Third quarter highlights:
- Net income of $14.5 million, a $20.8 million increase from a
$6.3 million loss in same quarter prior year
- Net income per diluted share of $2.25, a $3.11 increase from an
$0.87 per share loss in same quarter prior year
- Loans outstanding of $1.26 billion, a 7.9% decrease from
December 31, 2019, but a 14.0% sequential increase from the end of
the prior quarter
- Total revenues of $130.9 million, a 10.9% decrease from the
same quarter prior year but a 5.2% sequential increase from the
prior quarter
- Significant decrease in percentage of accounts 61 days or more
past due on a recency basis from same quarter prior year
- Cash flow from operating activities of $217.8 million and free
cash flow of $131.0 million, both over the last twelve months.
World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its third fiscal quarter and nine months
ended December 31, 2020.
Portfolio results
Third quarter of fiscal 2021 results reflect the increase in
loan demand and improved operating environment compared to the
early months of the COVID-19 pandemic. Gross loans outstanding
decreased to $1.26 billion as of December 31, 2020, a 7.9% decrease
from the $1.37 billion of gross loans outstanding as of December
31, 2019. This is compared to a 9.0% increase as of quarter ended
December 31, 2019, when compared with the quarter ended December
31, 2018. Gross loans increased $155.2 million, or 14.0%,
sequentially over the prior quarter as customer demand stabilized,
representing the largest gross loan increase during a third quarter
in a decade.
Our customer base decreased by 18.3% year-over-year as of
December 31, 2020, compared to 7.2% growth for the comparable
period ended December 31, 2019. Excluding the direct impact of
portfolio acquisitions, the customer base decreased 18.5%
year-over-year as of December 31, 2020, compared to 8.9% growth for
the comparable period ended December 31, 2019. During the quarter
ended December 31, 2020, the number of unique borrowers in the
portfolio increased by 8.4% compared to an increase of 4.3% during
the quarter ended December 31, 2019.
The following table includes the change in the number of loan
originations by customer type for the following comparative
quarterly periods:
Q3 FY 2021 vs. Q3 FY 2020
Q3 FY 2020 vs. Q3 FY 2019
Q2 FY 2021 vs. Q2 FY 2020
New Customers
(27.3)%
3.9%
(46.9)%
Former Customers
3.5%
13.9%
2.3%
Refinance Customers
(21.6)%
6.4%
(19.7)%
Refinance loan volume is in-line with the 18.3% reduction in the
customer base year-over-year
As of December 31, 2020, we had 1,230 branches open. For
branches open throughout both periods, same store gross loans
decreased 7.6% in the twelve months ended December 31, 2020,
compared to an 8.2% increase for the twelve-month period ended
December 31, 2019. For branches open throughout both periods, the
customer base over the twelve-month period ended December 31, 2020,
decreased 18.0% compared to a 5.4% increase for the twelve months
ended December 31, 2019.
Three-month financial results
Net income for the third quarter of fiscal 2021 increased by
$20.8 million to $14.5 million compared to a loss of $6.3 million
for the same quarter of the prior year. Net income per diluted
share increased to $2.25 per share in the third quarter of fiscal
2021 compared to a loss of $0.87 per share for the same quarter of
the prior year (which was negatively impacted by an $8 million
accrual related to the investigation into our Mexico
operations).
Earnings per share for the quarter benefited from our share
repurchase program. The Company repurchased 238,452 shares of its
common stock on the open market at an aggregate purchase price of
approximately $26.2 million during the third quarter of fiscal
2021. This follows a repurchase of 786,418 shares in the first half
of fiscal 2021 at an aggregate purchase price of approximately
$62.7 million and the repurchase of 1,520,679 shares in fiscal 2020
at an aggregate purchase price of approximately $197.4 million. The
Company had approximately 6.2 million common shares outstanding
excluding approximately 0.6 million unvested restricted shares as
of December 31, 2020.
Total revenues for the third quarter of fiscal 2021 decreased to
$130.9 million, a 10.9% decrease from the $147.0 million reported
for the same quarter of the prior year. The revenues from the 1,222
branches open throughout both quarterly periods (revenue from
comparable branches) decreased by 8.2%. Interest and fee income
declined 11.8%, from $130.2 million in the third quarter of fiscal
2020 to $114.9 million in the third quarter of fiscal 2021,
primarily due to a decrease in average earning loans. Insurance and
other income decreased by 4.2% to $16.1 million in the third
quarter of fiscal 2021 compared to $16.8 million in the third
quarter of fiscal 2020. Sales of our motor club product increased
by $1.3 million as we expanded the number of states in which we
offer the product. Insurance revenue decreased due to lower loan
volume during the third quarter of fiscal 2021.
Accounts 61 days or more past due decreased to 5.2% on a recency
basis at December 31, 2020, compared to 7.0% at December 31, 2019.
Total delinquency on a recency basis decreased to 8.9% at December
31, 2020, compared to 10.9% at December 31, 2019. Our allowance for
credit losses compared to net loans was 12.2% at December 31, 2020,
compared to 11.2% at December 31, 2019.
On April 1, 2020, the Company replaced its incurred loss
methodology with a current expected credit loss ("CECL")
methodology to accrue for expected losses. The provision for credit
losses decreased $26.4 million, or 47.7%, to $28.9 million from
$55.2 million when comparing the third quarter of fiscal 2021 to
the third quarter of fiscal 2020. The provision decreased during
the quarter due primarily to an $18.6 million decrease in net
charge-offs as well as an improvement in delinquency. Net
charge-offs as a percentage of average net loans on an annualized
basis decreased from 18.1% in the third quarter of fiscal 2020 to
11.6% in the third quarter of fiscal 2021. The charge-off rate
during the quarter benefited from the reduced number of lower
tenured customers in the portfolio as of September 30, 2020. Loans
that were 90 days past due on a recency basis increased $7.4
million during the quarter compared to an $11.4 million increase in
the third fiscal quarter of the prior year. We are experiencing
lower losses on loans that were in the portfolio as of April 1,
2020, than initially predicted under our CECL methodology through
December 31, 2020. As a result of this positive performance and
additional federal stimulus announced in December, we have
decreased our expected future credit losses by approximately $6.5
million during the quarter. However, due to the ongoing uncertainty
created by the pandemic, we have maintained the overall allowance
for credit loss at the high end of the calculated range of expected
losses as of December 31, 2020.
The table below is updated to use the customer tenure based
methodology that aligns with our CECL methodology. After
experiencing rapid growth of the portfolio during the prior two
years, primarily in new customers, the gross loan balance declined
in the first nine months of fiscal 2021 as a result of the ongoing
pandemic and its effect on the overall economy. The tables below
illustrate the changes in the weighting within the portfolio as
well as the relative impact on charge-offs within the vintages over
the last five years.
Gross Loan Balance By Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
Total
12/31/2015
$331,120,618
$793,079,740
$1,124,200,358
12/31/2016
$302,649,934
$762,474,846
$1,065,124,780
12/31/2017
$336,582,487
$790,836,894
$1,127,419,381
12/31/2018
$426,884,909
$832,020,730
$1,258,905,639
12/31/2019
$489,940,306
$882,877,242
$1,372,817,549
12/31/2020
$413,509,916
$851,073,804
$1,264,583,720
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
12/31/2015
$(27,513,624)
$(11,520,082)
$(39,033,706)
12/31/2016
$(28,470,684)
$(30,604,893)
$(59,075,578)
12/31/2017
$33,932,553
$28,362,048
$62,294,601
12/31/2018
$90,302,422
$41,183,836
$131,486,258
12/31/2019
$63,055,398
$50,856,512
$113,911,910
12/31/2020
$(76,430,390)
$(31,803,439)
$(108,233,829)
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
12/31/2015
29.5%
70.5%
12/31/2016
28.4%
71.6%
12/31/2017
29.9%
70.1%
12/31/2018
33.9%
66.1%
12/31/2019
35.7%
64.3%
12/31/2020
32.7%
67.3%
The table below includes the charge-off rate of each vintage
(the actual gross charge-off balance in the subsequent twelve
months divided by the starting gross loan balance) indexed to the
December 31, 2016, vintage.
Actual Gross Charge-off Rate
During Following 12 Months; Indexed to 12/31/2016 Vintage
12 Months Beginning
Less Than 2 Years
More Than 2 Years
Total
12/31/2015
1.91
1.01
1.28
12/31/2016
1.52
0.80
1.00
12/31/2017
1.58
0.76
1.00
12/31/2018
1.73
0.77
1.09
12/31/2019
1.71
0.77
1.10
The increase in overall charge-off rate over the last twelve
months is primarily due to the elevated weighting of the lower
tenure portion of the portfolio as of December 31, 2019, while the
charge-off rates within the tenure buckets are within historical
norms. The 12 month charge-off rates remain elevated despite the
lower charge-off rates experienced during Q2 and Q3 of fiscal 2021
due to elevated loss rates during Q4 of fiscal 2020 and Q1 of
fiscal 2021. We continue to expect the long-term value of our newly
added customers to exceed our investment return threshold.
General and administrative (“G&A”) expenses decreased $12.7
million, or 14.0%, to $77.9 million in the third quarter of fiscal
2021 compared to $90.6 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 61.6% during the third quarter of fiscal 2020 to
59.5% during the third quarter of fiscal 2021. G&A expenses per
average open branch decreased by 13.6% when comparing Q3 fiscal
2021 to Q3 fiscal 2020.
Personnel expense decreased $2.7 million, or 5.4%, during the
third quarter of fiscal 2021 as compared to the third quarter of
fiscal 2020. Salary expense decreased approximately $1.9 million,
or 6.1%, when comparing the two quarterly periods ended December
31, 2020 and 2019. Our headcount as of December 31, 2020, decreased
10.4% compared to December 31, 2019. Benefit expense increased
approximately $0.5 million, or 5.2%, when comparing the quarterly
periods ended December 31, 2020 and 2019. Incentive expense
decreased $1.6 million in Q3 fiscal 2021 compared to Q3 fiscal 2020
mostly due to a decrease in share-based compensation.
Occupancy and equipment expense increased $1.5 million, or
11.2%. Occupancy expense was negatively impacted by a $2.1 million
write down of signage as a result of rebranding our branch offices
during the third quarter of fiscal 2021.
Advertising expense decreased $1.5 million in the third quarter
of fiscal 2021 compared to the third quarter of fiscal 2020. The
Company anticipated lower demand as a result of the economic
effects of COVID-19 during the quarter and reduced marketing spend
accordingly.
Interest expense for the quarter ended December 31, 2020,
increased by $0.2 million, or 2.4%, from the corresponding quarter
of the previous year. The increase in interest expense is due to a
17.1% increase in the effective interest rate from 5.2% to 6.1%.
The average debt outstanding decreased from $542.6 million to
$475.7 million when comparing the quarters ended December 31, 2019
and 2020. The Company’s debt to equity ratio remained flat at 1.5:1
at December 31, 2020, compared to December 31, 2019. The Company
had outstanding debt of $539.6 million as of December 31, 2020.
Other key return ratios for the third quarter of fiscal 2021
included a 6.6% return on average assets and a return on average
equity of 17.4% (both on a trailing twelve-month basis).
Nine-month results
Net income for the nine-months ended December 31, 2020,
increased $38.5 million to $43.4 million compared to $4.9 million
for the same period of the prior year. This resulted in net income
of $6.44 per diluted share for the nine months ended December 31,
2020, compared to $0.59 per diluted share in the prior year period.
Total revenues for the first nine months of fiscal 2021 decreased
11.2% to $379.3 million compared to $427.0 million during the
corresponding period of the previous year. Annualized net
charge-offs as a percent of average net loans decreased from 17.1%
during the first nine months of fiscal 2020 to 14.7% for the first
nine-months of fiscal 2021.
Non-GAAP financial measures
From time-to-time the Company uses certain financial measures
derived on a basis other than generally accepted accounting
principles (“GAAP”), primarily by excluding from a comparable GAAP
measure certain items the Company does not consider to be
representative of its actual operating performance. Such financial
measures qualify as “non-GAAP financial measures” as defined in SEC
rules. The Company uses these non-GAAP financial measures in
operating its business because management believes they are less
susceptible to variances in actual operating performance that can
result from the excluded items and other infrequent charges. The
Company may present these financial measures to investors because
management believes they are useful to investors in evaluating the
primary factors that drive the Company’s core operating performance
and provide greater transparency into the Company’s results of
operations. However, items that are excluded and other adjustments
and assumptions that are made in calculating these non-GAAP
financial measures are significant components to understanding and
assessing the Company’s financial performance. Such non-GAAP
financial measures should be evaluated in conjunction with, and are
not a substitute for, the Company’s GAAP financial measures.
Further, because these non-GAAP financial measures are not
determined in accordance with GAAP and are, thus, susceptible to
varying calculations, any non-GAAP financial measures, as
presented, may not be comparable to other similarly titled measures
of other companies.
For purposes of its internal liquidity assessments, the Company
considers free cash flow. The Company defines free cash flow as
cash flow from operating activities less purchases of property and
equipment and net funding/repayment of loans, which are considered
to be operating in nature by the Company but are included in cash
flow from investing activities.
Free cash flow is commonly used by investors as an additional
measure of cash generated by business operations that may be used
to repay debt, may be available to invest in future growth through
new business development activities or acquisitions, or repurchase
stock. These metrics can also be used to evaluate the Company’s
ability to generate cash flow from business operations and the
impact that this cash flow has on the Company’s liquidity. However,
free cash flow has limitations as an analytical tool and should not
be considered in isolation or as a substitute for cash flow from
operating activities or other income statement data prepared in
accordance with GAAP. The following table reconciles cash flow from
operating activities to free cash flow:
Twelve months ended
December 31,
2020
Net cash provided by operating activities
(1)
$217,808,438
Net cash used in investing activities:
Increase in loans receivable, net
(74,628,950)
Purchases of property and equipment
(12,226,180)
Free cash flow
130,953,308
(1) As previously disclosed, the Company
paid $21.7 million in disgorgement, prejudgment interest, and civil
penalties during the second quarter of fiscal 2021 to resolve an
investigation into its former Mexico operations.
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 1,200
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, but 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. In its last fiscal year, the Company helped more than
225,000 individuals improve their credit score out of subprime and
deep subprime. 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://www.webcaster4.com/Webcast/Page/1118/39733. The call will
be available for replay on the Internet for approximately 30
days.
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: the ongoing
impact of the COVID-19 pandemic; 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, the
Securities and Exchange Commission (SEC), Department of Justice,
U.S. Consumer Financial Protection Bureau, and individual state
regulators having jurisdiction over the Company; the unpredictable
nature of regulatory proceedings and litigation; uncertainties
associated with management turnover and the effective succession of
senior management; 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; risks relating to
expansion; risks inherent in making loans, including repayment
risks and value of collateral; cybersecurity threats, including the
potential misappropriation of assets or sensitive information,
corruption of data or operational disruption; 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); 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, 2020, and
quarterly report on Form 10-Q for the fiscal quarter ended
September 30, 2020, each 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,
2020
2019
2020
2019
Revenues:
Interest and fee income
$
114,886
$
130,224
$
333,632
$
379,226
Insurance income, net and other income
16,060
16,772
45,621
47,786
Total revenues
130,946
146,996
379,253
427,012
Expenses:
Provision for credit losses
28,857
55,219
80,608
149,479
General and administrative expenses:
Personnel
46,700
49,375
138,155
151,446
Occupancy and equipment
15,058
13,544
41,755
40,455
Advertising
6,660
8,181
14,528
20,561
Amortization of intangible assets
1,377
1,391
4,045
3,604
Other
8,079
18,066
26,293
34,721
Total general and administrative
expenses
77,874
90,557
224,776
250,787
Interest expense
7,305
7,130
18,759
17,861
Total expenses
114,036
152,906
324,143
418,127
Income (loss) before income taxes
16,910
(5,910
)
55,110
8,885
Income taxes
2,418
356
11,711
4,031
Net income (loss)
$
14,492
$
(6,266
)
$
43,399
$
4,854
Net income (loss) per common share,
diluted
$
2.25
$
(0.87
)
$
6.44
$
0.59
Weighted average diluted shares
outstanding
6,452
7,221
6,744
8,163
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited and in
thousands)
December 31, 2020
March 31, 2020
December 31, 2019
ASSETS
Cash and cash equivalents
$
9,691
$
11,619
$
12,039
Gross loans receivable
1,264,530
1,209,871
1,372,769
Less:
Unearned interest, insurance and fees
(335,056
)
(308,980
)
(366,034
)
Allowance for credit losses
(113,467
)
(96,488
)
(113,070
)
Loans receivable, net
816,007
804,403
893,665
Right-of-use asset
93,144
101,687
122,841
Property and equipment, net
26,382
24,761
28,215
Deferred income taxes, net
26,507
23,258
28,912
Other assets, net
28,897
28,548
31,889
Goodwill
7,371
7,371
7,240
Intangible assets, net
24,886
24,448
24,825
Assets held for sale
1,144
3,991
—
Total assets
$
1,034,029
$
1,030,086
$
1,149,626
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
539,600
$
451,100
$
583,731
Income taxes payable
853
4,965
9,288
Lease liability
94,385
102,759
123,668
Accounts payable and accrued expenses
40,329
59,299
42,932
Total liabilities
675,167
618,123
759,619
Shareholders' equity
358,862
411,963
390,007
Total liabilities and shareholders'
equity
$
1,034,029
$
1,030,086
$
1,149,626
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,
2020
2019
2020
2019
Gross loans receivable
$
1,264,530
$
1,372,769
$
1,264,530
$
1,372,769
Average gross loans receivable (1)
1,175,251
1,310,329
1,133,065
1,245,314
Net loans receivable (2)
929,474
1,006,735
929,474
1,006,735
Average net loans receivable (3)
865,480
963,664
839,491
917,938
Expenses as a percentage of total
revenue:
Provision for credit losses
22.0
%
37.6
%
21.3
%
35.0
%
General and administrative
59.5
%
61.6
%
59.3
%
58.7
%
Interest expense
5.6
%
4.9
%
4.9
%
4.2
%
Operating income as a % of total revenue
(4)
18.5
%
0.8
%
19.5
%
6.3
%
Loan volume (5)
782,995
857,976
1,893,502
2,339,899
Net charge-offs as percent of average net
loans receivable on an annualized basis
11.6
%
18.1
%
14.7
%
17.1
%
Return on average assets (trailing 12
months)
6.6
%
4.2
%
6.6
%
4.2
%
Return on average equity (trailing 12
months)
17.4
%
8.7
%
17.4
%
8.7
%
Branches opened or acquired (merged or
closed), net
(2
)
6
(13
)
47
Branches open (at period end)
1,230
1,240
1,230
1,240
_______________________________________________________
(1) Average gross loans receivable have
been 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 have been
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/20210122005034/en/
John L. Calmes, Jr. Chief Financial and Strategy Officer (864)
298-9800
World Acceptance (NASDAQ:WRLD)
Historical Stock Chart
From Aug 2024 to Sep 2024
World Acceptance (NASDAQ:WRLD)
Historical Stock Chart
From Sep 2023 to Sep 2024