Good day everyone, and welcome to the Consumer Portfolio Services 2020 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 are not the statements of historical facts, may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, also are forward-looking statements. All such forward-looking statements are subject to risks, could cause actual results to differ materially from those projected. I refer you to the company's annual report filed March 16 and its quarterly report filed May 5 for further clarification. The company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, further events or otherwise. With us here now is Mr. Charles Bradley, Chief Executive Officer; and Mr. Jeff Fritz, Chief Financial Officer of Consumer Portfolio Services. I'll now turn the call over to Mr. Bradley

Thank you, and welcome everyone to the second quarter earnings call. I must note I wanted to have people on the conference call set up business get their jobs sometimes, but nonetheless - oh my God. So it's been an interesting quarter. Certainly this is the real COVID quarter because our first quarter ended in March and that - and March really showed no signs. This quarter has been a roller coaster of not knowing what's going to happen, whether things, good or bad, are going to happen. The good news is the quarter stood up very well. We went from starting on April, with wondering whether we could do any more securitizations. We had to postpone our securitization. But the market recovered exceedingly quickly and we were able to get off the securitization without any problems, and actually very good pricing. So that was a very big accomplishment. Everybody is worried about the volumes. Our volumes are off a bit, however still functioning and everything's going pretty well. I think generally people are being quite conservative right now, both in terms of how long this is all going to last, whether there's going to be a liquidity issue and everybody is sort of trying to maintain liquidity and being cautious, and as our we. Collections was another big challenge. Our motto always is, you can sleep in your car, you can't drive your house, but it really shows with the government check and the unemployment benefits, our customers are using that money and they're paying us. People wondered how that would all work. But our collection efforts and our results have been really good this quarter even though we're in the midst of all these problems. So that's another huge highlight of what's going on. The earnings where good, was the best earnings since fourth quarter of 2018. We're hoping that trend will continue. So at the end of the day, we don't really know what's going to happen. So we're going to move cautiously, preserve liquidity. We're buying a little tighter. We're getting good quality paper. So we're doing bunch of things right. And the results are there to back it up. We went from having an enormous surge in extensions in April to almost back to normal, very much just flat in June. So for all intents and purposes our collection efforts are back to where they're supposed to be. The performance is obviously where they're supposed to be. So we've been very pleased with all those results. Again still lots of unknowns, but we'll sort of talk about that a little more. I'll let Jeff run through the financials.

Thanks Brad. Welcome everyone. Let's begin with the revenues, revenues for the quarter were $67.3 million. It's a 5% decrease from the first quarter this year and a 22% decrease from the second quarter of 2019. The six month earning - revenues were $138.1 million. That's a 21% decrease compared to the first six months of 2019. So I think the way to look at the revenues for the quarter, really think about in terms of three components. Our legacy portfolio ended the quarter at $695 million or 30% of our total managed portfolio. And that portfolio is yielding 18.5%. But then the more recent portfolio, the fair value portfolio is $1.6 billion, 70% of the total. That portfolio is accounted for at fair value. So it's yielding about 10.2%. And remember that, that yield is net of credit losses. So you have those two components which are going to be with us for a while, and then the unusual component is a markdown, a negative revenue component of $9.5 million on the fair value portfolio, a markdown that we took as a result of the COVID event and the uncertainty surrounding that. And it's basically - I mean it's a combination of a couple of things, but really essentially a COVID-related markdown of $9.5 million. You may recall, we had a $10 million COVID-related markdown on the portfolio in the first quarter of this year. Moving on to expenses, $62.6 million for the quarter, that's down 8% from the first quarter of this year, $67.7 million, and down 25% compared to the second quarter of 2019. The six month expense numbers are $130.3 million, and that's a 23% reduction for the first six - compared to the first six months of 2019. So the biggest difference in expenses year-over-year…

Thanks Jeff. And sort of running through where we sit today. From the marketing originations point of view, I think our sort of our watchword is caution we're going to try and grow back to our levels or normal levels slowly and cautiously. There is less new cars out there because of the COVID problem. A lot of the new car manufacturers haven't made cars. And so the mix is beginning to change. We've dropped almost 8% in the percentage of new cars we buy. But sort of as a result of those things, we've also been able to raise our APR a little bit. We raised our fees significantly, have also improved the credit quality. Our LTVs are down, our payment to income ratios are down. So we're really getting a better piece of paper. As much as we're not getting the volumes we were getting and I think we can get back to those volumes. I think volumes across the industry will be slightly depressed a little bit, mostly because I would think most people are proceeding with caution like we are. But again, it's a little hard to tell the industries’ seems to have plenty of liquidity. It seems like everything is functioning the normal, other than car sales are down. People though, do get cars when they when their cars breakdown and they need new cars. And so that's going to drive our industry almost regardless of the economic conditions. So we've been able to take advantage of that. As we pointed out the numbers have been very good. The collection average are doing great. The fact that we've been able to get the extensions back down to what we'll call a normalized level and the DQ is doing really well. And granted, we might be…

[Operator Instructions] Thank you. Our first question is coming from the line of Kyle Joseph from Jefferies. Your line is open.

In terms of the deferrals or the extensions that you talked about the volumes were high in April, and they gradually fell down through the quarter. Can you give us a sense for the performance or the extensions that you granted in April, are they performing kind of consistently with your expectations, and how more recent deferrals have been performing?

Well, we do a fair amount of sort of long-term analysis of extension effectiveness. And so, we don't have really any data on those most recent extensions, but we monitor that on a regular basis and put some tables in our 10-Q document that show that. In general, we make good extension decisions. And so I mean, I think we're confident that those results, and one thing, I guess indirectly I do know for example Kyle, that the cash collections have been very consistent. So the dollar amounts of cash payments that the customers have made have been steady. They were actually up slightly in May compared to April, and the June numbers were level with May. And so I mean, I think that we're satisfied that the customers are getting that one month extension, and then they recognize that they've got to be on track after that.

And then in terms of the fair value mark, and the incremental provision in the quarter, can you give us a sense for what sort of economic assumptions you are baking into those credit forecasts, and how those have changed since March 31?

So in the fair value mark, there is two pieces of it. One is kind of straightforward and the other one is a little bit more subtle. The main one that goes into that $9.5 million mark is - we're just looking at the forecast and like each of these, the whole fair value portfolios to us on a granular basis is a bunch of monthly portfolios starting from January of 2018. And so, we look at each monthly portfolio, and each portfolio has a forecast of losses in the future. And so we've picked a window like a six-month window coming up. And we predict - just judgmentally predict that the losses over that six-month window will be something like maybe 10% higher. And so, we've baked that in, and then that has an effect on the mark. And then the other mark is a little more subtle, as Brad mentioned, we're getting a juicer yield or richer yield and the paper that we're buying today. And so when we look at that, technically this fair value accounting, you're supposed to look at your current purchases as sort of a proxy for the value of your existing book. And so, what we've seen is because the yield is a little higher on the paper we're buying today. We actually went back to some of the oldest cohorts in the fair value portfolio and we marked their yield up just ever so slightly. So it was more comparable to the current yield. But in order to do that, you have to give something back if you will. And so, a part of the markdown of the fair value portfolio was to write-up the yield on the oldest cohorts.

And one last one from me. Can you just give us a sense for - I know you talked about - the goal is to get volumes back to where they were gradually, can you give us a sense for how volumes trended in April, May, June, and then ultimately how they're trending in July?

Generally, they’re obviously going up probably on a - maybe a slightly slower scale than we would expect. But again, we're actually doing really well with what we're buying. So, the offsetting yield adjustments are probably worth the lower volumes. So I mean the other problem as its summer and summer is generally given everything's going on, they're not going to be a real great time to try and push the growth. And so probably, unless things change somewhat dramatically in the next month or so, we would probably expect slight increases month-to-month. It's not like we're going to go from 50 to 80 or something like that. But we would expect it to trend up 10% a month or something would be sort of the guess at the moment it’s just - we’ll react with the market. And like I said, I guess the important thing is, we're doing very well at what we're buying. We want to get back to those levels, but we're going to let the market sort of dictate how fast that happens again, the watchword and all that is caution. We don't want to get going real fast and have something go wrong - either with COVID or the economy or whatever it is, that causes us to have a liquidity problem down the road. So, we're doing fine with what we're doing. We'll just keep managing it as we go. So it's a little hard to put a number on it. If we wanted to say we were going to grow, we would hope at a minimum 10% monthly, but we'll see.

[Operator Instructions] Next question is coming from the line of Jeff Zhang from JMP Securities. Your line is open.

I just got a quick one on. I was wondering what you guys just thoughts are on recovery values in terms of repossession activities in near-term and potential future regulatory action?

I mean, we sort of talked about as the market - the auction markets are going to remain strong. There is, a few states still that you cannot repossess cars right now I think there is five of them. And so, it's not having any dramatic impact in terms of repossessions. We would expect I almost think as much as it maybe - I don’t know was the perfect thing to say, the new car manufacturers were kind of keeping the new car sales as high as they could for the last few years. And that bubble is going to burst and so COVID has certainly burst that bubble. And maybe in some ways, it's going to be the best thing for the new car market because now they're going to be unless demand get built back up as they ramp up production again. But in the meantime, we're going to benefit dramatically from used cars going to auction and having a much better value. So in terms of repossessions we're missing a few states, but it's not dramatic. In terms of the values we get it auctioned, they're probably going to be stronger until that new car demand catches up to the new car production, which again it may not happen this year. So, we would be relatively optimistic for both repossessions the rest of the year and auction values the rest of the year.

[Operator Instructions] I don't have any further questions. Mr. Bradley, you may continue.

Thank you. So I guess I probably said we are caution about 10 times today, but that's really the operative word for what we're going to do. We're going to proceed that way. We're going to take advantage of the markets when we can. We're still looking of course, as always to improve our collections, improve our technology, cut expenses, and manage our way through this best as we can. And we said, I’ll add second quarter was great. I mean, it's amazing given the COVID and all these other problems going on, that we're able to have such a good quarter. And so, our hope is that this continues, and we'll get through it. Hope everyone stays healthy and safe. And I will speak to you next quarter. Thank you for attending.

Thank you. This concludes today's teleconference. A replay will be available beginning two hours from now until the 29th of July by dialing 855-859-2056 or 404-537-3406. The conference identification number 9486817. A broadcast of the conference call will be available live and for 90 days after the call via the company's website at www consumerportfolio.com. Please disconnect your lines at this time and have a wonderful day.