Marlin Business Services Corp. (NASDAQ:MRLN) Q2 2018 Earnings Conference Call Transcript

Aug 03, 2018 • 09:00 am ET


Marlin Business Services Corp. (NASDAQ:MRLN) Q2 2018 Earnings Conference Call Transcript


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Greetings, and welcome to Marlin Business Services Corp. Second Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen.

Lasse Glassen

Good morning, and thank you for joining us today for Marlin Business Services Corp.'s 2018 Second Quarter Results Conference Call.

On the call today is Jeff Hilzinger, President and Chief Executive Officer; Lou Maslowe, Senior Vice President and Chief Risk Officer; and Taylor Kamp, Senior Vice President and Chief Financial Officer.

(Forward-Looking Cautionary Statements)

With that, it's now my pleasure to turn the call over to Marlin's President and CEO, Jeff Hilzinger. Jeff?

Jeffrey A. Hilzinger

Thank you, Lasse. Good morning and thank you everyone for joining us to discuss our 2018 second quarter results. I will begin with an overview of the highlights from the second quarter along with our recent progress on the Marlin 2.0 strategy aimed at transforming our company from a micro-ticket equipment lessor into a broader provider of credit products and services to small businesses. Lou Maslowe, our Chief Risk Officer will comment on credit quality and Taylor Kamp, our Chief Financial Officer, will follow with additional details on our financial results and business outlook.

Once again, Marlin delivered a strong performance this past quarter, highlighted by solid origination volume, stable credit quality and excellent earnings growth. Excluding referral volume, total origination volume was $172.2 million for the quarter, compared with $155.5 million last year, resulting in a year-over-year increase of 11%.

Growth in the quarter was driven by continued traction in our direct origination channel which focuses on providing financing to our existing customers. During the quarter, direct origination volume increased to $36.3 million compared with $23.6 million last year resulting in a year-over-year increase of 54%.

In terms of originations by product type, we also enjoyed double-digit growth in both our equipment finance and working capital loan products. Also in the quarter, as part of Marlin's capital markets activities, we referred or sold $22.5 million of leases and loans. Due to these origination and capital markets activities, our net investments in leases and loans expanded to $963.1 million, up 12% from a year ago, and our total managed assets grew to approximately 1.1 billion, an increase of 18% from a year ago. Importantly, we remain keenly focused on maintaining our disciplined underwriting standards as evidenced by our portfolio performance, which remains stable and within expectations during the quarter.

Looking at our second quarter profitability, we reported GAAP earnings of $0.52 per diluted share, compared with $0.36 per diluted share for the second quarter last year. On a non-GAAP basis, we also reported earnings of $6.5 million or $0.52 per diluted share, compared with non-GAAP earnings of $4.8 million or $0.38 per diluted share a year ago. A reconciliation of non-GAAP to GAAP net income is available in the press release we published yesterday afternoon.

I'd now like to move to an update on our Marlin 2.0 business transformation initiatives. As