Janet Matricciani - CEO, President & Director John Calmes - SVP & CFO.

John Rowan - Janney Montgomery Scott John Hecht - Jefferies LLC Clifford Sosin - CAS Investment Partners.

Good morning and welcome to the World Acceptance Corporation’s Sponsored First Quarter Press Release 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 of the corporation's most recent Form 10-K for the fiscal year ended March 31, 2017 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, Janet Matricciani, CEO..

Thank you. Good morning and welcome to our first quarter of fiscal year 2018 earnings Call. As well as our earnings release, as usual, we've issued a script that provides more details on our results and activities. I'll assume that everyone on this call has read the script and the script is filed with the SEC as an attachment to our 8-K.

So we'll simply now say that we're ready to take any questions that you may have..

[Operator Instructions]. Our first question today comes from John Rowan of Janney..

The personnel expenses, they seem to have spiked in the fourth quarter and the first quarter. Can you remind me if there's a seasonal impact there and whether or not we're going to see a falloff into 2Q? I think there might be some type of bonus accruals or something in 1Q.

Or it might -- I think -- or it might be actually like a profit sharing with the employees or something to that effect..

Firstly, John, I'll let Johnny comment on incentives and bonus plans. But we have our tax preparation business in the fourth quarter of every year and our tax preparation business results in longer hours and more staffing required in order to complete all the tax preps that we have coming in.

As you know, we had a record year for our tax preparations which is in the history of the company..

Yes. So as we discussed in the earnings release, both in the script and the earnings release, we have seen an increase in part-time employees as we extend our hours in the branch. So that has impacted the run rate of our personnel expense. But it's something we're also focusing on, make sure we get the right balance there.

And also, the incentives that has gone up, that's the field bonus expense and that's just a function of the branches being more profitable than they were a year ago..

Okay. And none of the $2.5 million charge or legal expense that you called out related to the Mexico investigation, that's not in personnel. I assume that's in other..

That's another, yes, yes..

Okay. What -- how do you categorize that expense, right? I mean, there's -- $2.5 million, that's strictly onetime expense, but I don't think the investigation is complete really as it didn't seem like that based on the comments.

So I mean, is that -- does that continue -- give us an idea of kind of the overall expense that this investigation is going to cost World?.

So we don't have a clear idea exactly what it's going to cost, so I think it's fair to say that the amount of expense in the first quarter is likely higher than what we would expect going forward. But at this point, we don't know exactly what -- we'll do what we need to do and so we need to spend to complete the investigation..

That's right. There are multiple factors that affect the cost of an investigation and they're -- I think it's ongoing. We can't really know for sure at this time and we'll continue to keep investors updated on these calls as appropriate..

Okay. And then just last question for me.

Can you guys remind me where you stand with your buyback authorization? And what, if anything, you purchased during the quarter? And what the plans are going forward and to whether or not you still have consent from your lenders to buy back stock, given what you announced regarding Mexico?.

Sure. So we purchased $4.6 million during the quarter and there is still $1.9 million left from the board authorization that's in place today. Under the debt agreement which allows [indiscernible] of our adjusted net income.

We have around $38.7 million available to provide shares back, but at the moment, we have put ourselves in a blackout until we feel we have more clarity under the investigation..

[Operator Instructions]. And we'll go next to John Hecht of Jefferies..

Yes, I'm just wondering if you -- with respect to the operations, if you can give us some maybe some more details about the branch performance, the same-store performance in the U.S. versus the performance in Mexico, maybe you highlight that in a credit basis as well. And really, kind of the -- what I'm looking for is, how is the U.S.

performing in a standalone basis and how are the effects of the investigation and the changes in Mexico affecting that operation?.

All right, John, I will talk about the U.S. business. At this time, we're not making a whole load of comments regarding Mexico while the investigation is underway. But in terms of our U.S. business, you asked about branch performance.

And for example, in the same stores, as we talked about in the earnings call script, we're seeing positive increases that we haven't seen for a while. For example, over 50% of our U.S. stores grew the customer and account base which is reversing a declining trend, right? 43% of our stores grew ledger, about 26% last year.

And furthermore, this is the work we believe that we've done on analytics and further information exploration and research for opening of new branches. The 2 branches that we have opened have seen a much faster increase in accounts growth than we have historically seen for several years..

Okay. And then you highlighted a bigger kind of expense budget for advertising and obviously, turn that to some of the increased loan ledger at the branches. Should we think that -- is that a permanent shift here? Are we -- are you guys kind of dedicated to do more aggressive advertising campaign.

Or is this sort of just a near term spike?.

So I think a lot of it, the spike in advertising expense for this quarter was due to -- we spent a lot less in Q1 of last year, so I wouldn't expect the same increases in advertising expense going forward quarter-over quarter. So we would expect more modest increase in the spend quarter-versus quarter going forward..

Furthermore, we don't attribute all of our growth simply during more in advertising.

Our main strategies have improved significantly with higher response rates and lower cost of acquisitions and we have moved some marketing activities in-house for greater control and believe that some of those activities are restored for other of competitive advantages so it's better to have that enhancement than outsourced..

[Operator Instructions]. And we will go next to Clifford Sosin of CAS Investment Partners..

Has the FCPA related matters had any impact on the profitability of your Mexico operations, separate in part from any investigation expense or additional ongoing compliance cost?.

Cliff, I think that while we're in the middle of this investigation, just like with the CFPB, where we have nothing specific to say, it is our policy to simply remain silent on these topics until we have something significant or material to say.

We continue to review operational changes relating to our business activities in Mexico, but we cannot really talk about or speculate on any kind of effect..

Oh sorry, no. I guess, I was just asking to the effect that I was asking -- I mean, the investigation started a number of months ago.

And I guess, I was asking like on a trailing basis, did the Mexican operations have any sort of operational impact in terms of volume growth, profitability and so forth in the quarter?.

Let's see. Investigation that we announced publicly, of course, has only been going on for a short number of months and so on and it's simply too early to know and to answer that question in any kind of confident manner at this stage..

Okay. And so the next -- I have a different question on Mexico. The -- I know there's two businesses, the traditional installment business and then there's the union pay business. Are -- my understanding is and correct me if I'm wrong, that the branches in Mexico either do the traditional installment business or the union pay business.

And correct me if I'm wrong on that.

But then within the ones that do the union pay business, does each branch serve a different union? Or do branches serve multiple unions, typically?.

The branches can serve multiple unions from their location. For example, a union contract can be specified where they would like a branch location to serve that union. In fact, one branch within the area that can serve multiple unions can occur.

Or we can have a situation where to serve those union employees, there is not another union contract that we have nearby, in which case, it would be focused on just those -- on just that particular union.

What we've seen is that our branches focused on our union business, also known as Viva, have fewer employees generally than our branches focused on our advanced pay business which is our traditional installment loans business..

Got it.

So would I be right then to assume that a typical branch serves 1, 2, 3, a handful of unions, in the union business due to the proximity of where they are?.

Cliff, we haven't looked at this on a branch-by-branch basis so we hesitate to answer, but it might be 1 or 2 union, so the unions that we serve in a state. Obviously, when you have unions in different states, you're not going to have one branch going across the borders.

But I would say typically, like you said, 1, 2, 3 unions depending on the geographic availability and the reach that, that branch can cover with respect to the union customers..

[Operator Instructions]. And at this time, we have no further questions in queue..

All right. Well, in that case, I'd like to thank everybody on the call for their interest in our company. We certainly appreciate it and we expect to continue to work on improving and strengthening our company as we move forward. Thank you, everybody, for your interest and your time..

Again, thank you for your participation. This concludes the World Acceptance Corporation quarterly teleconference..