Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- World Acceptance Corp (WRLD, Financial) experienced moderate growth in its customer base by around 50 basis points in the first quarter of 2025.
- The company significantly improved its gross yields, delinquency rates, and G&A expenses.
- Loss reserves have declined year over year, indicating an improvement in the underlying portfolio.
- The number of former customers increased by 6.3% year over year, contributing to higher yields and lower delinquency rates.
- G&A expenses were reduced by 9.9% compared to the first quarter of the previous year, showcasing prudent management.
Negative Points
- The average loan balance has decreased by almost 7% year over year, which could impact overall revenue.
- New customer loan volume was down about 8% in dollars within the quarter year over year.
- The number of new customers declined by 3.5% year over year, indicating challenges in customer acquisition.
- Refinance loan volume in dollars decreased by 5% within the quarter year over year.
- The company is still facing high charge-off rates, with a 16.4% rate for the quarter, which is far from the target low-double-digit loss rate.
Q & A Highlights
World Acceptance Corp (WRLD) Q1 2025 Earnings Call Highlights
Q: Chad, did I hear you correctly saying that you're going to grow ledger by mid-single digits or low-single digits for fiscal 2025?
A: Yes, that's right. We are targeting mid-single-digit growth off the $1.3 billion gross or $847 million net by the end of the year. - Ravin Prashad, President, Chief Executive Officer, Director
Q: Is there a reason why it looks like you guys increased the allowance ratio a little bit sequentially? Are you changing any expected loss rates?
A: The expected loss rates increased faster this year than last year, but they are still lower at June 30 this year compared to June 30 fiscal '24. The increase is more about the relative change from last year. - John Calmes, Chief Financial and Strategy Officer, Executive Vice President, Treasurer
Q: Are you still accruing for $20.45 of earnings for this year in the incentive comp?
A: Yes, we are still accruing towards $20.45. The main factors are growth, yields, and delinquency. We will build confidence around achieving this target as we progress through the second quarter. - Ravin Prashad, President, Chief Executive Officer, Director
Q: How are you planning to achieve a low-double-digit loss rate given the current charge-off rate of 16.4%?
A: We are focusing on increasing yields, improving net charge-off rates, and achieving modest growth. Operational improvements and focusing on former customers with lower acquisition costs and better performance will help us reach this target. - John Calmes, Chief Financial and Strategy Officer, Executive Vice President, Treasurer
Q: Wouldn't modest growth actually hinder your chances to achieve the earnings target due to the CECL provision?
A: It depends on the timing of the growth. Growth in the next quarter or so can generate enough revenue to benefit us throughout the fiscal year. - John Calmes, Chief Financial and Strategy Officer, Executive Vice President, Treasurer
Q: Can you speak to the regulatory environment in the states you operate in as well as on the Federal level?
A: At the state level, we have moved to sub-36% in Illinois and New Mexico. At the federal level, we are cooperating with the CFPB's supervision process, which is still ongoing. - Ravin Prashad, President, Chief Executive Officer, Director
Q: Has the CFPB supervision impacted your business to date?
A: No, it has not impacted our business to date. - Ravin Prashad, President, Chief Executive Officer, Director
Q: What's the status of securitizing some of your loans?
A: We are in the process of creating a warehouse facility, which is the first step in the securitization process. We hope to have it rolled out in the fiscal third quarter. - John Calmes, Chief Financial and Strategy Officer, Executive Vice President, Treasurer
Q: What's the right tax rate to use going forward?
A: The tax rate for the year is expected to be around 20% to 21%. - John Calmes, Chief Financial and Strategy Officer, Executive Vice President, Treasurer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
