Earnings call transcript Q1 2023

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Operator

Good day, everyone. And welcome to the Credit Acceptance Corporation First Quarter 2023 Earnings Call. Today’s call is being recorded. A webcast and transcript of today’s earnings call will be made available on Credit Acceptance website.

At this time, I would like to turn the call over to Credit Acceptance Chief Treasury Officer, Doug Busk.

Doug Busk

you. Thank afternoon. Good the call. to Corporation quarter first And Credit earnings XXXX welcome Acceptance

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

from and and such to which are of These are to subject many results forward-looking actual a our statements. uncertainties, which control statements differ cause materially number of risks could beyond

risks information news out in regarding all These other include the in spelled statements and and those included uncertainties risks cautionary statement and light forward-looking release. forward-looking of those the uncertainties. in Consider

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

the adjusted estimates to XXXX loan loans loan for and consumer of decline decrease during results XXXX GAAP a was Our than three and XXXX include that primarily of for consumer for XXXX, forecasted due assignment quarter flow March the a the XX, XXXX net lower in rates profitability cash assigned quarter as result in through quarters at slower timing consumer of last in during forecasted prepayments. collection first a our

benefits. results distribution from unemployment and our collection that followed rates comparison, performance portfolio loan our stimulus increasing reflected of flows the with XXXX X.X%. elevated federal payments by of cash In XXXX forecasted Stable million loan net during the of first first the enhanced forecasted consumer $X.X or quarter quarter for

and XXXX. respectively, and the compared in first quarter consumer as unit dollar grew volumes XX.X% loan XX.X%, Growth volume assignment to of as

XXXX. increased our average of and and on the X.X% quarter loan X.X%, XXXX of adjusted basis The first GAAP as quarter respectively, for to the first compared of a balance portfolio and the increased quarter The loan and of adjusted average for GAAP X% portfolio of X.X%, compared XXXX. fourth to our a the respectively, basis first quarter balance of as XXXX on

assigned quarter fourth XX.X% on XX.X% consumer the in compared and initial of loans on quarter The XXXX. assigned the loans consumer XXXX XXXX was XX%, of on first in of consumer first in quarter loans the assigned spread to

XX.X% our we Growth operating members customer the our to are primarily dealer and to in of increase enhance expenses number team our of technology as in first be to investing compared engineering in our due more systems quarter the as department, in business and an of transform product to focused. XXXX,

first from million. the of share Adjusted quarter Adjusted decreased $XXX to of $X.XX. per net for decreased XXXX to income earnings quarter XX.X% XX.X% the first XXXX

Martin, At our Chief Senior Ken Jay Officer; Accounting; of Booth, will I this Finance our take your President Executive and questions. time, Vice and

Operator

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

open. is line Your

Moshe Orenbuch

talk you was little net flows. you like I bit could Thanks. hoping Great. kind but slower about about, talked Doug, a cash of just stable collections

talk Just what the as of forward? financials about how that affect what go we the -- and two means those things a they little bit

Doug Busk

all cash Well, else the equal be... net flows should stable

Moshe Orenbuch

collections. stable think I and cash flows, net said slower right, you

Doug Busk

rates, sorry. collection am I forecasted Stable

Moshe Orenbuch

Yeah.

Doug Busk

we last periods yield and forecasted rates. in more or up The XXXX have all the rates collection Obviously, stable yield on if stable it be we cause where happens stable down. rates as to after new will of it’s forecasted had what forecasted collection rates three originations have declines quarters modest impact well, the gone but that forecasted the nice had collection the equal in else collection than have been would future to

in dollars cash our the shorter mean of longer current coming over because period the the of portfolio, timing terms period cash a I all time obviously, if flow that mean, flows, less slowing in yield came they a of the causes In net equal in of else in a is for time. on over decline than

Moshe Orenbuch

it. $XX the million the for provision impacts Got forecast -- changes? caused those and of And which

Doug Busk

cash timing. in the flow slowdown The

Moshe Orenbuch

Got it.

you that rates think relative how spread do changes loans initial how when about to in about period, about Okay. we And or on talk the it? should the acquired interest think the we in like,

Doug Busk

to What economic are we which and profit when times we the are profit number price is, of originated. economic loans is trying do the maximize loans amount to our loan trying of Economic we profit, per expected relationship what the of expenses over what and collect, for perform including we considers over paid between those expense. interest to loan the life loan the time the the loans how we anticipated

we So return, need want the to to if up assuming earn expense we else advance, and lower same nothing change. interest goes

it’s longwinded a pricing be it’s expense. factored just So like to needs other an answer any our question, that to expense your into

Moshe Orenbuch

Got it.

Okay. will the queue. back Thanks. I in get

Operator

Thank you.

comes with Robert question Wildhack next Autonomous Our from Research.

open. line is Your

Robert Wildhack

Hi. about Guys. wanted ask I a originations. unit to question

in I a the implies which they think maybe in high up February quarter, XXXX mid-February you this in and that were January up were finished XXs would decent and they March. in said they from or I think back slowdown XX% Jan

So just growth what unit in that you is and and March think do did slowdown? then slow how behind much origination February

Doug Busk

XX% The February XX% in in March. and January, growth by rates in month the in quarter were XX%

a soft March I had capitals. and think the XXXX, growth variability amount better. January a certainly the of fair were of quarter in was We February in due in year strength a primarily of to bit during rates the differences prior

year comps think it. I had prior a that fair amount to with So do

Robert Wildhack

stretched XXXX XXXX. industry-wide, then maybe things then early maybe most into in I And and Okay. think, the looked

degree think broadly, have So see and their the of point underwriting? competitors do coming industry to losses months headlines and your XX the lot that rationalized from a subprime around delinquencies that up and on you what we in auto

Doug Busk

very is industry fragmented. The

and industry appear the have on credit reacting how pushing environment. industry insight more So can Count at that a I Auto by as tapping see challenging more participant brakes the be that gas. to don’t is tremendous people each to into I on published the look are statistics

getting of industry top least are most believe that at XX would lead the participants that So conservative. more me to incrementally

Robert Wildhack

Thanks. Okay.

Operator

Thank you.

from comes John Janney. Our with next Rowan question

open. is line Your

John Rowan

guys. afternoon, Good

Doug Busk

Hi, John.

John Rowan

gave kind just numbers of regarding month-by-month. a you bunch of the Doug,

think and relatively you correct? coincidence that’s comps Was in wondering March? I there mentioned with a I big quarter. have am any but advance change advance number slower rate also decrease if the a unit for was it year-over-year the rate in underwriting change was there in fine, that, the the you the volume, any for here obviously, and did

Doug Busk

We had in mean I you for if XX%. it a was number of better number days April. the adjust

point so you likely volume. better that lower impact was the origination, out, the in you as I less you lower April dealers advance general, it In some So of QX, the pay on was March. and the had rightly in was rate than mean originate, fewer loans QX.

John Rowan

And rate XXXX. but an the the XX%. -- the initial It am year Okay. is looks advance in number since advance then, it’s your maybe obviously, the it’s advance to if release, wondering there highest I -- press yet, initial for haven’t rate through like for April? gone is

Doug Busk

release. No. at There is the

John Rowan

Okay. updates issue? And on AG New then lastly, just, any and the CFPB York

Doug Busk

we The is the today. and that XX-Q No. filed greatest latest in

John Rowan

Okay.

So what correct? was there, just it’s it -- case, dismiss was just in from to a the motion whole

Doug Busk

Correct.

John Rowan

All Thank Okay. you. right.

Doug Busk

Yeah.

Operator

Ray comes next Capital Thank you. Management. Cheesman [Operator Anfield with Our from question Instructions]

open. Your line is

Ray Cheesman

lower -- school I we lowered environment. had am tightening, payments, standards wondering, payments many, refunds, years is restarting. SNAP inflation, rising been rising unique a such It’s since I tax do Doug, you got -- debt do you many against guys mean you this to credit day on computer rates, program have grower. Congratulations you advantage it’s priced. extension very a into how protect you are taking the the people of a capital, warehouse other that attractively and How

the runoff and letting the theirs so there everything maybe there that are in the while else you all clearly do some trenches, guys fighting. you runoff, Capital how in with loans the numbers? are is in the good Citizens versus you take collateral But And you let is that in piling out theirs and good are of One -- ABS payers good pick on up

Doug Busk

good have the record number we I being to don’t individual predict collection predict ability have to at Well, able mean, satisfactory a large rates track loans. We pretty over outcomes. of a

to over loans. XX what medical which consumer to shown large their have the encounter of which differentiating predictive a ability have But or in bills you. going be So job or one’s we is months number to going lose

bunch just behave certain the from prices. loan you there factors at No things time accurately are a going one are loan. Having whole terms can XX-month mentioned. aside Inflation, not to in of of those I how car in rates, changes are that, said that the are underwriting changes predict the auto over a unemployment variables the

produce significant still that is if satisfactory going that we uncertainty our the primary build loans a loan likely than are to loans profitability. of our it’s deal we time anticipated, that So at safety way even less result being the highly with originate into margin them, levels is with of performance the we

risk with on addition, sharing the dealer. we In program, loan are portfolio the the the on

going be borne a dealer So holdback. reduction if less $XXX by to collect dealer a is loan, form the in in of we of the on XX% that

certain certainly, only of Now, to obviously, that helpful. but we there have is a protection extent, that works layer a

Ray Cheesman

less you does how availability, how said, impacts bank tend your is funding guys stuff all you just Are mean, environmental environments you terrific generally? it people’s that for apart just changing, better. this it to and your change, of fall we do environment was, another you funding to question competitor’s morning I credit But had during disappear. environment traditionally, other mean, wonderful that think do that the seeing see. and I warehouse and My times impact? extended as was I

that kind that you still the forward? going outlook is So of have

Doug Busk

seen. have tightening recent of has periods spreads that bit that for Board. some think credit think numbers be think growth the across credit that remains shown do some have I fact the I better the the I the banks better indicates some wider I reacted to in gotten concerns quality, to are around markets are debt a credit, that mean we market us.

credit capital reacted or and ago. it hasn’t So I I But markets impacted us XX more expensive It months markets than year were, the that and hopefully, the to certainly say, yet, think now a doesn’t. think tighter it. they are have

Ray Cheesman

thoughts. really you guys Okay. in I Thank very hanging there you well. for very much your though are

thanks. So

Operator

Thank you.

follow-up question Orenbuch from Moshe Credit next Suisse. is with Our a

Your line is open.

Moshe Orenbuch

quick just Doug, things. two

The were X% to mentioned GAAP adjusted that, assets and first you is, kind in growing mid-X%s. of the

kind April? decelerating them of in you originations, talked QX in that, that of the into deceleration pace seeing of think about cash numbers terms are or flows, you and you two originations what of kind into together, that put Given growth of the that the do accelerating if loans? went And you

Doug Busk

a growing are portfolio, on still think, should turn May think, the I mean, be I we or of June. we but April that, around numbers, lot I -- could that based

primarily, growth from we growth forward. So of in think sort what of is I the put function the portfolio point a think, I out just this

Moshe Orenbuch

high, were think, that of then a didn’t as rate? chance Got just there the run I think Was should is salaries the one, there that And and I Q. modeling in in onetime anything you. look get or quick a wages, to we

Doug Busk

QX, if due tend increase are right. most seasonal comparing and increase All certain there of you another to in QX Well, was versus expenses, QX sales QX that commissions like, in be one. the higher benefits are would payroll fringe and to impacts, taxes to be

factors in QX If it thing to engineering last obviously, is likely seasonal is operating for that year the today, continue. but accounts to you last versus that an comparing year, QX QX increase this of difference in expenses in year are expense have the comparable

really… So

Moshe Orenbuch

Excellent.

Doug Busk

depends it point starting Moshe. is, your on what …

Moshe Orenbuch

much. right. Okay. very Thanks All

Operator

Thank you.

follow-up Robert Autonomous question is next a Our Wildhack from with Research.

is open. line Your

Robert Wildhack

repurchase. wanted just I follow. to ask the for the about Thanks Doug. Hi,

in think much and you you you have vice repurchase as won’t are about past originations, I versa. growing when talked the

year? So a share it was than is slower repurchases curious little bit end given towards is last growth appetite the of now for what just the the

Doug Busk

it continue same always about I to the way have. think we think we

we what The like, is subjective like, make levels we matters, fund the markets of of obviously have to to et and first that loan is on, a of includes are, capital originations going capital need what priority sort number sure anticipated regulatory the tightening bank considerations, cetera.

step and capital think and all buy levels we But anticipate go we originations if the fund with the we it’s have so. if need than worth, the less we what of to can do we comfortable stock for next the to are we we then

are So we same about it many, thinking we have the way years. for many

Operator

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

Doug Busk

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

at mailbox any If direct follow-up you have ir@creditacceptance.com. Relations to please questions, them additional Investor our

We to Thank again are you talking you. looking forward to quarter. next

Credit Acceptance (CACC) 1 May 232023 Q1 Earnings call transcript