Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries World Acceptance Corporation Reports Fiscal 2023 First Quarter Results By: World Acceptance Corporation via Business Wire July 27, 2022 at 07:30 AM EDT World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its first quarter of fiscal 2023 and three months ended June 30, 2022. First quarter highlights During its first quarter, the World Acceptance Corporation experienced exceptional growth in both loan balances and customer base even while tightening our underwriting at the beginning of the quarter. 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. Highlights from the first quarter include: Unique customer base grew 11.4% from same quarter prior year Gross loans outstanding of $1.64 billion, a 34.2% increase from same quarter prior year Total revenues of $157.6 million, a 21.5% increase from the same quarter prior year Net loss of $8.8 million and adjusted net income of $6.6 million Net loss per diluted share of $1.53, and adjusted net income per diluted share of $1.15 Cash flow from operating activities of $58.2 million over the last three months, a 18.8% increase from FY2022 Portfolio results Gross loans outstanding increased to $1.64 billion as of June 30, 2022, a 34.2% increase from the $1.22 billion of gross loans outstanding for the period ended June 30, 2021. During the most recent quarter, gross loans outstanding increased 7.8%, or $119.0 million, from Q4 fiscal 2022 compared to an increase of 10.7%, or $118.4 million, in the comparable quarter of the prior year. During the quarter, we saw an increase in borrowing from new, current and former customers that exceeded comparable pre-pandemic volumes. We have seen increased demand for new customer applications since the third quarter of fiscal 2022. The borrowing increase was driven by an increase in applications under tightened underwriting standards initiated during the third quarter of fiscal 2022. Underwriting was tightened further in April for 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: Q1 FY 2023 Q1 FY 2022 Q1 FY 2021 New Customers $75,263,048 $58,956,364 $17,737,020 Former Customers $110,262,220 $104,117,107 $39,210,936 Refinance Customers $746,840,769 $595,277,770 $412,496,734 Our customer base increased by 11.4% during the twelve-month period ended as of June 30, 2022, compared to a decrease of 6.5% for the comparable period ended June 30, 2021. During the quarter ended June 30, 2022, the number of unique borrowers in the portfolio increased by 0.2% compared to a decrease of 1.0% during the quarter ended June 30, 2021. As a result of the expanded emphasis on our larger loan offerings, the average gross loan balance increased 20.8% during the twelve-month period ended June 30, 2022, compared to June 30, 2021. As a result of underwriting changes over the past several quarters, the number of new customer loans originated during the quarter declined 27-30% when compared to the most recent pre-pandemic Q1 levels as the increased credit quality requirements resulted in a 28-31% lower book-to-look rate when compared to the same periods. As of June 30, 2022, the Company had 1,146 open branches. For branches open throughout both periods, same store gross loans increased 38.2% in the twelve-month period ended June 30, 2022, compared to an increase of 16.4% for the twelve-month period ended June 30, 2021. For branches open throughout both periods, the customer base over the twelve-month period ended June 30, 2022, increased 14.6% compared to a decrease of 5.1% for the twelve months ended June 30, 2021. Three-month financial results Net income for the first quarter of fiscal 2023 decreased by $24.6 million to an $8.8 million loss from $15.8 million for the same quarter of the prior year. Net income per diluted share decreased to $1.53 loss per share in the first quarter of fiscal 2023 from $2.44 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 and the impact of seasonality on the expected loss rates. Net income adjusted for the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses was $6.6 million for the current quarter compared to $20.5 million in the same quarter of the prior year. Adjusted net income per diluted share decreased to $1.15 per share in the first quarter of fiscal 2023 from $3.17 per share for the same quarter of the prior year. We believe this provides additional insight into our operations and profitability in periods of substantial growth and provides additional information regarding the expected loss rates due to credit normalization and seasonality. See further discussion on the current quarter provision and impact of current expected credit loss below. 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 the first quarter of fiscal 2023. This is in addition to repurchase of 589,533 shares in fiscal 2022 at an aggregate purchase price of approximately $111.1 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 5.7 million common shares outstanding, excluding approximately 550,000 unvested restricted shares, as of June 30, 2022. As of June 30, 2022, the Company had the ability to repurchase approximately $1.1 million of additional shares under its current share repurchase program and, subject to board approval, could repurchase approximately $14.2 million of shares under the terms of its debt facilities. Total revenues for the first quarter of fiscal 2023 increased to $157.6 million, a 21.5% increase from $129.7 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 19.3%, from $109.2 million in the first quarter of fiscal 2022 to $130.2 million in the first quarter of fiscal 2023 due to an increase in loans outstanding. Insurance income increased by 37.2% to $17.0 million in the first quarter of fiscal 2023 compared to $12.4 million in the first quarter of fiscal 2022. The large loan portfolio increased from 46.0% of the overall portfolio as of June 30, 2021, to 53.4% as of June 30, 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 28.3% to $10.3 million in the first quarter of fiscal 2022 compared to $8.1 million in the fourth quarter of fiscal 2021. Other income includes a $3.1 million bargain purchase gain during the current 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 $55.6 million to $85.8 million from $30.3 million when comparing the first quarter of fiscal 2023 to the first quarter of fiscal 2022. 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 2023 FY 2022 Difference Beginning Allowance - March 31 $134.2 $91.7 $42.5 Change due to Growth $10.5 $9.8 $0.7 Change due to Expected Loss Rate on Performing Loans $16.8 $2.5 $14.3 Change due to 90 day past due $(5.9) $(6.2) $0.3 Ending Allowance - June 30 $155.6 $97.8 $57.8 Net Charge-offs $64.4 $24.1 $40.3 Provision $85.8 $30.3 $55.5 Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter. The change in the allowance during the quarter was significantly impacted by both growth and changes in expected loss rates on our performing loans. The three most important factors impacting the expected loss rates on performing loans are recent actual loss performance, changes in mix of the portfolio tenure, and a seasonality factor. The seasonality factor had the most significant impact on the expected loss rates during the quarter, resulting in a 14.5% increase in the portfolio expected loss rates or approximately $13.4 million. The table below includes the seasonality factor for each quarter end. Quarter End Seasonality Factor March 31 0.943738 June 30 1.080301 September 30 1.047518 December 31 0.938281 Expected loss rates by tenure bucket also increased due to actual loss rates increasing as credit normalizes. This was offset to some degree by a shift in portfolio mix to more tenured customers. Net charge-offs for the quarter increased $40.3 million, from $24.1 million in the first quarter of fiscal 2022 to $64.4 million in the first quarter of fiscal 2023. Net charge-offs as a percentage of average net loan receivables on an annualized basis increased from 11.4% in the first quarter of fiscal 2022 to 22.3% in the first quarter of fiscal 2023. Annualized net charge-offs were 18.3% for the first quarter of fiscal 2021. The increase in delinquency and charge-offs were expected due to the increase in new and shorter tenured customers over the last twelve months. Accounts 61 days or more past due increased to 6.9% on a recency basis at June 30, 2022, compared to 4.0% at June 30, 2021, and 5.7% at June 30, 2020. Total delinquency on a recency basis increased to 11.2% at June 30, 2022, compared to 6.7% at June 30, 2021, and 8.3% at June 30, 2020. Our allowance for credit losses as a percent of net loans receivable was 13.0% at June 30, 2022, compared to 10.9% at June 30, 2021, and 14.2% at June 30, 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 fiscal 2022. 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 06/30/2017 $273,887,376 $707,810,306 $981,697,682 06/30/2018 $319,827,964 $742,845,987 $1,062,673,951 06/30/2019 $429,461,205 $793,297,330 $1,222,758,535 06/30/2020 $355,437,073 $712,516,701 $1,067,953,773 06/30/2021 $382,753,073 $840,444,842 $1,223,197,915 06/30/2022 $522,860,576 $1,119,072,168 $1,641,932,744 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 6/30/2017 $4,751,788 $(9,068,937) $(4,317,149) 6/30/2018 $45,940,588 $35,035,681 $80,976,269 6/30/2019 $109,633,241 $50,451,343 $160,084,584 6/30/2020 $(74,024,133) $(80,780,629) $(154,804,762) 6/30/2021 $27,316,000 $127,928,141 $155,244,141 6/30/2022 $140,107,503 $278,627,326 $418,734,829 Portfolio Mix by Customer Tenure at Origination As of Less Than 2 Years More Than 2 Years 6/30/2017 27.9% 72.1% 6/30/2018 30.1% 69.9% 6/30/2019 35.1% 64.9% 6/30/2020 33.3% 66.7% 6/30/2021 31.3% 68.7% 6/30/2022 31.8% 68.2% While the mix of less than two year customer balances is relatively consistent with June 30, 2021, there has been a significant increase in the shortest tenured customers within this cohort. The 0-5 month customer bucket has increased from 8.5% of the overall portfolio as of June 30, 2021, to 11.9% of the portfolio as of June 30, 2022. The 0-5 month customer is our riskiest customer. General and administrative (“G&A”) expenses decreased $0.5 million, or 0.7%, to $72.9 million in the first quarter of fiscal 2023 compared to $73.4 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses decreased from 56.6% during the first quarter of fiscal 2022 to 46.2% during the first quarter of fiscal 2023. G&A expenses per average open branch increased by 3.3% when comparing the first quarter of fiscal 2023 to the first quarter fiscal 2022. Personnel expense decreased $1.1 million, or 2.3%, during the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. Salary expense increased approximately $1.6 million, or 5.6%, in the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021. Our headcount as of June 30, 2022, increased 3.3% compared to June 30, 2021. Benefit expense decreased approximately $0.4 million, or 4.0%, when comparing the quarterly periods ended June 30, 2022 and 2021. Incentive expense decreased $2.1 million, or 17.4%, in the first quarter of fiscal 2023 compared to first quarter of fiscal 2022. Occupancy and equipment expense decreased $0.4 million, or 2.7%, when comparing the quarterly periods ended June 30, 2022 and 2021. The prior year includes a $0.3 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 $1.6 million, or 41.3%, in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 due to decreased spending on new customer acquisition programs. Other expense increased $2.6 million, or 30.0%, in the first quarter of fiscal 2023 compared to the fourth quarter of fiscal 2022. Interest expense for the quarter ended June 30, 2022, increased by $5.7 million, or 103.1%, from the corresponding quarter of the previous year. Interest expense increased due to an increase in average debt outstanding and a 20.0% increase in the effective interest rate from 5.0% to 6.0%. The average debt outstanding increased from $420.2 million to $741.7 million when comparing the quarters ended June 30, 2021 and 2022. The Company’s debt to equity ratio increased to 2.2:1 at June 30, 2022, compared to 1.2:1 at June 30, 2021. As of June 30, 2022, the Company had $777.0 million of debt outstanding, net of unamortized debt issuance costs related to the unsecured senior notes payable. Other key return ratios for the first quarter of fiscal 2023 included a 2.5% return on average assets and a return on average equity of 7.5% (both on a trailing twelve-month basis). Non-GAAP financial measures From time-to-time the Company uses certain financial measures derived on a basis other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. Such financial measures qualify as “non-GAAP financial measures” as defined in SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company may present these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components to understanding and assessing the Company’s financial performance. Such non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are, thus, susceptible to varying calculations, any non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies. For purposes of assessing performance, the Company will adjust earnings to remove the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses. The Company believes this measure improves the compatibility of our results to peer companies who use varying methods to determine their allowance for credit losses under the CECL. The measure also normalizes earnings for the impact of growth, seasonality and periods of volatility in expected loss rates. This measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP earnings or other income statement data prepared in accordance with GAAP. The following table reconciles GAAP net income (loss) to Adjusted net income (loss): Three months ended June 30, Three months ended June 30, 2022 2021 Income (loss) before income taxes $(12,252,252) $ 20,541,298 Provision for credit losses 85,822,267 30,265,811 Net charge-offs (64,414,450) (24,135,468 ) Adjusted income before income taxes 9,155,565 26,671,641 Income taxes at actual rate 2,577,555 6,194,169 Adjusted net income $6,578,010 $ 20,477,472 Weighted average dilutive shares outstanding 5,740,835 6,455,753 Adjusted net income per common share, diluted $1.15 $ 3.17 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. First 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=DC1YNN8t. 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, 2022, 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 June 30, 2022 2021 Revenues: Interest and fee income $ 130,205 $ 109,175 Insurance income, net and other income 27,389 20,484 Total revenues 157,594 129,659 Expenses: Provision for credit losses 85,822 30,266 General and administrative expenses: Personnel 45,178 46,232 Occupancy and equipment 13,235 13,607 Advertising 2,208 3,760 Amortization of intangible assets 1,132 1,215 Other 11,097 8,537 Total general and administrative expenses 72,850 73,351 Interest expense 11,174 5,501 Total expenses 169,846 109,118 Income (loss) before income taxes (12,252 ) 20,541 Income taxes (3,449 ) 4,770 Net income (loss) $ (8,803 ) $ 15,771 Net income (loss) per common share, diluted $ (1.53 ) $ 2.44 Weighted average diluted shares outstanding 5,741 6,456 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited and in thousands) June 30, 2022 March 31, 2022 June 30, 2021 ASSETS Cash and cash equivalents $ 13,303 $ 19,236 $ 8,387 Gross loans receivable 1,641,798 1,522,789 1,223,139 Less: Unearned interest, insurance and fees (447,290 ) (403,031 ) (322,754 ) Allowance for credit losses (155,651 ) (134,243 ) (97,853 ) Loans receivable, net 1,038,857 985,515 802,532 Operating lease right-of-use assets, net 86,224 85,631 87,951 Finance lease right-of-use assets, net 505 608 912 Property and equipment, net 24,164 24,476 25,391 Deferred income taxes, net 45,579 39,801 28,782 Other assets, net 44,231 35,902 38,867 Goodwill 7,371 7,371 7,371 Intangible assets, net 18,839 19,756 22,340 Assets held for sale — — 1,144 Total assets $ 1,279,073 $ 1,218,296 $ 1,023,677 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Senior notes payable $ 481,393 $ 396,973 $ 467,700 Senior unsecured notes payable, net 295,645 295,394 — Income taxes payable 6,632 7,384 12,407 Operating lease liability 88,304 87,399 89,441 Finance lease liability 46 80 431 Accounts payable and accrued expenses 52,926 58,042 48,227 Total liabilities 924,946 845,272 618,206 Shareholders' equity 354,127 373,024 405,471 Total liabilities and shareholders' equity $ 1,279,073 $ 1,218,296 $ 1,023,677 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED STATISTICS (unaudited and in thousands, except percentages and branches) Three months ended June 30, 2022 2021 Gross loans receivable $ 1,641,798 $ 1,223,139 Average gross loans receivable (1) 1,575,548 1,144,425 Net loans receivable (2) 1,194,508 900,385 Average net loans receivable (3) 1,152,981 849,175 Expenses as a percentage of total revenue: Provision for credit losses 54.5 % 23.3 % General and administrative 46.2 % 56.6 % Interest expense 7.1 % 4.2 % Operating income (loss) as a % of total revenue (4) (0.7 ) % 20.1 % Loan volume (5) 932,379 754,209 Net charge-offs as percent of average net loans receivable on an annualized basis 22.3 % 11.4 % Return on average assets (trailing 12 months) 2.5 % 9.1 % Return on average equity (trailing 12 months) 7.5 % 23.0 % Branches opened or acquired (merged or closed), net (21 ) — Branches open (at period end) 1,146 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/20220727005155/en/Contacts John L. Calmes, Jr. Chief Financial and Strategy Officer (864) 298-9800 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
World Acceptance Corporation Reports Fiscal 2023 First Quarter Results By: World Acceptance Corporation via Business Wire July 27, 2022 at 07:30 AM EDT World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its first quarter of fiscal 2023 and three months ended June 30, 2022. First quarter highlights During its first quarter, the World Acceptance Corporation experienced exceptional growth in both loan balances and customer base even while tightening our underwriting at the beginning of the quarter. 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. Highlights from the first quarter include: Unique customer base grew 11.4% from same quarter prior year Gross loans outstanding of $1.64 billion, a 34.2% increase from same quarter prior year Total revenues of $157.6 million, a 21.5% increase from the same quarter prior year Net loss of $8.8 million and adjusted net income of $6.6 million Net loss per diluted share of $1.53, and adjusted net income per diluted share of $1.15 Cash flow from operating activities of $58.2 million over the last three months, a 18.8% increase from FY2022 Portfolio results Gross loans outstanding increased to $1.64 billion as of June 30, 2022, a 34.2% increase from the $1.22 billion of gross loans outstanding for the period ended June 30, 2021. During the most recent quarter, gross loans outstanding increased 7.8%, or $119.0 million, from Q4 fiscal 2022 compared to an increase of 10.7%, or $118.4 million, in the comparable quarter of the prior year. During the quarter, we saw an increase in borrowing from new, current and former customers that exceeded comparable pre-pandemic volumes. We have seen increased demand for new customer applications since the third quarter of fiscal 2022. The borrowing increase was driven by an increase in applications under tightened underwriting standards initiated during the third quarter of fiscal 2022. Underwriting was tightened further in April for 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: Q1 FY 2023 Q1 FY 2022 Q1 FY 2021 New Customers $75,263,048 $58,956,364 $17,737,020 Former Customers $110,262,220 $104,117,107 $39,210,936 Refinance Customers $746,840,769 $595,277,770 $412,496,734 Our customer base increased by 11.4% during the twelve-month period ended as of June 30, 2022, compared to a decrease of 6.5% for the comparable period ended June 30, 2021. During the quarter ended June 30, 2022, the number of unique borrowers in the portfolio increased by 0.2% compared to a decrease of 1.0% during the quarter ended June 30, 2021. As a result of the expanded emphasis on our larger loan offerings, the average gross loan balance increased 20.8% during the twelve-month period ended June 30, 2022, compared to June 30, 2021. As a result of underwriting changes over the past several quarters, the number of new customer loans originated during the quarter declined 27-30% when compared to the most recent pre-pandemic Q1 levels as the increased credit quality requirements resulted in a 28-31% lower book-to-look rate when compared to the same periods. As of June 30, 2022, the Company had 1,146 open branches. For branches open throughout both periods, same store gross loans increased 38.2% in the twelve-month period ended June 30, 2022, compared to an increase of 16.4% for the twelve-month period ended June 30, 2021. For branches open throughout both periods, the customer base over the twelve-month period ended June 30, 2022, increased 14.6% compared to a decrease of 5.1% for the twelve months ended June 30, 2021. Three-month financial results Net income for the first quarter of fiscal 2023 decreased by $24.6 million to an $8.8 million loss from $15.8 million for the same quarter of the prior year. Net income per diluted share decreased to $1.53 loss per share in the first quarter of fiscal 2023 from $2.44 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 and the impact of seasonality on the expected loss rates. Net income adjusted for the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses was $6.6 million for the current quarter compared to $20.5 million in the same quarter of the prior year. Adjusted net income per diluted share decreased to $1.15 per share in the first quarter of fiscal 2023 from $3.17 per share for the same quarter of the prior year. We believe this provides additional insight into our operations and profitability in periods of substantial growth and provides additional information regarding the expected loss rates due to credit normalization and seasonality. See further discussion on the current quarter provision and impact of current expected credit loss below. 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 the first quarter of fiscal 2023. This is in addition to repurchase of 589,533 shares in fiscal 2022 at an aggregate purchase price of approximately $111.1 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 5.7 million common shares outstanding, excluding approximately 550,000 unvested restricted shares, as of June 30, 2022. As of June 30, 2022, the Company had the ability to repurchase approximately $1.1 million of additional shares under its current share repurchase program and, subject to board approval, could repurchase approximately $14.2 million of shares under the terms of its debt facilities. Total revenues for the first quarter of fiscal 2023 increased to $157.6 million, a 21.5% increase from $129.7 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 19.3%, from $109.2 million in the first quarter of fiscal 2022 to $130.2 million in the first quarter of fiscal 2023 due to an increase in loans outstanding. Insurance income increased by 37.2% to $17.0 million in the first quarter of fiscal 2023 compared to $12.4 million in the first quarter of fiscal 2022. The large loan portfolio increased from 46.0% of the overall portfolio as of June 30, 2021, to 53.4% as of June 30, 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 28.3% to $10.3 million in the first quarter of fiscal 2022 compared to $8.1 million in the fourth quarter of fiscal 2021. Other income includes a $3.1 million bargain purchase gain during the current 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 $55.6 million to $85.8 million from $30.3 million when comparing the first quarter of fiscal 2023 to the first quarter of fiscal 2022. 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 2023 FY 2022 Difference Beginning Allowance - March 31 $134.2 $91.7 $42.5 Change due to Growth $10.5 $9.8 $0.7 Change due to Expected Loss Rate on Performing Loans $16.8 $2.5 $14.3 Change due to 90 day past due $(5.9) $(6.2) $0.3 Ending Allowance - June 30 $155.6 $97.8 $57.8 Net Charge-offs $64.4 $24.1 $40.3 Provision $85.8 $30.3 $55.5 Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter. The change in the allowance during the quarter was significantly impacted by both growth and changes in expected loss rates on our performing loans. The three most important factors impacting the expected loss rates on performing loans are recent actual loss performance, changes in mix of the portfolio tenure, and a seasonality factor. The seasonality factor had the most significant impact on the expected loss rates during the quarter, resulting in a 14.5% increase in the portfolio expected loss rates or approximately $13.4 million. The table below includes the seasonality factor for each quarter end. Quarter End Seasonality Factor March 31 0.943738 June 30 1.080301 September 30 1.047518 December 31 0.938281 Expected loss rates by tenure bucket also increased due to actual loss rates increasing as credit normalizes. This was offset to some degree by a shift in portfolio mix to more tenured customers. Net charge-offs for the quarter increased $40.3 million, from $24.1 million in the first quarter of fiscal 2022 to $64.4 million in the first quarter of fiscal 2023. Net charge-offs as a percentage of average net loan receivables on an annualized basis increased from 11.4% in the first quarter of fiscal 2022 to 22.3% in the first quarter of fiscal 2023. Annualized net charge-offs were 18.3% for the first quarter of fiscal 2021. The increase in delinquency and charge-offs were expected due to the increase in new and shorter tenured customers over the last twelve months. Accounts 61 days or more past due increased to 6.9% on a recency basis at June 30, 2022, compared to 4.0% at June 30, 2021, and 5.7% at June 30, 2020. Total delinquency on a recency basis increased to 11.2% at June 30, 2022, compared to 6.7% at June 30, 2021, and 8.3% at June 30, 2020. Our allowance for credit losses as a percent of net loans receivable was 13.0% at June 30, 2022, compared to 10.9% at June 30, 2021, and 14.2% at June 30, 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 fiscal 2022. 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 06/30/2017 $273,887,376 $707,810,306 $981,697,682 06/30/2018 $319,827,964 $742,845,987 $1,062,673,951 06/30/2019 $429,461,205 $793,297,330 $1,222,758,535 06/30/2020 $355,437,073 $712,516,701 $1,067,953,773 06/30/2021 $382,753,073 $840,444,842 $1,223,197,915 06/30/2022 $522,860,576 $1,119,072,168 $1,641,932,744 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 6/30/2017 $4,751,788 $(9,068,937) $(4,317,149) 6/30/2018 $45,940,588 $35,035,681 $80,976,269 6/30/2019 $109,633,241 $50,451,343 $160,084,584 6/30/2020 $(74,024,133) $(80,780,629) $(154,804,762) 6/30/2021 $27,316,000 $127,928,141 $155,244,141 6/30/2022 $140,107,503 $278,627,326 $418,734,829 Portfolio Mix by Customer Tenure at Origination As of Less Than 2 Years More Than 2 Years 6/30/2017 27.9% 72.1% 6/30/2018 30.1% 69.9% 6/30/2019 35.1% 64.9% 6/30/2020 33.3% 66.7% 6/30/2021 31.3% 68.7% 6/30/2022 31.8% 68.2% While the mix of less than two year customer balances is relatively consistent with June 30, 2021, there has been a significant increase in the shortest tenured customers within this cohort. The 0-5 month customer bucket has increased from 8.5% of the overall portfolio as of June 30, 2021, to 11.9% of the portfolio as of June 30, 2022. The 0-5 month customer is our riskiest customer. General and administrative (“G&A”) expenses decreased $0.5 million, or 0.7%, to $72.9 million in the first quarter of fiscal 2023 compared to $73.4 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses decreased from 56.6% during the first quarter of fiscal 2022 to 46.2% during the first quarter of fiscal 2023. G&A expenses per average open branch increased by 3.3% when comparing the first quarter of fiscal 2023 to the first quarter fiscal 2022. Personnel expense decreased $1.1 million, or 2.3%, during the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. Salary expense increased approximately $1.6 million, or 5.6%, in the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021. Our headcount as of June 30, 2022, increased 3.3% compared to June 30, 2021. Benefit expense decreased approximately $0.4 million, or 4.0%, when comparing the quarterly periods ended June 30, 2022 and 2021. Incentive expense decreased $2.1 million, or 17.4%, in the first quarter of fiscal 2023 compared to first quarter of fiscal 2022. Occupancy and equipment expense decreased $0.4 million, or 2.7%, when comparing the quarterly periods ended June 30, 2022 and 2021. The prior year includes a $0.3 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 $1.6 million, or 41.3%, in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 due to decreased spending on new customer acquisition programs. Other expense increased $2.6 million, or 30.0%, in the first quarter of fiscal 2023 compared to the fourth quarter of fiscal 2022. Interest expense for the quarter ended June 30, 2022, increased by $5.7 million, or 103.1%, from the corresponding quarter of the previous year. Interest expense increased due to an increase in average debt outstanding and a 20.0% increase in the effective interest rate from 5.0% to 6.0%. The average debt outstanding increased from $420.2 million to $741.7 million when comparing the quarters ended June 30, 2021 and 2022. The Company’s debt to equity ratio increased to 2.2:1 at June 30, 2022, compared to 1.2:1 at June 30, 2021. As of June 30, 2022, the Company had $777.0 million of debt outstanding, net of unamortized debt issuance costs related to the unsecured senior notes payable. Other key return ratios for the first quarter of fiscal 2023 included a 2.5% return on average assets and a return on average equity of 7.5% (both on a trailing twelve-month basis). Non-GAAP financial measures From time-to-time the Company uses certain financial measures derived on a basis other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. Such financial measures qualify as “non-GAAP financial measures” as defined in SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company may present these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components to understanding and assessing the Company’s financial performance. Such non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are, thus, susceptible to varying calculations, any non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies. For purposes of assessing performance, the Company will adjust earnings to remove the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses. The Company believes this measure improves the compatibility of our results to peer companies who use varying methods to determine their allowance for credit losses under the CECL. The measure also normalizes earnings for the impact of growth, seasonality and periods of volatility in expected loss rates. This measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP earnings or other income statement data prepared in accordance with GAAP. The following table reconciles GAAP net income (loss) to Adjusted net income (loss): Three months ended June 30, Three months ended June 30, 2022 2021 Income (loss) before income taxes $(12,252,252) $ 20,541,298 Provision for credit losses 85,822,267 30,265,811 Net charge-offs (64,414,450) (24,135,468 ) Adjusted income before income taxes 9,155,565 26,671,641 Income taxes at actual rate 2,577,555 6,194,169 Adjusted net income $6,578,010 $ 20,477,472 Weighted average dilutive shares outstanding 5,740,835 6,455,753 Adjusted net income per common share, diluted $1.15 $ 3.17 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. First 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=DC1YNN8t. 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, 2022, 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 June 30, 2022 2021 Revenues: Interest and fee income $ 130,205 $ 109,175 Insurance income, net and other income 27,389 20,484 Total revenues 157,594 129,659 Expenses: Provision for credit losses 85,822 30,266 General and administrative expenses: Personnel 45,178 46,232 Occupancy and equipment 13,235 13,607 Advertising 2,208 3,760 Amortization of intangible assets 1,132 1,215 Other 11,097 8,537 Total general and administrative expenses 72,850 73,351 Interest expense 11,174 5,501 Total expenses 169,846 109,118 Income (loss) before income taxes (12,252 ) 20,541 Income taxes (3,449 ) 4,770 Net income (loss) $ (8,803 ) $ 15,771 Net income (loss) per common share, diluted $ (1.53 ) $ 2.44 Weighted average diluted shares outstanding 5,741 6,456 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited and in thousands) June 30, 2022 March 31, 2022 June 30, 2021 ASSETS Cash and cash equivalents $ 13,303 $ 19,236 $ 8,387 Gross loans receivable 1,641,798 1,522,789 1,223,139 Less: Unearned interest, insurance and fees (447,290 ) (403,031 ) (322,754 ) Allowance for credit losses (155,651 ) (134,243 ) (97,853 ) Loans receivable, net 1,038,857 985,515 802,532 Operating lease right-of-use assets, net 86,224 85,631 87,951 Finance lease right-of-use assets, net 505 608 912 Property and equipment, net 24,164 24,476 25,391 Deferred income taxes, net 45,579 39,801 28,782 Other assets, net 44,231 35,902 38,867 Goodwill 7,371 7,371 7,371 Intangible assets, net 18,839 19,756 22,340 Assets held for sale — — 1,144 Total assets $ 1,279,073 $ 1,218,296 $ 1,023,677 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Senior notes payable $ 481,393 $ 396,973 $ 467,700 Senior unsecured notes payable, net 295,645 295,394 — Income taxes payable 6,632 7,384 12,407 Operating lease liability 88,304 87,399 89,441 Finance lease liability 46 80 431 Accounts payable and accrued expenses 52,926 58,042 48,227 Total liabilities 924,946 845,272 618,206 Shareholders' equity 354,127 373,024 405,471 Total liabilities and shareholders' equity $ 1,279,073 $ 1,218,296 $ 1,023,677 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED STATISTICS (unaudited and in thousands, except percentages and branches) Three months ended June 30, 2022 2021 Gross loans receivable $ 1,641,798 $ 1,223,139 Average gross loans receivable (1) 1,575,548 1,144,425 Net loans receivable (2) 1,194,508 900,385 Average net loans receivable (3) 1,152,981 849,175 Expenses as a percentage of total revenue: Provision for credit losses 54.5 % 23.3 % General and administrative 46.2 % 56.6 % Interest expense 7.1 % 4.2 % Operating income (loss) as a % of total revenue (4) (0.7 ) % 20.1 % Loan volume (5) 932,379 754,209 Net charge-offs as percent of average net loans receivable on an annualized basis 22.3 % 11.4 % Return on average assets (trailing 12 months) 2.5 % 9.1 % Return on average equity (trailing 12 months) 7.5 % 23.0 % Branches opened or acquired (merged or closed), net (21 ) — Branches open (at period end) 1,146 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/20220727005155/en/Contacts John L. Calmes, Jr. Chief Financial and Strategy Officer (864) 298-9800
World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its first quarter of fiscal 2023 and three months ended June 30, 2022. First quarter highlights During its first quarter, the World Acceptance Corporation experienced exceptional growth in both loan balances and customer base even while tightening our underwriting at the beginning of the quarter. 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. Highlights from the first quarter include: Unique customer base grew 11.4% from same quarter prior year Gross loans outstanding of $1.64 billion, a 34.2% increase from same quarter prior year Total revenues of $157.6 million, a 21.5% increase from the same quarter prior year Net loss of $8.8 million and adjusted net income of $6.6 million Net loss per diluted share of $1.53, and adjusted net income per diluted share of $1.15 Cash flow from operating activities of $58.2 million over the last three months, a 18.8% increase from FY2022 Portfolio results Gross loans outstanding increased to $1.64 billion as of June 30, 2022, a 34.2% increase from the $1.22 billion of gross loans outstanding for the period ended June 30, 2021. During the most recent quarter, gross loans outstanding increased 7.8%, or $119.0 million, from Q4 fiscal 2022 compared to an increase of 10.7%, or $118.4 million, in the comparable quarter of the prior year. During the quarter, we saw an increase in borrowing from new, current and former customers that exceeded comparable pre-pandemic volumes. We have seen increased demand for new customer applications since the third quarter of fiscal 2022. The borrowing increase was driven by an increase in applications under tightened underwriting standards initiated during the third quarter of fiscal 2022. Underwriting was tightened further in April for 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: Q1 FY 2023 Q1 FY 2022 Q1 FY 2021 New Customers $75,263,048 $58,956,364 $17,737,020 Former Customers $110,262,220 $104,117,107 $39,210,936 Refinance Customers $746,840,769 $595,277,770 $412,496,734 Our customer base increased by 11.4% during the twelve-month period ended as of June 30, 2022, compared to a decrease of 6.5% for the comparable period ended June 30, 2021. During the quarter ended June 30, 2022, the number of unique borrowers in the portfolio increased by 0.2% compared to a decrease of 1.0% during the quarter ended June 30, 2021. As a result of the expanded emphasis on our larger loan offerings, the average gross loan balance increased 20.8% during the twelve-month period ended June 30, 2022, compared to June 30, 2021. As a result of underwriting changes over the past several quarters, the number of new customer loans originated during the quarter declined 27-30% when compared to the most recent pre-pandemic Q1 levels as the increased credit quality requirements resulted in a 28-31% lower book-to-look rate when compared to the same periods. As of June 30, 2022, the Company had 1,146 open branches. For branches open throughout both periods, same store gross loans increased 38.2% in the twelve-month period ended June 30, 2022, compared to an increase of 16.4% for the twelve-month period ended June 30, 2021. For branches open throughout both periods, the customer base over the twelve-month period ended June 30, 2022, increased 14.6% compared to a decrease of 5.1% for the twelve months ended June 30, 2021. Three-month financial results Net income for the first quarter of fiscal 2023 decreased by $24.6 million to an $8.8 million loss from $15.8 million for the same quarter of the prior year. Net income per diluted share decreased to $1.53 loss per share in the first quarter of fiscal 2023 from $2.44 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 and the impact of seasonality on the expected loss rates. Net income adjusted for the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses was $6.6 million for the current quarter compared to $20.5 million in the same quarter of the prior year. Adjusted net income per diluted share decreased to $1.15 per share in the first quarter of fiscal 2023 from $3.17 per share for the same quarter of the prior year. We believe this provides additional insight into our operations and profitability in periods of substantial growth and provides additional information regarding the expected loss rates due to credit normalization and seasonality. See further discussion on the current quarter provision and impact of current expected credit loss below. 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 the first quarter of fiscal 2023. This is in addition to repurchase of 589,533 shares in fiscal 2022 at an aggregate purchase price of approximately $111.1 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 5.7 million common shares outstanding, excluding approximately 550,000 unvested restricted shares, as of June 30, 2022. As of June 30, 2022, the Company had the ability to repurchase approximately $1.1 million of additional shares under its current share repurchase program and, subject to board approval, could repurchase approximately $14.2 million of shares under the terms of its debt facilities. Total revenues for the first quarter of fiscal 2023 increased to $157.6 million, a 21.5% increase from $129.7 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 19.3%, from $109.2 million in the first quarter of fiscal 2022 to $130.2 million in the first quarter of fiscal 2023 due to an increase in loans outstanding. Insurance income increased by 37.2% to $17.0 million in the first quarter of fiscal 2023 compared to $12.4 million in the first quarter of fiscal 2022. The large loan portfolio increased from 46.0% of the overall portfolio as of June 30, 2021, to 53.4% as of June 30, 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 28.3% to $10.3 million in the first quarter of fiscal 2022 compared to $8.1 million in the fourth quarter of fiscal 2021. Other income includes a $3.1 million bargain purchase gain during the current 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 $55.6 million to $85.8 million from $30.3 million when comparing the first quarter of fiscal 2023 to the first quarter of fiscal 2022. 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 2023 FY 2022 Difference Beginning Allowance - March 31 $134.2 $91.7 $42.5 Change due to Growth $10.5 $9.8 $0.7 Change due to Expected Loss Rate on Performing Loans $16.8 $2.5 $14.3 Change due to 90 day past due $(5.9) $(6.2) $0.3 Ending Allowance - June 30 $155.6 $97.8 $57.8 Net Charge-offs $64.4 $24.1 $40.3 Provision $85.8 $30.3 $55.5 Note: The change in allowance for the quarter plus net charge-offs for the quarter equals the provision for the quarter. The change in the allowance during the quarter was significantly impacted by both growth and changes in expected loss rates on our performing loans. The three most important factors impacting the expected loss rates on performing loans are recent actual loss performance, changes in mix of the portfolio tenure, and a seasonality factor. The seasonality factor had the most significant impact on the expected loss rates during the quarter, resulting in a 14.5% increase in the portfolio expected loss rates or approximately $13.4 million. The table below includes the seasonality factor for each quarter end. Quarter End Seasonality Factor March 31 0.943738 June 30 1.080301 September 30 1.047518 December 31 0.938281 Expected loss rates by tenure bucket also increased due to actual loss rates increasing as credit normalizes. This was offset to some degree by a shift in portfolio mix to more tenured customers. Net charge-offs for the quarter increased $40.3 million, from $24.1 million in the first quarter of fiscal 2022 to $64.4 million in the first quarter of fiscal 2023. Net charge-offs as a percentage of average net loan receivables on an annualized basis increased from 11.4% in the first quarter of fiscal 2022 to 22.3% in the first quarter of fiscal 2023. Annualized net charge-offs were 18.3% for the first quarter of fiscal 2021. The increase in delinquency and charge-offs were expected due to the increase in new and shorter tenured customers over the last twelve months. Accounts 61 days or more past due increased to 6.9% on a recency basis at June 30, 2022, compared to 4.0% at June 30, 2021, and 5.7% at June 30, 2020. Total delinquency on a recency basis increased to 11.2% at June 30, 2022, compared to 6.7% at June 30, 2021, and 8.3% at June 30, 2020. Our allowance for credit losses as a percent of net loans receivable was 13.0% at June 30, 2022, compared to 10.9% at June 30, 2021, and 14.2% at June 30, 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 fiscal 2022. 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 06/30/2017 $273,887,376 $707,810,306 $981,697,682 06/30/2018 $319,827,964 $742,845,987 $1,062,673,951 06/30/2019 $429,461,205 $793,297,330 $1,222,758,535 06/30/2020 $355,437,073 $712,516,701 $1,067,953,773 06/30/2021 $382,753,073 $840,444,842 $1,223,197,915 06/30/2022 $522,860,576 $1,119,072,168 $1,641,932,744 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 6/30/2017 $4,751,788 $(9,068,937) $(4,317,149) 6/30/2018 $45,940,588 $35,035,681 $80,976,269 6/30/2019 $109,633,241 $50,451,343 $160,084,584 6/30/2020 $(74,024,133) $(80,780,629) $(154,804,762) 6/30/2021 $27,316,000 $127,928,141 $155,244,141 6/30/2022 $140,107,503 $278,627,326 $418,734,829 Portfolio Mix by Customer Tenure at Origination As of Less Than 2 Years More Than 2 Years 6/30/2017 27.9% 72.1% 6/30/2018 30.1% 69.9% 6/30/2019 35.1% 64.9% 6/30/2020 33.3% 66.7% 6/30/2021 31.3% 68.7% 6/30/2022 31.8% 68.2% While the mix of less than two year customer balances is relatively consistent with June 30, 2021, there has been a significant increase in the shortest tenured customers within this cohort. The 0-5 month customer bucket has increased from 8.5% of the overall portfolio as of June 30, 2021, to 11.9% of the portfolio as of June 30, 2022. The 0-5 month customer is our riskiest customer. General and administrative (“G&A”) expenses decreased $0.5 million, or 0.7%, to $72.9 million in the first quarter of fiscal 2023 compared to $73.4 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses decreased from 56.6% during the first quarter of fiscal 2022 to 46.2% during the first quarter of fiscal 2023. G&A expenses per average open branch increased by 3.3% when comparing the first quarter of fiscal 2023 to the first quarter fiscal 2022. Personnel expense decreased $1.1 million, or 2.3%, during the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. Salary expense increased approximately $1.6 million, or 5.6%, in the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021. Our headcount as of June 30, 2022, increased 3.3% compared to June 30, 2021. Benefit expense decreased approximately $0.4 million, or 4.0%, when comparing the quarterly periods ended June 30, 2022 and 2021. Incentive expense decreased $2.1 million, or 17.4%, in the first quarter of fiscal 2023 compared to first quarter of fiscal 2022. Occupancy and equipment expense decreased $0.4 million, or 2.7%, when comparing the quarterly periods ended June 30, 2022 and 2021. The prior year includes a $0.3 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 $1.6 million, or 41.3%, in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 due to decreased spending on new customer acquisition programs. Other expense increased $2.6 million, or 30.0%, in the first quarter of fiscal 2023 compared to the fourth quarter of fiscal 2022. Interest expense for the quarter ended June 30, 2022, increased by $5.7 million, or 103.1%, from the corresponding quarter of the previous year. Interest expense increased due to an increase in average debt outstanding and a 20.0% increase in the effective interest rate from 5.0% to 6.0%. The average debt outstanding increased from $420.2 million to $741.7 million when comparing the quarters ended June 30, 2021 and 2022. The Company’s debt to equity ratio increased to 2.2:1 at June 30, 2022, compared to 1.2:1 at June 30, 2021. As of June 30, 2022, the Company had $777.0 million of debt outstanding, net of unamortized debt issuance costs related to the unsecured senior notes payable. Other key return ratios for the first quarter of fiscal 2023 included a 2.5% return on average assets and a return on average equity of 7.5% (both on a trailing twelve-month basis). Non-GAAP financial measures From time-to-time the Company uses certain financial measures derived on a basis other than generally accepted accounting principles (“GAAP”), primarily by excluding from a comparable GAAP measure certain items the Company does not consider to be representative of its actual operating performance. Such financial measures qualify as “non-GAAP financial measures” as defined in SEC rules. The Company uses these non-GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items and other infrequent charges. The Company may present these financial measures to investors because management believes they are useful to investors in evaluating the primary factors that drive the Company’s core operating performance and provide greater transparency into the Company’s results of operations. However, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components to understanding and assessing the Company’s financial performance. Such non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are, thus, susceptible to varying calculations, any non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies. For purposes of assessing performance, the Company will adjust earnings to remove the impact of the change in the allowance for credit losses but including the impact of recognized net credit losses. The Company believes this measure improves the compatibility of our results to peer companies who use varying methods to determine their allowance for credit losses under the CECL. The measure also normalizes earnings for the impact of growth, seasonality and periods of volatility in expected loss rates. This measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP earnings or other income statement data prepared in accordance with GAAP. The following table reconciles GAAP net income (loss) to Adjusted net income (loss): Three months ended June 30, Three months ended June 30, 2022 2021 Income (loss) before income taxes $(12,252,252) $ 20,541,298 Provision for credit losses 85,822,267 30,265,811 Net charge-offs (64,414,450) (24,135,468 ) Adjusted income before income taxes 9,155,565 26,671,641 Income taxes at actual rate 2,577,555 6,194,169 Adjusted net income $6,578,010 $ 20,477,472 Weighted average dilutive shares outstanding 5,740,835 6,455,753 Adjusted net income per common share, diluted $1.15 $ 3.17 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. First 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=DC1YNN8t. 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, 2022, 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 June 30, 2022 2021 Revenues: Interest and fee income $ 130,205 $ 109,175 Insurance income, net and other income 27,389 20,484 Total revenues 157,594 129,659 Expenses: Provision for credit losses 85,822 30,266 General and administrative expenses: Personnel 45,178 46,232 Occupancy and equipment 13,235 13,607 Advertising 2,208 3,760 Amortization of intangible assets 1,132 1,215 Other 11,097 8,537 Total general and administrative expenses 72,850 73,351 Interest expense 11,174 5,501 Total expenses 169,846 109,118 Income (loss) before income taxes (12,252 ) 20,541 Income taxes (3,449 ) 4,770 Net income (loss) $ (8,803 ) $ 15,771 Net income (loss) per common share, diluted $ (1.53 ) $ 2.44 Weighted average diluted shares outstanding 5,741 6,456 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited and in thousands) June 30, 2022 March 31, 2022 June 30, 2021 ASSETS Cash and cash equivalents $ 13,303 $ 19,236 $ 8,387 Gross loans receivable 1,641,798 1,522,789 1,223,139 Less: Unearned interest, insurance and fees (447,290 ) (403,031 ) (322,754 ) Allowance for credit losses (155,651 ) (134,243 ) (97,853 ) Loans receivable, net 1,038,857 985,515 802,532 Operating lease right-of-use assets, net 86,224 85,631 87,951 Finance lease right-of-use assets, net 505 608 912 Property and equipment, net 24,164 24,476 25,391 Deferred income taxes, net 45,579 39,801 28,782 Other assets, net 44,231 35,902 38,867 Goodwill 7,371 7,371 7,371 Intangible assets, net 18,839 19,756 22,340 Assets held for sale — — 1,144 Total assets $ 1,279,073 $ 1,218,296 $ 1,023,677 LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Senior notes payable $ 481,393 $ 396,973 $ 467,700 Senior unsecured notes payable, net 295,645 295,394 — Income taxes payable 6,632 7,384 12,407 Operating lease liability 88,304 87,399 89,441 Finance lease liability 46 80 431 Accounts payable and accrued expenses 52,926 58,042 48,227 Total liabilities 924,946 845,272 618,206 Shareholders' equity 354,127 373,024 405,471 Total liabilities and shareholders' equity $ 1,279,073 $ 1,218,296 $ 1,023,677 WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED STATISTICS (unaudited and in thousands, except percentages and branches) Three months ended June 30, 2022 2021 Gross loans receivable $ 1,641,798 $ 1,223,139 Average gross loans receivable (1) 1,575,548 1,144,425 Net loans receivable (2) 1,194,508 900,385 Average net loans receivable (3) 1,152,981 849,175 Expenses as a percentage of total revenue: Provision for credit losses 54.5 % 23.3 % General and administrative 46.2 % 56.6 % Interest expense 7.1 % 4.2 % Operating income (loss) as a % of total revenue (4) (0.7 ) % 20.1 % Loan volume (5) 932,379 754,209 Net charge-offs as percent of average net loans receivable on an annualized basis 22.3 % 11.4 % Return on average assets (trailing 12 months) 2.5 % 9.1 % Return on average equity (trailing 12 months) 7.5 % 23.0 % Branches opened or acquired (merged or closed), net (21 ) — Branches open (at period end) 1,146 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/20220727005155/en/