Douglas Busk - SVP and Treasurer Brett Roberts - CEO Kenneth Booth - CFO.

Moshe Orenbuch - Credit Suisse John Rowan - Janney Kyle Joseph - Jefferies Vincent Caintic - Macquarie Kenneth Bruce - Bank of America Merrill Lynch Randy Heck - Goodnow Investment Group.

Good day, everyone, and welcome to the Credit Acceptance Corporation Second Quarter 2015 Earnings Call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on Credit Acceptance’s webcast.

At this time, I'd like to turn the call over to Credit Acceptance's Senior Vice President and Treasurer, Doug Busk..

Thank you, Vince. Good afternoon and welcome to the Credit Acceptance Corporation second quarter 2015 earnings call.

As you read our news release posted on the Investor Relations section of our website at creditacceptance.com and as you listen to this conference call, please recognize that both contains forward-looking statements within the meaning of Federal Securities law.

These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, and which could cause actual results to differ materially from such statements.

These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties.

Additionally, I should mention that to comply with the SEC's Regulation G, please refer to the adjusted financial results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures.

At this time, Brett Roberts, our Chief Executive Officer; Ken Booth, our Chief Financial Officer, and I will take your questions..

[Operator Instructions] Our first question comes from Moshe Orenbuch of Credit Suisse. Your line is open..

Great. Thanks guys. Could you just talk a little bit about how you're looking at the competitive environment? I guess you got a couple of different factors showing up in your release, some of which would indicate an improving environment, some of a little more competitive.

Could you just give us your thoughts?.

I think as we've said in the prior quarters, the best insight we have into the market is that, our success regarding business particularly the volume for dealer number increased in the second quarter 6.4% increase in volume per dealer, that's the third straight quarter we’ve seen.

Apart of that move there, after a couple of years, or even longer than that a decline in volume per dealer. That's really best insight we have. So if you look at some of the macro numbers, there is more loan at the end rate than they were a year ago.

There is more subprime loans been written in a year ago, that would point to higher levels of competition. The volume per dealer number that we experienced was going to the opposite. So that only concludes from there.

From our perspective, I think we have – we have to assume given the volume per dealer number that competition is fairly even hurting at this point year-over-year and probably is helping us to some extent..

Got it. Okay. Thank you..

Our next question comes from John Rowan of Janney. Your line is open..

Good afternoon, guys. So just a few questions.

The first one, were there one timers in the quarter that I should be aware of?.

No..

Okay. And as far as duration goes, it looks like you are now at 49.4 months for 2015.

If I am not mistaken, last quarter you were at 48.5, if that’s correct, I might assume that the - originating your ratio now was somewhere north of 50 months?.

It's right about at 50..

Okay. As far as the CFPB goes, obviously there has been some news about the debt collection space and then reinterpreting the FDCPA.

I want to know what your take on that was, whether or not there is any risk from ruling against a debt collector or whether or not you even bound by the interpretation of the FDCPA?.

I think the way we look at it, it’s a priority for the CFPB, and it becomes a priority for us. We take very close look at any guidance they put out. And we make sure that we're complying with that, both this period and whether that's compliant.

So, whether debt collection or any other topics that have been priority for them we pay close attention and we make sure that we're satisfied with our internal procedures..

Okay. Quarter-over-quarter your leverage ratios all came down, but it doesn't it look like you have a share repurchase program in place at this point. Can you just gave idea of what your planning as far as share repurchases levered on the balance sheet going forward.

Obviously we haven't seen any repurchases this quarter?.

I think what we look there, we look at the price of the stock and we look how much capital we have available and then we repurchase when both of those indicators tell us to. We did – we haven’t repurchased any shares of this year.

I think the primary reason for that versus prior years is just the volume of business we're writing makes it more likely we're going to need our capital to fund new loans. And so when we're growing as fastest as we earn out we tend to be a little more cautious with respect to share repurchase..

Okay. And then just last question, just structurally. Do you guys - if a consumer wants to buy another car, but they are currently underwater on another vehicle.

Do you allow them to buy another car as you enrolled the deficiency into the principal of the new loan?.

No..

Okay. All right. Thank you very much..

Thank you. Our next question comes from Kyle Joseph of Jefferies. Your line is open..

Afternoon, guys. Thanks for taking my questions. Just looking at the press release, the forecasted collections are trending down, if you look at it on a year-over-year basis. But you are also seeing sort of a similar decline in the advance rate, what is that result of the term extension, first and foremost.

And then what's your outlook for that on a longer term basis?.

As we said last quarter, it’s just result of it, the term and mix of the business..

Okay.

And then do you have any outlook as to where those are heading over time?.

Not really, we're happy to write business at the current collection rate. We're happy with it, 10 points higher, was in 09, we'd happy if that was lower, it doesn’t really matter, just as long as we maintain the appropriate relationship between the advance and the collection rate, we're okay with that..

The important thing is really can we accurately forecast loan performance at originations but again we vary the amount of the advance base and the expected performance of the loan. So really the important thing is do the loans performance expected at origination..

Got it. Thank you.

And then, so you guys are at I think a little over 6000 dealerships now according to the press release, can you remind us exactly how big do you think the market is domestically and where the size of the market is going over time as well?.

There are about 55,000 dealers domestically in United States, if you go back a long way, it was a fair amount higher than that, but it's been relatively stable in recent years..

Okay.

And then, do you have any idea of what percentage is that 55,000 would be addressable for Credit Acceptance, specifically?.

It's not really, I think that we have a lot of runway in front of us in terms of being able to grow the business. Others in the industry have had much larger numbers of active dealers than that. So I think that there is ample opportunity for a long time to continue to increase the active dealer base..

Got it. And just as we're starting to see revenue growth accelerate here, how should we think about expense growth going forward? Just more of a modeling question there..

For a long period of time, expenses as a percentage of revenue or as a percentage of capital have come down. We expect the loans to continue to grow, we do have certainly some fixed and semi-fixed expenses as part of our structure, so we would expect that to continue to come down..

All right, that's very helpful. Thanks for answering my question..

Thank you. Our next question comes from Vincent Caintic of Macquarie. Your line is open..

Great. Thanks so much guys.

A couple of questions, one on CFPB and taking it from the auto rules, so the larger participants rules were finalized, and if you could just remind us if you're subject to that and then in particular if that has any impact on your guys, particularly I think that this would impact rule on dealer holdback?.

We are a larger participant, that wasn't a surprise to us. We've known that was coming for a long time. So it's the - when they published the rule or the definition of what a larger participant is, it didn't really impact us in anyway..

Okay, got it.

And then for the share repurchases and the capital that you mentioned you had, what is the best way that you use to measure your excess capital capacity, do you look at in terms of leveraging how much capacity do you have?.

We run series of financial projections with different volume assumptions, different leverage assumptions and try to select a financing strategy that will enable us to do well not only when the capital markets are open but also allow us to maintain origination levels in the event that capital markets are unavailable to us for a lengthy period of time.

So that's really the way we manage our liquidity in capital..

Okay, got it.

And final one from me, so the dealer penetration has been - seem to have turned the quarter, the past two quarters has been very good, I was just wondering if you could delve into kind of what has been driving that, is it been more - has there been more subprime consumers who have been demanding loans or there is an improvement in auto origination for them or is it been better selling or if there is any kind of color that you can use to break that down that would be appreciated.

Thank you..

You referred to the volume per dealer or the number of dealers active?.

I guess for both maybe just trying to figure out, is your penetrations of the volume per dealer and the count of dealers is that because your just demand coming from the customers that's pulling that demand in loans or is it better penetration on your guys behalf on selling that to the dealership or kind of just trying to figure that part out?.

I think it's a combination of external factors and international factors. It is hard to say how much of each. If you take a look at the components, in terms of new active dealers that has been strong in the last couple of quarters, I think our sales force can probably take a lot of credit for that.

In terms of volume per dealer, I think that's probably more a function of external environment certainly we have some control over that, we like to that that we are doing a little bit better job there but it is hard to separate how much we can take credit for versus how much is just the function of the competitive environment.

The same is probably true for active dealers, the only other component is talk about attrition, attrition certainly is something to do with the current environment and it also has a lot to do with how good a job we are doing for the dealers.

So I think it is tough to separate the two, the overall result was obviously very good for the quarter and so we take that at this point..

Got it, and sorry just one last one from me. The 2015 forecasted collections rate is lower than it's been for the past two or three years, just wondering if that's more of a - is that a competitive set that's driving that or you just being little bit conservative. And that's it from me, thank you..

It's not conservative, it's just a change in the mix of business, the term being the primary change there. So we went a longer term loan, we expect that to - all other things being equal, to have a lower cautionary than a short term loan..

Okay. Got it, thank you.

Thank you. Our next question comes from Kenneth Bruce of Bank of America Merrill Lynch. Your line is open..

Thank you, good afternoon.

I want to follow-up on I guess the question around the active dealer conversation, and specifically can you give us some - either color or specific numbers around how many sales people that you have in the market as of end of the quarter versus say maybe a year ago, can we dimensionalise what your sales force looks like today?.

Sure, we have 240 salespeople active out in the market at the end of the quarter. That compared to 225 at year end 2014, and 236 in June of 2014..

And are you actively adding to your sales base or is this run rate level at this point?.

We're adding to it incrementally, we're not making a sort of increase that that we made in 2011, 2012, but we are adding to it incrementally..

Okay.

And I know we've had this conversation in the past, I don't know if there is any way to give us a sense as to what level of productivity either in terms of peak dealers per sales person or volumes per sales person, is there any way to think about in terms of the additions that you've had, what the buildup for full productivity would be for that sales team?.

It's difficult to say. Certainly there's a big variance between the back salesperson in terms of how many dealers they handle and the person who's at the bottom of the list.

So if we'd like to get the average higher than it is today, the success of that salesperson or a top 10 person certainly make us optimistic that we can move the average up over time..

Great, thank you very much. Appreciate your color here..

[Operator Instructions] Our next question comes from Randy Heck of Goodnow Investment Group. Your line is open..

Hi, thanks for taking my question. Congrats on another excellent quarter.

Brett, how do your market area managers or the sales folks, how do they get paid in terms of business being written - so the last two quarters your loan volume has been so strong, does that - how was that accounted to those commissions get expensed upfront or do they get paid over the course of the loan?.

They get expensed in the periods that the loans originated. So thereafter - the first part of your question, they are paid based on volume, they get per-unit commission based on any volume, that's the same as the prior year volume and then get an incremental additional commission if it's growth volume.

Commissions increases when volume increases, and those commissions are expensed in the current quarter..

Okay.

So in periods of strong loan generation, you've got some upfront expenses and you generate the economics over the course of the next couple of years, is that fair?.

That's fair..

Okay. Thank you..

With no further questions in the queue, I'd like to turn the conference back over to Mr. Busk for any additional closing remarks..

We want to thank everyone for their support and for joining us in our conference call today. If you have any additional follow-up questions, please direct them to our Investor Relations mailbox, at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you..

Once again, this does conclude today's conference. We thank you for your participation..