World Acceptance (US:WRLD)2022-07-27 18:13Financial Data and Key Metrics Changes - For the fourth consecutive quarter, the company experienced record growth in origination volumes, with gross originations increasing by approximately $175 million compared to the prior year, totaling over $930 million, surpassing the previous strongest first quarter of $762 million in fiscal year 2020 [5] - The provision for credit losses increased by 14.5% due to seasonal credit adjustments, which is unrelated to new originations or recent performance [9] Business Line Data and Key Metrics Changes - The number of new customers increased by 7% year-over-year during the first quarter, but declined by 27% to 30% compared to pre-pandemic levels in the first quarter of 2019 and 2020 [7] - Charge-offs have increased as prior delinquencies aged, with delinquencies normalizing but remaining elevated compared to the previous two years [8] Market Data and Key Metrics Changes - Demand for credit has increased across the industry due to inflationary and cost pressures, impacting both delinquencies and demand for new originations [6] - The book-to-look ratio declined by 28% to 31% for new customers compared to pre-pandemic levels [6] Company Strategy and Development Direction - The company is focused on protecting its growth from the previous year and aims to achieve a long-term earnings per share target of $25.40 by the end of fiscal year 2025 [9] - The company is adapting to regulatory changes, such as the 36% rate cap in New Mexico, by pivoting to larger loans and exploring acquisition opportunities [58] Management's Comments on Operating Environment and Future Outlook - Management expects charge-offs and delinquencies to decrease moving forward due to tightened underwriting and reduced new borrower growth [18] - The company is optimistic about its ability to manage charge-offs and delinquencies despite current economic pressures [18][29] Other Important Information - The company acquired a portfolio during the quarter, resulting in a $3.1 million bargain purchase gain, indicating potential for future acquisitions [36] - The company is in the process of exploring securitization of loans, which would involve building out necessary infrastructure [60] Q&A Session Summary Question: Charge-offs and delinquencies trajectory - Management indicated that charge-offs are expected to decrease as delinquencies have leveled off since March, with a focus on managing the situation [17][18] Question: Lifetime loss assumption change - The change in lifetime loss assumption resulted in a $16.8 million impact on the provision, with a significant portion attributed to seasonality [21][22] Question: Bargain purchase gain explanation - The $3.1 million bargain purchase gain was due to acquiring a portfolio at a significant discount [36] Question: Opportunities for portfolio acquisitions - Management noted that there are a few opportunities available for acquiring portfolios [37] Question: Securitization of loans - The company is in the process of preparing for securitization, focusing on longer-term loans with lower interest rates [60][62]