Earnings call transcript: World Acceptance misses Q1 2026 EPS forecasts

World Acceptance Corporation (WRLD) reported its Q1 FY2026 earnings, revealing a significant miss on earnings per share (EPS) compared to forecasts, while revenue surpassed expectations. The company’s stock reacted negatively, declining by 5.06% following the announcement. Despite the earnings miss, World Acceptance highlighted strategic initiatives aimed at enhancing long-term shareholder value. The company maintains a "GREAT" financial health score according to InvestingPro metrics, with impressive year-to-date returns of 52.35%.

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Key Takeaways

• EPS fell short of expectations at $0.25, significantly below the forecast of $2.16.
• Revenue exceeded projections, reaching $132.5 million against a $122.38 million forecast.
• Stock price dropped by 5.06% post-announcement.
• New credit card product and increased stock repurchase plans were announced.
• Positive growth in customer base for the first time in three quarters.

Company Performance

World Acceptance Corporation experienced a challenging first quarter, with EPS significantly underperforming against market expectations. Despite this, the company reported growth in both refinance volume and new originations, indicating a strategic focus on expanding its customer base and market reach.

Financial Highlights

• Revenue: $132.5 million, up from the forecasted $122.38 million.
• Earnings per share: $0.25, compared to the forecast of $2.16.
• Net income: Approximately $45 million since the beginning of 2025.

Earnings vs. Forecast

The company reported an EPS of $0.25, which was a stark contrast to the anticipated $2.16, marking an 88.43% negative surprise. This miss is notable compared to previous quarters where the company had managed to align more closely with market expectations. However, revenue came in at $132.5 million, surpassing the forecast by 8.27%.

Market Reaction

Following the earnings announcement, World Acceptance’s stock price fell by 5.06%, closing at $171.3. This decline reflects investor concerns over the significant EPS miss, despite the positive revenue surprise. The stock remains within its 52-week range, which spans from $101.85 to $177.25. InvestingPro data shows strong momentum with a 32.11% return over the past six months, suggesting resilient investor confidence despite near-term volatility.

Outlook & Guidance

Looking forward, World Acceptance aims for moderate portfolio growth with a focus on low-cost customer acquisition and improving credit performance. The company is also concentrating on enhancing shareholder value through EPS growth and an aggressive share repurchase strategy. InvestingPro analysis reveals management’s commitment to shareholder returns, with detailed metrics and forecasts available in the comprehensive Pro Research Report, part of the extensive coverage of 1,400+ US equities.

Executive Commentary

CEO Chad Prashad emphasized the company’s strategic initiatives, stating, "We want to better align yield with risk, especially in rate cap states." He also highlighted the company’s cautious approach, saying, "We’re not looking to massively grow the portfolio, either the base or the ledger."

Risks and Challenges

• Potential for continued earnings volatility if EPS expectations are not met.
• Market saturation and competition in the credit market.
• Macroeconomic pressures affecting consumer behavior and credit risk.
• Execution risks associated with new product launches and strategic initiatives.

Q&A

During the earnings call, analysts inquired about the company’s credit quality improvements and conservative investment strategies. Management indicated that credit quality is improving due to a lower proportion of new customers in the portfolio and reiterated their commitment to a conservative approach in new customer investments.

Full transcript - World Acceptance Corporation (WRLD) Q1 2026:

Conference Operator: Good morning, and welcome to World Acceptance Corporation’s First Quarter twenty twenty six Earnings Conference Call. This call is being recorded. At this time, all participants have been placed on listen only mode. Before we begin, the corporation has requested that I make the following announcement. The comments made during 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, 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 ks for the fiscal year ended 03/31/2025, 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.

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: Good morning, and thank you for joining our fiscal twenty twenty six first quarter earnings call. Before we open up to questions, we’ve had a few major updates this week to share along with highlights from the first quarter. We recently completed a new credit agreement increasing commitments to $640,000,000 allowing for stock repurchases of up to 100% of net income, which is an increase from 50% of net income in the prior agreement and a $100,000,000 upfront repurchase allowance in addition to 100% of net income beginning 01/01/2025. The net income is around $45,000,000 since 01/01/2025. In addition, we’re in the process of redeeming the remaining bonds that were issued in 2021.

If you recall, we issued $300,000,000 in high yield notes with a five year maturity in the 2021 and have been repurchasing them in the market over the last few quarters. We currently have around $170,000,000 outstanding that will redeem by the August. This removes the constraint to allow for more accelerated stock repurchases. That capacity may be over $200,000,000 for share repurchases over the next twelve months, which is approximately 23% to 25% of outstanding shares at this morning’s stock price. As a reminder, our earnings are quite seasonal.

Historically, the first quarter is our lowest quarter for earnings as we rebound from growth and provision from the tax season runoff. Over the prior three years, first quarter net income has made up an average of only 5.6% of our total annual net income and has peaked at a high of only 12% of annual net income. We’re excited about the current portfolio and its trajectory, which includes substantial customer base expansion, strong loan growth, improved loan approval rates while maintaining credit quality, growth in yields and stable to improving late stage delinquency. On growth, refinance volume increased 10% this quarter over the first quarter last year. To really underscore the overall growth we’re seeing in the current lending environment, the number of new originations this quarter increased 12.6% over last year’s first quarter.

This is the highest volume of new originations in our first quarter since fiscal year twenty twenty. In terms of dollars lent in new originations, we increased 12.8% year over year and are in line with fiscal years 2019 and 2020, both of which were some of the highest non refinance growth years on record. Our customer base increased by 4% this quarter compared to the first quarter of last year. This is our first positive customer base growth we’ve experienced during the first quarter in three years. We’ve also returned to the largest customer base we’ve had since the first quarter of twenty twenty three.

All this growth has put us on track to rapidly close the year over year ledger gap. We began the year on April 1 with a ledger that was down around 4% year over year or approximately $50,000,000 We’ve grown around $40,000,000 in this quarter to end the quarter down about 80 basis points, which is approximately $10,000,000 year over year. Even with the substantial growth, both new originations and the overall portfolio have stable first pay default rates and improving delinquency as well as, and quite importantly, gross yields have increased over two thirty basis points year over year. These results and other operational capital improvements increase our confidence in a portfolio that will continue to have moderate growth with low cost of acquisitions, strong credit performance, improving yields, increased revenue, declining share count and ultimately returning enhanced value to our shareholders through strong EPS growth. One short note on the new Royal Finance Smile credit card.

We completed the first phase of internal testing and have moved on to live testing with customers. The To reiterate, our main goals are to use this product slowly and wisely. We want to better align yield with risk, especially in rate cap states, help customers manage both installment and revolving credit, lower our overall cost of acquisition and service, improve customer retention and expand our markets. Our approach is to be prudent in our efforts to serve the one in three Americans with minimal to no mainstream access to responsible and affordable credit. Finally, we have an absolutely amazing team 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 and rebuild credit while also meeting immediate financial needs. At this time, Johnny Calmese, our Chief Financial and Strategy Officer, and I would like to open up to any questions you have.

Conference Operator: We will now begin the question and answer session. Our first question comes from Kyle Joseph of Stephens. Go ahead please.

Kyle Joseph, Analyst, Stephens: Hey, good morning guys. Thanks for taking my questions. Just want to parse through some of the credit developments in the quarter. So I understand that you guys were expecting charge offs to be higher because of late stage DQs last quarter. Obviously, delinquencies moved in the right direction this quarter.

Is there anything that’s driving that, whether it’s underwriting changes in macro and how that kind of positions your outlook for charge offs for the remainder of the year?

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: Yes. So the biggest thing is the proportion of new customers in the portfolio. So we had a really good third quarter or December with new customer growth. And at the December, our zero to five month customer, right, so they’ve only had been with us for zero to up to five months, That made up 8.7% of our portfolio at December or $120,000,000 That’s now down to 7.2% or $91,000,000 at June, right? So a lot of the risk has come out of the portfolio as that zero to five month customer becomes a smaller proportion of the overall portfolio.

Kyle Joseph, Analyst, Stephens: Yes. Okay. I got it. That makes sense. And then kind of on the strategy in terms of smaller loans, higher yields, kind of give us a sense for where you are in terms of that strategy?

Are you happy with the current mix? Do we would you expect ongoing growth in smaller loans? And how you foresee that impacting kind of the portfolio yield over time?

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: Yes, great question. So I think right now we’re fairly happy with the overall mix. We don’t expect to dramatically increase investments into new customers beyond the current weighting

John Rowan, Analyst, Janney: of the

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: portfolio. We have been running a strategy for the past year or two that really weights both new customers and returning customers pretty heavily in terms of our investments. We would like to continue that strategy, especially in terms of returning customers and overall customer retention. We’re not really in a place where we are looking to massively grow the portfolio, either the base or the ledger. We’re not looking for double digit growth there.

We’re not looking to take any unnecessary risks on from a credit perspective. So to the extent that application volume of acceptable risk customers continues to be this high and operations continues to run as smoothly as it is, I would expect the current mix of new customers to be about the same as well as former customers as in addition to that, still aiming for overall increase in customer retention.

Kyle Joseph, Analyst, Stephens: Got it. Helpful. And then last time we caught up was April. Obviously, has shifted dramatically at least in terms of public equity markets, but at least just give us a sense for any changes in your consumer behavior. It didn’t sound like in April there had been a dramatic impact from tariffs and then, but kind of any changes as at least the public stock market has sentiment has shifted pretty dramatically since we last caught up?

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: Yes. We have not really seen any increase in risk from our especially our newer customers. We would tend to see first signs of weakness there first. So for our new customers, we’ve had some really tight underwriting for a few years. And even as we look at different credit bands, we haven’t seen any real dramatic shifts in terms of first pay defaults or their ability to repay.

So far we haven’t seen any real impacts of that.

Kyle Joseph, Analyst, Stephens: Got it. That’s it for me. Thanks for taking my questions.

Conference Operator: Comes from John Rowan of Janney. Go ahead please.

John Rowan, Analyst, Janney: Good morning, guys. Good morning. You Jack, you were Pete, what you said about the repurchase authorization with the buckets that I guess come in once you retire the remaining notes?

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: Yes. So with the new credit agreement, there’s really two things at play here. So there’s an upfront repurchase allowance around $100,000,000 in the first twelve months. In addition to that, we can also repurchase up to 100% of net income, which begins with 01/01/2025. So there’s already approximately $45,000,000 in that bucket as well.

So as we sit today, that’s around $145,000,000

John Rowan, Analyst, Janney: Okay. But there was I thought you said there’s another $100,000,000 that you’d have like $200,000,000 upfront?

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: So that bucket will build as we continue to earn income going forward. So that used to be it would build at 50% of net income, it’s now 100% of net income.

John Rowan, Analyst, Janney: So you have 100,000,000 that will that comes in, but is that governed by the notes that you have to repurchase?

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: Right. Yes. So the notes are sort of the limiting factor right now, right? So as of today, we can repurchase, I think, 7,200,000.0. But once we retire the bonds, that’s no longer a factor.

John Rowan, Analyst, Janney: Okay. And then you’ll have just 100% of net income accruing into the bucket,

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: Correct.

John Rowan, Analyst, Janney: Okay. The new $640,000,000 credit agreement, does that have any type of performance based governor repurchase? Or what are the what’s the debenture as far as the credit performance within that There’s nothing

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: new in terms of that. So we there are some sort of CPI measures in there, but that’s nothing new in terms of that.

John Rowan, Analyst, Janney: If I’m not mistaken, haven’t looked at the CPI in a little while for your old credit agreement. It was in the low 20s, if I’m not mistaken, for a trailing a trailing basis. Is that still around that same number?

Johnny Calmese, Chief Financial and Strategy Officer, World Acceptance Corporation: It’s a progressive measure, right? So it did I think it right now, we’re around 18%. I think I can’t remember exactly what it is, maybe 23% or 24% a bit of default. I can’t remember exactly what the number is, but we’ve plenty of cushion at this point.

John Rowan, Analyst, Janney: Okay. All right. Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Prashad for any closing remarks.

Chad Prashad, President and Chief Executive Officer, World Acceptance Corporation: Thank you for taking the time to join us today and this concludes the first quarter earnings call for World Acceptance Corporation.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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