WRLD
#Great.
Good morning, and welcome to our third quarter earnings call.
As in recent quarters, we've issued our earnings release and an additional document to provide what we call further details and observations about our results.
Again, my name is Jim <UNK>.
I'm fulfilling the role of Interim President and Chief Executive Officer until the search for a permanent replacement is completed.
A little background on me might be useful.
I specialize in public and private corporate executive-level transitions with well-known names to mid-market firms.
I also do some specific project work into what I would call targeted client risk areas.
My career thus far includes some 40 years of experience in C-suite operational regulatory finance positions with large corporations and firms such as MCI, Telecom USA, Sprint, Arthur Andersen Business Consulting as well as others.
For this group, I am not a candidate for the permanent role of President and CEO.
From my vantage point, the board is focused on the search for that candidate and who likely will include tenure, skills, strategic industry and pedigree that fit their targeted preference.
In the meantime, the board has charged me with assuring the company and management team operate on a business-as-usual approach throughout this transition.
And a primary focus for me is assuring our business is conducted in a manner advantageous to our customers, to our employees and shareholders.
So as for the business for this call, overall, our third quarter results were strong.
We see positive momentum building and continued in our business as a result of a number of initiatives by the company.
Our Chief Financial Officer, <UNK>ny <UNK>, is with me.
And we're certainly welcome to take questions about our quarterly results.
No, that's a Q4 event.
No.
There's ---+ obviously, there's been a press release on the activity by the board about the mutual separation.
So yes, we see no reason to comment further on personal matters.
Right.
So the tax rate will also shift due to the change in the tax law.
So obviously, our corporate rate was 35%, and it's moving to 21%.
For the current fiscal year, that's going to be a blended rate.
But going forward, our effective tax rate will be more in the neighborhood of 24% to 25%.
No, it's effective January 1, I believe, or maybe even a few days before that.
Well, you're providing for the annual tax, right.
So our fiscal year tax rate will be a blended rate of the 35% and the 21%.
Sure.
Yes, there is some seasonality in Mexico, as you pointed out.
As in Mexico, there's a kind of required Christmas bonus and ---+ that generally leads to pay downs and runoff in both portfolios.
We have seen runoff in our Viva payroll deduct portfolio.
As of the end of the quarter, our net receivables on the payroll deduct product after allowance is $16.9 million.
The gross figure is $56.2 million.
I believe we stated on the last call, we have stopped originating in our Viva product.
And so the [amount of] delinquencies have remained relatively steady.
So yes, a lot of delinquencies in the Viva portfolio.
Sure.
We feel like in the states we operate in today, there's still a lot of opportunity to open new branches.
While there are states that look possible for us to move into, there's no immediate plans to move into those states.
The plan right now is to continue to open branches in the space we operate in today.
And it'll likely be similar to the current year where we open 30 ---+ 25 to 30 branches here in the U.S.
So for the current year, the effective tax rate, again, this would be a blended rate of the 35% and the 21% that went into effect around the new year.
Going forward, so starting in fiscal '19, we expect our effective tax rate to be in the 24% to 25% range.
There was some shifting in expenses between Mexico and in the U.S. which would have some impact, but it's relatively minor.
Yes.
Again, from my perspective and my conversations with the board, it's a very active future-looking group.
I've grown to be impressed by their willingness to stay actively involved.
In terms of the management team, again it's nice to walk into an organization that's got some stable management at the operational level.
There's lots of things going on, and I feel good about that.
In terms of the recent turnover, the function of the board is to always be taking a look at what does the leadership look like for now and going forward.
And they've made some decisions along the way, and hence, the joint decision to part ways with the previous CEO.
So I feel comfortable.
Again, my charge is business as usual.
But I've got a talented and knowledgeable group of board members to work with.
I'm not sure I understand the question, <UNK>.
No, there's nothing we can elaborate on at this time.
So as I mentioned to <UNK>, we have stopped originating in the Viva business.
There's nothing more to add to that.
Sure.
I think you can maybe assume that it is us taking market share, but it's hard to get a very clear view on that, just given that most of the companies in the industry are private companies.
So it's hard to know what their growth rates are and what they're seeing to know that for sure.
But we are encouraged by the strong growth in new customers and former customers.
And they'll continue to be a focus as we move forward.
And really some of our initiatives are concerned with retaining our base.
We've got a good brand name where we are.
And so the better service we can provide, hopefully, that might influence our ability to grow a little bit as well.
Sure.
As you know, around a year ago, we started to ramp up our internal collections efforts.
And we've seen strong benefits from that.
And since we started holding our 90-day accounts or longer, we have seen an increase in the rehabilitations of those customers.
So it was something we felt good about, and the results seem to be playing out.
Sure.
I won't elaborate too much, but I will say it was relatively small acquisition.
It was only $350,000.
Generally, the third quarter is pretty quiet for acquisitions, given most of these companies were in the middle of their growth season, and it's a profitable quarter for them.
And you don't typically see people looking to sell in the third ---+ our third quarter, calendar fourth quarter.
It's relatively small.
So as you may recall, or may have seen, our live check program is focused on our former borrowers.
We've rolled that out in the summer of last year.
And obviously, since we're focusing on a former customer base, the response rates on those will go down over time as there's a limited number of people in that base.
So while it's still a very helpful piece to our overall marketing program, it's not a significant piece of that program.
I don't have it in front of me.
But again, it's going to be a relatively small percentage of the overall base.
Sure.
So our ---+ we typically renegotiate our facility in the springtime, so coming up in the next few months.
I'm not going to elaborate on what we ---+ what the negotiating points may or may not be at this time.
So the fourth quarter, I think it'll be in that 31% range.
So just to clarify on why the quarterly effective tax rate was lower, a lot of that has to do with the first 2 quarters be that ---+ the 30 ---+ closer the 37% rate, and you have a true-up in the fourth quarter to adjust down to that 31% rate.
So that's why the fourth quarter effective tax rate was a little lower.
But for the full year, we expect to be closer to that 30%, 31%, 34% rate once you take into effect the state taxes.
Correct.
Well, great.
Thanks for everybody's time and interest.
We appreciate the opportunity to get in front of the group.
And everybody, have a great day, and let's enjoy the warming weather, at least down here in the south.
