Q2 2024 World Acceptance Corp Earnings Call
Speaker 1: Good morning and welcome to World Acceptance Corporation's second quarter 2024 earnings conference call.
Good morning, and welcome to World acceptance corporations second quarter 'twenty 'twenty four earnings conference call.
Speaker 1: This call is being recorded. At this time, all participants have been placed on listen-only mode. Before we begin, the corporation has requested that I make the following announcement.
This call is being recorded at this time all participants have been placed on listen only mode. Before we begin the corporation has requested that I make the following announcement.
Speaker 1: The comments made during this conference may contain certain forward-looking statements within the meeting of Section 21E of the Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events.
The comments made during this conference 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.
Speaker 1: Such forward-looking statements are about matters that are inherently subject to risks and uncertainty.
Such forward looking statements are about matters that are inherently subject to risks and uncertainties state.
Speaker 1: statements other than those of historical fact, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of the foregoing and similar expressions are forward-looking statements.
Statements other than those of historical fact, as well as those identified by the words anticipate estimate intend plan expect believe may will and should or any variation of the foregoing and similar expressions are forward looking statements.
Speaker 1: Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraph discussing forward-looking statements in 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, 2023, and subsequent reports filed with or furnished to the SEC from time to time.
Additional information regarding forward looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward. Looking statements are included in the paragraph discussing forward looking statements in 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, 2023 and subsequent reports filed with or furnished to the S. E C from time to time.
Speaker 1: The corporation does not undertake any obligation to update any forward-looking statements it makes.
The Corporation does not undertake any obligation to update any forward looking statements. It makes.
Speaker 1: At this time, it is my pleasure to turn the floor over to your host, Chad Prashad, President and Chief Executive Officer. Please go ahead.
At this time it is my pleasure to turn the floor over to your host Chad <unk>, President and Chief Executive Officer. Please go ahead.
Speaker 2: Good morning and thank you for joining our fiscal 2024 second quarter earnings call.
Good morning, and thank you for joining our fiscal 2024 second quarter earnings call.
Speaker 2: Before we open up to questions, there are a few areas that I'd like to highlight. In fiscal year 2023, we tightened underwriting as economic uncertainty and inflation concerns were increased.
Before we open up to questions. There are a few areas that I'd like to highlight and.
In fiscal year 2023, we tightened underwriting as economic uncertainty and then place you concerns were increasing for the remainder of 'twenty three and into early 2024.
Speaker 2: the remainder of 23 and into early 2024.
Speaker 2: We weathered delinquency normalization after a period of very low delinquency, mostly induced by economic stimulus, followed by extraordinary portfolio growth.
We weathered delinquency normalization after a period of very low delinquency, mostly induced by economic stimulus followed by extraordinary portfolio growth.
Speaker 2: This year, we continue to see lower and normalizing delinquency rates in our portfolio and increasing yields and expect these trends to continue for several more months.
This year, we continue to see lower and normalizing delinquency rates in our portfolio and increasing yields and expect these trends to continue for several more months.
Speaker 2: These outcomes are primarily due to adjustments to our operational efficiencies, marketing and underwriting, as well as an overall heightened focus on credit quality and yields that we've discussed in prior earnings.
These outcomes are primarily due to adjustments to our operational efficiencies.
Marketing and underwriting as well as an overall heightened focus on credit quality and yields that we've discussed in prior calls prior earnings calls.
Speaker 2: We continue to see economic uncertainties and potential impacts to both customer cash flow and their credit histories, both positive and negative, on the horizon as potential outcomes for our customers.
We continue to see economic uncertainties and potential impacts to both customer cash flow and their credit histories, both positive and negative on the horizon as potential outcomes for our customer base.
Speaker 2: Therefore, we cautiously have been increasing approval and booking rates for best applicants and continue to explore ways to profitably serve more of our app.
Therefore, we consciously have been increasing approval and booking rates for our best applicants and continue to explore ways to profitably serve more of our applicants.
Speaker 2: Today are approval and booking rates while higher than this time last year remain low compared to historical nor.
Today, our approval and booking rates, while higher than this time last year remain low compared to historical norms.
Speaker 2: During the second quarter, our customer base continued to grow and the number of new loan originations remained stable versus the prior quarter, and increased by over a third compared to the same quarter last.
During the second quarter, our customer base continued to grow and the number of new loan originations remained stable versus the prior quarter and increased by over a third compared to the same quarter last year.
Speaker 2: The number of new customers each quarter, as a percentage of our customer base, continues to increase and return closer to our historical normal growth.
The number of new customers each quarter as a percentage of our customer base continues to increase and return closer to our historical normal growth rate.
Speaker 2: The number of former or return customer originations also increased to be slightly above historical volume.
The number of former or returning customer originations also increase to be slightly above historical volumes.
Speaker 2: That says a percent of the customer base and it has increased both normally and relatively compared to the second quarter of last
That said as a percent of the customer base and it has increased both nominally and relatively compared to the second quarter of last year.
Speaker 2: This growth is important as our overall average loan balance continues to be right sized as we've discussed with the portfolio risk in you. All originations made this quarter have approximately a 10% lower balance year of year, and the average current balance that'll stand as a client around 4%.
This growth is important as our overall average loan balance continues to be right sized as we've discussed with the portfolio risk and yield.
All originations made this quarter have approximately a 10% lower balance year over year.
And the average current balance outstanding have declined around 4%.
Speaker 2: Well, economic uncertainty still exists. Management continues to accrue for a long term incentive plan with besting tiers of $16.35 and $20.45 earnings per share. We are no longer accruing for the $25.30 stretch EPS target, primarily due to reduced new customer investment, which would hinder overall potential growth for this fiscal year.
Well economic uncertainty still exists management continues to accrue for long term incentive plan with besting tiers of $16.35 and $20 45.
Earnings per share.
We are no longer accruing for the $25.30 stretch EPS target, primarily due to reduced new customer investment, which would hinder overall potential growth for this fiscal year.
Speaker 2: that growth or lack of growth reduces the earnings power for the next.
Operator: Good Morning, and welcome to World Acceptance Corporations 2nd Quarter 2024 Earning Conference Call. This call is being recorded. At this time, all participants have been placed on listen-only mode.
That growth or lack of growth reduces the earnings power for the next fiscal year.
Speaker 2: We believe this move is prudent, so long-term health of the company, as credit risk and economic uncertainty are likely to persist for some time, and our new customer investment remains temperate and focused on the highest credit credit cost.
We believe this move is prudent for long term health of the company as credit risk and economic uncertainty are likely to persist for some time and our new customer investment remains tempered and focus on the highest credit quality.
Operator: Before we begin, the corporation has requested that I make the following announcement. The comments made during this conference may contain certain forward-looking statements within the meeting of Section 21e of the Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties. Statements other than those of historical fact, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will and should, or any variation of the foregoing and similar expressions are forward-looking statements.
Speaker 2: We continue to see stabilizing and improving credit quality yields and operational conditions as we look forward and accrue for the $20.45 EPS target for fiscal year 2025.
We continue to see stabilizing and improving credit quality yields and operational conditions as we looked forward and accrue for the $20, 45% EPS target for fiscal year 2025.
Speaker 2: At this time, Johnny Calmys are a Chief Financial and Strategy Officer, and I would like to open up to any questions you have.
At this time, John <unk>, our chief financial and strategy Officer, and I would like to open up to any questions you have.
Yeah.
We will now begin the question and answer session too.
Speaker 1: To ask a question, you may press star then one on your telephone keypad.
To ask a question you May press Star then one on your telephone keypad.
Speaker 1: If you are using a speaker phone, please pick up your handset before pressing the key.
If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker 1: to a draw your question, please press star then two. At this time, we will pause momentarily to assemble our rods.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Operator: Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraph discussing forward-looking statements and today's earnings press release and in the risk factor section of the corporation's most recent form 10k for the fiscal year ended March 31st, 2023, and subsequent reports filed with or furnished to the SEC from time to time. The corporation does not undertake any obligation to update any forward-looking statements it makes.
Speaker 1: Our first question is from Visit Kaintec with Stevens. Please go ahead.
Our first question is from visit can't it with Stephens. Please go ahead.
Speaker 3: Good morning. Thanks for taking my questions. First one on the
Hi, Good morning, Thanks for taking my questions first one on the.
Speaker 3: pullback of the $25 by fiscal 2025 EPS. Just wondering if that will drive any changes to how you're thinking about operating the business. I know there was a couple of variables you were looking at in order to achieve that 2025 EPS. And just wondering what if there's any changes all along how you're thinking of driving the business with that of
So the pullback of the $25 by fiscal 225 bps, just wondering if that.
We will drive any changes to how you're thinking about.
Operating the business I know there was a couple of variables you're looking at in order to achieve that.
25 of EPS.
Chad Prasad: At this time, it is my pleasure to turn the floor over to your host, Chad Prasad, President and Chief Executive Officer. Please go ahead. Good morning, and thank you for joining our fiscal 2024 second-quarter earnings call.
I was just wondering what what if theres any changes on how you are thinking of driving the business with that.
Focus out of the way.
Speaker 4: No, I think the big change that happened is we were just kind of patterned, we're going to be tighter for longer. We were hopeful that we could see some improvement in new customer performance and start to loosen some of our underwriting, which would allow for higher growth.
No.
Chad Prasad: Before we open up to questions, there are a few areas that I'd like to highlight. In fiscal year 2023, we tightened underwriting as economic uncertainty and inflation concerns were increasing. For the remainder of 2023 and into early 2024, we weathered delinquency normalization after a period of very low delinquency, mostly induced by economic stimulus, followed by extraordinary portfolio growth. This year, we continue to see lower in normalizing delinquency rates in our portfolio and increasing yields and expect these trends to continue for several more months.
Yes, the big change that happened is we were just kind of.
Pattern or will it be tighter for longer right. So.
Yeah. We were we were hopeful that we could see some improvement in new customer performance and start to loosen some of our underwriting which will allow for higher growth.
Speaker 4: We just haven't gotten to that point yet and as a result, we won't see the growth that we'll need for this year. And potentially next year that would have allowed us to hit that higher EPS, but you have everything else still.
Yeah, we just haven't gotten to that point, yet and as a result.
We won't see the growth that we'll need for this year.
And potentially next year that would have allowed us to hit that that higher EPS.
But everything else still.
Chad Prasad: These outcomes are primarily due to adjustments to our operational efficiencies, marketing and underwriting, as well as an overall heightened focus on credit quality and yields that we've discussed in prior earnings calls. We continue to see economic uncertainties and potential impacts to both customer cash flow and their credit histories, both positive and negative, on the horizon as potential outcomes for our customer base. Therefore, we cautiously have been increasing approval and booking rates for best applicants and continue to explore ways to profitably serve more of our applicants.
Still remains the same.
Speaker 3: Okay, that's helpful. I mean, I just relatedly the $20 EPS target.
Okay. That's helpful and then I guess relatedly.
$20 EPS.
Target.
Speaker 3: Is there anything that needs to change from the conditions in the current environment to get there or basically what needs to happen to get to the $20 APS? Thank you. Thank you.
Is there anything that needs to change from the conditions.
In the current environment to get there or basically what what what needs to happen to get to the $20 EPS. Thank you.
Yes, nothing needs.
Speaker 4: needs to change significantly to get to the $20, right? I mean, we need to, you know, credit quality to it.
It needs to change significantly to get to the $20 right I mean, we need to.
Credit quality.
Chad Prasad: Today, our approval and booking rates, while higher than this time last year, remain low compared to historical norms. During the second quarter, our customer base continued to grow and the number of new loan originations remained stable versus the prior quarter, and increased by over a third compared to the same quarter last year. The number of new customers each quarter, as a percentage of our customer base, continues to increase and return closer to our historical normal growth.
Speaker 4: to maintain the current levels, yes, obviously.
To maintain the current levels.
So obviously.
Speaker 4: If something were to change in the macro environment drastically, if unemployment rates were to spike or something like that, that would obviously make it difficult to hit the 20, but yeah, I think...
If something were to change in the macro environment drastically.
If unemployment rates were to spike or something like that that would obviously make it difficult to hit the 20, but.
Yes, I think.
Speaker 4: We have things in place now that would allow us to hit that $20.
We have.
Things in place now that would allow us to hit that that $20. Thanks.
Next year.
Speaker 3: Okay, thank you. And I guess one last one for me, and I'll hop off. So we've seen the portfolio shrinking, right sizing recently, but it sounds like you have kind of encouraging signals in the link on these.
Chad Prasad: Secretary. The number of former or return customer originations also increased to be slightly above historical volumes. That says a percent of the customer base and it has increased best nominally and relatively compared to the second quarter of last year. This growth is important as our overall average loan balance continues to be right sized as we've discussed with the portfolio risk and yield. All originations made this quarter have approximately a 10% lower balance year of year and the average current balance outstanding as a client around 4%.
Okay.
Thank you I guess, one last one for me and I'll hop off.
So we've seen the portfolio shrinking right sizing recently.
It sounds like you have kind of encouraging signals in delinquencies.
Speaker 3: and other underwriting things to be taking. Oh, just wondering if we should be expecting.
And other underwriting seems to be taking hold just wondering if we should be expecting.
Speaker 3: portfolio to start to grow again or what your sense is in terms of portfolio balance is going forward.
The portfolio to start to grow again or what your sense is in terms of.
Portfolio balances going forward. Thank you.
Speaker 2: Yeah, I think we'll continue to see some mild portfolio growth. You know, we're not forecasting or shooting towards portfolio growth we've seen in the past.
Yes, I think we will.
Chad Prasad: Well, economic uncertainty still exists. Management continues to accrue for long-term incentive plan with besting tiers of $16.35 and $20.45 earnings per share. We are no longer accruing for the $25.30 stretch EPS target, primarily due to reduced new customer investment which would hinder overall potential growth for this fiscal year. That growth or lack of growth reduces the earnings power for the next fiscal year. We believe this move is prudent so long-term health of the company as credit risk and economic uncertainty are likely to persist for some time and our new customer investment remains temperate and focus on the highest credit quality. We continue to see stabilizing and improving credit quality yields and operational conditions as we look forward and accrue for the $20.45 percent EPS target for fiscal year 2025.
Continue to see some mild portfolio growth, we're not forecasting are shooting towards portfolio growth we've seen in the past.
Speaker 2: Year or two, certainly more muted and certainly focused on much higher credit quality. We do expect that the average balances will continue to decline. We've been working on that for about a year now. So we're seeing that come through for the whole overall portfolio and not just for new costs.
Year, or two certainly more muted and certainly focused on much higher credit quality.
We do expect that the average balances will continue to decline.
We've been working on that for about a year now so we're seeing that come through for the whole overall portfolio and not just for new customers.
Speaker 2: And in conjunction with that, you're beginning to see what those lower balances, also having higher yields, you're beginning to see the overall portfolio yields increase at real-ass two quarters as well. So we would anticipate seeing that continue throughout the rest of this year.
In conjunction with that.
We're beginning to see with those lower balances also having higher yields youre beginning to see the overall portfolio yields increase over the last two quarters as well.
We would anticipate seeing that continue.
The rest of this year.
Okay, great. Thanks, so much.
Speaker 1: Again, if you have a question, please press star then one. The next question is from John Rowan with Janney. Please go ahead.
Again, if you have a question. Please press Star then one the next question is from John Rowan with Janney. Please go ahead.
Chad Prasad: At this time, Johnny Kalmese is our chief financial and strategy officer and I would like to open up to any questions you have. 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. To draw your question, please press star then two.
Good morning.
Speaker 5: As far as like, ongoing personal expenses, obviously there was a $5 million reversal of prior accrued expense. That's not an ongoing reduction to that line item, correct? Because that's a reversal of prior accruals, correct?
Good morning, Good morning, just as far as like ongoing personnel expenses. Obviously, there was a five ish million dollars reversal of prior accrued expense, that's not an ongoing reduction to that line item correct, because thats an accrual from that's a reversal of prior accruals correct.
Speaker 5: It is, but it will also reduce the expense going forward, right? So because we're no longer accruing for that that's not. But not the $5 million less per quarter, right? No, no, no, no, no. Okay. Any plans for repurchases or was there any change in OU? You know, you got...
Operator: At this time, we will pause momentarily to assemble our roster.
It is but.
It will also reduce the expense going forward right. So because we're no longer accruing for that.
That drops, but not $5 million loss per quarter right No no no no no.
Vincent Caintic: Our first question is from Vincent Cantec with Stevens. Please go ahead. Hi, good morning. Thanks for taking my questions. First one on the pullback of the $25 EPS. Just wondering if that will drive any changes to how you are thinking about operating the business. I know there was a couple of variables you are looking at in order to achieve that $20.25 EPS. Just wondering if there are any changes in how you are thinking of driving the business with that focus out of the way.
Okay.
Any plans for repurchases or was there any change I know you you know you've got you.
Speaker 5: basically renegotiated your credit facility was there. Any change in repurchase authorization, when will you look to start it up again if you can?
Basically yes.
Renegotiated your credit facility was there any change in repurchase authorization when will you look to start it up again, if you can.
Speaker 4: Yeah, so the current credit agreement allows for for repurchases once the the fixed charge cover ratio gets back to two two to one and would we're just shy of that this quarter but we should be there by the end of next quarter and that will allow for repurchases to starting in fiscal
Yes. So the current credit agreement allows for repurchases once the fixed charge covered ratio gets back to two.
Due to one and we are just shy of that this quarter.
But we should be there but.
End of next quarter and that would allow for repurchases starting.
In fiscal Q4.
Speaker 5: Okay, and then I think he touched on it before but I was trying to calculate something while you said it The seasonality in the Lone Port probably obviously typically loans go up in in the December quarter down in March quarter But loans also usually typically go up from June to September So I you know, I'm just trying to parse out you know if
Chad Prasad: I think the big change that happened is we are kind of patterned and we are going to be tighter for longer. We were hopeful that we could see some improvement in new customer performance and start to loosen some of our underwriting, which would allow for higher growth. We just haven't gotten to that point yet. As a result, we won't see the growth that we will need for this year. Infinitely next year, that would have allowed us to hit that higher EPS.
And then I think you touched on it before but I was trying to calculate something while you said that the seasonality in the loan portfolio. Obviously typically loans go up in the December quarter down in March quarter, but loans also usually typically go up from June to September .
Trying to parse out if the credit tightening and what we're seeing is what's a little bit of an abnormal.
Speaker 5: The credit tightening and what we're seeing is what's a little bit of an abnormal, you know, sequential decline here in September quarter. Like how that affects going forward. Our loans are going to go up next quarter and then down in March, like how, actually think about that.
<unk> decline here in the September quarter, like how that affects going forward. Our loan is going to go up next quarter and then down in March like how should we think about that.
Speaker 4: Yeah, I think we would expect the same seasonality. Yeah, typically the September quarter, we do show some growth. Obviously not to the same levels we show in the December quarter historically. We still expect to see that growth in the December quarter. But yeah, the big change versus history is we are...
Yes, I think we would expect the same seasonality.
Chad Prasad: But you have everything else still remains the same. Okay, that's helpful. I mean, I just relatedly the $20 EPS target. Is there anything that needs to change from the conditions in the current environment to get there, or basically what needs to happen to get to the $20 EPS? Thank you. Yeah, so nothing needs to change significantly to get to the $20, right? I mean, we need to, you know, credit quality to maintain the current levels.
Yeah typically the September quarter, we do show show some growth.
Obviously not to the same levels, we show in the December quarter historically.
We still expect to see that growth in the December quarter.
Chad Prasad: Yeah, so obviously, if something were to change in the macro environment drastically, you know, if unemployment rates were to spike, or something like that, that would obviously make it difficult to hit the 20, but yeah, I think we have things in place now that would allow us to hit that $20 next year. Okay, thank you.
The big change versus history as we are.
Speaker 4: Still, so it's mostly tighter on new cost of originations than we have ever been. And we're still...
Still substantially tighter.
One new customer originations than we have ever been.
And we're still seeing.
Speaker 4: very strong application flow, but you know, we've reduced our approval rates to change.
So very strong application flow.
But.
We've reduced our approval rates substantially.
Speaker 2: Sorry. Yeah, I think it's important to point out that, during the last quarter, we actually did grow our customer base number of accounts, but the average balance is lower, so the overall portfolio size is lower. So, and it's something we've mentioned before, in right sizing, the loan size is also the health of the increase, the overall yield. And it's important to do that in conjunction with the overall credit quality as well. Okay, and then just one bigger.
Okay Jonathan.
Okay sorry.
Sorry, yes.
I think it is important to point out that during the last quarter. We actually did grew our customer base and number of accounts.
But the average balance is lower so the overall portfolio size is lower so.
And it's something we've mentioned before and right sizing the the loan sizes also helps us increase the overall yield.
Any.
It is important to do that in conjunction with the overall credit quality as well.
Okay, and then just one bigger.
Chad Prasad: And I guess one last one for me, and I'll hop off. So we've seen the portfolio shrinking, right sizing recently, but it sounds like you have kind of encouraging signals in the link on sees, and other underwriting seems to be taking all this wondering if we should be expecting the portfolio to start to grow again, or what your sense is in terms of portfolio balance is going forward. Thank you. Yeah, I think, you know, we continue to see some mile portfolio growth, you know, we're not forecasting our, you know, shooting towards portfolio growth we see in the past year or two, certainly more muted and certainly focused on much higher credit quality.
Question.
Speaker 5: you know obviously you've abandoned the highest year a cruel for next year you know just like in the consensus estimates mine too I mean we're nowhere near for this we're nowhere near where you would need to accrue even for the 2045 you know John you know we've talked about in the past
Obviously, you've abandoned the highest tier accrual for next year, it's really going to consensus estimates and mine too I mean, we're nowhere near.
Before that we're nowhere near where you wouldn't need to accrue even for the 2045, John we've talked about in the past.
Speaker 5: you know needing to get to high single digit or high high single digit and maybe low double digit type chart offer eight wherever she not near there now uh... although you obviously have improved credit quality i just i'm curious about your comment earlier he said we have the pieces in place now
We're needing to get to high single digit or high single digit maybe low double digit type charge off rate. We're obviously not near there now although you obviously have improved credit quality.
I'm curious about your comment earlier, you said, we have the pieces in place now to reach 2045 next year I'm paraphrasing, a little bit versus what you said.
Speaker 5: to reach 2045 next year. I'm paraphrasing a little bit versus what you said.
Speaker 5: you know obviously you know the the goals have been changed from the mid-20s to twenty forty five i don't think that you know you hit even the lower number with the sixteen percent hard to operate and just trying to figure out what are the pieces in place in that nothing really material needs to change for you to get to twenty forty five next year when i was in the run rate of earnings
You know obviously.
The goals have been changed from the mid Twenty's to 2045, I don't think that you have.
Chad Prasad: We do expect that the average balances will continue decline. We've been working on that for about a year now. So we're seeing that come through for the whole overall portfolio and not just for new customers. You know, in conjunction with that, you're beginning to see with those lower balances, you know, also having higher yields, you're beginning to see the overall portfolio yields increase over the last two quarters as well. So, you know, we would anticipate seeing that continue throughout the rest of this year. Okay, great. Thanks so much. Again, if you have a question, please press star then one.
Even the lower number with the 16% charge off rate and I'm just trying to figure out what are the pieces in place and that nothing really material needs to change for you to get to 2045 next year when obviously the run rate of earnings too.
Speaker 5: yet two dollars and seventy one cents which you think includes a big reversal in it not to get a big reversal i had a week get there because that run rate is nowhere near twenty dollars in forty five cents but yet you're saying nothing material needs to change rest to get to that number i've just i'm having trouble you know marrying those those
$2.71, which even includes a big reversal in it I mean, not gigantic but big reversal.
Do we get there because that run rate is nowhere near $20 45, but yet youre, saying nothing material needs to change for us to get to that number I just I'm having trouble.
Marrying those comments together.
Speaker 4: Yeah, so we expect that we see that the credit quality of the portfolio continuing to improve, right? So as we move forward, two things should continue to happen. One, we expect the credit quality, absent of any other macro events should continue to improve on the existing portfolio, right? And the loans that the new customers that we are adding
Yes, so we expect to see that the credit quality of the portfolio continuing to improve right. So as we as we move forward.
John Rowan: The next question is from John Rowan with Jenny. Please go ahead.
Chad Prasad: Morning. It's as far as like, ongoing personal expenses, obviously there was a five-ish million dollar reversal of prior or crude expense. That's not an ongoing reduction to that line item correct because that's an accrual from free, that's a reversal of prior or crude, correct. It is, but it will also reduce the expense going forward, right? So because we're no longer accruing for that, that drop. But not the five million dollars less per quarter, right? No, no, no, no, no, no. Okay.
We had two things should continue to happen one we expect the credit quality absent of any other.
Other macro events should continue to improve on the existing portfolio right.
And the the loans at the new customers that we are adding.
Speaker 4: or performing at a much higher level for a better quality standpoint and have much healthier yield.
Are performing at a much higher level.
From a credit quality standpoint, and have much healthier yields right. So.
Speaker 4: Right? So, you know, as we move forward, and it will take to get to the $20 LPS will take some growth, right, over the next 18 months. And we expect that to happen, right?
As we move forward and it will take to get to the 20.
Chad Prasad: Any plans for repurchases or was there any change in owe you, you know, you got, you, you basically, you know, renegotiated your credit facility was there. Any change in repurchase authorization, when will you look to start it up again if you can? Yeah, so the current credit agreement allows for repurchases once the fixed charge cover ratio gets back to 2, 2 to 1, and we would just shy that this quarter, but we should be there by the end of the next quarter, and that would allow for repurchases to starting in fiscal Q4.
Dollars EPS will take some growth right over the next 18 months.
And we expect that to happen right.
Speaker 4: We expect at some point over the next 18 months, there would be more clarity with where the economy is going and hopefully be able to start losing a little bit, right? But so with that, you'll have better performance on the new customers at higher yields and we expect the criticality of existing portfolio to continue to trend better.
We expect at some point over the next 18 months will be more clarity.
With where the economy is going and hopefully be able to.
Start, losing a little bit right, but so with that youll have.
Higher better performance on the new customers at higher yields.
And we expect the credit quality of the existing portfolio to continue to trend better.
Speaker 5: Okay, I was a little confused with the commies, so we kind of had nothing major need to change from now to get to there, but it's not nothing major need to change from what we reported this quarter, but we have to continue certain trends. Am I interpolating that correctly?
Chad Prasad: Okay, and then I think you touched on it before, but I was trying to calculate something while you said it. The seasonality in the loan portfolio obviously typically loans go up in the December quarter, down in March quarter, but loans also usually typically go up from June to September. So I'm just trying to parse out if the credit tightening and what we're seeing is what's a little bit of an abnormal sequential decline here in the September quarter, like how that affects going forward, our loans are going to go up next quarter and then down in March like how actually we think about that.
Okay.
A little confused with the comment you said that you kind of have.
Nothing major needs to change from now to get to there, but it's not nothing major needs to change from what we reported this quarter, but.
We have to continue certain trends interpreting that correctly.
Speaker 6: Right. Yeah. Okay. Alright. Alright. That's it for me. Thank you.
Right Yeah, Okay, alright, that's it for me thank you.
Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Mr. Prasad for any closing remarks.
This concludes our question and answer session I would like to turn the conference back over to Mr. <unk> Shah for any closing remarks.
Speaker 2: Thank you for taking the time to join us today and this concludes our second quarter fiscal year 2024 earnings call for World Acceptance Corporation.
Thank you for taking the time to join US today and this concludes our second quarter fiscal year 2024 earnings call for World Acceptance Corporation.
Chad Prasad: Yeah, I think we would expect the same seasonality, yeah, typically the September quarter we do show some growth, obviously not the same levels we show in the December quarter historically. We still expect to see that growth in the December quarter, but yeah, the big change versus history is we are still a substantially tighter on new customer originations than we have ever been. We're still seeing a very strong application flow, but we've reduced our approval rates substantially.
Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker 7: So that.
[music].
Speaker 7: P not.
Chad Prasad: Sorry, John, I think it's important to point out that during the last quarter we actually did grow our customer base number of accounts, but the average balance is lower, so the overall portfolio size is lower. So, and it's something we've mentioned before in right sizing, the loan size also helps us increase the overall yield, and it's important to do that in conjunction with the overall credit quality as well.
Chad Prasad: Okay, and then just one bigger question. Obviously, you've abandoned the highest year a cruel for next year, just like in the consensus estimates, mine too, I mean, we're nowhere near for this, we're nowhere near where you would need to accrue even for the 2045, you know, John, you know, we've talked about in the past, you know, needing to get to a high single digit or a high single digit, maybe low double digit type charge off rate, we're obviously not near there now, although you obviously have improved credit quality.
Chad Prasad: I just, I'm curious about your comment earlier, how you said we have the pieces in place now to reach, you know, 2045 next year, I'm paraphrasing a little bit versus what you said, you know, obviously, you know, the goals have been changed from the mid 20s to 2045, I don't think that, you know, you hit even the lower number with the 16% charge off rate, I'm just trying to figure out what are the pieces in place and that nothing really material needs to change for you to get to 2045 next year, when obviously the run rate of earnings, $2.71, which I mean, even includes a big reversal in it, I mean, not gigantic, but big reversal, how do we get there? Because that run rate is nowhere near $20.45, but yet you're saying, nothing material needs to change for us to get to that number, I'm having trouble, you know, marrying those comments together.
Chad Prasad: Yeah, so we expect that we see that the credit quality of the portfolio continuing to to improve, right? So, you know, as we as we move forward, you know, two things should continue to happen. One, we expect the credit quality, you know, absent of any, you know, other macro events should continue to improve on the existing portfolio, right? And the loans that the new customers that we are adding are are performing at a much higher level for credit quality standpoint and have much healthier yields, right?
Chad Prasad: So, you know, as we move forward, and it will take to get to the $20.00 if you ask, we'll take some growth, right? Over the next 18 months. And we expect that to happen. Right? You know, we expect at some point over the next 18 months, there would be more clarity. With where the economy is going and hopefully able to start losing a little bit, right? But so with that, you'll have, you know, higher, better performance on the new customers at higher yields and, you know, we expect the credit quality of existing portfolio to continue to trend better.
Chad Prasad: Okay, I was a little confused with the economy so that we kind of have, you know, nothing major needs to change from now to get to there, but it's not nothing major needs to change from what we reported this quarter, but we have to continue certain trends. Am I interpolating that correctly? Right. Yeah. Okay.
John Rowan: All right.
John Rowan: That's it for me. Thank you.
Chad Prasad: Okay.
Chad Prasad: This concludes our question and answer session.
Chad Prasad: I would like to turn the conference back over to Mr. Prasad for any closing remarks. Thank you for taking the time to join us today, and this concludes our second quarter fiscal year 2024 earnings call for World Acceptance Corporation.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.