Sign in
CA

CREDIT ACCEPTANCE CORP (CACC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid GAAP results with revenue $571.1M (+12.4% YoY), GAAP net income $106.3M (+65.3% YoY), and GAAP diluted EPS $8.66 (+70.5% YoY) as smaller forecast revisions and lower provisions aided profitability .
  • Adjusted EPS of $9.35 was a modest miss versus S&P Global consensus $9.67; GAAP revenue modestly beat consensus $567.2M. Prior quarter (Q4 2024) was a meaningful beat on adjusted EPS ($10.17 vs $7.93) and a slight beat on revenue ($565.9M vs $564.7M)* .
  • Forecasted net cash flows declined only 0.2% ($20.9M) — the smallest decline in the last five quarters — with vintages 2020 improving and 2022/2024/2025 modestly underperforming; slowing prepayments continue to weigh on timing .
  • Originations slowed: unit volume -10.1% and dollar volume -15.5% YoY; mix shifted slightly toward purchased loans; management cited scorecard changes (lower advance rates) and competition as drivers .
  • Capital and liquidity strengthened via $500M 2030 notes (redeemed 2026s) and a $400M ABS; unrestricted cash plus revolvers exceeded $2.2B at quarter-end, supporting buybacks (329k shares) and growth .

What Went Well and What Went Wrong

What Went Well

  • Stabilizing portfolio performance: forecasted net cash flows decreased only 0.2% ($20.9M), the smallest decline in eight quarters; CEO highlighted collections improved sequentially except in 2022/2024/2025 vintages .
  • Record loan portfolio and strong liquidity: adjusted loans receivable reached $9.06B; unrestricted cash plus available revolvers >$2.2B, enabling flexibility and buybacks .
  • Financing actions de-risked the balance sheet: issued $500M 6.625% senior notes due 2030 and completed a $400M ABS at ~5.6% cost, supporting funding and liquidity .

Management quote: “Overall, forecasted net cash flows declined by 0.2% or $21 million, which was our smallest decline of the last 8 quarters.” — CEO Ken Booth .

What Went Wrong

  • Originations decelerated: unit volume -10.1% and dollar volume -15.5% YoY; average advances fell, reflecting smaller loan sizes and lower advance rates; market share slipped to ~5.2% for first two months vs 6% LY .
  • Adjusted return on capital declined to 9.2% (from 10.1% YoY and 9.8% QoQ), driven by slower cash flow timing (lower prepayments) and higher operating expenses (seasonal payroll/fringe benefits) .
  • 2022 vintage still underperforming initial forecasts; macro volatility (inflation/tariff risk/recession) could challenge forecast accuracy further, per management .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$508.0 $565.9 $571.1
GAAP Net Income ($USD Millions)$64.3 $151.9 $106.3
GAAP Diluted EPS ($)$5.08 $12.26 $8.66
Adjusted EPS ($)$9.28 $10.17 $9.35
Adjusted Return on Capital (%)10.1% 9.8% 9.2%
Adjusted Revenue / Adjusted Capital (%)19.8% 18.4% 18.0%
Adjusted Finance Charges / Adjusted Avg Loans (%)17.6% 16.5% 16.7%

Consensus vs Actual

MetricQ1 2024Q4 2024Q1 2025
Primary EPS Consensus Mean ($)9.13*7.93*9.67*
Actual Adjusted EPS ($)9.28 10.17 9.35
Surprise ($)+0.15+2.24-0.32
Revenue Consensus Mean ($USD Millions)497.7*564.7*567.2*
Actual GAAP Revenue ($USD Millions)508.0 565.9 571.1
Surprise ($USD Millions)+10.3+1.2+3.9

Values retrieved from S&P Global.*

Segment/Mix

Mix (%)Q3 2024Q4 2024Q1 2025
Dealer Loans (Unit)79.5% 78.7% 77.0%
Purchased Loans (Unit)20.5% 21.3% 23.0%
Dealer Loans (Dollar)78.4% 77.7% 75.1%
Purchased Loans (Dollar)21.6% 22.3% 24.9%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Consumer Loan Unit Volume95,670 78,911 100,278
Active Dealers10,678 10,149 10,789
YoY Unit Volume Change (%)+17.7% +0.3% -10.1%
YoY Dollar Volume Change (%)+12.2% -4.9% -15.5%
Forecasted Net Cash Flow Change ($M)-62.8 -31.1 -20.9
Forecasted Net Cash Flow Change (%)-0.6% -0.3% -0.2%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company guidanceN/ANoneNoneNo formal guidance provided; management discusses trends but does not issue quantitative guidance ranges .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Collections/Forecast RevisionsContinued declines; -0.6% Q3; -0.3% Q4; 2022 vintage underperformed; slowing prepayments near historical lows Smallest decline in 8 quarters (-0.2%); vintages 2020 improved; 2022/2024/2025 modestly down; timing still slower on prepayments Stabilizing but cautious
Originations & Advance RatesStrong Q3 growth; Q4 slowed; scorecard change lowered advance rates; competition noted Unit -10.1% YoY; advance rates lower; mix shift to purchased loans; market share 5.2% vs 6% LY (first two months) Softening volumes
Macro/VolatilityPost-pandemic volatility cited (inflation, supply chain, vehicle prices, credit availability) Inflation/tariff/recession risks noted as forecast challenges Ongoing macro uncertainty
Prepayments/TimingPrepayments near historical lows, dragging yield timing Slower cash flow timing continues; adjusted yield up QoQ but adjusted revenue/adjusted capital down due to cash holdings Timing headwind persists
Capital & LiquidityABS issuance; conservative cash stance pre-election; leverage monitored $500M 2030 notes (redeemed 2026s); $400M ABS; >$2.2B liquidity; elevated cash temporarily from financing timing Strengthened funding
Legal/RegulatoryLegal expense volatility; no specifics (Q4) CFPB withdrew from joint lawsuit, limiting case to NYAG/New York consumers if granted Reduced regulatory overhang
Technology/OperationsOngoing investment in tech stack and go-to-market Continued modernization and hiring; operating expense seasonality in Q1 Execution focus

Management Commentary

  • “Collections improved sequentially this quarter… Overall, forecasted net cash flows declined by 0.2% or $21 million, which was our smallest decline of the last 8 quarters.” — CEO Ken Booth .
  • “Our unit volume was likely impacted by our Q3 2024 scorecard change that has resulted in lower advance rates and increased competition.” — CEO Ken Booth .
  • “Similar to last quarter, we did see an increase in the [adjusted] yield from the prior quarter… [but] adjusted revenue as a percentage of adjusted capital… did decrease… due to ~$500 million of cash and cash equivalents.” — CFO Jay Martin .
  • “We refied our ’26 notes and upsized those by $100 million. We also closed a securitization at the end of the quarter… feels good to be in the cash position that we are right now rather than having to issue into a volatile capital market environment.” — SVP/Treasurer Jay Brinkley .
  • “We are pleased with the CFPB’s decision to withdraw from this case… we remain committed to operating with integrity and in compliance with all applicable laws.” — Chief Legal Officer Erin Kerber .

Q&A Highlights

  • Forecast changes and timing: Provision for forecast changes ($76.3M) reflected a $21M decline in undiscounted cash flows plus slower timing; adjusted yield rose QoQ, but adjusted revenue/adjusted capital fell due to elevated cash from recent financings .
  • Originations/mix and competition: Slightly higher purchased-loan mix seen as “modest” change; lower advance rates since Q3 scorecard change and competition impacting unit volumes .
  • Cash balances: Elevated cash is deliberate given volatile markets and recent transactions; supports flexibility in busy tax season .
  • Expenses and dealer holdback: Q1 salaries and wages elevated partly due to seasonality (payroll taxes, equity vesting, benefits); accelerated dealer holdback is used to better align dealer behavior with collections performance .
  • Macro/forecast risk: Inflation, potential tariffs, and recession risk may pressure forecast accuracy; 2022 vintage underperformance tied to competitive period, peak valuations, inflation .

Estimates Context

  • Q1 2025: Adjusted EPS $9.35 vs consensus $9.67 (miss); GAAP revenue $571.1M vs consensus $567.2M (beat)* .
  • Q4 2024: Adjusted EPS $10.17 vs consensus $7.93 (beat); GAAP revenue $565.9M vs consensus $564.7M (beat)* .
  • Q1 2024: Adjusted EPS $9.28 vs consensus $9.13 (beat); GAAP revenue $508.0M vs consensus $497.7M (beat)* .
  • Coverage: 4 EPS and revenue estimates in Q1 2025 and Q4 2024; 3 in Q1 2024*, indicating moderate sell-side coverage. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Stabilizing performance: The smallest forecast net cash flow decline (-0.2%) in five quarters is a constructive data point for credit normalization, though prepayment timing remains a headwind .
  • Mixed print vs estimates: Modest revenue beat coupled with an adjusted EPS miss suggests pressure from timing and seasonal operating expenses; watch adjusted ROC trajectory next quarter .
  • Originations under pressure: Lower advance rates and competition led to -10.1% unit and -15.5% dollar volume YoY; monitor share and dealer productivity into tax season .
  • Strong funding/liquidity: $500M 2030 notes, $400M ABS, and >$2.2B liquidity support portfolio growth and opportunistic buybacks (329k shares this quarter) .
  • Legal overhang reduced: CFPB’s withdrawal narrows the case scope to NYAG/New York consumers if granted; reduces regulatory uncertainty tail risk .
  • Operational focus: Continued investment in tech/go-to-market; seasonal expense dynamics in Q1 should abate; mix shift toward purchased loans bears watching for spread sensitivity .
  • Near-term trading: Stock likely reacts to signs of sustained stabilization (smaller revisions), funding strength, and legal clarity; risks include macro volatility (inflation/tariffs/recession) affecting forecasts .

Notes:

  • Non-GAAP disclosures and reconciliations provided in the press release explain “floating yield adjustment” and adjusted metrics; investors should anchor to adjusted EPS/ROC when comparing to consensus .
  • Company does not provide formal quantitative guidance; trends and drivers should be monitored via quarterly disclosures and call commentary .