Regional Managment ((RM)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Regional Management Corp. painted a picture of a company experiencing a strong start to the year, marked by record originations and successful branch expansions. The sentiment was largely positive, with the company expressing optimism about meeting its growth and income targets for 2025, despite facing challenges such as increased expenses and economic uncertainties.
Strong Start to 2025
Regional Management Corp. reported a net income of $7 million and $0.70 in diluted EPS for the first quarter, aligning with their guidance. The company achieved record first-quarter originations while maintaining a tightened credit box, and ending net receivables rose by 8% year-over-year, marking the fastest growth rate since 2023.
Successful Branch Expansion
In September 2024, the company opened 15 new branches, with 10 in new markets. These branches have been performing well, generating $1.5 million in revenue against $1.1 million in G&A expenses. This expansion underscores the effectiveness of the branch-based model in driving growth.
Barbell Strategy Success
The company’s barbell strategy has shown success, with the auto-secured loan portfolio growing by 37% year-over-year and the small loan portfolio with APRs above 36% increasing by 21%. These portfolios have performed well, supporting the customer graduation strategy.
Record Revenue Achieved
The loan portfolio generated a record $153 million in revenue for the quarter, up 7% from the prior year period. Since 2020, total capital generation has reached $339 million, averaging an annual capital generation of 21% as a percentage of stockholder’s equity.
Positive Credit Performance
The company reported a 30-plus-day delinquency rate of 7.1%, flat year-over-year, and net credit losses were $1.6 million better than guidance. The front book now constitutes 92% of the portfolio and is performing well.
Lower Income Compared to Prior Year
Net income for the first quarter of 2025 was lower than the first quarter of 2024 due to the benefit of a special loan sale in the prior year.
Increased Expenses
G&A expenses rose to $66 million in the first quarter, $5.6 million higher than the previous year, driven by incentive expenses and investments in growth, including new branch openings and marketing expenses.
Economic Uncertainty
The company highlighted concerns about the macroeconomic environment, particularly tariffs and potential economic downturns, as factors that could impact future performance.
Higher Interest Expenses Expected
Interest expenses are anticipated to rise as lower fixed-rate funding matures and growth continues using variable-rate debt.
Forward-Looking Guidance
Regional Management Corp. remains optimistic about achieving a minimum of 10% portfolio growth in 2025. The company plans to leverage its branch-based model and a tightened credit box while navigating potential economic challenges. Despite macroeconomic uncertainties, they maintain a 10.5% allowance for credit loss reserve rate and reported an annualized net credit loss rate of 12.4%, which was 120 basis points better than the prior year after adjustments.
In conclusion, Regional Management Corp.’s earnings call reflected a positive sentiment with a strong start to 2025, driven by record originations and successful branch expansion. While challenges such as increased expenses and economic uncertainties persist, the company remains optimistic about achieving its growth targets for the year.