CACC - Earnings call transcript Q2 2019 | Credit Acceptance Corporation

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Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation's Second Quarter 2019 Earnings Call. Today’s call is being recorded. A webcast and transcript of today’s earnings call will be made available on the 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.

Douglas Busk

Thank you. to Acceptance welcome XXXX second and call. earnings afternoon, the Corporation Credit quarter Good

our posted Federal as news Relations read within recognize you As release, forward-looking contain our this call, statements at that to both section meaning on website creditacceptance.com Law. listen and of you the conference please Securities of Investor the

include and materially control, cautionary statements other forward-looking risks from Consider the out results of statement and which many statements and regarding risks those uncertainties, actual These uncertainties. forward-looking are These statements. cause beyond such subject and uncertainties our spelled of to news in forward-looking in all in those could and the to differ light of information, a number included which risks release. are

comply measures mention which the measures. to refer of should G, please results to non-GAAP the Release, our News I how Regulation reconcile that to showing SEC’s financial section GAAP tables with provides Additionally,

Executive Officer; this Officer; At our our questions. I take and Chief time, your Booth, Ken will Brett Roberts, Chief Financial

Operator

[Operator Thank Moshe of from Orenbuch first comes question Suisse. Our Credit Instructions] you.

open. is line Your

Moshe Orenbuch

thanks. Great,

Doug, and So – about talked you noticed fair to you're expanded have you as thought a value. the that that CECL to opposed you going elect about that? process in CECL Could we discussion of bit into some talk that here did little went

Douglas Busk

rates. volatility conditions. loans results our fair economics CECL occur our impact that material of different alternatives financial to elected did could Well, results is few period one have of job in financial our does. accounting would the faced That volatility in which our reasons, opinion basically, underlying a two a interest with a we're in a wanted our poor current financial because for we reflecting changing of value We and and under minimize method the on that

market relative based has interest CECL to less rates. volatility So

was one that So consideration.

borrow able and going with comply our amount to credit the so Additionally, that going ability covenants to revolving be we've modified to the is to we're facilities, our unaffected. be

with And thing do queue, to from reality. said, able We expect going financing. in same be shareholders the CECL able final the to we're believe diverges explain how Term be our economic ABS to we to to is, as the we then

thought really that So was the process.

Moshe Orenbuch

I would you've So if in I that means you're share I'd us guess, that – can us look mean, your CECL? work, under what parallel. you done like with the Could assume results running what probably share with results.

Douglas Busk

provide of quantify We're impact of to this At disclosure in not expect CECL. to QX year. point, prepared incremental the we that

Moshe Orenbuch

and that you February. securitization Got be what we we mean, of that restructure – you I noted hadn't you'll you the funding a from expect in that standpoint? that the in mentioned future should kind to a since them, is able done – Was back

Douglas Busk

a didn't mean, I quarter this CECL. securitization with anything really reason we the doesn't do have do to

already securitization in note have a year. done issuance We this a senior

securitizations. perspective. CECL the So accomplished that a on quite capital a of think from to the adoption material a the structure impact have We raising is we've don't going bit of

Moshe Orenbuch

was what's the I kind subpoena there anything is guess, lastly a mean months a commitments just footnote then can mention York add State ago, AG there? and half issued, Okay that does of you New and to two what I in

Douglas Busk

disclosed Nothing really, what's queue. other the than in

Moshe Orenbuch

you. thank Okay,

Operator

Thank you.

Scharf from David question next of Securities. comes JMP Our

Your line is open.

David Scharf

taking for my as questions Hi, good well. afternoon. Thanks

certainly the to figured in times you're funding two thought well I that and times? under and high, sort are this levering other comparatively just undervalued, there rates we've equity, the two focusing subprime to at given of seeing about comparison could been actually of debt some certainly is quite more recently First topical. it but lenders, but lenders any been your as range every reduced have question them, to costs, – pullback and and Obviously, more becomes leverage question, public current ROEs on up Doug, in asking you're expand to no beyond pressure auto quarter,

Douglas Busk

the so one. and half two been two or five has I mean and a over years between last range the to

the time. low end the at the mean, want unavailable business reason a to do I an to we leverage period with range. the the amount for operate we're that results is and So of us are originate markets capital historical reasonable we be extended able to of that of strong we produce

the So leverage employing do. that's that we the rationale behind

David Scharf

is we should seeing average finance your that further. with when do QX. a an I calculation, lead new take anything calculation, up originations on the to charges XX.X, as certainly a up average goes would beginning changed the months? simple average, into IRR you're business directionally, into a One and materially that over hasn't is yield, ending lever it question come assume in so just to losses quarter lot fair pricing balances level, same just three average which think interpret that we materially Obviously, the as not well. at Okay, you the fundamentals pricing for high that different divided just as on the But last forecasted I

Douglas Busk

from nothing's changed Yeah, perspective. pricing a

David Scharf

not to you got got Okay, Moshe. then following last question. up is be And it. question, on meant This a

that dropped the an like be New a that a just DFS X Mississippi in come other actions that. Looks the to before activity and there's that. pure states couple is there of a before just pure days, York of New may four suite. just to may were another there State within surface? XX just investigation the coincidence. decided the it acceleration In State CID subpoenas there two disclosure that days actually is their maybe or pursue sense CFPB York May weeks had think coincidence I

Douglas Busk

insight don't get things have No, started. we when those any why and into

been just into that's yeah, played normally that? So it's [ph] coincidence or

David Scharf

alright, Understood, thank you.

Operator

you. Thank

question Hugh of from comes next Our Miller Buckingham.

open. Your line is

Hugh Miller

thanks Hi, for questions. good afternoon, taking my

sensitivity were volume year-over-year. per being dealer kind being dealers, about just kind a you're increasing of What's maybe more and to giving to of bit the business. taking at bit little business? rates more of feedback rates X% at from the to advanced guys loan what I an their like was a a around obviously, incentive more – and do So the do may do you they look maybe see advanced down hearing just that Seems

Douglas Busk

come would in grow Yeah, base. the it's I one don't quarter dealer, the dealer The think where able we're dealers change from We've before period on get volume it's enough we it's positive vibe right we The were much an that But dealer, pricing. for for per active to tough the had for down per insight us. a now. individual in back they dealer's where those notice. not periods and of was big

some dealer per So as can long continue to point do that out. level will as we volume at

Hugh Miller

a is And I know there hiring you have guys yet strategy? some activity.

drum with to not Just is the that is dealers more much and the as that business kind try or just of of to up sales force incentivize – focus? a

Douglas Busk

expanded have They to in are the business of We've of the there. their them Many lots force sales having markets. grow incentive success.

quarter. We are the flat for

roughly the I markets do the to much quarter, anything So and for we not half had, incentives. effect don't expect, And net sales with but as half you the the the growth markets was opposite. force were it doing growing think were has might

Hugh Miller

for kind Thank about we which the the that trending it at that participation the and I in relative gross But relative helpful. of think offer then guess? that ratio that's a should think credit we of on towards protection. been the How we about losses to that dealer some And a is has to we the how threshold trend, lower. just mix we a purchase relationship it, should Got portfolio, or bond allowance there shift you. there that loans and track at point, as that as context minimum of don't bit look seeing consider on the loans, allowance should some more

Brett Roberts

about have the think the that I would don't focus it you worry and it, ratios to about on results think The allowance up adjusted we or others way and went this recommend guess then quarter. to provision way the is about the why we

simplify really way in the what's focus on financials You a adjusted can to – results important.

Hugh Miller

trend talk given dipping XX% how buyback kind okay. the And you, me, as just how just the then think and – for threshold. the issuing purchase putting Can ROE in work stock you about maybe loans yields consuming we the in about Got of your below think bit last to just capital of loans you a relative strong or more about is? to purchase maybe

Douglas Busk

the the where happy we we loans dealers. or the I I risk think generally return can we portfolio program web. said, our times, as position – Having we're way And of the in shares with have more the that prefer capital the that, to we of interests. in said portfolio program the because on alignment we've mean, invest a it many mean, that

investing capital than think loans purchase our in happy web buybacks. at or of is So better returns use we a

Hugh Miller

Okay, thank you.

Operator

you. Thank

question next from Our BTIG. Bologna comes of Giuliano

line open. Your is

Giuliano Bologna

loans Good average seems the on on on increase back for of guess loan trying purchase questions. size the looks out like some the the of purchase the there to driving? out Just term there? in the change the what that high driver teens as my afternoon. kind to Thanks and just higher into be taking quarter figure that to trying might sequentially. Is be some numbers I it figure the may as program of any significantly far there

Brett Roberts

term loan. between It's usually and correlation a sizable

in mix. written writing the probably mix We're we that's haven't case, we in We're did So period. change any than not writing before. just the that just a different the loans prior

Giuliano Bologna

the because And it the that is you increase a purchase – of the you the sense more versus may duration extended side any notice on it months few on or so if explain program. dealer purchase alongside the if do duration

Douglas Busk

material difference. think I been there's don't a

Giuliano Bologna

that. Thank sense. very that much. Okay, appreciate makes I you

Operator

Instructions] comes from Dominick [Operator you. Gabriele of Thank Oppenheimer. next Our question

is line open. Your

Dominick Gabriele

When you growth unit walk about movement through Hi, the loan we everybody the just again, your there, loan and how year-over-year and receivables? gross the all can dealer – thanks translate active think gross us receivables volume a average the to lot. Thanks. eventually just

Brett Roberts

there's growth rate grow between the other. But one at period the long Over your and the big of receivable lag a as will growth. origination same time obviously a

two flat growth it quarter So perspective. this from will growth we decelerate receivable point. the we from loan until next unit a growth dollar some a your years, that perspective, had that consistent reaches is over were If

and growth sheet would we slower, expect origination this prior balance because balance growing quarter on last growth the the – we're period's quarter, sheet and was So the growth origination based decelerate. is

Dominick Gabriele

something little we from then a And when last at think expense and about it's elevated off quarters. or we've last seen this a in Is looking expense, or what going on it may about of we've there on just bit should the a G&A we what you. the higher think seen one is in seem in something picky. forward I'm there few quarters a going was rate just run the elevated few there? Thank G&A the kind

Brett Roberts

release I future level – for make impossible disclosed reasons elevated to be to in that a mean, the going XX-Q. press for in tell level at But will G&A of I I'm to as what the think and not prediction it's we expense the the periods.

Dominick Gabriele

seen two than you your initial dealer And then vintages great. on vintages collections expectations Okay, what particular? for why and XXXX, the purchase better about risen for 'XX in have estimate. the and have those Can both talk collections quarter come loans just in you're actually in seeing your you this

Brett Roberts

at if pretty accurate I period. it time you long a XX year look have the been of over over forecasts a period think

years got roughly pessimistic. where we've you Now, even an results, between we've been we've years, been optimistic split forecast and published

favorable I a variance period. and there's unfavorable, results few of more think a to but period be we going got from

variance, This the small the at dollar and if look best forecast in the total, quarter, is the of quarter on during million pretty number the change focus in amount $XX the number. you

think fair forecast this was draw I stable is two period. conclusion So the pretty a

Dominick Gabriele

about And particular volumes I volumes it. dollar then the is unit was talk that's a can – more what Okay, little just unit paid the your driving may be this before, think got asked what helping in talk can in detail? slightly about you just over per you price

Brett Roberts

thing advanced to the at of the the amount amount paid origination? dollar or the mean You dealer

Dominick Gabriele

Yeah, you thank exactly,

Brett Roberts

we're issue, any haven't quarter. mix saw a doing so It's before. this we not we a last done quarter just different just mix Again, loans than

Dominick Gabriele

I guys. much, so Thanks great. it. appreciate really Okay,

Operator

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

Douglas Busk

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

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

Operator

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

Credit Acceptance (CACC) 30 Jul 192019 Q2 Earnings call transcript