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DATE

  • Thursday, July 24, 2025, at 10 a.m. EDT

CALL PARTICIPANTS

  • Chairman, President, and Chief Executive Officer — Chad Prashad
  • Chief Financial and Strategy Officer — Johnny Calmes

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TAKEAWAYS

  • Credit Agreement Expansion: The company completed a new credit agreement during Q1 FY2026, increasing commitments to $640 million, with revised terms permitting stock repurchases of up to 100% of net income beginning Jan. 1, 2025, and a $100 million upfront repurchase allowance available in the first twelve months of the new credit agreement.
  • Outstanding Bonds Buyback: Redemption of approximately $170 million in remaining 2021 high-yield notes will be finalized by August, removing prior constraints on accelerated share repurchases.
  • Share Repurchase Capacity: As a result of capital changes, current capacity enables over $200 million in potential repurchases over the next twelve months (as of Q1 FY2026), representing approximately 23%-25% of outstanding shares at the current stock price.
  • Net Income Accrual: Approximately $45 million in net income generated since Jan. 1, 2025, is available for use within the new repurchase framework.
  • Customer Base Growth: The customer base expanded by 4% compared to the first quarter of the prior fiscal year, marking the first-quarter customer base increase in three years and returning to levels last seen in Q1 2023.
  • New Loan Originations: New loan originations rose 12.6% year over year in Q1 FY2026, the highest for a fiscal first quarter since 2020.
  • Dollars Lent in New Originations: The dollar value of new originations increased 12.8% year over year in Q1 FY2026, aligning with fiscal years 2019 and 2020, which were among the highest recorded non-refinance years.
  • Loan Portfolio Ledger Recovery: The ledger gap narrowed from a 4% year-over-year decline (approximately $50 million) at the start of Q1 FY2026 to an 80 basis point decline (approximately $10 million) by quarter end.
  • Portfolio Risk Profile: The proportion of recent customers (zero to five months tenure) declined from 8.7% ($120 million) in December 2024 to 7.2% ($91 million) in June, reducing portfolio risk exposure.
  • Loan Credit Metrics: Gross yield on the portfolio increased by more than 230 basis points year over year; while first pay default rates and delinquency trends stabilized or improved despite growth in Q1 FY2026.
  • Product Development Milestone: Internal testing of the World Finance Smile credit card concluded, advancing to live customer pilots with a stated goal to better align yield and risk, reduce acquisition costs, and improve retention, especially in regulated ("rate cap") states.
  • Stock Repurchase Restriction Lifted: Full bond redemption will remove limits immediately restricting repurchase to $7.2 million, unlocking larger authorized amounts.
  • Credit Agreement’s Performance Covenant (“CPI”): The CPI covenant is approximately 18, with a default threshold of around 23-24, and management stated there is "plenty of cushion at this point."
  • Strategic Growth Approach: Management confirmed commitment to moderate growth, prioritizing customer retention and credit quality, not targeting double-digit portfolio or ledger growth rates.

SUMMARY

World Acceptance (WRLD 2.75%) implemented a new $640 million credit agreement in Q1 FY2026, enabling expanded stock repurchase flexibility and providing over $200 million in repurchase capacity for the next twelve months (as of Q1 FY2026). Share buyback activity is set to accelerate following the scheduled August redemption of $170 million in outstanding 2021 bonds, as discussed on the Q1 FY2026 earnings call. The company's customer base grew 4% in Q1 FY2026—the first such first-quarter increase in three years—with loan originations and dollars lent both exceeding 12% year-over-year growth in Q1 FY2026. New customer risk in the portfolio dropped on a sequential basis, while portfolio yields climbed by more than 230 basis points year over year in Q1 FY2026. First-phase customer trials have begun for the new World Finance Smile credit card, targeting improved yield and risk alignment and customer retention.

  • Peaking at no more than 12%, and suggested that seasonal factors result in this being the lowest earnings quarter each year.
  • Management does not anticipate significant risk impacts on credit quality or customer repayment behaviors despite changing macro and market sentiment.
  • Management stated, "we haven't seen any real dramatic shifts in terms of first pay defaults or their ability to repay."
  • There are no new performance-based covenants in the revised credit agreement other than an unchanged CPI measure.

INDUSTRY GLOSSARY

  • Ledger: The aggregate outstanding balance of all loans currently held by the company.
  • Rate Cap State: A state in which regulatory law sets a legal maximum interest rate on loans or revolving credit products.
  • CPI (Covenant Performance Indicator): A contractual threshold in the credit agreement measuring portfolio or operational performance that, if breached, may trigger lender remedies or restrictions.

Full Conference Call Transcript

Chad Prashad: Thank you for joining our fiscal 2026 first quarter earnings call. Before we open up to questions, we've had a few major updates this week to share along with highlights from the first quarter. We recently completed a new credit agreement increasing commitments to $640 million, allowing for stock repurchases of up to 100% of net income, which is an increase from 50% of net income in the prior agreement, and a $100 million upfront repurchase allowance in addition to 100% of net income beginning 01/01/2025. The net income is around $45 million since 01/01/2025. In addition, we're in the process of redeeming the remaining bonds that were issued in 2021.

If you recall, we issued $300 million in high yield notes with a five-year maturity in the fall of 2021, and have been repurchasing them in the market over the last few quarters. We currently have around $170 million outstanding that we'll redeem by August. This removes the constraint to allow for more accelerated stock repurchases. That capacity may be over $200 million for share repurchases over the next twelve months, which is approximately 23% to 25% of outstanding shares at this morning's stock price. As a reminder, our earnings are quite seasonal. Historically, the first quarter is our lowest quarter for earnings as we rebound from growth and provision from the tax season runoff.

Over the prior three years, first quarter net income has made up an average of only 5.6% of our total annual net income, and it's peaked at a high of only 12% of annual net income. We're excited about the current portfolio and its trajectory, which includes substantial customer base expansion, strong loan growth, improved loan approval rates while maintaining credit quality, growth in yields, and stable to improving late-stage delinquency. On growth, refinance volume increased 10% this quarter over the first quarter last year, really underscoring the overall growth we're seeing in the current lending environment. The number of new originations this quarter increased 12.6% over last year's first quarter.

This is the highest volume of new originations in our first quarter since fiscal year 2020. In terms of dollars lent in new originations, we increased 12.8% year over year and are in line with fiscal years 2019 and 2020, both of which were some of the highest non-refinance growth years on record. Our customer base increased by 4% this quarter compared to the first quarter of last year. This is our first positive customer base growth we've experienced during the first quarter in three years. We've also returned to the largest customer base we've had since the first quarter of 2023. All this growth has put us on track to rapidly close the year-over-year ledger gap.

We began the year on April 1 with a ledger that was down around 4% year over year, or approximately $50 million. We've grown around $40 million in this quarter to end the quarter down about 80 basis points, which is approximately $10 million year over year. Even with the substantial growth, both new originations and the overall portfolio have stable first pay default rates and improving delinquency. As well as quite importantly, gross yields have increased over 230 basis points year over year.

These results and other operational and capital improvements increase our confidence in a portfolio that will continue to have moderate growth with low cost of acquisitions, strong credit performance, improving yields, increased revenue, declining share count, and ultimately returning enhanced value to our shareholders through strong EPS growth. One short note on the new World Finance Smile credit card. We completed the first phase of internal testing and have moved on to live testing with customers. To reiterate, our main goals are to use this product slowly and wisely.

We want to better align yield with risk, especially in rate cap states, help customers manage both installment and revolving credit, lower our overall cost of acquisition and service, improve customer retention, and expand our markets. Our approach is to be prudent in our efforts to serve the one in three Americans with minimal to no mainstream access to responsible and affordable credit. Finally, we have an absolutely amazing team at World, and I'm very grateful for their commitment to their customers as well as to each other. They are helping our customers every day to establish and rebuild credit while also meeting immediate financial needs.

At this time, Johnny Calmes, Chief Financial and Strategy Officer, and I would like to open up to any questions you have.

Operator: We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question comes from Kyle Joseph of Stephens. Go ahead, please.

Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. Just want to parse through some of the credit developments in the quarter. So understand that you guys were expecting charge-offs to be higher because of late-stage DQs last quarter. Obviously, delinquencies moved in the right direction this quarter. Just, you know, is there anything that's driving that, whether it's underwriting changes and in macro and how that kind of positions your outlook for charge-offs for the remainder of the year?

Chad Prashad: Yeah. So the biggest thing is the proportion of new customers in the portfolio. So we had a really good third quarter, or December, with new customer growth. And at the end of December, our zero to five-month customer, right? So they've only been with us for zero to up to five months. That made up 8.7% of our portfolio at December, or $120 million. That's now down to 7.2%, or $91 million, at June. Right? So a lot of the risk has come out of the portfolio as that zero to five-month customer becomes a smaller proportion of the overall portfolio.

Kyle Joseph: Yep. Okay. I got it. That makes sense. And then kind of on the new strategy in terms of smaller loans, higher yields, kind of give us a sense for where you are in terms of that strategy? Are you happy with the current mix? Would you expect ongoing growth in smaller loans and how you foresee that impacting kind of the portfolio yield over time?

Chad Prashad: Yeah. Great question. You know, so I think right now, we are fairly happy with the overall mix. We do not expect to dramatically increase investments into new customers beyond the current weighting of the portfolio. We have been running a strategy for the past year or two that really weights both new customers and returning customers pretty heavily in terms of our investments. We would like to continue that strategy, especially in terms of returning customers and overall customer retention. We're not really in a place where we are looking to massively grow the portfolio, either the base or the ledger. We're not looking for double-digit growth there.

We're not looking to take any unnecessary risks from a credit perspective. So to the extent that application volume of acceptable risk customers continues to be this high and operations continue to run as smoothly as it is, I would expect the current mix of new customers to be about the same, as well as former customers, and then in addition to that, still aiming for overall increase in customer retention.

Kyle Joseph: Got it. Helpful. And then, you know, last time we caught up was April. Obviously, sentiment has shifted dramatically, at least in terms of public equity markets, but at least just give us a sense for any changes in your consumer behavior. It didn't sound in April there had been a dramatic impact from tariffs, but, you know, any changes as at least the public stock market sentiment has shifted pretty dramatically since we last caught up.

Chad Prashad: Yeah. We have not really seen any increase in risk from our especially our newer customers. We would tend to see first signs of weakness there first. So for our new customers, we've had some really tight underwriting for a few years. And even as we look at different credit bands, we haven't seen any real dramatic shifts in terms of first pay defaults or their ability to repay. So, so far, we haven't seen any real impacts with that.

Kyle Joseph: Got it. That's it for me. Thanks for taking my questions. Thanks.

Operator: Our next question comes from John Rowan of Janney. Go ahead, please.

John Rowan: Can you, Chad, you were you said about the repurchase authorization with the buckets that I guess come in once you retire the remaining notes?

Chad Prashad: Yeah. So, with the new credit agreement, there's really two things at play here. So there's an upfront repurchase allowance of $100 million in the first twelve months. In addition to that, we can also repurchase up to 100% of net income, which begins with 01/01/2025. So there's already approximately $45 million in that bucket as well. So as we sit today, that's around $145 million.

John Rowan: Okay. But there was I thought you said there's another $100 million that you'd have, like, $200 million upfront.

Chad Prashad: Wait. So that bucket will build as we continue our income going forward. So where that used to be, it would build at a percent of net income. It's now 100% of net income.

John Rowan: Okay. So you would I'm sorry. Distribute. You have $100 million that comes in, but is that governed by the notes that you have to repurchase?

Chad Prashad: Right. Yes. So the notes are sort of the limiting factor right now. Right? So as of today, we can repurchase, I think, $7.2 million. But once we retire the bonds, that's no longer a factor.

John Rowan: Okay. And then you'll have just 100% of net income accruing into the bucket. Correct?

Chad Prashad: Right.

John Rowan: Okay. The new $640 million credit agreement, does that have any type of, you know, performance-based governor to repurchase? Or what are the debenture as far as your credit performance within that?

Chad Prashad: There's nothing new in terms of that. Yeah. So there are some sort of, you know, CPI measures in there. That's nothing new in terms of that.

John Rowan: If I'm not mistaken, I haven't looked at the CPI in a little while, for your old credit agreement. It was in the low twenties, if I'm not mistaken, on a trailing basis. Is that still around that same number?

Chad Prashad: It is a progressive measure. Right? So it did, you know, I think right now, we're around 18. I think, I can't remember exactly what it is. Maybe 23 or 24 is in a default. I can't remember exactly what the number is. But we've got plenty of cushion at this point.

John Rowan: Okay. Alright. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Prashad for any closing remarks.

Chad Prashad: Thank you for taking the time to join us today, and this concludes the first quarter earnings call for World Acceptance Corporation.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.