Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation third 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 third 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 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 that decreased forecasted net cash flows by $69 million, or 0.7%, compared to a decrease in forecasted collection rates during the third quarter of 2022 that decreased forecasted net cash flows by by $87 million, or 0.9%. Forecasted profitability for consumer loans assigned in 2020 through 2022, that was lower than our estimates of September 30th, 2022, due to a decline in forecasted collection rates since the third quarter of 2022, and slower forecast net cash flow timing during 2023. primarily as a result of a decrease in consumer loan prepayments to below average levels. Unit and dollar volumes grew 13% and 10.5% respectively as compared to the third quarter of 2022. The average balance of our loan portfolio on a GAAP and adjusted basis increased 5.9% and 10.6% respectively as compared to the third quarter of 2022. An increase in the initial spread on consumer loan assignments to 21.4% compared to 20.2% on consumer loans assigned in the third quarter of 2022. An increase in our average cost of debt, which was primarily a result of higher interest rates on recently completed or extended secured financing, and the repayment of older secured financings with lower interest rates. Adjusted net income decreased 22% from the third quarter of 2022 to $140 million. Adjusted earnings per share decreased 20% from the third quarter of 2022 to $10.70. 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. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again and please stand by while we compile our Q&A roster. One moment for our first question. Our first question comes from John Rowan of Janine Montgomery Scott.