Credit Acceptance Announces Second Quarter 2024 Results

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].