Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
Please consider a small donation if you think this website provides you with relevant information
| Statement |
|---|
| We continue to see stabilizing and improving credit quality yields and operational conditions as we looked forward and accrue for the $20 and 45% EPS target for fiscal year 2025 |
| And it's something we've mentioned before in rightsizing the loan sizes also helped us increase the overall yield |
| One, we expect the credit quality absent of any other macro events should continue to improve on the existing portfolio, right? And the loans that – the new customers that we are adding are performing at a much higher level from a credit quality standpoint and have much healthier yields, right? So as we move forward, and it will take – to get to the $20 EPS will take some growth, right, over the next 18 months |
| During the second quarter, our customer base continued to grow and the number of new loan originations remained stable versus the prior quarter and increased by over a third compared to the same quarter last year |
| And we expect the credit quality of the existing portfolio to continue to trend better |
| I think the big change that happened is [we're just kind of pattern] where we're going to be tighter for longer, right? So we were hopeful that we could see some improvement in new customer performance and start to loosen some of our underwriting, which would allow for higher growth |
| Therefore, we cautiously have been increasing approval and booking rates for our best applicants and continue to explore ways to profitably serve more of our applicants |
| We're obviously not near there now, although you obviously have improved credit quality |
| So we expect to – we see the credit quality of the portfolio continuing to improve, right? So as we move forward, two things should continue to happen |
| The number of former or return customer originations also increased to be slightly above historical volumes |
| This year, we continue to see lower and normalizing delinquency rates in our portfolio and increasing yields and expect these trends to continue for several more months |
| And we expect that to happen, right? We expect at some point over the next 18 months, there will be more clarity with where the economy is going and hopefully be able to start losing a little bit, right? But so with that, you'll have higher – better performance on the new customers at higher yields |
| For the remainder of 2023 and into early 2024, we weathered delinquency normalization after a period of very low delinquency, mostly induced by economic stimulus, followed by extraordinary portfolio growth |
| The number of new customers each quarter as a percentage of our customer base continues to increase, and we are returning closer to our historical normal growth rate |
| In conjunction with that, you're beginning to see with those lower balances, also having higher yields, you're beginning to see the overall portfolio yields increase over the last two quarters as well |
| Great |
| So we've seen the portfolio shrinking rightsizing recently, but it sounds like you have kind of encouraging signals in delinquencies and other underwriting seems to be taking hold |
| John Rowan Good morning |
| Good morning |
| Chad Prashad Good morning |
| This growth is important as our overall average loan balance continues to be right-sized as we've discussed with the portfolio risk and yield |
| We're still seeing very strong application flow, but we've reduced our approval rates substantially |
| Thank you |
| Thank you |
| Chad Prashad Yes, I think it's important to point out that during the last quarter, we actually did grow our customer base and number of accounts, but the average balance is lower |
| Statement |
|---|
| We were no longer accruing for the $25.30 stretch EPS target, primarily due to reduced new customer investment, which would hinder overall potential growth for this fiscal year |
| So obviously, if something were to change in the macro environment drastically, if unemployment rates were to spike or something like that, that would obviously make it difficult to hit the $20 |
| That growth or lack of growth reduces the earnings power for the next fiscal year |
| Today, our approval and booking rates while higher than this time last year, remain low compared to historical norms |
| We continue to see economic uncertainties and potential impacts to both customer cash flow and their credit histories, both positive and negative on the horizon as potential outcomes for our customer base |
| All originations made this quarter have approximately a 10% lower balance year-over-year, and the average current balance outstanding has declined around 4% |
| We do expect that the average balances will continue to decline |
| So I'm just trying to parse out if the credit tightening and what we're seeing is what's a little bit of an abnormal sequential decline here in the September quarter |
| We believe this move is prudent for the long-term health of the company as credit risk and economic uncertainty are likely to persist for some time and our new customer investment remains tempered and focused on the highest credit quality |
| In fiscal year 2023, we tightened underwriting as economic uncertainty and inflation concerns were increasing |
| But it's not – nothing major needs to change from what we reported this quarter, but we have to continue certain trends |
| And as a result, we won't see the growth that we'll need for this year and potentially next year, that would have allowed us to hit that higher EPS |
| I mean not gigantic, but a big reversal |
| I think we'll continue to see some mild portfolio growth |
| The seasonality in the loan portfolio, obviously, typically loans go up and in the December quarter, down in the March quarter |
| I was a little confused just with the comment you said that we kind of have – nothing major needs to change from now to get to there |
| How do we get there because that run rate is nowhere near $20.45, but yet you're saying nothing material needs to change for us to get to that number? I'm just – I'm having trouble marrying those comments together |
Please consider a small donation if you think this website provides you with relevant information