World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its first fiscal quarter 2022 and three
months ended June 30, 2021.
First quarter highlights:
- Loans outstanding of $1.22 billion, a 14.5% increase from the
same quarter prior year
- Total revenues of $129.7 million, a 4.7% increase from the same
quarter prior year
- Net income of $15.8 million, a $0.3 million increase from $15.5
million in same quarter prior year
- Net income per diluted share of $2.44, a $0.20 increase from
$2.24 per share in same quarter prior year
- Significant decrease in net charge-off rate and delinquency
from same quarter prior year
- Cash flow from operating activities of $197.2 million over the
last twelve months
Portfolio results
Gross loans outstanding increased to $1.22 billion as of June
30, 2021, a 14.5% increase from the $1.07 billion of gross loans
outstanding as of June 30, 2020. During the quarter, gross loans
outstanding increased 10.7%, or $118.4 million, the largest growth
and rate of growth during the first quarter in over a decade.
During the quarter, we saw an increase in borrowing from our
current and former customers as the economy continued to reopen and
federal economic stimulus waned. The increase in borrowing from our
longer tenured customers should benefit revenue and overall
portfolio credit quality in future quarters as tenured customers
tend to outperform new customers. While new customer originations
still lag pre-pandemic levels, we have seen increased demand from
new customers each month compared to last year.
Our customer base decreased by 6.5% year-over-year as of June
30, 2021, compared to a 14.4% decrease for the comparable period
ended June 30, 2020. During the quarter ended June 30, 2021, the
number of unique borrowers in the portfolio decreased by 1.0%
compared to a decrease of 14.0% during the quarter ended June 30,
2020. As a result of the expanded emphasis on our larger loan
offerings, the average gross loan balance increased 12.3% during
the first quarter to $1,670, a 23.0% increase from the period ended
June 30, 2020.
The following table includes the change in the number of loan
originations by customer type for the following comparative
quarterly periods:
Q1 FY 2022 vs. Q1 FY 2021
Q1 FY 2021 vs. Q1 FY 2020
Q1 FY 2022 vs. Q1 FY 2020
New Customers
151.8%
(74.1)%
(34.8)%
Former Customers
111.6%
(58.1)%
(11.3)%
Refinance Customers
16.4%
(34.2)%
(23.4)%
To provide more clarity on the change in loan demand throughout
the most recent quarter, the following table reflects the change in
the number of loan originations by customer type by month compared
to Q1 FY2020, the most recent first quarter prior to the start of
the COVID-19 pandemic.
April 2021 vs April 2019
May 2021 vs. May 2019
June 2021 vs June 2019
Q1 FY 2022 vs. Q1 FY 2020
New Customers
(50.3)%
(38.6)%
(20.2)%
(34.8)%
Former Customers
(20.0)%
(28.0)%
16.6%
(11.3)%
Refinance Customers
(29.4)%
(26.7)%
(13.2)%
(23.4)%
As of June 30, 2021, we had 1,205 branches open. For branches
open throughout both periods, same store gross loans increased
16.4% in the twelve months ended June 30, 2021, compared to a 13.1%
decrease for the twelve-month period ended June 30, 2020. For
branches open throughout both periods, the customer base over the
twelve-month period ended June 30, 2021, decreased 5.1% compared to
a 15.3% decrease for the twelve months ended June 30, 2020.
Three-month financial results
Net income for the first quarter of fiscal 2022 increased by
$0.3 million to $15.8 million compared to $15.5 million for the
same quarter of the prior year. Net income per diluted share
increased to $2.44 per share in the first quarter of fiscal 2022
compared to $2.24 per share for the same quarter of the prior
year.
Earnings per share for the quarter benefited from our share
repurchase program. The Company repurchased 134,249 shares of its
common stock on the open market at an aggregate purchase price of
approximately $21.1 million during the first quarter of fiscal
2022. This follows a repurchase of 1,129,875 shares in fiscal 2021
at an aggregate purchase price of approximately $102.4 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 6.1 million common shares outstanding excluding
approximately 0.6 million unvested restricted shares as of June 30,
2021. As of June 30, 2021, including the benefit of first quarter
earnings, the Company has the ability, subject to board approval,
to repurchase approximately $103.9 million of shares under the
terms of its revolving credit facility.
Total revenues for the first quarter of fiscal 2022 increased to
$129.7 million, a 4.7% increase from the $123.9 million reported
for the same quarter of the prior year. The revenues from the 1,205
branches open throughout both quarterly periods (revenue from
comparable branches) increased by 16.0%. Interest and fee income
declined 0.6%, from $109.9 million in the first quarter of fiscal
2021 to $109.2 million in the first quarter of fiscal 2022.
Insurance income increased by 20.0% to $12.4 million in the first
quarter of fiscal 2022 compared to $10.3 million in the first
quarter of fiscal 2021. The large loan portfolio increased from
39.5% of the overall portfolio as of June 30, 2020, to 46% as of
June 30, 2021. This resulted in lower interest and fee yields but
higher insurance sales during the first quarter of fiscal 2022.
Other income increased by 120.4% to $8.1 million in the first
quarter of fiscal 2022 compared to $3.7 million in the first
quarter of fiscal 2021. Sales of our motor club product increased
by $2.5 million as we expanded the number of states in which we
offer the product and demand increased quarter over quarter.
Revenue from our tax preparation business increased to $3.3 million
in the first quarter of fiscal 2022 from $1.9 million in the first
quarter of fiscal 2021, or 79.5%. This was largely driven by a
delay in the individual income tax filing season which resulted in
a higher number of tax preparations being completed in the first
quarter of fiscal 2022.
Accounts 61 days or more past due decreased to 4.0% on a recency
basis at June 30, 2021, compared to 5.7% at June 30, 2020. Total
delinquency on a recency basis decreased to 6.7% at June 30, 2021,
compared to 8.3% at June 30, 2020. Our allowance for credit losses
as a percent of net loans receivable was 10.9% at June 30, 2021,
compared to 14.2% at June 30, 2020.
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 increased $4.6 million, or 17.9%, to $30.3 million from
$25.7 million when comparing the first quarter of fiscal 2022 to
the first quarter of fiscal 2021. The provision increased during
the quarter primarily due to significant loan growth during the
quarter. CECL requires expected losses to be accrued at the time of
origination. This increase was offset by a $14.0 million decrease
in net charge-offs. Net charge-offs as a percentage of average net
loans receivable on an annualized basis decreased from 18.3% in the
first quarter of fiscal 2021 to 11.4% in the first quarter of
fiscal 2022. The charge-off rate during the quarter benefited from
the increased average tenure and reduced credit risk of customers
in the portfolio as of March 31, 2021. We are experiencing lower
losses on loans that were in the portfolio as of July 1, 2020, than
initially predicted under our CECL methodology through June 30,
2021.
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 fiscal years 2019
and 2020, primarily in new customers, the gross loan balance
experienced pandemic related declines in fiscal 2021 before
rebounding in the most recent quarter. 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
06/30/2016
$269,135,588
$716,879,243
$986,014,831
06/30/2017
$273,887,376
$707,810,306
$981,697,682
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
$1,067,953,774
06/30/2021
$382,753,073
$840,444,842
$1,223,197,915
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
6/30/2016
$(37,708,655)
$(30,609,452)
$(68,318,107)
6/30/2017
$4,751,788
$(9,068,937)
$(4,317,149)
6/30/2018
$45,940,588
$35,035,681
$80,976,269
6/30/2019
$109,633,241
$50,451,343
$160,084,584
6/30/2020
$(74,024,133)
$(80,780,629)
$(154,804,762)
6/30/2021
$27,316,000
$127,928,141
$155,244,141
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
6/30/2016
27.3%
72.7%
6/30/2017
27.9%
72.1%
6/30/2018
30.1%
69.9%
6/30/2019
35.1%
64.9%
6/30/2020
33.3%
66.7%
6/30/2021
31.3%
68.7%
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
June 30, 2017, vintage.
Actual Gross Charge-off Rate
During Following 12 Months; Indexed to 6/30/2017 Vintage
12 Months Beginning
Less Than 2 Years
More Than 2 Years
Total
6/30/2016
1.87
0.97
1.21
6/30/2017
1.57
0.78
1.00
6/30/2018
1.67
0.78
1.04
6/30/2019
1.79
0.79
1.14
6/30/2020
1.26
0.57
0.80
The decrease in overall charge-off rate over the last twelve
months has been seen across tenure buckets, primarily driven by
stronger performance relating to COVID-19 stimulus and unemployment
benefits. The lower tenure bucket has also benefited from improved
underwriting practices on new borrowers.
General and administrative (“G&A”) expenses increased $1.7
million, or 2.4%, to $73.4 million in the first quarter of fiscal
2022 compared to $71.6 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 57.8% during the first quarter of fiscal 2021 to
56.6% during the first quarter of fiscal 2022. G&A expenses per
average open branch increased by 5.6% when comparing Q1 fiscal 2022
to Q1 fiscal 2021.
Personnel expense increased $1.6 million, or 3.6%, during the
first quarter of fiscal 2022 as compared to the first quarter of
fiscal 2021. Salary expense decreased approximately $1.1 million,
or 3.8%, when comparing the two quarterly periods ended June 30,
2021 and 2020. Our headcount as of June 30, 2021, decreased 10.0%
compared to June 30, 2020. Benefit expense increased approximately
$1.8 million, or 21.8%, when comparing the quarterly periods ended
June 30, 2021 and 2020. Incentive expense increased $2.3 million,
or 24.1%, in Q1 fiscal 2022 compared to Q1 fiscal 2021 due to an
increase in branch level bonuses offset by a decrease in
share-based compensation. The Company deferred $1.3 million more in
payroll related origination costs under ASC 310, when comparing
period over period, due to higher originations during the quarter,
which offset the increase in personnel expense.
Occupancy and equipment expense increased $0.4 million, or 3.2%.
Occupancy expense was negatively impacted by a $0.3 million write
down of signage as a result of rebranding our branch offices during
the first quarter of fiscal 2022.
Advertising expense increased $1.1 million in the first quarter
of fiscal 2022 compared to the first quarter of fiscal 2021. The
Company anticipated an increase in demand during the quarter and
increased marketing spend accordingly.
Other expense decreased $1.3 million in the first quarter of
fiscal 2022 compared to the first quarter of fiscal 2021.
Interest expense for the quarter ended June 30, 2021, decreased
slightly, from the corresponding quarter of the previous year.
Interest expense decreased slightly despite an increase in average
debt outstanding due to a 10.9% decrease in the effective interest
rate from 5.6% to 5.0%. The average debt outstanding increased from
$390.9 million to $420.2 million when comparing the quarters ended
June 30, 2020 and 2021. The Company’s debt to equity ratio
increased to 1.2:1 at June 30, 2021, compared to 0.9:1 at June 30,
2020. The Company had outstanding debt of $467.7 million as of June
30, 2021.
Other key return ratios for the first quarter of fiscal 2022
included a 9.1% return on average assets and a return on average
equity of 23.0% (both on a trailing twelve-month basis).
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.
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://services.choruscall.com/mediaframe/webcast.html?webcastid=JBqPcFE7.
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: the ongoing
impact of the COVID-19 pandemic and the mitigation efforts by
governments and related effects on our financial condition,
business operations and liquidity, our customers, our employees,
and the overall economy; 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; 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; 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, 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); 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, 2021 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,
2021
2020
Revenues:
Interest and fee income
$
109,175
$
109,860
Insurance income, net and other income
20,484
14,006
Total revenues
129,659
123,866
Expenses:
Provision for credit losses
30,266
25,661
General and administrative expenses:
Personnel
46,232
44,622
Occupancy and equipment
13,607
13,182
Advertising
3,760
2,612
Amortization of intangible assets
1,215
1,382
Other
8,537
9,809
Total general and administrative
expenses
73,351
71,607
Interest expense
5,501
5,562
Total expenses
109,118
102,830
Income before income taxes
20,541
21,036
Income taxes
4,770
5,527
Net income
$
15,771
$
15,509
Net income per common share, diluted
$
2.44
$
2.24
Weighted average diluted shares
outstanding
6,456
6,928
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
June 30, 2021
March 31, 2021
June 30, 2020
ASSETS
Cash and cash equivalents
$
8,387
$
15,746
$
9,960
Gross loans receivable
1,223,139
1,104,746
1,067,877
Less:
Unearned interest, insurance and fees
(322,754
)
(279,365
)
(273,593
)
Allowance for credit losses
(97,853
)
(91,722
)
(112,687
)
Loans receivable, net
802,532
733,659
681,597
Right-of-use asset
89,797
90,056
96,579
Property and equipment, net
24,457
26,340
25,369
Deferred income taxes, net
28,782
24,993
28,132
Other assets, net
38,867
31,423
25,594
Goodwill
7,371
7,371
7,371
Intangible assets, net
22,340
23,538
24,052
Assets held for sale
1,144
1,144
3,991
Total assets
$
1,023,677
$
954,270
$
902,645
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
467,700
$
405,008
$
352,206
Income taxes payable
12,407
11,576
7,548
Lease liability
89,872
91,718
97,616
Accounts payable and accrued expenses
48,227
41,040
54,032
Total liabilities
618,206
549,342
511,402
Shareholders' equity
405,471
404,928
391,243
Total liabilities and shareholders'
equity
$
1,023,677
$
954,270
$
902,645
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SELECTED CONSOLIDATED
STATISTICS
(unaudited and in thousands,
except percentages and branches)
Three months ended June 30,
2021
2020
Gross loans receivable
$
1,223,139
$
1,067,877
Average gross loans receivable (1)
1,144,425
1,113,530
Net loans receivable (2)
900,385
794,284
Average net loans receivable (3)
849,175
831,388
Expenses as a percentage of total
revenue:
Provision for credit losses
23.3
%
20.7
%
General and administrative
56.6
%
57.8
%
Interest expense
4.2
%
4.5
%
Operating income as a % of total revenue
(4)
20.1
%
21.5
%
Loan volume (5)
754,209
463,484
Net charge-offs as percent of average net
loans receivable on an annualized basis
11.4
%
18.3
%
Return on average assets (trailing 12
months)
9.1
%
3.4
%
Return on average equity (trailing 12
months)
23.0
%
8.2
%
Branches opened or acquired (merged or
closed), net
—
(3)
Branches open (at period end)
1,205
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/20210721005164/en/
John L. Calmes, Jr. Chief Financial and Strategy Officer (864)
298-9800
World Acceptance (NASDAQ:WRLD)
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