• Loan Portfolio: Record high of $8.9 billion, adjusted basis increase of 15% from last year.
• Market Share: 6.1% year-to-date through November in the core segment of used vehicles financed by subprime consumers, up from 4.8% in 2023.
• Contracts Financed: 78,911 contracts for dealers and consumers during the quarter.
• Collections: $1.3 billion collected overall during the quarter.
• Portfolio Profit Paid: $65 million paid in portfolio profit to dealers.
• Active Dealers: 10,149 dealers, the largest number ever for the fourth quarter.
• New Dealers: 902 new dealers added during the quarter.

• Warning! GuruFocus has detected 7 Warning Sign with CACC.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Collections improved sequentially this quarter, with only the 2022 vintage underperforming expectations.
• The loan portfolio reached a new record high of $8.9 billion, an adjusted increase of 15% from last year.
• Market share in the core segment of used vehicles financed by subprime consumers increased to 6.1% year-to-date through November, compared to 4.8% for the same period in 2023.
• Credit Acceptance Corp (NASDAQ:CACC) financed 78,911 contracts for dealers and consumers, collected $1.3 billion overall, and paid $65 million in portfolio profit to dealers.
• The company received five workplace awards during the quarter, contributing to a total of 13 awards for 2024, the most ever received in a single year.

Negative Points

• Growth slowed significantly during the quarter, despite it being the second highest Q4 unit and dollar volume ever.
• Volume per dealer declined by about 3.7% compared to Q4 2023, indicating a potentially more competitive environment.
• The 2022 vintage continued to underperform expectations, contributing to a small decline of 0.3% or $31 million in forecasted net cash flows.
• General and administrative expenses saw a large sequential decline, primarily due to volatility in legal expenses.
• The company's scorecard change in Q3 resulted in lower advance rates, impacting growth.

Q & A Highlights

Q: Could you expand on the comments about the slowing growth and how much of that is due to changes you made versus changes in the environment or competition? A: Jay Martin, CFO: It's difficult to pinpoint exactly. Our volume per dealer declined by about 3.7% compared to Q4 2023, which might indicate a competitive environment. However, we also changed our scorecard, complicating the attribution. Despite this, Q4 2024 was our second-highest unit dollar volume ever, so we feel positive about our position.

Q: How did the adjusted yield increase despite a reduction in collections last quarter? A: Jay Martin, CFO: Typically, a decline in collections would negatively impact the floating yield. However, the yield we recognized on the business written in the fourth quarter increased our overall yield, offsetting the decline in forecast collections from the third quarter.

Q: When did you make the change to the scorecards, and was it disclosed in the last quarter's call? A: Kenneth Booth, CEO: The scorecard changes were made during Q3 and took full effect by September. We may not have specifically discussed it in the last call, but adjusting our scorecard to reflect recent trends is a common practice.

Q: Is the decline in G&A expense due to weaker volume growth or something one-time? A: Jay Martin, CFO: The decline in G&A expense is primarily related to legal expenses, which can be volatile quarter to quarter due to ongoing regulatory and legal matters.

Q: Are the smaller negative revisions to forecasted collections a signal that the worst is behind in terms of downward revisions? A: Jay Martin, CFO: Our forecasts reflect our best estimates, factoring in past underperformance. The decline this quarter was smaller, mainly due to the 2022 cohort. Our forecasting models perform best during stable economic periods, and the 2022 cohort's performance is not unique to us. The 2023 and 2024 cohorts are more significant to our financial results, and their forecasts were stable this quarter.

Q: With recent capital market activities, is there a possibility of being in a meaningful excess capital position given slower origination growth? A: Jay Brinkley, SVP & Treasurer: We prepared conservatively for potential capital market impacts related to the election, resulting in a solid cash position. This is advantageous as we enter our busy season when originations typically increase.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.