World Acceptance ((WRLD)) has held its Q2 earnings call. Read on for the main highlights of the call.
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World Acceptance’s recent earnings call painted a mixed picture for investors. The company showcased significant strides in new customer growth and origination volume, alongside an improved capital position. However, these positives were counterbalanced by one-time expenses and increased provisions, leading to a GAAP loss for the quarter. The sentiment expressed during the call was cautiously optimistic, acknowledging the challenges while highlighting the strategic advancements.
New Customer Growth
World Acceptance reported remarkable new customer growth, marking the most significant increase in the past four years. The company’s new customer portfolio expanded by 35% year-over-year, a testament to its successful customer acquisition strategies.
Increased Origination Volume
The company experienced a substantial rise in new customer origination volume, which increased by 40% year-over-year by the end of the second quarter. This growth signifies a return to pre-COVID levels, reflecting a robust demand for the company’s offerings.
Record Loan Volume
Non-refinance originations saw a 15% increase year-over-year in the second quarter, marking the highest volume for this period on record, except for FY 2022. This achievement underscores the company’s strong market position and ability to meet customer needs.
Portfolio Growth
World Acceptance’s portfolio grew nominally by 5.5% more this year compared to last year, ending the second quarter with a 1.5% year-over-year increase. This growth highlights the company’s effective portfolio management and expansion strategies.
Improved Capital Position
The company enhanced its capital position by repurchasing and canceling $170 million of bonds, establishing a $175 million warehouse facility, and completing a new credit agreement with increased commitments. These actions demonstrate a strategic approach to strengthening financial stability.
Share Repurchase Program
World Acceptance has repurchased 9.1% of its shares year-to-date, with the potential to repurchase up to 17.7% of outstanding shares. This move reflects the company’s commitment to returning value to shareholders.
One-time Expenses
The quarter was impacted by a $3.7 million one-time expense from early bond redemption and a $1.3 million discrete tax-related expense from previous Mexico operations. These expenses contributed to the financial challenges faced during the period.
Increased Provision for New Customers
A $5 million increase in provision was necessary due to the larger new customer base, impacting earnings per share by $0.78 after tax. This provision reflects the company’s proactive approach to managing potential risks associated with its expanding customer base.
Increased Long-term Incentive Compensation Expenses
There was a notable $23.9 million net increase in long-term incentive compensation expenses compared to the previous year. This increase is indicative of the company’s investment in talent retention and motivation.
GAAP Loss for the Quarter
The company reported a GAAP loss for the quarter, influenced by the aforementioned one-time expenses and increased provisions. This loss highlights the financial hurdles faced despite the company’s strategic growth initiatives.
Forward-looking Guidance
Looking ahead, World Acceptance acknowledged several unusual events that impacted the quarter’s financial results, including a combined EPS impact of $1.61 from specific expenses. Despite these challenges, the company remains focused on leveraging its significant new customer origination volume, which rose by 40% year-over-year, and its strategic share repurchase program.
In summary, World Acceptance’s earnings call revealed a complex financial landscape, with notable achievements in customer growth and capital management overshadowed by significant expenses and provisions. The overall sentiment was one of cautious optimism, as the company navigates its challenges while capitalizing on growth opportunities.