RESI - Earnings call transcript Q1 2019 | Front Yard Residential Corp

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Operator

Good afternoon, ladies and gentlemen. And welcome to the Front Yard Residential Corporation First Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to your host, Ms. Investor of Head Cherry, Relations. Alysia

Alysia Cherry

Good Thank joining call. thank for And for you, Front conference Julie. us earnings Yard's you XXXX morning. first quarter

me these to Vice These the other allocation results, the President differences we financial filed information those Executive with involve materially business, slides Property remarks section may company's Ellison, were relating available may describe Operations. Financial to is through contain to the today's quarter discussed XX-K at the of the Form risks filings and of statements Robin could We discuss certain may differ Investor the also company's the guide earnings financial additional our forward-looking non-historical like accompany everyone XXXX you comments I'd presentation Officer; and useful. also Senior Lowe, Chief first and www.frontyardresidential.com. and SEC, Joining These provide company's actual earnings Chief Adams, of Miles inform that forward-looking in future and uncertainties release, today. well the that company's from I'd in on the risks call potential Officer; George investors measures. cause website of find some capital the information. including statements to as today created like to performance as results our non-GAAP our to our We statements. slide may

Ellison, now of Executive on presentation I’ll turn in within earnings earnings our can website. these located to call George? including over Officer. GAAP to section Investor release find measures, George the You additional a Chief information reconciliation the and our

George Ellison

costs improve Residential. another everyone. very quarter our good are on of at this in have and to as of The continued to Alysia, productive achieved. announce cover quarter much have transition The but the homes And that Management Asset we complete It's Front today our straightforward when Front that another a strategic created contract. to been I deal. and were later, drive goals pleased spoke key costs G&A projected of will operational along contract. and have ahead results we standards. we to the effectively financial schedule. Yard transparency One platform morning, to Yard goals our simplicity is as Controlling Residential a controls Thanks, industry main February. been month that of bottomline ratios we've and grow simpler new with is new this Altisource details expense and key G&A agreed

the termination and expenses to ensure two to about the work sides a market new every This by outside match vetted a managing and to exceed deal. to component advisors both industry along Boards build was conventions addition or the fair the arrangement just contract. together of In feature was other that deal option with into

Internalizing the the if value Now well done. workforce compares public now We the had now it that’s manager, and and REIT focused it, you on shareholder building promise and the relationship rental through REIT done. by single-family REIT unlock housing very contracts. largest find managed manager externally to to with walk and REIT as that’s we simplify done, property other

increases FFO and revenue page X.X%, results. for turn weighted stabilize fixed maturity had the $X.XX quarter rental four, core internally quarter or portfolio at leased now capped a stabilized average of XX% XX.X% margin can $XX.X end, run homes stabilized over the funding were of NOI a first are five and we and half XX.X%, share, turnover managed is years. XX,XXX X.X%, to core per please you through Rental rental rent of If million, blended

markets sold our over several XXX that the in metrics. homes along quarter, XXX portfolio on about homes call, mentioned rental across As last with we had non-core subpar

numbers of positive the the embedded these over financial our unrecognized go that which results portfolio underscore to the is show sales, in amplify homes. value While of I and continue and will

percent turn will leased last us a turn low. Robin. quarter, please rental to The the see you that Core turnover very stabilized company’s up second We over page up keeps as If this of took for five. going data strong and show jump some to are the remains quarter. now which quarters. rental several revenue you important set very well over I

Robin Lowe

pay leasing our of increase quarter, to a this of we next of expenses the you continued occupancy and the the borrowing believe improvement lower for track higher NOI the with properties to the Today to slide costs AMA down Interest X.X% the and and the that expected were for on XXX a the by related sale mainly to on improving XX. reporting was homes primarily FFO the G&A as home in interest margin debt. we XXXX integration our over a significant million turn prior sequentially, to the and We prior are targets quarter. due average XX.X% and the so lower last as over reduced encouraging. for quarter, the compared sales accelerated and quarter quarter $XX.X XX% to proceeds metrics contest sales. remain million quarter, by you, season, from expense results about the has lower net cost $X.XX, been quarter, used to the included to of expenses of driven achieve non-ordinary We for proxy quarter, we if have with to end Stanley to saw integration as quarter was we operational shown property expense litigation. in was last reduction quarter and George. of prior XX% to marginally negotiation, of GAAP loss $X home gains Core costs. are elevated acquisition than Thank last Core available down and complete. from million $X.X quarter platform Acquisition very four rent continue reduced of due quarter refinance approximately Morgan loan far legal driven Revenues and see $X.X a than benefit $X compared to expenses professional we also XX% strong number the drop cost internal now the XX.X%. start very transition ended quarter maximize efforts the at significantly million by

from or Regarding both improvements properties our X.X as a our interest the well XX% rate to In as X.X%, of XX-basis-point structures. balance of Nomura is fixed maturity to negotiated sheet, lines in and some Credit with average debt weighted our we on the approximately April, successfully years. rental other reduction now spreads, fee rates capped X% Suisse

Finally, homes not gain XXX non-core that a during criteria, the gap homes rental of $X.X announced. the giving the carrying of that quarter previously we a did Net sales XXX million proceeds value. million block was our were sales $XXX we sold approximately fit

the $X.X in baseline Additionally, markets proceeds Miles. the million We of home further homes are XXX were gain believe of we are Sales we believe our XX price support valuation portfolio. on carrying to turn for sold we these of by call million now the investment a first gains and costs value. details will that giving XX our portfolio. I in quarter. and over slides appreciation provide key providing gap further a value embedded Once of approximately $XX evidence again

Miles Adams

Robin, Thank morning, and you, good everyone.

was prior to very in the areas quarter operations similar This for objectives. the and terms focus team quarter of

Our was first platform. on homes successfully transition of company all objective our MSR to management the to

properties a XX,XXX team best-in-class at Next to and capable of footprint operating to complete the similar our expansion of metrics.

we Finally, our team challenge improve occupancy levels. to

management all of end completed to the the internal our XXXX ahead a schedule. reminder, As of under approximately QX and I'm internal of that of report well XXXX. total on during XX, X,XXX transition homes have transition XXXX from on the of of QX the platform ASPS had homes to as homes December X,XXX we of pleased a platform rental at our we to

to During This the to XXXX skill our small footprint the currently of and XXX from dedication property from homes operating great City. Miami transferred we homes of homes. first our approximately Charlotte over X,XXX Kansas feet team. quarter a quarter transitions now Minneapolis, spans After completing After XX,XXX and the is the is testament to during sale no of managing we are the MSR. approximately

Our service our to portfolio MSAs, divided we've those seven homes. Within regions. people which located and approximately geographical is distinct and regions XX in we residence into offices located have strategically

people. Our as of the and largely management This When expanded local process XX with markets. has team residence comprised team the proximally of today teams are well-versed demand team jurisdictional XXX their complete. is now been transition include and members to we approximately company of was this requirements our begin

an assembled have and professionals service experienced team performance. best-in-class to We deliver operating of

members. that talent programs of has our about of truly middle the optimize in performance new our are the training and company excited the the team to rigorous joined We we're

primary we believe quality during to which maintain service was our transition resident, this accomplished. focused Our was high existing for

challenge also returning We improve at level XXXX. our to portfolio leasing ourselves homes of XX.X% XX, December occupancy and

of This from significant well sets points As the and XX.X%. represents XXX very December XXst the our of for a portfolio of result stabilized year. XXXX rest at team's efforts March was lease focused percentage a us basis our improvement XX, up

and the during represents of were turnover quarter pleased the prior team comprised growth of rates as QX of options we over rate renewal a represents rate achieved at XXX X,XXX size rates improving rental of growth QX QX, and In of months. turnover The the live. they X.X% many rate different we an consistent X.X%. XX% XX% and lower are X.X% may XX-basis-point expect for This rate double was choose we the the X.X%, turnover improvement to points rent and release growth this stabilized seasonal renewal higher over growth with We time. X.X%. rate homes of QX basis to retention able same over summer during QX to addition The of of improvement certainly very rate a XXXX. maintain rent on-boarded particularly occupancy But the of Residences of have blended quarter. our with

chosen company by renewing demonstrate their our honored us. they leases that are have [inaudible] We continue to our and service with their

of and operating improve our high. while the margins year levels goal further QX is the keeping our primary For remainder to service

focused Continued achieve expense on combined required our very commensurate team to is of maintenance summary, reduction successful in it confident repairs growth am In is in I and cash unlock cost with our expectations. another these quarter. our and was will the goals. objectives revenue turn flow with

the property steps management with and necessary of to We property a to The experience have gain completed property process just management our occupancy the the significantly. transition depth to transition requirements of we market from a these completed the opportunity platform to opportunities. team. our major experience the unique external on or our the improved same positioned take the to of We build-out on-board completed reach provided of This we array are of with our and Many acquisition with homes. large homes. advantage company number associated similar our of combined of uniquely platform those wide

on margins portfolio. focused within We our are improving existing

However, on we over are I'll to George. sure take come now are turn new challenges the way. call back eager our that to to

George Ellison

Thanks, Miles. Great job.

turn to highlights If the you asset we management can new of the page agreement. six, hit

but the stated, well be to the deal, as back the hit, AAMC goals I additional RESI fees a last the covered. for After RESI contract simplicity, increase management a the of in As and it was grow construction ensure after that to the split were during increase Group, clarity was structure the a overarching only disproportionately held team is that but up transparency the this reached. cap. that the only G&A, will friendly. features quarterly deal We is the as What the the AFFO of of RESI are AAMC, want would creating allows shareholder new was need paid AFFO contract dividend XX-XX, target to for $X.XX this gradual of

of sharing the feature will to anticipated important stated RESI’s $X.XX AFFO impacted per is covered target share then growth So and let’s dividend not This of be for share AFFO. this that again, AAMC But capped. only cover of be grow. after is that we allows reached, RESI’s goal

by earned must G&A as sense. but fees descending estate that the as grow makes at as grows. portfolio grow well, rate assets the and to ratio of AAMC continues RESI As a real a decline

page six, will If how you well shows declining them. G&A fees, the the chart over the as This The time. ratio as capped the chart on modeled that governs look parallel. have we is decline at

we ratio high and of regardless we've come the us managed as again is industry growth fees AAMC, capped. growth same external within this holding contract. We internal its which which with or an really standard. ourselves and to this The enable manage time solution up and our also competitors issues standards a to G&A can Incentive will are heart earned So discuss control by over openly they that we think grow. of are expense to but excellent

that at trailing need options convenience RESI marketplace and industry AAMC contract be we the to There deal for fees. for simple other used is a Board multiple to termination frequently and of dozens second feature control. contracts visible, This terminate clear Yard available and a terminated market be control to three to is three external mechanism. of AAMC The sole no under reasonable, studied past felt allows to in of years quantifiable This The that its contract had to discretion. change of existing important one The for our and fair, found of a of separate Front RESI’s are allows convention fees. two cause termination new the managers address a in average RESI times than other in only situations. was allows

As recaps available clear practice. That But were and our multiple is simple. we just and and termination bottomline Yard were that on separate now mirrors key to that done. performance terms two view. to now the grow seven stated, the dozens We full with as details initiatives. that is Page the the companies control one average quantifiable, is make be agreement. asked mechanism path annual the of best just industry to of could are was to tight several These reviewed our the and fees of in free, Obviously, reviewed there terminate structures in expense install, a today. stated file them to Front Residential paid is

management. property We have of completed internalization the

increasing drive rental We a efficiency, rates, growth, our occupancy few turnover strong just continue to metrics. to low operating name

markets results. We portfolio home non-target in proven of continue excellent our financial existing to with

and shareholders. goal to on of shareholder-friendly asset agreement. These improve delivered great continue per continue the our our end and growth $X.XX accomplishments trends competitors a leverage well. leverage, bringing right, earnings opportunity $X.XX if improve management the our to hitting in now operating you on when margins, providing our our sector down, Macro our our and we for they the new us is focus the per of We of position continue to to it year that by and clear remind share maintain private I share AFFO when to corner. have grow growth revenue that but story would time some high of have their in were competitors some up, is turning wrap model financially and Residential Front it's and as high Yard operation, leverage To we've the larger

key improve rate are FFO. the occupancy, quarter, improving continue to of should increases, All NOI, and each metrics

leaders operational strategies greater our senior solid expense. internalization growth We business of structural which with headquarter we and better out all inside are continuing to have of next to management produce better two-day ground, map portfolio on our even to our management and agreement property addressed. revenue current And quarter. just over The with starting and results, complete the we finalize this better last our is we review we as our are control the also here several clarity at asset as three expense deep have push into and dive has been Today impediment, years. continue existing now remaining control

Today right difficult housing. Front the the segment the to balance this Boards would ways play place. to building Yard vision, of for one of last resolution rebel of have finding I to for as We the largest the patience market, and thrilled AAMC to courage to complicated having thank workforce like and both have the block and bring single-family for stands in shareholders. best RESI negotiation

give team, We call the market our acquisition have the the world-class a in in management up footprint experience will industry. and I first deep that us back turn to open operator advantages move Q&A. to now

Operator

Suisse. Your of from comes Credit the Instructions] [Operator first line Harter of Douglas question

Douglas Harter

about or under talk Robin, of -- look will kind new how the short-term size? can agreement at current or the management George you in G&A the fees

Robin Lowe

Yes, Doug.

all obviously covers are $X.XX say So RESI that to is quarterly at the the thing dropped until fees the first AFFO.

sharing the – that’s there RESI Once which cap pass we at first rental [AAMC] the get (sic) So assets, that until XX-XX AMCC’s the level of current is level, hit gross thing. million. work you By just so through, $XX this, seen year. if the through need math a stage that $X.XX time is we you work to like that’s and some but AFFO

all the until covered. that quota is short-term in So get at going is not to AAMC XX-XX

Douglas Harter

the kind extra mentioned a you is that, of the kind you guys the that see forward? then, of and the incurred that to complete, Okay. now during can expense type benefit receive quarter internalization is that some would what of quantify to And -- you -- you you expect from going benefits would costs expect mostly what what

George Ellison

over start I and will Miles. I will Yeah. to then hand

in last of we So, thing, on-boarded still mentioned which one accelerated an cost the as two scale quarters, homes, the for so the as big very all XX,XXX those, I turn my not is new on-boarded prepared we remarks, things easy. that

a HavenBrook We efficiency really have I quarter, have to opportunity is that is this as embedded occupancy on now about think, at that we a now bit cost. but easily will I the I more tried integrate then, out operational quarter as and and on here fully of focus driven Miles of X% turn cost NOI that done platform that. entire think our this, focus lot focus in accelerate and there talk reduced on and let both we And to last so just

Miles Adams

Yeah.

the are to an where things internal beyond those XXX what we opportunities. resources points we would still grow room of contribute NOI R&M very couple in we XXst where then March basis nicely utilization basis where ended in or Those have to unlock in from and and at, are certainly can up the primarily are to categories be topline some average are where greatest And that of to going occupied margin through R&M addition we think we another space. today. both very our to want we another that’s comfortably, time technology on use points we points over improve we basis basis the So of the XX XXX by currently, above happen are

Douglas Harter

Great. Thank you.

George Ellison

Thanks, Doug.

Operator

your from Jade line the of And of comes KBW. question next Rahmani

Jade Rahmani

very much. Thanks

target a main – the to are Just you looking are XX.X%, there? XX%. that you at margin, NOI drivers and the XX% to still have what target What think, I of get sticking as

Robin Lowe

Yeah.

We reference we – as think, As question, just quarter turn accelerated cost again said, said of Jade, in that’s [ph] have NOI. R&M we I this opportunity lot the as still we to of months. should over few forward. X% those, And then Doug’s have there we I on next alluded $X.X that a million was I going to, right Miles think, in

that’s think are the end we to So still XX%, shooting by the achievable still of we year.

Jade Rahmani

just on Boards I just And the entire management put the sorry, internalization contemplate the external agreement, the mean, separately consider structure that internalization, company? on revised the and behind did potential

George Ellison

I both by negotiation Boards, months six it to everything so was a probably took mean, pretty this discussed. we was – much months, seven

all I all went internalizing we talk as forward real think trying to we're what critical costs now, and think and trust about necessary, don't and that. optionality, it of right together so the was manager shareholders flexibility to was control I or maximum external maximum getting was that but have putting the deliver

happen how happen. is There option So a of around what work around opaqueness can could things the what strategic does -- lot two and is that this now. and the think confusion I

very table, options discussion the Everything happen very types you but that of So all now often that very could are quantifiable, very now. is clear, simple. clean, could on is happen,

Jade Rahmani

much. very Thanks

Robin Lowe

you. Thank

Operator

more question… [Operator no Instructions] are If there

George Ellison

is… that Julie,

Operator

over the there now I further back speakers If at to questions time, this turn will for any comments. are it

Alysia Cherry

have I’d day. and like thank you everybody to for a very Thank joining today great much.

George Ellison

you. Thank

Operator

Thank Ladies day. participation and and today’s have you a gentlemen, conference. your this concludes wonderful for

disconnect. You may all

Front Yard Residential (RESI) 8 May 192019 Q1 Earnings call transcript