RM - Earnings call transcript Q3 2017 | Regional Management Corp.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Regional Management Corp. third quarter 2017 earnings call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. will opportunity there ask presentation, the be to an questions. After Instructions]. [Operator now I the call to to turn would like Garrett Edson. Please go ahead.

Garrett Edson

good earnings presentation, website at Thank access may also to and afternoon. on everyone which now, you our found should this to call, our was announcement which slide regionalmanagement.com. be and released prior By have

Management Regional to or to disclaim Knitzer, Peter any Management any are on and we uncertainties Corp. our intentions Regional reliance formal Corp. of could forward-looking detailed undue could update future statements. everyone of are our not I the of part are may therefore of future a should more and except them. cause begin that various forward-looking remarks, include implied from discussion by subject which remind or to placed the our like These difficult today. forward-looking statements obligations estimates statements Before statements results or to upon discussion discussion and applicable results required which statements, forward-looking introduce the to management as materially We based in revise differ are assumptions, that projections extent and operating other law. I the the of performance for with the now need of expectations, that today uncertainties actual and guarantees those to condition and filings risks The would to you refer SEC be risks, to all impact of CEO predict not expressed financial We recent of factors in our

Peter Knitzer

quarter call. Garrett welcome earnings Thanks XXXX to third and our

who with for interest financial speak here want team. later this the Thomas, afternoon I I our I with call. some on Don our your for our members participating company. always, also to everyone here am am As will continued CFO, in thank and of

our have we mobile provide on remarks. supplemental to a you regionalmanagement.com presentation a with to device, those computer our access of website color posted For to or at a additional

see generated on accounts. negative EPS you form bankrupt a which benefit previously of diluted charged-off the As three, estimated million hurricanes, sale and the of year-over-year XXth $X.XX and quarter includes bulk hurricanes Despite our portfolio page from have revenue of impact digit we double by finance revenue XX.X% the driven $X.XX can of $X.XX in we of growth fifth This of represents of in quarter digit $XX.X growth. consecutive receivables. growth growth double consecutive

the took business cost increased hurricanes. the will of a While which for related losses to we that will believe show impact core Most credit well. and and credit overall future for $X we Don of million no on, capture the XXXX the hurricanes Later reserve, to impact the reserve primarily due have results that on quite are our should plans credit actually all hurricanes the strategic beyond. importantly, our metrics you performing

and through increased interest our Lastly, more take detail. this to facility Again, expense financing. in will upsizing Don of cost bank higher of our you growth, warehouse due

significant items our is our few highlight. the including NLS of completed, our to system. our completed we Turning October, two to have Texas new successfully onto Texas XX% our are we running platform, strategic largest of standpoint, the a four. now At From branches there new of on With slide beginning conversion loans states.

NLS stopping a am we said, This conversion loans. track. to call, Texas, every have last I other auto on in in our production in and the increase that smoothly the just a remains experienced on That of we temporary As temporary converted. state system pleased as are in month, have we delinquencies noted and report we is slowdown expect origination running overall

years. for We as we loans the continue to been have service will

on and dedicate our long-term our is I As objectives. large decision enable primary to segments. This loan have our on core strategic said to will further our small resources focus previous regional calls,

although terms reduction down, impact by from our quarters this there some expense portfolio. will believe be In savings that we impact, growth coming largely will it in portfolio be of in as revenue winds in the the mitigated auto and core

In addition, lower from is yield business of portion auto as expect loans small we towards was yielding occurring our from mix the large a of migrate portfolio to the shift we one smaller auto loans. as the impact portfolios, offset the

we last additional our call, into the collections In I our addition, as quarter of expansion accelerated during noted functions on the states. centralized

on of with albeit continue We early customer performance a portion to collection team's exceeding small base. the results our be expectations relatively with pleased

collections we As make approach losses. lower centralized and to marketing focusing future Further, progress to on branch our hybrid we on rates and roll improve credit novo continue ramp to our up, we de strategies expect net growth.

level in have strong complete We with we maintained as expansion growth branches de conversion. existing novo platform the

response and in We be of targeting the implemented new are which in for tools risk XXXX. process will both developing

expand novo our next plan year. to We de also efforts

affiliates. channel Lastly, expanded as and with to as our LendingTree, continues test our digital develop relationship additional well we as evolve further

rolling Our and our search engine and improved we with portals website optimization. are state have texting out each we and customer NLS convert to

I Before the a Don, occurred the that I third turn to over few of on want hurricanes minutes the quarter. to it spend in impacts

most employees in of areas, throughout our our and foremost, affected are affected days by these lost employees few thoughts weeks we the most in a families go hurricanes. their branches affected storms we up and these continue our that only relieved to remained a In and and and those our few out severely to areas. to First the customers branches safe in

for since all running branches been time. and have reopened some have our normally impacted been However, of

fortunate files. branches magnitude in minimal and we damage the no customer to Given that the of damage our occurred our only are flooding,

in of these their However, and scheduled late the many waived provided of we to our free customers. aftermath, make customers Immediately fees were impacted their payments. terms in ability deferments for

on their get and to feet We are them normal. back with continuing these to help customers work closely return to

of million few attributable a share entire I by As estimate third specifically losses the reported precisely in diluted the on additional our impact results, $X for credit to provision quarter, while hurricanes $X.XX. it's hurricanes per the Ultimately these an hurricanes. earnings that mentioned we quantify minutes to impacted we in ago, quarter the impossible

We hurricanes from quarter. that in the be there expect effects also lingering the fourth limited will some

However beyond and most customers and our employees ongoing and standpoint, importantly, unchanged. are business for and safe and plans our a XXXX from initiatives remain

from third We profitable growth. I continue to receivables, hurricanes digit now generate more term from execute remain So there to remained while and strong standpoint. our impact on and to turn credit the on long our still the pace to was provide platform Double performance, we hurricanes affected on about call increases operational impact the pleased in be to finance the revenue excluding much over performance an will little the color financials. a loan conversion. Don quarter

Don Thomas

net stood year XX.X% loan Net third growth see up digit Thanks call. period. components slide can for Peter quarter increased the XXth ending with and for six. finance of on finance XXXX, net net million, hello from It's receivables. you $XXX receivables September slide receivables. seven, over XX, growing the the Picking on more year. double consecutive the XXXX Core at than On XX% quarter at to prior everyone and the receivables our the prior of

the portfolio Out a the nearly year or The increase pickup saw $XX and sequentially from from $XX and loan growth from quarter. million and of a end our at loan saw in and loan our of the prior be automobile loan stands other XX.X% portfolio down portfolio. to the large XX.X% from and increase prior continues a to our second total accounts were the X%increase we prior end the second our liquidation small quarter. $X $XX million $XX the now $XXX category. engine the or for due year as continued million from large Our categories primarily or X% category Meanwhile, million million year, million XX% of

was revenue revenues and between yield XXXX Sequentially, in basis result calls. XX an in increase that discontinuing growth was Given our eighth quarter net squarely auto continue XX% more year-over-year loan the of will year-over-year finance the swing digit credit subsequent mix product Total it eight swing driven declined average loan in in of the quarter. are for quarter shifting our in on This origination in to focus average receivables. by insurance less order as XXXX carrier line consecutive decline as XX.X% change double with slide on line revenue than of we increases third offset the other was provision third is second loan a receivables. The have quarters. primarily on our categories points to from the what more we core than our the receivables benefit the in mentioned portfolio, previous losses our quarter announcement the benefit

the In fees income decline resulted with despite expected interest total addition, hurricane. and to in the fees a sequential included revenue in lower points lower line than were yield. a consistent in other Lower our swing due fee XX basis collectively

the to nine. top slide Moving of

prior million of which this of losses we $X.X prior sequential and the had the allowance was a XQ offset allowance a allowance Our credit course, we of partially versus million credit in increase the year hurricanes. regular million by of basis. related quarter million reduced by $X for credit XXXX, $X.X additional period over million million provision XQ losses was hurricanes, $X.X allowance the in The $XX.X versus the year the excluding for incurred year-over-year allowance million up the of in XXXX impact additional build smaller provision third $X.X prior from estimated for the build was quarter a period. period. primarily build by the on of up In to The a hurricane $X.X of year driven losses

XXXX, Finally, the quarter net $X.X million sequentially. but third were down over up of losses credit

$X rate. At show the making offset in allowance, increase $X.X the net regular credit So slide we the were by $X.X lower million credit build hurricane increase for of the the the loss of and net trend bottom losses million $X.X our up total nine quarter. the million of million allowance

claims trend washed to slide the out. third loss increase including percentage the other quarter in basis which the net XXX that to the from the at XX basis net bulk We consistent bulk accounted rate point of of credit is sequential for due the the loss Year-over-year, the but net credit X.X% bottom Our for I of third an a was note the sale, bulk the offset losses points quarter, the XX seasonal quarter do XX improvement. in line rate the points. and sale XXXX, of a was up with line average insurance expect as points The was receivables swing XXXX. would annualized nine. go in basis annualized each That's net down decline, basis sale credit of fourth

XX, slide of our to Turning we seasonal show pattern delinquency.

at X.X%, from quarter in the stood level XXXX, X.X% the of delinquency in quarter an improvement while Our up XXXX. from day XX-plus X.X% third second of

in second in our level and from from X.X% of day early-stage flow-through level from some will from is come the expected XX-plus second biggest the quarter hurricanes stood could Therefore XXXX, delinquency X.X%, in on amount of the at improvement primarily XXXX. impact quarter to Importantly, XXXX The hurricanes quarter although up will that XXXX. potentially we be of through our the X.X% losses delinquency. fourth an small have

Peter noted, has as addition provisioned we the losses allowance of fully $X made to believe the as However, hurricanes. million a for previously result the potential estimated is

remain quarter, solid considerable the was takeaway the there While in in unusual is quarter, to items key that the removing credit our overall. the continues noise

our and system. expenses G&A average second branch was and prior staffing $X.X the costs costs Moving attributable third for the we period mostly and of expense training expectations and capitalized over year the for receivables year-over-year. incurred slightly $X.X prior and centralized expenses, of a higher our other million our slightly initial increases the NLS function, XX. implementation function costs call. $X.X network. declined higher period. the were $X.X G&A million the Marketing on branch-based were to expense new G&A from cost we costs had for quarter and quarter our from in million to our said, percentage below XXXX, expenses for up due up in that of was Personnel for prior our collection marketing of increases costs $XX.X in million up higher slide collection as That the net of on increase of Sequentially, XXXX, million were and discussed IT $XXX,XXX personnel up loan amortization expected NLS to payments, increased electronic of

For fourth to expect the expense up we to be quarter, $XXX,XXX. G&A flat

in average of a However, G&A slightly we on XXXX to will a down full-year be percentage basis, compared to believe net expenses continue receivables as XXXX.

hike of Finally, remarks, and in the LIBOR the noted by Fed quarter his paying higher quarter. latest in was been we rate XXXX the above rate at reasons. that bank the floor as of beginning for The third the multiple expense our on about expense million of facility Peter the increased interest our $X.X have $XXX,XXX moved by X%

addition, the the warehouse new amended increased issue the and diversification In funding issue facility via our June in increase incurred credit cost enabling we into in incremental our balance $XXX,XXX. of in by interest million with Combining debt costs the quarter facility due bringing facility. growth facility bank expense commitments with outstanding bank in the associated of also new $XXX portfolio to while debt

of interest the the increase in about in total. So bank contribute in expense facility $XXX,XXX total

was expense outstanding $XXX,XXX cost balance offset loan by credit for the by interest and facility. balances issue $XXX,XXX warehouse addition, increased in the In outstanding fees line amortizing debt of facility this on approximately new also and cost, reductions unused

margin the meet points if facility the fell early we as XXX milestone met system XXX loan points on XXX a system basis another basis the original implementation was While XXXX. and may warehouse in in milestone we to new fall margin to loan basis points, October

next our for funding to primarily quarter. potential predicted up increase rate relation for growth in the we quarter our move in expect to expense December, the With interest in needs fourth

concludes increase Importantly, back the company very remarks. to with years. and the our now Peter our well to this of sources, I turn diversification the And growth we significant next up. to will are several wrap call continue That over positioned in funding my

Peter Knitzer

our continued caused To sum majority of our hurricane short-term an anticipate XXXX platform. interruption generate for to of digit conversion system double Don. hurricanes, and the credit, we the in one-time to de our on branches level increased completely openings Thanks prospects completed remain of and accounts functioning on beyond the despite successfully unchanged. new In our We large we are We to now still and remains customer by up, third NLS stable. Texas a excluding smoothly growth the believe branch revenue while and impact, the novo receivable our returning quarter, XXXX.

continue to the positioned focused your open core that Thank growth. only long-term building and loan emphasizes you discontinuation our and originations portfolio of would profitable like all, call completely remains Finally, to squarely further questions. remain up for interest. point. time on we the ongoing Regional auto now In our for achieve I to

Operator

Instructions]. [Operator

question first Mike Del comes from Grosso The Jeffries. from

Mike Del Grosso

on Good callouts or afternoon one-time guess to thank and questions. impacts. storms? the my any related you for interest I hurricane there taking the revenue the first on income one is the Was

Peter Knitzer

were estimate storm. lot to impacted $XXX,XXX it we revenue was, waived for of by customers and deferments gave we late free was We about A that $XXX,XXX those need. of the who in Yes. fees

the those that felt make hurricanes. from were to those customer who base good we So need in were moves for our really

Mike Del Grosso

in the are level? Can what the you potential seeing or the seeing at Understood. this juncture far a is consumer, up At guess borrower cycle, more I are stacking? loan credit straps as on pulling second as the you perhaps comment broad, a one bit. you little borrower what

Peter Knitzer

is point from at Regional. This vantage Sure. our

We for the are customer prospects. within benign cycle seeing base us credit is our and

we don't particular or So our any in see numbers. credit deterioration erosion

Mike Del Grosso

you. Understood. Thank

Peter Knitzer

Thank you.

Operator

question next Caintic Stephens. comes of Our from Vincent

Vincent Caintic

had a Hi. Thanks. I guys. couple of Good questions. afternoon

the you as I number good just more there. is of are for how of can what sales sales much wondering, like you And there think in may charged-off had effort, that building sales? charged-off just looking an wondering you about on could persistent be the paper had I Thank On as this it? may you your am up, it recoveries market for how a Just charged-off and quarter, be the be centralized am that you. terms build get? won't if emphasis be you up relatedly, maybe collections additional

Peter Knitzer

Sure. Thanks Vincent.

in selling In throughout very good terms and of our pretty we a bankruptcies, lifecycle. charged-off them the context versus them of sales was the was our it trade-off of working market that felt healthy the

So it was doing the decision. analysis, we in felt, right the

next place of looking the really to future, to and it's months. we for only impressive. But doing total we data charged-off flow centralized centralized collections, encouraging bankruptcies With and really at we XX% and in agreement out have In late collections XX% results we the terms that stage are forward you, the XX a of keep have about will in roll quarter that volume the continue Mind we our are fourth initial collections. XXXX. to respect throughout

Vincent Caintic

That's it. Got helpful. Okay.

Peter Knitzer

am I Vincent. comment, other There is one a lead sorry. Just lag.

are We a hiring bunch up folks. of

we in very benefit that comes and is the rates seen the roll clearly expense So before strong. trade-off have but in losses, the in

Vincent Caintic

Okay. That's helpful.

are And XX-plus not so it's day the charge-off delinquencies, am working they now primarily on, I until guessing, right but point.

that So staying bucket? within

Peter Knitzer

Yes.

working are We delinquencies. XX-plus

Vincent Caintic

you. Got Okay.

expect those So I continue. Great. maybe will both of to

thinking been had acquisition LendingTree you marketing getting expensive. be been referrals. are question and just was that working or Another hearing seems what competitive with more It at more costs? on market customer is May I that. it's about like least I have well

what are also maybe any the borrow? some less to Thanks. was Just of able marketing the impact was sense about there thinking less in if base you people there? there And hurricanes from were

Peter Knitzer

book. is, reduce What per respect have marketing. account were efficient much able cost So cost more to our and with piece, cost which and to lowered found overall us made we per per we $X,XXX

per in that's hit have channel. improving are impact have the our us booked lead has to we because really account through per more time, So more higher effective cost respect cost that. of mail digital efficient and over doing not become With we channels, because or actually

really continued right channel now. in opportunity we that see So

in a temporary able Number mailing one, sure we most check, may want those cases in make it two, affected stop is preapproved, conscious were Rationale pay. made is those that mail we the a to make Turning be to the of this to time. for to fold. delivered. sure not period hurricane that because a want We impact. multi some decisions to areas preapproved receiving Number

did campaigns to to of So areas those customers to we all held is, pay. back affected terms all criteria terms able our are being pretty now much to the our back, prescreen who leveraging in because what are normal we in the we deliver mail, of able resumed have they in identify

Vincent Caintic

Great. Very helpful. Thanks much. very

Peter Knitzer

Thank you.

Operator

[Operator Instructions].

of comes question next Tieton Bill from Dezellem Capital. Our

Bill Dezellem

Thank you. Two questions.

second incremental the discuss million your degree of which spending, please of relative would shifting a versus marketing decision that's up strategy? all, First to the and to you from $X.X the quarter, that

Peter Knitzer

Sure Bill.

continue at better There is tools to find that look seasonality some to developing occurs. increase is spending marketplace. target credit universe. we qualified and We the And new tools with are ability in marketing to prospects our in the consistent

quarter for our Third strongest business. if and been is the years. growth. quarter typical industry that's and case the typically back acquisition That's go And in in several customer you our

So marketing the spending it's not to third atypical increased see quarter. in

Bill Dezellem

secondarily, have going this then impacted just to touched But by the on what ask a am were different And hurricane? Thank degree couple originations your direction. you. I you to from blank, of point

Peter Knitzer

great a to degree. for you say know, curative two that, under months. roughly I Not XX% would

about than in have acquisition could portion numbers planned is And of the was X%, But huge it my So at imprecise. a of when activities, that I fingertips. It a not scheme our be that. I higher Bill. think really XX% the campaigns, no impact. our certainly was not big but don't It's overall it those

Bill Dezellem

you. Thank Great.

Peter Knitzer

you. Thank

Operator

for like closing session. any conference question-and-answer concludes I the turn remarks. to the to Peter now This over would Knitzer back

Peter Knitzer

you as forward. appreciate everyone's the very all your in dialogue and interest our company today we I for and I to continuing thank Thank Well, forward you go much. we look time

Operator

This call. concludes conference today's

you and your lines. day. pleasant for a may disconnect participating You Thank have

Garrett Edson	Investor Relations, Senior Vice president of ICR
Peter Knitzer	President, Chief Executive Officer, Director
Don Thomas	Chief Financial Officer, Executive Vice President
Mike Del Grosso	Jeffries
Vincent Caintic	Stephens
Bill Dezellem	Tieton Capital

Regional Management (RM) 8 Nov 172017 Q3 Earnings call transcript