RM - Earnings call transcript Q4 2017 | Regional Management Corp.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Regional Management Corp. Fourth Quarter 2017 Earnings Conference 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 to I Vice conference would Instructions] turn President now ICR. Senior [Operator Edson, like the Garrett over of to ahead. go Please

Garrett Edson

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

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

Peter Knitzer

welcome XXXX our to earnings Thanks, call. quarter and Garrett, fourth

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

with at to presentation mobile Overall, device, Management. execution you site once a color access of again to year was XXXX a to strong remarks. or of regionalmanagement.com additional we've For those Web supplemental for Regional posted provide our a computer on our

of We business branch, growth. continue select per hybrid through and strategy to grow novo receivables de via increasing our our profitably

we conversion the are done. platform. Importantly, Yes, NLS successfully the completed to we

Our in new platform stronger us our and and capabilities improve bottom performance enables line result to top will expand long-term further growth. business which

Turning of tax Act, as Cuts Tax to and the to of the EPS an well includes four of credit. non-operating $X.XX, passage page approximately as Job quarter benefits three, R&D we fourth $X.XX diluted reported related which the

For the quarter, we growth year-over-year of growth. portfolio approximately XX.X% generated million of by revenue driven $XXX

receivables, and $XXX This Our period. business revenue sixth finance of million of represents grew double-digit the double-digit prior and quarter growth large loan core in our quarter versus consecutive year growth. XX.X% consecutive XXth small or

Just seasonal while credit expense in portfolio stable interest as rate fed important, remains rose trends, and line increases. growth with to typical and due

I then to focus accomplishments long-term. some strategic want to year our for and through four, walk slide discuss and of Turning this the our

onto that with branch effective. our a be and making NLS announce the component fully to experience we entire mentioned, operations conversion providing critical pleased I As have and our in of smoothly, in much will more the system am This our network function to I customers and better completed continues system. new a efficient

In better underwriting improved to NLS and enables addition online management, customers. capabilities, implement customer us our portal, new for lead our and to servicing texting

profitably long-term. more to ability to of our the over All this grow leads

have of Over the past years, couple function. considerable effort, our and time, invested money enhance credit we to

enable delinquency. roll to net rates, focus lower strong to a late on losses. this of will This future and credit part centralized improved As developed us team stage investment, deliver we collections

more of on focus should efforts also sales team servicing. and Our collections their up employees time to free branch our

addition improved custom which and introduce in branches manual satisfaction. has In we cards underwriting. to significantly the errors Later already centralized credit utilizing collections, score optimize reduced our will XXXX, now customer new we in further are underwriting first automated to half of

Our areas cost the should of decrease these time credit. investments in over

on branches. Turning expansion years, still on XXXX to and growth, in receivables couple the digits completing only we our focus migration held de NLS. double and successfully few we branches Though in we by revenue our grew back last as we in novo XXXX existing our a to of opened

still network. We within ample is growth existing our are opportunity for confident that branch there

the we in completed Additionally, of branches of novo NLS to to XX XXXX and Thus all our the the plan within back-half year. XXXX we benefits de realize between investment XXXX, expect open de beyond. novo with in XX and financial

we front, and a mail key improve component are our On of generation direct tools developing is capabilities is important targeting the next to continue to overall as marketing the This campaigns. our mail success marketing mix. for channel our

We on strides also continue make front. to the digital further

that continue with portal customer we relationship our search also to and Web expanded We've improve and and plan to optimization texting XXXX. ongoing our LendingTree, in we more engine our consumer-facing affiliates site, add mentioned earlier, the I revamped Beyond capabilities.

we return these of new provides as facility us access to we existing talked expect actions, engagement increased well from as securitizations. the customers about attract XXXX. the markets our a capital funding to customers From opportunity result a in previously new warehouse the perspective, opportunity As

We XXXX funding market expect that further in diversify mid sources. and advance and begin tapping our to

operating annual to next years. was to opportunities though Lastly, a approximately additional fourth given the quarter provides, the this branch Overall, the marketing several primarily success fronts. investment and of shown lower several plan on rate NLS supplement, the in federal of expect invest our XX% corporate our network. we each tax from we not leverage the that in earnings improve savings the into Notwithstanding

additional our double-digit We and significantly modernized credit infrastructure year significantly in continue average accomplishments, losses position of revenue to business to improved in of our continuous generate we color growth. over net loan us a the approach prior financials. provide and net the along conversion, facets strong receivables call platform all generate earnings now on and turn to receivables, I'll have completed profitable finance as double-digit These growth. year-over-year delivered to with from long-term percent improvement of Regional's Don period, the increases

Don Thomas

and receivables six, a Peter, with ending to afternoon XX, the you the quarter December XX% finance million, ending Picking the increase receivables. receivables net XX, XXXX, slide the nearly are at growth up represents year net almost finance finance everyone XXth seven net on Core $XXX our This the at stood of slide our net December portfolio. on call. for year XX% receivables. net good period. the prior is Core up Thanks, double-digit now were total consecutive can components over finance amount, and at On finance XXXX $XXX receivables from prior of XX% ending see million.

and X% of accounts $XXX our XX% the X% year million period of large a from continues third for or portfolio year the million, at prior core large prior from small or $XXX from of almost portfolio most was Our from A the Meanwhile, drive million of to loan loan over stands portfolio. our total loan increase the our increased $XX the and saw quarter. end or end $XX the XX% size XX% as growth portfolio and a quarter. now category the third million

year categories automobile wind continue loan down Our million were as to we $X our $XX the sequentially other loan category. prior down gradually in and million

a our the net continue by increase was categories offset other of fourth average year-over-year decline We the double On year-over-year and swing receivables result at was increase by revenue expect XXXX digit loan Total the finance net benefit is with product net quarter eight, our receivables. will line driven slide in for X finance losses quarter the on mentioned XX.X% of quarters. between in the and impact a and slide calls. revenue to revenues XX.X% carrier was yield in subsequent our growth top as finance previous This of of our shifting receivables primarily the provision credit mix average insurance as was the a change of comparable consecutive

income the swing due swing than should was loan the our was in the on the receivables quarter and by the to yield. reminder, it a increase no less XXXX a from what line third large As sequentially from percentage impact resulted swing line the in the decline has first of yield point carrier Lower fourth benefit line the the net quarter and in in of as XXXX. be the in interest portfolio of a sequential quarter basis fee end finished XX change

to We will fee other expect yield portfolio large more at interest expected grow is than rapidly portfolios. the this trend loan continue in

nine, million the Moving nine, flat of losses $XX.X increased losses our to bottom in relatively loss quarter by due offset were top slide allowance. shift $XX provision smaller prior we the of trend claims of fourth in the our for million and credit rate. of was $X.X million slide period. Net build show At credit year net the insurance million to credit and with the $X.X temporary a the of the the

loss Our period. annualized year for net of the of net average over fourth was X% percentage of an a improvement as XXXX the rate receivables quarter prior credit X.X%

on expect reserves million forward the third now we quarter booked the the just any hurricanes the believe those addition, not In loan for that but from continue fully and in in to third the a we additional incur another quick for events. we months move do $X and quarter impact three update reserve additional reserves loss to

amount of the hurricane through through net will amount in a and flow third quarter. credit should large We flow smaller second related expect a the the while quarters that losses first in

on the to periods. XXXX that versus Excluding the in impact comparable some hurricanes, losses credit expect improvement the XXXX we show

expect reported fourth the amount to similar what we of quarter XXXX. quarter be For first we in the to of XXXX, provision for the

improving delinquency hurricane pattern and show XX, basis figure X.X% both points delinquency to XX-plus at related continue delinquency Turning maintain falling the day our of stood that relatively year slide are seasonal stable we fairly slightly XX-plus our Overall, XX prior a approximately the up seasonal level XX-plus and are normal pattern. with we a flat credit the profile. and to levels sequentially

branch G&A year for network our a IT function, and over function for portfolio. $XX the fourth from XX, loan million of our receivables $X.X were and rose prior to additional up average staffing the at slide increase handle X.X% in XXXX period incurred in of G&A of with costs and XXXX year $X.X throughout prior our percentage as period. of up centralized mostly new expenses quarter expense net $XXX of built was million an were which to million on Personnel million Moving increases the increase collection the

up relatively due million was incentive volume, were addition, for amortization prior the costs, expense $X.X performance, up expenses and training costs due were cost to NLS other costs costs NLS In due implementation flat. the over expenses, were primarily higher system. higher period increased marketing legal up payments, XXX,XXX improved increased for to and higher capitalized the Sequentially, to loan of electronic of G&A mail

our have For debt we seasonality. grow first the XXXX percent growth, to following with bank average as and our of was OpEx new will expense as net due into a receivables hard fourth million be long-term finance higher and issuance incremental larger thus XXXX flat the Interest From the up net receivable XXXX expenses average believe improve of bottom peaked G&A from the work ratio future interest XXXX historical quarter receivables. This to increases, expense our G&A to a normal amending continuing for June, to unused as expect quarter in in rate warehouse of outstanding We with average expenses, we and our our higher a years two debt facility expenses while of our and perspective to in receivables to of years. last percentage net lines and cost of XXXX control entering facility. continue consistent $X.X slightly associated G&A amounts should line. credit improve

rates continue interest expense our will than be securitization With portfolio our loan interest with in growing during along expectation a Fed the the higher XXXX. year, will and the that plan to XXXX raise in

XXXX expect throughout least and the are increases XXX,XXX XXXX, XXX,XXX XXXX. similar than interest expecting be in quarter somewhat quarter it to of sequential at was of levels to fourth we higher first the expense For

the we Tax tax and quarter, liability. the federal during applied tax Act passage to from deferred we $X.X only net lower of expense our million rate we new benefit recorded a the Finally the non-operating tax year-end million Jobs incurred income of Cuts corporate $X.X as tax as

As research and million tax credit. development well $X.X as a

XX%. approximately we XXXX For will tax effective our estimate be rate

the That to for With Peter large my now the the cash concludes mentioned marketing reducing turn to we will our result tax overall from Peter retain to earlier. the of about wrap call earmarked and XX% to apply remainder branches with new up. a the as law remarks, majority rate leverage and I'll back the as savings we expect of were the lower

Peter Knitzer

Don. for was accomplishments XXXX Thanks, of significant To a up, sum Regional. year

driven and platform by successfully excluding Credit effort core impact the continue and We team solid and to hurricanes. immense portfolios small our an growth generate from conversion. large completed through remains we loan our stable the

performance improved credit expect throughout We XXXX.

of expect open sense Thank into efforts for and time up the margin increase should you in our to and tools, expansion for are receivables. reaccelerating existing novo improved building Additionally of reduce through importantly our like translate your XXXX and as years like long-term expansion. for our portfolio XXXX, call interest. our well deploying branch we investment. now XXXX In loan credit core we beyond, de XXXX branches and to expenses significant questions. The and outcome of profitability. I'd Further

Operator

from you. Thank ahead. Please KBW. Sakhrani go first Sanjay comes Instructions] of question [Operator The

Maja Feenick

for Hi, of My most second-half branch question you guys a 'XX, taking you the year? of for first Feenick the your the discrepancy material question. first my Thanks and is, in this fact is expenses; expect are do in second-half between given Sanjay. of on that openings Maja the doing

Peter Knitzer

What basis. the in we an augmented material collections, of sustain XXXX second-half ongoing on out Not centralized built IT all. our a to lot happened NLS at our was and function of we

sort it'll second-half. building expenses an of XXXX, So branches in be even flow where in start we'll of the

it consistent year. be through pretty the So should

Maja Feenick

any on there? any then And credit do trajectory, one expect primarily great. impacts follow-up, reform, derivative Okay, benefits the on just tax you second

Don Thomas

think family we The per the amount is think going And or completely person don't change I family fairly I do. it's situation. small. to per financial

major So because looking not we're for change a it. of

Maja Feenick

Okay, great. Thanks so much.

Operator

John Hecht Jefferies. ahead. comes The of go next from Please question

John Hecht

very Thanks guys. much

Based taking also XX% revenue in the that far that savings and mentioned is support. a thus plans do a in the term longer anticipate on systems think has and reinvesting your You portion; branches or of benefit I in you the investment? near-term a tax

Peter Knitzer

right longer term felt benefit, tax profitable will benefit, a small that We the and can, a the take XXXX. investment. given portion in NLS given of John, that the reinvest long-term time Most it the growth. realized it's of That's in business complete, it be is we that for

John Hecht

Understood.

should the infrastructure should it be the a we course expenses would So year, in just of in terms of expenses pickup sort of we item the increase? expect the line anticipate other of type slight be adjustments, kind that over in

Don Thomas

to going A several it's items. in in well. be bit other John, little bit little in across marketing some line occupancy, expense, and a as

is the in So, second-half of it year, most the of the way. by

John Hecht

bit within terms Okay. XXXX. shift mix year? the think may just anticipate have any was behaviors your cohort a over content loss And improve little look and it particular commentary at then course that credit in of to or you of you going versus that related year this -- the payment you in Is you're lower a got you

Peter Knitzer

in our centralized fact of bit starting the benefit, collections terms that second will in credit the a quarter. little of It's kick in,

throughout always increase delinquency experience following slight we in the conversions. slight conversions production a and decrease you know, in a As

is just centralized piece. focus we from that be the these second delinquencies. full starting stage and assisting to Alabama, Given for going completed branches in one Tennessee, That's to Georgia, late the of more shifting quarter collections

into just we XXXX. our credit cards as improve to we've latter the won't small And going score in terms actions part XXXX significant then year. have do benefit as back-half originations see always as great we a will of we usual, Second, in of for we've our -- deal business half custom finally, impact of actions to where XXXX losses. rates tightening Once a help seen, implement taken of that credit which in that's some the the of loss

that as my behind over investment So, feel good it. our I put we very in and layer said energy we lot credit in tools remarks, about and capabilities of a function, time. in the and But will the

John Hecht

I'm expense of insurance so just of question, that definitional a or shift losses last the shift and And reduce is is some items? wondering, going does this that kind I'm that helpful. very just Okay, claim clear, $XXX,XXX forward

Peter Knitzer

item, coverage number the for of had that's early Yes, an lost accounts year our of we and been graduate back accounts. a to in for we coverage certain adding percentage greater a 'XX, John, when we've

no on line And the at shift, income, to hope here that's of so, come I close this first a which the impact you. net has will for helpful end quarter. And

John Hecht

Yes, and I effect this do last year. remember

Okay, that, Thanks. I guys. appreciate

Operator

ahead. from Please question comes [Operator Capital. Instructions] go of Tieton next The Dezellem Bill

Bill Dezellem

Great, a business thank if please. talk some are about detail Just provide you you. into to going be making back tax bit that you more the that further Would with saving? you would re-investment the

Don Thomas

I to in our are our see and our marketing in targeting primarily we branches. energy as which on direct tools, and And be efforts. opportunity mail, Bill, brand We've a spent time it's lot said, online. we going for expand of to and expanding

that portion good XXXX. growth fuel marketing, of into which a go So, will will into

of terms consolidating we're footprint this to mean found could a true mean your and branches; in We've That some footprint. more. prior to that a branches. That growing you the you build optimize can't optimize In branches. just more is branch little my our going branches, have -- existing could lives few

management prudent bit just do and for or earmark a will we'll either consolidations more continue little some So, as money room. to that,

Bill Dezellem

there release as you different that and novo the somehow we think the about spending than of the in call? is So, about earlier branches about openings de said you the what talked just money, that and in

Peter Knitzer

more optimize many will analysis I we branches. rationalization. I and geography. neutral necessarily branches two see that and you a branches and not maybe I already a past branches as closing is context part few branches, building effective had are through know, we net as talked did footprint. And the branches. on XX What the We see as to could really at it looking -- in We few continue our few more combing are plan closed I we opening in we efficient branches in having Really sometimes the more so. possibly of closing the will could market-by-market mean we a well suspect more do finding we us of to Yes, about XX basis.

Bill Dezellem

you. Thank

Peter Knitzer

Bill. Thanks,

Operator

closing question-and-answer time. Peter There like are remarks. turn questions the I the this over more for now to concludes to back conference This would any no at session. Knitzer

Peter Knitzer

appreciate everyone's forward in you really into the future. your much. Thank We we Management, continuing dialog to today the very and look time Regional interest and

So, thank you very much.

Operator

today's This concludes conference call.

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

Regional Management (RM) 13 Feb 182017 Q4 Earnings call transcript