Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation Second 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 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 Second 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 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 Chief Executive Officer Ken Booth to discuss our second quarter results.

Thanks, Jay. Our results for this quarter reflect the steady execution with declines in loan performance and year-over-year origination volumes balanced by continued portfolio growth. Loan performance declined this quarter with our 2022, 2023, and 2024 vintages underperforming our expectations and our 2025 vintages exceeding our expectations, while our other vintages were stable during the quarter. Overall forecasted net cash flows declined by 0.5% or $56 million. During the quarter, we experienced a decline in unit and dollar volumes, though our loan portfolio still reached our new record high of $9.1 billion on an adjusted basis, up 6% from last Q2. Our market share in our core segment of used vehicles financed by subprime consumers was 5.4% for the first five months of the year, down from 6.6% for the same period in 2024. Our unit volume was impacted by our Q3 2024 scorecard change that resulted in lower advance rates and likely impacted by 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 credit history. This allows dealers to make incremental sales. For the 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 Sugar from Oklahoma. Sugar's life took a dramatic turn when the former credit counselor was arrested for driving under the influence in 2014. Overwhelmed with shame and having lost her license, she realized she needed to make a profound change. She sought help from Women's First Step, a treatment facility, and after graduating from the program eight months later, she began rebuilding her life. She regained her license, started a stable career, and achieved a powerful symbol of victory when she was approved by us for a car loan. This journey of recovery came full circle when Sugar was hired to work for the treatment facility that had helped her dedicate herself to her new mission of helping others find their own second chance. During the quarter, we financed over 85,000 contracts for our dealers and consumers. We collected $1.4 billion overall and paid $63 million in dealer holdback and accelerated dealer holdback to our dealers. We enrolled 1,560 new dealers and had 10,655 active dealers during the quarter. We continued to invest in our engineering team, which is focused on modernizing both our key technology architecture and how our teams perform work. The engineering team has made significant strides in modernizing our loan origination system. This modernization has laid a strong foundation for us to deploy innovative, frictionless dealer experiences. It has increased the velocity at which we release features from a matter of months to a matter of days, allowing us to accelerate value to our business and customers. During the quarter, we received two awards for our amazing workplace, including being named one of the 100 Best Companies to Work For by Great Place to Work and Fortune Magazine. With 93% of team members agreeing that credit acceptance is a great place to work, this year marked our 11th time in the last 12 years receiving this prestigious award, moving up five spots in the number 34 ranking. We support our team members in making a difference to what makes a difference to them, raising over $270,000 for St. Jude's Research Hospital and Make-A-Wish Foundation. Through these donations, we are able to fund wishes for 15 children, bringing our total to 95 wishes granted. Now, Jay Martin and I will take your questions along with Doug Busk, our Chief Treasury Officer, and Jay Brinkley, our Senior Vice President and Treasurer.