Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation fourth 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. Please go ahead.

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

Thanks, Jay. Overall, we had another mixed quarter as it related to collections and originations, two key drivers of our business. Collections improved sequentially this quarter, with only our 2022 vintage continuing to underperform our expectations. while our other vintages were stable during the quarter. Overall, a small decline of 0.3% or $31 million in forecasted net cash flows. During the quarter, our growth slowed significantly. However, this was still our second highest Q4 unit in dollar volume ever. Our loan portfolio is now at a new record high of $8.9 billion on an adjusted basis, up 15% from last year. Our market share in our core segment of used vehicles financed by subprime consumers was 6.1% year to date through November, compared to 4.8% for the same period in 2023. Our slower growth was likely impacted by our Q3 scorecard change that has resulted in lower advance rates. Beyond these two key drivers, we continued making progress during the quarter, towards our mission of maximizing intrinsic value and positively changing the lives of our five key constituents, dealers, consumers, team members, investors, and the communities we operate in. We do this by providing a valuable product that enables dealers to sell vehicles to consumers regardless of their credit history. This allows dealers to make incremental sales to the roughly 55% of adults with other than prime credit. For these adults, it enables them to obtain a vehicle to get their jobs, take their kids to school, et cetera. It also gives them the opportunity to improve or build their credit. Our customers are couples like Marita and Steven, who experienced financial challenges after they moved from the Midwest to the South for a fresh start. Their financial challenges took a toll on their credit and their transportation. Steven's car broke down during his long commute to work. They tried to finance a new vehicle, but dealerships turned them away due to their credit. They had to rent cars at high costs so Stephen could get to work. Discouraged but not defeated, they found a dealership who approved them for a vehicle through credit acceptance. It was a moment of relief and a turning point in their lives. With a reliable vehicle, they regained stability, improved their credit, and felt supported along the way. For Marita and Stephen, credit acceptance was more than a lender. We were a jumpstart in their new life journey. As Marita and Stephen discovered, The benefits of our program don't end once the contract is signed. We strive to support our consumers throughout the life of the contract. As we have for many years, we are working with consumers impacted by hurricanes and more recently the wildfires, including suspending some of our collection efforts to allow those customers to prioritize their safety and most urgent needs. During the quarter, we financed 78,911 contracts for our dealers and consumers. We collected $1.3 billion overall and paid $65 billion in portfolio profit and portfolio profit expressed for our dealers. We added 902 new dealers for the quarter and now have our largest number of active dealers ever for our fourth quarter with 10,149 dealers. From an initiative perspective, we've made progress towards improving product innovation and our go-to-market approach. with the goal of supporting our viewers faster and more effectively than ever before. This requires teamwork, attention to detail, and an iterative process that attempts to make improvement every step of the way. We also continue to invest in our technology team to remain focused on modernizing both our key technology architecture and how our teams perform work to support this goal. During the quarter, we received five awards from Newsweek, Monster, Fortune, the Detroit Free Press, and Computer World, recognizing us as a great place to work. We continue to focus on making our amazing workplace even better. This makes 13 workplace awards for 2024, which is the most we've ever received. We support our team members in making a difference to what makes a difference to them. During Q4, we raised money in collected food for Stone's Soup Food Bank, And our team members also came together over the holiday season to pack 106,000 meals for local food banks. Now, Jay Martin and I will take your questions, along with Doug Bust, our Chief Treasury Officer, Jay Brinkley, our Senior Vice President and Treasurer, and Jeff Sutar, our Vice President and Assistant Treasurer.