James Wanserski - Interim President & CEO John Calmes - SVP, Treasurer & CFO Chad Prashad - Senior VP of Analytics and Strategy.

John Rowan - Janney Vincent Caintic - Stephens.

Good morning, and welcome to the World Acceptance Corporation's Sponsored Fourth 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, Jim Wanserski, Interim President and CEO..

Great. Good morning, and welcome to World Acceptance Corporation fourth quarter earnings call. Again, my name is Jim Wanserski. I’m joined here with two members of my management team for this call and to participate in the Q&A session. Just a couple of introductory remarks before we get started on the Q&A.

As is customary, we’ve published our fourth quarter earnings press release this morning along with our earnings call script. The two purposes of these documents are number one to provide summary data on our results and then secondly to display some various components of increase, decrease with some granularity within that script.

World is one of the largest, small dollar installment loan providers where I’d say despite what could be easily be described as some mischaracterizations from certain segments of the media but our website customers industry associations we deal with regulators, many legislators, all display and know what installment loans are as well as the differences between us and other loan types offered within the first no financing lending industries.

Among a host of other metrics provided, you can see that in sum the loan portfolio has increased yet again this quarter. We acknowledge the contributions from our seasoned field or operations and sales organizations top to bottom for this continuing momentum.

It’s their enthusiasm and tenacity in embracing and driving out our combination by these and changes into our branches working closely with our headquarters, functions in Greenville which have led us to bank those improvements and day to driven activities we’ve worked on for some time.

By converting those ideas from our customers implementing the improvement initiative, system upgrades, all of the other things we’ve been working on for some time along with our customer service base selling, we’ve produced yet another quarter of continuing positive results. So thanks to all of our employees and associates.

As I indicated on this earnings call with me this morning are Chief Financial Officer, John Calmes and Senior VP of Analytics and Strategy, Chad Prashad and at this time we are pleased to accept questions about our fourth quarter results..

Thank you. [Operator Instructions] And our first question will come from John Rowan with Janney..

Good morning, guys..

Good morning, John..

You guys gave the Mexican charge-off rate, I couldn’t find the U.S. just that it was flap, of course you have the number for the U.S.

charge-off rate?.

Yes, it was just under 16%, which is consistent – slightly down from the same quarter last year..

Okay and then you have 101 million receivables in Mexico that’s down versus last year, how much of that $101 million is payroll advance or payroll deduct and is there a growth in the non-payroll deduct and you’ve just passed out growth or contraction in the non-payroll advance business in Mexico versus the payroll advance business in Mexico?.

Sure, so the gross loan portfolio in the payroll deduct business is $50.1 million gross loans after -- $45.1 million in net loans and then after allowance we have an exposure of $13.3 million left in that payroll deduct loan portfolio.

So the run-off in Mexico is concentrated in that portion of the business, in payroll of that business and that the advanced pay or traditional business is up year-over-year..

Okay, the other business is growing you are saying you are $50.1 million but after – or $45.1 million but if you take out your allowance you have $13 million of net loans still left in Mexico, correct?.

Correct..

Now you closed 30 stores in Mexico, is that correct also?.

That’s right. We closed actually 36 in the year, but the 33 in the quarter and those 33 in the quarter were the all in the payroll deduct business..

Okay. And as far as the asset quality issues, obviously we know one portfolio is growing and the other one is contracting, all the asset quality problems that you called out in Mexico, is that all payroll advance or was there a deterioration or improvement in traditional Mexican lending business..

There was a – there is a slight improvement in the traditional Mexican business from a delinquency standpoint. So yes, all the issues are concentrated in the payroll deduct business..

Okay. And then, for the year obviously your unique customers are up for the fourth quarter and looks like in the U.S.

your unique customers were down 7%, means to explain why there is that weakness in the fourth quarter?.

I can -- Chad can handle some of the more detailed questions. But the decrease for the quarter is just the seasonal decrease that seasonal run off we have every year, right. So which is the line with the tax recurring season..

Which that 7% is sequential, not year-over-year?.

That’s right, sequential..

Okay.

And then just make sure have all the kind of one time unusual items down, so its $4.8 million in tax for a calculated repatriation tax, correct?.

Correct..

And then at $2.5 million severance..

Correct..

$1.6 million in Mexican legal fees?.

$1.8 million and a change in the paid time off policy?.

Correct..

And then I would use a let’s say a 30% tax rate once you adjust out the adjustment to the tax rate for the repatriation issue?.

You said – I think 31.8% is the effective tax rate ex the transition tax..

Okay, that’s what I needed to know. Thank you very much..

Thanks, John..

[Operator Instructions] Moving on from Jefferies, we’ll go to John Hecht..

Morning and thanks very much guys. John actually asked a lot of the questions. I’m wondering if -- you talk about new versus recurring customers, versus getting back some of your prior customers.

How does the credit performance of those three cohorts is it fairly consistent or is there different is there different delinquency in charge-off patents on those levels..

Hey John, this is Chad. So between the different levels, the comment has been fairly consistent. Over the past couple of years, improving slightly for new customers and former customers especially, but over the last couple of years, the originations for new former customers have increased in volume..

Okay. And then the ALL as a percentage of loans has been fairly consistent. There are some seasonal fluctuations. Yes, I just sort of think about the mixed bag of what’s going on in Mexico and then some of the performance it sounds like the domestic performance is pretty clean.

Should we still kind of from a modeling perspective think about the ALL as a percentage of loans is being kind of flat year-over-year is there any changes we should anticipate going forward?.

So as that payroll deduct business continues to roll off, I expect that the allowance to loan 2% [ph] ratio to come down with that given that a lot of that, that the weakness and the delinquencies are in that portfolio..

Okay, that’s helpful thanks. And final – well actually two questions related to Mexico. You guys talked -- you've given us some credit information.

Do you have any information pertaining to the contribution of pretax profits from that segment?.

So we have been sharing that in the past, and we’ll share Mexico in total during the in the 10-K and we can consider breaking out more information there around the business as well..

Okay, but I guess the question is related to the strategy of Mexico, you pointed out you shut down some branches, are those just solely tied to the payroll deduction business or are you just optimizing branches tied to the general traditional lending business, how do we just think about the Mexican strategy going forward?.

Sure, yes those branches are solely tied to the payroll deduct business. In Mexico, there is -- we don't sort of co-mingle the businesses in one branch, so the advance – the traditional loan business has still been expanding their branch network..

All right. That’s it from me, thanks guys..

[Operator Instructions] Moving on, we’ll go to Vincent Caintic with Stephens..

Hey thanks, good morning guys. Just three quick ones from me and they are really just follow ups, but the first one is a follow up.

But just on the sort of Mexican payroll deduct business, should we – should our base case be that net $30 million loans remaining that that just runs off overtime, or should we expect maybe that at some point holds on, stabilizes and grows again..

So we stopped originating in that portfolio, so the expectation seems to be that portfolio winds down every time..

Okay, got it.

Secondly, just your call out for advertising expense up 33% year-over-year and then some other personal expenses, is that something we should expect rolling forward and kind of what your thought is around marketing and advertising going forward?.

Yes, so in Q4, that’s up a little over 30%. There are a couple of things contributing to that. There have been some changes in our marketing campaign volume and also the channel that we use. We’ve shown what we think are pretty impressive results in Q4 as far as increases in new customers, and former customers.

Secondly, we are also in the middle of phasing in a centralization of some of our mail that was previously sent from the branches. And so you are going to see some of these expenses, expenses move from the branches to the central advertising budget. So you will probably see that continue to increase over the next couple of quarters..

Right. But it's quite positive, we don't expect [Indiscernible] increases in our marketing budget next year, we do expect some increases to that budget which we think is reasonable given some of the success we’ve had in marketing recently..

Okay, got it.

And would you attribute a lot of the – like we’ve seen it with some of the other – like the subprime consumer lenders as a group have done well in this previous quarter of the data, are you seeing kind of just general favorable trends with sub-prime or would you attribute a lot of this to your actions, if you could just pass those two out?.

It’s hard to know exactly what is going on in the market, but we certainly have made a lot of internal changes to our practices and then procedures regarding marketing over the last year and a half to two years. So we certainly figure a lot of that success to the changes we’ve made here.

And those things have led to a higher quality customer as well and some of those things have obviously helped in charge-offs down the road. So we actually like the – we’ve had the success despite falling back on lending to the lower credit scores in our segment..

At the same time, I think decreasing our acquisition..

Got it, thanks. And just last one from me, just following up from last quarter I think John you discussed that typically in the spring you go through your credit facility, renegotiation, just wondering if there is any update on that? Thanks..

Sure. Those negotiations are ongoing and we don’t expect any issues on with extending that credit facility this spring..

Okay, got it. Thank you very much..

Thank you for your participation. This concludes the World Acceptance Corporation quarterly teleconference. You may now disconnect..