CPSS 8-K
Consumer Portfolio Services, Inc. (CPSS)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On July 30, 2024, the registrant announced its earnings for the three-month period ended June 30, 2024. A copy of the announcement is attached as an exhibit to this report. As noted in the announcement, the registrant will hold a conference call on Wednesday, July 31, 2024 at 03:00 p.m. ET to discuss its second quarter 2024 operating results. Those wishing to participate can pre-register for the conference call at the following link https://register.vevent.com/register/BI5a2c5e2c2a8946a5896de7685ccf8ea1. Registered participants will receive an email containing conference call details for dial-in options.
Item 9.01. Financial Statements and Exhibits.
Neither financial statements nor pro forma financial information are filed with this report.
(d) Exhibits
One exhibit is included with this report:
| 99.1 | News release re earnings. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CONSUMER PORTFOLIO SERVICES, INC. | |
| Dated: July 31, 2024 | By: /s/ Denesh Bharwani |
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Denesh Bharwani Executive Vice President and Chief Financial Officer Signing on behalf of the registrant |
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Exhibit 99.1
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NEWS RELEASE |
CPS ANNOUNCES SECOND QUARTER 2024 EARNINGS
| § | Revenues of $95.9 million compared to $84.9 million in the prior year period | |
| § | Pretax income of $6.7 million | |
| § | Net income of $4.7 million, or $0.19 per diluted share | |
| § | New contract purchases of $431.9 million, compared to $318.4 million in the prior year period |
LAS VEGAS, NV, July 30, 2024 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $4.7 million, or $0.19 per diluted share, for its second quarter ended June 30, 2024. This compares to a net income of $14.0 million, or $0.55 per diluted share, in the second quarter of 2023.
Revenues for the second quarter of 2024 were $95.9 million, an increase of $11.0 million, or 13.0%, compared to $84.9 million for the second quarter of 2023. Total operating expenses for the second quarter of 2024 were $89.2 million compared to $66.3 million for the 2023 period. A reversal of provision for credit loss expense reduced operating expenses by $2.0 million in the second quarter of 2024 and $9.7 million in the second quarter of 2023. Pretax income for the second quarter of 2024 was $6.7 million compared to pretax income of $18.6 million in the second quarter of 2023.
For the six months ended June 30, 2024 total revenues were $187.6 million compared to $168.0 million for the six months ended June 30, 2023, an increase of approximately $19.7 million, or 11.7%. Total operating expenses for the six months ended June 30, 2024 were $174.4 million, compared to $130.9 million for the six months ended June 30, 2023. A reversal of provision for credit loss expense reduced operating expenses in the first six months of 2024 and 2023, by $3.6 million and $18.7 million, respectively. Pretax income for the six months ended June 30, 2024 was $13.2 million, compared to $37.0 million for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024 was $9.3 million compared to $27.8 million for the six months ended June 30, 2023.
During the second quarter of 2024, CPS purchased $431.9 million of new contracts compared to $346.3 million during the first quarter of 2024 and $318.4 million during the second quarter of 2023. The Company's receivables totaled $3.173 billion as of June 30, 2024, an increase from $3.021 billion as of March 31, 2024 and an increase from $2.910 billion as of June 30, 2023.
Annualized net charge-offs for the second quarter of 2024 were 7.26% of the average portfolio as compared to 6.29% for the second quarter of 2023. Delinquencies greater than 30 days (including repossession inventory) were 13.29% of the total portfolio as of June 30, 2024, as compared to 11.72% as of June 30, 2023.
"During our second quarter, origination volumes outpaced last year’s second quarter by 36%, leading to the closing of our largest securitization in company history,” said Charles E. Bradley Jr., Chief Executive Officer. "We remain focused on controlled growth and improving operating efficiency."
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Conference Call
CPS originally announced on July 29, 2024, that it will hold a conference call on July 31, 2024 at 1:00 p.m. ET to discuss its second quarter 2024 operating results. A modification has now been made to the start time. The call will now start at 3:00 p.m. ET. No other changes to the call were made.
Those wishing to participate can pre-register for the conference call at the following link https://register.vevent.com/register/BI5a2c5e2c2a8946a5896de7685ccf8ea1. 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
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Consumer Portfolio Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues: | ||||||||||||||||
| Interest income | $ | 88,367 | $ | 82,637 | $ | 172,655 | $ | 162,699 | ||||||||
| Mark to finance receivables measured at fair value | 5,500 | – | 10,500 | – | ||||||||||||
| Other income | 2,013 | 2,221 | 4,469 | 5,259 | ||||||||||||
| 95,880 | 84,858 | 187,624 | 167,958 | |||||||||||||
| Expenses: | ||||||||||||||||
| Employee costs | 23,725 | 21,147 | 48,141 | 43,180 | ||||||||||||
| General and administrative | 13,260 | 11,783 | 27,013 | 23,180 | ||||||||||||
| Interest | 46,710 | 35,706 | 88,678 | 68,465 | ||||||||||||
| Provision for credit losses | (1,950 | ) | (9,700 | ) | (3,585 | ) | (18,700 | ) | ||||||||
| Other expenses | 7,463 | 7,318 | 14,148 | 14,798 | ||||||||||||
| 89,208 | 66,254 | 174,395 | 130,923 | |||||||||||||
| Income before income taxes | 6,672 | 18,604 | 13,229 | 37,035 | ||||||||||||
| Income tax expense | 2,000 | 4,650 | 3,967 | 9,258 | ||||||||||||
| Net income | $ | 4,672 | $ | 13,954 | $ | 9,262 | $ | 27,777 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.22 | $ | 0.67 | $ | 0.44 | $ | 1.35 | ||||||||
| Diluted | $ | 0.19 | $ | 0.55 | $ | 0.38 | $ | 1.09 | ||||||||
| Number of shares used in computing earnings per share | ||||||||||||||||
| Basic | 21,263 | 20,866 | 21,203 | 20,643 | ||||||||||||
| Diluted | 24,263 | 25,373 | 24,433 | 25,384 | ||||||||||||
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Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 9,752 | $ | 6,174 | ||||
| Restricted cash and equivalents | 256,859 | 119,257 | ||||||
| Finance receivables measured at fair value | 2,960,375 | 2,722,662 | ||||||
| Finance receivables | 12,714 | 27,553 | ||||||
| Allowance for finance credit losses | (684 | ) | (2,869 | ) | ||||
| Finance receivables, net | 12,030 | 24,684 | ||||||
| Deferred tax assets, net | 2,418 | 3,736 | ||||||
| Other assets | 45,108 | 27,233 | ||||||
| $ | 3,286,542 | $ | 2,903,746 | |||||
| Liabilities and Shareholders' Equity: | ||||||||
| Accounts payable and accrued expenses | $ | 66,393 | $ | 62,544 | ||||
| Warehouse lines of credit | 82,175 | 234,025 | ||||||
| Residual interest financing | 99,079 | 49,875 | ||||||
| Securitization trust debt | 2,736,225 | 2,265,446 | ||||||
| Subordinated renewable notes | 22,356 | 17,188 | ||||||
| 3,006,228 | 2,629,078 | |||||||
| Shareholders' equity | 280,314 | 274,668 | ||||||
| $ | 3,286,542 | $ | 2,903,746 | |||||
| 4 |
Operating and Performance Data ($ in millions)
| At and for the | At and for the | |||||||||||||||
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Contracts purchased | $ | 431.88 | $ | 318.39 | $ | 778.19 | $ | 733.54 | ||||||||
| Contracts securitized | $ | 657.09 | $ | 369.86 | 957.71 | 732.73 | ||||||||||
| Total portfolio balance (1) | $ | 3,173.28 | $ | 2,910.29 | $ | 3,173.28 | $ | 2,910.29 | ||||||||
| Average portfolio balance (1) | $ | 3,122.28 | $ | 2,903.99 | 3,058.05 | 2,880.29 | ||||||||||
| Delinquencies (1) | ||||||||||||||||
| 31+ Days | 10.87% | 10.25% | ||||||||||||||
| Repossession Inventory | 2.42% | 1.47% | ||||||||||||||
| Total Delinquencies and Repo. Inventory | 13.29% | 11.72% | ||||||||||||||
| Annualized Net Charge-offs as % of Average Portfolio (1) | 7.26% | 6.29% | 7.55% | 5.75% | ||||||||||||
| Recovery rates (1), (2) | 30.9% | 43.7% | 32.1% | 42.8% | ||||||||||||
| For the | For the | |||||||||||||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| $(3) | %(4) | $(3) | %(4) | $(3) | %(4) | $(3) | %(4) | |||||||||||||||||||||||||
| Interest income | $ | 88.37 | 11.3% | $ | 82.64 | 11.4% | $ | 172.66 | 11.3% | $ | 162.70 | 11.3% | ||||||||||||||||||||
| Mark to finance receivables measured at fair value | 5.50 | 0.7% | – | 0.0% | 10.50 | 0.7% | – | 0.0% | ||||||||||||||||||||||||
| Other income | 2.01 | 0.3% | 2.22 | 0.3% | 4.47 | 0.3% | 5.26 | 0.4% | ||||||||||||||||||||||||
| Interest expense | (46.71 | ) | -6.0% | (35.71 | ) | -4.9% | (88.68 | ) | -5.8% | (68.47 | ) | -4.8% | ||||||||||||||||||||
| Net interest margin | 49.17 | 6.3% | 49.15 | 6.8% | 98.95 | 6.5% | 99.49 | 6.9% | ||||||||||||||||||||||||
| Provision for credit losses | 1.95 | 0.2% | 9.70 | 1.3% | 3.59 | 0.2% | 18.70 | 1.3% | ||||||||||||||||||||||||
| Risk adjusted margin | 51.12 | 6.5% | 58.85 | 8.1% | 102.53 | 6.7% | 118.19 | 8.2% | ||||||||||||||||||||||||
| Other operating expenses (5) | (44.45 | ) | -5.7% | (40.25 | ) | -5.5% | (89.30 | ) | -5.8% | (81.16 | ) | -5.6% | ||||||||||||||||||||
| Pre-tax income | $ | 6.67 | 0.9% | $ | 18.60 | 2.6% | $ | 13.23 | 0.9% | $ | 37.04 | 2.6% | ||||||||||||||||||||
______________________
| (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. | |
| (5) | Total pre-tax expenses less provision for credit losses and interest expense. |
| 5 |