Core Viewpoint - Credit Acceptance Corporation (CACC) reported better-than-expected fourth-quarter 2024 results, with significant earnings growth and revenue increase, despite rising operating expenses [1][4]. Financial Performance - Earnings per share for Q4 2024 were $12.26, exceeding the Zacks Consensus Estimate of $6.82, marking a 68.2% year-over-year increase [1]. - For the full year 2024, earnings per share were $19.88, surpassing the consensus estimate of $14.47 but reflecting a 9.6% decline from the previous year [3]. - Adjusted net income for Q4 2024 was $126 million or $10.17 per share, slightly down from $129.1 million or $10.06 per share in the prior-year quarter [2]. Revenue and Expenses - Total GAAP revenues for Q4 2024 were $565.9 million, a 15.1% increase year over year, beating the consensus estimate of $562.4 million [4]. - For the full year 2024, total GAAP revenues reached $2.16 billion, up 13.7% from the prior year, meeting the consensus estimate [4]. - Operating expenses increased by 6.4% to $121.6 million [5]. Loan and Asset Growth - Net loans receivables as of December 31, 2024, were $7.85 billion, a 12.9% increase from December 2023 [5]. - Total assets grew to $8.85 billion as of December 31, 2024, up from $7.61 billion a year earlier [5]. - Total shareholders' equity remained stable at $1.75 billion [5]. Industry Context - Credit Acceptance is positioned for revenue growth due to increasing demand for consumer loans, despite challenges from rising expenses and potential asset quality issues [6]. - Peer performance highlights include Capital One's adjusted earnings of $3.09 per share, surpassing estimates, and Ally Financial's adjusted earnings of 78 cents per share, reflecting a 95% year-over-year increase [7][8].

Core Insights - Credit Acceptance (CACC) reported revenue of $565.9 million for Q4 2024, marking a year-over-year increase of 15.1% and exceeding the Zacks Consensus Estimate of $562.4 million by 0.62% [1] - The company's EPS for the same quarter was $12.26, a significant increase from $7.29 a year ago, resulting in an EPS surprise of 79.77% compared to the consensus estimate of $6.82 [1] Financial Performance Metrics - Other income for the quarter was reported at $22.90 million, surpassing the estimated $19.31 million, reflecting a year-over-year increase of 24.5% [4] - Premiums earned amounted to $24.80 million, slightly below the estimated $25.14 million, but still showing a year-over-year increase of 14.8% [4] - Finance charges reached $518.20 million, exceeding the estimated $510.97 million, with a year-over-year increase of 14.8% [4] Stock Performance - Over the past month, shares of Credit Acceptance have returned +11.8%, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Credit Acceptance (CACC) reported quarterly earnings of $12.26 per share, significantly exceeding the Zacks Consensus Estimate of $6.82 per share, and up from $7.29 per share a year ago, representing an earnings surprise of 79.77% [1] - The company posted revenues of $565.9 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.62% and increasing from $491.6 million year-over-year [2] - Credit Acceptance shares have increased approximately 11.8% year-to-date, outperforming the S&P 500's gain of 2.7% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $6.82, with expected revenues of $556.82 million, and for the current fiscal year, the EPS estimate is $33.57 on revenues of $2.35 billion [7] - The estimate revisions trend for Credit Acceptance is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - Consumer Loans industry, to which Credit Acceptance belongs, is currently in the top 33% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Encore Capital Group (ECPG), is expected to report quarterly earnings of $1.55 per share, reflecting a year-over-year increase of 24%, with revenues anticipated to be $373.71 million, up 34.7% from the previous year [9][10]

Financial Performance - Consolidated net income for Q4 2024 was $151.9 million, or $12.26 per diluted share, compared to $93.6 million, or $7.29 per diluted share in Q4 2023, representing a 62.2% increase in net income[2] - Adjusted net income for Q4 2024 was $126.0 million, or $10.17 per diluted share, slightly down from $129.1 million, or $10.06 per diluted share in Q4 2023[2] - GAAP net income for Q4 2024 was $151.9 million, a 62.3% increase from $93.6 million in Q4 2023, while net income for the year decreased by 13.4% to $247.9 million[33] - Adjusted net income decreased by 2.4% ($3.1 million) for Q4 2024 compared to Q4 2023, and by 10.6% ($56.7 million) for the full year[42] - Economic profit declined by 8.2% for Q4 2024 and by 23.1% for the full year compared to the same periods in 2023[42] - Adjusted net income for 2024 was $478.9 million, down from $535.6 million in 2023, representing a decrease of 10.6%[55] - GAAP net income decreased to $247.9 million in 2024 from $286.1 million in 2023, a decline of 13.3%[55] Loan Portfolio and Consumer Loans - The average balance of the loan portfolio increased by 14.0% on a GAAP basis and 16.5% on an adjusted basis compared to Q4 2023[3] - Consumer Loan assignment unit volume growth slowed to 0.3% year-over-year, down from 26.7% in Q4 2023[3] - The initial spread on Consumer Loan assignments increased to 22.4% from 21.7% in Q4 2023[3] - Consumer loan assignment volume for 2023 reached $4,147.8 million, with a unit volume of 332,499, while the forecast for 2024 is expected to increase to $4,618.4 million with a unit volume of 386,126[11] - The average initial loan term for Consumer Loans in 2024 is projected to be 61 months, consistent with previous years[13] - The profitability of loans is primarily driven by the net cash flows from the spread between forecasted collection rates and advance rates, with a focus on maintaining acceptable profitability levels[14] Collection Rates and Forecasts - The forecasted collection rate for 2024 Consumer Loans was 66.5% as of December 31, 2024, down from an initial forecast of 67.2%[7] - The forecasted collection percentage for dealer loans in 2024 is 65.4%, while for purchased loans it is 70.7%, indicating a variance of -0.9% and 0.0% respectively from initial forecasts[19] - The forecasted collection rate for 2024 Consumer Loans assigned from January 1 to September 30 is 66.4%, while for the period from October 1 to December 31, it is 66.8%[17] - The risk of material changes in forecasted collection rates decreases as Consumer Loans age, with over 90% of expected collections realized for loans assigned in 2020 and prior[17] - The company has experienced variances in forecasted collection rates, with 2022 loans underperforming compared to initial estimates, while 2019 and 2020 loans have exceeded expectations[18] Expenses and Provisions - Provision for credit losses decreased by 24.6% ($40.3 million) in Q4 2024, attributed to a smaller decline in Consumer Loan performance[35] - The total provision for credit losses for the year ended December 31, 2024, was $814.7 million, an increase of $78.5 million from $736.2 million in 2023[38] - Interest expense increased by 57.4% ($153.0 million), driven by a rise in average cost of debt and outstanding debt balance[10] - Operating expenses increased by 9.2% ($42.4 million), with salaries and wages expense up by 10.3% ($29.0 million) due to team expansion and higher medical claims[40] Debt and Capital - The average debt increased by 24.4% to $6,202.5 million in Q4 2024, compared to $4,986.3 million in Q4 2023[33] - Adjusted average capital increased by 19.3% ($1.4 billion) for Q4 2024 compared to Q4 2023, reflecting growth in the loan portfolio[42] - GAAP average debt increased to $5,849.7 million in 2024 from $4,785.7 million in 2023, an increase of 22.2%[55] - Adjusted average capital rose to $8,140.5 million in 2024 from $6,909.8 million in 2023, an increase of 17.8%[55] Revenue and Earnings - Total revenue for Q4 2024 was $565.9 million, a 15.1% increase from $491.6 million in Q4 2023[77] - Adjusted revenue reached $396.4 million, up from $382.4 million in the previous quarter and $393.1 million in the same quarter last year[47] - Basic net income per share for Q4 2024 was $12.39, compared to $7.33 in Q4 2023, showing a 69.5% increase[77] Other Financial Metrics - The average cost of debt rose from 6.3% to 7.2% due to higher interest rates on new financings[3] - The company reported a loss on the sale of a building amounting to $23.7 million, aimed at reducing excess office space and associated costs[40] - Cash and cash equivalents rose significantly to $343.7 million as of December 31, 2024, compared to $13.2 million at the end of 2023[79] - Total assets increased to $8,854.6 million as of December 31, 2024, up from $7,610.2 million a year prior, marking a 16.3% increase[79]

Financial Performance - Credit Acceptance Corporation reported consolidated net income of $151.9 million, or $12.26 per diluted share, for Q4 2024, compared to $93.6 million, or $7.29 per diluted share, in Q4 2023 [1] - Adjusted net income for Q4 2024 was $126.0 million, or $10.17 per diluted share, compared to $129.1 million, or $10.06 per diluted share, in Q4 2023 [1] - The average balance of the loan portfolio increased by 14.0% on a GAAP basis and 16.5% on an adjusted basis compared to Q4 2023 [4] Collection Rates and Profitability - A smaller decline in forecasted collection rates resulted in a decrease of $31.1 million, or 0.3%, in forecasted net cash flows from the loan portfolio compared to a decrease of $57.0 million, or 0.6%, in Q4 2023 [2] - Forecasted profitability for Consumer Loans assigned in 2021 through 2024 was lower than estimates due to a decline in forecasted collection rates and slower cash flow timing [3] - The initial spread on Consumer Loan assignments increased to 22.4% compared to 21.7% in Q4 2023 [5] Debt and Share Repurchases - The average cost of debt increased from 6.3% to 7.2% due to higher interest rates on recent financings [6] - The company repurchased approximately 590,000 shares, or 4.7% of shares outstanding as of December 31, 2023 [7] Consumer Loan Metrics - Consumer Loan unit volume growth slowed significantly to 0.3% in Q4 2024 compared to 26.7% in Q4 2023 [4] - The number of active dealers increased by 4.7%, while the average volume per active dealer declined by 3.7% [31] - The forecasted collection rates for Consumer Loans assigned in 2022 and 2024 declined, while those for earlier years remained consistent with expectations [12][23] Changes in Loan Assignment Volume - Consumer Loan assignment volumes depend on demand for financing programs, available capital, and infrastructure capacity [30] - The dollar volume of Consumer Loans declined by 4.9% in Q4 2024, despite a modest increase in unit volume [31] - The company experienced a decrease in average advance paid, resulting from smaller average loan sizes and lower advance rates [31]

Company Announcement - Credit Acceptance Corporation is set to release its fourth quarter 2024 earnings on January 30, 2025, after market close [1] - A webcast to discuss the earnings will take place on the same day at 5:00 p.m. Eastern Time [1] Conference Call and Webcast Information - Participants wishing to ask questions during the webcast must pre-register via a provided link [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] Company Description - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers with varying credit histories [4] - The company's financing programs help consumers who might otherwise be unable to purchase vehicles, thereby improving their credit scores and access to traditional financing [5]

Core Viewpoint - Credit Acceptance Corporation has successfully completed a $300 million asset-backed non-recourse secured financing, involving the conveyance of loans valued at approximately $375.1 million to a special purpose entity for institutional lenders [2]. Financing Details - The financing will consist of three classes of notes with an expected average annualized cost of about 6.3%, which includes upfront fees and other costs [3]. - The financing will revolve for 36 months, after which it will amortize based on the cash flows from the conveyed loans [3]. - The funds from this financing will be utilized to repay outstanding indebtedness and for general corporate purposes [3]. Cash Flow Distribution - The company will receive 4.0% of the cash flows from the underlying consumer loans to cover servicing expenses [5]. - The remaining 96.0% of cash flows, after dealer holdback payments, will be allocated to pay principal and interest to institutional lenders and cover ongoing financing costs [5]. Company Overview - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers with varying credit histories [6][7]. - The company’s financing programs are designed to help consumers improve their credit scores, allowing them to access more traditional financing options in the future [6].

Company Recognition - Credit Acceptance Corporation has been named one of the Best Places to Work in IT by Computerworld for the 10th consecutive year, ranking 8 among midsize companies [1] - The company has received multiple honors from Great Place to Work® and Fortune, including 39th in the 100 Best Companies to Work For®, 29th in Best Workplaces for Women, 50th in Best Workplaces for Millennials, and 13th in the Best Workplaces in Financial Services & Insurance [3] Engineering and Innovation - The Engineering team at Credit Acceptance is driving key initiatives to modernize operations, enhance foundational technologies, and maximize automation, which contributes to faster customer value delivery and business growth [2] - The "Test Drive" program allows potential dealers to experience Credit Acceptance's software firsthand, increasing dealer engagement and expanding community reach [2] Financing Solutions - Credit Acceptance provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history, thus facilitating vehicle ownership for many who would otherwise be unable to purchase reliable vehicles [4][5] - The company's financing programs also help consumers improve their credit scores by reporting to national credit agencies, allowing them to transition to more traditional financing sources [5]

Group 1 - Credit Acceptance Corporation has increased the amount of Warehouse Facility V from $200.0 million to $250.0 million and extended the revolving period to December 29, 2027 [1] - The maturity of the Facility has been extended from December 27, 2027 to December 27, 2029, and the interest rate on borrowings has decreased from SOFR plus 245 basis points to SOFR plus 185 basis points [1] - As of December 5, 2024, there was no outstanding balance under the Facility [2] Group 2 - Credit Acceptance Corporation provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history [3] - The financing programs are offered through a nationwide network of automobile dealers, allowing sales to consumers who otherwise could not obtain financing [3] - The company reports to the three national credit reporting agencies, helping consumers improve their credit scores and access more traditional financing sources [4]

Core Insights - Credit Acceptance Corporation has been recognized as the 2 top large company in Michigan by the Detroit Free Press for the year 2024, marking the 13th consecutive year of receiving this award [1] - The company also received the Managers Specialty Award for its leaders' commitment to employee growth and well-being [1] Company Culture and Community Engagement - Credit Acceptance emphasizes its commitment to community involvement, with team members participating in various volunteer efforts, including supporting children with incarcerated parents and providing meals for those in need [2] - The company has established a mission-driven workplace that fosters professional and personal growth among its employees [2] Employee Experience and Recognition - The ranking of Credit Acceptance as a top workplace was based on an anonymous survey conducted by Energage, which measures employee experiences such as respect, support, and empowerment [3] - In 2024, the company received 11 awards, including recognitions from Great Place to Work® and Fortune, highlighting its status as a desirable workplace [4] Business Model and Financing Solutions - Credit Acceptance provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers with varying credit histories, thus facilitating vehicle ownership [5] - The company's financing programs not only help consumers purchase vehicles but also assist them in improving their credit scores, allowing them to access traditional financing options in the future [6]