Q4 2024 World Acceptance Corp Earnings Call

Good morning, and welcome to the World Acceptance Corporation fourth quarter 2024 earnings Conference call.

Operator: Good morning, and welcome to the World Acceptance Corporation fourth quarter 2024 earnings conference call. This call is being recorded. At this time, all participants have been placed in a listen-only mode.

Operator: This call is being recorded.

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.

Operator: Before we begin, the Corporation has requested that I make the following announcement. The comments made during this conference call may contain certain forward-looking statements within the meaning of Section 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 uncertainty. 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.

Operator: The comments made during this conference call may contain certain forward looking statements within the meaning of section 20 <unk> of Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events.

Operator: 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 Sim.

Operator: Expressions are forward looking statements additional information.

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 is included in the paragraph discussing forward-looking statements in today's Earnings Press Release and in the Risk Factors sections 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. The Corporation does not undertake any obligation to update any forward-looking statements it makes. At this time, it is my pleasure to turn the floor over to your host, Chad Prashad, President and Chief Executive Officer.

Operator: 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 sections of the Corporation's most recent form 10.

Ravin Chad Prashad: K 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 at this time. It is my pleasure to turn the floor over to your host Chad.

Ravin Chad Prashad: Shot President and Chief Executive Officer.

Operator: Yeah.

Ravin Chad Prashad: Good morning, and thank you for joining our fiscal 2024 year end earnings call.

Ravin Chad Prashad: Good morning, and thank you for joining our fiscal 2024 year-end earnings call. Before we open up to questions, there are a few areas I'd like to highlight. Nearly two years ago, in the spring of 2022, we began to see the effects of the stimulus hangover impacting our customer base, mainly through inflation and increased financial insecurity about their future. At that time, we began what has been nearly a two-year period of tightened underwriting, reduced outstandings with our highest credit risk customers, and a focus on building a stronger portfolio base that included stopping and reversing the reduction in gross yield.

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

Ravin Chad Prashad: Nearly two years ago and the spring of 2022, we began to see the effects of the stimulus hangover impacting your customer base, mainly through inflation and increased financial and security about their future.

Ravin Chad Prashad: At that time, we began was been nearly a two year period of tightened underwriting reduced outstandings with our highest credit risk customers.

Ravin Chad Prashad: Our focus on building a stronger portfolio of base that included stopping and reversing the reduction in gross yields.

Ravin Chad Prashad: Earlier this fiscal year, we signaled that we would continue with tighter credit it would not anticipate our normal portfolio growth pace for the year.

Ravin Chad Prashad: Earlier this fiscal year, we signaled that we would continue with tighter credit and would not anticipate our normal portfolio growth pace for the year. As a result of this portfolio rightsizing process, we decreased our portfolio size by 8.1% this fiscal year.

Ravin Chad Prashad: During this portfolio right sizing process, we decreased our portfolio size by 818, 1% this fiscal year.

Ravin Chad Prashad: However, our customer base was largely unchanged with a 1.5% increase and the number of customers at year end compared to 2023, for branches that were open in both fiscal years. The reduction in customer base was negligible at 0.2%. This is an important distinction, as we've used this time to right-size and de-risk the portfolio through improving the overall credit quality of our customer base and reducing our realized and expected losses, while at the same time improving the yield and decreasing our average customer outstanding.

Ravin Chad Prashad: However, our customer base was largely unchanged with a one 5% decrease in the number of customers at year end compared to 2023.

Ravin Chad Prashad: For branches that were opened in both fiscal years.

Ravin Chad Prashad: Reduction in customer base was negligible at 2%.

Ravin Chad Prashad: This is an important distinction as we've used this time to rightsize and derisk the portfolio through improving the overall credit quality of our customer base.

Ravin Chad Prashad: And reducing our realized unexpected losses, while at the same time, improving the yield and decreasing our average customer outstandings.

Ravin Chad Prashad: The results show significant reductions in delinquency with our recency 60-day or longer rate improving significantly by 9% from 5.5% to 5% when comparing the end of 2024 to the end of 2023, and our 90-plus delinquency rate improving by 11%, from 3.5% to 3.1%. Again, comparing data from 2024 to 2023.

Ravin Chad Prashad: The results showed significant reductions in delinquency with a recently 60 day or longer rate improving significantly by 9% from five 5% to 5% when comparing the end of 2024 to the end of 2023, and our 90 plus delinquency improving by 11%.

Ravin Chad Prashad: Three 5% to three 1% again, comparing <unk> 2024 to 2023.

Ravin Chad Prashad: Also, our annualized net charge-off rate improved by more than 500 basis points, more than 20% on a relative basis when comparing the end of fiscal 2024 to 2023. I'm also very proud of our capital position, especially in the current economic climate. I think the prudent use of our debt has led to a reduced interest expense in the fourth quarter when compared to fiscal 2023 and a very conservative 1.2 to 1 debt to equity ratio at the end of the year.

Ravin Chad Prashad: Our annualized net charge off rate improved by more than 500 basis points more than 20% on a relative basis when comparing the end of fiscal 2024 to 2023.

Ravin Chad Prashad: I'm also very proud of our capital position, especially in the current economic climate.

Ravin Chad Prashad: I think the prudent use of our debt has led to reduced interest expense in the fourth quarter when compared to fiscal 2023, and a very conservative one two to one debt to equity ratio at the end of the year.

Ravin Chad Prashad: New loan volumes increased 7% this quarter compared to the fourth quarter last year as demand for our former and new customers continues to remain high.

Ravin Chad Prashad: New loan volumes increased 7% this quarter compared to the fourth quarter last year, as demand for our former and new customers continues to remain high. Former customer loan volume in particular was 14% higher in the fourth quarter this year compared to last year and improved 11% year over year for the entire fiscal year.

Ravin Chad Prashad: Former customer loan volume in particular, it was 14% higher in the fourth quarter this year compared to last year and improved 11% year over year for the entire fiscal year.

Ravin Chad Prashad: During the quarter, new customer approval rates were relatively flat.

Ravin Chad Prashad: During the quarter, new customer approval rates were relatively flat when compared to the same quarter last year, with our continued focus on credit quality and our early indications that performance through first payment defaults is significantly lower than the prior two fiscal years and in line with or better than pre-pandemic first payment defaults comparisons. For new customers and the portfolio as a whole, our yields continue to improve. This is a result of improved gross yields as well as reduced delinquency.

Ravin Chad Prashad: When compared to the same quarter last year.

Ravin Chad Prashad: With our continued focus on credit quality and our early indications performance through first payment defaults are significantly lower than the prior two fiscal years and in line with or better than pre pandemic first pay defaults comparisons.

Ravin Chad Prashad: For new customers in the portfolio as a whole our yields continue to improve.

Ravin Chad Prashad: This is a result of improved gross yields as well as reduced delinquencies.

Ravin Chad Prashad: While we are pleased with our current progress in delinquency improvement and trending of the underlying portfolio, we still believe there is room for improvement in the current and upcoming quarters. With the expectations of economic stability continuing to increase and the decreasing likelihood of a major unemployment event impacting our customer base, management continues to accrue the long-term incentive plan with vesting periods of $16.35 and $20.45 earnings per share due to the overall much improved credit quality and operating costs.

Ravin Chad Prashad: While we are pleased with our current progress and delinquency improvement and training of the underlying portfolio. We still believe there is room for improvement in the current and upcoming quarters.

Ravin Chad Prashad: With the expectations of economic stability, continuing to increase and the decreasing likelihood of a major unemployment event impacting our customer base management continues to accrue for long term incentive plan with vesting periods of $16 35.

Ravin Chad Prashad: And $3.45 earnings per.

Ravin Chad Prashad: Share due to the overall much improved credit quality and operating conditions.

Ravin Chad Prashad: We anticipate returning to modest growth this year with a continued focus on reducing delinquency and net charge-offs. We'll continue to monitor both of these, especially in the first several quarters of fiscal year 2025, as those assumptions are fairly vital to us achieving $20.45 for the full fiscal year. Finally, I'd like to thank our wonderful team members here at World who have helped so many customers from our communities throughout the entire fiscal year of 2024, helping to establish and rebuild credit, as well as meeting immediate financial needs.

Ravin Chad Prashad: We anticipate returning to modest growth this year with a continued focus on reducing delinquency and net charge offs.

Ravin Chad Prashad: We'll continue to monitor both of these especially in the first several quarters of fiscal year 2025, as those assumptions are fairly vital towards achieving $20 45 for the full fiscal year.

Ravin Chad Prashad: Finally, I'd like to thank our wonderful team members here at World, who have helped so many customers from our communities throughout the entire fiscal year of 2024 up into established and rebuild credit as well as meeting immediate financial needs. We have an absolutely amazing team I'm very grateful for their commitment to their customers as well as to each other.

Ravin Chad Prashad: We have an absolutely amazing team. I'm very grateful for their commitment to their customers as well as to each other. At this time, Johnny Calmes, our Chief Financial and Strategy Officer, and I would like to open up to any questions you have.

John L. Calmes: At this time, John <unk>, our chief financial and strategy Officer, and I would like to open up to any questions you have.

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

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are 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. At this time, we will pause momentarily to assemble our roster. The first question comes from John Rowan with Chani. Please go ahead.

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

Operator: The first question comes from John Rowan with Janney. Please go ahead.

John J. Rowan: Good morning guys. Chad, my phone broke down for a second there. Did you give any type of guidance for the upcoming quarter and the year, or were you just kind of restating what the, you know, the vesting, you know, goals are?

John J. Rowan: Morning, guys.

John J. Rowan: Chad My phone broke up for a second there did you give us some type of guidance for the upcoming quarter and the year or are you just kind of restating what.

John J. Rowan: Best thing.

John J. Rowan: Goals are.

Ravin Chad Prashad: Yeah, really just restating what our investing goals are at $16.35 per share and $20.45 per share. And, you know, also reinforcing that, you know, we realize that there are two major events. One is modest growth, and the other is continuing to reduce our delinquency and net charge-off rates, which we'll have to continue to focus on, especially in the first, you know, one to two quarters this year, to remain confident that those tiers, especially at $20.45, are

John J. Rowan: Yes, really just restating, what our investing goals are at $16 35 per share in 2045 per share and.

Ravin Chad Prashad: Also reinforcing that we realize that there is two major events one is modest growth and the other is continuing to reduce our delinquency and net charge off rates that will have to continue to focus on especially in the first one or two quarters. This year.

Ravin Chad Prashad: To remain confident that those those tiers, especially at $20 45.

Ravin Chad Prashad: Are achievable.

John J. Rowan: Okay, obviously, you charged off quite a bit less, or you provisioned quite a bit less in your charge-off for the quarter. Is that just a function of portfolio liquidation and CECL, or were there changes to macro assumptions for left-hand loss?

Ravin Chad Prashad: Okay.

John J. Rowan: Obviously, you charged off quite a bit less provision climate lessen your charge off for the quarter is that just a function of portfolio liquidation and CSO or are there changes to macro assumptions for what kind of loss.

John J. Rowan: David It's primarily just yet.

Ravin Chad Prashad: Yeah, it's primarily just, yeah, the biggest thing is the decrease in the portfolio that happens in the fourth quarter. But, yeah, but also, like, there's, you know, improvement in the underlying loss rates that drive the CISO model, right? And obviously, lower delinquency also factors in there as well. So, you know, all those things together led to a lower provision. You're in the

Ravin Chad Prashad: Biggest thing is the decrease in the.

Ravin Chad Prashad: The portfolio of that happens in the in the fourth quarter.

Ravin Chad Prashad: But yes, but also like theirs.

Ravin Chad Prashad: Improvement in the.

Ravin Chad Prashad: Underlying loss rates that drive the CSO model right and obviously lower lower delinquency also factors in there as well so.

Ravin Chad Prashad: All those things together.

Ravin Chad Prashad: <unk> led to the lower.

Ravin Chad Prashad: Provision during the quarter.

John J. Rowan: Okay, so, okay, so there were changes to the lifetime loss assumptions based on delinquencies or whatever you have, you know, going into that. That's right, yeah. Okay. And then just one last question: any unusual items in G&A?

Speaker Change: Okay. So okay. So there were changes to the lifetime loss assumptions based on delinquencies.

Speaker Change: You have going into that assumption.

Speaker Change: That's right yes, okay.

Ravin Chad Prashad: No, nothing unusual happened this quarter.

Speaker Change: And then just one last question any unusual items in G&A.

Speaker Change: Nothing unusual this quarter, Okay, alright, that's it for me. Thank you.

John J. Rowan: Okay, all right. That's it for me. Thank you.

John J. Rowan: Yeah.

Speaker Change: Again, if you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star then 1. If there are no further questions, I would like to turn the conference back over to Chad Prashad for any closing remarks.

Ravin Chad Prashad: Seeing no further questions I would like to turn the conference back over to Chad Prasad for any closing remarks.

Ravin Chad Prashad: Thank you for taking the time to join us today, and John, thank you for your question. This concludes the fourth quarter earnings call for World Acceptance Corporation. Thank you. The conference is now concluded.

Ravin Chad Prashad: Thank you for taking the time to join US today and John. Thank you for your question. This concludes the first or the fourth quarter earnings call for World Acceptance Corporation. Thank you.

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

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

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