Participants

Ravin Prashad; President, Chief Executive Officer, Director; World Acceptance Corp

John Calmes; Chief Financial and Strategy Officer, Executive Vice President, Treasurer; World Acceptance Corp

Kyle Joseph; Analyst; Stephens Inc.

John Rowan; Analyst; Janney Montgomery Scott LLC

Presentation

Operator

Good morning, and welcome to World Acceptance Corporation's fourth quarter 2025 earnings conference call. This call is being recorded. At this time, all participants have been placed in a listen-only mode.
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 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 facts, 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 of the corporation's most recent Form 10-K for the fiscal year ending March 31, 2024, 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. Please go ahead.

Ravin Prashad

Morning, and thank you for joining our fiscal 2025 year-end earnings call. Before we open up the questions, there are a few areas I'd like to highlight. We ended the year with a $1.22 billion outstanding ledger, which is a 4% decrease year over year. However, our customer base increased by 3.5%. Of note, this is the first year of year of year-over-year customer growth since fiscal year 2022. And we've returned to the largest customer base since the end of fiscal year 2022.
The reduced ledger and increased customer base are a result of our continued efforts to reduce our outstanding average balance per customer, which decreased 7.3% year over year following a 7.1% decrease last year. As we continue to focus on improving gross yields, which improved by over 100 basis points this year and growing the customer base through primarily new and former customers, as well as improved retention of existing customers, we continue to expect the average balance to right size in the upcoming fiscal year.
On the surface, we continue to experience what may seem like sticky delinquency, which, for World, looks like overall annual delinquency in charge-off rates that appear stubborn to return to normal levels. Part of that, roughly 125 to 150 basis points of the 17.5% annually charge-off rates is due to the portfolio shrinking this year and a reduction in the denominator itself as individual credit vintages appear steady or improved overall. With normal to mid-single-digit portfolio growth, we would expect a natural 125 to 150 basis points reduction in the annualized rate, all else being equal.
The other major component of our delinquency rate is the growth in new customers this year. At the end of December 2024, we increased our newest customer bucket, those with less than six months of tenure with the company, by 36% compared to December 2023. That's a $32 million increase. This is important because these newest customers for World are our riskiest customers with the highest loss rates.
As we rolled into the fourth quarter, this growth had an expected impact on our delinquency rates, especially our 60- and 90-day buckets. With our early stage 0- to 60-day delinquent buckets, those actually improved. As of today, in April fiscal year 2026, the current month, we've actually seen improvement sequentially in our 30-, 60-, and 90-day buckets. But it's important to keep in mind that new customer growth is an investment with an outsized impact immediately to our provision for losses, as well as the short term, about one-quarter lag impact to our delinquency rates.
We're also optimistic about the impact that improved training and quality of delinquency and loan servicing management will have on delinquency that's already underway for fiscal year 2026. Our fourth quarter benefited from a 25% increase in tax return revenue this season, nearly $7 million. I do want to further point out that our fourth-quarter EPS also benefited from a $2.8 million after-tax accrual release of share-based comp expense or roughly $0.38 per share. This release comes from a portion of forfeited performance shares and resulted in $8.13 per share this quarter, which would have been around $7.25 per share during the fourth quarter without this one-time benefit.
Non-refinance loan volume during the fiscal year increased by 12.6% year over year, which followed a 10% increase last year while maintaining high-credit quality, low first payment default rates, and improved gross and net yields. This has continued already into April of the current month, fiscal year 2026, with to date non-refinance originations surpassing April of the most recent prior years, going all the way back to April of fiscal year 2020, including surpassing April of fiscal year 2023, which was our previous high benchmark.
Of note, the April non-refinance volume here that I'm talking about is the number of originations, not dollars originated. This is an important distinction in the difference in our current strategy. It's really highlighted by comparing our April current year fiscal year 2026 originations to April of fiscal year 2023. While the number originated thus far in this April is similar to April of 2023, the average balance from this April is 24% lower than it was back in April of fiscal year '23, and the gross yield today is 800 basis points higher.
While the current month April's originations first payments haven't come due yet, the first pay default comparisons for the three prior months to each of these Aprils highlights an increase in our stability and performance. The Q4 originations from fiscal year '25 versus fiscal year '22, the three months prior to each of those Aprils, shows a lower first payment default rate in the most recent period, again, coupled with a much lower balance and around 800 basis points higher gross yields for those comparable periods.
There's much to be optimistic about with the credit quality of what we're originating today, especially while growing our customer base. Our refinance loan volume has improved slightly by 3% year over year, which we're especially proud of during a period of increased refinance credit selectivity, as well as reduced large loan credit offerings. Refinance volume dipped in the fourth quarter, namely during March, which we view as a temporary reduction in demand that has already rebounded in April of the current fiscal year.
Refinance volume in the current month, this April, has already eclipsed the full month of April of last year, both in terms of numbers, as well as dollars of refinance originations, still with a few days left of the current month. Similar to non-refinance originations, these refinance originations also carry a lower average balance compared to prior periods. Of note, the small and large loan makeup of our portfolio continues to shift towards small loans. From our peak of nearly 60% of the portfolio being large loans just two years ago, we've already reduced that down to 48% at the end of fiscal year '25 and expect the portfolio to continue to shift predominantly towards small loans. This is exemplified again by the reduction in average balance for non-refinance and for refinance customers.
For new customers, marketing and acquisition channel adjustments continue to show the increased quality and applications. Approval rates for new customers have continued to improve dramatically. The third and fourth-quarter approval rates increased around 50% compared to the third and fourth quarter of fiscal '24, again, while maintaining low first payment default rates and improved gross yields, as well as significantly reducing our average loan size.
Similar to refinance loan volume already in April of the current fiscal year 2026, we continue to see an increase of loan volume year over year and stability of credit quality for new customers.
I'd also like to mention that the hard work of our special projects team for the last few years has resulted in our first World Finance credit card being piloted internally at the end of March. I've enjoyed the privilege of testing this credit card this month as we prepare wider pilots this spring and summer before offering it to our customers later this fiscal year.
We've done a tremendous amount of research and vetting of competitor platforms, products, and their successes and failures of the years as we reviewed several potential acquisition opportunities. We're confident in our strategy to control our own credit card and market it prudently to select customer types. Our main goals are to use this product to slowly and wisely better align yield with risk, especially in rate cap states we're currently in, help customers manage both installment and revolving credit, lower our overall cost of acquisition and cost of service, allow existing customers to maintain a relationship with World when they pay off their loan, and/or move out of our footprint states, as well as expand our markets. Our approach is to be prudent on the road to serving the one in three Americans with low to no credit.
Finally, we have an absolutely amazing team here 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 credit and rebuild credit, all while maintaining -- all while meeting an immediate financial need.
At this time, Johnny Calmes, our Chief Financial and Strategy Officer, and I would like to open up any questions you have.

Question and Answer Session

Operator

(Operator Instructions) Kyle Joseph, Stephens.

Kyle Joseph

Hey. Good morning, guys. Thanks for taking my questions. Just, I know there's a lot going on in the in the first quarter with tax refunds and everything, but just want to get a sense if you've seen any sort of shift in consumer behavior, call it, since, I don't know, mid, late February really when tariff noise really got loud, whether it's on the demand or the credit side?

Ravin Prashad

I would say, we haven't seen any significant increase or decrease in demand or change in payment. So to that extent, that hasn't hit us yet.

Kyle Joseph

Got it. And then the portfolio, the mix shift to smaller loans, is that really a function of your underwriting or consumer demand or customer mix shift? And I think I heard you right, saying you would expect this trend to continue, right?

Ravin Prashad

Yeah, great question. So it's really more of a return to the World's roots, so historically, roughly 60% or higher of our portfolios in small loans, where we would graduate a small portion of customers to large loans. We hit a peak of around 60% of the portfolio being large loans a few years ago. The strategy for the last couple of years has really been to return to the bread and butter of the company, which is focusing on small loan customers, so more of a shift in who we're marketing to and how we're underwriting loans than it is in customer demand.

Kyle Joseph

Got it. Makes sense. And then last one for me, the revenue growth on the tax front, I mean, obviously, that's really strong. What's driving that is that? Is that a function of marketing? Are there any sort of changes in the competitive dynamics in that market? Obviously, it's a good thing, but just want to know what what's the driver there.

Ravin Prashad

Yeah, so we've been doing market research for the last couple of years around the product we're offering, pricing, and customer demand. This year, we increased prices and experienced very little, if any, reduction in demand throughout the tax season. So overall revenue is up around 25%. I believe the number that we filed was down around 3% or 4%.

Kyle Joseph

Okay, got it. Great. Thanks for taking my questions.

Operator

(Operator Instructions) John Rowan, Janney Montgomery Scott.

John Rowan

Hey, guys. Forgive me if you just answered this, but can you just let me know why the insurance and other income was up so much? I assume it's tax prep, but it was about $5 million up year over year. Just give me an idea of what that came from.

John Calmes

Yeah, so Chad just walked through that, right? So it's the tax prep revenue. So I think insurance revenue is actually down a little bit. It's all driven by the tax prep business.

John Rowan

Okay. And then the allowance was down a little bit sequentially. Any reason why that went down?

John Calmes

Largely, it is going to be the runoff of the portfolio.

John Rowan

Okay. And what are your expectations for share repurchases going forward?

John Calmes

Probably more than we've done this year, but that's part of the negotiations we have with our banks, and a lot of it also depends on our bonds have a limit on how much we can repurchase, this cap at 50% of consolidate net income. But we're coming up to the point where we need to take those out, and that'll give us more flexibility to do more than that 50% of net income.
So we've already purchased over $100 million, I think $115 million of the bonds. Probably, we have about $185 million outstanding.

Ravin Prashad

That's right, yeah.

John Rowan

Okay. All right. Thank you very much.

Operator

With no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Chad Prashad for any closing remarks.

Ravin Prashad

Thank you for taking the time to join us today. This concludes the fiscal year-end 2025 earnings call for World Acceptance Corporation.

Operator

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