Consumer Portfolio Services Inc (CPSS) 2024 Q1 法說會逐字稿

Good day, everyone, and welcome to the Consumer Portfolio Services 2024 first-quarter operating results conference call. Today's call is being recorded.

大家好，歡迎參加消費者投資組合服務 2024 年第一季營運業績電話會議。今天的通話正在錄音。

Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements. Any statements made during this call that are not statements of historical fact may be deemed forward-looking statements.

在我們開始之前，管理層要求我通知您，本次電話會議可能包含前瞻性陳述。本次電話會議期間所做的任何非歷史事實陳述的陳述都可能被視為前瞻性陳述。

Statements regarding current historical valuation of receivables because dependent on estimates of future events, also are forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected.

有關應收帳款當前歷史估值的陳述取決於對未來事件的估計，因此也是前瞻性陳述。所有此類前瞻性陳述都存在可能導致實際結果與預測有重大差異的風險。

I refer you to the Company's annual report filed March 15th for further clarification. Company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

請您參閱本公司 3 月 15 日提交的年度報告以取得進一步說明。本公司不承擔公開更新任何前瞻性陳述的義務，無論是由於新資訊、未來事件或其他原因。

With us here is Mr. Charles Bradley, Chief Executive Officer, Mr. Danny Bharwani, Chief Financial Officer, and Mr. Mike Lavin, President and Chief Operating Officer of Consumer Portfolio Services. I will now turn the call over to Mr. Bradley.

與我們一起出席的有執行長 Charles Bradley 先生、財務長 Danny Bharwani 先生以及 Consumer Portfolio Services 總裁兼營運長 Mike Lavin 先生。我現在會把電話轉給布拉德利先生。

Thank you, and welcome, everyone to the first-quarter earnings call . Generally speaking, earnings weren't particularly great, but more importantly, to a point where we're now turning the corner on what's been a very big struggle for most everyone in the industry, but something we've handled quite well, which is to get through the '21 and '22 production and then sort of weaker performance of those pools. But at this point, it's still true. what we said last time, which is our company has done far better in that area than almost anywhere else in the industry. So we're very proud of that. But more importantly, as I just said earlier, we've now sort of turn the corner, on the new papers is performing much better, and we're beginning to grow again.

謝謝並歡迎大家參加第一季財報電話會議。一般來說，收益並不是特別好，但更重要的是，我們現在正在扭轉這個行業大多數人都面臨的巨大困難，但我們處理得很好，度過'21 和'22 的生產，然後這些池的性能較弱。但在這一點上，這仍然是事實。正如我們上次所說，我們公司在該領域做得比業內幾乎任何其他地方都要好得多。所以我們對此感到非常自豪。但更重要的是，正如我之前所說，我們現在已經扭轉了局面，在新報紙上的表現要好得多，我們開始再次成長。

A couple of highlights. We did raise $50 million in new residual money to use for growth capital and originations in the first quarter beginning to really take off again. So really, everything is going the right way. One other note is we renewed one of our $200 million warehouse lines. So the first quarter is really going to be sort of the jump-off point for this year and kind of getting back to where we buy very good paper, It performs very well ,and we get to grow again and hopefully at some point rather aggressively. We'll touch on all those areas a little bit more in a few minutes, but for now, I will turn it over to Danny to go through the financials.

有幾個亮點。我們確實籌集了 5000 萬美元的新剩餘資金，用於第一季的成長資本和啟動，開始真正起飛。所以說真的，一切都朝著正確的方向發展。另一件值得注意的事情是我們更新了價值 2 億美元的倉庫線之一。因此，第一季確實將成為今年的起點，並回到我們購買非常好的紙張的地方，它表現得非常好，我們將再次成長，並希望在某個時候相當積極地成長。我們將在幾分鐘內進一步討論所有這些領域，但現在，我將把它交給丹尼來檢查財務狀況。

And thank you, Brad. Going over some of the financial results for the first quarter. Revenues were $91.7 million in Q1 versus $83.1 in the March quarter last year. That's a 10% increase. That's primarily driven by our fair value portfolio, which is now $2.8 billion and that's yielding 11.3%. If you've been on these calls before, you're aware that that yield of 11.3% is net of the credit losses or projected losses. The yield on the portfolio at the first quarter of last year was 11.2%.

謝謝你，布拉德。回顧第一季的一些財務表現。第一季的營收為 9,170 萬美元，而去年第三季的營收為 83.1 美元。增幅為 10%。這主要是由我們的公允價值投資組合推動的，目前為 28 億美元，收益率為 11.3%。如果您以前參加過這些電話會議，您就會知道 11.3% 的收益率是扣除信用損失或預計損失後的淨值。去年第一季該投資組合的報酬率為11.2%。

Moving down to expenses for the first quarter, $85.2 million versus $64.7 million last year in the first quarter. A couple of things of note under expenses, the interest expense increased to $42 million in the first quarter compared to $32.7 last year, largely due to higher rates but also in part to portfolio growth and the higher debt balance.

來看第一季的支出，為 8,520 萬美元，而去年第一季的支出為 6,470 萬美元。支出項下值得注意的幾件事是，第一季利息支出從去年的 32.7 美元增加到 4,200 萬美元，這主要是由於利率上升，部分原因是投資組合成長和債務餘額增加。

Also included in expenses is the reversal of the loss provision on our legacy portfolio, which is accounted for under CECL. That number -- that contribution for the reversal of the loss provision last year was $9 million, and this year in the first quarter it's $1.6 million. So that portfolio is going to run off over the next two or three quarters. And then now we will not have much of that legacy portfolio remaining by the time we get to the end of the year.

費用中還包括我們遺留投資組合損失撥備的轉回，該損失撥備在 CECL 下核算。這個數字——去年扭轉損失準備金的貢獻是 900 萬美元，今年第一季是 160 萬美元。因此，該投資組合將在未來兩、三個季度內耗盡。現在，到今年年底時，我們將沒有太多遺留投資組合剩餘。

Our pretax earnings for the quarter were $6.6 million compared to $18.4 million in the first quarter of last year, again mainly due to higher interest expense, and the decrease in the reversal of the loss provision on the legacy portfolio. Net income was $4.6 million for the quarter, down from $13.8 million in the first quarter of last year. And following the same trends, diluted earnings per share was $0.19 per share in the first quarter compared to $0.54 last year.

我們本季的稅前收益為 660 萬美元，而去年第一季為 1,840 萬美元，這同樣主要是由於利息支出增加以及遺留投資組合損失準備金轉回的減少。該季度淨利潤為 460 萬美元，低於去年第一季的 1380 萬美元。遵循同樣的趨勢，第一季攤薄後每股收益為 0.19 美元，而去年為 0.54 美元。

Moving to the balance sheet. Our finance receivables at fair value of $2.791 billion in the first quarter is up 8% from the $2.575 in the first quarter of last year. Our securitization debt balance is $2.277 billion, which is up 5% from the $2.175 billion in the first quarter of last year. So we're seeing an 8% increase in the fair value asset and only a 5% increase in the corresponding debt. So that benefit and the lower leverage is making us show some strength in our balance sheet. Shareholders' equity is up to $279.1 million in the first quarter, at the end of the first quarter that's a 22% increase from the $228.4 million in March of last year. That's driven by this would mark our 50th consecutive quarter of pre-tax profit. That's over 12 years of of pre-tax profitability, and that's helping to boost the shareholders' equity number on the balance sheet.

轉向資產負債表。第一季我們的金融應收帳款公允價值為 27.91 億美元，比去年第一季的 2.575 美元成長了 8%。我們的證券化債務餘額為22.77億美元，比去年第一季的21.75億美元增加5%。因此，我們看到公允價值資產增加了 8%，而相應的債務僅增加了 5%。因此，這種好處和較低的槓桿率使我們在資產負債表中顯示出一定的優勢。第一季股東權益高達2.791億美元，較去年3月末的2.284億美元成長22%。在此推動下，我們將連續第 50 個季度實現稅前利潤。這是超過 12 年的稅前獲利能力，有助於提高資產負債表上的股東權益數量。

Moving to other important metrics. The net interest margin is $49.8 million, which is down 1% from the $50.3 million in the first quarter of last year. Core operating expenses as a percentage of the average managed portfolio is 6% in the first quarter of this year compared to 5.7% at the end for the first quarter of 2023.

轉向其他重要指標。淨利差為4,980萬美元，較去年第一季的5,030萬美元下降1%。今年第一季核心營運費用佔平均管理投資組合的百分比為 6%，而 2023 年第一季末為 5.7%。

That's it for the financial numbers. I will turn the call over to Mike.

這就是財務數據。我會把電話轉給麥克。

Thank you, Danny. The first quarter was a terrific quarter in originations as we purchased $346 million of new contracts. That compares to $301 million in the fourth quarter of 2023, and $415 million during the first quarter of 2023. More good news, our portfolio grew to $3.02 billion as of March 31, 2024. I note that's the highest portfolio amount in our 33 year history, and that's an increase from $2.97 billion as of December 31, 2023, and an increase from $2.86 billion as of March 31, 2023. As Brett said, the first quarter showed positive growth, a positive growth trend. We did $102 million in January, then upped that to $105 million in February and upped that to $139 million in March.

謝謝你，丹尼。第一季是一個出色的季度，我們購買了 3.46 億美元的新合約。相較之下，2023 年第四季為 3.01 億美元，2023 年第一季為 4.15 億美元。更多好消息是，截至 2024 年 3 月 31 日，我們的投資組合增至 30.2 億美元。我注意到，這是我們 33 年歷史上最高的投資組合金額，較截至 2023 年 12 月 31 日的 29.7 億美元有所增加，較截至 2023 年 3 月 31 日的 28.6 億美元有所增加。正如布雷特所說，第一季呈現正成長，正成長的趨勢。我們在 1 月完成了 1.02 億美元，然後在 2 月將其提高到 1.05 億美元，在 3 月將其提高到 1.39 億美元。

The trick is to hold that volume and we're optimistic we can do so. We use several credit initiatives to nudge our growth in the first quarter, which worked, but it is critical to note that none of those credit initiatives touched our LTV or loan to value, which is the key credit metric that predicts losses. Didn't affect our pricing, didn't affect our fees. So all good news there. Those initiatives helped increase our organic growth of contracts through increasing our capture rate, our funding dealers and our dealer loyalty.

訣竅是保持這個數量，我們樂觀地認為我們可以做到這一點。我們在第一季使用了多項信貸舉措來推動成長，這些舉措取得了成效，但值得注意的是，這些信貸舉措都沒有觸及我們的貸款價值比或貸款價值，而這是預測損失的關鍵信貸指標。沒有影響我們的定價，也沒有影響我們的費用。所以這都是好消息。這些舉措透過提高我們的捕獲率、資助經銷商和經銷商忠誠度，幫助增加了我們合約的自然成長。

One of the things that we've been focusing on for the last two years is is to onboard and service more large dealer groups, which is defined by a dealer group with more than 15 dealers under their umbrella. When we launched that initiative in early 2023, the large dealer groups made up 17% of our business. And at the end of the first quarter, that has grown to 22%. That is exponential growth because instead of adding just one dealer. We're adding between 15 and 200 dealers per dealership. We currently have 70 sales reps in this, 42 in the field, 28 inside. We hired a new class of reps in the first quarter and will likely do more as the year heads out. This has and will help our growth going forward. We continued our Ironclad partnerships with [Allen] and Pagaya in the first quarter, resulting in added origination volume and with Pagaya solid on gain profits.

過去兩年我們一直關注的事情之一是為更多大型經銷商集團提供服務，這是指旗下擁有超過 15 家經銷商的經銷商集團。當我們在 2023 年初推出該計劃時，大型經銷商集團占我們業務的 17%。截至第一季末，這一比例已增長至 22%。這是指數級增長，因為而不是只增加一個經銷商。我們為每個經銷商增加 15 至 200 名經銷商。目前，我們有 70 名銷售代表，其中 42 名在現場，28 名在內部。我們在第一季聘請了一批新的銷售代表，隨著今年的到來，我們可能會做更多的工作。這已經並將有助於我們未來的成長。我們在第一季繼續與 [Allen] 和 Pagaya 建立牢固的合作關係，從而增加了原創量，並與 Pagaya 獲得了穩定的利潤。

Another thing of note, we continue to build our customer service platform in originations. In the first quarter, we lowered our packers return rate to an all-time low. We lowered our deals -- deal funding time to less than three days and with significant significantly reduce our underwriting errors. All of these are metrics that encourage the dealers to send their applications and do business with CPS.

另一件值得注意的事情是，我們繼續建立我們的客戶服務平台。第一季度，我們將包裝機退貨率降至歷史最低。我們將交易融資時間縮短至不到三天，並大幅減少了核保錯誤。所有這些都是鼓勵經銷商發送申請並與 CPS 開展業務的指標。

In terms of competition, we continue to see waves of credit unions come in and out of the space with lower rates, and then they pull out of the space when the losses don't meet their expectations. Demand will remain strong, and so there's enough business for the five or six of us that sort of dominate the market. Again, the sort of silver bullets for us and our friendly competitors are things like a recession, and the unemployment rate. So far, there has been no recession. and even though unemployment ticked up just a bit, it hasn't affected our demand or our near term portfolio performance.

在競爭方面，我們繼續看到一波又一波的信用合作社以較低的利率進出該領域，然後當損失未達到預期時又退出該領域。需求將保持強勁，因此我們五到六個人有足夠的業務來主導市場。同樣，對我們和我們友善的競爭對手來說，靈丹妙藥就是經濟衰退和失業率。到目前為止，還沒有出現衰退。儘管失業率略有上升，但並沒有影響我們的需求或我們的近期投資組合表現。

And taking a quick check on our Q1 risk profile, we continue to hold a strong APR at 21%, probably the best thing in our risk profile as we've driven down our LTV from 125 to and it fluctuates between 118 and 119. Our payment-to-income ratio and our debt-to-income-ratio, which we use in our scoring model, remains flat, which is great. And the amount finance remains flat quarter -over-quarter at 20,500.

快速檢查我們第一季的風險狀況，我們繼續保持 21% 的強勁年利率，這可能是我們風險狀況中最好的事情，因為我們已將 LTV 從 125 降低到 118 至 119 之間波動。我們在評分模型中使用的支付收入比和債務收入比保持平穩，這很好。融資金額環比持平，為 20,500 筆。

Switching to portfolio performance for the first quarter DQ, including repossession inventory ended up at 14.55% of the total portfolio as compared to 12.68% in the same quarter in 2022. Annualized net charge-offs for the first quarter were 7.84% of the total portfolio as compared to 7.74% as of the fourth quarter of 2023, and 5.20% in the same quarter in 2023. The positive news is that we indeed have turned the corner in terms of performance as we've lowered our DQ, compared to our previous quarter, and we've also lowered our charge-offs as compared to our previous quarter. So year over year, It's ticked up a quarter over quarter, record quarter over quarter one, We've driven those metrics down.

轉向第一季 DQ 的投資組合表現，包括收回庫存，最終佔投資組合總額的 14.55%，而 2022 年同一季度為 12.68%。第一季的年化淨沖銷佔投資組合總額的 7.84%，而 2023 年第四季為 7.74%，2023 年同一季度為 5.20%。正面的消息是，我們確實在業績方面已經扭轉了局面，因為與上一季相比，我們降低了 DQ，並且與上一季相比，我們也降低了沖銷。因此，年復一年，季度環比上升，創紀錄的季度環比增長，我們已經降低了這些指標。

We've done this while utilizing less extensions, which is interesting. In terms of our vintages, It's no secret that the 2022 vintages have been challenging for the industry. We believe sort of at it as of the end of quarter one, we've got our arms around the 2022 vintages. We've employed more collectors to collect those vintages, and we've been utilizing unique collection strategies to control those key metrics and flatten out those curves.

我們在使用較少擴展的情況下完成了這項工作，這很有趣。就我們的年份而言，2022 年年份對整個產業來說充滿挑戰，這已不是什麼秘密。我們相信，從第一季末開始，我們就已經開始關注 2022 年的葡萄酒了。我們僱用了更多的收藏家來收集這些年份的葡萄酒，並且我們一直在利用獨特的收藏策略來控制這些關鍵指標並拉平這些曲線。

The first two of our 2023 vintages were also challenging, albeit a little slightly more, slightly less challenging, I should say. But the most critical thing to look at in our 2023 vintages is that our 2023-C, vintage is doing much, much better. The 2023-D, while, it's a little early to judge, is also looking to be a much better and does this 2023 vintages might just normalize into our historical CNL.

我應該說，我們 2023 年的前兩個年份也充滿挑戰，儘管挑戰稍微多一點，稍微少一點。但在我們的 2023 年年份中最值得關注的是我們的 2023-C 年份表現要好得多。2023-D 雖然現在下判斷還為時過早，但它也看起來會更好，而且這個 2023 年份的葡萄酒可能會正常化到我們歷史上的 CNL 中。

Looking at how we stack up in the industry. We are reportedly according to the investment bankers that we work with and the investors in our securitization bonds who follow the industry know that we're outperforming all of our competitors in CNL performance on the 2022 and 2023 vintages and also our DQ. And interestingly enough, we're outperforming our competitors when it comes to the all-important recovery metrics. One thing to note is in the first quarter, we bolstered our ARD department, which is in charge of collecting our charge-off balances. And after employing a few new initiatives and training up the staff, We've collected at least 40% so far in three months of what we collected all of 2023, and all of those collections go right to offset our losses.

看看我們在行業中的地位如何。據報道，與我們合作的投資銀行家和關注行業的證券化債券投資者都知道，我們在 2022 年和 2023 年的 CNL 表現以及我們的 DQ 方面優於所有競爭對手。有趣的是，在最重要的恢復指標方面，我們的表現優於競爭對手。值得注意的是，在第一季度，我們加強了 ARD 部門，該部門負責收集我們的沖銷餘額。在採取了一些新措施並對員工進行培訓之後，我們在三個月內收集了至少 2023 年全年收集量的 40%，並且所有這些收集的資金都用於抵消我們的損失。

In terms of technology, we deployed our artificial intelligence scoring tool for fraud in the first quarter, which has significantly reduced since the synthetic fraud in our application base. That has already saved us over $1 million in the first quarter, and looking and we expect to save many more millions going forward on that, using that AI fraud tool. As I mentioned in our last call, we launched our Gen eight originations model from the fourth quarter of 2023. We have now had a chance to analyze the October 2023 originations where we originated it. We originated those originations with Gen eight. We also originated those that paper with Gen seven and Gen eight has organically lowered our DQ. by 200 basis points. So that bodes well for our DQ going forward, which also translate -- should translate to lower CNL just through our AI model.

在技​​術方面，我們在第一季部署了針對詐欺的人工智慧評分工具，自我們應用程式庫中的合成詐欺以來，該工具已顯著減少。這已經在第一季為我們節省了超過 100 萬美元，並且預計，使用人工智慧詐騙工具，我們預計未來將節省更多數百萬美元。正如我在上次電話會議中提到的，我們從 2023 年第四季開始推出第八代起源模型。我們現在有機會分析 2023 年 10 月的起源。我們從第八代開始了這些起源。我們也原創了那些第七代和第八代的論文有機地降低了我們的 DQ。 200個基點。因此，這對我們未來的 DQ 來說是個好兆頭，它也可以透過我們的 AI 模型轉化為更低的 CNL。

And with that, I'll kick it back to Brad.

說到這裡，我會把它踢回給布萊德。

Thank you, Mike. And turning to the industry. As Mike pointed out, we -- and I guess I pointed out as well, we weather this storm probably much better than most in our industry. And we think at this point, given that our growth is going to be able to hang on. We're very large margins that some of our fellow friendly industry players are either easing back or going slow to get through the problems we've had with the '22 vintages that creates an opportunity for us to grow and hang on a big margins. And so that's good. And it also might create some opportunities for a few of the weaker fellow folks out there that may or may not be able to get through on the production problems of '21, '22. So we'll wait and see, but we're always looking for opportunities in the industry, maybe helping out some of our fellow competitors. I mean, looking at the economy, generally speaking, we're quite optimistic. We think so our industry is very much a tip of the spear in recessions. And yet our customers seem to be doing just fine.

謝謝你，麥克。並轉向行業。正如麥克指出的那樣，我們——我想我也指出過，我們度過這場風暴的能力可能比我們行業中的大多數人要好得多。鑑於我們的成長將能夠持續下去，我們認為在這一點上。我們的利潤率非常高，一些友好的行業參與者要么放鬆態度，要么緩慢地解決我們在 22 年份遇到的問題，這為我們創造了增長和保持高利潤的機會。所以這很好。它也可能為一些較弱的人創造一些機會，他們可能無法解決 21 年、22 年的生產問題。因此，我們將拭​​目以待，但我們一直在行業中尋找機會，也許可以幫助我們的一些競爭對手。我的意思是，從經濟角度來看，總的來說，我們相當樂觀。我們認為，我們的產業在經濟衰退中處於領先地位。然而我們的客戶似乎表現得很好。

Unemployment is certainly the thing we watch and care about the most and unemployment looks fine. But we would love to do, of course, is keep things growing, get the volumes up to where when and if we get a rate cut, we then get to pick up that extra margin and really just enhance what we're doing. We're not really thinking that we may raise cut currently, but down the road, it could be so doing large volumes when those come, we'll be much better than just sitting around waiting for them to then grow. So again, we're kind of optimistic on all those different fronts. So we're almost well into our second quarter. Those things look good as well. So we'll be back rather shortly to report in the second quarter on a little bit.

失業無疑是我們最關注和最關心的事情，而且失業情況看起來還不錯。但當然，我們想做的是保持成長，將銷量提高到降息時的水平，然後我們就能獲得額外的利潤，並真正加強我們正在做的事情。我們目前並沒有真正考慮提高減產幅度，但在未來，當這些產量到來時，我們可能會進行大量減產，這比只是坐等它們增長要好得多。再說一遍，我們對所有這些不同的方面都持樂觀態度。所以我們即將進入第二季。這些東西看起來也不錯。因此，我們很快就會回來報告第二季的一些情況。

With that, thank you all for joining us, and we'll speak to you soon.

在此，感謝大家加入我們，我們很快就會與您聯繫。

Thank you. Ladies and gentlemen, this concludes today's teleconference. A replay will be available beginning two hours from now for 12 months via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.

謝謝。女士們、先生們，今天的電話會議到此結束。從現在開始兩小時後，您可以透過公司網站 www.consumerportfolio.com 重播，為期 12 個月。請此時斷開線路，祝您有美好的一天。