CPS Announces Third Quarter 2020 Earnings

Rhea-AI Summary

Consumer Portfolio Services (CPSS) reported a net income of $3.8 million or $0.16 per diluted share for Q3 2020, up from $1.8 million in Q3 2019. Total revenues for Q3 2020 were $70.7 million, down 17.4% from $85.5 million in the same period last year. However, operating expenses decreased by 21.7% to $64.8 million. For the nine months ended September 30, 2020, revenues were $208.7 million, down 19.7% year-over-year. The company also purchased $174 million in new contracts during Q3 2020.

Positive

• Net income for Q3 2020 increased to $3.8 million, an increase of 111.1% YoY.
• Pretax income for Q3 2020 jumped to $5.9 million, a 108.2% increase from Q3 2019.
• Operating expenses decreased by $17.9 million, or 21.7%, helping to improve net income.
• Annualized net charge-offs dropped to 6.39% from 8.07% YoY, indicating improved credit performance.

Negative

• Total revenues decreased by $14.9 million, or 17.4%, compared to Q3 2019.
• Receivables decreased to $2.250 billion, down from $2.413 billion YoY.
• For the nine months, revenues were down approximately $51.3 million, or 19.7% YoY.

• Pretax income of $5.9 million
• Net income of $3.8 million, or $0.16 per diluted share
• New contract purchases of $174 million
  

LAS VEGAS, NV, Oct. 19, 2020 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $3.8 million, or $0.16 per diluted share, for its third quarter ended September 30, 2020. This compares to net income of $1.8 million, or $0.08 per diluted share, in the third quarter of 2019.

Revenues for the third quarter of 2020 were $70.7 million, a decrease of $14.9 million, or 17.4%, compared to $85.5 million for the third quarter of 2019. Total operating expenses for the third quarter of 2020 were $64.8 million compared to $82.7 million for the 2019 period for a decrease of $17.9 million, or 21.7%.   Pretax income for the third quarter of 2020 was $5.9 million compared to pretax income of $2.8 million in the third quarter of 2019, an increase of 108.2%.

For the nine months ended September 30, 2020 total revenues were $208.7 million compared to $260.1 million for the nine months ended September 30, 2019, a decrease of approximately $51.3 million, or 19.7%. Total expenses for the nine months ended September 30, 2020 were $195.1 million, a decrease of $56.7 million, or 22.5%, compared to $251.8 million for the nine months ended September 30, 2019. Pretax income for the nine months ended September 30, 2020 was $13.6 million, compared to $8.3 million for the nine months ended September 30, 2019. Net income for the nine months ended September 30, 2020 was $17.5 million compared to $5.4 million for the nine months ended September 30, 2019. Results for the nine months ended September 30, 2020 include a net tax benefit of $8.8 million related to the revaluation of the Company’s net operating losses and other tax adjustments. Without this tax benefit, net income and net income per diluted share for the nine months ended September 30, 2020 would have been $8.7 million and $0.37 per share, respectively.  

During the third quarter of 2020, CPS purchased $174.0 million of new contracts compared to $135.9 million during the second quarter of 2020 and $262.1 million during the third quarter of 2019. The Company's receivables totaled $2.250 billion as of September 30, 2020, a decrease from $2.326 billion as of June 30, 2020 and $2.413 billion as of September 30, 2019.

Annualized net charge-offs for the third quarter of 2020 were 6.39% of the average portfolio as compared to 8.07% for the third quarter of 2019. Delinquencies greater than 30 days (including repossession inventory) were 10.29% of the total portfolio as of September 30, 2020, as compared to 15.74% as of September 30, 2019.

Conference Call

CPS announced that it will hold a conference call on Tuesday, October 20, at 1:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time. The conference identification number is 2265436.

A replay of the conference call will be available between October 20 and October 27, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 2265436. A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site at www.consumerportfolio.com.

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, low incomes 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 pandemic-related markdown of carrying value for the portion of its portfolio accounted for at fair value, its pandemic-related charge to the provision for credit losses for the its legacy portfolio, 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 (in addition to risks relating to the COVID-19 pandemic and to the economy generally) 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. The accuracy of such estimates may also be affected by the effects of the COVID-19 pandemic and of governmental responses to said pandemic, which have included prohibitions on certain means of enforcement of receivables, and may include additional restrictions, as yet unknown, in the future. 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

Jeffrey P. Fritz, Chief Financial Officer
844 878-2777

Consumer Portfolio Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
			Three months ended												Nine months ended
			September 30,												September 30,
			2020						2019						2020						2019
Revenues:
Interest income			$	72,582					$	83,528					$	227,271					$	253,822
Mark to finance receivables measured at fair value				(3,152	)					-						(23,051	)					-
Other income				1,239						1,994						4,508						6,255
				70,669						85,522						208,728						260,077
Expenses:
Employee costs				19,155						20,251						60,826						59,030
General and administrative				7,846						8,185						24,352						25,109
Interest				24,901						27,940						78,377						82,933
Provision for credit losses				7,400						19,874						14,113						64,319
Other expenses				5,478						6,443						17,416						20,411
				64,780						82,693						195,084						251,802
Income before income taxes				5,889						2,829						13,644						8,275
Income tax expense				2,121						991						(3,888	)					2,898
Net income			$	3,768					$	1,838					$	17,532					$	5,377
Earnings per share:
Basic			$	0.17					$	0.08					$	0.77					$	0.24
Diluted			$	0.16					$	0.08					$	0.74					$	0.22
Number of shares used in computing earnings
per share:
Basic				22,666						22,526						22,630						22,378
Diluted				23,908						24,066						23,825						24,102
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
			September 30,						December 31,
			2020						2019
Assets:
Cash and cash equivalents			$	11,253					$	5,295
Restricted cash and equivalents				200,912						135,537
Finance receivables measured at fair value				1,540,955						1,444,038
Finance receivables				577,281						897,530
Allowance for finance credit losses				(94,218	)					(11,640	)
Finance receivables, net				483,063						885,890
Deferred tax assets, net				31,026						15,480
Other assets				42,023						53,009
			$	2,309,232					$	2,539,249
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses			$	49,056					$	47,077
Warehouse lines of credit				31,201						134,791
Residual interest financing				32,000						39,478
Securitization trust debt				2,048,089						2,097,728
Subordinated renewable notes				20,242						17,534
				2,180,588						2,336,608
Shareholders' equity				128,644						202,641
			$	2,309,232					$	2,539,249
Operating and Performance Data ($ in millions)
			At and for the												At and for the
			Three months ended												Nine months ended
			September 30,												September 30,
				2020						2019						2020						2019
Contracts purchased			$	174.02					$	262.11					$	575.88					$	755.29
Contracts securitized				260.00						244.12						741.87						739.12
Total portfolio balance			$	2,250.39					$	2,412.64					$	2,250.39					$	2,412.64
Average portfolio balance				2,270.55						2,409.10						2,353.59						2,400.08
Allowance for finance credit losses as % of fin. receivables				16.32	%					1.25	%
Aggregate allowance as % of fin. receivables (1)				18.02	%					3.83	%
Delinquencies
31+ Days				8.85	%					13.64	%
Repossession Inventory				1.44	%					2.10	%
Total Delinquencies and Repo. Inventory				10.29	%					15.74	%
Annualized net charge-offs as % of average portfolio
Legacy portfolio				14.09	%					12.97	%					12.20	%					12.19	%
Fair value portfolio				3.46	%					3.93	%					4.54	%					3.21	%
Total portfolio				6.39	%					8.07	%					6.93	%					7.96	%
Recovery rates (2)				45.1	%					34.4	%					37.8	%					34.0	%
			For the												For the
			Three months ended												Nine months ended
			September 30,												September 30,
				2020						2019						2020						2019
				$ (3)		% (4)				$ (3)		% (4)				$ (3)		% (4)				$ (3)		% (4)
Interest income			$	72.58		12.8	%		$	83.53		13.9	%		$	227.27		12.9	%		$	253.82		14.1	%
Mark to finance receivables measured at fair value				(3.15	)	-0.6	%			-		0.0	%			(23.05	)	-1.3	%			-		0.0	%
Servicing fees and other income				1.24		0.2	%			1.99		0.3	%			4.51		0.3	%			6.26		0.3	%
Interest expense				(24.90	)	-4.4	%			(27.94	)	-4.6	%			(78.38	)	-4.4	%			(82.93	)	-4.6	%
Net interest margin				45.77		8.1	%			57.58		9.6	%			130.35		7.4	%			177.14		9.8	%
Provision for credit losses				(7.40	)	-1.3	%			(19.87	)	-3.3	%			(14.11	)	-0.8	%			(64.32	)	-3.6	%
Risk adjusted margin				38.37		6.8	%			37.71		6.3	%			116.24		6.6	%			112.83		6.3	%
Core operating expenses				(32.48	)	-5.7	%			(34.88	)	-5.8	%			(102.59	)	-5.8	%			(104.55	)	-5.8	%
Pre-tax income			$	5.89		1.0	%		$	2.83		0.5	%		$	13.64		0.8	%		$	8.28		0.5	%
(1) Includes allowance for finance credit losses and allowance for repossession inventory.
(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 were the earnings results for CPSS in Q3 2020?

CPSS reported a net income of $3.8 million, or $0.16 per diluted share for Q3 2020.

How much did CPSS purchase in new contracts during Q3 2020?

CPSS purchased $174 million in new contracts during the third quarter of 2020.

What is the total revenue for CPSS for the nine months ended September 30, 2020?

Total revenues for CPSS for the nine months ended September 30, 2020, were $208.7 million.

How did CPSS's operating expenses change in Q3 2020?

Operating expenses for Q3 2020 decreased by $17.9 million, or 21.7%, compared to Q3 2019.