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CPS Announces Third Quarter 2020 Earnings

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Consumer Portfolio Services, Inc.
·9 min read
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  • 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.