World Acceptance Corporation

Good morning and welcome to the world acceptance fiscal 2022 second quarter earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Chad Prashad, President and Chief Executive Officer. Please go ahead.

Good morning, and thank you for joining our fiscal second quarter 2022 earnings call. Before we open up to questions, there are a few areas that I'd like to highlight. First of all, I'm pleased to report that we experienced record originations growth in this most recent quarter. The overall portfolio grew $170 million, or 25.7% year over year. In fact, it was the largest single quarter growth on record. Further, we experienced this broad growth across all customer types on the strength of a record number of customer applications for credit. In particular, we saw tremendous increases in new and returning customer loan volume when compared to last year or even pre-pandemic levels, with both customer types' loan origination volumes increasing by more than 40% when compared to the same quarter two years ago, which is the most recent pre-pandemic comparison. Refinance volumes returned to and slightly exceeded pre-pandemic levels as well. To help fund this growth, we're proud to have completed the company's first 144A bond issuance, providing an additional $300 million in working capital. This funding channel diversifies our capital structure and provides stability to the company moving forward. In addition, we still expect to continue diversifying our capital structure further, especially as our larger loan lower interest portfolio continues to grow. Delinquency remains low on a relative basis and within expectations. With a change to CECL provisioning last year, we should expect to grow our provision in real time as our portfolio grows, which temporarily depresses net income as compared to our historical delinquency-based provisioning model. With respect to the quarter's provision for loan losses, it is credit cohort specific and naturally adapts based on customer credit and loss expectations. The loan growth and earlier provisioning of CECL should positively impact revenue and income in future quarters. Of note, our new customer portfolio increased by 54.6% in the second quarter and 101% year-over-year. This share of our customer base has the highest expected losses and corresponding impact on our provision. We expect the cohort quality to remain relatively consistent in the near term based on several factors, including overall economic environment, changes to our credit underwriting, and new loan products to remain the most attractive option for our best customers. We continue to expect to hit our long-term incentive EPS targets before the end of fiscal year 2025. On the customer access front, a year ago, as a result of some of these changes, today, over 40% of our portfolio is below 36% APR. This is a dramatic increase from 26% just three years ago. Today, nearly two-thirds of our portfolio is below 50% APR, an increase from 50% of the portfolio just three years ago. At this time, John Calamese, our Chief Financial and Strategy Officer, and I would like to open it up to questions about our second quarter fiscal 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. 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 Vincent Cantik with Stevens. Please go ahead.