Credit Acceptance Corporation Q3 FY2025 earnings call

• Loan performance: 2022, 2023, and 2024 vintages underperformed; 2025 vintage exceeded; other vintages stable. Forecasted net cash flows down 0.5% or $59 million.
• Portfolio: Loan portfolio at record high of $9.1 billion adjusted, up 2% from last Q3.
• Market share: 5.1% for first 8 months of year, down from 6.5% same period 2024.
• Volume: Impacted by 2024 Q3 scorecard change and increased competition.
• Mission progress: Enabling dealers to sell to subprime consumers, helping consumers like Becky. She was able to finance a vehicle through Credit Acceptance.
• Engineering: Modernizing loan origination system, increased speed of enhancements by almost 70% vs year ago.
• Awards: 4 awards for amazing workplace, including 11th year as Best Workplace in Financial Services and Insurance.
• CEO update: Ken Booth retiring, Vinayak joining Board as new role, Booth to continue as Board member.

The loan portfolio remained at a record high of $9.1 billion on an adjusted basis, up 2% from last Q3. Loan performance saw declines with 2022, 2023, and 2024 vintages underperforming expectations, while 2025 vintage exceeded expectations and other vintages were stable. Forecasted net cash flows declined by 0.5% or $59 million. Market share in the core segment of used vehicles financed by subprime consumers was 5.1% for the first 8 months of the year, down from 6.5% in the same period of 2024. Unit volume was impacted by the third quarter 2024 scorecard change and increased competition.

• ABS covenants: Still have 10% forecast shortfall early amortization covenant in warehouse facilities and ABS securitization debt; no securitizations close to 90% trigger.
• G&A: GAAP G&A had contingent losses, but adjusted G&A is consistent with prior quarters as a percentage of average capital.
• Legal: $15 million contingent loss related to ongoing legal matters, can't comment beyond disclosures.
• Affordability: Tariffs or federal policies impacting consumer affordability could negatively affect the business.
• Competitive: High competition affecting volume, market share, and dealer attrition.

Q: Your asset-backed securities used to have a covenant about 10% forecast shortfall entering early amortization. Does current ABS still have that and are any close?

A: Still have the covenant in warehouse facilities and ABS securitization debt; no outstanding securitizations close to 90% trigger.

Q: G&A was higher than expected, any onetime items in $36 million G&A expense?

A: Look at adjusted results to eliminate onetime charges; GAAP had $23.4 million contingent loss in Q2 and $15 million this quarter.

Q: What's the repurchase authorization?

A: Just over 2 million shares currently under the Board authorization.

Q: Impact of tariffs and federal policy?

A: Affordability impacts are negative; tariffs change often, hard to gauge specific impact on business.

Q: Scorecard change and potential for change?

A: Scorecard adjusted based on loan performance and capital market conditions; not permanent, adjusted as situation changes.

Q: Volume, market share, and prepays?

A: Volume affected by competition and subprime market dynamics; prepays lag in current competitive environment.

Q: $15 million contingent loss related to legal matters?

A: Ongoing legal matter, can't comment beyond disclosures in 10-Q and earnings release.

Q: Capital markets activity?

A: Favorable environment for ABS issuers; $1.6 billion unused availability on revolving credit facilities