loan%20Volume) Consumer Loan assignment unit and dollar volumes declined in Q2 2025, with an increase in Purchased Loans due to expanded dealer access Consumer Loan Assignment Volume (YoY % Change) | Period | Unit Volume | Dollar Volume | | :---------------- | :---------- | :------------ | | Q3 2023 | 13.0% | 10.5% | | Q4 2023 | 26.7% | 21.3% | | Q1 2024 | 24.1% | 20.2% | | Q2 2024 | 20.9% | 16.3% | | Q3 2024 | 17.7% | 12.2% | | Q4 2024 | 0.3% | -4.9% | | Q1 2025 | -10.1% | -15.5% | | Q2 2025 | -14.6% | -18.8% | - Active Dealers declined by **0.8%** in Q2 2025, and average unit volume per active Dealer decreased by **14.0%**[224](index=224&type=chunk) - The percentage of Purchased Loans in total assignment volume increased in 2025 due to expanded dealer access for consumers with higher credit ratings[229](index=229&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenue, expenses, and net income for the three and six months ended June 30 [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=56&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202024) Net income for Q2 2025 was **$87.4 million**, a significant improvement from a **$47.1 million** net loss in Q2 2024, driven by finance charges and lower credit loss provisions Key Financial Changes (Q2 2025 vs. Q2 2024) | Metric | Change (Millions) | % Change | Primary Driver | | :------------------------------------ | :---------------- | :------- | :------------- | | Finance charges | $43.0 | 8.6% | Increase in average net Loans receivable balance and average yield. | | Total operating expenses | $31.1 | 25.0% | Increase in legal expenses ($23.4M contingent loss) and salaries/wages (team members, stock-based comp). | | Total provision for credit losses | $(148.0) | -46.2% | Smaller decline in Consumer Loan performance and decrease in new Consumer Loan assignments. | | Interest expense | $13.6 | 13.0% | Increase in average outstanding debt balance. | | Loss on sale of building | $(23.7) | — | Non-recurring loss in Q2 2024. | | Net income (loss) | $134.5 | 285.6% | Combined impact of above. | - The effective income tax rate increased to **25.8%** in Q2 2025 from **14.8%** in Q2 2024, mainly due to state tax law changes and the shift from a pre-tax loss to pre-tax income[243](index=243&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=59&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202024) Net income for H1 2025 was **$193.7 million**, a substantial increase from **$17.2 million** in H1 2024, driven by finance charges and lower credit loss provisions Key Financial Changes (H1 2025 vs. H1 2024) | Metric | Change (Millions) | % Change | Primary Driver | | :------------------------------------ | :---------------- | :------- | :------------- | | Finance charges | $100.5 | 10.4% | Increase in average net Loans receivable balance and average yield. | | Other income | $6.8 | 20.5% | Increase in interest income and ancillary product profit sharing. | | Total operating expenses | $40.5 | 16.2% | Increase in legal expenses ($23.4M contingent loss) and salaries/wages (team members, stock-based comp, fringe benefits). | | Total provision for credit losses | $(172.1) | -34.0% | Smaller decline in Consumer Loan performance and decrease in new Consumer Loan assignments. | | Interest expense | $35.8 | 18.2% | Increase in average outstanding debt balance. | | Loss on sale of building | $(23.7) | — | Non-recurring loss in H1 2024. | | Net income | $176.5 | 1026.2% | Combined impact of above. | - The effective income tax rate decreased to **25.4%** in H1 2025 from **44.7%** in H1 2024, primarily due to a significant increase in pre-tax income in H1 2025[256](index=256&type=chunk) - The CECL model requires a significant provision for credit losses at loan assignment for contractual net cash flows not expected to be realized, and finance charge revenue in subsequent periods that exceeds expected yield[233](index=233&type=chunk) - The company believes the GAAP methodology does not fully reflect the economics of its business due to the timing of expense and revenue recognition[231](index=231&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, available credit, and debt structure, highlighting financing activities and debt maturities - Cash and cash equivalents were **$70.0 million** as of June 30, 2025, down from **$343.7 million** at December 31, 2024[264](index=264&type=chunk) - Unused and available revolving lines of credit totaled **$1,733.5 million** as of June 30, 2025[264](index=264&type=chunk) - Total balance sheet indebtedness increased to **$6,471.2 million** as of June 30, 2025, from **$6,352.9 million** at December 31, 2024, primarily funding loan portfolio growth and stock repurchases[264](index=264&type=chunk) - Key financing activities in H1 2025 included issuing **$500.0 million** in 2030 senior notes, completing a **$400.0 million** Term ABS financing, and extending the revolving secured line of credit facility[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk) Scheduled Principal Debt Maturities (as of June 30, 2025) | Year | Scheduled Principal Debt Maturities (Millions) | | :---------------- | :--------------------------------------- | | Remainder of 2025 | $745.2 | | 2026 | $2,266.5 | | 2027 | $2,136.5 | | 2028 | $860.3 | | 2029 | $0.0 | | Over five years | $500.0 | | **Total** | **$6,508.5** | [Critical Accounting Estimates](index=63&type=section&id=Critical%20Accounting%20Estimates) Management's estimates are crucial for financial statements, especially for forecasting net cash flows from the Loan portfolio, with recent adjustments - Management's estimates and judgments are crucial for financial statements, especially for forecasting future net cash flows from the Loan portfolio[268](index=268&type=chunk) - A Q2 2025 methodology adjustment reduced forecasted collection rates for 2024 Consumer Loans by **$18.6 million** (**0.2%**), increasing provision for credit losses by **$16.5 million**[269](index=269&type=chunk) [Forward-Looking Statements](index=63&type=section&id=Forward-Looking%20Statements) This section identifies forward-looking statements, outlining key risk categories including industry, operational, macroeconomic, capital, liquidity, technology, cybersecurity, legal, and regulatory - Forward-looking statements are identified by words like "may," "will," "should," "believe," "expect," and are subject to risks and uncertainties[270](index=270&type=chunk)[271](index=271&type=chunk) - Key risk categories include industry, operational, macroeconomic, capital, liquidity, technology, cybersecurity, legal, and regulatory risks[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - The company disclaims any obligation to update forward-looking statements unless required by law[275](index=275&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=65&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to market risk information have occurred since the December 31, 2024 Annual Report on Form 10-K - No material changes to market risk information since the December 31, 2024 Annual Report on Form 10-K[277](index=277&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=65&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - Disclosure controls and procedures were deemed effective as of June 30, 2025[278](index=278&type=chunk) - No material changes to internal control over financial reporting occurred during the fiscal quarter[279](index=279&type=chunk) [PART II. — OTHER INFORMATION](index=66&type=section&id=PART%20II.%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security sales, other disclosures, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=66&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company faces routine consumer claims, litigation, and regulatory investigations, with potential for substantial damages and material financial impacts - The company is frequently subject to consumer claims, litigation, and regulatory investigations alleging violations of various consumer-oriented laws[282](index=282&type=chunk) - Potential outcomes include substantial damages, fines, statutory penalties, and injunctive relief, with possible material adverse impacts on financial position, liquidity, and results of operations[282](index=282&type=chunk) - For a detailed description of significant litigation, refer to Note 15 of the consolidated financial statements[283](index=283&type=chunk) [ITEM 1A. RISK FACTORS](index=67&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section updates risk factors related to adverse economic conditions and introduces new risks associated with artificial intelligence, including implementation, regulatory, and output challenges - The risk factor regarding adverse economic conditions and industry changes has been updated, emphasizing increased delinquencies, defaults, and losses during economic slowdowns, and the impact of inflation, high gasoline prices, and declining auto values[285](index=285&type=chunk)[286](index=286&type=chunk) - New risks associated with artificial intelligence (AI) include significant investment requirements, challenges in integration, rapid technological evolution, and potential for competitive disadvantage[291](index=291&type=chunk) - The evolving legal and regulatory environment for AI poses compliance costs and risks, while AI models themselves may produce incorrect, biased, or harmful output, or infringe on intellectual property[292](index=292&type=chunk)[293](index=293&type=chunk) - Reliance on third-party AI models and potential failures by third parties to adhere to AI policies could lead to legal/regulatory violations, intellectual property issues, or cybersecurity threats[293](index=293&type=chunk)[294](index=294&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=69&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased **529,605 shares** of common stock for **$490.21** per share during Q2 2025, primarily through open market transactions Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1 to April 30, 2025 | 145,468 | $482.35 | 144,987 | 774,606 | | May 1 to May 31, 2025 | 284,332 | $492.03 | 284,024 | 490,582 | | June 1 to June 30, 2025 | 99,805 | $496.49 | 99,451 | 391,131 | | **Total** | **529,605** | **$490.21** | **528,462** | **391,131** | - The repurchases were made under an August 2023 authorization for up to two million shares, with **391,131 shares** remaining authorized as of June 30, 2025[298](index=298&type=chunk) [ITEM 5. OTHER INFORMATION](index=69&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025 - No changes in Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers during Q2 2025[301](index=301&type=chunk) [ITEM 6. EXHIBITS](index=70&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including amendments to credit agreements and certifications - Key exhibits include the Fourteenth Amendment to Sixth Amended and Restated Credit Agreement (June 24, 2025) and the Seventh Amendment to Loan and Security Agreement (July 11, 2025)[302](index=302&type=chunk) - Certifications from the principal executive and financial officers (Sarbanes-Oxley Act Sections 302 and 906) are included[302](index=302&type=chunk) [SIGNATURES](index=71&type=section&id=SIGNATURES) The report was signed by Jay D. Martin, Chief Financial Officer, on behalf of Credit Acceptance Corporation on July 31, 2025 - The report was signed by Jay D. Martin, Chief Financial Officer, on July 31, 2025[305](index=305&type=chunk)

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) [Q2 2025 Key Financial Results](index=1&type=section&id=Q2%202025%20Key%20Financial%20Results) Q2 2025 GAAP net income was $87.4 million ($7.42 diluted EPS), with adjusted net income at $100.8 million ($8.56 diluted EPS) Q2 2025 Key Financial Results | (In millions, except per share data) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------- | :------------ | | GAAP net income (loss) | $ 87.4 | $ 106.3 | $ (47.1) | | GAAP net income (loss) per diluted share | $ 7.42 | $ 8.66 | $ (3.83) | | Adjusted net income | $ 100.8 | $ 114.8 | $ 126.4 | | Adjusted net income per diluted share | $ 8.56 | $ 9.35 | $ 10.29 | [Key Operational Achievements and Challenges](index=1&type=section&id=Key%20Operational%20Achievements%20and%20Challenges) Q2 2025 saw declining collection rates and loan assignment volumes, alongside portfolio growth and significant share repurchases - Forecasted collection rates declined, decreasing forecasted net cash flows from the loan portfolio by **$55.8 million**, or **0.5%**, and indicating slower forecasted net cash flow timing[2](index=2&type=chunk) - The average balance of the loan portfolio increased by **6.8%** from Q2 2024 to a record **$8.0 billion**[2](index=2&type=chunk) - Consumer Loan assignment unit and dollar volumes decreased by **14.6%** and **18.8%** respectively, compared to Q2 2024[2](index=2&type=chunk) - Approximately **530,000 shares**, or **4.5%** of shares outstanding at the beginning of the quarter, were repurchased[2](index=2&type=chunk) - **1,560 new dealers** were enrolled, contributing to **10,655 active dealers** during the quarter[2](index=2&type=chunk) - A **$23.4 million contingent loss** was recognized related to previously disclosed legal matters[2](index=2&type=chunk) - The estimated long-term effective income tax rate increased from **23% to 25%**[2](index=2&type=chunk) - Named one of the **100 Best Companies to Work For** by Great Place to Work and Fortune magazine for the eleventh time, ranking **34**[2](index=2&type=chunk) [Consumer Loan Performance Metrics](index=2&type=section&id=Consumer%20Loan%20Performance%20Metrics) [Forecasted Collection Rates](index=2&type=section&id=Forecasted%20Collection%20Rates) Forecasted collection rates improved for 2025 loans but declined for 2022-2024 loans as of June 30, 2025 Aggregated Forecast of Consumer Loan Collection Rates | Consumer Loan Assignment Year | Forecasted Collection Percentage as of June 30, 2025 | Forecasted Collection Percentage as of March 31, 2025 | Initial Forecast | | :---------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :--------------- | | 2016 | 63.9 % | 63.9 % | 65.4 % | | 2017 | 64.8 % | 64.8 % | 64.0 % | | 2018 | 65.6 % | 65.5 % | 63.6 % | | 2019 | 67.3 % | 67.2 % | 64.0 % | | 2020 | 68.0 % | 67.9 % | 63.4 % | | 2021 | 63.8 % | 63.9 % | 66.3 % | | 2022 | 59.7 % | 60.0 % | 67.5 % | | 2023 | 64.1 % | 64.3 % | 67.5 % | | 2024 | 65.7 % | 66.3 % | 67.2 % | | 2025 | 66.9 % | 66.0 % | 66.9 % | - For Q2 2025, forecasted collection rates **improved** for Consumer Loans assigned in 2025, **declined** for those assigned in 2022 through 2024, and were generally **consistent** for other assignment years[4](index=4&type=chunk) [Changes in Forecasted Net Cash Flows](index=3&type=section&id=Changes%20in%20Forecasted%20Net%20Cash%20Flows) Forecasted net cash flows decreased by **$55.8 million (0.5%)** in Q2 2025, partly due to a 2024 loan methodology adjustment Decrease in Forecasted Net Cash Flows from Loan Portfolio | Three Months Ended | Total Loans (Decrease in Forecasted Net Cash Flows) | % Change from Forecast at Beginning of Period | | :----------------- | :------------------------------------------------ | :-------------------------------------------- | | 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 % | | March 31, 2025 | $ (20.9) | -0.2 % | | June 30, 2025 | $ (55.8) | -0.5 % | - A methodology adjustment in Q2 2025 for 2024 Consumer Loans reduced forecasted net cash flows by **$18.6 million (0.2%)** and increased provision for credit losses by **$16.5 million**[5](index=5&type=chunk) [Consumer Loan Assignment Volume and Terms](index=3&type=section&id=Consumer%20Loan%20Assignment%20Volume%20and%20Terms) YTD 2025 Consumer Loan assignments totaled **185,764 units** and **$2,110.7 million**, with average loan amounts of **$25,376** Consumer Loan Assignments (Last 10 Years) | Consumer Loan Assignment Year | Average Consumer Loan | Average Advance | Initial Loan Term (in months) | Unit Volume | Dollar Volume (in millions) | | :---------------------------- | :-------------------- | :-------------- | :---------------------------- | :---------- | :-------------------------- | | 2016 | $ 18,218 | $ 7,976 | 53 | 330,710 | $ 2,635.5 | | 2017 | $ 20,230 | $ 8,746 | 55 | 328,507 | $ 2,873.1 | | 2018 | $ 22,158 | $ 9,635 | 57 | 373,329 | $ 3,595.8 | | 2019 | $ 23,139 | $ 10,174 | 57 | 369,805 | $ 3,772.2 | | 2020 | $ 24,262 | $ 10,656 | 59 | 341,967 | $ 3,641.2 | | 2021 | $ 25,632 | $ 11,790 | 59 | 268,730 | $ 3,167.8 | | 2022 | $ 27,242 | $ 12,924 | 60 | 280,467 | $ 3,625.3 | | 2023 | $ 27,025 | $ 12,475 | 61 | 332,499 | $ 4,147.8 | | 2024 | $ 26,497 | $ 11,961 | 61 | 386,126 | $ 4,618.4 | | 2025 (YTD) | $ 25,376 | $ 11,362 | 60 | 185,764 | $ 2,110.7 | 2025 Consumer Loan Assignment Period Averages | 2025 Consumer Loan Assignment Period | Consumer Loan | Advance | Initial Loan Term (in months) | | :----------------------------------- | :------------ | :------ | :---------------------------- | | January 1, 2025 through March 31, 2025 | $ 25,188 | $ 11,096 | 60 | | April 1, 2025 through June 30, 2025 | $ 25,596 | $ 11,674 | 60 | [Loan Profitability and Spreads](index=4&type=section&id=Loan%20Profitability%20and%20Spreads) Loan profitability spreads were positive for 2019-2020 loans, negative for 2021-2024, with 2025 spreads higher than 2024 Aggregate Forecasted Consumer Loan Collection Rates, Advance Rates, and Spreads | Consumer Loan Assignment Year | Forecasted Collection % as of June 30, 2025 | Initial Forecast | Advance % | Spread % as of June 30, 2025 | Initial Forecast | % of Forecast Realized | | :---------------------------- | :------------------------------------------ | :--------------- | :-------- | :--------------------------- | :--------------- | :--------------------- | | 2016 | 63.9 % | 65.4 % | 43.8 % | 20.1 % | 21.6 % | 99.6 % | | 2017 | 64.8 % | 64.0 % | 43.2 % | 21.6 % | 20.8 % | 99.4 % | | 2018 | 65.6 % | 63.6 % | 43.5 % | 22.1 % | 20.1 % | 99.0 % | | 2019 | 67.3 % | 64.0 % | 44.0 % | 23.3 % | 20.0 % | 98.0 % | | 2020 | 68.0 % | 63.4 % | 43.9 % | 24.1 % | 19.5 % | 95.1 % | | 2021 | 63.8 % | 66.3 % | 46.0 % | 17.8 % | 20.3 % | 88.7 % | | 2022 | 59.7 % | 67.5 % | 47.4 % | 12.3 % | 20.1 % | 74.7 % | | 2023 | 64.1 % | 67.5 % | 46.2 % | 17.9 % | 21.3 % | 55.0 % | | 2024 | 65.7 % | 67.2 % | 45.1 % | 20.6 % | 22.1 % | 30.4 % | | 2025 | 66.9 % | 66.9 % | 44.9 % | 22.0 % | 22.0 % | 6.9 % | - Spreads for **2019 and 2020 Consumer Loans** were **positively impacted** by performance exceeding initial estimates[12](index=12&type=chunk) - Spreads for **2021 through 2024 Consumer Loans** were **negatively impacted** by performance lower than initial estimates[12](index=12&type=chunk) - The **higher spread for 2025 Consumer Loans** relative to 2024 was primarily due to the **underperformance of 2024 Consumer Loans**[12](index=12&type=chunk) [Dealer Loans vs. Purchased Loans Analysis](index=5&type=section&id=Dealer%20Loans%20vs.%20Purchased%20Loans%20Analysis) Comparison of dealer and purchased loans shows distinct performance trends in collection rates, advance rates, and spreads Forecasted Collection Percentage: Dealer Loans vs. Purchased Loans | Consumer Loan Assignment Year | Dealer Loans (June 30, 2025) | Dealer Loans (Initial Forecast) | Dealer Loans (Variance) | Purchased Loans (June 30, 2025) | Purchased Loans (Initial Forecast) | Purchased Loans (Variance) | | :---------------------------- | :----------------------------- | :------------------------------ | :---------------------- | :------------------------------ | :--------------------------------- | :------------------------- | | 2016 | 63.1 % | 65.1 % | -2.0 % | 66.1 % | 66.5 % | -0.4 % | | 2017 | 64.1 % | 63.8 % | 0.3 % | 66.4 % | 64.6 % | 1.8 % | | 2018 | 65.0 % | 63.6 % | 1.4 % | 66.8 % | 63.5 % | 3.3 % | | 2019 | 66.9 % | 63.9 % | 3.0 % | 67.9 % | 64.2 % | 3.7 % | | 2020 | 67.8 % | 63.3 % | 4.5 % | 68.3 % | 63.6 % | 4.7 % | | 2021 | 63.6 % | 66.3 % | -2.7 % | 64.3 % | 66.3 % | -2.0 % | | 2022 | 58.9 % | 67.3 % | -8.4 % | 61.7 % | 68.0 % | -6.3 % | | 2023 | 62.9 % | 66.8 % | -3.9 % | 67.6 % | 69.4 % | -1.8 % | | 2024 | 64.5 % | 66.3 % | -1.8 % | 70.0 % | 70.7 % | -0.7 % | | 2025 | 65.4 % | 65.4 % | 0.0 % | 71.5 % | 71.5 % | 0.0 % | Forecasted Collection Rates, Advance Rates, and Spreads: Dealer Loans vs. Purchased Loans (as of June 30, 2025) | Consumer Loan Assignment Year | Dealer Loans (Collection %) | Dealer Loans (Advance %) | Dealer Loans (Spread %) | Purchased Loans (Collection %) | Purchased Loans (Advance %) | Purchased Loans (Spread %) | | :---------------------------- | :-------------------------- | :----------------------- | :---------------------- | :----------------------------- | :-------------------------- | :------------------------- | | 2016 | 63.1 % | 42.1 % | 21.0 % | 66.1 % | 48.6 % | 17.5 % | | 2017 | 64.1 % | 42.1 % | 22.0 % | 66.4 % | 45.8 % | 20.6 % | | 2018 | 65.0 % | 42.7 % | 22.3 % | 66.8 % | 45.2 % | 21.6 % | | 2019 | 66.9 % | 43.1 % | 23.8 % | 67.9 % | 45.6 % | 22.3 % | | 2020 | 67.8 % | 43.0 % | 24.8 % | 68.3 % | 45.5 % | 22.8 % | | 2021 | 63.6 % | 45.1 % | 18.5 % | 64.3 % | 47.7 % | 16.6 % | | 2022 | 58.9 % | 46.4 % | 12.5 % | 61.7 % | 50.1 % | 11.6 % | | 2023 | 62.9 % | 44.8 % | 18.1 % | 67.6 % | 49.8 % | 17.8 % | | 2024 | 64.5 % | 44.1 % | 20.4 % | 70.0 % | 48.9 % | 21.1 % | | 2025 | 65.4 % | 43.1 % | 22.3 % | 71.5 % | 50.3 % | 21.2 % | - The spread on **2025 dealer loans** was **22.3%**, up from **20.4%** on 2024 dealer loans, primarily due to the **lower performance of 2024 dealer loans**[18](index=18&type=chunk) - The spread on **2025 purchased loans** was **21.2%**, slightly up from **21.1%** on 2024 purchased loans, reflecting **improved performance of 2024 purchased loans** partially offset by a **lower initial spread on 2025 purchased loans**[19](index=19&type=chunk) [Consumer Loan Volume and Dealer Dynamics](index=6&type=section&id=Consumer%20Loan%20Volume%20and%20Dealer%20Dynamics) [Consumer Loan Volume Trends](index=6&type=section&id=Consumer%20Loan%20Volume%20Trends) Q2 2025 Consumer Loan assignment volumes declined significantly year-over-year due to fewer active dealers and lower average unit volume Year over Year Percent Change in Consumer Loan Assignment Volume | Three Months Ended | Unit Volume | Dollar Volume | | :----------------- | :---------- | :------------ | | September 30, 2023 | 13.0 % | 10.5 % | | December 31, 2023 | 26.7 % | 21.3 % | | March 31, 2024 | 24.1 % | 20.2 % | | June 30, 2024 | 20.9 % | 16.3 % | | September 30, 2024 | 17.7 % | 12.2 % | | December 31, 2024 | 0.3 % | -4.9 % | | March 31, 2025 | -10.1 % | -15.5 % | | June 30, 2025 | -14.6 % | -18.8 % | - Unit and dollar volumes declined **14.6%** and **18.8%** respectively in Q2 2025, driven by a **0.8% decline in active dealers** and a **14.0% decline in average unit volume per active dealer**[22](index=22&type=chunk) - Dollar volume declined more than unit volume due to a **decrease in the average advance paid**, primarily from a **decrease in the average size of Consumer Loans assigned**[22](index=22&type=chunk) [Active Dealers and Volume per Dealer](index=7&type=section&id=Active%20Dealers%20and%20Volume%20per%20Dealer) Q2 2025 Consumer Loan unit volume decreased **14.6%**, with active dealers down **0.8%** and average volume per dealer declining **14.0%** Changes in Consumer Loan Unit Volume and Active Dealers (Q2 2025 vs. Q2 2024) | | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | % Change | | :---------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------- | | Consumer Loan unit volume | 85,486 | 100,057 | -14.6 % | | Active dealers | 10,655 | 10,736 | -0.8 % | | Average volume per active dealer | 8.0 | 9.3 | -14.0 % | | Consumer Loan unit volume from new active dealers | 3,216 | 3,820 | -15.8 % | | New active dealers | 1,094 | 1,080 | 1.3 % | | Average volume per new active dealer | 2.9 | 3.5 | -17.1 % | [Loan Type Distribution (Dealer vs. Purchased)](index=7&type=section&id=Loan%20Type%20Distribution%20(Dealer%20vs.%20Purchased)) Q2 2025 saw a notable shift towards purchased loans, increasing to **28.4% of unit volume** and **31.7% of dollar volume** Percentage of Consumer Loans Assigned as Dealer Loans and Purchased Loans | Three Months Ended | Unit Volume (Dealer Loans) | Unit Volume (Purchased Loans) | Dollar Volume (Dealer Loans) | Dollar Volume (Purchased Loans) | | :----------------- | :------------------------- | :---------------------------- | :--------------------------- | :------------------------------ | | September 30, 2023 | 74.8 % | 25.2 % | 71.7 % | 28.3 % | | December 31, 2023 | 77.2 % | 22.8 % | 75.0 % | 25.0 % | | March 31, 2024 | 78.2 % | 21.8 % | 76.6 % | 23.4 % | | June 30, 2024 | 78.5 % | 21.5 % | 77.3 % | 22.7 % | | September 30, 2024 | 79.5 % | 20.5 % | 78.4 % | 21.6 % | | December 31, 2024 | 78.7 % | 21.3 % | 77.7 % | 22.3 % | | March 31, 2025 | 77.0 % | 23.0 % | 75.1 % | 24.9 % | | June 30, 2025 | 71.6 % | 28.4 % | 68.3 % | 31.7 % | - The increase in the percentage of purchased loans in 2025 Consumer Loan assignment volume was primarily related to **expanded dealer access to the purchase program for consumers with higher credit ratings**[26](index=26&type=chunk) [GAAP Financial Results](index=8&type=section&id=GAAP%20Financial%20Results) [Consolidated Statements of Income](index=22&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2025 total revenue increased to **$583.8 million**, yielding **$87.4 million net income**, a significant improvement from Q2 2024 Consolidated Statements of Income (Unaudited) | (Dollars in millions, except per share data) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue: | | | | Finance charges | $ 540.7 | $ 497.7 | | Premiums earned | 24.1 | 24.3 | | Other income | 19.0 | 16.2 | | Total revenue | 583.8 | 538.2 | | Costs and expenses: | | | | Salaries and wages | 83.7 | 75.8 | | General and administrative | 45.2 | 23.2 | | Sales and marketing | 26.6 | 25.4 | | Total operating expenses | 155.5 | 124.4 | | Provision for credit losses on forecast changes | 101.3 | 237.8 | | Provision for credit losses on new Consumer Loan assignments | 71.3 | 82.8 | | Total provision for credit losses | 172.6 | 320.6 | | Interest | 118.1 | 104.5 | | Provision for claims | 19.8 | 20.3 | | Loss on sale of building | — | 23.7 | | Total costs and expenses | 466.0 | 593.5 | | Income (loss) before provision for income taxes | 117.8 | (55.3) | | Provision (benefit) for income taxes | 30.4 | (8.2) | | Net income (loss) | $ 87.4 | $ (47.1) | | Net income (loss) per share: | | | | Basic | $ 7.55 | $ (3.83) | | Diluted | $ 7.42 | $ (3.83) | [Consolidated Balance Sheets](index=23&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$8,724.6 million**, with net loans receivable at **$8,001.9 million** Consolidated Balance Sheets (Unaudited) | (Dollars in millions, except per share data) | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------------- | :------------------ | :---------------------- | | ASSETS: | | | | Cash and cash equivalents | $ 70.0 | $ 343.7 | | Restricted cash and cash equivalents | 493.8 | 501.3 | | Restricted securities available for sale | 107.1 | 106.4 | | Loans receivable | 11,563.0 | 11,289.1 | | Allowance for credit losses | (3,561.1) | (3,438.8) | | Loans receivable, net | 8,001.9 | 7,850.3 | | Property and equipment, net | 13.2 | 14.7 | | Income taxes receivable | 9.4 | 4.2 | | Other assets | 29.2 | 34.0 | | Total assets | $ 8,724.6 | $ 8,854.6 | | LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | Liabilities: | | | | Accounts payable and accrued liabilities | $ 378.8 | $ 315.8 | | Revolving secured lines of credit | 1.5 | 0.1 | | Secured financing | 5,383.3 | 5,361.5 | | Senior notes | 1,086.4 | 991.3 | | Deferred income taxes, net | 306.1 | 319.1 | | Income taxes payable | 13.8 | 117.2 | | Total liabilities | 7,169.9 | 7,105.0 | | Shareholders' Equity: | | | | Common stock | 0.1 | 0.1 | | Paid-in capital | 369.3 | 335.1 | | Retained earnings | 1,184.3 | 1,414.7 | | Accumulated other comprehensive income (loss) | 1.0 | (0.3) | | Total shareholders' equity | 1,554.7 | 1,749.6 | | Total liabilities and shareholders' equity | $ 8,724.6 | $ 8,854.6 | [Analysis of GAAP Net Income Changes](index=8&type=section&id=Analysis%20of%20GAAP%20Net%20Income%20Changes) Q2 2025 GAAP net income increased significantly, driven by lower credit loss provisions and higher finance charges - Decrease in provision for credit losses of **46.2% ($148.0 million)**, mainly due to a smaller downward forecast adjustment in Q2 2025 compared to Q2 2024, and a **14.6% decrease in Consumer Loan assignment unit volume**[29](index=29&type=chunk) - Increase in finance charges of **8.6% ($43.0 million)**, primarily due to an **increase in the average balance of the loan portfolio**[29](index=29&type=chunk) - A **loss on sale of a building of $23.7 million** was recognized in Q2 2024, which did not recur in Q2 2025[29](index=29&type=chunk) - Increase in interest expense of **13.0% ($13.6 million)**, mainly due to an **increase in average outstanding debt balance** used to fund loan portfolio growth and stock repurchases[29](index=29&type=chunk) - Increase in operating expenses of **25.0% ($31.1 million)**, driven by a **94.8% increase in general and administrative expense** (including a **$23.4 million contingent legal loss**) and a **10.4% increase in salaries and wages**[29](index=29&type=chunk) - Increase in provision for income taxes of **470.7% ($38.6 million)**, primarily due to an **increase in pre-tax income**[29](index=29&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Adjusted Financial Performance Summary](index=9&type=section&id=Adjusted%20Financial%20Performance%20Summary) Q2 2025 adjusted net income was **$100.8 million** (down **20.3%**), with economic profit decreasing **56.6%** to **$24.4 million** Adjusted Financial Results (Q2 2025 vs. Q2 2024) | (Dollars in millions, except per share data) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | % Change | | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------- | | Adjusted average capital | $ 8,932.7 | $ 8,033.3 | 11.2 % | | Adjusted net income | $ 100.8 | $ 126.4 | -20.3 % | | Adjusted interest expense (after-tax) | $ 88.6 | $ 80.5 | 10.1 % | | Adjusted net income plus adjusted interest expense (after-tax) | $ 189.4 | $ 206.9 | -8.5 % | | Adjusted return on capital | 8.5 % | 10.3 % | -17.5 % | | Cost of capital | 7.4 % | 7.5 % | -1.3 % | | Economic profit | $ 24.4 | $ 56.2 | -56.6 % | | Adjusted net income per diluted share | $ 8.56 | $ 10.29 | -16.8 % | | Economic profit per diluted share | $ 2.07 | $ 4.58 | -54.8 % | - Economic profit decreased **56.6%** year-over-year, primarily due to a **180 basis point decrease in adjusted return on capital**[31](index=31&type=chunk) - The decrease in adjusted return on capital was mainly due to a **100 basis point decrease** from a lower yield on the loan portfolio (due to declining collection rates and slower cash flow timing), a **60 basis point decrease** from increased operating expenses (including a **$23.4 million legal contingent loss**), and a **20 basis point decrease** from an increased estimated long-term effective income tax rate (from **23% to 25%**)[31](index=31&type=chunk) [Adjusted Financial Performance Ratios](index=11&type=section&id=Adjusted%20Financial%20Performance%20Ratios) Adjusted return on capital declined to **8.5%** in Q2 2025, primarily due to faster growth in operating expenses Adjusted Financial Performance Ratios (Last Eight Quarters) | | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | | :---------------------------------------------------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | :------------ | :------------ | :------------- | | Adjusted finance charges as a percentage of adjusted average loans receivable (1) | 17.0 % | 16.7 % | 16.5 % | 16.4 % | 17.8 % | 17.6 % | 17.9 % | 18.5 % | | Adjusted revenue as a percentage of adjusted average capital (1) | 18.3 % | 18.0 % | 18.4 % | 18.2 % | 19.6 % | 19.8 % | 20.2 % | 20.7 % | | Operating expenses as a percentage of adjusted average capital (1) | 7.0 % | 6.1 % | 5.6 % | 6.2 % | 6.2 % | 6.7 % | 6.3 % | 6.3 % | | Adjusted return on capital (1) | 8.5 % | 9.2 % | 9.8 % | 9.3 % | 10.3 % | 10.1 % | 10.6 % | 11.1 % | | Percentage change in adjusted average capital compared to the same period in the prior year | 11.2 % | 18.3 % | 19.3 % | 19.4 % | 17.6 % | 14.6 % | 11.5 % | 8.8 % | - The decrease in adjusted return on capital from Q1 2025 to Q2 2025 was primarily due to a **70 basis point impact** from faster growth in operating expenses (up **14.8%** while adjusted average capital grew **0.6%**), partially offset by a **40 basis point increase** from higher yields on recent Consumer Loan assignments[33](index=33&type=chunk) [Reconciliation of Non-GAAP to GAAP Measures](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20to%20GAAP%20Measures) Detailed reconciliations of non-GAAP measures to GAAP figures are provided, including floating yield, senior notes, and income tax adjustments Reconciliation of Adjusted Net Income, Adjusted Revenue, Adjusted Average Capital, and Adjusted Loan Yield | (Dollars in millions, except per share data) | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | | :----------------------------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | :------------ | :------------ | :------------- | | **Adjusted net income** | | | | | | | | | | GAAP net income (loss) | $ 87.4 | $ 106.3 | $ 151.9 | $ 78.8 | $ (47.1) | $ 64.3 | $ 93.6 | $ 70.8 | | Floating yield adjustment (after-tax) | (117.1) | (118.9) | (116.8) | (115.1) | (96.1) | (92.4) | (83.9) | (76.4) | | GAAP provision for credit losses (after-tax) | 129.6 | 124.6 | 95.0 | 142.2 | 246.9 | 143.2 | 126.1 | 142.1 | | Loss on sale of building (after-tax) | — | — | — | — | 18.3 | — | — | — | | Senior notes adjustment (after-tax) | — | — | — | — | — | — | (2.6) | (0.5) | | Income tax adjustment | 0.9 | 2.8 | (4.1) | 3.2 | 4.4 | 2.3 | (4.1) | 3.5 | | **Adjusted net income** | $ 100.8 | $ 114.8 | $ 126.0 | $ 109.1 | $ 126.4 | $ 117.4 | $ 129.1 | $ 139.5 | | **Adjusted revenue** | | | | | | | | | | GAAP total revenue | $ 583.8 | $ 571.1 | $ 565.9 | $ 550.3 | $ 538.2 | $ 508.0 | $ 491.6 | $ 478.6 | | Floating yield adjustment | (156.0) | (154.5) | (151.8) | (149.4) | (124.8) | (120.0) | (108.9) | (99.3) | | GAAP provision for claims | (19.8) | (16.1) | (17.7) | (18.5) | (20.3) | (17.0) | (16.6) | (16.5) | | **Adjusted revenue** | $ 408.0 | $ 400.5 | $ 396.4 | $ 382.4 | $ 393.1 | $ 371.0 | $ 366.1 | $ 362.8 | | **Adjusted average capital** | | | | | | | | | | GAAP average debt | $ 6,583.8 | $ 6,398.3 | $ 6,202.5 | $ 6,071.1 | $ 5,818.2 | $ 5,306.8 | $ 4,986.3 | $ 4,831.4 | | Deferred debt issuance adjustment | — | — | — | — | — | — | 20.9 | 24.5 | | Senior notes debt adjustment | — | — | — | — | — | — | 2.8 | 3.4 | | Adjusted average debt | 6,583.8 | 6,398.3 | 6,202.5 | 6,071.1 | 5,818.2 | 5,306.8 | 5,010.0 | 4,859.3 | | GAAP average shareholders' equity | 1,635.9 | 1,782.0 | 1,712.3 | 1,594.2 | 1,623.5 | 1,678.5 | 1,734.3 | 1,731.3 | | Senior notes equity adjustment | — | — | — | — | — | — | 2.0 | 2.9 | | Income tax adjustment | (100.5) | (118.5) | (118.5) | (118.5) | (118.5) | (118.5) | (118.5) | (118.5) | | Floating yield adjustment | 813.5 | 820.8 | 837.0 | 840.8 | 710.1 | 641.0 | 606.5 | 548.9 | | **Adjusted average equity** | 2,348.9 | 2,484.3 | 2,430.8 | 2,316.5 | 2,215.1 | 2,201.0 | 2,224.3 | 2,164.6 | | **Adjusted average capital** | $ 8,932.7 | $ 8,882.6 | $ 8,633.3 | $ 8,387.6 | $ 8,033.3 | $ 7,507.8 | $ 7,234.3 | $ 7,023.9 | | **Adjusted loan yield** | | | | | | | | | | GAAP finance charges | $ 540.7 | $ 526.7 | $ 518.2 | $ 507.6 | $ 497.7 | $ 469.2 | $ 451.6 | $ 441.7 | | Floating yield adjustment | (156.0) | (154.5) | (151.8) | (149.4) | (124.8) | (120.0) | (108.9) | (99.3) | | **Adjusted finance charges** | $ 384.7 | $ 372.2 | $ 366.4 | $ 358.2 | $ 372.9 | $ 349.2 | $ 342.7 | $ 342.4 | | GAAP average loans receivable, net | $ 8,011.6 | $ 7,882.4 | $ 7,831.4 | $ 7,690.9 | $ 7,499.2 | $ 7,101.3 | $ 6,867.8 | $ 6,690.8 | | Average floating yield adjustment | 1,064.1 | 1,048.9 | 1,071.4 | 1,072.2 | 903.2 | 819.7 | 775.6 | 701.0 | | **Adjusted average loans receivable** | $ 9,075.7 | $ 8,931.3 | $ 8,902.8 | $ 8,763.1 | $ 8,402.4 | $ 7,921.0 | $ 7,643.4 | $ 7,391.8 | Reconciliation of Adjusted Interest Expense, Adjusted Return on Capital, and Economic Profit | (Dollars in millions) | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | | :-------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | :------------ | :------------ | :------------- | | **Adjusted interest expense (after-tax)** | | | | | | | | | | GAAP interest expense | $ 118.1 | $ 114.7 | $ 111.3 | $ 111.2 | $ 104.5 | $ 92.5 | $ 78.8 | $ 70.5 | | Senior notes adjustment | — | — | — | — | — | — | 3.5 | 0.7 | | Adjusted interest expense (pre-tax) | 118.1 | 114.7 | 111.3 | 111.2 | 104.5 | 92.5 | 82.3 | 71.2 | | Adjustment to record tax effect | (29.5) | (26.4) | (25.6) | (25.6) | (24.0) | (21.3) | (18.9) | (16.4) | | **Adjusted interest expense (after-tax)** | $ 88.6 | $ 88.3 | $ 85.7 | $ 85.6 | $ 80.5 | $ 71.2 | $ 63.4 | $ 54.8 | | **Economic profit** | | | | | | | | | | Adjusted net income | $ 100.8 | $ 114.8 | $ 126.0 | $ 109.1 | $ 126.4 | $ 117.4 | $ 129.1 | $ 139.5 | | Adjusted interest expense (after tax) | 88.6 | 88.3 | 85.7 | 85.6 | 80.5 | 71.2 | 63.4 | 54.8 | | Adjusted net income plus adjusted interest expense (after-tax) | 189.4 | 203.1 | 211.7 | 194.7 | 206.9 | 188.6 | 192.5 | 194.3 | | Less: cost of capital | 165.0 | 167.8 | 160.4 | 153.3 | 150.7 | 137.2 | 136.6 | 125.2 | | **Economic profit** | $ 24.4 | $ 35.3 | $ 51.3 | $ 41.4 | $ 56.2 | $ 51.4 | $ 55.9 | $ 69.1 | - The estimated long-term effective income tax rate increased from **23% to 25%** for Q2 2025 and future periods, due to higher state and local income taxes and lower excess tax benefits from stock-based compensation[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [Explanation of Floating Yield Adjustment](index=16&type=section&id=Explanation%20of%20Floating%20Yield%20Adjustment) The floating yield adjustment is a non-GAAP measure recognizing loan revenue on a level-yield basis, differing from GAAP's CECL model - The floating yield adjustment recognizes net loan income (finance charge revenue less provision for credit losses) on a **level-yield basis** over the life of the loan, based on expected future net cash flows[44](index=44&type=chunk) - It differs from GAAP's CECL model, which recognizes a **significant provision for credit losses at loan assignment** and then **higher finance charge revenue in subsequent periods**[45](index=45&type=chunk)[49](index=49&type=chunk) - The adjustment aims to provide a **more transparent view of business economics**, reflecting how the business is managed and offering valuable supplemental information for investors[45](index=45&type=chunk) [Explanation of Senior Notes Adjustment](index=16&type=section&id=Explanation%20of%20Senior%20Notes%20Adjustment) The senior notes adjustment, a non-GAAP modification, treated certain note issuances as refinancings, deferring losses and interest expense - The senior notes adjustment modified GAAP financial results to treat the issuance of certain senior notes as a **refinancing of previously issued senior notes**[46](index=46&type=chunk) - Under this non-GAAP approach, **losses on extinguishment of debt and additional interest expense were deferred** as debt issuance costs and recognized ratably over the term of the newly issued notes[51](index=51&type=chunk) - The company ceased applying the senior notes adjustment for issuances in December 2023 and February 2025 because the **adjustments would not be material**[52](index=52&type=chunk) [Company Information and Risk Factors](index=18&type=section&id=Company%20Information%20and%20Risk%20Factors) [Company Description](index=20&type=section&id=Company%20Description) Credit Acceptance provides innovative financing solutions for automobile dealers, enabling vehicle sales to consumers across all credit histories - Credit Acceptance makes vehicle ownership possible by providing **innovative financing solutions to automobile dealers**, enabling them to sell vehicles to consumers regardless of credit history[61](index=61&type=chunk) - The financing programs benefit dealers through **sales to consumers who otherwise couldn't obtain financing**, and from **repeat/referral sales**[61](index=61&type=chunk) - An ancillary benefit for consumers is the **opportunity to improve their credit score** by reporting to national credit reporting agencies, helping them move to more traditional financing[62](index=62&type=chunk) [Webcast Details](index=20&type=section&id=Webcast%20Details) A webcast discussing Q2 results will be held on July 31, 2025, at 5:00 p.m. ET, accessible via the investor relations website - A webcast to discuss Q2 results will be held on **July 31, 2025, at 5:00 p.m. Eastern Time**[59](index=59&type=chunk) - Access is available live through the 'Investor Relations' section of **creditacceptance.com** or by telephone with pre-registration[59](index=59&type=chunk)[60](index=60&type=chunk) - Only telephone participants will be able to pose questions, and a **replay/transcript will be archived online**[59](index=59&type=chunk) [Cautionary Statement Regarding Forward-Looking Information](index=18&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) Forward-looking statements are subject to risks and uncertainties, with actual results potentially differing materially from expectations - Statements in the release that are not historical facts are **'forward-looking statements'** subject to risks and uncertainties[53](index=53&type=chunk) - Actual results could differ materially from these statements due to various factors, including those detailed in the company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q[53](index=53&type=chunk) - The company does not undertake any obligation to update or alter its forward-looking statements, except as required by applicable law[58](index=58&type=chunk) [Risk Factors](index=18&type=section&id=Risk%20Factors) The company faces diverse risks across industry, operational, macroeconomic, capital, technology, and legal/regulatory categories - Industry, Operational, and Macroeconomic Risks: **Inability to accurately forecast collections**, **intense competition**, **adverse economic conditions**, reliance on third parties and senior management, reputational risks, and impacts from public health emergencies or natural disasters[54](index=54&type=chunk)[55](index=55&type=chunk) - Capital and Liquidity Risks: **Inability to access or renew funding**, **debt limitations and obligations**, **interest rate fluctuations**, credit rating reductions, and conditions of capital markets[55](index=55&type=chunk)[63](index=63&type=chunk) - Technology and Cybersecurity Risks: **Dependence on technology**, **risk of system breaches**, impact of electronic contracts, failure to safeguard proprietary information, and challenges from artificial intelligence development and use[57](index=57&type=chunk)[63](index=63&type=chunk) - Legal and Regulatory Risks: **Litigation**, **changes in tax laws**, and regulatory compliance leading to adverse effects on business[58](index=58&type=chunk)[63](index=63&type=chunk)

Financial Performance - Credit Acceptance Corporation reported consolidated net income of $87.4 million, or $7.42 per diluted share, for the three months ended June 30, 2025, compared to a net loss of $47.1 million in the same period of 2024, marking a significant recovery [1][27] - Adjusted net income for the same period was $100.8 million, or $8.56 per diluted share, down from $126.4 million, or $10.29 per diluted share, in 2024, reflecting a 20.3% decrease [1][29] - The company experienced a 46.2% decrease in provision for credit losses, amounting to $148.0 million, primarily due to a smaller decline in Consumer Loan performance compared to the previous year [27][32] Consumer Loan Metrics - The forecasted collection rates for Consumer Loans assigned in 2025 improved to 66.9% as of June 30, 2025, while rates for loans assigned in 2022 through 2024 declined [3][4] - The average balance of the loan portfolio increased by 6.8% to $8.0 billion, the highest ever recorded [6] - Consumer Loan assignment unit and dollar volumes decreased by 14.6% and 18.8%, respectively, compared to the second quarter of 2024 [6][22] Dealer Activity - The company enrolled 1,560 new dealers, bringing the total to 10,655 active dealers during the quarter [6] - The number of active dealers declined by 0.8%, and the average unit volume per active dealer decreased by 14.0% [22][23] - Consumer Loan unit volume from dealers active in both periods fell by 16.8% [23] Economic Profit and Capital - Economic profit decreased by 56.6% for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a decrease in adjusted return on capital [29] - Adjusted average capital increased by 11.2% to $8.93 billion [29] - The company repurchased approximately 530,000 shares, or 4.5% of the shares outstanding at the beginning of the quarter [6] Tax and Legal Matters - The estimated long-term effective income tax rate increased from 23% to 25% [6] - A contingent loss of $23.4 million was recognized related to previously disclosed legal matters [6][32]

Group 1 - Credit Acceptance Corporation is set to release its second quarter 2025 earnings on July 31, 2025, after market close [1] - A conference call and webcast will be held on the same day at 5:00 p.m. Eastern Time to discuss the earnings [2] - The webcast can be accessed live through the company's Investor Relations website, and a replay will be available afterward [3] Group 2 - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers with varying credit histories [4] - The company's financing programs help consumers who might otherwise be unable to purchase vehicles, allowing them to improve their credit scores and access traditional financing options in the future [5]

Core Viewpoint - Credit Acceptance (CACC) is anticipated to report a year-over-year increase in earnings driven by higher revenues, with a consensus outlook suggesting a significant earnings surprise could impact its stock price [1][3]. Earnings Expectations - The consensus estimate for Credit Acceptance's quarterly earnings is $9.84 per share, reflecting a year-over-year increase of +356.9% [3]. - Expected revenues for the quarter are projected at $585 million, which is an 8.7% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial projections [4]. - The Most Accurate Estimate for Credit Acceptance is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.02%, suggesting a bearish outlook from analysts [11]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict the likelihood of an earnings beat or miss, with a positive ESP being a strong indicator of an earnings beat [8][9]. - Credit Acceptance currently holds a Zacks Rank of 5, which complicates the prediction of an earnings beat [11]. Historical Performance - In the last reported quarter, Credit Acceptance was expected to post earnings of $10.31 per share but only achieved $8.66, resulting in a surprise of -16.00% [12]. - Over the past four quarters, the company has only beaten consensus EPS estimates once [13]. Industry Comparison - OneMain Holdings (OMF), another player in the financial consumer loans industry, is expected to report earnings of $1.25 per share, reflecting a year-over-year change of +22.6% [17]. - OneMain's revenues are projected at $1 billion, also an 8.7% increase from the previous year, but it has an Earnings ESP of -0.89% [18].

Company Recognition - Credit Acceptance Corporation has been named a 2025 Top Workplace in Financial Services for the second consecutive year, ranking 4 in the 1,000+ employee size category, an improvement of five spots from the previous year [1] - The company has also received three other workplace awards this year, including 34 on Fortune's 2025 100 Best Companies to Work For list and 2 on the 2025 Top Workplaces USA list [3] Company Culture - The CEO emphasizes the goal of creating a workplace where team members feel they can make a difference, supported by a meaningful mission and a culture that values every voice [2] - The company's PRIDE values—Positive, Respectful, Insightful, Direct, Earnest—are foundational to its culture, fostering an environment of trust and collaboration [2] Business Model - Credit Acceptance provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history, thus facilitating vehicle ownership [4] - The financing programs not only help consumers purchase vehicles but also allow them to improve their credit scores, enabling access to more traditional financing options in the future [5]

Group 1 - Credit Acceptance Corporation has extended the maturity date of its $75.0 million revolving secured warehouse facility from September 30, 2026, to September 30, 2028 [1] - The interest rate on borrowings under the facility has decreased from SOFR plus 210 basis points to SOFR plus 185 basis points [1] - The servicing fee has been reduced from 6.0% to 4.0% of collections on the underlying consumer loans [1] Group 2 - As of July 11, 2025, there was no outstanding balance under the facility [2] - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history [3] - The financing programs are offered through a nationwide network of automobile dealers, benefiting from sales to consumers who otherwise could not obtain financing [3] Group 3 - Without these financing programs, consumers may struggle to purchase vehicles or may end up with unreliable options [4] - The company reports to the three national credit reporting agencies, allowing consumers to improve their credit scores and access more traditional financing sources [4] - Credit Acceptance Corporation is publicly traded on the Nasdaq Stock Market under the symbol CACC [4]

Core Viewpoint - Credit Acceptance (CACC) shares have increased by approximately 3.3% over the past month, underperforming the S&P 500, raising questions about the sustainability of this trend leading up to the next earnings release [1] Estimates Movement - Estimates for Credit Acceptance have trended downward over the past month, with the consensus estimate shifting down by 6.33% [2] VGM Scores - Credit Acceptance has a Growth Score of B, a Momentum Score of D, and a Value Score of B, placing it in the top 40% for the value investment strategy. The overall aggregate VGM Score is B, which is relevant for investors not focused on a single strategy [3] Outlook - The downward trend in estimates indicates a negative shift, with Credit Acceptance holding a Zacks Rank of 3 (Hold). An in-line return is expected from the stock in the coming months [4] Industry Performance - Credit Acceptance is part of the Zacks Financial - Consumer Loans industry. Mr Cooper (COOP), a peer in the same industry, has gained 11% over the past month, reporting revenues of $560 million for the last quarter, which reflects a year-over-year decline of 0.7% [5] Earnings Expectations for Peers - For the current quarter, Mr Cooper is projected to post earnings of $3.33 per share, indicating a year-over-year increase of 32.1%. The Zacks Consensus Estimate for Mr Cooper has changed by -1.1% over the last 30 days, and it holds a Zacks Rank of 2 (Buy) [6]

Core Viewpoint - Credit Acceptance Corporation (CACC) reported a first-quarter 2025 earnings per share of $8.66, which was below the Zacks Consensus Estimate of $10.31, despite a year-over-year increase of 70.5% in earnings [1] Financial Performance - Adjusted net income for the quarter was $114.8 million or $9.35 per share, slightly down from $117.4 million or $9.28 per share in the same quarter last year [2] - Total GAAP revenues reached $571.1 million, reflecting a 12.4% year-over-year increase and surpassing the Zacks Consensus Estimate of $566.6 million [3] - Provision for credit losses decreased by 13% to $161.9 million, while operating expenses rose by 7.5% to $135.5 million [3] Asset and Equity Position - As of March 31, 2025, total assets were $9.26 billion, up from $8.85 billion at the end of December 2024, while total shareholders' equity decreased to $1.71 billion from $1.75 billion [4] Share Repurchase Activity - During the reported quarter, Credit Acceptance repurchased approximately 0.32 million shares [5] Market Outlook - The company faces challenges from rising expenses and weak asset quality, but is positioned for revenue growth due to increasing demand for consumer loans [6]