CPS Announces Third Quarter 2021 Earnings

·8 min read
  • Pretax income of $19.5 million, a 232% increase over the prior year period

  • Net income of $13.7 million, or $0.52 per diluted share

  • New contract purchases of $327 million, a 14% increase over the second quarter of 2021

LAS VEGAS, NV, Oct. 27, 2021 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $13.7 million, or $0.52 per diluted share, for its third quarter ended September 30, 2021. This compares to net income of $3.8 million, or $0.16 per diluted share, in the third quarter of 2020.

Revenues for the third quarter of 2021 were $68.6 million, compared to $70.7 million for the third quarter of 2020. Total operating expenses for the third quarter of 2021 were $49.0 million compared to $64.8 million for the 2020 period for a decrease of $15.8 million, or 24.3%. Pretax income for the third quarter of 2021 was $19.5 million compared to pretax income of $5.9 million in the third quarter of 2020, an increase of $13.7 million.

For the nine months ended September 30, 2021 total revenues were $198.4 million compared to $208.7 million for the nine months ended September 30, 2020, a decrease of approximately $10.3 million, or 4.9%. Total expenses for the nine months ended September 30, 2021 were $157.1 million, a decrease of $38.0 million, or 19.5%, compared to $195.1 million for the nine months ended September 30, 2020. Pretax income for the nine months ended September 30, 2021 was $41.4 million, compared to $13.6 million for the nine months ended September 30, 2020, an increase of $27.7 million. Net income for the nine months ended September 30, 2021 was $28.6 million compared to $17.5 million for the nine months ended September 30, 2020. 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 2021, CPS purchased $326.8 million of new contracts compared to $286.0 million during the second quarter of 2021 and $174.0 million during the third quarter of 2020. The Company's receivables totaled $2.161 billion as of September 30, 2021, an increase from $2.116 billion as of June 30, 2021 and a decrease from $2.250 billion as of September 30, 2020.

Annualized net charge-offs for the third quarter of 2021 were 2.82% of the average portfolio as compared to 6.39% for the third quarter of 2020. Delinquencies greater than 30 days (including repossession inventory) were 9.44% of the total portfolio as of September 30, 2021, as compared to 10.29% as of September 30, 2020.

On October 20, 2021, the Company purchased 1,999,995 shares of its stock for a purchase price of $12.5 million. The shares were acquired by the seller in 2018 upon the exercise of a warrant that the Company issued to its lender upon the 2008 amendment and partial repayment of outstanding debt under a residual interest financing. The shares purchased, which represent approximately 8.7% of the common shares outstanding prior to the transaction, have been cancelled and retired.

“We are pleased with our results for the third quarter,” said Charles E. Bradley, President and Chief Executive Officer. “We originated $327 million of new receivables in the quarter, our second highest total ever. Investments in our servicing platform have led to some of the best credit performance metrics in our history. In addition, after the quarter ended, we made a significant commitment to our shareholders by repurchasing approximately two million shares of our stock.”

Conference Call

CPS announced that it will hold a conference call on Thursday, October 28, 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 9262788.

A replay of the conference call will be available between October 28th and November 4th, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 9262788. 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,

2021

2020

2021

2020

Revenues:

Interest income

$

67,018

$

72,582

$

198,551

$

227,271

Mark to finance receivables measured at fair value

-

(3,152)

(4,417)

(23,051)

Other income

1,547

1,239

4,312

4,508

68,565

70,669

198,446

208,728

Expenses:

Employee costs

18,170

19,155

57,777

60,826

General and administrative

7,455

7,846

23,034

24,352

Interest

18,334

24,901

58,260

78,377

Provision for credit losses

(1,590)

7,400

(1,590)

14,113

Other expenses

6,649

5,478

19,599

17,416

49,018

64,780

157,080

195,084

Income before income taxes

19,547

5,889

41,366

13,644

Income tax expense

5,864

2,121

12,807

(3,888)

Net income

$

13,683

$

3,768

$

28,559

$

17,532

Earnings per share:

Basic

$

0.59

$

0.17

$

1.25

$

0.77

Diluted

$

0.52

$

0.16

$

1.12

$

0.74

Number of shares used in computing earnings

per share:

Basic

23,011

22,666

22,866

22,630

Diluted

26,218

23,908

25,439

23,825


Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 30,

December 31,

2021

2020

Assets:

Cash and cash equivalents

$

28,799

$

13,466

Restricted cash and equivalents

144,966

130,686

Finance receivables measured at fair value

1,667,193

1,523,726

Finance receivables

282,640

492,133

Allowance for finance credit losses

(68,724)

(80,790)

Finance receivables, net

213,916

411,343

Deferred tax assets, net

24,100

28,512

Other assets

27,625

38,162

$

2,106,599

$

2,145,895

Liabilities and Shareholders' Equity:

Accounts payable and accrued expenses

$

51,921

$

43,112

Warehouse lines of credit

97,768

118,999

Residual interest financing

64,589

25,426

Securitization trust debt

1,703,465

1,803,673

Subordinated renewable notes

27,462

21,323

1,945,205

2,012,533

Shareholders' equity

161,394

133,362

$

2,106,599

$

2,145,895


Operating and Performance Data ($ in millions)

At and for the

At and for the

Three months ended

Nine months ended

September 30,

September 30,

2021

2020

2021

2020

Contracts purchased

$

326.85

$

174.02

$

818.34

$

575.88

Contracts securitized

300.00

260.00

785.00

741.87

Total portfolio balance

$

2,161.50

$

2,250.39

$

2,161.50

$

2,250.39

Average portfolio balance

2,142.96

2,270.55

2,133.43

2,353.59

Allowance for finance credit losses as % of fin. receivables

24.32%

16.32%

Aggregate allowance as % of fin. receivables (1)

24.76%

18.02%

Delinquencies

31+ Days

8.44%

8.85%

Repossession Inventory

1.00%

1.44%

Total Delinquencies and Repo. Inventory

9.44%

10.29%

Annualized Net Charge-offs as % of Average Portfolio

Legacy portfolio

3.75%

14.09%

7.06%

12.20%

Fair Value portfolio

2.67%

3.46%

3.16%

4.54%

Total portfolio

2.82%

6.39%

3.85%

6.93%

Recovery rates (2)

56.5%

45.1%

52.2%

37.8%


For the

For the

Three months ended

Nine months ended

September 30,

September 30,

2021

2020

2021

2020

$ (3)

% (4)

$ (3)

% (4)

$ (3)

% (4)

$ (3)

% (4)

Interest income

$

67.02

12.5%

$

72.58

12.8%

$

198.55

12.4%

$

227.27

12.9%

Mark to finance receivables measured at fair value

-

0.0%

(3.15)

-0.6%

(4.42)

-0.3%

(23.05)

-1.3%

Other income

1.55

0.3%

1.24

0.2%

4.31

0.3%

4.51

0.3%

Interest expense

(18.33)

-3.4%

(24.90)

-4.4%

(58.26)

-3.6%

(78.38)

-4.4%

Net interest margin

50.23

9.4%

45.77

8.1%

140.19

8.8%

130.35

7.4%

Provision for credit losses

1.59

0.3%

(7.40)

-1.3%

1.59

0.1%

(14.11)

-0.8%

Risk adjusted margin

51.82

9.7%

38.37

6.8%

141.78

8.9%

116.24

6.6%

Core operating expenses

(32.27)

-6.0%

(32.48)

-5.7%

(100.41)

-6.3%

(102.59)

-5.8%

Pre-tax income

$

19.55

3.6%

$

5.89

1.0%

$

41.37

2.6%

$

13.64

0.8%

(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.


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