What Consumer Portfolio Services (CPSS) Said on Its Q3 Earnings Call

Key Points

• Q3 financial results improved significantly: Revenue rose 22% year over year to $131.9 million, while net income increased 42% to $7 million and diluted EPS climbed 50% to $0.30.
• Originations reached a record: New auto-loan originations more than doubled to $815 million, supported by an expanded sales force and dealer network. Management said growth came without loosening underwriting standards.
• Credit and funding conditions strengthened: Delinquencies and net charge-offs declined year over year, while warehouse capacity surpassed $1 billion after expansions with Citibank and Capital One, supporting continued measured growth.

Consumer Portfolio Services NASDAQ: CPSS reported higher third-quarter revenue, earnings and record originations as the company expanded its sales force and dealer network while maintaining what management described as a disciplined credit approach.

Chief Executive Officer Charles Bradley called the quarter “one of the best quarters all around” that the company has had in a long time. He said the results reflected investments made during 2025 to prepare the company for higher lending volumes, including staffing, collections capacity and expanded field marketing coverage.

Revenue and Earnings Increase

Chief Financial Officer Danny Bharwani said third-quarter revenue rose 22% year over year to $131.9 million from $108.4 million. Revenue for the first nine months increased 12% to $365.6 million.

Expenses increased 20% in the quarter to $121.8 million, driven primarily by higher interest expense and variable costs associated with the larger loan portfolio. Interest expense rose 19% to $70 million.

Because revenue grew faster than expenses, pretax income increased 44% to $10.1 million, compared with $7 million in the prior-year quarter. Net income rose 42% to $7 million from $4.9 million, while diluted earnings per share increased 50% to $0.30 from $0.20. Bharwani said the EPS gain exceeded the increase in after-tax income partly because the company repurchased shares during the quarter.

For the first nine months, net income increased 31% to $18.7 million, while earnings per share rose 36% to $0.80.

• Finance receivables measured at fair value increased 28% year over year to $4.6 billion.
• Total debt rose 28% to $4.4 billion, which Bharwani said was in line with the growth in assets.
• Shareholders’ equity rose 5% to $324 million.
• Return on managed assets increased to 0.9% from 0.8% in the prior-year period.

Record Originations and Dealer Expansion

The company originated $815 million of new auto loans during the third quarter, more than double the $391 million originated a year earlier and the highest quarterly total in its 35-year history, according to President and Chief Operating Officer Mike Lavin.

For the first nine months of 2026, contract purchases reached $2.11 billion, compared with $1.28 billion during the same period in 2025. Lavin said the nine-month total had already surpassed the company’s previous annual origination record of $2 billion, set in 2022.

Management attributed the growth to a larger sales organization, more dealership relationships, greater application volume and an improved capture rate. The company increased its sales force to about 150 representatives from 93 at the end of 2025. Its dealer base grew by nearly 6,100 partners over the past 12 months to roughly 12,900 dealers, a 90% increase from the prior-year third quarter.

Applications received increased to 1.3 million during the quarter from 758,000 in the prior quarter. The company’s capture rate rose from the high-5% range to just over 7%, Lavin said.

Lavin emphasized that the company pursued growth through expanded sales coverage and dealer relationships rather than by reducing pricing or loosening underwriting standards. He said approval rates declined from the low-50% range to the low-40% range over the preceding six months, while payment-to-income and debt-to-income ratios remained flat.

The company also introduced a prime lending product at the beginning of the year and launched a refinance product, both of which Lavin said had grown sequentially.

Credit Performance and Collections

Credit metrics improved from a year earlier. Total delinquencies of more than 30 days, including repossession inventory, declined to 12.26% from 13.9%. Annualized net charge-offs fell to 7.26% from 8.01%.

Lavin said repossessions and extensions also declined year over year. He added that the company’s analysis found that three out of four loan extensions did not lead to repossession and two out of three did not result in a charge-off.

Net recovery rates on repossessed collateral sold at wholesale auction improved to 32% from 28%, although Lavin said the figure remained below the company’s historical average in the low-40% range. Management expects recoveries to improve as loans originated in 2022 and 2023 continue to run off; those vintages represented 14% of the portfolio at quarter-end.

The company is using nearshore collections operations and artificial intelligence tools to lower servicing costs as account volumes rise. Lavin also said Consumer Portfolio Services uses three third-party AI-based fraud-prevention products and expects to add a fourth late in the fourth quarter.

Funding Capacity and Outlook

Bradley said the company expanded its Citibank warehouse facility to $508 million from $335 million and its Capital One facility to $518 million from $390 million. The increases brought total warehouse capacity above $1 billion for the first time, he said.

The company also completed an $80 million residual financing during the quarter and used part of the proceeds to repay $60 million of more expensive prior residual financing. Bradley said the transaction improved the company’s future cost of funds. He added that Consumer Portfolio Services completed another securitization and expects future securitizations to be incrementally larger.

Management said it has adjusted annual percentage rates and fees to help preserve margins amid higher interest rates. Bradley said the company does not seek to double its business next year but intends to continue growing in what he described as a strategic and organized manner.

Bradley characterized the broader industry as relatively unchanged, with a small number of large participants and increasingly high barriers to entry. He said management continues to monitor unemployment, inflation and interest rates, while noting that the third-quarter unemployment rate of 4.2% indicated a relatively strong labor market.

About Consumer Portfolio Services (NASDAQ:CPSS)

Consumer Portfolio Services, Inc NASDAQ: CPSS is a specialty finance company that provides indirect automobile financing to consumers, primarily those with limited or impaired credit histories. The company works with franchised and independent automobile dealers to arrange financing for purchasers of new and used vehicles.

Consumer Portfolio Services typically purchases retail installment sales contracts originated by its dealer partners and then services the related automotive loans.

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