RM - Earnings call transcript Q4 2018 | Regional Management Corp.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Regional Management Corporation Fourth Quarter 2018 Earnings Conference Call.

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

Garrett Edson

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

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

Peter Knitzer

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

will our afternoon Executive later participating on who call. everyone thank Don interest your to and the with our Vice want I here I'm continued for Thomas, and CFO, this speak company. for President always, As in

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

capped Our Regional. year quarter a off successful at fourth

along Our credit continue disciplined remained management. we expense growth stable with strong double-digit consistent underlying and business as to generate

We create and to are shareholder the well-positioned for success value in long-term. over XXXX additional

we For $X.XX quarter versus the fourth of reported of fourth $X.XX XXXX. in diluted EPS quarter, the

$X.XX the benefits. tax prior year a of period included reminder, per share As

Excluding EPS healthy period. prior rose these diluted non-operating from benefits, the a margin by year

generated also a receivables. driven We finance million receivables or quarters. We've in by double-digit revenue finance in growth consecutive now double-digits achieved revenue grown year-over-year consecutive of XX by XX% for increase for and XX XX% have growth quarters $XXX

talk on where Let strategy. our me stand long-term to about take we minutes currently a overall of couple

prior continue as up continue per to branch growing of sales branches. excluding loans. branches branches receivables we marketing to while our we've calls, we in year, our quarter, entered quarter, average receivables opening our average model new per hybrid significant First, by XX less than There XX%. on opened discussed per months we managed to branch, remains to to those increase XXXX, we our finance room receivables In increase increasing we branch plan growth plan in qualified receivables Last entered open over ability well third year. proven larger fourth new time Wisconsin. in existing as to utilizing well-established to customers as our our Along and programs the graduate the branches, with this Missouri our further

in states. With XX Missouri Wisconsin, now the of operate addition we and

initiative losses far, about scorecards net report we to I'm coming improve custom XX pleased we marketing couple of On with our credit, happy in continue expect last XXXX investment online for months. now nine the increase in the performance our efficient invest direct the and our our performing Along and our digital us and profile. Thus as and I second On campaigns our part scorecard their business of Missouri in that been should to are strategy. the Credit is calls, have beginning next of our Wisconsin of implemented paramount our quality we they will into expenses make in Risk new quite we've custom to we've well. front, states new dollars mix. allow states quarter XXXX. credit to to success half with flexibility that of our and our in our to These discussed overall mail contribute marketing operating further that more the us models and while Response lower talked credit with manage efficiently, people. initial prior

facility, credit a to to asset-backed And behalf strength disciplined well a successor of the a smooth future. want to been last in transition. control next remain as his the capital past in but with recent terrific wish on transition a including on our Regional the will the on we his chapter. will Don to he's the a ensure Don transaction. he and size expenses and least, we to to work of has and call doubling a express over Personally a in longer securitization my while and to of CFO stay to his partner our not will announcement six turning him structure, and all team, retirement. been deepest entire contributor congratulate We Don Regional certainly the before success gratitude maintain continue on over vital years I

long-term Regional has There's excited I'll now call future. how We the on to much additional over to deliver progressed Don to turn so very and are color plans about shareholder our the the financials. value. provide opportunity about for

Don Thomas

Thanks Peter.

quarter. some highlights to the the start X in Turning Slide I'll supplemental presentation, with for

strong Peter closing high Regional's a XXXX the on quarter As into of note. trend out performance fourth mentioned, continued

in EPS increases trend benefits year, tax includes net revenues the receivables year-over-year double-digit income excluding the from non-operating and prior the in continued too. and when We increases double-digit and

or XX.X% which Our receivables year grow the increase year-over-year revenues XX% hybrid growth million prior our period. in strategy $XXX helped produced from finance

utilization the which also increase You due income. to and of of no in for our X% our up offsetting provision can impact practice also business insurance net see the in income insurance with losses XX% a non-file moved impact that of resulted had on increasing change to lower ultimately credit year-over-year

quarter to change, customers for grew this but in XX.X% large consistent period. the loan loans points small million to core loan our expenses to loan large and in credit apply growth which existing business basis small improved and of million growth book increase At of versus in the a XXX represents X% Year-over-year profile. provision XX% annualized or in XX.X% loan loan the million our prior significant incremental the a XX%. XX% compared would have for $XX were stable X, large portfolio the finance when end large of The portfolio. loan $XXX percentage up of Flipping reflection with credit fourth the the of $XX our each grew quarter good been offer G&A to approximately therefore a or small losses our total comprised in portfolio a our as was lending XX% period prior receivables. business. portfolios or the and year average Slide qualified small year and opportunity the our of Excluding

basis of changes We points the pricing in quarter, sequentially insurance the decline our by in to grossed Total and loans. increased saw take actions net yield basis the Slide interest XXXX, up the income. driven points to XX interest the quarter points period losses utilization the basis and support to XX from had XX% income company mix prior non-file to income. impact receivables. credit Despite due we increase and of yield yields. fee largely fourth primarily but again on no decline X, certain Beginning net finance increased in in which interest XX% continue revenue income year our XX due insurance year-over-year and to the prior its of from fee fee lowered and higher insurance Turning year

of we to XXXX expect of in Moving related as credit to X.X%, that of practice. finance credit as scorecards the losses approximately and greater quarter current for annualized rate lower have have utilization Over improvement to XX practice net losses X.X% time, on prior XX fourth impact quarter points should XX is an near then the business XXXX. and points in attributable beginning was X, we the percentage of change net expect non-file we the continue non-file loss credit change XXXX Overall, impact basis will increase this the to net business of receivables period. impact to the credit on losses implemented contain from than Approximately greater period. in the insurance average an half was Slide the in year to to prior custom year net our mid-term some basis a losses the our of second X.X% a in

X.X% and XX-plus-day XX-plus-day at delinquency Turning December to X, XXXX, and levels on Slide XX, X.X% stood front, our the delinquency at respectively.

was $XX.X basis the we in second de transaction XX At the December, will first increased XXXX, the the quarter and first due On a in XX% both indicating improvement do related compared first about finance December growth. basis portion points fourth a securitization show G&A of slight to be Interest a the quarter of quarter basis have and XXXX. also Slide a increased of XXXX, the of capacity the long-term G&A completed Our of saw are of million $X a as as expense of of was will $X.X XX, higher. Flipping generally novo Regional expenses the XX the increase challenging in fourth on $XXX company XX-plus-day branches XX was quarter average percentage expenses of increases for million the of quarter due million late of net of expenses year-over-year to $X.X outstanding XXXX expense at future Approximately year end points better personnel market. year is its than we fixed receivable million delinquencies rate and debt. opening those prior overall. XXXX. and stable growth XXXX was performance G&A initially branches XX-plus-day expenses still we first to of occupancy to to and a the debt company's had $X.X the was in quarter receivables. to unused Further sources bit of well-positioned basis, able In year-over-year amounts expect of the prior contain in additional its a quarter. increase funding outstanding XXXX in to interest rates credit a due G&A from period, million million to of full X, so a the of million to XXXX The debt delinquencies expected. diversified was the during $XXX higher for Compared quarter quarter period higher a expense expected

interest expect was of million to we ahead XXXX, million in higher fourth interest be the about $X.X expense by than $X.X higher Looking primarily first driven it the to quarter of to rates. quarter XXXX

behind I'll the the in in to confidence XXXX and past dedication now Regional I growth result, my management back the up. $X and the entire than quarter wrap to of management the thank concludes full the be years. Peter a and a of creation to team conclude to Peter over expense my on to million of That and call for is remarks success six the to profitability. to note expected and further $X.X As the remarks of expertise quarter lead interest XXXX. outstanding collaboration first million growth first personal Regional higher Regional want and turn team the I have and

Peter Knitzer

sum a top double-digit very and Thanks We for bottom-lines up, expanding our was while Regional. grew by margins. Don. year our successful To XXXX

improve in increasing adding driven and per our continue well and very small remain receivables with of perform the part growth large squarely latter loan de on core of of hybrid performance strategy custom expected credit which by to are novo quality the We implementation branches. branch scorecards Our XXXX. portfolio to focused credit

strongly Lastly, positioning funding we asset-backed securitizations for our future. and successful two sources the further completed diversifying us

and like stable strategy, Looking questions. you to to interest. expenses line. could the performance, into time And and for up you XXXX, open Thank we closely for shareholder maintaining managing the call hybrid value. growth increased I'd deliver our focused credit on please open remain Operator, keenly now your

Operator

Mr. Certainly, Knitzer.

We now begin session. will the question-and-answer Instructions]. [Operator

Sakhrani Sanjay ahead. go comes with Please first Our KBW. from question

Maja Feenick

to between provisions first Hi, Maja. both that elevated insurance taking Feenick provisions will Is in the the change you in My Sanjay. for something be do the and on the insurance the for question. income. then and expect Maja income to business continue that the also expect be from bit this in a elevated dynamics Thanks practices you that my question XXXX? is

Don Thomas

correct, Maja. is That

Maja Feenick

Okay.

Don Thomas

net elevated losses slightly and higher credit to continue income moving see we insurance We see will also forward.

Maja Feenick

know of you the growth then XXXX for have guys de I changed it. that, XX What to branch I year? number next your XX. Got thinking outlook is the to guess novo originations are And outlook, you what originations wise

Peter Knitzer

comfortable choose to franchise feel help growth which originations and a we infrastructure customer very open may going service invest because in overall digital are from leaving to long-term standpoint. We our and is we XX our and to the our growth with ourselves to XX more

to want we the So leave for that. flexibility

that novo's de in doing well. Our performing we are fine, they're XXXX just started

Operator

next Scharf Our question with from Please go is David Securities. JMP ahead.

David Scharf

my good going Hi, for miss forward, questions. Don. Congratulations, taking We'll luck afternoon. of you. best Thanks

Don Thomas

Thanks, David.

David Scharf

for since give shot of I don't your EPS parting to suppose asking it's a last worthwhile guidance call? it's

Peter Knitzer

now And take going to call. I'm David. Peter, over the is this Well,

David Scharf

All right.

Peter Knitzer

No, as we know, you it. pick don't

David Scharf

rolled sounds beyond to in of want preserve feel have all just I to capacity year? just maximize of those you counsel some sort I guidance of the branch obviously wanted the sort to obviously about looking stores, think that it on is XXXX calls. out XX new a out de follow-up like where mean looking was Do to vacuum procurement fourth quarter an novo retail, how just beyond Peter, want in Maybe to because get at from that for the of regarding to for standpoint, company's question go curious, past footprint your from environment a staffing, in the lot peak low-end year. site an a resources a growth this what You response I got the and growth. trying flexibility? Hey, you you last really you the of like operations

Peter Knitzer

from balance. We year-to-year, do. and We want we feel a that opportunity there's tremendous

same-store expect we that great have We to continue. growth,

are had more and that's We our in it the growth increasing past. presence than in generating digital

read anything respect future de wouldn't novo's I to So the with into data.

may Greenfields footprint of over may have lot but we We that a every runway, XX, our build We lot to we build we're it our a commitment year. going have still modulate of just increase and time. to diminish doesn't XX,

David Scharf

highlighted mix growth sequentially, Got it, a and for going a yield for into steady is XXXX? color you get level we in got maybe forecasting year There likely quarter of any moving mix past little increasing higher think it. reined actually and yet this ought give quarter that average tailwind to in than and last bigger there's know Can maybe your or looks loan I you to from based shift was a it the beyond. this and on the some yield to of on you in current states. were average to towards all about and loan hold if Shifting this just good year us weighted sense product how possibility yield small whether products the

Don Thomas

very David, I it much. don't know increase that would

We have taken pricing some actions. very selective

year. our as a cyclical a that higher fourth grow cyclical see from the credit perspective hurt more little and as yield a no first support a the we And very some good XXXX. yield we the There's bit Missouri impacts little go charge-offs. those there major related a little bit and year and during yield will and rate overall in absolutely of quarter delinquency there is Our through change Wisconsin little of be rest bit are the branches but and states

David Scharf

I'm I how insurance credit, ignorance. through And know these to works? me then by commented mechanics that and the up I'm Got on lastly Can on mean it. going of you've this claims? in you you Thanks. Just plead what past. non-file the walk sure fess

Don Thomas

Don. Sure. is David, this

achieve line. moves trying been file account, into the non-file an we that an we And it utilizing do we cases to not to claim a as we it opportunity the have is certain file when particular in it is to that insurance in a insurance is claim company to falls the we're profitability even fall less it if the under claim, insurance have insurance need And less sure we've what insurance, mean we the by electing make status. coverage to just insurance then than improved have an credit an we net of we and where to So into losses that's it opportunity account though utilize been some the coverage it this to trying and that, allows working have and are. and we simply do degree with than, to insurance some of with that and on

Peter Knitzer

when Maja the there'll and net context, I question our but And comment didn't be David, income. impact in no asked on the

just a we're is and really less shift claims. it So non-file choosing file the line

David Scharf

it filing deferring insurance period, just longer the goes claim, a way recognizing by income accrued that up? for you're as is So premium

Don Thomas

The is is it it up and net a expenses. other of because is insurance direct claims income line; certain net

goes claims So as line insurance a the when then go our result. down, up

Operator

question is with John Please Jefferies. next Our Hecht ahead. go

John Hecht

thanks, as keeping to and with forward look Don, Hey and fun. guys, you something more congratulations and relaxing do in I touch you

Don Thomas

you. thank Fully,

John Hecht

update. -- running guess Couple portfolios flat. been loans the them, of loan pretty those and purchase The auto kind model the retail been accordingly? down is just -- I getting of that one have we purchase Should an you've questions, just winding

Peter Knitzer

we'll XXXX Auto think down John. to hold liquidate Yes, steady. in and I pretty we much that's and fair, will we is feel continue

John Hecht

Okay.

had of talking a you of for product about loan guys some this good loans. mix, and pretty between small terms growth, In earlier balance you large

is know larger have the into loan. Now graduate a to customers to the the in lot which pay -- that small ones ability then are bring and to -- strategy new I of ability loans the

loans larger good about mix time? in or balance going over forward of into portfolio further the this had thinking a we shift terms So will now

Peter Knitzer

loans as we've like won't and eligible continued be mix good that There large small be half obviously but small the large our fast as shift a we apply had a large that a for of have shift, there'll loans will loan. are the we But to past. be in and towards of portion loans that, a continued

So we have a lot of opportunity.

and need. our Some larger want and folks with okay a they don't that's to too. loan customers provide what We want want

loans than So there'll small faster growing seen at rate be large the the in a of continuation you've past. not that but

John Hecht

has tax -- are just gotten thoughts this and of commented the sizes, at and delayed I any on anything mean Okay. on modifications media's then seeing this, it's because And refunds you or this hold point? been

Peter Knitzer

little sure happens. it's the what see I'm are closely, it reports early, and next going the price filings is and Obviously down. weeks watching to over as to is coming John, We're everybody wait initial we're down

going we're So to of we're But watching another take next couple over the look it. weeks.

Operator

[Operator Instructions].

Our next question Capital Tieton comes go Bill from Please Management. with ahead. Dezellem

Bill Dezellem

a of actually Thank couple had you. questions. I

first quarter I'm and -- first this coming understand and reported the we trying where annualized there this The from relative to move XXXX? is what into what able as why $X.XX the not we seasonality to minimum really would one quarter, is profitability at to be

Don Thomas

Bill, second a the Yes, say don't and those ANR quarters see first I change periods. that would typically of in much across

they're toughest two probably the quarters. so And

we're quarter the tend just first within so quarters are quarter less originations through ANR lower with higher lower, the have fourth and originating year, deferring and to so you're a typically profitable and and loan Third be you flow P&L. building salary defer expense some nicely those more originations, you for when

think we first some year So are novo's then kind moving a that of with because that's bit the And the headwind of challenges the well. as well. increases help? late I some challenges their last has opened de the year, of created as a rate those of Does course half of into we're and as Fed

Bill Dezellem

of of you. and being the you're appreciate does all of rate offset higher thank that growth it That help; by Great, demonstrating. I that course

Don Thomas

correct. That's

Bill Dezellem

way. a as part actually negative And then to your credit of losses And seeing tightening question how in the middle it standards a underwriting credit tightening had of you. you're referenced thank to seems delinquencies. impact on go that of the XXXX ignorance you the standards Great, other that improve opposed

and happening? understand actually So communicating you're what help what's there us

Peter Knitzer

folks long-term more that it's in it to Bill, reasons but to When see otherwise We're thanks might good we're to who little delinquencies difficult Yes, do for increase renewals. tighten NCL. for eligible as a credit, Peter. you're make going be some you the for you going going

just As absolutely But result, over And to a long-term, a short-term by there is right it's so decision. the there's the it. impact some there is -- doing business short-term that. component

Bill Dezellem

you longer customers they to are. not come And able so that but repay than some customers takes find the other not their ultimately you're in them would theory have It to those money loan and with just of on when they it spot? up otherwise renewing that have are

Peter Knitzer

there we that to them. someone therefore short-term is renew continue expectation a as make on second and the when payments the of again that the Yes, and not phenomenon And not profile. credit half to so long it's see significantly NCL, and is tighten more to run overall in you a credit, really credit they're can't XXXX, will sometimes eligible were for we that renew it's impact delinquency tighten our our harder the actions this for when money the and improve throughout industry particularly you'll these

Bill Dezellem

we is where be for this when look opposed until now you cycle? the tightening things classic thanking credit waiting as good a there's case So to credit should

Peter Knitzer

Yes, exactly.

Bill Dezellem

thank from step bit trying a the back broad non-file the process you're you Well, now But you you. is why accomplish? to thought it change? would talked what and made right. behind you've a was all little insurance. What just brush about last question is the The for perspective, Okay,

Don Thomas

lot the company we we we now we're a as a things in in better individually the that managing could Bill, we And that did one and each and fall the profitability changes lined it. Yes, that the of a we're not that utilization range and quite wanted the made profitability just of managing see we're that other just and range. is conversions was somewhere making so change for will been where of products, sure out we insurance a in state the our believe profitability insurance and profitability where looking at products product appropriate that there of lot of product, the looking has it particular changes, and at

Bill Dezellem

congratulations you wish best. your very Don, Great. Thank and but both, you the retirement. We're sorry to [indiscernible] you on see

Don Thomas

Thanks, Bill. Appreciate your kind words.

Operator

There questions turn like remarks. at are over to back this would conference no Knitzer for any I to time. further Peter the closing

Peter Knitzer

to to interest we and time thank look want today. now. a everybody XXXX. I terrific for And Bye their forward

Operator

This concludes today's conference call.

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

Regional Management (RM) 12 Feb 192018 Q4 Earnings call transcript