World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its second quarter of fiscal 2024 and six
months ended September 30, 2023.
Second fiscal quarter highlights
During its second 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 second quarter include:
- Net income of $16.1 million
- Diluted net income per share of $2.71
- Recency delinquency on accounts 90+ days past due improved from
5.0% at September 30, 2022, to 3.7% at September 30, 2023
- Total revenues of $136.9 million, including a 240 basis point
yield increase compared to the same quarter in the prior year
Portfolio results
Gross loans outstanding were $1.38 billion as of September 30,
2023, a 13.7% decrease from the $1.60 billion of gross loans
outstanding as of September 30, 2022. During the most recent
quarter, gross loans outstanding decreased sequentially 1.3%, or
$18.5 million, from $1.40 billion as of June 30, 2023, compared to
a decrease of 2.6%, or $43.4 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 fiscal year 2022 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. 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:
Q2 FY 2024
Q2 FY 2023
Q2 FY 2022
New Customers
$36,822,744
$36,638,094
$89,356,906
Former Customers
$90,227,607
$98,701,899
$131,266,845
Refinance Customers
$541,181,690
$621,138,738
$580,856,073
Our customer base decreased by 9.4% during the twelve-month
period ended September 30, 2023, compared to a decrease of 2.3% for
the comparable period ended September 30, 2022. During the quarter
ended September 30, 2023, the number of unique borrowers in the
portfolio increased by 1.0% compared to a decrease of 5.1% during
the quarter ended September 30, 2022.
As of September 30, 2023, the Company had 1,053 open branches.
For branches open at least twelve months, same store gross loans
decreased 10.9% in the twelve-month period ended September 30,
2023, compared to an increase of 21.2% for the twelve-month period
ended September 30, 2022. For branches open throughout both
periods, the customer base over the twelve-month period ended
September 30, 2023, decreased 6.7% compared to an increase of 3.3%
for the twelve-month period ended September 30, 2022.
Three-month financial results
Net income for the second quarter of fiscal 2024 increased to
$16.1 million from a net loss of $0.6 million for the same quarter
of the prior year. Net income per diluted share increased to $2.71
per share in the second quarter of fiscal 2024 from a net loss of
$0.11 per share for the same quarter of the prior year.
Total revenues for the second quarter of fiscal 2024 decreased
to $136.9 million, a 9.5% decrease from $151.3 million for the same
quarter of the prior year. Interest and fee income declined 10.4%,
from $130.46 million in the second quarter of fiscal 2023 to
$116.95 million in the second quarter of fiscal 2024. Insurance
income decreased by 7.8% to $15.5 million in the second quarter of
fiscal 2024 compared to $16.8 million in the second quarter of
fiscal 2023. The large loan portfolio increased from 55.4% of the
overall portfolio as of September 30, 2022, to 56.7% as of
September 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 110 basis points for the
quarter ended September 30, 2023, relative to the quarter ended
March 31, 2023, and 240 basis points relative to the quarter ended
September 30, 2022. Other income increased by 11.0% to $4.40
million in the second fiscal quarter of fiscal 2024 compared to
$3.96 million in the second fiscal 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 $28.1
million to $40.5 million from $68.6 million when comparing the
second quarter of fiscal 2024 to the second 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 - June 30
$129.3
$155.7
$(26.4)
Change due to Growth
$(1.6)
$(4.1)
$2.5
$2.5
Change due to Expected Loss Rate on
Performing Loans
$(1.2)
$(3.6)
$2.4
$2.4
Change due to 90 day past due
$2.4
$7.9
$(5.5)
$(5.5)
Ending Allowance - September 30
$128.9
$155.9
$(27.0)
$(0.6)
Net Charge-offs
$40.9
$68.4
$(27.5)
$(27.5)
Provision
$40.5
$68.6
$(28.1)
$(28.1)
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 and
smaller increases in accounts 90 days past due.
Net charge-offs for the quarter decreased $27.5 million, from
$68.4 million in the second quarter of fiscal 2023 to $40.9 million
in the second quarter of fiscal 2024. Net charge-offs as a
percentage of average net loan receivables on an annualized basis
decreased to 16.1% in the second quarter of fiscal 2024 from 23.0%
in the second quarter of fiscal 2023.
Accounts 61 days or more past due decreased to 5.9% on a recency
basis at September 30, 2023, compared to 8.0% at September 30,
2022. Our allowance for credit losses as a percent of net loans
receivable was 12.8% at September 30, 2023, compared to 13.5% at
September 30, 2022.
We experienced significant improvement in recency delinquency on
accounts at least 90 days past due, improving from 5.0% at
September 30, 2022, to 3.7% at September 30, 2023. Recency
delinquency for accounts 0-89 days past due also improved from
23.5% at September 30, 2022, to 22.1% at September 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 twelve 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
09/30/2018
$360,508,875
$766,281,264
$1,126,790,139
09/30/2019
$457,720,143
$816,488,354
$1,274,208,497
09/30/2020
$365,242,591
$744,182,305
$1,109,424,896
09/30/2021
$455,201,848
$939,669,804
$1,394,871,652
09/30/2022
$481,374,232
$1,117,025,275
$1,598,399,507
09/30/2023
$324,731,250
$1,054,823,272
$1,379,554,522
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
09/30/2018
$67,589,136
$35,276,253
$102,865,389
09/30/2019
$97,211,268
$50,207,090
$147,418,358
09/30/2020
$(92,477,552)
$(72,306,050)
$(164,783,602)
09/30/2021
$89,959,256
$195,487,500
$285,446,756
09/30/2022
$25,139,613
$178,388,242
$203,527,855
09/30/2023
$(148,952,393)
$(69,892,592)
$(218,844,985)
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
09/30/2018
32.0%
68.0%
09/30/2019
35.9%
64.1%
09/30/2020
32.9%
67.1%
09/30/2021
32.6%
67.4%
09/30/2022
30.1%
69.9%
09/30/2023
23.5%
76.5%
General and administrative (“G&A”) expenses decreased $6.7
million, or 9.7%, to $62.95 million in the second quarter of fiscal
2024 compared to $69.69 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 46.1% during the second quarter of fiscal 2023 to
46.0% during the second quarter of fiscal 2024. G&A expenses
per average open branch decreased by 3.3% when comparing the second
quarter of fiscal 2024 to the second quarter fiscal 2023.
Personnel expense decreased $6.9 million, or 15.1%, during the
second quarter of fiscal 2024 as compared to the second quarter of
fiscal 2023. Salary expense decreased approximately $0.6 million,
or 1.9%, in the quarter ended September 30, 2023, compared to the
quarter ended September 30, 2022. Our headcount as of September 30,
2023, decreased 6.2% compared to September 30, 2022. Benefit
expense increased approximately $1.2 million, or 15.0%, when
comparing the quarterly periods ended September 30, 2023 and 2022.
Incentive expense decreased $7.3 million, or 93.9%, in the second
quarter of fiscal 2024 compared to the second quarter of fiscal
2023. The decrease in incentive expense is mostly due to a decrease
in share-based compensation of $4.9 million related to the reversal
of the expense associated with the third tranche of our
performance-based share plan, since the Company is not expected to
achieve the target required for the third tranche to vest, which
was set at earnings per share of $25.30 over four consecutive
quarters.
Occupancy and equipment expense decreased $1.1 million, or 7.9%,
when comparing the quarterly periods ended September 30, 2023 and
2022. The prior year's second quarter includes $0.8 million in
expense related to the merger of branches during the quarter.
Advertising expense increased $1.2 million, or 122.0%, in the
second quarter of fiscal 2024 compared to the second quarter of
fiscal 2023 due to increased spending on customer acquisition
programs.
Interest expense for the quarter ended September 30, 2023,
decreased by $0.5 million, or 3.8%, from the corresponding quarter
of the previous year. Interest expense decreased due to a 25.2%
decrease in average debt outstanding for the quarter offset by a
30% increase in the effective interest rate from 6.7% to 8.7%. The
average debt outstanding decreased from $775.6 million to $580.4
million when comparing the quarters ended September 30, 2023 and
2022. The Company’s debt to equity ratio decreased to 1.4:1 at
September 30, 2023, compared to 2.1:1 at September 30, 2022. As of
September 30, 2023, the Company had $560.9 million of debt
outstanding, net of unamortized debt issuance costs related to the
unsecured senior notes payable. The Company repurchased and
canceled $1.5 million of its previously issued bonds for a purchase
price of $1.3 million during the quarter.
Other key return ratios for the second quarter of fiscal 2024
included a 5.0% return on average assets and a return on average
equity of 15.2% (both on a trailing twelve-month basis).
There were no repurchases of common stock during the second
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
September 30, 2023.
Six-Month Results
Net income for the six-months ended September 30, 2023,
increased $34.8 million to $25.6 million compared to a loss of $9.2
million for the same period of the prior year. This resulted in a
net income of $4.33 per diluted share for the six months ended
September 30, 2023, compared to a net loss of $1.61 per diluted
share in the prior year period. Total revenues for the first
six-months of fiscal 2024 decreased 10.7% to $276.2 million,
compared to $309.2 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
22.8% during the first six-months of fiscal 2023 to 16.5% for the
first six-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.
Second 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=W1A4TN87.
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 September
30,
Six months ended September
30,
2023
2022
2023
2022
Revenues:
Interest and fee income
$
116,953
$
130,462
$
233,572
$
260,667
Insurance and other income, net
19,922
20,797
42,627
48,510
Total revenues
136,875
151,259
276,199
309,177
Expenses:
Provision for credit losses
40,463
68,620
87,065
154,442
General and administrative expenses:
Personnel
38,437
45,295
80,229
90,473
Occupancy and equipment
12,429
13,491
25,048
26,726
Advertising
2,242
1,010
4,991
3,218
Amortization of intangible assets
1,063
1,106
2,132
2,238
Other
8,776
8,793
18,672
18,690
Total general and administrative
expenses
62,947
69,695
131,072
141,345
Interest expense
12,543
13,032
24,785
24,207
Total expenses
115,953
151,347
242,922
319,994
Income (loss) before income taxes
20,922
(88
)
33,277
(10,817
)
Income tax expense (benefit)
4,839
549
7,655
(1,613
)
Net income (loss)
$
16,083
$
(637
)
$
25,622
$
(9,204
)
Net income (loss) per common share,
diluted
$
2.71
$
(0.11
)
$
4.33
$
(1.61
)
Weighted average diluted shares
outstanding
5,939
5,726
5,915
5,734
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
September 30, 2023
March 31, 2023
September 30, 2022
ASSETS
Cash and cash equivalents
$
18,786
$
16,509
$
20,695
Gross loans receivable
1,379,514
1,390,016
1,598,361
Less:
Unearned interest, insurance and fees
(370,312
)
(376,675
)
(439,656
)
Allowance for credit losses
(128,892
)
(125,553
)
(155,892
)
Loans receivable, net
880,310
887,788
1,002,813
Operating lease right-of-use assets,
net
80,397
81,289
85,517
Property and equipment, net
23,696
23,926
24,741
Deferred income taxes, net
41,858
41,722
48,315
Other assets, net
40,124
43,423
40,184
Goodwill
7,371
7,371
7,371
Intangible assets, net
13,158
15,291
17,518
Total assets
$
1,105,700
$
1,117,319
$
1,247,154
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
276,556
$
307,911
$
450,899
Senior unsecured notes payable, net
284,379
287,353
295,793
Income taxes payable
1,947
2,533
2,317
Operating lease liability
82,948
83,735
87,968
Accounts payable and accrued expenses
49,847
50,560
54,511
Total liabilities
695,677
732,092
891,488
Shareholders' equity
410,023
385,227
355,666
Total liabilities and shareholders'
equity
$
1,105,700
$
1,117,319
$
1,247,154
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SELECTED CONSOLIDATED
STATISTICS
(unaudited and in thousands,
except percentages and branches)
Three months ended
September 30,
Six months ended
September 30,
2023
2022
2023
2022
Gross loans receivable
$
1,379,514
$
1,598,361
$
1,379,514
$
1,598,361
Average gross loans receivable (1)
1,394,395
1,635,556
1,390,609
1,600,374
Net loans receivable (2)
1,009,202
1,158,705
1,009,202
1,158,705
Average net loans receivable (3)
1,017,773
1,187,295
1,015,017
1,166,656
Expenses as a percentage of total
revenue:
Provision for credit losses
29.6
%
45.4
%
31.5
%
50.0
%
General and administrative
46.0
%
46.1
%
47.5
%
45.7
%
Interest expense
9.2
%
8.6
%
9.0
%
7.8
%
Operating income as a % of total revenue
(4)
24.4
%
8.6
%
21.0
%
4.3
%
Loan volume (5)
668,215
756,477
1,389,449
1,688,856
Net charge-offs as percent of average net
loans receivable on an annualized basis
16.1
%
23.0
%
16.5
%
22.8
%
Return on average assets (trailing 12
months)
5.0
%
1.3
%
5.0
%
1.3
%
Return on average equity (trailing 12
months)
15.2
%
4.1
%
15.2
%
4.1
%
Branches opened or acquired (merged or
closed), net
(2
)
(42
)
(20
)
(63
)
Branches open (at period end)
1,053
1,104
1,053
1,104
_______________________________________________________
(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/20231020254640/en/
John L. Calmes, Jr. Executive VP, Chief Financial & Strategy
Officer, and Treasurer (864) 298-9800
World Acceptance (NASDAQ:WRLD)
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