Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation first quarter 2025 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 now 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 2025 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 say 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 the GAAP measures. At this time, I will turn the call over to our Chief Executive Officer, Ken Booth, to discuss the first 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, 2024, and 2025 vintages modestly underperforming our expectations, while our other vintages were stable during the quarter. Overall forecast, the net cash flow declined by 0.2%, or $21 million, which was our smallest decline of the last eight quarters. During the quarter, our loan portfolio reached a new record high of $9.1 billion on an adjusted basis, up 10% from Q1 last year, although we experienced a decline in unit dollar volume growth. Our market share in our core segment of used vehicles financed by subprime consumers was 5.2% for the first two months of the year, compared to 6% for the same period in 2024. Our unit volume was likely impacted by our Q3 2024 scorecard change that has resulted in lower advance rates and increased competition. 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 crime history. This allows dealers to make incremental sales to roughly 55% of adults with other than prime credit. For these adults, it enables them to obtain a vehicle to get to their jobs, take their kids to school, et cetera. It also gives them the opportunity to improve or build their credit. Our customers are people like Vivian from Maryland. Vivian is an elementary school assistant, a role that requires her to consistently and timely show up for children with disabilities and special needs. After her vehicle was towed in an accident, she was left without reliable transportation. She needed a new vehicle, but worried about her ability to secure financing due to her poor credit history. Her fears were confirmed when she was turned down for financing multiple times. Discouraged but not defeated, she found a dealership who approved her to finance a vehicle through credit acceptance. Vivian described the moment she was approved for financing as a turning point in her life. With a reliable vehicle, she regained her independence. Vivian plans to use credit acceptance again when it comes time to finance another vehicle, knowing she would be supported by a team that listens and puts her at ease. During the quarter, We financed over 100,000 contracts for our dealers and consumers. We collected $1.4 billion overall and paid $68 million in dealer holdback and accelerated dealer holdback for our dealers. We enrolled 1,617 dealers and now have our second highest quarterly number of active dealers with 10,789 dealers. From an initiative perspective, we've made progress with our go-to-market approach with the goal of supporting our dealers faster, more effectively, 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, remain focused on modernizing both our key technology architecture and how our teams work to support this goal. During the quarter, we were named the top Workplace USA award winner for the fifth year in a row with the number two ranking among companies of our size. Last year, we were recognized as the record 13 workplace awards, and we continue to focus on making our amazing workplace even better. We support our team members in making a difference to what makes a difference to them, raising money for five different charitable organizations that were selected by our team members. Now, Jay Martin and I will take your questions, along with Doug Voss, our Chief Treasury Officer, Jay Brinkley, our Senior Vice President and Treasurer, and Jeff Suter, our Vice President and Assistant Treasurer.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our first question comes from Moshe Orenbuck with TD Cowan. You may proceed.