Happen, Inc.

For the third quarter and first nine months of 2026, we recorded an income tax expense of $17.5 million and $50.7 million, respectively, representing an effective tax rate of 22.8% and 23.1%, respectively. For the third quarter and first nine months of 2025, we recorded an income tax expense of $13.0 million and $32.8 million, respectively, representing an effective tax rate of 22.6% and 25.8%, respectively. The effective tax rate differs from the federal statutory rate primarily due to state taxes, the favorable impact of recurring items such as tax credits, the unfavorable impact of the non-deductible portions of executive compensation, and the net discrete impact of stock-based compensation. The decrease in the effective tax rate for the first nine months of 2026 compared to the first nine months of 2025 was primarily driven by the discrete tax expense recognized in the second quarter of 2025 related to the revaluation of our deferred tax assets following the enactment of California Senate Bill 132 on June 27, 2025, and the reduction in the overall effective state tax rate resulting from the law’s requirement that banks and financial companies use a single-sales-factor apportionment formula, effective for tax years beginning in 2025.

As of September 30, 2026, we maintained a valuation allowance of $48.0 million related to certain state net operating loss carryforwards (NOLs) and state tax credit carryforwards. The realization and timing of any remaining state NOLs and state tax credit carryforwards is uncertain and may expire before being utilized, based primarily on limitations related to the allocation of taxable income to the Parent and not related to our earnings. Changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions are recorded as current period income tax expense or benefit.

Income taxes are recorded on a separate entity basis whereby each operating segment determines income tax expense or benefit as if it filed a separate tax return. Differences between separate entity and consolidated tax returns are eliminated upon consolidation.