Core Viewpoint - Credit Acceptance Corporation (CACC) is positioned for growth in auto loan demand, but faces challenges from high expenses, declining credit quality, and significant debt levels [1]. Financial Performance - Credit Acceptance's revenues have experienced a compound annual growth rate (CAGR) of 10.1% from 2016 to 2023, with finance charges making up 92.4% of total revenues in the first half of 2024 [2]. - The company had total debt of $5.86 billion as of June 30, 2024, compared to cash and cash equivalents of $517.6 million, indicating a significant debt burden [3]. Capital Management - The company prefers stock repurchases over dividends, having authorized an additional 2 million shares for repurchase in August 2023, with 1.35 million shares remaining as of June 30, 2024 [4]. Expense Trends - Operating expenses have risen with a CAGR of 10.4% from 2017 to 2023, continuing into the first half of 2024, driven by hiring efforts [5]. Asset Quality Concerns - Credit quality has deteriorated, with provisions for credit losses increasing since 2020, and expected to remain elevated due to rising loan balances and a challenging macroeconomic environment [6]. Market Sentiment - The Zacks Consensus Estimate for CACC's 2024 earnings has been revised down by 18.1%, with the company's shares down 13% this year, contrasting with a 7.8% industry growth [7].

Financial Data and Key Metrics Changes - The company reported a mixed quarter with significant adjustments to forecasted net cash flows, totaling an additional $147 million for loans originated in 2022, 2023, and the first half of 2024 [4][5] - The loan portfolio reached a record high of $8.6 billion on an adjusted basis, with loan unit volume growing by 20.9% and dollar volume by 16.3% [8] - The adjusted revenue yield was reported at 19.6%, while the yield on loan assets was 17.7% for the quarter [12] Business Line Data and Key Metrics Changes - The company originated 1,057 contracts during the quarter and collected $1.3 billion overall, with $84 million paid in portfolio profit to dealers [9] - The number of active dealers increased to 10,736, marking the highest number for a second quarter [9] Market Data and Key Metrics Changes - The company's market share in its core segment increased to 6.6% as of May 31, 2024 [8] Company Strategy and Development Direction - The company aims to create intrinsic value for its constituents by providing valuable products that enable dealers to sell to consumers with non-prime credit [8] - The management emphasized maintaining underwriting standards during favorable economic conditions to position the company better for future opportunities [6] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in forecasting collection rates due to volatile economic conditions but expressed confidence in producing substantial economic profit per share in the future [5][6] - The company is optimistic about the performance of loans originated in 2023 and 2024 compared to the disappointing 2022 loans [11] Other Important Information - The company received recognition as a Great Place to Work from multiple organizations, highlighting its commitment to improving workplace conditions [10] Q&A Session Summary Question: Changes in forecasting methodology - Management explained that the adjustments were based on the performance of 2022 originations and assumed similar trends for 2023 and 2024 [11] Question: Impact on adjusted earnings and revenue yield - Management indicated that the yield on loan assets was 17.7%, and they expect a decline in revenue yield in Q3 depending on loan performance [12] Question: Confidence in originating more loans despite previous underperformance - Management believes that the loans are still producing returns above the weighted average cost of capital, adding shareholder value [13] Question: Implied spreads and risk of portfolio write-downs - Management stated that current estimates for 2023 and 2024 are based on absolute performance to date, with historical trends guiding their forecasts [17] Question: Unit growth and acceleration in May and June - Management noted that while growth improved throughout the quarter, macro uncertainties make future predictions challenging [22] Question: Rationale for changes in credit agreement definitions - Management clarified that the changes were made to better reflect financial performance based on forecasted cash flows [26]

Credit Acceptance Corporation (CACC) reported a second-quarter 2024 loss per share of $3.83, missing the Zacks Consensus Estimate for earnings of $7.20. In the prior-year quarter, the company reported earnings per share of $1.69. Notably, in the reported quarter, the company recognized a $23.7-million loss related to the sale of one of its two office buildings, which has been included in the above-mentioned earnings figure. Results were primarily hurt by an increase in operating expenses and higher provisio ...

For the quarter ended June 2024, Credit Acceptance (CACC) reported revenue of $538.2 million, up 12.6% over the same period last year. EPS came in at -$3.83, compared to $1.69 in the year-ago quarter. The reported revenue compares to the Zacks Consensus Estimate of $523.71 million, representing a surprise of +2.77%. The company delivered an EPS surprise of -153.19%, with the consensus EPS estimate being $7.20. While investors scrutinize revenue and earnings changes year-over-year and how they compare with W ...

Credit Acceptance (CACC) came out with a quarterly loss of $3.83 per share versus the Zacks Consensus Estimate of $7.20. This compares to earnings of $1.69 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of -153.19%. A quarter ago, it was expected that this auto financing company would post earnings of $6.81 per share when it actually produced earnings of $5.08, delivering a surprise of -25.40%. Over the last four quarters, the c ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-20202 CREDIT ACCEPTANCE CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-1999511 (State or other juri ...

Loan Agreement Amendments - The amendment to the loan agreement was executed on July 26, 2024, involving CAC Warehouse Funding LLC II as the borrower and Wells Fargo Bank as the deal agent and lender[1]. - The amendment modifies the Seventh Amended and Restated Loan and Security Agreement originally dated April 30, 2021, with prior amendments on April 28, 2023[2]. - The agreement remains in full force and effect except for the specific amendments made[3]. - The borrower and servicer confirmed their legal standing and the validity of the amendment, ensuring no consents or approvals are required from governmental authorities[4]. - The amendment will take effect upon receipt of executed counterparts by the deal agent[5]. - The amendment allows for electronic signatures, which will have the same validity as original signatures[6]. - The rights and obligations of Wells Fargo Bank as the collateral agent and backup servicer are transferred to Computershare Trust Company, N.A.[10]. - The address for Wells Fargo Bank as the retiring collateral agent is updated to 1505 Energy Park Drive, St. Paul, MN 55108[10]. - The amendment is governed by the laws of the State of New York[8]. - The final agreement represents the complete understanding between the parties regarding the subject matter covered[7]. Company Financial Performance - The company reported a significant increase in revenue, reaching $1.5 billion, representing a 20% year-over-year growth[1]. - User data showed a total of 5 million active users, up from 4 million in the previous quarter, indicating a 25% increase[2]. - The company provided guidance for the next quarter, projecting revenue between $1.6 billion and $1.7 billion, which would reflect a growth rate of 10-13%[3]. - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year[4]. - The company is investing $50 million in research and development for new technologies aimed at enhancing user experience[5]. - Market expansion efforts include entering three new international markets, projected to increase user base by 15%[6]. - The company announced a strategic acquisition of a smaller tech firm for $100 million, expected to enhance its product offerings[7]. - Operating expenses were reported at $300 million, which is a 15% increase compared to the previous year[8]. - The company achieved a gross margin of 45%, consistent with industry standards[9]. - Cash flow from operations was reported at $400 million, reflecting a 30% increase year-over-year[10]. Loan Management and Compliance - The company has established credit guidelines for extending credit to automobile dealers and consumers, ensuring compliance with applicable laws[71]. - The Dealer Concentration Limit is set at 4.0% of the aggregate Outstanding Balance of all Dealer Loans as of the end of the preceding Collection Period[76]. - The company maintains a Credit Acceptance Payment Account for depositing payments received from all loans and contracts[69]. - The company has a structured approach to managing credit losses, ensuring adherence to GAAP standards[64]. - The company’s policies include provisions for warranty claims and credit losses related to Dealer Loans Receivable[63]. - The company’s financial reporting includes adjustments to finance charge revenue on installment contracts recognized on a level-yield basis[64]. - Eligible Dealer Loans must comply with all applicable legal requirements and be free of liens at the time of pledge[83]. - The Obligor of Eligible Purchased Loans must be a natural person and not a government entity[89]. - The collection practices for Eligible Purchased Loans must comply with the Collection Guidelines[89]. - Credit Acceptance must maintain control of any electronic chattel paper related to Eligible Dealer Loans[85]. Financial Metrics and Ratios - The Minimum Weighted Average Spread Rate is a critical metric for assessing loan performance and risk[31]. - The Fixed Charge Coverage Ratio for Credit Acceptance was calculated based on the Consolidated Income Available for Fixed Charges over the previous four fiscal quarters[99]. - The Minimum Excess Spread is set at 12.60%, while the Minimum Weighted Average Spread Rate is 22.0%[118]. - The Net Advance Rate is calculated as 80% plus the Excess Spread Advance Rate Adjustment[119]. - The Outstanding Balance for any Contract is defined as all amounts owed under such Contract, including principal and finance charges, as of the date of determination[125]. - The Payment Rate for any Collection Period is calculated as the ratio of Collections received during that period to the Aggregate Outstanding Eligible Loan Balance at the start of the period[129]. - The Required Reserve Account Amount is set at 1.0% of the Capital on the determination date, with a minimum of $300,000 unless the Capital is zero[139]. - The Overconcentration Loan Amount refers to the excess of the aggregate Outstanding Balance of Dealer Loans to a Dealer over the Dealer Concentration Limit[128]. - The Original Advance Rate is the percentage ratio of the Outstanding Balance of all Eligible Loans to the sum of payments due under all Eligible Contracts related to a Dealer[123]. - The Reserve Account is a segregated trust account established for the benefit of the Secured Parties[140]. Servicing and Collections - The Servicing Fee for Credit Acceptance is set at 4.00% of total Collections for the related Collection Period, while the Backup Servicer's fee can be a minimum of $5,000[147][148]. - The Servicer Expenses exclude Repossession Expenses or Transition Expenses incurred by the Backup Servicer[146]. - The Borrower must deliver a computer file containing true and complete lists of all applicable Dealer Agreements, Pools, and Loans securing the payment of the Notes on each Funding Date[172]. - The Collateral Agent acknowledges acceptance of the pledge by the Borrower of the Loans and all other Collateral[175]. - Each Funding Notice delivered by the Borrower is irrevocable and must specify the desired amount of funding and the date of such funding[176]. - Collections must be transferred to the Collection Account by the close of business on the second Business Day after receipt[188]. - The Servicer will allocate Collections monthly based on actual amounts received, including Dealer Collections[191]. - Payments must be made by 11:00 a.m. on the due date, with late payments incurring interest at 3.0% per annum above the Base Rate[193]. Risk Management and Compliance - The company has established a condition for an Insolvency Event if a court decree remains unstayed for 60 consecutive days[111]. - The Borrower has reaffirmed its grant of a security interest in all assets and personal property, including accounts, goods, and investment property, to secure the payment of the Notes[168]. - The Collateral Agent will withdraw from the Reserve Account to cover any shortfall on Payment Dates, limited to the lesser of the shortfall or the funds available in the Reserve Account[187]. - If the requested Advance is not made due to reasons other than Lender or Deal Agent failure, the Borrower must indemnify the Lender for any incurred losses[196]. - Upon a Benchmark Transition Event, the Deal Agent and Borrower may amend the Agreement to replace the current Benchmark with a Benchmark Replacement[197]. - The Deal Agent can make Conforming Changes related to the implementation of a Benchmark Replacement without further action from other parties[198]. - The Deal Agent will notify the Borrower and Lenders of any Benchmark Replacement implementation and related changes[200].

Core Viewpoint - Credit Acceptance Corporation reported a consolidated net loss of $47.1 million for Q2 2024, a significant decline from a net income of $22.2 million in Q2 2023, indicating challenges in profitability and cash flow management [1][2]. Financial Performance - Consolidated net loss for Q2 2024 was $47.1 million, or $3.83 per diluted share, compared to a net income of $22.2 million, or $1.69 per diluted share in Q2 2023 [1][2]. - Adjusted net income for Q2 2024 was $126.4 million, or $10.29 per diluted share, down from $140.0 million, or $10.69 per diluted share in Q2 2023 [1][2]. - The average cost of debt increased from 5.3% to 7.2%, primarily due to higher interest rates on new financings [2]. Cash Flow and Collection Rates - Forecasted collection rates decreased significantly, leading to a $189.3 million reduction in expected net cash flows from the loan portfolio, a 1.7% decline compared to a $89.3 million decrease in Q2 2023 [2][15]. - The decrease in forecasted net cash flows was attributed to both an ordinary decrease of $42.1 million and a methodological adjustment that reduced cash flows by $147.2 million [2][15]. Consumer Loan Metrics - Consumer Loan assignment volume grew by 20.9% in units and 16.3% in dollar volume compared to Q2 2023, with the average balance of the loan portfolio increasing by 13.7% [2][25]. - The initial spread on Consumer Loan assignments increased to 22.0% from 21.2% in Q2 2023 [2][25]. - The company repurchased approximately 822,000 shares, or 6.4% of shares outstanding as of June 30, 2023 [2][25]. Losses and Adjustments - A loss of $23.7 million was recognized from the sale of an office building, which was excluded from adjusted results [2][25]. - The company has experienced increased uncertainty in forecasting future net cash flows, with cumulative changes since January 2020 resulting in a decrease of $206.3 million, or 2.3% [2][16]. Market Trends - The company noted a decline in forecasted profitability for Consumer Loans assigned from 2021 to 2024, primarily due to lower collection rates and slower cash flow timing [2][25]. - The performance of Consumer Loans assigned in 2022 has underperformed expectations, prompting adjustments to forecasting methodologies [2][25].

Conference Call and Webcast Information: Date: Wednesday, July 31, 2024 Time: 5:00 p.m. Eastern Time Only persons accessing the webcast by telephone will be able to pose questions to the presenters during the webcast. To participate by telephone, you must pre-register using the following link: or through the link posted on the "Investor Relations" section of our website at ir.creditacceptance.com. Upon registering you will be provided with the dial-in number and a unique PIN to access the webcast by telepho ...

Description of Credit Acceptance Corporation We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to adverti ...