Credit Acceptance Corporation

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

Thank you. Good afternoon and welcome to the Credit Acceptance Corporation First Quarter 2023 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. Our gap and adjusted results for the quarter include forecasted profitability per consumer loan assignment for consumer loans assigned in 2020 through 2022 that was lower than our estimates at March 31st, 2022 due to a decline in forecasted collection rates during the last three quarters of 2022 and slower net cash flow timing during the first quarter of 2023 primarily as a result of a decrease in consumer loan prepayments. Stable forecasted collection rates during the first quarter of 2023, with forecast net cash flows from our loan portfolio increasing by $9.4 million, 4.1%. In comparison, our results for the first quarter of 2022 reflected elevated consumer loan performance, that followed the distribution of federal stimulus payments and enhanced unemployment benefits. Growth in consumer loan assignment volume as unit and dollar volumes grew 22.8% and 18.6% respectively as compared to the first quarter of 2022. The average balance of our loan portfolio on a GAAP and adjusted basis for the first quarter of 2023 increased 0.8% and 5.1% respectively as compared to the first quarter of 2022. The average balance of our loan portfolio on a GAAP and adjusted basis for the first quarter of 2023 increased 1% and 1.3% respectively as compared to the fourth quarter of 2022. The initial spread on consumer loans assigned in the first quarter of 2023 was 21% compared to 19.4% on consumer loans assigned in the first quarter of 2022, and 20.9% on consumer loans assigned in the fourth quarter of 2022. Growth in operating expenses of 14.4% as compared to the first quarter of 2022, primarily due to an increase in the number of team members in our engineering department as we are investing in our business to enhance our product transform our technology systems to be more dealer and customer focused. Adjusted net income decreased 35.6% from the first quarter of 2022 to $127 million. Adjusted earnings per share decreased 29.4% from the first quarter of 2022 to $9.71. At this time, Ken Booth, our Chief Executive Officer, Jay Martin, our Senior Vice President in Finance and Accounting, and I will take your questions.

If you would like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself in the queue, please press star 1-1 again. Our first question comes from Moshe Orenbach with Credit Suisse. Your line is open.