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Consumer Portfolio Services Inc (CPSS) Q1 2024 Earnings Call Transcript Highlights: Navigating ...

Release Date: May 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Consumer Portfolio Services Inc reported a 10% increase in Q1 revenues year-over-year, reaching $91.7 million.

  • The company successfully raised $50 million in new residual money for growth capital and originations, indicating strong financial mobilization.

  • Renewal of a $200 million warehouse line, enhancing the company's liquidity and operational capabilities.

  • Recorded the highest portfolio amount in its 33-year history, reaching $3.02 billion as of March 31, 2024.

  • Introduced artificial intelligence scoring tools for fraud detection, significantly reducing synthetic fraud and saving over $1 million in the first quarter.

Negative Points

  • Net income decreased to $4.6 million in Q1 2024 from $13.8 million in Q1 2023, following higher interest expenses and decreased reversal of loss provisions.

  • Diluted earnings per share dropped to $0.19 in Q1 2024 from $0.54 in the same quarter the previous year.

  • Annualized net charge-offs increased to 7.84% of the total portfolio from 5.20% in Q1 2023.

  • Delinquency rates, including repossession inventory, rose to 14.55% of the total portfolio from 12.68% in Q1 2023.

  • Core operating expenses as a percentage of the average managed portfolio increased to 6% from 5.7% year-over-year.

Q & A Highlights

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Q: Can you provide an overview of the financial results for the first quarter? A: Danny Bharwani, CFO, reported that Q1 revenues were $91.7 million, up 10% from the previous year, driven by a fair value portfolio now at $2.8 billion net yielding 11.3%. Expenses rose to $85.2 million due to higher interest expenses and a decrease in the reversal of the loss provision. Net income was $4.6 million, down from $13.8 million last year, with diluted earnings per share at $0.19.

Q: How did the company's portfolio and originations perform in the first quarter? A: Michael Lavin, COO, highlighted that originations reached $346 million, with the portfolio growing to $3.02 billion, the highest in the company's 33-year history. This growth represents an increase from $2.97 billion at the end of the previous quarter.

Q: What strategic financial moves did the company make in the first quarter? A: Charles Bradley, CEO, mentioned that the company raised $50 million in new residual money for growth capital and originations. Additionally, they renewed one of their $200 million warehouse lines, positioning the first quarter as a pivotal moment for growth and recovery.

Q: What are the key operational metrics and initiatives that were focused on in the quarter? A: Michael Lavin discussed several operational improvements, including reducing the packers return rate to an all-time low, cutting deal funding time to under three days, and significantly reducing underwriting errors. These enhancements aim to boost dealer engagement and loyalty.

Q: How is the company addressing competition and market challenges? A: Lavin noted the fluctuating involvement of credit unions in the market, which impacts competition. He emphasized that despite these challenges, the demand remains strong, and CPS is well-positioned among the top industry players due to their strategic initiatives and robust portfolio management.

Q: What is the company's outlook for the upcoming quarters based on current performance and market conditions? A: Charles Bradley expressed optimism about the company's trajectory, citing strong beginnings in Q2 and potential opportunities for growth and margin expansion. He highlighted the importance of maintaining high volume operations to leverage potential future rate cuts, enhancing profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.