CASH - Earnings call transcript Q4 2021 | Pathward Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter and Fiscal Year 2021 Investor Conference Call.

During the presentation, all participants will be in a listen-only mode.

Following the prepared remarks, we will conduct a question-and-answer session.

As a reminder, this conference call is being recorded. to Kelley conference Relations. Elsasser, like your over now Brittany host Director would turn call the to I of Investor go ahead. Please

Brittany Kelley Elsasser

Meta results President, September Anthony Thank everyone and year CFO, and like ended would will Sharett fourth where Financial discuss fiscal Herrick, the and the webcast, Pharr; you. call our Group XX, Brett to CEO, XXXX. Glen conference of I to welcome quarter

metafinancialgroup.com. on earnings the and presentation, our release website found at Additional information, including may investor be

filings our include and that company may Those to any are reminder, to Please recent Securities statements. our cause a cautionary uncertainties from Commission, As forward-looking including for forward-looking with The and subject filing actual Exchange materially the comments language factors refer update the could the in statements forward-looking statements. the undertakes obligation differ. to anticipated results release, in to and that most earnings information investor risks statements. no additional actual cause results covering presentation differ could to Meta’s and

we such within today, the results conference non-GAAP are presentation. financial measures non-GAAP assist discussing may are measures Reconciliations provided certain of this to to References trends. for performance in only understanding call. and you the measures Meta’s appendix non-GAAP included on be investor Additionally,

Now, I Pharr. will Brett turn the call over to

Bret Pharr

this Thank you for joining afternoon. everyone us

in efforts service. Under and thank a entrant an His discuss Meta enjoys the years. that for Hanson Brad Meta his built Brad's the to with fiscal as pioneered and payments nearly banking the direction, was contributions our want XX team we Before Meta position I results for quarter those the today. industry, early XXXX, leadership to for of fourth together

XXX of who we We qualified a for powered Meta ESG he want talented myself, Russell our the leadership until recognize of corporate are taking expect of same. partners, and Board to transition smooth facilitate until During and mission and and Financial Brad and all, Board next leadership place efforts. executives with the level expanded the which to CEO, XXXX. the deep S&P take Brad's end in to as executing created adviser remain our Group from At Meta XXXX significantly and Meta’s business company the Anthony meeting, was our senior our the company outperformed will also will experienced Brad Indices. attracted himself financial strategy the to which and period the Brad is bench February inspired surrounded the to I services XXXX. affirms of on the forward. a mission DE&I executives range commitment and the highly serve benefit stockholders strong remained Board our offer time, that will we inclusion financial same Having completed he the a Meta’s strategic and transition, Meta Annual the strategy team. To

percentage high to key run our a an Our continue lower efficiencies of higher optimizing on deposits, strategy growing around with and stable our improve mix to business. and assets we earning cost way core of assets, of return three metrics; ongoing operating simplify continuing portfolio will our the center emphasis maintaining

over share net represent fiscal year during XX% generated of The earnings share. XXXX, increase XXXX. fiscal or an results, revenue $XXX $XXX.X fiscal of and our to year million, Turning per year Meta million, of $X.XX XXXX income per

XX.XX%. U.S. participation in to assets due the to pleased are achieve equity government's X.XX% balances average the payment of on We on program cash and average impact recorded our economic a a large despite return held return of

for believe established partners as Meta been services innovative is service others supporting financial the all with to positioned administration on programs. while efforts. who like stronger. we we And discussed an our financial upon last a I’d never for stakeholders national for our as offer and continue update quarter. DE&I build OCC we We guidance generating banking which our now and credit and value backbone Our well align provide policies our ESG banks, our strategy process execute technology as serve pipeline to has with to better companies their

a quarter, these review the categories. changes During do for expected we downgrade forward. any not the in performance. to future credits several fourth certain risk not Further, and one-time our XX expect of increase overall do an through want and ratings. metrics completed cycles in resulted in effective new But portfolio downgrades our loan do periods a losses of in going portfolio or years. credits baseline deterioration over a our indicate in we these reflect increase managing established these last risk management in of practices loan as to collateral have I and for losses not the result these proven credit past This adjustments economic administrative reiterate;

assist this our to set review the and million financial of baseline, with our $X.X to is approximately the new Excluding position comprehensive portfolio professional expenses impact minimal. of

like million developments, end banking on. of legacy the to couple of had we quarter, Following In community the $XXX approximately million more. loans central place to October, sell agreements you I’d and brief we a have to bank fourth positive in sold $XX

the loans, community sales, as less Included down bank loan Community and of the million, sales legacy of non-accrual XXXX. XX% as $XXX approximately be than sales portfolio. XX% all of XX, doubtful non-accrual million Representing or the wind lease these of balances our doubtful loans of and September nearly $X of Bank loan loan $XX in legacy and are balances. substandard Following will and which million will substandard portfolio

in first balances fiscal impact recognized made and earnings quarter efficiently phase our bank this first our will of progress XXXX to well of mark our fiscal at in XXXX. ongoing the And performed The our will return the capital the of be assets. initiatives. zero as quarter net effort successful the record In executed and on higher end three sales first conclusion be we pre-tax to summary, expected fiscal of against to recorded the of be of in strategy community the expect deploy Meta key We XXXX breakeven. roughly and is

we are positioned We head year. into the well fiscal next as

now turn President, over to me Anthony the our Sharett. Let call new

Anthony Sharett

or largest from charter. plan then strategic and was human And organization. to Bakerand with may, group. its of Meta States consumer transition, was today's Meta to in all closely to served health the Insurance a meet roadmap of pet in before I mission is roles. billion the trust was credit, in transition action Prior I develop of driven the me give United responsible with person Brett. working in and a I financial to marketing, to joining a lines, activities and as transitioning most let you its including the of resources I business where law risk introduction in bank direct insurer management, Directors. look pleasure at and President a only acting units you, forward quarters for for Nationwide Thank If a legal and to Meta. President firm P&L compliance, with business operations, it's call. Bank, private I all full brief prior Nationwide talking institutions co-chaired you recently $X the the leadership you to the service Mutual I in Hostetler, at practices served of time lead I Pet, Company. the my ahead. which practice, XXXX, President Nationwide in as a Board assets a Previously, I institution, of

all, we all look XXXX, mission want decisions to make about continues that which our to ensure we fiscal inclusion be As fit for within north our financial to year forward new capabilities we star. of

a continue and we better on customers. to work straightforward optimizing And will our partners interest deposits, financial better results performance. asset increasing which in our our efficiency, as our We we will processes possible, at our serve earning as so core mix can making focus in

strategy team financial much over management board to review are excited results. our and further Our run and we prospects. Glen about as you to Meta's these to believe

Glen Herrick

afternoon and Anthony you, Thank everyone. good

of me results. and another Let summarize year achieved our a earnings. briefly We solid quarter

totaled million, income $X.XX ended fourth XX, quarter $X.X fiscal the per XXXX. or from the share $XX.X million quarter of increase an For September of net

balances. attributable gain income income fee from the of to increased to loan income the $XX net increase higher for increase during our year year million equity of Non-interest payments totaled continued million, million $XXX.X quarter the investment. sheet an balance income $X.XX and million million share fiscal approximately X% optimization XXXX. of $XX $X an on an grew strong million, interest per to the $XXX Net $XX fiscal For year-over-year, or by and mainly aided an

represented income year, to fiscal of payments fiscal million, growth non-interest XX% an year aided government by from of driven XX%, was in which $XXX payments income related to revenue total activity strong programs. XXXX. the stimulus grew Non-interest increase For fee in income XX%

as de-SPAC traded banking completed the capital a service During process our quarter XX. arm in our through on September a MoneyLion investment venture Meta $X partners of in made MoneyLion Meta and Ventures XXXX. May million publicly one became its

approximately recognize quarter, approximately expense growth. where public efficiency in of exceeded of As value of which fair producing $XX of on A increase adjustments position. XX, million non-interest revenue year-over-year. million expense We expense XX.X%, gain the equity, improved recognizing hold of increased the grew while a Non-interest in million non-interest $X it net mark-to-market total in portion as expense ratio shares million the the measure while are $XX.X $XX.X unrealized XXXX, at occurred an XXX,XXX investment. September we $XXX we the and hold this fourth million income, to we will fiscal growth of large

within these $X historical company the in the to expense investments the range in expenses and Meta with to $X.X future CEO items, of million year associated the our expect of million traditional to spend transition. support XXXX. and incurred, expenses first low stack Outside be the Furthermore, During $XX quarter total of remained growth. million technology quarter fiscal related one-time for recognized we of product levels,

to Turning margin, margin interest from interest continues net our our approach balance to optimizing benefit to sheet. net

strong optimize we During finance mix we the loan from our to loan lower by continue away portfolio. the yielding growth evidenced in while growth, have commercial quarter assets

to momentum robust effort seeing lending also ramps we of portfolios to are balances factors customer finance in to Brett first there renewed be commercial working direct XXXX. asset capital. noted, community zero These optimize bank economy quarter factoring growth to we in and is based community the earning the XXXX. of fiscal and and demand are continued contribute sales bank pipeline as at expect as We loan at fiscal a and assets a up see the expect loan end our for The

of that expiring stock common million on X to capital, program Turning September, our in new XX, a company's shares September we Board share outstanding the authorized to up announced repurchase of XXXX.

with October in Board During the we recent October XXX,XXX shares authorization quarter nearly increasing please open the trajectory. regulatory 'XX. our the joining The for confidence in the ratio repurchase repurchased the Operator, have prepared shares The purchased for from fourth us reflect outlook X.X% growth and all concludes to and X.X%, the quarter. leverage the you remains and an today. purchases This bank momentum XXX,XXX through the and well-capitalized Thank of Q&A. fiscal business prior for additional remarks. up company's line company share

Operator

question-and-answer begin [Operator Certainly, Sandler. line question comes Frank Piper the The session. we of first the from Schiraldi will with Instructions] now

Frank Schiraldi

any expense? as wanted you in Glen, was further that the And of into expense, expenses, opposed over in one-time in on terms front, call being up just what's million X dive I start one-time little the maybe on all the you you taken then, mentioned with to amortized why could it a to in mentioned the color that release, time?

Glen Herrick

felt worth capitalized development over time are that or Frank. and make ongoing saw are and investment that, do, making larger some that a certainly time. investments really strong and are Hi, we was that business saw, related that and shorter we ongoing of the to amortized We pipeline a projects. efforts period opportunities we in there Sure opportunities, it

to serve be So to customers that we can the serve. prepared for we want

and the it line, then other So you'll lot of in and expense. consulting legal see some a

number a So, consultants, expenses think on pass of contractors, augmentation, type items. to of of staff through

Frank Schiraldi

reflects larger, generally? or a So it this FTE is partially is count

Glen Herrick

that coming if push to our normal to the range an fact, is we as year, where quarter. we But our we we look to through opportunity yes, bubble into This guided is able baking see prepare a million back pipeline, had that will , run and you serve low we've cost for No, next in external or on quarter be customers $XX well, particular. time the think really, more expenses know, expenses rate. service and the growth down in to a in we next be down one wanted that linked compensation our

Frank Schiraldi

over in this then, coincidental? timing the some And Brett reflect CEO it, change fees this about a versus with taking thinking Okay. ways timing, consulting of in spot, FTEs just is of the terms or, in

Brett Pharr

Yes, Frank. This is Brett.

purely I coincidental. think it's

it There's no seeing of our just and to we're we and As completely sort our up service. of ramp to as relates prepared continual we What strategy the approach volume a we our be are additional quickly our around aligned. tactics opportunities. deeper even change to needed some banking to is a felt things revenue some like of handle way. And do that's coming the and

was, nothing CEO the with had it do what purely switch. to that's So

being CEO In this before fact, place of lot switch the was was a in already announced.

time reason and been that's decided So invest the quarter. in to we've talking for the these we things about a

Frank Schiraldi

Wondering gave in expectations you you strong other as think banks you of year-over-year can the either as would I payments Glenn, mentioned XXXX expenses. you it. have for year bottom-line give I you can about, any taking comps, maybe terms even just advantage color, was. just tough growth as given any thinking But of created kind quarter a guys banking niche, just then, expect of it what if provide about and creates in some And service, expectations, the color guys far thinking beyond moat, that a first Okay. your in XXXX or

couple some expectation this XXXX, years. the of the even growth in either guide be maybe, So bottom-line just could rate coming for over core next what business, your or of

Glen Herrick

sides we've overall this guidance payments in talked point. finance the pipeline. the Sure. about consistently strong a But at commercial both providing business. And of not and We're

managers upfront customer moving little investment require over. these As -- fast payments a in and ramp program you that see timing especially acceptance know, and the predict Frank harder to how partners, some up of larger things and

a that or of predict. year is harder five if three rate, feel good. we lot But at we a will little run So to a look pretty

outlook growth extended the about positive of having time. EPS period very double digit are We of over an

Operator

Securities. Thank you, The next Steve line Moss question Schiraldi. of Riley B. Mr. from comes the with

Steve Moss

line this How in figure 'XX? growth in some quarters had probably thinking following but understand you you the Maybe Card extra growth in up revenue guys of just of the on terms Frank's baseline. a fees. about obviously prior fiscal in question numbers I are here. terms of juice there good

Glen Herrick

Steve. Hi, Yes.

whole our part to year-over-year, unless a expect was cannibalized large lot what -- will all So of but cash was be A growth the out year fee tax by stimulus. have in fee the bunch that went our stimulus. income this around be some more payments was of will consumers would products. depressed income, because taken in And of it rates depressed that fiscal would we government there's a 'XX, otherwise

in would will So occurs, we up tax our as expect XXXX. to return leg that income And to income grow if fee But fee payments certainly much. we normal. a not in nice expect

programs, extends not in of out social we then government and stimulus growth strength as would other programs tax. if expect child in payments and bunch does other Now, tax maybe continued comes a the much with credits

of hedge natural way. but there's government then put a So worked the company for out to hedge, that stimulus, we it certainly somewhat together

Steve Moss

sounds for of thinking fair terms growth fiscal rate loans, of -- kind And for you're kind hear robust, the loan enough. that commercial when is just going Okay, like pipeline, in what me. on bank I you double-digit then, of curious, the robust before 'XX to

around of with just there. have of bit guys to more You a trying drivers chain issues business, supply any or any seen get disruptions the flavor little line

Brett Pharr

Brett. is This

about The across factoring working good it's capital So a in set happening by growth look. our so we your an is consistent a thing, classes, pretty good growth double-digit pretty seeing our insights I that. feel many into of particularly lending, interesting think we're asset there. good good and what's And have to actually areas, asset-based highly it customers. of is moment moment diversified place And rate

pieces slowing any impact down for us. seeing So chain we're the that not supply from things are

be supply we're well but seem happening, experiencing not to two are at that specific where having going that's not customers very be all. pockets pretty one there Our issues and chain or may

Steve Moss

Okay.

one that's the on or one charge forward. maybe of And last think more So kind excluding here, offs less matching me, just then for helpful. just line about the tax provision going provision

guys dynamic? curious to that about of kind Just as how thinking are you

Glen Herrick

I services. starting are that's Seasonal think fair back the on down. loan rates, depending growth obviously, similar seasonal come we to our for of the and factors what are then some bank use factors every

will that be tailwind So provision. a to

provisioning for lower had past. Our headwind loan But we've expect having in than loans. would we amount be of to just overall numbers upfront and provide growth would the larger

Operator

Mr. question Michael of line the from with you, KBW. comes Thank Perito The Moss. next

Michael Perito

a -- the of dollars to were but here horse dead I'm on on. just $X not Sorry spent million, beat kind I'm on clear what fully the

called guess, a guys kind asking little Difficulty] question think consulting I the driven. and differently, it's sounds So more cost. you I kind one-time tech of [Technical like But a it's technology mean, it legal flagged I this of --

maybe it spent? just handle more? kind So you I try a get trying of opinions protocols needed or kind sets there upgrades? Was of doing I guess, you guys protocols where can to break platform a little were were better technology there or kind you on compliance and of the of bit were mean, of dollars down certain second

Glen Herrick

there because was on part coming are our or opportunities to than been Yes, it to team of capacity to plate. that that, our help consulting extra quite ready in to so get -- things faster was have the meaning it we cases, were was few services all existing a many them, analyze the we the have It but And to. some and were Mike. get us been some planning, had -- frankly, that much

it's from talked consultants, be of of it's we're to augmentation to do that or area, attack, to how that staff is thinking go if we lot this looking Xx product future it's -- So we're of, if going about, a little about some it's that. going need we a

And together of so quarter. lot this those came a

we plan about, we execute under leadership transition process really were talked through part the with no they to and company that as through in that the continued a Brett's disruption. Brett of and work As to team on and wanted a

Michael Perito

quite a situation is bank pipeline where like -- because a been has business service it for I robust fairly as in in time. the So that feel the -- some

companies So the of magnitude is size being in complex not the good companies companies and of pipeline of or the a the was types where go you of it kind increasing pipeline is or were much on the was more able and a else? like the higher business the or or felt letting there quality to situation changing have becoming you something rate by close away the too just

Glen Herrick

the It's a all and you experience how from of you onboarding things FTE over lot that, Mike, Our expenses increased compensation the time last like said, do versus the of few we just keep anywhere compensation? some do scale up, adding years. have what's and

faster even get were there has more scale thought through opportunities revenue to our it. wanted Now than we break that, but grown and to we

Now see the it's be December low and in managing $XX them. didn't can the also this would I guidance that we that a to return million if quarter. in point investments these -- making we returning you there on is expenses our wouldn't of And think we're

Michael Perito

for spending extra it. that's No, Thanks on helpful. okay. minute Yes,

Glen Herrick

one why of knew in going to put we is was expenses the ground this we we in here and just an quarter. be stake we very and the instant, clear thought our be knew a that's are -- what Yes, outlier, December want to yes, it

Michael Perito

of the behind point, of make it towards BaaS heavily it's curious, then to like said, any we've mean, it's prepaid And revenue I still -- got think it. this like the the in growth like mean, these a kind its and just -- card lost still there if is momentum your prepaids slide mean, was revenue feels want around get of debit-oriented checking other it platforms Got mean, more coming where wind was show pipeline little the of certainly the I there on has pretty in that some mean, neobank good and is prepaid terms more you talked kind kind having business, XX% And side, prepaid this of into you on clients, on a the sales comments. payment revenues was of debit do of member guess of which I side or sponsor But any are bigger that I things guys pretty are -- oriented I on kind feels I any at like the opportunities the the in of monoline deck. around you I picture does you that? pretty mix on the big it mean, guys like more? more of probably past. kind -- thing, that? some whether that's from, growth. that, card credit I were these -- thoughts type I

Brett Pharr

I Yes, is think this -- Brett.

and I of you're their there out -- are products we're to all in a and to things. offer that they correctly. set are broader those so of The it categorizing financial neobanks engaging wanting consumers think

not is going anticipate income occur. lot a they're things. sheet about, to good remittance, those increasingly the kinds is as of types us problem a transition broader things, happen. even that going balance cetera, news hard consumer that. et and which is And to the cases, speed are see going I in it's mix many talking think for things, products And to very fee of of of of various to So to maybe payments is, that in we're much The it's us

which of we're a is service So everybody of a in. for got but the which modeling many what products, it's to conference. trend clearly across other that, or That's as talking about, purposes, a hard from doing just these back is that involved some understand banking

it's mix going how that will to see I you you happen. So I fast shift. guess, tell can't

Glen Herrick

wanted on. Hence investment behind some the we of that get reasoning moving to the

Brett Pharr

Yes. right. that's Investment,

Michael Perito

missed move would has just lastly, had I I up buybacks from additional on the stocks or the But kind the authorization, nice buyback as on refreshing the of room mean, just making form appetite and here. then an capital a that'd how just apologize comment And a love okay. have deployment, if mind of I you you this. don't some it, Got specific you But of on kind just, a kind a valuation be great? bit. more of if about broadly moved just comment think us obviously

Glen Herrick

we're our the making efficient, more foreseeable Yes, we for We're to best sheet holding scalable. excess And And, with to continue flat. believe more generate to [Phonetic] future. are but we're going still from opportunities them earnings, capital the have, only XXX the platforms ROA, those our we balance head there. and making up going

for capital excess earnings, A that only beyond. you and with outlook board best best use of the into believe management lot of factors that can our now, shares 'XX so repurchase 'XX's what is and 'XX go for but think including value providing that the to assume, is not we shareholders. the our through And right as

comfortable shares at very we're so today's And buying price.

Michael Perito

Great. Thank it. you, guys. Appreciate

Operator

Raymond Perito. Thank comes with next Mr. you, James. Wallace from question of Wally line the The

proceed. may You

Wally Wallace

is charter is of the you you try their I of it or following that the the if just from up that of a et banking kind seeing of requirements, side definitely business comments about just et I we're banks use that to environment of just to to down larger have do hi. the level press Mike's It's, coming competitors locked Maybe business. smaller Maybe curious in competitive growth of questioning -- you are seeing trying increasing. more the of changing, feel guess line see from cetera? cetera, you amount really of the your mean, win the other are kind regulatory on new service kind and entrants, Bancorp because and like of as you I'm that pipe

Brett Pharr

there to in and answered learning requirements things, these I pathing partially on this of get a clear we've should doing us and most well out. ways own their the allow long of them yes, a it, people constantly question. will then internally will them how they your going to they'll building Are the would think, a be based get in also many got win capabilities in dip talent who regulatory I you operational and to history back toe trouble do in history, base, and marketplace. say,

others be have end So very the to to few there come short in us, it. competitors is they're of that to the lived to going to whole or do a day, really invest be are of going at able two lot

that consumers. of products, it So it. about other us all components worried just in not are the the neobanks expanding their serve now in place think And prepaid market it is pieces, and as they into positions I sort them not better coming the to to the able other bolt-on provide just you sponsorship a with but be as want to

for play. right, others got I it that it's tough So pretty to just think you've

Wally Wallace

that did clear is have find mean, others to it that the out hard you makes the regulators to or I way?

Brett Pharr

I for to what others. to us mean, hard the answer saying regulators it's are

that's hard see the Sometimes and news to but you what answer. read can they're saying,

Glen Herrick

today. I had is, Yes. we And say, than we've have opportunities would what never more Wally

capable, clearly some doing very stuff Bancorp good so pipelines there's yes, some been stronger. and is but our So banks never obviously

Wally Wallace

range based might -- much have deposits given balances, now, of this EIP how as the if kind But guessing I Okay. apologize you And follow on in sheet? size I'm on the missed And are cash shift the you're of left optimal release, I the I'm at much. balance to close I the like a to just earning asset asset you of for mix? that to on given opportunity feel kind the do it. that, not wondering maybe

Glen Herrick

the don't balances. EIP. about we, of talked deck in I Yes, some have think mean, from many our we investor left we I

of forward. very will of Outside to tax billion plus $X flows minus of some We balance sheet. this how given a look down billion this just you movement year, number will will and we've we efficient can than move February larger that remix It billion partnership kind $X.X balance that. some moved season, between the be and help other the when us. Yes, have we years in developed $X.X for $X going or we off our think a run March, up some of and of that of and side seems and want us money good billion with that hand banks is business. But couple at our left balances sheet a for

Wally Wallace

Okay, loan think I great. could of nature that just student recovery, But question. That's recur? you insurance is helpful. something was kind the the And one that last, said just stinky of recovery, what then insurance and

Glen Herrick

may recall we documents. that ago, so that things the other so private all totally have purchased to by in they They a portfolios they and insurer, for up recall, number loan -- then student that You'll matters barely that's gotten insured. loan went years involved unrelated were insured some portfolio public had a well, student of

went state the So they Dakota insurance bankrupt were of guess by or regulator. liquidated, South I

unsecured Over to state get quarter. And be wrapping some on left. this one We material, The so claim we but I time, may more And up. we expect closes probably claim down. is claims get we before we the loans. state will we wouldn't another as those have that. did have those final -- carry received back it one

Wally Wallace

appreciate refreshing for now. I do remember questions. That's your thanks I all my Yes, my Okay. time. memory, that

Operator

you, the the rest all Wallace. you Meta fiscal additional XXXX call. year There Mr. Financial investor concludes at I quarter and your That time. of waiting Group enjoy day. fourth questions Thanks are hope no this

Pathward Financial (CASH) 28 Oct 212021 Q4 Earnings call transcript