Release Date: February 26, 2025

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

Positive Points

• Consumer Portfolio Services Inc (NASDAQ:CPSS) reported a 14% increase in fourth-quarter revenues compared to the previous year, driven by strong growth in loan originations.
• Loan originations for the year reached $1.68 billion, marking a 24% increase from 2023, indicating robust demand and effective sales strategies.
• The company's fair value portfolio increased to $3.5 billion, yielding 11.3%, showcasing improved credit performance and portfolio growth.
• CPSS achieved a record portfolio balance of $3.41 billion by the end of 2024, reflecting successful expansion efforts.
• The company has strengthened its operational capabilities by hiring 42 new sales reps and expanding into new territories, setting the stage for future growth in 2025.

Negative Points

• Pre-tax earnings for the quarter decreased by 24% compared to the same period last year, indicating challenges in maintaining profitability.
• Net income for the year dropped significantly to $19.2 million from $45.3 million in 2023, reflecting financial pressures.
• Interest expenses continue to rise due to higher rates and increased securitization debt, impacting overall financial performance.
• Auction recoveries remain low at around 30%, affected by macroeconomic issues such as inflation and higher car values.
• The company's return on managed assets decreased to 0.9% for the year, down from 2.1% in 2023, highlighting efficiency challenges.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with CPSS.

Q: Can you elaborate on the changes in credit performance and how they have impacted your growth strategy? A: Charles Bradley, CEO, explained that 2024 marked a significant improvement in credit performance compared to 2022 and early 2023. This improvement allowed the company to set up for more aggressive growth in 2025. The focus was on ensuring better credit quality, which has now been achieved, setting the stage for a potentially strong year ahead.

Q: What were the key drivers behind the revenue increase in the fourth quarter and for the year 2024? A: Danny Bharwani, CFO, highlighted that the revenue increase was driven by strong growth in loan originations. The company originated $458 million in new auto loans in Q4, a 52% increase from the previous year, and $1.68 billion for the year, a 24% increase from 2023.

Q: How has the company managed its expenses, and what were the main factors affecting them? A: Danny Bharwani noted that expenses increased due to higher interest expenses and adjustments to the CPS portfolio for excess loan provisions. However, there was a significant decrease in loan provision adjustments from 2023 to 2024, which helped manage overall expenses.

Q: What operational strategies contributed to the growth in originations and portfolio balance? A: Mike Lavin, President and COO, mentioned that the company hired new sales reps and opened new territories, which contributed to the growth. They also expanded their large dealer group base and improved funding times, enhancing their brand with dealers and driving organic growth.

Q: How is the company leveraging technology to improve operations and credit performance? A: Mike Lavin discussed the use of AI-driven fraud scores and a new AI voice bot to enhance fraud detection and collections. These technologies have led to significant savings and improved efficiency, allowing human collectors to focus on more complex accounts.

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