Earnings Call: Consumer Portfolio Services Reports Strong Q3 Growth

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Earnings Call: Consumer Portfolio Services Reports Strong Q3 Growth

In the third quarter of 2024, Consumer Portfolio Services (CPS) reported strong financial performance with a significant decrease in troubled receivables and an increase in lending volume. Despite a decrease in pre-tax earnings and net income, the company showed robust growth in revenue on an annual basis and remains optimistic about future expectations, leveraging technology in a stable economic environment.

Key Points:

  • Consumer Portfolio Services earned $100.6 million in revenue in Q3 2024, a 9% increase year-over-year.
  • Lending volume rose by 38% to $446 million, contributing to year-to-date revenues reaching $288.2 million, reflecting an 11% increase compared to the previous year.
  • Pre-tax earnings and net income fell to $6.9 million and $4.8 million, respectively, compared to $14.2 million and $10.4 million in Q3 2023.
  • The company's fair value portfolio increased to $3.1 billion with an 11.3% return.
  • Despite a slight rise in annual net charge-offs, operational improvements include reduced funding times and increased same-day funding.
  • Ongoing improvements in credit performance, such as the Gen 8 credit decision model and AI-driven tools, are expected to ensure continued progress.
  • Economic outlook remains positive with stable unemployment rates and anticipated interest rate cuts by the Federal Reserve.

Company Outlook: Consumer Portfolio Services is confident about strong performance in the upcoming year, having made a solid start in October. The company plans to continue focusing on technology to enhance efficiency and reduce fraud losses.

Negative Highlights:

  • Pre-tax earnings and net income for Q3 2024 decreased compared to the same period last year.

Positive Highlights:

  • The company continued to grow without loosening credit terms and outperformed competitors in charge-offs.
  • Favorable economic indicators and a stable sector environment support significant growth potential in 2024.

Shortcomings:

  • There has been a slight increase in annual net charge-offs, currently standing at 7.53%.

Q&A Highlights:

  • The company discussed ongoing improvements in credit performance and the successful integration of a new AI fraud score.
  • The next earnings call is scheduled for February, with a replay available on the company's website.

Consumer Portfolio Services (ticker symbol not specified) demonstrated resilience in Q3 2024, leveraging advances in technology to maintain its competitive edge amidst economic challenges. The company’s strategic focus on operational efficiency and credit performance, coupled with a favorable economic environment, positions it well for continued success in the financial sector.

InvestingPro Forecasts: Consumer Portfolio Services (NASDAQ:CPSS) continues to demonstrate financial resilience and growth potential, as reflected in both Q3 2024 results and recent InvestingPro data. The company has a market capitalization of $207.22 million and a price-earnings ratio of 11.52, indicating a relatively attractive valuation compared to industry peers.

InvestingPro data reveals that CPSS has delivered a strong performance with a total price return of 16.26% over the last three months. This aligns with the reported 38% increase in lending volume and a 9% revenue growth year-over-year in Q3 2024. The current stock price is 83.14% of its 52-week high, indicating potential room for growth.

InvestingPro insights emphasize that analysts expect sales growth in the current year, aligning with the company’s positive outlook and strong start in October. Additionally, CPSS is expected to remain profitable this year, supporting its ability to invest in technology and operational improvements.

It is important to note that CPSS does not pay dividends to shareholders, but it has been profitable over the last twelve months with a diluted earnings per share of $0.87 from continuing operations. This profitability, combined with the company's focus on technology-driven efficiencies and credit performance improvements, positions CPSS well for future growth.

For investors seeking a deeper understanding of Consumer Portfolio Services' financial health and growth prospects, InvestingPro offers 8 additional insights, providing comprehensive analysis to inform investment decisions.