CONSUMER PORTFOLIO SERVICES, INC. Q1 FY2024 earnings call

• Revenues increased due to the fair value portfolio. - Expenses saw an increase with higher interest expense and a change in the reversal of the loss provision on the legacy portfolio. - Originations in Q1 were $346 million, and the portfolio grew to $3.02 billion, the highest in 33-year history. - Employed credit initiatives that didn't affect LTV, price, or fees, helping increase organic growth. - Large dealer groups' business grew from 17% to 22% of the business. - Continued partnerships with [indiscernible] and Pagaya, resulting in added origination volume. - Lowered package return rate, deal funding time, and underwriting errors in customer service platform. - Held strong APR at 21%, lowered LTV, and had flat payment-to-income and debt-to-income ratios. - DQ and CNL changed, with positive trends quarter-over-quarter. - Bolstered ARD department, collected significant amounts in Q1. - Deployed AI fraud scoring tool, saving over $1 million in Q1. - Gen 8 originations model lowered DQ by 200 basis points.

Revenues in Q1 were $91.7 million, up 10% from $83.1 million in the March quarter last year, primarily driven by the fair value portfolio which is $2.8 billion and yielding 11.3%. Expenses in Q1 were $85.2 million vs $64.7 million last year. Interest expense increased to $42 million in Q1 compared to $32.7 million last year due to higher rates, portfolio growth, and higher debt balance. Pretax earnings were $6.6 million vs $18.4 million last year. Net income was $4.6 million vs $13.8 million last year. Diluted earnings per share was $0.19 vs $0.54 last year. Finance receivables at fair value were $2.791 billion in Q1, up 8% from last year. Securitization debt balance was $2.277 billion, up 5% from last year. Shareholders' equity was $279.1 million, up 22% from last year. Net interest margin was $49.8 million, down 1% from last year. Core operating expenses as a percentage of the average managed portfolio were 6% in Q1 this year compared to 5.7% in Q1 2023.

• Raised $50 million in new residual money for growth capital and originations in Q1. - Renewed one of the $200 million warehouse lines. - Expect to get back to buying very good paper that performs well and grow again, hopefully aggressively at some point.

• Waves of credit unions coming in and out of the space with lower rates and then pulling out when losses don't meet expectations. - Impact of recession and unemployment rate on demand and portfolio performance. - Potential problems from '21 and '22 production affecting weaker competitors. - Risks associated with the AI fraud tool and its effectiveness.