Consumer Portfolio Services, Inc.

Good day, everyone, and welcome to the Consumer Portfolio Services 2025 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 evaluation of receivables because dependent on estimates of future events, but also forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those rejected. I refer you to the company's annual report filed March 12th for further clarification. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. With us here, is Mr. Charles Bradley, Chief Executive Officer, Mr. Danny Barwani, 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. You know, looking at the quarter, I think it's not quite business as usual, but we're continuing. We've kind of reached that new level in terms of originations. More recently, they're slightly flat, but still stronger than last year. So we've had a better first half this year than last year. The market appears to be a little cautious or flat currently, but nonetheless, we're on pace for a better year in originations this year than last year, and the second quarter shows that. We did just do another securitization, which as much as it was recently, we usually talk about this securitization during the previous quarter call. It was $418 million with a 5.43 all-in cost. What's good about that is it's the lowest coupon since 2022. So, you know, depending on what happens going forward, if there's some rate cuts, this is what would really, really help, you know, both our NIM in terms of what we're doing going forward. A couple rate cuts down the road would be very, very helpful. But nonetheless, the second quarter securitization went off very well. The fact that that market remains very strong is certainly key to our success going forward. We also continue to have improvement in our operating expenses. OPEX is now the lowest it's been in the history of the company, at least in the last 10 years. We're pushing to continue that trend. And as we continue to grow, both with our cost-cutting measures and efficiency measures and the fact that we're growing, we'll make that number even better. So, again, those are real good highlights. I think... The other thing to talk about in terms of performance is the 22 and 23 portfolio paper isn't the strongest, to say the least. We've been kind of waiting for that to run off. It is now less than 35% of the overall portfolio, still very significant. But nonetheless, as more new paper gets on and the trending of the new paper, both from 24 and 25, is significantly better so far. So as time goes by and we're able to replace – the portfolio becomes more sort of front-loaded with 24, 25, and 26 paper, and the 22 and 23 paper continues to run off. You know, you're going to get a little boost there that you really can't see because basically the bad paper's gone away and the good paper's replacing it. So, again, a very strong trend in terms of the quarter's production. I'll have a few more comments on the industry, but for now I'll turn it over to Danny for the financials.

Thank you, Brad. Going over the financial results for the quarter, Starting with top line revenue, revenues for the second quarter were $109.8 million. That is a 14% increase over the $95.9 million in the second quarter of last year. That revenue is primarily driven by our interest from the fair value portfolio, which is now at $3.6 billion and yielding 11.4%, remembering that that yield is net of losses. The revenues for the quarter also include a $3 million fair value markup, which compares to a $5.5 million fair value markup in the prior year quarter. The fair value markup is a result of better than expected performance in our fair value portfolio. For the six months ended June 30, revenues were $216.6 million, which is a 15% increase over the $187.6 million last year. Moving on to expenses for the quarter, $102.8 million is a 15% increase over the $89.2 million for the second quarter of last year. The primary driver for the increase in expenses are the increases in interest expense, which is up 26% year over year. from 58.7 this year, or from 46.7 last year to 58.7 this year. That increase in interest expenses, largely due to increases in the volume of our debt, including our securitization debt, but there's also increases in rate increases that are built into that interest expense increase. Total expense for the six months, $202.9 million, is a 16% increase over the 174.4 million in the six months of 2024. Looking at pre-tax earnings, 7 million for the quarter is a 4% increase over the 6.7 million last year. And for the year-to-date period, 13.8 million this year compared to 13.2 million last year. Similarly, net income follows the same trends, 4.8 million for the quarter, $4.7 million last year, and for the six months, $9.5 versus $9.3. Diluted earnings per share, $0.20 a share for 2025 second quarter compared to $0.19 in the prior year quarter. For the six months, $0.39 versus $0.38. Moving on to the balance sheet, a couple of things of note. Our finance receivables at fair value now stands at $3.56 billion. which is a 20% increase over the $2.96 billion last year, driven by healthy origination levels, $433 million in new auto originations in the current quarter, and puts us on pace for another strong year in loan originations. On the debt side, total debt, which includes our warehouse credit lines, residual interest financing, securitization, ABS debt, and corporate long-term debt, 3.4 billion at the end of June this year compared to 2.9 billion last year at the same time, which is a 15% increase. So you'll see that our financial receivables are 20% higher year over year, but our debt is only 15% higher, so that shows that our leverage is improving. Moving on to shareholders' equity for the second quarter, we finished the quarter at 303.1, which is an 8% increase. over the 280.3 million last year, and it's the first time our equity has eclipsed the 300 million mark. Other metrics, looking at our net interest margin, 51.1 million in the second quarter is 4% better than 49.2 million last year. For the year-to-date period, 103 million is also 4% better than 99 million last year. As Brad said, core operating expenses is now below 5%. 4.9% in the second quarter is a 14% improvement over the 5.7% last year. And our return on managed assets, 0.8% compared to 0.9% last year. For the year-to-date period, same numbers, 0.8 versus 0.9. I will turn the call over to Mike.