CPS Posts Another Quarterly Loss, But CEO Expects Portfolio to Grow Again Soon
IRVINE, Calif. — Continuing to struggle with a decline in the portfolio it manages, Consumer Portfolio Services announced another quarterly loss this week.
The second-quarter financials included a 19.1-percent drop in revenue. CPS' revenue slid down by approximately $7.4 million from $38.5 million to $31.2 million.
Though executives determined their second-quarter operating expenses dropped 9.8 percent or about $4.1 million to $37.6 million, CPS still recorded a pretax and net loss.
The company's second-quarter pretax loss actually doubled year-over-year, climbing from $3.2 million to $6.4 million.
CPS' net loss for the second quarter was $6.4 million or 35 cents per diluted share compared to a net loss of $6.8 million or 39 cents per diluted share for the year-ago quarter. The company pointed out its net loss for the second quarter of last year included a charge to income tax expense of $3.6 million or 21 cents per diluted share related to an addition to the valuation allowance against the deferred tax asset.
Since it had its second-quarter figures in hand, CPS also shared year-over-year comparisons for the first six months of 2010 and 2011. Again, the company sustained losses.
CPS' total revenue for the first half of this year settled at $63.5 million, off by approximately 23.5 percent from the same time period a year ago when the company generated $83.1 million.
The company managed to shave its total expenses through the first six months of 2011 by 21.3 percent year-over-year. This ledger tally sunk from $94.2 million to $74.2 million.
Nonetheless, CPS has posted net losses through the first six months of the year, but these are lower than 2010.
The company's pretax loss was $10.6 million, down from the $11.1 million pretax loss during the first half of last year. The net loss also was $10.6 million or 58 cents per share. A year earlier, the company's six-month net loss was $14.7 million or 83 cents per share.
Like in the second quarter, CPS mentioned net loss for the first half of 2010 included a charge to income tax expense of $3.6 million or 20 cents per diluted share related to an addition to the valuation allowance against the deferred tax asset.
Other 2Q Company Activity & Performance Measures
During the second quarter of this year, CPS highlighted that it purchased $60.8 million of contracts from dealers as compared to $50.0 million during the first quarter of this year and $26.7 million during the second quarter of last year.
The company's managed receivables totaled $635.0 million as of June 30, a decrease of $296.6 million or 31.8 percent from $931.6 million as of the same date last year.
Executives determined their annualized net charge-offs for the second quarter were 6.04 percent of the average owned portfolio as compared to 9.33 percent a year ago.
CPS' delinquencies greater than 30 days — including repossession inventory — stood at 5.9 percent of the total owned portfolio as of June 30. On the same date a year earlier, the level was 6.8 percent.
Top Exec Reacts to Company Performance
In assessing how CPS performed, chairman and chief executive officer Charles Bradley Jr., began by stating "the second quarter was another good quarter operationally.
"We continued to increase our new contract purchases, and our asset performance metrics improved year-over-year," Bradley continued.
"We are now getting close to the point where our managed portfolio will start growing again," he went on to say. "As I have mentioned in the past, the decrease in our managed portfolio has been one of the key factors contributing to the losses we have experienced over the last several quarters."
Bradley also mentioned other avenues where he believes CPS can boost its performance.
"In addition, last week we signed a purchase agreement with Fireside Bank to acquire its $237 million subprime auto portfolio," he noted.
"We expect to close the transaction later this quarter after receiving the requisite regulatory approvals," Bradley explained. "This will be the fifth acquisition we have completed in the last 10 years and will boost our managed portfolio by over 35 percent.
"More importantly, the transaction should accelerate our return to profitability as a result of increased net interest margin and enhanced operational efficiencies," he concluded.