Upbound Group, Inc.: Form 10-Q for the period ended Sep 30, 2025

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” These forward-looking statements, include, without limitation, those relating to the impact of ongoing challenging macroeconomic conditions on our business, operations, financial performance and prospects, the future business prospects and financial performance of our Company as a whole (which includes Bridge IT, Inc. (“Brigit”) following the closing of our acquisition of Brigit (the “Merger”) on January 31, 2025) and our segments, our growth strategies, our expectations, plans and strategy relating to our capital structure and capital allocation, including any share repurchases under our share repurchase program, the potential impact of the matters discussed in Note 12 - “Contingencies” in this Quarterly Report on Form 10-Q, and other statements that are not historical facts. Unless expressly indicated or the context requires otherwise, the terms “Upbound Group, Inc.,” “Company,” “we,” “us,” and “our” in this document refer to Upbound Group, Inc. and, where appropriate, its subsidiaries.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially and adversely depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Quarterly Report on Form 10-Q and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. Except as required by law, we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. Factors that could cause or contribute to these differences include, but are not limited to:

• the possibility that costs, difficulties or disruptions related to the integration of Brigit operations into our other operations will be greater than expected;
• the possibility that the anticipated benefits from the Brigit acquisition may not be fully realized or may take longer to realize than expected;
• our ability to (i) effectively adjust to changes in the composition of our offerings and product mix as a result of acquiring Brigit and continue to maintain the quality of existing offerings and (ii) successfully introduce other new product or service offerings on a timely and cost-effective basis;
• changes in our future cash requirements as a result of the Brigit acquisition, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise;
• our ability to retain the talent and dedication of key employees of Brigit;
• the general strength of the economy and other economic conditions affecting consumer preferences, spending and payment behaviors, including the availability of credit to our target consumers and to other consumers, impacts from continued or renewed inflation, central bank monetary policy initiatives to address inflation concerns, and a possible recession or slowdown in economic growth;
• factors affecting the disposable income available to our current and potential customers;
• changes in the unemployment rate;
• capital market conditions, including changes in interest rates and availability of funding sources for us;
• changes in our credit ratings;
• difficulties encountered in managing the financial and operational performance of our multiple business segments;
• risks associated with pricing, value proposition and other changes to our consumer offerings and strategies being deployed in our businesses;
• our ability to continue to effectively execute our strategic initiatives, including mitigating risks associated with any potential additional mergers and acquisitions, or lease-to-own refranchising opportunities;
• our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, including Brigit;
• failure to effectively manage our operating labor and non-labor operating expenses, including merchandise losses for our lease-to-own offerings;
• disruptions caused by the operation of our information management systems or disruptions in the systems of our host retailers or other third parties with whom we do business;
• risks related to our virtual lease-to-own business, including our ability to continue to develop and successfully implement the necessary technologies;
• our ability to achieve the benefits expected from our integrated virtual and staffed third-party retailer offering and to successfully grow this business segment;
• exposure to potential operating margin degradation due to the higher cost of merchandise and higher merchandise losses in our Acima segment compared to our Rent-A-Center segment;
• additional risks associated with the Brigit business and its consumer products and services, including managing losses and payment defaults, regulatory, licensing and other compliance risks, risks associated with Brigit’s reliance on regulated banks and on providers of third party data, technology and other third-party service providers; and other new risks for our Company;
• litigation or administrative proceedings to which we are or may be a party to from time to time and changes in estimates relating to litigation reserves, including in each case in connection with the regulatory and litigation matters described in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q;
• our compliance with applicable statutes and regulations governing our businesses, impacts from the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting our business, including in connection with the regulatory matters described in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and any legislative or other regulatory enforcement efforts or private party litigation or arbitration that seeks to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to our lease-to-own business or to apply credit laws to Brigit’s non-credit consumer offerings;
• our transition to more-readily scalable “cloud-based” solutions;
• our ability to develop and successfully implement digital or e-commerce capabilities, including mobile applications;
• our ability to protect our proprietary intellectual property and to defend against allegations by third parties that any of our products, services or business activities may infringe against their intellectual property rights;
• our ability or that of our host retailers or other third parties with whom we do business to protect the integrity and security of customer, employee, supplier and host retailer or other third party information, which may be adversely affected by hacking, computer viruses, cybersecurity attacks or similar disruptions;
• impairment of our goodwill or other intangible assets;
• disruptions in our supply chain;
• limitations of, or disruptions in, our distribution network;
• rapid inflation or deflation in the prices of our lease-to-own products and other related costs;
• allegations of product safety and quality control issues, including recalls of goods we lease to customers;
• our ability to execute, as well as the effectiveness of, lease-to-own store consolidations, including our ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation;
• our available cash flow and our ability to generate sufficient cash flow to continue paying dividends;
• increased competition from traditional competitors, virtual lease-to-own competitors, online retailers, Buy-Now-Pay-Later, earned wage access and financial health technology competitors and other fintech companies and other competitors, including subprime lenders;
• our ability to identify and successfully market products and services that appeal to our current and future targeted customer segments and to accurately estimate the size of the total addressable market;
• consumer preferences and perceptions of our brands;
• our ability to effectively provide consumers with additional products and services beyond lease-to-own and products and services currently offered by Brigit, including through third-party partnerships;
• our ability to retain the revenue associated with acquired lease-to-own customer accounts and enhance the performance of acquired stores;
• our ability to enter into new rental or lease purchase agreements and collect on our existing rental or lease purchase agreements;
• ongoing changes in tariff policies, including impacts from tariffs imposed by the current Presidential Administration on the price of imported goods, or consumer prices overall or other financial impacts of such tariffs or retaliatory tariffs enacted by U.S. trading partners on our costs or target consumers;
• adverse changes in the economic conditions of the industries, countries or markets that we serve;
• information technology and data security costs;
• the impact of breaches in data security or other disturbances to our information technology and other networks;
• changes in estimates relating to self-insurance liabilities and income tax reserves;
• changes in our effective tax rate;
• fluctuations in foreign currency exchange rates;
• our ability to maintain an effective system of internal controls; and
• the other risks detailed from time to time in our reports furnished or filed with the United States Securities and Exchange Commission (the “SEC”).

Additional important factors that could cause our actual results to differ materially from our expectations are discussed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and elsewhere in this Quarterly Report on Form 10-Q.

Our Business

We are a technology and data-driven leader in accessible and inclusive financial solutions that address the evolving needs and aspirations of underserved consumers. Through our Acima and Rent-A-Center segments, we are a leading lease-to-own provider with operations in the United States, Puerto Rico and Mexico. We provide a critical service for underserved consumers by providing them with access to, and the opportunity to obtain ownership of, high-quality, name brand durable products under a flexible lease-purchase agreement with no long-term debt obligation. Our Acima segment offers lease-to-own solutions through retailers in stores and online enabling such retailers to grow sales by expanding their customer base utilizing our differentiated offering and allowing customers to access our flexible lease-to-own solutions at thousands of retailers and to lease a wide range of durable products. Through our Rent-A-Center segment, we provide a fully integrated customer experience through our e-commerce platform and brick and mortar presence.

On January 31, 2025, we completed the acquisition of Brigit, a holistic financial health technology company that has helped millions of customers budget better, access their earned wages before their regularly scheduled payday, build their credit through savings, protect themselves from identity theft, and find ways to earn and save money. Its mission is to help customers build a better financial future. See Note 2 in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

We were incorporated in the State of Delaware in 1986, and our common stock is traded on the Nasdaq Global Select Market under the ticker symbol “UPBD.”

Executive Summary

Our Strategy

Our strategy is focused on achieving our mission to elevate financial opportunity for all and growing our business through emphasis on the following key initiatives:

• Leverage data analytics capabilities to attract new customers, approve more customers and mitigate risk across business segments;
• Upgrade and integrate technology platforms to allow for a more simplified and seamless consumer experience, third-party retailer and waterfall integration and consumer transaction process and coworker efficiency;
• Execute on market opportunities and enhance our competitive position across both traditional and virtual lease-to-own solutions, and implement complementary products and services that supplement our current offerings and provide our customers more financial alternatives;
• Develop centers of excellence that will be leveraged across the organization to support our various business segments, utilizing best practices to drive efficiency and growth;
• Grow penetration with current Acima third-party retailers and build on our strength with small to medium size businesses while also adding new national and regional third-party retailers to our platform and expanding our direct-to-consumer channels; and
• At Rent-A-Center, accelerate the shift to e-commerce, improve the fully integrated omni-channel customer experience and expand product categories, which we expect will increase brand awareness and customer loyalty.

As we pursue our strategy, we have taken, and may in the future take, advantage of joint venture, partnership, or merger and acquisition opportunities from time to time that advance our key initiatives and elevate the financial mobility of underserved consumers.

Recent Developments

Dividend. On September 17, 2025, we announced that our board of directors approved a quarterly cash dividend of $0.39 per share for the fourth quarter of 2025. The dividend was paid on October 21, 2025 to our common stockholders of record as of the close of business on September 30, 2025.

Term Loan Facility Amendment. On August 19, 2025 we entered into a Fourth Amendment to the Term Loan Facility, effective as of August 19, 2025. The amendment, in addition to certain other changes, (i) extended the maturity date for the loans outstanding under the Term Loan Facility to August 19, 2032 (subject to certain springing maturity provisions) and (ii) provided approximately $77 million of incremental commitments under the Term Loan Facility, all of which were drawn at the closing of the amendment, resulting in total aggregate borrowings under the Credit Agreement on such date of $875 million.

Executive Management Changes.

• On October 30, 2025, we announced that Mr. Hal Khouri will join Upbound Group, Inc. as Executive Vice President, Chief Financial Officer effective November 10, 2025. Mr. Khouri has over 30 years of experience in consumer-based banking, financial services, leasing, retail, consulting and government service.
• Effective September 18, 2025 Rebecca Wooters joined Upbound Group, Inc. as Executive Vice President, Chief Growth Officer. Ms. Wooters brings more than 30 years of executive leadership in digital transformation, product innovation, technology, and customer engagement. Under the leadership of Ms. Wooters, we will consolidate Upbound’s marketing, data, analytics, customer experience, and product development teams into a single integrated group.

Business and Operational Trends

Macroeconomic Conditions. In recent years, we have experienced significant change in business and operational trends driven by macroeconomic conditions, which have directly impacted our customers as well as our operations, including significant changes in the U.S. consumer price index, changes in demand for certain consumer retail categories, changes in consumer payment behaviors, a condensed labor market, which has also contributed to wage inflation, rapid increases in interest rates, changes in tariff and trade policies, and global supply chain disruptions resulting in reduced product availability and rising product costs.

While our businesses have historically remained resilient through various economic cycles, the full extent to which our risk management strategy and these macroeconomic trends (including consumer spending and payment behavior) may impact the Company in future periods is uncertain. The continuation of volatile macroeconomic trends may have a material adverse impact on our financial statements, including our results of operations, operating cash flows, liquidity and capital resources.

See “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2024, for additional discussion of impacts to our business and additional risks associated with macroeconomic conditions.

Rent-A-Center e-commerce revenue. In recent years, e-commerce revenues have continued to increase as a percentage of total rentals and fees revenue in our Rent-A-Center segment. For the nine months ended September 30, 2025 and 2024, e-commerce revenues represented approximately 27% and 26% of total lease-to-own revenues, respectively. Due to recent trends in consumer shopping behaviors and expectations, we believe e-commerce solutions are an important part of our lease-to-own offering. However, we are unable to quantify the extent to which e-commerce revenues are incremental compared to what our overall revenues would have been in the absence of those e-commerce transactions. In addition, the profitability of e-commerce transactions can be impacted by different merchandise loss factors compared to traditional store-based transactions in the Rent-A-Center segment. Therefore, we are unable to determine with certainty whether the continuation of this trend toward increased e-commerce transactions will have a significant impact to our financial statements in future periods or be ultimately favorable or unfavorable to our financial results.

Results of Operations

The following discussion focuses on our results of operations and our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the nine months ended September 30, 2025 included in Part I, Item I of this Quarterly Report on Form 10-Q.

Key Metrics

Gross Merchandise Volume (“GMV”): The Company defines Gross Merchandise Volume as the retail value in U.S. dollars of merchandise acquired by the Acima segment that is leased to customers through a transaction that occurs within a defined period, net of estimated cancellations as of the measurement date.

Lease Portfolio Value: Represents the aggregate dollar value of the expected monthly rental income associated with current active lease agreements from our Company-owned Rent-A-Center lease-to-own stores and e-commerce platform at the end of any given period.

Same Store Lease Portfolio Value: Represents the aggregate dollar value of the expected monthly rental income associated with current active lease agreements from our Company-owned Rent-A-Center lease-to-own stores that were operated by us for 13 months or more at the end of any given period. The Company excludes from the same store base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store base in the 30th full month following account transfer.

Same Store Sales: Same store sales generally represents revenue earned in Company-owned Rent-A-Center stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. The Company excludes from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30th full month following account transfer.

Lease Charge-Offs (“LCOs”) (previously referred to as “skip / stolen losses”): Represents charge-offs of the net book value of unrecoverable on-rent merchandise with lease-to-own customers who are past due. This is typically expressed as a percentage of revenues for the applicable period. For the Rent-A-Center segment, LCOs exclude Get It Now, Home Choice and franchise-owned Rent-A-Center locations.

Brigit Paying Users: Represents Brigit customers who have an active Plus or Premium subscription account, are not delinquent (not 45 days past due) on a cash advance, and have made at least one of their last two subscription payments.

Brigit Net Advance Losses: Represents charge-offs of Brigit uncollectible customer cash advances that are more than 45 days past due. This is typically expressed as a percentage of total cash advances originated in the applicable period.

Overview

On January 31, 2025 we established a new operating segment following the acquisition of Brigit. Please reference Note 2 for additional discussion of the acquisition. In addition we combined our Franchising segment with our Rent-A-Center segment. Financial information disclosed within this report has been recast for the related prior year period to reflect this change. We report four operating segments: Acima, Rent-A-Center, Brigit and Mexico. The following briefly summarizes our financial performance for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 on a consolidated basis and for our operating segments.

During the first nine months of 2025, consolidated revenues and gross profit increased by approximately $257.3 million and $112.9 million, respectively, primarily due to the addition of Brigit segment revenues and an increase in the Acima segment revenues, partially offset by a decrease in Rent-A-Center segment revenues described below. Operating profit decreased by approximately $46.4 million, primarily due to increases in other gains and charges, non-labor operating expenses, and general and administrative expenses of $82.2 million, $77.4 million, and $17.2 million, respectively, partially offset by the increase in gross profit noted above and a decrease in operating labor expenses of $17.0 million.

The Acima segment revenues increased approximately $201.2 million for the nine months ended September 30, 2025, due to increases in rentals and fees revenues and merchandise sales of $150.5 million and $50.7 million, respectively, primarily resulting from higher GMV. Growth in GMV was primarily due to an increase in third-party retailer locations and productivity, which resulted in more leases per retailer, and expanded direct-to-consumer offerings. Operating profit increased approximately $33.5 million for the nine months ended September 30, 2025, primarily due to an increase in gross profit of $41.8 million and decreases in operating labor costs and other gains and charges of $5.2 million and $1.7 million, respectively, partially offset by an increase in non-labor operating expenses of $14.8 million. See “Segment Performance” below for further discussion of Acima segment operating results for the nine months ended September 30, 2025.

Revenues in our Rent-A-Center segment decreased approximately $83.3 million for the nine months ended September 30, 2025, due to a decreases in same store sales of 3.2% and lower corporate-owned store count as a result of prior year store closures, resulting in decreases in rentals and fees revenues and merchandise sales of $79.9 million and $5.3 million, respectively. Operating profit decreased approximately $37.1 million for the nine months ended September 30, 2025, primarily due to a decrease in gross profit of approximately $52.0 million driven by lower revenues, in addition to higher general and administrative expenses and other gains and charges of approximately $10.6 million and $6.5 million, respectively, partially offset by decreases in non-labor operating expenses and operating labor expense of $18.6 million and $14.1 million, respectively. See “Segment Performance” below for further discussion of Rent-A-Center segment operating results for the nine months ended September 30, 2025.

The Brigit segment had revenues and operating profit of $141.4 million and $23.9 million, respectively, since the Closing Date. See “Segment Performance” below for further discussion of Brigit segment operating results for the nine months ended September 30, 2025.

The Mexico segment revenues and gross profit decreased by 3.3% and 4.0% for the nine months ended September 30, 2025, respectively, primarily due to negative impacts of exchange rate fluctuations. Operating profit increased 8.1%, primarily due to lower operating expenses, partially offset by negative impacts of exchange rate fluctuations. See “Segment Performance” below for further discussion of Mexico segment operating results for the nine months ended September 30, 2025.

Cash flow from operations was $264.0 million for the nine months ended September 30, 2025. As of September 30, 2025, we held $107.0 million of cash and cash equivalents and had outstanding indebtedness of $1.6 billion.

The following table is a reference for the discussion that follows.

(dollar amounts in thousands)

nm - percent change is not meaningful for comparison

Three Months Ended September 30, 2025, compared to Three Months Ended September 30, 2024

Revenue. Total revenues increased by $95.8 million, or 9.0%, to $1,164.7 million for the three months ended September 30, 2025, from $1,068.9 million for the three months ended September 30, 2024. This increase was primarily due to an increase of approximately $59.1 million in the Acima segment and the addition of the Brigit segment with $57.7 million in revenues, partially offset by a decrease of approximately $22.6 million in the Rent-A-Center segment, as discussed further in the “Segment Performance” section below.

Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months ended September 30, 2025 increased by $21.7 million, or 6.4%, to $364.1 million as compared to $342.4 million for the three months ended September 30, 2024. The increase was primarily attributable to an increase of approximately $31.8 million in the Acima segment, driven by an increase in rentals and fees revenues, partially offset by a decrease of approximately $10.6 million in the Rent-A-Center segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increase to 40.4% for the three months ended September 30, 2025, as compared to 39.0% for the three months ended September 30, 2024, primarily due to the continued growth of the Acima segment as a percent of total rentals and fees revenue.

Cost of Merchandise Sold. Cost of merchandise sold represents the net book value of rental merchandise at time of sale. Cost of merchandise sold increased by $15.5 million, or 7.2%, to $230.9 million for the three months ended September 30, 2025, from $215.4 million for the three months ended September 30, 2024, primarily attributable to an increase of $18.0 million in the Acima segment, driven primarily by higher merchandise sales, partially offset by a decrease of approximately $2.6 million in the Rent-A-Center segment. The gross margin percent of merchandise sales increased to (16.5)% for the three months ended September 30, 2025, from (17.5)% for the three months ended September 30, 2024.

Gross Profit. Gross profit increased by $52.0 million, or 10.2%, to $563.1 million for the three months ended September 30, 2025, from $511.1 million for the three months ended September 30, 2024, primarily due to the addition of the Brigit segment with $51.0 million in gross profit and an increase of $9.3 million in the Acima segment, partially offset by a decrease of $9.4 million in the Rent-A-Center segment, as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue increased to 48.3% for the three months ended September 30, 2025, from 47.8% for both the three months ended September 30, 2024.

Operating Labor. Operating labor includes all salaries and wages paid to operational employees and district managers, together with payroll taxes and benefits. Operating labor decreased by $0.9 million, or 0.6%, to $151.7 million for the three months ended September 30, 2025, as compared to $152.6 million for the three months ended September 30, 2024, primarily due to decreases of $1.4 million and $1.0 million in the Rent-A-Center and Acima segments, respectively, partially offset by $1.2 million attributable to the addition of the Brigit segment. Operating labor expressed as a percentage of total revenue was 13.0% for the three months ended September 30, 2025, as compared to 14.3% for the three months ended September 30, 2024.

Non-Labor Operating Expenses. Non-labor operating expenses include LCOs, occupancy, delivery, advertising, selling, insurance, travel and other operating expenses. Non-labor operating expenses increased by $46.1 million, or 23.5%, to $242.1 million for the three months ended September 30, 2025, as compared to $196.0 million for the three months ended September 30, 2024, primarily due to the addition of the Brigit segment with $38.8 million in non-labor operating expenses and an increase in non-labor operating expense of approximately $10.6 million in the Acima segment, driven primarily by an increase of $8.9 million in lease charge-off expense, partially offset by a decrease in non-labor operating expenses of $4.0 million in the Rent-A-Center segment, primarily attributable to a decrease of $2.2 million in lease charge-off expense. Non-labor operating expenses expressed as a percentage of total revenue was 20.8% for the three months ended September 30, 2025, compared to 18.3% for the three months ended September 30, 2024.

General and Administrative Expenses. General and administrative expenses include all corporate overhead expenses related to our headquarters such as salaries, payroll taxes and benefits, stock-based compensation, occupancy, administrative and other expenses, as well as salaries and labor costs for our regional directors, divisional vice presidents and executive vice presidents. General and administrative expenses decreased by $1.3 million, or 2.4%, to $50.2 million for the three months ended September 30, 2025, as compared to $51.5 million for the three months ended September 30, 2024. General and administrative expenses expressed as a percentage of total revenue was 4.3% for the three months ended September 30, 2025, compared to 4.8% for the three months ended September 30, 2024.

Other Gains and Charges. Other gains and charges increased by $25.3 million to $53.4 million for the three months ended September 30, 2025, as compared to $28.1 million for the three months ended September 30, 2024. The increase in other gains and charges was driven primarily by an increase of $16.4 million related to the Brigit acquisition, including depreciation and amortization of the fair value of acquired software and intangible assets, stock compensation expense related to the vesting of a portion of the equity consideration, and other compensation and transaction costs, and an increase of $11.7 million in asset impairments related to the closure of approximately 50 franchise store locations.

Operating Profit. Operating profit decreased by $17.3 million, or 24.7%, to $52.8 million for the three months ended September 30, 2025, as compared to $70.1 million for the three months ended September 30, 2024, primarily due to increases in non-labor operating expenses and other gains and charges, partially offset by an increase in gross profit and decreases in general and administrative expenses and operating labor, as described above. Operating profit expressed as a percentage of total revenue was 4.5% for the three months ended September 30, 2025, compared to 6.6% for the three months ended September 30, 2024.

Income Tax Expense. Income tax expense decreased by $6.7 million to $6.6 million for the three months ended September 30, 2025, as compared to $13.3 million for the three months ended September 30, 2024, primarily due to the decrease in earnings before income taxes for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, partially offset by a higher effective tax rate for the three months ended September 30, 2025, attributable to the tax impact on non-deductible expenses related to the Brigit acquisition.

Nine Months Ended September 30, 2025, compared to Nine Months Ended September 30, 2024

Revenue. Total revenue increased by $257.3 million, or 7.9%, to $3,498.6 million for the nine months ended September 30, 2025, from $3,241.3 million for the nine months ended September 30, 2024, primarily due to an increase of approximately $201.2 million in the Acima segment and the addition of the Brigit segment with $141.4 million in revenue, partially offset by a decrease of approximately $83.3 million in the Rent-A-Center segment, as discussed further in the “Segment Performance” section below.

Cost of Rentals and Fees. Cost of rentals and fees for the nine months ended September 30, 2025 increased by $66.7 million, or 6.6%, to $1,074.8 million, as compared to $1,008.1 million for the nine months ended September 30, 2024. The increase was primarily attributable to an increase of approximately $93.7 million in the Acima segment driven by an increase in rentals and fees revenues, partially offset by a decrease of approximately $26.8 million in the Rent-A-Center segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 39.7% for the nine months ended September 30, 2025, as compared to 38.2% for the nine months ended September 30, 2024, primarily due to the continued growth of the Acima segment as a percent of total rentals and fees revenue.

Cost of Merchandise Sold. Cost of merchandise sold increased by $61.1 million, or 9.2%, to $722.2 million for the nine months ended September 30, 2025, from $661.1 million for the nine months ended September 30, 2024, primarily attributable to an increase of $65.6 million in the Acima segment driven primarily by higher merchandise sales. The gross margin percent of merchandise sales decreased to (15.3)% for the nine months ended September 30, 2025, from (13.8)% for the nine months ended September 30, 2024.

Gross Profit. Gross profit increased by $112.9 million, or 7.2%, to $1,685.0 million for the nine months ended September 30, 2025, from $1,572.1 million for the nine months ended September 30, 2024, primarily due to the addition of the Brigit segment with $124.8 million in gross profit and an increase of $41.8 million in the Acima segment, partially offset by a decrease of approximately $52.0 million in the Rent-A-Center segment, as discussed further in the “Segment Performance” section below. Gross profit as a percentage of total revenue decreased to 48.2% for the nine months ended September 30, 2025, as compared to 48.5% for the nine months ended September 30, 2024.

Operating Labor. Operating labor decreased by $17.0 million, or 3.6%, to $450.0 million for the nine months ended September 30, 2025, as compared to $467.0 million for the nine months ended September 30, 2024, primarily due to decreases of $14.1 million and $5.2 million in the Rent-A-Center and Acima segments, respectively. The decrease in Rent-A-Center operating labor was primarily attributable to a decrease in corporate-owned store count, resulting from prior year store closures and refranchising. Operating labor expressed as a percentage of total revenue was 12.9% for the nine months ended September 30, 2025, as compared to 14.4% for the nine months ended September 30, 2024.

Non-Labor Operating Expenses. Non-labor operating expenses increased by $77.4 million, or 12.6%, to $691.2 million for the nine months ended September 30, 2025, as compared to $613.8 million for the nine months ended September 30, 2024, primarily due to the addition of the Brigit segment with $81.5 million in non-labor operating expenses and increase of approximately $14.8 million in the Acima segment primarily related to an increase of $16.0 million in lease charge-off expense, partially offset by a decrease of approximately $18.6 million in the Rent-A-Center segment, primarily attributable to decreases of $9.0 million in lease-to-own store merchandise losses and $5.9 million in store occupancy and vehicle expenses driven by lower corporate-owned store count due to prior year store closures. Non-labor operating expenses expressed as a percentage of total revenue was 19.8% for the nine months ended September 30, 2025, as compared to 18.9% for the nine months ended September 30, 2024.

General and Administrative Expenses. General and administrative expenses increased by $17.2 million, or 10.8%, to $177.4 million for the nine months ended September 30, 2025, as compared to $160.2 million for the nine months ended September 30, 2024, primarily due to an increase in the allowance for doubtful accounts of $10.6 million related to franchising trade receivables and the addition of the Brigit segment with $9.5 million in general and administrative expenses. General and administrative expenses expressed as a percentage of total revenue were 5.1% for the nine months ended September 30, 2025, compared to 4.9% for the nine months ended September 30, 2024.

Other Gains and Charges. Other gains and charges increased by $82.2 million to $162.1 million for the nine months ended September 30, 2025, as compared to $79.9 million for the nine months ended September 30, 2024. The increase in other gains and charges was driven primarily by increases of $49.5 million related to the Brigit acquisition, including depreciation and amortization of the fair value of acquired software and intangible assets, stock compensation expense related to the vesting of a portion of the equity consideration, other compensation and transaction costs, $44.0 million in estimated legal accruals and related litigation and defense expenses described further in Note 9 of our Condensed Consolidated Financial Statements and $5.8 million in lease impairment charges and fixed asset disposals, partially offset by decreases of $6.1 million in accelerated software depreciation, $4.9 million in stock compensation expense related to restricted stock issued in connection with the Acima Holdings acquisition and $1.7 million in depreciation and amortization of acquired software and intangible assets in connection with the Acima Holdings acquisition for the nine months ended September 30, 2025.

Operating Profit. Operating profit decreased by $46.4 million, or 21.8%, to $166.1 million for the nine months ended September 30, 2025, as compared to $212.5 million for the nine months ended September 30, 2024, primarily due to the increases in other gains and charges, non-labor operating expenses and general and administrative expenses, partially offset by an increase in gross profit and decrease in operating labor, as described above. Operating profit expressed as a percentage of total revenue was 4.7% for the nine months ended September 30, 2025, compared to 6.6% for the nine months ended September 30, 2024.

Income Tax Expense. Income tax expense decreased by $6.0 million to $24.7 million for the nine months ended September 30, 2025, as compared to $30.7 million for the nine months ended September 30, 2024, primarily due to the decrease in earnings before income taxes for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, partially offset by a higher effective tax rate for the nine months ended September 30, 2025 attributable to the tax impact on non-deductible expenses related to the Brigit acquisition.

Segment Performance

Acima segment

(dollar amounts in thousands)

(1) See Key Metrics described above for additional information.

Revenues. The increase in revenues for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, were primarily due to increases in rentals and fees revenues of $46.1 million and $150.5 million, respectively, and increases in merchandise sales revenue of $13.2 million and $50.7 million, respectively, resulting from higher GMV. Growth in GMV was primarily due to an increase in new third-party retailer locations and productivity, which resulted in more leases per retailer, in addition to expanded direct-to-consumer offerings.

Gross Profit. Gross profit increased for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, driven primarily by the increase in revenues described above. Gross profit as a percentage of segment revenues decreased to 29.3% and 30.0% for the three and nine months ended September 30, 2025, compared to 30.7% and 31.1% for the three and nine months ended September 30, 2024, primarily due to the conversion of Acceptance Now locations to the Acima Holdings Lease Management platform.

Operating Profit. Operating profit as a percentage of segment revenues was 10.2% and 11.7% for the three and nine months ended September 30, 2025, compared to 11.3% and 11.1% for the three and nine months ended September 30, 2024. The decreases in operating profit margin were primarily due to decreases in gross profit as a percentage of segment revenues as described above and increases in merchandise losses. Merchandise losses in our Acima locations due to LCOs, expressed as a percentage of revenues, were approximately 9.7% and 9.3% for the three and nine months ended September 30, 2025, respectively, compared to 9.2% and 9.5% for the three and nine months ended September 30, 2024, respectively. Merchandise losses in our Acima locations due to other merchandise losses, expressed as a percentage of revenues, were 0.4% for both the three and nine months ended September 30, 2025, and were 0.3% and 0.2% for the three and nine months ended September 30, 2024, respectively. Other merchandise losses include unrepairable and missing merchandise and loss/damage waiver claims.

Rent-A-Center segment

(dollar amounts in thousands)

(1) See Key Metrics described above for additional information.

Revenues. The decrease in revenues for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, was primarily due to decreases in same store sales of 3.6% and 3.2%, respectively, resulting from certain underwriting adjustments implemented in prior periods. In addition, the decrease in revenue for the nine months ended September 30, 2025 was also driven by lower corporate-owned store count due to prior year store closures.

Gross Profit. Gross profit decreased for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, driven primarily by the decrease in revenues described above. Gross profit as a percentage of segment revenues was 68.1% and 67.3% for the three and nine months ended September 30, 2025, respectively, as compared to 66.9% and 67.0% for the three and nine months ended September 30, 2024, respectively. Higher gross profit as a percentage of revenues for the three months ended September 30, 2025 was primarily due to mix-shift changes between lease merchandise product categories.

Operating Profit. Operating profit as a percentage of segment revenues was 12.2% and 13.1% for the three and nine months ended September 30, 2025, respectively, compared to 15.1% and 14.9% for the three and nine months ended September 30, 2024, respectively. The decrease in operating profit margin for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, was primarily due to an increase in other gains and charges of $12.5 million and $6.5 million for the three and nine months ended September 30, 2025, respectively, primarily due to impairment charges and shutdown costs related to closure of refranchised locations. The decrease in operating profit margin for the nine months ended September 30, 2025 was also attributable to an increase in general and administrative expenses of $10.6 million, primarily driven by increases in the allowance for doubtful accounts related to franchising trade receivables. Merchandise losses in our Rent-A-Center lease-to-own stores due to LCOs, expressed as a percentage of Rent-A-Center lease-to-own revenues, were approximately 4.7% for both the three and nine months ended September 30, 2025, compared to 4.9% and 4.6% for the three and nine months ended September 30, 2024, respectively. Merchandise losses in our Rent-A-Center lease-to-own stores due to other merchandise losses, expressed as a percentage of Rent-A-Center lease-to-own revenues, were approximately 1.0% and 0.9% for the three and nine months ended September 30, 2025, respectively, compared to approximately 1.3% for both the three and nine months ended September 30, 2024. Other merchandise losses include unrepairable and missing merchandise and loss/damage waiver claims.

Brigit segment

(dollar amounts in thousands)

(1) See Key Metrics described above for additional information.

nm - percent change is not meaningful for comparison

Revenues. Revenues for the three and nine months ended September 30, 2025 included $39.2 million and $99.5 million in subscription revenue, $12.4 million and $29.0 million in transfer fee revenue and $6.1 million and $12.9 million in marketplace revenue, respectively.

Gross Profit. Gross profit as a percentage of segment revenues was 88.5% and 88.2% for the three and nine months ended September 30, 2025, respectively.

Operating Profit. Operating profit as a percentage of segment revenues was 7.9% and 16.9% for the three and nine months ended September 30, 2025. The decrease in operating profit as a percentage of segment revenues for the three months ended September 30, 2025 compared to the nine months ended September 30, 2025 was primarily due to higher marketing and customer acquisition expenses during the three months ended September 30, 2025. Net advance losses expressed as a percentage of total cash advances originated was approximately 3.3% and 2.8% for the three and nine months ended September 30, 2025, respectively.

Please refer to Note 2 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information about the acquisition of Brigit that was completed on January 31, 2025.

Mexico segment

(dollar amounts in thousands)

(1) See Key Metrics described above for additional information.

Revenues. Exchange rate fluctuations positively impacted revenues by approximately $0.3 million for the three months ended September 30, 2025 and negatively impacted revenues by approximately $6.1 million for the nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024. On a constant currency basis, revenues for the three and nine months ended September 30, 2025 increased approximately $1.4 million and $4.1 million, respectively, compared to the three and nine months ended September 30, 2024.

Gross Profit. Exchange rate fluctuations positively impacted gross profit by approximately $0.1 million for the three months ended September 30, 2025 and negatively impacted gross profit by approximately $4.4 million for the nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024. On a constant currency basis, gross profit for the three and nine months ended September 30, 2025 increased by approximately $0.9 million and $2.7 million, respectively, as compared to the three and nine months ended September 30, 2024. Gross profit as a percentage of segment revenues was 71.2% and 71.4% for the three and nine months ended September 30, 2025, respectively, compared to 72.1% and 71.8% for the three and nine months ended September 30, 2024, respectively.

Operating Profit. Exchange rate fluctuations minimally impacted operating profit for the three months ended September 30, 2025 and negatively impacted operating profit by approximately $0.5 million for the nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024. On a constant currency basis, operating profit for the three and nine months ended September 30, 2025 increased by approximately $0.4 million and $0.8 million, respectively, as compared to the three and nine months ended September 30, 2024. Operating profit as a percentage of segment revenues increased to 6.4% and 7.7% for the three and nine months ended September 30, 2025, respectively, compared to 4.6% and 6.8% for the three and nine months ended September 30, 2024, respectively.

Liquidity and Capital Resources

Overview. For the nine months ended September 30, 2025, we generated $264.0 million in operating cash flow, used cash in the amount of $444.4 million for debt repayments, $278.0 million for acquisitions, $65.7 million for dividends, $49.3 million for capital expenditures, and $47.7 million for customer cash advance originations net of collections, and had cash proceeds from indebtedness of $681.0 million. We ended the third quarter of 2025 with $107.0 million of cash and cash equivalents and outstanding indebtedness of $1.6 billion.

Analysis of Cash Flow. Cash provided by operating activities increased by $97.3 million to $264.0 million for the nine months ended September 30, 2025, from $166.7 million for the nine months ended September 30, 2024, primarily due to an increase of approximately $153.0 million in cash provided by net earnings (net earnings less adjustments to reconcile net earnings to net cash provided by operating activities), which was benefited by $23.9 million in operating income generated by the Brigit operating segment following the acquisition; a year-over-year decrease of approximately $67.9 million in payments of outstanding inventory and trade payables primarily due to higher payments of outstanding inventory payables made in early 2024; and a decrease in legal settlement payments due to the 2024 settlement payment of approximately $8.8 million related to the Massachusetts Attorney General matter. These impacts were partially offset by higher inventory purchases of approximately $186.0 million, net of approximately $70.9 million of customer lease buyouts through early purchase options, lease charge-offs, and other merchandise losses, driven by increased consumer demand.

Cash used in investing activities increased by $347.6 million to $374.9 million for the nine months ended September 30, 2025, compared to $27.3 million for the nine months ended September 30, 2024, primarily due to payment of cash consideration for the acquisition of Brigit of $275.9 million and $47.7 million for customer cash advance originations net of collections, in addition to higher proceeds from sale of property assets of $18.3 million for the nine months ended September 30, 2024 resulting from the sale of 55 Rent-A-Center stores in the states of New York and New Jersey to a franchisee.

Cash provided by (used in) financing activities increased by $301.9 million to $156.0 million for the nine months ended September 30, 2025, compared to $(145.9) million for the nine months ended September 30, 2024, primarily due to an increase in borrowings under the ABL Credit Facility of $466.0 million, used to facilitate the Brigit acquisition, partially offset by an increase in debt repayments of $152.8 million for the nine months ended September 30, 2025.

Liquidity Requirements. Our primary liquidity requirements are for rental merchandise purchases in our Rent-A-Center and Acima segments, which are impacted by consumer demand for our lease-to-own solutions, and customer advances in our Brigit segment. Other capital requirements include expenditures for technology and property assets, and debt service. Our primary source of liquidity has been cash provided by operations.

We generally utilize our ABL Credit Facility for the issuance of letters of credit, to manage normal fluctuations in operational cash flow caused by the timing of cash payments vs cash receipts, and to potentially fund strategic initiatives including acquisitions. In that regard, we may from time to time draw funds under the ABL Credit Facility for general corporate purposes. Amounts are drawn as needed due to the timing of cash flows and are generally paid down as cash is generated by our operating activities. We believe cash flow generated from operations and availability under our ABL Credit Facility will be sufficient to fund our operations during the next twelve months. At October 23, 2025, we had approximately $76.0 million in cash on hand, and $222.0 million available under our ABL Credit Facility.

Merchandise Losses. Merchandise losses consist of the following:

(in thousands)

(1) Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.

Capital Expenditures. We make capital expenditures in order to maintain our existing operations, acquire new capital assets in new and acquired stores and invest in information technology. We spent $49.3 million and $44.2 million on capital expenditures during the nine months ended September 30, 2025 and 2024, respectively. The increase of $5.1 million is primarily due to higher investment in software development.

Acquisitions and New Location Openings. During the nine months ended September 30, 2025, we acquired four lease-to-own store locations and customer accounts for an aggregate purchase price of approximately $2.2 million. One store location was closed upon acquisition and consolidated into existing store operations in our Rent-A-Center segment.

The table below summarizes the store location activity for the nine-month period ended September 30, 2025 for our Rent-A-Center and Mexico operating segments.

(1) Represents closure of Rent-A-Center franchisee store locations.

Senior Debt. On February 17, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a five-year asset-based revolving credit facility with commitments of $550 million and a letter of credit sublimit of $150 million, which commitments may be increased, at our option and under certain conditions, by up to an additional $125 million in the aggregate (as amended on August 29, 2025, the “ABL Credit Facility”). Under the ABL Credit Facility, we may borrow only up to the lesser of the level of the then-current borrowing base and the aggregate amount of commitments under the ABL Credit Facility. The borrowing base is tied to the amount of eligible installment sales accounts, inventory and eligible lease contracts, reduced by certain reserves. The ABL Credit Facility bears interest at a fluctuating rate determined by reference to an adjusted Term SOFR rate plus an applicable margin of 1.50% to 2.00%, which, as of October 23, 2025, was 6.23%. A commitment fee equal to 0.250% to 0.375% of the unused portion of the ABL Credit Facility fluctuates dependent upon average utilization for the prior month as defined by a pricing grid included in the documentation governing the ABL Credit Facility. Loans under the ABL Credit Facility may be borrowed, repaid and re-borrowed until June 7, 2029 (subject to certain springing maturity provisions), at which time all amounts borrowed must be repaid.

The obligations under the ABL Credit Facility are guaranteed by us and certain of our material wholly owned domestic restricted subsidiaries, subject to certain exceptions. The obligations under the ABL Credit Facility and such guarantees are secured on a first-priority basis by all of our and our subsidiary guarantors’ accounts, inventory, deposit accounts, securities accounts, cash and cash equivalents, rental agreements, general intangibles (other than equity interests in our subsidiaries), chattel paper, instruments, documents, letter of credit rights, commercial tort claims related to the foregoing and other related assets and all proceeds thereof related to the foregoing, subject to permitted liens and certain exceptions (such assets, collectively, the “ABL Priority Collateral”) and a second-priority basis in substantially all other present and future tangible and intangible personal property of ours and the subsidiary guarantors, subject to certain exceptions.

On February 17, 2021, we also entered into a term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a seven-year $875 million senior secured term loan facility (as amended on August 19, 2025, the “Term Loan Facility”). Subject in each case to certain restrictions and conditions, we may add up to $625 million (plus additional amounts subject to satisfaction of certain financial ratios) of incremental term loan facilities to the Term Loan Facility or utilize incremental capacity under the Term Loan Facility at any time by issuing or incurring incremental equivalent term debt. Interest on borrowings under the Term Loan Facility is payable at a fluctuating rate of interest determined by reference to the Term SOFR rate plus an applicable margin of 2.75%, subject to a 0.50% Term SOFR floor, which, as of October 23, 2025 was 6.88%.

Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.000% per annum of the original aggregate principal amount thereof, with the remaining balance due at final maturity on August 19, 2032. The Term Loan Facility is secured by a first-priority security interest in substantially all of present and future tangible and intangible personal property of us and our subsidiary guarantors, other than the ABL Priority Collateral, and by a second-priority security interest in the ABL Priority Collateral, subject to certain exceptions. The obligations under the Term Loan Facility are guaranteed by us and our material wholly-owned domestic restricted subsidiaries that also guarantee the ABL Credit Facility.

At October 23, 2025, we had outstanding borrowings of $875.0 million under the Term Loan Facility and available commitments of $222.0 million under our ABL Credit Facility, net of letters of credit.

See Note 6 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our senior debt.

Senior Notes. On February 17, 2021, we issued $450 million in senior unsecured notes due February 15, 2029, at par value, bearing interest at 6.375% (the “Notes”). Interest on the Notes is payable in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. We may redeem some or all of the Notes at any time for cash at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest to, but not including, the redemption date. If we experience specific kinds of change in control, we will be required to offer to purchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest. See Note 7 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our senior notes.

Operating Leases. We lease space for all of our Rent-A-Center and Mexico stores under operating leases expiring at various times through 2036. In addition, we lease space for certain support facilities under operating leases expiring at various times through 2032. Most of our store leases are five-year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed-upon formulas. As of September 30, 2025, our total remaining obligation for existing store lease contracts was approximately $338.0 million.

We lease vehicles for all of our Rent-A-Center stores under operating leases with lease terms expiring twelve months after the start date of the lease. We classify these leases as short-term and have elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our Condensed Consolidated Balance Sheets. As of September 30, 2025, our total remaining minimum obligation for existing Rent-A-Center vehicle lease contracts was approximately $3.5 million.

We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2029 with rental rates adjusted periodically for inflation. As of September 30, 2025, our total remaining obligation for existing Mexico vehicle lease contracts was approximately $3.4 million.

Uncertain Tax Position. As of September 30, 2025, we have recorded $0.4 million in uncertain tax positions. Although these positions represent a potential future cash liability to us, the amounts and timing of such payments are uncertain.

Seasonality. Our revenue mix is moderately seasonal, with the first quarter of each fiscal year generally providing higher sales than any other quarter during a fiscal year. Generally, our customers will more frequently exercise the early purchase option on their existing lease purchase agreements in our Acima and Rent-A-Center segments or purchase pre-leased merchandise off the showroom floor in our Rent-A-Center segment during the first quarter of each fiscal year, primarily due to the receipt of federal income tax refunds. In contrast, our cash expenditures for our merchandise purchases for the fiscal year are generally the highest beginning in the latter part of the third quarter through the fourth quarter, primarily as a result of holiday promotions that lead to increased demand for our lease-to-own offerings.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires new tabular disclosures disaggregating prescribed expense categories within relevant income statement captions. In January 2025, the FASB issued ASU 2025-01, which clarifies the effective date for ASU No. 2024-03. The adoption of ASU 2024-03 will be required for us for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. We are currently in the preliminary stages of assessing this ASU and the impact it will have on our financial statements following adoption.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), which amends the existing standard that refers to estimating expected credit losses on current accounts receivables and current contract assets arising from transactions under Topic 606. Under the new standard, public business entities may elect a practical expedient that assumes the current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating expected credit losses. The adoption of ASU 2025-05 will be required for us for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. We are currently in the preliminary stages of assessing this ASU and the impact it will have on our financial statements following adoption.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which amends the existing standard that refers to various stages of a software development. Under the new standard, entities will start capitalizing eligible costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. The adoption of ASU 2025-06 will be required for us for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. We are currently in the preliminary stages of assessing this ASU and the impact it will have on our financial statements following adoption.

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that we adopt as of the specified effective date. As of September 30, 2025, unless otherwise discussed (including with respect to ASU 2023-07), we believe the impact of any other recently issued standards that are not yet effective are either not applicable to us at this time, or will not have a material impact on our consolidated financial statements upon adoption.

Interest Rate Risk

Our primary market risk exposure is fluctuations in interest rates. Monitoring and managing this risk is a continual process carried out by our senior management. We manage our market risk based on an ongoing assessment of trends in interest rates and economic developments, giving consideration to possible effects on both total return and reported earnings. As a result of such assessment, we may enter into swap contracts or other interest rate protection agreements from time to time to mitigate this risk.

As of September 30, 2025, we had $450 million in Notes outstanding at a fixed interest rate of 6.375%. We also had $875.0 million outstanding under the Term Loan Facility and $239.0 million outstanding under our ABL Credit Facility, each at interest rates indexed to the Term SOFR rate or the prime rate. Carrying value of the Term Loan Facility and ABL Credit Facility approximates fair value for such indebtedness. Based on our overall interest rate exposure at September 30, 2025, a hypothetical 1.0% increase or decrease in market interest rates would have the effect of causing an additional $11.1 million annualized pre-tax charge or credit to our Condensed Consolidated Statements of Operations. We have not entered into any interest rate swap agreements as of September 30, 2025.

Foreign Currency Translation

We are also exposed to market risk from foreign exchange rate fluctuations of the Mexican peso to the U.S. dollar as the financial position and operating results of our stores in Mexico are translated into U.S. dollars for consolidation. Resulting translation adjustments are recorded as a separate component of stockholders’ equity.

Disclosure Controls and Procedures. In accordance with Rule 13a-15(b) under the Securities Exchange Act of 1934, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that, as of September 30, 2025, our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Controls over Financial Reporting. On January 31 2025, we acquired Brigit. We are currently in the process of integrating Brigit into our assessment of our internal control over financial reporting. Management’s assessment and conclusions on the effectiveness of our disclosure controls and procedures as of September 30, 2025 excludes an assessment of the internal control over financial reporting of Brigit.

For the quarter ended September 30, 2025, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that, in the aggregate, have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors disclosed in Item 1A of Part 1, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024.