Credit Acceptance (CACC) Q2 FY26 earnings call: the analyst Q&A

Why did the forecasted net cash flow revision go from -$9M last quarter to -$39M this quarter, and how does this square with comments about increasing stability?

The $39M decrease is modest given $12B in future cash flows and is an improvement from -$55M a year ago. The 2025 vintage showed modest underperformance but is within initial forecast, while older vintages are winding down. The difference between the $39M cash flow decline and $82M provision change is due to slower prepayments.

“So we did see a $39 million decrease for the quarter. It is down from the $55 million we saw a year ago. We believe the change, the decrease of the $39 million is relatively modest when you consider we're forecasting $12 billion of future cash flows.”

asked by Robert Wildhack · answered by Jay Martin

Prepayments have been a headwind for several quarters; at what point will the current slower level be incorporated into the forecast as the new normal?

The company will continue to monitor the prepayment trend, noting that consumers are holding onto vehicles longer due to elevated prices and lack of alternatives. They will adjust forecasts if needed but expect prepayments to return to normal at some point.

“Like I said, that's something we'll continue to monitor. And to your point, it has been several quarters where there's -- where it's -- prepayments have come in slower than what we've expected. So we'll continue to monitor that. We do think it will return to normal at some point.”

asked by Robert Wildhack · answered by Jay Martin

What is driving the higher yields on new loans and what are the expectations going forward?

The increase in adjusted revenue yield is primarily due to newer loans with higher yields replacing older vintages with lower yields. Loans originated this quarter did not have significantly different yields than recent quarters, indicating a trend of older, underperforming vintages rolling off.

“We have seen our adjusted revenue yield increase. It's really just a factor of putting loans on with new yields and the older vintages running off that had lower yields due to loan performance.”

asked by Kyle Joseph · answered by Jay Martin

Is the unit volume improvement a function of comps or the competitive environment, and is it expected to continue?

The improvement is partly due to easier comps, with unit volumes returning to 2024 levels. It's also driven by deliberate initiatives like increased engagement with franchise dealers, integrations with aggregators (RouteOne, Dealertrack), and segmentation efforts to identify profitable growth opportunities, including new vehicle categories like light structural damaged vehicles.

“It is a question of some of the comps as well. If you look at the unit volumes coming back, it's coming back to 2024 levels. There are a bunch of initiatives that I put in my opening remarks. The franchise dealers, the integration that we did with RouteOne and all the aggregators I've been talking about in the last few quarters. It is starting to come to fruition.”

asked by Kyle Joseph · answered by Vinayak Hegde

Why should investors be confident in the new management team, which is perceived as non-subprime professionals, to manage a subprime company effectively?

The CEO was on the Board for 5 years and knows the team well. While main leaders have changed, many new hires have deep subprime experience (e.g., CMO and Chief Business Officer from T-Mobile). Core pricing people remain, and the transformation to a data-informed, AI-enabled company requires leaders with experience in such transformations. The COO, who runs collections, has been promoted to oversee sales and servicing.

“I just want to remind everybody that I was on the Board for 5 years, and I've known this management team for a very long time as well. And while the main leaders have been changed, a lot of people who are coming in have deep experience in subprime. It may not be in auto lending.”

asked by Rikard Ekstrand · answered by Vinayak Hegde

Do advance rates go much higher than 46.1%, and what makes management confident they are not too aggressive?

Advance rates are set to maximize intrinsic value and vary between purchase and portfolio programs, with purchase programs generally having higher advances. The shift reflects a change in mix towards more purchase programs. The initial spread table in the earnings release provides a better indication of pricing.

“So as it relates to our pricing, we're looking to maximize intrinsic value. So the advance rates that we have will be dependent on that. Overall, we do advance all things equal, more under the purchase program than we do the portfolio program.”

asked by Rikard Ekstrand · answered by Jay Martin