On July 31, 2024, Consumer Portfolio Services Inc (CPSS, Financial) released its 8-K filing for the second quarter of 2024. The company reported earnings of $4.7 million, or $0.19 per diluted share, compared to $14.0 million, or $0.55 per diluted share, in the same period last year.
Company Overview
Consumer Portfolio Services Inc is a U.S.-based company operating in the specialty finance sector. It purchases and services retail automobile contracts originated by franchised and select independent automobile dealers in the United States. The company provides indirect financing to sub-prime customers, facilitating sales to individuals with limited credit histories, low incomes, or past credit problems.
Performance and Challenges
For the second quarter of 2024, CPSS reported revenues of $95.9 million, a 13.0% increase from $84.9 million in the prior year period. However, the company's net income saw a significant decline to $4.7 million from $14.0 million in Q2 2023. This drop in net income is attributed to increased operating expenses, which rose to $89.2 million from $66.3 million in the previous year.
The reversal of provision for credit loss expense reduced operating expenses by $2.0 million in Q2 2024, compared to a $9.7 million reduction in Q2 2023. This indicates a higher credit loss provision in the current period, reflecting potential challenges in credit quality.
Financial Achievements
Despite the challenges, CPSS achieved notable financial milestones. The company purchased $431.9 million in new contracts during Q2 2024, a significant increase from $318.4 million in the same period last year. Additionally, the company's receivables grew to $3.173 billion as of June 30, 2024, up from $2.910 billion a year earlier.
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."
Key Financial Metrics
Key metrics from the financial statements include:
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenues | $95.9 million | $84.9 million |
| Pretax Income | $6.7 million | $18.6 million |
| Net Income | $4.7 million | $14.0 million |
| New Contract Purchases | $431.9 million | $318.4 million |
| Receivables | $3.173 billion | $2.910 billion |
| Annualized Net Charge-offs | 7.26% | 6.29% |
| Delinquencies > 30 Days | 13.29% | 11.72% |
Analysis
Consumer Portfolio Services Inc's Q2 2024 performance reflects a mixed bag of achievements and challenges. The revenue growth and increased contract purchases highlight the company's ability to expand its market presence. However, the significant rise in operating expenses and higher credit loss provisions indicate potential risks in managing credit quality and operational efficiency.
For value investors, the company's focus on controlled growth and improving efficiency, as stated by the CEO, could be a positive sign. However, the rising delinquencies and net charge-offs warrant close monitoring as they could impact future profitability.
For more detailed insights, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Consumer Portfolio Services Inc for further details.
