CPS Announces Fourth Quarter and Full Year 2024 Earnings

Rhea-AI Summary

Consumer Portfolio Services (CPSS) reported its Q4 and full-year 2024 financial results. Q4 revenues reached $105.3 million, up 14.5% year-over-year, while full-year revenues grew 11.8% to $393.5 million.

Q4 net income was $5.1 million ($0.21 per diluted share), with full-year net income at $19.2 million ($0.79 per diluted share). The company achieved record-high total portfolio balance of $3.491 billion. New contract purchases for 2024 totaled $1.682 billion, representing a 24% increase from 2023.

However, operating expenses increased significantly, with Q4 expenses at $98.0 million compared to $82.1 million in 2023. Delinquencies over 30 days rose to 14.85%, and net charge-offs increased to 8.02% in Q4 2024.

Positive

• Revenue growth of 14.5% in Q4 and 11.8% for full year
• Record-high portfolio balance of $3.491 billion
• New contract purchases up 24% to $1.682 billion
• Q4 contract purchases increased to $457.8M from $301.8M YoY

Negative

• Net income declined 57.6% from $45.3M to $19.2M
• Operating expenses increased 25.9% YoY
• Delinquency rate increased to 14.85% from 14.55%
• Net charge-offs rose to 8.02% from 7.74%
• Pretax income dropped 55.2% YoY to $27.4M

Insights

Financial Analyst

Consumer Portfolio Services' Q4 and full-year 2024 results reveal a concerning divergence between top-line growth and bottom-line performance. While revenues increased by 11.8% to $393.5 million for the year, net income plummeted by 57.6% to $19.2 million, signaling significant margin compression.

The primary concern is the disproportionate rise in operating expenses, which surged 25.9% to $366.1 million, substantially outpacing revenue growth. This expanding cost structure has dramatically reduced the company's operating leverage, with the efficiency ratio deteriorating considerably year-over-year.

Credit quality metrics show troubling trends amid the company's aggressive portfolio expansion. The record-high receivables of $3.491 billion have been accompanied by increasing delinquencies (14.85% vs 14.55% year-over-year) and higher net charge-offs (8.02% vs 7.74%). This suggests CPSS may be sacrificing underwriting standards to fuel growth, a particularly risky strategy in the current economic environment.

The 23.9% increase in new contract purchases to $1.682 billion demonstrates strong origination capabilities, but the sustainability of this growth is questionable if credit performance continues to deteriorate. The widening gap between portfolio growth and profitability raises concerns about the long-term economics of recently originated loans.

Management's optimism about "operating efficiencies" seems at odds with the financial results, which show no evidence of improving cost structures or operational leverage. Without significant improvements in expense management or credit performance, CPSS may struggle to return to historical profitability levels despite its revenue growth trajectory.

Credit Risk Specialist

CPSS's 2024 results reveal a classic case of growth at the expense of credit quality in the subprime auto lending space. The company's 57.6% profit decline despite 11.8% revenue growth points to fundamental issues with their underwriting approach and risk pricing.

The deteriorating credit metrics are particularly concerning when viewed against the backdrop of their aggressive portfolio expansion. The 8.02% annualized charge-off rate and 14.85% delinquency rate would be problematic in any environment, but they're especially troubling given that these metrics are worsening during a period of relatively low unemployment. This suggests fundamental weaknesses in underwriting standards rather than merely cyclical factors.

The 25.9% increase in operating expenses likely includes significant provisions for credit losses, indicating management recognizes the growing risk in their portfolio. However, their continued aggressive origination pace ($457.8 million in Q4 alone) suggests they haven't adequately adjusted their growth strategy to reflect these realities.

The vintage analysis implications are concerning - with each successive quarter showing portfolio growth but deteriorating performance, newer vintages appear to be performing worse than older ones. This negative selection spiral often precedes more significant credit issues in subprime lenders.

Most troubling is the rapid portfolio growth in a rising delinquency environment, which historically has been a red flag for specialty finance companies. The $3.491 billion portfolio represents significant risk concentration, and if economic conditions deteriorate, CPSS could face a perfect storm of higher funding costs, increased defaults, and depressed recovery values on repossessed vehicles.

The forward-looking statements highlight numerous risk factors, but management's optimistic tone seems disconnected from the financial reality. Without significant tightening of underwriting standards and operational efficiencies, the current trajectory suggests further compression of margins and potentially more severe credit issues ahead.

• Revenues of $105.3 million for the fourth quarter and $393.5 million for 2024
• Net income of $19.2 million, or $0.79 per diluted share for 2024
• Total portfolio balance of $3.491 billion, highest in company history
• New contract purchases of $1.682 billion for the full year 2024

LAS VEGAS, NV, Feb. 25, 2025 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $5.1 million, or $0.21 per diluted share, for its fourth quarter ended December 31, 2024.

Revenues for the fourth quarter of 2024 were $105.3 million, an increase of $13.3 million, or 14.5%, compared to $92.0 million for the fourth quarter of 2023. Total operating expenses for the fourth quarter of 2024 were $98.0 million compared to $82.1 million for the 2023 period.   Pretax income for the fourth quarter of 2024 was $7.4 million compared to pretax income of $9.8 million in the fourth quarter of 2023.

For the twelve months ended December 31, 2024 total revenues were $393.5 million compared to $352.0 million for the twelve months ended December 31, 2023, an increase of approximately $41.5 million, or 11.8%. Total operating expenses for the twelve months ended December 31, 2024 were $366.1 million, compared to $290.9 million for the twelve months ended December 30, 2023. Pretax income for the twelve months ended December 31, 2024 was $27.4 million, compared to $61.1 million for the twelve months ended December 31, 2023. Net income for the twelve months ended December 31, 2024 was $19.2 million compared to $45.3 million for the twelve months ended December 31, 2023.

During the fourth quarter of 2024, CPS purchased $457.8 million of new contracts compared to $445.9 million during the third quarter of 2024 and $301.8 million during the fourth quarter of 2023. The total number of contracts purchased for 2024 totaled $1.682 billion compared to $1.358 billion in 2023. The Company's receivables totaled $3.491 billion as of December 31, 2024, an increase from $3.330 billion as of September 31, 2024 and an increase from $2.970 billion as of December 31, 2023.

Annualized net charge-offs for the fourth quarter of 2024 were 8.02% of the average portfolio as compared to 7.74% for the fourth quarter of 2023. Delinquencies greater than 30 days (including repossession inventory) were 14.85% of the total portfolio as of December 31, 2024, compared to 14.55% as of December 31, 2023.

“New loan originations grew by 24% in 2024 over the prior year, leading to solid top line revenue growth,” said Charles E. Bradley, Chief Executive Officer. “With positive trends in loan originations and operating efficiencies, we remain optimistic in all aspects of our business going into 2025.”

Conference Call

CPS announced that it will hold a conference call on February 26, 2025 at 1:00 p.m. ET to discuss its fourth quarter 2024 operating results.

Those wishing to participate can pre-register for the conference call at the following link https://register.vevent.com/register/BI34e818cf84a24e118241657af74dd2d4. 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,
		2024				2023				2024				2023
Revenues:
Interest income	$	98,150			$	83,260			$	363,962			$	329,219
Mark to finance receivables measured at fair value		5,000				6,000				21,000				12,000
Other income		2,153				2,718				8,544				10,795
		105,303				91,978				393,506				352,014
Expenses:
Employee costs		23,889				23,157				96,192				88,148
General and administrative		14,422				13,777				54,710				50,001
Interest		52,522				40,277				191,257				146,631
Provision for credit losses		(728	)			(1,600	)			(5,307	)			(22,300	)
Other expenses		7,847				6,523				29,223				28,437
		97,952				82,134				366,075				290,917
Income before income taxes		7,351				9,844				27,431				61,097
Income tax expense		2,206				2,657				8,228				15,754
Net income	$	5,145			$	7,187			$	19,203			$	45,343
Earnings per share:
Basic	$	0.24			$	0.34			$	0.90			$	2.17
Diluted	$	0.21			$	0.29			$	0.79			$	1.80
Number of shares used in computing earnings per share:
Basic		21,412				21,136				21,292				20,896
Diluted		24,274				24,879				24,325				25,218

Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
	December 31,				December 31,
		2024				2023
Assets:
Cash and cash equivalents	$	11,713			$	6,174
Restricted cash and equivalents		125,684				119,257
Finance receivables measured at fair value		3,313,767				2,722,662
Finance receivables		5,420				27,553
Allowance for finance credit losses		(433	)			(2,869	)
Finance receivables, net		4,987				24,684
Deferred tax assets, net		1,010				3,736
Other assets		36,707				27,233
	$	3,493,868			$	2,903,746
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses	$	70,151			$	62,544
Warehouse lines of credit		410,898				234,025
Residual interest financing		99,176				49,875
Securitization trust debt		2,594,384				2,265,446
Subordinated renewable notes		26,489				17,188
		3,201,098				2,629,078
Shareholders' equity		292,770				274,668
	$	3,493,868			$	2,903,746

Operating and Performance Data ($ in millions)

		At and for the								At and for the
		Three months ended								Twelve months ended
		December 31,								December 31,
			2024				2023				2024				2023
Contracts purchased		$	457.81			$	301.80			$	1,681.94			$	1,357.75
Contracts securitized		$	298.42			$	306.70				1,256.13				1,352.11
Total portfolio balance (1)		$	3,490.96			$	2,970.07			$	3,490.96			$	2,970.07
Average portfolio balance (1)		$	3,445.52			$	2,958.95				3,209.99				2,913.57
Delinquencies (1)
31+ Days			12.11	%			12.29	%
Repossession Inventory			2.74	%			2.26	%
Total Delinquencies and Repo. Inventory			14.85	%			14.55	%
Annualized Net Charge-offs as % of Average Portfolio (1)			8.02	%			7.74	%			7.62	%			6.53	%
Recovery rates (1), (2)			27.2	%			34.3	%			30.1	%			39.2	%

	For the														For the
	Three months ended														Twelve months ended
	December 31,														December 31,
	2024							2023							2024							2023
		$ (3)			% (4)				$ (3)			% (4)				$ (3)			% (4)				$ (3)			% (4)
Interest income	$	98.15			11.4	%		$	83.26			11.3	%		$	363.96			11.3	%		$	329.22			11.3	%
Mark to finance receivables measured at fair value		5.00			0.6	%			6.00			0.8	%			21.00			0.7	%			12.00			0.4	%
Other income		2.15			0.2	%			2.72			0.4	%			8.54			0.3	%			10.80			0.4	%
Interest expense		(52.52	)		-6.1	%			(40.28	)		-5.4	%			(191.26	)		-6.0	%			(146.63	)		-5.0	%
Net interest margin		52.78			6.1	%			51.70			7.0	%			202.25			6.3	%			205.38			7.0	%
Provision for credit losses		0.73			0.1	%			1.60			0.2	%			5.31			0.2	%			22.30			0.8	%
Risk adjusted margin		53.51			6.2	%			53.30			7.2	%			207.56			6.5	%			227.68			7.8	%
Other operating expenses (5)		(46.16	)		-5.4	%			(43.46	)		-5.9	%			(180.13	)		-5.6	%			(166.59	)		-5.7	%
Pre-tax income	$	7.35			0.9	%		$	9.84			1.3	%		$	27.43			0.9	%		$	61.10			2.1	%
(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.
(5) Total pre-tax expenses less provision for credit losses and interest expense.

FAQ

What was CPSS's revenue growth in Q4 2024 compared to Q4 2023?

CPSS's Q4 2024 revenue grew 14.5% to $105.3 million, compared to $92.0 million in Q4 2023.

How much did CPSS's new contract purchases increase in 2024?

CPSS's new contract purchases grew 24% to $1.682 billion in 2024, up from $1.358 billion in 2023.

What was CPSS's delinquency rate as of December 31, 2024?

Delinquencies over 30 days were 14.85% of the total portfolio as of December 31, 2024.

How did CPSS's net income change from 2023 to 2024?

Net income decreased from $45.3 million in 2023 to $19.2 million in 2024.

What was CPSS's total portfolio balance at the end of 2024?

CPSS achieved a record-high total portfolio balance of $3.491 billion as of December 31, 2024.