Consumer Portfolio Services, Inc.

Good day, everyone, and welcome to the Consumer Portfolio Services 2024 Second Quarter Operating Results 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. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables because dependent on estimates of future events are also forward-looking statements. All such forward-looking statements are subject to risk that could cause actual results to differ materially from those projected. I refer you to the company's annual report filed March 15th for further clarifications. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, further events, or otherwise. With us here is Mr. Charles Bradley, Chief Executive Officer, Mr. Daniel Barwaney, Chief Financial Officer, and Mr. Mike Levine, President and Chief Operating Officer of Consumer Portfolio Services. I will now turn the call over to Mr. Bradley.

Thank you, and welcome to our second quarter earnings call. Probably the best way to sum up the quarter, it was a good quarter, but we're still trying, we're beginning to make the transition from what we'll call watchful waiting on our portfolio to where we can start growing again. We probably need, in terms of being absolutely certain the credit is made to turn another six to nine months, but we have gotten to the point where we're confident enough in the performance of the pools that we started to grow this quarter. Our quarter over quarter growth is 25%, year over year it's 36%, so really putting an effort in to start growing again. Mostly because we finally think we're looking at most of what would be the 23C, 23D, and 24A securitizations, 24A being the newest that we're looking at, and the performance there has turned a corner enough to where we're confident that the overall performance going forward will be fine. And with that, we've been able to start growing again. But still, even at that point, at least in the second quarter, we're still concerned with making sure our credit's very good. We're working on expanding our footprint in terms of sales. And we, of course, are anxiously waiting some word on whether interest rates will go down towards the end of the year. So I think we'll go through some of the other highlights. But basically, we're about to turn the corner. We're really focused on growing again. And hopefully, this timing will all go together towards the end of the year when interest rates come down. I'll talk more about that, but for the moment I'll turn it over to Danny for the financial stuff.

Thanks, Brad. Going over the financial results for the quarter, revenues were 95.9 million, which is a 5% increase over the 91.7 last quarter, and a 13% increase over the 84.9 million in the June quarter last year. For the six months, 187.6 million. is a 12 percent increase over the 168 million last year. Included in the revenue numbers are a mark to a finance receivables on our fair value portfolio. It's a mark that shows the 5.5 billion mark shows the outperformance of that portfolio during the quarter. That compares to, we didn't have a mark in the same quarter last year, and for the six months that mark was $10.5 million in the six months for 2024. Also included in the revenue numbers are the increase in interest income driven by the growth, as Brad said, the growth in new loan originations. We originated $431.9 million in the second quarter, which is a 25% increase over our first quarter and a 36% increase over the 318.4 million last year. So those two facts are driving the increase in revenues. Moving over to expenses, 89.2 million for the quarter is up 5% over the 85.2 million last quarter, compared to 66.3 million in the second quarter last year. For the six months, expenses were 174.4 million. which is a 33% increase over the $131 million for the six months last year. A couple of items to note for expenses. We had a reversal in the provision for losses on our legacy portfolio. You might recall our legacy portfolio is the loans we originated prior to 2018, which is mostly gone by now. It's mostly amortized. There's only about $13 million of that left. But during the quarter, we did reverse about $2 million of credit losses that was previously reserved that was no longer required because the performance had been better than expected. That compares to a reversal of $9.7 million in the second quarter of last year. For the six-month period, that reversal was $3.6 million for the 24 quarter and $18.7 million last year. The other increase in expense primarily driven by the increase in interest expense, which has increased to $46.7 million this quarter compared to $35.7 million last year. Obviously, the increase in interest rates had something to do with that increase in interest expense, but part of that increase is also due to portfolio growth, again driven by the higher origination levels during the year. Moving on to pre-tax income, $6.7 million is comparable to the $6.6 million last quarter versus $18.6 million last year. For the six months, pre-tax income was $13.2 million. down from 37 million last year. Similarly, net income is 4.7 million for the second quarter, down from 14 million the second quarter last year. For the six-month period, net income is 9.3 million, down from 27.8 million last year. The same trends follow for earnings per share. 19 cents for the second quarter this year, down from 55 cents last year. For the six months, 38 cents per diluted share compared to $1.09 last year. So again, these trends are all driven by the increase in interest expense and expenses overall, somewhat offset by the increase in revenues from the higher portfolio balance. Moving on to the balance sheet, our finance receivables at fair value is two $2,960,000,000 is a 6% increase from the first quarter and a 13% increase from the $2.6 billion last year. Our total debt balance is $2.9 million as of June 2024, is up 16% from the $2.5 billion last year. And lastly, on the balance sheet, our shareholders' equity. Another record high for the company, 280.3 million is up 10% from the 255 million June of last year. Looking at other metrics, the net interest margin, 49.2 million in the second quarter is flat from 49.2 million last year. For the six months, it's 99 million as compared to 99.5 million last year. Core operating expenses is down 1% this quarter from last quarter, but it's up 10% from the 40.3 million last year. On a year-to-date basis, core operating expenses were 89.3 million, is up 10% from the 81.2 million in the June quarter of last year. As a percentage of the managed portfolio, core operating expenses is down to 5.7 from 6% in the first quarter, but it's up from 5.5% in the second quarter of 2023. And lastly, the return on managed assets, 0.9% in the second quarter compared to 2.6% in the second quarter last year. The same numbers for the year-to-date period, 0.9% for the six months compared to 2.6% for the six months of 2023. I'll turn the call over to Mike. Thanks, Danny.