Q4 2021 World Acceptance Corp Earnings Call

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Good morning, and welcome to the World Acceptance Corporation sponsored fourth quarter.

Press release conference call.

If you require operator assistance. Please press Star then zero this call is being recorded.

At this time all participants have been placed in listen only mode. Before we begin the corporation has requested that I make the following announcement.

The comments made during this conference call may contain certain forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events such forward looking statements are about manner matters that are in.

Inherently subject to risks and uncertainties statements other than those of historical fact, as well as those identified by the words anticipate estimate and.

Intend.

Plan expect.

Believe may.

Will and should or any variation of the foregoing and similar expressions are forward looking statements additional information.

Information regarding forward looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied and such forward. Looking statements are included and the paragraph discussing forward looking statements.

And today's earnings press release and in the risk factors section of the Corporation's most recent form 10-K for the fiscal year ended March 31 2020.

And subsequent reports filed with or furnished to the SEC from time to time. The Corp does not undertake any obligation to update any forward looking statements. It makes.

At this time it is my pleasure to turn the floor over to your host Chad per shot President and Chief Executive Officer.

Good morning, and thank you for joining the world acceptance earnings call for the end of the 2021 fiscal year and fourth quarter.

And we've all experienced this year has presented so many challenges both professionally and personally for all people.

Our customers and team members are no exception and both have risen to adapt and overcome the challenges.

And first one I'll highlight a few amazing outcomes from this year.

First on the operating side, we've adapted to this new environment.

<unk> sales and flexible work arrangements for employees.

Adjusting branch hours expediting technology improvements and that thing underwriting and marketing with 39% of new customers now being sourced through digital channels.

Centralizing certain decisioning and loan funding segment.

With a quarter of loans, and our fourth quarter and approximately 24% being funded and closed remotely.

All the while continuing and improving upon our already world class customer service.

We're now seeing and all time low in terms of loan delinquency and we continue to see signs that customers financial situations and remain improved.

Our culture also continues to be among one of our best assets when and many top workplaces awards across the country, including being the only South Carolina based company to be named a top workplaces USA and 2021.

We also remain excited and optimistic and line of our successful execution across a range of initiatives and such and otherwise challenging year.

We are now exceptionally well positioned for the future.

Our capital and financing conditions are solid with our recently amended bank agreement and $117 million and stock repurchase capacity today and.

And continued low leverage.

In order to fuel continued large loan growth, we expect to add.

Another diversified funding source later this year.

We pivoted to serve higher credit quality customers and Illinois with the recent passage of a 36% rate credits.

Our portfolio and Illinois shrunk by less than 1% during the last fiscal year, this and compare it to our entire portfolio which decreased.

And approximately eight 6% due to both the pandemic and the resulting index.

On the heels of this operational underwriting pivot and Illinois, we are proactively and growing our large loan and lower interest rate portfolio and all of our states.

During fiscal 2021, our large loan portfolio.

Loans greater than $2500 grew by seven 4% compared to the end of March 'twenty 'twenty and.

It is not a shift to focus on large loans and away from tomorrow, and the and an additional focus on serving customers as they move up the credit market.

And the states. We currently operate and this could roughly double the potential customer base and triple the potential portfolio size of just new customers and our expanded total addressable market.

We've also been quite busy this quarter working with stakeholders across the country to convey the importance of equal access to regulated credit for all Americans.

<unk> and Illinois rate counts can make it mathematically impossible to lend to large segments of the population.

Excluding millions and people from affordable and regulated credit building and risky priced credit.

While world acceptance has proven our ability to quickly pivot to higher credit quality credit quality customers.

As a community based lender, we feel the responsibility to our communities to ensure that these citizens arent left the choices. They don't give them a way to improve their credit history, and our put their assets at significant risk.

The near future, we hope our customers will see us less as a lender and more as a one stop shop for financial wellness. This includes our current installment loan and tax products, but also seeks to improve the overall financial health of our customers with credit building products banking products like checking and savings accounts revolving lines of.

And budget coaching that increases the financial stability through both proactively reducing monthly expenses and also increasing savings towards the customer's goals with.

And we piloted several financial and health related programs throughout fiscal 2021, and expect to announce of our partnerships. Later this year to allow us to improve the financial lives of the one three to $1 5 million customers we serve annually.

This is in addition to our Attritional and products.

There is much to be excited about and the future at this time, John <unk>, our chief financial and strategy Officer, and I would like to open up to any questions about our fourth quarter.

2021 earnings.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you are using a speaker phone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Kyle Joseph with Jefferies. Please go ahead.

Hey, good morning, guys and thanks for thanks for taking my questions.

First one for John obviously.

And going on last year in terms of reserve with both COVID-19 and it's T cell, but can you can you walk us through how you kind of envision and the reserve.

Going forward and ultimately loan demand recovers and theoretically if the economy keeps chugging along.

Sure.

Yes, so as of the end of March.

We no longer have any incremental allowance related to COVID-19.

And that's especially a function to the stimulus has happened over the last several months.

So you won't going forward.

We expect to be a more normalized per.

Process and allowance.

And when you look at our portfolio.

And then gross loan portfolio.

<unk> should grow at around 6% to 7%.

Of that growth loan growth right.

And there's a lot of factors that can that can move that within that range or even possibly outside of that range.

For instance, the tenure right. So if we.

Begin to grow new customers.

The customers that are new to world that could push that allow us to gross loans to the higher and.

But if we grow larger loans that are to current and former customers it could stay to that lower and the 6% to 7%.

And lastly, the other factors will be.

And I expect a loss rates within those senior buckets and those can move depending on the actual.

Recent performance within those senior buckets.

Does that got it very helpful.

And then just in terms of loan demand recovering and kind of credit normalization and what are your expectations for the remainder of the calendar year here we're in Sydney.

Stimulus and appears to be in the rearview, we add some.

Changes in and child tax credits and then kind of a more open economy with people and discretionary spending going up.

Sure Yeah, So we're pretty hopeful for the next year.

After we have the April data, Alright, and April was more or less flat.

Relative to March 31.

And when you look year over year.

And we're down less than 2% versus last year, just just through April.

And we're seeing similar trends.

Very early on in May.

Obviously.

Most of the stimulus is behind us it appears.

And this year feels very different and last year. So when our customers receive their stimulus last year. They didn't really have a lot of options to spend that that stimulus money.

So we feel like this year.

And more options for them and that could help with demand for our loan products.

And yes, obviously that I think it will still be some.

The impact of the stimulus for the next several months, but really and the second half of the calendar year.

We hope to see demand come back to more normalized levels.

Got it last one from me and interesting commentary from you guys on Illinois.

And at year and loan portfolio has kind of hung in there better than the rest of the country is that is that kind of a function of us.

Other credit providers exiting that market as a result of Reg regulation or can you explain what drove that.

And at.

And that certainly is a potential factor.

And we put a lot of work and mid to late January to pivot quite quickly. So we didn't wait until the bill was signed.

Several weeks later.

But began operating as if it were in effect pretty much immediately.

And so we changed our underwriting criteria and began to restrict underwriting and most risky customers and.

Under the new rate count and began moving more upstream to higher credit quality customers and the demand was quite high.

But we're also.

We're able to retain a lot of our existing customers.

World Historically has been primarily a small dollar lender.

With a smaller large loan business on the side.

And through this process, we've been very proactive and making sure we have very competitive products that help retain customers and provide a.

And a very attractive option for them instead of going elsewhere. So.

Think that is.

But the bigger cause for Illinois, overall success rather than debt.

A decrease competition.

Great. Thanks, very much for answering my questions.

Yes.

Again, if you have a question. Please press Star then one day.

Next question comes from John Rowan with Janney. Please go ahead.

Good morning, guys good morning.

Jonathan and you guys don't give guidance with Johnny and kind of touched on it anyway.

Can you give us an idea of what you think happens sequentially with the gross loan portfolio.

Yes.

Ill try.

And try and be very vague right, yes, yeah, so I'm not going to give hard part numbers right, but just in general.

April looks looks good and may looks promising.

And just anecdotally, we feel like that that should lead to a pretty good second half of the calendar year.

Obviously.

It's hard to project exactly what that is going to look like this is all.

This is all new territory for us and everybody else.

But we're hopeful.

And there's early signs that demand should come back.

John.

A few points that might help as youre modeling us but.

Last year, we took the opportunity to increase it.

And our central Decisioning and.

And how that whole process and rolled out and implemented.

And through that process, we are able to adjust our underwriting criteria fairly rapidly.

But we also made very conscious decisions to reduce our marketing spend for new customers right around this time last year, just due to all the uncertainty.

And so to the process from this point last year throughout the rest of the year, we saw our cost of acquisition decline.

Mainly due to significant changes and marketing.

As well as significant investments and as we pivoted towards more digital sourcing customers.

And I see those playing out for the rest of the year.

And certainly has been quite productive for us.

So as youre thinking about future demand.

And prior to this point last year is primarily just the brick and mortar and trends with.

As a smaller proportion coming in online, but that the online portion is continuing to grow.

And it's built into our overall process now so.

That will certainly play a factor and the future loan demand.

Okay.

Repurchases did you buy any stock back this quarter.

The outlook, obviously, you have and authorization.

But just based on the share count it didn't look like you did much on that front this quarter.

That's right and we didn't buy a lot back and the fourth quarter.

We do have $2021 4 million left under the current authorization and as Chad mentioned.

Around $117 million available under the current debt facility.

So, but we'll likely.

Okay back and the market over the next several quarters.

But there wasn't any type of limitation on the debt stack to why you could repurchase during this quarter.

Alright, good restricted bucket or something.

It was more just price driven right and obviously.

And I'm sure you follow our stock.

I think we add some of the the gamestop effects going on and the fourth quarter that drove our stock up pretty wildly during late January early February so that drove a lot of it.

Okay alright, thank you.

This.

<unk> our question and answer session I would like to turn the conference back over to Chad for Shaw for any closing remarks.

Thanks for joining us this quarter and a special thanks to all of our incredible team members, who are making this year incredibly successful and light of all the challenges that we all face professionally and personally.

This concludes the 2021 and Q4 earnings call for World acceptance and hope to see you guys for our Q1 call in August.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

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