8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 1, 2017

WORLD ACCEPTANCE CORPORATION

(Exact name of registrant as specified in its charter)

South Carolina	0-19599	57-0425114
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

108 Frederick Street, Greenville, South Carolina	29607
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (864) 298-9800

n/a

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company	⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.	⃞

Item 2.02 Results of Operations and Financial Condition; and

Item 7.01 Regulation FD Disclosure.

On November 1, 2017, World Acceptance Corporation ("WRLD") issued a press release announcing financial information for its second quarter ended September 30, 2017.  The press release is attached as Exhibit 99.1 to this Form 8-K and is furnished to, but not filed with, the Commission.

On November 1, 2017, World Acceptance Corporation senior management held a conference call to discuss the results of its second quarter ended September 30, 2017.  Prepared remarks for the conference call by the Chief Executive Officer of WRLD is attached hereto as Exhibit 99.2 to this Form 8-K and is furnished to, but not filed with, the Commission.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits.
	Exhibit Number	Description of Exhibit
	99.1	Press release issued November 1, 2017
	99.2	Prepared remarks by Chief Executive Officer for November 1, 2017 conference call

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		WORLD ACCEPTANCE CORPORATION
		(Registrant)
Date:	November 1, 2017	By:	/s/ John Calmes
			John Calmes
			Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description
99.1	Press Release dated November 1, 2017
99.2	Prepared remarks by Chief Executive Officer for November 1, 2017 conference call

EX-99.1

Exhibit 99.1

World Acceptance Corporation Reports Fiscal 2018 Second Quarter Results

GREENVILLE, S.C.--(BUSINESS WIRE)--November 1, 2017--World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its quarter and six months ended September 30, 2017.

Gross loans increased to $1.15 billion as of September 30, 2017, a 4.8% increase from the $1.10 billion of loans outstanding as of September 30, 2016. Gross loans in the US increased 3.2%. Gross loans in the US benefited from the acquisition of $8.5 million in gross loans during the quarter. Gross loans in Mexico increased 19.5% in US dollars. However, gross loans in Mexico increased only 11.9% in Mexican pesos. Our unique borrowers in the US increased by 36,751, or 4.9% during the second quarter of fiscal 2018. This is compared to an increase of 20,614, or 2.8%, in the second quarter of fiscal 2017 and an increase of 11,081, or 1.4%, in the second quarter of fiscal 2016.

Net income for the second quarter decreased 36.7% to $9.8 million compared to $15.5 million for the same quarter of the prior year. Net income per diluted share decreased 37.4% to $1.10 in the second quarter of fiscal 2018 compared to $1.76 in the prior year quarter.

Total revenues increased to $131.0 million for the second quarter of fiscal 2018, a 1.3% increase from the $129.3 million reported for the second quarter last year. Revenues from the 1,286 offices open throughout both quarterly periods increased by 0.8%. Interest and fee income increased 1.2% from $117.0 million to $118.4 million in the second quarter of fiscal 2018 primarily due to an increase in average earning loans. Insurance and other income increased by 2.6% to $12.6 million in the second quarter of fiscal 2018 compared with $12.3 million in the second quarter of fiscal 2017.

Accounts in the US that were 61 days or more past due increased to 5.7% on a recency basis and to 7.4% on a contractual basis at September 30, 2017, compared to 5.3% and 7.0%, respectively, at September 30, 2016. On a consolidated basis, accounts that were 61 days or more past due increased to 6.5% on a recency basis and to 8.4% on a contractual basis at September 30, 2017, compared to 5.5% and 7.7%, respectively, at September 30, 2016. As a result of the higher delinquencies, our allowance to net loans increased from 9.7% at September 30, 2016 to 10.5% at September 30, 2017.

As previously disclosed, the Company ceased all in-person collection visits at the end of fiscal 2016. Following the change in practice, we experienced an increase in delinquencies and charge-offs. We have seen an improvement in net charge-offs during the first and second quarters of fiscal 2018 compared to 2017 and charge-offs. Consolidated net charge-offs as a percentage of average net loans on an annualized basis decreased from 15.6% to 14.0% when comparing the two quarters. However, the consolidated provision for the quarter increased $3.1 million when comparing the second quarter of fiscal 2018 to the second quarter of fiscal 2017. This is primarily due to an increase in net charge-offs and delinquent accounts in Mexico. Consolidated net charge-offs were down $2.4 million when comparing the two quarters. The portion of the provision related to an increase in loans outstanding, which increased $1.2 million quarter over quarter due to gross loans outstanding increasing $37.3 million in the second quarter of fiscal 2018 versus $8.1 million in the second quarter of fiscal 2017. The US provision decreased $1.6 million when comparing the second quarter of fiscal 2018 to the second quarter of fiscal 2017. This is due to a decrease in net charge-offs of $4.5 million. The portion of the US provision related to an increase in loans outstanding increased $1.6 million quarter over quarter. There was also a $1.3 million increase in the US provision due to a larger increase in accounts that became 90 days past due in the second quarter of 2018 compared to the second quarter of 2017.

General and administrative (“G&A”) expenses amounted to $70.9 million in the second quarter of fiscal 2018, a 11.7% increase over the $63.5 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses increased from 49.1% during the second quarter of fiscal 2017 to 54.1% during the current quarter. G&A expenses per average open office increased by 11.3% when comparing the two quarters. G&A expense increased due to increased advertising expense, personnel costs, and legal and professional expense.

Personnel expense increased $3.8 million quarter over quarter. Personnel expense in the US increased $1.8 million. Personnel expense in the US increased primarily due to an increase in part-time employees hired to enable our branch offices to extend their hours without significant overtime or hiring additional full time employees as well as expense associated with equity awards granted during October 2016.

Advertising expense increased 30.3%, or $1.2 million, due to an increase in our direct marketing program relative to the same quarter last year.

Legal and professional expense increased $1.9 million primarily due to additional expense related to the previously disclosed investigation related to our operations in Mexico. We incurred $1.3 million in expense directly related to the investigation during the quarter. See “Other Matters” below for additional information regarding the investigation.

Interest expense for the quarter ended September 30, 2017, decreased by $700,000, or 13.2%, from the corresponding quarter of the previous year. The decrease in interest expense is due to a 14.0% decrease in the average debt outstanding, from $365.0 million to $313.8 million for the quarters ended September 30, 2016 and 2017, respectively. The Company’s debt to equity ratio decreased from 0.9:1 at September 30, 2016, to 0.7:1 at September 30, 2017.

The Company’s second quarter effective income tax rate increased to 40.0% compared with 36.6% in the prior year’s second quarter.

Other key return ratios for the second quarter included a 7.6% return on average assets and a return on average equity of 14.3% (both on a trailing 12-month basis).

At September 30, 2017, we had approximately 162,000 accounts and approximately $123.7 million in gross loans outstanding in Mexico. There were $103.5 million in gross loans as of September 30, 2016. Annualized net charge-offs for Mexico as a percentage of average net loans increased from 11.1% for the second quarter of fiscal 2017 to 19.9% for the current fiscal quarter. Additionally, our Mexican 61+ day delinquencies were 13.2% and 17.3% on a recency and contractual basis, respectively, as of September 30, 2017, a change from 7.4% and 13.6%, respectively, as of September 30, 2016.

Six-Month Results

For the first six-months of the fiscal year, net income decreased 28.8% to $22.9 million compared with $32.1 million for the six-months ended September 30, 2016. Fully diluted net income per share decreased 29.4% to $2.58 in the first six months of fiscal 2018 compared with $3.65 for the first six-months of fiscal 2017. Year to date net income for Mexico decreased $5.8 million from $3.1 for the six months ended September 30, 2016, to a loss of $2.7 million for the six months ended September 30, 2017.

Total revenues for the first six-months of fiscal 2018 increased 1.4% to $259.9 million compared with $256.3 million during the corresponding period of the previous year. Annualized net charge-offs as a percent of average net loans decreased from 15.3% during the first six-months of fiscal 2017 to 13.9% for the first six-months of fiscal 2018.

Other Matters

As previously disclosed, we are conducting an investigation of our operations in Mexico, focusing on the legality under the U.S. Foreign Corrupt Practices Act and certain local laws of certain payments related to loans, the maintenance of the Company’s books and records associated with such payments, and the treatment of compensation matters for certain employees. We promptly retained outside legal counsel and forensic accountants to lead the investigation upon receipt of an anonymous letter regarding compliance matters, and we have voluntarily contacted the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) to advise both agencies that an investigation is underway. We are committed to compliance with applicable laws and regulations, intend to cooperate fully with both the SEC and the DOJ, and are developing and executing a remediation plan to ensure compliance with applicable laws and regulations and to remediate the material weaknesses in our internal control over financial reporting.

As previously disclosed, on August 7, 2015, the Company received a letter from the CFPB’s Enforcement Office notifying the Company that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the staff of CFPB’s Enforcement Office is considering recommending that the CFPB take legal action against the Company (the “NORA Letter”). The NORA Letter states that the staff of the CFPB’s Enforcement Office expects to allege that the Company violated the Consumer Financial Protection Act of 2010, 12 U.S.C. §5536. The NORA Letter confirms that the Company has the opportunity to make a NORA submission, which is a written statement setting forth any reasons of law or policy why the Company believes the CFPB should not take legal action against it. Following the CFPB’s NORA Letter, the Company made NORA submissions to the CFPB’s Enforcement Office. The Company understands that a NORA Letter is intended to ensure that potential subjects of enforcement actions have the opportunity to present their positions to the CFPB before an enforcement action is recommended or commenced. While the Company believes its marketing and lending practices are lawful, there can be no assurance that the CFPB’s ongoing investigation or future exercise of its enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal consumer financial protection laws.

About World Acceptance Corporation

World Acceptance Corporation is one of the largest small-loan consumer finance companies, operating 1,331 offices in 15 states and Mexico.

Second Quarter Conference Call

The senior management of World Acceptance Corporation will be discussing these results in its quarterly conference call to be held at 10:00 a.m. Eastern time today. A simulcast of the conference call will be available on the Internet at https://www.webcaster4.com/Webcast/Page/1118/23111. The call will be available for replay on the Internet for approximately 30 days.

This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, that represent the Company’s expectations or beliefs concerning future events. Statements other than those of historical fact, as well as those identified by the words “anticipate,” “estimate,” ”intend,” “plan,” “expect,” ”project,” “believe,” “may,” “will,” “should,” “would,” “could” and 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-looking statements include the following: recently enacted, proposed or future legislation and the manner in which it is implemented; the nature and scope of regulatory authority, particularly discretionary authority, that may be exercised by regulators, including, but not limited to, the SEC, DOJ, or the Consumer Financial Protection Bureau (the “CFPB”), having jurisdiction over the Company; the unpredictable nature of regulatory proceedings and litigation; any determinations, findings, claims or actions made or taken by the SEC, DOJ, CFPB, or other regulators or third parties in connection with or resulting from the previously disclosed investigation of our operations in Mexico or the civil investigative demand or the NORA Letter from the CFPB that assert or establish that the Company’s lending practices or other aspects of its business violate applicable laws or regulations; the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company’s reported financial statements or necessitate material delays or changes in the issuance of the Company’s audited financial statements; the Company's assessment of its internal control over financial reporting, and the timing and effectiveness of the Company's efforts to remediate any reported material weakness in its internal control over financial reporting; changes in interest rates; risks related to expansion and foreign operations; risks inherent in making loans, including repayment risks and value of collateral; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); the potential impact of limitations in the Company’s amended revolving credit facility; and changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company). These and other factors are discussed in greater detail in Part I, Item 1A, “Risk Factors” in the Company’s most recent annual report on Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC and the Company’s other reports filed with, or furnished to, the SEC from time to time. World Acceptance Corporation does not undertake any obligation to update any forward-looking statements it makes. The Company is also not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

World Acceptance Corporation
Consolidated Statements of Operations
(unaudited and in thousands, except per share amounts)
	Three Months Ended					Six Months Ended
	September 30,					September 30,
	2017		2016			2017		2016
Interest & fees	$	118,394		116,980		234,033		231,024
Insurance & other		12,611		12,289		25,882		25,325
Total revenues		131,005		129,269		259,915		256,349
Expenses:
Provision for loan losses		38,976		35,871		69,817		67,885
General and administrative expenses
Personnel		44,185		40,401		89,182		82,396
Occupancy & equipment		10,912		10,631		21,588		21,133
Advertising		5,334		4,093		10,258		6,444
Intangible amortization		275		164		461		274
Other		10,202		8,167		22,337		16,157
		70,908		63,456		143,826		126,404
Interest expense		4,791		5,519		9,037		11,105
Total expenses		114,675		104,846		222,680		205,394
Income before taxes		16,330		24,423		37,235		50,955
Income taxes		6,531		8,932		14,369		18,845
Net income	$	9,799		15,491		22,866		32,110
Diluted earnings per share	$	1.10		1.76		2.58		3.65
Diluted weighted average shares outstanding		8,895		8,805		8,861		8,787
Consolidated Balance Sheets
(unaudited and in thousands)
			September 30,			March 31,		September 30,
			2017			2017		2016
ASSETS
Cash			$	18,780		15,200		16,255
Gross loans receivable				1,147,641		1,059,804		1,095,577
Less: Unearned interest & fees				(321,440	)	(291,909	)	(305,080	)
Allowance for loan losses				(86,731	)	(72,195	)	(76,421	)
Loans receivable, net				739,470		695,700		714,076
Property and equipment, net				24,358		24,185		23,898
Deferred income taxes, net				46,865		39,025		41,891
Goodwill				7,035		6,067		6,067
Intangibles, net				6,981		6,614		2,697
Other assets, net				13,580		13,797		12,514
			$	857,069		800,588		817,398
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable				320,750		295,136		360,586
Income tax payable				12,085		12,520		10,114
Accounts payable and accrued expenses				34,082		31,870		28,882
Total liabilities				366,917		339,526		399,582
Shareholders' equity				490,152		461,062		417,816
			$	857,069		800,588		817,398

Selected Consolidated Statistics
(dollars in thousands)
	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Expenses as a percent of total revenues:
Provision for loan losses		29.8	%		27.7	%		26.9	%		26.5	%
General and administrative expenses		54.1	%		49.1	%		55.3	%		49.3	%
Interest expense		3.7	%		4.3	%		3.5	%		4.3	%
Average gross loans receivable	$	1,136,164		$	1,098,722		$	1,106,183		$	1,086,278
Average net loans receivable	$	816,727		$	792,684		$	797,325		$	785,474
Loan volume	$	638,396		$	617,746		$	1,300,860		$	1,265,875
Net charge-offs as percent of average loans		14.0	%		15.6	%		13.9	%		15.3	%
Return on average assets (trailing 12 months)		7.6	%		9.0	%		7.6	%		9.0	%
Return on average equity (trailing 12 months)		14.3	%		19.6	%		14.3	%		19.6	%
Offices opened (closed) during the period, net		-			(2	)		4			(17	)
Offices open at end of period		1,331			1,322			1,331			1,322

CONTACT:
World Acceptance Corporation
John L. Calmes Jr., 864-298-9800
Chief Financial Officer

EX-99.2

Exhibit 99.2

EARNINGS CALL SCRIPT – Q2 FY2018

Please find following a summary of our operational results for this past quarter, Q2 FY2018. The purpose of these notes is to add more detail to the standard press release that we issue each quarter. We intend to dedicate the Earnings Call time to answer any specific questions on our results or performance year-to-date.

INTRODUCTORY UPDATE
As we announced in June, and repeated in our last earnings call, we have an ongoing investigation relating to our Mexico operations. As previously stated, we voluntarily disclosed the matters under investigation to the Department of Justice and the Securities and Exchange Commission in June. We remain committed to full cooperation with both agencies.

I would like to reaffirm our strong commitment to compliance with all applicable laws and regulations. Based on the progress of the investigation to date, we continue to enhance internal controls and compliance programs as well as review and update operational procedures relating to our business activities in Mexico, all of which may negatively affect future growth trends. Since this is an ongoing investigation, we are not able to provide additional information about the investigation or answer any additional questions about the investigation at this time.

OVERALL
The second quarter of fiscal year 2018 extends the positive results on growth in accounts and outstanding balance that we disclosed at the end of our first quarter. We sustained solid growth for the third quarter in a row, after several previous years of shrinkage.

Revenues (consolidated) this quarter increased 1.3% over the same quarter of a year ago, with growth in both our US and Mexico businesses. Likewise, same-store revenue (from the 1,286 branches open in both quarters) increased 0.8%.

Net income this quarter was down 36.7% versus Q2 FY2017. This was due to several factors.

Firstly, our consolidated provision for loan loss was up $3.1MM due to increased chargeoffs and delinquencies in our Mexico business, offset by a reduction in provision in our US business of $1.6MM due to lower chargeoffs.

Secondly, our personnel expenses continue to be higher than a year earlier. In the U.S., this is primarily due to the increase in part-time personnel hired to allow us to extend branch operating hours. However, in recent months, field personnel costs are decreased as we become more efficient in our use of human resources.

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Thirdly, as with last quarter, our advertising expense was up significantly. This quarter, our advertising costs were up 30% versus the same quarter of last year. We believe this has proven to be a good decision due to the much higher loan growth we continue to experience.

Fourthly, our legal and professional expenses were up by over $1.9MM this quarter versus Q2 FY2017, of which $1.3MM can be attributed to the investigation of our Mexico operations. In Q1 FY2018, costs attributed to the investigation were $2.4MM.

Both interest & fee income and insurance & other income were up versus Q2 FY2017.  

Our overall gross loans growth increased to $1.15BN at the end of Q2 FY2018, up 4.8% from the end of Q2 FY2017. Of this, US gross loans increased 3.2% and Mexico gross loans increased 19.5% in USD, helped by a favourable change in exchange rates (in pesos, our gross loans increased 11.9%).

In our US business, we also added more accounts this quarter than we have during any second fiscal quarter for more than six years. In each category of new and former borrowers, we added more accounts this quarter since 2012.

Our refinancing volumes in the US are showing consistent improvement, meaning we are better meeting our customers’ needs by offering refinancing opportunities where they desire and merit them. These volumes, this quarter as with last, are slightly above the same quarter in FY2017.

Our net charge-off levels have also improved this quarter compared to the same quarter of a year earlier, although they remain above historic levels prior to our decision to eliminate field calls.

LOAN PORTFOLIO PERFORMANCE

US Customer Performance:
Sustaining our positive trend in customer growth, we continue to close the gap each quarter in unique customers versus our highest historical value. We ended Q2 with more unique customers than in the same quarter of last year, and almost the same number as at the end of Q2 FY2016.

2

Our growth in unique customers during this quarter, at 36,571, was the highest in at least five years. This growth as a percentage is a 78% improvement over last year. Year to date, we have grown our unique customers by 7.1%, nearly double the prior best year in recent history (2015). After years of shrinkage, this is now the third quarter in a row where we have seen results that are not just better than a year earlier but better than any of the last four years.

Our data on payment performance is in line with our expectations. We believe that this shows that our underwriting continues to be prudent and to ensure we are not sacrificing customer quality for growth.

We are also finding that more former borrowers are coming back to us after more than a year of separation. We believe this is due to our improved marketing strategy in this customer segment as well as the strong loyalty that previous customers have for our brand due to our excellence in customer service.

US Gross Loan performance:
We again maintained our trend of improved quarterly performance in Q2 of FY2018. This represents the fourth quarter in a row where our gross loan performance has shown improvement.

We ended Q2 with $42M growth in our US ledger, representing a 4.3% increase during the quarter. This is the highest Q2 growth that we have experienced since 2013.

Year-to-date, our ledger has grown 8.5% compared to last year’s growth of 2.9% and significantly better to prior years going back to 2014. Furthermore, our US ledger ended the quarter at a higher level than the same quarter of a year earlier. This is the first time we have achieved this in ten quarters.

Looking at same-store gross loan growth in the US, for the 1,136 stores open in both years, our ledger was up 2.8%. This is an improvement on the same quarter of last year where we shrunk 5.7%, and it is the first time we have experienced same-store ledger growth in Q2 since FY2015. We increased the number of unique customers in these stores by 5.0%; the first time in four years that we have not shrunk in same store customer growth in Q2.

A total of 619 (54.2%) of our full-year operated branches have grown their ledger and almost 60% also grew their number of accounts in comparison to the end of Q2 FY2017. These are the highest percentages in four years.

3

Credit Quality of Customer Base:
Once again, this quarter, our credit quality (as indicated by credit score) of loans originated improved for all categories of borrowers (new, former and current) versus the same quarter of a year earlier. In fact, the credit quality of these categories is better than any Q2 since at least 2014.

Additionally, the entire outstanding portfolio has increased in average credit score at the end of Q2 versus a year earlier for all categories of borrowers, which we believe is a significant increase.

We are still consciously reducing the number of loans we make to individuals with credit scores in the lower end of our range.

Refinancing:
After much effort in improving our refinancing strategy, we are now seeing the results of this activity start to pay off in small but consistent improvements. As with Q1 FY2018, our refinancing volumes this quarter were again above those of the same quarter of a year ago, and with a higher increase to the same quarter a year earlier than we experienced in Q1. This is the first time we have managed to increase Q2 refinancing volume in four years.

However, we believe there is still more work we need to do to determine more quickly and optimally those customers who would like to be refinanced and warrant such an increase based on our underwriting criteria.

Since we are bringing in customers at lower loan origination sizes than in the past, due to our cautious and prudent new underwriting criteria, it is important that we offer these customers higher loan sizes as they merit and desire them – or the competition will. We have improved the quantity of these offers of increased loan amounts and are now appropriately at levels above those of the last three years. However, the average customer loan size increase is at the lowest amount since 2014, thus indicating that, even in loan increase amounts, we are exercising caution.

Delinquencies and Charge-offs:
In our US business, accounts that are 30 and 60 recency days late are also showing much improvement both as a whole and in the current, new and former borrower segments.

In dollar terms, 30 and 60 day recency delinquency is lower than any Q2 since FY2015. We are holding the bucket of 90+ days late accounts longer rather than charge-off these accounts to improve our chance for rehabilitating customers. At the end of Q1 FY2018, we were holding $5.2MM more in our 90+ bucket versus a year earlier. This Q2, we rehabilitated $2MM more in balance. The growth in our current portfolio (not 30+ delinquent) has grown more this Q2 than any Q2 since before 2014. 

4

Therefore, we believe our strategy of holding 90+ accounts longer before charge off is indeed improving our collection capabilities and allowing us to successfully retain customers.

Our consolidated net charge-offs as a percentage of annualized loans were down from 15.7% in Q2 FY2017 to 14.0% at the end of this quarter, representing a reduction of $2.4MM. We believe this improvement is largely due to the higher average credit score of new customers and customers, from whom we relied on field calls to collect, having now cycled out of our portfolio. To a lesser degree, the charge-off rate benefited from the Company holding 90+ day late accounts longer as discussed above.

GROWTH STRATEGIES

The results of the last two quarters show significant improvement in growth in accounts. We attribute this to our increased learning in marketing tests and thus our improved ability to target the right customer at the right time with the right product through the right channel. The increased investments we are making in advertising and personnel are designed to get more customers in the door and to keep them for longer.  We use customer lifetime value analysis to measure the impacts of those investments.  Thus far, the metrics we track are giving us confidence that the investments are working as intended and that we can continue to make them.  There is a lag effect on our reported results, however, in that the cost of those investments are expensed up front and the revenue benefits flow in over time.

Live Checks Program:
We currently have nine US states in which we regularly offer live (convenience) checks. This distribution channel keeps growing in importance for our company as we carefully use our learning from past tests to improve our mailing selection.

Direct Mail:
Our Q2 FY2018 centralized mail campaign brought in 88% more booked loans compared to Q2 FY2017.

Digital Presence:
Digital continues to be an important channel for us and we keep refining and improving the manner in which we target customers online. The number of web applications that we received this quarter is an all-time high for our company and the volume of booked loans via this channel is up more than 43% versus the same quarter last year.

5

It is noteworthy that, while the quantity of these applications has increased, the quality has not deteriorated. In fact, our conversion rate (meaning the percent of web applications that convert into new approved loan originations) is higher than Q2 FY2017.

Once again this quarter, we grew the number of customers who signed up for text messaging and these are at a record high.

New Branches:
We have opened four branches this quarter, acquired one and closed five, making a net increase of zero. We have several more branches currently where the leases are signed and opening is imminent.

Year-to-date, we have closed nine branches, much less than the twenty we had closed year-to-date in FY2017. We believe that the number of branch closures will be significantly lower in FY2018 than in FY 2017; however, we will continue to close branches where we are losing money and do not believe the right conditions exist to turn the situation around.

We now have 1,093 branches operating under the World Finance name (up nine from the end of last quarter) out of our 1,169 open US branches.

We purchased one branch and seventeen loan portfolios this quarter, and continue to see an increase in the number of acquisition opportunities with which we are being presented.

In the US and Mexico combined, we currently have 1,331 open branches, compared to 1,326 as of end Q2 FY2017. The reduction in net branches is principally due to our focus on improving branch efficiency in FY2017 where we closed and merged 44 branches that were not at economies of scale or unproductive due to suboptimal location selection many years ago.

We have created a newly-designed denovo process with more-rigorous analysis, combining data analytics with local demographics and in-district knowledge, to decide on optimal branch locations. We are finding many opportunities to add branches in our current states.

All of the new branches that we opened in Q1 FY2017 have grown faster than the average denovo branches opened in Q1 in the last four years and are expected to become profitable much faster than prior denovos. We attribute this not only to better selection of branch locations and our constant refining of our marketing campaigns, activities and events in the local area, but also to more visible in-store messaging.

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OTHER PERFORMANCE DETAILS

IT Improvements:
We rolled out the initial version of our new Loan Origination System to nine states and expect completion of this rollout to all branches in early Q3.  The Loan Origination System facilitates the collection of critical electronic data to drive better business decisions.  This is just the first step in introducing a system that will improve the way we originate a loan and provide much better management oversight and analysis.  We believe an agile approach, small and often, is the best and safest way to introduce new system changes to our branch associates. This allows us to gather feedback and adjust accordingly as we proceed.

In addition, during Q2 FY2018, we completed work on our online payments solution and we are currently in the process of rolling this out.  We believe this will have a positive impact on delinquencies as well as helping to attract new customers.  

Lastly, during the quarter we identified and chose a new ERP (Enterprise Resource Planning) solution which will be implemented to replace our current finance and accounting system. This will give World a Human Capital Management system for the first time, replacing outdated, inefficient and manual processes throughout the HR (Human Resource) function.  It will be a multi-year project.

Debt to Equity:
As of September 30, 2017, our debt to equity ratio was down to 0.7:1 from 0.9:1 at the end of Q2 2017.  We consider 2:1 to be a conservative level, and we are significantly below that level.

Share Repurchases:
Due in part to the ongoing  investigation in Mexico, we have chosen not to repurchase our common stock this quarter even though our debt to equity ratio is much lower than we believe necessary even in a conservative environment. We cannot, at this time, say when we may recommence repurchasing our shares, but we may repurchase additional shares in accordance with federal securities laws on the open market or in privately negotiated transactions.

REGULATORY ENVIRONMENT  

State-level Regulations:
We are not aware of any significant changes in state regulations that have been adopted (or appear likely to be adopted in the near term) that are likely to have a material adverse effect on our business.

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CFPB:
Regarding the final regulations from the CFPB on small dollar lending we believe that the effect on our business practices will be very limited. Because we do not make any loans with a repayment period of 45 days or shorter, and do not make any loans that include a balloon feature, our instalment loans are not subject to the rule’s ability to repay requirements. Regarding the CID issued to World in March of 2014, we have no further information to add. Regarding any other proposed legislation such as on CFPB oversight, we decline to comment on any potential impact on our business. At the time that any legislation is fully enacted that impacts our business, we will then discuss any effect on our operations or policies.

IN SUMMARY

This quarter, we are pleased to propagate further the seeds of growth that we started to see in key indicators in Q4 FY2017 and Q1 FY2018. We have achieved the “best in multi-years” growth in many accounts, ledger and unique customer metrics (both as a percentage of our base and in absolute terms). This seems to indicate signs of success in our cautious and prudent “test and learn” strategy of bringing innovation into the activities of our core corporate departments and into the field. We believe there is still significant opportunity for our business in expanding our geographic reach, improving our marketing strategies and using data analytics to support further our decision-making across all departments including credit risk, HR and Real Estate. We look forward to continued improvement in our operating metrics as we go into growth season in Q3 FY2018.

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