Credit Acceptance Corporation Stock

Good day, everyone, and welcome to the Credit Acceptance Corporation Second Quarter 2026 Earnings Call. A webcast recording and transcript of today's earnings call will be made available on Credit Acceptance's website. At this time, I would like to turn the call over to Credit Acceptance's Senior Adviser, Jay Martin.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation Quarterly Earnings Call. As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of federal securities law. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements.

These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, to comply with the SEC's Regulation G, please refer to the Financial Results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

Before turning the call over to Vinayak, I'd like to share a personal note. I retired as Chief Financial Officer on July 27 and now serve as a senior adviser to assist with the leadership transition. As a result, this will be my final quarterly earnings call. It has been an honor to serve Credit Acceptance and its shareholders for the past 23 years. I am sincerely grateful for the trust and support that our investors, analysts, business partners, directors and team members have shown throughout the years.

I leave my role with tremendous confidence in the future of the company under Vinayak's leadership and with Joe Billante now serving as Chief Financial Officer, I believe Credit Acceptance is well positioned to continue building on its long history of success. While I am stepping away from my day-to-day responsibilities, I will remain a shareholder and look forward to following the company's continued success in the years ahead. Thank you again for your support over the years.

And with that, I'd like to introduce our Chief Executive Officer, Vinayak Hegde.

Good afternoon, everyone, and thank you for joining us today. The second quarter represented another step forward for Credit Acceptance. While the environment remains challenging for many non-prime consumers and the dealers who serve them, we're seeing encouraging signs that the work we have been doing across pricing, segmentation and operating efficiency is beginning to gain traction. Profitability increased, volume trends continued to improve, dealer engagement remains strong, and we are becoming more precise in how we deploy capital, underwrite risk and serve our customers.

The progress we are seeing is the result of a series of deliberate changes we have made across the business. It reflects a broader evolution in how we operate using data, better tools and a more disciplined approach to decision-making across the business. At the center of that transformation is a commitment to customer obsession, putting dealers and consumers at the heart of the decisions we make. We are still early in that journey, and we are beginning to see those efforts show up in the results.

I'll begin with the financial highlights. For the second quarter, we reported GAAP net income of $12.66 per diluted share, up 71% from the second quarter of 2025 and adjusted net income of $12.12 per diluted share, up 21% from last Q2. From a loan performance perspective, forecasted net cash flows from the loan portfolio declined by 0.3% during the quarter compared to a decline of 0.5% in the second quarter of last year. While we continue to monitor portfolio performance carefully, the broader picture remains of increasing stability relative to the more volatile periods we have experienced over the past several years.

On the origination side, Consumer Loan assignment unit volume declined 1% year-over-year. Importantly, monthly unit volumes returned to year-on-year growth in June, and that growth continued into July. This does not mean our work is complete, but it's an encouraging sign that the changes we have made are beginning to show up in the business.

Looking across the business, the quarter shows that we are moving back towards better operating results while doing so with a more data-informed and targeted approach. That distinction is important. Our objective is not to regain volume at any cost. Our objective is profitable growth, supported by disciplined capital allocation and a relentless focus on maximizing long-term intrinsic value per share.

A central part of our strategy is building credit acceptance into a deeply data-informed AI-enabled company. That means using better information and a sharper operating discipline to make more precise decisions across pricing, marketing, servicing and collections. The foundation of that work is segmentation, understanding dealers, vehicles and consumers at a more granular level so we can focus on where we can be most competitive and where the long-term economics are strongest.

At the dealer level, segmentation helps us better understand friction points, dealer needs and opportunities to strengthen our partnerships. We are using those insights to simplify workflows and integrate more deeply into the systems dealers already use, including RouteOne, Dealertrack and dealer center. The easier we are to do business with while maintaining our discipline, the better experience we create for dealers and a better position we are in the marketplace.

To better serve our dealer partners, we made improvements in our sales engagement model. We are being more deliberate about where our sales force spends time, how we structure markets and how we tailor service to different types of dealers. Not every dealer has the same needs and not every market opportunity requires the same approach. We believe better alignment between dealer engagement and pricing should support more disciplined profitable growth.

In prior quarters, I discussed our strategy with franchise dealers. And today, we are seeing encouraging progress in originations and engagement across that segment of our dealer network. Our focus has been on reducing attrition, regaining market share where the economics make sense and better meeting their needs. We're also building AI-based tools to give our sales teams better insights in the field. One example is helping our teams advise dealers on which vehicles in their inventory best fit our program, where adjustments to inventory strategy may improve outcomes.

This is what we mean by being AI-enabled, using better information to help our teams make more informed recommendations for our dealer partners. At a vehicle level, segmentation helps us identify which vehicles fit our program, where we can be competitive and how vehicle characteristics interact with consumer credit performance. One example this quarter was our work around light structural damaged vehicles. We opened this opportunity up to careful calibration as it aligns with market standards, the inventory dealers commonly carry and the price and vehicle segments in which we compete.

We're monitoring the performance and risk carefully and early results are encouraging, plan to evaluate additional vehicle categories with the same disciplined approach to determine where we can expand responsibly. Consumer segmentation is equally important. Our goal is to better match consumer credit performance with the vehicle profile and deal structure. Over time, we want to move closer to personalization, making decisions that reflect specific economics and risk of each transaction.

We're still early in that journey, but the direction is clear, and I'm confident in our ability to keep improving. We're continuing to improve our pricing and decisioning models as conditions change, our models need to evolve with them. This means testing assumptions, backtesting performance, refining variables to improve precision and deploying pricing changes efficiently. Our goal is to make this process faster, more rigorous and more responsive to current market conditions.

Our refined scorecard improves how we evaluate consumer credit strength and deal level risk by leveraging additional data across consumer, deal and vehicle characteristics. This can enable us to assess risk more precisely at the deal level. We're encouraged by the initial results we saw in Q2. We'll continue refining the scorecard as conditions evolve. We are taking the same deeply data-informed AI-enabled approach to servicing. We see meaningful opportunities for data to help us better understand where consumers are in their journey, what challenges they may be facing and how we can support them through the life of their loan.

Our objective is to improve both the effectiveness and efficiency of servicing, helping consumers get the support they need while expanding self-service options and delivering a better consumer experience at scale. This work is closely tied to our purpose of changing lives. Credit acceptance exists to make vehicle ownership possible for consumers who may otherwise have limited access to financing. When we do our job well, we help consumers obtain transportation and create an opportunity to build stronger financial future. That is why improving our company and improving consumer outcomes are not separate goals, they are deeply connected.

Stepping back, I believe our transformation is still early, but it's becoming increasingly tangible. We have not changed our focus on profitable growth. We continue to approach capital allocation with discipline, directing capital towards opportunities where we see the strongest long-term value for shareholders. What has changed is the level of precision in which we are managing the business, the dealers we serve, the vehicles that fit our program, the consumers we can support effectively and the pricing strategies that create attractive long-term economics.

That precision should help us build a more durable, resilient company while delivering a better experience for both dealers and consumers. I'm optimistic about the path we are on and the team we have to execute our vision. The work we are doing is beginning to show up in the business. And while we still have plenty left to accomplish, the capabilities we are building today should position Credit Acceptance to serve our customers better and maximize long-term intrinsic value per share.

As I close, I want to take a moment to recognize 2 leaders who have made a meaningful impact on credit acceptance. First, I want to recognize Ken Booth, who recently retired from our Board of Directors as part of a planned transition after previously serving as our CEO. Ken played a pivotal role in shaping Credit Acceptance and advancing our mission. I also want to thank Jay Martin for his many years of leadership as our CFO. Jay has been a trusted partner and a study steward of the financial discipline and shareholder focus that have long defined this company.

On behalf of all of us at Credit Acceptance, I want to thank both Ken and Jay for their countless contributions over the years and wish them all the best in retirement. At the same time, I'm excited to welcome Joe Billante, our new Chief Financial Officer. Joe has been a wonderful addition to our leadership team, and I'm confident that his experience and perspective will help us continue to strengthen the company as we move forward.

With that, I will turn it over to Joe to walk through our financial results and the highlights for the quarter.

Thank you, Vinayak, for the warm welcome. Let me start with a recap of our second quarter financial results. In Q2, we delivered year-over-year earnings growth. GAAP net income was $135.9 million or $12.66 per diluted share, up 71%. Growth was driven primarily by a decrease in provision for credit losses and by a $23 million contingent loss recognized last year that did not recur this year. Adjusted net income was $130.1 million or $12.12 per diluted share, up 21% from the prior year, primarily driven by higher yields on newer loans.

Loan volume declines continued to moderate this past quarter with unit volume declining 1% in Q2 versus a decline of 4.3% in Q1. As Vinayak mentioned, monthly unit volume returned to positive growth in June and continued into July. In part due to a soft comparison, July was up over 20% year-over-year, taking volume approximately back to 2024 levels. Loan dollar volume grew modestly by 0.1% versus a decline of 4% in Q1. The average unit volume per active dealer declined 3.8% year-over-year.

We financed over 84,000 contracts for our dealers and consumers and enrolled over 1,400 new dealers. We had over 11,000 active dealers during the quarter, making this our second consecutive record-setting quarter for active dealers.

Market share in our core segment of used vehicles financed by subprime consumers for the first 2 months of the quarter was 4.9%, down from 5.3% for the same period in 2025, but up from the recent low of 4.4% in the fourth quarter of last year. We collected more than $1.4 billion and paid $43.5 million in dealer holdback and accelerated dealer holdback. From a loan performance standpoint, forecasted net cash flows declined $39.1 million or 0.3% during the quarter, a lower magnitude than the $55.8 million or 0.5% decline in the second quarter of last year.

We continue to see our older challenged vintages wind down with the 2022 vintage remaining stable through the first half of 2026. And while the 2025 vintage experienced modest underperformance during the quarter, it remains within 10 basis points of our initial forecast. We ended the quarter in a strong liquidity position with approximately $1.4 billion in amounts available for borrowing under our revolving lines of credit.

In closing, I'm excited to join Credit Acceptance at a pivotal time in its history. I plan to focus on executing our vision, maintaining disciplined capital allocation and delivering long-term shareholder value. At this time, Vinayak, Jay and I will take your questions, along with Jay Brinkley, our Senior Vice President and Treasurer; and Jeff Soutar, our Vice President and Assistant Treasurer.

[Operator Instructions]

Our first question comes from the line of Robert Wildhack of Autonomous Research.

A question on the forecasted collections and the revision there. That revision was all but de minimis last quarter, minus $9 million, but now it's back to negative $39 million this quarter. So just from a credit perspective, was there anything that jumped out? Anything you want to highlight as a driver in the quarter? And then how do we square the comments for increasing stability with the larger downward revision this time?

Yes. So we did see a $39 million decrease for the quarter. It is down from the $55 million we saw a year ago. We believe the change, the decrease of the $39 million is relatively modest when you consider we're forecasting $12 billion of future cash flows. We did see some underperformance of the '25 loans this quarter, but mainly offsets the increase in performance we saw in Q1. So overall, very consistent with our initial expectations.

The older vintages of '23 and '24 declined modestly. So -- but I would say with the new vintages, no concerns there. As far as '25 is progressing in its life cycle, it's more consistent with our expectations than what we saw with those older vintages. So the vintage is not very seasoned, so we're cautious. We will expect to see some up and down as the vintage seasons, but we haven't seen anything meaningful that gives us concerns about our current forecast.

Okay. And then if I unpack the components of the provision in the quarter, you've got the forecast changes and then the $39 million revision. I assume that the prepayment headwind is still the missing piece and roughly the same in terms of magnitude. Is that right?

Yes, that's correct. So undiscounted cash flows declined $39 million. The provision forecast changes was $82 million. That difference is a slight slowing of forecasted cash flow timing on the nearly $12 billion of cash flows we're forecasting, and that is mainly driven by prepayments. Those continue to come in slower than what our forecast would expect. So we'll continue to monitor that. And as Vinayak said earlier, as we focus on being deeply data-driven and use more segmentation, we'll refine those forecasts as we see opportunities.

Yes. I guess is there any update to how you're thinking about that? The prepayment thing has been a headwind in the provision for several quarters in a row now. At what point would you say the current level is the right assumption and then update the forecast there?

Yes. Like I said, that's something we'll continue to monitor. And to your point, it has been several quarters where there's -- where it's -- prepayments have come in slower than what we've expected. So we'll continue to monitor that. We do think it will return to normal at some point. It does seem that consumers are holding on to their vehicles longer. That could be due to elevated vehicle prices and a lack of alternatives. But like I said, we'll continue to monitor that when we see that we can make an adjustment or if we need to make an adjustment, we'll do so.

Okay. Congrats, Jay, on the retirement, and welcome Joe.

Our next question comes from the line of Kyle Joseph of Stephens.

I think in terms of the quarter, you guys talked about higher yields on new loans. Can you tell us what's driving that and expectations for that going forward?

We have seen our adjusted revenue yield increase. It's really just a factor of putting loans on with new yields and the older vintages running off that had lower yields due to loan performance. I would say the loans we originated during the quarter didn't necessarily have a significantly different yield than what we've originated in recent quarters, just more of a fact of the older underperforming vintages rolling off [indiscernible] fourth quarter in a row where the adjusted yield is ticked up there.

Sure. And then along the same lines, in terms of the unit volume improvement, just -- I guess, is that a function of comps? Is that a function of the competitive environment? And would you expect that to kind of continue going forward?

Well, [ Stephens, ] thanks for the question. It is a question of some of the comps as well. If you look at the unit volumes coming back, it's coming back to 2024 levels. There are a bunch of initiatives that I put in my opening remarks. The franchise dealers, the integration that we did with RouteOne and all the aggregators I've been talking about in the last few quarters. It is starting to come to fruition. We're starting to see increased volume from franchise dealers and conversion from that.

And we are continuing to segment where we spend the time, are we spending the time with the right set of dealers, identifying the right segments that we want to work with. One example of that, that I had in my remarks is this light frame damage. So that is also happening. So it's not just one particular thing. We are continuing to also improve our scorecard and pricing as well, continuing to refine that at the dealer level.

So there's not one thing that is actually causing it. It's the deliberate effort across finally segmenting it, looking for profitable growth through discipline on capital allocation and everywhere where we spend time with the dealer, what kind of vehicles we support. And so all those things are actually contributing to that unit volume growth.

[Operator Instructions] Our next question comes from the line of [ Rikard Ekstrand ] of ECM Capital.

Yes. One question we have is looking at the whole management team, it's been turned over to non-subprime professionals. Why should we be confident that you can manage the subprime company equally well or better than the previous team in place?

Yes. Thanks for the question. I just want to remind everybody that I was on the Board for 5 years, and I've known this management team for a very long time as well. And while the main leaders have been changed, a lot of people who are coming in have deep experience in subprime. It may not be in auto lending. Both our new CMO and our Chief Business Officer have had deep experience working with subprime customers in large companies like T-Mobile. That's number one. Number two, the core people working on pricing are still here. So it's not like the leadership has massively turned over.

We are transforming the company into a deeply data-informed AI-enabled company. And I'm looking for people who have that experience from having done last year transformations, and that is what is causing the change in the management. Many of the senior leadership and management are still here. The person who runs collections, our COO, in fact, has been promoted. He now owns both sales and servicing. So it is not a complete turnover. There are certain areas that we have made some changes.

Okay. Very good. Do you see advance rates going much higher than the 46.1%? And what makes you confident advance rates are not too aggressive?

Yes. So as it relates to our pricing, we're looking to maximize intrinsic value. So the advance rates that we have will be dependent on that. Overall, we do advance all things equal, more under the purchase program than we do the portfolio program. So some of the shift you're seeing there in the overall advance rate reflects a change in mix to more of the purchase program.

But what I would do is if you look at the table in our earnings release. That focuses on the initial spread. That would give you a good idea of how pricing was this quarter versus what it has been in prior periods. So I would expect it to stay roughly within that historical range, again, with the emphasis of trying to maximize intrinsic value.

Yes. I would also add, I mean, some of the stuff with franchise, they tend to be more for purchase. As we have started working with some aggregators, you will see some purchase transactions come through because franchise dealers tend to be more of purchase dealers than portfolio dealers.

With no further questions in the queue, I would like to turn the conference back over to Mr. Billante for any additional or closing remarks.

Thanks. We'd like to thank everyone for their support and for joining us on our conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at [email protected]. We look forward to talking to you again next quarter. Thank you.

Once again, this does conclude today's conference. We thank you for your participation.

Good day, everyone, and welcome to the Credit Acceptance Corporation First Quarter 2026 Earnings Conference Call. A webcast recording and transcript of today's earnings call will be made available on Credit Acceptance website. At this time, I would like to turn the call over to the Credit Acceptance Chief Financial Officer, Jay Martin. Jay, please go ahead.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation Quarterly Earnings Call. As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com, and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of Federal Securities Law.

These forward-looking statements are subject to a number of risks and uncertainties many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spilled out in the cautionary statement regarding forward-looking information included in the news release.

Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, to comply with the SEC's Regulation G, please refer to the financial results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time, I'd like to introduce our Chief Executive Officer, Vinayak Hegde.

Good day, everyone, and thank you for joining us today. The first quarter of 2026 represented meaningful progress across the business. Before I get into the broader themes of the quarter, I want to start with the headline numbers. For the first quarter, we delivered GAAP net income of $12.40 per diluted share and adjusted net income of $10.71 per diluted share.

From a loan performance perspective, forecasted net cash flows from our loan portfolio declined modestly by $9.1 million or 0.1%, which was the smallest quarterly change we have seen in the past 3 years. On the origination side, you've seen a moderation in decline of consumer loan assignment volume from 9.1% to 4.3% year-over-year. Within that context, we continue to operate in an environment that remains challenging for non-prime consumers as we remain very intentional about how we deploy capital and take risk.

The data suggests that our pricing adjustments and segmentation work are helping bringing greater predictability back into the portfolio. While we remain vigilant about the macro environment, we are cautiously optimistic that our portfolio is becoming better aligned with current conditions. These trends do not change our posture as we remain disciplined. However, they do reinforce that the actions we have taken over the past several quarters are beginning to show up in the data.

More importantly, they support our long-standing focus on managing the business to maximize long-term economic profit and intrinsic value. A critical part of our evolution is how we operate internally. Over the past quarter, we implemented a new company-wide operating system that defines how we plan, execute and review the business.

This system introduces consistent operating rhythms weekly and quarterly where leaders review performance surface issues early and make data-driven decisions. We call this reinforcing a founder's mentality, which is simple but demanding expectation, stay obsessively focused on the customer, operate with ownership and never drift away from the front line.

What's changing tangibly is not just cadence but clarity. Teams are aligned around fewer, more explicit priorities, accountability is clearer across functions. Decisions are made faster with better visibility into trade-offs. This operating rigor allows us to run credit acceptance as a more cohesive system rather than a collection of functional silos. Over time, we believe this discipline will improve execution quality and allow us to scale without adding unnecessary complexity with the ultimate goal being how we best serve our customers.

Against that backdrop, we have taken a hard look at our cost structure. Our approach to cost discipline is broader than any single action. We are constantly evaluating capital allocation holistically across the organization, how resources, talent and time are deployed against our highest priority objectives.

In April, following a thorough review of how resources are allocated, we made a difficult decision to part ways with approximately 6% of our workforce. These decisions are never easy, and we approach them thoughtfully and with respect for the individuals impacted, responsibility as stewards of this business is to ensure our long-term viability and continue to change lives.

And part of our responsibility is making sure our cost base reflects where we are today and where we need to be tomorrow. Head count changes were 1 outcome of this review. But the broader goal is to build a more focused and efficient operating model that supports sustainable value creation over time. This means simplifying how work gets done narrowing our focus to the highest impact initiatives and directing investment towards areas that deliver the strongest long-term returns.

We'll continue to look for opportunities to operate more efficiently and drive operating leverage over time. While protecting investment in areas that strengthen risk management, scalability and dealer and consumer experience. As a part of our continued focus on disciplined execution, we made 2 strategic senior leadership additions in areas that are critical to strengthening our operating model and long-term performance. We appointed Stefan Shuman as Chief Business Officer to help integrate our pricing, performance and analytics efforts around a more data-driven and coordinated operating approach.

Prior to joining Credit Acceptance, Stefan spent more than 2 decades at Deutsche Telekom and T-Mobile, most recently serving as a Senior Vice President at T-Mobile where he focused on driving commercial growth, marketing and increasing customer lifetime value. His experience operating at scale and translating data into commercial outcomes strengthens our ability to make more precise disciplined decisions across the business.

We also appointed Robert Borie as Chief Sales Officer to lead our sales organization with a sharper focus on dealer segmentation frontline execution and reducing friction in how dealers engage with us. Robert brings more than 2 decades of experience in aviation, more recently, holding senior leadership roles at Delta Airlines and Wheel South.

He has led sales organization serving a wide range of customers from small and midsized businesses to large enterprises, which aligns well with our diversity and scale of our dealer network. Together, these leadership additions reinforce our commitment to investing in talent that strengthens execution, improves decision quality and support sustainable long-term value creation.

On the dealer front, we are seeing encouraging signs particularly with franchise and large independent dealers. They are making deliberate changes to how we support their business, including simplifying workflows, integrating more deeply into the systems they already use reducing time and friction in origination and funding. At the same time, we are becoming more targeted in how we deploy pricing and advanced strategies. We are actively testing scenarios, analyzing sensitivities and applying more granular segmentation to ensure that we partner most deeply with dealers where the long-term economics are the strongest.

This is because our success is aligned with the success of our partners and their customers. We have the strongest returns when the consumers meet their obligations and our dealers build healthier businesses. And I believe it's important to note, our goal is not to regain volume at any cost.

Technology and artificial intelligence, in particular, continues to be 1 of the most important levers for improving how we operate. Our focus is on practical application of AI to make our operations more seamless and more efficient. We are embedding AI into daily workflows, but it meaningfully improves speed, consistency and decision quality by automating high-volume analytical work to free our teams to focus on insight, nuance and customer understanding.

For example, during the first quarter, our AI-enabled call center agent handled approximately 5x more inbound calls than the prior quarter. This allows us to scale servicing capacity without a proportional increase in cost, while still enabling consumers to access information and complete payments efficiently. We are also using AI to automate and analyze dealer interaction data, combining performance data with dealer interaction dialogue to build a more intelligent CRM system.

This gives our sales and support teams real-time insight into dealer needs, emerging friction points and opportunities to respond more proactively. Over time, these capabilities are designed to lower the marginal cost of high-quality decision-making across the business. We are still in early stages of this journey, and we'll continue to make disciplined investments focused on high-impact use cases that drive efficiency and create long-term value.

We continue to focus intensely on improving our pricing and decision-making models through deeper use of data and more granular analysis. Over the past quarter, we took a critical look at where we are losing market share and work to diagonize the underlying drivers rather than simply reacting to outcomes. This included deeper analysis of performance vector segmentation by dealer segment, credit brand, geography and vehicle characteristics.

It is critical to understand where our economics are strongest and where refinement is needed. We're actively fine-tuning our advanced models and testing targeted opportunities to improve conversion while maintaining appropriate margins of safety. At the same time, we are evaluating scorecard enhancements to ensure our underwriting and pricing models remain aligned with current market conditions.

This disciplined data-driven approach is designed to sharpen decision quality, improve consistency and support sustainable risk-adjusted growth over the long term. To close, I want to reiterate the purpose that drives us. Our mission is to change lives by providing access to credit that enables people to obtain reliable transportation and create opportunities for financial progress.

We believe all consumers deserve respect and that dignity should never depend on a credit score. This principle is the foundation upon which we are building Credit Acceptance with the goal of compounding intrinsic value over time. This will require discipline, transparency and a willingness to make difficult decisions when needed. It also requires continuous improvement in how we operate, how we serve our dealers and consumers and how we allocate resources. Progress will not always be linear, but the operational changes we are making today across credit, cost structure, operating discipline, customer experience and technology are designed to make credit acceptance more durable, more agile and better position for the future.

With that, I'll turn it over to Jay to walk through the financial results in more detail.

Thank you. We reported year-over-year growth in earnings for the first quarter with GAAP net income of $135.8 million or $12.40 per diluted share and adjusted net income of $117.3 million or $10.71 per diluted share. From a loan performance standpoint, forecasted net cash flows from our loan portfolio declined $9.1 million or 0.1% during the quarter versus a decline of $34.2 million or 0.3% last quarter, reflecting reduced volatility and forecast changes.

As Vinayak mentioned, this was the lowest quarterly decline we've seen in the past 3 years. Loan volume declines continued to moderate this quarter with unit volume declining 4.3% this quarter versus a decline of 9.1% last quarter.

Likewise, loan dollar volume declined 4% this quarter versus a decline of 11.3% in Q4. We financed nearly 96,000 contracts for our dealers and consumers, collected nearly $1.5 billion overall and paid $47 million and dealer holdback and accelerated dealer holdback.

Additionally, we enrolled over 1,500 new dealers and had a record 10,977 active dealers during the quarter, reflecting continued engagement across our dealer network. Our market share in our core segment of used vehicles financed by subprime consumers for the first 2 months of the quarter, the period for which data is currently available was 4.5% down from 5.2% for the same period in 2025.

The average unit volume per active dealer declined 6.5% year-over-year, while our average loan portfolio remains steady at $8.9 billion on an adjusted basis year-over-year. From a capital standpoint, we closed our first ABS transaction in the year earlier today, raising $450 million of capital. The all-in cost was 5.2% compared to 5.1% on our most recent securitization in Q4 with the modest increase driven by higher treasury rates.

Despite a volatile macroeconomic backdrop, the transaction was supported by a broad and diversified investor base and achieved our lowest credit spread since late 2021.

At this time, Vinayak and I will take your questions along with Jay Brinkley, our Senior Vice President and Treasurer; and Jeff Sutor, our Vice President and Assistant Treasurer.

[Operator Instructions] Our first question comes from Moshe Orenbuch of TD Cowen.

Great. The the data that you show for collections shows some improvement in performance in prior vintages. But some deterioration in 2026 and in the footnote, it attributes it to canceled loans. I mean I know you've -- could you just maybe explain what that is and whether that's something that either will continue or was onetime in nature?

Yes. So it's something we see just about every quarter when we originate loans, we don't have enough loan performance experience yet with the loan performance impact the collection rate, but our numerator when a loan cancels our collection rate drops to 0 on that loan, but our denominator still has the original contract amount in that. So in the quarter, something as originated. Generally, the change you see there is driven by these cancellations.

So if you go back to first quarter last year, you'd see the 25 loans were down 20 basis points in Q1, and that's driven by these cancellations. And there's nothing that's onetime. It's something that impacts all our origination years. It's just more -- you see it more in Q1 because those are the loans you originated you don't have multiple quarters of originations in the year where loan procurements are offsetting that calculation.

Great. And I did notice an increase in the percentage of originations on the purchase loans. And sort of when you look at the spread on the portfolio loans versus the purchase loans, the spread was roughly flat on the portfolio loans, but down on the purchased loans. Is that like what it is taking -- that's what it takes to get that volume? Like maybe could you just describe what's going on from your perspective in terms of those 2 pieces of the portfolio?

Sure. I'll start I mean I think in '25, we expanded the dealer access to the purchase program to include all contracts from consumers with higher credit ratings. So the dealers have the option to use both portfolio and purchase. We kind of still price them with the same economic profit. .

For perspective, the loan mix is purchase is 28% and ended as well within the historical range of 20% to 40% over the last 6 years. On the spread, you can comment on that.

Yes. So part of that, when you're looking at the spread table in the earnings release, you're looking at what the spread is now based on the current forecast. So if you look at the table above that, if you look at purchase loans, the 25 loans have outperformed our initial forecast by 20 basis points, the 26 loans have underperformed -- so that leads to a little bit of that difference in the spread, just the impact of the loan performance there where the deal allowance in '25 have been generally consistent with our initial expectation.

Our next question comes from Rob Wildhack of Autonomous Research. .

I wanted to ask about the revision to forecasted collection and how that flows through to the provision in the income statement. -- you've got the negative $9 million this quarter, but a provision expense of $54 million for forecast changes -- and I contrast that with last quarter, you revised collections down by a lot more, $34 million, but the provision for forecast changes was close, it was $57 million.

So I guess the question is, why doesn't the lower forecast changed this quarter, the $9 million flow through to a lower provision expense in the income statement.

So I'll take that. First, I'd point out the provision for forecast changes in December was actually $73 million. So some of that difference is due to the change in forecasted net cash flows being down $9 million this year versus $34 million last quarter. But when you look at -- when you think about our provision for credit losses on forecast changes, is driven by a change in the net present value of future cash flows.

So that considers both the decreases in undiscounted cash flows that we referenced there and then also the overall cash flow timing of approximately $12 billion in future net cash flows that we're considering. So most of -- in both of those periods, a large contributor of the provision for credit losses was the overall slowing of forecasted cash flows, and that's primarily related to prepayments.

We're seeing a lower level of prepayments than what our forecast would expect. Historically, when the environment is competitive, we've seen more consumers prepay their loans. We're not seeing that in this current cycle. Difficult to say exactly what's driving that. We think probably a couple of things. Consumers are holding on their cars longer. It could be related to the prices of new cars could also be consumers having more negative equity and making them hard to refinance. So our forecast assume that prepayments are going to normalize at some point in the future. They haven't yet we'll continue to evaluate our forecast and make the revisions as we find opportunities to do so.

And all told that the negative $9 million is still quite a bit better. I'm curious if there's anything that you'd want to highlight as a main driver there. Do you think there's something specific to the consumer tax refunds or lower tax withholdings this year? Or do you think it's more natural like vintage remixing away from 22 and towards some better vintages? .

Yes. Thank you. Yes, it's both the fact that vintage remix of the 22, 23 core shrinking and in the real performance of the new take the '24 and '25 vintages right? The '24 vintage is performing. I talk about the level of '25 is definitely tracking ahead.

And what happens is every every quarter goes by the relative mix of 22-23 becomes lesser as compared to the '24 and that confidence from the portfolio improving helps us kind of improve that on an ongoing period,

[Operator Instructions] Our next question comes from Jordan Hymowitz of Philadelphia Financial.

This is Dan for Jordon. I just tried to recall my question because Rob from Autonomous just asked it. .

Our next question comes from Moshe Orenbuch of TD Cowen.

Maybe just to understand how you're thinking about the market share. I know it's just the first 2 months of the quarter. But is there are there specific things that you're doing to regain that market share or things that you're -- that you think are factors in it? And what would cause those to change to your benefit?

Yes, Moshe, thanks for the question. Yes. I mean the latest data obviously shows February stable from Q4 at 4.5%. I mean, we are not trying to gain share at any cost, right? We have been very deliberate about the trade-offs. We didn't price aggressively to get to the previous thresholds. Our focus is continuing to be having good economics. And -- but what we are trying to do is to understand it by segment, by price point, by credit band, by geography and see if we can get sharper in pricing without compromising return on investment.

And it's but that's what we're starting to do, so that we can actually understand whether it's over advance or pricing how do we understand this at a more segmented level? What is the competition in those particular areas, be it be independent of franchise and selectively go after pockets of opportunity. So that's what we are trying to do. We don't want to get share just for the sake of getting share.

Got it. And maybe just a housekeeping question. I noticed the claims expense was down pretty sharply, which is a good thing. Is that the new level? Or is there something onetime in there.

This is related to the provision for claims. Yes, I would say the profitability of these contracts there has been fairly consistent. You do see some volatility quarter-to-quarter. So I wouldn't read too much into just the impact this quarter. So nothing unusual there or a new trend.

Thank you. With no further questions in the queue, I would now like to turn the conference back over to Mr. Martin for any additional or closing remarks.

We would like to thank everyone for their support and for joining us on our conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at [email protected]. We look forward to talking to you again next quarter. Thank you.

Once again, this does conclude today's conference. We thank you for your participation. You may now disconnect.

Good day, everyone, and welcome to the Credit Acceptance Corporation Fourth Quarter 2025 Earnings Call. A webcast recording and transcript of today's earnings call will be made available on Credit Acceptance's website.

At this time, I would like to turn the call over to Credit Acceptance Chief Financial Officer, Jay Martin.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation earnings call. As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of federal securities law. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, to comply with the SEC's Regulation G, please refer to the Financial Results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time, I'd like to introduce our Chief Executive Officer, Vinayak Hegde.

Good afternoon, everyone. I'm honored to join you today for my first quarterly earnings call as CEO. While I have only recently stepped into this role, it has been my privilege to serve as Credit Acceptance's Board of Directors for nearly 5 years. That experience gave me a front row seat to the tremendous passion, talent and resilience that define our organization.

Prior to joining Credit Acceptance, I led teams at founder-led companies where success came down to 3 things: a clear mission and purpose, an owner's mindset and an obsession with the front line, staying close to customers and those who execute the work every day. Those same attributes drew me to Credit Acceptance. They were instilled by our founder, Don Foss, who led the company from our founding in 1972 until 2017 when he retired as the Chairman of the Board. Let me share a quick reminder of his story and our enduring mission.

Don, a car dealer himself started Credit Acceptance based on a simple but powerful belief. Many hard-working individuals were being unfairly denied the opportunity to finance a vehicle they needed simply because of their past credit challenges or limited credit history. Don believed traditional lenders too often misjudged people with less than prime credit, assuming they weren't worthy of a second chance. He built Credit Acceptance to change that by empowering dealers to serve those individuals through access to financing. These individuals in turn gained reliable transportation and the ability to build or rebuild their credit, a path forward in life.

I intend to lead Credit Acceptance in exactly that spirit, embracing the owner's mindset, being driven by the bold mission to help every American buy a car through dealers and obsessing over the front line, understanding dealers' needs intimately and empowering them to serve credit-challenged and credit-invisible consumers. If we serve our dealers and consumers well, I believe our business will thrive.

Since assuming the role of CEO nearly 90 days ago, I focused on listening, learning and charting a purposeful path forward. First, I connected with team members throughout the company to better understand the dealer and consumer experience. I also met the dealers to learn firsthand how our services and products support their businesses and consumers and potential points of friction.

Next, I developed a growth plan with clear priorities and established highly disciplined operating rhythms. These operating rhythms include weekly business reviews to track performance and address issues in real time and a quarterly game plan with a consolidated road map across all functions of the company to stay tightly aligned with our annual objectives. I believe this type of structured approach creates accountability, agility and consistent progress towards goals.

As I move forward, my leadership will be guided by several core operating principles, be obsessed with and remove friction for our customers, both the dealer and the consumer, make data-driven decisions, explore ways to enhance our servicing and processing capabilities through artificial intelligence, prioritize a digital-first approach in our initiatives and continue to provide a culture that attracts and retains talented people and enables them to excel.

Consistent with those core operating principles, I believe we can position Credit Acceptance for growth. We're continuing to prioritize 3 strategic objectives: one, generating dealer and consumer demand by deepening relationships within our dealer network, support dealers in acquiring new consumers and leveraging data-driven insights to better understand and serve our markets; two, empowering dealers to fulfill their demand through preferred channels such as our proprietary origination system or through aggregators like RouteOne and Dealertrack; three, delivering world-class servicing and processing. We are continuing to invest in artificial intelligence, which is already supporting our customer service calls and helping to improve efficiency. It also includes making ongoing enhancements to our app, prioritizing customer experience and nurturing long-term loyalty among dealers and consumers.

I've been impressed by the strong foundation and dedication across our teams to execute on these priorities. For example, in the fourth quarter, we rolled out a new contract origination experience specifically built for the way franchise and large independent dealers operate in today's market. Increasingly, these dealers originate contracts through aggregator platforms and integrated dealer systems rather than stand-alone lender portals. Our experience meets them where they are. It includes seamless RouteOne e-contracting integration, enhanced deal structuring and optimization tools and expanded support for financial and insurance products, all designed to eliminate friction and make working with Credit Acceptance faster and more intuitive inside the systems dealers already use every day.

This launch is particularly timely. The percentage declines in loan unit volume we have seen were most significant among franchise dealers. Notably, we have observed that Consumer Loans originated through franchise dealers also continue to exhibit slightly better credit performance than those from independent dealers. We expect to continue to expand the number of dealers using the new contract origination experience in the first quarter of 2026.

I'm encouraged by real dealer stories that show our mission in action, like the one from Town & Country Ford, a family-owned franchise dealership in Alabama. The community in which Town & Country Ford is located faced economic headwinds, including factory closures that left retired steel and iron workers with credit challenges.

When the new general sales manager joined, bringing prior positive experience with Credit Acceptance, she recognized an opportunity to empower her team to serve this credit challenge buyers. She led the dealership to enroll with us, which boosted repeat and referral business while strengthening their local reputation in tough times.

This collaboration echoes the very reason Credit Acceptance was founded. Our company was built to provide second chances, help individuals finance reliable transportation, rebuild credit and move their lives forward. At Town & Country, we are seeing that mission come alive. Consumers gain access to vehicles that change their daily lives, while the dealership staff finds renewed purpose in making a difference in their community. When we enable franchise and independent dealers to serve a wider market, everyone wins. Consumers get opportunities, dealers build sustainable businesses and communities benefit from greater economic mobility.

Importantly, we delivered our mission while maintaining a great workplace. During the quarter, we were named one of America's Top 100 Most Loved Workplaces for the second consecutive year. with a #6 ranking. I'm deeply impressed by the culture and the excitement to execute our mission and drive Credit Acceptance forward. A special thank you to Ken Booth, who helped build a strong foundation through his leadership and continues to serve our Board.

Before I hand it to Jay to provide an overview of our Q4 performance, I want to leave you with one final message. I'm a builder by trade. In my past leadership roles, I have built and scaled innovative customer-centric businesses that transformed how people shop, travel and connect. I believe Credit Acceptance has a very strong foundation, one built on purpose and performance. I'll strive to layer technology, a deeply data-informed approach and a highly structured operating rhythm on top of that foundation to create a dynamic, durable and even more customer-obsessed company. You can expect me to report progress on our initiatives, be transparent about our challenges and be disciplined with capital allocation. We'll maintain our focus on maximizing economic profit and the company's long-term intrinsic value.

I'm genuinely excited to partner with all of you, our team, our dealers, our consumers and our investors as we build this next phase together.

Thank you. As to the fourth quarter results, we were pleased to announce growth in adjusted earnings per share despite declines in loan performance and loan volume. We financed nearly 72,000 contracts for our dealers and consumers and collected $1.3 billion overall and paid $48 million in dealer holdback and accelerated dealer holdback. Additionally, we enrolled over 1,200 new dealers and had over 9,800 active dealers during the quarter.

Loan performance measured by variances in forecasted collection rates from the last quarter moderately declined. More specifically, our 2023 and 2024 vintages declined 0.4% and 0.2%, respectively, while our other vintages were stable during the quarter. Importantly, the underperformance of our '24 vintage was primarily related to loans originated prior to the scorecard change during the third quarter of 2024. We believe the underperformance was largely the result of the continued impact of high inflation on the subprime consumer.

Changes to our forecast of future net cash flow sequentially improved this quarter with the rate of decline narrowing from a decrease of $58.6 million or 0.5% during the third quarter of 2025 to a decrease of $34.2 million or 0.3% during the fourth quarter of '25. Loan volumes also sequentially improved this quarter with year-over-year declines narrowing. Loan unit volume improved to a decline of 9.1% this quarter versus a decline of 16.5% last quarter. Likewise, loan dollar volume improved to a decline of 11.3% this quarter versus a decline of 19.4% last quarter.

Our market share in our core segment in used vehicles financed by subprime consumers was 4.5% for the first 2 months of the fourth quarter, down from 5.4% for the same period in 2024. The number of active dealers declined 2.8% year-over-year, and the average unit volume per active dealer declined 6.4% year-over-year. Our loan portfolio, however, increased 1% year-over-year on an adjusted basis.

At this time, Vinayak and I will take your questions along with Jay Brinkley, our Senior Vice President and Treasurer; and Jeff Soutar, our Vice President and Assistant Treasurer.

[Operator Instructions] Our first question comes from Robert Wildhack with Autonomous Research.

Vinayak, welcome. Nice to have you on the call here. A question for you. You spent several years on the Board, so certainly not new to the company, but your background definitely much more from the marketing growth technology areas than it is from maybe more traditional financial services. I thought the opportunities you outlined sound very interesting, but I would love to get your thoughts on how you plan to manage the credit lending, underwriting, more financial aspects of the business. And if you see any opportunities for improvement or change in any of those areas specifically?

Robert, thank you for your question. Yes, I mean, look, I mean, we tend to take a long-term view on this, and we want to be conservative in our approach towards lending, do the right thing, improve the customer experience. But we always take a long-term view on this, not just a short-term view on this. We obviously see opportunities to constantly improve the credit scoring models, improving the models, which we'll constantly continue to do. But the approach towards lending and credit scoring is going to be conservative and long-term focused.

Okay. And then maybe one for Jay. The provision, I wanted to ask about specifically the $73 million for new originations. On a per unit basis, that's roughly $1,000 per unit. But for the last 2 quarters, provision per new unit had been more like $700 or $800. So wondering what the driver of the increase is there? And then do you think that, that number should revert more to $800? Or should it run more like $1,000 per unit going forward?

Yes. The provision for new advances, it's a function of how much we're advancing the dealer and then also the mix between our portfolio and purchase program. In general, the purchase -- the initial provision on the purchase program is about 3x what it is on the portfolio program. So as far as projecting that for the future, it all depends on the mix of business between purchase and portfolio and just also the amount that we're advancing to the dealer.

Okay. And is the mix the driver of the increase in this -- in the fourth quarter specifically?

Yes.

Our next question comes from Moshe Orenbuch with TD Cowen.

And maybe could you talk a little bit about the competitive environment? Because it's interesting that the market share you talked about 3 months ago kind of for the first 8 months of the year was over 5%, and now it's at 4.5%. So is there some -- I mean, is there something -- is it more dramatic? Like what's the changes? And maybe you could just talk about that a little bit.

Moshe, thank you for your question. Yes, look, I mean, the competitive environment is always competitive and evolving. We actually want to be more customer-focused and not competitive focused and we'll continue to be customer focused, not competitive focused. With respect to the share in the used vehicle subprime market, as of November, it was 4.5%, which is kind of flat quarter-on-quarter since what we reported last quarter.

As I said in my remarks, the decline that we are seeing is mostly in the large independent dealers and franchise dealers. And that is where we are focused on actually building solutions for that, right, our new experience where we include seamless RouteOne e-contracting that has launched, enhanced deal structuring and optimization and support for F&I tools because that helps these large independent dealers and franchise dealers use us in the workflow that they are already used to, like we kind of are meeting them where they are. And we expect to continue to expand on this to help those large independent dealers, and that's something that we are doing.

One thing I want to tell you is like this removing friction in this is like a very interesting thing here, right? Like if you think about it, we have a feature in our system, which allows the dealer and the customer to basically optimize the deal. That's kind of the moment of truth, if you think about it. Imagine you're trying to book an airline or search on Google or buy something on Amazon, it would take 3 minutes. The investments we have done in technology now allows that to be done in less than 2 seconds. And it becomes even more important when you think about this integration with things like RouteOne because we are in competition with others and speed is actually incredibly important. And that's how I think about it.

Got it. Okay. And maybe talk a little bit about where your leverage is. It looks like it's a little over 2.8 at this point and how you think about that in terms of what you're likely to do from the standpoint of capital distributions going forward.

Moshe, yes, I mean, our leverage continues to be within an acceptable range, albeit at the higher end. But when we think about capital allocation, we haven't changed that strategy. And leverage, obviously, is one of the points that we look at, we always want to ensure that we have the capital needed to fund new originations. After that, we look at a variety of factors, which includes leverage. And then obviously, we look and estimate the intrinsic value of our stock and compare that to the market price to decide if we want to repurchase. And in Q4, obviously, very active, we felt like that was the case. So no overall, no change in strategy there.

[Operator Instructions] Our next question comes from John Hecht with Jefferies.

Actually, Moshe just asked most of the -- my questions were kind of about the volumes and the competitive framework. So you touched on that. Maybe something that's along those lines is it's been a challenging cycle because, I think, largely because of affordability issues and high used car prices and the related. What's your guys -- what's your perspective on how that fluctuates in the coming periods? And does lower interest rates alleviate some of that? And are there any other factors to think about in that regard?

Well, we believe we are well positioned to serve the needs of the subprime customer. We work on cycles which are good for us and bad economic cycles, right? So our product is built to serve customers in all sorts of environments. And we will continue to kind of be focused on making the experience much more frictionless, partnering with the dealers and still take a very conservative approach, right? Like I mean, there are companies which take more short-term approach. What we are thinking about is irrespective of the cycle, be conservative, maximize intrinsic value and take a very conservative approach towards it.

Okay. And then any -- just -- Moshe also asked about the balance sheet leverage, but did you -- in terms of capital returns, in terms of accessing the capital markets, things of that nature, and when I mean capital returns, I guess I'm mostly talking about buybacks. [indiscernible], do you think there'll be any change in the strategy under your leadership or kind of stay the course?

We are going to stay the course. I don't think there's going to be any change in that.

And then final question. After a period of time where the spread -- the initial spread has been declining. I think we've got a couple of quarters now or a couple of periods of time where we're starting to see the spread expand. Do you think you'll -- is that trend going to persist for a while? And is that related to better pricing or just better overall operating metrics within the business?

Yes. If you're focused on the initial spread, that relates to pricing. So we don't provide any guidance on what our future pricing will be. You can look at the table in the press release that will show historically how we've been pricing.

Our next question comes from Moshe Orenbuch with TD Cowen.

Just as a follow-up for Vinayak, it's kind of interesting. We've been thinking over the last few quarters. It's been a little -- I'd say, a little bit unusual that the volumes and market share were under some pressure, but prepayments in the portfolio also were under pressure. And I'm just wondering, does that tell you anything kind of different about the way either your consumer is behaving or the way kind of the industry is behaving and perhaps maybe the market share issues would be more persistent.

You're correct on the prepayments, we did see a decline there with our cash flow timing. If you just look at historical prepayments, they have increased year-over-year, but they're below our historical norms.

It's tough, Moshe. I mean all you can really read into that, and it's pure conjecture is perhaps the customers are staying in their vehicles longer because if you follow historical trends, as we've talked about before, typically, you see prepays tick up as sort of a lag to a competitive environment, and we've been in a competitive environment for almost a year, yet we haven't seen that uptick. So it's tough to really see how this will play out. But I'll leave it at that.

With no further questions in the queue, I would like to turn the conference back over to Mr. Martin for any additional or closing remarks.

We'd like to thank everyone for their support and for joining us on our conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at [email protected]. We look forward to talking to you again next quarter. Thank you.

Thank you. Once again, this does conclude today's conference. We thank you for your participation.

Good day, everyone, and welcome to the Credit Acceptance Corporation Third Quarter 2025 Earnings Call. A webcast recording and transcript of today's earnings call will be made available on Credit Acceptance's website.

At this time, I would like to turn the call over to Credit Acceptance Chief Financial Officer, Jay Martin.

Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation Third Quarter 2025 Earnings Call.

As you read our news release posted on the Investor Relations section of our website at ir.creditacceptance.com and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of federal securities law. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties. Additionally, I should mention to comply with the SEC's Regulation G, please refer to the Financial Results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time, I'll turn the call over to our Chief Executive Officer, Ken Booth, to discuss our third quarter results.

Thanks, Jay. Our results for this quarter reflected steady execution with declines in loan performance and year-over-year originations volume, balanced by a portfolio that remains at a record high. Loan performance declined this quarter with our 2022, 2023 and 2024 vintages underperforming our expectations and our 2025 vintage exceeding our expectations, while our other vintages were stable during the quarter. Overall, forecasted net cash flows declined by 0.5% or $59 million.

During the quarter, we experienced a decline in unit and dollar volumes, though our loan portfolio remained at its record high of $9.1 billion on an adjusted basis, up 2% from last Q3. Our market share in our core segment of used vehicles financed by subprime consumers was 5.1% for the first 8 months of the year, down from 6.5% from the same period in 2024. Our unit volume was impacted by our third quarter 2024 scorecard change that has resulted in lower advance rates and is also likely impacted by increased competition.

Beyond these 2 key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and positively changing the lives for our 5 key constituents: dealers, consumers, team members, investors and the communities we operate in. We do this by providing a valuable product that enables dealers to sell vehicles to consumers regardless of their credit history. This allows dealers to make incremental sales to the 55% of adults with other than prime credit. For these adults, it enables them to obtain a vehicle to get to their jobs, take their kids to school, et cetera. It also gives them the opportunity to improve or build their credit.

Our customers are people like Becky, a single mother who has faced significant financial challenges. Her career as a chef met that her hours and her paycheck were unpredictable. Between this and needing frequent car repairs, she was living paycheck to paycheck and struggling with poor credit after falling behind on her bills. Determined to turn things around, she was eventually able to finance a dependable vehicle through Credit Acceptance, which gave her stability and relief despite continuing to face financial hurdles.

Credit Acceptance worked with Becky to come up with a realistic payment plan and provide her the flexibility to need to get back on track. Becky hopes to be able to purchase a home in the near future and urges others with similar struggles to look to Credit Acceptance.

During the quarter, we financed almost 80,000 contracts for our dealers and consumers. We collected $1.4 billion overall and paid $52 million in dealer holdback and accelerated dealer holdback to our dealers. We enrolled over 1,300 new dealers and had 10,180 active dealers during the quarter. We continue to invest in our engineering team, which is focused on modernizing both our key technology architecture and how our teams perform work.

The engineering team has made significant strides in modernizing our loan origination system. This modernization has laid a strong foundation for innovation, frictionless dealer experiences, and we've increased the speed that we deliver enhancements to our dealers by almost 70% compared to a year ago. This allows us to innovate faster and accelerate value to our business and customers.

During the quarter, we received 4 awards for our amazing workplace, including being named one of the Best Workplaces in Financial Services and Insurance by the Great Place to Work and Fortune Magazine for the 11th year in a row. We're proud to be one of the few companies in our industry that offers remote first work. We work hard to ensure that every team member feels supported and connected, keeping our culture strong.

In July, team members from around the country gathered Detroit to celebrate the company's 53rd anniversary. During this celebration, we recognized 8 of our team members, each of whom have been with the company for more than 30 years.

Additionally, on a personal note, this will be my last quarterly earnings call. After starting my career over 34 years ago, including the last 22 years at Credit Acceptance, I've decided to retire and embark on the next chapter of my life. My decision wasn't easy. I will miss working with our amazing team members, and I'm so proud of everything we've accomplished together. But I believe the company is in a great position for the future.

During his 4.5-year tenure on the Board, Vinayak has been an invaluable partner as we modernized our approach to the business. His strong mix of experience in technology, marketing, engineering and product, along with a proven track record of driving transformation and growth will be an excellent complement to our experienced management team. I look forward to both working alongside Vinayak as he transitions into his new role and continuing to serve the company as a Board member going forward.

At this time, Jay Martin and I will take your questions along with Andrew Rostemi, our Chief Product and Marketing Officer; Jay Brinkley, our Senior Vice President and Treasurer; and Jeff Soutar, our Vice President and Assistant Treasurer.

[Operator Instructions] Our first question comes from John Rowan with Janney Montgomery Scott.

Your asset-backed securities used to have a covenant in them that said if there was a 10% forecast shortfall that would enter into early amortization. Does the current ABS still have that? And are you close on any of those? I mean just given -- looking at the 2022 vintage, it's down 8% relative to the initial forecast. Is that the right way to look at it? Just walk us through kind of the ABS covenants there.

Yes, absolutely. We still have that covenant in our -- both our warehouse facilities and our ABS securitization debt. As you know our business well with the pooling concept, we tend to contribute loans to a securitization for our portfolio program, a lot of which are uncapped. So as additional loans are originated, they belong to the securitization. So if you were to look at the actual performance from a collection rate standpoint, they tend to run above 100%. So we have no outstanding securitizations that are close to the 90% trigger.

Okay. And then G&A was still higher than I expected. Obviously, last quarter, you had a contingent loss in there, but it didn't go back to like the run rate to prior quarters. Can you give us an idea if there's any kind of onetime items in the $36 million G&A expense?

Yes. I would say -- I would suggest that you look at the adjusted results. We've used that to eliminate the onetime charges related to the contingent losses. So I think if you look at that, you'll see G&A is fairly consistent the last several quarters as a percentage of average capital. But you're right, like if you're looking at just the GAAP, we had a $23.4 million contingent loss in Q2, and we had an additional $15 million contingent loss this quarter.

Okay. Can you let us know what your repurchase authorization is?

Yes. We've got just over 2 million shares currently under the Board authorization.

Okay. And then just last question for me. I was a little bit surprised to see the advance rate was actually up a little bit in the quarter relative to the first half of the year, but unit volume still continues to decline. Obviously, the advance rate is not back to where it was. But can you just talk us through that a little bit? Are you still having trouble competitively speaking, even at a higher advance rate?

Yes. I think it's really a little bit of a change in mix in our business. I think there's a higher percentage of purchase loans. And I also think there's a higher percentage of our product that is designed for people with a little bit better credit, and those tend to have higher advance rates.

Our next question comes from Robert Wildhack with Autonomous Research.

Are you seeing any of your peers pull back at all in the industry? I just would love to get sort of the boots on the ground view of what's happening at the industry level in the wake of some of the headlines we've seen around subprime auto in the last couple of weeks.

Yes. I think overall, while there have been some that have had struggles and have pulled back, in general, the environment is very competitive right now. So we're seeing a lot of competition out there. I mean, you can look at our volume per dealer, and it's down, and it's a competitive market.

Why do you think the competitive intensity hasn't really reacted to like the poor credit results that we've seen for the last few vintages? I would have expected people to pull back a little bit more with the delinquencies and losses as high as they are.

It's always hard to tell what our competitors are doing. The market is fragmented. But oftentimes, at the beginning of downturns, it is a competitive environment. We've lived through this before. 2021 was super competitive, and those vintages ultimately didn't turn out very well. 2016, 2007. I mean, so there have been times where it's been like this.

But I will say this has been a long time where it's been competitive, and we're seeing underperformance. I will say we build our business for the long run. Our goal is always to have a large margin of safety in the aggregate in our pricing. And we're at a point where our loan portfolio is kind of at the highest it's been. And we'd rather do less volume at solid margins than do chase volume. So that's where we're at on that.

Okay. And then just quickly, we noticed that attrition had been increasing in the last few quarters. I mean could you comment on some of the drivers there? Is there a chance that dealers are pushing back on the scorecard change or anything like that?

I mean a little bit, it could be. The way we measure attrition is that they've done a deal in the period shown. And given that we've got our lower volume, we've got some dealers that just aren't doing business with us right now. So I'm sure a little bit that's the scorecard, but it's also our scorecard relative to what everybody else is doing.

And like I said before, it's a large fragmented market. So there's lots of different options out there. I would point out, though, that while it's been a challenging year for growth for Credit Acceptance, we're coming off our record year last year, and this will still end up probably -- we're kind of trending towards it being our fifth best year ever. So it's not like we've gone super, super far backwards, but we got tough comparables.

[Operator Instructions] Our next question comes from Ryan Shelley with Bank of America.

I wanted to ask around the impact of tariffs. I mean, obviously, it's kind of on again, off again. But have you guys seen any profound impacts, whether it's in the marketplace or to your own business from federal policy? And just going into next year, how do you guys kind of handicap that?

Anything that impacts affordability for our consumer is a negative for us generally. Our consumer already has affordability issues and anything that tends to impact affordability will be a negative. It's hard to say how much the tariffs are impacting things. They seem like they change quite a bit. But anything that puts pressure on our consumers from an affordability standpoint, Ultimately, is generally not good for us and good for people in our industry.

Got it. And then just one more, if I could, on the scorecard change. Forgive me if you've already clarified this. But going forward, is there a potential for any loosening or change back maybe come next year or the year after? Or is that a permanent change going forward?

We always try to price to maximize the amount of economic profit we originate. So we consider recent trends in loan performance and capital market conditions, and we adjust our scorecard and our pricing based upon what we think we're going to collect and how we think we can maximize that economic profit originated. So I don't know what the future will hold, but it's not like this is probably a permanent scorecard from now until the end of time. As the situation changes, we make updates to it. And again, we always try to maximize economic profit originated.

Our next question comes from Moshe Orenbuch with TD Cowen.

Maybe just to talk you come back a little bit to the volume story and market share? Because I guess, do you attribute it to supply of vehicles being down? Or are you just -- are there cars being sold and just some competitors is financing them? Because I mean, you fully -- by October, you fully anniversaried the scorecard change and still down double digit, maybe not as much as in Q3, but still down pretty hard. Any kind of any way to think about that?

Your question is a great one. I mean we are, I would say, anniversaried on the scorecard change for sure by October. I mean while it happened in Q3, there's a little bit of a lag. But by October, it's more apples-to-apples. I will say that Q4 last year was one of our better quarters. It was the second best Q4 in the history of the company. So it's still a little bit of a tougher comparable, but you're right, you wouldn't have expected it to be down as much as it is other than the fact that the intensity of the competitive environment is probably higher.

I do think, as you mentioned, affordability of vehicles has been a detriment to us. Our consumer is challenged by prices and they kind of get squeezed out. If you were to look at the size of the subprime market, it has declined over the last 4 or 5 years. It seems like it's kind of stabilized somewhat right now, but our consumer has a lot of pressure on them in order to try to make purchases, which I think is impacting us negatively because we tend to be a little bit deeper in the subprime space than some other companies.

Got it. I guess from the competitive standpoint, I guess the other aspect that's been an issue this year in the first -- last 3 quarters has been the fact that your prepays have slowed. I mean you still got a full quarter of the '22 vintage still on the books, right, at the end of September. Wouldn't it stand a reason that if competition were higher, there would be somewhat more prepays, not less?

Can you say the question again? I didn't quite understand what you asked.

Sure. Yes. I mean one of the phenomena that you've observed this year has been that the loans are staying on the books longer. And I think you had said in the second quarter call that, that was an issue that there were just fewer people were able to either refinance or trade into another vehicle. But I guess, wouldn't a competitive environment be easier to do that in as opposed to harder?

Yes. I think generally, over time, what you've seen is sort of a lag effect of when competition heats up, prepays tend to speed up because obligors have other options. And I think what you're pointing out here, Moshe, is that we're not really seeing that. It's tough to say. There is always a natural lag. I just think we're in a unique environment right now.

Got it. In terms of leverage...

I was just to say if history holds true, then we should see prepays tick up if competition continues.

Got it. Could you -- this -- that $15 million contingent loss that you talked about, I guess it said it related to previously disclosed legal matters, but I guess the dollars are coming because you're making settlement offers in the lawsuit, right? I mean that's what it says in the 10-Q, which I think is the first mention of that. Is there any way for us to kind of think about whether there are other terms that we should be aware of that might be part of that settlement?

You're correct. This is the first time that we've mentioned that. I would tell you, since it is an ongoing legal matter, though, we can't comment on it beyond the disclosures we've included in the 10-Q and the earnings release. So I can't provide any more detail than what's out there.

Got you. Appreciate that. And then just last one for me. Maybe just can you talk about your leverage and your kind of outlook given what you're seeing both from a growth and how that impacts your thoughts on share repurchase?

Yes. Our current leverage on an adjusted basis is at the high end of that historical range. We've tended to operate in that 2 to 3x debt to adjusted debt-to-equity range. As we've talked about, all else equal, we tend to generally repurchase more shares when our leverage or growth rates are lower. I would also say that our leverage is modest relative to other industry participants. So I don't think there's -- I would tell you, there hasn't been a wholesale change in how we view the leverage on our balance sheet. But as we think about repurchasing shares, leverage is certainly a key aspect of that dialogue.

Our next question comes from Kyle Joseph with Stephens.

Just wanted to get an update from you guys on kind of capital markets activity given the things that have gone on in the auto space. And I just want to get a sense for what credit markets are doing? Are they really differentiating between quality operators and whatnot and kind of the investor appetite in the fixed income market?

Sure. Yes, happy to take that one. It's generally been a fairly favorable environment for ABS issuers this year. And I'd say ABS issuers, those of our peers, including ourselves in the subprime auto ABS market where aside really from a couple of weeks around Liberation Day where everything kind of froze, spreads have been pretty tight. I will note that in recent weeks, we have seen some widening in spreads really on the back of the Tricolor bankruptcy, but that's mostly been deeper in the capital structure than where we issue.

We actually have an ABS deal in the market right now. We began marketing this morning, and we're seeing a lot of demand at levels that I think you'll see comparable to our recent deals. So we feel good about our access there. And would just point out as well that we think we're pretty well positioned regardless with the amount of liquidity that we keep on the books. So right now, as of quarter end, we had $1.6 billion of unused availability on our revolving credit facilities.

Thank you. With no further questions in the queue, I would like to turn the conference back over to Mr. Martin for any additional or closing remarks.

We would like to thank everyone for their support and for joining us on the conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox at [email protected]. We look forward to talking to you again next quarter. Thank you.

Once again, this does conclude today's conference. We thank you for your participation.