WRLD
#Great.
Good morning, and welcome to World Acceptance Corporation's Fourth Quarter Earnings Call.
Again, my name is Jim <UNK>.
I'm joined here with 2 members of my management team for this call and to participate in the Q&A session.
Just a couple of introductory remarks before we get started on the Q&A.
As is customary, we've published our fourth quarter earnings press release this morning, along with our earnings call script.
The 2 purposes of these documents are: number one, to provide summary data on our results; and then secondly, to display some various components of increase, decrease with some granularity within that script.
World is one of the largest small-dollar installment loan providers.
What I'd say, despite what could easily be described as mischaracterizations from certain segments of the media, but our website, customers, industry associations we deal with, regulators, many legislators, all display and know what installment loans are, as well as the differences between us and other loan types offered within the personal finance and lending industries.
Among a host of other metrics provided, you can see that installment loan portfolio has increased yet again this quarter.
We acknowledge the contributions from our seasoned field or operations and sales organizations, top-to-bottom, for this continuing momentum.
It's their enthusiasm and tenacity in embracing and driving a combination of ideas and changes into our branches, working closely with our headquarter's functions in Greenville, which have led us to bank those improvements and data-driven activities we worked on for some time.
By converting those ideas from our customers, implementing the improvement initiatives, system upgrades, all of the other things we've been working on for some time, along with our customer service-based selling, we've produced yet another quarter of continuing positive results.
So thanks to all of our employees and associates.
As I indicated, on this earnings call with me this morning our Chief Financial Officer, <UNK>ny <UNK>; and Senior VP of Analytics and Strategy, <UNK> <UNK>.
And at this time, we're pleased to accept questions about our fourth quarter results.
Yes.
So it was just under 16%, which is consistent ---+ slightly down from the same quarter last year.
Sure.
So the gross loan portfolio in the payroll deduct business is $50.1 million gross loans.
After ---+ so ---+ and $25.1 million net loans.
And then after allowance, we have an exposure of $13.3 million left in that payroll deduct loan portfolio.
So the run-off in Mexico is concentrated in that portion of the business, in the payroll deduct business and that the advanced pay or traditional loan business is up year-over-year.
That's right.
I will also say we closed actually 36 on the year, but 33 in the quarter, and those 33 in the quarter were the ---+ all in the payroll deduct business.
There was a slight improvement in the traditional Mexican business from a delinquency standpoint.
So yes, all the issues are concentrated in the payroll deduct business.
I can ---+ <UNK> can handle some of the more detailed questions.
But the decrease for the quarter is just the seasonal decrease, the seasonal run-off we have every year, right, which is aligned with the tax return season.
That's right, sequential.
Correct.
I think 31.8% is the effective tax rate, ex the transition tax.
<UNK>, this is <UNK>.
So between those different levels, the performance has been fairly consistent over the past couple of years, improving slightly for new customers and former customers especially.
But over the last couple of years, the originations for new and former customers have increased in volume.
So as that payroll deduct business continues to roll off, I expect the allowance to loan percent ratio to come down with that, given that a lot of that ---+ the weakness and the delinquencies are in that portfolio.
So that'll ---+ we haven't shared that in the past and we'll share Mexico in total, sharing the ---+ in the 10-K.
And we can consider breaking out more information there around the payroll deduct business as well.
Yes, sure.
Yes, so those branches are solely tied to the payroll deduct business.
In Mexico, there's ---+ we don't sort of co-mingle the businesses in one branch.
So the [avance] traditional loan business has still been expanding their branch network.
So we've stopped originating in that portfolio.
So the expectation is that portfolio winds down over time.
So in Q4, that's up a little over 30%.
There are a couple of things contributing to that.
There's been some changes in our marketing campaign volume and also the channels that we use.
We've shown what we think are pretty impressive results in Q4 as far as increases in new customers and former customers.
Secondly, we're also in the middle of phasing in a centralization of some of our mail that was previously sent from the branches.
And so you're going to see some of those expensive ---+ expenses move from the branches to the central advertising budget.
So you'll probably see that continue to increase over the next couple of quarters.
But it's quite positive, we don't expect 30% increases in our marketing budget next year.
We do expect some increases to that budget, which we think is reasonable given that some of the success we've had in marketing recently.
So it's hard to know exactly what is going on in the market.
But we certainly have made a lot of internal changes to our practices and procedures regarding marketing over the last 1.5 years to 2 years.
So we certainly attribute a lot of that success to the changes we made here.
And those things have led to a higher-quality customer as well and some of those things have obviously helped in charge-offs down the road.
Yes.
So we actually like we've had the success, despite pulling back on lending to the lower credit scores in our segment.
And at the same time, decreasing our cost acquisition.
Sure.
Those negotiations are ongoing.
And we don't expect any issues with extending that kind of facility this spring.
Yes, great.
So thanks for everybody's time this morning and interest.
And I'm sure we'll be talking some more with the other disclosures coming up with 10-K, et cetera.
Thanks for your time and interest.
