Consumer Portfolio Services Q3 2025: Contradictions Emerge in Credit Performance, Tricolor Collapse Impact, and Financials

Date of Call: None provided

Financials Results

• Revenue: $108.4M for Q3, up 8% YOY (Q3 2024: $100.6M); nine months $325.1M, up 13% YOY (9M 2024: $288.0M)
• EPS: $0.20 diluted EPS for Q3, flat YOY; nine months $0.59 vs $0.58 prior year

Guidance:

• Added a new credit line post-quarter and completed a securitization, providing ample funding.
• Expect margin improvement if interest rates continue to decline and plan to retain APRs to capture upside.
• Anticipate portfolio credit mix to improve as 2022/2023 vintages run off and 2024/2025 vintages perform better.
• Cash posted in securitizations should roll back early–mid next year, improving liquidity.
• Q4 typically slow; expect stronger growth in Q1–Q2 next year if macro conditions hold.

Business Commentary:

• Financial Performance and Revenue Growth:
• Consumer Portfolio Services reported revenue of $108.4 million for Q3, up 8% from the third quarter of last year.

• Growth was driven by an increase in the fair value portfolio and a decrease in fair value marks, leading to a higher yield.

• Credit Quality and Credit Performance Improvements:

• The company has seen improvements in credit performance, with the 2024 and 2025 vintages performing better than previous years.

• These improvements were primarily due to the company's credit tightening measures implemented in 2022 and 2023.

• Expensive Securitization and Debt Management:

• Despite more expensive securitization due to the Tricolor problems, the company successfully completed its securitization.

• Efficient debt management resulted in a 11% increase in total debt compared to a 16% increase in the fair value portfolio, improving the balance sheet.

• Operational Efficiency and Cost Management:

• Core operating expenses were down 4% year-over-year, with a decrease in the percentage of employees as a proportion of portfolio balance from 28% to 24%.

• This was achieved through a reduction in employee headcount, contributing to overall operational efficiency.

• Regulatory Environment and Market Stability:

• The industry faced challenges due to the Tricolor collapse and related issues, but the market remained stable.
• Consumer Portfolio Services was able to successfully navigate these challenges due to its reliance on third-party custodians and a focus on operational efficiency.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted completed securitization and a new credit line ('tons of funding'), said 2024/2025 vintages 'have all proven to be better', expects margin and cash benefits from lower rates and runoff of weaker vintages, and called 2025 potentially the company's second-best year.

Contradiction Point 1

Credit Performance Trends

It involves the assessment of credit performance, which is crucial for understanding the financial health and risk management of the company.

What are the key credit performance trends and operational highlights? - [] ([Questioner's Company])

2025Q3: Credit performance is improving, with a slight drop in DQ greater than 30 days and an increase in net interest margin despite a tight credit box. - Mike Lavin(COO)

Can you discuss sales and originations performance and credit performance for Q2? - [] ([Questioner's Company])

2025Q2: Credit performance improved, with DQ greater than 30 days slightly down, and annualized net charge-offs slightly up. - Michael Lavin(COO)

Contradiction Point 2

Impact of Tricolor Collapse

It involves differing views on the impact of the Tricolor collapse on the industry and the company, which could influence investor perceptions of risk and stability.

How has the Tricolor collapse affected the industry, and what are the expectations for the future? - [] ([Questioner's Company])

2025Q3: The Tricolor collapse affected the industry, particularly investors, but Consumer Portfolio Services was not impacted due to having a custodian for our contracts. The market remains stable, and we expect the industry to recover. - Charles Bradley(CEO)

How does the Tricolor collapse affect your business? - George Fadel (Stifel)

2025Q1: And we've always maintained that we are very different from Tricolor. And the fact that we have all of our originations of our contracts that are held by an independent custodian, which was a proactive move for us, we are not in the position of holding the paper ourselves. - Charles Bradley(CEO)

Contradiction Point 3

Credit Performance and Strategy

It highlights differing perspectives on the company's credit performance and strategic focus, which are crucial for investor confidence and financial decision-making.

How has Consumer Portfolio Services' growth and credit performance been this year? - Charles Bradley

2025Q3: The year is proceeding as expected, with modest growth instead of aggressive growth. The focus has been on reforming the 2022 and 2023 paper and proving better credit in the 2024 and 2025 vintages. The 2024 and 2025 deals have shown improved performance compared to previous vintages. - Charles Bradley(CEO)

What incremental changes have been made to the Blackwell GPU, and how do they affect revenue and customer reactions? - Vivek Arya (Bank of America Securities)

2025Q1: And while we do not wish to have a conservative credit box during the course of a credit cycle, we still have a pretty tight credit box today, and we have not seen anything that would cause us to loosen that credit box. - Mike Lavin(COO)

Contradiction Point 4

Industry Impact and Market Stability

It involves the assessment of industry stability and market conditions, which are crucial for understanding the competitive landscape and potential risks.

What impact has Tricolor's collapse had on the industry, and what are the future expectations? - [] ([Questioner's Company])

2025Q3: The Tricolor collapse affected the industry, particularly investors, but Consumer Portfolio Services was not impacted due to having a custodian for our contracts. The market remains stable, and we expect the industry to recover. - Charles Bradley(CEO)

Can you comment on industry trends and macroeconomic impacts? - [] ([Questioner's Company])

2025Q2: Market conditions are cautious, with light foot traffic at dealerships. Potential M&A activity could benefit our comps. Interest rates going down would be helpful, while unemployment is a focus. Collection and efficiency improvements are key, with the overall economic outlook looking positive. - Charles Bradley(CEO)

Contradiction Point 5

Financial Performance and Expenses

It relates to the financial performance and expenses of the company, which are important indicators for investors and stakeholders.

Can you summarize the financial highlights for the third quarter and year-to-date as of September 2025? - Danny Bharwani (CFO)

2025Q3: Revenue was $108.4 million, up 8% YOY, with a 13% increase in the nine months. The fair value portfolio is $3.6 billion, yielding 11.4% net of losses. Pretax earnings were $7 million, up 4% YOY for the nine months. Leverage has improved with a 16% increase in the fair value portfolio and an 11% increase in debt. - Danny Bharwani(CFO)

How did the company perform in 2024 in terms of revenue and expenses? - Denesh Bharwani (CFO)

2024Q4: Revenues for the year were $393.5 million, a 12% increase from 2023. This increase was driven by strong growth in loan originations. Expenses for the year were $366.1 million, 26% higher than in 2023. - Denesh Bharwani(CFO)