Sign in

You're signed outSign in or to get full access.

RM

Regional Management Corp. (RM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record total revenue ($157.4M) and EPS of $1.03, with improving credit metrics and an all‑time best operating expense ratio (13.2%) .
  • Results materially outperformed S&P Global consensus: EPS beat by ~$0.31 (actual $1.03 vs $0.716*), and revenue beat by ~$2.2M (actual $157.4M vs $155.2M*) — driven by record originations ($510.3M) and portfolio growth .
  • Management issued new guidance: Q3 2025 net income ~$14.5M; FY 2025 net income range $42–$45M; reiterated minimum 10% receivables growth for 2025 .
  • Credit quality improved: 30+ day delinquency fell to 6.6% (–50 bps QoQ; –30 bps YoY) and net credit loss rate to 11.9% (–50 bps QoQ; –80 bps YoY), aided by tightened underwriting and mix management; hurricane‑related losses added ~40 bps to NCL .
  • Capital return continues: $0.30 dividend declared for Q3 and 165K shares repurchased at $30.36 average during Q2; book value per share rose to $36.43 .

Note: * denotes S&P Global consensus data.

What Went Well and What Went Wrong

  • What Went Well

    • Record revenue ($157.4M) and record originations ($510.3M) on strong digital, auto‑secured, and new‑branch contributions .
    • Operating leverage: operating expense ratio improved to 13.2% (all‑time best) as revenue growth outpaced G&A by >5x; diluted EPS $1.03 rose ~20% YoY .
    • CEO on execution and strategy: “record originations and revenue, improving credit performance, [and] an all‑time best operating expense ratio” with 17 new branches opened and analytics tools rolling out .

  • What Went Wrong

    • Provision rose YoY with growth: provision for credit losses increased to $60.6M (+$6.8M YoY) as the company reserved up‑front under CECL to support receivables growth .
    • Small‑loan delinquency ticked higher YoY (9.6%, +50 bps) reflecting higher‑margin mix; management balanced with higher‑quality auto‑secured growth (auto 12.5% of portfolio) .
    • Funding costs trending up: interest expense rose to $20.4M, and management noted securitizations maturing at low rates will reset higher even if Fed cuts occur (84% fixed; WAC 4.5%) .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Cons.
Total Revenue ($M)143.0 153.0 157.4 155.2*
Diluted EPS ($)0.86 0.70 1.03 0.716*
Provision for Credit Losses ($M)53.8 58.0 60.6 —
Interest Expense ($M)17.9 19.8 20.4 —
30+ Day Delinquency (%)6.9 7.1 6.6 —
Net Credit Loss Rate (%)12.7 12.4 11.9 —
Operating Expense Ratio (%)13.8 14.0 13.2 —
Total Revenue Yield (%)32.7 32.4 32.9 —
Originations ($M)426.1 392.1 510.3 —
  • EPS beat: $1.03 vs $0.716* (+$0.31); Revenue beat: $157.4M vs $155.2M* (+$2.2M).
  • Mix and Portfolio
    • Ending Net Finance Receivables ($B): $1.960 (Q2 25), +$70M QoQ; large loans $1.413B (72.1%), small loans $0.547B (27.9%); auto‑secured $0.246B (12.5%) .
    • Book value per share: $36.43 (Q2 25) .
Portfolio MixQ2 2024Q2 2025
Large Loans ($B, % of portfolio)1.266, 71.4% 1.413, 72.1%
Small Loans ($B, % of portfolio)0.508, 28.6% 0.547, 27.9%
Auto‑Secured ($B, % of portfolio)0.179, 10.1% 0.246, 12.5%

Note: * denotes S&P Global consensus data. Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net IncomeQ3 2025—~$14.5M New
ENR GrowthQ3 2025—~$55–$60M New
ANR GrowthQ3 2025—~$75M New
Total Revenue YieldQ3 2025—~32.8% New
Net Credit Losses / RateQ3 2025—~$51M / ~10.3% New
Allowance for Credit Loss RateQ3 2025—~10.3% New
G&A ExpenseQ3 2025—~$65–$66M New
Interest ExpenseQ3 2025—~$22M New
Effective Tax RateQ3 2025—~24.5% (pre‑discrete) New
Net IncomeFY 2025Not previously quantified (commitment to higher net income YoY) $42–$45M Introduced numeric range
Receivables GrowthFY 2025Minimum 10% growth Minimum 10% growth (reaffirmed) Maintained
DividendQ3 2025$0.30 (Q1/Q2) $0.30 declared Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q‑2)Q1 2025 (Q‑1)Q2 2025 (Current)Trend
Technology/Analytics (ML underwriting; CLV models)Investing in data/tech; improving yields and efficiency Record Q1 originations with tight credit; tech investment continues Rolling out new branch origination platform; ML models for underwriting and marketing scaling over next 18 months Acceleration in deployment
Barbell mix (auto‑secured + small loans)Leaning into auto‑secured; balance higher‑margin small loans Barbell driving growth; front‑book outperforming back‑book Auto‑secured up 37% YoY (13% of portfolio); small loans high‑margin with modestly higher delinquency Continued, with improved credit
Macro/tariffs/cost of fundsCECL growth drag; funding cost management; 79% fixed debt Unused capacity high; WAC 4.4% fixed; ABS at 5.3% 84% fixed; WAC 4.5%; securitizations set to reset higher even with rate cuts Cost of funds gradually rising
Credit performanceNet credit loss rate improving; front‑book stronger DQ improved 60 bps QoQ; front book 6.8% 30+ DQ DQ 6.6%; NCL 11.9%; hurricane losses added ~40 bps Improving YoY; seasonal dynamics persist
Branch expansion4 new branches in Q4; plan +8 in Q1 Opened 10 branches in Q1 17 new since Sept. 2024; expect +5–10 more in coming months; consolidate 8–10 branches for efficiency Network optimization & expansion

Management Commentary

  • “We delivered a very strong second quarter, marked by record originations and revenue, improving credit performance, an all‑time best operating expense ratio… diluted EPS reached $1.03.” — CEO Robert Beck .
  • “Auto‑secured loan portfolio grew by $66M (37% YoY)… machine learning branch underwriting model starting in the third quarter… roll out across our network.” — CEO Robert Beck .
  • “Q3 outlook: net income ~$14.5M; revenue yield ~32.8%; NCL ~$51M/~10.3%; G&A ~$65–66M; interest expense ~$22M; ETR ~24.5%.” — CFO Harp Rana .

Q&A Highlights

  • Guidance philosophy and conservatism: Q2 outperformed guidance due to stronger demand and expense discipline; full‑year range reflects growth/CECL trade‑off and tariff uncertainty .
  • Yields and pricing vs rate cuts: Pricing set by risk/competition; cost of funds managed tightly, but fixed ABS will reset higher as low‑coupon deals mature even if rates fall .
  • Originations mix: Large loans accelerated (digital + auto‑secured); small loans slower; expectation that >36% APR share may decline as % of portfolio over time .
  • Digital and branch productivity: Digital partners and new branches contributed materially; receivables per newer stores in newer states can exceed legacy averages .
  • Expense actions: Branch consolidations (8–10) and corporate restructuring to streamline processes; expected G&A savings of ~$2.3M annualized .

Estimates Context

  • Q2 2025 vs S&P Global consensus: EPS $1.03 vs $0.716* (beat by ~$0.31); total revenue $157.4M vs $155.2M* (beat by ~$2.2M) .
  • Forward consensus (S&P Global): Q3 2025 EPS 1.432*, revenue $162.8M*; Q4 2025 EPS 1.274*, revenue $167.9M*; management’s Q3 net income guide (~$14.5M) implies EPS roughly mid‑$1.40s (consistent with analyst math on the call) .
  • Implications: Estimate revisions likely move higher post‑print given operating leverage, clearer Q3 outlook, and credit improvement.

Note: * denotes S&P Global consensus data. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Clear beat on EPS and revenue with improving credit and best‑ever expense ratio — a quality beat driven by volume, mix, and operating leverage .
  • Q3 guide is constructive (EPS implied mid‑$1.40s; YE allowance steady at ~10.3%), suggesting continued bottom‑line momentum absent macro shocks .
  • Mix strategy working: auto‑secured expansion (12.5% of portfolio) offsets small‑loan risk while preserving margins; delinquency and NCL trends are favorable .
  • Funding cost creep is the primary watch‑item; securitizations will refi at higher coupons even if policy rates decline, though 84% fixed and ABS access help manage pacing .
  • Execution catalysts: continued branch rollout and analytics/ML deployments should support originations productivity and Opex efficiency over the next 12–18 months .
  • Capital returns intact (dividend + buybacks) with rising book value ($36.43), offering downside support while growth resumes .
  • Near‑term trading lens: Positive reaction supported by beat/guide; monitor small‑loan delinquency, hurricane loss noise, and any tariff/macro headlines referenced by management .