Credit Acceptance Corp (CACC) 2014 Q1 法說會逐字稿

Good day everyone, and welcome to the Credit Acceptance Corporation first quarter 2014 earnings conference call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on Credit Acceptance's webcast. At this time I would now like to turn the call over to Credit Acceptance Corp's Vice President and Treasurer, Doug Busk.

Thank you Charlotte. Good afternoon, and welcome to the Credit Acceptance Corporation's first quarter 2014 earnings call. As you read our news release posted on the Investor Relations section of our website at 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 including 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 Adjusted Financial Results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time Brent Roberts, our Chief Executive Officer, Ken Booth, our Chief Financial Officer, and I will take your questions.

(Operator Instructions). Our first question will be coming from the line of Moshe Orenbuch from Credit Suisse. Your line is open.

Great. Thanks very much. I was hoping you could kind of give us a little bit of an assessment of the competitive environment, and has been the trend for some time the advance rate has been increasing, and your spread relative to your forecast collection is kind of coming down, so maybe just talk a little bit about that for starters?

Sure. The competitive environment continues to be challenging. We probably won't see a change there until the sources of capital dry up for the Sub Prime Auto financial industry. I think the best measure for the competitive environment is our volume and more specifically our loan volume per dealer and that continues to decline, but it's declining at a slower rate than we had in prior quarters.

In terms of the spread, we haven't made any material pricing changes since the third quarter of 2012, so any change you see in the spread is a result of probably a couple of things. One would just be a change in the mix of loans, and the second thing you have to be aware of is historically at least for the most recent periods, we have seen an increase in forecasted collections after the loans were originally booked, so the actual performance of the loans has exceeded our expectations when we wrote the loan. So if that continues to be the case, the spread that we reported for 2014 originations would climb in future periods. That's just something to keep an eye on as you're comparing the more recent loans with more seasoned loans.

Got it. Do you think about the effect or the likelihood of that, is that kind of just as likely in a competitive environment, or is it less likely? How should we think about that?

For the forecast to increase?

Yes.

It's the more competitive the environment is the less likely it is that the forecast will increase. The primary reason for the more competitors is just the more competitors that you have for a given loan, typically that depresses loan performance versus in an empirical scorecard.

Do you see anyone trying to kind of emulate your approach, or is it just kind of more traditional lenders that are just bringing that capital to bear?

Well, most of the competition is for the traditional discount model, the big players. There are a few players out there that have a program that looks something like ours, but most of the big players are your traditional discount lenders.

The last one for me is just over a year ago the CFPB had started kind of talking about the disparate impact, and kind of made some noises about the auto finance industry. They have kind of had one action I guess, and it's been quiet, any thoughts that you can kind of update us on the regulatory environment?

With respect to that specific issue, obviously that is the number one issue in the auto finance space as it relates to the CFPB. It's got everyone's attention and like everybody else we're working through those issues. Charlie Pearce, who is our Chief Legal Officer is on the Board of the Industry Association. He's dialed into the latest updates, in terms of the CFPB's position on that issue, so we're working through that issue like everybody else.

Thank you. (Operator Instructions). Our next question will be coming from the line of Robert Dodd from Raymond James. Your line is open.

Hi, guys. Could you give us any color on what you are seeing on credit in terms of delinquencies, or anything like that? Obviously your allowance is very stable right now in fact slightly better on the owned loans, but is there any indication you are seeing that in terms of the delinquencies, early signs of one way or the other of things getting better?As you said with adverse selection, et cetera, I would expect maybe there to be a shift somewhat in the allowance of the potential delinquencies, but we are not seeing that right now. Any more color there would be helpful?

Yes. I would just refer you to the table that's in our earnings release, and we provide you our expectation at the time we originate the loan, and then continue to update you each quarter on how the actual performance compares to our original expectation. As you say, I agree with you, typically as it gets more competitive, our loan performance comes under some pressure. We're not seeing that in the numbers so far, but it's up and that certainly we are aware of, and it has our attention.

Okay. Thank you.

Thank you. Our next question will be coming from the line of Eric [Jake] from Stephens Incorporated.

Hey, guys. Thanks for taking it actually, I just had my last question answered, I just wanted to say congratulations on a good quarter. Thanks guys.

Thank you. With no further questions in the queue, I would now like to turn the conference back over 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.