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CPS(CPSS) - 2025 Q2 - Quarterly Report
CPSCPS(US:CPSS)2025-08-11 20:51

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2025, reflect growth in total assets and net income, supported by strong operating cash flow Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $3.76 billion, driven by finance receivables, while liabilities also grew, resulting in higher shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,763,790 | $3,493,868 | | Finance receivables measured at fair value | $3,559,029 | $3,313,767 | | Total Liabilities | $3,460,689 | $3,201,098 | | Warehouse lines of credit | $395,596 | $410,898 | | Securitization trust debt | $2,813,234 | $2,594,384 | | Total Shareholders' Equity | $303,101 | $292,770 | Unaudited Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2025, net income slightly increased, driven by higher interest income largely offset by rising interest expenses Statements of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $109,764 | $95,880 | $216,638 | $187,624 | | Interest Expense | $58,704 | $46,710 | $113,622 | $88,678 | | Net Income | $4,797 | $4,672 | $9,491 | $9,262 | | Diluted EPS | $0.20 | $0.19 | $0.39 | $0.38 | Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating cash flow significantly increased, while investing activities used more cash and financing activities provided less cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $128,328 | $95,996 | | Net cash used in investing activities | ($360,829) | ($317,817) | | Net cash provided by financing activities | $255,272 | $363,001 | | Increase in cash and cash equivalents | $22,771 | $141,180 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, debt structure including $2.8 billion in securitization trust debt, legal contingencies, and a subsequent $418.33 million securitization - The company specializes in purchasing and servicing sub-prime retail automobile installment sale contracts, providing indirect financing to customers with limited or poor credit histories18 - As of June 30, 2025, the company was in compliance with all financial covenants related to its securitization transactions, warehouse credit facilities, and residual interest financing36 - The company estimates that the range of reasonably possible losses for legal proceedings and contingencies does not exceed $3.2 million as of June 30, 202578 - On July 28, 2025, the company executed its third securitization of the year, selling $418.33 million of asset-backed notes secured by automobile receivables with a weighted average yield of approximately 5.43%93 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue growth to portfolio expansion, though profitability was constrained by rising interest expenses, while credit quality improved and liquidity remains supported by debt facilities Overview Consumer Portfolio Services, a sub-prime auto lender, consistently grew its managed portfolio to $3.85 billion, primarily funding through warehouse facilities and securitizations Contract Purchases and Managed Portfolio Growth ($ in thousands) | Period | Contracts Purchased in Period | Managed Portfolio at Period End | | :--- | :--- | :--- | | 2022 | 1,854,385 | 3,001,308 | | 2023 | 1,357,752 | 3,194,623 | | 2024 | 1,681,941 | 3,665,725 | | Six months ended June 30, 2025 | 884,236 | 3,854,825 | - The company utilizes two primary warehouse credit facilities with a total capacity of $535 million to fund automobile contract purchases on an interim basis before securitization109110 Results of Operations Revenues increased significantly in Q2 and H1 2025 due to higher interest income from a larger loan portfolio, though net income growth was constrained by rising interest expenses Q2 2025 vs Q2 2024 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $109.8 | $95.9 | +$13.9 | +14.5% | | Interest Income | $105.4 | $88.4 | +$17.0 | +19.2% | | Interest Expense | $58.7 | $46.7 | +$12.0 | +25.7% | H1 2025 vs H1 2024 Performance (in millions) | Metric | H1 2025 | H1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $216.6 | $187.6 | +$29.0 | +15.5% | | Interest Income | $207.3 | $172.7 | +$34.6 | +20.1% | | Interest Expense | $113.6 | $88.7 | +$24.9 | +28.1% | - The blended cost of funds for new asset-backed term securitizations has shown a significant upward trend since early 2022, with rates for recent securitizations in 2025 hovering around 5.9%126150 Credit Experience As of June 30, 2025, total delinquencies improved from year-end 2024, while annualized net charge-offs slightly increased, with the extension program continuing to mitigate losses Delinquencies as a Percentage of Gross Servicing Portfolio | Date | Percentage | | :--- | :--- | | June 30, 2025 | 10.50% | | June 30, 2024 | 10.87% | | December 31, 2024 | 12.11% | Annualized Net Charge-Offs as a Percentage of Average Servicing Portfolio | Period | Percentage | | :--- | :--- | | Q2 2025 | 7.45% | | Q2 2024 | 7.26% | | Full Year 2024 | 7.62% | - The company's loan extension program is presented as an effective loss mitigation tool, with 57.8% of accounts granted extensions in 2019 either paid off or still active and performing as of June 30, 2025174 Liquidity and Capital Resources The company maintains liquidity through operating cash flow, warehouse credit facilities, and securitization proceeds, with total outstanding debt at approximately $3.4 billion - As of June 30, 2025, the company had $15.8 million in unrestricted cash and $136.4 million in available borrowings under its two warehouse credit facilities, assuming sufficient eligible collateral189 - Total debt outstanding at June 30, 2025, was approximately $3.4 billion, composed primarily of $2.8 billion in securitization trust debt and $395.6 million from warehouse lines of credit193 Item 4. Controls and Procedures The company's principal executive and financial officers concluded that disclosure controls and procedures are effective, with no material changes to internal controls over financial reporting - The CEO and CFO have certified that the company's disclosure controls and procedures were effective as of June 30, 2025195 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section incorporates legal proceedings information from Note 8, with estimated reasonably possible losses not exceeding $3.2 million from routine consumer litigation - The information regarding legal proceedings is incorporated by reference from Note 8 to the Unaudited Condensed Consolidated Financial Statements197 Item 1A. Risk Factors The company highlights its substantial indebtedness of approximately $3.4 billion as a significant risk, potentially increasing vulnerability and limiting operational flexibility - The company highlights its substantial indebtedness of approximately $3.4 billion as of June 30, 2025, as a key risk factor199 - Potential adverse effects of high debt include increased vulnerability to economic downturns, reduced cash flow for operations, limited business flexibility, and a competitive disadvantage202 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 76,880 shares of common stock at an average price of $9.72 per share under its buyback program Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | – | $– | | May 2025 | 27,544 | $9.26 | | June 2025 | 49,336 | $9.98 | | Total | 76,880 | $9.72 | Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2025205 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The exhibits filed with the report include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL data files207