WORLD ACCEPTANCE CORP Q3 FY2025 earnings call

• Portfolio stabilized after rightsizing and de-risking, with yields up over 200 basis points YoY.
• Portfolio growth in Q3 2025 returned to pre-pandemic norms; loan portfolio performed well with low first pay default rates.
• Portfolios returned to same size YoY after shrinking previously; customer base increased 4% YoY.
• Non-refinance volume rebounded in Q3 2025, with over 18% more loans vs Q3 2024 and 53% more vs Q3 2023.
• Approval rates for new customers improved dramatically (47% YoY vs Q3 2024, 80% YoY vs Q3 2023) while maintaining low first payment default rates.
• Focus on regrowing customer base with higher credit quality customers, decreasing average balance to improve yield and long-term profitability.

In the third quarter of 2025, the loan portfolio grew by 6.6% compared to 1.5% in Q3 2024 and -2.8% in Q3 2023. The customer base experienced 7% growth in Q3 2025 compared to 3% in the prior year's Q3 and an average of 6.3% pre-pandemic. Yields improved by over 200 basis points year-over-year. The average balance decreased by almost 5.1% from Dec 31, 2023, and 12.6% from Dec 31, 2022. Non-refinance volume rebounded with over 18% more loans in Q3 2025 vs Q3 2024 and 53% more vs Q3 2023. Approval rates for new customers increased by 47% YoY vs Q3 2024 and 80% YoY vs Q3 2023. Revenue contribution: Loan portfolio performance is key, with growth, yield improvements, and customer base changes driving segment performance.

• Expect yields and delinquency trends to continue converting into revenue and income trends for 2026.
• Opportunity to improve delinquency and charge-off rates, especially related to large loan portfolio from investments in fiscal years '21 and '22.

• Continued opportunity to improve delinquency and charge-off rates, particularly related to the large loan portfolio stemming from outsized investments in fiscal years '21 and '22.

Q: Good morning, thanks for taking my questions. Just thinking about growth versus credit quality in the macro-environment, obviously, inflation is lingering, and there's still good loan demand, but it really sounds like a lot of your kind of return to growth has been driven by new customers. Is that fair? And then, going forward, is this kind of the type of environment where you can see sustaining portfolio quality while also growing the portfolio?

A: Yes. Good morning, Kyle. So, a lot of our growth has been from non-refinance customers, so that includes our former customer base as well. While we have increased our approval rates and overall booking rates of our new customers, they still remain, I would say, within the normal range from a historic perspective. Over time, over the last year or two, we've really focused in on attracting former customers to return to us as well as increasing the retention of our current customers. So, to that point, from a risk perspective in the current macro-environment, we're not any more weighted towards new customers now than we have been in the past, pre-pandemic especially. We're certainly less weighted towards new customers today than we were from 2018 on through like 2021 or so. In terms of credit quality, in the macroeconomic environment, we've moved and shifted towards smaller loans over the last two to three years than we were doing in fiscal '21 and fiscal '22, which allows us a little more flexibility, and how we're underwriting and the type of loan products that we are fitting our customers with to make sure that we can recognize the product matches the risk of the customers, especially with new customers. So, I don't really anticipate anything in the short-term to have any significant impacts negatively.

Q: Got it. So, it's a good segue to -- yes, on the portfolio yield, you highlighted, I think a 200 basis point improvement. Is that a function of mix? Is that a function of credit quality? And, kind of, give us a sense for -- you know, do you see that being stable going forward at the new base level?

A: Yes, I'll take that. It's a -- it's primarily mix, right? So, I mean, you can see that our large loan portfolio as a percent of the mix has shrunk to 48.2%, where it was 55.2% last year. So, year-over-year, our large loans have shrunk close to 14%, while small loans have grown close to 14%. So, that's the largest part of it. But yes, certainly, credit quality will have a -- a part in that as well. So -- obviously, we're not accruing interest on our non-performing loans. So, that does help as well.

Q: Very helpful. Thanks. And then one last one from me, just given where we are in the quarter. Any insight you guys have on tax refunds, how you're thinking about this season in terms of timing and magnitude versus last year?

A: Yes. I mean, I think it's still a little too early to tell. I think we're off to a good tax season. We've made a number of operational changes over the last couple of years that have really taken hold and taken root in our branches throughout the country. So, kudos to our operators. I think they've done a wonderful job there. From a marketing perspective, same thing. So, I think we've seen early signs or at least the same or increased customer demand or interest in the product with us. But it's still -- it's early -- we haven't quite hit our biggest weeks yet that we normally file, which will be this week into the first couple of weeks of February. So, I would say, it's early to tell, but we're cautiously optimistic.

Q: Good morning, guys.

A: Good morning, John.

Q: So, it feels like you guys were -- you're obviously, kind of, reembracing the small loan portfolio, kind of, the history of the company. I'm curious, I mean, are you guys marketing to customers that, you know, I want to say Jettison, but were not really the core focus as you were growing the large loan portfolio? Are you going back to former customers? Are you marketing to them? And what are you marketing to them? Is it the same economics that we grew to know in the history of the company, meaning, you know, the yields, the periods in which you market or refinance and then also, you know, the typical refinancing rates that, you know, the company has had for 20 or so years? I'm just curious if you're basically remarketing the same small loan product to the same customers that may have left the company during the growth of the large portfolio growth?

A: Yes, morning, John. Great question. So there's a little bit of yes, there's a lot of no to that answer. So, we are moving back to our smaller loan customers, not quite as small on the whole as you would have seen pre-2020. To give you some context, leading up to 2020, our average new or non-refinanced customer was seeking around a $650 loan, today, that's closer to around $800 to $850, which is still down a good bit from the $1,100, $1,150 that we were lending back in -- in calendar '22 and prior '21. So, while we've come back down, it's still not as low as it used to be. On the economic side, we have worked to get our yields up close to where they used to be. Again, the loans are not quite as small as they used to be, so the yields are not going to be quite as high as they used to be, the gross yields. And then on the refinance side, I don't see us ever being able to return to a super-high refinance rate that you would see back pre-2010, certainly not even back to what you would see pre-2015, part of that is the product itself is a little bit different. So, our average term is longer than it used to be. So, for a new customer walking the door, you're looking at around 12 months. For a term, all of our loans today are closer to about 18 months for an average term. So, we're typically not going to see customers refinance more than once or twice within a year, just given the length of that loans, right? So, we're not -- we're not in a period where we're looking at six-month term loans or seven-month term loans and four refinances in a year. So, it's moved on to a different product from that perspective. From an overall performance perspective, though, you know, we are still really focused on, one, the small loan customer from a growth perspective for new and former customers, and we do continue to market to those former customers who've left us over last couple of years to return for smaller dollar loans. On the larger loan side, we are actively and continue to actively continue to work to make sure that large loan portfolio is really well underwritten, and also secured.

Q: Can I just make sure I understood one of the answers? Particularly with the duration, so, on a small loan today, what's the stated contractual length when the loan is underwritten? And when are you marketing a refinance? Like what's the -- what's the contractual life versus the actual life of -- the average life of the portfolio basically?

A: Yes. So, the typical new loan will be, let's say, around 12 months with roughly 45% of our customers choosing to refinance in the first year. It's probably the best way to articulate that.

Q: Okay -- yes, that's what I needed to know. All right. Thank you very much.

A: Thanks, John.