Credit Acceptance Corporation Q2 FY2025 earnings call

• Loan performance declined with 2022, 2023, 2024 vintages underperforming and 2025 vintage exceeding expectations; forecasted net cash flows declined by 0.5% or $56 million.
• Loan portfolio reached $9.1 billion adjusted, up 6% from last Q2. Market share in core segment down from prior year.
• Continued progress towards mission of maximizing intrinsic value and positively changing lives of constituents; financed over 85,000 contracts, collected $1.4 billion, paid $63 million in dealer holdback.
• Invested in engineering team modernizing loan origination system; received awards for amazing workplace, with 93% of team members agreeing it's a great place to work; raised over $270,000 for charities.

Loan portfolio reached a new record-high of $9.1 billion on an adjusted basis, up 6% from last Q2. Market share in core segment of used vehicles financed by subprime consumers was 5.4% for the first 5 months of 2025, down from 6.6% for the same period in 2024. Unit volume was impacted by Q3 2024 scorecard change and increased competition.

• Forecasted net cash flows declined by 0.5% or $56 million.
• Loan portfolio still reached record-high despite volume declines.
• Continued adjustment of expectations on new loans to address underperformance reflected in initial estimates.

• Economic volatility impacting loan performance accuracy of forecast models.
• Competitive environment leading to lower unit and dollar volumes.
• Potential underperformance of older vintages leading to returns below cost of capital.

Q: Noted collections were down again, and adjusted yield higher. What drives that?

A: Decline in forecasted collections would drive adjusted yield down, but ultimate yield is dependent on volume and pricing of new loan originations; new loan yields more than offset decline in yield due to loan performance.

Q: Loan size continues to decline. Different type of card or borrower?

A: Different mix of consumer, not necessarily lower or higher quality, but different mix of vehicles financed due to post-pandemic variability.

Q: Understand return profile, with adjusted return on capital 8.5% vs cost of capital 7.4%. Are some vintages generating negative economic return?

A: '22 vintage has underperformed most, but aggregate still producing return on capital in excess of cost of capital assuming current collection expectations; loans still profitable.

Q: Talk about competitive environment. Expect pullback from traditional providers?

A: Competitive environment was intense in first half of 2025; volume per dealer went down; tariff impacts on consumers negative; tough comps due to last year being highest volume year ever; scorecard change in Q3 2024 helps with comparables going forward