CACC - Earnings call transcript Q4 2018 | Credit Acceptance Corporation

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Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation Fourth Quarter 2018 Earnings Call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on Credit Acceptance's website. At this time I would like to turn the call over to Credit Acceptance, Senior Vice President and Treasurer, Doug Busk.

Doug Busk

Thank you. to Acceptance welcome XXXX fourth and call. earnings afternoon the Corporation's Credit quarter Good

actual our posted our Federal a include as and news control, news forward-looking Relations differ and read and in of within results which in cause subject recognize you These uncertainties to As in release to forward-looking release. contain These our this from could and call, many the statements are statements at risks forward-looking uncertainties, those forward-looking uncertainties. light that to are statements. such the both beyond all information, section meaning included on regarding risks materially website those creditacceptance.com, Law. listen number which of and other out of of you Consider cautionary the conference please risks Securities of statement spelled Investor the statements and

comply Officer; the our G, mention At Regulation Booth, with Chief this GAAP that SEC's I measures. which Release, will time, measures News results your Additionally, financial how take reconcile provides tables to Financial Roberts, Officer; Chief to Ken should I Executive non-GAAP the our our showing to and section Brett questions. refer please of

Operator

And comes JMP of David Securities. Thank our Scharf first you. from [Operator with Instructions] question the line

Your line is now open.

David Scharf

looks first it up start. Yeah, -- was Doug. good finished afternoon where and the couple year rates my one cost for given to with Maybe, you moved questions. thanks to for taking average having had the A X.X%. funding Wondering like

funding as us we spreads guess XXXX? kind been Is well seen you in there best average you've both any throughout how thinking ought performing everything can the expectations have securitizations your Fed on give about be how based actions market. for to for Just on of recent as

Doug Busk

will the am. don't about curve today behave. expectations the forward are than more I say mean, LIBOR should Fed really to remains XX basis informed lot again unlikely. point curve same, or have But for and of that that that funding people the correct I going which the then remains assumes I are XXXX. that about a any I is if XX% same, that the is how by forward expect mix you there the exist year-end that Well, is increase rate in our a

David Scharf

Right, or got But even It there dealer it that on competitors as still been any shakeout competitive we've that on may with transitioning volume and was side. is saw months some the of months or three seems that for widened ago? declining month it. helpful. pulled based per is It's benchmark last waiting And six kind remains maybe as signs I'm be it active what years your indication the like any spreads competitive of but deals back. so, that sense you wondering, to some though competitive

Doug Busk

don't point impact I the mean, at and changed of combination things. benchmarks spreads think to materially has I really enough credit this

David Scharf

Okay.

quarters. it's as provision and over the in think we status And then get few quo. about I'll forecasting curious next queue. So expense lastly, I'm

are this think just sort being upward? not that on fourth allowance seeing, about that fourth that the kind the into in there taken figure and net reported, or $XX big quarter third factoring was the of maybe we're the were those of of we any provision that quarter still expense pools Is year? charge reversals of kind you As prior allowance revised are quarter million the recognize to -- charge starting were even

Doug Busk

period you an extent filings was reverse we performance But a the we improves, have a we that pools mean, established number to. and purchased pools, attributable will have necessarily allowance we loan of that thousands public to what say in and dealer stated I significant as specific of and allowance. allowance against and specifically the pool our can't

David Scharf

Got it.

Thank you much. very Okay.

Operator

Suisse. question Credit our Orenbuch Moshe you. with line next comes Thank the from of And

open. Your line is now

Moshe Orenbuch

competitive Kind is here, been. fourth down forecasted the than every from of of it been continuing Great. from looks of kind falling, you where the years kind environment. I look like don't quarter guess, XXXX. percentage individual of during the the it's And but kind here, on you it's one on of collection of I obviously, tables had quarter as at the lower have any and guess,

driving rate reach is and should advance kind talk rising facts? little that those and of conclusions we bit a Just about whether what any from the two

Brett Roberts

collection performance year? for just each about absolute You're the talking

Moshe Orenbuch

forecasted the both look the rate, the and at two them. spread of compressing directions advance QX moved No. the in When collection opposite percentage they for you of kind between

kind if early differing by amounts. compare part for guess, year down that of basis the obviously points to points the you I and other So of XXX about it in various was history,

Brett Roberts

probably not basis. yield we there contract of this the the to think a thing is a also going to the kind that. drivers of that is the of percentage loans on of through or is The compression there's larger the trend talked that there a or best for increasing. I we're we just bit really time other about in XX-K that absolute the expect is, there’s the contract accept revenue aren't that do if I But a what amount wrote XX-Q a get In quite of yield terms, you is goes slightly – during now, that's lower bit increasing compensate because information little and material. profit per That's than accretive there contract, the size average that look you'd available if quarter. we see the right that not best at of and look, place to but the I think to

that, your will So loan that prior conclusion per the when quarter. from be QX look to at think profit compared you remarkable I a probably wasn't perspective,

Moshe Orenbuch

aware things talking update should the with that you to things out Got it. XX-K while. on thinking or that that method be maybe like should pointed in that otherwise be available of? not the a any – little we be respect I Anything is the XX-K, of for else mean, accounting you would CECL that kind about anything about we

Doug Busk

discussion. the on update value CECL No fair

to do continue when there and additional appropriate. good of work we'll disclosure We lot provide a

Moshe Orenbuch

Okay. Thanks.

Operator

And you. the of line Janney. next Thank comes with our Rowan John from question

Your line now is open.

John Rowan

Good you the quarter? buyback in stock afternoon, any guys. Did

Doug Busk

bought we back shares approximately did. XXX,XXX Yes an of at We average price $XXX. about

John Rowan

forward? representative Okay. of What the be was Was timing quarter? the is back-end what will that or in from the diluted it this of count going loaded, share it quarter

Doug Busk

Yeah. The activity the shares. by count XX,XXX reduced share quarter approximately the during

John Rowan

the change that mean, not I mix even the wasn't a loan car the used understand with vehicles that and in it higher Is in change, change outstanding a Okay. trying that One in but selling? duration. know consumer through is duration, we between this the always thing is past average increase the didn't I fourth in third to pricing gigantic the I'm I was there? it's just but come just quarter but to the about in now there a you're $XXX noticed up of the loan can the stronger market there track quarter, quarter.

if drove wondering, there anything consumer? higher to loan the that I'm So else that was

Doug Busk

small. pointed bit, is price of changes, the is but it's pretty the as a little up out vehicle selling think again you it the I

John Rowan

But correct? your mileage are there partners type of was that wholesale dealer in vehicle retailing Okay. shift no the like

Doug Busk

a No. material. was is characterized but There there shifts – is as little mix bit, that a nothing no – the always

John Rowan

an where stand the more of just the time Where force? where as idea you sales give versus update Can What us us this last force Okay. we with we Just sales give year? stands to growth today? hiring? any of an growth program are today is that type seeing,

Doug Busk

sales year-end force. terms XX MAMs Well, in we’ve of MAMs. the continued little We're We're at were growing up versus we up progress number XXXX. to of the where make about over

John Rowan

right. much. All Thank very you Okay.

Operator

our from Bank question High Mark Hammond the And Yield. next you. comes Thank of of America line of

is Your line open. now

Mark Hammond

capital Thanks. one had structure. the question I on

your on I in the the had stepping high-yield bond down seen February. par So – [indiscernible] call price

wondering, about in XX something basis counter increase you're dealing Just with that financing Doug? that to you that like bonds points costs with funding those possible early or if secured mentioned thinking

Doug Busk

Relative got there. our we time that goes to bunch funding continually strategy February. options I perspective. a it Yes. our of right actions down assess in par specific all We've from of to mean you're

can no pay off it and we out use it way, or could ABS until Let We decision replace just to just so our assessing run it available that liquidity issue maturity. options.

Mark Hammond

any of Great. there And just is terms mix wouldn't then you go debt total of on percent below in that a that, follow-up a financing as financing? secured

Doug Busk

side capital result is We don't we good markets if so are readily absolute an pretty manage try provides the is a the provides What liability of available the sheet balance that we constrained. and a when have also good to result really it to capital do number.

analysis. are amount leverage that of kind into mix of the of all availability that inputs unused So

moving of and absolute bunch a it's So there no but -- number. parts

Mark Hammond

Doug thanks right, All

Operator

of comes Kyle from Thank with Joseph next our you. line And question Jefferies. the

is now line Your open.

Kyle Joseph

already. Most just I’m you for in guys. magnitude of terms have afternoon of last Good outlook refunds my if been could tax and But timing the talk versus about answered year? questions wondering

Doug Busk

I about size There's historically been -- written to think the what lot think don't been delays lot written There's to received. don't we potential really I the shutdown. have transpire. we what's a don't to know. due government versus consumers a of relative know going refunds

comes. just with it -- deal we'll we're when So it

Kyle Joseph

seeing portfolio just about of a give of Sure. talk health but their underlying consumers from And have you're your overall you could just underlying then if us the in overall sense Obviously, a of broad terms trends you consumer. pretty geographically health?

Doug Busk

the that think just net that three It's look of the in table numbers to the at shows release. on to change best the is the I is in flows. There a release. forecasted probably provided cash approach way Page we’ve

number quarter amount number, flows $X.X the we're This cash a very forecasting. small positive to million of was relative

forecast borrower. that's of at of that, the and was health best assessment say think So you'd you if the I our stable probably our look

Kyle Joseph

purchase And And or terms versus your table can loans vice of that Sure. outlook growth -- versa? and you for looking growth us opportunities at where product? that sense are by opportunities of loans, a then the same dealer seeing in you give

Doug Busk

than the growing We opposite That time. time-to-time. the relied But gets the more That's changes when obviously have kind on the environment's you more can purchased easier, same mean from we're look portfolio happens. for the tough, that And historical environment product. I purchase numbers. the typically when this product loans trend we've growth. been at seeing program of rapidly the

Kyle Joseph

my questions. answering Thanks Got for it.

Operator

Gabriele question line Dominick our comes of And from Oppenheimer. next with the

Your line now is open.

Dominick Gabriele

number acquire? Hey some much. so my a what hiring reaccelerate And plans the possible XXXX in you of plans or about you guys. the are little bit the the Can help an if do of acceleration, dealer? could that for that also maybe around and XXXX things for Thanks question. just could talk of your looking also more taking in Thanks that dealers guys per you're to penetration reacceleration

Doug Busk

I assume, sales force plans hiring the you're talking In about of terms the there.

Dominick Gabriele

exactly. Yes, Thanks.

Doug Busk

We've a size rapid of the pretty increase force. gone sales in the through

We a are probably at in. period where filling we're now

was a years last the that that force us fill we sales the grew year about force rapidly growth. where with productivity a sales we a but mostly five expansion think some -- one force took before time it year XXXX. back to followed of second did I period, we started. a pretty We It in over sales to got

it We've that So expansion. reached back the we're number this in maximum period we're and number terms of now we're two close target where to pretty expansion number want to productivity and probably years trying we fill get to in year and that to in in the that's where this three one the into was. quarter two now probably

Dominick Gabriele

Great. Thanks a lot.

Operator

comes Thank of line Autonomous And Staff question the with Research. next Daniel with you. our from

line open. Your now is

Daniel Staff

a you tale Industry segment Here dealerships Pay many an suggest Buy report Thank not financing of of small also to borrower there who meaningful into a similar do my appear lend Here question. for as Hi. talk have a outside taking acceptance which little the you getting pushback these credit that Can areas you as field in the of dealers? about of proposition any to level recurring from be well partner. you Thank see you. may the receptivity bit value is

Doug Busk

us. good always for Yes, a been that of source business has market

nicer because for positive the They program our their Buy a Pay a program. vehicle Here life in to think over interest particular, at can program. a newer credit on they We advantages credit consumer our lot their move direction. can lower move Advantages in credit, Here get and rate, their reestablish on of the I has reestablish report typical a bureaus.

former Pay So Here there's large our good benefits Pay we've Here program. Here of pretty a those Buy and had enrolling is market lot in our historically program. Here to success Buy dealers

that changed. So hasn't

was this year the It's which volume The very In Attrition per prior issue both equal strong I volume focus those success the last the of long-term success, quarter terms are increase our digits. double consistent we're months. dealers really first just six turned trend dealer having the line in pretty six solid. release. the so trend the per on up just dealer, and quarter good with the Active dealers. signing numbers the are in way months has to rates about was of other but

Daniel Staff

question. taking Great. my Thanks for

Operator

[Operator Instructions] next Stephens. And Vincent of comes the from with our question line Caintic

Your line open. is now

Vincent Caintic

afternoon. Hi, thanks, good

follow get the wanted and dealer to on up the sense dealers broadly wanted to Just you're of questions some landscape a that hearing. about

that as going conversations changed your sort XXXX? what driving XXXX, are dealers that that into are dealers might growth? of So you're wondering sub calendar the have things we're versus the having kind resonating of with And just the calendar are with any

Doug Busk

isn't dealers offer different. a year than today we mean, the conversations I whole really lot is was think having or that ago. the really I don't we're environment value with a different The it proposition that the

So was ago. same the interest I the as year and is a and the receptivity conversations think it

Vincent Caintic

Okay nothing they're any generally that's got worried different? about it, that or kind for different they're or that so products looking features of

Doug Busk

No.

Vincent Caintic

it. had. That’s much. all got Thanks Okay, very I

Operator

Global comes next with question the of Hahn Principal Thank line from Investments. you. And our Jason

Your now is open. line

Jason Hahn

guys. Good afternoon

couple there the the regarding you AGs? of One commentary ones. quick provide ongoing by with state K update investigations any is not or yet the a Just out can various any

Doug Busk

disclosure this Yes. XX-K, two the The We provide X-K will the earnings. to state filed in an we an we time provided update be wanted release on to update the but matters. afternoon provide at

should it relates Massachusetts in It Mississippi. the one a there. X-K So to in out matter be state that and

Jason Hahn

contract maybe an you. thank extending of loans to talk of I'll if your more of and your increasingly sort can just type would take at size about of And just the modeling out of view in sort qualitatively a then Okay, look average tenor sort guess with confidence what I'm I outstanding, broadly you increase guess just that. the I as in steady curious I of sample activity?

Doug Busk

Yes it's not out of sample.

we we're only today And we that full don't loan. amortization think us loans So have XX is term we writing have any XX not for months, but I months on shorter. the behind those and and term a before. months us The behind full through us period the now so on we're have ones on up a loans almost behind to written we're we that any XX haven't full XX-month a schedule

anything in quite So while. any a we're haven't change not written not writing going we We're to loans before.

up So different all an when mix. offer you see the average dealers contract one just and size payments it's terms all that which our customers like prefer sizes different they move issue the drives mix. and different We all of and

Jason Hahn

much. very you Thank

Brett Roberts

and we've would perform, we the don't that extending to I those six obviously programs and the and months, performance refine broadly. based add roll we've estimate for good to pretty you once time program are you long we pilot been data data comfortable a think necessary we you're know you estimate a so going accumulate on extend and you been do a and if just while out loan you make it pilot performance more use can but when how that run you your do terms I term have

So it's many a years. followed we for process many,

Jason Hahn

you. That’s that. Thank appreciate good. helpful I Yeah, color.

Operator

Bologna comes from BTIG. you. Thank question next the Julio line with our of And

now is line Your open.

Julio Bologna

question. my taking for thanks Hi,

about the term about time? the and between there thinking portfolio. of Just dealer over the difference average purchase any the loan-term the programs Is way in thinking in

Doug Busk

materially point I they're different. disclose separately, them but this say mean, we will at I don't not

Julio Bologna

find It one like lot looks are we'll you. at things about transfers the of or we number a the the of probably of is And are of the happening of continued, transfers. dealer forward? quarterly looking increasing then annualized program going the and on basis. in and principal program out a that on purchase between how those about those the K rate that That sense. Thank makes think percentage the should Have thinking

Doug Busk

Well, basically an there some occurred last was periods. of disclosure transfers we the year, should some the if periods. reported that XXXX amount K, prior that said that in of significantly in those than transfers did in We of quarter have higher in fourth our prior

a transfers have not in was higher a So of at there a catch occurring rate. higher XXXX, but rate bit a early there. been XXXX than up materially

the I think we've place just of of up and process the is conclusion function new the in put catch higher transfer had following that. we

Julio Bologna

you. And Thank one last one.

big about your borrower change the in borrower or the thinking Just of seen profile any have borrower and you quarters? the in last average average few the

Doug Busk

No.

Julio Bologna

appreciate That from make it time. was sense. I me. That the

Operator

back for like further turn with And in remarks. conference over or would the to queue, Busk closing additional you. to no Thank the questions Mr. any I

Doug Busk

to conference call thank everyone like us support today. for for and joining We'd their on our

any Thank We talking follow-up have questions direct again you to mailbox additional at you. Investor ir@creditacceptance.com. please them Relations look to forward you our to If quarter. next

Operator

Once you again thank We conference. this does conclude participation. for today's your

Credit Acceptance (CACC) 30 Jan 192018 Q4 Earnings call transcript