Q3 2025 World Acceptance Corp Earnings Call
Good morning and welcome to World Acceptance Corporation's 3rd Quarter 2025 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.
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.
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 31st, 2024, and subsequent reports were 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
Good morning. Thank you for joining our fiscal 2025 third quarter earnings call. Before we open up to questions, there are a few areas I'd like to highlight.
We're excited about the results we're seeing throughout the portfolio after a few years of right-sizing and de-risking.
Notably, yields have improved by over 200 basis points year-over-year. Portfolio growth in the third quarter returned to pre-pandemic norms.
The loan portfolio itself continues to perform well as first pay default rates remain low, even as we've increased our growth over the last several quarters.
And finally, our portfolios returned to essentially the same size year-over-year after shrinking 10% year-over-year at the end of the third quarter last year, as well as shrinking three of the last four years, year-to-date.
Customer base has actually increased by 4% year-over-year.
compared to shrinking 2.2% for the 12 months ending December of 2024 and shrinking 14% for the same period of fiscal 23.
All of these results show a stabilized portfolio with both higher credit quality and higher yields as we're poised to steadily grow in fiscal 26.
During the third quarter of 25, we grew the portfolio by 6.6% compared to 1.5% during the third quarter of fiscal 24 and shrinking 2.8% in fiscal 23.
For the customer base, we experienced 7% growth in our customer base during the third quarter, which compares to 3% during the third quarter of the prior year, as well as an average of 6.3% customer base growth pre-pandemic.
We work diligently to regrow our customer base with higher credit quality customers while decreasing our overall average balance to ensure the right risk-reward profile across our customer base and to improve our yields and long-term customer profitability.
Year-over-year our average balance has decreased by almost 5.1% from December 31st, 2023 and by 12.6% from December 31st, 2022.
Our yields have improved notably for the entire portfolio, driven by an improvement in yields for both our non-refinanced customers as well as now including our refinanced customers.
Our non-refinance volume has rebounded during the third quarter with over 18% more loans made during the third quarter compared to fiscal 24 and 53% more compared to fiscal 23.
All of this growth comes with marked improvement in yield as well as stable early performance indicators for credit quality.
For new customers, marketing and acquisition channel adjustments continue to show increased quality in applications. Our approval rates for new customers has improved dramatically.
The third quarter approval rates increased by 47 percent compared to the same period of fiscal 24 and by 80 percent compared to the same period of fiscal 23, all again while maintaining low first payment default rates and improving our gross yields.
With these shifts in the portfolio makeup and the weighting continuing into this current calendar year, we expect to see yields and delinquency trends continue to convert into the same revenue and income trims that we've already seen so far this year, as well as into fiscal 26.
We do continue to see an opportunity to improve our delinquency and charge-off rates, especially related to the large loan portfolio, part of which stems from our outsized investments into large loans made during fiscal years 21 and 22.
Finally, in closing, we have an absolutely amazing team and I'm very grateful to their commitment to our customers and to each other. They are helping our customers every day to establish credit, rebuild credit, as well as meeting an immediate financial need.
Speaker Change: At this time, Johnny Cummings, 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 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Kyle Joseph with Stevens. Please go ahead.
Hey, good morning. Thanks for taking my questions.
Just uh
Speaker Change: Thinking about growth versus versus credit quality in the in the macro environment obviously
Thank you Brian.
Speaker Change: See, you know, sustaining portfolio quality while also growing the portfolio.
Yeah, good morning, Kyle.
Speaker Change: So, a lot of our growth has been from non-refinance customers, so that includes our former customer base as well.
Speaker Change: While we have increased our approval rates and overall booking rates of our new customers, they still remain, you know, I would say, within the normal range from a historic perspective.
Speaker Change: Over time over the last year or two we've really focused in on
attracting former customers to return to us.
Speaker Change: any more weighted towards new customers now than we have been in the past, pre-pandemic especially. We're certainly less weighted towards new customers today than we were from 2018 on through like 2021 or so.
In terms of credit quality in the macroeconomic environment,
Speaker Change: We've moved and shifted towards smaller loans over the last two to three years than we were doing in fiscal 21 and fiscal 22, which allows us a little more flexibility in how we're underwriting and the type of loan products that we are
Speaker Change: fitting our customers with to make sure that we can recognize the
Speaker Change: the product matches the risk of the customers, especially with new customers. So in this environment, you know, I don't anticipate, you know, unemployment to move up dramatically or even on the inflation side to see any real additional demands on our customers' pocketbooks.
Thank you.
Speaker Change: Got it. Thanks, that's a good segue to yeah on the on the portfolio yield you highlighted I think at 200 basis point improvement is that a function of mix is that a function of credit quality and kind of give us a sense for you know do you see that being being stable going forward at the new base level?
Speaker Change: Yes, I'll take that. It's primarily mixed, right? So you can see that, you know, our large loan,
Speaker Change: portfolio as a percent of the mix has shrunk to 48.2% where it was 55.2% last year. So year-over-year
Speaker Change: Our large loans have shrunk close to 14% while our small loans have grown close to 14%.
Speaker Change: You know, credit quality will have a part in that as well, because obviously we're not accruing interest on our non-performing loans, so that does help as well.
Speaker Change: Very helpful. Thanks. And then one last one for me just given where we are in the in the quarter You know any insight you guys have on tax refunds how you're how you're thinking about this season in terms of timing and magnitude versus last year
Speaker Change: Yeah, I mean, I think it's still a little too early to tell. I think we're off to a good tax season. We've made a number of operational changes over the last couple of years that have really.
Speaker Change: customer demand or interest in you know the product with us but it's still you know it's early we haven't quite hit our biggest weeks yet that we normally file which will be you know this week into the first couple weeks of February so I would say it's early to tell but we're cautiously optimistic.
Great. Thank you very much for answering my questions.
Thanks, Kyle.
Speaker Change: Again, if you have a question, please press star then 1. Our next question will come from John Rowan with JANI. Please go ahead.
Good morning, guys.
or John
Speaker Change: So, it feels like you guys are, you're obviously, you know, kind of re-embracing the small loan portfolio, kind of the history of the company. I'm curious, I mean, are you guys marketing to customers that...
Speaker Change: I want to say jettisoned, but we're not really the core focus as you were growing the large long portfolio. Are you going back to former customers, are you marketing to them, and what are you marketing to them? Is it the same economics that we grew to know in the history of the company, meaning, you know?
Speaker Change: you know, the company has had for, you know, 20 or so years. I'm just curious if you're basically remarketing the same small loan product to the same customers that may have left the company during the growth of the large portfolio growth.
Morning: Yeah. Morning, John. Great question. So, there's a little bit of yes, there's a lot of no to that answer. So, we are moving back towards smaller loan customers, not quite as small on the whole as you would have seen pre-2020.
Morning: to give you some context. Leading up to 2020, our average...
Morning: It was seeking around a $650 loan, today that's closer to around $800 to $850, which is still down a good bit from the $1100, $1150 that we were lending back in calendar 22.
Morning: Part 21. So while we've come back down, it's still not as low as it used to be.
Morning: On the economic side, we have worked to get our yields up close to where they used to be. Again, the loans are not quite as small as they used to be, so the yields are not going to be quite as high as they used to be.
Morning: the gross yields. And then, you know, on the refinancing side,
Morning: I don't see us ever being able to return to a super high refinance rate that you would see back
Thank you.
Morning: So, you know, for a new customer walking the door, you're looking at around 12 months for a term. All of our loans today are closer to about 18 months for an average term, you know, so we're typically not going to see.
a look.
Morning: We're not in a period where, you know, we're looking at six-month term loans or seven-month term loans and for refinances in a year. So it's moved on to a different product from that perspective.
From an overall performance perspective, though,
Morning: One, the small loan customer from a growth perspective for new and former customers, and we do continue to market to those former customers who've left us over the last couple of years to return for smaller dollar loans.
Morning: On the larger loan side, we are actively and continue to actively continue to work to make sure that large loan portfolio is really well underwritten and also secured.
Morning: Okay, I'll just make sure I understood one of the answers.
Morning: particularly with the the duration so on a small loan today what's the stated contractual length when the loan is underwritten and when are you marketing a refinance?
Morning: What's the contractual life versus the actual life, the average life of the portfolio basically?
Morning: Yeah, so the typical new loan will be, let's say, around 12 months with roughly 45% of our customers choosing to refinance in the first year.
Morning: Yeah, that's what I need to know. All right, thank you very much.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Chad Prashad for any closing remarks.
Chad Prashad: Thank you, guys, for taking the time to join us today, and this concludes our 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.