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spk05: and today's call include references to 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. All figures are presented in U.S. dollars unless explicitly noted. With these remarks, I will now turn the call over to our CEO, Steve Hudson.
spk01: Thanks, Kathy, and good evening. I believe everyone has seen five or six in the past, but let me just make a comment on the bottom of slide six if I can, which is ECN is the only source at scale of approximately $3 billion per annum in attractive consumer and credit assets with very strong risk-adjusted returns. They are of interest to numerous investors, and we'll speak to that in a moment. Turning to slide seven, I'm pleased to report flat earnings per share in the first quarter, which compares favorably to our previously provided quarterly guidance of a $0.01 to $0.02 loss. I'd like to highlight three things, both with respect to manufactured housing and RV and marine. Regarding manufactured housing, Q1, over $300 million, was Lance's largest Q1 in triad history. Great result. Second point I would draw to is the improved origination revenue margin went from 3.9% in the fourth quarter to 5.2% in Q1, and we're tracking to rates approximately 6% through the latter part of the year. And there is no fair value adjustments in the quarter. Third, we're overfunded in 24. Banks and credit unions are increasing commitments, and we have extended and expanded agreements with our existing institutional investors. Turning to RV Marine, at 166 million of originations. Source one was up 5% year over year. IFG was actually down a bit, but that was due to a couple large transactions in March of 23. If you look to the run rate, they were up January and February at 4% growth. And as both presidents, all three presidents, will speak to in a second, their Q2 results are indicating even stronger acceleration in growth. Second, we're executing on, Mike and Hans are executing on two take-share strategies, specifically expanding the geographic footprint and further dealer presentation. And like Triad, they are overfunded for 24. Turning to slide 8, pleased to announce Cathy's promotion to include senior responsibility for IR. Cathy is a seasoned financial service executive and a member of ECN's senior management team for the past seven years. I'd like to highlight two other announcements which add additional senior bench strength ECM. On page 9, announcing Mike McCauley has joined Triad as General Counsel. Mike has over 18 years of senior experience in the U.S. mortgage industry. As well, he served at the financial ombudsman for the state of New Jersey. We're happy to have Mike on board. As well, Joe O'Brien is joining as Chief Operating Officer at Source One. Joe has over 22 years of senior experience in U.S. and consumer and specialty finance. These three additions add significant strength and underpin the growth of our businesses. With that, I'm going to pass to Lance.
spk04: Well, thank you, Steve. And as Steve said, we're excited about the first quarter that we had. It was the largest Q1 in triad history. And while we're celebrating with the team right now, we're not resting because we do have an accelerating growth path for the remainder of the year. It and our commitment is to achieve this committed path for the remainder of 2024. I want to point you to just four points on this slide, number 12. First of all, while we were at 6% year-over-year in Q1 originations, I want to really focus on the originations growth in chattel at 17% year-over-year. Our business is segmented into three primary areas, chattel, land, home, and communities. The rebounding of land, home, and communities is a little slower than the chattel business. The fact that our chattel originations growth is ahead of plan has enabled us to achieve the results we did this quarter. Secondly, Steve mentioned it, but I think it's worth repeating that we had no fair value adjustment in Q1, as we believe the portfolio is now conservatively marked. The third thing I'd like to highlight is, again, the $350 million reduction in the held for trading asset portfolio. We had a very tremendous opportunity and moved that $350 million through the sales process in Q1, dramatically lowering the balance sheet. And then lastly, very important to note that our funding capacity is actually in an overfunded status. We have $2.3 billion worth of capacity now. Our banks and credit unions have rebounded sharply from last year. They're more than double. where we were last year, and we signed a new Blackstone agreement in Q1, expanded that agreement, and we have a rental funding program that we actually will announce a little bit later this month. And with that, I'll turn it over to COO Matt Heidelberg.
spk02: Thank you, Lance. I'm going to start on page 13, walk through a few of the trends that we're seeing in the business for the next few slides. Originations, like Lance said, were up 6% overall. But you all know that's just part of the story. Product mix matters. Lance also highlighted the core chattel products up 17% year over year, which is ahead of pace for us to start out. Lance is going to speak more to land home later. But the material improvements that we've made in this division is going to lead to significantly more growth in the second half. You'll also see rental growing $25 million year over year. and silver and bronze, which are going to be benefiting from that expanded agreement with that signed agreement as well as a few more that we have coming. This is giving us an opportunity to further accelerate these products, which is going to be part of the growth story for us for the remainder of the year. Moving to slide 14, approvals are up 2% in units overall and 6% in dollars for the first quarter. Within this number, we see core also up 2%, but silver and bronze increasing over 50% each. One additional thing I wanted to remind people, the approval numbers are really just focused on our consumer loans, but the growth ahead for our commercial loans, in particular rental, is not represented in these numbers. How the industry is doing on page 15, The industry began the year as we expected with shipments up 15% year-over-year. We continue to remain very positive on the industry and see it benefiting from long-term tailwinds as it is an ideal solution to satisfy the affordable housing demand. To move back to our loans on page 16, Triad's average loan rates are back near highs relative to market rates as seen in the graphs on this page. This premium is benefiting our partners' returns and driving more demand for triad loans. The other factor impacting returns for our partners, moving to slide 17, would be our loan performance. You can see in the graph to the right that performance continues to stay well within expectations. Our partners are quite happy with the returns they're earning. To give you a quick update on our commercial business on page 18, I want to shift you to start focusing on our total balance. That's $426 million. That's up quarter over quarter and year over year. We see this number as more relevant now as we continue to sell service commercial loans. Our floor plan flow portfolio is performing exceptionally well for our partners. And we see rental growth accelerating meaningfully as we convert this to a flow program in the second quarter. With that, I'm going to hand it back to Lance.
spk04: Thanks, Matt. Turning to slide 19, just a quick update on our land home progress. In my first 10 months at Triad, much of my time in operations has been spent in the areas surrounding land home. During that time, I had two primary focuses. One was the reduction of risk in the portfolio and two was a very solid plan for growth. In order for us to address the risk, we had to get to a point of having higher loan rates and we had to improve our funding cycle times. And while we got some help from the industry as backlogs have normalized, we also have strengthened our systems and our people and our processes that have enabled us to cut our funding times dramatically. As you can see in the graphs down towards the bottom of the page, our land home rates have increased steadily over 2023, now up more than 300 basis points since the low mark in 23. And our construction portfolio is down by more than 100 million, which has put us in a much more efficient position of capital. And lastly, it's very nice to note that we also have an additional partner to fund our land home loans. It's now committed an additional $100 million in funding capacity for land homes. So we're in a very strong position for growth going forward, and we do believe that the land home rebound is well underway. Switching to slide 20, just a quick update on the Champion Financing Update. We had a very successful launch of the program that we talked about last quarter at the Louisville Show in Kentucky. earlier this year. That resulted in what you see at the graph at the bottom is a strong interest in our floor plan programs where we have nearly $170 million worth of credit lines now in process. As a reminder, that floor plan income is not the only benefit to this partnership with Skyline Champion, but we also know that for every dollar of floor plan business that we get, it will translate into $3 of retail funding. And so much of that funding will also be flowing into the partnership with Champion Financing. Perhaps the most important thing on this slide, however, though, is the note down at the bottom referencing the National Retail Loan Program. We were very excited that Skyline Champion and Triad have partnered to announce a retail loan program through all of their stores that provides customers some of the very best rates that Triad has with discounted rates that are going to drive more traffic and help us again to grow the activity level in this partnership. On slide 21, it's just a little bit of information about our originations history, and as we have done in the past, I'll leave that with you. And with that, I'll turn it back to Steve.
spk01: Thanks, Lance. Turning to slide 23, I'd like to introduce Mike Optal and Hans Cross in a second, but let me highlight a few things on these two slides. First and foremost, we've produced half a million dollars of income for the businesses, which is in line with management's forecast. As I mentioned, early originations are up 5%, source one, and adjusting for two large transactions in March last year, up 4% in January and February for IFG. We're not finished second quarter, but the growth rates in the mid part of the second quarter have accelerated significantly over those levels for both these businesses. And finally, at the bottom of slide 23, As you know, Chris Johnson has joined our management team as Senior Vice President of Capital Markets. In addition to the hedging responsibilities and disciplines, Chris is also launching expanded initiatives that will look very similar to the funding arrangements we have in place for Triad for Source 1. Turning to slide 24, if you look at the Q1 originations, I think it's fair to say we've returned to pre-pandemic normalcy. And we have take share strategies which are gaining significant national share as well as dealer presentations, dealer penetrations, which I will now have Mike talk about.
spk03: Thank you, Steve. Good afternoon, everyone. Let's turn to slide 25. For over 25 years, Source 1 has originated contracts that focus on prime to super prime consumers with high value assets. As the graphs show, both Source 1 and our lending partners, RV and Marine Portfolios, continue to outperform automotive loans with a rate premium consistently over 2% and losses of 1 3rd to 1 6th that of Prime Auto. Moving on to the next page. What I'd like you to take away from this slide is that the future is very promising for the RV industry. Over 90 new campgrounds and more than 18,000 campsites are opening in the next three years. with an estimated 11 million potential new buyers in the next six years and over four million consumers annually aging into RV's key demographic. This ensures both demand and growth for years to come. Turning to slide 17. I'd like to focus on how SourceOne continues to execute the proven ECN playbook to successfully scale our business. We believe that the RV and marine origination model is 25 years behind automotive finance in terms of technology and efficiencies, and we are investing heavily to close that gap. We are now licensed in 48 states compared to the 13 states that Source 1 was operating in prior to ECN's acquisition. We continue to build out our sales team. In the first quarter, we entered the Pacific Northwest and Mid-Atlantic regions. and we look to enter the Northeast later this year. Additionally, we'll be doubling our presence in California and Texas in the coming months. While we currently capture approximately 2% of financed RV and marine originations, geographically, we are just getting started. We believe there's an opportunity to boost volume upwards of 50% this year alone through a combination of the expansion and incremental gains in our current dealerships. Moving on to slide 28. Let's take a look at our accomplishments this past quarter. As Steve mentioned, quarter one originations were up 5% year over year, and early indications are that Q2 is going to be substantially higher. Our proprietary e-contracting capabilities have improved our capture rates. We are now entering peak season, and our inbound pipeline continues to grow. Keep in mind that while we have best-in-class technology, At our core, we are still a relationship lender, and the relationships with both our lending partners and our dealerships are incredibly hard to replicate. An example of the strength of these relationships was exhibited last month at the world's largest consumer RV show, where we had underwriters on site. This personal touch allowed us to capture 62% of our approved applications and double our monthly originations from this dealer group. Our investments have not been limited to technology, as we are fortunate to have Joseph O'Brien join SourceOne as COO. We are confident that with Joe's leadership and experience, the company's growth will be assured. I'll now turn it over to Hans to bring everyone up to speed on IFG's accomplishments and our cross-company initiatives.
spk00: Thanks, Mike. Please turn to slide 29. Consistent with the ECN's playbook, Michael and I have been working to identify and execute on cross-platform synergies. Some of those include IFG and Source 1 can access each other's funding, materially expanding the financing option for its customers. Two, Source 1 dealers are able to access IFG's best-in-class title department. For example, we did a test pilot at a subsidiary, Epic, that successfully secured 100 mortgages and titles. Finally, combining credit report accounts, which will result in a 30 percent cost savings. Turn to slide 30, please. IFG business update. As you can see in the origination volume chart on the right, 2004 year-to-date activity is trending positively based on total originations. We're seeing this trend continue into April with units financed up year over year. As you're aware, IFG originates loans through a diverse network. All channels are firing on all cylinders as we continue to add capabilities through our sales origination process. That said, we win our business through our people. Infrastructure and industry leading funding partner relationships. Our funding relationships have been built over 30 plus years. We offer a spectrum of solutions to our customers and are continually working to enhance and improve them. The source of funding provides us with virtually unlimited funding capacity. We're also investing in technology, which is displayed by a small acquisition of first approval source. Two key points on this deal. This will sharply reduce the time between origination and sale, maximizing profit per transaction. And number two, the acquisition brought 34 new dealer relationships that have been successfully integrated. And now I'll turn it over to Jackie.
spk07: Thank you, Hans. Turning to page 33 for our consolidated operating highlights. I think what the highlights demonstrate here is that we've turned a corner in Q1 with adjusted EBITDA of 21.8 million and adjusted operating income of 1.4 million, reflecting significant improvements from Q4. Adjusted operating income improved from a loss of 14.3 million in Q4 to positive adjusted operating income of 1.4 million in the current quarter. I would also add that there were no fair value provisions in the current quarter and our held for trading portfolio is conservatively marked. Adjusted net loss was 0.3 million or zero cents per share. Turning to page 34, I think our balance sheet highlights are also reflecting our commitments from Q4. Our total assets and debt decreased substantially in the first quarter as a result of the sale of red oak and pooled sales at Triad. We ended the first quarter with 400 million of capacity available on our senior line, and our businesses are fully funded for 2024. Turning to page 35, I think what this slide shows is that we're on track to deliver our 2024 business plan. Loan origination revenues of 19.8 million reflect a significant improvement in margin from Q4. The turnaround in adjusted operating income reflects both the improvements in revenue and in operating expenses. On page 36, year-over-year growth in business segment operating expenses reflect operational enhancements. Corporate operating expenses decreased to 2.8 million. And lastly, on page 37, Our held for trading portfolio decreased from $382 million at the end of 2023 to $227 million at the end of Q1, in line with our forecast provided in Q4. As I mentioned earlier, the on-balance sheet portfolio is conservatively marked, and our exposure is hedged moving forward. I'll turn it back to Steve for his closing remarks.
spk01: Thank you, Jackie. Let me highlight five items on slide 39. Based upon our return to historical origination revenue margins, we recorded 5.2% in Q1, up significantly over the 3.9% in the fourth quarter, and a target of 6% for Q2, 3, and 4 on average. As well as the increased servicing revenue, we're reconfirming our 24 guidance of 10 to 16 cents. However, I would focus you on the higher end of that range, given the results of this quarter. Second, there are no fair value adjustments in Q1, nor expected for the remaining part of 2024. We have conservatively marked our book and have effective hedging in place going forward. Three, land home processes, systems, and personnel under Lance Hull's leadership have entirely improved. And in H2, we will return to growth in the LH business line. Funding capacity has significantly improved. In fact, we are overfunded. And finally, MH triads Q1 originations of over $300 million represent a strong start to the year, as well as the $165 million at RRB Marine Business. The business is in good shape. With that, operator, we'll open the call to questions.
spk06: Thank you. We will now take analyst questions from the telephone lines. If you have a question, please press star then 1 on your telephone keypad. you will hear a tone acknowledging your request. If you are using a speakerphone, please lift your handset before pressing any keys. To withdraw your question, please press star then two. There will be a brief pause while the participants register for questions. Thank you for your patience. The first question is from Jamie Gloin from National Bank Financial. Please go ahead.
spk09: Yeah, thanks. Good afternoon. First question just around the triad business, the origination yield 5.2% improved, but I guess still below the sort of run rate range of 5.5% to 6%. Maybe just talk through some of the factors that were at play to keep it below. And then I think the comment was that it was going to trend towards 6% through this year. So is that kind of the high end that we would expect as we progress through 2024 that will be more in the sort of five to six percent range as opposed to five and a half, six and a half.
spk01: Yeah, Jim, I'm going to let Matt answer it, but I think in our last call I guided everyone to an average for the year of 5.5 to six. We are on track to that average. If anything, based upon Q1, I think we would be the high end of that average for 24. Matt?
spk02: Yeah, that's right. Hi, Jim. It's clearly a significant improvement than we had from the last quarter. In any court, it's going to come down to a bit of mix too. Last quarter, we really tried to highlight for you the different yields across the different products. At the end of the day, we're still very confident with the number that we put out for the complete year, which would include this quarter. So we're expecting to see that number continue to move up and hit that average for the year.
spk01: And finally, I think that, I don't think, the fact that we are overfunded brings pricing discipline to the table. It's taken us several years to establish this institutional asset with investors across the spectrum. And that overfunded position will provide pricing discipline as we go into the round of 24 and 25.
spk09: Okay, second question still on triad originations. Just looking at two data points here. First is originations on the quarter are tracking below the industry shipments. you know, give a comment on, uh, on, on, you know, that relationship. And then just looking at the trend, like March originations were lighter than, than a year ago, whereas January, February were plus. So was there anything going on in March this year? You know, does that suggest that we have a little bit of a weaker handoff on originations in the, into the Q2 period?
spk02: Hey, Jim, it's Matt again. No, you know, the first quarter is seasonally. It's always our slowest quarter for the year. We feel really good where we are. I mean, if I kind of take you back to the guidance we gave, I believe we boiled it down into like three buckets. It was a little, like a bit over a billion dollars in chattel, around $500 million in community, and a couple hundred million in land home. Chattel, you've heard from us, we feel really good about. You saw the growth rates that we had there in the first quarter with that demand and approval growth coming in really fast behind in that silver and bronze category. With those expanded agreements that we signed with our partners, that's giving us additional capacity there that's really giving us the opportunity to grow those channels even faster. In community, in a similar way, the rental program that we're going to be launching and turning into flow, we've been just sort of waiting for that partner to come around so we can really get that going. So we feel very strong about that growth as well. Community, I believe, was up about 170% in that first quarter. And then Land Home was, Lance touched on that before, with the improvements put in place there, that was gonna be a second half kind of story for us, but also the smallest bucket of the three.
spk09: Okay, understood. Last one on Triad for me, just... As you think about the funding risks that came through last year and hedging, noise we'll call it, in a scenario where the Fed hikes rates, what should we expect from the triad performance from financials?
spk01: The triad is hedged on its forward flow arrangements now, Jamie. By the way, I think you're being kind on noise. The reason that Chris Johnson here and his leadership and his substantial financial service experience in capital markets is that we now have a board-approved hedging policy, and each hedge position is approved by the board. So we feel good about either a rising or a decreasing rate environment. I know we aren't talking about rates coming down as quick, but either environment is fine for us.
spk09: Okay, I'll turn it over.
spk06: The next question is from Tom McKinnon from BMO. Please go ahead.
spk08: Yeah, thanks very much and good afternoon. Just a question with respect to the corporate segment and looking at that on page, what is it, on page 13 or page 16 of the MD&A, there's about a million in revenue here, and it seems to be from some legacy stuff. How should we be thinking of that? Is that kind of more of a one-off, or what's the trend for revenue in corporate? I don't believe there was anything in the guide for that, but maybe you can help me. Thanks.
spk07: Hi, Tom. It's Jackie. Corporate revenue, there's two components really built in there. One is we have some corporate investments that Those can trend up or down just a little bit because they're marked at fair value. So this quarter, there's a little bit of pickup there. There's also a little bit of FX that rolls into corporate revenue. So as the CAD weekend in Q1, you saw a little bit of FX revenue there as well. I wouldn't expect those amounts to grow or change materially throughout the year. They tend to just move up and down slightly.
spk08: So these would be legacy corporate investments? Is that correct? Just help us think about what we should have for revenues in this segment going forward.
spk07: I don't think of the old businesses as far as aircraft or rail legacy. These are more of fun type investments that we hold for purposes of gains.
spk08: And is there any How should we be thinking about that line going forward? Because it was up significantly.
spk01: I think the guidance, Tom, is to be plus or minus $500,000 from the million. I don't know what chunk is FX, but... Okay, that's fine.
spk08: And then, pardon me?
spk07: They tend to move a couple hundred thousand dollars each direction. It just happened to be up slightly this quarter.
spk08: Okay, so if it's plus or minus, is zero the best way to think of it going forward?
spk07: That's fair, Tom.
spk08: Okay, thanks. And then with respect to the, there seems to be some elevated transaction corporate development and strategic review costs that are below the line, still over $2 million. Granted, running half the level they were in December and the quarter ended then, but is there still ongoing strategic review here? What would these two million costs be related to?
spk07: So, Tom, the two million of transaction costs in Q1, there's a couple of different components there. I'd say the first was we did complete the acquisition of FAS in Q1. And then we do obviously look continuously at improvements for our businesses. And then the wrap-up of the strategic review as well.
spk08: Okay. And so going forward, we probably would anticipate that number to be lower as well?
spk07: Correct. It was down this quarter, and we expect it to be down going forward.
spk08: Okay. Those are my questions. Thanks.
spk06: As there are no further questions registered, this concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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