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Overview of Consumer Portfolio Services, Inc. (CPSS)
Consumer Portfolio Services, Inc. (CPSS) is a leading independent specialty finance company headquartered in Irvine, California. Operating within the niche subprime auto finance sector, CPSS focuses on providing indirect automobile financing solutions to customers with limited credit histories, low incomes, or past credit challenges. By addressing a market underserved by traditional financial institutions, CPSS plays a critical role in facilitating vehicle ownership for individuals who might otherwise struggle to secure financing.
Business Model and Revenue Generation
At its core, CPSS purchases retail installment sales contracts from franchised and select independent automobile dealerships across the United States. These contracts are predominantly secured by late-model used vehicles, with a smaller portion tied to new vehicles. The company generates revenue through two primary channels:
- Contract Purchases: CPSS acquires contracts from dealers, providing them with an alternative financing option for subprime customers. This enables dealers to expand their customer base and complete sales that might otherwise be unfeasible.
- Servicing and Securitization: CPSS funds its contract purchases through securitization markets, bundling contracts into asset-backed securities sold to investors. The company retains servicing responsibilities, collecting payments, and managing the contracts over their lifespans.
Operational Footprint and Scale
Since its inception in 1991, CPSS has established a robust operational presence. The company maintains dealer relationships in 48 states, ensuring broad geographic coverage and access to a diverse customer base. Its operational headquarters in Irvine is complemented by four strategically located servicing branches in Florida, Illinois, Nevada, and Virginia, enabling efficient contract servicing and customer support. CPSS currently manages a significant portfolio of contracts, reflecting its scale and expertise in the specialty finance market.
Market Position and Competitive Landscape
CPSS operates in a highly specialized segment of the finance industry, targeting subprime borrowers who represent a unique risk profile. Its ability to underwrite, securitize, and service these loans effectively sets it apart from competitors. Key competitors include other specialty finance companies and traditional lenders entering the subprime space. CPSS differentiates itself through its long-standing dealer relationships, extensive operational infrastructure, and deep expertise in securitization and loan servicing.
Industry Significance
The subprime auto finance market plays a vital role in the broader automotive and financial sectors by enabling vehicle purchases for underserved customer segments. CPSS's operations not only support dealerships in closing sales but also contribute to economic mobility for individuals. Its securitization activities provide a mechanism for institutional investors to gain exposure to the subprime auto finance market, further underscoring its industry importance.
Key Value Proposition
CPSS’s primary value proposition lies in its ability to bridge the gap between dealerships and subprime borrowers. By offering tailored financing solutions and leveraging its securitization expertise, the company facilitates sales for dealers while providing customers with access to reliable transportation. This dual focus enhances its relevance and resilience within the specialty finance industry.
Consumer Portfolio Services (Nasdaq: CPSS) is set to present at the 2024 Annual Gateway Conference in San Francisco on September 4 at 10:00 a.m. PT. The event, held at the Four Seasons Hotel, will feature a live webcast of CPS's presentation, which will also be available for replay. CPS executives will be available for one-on-one meetings throughout the conference, offering investors and analysts direct access to the company's management team.
This presentation provides an opportunity for CPS to showcase its business strategies and financial performance to a wider audience of potential investors and industry professionals. Interested parties can request an invitation or schedule meetings by emailing conference@gateway-grp.com.
Consumer Portfolio Services (CPSS) reported Q2 2024 earnings with revenues of $95.9 million, up 13% year-over-year. Net income was $4.7 million, or $0.19 per diluted share, compared to $14.0 million, or $0.55 per share, in Q2 2023. Pretax income decreased to $6.7 million from $18.6 million last year. New contract purchases surged to $431.9 million, a 36% increase from Q2 2023. The company's receivables totaled $3.173 billion as of June 30, 2024. Annualized net charge-offs rose to 7.26% from 6.29% in Q2 2023, while delinquencies increased to 13.29% from 11.72% year-over-year. Despite challenges, CPSS achieved its largest securitization in company history, focusing on controlled growth and operational efficiency.
Consumer Portfolio Services, Inc. (Nasdaq: CPSS) has announced a conference call to discuss its second quarter 2024 operating results. The call is scheduled for Wednesday, July 31, 2024, at 1:00 p.m. ET. Participants can pre-register for the call using a provided link and will receive dial-in details via email. To avoid delays, participants are encouraged to dial in fifteen minutes before the start time. A replay of the call will be available for 12 months on the company's investor relations website.
CPS is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems or credit histories. The company purchases retail installment sales contracts primarily from franchised automobile dealerships, secured by late model used vehicles and, to a lesser extent, new vehicles. CPS funds these purchases through securitization markets and services the contracts over their lives.
Consumer Portfolio Services (CPS) announced the renewal of its two-year revolving credit agreement with Citibank, N.A., effective July 11, 2024. This $200 million credit facility will be secured by automobile receivables that CPS owns or will purchase in the future. The agreement allows CPS to borrow on a revolving basis until July 15, 2026, after which it can either repay the outstanding loans in full or let them amortize over one year. CPS provides automobile financing to individuals with poor or credit histories, purchasing installment sales contracts from dealerships and securing them through the securitization market.
Consumer Portfolio Services (CPS) announced the closing of a $436.31 million senior subordinate asset-backed securitization on June 26, 2024. This marks CPS's third term securitization in 2024 and its 52nd since 2011. The transaction involves asset-backed notes secured by $460 million in automobile receivables.
The notes, issued by CPS Auto Receivables Trust 2024-C, include five classes with a weighted average coupon of 6.56%. The transaction received a triple “A” rating on the senior class from Standard & Poor's and DBRS Morningstar.
Initial credit enhancement includes a 1% cash deposit and 5.15% overcollateralization. The securitization uses a pre-funding structure, with $319.85 million in receivables sold initially and an additional $140.15 million to be sold in July 2024.
Consumer Portfolio Services, Inc. announced earnings of $4.6 million, or $0.19 per diluted share, for the first quarter of 2024. Revenues were $91.7 million, up 10.4% from the prior year period. The company recorded increased operating expenses and a decrease in pretax income compared to 2023. CPS purchased $346.3 million of new contracts in Q1 2024.
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