World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its second quarter of fiscal 2025.
Second fiscal quarter highlights
During its second fiscal quarter, World Acceptance Corporation
achieved improved loan growth while continuing to focus on credit
quality. Management believes that continuing to carefully invest in
our best customers and closely monitoring performance has
strengthened the Company's financial position and positioned us
well for the remainder of the fiscal year.
Highlights from the second quarter include:
- Net income of $22.1 million
- Diluted net income per share of $3.99
- Recency delinquency on accounts 90+ days past due improved to
3.4% at September 30, 2024, from 3.7% at September 30, 2023
- Total revenues of $131.4 million, including a 113 basis point
yield increase compared to the same quarter in the prior year
Portfolio results
Gross loans outstanding were $1.30 billion as of September 30,
2024, a 6.1% decrease from the $1.38 billion of gross loans
outstanding as of September 30, 2023. During the most recent
quarter, gross loans outstanding increased sequentially 1.7%, or
$21.1 million, from $1.28 billion as of June 30, 2024, compared to
a decrease of 1.3%, or $18.5 million, in the comparable quarter of
the prior year.
During the most recent quarter, we saw improvement in borrowing
from new, former and existing customers compared to the same
quarter of fiscal year 2024. Specifically, new, former and
refinance loan customer volume during the quarter increased 20.8%,
11.5% and 2.9%, respectively, compared to the same quarter of
fiscal year 2024. Our customer base decreased by 0.1% during the
twelve-month period ended September 30, 2024, compared to a
decrease of 9.4% for the comparable period ended September 30,
2023. During the quarter ended September 30, 2024, the number of
unique borrowers in the portfolio increased by 3.6% compared to an
increase of 1.0% during the quarter ended September 30, 2023. We
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 by customer type for the following comparative
quarterly periods:
Q2 FY 2025
Q2 FY 2024
Q2 FY 2023
New Customers
$44,479,349
$36,822,744
$36,638,094
Former Customers
$100,630,514
$90,227,607
$98,701,899
Refinance Customers
$557,020,707
$541,181,690
$621,138,738
As of September 30, 2024, the Company had 1,045 open branches.
For branches open at least twelve months, same store gross loans
decreased 5.6% in the twelve-month period ended September 30, 2024,
compared to a decrease of 10.9% for the twelve-month period ended
September 30, 2023. For branches open throughout both periods, the
customer base over the twelve-month period ended September 30,
2024, increased 0.3% compared to a decrease of 6.7% for the
twelve-month period ended September 30, 2023.
Three-month financial results
Net income for the second quarter of fiscal 2025 increased to
$22.1 million compared to $16.1 million for the same quarter of the
prior year. Net income per diluted share increased to $3.99 per
share in the second quarter of fiscal 2025 compared to $2.71 per
share for the same quarter of the prior year. Net income in the
current and prior year quarter benefited from lower incentive
expense as a result of the reversal of the expense associated with
our performance-based share plan.
Total revenues for the second quarter of fiscal 2025 decreased
to $131.4 million, a 4.0% decrease from $136.9 million for the same
quarter of the prior year. Interest and fee income declined 2.6%,
from $117.0 million in the second quarter of fiscal 2024 to $113.9
million in the second quarter of fiscal 2025. Insurance income
decreased by 20.5% to $12.3 million in the second quarter of fiscal
2025 compared to $15.5 million in the second quarter of fiscal
2024. The large loan portfolio decreased from 56.7% of the overall
portfolio as of September 30, 2023, to 52.1% as of September 30,
2024. Interest and insurance yields for the quarter ended September
30, 2024 increased 191 and 113 basis points compared to the
quarters ended March 31, 2024 and September 30, 2023, respectively.
Other income increased by 17.5% to $5.2 million in the second
quarter of fiscal 2025 compared to $4.4 million in the second
quarter of fiscal 2024.
The Company accrues for expected losses with a current expected
credit loss ("CECL") methodology, which requires us to create a
provision for credit losses on the day we originate the loan. The
provision for credit losses increased $6.2 million to $46.7 million
from $40.5 million when comparing the second quarter of fiscal 2025
to the second quarter of fiscal 2024. The table below itemizes the
key components of the CECL allowance and provision impact during
the quarter.
CECL Allowance and Provision (Dollars
in millions)
Q2 FY 2025
Q2 FY 2024
Difference
Reconciliation
Beginning Allowance - June 30
$109.7
$129.3
$(19.6)
Change due to Growth
$1.8
$(1.6)
$3.4
$3.4
Change due to Expected Loss Rate on
Performing Loans
$0.8
$(1.2)
$2.0
$2.0
Change due to 90 day past due
$2.2
$2.4
$(0.2)
$(0.2)
Ending Allowance - September 30
$114.5
$128.9
$(14.4)
$5.2
Net Charge-offs
$41.9
$40.9
$1.0
$1.0
Provision
$46.7
$40.5
$6.2
$6.2
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 was negatively impacted by growth and an increase
in expected loss rates during the quarter. Specifically, expected
loss rates were negatively impacted by an increase in our 0-5 month
customers, our riskiest customers, during the current quarter.
Net charge-offs for the quarter increased $1.0 million, from
$40.9 million in the second quarter of fiscal 2024 to $41.9 million
in the second quarter of fiscal 2025. Net charge-offs as a
percentage of average net loan receivables on an annualized basis
increased to 17.6% in the second quarter of fiscal 2025 from 16.1%
in the second quarter of fiscal 2024. The prior year quarter's net
charge-offs benefited from a $4.9 million bulk sale of charge-offs
from prior periods.
Accounts 61 days or more past due decreased to 5.6% on a recency
basis at September 30, 2024, compared to 5.9% at September 30,
2023. Our allowance for credit losses as a percent of net loans
receivable was 12.0% at September 30, 2024, compared to 12.8% at
September 30, 2023. We also experienced improvement in recency
delinquency on accounts at least 90 days past due, improving from
3.7% at September 30, 2023, to 3.4% at September 30, 2024.
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 two and a half years
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
09/30/2019
$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
09/30/2024
$259,160,389
$1,036,732,429
$1,295,892,818
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
09/30/2019
$97,211,268
$50,207,090
$147,418,358
09/30/2020
$(92,477,552)
$(72,306,049)
$(164,783,601)
09/30/2021
$89,959,257
$195,487,499
$285,446,756
09/30/2022
$26,172,384
$177,355,471
$203,527,855
09/30/2023
$(156,642,982)
$(62,202,003)
$(218,844,985)
09/30/2024
$(65,570,861)
$(18,090,843)
$(83,661,704)
Portfolio Mix by Customer
Tenure at Origination
As of
Less Than 2 Years
More Than 2 Years
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%
09/30/2024
20.0%
80.0%
General and administrative (“G&A”) expenses decreased $16.6
million, or 26.4%, to $46.4 million in the second quarter of fiscal
2025 compared to $62.9 million in the same quarter of the prior
fiscal year. As a percentage of revenues, G&A expenses
decreased from 46.0% during the second quarter of fiscal 2024 to
35.3% during the second quarter of fiscal 2025. G&A expenses
per average open branch decreased by 25.9% when comparing the
second quarter of fiscal 2025 to the second quarter of fiscal
2024.
Personnel expense decreased $16.7 million, or 43.4%, during the
second quarter of fiscal 2025 as compared to the second quarter of
fiscal 2024. Salary expense decreased approximately $0.5 million,
or 1.7%, during the quarter ended September 30, 2024, compared to
the quarter ended September 30, 2023. Our headcount as of September
30, 2024, decreased 6.7% compared to September 30, 2023. Benefit
expense decreased approximately $1.1 million, or 12.2%, when
comparing the quarterly periods ended September 30, 2024 and 2023.
Incentive expense decreased $14.6 million, in the second quarter of
fiscal 2025 compared to the second quarter of fiscal 2024. The
decrease in incentive expense is mostly due to a decrease in
share-based compensation as a result of an $18.5 million reversal
of the expense associated with the second tranche of our
performance-based share plan since the Company is no longer
expected to achieve the target required for the second tranche to
vest. The target was set at earnings per share of $20.45 over four
consecutive quarters, and the final measurement date for this
target is March 31, 2025.
Occupancy and equipment expense decreased $0.1 million, or 0.7%,
when comparing the quarterly periods ended September 30, 2024 and
2023.
Advertising expense increased $0.6 million, or 25.9%, in the
second quarter of fiscal 2025 compared to the second quarter of
fiscal 2024 due to increased spending on customer acquisition
programs.
Interest expense for the quarter ended September 30, 2024,
decreased by $2.1 million, or 16.6%, from the corresponding quarter
of the previous year. Interest expense decreased due to a 14.5%
decrease in average debt outstanding for the quarter and a 0.6%
decrease in the effective interest rate from 8.71% to 8.66%. The
average debt outstanding decreased from $580.4 million to $496.0
million when comparing the quarters ended September 30, 2024 and
2023. The Company’s debt to equity ratio decreased to 1.2:1 at
September 30, 2024, compared to 1.4:1 at September 30, 2023. As of
September 30, 2024, the Company had $504.9 million of debt
outstanding, net of unamortized debt issuance costs related to the
unsecured senior notes payable. The Company repurchased and
canceled $12.0 million of its previously issued bonds for a
purchase price of $11.5 million during the second quarter of fiscal
2025.
Other key return ratios for the second quarter of fiscal 2025
included a 7.8% return on average assets and a return on average
equity of 20.1% (both on a trailing twelve-month basis).
The Company repurchased 85,843 shares of its common stock on the
open market at an aggregate purchase price of approximately $10.0
million during the second quarter of fiscal 2025. This is in
addition to repurchases of 79,324 shares during the first quarter
of fiscal 2025 at an aggregate purchase price of approximately
$11.1 million. As of September 30, 2024, the Company had $10.0
million in aggregate remaining repurchase capacity under its
current share repurchase program and approximately $24.7 million
under the terms of our debt facilities. The Company repurchased
295,201 shares during fiscal 2024 at an aggregate purchase price of
approximately $36.2 million. The Company had approximately 5.4
million common shares outstanding, excluding approximately 367,500
unvested restricted shares, as of September 30, 2024.
Six-Month Results
Net income for the six-months ended September 30, 2024,
increased $6.5 million to $32.1 million compared to $25.6 million
for the same period of the prior year. This resulted in a net
income of $5.77 per diluted share for the six months ended
September 30, 2024, compared to $4.33 per diluted share in the
prior-year period. Total revenues for the first six-months of
fiscal 2025 decreased 5.5% to $260.9 million, compared to $276.2
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 increased from 16.5% during the first
six-months of fiscal 2024 to 17.0% for the first six-months of
fiscal 2025.
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=Lh4m14ro.
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 examinations, 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, 2024, 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,
2024
2023
2024
2023
Revenues:
Interest and fee income
$
113,905
$
116,953
$
225,066
$
233,572
Insurance and other income, net
17,504
19,922
35,870
42,627
Total revenues
131,409
136,875
260,936
276,199
Expenses:
Provision for credit losses
46,669
40,463
92,088
87,065
General and administrative expenses:
Personnel
21,754
38,437
58,730
80,229
Occupancy and equipment
12,337
12,429
24,500
25,048
Advertising
2,821
2,242
4,478
4,991
Amortization of intangible assets
959
1,063
1,965
2,132
Other
8,484
8,776
18,093
18,672
Total general and administrative
expenses
46,355
62,947
107,766
131,072
Interest expense
10,457
12,543
20,226
24,785
Total expenses
103,481
115,953
220,080
242,922
Income before income taxes
27,928
20,922
40,856
33,277
Income tax expense
5,800
4,839
8,780
7,655
Net income
$
22,128
$
16,083
$
32,076
$
25,622
Net income per common share, diluted
$
3.99
$
2.71
$
5.77
$
4.33
Weighted average diluted shares
outstanding
5,549
5,939
5,558
5,915
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited and in thousands)
September 30, 2024
March 31, 2024
September 30, 2023
ASSETS
Cash and cash equivalents
$
9,746
$
11,839
$
18,786
Gross loans receivable
1,295,870
1,277,149
1,379,514
Less:
Unearned interest, insurance and fees
(338,708
)
(326,746
)
(370,312
)
Allowance for credit losses
(114,455
)
(102,963
)
(128,892
)
Loans receivable, net
842,707
847,440
880,310
Income taxes receivable
4,769
3,091
—
Operating lease right-of-use assets,
net
80,604
79,501
80,397
Property and equipment, net
21,445
22,897
23,696
Deferred income taxes, net
32,231
30,943
41,858
Other assets, net
41,183
42,199
40,124
Goodwill
7,371
7,371
7,371
Intangible assets, net
9,107
11,070
13,158
Total assets
$
1,049,163
$
1,056,351
$
1,105,700
LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable
$
265,630
$
223,419
$
276,556
Senior unsecured notes payable, net
239,311
272,610
284,379
Income taxes payable
—
—
1,947
Operating lease liability
82,860
81,921
82,948
Accounts payable and accrued expenses
43,898
53,974
49,847
Total liabilities
631,699
631,924
695,677
Shareholders' equity
417,464
424,427
410,023
Total liabilities and shareholders'
equity
$
1,049,163
$
1,056,351
$
1,105,700
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,
2024
2023
2024
2023
Gross loans receivable
$
1,295,870
$
1,379,514
$
1,295,870
$
1,379,514
Average gross loans receivable (1)
1,284,326
1,394,395
1,277,911
1,390,609
Net loans receivable (2)
957,162
1,009,202
957,162
1,009,202
Average net loans receivable (3)
949,302
1,017,773
946,188
1,015,017
Expenses as a percentage of total
revenue:
Provision for credit losses
35.5
%
29.6
%
35.3
%
31.5
%
General and administrative
35.3
%
46.0
%
41.3
%
47.5
%
Interest expense
8.0
%
9.2
%
7.8
%
9.0
%
Operating income as a % of total revenue
(4)
29.2
%
24.4
%
23.4
%
21.0
%
Loan volume (5)
702,238
668,215
1,384,435
1,389,449
Net charge-offs as percent of average net
loans receivable on an annualized basis
17.6
%
16.1
%
17.0
%
16.5
%
Return on average assets (trailing 12
months)
7.8
%
5.0
%
7.8
%
5.0
%
Return on average equity (trailing 12
months)
20.1
%
15.2
%
20.1
%
15.2
%
Branches opened or acquired (merged or
closed), net
(2
)
(2
)
(3
)
(20
)
Branches open (at period end)
1,045
1,053
1,045
1,053
_______________________________________________________
(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/20241025905980/en/
John L. Calmes, Jr. Executive VP, Chief Financial & Strategy
Officer, and Treasurer (864) 298-9800
World Acceptance (NASDAQ:WRLD)
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