CPSS - Earnings call transcript Q4 2018 | Consumer Portfolio Services, Inc.

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Operator

Good day, everyone, and welcome to the Consumer Portfolio Services 2018 Fourth Quarter and Full-Year Earnings 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 within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements are subject to certain risks that could cause actual results to differ materially from those projected. the filings to further you refer company's for SEC clarification. I or update assumes of forward-looking events no company publicly new obligation future result The a to any as statements, information, otherwise. whether Mr. us now With here is Chief Bradley, Executive Mr. Charles and Officer; Portfolio Fritz, Jeff Services. of Financial Officer Chief Consumer now call over Mr. to turn the will you I Bradley.

Charles Bradley

Thank you, call. and our to welcome conference year-end

had because that and looking of this December the and -- they December think both XXXX the numbers, recurring are in in XXXX, some a overall numbers. I at little affected of we bit tax garbled year

forward although hopefully those good to But the little Going pretty numbers would to the figure a be looking we cleaner, a yet actually have year is quarter. out.

was have size and I in year, for that we better portfolio the than if it terms actually of and actually originations think wasn't fourth expected we thought down true. grew importantly we quarter year might probably course of you the in and notice originations

last the year, actually million originated XXX For XXX we year. million versus

really So kind of don't portfolio get it it shrinking important, or want starts to big shrink. and effort managed again. portfolio a because back takes to the that's as Once to we going what

the away is in shrink that the from the to one grew. that and didn’t things grew at core as XXXX portfolio little it important is So fact all, bit of even take somewhat overall originations

up. be slightly down, or it we flat in some so would we made progress year And going thought the actually

growing, start been wouldn’t our up collections you red little bit than always three Also, that bad growing it for delinquencies and the we really portfolio, are is the look be years, other fourth was flat to the fairly real delinquency portfolio DQ. see to the were is for going hasn't flat even of are now companies little quarter. crazy, a in toughest like notice probably delinquencies side should worst. really even This in they a because one are a it you're almost But On numbers fourth them. that It's s you it’s with for like flag. up growing the been a worst have bit. when seeing But bit, the worst us quarter

delinquency we’re it's on working as not concerned certainly something only much keep concerned fourth about quarter with as and we’re we So that, number. the

down. the losses On other side the are

in think So again which get that I overly the in it's a news losses being trend quarter of some long again but important down good until But when for the delinquencies. excited will fourth to more I stay down. certainly hopefully the continue ways down down is losses time, are they I than little

midyear aggressive In do think very sort portfolio, terms of I spend XXXX trying our the still think in out the things the competition started there, we we time wanted frisky things we I the making set year, big that project as were full that and it. The so opportunity so and new from when in and the was to took of and August. scorecard We’ve in looked an better, we new put to really promising very results up going have we're to well a be in past, still mentioned quite we managing had do sort scorecard grow is to really price effect of in XXXX. that to that

and could probably of be results so of originations second we some the The promising. originations best there think were XXXX had half the we've

think again for and been ready of I to getting probably talking XXXX of grow think than years, ready I we've we expected. about better was sort and couple things being a

However, we’re very and good happy it's over. that

the more after which things, and runs Jeff I'll looking financials. are get forward to XXXX We through much into better

Jeffrey Fritz

Brad. Thanks, everybody. Welcome,

as decrease from at full-year from is the with revenues. year full-year revenues $XX.X the that's quarter a a third decrease million XXXX. fourth a million, $XX.X X% begin decrease the the quarter course, year the from XX% of accounting as XX% on this $XXX.X baked QX primarily of of will this We revenues were we've the for for value the And million said The recognition revenues methodology fair of XXXX. losses things, and XXXX we've adoption the there’s discussed, of are the story of methodology really the two fair value. originations, revenue revenues, the into

fairly seen alluded of result revenues, also to a impact Brad And just as to has so, the we've the which as significant portfolio contribution has year, on And revenue had recognition. significant been then in flat that. for overall a decrease the

that’s are decrease the expenses, X% from $XX.X on on which entirely for losses And quarter core -- which no is and provisions X% fourth million credit for an by quarter on decreases really of being year value in $XXX.X year offset is the the $XXX.X the largely basis, third the from year. of million from the you've offset increases there this decrease the Full XXXX some a year expenses method. accounted million for credit in of losses get fourth provisions Moving categories are last in expenses, for portfolio, decrease because to by fair XX% this quarter, the a XXXX.

XX% fourth full-year Looking a year a at the XXXX. the million for million quarter provisions $XXX.X that’s from for basis, quarter a of XX% and On in from $XX.X this third the decrease credit shrinking in driven XXXX, $XX decrease quarter, the for losses, legacy portfolio call being provisions we the million of books legacy a on the which the portfolio, -- losses what by XX% credit the XXXX. decrease of from XXXX. of all at the XX/XX was legacy of Again,

portfolio now so that And is old. XX.X months really

a portfolio, kind we increase you Pretax X% quarter quarter of $X.X as for forward the the decrease this $XX.X quarter year here. a of decrease pretax and XX% million $X.X $XX.X to to earnings earnings and million a a fourth that feel third earnings Full compared for million million aging the the XX% the And XXXX. in pretax year compared for go that's compared get talk minute. to of to third that's in so quarter, with income about full income the here we and that $XX.X a full-year of The XXXX. going compared we're the net XXXX. year, last for compares million year XXX% to the million XX% the year, XXXX, compared fourth for $X.X a quarter increase $XX this increase and million have of in in million that year-to-date net $X.X to Net loss

clarify that to So bit. a little

it one-time we effective tax net one to So this fair quarter, benefit the fourth for year do tax year of in that had with adopted the net earlier books. GAAP than the impacted our net tax the million books for a benefit had this the income, bulk adoption accounting value for $X.X we

much tax tax fourth I a as value that we fourth down that said, on getting the retroactively the change tax the that in too a adjustments big booked tax during we sheet corporate rate quarter, so, weeds, year as last then, into deferred year of the quarter to, Brad flow-through a little the last just tax is asset a and for non-cash And one basically in we expense quarter. And result triggered we the benefit in wrote the balance with and year. fourth without tax alluded earlier just fair adopted as

share in talked about So tricky that's a XX% On loss last $X.XX, year-to-date compared $X.XX last $X.XX XXXX, numbers, to but this compared earnings quarter per $X.XX basis, compared again a for per full big fourth diluted to year, the quarter those year year. greatly a for influenced year. to the $X.XX fourth of and most numbers the Diluted little earnings it’s increase a of those the by quarter share, we of in change before. that comparing tax

changes debt by and significant no net to to you kind in of what line the receivables $XXX the we the breakout last this time, and portfolio, to the what's the it can significant No now for on the XX% structures, it's it of on sheet, of $XXX.X the the balance we of originated balance left financing allowance, since a in we portfolio, year separate portfolio sheet, changes and million compared legacy XXst, quarter sequential the Moving in December shrunk balance sheet call sheet. the XXXX. finance that's side XX% million have fair continues the at value shrink, see the we on but balance that at shrunk

do quarter, about talk minute. I'll which little a bit continue a securitization to in more the our transactions for We

margin Just this quarter quarter compared take a the look quarter X% metrics. interest XX.X operating a for third was decrease XXXX. million, XX% the at to that's a net some fourth The of of the these to year, compared decrease and

although million net ABS compared X.XX% year of have full decrease of debt the sheet quarter total to have blended compared fourth the but interest the trended in throughout $XXX.X of balance the the for very up up XXXX. full on the XXXX. a cost is slowly, year to margin ABS generally For costs year, fourth was trended the the X.XX% and quarter of XX%

NIM the and this that $XX.X year The NIM year from it's for quarter year X% full there’s interest see XXXX. in just significant risk risk you QX, So margin million down can been risk-adjusted funds. ABS year up full with from fourth X% full QX flat of from net is that’s the XXXX. the from cost million adjusted XXX.X The of the about adjusted of almost slightly over increase

The from the in at up operating core year full up XX% from the million quarter expenses that’s full XXXX. operating million of XXX.X and about QX of X% quarter year, from year fourth million for this is XXXX. Looking $XX.X September the core XX% the expenses about $XX.X up

couple in again so -- things of on going expenses. And the you got going down here a

employee deferring doesn't are about associated as fair we’ve happening in there value from incorporated the as But the So us prior originating certain preclude or allow years. costs, we another increases expenses, occupancy. some thing accounting operating costs such us is with and core in big which talked contracts here

recognized so be of million we fair about year that to was And value Most that accounting. estimate would've we been there recognized to switched in deferred of this not I that probably expenses periods. $X future had

percentage excuse quarter and X.X% managed year up last is operating from is expenses up X.X% of little Looking from little those the ratio bit also bit numbers fourth of X.X% a X.X% as quarter the the of for X.X% this year expense portfolio full me a and for ratio up -- full-year a bit down from XXXX. the -- core a year at little The the operating September from ratios. as from

from ago. credit XX.XX% from that's the the from a XX.X% year at and to for slightly a -- X.XX% the of last Looking were X% September for XX.X% sequential as of X.X% fourth bit in Brad little losses end year down delinquency just getting at metrics, the total the QX what X.XX% quarter. growth in our always the compared quarter full the to year, -- Seasonally benefit in of fourth X.XX% up to most portfolio from thing those that don't as unrealized said very nominal annualized is numbers we And in the down quarter quarter XXXX. challenging course the at any with in being losses this options. monitor Brad are year's the denominator. growth year and fourth The One dilution to last and we compared is in of quarter all don't alluded

have seen at year a quick this quarter the a all those little for market. from look option markets bit in We this A soft for XX% in XXXX. quarter and little fourth is the continuously XX.X% third down XX.X% asset-backed in of activity,

to XXXX-D fourth that receptive transaction. our The So at and we that quarter October were very strong securitization $XXX was million time. XXXX, offerings bond completed markets a very in of our

fact the XXXX weighted-average In securitizations. of since spread our we any least from at achieved lowest

XXXX-A bit and We that period more the but softer that seen release, spreads on first I unique the XX of recently, had you've our week in achieved quarter little think a slightly have the time. market, of a a actually little sunk transaction, coupon in for last 'XX blended actually transaction, then benchmarks X.XX% investors And transaction. wider during

even blended for slightly softer we the a that X.XX% with for bonds coupon So securitization. lower of the demand achieved

the that, I our to relative So I'll company's continue over it offerings of business. that bright back is it to be continues Brad. guess the to to very and markets a With receptive overall those bond be message there turn spot

Charles Bradley

Again, mentioned sort fair the at value. Jeff. you, said, Thank so of where looking we Jeff

focused into really back So a much marketing, stocking them everybody dealers thinks we’re still upgrading more goes the getting XXXX reps were important. as year getting connecting changes, our all, dealerships, beyond as with automation was where we very the is some making in field, on

strategy we we we’re do will as can fairly little slightly our forward and add bottom back which has scorecard, We've So move line of confident we new we originations to changed the the we’re sort that. gave Originations, substantially. actually get if going quality in to bit accomplish the substantially XXXX, with that, try improved APR up there. on and and that our discount a the

With to the and We are of by more a the of sort new sort the we've is much more there we like still scorecard, buying have so more where we have deeper line. the of to actually it as as had, and shift are we paper. good blend a the think mix losses will bottom higher little tier some having normal a profitable which blend more profitable contribute

So that in scorecard very XXXX terms project what it that's originations well. But of importantly for sort and XXXX. shows the the we doing more has were in of worked

always isn’t five now. but is all always as at five goes, collection branches, is to As collections we it far operating but quite right well, that going have occasions are true challenge be

good there of as really bit expansion on room branches. little the there in of a shape are to we is so we all expand continue for And

collections our well. sit very So

As just that options Jeff the that if can will was little happen bit, come that soon. I be in a the anytime and mentioned, recovery nice see down don't back know we some would

folks become so are because customers cars whatever they good cars and used expensive, there cars rather used new just have it. call think lot would out they or a I have quality, new of certified buy

of would rather all said that, get auctions. think And portfolio Originations they that's used result the to than the terms effect I quality fourth a in nonetheless car some on to continue of almost have a car. XXXX. in we expect quarter. But growing so as new And going as that's wise the buying we good more that trend buying a in

we've originations, to from if of the we downside and is that and performance probably some in this be marketplace there. being forward bit of quality, But better and sort goes to move up in will 'XX of the terms net here 'XX point down rates in only and cost of to originations XXXX So of sort 'XX, would little 'XX, a think collections get or cycle I of continue usually all is 'XX had up and sort the performance, 'XX, in a both the low going we the the as rise. get the offset funds 'XX, growth

to January will avoid fair fair other be it’s that possible folks significant and the that Jeff accounting to alluded that As I If CECL value hit in ahead that of adopt value. a was well. we game of XXXX, change lots happens will as

than about, future. results, So as all XXXX expected. is much we right a have in worked will is we If want better help things in of different that better But XXXX better we accomplish us the bunch we up everything. nothing did

decide XXX million, hanging waiting looking there what do, they other companies few to they're still are big range these there to been In of make sort the to trigger million still. out a triple the at in People of all companies XXX companies for also the lots to are happen, smaller companies everybody All their companies companies terms around has has the for big going decisions. to going consolidation value less make backed going what's or There ones. waiting ones portfolios equity around are to to the of but the private Once really beginning see there going when are than not market are talk establish been decisions. all is or that are that the a is either about whether good big out is peak industry happen. always that

consolidation that do a in people, involved in companies I myself there’s including the think, geez industry to in to the they XXXX XXXX, we going but going of started so said were 'XX lot think saying be And something.

away our the the valuation when one that shake XXXX of that to rolling right for at whole well. ball what finally This great the us that. the couple even and get are advantage things. the these sitting But nonetheless in companies large the with these in it in the as okay making including again any some the is go everyone. so hopefully some a take some and can out be all so sees So fact these be or of And of they companies of extent we of than that stunning boats purchase time to about of spot spot saying maybe or will folks to are to will right tide those that would industry that's we've going something's and flow for done do last start talking years then true they're in is hopefully us goal that some and decisions try

terms news of about, subprime the and certainly debt I big everything performance, today everything. it's performance, unemployment. or really bit there industry and doesn't picture of have unemployment of line the to what about for industry debt factor the our being Unemployment care even be and think is the bottom a don't growing probably up we result unemployment delinquencies the us guess auto up, people that recession little aggressive, In across being at goes our if we answer in of But has all. I I interesting, terms that up the being about to being production, been affects think seem the is somewhat

and interesting not So trends our for delinquency worried think delinquencies the be us. we're other might some for the across folks not industry, We but are overly about fine it that.

is XXXX I started. So done think XXXX behind us,

to again XXXX out. hopes be will you works that we high soon how see after and talking have We for

So for open up we will questions.

Operator

JMP with Securities. coming [Operator question from Instructions] Scharf first David Our is

Your now is line open.

David Scharf

close surprising the usually Was spike testing commentary as there on quarter? we competitive think slowest or changed is environment shift scorecards new about macro for that big particular -- higher the it to demand to seem seasonally tiered your as going interpret strong hasn't What how credits or very either somewhat have the was volume lot Brad, outlook? else maybe the backdrop Because of volumes I'm related were which out particularly in we competition? you the something on which changed. buying a a in year, doesn't XXXX to your to the reflects the wondering and was ought

Charles Bradley

Good question.

vendors our flow still programs they go in of I and so above joint above just beginning during done some sources. additional dealer some flow that in We've probably to normal certainly quite sources -- and ventures there’s beyond sort other provide other of seeing look looks of think but so and we fourth the other some XXXX how some we’re some sort with not could the getting volume but quarter. and and did

great that competitive, quite industry companies. not If hopes quite be work possible for really We avenue but something of moreover But to banks of you I is with to industry company some that And some would are the going still happen. it’s looks from been XXXX. interesting but the that are in people other their out, the all fourth some various picture agree that an getting they best put work, want and has the it's in to volume would the -- sure continues said we to getting out on be to there, the still at turndown how the answer probably quarter.

and industry. we've in having regardless should so be that But able provide background. is stuff that a generally lot that happening been what's that time to set-up said competitive hopefully some paper the to alliances going of still been we've good So even in and changes

David Scharf

these looks, fourth should jumping we is origination first off about strong fourth. we and half And programs, slow a for the extra modeling both the year the that bit mean of quarters than QX I being be an or quarter normally, the a Were the seasonality? as outlier typical of interpret point QX would thinking good

Charles Bradley

guess. I Well,

this quarters. to a seasonality quarter wouldn’t better as typical have of the terms of XXXX fourth look outlier I because three at volume In first it an and expect I would

quarter back XXXX hope the would that the than But there and three little XXXX to little then quarter then maybe we the the quarter But what be first generally fourth off So of down a other quarters shutdown, little quarter, first a fourth XXXX. soften maybe for third first quarter, quarter third get that we pushed further a the turns we quarter is is jump the out. expect tax stuff, second then in in first And and bit particularly will seasonality the second bit would with growth and -- slow the do speaking fourth. government quarters.

hope change seasonality for but quarters good the So is point off the fourth quarter. wouldn’t of in is of the next a quarter that news I fourth kind the we bank the the couple on jumping being of

David Scharf

are should I there’s Jeff. think this how is like think for this question a would that it you us about do ballpark know can XXXX? answering in months lot XXXX fourth of to sort but we the going seems give maybe to of maybe time be expense XX.X quarterly quite portfolio year. question, below And Obviously forecast of you a million some exiting a $XX legacy provision becoming aged, quarter it in go some It away, of

Jeffrey Fritz

on for I if haven't what we establish the will And we know option I portfolio, the CECL take but allowance CECL if if talked about expense we yet, go legacy that, won't legacy remaining will for we adopt can right? the portfolio a that turns away XXXX, don’t portfolio. XXXX which an the there may have a will so out because we any provision portfolio that tell you in lifetime provision, provision in happen, can there it I but legacy be predict to adopt one-time in that

XXXX provision there portfolio way the terms or the of legacy be one January in other. In really fact, won't tell can you I after any

you that right in maybe look and the ballpark. little expense think can decrease progression, provision in year, at is you the a of bit extrapolate sequential little For off this a probably the gets what I during it XXXX kind mean do bit I and

Operator

you. Thank

Joseph Jefferies. next Our with Kyle comes from question

open. line is now Your

Kyle Joseph

changes one. Jeff, any on the forward Any rate outlook just going quick here, tax modeling there? a

Jeffrey Fritz

think would I do XX% rate. might Yes, used be year, than last around a little I tax the it higher we've on

Kyle Joseph

change we’re back And cost the actually the of of the quarter first a from to we're seeing It a funds cost quarter Can getting swing the little sounds had where you your your then just forward? cost pause a for of given the Fed. funds cost funds. give bit the of like with Okay. going funds deal up stable us for sense year-over-year of fourth expectations

Jeffrey Fritz

bit of think feel we they cost increases, I seems a with little of I softer of to feeding bit their that the disappoint of the said pretty for the suggested the market about a we deal. slightly gas don’t better if of frenzy and good depression a with but January as foot even -- we is funds. word, observed funds little of right you benchmarks of blended rate But less a October on maybe so even if the little the I the a have actually know were bit compared to they pedal kind a will the take going Fed though to right little and cost did bit demand are deal -- in the on

too many satisfied about it business on front. be so asset backed not continues part said, it to with that a really continues And we’re complain pretty of I things as the to the

Charles Bradley

accounting fair with and Wall things tax December the our Probably, it's worth December deal. 'XX retention now first and sort in and risk you both US risk European the they to change risk value of retention also year world earlier 'XX much as in 'XX Street noting retention the is affected that so world rules put of quarter so working had this the as put are that and and rules our in trying of the we've

going deal do least sort been of one think is for at they wasn't overall has assume rates good that assuming news robust demand So retention what's probably The European that more should the going that would just been our the our with I it's the out bonds risk happen. than a little on Jeff outlook of all as not fairly you and as I up a good market. to great. interest demand the that rules bit, perfect, have these be much out, think to XXXX that first pointed has as It anything about or with

So now out. I people weren’t think work, forward. at one beginning I the the expect very think would have would it sure It because think it what go to they will probably going it's of will we -- how sorted and year back

market there most said care I As probably about ton the we is unemployment, world we we things care about functioning the ton care a two about in ABS being and well.

going And good and so problems are be as the the even of and good employment, adjustment to great. looked Europe. risk are as news No is US they things those markets both with ABS that to retention both

Kyle Joseph

on just million which accounting, value the line because one you recognize those fair of question. guys me last the were then follow-up had Jeff a expenses specifically? $X in modeling from And upfront items to one

Jeffrey Fritz

almost expenses. It's employee all on

Operator

question Jim comes Instructions] from Henry [Operator News. next you. Thank Our Automotive with

open. now is line Your

Jim Henry

or cars, good? used problem more on a The more you I car you new an to being create affordability have a about is that issue on not is to people cheaper availability question especially so you. to all a for about is availability cars written and issue demand do new lot much there's affordability, or there's an switch

Charles Bradley

actually it's want I to car for mean manufacturer. be think this I positive I point us wouldn’t Yes, a new at

before, a being today I I after margins margins tough high time. think they their having are minuscule. think They had very

to car new of last an so are -- is made so or I think that make just and cars for problem, created the problem there certainly used think goes cars cars going an thing. cars better, years affordability overproduction somewhat last they worse I longer. so better to just through whatever for was until better used couple used it the And of be a or that is cars are them made think I bubble

I like look saying rather one. Three wouldn’t a a old three year I year old car why new pretty a think buy customers car than are new.

affect to to to doing vendors going think for the it's going subprime the anything neo I mean somewhat, well. think auctions so really us. quite if actually it's trend I that's prime vendors continue good and I And and

said money, new on I it's one dealerships even that good the new us, sales, very and dealerships make car to pretty -- be for think rather subprime. I be the are the usual in or XX and years used made never they they much of last good with and still like on things car seeing the So so guys money also something do us better the they’d all car

So the I our the actually get of for for going what point trend pay regardless should the positive recovery to terms in us, auctions. think the auctions almost competitive rates cars more our they some is and improve. are very At of

So affordability think is an it I question. yes

Operator

Thank there Charles remarks. closing the additional further no speaker will questions you. Mr. for are or turn back the over operator to floor the If Bradley any

Charles Bradley

I a of better all the I looking you players for We expected guys what next and years, be consolidation think were a happens think year XXXX internally a in would of that spot. think all than done should the for. aren’t in but the soon particularly never like looking couple got of happen that was of in So very thing we’re things be consolidated the terms we XXXX what industry we've doing just us. it we’re we to And the industry good nothing great

terms been of to value. scorecard the waiting to We've the of performance, accounting collection Like done the the fair lot back to I we’re fair over -- said in think I come great. is see change things excited together. we've

problem So next are to year. not we some going see

amount I actually And been to We in have you the well top we've would we've for a guess of that bode of housekeeping housekeeping done in that tremendous as XXXX some. done it on call should but much grow as able future.

as in So yet, aren't really to isn’t and we’ve right these the -- the as line to a much built numbers We bottom in succeed be there quite quite at all aren’t yet, there think price stock there yet. thing and XXXX. quite position

will it goes. And so see I how

ABS is unemployment is I the think the market I remark great. great, said

again. growing I a to think we’re in to continue position get

to look With to April. probably talk to Thank you. you So we’re it. will looking we forward in that,

Operator

Thank XX, now By or today's available PM number you. identification XXXXXXX. from time. the with the Eastern days be A two beginning time, XX teleconference. and of Please be will the disconnect XXX-XXX-XXXX live your A conference the replay broadcast conference until This XX:XX day. conclude hours also call XXX-XXX-XXXX, XXXX dialing www.consumerportfolio.com. have February website lines a at this available company's for call via at after will and does wonderful

Consumer Portfolio Services (CPSS) 13 Feb 192018 Q4 Earnings call transcript