Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation first 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 Chief Financial Officer Jay Martin.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation first quarter 2024 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 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. At this time, I will turn the call over to our Chief Executive Officer, Ken Booth, to discuss our first quarter results.

Thanks, Jay. Our gap in adjusted results for the quarter as compared to the first quarter of 2023 includes the following. First, related to earnings, adjusted net income of $117 million, which is an 8% decrease from the first quarter of last year, and adjusted earnings per share of $9.28, which is a 4% decrease from the first quarter of last year. Second, related to collections, a decrease in forecasted collection rates that decreased forecasted net cash flows from our loan portfolio by $31 million, or 0.3%, compared to stable forecasted collection rates during the first quarter of last year that increased forecasted net cash flows from our loan portfolio by $9 million, or 0.1%. Also, forecasted profitability for consumer loans signed in 2020 through 2022 that was lower than our estimates at March 31st, 2023 due to a decline in forecasted collection rates since the first quarter of 2023 and slower forecasted net cash flow timing during 2023 and the first quarter of 2024. This was primarily a result of a decrease in consumer loan prepayments, which remain at below average levels. Then related to volume, unit and dollar volumes grew 24.1% and 20.2% respectively as compared to the first quarter of last year, and the average balance of our loan portfolio is now the largest it has ever been. On a GAAP and adjusted basis, it increased by 12% and 16% respectively as compared to the first quarter of last year. Additionally, An increase in the initial spread on consumer loan assignments to 22% compared to 21% on consumer loan assignments in the first quarter of 2023. Also an increase in our average cost of debt from 5% to 7%, which was primarily due to higher interest rates on recently completed or extended secured financings and recently issued senior notes, coupled with the repayment of older secured financings and senior notes with lower interest rates. Finally, the decrease in common shares outstanding since the first quarter of 2023 due to stock repurchases of approximately 728,000 shares, or 6% of the shares outstanding as of March 31st, 2023. At this time, Doug Busk, our Chief Treasury Officer, along with Jay and I, will take your questions.