Here are my expectations for $CACC earnings tomorrow:

$1 billion write down on receivables ex CECL

Advances of $750 million in Q1, with an expected collection percentage of 55%

Collections of $680 million, with revenue of $200 million

Net loss of $1.1 billion, or $60.60/sh

Cash burn north of $1 billion

Trying to model out this quarter was one of the more complicated exercises I’ve ever done. There are so many moving variables here, especially when taking CECL and COVID into consideration. It’s entirely possible the company chooses not to...

Take its entire write-down this quarter; it’s also possible they take a much larger one. What I will say is that never in my life have I been more anxious for an earnings report. I fully expect the company to try to pull some accounting shenanigans, but I would be shocked...

If there isn’t going concern language when the Q is released. I fully expect the stock to be down 30%+ on the release, but in this market you really never know. Anyway, just my $.02, good luck to all involved.

One more note on this $CACC: the sell side is enchanted by this story. They see the model as insulated from problems, largely due to CACC’s success in the GFC. My take differs, as I see the company as a financial engineering story, with earnings growth entirely a product of...

Buybacks and failure to take provisions like their competitors. The stock trades at 2.5x tangible book, while $ALLY, with a much higher quality loan book, trades at <1x TBV. That could all change tomorrow. CECL is going to reverse a lot of the good in earnings growth over the...

Last 10 years, and COVID is going to undo the rest. The more work I do, the less surprised I am to see so much crossover between $CACC and former $VRX holders. It’s the same story: adj earnings growth with no cash flow to back it up. I fully expect a similar outcome.

I’ve been using twitter as a way to document my stream of consciousness, so heres one more thought: I’m exceedingly nervous about this report. Something feels amiss, almost like its too obvious. Maybe this mkt is just that oblivious, but idk. Has $tsla miraculous qtr feels. $cacc

Well here’s my post call update: my expectations were way too low. January collections up 20% YOY gave them a huge buffer into February and March, and despite the decel they were able to weather the storm with some notable bumps and bruises namely:

The company is going to trip the net income covenant on their revolver next quarter. My guess is they didn’t take a bigger loss provision this quarter to prevent tripping it already, but that’s just a guess. Ultimately, with April collections down 3.1% YOY, the implication is a..

13% (give or take a few % points) decline in loan performance year over year. That’s really bad, and the return to growth in may (up 4.9%) still implies that the company is seeing collections flat YOY on an asset base that’s grown by 14.2%. Not good.

Worse, that spike in May was a result of stimulus checks hitting the bank accounts of borrowers, who potentially won’t see that same check come again for quite awhile. June could return to negative collections growth. Purchases up to 39.5% of total originations also a negative.

Onto liquidity, which will be the main issue moving forward. The company has about $1 bn left in collateral to contribute to their ABS’, and another $1.1 bn on their revolver. Given that collections are going to be flat YOY this quarter, the company is actually better off...

With originations also flat. The question now is, can they ever return to growth? At this point, it’s hard to see how. Sure, banks won’t cut them off, but with a deteriorating loan book and little cash on hand, it’s hard to see how they can lever up further to grow.

The only way that could change is with a significant equity offering, one that seems unlikely given managements affinity for keeping the stock price inflated. This stock is so freaking expensive, management would be smart to sure up the balance sheet.

As far as other potential takeaways, we did get a few nuggets around delinquency rates which I’ll have to dig through over the next few days.

But all of this is a long winded way of saying: if the mkt didn’t think this company was a BK candidate yesterday, nothing has changed.

I was wrong about how bad this quarter would be, both from a cash perspective and an earnings perspective, and that hurts. No getting around it. I still believe this company is a single creditor causing a stir, or a second wave, or a slower recovery or any other of a multitude...

Of reasons away from bankruptcy. This quarter is going to force me to reassess my expectations for cash burn moving forward, but other than that there’s not much to like here. $CACC