Credit Acceptance(US:CACC)2022-10-31 16:00Financial Performance - For the three months ended September 30, 2022, consolidated net income was $86.8 million, or $6.49 per diluted share, a decrease from $250.0 million, or $15.79 per diluted share, for the same period in 2021[226] - For the nine months ended September 30, 2022, consolidated net income was $408.5 million, or $29.74 per diluted share, down from $740.7 million, or $44.73 per diluted share, for the same period in 2021[227] - Net income for the three months ended September 30, 2022, was $86.8 million, down 65.3% from $250.0 million in the same period last year[259] - Net income for the nine months ended September 30, 2022, was $408.5 million, down $332.2 million or -44.8% from $740.7 million in 2021[270] - Total revenue for the three months ended September 30, 2022, was $460.3 million, a decrease of 2.1% from $470.1 million in 2021[259] - Total revenue for the nine months ended September 30, 2022, was $1,373.4 million, a decrease of $19.4 million or -1.4% compared to $1,392.8 million in 2021[270] Consumer Loan Performance - Consumer Loan assignment volume grew, with unit and dollar volumes increasing by 29.3% and 32.1%, respectively, compared to the third quarter of 2021[226] - The average Consumer Loan assignment for 2022 was $27,197, with an average advance of $12,938 and an initial loan term of 59 months[235] - The company experienced a decline in Consumer Loan assignment unit volume of 0.4% for the nine months ended September 30, 2022, while dollar volume grew by 11.5%[227] - Forecasted profitability per Consumer Loan assignment significantly exceeded initial estimates for loans assigned in 2018 through 2020[226] - Consumer Loan unit volume for the three months ended September 30, 2022, was 71,937, a 29.3% increase from 55,620 in 2021[252] - Consumer Loan unit volume from new active Dealers rose to 2,522, a 70.9% increase compared to 1,476 in the prior year[253] Collection Rates and Forecasts - Forecasted collection rates for Consumer Loans assigned in 2022 were 66.5% as of September 30, 2022, down from an initial forecast of 67.4%[231] - The forecasted collection rate for Consumer Loans in 2022 is 66.5%, with an advance rate of 47.6% and a spread of 18.9%[238] - The spread between the forecasted collection rate and the advance rate has ranged from 18.9% to 25.8% over the last 10 years, with a decrease from 2021 to 2022 primarily due to lower performance of 2022 Consumer Loans[239] - The forecasted collection rates for Dealer Loans and Purchased Loans as of September 30, 2022, were 66.1% and 67.3%, respectively, with corresponding advance rates of 46.5% and 50.1%[243] - The risk of a material change in the forecasted collection rate declines as Consumer Loans age, with over 90% of expected collections realized for loans from 2018 and prior[238] Expenses and Provisions - Total costs and expenses for the three months ended September 30, 2022, were $338.2 million, a significant increase of 145.3% from $137.9 million in 2021[259] - Provision for credit losses increased by $188.6 million, reflecting changes in forecasted credit losses[263] - The total provision for credit losses reached $351.1 million, reflecting an increase of $368.6 million primarily due to forecast changes[275] - Provision for credit losses for new Consumer Loan assignments increased to $283.5 million in 2022 from $298.9 million in 2021, a change of $(15.4) million[276] - Operating expenses increased by $43.2 million or 15.5%, primarily due to a $45.8 million increase in salaries and wages[274] Debt and Financing - The funded debt to equity ratio was 2.9 to 1 as of September 30, 2022, indicating the company's strategy to maintain modest financial leverage[247] - Total balance sheet indebtedness increased to $4,625.9 million as of September 30, 2022, from $4,616.3 million as of December 31, 2021, primarily due to stock repurchases[289] - Scheduled principal debt maturities total $4,647.3 million as of September 30, 2022, with $1,608.8 million due in 2023 and $1,293.8 million due in 2024[290] - The company completed a $350.0 million Term ABS financing on June 16, 2022, with an expected annualized cost of approximately 5.4%[285] - The maturity of the revolving secured line of credit facility was extended from June 22, 2024, to June 22, 2025, with a net decrease in the facility amount from $435.0 million to $410.0 million[287] Operational Adjustments - The company is considering options to further reduce office space, which may include the sale of one or both of its buildings in Southfield, Michigan[281] - Management believes that cash flows from operations and various financing alternatives will provide sufficient financing for debt maturities and future operations[291] - The company had $1,171.1 million in unused and available lines of credit as of September 30, 2022[289] - The company removed the COVID forecast adjustment in Q1 2022, resulting in an increase of $149.5 million in forecasted net cash flows[294] - The implementation of enhanced forecasting methodology led to a total increase of $95.7 million in forecasted net cash flows[294]