Q1 2021 Credit Acceptance Corp Earnings Call

Good day, everyone and welcome to the credit acceptance Corp, first quarter 2021 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 bass.

Okay.

Thank you.

Good afternoon, and welcome to the credit acceptance Corp, first quarter 2021 earnings call.

And you read our news release posted on the Investor Relations section of our website at IR Dot credit acceptance dotcom and.

And as you listen to this conference call.

So 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.

Any 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 and 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'll turn the call over to Brett Roberts.

Thanks, Doug.

Today, we announced my retirement.

Tiring for personal reasons, and I'm, leaving with a tremendous sense of gratitude for the opportunity I had and.

For all the people that helped me along the way. The board has decided that can boost will replace me as CEO, Ken and as a great choice.

And on it as high integrity and he is well respected inside the company.

If anyone is worried about my retirement and creating a Boyd I think you should understand that this has never been a one man band we've run the company and a very collaborative manner for at least the last 15 years. The leadership team meets on a weekly basis and every decision every challenge every opportunity has been discussed and decisions.

And I've been made and a collaborative manner.

We have and unusually experienced team.

Charlie Pearce, Daniel I'll Skip on with the company for more than 25 years Art Smith, and Doug plus more than 24 years.

John Lam, our Chief operating officer, and more than 19 years and Ken has worked for me for the last 17 years.

And I leave behind a talented and experienced team and and Pat but they will do a great job.

I would like to use this opportunity to thank all the people that have supported me over the years, we have and amazing board and great leaders throughout the company. We have what I think is a unique culture filled with an unusual amount of trust and goodwill and I'm proud of what we accomplished together over the last 29 and a half years with.

That I will say goodbye and <unk>.

Turn it over to Doug and Ken to answer your questions about the quarter.

And if he would like to ask a question. Please press Star then the number one on your telephone keypad and.

And that is star and the number one.

Please stand by while we compile the Q&A roster.

Your first question comes from the line of Moshe Orenbuch from Credit Suisse. Your line is open.

Great Thanks and.

And Canada.

It is.

I guess.

And I understand that the agreement with the Commonwealth of Massachusetts, as an agreement in principle.

The press release mentions and.

And the contingent loss are there any other elements of that are that you could kind of tell us about in terms of and.

And you think that you're gonna have to do that.

Different as you go forward.

I can't really discuss the agreement in principle that we have with the Commonwealth of Massachusetts beyond what's disclosed.

Disclosed and the press release and the 10-Q.

Okay.

Hmm.

The 10-Q mentioned zone and additional Cid's.

And the CFPB that was in March and that's kind of back and forth over the back half of last year.

And.

Is there any.

And you kind of updates that you can give us there.

Yeah.

Can't really provide any commentary beyond what we've disclosed and the 10-Q.

Okay and <unk>.

The collection percentages, you're you said.

As of quarter that your expectations for 2018 through 'twenty and.

Actually improved.

During the first part of 2021.

But the.

The collection expectations for the first quarter of the year actually deteriorated.

And.

Is there any any way to kind of explain how that happens like what would cause the most recent expectations to deteriorate slightly.

And the ones you know and prudent.

And then for the first quarter, it's down a 10th of a percent which is pretty much flat. So it doesn't surprise me that would be flat with our expectations.

And if you're referring to the fact that.

Lower than previous quarters, our initial expectation.

And it really just depends on what kind of business for pricing.

And that initial expectation is certainly relevant except for the fact on how we do compare.

Right and I guess.

Well I'm, sorry, one thing that I'd like to point out is I think if you look on the footnote.

You'll note that we say that forecasts and collection rates are negatively impacted by canceled consumer loans because.

Because we don't take the contractual amount out some good that denominator.

For purposes of computing forecasted collection rates so.

I think you'll generally see.

And the first quarter following originations.

And that.

Collection results are.

Either down a little bit or up a little bit but in any event there.

You know depressed by the impact of canceled and loans.

Got it thanks, Ed and actually with.

And I have no debt.

Similar sort of thing on on the did you discuss kind of the spread.

And I between your forecasted collection rates.

And that I think Ken and that's what you're referring to the forecasted collection rates.

And are a bit lower in 2021 and.

And these answers a bit higher.

And he and the explanation you say that that's because it's the debt.

Or.

And to better collections does that mean debt to better collections that you've experienced.

Cause that I guess I didn't quite understand that so I don't know if you if theres a later and it kind of help us understand that.

And that's all that we have and expectation of what we're going to collect and as we gather more information from month to month.

On our forecast.

It goes up or down generally based on what we learn.

What we're talking about there is on.

Our Paas business has performed a little better than we initially thought what's it made the spreads and by the pool, but there.

Yeah.

Okay alright, thank you.

I think and reminder to ask a question. Please press Star then the number one on your telephone keypad again debt is aspire one.

Next question comes from the line of Randy Heck from good now investment your line is open.

Thank you.

Well first I just wanted to congratulate Brett for just a tremendous run and a tremendous.

Job, creating value tremendous.

Tremendous value for shareholders and.

And a real pleasure being a shareholder for the last 23 years.

And secondly.

It was noted in the.

Press release the collections.

We're much better and the month of March and that and they were up another 20, I think 25%.

And the month of April and you said that the.

Because of the way the accounting works.

The earnings.

And you didn't get the full benefit and the earnings release our P&L.

Cause the collections were back.

Back in the quarter.

Skewed so can you give us a general idea of what.

Adjusted earnings would have been roughly and.

And the first quarter.

If we take into account the stronger collections in March.

The accounting was different.

And then.

And Thats a hard question to answer I mean it.

Yeah, we really can't calculate better quantify that clearly if debt collections and come in higher ratably through the quarter.

And would have done better but.

And <unk>.

And.

Collections continue to come better that'll help us next quarter.

Okay, and then finally.

The press release noted that unit volume.

Unit volume and originations were up 25% and the month of April through I guess yesterday or something.

And that's against the negative seven comp.

What what would you attribute that strength to.

And a lot of that really is and it has to do with the comparable we have to last year.

First part of.

April last year was a pretty easy comparable.

And basis basically due to stimulus so while it was a good run for the first 28 days.

And it's really a and easier comparable that's why we included the comparable to 2019 and.

And the release.

Okay. If you go back on and look I think that unit volumes were down approximately 20%.

Last year and both March and April.

And then up.

And quite a bit and May and June.

Okay.

Alright.

Well, thank you very much.

Thanks Randy.

Okay.

Fantastic question. Please press Star and then the number one on your telephone keypad.

Your next question comes from the line of <unk>.

Rob <unk> from Autonomous Research your line is open.

Hi, everyone, you've mentioned and in the past that stimulus programs have helped originations and active dealers and in any given quarter.

Can you give any color as to the degree that the most recent stimulus package helped this quarter's results and.

And I'm wondering if you're also still feeling a benefit from that stimulus package through April.

It's hard to quantify the impacts of that but the.

It's very likely that stimulus is having positive impact on both collections and originations.

If you look at our experience over the last 13 months.

Done better when there's stimulus and not as well and there's not solid.

We don't have a quantification of that though.

Okay.

Okay. Thank you.

With no further questions in the queue I would like to turn the conference back over to Mr. Boss.

And any additional or closing remarks.

We'd like to thank everyone for their support and for joining us on our conference call today.

You have any additional follow up questions. Please direct them to our Investor relations mailbox at IR at credit acceptance Dot 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.

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