Front Yard Residential (RESI) 11 May 202020 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Front Yard Residential First Quarter 2020 Earnings Call. [Operator Instructions].

I would now like to hand today's conference over to Alysia Cherry, Head of Investor Relations. Please go ahead.

Thank you, Stephanie. you Earnings us Conference thank First Front and XXXX Quarter Call. morning, for for joining Yard's Good

Joining me Property on Executive Lowe, Officer; today's Financial call is Adams, Chief Vice George Senior President of Officer. Operations; Robin Miles and Ellison, Chief

we forward-looking may earnings our guide Investors through additional remarks our from light at risks with and the also of were slides company's statements, potential that including may and investors presentation the and frontyardresidential.com. statements available as well those risks the provide the I'd our like financial XX-Q today. in useful. company's of These could in as contain I'd uncertainties actual the other to comments inform find of differences these the statements COVID-XX performance some created financial measures. slide particularly that to website of SEC, the release everyone like the results, section describe certain These and forward-looking to company's non-GAAP pandemic. to information differ accompany also earnings We in today relating filed our to you We involve allocation filings nonhistorical the future our information. cause Form discussed discuss the ongoing materially may may business, results to capital

and can presentation website. located these information to Investors measures, release of on our find our earnings earnings additional GAAP in You including a within reconciliation section the

over to call Ellison, the George? turn now Executive I'll George Chief Officer.

to you again. It's Thanks, Alysia. of Good morning, be speaking all good with everyone.

the our you. go listening are your this successfully family, your you that at Yard of I terrible virus you prayers us friends, personally touched weathering here or or of All to and has family hope out the storm. If Front safe those

let's into call. Now get today's

with been Amherst as of agreement Yard's you know, terminated. has most merger First, Front

look the like does about what's all of Residential the go Front this, important now. is what appreciate, didn't why you I will But really ultimately Yard deal details can't into As close.

As features. Two, with $XX Amherst has to SFR to stock million our distinct speaks Front Front settlement Yard. Yard space, $XX.XX announcement and stake Front continued Front issuing Yard's new X represents X.X% paid X.X Amherst business model commitment Amherst at and to to the Yard This of team. Amherst. One, is detailed, a specifically roughly management the the in million shares

rental at for the their both We effort. other diligence each lot presents all process, due marketplace, very learned a a in when sides opportunity hard I from think Amherst itself. and need old homes, stakeholders. new we returns excellent providing realize What market to while to equity. that message And stronger focused best practices. the last, sends with told, dependence in and revolving million will of markets fees million, unsecured be sheet, year that no capital time the balance credit down clear liquidity majority to single-family any Amherst providing pricing. roughly is a attractive at a $XX this lenders in $XXX very facility additional This that our ever families remain that rent continuing we that to committed and than of no serve drawn to opportunity RESI All a play with on an prefer provides offense thank two productive the in terms It the the transaction and team to with and have shareholders and are and our was work is on strong

the families the safety to and priority employees be top pandemic. ongoing the course, our of continues Of during

we resolve face And team operational Although we in for thank as demonstrated And have experienced our efforts. operating crisis. incredible this the has the challenges recent of peers, the results our this, same them. our reflect

metrics. on on be call performance those call, the low for quarter, results fourth earnings the the quarter but point an would that our do third we didn't we Obviously, predicted

share. per recall, you would quarter indeed, If the of better that did. would FFO third the and XQ $X.XX be it approximate fourth quarter XXXX We core and predicted showed

and would predicted better also XXXX be to ever. strongest QX that still, pleased we're report our quarter We operational

So highlights. NOI, $XX revenue, let's from up quarter. up X X% previous $X.XX FFO the Stabilized over of double rental share, rental more look NOI quarter. turn per Rental XX%. the and million, at X%. to core the in Page Stabilized Core than margin, last

significantly metrics, You can balance proceeds sheet see from the the quarter-end our were which strengthened settlement. by

And quarter. stabilized Our leave demonstrate the details but business. lease stabilized our numbers April X.X%. X.X% in I'll resilience best our strong XX%, growth was Stabilized was the to rental strong to the of rent Miles, a percentage and turnover, continue be ever.

a here, NOI discuss, will core margin very Page company Excellent improve. There's snapshot. X, Miles? is to strong numbers Miles rent collections all and growth and continues strong, occupancy, results. lot of our but as are

steps suspending became of impact pandemic limit Thank is interaction with to safety our you, daily and resulted social spread COVID-XX and maintain from Resident steps everyone. to in to our of our perform tasks. changes necessary nonemergency morning, prospects work, George, the the apparent, residents maintenance we employee interact the residents. where and team took working employees virus. paramount. has home, our including how measures included many the These and the business, safety to good we of our closing significant well-being When certainly to the and help the offices, prevent and

to world and the Our team continued changed well has normal, of two have fundamentals new business in our while quite the past has steadily the over improve. much our to adapted months,

considerable our we've all an Further, the by efficient, We've we've beyond performance operational challenges our our performance to key able portfolio. progress very in the maximize I excited despite the mentioned, quarter in the X been our improvements over the in of to made of the continue to long-term operations I'm progress the our platform team scalable as first past pandemic. build of to presented particular. and and on quarter, months discuss made this initiatives

expense. and of the platform, onto As from collections a reminder, we challenges our discussed maintenance our call, transition during homes last occupancy, operating that and repairs earnings primary resulted X elevated

matters Last me heard and of markets, our our have X portfolio. Once through talking biggest of Texas across about been and these number our backlog of concerns available an We've you in on We has strong Tennessee. to significant the initiative stabilize the year, all made homes of lease significant with these progress platform entire leasing particular worked homes turn, demand across in occupancy markets. incredibly increased our team for turn the our of issues.

Our since occupancy has increased September. substantially

Stabilized at XX.X%, XX. largely up April March, occupancy were our to improvement markets. improve occupancy metrics you me of XX% of Each XX, from a XX.X% continue September by XX.X% of and Let gains to at numbers. Texas with give these driven leased March the These to by end XX. at few rose respectively, in XX.X% and physical Tennessee

Nashville March, to of to occupancy Texas improving XX.X%, XX.X% markets In from September XX.X%, up in Texas, DFW the showed XX.X%, from and to April. from grew from From with to each continued improved grew XX.X% improvement XX.X% to XX.X%. Memphis occupancy Houston XX.X%

Midwest Additionally, at grew points incredible our basis we Midwest XX.X% strong to gains XX.X%, XXX points of achieved St. XX.X%, market, our in and Louis to very markets. way the occupancy March. the basis X,XXX end Indianapolis, all of an two from largest key in grew

of month at In own homes. leased XXX reached we stabilized end, fact, of have more we April occupancy where every least than market as XX% in a

our occupancy, not we did rate sacrifice While grew we rental growth.

growth Blended growth during growth of accelerated comprised renewal X.X%. re-lease growth X.X% growth remained Our X.X% rent to X.X% blended in was renewal rent April, further X.X%. strong of of comprised QX of to X.X%, and while rent re-lease rental of and rent improved rent of growth rate

tours to mitigate taken pandemic steps COVID-XX we've use our homes. of increased including business, its and shores, unassisted reached the virtual Since our on impact of

So and historical April received applications May May. for versus our up seen demand average. and far, per our April homes increase home and a marketed are in we've Total in into applications

consider and space we safety these their believe particularly meet family's that those positioned prospects As is trying needs during needs. times, well to SFR for

our occurred of the our during quarter that expectations for cycle the line were from with transfer previously of We in homes disruption improved external were and the with March. collection of as discussed the portfolio Collections managers. long-term

proud tirelessly key XXXX. date. the month, the to metric terminal I'm first very rates collection rates. worked in to We quarter effort here. is progress collection team needed make Our to of our XX-day and the our in made drive improvement stabilized resulting each achieve continual This team of October best our

progress resulted in on and collections line steady QX. a in This pace for with continued our targets

progress portfolio's roll our of positioned here, challenges is resulting rent a As the the COVID-XX. team's for well result from

country's the exceeded economy for of Although and average demands with our rates late we current at assessment remain even strong, fees XX the rates collection our suspended facing day headwinds April. historical collection of XX% and April, in

April X. right collections While May day in collection it X, early, is XXX% and line in were rates day through of were with historical averages through

expense and revenue key of turnover. area both unit our improvement, impacts which reducing Another is

as and quarter March occupancy We to month normal turn in in turnover turnover quite have was of X.X%. well near-term COVID-XX. With than physical improved, lease related lower at due of low rates for costs April the even largest improvement collections, though will the near in The both concerns X.X%. our at the expirations, month retention will the remained was remain This term. benefit believe to low

orders increasing from to scheduling discussed exciting maintenance expense. improvement teams. call, and that work of optimization, efficiency for that performance We our discussed we technology route last resulted of improve our During in control in-house also the our R&M

to markets meet of and during in-house of the approximately teams QX XX% skilled performance goals seen of combination our added of staff our orders. increase in volume of in-house also bandwidth route we've over the and to work We maintenance optimization, Through orders technicians sufficient XXXX. additional of certain performance fourth work an quarter a achieve of to in

the and we of XX% orders work COVID-XX, of nonemergency performing As in-house. due work orders our of February suspension to were to prior

R&M total volume efficiency, QX and X.X% sequential by sequential basis, turn a to result on QX. a by basis. per the R&M work even quarterly increased by of Overall, declined a though quarterly declined order costs As on home X.X% increased X.X% from

long-term XX. March. expectations line our of X, X.X%. as quarter, April average our recap. end metrics Stabilized to improve to April let's of in March, XX.X% quarter XX. March at a low collections. during Each for for is in incredibly XXX% collection at for our rates April historical portfolio at for were homes. April leased at and quarter May X.X%. XX. of Demand up low XX% Blended collection And of the turnover our April the XX% X.X% robust well were these of April in rates for strong rent remains Turnover XX.X% XX.X% of the remains with XX growth at at at rise coming in to X.X% September at is from physical remained as were Collections with day had day the improved through continued So with and the occupancy at April on XX.X% strong occupancy

first improvement we summary, well. sustained reflected have our The operations since focus performing transition the key In are quarter significant our all the year, areas. significantly and of of of company in and matured last

work additional excited am we going never during satisfied, with I forward. pleased about can and the remains, and progress team what this quarter are we the achieve Although made

call Robin. to I will the over turn now

morning, strong Miles, the quarter, portfolio. touch quarter. rental GAAP core the has the will of up an reflecting everyone. was $X.XX prior FFO XX%, loss last net cover update sequentially performance quarter. for up very Thanks, was was XX% provide stabilized financial over and our the XX.X% activity Rental from sheet million, share, an revenue and good Today, on million, margin for of last over quarter discussed. the increase our $XX.X the on and that an quarter, per Miles was improvement the balance $X.XX $XX.X Core operating X.X% results NOI I in

expect years. at we to expense about million see was around that saving rate of maturity capital balance sheet. to financing $X first a the Approximately rates of And The In either interest average an in debt expense the million reduction XX% seeing weighted due or is remain $XXX,XXX. meaning interest was we quarter, the $XXX the recent if to benefit quarter. the current X.X floating, of time second Turning our to are reductions. our levels,

first the of quarter, Regarding reported unrestricted $XX.X liquidity, million at we of the end cash.

on merger of termination received May agreement, part or we be will before Amherst, from of $XX As $XX the cash purchase fee million plus a million stock XX. due the already adding from

industry, position any under a In of have this We access but addition, weather to note in credit of us potential take short-term $XX agreement. strong challenges promissory we a believe any to attractive unsecured our revolving to million potential opportunities. only puts the not also acquisition in further advantage

the and Furthermore, responsible this to current our taken Board uncertainties operating until prudent decision suspend We dividend measure has further the the environment. the in a given believe is notice. that

a with During carrying proceeds criteria. approximately fit million, the not noncore million of value. a quarter, we homes approximately that were sales $X.X gain $XX.X of sold rental did XX Net our GAAP

home Finally, we key a on support XX, valuation Slide portfolio. details price investment believe provide appreciation by we of for provides of and XX cost and baseline our that markets

I'll the call to now turn back George.

Thanks, Rob.

We it's interesting review. of a as competition many met during months. platform. XX our own learned properties an the So with our onto great transition been about finished We of deal strategic us them our XX,XXX

social we've result, investment a sheet. advantage and the As for to business our weather of the but homes continued for tremendous a opportunities our model. strengthened residents or at well turned the In what as more of I'd for ourselves and particularly held of living our distancing, thesis. will we things enormous and continue And through, strong The rental with one And opportunity year existing is than business This lack grow. single-family of bankers at desiring we got Deutsche supply the new market. was to summer, homes during resilient now just around. find business demand available balance strong an a as operating strong been commitment stronger. the Board indications all to last settlement, investment thank already case increased Gotshal. stumbled significantly as storm, our stronger the not body of Bank, housing Weil, for already for will promised, With best housing results, our even early up, like more sheet our tremendous it keep demand team are bit last all that we rental work some families before, balance this as positives but single-family still degree workforce we of of space, wanted with rental single-family take who to short, predicted the construction, Directors

now I'll up call open questions. to the Stephanie?

is with [Operator Instructions]. line of the And Harter from Douglas question your first Suisse. Credit

talk of you of advantage thinking a for take about take terms reinstating the and to perspective? what about of acquisition of in would would of opportunities and of could of you kind from kind the look to liquidity of it kind Board homes kind Hoping you new what be kind dividend

Well, of is so first and the job number right preserving one. said, settlement helped now, as liquidity, maintaining Doug, I all, which obviously

how the as plays hold out, said, until thing pointed the out, numbers dividend -- we as Rob the So recommended listened and as and Board are well. the Miles to off on see to we this I calls other

the fall. just X going everybody at back is watch the resilient years think but news. We year know. if coming are, I a around same X back. know surprised for say we coming to thing's don't we this in don't how People it's And little or all residents or the be

So right now, is job protecting liquidity one.

revisit and said, then As the it quarter. always we'll I we'll And as for to relates time dividend, we all do, now. as every that that suspend

comment, did at opportunities. a I to Rob as relates made it looking As about

clears, going going a there's dislocation, lot when there be a -- smoke already to think to the there's be is. of I

there's so think not opportunity I the down going the now, road, but an be And road. down to

job and now, X is let's batten this plays right out. hatches, X just how down So the and thing see X,

As to said, is start, a even Miles stronger May than off strong April. surprisingly

assets. operations people keeping sure the to be. again, homes. the the with thing to behind make business. We're now focused we're up business. we're running like love just keeping We're with merger just happy so We're the And We can they everybody us, is We trying safe. the as back on

try X down going to our next operations and thing. keep months, through for get to on this heads focus So we're the

JP Anthony Paolone with question Our Morgan. the from is line of next

the can't your you going didn't or payments about deal know say, can work perhaps you why the I out. to of Amherst talk a But to minute perform? them you pursuing sort about into talk decision versus, litigation take did

Yes.

the knows the -- day, circumstances. there's which result whole was play sustained said, long I under end for We possible again As it say we things best our who how of shareholders can But a out. at deal. litigation, that over certainty not a took about those we the the thought lot

solution we So the we time. through optimal what money also the of went maximum, and thought

out we've so market deal. dislocation been apart show and in point I people that's And studied. would some And falling a why the and that seen of lot to of deals are made the we nothing lot there's that for it. a have

shareholders. on certainty we business, We got now to liquidity results believe, we best possible much So the for as our focus I our we and stronger position. have a said, have the

the is of as for for Miles, normal XX% sense portfolio? collections level guys to give Okay. the days your a Maybe what Can us normal. in you quoted you XX of

Yes.

we've Our XX%, the performing minimum months, and target I last that over been is mentioned. X at well as above

this experience. our based high class, for typically, really month was good that's a And point. water So our March my asset on

that's So that mark.

Is So XX%. when XX%. XX% was that you of say April the

in low some So you guys or got XXs other number? something basically the

about XX%. Yes,

Okay.

spreads your your mean, Okay. next months? quite hold sense can the to over continue you to -- those able what's And sense -- I the being what's few be rent good, -- of

Yes.

on think were what towards to mid- moderation we're of to little just Xs, renewal on in the of re-lease is We a below accelerate. rates would sort level moderated continued that on or bit that's I and I that upper slightly say flip the X% seeing running the spreads. side, that. that But have

those where virtually So we're identical numbers converging now. right are X

remain foreseeable -- market haven't the forward, indicators demand positive fairly bit of renewal think on that make see, the the I But any So more side. won't little that would in going us I future. terms we so re-lease a in seen that we'll moderation probably rents for think far,

that. I say about what that's would So

over think XX the months do anticipate CapEx side, where of what CapEx you you cost the per say, in portfolio the needs, Okay. next then terms on door question the And side? on last

$X,XXX and X I the So over CapEx. would side the turn at don't Yes, ran about be either the range for have up months. quarter, recurring next down that, $X,XXX indication or we CapEx to that that XX for materially on to different, any

your next question is line And Instructions]. Ryan KBW. the [Operator of from with Tomasello

In the light next in And sale termination, the Board to you AAMC, termination? revisit Board of company expect the do regarding over G&A post evaluating the deal the agreement the the of management the is year?

a sort would we've know, I suggestions, is What Well, has is strategic in listened always initiated have which strategic, process over how was terms to. always of who Board the say or the was merger the to ideas, in pushed started. initiated serious been review, years, you as May, who we any last and X.X whole open us proposals, of anyone

leave I'll always to That's think a So will to value. it is their some the is whether idea review it shareholder listened our and increase strategic we matter. shareholders to doesn't But as Board. sense, continue. help the We've serious, anybody in call has who that constructive to

stance, stance. strategic that's will always review not, has always it or that be So -- been our and our

listen shareholder who people will serious ideas value. always to to have how all We increase

the it clearly, of at falling AAMC, also things, AAMC. us of not changed but us, a lot merger at to away those As relates for RESI, for just

And so this days. week about it's a Obviously, is old. very early

together we'll And scramble pull halt. to in Board, to have obviously a us, to situation. merger where of we're had new Board obviously and one situation But of kind about screeching stands it, the and so revisit both taking that's to And them to RESI this of forgive that are down path, both AAMC because them talking the whole terms the and to everything you. was relates come of all aware that of speaking it we as to of

terminating relationship changed. But So lot be and obviously, soon. very the both has we're a reviewing the with no of anytime relationship. And will intention had boards it pleased

including can inclusive and investment, And hand payment of Robin, the and is, Okay. capacity? what available you post termination clarify the the borrowing liquidity on Amherst position XQ cash

Sure.

million is termination million borrowing, $XX liquidity, million $XX adds Amherst said, of about $XXX I the is of as arrangement that equity. So basically, unsecured

the that just quarter, reported So kind cash equivalents million, cash of that $XXX-plus and you're the range. which the end was to getting $XX.X million to of adding at that we

And clarify can would for credit any what today margin that the be and regarding there great. if then are? there's Okay, borrowings, facility the risk triggers current you if call there

debt Yes. is Most you of out, as know. termed our

XXXX, call various obviously from apart the of just you'd repo little the as a facilities, In on the have those expect. do reasons, The facilities for term the in different fact, possibility you XXXX. -- April structure margin is maturity structured. more very we is way line, facility earliest repo The exposed, what our very, the that, calls they're is any low

But quite So right is there's will say the the portfolio. now. our low also only potentially It's to on I something of line rest leverage there. that compared that XX%

a we'd So be margin of even call. again, any kind there's I facing before think of fair amount cushion

a is requirements And on there? market tangible requirements would repo facility, any the call or that worth net capitalization margin that there trigger

than more Not facilities. any of the other

net requirements enough have meet We some tangible than of Obviously, have our more we worth liquidity those. facilities. in to

So see that whatsoever. any don't in I respect issues

just lastly, industry color on you track then the the tenant any type by of -- great. profile, you across the the of portfolio what tenants that? potentially profile employment can give if group, And Okay, regarding

Yes. This is Miles.

industrial just and type So in majority work the of in our office-based of operations essential and that I'd business businesses. folks say

our I the dispersion that in some in reflective concentrated in, that which but market. the one geographic that one concentrated say we're And any of would thing given not provides too where industry not would highly, we're we're so I here, there's it's in safety that other heavily operating. highly -- mention And we're submarkets is really just

that And go I us that, this. think we as through helps for so

have paid true of all collections deposits? clarify of And that's April security Or and can been out just if collections? one, any last on one miles, you the if May

deposits not to not wouldn't We're -- we Yes. ramp. applying We do do that. do security

of So those X either in months. is included

Securities. the is Your with Mike Grondahl next from Northland question of line

increase? to of what the of it? XXX% kind do One, process you change to you questions. was Or the outreach Two day sounded process the level. or to it May's think the like improve Did like led anything collection April do collections X through

everyone Well, became say on. this of I what were could. early to needed about to get lots as in would through had mid-March, best as And what just we we we to we this, internally with concerned, did, we conversations going do seeing

literally So everything. we changed

in I But outreach increased think residents. told we in fees. also I we late April. our that to demands you, suspended And suspended We began mid-March.

whether X% so accommodation often. that needed we had to through or was up reached of And any ultimately, it of out residents around our plan texts diligently less we very April. or calls them or speaking And X% very beyond and sort to And payment e-mails, ended some April. concerns about than

really And that to then communication us be working support think that them took of and April. and I the -- to impact led bit place there And other some So time a in May. to has think I think that's stimulus I little that, in government get with there dialogue more in to improvement made an helped us. to and that even open with

very think, yes, factors, for to think So in contributed really remarks, those in and his residents George pleased, [indiscernible] But mentioned we're been greatly have we're seeing I we May. thankful two that. resilient, we're our as

the secondly, Got little get could and good, look percent except those to core rental plan then it sort XX, stabilized MSAs? when lift Miami pretty looks Houston a a and use is from X lease maybe up Houston at for Dallas, maybe margin, like of bit to NOI of it. Then average. I What's the everywhere Slide

Yes.

percentage into Dallas, both tremendous say, and February lease So their had April. I in improvement and on in and would that we continued Houston March,

of into you're not the uplift you're so that -- the not benefit really the And NOI. quarter, full the falling really in down getting for revenues

that's bit think timing. I of So little a

was of we Texas. a quarter bit impacted a turn of had also ran We through as volume that the additional little lot in during there that cost

that in So and I then taxes, Miami, QX, in think into insurance, us, that say higher the property as for of we'll are benefit than term being other less markets. occupancy cost, a in would just Florida behind QX mean, Texas higher of and in Texas. I I volume general well, that going little our fixed some have On

rule. to just So on a a nominal average, as those tend margins NOI going markets on run lower are little to

to At this turn company time, back for remarks. there are it questions. the I'll any no closing further

today Thank all We'll interest and Thanks, you Great. with and very you thank Stephanie. I of everyone. and everyone for hope throughout your much time. safe. tomorrow, enjoy speaking And you, stays your

conference does This you. Thank conclude call. today's

disconnect. now may You