Consumer Loans and Financing Programs - 79.5% of Consumer Loans assigned in 2025 had FICO scores below 650 or no FICO scores, compared to 80.6% in 2024 and 80.9% in 2023[15] - In 2023, 74.0% of Consumer Loans were assigned under the Portfolio Program, while 26.0% were under the Purchase Program[18] - The Portfolio Program allows Dealers to receive advances against future collections, while the Purchase Program involves a one-time payment for Consumer Loans[26] - The Company’s financing programs enable consumers with impaired credit histories to purchase vehicles, improving their credit scores over time[12] - The company provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers, regardless of their credit history, through a nationwide network of automobile dealers[149] Financial Performance - For the year ended December 31, 2025, consolidated net income was $423.9 million, or $36.38 per diluted share, compared to $247.9 million, or $19.88 per diluted share, for the same period in 2024, indicating a significant increase in profitability[150] - The increase in consolidated net income for 2025 was primarily due to a decrease in provision for credit losses and an increase in finance charges, partially offset by an increase in operating expenses[150] - Total revenue for the year ended December 31, 2025, was $2,317.2 million, an increase of $154.8 million or 7.2% compared to $2,162.4 million in 2024[188] - Finance charge revenue increased by $149.1 million, or 7.5%, driven by a rise in the average net Loans receivable balance to $7,956.3 million from $7,530.7 million[190] - Operating expenses rose by $98.4 million, or 19.6%, largely due to a $63.5 million increase in general and administrative expenses[192] Dealer Network and Operations - The number of Dealer enrollments in 2025 was 5,752, with 15,745 active Dealers, an increase from 15,463 active Dealers in 2024[29] - The Company provides financing solutions through a network of approximately 60,000 independent and franchised automobile dealers in the U.S.[29] - The company’s business model aligns the interests of Dealers, consumers, and the company by sharing the risk and reward of collecting on Consumer Loans, particularly through the Portfolio Program[42] - The number of active Dealers in 2025 was 15,745, with Texas having the highest number at 1,377 (8.7%) and Michigan at 854 (5.4%)[53] 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 its operations if not complied with[56] - The company received a subpoena from the New York State Attorney General on May 7, 2019, regarding its origination and collection policies, followed by additional subpoenas until April 30, 2021[59] - On January 4, 2023, a joint complaint was filed by the New York State Attorney General and the Bureau, alleging deceptive practices and seeking various forms of relief, including restitution and civil penalties[61] - The company intends to vigorously defend itself against the allegations and has filed a motion to dismiss the complaint, which is currently under review[61] Economic and Market Conditions - Economic downturns could lead to increased delinquencies and defaults on consumer loans, adversely impacting financial results and liquidity[75] - The company faces intense competition in the automobile finance market, which may affect its ability to maintain and expand dealer relationships[74] - Economic conditions, including public health emergencies, could lead to decreased collections and consumer loan assignments, adversely affecting financial results[81] Debt and Liquidity - The funded debt to equity ratio was 4.2 to 1 as of December 31, 2025, indicating the company's financial leverage[175] - A substantial amount of debt could negatively impact the company's financial condition and ability to meet obligations[96] - Interest rate fluctuations may adversely affect the company's borrowing costs, profitability, and liquidity, particularly during periods of higher interest rates[97] - A reduction in the company's credit rating could increase funding costs and restrict access to capital markets, adversely affecting liquidity and financial condition[98] Cybersecurity and Technology - The company has adopted NIST SP 800-37 Rev. 2 and the NIST Cybersecurity Framework to manage cybersecurity risks effectively[122] - The company conducts periodic cybersecurity assessments and preparedness analyses, supervised by the Chief Information Security Officer (CISO) with over twenty years of experience in information security[126] - The company has established a comprehensive information security incident management plan to respond quickly and effectively to cybersecurity threats[129] - Cybersecurity threats have not materially affected the company to date, but future incidents could have a significant adverse impact on business and financial condition[103] Collection and Forecasting - The company monitors Consumer Loan performance monthly, comparing current forecasted collection rates to initial expectations[208] - A statistical model is used to estimate expected collection rates based on various credit quality indicators[208] - Adjustments to the statistical pricing model are made periodically to reflect new trends identified through performance evaluations[208] - The company forecasts future collections on each Consumer Loan for a 120-month period after the origination date[207]

Core Insights - Credit Acceptance Corporation (CACC) shares rose 2.9% in after-market trading following better-than-expected Q4 2025 results, with adjusted earnings per share of $11.35 exceeding the Zacks Consensus Estimate of $10.30 and reflecting an 11.6% year-over-year increase [1][8] Financial Performance - CACC's total GAAP revenues for the quarter were $579.9 million, a 2.5% increase year-over-year, although it slightly missed the Zacks Consensus Estimate of $580 million [3][8] - The quarterly provision for credit losses was $129.6 million, up 5% year-over-year [3] - Total operating expenses rose significantly by 33.5% to $162.3 million compared to the prior-year quarter [3][8] Balance Sheet Highlights - As of December 31, 2025, net loans receivable stood at $7.91 billion, showing a marginal increase from December 2024 [4] - Total assets decreased by 2.5% to $8.63 billion as of the same date [4] - Total shareholders' equity was reported at $1.52 billion, down 12.9% from December 31, 2024 [4] Market Position and Outlook - The company is expected to face challenges due to rising expenses and weak asset quality, which may impact financial performance [5] - Despite these challenges, CACC is positioned for revenue growth due to increasing demand for consumer loans [5]

Core Viewpoint - Credit Acceptance (CACC) reported quarterly earnings of $11.35 per share, exceeding the Zacks Consensus Estimate of $10.3 per share, but down from $12.26 per share a year ago, indicating a +10.19% earnings surprise [1] Financial Performance - The company posted revenues of $579.9 million for the quarter ended December 2025, slightly missing the Zacks Consensus Estimate by 0.02%, compared to $565.9 million in the same quarter last year [2] - Over the last four quarters, Credit Acceptance has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Stock Performance - Credit Acceptance shares have declined approximately 2.3% since the beginning of the year, while the S&P 500 has gained 1.9% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $11.26 on revenues of $599.13 million, and for the current fiscal year, it is $44.62 on revenues of $2.4 billion [7] - The estimate revisions trend for Credit Acceptance was mixed ahead of the earnings release, which may change following the recent report [6] Industry Context - The Financial - Consumer Loans industry, to which Credit Acceptance belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - The company reported growth in adjusted earnings per share despite declines in loan performance and loan volume [14] - Loan unit volume improved to a decline of 9.1% this quarter, compared to a decline of 16.5% last quarter, while loan dollar volume improved to a decline of 11.3% this quarter, versus a decline of 19.4% last quarter [15] - Changes to the forecast of future net cash flows improved, with the rate of decline narrowing from $58.6 million (0.5%) in Q3 2025 to $34.2 million (0.3%) in Q4 2025 [15] Business Line Data and Key Metrics Changes - The company financed nearly 72,000 contracts for dealers and consumers, collecting $1.3 billion overall [14] - The underperformance of the 2024 vintage was primarily related to loans originated prior to the scorecard change during Q3 2024 [14] - The number of active dealers declined by 2.8% year over year, and the average unit volume per active dealer declined by 6.4% year over year [16] Market Data and Key Metrics Changes - The company's market share in the core segment of used vehicles financed by subprime consumers was 4.5% for the first two months of Q4, down from 5.4% for the same period in 2024 [16] - The loan portfolio increased by 1% year over year on an adjusted basis [16] Company Strategy and Development Direction - The company aims to generate dealer and consumer demand by deepening relationships within the dealer network and leveraging data-driven insights [9] - The strategic objectives include empowering dealers through preferred channels and delivering world-class servicing and processing [9] - The CEO emphasized a focus on removing friction for customers and enhancing servicing capabilities through artificial intelligence [8] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the impact of high inflation on subprime consumers and expressed a conservative approach to lending [19] - The CEO highlighted the importance of being customer-focused rather than competitive-focused, aiming to build solutions for large independent and franchise dealers [26] - The management believes the company is well-positioned to serve subprime customers across various economic cycles [37] Other Important Information - The company was named one of America's top 100 Most Loved Workplaces for the second consecutive year, ranking number 6 [12] - The CEO plans to layer technology and a data-informed approach on the company's strong foundation to enhance customer experience [13] Q&A Session Summary Question: How will the new CEO manage credit lending and underwriting? - The CEO plans to take a long-term and conservative approach to lending while continuously improving credit scoring models [19] Question: What is driving the increase in the provision for new originations? - The increase is attributed to the mix between the portfolio and purchase program, with the initial provision on the purchase program being significantly higher [21][22] Question: What is the competitive environment like, given the decline in market share? - The CEO noted that the competitive environment is evolving, with a focus on customer needs rather than competition [26] Question: How does the company view its leverage and capital distributions? - The company maintains its strategy regarding capital allocation and leverage, ensuring sufficient capital for new originations [33] Question: What is the perspective on affordability issues and used car prices? - The CEO believes the company is well-positioned to serve subprime customers regardless of economic cycles, focusing on a frictionless experience [37] Question: What is the outlook on prepayments in the portfolio? - There has been a decline in prepayments, which may indicate customers are staying in their vehicles longer [44]

Financial Data and Key Metrics Changes - The company reported growth in adjusted earnings per share despite declines in loan performance and loan volume [14] - Loan performance declined moderately, with 2023 and 2024 vintages decreasing by 0.4% and 0.2% respectively, while other vintages remained stable [14] - Changes in forecasted future net cash flows improved, with a decrease narrowing from $58.6 million (0.5%) in Q3 2025 to $34.2 million (0.3%) in Q4 2025 [15] - Loan unit volume decline improved to 9.1% in Q4 from 16.5% in Q3, and loan dollar volume decline improved to 11.3% from 19.4% [15] Business Line Data and Key Metrics Changes - The company financed nearly 72,000 contracts and collected $1.3 billion overall, while paying $48 million in dealer holdback [14] - The number of active dealers decreased by 2.8% year-over-year, and average unit volume per active dealer declined by 6.4% year-over-year [16] Market Data and Key Metrics Changes - Market share in the core segment of used vehicles financed by subprime consumers was 4.5% for the first two months of Q4, down from 5.4% for the same period in 2024 [16] Company Strategy and Development Direction - The company aims to deepen relationships within its dealer network, support dealers in acquiring new consumers, and leverage data-driven insights [9] - Strategic objectives include generating demand, empowering dealers through preferred channels, and delivering world-class servicing and processing [9] - The company is investing in artificial intelligence to enhance customer service and improve efficiency [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of high inflation on subprime consumers and emphasizes a conservative approach to lending [19] - The CEO expressed confidence in the company's ability to serve subprime customers across various economic cycles [37] - The company plans to maintain a focus on maximizing intrinsic value and disciplined capital allocation [13][38] Other Important Information - The company was named one of America's top 100 Most Loved Workplaces for the second consecutive year, ranking sixth [12] - The new contract origination experience was rolled out to better support franchise and large independent dealers [10] Q&A Session Summary Question: How will the new CEO manage credit lending and underwriting? - The CEO plans to take a long-term and conservative approach to lending while improving customer experience and credit scoring models [19] Question: What drove the increase in provision for new originations? - The increase is attributed to the mix between the portfolio and purchase program, with the initial provision on the purchase program being significantly higher [21][22] Question: What is the competitive environment like, given the decline in market share? - The CEO noted that the competitive environment is evolving, with a focus on being customer-centric rather than competitive-centric [26] Question: How does the company view its leverage and capital distributions? - The company maintains an acceptable leverage range and will continue to ensure capital is available for new originations while considering intrinsic stock value for buybacks [33][38] Question: What factors could affect affordability and used car prices? - The CEO believes the company is well-positioned to serve subprime customers regardless of economic cycles and emphasizes a conservative approach [37] Question: What is the outlook on prepayments in the portfolio? - There has been a decline in prepayments, which may indicate customers are staying in their vehicles longer, despite historical trends suggesting an uptick in competitive environments [43][44]

Financial Data and Key Metrics Changes - The company reported growth in adjusted earnings per share despite declines in loan performance and loan volume [14] - Loan unit volume improved to a decline of 9.1% this quarter, compared to a decline of 16.5% last quarter, while loan dollar volume improved to a decline of 11.3% this quarter, versus a decline of 19.4% last quarter [16] - Changes to the forecast of future net cash flows improved, with the rate of decline narrowing from $58.6 million (0.5%) in Q3 2025 to $34.2 million (0.3%) in Q4 2025 [16] Business Line Data and Key Metrics Changes - The company financed nearly 72,000 contracts for dealers and consumers, collecting $1.3 billion overall [14] - The underperformance of the 2024 vintage was primarily related to loans originated prior to the scorecard change during Q3 2024 [15] - The number of active dealers declined by 2.8% year over year, and the average unit volume per active dealer declined by 6.4% year over year [17] Market Data and Key Metrics Changes - The company's market share in the core segment of used vehicles financed by subprime consumers was 4.5% for the first two months of Q4, down from 5.4% for the same period in 2024 [17] - The loan portfolio increased by 1% year over year on an adjusted basis [17] Company Strategy and Development Direction - The company aims to deepen relationships within its dealer network, support dealers in acquiring new consumers, and leverage data-driven insights [8] - The strategic objectives include generating dealer and consumer demand, empowering dealers through preferred channels, and delivering world-class servicing and processing [9] - The company is investing in artificial intelligence to enhance customer service and improve efficiency [9] Management's Comments on Operating Environment and Future Outlook - The CEO emphasized a long-term conservative approach to lending and credit scoring, focusing on improving customer experience [20] - The management believes the company is well-positioned to serve subprime customers and will continue to focus on making the experience frictionless [37] - The CEO expressed excitement about building a customer-obsessed company while maintaining a disciplined approach to capital allocation [13] Other Important Information - The company was named one of America's top 100 Most Loved Workplaces for the second consecutive year, ranking number 6 [12] - The new contract origination experience was rolled out to better meet the needs of franchise and large independent dealers [10] Q&A Session Summary Question: How will the new CEO manage credit lending and underwriting? - The CEO stated that the approach towards lending and credit scoring will be conservative and long-term focused, with ongoing improvements to credit scoring models [20] Question: What drove the increase in provision for new originations? - The CFO explained that the provision is influenced by the mix between the portfolio and purchase program, with the purchase program having a higher initial provision [22][23] Question: What is the competitive environment like, given the decline in market share? - The CEO noted that the competitive environment is evolving, and the company is focused on being customer-centric rather than competitive-centric [26] Question: How does the company view affordability issues and high used car prices? - The CEO mentioned that the company is well-positioned to serve subprime customers and will continue to take a conservative approach regardless of economic cycles [36] Question: Will there be any changes in capital returns or buyback strategies? - The CEO confirmed that the company will stay the course regarding capital allocation and buyback strategies [38]

Financial Performance - Consolidated net income for Q4 2025 was $122.0 million, or $10.99 per diluted share, showing a sequential growth from $108.2 million in Q3 2025[1] - Adjusted net income for Q4 2025 was $126.0 million, or $11.35 per diluted share, compared to $117.9 million in Q3 2025[1] - GAAP net income for Q4 2025 decreased by 19.7% to $122.0 million compared to $151.9 million in Q4 2024[28] - Adjusted net income for Q4 2025 remained flat at $126.0 million compared to Q4 2024[30] - Economic profit increased by 3.9% to $53.3 million for Q4 2025, driven by a decrease in the cost of capital[30] - Adjusted net income per diluted share rose by 11.6% to $11.35 in Q4 2025, compared to $10.17 in Q4 2024[30] - GAAP net income for the three months ended September 30, 2025, was $122.0 million, an increase from $108.2 million in the previous quarter[34] - Adjusted net income per diluted share increased to $11.35, compared to $10.28 in the previous quarter[34] - Economic profit for the quarter was $53.3 million, an increase from $43.0 million in the prior year, marking a growth of 24.3%[39] Revenue and Expenses - Total revenue for Q4 2025 was $579.9 million, an increase of 2.2% from $565.9 million in Q4 2024[59] - Adjusted revenue for the three months ended September 30, 2025, was $408.2 million, up from $405.1 million in the previous quarter[34] - Operating expenses increased by 33.5% ($40.7 million), primarily due to a 162.7% increase in general and administrative expenses, including a $35.8 million contingent loss related to legal matters[28] - Adjusted operating expenses for the quarter were $126.5 million, compared to $131.6 million in the same period last year, showing a decrease of 3.9%[39] Loan Portfolio and Collections - The average balance of the loan portfolio was $7.9 billion, with a consumer loan assignment unit volume of 71,731 and a dollar volume of $821.3 million[4] - Forecasted collection rates for Consumer Loans assigned in 2025 were 67.2%, with a slight decline from the initial forecast[7] - The forecasted net cash flows from the loan portfolio decreased by $34.2 million, or 0.3%, in Q4 2025[8] - Consumer Loan assignment volume decreased by 9.1% in unit volume and 11.3% in dollar volume during the fourth quarter of 2025 compared to the same period in 2024[23] - The forecasted collection percentage for dealer loans in 2025 is 65.7%, while for purchased loans it is 71.9%, reflecting variances of 0.2% and 0.4% respectively from initial forecasts[15] Dealer Activity - The company enrolled 1,207 new dealers, bringing the total to 9,863 active dealers during the quarter[4] - The number of active dealers decreased by 2.8% to 9,863 in the fourth quarter of 2025[24] - Consumer Loan unit volume from new active dealers increased by 8.1% to 2,954 in the fourth quarter of 2025[25] - The average volume per active dealer declined by 6.4% to 7.3 units in the fourth quarter of 2025[24] Legal and Contingent Losses - A contingent loss of $35.8 million was excluded from adjusted results due to previously disclosed legal matters[4] - The cumulative contingent losses recognized through Q4 2025 amounted to $82.6 million, with a potential cash payment of $75.5 million related to legal settlements[28] Capital and Debt - Average debt increased by 3.3% to $6,409.6 million in Q4 2025 from $6,202.5 million in Q4 2024[28] - Adjusted average capital for the three months ended September 30, 2025, was $535.0 million, compared to $539.4 million in the previous quarter[34] - Adjusted average capital for the quarter was $8,662.9 million, a slight decrease of 0.4% from $8,699.2 million in the previous quarter[39] Future Outlook - The company expects a long-term effective income tax rate increase to 25%, up from 23% previously used[36] - The company plans to host a webcast on January 29, 2026, to discuss its fourth quarter results[53] - The company emphasizes its role in providing financing solutions to consumers with poor credit histories, enabling vehicle ownership[55]

Core Insights - Credit Acceptance Corporation reported consolidated net income of $122.0 million, or $10.99 per diluted share, for Q4 2025, showing a sequential growth despite declines in loan volumes and performance [1][29] - Adjusted net income for the same period was $126.0 million, or $11.35 per diluted share, indicating stability in adjusted performance metrics [1][30] - The company emphasized its commitment to maximizing intrinsic value and enhancing customer lives, despite challenges in loan performance [1][2] Financial Performance - GAAP net income decreased by 19.7% compared to Q4 2024, primarily due to increased operating expenses and legal contingencies [29][32] - Adjusted net income remained stable year-over-year, reflecting effective management of operational costs and capital [30] - The average balance of the loan portfolio was reported at $7.9 billion, with a consumer loan assignment unit volume of 71,731 and a dollar volume of $821.3 million [5][24] Consumer Loan Metrics - The forecasted collection rates for Consumer Loans showed a moderate decline, impacting net cash flows from the loan portfolio by $34.2 million, or 0.3% [5][7] - The company utilized a statistical model to estimate expected collection rates, which improved for loans assigned in 2025 but declined for those assigned in 2023 and 2024 [4][6] - The forecasted collection rates for 2025 Consumer Loans were 67.2%, reflecting a positive variance from initial forecasts [11][19] Dealer Relationships and Product Initiatives - The company enrolled 1,207 new dealers, bringing the total to 9,863 active dealers, indicating growth in dealer relationships [5][24] - Recent product initiatives aimed at enhancing dealer and consumer experiences included digital credit applications and AI-powered call-center agents, which have shown promising adoption rates [2][5] - The average volume per active dealer decreased by 6.4%, highlighting challenges in maintaining dealer performance amidst market fluctuations [24][23] Legal and Operational Challenges - The company recognized a contingent loss of $35.8 million related to ongoing legal matters, which significantly impacted operating expenses [5][32] - An increase in general and administrative expenses was noted, primarily due to legal costs, which rose by 162.7% [32] - The provision for credit losses increased by 5.0%, reflecting slower forecasted net cash flow timing and a decline in Consumer Loan performance [32]

Core Viewpoint - Credit Acceptance Corporation is set to release its fourth quarter 2025 earnings on January 29, 2026, after market close, with a subsequent webcast scheduled for the same day at 5:00 p.m. Eastern Time [1]. Group 1: Earnings Announcement - The company will issue a news release regarding its fourth quarter 2025 earnings on January 29, 2026 [1]. - A conference call and webcast will take place on January 29, 2026, at 5:00 p.m. Eastern Time to discuss the earnings [2]. Group 2: Webcast Participation - Participants wishing to ask questions during the webcast must pre-register via a provided link to receive a dial-in number and unique PIN [2]. - The webcast can be accessed live through the "Investor Relations" section of the company's website, with a replay and transcript available afterward [3]. Group 3: Company Overview - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history [4]. - The company's financing programs help consumers who might otherwise be unable to purchase vehicles, thereby improving their credit scores and allowing them to access traditional financing sources in the future [5].

Core Insights - Credit Acceptance Corporation has been recognized as one of the Best Places to Work in IT by Computerworld for the 11th consecutive year, ranking 2 among midsize companies, an improvement of six positions from the previous year [1] - The company has received a total of twelve workplace awards this year, including 34 on Fortune's 2025 100 Best Companies to Work For list and 1 on the 2025 Top Workplaces for Remote Work list [3] Company Overview - Credit Acceptance provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history, thus facilitating vehicle ownership [4] - The financing programs are offered through a nationwide network of automobile dealers, benefiting from sales to consumers who might otherwise be unable to obtain financing [4][5] Technological Advancements - The Engineering team has made significant progress in modernizing foundational technologies and integrating AI to enhance customer and team member support, leading to improved reliability, speed, and overall performance of technology [2] - Enhancements include increased system stability, AI capabilities that streamline support, and the launch of new digital platforms that simplify work and enhance service [2]