Credit Acceptance 2025 Q2 Earnings Misses Targets with Net Income Down 20.3%

Credit Acceptance (CACC) reported its fiscal 2025 Q2 earnings on Jul 31st, 2025. Despite a return to profitability compared to last year’s loss, the results fell short of analyst expectations, with adjusted net income showing a notable decline from the previous year. The company’s forecasted collection percentage remains above 65%, aligning with prior projections. However, ongoing challenges with older vintages are acknowledged. Credit Acceptance aims to adjust expectations to match market performance, ensuring profitability amidst a competitive landscape.

Revenue
The total revenue of Credit Acceptance increased by 8.2% to $564.80 million in 2025 Q2, up from $522 million in 2024 Q2.

Earnings/Net Income
Credit Acceptance returned to profitability with EPS of $7.55 in 2025 Q2, reversing from a loss of $3.83 per share in 2024 Q2. Net income showed a remarkable turnaround, reaching $87.40 million. The positive EPS reflects improved financial health.

Price Action
The stock price of Credit Acceptance has edged down 2.83% during the latest trading day, dropped 4.52% during the most recent full trading week, and decreased 3.76% month-to-date.

Post-Earnings Price Action Review
Over the past three years, buying Credit Acceptance (CACC) shares following revenue increases on earning release dates and holding them for 30 days has proven effective. The strategy yielded a solid 20.5% annualized gain, illustrating profitable risk-adjusted returns. Each quarter showed varied performance, with gains ranging from 3.9% to 12.5% in the 30 days post-earnings, highlighting market confidence in the company's performance. The strongest cumulative return was 21.8%, recorded in the second quarter of 2024. This backtest suggests that the strategy provides reasonable returns. However, it's important to remember that past performance doesn't always predict future results, and investors should consider other factors before making decisions.

CEO Commentary
Kenneth S. Booth, CEO, indicated that the quarter's results reflect steady execution amidst challenges, with loan performance declining and origination volumes decreasing year-over-year while the portfolio grew to a record-high of $9.1 billion. He emphasized the impact of a scorecard change and increased competition on unit volume but highlighted progress in maximizing intrinsic value for five key constituents. Booth shared a customer success story, illustrating the positive impact of their financing services on consumers' lives. He acknowledged the investment in engineering to modernize technology and improve dealer experiences, fostering a strong workplace culture recognized by awards for the 11th time in 12 years.

Guidance
The company expects a forecasted collection percentage exceeding 65% for 2025, despite prior trends of downward adjustments over nine consecutive quarters. Kenneth S. Booth noted that while there are challenges with older vintages, the loans originated in 2024 and 2025 are performing as anticipated. The strategic focus remains on adjusting expectations to align with market performance, ensuring continued profitability while navigating a competitive landscape.

Additional News
Credit Acceptance recently announced an extension of its $75 million revolving secured warehouse facility, with the revolving date moved from September 30, 2026, to September 30, 2028. The interest rate on borrowings under the facility has decreased from SOFR plus 210 basis points to SOFR plus 185 basis points. Additionally, Credit Acceptance faced a credit rating downgrade, which may increase funding costs and impact liquidity. Despite these challenges, the company remains committed to maintaining growth projections and expanding its loan portfolio. Furthermore, Credit Acceptance repurchased approximately 530,000 shares during Q2 2025, representing 4.5% of its outstanding shares at the quarter's start, continuing to return capital to shareholders.