World Acceptance Corporation

Good morning, and welcome to World Acceptance Corporation's Second Quarter 2024 Earnings 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 announcement. The comments made during this conference 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 31, 2023, 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 fiscal 2024 second quarter earnings call. Before we open up to questions, there are a few areas that I'd like to highlight. In fiscal year 2023, we tightened underwriting as economic uncertainty and inflation concerns were increasing. For the remainder of 23 and into early 2024, we weathered delinquency normalization after a period of very low delinquency, mostly induced by economic stimulus, followed by extraordinary portfolio growth. This year, we continue to see lower and normalizing delinquency rates in our portfolio and increasing yields and expect these trends to continue for several more months. These outcomes are primarily due to adjustments to our operational efficiencies, marketing and underwriting, as well as an overall heightened focus on credit quality and yields that we've discussed in prior earnings calls. We continue to see economic uncertainties and potential impacts to both customer cash flow and their credit histories, both positive and negative, on the horizon as potential outcomes for our customer base. Therefore, we consciously have been increasing approval and booking rates for our best applicants and continue to explore ways to profitably serve more of our applicants. Today, our approval and booking rates, while higher than this time last year, remain low compared to historical norms. During the second quarter, our customer base continued to grow and the number of new loan originations remained stable versus the prior quarter and increased by over a third compared to the same quarter last year. The number of new customers each quarter as a percentage of our customer base continues to increase and return closer to our historical normal growth rate. The number of former or return customer originations also increased to be slightly above historical volumes. That's as a percent of the customer base, and it has increased both nominally and relatively compared to the second quarter of last year. This growth is important as our overall average loan balance continues to be right-sized, as we've discussed with the portfolio risk and yield. All originations made this quarter have approximately a 10 percent lower balance year-over-year, and the average current balance outstanding has declined around 4 percent. While economic uncertainty still exists, management continues to accrue for the long-term incentive plan with besting tiers of $16.35 and $20.45 earnings per share. We are no longer accruing for the $25.30 stretch EPS target, primarily due to reduced new customer investment, which would hinder overall potential growth for this fiscal year. That growth or lack of growth reduces the earnings power for the next fiscal year. We believe this move is prudent for long-term health of the company, as credit risk and economic uncertainty are likely to persist for some time, and our new customer investment remains tempered and focused on the highest credit quality. We continue to see stabilizing and improving credit quality yields and operational conditions as we look forward and accrue for the $20.45 EPS target for fiscal year 2025. At this time, Johnny Calmes, our Chief Financial and Strategy Officer, and I would like to open up to any questions you have.

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. At this time, we will pause momentarily to assemble our roster. Our first question is from Vincent Caintick with Stevens. Please go ahead.