Credit Acceptance Corporation (CACC) Earnings

Management highlights

### Leadership Transition Announcements - Jay Martin retired from the CFO role on July 27, 2026, and now serves as Senior Advisor for the leadership transition; this was his final quarterly earnings call after 23 years of service to the company - Ken Booth, former CEO, retired from the Board of Directors as part of a planned transition, after playing a pivotal role in shaping the company - Joe Bilante has assumed the role of CFO, and leadership expressed confidence his experience will strengthen the company's strategic execution ### Core Strategic Transformation - Management is executing a deliberate transformation of Credit Acceptance into a deeply data-informed, AI-enabled company, focused on improving precision in pricing, underwriting, capital deployment, customer service, and decision-making across all business functions - The core priority remains disciplined profitable growth that maximizes long-term intrinsic value per share, rather than regaining volume at any cost - Granular segmentation of dealers, vehicles, and consumers is the foundation of the transformation, to focus on the most competitive opportunities with the strongest long-term economics ### Operational Initiative Progress - **Dealer partnership improvements**: Segmentation insights are being used to simplify workflows and deepen integration into dealer systems such as Route 1 Dealers Track and Dealer Center to improve the dealer experience. The sales engagement model has been refined to tailor service to different dealer types and align engagement with pricing discipline. Encouraging progress in originations and engagement is being seen in the franchise dealer segment, focused on reducing attrition and regaining share where economics support it. AI tools are being rolled out to help sales teams advise dealers on inventory alignment with Credit Acceptance's program - **Vehicle segmentation expansion**: The company opened up financing for light structural damage vehicles after careful risk calibration that aligned with common dealer inventory and market standards; early performance is encouraging, and additional vehicle categories will be evaluated for responsible expansion with the same disciplined approach - **Consumer credit and pricing improvements**: Consumer segmentation is being refined to better match credit performance to vehicle profile and deal structure, with a long-term goal of transaction-level personalized decisioning. The credit scorecard has been updated to leverage additional data on consumers, deals, and vehicles, improving deal-level risk assessment precision; initial Q2 results are encouraging, and the scorecard will continue to be refined as market conditions evolve - **Servicing improvements**: A data-driven, AI-enabled approach is being applied to servicing to better understand consumer needs and support borrowers over the life of their loan. The goal is to improve servicing effectiveness and efficiency, expand consumer self-service options, and deliver a better scaled consumer experience aligned with the company's mission of expanding vehicle access for non-prime consumers ### Portfolio Performance Update - Forecasted net cash flows from the existing loan portfolio declined 0.3% ($39.1 million) in Q2 2026, a smaller decline than the 0.5% ($55.8 million) decline in Q2 2025, indicating increasing portfolio stability relative to recent volatile periods. Older challenged vintages (particularly 2022) are winding down and remain stable; the 2025 vintage saw modest underperformance in the quarter but remains within 10 basis points of the initial forecast

Guidance

Management did not issue explicit numerical quarterly or full-year guidance in this call. Key forward-looking outlooks include: - Management expects the recent return to positive monthly unit volume growth to continue, as the deliberate strategic changes to segmentation, pricing, and dealer engagement continue to gain traction - Advance rates are expected to stay roughly within their historical range, with adjustments driven by the goal of maximizing long-term intrinsic value; recent shifts in overall advance rates reflect mix changes toward more purchase program transactions from the growing franchise dealer segment - Management expects slower-than-forecast prepayment speeds will eventually normalize to historical levels, as consumers are currently holding vehicles longer due to elevated vehicle prices and limited alternatives, and will update forecast assumptions if and when sustained shifts are confirmed - The company is in the early stages of its transformation, and management expects ongoing improvements in operational precision, business resilience, and shareholder value creation over the long term

Segment performance

Credit Acceptance operates as a single consumer auto lending segment focused on subprime used vehicle financing. In Q2 2026: GAAP net income totaled $135.9 million ($12.66 per diluted share), representing 71% year-over-year growth; adjusted net income totaled $130.1 million ($12.12 per diluted share), representing 21% year-over-year growth. Consumer loan assignment unit volume declined 1% YoY, a moderation from the 4.3% YoY decline in Q1 2026, with monthly unit volume returning to positive YoY growth in June 2026 and continuing into July 2026. Loan dollar volume grew 0.1% YoY, an improvement from the 4% YoY decline in Q1 2026. The company financed 84,000 contracts, enrolled 1,400 new dealers, and recorded 11,000 active dealers (the second consecutive quarter of record high active dealer counts). Core subprime used vehicle financing market share was 4.9% for the first two months of Q2, down from 5.3% in the year-ago period but up from the 4.4% recent low in Q4 2025. Total collections exceeded $1.4 billion, and $43.5 million was distributed in dealer holdback and accelerated dealer holdback. The company ended the quarter with ~$1.4 billion in available borrowing capacity under its revolving lines of credit.

Risks & headwinds

- The operating environment remains challenging for non-prime consumers and the auto dealers that serve them, creating ongoing pressure on loan performance - Uncertainty around macroeconomic conditions and consumer financial stability means actual portfolio performance can differ materially from management forecasts, even as stability has improved relative to prior volatile periods - Prepayment speeds have consistently come in slower than management forecasts for multiple consecutive quarters, creating a continuing headwind to provision for credit losses - The 2025 loan vintage is still unseasoned, and continued fluctuations in performance are expected as it matures, though current performance remains within expected ranges - All forward-looking strategic and financial targets are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations

Analyst Q&A

• Q: Analyst asked why the larger Q2 2026 downward revision to forecasted net cash flows aligns with management's comment of increasing portfolio stability, what drove the revision, and if the prepayment headwind remains unchanged in magnitude.

  A: The $39.1 million (0.3%) decline is modest relative to the $12 billion total forecasted portfolio cash flows, and is a smaller decline than the $55.8 million 0.5% drop in Q2 2025. The modest 2025 vintage underperformance this quarter offset the better-than-expected performance seen in Q1, leaving overall results consistent with initial forecasts; older vintages saw only minor declines with no material concerns. The difference between the $39 million undiscounted cash flow drop and $82 million provision is driven by slower-than-expected prepayments, which remains an ongoing headwind consistent with prior quarters. Consumers are holding vehicles longer than expected, likely due to elevated prices and limited alternatives, but management expects this to normalize over time and will update forecasts as appropriate. /

• Q: Analyst asked what is driving higher yields on new loans and what the outlook for yields is going forward.

  A: The rising adjusted yield trend is mostly driven by lower-yielding, underperforming older vintages rolling off the portfolio, rather than material yield increases on newly originated loans relative to recent quarters. New loans originated in Q2 had yields broadly in line with recent originations, so the upward trend in overall portfolio yield will continue as older vintages continue to run off. /

• Q: Analyst asked what is driving the recent unit volume improvement, and if the improvement is expected to continue.

  A: The improvement is partially driven by easier year-over-year comparables, but also reflects the cumulative impact of multiple deliberate strategic initiatives rolled out in recent quarters. Growth is supported by rising originations from the franchise dealer segment from improved engagement and system integrations with aggregators like Route 1, expansion into new vehicle segments such as light structural damage, and ongoing refinements to segmentation, dealer engagement, and credit scoring. Volume has now returned to 2024 levels, and management expects the positive trend to continue as the transformation progresses. /

• Q: Analyst asked why investors should be confident the new management team, which includes many leaders not previously focused on subprime auto lending, can manage the business as well as the prior leadership team.

  A: The new CEO served on the company's board for five years prior to taking the role, and many core leaders who oversee pricing, collections, and servicing remain with the company, so it is not a full leadership turnover. New senior leaders brought in for the transformation do have deep experience serving subprime consumers, even if their experience comes outside of auto lending, which aligns with the goal of building a data-driven, AI-enabled company. New roles were filled with leaders who have large-scale digital transformation experience, which supports the company's current strategic priorities, rather than a lack of relevant subprime experience. /

• Q: Analyst asked if advance rates will increase much further from current 46.1% levels, and how management is confident they are not too aggressive.

  A: Advance rates are set based on the core goal of maximizing long-term intrinsic value per share, so they will adjust based on that objective. The recent uptick in the overall company-wide advance rate is mostly due to a mix shift toward more purchase program loans (which have higher advance rates than the portfolio program), driven by growth in the franchise dealer segment where purchase program transactions are more common. Management expects advance rates will remain broadly within their historical range going forward.