Credit Acceptance(US:CACC)2022-08-02 01:18Financial Data and Key Metrics Changes - Unit and dollar volumes grew by 5.1% and 22% respectively compared to Q2 2021 [5] - Adjusted net income decreased by 18% from Q2 2021 to $188 million [5] - Adjusted earnings per share increased by 1.5% from Q2 2021 to $13.92 [5] Business Line Data and Key Metrics Changes - The adjusted yield on the portfolio increased due to better loan performance in Q1, although Q2 performance slightly underperformed expectations [10][12] - The company experienced a decrease in forecasted collection rates for loans originated from 2020 to 2022, impacting net cash flows by $43 million [5] Market Data and Key Metrics Changes - Used car prices remain elevated, but there is potential for a future decline, which could impact the company's portfolio [18] - The competitive landscape appears to have improved, as indicated by increased volume per dealer and anecdotal feedback from sales teams [37] Company Strategy and Development Direction - The company is focused on accurately forecasting collection rates and making necessary adjustments to its business model [22] - Management is monitoring the capital markets closely and factoring changes into business operations [26] Management Comments on Operating Environment and Future Outlook - Management noted that inflation is a headwind affecting consumers' ability to pay, which could impact future loan performance [13][44] - The company is in an unusual environment with high inflation and the absence of government stimulus, making it difficult to predict when conditions will normalize [21] Other Important Information - The company repurchased approximately 404,000 shares, representing 3% of shares outstanding at the beginning of the quarter [6] - A $12 million expense was related to settling a previously disclosed class action lawsuit [6] Q&A Session Summary Question: How to understand the increase in adjusted revenue or yield? - Management explained that the adjusted yield increased due to better loan performance in Q1, but Q2 performance slightly underperformed expectations [10][12] Question: Is inflation impacting loan performance? - Management indicated that inflation and the end of government support programs are likely contributing to underperformance in loan collections [12][13] Question: Are there adjustments being made to the business model? - Management stated they continuously forecast collection rates and make necessary adjustments, but do not disclose specific changes [22] Question: How is the competitive landscape affecting the company? - Management noted an improvement in the competitive landscape, likely due to changes in interest rates and market conditions [37] Question: Are there any changes in business practices due to legal settlements? - Management confirmed that no significant changes were required in business practices following recent settlements [34] Question: What is the impact of capital markets on business operations? - Management acknowledged that the capital markets are functioning differently than in the past, and they are closely monitoring these changes [26]