Credit Acceptance(CACC) - 2024 Q4 - Annual Results

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]