CACC 10-K & 10-Q changes, risk factors and insider trading

We are subject to general economic conditions which are beyond our control. During periods of economic slowdown or recession, delinquencies, defaults, repossessions, and losses may increase on our Consumer Loans, and Consumer Loan prepaymentsprepayments, 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 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, 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. Imposition of or increases in tariffs on U.S. imports could result in higher used car prices in the United States, leading to decreased Dealer origination of Consumer Loans and a decline in Consumer Loan assignments to us. 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.

We have relationships with TPPs to administer vehicle service contracts and GAP underwritten by third-party insurers and indirectly financed by us. We depend on these TPPs to evaluate and pay claims in an accurate and timely manner. If our relationships with these TPPs were modified, disrupted, or terminated, we would need to obtain these services from an alternative administrator or provide them using our internal resources. We may be unable to replace these TPPs with a suitable alternative in a timely and efficient manner on terms we consider acceptable, or at all. In the event we were unable to effectively administer our ancillary products offerings, we may need to eliminate or suspend our ancillary product offerings from our future business, we may experience a decline in the performance of our Consumer Loans, our reputation in the marketplace could be undermined, and our financial position, liquidity, and results of operations could be adversely affected.

OurAs of December 31, 2025, our senior management averageaveraged 1615 years of experience with us. Our success is dependent upon the management and the leadership skills of this team. In addition, competition from other companies to hire our team members possessing the necessary skills and experience required could contribute to an increase in team member turnover. The loss of any of these individuals or an inability to attract and retain additional qualified team members could adversely affect us. There can be no assurance that we will be able to retain our existing senior management or attract additional qualified team members.

Our financial position, liquidity, and results of operations depend on management’s ability to execute our business strategy. Key factors involved in the execution of our business strategy include achieving our desired Consumer Loan assignment volume, continued and successful use of CAPS and other internet-based credit application processing systems and pricing strategy, the use of effective credit risk management techniques and servicing strategies, continued investment in technology to support operating efficiency, and continued access to funding and liquidity sources. Although our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints, there can be no assurance that this strategy will have its intended effect. Please see the Consumer Loan Volume section in Item 7 of this Form 10-K, which is incorporated herein by reference. Our failure or inability to execute any element of our business strategy could materially adversely affect our financial position, liquidity, and results of operations.

The beneficial ownership reported by Mr. Apple and Mr. Neary includes, in each case, beneficial ownership in their capacity as trustees of shares held in a marital trust established by our late founder, Donald Foss, and representing 8.6%8.0% of our common stock as of December 31, 2024.2025. The shares in the trust are subject to the terms of a shareholder agreement, entered into by Mr. Foss on January 3, 2017. Under the terms of that agreement that became applicable to the trustees of the trust upon Mr. Foss’s death on August 14, 2022, until the final adjournment of the tenthCompany’s 2026 annual meeting of shareholders held by the Company after the date of the shareholder agreement,shareholders, the shares in the trust are to be voted in accordance with the recommendation of the Company’s Board of Directors with respect to election and removal of directors, certain routine matters, and any other proposal to be submitted to the Company’s shareholders with respect to any extraordinary transaction providing for the acquisition of all of the Company’s outstanding common stock.

Some of our debt agreements also impose requirements that we maintain specified financial measures not in excess of, or not below, specified levels. In particular, our revolving credit facility requires,and warehouse facilities require, among other things, that we maintain (i) as of the end of each fiscal quarter, a ratio of consolidated funded debt less unrestricted cash and cash equivalents to consolidated tangible net worth at or below a specified maximum and (ii) as of the end of each fiscal quarter, a ratio of consolidated income available for fixed charges for the period of four consecutive fiscal quarters most recently ended to consolidated fixed charges, as defined in the agreements, for that period of not less than a specified minimum. These covenants limit the manner in which we can conduct our business and could prevent us from engaging in favorable business activities or financing future operations and capital needs and impair our ability to successfully execute our strategy and operate our business.

A breach of any of the covenants in our debt instruments would result in an event of default thereunder if not promptly cured or waived. Any continuing default would permit the creditors to accelerate the related debt, which could also result in the acceleration of other debt containing a cross acceleration or cross default provision. In addition, an event of default under our revolving credit facility or warehouse facilities would permit the lenders thereunder to terminate all commitments to extend further credit under oursuch revolving credit facility.facilities. Furthermore, if we were unable to repay the amounts due and payable under our revolving credit facility or other secured debt, the lenders thereunder could cause the collateral agent to proceed against the collateral securing that debt. In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity, and results of operations would suffer.

All Consumer Loans submitted to us for assignment are processed either through our internet-based CAPS application.or via an integration we have with aggregators used by Dealers to submit credit application information to various finance sources. Our Consumer Loan servicing platform is also technology based. We rely on these systems to record and process significant amounts of data quickly and accurately. Our systems, and those of our third-party service providers, are dependent upon computer and telecommunications equipment, software systems, and internet access. The temporary or permanent loss of any components of these systems through hardware failures, software errors, operating malfunctions, the vulnerability of the internet, or otherwise could interrupt our business operations and harm our business.

We and our third-party service providers face ongoing threats to our systems and data and from time to timeoccasionally experience cyberattacks and other security incidents. Numerous national finance companies have disclosed security breaches involving sophisticated cyber-attacks, including ransomware, that were not recognized or detected until after such companies had been affected, notwithstanding the preventive measures such companies had in place. Further, the rapid evolution and increased adoption of artificial intelligence (“AI”) technologies, increased sophistication and activities of organized crime, hackers, terrorists, activistsactivists, and other external parties may increase our level of cybersecurity risk. Additionally, our increased use of mobile and cloud technologies could heighten these and other operational risks by increasing our attack surface, and any failure by mobile or cloud technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruptioncorruption, or loss of confidential or propriety information. The security measures we have implemented to protect against cybersecurity incidents, or those of our third-party service providers, may not always prevent or mitigate the impact of a cybersecurity incident, and there can be no assurance that future efforts to prevent or mitigate a cybersecurity incident will be effective either. As a result, our computer systems, software, and networks, as well as those of our third-party service providers, are vulnerable to unauthorized access, computer viruses, malware attacks, and other events that could have a security impact beyond our control, and information we transmit and receive may be vulnerable to interception, misuse, or mishandling. Cybersecurity incidents, including such occurrences that compromise information processed by, stored in, or transmitted through our computer systems and networks, or those of our third-party service providers, or that cause interruptions or malfunctions in our or our service providers’ operations could result in losses, loss of business by us and loss of confidence in us, consumer and Dealer dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation, any of which could have a material adverse impact on our business, financial condition, and results of operations.

If third parties or our team members breach or are able to breach our network security or the network security of a third party that we share information with or otherwise are able to misappropriate our consumers’ and team members’ personal information, or if we give third parties or our team members improper access to our consumers’ and team members’ personal information, we could be subject to liability. This liability could include identity theft or other similar fraud-related claims. This liability could also include claims for other misuses or losses of personal information, including for unauthorized marketing purposes. Other liabilities could include claims alleging misrepresentation of our privacy and data security practices. Moreover, the loss of confidential customer personal information could harm our reputation, result in the loss of business, and subject us to liability under laws that protect personal information, resulting in increased costs, loss of revenues and substantial penalties. For instance, the California Consumer Privacy Act of 2018, as amended (“CCPA”), provides for enhanced consumer protections for California residents and statutory fines for data security breaches or other CCPA violations.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to secure online transmission of confidential consumer and team member information, which can include personal information. Advances in computer capabilities, new discoveries in the field of cryptography, advancements in AI, or other events or developments may result in a compromise or breach of the algorithms that we use to protect sensitive consumer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against, or alleviate problems caused by, security breaches or other cybersecurity incidents. Although we have experienced occasional cybersecurity incidents from time to time that have not had a material effect on our business, financial condition, or results of operations, there can be no assurance that a cyber-attack, security breach, or other cybersecurity incident will not have a material adverse effect on us in the future. Our security measures are designed to protect against security breaches, but our failure to prevent security breaches could subject us to liability, decrease our profitability, and damage our reputation.

Unit•$7.5 and dollar volumes grew 16.1% and 11.3%, respectively, as compared to 2023. Thebillion average balance of our Loan portfolio, which isrepresented our largest-ever, increaseda 13.6% asincrease compared tofrom 2023.

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

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

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.

The changes into forecastedour collectionforecast ratesof impacted forecastedfuture net cash flows from our Loan portfolio (forecasted collections less forecasted Dealer Holdback payments) asare followsshown in the following table:

During the second quarter of 2023, we adjusted our methodology for forecasting the amount and timing of future net cash flows from our Loan portfolio through the utilization of more recent Consumer Loan performance and Consumer Loan prepayment data. We had experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result, slowed our forecasted net cash flow timing. Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit. Changes in the amount and timing of forecasted net cash flows are recognized in the period of change as a provision for credit losses. The implementation of the adjustment to our forecasting methodology during the second quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3 million.

The spread between the forecasted collection rate as of December 31, 20242025 and the advance rate ranges from 12.8%11.9% to 23.8%24.1% for Consumer Loans assigned over the last 10 years. The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented. The spreadspreads with respect to 2022 and 2023 Consumer Loans hashave 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 20242025 Consumer Loans relative to 20232024 Consumer Loans as of December 31, 20242025 was primarily a result of Consumer Loan performance, as the performance of 20232025 Consumer Loans has exceeded our initial estimates while the performance of 2024 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.estimates.

The spread as of December 31, 20242025 on 20242025 Dealer Loans was 21.3%,22.5%, as compared to a spread of 18.3%20.0% on 20232024 Dealer Loans. The increase was primarily duea toresult of Consumer Loan performance, as the performance of 20232025 Dealer Loans has exceeded our initial estimates while the performance of 2024 Dealer Loans has been lower than our initial estimates by a greater margin than 2024 Dealer Loans.estimates.

Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs,programs and (2) the amount of capital available to fund new Loans, and (3) our assessment of the volume that our infrastructure can support.Loans. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints.

During 2023,2025, unit and dollar volumes increaseddeclined 18.6%12.6% and 14.4%,16.5%, respectively, as the number of active Dealers increased 19.1%1.8% while average unit volume per active Dealer decreaseddeclined 0.4%.14.4%. Dollar volume increaseddeclined lessby more than unit volume in 20232025 primarily due to a decrease in the average advancesize paid,of dueConsumer toLoans decreasesassigned, which resulted in a decrease in the average advance rate and the average size of Consumer Loans assigned.paid.

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

Finance Charges. The increase of $237.3$149.1 million, or 13.5%,7.5%, was primarilythe dueresult toof an increaseincreases in the average net Loans receivable balance,balance and the average yield on our Loan portfolio, as follows:

For the three months ended MarchJune 31,30, 2026, consolidated net income was $135.8$135.9 million, or $12.40$12.66 per diluted share, compared to consolidated net income of $106.3$87.4 million, or $8.66$7.42 per diluted share, for the same period in 2025. The increase was primarily due to a decreasedecreases in operating expenses and provision for credit losses.

Our financial results for the three months ended MarchJune 31,30, 2026 included the following:

•$7.9$8.0 billion average balance of our Loan portfolio, consistent with the firstsecond quarter of 2025.

•Consumer Loan assignment unit volume ofdeclined 95,9921.0% andto 84,615 while dollar volume ofgrew $1.10.1% to $1.0 billion, down 4.3% and 4.0%, respectively, compared to the firstsecond quarter of 2025. Monthly unit volume returned to year-over-year growth in June, which continued into July.

•Forecasted net cash flows from our Loan portfolio declined modestly by $9.1$39.1 million, or 0.1%,0.3%, representingcompared theto smallesta quarterlydecline changeof $55.8 million, or 0.5%, in the pastsecond threequarter years.of 2025.

•$1.3$1.4 billion in liquidity (unrestricted cash and cash equivalents and amounts available for borrowing under revolving lines of credit and unrestricted cash and cash equivalents) as of MarchJune 31,30, 2026.

CompanyOur highlightsfinancial results for the threesix months ended MarchJune 31,30, 2026 included the following:

We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of MarchJune 31,30, 2026, with the aggregated forecasts as of March 31, 2026, December 31, 2025 and at the time of assignment, segmented by year of assignment:

(1)Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment, including both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans because the contractual amount owed is not removed from the denominator used to calculate these rates. As a result, anyAny declines in forecasted collection rates for Consumer Loans assigned in the most recent quarter primarily reflect the impact of cancellations rather than underlying Consumer Loan performance.

For the three months ended MarchJune 31,30, 2026, forecasted collection rates improved for Consumer Loans assigned in 2021, declined for Consumer Loans assigned in 2023,2023 through 2025 and were generally consistent with expectations at the start of the period for all other assignment years presented. For Consumer Loans assigned in 2026, the declineincrease in the current forecasted collection rate from theMarch 31, 2026 was primarily due to a higher initial forecast primarily reflects the impact of canceled Consumer Loans, as described in the footnote to the table above. Theseon Consumer Loans areassigned notduring seasonedthe enoughsecond forquarter. changesFor inthe six months ended June 30, 2026, forecasted collection rates toimproved befor meaningfullyConsumer influencedLoans byassigned performance.in 2021, declined for Consumer Loans assigned in 2023 through 2025, and were generally consistent with expectations at the start of the period for all other assignment years presented.

(3)Represents activity for the threesix months ended MarchJune 31,30, 2026. Information in this table for each of the years prior to 2026 represents activity for all 12 months of that year.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collectionsfuture thatnet hadcash been realizedflows as of MarchJune 31,30, 2026, as well as forecasted collection rates and spreads at the time of assignment. All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both Dealer Loans and Purchased Loans.

(2)PresentedRepresents as a percentage of totalthe forecasted collections.collection rate less the advance rate.

The spread between the forecasted collection rate as of MarchJune 31,30, 2026 and the advance rate ranges from 11.9% to 24.2%, on an annual basis, for Consumer Loans assigned over the last 10 years. The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented. The spreads with respect to 2021 through 20232024 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 lower spread foras of June 30, 2026 on 2026 Consumer Loans relativewas to21.9%, consistent with 2025 Consumer Loans as of March 31, 2026 was primarily a result of Consumer Loan performance, as the performance of 2026 Consumer Loans has been lower than our initial estimates while performance of 2025 Consumer Loans has exceeded our initial estimates.Loans.

The following table compares our forecast of aggregate Consumer Loan collection rates as of MarchJune 31,30, 2026 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately:

(1)The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment. The forecasted collection rates represent the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment, including both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans because the contractual amount owed is not removed from the denominator used to calculate these rates. As a result, anyAny declines in forecasted collection rates for Consumer Loans assigned in the most recent quarter primarily reflect the impact of cancellations rather than underlying Consumer Loan performance.

The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of MarchJune 31,30, 2026 for Dealer Loans and Purchased Loans separately. All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).

The spread as of MarchJune 31,30, 2026 on both 2026 and 2025 Dealer Loans was 22.4%, reflectingas thecompared netto impacta spread of two22.1% offsetting factors. Consumer Loan performance decreased the spread fromon 2025 toDealer 2026,Loans. primarilyThe dueincrease towas thea performanceresult of 2026 Dealer Loans, which has been lower than our initial estimates. The impact of Consumer Loan performance was offset by thea higher initial spread on 2026 Dealer Loans, due to the advanceinitial rateforecast decreasingincreasing by a greater margin than the initialadvance forecastrate in our Dealer Loan portfolio.

The spread as of MarchJune 31,30, 2026 on 2026 Purchased Loans was 20.5%,20.3%, as compared to a spread of 21.3%21.1% on 2025 Purchased Loans. The decrease was primarily a result of (i) Consumer Loan performance, as the performance of 2026 Purchased Loans has been lower than our initial estimates while the performance of 2025 Purchased Loans has exceeded our initial estimates, and (ii) 2026 Purchased Loans having a lower initial spread,spread on 2026 Purchased Loans, due to the initial forecast decreasing by a greater margin than the advance rate.rate in our Purchased Loan portfolio.

Unit andvolume declined 1.0% while dollar volumesvolume declinedincreased 4.3% and 4.0%, respectively,0.1% during the firstsecond quarter of 2026 as the number of active Dealers increased 1.7%3.3% and the average unit volume per active Dealer declined 6.5%.3.8%. Monthly unit volume returned to year-over-year growth in June, which continued into July. Unit volume for AprilJuly 2026 decreasedincreased 5.1%28.0% compared to the same period in 2025.

As of MarchJune 31,30, 2026 and December 31, 2025, the net Dealer Loans receivable balance was 71.7%71.0% and 72.1%, respectively, of the total net Loans receivable balance. In 2025, we expanded Dealer access to the Purchase Program for Consumer Loans to consumers with higher credit ratings. The higher percentage of Purchased Loans in Consumer Loan assignment volume since 2024 has been primarily related to Consumer Loans assigned under this expanded Dealer access.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025 The following is a discussion of our results of operations and income statement data on a consolidated basis.

Finance Charges. The increase of $11.7$5.5 million, or 2.2%,1.0%, was primarily athe result of an increase in the average yield on our Loan portfolioportfolio, partially offset by a decrease in the average net Loans receivable balance, as follows:

The following table summarizes the impact each component had on the overall increase in finance charges for the three months ended MarchJune 31,30, 2026:

The increase in the average yield on our Loan portfolio was primarily due to higher contractual yields on more recent Consumer Loan assignments. The decrease in the average net Loans receivable balance was primarily due to the principal collected on Loans receivable exceeding the dollar volume of new Consumer Loan assignments.

Operating Expenses. The increasedecrease of $5.7$21.4 million, or 4.2%,13.8%, was primarily due to:

•AnA increasedecrease in general and administrative expense of $2.7$19.1 million, or 12.2%,42.3%, primarily due to the recognition of a $23.4 million contingent loss during the three months ended June 30, 2025 related to previously disclosed legal matters. The decrease was partially offset by higher professional services costs related to strategic market analysis initiatives.

Provision for Credit Losses. The decrease of $22.3$13.4 million, or 13.8%,7.8%, was primarily due to a decrease in provision for credit losses on forecast changes.changes, partially offset by an increase in provision for credit losses on new Consumer Loan assignments.

The decrease in provision for credit losses related to forecast changes in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 reflected a smaller decline in Consumer Loan performance and changes in forecasted net cash flow timing. During the firstsecond quarter of 2026, we decreased our estimate of future net cash flows modestly by $9.1$39.1 million, or 0.1%,0.3%, and slowed our forecasted net cash flow timing to reflect lower-than-expected Consumer Loan prepayments, which remained below historical averages. During the first quarter of 2025, we decreased our estimate of future net cash flows by $20.9 million, or 0.2%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect lower-than-expected Consumer Loan prepayments.

The following table presents the change in interest expense, average outstanding debt balance, and average cost of debt for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025:

Provision for Income Taxes. For the three months ended MarchJune 31,30, 2026, the effective income tax rate decreased to 22.4%19.4% from 25.0%25.8% for the same period in 2025. The decrease was primarily due to (i) a reversalresearch ofand previouslydevelopment tax credit recognized non-deductible executive compensation expenses, related to the retirement of executive officers during the firstsecond quarter of 2026, and(ii) a decreasechanges in state tax laws enacted during the impactsecond quarter of state2025 andthat local income taxes onincreased our effective income tax rate,rate for that period, whereas the second quarter of 2026 had relatively few state tax law changes enacted, resulting in minimal impact to our effective income tax rate for that period, and (iii) the recognition of excess tax benefits primarily relatedfor stock option exercises in the second quarter of 2026, as opposed to uncertaina tax positiondeficiency estimates.recognized in the second quarter of 2025. For additional information, see Note 10 to the consolidated financial statements contained in Part I - Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.