Open the filing on EDGARCREDIT ACCEPTANCE ANNOUNCES THIRD QUARTER 2025 RESULTS
Southfield, Michigan - October 30, 2025 - Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) today announced consolidated net income of $108.2 million, or $9.43 per diluted share, for the three months ended September 30, 2025. Adjusted net income, a non-GAAP financial measure, for the three months ended September 30, 2025 was $117.9 million, or $10.28 per diluted share. The following table summarizes our financial results:
| September 30, 2025 | June 30, 2025 | September 30, 2024 |
|---|
| (In millions, except per share data) | For the Three Months Ended |
| GAAP net income | $108.2 | $87.4 | $78.8 |
| GAAP net income per diluted share | $9.43 | $7.42 | $6.35 |
| Adjusted net income (1) | $117.9 | $118.3 | $114.8 |
| Adjusted net income per diluted share (1) | $10.28 | $10.05 | $9.25 |
(1) Prior period amounts have been restated to remove the effect of contingent losses recognized during those periods to conform to the current presentation.
“We are pleased to report growth in adjusted EPS despite the challenging competitive landscape and difficult collection environment,” said Ken Booth, CEO of Credit Acceptance. “While we have continued to experience modest declines in loan performance, our business model is designed to produce acceptable returns in the aggregate even if loan performance is significantly worse than forecasted. We are also pleased with the investments that we have made over the last few years to modernize our loan originations system as we are now well positioned to make improvements significantly faster going forward.”
Third Quarter 2025 Financial Highlights
- A 3.9% increase in the average balance of our loan portfolio from the third quarter of 2024 to $8.0 billion.
- A decline in Consumer Loan assignment unit and dollar volumes of 16.5% and 19.4%, respectively, as compared to the third quarter of 2024.
- A decline in forecasted collection rates, which decreased forecasted net cash flows from our loan portfolio by $58.6 million, or 0.5%, and slower forecasted net cash flow timing.
- $107.4 million in the repurchase of approximately 230,000 shares, or 2.0% of the shares outstanding at the beginning of the quarter.
- $51.9 million in dealer holdback and accelerated dealer holdback payments to dealers.
- $15.0 million contingent loss, which we have excluded from our adjusted results, related to previously disclosed legal matters.
“We are encouraged by the progress of our product initiatives,” said Andrew Rostami, Chief Product and Marketing Officer of Credit Acceptance. “The modernization of our systems has allowed us to build, launch, and iterate at a rapid pace, delivering new product experiences that are providing value to dealers and consumers.”
Third Quarter 2025 Company Highlights
- Enrolled 1,342 new dealers in our programs and had 10,180 active dealers during the quarter.
- Modernized our CAPS origination system and delivery operating model, resulting in significant improvements to our technology stack and delivery speed since the start of this initiative in 2022. We have increased the speed that we are able to deliver enhancements to our dealers by almost 70% compared to one year ago.
- Built and began testing a new dealer experience for franchise and large independent dealers, which will allow dealers to work consumers' credit applications in RouteOne, with enhanced deal optimization and structuring experience and expanded F&I products.
- Built and launched a digital credit application product for dealers, enabling dealers to capture information from consumers across channels (in-store, websites, marketing). We have made the product generally available to smaller independent dealers. More than 900 dealers submitted applications using the product during the quarter.
- Enhanced our consumer mobile application functionality, which has contributed to fewer servicing calls, increasing operational efficiency.
- Introduced technology allowing consumers to make payments via mobile devices through personalized text messages without logging in.
- Deployed AI to improve call center operational efficiencies and consumer engagement.
- Received the following awards:
- Financial Services Top Workplaces for the second consecutive year, with a #4 ranking in the 1,000+ employee size category.
- Crain’s Fast 50 list by Crain's Detroit Business for the ninth time.
- PEOPLE 100 Companies that Care® by PEOPLE magazine and Great Place to Work®, for the fourth consecutive year, with a #44 ranking.
- Fortune Best Workplaces in Financial Services and InsuranceTM by Great Place to Work® and Fortune for the eleventh consecutive year, with a #10 ranking in the large company category.
Consumer Loan Metrics
Dealers assign retail installment contracts (referred to as “Consumer Loans”) to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital, and the amount of capital invested.
We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast. By comparing our current expected collection rate for each Consumer Loan with the rate we projected at the time of assignment, we are able to assess the accuracy of our initial forecast. The following table compares our aggregated forecast of Consumer Loan collection rates as of September 30, 2025, with the aggregated forecasts as of June 30, 2025 and at the time of assignment, segmented by year of assignment:
| Forecasted Collection Percentage as of (1) | Current Forecast Variance from | |
|---|
| Consumer Loan Assignment Year | September 30, 2025 | June 30, 2025 | InitialForecast | June 30, 2025 | InitialForecast |
| 2016 | 63.9% | 63.9% | 65.4% | 0.0% | -1.5% |
| 2017 | 64.8% | 64.8% | 64.0% | 0.0% | 0.8% |
| 2018 | 65.5% | 65.6% | 63.6% | -0.1% | 1.9% |
| 2019 | 67.2% | 67.3% | 64.0% | -0.1% | 3.2% |
| 2020 | 68.0% | 68.0% | 63.4% | 0.0% | 4.6% |
| 2021 | 63.8% | 63.8% | 66.3% | 0.0% | -2.5% |
| 2022 | 59.3% | 59.7% | 67.5% | -0.4% | -8.2% |
| 2023 | 63.7% | 64.1% | 67.5% | -0.4% | -3.8% |
| 2024 | 65.5% | 65.7% | 67.2% | -0.2% | -1.7% |
| 2025 (2) | 67.2% | 66.9% | 67.1% | 0.3% | 0.1% |
(1) Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.
(2) The forecasted collection rate for 2025 Consumer Loans as of September 30, 2025 includes both Consumer Loans that were in our portfolio as of June 30, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments:
| Forecasted Collection Percentage as of | Current Forecast Variance from |
|---|
| 2025 Consumer Loan Assignment Period | September 30, 2025 | June 30, 2025 | Initial Forecast | June 30, 2025 | Initial Forecast |
| January 1, 2025 through June 30, 2025 | 67.1% | 66.9% | 66.9% | 0.2% | 0.2% |
| July 1, 2025 through September 30, 2025 | 67.4% | - | 67.4% | - | 0.0% |
For the three months ended September 30, 2025, forecasted collection rates improved for Consumer Loans assigned in 2025, declined for Consumer Loans assigned in 2022 through 2024, and were generally consistent with expectations at the start of the period for all other assignment years presented.
The changes to our forecast of future net cash flows from our Loan portfolio (forecasted collections less forecasted dealer holdback payments) for each of the last eight quarters are shown in the following table:
| (Dollars in millions) | Decrease in Forecasted Net Cash Flows |
| Three Months Ended | Total Loans | % Change from Forecast at Beginning of Period |
| December 31, 2023 | $(57.0) | -0.6% |
| March 31, 2024 | (30.8) | -0.3% |
| June 30, 2024 | (189.3) | -1.7% |
| September 30, 2024 | (62.8) | -0.6% |
| December 31, 2024 | (31.1) | -0.3% |
| March 31, 2025 | (20.9) | -0.2% |
| June 30, 2025 | (55.8) | -0.5% |
| September 30, 2025 | (58.6) | -0.5% |
The following table presents information on Consumer Loan assignments for each of the last 10 years:
| Average | Total Assignment Volume |
|---|
| Consumer Loan Assignment Year | Consumer Loan (1) | Advance (2) | Initial Loan Term (in months) | Unit Volume | Dollar Volume (2) (in millions) |
| 2016 | $18,218 | | $7,976 | | 53 | 330,710 | $2,635.5 | |
| 2017 | | 20,230 | | 8,746 | 55 | 328,507 | | 2,873.1 |
| 2018 | | 22,158 | | 9,635 | 57 | 373,329 | | 3,595.8 |
| 2019 | | 23,139 | | 10,174 | 57 | 369,805 | | 3,772.2 |
| 2020 | | 24,262 | | 10,656 | 59 | 341,967 | | 3,641.2 |
| 2021 | | 25,632 | | 11,790 | 59 | 268,730 | | 3,167.8 |
| 2022 | | 27,242 | | 12,924 | 60 | 280,467 | | 3,625.3 |
| 2023 | | 27,025 | | 12,475 | 61 | 332,499 | | 4,147.8 |
| 2024 | | 26,497 | | 11,961 | 61 | 386,126 | | 4,618.4 |
| 2025 (3) (4) | | 25,384 | | 11,423 | 60 | 265,680 | | 3,034.8 |
(1)Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
(2)Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
(3)Represents activity for the nine months ended September 30, 2025. Information in this table for each of the years prior to 2025 represents activity for all 12 months of that year.
(4)The averages for 2025 Consumer Loans include both Consumer Loans that were in our portfolio as of June 30, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides averages for each of these segments:
| Average |
|---|
| 2025 Consumer Loan Assignment Period | Consumer Loan | Advance | Initial Loan Term (in months) |
| January 1, 2025 through June 30, 2025 | $25,376 | $11,362 | 60 |
| July 1, 2025 through September 30, 2025 | 25,402 | 11,563 | 60 |
The profitability of our loans is primarily driven by the amount and timing of the net cash flows we receive from the spread between the forecasted collection rate and the advance rate, less operating expenses and the cost of capital. Forecasting collection rates accurately at loan inception is difficult. With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability across our portfolio, even if collection rates are less than we initially forecast.
The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of September 30, 2025, as well as forecasted collection rates and spreads at the time of assignment. All amounts, unless otherwise noted, are presented as a percentage of the initial balance of the Consumer Loan (principal + interest). The table includes both dealer loans and purchased loans.
| Forecasted Collection % as of | | Spread % as of | |
|---|
| Consumer Loan Assignment Year | September 30, 2025 | Initial Forecast | Advance % (1) | September 30, 2025 | Initial Forecast | % of Forecast Realized (2) |
| 2016 | 63.9% | 65.4% | 43.8% | 20.1% | 21.6% | 99.7% |
| 2017 | 64.8% | 64.0% | 43.2% | 21.6% | 20.8% | 99.5% |
| 2018 | 65.5% | 63.6% | 43.5% | 22.0% | 20.1% | 99.1% |
| 2019 | 67.2% | 64.0% | 44.0% | 23.2% | 20.0% | 98.3% |
| 2020 | 68.0% | 63.4% | 43.9% | 24.1% | 19.5% | 96.0% |
| 2021 | 63.8% | 66.3% | 46.0% | 17.8% | 20.3% | 90.8% |
| 2022 | 59.3% | 67.5% | 47.4% | 11.9% | 20.1% | 78.6% |
| 2023 | 63.7% | 67.5% | 46.2% | 17.5% | 21.3% | 60.5% |
| 2024 | 65.5% | 67.2% | 45.1% | 20.4% | 22.1% | 37.3% |
| 2025 (3) | 67.2% | 67.1% | 45.1% | 22.1% | 22.0% | 11.0% |
(1) Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program as a percentage of the initial balance of the Consumer Loans. Payments of dealer holdback and accelerated dealer holdback are not included.
(2) Presented as a percentage of total forecasted collections
(3) The forecasted collection rate, advance rate and spread for 2025 Consumer Loans as of September 30, 2025 include both Consumer Loans that were in our portfolio as of June 30, 2025 and Consumer Loans assigned during the most recent quarter. The following table provides forecasted collection rates, advance rates, and spreads for each of these segments:
| Forecasted Collection % as of | | Spread % as of |
|---|
| 2025 Consumer Loan Assignment Period | September 30, 2025 | Initial Forecast | Advance % | September 30, 2025 | Initial Forecast |
| January 1, 2025 through June 30, 2025 | 67.1% | 66.9% | 44.9% | 22.2% | 22.0% |
| July 1, 2025 through September 30, 2025 | 67.4% | 67.4% | 45.5% | 21.9% | 21.9% |
The risk of a material change in our forecasted collection rate declines as the Consumer Loans age. For 2021 and prior Consumer Loan assignments, the risk of a material forecast variance is modest, as we have currently realized in excess of 90% of the expected collections. Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.
The spread between the forecasted collection rate as of September 30, 2025 and the advance rate ranges from 11.9% to 24.1%, on an annual basis, for Consumer Loans assigned over the last 10 years. The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented. The spreads with respect to 2021 through 2023 Consumer Loans have been negatively impacted by Consumer Loan performance, which has been lower than our initial estimates by a greater margin than the other years presented. The higher spread for 2025 Consumer Loans relative to 2024 Consumer Loans as of September 30, 2025 was primarily a result of Consumer Loan performance, as the performance of 2024 Consumer Loans has been lower than our initial estimates.
The following table compares our forecast of aggregate Consumer Loan collection rates as of September 30, 2025 with the forecasts at the time of assignment, for dealer loans and purchased loans separately:
| Dealer Loans | Purchased Loans |
|---|
| Forecasted Collection Percentage as of (1) | | Forecasted Collection Percentage as of (1) | |
|---|
| Consumer Loan Assignment Year | September 30, 2025 | Initial Forecast | Variance | September 30, 2025 | Initial Forecast | Variance |
| 2016 | 63.2% | 65.1% | -1.9% | 66.2% | 66.5% | -0.3% |
| 2017 | 64.1% | 63.8% | 0.3% | 66.4% | 64.6% | 1.8% |
| 2018 | 65.0% | 63.6% | 1.4% | 66.8% | 63.5% | 3.3% |
| 2019 | 66.9% | 63.9% | 3.0% | 67.9% | 64.2% | 3.7% |
| 2020 | 67.8% | 63.3% | 4.5% | 68.3% | 63.6% | 4.7% |
| 2021 | 63.5% | 66.3% | -2.8% | 64.4% | 66.3% | -1.9% |
| 2022 | 58.5% | 67.3% | -8.8% | 61.3% | 68.0% | -6.7% |
| 2023 | 62.4% | 66.8% | -4.4% | 67.1% | 69.4% | -2.3% |
| 2024 | 64.3% | 66.3% | -2.0% | 69.9% | 70.7% | -0.8% |
| 2025 | 65.6% | 65.5% | 0.1% | 71.8% | 71.6% | 0.2% |
(1) The forecasted collection rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment. The forecasted collection rates represent the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates.
The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of September 30, 2025 for dealer loans and purchased loans separately. All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).
| Dealer Loans | Purchased Loans |
|---|
| Consumer Loan Assignment Year | Forecasted Collection % (1) | Advance % (1)(2) | Spread % | Forecasted Collection % (1) | Advance % (1)(2) | Spread % |
| 2016 | 63.2% | 42.1% | 21.1% | 66.2% | 48.6% | 17.6% |
| 2017 | 64.1% | 42.1% | 22.0% | 66.4% | 45.8% | 20.6% |
| 2018 | 65.0% | 42.7% | 22.3% | 66.8% | 45.2% | 21.6% |
| 2019 | 66.9% | 43.1% | 23.8% | 67.9% | 45.6% | 22.3% |
| 2020 | 67.8% | 43.0% | 24.8% | 68.3% | 45.5% | 22.8% |
| 2021 | 63.5% | 45.1% | 18.4% | 64.4% | 47.7% | 16.7% |
| 2022 | 58.5% | 46.4% | 12.1% | 61.3% | 50.1% | 11.2% |
| 2023 | 62.4% | 44.8% | 17.6% | 67.1% | 49.8% | 17.3% |
| 2024 | 64.3% | 44.1% | 20.2% | 69.9% | 48.9% | 21.0% |
| 2025 | 65.6% | 43.2% | 22.4% | 71.8% | 50.5% | 21.3% |
(1) The forecasted collection rates and advance rates presented for dealer loans and purchased loans reflect the Consumer Loan classification at the time of assignment.
(2) Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program as a percentage of the initial balance of the Consumer Loans. Payments of dealer holdback and accelerated dealer holdback are not included.
Although the advance rate on purchased loans is higher as compared to the advance rate on dealer loans, purchased loans do not require us to pay dealer holdback.
The spread as of September 30, 2025 on 2025 dealer loans was 22.4%, as compared to a spread of 20.2% on 2024 dealer loans. The increase was primarily a result of Consumer Loan performance, as the performance of 2024 dealer loans has been lower than our initial estimates.
The spread as of September 30, 2025 on 2025 purchased loans was 21.3%, as compared to a spread of 21.0% on 2024 purchased loans, reflecting the net impact of two offsetting factors. Consumer Loan performance increased the spread from 2024 to 2025, as the performance of 2025 purchased loans has exceeded our initial estimates while the performance of 2024 purchased loans has been lower than our initial estimates. This impact of Consumer Loan performance was partially offset by the impact of a lower initial spread on 2025 purchased loans, due to the advance rate increasing by a greater margin than the initial forecast in our purchased loan portfolio.
Consumer Loan Volume
The following table summarizes changes in Consumer Loan assignment volume in each of the last eight quarters as compared to the same period in the previous year:
| Year over Year Percent Change |
|---|
| Three Months Ended | Unit Volume | Dollar Volume (1) |
| December 31, 2023 | 26.7% | 21.3% |
| March 31, 2024 | 24.1% | 20.2% |
| June 30, 2024 | 20.9% | 16.3% |
| September 30, 2024 | 17.7% | 12.2% |
| December 31, 2024 | 0.3% | -4.9% |
| March 31, 2025 | -10.1% | -15.5% |
| June 30, 2025 | -14.6% | -18.8% |
| September 30, 2025 | -16.5% | -19.4% |
(1) Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
Consumer Loan assignment volumes depend on a number of factors including (1) the overall demand for our financing programs and (2) the amount of capital available to fund new loans. Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital constraints.
Unit and dollar volumes declined 16.5% and 19.4%, respectively, during the third quarter of 2025 as the number of active dealers declined 4.7% and the average unit volume per active dealer declined 12.2%. Dollar volume declined by more than unit volume during the third quarter of 2025 due to a decrease in the average advance paid, primarily resulting from a decrease in the average size of Consumer Loans assigned. Unit volume for the 28-day period ended October 28, 2025 decreased 13.0% compared to the same period in 2024.
The following table summarizes the changes in Consumer Loan unit volume and active dealers:
| For the Three Months Ended September 30, | |
|---|
| 2025 | 2024 | % Change |
|---|
| Consumer Loan unit volume | 79,916 | | 95,670 | | -16.5% |
| Active dealers (1) | 10,180 | | 10,678 | | -4.7% |
| Average volume per active dealer | 7.9 | | 9.0 | | -12.2% |
| Consumer Loan unit volume from dealers active both periods | 63,739 | | 77,544 | | -17.8% |
| Dealers active both periods | 6,627 | | 6,627 | | - |
| Average volume per dealer active both periods | 9.6 | | 11.7 | | -17.8% |
| Consumer loan unit volume from dealers not active both periods | 16,177 | | 18,126 | | -10.8% |
| Dealers not active both periods | 3,553 | | 4,051 | | -12.3% |
| Average volume per dealer not active both periods | 4.6 | | 4.5 | | 2.2% |
(1) Active dealers are dealers who have received funding for at least one Consumer Loan during the period.
The following table provides additional information on the changes in Consumer Loan unit volume and active dealers:
| For the Three Months Ended September 30, | |
|---|
| 2025 | 2024 | % Change |
|---|
| Consumer Loan unit volume from new active dealers | 2,924 | | 3,447 | | -15.2% |
| New active dealers (1) | 1,012 | | 1,038 | | -2.5% |
| Average volume per new active dealer | 2.9 | | 3.3 | | -12.1% |
| Attrition (2) | -18.9% | | -16.4% | | |
(1) New active dealers are dealers who enrolled in our program and have received funding for their first dealer loan or purchased loan from us during the period.
(2) Attrition is measured according to the following formula: decrease in Consumer Loan unit volume from dealers who have received funding for at least one dealer loan or purchased loan during the comparable period of the prior year but did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period Consumer Loan unit volume.
The following table shows the percentage of Consumer Loans assigned to us as dealer loans and purchased loans for each of the last eight quarters:
| Unit Volume | Dollar Volume (1) |
|---|
| Three Months Ended | Dealer Loans | Purchased Loans | Dealer Loans | Purchased Loans |
| December 31, 2023 | 77.2% | 22.8% | 75.0% | 25.0% |
| March 31, 2024 | 78.2% | 21.8% | 76.6% | 23.4% |
| June 30, 2024 | 78.5% | 21.5% | 77.3% | 22.7% |
| September 30, 2024 | 79.5% | 20.5% | 78.4% | 21.6% |
| December 31, 2024 | 78.7% | 21.3% | 77.7% | 22.3% |
| March 31, 2025 | 77.0% | 23.0% | 75.1% | 24.9% |
| June 30, 2025 | 71.6% | 28.4% | 68.3% | 31.7% |
| September 30, 2025 | 73.1% | 26.9% | 70.6% | 29.4% |
(1) Represents advances paid to dealers on Consumer Loans assigned under the portfolio program and one-time payments made to dealers to purchase Consumer Loans assigned under the purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
As of September 30, 2025 and December 31, 2024, the net dealer loans receivable balance was 72.1% and 72.3%, respectively, of the total net loans receivable balance. In 2025, we expanded dealer access to the purchase program for Consumer Loans to consumers with higher credit ratings. The higher percentage of purchased loans in 2025 Consumer Loan assignment volume was primarily related to Consumer Loans assigned under this expanded dealer access.
Financial Results
| (Dollars in millions, except per share data) | For the Three Months Ended September 30, | |
| | 2025 | | 2024 | % Change |
| GAAP average debt | $6,400.1 | | $6,071.1 | | 5.4% |
| GAAP average shareholders' equity | 1,573.4 | | 1,594.2 | | -1.3% |
| Average capital | $7,973.5 | | $7,665.3 | | 4.0% |
| GAAP net income | $108.2 | | $78.8 | | 37.3% |
| Diluted weighted average shares outstanding | | 11,472,729 | | 12,415,143 | -7.6% |
| GAAP net income per diluted share | $9.43 | | $6.35 | | 48.5% |
The increase in GAAP net income for the three months ended September 30, 2025, as compared to the same period in 2024, was primarily a result of the following:
- A decrease in provision for credit losses of 17.7% ($32.7 million), due to:
- A decrease in provision for credit losses on forecast changes of $17.8 million, reflecting changes in forecasted net cash flow timing and a smaller decline in Consumer Loan performance. While we continued to experience slowing of forecasted net cash flow timing as a result of lower-than-expected Consumer Loan prepayments, it was to a lesser extent as compared to the same period in 2024.
- A decrease in provision for credit losses on new Consumer Loan assignments of $14.9 million, primarily due to a 16.5% decrease in Consumer Loan assignment unit volume.
- An increase in finance charges of 6.3% ($31.8 million), due to an increase in the average balance of our loan portfolio and an increase in the average yield on our loan portfolio primarily due to higher contractual yields on more recent Consumer Loan assignments.
- An increase in interest expense of 4.6% ($5.1 million), primarily due to an increase in our average outstanding debt balance.
- An increase in provision for income taxes of 46.9% ($13.0 million), primarily due to an increase in pre-tax income.
- An increase in operating expenses of 13.3% ($17.2 million), primarily due to:
- An increase in salaries and wages expense of 10.6% ($8.2 million), primarily due to increases in (i) the number of team members, as we are investing in our business with the goal of increasing the speed at which we enhance our product for dealers and consumers, and (ii) fringe benefits, primarily due to higher medical claims.
- An increase in general and administrative expense of 25.2% ($7.3 million), primarily due to an increase in legal expenses, which included a $15.0 million contingent loss recognized during the third quarter of 2025 compared to a $7.4 million contingent loss recognized during the third quarter of 2024, both related to previously disclosed legal matters as to which we have recognized cumulative contingent losses of $46.8 million through the end of the third quarter of 2025. The cumulative amount reflects, among other things, a September 2025 offer by us to settle the previously disclosed multi-state and New York Attorney General legal matters on terms that include, among other things, a proposed cash payment of $45.0 million.
Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine certain incentive compensation. We also use economic profit as a framework to evaluate business decisions and strategies, with the objective to maximize economic profit over the long term. In addition, certain debt facilities utilize adjusted financial information for the determination of loan collateral values and to measure financial covenants. The table below shows our results following adjustments to reflect non-GAAP accounting methods. Material adjustments are explained in the table footnotes and the subsequent “Floating Yield Adjustment” and “Senior Notes Adjustment” sections. Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, adjusted interest expense (after-tax), adjusted net income plus adjusted interest expense (after-tax), adjusted return on capital, adjusted revenue, adjusted operating expenses, adjusted loans receivable, adjusted finance charges, adjusted average loans receivable, economic profit, and economic profit per diluted share are non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.
Adjusted financial results for the three months ended September 30, 2025, compared to the same period in 2024, include the following:
| (Dollars in millions, except per share data) | For the Three Months Ended September 30, | |
| | 2025 | | 2024 | % Change |
| Adjusted average capital | $8,699.2 | | $8,387.6 | | 3.7% |
| Adjusted net income (1) | $117.9 | | $114.8 | | 2.7% |
| Adjusted interest expense (after-tax) | $87.3 | | $85.6 | | 2.0% |
| Adjusted net income plus adjusted interest expense (after-tax) (1) | $205.2 | | $200.4 | | 2.4% |
| Adjusted return on capital (1) | 9.4% | | 9.6% | | -2.1% |
| Cost of capital | 7.5% | | 7.3% | | 2.7% |
| Economic profit (1) | $43.0 | | $47.1 | | -8.7% |
| Diluted weighted average shares outstanding | | 11,472,729 | | 12,415,143 | -7.6% |
| Adjusted net income per diluted share (1) | $10.28 | | $9.25 | | 11.1% |
| Economic profit per diluted share (1) | $3.75 | | $3.79 | | -1.1% |
(1) Prior period amounts have been restated to remove the effect of contingent losses recognized during those periods to conform to the current presentation.
Economic profit decreased 8.7% for the three months ended September 30, 2025, as compared to the same period in 2024. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business. The following table summarizes the impact each of these components had on the changes in economic profit for the three months ended September 30, 2025, as compared to the same period in 2024:
| For the Three Months Ended September 30, 2025 |
|---|
| (In millions) | Year over Year Change in Economic Profit |
| Increase in cost of capital | $(3.0) |
| Decrease in adjusted return on capital | (2.8) |
| Increase in adjusted average capital | 1.7 |
| Decrease in economic profit | $(4.1) |
The decrease in economic profit for the three months ended September 30, 2025, as compared to the same period in 2024, was primarily a result of the following:
- An increase in our cost of capital, primarily due to an increase in the 30-year Treasury rate, which is used in the average cost of equity calculation.
- A decrease in our adjusted return on capital of 20 basis points, primarily due to:
- An increase in our estimated long-term effective income tax rate decreased our adjusted return on capital by 30 basis points as the rate increased from 23% to 25% for the second quarter of 2025 and future periods. The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
- An increase in adjusted operating expenses decreased our adjusted return on capital by 20 basis points as adjusted operating expenses increased by 7.7% while adjusted average capital increased by 3.7%. The increase in adjusted operating expenses was primarily due to increases in (i) the number of team members, as we are investing in our business with the goal of increasing the speed at which we enhance our product for dealers and consumers, and (ii) fringe benefits, primarily due to higher medical claims.
- An increase in the yield used to recognize adjusted finance charges on our loan portfolio increased our adjusted return on capital by 30 basis points, primarily due to higher expected yields on more recent Consumer Loan assignments, partially offset by a decline in forecasted collection rates and slower forecasted net cash flow timing throughout 2024 and 2025. The slower forecasted net cash flow timing was primarily due to lower-than-expected Consumer Loan prepayments, which remain below historical averages.
- An increase in adjusted average capital of 3.7%, primarily due to an increase in the average balance of our loan portfolio.
The following table shows adjusted finance charges as a percentage of adjusted average loans receivable, adjusted revenue and adjusted operating expenses as a percentage of adjusted average capital, the adjusted return on capital, and the percentage change in adjusted average capital for each of the last eight quarters, compared to the same period in the prior year:
| For the Three Months Ended |
|---|
| Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 |
|---|
| Adjusted finance charges as a percentage of adjusted average loans receivable (1) | 16.8% | 17.0% | 16.7% | 16.5% | 16.4% | 17.8% | 17.6% | 17.9% |
| Adjusted revenue as a percentage of adjusted average capital (1) | 18.6% | 18.3% | 18.0% | 18.4% | 18.2% | 19.6% | 19.8% | 20.2% |
| Adjusted operating expenses as a percentage of adjusted average capital (1)(2) | 6.1% | 5.9% | 6.1% | 5.6% | 5.8% | 6.1% | 6.7% | 6.3% |
| Adjusted return on capital (1)(2) | 9.4% | 9.3% | 9.2% | 9.8% | 9.6% | 10.3% | 10.1% | 10.6% |
| Percentage change in adjusted average capital compared to the same period in the prior year | 3.7% | 11.2% | 18.3% | 19.3% | 19.4% | 17.6% | 14.6% | 11.5% |
(1) Annualized.
(2) Prior period amounts have been restated to remove the effect of contingent losses recognized during those periods to conform to the current presentation.
The following tables provide a reconciliation of non-GAAP measures to GAAP measures. Certain amounts do not recalculate due to rounding.
| Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 |
|---|
| (Dollars in millions, except per share data) | For the Three Months Ended |
| Adjusted net income | | | | | | | | |
| GAAP net income (loss) | $108.2 | | $87.4 | | $106.3 | | $151.9 | | $78.8 | | $(47.1) | | $64.3 | | $93.6 | |
| Floating yield adjustment (after-tax) | (119.0) | | (117.1) | | (118.9) | | (116.8) | | (115.1) | | (96.1) | | (92.4) | | (83.9) | |
| GAAP provision for credit losses (after-tax) | | 114.0 | | 129.6 | | 124.6 | | 95.0 | | 142.2 | | 246.9 | | 143.2 | | 126.1 |
| Loss on sale of building (after-tax) (1) | - | | - | | - | | - | | - | | 18.3 | | - | | - | |
| Contingent loss (after-tax) (2) | 11.2 | | 17.5 | | - | | - | | 5.7 | | 0.8 | | - | | - | |
| Senior notes adjustment (after-tax) | - | | - | | - | | - | | - | | - | | - | | (2.6) | |
| Income tax adjustment (3) | 3.5 | | 0.9 | | 2.8 | | (4.1) | | 3.2 | | 4.4 | | 2.3 | | (4.1) | |
| Adjusted net income | $117.9 | | $118.3 | | $114.8 | | $126.0 | | $114.8 | | $127.2 | | $117.4 | | $129.1 | |
| Adjusted net income per diluted share | $10.28 | | $10.05 | | $9.35 | | $10.17 | | $9.25 | | $10.36 | | $9.28 | | $10.06 | |
| Diluted weighted average shares outstanding | | 11,472,729 | | 11,771,525 | | 12,279,446 | | 12,388,072 | | 12,415,143 | | 12,282,174 | | 12,646,529 | | 12,837,181 |
| Adjusted revenue | | | | | | | | |
| GAAP total revenue | $582.4 | | $583.8 | | $571.1 | | $565.9 | | $550.3 | | $538.2 | | $508.0 | | $491.6 | |
| Floating yield adjustment | (158.7) | | (156.0) | | (154.5) | | (151.8) | | (149.4) | | (124.8) | | (120.0) | | (108.9) | |
| GAAP provision for claims | (18.6) | | (19.8) | | (16.1) | | (17.7) | | (18.5) | | (20.3) | | (17.0) | | (16.6) | |
| Adjusted revenue | $405.1 | | $408.0 | | $400.5 | | $396.4 | | $382.4 | | $393.1 | | $371.0 | | $366.1 | |
| Adjusted average capital | | | | | | | | |
| GAAP average debt | $6,400.1 | | $6,583.8 | | $6,398.3 | | $6,202.5 | | $6,071.1 | | $5,818.2 | | $5,306.8 | | $4,986.3 | |
| Deferred debt issuance adjustment | - | | - | | - | | - | | - | | - | | - | | 20.9 | |
| Senior notes debt adjustment | - | | - | | - | | - | | - | | - | | - | | 2.8 | |
| Adjusted average debt | 6,400.1 | | 6,583.8 | | 6,398.3 | | 6,202.5 | | 6,071.1 | | 5,818.2 | | 5,306.8 | | 5,010.0 | |
| GAAP average shareholders' equity | 1,573.4 | | 1,635.9 | | 1,782.0 | | 1,712.3 | | 1,594.2 | | 1,623.5 | | 1,678.5 | | 1,734.3 | |
| Senior notes equity adjustment | - | | - | | - | | - | | - | | - | | - | | 2.0 | |
| Income tax adjustment (4) | (96.9) | | (100.5) | | (118.5) | | (118.5) | | (118.5) | | (118.5) | | (118.5) | | (118.5) | |
| Floating yield adjustment | 822.6 | | 813.5 | | 820.8 | | 837.0 | | 840.8 | | 710.1 | | 641.0 | | 606.5 | |
| Adjusted average equity | 2,299.1 | | 2,348.9 | | 2,484.3 | | 2,430.8 | | 2,316.5 | | 2,215.1 | | 2,201.0 | | 2,224.3 | |
| Adjusted average capital | $8,699.2 | | $8,932.7 | | $8,882.6 | | $8,633.3 | | $8,387.6 | | $8,033.3 | | $7,507.8 | | $7,234.3 | |
| Adjusted revenue as a percentage of adjusted average capital (5) | 18.6% | | 18.3% | | 18.0% | | 18.4% | | 18.2% | | 19.6% | | 19.8% | | 20.2% | |
| Adjusted loans receivable | | | | | | | | |
| GAAP loans receivable, net | $7,975.5 | | $8,001.9 | | $7,978.2 | | $7,850.3 | | $7,781.5 | | $7,547.7 | | $7,345.6 | | $6,955.3 | |
| Floating yield adjustment | 1,089.7 | | 1,096.4 | | 1,079.8 | | 1,072.4 | | 1,100.8 | | 1,065.6 | | 869.7 | | 803.8 | |
| Adjusted loans receivable | $9,065.2 | | $9,098.3 | | $9,058.0 | | $8,922.7 | | $8,882.3 | | $8,613.3 | | $8,215.3 | | $7,759.1 | |
| Adjusted loan yield | | | | | | | | |
| GAAP finance charges | $539.4 | | $540.7 | | $526.7 | | $518.2 | | $507.6 | | $497.7 | | $469.2 | | $451.6 | |
| Floating yield adjustment | (158.7) | | (156.0) | | (154.5) | | (151.8) | | (149.4) | | (124.8) | | (120.0) | | (108.9) | |
| Adjusted finance charges | $380.7 | | $384.7 | | $372.2 | | $366.4 | | $358.2 | | $372.9 | | $349.2 | | $342.7 | |
| GAAP average loans receivable, net | $7,990.5 | | $8,011.6 | | $7,882.4 | | $7,831.4 | | $7,690.9 | | $7,499.2 | | $7,101.3 | | $6,867.8 | |
| Average floating yield adjustment | 1,080.9 | | 1,064.1 | | 1,048.9 | | 1,071.4 | | 1,072.2 | | 903.2 | | 819.7 | | 775.6 | |
| Adjusted average loans receivable | $9,071.4 | | $9,075.7 | | $8,931.3 | | $8,902.8 | | $8,763.1 | | $8,402.4 | | $7,921.0 | | $7,643.4 | |
| Adjusted finance charges as a percentage of adjusted average loans receivable (5) | 16.8% | | 17.0% | | 16.7% | | 16.5% | | 16.4% | | 17.8% | | 17.6% | | 17.9% | |
(1) The sale of one of our two office buildings in June 2024 resulted in a loss on the sale of the asset. As this transaction is both unusual and infrequent in nature, we applied this adjustment to remove the impact of the loss on sale of building from our adjusted net income.
(2) From time to time, we recognize a contingent loss related to legal matters. As these transactions are both unusual and infrequent in nature, we have applied this adjustment to remove the impact of the contingent loss from our adjusted net income.
(3) Adjustment to record taxes at our estimated long-term effective income tax rate. The adjustment for the three months ended September 30, 2025 and June 30, 2025 is calculated using a 25% income tax rate, which is expected to be used for the remainder of 2025 and future periods. This rate represents an increase from 23%, which had been used to calculate after-tax adjustments since 2018, following the enactment in December 2017 of Public Law 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
(4) The enactment of the 2017 Tax Act resulted in the reversal of provision for income taxes to reflect a new, lower federal statutory income tax rate. We began applying the income tax adjustment at that time to remove the impact of this reversal from adjusted average capital. As the enactment of Public Law 119-21 on July 4, 2025 made the lower federal statutory tax rate permanent, removing uncertainty on the future federal statutory income tax rate, we increased our estimated long-term effective income tax rate from 23% to 25% to reflect higher expected state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation in future periods. We believe the income tax adjustment provides a more accurate reflection of the performance of our business as we are recognizing provision for income taxes at the applicable long-term effective tax rate for the period.
(5) Annualized.
| Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 |
|---|
| (Dollars in millions) | For the Three Months Ended |
| Adjusted interest expense (after-tax) | | | | | | | | |
| GAAP interest expense | $116.3 | $118.1 | $114.7 | $111.3 | $111.2 | $104.5 | $92.5 | $78.8 |
| Senior notes adjustment | - | - | - | - | - | - | - | 3.5 |
| Adjusted interest expense (pre-tax) | 116.3 | 118.1 | 114.7 | 111.3 | 111.2 | 104.5 | 92.5 | 82.3 |
| Adjustment to record tax effect (1) | (29.0) | (29.5) | (26.4) | (25.6) | (25.6) | (24.0) | (21.3) | (18.9) |
| Adjusted interest expense (after-tax) | $87.3 | $88.6 | $88.3 | $85.7 | $85.6 | $80.5 | $71.2 | $63.4 |
| Adjusted return on capital (2) | | | | | | | | |
| Adjusted net income | $117.9 | $118.3 | $114.8 | $126.0 | $114.8 | $127.2 | $117.4 | $129.1 |
| Adjusted interest expense (after-tax) | 87.3 | 88.6 | 88.3 | 85.7 | 85.6 | 80.5 | 71.2 | 63.4 |
| Adjusted net income plus adjusted interest expense (after-tax) | $205.2 | $206.9 | $203.1 | $211.7 | $200.4 | $207.7 | $188.6 | $192.5 |
| Reconciliation of GAAP return on equity to adjusted return on capital (5) | | | | | | | | |
| GAAP return on equity (3) | 27.5% | 21.4% | 23.9% | 35.5% | 19.8% | -11.6% | 15.3% | 21.6% |
| Non-GAAP adjustments | -18.1% | -12.1% | -14.7% | -25.7% | -10.2% | 21.9% | -5.2% | -11.0% |
| Adjusted return on capital (2) | 9.4% | 9.3% | 9.2% | 9.8% | 9.6% | 10.3% | 10.1% | 10.6% |
| Economic profit | | | | | | | | |
| Adjusted return on capital | 9.4% | 9.3% | 9.2% | 9.8% | 9.6% | 10.3% | 10.1% | 10.6% |
| Cost of capital (4) (5) | 7.5% | 7.4% | 7.6% | 7.4% | 7.3% | 7.5% | 7.3% | 7.6% |
| Adjusted return on capital in excess of cost of capital | 1.9% | 1.9% | 1.6% | 2.4% | 2.3% | 2.8% | 2.8% | 3.0% |
| Adjusted average capital | $8,699.2 | $8,932.7 | $8,882.6 | $8,633.3 | $8,387.6 | $8,033.3 | $7,507.8 | $7,234.3 |
| Economic profit | $43.0 | $41.8 | $35.3 | $51.3 | $47.1 | $57.0 | $51.4 | $55.9 |
| Reconciliation of GAAP net income (loss) to economic profit | | | | | | | | |
| GAAP net income (loss) | $108.2 | $87.4 | $106.3 | $151.9 | $78.8 | $(47.1) | $64.3 | $93.6 |
| Non-GAAP adjustments | 9.7 | 30.9 | 8.5 | (25.9) | 36.0 | 174.3 | 53.1 | 35.5 |
| Adjusted net income | 117.9 | 118.3 | 114.8 | 126.0 | 114.8 | 127.2 | 117.4 | 129.1 |
| Adjusted interest expense (after-tax) | 87.3 | 88.6 | 88.3 | 85.7 | 85.6 | 80.5 | 71.2 | 63.4 |
| Adjusted net income plus adjusted interest expense (after-tax) | 205.2 | 206.9 | 203.1 | 211.7 | 200.4 | 207.7 | 188.6 | 192.5 |
| Less: cost of capital | 162.2 | 165.1 | 167.8 | 160.4 | 153.3 | 150.7 | 137.2 | 136.6 |
| Economic profit | $43.0 | $41.8 | $35.3 | $51.3 | $47.1 | $57.0 | $51.4 | $55.9 |
| Economic profit per diluted share | $3.75 | $3.55 | $2.87 | $4.14 | $3.79 | $4.64 | $4.06 | $4.35 |
| Adjusted operating expenses | | | | | | | | |
| Operating expenses | $146.6 | $155.5 | $135.5 | $121.6 | $129.4 | $124.4 | $126.1 | $114.3 |
| Contingent loss (6) | (15.0) | (23.4) | - | - | (7.4) | (1.0) | - | - |
| Adjusted operating expenses | $131.6 | $132.1 | $135.5 | $121.6 | $122.0 | $123.4 | $126.1 | $114.3 |
| Adjusted operating expenses as a percentage of adjusted average capital (5) | 6.1% | 5.9% | 6.1% | 5.6% | 5.8% | 6.1% | 6.7% | 6.3% |
| Percentage change in adjusted average capital compared to the same period in the prior year | 3.7% | 11.2% | 18.3% | 19.3% | 19.4% | 17.6% | 14.6% | 11.5% |
(1) Adjustment to record taxes at our estimated long-term effective income tax rate. The adjustment for the three months ended September 30, 2025 and June 30, 2025 is calculated using a 25% income tax rate, which is expected to be used for the remainder of 2025 and future periods. This rate represents an increase from 23%, which had been used to calculate after-tax adjustments since 2018, following the enactment of the 2017 Tax Act. The increase in our long-term estimate was due to higher state and local income taxes in certain jurisdictions and lower excess tax benefits from stock-based compensation.
(2) Adjusted return on capital is defined as adjusted net income plus adjusted interest expense (after-tax) divided by adjusted average capital.
(3) Calculated by dividing GAAP net income (loss) by GAAP average shareholders' equity.
(4) The cost of capital includes both a cost of equity and a cost of debt. The cost of equity capital is determined based on a formula that considers the risk of the business and the risk associated with our use of debt. The formula utilized for determining the cost of equity capital is as follows: (the average 30-year Treasury rate + 5%) + [(1 - tax rate) x (the average 30-year Treasury rate + 5% - pre-tax average cost of debt rate) x average debt/(average equity + average debt x tax rate)]. For the periods presented, the average 30-year Treasury rate and the adjusted pre-tax average cost of debt were as follows:
| For the Three Months Ended |
|---|
| Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | Dec. 31, 2023 |
|---|
| Average 30-year Treasury rate | 4.9% | 4.8% | 4.7% | 4.4% | 4.3% | 4.6% | 4.3% | 4.7% |
| Pre-tax average cost of debt (5) | 7.3% | 7.2% | 7.2% | 7.2% | 7.3% | 7.2% | 7.0% | 6.3% |
(5) Annualized.
(6) From time to time, we recognize a contingent loss related to legal matters. As these transactions are both unusual and infrequent in nature, we have applied this adjustment to remove the impact of the contingent loss from our adjusted operating expenses.
Floating Yield Adjustment
The net loan income (finance charge revenue less provision for credit losses expense) that we recognize over the life of a loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the dealer. We believe the economics of our business are best exhibited by recognizing loan revenue on a level-yield basis over the life of the loan based on expected future net cash flows. The purpose of this non-GAAP adjustment is to provide insight into our business by showing this level yield measure of income. Under GAAP, contractual amounts due in excess of the loan receivable balance at the time of assignment will be reflected as interest income, while contractual amounts due that are not expected to be collected are reflected in the provision for credit losses. Our non-GAAP floating yield adjustment recognizes the net effects of contractual interest income and expected credit losses in a single measure of finance charge revenue, consistent with how we manage our business. The floating yield adjustment recognizes revenue on a level-yield basis based upon expected future net cash flows, with any changes in expected future net cash flows, which are recognized immediately under GAAP as provision for credit losses, recognized over the remaining forecast period (up to 120 months after the origination date of the underlying Consumer Loans) for each individual dealer loan and purchased loan. The floating yield adjustment does not accelerate revenue recognition. Rather, it reduces revenue by taking amounts that are reported under GAAP as provision for credit losses and instead treating them as reductions of revenue over time.
Under the GAAP methodology we employ, which is known as the current expected credit loss model, or CECL, we are required to recognize:
- a significant provision for credit losses expense at the time of the loan’s assignment to us for contractual net cash flows we do not expect to realize; and
- finance charge revenue in subsequent periods that is significantly in excess of our expected yield.
Due to the GAAP treatment of contractual net cash flows we do not expect to realize at the time of loan assignment (i.e. significant expense at the time of loan assignment, which is offset by higher revenue in subsequent periods), we do not believe the GAAP methodology we employ provides sufficient transparency into the economics of our business, including our results of operations, financial condition, and financial leverage. Our floating yield adjustment enables us to provide measures of income that are not impacted by GAAP’s treatment of contractual net cash flows we do not expect to realize at the time of loan assignment. We believe the floating yield adjustment is presented in a manner which reflects both the economic reality of our business and how the business is managed and provides valuable supplemental information to help investors better understand our business, executive compensation, liquidity, and capital resources.
Senior Notes Adjustment (applied in periods prior to December 31, 2023)
This non-GAAP adjustment modifies our GAAP financial results to treat the issuance of certain senior notes as a refinancing of certain previously issued senior notes. Our historical adjusted financial information reflects application of the senior notes adjustment as described below in connection with (i) the issuance by us in 2014 of $300.0 million principal amount of 6.125% senior notes due 2021 (the “2021 senior notes”) and the related retirement of our 9.125% senior notes due 2017 (the “2017 senior notes”) and (ii) the issuance by us in 2019 of $400.0 million principal amount of 5.125% senior notes due 2024 (the “2024 senior notes”) and the related retirement of the 2021 senior notes and our 7.375% senior notes due 2023 (the “2023 senior notes”).
We issued the 2024 senior notes on December 18, 2019. We used a portion of the net proceeds from the 2024 senior notes to repurchase or redeem all of the $300.0 million outstanding principal amount of the 2021 senior notes, of which $148.2 million was repurchased on December 18, 2019 and the remaining $151.8 million was redeemed on January 17, 2020. We used the remaining net proceeds from the 2024 senior notes, together with borrowings under our revolving credit facility, to redeem in full the $250.0 million outstanding principal amount of the 2023 senior notes on March 15, 2020. Under GAAP, the fourth quarter of 2019 included (i) a pre-tax loss on extinguishment of debt of $1.8 million related to the repurchase of 2021 senior notes in the fourth quarter of 2019 and the redemption of the remaining 2021 senior notes in the first quarter of 2020 and (ii) additional interest expense of $0.3 million on $160.0 million of additional outstanding debt caused by the one month lag from the issuance of the 2024 senior notes and repurchase of 2021 senior notes in the fourth quarter of 2019 to the redemption of the remaining 2021 senior notes in the first quarter of 2020. Under GAAP, the first quarter of 2020 included (i) a pre-tax loss on extinguishment of debt of $7.4 million related to the redemption of 2023 senior notes in the first quarter of 2020 and (ii) additional interest expense of $0.4 million on $160.0 million of additional outstanding debt caused by the one month lag from the issuance of the 2024 senior notes and repurchase of 2021 senior notes in the fourth quarter of 2019 to the redemption of the remaining 2021 senior notes in the first quarter of 2020.
We issued the 2021 senior notes on January 22, 2014. On February 21, 2014, we used the net proceeds from the 2021 senior notes, together with borrowings under our revolving credit facilities, to redeem in full the $350.0 million outstanding principal amount of the 2017 senior notes. Under GAAP, the first quarter of 2014 included (i) a pre-tax loss on extinguishment of debt of $21.8 million related to the redemption of the 2017 senior notes in the first quarter of 2014 and (ii) additional interest expense of $1.4 million on $276.0 million of additional outstanding debt caused by the one month lag from the issuance of the 2021 senior notes to the redemption of the 2017 senior notes.
Under our non-GAAP approach, the loss on extinguishment of debt and additional interest expense that were recognized for GAAP purposes were in each case deferred as debt issuance costs to be recognized ratably as interest expense over the term of the newly issued notes. In addition, for adjusted average capital purposes, the impact of additional outstanding debt related to the lag from the issuance of the new notes to the redemption of the previously issued notes was in each case deferred to be recognized ratably over the term of the newly issued notes. Upon the issuance of the 2024 senior notes in the fourth quarter of 2019, the outstanding unamortized balances of the non-GAAP adjustments related to the 2021 senior notes were deferred and were recognized ratably over the term of the 2024 senior notes, until the repurchase and redemption of the 2024 senior notes in December 2023.
We believe the application of the senior notes adjustment as described above provides a more accurate reflection of the performance of our business, since we were recognizing the costs incurred with these transactions in a manner consistent with how we recognize the costs incurred when we periodically refinance our other debt facilities. We have determined not to apply the senior notes adjustments in connection with (i) the issuance by us in December 2023 of our 9.250% senior notes due 2028 and the related retirement of the 2024 senior notes or (ii) the issuance by us in February 2025 of our 6.625% senior notes due 2030 and the related retirement of the 2026 senior notes, because the adjustments would not be material.
Cautionary Statement Regarding Forward-Looking Information
Forward-looking statements notice
We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan,” “target,” or similar expressions, and those regarding our future results, plans, and objectives, are “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2025, and Item 1A in Part II of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, filed with the SEC on October 30, 2025, and other risk factors discussed herein or listed from time to time in our reports filed with the SEC and the following:
Industry, Operational, and Macroeconomic Risks
- Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations.
- Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
- Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could adversely affect our financial position, liquidity, and results of operations, the ability of key vendors that we depend on to supply us with services, and our ability to enter into future financing transactions.
- Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial results.
- We are dependent on our senior management, and the loss of any of these individuals or an inability to hire additional team members could adversely affect our ability to operate profitably.
- Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace.
- An outbreak of contagious disease or other public health emergency could materially and adversely affect our business, financial condition, liquidity, and results of operations.
- The concentration in several states of automobile dealers who participate in our programs could adversely affect us.
- Reliance on our outsourced business functions could adversely affect our business.
- Our ability to hire and retain foreign engineering personnel could be hindered by immigration restrictions.
- We may be unable to execute our business strategy due to current economic conditions.
- Natural disasters, climate change, military conflicts, acts of war, terrorist attacks and threats, or the escalation of military activity in response to terrorist attacks or otherwise may negatively affect our business, financial condition, and results of operations.
- Governmental or market responses to climate change and related environmental issues could have a material adverse effect on our business.
- A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders have interests which may conflict with the interests of our other security holders.
Capital and Liquidity Risks
- We may be unable to continue to access or renew funding sources and obtain capital needed to maintain and grow our business.
- The terms of our debt limit how we conduct our business.
- A violation of the terms of our asset-backed secured financings or revolving secured warehouse facilities could have a material adverse impact on our operations.
- Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations, and adversely affect our financial condition.
- We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced to take other actions to satisfy our obligations under such debt.
- Interest rate fluctuations may adversely affect our borrowing costs, profitability, and liquidity.
- Reduction in our credit rating could increase the cost of our funding from, and restrict our access to, the capital markets and adversely affect our liquidity, financial condition, and results of operations.
- We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our current debt levels.
- The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity, and results of operations.
Technology and Cybersecurity Risks
- Our dependence on technology could have a material adverse effect on our business.
- We depend on secure information technology, and a breach of our systems or those of our third-party service providers could result in our experiencing significant financial, legal, and reputational exposure and could materially adversely affect our business, financial condition, and results of operations.
- Our use of electronic contracts could impact our ability to perfect our ownership or security interest in Consumer Loans.
- Failure to properly safeguard our proprietary business information or confidential consumer and team member personal information could subject us to liability, decrease our profitability, and damage our reputation.
- The development and use of artificial intelligence presents risks and challenges that may adversely impact our business.
Legal and Regulatory Risks
- Litigation we are involved in from time to time may adversely affect our financial condition, results of operations, and cash flows.
- Changes in tax laws and the resolution of uncertain income tax matters could have a material adverse effect on our results of operations and cash flows from operations.
- The regulations to which we are or may become subject could result in a material adverse effect on our business.
Other factors not currently anticipated by management may also materially and adversely affect our business, financial condition, and results of operations. We do not undertake, and expressly disclaim any obligation, to update or alter our statements, whether as a result of new information or future events or otherwise, except as required by applicable law.
Webcast Details
We will host a webcast on October 30, 2025 at 5:00 p.m. Eastern Time to discuss our third quarter results. The webcast can be accessed live by visiting the “Investor Relations” section of our website at ir.creditacceptance.com or by telephone as described below. Only persons accessing the webcast by telephone will be able to pose questions to the presenters during the webcast. A replay and transcript of the webcast will be archived in the “Investor Relations” section of our website.
To participate in the webcast by telephone, you must pre-register at https://register.vevent.com/register/BI347675a88ed14abea81f254c6a05dd0c, or through the link posted on the “Investor Relations” section of our website at ir.creditacceptance.com. Upon registration you will be provided with the dial-in number and a unique PIN to access the webcast by telephone.
Description of Credit Acceptance Corporation
We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.
Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the Nasdaq Stock Market under the symbol CACC. For more information, visit creditacceptance.com.
Investor Relations: Jay Brinkley
Senior Vice President & Treasurer
(248) 353-2700 Ext. 6739
IR@creditacceptance.com
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| (Dollars in millions, except per share data) | For the Three Months Ended September 30, |
| | 2025 | | 2024 |
| Revenue: | | |
| Finance charges | $539.4 | | $507.6 | |
| Premiums earned | 24.1 | | 25.1 | |
| Other income | 18.9 | | 17.6 | |
| Total revenue | 582.4 | | 550.3 | |
| Costs and expenses: | | |
| Salaries and wages | 85.5 | | 77.3 | |
| General and administrative | 36.3 | | 29.0 | |
| Sales and marketing | 24.8 | | 23.1 | |
| Total operating expenses | 146.6 | | 129.4 | |
| Provision for credit losses on forecast changes | 88.1 | | 105.9 | |
| Provision for credit losses on new Consumer Loan assignments | 63.9 | | 78.8 | |
| Total provision for credit losses | 152.0 | | 184.7 | |
| Interest | 116.3 | | 111.2 | |
| Provision for claims | 18.6 | | 18.5 | |
| Total costs and expenses | 433.5 | | 443.8 | |
| Income before provision for income taxes | 148.9 | | 106.5 | |
| Provision for income taxes | 40.7 | | 27.7 | |
| Net income | $108.2 | | $78.8 | |
| Net income per share: | | |
| Basic | $9.62 | | $6.42 | |
| Diluted | $9.43 | | $6.35 | |
| Weighted average shares outstanding: | | |
| Basic | 11,248,227 | | 12,274,685 | |
| Diluted | 11,472,729 | | 12,415,143 | |
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| September 30, 2025 | December 31, 2024 |
|---|
| (Dollars in millions, except per share data) | As of |
| ASSETS: | | |
| Cash and cash equivalents | $15.9 | $343.7 |
| Restricted cash and cash equivalents | 482.9 | 501.3 |
| Restricted securities available for sale | 108.9 | 106.4 |
| Loans receivable | 11,563.7 | 11,289.1 |
| Allowance for credit losses | (3,588.2) | (3,438.8) |
| Loans receivable, net | 7,975.5 | 7,850.3 |
| Property and equipment, net | 12.9 | 14.7 |
| Income taxes receivable | 9.7 | 4.2 |
| Other assets | 34.8 | 34.0 |
| Total assets | $8,640.6 | $8,854.6 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: | | |
| Liabilities: | | |
| Accounts payable and accrued liabilities | $382.9 | $315.8 |
| Revolving secured lines of credit | 148.7 | 0.1 |
| Secured financing | 5,133.1 | 5,361.5 |
| Senior notes | 1,087.2 | 991.3 |
| Deferred income taxes, net | 298.2 | 319.1 |
| Income taxes payable | 11.9 | 117.2 |
| Total liabilities | 7,062.0 | 7,105.0 |
| Shareholders’ Equity: | | |
| Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued | - | - |
| Common stock, $.01 par value, 80,000,000 shares authorized, 11,041,431 and 12,048,151 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | 0.1 | 0.1 |
| Paid-in capital | 392.1 | 335.1 |
| Retained earnings | 1,185.3 | 1,414.7 |
| Accumulated other comprehensive income (loss) | 1.1 | (0.3) |
| Total shareholders’ equity | 1,578.6 | 1,749.6 |
| Total liabilities and shareholders’ equity | $8,640.6 | $8,854.6 |