World Acceptance Corporation

Good morning and welcome to the World Acceptance Corporation sponsored first quarter press release conference call. This call is being recorded. At this time, all participants have been placed on listen only mode. Before we begin, the corporation has requested that I make the following statement. The comments made during this conference call may contain certain forward looking statements within the meeting 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, 2021, 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. Please go ahead.

Good morning, and thank you for joining our 2022 Quarter 1 Earnings Call this morning. Before we open it up to questions, there are a few aspects about the quarter that I'd like to highlight. First, we continue to experience record-low delinquency as a result of several factors. The continued improvement in the overall economic environment, changes to our credit underwriting, and new loan products and marketing to ensure that we remain the most attractive option for our best customers. Recently, we eliminated all loans with APRs in the triple digits. and continue to evolve our underwriting criteria. We've also made meaningful progress in large loan offerings that provide more attractive terms to increase customer retention. After the recent rate changes in Illinois, we've had to shift away from serving the subprime population towards a larger average balance loan and higher FICO customer. As a result, our Illinois portfolio has grown 31% year-over-year and 17.5% in the first quarter of this year. Across the rest of our footprint, we're also growing a large loan portfolio. However, we're still serving the non-prime community, and in June, we saw new customer demand return to parity with pre-pandemic levels, which has continued to date in July so far in this quarter. During this time, our most selective underwriting has resulted in our approval and booking rate declining by approximately 20%. increasing the overall quality of our average new customer as this customer segment remains very important to us and our future. On the customer access front, a year ago, in the first quarter of 2021, roughly 1% of our loan proceeds were funded to debit cards, almost exclusively, remotely, and outside of the branch. This year, during quarter one of 2022, with over 45% of funds dispersed via debit card, we've demonstrated our ability to adapt and meet customers' needs and allow them to get funded without the need for a branch visit. As a result of these changes, today, over 40% of our portfolio is below 36% APR, and nearly two-thirds of our portfolio is below 50% APR. This is a dramatic increase from 26% and 50%, respectively, just three years ago. Along with this portfolio shift, our first quarter loan growth is the largest on record, With a change to CECL provisioning last year, we should expect to grow our provision in real time as the portfolio grows, which temporarily decreases net income as compared to our historical delinquency-based provisioning model. The loan growth and earlier provisioning of CECL should continue to positively impact revenue and income in future quarters, and we continue to expect to hit our long-term incentive EPS targets before the end of fiscal year 2025 and accrue as expected. Finally, we continue to pilot and explore products to add to our financial wellness suite. Our ultimate goal is to help all of our customers improve their financial health, credit score, and access to affordable credit. There's much to be excited about at World. At this time, Johnny Calamese, our Chief Financial and Strategy Officer, and I would like to open up to questions about our first quarter fiscal year 2022 earnings.

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. Our first question comes from Kyle Joseph with Jefferies.