Good day everyone and welcome to the Credit Acceptance Corporation Second Quarter 2025 Earnings Call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on the Credit Acceptance website. At this time, I would like to turn the call over to Credit Acceptance Chief Financial Officer Jay Martin. Please go ahead. Thank you. Good afternoon and welcome to the Credit Acceptance Corporation second 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 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 I will turn the call to Chief Executive Officer Kenneth Booth to discuss our second quarter results. Thanks Jay. Our results for this quarter reflect the steady execution with declines in loan performance and year-over-year origination volumes balanced by continued portfolio growth. 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 $56 million during the quarter. We experienced a decline in unit and dollar volumes, though our loan portfolio still reached a new record high of $9.1 billion on an adjusted basis, up 6% from last Q2. Our market share in our core segment of used vehicles financed by subprime consumers was 5.4% for the first five months of the year, down from 6.6% for the same period in 2024. Our unit volume was impacted by our Q3 2024 scorecard change that resulted in lower advance rates and likely impacted by increased competition. Beyond these two key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and positively changing the lives of our five 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 Sugar from Oklahoma. Sugar's life took a dramatic turn when the former credit counselor was arrested for driving under the influence in 2014. Overwhelmed with shame, having lost her license, she realized she needed to make a profound change. She sought help from Women's First Step, a treatment facility, and after graduating from the program eight months later, she began rebuilding her life. She regained her license, started a stable career, and achieved a powerful symbol of victory when she was approved by us for a car loan. This journey of recovery came full circle when Sugar was hired to work for the treatment facility that had helped her, dedicating herself to her new mission of helping others find their own second chance. During the quarter, we financed over 85,000 contracts for our dealers and consumers. We collected $1.4 billion overall and paid $63 million in dealer holdback and accelerated dealer holdback to our dealership. We enrolled 1,560 new dealers and had 10,655 active dealers. During the quarter, we continued 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 us to deploy innovative, frictionless dealer experiences. It has increased the velocity with which we release features from a matter of months to a matter of days, allowing us to accelerate value to our business and customers. During the quarter, we received two awards for our amazing workplace, including being named one of the 100 Best Companies to Work For by Great Place to Work and Fortune magazine, with 93% of team members agreeing that Credit Acceptance is a great place to work. This year marked our 11th time in the last 12 years receiving this prestigious award, moving up five spots to the number 34 ranking. We support our team members in making a difference in what makes a difference to them, raising over $270,000 for St. Jude's Research Hospital and Make-A-Wish Foundation. Through these donations, we were able to fund wishes for 15 children, bringing our total to 95 wishes granted. Now Jay Martin and I will take your questions along with Doug Busk, our Chief Treasury Officer, and Jay Brinkley, our Senior Vice President and Treasurer. Thank you. If you have a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press star one one again. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment for the first question. The first question will come from the line of Marsh Arendoch of TD Cowen. Your line is open. Great, thanks. I noticed that obviously the collections were down again this quarter, but the adjusted yield higher. That's happened, I think, at least once before. Maybe if you could just talk about what drives that. Usually the adjusted yield will kind of follow that, the lower collections. Sure. The decline in forecasted collections, the change in the amount and timing there, all things being equal, would drive the adjusted yield down. The ultimate yield that we recognize is also dependent on the volume and pricing of new loan originations. That's what you've seen the last few quarters. The yields of the new loans that we've originated more than offset the decline in the yield due to loan performance. Right. Although, interestingly, the collection shortfall is kind of greater than the last two quarters. Even though you said that the 2025 vintage is outperforming, the underperformance in the back book has been greater than it's been in the past. Even if you kind of X out the change that you made, it's still bigger than either of the last two quarters. In the discussions we've had before, there had been an idea that you were burning through those vintages and they should be hurting you less. That's not what happened. Is there any way to kind of talk about why that is? Yeah, I would say that our forecasting models generally perform well during a relatively stable economic period, but are less accurate during periods of volatility like we've experienced in recent years. We do think the continued impact of inflation is contributing to the loan underperformance we've seen there. You may recall, second quarter last year, we put in an adjustment to address that underperformance. It's worked fairly well for most vintages, but for our 2024 loans, we have seen some more underperformance there than what that adjustment would have anticipated. It's specifically related to the loans that we originated in 2024 before our scorecard changed during the third quarter. That's the bulk of the decrease you saw for the quarter, was on that segment of loans. The good news for the loans that we originated since we put that scorecard change in during the third quarter last year, those loans are performing as expected. We haven't seen any signs of underperformance on those loans. Right. A couple of other trends caught my attention. The first is that the loan size continues to decline over the last couple of quarters. Is that a different type of car that you're financing, or is there something else that's going on there? A follow up to that. I think we've just had a different mix of consumer that's come in in recent years, and that's contributing to the size of the consumer loans. It's just a different mix of business. Different meaning higher quality, lower quality. Because, you know, back in 2023, I guess you were talking about a higher quality kind of borrower. Is this a lower quality borrower that you're seeing? I don't think it's a lower quality borrower. I think there's a slightly different mix. Of vehicles that are being financed. Again, there's been a fair amount of. Variability in the mix of vehicles since. The start of the pandemic. I think it's just normal volatility there. Right. I guess the last thing for me is that you're assuming you've got a forecasted collection percentage that's over 65% for 2025 and actually higher than that for the second quarter. It's been rising even as you've had these nine quarters in a row of having to pull your estimates back down. I mean, it's hard for me on the outside. Obviously, we don't see the detail in that, but it's hard to understand that from the outside. Yeah. When you look at the initial forecasted collection rate there, your point, they're very similar, but again to the point of having a different mix of business is driving that. Over the last few years we've lowered our initial expectations. All things being equal, the loans that were originated in 2024 and 2025, had we originated those back in 2022, we would have had a higher expected collection rate on those. Different mix of business. We have, as we always have, continued to adjust our expectations on the new loans to address that underperformance, and that's reflected in those initial estimates. Okay, thanks. Thank you. One moment for the next question. The next question will be coming from the line of John Rowan of Janney Montgomery. Your line is open. Good afternoon, guys. I guess I just want to understand, you know, the return profile. Your release says you've got an 8.5% return on capital, adjusted return on capital, but the cost of capital is 7.4%, which leaves a 110 basis point spread. As you look back at some of these advantages that you've written down, are some actually generating a negative economic return? Where is that watermark? I'm just trying to understand whether or not there is a point in time when you, I don't know, I want to say get more realistic, but start putting loans on the books at a number that's more achievable and whether or not you're really generating economic profit on the loans that you're putting on today. Assuming that there's going to be a reduction in forecasted collection. I know it's a loaded question, but you spend a lot of money on share repurchases in the quarter. I'm trying to assess whether or not you're diverting capital to repurchasing shares, because in reality, when you look back at these older vintages, if 2024 and 2025 trend that way, they're going to be generating negative economic profit. Yeah. Our business model is designed to produce an acceptable return even if our loans underperform. To your point, if you look at the 2022 vintage, that vintage has underperformed the most of any year that we presented in that collection rate table. I'll say those loans in aggregate are still producing a return on capital in excess of our cost of capital, assuming that those collection expectations are accurate. There would be, at some point, if they continue to decline, where that return would fall below our weighted average cost of capital. Based on our current estimates, those are still producing economic profit. There's still profit. Okay. Can you tell me how much money you spent on repurchases in the quarter and what the plans are for repurchases going forward? It seems like you spent quite a bit of money in the second quarter. Yeah, this is Jay Brinkley. We were very active in the quarter. We bought back 530,000 shares at roughly an average price of $490. As always, we look at ensuring that we've got adequate capital to fund new originations and then look at the share price as well. We haven't changed our view there. Volume is down, as Ken mentioned, due to our pricing change and, to some degree, the competitive environment. Year over year, growth being slower. If you look back over a long period. periods when originations are down, we tend to be pretty active. That was certainly the case this quarter. What is remaining on any current authorization, and where the plan is going forward? That's it for me. Thank you. Sure. Yeah, we've got, under the latest authorization, we've got 391,000 shares left. I imagine, based on that, we'll be reviewing that and going back to the board for additional capacity should the buying opportunity arise. All right, thank you. Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. One moment for the next question. The next question will be coming from the line of Kyle Joseph for Stephens. Your line is open. Hey, good afternoon. Thanks for taking my questions. I just wanted to talk about the competitive environment. I think in your prepared remarks you mentioned that competition either heated up or remains intense. Just given the macro outlook and expectations, with tariffs for used car prices to continue to increase and the industry kind of reeling from the 2022 vintage, is your expectation that you'd see a little bit of a pullback from traditional providers of credit, or did you actually see them kind of get more aggressive post-Liberation Day? I just want to get your sense for the pulse of the competitive environment. The competitive environment is always hard to kind of forecast how it's going to be going forward. Obviously, our volume per dealer went down, so it does seem like the environment is more competitive in the first half of this year. Tariffs and things that drive up costs for our consumers tend to be a negative for us both, whether it's related to vehicles or just other things that they spend money on. It is really too early to tell what the impact will be on our business. I do think from a volume standpoint, we had a pretty tough comparable. Last year was our highest volume year ever. When we compare it year over year, it's a tough comparable. We made our scorecard change last year in the middle of the third quarter. Once we get past that, we'll have an easier comparable, you know, so I think that those would be some things that might be a positive going forward. That's a good caller. Good reminder on the tough comps. Thanks for taking my questions. 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. Go ahead please. We'd 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 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. You may disconnect. Good day everyone and welcome to the Credit Acceptance S econd Quarter 2025 Earnings Call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on the Credit Acceptance website. At this time, I would like to turn the call over to Credit Acceptance Chief Financial Officer Jay Martin. Please go ahead. Thank you. Good afternoon and welcome to the Credit Acceptance Corporation second 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 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, I will turn the call to Chief Executive Officer Kenneth Booth to discuss our second quarter results. Thanks Jay. Our results for this quarter reflect the steady execution with declines in loan performance and year-over-year origination volumes balanced by continued portfolio growth. 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 $56 million during the quarter. We experienced a decline in unit and dollar volumes, though our loan portfolio still reached a new record high of $9.1 billion on an adjusted basis, up 6% from last Q2. Our market share in our core segment of used vehicles financed by subprime consumers was 5.4% for the first five months of the year, down from 6.6% for the same period in 2024. Our unit volume was impacted by our Q3 2024 scorecard change that resulted in lower advance rates and likely impacted by increased competition. Beyond these two key drivers, we continued making progress during the quarter towards our mission of maximizing intrinsic value and positively changing the lives of our five 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 Sugar from Oklahoma. Sugar's life took a dramatic turn when the former credit counselor was arrested for driving under the influence in 2014. Overwhelmed with shame and having lost her license, she realized she needed to make a profound change. She sought help from Women's First Step, a treatment facility, and after graduating from the program eight months later, she began rebuilding her life. She regained her license, started a stable career, and achieved a powerful symbol of victory when she was approved by us for a car loan. This journey of recovery came full circle when Sugar was hired to work for the treatment facility that had helped her, dedicating herself to her new mission of helping others find their own second chance. During the quarter we financed over 85,000 contracts for our dealers and consumers. We collected $1.4 billion overall and paid $63 million in dealer holdback and accelerated dealer holdback to our dealership. We enrolled 1,560 new dealers and had 10,655 active dealers. During the quarter we continued 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 us to deploy innovative, frictionless dealer experiences and has increased the velocity with which we release features from a matter of months to a matter of days, allowing us to accelerate value to our business and customers. During the quarter we received two awards for our amazing workplace, including being named one of the 100 Best Companies to Work For by Great Place to Work and Fortune magazine. With 93% of team members agreeing that Credit Acceptance Corporation is a great place to work, this year marked our 11th time in the last 12 years receiving this prestigious award, moving up five spots in the number 34 ranking. We support our team members in making a difference to what makes a difference to them, raising over $270,000 for St. Jude's Research Hospital and Make-A-Wish Foundation. Through these donations, we were able to fund wishes for 15 children, bringing our total to 95 wishes granted. Now Jay Martin and I will take your questions along with Doug Busk, our Chief Treasury Officer, and Jay Brinkley, our Senior Vice President and Treasurer. Thank you. If you have a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press star 11 again. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment for the first question. The first question will come from the line of Marsh Arendoch of TD Cowen. Your line is open. Great, thanks. I noticed that obviously the collections were down again this quarter, but the adjusted yield higher. That's happened, I think, at least once before. If you could just talk about what drives that. Usually the adjusted yield will kind of follow that, the lower collections. Sure. The decline in forecasted collections, the change in the amount and timing there, all things being equal, would drive the adjusted yield down. The ultimate yield that we recognize is also dependent on the volume and pricing of new loan originations. That's what you've seen the last few quarters. The yields of the new loans that we've originated more than offset the decline in the yield due to loan performance. Right. Although, interestingly, the collection shortfall is kind of greater than the last two quarters. Even though you said that the 2025 vintage is outperforming, the underperformance in the back book has been greater than it's been in the past. Even if you kind of X out the change that you made, it's still bigger than either of the last two quarters. In the discussions we've had before, there had been an idea that you were burning through those vintages and they should be hurting you less. That's not what happened. Is there any way to kind of talk about why that is? Yeah, I would say that our forecasting models generally perform well during a relatively stable economic period, but are less accurate during periods of volatility like we've experienced in recent years. We do think the continued impact of inflation is contributing to the loan underperformance. We’ve seen there, you may recall, second quarter last year, we put in an adjustment to address that underperformance. It’s worked fairly well for most vintages. For our 2024 loans, we have seen some more underperformance there than what that adjustment would have anticipated. It’s specifically related to the loans that we originated in 2024 before our scorecard changed during the third quarter. That’s the bulk of the decrease you saw for the quarter, it was on that segment of loans. The good news for the loans that we’ve originated since we put that scorecard change in during the third quarter last year, those loans are performing as expected. We haven’t seen any signs of underperformance on those loans. Right. A couple of other trends caught my attention. The first is that the loan size continues to decline over the last couple of quarters. Is it a different type of car that you're financing, or is there something else that's going on there? A follow up to that. I think we've just had a different mix of consumer that's come in in recent years, and that's contributing to the size of the consumer loans. It's just a different mix of business. Different meaning higher quality, lower quality. Because, you know, back in 2023, I guess you were talking about a higher quality kind of borrower. Is this a lower quality borrower that you're seeing? I don't think it's a lower quality borrower. I think there's a slightly different mix of vehicles that are being financed. Again, there's been, you know. A fair amount of variability in the. Mix of vehicles, you know, since the. Start of the pandemic. I think it's just normal volatility there. Right. I guess the last thing for me is that you're assuming you've got a forecasted collection percentage that's over 65% for 2025 and actually higher than that for the second quarter. It's been rising even as you've had these nine quarters in a row of having to pull your estimates back down. I guess it's hard for me on the outside. Obviously, we don't see the detail in that, but it's hard to understand that from the outside. Yeah. When you look at the initial forecast of collection rate there, your point, they're very similar, but again, to the point of having a different mix. Business is driving that. Over the last few years, we've lowered our initial expectations. All things being equal, the loans were originated in 2024 and 2025. Had we originated those back in 2022, we would have had a higher expected collection rate on those. Different mix of business. We have, as we always have, we can continue to adjust our expectations on the new loans to address that underperformance. That's reflected in those initial estimates. Okay, thanks. Thank you. One moment for the next question. The next question will be coming from the line of John Rowan of Janney Montogomery. Your line is open. Good afternoon, guys. I guess I just want to understand, you know, the return profile. Your release says you've got an 8.5% return on capital, adjusted return on capital, but the cost of capital is 7.4%, which leaves a 110 basis point spread. As you look back at some of these advantages that you've written down, are some actually generating a negative economic return? Where is that watermark? I'm just trying to understand whether or not there is a point in time when you, I don't know, I would say get more realistic, but start putting loans on the books at a number that's more achievable and whether or not you're really generating economic profit on the loans that you're putting on today. Assuming that there's going to be a reduction in forecasted collection. I know it's a loaded question, you spent a lot of money on share repurchases in the quarter. I'm trying to assess whether or not you're diverting capital to repurchasing shares. Because in reality, when you look back at these older vintages, if 2024 and 2025 trend that way, they're going to be generating negative economic profit. Yeah. Our business model is designed to produce an acceptable return even if our loans underperform. To your point, if you look at the 2022 vintage, that vintage has underperformed the most of any year that we presented in that collection rate table. I'll say those loans in aggregate are still producing a return on capital in excess of our cost of capital, assuming that those collection expectations are accurate. There would be at some point, if they continue to decline, where that return would fall below our weighted average cost of capital. Based on our current estimates, those are still producing economic profit. There's still profit. Okay. Can you tell me how much money you spent on repurchases in the quarter and what the plans are for repurchases going forward? It seems like you spent quite a bit of money in the second quarter. Yeah. This is Jay Brinkley. We were very active in the quarter. We bought back 530,000 shares at roughly an average price of $490. As always, we look at ensuring that we've got adequate capital to fund new originations and then look at the share price as well. We haven't changed our view there. Volume is down, as Ken mentioned, due to our pricing change and, to some degree, the competitive environment. Year over year, growth being slower. If you look back over a long period. Period when originations are down, we tend to be pretty active. That was certainly the case this quarter. What is remaining on any current authorization, and you know where the plan is going forward. That's it for me. Thank you. Sure. Yeah, we've got, under the latest authorization, we've got 391,000 shares left. I imagine, based on that, we'll be reviewing that and going back to the board for additional capacity should the buying opportunity arise. All right, thank you. Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. One moment for the next question. The next question will be coming from the line of Kyle Joseph for Stephens, your line is open. Hey, good afternoon. Thanks for taking my questions. I just wanted to talk about the competitive environment. I think in your prepared remarks you mentioned that competition either heated up or remains intense. Just given the macro outlook and expectations, with tariffs for used car prices to continue to increase and the industry kind of reeling from the 2022 vintage, is your expectation that you'd see a little bit of a pullback from traditional providers of credit or, you know, did you actually see them get more aggressive post-Liberation Day? I just want to get your sense for the pulse of the competitive environment. The competitive environment's always hard to kind of forecast how it's going to be going forward. Obviously, our volume per dealer went down. It does seem like the environment's more competitive in the first half of this year. Tariffs and things that drive up costs for our consumers tend to be a negative for us, whether it's related to vehicles or just other things that they spend money on. It's really too early to tell what the impact will be on our business. I do think from a volume standpoint, we had a pretty tough comparable. Last year was our highest volume year ever. When we compare it year over year, it's a tough comparable. We made our scorecard change last year in the middle of the third quarter. Once we get past that, we'll have an easier comparable. I think that those would be some things that might be a positive going forward. Oh, that's a good call. Good reminder on the tough comps. Thanks for taking my questions. 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. Go ahead, please. We'd 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 ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.