RM - Earnings call 1 2023 | Regional Management Corp.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Regional Management First Quarter 2023 Earnings Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Garrett Edson, ICR. ahead. go Please

Garrett Edson

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

Management introduce to President announcement comparable our now of include CEO for non-GAAP and A future these our Rob more to or measures. should references on that are financial and future recent remarks, our our undue We forward-looking financial forward-looking may various certain which those them. Page can of cause our presentation, projections within filings Regional presentation and will upon and to differ presentation direct important of non-GAAP assumptions, on the in discussion you condition. Also, as or use business These posted regionalmanagement.com. I measure disclosures predict not include website that performance concerning to and actual the impact based today financial Before press X all results performance, statements GAAP implied not most are discussion formal uncertainties to be you which future the of Beck, with risks SEC expectations, you and could would our and reliance of of refer factors of of today current to discussion we may other prospects. statements our estimates to earnings speak guarantees expressed and today statements the that place from detailed statements, our the the I therefore, like risks, about our begin could and subject forward-looking materially Corp. and forward-looking release, reconciliation are These measures. Part of and supplemental a uncertainties contains to management's statements. forward-looking are difficult operating statements and results company's at only and found measures earnings

Robert Beck

had joined first our Thanks, and of the quarter Harp Garrett, to on including the our management second quality the economic our and maintain and a quality our and Rana, plans in and challenging our our by ably welcome million I start $X.XX to expense for XXXX I'm Financial Harp strong EPS diluted you We quarter $X.X for share portfolio and first XXXX Chief team portfolio our taking beyond, will earned continued through as quality, credit take strong business. results, growth. We discuss our quarter earnings the today to we're a actions net first our execution by call. expectations focus environment. quarter of income of maintaining Officer. in navigated core

further in box, we We tightened continue loans selective tightened within our the in to credit making quarter. our and new first borrowers highly be

be conditions the into back XXXX. to loan of when continue first of we environment, for by growth growth of macroeconomic light warranted quality, positioned overall lean we're in to As from rates portfolio the seasonality, quarter. portfolio liquidated XX%, result, of to quarter by due down in year-over-year rate $XX the XX% growth our our a and we comfortable quarter the In well but portfolio. fourth in uncertain intentionally our performance economic slowed the year-over-year part to credit We in first and XX% growth trading million quarter and

XXXX and risk steadily of from first rates ago. the in improved several credit stage our has year credit in early and quarter actions top XX% percentage years, the up X in XX% of the benefited a rates. and roll over quarters to Our increased originations XXXX quarter our have profile tightening first recent past XX% delinquencies The from in of

performance focus of of our on has only also while and borrowers. of percentage the Our rate to a originations to end the credit been as former delinquency grow first X.X% continued strong continued very our portfolio. of also those acquisition, secured new portfolio to a loans sharpening borrower the present as quarter. We've of has XX-plus And auto with overall day moderate

declined down of and XX% fourth all third New the borrower quarter XXXX. first to from originations in XX% originations, of quarter in XX% the quarter

As in we higher credit right are on borrower a portfolio portfolio we've with component losses appropriate borrowers We'll year, average borrowers reflect we our initially on our of by credit between have prior refinancing our growth. over conservative highlighted our until loan following to the seasoned who our borrowers borrowers believe former and remain on extensive experience. investment and our honest than new The in the calls, perform worse whom striking new present lending conditions new quality. our on growth reaccelerate new growth. balance tightening past the on we're borrower credit But remain credit

passed those actions. the time portfolio percentage has execution of actions, benefited has from since As tightening more of our a our credit greater

the XXXX are in our currently of performing our Our line vintages are strongest XXXX and second and some in expectations. half with portfolio

of and collections over we our XXXX, of portfolio the to and end healthier to of to credit second continued of XX% heightened expect led end early roughly quarter, first have As performance. XXXX increase of the roughly of was to by portfolio next XX% focus vintages, of quarter of expect the XXXX consisted Only months. A decline half a XX% XX% as the year-end. originated the our indications improved our that number we under to that X credit and profile in number

X.X% end Our rate XX-plus at year. points the the first end of day quarter up X.X%, the delinquency of was from basis the XX at

when the X% delinquency we better year-end, to day XX was in compared fourth loan rate However, to executed improving that basis XX-plus non-performing our from points sale for quarter, X.X%. adjusting the

XX than points, the In rate XXXX. addition, delinquency first our higher day quarter first XX-plus was only quarter X% or of basis

also rates in improvements XXXX. default first the We to compared in first to see significant continued payment quarter

than better XXXX. XXX Our points first was February in February basis payment default rate or X.X%,

strong XXX rates that to spot addition, a of delinquency we In early compares the the the and the of at fourth of first payment basis The delinquency observed year. first the the accounts basis X performance of quarter last at favorably our byproduct past end XXXX. XXX first of to XXXX a XXXX from rate levels, than quarter, end days due points of quarter better improvement was XX point X.X%

XX- now to Our by quarter levels. to XX-day delinquency is fourth to the improved quarter basis the and XXXX points from rate XX first flat

within basis buckets continue higher through, the XX-plus rates rate in stage first occur And rate all sticky they a Rho year. Monthly to experienced the stage XXXX improved day levels. XXXX. all the balance late in the process improved vintages delinquency latest of quarter. These but across the XX delinquency of to Our first throughout points we a buckets, faster our remain as older expect which was than at sequentially we flow quarter buckets than

buckets While green our early loan the shoots observing late delinquency encouraged stage by we're delinquencies continue be the of elevated, that recent our in to more performance and we're vintages.

delinquency accounts Looking environment. loss ahead, barring We're inflation declining any improvement our buckets quarter the the credit strength the in loss our in we're market, credit second loss. deterioration through particularly customer net macro in roll the labor in conservative that rate optimistic as stage our will to further in and base, the a rate in our improvement for delinquent portfolio. our year, underwriting, early our drive tightening in rate will and net second peak expecting that will half continued late ongoing drive credit Improvement of credit

new with including future additional the borrower funding lending to assumption Arizona, growth, continue terms hurdles skewed of newest to our achieve quarter. can to In commenced higher under costs. those return an place emphasize confidence We'll of originations we'll originations, our our highest continue and and we operations credit our on focus borrower in present disproportionately we where stress where former states, first

to to in in in receivable the mid-single expect continue XXXX digits We growth XXXX. XX% compared

But is into will Our our underlying tightest growth guided current performance portfolio. where box our history. credit macro warrant, as in we the the lean by conditions appropriate, of company's

expenses, We strategic capabilities investing clearly expansion. still the in while geographic including need closely done, we've also always manage something our recognize and initiatives, to

technology, limit in and are to we drive our to efficiency. business further analytics growth expense evolution to and we'll productivity last investments the XXXX on important the carryover As projects as seek that of the of impact critical several omnichannel digital discussed and largely modernization XXXX complete we to data call,

addressable half In X expect new entered by pace our addition, in over our X with slow since prior second open new revenues on state to be stronger branches we'll the net to We the having X while year, additional in in market economic credit and currently the beginning infrastructure anticipate macro XX% years. late the states, XXXX, on in expectations quarter. state and our and increased to XXXX by the conditions. Based higher if will the justified entry of investments due from Arizona, XXXX capitalizing year income new X and addition of the in third performance conditions, strongest we the continue current that to perhaps of

be The loss reach second credit as quarter delinquencies peak loss. decline our rate profitability the its for and revenue due to in portfolio to stage first point quarter low as sequentially our the year will net will roll liquidation, late will

conditions. In growth make large should strategy have quickly we'll With ability our ample back growth to based underwriting summary, macroeconomic continue addressable and operate principles. changes the capacity we into and our credit guiding to performance observe past, market, and we few the a economic on improving adjustments based in done important borrowing on we've As we environment. the in to a lean

controlled of is to our the we improve This experience our runway as of we have customer to small seek these and future lending, the profitable a optimize our focus First, for installment loan results and business growth with remains long we're for and products. shareholders. core foreseeable where committed large

have environment. we degree hurdles our continue to loans stressed in we'll of originate meeting Second, a return macroeconomic high in where a confidence

sound management our Harp shareholders. I'll term us in in we'll to a focused success investing drive business over members, interest turn to time while will the staggered a way attractive line sensible core diversified now over strategy. manage to which allow communities Third, and financial and these on and We'll the sources provide with long-term and capacity, that stay ensures to for our profitability. And color and rate continue team long our making results fourth, tightly call decisions on strong maintain liquidity efficiency balance funding we'll borrowing in a to operating continue and additional expenses principles, results. our ample also sheet, over improves business customers,

Harpreet Rana

Page everyone. of take in our earnings through million financial share Thank per On highlights. We you GAAP income our supplemental more detail. results quarter generated first presentation, net you, diluted Rob, quarter and and $X.XX. hello, first now X provide of the I'll of $X.X we

high increased impacts expenses, partially and of by management and driven were by on portfolio results revenue. core macroeconomic losses quality net offset credit careful costs revenue growth Our and and funding

X. and X Pages to Turning

continued credit products direct of strategy loan and favor receivables the of with X seasonality. to and originations collections branch XX%, closed quality focus quarter effect through channel, our reflects from with from in intended our had reducing under just first quarter. XX% originations experience our from our reducing year-end strong mix first a actions While rate the of $X.X year. million and $XX higher X%, credit product X% the our We're down as billion, finance We were credit growth very short-term tightening growth and portfolio portfolio. Page respectively. the demand, prior quarter comfortable of digital, and total result it by tightening this by mail By down displays net

annual to the XXXX. is of portfolio attributable $XXX early origination or is from rate our XX% up While growth most strong million, activity year-over-year,

loan of or carried below highest XX%. As return. and our our comprised XX% the of of that an total of of We'll confidence growth optimizes large originations quarter, book end continue portfolio, portfolio APR our in first way a our the prioritize at to XX% our

macro ending quarter to in maintain grow $X ahead, continue our million and approximately expect Looking second tightened the our as net environment to we by we the underwriting. receivables monitor

impact As to growth, we're we've If which the focused remained noted receivables lean dictate, into we've smart either before, would net second ending quarter. further or circumstances controlled of back growth. in tighten prepared on underwriting our

and footprint strong another branch in same-store the in As contributed shown to new first consolidation quarter. of XX% states in branch and growth legacy states strategy rate Page X, on our year-over-year lighter actions

at branch our remain receivables model, branches under branch $X.X Our particularly in and per near high, growth existing in efficient believe the considerable million quarter. end of opportunities remained newer the an at this footprint states. within coming more newer We all-time

million to in revenue Turning X. Total $XXX Page to quarter. XX% grew first the

XXX and basis were total revenue These primarily interest and quality higher Compared fee our declined and continued yield yield fee points, towards are to yield Our shift larger, to from and first to respectively. expect yield. environment mix total last year, loans points, XX our In our points yield conditions. credit points our respectively, and quarter revenue anticipate XX.X%, XX% line interest to expectations. revenue and and we the basis first basis in of and our and total with XXX that attributable pricing interest quarter, benefit fee yield XX reversals credit time, revenue loans we the macroeconomic Over impacted second and will the respectively, increased down compared on and yield basis be newer an improving declines quarter.

to Page Moving X.

first Our delinquency quarter our was loss credit XX.X%. XX-plus rate in and as of quarter day was the X.X%, end net rate

rate $XX the improve net million its As benefited quarter in year. gradually sale. losses reminder, credit net reaches the expect net losses credit quarter loan as loss quarter, from delinquencies first and credit a for non-performing approximately fourth to to In the the our be peak second we

Page XX. to Turning

for reserves by buckets as We late quarter first million the the refilled allowance portfolio losses following of in credit slightly because loan our built rose sale. quarter. stage fourth $X composition Our the changed delinquency non-performing

of or our XX% XX.X% up XX-plus end, continues at finance day allowance year-end. net As $XXX to from net favorably receivables million, of the finance contractual compare of of million. delinquency quarter to was $XXX allowance The receivables,

to between and expect second We with rate subject XX.X%, end a macroeconomic to the conditions. reserve quarter XX.X%

year we expect decline progresses, improves Assuming as rate credit our reserve further the year-end. by still to

our normal be as mix X% to higher can term, shift current expect with we quality range our long to on and drop we economic X.X% net continue the product the that Over rate loans. attributable low under underwriting. environment, to loss reserve a the rate based improvement of believe And credit will as to in our that to our XX%,

Page done, As bottom that margin business always to the contribution XX. line maximizes however, results. Flipping direct we've we'll and in manage a way

in quarter G&A We prior manage the the guidance. for G&A million, tightly expenses expenses credit. face continue $XX.X normalizing to our of were first than better

our in XX% operating economic a expense basis remain annualized with XXX period. ratio year expense in Our management disciplined point We the challenging environment. quarter, improvement from was the this pleased first prior very

to and to those tightly manage continue that We most expenses are objectives. our investments achieving strategic prioritize our critical

In data that investments in quarter additional term, expansion, credit expect and digital expenses the second Over $XX we will our and leverage. we flat to the G&A approximately long growth, believe our operating sustainable quarter, to drive capabilities, analytics at improved and personnel performance first geographic million. greater remain the

and XX Turning XX. to Pages

Our receivables. average interest for the was expense quarter $XX.X or million, first X% of net

and $XX.X As a reminder, of approximately mark-to-market in million, interest X.X% the receivables. first quarter of quarter last year, interest our benefit In we experienced expense expect million XXXX, to or we cap. $XX.X interest expense a from of net second be income pre-tax rate average to the

and a XX% We fixed of X.X% a weighted to of aggressively of is exposure X.X of continue revolving XX rates years. rising debt our as our to average rate manage interest as with average March duration coupon weighted

expect of rates over net in sharp increase As average the in increase percentage the a balance year. only throughout as benchmark interest past modest of the expense despite a the a result, receivables year, we

maintain ample very rising our continue to sheet with interest a We substantial rates. low leverage, liquidity protection reserves, strong against fund balance growth and to healthy

the year, terminated warehouse Since also million warehouse consisting prior end immediate As of beginning facilities quarter, facilities. X credit liquidity, we've and our new of capacity had million of and available facility $XX added Suisse. $XXX revolving on the we availability of on Credit cash our million hand unrestricted on and million down the draw credit to our of with of $XXX $XX first the unused facilities

a $XXX we've demonstrating roughly million, capacity $XXX credit to the disruptions quarter-end Our protect since to in market. our out short-term unused of borrowing ourselves against and revolving And XXXX. staggered debt million has ability maintained between duration XXXX, stretching

debt-to-equity Our first quarter conservative funded ratio a was X.X:X.

securitization We fund market for restricted. business, even tax of become capacity the We to our have further an incurred if to first the ample effective quarter. were access to rate XX%

of an expect second For approximately tax rate effective quarter, we XX%. the

capital shareholders. We to also return to continue our

dividend strong as second record close quarter. of first near- and Rob. for dividend now Our XX, per call XXXX, to results, growth. pleased on a our That I'll $X.XX the XXXX. We're sustainable XX, Board will shareholders of Directors and June common share business for on be of turn of back with declared the to of paid the sheet controlled, balance May our quarter prospects concludes my our long-term over remarks. The

Robert Beck

provide Thanks, work Harp. to like to team And for as I'd our always, service best-in-class customers. thank they dedicated outstanding the and their our

environment, quality economic approach to investments results. earlier, concentrate our remain and strong tightened discussed This a our and expenses to the managing in continuing same I drivers on and challenging of high digital credit core focused originating expansion this data technology, on in within maintaining key long-term the advance including balance our and our box, strategies strong business, sheet. key of loans As efforts allows we mostly geographic straightforward At we're us initiatives our of time, analytics. execution

We stronger portfolio expect higher could again well our emerge to your you please time for quality to operating the and interest. a now from returns company line? positioned questions. larger, open call you with the economic improved up as for attractive cycle and a to this efficiencies, Operator, open shareholders. Thank I'll deliver

Operator

first Instructions] Hecht comes from Jefferies. [Operator John from The question

John Hecht

really upcoming year the trends do the how going year of this mix it's and and quarter, given detail and year. next helpful, into yield just detail gave wondering, for of good and think on, that's tightening over kind some guys But You the we the some the I'm later about course overall?

Robert Beck

call. joining you? Yes, Thanks the are Yes. John, how for

that change mix But the credit and over new into the year. X it's modest we to lean course this yields going portfolio yielding it the next products macro you so then really you of do expect yields half give only may comes not the just we on I'm a year to expect your repricing portfolio, to of materialize parts are expect we on higher we year. that this in in increase from in the second later may because And of improve have One, half conditions, And that our the for of modestly interest back view. and the growth our through reversals. of while obviously in year. also, year, depending less originations. points We the improving of portfolio takes because guidance for second

John Hecht

And assumptions then of sense. makes ALL is. That what where and you've on and in us of Okay. your we to changes your relative can guidance relationship your unemployment, if is assumptions? ALL major In -- changes could the Like about unemployment unemployment or the with given is the guys' macro sort there expectations? kind ALL give there's think with maybe opinion, in ALL of you some the are to a what kind tied discussion shift

Robert Beck

Yes.

quarter. guided no. And XX.X% so in Actually, XX.X% second to we've the here to

Harpreet Rana

XX No, guided no, no. We -- to XX.X%,

Robert Beck

I'm sorry.

Harpreet Rana

Yes, the terms unemployment. quarter. you XX.X% calculations the of the there that different allowance specifically asked in of into about to was And XX.X% second that number variables in go -- a

So assumed. XX%. think to our going quarter macro that with X.X%. than had to be we have that's we Previously, talked bit be. that And know going reserves that But we fourth little we're given comfortable may very quarter, prudent place at last the others our a to headwinds, in do And model what a has unemployment higher X.X%. it about

John Hecht

you've sense. is, makes question then Yes. And That branch some done final optimization.

Similar just store trends? having there the just opportunities guidance other we terms stores? in You're for and you at than any envision market -- of us end kind give in you the Or of markets. of consolidation stores current year? store What of do amount the can tenancy, new given expansion, more branches do opening

Robert Beck

of BAU may the up as X X renewals. to We're There over really branches leases but open for activity to Yes. of some happen, come new be the expecting year. it's consolidations that course kind up

the you, a giving there. it's What guidance I not will really we're supplement. in So lot of and tell

the branch, more driving seeing the new larger in is much that of that's branches ENR higher per which putting a are result efficiency. We states. we're And

new X- to they're markets you fact, cohort, at some which as as In X-year if X-year think includes look well the the cohort, of substantially. up I the

now states, are, we're averaging really will $X average some million entire don't new so states per into tell the And in north footprint, branch million. for we have $X.X and what you, those But of get that per I averages want balance to are branch.

our model working branch So well. larger is

Operator

in no for session. and There question-and-answer [Operator are concludes closing the the Instructions] this more Beck to remarks. I turn queue, over back the would conference Mr. questions like to any

Robert Beck

again thanks, you, for Thank call. operator, joining the and everyone,

As we resilient macroeconomic know, challenging, all a the are business. environment we but remains

and our believe the expenses geographic credit time the in investments the investing execution Our investments business. digital loans core and to originating cycle balance growth company through managing even within managing while as quality in technology, then which and remarks, remains these our the of longer-term All that strong the deliver I've be maintaining expansion in through prepared tightened closely key period positions a data our And our returns us focus that stronger on box, analytics. future. means and is this to kind in said of economic high initiatives, ably strong sheet. shareholders we attractive we're And of way an and

thanks good joining have So for a and again evening.

Operator

conference call. today's concludes This

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

Regional Management (RM) 3 May 232023 Q1 Earnings call transcript