Credit Acceptance (CACC) Q2 2024 earnings summary

Executive summary

• Reported a GAAP net loss of $47.1 million for Q2 2024, compared to net income of $22.2 million in Q2 2023, driven by higher provision for credit losses, increased interest expense, and a $23.7 million loss on sale of a building.

• Adjusted net income was $126.4 million, down 9.7% year-over-year, with adjusted return on capital at 10.3%.

• Loan assignment unit and dollar volumes grew 20.9% and 16.3% year-over-year, reaching record portfolio balances.

• Significant adjustment to loan forecasting methodology reduced forecasted net cash flows by $147.2 million and increased provision for credit losses by $127.5 million.

• Recognized a $23.7 million loss on the sale of an office building as part of a shift to remote work.

Financial highlights

• Q2 2024 total revenue rose 12.6% year-over-year to $538.2 million, driven by a 12.9% increase in finance charges and 22.7% growth in premiums earned.

• Provision for credit losses increased 28.0% to $320.6 million, mainly due to a $189.3 million decrease in forecasted net cash flows.

• Interest expense surged 66.4% to $104.5 million due to higher average cost of debt (7.2% vs. 5.3%) and increased outstanding debt.

• Adjusted revenue yield was 19.6%; loan asset yield was 17.7% for the quarter.

• Diluted EPS was $(3.83) for Q2 2024, down from $1.69 in Q2 2023; adjusted net income per diluted share was $10.29.

Outlook and guidance

• Management expects continued uncertainty in forecasting future loan collections due to underperformance of 2022–2024 loans.

• Yield and revenue as a percent of average capital are expected to decline in Q3, depending on new origination yields and loan performance.

• Capital resources are considered sufficient for future operations and debt maturities, with $1.44 billion in unused credit lines as of June 30, 2024.