Q4 2025 World Acceptance Corp Earnings Call
Operator: Good morning, and welcome to World Acceptance Corporation's fourth quarter 2025 earnings conference call. This call is being recorded. At this time, all participants have been placed in a listen only mode.
Good morning, and welcome to the World Acceptance Corporation fourth quarter 2025 earnings Conference call.
Is being recorded at.
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 announcements.
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 facts, 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.
The comments made during this conference call may contain certain forward looking statements within the meaning of section 21 E of 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.
Other than those of historical facts as well as those identified by the words anticipate.
To meet intend plan expect believe may will and should or any variation of the foregoing and similar expressions are forward looking statements. Additionally.
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 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, 2024, 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.
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.
<unk> ended March 31, 2024, and subsequent reports filed 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.
Chad Prashad: 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. Morning, and thank you for joining our fiscal 2025 year-end earnings call.
Speaker Change: 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.
Chad Prasad: Good morning, and thank you for joining our fiscal 2025 year end earnings call.
Chad Prashad: Before we open up to questions, there are a few areas I'd like to highlight. We ended the year with a 1.22 billion dollar outstanding ledger, which is a 4% decrease year. However, our customer base increased by three and a half. Of note, this is the first year of year-over-year customer growth since fiscal year 2022. And we've returned to the largest customer base since the end of fiscal year 2020. The reduced ledger and increased customer base are the result of our continued efforts to reduce our outstanding average balance per customer. which decreased 7.3% year-over-year following a 7.1% decrease last year.
Chad Prasad: Before we open up to questions. There are a few areas I'd like to highlight.
Chad Prasad: We ended the year with a one point to $2 billion outstanding let here, which is a 4% decrease year over year.
Chad Prasad: Over our customer base increased by three 5%.
Chad Prasad: Note. This is the first year of year over year customer growth.
Chad Prasad: Since fiscal year 2022.
Chad Prasad: And we returned to the largest customer base since the end of fiscal year 2022.
Chad Prasad: Reduced ledger and increased customer base are a result of our continued efforts to reduce our outstanding average balance per customer.
Chad Prasad: Which decreased seven 3% year over year following a seven 1% decrease last year.
Chad Prashad: As we continue to focus on improving gross yields, which are improved by over 100 basis points. and growing the customer base through primarily new and former customers as well as improve retention of existing customers. We continue to expect the average balance to right size in the upcoming. On the surface, we continue to experience what may seem like sticky delinquency. which for World looks like overall annual delinquency and charge-off rates that appear stubborn to return to normal levels. Part of that, roughly 125 to 150 basis points of the 17.5% annualized charge-off rate is due to the portfolio shrinking this year and a reduction in the denominator itself.
Chad Prasad: As we continue to focus on improving gross yields which improved by over 100 basis points. This year and growing the customer base through primarily new and former customers as well as improve retention of existing customers.
Chad Prasad: We continue to expect the average balance to rightsize in the upcoming fiscal year.
Chad Prasad: On the surface, we continue to experience what may seem like sticky delinquency, which world looks like overall annual delinquency and charge off rates that if your stubborn to return to normal levels.
Chad Prasad: Part of that roughly 125 to 150 basis points of the same thing in a 5% annualized charge off rates.
Chad Prasad: This is due to the portfolio shrinking this year and a reduction in the denominator itself.
Chad Prashad: as individual credit vintages appear steady or improved overall. With normal to mid-single-digit portfolio growth, we would expect a natural 125 to 150 basis points reduction in the annualized rate, all else being equal. The other major component of our delinquency rate is the growth in new customers. At the end of December 2024, we increased our newest customer bucket, those with less than six months of tenure with the company, by 36% compared to December 2023. That's a $32 million increase. This is important because these newest customers to the world are our riskiest. As we rolled into the fourth quarter, this growth had an expected impact on our delinquency rates, especially our 60- and 90-day buckets.
Chad Prasad: As individual credit vintages appear steady or improved overall.
Chad Prasad: With normal to mid single digit portfolio growth, we would expect a natural 125 to 150 basis points reduction in the annualized rate all else being equal.
Chad Prasad: The other major component of our delinquency rate is the growth in new customers. This year.
Chad Prasad: At the end of December 2024, we increased our newest customer bucket those with less than six months of tenure with the company by 36% compared to December 2023, that's a $32 million increase.
Chad Prasad: This is important because these newest customers world, our riskiest customers with the highest loss rates as we rolled into the fourth quarter. This growth hadn't expected impacts our delinquency rates, especially our 60 and 90 day buckets with our early stage zero to 60 days delinquent buckets those actually improved.
Chad Prashad: With our early-stage 0- to 60-day delinquent buckets, those actually improved. As of today, in April fiscal year 2026, the current month, we've actually seen improvement sequentially in our 30-, 60-, and 90-day buckets. But it's important to keep in mind that new customer growth is an investment with an outsized impact immediately to our provision for law. as well as the short-term, about one-quarter lag impact toward delinquency. We are also optimistic about the impact that improved training and quality of delinquency and loan servicing management will have on delinquents.
Chad Prasad: As of today in April fiscal year 2026, the current month, we've actually seen improvement sequentially in our 30, 60, and 90 day buckets, but it's important to keep in mind that new customer growth is an investment with an outsized impact immediately to our provision for losses as well as the short term about one quarter of lag impact towards that.
Chad Prasad: Once the rates.
Chad Prasad: We're also optimistic about the impact that improved training and quality of delinquency and loan servicing manager management will have on delinquency that's already underway for fiscal year 2026.
Chad Prashad: that's already underway for fiscal year 2020. Our fourth quarter benefited from a 25% increase in tax return revenue. nearly $7 million. I do want to further point out that our fourth quarter EPS also been extended from a $2.8 million after-tax accrual release of share-based compensation. or roughly $0.38 per share. This release comes from a portion of forfeited performance shares and resulted in $8.13 per share this quarter, which would have been around $7.75. $7.75 per share during the fourth quarter without this one-time benefit. Non-refunding loan volume during the fiscal year increased by 12.6% year-over-year, which followed a 10% increase last year.
Chad Prasad: Our fourth quarter benefited from a 25% increase in tax return revenue the season.
Chad Prasad: Nearly $7 million.
Chad Prasad: I do want to further point out that our fourth quarter EPS also benefited from a $2 $8 million after tax accrual release of share based comp expense of roughly 38 per share. This release comes from a portion of forfeited performance shares resulted in $8 13 per share this quarter, which would have been around $7.
Chad Prasad: And 75% a.
Chad Prasad: $7.75.
Chad Prasad: Per share during the fourth quarter without this one time benefit.
Chad Prasad: Non refundings loan volume during the fiscal year increased by 12, 6% year over year, which followed a 10% increase last year.
Chad Prashad: while maintaining high credit quality, low first payment default rates, and improved gross and net yields. This has continued already into April of the current month, fiscal year 2026, with to date non-refinance origination surpassing April of the most recent prior years, going all the way back to April of fiscal year 2020, including surpassing April of fiscal year 2023, which was our previous high of interest. Of note, the April non-refinance volume here that I'm talking about is in number of originations, not dollars originated. This is an important distinction in the difference in our current strategy. It's really highlighted by comparing our April, current year, fiscal year 2026, originations to April of fiscal year 2023.
Chad Prasad: While maintaining high credit quality worst low first payment default rates and improved gross and net yields. This is continued already into April the current month fiscal year 2026 with to date non refinance originations surpassing April.
Chad Prasad: The most recent prior years going all the way back to April of fiscal year 2020.
Chad Prasad: Including suppressing April of fiscal year, 2023, which was our previous high benchmark.
Chad Prasad: Of note the April non refinance volume here that I'm talking about is a number of originations not dollars originated this is an important distinction and the difference in our current strategy is really highlighted by comparing our April current year fiscal year 2026 originations to April of fiscal year, 2023 well.
Chad Prashad: While the number originated thus far in this April is similar to April of 2023, the average balance from this April is 24% lower than it was back in April of fiscal year 23. And the gross yield today is 800 basis points higher. While the current month, April's Origination's first payments haven't come due yet, the first pay default comparisons for the three prior months to each of these April's highlights an increase in or stability in performance. The Q4 originations from Fiscal Year 25 versus Fiscal Year 22, the three months prior to each of those Aprils, shows a lower first payment default rate in the most recent period.
Chad Prasad: Number of originated thus far and the favorable a similar to April 2023 the average balance from this April is 24% lower than it was back in April of fiscal year, 'twenty, three and they get gross yield today, it's 800 basis points higher.
Chad Prasad: Well the current month April's originations first payments haven't come due yet the first pay default comparisons for the three prior months to each of these april's highlights.
Chad Prasad: Highlights an increase in our stability and performance the key.
Chad Prasad: Q4 originations from fiscal year, 'twenty five versus fiscal year, 'twenty, two or three months prior to each of those april's shows a lower first payment default rate in the most recent period again, coupled with a much lower balance and around 800 basis points higher gross yields but those comparable periods.
Chad Prashad: Again, coupled with a much lower balance and around 800 basis points higher gross yields than those comparable. There's much to be optimistic about with the credit quality of what we're originating today, especially while growing our customer base. Our refinance loan volume has improved slightly by 3% year-over-year, which we're especially proud of during a period of increased refinance credit selectivity as well as reduced large loan credit offerings. Refinance volume dipped in the fourth quarter, mainly during March, which we view as a temporary reduction in demand that has already rebounded in April of the current fiscal year.
Chad Prasad: Theres must be optimistic about with the credit quality of what we originate today, especially while growing our customer base.
Chad Prasad: Our refinance loan volume has improved slightly by 3% year over year, which we're especially proud of during a period of increased refinance credit selectivity as well as reduced large loan credit offerings.
Chad Prasad: Finance volume dipped in the fourth quarter, namely during March, which we view as a temporary reduction in demand that has already rebounded in April of the current fiscal year refi.
Chad Prashad: Refinance volume in the current month, this April, has already eclipsed the full month of April of last year, both in terms of numbers as well as dollars of refinance originations, still with a few days left of the current month. Similar to non-refinance rich nations, these refinance rich nations also carry a lower average balance compared to prior. Of note, the small and large loan makeup of our portfolio continues to shift towards small loans. From our peak of nearly 60% of the portfolio being large loans just two years ago, we've already reduced that down to 48% at the end of fiscal year 2020.
Chad Prasad: Refinance volume in the current months this April.
Chad Prasad: Already eclipsed the full month of April of last year, both in terms of numbers as well as dollars of refinance originations still with a few days left of the current market.
Chad Prasad: Similar to non refinance originations. These refinance originations also carry a lower average balance compared to prior periods of note.
Chad Prasad: Small and large loan makeup of our portfolio continues to shift towards small loans from a peak of nearly 60% of the portfolio being large loans just two years ago, we've already reduced that down to 48% at the end of fiscal year 'twenty five and expect the portfolio to continue to shift predominantly towards small ones.
Chad Prashad: and expect the portfolio to continue to shift predominantly towards smaller. This is exemplified again by the reduction in average balance for non-refinance and for refinance. For new customers, marketing and acquisition channel adjustments continue to show the increased quality in applications. Approval rates for new customers have continued to improve dramatically. The third and fourth quarter approval rates increased around 50% compared to the third and fourth quarter of fiscal 24, again, while maintaining low first payment default rates and improved gross yields, as well as significantly reducing our average loan size. Similar to refinance loan volume already in April of the current fiscal year, 2026, we continue to see an increase of loan volume year-over-year and stability of credit quality from year to year.
Chad Prasad: This is exemplified again by the reduction in average balance for non refinance and for refinance customers.
Chad Prasad: For new customers marketing and acquisition channel adjustments continue to show the increased quality and application approval rates for new customers has continued to improve dramatically the <unk>.
Chad Prasad: Third and fourth quarter approval rates increased around 50% compared to the third and fourth quarter of fiscal 'twenty four again, while maintaining low first payment default rates and improved gross yields as well as significantly reducing our average loan size.
Chad Prasad: Similar to refinance the loan volume already in April of the current fiscal year 2026, and continues to see an increase of loan volume year over year and stability of credit quality for new customers.
Chad Prashad: I'd also like to mention that the hard work of our special projects team for the last few years has resulted in our first World Finance credit card being piloted internally at the end of March. I've enjoyed the privilege of testing this credit card this month as we prepare wider pilots this spring and summer before offering it to our customers later this fiscal year. We've done a tremendous amount of research and vetting of competitor platforms, products, and their successes and failures of the years as we reviewed several potential acquisition opportunities. We're confident in our strategy to control our own credit card and market it prudently to select customers.
Speaker Change: I'd also like to mention that the hard work of our special projects team for the last few years has resulted in our first world Finance credit card being piloted internally at the end of March I've enjoyed the privilege of testing. This credit card. This month as we prepare wider pilots the spring and summer before offering to our customers later this fiscal year.
Chad Prasad: We've done a tremendous amount of research and betting a competitor platforms.
Chad Prasad: Products and their successes and failures of the years as we reviewed several potential acquisition opportunities were.
Chad Prasad: We're confident in our strategy to control our own credit card marketing prudently to select customer types.
Chad Prashad: Our main goals are to use this product to slowly and wisely better align yield with risk, especially in rate cap states we're currently in, help customers manage both installment and revolving credit. lower our overall cost of acquisition and cost of service, allow existing customers to maintain a relationship with World when they pay off their loan and or move out of our footprint space as well as expand our market.
Chad Prasad: Our main goals are to use this product to slowly and wisely better align yield with risk, especially in rate cap states were currently in help customers manage both installment and revolving credit.
Chad Prasad: Our overall cost of acquisition and cost of service allow existing customers to maintain a relationship with world when they pay off their loan and or move out of our footprint states as well as expand our markets.
Chad Prashad: Our approach is be prudent on the road to serving the 1 in 3 Americans with low to no credit. Finally, we have an absolutely amazing team here at World and I'm very grateful for their commitment to their customers as well as to each other. They are helping our customers every day to establish credit and rebuild credit, all while meeting an immediate financial need.
Chad Prasad: Our approach is to be prudent on the road of serving the one in three Americans with low to no credit.
Chad Prasad: Finally, we have an absolutely amazing team here at World and I'm very grateful for their commitment to their customers as well as to each other.
Chad Prasad: They are helping our customers every day to establish credit and rebuild credit all while maintaining Oh, one meeting and immediate financial need.
Chad Prashad: At this time, Johnny Calmes, our Chief Financial and 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 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 two.
Chad Prasad: At this time, Johnny companies, our Chief financial and strategy Officer, and I would like to open up to any questions you have.
Chad Prasad: We will now begin the question and answer session.
Chad Prasad: I 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.
Chad Prasad: To withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Chad Prasad: At this time, we will pause momentarily to assemble our roster.
Kyle Joseph: And our first question will come from Kyle Joseph with Stephens. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. Just I know there's a lot going on in the in the first quarter with tax refunds and everything, but just want to get a sense if you've seen any sort of shift in consumer behavior. Call it since I don't know, mid late February really when when tariff noise really got got loud, whether it's on the demand or the credit side. I would say we haven't seen any significant increase or decrease in demand or change in payment.
Kyle Joseph: And our first question will come from Kyle Joseph with Stephens. Please go ahead.
Kyle Joseph: Hey, good morning, guys. Thanks for taking my question.
Kyle Joseph: Just I know Theres a lot going on in the in the first quarter with tax refunds and everything but just wanted to get a sense, if you've seen any sort of shift in consumer behavior call. It I.
Kyle Joseph: I don't know made late February really when when tariff noise really.
Kyle Joseph: Got got louder, whether it's on the demand or the credit side.
Kyle Joseph: I would say, we haven't seen any significant increase or decrease in demand or change in payments so to.
Chad Prashad: To that extent, that hasn't happened. Got it.
Kyle Joseph: To that extent that hasnt hit us yet.
Speaker Change: Got it and then the the portfolio the mix shift to smaller loans. You know is that really a function of your underwriting or consumer demand or our customer mix shift and I think I heard you right you would expect this trend to continue right.
Chad Prashad: And then the the portfolio, the mix shift to smaller loans, you know, is that really a function of your underwriting or consumer demand or customer mix shift? And I think I heard you right, saying you would expect this trend to continue, right? Yeah, great question. So it's really more of a return to world's roots. So historically, you know, roughly 60% or higher of our portfolio has been small loans, where we would graduate a small portion of customers to large loans. You know, we hit a peak of around 60% of the portfolio being large loans a few years ago.
Speaker Change: Yeah, Great question. So it's really more of a return to the world's routes. So historically.
Speaker Change: Roughly 60% or higher of our portfolio has been small loans.
Speaker Change: Where we would gradually a small portion of customers to a large loads.
Speaker Change: We hit a peak of around 60% of the portfolio being large loans a few years ago.
Kyle Joseph: The strategy for the last couple of years has really been to return to the bread and butter of the company, which is focusing on small loans. So more of a shift in who we're marketing to and how we're underwriting loans than it is in Got it. Makes sense.
Speaker Change: The strategy for the last couple of years has really been to return to the <unk>.
Speaker Change: Bread and butter of the company, which is focusing on small loan customers. So more of a shift in.
Speaker Change: Who we're marketing to and how we're underwriting loans than it is in customer demand.
Speaker Change: Got it makes sense and then last one from me.
Chad Prashad: And then last one for me, the revenue growth on the tax front, I mean, obviously, that's really strong. You know, what's driving that? Is that a function of marketing? Are there any sort of changes in the competitive dynamics in that market? Obviously, it's a good thing, but just want to know what's the driver there. Yeah, so we've been doing market research for the last couple of years around the product we're offering, pricing, and customer demand. This year, we increased prices and experienced very little, if any, reduction in demand throughout the tax season. So, overall revenue is up around 25%.
Speaker Change: The revenue growth on the on the tax front I mean, obviously, that's really strong you know what's driving that is that a is that a function of marketing is are there any sort of changes in the competitive dynamics in that market. Obviously, it's a good thing, but just wanted to know like what's the driver there.
Speaker Change: Yeah. So we've been doing market research for the last couple of years.
Speaker Change: The product, we're offering pricing and customer demand.
Speaker Change: This year, we increased prices and experienced very little if any.
Speaker Change: Reduction in demand.
Speaker Change: Throughout the.
Speaker Change: The tax season, so our overall revenue.
Speaker Change: Revenue was up around 25% I believe a number that we filed was down around 3% to 4%.
Kyle Joseph: I believe the number that we filed was down around 3 or 4. Okay, got it. Great, thanks for taking my questions. Again, if you have a question, please press star, then 1.
Speaker Change: Okay got it.
Speaker Change: Great. Thanks for taking my questions.
Speaker Change: Again, if you have a question. Please press Star then one.
John Rowan: Our next question will come from John Rowan with Jenny Montgomery Scott. Please go ahead. Hey guys, forgive me if you just answered this, but can you just let me know why the insurance and other income was up so much? I assume it's tax prep, but just, you know, there's about $5 million up year over year. Just give me an idea of what that came from.
Operator: Our next question will come from John Rowan with Janney Montgomery Scott. Please go ahead.
John Rowan: Hey, guys.
Speaker Change: Forgive me if you just answered this but can you just give it.
Speaker Change: Let me know why the insurance other income was up so much I assume its tax prep, but just well you know it was about $5 million up year over year excuse me an idea of what that came from.
Chad Prashad: Yeah, so Chad just walked through that, right, so it's the tax prep revenue, so the insurance revenue is actually down a little bit. It's all driven by the tax prep business.
Speaker Change: Yes, so chad as well through that right. So it's the tax prep revenue and insurance revenue is actually down a little bit.
Speaker Change: It was all driven by the.
Speaker Change: Tax prep business.
Chad Prashad: Okay, and then, um, the allowance was down a little bit sequentially, um, any reason why that went down? Largely, it is going to be the runoff of the portfolio. OK.
Speaker Change: Okay and then the.
Speaker Change: The allowance was down a little bit sequentially.
Speaker Change: Any reason why that went down.
Speaker Change: Largely it's going to be the run off of the portfolio.
Speaker Change: Okay.
Chad Prashad: And what are your expectations for shared purchases going forward? Um hi Probably more than we've done this year, but, you know, that's part of the negotiations we have with our banks. And a lot of it also depends on, you know, our bonds have a limit on how much we can repurchase. It's capped at 50% of consolidated net income. But we're coming up to the point where we need to take those out, and that will give us more flexibility to do more than that 50% of net income. We've already purchased over $100 million, I think $115 million of the bonds, so we have about $185 million outstanding.
And what are your expectations for share repurchases going forward.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: Probably more than we've done this year, but yes, that's part of the negotiations we have with our banks.
Speaker Change: A lot of it also depends on our bonds have a limit on how much. We can repurchase is capped at 50% of consolidate net income.
Speaker Change: But we're coming up with what we are.
Speaker Change: We need to take those out and that'll give us more flexibility.
Speaker Change: To do more than that could represent a net income.
Speaker Change: You've already purchased over $100 million I think $115 million of the bonds study, we have now 185 out meaning that's right yeah yeah.
Operator: Okay. All right. Thank you very much. With no further questions, this will conclude our question and answer session.
Speaker Change: Okay, Alright, thank you very much.
Speaker Change: Right.
Speaker Change: With no further questions. This will conclude our question and answer session.
Chad Prashad: I would like to turn the conference back over to Chad Prashad for any closing remarks. Thank you for taking the time to join us today. This concludes the fiscal year-end 2025 earnings call for World Acceptance Corp. Thank you.
Chad Prasad: Like to turn the conference back over to Chad for Shaw for any closing remarks.
Chad Prasad: Thank you for taking the time to join US today. This concludes the fiscal year end 2025 earnings call for World Acceptance Corporation.
Chad Prasad: Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Chad Prasad: [music].
Chad Prasad: Right.
Chad Prasad: Yeah.
Chad Prasad: [music].
Chad Prasad: Yes.