Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation second 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 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 second quarter 2023 earnings call. As you read our news release posted on the investor relations section of our website at ir.creditexceptance.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. excuse me, 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 GAAP and adjusted results for the quarter include a decrease in forecasted collection rates, which decreased forecasted net cash flows by $89 million, or 0.9%, compared to a decrease in forecasted collection rates during the second quarter of 2022, which decreased forecast and net cash flows by $43 million, or 0.5%. The $89 million decrease this quarter included the impact of an adjustment to our forecasting methodology, which decreased our estimate by $45 million, or 0.5%. In addition, forecast and net cash flow timing slowed, primarily as a result of the decrease in consumer loan prepayments, to below average levels. Changes in the amount and timing of forecasted net cash flows are recognized in our GAAP results in the period of change through provision for credit losses and our adjusted results, respectively, over the remaining forecast period of loans through finance charges. Unit and dollar volumes grew 12.8% and 8.3%, respectively, as compared to the second quarter of 2022. The average balance of our loan portfolio on a GAAP and adjusted basis increased 4.3% and 8.6% respectively as compared to the second quarter of 2022. The initial spread on consumer loans assigned increased to 21.2% compared to 20% on consumer loans assigned in the second quarter of 2022. Adjusted net income decreased 26% in the second quarter of 2022 to $140 million. Adjusted earnings per share decreased 23% from the first quarter of 2022 to $10.69. At this time, Ken Booth, our Chief Executive Officer, Jay Martin, our Senior Vice President, Finance and Accounting, and I will take your questions.

Thank you. At this time, if you'd like to ask a question, please press star 1-1 on your phone. Once again, that's star 1-1. Until we draw a question, press star 1-1 again. One moment for our first question. Our first question comes from Arjun Tuteja from Jaroslawski-Fraser. Your line is open.