Good morning, and welcome to World Acceptance Corporation's First Quarter 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions] Before we begin, the corporation has requested that I make the following announcement. The comments made during this conference call may contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent the corporation's expectations and beliefs concerning future events. Such forward- looking statements are about matters that are inherently subject to risks and uncertainties. Statements other than those of historical fact as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will and should or any variation of the foregoing and similar expressions are forward-looking statements. Additional information regarding forward-looking statements and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraph discussing forward- looking statements in today's earnings press release and in the Risk Factors section Corporation's most recent Form 10-K for the fiscal year ended March 31, 2025, and subsequent reports filed with or furnished to the SEC from time to time. The corporation does not undertake any obligation to update any forward-looking statements it makes. At this time, it is my pleasure to turn the floor over to your host, Chad Prashad, President and Chief Executive Officer. Ravin Ch

Good morning, and 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 January 1, 2025. The net income is around $45 million since January 1, 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 5-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 will redeem by the end of 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 12 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 3 years, first quarter net income has made up an average of only 5.6% of our total annual net income and has peaked at a high of only 12% of annual net income. We're excited about the current portfolio in 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. To really underscore 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 year 2019 and 2020, both of which were some of the highest non-refinanced 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 3 years. And 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 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, and quite importantly, gross yields have increased over 230 basis points year-over-year. These results and other operational 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 of customers. To reiterate, our main goals are to use this product slowly and wisely. And we want to better align yield with risk, especially in rate cap states, to 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 1 in 3 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, our Chief Financial and Strategy Officer, and I would like to open up to any questions you have.

[Operator Instructions] Our first question comes from Kyle Joseph of Stephens.

Just want to parse through some of the credit developments in the quarter. So I 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 -- is there anything that's driving that, whether it's underwriting changes in macro and how that kind of positions your outlook for charge-offs for the remainder of the year?

Yes. So the biggest thing is the proportion of new customers in the portfolio. So we had a really good third quarter or December quarter with new customer growth. And at the end of December, our 0 to 5-month customer, right? So they only had been with us for up to 5 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 0 to 5-month customer becomes a smaller proportion of the overall portfolio.

Yes. Okay. I got it. That makes sense. And then kind of on the 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?

Yes. Great question. So I think right now, we're fairly happy with the overall mix. We don't 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 2 that really weighs 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 on from a credit perspective. So to the extent that application volume of acceptable risk customers continues to be this high, and operations continues 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 as -- in addition to that, still aiming for overall increase in customer retention.

Got it. Helpful. And then 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 like in April, there had been a dramatic impact from tariffs and then -- but kind of any changes as at least the public stock market has -- sentiment has shifted pretty dramatically since we last caught up?

Yes. 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 far, we haven't seen any real impacts to that.

Next question comes from John Rowan of Janney.

Can you -- Chad, can you repeat what you said about the repurchase authorization with the buckets that, I guess, come in once you retire the remaining notes?

Yes. So with the new credit agreement, there's really 2 things at play here. So there's an upfront repurchase allowance around $100 million in the first 12 months. In addition to that, we can also repurchase up to 100% of net income, which begins with January 1, 2025. So, there's already approximately $45 million in that bucket as well. So as we sit today, that's around $145 million.

Okay. But there was -- I thought you said that there's another $100 million, then you'd have like $200 million upfront?

That bucket will build as we continue to earn income going forward. So that used to be, it would build at 50% of net income, it's now 100% of net income.

Okay. So sorry, just to repeat, you have $100 million that will -- that comes in, but is that governed by the notes that you have to repurchase?

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.

Okay. And then you'll have just 100% of net income accruing into the bucket, correct?

Correct.

Okay. The new $640 million credit agreement, does that have any type of performance-based governor to repurchase? Or what are the -- what's the debenture as far as the credit performance within that...

There's nothing new in terms of that. So we -- there are some sort of CPI measures in there, but that's nothing new in terms of that.

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 20s, if I'm not mistaken, for a trailing -- on a trailing basis, is that still around that same number?

It's a progressive measure, right? So I think -- right now, we're around 18%. I think, I can't remember exactly what it is it, maybe 23% or 24% is an event of default. I can't remember exactly what the number is, but we've got plenty of cushion at this point.

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

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

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