World Acceptance (US:WRLD)2021-10-26 16:50Financial Data and Key Metrics Changes - The overall portfolio grew by $170 million, representing a 25.7% year-over-year increase, marking the largest single quarter growth on record [4] - New and returning customer loan volumes increased by over 40% compared to the same quarter two years ago [4] - Delinquency rates remain low and within expectations, with provisions for loan losses adapting based on customer credit and loss expectations [6][7] Business Line Data and Key Metrics Changes - The new customer portfolio increased by 54.6% in the second quarter and 101% year-over-year, indicating strong growth in new customer acquisition [7] - Over 40% of the portfolio is now below 36% APR, up from 26% three years ago, and nearly two-thirds of the portfolio is below 50% APR, an increase from 50% three years ago [9] Market Data and Key Metrics Changes - The company completed its first 144A bond issuance, providing an additional $300 million in working capital, which diversifies the capital structure [5] - The expected loss rates for new customers are higher than for existing customers, impacting provisioning during periods of rapid growth [14][19] Company Strategy and Development Direction - The company aims to diversify its capital structure further as its larger loan, lower interest portfolio continues to grow [5] - Management emphasizes the importance of maintaining growth across all customer types, including new, returning, and former customers, to ensure overall portfolio health [21] Management's Comments on Operating Environment and Future Outlook - Management expects to hit long-term incentive EPS targets before the end of fiscal year 2025, despite potential increases in expected loss rates due to the macroeconomic environment [8][29] - The company has tightened underwriting standards during the pandemic, which is expected to improve credit quality moving forward [28] Other Important Information - The company anticipates seasonal volatility in provisions, with an expected increase in delinquency as it moves into the third quarter [33] - Management noted that the expected loss rates are not anticipated to return to pre-pandemic levels due to a more diverse customer base [29] Q&A Session Summary Question: Inquiry on credit reserves and provisioning - Management explained that the increase in credit provisions is largely due to the growth in new customers, who typically have higher expected loss rates [12][15] Question: Expected losses in a normalized credit environment - Management indicated that while delinquencies and loss rates are expected to rise, they do not anticipate returning to pre-pandemic levels due to a more stable customer mix [26][29] Question: Provision expense expectations for the next quarter - Management expects the allowance ratio to be higher in Q3 due to seasonal trends, with a reversal anticipated in Q4 [32][33]