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spk02: Good morning and welcome to the World Acceptance Corporation sponsored fourth quarter press release conference call. If you require operator assistance, please press star then zero. This call is being recorded. At this time, all participants have been placed in 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 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 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 31, 2020, 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.
spk01: Good morning, and thank you for joining the World Acceptance Earnings Call for the end of the 2021 fiscal year and fourth quarter. As we've all experienced, this year has presented so many challenges, both professionally and personally, for all people. Our customers and team members are no exceptions. and both have risen to adapt and overcome the challenges. I first want to highlight a few amazing outcomes from this year. First, on the operating side, we've adapted this new environment, creating safe and flexible work arrangements for employees, adjusting branch hours, expediting technology improvements, adapting underwriting and marketing with 39% of new customers now being sourced through digital channels, centralizing certain decisioning and loan funding segments, with a quarter of loans in our fourth quarter, approximately 24%, being funded and closed remotely, all the while continuing and improving upon our already world-class customer service. We're now seeing an all-time low in terms of loan delinquency, and we continue to see signs that customers' financial situations remain improved. Our culture also continues to be among one of our best assets, winning many Top Workplaces awards across the country, including being the only South Carolina-based company to be named a Top Workplaces USA in 2021. We also remain excited and optimistic in light of our successful execution across a range of initiatives in such an otherwise challenging year. We are now exceptionally well positioned for the future. Our capital and financing positions are solid. with our recently amended bank agreement and $117 million in stock repurchase capacity today and continued low leverage. In order to fuel continued large loan growth, we expect to add another diversified funding source later this year. We pivoted to serve higher credit quality customers in Illinois with the recent passage of a 36% rate cap. our portfolio in Illinois shrunk by less than 1% during the last fiscal year. This is compared to our entire portfolio, which decreased approximately 8.6% due to both the pandemic and the resulting stimulus impacts. On the heels of this operational underwriting pivot in Illinois, we are proactively growing our large loan and lower interest rate portfolio in all of our states. During fiscal 2021, our large loan portfolio loans greater than $2,500 grew by 7.4% compared to the end of March 2020. This is not a shift to focus on large loans and away from smaller loans, but an additional focus on serving customers as they move up the credit market. In the states we currently operate in, this could roughly double the potential customer base and triple the potential portfolio size of just new customers in our expanded total adjustable market. We've also been quite busy this quarter working with stakeholders across the country to convey the importance of equal access to regulated credit for all Americans. As in Illinois, rate caps can make it mathematically impossible to lend to large segments of the population, excluding millions of people from affordable, regulated, credit building, and risk-priced credit. While world acceptance has proven our ability to quickly pivot to higher credit quality customers, As a community-based lender, we feel the responsibility to our communities to ensure that these citizens aren't left with choices, they don't give them a way to improve their credit history, and or put their assets at significant risk. In the near future, we hope our customers will see us less as a lender and more as their one-stop shop for financial wellness. This includes our current installment loan and tax products, but also seeks to improve the overall financial health of our customers with credit building products, banking products like checking and savings accounts, revolving lines of credit and budget coaching that increases the financial stability through both proactively reducing monthly expenses and also increasing savings towards the customer's goals. We've piloted several financial health related programs throughout fiscal 2021 and expect to announce several partnerships later this year to allow us to improve the financial lives of the 1.3 to 1.5 million customers we serve annually. This is in addition to our traditional land products. There's much to be excited about in the future. At this time, John Calmes, our Chief Financial and Strategy Officer, and I would like to open it up to any questions about our fourth quarter fiscal 2021 earnings.
spk02: 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 addressed 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 Kyle Joseph with Jefferies. Please go ahead.
spk00: Hey, good morning, guys, and thanks for taking my questions. I think first one for John. Obviously, a lot going on last year in terms of the reserve with both COVID and CECL, but can you walk us through how you envision the reserve going forward as ultimately loan demand recovers and theoretically the economy keeps chugging along? Sure.
spk03: As of the end of March, we no longer have any incremental allowance related to COVID. That's mostly a function to the stimulus that's happened over the last several months. So going forward, we expect to be a more normalized process and allowance. And when you look at our portfolio and gross loan portfolio, the allowance should grow at around 6% to 7% of that gross loan growth, right? There's a lot of different factors that can move that within that range or even possibly outside of that range. For instance, the tenure, right? So if we begin to grow new customers, customers that are new to the world, they could push that allowance to gross loans to the higher end. But if we grow larger loans that are to current and former customers, it could stay to that lower end of the 6% to 7%. Obviously, the other factors will be expected loss rates within those 10-year buckets, and those can move depending on the actual recent performance within those 10-year buckets. Does that help?
spk00: Got it. Very helpful. And then just in terms of, you know, loan demand recovering and kind of credit normalization, what are your expectations for the remainder of the calendar year here where, you know, stimulus appears to be in the rear view. We have some, you know, changes in child tax credits and then kind of a more open economy with people, you know, discretionary spending going up.
spk03: Sure. Yeah, so we're pretty hopeful for the next year. We have the April data, right? And April was more or less flat relative to March 31st. And when you look year over year, we're down less than 2% versus last year just through April. And we're seeing similar trends, you know, obviously very early on in May. So obviously most of the stimulus is behind us, it appears. And this year feels very different than last year. So when our customers received the stimulus last year, they didn't really have a lot of options to spend that stimulus money. So we feel like this year there's more options for them and that could help with demand for our loan product. Yeah, obviously I think there'll still be some impact of the stimulus for the next several months, but really in the second half of the calendar year, we hope to see demand come back to more normalized levels.
spk00: Got it. Last one from me. Interesting commentary from you guys on Illinois, that your loan portfolio is kind of hung in there better than the rest of the country. Is that kind of a function of other credit providers exiting that market as a result of regulations, or can you explain what drove that?
spk01: Yeah, that certainly is a potential factor. We put a lot of work in mid to late January to pivot quite quickly, so we didn't wait until the bill was signed several weeks later, but began operating as if it were in effect pretty much immediately. And so we changed our underwriting criteria and began to restrict underwriting to the most risky customers under the new rate cap and began moving more upstream to higher credit quality customers and the demand was quite high. But we were also able to retain a lot of our existing customers. World historically has been primarily a small dollar lender with a smaller large loan business on the side. And through this process, we've been very proactive in making sure we have very competitive products that help retain customers and provide a very attractive option for them instead of going elsewhere. So I think that is the bigger cause for Illinois' overall success rather than decreased competition.
spk00: Great. Thanks very much for answering my questions.
spk02: Yep. Again, if you have a question, please press star, then 1. The next question comes from John Rowan with Jannie. Please go ahead.
spk04: Good morning, guys. Good morning, John. I know you guys don't give guidance, but, John, you kind of touched on it anyway. Can you give us an idea of what you think happens sequentially with the gross loan portfolio?
spk03: Look, I was trying to be fairly vague there, right? Yeah, I'm not going to give hard numbers, but in general, April looks good and May looks promising. Just anecdotally, we feel like that should lead to a pretty good second half of the calendar year. Obviously, it's hard to project exactly what that's going to look like. This is all new territory for us and everybody else, but we're hopeful. And there's early signs that demand should come back.
spk01: Hey, John, just a few points that might help as you're modeling this. But, you know, last year we took the opportunity to increase our central decisioning and how that whole process is rolled out and implemented. And through that process, we're able to adjust our underwriting criteria fairly rapidly and But we also made very conscious decisions to reduce our marketing spend for new customers right around this time last year just due to all the uncertainty. And so through the process from this point last year throughout the rest of the year, we saw our cost of acquisition decline mainly due to significant changes in marketing as well as significant investments as we pivoted towards more digital sourcing customers. And I see those playing out for the rest of the year. It certainly has been quite productive for us. So as you're thinking about future demand, prior to this point last year, it was primarily just a brick and mortar entrance with a small portion coming in online. The online portion has continued to grow, and it's built into our overall process now. So that will certainly play a factor into future loan demand.
spk04: Okay. Repurchases. Did you buy any stock back this quarter? What's the outlook? Obviously, you have an authorization, but just based on the share count, it didn't look like you did much on that front this quarter. Okay.
spk03: That's right. We didn't buy a lot back in the fourth quarter. We do have $21.4 million left under the current authorization. And as Chad mentioned, around $117 million available under the current debt facility. So yeah, we'll likely get back in the market over the next several quarters.
spk04: But there wasn't any type of limitation on the debt stack to why you couldn't have repurchased during this quarter, correct?
spk03: No, there wasn't.
spk04: Like a restricted bucket or something?
spk03: No, it was more just price-driven, right? I mean, obviously, I'm sure you follow our stock. I think we had some of the GameStop effect going on in the fourth quarter that drove our stock up pretty wildly during late January, early February. So that drove a lot of it.
spk04: Okay. All right. Thank you.
spk02: This concludes our question and answer session. I would like to turn the conference back over to Chad Prashad for any closing remarks.
spk01: Thanks for joining us this quarter, and a special thanks to all of our incredible team members for making this year incredibly successful in light of all the challenges that we've all faced professionally and personally. This concludes the 2021 Q4 earnings call for world acceptance. I hope to see you guys for our Q1 call in August.
spk02: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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