Credit Acceptance Corporation

Good day, everyone, and welcome to the Credit Acceptance Corporation third quarter 2025 earnings call. A webcast recording 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.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation third 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. This time, I'll turn the call over to our Chief Executive Officer, Ken Booth, to discuss our third quarter results.

Thanks, Jay. Our results for this quarter reflected steady execution with declines in loan performance and year-over-year originations volume balanced by a portfolio that remains at a record high. Loan performance declined this quarter with our 2022, 2023, and 2024 vintages underperforming our expectations and our 2025 vintage exceeding our expectations. while our other vintages were stable during the quarter. Overall, forecasted net cash flows declined by 0.5% or $59 million. During the quarter, we experienced a decline in unit and dollar volumes, though our loan portfolio remained at its record high of $9.1 billion on an adjusted basis, up 2% from last Q3. Our market share in our core segment of used vehicles financed by subprime consumers was 5.1%, for the first eight months of the year, down from 6.5% from the same period in 2024. Our unit volume was impacted by our third quarter 2024 scorecard change that has resulted in lower advance rates and is also likely impacted by increased competition. Beyond these two key drivers, We continue 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 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, etc. It also gives them the opportunity to improve or build their credit. Our customers are people like Becky, a single mother who has faced significant financial challenges. Her career as a chef meant that her hours and her paycheck were unpredictable. Between this and needing frequent car repairs, she was living paycheck to paycheck and struggling with poor credit after falling behind on her bills. Determined to turn things around, she was eventually able to finance a dependable vehicle through credit acceptance, which gave her stability and relief despite continuing to face financial hurdles. Credit acceptance worked with Becky to come up with a realistic payment plan and provide her the flexibility she needed to get back on track. Becky hopes to be able to purchase a home in the near future and urges others with similar struggles to look to credit acceptance. During the quarter, we financed almost 80,000 contracts for our dealers and consumers. We collected $1.4 billion overall, we paid $52 million in dealer holdback, and accelerated dealer holdback to our dealers. We enrolled over 1,300 new dealers and had 10,180 active dealers during the quarter. We continue 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 innovation, frictionless dealer experiences, and we've increased the speed that we deliver enhancements to our dealers by almost 70% compared to a year ago. This allows us to innovate faster and accelerate value to our business and customers. During the quarter, we received four awards for our amazing workplace, including being named one of the best workplaces in financial services and insurance by The Great Place to Work and Fortune Magazine for the 11th year in a row. We're proud to be one of the few companies in our industry that offers remote-first work. We work hard to ensure that every team member feels supported and connected, keeping our culture strong. In July, team members from around the country gathered in Detroit to celebrate the company's 53rd anniversary. During this celebration, we recognized eight of our team members, each of whom had been with the company for more than 30 years. Additionally, on a personal note, this will be my last quarterly earnings call. After starting my career over 34 years ago, including the last 22 years at Credit Acceptance, I've decided to retire and embark on the next chapter of my life. My decision wasn't easy. I will miss working with our amazing team members, and I'm so proud of everything we've accomplished together. But I believe the company is in a great position for the future. During his four-and-a-half-year tenure on the board, Linayak has been an invaluable partner as he modernized our approach to the business. His strong mix of experience in technology, marketing, engineering, and product along with a proven track record of driving transformation and growth, will be an excellent complement to our experienced management team. I look forward to both working alongside Vinayak as he transitions into his new role and continuing to serve the company as a board member going forward. At this time, Jay Martin and I will take your questions, along with Andrew Rostemi, our Chief Product and Marketing Officer, Jay Brinkley, our Senior Vice President and Treasurer, and Jeff Soutar, our Vice President and Assistant Treasurer.