World Acceptance Corporation

Good morning, and welcome to World Acceptance Corporation's first quarter 2025 earnings conference call. This call is being recorded. At this time, all participants have been placed in a 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, 2024, 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 2025 first quarter earnings call. Before we open up the questions, there are a few areas I'd like to highlight. We've talked a good bit about right-sizing and de-risking the portfolio over the last year or two, as well as returning to moderate growth this year. In the first quarter of 2025, we experienced moderate growth in our customer base of around 50 basis . Their average balance declined slightly, and gross yields improved across all customer types. Year-over-year, our average balance has decreased almost 7 percent from June 30, 2023. Currently, our average loan balance has decreased over 11 percent from the peak average loan size, which was towards the end of fiscal year 2023. Along with that decrease in average loan size, we've significantly improved our gross yields, delinquency, and G&A expenses. As the underlying portfolio improves, our loss reserves have also declined year-over-year and stepped up the maturing of the portfolio. We are focused on modest, single-digit, high-credit quality growth this year through specific strategies for each of our customer types. For new customers, we've adjusted our acquisition channels and are already increasing our approval rates while minimizing losses. In the first quarter, while new customer loan volume was down about 8% in dollars within the quarter year-over-year, our new customer average loan balance also decreased, and the number of new customers in the quarter declined by only 3.5% year-over-year. We also improved our first-pay default rates, which are an early indication of success for those customers. This is part of a low-cost growth strategy in terms of both the upfront cost of acquisition as well as the total cost of acquisition for a tenured performing customer. As we've regrouped to a higher credit quality and performing portfolio, we've grown a large paid-off customer population that continues to return as a former customer. and make up a larger percent of our non-refinance loans. As we increase their weighting in the portfolio, our net yield and income naturally improve. Within the quarter, both returning and refinance customers had a similar trend in improvement in performance and yield, as well as lower average balances. While the former customer loan volume in dollars declined 7.6 percent this quarter versus first quarter last year, the number of former customers actually increased by 6.3 percent year-over-year. For returning former customers, the average balance of those originations decreased 13 percent, and the average yield is significantly higher, and they have the lowest first-pay default rates of our non-refinance originations. Similarly, refinance loan volume in dollars decreased 5 percent within the quarter year-over-year, while the number of refinances actually increased 6 percent in the quarter. And the average balance of those originations decreased 10 percent. With these shifts in the portfolio makeup and the waiting continuing into the second quarter, we expect to see yields and delinquency trends continue to convert into the same revenue and income trends that we're already seeing this year. Today, in the second quarter, we've seen growth in our former customer base. Currently, we're at the highest number of former customers in July that we've had going back at least 10 years. All at lower average balances, higher yields, and great credit quality leading us to expect continued low delinquency. Today in July, new customers have improved over the prior two years as well, but our focus remains on a low total cost of acquisition of performing customers, and we'll continue to invest wisely for high credit quality growth as we work towards moderate single-digit ledger growth this year. In addition to portfolio performance, our prudent management has also resulted in 9.9 percent reduction in G&A expenses, this quarter compared to the first quarter last year. This is especially important during a prolonged period of increasing expenses nationwide. With economic stability increasing and improved portfolio performance, management continues to accrue to the long-term incentive plan with vesting tiers of $16.35 and $20.45 earnings per share. Even with the much improved credit quality yield and operating conditions I've discussed, we'll continue to build confidence throughout the second quarter on achieving these targets. especially the $20.45 for the full fiscal year target. Finally, we have an absolutely amazing team here at World, and I'm very grateful for their commitment to their customers as well as to each other. They are helping our customers every day to establish credit, rebuild credit, and meet their immediate financial needs. At this time, Johnny Cummings, our Chief Financial and Strategy Officer, and I would like to open to any questions that you may have.

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. The first question is from John Rowan with Jannie. Please go ahead.