GREENVILLE, S.C.--(BUSINESS WIRE)--World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its third quarter of fiscal 2024 and nine months ended December 31, 2023.
Third fiscal quarter highlights
During its third fiscal quarter, World Acceptance Corporation continued to focus on credit quality and a conservative approach to its lending operations. Management believes that continuing to carefully invest in our best customers and closely monitoring performance will put the Company in a strong position throughout the fiscal year, particularly given the uncertain economic environment.
Highlights from the third quarter include:
- Net income of $16.7 million
- Diluted net income per share of $2.84
- Recency delinquency on accounts 90+ days past due improved from 4.9% at December 31, 2022, to 3.7% at December 31, 2023
- Total revenues of $137.7 million, including a 180 basis point yield increase compared to the same quarter in the prior year
Portfolio results
Gross loans outstanding were $1.40 billion as of December 31, 2023, a 9.9% decrease from the $1.55 billion of gross loans outstanding as of December 31, 2022. During the most recent quarter, gross loans outstanding increased sequentially 1.5%, or $21.1 million, from $1.38 billion as of September 30, 2023, compared to a decrease of 2.8%, or $44.4 million, in the comparable quarter of the prior year. During the most recent quarter, we saw an increase in borrowing from new and former customers compared to the same quarter of fiscal year 2023 as we took incremental steps to ease the historically stringent underwriting standards implemented in prior quarters. We also continued to improve the gross yield to expected loss ratio for all new, former, and refinance customer originations and will continue to monitor performance indicators and intend to adjust underwriting accordingly.
The following table includes the volume of gross loan origination balances, excluding tax advance loans, by customer type for the following comparative quarterly periods:
Q3 FY 2024 | Q3 FY 2023 | Q3 FY 2022 | |
New Customers | $46,768,269 | $28,909,629 | $104,219,695 |
Former Customers | $96,582,426 | $94,505,522 | $134,326,565 |
Refinance Customers | $600,866,594 | $664,382,650 | $737,562,906 |
Our customer base decreased by 2.4% during the twelve-month period ended December 31, 2023, compared to a decrease of 13.7% for the comparable period ended December 31, 2022. During the quarter ended December 31, 2023, the number of unique borrowers in the portfolio increased by 2.4% compared to a decrease of 4.9% during the quarter ended December 31, 2022.
As of December 31, 2023, the Company had 1,052 open branches. For branches open at least twelve months, same store gross loans decreased 8.2% in the twelve-month period ended December 31, 2023, compared to an increase of 3.7% for the twelve-month period ended December 31, 2022. For branches open throughout both periods, the customer base over the twelve-month period ended December 31, 2023, decreased 0.8% compared to a decrease of 7.7% for the twelve-month period ended December 31, 2022.
Three-month financial results
Net income for the third quarter of fiscal 2024 increased to $16.7 million compared to $5.8 million for the same quarter of the prior year. Net income per diluted share increased to $2.84 per share in the third quarter of fiscal 2024 compared to $0.99 per share for the same quarter of the prior year.
Total revenues for the third quarter of fiscal 2024 decreased to $137.7 million, a 6.0% decrease from $146.5 million for the same quarter of the prior year. Interest and fee income declined 6.0%, from $126.2 million in the third quarter of fiscal 2023 to $118.7 million in the third quarter of fiscal 2024. Insurance income decreased by 15.9% to $14.5 million in the third quarter of fiscal 2024 compared to $17.2 million in the third quarter of fiscal 2023. The large loan portfolio decreased from 56.4% of the overall portfolio as of December 31, 2022, to 55.2% as of December 31, 2023. The large loan percent of the mix decreased when compared to March 31, 2023, at which time it was 58.1%. Interest and insurance yields increased 160 basis points for the quarter ended December 31, 2023, relative to the quarter ended March 31, 2023, and 180 basis points relative to the quarter ended December 31, 2022. Other income increased by 48.6% to $4.6 million in the third quarter of fiscal 2024 compared to $3.1 million in the third quarter of fiscal 2023.
The Company accrues for expected losses with a current expected credit loss ("CECL") methodology. This accounting methodology requires us to create a provision for credit losses on the day we originate the loan. The provision for credit losses decreased $19.0 million to $40.6 million from $59.6 million when comparing the third quarter of fiscal 2024 to the third quarter of fiscal 2023. The table below itemizes the key components of the CECL allowance and provision impact during the quarter.
CECL Allowance and Provision (Dollars in millions) | FY 2024 | FY 2023 | Difference | Reconciliation | ||||
Beginning Allowance - September 30 | $128.9 | $155.9 | $(27.0) | |||||
Change due to Growth | $2.0 | $(4.3) | $6.3 | $6.3 | ||||
Change due to Expected Loss Rate on Performing Loans | $(10.0) | $(7.5) | $(2.5) | $(2.5) | ||||
Change due to 90 day past due | $0.2 | $0.4 | $(0.2) | $(0.2) | ||||
Ending Allowance - December 31 | $121.1 | $144.5 | $(23.4) | $3.6 | ||||
Net Charge-offs | $48.4 | $71.0 | $(22.6) | $(22.6) | ||||
Provision | $40.6 | $59.6 | $(19.0) | $(19.0) | ||||
Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter (see above reconciliation). | ||||||||
The provision benefited from substantially lower charge-offs during the quarter.
Net charge-offs for the quarter decreased $22.6 million, from $71.0 million in the third quarter of fiscal 2023 to $48.4 million in the third quarter of fiscal 2024. Net charge-offs as a percentage of average net loan receivables on an annualized basis decreased to 19.1% in the third quarter of fiscal 2024 from 25.1% in the third quarter of fiscal 2023.
Accounts 61 days or more past due decreased to 5.8% on a recency basis at December 31, 2023, compared to 7.4% at December 31, 2022. Our allowance for credit losses as a percent of net loans receivable was 11.8% at December 31, 2023, compared to 12.9% at December 31, 2022. We experienced significant improvement in recency delinquency on accounts at least 90 days past due, improving from 4.9% at December 31, 2022, to 3.7% at December 31, 2023.
The table below is updated to use the customer tenure-based methodology that aligns with our CECL methodology. After experiencing rapid portfolio growth during fiscal years 2019 and 2020, primarily in new customers, our gross loan balance experienced pandemic related declines in fiscal 2021 before rebounding during fiscal 2022. Over the last eighteen months we have tightened our lending to new customers substantially. The tables below illustrate the changes in the portfolio weighting.
Gross Loan Balance By Customer Tenure at Origination | |||
As of | Less Than 2 Years | More Than 2 Years | Total |
12/31/2018 | $426,884,909 | $832,020,730 | $1,258,905,639 |
12/31/2019 | $489,940,306 | $882,877,242 | $1,372,817,548 |
12/31/2020 | $413,509,916 | $851,073,804 | $1,264,583,720 |
12/31/2021 | $527,433,398 | $1,078,703,853 | $1,606,137,251 |
12/31/2022 | $421,291,725 | $1,132,819,599 | $1,554,111,324 |
12/31/2023 | $315,059,832 | $1,085,605,652 | $1,400,665,484 |
Year-Over-Year Growth (Decline) in Gross Loan Balance by Customer Tenure at Origination | |||
12 Month Period Ended | Less Than 2 Years | More Than 2 Years | Total |
12/31/2018 | $90,302,422 | $41,183,836 | $131,486,258 |
12/31/2019 | $63,055,397 | $50,856,512 | $113,911,909 |
12/31/2020 | $(76,430,390) | $(31,803,438) | $(108,233,828) |
12/31/2021 | $113,923,482 | $227,630,049 | $341,553,531 |
12/31/2022 | $(106,141,673) | $54,115,746 | $(52,025,927) |
12/31/2023 | $(106,231,893) | $(47,213,947) | $(153,445,840) |
Portfolio Mix by Customer Tenure at Origination | ||
As of | Less Than 2 Years | More Than 2 Years |
12/31/2018 | 33.9% | 66.1% |
12/31/2019 | 35.7% | 64.3% |
12/31/2020 | 32.7% | 67.3% |
12/31/2021 | 32.8% | 67.2% |
12/31/2022 | 27.1% | 72.9% |
12/31/2023 | 22.5% | 77.5% |
General and administrative ("G&A") expenses increased $0.96 million, or 1.5%, to $65.91 million in the third quarter of fiscal 2024 compared to $64.95 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses increased from 44.3% during the third quarter of fiscal 2023 to 47.8% during the third quarter of fiscal 2024. G&A expenses per average open branch decreased by 5.4% when comparing the third quarter of fiscal 2024 to the third quarter fiscal 2023.
Personnel expense decreased $0.8 million, or 2.0%, during the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023. Salary expense totaled $32.0 million for the quarter ended December 31, 2023, remaining relatively flat compared to the quarter ended December 31, 2022. Our headcount as of December 31, 2023, decreased 6.9% compared to December 31, 2022. Benefit expense increased approximately $0.6 million, or 8.1%, when comparing the quarterly periods ended December 31, 2023 and 2022. Incentive expense decreased $1.0 million, or 24.5%, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.
Occupancy and equipment expense decreased $0.8 million, or 6.5%, when comparing the quarterly periods ended December 31, 2023 and 2022. The prior year's third quarter includes $0.4 million in expense related to the merger of branches during the quarter.
Advertising expense increased $2.4 million, or 181.1%, in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 due to increased spending on customer acquisition programs.
Interest expense for the quarter ended December 31, 2023, decreased by $2.4 million, or 16.9%, from the corresponding quarter of the previous year. Interest expense decreased due to a 22.8% decrease in average debt outstanding for the quarter offset by a 12.5% increase in the effective interest rate from 7.62% to 8.57%. The average debt outstanding decreased from $734.3 million to $567.1 million when comparing the quarters ended December 31, 2023 and 2022. The Company's debt to equity ratio decreased to 1.4:1 at December 31, 2023, compared to 2.0:1 at December 31, 2022. As of December 31, 2023, the Company had $585.0 million of debt outstanding, net of unamortized debt issuance costs related to the unsecured senior notes payable. The Company repurchased and canceled $4.8 million of its previously issued bonds for a purchase price of $4.1 million during the quarter.
Other key return ratios for the third quarter of fiscal 2024 included a 6.0% return on average assets and a return on average equity of 17.3% (both on a trailing twelve-month basis).
The Company repurchased 148,765 shares of its common stock on the open market at an aggregate purchase price of approximately $17.2 million during the third quarter of fiscal 2024. The Company repurchased 73,643 shares of its common stock on the open market at an aggregate purchase price of approximately $14.3 million during fiscal 2023. This is in addition to the repurchase of 589,533 shares in fiscal 2022 at an aggregate purchase price of approximately $111.1 million. The Company had approximately 5.7 million common shares outstanding, excluding approximately 388,500 unvested restricted shares, as of December 31, 2023.
Nine-Month Results
Net income for the nine-months ended December 31, 2023, increased $45.7 million to $42.3 million compared to a loss of $3.4 million for the same period of the prior year. This resulted in a net income of $7.17 per diluted share for the nine months ended December 31, 2023, compared to a net loss of $0.59 per diluted share in the prior-year period. Total revenues for the first nine-months of fiscal 2024 decreased 9.2% to $413.9 million, compared to $455.7 million during the corresponding period of the previous year due to a decrease in loans outstanding. Annualized net charge-offs as a percent of average net loans decreased from 23.6% during the first nine-months of fiscal 2023 to 17.4% for the first nine-months of fiscal 2024.
About World Acceptance Corporation (World Finance)
Founded in 1962, World Acceptance Corporation (NASDAQ: WRLD), is a people-focused finance company that provides personal installment loan solutions and personal tax preparation and filing services to over one million customers each year. Headquartered in Greenville, South Carolina, the Company operates more than 1,000 community-based World Finance branches across 16 states. The Company primarily serves a segment of the population that does not have ready access to credit; however, unlike many other lenders in this segment, we strive to work with our customers to understand their broader financial pictures, ensure they have the ability and stability to make payments, and help them achieve their financial goals. For more information, visit www.loansbyworld.com.
Third quarter conference call
The senior management of World Acceptance Corporation will be discussing these results in its quarterly conference call to be held at 10:00 a.m. Eastern Time today. A simulcast of the conference call will be available on the Internet at https://event.choruscall.com/mediaframe/webcast.html?webcastid=DOmXS8u2. The call will be available for replay on the Internet for approximately 30 days.
During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends that have occurred after quarter-end. The Company's responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.
Cautionary Note Regarding Forward-looking Information
This press release may contain various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, that represent the Company's current expectations or beliefs concerning future events. Statements other than those of historical fact, as well as those identified by words such as "anticipate," "estimate," intend," "plan," "expect," "project," "believe," "may," "will," "should," "would," "could," "probable" and any variation of the foregoing and similar expressions are forward-looking statements. Such forward-looking statements are inherently subject to risks and uncertainties. The Company's actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include the following: recently enacted, proposed or future legislation and the manner in which it is implemented; changes in the U.S. tax code; the nature and scope of regulatory authority, particularly discretionary authority, that is or may be exercised by regulators, including, but not limited to, U.S. Consumer Financial Protection Bureau, and individual state regulators having jurisdiction over the Company; the unpredictable nature of regulatory proceedings and litigation; employee misconduct or misconduct by third parties; uncertainties associated with management turnover and the effective succession of senior management; media and public characterization of consumer installment loans; labor unrest; the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company's reported consolidated financial statements or necessitate material delays or changes in the issuance of the Company's audited consolidated financial statements; the Company's assessment of its internal control over financial reporting; changes in interest rates; the impact of inflation; risks relating to the acquisition or sale of assets or businesses or other strategic initiatives, including increased loan delinquencies or net charge-offs, the loss of key personnel, integration or migration issues, the failure to achieve anticipated synergies, increased costs of servicing, incomplete records, and retention of customers; risks inherent in making loans, including repayment risks and value of collateral; cybersecurity threats or incidents, including the potential or actual misappropriation of assets or sensitive information, corruption of data or operational disruption and the cost of the associated response thereto; our dependence on debt and the potential impact of limitations in the Company's amended revolving credit facility or other impacts on the Company's ability to borrow money on favorable terms, or at all; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquency and charge-offs); the impact of extreme weather events and natural disasters; changes in the Company's markets and general changes in the economy (particularly in the markets served by the Company).
These and other factors are discussed in greater detail in Part I, Item 1A,"Risk Factors" in the Company's most recent annual report on Form 10-K for the fiscal year ended March 31, 2023, as filed with the SEC and the Company's other reports filed with, or furnished to, the SEC from time to time. World Acceptance Corporation does not undertake any obligation to update any forward-looking statements it makes. The Company is also not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
| ||||||||||||
Three months ended December 31, | Nine months ended December 31, | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
Revenues: |
| |||||||||||
Interest and fee income | $ | 118,665 | $ | 126,201 | $ | 352,237 | $ | 386,868 | ||||
Insurance and other income, net | 19,084 | 20,331 | 61,711 | 68,841 | ||||||||
Total revenues | 137,749 | 146,532 | 413,948 | 455,709 | ||||||||
Expenses: | ||||||||||||
Provision for credit losses | 40,632 | 59,609 | 127,697 | 214,051 | ||||||||
General and administrative expenses: | ||||||||||||
Personnel | 39,890 | 40,701 | 120,120 | 131,174 | ||||||||
Occupancy and equipment | 12,090 | 12,932 | 37,138 | 39,658 | ||||||||
Advertising | 3,721 | 1,324 | 8,712 | 4,542 | ||||||||
Amortization of intangible assets | 1,051 | 1,115 | 3,183 | 3,353 | ||||||||
Other | 9,157 | 8,879 | 27,829 | 27,569 | ||||||||
Total general and administrative expenses | 65,909 | 64,951 | 196,982 | 206,296 | ||||||||
Interest expense | 11,690 | 14,070 | 36,475 | 38,277 | ||||||||
Total expenses | 118,231 | 138,630 | 361,154 | 458,624 | ||||||||
Income (loss) before income taxes | 19,518 | 7,902 | 52,794 | (2,915 | ) | |||||||
Income tax expense | 2,853 | 2,097 | 10,508 | 484 | ||||||||
Net income (loss) | $ | 16,665 | $ | 5,805 | $ | 42,286 | $ | (3,399 | ) | |||
Net income (loss) per common share, diluted | $ | 2.84 | $ | 0.99 | $ | 7.17 | $ | (0.59 | ) | |||
Weighted average diluted shares outstanding | 5,860 | 5,857 | 5,897 | 5,743 | ||||||||
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES | |||||||||||
CONSOLIDATED BALANCE SHEETS
| |||||||||||
December 31, 2023 | March 31, 2023 | December 31, 2022 | |||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 12,776 | $ | 16,509 | $ | 20,962 | |||||
Gross loans receivable | 1,400,622 | 1,390,016 | 1,553,985 | ||||||||
Less: | |||||||||||
Unearned interest, insurance and fees | (372,311 | ) | (376,675 | ) | (431,298 | ) | |||||
Allowance for credit losses | (121,082 | ) | (125,553 | ) | (144,539 | ) | |||||
Loans receivable, net | 907,229 | 887,788 | 978,148 | ||||||||
Income taxes receivable | 1,717 | - | 912 | ||||||||
Operating lease right-of-use assets, net | 80,049 | 81,289 | 83,437 | ||||||||
Property and equipment, net | 23,196 | 23,926 | 24,378 | ||||||||
Deferred income taxes, net | 37,048 | 41,722 | 43,402 | ||||||||
Other assets, net | 38,045 | 43,423 | 41,094 | ||||||||
Goodwill | 7,371 | 7,371 | 7,371 | ||||||||
Intangible assets, net | 12,107 | 15,291 | 16,403 | ||||||||
Total assets | $ | 1,119,538 | $ | 1,117,319 | $ | 1,216,107 | |||||
LIABILITIES & SHAREHOLDERS' EQUITY | |||||||||||
Liabilities: | |||||||||||
Senior notes payable | $ | 305,089 | $ | 307,911 | $ | 426,490 | |||||
Senior unsecured notes payable, net | 279,916 | 287,353 | 296,050 | ||||||||
Income taxes payable | - | 2,533 | - | ||||||||
Operating lease liability | 82,471 | 83,735 | 86,010 | ||||||||
Accounts payable and accrued expenses | 45,043 | 50,560 | 48,801 | ||||||||
Total liabilities | 712,519 | 732,092 | 857,351 | ||||||||
Shareholders' equity | 407,019 | 385,227 | 358,756 | ||||||||
Total liabilities and shareholders' equity | $ | 1,119,538 | $ | 1,117,319 | $ | 1,216,107 | |||||
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES | ||||||||||||||||
SELECTED CONSOLIDATED STATISTICS
| ||||||||||||||||
Three months ended December 31, | Nine months ended December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Gross loans receivable | $ | 1,400,622 | $ | 1,553,985 | $ | 1,400,622 | $ | 1,553,985 | ||||||||
Average gross loans receivable (1) | 1,383,194 | 1,562,199 | 1,388,752 | 1,585,306 | ||||||||||||
Net loans receivable (2) | 1,028,311 | 1,122,687 | 1,028,311 | 1,122,687 | ||||||||||||
Average net loans receivable (3) | 1,014,113 | 1,131,636 | 1,015,237 | 1,153,443 | ||||||||||||
Expenses as a percentage of total revenue: | ||||||||||||||||
Provision for credit losses | 29.5 | % | 40.7 | % | 30.8 | % | 47.0 | % | ||||||||
General and administrative | 47.8 | % | 44.3 | % | 47.6 | % | 45.3 | % | ||||||||
Interest expense | 8.5 | % | 9.6 | % | 8.8 | % | 8.4 | % | ||||||||
Operating income as a % of total revenue (4) | 22.7 | % | 15.0 | % | 21.6 | % | 7.8 | % | ||||||||
Loan volume (5) | 744,193 | 787,775 | 2,133,642 | 2,476,631 | ||||||||||||
Net charge-offs as percent of average net loans receivable on an annualized basis | 19.1 | % | 25.1 | % | 17.4 | % | 23.6 | % | ||||||||
Return on average assets (trailing 12 months) | 6.0 | % | 1.2 | % | 6.0 | % | 1.2 | % | ||||||||
Return on average equity (trailing 12 months) | 17.3 | % | 4.1 | % | 17.3 | % | 4.1 | % | ||||||||
Branches opened or acquired (merged or closed), net | (1 | ) | (20 | ) | (21 | ) | (83 | ) | ||||||||
Branches open (at period end) | 1,052 | 1,084 | 1,052 | 1,084 | ||||||||||||
_______________________________________________________ | |
(1) | Average gross loans receivable is determined by averaging month-end gross loans receivable over the indicated period, excluding tax advances. |
(2) | Net loans receivable is defined as gross loans receivable less unearned interest and deferred fees. |
(3) | Average net loans receivable is determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period, excluding tax advances. |
(4) | Operating income is computed as total revenues less provision for credit losses and general and administrative expenses. |
(5) | Loan volume includes all loan balances originated by the Company. It does not include loans purchased through acquisitions. |
Contacts
John L. Calmes, Jr.
Executive VP, Chief Financial & Strategy Officer, and Treasurer
(864) 298-9800
