Good morning, and welcome to the World Acceptance Corporation-sponsored Second 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, 2018, 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, sir..

Good morning. This is Chad Prashad, President and CEO of World Acceptance. I trust you've all had a chance to review the financials that are released this morning as well as the script. At this time, we'll go ahead and open up to any questions. Well, we give you guys a few more minutes for questions..

Thank you. [Operator Instructions] We will now take our first question from Vincent Caintic of Stephens. Please go ahead, sir..

Hey, thanks guys. You talked on the prepared scripts about the new growth that you are experiencing. I was just wondering if you can give us just kind of a sense of how that new growth trend is growing.

And then, saw that the provisions and the losses were a bit higher, perhaps, as a result of that, but maybe if you could explain that a bit further? And if those -- given the strong growth that you saw with new customers, if we should be expecting maybe an elevated level of that credit trend to continue for a little bit?.

Yes. So there are a number of factors contributing into our new customer growth. Mostly, in the marketing and analytics improvements we've made over the last year or so.

Also, a fair amount of operational improvements in our stores to allow us to receive customers faster and begin processing applications faster, so you can see that new customers are up tremendously year-over-year, which is contributing what you're talking about.

On the provisions side, I'll let Johnny chime in just a second, but there are a couple of things that are going on with the provision for this quarter. One is, we have an unusually large amount of accounts that became due on the 29, 30, and 31 of the month.

Roughly -- we've had roughly a doubling the number of customers who are requesting payment increases -- sorry, payment extensions on their first payment due date, which we allow them to pick the date during the month, which they want their first payment to be due.

So what that resulted is the number of customers who are due at the end of the month, with July and August having 31 days in the month this year, the September having 30 days, which fell on a Sunday.

So one thing we did notice in October is an unusually large amount of payments coming in on accounts that were just recently past due, specifically on the 30 and 31 that would have been due at 30 and 31 of September. And Johnny can speak more to the provisions, on that..

Right. So as Chad mentioned, so we had an uptick in our sort of early delinquency, so really -- especially in that 0 to -- 1 to 30 days past due at the end of September. So when we look to delinquencies, due to 60 days past due bucket was 23.1% at September 30 compared to 21.4% at September 30 of last year.

So when that flows through our model, it sits out at a higher number that needs to be allowed for. As we expected, we saw a significant increase in payments in the week following, so the first week of October. And during the month of October, that funded delinquency dropped back down to 20.8% as of the end of October.

That's compared to 21.5% at the end of October of last year. So, I mean, it improved substantially from September as well as October of last year.

And you mentioned that our loss rates did increase Q2 versus Q2, but when you -- a lot of happened to -- in fact, we have essentially the larger proportion of our portfolio that are new customers in recent years.

When you get back several years when the company was growing at similar rates that we are right now, the charge-off rate is in line, even better than in some of those years -- in some of those second quarters in previous years.

So we're still comfortable with the performance of that portfolio, and we're looking at those originations and how they're performing on the vintage. And they're performing in line with past performance. So we don't believe there is weakness. We're not dropping credit quality to achieve growth.

The credit quality is similar or better and is just a function of having more growth..

Okay. That's really helpful. And on that one piece where high delinquencies in September, but that's come back in October. Does that mean that would you expect a large reserve release this quarter? And if there is any sense where you can kind of quantify that? That would be helpful..

Yes, it's still -- it's only one month of the quarter, right. So I do not want to project too much of what's my asset in the quarter, but that could be the case..

Okay, makes sense. Just my last one is, just on the competitive environment, just what you're seeing out there. So you've got good growth with new customers.

Heard that -- you might have heard that some of the banks are getting into the small dollar, higher APR space, and I'm just kind of wondering what you're seeing generally with competition?.

Yes. So we do see increased competition into the higher credit quality range of the customers that we serve. On one side, this competition also increases awareness. So we're seeing more and more use of customers with just using the internet to find, source and educate themselves about different types of loans.

So what we find and what we believe we're going to lead to is just more educated consumers in general, but more customers who are probably entering the installment loan space now than would have entered several years ago. From a competitive environment, we believe that's been helpful, and we could see that.

But our new customer growth is at all-time record highest growth right now. And we have no reason to really believe that -- even as other customers are -- other competitors entered this area that it's going to significantly hurt us from a growth perspective..

Okay, great. Thanks very much..

[Operator Instructions] We will now take our next question from Kyle Joseph of Jefferies. Please go ahead..

Hey, good morning, and thanks for taking my question. I just wanted -- on the new customers and my question is primarily about portfolio yield.

But what's the preference of the new customers? If you guys can quantify for us? Are they looking for sort of the larger balance, lower-yielding loans? Or where you guys seeing the best pockets to growth in terms of specific products?.

So, so far our customer increasing -- our customer increases in the new customer area have been mostly in the small-dollar area still. Average loan amounts are still in the $1,100, $1,200 range. We still haven't seen a lot of increases above $2,500. So that remains very consistent over the last, we'll say, four or five years.

And then, from the yield perspective, Johnny?.

Yes. So I think our point has always been to as we find new customers to keep them on the smallest loan as we possibly can, right, because new customers are riskiest customers. So we want to minimize the loss given the fall.

And generally, we'll -- as those customers perform and demonstrate the willingness to pay, we'll increase them into larger, lower-yielding loans over that time. So, some of the yield increases that you've seen have been result of that, right.

We've had several years of good new customer growth, and we're now growing that sort of older vintage customer into larger lower-yielding customers as they demonstrated good performance.

In some pockets -- in some states, we have reduced rates in general, just due to the fine increased demand as an advanced spread, but we did see a good uptick in growth in that -- in the space where we drop rates..

Yes. We just say that we dropped rates. It represented 8% of the portfolio. So it's rather small..

Okay, got it. That's really helpful color. And then, just thinking about your growth opportunities going forward, obviously, you guys are seeing a good pickup in same-store sales. It also looks like you expanded into a new state with a small acquisition.

But can you talk about your -- the balance of growth between new store builds versus ongoing same-store sales -- or same-store loan growth, sorry?.

Yes, sure. So our focus is on increasing same-store growth as much as we can over the next several years. Part of increase in our overall portfolio will be increasing our footprint of stores, whether it's expanding geographically as we just did in a new state or continuing to flesh out the states we're already in.

But overall, our focus will be an increasing same-store growth as the major metric that we're thinking..

Got it. That's helpful. And then one just modeling question for me and apologies if I missed it last quarter.

But given the Mexico sale, can you give us a sense for where you expect your tax rate to be?.

Sure. So, going forward, we expect the tax rate to be around 24%..

Okay, perfect. That's helpful. Thanks a lot for answering my questions..

[Operator Instructions] It appears there are no further questions at this time. I'd now like to turn the conference back over to Mr. Prashad for any additional or closing remarks..

I think we've experienced a really good quarter this quarter and look forward to continue growth over the next several years. We appreciate the questions here today and look forward to seeing you in next quarter. Thank you..

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