World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its fourth quarter of fiscal 2022 and twelve
months ended March 31, 2022.
Fourth quarter highlights
During its fourth quarter, the World Acceptance Corporation
experienced exceptional growth in both loan balances and customer
base relative to prior fourth quarters. 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 fourth quarter include:
- Record fourth quarter loan originations and customer
retention
- Unique customer base grew 10.1% year-over-year
- Gross loans outstanding of $1.52 billion, a 37.8% increase from
same quarter prior year
- Total revenues of $166.3 million, a 13.7% increase from the
same quarter prior year
- Net income of $18.4 million, a $26.5 million decrease from
$44.9 million in same quarter prior year
- Net income per diluted share of $2.97, a $3.99 decrease from
$6.96 per share in same quarter prior year
- Cash flow from operating activities of $281.5 million over the
last twelve months, a 29.9% increase from FY2021
Portfolio results
Gross loans outstanding increased to $1.52 billion as of March
31, 2022, a 37.8% increase from the $1.10 billion of gross loans
outstanding as of March 31, 2021. Typically, the company
experiences a 10% to 13% decrease in gross loans between during its
fiscal fourth quarter due to income tax refunds. During the most
recent quarter, gross loans outstanding decreased 5.2% or $83.3
million compared to a decrease of 12.6% or $159.8 million in the
same quarter of the prior year. This lower payoff rate in the most
recent quarter resulted from the continued shift to larger loans
and significant increases in borrowing from new, current, and
former customers that exceeded comparable pre-pandemic volumes. The
borrowing increase was driven by an increase in applications under
tightened underwriting standards initiated during the third quarter
of the current fiscal year.
The following table includes the volume of gross loan
origination balances, excluding tax advance loans, by customer type
for the following comparative quarterly periods:
Q4 FY 2022
Q4 FY 2021
Q4 FY 2020
New Customers
$61,003,941
$24,898,496
$34,639,321
Former Customers
$79,531,181
$49,487,552
$51,371,140
Refinance Customers
$516,503,079
$351,573,817
$422,163,207
Our customer base increased by 10.1% during the twelve-month
period ended as of March 31, 2022, compared to a decrease of 18.8%
for the comparable period ended March 31, 2021. During the quarter
ended March 31, 2022, the number of unique borrowers in the
portfolio decreased by 4.6% compared to a decrease of 9.5% during
the quarter ended March 31, 2021. As a result of the expanded
emphasis on our larger loan offerings, the average gross loan
balance increased 26.4% during the twelve-month period ended March
31, 2022, compared to March 31, 2021.
As of March 31, 2022, we had 1,167 open branches. For branches
open throughout both periods, same store gross loans increased
40.4% in the twelve-month period ended March 31, 2022, compared to
a decrease of 8.0% for the twelve-month period ended March 31,
2021. For branches open throughout both periods, the customer base
over the twelve-month period ended March 31, 2022 increased 11.6%
compared to a decrease of 18.2% for the twelve months ended March
31, 2021.
Three-month financial results
Net income for the fourth quarter of fiscal 2022 decreased by
$26.5 million to $18.4 million from $44.9 million for the same
quarter of the prior year. Net income per diluted share decreased
to $2.97 per share in the fourth quarter of fiscal 2022 from $6.96
per share for the same quarter of the prior year. Net income was
significantly impacted by an increase in the day one provision for
credit losses under the accounting standards 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 300,375
shares of its common stock on the open market at an aggregate
purchase price of approximately $60.7 million during the fourth
quarter of fiscal 2022. This is in addition to repurchases of
289,158 shares in the first three quarters of fiscal 2022 at an
aggregate purchase price of approximately $50.5 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 5.8 million common shares outstanding, excluding
approximately 550,000 unvested restricted shares, as of March 31,
2022. As of March 31, 2022, the Company had the ability to
repurchase approximately $15.4 million of additional shares under
its current share repurchase program and, subject to board
approval, could repurchase approximately $32.9 million of shares
under the terms of its debt facilities.
Total revenues for the fourth quarter of fiscal 2022 increased
to $166.3 million, a 13.7% increase from $146.3 million for the
same quarter of the prior year. This was driven by an increase in
average gross earning loans (total gross loans less gross loans 60
days contractually past due and tax advances) of 29.7%. Interest
and fee income increased 10.9%, from $117.5 million in the fourth
quarter of fiscal 2021 to $130.2 million in the fourth quarter of
fiscal 2022 due to an increase in loans outstanding. Insurance
income increased by 34.8% to $15.6 million in the fourth quarter of
fiscal 2022 compared to $11.6 million in the fourth quarter of
fiscal 2021. The large loan portfolio increased from 43.0% of the
overall portfolio as of March 31, 2021 to 51.8% as March 31, 2022.
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 19.0% to $20.5 million in the
fourth quarter of fiscal 2022 compared to $17.2 million in the
fourth quarter of fiscal 2021. Sales of our motor club product
increased by $0.8 million as sales opportunities increased, similar
to our insurance products, with the increase in large loan
originations.
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 $51.8
million to $57.4 million from $5.6 million when comparing the
fourth quarter of fiscal 2022 to the fourth quarter of fiscal 2021.
The provision for credit losses increased during the most recent
quarter due to much lower than typical fourth quarter portfolio
run-off as explained above and an increase in charge-offs and
delinquencies primarily driven by record new borrower growth in the
most recent second and third quarters. Net charge-offs as a
percentage of average net loan receivables on an annualized basis
increased from 12.3% in the fourth quarter of fiscal 2021 to 19.4%
in the fourth quarter of fiscal 2022. Annualized net charge-offs
were 20.1% for the fourth quarter of fiscal 2020. The increase 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. Collections during the current quarter were
also impacted by a significant number of associates being unable to
work due to Covid. These absences often occurred in branches that
were already shorthanded due to a difficult hiring environment.
Accounts 61 days or more past due increased to 6.9% on a recency
basis at March 31, 2022, compared to 4.9% at March 31, 2021, and
6.5% at March 31, 2020. Total delinquency on a recency basis
increased to 10.4% at March 31, 2022, compared to 7.1% at March 31,
2021, and 10.5% at March 31, 2020. Our allowance for credit losses
as a percent of net loans receivable was 12.0% at March 31, 2022,
compared to 11.1% at March 31, 2021, and 10.7% at March 31, 2020.
The increase in delinquency was expected given the increase in new,
shorter tenured borrowers in recent 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 during the current fiscal year. 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
03/31/2017
$256,616,684
$686,698,452
$943,315,136
03/31/2018
$288,592,036
$715,641,123
$1,004,233,159
03/31/2019
$375,272,969
$752,683,977
$1,127,956,946
03/31/2020
$417,601,494
$792,663,099
$1,210,264,593
03/31/2021
$342,202,779
$762,610,487
$1,104,813,266
03/31/2022
$482,248,578
$1,040,695,747
$1,522,944,326
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
3/31/2017
$(9,161,099)
$(12,074,624)
$(21,235,723)
3/31/2018
$31,975,352
$28,942,671
$60,918,023
3/31/2019
$86,680,933
$37,042,854
$123,723,787
3/31/2020
$42,328,525
$39,979,122
$82,307,647
3/31/2021
$(75,398,715)
$(30,052,612)
$(105,451,327)
3/31/2022
$137,788,334
$280,342,725
$418,131,059
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
3/31/2017
27.2%
72.8%
3/31/2018
28.7%
71.3%
3/31/2019
33.3%
66.7%
3/31/2020
34.5%
65.5%
3/31/2021
31.0%
69.0%
3/31/2022
31.7%
68.3%
While the mix of less than two-year customer balances is
relatively consistent with March 31, 2021, there has been a
significant increase in the shortest tenured customers within this
cohort. The 0–5-month customer bucket has increased from 8.4% of
the overall portfolio as of March 31, 2021, to 13.1% of the
portfolio as of March 31, 2022. 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, 2018, vintage.
Actual Gross Charge-off Rate
During Following 12 Months;
Indexed to 3/31/2018
Vintage
12 Months Beginning
Less Than 2 Years
More Than 2 Years
Total
3/31/2017
1.59
0.78
1.00
3/31/2018
1.68
0.78
1.04
3/31/2019
1.74
0.77
1.09
3/31/2020
1.49
0.65
0.94
3/31/2021
1.41
0.55
0.81
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 $2.8
million, or 3.6%, to $74.6 million in the fourth quarter of fiscal
2022 compared to $77.4 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 52.9% during the fourth quarter of fiscal 2021 to
44.9% during the fourth quarter of fiscal 2022. G&A expenses
per average open branch decreased by 1.1% when comparing the fourth
quarter of fiscal 2022 to the fourth quarter fiscal 2021.
Personnel expense increased $0.2 million, or 0.5%, during the
fourth quarter of fiscal 2022 as compared to the fourth quarter of
fiscal 2021. Salary expense decreased approximately $1.0 million,
or 3.9%, in the quarter ended March 31, 2022, compared to the
quarter ended March 31, 2021. Our headcount as of March 31, 2022
decreased 1.5% compared to March 31, 2021. Benefit expense
increased approximately $0.2 million, or 1.8%, when comparing the
quarterly periods ended March 31, 2022 and 2021. Incentive expense
increased $1.1 million, or 9.9%, in the fourth quarter of fiscal
2022 compared to fourth quarter of fiscal 2021.
Occupancy and equipment expense decreased $1.5 million, or
10.2%, when comparing the quarterly periods ended March 31, 2022
and 2021. The prior year includes a $0.9 million write down of
signage as a result of rebranding our offices in the prior year
fourth quarter and we did not have any similar expense this
year.
Advertising expense decreased $0.3 million in the fourth quarter
of fiscal 2022 compared to the fourth quarter of fiscal 2021.
Other expense decreased $1.1 million in the fourth quarter of
fiscal 2022 compared to the fourth quarter of fiscal 2021.
Interest expense for the quarter ended March 31, 2022 increased
by $4.1 million from the corresponding quarter of the previous
year. Interest expense increased due to an increase in average debt
outstanding and a 7.5% increase in the effective interest rate from
5.6% to 6.0%. The average debt outstanding increased from $488.7
million to $728.5 million when comparing the quarters ended March
31, 2021 and 2022. The Company’s debt to equity ratio increased to
1.9:1 at March 31, 2022 compared to 1.0:1 at March 31, 2021. The
Company had outstanding debt of $692.4 million as of March 31,
2022.
Other key return ratios for the fourth quarter of fiscal 2022
included a 4.8% return on average assets and a return on average
equity of 13.4% (both on a trailing twelve-month basis).
Twelve-Month Results
Net income for the year ended March 31, 2022 decreased $34.4
million, to $53.9 million, compared to $88.3 million for the prior
year. This resulted in net income of $8.47 per diluted share for
the year ended March 31, 2022, compared to $13.23 per diluted share
in the prior-year period. Total revenues for fiscal 2022 increased
10.8%, to $582.4, million compared to $525.5 million for fiscal
2021 due to an increase in loans outstanding. Net charge-offs as a
percent of average net loans increased from 14.1% during fiscal
2021 to 14.2% for 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 1,100
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.
Fourth 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=8kZeS8VQ.
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 March 31,
Twelve months ended March 31,
2022
2021
2022
2021
Revenues:
Interest and fee income
$
130,231
$
117,481
$
485,667
$
451,114
Insurance income, net and other income
36,098
28,798
96,721
74,420
Total revenues
166,329
146,279
582,388
525,534
Expenses:
Provision for credit losses
57,439
5,636
186,207
86,245
General and administrative expenses:
Personnel
46,697
46,466
183,058
184,621
Occupancy and equipment
12,929
14,405
52,085
56,160
Advertising
2,396
2,663
18,298
17,191
Amortization of intangible assets
1,274
1,429
5,010
5,474
Other
11,311
12,449
38,725
38,741
Total general and administrative
expenses
74,607
77,412
297,176
302,187
Interest expense
11,044
6,940
33,425
25,699
Total expenses
143,090
89,988
516,808
414,131
Income before income taxes
23,239
56,291
65,580
111,403
Income taxes
4,857
11,409
11,660
23,121
Net income
$
18,382
$
44,882
$
53,920
$
88,282
Net income per common share, diluted
$
2.97
$
6.96
$
8.47
$
13.23
Weighted average diluted shares
outstanding
6,181
6,452
6,364
6,672
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
March 31, 2022
March 31, 2021
March 31, 2020
ASSETS
Cash and cash equivalents
$
19,236
$
15,746
$
11,619
Gross loans receivable
1,522,789
1,104,746
1,209,871
Less:
Unearned interest, insurance and fees
(403,031
)
(279,364
)
(308,980
)
Allowance for credit losses
(134,243
)
(91,722
)
(96,488
)
Loans receivable, net
985,515
733,660
804,403
Operating lease right-of-use assets,
net
85,631
90,056
101,687
Finance lease right-of-use assets, net
608
1,014
1,421
Property and equipment, net
24,476
25,326
23,340
Deferred income taxes, net
39,801
24,993
23,258
Other assets, net
35,902
31,422
28,548
Goodwill
7,371
7,371
7,371
Intangible assets, net
19,756
23,538
24,448
Assets held for sale
—
1,144
3,991
Total assets
$
1,218,296
$
954,270
$
1,030,086
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
396,973
$
405,008
$
451,100
Senior unsecured notes payable, net
295,394
—
—
Income taxes payable
7,384
11,576
4,965
Operating lease liability
87,399
91,133
101,580
Finance lease liability
80
585
1,179
Accounts payable and accrued expenses
58,042
41,040
59,299
Total liabilities
845,272
549,342
618,123
Shareholders' equity
373,024
404,928
411,963
Total liabilities and shareholders'
equity
$
1,218,296
$
954,270
$
1,030,086
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SELECTED CONSOLIDATED
STATISTICS
(unaudited and in thousands,
except percentages and branches)
Three months ended March 31,
Twelve months ended March 31,
2022
2021
2022
2021
Gross loans receivable
$
1,522,789
$
1,104,746
$
1,522,789
$
1,104,746
Average gross loans receivable (1)
1,581,619
1,198,824
1,377,740
1,143,186
Net loans receivable (2)
1,119,758
825,382
1,119,758
825,382
Average net loans receivable (3)
1,164,389
892,022
1,014,984
848,732
Expenses as a percentage of total
revenue:
Provision for credit losses
34.5
%
3.9
%
32.0
%
16.4
%
General and administrative
44.9
%
52.9
%
51.0
%
57.5
%
Interest expense
6.6
%
4.7
%
5.7
%
4.9
%
Operating income as a % of total revenue
(4)
20.6
%
43.2
%
17.0
%
26.1
%
Loan volume (5)
736,046
478,479
3,267,860
2,371,981
Net charge-offs as percent of average net
loans receivable on an annualized basis
19.4
%
12.3
%
14.2
%
14.1
%
Return on average assets (trailing 12
months)
4.8
%
9.1
%
4.8
%
9.1
%
Return on average equity (trailing 12
months)
13.4
%
22.8
%
13.4
%
22.8
%
Branches opened or acquired (merged or
closed), net
(35
)
(25
)
(38
)
(38
)
Branches open (at period end)
1,167
1,205
1,167
1,205
______________________________________________
(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/20220505005315/en/
John L. Calmes, Jr. Chief Financial and Strategy Officer (864)
298-9800
World Acceptance (NASDAQ:WRLD)
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