World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its third quarter of fiscal 2022 and nine
months ended December 31, 2021.
Third quarter highlights
During its third quarter, the Company experienced exceptional
growth in both loan balances and the customer base. While this
growth initially depresses current earnings due to the day one
provisioning for anticipated credit losses under the current
accounting standards, it positions the Company well for the future
as these customers continue to generate revenue over the long
term.
Some highlights from the third quarter include:
- Gross loans outstanding of $1.61 billion, a Q3 increase of
$211.3 million, or 15.1% and 27.0% increase from same quarter prior
year
- Total revenues of $148.6 million, a 13.5% increase from the
same quarter prior year
- Net income of $7.3 million, a $7.2 million decrease from $14.5
million in same quarter prior year
- Net income per diluted share of $1.14, a $1.11 decrease from
$2.25 per share in same quarter prior year
Portfolio results
Gross loans outstanding increased to $1.61 billion as of
December 31, 2021, a 27.0% increase from the $1.26 billion of gross
loans outstanding as of December 31, 2020. During the most recent
quarter, gross loans outstanding increased 15.1%, or $211.3
million, the largest growth and rate of growth during the third
fiscal quarter in company history. The largest third quarter growth
prior to this year was the $155.2 million increase during the third
fiscal quarter of 2021. During the quarter, we saw an increase in
borrowing from new, current, and former customers that exceeded
comparable pre-pandemic volumes as the economy continued to reopen
and federal economic stimulus waned. We have seen increased demand
for new customer applications in the third quarter of fiscal
2022.
Our customer base increased by 4.4% year-over-year as of
December 31, 2021, compared to a 18.3% decrease for the comparable
period ended December 31, 2020. During the quarter ended December
31, 2021, the number of unique borrowers in the portfolio increased
by 7.7% compared to an increase of 8.4% during the quarter ended
December 31, 2020. As a result of the expanded emphasis on our
larger loan offerings, the average gross loan balance increased
7.3% from the period ended September 30, 2021, to $1,895; a 23.0%
increase from the period ended December 31, 2020.
The following table includes the change in the volume of loan
origination balances by customer type for the following comparative
quarterly periods:
Q3 FY 2022 vs. Q3 FY 2021
Q3 FY 2021 vs. Q3 FY 2020
Q3 FY 2022 vs. Q3 FY 2020
New Customers
73.5%
(21.7)%
35.8%
Former Customers
15.6%
8.3%
25.2%
Refinance Customers
21.1%
(9.7)%
9.3%
As of December 31, 2021, we had 1,202 open branches. For
branches open throughout both periods, same store gross loans
increased 28.8% in the twelve-month period ended December 31, 2021,
compared to a 7.6% decrease for the twelve-month period ended
December 31, 2020. For branches open throughout both periods, the
customer base over the twelve-month period ended December 31, 2021,
increased 5.4% compared to a 18.0% decrease for the twelve months
ended December 31, 2020.
Three-month financial results
Net income for the third quarter of fiscal 2022 decreased by
$7.2 million to $7.3 million compared to $14.5 million for the same
quarter of the prior year. Net income per diluted share decreased
to $1.14 per share in the third quarter of fiscal 2022 compared to
$2.25 per share for the same quarter of the prior year. Net income
was significantly impacted by an increase in the day one provision
under the accounting standards for credit losses that is directly
related to the growth in loan balances and increase in
delinquency.
Earnings per share for the most recent quarter benefited from
our share repurchase program. The Company repurchased 93,722 shares
of its common stock on the open market at an aggregate purchase
price of approximately $19.3 million during the third quarter of
fiscal 2022. This follows a repurchase of 195,436 shares in the
first fiscal half of fiscal 2022 at an aggregate purchase price of
approximately $31.1 million and the repurchase of 1,129,875 shares
in fiscal 2021 at an aggregate purchase price of approximately
$102.4 million. The Company had approximately 6.1 million common
shares outstanding excluding approximately 0.6 million unvested
restricted shares as of December 31, 2021. As of December 31, 2021,
the Company had the ability to repurchase approximately $46.1
million of additional shares under its current share repurchase
program and, subject to board approval, could repurchase
approximately $84.4 million of shares under the terms of its debt
facilities.
Total revenues for the third quarter of fiscal 2022 increased to
$148.6 million, a 13.5% increase from $130.9 million for the same
quarter of the prior year. Interest and fee income increased 11.5%,
from $114.9 million in the third quarter of fiscal 2021 to $128.1
million in the third quarter of fiscal 2022 due to an increase in
loans outstanding. Insurance income increased by 24.9% to $14.4
million in the third quarter of fiscal 2022 compared to $11.6
million in the third quarter of fiscal 2021. The large loan
portfolio increased from 39.5% of the overall portfolio as of
December 31, 2020, to 49.5% as December 31, 2021. This resulted in
lower interest and fee yields but higher insurance sales in the
most recent quarter, given that the sale of insurance products is
limited to large loans in several states in which we operate. Other
income increased by 32.9% to $6.0 million in the third quarter of
fiscal 2022 compared to $4.5 million in the third quarter of fiscal
2021. Sales of our motor club product increased by $1.5 million as
sales opportunities increased, similar to our insurance products,
with the increase in large loan originations.
Accounts 61 days or more past due increased to 6.4% on a recency
basis at December 31, 2021, compared to 5.2% at December 31, 2020.
Total delinquency on a recency basis increased to 10.4% at December
31, 2021, compared to 8.9% at December 31, 2020. Our allowance for
credit losses as a percent of net loans receivable was 11.4% at
December 31, 2021, compared to 12.2% at December 31, 2020. The
increase in delinquency was expected given the increase in new,
shorter tenured borrowers in recent months. The delinquency rates
remain in line with historical delinquency trends as of the end of
the third quarter.
On April 1, 2020, the Company replaced its incurred loss
methodology with a current expected credit loss ("CECL")
methodology to accrue for expected losses. This change in
accounting methodology requires us to create a larger provision for
credit losses on the day we originate the loan compared to the
prior methodology. The provision for credit losses increased $27.6
million, or 95.6%, to $56.5 million from $28.9 million when
comparing the third quarter of fiscal 2022 to the third quarter of
fiscal 2021. The provision for credit losses increased during the
most recent quarter primarily due to significant loan growth and
the increase in loans 90 days past due. The same quarter in the
prior year also included a $6.5 million release of a pandemic
related reserve. Net charge-offs as a percentage of average net
loans receivables on an annualized basis increased from 11.6% in
the third quarter of fiscal 2021 to 13.8% in the third quarter of
fiscal 2022. The increases in delinquency and charge-offs were
expected due to the increase in new and shorter tenured customers
in the most recent fiscal second and third quarters.
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 in the most recent three quarters. The tables below
illustrate the changes in the portfolio weighting 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
12/31/2016
$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
12/31/2021
$527,433,398
$1,078,703,853
$1,606,137,251
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
12/31/2016
$(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)
12/31/2021
$111,759,945
$229,793,585
$341,553,531
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
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%
12/31/2021
32.8%
67.2%
While the mix of less than two year customer balances is
relatively consistent with December 31, 2020, there has been a
significant increase in the shortest tenured customers within this
cohort. The 0-5 month customer bucket has increased from 8.6% of
the overall portfolio as of December 31, 2020, to 13.8% of the
portfolio as of December 31, 2021. The 0-5 month customer is our
riskiest customer.
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, 2017, vintage.
Actual Gross Charge-off Rate
During Following 12 Months; Indexed to 12/31/2017 Vintage
12 Months Beginning
Less Than 2 Years
More Than 2 Years
Total
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
12/31/2020
1.49
0.59
0.89
The decrease in overall charge-off rate over the last twelve
months has been seen across all tenure buckets, primarily driven by
stronger performance from COVID-19 related stimulus and
unemployment benefits. The lower tenure bucket has also benefited
from improved underwriting practices on new borrowers.
General and administrative (“G&A”) expenses decreased $3.7
million, or 4.7%, to $74.2 million in the third quarter of fiscal
2022 compared to $77.9 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 59.5% during the third quarter of fiscal 2021 to
50.0% during the third quarter of fiscal 2022. G&A expenses per
average open branch decreased by 2.4% when comparing the third
quarter of fiscal 2022 to the third quarter fiscal 2021.
Personnel expense decreased $2.3 million, or 5.0%, during the
third quarter of fiscal 2022 as compared to the third quarter of
fiscal 2021. Salary expense decreased approximately $0.1 million,
or 0.2%, in the quarter ended December 31, 2021, compared to the
quarter ended December 31, 2020. Our headcount as of December 31,
2021, decreased 5.9% compared to December 31, 2020. Benefit expense
decreased approximately $2.1 million, or 20.5%, when comparing the
quarterly periods ended December 31, 2021 and 2020. Incentive
expense decreased $0.2 million, or 1.8%, in the third quarter of
fiscal 2022 compared to third quarter of fiscal 2021.
Occupancy and equipment expense decreased $2.4 million, or
16.2%, when comparing the quarterly periods ended December 31, 2021
and 2020. The prior year includes a $2.1 million write down of
signage as a result of rebranding our offices in the prior year
quarter and we did not have any similar expense this year.
Advertising expense remained flat in the third quarter of fiscal
2022 compared to the third quarter of fiscal 2021. The Company
anticipated an increase in demand during the quarter and increased
marketing accordingly. However, marketing spend remained neutral
despite this increase as the Company shifted to lower cost
channels.
Other expense increased $1.0 million in the third quarter of
fiscal 2022 compared to the third quarter of fiscal 2021.
Interest expense for the quarter ended December 31, 2021,
increased by $2.9 million from the corresponding quarter of the
previous year. Interest expense increased due to an increase in
average debt outstanding and a 3.7% increase in the effective
interest rate from 6.1% to 6.3%. The average debt outstanding
increased from $475.7 million to $640.8 million when comparing the
quarters ended December 31, 2020 and 2021. The Company’s debt to
equity ratio increased to 1.8:1 at December 31, 2021, compared to
1.5:1 at December 31, 2020. The Company had outstanding debt of
$720.3 million as of December 31, 2021.
Other key return ratios for the third quarter of fiscal 2022
included a 7.4% return on average assets and a return on average
equity of 20.1% (both on a trailing twelve-month basis).
Nine-Month Results
Net income for the nine months ended December 31, 2021,
decreased $7.9 million to $35.5 million compared to $43.4 million
for the same period of the prior year. This resulted in net income
of $5.53 per diluted share for the nine months ended December 31,
2021, compared to $6.44 per diluted share in the prior-year-period.
Total revenues for the first nine months of fiscal 2022 increased
9.7% to $416.1 million compared to $379.3 million during the
corresponding period of the previous year due to an increase in
loans outstanding. Annualized net charge-offs as a percent of
average net loans decreased from 14.7% during the first nine months
of fiscal 2021 to 12.0% for the first nine months of fiscal
2022.
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, 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. In fiscal 2021, 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://services.choruscall.com/mediaframe/webcast.html?webcastid=4rOLtPbS.
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, 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, 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 December
31,
Nine months ended December
31,
2021
2020
2021
2020
Revenues:
Interest and fee income
$
128,147
$
114,886
$
355,435
$
333,632
Insurance income, net and other income
20,425
16,060
60,622
45,621
Total revenues
148,572
130,946
416,057
379,253
Expenses:
Provision for credit losses
56,459
28,857
128,768
80,608
General and administrative expenses:
Personnel
44,384
46,700
136,362
138,155
Occupancy and equipment
12,614
15,058
39,156
41,755
Advertising
6,848
6,660
15,902
14,528
Amortization of intangible assets
1,276
1,377
3,736
4,045
Other
9,107
8,079
27,412
26,292
Total general and administrative
expenses
74,229
77,874
222,568
224,775
Interest expense
10,166
7,305
22,381
18,759
Total expenses
140,854
114,036
373,717
324,142
Income before income taxes
7,718
16,910
42,340
55,111
Income taxes
391
2,418
6,802
11,711
Net income
$
7,327
$
14,492
$
35,538
$
43,400
Net income per common share, diluted
$
1.14
$
2.25
$
5.53
$
6.44
Weighted average diluted shares
outstanding
6,404
6,452
6,424
6,744
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
December 31, 2021
March 31, 2021
December 31, 2020
ASSETS
Cash and cash equivalents
$
18,668
$
15,746
$
9,691
Gross loans receivable
1,606,111
1,104,746
1,264,530
Less:
Unearned interest, insurance and fees
(433,432
)
(279,364
)
(335,056
)
Allowance for credit losses
(133,281
)
(91,722
)
(113,467
)
Loans receivable, net
1,039,398
733,660
816,007
Operating lease right-of-use assets,
net
86,098
90,056
93,144
Finance lease right-of-use assets, net
708
1,014
1,116
Property and equipment, net
24,531
25,326
25,266
Deferred income taxes, net
34,808
24,993
26,507
Other assets, net
37,596
31,422
28,897
Goodwill
7,371
7,371
7,371
Intangible assets, net
21,027
23,538
24,886
Assets held for sale
—
1,144
1,144
Total assets
$
1,270,205
$
954,270
$
1,034,029
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
425,174
$
405,008
$
539,600
Senior unsecured notes payable, net
295,143
—
—
Income taxes payable
1,591
11,576
853
Operating lease liability
87,677
91,133
93,648
Finance lease liability
146
585
737
Accounts payable and accrued expenses
51,068
41,040
40,329
Total liabilities
860,799
549,342
675,167
Shareholders' equity
409,406
404,928
358,862
Total liabilities and shareholders'
equity
$
1,270,205
$
954,270
$
1,034,029
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,
2021
2020
2021
2020
Gross loans receivable
$
1,606,111
$
1,264,530
$
1,606,111
$
1,264,530
Average gross loans receivable (1)
1,493,234
1,175,251
1,319,026
1,133,065
Net loans receivable (2)
1,172,679
929,474
1,172,679
929,474
Average net loans receivable (3)
1,094,014
865,480
970,992
839,491
Expenses as a percentage of total
revenue:
Provision for credit losses
38.0
%
22.0
%
30.9
%
21.3
%
General and administrative
50.0
%
59.5
%
53.5
%
59.3
%
Interest expense
6.8
%
5.6
%
5.4
%
4.9
%
Operating income as a % of total revenue
(4)
12.0
%
18.5
%
15.6
%
19.5
%
Loan volume (5)
976,118
782,995
2,531,815
1,893,502
Net charge-offs as percent of average net
loans receivable on an annualized basis
13.8
%
11.6
%
12.0
%
14.7
%
Return on average assets (trailing 12
months)
7.4
%
6.6
%
7.4
%
6.6
%
Return on average equity (trailing 12
months)
20.1
%
17.4
%
20.1
%
17.4
%
Branches opened or acquired (merged or
closed), net
—
(2
)
(3
)
(13
)
Branches open (at period end)
1,202
1,230
1,202
1,230
_______________________________________________________
(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/20220125005249/en/
John L. Calmes, Jr. Chief Financial and Strategy Officer (864)
298-9800
World Acceptance (NASDAQ:WRLD)
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