CPS Announces Fourth Quarter and Full Year 2023 Earnings

Rhea-AI Summary

Consumer Portfolio Services, Inc. (CPSS) reported pretax income of $9.8 million for Q4 and $61.1 million for 2023, with revenues of $92.0 million for Q4 and $352.0 million for 2023. Net income was $45.3 million for 2023, with new contract purchases of $1.358 billion in 2023. The company achieved its largest managed portfolio balance of $3.2 billion in history.

Insights

Financial Analyst

The reported financial results indicate a mixed picture for Consumer Portfolio Services, Inc. (CPS). While the company experienced a revenue increase of 10.8% for the fourth quarter and 6.8% for the full year, this was overshadowed by a significant rise in total operating expenses, leading to a reduced pretax income year-over-year. Notably, the annualized net charge-offs have increased, suggesting potential credit quality issues within their loan portfolio. This uptick in charge-offs, coupled with the rise in delinquencies, may signal a need for more conservative risk assessment or an adjustment in credit policies.

Investors should also consider the growth in the company's managed portfolio to a record $3.2 billion, which reflects an expansion of CPS's asset base and could imply future revenue growth. However, the increased portfolio size comes with greater risk exposure, especially in light of the higher delinquencies. The new contract purchases have declined compared to the previous year, potentially indicating a tightening market or a strategic shift in origination practices.

Market Research Analyst

From a market perspective, CPS's performance must be contextualized within the broader economic environment and the consumer finance sector. The increase in delinquency rates may reflect broader economic pressures on consumers, such as rising interest rates or inflation, which can affect borrowers' ability to repay loans. The auto finance industry, where CPS operates, is sensitive to economic cycles and the company's financials may be an early indicator of consumer distress.

Moreover, the stock market reaction to such earnings reports can be influenced by expectations and sentiment. If the market anticipated better performance or is particularly risk-averse due to macroeconomic conditions, CPS's stock could see volatility. Conversely, the demonstrated ability to grow revenues and manage a larger portfolio might be viewed positively if investors believe the company can effectively manage the associated risks.

• Pretax income of $9.8 million for the fourth quarter and $61.1 million for 2023
• Revenues of $92.0 million for the fourth quarter and $352.0 million for 2023
• Net income of $45.3 million, or $1.80 per diluted share for 2023
• New contract purchases of $1.358 billion for the full year 2023
• Largest managed portfolio balance in company history, $3.2 billion
  

LAS VEGAS, NV, March 15, 2024 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $7.2 million, or $0.29 per diluted share, for its fourth quarter ended December 31, 2023. This compares to a net income of $14.1 million, or $0.59 per diluted share, in the fourth quarter of 2022.

Revenues for the fourth quarter of 2023 were $92.0 million, an increase of $9 million, or 10.8%, compared to $83.0 million for the fourth quarter of 2022. Total operating expenses for the fourth quarter of 2023 were $82.1 million compared to $64.7 million for the 2022 period. Pretax income for the fourth quarter of 2023 was $9.8 million compared to pretax income of $18.3 million in the fourth quarter of 2022.

For the twelve months ended December 31, 2023 total revenues were $352.0 million compared to $329.7 million for the twelve months ended December 31, 2022, an increase of approximately $22.3 million, or 6.8%. Total expenses for the twelve months ended December 31, 2023 were $290.9 million, compared to $213.5 million for the twelve months ended December 31, 2022. Pretax income for the twelve months ended December 31, 2023 was $61.1 million, compared to $116.2 million for the twelve months ended December 31, 2022. Net income for the twelve months ended December 31, 2023 was $45.3 million, or $1.80 per diluted share. This compares to net income of $86.0 million, or $3.23 per diluted share for the twelve months ended December 31, 2022.

During the fourth quarter of 2023, CPS purchased $301.8 million of new contracts compared to $322.4 million during the third quarter of 2023 and $428.1 million during the fourth quarter of 2022. The Company's receivables totaled $2.970 billion as of December 31, 2023, an increase from $2.943 billion as of September 30, 2023 and an increase from $2.795 billion as of December 31, 2022. Including receivables we service for third parties, our total managed portfolio increased from $3.001 billion at December 31, 2022 to $3.195 billion at December 31, 2023.

Annualized net charge-offs for the fourth quarter of 2023 were 7.74% of the average portfolio as compared to 5.83% for the fourth quarter of 2022. Delinquencies greater than 30 days (including repossession inventory) were 14.55% of the total portfolio as of December 31, 2023, as compared to 12.68% as of December 31, 2022.

“We reported solid results for the fourth quarter and for the full year 2023” said Charles E. Bradley Jr., Chief Executive Officer. “Strong loan originations led to continued revenue growth and brought our managed portfolio to new record high levels.”

Conference Call

CPS announced that it will hold a conference call on Monday, March 18, 2024 at 1:00 p.m. ET to discuss its fourth quarter 2023 operating results.

Those wishing to participate can pre-register for the conference call at the following link https://register.vevent.com/register/BI280eff9814e7495fb11dd11c31078155. Registered participants will receive an email containing conference call details for dial-in options. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the schedule start time. A replay will be available beginning two hours after conclusion of the call for 12 months via the Company’s website at https://ir.consumerportfolio.com/investor-relations.

About Consumer Portfolio Services, Inc.

Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis primarily through the securitization markets and service the contracts over their lives.

Forward-looking statements in this news release include the Company's recorded figures representing allowances for remaining expected lifetime credit losses, its estimates of fair value (most significantly for its receivables accounted for at fair value), its provision for credit losses, its entries offsetting the preceding, and figures derived from any of the preceding. In each case, such figures are forward-looking statements because they are dependent on the Company’s estimates of losses to be incurred in the future. The accuracy of such estimates may be adversely affected by various factors, which include the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect the Company’s ability to service its portfolio; possible increases in the rate of consumer bankruptcy filings, which could adversely affect the Company’s rights to collect payments from its portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect the Company’s realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. Any or all of such factors also may affect the Company’s future financial results, as to which there can be no assurance. Any implication that the results of the most recently completed quarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to losses to be incurred in the future may affect future performance.

Investor Relations Contact

Danny Bharwani, Chief Financial Officer

949-753-6811

Consumer Portfolio Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
			Three months ended												Twelve months ended
			December 31,												December 31,
				2023						2022						2023						2022
Revenues:
Interest income			$	83,260					$	79,690					$	329,219					$	305,237
Mark to finance receivables measured at fair value				6,000						-						12,000						15,283
Other income				2,718						3,330						10,795						9,189
				91,978						83,020						352,014						329,709
Expenses:
Employee costs				23,157						20,868						88,148						84,282
General and administrative				13,777						11,699						50,001						37,618
Interest				40,277						28,870						146,631						87,524
Provision for credit losses				(1,600	)					(4,700	)					(22,300	)					(28,100	)
Other expenses				6,523						7,978						28,437						32,192
				82,134						64,715						290,917						213,516
Income before income taxes				9,844						18,305						61,097						116,193
Income tax expense				2,657						4,170						15,754						30,210
Net income			$	7,187					$	14,135					$	45,343					$	85,983
Earnings per share:
Basic			$	0.34					$	0.69					$	2.17					$	4.10
Diluted			$	0.29					$	0.59					$	1.80					$	3.23
Number of shares used in computing earnings
per share:
Basic				21,136						20,341						20,896						20,958
Diluted				24,879						23,828						25,218						26,589
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
			December 31,						December 31,
				2023						2022
Assets:
Cash and cash equivalents			$	6,174					$	13,490
Restricted cash and equivalents				119,257						149,299
Finance receivables measured at fair value				2,722,662						2,476,617
Finance receivables				27,553						92,304
Allowance for finance credit losses				(2,869	)					(21,753	)
Finance receivables, net				24,684						70,551
Deferred tax assets, net				3,736						10,177
Other assets				27,233						32,634
			$	2,903,746					$	2,752,768
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses			$	62,544					$	55,421
Warehouse lines of credit				234,025						285,328
Residual interest financing				49,875						49,623
Securitization trust debt				2,265,446						2,108,744
Subordinated renewable notes				17,188						25,263
				2,629,078						2,524,379
Shareholders' equity				274,668						228,389
			$	2,903,746					$	2,752,768
Operating and Performance Data ($ in millions)
			At and for the												At and for the
			Three months ended												Twelve months ended
			December 31,												December 31,
				2023						2022						2023						2022
Contracts purchased			$	301.80					$	428.08					$	1,357.75					$	1,854.39
Contracts securitized				306.70						337.38						1,352.11						1,537.38
Total portfolio balance (1)			$	2,970.07					$	2,795.38					$	2,970.07					$	2,795.38
Average portfolio balance (1)				2,958.95						2,764.80						2,913.57						2,539.11
Delinquencies (1)
31+ Days				12.29	%					11.20	%
Repossession Inventory				2.26	%					1.48	%
Total Delinquencies and Repo. Inventory				14.55	%					12.68	%
Annualized Net Charge-offs as % of Average Portfolio (1)				7.74	%					5.83	%					6.53	%					4.53	%
Recovery rates (1), (2)				34.3	%					43.6	%					39.2	%					52.3	%

			For the												For the
			Three months ended												Twelve months ended
			December 31,												December 31,
				2023						2022						2023						2022
			$	(3	)	% (4)			$	(3	)	% (4)			$	(3	)	% (4)			$	(3	)	% (4)
Interest income			$	83.26		11.3	%		$	79.69		11.5	%		$	329.22		11.3	%		$	305.24		12.0	%
Mark to finance receivables measured at fair value				6.00		0.8	%			-		0.0	%			12.00		0.4	%			15.28		0.6	%
Other income				2.72		0.4	%			3.33		0.5	%			10.80		0.4	%			9.19		0.4	%
Interest expense				(40.28	)	-5.4	%			(28.87	)	-4.2	%			(146.63	)	-5.0	%			(87.52	)	-3.4	%
Net interest margin				51.70		7.0	%			54.15		7.8	%			205.38		7.0	%			242.19		9.5	%
Provision for credit losses				1.60		0.2	%			4.70		0.7	%			22.30		0.8	%			28.10		1.1	%
Risk adjusted margin				53.30		7.2	%			58.85		8.5	%			227.68		7.8	%			270.29		10.6	%
Core operating expenses				(43.46	)	-5.9	%			(40.55	)	-5.9	%			(166.59	)	-5.7	%			(154.09	)	-6.1	%
Pre-tax income			$	9.84		1.3	%		$	18.30		2.6	%		$	61.10		2.1	%		$	116.19		4.6	%
(1) Excludes third party portfolios.
(2) Wholesale auction liquidation amounts (net of expenses) as a percentage of the account balance at the time of sale.
(3) Numbers may not add due to rounding.
(4) Annualized percentage of the average portfolio balance. Percentages may not add due to rounding.

FAQ

What was Consumer Portfolio Services, Inc.'s pretax income for Q4 2023?

Consumer Portfolio Services, Inc. reported a pretax income of $9.8 million for the fourth quarter of 2023.

What were the revenues for Consumer Portfolio Services, Inc. in 2023?

Consumer Portfolio Services, Inc. generated revenues of $352.0 million for the full year 2023.

What was the net income for Consumer Portfolio Services, Inc. in 2023?

Consumer Portfolio Services, Inc. achieved a net income of $45.3 million for 2023.

What was the total new contract purchases for Consumer Portfolio Services, Inc. in 2023?

Consumer Portfolio Services, Inc. had new contract purchases of $1.358 billion for the full year 2023.

What was the largest managed portfolio balance in Consumer Portfolio Services, Inc.'s history?

Consumer Portfolio Services, Inc. reached its largest managed portfolio balance of $3.2 billion in history.

When is the conference call to discuss Consumer Portfolio Services, Inc.'s Q4 2023 operating results?

Consumer Portfolio Services, Inc. will hold a conference call on Monday, March 18, 2024, at 1:00 p.m. ET to discuss its fourth quarter 2023 operating results.