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Investor Presentation World Acceptance Corp
Citation preview
Cautionary Note About Forward-Looking Statements
2
Certain statements in this presentation constitute “forward looking-statements” under the Private Securities Litigation Reform Actof 1995. 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. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties.Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-lookingstatements include the following: recently enacted, proposed or future legislation and the manner in which it is implemented; thenature and scope of regulatory authority, particularly discretionary authority, that may be exercised by regulators havingjurisdiction over the Company’s business or consumer financial transactions generically, including, but not limited to, theConsumer Financial Protection Bureau (the “CFPB”), having jurisdiction over the Company’s business or consumer financialtransactions generically; the unpredictable nature of regulatory proceedings and litigation; and any determinations, findings,claims or actions made or taken by the CFPB, other regulators or third parties in connection with or resulting from the previouslydisclosed civil investigative demand from the CFPB that assert or establish that the Company’s lending practices or other aspects ofits business violate applicable laws or regulations; the impact of changes in accounting rules and regulations, or their interpretationor application, which could materially and adversely affect the Company’s reported financial statements or necessitate materialdelays or changes in the issuance of the Company’s audited financial statements; the Company's assessment of its internal controlover financial reporting, and the timing and effectiveness of the Company's efforts to remediate any reported material weakness inits internal control over financial reporting; changes in interest rates; risks related to expansion and foreign operations; risksinherent in making loans, including repayment risks and value of collateral; the timing and amount of revenues that may berecognized by the Company; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); and changes in the Company’s markets and general changes in the economy (particularly in the markets served by theCompany). These and other factors are discussed in greater detail in Part I, Item 1A, “Risk Factors” in the Company’s most recentannual report on Form 10-K for the fiscal year ended March 31, 2015 filed with the Securities and Exchange Commission (“SEC”)and the Company’s other reports filed with, or furnished to, the SEC from time to time. World Acceptance Corporation does notundertake any obligation to update any forward-looking statements it makes.
Company overview
One of nation’s largest small-loan consumer finance companies
Founded in 1962 in Greenville, South Carolina
Generally serves individuals with limited access to other sources of consumer credit
1,320 consumer loan offices in fifteen states and Mexico as of March 31, 2015
$2.7 billion gross loan volume in fiscal 2015
Over 1.9 million loans made in fiscal 2015
Consistent, extended record of expansion and profit
4
Financial highlights: Consecutive years of growth
5
0%
5%
10%
15%
20%
25%
30%
35%
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
PreTax Margin (%)Revenue (mm)
Consumer finance office network – U.S.
6At March 31, 2015: 1,172 offices in the United States 6
99113300
83
49
107
8278
44
79
68
28
22
12
8
“Average” World office – US locations (1,172)
Rural America – Typically downtown or small strip center
1,500 S.F. – approximately $1,470 per month lease
3.3 employees
683 accounts as of March 31, 2015
$867,000 gross loans receivable as of March 31, 2015
Average loan made during fiscal 2015 - $1,413
Average revenue during fiscal 2015 - $499,000
7
Consumer finance office network – Mexico
At March 31, 2015: 148 Offices in Mexico 8
CHIHUAHUA30
SONORA10
COAHUILA12
TAMAULIPAS
14
SLP5
NUEVO LEON23
GUANAJUATO
5
YUCATAN4
QUINTANAROO
5
QUERETARO
3
AGUAS CALIENTES
4
GUERRERO4
CHIAPAS7
PUEBLA5
MORELOS
3
VERACRUZ 2
HILDALGO1
SINALOA
6
EDO DE MEXICO
3
CAMPECHE1
JALISCO1
“Average” World office – Mexico locations (148)
Medium to large cities– Typically in small strip centers
1,725 S.F. – approximately $1,800 per month lease
7.6 employees
957 accounts as of March 31, 2015
$637,000 gross loans receivable as of March 31, 2015
Average loan made during fiscal 2015 - $955
Average revenue during fiscal 2015 - $386,000
9
Geographic composition of loan portfolio
Alabama, 4.39%
Georgia, 11.94%
Mississippi, 0.16%
Texas, 17.75%
South Carolina, 10.31%
Mexico, 8.49%Oklahoma, 6.57%
Louisiana, 2.17%
Tennessee, 12.28%
Idaho, 0.06%
Illinois, 6.17%
Indiana, 1.13%
Missouri, 6.39%New Mexico, 2.04%
Kentucky, 8.87% Wisconsin, 1.28%
10As of March 31, 2015
U.S. PORTFOLIO BY LOAN SIZE AMOUNT
$0 - $250, 1.31%$251 - $500, 14.89%
$501 - $750, 9.97%
$751 - $1,000, 11.85%
$1,001 - $1,500, 18.93%
$1,501 - $2,000, 12.90%
$2,001 - $5,000, 26.47%
$5,001 +, 3.68%
11As of March 31, 2015
U.S. PORTFOLIO BY BEACON SCORE
12
3.0%
15.0%
18.0%
25.0% 25.0%
12.0%
2.0%
0%
5%
10%
15%
20%
25%
30%
Thinline 300 - 499 500 - 549 550 - 599 600 - 649 650 - 699 700 - 750
As of November 30, 2014
Our employees (1)
U.S.
13
4,548 BranchEmployees(5.9 years)
126 Supervisors(12.5 years)
18 Vice Presidentsof Operations(18.7 years)
3 Sr. Vice Presidents
(24.6 years)
77.3% Female Average Tenure 5.9 years
(Average Tenure)
(1) U.S. Field Employees, as of March 31, 2015
Our employees (1)
mexico
14
1032 BranchEmployees(3.2 years)
32 Supervisors(3.9 years)
4 Vice Presidentsof Operations(4.4 years)
1 Sr. Vice President
(10.0 years)
56.0% Female Average Tenure 3.2 years
(Average Tenure)
(1) Mexico Field Employees, as of March 31, 2015
Regulatory Landscape
State Lending Regulation World Acceptance is licensed on a state by state basis and subject to licensing and regulation in each state
State statutes establish maximum loan amounts, terms, interest rates and fees charged
Consumer Financial Protection Bureau (CFPB) The Dodd-Frank Act established the CFPB which implements and enforces federal consumer financial
protection laws and regulations
The CFPB has regulatory, supervisory, examination and enforcement powers over most providers of consumer financial products and services
However, the CFPB does not have the ability to set rate caps
The CFPB formally commenced an investigation of World Acceptance on March 12, 2014 by issuing an initial Civil Investigative Demand (CID) of the Company World Acceptance responded to the initial CID with all requested documentation on April 10, 2014
World Acceptance has received and expects to continue to receive additional requests for information from the CFPB
World Acceptance has been working with outside counsel and continues to cooperate with the investigation
State Insurance Regulation State authorities regulate and supervise the insurance products and services offered
15
Administration and risk control
Decentralized loan approval and collections Individual loan approval authority based on experience
and position Local presence with strong emphasis on “relationship”
lending Underwriting policies with objective credit evaluation
criteria; with emphasis on stability, ability and willingness to pay
Annual audits by internal audit staff and state regulators Established standards for lending, collections and
profitability ParaData Financial Systems – wholly owned subsidiary
17
Loan delinquency – 61 Days +Delinquencies as % of fiscal year – end gross
loans
18
2.3%2.5%
2.1% 2.2%
2.6% 2.7%2.4% 2.4% 2.5%
2.7%3.0%
4.4%
3.8%4.1%
3.4% 3.5%
4.0%4.2%
3.8% 3.8%4.0%
4.4%
5.3%
7.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Recency Contractual
Credit loss experience – Fiscal YearCharge-off as % average loans receivable
19
14.6% 14.8%
13.3%14.5%
16.7%15.5%
14.3% 14.0% 13.9%14.7%
12.9%
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Credit loss experience 4th Fiscal quarter
Charge-off as % average loans receivable (Annualized)
15.9% 17.4%15.6%
15.1%
13.6% 13.1% 12.7%13.7% 13.9%
13.0%
0%
5%
10%
15%
20%
25%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
20Quarters ended March 31
Growth strategy
Our plan is to open 30 new offices in the U.S. and 10 new offices in Mexico in fiscal 2016
Evaluate acquisitions as opportunities arise
Evaluate new states with favorable regulations and demographics for de novo openings
Maintain focus on growing existing branches
22
Offices open at year end
23
579620
732
838
944990
1,067
1,1371,203
1,2711,320
0
200
400
600
800
1000
1200
1400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 23* CAGR computed for Fiscal Years 2005-2015
Offices open AT YEAR END in Mexico
2
16
37
63
80
95
105
119
133
148
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
24
Year end gross loans receivable (in millions)
25
$352$416
$506
$600
$671
$770
$875
$973
$1,067$1,112 $1,110
0
200
400
600
800
1000
1200
1400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
25* CAGR computed for Fiscal Years 2005-2015
Loan origination volume(in millions)
26
$1,029
$1,218
$1,455
$1,734
$1,935
$2,261
$2,572
$2,820$2,985 $2,954
$2,724
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Acquisition history
Fiscal yearNumber offices
Retained offices NumberAccounts Gross loans
Fiscal 2002 36 15 15,771 $ 14,890,000
Fiscal 2003 42 21 19,931 $ 22,558,000
Fiscal 2004 68 39 28,888 $ 24,499,000
Fiscal 2005 60 30 26,969 $ 27,434,000
Fiscal 2006 25 3 11,096 $ 9,084,000
Fiscal 2007 86 36 41,935 $ 20,494,000
Fiscal 2008 25 13 8,738 $ 4,546,000
Fiscal 2009 22 11 9,013 $ 10,881,000
Fiscal 2010 12 1 6,269 $ 3,902,000
Fiscal 2011 20 6 5,904 $ 3,979,000
Fiscal 2012 25 2 5,937 $ 4,255,000
Fiscal 2013 12 3 4,377 $ 2,559,000
Fiscal 2014 7 1 1,669 $ 1,009,000
Fiscal 2015 5 2 1,952 $ 1,989,000
27
World’s tax preparation
Provides additional service for existing customers
Excellent fit for World’s customer demographics
Excellent fit for World’s employees due to seasonality
Excellent revenue potential with little additional expense
56,000 returns completed in fiscal 2015
Approximately $9.9 million in net fees generated in fiscal 2015
28
Expansion in Mexico
Why Mexico? Favorable regulatory climate Tremendous potential market
Status at March 31, 2015 148 offices opened since September 2005 Approximately 142,000 accounts Approximately $94.3 million in gross ledger balance 14.3% net charge-offs to average net loan in fiscal
2015 Plan to open a total of 10 offices in fiscal 2016
29
Financial highlights
Fiscal Year
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Revenue Increase
15.1% 17.6% 15.4% 20.2% 18.4% 13.8% 12.4% 11.5% 9.9% 8.1% 5.8% 1.9%
Net IncomeIncrease
25.8% 18.2% 13.3% 19.9% 8.8% 12.4% 30.4% 23.9% 10.4% 3.4% 2.4% 6.8%
EPSIncrease
19.2% 16.8% 16.1% 24.3% 15.1% 18.7% 29.7% 26.5% 18.3% 20.1% 20.0% 27.3%
Avg. Net Loan
Growth13.4% 18.1% 14.2% 20.2% 20.0% 14.1% 13.7% 14.5% 11.6% 10.6% 7.0% 2.4%
Return on Avg. Assets
11.7% 11.8% 11.9% 12.2% 11.0% 10.9% 12.7% 13.9% 13.9% 13.0% 12.3% 12.9%
Return on Avg. Equity
21.5% 20.1% 19.9% 20.9% 21.2% 21.2% 22.1% 22.8% 23.6% 27.0% 31.2% 37.6%
Same StoreRevenue
9.8% 8.6% 10.1% 12.5% 8.9% 7.7% 8.1% 9.0% 6.8% 5.5% 3.7% .83%
31
Net Earnings – Fiscal years(in millions)
32
$34$39
$46$50
$56
$74
$91
$101$104
$107
$114
0
20
40
60
80
100
120
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Earnings Per Share – Fiscal years
$1.74 $2.02$2.51
$2.89$3.43
$4.45
$5.63
$6.63
$8.00
$9.60
$12.22
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
33
Operating returns as a percent of total revenues
27.8% 28.3%29.7%
28.7%27.1%
30.3%32.2% 32.2% 31.5% 31.0% 31.7%
0%
5%
10%
15%
20%
25%
30%
35%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
C l 1 34
Operating returns on average loans – Fiscal years
22.4% 23.0%24.2%
23.3%21.9%
24.1%24.9% 24.6%
23.5% 22.9% 23.3%
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2008 2010 2011 2012 2013 2014 2015
35
World’s return on assets and equity
11.8% 11.9% 12.2%11.0% 10.9%
12.7%13.9% 13.9%
13.0% 12.3% 12.9%
20.1% 19.9%20.9% 21.2% 21.2%
22.1% 22.8%23.6%
27.0%
31.2%
37.6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ROA ROE
36
Capitalization: Equity rich(At March 31, 2015; $ millions)
Revolving Senior Notes, $501.2,
61.1%
Equity, $318.6,38.9%
37
Cash flow growth strengthens the balance sheet
Total capitalization ($ millions)
$157 $190 $210 $229 $245 $296
$383 $443 $419
$366 $307 $319
$95 $84
$101
$171 $215
$208
$176
$189 $279 $400 $506 $501
-
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Equity Debt
38Note: Total debt represents the outstanding balance of the revolver debt at March 31, 2015
D/E Ratio 0.6 0.4 0.4 0.7 0.9 0.7 0.5 0.4 .7 1.1 1.6 1.6
Stock repurchase programFISCAL YEAR SHARES PURCHASED AVERAGE PURCHASE PRICE PER SHARE
• Fiscal 1996 176,000 shares $10.00
• Fiscal 1997 1,810,000 shares $ 7.88
• Fiscal 2000 144,000 shares $ 5.03
• Fiscal 2001 275,000 shares $ 5.21
• Fiscal 2002 251,891 shares $ 8.65
• Fiscal 2003 1,623,549 shares $ 7.39
• Fiscal 2005 486,000 shares $18.01
• Fiscal 2006 800,400 shares $25.98
• Fiscal 2007 1,209,395 shares $44.73
• Fiscal 2008 1,375,100 shares $30.44
• Fiscal 2009 288,700 shares $27.19
• Fiscal 2010 38,500 shares $37.26
• Fiscal 2011 1,298,057 shares $41.09
• Fiscal 2012 2,181,045 shares $64.10
• Fiscal 2013 2,569,597 shares $71.24
• Fiscal 2014 2,091,699 shares $91.09
• Fiscal 2015 1,432,058 shares $80.53
• Total 18,050,991 shares $47.04
39$849,189,393
Key considerations
Profitable and Growing Company Serving an Expanding Market
Experienced and Involved Management Team
Proven Profitability in Various Economic Conditions
Low Leverage Offers Future Flexibility
Focused on Core Business
Management Bonus Structure Focused on Building Maximum Shareholder Value
Consistent Performance Over 50 Years
40