Credit Acceptance Corp (CACC) Q3 2023 Earnings: A Detailed Review
Credit Acceptance Corp (NASDAQ:CACC) reported a consolidated net income of $70.8 million for Q3 2023, down from $86.8 million in Q3 2022.
The company's adjusted net income for Q3 2023 was $139.5 million, compared to $178.5 million for the same period in 2022.
Consumer Loan assignment volume grew, with unit and dollar volumes increasing by 13.0% and 10.5% respectively, compared to Q3 2022.
The average balance of the loan portfolio increased by 5.9% on a GAAP basis and 10.6% on an adjusted basis compared to Q3 2022.
On October 30, 2023, Credit Acceptance Corp (NASDAQ:CACC) announced its Q3 2023 earnings. The company reported a consolidated net income of $70.8 million, or $5.43 per diluted share, compared to $86.8 million, or $6.49 per diluted share, for the same period in 2022. Despite the decline in net income, the company saw growth in its Consumer Loan assignment volume and an increase in the average balance of its loan portfolio.
Financial Performance and Challenges
Credit Acceptance Corp (NASDAQ:CACC) faced several challenges in Q3 2023. The company reported a decrease in forecasted collection rates, which reduced forecasted net cash flows from the loan portfolio by $69.4 million, or 0.7%. This was compared to a decrease in forecasted collection rates during Q3 2022 that decreased forecasted net cash flows by $85.4 million, or 0.9%. The company also noted that forecasted profitability for Consumer Loans assigned in 2020 through 2022 was lower than estimates at September 30, 2022, due to a decline in forecasted collection rates since Q3 2022 and slower forecasted net cash flow timing during 2023.
Financial Achievements
Despite the challenges, Credit Acceptance Corp (NASDAQ:CACC) achieved several financial milestones in Q3 2023. The company reported growth in Consumer Loan assignment volume, with unit and dollar volumes growing 13.0% and 10.5%, respectively, compared to Q3 2022. The average balance of the company's loan portfolio on a GAAP and adjusted basis for Q3 2023 increased 5.9% and 10.6%, respectively, compared to Q3 2022. The company also reported an increase in the initial spread on Consumer Loan assignments to 21.4% on Consumer Loans assigned in Q3 2023 compared to 20.2% on Consumer Loans assigned in Q3 2022.
Income Statement Highlights
The company's GAAP net income for Q3 2023 was $70.8 million, down from $86.8 million in Q3 2022. The adjusted net income, a non-GAAP financial measure, for Q3 2023 was $139.5 million, down from $178.5 million in Q3 2022. The decrease in net income was primarily due to an increase in interest expense, which was primarily a result of higher interest rates on recently-completed or extended secured financings and the repayment of older secured financings with lower interest rates.
Balance Sheet and Cash Flow Statement Highlights
The company's balance sheet showed an increase in the average balance of the loan portfolio, which grew by 5.9% on a GAAP basis and 10.6% on an adjusted basis compared to Q3 2022. The company's cash flow statement highlighted a decrease in forecasted net cash flows from the loan portfolio by $69.4 million, or 0.7%, compared to a decrease in forecasted net cash flows by $85.4 million, or 0.9%, in Q3 2022.
Looking Ahead
While Credit Acceptance Corp (NASDAQ:CACC) faced challenges in Q3 2023, the company's growth in Consumer Loan assignment volume and increase in the average balance of its loan portfolio indicate potential for future growth. However, the company's ability to maintain this growth may be impacted by factors such as changes in interest rates and collection rates. As such, investors should continue to monitor the company's performance closely.
Explore the complete 8-K earnings release (here) from Credit Acceptance Corp for further details.
This article first appeared on GuruFocus.
