WRLD - Earnings call transcript Q2 2020 | World Acceptance Corporation

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Operator

Good morning and welcome to the World Acceptance Corporation Sponsored Second Quarter Press Release Conference Call. This conference 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 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. about are are risks subject statements uncertainties. and forward-looking matters inherently that to Such those facts statements. plan, of those than similar any other Statements historical foregoing the the will should and anticipate, variation may, of identified are as words estimate, believe, intend, forward-looking expect, expressions and or by as well

the of or results to The XXXX. XX-K of differ And corporation any in obligation from Additional information does section from any discussing and are any performance statements paragraphs furnished such factors the that XX, statements expectations filed recent in reports SEC or March press expressed or not statements with implied statements undertake regarding ended corporation’s the update forward-looking it could in forward-looking makes. cause the subsequent to today’s to most time. actual and release forward-looking the Risk fiscal included earnings Factors forward-looking to Form the year time in

my turn Chief is Executive it and time, pleasure Officer. President over this the to host, Prashad, to At Chad your floor

Chad Prashad

release. time Good review to hope second call. our you quarter Officer. our joined all and John am Calmes, have had I welcome by Chief press I morning the Financial earnings and Strategy to

return growth new are consistent increase relatively This tremendous and both in quarter, investment specifically well our long-term. last the customer the the great remained the additional period. of of a our the over grow on believe is for has the to buckets about focused the during those portfolio within the expected portfolio continuing We customers, risk growth, we included to our over information company highlight portfolio growth as the while overall X as newer years

we up may to time, like questions the this you call open would At have. any to

Operator

of Janney. [Operator come Instructions] John our will first Rowan from question And

John Rowan

Good guys. morning,

Chad Prashad

morning. Good

John Rowan

to because rates new historically losses levels, I loss get or mean customer that loss are to for obviously, What loss run-rate are at what revert you seems prior new future. seasoned because stuck like if going are all it earnings reversion rates customers. you of right? up lower nothing don’t here, are, we for the gives we customer are foreseeable So to the much comfort mean back this mean a

of me give you going loss how idea an reversion timing view and So rates mean forward? in

Chad Prashad

Yes.

that’s question. within our historical look customer the way several different it norms we based to good we charge-off those haven’t of So a or deviations large seen on The that buckets from performance at we in down rates. portfolio, company. tenure tranches break with And terms

of mean, in when revert XX large at does growing see risky a growing where acquisitions, being a portfolio, we to whole the to large into especially less ago, we sections rate from age risky growth at are time, of we to prior now, growth the that have, And in the to continue more question that year it’s with to the of acquisitions opportunistic clip, calls, have new will and months continue the Over if do mentioned back something we so extent And the tremendous that stop question portfolio right? the when we this the it’s it’s we to our that ago portfolio. from beginning XX customers. see that sections of really beginning

are the actually but past, some in all And what have consistent. sections and of are very those they they by outperforming large,

growth is on the when right. or to and long-term as a question back of portfolio X That to portfolio growth being said, it the re-weighted our really be then begins well, revenue focus was years it’s of long-term ago. So X what of

quickly and out growing over the to smarter really grow if investment over time have opportunity slowly a So for us, it’s it time. versus flesh always we

John Calmes

Right.

to that. just to think add I

to back I John way, quickly right. revert by stopping mean the So kind another customer said of we just think growth, new very could

that’s the do right. to growth tenured it way to is other customers, increase to in the way the longer So one it, do

obviously, stopping negative preference impacts. So to customer our in obviously growth versus new customer is has long-term that because growth focus the that longer-tenured on increasing

John Rowan

just the with any a Okay. we next have was think And in heading thoughts there the do on your a decline book group guys there shares a give tolerance you CECL, as million book you understand of of the one-time Is Just I is being per $XXX have here value of well me as bought lending the to trying quarter. per coming value value book able big that? back in slug group? to Do share the within you am Obviously, quarter? an another idea lending year. above the lie and okay your kind capital possibility as for from that into quite in where share dilute number for still far re-up liquidity like of had levels

Chad Prashad

Yes, right.

around facility, to going And million share-based to current net adds also net that continue $XXX the the So will in worth. to can million add million. the we $XXX at ended we both that compensation income, from go net that we of in also under Obviously, end to net the income. forward down worth addition $XXX quarter, but

order in So us will that buy give some additional to back. runway shares

million, with large the a $XXX this had incremental time banks about always a a discussion that’s We buyback doing but similar possibility. haven’t to the at

the under ability the facility to have do that. We

John Rowan

you threshold... conceivably today given worth But shareholders’ though you stands your have renegotiate equity net covenant covenant would would the where have the and to to –

Chad Prashad

That’s right. Yes.

John Rowan

this would Because you Okay. diluted breach. you in you – value per if book similar more, book obviously be value did what share to quarter,

Chad Prashad

Yes. Correct.

John Rowan

And defer next you for to it? CECL year? CECL, going are outlook adopting the or are What’s you guys

John Calmes

No.

will X. we on adopt So April

our and our to model been there to existing existing could impact, a to parallel but running models So be material we model. track new our have closely seems fairly it

John Rowan

that the assumption using you allowance What’s CECL? the for are under lifetime loss

John Calmes

the I have this don’t at details point.

John Rowan

lifetime rate south charge-off looks here a have mean rate, their of back XX%. is have I that especially a I charge-off just material I a the growth never mean in the has increase looking the model. am – am in I at seen Well, – you – I of mean here, I I loss like mean a envelope allowance? I mean now net lender just it

John Calmes

No, how our model loans that way loss through of so is of so migration model of classes be right? today, based perform, customers a new quickly. so houses our migrate they – borrowers, expected Because migration new current Where migrate the the the right, on rates the pretty of and borrowers roll former borrowers, performance those within because – on rates analysis, will based and historical right borrowers, delinquency? our through

but job of will do model huge expected better what losses those a a not is the there difference, CECL projecting So are.

right. will but our lag when Because new So of be quickly a less borrowers as don’t perform, that say, not we through delinquency. we there is they see, very can there have huge a migrate lag, today,

John Rowan

is, debt shareholders’ there covenants what with am some companies threshold. covenants know to and a I not charges CECL your another from Are – are we current least going do of covenant – what lot exclusion. net of at I is worth the going is Well, there to in exclude do are between mean seeing the that without take is equity just impacts knowing to debt I mean, out to daylight And your want I not CECL? CECL bite value. are your book we

Chad Prashad

Yes.

threatening minimum are worth. of So about impact not we worried our net CECL the

John Rowan

But is the just or covenant in excluded based it this that is it’s on...

John Calmes

an it’s but expect issue. we is, No, it are not. the – be don’t what not not It’s of to knowing size excluded, we just the impact

John Rowan

ratio we as obviously little bit. then the we allowance year, mean, go big have And Okay. a there historically, I into number seen around quarter that this and is increase bump in next a

all issues be you with And a the prior had it it used model. was and guys sometimes flat easy the to management prior used be to It number. to that nice accounting to

the a you change that Should been emergence coming here, it’s as at number, it and the go the next I I what because would customers to like are is year the seasonal, look in, the the with loss a Are it moving looking we dynamic assume? on, flatten around going we period. should loss, allowance? adjustments more lifetime of obviously, and we be make And you when we gets a up Now, number out into stream ratio in are at volatile think at looking that’s as allowance down? then had flat at what’s earnings have higher

John Calmes

Right.

to to follow So, it’s to it’s proportion going right. – Chad’s earlier customers, going point right, new of the

percentage impact the we a long new current higher which higher as overall delinquencies portfolio, to will model, will maintain proportion of be right. customers as So the as we a of expect

based model, So lead will allowance but customer we class. to the CECL, when higher project in similarly, that current rates a on the will loss under

higher lead then could expect that. a will that customers So on allowance if if relation have new also portfolio loss go in more down you that that we a those to percentage, will changes mix customers to and we up percentage right, or allowance new higher rate see to

John Rowan

question, what quarters numbers currently? that two And expense us the the projecting for you can in forward you last did comp quarter, you us can give it give last just you next – are stock-based are

John Calmes

Yes. Right.

quarter, So changed it’s specifically gave that the as hasn’t last we there. the same

John Rowan

much. very you Thank Alright.

John Calmes

Thank you.

Operator

of Instructions] We from [Operator next take Jefferies. our Kyle Joseph will question

Kyle Joseph

basis what’s same-store wanted double-digits. like Hey, growth. sense growth I touch I to market? want driving a changes it strong just Obviously, Thanks just on my on questions. to the guys. even in your been that good how But growth, really acquisition-driven. you a or looks Is Is very obviously, morning base that it’s is it for of growing advertising? some answering just outpacing and that the price get of are is

Chad Prashad

Yes.

folks changes we different past same years. tremendous the We’ve So had we company. folks those our centrally, our change the and them couple and get it’s in had in time, several incentive here, had marketing to get processes have a the in have need customers At combination as to of or they quickly across also of to also One, a allow plans things. over feel they change to the apply technology changes as possible. that in potential online applications

in a net are nutshell, we a casting So customers. wider basically, to

sort to fast make We can them reel order best the as we and we are in trying decisions through to in them can. as

On side, in seen changes the we the haven’t any across pricing the pricing board.

so in And to attract order and/or pricing taking on lowering that not customers. more customers our are it’s riskier we

years loans, is last installment for of increased I I see industry increased just exist. demand in think installment that installment loans one across the customer also the thing awareness for couple entire lending

large then that the being have obviously, over have that also that. increased seen from are years come we with pretty growth past make long-term those purchases for of So results the acquisitions X played more opportunistic demand And up and and just our sense a role in said, company. the

Kyle Joseph

of down, then it you growth us Got give organic dumb could to and between just it. growth? And balance sort acquired a

Chad Prashad

Yes.

say to Johnny. was want organic I – go it ahead, So quarter last growth was up,

John Calmes

Yes.

So growth customers, look driven to higher growth up and and/or during growth charge-offs, this down the largely right. When the quarter you quarter. customers, quarter, customers former year. was actually relative at the similar year. was same to they balance acquisition NPVs so current last being Organic the new were last actually and in growth That’s by

Chad Prashad

of of working reduce their up Yes, in terms quarter, as organic year-over-year. the believe X% to in prior customers But number way customers through I is ledger in kind Johnny mentioned, the X.X% quarter. the of acquisitions

Kyle Joseph

they an good if another, that in bank accounting you increase discount Got do of as acquired loans, and like of us the typically, delinquency pay looks sort And a the lot allocation a it installment and the for you lender bad the kind those multiple well it. of paying And give the sort on are are on acquires was those the just a for result can a delinquent. bank, of will sense as acquisitions? of

for going Just give sense on what’s us a there?

John Calmes

Sure.

have a the we we unique reliable some how So we we the I because information. far don’t versus small we But whole perspective company don’t with again, paying approach to typically assets. detail companies, in are go financial multiple very customer acquisitions. acquisitions don’t buy much always will from want a of it the And do, buying for we we about price as as cost too say,

customer a take approach. we So

the as acquisitions, what we delinquent for well So you pointed yes, certainly right. as paying we are out, adjust customers,

on are delinquency. we won’t they performing. certain right? So pay But To it anything, not will discounted based a extent, be

allowance So September on significant acquisitions the had as far pretty the in pointed past year a we’ve so you had impact out, at XX. the

right? So as you it had of million, provision If acquisitions, would to is the an from of delinquency stripped $X.X September provision. out million, the just adjustment qualitative impact XX $X.X the within a

that if So allowance XX. it would that weren’t the of we increase portfolio were necessary million normal within top accounts the September our sort acquired for $X still allowance. on $X been of at have million the And

Kyle Joseph

any growth what industry is question guys are it should someone terms sense to referred through provision? the Got math else it. ultimately, very the strong, the growth of the sounds but And then And this you to think of still we when, from just like sort of see wane headwinds as impact start going some in demand I in last me, for math. on

Chad Prashad

Yes.

right. it stop depends we really clip, the same So on growing when at

So I grow at from continue similar opportunities years. that of have organically, it the out the we think rates comes down to we X to past perspective. there opportunistic A in an acquisition lot

getting are acquisition right large quarter. in third a fairly quarter year, now. third to the we we took ready enter So Last down

another So, large up to quarter we and that acquisition this may quarter. we comes begin see it unless close the within lapping

Kyle Joseph

very for you Thank helpful. answering questions. my very That’s it. guys Got much

Chad Prashad

Yes.

Operator

will for am I back We a just question, went they remarks. and sorry turn call closing did questions, further Mr. no with any to the away. I Prashad over get And

Chad Prashad

We they just will in to ask more want minutes give case anything.

Operator

[Operator Instructions]

Chad Prashad

is questions joining there appreciate you If no guys us other I the quarter call. Alright. earnings second for

call. And concludes so the this earnings

Looking to speaking in you January. with guys Thank forward you.

Operator

your concludes World This quarterly the participation. Acceptance gentlemen, teleconference. thank you and Ladies Corporation for

disconnect. You may now

World Acceptance (WRLD) 3 Nov 192020 Q2 Earnings call transcript