World Acceptance’s Earnings Call Highlights Growth and Challenges

World Acceptance ((WRLD)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for World Acceptance highlighted a mixed sentiment, with positive developments such as customer base growth, improved gross yields, and increased non-refinance loan volume. However, challenges like a decrease in the outstanding ledger and persistent delinquency rates were also noted. The company is actively addressing these issues through strategic initiatives, including a shift towards smaller loans and the introduction of a credit card pilot.

Customer Base Growth

The company reported a 3.5% increase in its customer base, marking the first year of year-over-year customer growth since fiscal year 2022. This growth is a positive indicator of the company’s expanding market presence and its ability to attract new customers.

Improved Gross Yields

Gross yields improved by over 100 basis points this year, significantly contributing to the company’s financial health. This improvement is a result of strategic efforts to optimize the company’s financial operations and enhance profitability.

Non-Refinance Loan Volume Increase

The non-refinance loan volume saw a substantial increase of 12.6% year-over-year, maintaining high credit quality and low first payment default rates. This growth reflects the company’s focus on expanding its lending portfolio while managing risk effectively.

Successful Tax Return Season

The fourth quarter was bolstered by a 25% increase in tax return revenue, contributing nearly $7 million. This seasonal boost provided a significant uplift to the company’s financial performance during the period.

Launch of Credit Card Pilot

World Acceptance piloted its first World finance credit card internally, with plans for wider pilots and customer offerings later this fiscal year. This initiative is part of the company’s strategy to diversify its product offerings and enhance customer engagement.

Decrease in Outstanding Ledger

The company ended the year with a $1.22 billion outstanding ledger, a 4% decrease year-over-year. This reduction is part of the company’s efforts to streamline operations and improve financial stability.

Sticky Delinquency Rates

Delinquency rates remained stubbornly high, partly due to the growth in new customers with higher loss rates. The company is working to address these challenges by improving early-stage delinquency management.

Reduction in Average Balance per Customer

The average balance per customer decreased by 7.3% year-over-year, following a 7.1% decrease the previous year. This trend aligns with the company’s strategy to shift towards smaller loans and improve yield.

Forward-Looking Guidance

CEO Chad Prashad provided several key metrics and guidance details during the call. The company concluded the fiscal year with a $1.22 billion outstanding ledger, marking a 4% decrease year-over-year, while the customer base grew by 3.5%. Efforts to improve gross yields resulted in an increase of over 100 basis points. The annualized charge-off rate is expected to naturally reduce by 125 to 150 basis points with normal portfolio growth. Additionally, the company is expanding its market reach through the new World finance credit card pilot, aiming to align yield with risk.

In conclusion, World Acceptance’s earnings call reflected a balanced sentiment with both positive developments and ongoing challenges. The company’s strategic initiatives, including customer base growth, improved gross yields, and the introduction of a credit card pilot, are expected to drive future growth and stability. However, challenges such as sticky delinquency rates and a decrease in the outstanding ledger remain areas of focus for the company.