Core Viewpoint - Credit Acceptance Corporation has successfully closed a $500 million offering of 6.625% senior notes due 2030, with the proceeds primarily aimed at funding the redemption of existing notes and for general corporate purposes [1][3]. Group 1: Offering Details - The company announced the closing of a private offering of $500 million aggregate principal amount of its 6.625% senior notes due 2030 at an issue price of 100% of the principal amount [1]. - The net proceeds from the offering are expected to be approximately $492.9 million after deducting fees and expenses [3]. Group 2: Redemption of Existing Notes - The company completed the redemption of all its 6.625% senior notes due 2026 in accordance with the indenture governing those notes [2]. - A portion of the net proceeds from the new offering was used to fund the redemption of the 2026 notes [3]. Group 3: Use of Proceeds - The remaining net proceeds from the offering will be utilized for general corporate purposes [3]. Group 4: Regulatory Compliance - The notes were offered only to qualified institutional buyers under Rule 144A of the Securities Act, and they will not be registered under the Securities Act [4].

Group 1 - Credit Acceptance Corporation announced a conditional notice of redemption for its 6.625% senior notes due 2026, totaling $400.0 million, scheduled for February 28, 2025 [1][2] - The redemption is contingent upon the company receiving at least $400.0 million from the offering of senior notes due 2030, which was also announced on the same day [1] - A notice of conditional full redemption will be sent to the holders of the 2026 notes by the trustee, detailing the terms and conditions of the redemption [2]

Core Viewpoint - Credit Acceptance Corporation has successfully priced $500 million of its 6.625% senior notes due 2030, increasing the offering size from the previously announced $400 million [1] Group 1: Offering Details - The notes are priced at 100% of the principal amount and the closing of the sale is expected around February 28, 2025, subject to customary closing conditions [1] - The net proceeds from the offering will be used to redeem all outstanding $400 million 6.625% senior notes due 2026 and for general corporate purposes [1] Group 2: Regulatory Information - The notes are being offered only to qualified institutional buyers under Rule 144A of the Securities Act of 1933 and will not be registered under the Securities Act [2]

Core Points - Credit Acceptance Corporation plans to offer $400.0 million in senior notes due 2030 to fund the redemption of its outstanding $400.0 million 6.625% senior notes due 2026 [1] - The net proceeds from the offering will also cover fees and expenses related to the redemption process [1] - Until the proceeds are applied, they may be invested in short-term investments or used to repay borrowings under the revolving credit facility [1] Regulatory Information - The notes will be offered only to qualified institutional buyers under Rule 144A of the Securities Act of 1933 [2] - The notes will not be registered under the Securities Act and cannot be sold in the U.S. without registration or an applicable exemption [2] - This announcement does not constitute a notice of redemption for the 2026 notes [2]

Consumer Loans Performance - In 2024, 80.6% of Consumer Loans assigned had either FICO scores below 650 or no FICO scores, compared to 80.9% in 2023 and 84.8% in 2022[15]. - In 2024, the total dollar volume of Consumer Loan assignments reached $4,618.4 million, a significant increase from $4,147.8 million in 2023, representing a growth of approximately 11.3%[51]. - The average balance of the Loan portfolio increased by 13.6%, marking the largest balance ever for the Company[146]. - The average yield on the Loan portfolio remained stable at 26.5%[187]. - The average forecasted collection percentage for Consumer Loans as of December 31, 2024, was 66.5%, compared to an initial forecast of 67.2%[163]. - Consumer Loans assigned in 2022 continued to underperform expectations, leading to a reduction in forecasted collection rates[156]. - The company monitors Consumer Loan performance monthly, adjusting forecasts based on actual performance data as loans age[206]. Revenue and Financial Performance - Total revenue for the year ended December 31, 2024, was $2,162.4 million, an increase of $260.5 million or 13.7% compared to 2023[185]. - Finance charges represented 92.2% of total revenue in 2024, slightly down from 92.3% in 2023 and up from 92.0% in 2022[25]. - Finance charge revenue increased by $237.3 million, or 13.5%, primarily due to an increase in the average net Loans receivable balance, which rose by $902.9 million to $7,530.7 million[187]. - The provision for credit losses increased by $78.5 million, or 10.7%, totaling $814.7 million, driven mainly by forecast changes[191]. - Net income decreased to $247.9 million, down $38.2 million or 13.4% from the previous year[185]. Dealer Relationships and Operations - The number of Dealer enrollments increased to 6,088 in 2024 from 5,605 in 2023, while active Dealers rose to 15,463 from 14,174[27]. - The Company relies on Dealers for Consumer Loan origination, and high levels of Dealer attrition could adversely affect operations[75]. - The company utilizes a Dealer rating system to assess performance, which influences the amount paid to Dealers for Consumer Loans, aligning interests among Dealers, consumers, and the company[40]. - The average volume per active Dealer increased by 6.4% in 2024, indicating improved performance among Dealers[178]. Regulatory and Legal Risks - The company is subject to various regulations, including the Truth in Lending Act and the Equal Credit Opportunity Act, which could materially affect operations if not complied with[55]. - Regulatory investigations by state and federal agencies are ongoing, which may have a material adverse impact on the company[57]. - The Company received multiple subpoenas from the New York State Attorney General regarding origination, collection, and securitization practices, with potential litigation for violations of various laws[59]. - The Company intends to vigorously defend itself against the allegations in the ongoing litigation[60]. Economic and Market Conditions - Economic downturns could lead to increased delinquencies, defaults, and losses on Consumer Loans, adversely impacting financial results[74]. - The market for consumers who do not qualify for conventional automobile financing is highly competitive, with various financial institutions and dealerships competing for this segment[49]. - The company is subject to competition from various financing sources, which may affect its ability to compete successfully in the automobile finance market[72]. Debt and Financial Management - The company has substantial debt, which may hinder its ability to generate sufficient cash flows to service obligations and could require asset sales or refinancing[94]. - Interest expense rose significantly by $153.0 million, or 57.4%, reaching $419.5 million, attributed to an increase in the average outstanding debt balance and average cost of debt[196]. - The average outstanding debt balance increased by $1,064.0 million to $5,849.7 million, contributing to higher interest expenses[196]. - The company's debt agreements impose covenants that restrict business operations, potentially preventing favorable business activities and impairing strategic execution[90]. Cybersecurity and Technology Risks - The Company has implemented a comprehensive information security incident management plan to respond effectively to cybersecurity threats[124]. - Cybersecurity threats have not materially affected the company to date, but future incidents could have a significant adverse effect[100]. - The company relies on technology for processing significant amounts of data, and any loss of these systems could interrupt business operations[99]. - The rapid evolution of technology may require additional investment in information systems to support future growth[102]. Collection Rates and Forecasting - The decline in forecasted collection rates decreased forecasted net cash flows from the Loan portfolio by $314.0 million, or 3.1%, compared to a decrease of $206.3 million, or 2.3% in 2023[145]. - The forecasted collection rates for Consumer Loans assigned in 2021 were 63.8%, down from an initial forecast of 66.3%[163]. - An adjustment in forecasting methodology during Q2 2024 reduced forecasted net cash flows by $147.2 million, or 1.4%, and increased provision for credit losses by $127.5 million[156].

Core Viewpoint - Credit Acceptance Corporation (CACC) reported better-than-expected fourth-quarter 2024 results, with significant earnings growth and revenue increase, despite rising operating expenses [1][4]. Financial Performance - Earnings per share for Q4 2024 were $12.26, exceeding the Zacks Consensus Estimate of $6.82, marking a 68.2% year-over-year increase [1]. - For the full year 2024, earnings per share were $19.88, surpassing the consensus estimate of $14.47 but reflecting a 9.6% decline from the previous year [3]. - Adjusted net income for Q4 2024 was $126 million or $10.17 per share, slightly down from $129.1 million or $10.06 per share in the prior-year quarter [2]. Revenue and Expenses - Total GAAP revenues for Q4 2024 were $565.9 million, a 15.1% increase year over year, beating the consensus estimate of $562.4 million [4]. - For the full year 2024, total GAAP revenues reached $2.16 billion, up 13.7% from the prior year, meeting the consensus estimate [4]. - Operating expenses increased by 6.4% to $121.6 million [5]. Loan and Asset Growth - Net loans receivables as of December 31, 2024, were $7.85 billion, a 12.9% increase from December 2023 [5]. - Total assets grew to $8.85 billion as of December 31, 2024, up from $7.61 billion a year earlier [5]. - Total shareholders' equity remained stable at $1.75 billion [5]. Industry Context - Credit Acceptance is positioned for revenue growth due to increasing demand for consumer loans, despite challenges from rising expenses and potential asset quality issues [6]. - Peer performance highlights include Capital One's adjusted earnings of $3.09 per share, surpassing estimates, and Ally Financial's adjusted earnings of 78 cents per share, reflecting a 95% year-over-year increase [7][8].

Core Insights - Credit Acceptance (CACC) reported revenue of $565.9 million for Q4 2024, marking a year-over-year increase of 15.1% and exceeding the Zacks Consensus Estimate of $562.4 million by 0.62% [1] - The company's EPS for the same quarter was $12.26, a significant increase from $7.29 a year ago, resulting in an EPS surprise of 79.77% compared to the consensus estimate of $6.82 [1] Financial Performance Metrics - Other income for the quarter was reported at $22.90 million, surpassing the estimated $19.31 million, reflecting a year-over-year increase of 24.5% [4] - Premiums earned amounted to $24.80 million, slightly below the estimated $25.14 million, but still showing a year-over-year increase of 14.8% [4] - Finance charges reached $518.20 million, exceeding the estimated $510.97 million, with a year-over-year increase of 14.8% [4] Stock Performance - Over the past month, shares of Credit Acceptance have returned +11.8%, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Credit Acceptance (CACC) reported quarterly earnings of $12.26 per share, significantly exceeding the Zacks Consensus Estimate of $6.82 per share, and up from $7.29 per share a year ago, representing an earnings surprise of 79.77% [1] - The company posted revenues of $565.9 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.62% and increasing from $491.6 million year-over-year [2] - Credit Acceptance shares have increased approximately 11.8% year-to-date, outperforming the S&P 500's gain of 2.7% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $6.82, with expected revenues of $556.82 million, and for the current fiscal year, the EPS estimate is $33.57 on revenues of $2.35 billion [7] - The estimate revisions trend for Credit Acceptance is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - Consumer Loans industry, to which Credit Acceptance belongs, is currently in the top 33% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Encore Capital Group (ECPG), is expected to report quarterly earnings of $1.55 per share, reflecting a year-over-year increase of 24%, with revenues anticipated to be $373.71 million, up 34.7% from the previous year [9][10]

Financial Performance - Consolidated net income for Q4 2024 was $151.9 million, or $12.26 per diluted share, compared to $93.6 million, or $7.29 per diluted share in Q4 2023, representing a 62.2% increase in net income[2] - Adjusted net income for Q4 2024 was $126.0 million, or $10.17 per diluted share, slightly down from $129.1 million, or $10.06 per diluted share in Q4 2023[2] - GAAP net income for Q4 2024 was $151.9 million, a 62.3% increase from $93.6 million in Q4 2023, while net income for the year decreased by 13.4% to $247.9 million[33] - Adjusted net income decreased by 2.4% ($3.1 million) for Q4 2024 compared to Q4 2023, and by 10.6% ($56.7 million) for the full year[42] - Economic profit declined by 8.2% for Q4 2024 and by 23.1% for the full year compared to the same periods in 2023[42] - Adjusted net income for 2024 was $478.9 million, down from $535.6 million in 2023, representing a decrease of 10.6%[55] - GAAP net income decreased to $247.9 million in 2024 from $286.1 million in 2023, a decline of 13.3%[55] Loan Portfolio and Consumer Loans - The average balance of the loan portfolio increased by 14.0% on a GAAP basis and 16.5% on an adjusted basis compared to Q4 2023[3] - Consumer Loan assignment unit volume growth slowed to 0.3% year-over-year, down from 26.7% in Q4 2023[3] - The initial spread on Consumer Loan assignments increased to 22.4% from 21.7% in Q4 2023[3] - Consumer loan assignment volume for 2023 reached $4,147.8 million, with a unit volume of 332,499, while the forecast for 2024 is expected to increase to $4,618.4 million with a unit volume of 386,126[11] - The average initial loan term for Consumer Loans in 2024 is projected to be 61 months, consistent with previous years[13] - The profitability of loans is primarily driven by the net cash flows from the spread between forecasted collection rates and advance rates, with a focus on maintaining acceptable profitability levels[14] Collection Rates and Forecasts - The forecasted collection rate for 2024 Consumer Loans was 66.5% as of December 31, 2024, down from an initial forecast of 67.2%[7] - The forecasted collection percentage for dealer loans in 2024 is 65.4%, while for purchased loans it is 70.7%, indicating a variance of -0.9% and 0.0% respectively from initial forecasts[19] - The forecasted collection rate for 2024 Consumer Loans assigned from January 1 to September 30 is 66.4%, while for the period from October 1 to December 31, it is 66.8%[17] - The risk of material changes in forecasted collection rates decreases as Consumer Loans age, with over 90% of expected collections realized for loans assigned in 2020 and prior[17] - The company has experienced variances in forecasted collection rates, with 2022 loans underperforming compared to initial estimates, while 2019 and 2020 loans have exceeded expectations[18] Expenses and Provisions - Provision for credit losses decreased by 24.6% ($40.3 million) in Q4 2024, attributed to a smaller decline in Consumer Loan performance[35] - The total provision for credit losses for the year ended December 31, 2024, was $814.7 million, an increase of $78.5 million from $736.2 million in 2023[38] - Interest expense increased by 57.4% ($153.0 million), driven by a rise in average cost of debt and outstanding debt balance[10] - Operating expenses increased by 9.2% ($42.4 million), with salaries and wages expense up by 10.3% ($29.0 million) due to team expansion and higher medical claims[40] Debt and Capital - The average debt increased by 24.4% to $6,202.5 million in Q4 2024, compared to $4,986.3 million in Q4 2023[33] - Adjusted average capital increased by 19.3% ($1.4 billion) for Q4 2024 compared to Q4 2023, reflecting growth in the loan portfolio[42] - GAAP average debt increased to $5,849.7 million in 2024 from $4,785.7 million in 2023, an increase of 22.2%[55] - Adjusted average capital rose to $8,140.5 million in 2024 from $6,909.8 million in 2023, an increase of 17.8%[55] Revenue and Earnings - Total revenue for Q4 2024 was $565.9 million, a 15.1% increase from $491.6 million in Q4 2023[77] - Adjusted revenue reached $396.4 million, up from $382.4 million in the previous quarter and $393.1 million in the same quarter last year[47] - Basic net income per share for Q4 2024 was $12.39, compared to $7.33 in Q4 2023, showing a 69.5% increase[77] Other Financial Metrics - The average cost of debt rose from 6.3% to 7.2% due to higher interest rates on new financings[3] - The company reported a loss on the sale of a building amounting to $23.7 million, aimed at reducing excess office space and associated costs[40] - Cash and cash equivalents rose significantly to $343.7 million as of December 31, 2024, compared to $13.2 million at the end of 2023[79] - Total assets increased to $8,854.6 million as of December 31, 2024, up from $7,610.2 million a year prior, marking a 16.3% increase[79]

Financial Performance - Credit Acceptance Corporation reported consolidated net income of $151.9 million, or $12.26 per diluted share, for Q4 2024, compared to $93.6 million, or $7.29 per diluted share, in Q4 2023 [1] - Adjusted net income for Q4 2024 was $126.0 million, or $10.17 per diluted share, compared to $129.1 million, or $10.06 per diluted share, in Q4 2023 [1] - The average balance of the loan portfolio increased by 14.0% on a GAAP basis and 16.5% on an adjusted basis compared to Q4 2023 [4] Collection Rates and Profitability - A smaller decline in forecasted collection rates resulted in a decrease of $31.1 million, or 0.3%, in forecasted net cash flows from the loan portfolio compared to a decrease of $57.0 million, or 0.6%, in Q4 2023 [2] - Forecasted profitability for Consumer Loans assigned in 2021 through 2024 was lower than estimates due to a decline in forecasted collection rates and slower cash flow timing [3] - The initial spread on Consumer Loan assignments increased to 22.4% compared to 21.7% in Q4 2023 [5] Debt and Share Repurchases - The average cost of debt increased from 6.3% to 7.2% due to higher interest rates on recent financings [6] - The company repurchased approximately 590,000 shares, or 4.7% of shares outstanding as of December 31, 2023 [7] Consumer Loan Metrics - Consumer Loan unit volume growth slowed significantly to 0.3% in Q4 2024 compared to 26.7% in Q4 2023 [4] - The number of active dealers increased by 4.7%, while the average volume per active dealer declined by 3.7% [31] - The forecasted collection rates for Consumer Loans assigned in 2022 and 2024 declined, while those for earlier years remained consistent with expectations [12][23] Changes in Loan Assignment Volume - Consumer Loan assignment volumes depend on demand for financing programs, available capital, and infrastructure capacity [30] - The dollar volume of Consumer Loans declined by 4.9% in Q4 2024, despite a modest increase in unit volume [31] - The company experienced a decrease in average advance paid, resulting from smaller average loan sizes and lower advance rates [31]