CPS(US:CPSS)2025-09-03 21:30Summary of Consumer Portfolio Services (CPSS) Conference Call Company Overview - Company Name: Consumer Portfolio Services (CPSS) - Ticker Symbol: CPSS - Industry: Specialty finance, specifically subprime auto financing - Headquarters: Las Vegas - Years in Business: 34 years, making it the longest-running subprime auto finance company in the industry - Employee Count: Approximately 1,000 - Dealer Relationships: Contracts with 13,000 auto dealers, with 85% being franchise dealers and 15% independent dealers [3][4] Financial Performance - Profitability: 55 consecutive profitable quarters since 2014 [4][5] - Assets Under Management (AUM): $3.9 billion, an all-time record [4][5] - Portfolio Growth: Year-over-year growth rate of 17% [5] - Asset-Backed Securities (ABS): Completed 105 ABS deals over 34 years, averaging four deals per year [5][6] - Revenue Growth: Revenue increased from $266 million in 2021 to $363 million in 2022, with projections to exceed $400 million in 2023 [21][22] - Net Yield: Currently tracking a net yield of 1.2%, with expectations to exceed 3% by the end of the year [24][25] Market Dynamics - Total Addressable Market: $1.6 trillion in auto finance, with subprime representing 16% of that market [14] - Application Volume: Receiving 11,000 applications per day with a 45% approval rate [15] - Competitive Landscape: Limited competition with only 6-7 national players, creating a favorable environment for CPS [6][14] Technology and Innovation - Fintech Approach: Utilizes advanced technology and AI for credit evaluation and loan origination [9][10] - AI Integration: AI is used for customer behavior analysis, underwriting, and collections, improving efficiency and accuracy [11][12][13] - Credit Algorithm: Regularly updated every 18 months, leveraging 34 years of customer data [9][10] Risk Management - Credit Tightening: Adjusts credit criteria based on macroeconomic conditions, evidenced by a reduction in originations from $1.8 billion to $1.3 billion in response to market pressures [32][33] - Net Losses: Historical cumulative net losses around 15%, with recent vintages reaching 21%, currently targeting a 17% net loss [42][43] Strategic Focus - Dealer Relationships: Emphasis on large dealer groups, increasing originations from 16% to 29% from these groups [40] - Operational Efficiency: Reduced operating expenses from 6% to below 5%, contributing to improved net yield [23] Future Outlook - Growth Projections: Anticipating a 10% growth rate for the current year, with a target of $1.75 billion in originations [21][30] - Interest Rate Impact: High interest expenses are currently affecting profitability, with hopes for a reduction in borrowing costs to improve margins [22][30] Additional Insights - Hidden Assets: CPS holds approximately $400 million in cash from residuals of ABS transactions, providing liquidity and value to shareholders [28][29] - Market Position: CPS is well-capitalized with high shareholder equity and a strong portfolio, positioning itself favorably for future growth [30]