World Acceptance Corporation

Good morning and welcome to the World Acceptance Corporation sponsored first quarter press release conference call. Today this call is being recorded. At this time all participants have been placed in a listen only mode. Following management's remarks there will be an opportunity to ask questions. Before we begin the corporation has requested that I make the following announcement. The comments made during the conference call today may contain certain forward-looking statements within the meaning of Section 21 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 31st, 2022, and subsequent reports filed 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.

Good morning, and thank you for joining our fiscal 2023 first quarter earnings call. Before we open up to questions, there are a few areas that I'd like to highlight. For the fourth consecutive quarter, we've experienced record growth in origination volumes. During the first quarter, gross originations increased by approximately $175 million more than the prior year first quarter. And at over 930 million, surpassed our prior strongest first quarter originations of 762 million back in fiscal year 2020. We continue to see elevated demand across all customer types. In addition to internal improvements in marketing, customer service, loan products, and customer access channels, demand for credit has increased across the entire industry as inflationary and cost pressures are top of mind for many customers. As a result of tightening credit and underwriting several times since the third quarter of last year, this first quarter, our book-to-look declined by 28% to 31% for new customers when compared to the first quarter periods prior to the pandemic. It continues to decline further throughout the current month, July, over a fiscal second quarter period. In particular, the number of new customers increased 7% year-over-year during the first quarter, but actually declined 27% to 30% when compared to pre-pandemic levels in the first quarter of 2019 and 2020. This significant decline in booking rate is a result of the increased selectivity during the last several quarters of credit normalization, as well as consumer economic challenges. Regarding credit performance, charge-offs have increased as prior delinquencies have aged through this past quarter. Today, delinquencies continue to normalize following the prior two years of unusual economic activity and are elevated compared to the prior two years. For our customer base, inflationary pressures on groceries and everyday living expenses have an impact both on our delinquencies as well as demand for new originations. Due to credit underwriting changes as well as ongoing operational adjustments, New originations remain within our long-term EVA expectations. It's important to note the potential significant growth and release in our provision under the new CECL accounting standards. In this quarter, we experienced a significant 14.5% increase in the provision as a result of a seasonal credit adjustment. This is exogenous and unrelated to new originations or recent actual performance. This adjustment is greatest during the first quarter of each year and reverses throughout the remainder of the year. Finally, following a year of growth as we rebounded out of the pandemic in fiscal 2022, we are poised to protect what we've built for the future this year. With the increasing earnings power of our portfolio and controlled expenses, we continue to expect to hit our long-term incentive earnings per share targets of $25.40 before the end of fiscal year 2025 and accrue accordingly. At this time, Johnny Calmes and our our Chief Financial and Strategy Officer, and I would like to open it up to any questions about our first quarter 2023 earnings.

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're using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from John Rowan with Jani. Please proceed.