管理層發言
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 to questions, there are a few areas I'd like to highlight. We've talked a good bit about rightsizing and derisking 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 points. Their average balance declined slightly and gross yields improved across all customer types. Year-over-year, our average balance has decreased almost 7% from June 30, 2023. Currently, our average loan balance has decreased over 11% 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 in step with 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 have also improved our first pay default rates, which are an early indication of success for those customers. This is part of our 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 improved. Within the quarter, both returning and refinanced customers had a similar trend and improvement in performance and yield, as well as lower average balances. While the former customer loan volume in dollars declined 7.6% this quarter versus first quarter last year, the number of former customers actually increased by 6.3% year-over-year. For returning former customers, the average balance of those originations decreased 13% and the average yield is significantly higher. They have the lowest first pay default rates of our non-refinance originations. Similarly, refinance and loan volume in dollars decreased 5% within the quarter year-over-year while the number of refinances actually increased 6% in the quarter, and the average balance of those originations decreased 10%. With these shifts in the portfolio makeup and the weighting 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.
To date, 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. To date 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 a 9.9% 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 for 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 Calmes, our Chief Financial and Strategy Officer and I would like to open up any questions that you may have.
分析師問答
The first question is from John Rowan with Janney. Please go ahead.
Good morning, guys.
Good morning.
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?
Yes. That's right.
Okay. So I mean, just, so you're talking about. I mean, you're talking about off of period end fiscal 2024. So the $1.3 billion gross, or I don't know, $847 million net just mid-single-digit growth off of that number by the end of the year.
Yes, that's right.
Is there a reason why it appears that you increased the allowance ratio slightly compared to the previous period? Are you adjusting any expected loss rates?
I think a lot of it was just the expected loss rates increased faster this year than they did relative to last year. But they're lower at June 30 this year than they were at June 30, fiscal '24. So we haven't increased them. It's really more has to do with what happened last year. The expected loss rates were decreasing faster in Q1 of '24 than they were this year, if that makes sense.
Okay. And just to be clear, you're still accruing for $20.45 of earnings for this year in the incentive comp. Because there was something in the press release about lower incentive compensation.
A lot of this is due to two factors. We had some field officers retire during the quarter, which resulted in some departures. Additionally, because of the long-term investment nature of the plan, there are fewer expenses to accrue. Unlike last year, we are no longer accruing for the third tranche, which is not included this time. There are six time-based tranches in the plan, and we are currently only accruing for one of them since the others have already been fully expensed. This is the reason for the decrease in share-based compensation.
And John, yes, we are still accruing towards $20.45. But the main factors into achieving that for this fiscal year are really some things around growth, yields and delinquency. So as we continue throughout this current quarter, the second quarter, we'll build some confidence around how likely we continue to think that is.
Yes, I was going to address that next. We've previously discussed the $25, $30 tranche, which has obviously stopped accruing. We had estimated that reaching that number would require a high single-digit loss rate. At the $20.45 level, we're looking at a low double-digit loss rate, based on what I recall from past calls. Your charge-off rate decreased slightly year-over-year but remains at 16.4%, which is still quite a distance from a low double-digit loss rate. How are you planning to reach that? To be honest, you would need to overcompensate for the remaining three quarters of the year given that you're at 16.4% for the quarter. How are you approaching this target?
Yes, there are a few factors at play. Over the past year, yields have been on the rise, which alleviates some of the pressure from the net charge-off rate. However, we still need to see improvement in that rate, and we are observing various operational developments that can contribute to this. Therefore, it's a mix of increasing yields, ongoing enhancements in the net charge-off rate, and some modest growth. As Chad mentioned, we will gain more clarity on whether these goals are attainable by September, and we should have a better understanding by then.
Okay. I mean, wouldn't modest growth actually hurt your chances to get to that? I mean, modest growth would help next year, but given how much you have to reserve for your CECL provision, I would think that the modest growth actually is a hindrance to earnings growth.
Fair enough. It depends when that growth happens. Right. So you're right. So modest growth at all happens in Q4. Doesn't help us a whole lot, but if we can get it in the next quarter or so, there's enough revenue that comes with it throughout the fiscal year that it benefits us.
Okay.
And John, that's also -
Yes, sorry, go ahead.
Yes, we have been placing more emphasis on former customers due to the lower cost of acquisition. Additionally, their performance results in lower accruals for them, leading to higher overall profitability for that group. While we still aim to acquire new customers, we are seeking to reduce the total cost of acquisition, which includes not only marketing expenses but also operational costs and expected losses. We understand that any growth we achieve may negatively impact us in the short term. However, we recognize it is essential for our company's future success and are committed to pursuing it carefully from both a cost and credit quality standpoint.
Okay. And then last question for me. Just what's the right tax rate to use? A little bit lower than my model for the quarter. I just want to make sure I have it going forward.
Yes, it varies from quarter to quarter, but it's still in the 20% to 21% range for the year.
You see 20% to 21%.
Yes. For the year.
All right, thank you very much.
Yes.
The next question is from Guy Riegel with Ingalls & Snyder. Please go ahead.
Hi, good morning. I was just curious if you could speak to...
Yes. Good morning.
To the regulatory environment in the states you operate in, as well as on the Federal level.
Yes. At the state level, we have managed to lower our rates to below 36% in Illinois and New Mexico over the past couple of years. For the other states where we operate, there have not been significant changes regarding regulations or legislation. We are still subject to regulation and oversight in all the states we operate in. At the federal level, back in February, the CBP issued an order that establishes their authority to supervise us. We are working with them during this supervisory process, which is new for us as well as for them in overseeing an installment lender. We anticipate that they will concentrate on the areas identified in that order, and we see this as a learning experience. It may be challenging to determine their timelines, but the order allows us to petition to conclude this supervisory period after two years. Other than the supervisory order from the CBP, we do not have any additional updates to share at this time.
Okay. So to date, they haven't impacted your business?
No. No, not to date.
Okay. And then I thought maybe a while ago, you maybe mentioned the possibility of securitizing some of your loans. What's the status of that?
Yes. So we're actually in process as we speak of creating a warehouse facility, and that's sort of the first step in the securitization process. Right. So we hope to have that warehouse facility rolled out in probably fiscal third quarter.
Great. Okay. Thank you so much.
Thanks, Guy.
This concludes our question-and-answer session. I would like to turn the conference back over to Chad Prashad for any closing remarks.
Thank you for taking the time to join us today. And this concludes the first quarter earnings call for World Acceptance.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.