Consumer Portfolio Services Inc (CPSS) 2005 Q4 法說會逐字稿

Welcome to the Consumer Portfolio Services 2005 fourth quarter and full year earnings release conference call. Today’s call is being recorded.

Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements are subject to certain risks that could cause actual results to differ materially from those projected. I refer you to the company’s SEC filings for further clarification. The company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise. I will now turn the call over to your host, Charles E. Bradley, Chief Executive Officer of Consumer Portfolio Services.

Thank you very much, and welcome everybody to our fourth quarter conference call, and also year end conference call. First off I think you can see by the release and the numbers that we did have a nice quarter, and therefore the year worked out very well for us. ’05 was probably the first really significant step forward. We’ve been working at it, and working at it in terms of getting the company turned around, and ’05 certainly showed those results. The company is now really rebuilt, we’re almost looking a lot more like the days before the fallout in the industry, which we’ll call ’96, ’97, ’98, and right now the way the company’s running and the numbers we’re beginning to produce are beginning to match that kind of timeframe as opposed to the last five or six years.

So we’re really happy about that. Overall I think a lot of things we’ve hoped to have happen have happened in ’05, and we’re again hopefully going to keep that going in ’06. I’ll run through some of the numbers.

In looking at the revenue we had nice revenue, we did $54.7 million in the quarter, that’s up a little bit from $49.4 million in the previous quarter and up significantly from $37.6 million in the year ago quarter. For the year the revenue was $193.7 million, and that’s up from last year of $132 million. So you’re beginning to see the revenue growth we’d expect now that everything’s on balance sheet and we’re beginning to generate much more portfolio than we have in the past.

In terms of the expenses, the quarterly expenses were $53 million, that’s up a little bit from September of $48 million and up a little bit from last year’s quarter of $49.8 million; year to date $190 million versus $148.6 million for a year ago. Now remember in looking at the expenses it’s a little apples and oranges, but you still have some affect from the accounting change. But more and more the things to look at in terms of the expenses is the provision expense along with the interest; and the two drivers would be the interest income is what creates obviously the revenue, and then the provision is what creates the expense. So as much as we can do a pretty good job, as you’ll see a bit later, we have in maintaining the core expenses the overall expense category is going to continue to climb based on increased provision.

Speaking of the provision, the loss provision for the quarter was $15.6 million, down just a touch from $15.8 million in the previous quarter, but up from $12 million a year ago. The provision for the year was $59 million, up from $32.6 million. Just for anybody who wants to compare these kinds of numbers to gain on sale, with the gain on sale there would be no provision. So that $59 million for the year of ’05 would have never been an expense at all and you wouldn’t have had that coming off of your revenue items.

In terms of the net income, the quarterly net income was $1.7 million, up a little bit from $1.4 million, and we had a much better quarter compared to last year when we lost $12.2 million based on the write-off. For the year, the year-to-date earnings were $3.4 million, again compared to the year based on the fourth quarter write-off of ’04 of $15.9 million lost. So ’05 easily is our first significantly profitable year in several.

Earnings per share was $0.07 for the quarter, up $0.01 from $0.06 last quarter, and up significantly from the $0.57 loss in the fourth quarter. Earnings per share for the year were $0.14 versus last year of $0.75 loss.

In terms of cash, cash on the balance sheet is $175 million, up from $164 million last quarter and up from $139.5 million a year ago. The cash continues to build as we build this portfolio because a lot of that cash goes into those securitizations, and as the portfolio grows and we grow and generate more paper that number will continually go up. In many ways that cash is just an investment in the portfolio’s future and comes back to the company over time to be reinvested. So really you’re just churning that cash, but that number will continue to rise as we continue to grow.

Looking at the finance receivables, they stand at $971 million with an allowance of 57.7 for net finance receivables at the end of December for $913.6 million. That’s up from $816 million in the previous quarter, and up from $550 million a year ago.

In looking at the debt, the debt is now on the balance sheet so you’re going to continue to see the debt rise. The securitized debt for the quarter was 924 over the year, that’s up from the previous quarter of 804, and up from a year ago of 542. That debt goes hand in hand with keeping the portfolio on the balance sheet, so you’d expect that to continue to grow since it’s now all on balance sheet as opposed to off.

Probably more importantly is the long term debt ended up at $58 million – excuse me, really the way to look at it, the more accurate way, the long term debt plus residual debt, at the end of December that number stood at $102.4 million up a bit from $76.8 million in the previous quarter, and then only up a very little bit from the previous years $97 million.

Probably one interesting way to look at how we’re using our money is we only raised or increased our long term debt by $5 million year-over-year, but we’ve almost doubled the size of the portfolio, and obviously the portfolio is the revenue generating component of the business.

Looking at the portfolio performance numbers we’re very pleased from the management’s point of view at the way the portfolio has performed, both for the fact that we’ve been growing steadily and also the way that all the things we’ve worked on over the last five years in terms of collections and the strength of our collections operation are really bearing fruit, in that we’re able to grow quite a bit and not only maintain the collection and the delinquency and loss numbers, we’re actually improving them, which is sort of neat trick to be able to do in a very good growth environment.

The delinquency in December of ’05 ended at 4.86 that’s up slightly from 4.72 the previous quarter, but down from 5.14 in the year ago quarter. What’s important is the fourth quarter is almost always the worst quarter for delinquency, people for whatever reason are busy thinking about Christmas. So to have our delinquency be at 4.86 for the quarter for that year end period is very, very good.

In looking at the annualized losses, the year end annualized losses were 5.69% that compares to 4.41% for the third quarter and down from 6.19% for the year ago quarter. So again, same sort of trend; it’s up from the third quarter but down, even significantly, from the fourth quarter last year. I probably can’t emphasize enough how pleased we are with the collection performance and the overall delinquency and loss performance. Again because we’re growing and everything just happens to be really going the right way for us there.

In looking at the portfolio the consolidated portfolio stood at $1 billion in December of ’05, that’s up from $900 million in the previous quarter and up from $619 million in the year ago quarter. Just for reference, two years ago that consolidated portfolio stood at $315 million. So that’s really the growth you can see. The non-consolidated portfolio, which is another way of looking at the old accounting, because the non-consolidated consists mostly of the gain on sale part of the portfolio, that non-consolidated part stood at $103 million in December down from $130 million the previous quarter, and down from $233 million a year ago, and down from $425 million two years ago. So you can see that trend, we’ve commented on this trend before. That number has come down from 425 two years ago to 100 now, it’s running off very quickly. In another year or so it should be gone.

The overall portfolio stood at $1,121,000,000 at the end of the year, up a little bit from $1,050,000,000 at the previous quarter and $906 million at the year ago quarter. In terms of looking at the percentages, the consolidated portfolio stands at 89%, non-consolidated at 9% and the C-West Servicing portfolio is now 2% of the overall service portfolio.

One of the things we tried to do in this whole growth period is we needed to find a way, we needed to get some growth in there and to build the portfolio to make up for the loss of the subsidiary portfolios we bought during those acquisitions, particularly the Mercury portfolio and the TFC portfolio. The Mercury portfolio for all intents and purposes is now gone, the TFC portfolio has shrunk dramatically but will maintain since we are in fact continuing to originate some TFC paper. But one of the things we might have had a problem with would be if the purchase portfolios ran off too quickly and we weren’t able to replace them with our own internal growth you’d have a dip in the portfolio. We’re pleased to report that that wasn’t the case and we were able to find the growth and grow the business, easily as a matter of fact, to replace the runoff of those acquired portfolios.

In looking at some other important metrics, the net interest margin for the quarter was $34 million compared to $31.8 million in the previous quarter and $21.4 million in the year ago quarter. Year-to-date it was $120 million versus $73.7 million the previous year. That’s really sort of the income element of the portfolio, of the income statement. That’s where we’re going to generate what’s going to turn into the profits.

Another way to look at that exact part of the risk adjusted margin, which is the net interest margin less the loss provision, for the quarter that number was $18.4 million, up from the previous quarter of $16 million, and up from the year ago quarter of $9.4 million. Year-to-date it was $61.2 million, up from $41.1 million in the previous year; again you can see rather significant growth in those numbers year-over-year, and even quarter-to-quarter. We would expect those numbers to continue to grow along those lines.

The core operating expense, which is the interest loss provision impairment for the quarter it was $21.6 million, up a little bit from $18.6 million in the previous quarter and $18.4 million in the year ago quarter. Year-to-date it was $79.7 million, up from $72.1 million. The core operating expense as a percentage of the managed portfolio increased a little bit to 7.7% as a percentage of the portfolio this quarter and year end, compared to 7.1% for the third quarter and 8.1% for the year ago. So it’s down overall year-to-year, up slightly because you pay the staff bonuses and things like that. There’s some other expenses in the fourth quarter that bring that up slightly. We would again expect to see that number, which in the past has been as high as 11% or 12%, to continue to decrease over time.

In looking at some of the things we did in the fourth quarter since the last conference call, we did announce that we added a new warehouse line provider in the form of Bear Stearns. There line is for $150 million. We view Bear Stearns as a very important partner to us as we go forward. They’re a big firm with lots of access to the capital markets and we think it’s a real step up from what we were doing. We’re very pleased to have signed them up.

We also closed our second residual transaction in the amount of $46 million that would be another indication that the capital markets are strong. We were able to do that deal easily and it shows that we have continued access along those residual deals. It’s something we’ve worked on doing, and now that we’ve done two of them we’re beginning to have a nice stream of being able to do more in the future.

We also did two securitizations in the fourth quarter, we did sort of what a normal securitization would be at $145 million, and then we did another securitization, which is mostly TFC paper, of $85 million. But again those securitizations went off very well. We would probably, in ’06, expect to only do four securitizations, so we may have an extra one in there at some point.

Looking at the portfolio, CPS paper has become the predominant paper in our portfolio today, and that portfolio probably, I can keep saying it, but I certainly can only emphasize how well it’s doing. But it’s performed wonderfully in ’05 and we’re very pleased with the projected performance and every aspect of how that paper is performing. The Mercury paper, as I mentioned, is now probably just about run off, so that acquisition is now sort of brought to a conclusion. What we call Mercury finance, MFN or the Mercury acquisition as well call it, has done very well for us. The portfolio helped keep our collection structure in place during the leaner times, it worked out to be a very good deal overall, but that paper is now just about gone.

The TSC portfolio performs very well, we wish we could actually grow that portfolio some more, because the military aspect of it really performs well. It is continuing to shrink as the volumes generated are not as much as they were when we first acquired the company, or when the company functioned on its own. We would work at continuing to grow that, or try to grow it somewhat, but the overall performance of that paper has been exceptional.

In terms of the C-West portfolio, that portfolio is running off rather quickly. It has been somewhat of a challenge in terms of collections, but actually a good challenge, because we’ve actually been able to do a very good job with it. It’s one aspect of how well our collections did this year. But now, at this point the portfolio is very well in control in terms of its performance and we actually might get better performance than we’d expected, going forward.

In terms of looking at the industry, I think the industry has really stabilized over the last three to six months. There really haven’t been any new competitors coming in. The competitors that are here are well financed, they’re strong competitors in the sense that we don’t have to worry about them doing a bunch of stupid things in the industry, causing any industry problems. As much as we, you know, would like the industry to be favorable to us, having strong competitors in the industry only helps us at this point. We don’t want anyone coming in and sort of messing up the program for everyone else. It really appears that there are strong barriers to entry now and there really hasn’t been anyone coming in. It’s kind of like we like the people we’re with and we want those companies to do well and have us all be successful.

In looking at car sales, that’s probably maybe the more interesting topic today. With all the things coming out of Detroit, the big three are having problems. Overall, new car sales are probably down or flat. What’s interesting, though, is what that has done and we’re really starting to see, in the last three or four months, is by having new car sales struggle and be flat or down somewhat, it’s causing the dealerships to really focus on other ways to make money and to focus on used car sales. As a result of that, the amount of used car finance, the amount of business we’re seeing has grown exceptionally in the last three to four months.

So, as much as, you know, objectively, or whatever you could say, that gee, the overall car industry is not doing as well, one of the things we’ve always said is what we do as we finance basic transportation. We’re financing the car that guy needs to have to get to work. By and large, those cars are bought because they’re replacing cars that don’t run anymore. And so, you’re really not as bound by new car sales.

New car sales are 20% of our overall business. That number is off slightly this quarter, but it’s just not a big enough piece so that problems in the new car sales or coming out of Detroit are going to affect us all that much.

If anything, it’s really a boon to our business because it’s increased used car sales on the one hand, and, almost more importantly, it’s put an enormous focus on the dealerships, particularly the franchise dealerships, to find other ways to make money. And so, prime finance is more profitable than new car finance. As a result of that, business has been very brisk.

Also, the capital markets, the capital markets are probably as strong as they’ve been. When we look at, you know, the appetite in the capital markets for our paper and for the debt and things like that, it really hearkens back to days of 1997, 1996; it’s a very robust market. It’s a good time for us to access the capital markets, which we’re going to continue to do. But, it’s really about as strong as it’s been in a very long time and the timing couldn’t be better for CPS.

And looking at CPS as a company, we are continuing to grow. Lately, we’ve experienced a record amount of growth. The month just ended, in February, was probably the best originations month we’ve had in almost seven or eight years. So, as I said, it’s almost, in many ways, getting back to the 1997 and 1998 kind of origination levels. We’re very pleased with those results. With all the controls we’ve built in over the last few years and the automation and the scoring we have in originations, it should be very easy for us to handle this growth and maintain credit quality. And, as I mentioned earlier, the results, given that we’re in a pretty good growth cycle, have been very, very good.

Also, obviously since the year has ended, the audit went through without any problems. Everything along those lines appears to be going very well.

Overall, things are, you know, it was a good quarter, a very good year. ’06 is starting off gang bang, so it’s really done very well. So, we’ll open it up for questions.

[OPERATOR INSTRUCTIONS]

Thank you. Our first question is coming from John Hecht, from JMP Securities.

Hi, how are you guys? Thanks for taking my questions and congratulations on a solid quarter. Real quick, can you comment on – did you see any bullets in the fourth quarter from bankruptcy legislative changes? And, are you seeing in normal credit trends, recoveries in the first part of this year?

In addressing the BK part first, there was a blip. And I guess there are maybe two schools of thought on what the bankruptcy law would do, one would be, with increased bankruptcies on a continuing ongoing basis, which it has not done. What we saw really, what it looks like, if you look at the chart in mapping out the bankruptcy finds within our portfolio, it took about two months where the people that might’ve – I can’t quite remember when the law changed, but assuming it changed in October, you took everyone who was going to file anyway in November and December, and they filed in October, because right after that one month, it normalized almost immediately, within 60 days. So, the bankruptcy law change had little or no effect, in terms of the overall way we look at bankruptcies or anything like that, which is probably what we expected anyway.

In terms of the used car market going forward, the year has started off much like originations, doing very well. The recoveries probably far exceed what we expected so far this quarter. The auctions probably are the strongest they’ve had, which sort of goes hand-in-hand with the fact, as I said, that the dealerships are now focused more on selling used cars. So, the auction prices are going to be better, therefore, our recoveries are going to be better. So, again, we’re seeing very positive things from that end as well.

OK. With the recent securitization, can you comment on both spreads and over-collateralization requirements?

The over-collateralization requirement came down just a touch. The spreads were about standard from what we normally do. They didn’t really widen or shorten, particularly.

Normally the spreads, in all fairness, the spreads could jump around 10 basis points and it wouldn’t be an enormous change to our overall model. They didn’t do anything wider than that, by any stretch. I guess the way we look at it, as long as they’re moving within a band of 10 or 20 basis points, it’s not that big a deal. I think lately, they’ve been well within the 10-point band.

OK, and then the last question is it seems like you guys are off to a solid start in ’06, with respect to originations. Can you comment on how much of this might be an industry-wide phenomenon? And then, how much of it is the fact that you guys have added a lot of marketing reps nationwide and where you might be seeing some marketing share gains?

That’s a very good question; it’s something we’re trying to figure out ourselves. I think, on the one hand, this is generally a time of year that the whole industry grows. I think everyone experiences growth during this part of the year, which we’ll call loosely the spring, generally, speaking, the end of the first quarter and the beginning of the second quarter.

Having said that, almost always, historically, you see a little bit of growth in February, a lot of growth in March and then a significant growth in April. This year, we saw the growth take off immediately in February. So, the growth came early. I don’t know whether that’s the same for other lenders, but certainly for us, it appears as if this could be a pretty big growth phase on a year-to-year comparison.

As to our company individually, having just said that part, you know, there is something to be said that we’ve been busily hiring and expanding our marketing rep base in the last six to nine months. And it does take some amount of time, in the range of three to six months, for those reps to get up to speed. And so, we may be experiencing both sort of part-A, generally annual growth during this period and part-B, the fact that a lot of those marketing reps that we’ve hired over the last six to nine months, are, in fact, really beginning to produce.

And maybe that’s the extra push. The easy answer is, we’re not going to – we’re very pleased with that and we’re going to see what we can do to keep it all going. But I think a lot of it is probably both. It’s probably that it is the time of year when there is a lot of growth.

I think, maybe the third factor is when I mentioned earlier, in that, the dealers are focusing on used cars. And, so you get - this is a good time of the year anyway, you’ve got an increased focus at the dealership to sell used cars, which again comes our way. And, in CPS’ instance, we’ve added a lot of marketing reps. So our market, you know, presence in many areas has probably increased. It’s somewhat of a pleasant perfect storm, probably.

Great. Thank you very much.

Our next question is coming from Casey [Ambrecht], of Millennium.

Hi Brad. Thank you for taking the question. I think it’s a great quarter. You know, we really like what we’re seeing here and we’re pleased with the commitment the company has to a disciplined growth.

So, I have just a question for you. Right now, you just crossed the $1.1 billion mark. Where do you think the company is going to be in three years, in three years, would you say in terms of portfolio size?

Again, I mean, it’ll probably be a little easier to answer that question next quarter. We really have to see, right now, where the originations growth flattens out for this year. We are probably, you know, somewhat ahead of expectations, certainly for the growth in the originations line for this year. I guess one way to look at it; in ’04 we originated $450 million. In ’05, we originated $700 million. We might, if things continue to go, originate $1 billion this year.

Having said that, if we did that and that tend continued into next year, you could get to a $2 billion portfolio, probably somewhat sooner than we might have thought. Again, the problem is what do you use as your tend line? If you were going to pick a high end and we really said you could sort of knock it out of the park, across the board, you could say we could do $100 million a month this year, $150 million the next and $200 million the year after. That would be very significant.

You can’t, in terms of how you run the company, manage your expectations, both in terms of the way we do things around here. I think our growth levels are probably significantly, or at least our forecast growth levels, are significantly less than that. For instance, this year, our target is in the $80 million to $90 million range, and we’re looking at that pretty [telephone line gap] right now.

$80 million to $90 million per month?

Per month. And, you know, we think that [inaudible] of the future is very bright. In terms of where we’re going to be, the growth could be substantial, if this trend continues over the next couple of years.

OK. That’s great. And then, is there any update on, I don’t know if you commented on, I might’ve missed it, but do you guys have any update on Katrina-related exposure?

We didn’t say anything, but we certainly will now. The Katrina thing is, at this point, is sort of back into – there was a time, right after Katrina, where most of the Katrina loans were collected out of one branch in particular. That branch certainly had their hands full. They now are reporting they’ve got all of the borrowers contacted and, you know, it’s almost sort of back to the normal collections on that paper.

Probably, our exposure, or you know, the increased loss may be $1 million to $1.5 million, on the outside. And, that’s saying if nothing got better or these guys didn’t come along. So, you know, it’s really not that big a deal today.

OK.

It worked out very well, would be the easy answer.

OK, and then, you know, looking at your company, I mean, you’ve taken a company that’s gone, you know, from nothing to 20, back to under a dollar, now back to almost 7. What do you look at right now as your biggest concern and how you try to, you know, avoid some of the issues that hit the industry before?

I think, probably, where now it used to be, within the last few years, getting the company put back together, getting the financing and the capital markets and we’ve done most of that now. So, we really kind of handled all that. So now, you almost go back to what your normal concerns were back in ’97, ’96, which would be just managing the growth. And probably, the real benefit we have today, that we didn’t have then is just a massive amount of automation and controls that probably weren’t even close to developed to the extent they are today.

So that keeps you, in many ways you can see things coming far easier. You can keep things from coming in, in terms of originations that you don’t want far more easily, and it’s all automated. So, there’s no real human element to it.

But you know, still I think, we probably have been waiting to get to the growth level we are at today and that is one we can handle. I think, as we go forward, we’ll just look carefully to make sure everything is lined up in terms of the capital market access, in terms of cash on hand, in terms of the quality controls; just to make sure, as we grow, before we grow too much more that it’s all doing just fine.

But really, if we have a concern, I mean, there are two concerns. One is, that we do everything I jus said correctly. [Inaudible-two people talking at once].

Yes.

Two that the world doesn’t fall out on top of us again. I mean we don’t need, you know, a 9/11. You don’t need any horrible thing to happen that could really cause the capital markets problems. I guess, you know, Detroit’s having some issues. They really aren’t extending to us. The mortgage industry is having some issues. That isn’t extending to us. Those are a couple of things we were watching. So right now we would have to look for kind of a left field problem and unfortunately you can’t do anything about it, but that would be the only thing we’d be somewhat wary of.

OK, and then just one last question. Right now there doesn’t seem like there’s many players left in the industry. What’s your thought on consolidation? It seems like there’s been some favorable comments made by some larger players like Cap One, just on terms of discipline in the market and favorable fundamental trends. Do you expect more consolidation, because not many companies are left?

Well we’ll do that in three levels; the first level is when we did our transactions it all worked out really well. Certainly from our acquisition point of view consolidation has worked very well. It certainly worked well for us. I also heard that the companies that – and there’s certainly been many other acquisitions in the last six months, and from what I understand all those have worked out very well. Some are still in the process, but certainly it appears that it’s all very positive.

So having said that you’re absolutely right; the neighborhood has gotten a little thin out here, particularly in terms of independents. I would think that there’s certainly a potential for a consolidation to continue. Being how we’re one of the little trees left I’m not so sure we want it to continue too much, but you never know. So I think you’ve got the three parts; one, it worked well for us, so we have personal experience that the consolidation acquisitions do work. We certainly see globally that it appears to work for anyone else, and I would therefore think, given the capital markets and the fact that people are looking for ways to generate assets; sub prime auto is one of the big asset generators. You could foresee future consolidation.

OK. Brad thanks very much.

Thank you very much Casey.

Our next question is coming from Clare Baum of Wachovia Securities.

Yes, hello. Just a question on your restricted cash. I know vaguely what that referred to, my question is, will that as percentage drop, are you able to negotiate lesser restriction? I presume that goes back to the ’98 – ’99 situation, and furthermore do you receive reasonable interest on that, or is it daily funds type of interest? Just how is it handled?

I think we’ve been getting a little bit of improvement in terms of the amount of restricted cash in each securitization. As the portfolio continues to perform we would expect that to continue to drop, though we’re getting into the neighborhood – because of what happened in the past and probably the conservative nature of the rating agencies, probably the requirements started off high. They have come down steadily as both our longevity continues and our portfolio performance continues, and so we would expect continued improvement. Having said that I think we’ve picked up a bunch lately and it will be incremental we’ll slow down some, though we will continue to get more. So that part’s very good.

In terms of what we make on it, in terms of the interest, that’s not all that good. Currently it’s about 3%, but again that’s just part of the way it works, there’s nothing you can really do in terms of what you can get out of that. But we think it’s all working out quite well.

OK good. The only other thing, I’m looking at your debt, I know you paid off the bonds at the beginning of the year, did you have to replace that debt or is that now gone?

We paid off some of the bonds at the end of the year, we did it with a portion of the residual financing we did. The good news with using residual financing to replace long term debt is residual financings pay themselves out, whereas long term debt almost in all cases have been bullets. So you either have to go out and do another refinancing of those long term debt pieces, but to the extent we’ve been replacing them with refinancing over the last two years, which we have, that money then gets paid out and it’s amortizing very quickly resulting in a lower overall debt.

Then the final, what’s your fully diluted number of shares? Is it around 30 million?

No, it’s not that high.

It’s more than 24, isn’t it?

It’s probably about 23.5.

So that’s your fully diluted number?

That is, yes.

All right, thanks.

[OPERATOR INSTRUCTIONS]

Our next question is coming from Ken Liddy of Wachovia Securities.

Congratulations on the excellent year.

Thank you Ken.

You’ve come a long way.

And it’s nice to have had you here all along.

I’m pleasantly surprised to hear a lot of other questions. I just had a question with regard to the seasonality of your earnings per share. All things being equal, and I know they’re never going to be equal, but all things being equal is the December going to be a little bit worse margins than the rest of the year?

Yes, that would be a fair way to look at it. If you think about it, it sort of makes sense. Like I say you have to pay staff bonuses and a few little things like that. The other thing you probably have is you’re going to do the audit and to the extent there’s any adjustments in the audit they’re going to come through in the fourth quarter, and you probably do whatever little amount of housekeeping you would do in the fourth quarter. We haven’t had much in the way of changes certainly this year, but for instance not to bring it up, but maybe for the last time, you know we took that big write down in the fourth quarter last year just because that was something it seemed like the time to do, but that would be a fourth quarter event.

So yes, I would say certainly again thinking about it before I say it, I would say the fourth quarter routinely should be the weakest of the four quarters.

Great. Now how has it been going getting some other firms following, I guess the Roth Capital Growth conference has some enthusiasm or renewed interest.

We’re certainly really focused on that aspect of the business; we would like to get some more coverage. We were at the Roth conference. I think if it’s an indication we hadn’t been to a Roth conference in five or six years if not more, and we had a pretty full room, which might have surprised us slightly. So certainly people are interested in the story, we are diligently working with many different groups to get some coverage. We would fully expect the amount of coverage we have, which everyone should know stands at one, should improve this year. But we are, as I said in the past and maybe I have to apologize, because in the past I said “We’re going to get there, we’re going to get there”, and we’ve had to delay it as things changed. Now we are really focused on getting out in the market and talking to more analysts and more investors. So certainly one of the big projects in ’06 is to expand that coverage, expand the holdings and things like that.

As far as the revenue numbers are concerned, do you have any type of parameters or goals for 2006, for 2007 that you’d like to share with us?

If you ask me that next quarter we might be able to give you a little more indication. Currently we’re really in the middle of the big growth thing so whatever I could give you would be really off the cuff. The easy answer is we expect things to go rather well and continue along the trends we’ve been showing. I know that’s not a great answer, but it’s a) the safest; and b) a good way to look at it.

One last question. I saw there was a transaction for VFC, a Canadian company in your space. I was wondering if they were at all a competitor of yours.

We probably wouldn’t expect to see them as much as a competitor. It’s certainly interesting to see that Canada is beginning to look at sub prime auto, not that we need any more places to go, but it’s a whole other market. They could be we don’t see them at all. Whether now that they’ve done the acquisition they show up and try and get in the market, they might. But again, the market is very, very large. The market is as much as 50 billion annually in America, which is easily the biggest player at 10 or 12 at most. So there’s plenty of room for them and if they’re a good strong company or bank, and they don’t buy too aggressively or foolishly, we more than welcome them. Sort of; I’ll say that.

We know the truth.

Put it another way, we’re not real worried.

OK great. Well once again congratulations and it’s been a really amazing last five years.

Thanks very much.

Our next question is a follow up from Clare Baum of Wachovia Securities.

I just wanted to follow up a little bit more on that restricted cash. Am I understanding that we’ll say you go to your $2 billion that the restricted cash would probably go up proportionately from here? I guess I would have thought the cash would finally be freed up. Frankly what I’m thinking of is eventually using the cash for maybe a little dividend here and there, that’s really where I was going with it.

OK well let me see what I can do. When we started out most recently, a year or two ago, the initial enhancement level was 19.25 growing to 23.25, that has come down to 15% growing to 20%. So both the front end numbers we initially have to put into the securitization in the form of restricted cash, and then it grows by trapping cash, to that next number. So our initial outlay has dropped 4% and our ending outlay has dropped 3%. We would expect those numbers to continue to come down, I’m not sure how far down, but more.

Then the next part, in terms of what you’re thinking about, is initially we’re going to be putting in less cash, but as we continue to grow it’s still going to be there as a percentage of the overall portfolio no matter how big it is. As sort of an easy piece of math we might say, take the portfolio size of 1 billion or 2 billion and you’re going to say it’s going to have 20% in terms of reserves against that portfolio, because that’s what keeps the ratings in place and so on and so forth.

That number should stay relatively consistent. In terms of the actual dollar amount of course it will continue to grow. The third part probably is, as that cash goes into those securitizations those securitizations build to that 20% level and then the cash is released. That then becomes a static number based on the size of the portfolio. So all the cash really just comes back out and we turn right around and put it in another securitization. So what you’re really doing is kind of churning the money, remembering that the portfolio is of course generating money as well.

So over time you’re going to have increased cash generated from the portfolio but you’re always going to be putting it back in, maybe at a slightly reduced level over time. In answer to the last part, we’d love to have a dividend, but as long as we’re growing 25% annually probably we’re more of a growth company.

OK very good.

Thank you. At this time I would like to turn the floor back over to Mr. Bradley for any additional or closing remarks.

Well thank you all for the questions. In wrapping up we think ’05 has been an excellent year, we’re very pleased with the way things have gone. As a few of you commented it has been a little bit of a long road and it’s nice to get to where we wanted to be. One of the parts, I think I mentioned, in the last couple of quarters we were missing is we wanted to get that growth. well we now have the growth, so ’06 we have some bright prospects in front of us, it’s always fun to do the final year end conference call because we do it right around now and basically we’ll have another one in another five or six weeks. Actually six or seven weeks, but much sooner than normal.

So again the first quarter is going well, we expect ’06 to be a good year, and we’re very positive on all aspects, both behind us and going forward. Thanks for attending and I will speak to you in about six weeks.

Thank you. This does conclude today’s teleconference. A replay will be available beginning an hour from now, until Wednesday March 8, by dialing 877-519-4471 or 973-341-3080 with pin number 7091872. A broadcast of the conference call will be available live for 30 days at the company’s website at www.consumerportfolio.com, and at www.streetevents.com. Please disconnect your lines at this time, and have a wonderful day.