Credit Acceptance Corporation (NASDAQ:CACC) Q2 2024 Earnings Call July 31, 2024 5:00 PM ET

Company Participants

Jay Martin - Chief Financial Officer
Ken Booth - Chief Executive Officer
Doug Busk - Chief Treasury Officer

Conference Call Participants

Moshe Orenbuch - TD Cowen
John Rowan - Janney Montgomery Scott
Rob Wildhack - Autonomous Research
Ryan Shelley - Bank of America

Operator

Good day, everyone, and welcome to the Credit Acceptance Corporation Second 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 website. At this time, I’d like to turn the call over to Credit Acceptance’s Chief Financial Officer, Jay Martin.

Jay Martin

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation second quarter 2024 earnings call. As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of federal securities law. These forward-looking statements are subject to a number of risks and uncertainties. Many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, I should mention that to comply with the SEC’s Regulation G, please refer to the financial results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time, I will turn the call over to our Chief Executive Officer, Ken Booth, to discuss our second quarter results.

Ken Booth

Thanks, Jay. We had a mixed quarter as related to collections and originations, two key drivers of our business. Our 2022 vintage continued to underperform our expectations, and our 2023 vintage began to slip as well. We’ve made an additional $147 million adjustment to forecasted net cash flows on top of our normal loan forecast model, but just our loans originated in 2022, 2023 and the first half of 2024, where we believe the ultimate collection rate will be based upon trending data over the last several years.

Historically, our model has been very good at predicting loan performance in aggregate, but our model worked faster in less volatile times. The pandemic and its ripple effects create volatile conditions, federal stimulus, enhanced unemployment benefits and supply chain disruptions led to vehicle shortages, inflation, et cetera, all of which impacted competitive conditions. We have had larger-than-average forecast misses both high and low during this volatile period. But because we understand forecasting collection rates is challenging, our business model is designed to produce acceptable returns even if loan performance is less than forecasted.