Participants

Jay Martin; Chief Financial Officer; Credit Acceptance Corp

Kenneth Booth; President, Chief Executive Officer, Director; Credit Acceptance Corp

Jay Brinkley; Senior Vice President & Treasurer; Credit Acceptance Corp

Moshe Orenbuch; Analyst; TD Cowen

John Rowan; Analyst; Janney Montgomery Scott.

Rob Wildhack; Analyst; Autonomous Research

Presentation

Operator

Good day, everyone and welcome to the Credit Acceptance Corporation fourth 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 would like to turn the call over to Credit Acceptance's Chief Financial Officer, Jay Martin, please go ahead.

Jay Martin

Thank you. Good afternoon and welcome to the Credit Acceptance Corporation fourth 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 regulations, please refer to the financial results section of our news release which provides tables showing how non-GAAP measures, reconcile the GAAP measures. At this time, I will turn the call over to our Chief Executive Officer, Ken Booth to discuss our fourth quarter results.

Kenneth Booth

Thanks, Jay. Overall, we had another mixed quarter as it related to collections and originations, two key drivers of our business. Collections improved sequentially this quarter with only our 2022 vintage continued to underperform our expectations while our other vintages were stable during the quarter. Overall, a small decline of 0.3% or $31 million in forecast and net cash flows. During the quarter, our growth slowed significantly. However, this was still our second highest Q4 unit and dollar volume ever.
Our loan portfolio is now at a new record high of $8.9 billion an adjusted basis of 15% from last year. Our market share in our core segment of used vehicles financed by subprime consumers was 6.1% year-to-date through November compared to 4.8% for the same period in 2023. Our slower growth was likely impacted by our Q3 scorecard change that has resulted in lower advance rates.
Beyond these two key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and positively changing the lives of our five key constituents: dealers, consumers, team members, investors, and the communities we operate in. We do this by providing a valuable product that enables dealers to sell vehicles to consumers regardless of their credit history.
This allows viewers to make incremental sales to the roughly 55% of adults with other than prime credit. For these adults, it enables them to obtain a vehicle to get their jobs, take their kids to school, et cetera. It also gives them the opportunity to improve or build their credit.
Our customers are couples like Marita and Steven who experienced financial challenges after they move from the Midwest to the South for a fresh start. Their financial challenges took a toll on their credit and their transportation. Steven's car broke down during his long commute to work. They tried to finance a new vehicle but dealerships turned them away due to their credit. They had to rent cars at high cost so Steven could get to work.
Discouraged but not defeated, they found a dealership who approved them for a vehicle through Credit Acceptance. It was a moment of relief and a turning point in their lives with a reliable vehicle to regain stability, improve their credit and felt support along the way from.
From Marita and Steven, Credit Acceptance is more than a lender. We're a jump start in their new life journey. As Marina and Steven discovered the benefits of our program don't end once the contract is signed, we strive to support our consumers throughout the life of the contract as we have for many years. We are working with consumers impacted by hurricanes and more recently the wildfires including suspending some of our collection efforts to allow those customers to prioritize their safety and most urgent needs.
During the quarter, we financed 78,911 contracts for our dealers and consumers. We collected $1.3 billion overall and paid $65 million in portfolio profit and portfolio profit expressed for our dealers. We had 902 new dealers for the quarter and now have our largest number of active dealers ever for our fourth quarter with 10,149 dealers.
From an initiative perspective, we've made progress towards improving product innovation and our go to market approach with the goal of supporting and getting us faster and more effectively than ever before. This requires teamwork, attention to detail and an iterative process that attempts to make improvement every step of the way.
We also continue to invest in our technology team to remain focused on modernizing both our key technology architecture and how our teams perform work to support this goal. During the quarter, we received five awards from Newsweek, Monster, Fortune, the Detroit Free Press and Computer World, recognizing us as a great place to work. We continue to focus on making our amazing workplace even better.
This makes 13 workplace awards for 2024 which is the most we've ever received. We support our team members in making a difference, to make a difference with us, and make a difference to them. During Q4, we raised money and collected food for stone soup food bank. And our team members also came together over the holiday season to pack 106,000 meals for local food banks.
Now Jay Martin and I will take your questions along with Doug Busk, our Chief Treasury Officer; Jay Brinkley, our Senior Vice President and Treasurer; and Jeff Soutar, our Vice President and Assistant Treasurer.

Question and Answer Session

Operator

(Operator Instructions)
Moshe Orenbuch, TD Cowen.

Moshe Orenbuch

Great. Thanks. Team, I'm hoping that you could expand just a little bit on the comments about the slowing growth and how much of that you think is a result of the changes that you made and is any of it a result of changes in the environment, competition? Maybe just flesh that out for us if you would.

Jay Martin

Yeah, good question. It's hard to tell exactly. Obviously, our volume per dealer declines about 3.7% versus Q4 2023. And that's a good indicator of maybe the competitive environment, but we also have the complication this time where we have changed our scorecard. So it's hard to attribute to which of the two. But I will say that Q4 of 2024 was our second highest unit dollar by ever. So we do feel good about where we're at.

Moshe Orenbuch

Got you. And one of the things I always use as a guide to think about the adjusted yield is, how you've performed kind of in the previous period and usually there's a pretty good correlation and you did have like a roughly I think $60 million reduction in collections last quarter and yet the adjusted yield went up. Anything that we should kind of be aware of like, what drives that adjusted yield up in a period when collections levels are down?

Jay Martin

Yeah, so all things being equal, that declined last quarter, you would think would have a negative impact on the floating yield, the adjusted revenue as a percentage of average capital going forward. But what impacts the ultimate yield is the business we write in the subsequent period and our overall composition of the portfolio. So the yield that we recognize on the business we wrote in the fourth quarter increased our overall yield, so that more than offset the decline forecast collections we saw in the third quarter.

Moshe Orenbuch

Okay. Thank you.

Operator

John Rowan, Janney Montgomery Scott.

John Rowan

Hi, good afternoon, guys. When did you make the change to the scorecards?

Kenneth Booth

The score current changes made during Q3. When it first goes in, and it takes a little while to take effect. So I was having full effect until sometime in September.

John Rowan

Okay. I just -- I don't remember discussing that on the last quarter conference call. Was -- that's something that I guess came in after, I don't know -- was that something you disclosed at the time of the call last quarter?

Kenneth Booth

I don't know if we did or not. I thought we did, but I don't know, probably didn't have much impact on Q3.

John Rowan

Okay.

Jay Martin

I mean. John, we've talked about that we always adjust our forecast, both with the credit scorecard and our ongoing forecast to reflect recent trends in loan performance. Whether we specifically discussed this change or not, I don't recall but it's a common practice.

John Rowan

Okay. Well, I mean, obviously unit volume was down, was flat, relatively, year over year. It looks like subsequent to the quarter end you're down about 4% -- or no 3% relative to the prior quarter. And obviously dollar volumes off more than that because of the increase in the advanced rate. I mean, or the decrease in the advance rate.
I guess I'm just trying to holding on whether or not you're -- this is a reaction to kind of the chronic underperformance of the vintages over the last several years and whether you're, I don't know, kind of right sizing you buy box in light of the current environment which has been challenging to get the forecasting models correct.
I'm just trying to understand if you know those are related that you basically go out and you cut the advanced rate and you let a bunch of volume trade off.

Kenneth Booth

Yeah, I mean, I think we adjusted the scorecard to reflect trends that we've seen in the forecast. So that that's a part of it. I think there's also a chance that the competitive environment is a little more difficult than it was before too. And then, we're coming off our highest year ever. So we got harder comparable.

John Rowan

Okay. And then just last question for me. Obviously there was that there's a relatively large sequential decline in G&A expense. Is that just because of the weaker volume growth or is that there's just something one time in that, that item?

Jay Martin

Yeah. So the decline in G&A expense is primarily related to legal expense. We do see a fair amount of volatility in legal expense quarter to quarter, just based on where ongoing regulatory matters and legal matters are. We don't comment on those matters specifically. We don't go into any more detail than what we put in our [profile] file, in our file. That decline primarily (technical difficulty).

John Rowan

Okay. All right. Thank you.

Operator

Rob Wildhack, Autonomous Research.

Rob Wildhack

Hi guys. A couple of quarters in a row where the revisions to forecasted collections, they're still negative, but they're smaller negative. Perhaps any changes in the broader economy and things like that. Does that, is that a signal that you think the worst is behind you in terms of downward revisions to the forecast?

Jay Martin

Well, our forecast at any point in time reflects our best estimate. So we do factor in under performance we've seen in the past. We point out for the quarter -- we did see a smaller decline this quarter than we have more recent quarters like what you said, it was down $31 million or 0.3%. If you start digging into it by cohort, you'll see that most of the decline was on the '22 business. Hard to say why that continues to keep declining. But we do know our forecasting models perform best during relatively stable economic periods. They're less accurate during periods of volatility like we experienced pandemic with this cohort.
We also know others in our industry who have experienced similar or worse performance on the ''22 cohort. So we don't believe the trends unique to Credit Acceptance. But I would point out at this point, the 22 business is less material to our financial results. We originated a lower volume that year and we've collected about 66% of what we ultimately expect to collect going forward.
Our financial results going to be more heavily weighted on the '23 and '24 cohorts. We wrote more businesses those years and they're last season and we were happy to report this quarter that our forecasts were stable on those two cohorts.

Rob Wildhack

Okay. And you've also been pretty active in capital markets raised a lot of new capital in the past several quarters. I mean, when you did that, did you have a specific level of origination growth in mind? I guess I'm wondering if origination growth is going to be a lot slower for a while given the scorecard changes or competitive dynamics. What's the possibility that you're in a really meaningful excess capital position today?

Jay Brinkley

Well. Hey, Rob. This is Jay Brinkley. We know that tax time is always our busy season, right? And so we'd rather miss it on that side of it. So I think we stated on last quarter's call that we were going to be fairly conservative going into the unknowns related to the election.
And what impact that might have on the capital market. So, ended up with a solid cash position, but you know that this is the right time of year to be in that position. And we feel good about that going into our busy time when originations really pick up.

Rob Wildhack

Okay. Thank you.

Operator

Thank you. There are no more questions in the queue, and I would like to go ahead and turn the call back over to Mr. Martin for closing remarks. Please go ahead.

Jay Martin

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

Operator

Once again, this does conclude today's conference. Thank you for your participation. You may all disconnect.