Credit Acceptance (CACC) 27 May 202020 Q1 Earnings call transcript

Company Profile

Participants

Douglas Busk	Senior Vice President and Treasurer
Brett Roberts	Chief Executive Officer
Kenneth Booth	Chief Financial Officer
Moshe Orenbuch	Credit Suisse AG
John Rowan	Janney Montgomery Scott, LLC
Vincent Caintic	Stephens Inc.
Randall Heck	Goodnow Investment Group LLC
John Hecht	Jefferies LLC
Arjun Tuteja	Jarislowsky, Fraser Limited
Sanjay Sen	BloombergSen Inc.
Robert Wildhack	Autonomous Research LLP
Benjamin Weinger	3-Sigma Value Investment Management, LLC
Giuliano Bologna	BTIG, LLC
Thomas Shen	GoldenTree Asset Management LP
David Scharf	JMP Securities LLC
Harold Levy	MCA Realty Inc.
Mark Hammond	Bank of America Merrill Lynch

Call transcript

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Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation First Quarter 2020 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.

Douglas Busk

Thank you. to Acceptance welcome XXXX first and call. earnings afternoon, the Corporation 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 ir.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

question Orenbuch [Operator comes from Instructions] with Our first Moshe Credit Suisse.

now is open. line Your

Moshe Orenbuch

Great. Can hear me you okay?

Douglas Busk

can. We

Moshe Orenbuch

your provisioning looking Doug. those think about I guess numbers, taking I'm of subsequent as new practices Page we on for we you've delinquency in quarters? and I should Thanks, here, XX got Okay. XX-Q. starters, account of there's bunch your guess, disclosure a into be the how And

Kenneth Booth

our future forecasted is terms quality flows. and the do cash to flows think credit understanding in We to assessing to useful look that collection to I is think rate. in changes mean, our information of the relative understanding I relative thing cash and our future provisioning forecasted most at best

Moshe Orenbuch

Right.

in only helpful that's loan that. really loss the not forecasting factor right. involved It's not certainly in that it's Although provision,

Brett Roberts

still what investment are are what business, they when focused provision an back to that to some results the at shareholders shareholders to go look any do have we and and be really in need provision, we on make trying the there's that's should they're adjusted decision no if at looking think adjusted I and results. run the The homework.

Moshe Orenbuch

it. Got

is Okay. in of there? cash about borrowers respect I on happens assumed when the going And Can of terms of in about other flows, your that in process? what's by about place? you Like, what should that about receiving your how X% you $XXX what with are mean, no words, the you've of about part your forecasted neighborhood currently What talked expectations reducing kind who think talk longer assumed million. you've to stimulus? In we

Brett Roberts

Right.

happened ongoing subjective in to remainder, the there's so impact a made a change about that million of COVID adjustment net model responding $XXX – on consider of far what flow QX. about So in to there's really in the as $XX we described the is two to which the the just cash then quarter. million, There's top the is pandemic. components release, And mechanical the forecasting

If it adjust happened best the numbers probably to so and falls that's actually the for the release other place change, make tables to we collections the the in what's calendar is more you collections at on calendar for the year-over-year total far. way release, some end the comparable. two there. we the One and really provided look There's look to front just one

April, March, the good. May April see little has what the as table, If particularly pretty far and bit of a came two last you falloff pretty in front would at the we second in in been sharp last saw March, of end so collections look you in weeks half back

Moshe Orenbuch

portfolio? we as I the How right? should as size absolute percentage about an do that think Not we adjust assume a loans, amount? that that of the of for

Brett Roberts

the In of change? forecast terms

Moshe Orenbuch

change collected, it was XXXX, a that's and dollars just in to That's what of No. right? it in rate in your the XXXX right? That's expectations. is Year-over-year, not just what relative

Brett Roberts

Yes.

and simple million, in assumption look to pandemic, at and Just no change we in it. that a early collections we're top way adjustment be caused the change of see would stages a a subjective collections the of impact forecast. in there didn't about They if March so we the then part did we be expect reasonable will March first of see the April, talked A change probably adjustment in would then a an made the on that. ongoing forecast in collections $XX Since a because you necessary. be

Moshe Orenbuch

I – total, but helped about that guess has X.X% question basically on those I that's talk your of the asked the main at Like, you about out does situation. point deteriorate that's guess I'll – I in assume end by doesn't I correctly the that can before – mean, is I'm more front asking? Right. ask numbers. that then as and the collected X%, X.X% out in current you point does that that all? what write-down here helped, you

Brett Roberts

that $XX The continuing impact is future. the on so far. there what The will based be No. $XXX happened in assumes million million some

Moshe Orenbuch

Like, how you that forecast? you came talk about much? can And how about

Brett Roberts

you're get to I really at components. looking don't complex want into think mean, highly the a I situation. I

say it's degree would $XXX the put get have of vehicle shot We'll say There's pandemic of we variables, any release given We the obviously how of this that do We how you hard forth. to number number a transpires, it. estimate. took best around. have arms lot values think how just that variables to the The your great to a transpires, million in in our try economy confidence best respond. it's see at to subjective. our is I

Moshe Orenbuch

with were now customers is your the to would borrower Got essentially? last the it. the receiving are of who understanding – single are you guess, is mean, who Or and unemployment for get were. they not if are being people they paid was today, checks underwrite what I people me, employment? underwriting I the unemployment took I some you they government by hoping in customers stimulus question checks? check, checks, that but are – So

Brett Roberts

The loan of vast time the is majority made. the are at employed borrowers the

Moshe Orenbuch

Thanks. Okay.

Operator

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

Your line is now open.

John Rowan

Good afternoon, guys.

distancing understand So repossessions, just the is reduction want Or forbearance? a various restrictions? in of to function with is state of and a function that that social

Brett Roberts

on and restrictions few obviously states that but have was restrictions, made early following a the crisis. a we There's that that repossessions those all in stop to decision we're

John Rowan

Okay.

the out be, that So consumers? of the guys majority vast to would giving actually, you forbearance

Brett Roberts

a repossess. not we decision to made Well

John Rowan

still covenant it covenant? positive on a might income net have some you net Do six-month at been Okay. income point? have – revolver I the believe

Kenneth Booth

that covenant. have Yes. We still

John Rowan

Okay.

mean covenant, to next quarter post correct? need So than break that to that the earnings quarter would larger not an or that equal you would loss this net to

Kenneth Booth

Yes.

to make You first for to items that idea But adjustments some right. there. need the loss counted aren't the quarter is yes,

income You'd certain to loss that for QX the have have in than net was for items in net greater adjusted adjusted certain items. QX

John Rowans

Okay.

counting at are make far the legal seems as sure I'm new like it three XX-Q, It Just correctly. as I issues want disclosures. there just to looking

those the and just you've like from Maryland. reading gone issues New it I updating? something in CID also subpoena, Or older then a seems back that that Am forth CFPB you’re York are new with and correct?

Brett Roberts

issues. newer are CFPB the and Maryland Certainly,

I quarter. New prior this think York, existed to

John Rowans

at Moody's some heard have when and just XX? of loss forecasts. expense want of event they lastly, said, using loss we're Okay. and to for end treating people we've And are mean, X% had XX provision the forecast the A economic Or a they issue here then March the in your expectations I a that in quarter? are from allowance, their also in that your their as you were using cutoff unemployment. I estimate see, just you post lenders hard set March including quarter guys lot provision subsequent

Kenneth Booth

up until filed We're basically everything Q. the released we including and we know

John Rowans

Okay. Thank right. All you.

Operator

you. our question Caintic Thank Stephens. from next comes And Vincent with

now is line Your open.

Vincent Caintic

Hey. my for taking questions. Thanks. and afternoon Good thanks

lot funding issues that coming of with that think Any to and from gotten discussion investors I'm and is funding. covenants I some a think could just securitizations. the I've wondering to one, first there? there something there? I drive if triggers some about concerns question because about your there's your thoughts there's collections So could just about Any maybe when if a the you that any talk forecasted down been of some

Kenneth Booth

We have securitization. sets of two One events. our in early covenants relates amortization to

to amortization period for cease revolve would XX months securitizations amortization and after our period revolving that So that they the are early. There cause amortize. commence to which events early

So level set termination when termination is of be other The at the early whole the set then default. higher considerations. the deal that's event. basically one than would amortization events are And in a events

are based at that. of this accumulated if one early would occur our to for that's early At of were less on as So it degradation three to collections, most The words, than in as an cease and termination cash consecutive have delivered XX% actual which stream point, XX% than collections the flow of on occur a months. all securitizations. to a to closing, well more event amortization would other cumulative forecasted currently period cushion if is less cumulative a we've revolving event nice for relevant cumulative cause amortization

duration future we an of event in severity pandemic that the obviously any early depending could avoiding amortization don't the anticipate near-term difficulties and change crisis. the So on

Vincent Caintic

the that XX% is to the – rate that forecasting impressive. was comparable is X.X%, that the against Is so That's collection mentioned pretty XX% on which helpful. the Okay. event? And comp think only I very your down you amortization early best

Kenneth Booth

consider both the but same I timing. the It's directionally mean and exact. amount to got it's you way, not goes

Vincent Caintic

That's very you. helpful. Thank Okay.

the competitive on question Next environment.

wondering coming volumes if more spreads So environment, gotten good volumes. than Because are past. May have seem placing of quality down unit loan recession. good in in are XXXX, the if you some loans last the I dollar would this be down, quality the higher back you’re your and your correctly, understanding off were you're maybe, and I’m of was remember seeing to volume than in just that April in if

you're has trying maybe just of seeing what So bottom this that reached? to been understand maybe now the

Brett Roberts

to in you same. was flat we what XX% down February. think pandemic about April through of dealerships. down the started saw volume, I the as first our impact March plus were is in terms the quarter was

so plus. lot far part. up May, then Although first the in we're last stronger XX% the a of And part than was April

In terms we for get was better kind performed say loans of at we well. I as XXXX perform the so at knew competing in too would of the you That's of competitive what because just We the environment. loan crisis early Couple have of don't origination. had at what the a be kind think you end happened than financial of the looked XXXX, lenders quality, adversely to would loans it's reverse highly that, those of there's a adverse lot selection reasons selected. loans one for know expected, and

out, thins see opposite competition you the As impact.

performed that's the think XXXX, I why reason vintages so well. XXXX one

a this The one them out, would more second that. in borrowers market more would a is competition getting they to loan, very they're thins We They they for it's loan. value period give it. hard and that don't pay and another loan. likely the reason our be when to And realize difficult. that more know for if they get And than they competitive probably so pay for

So or not, to early out things too time whether say. two we'll just those this see play it's

Vincent Caintic

question Very Okay. then helpful. me. last for And

collections much some Does you. going forecasted that So closed. being have to about there concerns the your Thank forward? of options an impact were

Brett Roberts

I – catch what sorry, the I'm didn't question.

Vincent Caintic

Does auction material a your the your closed. collections? have collections, overall being on impact Yes, is that

Brett Roberts

actually we're a not selling auction inventory an – They're started, had that they're open. lot virtual of the at crisis now, but We right sales. the repossessing when the are auctions cars. Well, doing was

at some crisis. we’re to the of able had of we inventory So the that start liquidate the

to We aren't adding it now.

difference. isn't issue, see really you'll an it but timing a So

that see front we're their can we I we than those cars but in auction usual because release end seeing level. around. repossessing you repossessing that not numbers. proceeds When tables see You were you're collections have the the fallen we values and the other the mean before more put provided that collections, not at in crisis. we're Total auction, the of that some at those again, start issue you'll all what have they that there aren't is flip vehicles getting

will the How rebound will of to collections and actual long those one occur. to for the variables will that take extent So are? what big determine what values it that

Vincent Caintic

very helpful. Okay. That's very you Thank much.

Operator

Thank you.

Heck with Randy Our comes next from question Investment. Goodnow

Your line open. now is

Randall Heck

you. Thank

– expected most I First, in the Brett relative of collections damn terms all, and of origination. have to I want or expected probably importantly both the say would to team, was good would what also quarter have first collections, anyone pretty but

backend so May – else? for you’re were the the chart – something to first have it what Or that the that up So there cars? that May, repossessing new in mention percent is the Does X.X%. question – does the mean collections refer you backend is of now

Brett Roberts

I didn't but hear to give Randy, you… think it I to I try all heard that, enough of

Randall Heck

I they and than mean better were why are in May collections February? in January

Brett Roberts

said, That I payments. I they whether if March, May I faster able the no. in money I think and think in stimulus week possibly a of behind flow think have never assume to me would you'd than were unemployment enhanced their the said I gave in then that, make People April, happen. the to have growing received, cash to could Having and think of things. addition January be would that in collections be February, ask third to couple that people March got and people you enough benefits

you're worst So is think what's a transpired case from far right I so scenario. that far do

Randall Heck

the And do that pricing? it’s the you that flattish you – Okay. any old loosen opposite? pricing XX%. changes the January, reflected your reflect volumes, up thought in then did against February, environment Does being I May whether well that Or competitive

Brett Roberts

one, effect the get think has pricing on not we to up to increase lead it's prior discussions, that's and the open May two are really, the obviously months: the as see that this That's I don't dealers know that year-over-year an point possible. to than there certainly a were in as better out not We environment market year. but had they to going into we open our started the this said at you Prefer volumes reasons money again. back competitive stimulus release, believe because do last improved. why

Randall Heck

that balance the when of in estimated of Okay. time remaining cash Normally variance The pools, in the loan, – flow flow have – effect quarter. best negative of your cash last had estimate the in life impact was point loan. that thing from the number life negative I the the negative the the estimate you you for the for

that's correct? $XXX you be balance which of for above of over understand That's to be for portfolio. so you the million, life million, is so the normally $XX Is The And hit and the of I would that. noted. what life the the just the suggesting the the loan over portfolio going entire that

Brett Roberts

it say I'd But Yes. differently. a little bit

that's million to what $XX.X the March. model So occurred responding the in

obviously collections March. had in lower we So

Second particular, half of making March, weren't people in payments. their

model that have the their So at looks customer and missed payment. says, okay, the

So that data the I'm estimated flows going the at the historical life that of to going to look payment, that that cash looks loan. their like missed it's reduce all customer for and

the but customer because and of It to a not but difficulty out just the March, doesn't in future the uncertain March, model did doesn't look responding So know it's model happened in in what about COVID-XX. necessarily economic continued that say, payment to already well, have they're that only environment. going miss

an we ongoing we on the where pandemic. the have doesn't model, and model know effect of to go make top we have to consider in because of adjustment the that's the So

So that's what the is. $XXX million

Randall Heck

Okay.

Brett Roberts

look XXXX, a you similar series adjustments. back made of in If we

quarter I in think and quarter the of the one magnitude. XXXX, in same XXXX of one about fourth the second

made If together numbers low out the to add X%, in those we be appropriate. two turned XXXX adjustments in you the

quarter were they it, pretty be accurate. say made look the you on back will to If we one this Not accurate.

think just of in have think that's confidence too $XXX incorporated top that zero. too to future. But to we the uncertainties many to But exact of right everything – number. think million the On model bad, is the early we going the a $XX there's the lot don't I million, happen it's we certainly tell. don't it's

Randall Heck

Okay.

make of a is other competitive of to is So [indiscernible] equal, things million, going $XX not the terms cost cost It's the environment or share, essentially an here again last crisis. best a be once of call given any out being questions it's are letter [indiscernible] less, and answered. wrote be wanted not just you. more cost, that ongoing for the point history to shareholders, was, your going a that to as time? you forward, the period of in number plus lot on And $XX but of I we're anybody the then if asked will talking the crisis. the substantially as some better being it's on of Thank And beautiful

Brett Roberts

All Randy. right. Thanks,

Operator

you. Thank

Our next question comes from Jefferies. John Hecht with

line Your open. is now

John Hecht

Good Thanks afternoon. very answering guys. my for much question

flow between want doing to understand to difference yield sure want adjustment. in forward But always flows? been going GAAP that's that – provision? I just we make sure cash down now DUCs going yield a now, kind and extent I adjusted would this? expected the do effectively, you're effect, is entire So got of I've on add formula my just your of going then the to is floating to order, a affect yields to accustomed a that deploy kind because to earnings. your cash Or the make adjustments in that the you're mean, what basis, bit the to make loss But right I back of little I collections the forward the take – we've of

Kenneth Booth

Yes.

Brett Roberts

we that way the look that's mean it, at right. I

As we flow it. That's have section. adjusted reduces the we adjusted page a cash release disclosed results. at the use run second I If change the results we business, the negative we think the that the how that in of we on look yield,

I it's challenging to the to do trying to understand GAAP the think very to business, think that. try results economics you're the very, of if use I

John Hecht

upon market going you're overall to reliant you. of have helpful. like guys second much your is get on you repossession or back disclose then And And activity? repossessions? that's Okay. did And flows the cash in when for how plans Thank you are do

Brett Roberts

Yes.

how repossessions in of made any We future. terms plan to announcement we in haven't the pursue

percentage terms flows X% our X%, repossession cash is In proceeds. of of around total somewhere

John Hecht

pretty just Okay. you productivity largely center work went so collections you I to, guys collections. home distant the were from all? I And if with intact one a adjusted then to could give versus at impressive likely how call it's guys mean, I'm imagine, wondering, you and I in collections that Maybe focused commentary impacts a at large all about rapidly? some ructions of degree mean us adjustment center

Brett Roberts

business. It the We area, work to environment able team to I great Yes. transitions say, just got that every adjusting in happy Couldn't of in in people. that We really but all culture. that overall, collections area extraordinary not extremely early. great a with the a with would different pleased way. got very was very react smooth an They're the be really how went. went

John Hecht

that. Okay. I appreciate Thank you.

Operator

Thank you.

Arjun comes Jarislowsky, Our with Fraser. next question from Tuteja

is line Your now open.

Arjun Tuteja

Hey, Brett.

First about He all congratulations [indiscernible] featured on good shareholder. which Lawrence the on all, you and CEOs, getting letters your talks it write there. made shareholder of

that. on Congrats deserved. well it's think I So

Brett Roberts

Thank you.

Arjun Tuteja

And letter XXXX, your compare question letter I this you my is to around. your When earlier shareholder so this came are which more about it seems a month. out latest came cautious in time March it bit which out XXXX

talk economic in didn't decreasing things lot I and the about about out XXXX talk profit optimistic a and You last back, recession were you two you competitors letter. different pulling your think though pointed

way help you me difference in So can you the the seeing are understanding it?

Brett Roberts

challenge. I'd but innings we're of go we I'm optimistic, back know. the less very what have more don't don't or in to have if the – and is significant read prior a letter. early I I know Yes.

going be the have remember is This think results you through it very, how there's if for I'm is unfold. from I how you very something is to We I my of know early. in an And when don't you reflection optimism look it's that without came quarter, – but can room precedent. accurate certainly far cautious, through feel. that first think that So the it's I letter to

Arjun Tuteja

just going is as Would you Okay. thing, make it than unemployment But higher the up unemployment right do now? is you see up last went jump XXXX because – number as more well. say time one cautious in this

Brett Roberts

so. think I Yes,

were only out greater, crisis has that to is react over time, longer crisis played more but period to I the a of what had much time is think much the seeing. you been Not time compressed. This magnitude different. you greatly period with

it's is I yes, enough get, isn't out again, look can but I period So and don't financial warranted. as me exactly period. going say, there's feel play it's think comparable caution at you to crisis The historical like that don't close make you to like a as historical think

Arjun Tuteja

Okay. Thank you.

Operator

you. Thank

comes from Sanjay Our Bloomberg. Sen next question with

Your line is open. now

Sanjay Sen

didn't in had to I question want Guys, just that about I the housekeeping at on you questions and pricing what question And And mentioned know marketplace all Doug for know, how you and would a a you're covenants quarters to anything ago couple a Doug could in the on And adjusted you pricing think just using seeing couple you a were net talk about net But of regarding revolver here. Brett, of of there I if bit lenders you I think there. specific. income for say income. the I be your numbers. wanted interesting? then that alluded said

does Is the quarter? really they're we income your if and issues use So revolvers? net positive with therefore, going – what covenant on-site well this adjusted any to that see

Brett Roberts

ahead, Go Doug.

Douglas Busk

ahead. you No, go

Brett Roberts

There's have perspective. dealerships He I don't how period really approaching on. are Customers stimulus. their a pricing I going from where have a just of too the money early. insight closed. lot any had It's were others business a into mean, the because

So you demand. might up some have pent

competitive gradually much enough breaking that. and And have to on be you the to during latter environment color were you those information all You and don't that dealers factors give then the just point, at May. I have have April opening out this able part of

Sanjay Sen

Sure.

Douglas Busk

about our basis the Rowan John net for our not of for quarters. credit consecutive required to value to dollar covenant the are the minimum revolving income facilities. loan are borrowing on They basis two earlier, for adjusted numbers, the the Relative adjusted the the numbers used of determine asset that

So that's way not the calculated. that is covenant that

Sanjay Sen

you. Thank Got you. right. All

Operator

you. Thank

Our Autonomous Rob comes Research. next from with question Wildhack

is line now Your open.

Robert Wildhack

but to through not is but previous who downturns, not who borrowers we've and significantly different maybe ideal health find going situation have borrower on question people time have work, A or lower could reluctant reasons. for you're you to return unemployment are unemployment gone to safety level specifically. levels, work guys. the just you only this have When a Hey higher,

to the in factor this new way you're and in How collections? that totally about have going operate. industries changing environment You're when you things do forecasting they think those

Brett Roberts

Yes.

I think your in of certainly to description what's going is opinion. happen one the future

with You a more than would the opinion going have say certainty that. going to any I economy really unfold. of I it know is the to lot unfold. I is how how health crisis don't on aspect don't this even know

pick So scenario I say, think of a difficult scenario. do what it's very specific to think and that you

precise early say, at You're at it all got situations the our evolves, as first this to this how will that It's on as to much say, just get out. to I over just the in is going everyone of possible it's the where of would crisis. But And more back a the figured results be we like we'll one We say see impact point. impact. too this impact time. period just we're to that where It's unfolds quarter forecast to the number, and as have and is not here's look those point. see this think able this

Robert Wildhack

made qualitatively in adjustments translate the your any in give the way. base can and Okay. we more in on Maybe economy can today, the quantitatively, to you've try to Is different and to how your us color a on can there that thing connect you what you're collections? same borrowing hit seeing

Brett Roberts

different Yes. didn't follow. I way. ask have a quite to that I

Robert Wildhack

up Okay. can Thanks. offline. We call

Operator

Thank you.

X-Sigma next Our Benjamin comes question Weinger Value. with from

Your line open. now is

Benjamin Weinger

Directors And question requirements audit of years. what the Glenda Hi. Prescott the is are Brett, your CEO, four see which since XX it's of as a of I I'm looking of guys you on and your company, affiliated over Partners, two with guess is for and investor and specifically largest standing comprised NASDAQ-listed has independence website at committee? the an XXXX. Board members. your the for my for longest with been General I Directors Board

Brett Roberts

that look website. to off up know the NASDAQ have what that I'm head. don't of we You'd that on the I sure comply. my top is

Benjamin Weinger

else that the – you here requirements sure are do can comply. independence's? what You're line How for the confirm on you have about anyone who

Brett Roberts

No, call that's not. your I lawyer. mean,

Benjamin Weinger

your Is Nobody on there? lawyer knows.

Brett Roberts

opinion. comply. sure mean a asked up. go You it me we look legal I I'm

Benjamin Weinger

Thanks. Okay. all I That's have.

Operator

Thank you.

Our next Bologna question with Giuliano BTIG. comes from

line now open. is Your

Giuliano Bologna

Good some tests things I think thanks get is I afternoon, off, perspective guess, of starting that and are interesting would in questions. on. other indentures What to bond my one your for be your on the taking the a fixed charge more really basis EBITDA cumulative has on with that's metric coverage on basis. But ratio, back a measured looking basis. impacted is XX-month so really a it an which GAAP

Is So if XXXX would you debt. around any you you on similar navigate kind saw and another revision it? ability way there that, how which think would trigger scenario, take probably covenant any your to to of the restrict could dramatically to about that

Brett Roberts

our to notes? senior referring Are you

Giuliano Bologna

That's correct, yes.

Brett Roberts

the notes the the accounting was of effect based in both senior in are the time of them. one at that the first – well for mean covenants for I Yes. on issuance

are GAAP there is the operative last we So operating that the year. GAAP under

Giuliano Bologna

and you you that in one the is that Have have bit And into you certain a point? thing the ability over to securitization have perspective of look little guess makes doing this at sense. the only the more at effectively transactions, That collateralize any of started that transactions certain transactions when we push other of assets do you had transactions. you mentioned on, I levers

Brett Roberts

We've a done basis. that limited on

Giuliano Bologna

another guess sense. different of a kind slightly point. makes I Then That different – on

referring collection your that to Moshe was You rates. table that around have

things delinquent in in of average balance your XX% And this if is last I levelizes those balance, year of XX% is, kind of reperform directly it unemployment But your in get second foot it mind in that's large in kind have loan an versus of that you think to average temporarily but of timeframe. of very in May trying of checks, of is One and number that get most of impact maybe strong quarter the up a for think to as first up of size delayed the I the the collections if of net, more with of or you in your of And terms loan the the bit that more and of that catch-up may then it, – first an quarter came to originations perspective a so related doesn't run the to was look little then lot looks Do is point, more it XX% payments or checks. I like was down to seem we deferred some I'm you a numbers, up on a guess, was adjustment had if it assuming the credit not kind year. that and like, X.X% there, and to then the of about different that had borrowers at lot better so stimulus if of April impact XX% with it kind that terms looks kind I'm more performance? of ability getting a – it unemployment in ballpark.

Brett Roberts

Yes, time. at the mean think it's both had we very I I of same say. difficult to occurring those

had You their payments. had that customers missed

saw of and and we stimulus the collections the April a as of from flow last all cash in additional potentially rebound factors, enhanced May. result in the have And half unemployment. You in those

Giuliano Bologna

of want main year, versus if how in and alone model, reason your makes you is impacts XX% up And sense. fixed interested out could forward? just your originations But you'd and continue would any thing there and kind think your is saying, that least, get other that my some only is That any the charges how of last not that impair significantly Then of you closer perspective on I about to sort of the types why you those allowances manage I'd originations, in of be asked obviously, about and going thinking you earning consent where stream to the at the – kind go just to numbers. covenant governance. do try change

Brett Roberts

at accounting don't economics looking run the to we We Yes, dictate business. how want business. the want the run have business we to the the of

a issue in our lenders prudent to potentially would facilities the prefer to cause revolving the with the and So if encounter the right then covenant business credit way do. have right explaining that's we the running way why to conversation us our thing run a business

Giuliano Bologna

sense. that. makes I questions. That's appreciate answering That you thank for helpful. And very my

Operator

Thank you.

Thomas GoldenTree. Our comes from with next question Shen

open. now is line Your

Thomas Shen

Hi.

In kinds looking guess that what for terms you're that? feel of going of before the with going things you're comfortable I to are repossessions, forward

Douglas Busk

I restrictions. certainly, have thing in Well, mean, do one the states several that is

to want sure that are obviously make lifted. those restrictions You

repossessing. don't are employed a no everywhere. and that the is we'll subjective one make specific I start internally and to the right for works for rest formula we'll make decision that at try areas judgment I the you right open think is which and and ourselves of to both in to would the degree is economy call ought people look a tell for And decision when scientific you that approach borrowers. precisely There's think that

Thomas Shen

And would you state-by-state? go

Brett Roberts

have it's than done different much think in really a of what that's mean historically. not we a really customer-by-customer – – decision. not I it's I lot ways

unable that for comes with them trying given those make would decision customer you to pay the the to specific can us. the comes just case for orders. follow and we state-by-state the a have if best at certain work certainly time, in You're in an is there to orders there's in a for if to point state, vehicle. arrangement you the where the customer The out If the repossess. customer vehicle point That's always obviously a in keeps

Thomas Shen

you. Thank it. Got

Operator

you. Thank

with next from David question Securities. Our comes JMP Scharf

now Your line is open.

David Scharf

been Most Brett, do different But you my a you're feedback questions. little do alternative to were financing platform, maybe kind your for a get about, you increase. lack rate? it on about included and Obviously, environment was fewer to dealers get some kind maybe any May I'm Hi. but take conclusions you mentioned there's finding wondering sense competitive too up of or wondering, the easing dealers your in a whether easing? had demand was early but maybe volumes on taking you make the or that a May up, volumes. not comments Obviously I likely the competition in Good the from pent of for that of provide of any options be origination term, color whether afternoon there and a answered. if could better equivalent thanks something have

Brett Roberts

sense, the data look an reluctant until on you have that Yes. but can mean, you at. anecdotal comment you I have to competitive environment

easier stimulus competitive last. the a long volumes. May, up concluded May pent competitive know the have that guess, it's you But try impacted have you environment if dealerships just demand, wouldn't have reopening, even had have potentially environment. I You to you in still gotten each of you you money, and to change in early how too how the say, would much

good. I'm So sure. lot It do a would not of you

David Scharf

we're Got health guess, Is share a the dealers of most Or I early similar the guess attrition on, Are base it roughly independents, indicators. on? all hanging through dealer for early And of obviously grasping I the it's there aware two-thirds the information overall particularly any still you of the crisis? just thus among of it. to anecdotal Yes, is that kind are independent network, follow-up, topic. independents. are any and maybe far

Brett Roberts

to I it's think like a of too early stress every in. under businesses of I'm still that should or most I we're they're that environment business say Yes, there. the say, sure lot because like

David Scharf

Got it.

very I have. you Thank all Okay. That's much.

Operator

you. Thank

next comes Vincent Stephens. Our with Caintic from question

open. Your is line now

Vincent Caintic

follow-up. the Two for thanks Hey, questions.

six-month that income the the takeouts Could income let or know you come net are exclusions for covenant. are from to us covenant? that First, what what to net

Kenneth Booth

or mean, be one gains losses. would basically biggest I the non-recurring

it's at real day, material. There's this number that you've less not pretax adjustments on of are the those a million other got but based a quarter. current significant, $X the quarter’s couple aren't end So things results, the

Vincent Caintic

helpful. That's Okay.

is volumes volatile. at understand and of and forecasts more even a disclosures I you collections collections that difficult your getting When March it's things May, the think were CECL But I forecast the about March are payment Second better. lot and deteriorating. based follow-up, makes so with end gave

wondering numbers the currently better being you meaning using that that direction a seeing basis, we're CECL direction? collections data a the than of we're the So going your maybe in some May, actually with and from release. forecasted I'm if forecasting then in go positive so these could other see And X.X% hit you're

Kenneth Booth

a that there. lot tell out it's I of mean, just I to variables conceivably, think early too again –

to May that Brett are it But part just have so So We'll goes. have out. of early. there to latter how there, of lot see said, out how the really a Certainly April been results I plays in as think in see and variables it's encouraging. have we'll just

Vincent Caintic

Okay. Understood. much. Thanks very

Operator

Thank you.

from comes question with Realty. MCA Harold next Our Levy

now Your line is open.

Harold Levy

guys. just for one the the Hi on time. question so Thanks financials. I have much

statement, $XXX to pretty balance the operating from $XX looks like and the flow from same cash is equivalents looking approximately. been cash time net equivalent But Looking cash to last million year. much have sheet, down it activities at significantly at million drawn cash

significant the I'm trying decrease tie two and in the cash what's those things just So out to caused quarter.

Kenneth Booth

as the primary reflective liquidity. of tended carry, think you to our less over long with current of more rely how we to the our facilities the run try source revolving because time. quarter, over a we've I as look to is if of cash business period time more on of credit unrestricted opposed We and operate negative

year. just the equivalents we’re some part amount sitting of unusually in the think and year I So occurred to last is due latter activities high cash that last financing cash in on

Harold Levy

incorrectly, have the really Got it. then the equivalents sense. down this And I'm gone impacted, quarter. that's That if cash fine. but much isn't statement, But cash reading the so flow net makes cash on the in

one something does that just with missing So there? how another? I Or am tie

Kenneth Booth

question. guess, I really I the don't follow

Harold Levy

pretty Okay. the quarter large guys last higher. time be same the to or is net much – negative would a But it on just adjustment. for Obviously, cash great. deployment, utilized with what like cash same Yes. number, lot looks slightly of but you you slightly the the basis which increased in with the unadjusted a an It adjustment year, it's

understand effectively, I'm so been struggling increased has but cash used, sure, just how much slightly. net to utilized I'm the cash So has

Kenneth Booth

Well, a unusual $XXX and unusual repaid during long-term there debt. – couple transaction we that were about the quarter one occurred the million that's in

quarter. $XXX We also about during the bought stock million of back

Harold Levy

much. That's Okay. so all. Thank you

Operator

Thank you.

comes question of from with next Mark Our America. Bank Hammond

is open. Your line now

Mark Hammond

of cause for quarter? that of Doug. originations. Thanks, towards I noticed and Brett, just increase there was was mix Ken the in purchase rather the the was share the first an what I wondering more

Kenneth Booth

larger No specific purchase reason. the during especially the share of tend that prefer franchise to consumer dealers, It just got the a franchise traffic groups could be dealers larger program. pandemic. Franchise the little

So reason, certain. absolutely know don't that, the perhaps, although, that maybe we

Mark Hammond

I you've know both with high-yield bonds am lastly, of ask since to them if Yes. That then mentioned stock have considered That's you some makes sense. repurchasing some repurchases. what XX I And analyst, around And happened. high-yield ever I yesterday? of as a

Kenneth Booth

think of I and but secondarily primary new the and focus never, investing loans shareholder's is stock back use say that's Never really. Not buying think capital. in best our we

Mark Hammond

the Thanks appreciate I Yes, guys. answer.

Operator

with next [Operator Instructions] from comes Our John question Janney. Rowan

line now Your is open.

John Rowan

Hey guys. Thanks for follow-up. the

you things amortization some you Doug. close collateral facilities, Why more in early an a said, contribute connecting basis Just on of couple event. limited to on as a you’re said to – triggering if

is the that a collection threshold? as for cure XX% far know, in shortfall I As that

Douglas Busk

Well, violate you early couldn't amortization test. the

forecast cumulative actual event. were So XX% if lead early than that less cumulative of amortization collections would an to

collateral. contributing that additional You by couldn't cure

breaching in You'd collateral avoid trigger first to that securitizations excess have the basically contribute proactively to to place.

John Rowan

collateral why facilities the of said, that you quarter? a excess is contributed during you to, So as limited number

Douglas Busk

outstanding more forecast. versus time shorter being a securitizations. been Yes, reason issued of is less build have if time for we The the and up contributed to had to the cushion they've recently a period cumulative

John Rowan

out your for liquidity I continue collections, breach facilities? does to Okay. does we then of how the the you to a create ABS have a in event fact liquidity that additional on you for if the in covenant I on losing revisions back need continue collateral potential to revolver end of to you mean, build lean mean, if you're if negative revolver, advance guys? that and will forecasted with

Douglas Busk

I mean, $X and have current time. the we over billion collateral at unused unencumbered

better terms at performing very very, of point. in expected securitizations excess this All our are a in than position strong we're So collateral.

at So with the aren't happy near-term this concern. performance there. point, Very securitizations a the

minimum have As net with maybe if it conversation concern, a is, we'll a it. that you income suggested the and banks about potentially

John Rowan

Okay. Thank you.

Operator

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

Douglas Busk

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

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

Operator

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

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