Credit Acceptance Corporation

Today, everyone, and welcome to the Credit Acceptance Corporation fourth 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 Financial Officer Jay Martin.

Thank you. Good afternoon and welcome to the Credit Acceptance Corporation fourth 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 majors reconcile to GAAP majors. At this time, I will turn the call over to our Chief Executive Officer, Ken Booth, to discuss our fourth quarter results.

Thanks, Jay. Our GAAP and adjusted results for the quarter include adjusted net income of $129 million, which is a 17% decrease from the fourth quarter of 2022. Adjusted earnings per share of $10.06, which is a 14% decrease from the fourth quarter of 2022. In terms of collections, we had a decrease in forecasted collection rates that decreased forecasted net cash flows for our loan portfolio by $57 million, or 0.6%, compared to a decrease in forecasted collection rates during the fourth quarter of 2022 that decreased forecasted net cash flows for our loan portfolio by $41 million, or 0.5%. We also had forecasted profitability for consumer loans assigned in 2020 through 2022 that was lower than our estimates at December 31, 2022, due to a decline in forecasted collection rates since the fourth quarter of 2022. Also, we had slower forecasts of net cash flow timing during 2023, primarily as a result of a decrease in consumer loan prepayments to below historical average levels. From a growth standpoint, unit and dollar volumes grew 26.7%, and 21.3% respectively as compared to the fourth quarter of 2022. The average balance of our loan portfolio is now the largest it has ever been. On a GAAP and adjusted basis, it increased by 9% and 13% respectively as compared to the fourth quarter of 2022. Our results also included an increase in the initial spread on consumer loan assignments to 21.7% compared to 20.9% on consumer loans assigned in the fourth quarter of 2022, and an increase in our average cost of debt, which was primarily due to higher interest rates on recently completed or extended secured financing, and the repayment of older secured financings with lower interest rates. At this time, Doug Busk, our Chief Treasury Officer, Jay Martin, and I will take your questions.