World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its first quarter of fiscal 2024 and three
months ended June 30, 2023.
First quarter highlights
During its first fiscal quarter, World Acceptance Corporation
continued to focus on credit quality and a conservative approach to
its lending operations. Management believes that continuing to
carefully invest in our best customers and closely monitoring
performance will put the Company in a strong position throughout
the fiscal year, particularly given the potentially challenging
economic environment.
Highlights from the first quarter include:
- Net income of $9.5 million
- Diluted net income per share of $1.62
- Recency delinquency on accounts 90+ days past due improved from
4.1% at June 30, 2022, to 3.5% at June 30, 2023
- Gross loans outstanding of $1.40 billion, a 0.6% increase from
March 31, 2023
- Total revenues of $139.3 million, including a 130 basis point
yield increase compared to the same quarter in the prior year
- Cash flow from operating activities of $59.7 million for the
three months ended June 30, 2023, a 2.7% increase from the same
period in the prior year
Portfolio results
Gross loans outstanding were $1.40 billion as of June 30, 2023,
a 14.9% decrease from the $1.64 billion of gross loans outstanding
as of June 30, 2022. During the most recent quarter, gross loans
outstanding increased sequentially 0.6%, or $8.0 million, from
$1.39 billion as of March 31, 2023, compared to an increase of
7.8%, or $119.0 million, in the comparable quarter of the prior
year. During the most recent quarter, we saw a decrease in
borrowing from new, former, and refinance customers compared to the
same quarter of the prior year due to the tighter underwriting
standards implemented in prior quarters. We also took steps to
improve the gross yield to expected loss ratio for all new, former,
and refinance customer originations. However, as early performance
indicators on new borrowers improved substantially, the Company
began to increase new borrower originations toward the end of the
third quarter of fiscal 2023 and into the first quarter of fiscal
2024. We will continue to monitor performance indicators and intend
to adjust underwriting accordingly.
The following table includes the volume of gross loan
origination balances, excluding tax advance loans, by customer type
for the following comparative quarterly periods:
Q1 FY 2024
Q1 FY 2023
Q1 FY 2022
New Customers
$34,647,578
$68,465,774
$53,321,912
Former Customers
$97,806,668
$117,241,356
$110,612,542
Refinance Customers
$588,767,136
$746,740,124
$590,269,556
Our customer base decreased by 14.8% during the twelve-month
period ended June 30, 2023, compared to an increase of 11.4% for
the comparable period ended June 30, 2022. During the quarter ended
June 30, 2023, the number of unique borrowers in the portfolio
increased by 1.5% compared to an increase of 0.2% during the
quarter ended June 30, 2022.
As of June 30, 2023, the Company had 1,055 open branches. For
branches opened at least twelve months, same store gross loans
decreased 10.0% in the twelve-month period ended June 30, 2023,
compared to an increase of 38.2% for the twelve-month period ended
June 30, 2022. For branches open throughout both periods, the
customer base over the twelve-month period ended June 30, 2023,
decreased 10.3% compared to an increase of 14.6% for the
twelve-month period ended June 30, 2022.
Three-month financial results
Net income for the first quarter of fiscal 2024 increased to
$9.5 million from a net loss of $8.6 million for the same quarter
of the prior year. Net income per diluted share increased to $1.62
per share in the first quarter of fiscal 2024 from a net loss of
$1.49 per share for the same quarter of the prior year.
Total revenues for the first quarter of fiscal 2024 decreased to
$139.3 million, an 11.8% decrease from $157.9 million for the same
quarter of the prior year. Interest and fee income declined 10.4%,
from $130.21 million in the first quarter of fiscal 2023 to $116.62
million in the first quarter of fiscal 2024. Insurance income
decreased by 5.9% to $16.0 million in the first quarter of fiscal
2024 compared to $17.0 million in the first quarter of fiscal 2023.
The large loan portfolio increased from 53.4% of the overall
portfolio as of June 30, 2022, to 57.4% as of June 30, 2023. The
large loan percent of the mix decreased when compared to March 31,
2023, at which time it was 58.1%. Interest and insurance yields
increased 140 basis points for the quarter ended June 30, 2023,
relative to the quarter ended March 31, 2023, and 130 basis points
relative to the quarter ended June 30, 2022. Other income decreased
by 37.5% to $6.67 million in the first fiscal quarter of fiscal
2024 compared to $10.67 million in the first fiscal quarter of
fiscal 2023. Other income in the prior year's first quarter
includes a $3.1 million bargain purchase gain related to an
acquisition.
The Company accrues for expected losses with a current expected
credit loss ("CECL") methodology. This accounting methodology
requires us to create a provision for credit losses on the day we
originate the loan. The provision for credit losses decreased $39.2
million to $46.6 million from $85.8 million when comparing the
first quarter of fiscal 2024 to the first quarter of fiscal 2023.
The table below itemizes the key components of the CECL allowance
and provision impact during the quarter.
CECL Allowance and Provision (Dollars
in millions)
FY 2024
FY 2023
Difference
Reconciliation
Beginning Allowance - March 31
$125.5
$134.2
$(8.7)
Change due to Growth
$0.7
$10.5
$(9.8)
$(9.8)
Change due to Expected Loss Rate on
Performing Loans
$3.5
$16.8
$(13.3)
$(13.3)
Change due to 90 day past due
$(0.4)
$(5.9)
$5.5
$5.5
Ending Allowance - June 30
$129.3
$155.6
$(26.3)
$(17.6)
Net Charge-offs
$42.8
$64.4
$(21.6)
$(21.6)
Provision
$46.6
$85.8
$(39.2)
$(39.2)
Note: The change in allowance for the
quarter plus net charge-offs for the quarter equals the provision
for the quarter (see above reconciliation).
The provision benefited from substantially lower charge-offs,
smaller increases in expected loss rates, and slower growth in the
portfolio. The three most important factors impacting the expected
loss rates on performing loans are recent actual loss performance,
changes in mix of the portfolio tenure, and a seasonality
factor.
Net charge-offs for the quarter decreased $21.6 million, from
$64.4 million in the first quarter of fiscal 2023 to $42.8 million
in the first quarter of fiscal 2024. Net charge-offs as a
percentage of average net loan receivables on an annualized basis
decreased to 16.9% in the first quarter of fiscal 2024 from 22.3%
in the first quarter of fiscal 2023.
Accounts 61 days or more past due decreased to 5.6% on a recency
basis at June 30, 2023, compared to 6.9% at June 30, 2022. Our
allowance for credit losses as a percent of net loans receivable
was 12.7% at June 30, 2023, compared to 13.0% at June 30, 2022.
We experienced significant improvement in recency delinquency on
accounts at least 90 days past due, improving from 4.1% at June 30,
2022, to 3.5% at June 30, 2023. Recency delinquency for accounts
0-89 days past due also improved from 23.0% at June 30, 2022, to
20.2% at June 30, 2023.
The table below is updated to use the customer tenure-based
methodology that aligns with our CECL methodology. After
experiencing rapid portfolio growth during fiscal years 2019 and
2020, primarily in new customers, our gross loan balance
experienced pandemic related declines in fiscal 2021 before
rebounding during fiscal 2022. Over the last nine months we have
tightened our lending to new customers substantially. The tables
below illustrate the changes in the portfolio weighting.
Gross Loan Balance By Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
Total
06/30/2018
$319,827,964
$742,845,987
$1,062,673,951
06/30/2019
$429,461,205
$793,297,330
$1,222,758,535
06/30/2020
$355,437,073
$712,516,701
$1,067,953,773
06/30/2021
$382,753,073
$840,444,842
$1,223,197,915
06/30/2022
$522,860,576
$1,119,072,168
$1,641,932,744
06/30/2023
$342,360,417
$1,055,724,428
$1,398,084,846
Year-Over-Year Growth
(Decline) in Gross Loan Balance by Customer Tenure at
Origination
12 Month Period Ended
Less Than 2 Years
More Than 2 Years
Total
06/30/2018
$45,940,588
$35,035,681
$80,976,269
06/30/2019
$109,633,241
$50,451,343
$160,084,584
06/30/2020
$(74,024,133)
$(80,780,629)
$(154,804,762)
06/30/2021
$27,316,000
$127,928,141
$155,244,141
06/30/2022
$136,525,752
$282,209,077
$418,734,829
06/30/2023
$(180,627,987)
$(63,219,911)
$(243,847,898)
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
06/30/2018
30.1%
69.9%
06/30/2019
35.1%
64.9%
06/30/2020
33.3%
66.7%
06/30/2021
31.3%
68.7%
06/30/2022
31.8%
68.2%
06/30/2023
24.5%
75.5%
General and administrative (“G&A”) expenses decreased $3.5
million, or 4.9%, to $68.13 million in the first quarter of fiscal
2024 compared to $71.65 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
increased from 45.4% during the first quarter of fiscal 2023 to
48.9% during the first quarter of fiscal 2024. G&A expenses per
average open branch decreased by 3.8% when comparing the first
quarter of fiscal 2024 to the first quarter fiscal 2023.
Personnel expense decreased $3.4 million, or 7.5%, during the
first quarter of fiscal 2024 as compared to the first quarter of
fiscal 2023. Salary expense increased approximately $1.1 million,
or 3.6%, in the quarter ended June 30, 2023, compared to the
quarter ended June 30, 2022. Our headcount as of June 30, 2023,
decreased 5.3% compared to June 30, 2022, which offsets a portion
of the salary expense increase. Benefit expense decreased
approximately $1.7 million, or 18.4%, when comparing the quarterly
periods ended June 30, 2023 and 2022. Incentive expense decreased
$3.3 million, or 34.2%, in the first quarter of fiscal 2024
compared to the first quarter of fiscal 2023. The decrease in
incentive expense is mostly due to a decrease in share-based
compensation. Additionally, on July 1, 2022, we increased base
wages for our financial service representatives to a minimum of
approximately $15 an hour and eliminated the monthly bonus for the
same position.
Occupancy and equipment expense decreased $0.6 million, or 4.6%,
when comparing the quarterly periods ended June 30, 2023 and 2022.
The current year's first quarter includes $0.3 million in expense
related to the merger of branches during the quarter.
Advertising expense increased $0.5 million, or 24.5%, in the
first quarter of fiscal 2024 compared to the first quarter of
fiscal 2023 due to increased spending on customer acquisition
programs.
Interest expense for the quarter ended June 30, 2023, increased
by $1.1 million, or 9.6%, from the corresponding quarter of the
previous year. Interest expense increased due to a 42% increase in
the effective interest rate from 6.0% to 8.5%. The average debt
outstanding decreased from $741.7 million to $593.2 million when
comparing the quarters ended June 30, 2023 and 2022. The Company’s
debt to equity ratio decreased to 1.5:1 at June 30, 2023, compared
to 2.2:1 at June 30, 2022. As of June 30, 2023, the Company had
$585.4 million of debt outstanding, net of unamortized debt
issuance costs related to the unsecured senior notes payable. The
Company repurchased and canceled $2.0 million of its previously
issued bonds for a purchase price of $1.5 million during the
quarter.
Other key return ratios for the first quarter of fiscal 2024
included a 3.3% return on average assets and a return on average
equity of 10.7% (both on a trailing twelve-month basis).
There were no repurchases of common stock during the first
quarter of fiscal 2024. The Company repurchased 73,643 shares of
its common stock on the open market at an aggregate purchase price
of approximately $14.3 million during fiscal 2023. This is in
addition to the repurchase of 589,533 shares in fiscal 2022 at an
aggregate purchase price of approximately $111.1 million. The
Company had approximately 5.8 million common shares outstanding,
excluding approximately 462,500 unvested restricted shares, as of
June 30, 2023.
About World Acceptance Corporation (World Finance)
Founded in 1962, World Acceptance Corporation (NASDAQ: WRLD), is
a people-focused finance company that provides personal installment
loan solutions and personal tax preparation and filing services to
over one million customers each year. Headquartered in Greenville,
South Carolina, the Company operates more than 1,000
community-based World Finance branches across 16 states. The
Company primarily serves a segment of the population that does not
have ready access to credit; however, unlike many other lenders in
this segment, we strive to work with our customers to understand
their broader financial pictures, ensure they have the ability and
stability to make payments, and help them achieve their financial
goals. For more information, visit www.loansbyworld.com.
First 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://event.choruscall.com/mediaframe/webcast.html?webcastid=trwLtcF4.
The call will be available for replay on the Internet for
approximately 30 days.
During the conference call, the Company may discuss and answer
questions concerning business and financial developments and trends
that have occurred after quarter-end. The Company’s responses to
questions, as well as other matters discussed during the conference
call, may contain or constitute information that has not been
disclosed previously.
Cautionary Note Regarding Forward-looking Information
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 current
expectations or beliefs concerning future events. Statements other
than those of historical fact, as well as those identified by words
such as “anticipate,” “estimate,” intend,” “plan,” “expect,”
“project,” “believe,” “may,” “will,” “should,” “would,” “could,”
“probable” and any variation of the foregoing and similar
expressions are forward-looking statements. Such forward-looking
statements are inherently subject to risks and uncertainties. The
Company’s actual results and financial condition may differ
materially from those indicated in the forward-looking statements.
Therefore, you should not rely on any of these forward-looking
statements. Important 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; changes in the U.S. tax code; the nature and scope
of regulatory authority, particularly discretionary authority, that
may be exercised by regulators, including, but not limited to, U.S.
Consumer Financial Protection Bureau, and individual state
regulators having jurisdiction over the Company; the unpredictable
nature of regulatory proceedings and litigation; employee
misconduct or misconduct by third parties; uncertainties associated
with management turnover and the effective succession of senior
management; media and public characterization of consumer
installment loans; labor unrest; the impact of changes in
accounting rules and regulations, or their interpretation or
application, which could materially and adversely affect the
Company’s reported consolidated financial statements or necessitate
material delays or changes in the issuance of the Company’s audited
consolidated financial statements; the Company's assessment of its
internal control over financial reporting; changes in interest
rates; the impact of inflation; risks relating to the acquisition
or sale of assets or businesses or other strategic initiatives,
including increased loan delinquencies or net charge-offs, the loss
of key personnel, integration or migration issues, the failure to
achieve anticipated synergies, increased costs of servicing,
incomplete records, and retention of customers; risks inherent in
making loans, including repayment risks and value of collateral;
cybersecurity threats or incidents, including the potential or
actual misappropriation of assets or sensitive information,
corruption of data or operational disruption and the cost of the
associated response thereto; our dependence on debt and the
potential impact of limitations in the Company’s amended revolving
credit facility or other impacts on the Company's ability to borrow
money on favorable terms, or at all; the timing and amount of
revenues that may be recognized by the Company; changes in current
revenue and expense trends (including trends affecting delinquency
and charge-offs); the impact of extreme weather events and natural
disasters; 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, 2023, as
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
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited and in thousands,
except per share amounts)
Three months ended June 30,
2023
2022
Revenues:
Interest and fee income
$
116,619
$
130,205
Insurance and other income, net
22,705
27,713
Total revenues
139,324
157,918
Expenses:
Provision for credit losses
46,602
85,822
General and administrative expenses:
Personnel
41,792
45,178
Occupancy and equipment
12,620
13,235
Advertising
2,750
2,208
Amortization of intangible assets
1,069
1,132
Other
9,894
9,897
Total general and administrative
expenses
68,125
71,650
Interest expense
12,242
11,174
Total expenses
126,969
168,646
Income (loss) before income taxes
12,355
(10,728
)
Income tax expense (benefit)
2,816
(2,162
)
Net income (loss)
$
9,539
$
(8,566
)
Net income (loss) per common share,
diluted
$
1.62
$
(1.49
)
Weighted average diluted shares
outstanding
5,891
5,741
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
June 30, 2023
March 31, 2023
June 30, 2022
ASSETS
Cash and cash equivalents
$
15,989
$
16,509
$
13,303
Gross loans receivable
1,397,966
1,390,016
1,641,798
Less:
Unearned interest, insurance and fees
(379,967
)
(376,675
)
(447,290
)
Allowance for credit losses
(129,343
)
(125,553
)
(155,651
)
Loans receivable, net
888,656
887,788
1,038,857
Operating lease right-of-use assets,
net
79,462
81,289
86,224
Finance lease right-of-use assets, net
—
—
505
Property and equipment, net
23,856
23,926
24,164
Deferred income taxes, net
43,272
41,722
46,596
Other assets, net
41,148
43,423
41,999
Goodwill
7,371
7,371
7,371
Intangible assets, net
14,220
15,291
18,839
Total assets
$
1,113,974
$
1,117,319
$
1,277,858
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
299,776
$
307,911
$
481,393
Senior unsecured notes payable, net
285,620
287,353
295,645
Income taxes payable
3,812
2,533
7,061
Operating lease liability
81,989
83,735
88,304
Finance lease liability
—
—
46
Accounts payable and accrued expenses
45,889
50,560
52,926
Total liabilities
717,086
732,092
925,375
Shareholders' equity
396,888
385,227
352,483
Total liabilities and shareholders'
equity
$
1,113,974
$
1,117,319
$
1,277,858
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SELECTED CONSOLIDATED
STATISTICS
(unaudited and in thousands,
except percentages and branches)
Three months ended June 30,
2023
2022
Gross loans receivable
$
1,397,966
$
1,641,798
Average gross loans receivable (1)
1,388,662
1,575,548
Net loans receivable (2)
1,017,999
1,194,508
Average net loans receivable (3)
1,013,007
1,152,981
Expenses as a percentage of total
revenue:
Provision for credit losses
33.4
%
54.3
%
General and administrative
48.9
%
45.4
%
Interest expense
8.8
%
7.1
%
Operating income as a % of total revenue
(4)
17.7
%
0.3
%
Loan volume (5)
721,234
932,379
Net charge-offs as percent of average net
loans receivable on an annualized basis
16.9
%
22.3
%
Return on average assets (trailing 12
months)
3.3
%
2.5
%
Return on average equity (trailing 12
months)
10.7
%
7.5
%
Branches opened or acquired (merged or
closed), net
(18
)
(21
)
Branches open (at period end)
1,055
1,146
_______________________________________________________
(1) Average gross loans receivable is determined by averaging
month-end gross loans receivable over the indicated period,
excluding tax advances. (2) Net loans receivable is defined as
gross loans receivable less unearned interest and deferred fees.
(3) Average net loans receivable is determined by averaging
month-end gross loans receivable less unearned interest and
deferred fees over the indicated period, excluding tax advances.
(4) Operating income is computed as total revenues less provision
for credit losses and general and administrative expenses. (5) Loan
volume includes all loan balances originated by the Company. It
does not include loans purchased through acquisitions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230721169872/en/
John L. Calmes, Jr. Executive VP, Chief Financial & Strategy
Officer, and Treasurer (864) 298-9800
Grafico Azioni World Acceptance (NASDAQ:WRLD)
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