World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its third quarter of fiscal 2024 and nine
months ended December 31, 2023.
Third fiscal quarter highlights
During its third 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 uncertain economic
environment.
Highlights from the third quarter include:
- Net income of $16.7 million
- Diluted net income per share of $2.84
- Recency delinquency on accounts 90+ days past due improved from
4.9% at December 31, 2022, to 3.7% at December 31, 2023
- Total revenues of $137.7 million, including a 180 basis point
yield increase compared to the same quarter in the prior year
Portfolio results
Gross loans outstanding were $1.40 billion as of December 31,
2023, a 9.9% decrease from the $1.55 billion of gross loans
outstanding as of December 31, 2022. During the most recent
quarter, gross loans outstanding increased sequentially 1.5%, or
$21.1 million, from $1.38 billion as of September 30, 2023,
compared to a decrease of 2.8%, or $44.4 million, in the comparable
quarter of the prior year. During the most recent quarter, we saw
an increase in borrowing from new and former customers compared to
the same quarter of fiscal year 2023 as we took incremental steps
to ease the historically stringent underwriting standards
implemented in prior quarters. We also continued to improve the
gross yield to expected loss ratio for all new, former, and
refinance customer originations and 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:
Q3 FY 2024
Q3 FY 2023
Q3 FY 2022
New Customers
$46,768,269
$28,909,629
$104,219,695
Former Customers
$96,582,426
$94,505,522
$134,326,565
Refinance Customers
$600,866,594
$664,382,650
$737,562,906
Our customer base decreased by 2.4% during the twelve-month
period ended December 31, 2023, compared to a decrease of 13.7% for
the comparable period ended December 31, 2022. During the quarter
ended December 31, 2023, the number of unique borrowers in the
portfolio increased by 2.4% compared to a decrease of 4.9% during
the quarter ended December 31, 2022.
As of December 31, 2023, the Company had 1,052 open branches.
For branches open at least twelve months, same store gross loans
decreased 8.2% in the twelve-month period ended December 31, 2023,
compared to an increase of 3.7% for the twelve-month period ended
December 31, 2022. For branches open throughout both periods, the
customer base over the twelve-month period ended December 31, 2023,
decreased 0.8% compared to a decrease of 7.7% for the twelve-month
period ended December 31, 2022.
Three-month financial results
Net income for the third quarter of fiscal 2024 increased to
$16.7 million compared to $5.8 million for the same quarter of the
prior year. Net income per diluted share increased to $2.84 per
share in the third quarter of fiscal 2024 compared to $0.99 per
share for the same quarter of the prior year.
Total revenues for the third quarter of fiscal 2024 decreased to
$137.7 million, a 6.0% decrease from $146.5 million for the same
quarter of the prior year. Interest and fee income declined 6.0%,
from $126.2 million in the third quarter of fiscal 2023 to $118.7
million in the third quarter of fiscal 2024. Insurance income
decreased by 15.9% to $14.5 million in the third quarter of fiscal
2024 compared to $17.2 million in the third quarter of fiscal 2023.
The large loan portfolio decreased from 56.4% of the overall
portfolio as of December 31, 2022, to 55.2% as of December 31,
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 160 basis points for the quarter ended December
31, 2023, relative to the quarter ended March 31, 2023, and 180
basis points relative to the quarter ended December 31, 2022. Other
income increased by 48.6% to $4.6 million in the third quarter of
fiscal 2024 compared to $3.1 million in the third quarter of fiscal
2023.
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 $19.0
million to $40.6 million from $59.6 million when comparing the
third quarter of fiscal 2024 to the third 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 - September 30
$128.9
$155.9
$(27.0)
Change due to Growth
$2.0
$(4.3)
$6.3
$6.3
Change due to Expected Loss Rate on
Performing Loans
$(10.0)
$(7.5)
$(2.5)
$(2.5)
Change due to 90 day past due
$0.2
$0.4
$(0.2)
$(0.2)
Ending Allowance - December 31
$121.1
$144.5
$(23.4)
$3.6
Net Charge-offs
$48.4
$71.0
$(22.6)
$(22.6)
Provision
$40.6
$59.6
$(19.0)
$(19.0)
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
during the quarter.
Net charge-offs for the quarter decreased $22.6 million, from
$71.0 million in the third quarter of fiscal 2023 to $48.4 million
in the third quarter of fiscal 2024. Net charge-offs as a
percentage of average net loan receivables on an annualized basis
decreased to 19.1% in the third quarter of fiscal 2024 from 25.1%
in the third quarter of fiscal 2023.
Accounts 61 days or more past due decreased to 5.8% on a recency
basis at December 31, 2023, compared to 7.4% at December 31, 2022.
Our allowance for credit losses as a percent of net loans
receivable was 11.8% at December 31, 2023, compared to 12.9% at
December 31, 2022. We experienced significant improvement in
recency delinquency on accounts at least 90 days past due,
improving from 4.9% at December 31, 2022, to 3.7% at December 31,
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 eighteen 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
12/31/2018
$426,884,909
$832,020,730
$1,258,905,639
12/31/2019
$489,940,306
$882,877,242
$1,372,817,548
12/31/2020
$413,509,916
$851,073,804
$1,264,583,720
12/31/2021
$527,433,398
$1,078,703,853
$1,606,137,251
12/31/2022
$421,291,725
$1,132,819,599
$1,554,111,324
12/31/2023
$315,059,832
$1,085,605,652
$1,400,665,484
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
12/31/2018
$90,302,422
$41,183,836
$131,486,258
12/31/2019
$63,055,397
$50,856,512
$113,911,909
12/31/2020
$(76,430,390)
$(31,803,438)
$(108,233,828)
12/31/2021
$113,923,482
$227,630,049
$341,553,531
12/31/2022
$(106,141,673)
$54,115,746
$(52,025,927)
12/31/2023
$(106,231,893)
$(47,213,947)
$(153,445,840)
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
12/31/2018
33.9%
66.1%
12/31/2019
35.7%
64.3%
12/31/2020
32.7%
67.3%
12/31/2021
32.8%
67.2%
12/31/2022
27.1%
72.9%
12/31/2023
22.5%
77.5%
General and administrative (“G&A”) expenses increased $0.96
million, or 1.5%, to $65.91 million in the third quarter of fiscal
2024 compared to $64.95 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
increased from 44.3% during the third quarter of fiscal 2023 to
47.8% during the third quarter of fiscal 2024. G&A expenses per
average open branch decreased by 5.4% when comparing the third
quarter of fiscal 2024 to the third quarter fiscal 2023.
Personnel expense decreased $0.8 million, or 2.0%, during the
third quarter of fiscal 2024 as compared to the third quarter of
fiscal 2023. Salary expense totaled $32.0 million for the quarter
ended December 31, 2023, remaining relatively flat compared to the
quarter ended December 31, 2022. Our headcount as of December 31,
2023, decreased 6.9% compared to December 31, 2022. Benefit expense
increased approximately $0.6 million, or 8.1%, when comparing the
quarterly periods ended December 31, 2023 and 2022. Incentive
expense decreased $1.0 million, or 24.5%, in the third quarter of
fiscal 2024 compared to the third quarter of fiscal 2023.
Occupancy and equipment expense decreased $0.8 million, or 6.5%,
when comparing the quarterly periods ended December 31, 2023 and
2022. The prior year's third quarter includes $0.4 million in
expense related to the merger of branches during the quarter.
Advertising expense increased $2.4 million, or 181.1%, in the
third quarter of fiscal 2024 compared to the third quarter of
fiscal 2023 due to increased spending on customer acquisition
programs.
Interest expense for the quarter ended December 31, 2023,
decreased by $2.4 million, or 16.9%, from the corresponding quarter
of the previous year. Interest expense decreased due to a 22.8%
decrease in average debt outstanding for the quarter offset by a
12.5% increase in the effective interest rate from 7.62% to 8.57%.
The average debt outstanding decreased from $734.3 million to
$567.1 million when comparing the quarters ended December 31, 2023
and 2022. The Company’s debt to equity ratio decreased to 1.4:1 at
December 31, 2023, compared to 2.0:1 at December 31, 2022. As of
December 31, 2023, the Company had $585.0 million of debt
outstanding, net of unamortized debt issuance costs related to the
unsecured senior notes payable. The Company repurchased and
canceled $4.8 million of its previously issued bonds for a purchase
price of $4.1 million during the quarter.
Other key return ratios for the third quarter of fiscal 2024
included a 6.0% return on average assets and a return on average
equity of 17.3% (both on a trailing twelve-month basis).
The Company repurchased 148,765 shares of its common stock on
the open market at an aggregate purchase price of approximately
$17.2 million during the third 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 5.7
million common shares outstanding, excluding approximately 388,500
unvested restricted shares, as of December 31, 2023.
Nine-Month Results
Net income for the nine-months ended December 31, 2023,
increased $45.7 million to $42.3 million compared to a loss of $3.4
million for the same period of the prior year. This resulted in a
net income of $7.17 per diluted share for the nine months ended
December 31, 2023, compared to a net loss of $0.59 per diluted
share in the prior-year period. Total revenues for the first
nine-months of fiscal 2024 decreased 9.2% to $413.9 million,
compared to $455.7 million during the corresponding period of the
previous year due to a decrease in loans outstanding. Annualized
net charge-offs as a percent of average net loans decreased from
23.6% during the first nine-months of fiscal 2023 to 17.4% for the
first nine-months of fiscal 2024.
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.
Third 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=DOmXS8u2.
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
is or 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 December
31,
Nine months ended December
31,
2023
2022
2023
2022
Revenues:
Interest and fee income
$
118,665
$
126,201
$
352,237
$
386,868
Insurance and other income, net
19,084
20,331
61,711
68,841
Total revenues
137,749
146,532
413,948
455,709
Expenses:
Provision for credit losses
40,632
59,609
127,697
214,051
General and administrative expenses:
Personnel
39,890
40,701
120,120
131,174
Occupancy and equipment
12,090
12,932
37,138
39,658
Advertising
3,721
1,324
8,712
4,542
Amortization of intangible assets
1,051
1,115
3,183
3,353
Other
9,157
8,879
27,829
27,569
Total general and administrative
expenses
65,909
64,951
196,982
206,296
Interest expense
11,690
14,070
36,475
38,277
Total expenses
118,231
138,630
361,154
458,624
Income (loss) before income taxes
19,518
7,902
52,794
(2,915
)
Income tax expense
2,853
2,097
10,508
484
Net income (loss)
$
16,665
$
5,805
$
42,286
$
(3,399
)
Net income (loss) per common share,
diluted
$
2.84
$
0.99
$
7.17
$
(0.59
)
Weighted average diluted shares
outstanding
5,860
5,857
5,897
5,743
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS (unaudited and in thousands)
December 31, 2023
March 31, 2023
December 31, 2022
ASSETS
Cash and cash equivalents
$
12,776
$
16,509
$
20,962
Gross loans receivable
1,400,622
1,390,016
1,553,985
Less:
Unearned interest, insurance and fees
(372,311
)
(376,675
)
(431,298
)
Allowance for credit losses
(121,082
)
(125,553
)
(144,539
)
Loans receivable, net
907,229
887,788
978,148
Income taxes receivable
1,717
—
912
Operating lease right-of-use assets,
net
80,049
81,289
83,437
Property and equipment, net
23,196
23,926
24,378
Deferred income taxes, net
37,048
41,722
43,402
Other assets, net
38,045
43,423
41,094
Goodwill
7,371
7,371
7,371
Intangible assets, net
12,107
15,291
16,403
Total assets
$
1,119,538
$
1,117,319
$
1,216,107
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
305,089
$
307,911
$
426,490
Senior unsecured notes payable, net
279,916
287,353
296,050
Income taxes payable
—
2,533
—
Operating lease liability
82,471
83,735
86,010
Accounts payable and accrued expenses
45,043
50,560
48,801
Total liabilities
712,519
732,092
857,351
Shareholders' equity
407,019
385,227
358,756
Total liabilities and shareholders'
equity
$
1,119,538
$
1,117,319
$
1,216,107
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SELECTED CONSOLIDATED
STATISTICS (unaudited and in thousands, except percentages and
branches)
Three months ended December
31,
Nine months ended December
31,
2023
2022
2023
2022
Gross loans receivable
$
1,400,622
$
1,553,985
$
1,400,622
$
1,553,985
Average gross loans receivable (1)
1,383,194
1,562,199
1,388,752
1,585,306
Net loans receivable (2)
1,028,311
1,122,687
1,028,311
1,122,687
Average net loans receivable (3)
1,014,113
1,131,636
1,015,237
1,153,443
Expenses as a percentage of total
revenue:
Provision for credit losses
29.5
%
40.7
%
30.8
%
47.0
%
General and administrative
47.8
%
44.3
%
47.6
%
45.3
%
Interest expense
8.5
%
9.6
%
8.8
%
8.4
%
Operating income as a % of total revenue
(4)
22.7
%
15.0
%
21.6
%
7.8
%
Loan volume (5)
744,193
787,775
2,133,642
2,476,631
Net charge-offs as percent of average net
loans receivable on an annualized basis
19.1
%
25.1
%
17.4
%
23.6
%
Return on average assets (trailing 12
months)
6.0
%
1.2
%
6.0
%
1.2
%
Return on average equity (trailing 12
months)
17.3
%
4.1
%
17.3
%
4.1
%
Branches opened or acquired (merged or
closed), net
(1
)
(20
)
(21
)
(83
)
Branches open (at period end)
1,052
1,084
1,052
1,084
_______________________________________________________
(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/20240119413627/en/
John L. Calmes, Jr. Executive VP, Chief Financial & Strategy
Officer, and Treasurer (864) 298-9800
World Acceptance (NASDAQ:WRLD)
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