ECN Capital Corp.

Thank you for standing by. This is the conference operator. Welcome to the ECN Capital fourth quarter 2023 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the meeting over to Mr. John Wimsatt. Please go ahead, Mr. Wimsatt.

Thank you, Gaylene. Good afternoon, everyone. First, I want to thank everyone for joining this call. Joining us today from the company are Steve Hudson, Chief Executive Officer, Michael Lepore, Chief Financial Officer, Jackie Weber, VP and Controller, Lance Hull, President of Triad Financial, Matt Heidelberg, Chief Operating Officer of Triad Financial, Hans Cross, founder and CEO of IFG, and Mike Optall, president of SourceOne. The news release summarizing these results was issued this afternoon, and the financial statements and MD&A for the three-month period ended December 31, 2023, and filed to CDAR. These documents are available on our website at www.ecncapitalcorp.com. Presentation slides to be referenced during the call are accessible in the webcast, as well as in PDF format under the presentation section of the company's website. Before we begin, I want to remind our listeners that some of the information we are sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. I'll refer you to the Cautionary Statements section of the MD&A for a description of such risks, uncertainties, and assumptions. Although management believes that the expectations reflected in these statements are reasonable, we can obviously give no assurance as any forward-looking statements will prove to be correct. You should note that the company's earnings release, financial statements, MD&A, and today's call include references to a number of non-IFRS measures, which we believe help to present the company and its operations in ways that are useful to investors. A reconciliation of these non-IFRS measures to IFRS measures can be found in our MD&A. With these introductory remarks complete, I will now turn the call over to Steven Hudson, Chief Executive Officer.

Thanks, John. Turning to slide six, a few comments before we begin the formal slide review. 2023 was a difficult year for ECN. On a personal note, it was even a more painful year for me. Tough decisions have been made to place ECN in a strong foundation for 2024 growth and beyond. Turning to the content on slide 26, the strategic review, concluding in our strategic partnership with Skyline was successful. The cost implemented were higher than anticipated, but I know we've ended up with a phenomenal partnership with Skyline Champion. Land home challenges were worse than we anticipated as late as Q3 23. I'll speak to those specifically in a minute and the solution. Funding, although ECN took moves to measure, to diversify its funding prior to 23, bank and credit unions pulled back even more than anticipated resulting in an elevated balance sheet and the use of lower margin institutional investor money. While bank and credit unions have returned in 2024, we are pursuing a diversified fund strategy to renew our growth. And finally, on the origination front, economic uncertainty resulted in slower originations in 23, but we've seen a meaningful rebound late in 24 and early 25. Turning to slide seven, As I mentioned, we've completed our strategic review and our partnership with Skyline. It's gone better than I expected. Champion Financing launched its first component. The floor plan initiative was successfully launched at the Louisville Show in early 24 to great results. We've just launched in the last three days the Champion Financing retail component at the Biloxi Show. We've also completed our RV Marine strategic review and determined the best path to maximize shareholder value is to continue to execute on the significant growth in front of both Source 1 and IFG. We have significant funding in place for both of those businesses. We have improving originations, strong industry uptick, and we're building out a servicing platform, which I'll speak to in a second, very much like we did at Service Finance and Triad to maximize value. Turning to slide eight, the last component of our strategic review was to successfully complete the sale of Red Oak. That was accomplished by Michael Lepore, by Keith Lamb, and by our Chief Credit Officer, Algis Veltalos. It resulted in proceeds of $153 million, and we sold that book. All of that capital was applied to reducing the senior credit facility. Expense reduction and corporate simplification has proceeded. Assets, corporate assets were sold, real estate footprint was right-sized, and significant reductions in senior management personnel, realizing a spent savings of $6 million. The corporate simplification plan is a component of our expanded Skyline partnership, which is under continued discussion. Turning to slide nine, we spent $40 million of shareholder capital, which is a very material amount, to accomplish three things. One, to streamline the company. Second, to sell assets and make the company far leaner. And third, to complete the sale of Red Oak and be able to deploy that capital in the growth of our two businesses. We believe that we're well positioned to grow in 2024. We see 2023 as a significant reset year. Turning to slide 10, Let me first start by recapping some of the challenges that we've experienced in Land Home, but more importantly, to outline the actions, the significant actions that have been taken to address these challenges. I won't recap the challenges, but on the left-hand side of the slide, the challenges, the spectrum ranged from having the right team in place, the correct process, robust systems, and appropriate pricing. If I flip to the other side of this page, on the right-hand side, would have been the seven-point action plan that ECN has assisted, but Lance Hall has shown leadership on. Obviously, the new management team with Lance Hall and James Berry joining Matt Heidelberg. We replaced the entire land home team with a stronger, more professional, and experienced platform and team. Process changes have been implemented to reduce turnaround times. not to dwell on the past, but in the past, it took a month to clear conditions on the land home financing. Today, that is two to three days. I know that Lance's objective is, in fact, shorter than that. On the pricing front, we've had significant rate increases, which have been implicated across the LH business, and Lance has established an internal rate committee that meets bimonthly to ensure that we're priced appropriately in the marketplace. We have a significant and robust dealer platform being finalized, which will digitate documents and streamline underwriting and monitoring. We've improved the funding pipeline with incremental funding capacity for 24. It's amazing in the space of 12 months we've gone from a significant change in funding to potentially being overfunded by a material margin of 24. And finally and not last, Chris Johnson, a very experienced executive, And Wall Street has joined us to head up capital markets, including the funding. His responsibilities include hedging. Turning to page 11 on the land home update, I won't spend a lot of time here just to say both charts are important. The left-hand side shows that we're now at market rates. Why we got where we did is part of our past. We've addressed that decisively. And the portfolio is now been reduced to amount that is immaterial with respect to exposure. I would note as a somewhat related point at today's board meeting, the compensation committee confirmed that the CEO and CFO are receiving no bonuses this year. In addition, salaries for the two of us were significantly reduced, in my case almost 50%. As well, the incentive compensation payments through PSUs were placed at zero. Turning to page 12, leadership team at Triad is, I think, industry leading. We've previously announced Lance Hall joining as the president of Triad. We're very happy with Lance's progress, in fact, from my personal perspective, ecstatic at what he's done in his first 200 days. We have James Berry joining as CFO. James is not a known name to people in this call, but James has worked beside me for 10 years at ECN Corporate. I consider him a very accomplished finance and treasury executive, and we love the fact that he has joined the team along with Matt Heidelberg, who drives the funding side. Turning to 13, a guy younger than me, Mike Optal. That's not saying a lot. Mike Optal has joined as head of Source One, 20-year executive in specialty finance. He's done a lot in a very short period of time. You'll see Mike speak to originations in funding. We're Happy to have Mike on team as one of our senior leaders. His handsome face isn't here, but Hans Cross has been with us over 200 days. Hans was the founder and CEO of IFG, very accomplished, and similarly, what was a tough 23 is turning into a great 24. Under Hans' leadership, he's also responsible for significant cost takeouts in his business. I want to thank all of you. On the corporate side, Michael Lepori, my partner of over a decade, is transitioning to strategic advisory role post Q1. Jackie Weber, who's been with us for five years as vice president controller, has been appointed to CFO. Happy for both of you. John Wimsatt, who's been a partner for two decades, is transitioning to strategic advisory to myself. He'll be focused on future M&A and funding. He'll assist me in an orderly transition of the IR function. And as I mentioned earlier, Chris Johnson has been hired as Senior Vice President, Capital Markets, in charge of our funding, as well as our hedging across our businesses. Turn to page 16. I don't want to dwell on this. In fact, Lance and Mike and Hans will do a better job speaking to all of this. Other than say, you know, the fourth quarter was not a financial result that we're pleased not anywhere near pleased about, but it did mark the turnaround operationally for the businesses with respect to increased originations, increased liquidity, and I know we're about to turn the page. With that, Lance, I'm going to pass it to you.