CACC - Earnings call transcript Q2 2020 | Credit Acceptance Corporation

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Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation Second 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's Chief Treasury Officer, Doug Busk.

Doug Busk

Thank you. to Acceptance welcome XXXX second 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 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

Ken At release company. the this we at filings preventing time, our are same take at Roberts, Financial the Booth, SEC your the that comply submitted the our G, mention We Chief I Regulation with with practice, any understand GAAP will due released Brett that SEC's I measures. which release, to that measures is Chief news results Additionally, earnings. financial time to Its delayed how reconcile provides SEC tables difficulties to Officer, we XX-Q available. not to accepting Consistent should Officer; questions. Executive technical XX-Q yet non-GAAP it the from past is showing and to the our section our refer please of from

Operator

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

open. is Your line

Moshe Orenbuch

look today, into same, could cash kind as you this level? given that a could when you take about be it flow the you that of account as how stimulus what's account thanks. talk at did different did happen you be how made ends guess, little to forward? into tomorrow, could renewed take Great, assumptions likely bit quarter, I renewed, Like you stands the

Doug Busk

you a then a forecast that what was And remember, to to in model would model the know to we're period we be first since So economic that difficult forecasting first there's we an loan if in reacting million that $XXX unfavorable write-down for change the happened the period pandemic quarter. $XX quarter, additional in had a reflected or what doesn't performance disruption, forecasting a – just that the our roughly expected we account from took million perspective. a of

and mechanical could the This kind think $XXX of you largely million as subjective. didn't so quarter, $XX – million, make of a we result and was

and gave book This result, any additional some what didn't the We adjustment. the at. you make favorable forecasting seeing let to. model quarter, can you fit-out trends there. numbers subjective look just We we collection we Generally that's

Moshe Orenbuch

Right, inputs? I what was Doug. the forecasting are what look I at the are mean, guess just But asking – mean, inputs? I the model at I looks books it it – – Does

Doug Busk

looks place cash lines. at forecast Well, many attributes a empirical approach, then it many for on based a model's It's based the future historical many, scorecard forecasting of where in and similar of the loan performance years. been flows

origination either It to they doesn't it when in changed. there. have – the like that stimulus But at we are at hasn't going degree another there, It doesn't similar of based throughout just pass on they going unemployment so variables macro capture historical process. what And performance looks in have part servicing or are the that to loans factors to bill.

Moshe Orenbuch

I just make want to this clear.

that do will or borrower, that the You pay continue the I mean, likelihood take account how said borrower them? rates to likelihood unemployment – doesn't into assess it you that, at that

Doug Busk

it's think what I said. I just

Brett Roberts

loans of performance characteristics. the on based it's similar and Look, with attributes

Moshe Orenbuch

do the to nothing the with state has current of it economy? But

Brett Roberts

Correct. correct That's

Doug Busk

The account. subjective I intended as into described, is that take to adjustment,

Moshe Orenbuch

back tick reversed you part that Now into right? you And adjustment, would subjective of Right. income? that

Doug Busk

not sure I'm if No, you're listening.

didn't we adjustment So make any quarter. additional second in subjective the

Moshe Orenbuch

Right. remaining losses the of release. of I reversal front There press of And in that's was credit was a to. provision I'm page of $XX.X quarter, the the referring looking at what million

Doug Busk

the Yes, adjustment. so that's CECL

the So the we're just here. talking about net change cash flows in

Moshe Orenbuch

Got it.

Okay. I see.

And was million number, that so how – and $XX.X that computed?

Ken Booth

me value $XX.X flows. value present the future of It's in the cash I the the reduce – mean differently. change net amount, the net expected future required was to amount It's the loan the flows. to cash of the million let expected present is say of it it expense the asset

was holdback. wasn't case, dealer less collections In a it this It So reversal. an expense.

Operator

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

open. is line Your

John Rowan

to any Good this contribute ABS have to Well, facilities afternoon, collateral? did the of cash, any quarter? any cash Or you not guys.

Doug Busk

No.

John Rowan

quarter duration? was in borrowers of your the there that the were XX then to in shift or discernible profile And given of win borrower – this the any credit out months another up and credit month loans you

Doug Busk

No.

John Rowan

why when, – Okay. further in obviously, is couple pandemic? a uneven me. least year for little next the given that's outlook you. Thank I And the mean, the for certainly duration go next out at it

Brett Roberts

ahead. Go

Doug. Sorry,

Doug Busk

No, Brett. ahead, go

Brett Roberts

change the program during our quarter. didn't We

the So and term the desired that their we what loan offer it's terms. results. a along of customer the that variety the with matches selects dealer vehicle And loan

don't we the control necessarily the loan So term. – average

John Rowan

very much. you Thank Okay.

Operator

Giuliano from is question Bologna BTIG. next from The Instructions] [Operator

is line open. Your

Giuliano Bologna

back the of just model into To question little a dig kind bit.

forecast things it looks use And to a One you using you Or I goes basis? curious an at was that model were I kind a are use there that forward is you use. kind was on that of a was perspective, little back bit different framework in of there? you from because CECL, an economic saying of the requirement and elected of about statistical curious the accounting estimates the you any

Brett Roberts

and We forecast It's more is data even the requirement. accurately, unemployment taken we've historically. model. unemployment there's found if actual model many use could to a forecasted to runs And just forecasting local to at, supposed it accuracy back, best to No, information figure doesn't for to what went you if years. how we've go and of be of see it your out And estimate. that data been didn't no work. including We've number actually we help the the just

if made But adjustment made in pretty similar if adjustment, mean it crisis. do during it accurate. actually, more to an financial it it And we've subjective be what doesn't So we magnitude. a possible, it similar the out it did treated first the accurate. will. was we in doesn't, did retrospect, to turned It We since as we'd like one this a of just very that quarter

we at stages of We're in quarter. emphasize lot don't early There's of at a should should I the probably I the you did our a around stressed think, like quarter either think last think forecast look the lot this. end I the a uncertainty that first of end an quarter or the of as we've second highered there's number. at that. of and I estimate, It's uncertainty.

Giuliano Bologna

unemployment trouble? that and the they support about customers provide to you planning business about are That the how additional actually benefits adjusting makes of sense. of for business, potential What if uncertainty you in other of unemployment your how some do the given roll-off I'd kind – different programs be thinking you is, think place to of And curious putting run your Or into things more how or nature? yes, operate are about around, stimulus? to

Brett Roberts

run business that what a We We fashion. tried It's predicting done, is we've we've it really difficult. don't the always our in like conservative expect to turn planned. always so out future know to we

continue. is the conservative approach through challenges the years over been only one lots of know, the we and we've So going the and to that's we're one

Giuliano Bologna

Thank for will I good. taking questions. sounds jump back in you queue. my That

David Scharf

Hello? Hello?

Brett Roberts

I you, can But hear anything don’t I Dave. else. hear

Doug Busk

operator. there’s like lost more one queue, we Look in the person our

second, back. Let’s comes just hope give he a

Brett Roberts

three Yes. the there’s in think queue. I

Doug Busk

be patient. Let’s

via In fact, responding the the operator is chats.

trying to he’s get So in. back

Brett Roberts

Yes.

Operator

the for delay. Apologies

Your David from JMP next question is from Securities. Scharf

Your line is open.

David Scharf

things. A One returns. mentioned perseverance past, had here, in values I a all-in on used Still your impact is, the off. kind that afternoon. you've of paid not know Good have of car material couple

at give the XX-second degree can why me high car at you Just portfolio, impact used shouldn't particularly the repossess? again, the a on – at to end given which tutorial values that net given such are June, returns Manheim just you the that of levels that least the

Doug Busk

I would about Here's how it. think

today, originate XX-month maybe XX-month it's if loan a loan. loan a or a So you

happen. to matters spectrum, XX-month the over bad good. little what, it four happens of loans them. the originate, what repossessing. go in through up market a But you points, is. the get what you get collateral, little And bit of opposite point the lucky At Some a bit going And the three be a a and good you'll you're at end the In or money, other downs, is loan you'll on get that probably ups in course you'll some less. will market that market of and will that you'll the sell day market, more

look of originations, at month's And it so typically, one you if sort evens out. just

way so changes the which the look XX, month. the XX, volatility And the period, kind if not look is way curve. the at people look nearly as we at of it Index, depreciation over it and look track much you XX-month every values at Manheim obviously we And at there's as

that cash Is other huge period the proceeds collect comes we it and aren't of their it out a from – factor making to time. the the evens repossession one that's factor. Most And is flows. tend of a payments. cash So downs then ups you and total over of customers just have portion

because us, it's are yes, the as extent. matters it So But variable. a the things important perceive mean combination out as that not and it's people it to huge be. I not car because of to a values sure, percentage flows, used evens of it critical those cash two mean, some for

David Scharf

it. No helpful. that's Got

Brett Roberts

the vehicle holdback. of the in would of amount add increases of the XX% portfolio value or decrease either is one dealer I there thing other the guess on program. the or increase I decreases

vehicle splitting on insulation us the the we're of terms prices dealer provides impact loan with the that So that for in the other some fact performance. in variation factors loan and collections

David Scharf

level smooth much. it. get was just short-term Understood. last doesn't in in Got values it Got not fluctuations wondering That's helpful. to I'm if out time the sure I'm over of question. it. like it – allows addressed yield for or accounting the it as sounds impact It kind

for trended a how peaked of deferral typical of are the in in sense much of May. maybe pretty Can terms consumer forbearance for program obviously, or some deferral throughout of accounts or give sometime that some April are of sort of the in year program? what percentage accounts percentage of sort asset deferral that's ago, forbearance in And the context maybe type and class, quarter? you trends, every a some us Just lending

Brett Roberts

Sure.

customer, that it's is in their the payments. the results we making the do, like difficulty what front having really is of the year-over-year for objective – we cash the customer The sort good So good to The and in the vehicle. It's out always keep are with – broke collections a work pandemic us. on for is, customers we reason impacting simple how our change it's disclose collections see the monthly a basis. end way to

numbers, clear to in which look tells gave of it end that's your a and through January XX. date started you, is those suffered which if in continued – through we last March So at July February. pretty dramatically the kind results started the is January, The We April, out improve and pretty May you story. in and baseline,

David Scharf

I right wise? getting close front levels, don't of I know sort of pre-pandemic And are me, they those numbers to but percentage in Okay. have

Brett Roberts

you than better your can February they're now, levels. doing that. pre-pandemic right if better look at than we're think, January, as kind And I baseline, of Well,

There's the federal I that, other it's – that's know uncertainty there's we're very we long will it going no stimulus. continue There's as And if out, side been is opposite it or been of people continue pointed even unemployment. enhanced that does. don't how think to early.

things So pretty good. early innings, look

thought in I back have if a this good be in said, we'd think I me asked no. position, I you'd would March, if

keep play So that of that. we're out also over is very to very, period mind a about long this it's But going pleased in time. and early,

David Scharf

you the stop average of returns, is in I static a things. all Got then divide – different quarter But quarter, five it this pools see And average, looking lastly, at anything for looks forecasted. or At the this calculated just portfolio charges the average terms generate an if me XX.X%. least vintages, to looking every like dealers holdback? it's yield quarters. pricing Is pricing did the and well, independent that different that whether a calculation six the a level in actually that about yield to forecasting your is environment? gross yield, of a And of just is environment maybe or that just it. all it finance I quarter, too highest that simple Or – of which how in is by that's these get in And of you're simplistic the of of at yield, accurate directionally willing that way much it's... overall terms demand kind balance the accept higher were you obviously on your instead to

Ken Booth

it's No, not.

probably think GAAP did number. is took what you So the I you

so remember to CECL, are GAAP than economic you with got the charges they're yield finance really our higher And what is. –

still is So to that it with forecast when just of dropped. quarter, than And yield you what there in we got start like March, portion back pre-pandemic. numbers. our the a expect, reduced the during but you was cash it's And have adjusted would second lower you the find flow we

recovers, if we will GAAP, lens. forecast the we're But not that it's to yield the then wouldn't economics – are, but didn't figure yield flow doesn't, looking I GAAP opposite. it of cash through in for the the you're time. the if at if out the it over – – only increased what – And world recover no, As difficult

David Scharf

Right.

and was Okay. No, thanks Thank clarification because stay the well. obviously you for counterintuitive. it

Operator

Your is from next Wells Feller David from question Fargo.

is line open. Your

David Feller

to wanted I afternoon. prices overall. good question Hey, just about car prior on follow-up the used

thinking so hear obviously a auto different prices seen number for used players the view. to around. you your Just give bounce and in different car retailers are the space internally What wanted You've of guys estimates, those various I year? seeing about

Brett Roberts

view. a have really don't We

David Feller

all as And appreciate well on then the I front the in both end total collections, collections. color month-by-month as changes Okay.

As more overall collections of customers? driven from at words... payments is much being just and to there, April of the and way closed through that kind you by data March look other the any the versus decline In how auctions there was on think

Doug Busk

Total reflect end cash collections would all front from customers. The reflect flows. collections payments

between why Clearly, that's assess end be could though. the So broke to numbers. trends impacted. going it so at doesn't you into cars collections total selling different weren't front collections, so we out That we two auction impact columns two those are

separately So you if out we see that that. could so broke

David Feller

question levels. major back you What of Got the pre-pandemic it talked kind And it. prior growth? the there about to are the getting driver where year-over-year of

Doug Busk

So in those I'd unaffected that January were February, because and say, was pre-pandemic.

the and May, and through saw see you impact pandemic June better and you March, go then and the of You April July, results.

which in June starting extent July, unemployment So see reflects the we're and money likely the really results, to impact benefits. some you May. enhanced better stimulus May, of and the

David Feller

And you Okay. performance terms Could all? talk exposures exposure? about higher you talk geographical regional where have at about in maybe of

Brett Roberts

I already talk anything about really what mean going beyond aren't disclosed. to we've we

in disclosed states our where XX-Ks five have are. We top our

filed. the to it gets of economic draw take But in in and XX-Q on can you at when what's all what's what not release and So some conclusions that the an from a about be going perspective in those look states. will anything going beyond we're disclose

David Feller

just expecting through drivers of in are terms dealers, And major muted? there? decline industry overall And year XXXX? the expect any question into last in Okay. changes more active you just the you talk in can do be maybe The this guys to about or Or it then you dealer of for closures major end me.

Doug Busk

Yes.

that than partially a of man just that new that that in just out might force average. probably their was as our number little saw as in related new the but was, about better actives that were the per before of trends had year-over-year in working or you the the maybe terms the the from pandemic the quarters you have was is look They saw in Attrition average, home. been continuation worsening of – Part decline fact bit prior of great. you declining you were at we this new The men see think actives to of historically. quarter. active actives it second if quarter count sales I largely attrition we have working many second didn't the quarter, haven't from dealer a of and But house. difference a dealers, be

David Feller

overall, thoughts any then on the significant And you'd expect dealership closures? more Okay. industry whether

Doug Busk

it's forecast I that. hard No, think to

David Feller

the for taking questions. – you thanks thank for the Okay,

Operator

have Orenbuch Suisse. from a Credit We follow-up Moshe from question

open. is line Your

Moshe Orenbuch

you of Maybe it and kind competitive of environment the terms see you're how doing? Thanks. of stage kind the just a originate ability about can guys you what at bit in talk little this to in

Brett Roberts

that capital Sure. started. happen. It thought some up know, you industry, that was for maybe might was the difficult, as pandemic before the There didn't dry

So you capital. fairly that the return have of a to competitive it pandemic, lots the I so before can same competitors to were you there out expect think state. All are

Moshe Orenbuch

you had someone the unemployment is into of factor models. your and into to But And employed it. a you loan? that a not originate originate Like loan Got or kind doesn't furloughed? is unemployment factor who to before will mentioned does ability employed

Brett Roberts

Historically, done when bit been demand But downturn, knows. will have little that concern. economic typically, have perspective. from we've this happen but hasn't downturn, who different you Whether lots economic the is But you we go into that well very, capital a that of again, an very an available. in a

So how we'll plays just to have out. it see

Moshe Orenbuch

Okay.

Operator

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

Doug Busk

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

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

Operator

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

Credit Acceptance (CACC) 1 Aug 202020 Q2 Earnings call transcript