Please standby. Good morning. And welcome to World Acceptance Corporation’s Sponsored Second Quarter Press Release Conference Call. This call is being recorded. At this time, all participants have been placed in a listen-only mode. Before we begin, the Corporation has requested that I make the following announcement. The comments made during today’s conference 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 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 or furnished to the SEC from time to time. The Corporation does not undertake any obligation to update any forward-looking statements that it makes. And at this time, it is my pleasure to turn the floor over to Janet Matricciani. Please go ahead.

Good morning. And welcome to our second quarter of the fiscal year 2018 earnings call. As well as our earnings release, we’ve issued a script that provides more details on our results and activity. And I’ll assume that everyone on this call has read the script. The script is filed with the SEC as an attachment to our 8-K. Just briefly, we are continuing to see the positive results in our U.S. business that we discussed last quarter, with growth in accounts and in our outstanding balance. And after several years of shrinkage, we are pleased to have solid growth for the third quarter in a row and our net charge-off levels have also improved this quarter. As the investigation into Mexico business continues, we will decline from making comments on this area beyond what is written in the script, press release. We are now ready to take any questions that you may have.

[Operator Instructions] And we will go first to John Rowan at Janney.

Good morning, everyone.

Good morning, John.

The unique borrower growth of 4.9% in the U.S. you quoted in the press release. Is that year-over-year or sequential?

Let me double check the precise number. Our growth in unique customers during this quarter, where we say, you mean, where we said the highest in at least five years.

I am assuming the unique borrowers in the U.S. increased by 36,751 or 4% during the second quarter. I was just wondering to see that was year-over-year or sequential growth that you have quoted?

Okay.

It’s just growth within the quarter or year-over-year?

Okay. That’s what I wanted to check. I want you guys maybe to expand upon a little bit the talk about denovo strategies, you said that you are identifying new locations and you are able to put more locations in the states in which you already operate. Maybe frame out that argument a little bit? How significant of an opportunity is that to grow branch locations? What are you doing differently and just give us -- frame out the argument a little bit for us in case there is another way up as far as growth goes?

Yeah. So, John, just to be clear on other question, we always compare growth in unique customers this quarter to the same quarter a year earlier due to the seasonality of our business. This is really what makes the most sense to look at your progress, right.

Okay. Just want to make sure I understood.

That’s true. You understand. In terms of denovo, and obviously, we are not going to get into the details of our strategy, although, we are very pleased to see these positive results, but in concept what we are doing differently is using a lot more information to make our decision. I would say, previously and some years ago, decisions were made based on the supervisor and if you like feet on the ground looking at locations and deciding what make sense with the drive to grow the branch numbers. And we don’t have a desire to grow branch numbers for any form of metrics. We simply look at the locations that make sense from the -- all the information that we gather on that area which includes data analytics of branches in the area and demographics and various different marketing campaigns to support that denovo growth. So it’s very much all inclusive and collaborative strategy between our corporate departments and the field, and the variety of analytical data sources to help us make the right decisions.

Is this go hand-in-hand with your push toward moving up FICO strata a little bit?

Well, I would say, yes and no. I mean, we look at the kind of customer segments that we want to go after and certainly use that to make sure there is a potential branch location in an area that would service that kind of consumer. But wouldn’t say that that is making a seismic difference to how we think about it. I would really call it a deeper level of analysis and we believe that there are -- there is a great potential to grow the advantages we have at new branches in the states where we are in and consider the addition of branches in new states for our business based on this prior kind of analysis that determine the opportunity.

Okay. And then, just lastly on the delinquencies, obviously, on a consolidated basis they are up -- I won’t say they are same, but they are up year-over-year. And in the press release, you said that this is what drove the allowance addition, I was certainly surprised by the allowance -- of the provisioning level just relative to the charge-offs, which obviously were down year-over-year. Maybe just give a little bit more discussion on why you see delinquencies being higher on year-over-year basis?

Yes. In the U.S. we incurred the branches to hold and continue to work accounts that they feel like there are still possibility collecting before they charge it off. So they are kind of stretching how long they are holding those accounts for the charge-offs in the branch, which has led to that increase in the 90-day bucket in the U.S. And as we are seeing that has been official. So, we have collected or rehabbed more of those 90-day customers, although, put 90-day plus customers in this quarter than we did last year. So nothing is rewarding. When you look at the front-end in the U.S. it’s lower both in number and percent versus last year. So while those 90-day bucket is up, which is driving the overall business is up, we don’t necessarily think that will lead to higher charge-offs in future, as well as we continue to see that reallocation of that 90-day bucket, because we don’t see many coming into the 90-day bucket as we have in the past.

Can you refresh my memory, if I remember there was a change in your collection policies a while back? I can’t remember if it was in conjunction with the change in collection policies. There was a change in the charge-off policy, which goes back to holding delinquencies longer and continued to work them past a certain day. If you remind me when that happens if we have anniversaried that already, what I basically want to understand is that the change in charge-off policy if we have annicersaried if there is not a comparable basis relative to last year?

I think what you are referring to is, it wasn’t a change in charge-off policy, but it was a change in incentives towards the branch managers, where their delinquency standard that we determine their bonus on, their monthly bonus on use to include 90-day accounts. We have see where in some cases they were charge-off in 90-day account in order to make sure they met their delinquency standard, which obviously isn’t necessary right -- the right answer. So that change happened in 2015. The more recent communication just reinforced the behavior we are trying to incur by changing that incentive in the first place.

Okay. There hasn’t been another policy change since then?

Yes. Yeah.

Okay. All right. Thank you very much. That’s all my questions.

Thanks, John.

[Operator Instructions] And we’ll go next to John Hecht at Jefferies. Please go ahead, sir.

Yeah. Thanks and good morning. Real quick money question, what -- your tax rate was a little elevated this quarter, what’s the proper tax rate to think about you guys on an ongoing basis? And what specifically wasn’t deductible this quarter?

So, it wasn’t necessarily, it wasn’t deductible, it was -- what happen was we are shifting expenses between the U.S. tax rate and the Mexico tax rate that drove that. But I think the expected tax rate will be similar to what has been historically, so around that 37% more.

Okay. And then, moving more onto the business stats, you guys -- you’re -- it seems to be the last three quarters you are more focused in driving new business, so you are highlighting more of the inflow of new customers. What are you specifically doing, I mean, obviously, there is the standard things, your local marketing, and obviously, the distribution of mailers and stuff. What are you doing -- what are you focused on for the near-term, what are you excited about in terms of the conversation of new customer and how should we think about that?

Well, there are many things that we are excited on in marketing. As you know, we operate the test and learn strategy. So we are always looking our toes in the water. New ideas and new ways of improving our relationships and contact with customers, and then we will open out in full in a large way. But we do this in a capital way to start with. I don’t think I am going to get into all of our marketing and customer related strategies now. We prefer to talk about them as we rolled them out and made them happen for a while. But I would call it better use of more data, more learning from past experience, as we build out on our knowledge, better use of digital channels and other channels to reach the customer and including our relationship with our customers in a variety of ways.

Okay. And I guess, thinking about the other side, how do we think about attrition and what’s been going on with attrition in the, I guess, incumbent customer base. Has there been any change there from the competitive front which makes you want to focus on new customers?

I am not sure what you mean from the competitive stat, but if you are asking if our customers are paying off the higher rate than in the past then it requires us to bring the new customers, the answer of that question is, no, we have not seen that trend.

Okay. What about, I mean, you follow with the customers that would be recurring customers and track how of them that may have been attrition recurring customer are, does there any change in that pattern at all?

You mean, customers who would come to us but didn’t?

Yeah. Yeah. I am just thinking about the standard attrition question, is there anything? Obviously, you guys are getting new customers at a more favorable rate. But I assume you also track your installed customer base and is there any change in that pattern?

That’s right. It’s a -- I think the answer to your question, so we are also focusing on customer retention, right. So we want to make sure that if our customer does want a large line in that we are offering to them or when they want it, which will help them with customer retention. And we will make sure that we provide them with the payment channels that they want that and things like update our branches for nicer branch and things like that will help the customer retention, so we are also focusing on that. But we haven’t seen a significant increase in payoffs, right, which will be an indication of lower or higher customer attrition.

Right. So the two ways you can move customers’ charge-off payoff, charge-off and we don’t see at least a positive trend. Payoff are not -- have not changed in any kind of negative way and that Johnny said, we are looking at increasing our focus on how we offer larger loans to customers to prevent those payoff whether as a consolidation loans, but we are not trying to move up ourselves up into a purely larger loan product, for example, we like the product we have, but we certainly look at adding to it.

Great. I appreciate the color. Thanks very much.

Welcome.

And we will go next to Clifford Sosin at CAS Investment Partners.

Thanks guys.

Hi, Clifford.

Can you provide some additional detail around the increase in provisioning charge-offs in the Mexican business, which of your two lines of business in Mexico was this related to and if there is any underlying detail about the costs that we might able to learn about?

Yeah. I can’t think much about the costs, but I will say that we are just coming in the Viva business, so the union payroll deduct this versus the traditional business. So charge-offs and delinquencies in a traditional installment loan next year are steady and improving in some aspects. I say that the charge-offs, increase charge-offs and the delinquencies came in the Viva business. Yes, I will say that the net portfolio for Viva in Mexico after allowance is around $24 million and we did stop lending in that business in August.

So that -- so just in terms of Viva business, you stop, I mean, it’s in run-off now and it was $24 million of balances -- $24 million of balances now?

Yes. So, net balance after allowance.

Got it. So is this discrete union where there was an issue?

I don’t want to get in too much more detail about the business…

Okay.

But I just want to share that detail.

And secondly, was there any impact on the business either during or after the quarter, some natural disasters, there was in Mexico -- there was earthquakes and thunder storms and what was?

Yes. Yes. We do believe we had an impact in our branches in Louisiana, in Texas principally, yes, due to weather effect, which we can’t control. What we do of course is we track how fast we can get these branches reopen and I think it was quite extraordinary the number of branches we got open in a day or two days and three days. But, of course, there was always a small negative impact when you miss the few days of lending, but we don’t consider it significant.

Got it. Thank you so much.

[Operator Instructions] And we will go next to Vincent Caintic at Stephens.

Hey. Thanks. Good morning, guys. Just a couple of questions, first, I wanted to get back to provision again. I want to breakout if you could, how much of the provision was driven by growth versus maybe what you’re seeing in the existing portfolio. I understand some of the changes you made to working the delinquencies more and so forth. But I’m guess you probably already reserved for those. So I am wondering maybe if the provision is more of the growth orientation or having if there something else to it?

Sure. The additional provision provided to growth during the quarter was $1.2 million and we actually saw an improvement in net charge-offs even with already charge-offs in Mexico, so another decrease of $2.4 million in charge-offs. And then, there is an increase due to higher delinquencies of $2.8 million, $1.3 million of that was in the U.S. and the other -- the rest was in within Mexico. So, and we also had an additional provision for the Mexico business outside of just delinquency.

Okay. Got it. That’s helpful.

Yeah. Okay.

And then, in terms of the marketing expenses, I saw it growing, of course, you also had some growth could be a good investment. I am -- but I’m wondering I’ve heard with some of the companies that are reporter already, there is kind of a mix trends on customer acquisition costs and I am wondering if you are seeing anything in terms of your acquisition costs moving up or down or if it’s becoming more competitive or not in terms of acquisition?

We have seen improvement in our customer acquisition costs.

And I will add a bit more to that. The way that we operate with marketing is, of course, we have a budget for the year, but we are not constraining marketing based on don’t exceed the budget. We are on track. We spent more in this quarter than previously. But, I think, that smarter marketing and what we are doing is completely focus on long-term profitability. So if we can bring in more customers and it makes sense to spend more on marketing now we will do that in order to be investing in our future. The customer acquisition costs, as Johnny said, have not gone up in our different channels in a significant manner even though we are getting higher response rate. We believe this is because -- even though I should say we are obviously going deeper in different segments and I would say the reason the acquisition costs are not going up significantly, because they are simply using more knowledge and information and getting better at sending the right product to the right customer at the right time.

Okay. That makes sense. Very helpful. And the last one I had on Mexico, I know you can’t talk about the investigation so setting that aside, but just wondering if that’s having any impact to the business where I can say that that’s maybe one-time in nature or the business should have been growing a bit more or more profitable ones this thing -- the investigation passes? Thanks.

Vincent, I think, at this time, we are going to really limit our comment on Mexico to what we have written in the script and simply wait the completion of the investigation or any material information before saying more on that topic. Now I appreciate and understand your interest.

Understood. All right. Thanks very much.

Thank you.

And I have no additional questions at this time. We will turn the program back over to our speakers for any additional or concluding remarks.

I don’t think we have anything extra to add today. We appreciate all the questions and wish everybody a great day.

And once again, ladies and gentlemen, thank you for your participation. This does conclude World Acceptance Corporation quarterly teleconference.