- Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Pathward Financial Fourth Quarter and Fiscal Year 2022 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. And as a reminder, this conference call is being recorded. to President conference Financial of like Justin over Reporting. now Vice Schempp, Investor would turn call the to I Relations and Please go ahead.

Justin Schempp

this and MoneyXX/XX September results questions. today's is for and and CEO, be fourth take fiscal week will operator your Pathward fiscal the Industry after our our year currently unable which and Pharr; will ended discuss financial you, President Herrick XXXX, will CFO, attending Anthony join and Thank operating Conference Sharett, quarter the Glen XXth, welcome. he Brett to Financial's we call.

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

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

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

the call over Now, Brett to our turn let CEO. Pharr, me

Brett Pharr

month unveiled and call. I fourth Financial's that our Pathward new new quarter am earlier pathward.com. launched joining website our earnings announce brand for XXXX everyone you Thank corporate excited to we this fiscal

stage path products Our next and offer a can their our highlights and redesigned the financial commitment to reach people businesses to the they of journey. providing services forward so and website we

potential and provide page we've current information You'll more Investor to shareholders. our also Relations updated to notice

Turning net compared fiscal million XXXX, Pathward brand's represent Fiscal prior per during GAAP the per one-time to share $XXX.X an year. our XXXX. including XX% our to or over the generated GAAP share, $XXX.X $X.XX of fiscal year former of fiscal on $X.XX sale trademarks gain XXXX in year income million financial earnings increase per of results, the or share

a a We tangible recorded return are have equity fiscal average pleased XX.X% the and to for on of achieved on assets average X.X% of year. return

income the Earnings $X.X to For the the $XX.X million quarter fourth for year the GAAP compared prior up prior $X.XX per million net share as was period. year. was fiscal to million, quarter, in compared in $XX.X same $X.XX

fourth Pathward's the financials that transpired During several impact positively believe we will forward. going events quarter,

loss student the net and sold from return interest its the a on loans commercial emphasize sale, corresponding company on to the Including as loss transaction. higher This optimizing economic portfolio's portfolio. assets remaining we execute on earning of pillar, finance loan $XX the recorded sale allowed additional the to core strategic assets. the company our to continue take reserves of release First, $XXX,XXX company the of the million

used in share through completed to our we and will September, proceeds The levels repurchases capital million offering. $XX dividends. for capital shareholders return be to Next a of continuous debt subordinated allowing strengthen

solar the government the lender for incentives Inflation of A leading energy a in going increased Pathward forward. States the and Finally, green industry this believe will we benefit United federal passed panels. our this item is solar recently including legislation Reduction key business is legislation Act. projects

on lending strain our the mentioned I solar issues due supply update, quarter's to volumes the industry. last chain impacting our During

Inflation could Act, our Reduction in coupled solar As incentives these enhanced issues volumes anticipate continue lending ahead. the to these with revitalized the be improve, years we from

our commercial strong loan portfolio, our growth. team to finance deliver to continues Turning

an in XX% third yields such last we portfolio quarter. a representing commercial XXXX, economy an to XXth, increase year the $X of a want X% and finance of balances increase our September loan stagflation fears from environment. reiterate the and our of from As With in loan lingering, billion, end totaled competence

provide and at new reprice yields First, will comes as rates. our rising interest variable higher greater rates loans in business

We are the floors. starting in environment are of see now especially the rising to rate loans our through that variable their our almost all benefits yields, rate

and be full the However, we some realized. sharply to given expect how risen, time will take quickly rates benefits have

our to sources, summary, their to will and access these that as needs opportunity the for returns we shareholders. outsized of continue cycle the results demonstrate Second, path In companies our through to we funding lending have and to our forward businesses. move credit provide their strategy produce fill financial lose traditional financial capital a optimization

year of remain net year earnings deposit fiscal our GAAP strategic adjusted on an to guidance affirming Moving respect financial simplification. this optimization, fiscal XXXX XXXX our for our between pillars operational of of and items, the key optimization, for of to earnings $X.XX asset in are XXXX, per Adjusting translates per non-recurring focused range With to into to $X.XX. we $X.XX tax, $X.XX. expectations share share

to rebranding XXXX. $XX we In to of be in to total, to wrap-up expenses all year continue expect million related expect rebranding between fiscal We quarter the million. $XX expenses first

of Vice release. CFO to ensure Chief Pathward. the to reins and work complete I contributions of of achievement thank have company Glen Glen, her of decade to Board today effective the will succeed over on Sonja comment Executive Pathward Glen to I the to our next given take invaluable near Glen in Pathward's appointed Finally, Governance at The The before I of transition you the CFO. on conjunction her track record CFO in confidence decade. Sonja I months Officer our the in April Chief team, XXXX. the Sonja to a over seamless company XXth, behalf last earnings for turn with your plan entire it want six Herrick, then succession as Accounting has announced CFO over currently Risk and Compliance together and Theisen, we Staff previously and to President and want

You your personally our your team. to and thank role help Board while leading finance CEO. for Pathward you of continued and appreciation your With over an for experience building essential your played into want world-class sincere and company, you overview your I Glen you wish a banking-as-a-service for and me in a molding insights success. our financials. provide to accounting express as that, of to and colleagues, our efforts I, to an years

Glen Herrick

Brett and everyone. Thank you, afternoon, good

all to Before be for It's years. the part I Pathward our be at I achievements. not like would want CEO, first prouder thank of our you and Tyler last join former Board, the alongside amazing opportunity company. an XX who to work team my me I results, opportunity over to could our to the this our to journey gave also talked Brett, privilege entire about I been thank and Haahr, a of

execute and During evolution CFO shape assume financial working extremely is with priorities. our in look forward the my closely at and tenure, a role, the strategic transition. I ensure the her Sonja I She qualified next worked and on to her company to closely with to smooth step logical to

Brett in QX last and I call. XXth, my XXXX until will earnings April April As as CFO earnings will be XXXX's therefore fiscal mentioned, serve

days seeing this best As still an to believe will what Pathward's team am looking shareholder, do. I forward and lie ongoing I ahead

$XX.X to million $X.X an million, increase or XXth, our for per Net the of prior Now, $X.XX on quarter income results. year. share, from the ended totaled September

million year million earnings year $XXX.X million XXXX. of per or net million and fiscal Adjusting tax $X.XX share their XXXX, per for share fourth per to for respectively. and $XX.X impact, compared items fiscal For $X.XX earnings share fiscal or or the $XX.X $XXX.X quarter increased one-time year of were $X.XX

For mix. The an reconciliation please year-over-year the income $XX.X $X.X on of to quarter fourth yields end the interest student decline billion of increase Overall, loan greater see year prior Community GAAP prior presentation. appendix At the the and billion increased in the XX% year. Bank margin the quarter investment sales portfolios. the company to of in earning net was expanded interest driven loans, had X.XX% million. from $X.X year. from improved our portfolios The and Relative net of the the securities the down fourth earnings, loan investor the due to XXXX, and X.XX% prior to the to in was year, asset by in fiscal

a During for provision to sale related fourth portfolio. losses reversal This quarter, the the was million. company $X.X reversal of reserve driven loan of release student credit the the $X.X million recorded of a by

driven investment throughout In by we periods of the continue money resolving addition, broader reserve following our loans in especially commercial income to uncertainty in environment, investment merger fiscal with portfolio troubled the quarter levels the fourth remains the and the adjust fourth prior The gain healthy XXXX. year. decrease primarily finance due from lease loan in will on $X.X metrics, government million SPAC strong macroeconomic and with as million of in Despite on of diligently a and Non-interest to was their in gain year assets. monitor the quarter declined future guaranteed the our company's and necessary. comfortable remain few $XX.X quality initial line sale asset reductions after

the of investment, quarter from pre-tax the the card greater on as was $X.X prior the addition, venture X% loan $X quarter fee related Offsetting the of The pre-tax expenses expenses. as rebranding million year. compensation separation reductions and fourth payments In and XX% million million processing year, prior on adjusting year-over-year. in included pre-tax core which loss a well income, stem Total student related non-interest $X.X from loss sale sale a for increase $X the for portfolio. grew expense expenses of a million increased million expenses costs, from capital increased the $X.X

expenses incur of As our will some interest partners. higher agreements company banking-as-a-service rise, the to due with processing contractual card rates

credits effective our full our quarterly fiscal year year guidance than quarter, expect fourth revenue expense previous were result, of provided earnings to September, to rise. million. as a rates to earnings in to solar increase above pushed on For a card said, That guidance consequently interest and the assumptions and tax and of our rate fiscal we of the this company structured expenses range. tax was financials. agreements corresponding Due $X.X loan be XX.X% high our being expand the closed we end the our the processing that lower as expects end below related in lift XXXX At large significant XXXX the the transaction, this

an for sale if about earnings guidance between $X.XX remain trademark We in for update the debt fiscal subordinated next further we announced we to of adjusted our stated the at additional his for of $XX.XX. this are per issuance we average to and be needed, under earnings On XXXX. between average shares corresponding In quarterly capital reiterating repurchase $X.XX price of an $XX $XX.XX. remarks, competent Through share. XXth, September expect XXXX $X.XX. XXX,XXX are left of guidance shares our expected are XXX,XXX year quarter shares the million XXth, XXXX year outlook, call. expenses, There price repurchased for and repurchase $X.XX on we at earnings strengthen currently our our remaining Brett and the X.X plan. authorized we million gain fiscal As our its GAAP Adjusting and levels. per to plan an share October at

well-capitalized open a company Operator, for for up prepared the remains shareholders. leverage questions. please That returning capital to with Finally, committed X.X% bank we ratio line concludes and regulatory of our to the remain the remarks.

Operator

you. Thank

[Operator start KBW. now first from will We from Q&A Tim question Switzer Our today session. comes Instructions] today's

Your is open. line now

Tim Switzer

Thank Mike you Hey, I'm taking for good question. Perito. my afternoon. for on

Brett Pharr

afternoon. good Hey,

Tim Switzer

with bit are what Sounds like other is there? near-term? was have of them. card in and what guys this guide some what about really the embedded of question like quarter, expenses items? the first expense one in large kind And reiterating My drivers big guys of processing up the the be little you a But might move you guidance,

Brett Pharr

I of Yes, think about that. it, but talk even part why don’t you you Glen mean, I that. processing take card

Glen Herrick

Yes. Hi, Tim.

we've in fee as talked rate expect have about, higher in and environment. environment. a card both interest income even So, in income higher higher expenses That we processing will income we higher a rate said,

early and update What's call. guidance do a this that So, our confident January look that, environment? side rates at loan Our XXXXs. rates yes, like be the will at a us. have faster of good higher quarter or in in we're current unique next with the better we since this pace for outlook on of will we -- just to to little we little haven't but our we demand -- some moved And -- this

Tim Switzer

like are need Okay, an target? Is a sounds efficiency to before going so of of, I kind is better trending land? you there get to like a that exactly think question? guess they see the how you, where can in economy ratio better -- idea you like Is XXXX you

Glen Herrick

comes our where efficiency the -- our for varies -- mix on what in it earnings shift. ratio really us, Well, from

our and have ratios provision under businesses, high typical have XX% lending they Our payments our payments, -- -- et core efficiency your businesses range have ratios, payments But efficiency tax then type our well XX%. provisioning, businesses, and cetera. -- card, prepaid they don't XX%

the around little it's close these of we would a -- where bit, ratio So, couple to think could expenses been but probably last quarters. move efficiency here

Tim Switzer

Okay, that's pretty way talking now you're And rate this floors. on helpful. the -- expansion, through interest obviously, and the good margin, the you're about all quarter,

how the we the we So, the impacts see was big were And even on quarter? about -- expansion Or NIM think recent eliminating in possibly floors that? more that pretty can so still should most quarter? next

Brett Pharr

lot of them a into we're but some the as high as -- were of go through is there's think So, I it factors that, of X%. part right? floors, Well,

So lot and with there, margin than out we of this we thought. we talked But being a seeing and at lower we're was liquidity point last might were your seeing a either up. now about did, duration the when have we rate. priced rates of were so still is deals, transactions is fact And you of that market prices matter there's on you actually the thinner is that not What to see thesis are because move quarter, actually fixed much or in participating, correct. happen have it were these is, lot what our the shorter and

we're and on marketplace. need We a Now, see the that's prepared expansion to margin see not wide we're turning But starting declare it. to victory in interest net yet. to

Glen Herrick

up NIM just our move quarter. a Tim, next of-- It's net-net, But matter will

Tim Switzer

Right.

Okay. look? deem and how what talk does the you question broader landscape, about Understood. which of And attractive a little opportunities the you competitive guys. bit seeing then Can pipeline to in kind just for best most And you're you? a

Brett Pharr

some there's wanting capital, kind to program of venture We've that been and of in very of to and We're next thing. some pressure. FinTechs, very our all larger starting to interesting a excitement. we've be to surprising. grow comes by and participants talked and told going But as of generate years, entire of and you cases. the XX% management lot the this continuing lot -- to neobanks also everybody, and other Those table We're those the water the in them toe the has banking-as-a-service some through backed are coming that -- market of, do in XX% a to couple things long-standing are And revenue their to the continues last this regulatory about fear the banks is we've phase the seeing the are -- put four and where which a in two not this can, public, understand seeing of that from the why, have experience case. industry in happening,

programs from in excitement, on. think to got We our we of lot from partners we're the standing MoneyXX/XX, companies a other keep long good strongly large just back larger, still going positioned consumer there going, So, and business. especially

so about say less pipeline. that over it. feel the And has because top, good the it think wouldn't we because FinTechs is I in I

Tim Switzer

you guys. Great. color. Thank I appreciate the

Operator

go Please comes [Operator Sandler. ahead. today Piper from from Instructions] Schiraldi our Now, question Frank next

Frank Schiraldi

Hey guys.

Brett Pharr

Hey Frank.

Frank Schiraldi

flow for given Just in the I back renewable year expectation And mentioned there recent you curious sort just to on the down there. as recall, the growth reiterated the and of guidance, Brett, energy the next you -- legislation. guide so going vertical, minimal was just and

of through Just greater year? why in me there? give degree pickup be not next your can there, recognized you life there's that expectation a might further just a to that signs thoughts if wondering Now,

Brett Pharr

Yes, intermediate I it. long-term think mean, for to us I optimism that gives legislation

things going You still have a couple other of on.

out, going eventually a still for but while. issues chain get going are have supply impacting will of that on washed I'm that and been some quite projects. that You hopeful that these that's some on are

becoming thing getting we're is mainstream, more this other because is players. The more

it and once high is And so these as not was. transactions the the as pricing of yield

continue to going we're watch to so And it.

have that I'm to this will we it's think than I sure return not the during spell former we in had going we during dry But glory past. years year. had the to more

Frank Schiraldi

terms in in finance a that of past, commercial just the uncertainty of obviously, growth about the macro growth lot on over And next a there's the six Okay. year. rate mid-teen But side, in of you've talked months, a business. curious sort

know quarter. below in can quarter, were little this ABL they balances the that I jump factoring downlink a a around were bit, You

about a growth makes think still of So, terms to as just finance? that curious on commercial bogey, in kind if sense of, the

Brett Pharr

Yes, there, much a have to starting base. I you're mean larger your growth percentage

to So, had real capital. this ABL are past into we and down the over of low be have be what depends the know, don't transactions. and problems from working same year wait factoring growth, where anticipate to XX migration see year, get significant. Everybody's types as for next I and The it. might the two-digits going factoring, client secret go of ABL seen yet. that traditional in to and nobody's months, talking is I and it growth on there in our That's C&I, about happens sales we problems, going slowdown some drop. could to of like But be companies to that we the we will the

to find And so waiting that's out. we're

Frank Schiraldi

you TCE then regulatory do okay. additional per doesn't value reduces book your tangible the AOCI, to just anything the ratio an and given share. which Right, of had size book, obviously, And [Indiscernible] mark but capital,

appetite your strictly all? is how you So, just buybacks How for all, it of look about And accounting just minds? think at impact do in at that your does that, you terms if guys that? wondering in at

Brett Pharr

ahead. go Glen,

Glen Herrick

at. regulators. driver look whole leverage keep we ongoing for is the they really to me both with antiquated, an weights eye balance our and our and capital capital, tangible are, tangible Sure. AOCI Regulatory the we have calculations that on the sheet. We risk discussions value don't capital,

You scheduled at the liquidity are on in billion balance sheet. a cost other think value We zero today deposit sit any sheet $X.X portfolios And you and things position, securities us. base by us have, that kicking off-balance of $XXX good have callable look of at our that really back of just of million almost off, feel both deposits time about our liquidity we we sides the then amortization. the at to year

really we our in that impacting see don't management anything So, or in operations it do we capital business outlook.

Frank Schiraldi

any Okay, just all that And the right. classified sort just all, wondering trend anything did of the the into in notice seeing commercial see lastly, line just in That's just then, that's in on you noise that finance fair. you you -- book, migration provide if color some movement terms book there? concerns you're of quarter, that substandard that at

Brett Pharr

we more a and risk we Yes, year in kind sensitive to Remember, disclosed rating bit ago, went modified our blips it through a approach. of cash is little we process flow. that

of and secure they're -- there's highly collateralized, have blip. very a much so had And transactions that flow in there couple but cash they

we And risk down. that so take strategy, following rating that

not debt any remind it unsecured in million I everybody a out there are if nothing material and have about secured so top highly continually head, that's but in like remember was off jump, case, substandard. think I my then lender it's we collateralized And there. we a there's $XX

Frank Schiraldi

Right, okay.

great. Okay, color. the Thanks all for

Brett Pharr

Thank you.

Operator

will time. back at now hand this you questions closing I over remarks. are for Brett no Pharr to There further

Brett Pharr

look soon. interest thank and to our to much. and appreciate again company your forward so talking I you you. listening in right. Thanks we Well, everybody today All Well,

Operator

fiscal That call. XXXX conference and concludes year quarter today's investors Pathward Financial fourth

line. may You your now disconnect

Pathward Financial (CASH) 28 Oct 222022 Q4 Earnings call transcript