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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, Inc. (Nasdaq: CPSS) has announced a conference call scheduled for May 11, 2021, at 1:00 p.m. ET to discuss its first quarter 2021 operating results. Interested participants can join by calling 877 312-5502 or 253 237-1131 for international calls, with a conference ID of 7645419. A replay will be available from May 11 to May 18, with dial-in numbers provided for both domestic and international listeners. The call will also be broadcast live on the company's website.
Consumer Portfolio Services (Nasdaq: CPSS) has successfully closed its second term securitization for 2021, totaling $240 million in asset-backed notes secured by automobile receivables. This marks the 39th securitization since 2011, maintaining a commendable record of receiving a triple 'A' rating from at least two agencies. The transaction includes five classes of notes with a weighted average coupon of 1.65%. Initial credit enhancement is set at 1% of the original receivable pool, and CPS plans to sell an additional $84.5 million in receivables in May 2021.
Consumer Portfolio Services, Inc. (CPSS) reported a net income of $4.1 million or $0.17 per diluted share for Q4 2020, compared to $29,000 in 2019. Total revenues decreased by 27.2% to $62.4 million. For the full year, net income reached $21.7 million or $0.90 per share, up from $5.4 million in 2019. The company purchased $743 million in new contracts in 2020. The annualized net charge-offs improved to 5.18% of the portfolio, and delinquencies dropped to 12.08% from 15.46% a year prior.
Consumer Portfolio Services, Inc. (Nasdaq: CPSS) will hold a conference call on February 24, 2021, at 1:00 p.m. ET to review its fourth quarter 2020 operational results. Participants can dial in at 877-312-5502 or 253-237-1131 for international access. A replay will be available from February 24 to March 3, 2021, and can be accessed using the same conference identification number, 3998868. CPS specializes in providing indirect automobile financing for individuals with credit challenges, purchasing retail installment sales contracts from dealerships secured by late-model used vehicles.
Consumer Portfolio Services (Nasdaq: CPSS) announced the closing of its first term securitization of 2021, marking its 38th senior subordinate securitization since 2011. The transaction involved the sale of $230.5 million in asset-backed notes backed by $245.0 million in auto receivables. Notably, this is the 21st consecutive securitization to receive a triple 'A' rating. The securitization includes a pre-funding structure, projecting future sales of approximately $60.6 million in receivables.
Consumer Portfolio Services (CPSS) renewed its two-year revolving credit agreement with Citibank on December 18, 2020. This agreement allows CPS to secure loans against automobile receivables, either currently held or to be purchased. CPS can borrow on a revolving basis until December 18, 2022, with options for full repayment or amortization afterward.
The renewal supports CPS's strategy of maintaining three $100 million warehouse lines with multi-year revolving commitments, enhancing its financing capabilities.
Consumer Portfolio Services, Inc. (Nasdaq: CPSS) announced its board of directors has unanimously rejected an unsolicited acquisition offer from Auto Experience Inc. (AEI), stating the proposed price of $135 million significantly undervalues the company. After thorough consideration, the board concluded that accepting AEI's proposal would not serve the best interests of CPS shareholders. Furthermore, the board expressed doubts regarding the credibility of AEI's interest, emphasizing CPS’s strong long-term prospects.
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.
Consumer Portfolio Services, Inc. (CPSS) will hold a conference call on October 20, 2020, at 1:00 p.m. ET to discuss its third quarter 2020 results. Interested participants can join by calling 877-312-5502 for domestic or 253-237-1131 for international calls, 10 minutes prior to the start. A replay will be available from October 20 to October 27, and the call will be streamed live on the company’s website, www.consumerportfolio.com. CPSS specializes in indirect automobile financing for individuals with limited credit histories.
Consumer Portfolio Services, Inc. (Nasdaq: CPSS) has received a non-binding, unsolicited offer to acquire the company from Auto Experience Inc. (AEI) valued at $135 million. CPS asserts that AEI's press release misrepresents the proposal's terms, which are contingent on various conditions. The CPS Board will carefully evaluate the offer, considering AEI's ability to fulfill the proposal and its fiduciary duties to shareholders. CPS advises investors to critically review any future communications from AEI and rely on official filings with the U.S. Securities and Exchange Commission.
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