Good day everyone, and welcome to the Credit Acceptance Corporation fourth quarter 2020 earnings call. Today's call is being recorded. A webcast 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 Credit Acceptance Chief Treasury Officer, Doug Busk. Thank you. Good afternoon, and welcome to Credit Acceptance's fourth quarter 2020 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 that 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, Brett Roberts, our Chief Executive Officer, Ken Booth, our Chief Financial Officer, and I will take your questions. To ask a question, you will need to press star one on our telephone. To withdraw your question, press the pound key. Please standby while we compile the Q&A roster. Your first question is from David Scharf with JMP Securities. Hi. Yeah. Good afternoon. Thanks for taking my questions. I'm just curious, can you remind us what the rough mix is among your dealer base in terms of independents versus franchised? Roughly 60% independent, 40% franchised. Okay. I'm wondering, Brett, this is probably the least scientific observation I can make. I know having been in a dealership in recent months during the pandemic. Thank you. There's a certain comfort level I just kind of emotionally had being in what I viewed as kind of a large established business and all the processes health-wise and screening that they put in place. I'm wondering, as you reflect upon just foot traffic and volume trends and some headwinds there, are you noticing or are your dealers noticing sort of a different level of demand during the pandemic or a different magnitude of pressure fall-off and foot traffic at independents versus franchised? Yeah. I think there's definitely a difference there. We saw softer volume from independents in both Q3 and Q4. Franchise still declined year-over-year in Q4 but by a lesser magnitude than the independents. Got it. Going forward, as you think about kind of your product, the value proposition to dealers, do you view that observation, that phenomenon as just a direct result of how consumers are viewing franchises versus maybe independent dealers and businesses during the pandemic? Or are you rethinking sort of the mix that you might want as you direct salespeople to call on dealerships? I think historically we've had products that appealed to independent dealers. Some franchise dealers, but not all. When we developed the purchased product, that had more appeal to some of the franchise dealers who weren't interested in the traditional product. We have a product for both. Each individual market area manager can determine where their best prospects are and how best to utilize their time. We're not necessarily targeting one over the other. My observation was just that it seems like independents have had a harder time through the pandemic than franchise dealers. Right. Yeah. No, I would agree. Then maybe just one follow-up. I know fourth quarter is tough because it's seasonally a slower period, and you've got the traditional tax refund season coming up in Q1. Did you notice, was there any kind of spike or reaction to the latest stimulus checks that went out? We gave you January volumes in the release. I think, certainly. Oh, I'm sorry. I didn't catch those. Yeah. The stimulus checks and the impact of that probably captured pretty well by the January figures we provided. Okay. Perfect. Thank you. Your next question is from Moshe Orenbuch with Credit Suisse. Great. Thanks. Maybe following up, the average size of the loan or the advance has grown and was bigger in Q4. You'd said three months ago that part of the issue, and I think it was repeated in the release now, part of the issue is that the wholesale prices are up. Maybe just give us an update as to where that stands and is that still having an impact, being offset by the stimulus? How do we think about those trends? It's still elevated. The numbers that we track internally, it's moderated to some extent over the last few months, but wholesale values are still higher than they were a year ago. Okay. Looking at the 8-K that you filed, I guess I'm struggling with trying to understand the verbiage on the CFPB. It says that on December 23rd, they sent you a civil investigative demand for investigational hearings, and then it said they withdrew that portion for civil investigative demands. Does that mean there were other things in there? I'm not sure I understand. It's kind of new to me. That continues to be active. That's the main takeaway from that language. There's not a lot we can add to what's in there. If you want a clarification, you should read that to mean it continues to be active. Okay. My last question was, the company kind of set up, I guess, an options program in December for a number of executives. Have you kind of talked about how that was arrived at and the value of those 330,000 options? I don't follow the question. Well, I guess the question is: Is there a plan or a program that's part of? Obviously, we saw the Form 4s and the grants, is there any part of the comp plan? Does it relate to company performance in a particular period or anything like that? Yes. We have a compensation plan for our senior executives. The last plan was a four-year plan. 2020 was the fourth year of that. What we've historically done is do either three- or four-year cycles. We put a plan in place, and then that's the plan that we use for that period. The prior plan ended, and we started another plan, and the options were part of that plan. Got it. Okay. Thank you. Your next question is from John Rowan with Janney. Hey, good afternoon, guys. When you look at the reduction in dealer partner productivity, would you categorize it more as lower foot traffic in CACC dealer partners? Is it stable foot traffic or even higher foot traffic, but more loans going to other lenders that might also have relationships with those dealers? Said another way, is it our share of the market or is it the size of the market? Correct. I'm trying to figure out if it's just people, if there was a change in advertising, perhaps, and there's the way that you advertise the car prices and whether or not that's caused a reduction in foot traffic at CACC dealer partners, or if other lenders are just getting more aggressive and are taking share from you at dealers. I just want to understand the difference, if there is a difference that you can note for 4Q. Yeah, I think we have some information on the market as a whole. It's not perfect. You get that information on a lag. We have some visibility into October and November, not the full quarter. I think the trends we saw both in Q3 and October and November is the overall market, used vehicle volume, used vehicle financed volume is pretty stable, even growing a little bit. We're obviously down. That would mean we lost share of the market defined as total used vehicles financed. What you also see in that data is that the lower tiers of the credit spectrums are actually down year-over-year, in some cases significantly, the further you get down. Our wheelhouse is independent dealers, and our wheelhouse is the lower credit tier customers, and those are the segments of the market that have been negatively impacted the most. Having said that, I do think it's probably fair to say that we lost share in Q4 year-over-year, and that means we lost it to others who maybe see the market differently than we do at this point or are pricing more aggressively than what we're willing to do. Obviously, on the incremental customer. Obviously, we did a lot of business. We added value in those dealers where we did business. There's still a niche there for us. It just gets a little bit smaller when some of these external factors come into play, including competition. Just to get back to that last point on competition, it doesn't seem like you were necessarily giving up, right? I mean, the advance rate was up, right? From what I can see, it was up in December. It still seems like you're actively pursuing volume. The loan term has plateaued here at 60 months, and loans are now over $25,000. It seems as if you are still trying to get volume by incentivizing dealer partners, and I'm just wondering if we're to this point now where the loans are just too big for your typical customers, and you're getting competition that's kind of putting you between a rock and a hard place almost. Where you can't increase advance anymore, or you don't want to increase advance anymore. The loan term is already 60 months. Now your loan portfolio actually just started to decline a little bit sequentially this quarter. Have we reached kind of the plateau here for the foreseeable future on the loan portfolio? Do you think it continues to come down through 2021? Well, I certainly agree with your statement that we haven't given up. We're still trying. As to what's going to happen in the future, I don't really know. I think if you go back and look, I think, I don't know, 2016 maybe even the one year before that, if you read my annual letter, I said, "Hey, unless something happens with the competitive environment, given the current trends, how many dealers we're able to enroll, the trends in attrition, the trends in volume per dealer, it's probably going to be pretty difficult to grow our market from here or to grow our book from here, barring some change in the competitive environment." We were able to grow from there. We did better than I expected. It's been tough. If you go back pre-pandemic, fourth quarter of 2019, we had year-over-year decline in unit volume in the fourth quarter of 2019. Got off to a decent start in January and February pre-pandemic. I think we were flat through February. The pandemic hit and then the results were what they were for the rest of 2020. I think overall, my view hasn't changed. I think we have a very healthy business, a profitable business. We're able to add considerable value in our niche. I think if you go back three or four years, maybe even five years, I think it was clear at that point that there's a point where it's going to be difficult to grow barring a change in the competitive environment or some other change, some other insight that we get, another way for us to add value, and that's been tough to come by. Adding that to the effects of the pandemic and wholesale values and the things we've already talked about or disclosed, and I think that explains where we are today. Okay. Thank you very much. Your next question is from John Hecht with Jefferies. Afternoon, thanks for taking my questions. First one, I'm just interested in the components of the provision. How much of the provision was tied to newer volumes versus maybe changes in the macro outlook versus changes of your expectations for loss content? Virtually all of the provision was related to new loans. We have a disclosure on the bottom of page one of the press release that details that. Okay, thanks. Going to make sure I see that. Maybe can you guys talk about ongoing effects of the pandemic on operations? Is collection still fairly done from home? Are repossession activity normalized? Where are you guys in the loan forgiveness program? The vast majority of the company, well over 90% of the team members, continues to work remotely. Virtually all of our servicing personnel continue to work remotely. Repossessions are really being handled on a customer-by-customer basis, depending on each consumer's individual circumstances. Can you give us a sense of where that activity is relative to normalized level? Are we halfway there? Are we approaching normalized levels? How do we think about that? We're not back to normal at this point. Again, we're giving the customers a lot of room. We know it's a difficult environment for many of them, and so we're giving them extra time to make their payments. Repossessions aren't yet back to where they normally would be. Okay. The last question is I guess it's more of your opinion. It's been, I don't know, extraordinary market in terms of residual values, maybe relative to historical averages. What we would've thought has been going on in this type of environment. What kind of catalyst do you think is going to need to occur where there could be a bigger shakeout in the market, which would allow you to reestablish market share? I think historically, you just have to look at the supply of capital to the industry. Capital's available. Capital's very cheap. And as long as that continues, I think you're looking at a very competitive environment. What would cause the capital to dry up? There's a variety of things. One would be loan performance within the industry or some sort of external event. I think had the government response to the pandemic been different, then perhaps the pandemic would've been that reason. Because the response and the stimulus offset any loan performance issues for most of the industry, it didn't play out that way. Okay. All right. Thanks very much. As a reminder, ladies and gentlemen, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. Your next question is from Rob Wildhack with Autonomous Research. Hi, guys. I just wanted to follow up on the January volume trends. How long do you think the tailwind from that December stimulus check will last? Does a $600 check in December help sales through February and March, or is the impact sort of already played out? Yeah, I think it's probably pretty hard to say. You could look at what happened May, June, July. We had, as I mentioned, January and February were flat, March and April were down sharply, you had May and June where we hit pretty strong growth, July was sort of a transition month. I can't tell you the same thing's going to play out this time, but I can say last time you had 2.5 months of what looked like elevated volume. Now that's coming off a couple of months where you had really soft volume. Some of that was a rebound that you might not see this time. Hard to say. You have tax season coming up. You have maybe another stimulus. I think it'll be a unique environment, so it's pretty hard to predict how it's going to play out in terms of either loan volumes or collections. Okay. Just on capital return, can you remind us of the repurchase authorization and your thoughts on the potential for share repurchases this year? At the end of the year, we had approximately 2.5 million shares under our existing authorization. Okay. Any comments- We continue to think about buybacks the same way we have for a very long time. We're employing the same criteria. Okay, thanks. With no further questions in the queue, I would like to turn the conference back to Mr. Busk 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 ir@creditacceptance.com. 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.