Good morning, everyone, and welcome to the World Acceptance Corporation's Sponsored Third 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's my pleasure to turn the floor over to your host, Jim Wanserski, Interim President and CEO. Please go ahead, sir..

Great. Good morning, and welcome to our third quarter earnings call. As in recent quarters, we've issued our earnings release and an additional document to provide what we call further details and observations about our results. Again, my name is Jim Wanserski.

I'm fulfilling the role of Interim President and Chief Executive Officer until the search for a permanent replacement is completed. A little background on me might be useful. I specialize in public and private corporate executive-level transitions with well-known names to mid-market firms.

I also do some specific project work into what I would call targeted client risk areas. My career thus far includes some 40 years of experience in C-suite operational regulatory finance positions with large corporations and firms such as MCI, Telecom USA, Sprint, Arthur Andersen Business Consulting as well as others.

For this group, I am not a candidate for the permanent role of President and CEO. From my vantage point, the board is focused on the search for that candidate and who likely will include tenure, skills, strategic industry and pedigree that fit their targeted preference.

In the meantime, the board has charged me with assuring the company and management team operate on a business-as-usual approach throughout this transition. And a primary focus for me is assuring our business is conducted in a manner advantageous to our customers, to our employees and shareholders.

So as for the business for this call, overall, our third quarter results were strong. We see positive momentum building and continued in our business as a result of a number of initiatives by the company. Our Chief Financial Officer, Johnny Calmes, is with me. And we're certainly welcome to take questions about our quarterly results..

Q - John Rowan So as far as the quarter, were there any onetime costs in the quarter related to Janet's resignation? A - John Calmes No, that's a Q4 event. Q - John Rowan Okay, and I assume you're probably not going to give us any more information around the reason why she left? A - James Wanserski No.

Obviously, there's been a press release on the activity by the board about the mutual separation. So yes, we see no reason to comment further on personal matters. Q - John Rowan Okay. As far as the operating numbers you guys reported, there's $1.37 x $10.5 million of DTA charge.

That $10.5 million, that's all in the tax line, right? Because when if I back that out, I get to an implied tax rate of about 20% and Johnny, if I'm not mistaken, last quarter, you guided to around 37%. So can you just juxtapose or help us consolidate why it looks like there's a big shift in the tax rate x the DTA charge? A - John Calmes Right.

So the tax rate will also shift due to the change in the tax law. So obviously, our corporate rate was 35%, and it's moving to 21%. For the current fiscal year, that's going to be a blended rate. But going forward, our effective tax rate will be more in the neighborhood of 24% to 25%.

Q - John Rowan Yes, but wouldn't your tax rate change for the next fiscal year not -- so is your tax rate going down this quarter? Is that the function? Or I was under the impression that the tax rate would go down starting 1Q over the next fiscal year. A - John Calmes No, it's effective January 1, I believe, or maybe even a few days before that.

Q - John Rowan But if it's effective January 1, that 20% tax rate or whatever the new -- the 21% new tax rate, shouldn't have affected the December quarter? A - John Calmes Well, you're providing for the annual tax, right? So our fiscal year tax rate will be a blended rate of the 35% and the 21%. Q - John Rowan Okay.

Going down to Mexico, I'm not going to ask you about the investigation, but I just want to make sure I understand. You guys had about $124 million worth of receivables last quarter. Now in the September quarter, now you have about $100 million, so down about $24 million.

Is that a function of seasonality? I know the bonus season is a little different down there when consumers get their tax refunds. Or is it a function of lower of 1 of the 2 portfolios down there? Maybe you can give us the payroll deduct balance for the end of December? A - John Calmes Sure. Yes, there is some seasonality in Mexico, as you pointed out.

As in Mexico, there's a kind of required Christmas bonus and -- that generally leads to pay downs and runoff in both portfolios. We have seen runoff in our Viva payroll deduct portfolio. As of the end of the quarter, our net receivables on the payroll deduct product after allowance is $16.9 million.

Q - John Rowan Do you have the gross figure? A - John Calmes The gross figure is $56.2 million. Q - John Rowan $56.2 million, so frankly almost three quarters of the reduction in the Mexico balance was in the payroll deduct. Have you guys -- again, I'm not asking about the investigation.

When you guys stopped originating payroll deduct loans, has there been a change in collection policies? And also, is that the product that's driving the significantly higher delinquencies in Mexico? Or is it something else? A - John Calmes I believe we stated on the last call, we have stopped originating in our Viva product.

And so the amount of delinquencies have remained relatively steady. So yes, a lot of delinquencies in the Viva portfolio. Q - John Rowan Okay, moving on from Mexico, are you guys looking at any states to expand in? Obviously, the U.S. is doing quite well. We saw growth in unique visitors, growth in new customers.

I believe there's a law kind of making its way through the Florida legislature right now about a potential installment product in that state. Any updates you can give us on strategic path forward, new states, new stores, just give us something? A - James Wanserski Sure.

We feel like in the states we operate in today, there's still a lot of opportunity to open new branches. While there are states that look possible for us to move into, there's no immediate plans to move into those states. The plan right now is to continue to open branches in the space we operate in today.

And it'll likely be similar to the current year where we open 30 -- 25 to 30 branches here in the U.S. Q - John Rowan Okay, and then just last question for me. As far as -- hang on, I actually kind of forgot what I was going to ask you. All right, forget it, I forgot my last question. Thank you very much for answering my question.

If I remember, I'll queue back in. Operator And we'll take our next question from Vincent Caintic with Stephens Q - Vincent Caintic So on the effective tax rate this quarter, it's about 20.1%. I'm just -- I wanted to understand.

So is that the effective tax rate we should be assuming going forward from the tax change? A - John Calmes So for the current year, the effective tax rate, again, this would be a blended rate of the 35% and the 21% that went into effect around the new year.

Going forward, so starting in fiscal '19, we expect our effective tax rate to be in the 24% to 25% range. Q - Vincent Caintic Okay, 24% to 25%. Got it.

Was there any items which would have driven -- so if the run rate would be, say, 24% to 25%, anything that kind of make this quarter to be 20.1% specifically? A - John Calmes There was some shifting in expenses between Mexico and in the U.S. which would have some impact, but it's relatively minor. Q - Vincent Caintic Okay. Got it. That's helpful.

And so the second question, so I know you don't want to speak about personal matters specifically, but any sort of views you can share about how the board is thinking about management and others? There's been a couple -- a little bit of turnover.

And so just any broad thoughts on the board's plan? And then was there any significance to the press release of the CEO transition and to see if you'd be on the same side and if there's anything that go there, but any broad thoughts on why the turnover from the board? A - James Wanserski Yes.

Again, from my perspective and my conversations with the board, it's a very active future-looking group. I've grown to be impressed by their willingness to stay actively involved. In terms of the management team, again it's nice to walk into an organization that's got some stable management at the operational level.

There's lots of things going on, and I feel good about that. In terms of the recent turnover, the function of the board is to always be taking a look at what does the leadership look like for now and going forward. And they've made some decisions along the way, and hence, the joint decision to part ways with the previous CEO. So I feel comfortable.

Again, my charge is business as usual. But I've got a talented and knowledgeable group of board members to work with. Q - Vincent Caintic Great. And then on Mexico, so not specific to the investigation. In the script, there was some discussion about the remedies and so forth.

I'm just wondering if you have a perspective on how we should be modeling any remedies or any changes from what you're seeing so far in Mexico? A - John Calmes I'm not sure I understand the question, Vincent.

Q - Vincent Caintic Well, just in terms of so what you put in place so far for any changes in Mexico, to the extent there are any changes, maybe there aren't.

But to the extent that there are any changes, is there anything we should be thinking about kind of forward-looking from what those changes in Mexico should be driving for earnings? A - John Calmes No, there's nothing we can elaborate on at this time. So as I mentioned to John, we have stopped originating in the Viva business.

There's nothing more to add to that. Q - Vincent Caintic Okay. Got it, got it. And then just last one for me. So your new consumer growth rate has been strong, so that's great.

I'm wondering if you can maybe talk about how you're taking -- how much of that is you're taking market share? And then maybe if you could speak about how maybe the industry is growing, so we can kind of get a flavor for maybe industry tailwinds and also your ability to take market share. A - John Calmes Sure.

I think you can maybe assume that it is us taking market share, but it's hard to get a very clear view on that, just given that most of the companies in the industry are private companies. So it's hard to know what their growth rates are and what they're seeing to know that for sure.

But we are encouraged by the strong growth in new customers and former customers. And they'll continue to be a focus as we move forward. A - James Wanserski And really some of our initiatives are concerned with retaining our base. We've got a good brand name where we are.

And so the better service we can provide, hopefully, that might influence our ability to grow a little bit as well. Q - Vincent Caintic Okay. Got it. And actually, just -- sorry, just one more, and I think this is a quick one.

For the delinquencies you're holding more in the bucket and you gave a stat of your ability to recover, are you seeing anything in the market where maybe you would have otherwise sold these charge-off loans but you're getting better recoveries by keeping them in-house? Or are there any practices where you're seeing better outcomes from your working it in-house? A - John Calmes Sure.

As you know, around a year ago, we started to ramp up our internal collections efforts. And we've seen strong benefits from that. And since we started holding our 90-day accounts or longer, we have seen an increase in the rehabilitations of those customers. So it was something we felt good about, and the results seem to be playing out.

Operator And we'll take our next question from Robert Vermillion with f/64 Capital. Q - Robert Vermillion In the release, you mentioned an acquisition of a loan portfolio. I was wondering if you could provide some detail in terms of the size of that portfolio, the source, the duration, etcetera? A - John Calmes Sure.

I won't elaborate too much, but I will say it was relatively small acquisition. It was only $350,000. Generally, the third quarter is pretty quiet for acquisitions, given most of these companies were in the middle of their growth season, and it's a profitable quarter for them.

And you don't typically see people looking to sell in our third quarter, calendar fourth quarter. Q - Robert Vermillion Got you. And then the loan volume in the quarter, the -- what percentage of that new loan growth is related to live checks? A - John Calmes It's relatively small.

So as you may recall, or may have seen, our live check program is focused on our former borrowers. We've rolled that out in the summer of last year. And obviously, since we're focusing on a former customer base, the response rates on those will go down over time as there's a limited number of people in that base.

So while it's still a very helpful piece to our overall marketing program, it's not a significant piece of that program. Q - Robert Vermillion Do have a sense of what percentage of the gross loan balance is -- was originated through live checks? A - John Calmes I don't have it in front of me.

But again, it's going to be a relatively small percentage of the overall base. Operator [Operator Instructions]. And we do have a follow-up from John Rowan with Janney. Q - John Rowan Safe to say I remembered my question. This is a good one so I wanted to get it in.

Now the CFPB investigation is over, do see an opportunity to renegotiate your credit facility? Obviously, it's been renegotiated a couple of times under the CID and NORA letter.

Do you think that there's the opportunity to maybe change the confidence around repurchase activity? Just maybe give us an idea of timing of renegotiation, whether or not Mexico is an overhang in that negotiation process. Just give us an idea of how that will change this year with the CFPB off the table. A - John Calmes Sure.

So we typically renegotiate our facility in the springtime, so coming up in the next few months. I'm not going to elaborate on what we -- what the negotiating points may or may not be at this time. Q - John Rowan Okay.

And then could you just maybe give us a -- venture a guess, for the tax rate? I know what we're going to look for next year, you said 24% to 25%, but what will the 4Q tax rate be? A - John Calmes So the fourth quarter, I think it'll be in that 31% range.

So just to clarify on why the quarterly effective tax rate was lower, a lot of that has to do with the first two quarters be that closer the 37% rate, and you have a true-up in the fourth quarter to adjust down to that 31% rate. So that's why the fourth quarter effective tax rate was a little lower.

But for the full year, we expect to be closer to that 30%, 31%, 34% rate once you take into effect the state taxes. Q - John Rowan But next year, we're looking at 24% to 25%, correct? A - John Calmes Correct. Operator And at this time, we have no further questions. End of Q&A James Wanserski Well, great. Thanks for everybody's time and interest.

We appreciate the opportunity to get in front of the group. And everybody, have a great day, and let's enjoy the warming weather, at least down here in the south. Operator And thank you, everyone, for your participation. This concludes the World Acceptance Corporation quarterly teleconference. You may now disconnect..