Q3 2024 World Acceptance Corp Earnings Call

January 19, 2024

Operator: transcript Emily Beynon Good morning, and welcome to the World Acceptance Corporation's third quarter 2024 earnings conference call. This call is being recorded. At this time, all participants have been placed in a 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 forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent corporations' expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risk and uncertainties. Statements other than those that are historically factual, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of these foregoing and similar expressions, are forward-looking statements.

Good morning, and welcome to the World Acceptance Corporation third quarter 2024 earnings Conference call. This call is being recorded at this time all participants have been placed in a 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 forward looking statements within the <unk>.

Good morning and welcome to the World Acceptance Corporation's third quarter 2024 earnings conference call. This call is being recorded. At this time, all participants have been placed in a 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 forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent corporations' expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risk and uncertainties. Statements other than those historically fact, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of these foregoing and similar expressions, are forward-looking statements. Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from these expectations expressed or implied in such statements. The comments made during this conference call are being recorded. The comments made during this conference call are included in the paragraph discussing forward-looking statements in today's earnings press release in the risk factor section of the corporation's most recent form 10-K.

Section 21 E of the Securities Exchange Act of 1934 that represent corporations 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 Stewart, historically fact, as well as those identified by the words anticipate estimate and <unk>.

Then plan expect believe may will and should or any variation of the foregoing and similar expressions are forward looking statements additional information regarding forward looking statements and any factors that could cause actual results or performance to differ from these expectations expressed or implied in such forward. Looking statements are included in the peer group.

Operator: Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from those expressed or implied in such statements. The comments made during this conference call are being recorded. The comments made during this conference call are included in the paragraph discussing forward-looking statements in today's earnings press release in the risk factor section of the corporation's most recent form 10-K for the fiscal year ending 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. And at this time, it is my pleasure to turn the floor over to your host, Mr. Chad Prashad, President and Chief Executive Officer. Please go ahead, sir.

Half discussing forward looking statements in today's earnings press release, and the risk factors section of the Corporation's most recent Form 10-K.

for the fiscal year ending March 31st of 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 forelooking statements it makes. And at this time, it is my pleasure to turn the floor over to your host, Mr. Chad Prashad, President and Chief Executive Officer. Please go ahead, sir.

For the fiscal year, ending March 31st 2023, and subsequent reports filed with the with or furnished to the S. E. C from time to time. The corporation does not undertake any obligation to update any forward looking statements. It makes and at this time. It is my pleasure to turn the floor over to your host Mr. Chad per shot President and Chief Executive.

Chad Pershot: Sir Please go ahead Sir.

Good morning, and thank you for joining our fiscal 2024 third quarter earnings call.

Chad Prashad: Good morning and thank you for joining our fiscal 2024 third quarter earnings call.

Chad Prashad: Good morning, and thank you for joining our fiscal 2024 third quarter earnings call. Before we open up the questions, there are a few areas I'd like to highlight.

Chad Prashad: Before we open up the questions, there are a few areas I'd like to highlight.

Before we open up to questions. There are a few areas I'd like to highlight.

Chad Prashad: Earlier this year, we signaled a tightening of credit and slower portfolio growth pace

Chad Prashad: Earlier this year, we signaled a tightening of credit and a slower pace of portfolio growth.

Earlier this year, we signaled a tightening of credit and slower portfolio growth pace for this year.

Chad Prashad: Our new customer loan volume increased about 22% sequentially this quarter from the prior quarter and about 56% compared to last year's third quarter.

Chad Prashad: Our new customer loan volume increased about 22% sequentially this quarter from the prior quarter and about 56% compared to last year's third quarter. But the percent of new customers relative to our customer base was around 30% lower than the prior normal third quarters, especially pre-COVID. Our credit quality and performance continues to improve and remain near historical norms or even higher, while our approval and booking rates have improved significantly from our low in August of this year. Through the end of this calendar year, our first pay defaults remain at or below historical rates.

Our new customer loan volume increased about 22% sequentially this quarter from the prior quarter and about 56% compared to last year's third quarter.

Chad Prashad: But the percent of new customers relative to our customer base was around 30% lower than the prior normal third quarters, especially pre-COVID.

But the percent of new customers relative to our customer base was around 30% lower than the prior normal third quarters.

Especially pre COVID-19.

Chad Prashad: Our credit quality and performance continues to improve and remain near historical norms or even higher.

Chad Pershot: Our credit quality and performance continues to improve and remain near historical norms or even higher.

Chad Prashad: while our approval and booking rates have improved significantly from our low in August of this

Chad Pershot: While our approval and booking rates have improved significantly from our low in August of this year through the end of this calendar year, our first pay defaults remain at or below historical norms.

Chad Prashad: Through the end of this calendar year, our first pay defaults remain at or below historical

Chad Prashad: New loan application volume increased around 30% this quarter when compared to last year.

Chad Prashad: New loan application volume increased around 30% this quarter when compared to last year. The earlier stat that I mentioned on the resulting loan comparison was a 56% increase in new customer loan volume for the same quarter. New applications increased only 1% sequentially over the prior quarter.

Chad Pershot: New loan application volume increased around 30% this quarter when compared to last third quarter.

Chad Prashad: The earlier stat that I mentioned on the resulting loan comparison was a 56% increase of new customer loan volume for the same quarter.

Chad Pershot: The earlier stat that I mentioned on the resulting loan comparison was at 56% increase of new customer loan volumes for the same quarter.

Chad Prashad: New applications increased only 1% sequentially over the prior quarter.

Chad Pershot: New applications increased only 1% sequentially over the prior quarter second quarter compared to the third quarter as we shifted marketing and underwriting strategies that resulted in higher approval and booking rates.

Speaker Change: Thank you very much.

Chad Prashad: Thank you very much, which earlier I shared is a 22% increase in booked new customer loans, sequential. And those new customers continue to perform well with first pay default rates that are significantly better than fiscal year 2022 and in line with last year and our pre-COVID comparison. Further, our overall new customer application volume has increased back to within 1% of our pre-COVID application volume after increasing over 30% in the third quarter when compared to last year's We believe we've been able to successfully increase our approval rates without sacrificing credit quality or yield and are focused on continually improving both our underwriting and marketing strategies.

Speaker Change: which earlier I shared is a 22% increase in booked new customer loans, sequential

Which earlier I shared is a 22% increase in booked new customer lines sequentially.

Speaker Change: And those new customers continue to perform well with first pay default rates that are significantly better than fiscal year 2022 and in line with last year and our pre-COVID comparison.

And those new customers continue to perform well with first pay default rates that are significantly better than fiscal year 2022, and in line with last year and our pre COVID-19 comparisons.

Speaker Change: Further, our overall new customer application volume has increased back to within 1% of our pre-COVID application volume.

Further our level of new customer application volume has increased back to within 1% of our pre COVID-19 application volumes after increasing over 30% in the third quarter when compared to last year's third quarter.

Speaker Change: after increasing over 30% in the third quarter when compared to last year's 13.

We believe we've been able to successfully increase our approval rates without sacrificing credit quality or yield and our focus on continually improving in both our underwriting and marketing strategies.

Speaker Change: We believe we've been able to successfully increase our approval rates without sacrificing credit quality or yield and are focused on continually improving in both our underwriting and marketing strategies.

Chad Prashad: Return of former customers increased around 6% sequentially in the third quarter compared to the second quarter and 17% compared to last year's third quarter. Additionally, the percent of former customers relative to the customer base continues to be higher than the prior normal comparable periods, especially pre-COVID. For new customers and the whole portfolio, our yields continue to improve, as a result of improved gross yields and reduced delinquency. While we are pleased with our current progress in delinquency improvement and the trending of the underlying portfolio, we believe there's still room for improvement in the current and upcoming quarters.

Speaker Change: Return of former customers increased around 6% sequentially in the third quarter compared to the second quarter and 17% compared to last year's third quarter.

Return of former customers increased around 6% sequentially in the third quarter compared to the second quarter and 17% compared to last year's third quarter.

Speaker Change: And the percent of former customers relative to the customer base continues to be higher than the prior normal comparable periods, especially pre-COVID.

And the percent of former customers relative to the customer base continues to be higher than the prior one normal comparable periods, especially pre COVID-19.

For new customers and the whole portfolio our yields continue to improve this is a result of improved gross yields and reduce delinquency.

Speaker Change: For new customers and the whole portfolio, our yields continue to improve. This is a result of improved gross yields and reduced delinquency.

Speaker Change: While we are pleased with our current progress in delinquency improvement and the trending of the underlying portfolio,

While we are pleased with our current progress and delinquency improvement and the trending of the underlying portfolio.

Operator: Good morning, and welcome to the World Acceptance Corporation's 3rd Quarter 2024 Earnings Conference Call. This call is being recorded.

Speaker Change: We believe there's still room for improvement in the current and upcoming quarter.

We believe there's still room for improvement in the current and upcoming quarters.

Operator: At this time, all participants have been placed in a 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 forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent a corporation's expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risk and uncertainties; statements other than those that are historical facts, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of these foregoing and similar expressions are forward-looking statements. Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from these expectations expressed or implied in such forward-looking statements is included in the paragraph discussing forward-looking statements in today's earnings press release and in the risk factor section of the corporation's most recent form 10-K for the fiscal year ending 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 Change: With the expectations of economic stability increasing and the decreasing likelihood of major unemployment impacts,

Chad Prashad: With the expectations of economic stability increasing and the decreasing likelihood of major unemployment impacts, Management continues to accrue for the long-term incentive plan with investing tiers of $16.35 and $20.45 earnings per share due to the much improved credit quality, yields, and operations.

With the expectations of economic stability, increasing and the decreasing likelihood of major unemployment impacts.

Speaker Change: Management continues to accrue for the long-term incentive plan with investing tiers of $16.35 and $20.45 earnings per share.

<unk> continues to accrue for long term incentive plan with investing tiers of $16.35.

$20 45 earnings per share due to the much improved credit quality yields and operating conditions.

Speaker Change: due to the much improved credit quality, yields, and operations.

Speaker Change: Finally, I'd like to thank all of our wonderful team members who have helped so many customers from our communities during the calendar year of 2023, helping to establish and rebuild credit, as well as meeting immediate financial needs.

Chad Prashad: Finally, I'd like to thank all of our wonderful team members who have helped so many customers in our communities during the calendar year of 2023, helping to establish and rebuild credit, as well as meeting immediate financial needs. We have an absolutely amazing team, and I'm very grateful for their commitment to their customers and to each other.

Chad Pershot: Finally, I'd like to thank all of our wonderful team members, who have helped so many customers for our communities during the calendar year of 2023.

Chad Pershot: Two established and rebuild credit as well as meeting immediate financial needs. We have an absolutely amazing team and I'm very grateful for their commitment to their customers into each other.

Speaker Change: we have an absolutely amazing team and I'm very grateful for their commitment to their customers and to each

Speaker Change: At this time, John <unk>, our Chief financial strategy Officer, and I would like to open up to any questions. You have thank you.

Speaker Change: At this time, Johnny Calmes, our Chief Financial and Strategy Officer, and I would like to open up to any questions.

Chad Prashad: At this time, Johnny Calmes, our Chief Financial and Strategy Officer, and I would like to open up to any questions.

John L. Calmes: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, 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 2. And at this time, we'll pause momentarily to assemble our roster.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. 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 and at this time, we'll pause momentarily to assemble our roster.

Chad Prashad: And at this time, it is my pleasure to turn the floor over to your host, Mr. Chad Prashad, President and Chief Executive Officer. Please go ahead, sir. Good morning, and thank you for joining our fiscal 2024 third quarter earnings call. Before we open up to questions, there are a few areas I'd like to highlight. Earlier this year, we signaled a tightening of credit and slower portfolio growth pace. Our new customer loan volume increased about 22% sequentially this quarter from the prior quarter and about 56% compared to last year's third quarter. But the percent of new customers relative to our customer base was around 30% lower than the prior normal third quarters, especially pre-COVID. However, our credit quality and performance continue to improve and remain near historical norms or even higher, while our approval and booking rates have improved significantly from our low in August of this year. Through the end of this calendar year, our first pay defaults remain at or below historical norms. New loan application volume increased around 30% this quarter when compared to last year.

And the first question will come from John Rowan with Janney. Please go ahead.

Speaker Change: And the first question will come from John Rowan with Jannie. Please go ahead.

John Rowan: And the first question will come from John Rowan with Jannie. Please go ahead.

John Rowan: Good morning, guys.

John Rowan: Good morning guys, so I just want to understand, what change in assumptions drove the 10 million dollar provision release? Obviously you talked about lower loss assumptions going forward, but what is the loss assumption that's included in that 10 million dollar reserve release and what economic factor change drove that assumption?

John Rowan: Good morning guys, so I just want to understand what change in assumptions drove the 10 million dollar provision release. Obviously, you talked about lower loss assumptions going forward, but what is the loss assumption that's included in that 10 million dollar reserve release, and what economic factor change drove that assumption?

Good morning.

So I just want to understand what what change in assumptions drove the $10 million provision release.

John Rowan: Obviously, you did you talk about lower loss assumptions going forward, but what what is the loss assumption. That's included in that you know that that $10 million reserve release, and what you know economic factor change drove that.

John Rowan: Sure.

Speaker Change: Okay, Yes.

Speaker Change: Okay, yeah, so you kind of broke up there, right?

John L. Calmes: Okay, yeah, so you kind of broke up there, right? So the biggest piece that's driving the reduction of that for the quarter is December's, like, seasonally, our lowest risk quarter in the fiscal third quarter. The opposite adjustment happened in the fiscal first quarter, right? So there was a substantial increase in the expected loss rates for seasonality that happened in Q1. So this is just sort of the release of that because, again, our customer base and portfolio is its least risky decision.

Speaker Change: Broke up there right.

So that's the biggest piece that's driving.

Speaker Change: So that the biggest piece that's driving the reduction of that for the quarter is December's like seasonally is our lowest risk quarter.

Speaker Change: The reduction of that for the quarter.

December like seasonally is our lowest risk.

Speaker Change: Quarter of the year right. So just due to the fact that.

Speaker Change: Obviously, our customer base will sort of a windfall.

Speaker Change: Cash receipts in the fourth quarter, so historically that drops down both delinquency and charge offs in the fourth quarter.

Chad Prashad: The earlier stat that I mentioned in the resulting loan comparison was a 56% increase in new customer loan volume for the same quarter. New applications increased only 1% sequentially over the prior second quarter compared to the third quarter as we shifted marketing and underwriting strategies that resulted in higher approval and booking rates, which earlier I shared was a 22% increase in booked new customer loans sequentially, and those new customers continue to perform well with first-pay default rates that are significantly better than fiscal year 2022 and in line with last year and our pre-COVID comparison. In addition, our overall new customer application volume has increased back to within 1% of our pre-COVID application volume after increasing over 30% in the third quarter when compared to last year's 30%. We believe we have been able to successfully increase our approval rates without sacrificing credit quality or yield, and we are focused on continually improving both our underwriting and marketing strategies. Return of former customers increased around 6% sequentially in the third quarter compared to the second quarter and 17% compared to last year's third quarter.

Speaker Change: So when we seasonally see every year. So there is a seasonal adjustment that happens.

Speaker Change: In the fiscal third quarter.

Speaker Change: in the fiscal third quarter. The opposite adjustment happened in the fiscal first quarter, right? So there was a substantial increase

The opposite adjustment happened in the fiscal first quarter right. So there was a substantial increase in the expected loss rates for seasonality that happened in Q1. So this is just sort of the release of that.

Speaker Change: in the expected loss rates for seasonality that happened in Q1. So this is just sort of the release of that because, again, our customer base and portfolio is its least risky decision.

Because again.

Our customer base and portfolio is its least risky that zimmer.

Speaker Change: I mean, I guess I just don't understand.

John Rowan: I mean, I guess I just don't understand.

Speaker Change: But I mean, I guess I just don't understand.

Speaker Change: Maybe I'm wrong, but I mean wouldn't lifetime loss accounting kind of negate seasonal seasonal trends and.

Speaker Change: Maybe I'm just wrong, but I mean, wouldn't lifetime loss accounting kind of negate seasonal trends?

John Rowan: Maybe I'm just wrong, but I mean, wouldn't lifetime loss accounting kind of negate seasonal trends and the Reserve?

And the reserve.

Speaker Change: and the Reserve.

Speaker Change: Lovell

John L. Calmes: Lovell

Level.

Speaker Change: No.

Speaker Change: No, I mean, there's still a seasonality factor that goes into the season, right? So at a point in time, right? So you're trying to assess the expected losses at a point in time still, right? So, you know, those point in time expected losses will change based on season.

John L. Calmes: No, I mean, there's still a seasonality factor that goes into the season, right? So at a point in time, right? So you're trying to assess the expected losses at a point in time, still, right? So, you know, those point-in-time expected losses will change based on season.

Speaker Change: The seasonality factor that goes into this.

Speaker Change: The seasonal price of at a point in time right. So you are trying to assess the.

Speaker Change: The expected losses that are at a point in time still right. So.

Speaker Change: Yes.

Speaker Change: Point in time expect losses will change based on seasonality.

Okay, and you said that you're still accruing for 16, 35% in 2045 correct. The hurdles what yours are what fiscal years are those two one.

Speaker Change: Okay, and you said that you're still accruing for 1635 and 2045, correct, the hurdles? What fiscal year are those two in?

John Rowan: Okay, and you said that you're still accruing for 1635 and 2045, correct? The hurdles? What fiscal year are those two in? That's by the end of fiscal year 2025, and So they're both in fiscal 2024, so you're assuming that you're going to basically get to 2045 by fiscal 2025. Is that correct? Because obviously, if you're accruing for 1645, you're certainly accruing for 2045; you're certainly accruing for 1635. Correct.

Speaker Change: That's by the end of fiscal year 2025.

Speaker Change: And.

Speaker Change: and

Speaker Change: So they're both in fiscal 2024, so...

Speaker Change: So theyre both in fiscal 'twenty 2024, so.

Speaker Change: You're accruing that you're going to basically get to 2045 by fiscal 2025. Is that correct? Because obviously if you're accruing for 1645, you're certainly accruing for 2045, you're certainly accruing for 1635.

Speaker Change: You are correct you are accruing that youre going to basically get to 2045 by fiscal 2025 is that correct. Because obviously if you if you're accruing for six you're accruing for 645 or certainly a growing for 2045 years, certainly accruing for 16 to 35.

Speaker Change: Correct.

Speaker Change: Okay. All right. Thank you.

John Rowan: Okay. All right. Thank you.

Speaker Change: Okay alright, thank you.

Speaker Change: Again, if you have a question, please press star, then 1. Our next question will come from Vincent Caintic with Stevens. Please go ahead.

Operator: Again, if you have a question, please press star, then 1. Our next question will come from Vincent Caintic with Stevens. Please go ahead.

Again, if you have a question. Please press Star then one our next question will come from Vincent <unk> with Stephens. Please go ahead.

Chad Prashad: And the percent of former customers relative to the customer base continues to be higher than the prior normal comparable periods, especially pre-COVID. For new customers and the whole portfolio, our yields continue to improve as a result of improved gross yields and reduced delinquency rates.

Vincent: Good morning, Thanks for taking my questions.

Vincent Caintic: Good morning. Thanks for taking my questions. First, actually a follow up just on that seasonality. Any different expectations with tax refund season this year and how that will shape up versus last year? Hearing different views about whether or not, you know, whether to expect more or less tax refunds for the consumer this year versus last year.

Vincent Caintic: Good morning. Thanks for taking my questions. First, actually, a follow-up just on that seasonality. Any different expectations with tax refund season this year and how that will shape up versus last year? I'm hearing different views about whether or not, you know, whether to expect more or less tax refunds for the consumer this year versus last year.

Vincent: Actually a follow up just on that that seasonality.

Vincent: Any different expectations with the tax refund season, this year and how.

Vincent: That will shape up versus last year.

Vincent: Okay hearing different views about whether or not.

Chad Prashad: While we are pleased with our current progress in delinquency improvement and the trending of the underlying portfolio, we believe there's still room for improvement in the current and upcoming quarters, with the expectations of economic stability increasing and the decreasing likelihood of major unemployment impact. Management continues to accrue for the long-term incentive plan with investing tiers of $16.35 and $20.45 earnings per share due to the much-improved credit quality, yields, and operations.

Vincent: Whether to expect more or less tax refunds.

Vincent: For the consumer this year versus last year. Thank you.

Speaker Change: Yes, good morning Vincent.

Speaker Change: Yeah, morning, Vincent. You know, for us right now, while we've started filing taxes, it's still too early for us to tell, you know, what the impact is going to be for our average customer base, you know, if it's going to be a higher or lower return from that perspective. From a runoff perspective, so, you know, typically in the fourth quarter, as our customers receive tax refunds, you know, they tend to pay down their loans. You know, it kind of remains to be seen what that may look like this year. Our portfolio is substantially different this year entering the fourth quarter than it has been in prior fourth quarters. We have substantially more tenured customers with us and less new customers with us. So, you know, that may have an impact to the runoff rate. But in terms of how the tax season is itself for our customer base, it's still too early to tell.

John L. Calmes: Yeah, morning, Vincent. You know, for us right now, while we've started filing taxes, it's still too early for us to tell what the impact is going to be for our average customer base, you know, if it's going to be a higher or lower return from that perspective. From a runoff perspective, so, you know, typically in the fourth quarter, as our customers receive tax refunds, they tend to pay down their loans. It kind of remains to be seen what that may look like this year. Our portfolio is substantially different this year entering the fourth quarter than it has been in prior fourth quarters. We have substantially more tenured customers with us and fewer new customers with us. So, you know, that may have an impact on the runoff rate. But in terms of how the tax season is going for our customer base, it's still too early to tell.

Speaker Change: For US right now while were startup Alan taxes, it's too it's still too early for us to tell.

Speaker Change: What the impact is going to be per average customer base, if it's going to be a higher or lower return.

Speaker Change: From that perspective.

Speaker Change: From a a runoff perspective, so you typically in the fourth quarter as our customers receive tax refunds.

Tend to pay down their lines.

Speaker Change: It kind of remains to be seen what that may look like this year.

Folio is.

Speaker Change: Essentially different this year entering the fourth quarter than it has been.

Speaker Change: In prior fourth quarters, we have substantially more tenure.

Tenured customers with us and less new customers with us that may have an impact to the runoff rate, but in terms of how the tax season is itself for our customer base, it's still too early to tell.

Chad Prashad: Finally, I'd like to thank all of our wonderful team members who helped so many customers in our communities during the calendar year of 2023, helping to establish and rebuild credit, as well as meeting immediate financial needs. We have an absolutely amazing team, and I'm very grateful for their commitment to their customers and to each other. At this time, Johnny Calmes, our Chief Financial Strategy Officer, and I would like to open up to any questions. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone.

Speaker Change: Okay understood. Thank you and then so very helpful prepared remarks details on the evolving and the tightened credit.

Speaker Change: Okay, understood. Thank you. And then, so very helpful prepared remarks, details on the evolving and the tightening credits resulting, you know, improving metrics. I'm just wondering,

Vincent Caintic: Okay, understood. Thank you. And then, so very helpful prepared remarks, details on the evolving and the tightening credits resulting, you know, improving metrics. I'm just wondering, uh if this quarter's metrics are sort of a good run rate to think about going forward or maybe said another way like once the entire portfolio has the metrics of your of your current underwriting um like what does that look like in terms of The yield that you're charging, the net charge-offs that you're targeting and so forth, just trying to basically get a sense of maybe what fiscal 2025 loan metrics look like.

Speaker Change: Resulting.

Speaker Change: Improving metrics just wondering.

Speaker Change: uh if this quarter's metrics are sort of a good run rate to think about going forward or maybe said another way like once the entire portfolio has the metrics of your of your current underwriting um like what does that look like in terms of

Speaker Change: If this quarter's metrics are sort of a good run rate to think about going forward or maybe said another way like once the entire portfolio.

Speaker Change: As the metrics of your of your current underwriting.

Speaker Change: Like what does that look like in terms of.

Speaker Change: The yield that you're charging, the net charge-offs that you're targeting and so forth, just trying to basically get a sense of maybe what fiscal 2025 loan metrics look like.

Speaker Change: The net of the <unk>.

Speaker Change: Yields that you are charging the net charge offs that you're targeting and so forth just trying to.

Speaker Change: Basically you get a sense of maybe what fiscal 2025.

Speaker Change: Loan metrics look like.

Speaker Change: Vincent, so on our end, it sounds like you cut out in the middle of your question there, but from what I heard, you're asking about what the credit quality and kind of performance of the new customers look like and what the impact of the overall yields would be?

John L. Calmes: Vincent, so on our end, it sounds like you cut out in the middle of your question there, but from what I heard, you're asking about what the credit quality and kind of performance of the new customers will look like and what the impact of overall yields would be.

Speaker Change: Yes.

Speaker Change: Vincent.

Speaker Change: So on our end it sounds like you cut out in the middle of your question here, but from what I heard.

Operator: If you're using a speakerphone, 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. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from John Rowan with Janney. Please go ahead.

Speaker Change: Youre asking about what the credit quality and performance of the new customers look like and what the impact to the overall yields would be.

Speaker Change: Yes, please. Yes. Thank you.

Vincent Caintic: Yes, please. Yes. Thank you.

Speaker Change: Yes. Please yes. Thank you.

Speaker Change: Great question.

Speaker Change: Great question. So, you know, for the last year and a half or so, we've been tightening credit a fair amount, you know, pretty aggressively to begin with. And, you know, our loan volumes certainly suffered because of that. But over that time period, a couple of things have happened. One, as those new customers have kind of aged into a portfolio, it's had an impact to the overall portfolio. Two, some of those underwriting strategies for new customers have also been applied to the rest of the portfolio book as well. So, that has a greater impact on the overall portfolio. And then three, you know, we've increased confidence in how we've been underwriting. We've increased our approval rates pretty substantially over the last two or three quarters, especially, and we haven't seen any reduction in credit quality there. So, all that to say, you know, going forward, you know, I wouldn't treat this as, you know, a high point in terms of credit quality. I would treat this as sort of the norm going forward. And then in terms of the overall portfolio. You know, we mentioned this about two years ago, that it would take a lot of time for these changes to impact the overall portfolio. And you're beginning to really see that in terms of the portfolio gross yields this quarter, you know, increasing pretty substantially year over year. And we'll continue to see that for some time.

John L. Calmes: Great question. So, you know, for the last year and a half or so, we've been tightening credit a fair amount, pretty aggressively to begin with. And, you know, our loan volumes certainly suffered because of that. But over that time period, a couple of things have happened. One, as those new customers have kind of aged into a portfolio, it's had an impact on the overall portfolio. Two, some of those underwriting strategies for new customers have also been applied to the rest of the portfolio book as well. So, that has a greater impact on the overall portfolio.

Speaker Change: For the last year, and a half or so we've been tightening credit fair amount.

Speaker Change: Pretty aggressively to begin with.

Speaker Change: Our loan volumes certainly suffered because of that.

Speaker Change: But over that time period, it's a couple of things have happened one as those new customers dependent agents a portfolio that's had an impact to the overall portfolio to some of those underwriting strategies for new customers have also been applied to the rest of the portfolio book as well.

John Rowan: Morning, guys. I just want to understand what change in assumptions drove the $10 million provision release. You know, obviously, you talked about, you know, lower loss, you know, assumptions going forward, but what is the loss assumption that's included in that, you know, that $10 million reserve release, and what, you know, economic factor change drove that assumption? Yeah, yeah. So you kind of broke up there, right?

Speaker Change: That has a greater impact on the overall portfolio in two and three.

John L. Calmes: And then three, you know, we've increased confidence in how we've been underwriting. We've increased our approval rates pretty substantially over the last two or three quarters, especially, and we haven't seen any reduction in credit quality there. So, all that to say, you know, going forward, you know, I wouldn't treat this as, you know, a high point in terms of credit quality. I would treat this as sort of the norm going forward. And then in terms of the overall portfolio.

Speaker Change: We've increased confidence in how we've been underwriting we've increased our approval rates pretty substantially over the last two or three quarters.

Speaker Change: Especially and we haven't seen any reduction in credit quality. There. So all that to say going forward I wouldn't treat this as.

Speaker Change: Our high point in terms of credit quality.

Speaker Change: I would treat this as sort of a norm going forward and then in terms of the overall portfolio. We mentioned this about two years ago that it would take a lot of time.

John L. Calmes: You know, we mentioned this about two years ago that it would take a lot of time for these changes to impact the overall portfolio, and you're beginning to really see that in terms of the portfolio gross yields this quarter, increasing pretty substantially year over year. And we'll continue to see that for some time.

These changes to impact our overall portfolio and you are beginning to really see that.

Speaker Change: In terms of the portfolio gross yields this quarter, increasing pretty substantially year over year, and we will continue to see that for some time as well.

So the biggest piece that's driving the reduction of that for the quarter is December, like seasonally, is our lowest-risk quarter of the year, right? So just due to the fact that, obviously, our customer base will sort of have windfall cash receipts in the fourth quarter. Historically, that drives down both delinquency and charge-offs in the fourth quarter. And that's something we seasonally see every year.

Speaker Change: Okay. Thank you lasse.

Speaker Change: okay thank you and then um last one for for me um the uh so we've been hearing about maybe macro improvement maybe soft landing

Vincent Caintic: okay thank you and then um last one for for me um the uh so we've been hearing about maybe macro improvement maybe soft landing and certainly you're talking about increasing approval rates and you're not seeing you're getting more comfortable you're underwriting not seeing reduction in credit quality is there a point or is there a macro trend or maybe just maybe just takes a little bit of time before you feel really comfortable and in leaning in and we can see the you know the portfolio significantly grow just wondering what what you're looking at before you know we see significant portfolio growth thank you

Speaker Change: Last one for me.

Speaker Change: So.

Speaker Change: We've been hearing about maybe macro improvement maybe soft landing.

Speaker Change: and certainly you're talking about increasing approval rates and you're not seeing you're getting more comfortable you're underwriting not seeing reduction in credit quality is there a point or is there a macro trend or maybe just maybe just takes a little bit of time before you feel really comfortable and in leaning in and we can see the you know the portfolio significantly grow just wondering what what you're looking at before you know we see significant portfolio growth thank you

And certainly.

Speaker Change: You talked about increasing accrual rates and youre not seeing youre getting more comfortable underwriting seeing reduction in credit quality is there a point.

Speaker Change: Is there.

A macro trend or.

Speaker Change: Or maybe just maybe just takes a little bit of time before you feel really comfortable in.

Speaker Change: And leaning in and we can see the portfolio significantly grow just wondering what.

So there is a seasonal adjustment that happens in the fiscal third quarter; the opposite adjustment happened in the fiscal first quarter, right? So there was a substantial increase in the expected loss rates for seasonality that happened in Q1. So this is just sort of the release of that because again, you know, our customer base and portfolios are it's least risky at the. But I mean, I guess I just don't understand, you know. Maybe I'm just wrong, but I mean, wouldn't lifetime loss accounting kind of negate seasonal trends in... and the Reserve. Bravo. No, I mean, there's still a seasonality factor that goes into the season, right?

What youre looking at.

Speaker Change: Before we see significant.

Speaker Change: Portfolio growth. Thank you.

Speaker Change: Yeah, you know, I would say, you know, we're very conservative in how we look at the macroeconomic picture. We began tightening in April 2021. Personally, I expected a rather tight and quick change to the economy, which, you know, obviously didn't come for, you know, another year, year and a half, and it was much slower than I expected. So in terms of loosening up, you know, we have loosened up where, you know, we have seen prudence over the last couple of quarters. Again, our approval rates are up pretty substantially, but

John L. Calmes: Yeah, you know, I would say we're very conservative in how we look at the macroeconomic picture. We began tightening in April 2021. Personally, I expected a rather tight and quick change to the economy, which, you know, obviously didn't come for another year or so, and it was much slower than I had expected. So in terms of loosening up, you know, we have loosened up where we have seen prudence over the last couple of quarters. Again, our approval rates are up pretty substantially, but in terms of loosening up for growth, we're not in a position at all where we are considering loosening up and reducing credit quality or, in any way, sacrificing credit quality for growth.

Speaker Change: Yes.

Speaker Change: I would say.

Speaker Change: We're very conservative in how we look at the macroeconomic picture. We began tightening in April 2021 personally I expected, a rather tight and quick change to the economy.

Speaker Change: Which obviously didn't come for another year year, and a half and it was much slower than I expected.

Speaker Change: So in terms of loosening up we've we have loosened up.

Speaker Change: Where.

Speaker Change: We have seen prudent over the last couple of quarters again, our approval rates are up pretty substantially.

But.

Speaker Change: In terms of loosening up for growth, we're not in a position at all where we are considering loosening up and reducing credit quality or any way sacrificing credit quality for growth.

Speaker Change: In terms of loosening up for growth, we're not in a position at all where we are considering loosening up and reducing credit quality or in any way sacrificing credit quality for growth. The opposite is actually pretty true, where we have spent a lot of time making sure from a marketing perspective, an underwriting perspective, we can drive applications and approve applications that are within the acceptable credit box. So going forward, that will continue to be one of our main focuses is to grow the business, kind of move out of this wait and see and be very conservative growth approach into a more aggressive approach from a growth perspective, but still very prudent and conservative on the credit side.

So at a point in time, right, so you're trying to assess the expected losses at a point in time still, right? So, you know, those expected losses at a point in time will change based on season. Okay, and you said that you're still accruing for 1635 and 2045, correct? The hurdles? What fiscal year are those two in? That's by the end of fiscal year 2025, and you're, but so they're both at fiscal year 20, 2024. So. You're accruing that you're going to basically get to 2045 by fiscal 2025, aren't you? Because obviously, if you're accruing for 1645, you're certainly accruing for 1635.

John L. Calmes: The opposite is actually pretty true; we have spent a lot of time making sure from a marketing perspective, an underwriting perspective, we can drive applications and approve applications that are within the acceptable credit box. So going forward, that will continue to be one of our main focuses, to grow the business, kind of move out of this wait and see and be very conservative growth approach into a more aggressive approach from a growth perspective, but still very prudent and conservative on the credit side.

The opposite is actually pretty sure where we have seen a lot of time, making sure that from a marketing perspective, an underwriting perspective, we can drive applications and approve applications that are within the acceptable credit box.

Speaker Change: So going forward.

Speaker Change: We will continue to be one of our main focuses is to grow the business kind of move out of this wait and see and be very conservative growth approach into a more aggressive approach from a growth perspective, but still very prudent and conservative on the credit side.

Speaker Change: Okay, very helpful. Thanks very much.

Vincent Caintic: Okay, very helpful. Thanks very much.

Speaker Change: Okay very helpful. Thanks very much.

Speaker Change: Thanks Vincent.

Speaker Change: Thanks, Vincent.

Vincent Caintic: Thanks, Vincent.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Mr. Prashad for any closing remarks. Please go ahead.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Prashad for any closing remarks. Please go ahead.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. <unk> for any closing remarks. Please go ahead.

Correct. Okay, all right, thank you. Again, if you have a question, please press star, then 1. Our next question will come from Vincent Caintic with Stevens. Please go ahead. Good morning.

Chad Prashad: Thank you all for taking the time to join us today, and this concludes the third quarter earnings call for World Acceptance Corporation.

Chad Prashad: Thank you all for taking the time to join us today, and this concludes the third quarter earnings call for World Acceptance Corporation. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Mr. <unk>: Thank you all for taking the time to join US today and this concludes the third quarter earnings call for World Acceptance Corporation.

Chad Prashad: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Mr. <unk>: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Vincent Caintic: Thanks for taking my questions. First, actually, a follow-up just on that seasonality. Any different expectations for the tax refund season this year and how that will shape up versus last year? Hearing different views about whether or not, you know, whether to expect more or less tax refunds for the consumer this year versus last year? Yeah. Morning, Vincent.

Mr. <unk>: Okay.

Operator: transcript Emily Beynon and many more.

Mr. <unk>: [music].

Mr. <unk>: Okay.

Mr. <unk>: [music].

You know, for us right now, while we've started filing taxes, it's still too early for us to tell what the impact is going to be for our average customer base, you know, if it's going to be a higher or lower return from that perspective. From a runoff perspective, so, you know, typically, in the fourth quarter, as our customers receive tax refunds, they tend to pay down their loans. You know, it kind of remains to be seen what that may look like this year.

Speaker Change: and many more.

Mr. <unk>: Okay.

Mr. <unk>: Yes.

Speaker Change: Music

Operator: Music

Mr. <unk>: Okay.

Speaker Change: Thank you for watching!

Operator: Thank you for watching! Thank you for watching!

Mr. <unk>: Okay.

Speaker Change: Thank you for watching!

Operator: transcript Emily Beynon transcript Emily Beynon transcript Emily Beynon transcript Emily Beynon

Mr. <unk>: [music].

Our portfolio is substantially different this year entering the fourth quarter than it has been in prior fourth quarters. We have substantially more tenured customers with us and fewer new customers with us. So, you know, that may have an impact on the runoff rate. But in terms of how the tax season is itself for our customer base, it's still too early to tell. Okay.

Mr. <unk>: Yes.

Vincent Caintic: And then, very helpful prepared remarks, details on the evolving and tightened credit resulting in, you know, improving metrics. Just wondering if this quarter's metrics are sort of a good run rate to think about going forward, or maybe said another way, like once the entire portfolio has the metrics of your current underwriting, like what does that look like in terms of? the yield that you're charging, the net charge-offs that you're targeting, and so forth.

Mr. <unk>: Okay.

Mr. <unk>: [music].

Operator: transcript Emily Beynon transcript Emily Beynon transcript Emily Beynon transcript Emily Beynon transcript Emily Beynon

Vincent Caintic: Just trying to basically get a sense of maybe what fiscal 2025 loan metrics might look like. Vincent, so on our end, it sounds like you cut out in the middle of your question there, but from what I heard, you're asking about what the credit quality and kind of performance of the new customers look like and what the impact of the overall yields would be. Yes, please, yes, thank you. Great question.

Chad Prashad: So, you know, for the last year and a half or so, we've been tightening credit a fair amount, pretty aggressively to begin with. And, you know, our loan volumes certainly suffered because of that. But over that time period, a couple of things have happened.

Mr. <unk>: Okay.

Speaker Change: Thank you for watching. Thank you for watching.

Operator: Thank you for watching. Thank you for watching.

Mr. <unk>: Yes.

Chad Prashad: One, as those new customers have kind of aged into the portfolio, it's had an impact on the overall portfolio. Two, some of those underwriting strategies for new customers have also been applied to the rest of the portfolio book as well. So that has a greater impact on the overall portfolio.

Yes.

Mr. <unk>: Yes.

Mr. <unk>: Okay.

Mr. <unk>: Yes.

Chad Prashad: And then three, you know, we've increased confidence in how we've been underwriting. We've increased our approval rates pretty substantially over the last two or three quarters, especially, and we haven't seen any reduction in credit quality there. So all that to say, you know, going forward, I wouldn't treat this as, you know, a high point in terms of credit quality. I would treat this as sort of the norm going forward. And then in terms of the overall portfolio, you know, we mentioned this about two years ago that it would take a lot of time for these changes to impact the overall portfolio.

Mr. <unk>: Sure.

Okay.

Mr. <unk>: Okay.

Mr. <unk>: Sure.

Operator: transcript Emily Beynon transcript Emily Beynon

Mr. <unk>: [music].

Mr. <unk>: Okay.

Mr. <unk>: Yes.

Mr. <unk>: [music].

Chad Prashad: And you're beginning to really see that in terms of the portfolio gross yields this quarter, increasing pretty substantially year over year. And we'll continue to see that for some time. Okay, thank you.

Vincent Caintic: And then last one for me, we've been hearing about maybe macro improvement, maybe soft landing. And certainly, you're talking about increasing approval rates, and you're not seeing, you're getting more comfortable in the underwriting, not seeing a reduction in credit quality. Is there a point, or is there a macro trend, or maybe it just takes a little bit of time before you feel really comfortable leaning in, and we can see the portfolio significantly grow?

Chad Prashad: I'm just wondering what you're looking at before, you know, we see significant portfolio growth. Thank you. Yeah, you know, I would say we're very conservative in how we look at the macroeconomic picture. We began tightening in April 2021. Personally, I expected a rather tight and quick change to the economy, which, you know, obviously didn't come for another year, year and a half, and it was much slower than I expected. So in terms of loosening up, we have loosened up where we have seen prudent over the last couple of quarters. Again, our approval rates are up pretty substantially. But, in terms of loosening up for growth, we're not in a position at all where we are considering loosening up and reducing credit quality or, in any way, sacrificing credit quality for growth.

Chad Prashad: The opposite is actually pretty true; we have spent a lot of time making sure, from a marketing perspective and an underwriting perspective, we can drive applications and approve applications that are within the acceptable credit box. Going forward, that will continue to be one of our main focuses, to grow the business, move out of this wait-and-see and be very conservative growth approach to a more aggressive approach from a growth perspective, but still very prudent and conservative on the credit side. Okay, very helpful. Thanks very much. Thank you, Vincent. This concludes our question and answer session. I would like to turn the conference back over to Mr. Prashad for any closing remarks. Please go ahead.

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