CACC - Earnings call transcript Q3 2024 | Credit Acceptance Corporation

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Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation Third Quarter 2024 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 Chief Financial Officer, Jay Martin.

Jay Martin

Thank you. Good morning, and welcome to the Credit Acceptance Corporation Third Quarter 2024 Earnings Call.

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

comply how time, I Additionally, to discuss news of to the Regulation third the this our SEC's refer non-GAAP GAAP results. Executive which measures. At the results to turn I our that Ken G, tables provides measures Chief section should Officer, release, to reconcile showing with over call to mention will please the quarter financial Booth,

Kenneth Booth

Thanks, business. Jay. originations, of quarter drivers as X key we collections our mixed related to it and had Overall, another

Our declined. XXXX cash decline a to vantage X.X% and forecasted of Overall, in $XX.X or million modest flows. and XXXX our XXXX, net expectations XXXX continued also underperform

pandemic inflation, unemployment stimulus, As to led et as very but federal loan The supply performance less ripple shortages, our our in conditions, we in effects and volatile enhanced models models previously and cetera. historically, good chain have times. vehicle volatile aggregate, communicated, created are at predicting benefits work disruptions faster

in is our even in produce acceptable But and low profit. quarter, to designed loan believe We high because business during period. model share had will is volatile forecasted economic returns to worst is we to we this All larger-than-average challenging, in of forecasted. Despite collections economic is profit rates forecast than produce per and conditions. forecast future. benefits aggregate, decline which XXXX we the collection understand Even the still both impacted substantial this competitive if continue the forecasted our produce performance less misses

As in We cycles I've and term standards of capital profit money take others because we to are deal becomes the industry. access long easy the less seek maintain XXXX the maximize are the economic industry company during to happy in and if we the underwriting economic to the position and Ultimately, changes in over in and priced the past, a explained the reactive best long limited. discipline times to XXXX. with especially of we competitive

was take this share better years, was more position believe conditions favorable today. a lower those While during we our us to market advantage of market

our highest a During is strong growth unit quarter we This our had XX.X% loan ever, experienced loan and unit our growth. by row XX.X%, the growing QX respectively. unit with double-digit and volume that our volume dollar quarter, dollar in volume and ninth

Our a $X.X loan up adjusted portfolio million new record high of XX.X% from is now XXXX. at an QX basis, on

our market XX, end core segment August X.X% in was share XXXX. of Our

during our QX. impacted slow that lower rates forecast changes in the did growth Our resulted likely by advance during quarter, QX

we history. in. roughly consumers This sales to product of credit. We towards of consumers, dealers, of dealers adults by key prime than making team continued mission value our to do these regardless quarter lives the creating X operate communities Beyond during XCs this incremental members, sell drivers, make changing the valuable positively and we investors dealers a with enables progress XX% constituents: to that and providing intuitive of other allows the our credit their

by the time school, For hurricanes. opportunity also recognize credit. enables rates their build these challenging We consumers been that obtain gives vehicle or take a to their improve to has It it impacted et them a adults, to to them their it to and jobs, get cetera. for kids our

we have some safety most these working many to collection our to years, urgent allow and consumers, prioritize suspending As customers are with these of for efforts their needs. including we

paid through During every spread than work $X.X for and dealers we our X,XXX with the of quarter, but product and dealers support collected step improvement we progress, quarter process number portfolio and million getting third are to financed go-to-market iterate providing effectively This our innovation This in our of faster the skill XX,XXX From contracts detail an added way. $XX the to and and now work, for requires of are consumers. dealers. and that better. We to our dealers. a is profit for to new perspective, largest have make overall attention XX,XXX ever approach billion committed dealers dealers improvement ever and active our is We before. quarter our to more tends initiative we

with We which the at speed our modernizing investing on our goal product the our focused capabilities are increasing also for our consumers. in continued work both perform team. of we We've teams dealers technology technology are improved and architecture, and our team's and enhance how key

recognizing People quarter, Great we the us today Borgen, from awards During Place received to a Magazine, as Work. USA X and

We School to even we pursuit Michigan We of Hospital and such prevention, continue a In their with the members to as making foundation. Foundation to District, makes better. difference connection [indiscernible] to area in strong, focus our Atlanta on contributed the that. Pure Children team American in efforts, difference making our Heart support what the amazing workplace organizations

Now Jay, Jay Chief Doug and Brinkley, our President your along Vice will Vice President I Lusk, and Treasury Jeff Assisted with Martin and Treasurer; Officer. Soutar, and questions our Senior our take Treasurer.

Operator

TD from comes Our Moshe Instructions] with [Operator first Orenbuch Cowen. question

Moshe Orenbuch

that comment for could returns all more X idea they're maybe spend been just I time on that your estimates guess upon revised have the confident because you I than and But a quarters. down appreciate hurdle higher rates. little are based estimates that the the you're

days we that? same now? the So I is, is about having real from XX we mean, how be you do And conversation what are should guess it how question to know? -- I Like -- going the think

Kenneth Booth

Yes.

to to best To our these in believe post-pandemic our we've the date on third point in represent estimates about expect we So your stable models the volatility accurate I the release relatively as of we've periods considers we how that economic are since of see the vintages. are say during our seen future, whether what periods experienced forecasting future performed loans to on perform like going underperformance less faster and quarter concept would estimates our it. hand in

in experienced very during period, cohorts, competitive have quarter loans these underperform, factors. say, declines multiple long credit valuations, impact to or but and likely on prices understand purchased of peak at softens. generally 'XX our to the Consumers so the subsequently performance. vehicles Including in We to we these cohorts, hurts these biggest declined that we 'XX saw performance unique industry believe have continued inflation. Let's vehicle others worse contributing the there precisely which to tough this say why don't are know is we then similar related a that were originated to trend the

in to to going XX% collect relates of we'd 'XX 'XX those seasoned. it less that on is our in business, into business our the an we perform loans 'XX financials 'XX are business -- And we out seasoned. and forward, -- weighted expect more based and we XX% impact what we it to year, business the business, as write collect point the just going ultimately of have to expect financial to We've ultimately what how 'XX. We're to be have years, 'XX wrote impact that will and cohorts then on of those on get to more also going are results. As those more our those because we of on loans more 'XX what an next climbed

Moshe Orenbuch

Right. different estimation this And cycles. just I factors you way underwriting me consumer about so the problem? Have to pushes that, behavior affecting is on guess, of loans? It's Or this about versus about would it problem? that I just it these what it thought to the has guess question isn't volatility. in actual you cycle actually tack maybe previous much an idea driven is I underwrite changing it

Kenneth Booth

we recent Well, I'd to consider continue our say performance. forecast,

underperformance loans, these new as So that 'XX in we've the and loans. considered seen we've originating we're 'XX

us So we've our estimate to future that. and lowered on allows this consider adjusted initial

So other Credit this believe across we it are considering forward. to the problem Acceptance, seeing this is we industry. The a we And unique we there. before, mentioned I we're performance don't believe as move the believe we quarter

Moshe Orenbuch

just And then All X for last right. me.

didn't the like. back stock buy third the to it You Q, from date in any quarter the in filing October or looks of

like So about It loan growth a little capital. a but looks is strong, little. just decelerated can you talk bit

So that? about can just you talk

Douglas Busk

Sure.

at we for the years, think we have capital a As in sure return then price. need is we if capital business. the And we'll if take look we'll than buy value, said first terms excess have it we shareholders. fund the to less many capital, to our over can to feel that the make we've we priority we stock times of

For higher revolving most of customarily facilities outstanding QX, we balances on had that we do. credit our

very was the a Now deal. that remedied situation large end of be relatively September at ABS will

and more QX a collection we conditions end light at we more revolver end the and the bit market approach. the the the leverage performance of a So is given usage had about fact and capital historical in uncertainties given of of took the of conservative high at range election,

In XXs. XX significant long As number over over time, you a the of it since consistently. buy repurchased But know, lot. some a periods, don't back we late shares do a we of we've period shares million

So periods, buy we back little. very

think at So trend quarter for that's X a and line. a I assume look you take new don't basis that can the

Operator

John will John we -- Our from question Janney question the Scott. next Hecht line Difficulty] Our come Montgomery question the [Technical with line from have Rowan of with comes next a Jefferies. of from

John Rowan

I consumers Is and been of are for understanding has down that little on judgments that a on in that consumer not -- drill just you a it? down like in fairly mean, But you defaulting asked term I just who So on is the better wholesales consumers wholesale you number of the debts what to want are is just need Is the change drill to lower related it deficiency? get I are there it prepayments paying tails? really repossession you guess means. into guess, to not a before is what lower bit just little just older lower we've -- a see go after someone trying when or getting it I'm means. call the what repossession. bit, generic Or I loans?

Kenneth Booth

purchasing we're consumers that's loans currently forms on of moving see of seeing and Yes. prepayments, or the and to we is in of financing traditional availability credit to periods consumers, It's levels primarily either to lower what referring limited their a there new car refinancing now. tend to where

John Rowan

in which look, of but now, much lot revisions. historically consumers, how for have those I Okay. But right? I company right been a There than does forecast even periods no there's driving a the that that's And time. mean, to -- covered mean, compare periods? And absolutely been long availability, to credit I've worse

Kenneth Booth

there say we're would in near historical lows currently. I

we have future, our similar which area which So this on periods, mix seen realize of will yield more we've one periods our pushes seen that prepaid lowers of the that that historical low lower cash come forecast seen we've which be with flow uses seen down and the a loans. we'll and the is the down, but to

Douglas Busk

really just future. dependent in competitive of one going cash would challenging behave is the environment competitive can timing no how add environment that the since and I on flows the forecasting to is it's forecast

So is it challenging.

but at it think I is tough. our take it, we crack best

John Rowan

question. Actually, let another ask me

are is the used Or what car people money? that don't cars, activity? driving want to their negative prices on car and they refinancing function and of equity is a refinance of why if a they're that some owe Is that sitting So level that refinancing position lower is that? --

Douglas Busk

I factor. think a Yes, fact contributing credit I could also as a general the be certainly factors. availability And you But to the think think just the consumer that is mentioned of are I factor.

Operator

John next with Our comes question from Jefferies. Hecht

John Hecht

clear work has continues question where opportunistic what prices 'XX residual financial was issue environment down those to scarce, for be this in might preceding it is it you? Is environment, whether an market unique, guess think the I challenged. cycle tended questions in was I cycles, point factors the know happen out questions. do apologize we an but vintage? to further? guys one to to need be out come Or earlier. look you about to post both I as favorable and great technical is thinking just the Is in the simply your example, maybe for just what for? the for the you other disruption I to is, This there for historical the -- the kind Do crisis. environment through capital follow-on of

Douglas Busk

Yes.

performance our to low to and I consider primarily loans we've we're that's do. originating continued new seen, continuing it's what the forecast when to think adjust we've

'XX significant As less have financial I a forward. our loans earlier, going the mentioned impact statements on

how be difficult. -- and results as based will our how collection business that year, we performance business our more Our 'XX 'XX next 'XX on going performs. But are mentioned, the Ken and rates know we into forecasting

a low than even in forecasted. if have model acceptable is returns aggregate, we business So worse to designed performance produce

So we'll approach that forward. move continue to we take as

Operator

Our Research. comes Robert from of next Wildhack question Autonomous the line with

Robert Wildhack

the on Question specifically. and 'XX 'XX vintages

think mentioned behave and 'XX expected you similarly I you earnings, quarter 'XX that second 'XX. to The to

with there's And you 'XX, think and to versus forecasted stands 'XX? collections 'XX. that happen? so, X are respectively, shoe do respect square to for difference? think we drop could Do points when though, As if it and percentage should 'XX today, X How another and 'XX higher that you

Kenneth Booth

Yes, originated of rate look years. during at I those collection because mixes just absolute different to it's the difficult think business we've

And you initial estimates of I that's to having to better. on that. And 'XX loans we started so at 'XX and currently what when have the 'XX to we 'XX to the loans, also to that some what lower done you'll our then those see loans. the versus 'XX that know on loans and consider originated part of the has look and think because due on trends And at far looking is initial 'XX need we lowered 'XX, we see performing forecast. us 'XX our our variance we're underperformance

especially that So believe based better 'XX 'XX business, it's performed business out, the on the business. 'XX business the 'XX very those factors, and I But we X also at the not this than would seasoned point. point

Douglas Busk

and observing we in prior loans. were add I And we 'XX a calls underperformance in Yes. 'XX similar on just trend said that would that the

severe trend that on So was 'XX loans. the less

point, So severe. 'XX. 'XX and we've then on forecast And less we our Jay's to are our conservative more pattern but forecast 'XX was 'XX seeing a or similar adjusted and than

Robert Wildhack

do -- the those How all? how impact if to Okay. collections, at forecasted due will recent hurricanes,

Kenneth Booth

portfolio. impact impacted things our the with state. North X.X% mainly about of Those No, But and X.X% didn't are entire the Florida Carolina. X the obviously, hurricanes hurricanes

people So That material they're impactful impact both direct the overall, they've to not portfolio. incredibly in really our to said, path. that been

the for by get feet. to approach our their we're get with years, back working ways them consistent So to on impacted many help those hurricanes in

Robert Wildhack

that vintage economic Okay. generate highlighted something economic versus If could how if still just 'XX more a like I was you profit good more X XXXX wondering vintage I in ask, generate much and like, sneak Ken, there, about could XXXX? you earlier, some context the profit. would more does specifically give say,

Douglas Busk

profitable of want stimulus mean XXXX we've details kind our overcollected I vintage vintages. means was would wide one, they a the all I all Obviously, profitability a economic got produce which highly by but I it profit. in led I of economic XXXX was they're a lesser say payments profitable -- don't variance But get profit, and profitable by XXXX into guess is vintage. to what is

Operator

from next of Our comes Shelley Bank Ryan Instructions] line with [Operator of America. question the

Ryan Shelley

question A quick here.

color the being the come Just there any a down few of dealer Is Or great. now. more on driving active that market? be function just So that? has touch like quarters Can selective? count softer a what's you would

Douglas Busk

a It of fairly the was to environment I higher the a seems think is flat, are pulling I somewhat. competitive in more at like quarter it due to of it the competitive maybe normal seemed to dealer subsided a first in terms people environment. back. returning that's say like counts, would is while, the environment And be it lot seasonality. for honest,

said, our highest still that to -- our ever. been However, we've able year grow been share, we're to able on market and for we've volume pace

business. I of it where the competitive feel So at to we're good we're how terms grow in able and about the environment

Ryan Shelley

guess . a I X addressing it. March process thought should in par Got could that? quickly, And at I investors but now. it's if callable around XX, think it. Got about then maturity more see How

Vincent Caintic

good conditions watching there Yes. closely. very with market bond that We're Two facts tranche.

March It we mature plenty until have of XXXX. of First, time. doesn't

years So something. X.X do to

fact relative good sheet small so our million, there it's and of other to The $XXX our the small, balance liquidity. is size relatively

those We higher refinance coupon refinance on than plenty bond that's have can can we our we market in no would notes So existing a it senior today. of securitization can it for options. liquidity. Rates be or we draw probably on issue the new that using just

So we're rush do not a in anything with to it.

the So monitor something and just to maturity. do we'll continue appropriate before it

Operator

Janney next with comes Our Montgomery Rowan of from Scott. line John question the

John Rowan

XXXX The where an about justifiable, XX.X%. profit XX.X% vintage Obviously, that's mean to it's we decline. that just that But a big of at do I right? internal versus level think XX.X% now become return become to you? Just we uneconomical of X a the doesn't where economic costs? proxy is does the initial spread, for do Or relatively follow-up. sitting a spread to number look the Or your if number rate of funding to down go at that how pool.

Douglas Busk

mean depends about. which program it you're on I talking

of So a portfolio think collections you is for then more reduction little effect point. certain on ends driving in X% rate The a to up about because a up bit complicated forecasted to shared on the the in dealer program basis tax is purchase timing, collection program, an but XX-XX return. that the the our to on shortfall with account and that have decline your

of program So purchase consumer the us doesn't. variations program insulates the from where portfolio loan performance

is the more program collection our a on is portfolio in to program sensitive program. purchase lot That obviously is more purchase profitability the the So rates. sensitive, forecasted declines

Operator

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

Jay Martin

us call have Relations you to to conference talking and the them forward for Thank everyone like mailbox our again if to ir.creditacceptance.com. joining Investor We We thank follow-up questions, you. today. for support please quarter. direct on any additional their would to you look at next

Operator

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

Credit Acceptance (CACC) 31 Oct 242024 Q3 Earnings call transcript